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Supporting Your Faith with Fiscal Accountability

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I am pleased with the service and patience we have received. Thanks to your service, we have greater confidence in our financial position. Professional... helpful... cooperative... and accommodating to our church's needs are characteristics that describe our experience with Patrick and Raines. They add credibility, while simplifying our church's financial management. I eagerly recommend them. Thanks again for your help. It's getting better and better.

Dr. Randy T. Hodges, Senior Pastor
Hernando Church of the Nazarene

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Know the Basics of an Internal Audit Committee

Second of a three-part series

In our last post, we discussed the need for a church audit and the differences between audits, reviews and agreed upon procedures engagements. Now we’ll discuss the fundamental operation of an internal audit committee, assuming you run only a basic church operation without a school, daycare, book store, foundation, etc. (If you do operate a multifaceted operation, we recommend you hire a CPA firm for assistance.)

After you’ve made the careful decision that an internal audit is the most practical approach to assuring the board and membership of your fiscal accountability, how do you plan to provide them with a credible result?

The first step is to select an audit committee that includes individuals who possess:

  • some financial expertise;
  • a level of trust from those who will receive their reports; and
  • sufficient independence from the typical flow of financial transactions.

Generally the committee will be small, perhaps only two to four members depending on the amount of work to be done. A committee of your own members can handle this process or you can form a committee in your organization that provides this service to another group while they reciprocate the same service for yours. This approach can be beneficial because the individuals would be impartial and may suggest alternate solutions to issues you may not have considered.

The committee should convene relatively soon after the period being audited, ideally within a couple of months. This tactic enables timely feedback to interested parties and makes the records easy to gather and subsequently store away. All the necessary records should be assembled prior to the scheduled meeting and include at least:

  • All bank statements from the month before the year being audited through the month after it ended;
  • All cancelled checks for this period, if they’re available;
  • All bank deposit copies and receipts for the year;
  • All bank reconciliations for all accounts for the year;
  • All investment statements for the same 14 months to match the bank statements;
  • All offering count sheets for each service or other activities with funds collected for the year;
  • All vendor invoices, purchase orders (if used) and receiving reports;
  • Petty cash ledgers, expense reports and credit card statements;
  • All payroll ledgers, payroll tax returns, time cards and employee files;
  • All current insurance policies;
  • All loan documents/debt instruments; and
  • A complete church budget for the year (and one for the coming year, as well.)

Once these important records are assembled, the committee can convene, but, despite prayer for wisdom, they may be confused about where to start with the given information. In our next blog, we’ll guide you through a few fundamentals to consider during the meeting.

Of course, if you have any questions about this information, or anything you read in our blogs, contact us at (904) 398-4747 or Email lynn@OnlineStewardship.com.

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