It is critical for all boards to have individuals with an appropriate level of financial literacy. At least one individual will represent the Board as Chair of the finance committee (Treasurer).
It is the responsibility of the finance committee to identify the budget, understand and deal with financial information, and review and sign-off on the annual financial statements.
While much of the financial operations and oversight is the responsibility of the finance committee, it is the responsibility of the board to ask critical questions, such as:
- Based on the Board’s knowledge of the organization and the overall view of performance for the year, do the financial statements convey the same message?
- Is the Board satisfied that the financial statements follow the decisions taken by the board during the year?
- Are the financial statements logically structured and easy to navigate? Consider if critical note disclosures should be prioritized.
- Is there evidence that any major judgements have been reached in an objective and neutral way?
- Are all assumptions made by management consistent with the Board’s understanding of the business and of the Board and management’s intent?
- What are the significant or unusual transactions and events that have taken place during the year? Do they correspond to those identified by the Board and management? Are these items properly reflected in the financial statements?
- When reading the financial statements does the Board understand all disclosures, especially those relating to complex or unusual transactions entered into in the current year, or are they left with further questions?
- If the Board is not satisfied that the financial statements are compliant, relevant and transparent, has the Board identified what needs to be done to ensure the financial statements become so?