Financial reporting can be a massive challenge for most nonprofit organizations. After all, most nonprofit boards comprise volunteers and contractual employees with little to no experience in financial management. Setting up an audit committee composed of financial experts will help ensure financial transparency and accountability in your organization. This post explains why your nonprofit board needs an audit committee.
The Role of a Nonprofit Audit Committee
The primary role of a nonprofit audit committee is to improve and maintain financial reporting standards. The board members oversee the organization’s financial procedures to ensure accountability and transparency.
Auditing is a critical process to your organization’s success, which explains why your nonprofit needs an audit committee now than ever before. With the help of an independent auditor, the committee members are responsible for:
- Gathering relevant financial documents
- Reviewing financial statements
- Scheduling audit processes
- Reconciling accounts and financial records
- Preparing audit reports
Benefits of an Audit Committee
Establishing a proactive audit committee can help streamline your organization’s financial reporting and resolve internal control issues. An audit team can benefit your nonprofit in several ways. Here are the top reasons your nonprofit needs an audit committee.
- Monitoring financial transactions for errors and discrepancies
- Establishing adequate internal control over financial reporting
- Detecting fraud and establishing anti-fraud programs
- Improving the organization’s financial credibility and integrity
- Enforcing accounting policies
- Implementing risk management strategies
- Reviewing filings to ensure financial compliance
Forming a Nonprofit Audit Committee
Since most nonprofits consist of part-time volunteers with limited auditing experience, they rely on independent parties for audit assistance services.
Based on the size of your firm, the ideal audit committee should have two to six members with no role in the current management. Appointing independent members helps avoid conflict of interest. Under GAAP rules, a financial expert must be on the audit committee to provide professional guidance.
Each member has a specific role based on their skills and qualifications. An audit committee charter can help spell out each member’s responsibilities, the committee’s membership structure, reporting authority, and meeting schedules.
Enlist Reliable Audit Assistance Services
Your nonprofit audit committee requires at least one member with financial management experience. Abel Accountants provides reliable HOA audit assistance services to help associations handle auditing tasks for improved accountability and transparency. Call us or visit our website to schedule a free community assessment and learn more about our audit services.
