Boards receive financial reports all the time. At most meetings, there is some version of the same information: account balances, income and expenses, current financial position, etc.
The question is not whether boards should see that information. They should. The real issue is what the board does with it.
Many boards take the extra step of voting to “approve” or “adopt” these routine financial reports. Sometimes that happens as a motion to “adopt” or “accept” the financial report. Sometimes it is included in a consent agenda. Either way, the result is the same. The board is taking formal action on something that usually does not require formal action.
What Boards Think The Vote Means
In most cases, the vote is intended to be harmless. Board members believe they are simply acknowledging that they have received the report, and it is often treated as a routine step. That assumption, however, does not match what the vote actually does.
What The Vote Actually Does
Under parliamentary procedure, adopting a report means more than just receiving it. It means the board is approving the contents of that report and making it the board’s own action. That is a much stronger statement than most boards intend.
Routine financial reports are typically informational. They reflect current balances, recent transactions, and ongoing activity, but they are not final, verified, or audited. As Robert’s Rules of Order Newly Revised (12th Edition) notes, “No action of acceptance by the assembly is required—or proper—on a financial report of the treasurer unless it is of sufficient importance, as an annual report, to be referred to auditors.” RONR (12th ed.) § 48. In other words, most monthly financial reports are not meant to be adopted at all.
What Is The Risk
The issue becomes more than theoretical when there is a problem. If funds go missing or financial irregularities are later discovered, prior votes to “approve” financial reports can be used against the board. The argument is straightforward: the board reviewed and adopted the reports, so it must have either known about the issue or failed to act.
This is not just a hypothetical concern. I’ve seen situations where significant amounts of association money went missing and board members were sued individually, in part based on the fact that they had approved the financial reports month after month. The defense was that board members had no idea what they were approving. That’s not a strong position to be in.
Voting to adopt financials can suggest a level of review and approval that did not actually occur, which can create unnecessary exposure if things go wrong.
Why This Happens So Often
This practice usually comes from habit, not intent. Many boards follo a practice where the treasurer gives a report and someone moves to approve it. It feels like good governance because it involves a formal vote.
The problem is that not everything presented at a meeting needs formal approval. Financial reports are a good example of something that is important to review but not appropriate to adopt.
A Better Approach
In most cases, the better practice is straightforward. The financial report is presented, directors ask questions, and the report is considered received and noted in the minutes. No motion is required.
If there is a specific action tied to the financials, that action should be voted on directly. For example, approving a budget, authorizing a budget change, or ratifying a specific expense. But the whole underlying monthly report does not need to be adopted, and treating it as such can create unnecessary risk.
That said, the best approach may depend on the organization, including its size, complexity, and governing documents. Boards should discuss this issue with their association counsel to determine the most appropriate practice for their specific situation.
When A Vote Does Make Sense
There are situations where adopting a financial report is appropriate. The most common example is an annual auditor’s report. In that case, the board is relying on the report as a final and verified statement, and formal adoption is more appropriate.
This ties directly to the distinction recognized in parliamentary procedure. Routine financial reports are not adopted, but an auditor’s report may be. As Robert’s Rules provides, routine financial reports are not acted upon, but an auditor’s report is typically adopted. RONR (12th ed.) § 48.
An “auditor” in this context does not always mean a full audit by a certified public accountant. Depending on the organization, it may be a CPA audit, a financial review or compilation, or even a review by an internal auditing committee or designated officers charged with carefully examining the association’s finances. The key point is that the report has been independently reviewed and is intended to be relied upon as accurate.
That is very different from routine monthly financials, which are part of an ongoing review process rather than a final product.
A Practical Takeaway
This issue comes down to a simple distinction. Receiving a report means the board has reviewed the information. Adopting a report means the board is approving it. Those are not the same thing, and boards should be careful not to confuse the two.
Jim Slaughter is an attorney, Certified Professional Parliamentarian, Professional Registered Parliamentarian, and a past President of the American College of Parliamentary Lawyers.
He is the author of four books on parliamentary procedure and running effective meetings, including Robert’s Rules of Order Fast Track and Notes and Comments on Robert’s Rules, Fifth Edition, both updated for the latest edition of Robert’s Rules of Order Newly Revised.