Many people reach a point in their lives where they ask how they can give back to their communities. Some people may respond to that by donating money to their favorite charity. Others arrive at a conclusion of serving on a nonprofit board of directors and donating their time and expertise (and often money, too!).
If you’re a CPA or financial professional like me though, more often than not, you quickly find yourself on the nonprofit finance committee. The question is what exactly does that mean and what are the responsibilities that come with it? And should you serve?!
The answer to that question can come in many shapes and forms and depends largely on the size of the organization you’re involved with. A small nonprofit may need hands-on assistance from you including maintaining a set of books and records. Larger organizations may primarily be seeking long-term strategic thinking and high-level review of the financial stability of the organization. In either case, it is important to be aware of whether the organization carries a Directors and Officers (D&O) insurance policy. While definitely recommended, I am not saying an organization should not be considered for involvement. However, as the board member, or the finance committee member specifically, you should be aware of whether such a policy exists and make your own decision as to the risk that could present.
Now that we have those bases covered, regardless of the organization’s size, here are a couple of broad areas almost all nonprofit finance committees face and how a CPA or finance professional can apply their knowledge to directly benefit the organization:
- Budgeting and financial planning – Help the organization translate its mission into budgeted numbers. Does the budget “agree” with the larger board’s strategy
- Financial reporting – Do the numbers correctly depict the organization’s financial stability and results?
- Internal controls and accountability policies – Are there sufficient segregation of duties and procedures in place to prevent errors or fraud from occurring?
In addition to the above, the nonprofit finance committee may also perform the duties of an audit committee and investment committee. In that case, you have the responsibility to evaluate whether the audit is performed adequately and by a qualified firm. You have the responsibility of drafting an investment policy, and making sure that policy is adhered to (and dealing with the results of those investments).
The intent is not to scare anyone from taking on these responsibilities. These are largely rewarding positions and are critical to fostering a great community. It’s also important to pick an organization whose mission aligns with your passions. My involvement with nonprofit organizations has brought great pleasure to my life. What I encourage my fellow finance committee members to do is reach out. Our firm has a large and experienced nonprofit practice with people more than happy to help others with the financial acumen necessary to assist in the responsibilities above. Further, we periodically provide CPE specific to nonprofit practices. So subscribe to Henry+Horne and join the finance committee army!
Matt Waller, CPA