How to Make Your Nonprofit Audit Committee More Impactful [SUBSCRIBERS-ONLY]

Audit committees for nonprofit organizations are charged with filling a very important and broad fiscal and financial accountability and governance oversight role. Most nonprofit audit committees center their attention on the back-end of the annual financial statement audit process when they receive draft auditor reports. While this is an important function, audit committees can be more impactful if they shift more of their focus to the front-end of the annual audit process and expand their internal control and business practices oversight roles.

The American Institute of Certified Public Accountants (AICPA) offers a compelling statement of why audit committees are needed:

“Success for not-for-profits (NFPs), regardless of their type or size, is built on a firm foundation of fiscal accountability and governance. Achieving these oftentimes elusive goals requires more than traditional business know-how and insights into industry and sector trends. It calls for a robust combination of strong internal controls, budgetary and legal compliance, accurate and timely financial reporting and disclosure, sound business practices, and a culture of uncompromised moral and ethical behavior. NFPs can access expertise in all these areas - and in the process more successfully fulfill their strategic goals - by leveraging the knowledge and experience of audit committees.”

Audit committees contribute to nonprofit “fiscal accountability and governance” through their most recognized role of receiving draft auditor reports and recommending whether the Board should approve or not approve these reports. However, there are many more opportunities to leverage “the knowledge and experience of audit committees.”

The following are three basic tactics that can be used to improve audit committee impact and effectiveness: