By: John S. Morlu II, CPA
Nonprofits love to talk about governance. They set up boards, create committees, and write policies that look good on paper. But too often, these structures exist only in name.
The most dangerous example? Audit committees that don’t actually audit.
Because here’s the truth: a silent audit committee is worse than none at all—it creates the illusion of oversight while letting fraud grow.
What Audit Committees Are Supposed to Do
An audit committee isn’t a decoration. It’s a shield. Its purpose is to:
- Review financial statements independently of staff.
- Ensure audits are completed and findings addressed.
- Oversee internal controls and risk management.
- Protect donors, staff, and the community from fraud or mismanagement.
When done right, an audit committee is the backbone of nonprofit accountability.
What Happens in Reality
Too many nonprofits reduce audit committees to window dressing:
- They never meet, except once a year to rubber-stamp reports.
- They lack financial expertise, so they don’t know what to look for.
- They rely entirely on staff, eliminating independence.
- They skip follow-ups, ignoring audit findings year after year.
In practice, they don’t protect anyone. They expose everyone.
The Fallout of Fake Oversight
When an audit committee fails, the consequences are brutal:
- Fraud festers, sometimes for years before discovery.
- Boards get blindsided, claiming ignorance that won’t hold up in court.
- Donors lose confidence, seeing governance as theater, not protection.
- Regulators and attorneys general intervene, holding directors personally accountable.
A fake audit committee doesn’t just fail to protect the mission—it destroys trust in it.
The Fatal Mistake Boards Make
Boards often think, “We have an audit committee—box checked.” But the presence of a committee isn’t protection. Only its performance is.
Neglecting this duty is negligence. And negligence is actionable.
The Cure: Make Audit Committees Real
If an audit committee exists, it must function. That means:
- CPA Audits: Independent verification of financials.
- Forensic Reviews: Targeted investigations when red flags arise.
- Committee Training: Equip members to actually understand financial oversight.
- Regular Meetings: Quarterly reviews, not annual rubber stamps.
- Follow-Through: Every audit finding must be addressed, not ignored.
Audit committees don’t need to be symbolic. They need to be watchdogs.
The Wake-Up Call
Ask yourself:
- Does your audit committee actually meet and review financials?
- Are its members financially competent—or just filling seats?
- Would you be proud to show a regulator your committee’s work—or terrified?
If you hesitated, your audit committee isn’t protection. It’s liability.
Final Word
Governance isn’t about appearances. It’s about accountability. And when audit committees exist only in name, nonprofits don’t just fail—they implode.
At JS Morlu, we help boards turn audit committees into real shields. Our CPA audits, forensic reviews, and governance support ensure oversight isn’t symbolic—it’s substantive.
Because in the nonprofit world, fake oversight isn’t harmless. It’s fatal.
Author: John S. Morlu II, CPA is the CEO and Chief Strategist of JS Morlu, leads a globally recognized public accounting and management consultancy firm. Under his visionary leadership, JS Morlu has become a pioneer in developing cutting-edge technologies across B2B, B2C, P2P, and B2G verticals. The firm’s groundbreaking innovations include AI-powered reconciliation software (ReckSoft.com) and advanced cloud accounting solutions (FinovatePro.com), setting new industry standards for efficiency, accuracy, and technological excellence.