Audit Committee Versus Finance Committee

Your board of directors is ultimately responsible for your nonprofit, including your financial reporting.  Many organizations have an audit and finance committee that includes financial experts, which may not be board members, to assist in providing the needed financial oversight.  Some organizations are not able to have both an audit committee and a finance committee, so the finance committee assumes the role of both. 

If your organization is able to have both an audit and a finance committee they should.  Even though both committees’ responsibilities are financial in nature, their roles are different.  Finance committee members who have an understanding of financial reporting may not be knowledgeable of audit requirements or internal controls.  Having an audit committee also demonstrates to the public that the organization recognizes the importance of the audit process and compliance.  Having two committees will require additional committee members but the benefits far outweigh the disadvantages of separating the responsibilities between two committees.

Below is a summary of the different roles of each committee.

Audit Committee

• Considers matters related to the financial statements and other financial information provided to the public
• Reviews the systems of internal controls (policies and procedures, risk management)
• Ensures financial reports are received, monitored and disseminated appropriately
• Engages the auditor and oversees the audit process (meets with the auditor, reviews the audit)
• Reviews annual Form 990

Finance Committee

• Monitors financial transactions
• Oversee the preparation of the annual budget
• Reviews financial statements
• Advise the board with respect to making significant financial decisions

Contributed by Carrie Minnich, MAcct, CPA | Partner | DWD CPAs & Advisors