You have been asked to volunteer on a board for a not-for-profit organization and serve on their audit committee. Do you accept? How do you know if it is the right fit for you?
While audit committees are not mandatory, many boards choose to establish them to oversee the quality and integrity of the NFP’s accounting and financial reporting practices. This committee plays a vital role in meeting the organization’s accountability requirements.
The qualifications to serve on an audit committee are really quite simple. You must be independent of organization management and have a working knowledge of how the financial structure and reporting function of organizations work.
In a nutshell, here’s what will be expected of you and your fellow committee members, should you choose to accept this important position:
Understand the financial health of the organization, including internal controls, financial statements, compliance requirements and audits (both internal and external)
Engage a qualified CPA firm to perform annual financial statement audits
Review CPA recommendations for improving the internal control structure
Implement policy changes to address these recommendations (or present proposed changes to the full board, if the audit committee does not have fully authority)
Investigate whistleblower complaints (if applicable)
A helpful resource for learning more about audit committee responsibilities and practices is the New York Revitalization Act of 2013, which took effect in the state of New York on July 1, 2014. The Act addresses items such as compensation, conflict of interest policies, mandatory whistleblower policy requirements, and board or audit committee oversight guidelines. Even if your NFP is not registered in New York, consider these best practices when preparing to serve and remember them throughout your term as an audit committee member.