Audit, Finance & Oversight Committees: Do You Need One?

1. Do You Need An Audit Committee, Finance Committee, or a Joint Municipal/Education Committee?

2. Today’s agenda: New thinking on audit, finance & oversight committees: • What are they? • Why do we need them? • Who should have one? • What do/can they do? • What are the benefits? • What are the drawbacks?

3. What Are They? • Audit Committee • Finance Committee • Joint municipal/education Committee

4. Audit Committee • Volunteers – with sufficient expertise and experience who are authorized to oversee the financial reporting, internal controls, and policies to prevent fraud, waste, and abuse • Supervise the audit process • Appointed by the management of the governing body

5. Finance Committees • Oversee the preparation of the annual budget and financial statements • Oversee the administration, collection, and disbursement of the financial resources of the organization • Advise the board with respect to making significant financial decisions

6. Joint Municipal/Education Finance Committee Financial oversight plus long-term planning to maximize use of local tax dollars and facilitate more effective capital expenditures

7. Why do we need them? • To prevent fraud, waste, and abuse • To provide transparency to the public concerning financial and operational activities of the town • To improve effectiveness of local government

8. Who Should Have One? • GFOA says that audit committees are as important for smaller governments as they are for larger ones • GFOA urges every governing body, no matter how small, to establish an audit committee

9. Typical Responsibilities • Report regularly and promptly to the Board regarding matters within the scope of the Committee charge • Oversee the financial reporting and disclosure process • Review the financial statements of the town with the auditor

10. More to do… • Monitor the effectiveness of the town’s internal control procedures • Ensure the Town has policy and controls to prevent fraud, waste, and abuse • Review the conduct and adequacy of the audit • Review audit findings and the corrective action steps required to correct them

11. And more… • Investigate audit issues that appear to need investigation • Other duties the Select Board may determine • Create an annual report to the Select Board of how the committee discharged its duties and met its responsibilities

12. Benefits • Audit committee can focus specifically on issues related to fiscal accountability, internal controls, and financial reports • Increases communication between auditors and governing boards about audit objectives and results • Helps preserve objectivity and independence of the financial statement audit • Can also monitor corrective actions for Board. • Small towns – assist in segregation of duties issues

13. The Concerns: • Possible higher audit costs due to extra time required from audit firm • May be hard to find qualified volunteers • More staff time likely for treasurer and other staff • Less control of audit by management • Open meeting law for committee would be a concern to some • Might slow down audit

14. What about you? • Do you have an audit committee? • Most cities and towns do not – yet. • UVM does. Vt. State College system does. • State of Vermont does not. • How about other types of committees?

15. Recommended Audit Committee Make-up • Members should possess experience in Accounting, Finance, Law or General Management • A majority of audit committee members should be selected from outside of management • No officer of the town or member of any board, commission or other committee of the town, whether elected or appointed should be a member of the committee • No town employee or school employee shall be a member of the committee • The committee should be small enough to operate efficiently – no fewer than 5 and no more than 7