Leslie Milton, CPA, CA, LPA, Associate Partner
In a word: yes. While audit committees are more visible in public corporations, there is a role for an audit committee or an audit and finance committee in a small non-profit organization.
Accounting standards, interim reporting to funders, and corporate governance responsibilities, such as new federal and provincial not-for-profit corporation acts or Ontario’s Accessibility Act, continue to change and evolve.
While the Board relies upon management to run the day-to-day operations, it is the Board that has the ultimate responsibility for the organization as a whole.
The Board of Directors’ responsibilities are not addressed by merely delegating duties to management. Having an audit committee in place can help limit the risk on the Board because of the role it plays.
An audit committee’s role can include:
- Selecting accounting policies;
- Monitoring internal controls;
- Overseeing the annual financial statements;
- Appointing the external auditor and monitoring that relationship;
- Overseeing regulatory compliance matters; andIdentifying and discussing areas of risk both with management and your external auditor.
Areas of risk that could be discussed by the audit committee include:
- Adequacy of insurance, including directors and officers liability insurance;
- Business continuity plan in the event of a catastrophe such as a fire or major power outage;
- Data security including offsite backups and confidential information;
- Controls over online banking;Investment policy with respect to surplus funds; and
- Controls over cash donations.
The existence of an active and functioning audit committee may also instill confidence in potential funders, as well as demonstrate the Board’s dedication to safeguarding assets and the overall stewardship of funds entrusted to them.
You can develop your own “charter” or mandate for your audit committee. Together with the help of your external auditor, the audit committee and management will assist the Board in protecting the organization and carrying out its charitable objectives.
