We been talking recently about the role of committees and subcommittees such as the Finance Subcommittee.   We agreed that the benefit of forming a subcommittee is that it allows the board of management to focus on broader organisational issues.  The subcommittee can then hold the more detailed discussions on the specific focus for which it was formed.

Some subcommittees can be formed for a specific purpose such as the performance review of the CEO and, once completed, cease to operate until the next performance review.  Other subcommittees are established to operate on an ongoing basis.  One such committee is the Finance Subcommittee.

Once the board decides to create a subcommittee it needs to set some rules and guidelines to which the subcommittee will work.  These are called the terms of reference.

The terms of reference for a Finance Subcommittee is not a complex document.  The main function is to outline what the Finance Subcommittee will do.  For example, it may cover things such as the purpose or the roles and responsibilities.  It might state which issues the subcommittee will cover, who can be members, how often the subcommittee should meet and what it should report on.  As discussed in the previous post, the important thing is to be clear about the role it will perform as well as the outcomes you are trying to achieve.

Furthermore, your organisation may have other subcommittees so it is important to identify exactly which functions will be performed by each one and then prepare the terms of reference to reflect those functions to avoid any duplication of effort.

In our next post we will show you an example of a Terms of Reference for a Finance Subcommittee.