I encourage all my clients to have an annual audit. You can find reasonably priced audit firms who will also provide assistance throughout the year with tricky questions.
In addition, I encourage my clients to have an Internal Auditor, typically the church’s treasurer if they have a financial assistant doing the books (or the Finance Committee chairperson if the treasurer is doing the books).
The procedures the internal auditor does each month are quite simple:
- After the month ends, the internal auditor receives the general ledger detail for the checking account. That lists every payment and deposit.
- The internal auditor will review the list and select up to 10 deposits and/or withdrawals for which he would like to have more information.
- The Finance Assistant finds the source documents for the requested deposits or withdrawals and has them in a folder in the church office for the auditor to review. These documents should never leave the church; the auditor can review them onsite.
- The auditor make notes and, if necessary, talk with the staff person or supervisor if there is an expense or receipt for which he needs further clarification.
That’s it. It is very simple and it is done every month. Church staff will be informed that every one of their expenses is subject to a random inspection and that will ensure they attach appropriate documentation and in a timely way. It also provides a sense of lay member oversight so that the church can know that there is someone “guarding the guards.”
The monthly bank reconciliation summary should also be sent to the treasurer. This is done to provide more detail about checks and deposits that cleared or haven’t cleared.
Lead On!