Forming an Audit Committee For Your Cemetery

Since the passage of the Not-for-Profit Revitalization Act ("NPRA"), cemeteries have been required to designate an Audit Committee consisting entirely of "Independent Directors" or the Board of Directors (only independent board members may deliberate or vote with respect to audit committee functions) to oversee their accounting and financial reporting practices. Added responsibilities are required of cemeteries with revenues over one million dollars.

While not required by NPRA, it is advisable to have at least one audit committee member with expertise in accounting and finance.

The Audit Committee must undertake the following responsibilities:

(1) retain or renew a CPA to conduct the annual financial audit;

(2) review the completed audit with the CPA; and

(3) review communications with those charged with governance (including a management letter) that result from the audit.

In addition, for cemeteries that have over one million dollars in revenue, the Audit Committee must also:

(1) review the scope and planning of the audit prior to the audit; and

(2) once the audit has been completed:

    (a) discuss with the CPA material risks and weaknesses in internal controls identified by the auditor,  

    (b) assess any restrictions on the scope of the auditor's activity or access to requested information,

    (c) assess any significant disagreements between the auditor and management, and

    (d) assess the adequacy of accounting and financial reporting processes of the organization; and  

(3) annually review the performance and independence of the auditor.

There are multiple additional duties that an audit committee can undertake, which may include, but are not limited to the following:

(a) Review of an organization's internal and financial controls assuring the conduct of appropriate risk assessments and risk response plans;

(b) Identifying and monitoring related party transactions;

(c) Review of conflicts of interests, ethics and whistleblower policies;

(d) Monitor any legal matters that could impact the reputation and financial health of the cemetery;

(e) Institute and oversee any special investigatory work as needed; and

(f) Periodically review the organization's insurance coverage.

A cemetery can adopt an Audit Committee Charter that outlines both the required responsibilities of the Audit Committee and the additional duties the Board of Directors can assign to the Audit Committee. The charter can serve as a road map for the Audit Committee's responsibilities. In addition, the Audit Committee is designated as the body that reviews ethics and related party transactions as well as allegations made under the cemetery's whistleblower policy.

Powered by 123ContactForm | Report abuse