Numbers, financials, and formulas are the foundation of your nonprofit organization. Everything relies on the strength of your financials and their accuracy. Precision is the watchword for inspecting you organization’s accounts -- and Audit is the name.
Your board of directors is responsible for overseeing the independent audit function and vetting the execution of the process and its outcome. The board is accountable for the fiscal affairs of your organization and often delegates tasks to an audit committee.
The audit committee for your organization is a special-assignment team or a standing committee that the board selects. The audit committee oversees your nonprofit’s independent audit. The audit committee is not involved with the day-to-day accounting role. It oversees the independent audit operation, which can include the selection and hiring of the independent auditor.
Often the audit committee also monitors that the organization enacts all auditor recommendations. Auditors frequently place recommendations in their letter to management.
The audit committee may also carry the responsibility to attend to complaints about poor fiscal management. The board usually delegates to the audit committee the power to examine and probe grievances about money mismanagement within the organization. Ideally, one board member should volunteer to be on the audit committee. Ethically, a “volunteer” board member is a separate participant and helps ensure that the audit remains impartial. Any paid employee or individuals from the organization's audit firm is not an independent participant. Maintaining the independent perspective allows the audit team members to express neutral opinions regarding organizational financial processes, effectiveness of the audit team, and quality of work the internal staff performs.
It is essential that the board presides over the audit task. It is one of their main responsibilities. However, it is not essential to have an audit committee.
Your organization can use members of another committee to supervise the independent audit task. Some organizations turn-over complete overseeing of the audit procedure to the entire board. A larger organization may find this responsibility too cumbersome for the board, and thus establish subcommittees to assist with overseeing the audit.
Your board, audit committee, and external accounting firm unite to verify the financial character of your financial records. You steer clear of conflicts of interest by confirming auditor independence.
Check the pulse of your organization often, and pay attention to your audit results. They will keep you on track and moving to achieve your mission.
If you have any questions about audits visit our website and keep in touch with our blog. We have ideas to share and solutions to management and organizational questions. If you have questions about any other not-for-profit industry topics, contact our not-for-profit team leader at trent@tbfosteraccounting.com.