Board Finance Committee Roles

The finance committee plays a crucial role in ensuring the financial health and sustainability of an organization. Reporting directly to the board of directors, the committee provides oversight and guidance on all financial matters, protecting assets, and promoting responsible fiscal management.

One of the primary responsibilities of the finance committee is financial planning and budgeting. They work closely with management to develop realistic and comprehensive annual budgets that align with the organization’s strategic goals. This involves reviewing revenue projections, expense forecasts, and capital expenditure plans. The committee scrutinizes these plans, challenging assumptions and offering recommendations to ensure they are sound and achievable. They then present the proposed budget to the board for approval and monitor performance against the budget throughout the year.

Financial reporting and analysis are also key functions. The committee reviews monthly, quarterly, and annual financial statements, assessing the organization’s financial performance and identifying potential risks and opportunities. They analyze key financial ratios and trends, providing insights to the board on profitability, liquidity, and solvency. They ensure financial reports are accurate, transparent, and comply with all applicable accounting standards and regulations. This often includes engaging with external auditors and reviewing their findings.

Oversight of investments and asset management falls under the finance committee’s purview. They establish investment policies that balance risk and return, and monitor the performance of the organization’s investment portfolio. They ensure that assets are properly safeguarded and that investment decisions are aligned with the organization’s long-term financial goals. This may involve working with investment managers, evaluating investment options, and recommending changes to the investment strategy.

Risk management is another critical area of responsibility. The finance committee identifies and assesses financial risks facing the organization, such as market risk, credit risk, and operational risk. They develop and implement strategies to mitigate these risks, ensuring that adequate insurance coverage is in place and that internal controls are effective. They also monitor compliance with financial regulations and laws, protecting the organization from potential legal and reputational damage.

Finally, the finance committee plays a key role in financial policy development. They establish and review financial policies related to areas such as debt management, cash management, procurement, and expense reimbursement. These policies provide a framework for sound financial decision-making and ensure consistency and transparency in financial operations. The committee ensures that these policies are communicated effectively and adhered to throughout the organization.