Creating a Financial and Audit Committee

What is a Finance Committee? Generally a standing committee of the board of directors that works with the director and the financial staff Note: The above assumes your organization is large and organized enough to have a board of directors.

What is a Finance Committee? (cont.) It gives the board financial control of the organization. Since the board is legally responsible for the organization's finances. It is often chaired by the board treasurer, and may consist of board members only, or may include some people who aren't on the board

Responsibilities of a Finance Committee Overseeing the financial dealings of the organization. This may include: – Approve and renew the organization's annual budget – Ensure financial reporting requirements are fulfilled – Catch any illegal, unethical or incompetent financial dealings

Responsibilities of a Finance Committee (cont.) Participating in the annual audit. This may include: – Participate in formulating a plan – Confer with the auditors – Evaluate the performance of the auditors

Responsibilities of a Finance Committee (cont.) Evaluating the organization's fiscal operation, and those in charge of it. Ensuring that the financial elements of the organization are in accord with its vision, mission, and strategic plan. Reporting to the board and/or Executive Committee about the financial condition of the organization

Why do you need a Finance Committee? It helps a board fulfill its fiduciary responsibility. It can protect the organization from legal challenges and liability. It can guard the organization against illegal, unethical, or incompetent activities by fiscal managers.

Why do you need a Finance Committee? (cont.) It can protect the organization from actual or apparent conflict of interest. It can act as the board's eyes and ears in the financial operation It can act as an advisory panel to the financial operation.

Why do you need a Finance Committee? (cont.) It can evaluate both the financial operation and the people in charge of it from a position of knowledge. It can be helpful in the hiring of fiscal staff or a new director. It can make the audit easier

Why do you need a Finance Committee? (cont.) It can interpret the audit for the rest of the board. It can be helpful in recommending the hiring, retention, or firing of potential or current auditors.

Who should be involved in a Finance Committee? Board members with the desire and background to be helpful Non-board members recruited specifically for the committee.

Who should be involved in a Finance Committee? (cont.) People without specific financial expertise, but who are willing to learn, and who can ask the kinds of questions that are representative of the understanding of the rest of the board. People whose very presence lends an aura of legitimacy to the committee and to the financial oversight of the organization.

How do you create and use a Finance Committee? Decide what you want the Finance Committee to do. Including the level of oversight the committee will have. Choose the members of the committee with its and their duties in mind. Establish (with the committee) policies and procedures for the committee. Develop training for the committee. Determine (with the committee) exactly how the committee will function and carry out its duties