When I'm asked what boards of theological schools should be doing in these tough economic times, that's my response: "What you should have been doing all along." Even in extraordinarily tough times like these, the chief duty of a board is the same-to provide a school with the best possible governance leadership. Schools that have been ignoring the board's development will emerge from the next few years the worse for wear, but those with a long-running commitment to building up the board will almost certainly see a strong return on their investment.
For a board, excellence in governance is the whole point-the reason for being. Yet exemplary board work is almost always undervalued, even by the board itself. In part, that's because board success is often equated with the size of the members' end-of-year donations. Now there's no denying that significant and sacrificial giving by board members is critical to the financial well-being of a theological school (I'll say more about this later), but money is only one of the many gifts that board members bring to an institution.
Realistic Responses
The Nonprofit Finance Fund recommends the following strategies for coping with economic hard times.
■ Avoid "strong, silent behavior" and sustained spending, which have been hallmarks of the nonprofit community for more than a decade and which continue to make nonprofits weaker, not stronger.
■ Engage a range of institutional partners in contingency planning.
■ Avoid large investments in fixed assets and infrastructure (i.e., a building purchase, new hires, or expansions of service).
■ Get a firm handle on revenue patterns. Stay in close touch with your support base.
Source: www.nonprofitfinancefund.org
Board members are charged with protecting and enhancing the economic capacity of the school while promoting its educational mission. As such, it's the board's responsibility to ensure that the school is ready to receive goodwill, gifts, and students. The accreditation standards of the Association of Theological Schools speak directly to this: "As fiduciaries, they [members of the governing board] should commit themselves loyally to the institution, its purpose, and its overall well-being," states Standard 8.3.1.3. "They should lead by affirming the good that is done and by asking thoughtful questions and challenging problematic situations."
The board's careful stewardship of a school's resources-financial, human, intellectual, and spiritual-is the linchpin of constituent confidence. Board members are called to pray for their schools, to offer hope, and with imagination and love, to provide a centered community of leadership in the life of the institution. Daniel Aleshire, executive director of the Association of Theological Schools, affirms this in his book, Earthen Vessels: Hopeful Reflections on the Work and Future of Theological Schools. Effective board governance, he says, is "no less important than theological scholarship and require[s] no less intellectual skill and effort."
Avoiding mistakes of the past
The financial straits in which a good many theological schools now find themselves didn't just happen. Rather, the economic tsunami of recent months has served to highlight operational and strategic weaknesses that have been lurking just under the surface for years or even decades. Board members can't undo what has already been done, but the conventional wisdom is true: If we don't learn from the past, we're bound to repeat it. However, rehashing yesterday's decisions will do little to advance the school unless board members are mining the past for nuggets of wisdom that can enrich the future.
Are today's difficulties the result of bad data in years past? Or is the crisis at hand the product of a misinterpretation of that data? Information like dashboards, strategic indicators, and administrative reports are critical for good governance, but unless trustees, presidents, and other administrators are capable of making sense of the information presented to them, there's hardly any point in generating all those reports. The nonprofit world is littered with the remains of once-robust organizations that were done in by poor fiscal management and inattentive boards. As we see in Strategic Decision Making: Key Questions and Indicators for Trustees (Association of Governing Boards, 1987), "the challenge . . . for most organizations is to focus their most limited resources - the time of trustees and top administrators - on those issues which really make the difference between success and failure."
Storm warning
Common signs that a school is in economic distress include:
■ Use of cash reserves or endowment funds to meet operating costs
■ Using up the school's line of credit
■ Failure to pay bills in a timely fashion
■ Failure to remit payroll taxes
■ Failure to meet payroll
When times are tight, boards should expand the list of financial documents that come before them beyond the annual budget and year-to-date actual vs. projected budgets. They should also review quarterly financial statements and cash flow projections. In situations of extreme financial distress, members of the board's finance committee may ask to review receivables and payables with aging data and the school's Form 941 (withholding tax form) and evidence of remittances.
After all, the goal of the next few years is not simply to keep the institutional ship afloat. The goal is to keep the school moving forward in the right direction. Strong boards are proactive in maintaining financial equilibrium and helping to preserve programs. They understand that abandoning functions vital to basic institutional purposes can threaten the institution's future. In the midst of a crisis, strong boards are able to keep their eyes firmly focused on the "prize of the high calling" of the school. Along with longtime seminary president Malcolm Warford, well-developed boards understand that "at the center of trusteeship is the basic question of what God calls the seminary to be and to do, and the complex issue of how we discern this calling in the middle of issues, events, conflicts, and trends that make up institutional life, making decisions in light of the Spirit's guidance." That includes good times and bad.
All hands needed on deck
If ever there was a need for the women and men who serve on the boards of theological schools to be in top form, it is now. When everything is going well (but who can remember a time such as that?), a board may be able to live with a stick or two of dead wood. But these days, all hands are needed on deck, at full attention, ready and eager to serve.
Theological schools in Canada and the United States are bracing themselves for a protracted economic downturn, and as they do so, board members must rededicate themselves to the mission and vision of the institutions they serve. If a trustee feels he or she can't come fully on board with the plans and priorities of the institution, it's time to exit the board. There's no room for lukewarm service, and that includes board members' participation in the school's fundraising program. (I promised I would return to this point.)
Show me a flourishing theological school, and I'll show you board members who have embraced the fundraising challenge. Conversely, schools that limp along from one financial crisis to the next are usually governed by board members with a fear of fundraising. It's not enough for trustees to show up for meetings, listen politely to staff reports, vote on a few items, pat the president on the back, and head for the door. They must be ready to roll up their sleeves and do what needs to be done to advance the mission and vision of the school. In good times, and all the more so when the institution is being battered by external forces, theological schools should ask much from board members.
■ Advocate. Every board member must believe in the mission and vision of the theological school and be an active advocate and ambassador for it.
■ Prioritize. Members must make service on this board a top priority.
■ Give and get. Every board member should joyfully and generously support the school financially and invite others to do so as well.
■ Network. Board members should use personal and professional contacts for the benefit of the school.
Board members have a double dose of responsibility in the area of resource generation. When it comes to fundraising, trustees are encouraged- indeed, expected-to step over the boundary from policy to direct action. They contribute through their careful and wise work when meeting in quorum and also through their individual activities on behalf of the institution.
Boards for such a time as this
Over the coming months, the members of theological school boards will likely find themselves returning again and again to this question: "What should we be doing in these tough times?" While the specifics of their answers will vary according to each school's unique situation, one thing is certain: Only the best possible governance will do. "There are different kinds of service, but the same Lord," says the Apostle Paul in 1 Corinthians 12:5 -that is, members of the church have various callings. I would add that some are called to be board members, to serve in a unique fashion by maximizing the gifts, talents, abilities, experiences, passions, and opportunities God has provided. And that applies in good times and in bad.
Two tests
There are two primary tests to determine whether an organization is insolvent: the balance sheet test and the cash flow test.
Under the balance sheet test, an organization is considered insolvent when its liabilities exceed its assets.
Under the cash flow test, an organization is considered insolvent when it cannot pay its debts when they come due.
What this means for board members is that once a school is insolvent, institutional leaders need to exercise good faith to operate the school in a manner that preserves corporate assets so that creditors can be paid and students served.
- Adapted from Zone of Insolvency: How Nonprofits Avoid Hidden Liabilities and Build Financial Strength, by Ron Mattocks (Wiley, 2008, 240 pp., $49)