Some organizations may ask, “Why do we need an audit committee, when we already have a finance committee?”

This is a reasonable question and it seems many organizations combine the roles of these two committees.  While this structure may function adequately, you may want to consider two separate committees so you can better define roles and goals, and provide stronger governance and oversight.

Finance Committee Duties

A finance committee is generally more “active” consistently throughout the year doing things such as:

• Developing the annual budget
• Overseeing the organization’s financial operations
• Monitoring financial results, such as budget vs. actual, cash flows, etc.
• Monitoring and managing investments (although, you could create an investment committee for this specifically)
• Determine the need for any debt or a line of credit
• Creating financial strategies and policies

Audit Committee Duties

An audit committee is more externally focused, and its role should be more centered around an external audit, compliance with laws and third-party requirements, and internal controls of the organization.  An audit committee’s roles may include the following:

• Selecting the external auditor
• Meeting with the external auditor prior to the audit to discuss risk assessment, any new compliance requirements, changes in management, etc.
• Meeting the external auditor after the audit to discuss results and any recommendations
• Ensure timely completion and filing of the audit and tax returns
• Periodically assess whether internal controls are in place and are effective
• Monitor compliance with laws and third party (banks, funding sources, etc.) requirements

Strengthen Governance

These two committees should work closely together, and there may even be some people who are members of both committees.  However, having two separate committees, and clearly defining the roles and tasks of each, will create an environment of stronger governance and oversight.  Strong governance helps nonprofits stay mission-focused and trustworthy. If you’re exploring ways to strengthen your internal controls or clarify committee responsibilities, Wegner CPAs nonprofit advisors are here to help. Whether you’re refining your committee structure, preparing for an audit, or simply not sure where to begin, get in touch to learn how we can support your mission with custom-tailored support.