Understanding Your Responsibilities on the Finance Committee
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While numbers might not always be the most exciting, your role on a nonprofit’s finance committee is a crucial one. Far too often, committee members sit idly during meetings because they don’t understand their role and purpose. When finance committee members understand their responsibilities, they can actively help the organization grow.
The overall role of a finance committee is to provide financial oversight for the organization. Members have to recognize that their first and most important responsibility is to be engaged and aware of what is going on at the organization and within the committee.
A Breakdown of Common Responsibilities
Budgeting & Financial Planning
Financial budgeting and reporting are crucial to your nonprofit’s success today and for years to come. These tasks should be strategic and focused, which requires in-depth knowledge of operations at the organization. Some of the typical tasks included in budgeting and financial planning are:
Development of an annual operating budget
Approval of an annual operating budget
Monitoring of actual to budgeted results as the fiscal year progresses
Creation of long-term financial goals for the organization
Financial Reporting
Equally important as planning, financial reporting reflects how well the nonprofit’s actual financials compare to the projected ones from budgeting. Finance committee members should be able to present financials to the Board of Directors and highlight potential problems and opportunities for growth. Some of the tasks usually included in financial reporting are:
Develop useful financial reports for managers
Determine a list of useful financial reports that include the level of detail and the frequency of these reports
Present financial reports to the Board of Directors
Setting & Monitoring Internal Controls
Internal controls are a nonprofit’s first line of defense in protecting the integrity of their finances. Finance committee members’ support of internal control procedures is directly strengthening the organization’s financial health. Some of the common tasks included in setting and monitoring internal controls include:
Create, monitor, and update internal controls that help protect the assets of the organization
Document internal controls and provide controls to staff
Monitor the staff to ensure the documented internal controls are being adhered to
Considerations
The role of a nonprofit finance committee member is an important one. Before joining, you should consider whether you have the time and ability to serve at the level of commitment the organization needs. If you do, you’re making a difference at your nonprofit for today and the future. Have questions about your specific role on a finance committee or how to execute these procedures for your nonprofit? Our nonprofit consulting experts are ready to help. Contact us to get started today.