By Natalie Hopkins Once, during my early years of public accounting, I was asked to present the financials to the Board of Directors, for my very first time. Being an eager young staff, I willingly said yes. At the meeting, the Board President introduced me and explained that I would be going over the audited financial statements. Someone quickly piped up, “Could I get a sedative for this part of the meeting?!” Needless to say…everyone laughed!
I survived the presentation, but it became a defining moment when I realized that not everyone loved financial information! How could that be? Doesn’t everybody feel the satisfaction that comes when a balance sheet or cash flows statement actually balances? Sadly, the answer is no, just us accountants…we are a unique breed. That’s why Not-For-Profit Finance Committees were established.
Monthly financial information is a critical element of the success of a not-for-profit organization, but it is only effective when coupled with adequate oversight by a Finance Committee. This committee can provide invaluable insight because the members generally don’t participate in the day-to-day operations of the Organization. Finance Committees often approve annual budgets and monitor actual results throughout the fiscal year. They are also involved in annual reporting requirements, including reviewing the audit of the financial statements and preparation of the annual filing of the Form 990.
Not-For-Profit Finance Committee members usually have solid financial, accounting and reporting backgrounds with experience in or an understanding of auditing. It is important to have a charter which outlines the responsibilities based on the needs of the particular Organization that is approved by the full Board. Depending on the size of the Organization, consideration should also be given to establishing a separate Audit Committee.
Having an engaged and active Finance Committee does not relieve a Board of Directors from its fiduciary role, but it does allow a more effective and efficient process at the Board level. Giving a high level overview of critical financial matters is appropriate for Board meetings and leaves more time for other matters that are also crucial to the organization, including marketing, development and special events. Donors entrust their money to the organization and a Finance Committee should be the backbone to ensure those funds are adequately managed.
For more information on how to better utilize and structure your Finance Committee, please contact Natalie Hopkins at firstname.lastname@example.org at 317-569-4181 ext. 244 or a member of the Alerding CPA Group. Alerding CPA Group is an Indianapolis-based public accounting firm. Visit our website: www.alerdingcpagroup.com.
This post was written by:
Natalie Hopkins, CPA
Natalie services audit and assurance clientele with their annual compliance needs and general consulting services. Her client base includes wholesale/distribution, manufacturing, retail, service organizations, and health and welfare organizations. Natalie was chosen as an “Emerging Leader” by the Indiana CPA Society.
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