Expert Coaching. Practical Resources.

December 2, 2021

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Richard Stringham

Wait! Before the Board Approves that Report…

…perhaps it shouldn’t!

Some boards have an interesting perspective on reports. They view a report as something the board needs to adopt or approve. On one hand, this is understandable. If the board doesn’t make a decision whether it will adopt or approve a report, what should the board do with it? At The Governance Coach, we’re constantly reminding boards that they are commanders, not advisors. So, doesn’t it make sense that the board should put its stamp of approval on reports?

On the other hand, what value is added by the board adopting a report? Unless the report provides actions for the board to undertake, what is the decision the board is making?

But then again, what harm could there be in adopting a report?

Robert’s Rules of Order makes the point with a sobering message:

In rare instances after [a board] has received a report, it may have occasion to adopt the (entire) report; an affirmative vote on such a motion has the effect of the [board] endorsing every word of the report – including the indicated facts and the reasoning – as its own statement. … Adoption of an entire report is seldom wise except when it is to be issued or published in the name of the whole organization.

When is a report published in the name of the whole organization? Financial statements which are provided to the general membership or regulatory authorities would be one example. Indeed, financial statements are a report of the financial status of the organization and often, the board is legally required to approve such statements before their release to those outside of the board and management.

Here is where some boards get confused. They receive an auditor’s report and think their job is to approve the auditor’s report, when really their job is to approve the financial statements before those statements are presented  outside the organization.

The audit is a method for checking whether the financial statements from management comply with accounting standards (e.g., GAAP) and are free from material misstatement. Consequently, after having received an audit report, an appropriate motion would be: “That the financial statements be adopted.”

You may have noticed that I referred to receiving the audit report, instead of adopting or approving the report. This is the source of yet another misconception. Some may feel the need to make a motion: “that the report be received.” However, if the board has received the report, there is no value in such a motion. After all, could you honestly oppose such a motion if the report has been received?

At the beginning of this blog, I posed the question: “If the board doesn’t make a decision whether it will adopt or approve a report, what should the board do with it?”

The answer lies in the purpose of the report.

Is it a monitoring report? If so, the board should make an assessment decision based upon the report contents. For example: “Moved that, based upon the monitoring report received [date], the board finds evidence of compliance with a reasonable interpretation of the policy for Treatment of Staff.” In making such a motion, the report itself was neither adopted, nor approved.

Is it information to inform a policy decision? If, following such information, the board makes changes to its policies, then it only needs to make motions with those changes.

Is it a report which is to be published in the name of the organization for those beyond the board and management, such as the financial statements noted above? The adoption of such a report should be handled carefully because the board is on record as agreeing with every word and number. In the case of a board using Policy Governance, it likely will require the use of a Required Approvals Agenda process.

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