Board Finance Committee Roles and Responsibilities

A board finance committee plays a crucial oversight role in ensuring the financial health and stability of an organization. It acts as a crucial link between the full board and the organization’s financial management, providing expertise and guidance on complex financial matters.

Key Responsibilities

The committee’s responsibilities generally include:

Financial Oversight

The committee oversees the integrity of financial reporting and compliance. This involves reviewing the organization’s financial statements, internal controls, and audit processes. It’s responsible for ensuring that financial information is accurate, reliable, and transparent.

Budgeting and Financial Planning

A significant role is to develop and recommend an annual budget to the full board for approval. This includes reviewing budget assumptions, revenue projections, and expense allocations. The committee also monitors the organization’s financial performance against the approved budget, identifying potential variances and recommending corrective actions.

Investment Management

If the organization has an investment portfolio, the finance committee oversees its management. This includes developing investment policies, monitoring investment performance, and ensuring that investments align with the organization’s risk tolerance and financial goals. This may involve working with external investment advisors.

Audit Oversight

The committee is typically responsible for selecting and overseeing the external auditors. It reviews the scope of the audit, the audit findings, and management’s responses to the audit recommendations. Ensuring auditor independence and objectivity is paramount.

Risk Management

The finance committee identifies and assesses financial risks facing the organization, such as credit risk, liquidity risk, and operational risk. It works with management to develop and implement risk management strategies to mitigate these risks.

Financial Policies and Procedures

The committee reviews and recommends financial policies and procedures to the full board for approval. These policies cover areas such as accounting, budgeting, internal controls, and investment management. Regular review and updates are crucial to remain compliant with relevant laws and regulations.

Staff Liaison

The committee serves as a liaison between the board and the organization’s finance staff, providing guidance and support to the chief financial officer (CFO) and other finance personnel. It facilitates communication and ensures that the board is informed of all significant financial matters.

Importance of an Effective Finance Committee

An effective finance committee is essential for sound financial governance. By providing expertise, oversight, and guidance, the committee helps ensure that the organization’s financial resources are managed responsibly and effectively, safeguarding its long-term financial health and sustainability. A strong finance committee enhances transparency and accountability, building trust among stakeholders.