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Covering Audits and Investments

Depending on many factors including the size of the board, the size of the budget, and the magnitude and complexity of existing financial assets, the finance committee may be called upon to perform the roles of two other committees that are usually separate in larger organizations: the audit committee and the investment committee. The basic audit and investment committees’ responsibilities include:

Audit Committee

1. Recruit and select the auditor.
2. Review the draft audit and 990 as presented by the auditor.
3. Present the audit report to the full board of directors (if the auditor does not do this).
4. Review the governance letter and management letter from the auditor and ensure
    follow up on any issues mentioned.
5. Review and circulate IRS 990 to the board in advance of filing.


Investment Committee

1. Draft an investment policy that:
    a. details the objectives of the investment portfolio,
    b. provides guidelines on the asset allocation of the portfolio based on
        a predetermined level of risk tolerance,
    c. determines whether/how the organization handles donation of stocks,
    d. specifies authorizations required for executing transactions,
    e. confirms disposition of earned investment income, etc.
2. Ensure provisions of the policy are followed.
3. Review the policy at least annually and update if necessary.
4. Hire and evaluate the investment managers/advisors (if assets are considerable
    enough to warrant outside assistance).

Even if an organization does not have enough cash to support a full-blown investment portfolio, it should manage its cash to optimize earned revenue. If an organization has excess operating cash, the finance committee, with the staff administrative leader’s input, may consider drafting guidelines for putting the excess cash in low–risk, short-term vehicles. These should be designed to maximize  revenue from existing cash without interfering with operating cash flow needs, i.e., purchasing short-term CDs with staggered maturity dates, or establishing a money market account or a sweep account arrangement wherein excess cash is swept into a higher-yield vehicle each night.

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