Controls to keep power in check

Dear friends,

Two stories from my two cities, five days apart, have stayed with me because they raise the same question: who checks the numbers a board sees? In Jacksonville, a board member at the transit authority (JTA) says the board went a year and a half without knowing the agency was spending down its reserves. The board is now hiring an outside firm to find out what happened. In Atlanta, a federal judge sentenced Brady Lum, the High Museum of Art's former COO, to a year in prison on November 2. For about six years he had approved his own expenses, guitars and woodworking tools included.

The two cases are very different. JTA's review is just getting started, and no one there has been found to have done anything wrong. The museum's COO pleaded guilty. What seems apparent in both is that what the board knew about the financials came from the executives it was supposed to oversee. I often see that same setup in the small and midsize nonprofits I've worked with, which is why I wrote about the High Museum case this month.

If you're a treasurer, ask before your next board meeting who prepares the numbers you see each month, and who that person answers to. If it's the executive director, or someone who reports to the executive director, give that person a real line to the board. A standing half hour with the treasurer, without the ED in the room, is a good start. If you bring in outside help, make sure they report to the board.

It's also budget season for calendar-year organizations. On top of the usual guess about year-end giving, the federal funding bill runs out December 11, a new Congress takes office in January, and so do new governors in Georgia and Florida. To plan around that uncertainty, I've suggested clients build their budget in two tiers. The board approves a core budget and agrees ahead of time on the milestones that would release the tentative pieces, like year-end giving achieving a certain goal, and I present the two tiers separately. The same split helps with government funding. For an organization that relies on reimbursement grants, for instance, a change in Washington or a state capital can result in delays or pauses in payments while new staff settle in. The Urban Institute found that nearly half of charities with government funding had at least one disruption in 2025. Know what share of your budget comes from government funding, and keep your forecast current enough that a late payment shows up in the board packet the month it happens.

One piece of news from us: this month we're starting In Context. Each week, I'll take a real story from the nonprofit world and talk through what it teaches those of us who steward a nonprofit's finances. Episodes are short and are published every week alongside our Field Notes articles. They're less polished than the writing and more personal. I learn something in this work every week, and this is my way of sharing it as I go. You'll find it at lyra-works.com/in-context.

I'd also love to hear from you. Each episode ends with a question, and the best part of this will be the conversation that follows. If you're an executive director, treasurer, board member, or anyone else carrying the finance load for a mission you care about, this is for you.

Dates to watch

If something in your finances is on your mind this season, reply to this email. I read every reply, and many of them become future articles.

Warmly,
Lydia Scarlett, Lyra Works