ALA Oregon’s Information Library

Department Audit Committee

The purpose of an American Legion Auxiliary Audit Committee is to meet the nonprofit governance expectations of the revolutionary IRS Form 990. The audit committee serves in a risk assessment and risk aversion oversight role for the Auxiliary department and the department’s subsidiary (ies), if any. The Audit Committee is required to operate at arm’s length from the Auxiliary leadership.

It is important to understand what the audit committee is, and as importantly, what it is not. The name “Audit Committee” is a misnomer because it the committee serves as a risk assessment/990 compilation committee, not an auditing (emphasis on the “ing”) committee that audits the books.

The audit committee solicits and engages the independent auditor for the department. The Department Audit Committee chairwoman signs the “Letter of Engagement” – the agreement with the audit firm retained to conduct the external audit or external review. A “Letter of Engagement” between the ALA department and the external audit firm is renewed annually. The audit committee reviews the Audit Firm Letter of Engagement, votes on the acceptance of the Letter of Engagement, reviews the audit, and reviews the IRS Form 990 annual filing. If the governing board has designated the audit committee to approve and oversee the filing of the IRS Form 990 annual report, then the audit committee fulfills that responsibility.

In keeping with the expectations and requirements of the IRS Form 990, the audit/risk aversion committee operates at arm’s length from the ALA. It reviews, evaluates and monitors the organization’s policies, standards, compliance, and potential for risk. It ensures that the ALA, as a corporate entity, has appropriate governance policies and internal and financial reporting controls in place that mitigate the organization’s exposure to financial reporting risks and other corporate-level risks.