Treasury Management: What Does the Audit Committee Need to Know? Depends
Is reporting to the board’s audit committee a “on a need-to-know basis” kind of thing? A question recently posed by a NeuGroup member to the entire NeuGroup network sought to answer that question. The questioner asked members what they reported, which prompted a variety of answers.
Worried that his report to the audit committee was growing stale and less useful, the questioner was looking for input on how he might make it more meaningful in both content and appearance. He received no less than 38 responses giving him more than enough input on which to base changes. Reviewing the responses indicate that treasury is both widely varied in what they report and consistently focused on the core component. The chart below reflects the percentage of member responses that include these items in the reporting.
Source: NeuGroup Exchange, January 2014
Clearly, the core components of treasury operations, indicated by the top five items, are most commonly reported. After that, the variance becomes much more widespread. Not listed in the chart are 12 other items reported by members which includes activities such as working capital / liquidity, retirement plans, counterparty exposure, credit lines, cash forecast and dividend recommendations, all of which received mention from less than 30 percent of the respondents.
Further, the “other” category includes reporting items such as regulatory updates, business continuity/crisis management review, customer credit reporting and accounting and controls review.
Another interesting observation is simply the audience to which these members report. Most report to the audit committee (53 percent) or the finance committee (21 percent). But a few others report to the board directly (16 percent) or the audit & finance committee (13 percent). One respondent has a unique committee referred to as the “Strategic Affairs and Finance Committee.”
The final item members noted was the frequency of their reporting. The range of responses ran from an ad hoc basis to five times per year. Quarterly reporting is most common with just over half noting that frequency, while a third report annually.
The initial query asked about reporting formats and presentation. None of the replies included any examples but a few offered to share offline. With all of this interest and information flowing on this topic, board members across the country are likely to see some changes from treasury.