This article is the third in the series on church boards, chairpersons and board committees (see #213 and #214). I have distinguished between standing committees and adhoc committees. I would regard a church board Finance/Audit Committee as a standing committee. Probably this is the committee that most church boards already have established in some form.
This kind of committee serves to care for one of the primary “worry points” that every church board experiences — what about the money! We all know stories of church boards that failed to give due diligence to finances, with the result that funds were wasted, misappropriated, or incompetently managed. The resources of the church languished and board credibility was jeopardized. It seems to be the case that if a church board does not demonstrate care and competence in overseeing finances, it will erode congregational confidence in all other areas of church board leadership. Just as in the case of marriages, financial matters in congregations often generate unhealthy conflict. For these and other good reasons board chairs have to make sure that this aspect of board responsibility is being exercised well.
It is also the case that external authorities, such as Canada Revenue Agency, pay particular attention to the financial oversight of non-profit entities. Failing to provide appropriate oversight of finances can lead to the removal of your ability to provide income tax receipts for donations.
Functions of a church board Finance/Audit Committee. This is a board committee and so its primary responsibilities focus on its service to the church board.(The following duties are not intended to be an exhaustive listing.)
- It should recommend policies to the board that deal with financial oversight. For example, when the board is considering what kind of internally restricted funds it should establish, the Finance/Audit committee should be tasked to gather information and propose policy options that the board can consider. This committee should ensure that appropriate internal controls are in place to handle financial matters.
- It should recommend annual budget parameters for the board’s consideration.
- It should propose investment policy that the board might implement to oversee the investment of surplus or specially designated funds.
- It should recommend to the board several firms that could manage the annual audit or financial review. If internal auditors are used, then this committee should be recommending the basic principles that the board should approve for the completion of this annual review. Often the chair of this committee will introduce on behalf of the board the results of the annual audit or financial review at the Annual General Meeting.
Qualifications for members. Some who serve on this committee should have expertise related to financial management. They should be able to read and analyze a financial statement and know when the results are good or bad. If no one on the church board has such competence, then steps should be taken to add to the committee from the congregation such people, while the chair of the committee continues to be a board member.
Relationship to church board chair. As with any standing committee the chair of the committee needs to work with the board’s chair. Such a requirement should be articulated in the policy developed by the board regarding a Finance/Audit Committee.
Issues to care for. This standing committee should produce minutes for its meetings and the board members should have access to these minutes. In the case where the board delegates to the Lead Pastor the management of ministry, this should include the oversight of the annual budget’s implementation. So the Finance/Audit Committee should be careful not to take to itself a management role. It can advise the staff in such matters. The board’s concerns for internal management should be covered by board policy. The Finance/Audit Committee ensures that the staff are operating in alignment with the board’s policy. This means that the monthly financial report is part of the lead pastor’s report, because it is a staff responsibility.
In the case where the church is smaller and the board needs to assume some management responsibilities because no paid staff are available to cover the finance and audit responsibilities, then care should be taken to distinguish carefully when the finance and audit committee is functioning as a board committee and when it is fulfilling a management responsibility.
There is scarcely a board meeting where some financial issue has to be considered or where the discussion about another issue does not include financial matters. A board with a well-led Finance/Audit Committee will be blessed and able to focus its energies appropriately.
You might consider the following resources for developing board policy regarding Finance/Audit Committee responsibilities: www.greatboards.org/…/Charter-Finance-Committee-Charter-July-2008; ctb.ku.edu/en/table-of…/finances/…finances/finance-committee/main.