Do You Need An Audit Do You Need An Audit Committee, Finance Committee, Finance

Committee, or a Joint Committee, or a Joint Municipal/Education Municipal/Education

Committee?Committee?

Today’s agenda: Today’s agenda:

New thinking on audit, finance & New thinking on audit, finance & oversight committees: oversight committees:

– What are they?What are they?– Why do we need them?Why do we need them?– Who should have one?Who should have one?– What do/can they do?What do/can they do?– What are the benefits?What are the benefits?– What are the drawbacks? What are the drawbacks?

What Are They?What Are They?

• Audit CommitteeAudit Committee

• Finance CommitteeFinance Committee

• Joint municipal/education CommitteeJoint municipal/education Committee

Audit CommitteeAudit Committee

– Volunteers – with sufficient Volunteers – with sufficient expertise and experience who are expertise and experience who are authorized to oversee the financial authorized to oversee the financial reporting, internal controls, and reporting, internal controls, and policies to prevent fraud, waste, policies to prevent fraud, waste, and abuse and abuse

– Supervise the audit processSupervise the audit process– Appointed by the management of Appointed by the management of

the governing bodythe governing body

Finance CommitteesFinance Committees

• Oversee the preparation of the annual Oversee the preparation of the annual budget and financial statementsbudget and financial statements

• Oversee the administration, Oversee the administration, collection, and disbursement of the collection, and disbursement of the financial resources of the organizationfinancial resources of the organization

• Advise the board with respect to Advise the board with respect to making significant financial decisions making significant financial decisions

Joint Municipal/Joint Municipal/Education Finance Education Finance CommitteeCommittee

Financial oversight plus long-term Financial oversight plus long-term planning planning

to maximize use of local tax dollars to maximize use of local tax dollars andand

facilitate more effective capital facilitate more effective capital expendituresexpenditures

Why do we need them?Why do we need them?

• To prevent fraud, waste, and abuseTo prevent fraud, waste, and abuse

• To provide transparency to the public To provide transparency to the public concerning financial and operational concerning financial and operational activities of the townactivities of the town

• To improve effectiveness of local To improve effectiveness of local government government

Who Should Have One?Who Should Have One?

• GFOA says that audit committees are GFOA says that audit committees are as important for smaller as important for smaller governments as they are for larger governments as they are for larger onesones

• GFOA urges every governing body, GFOA urges every governing body, no matter how small, to establish an no matter how small, to establish an audit committeeaudit committee

Typical ResponsibilitiesTypical Responsibilities

• Report regularly and promptly to the Report regularly and promptly to the Board regarding matters within the Board regarding matters within the scope of the Committee chargescope of the Committee charge

• Oversee the financial reporting and Oversee the financial reporting and disclosure processdisclosure process

• Review the financial statements of Review the financial statements of the town with the auditorthe town with the auditor

More to do…More to do…

• Monitor the effectiveness of the town’s Monitor the effectiveness of the town’s internal control proceduresinternal control procedures

• Ensure the Town has policy and controls Ensure the Town has policy and controls to prevent fraud, waste, and abuseto prevent fraud, waste, and abuse

• Review the conduct and adequacy of Review the conduct and adequacy of the auditthe audit

• Review audit findings and the corrective Review audit findings and the corrective action steps required to correct themaction steps required to correct them

And more…And more…

• Investigate audit issues that appear to Investigate audit issues that appear to need investigationneed investigation

• Other duties the Select Board may Other duties the Select Board may determinedetermine

• Create an annual report to the Select Create an annual report to the Select Board of how the committee discharged Board of how the committee discharged its duties and met its responsibilities its duties and met its responsibilities

Benefits Benefits

• Audit committee can focus specifically on issues Audit committee can focus specifically on issues related to fiscal accountability, internal controls, related to fiscal accountability, internal controls, and financial reports and financial reports

• Increases communication between auditors and Increases communication between auditors and governing boards about audit objectives and governing boards about audit objectives and resultsresults

• Helps preserve objectivity and independence of Helps preserve objectivity and independence of the financial statement audit the financial statement audit

• Can also monitor corrective actions for Board.Can also monitor corrective actions for Board.

• Small towns – assist in segregation of duties Small towns – assist in segregation of duties issuesissues

The Concerns:The Concerns:• Possible higher audit costs due to extra Possible higher audit costs due to extra

time required from audit firmtime required from audit firm

• May be hard to find qualified volunteers May be hard to find qualified volunteers

• More staff time likely for treasurer and More staff time likely for treasurer and other staff other staff

• Less control of audit by managementLess control of audit by management

• Open meeting law for committee would Open meeting law for committee would be a concern to somebe a concern to some

• Might slow down auditMight slow down audit

What about you?What about you?

• Do you have an audit committee? Do you have an audit committee?

• Most cities and towns do not – yet. Most cities and towns do not – yet.

• UVM does. Vt. State College system UVM does. Vt. State College system does.does.

• State of Vermont does not. State of Vermont does not.

• How about other types of How about other types of committees?committees?

Recommended Audit Recommended Audit Committee Make-upCommittee Make-up

– Members should possess experience in Members should possess experience in Accounting, Finance, Law or General Accounting, Finance, Law or General ManagementManagement

– A majority of audit committee members should A majority of audit committee members should be selected from outside of managementbe selected from outside of management

– No officer of the town or member of any board, No officer of the town or member of any board, commission or other committee of the town, commission or other committee of the town, whether elected or appointed should be a whether elected or appointed should be a member of the committeemember of the committee

– No town employee or school employee shall be No town employee or school employee shall be a member of the committeea member of the committee

– The committee should be small enough to The committee should be small enough to operate efficiently – no fewer than 5 and no operate efficiently – no fewer than 5 and no more than 7more than 7