Section 5 — Local Church Audits
Reasons for Audits“Every set of accounting records, from those of the local church to those of the General Conference, are subject to audit by auditors appointed for the purpose. This rule, which also applies to every denominationally affiliated institution, provides the maximum of safety in the handling of funds” — Church Manual Ch. 11 (Revisions 2010).
The business world considers audits as the “watchdog” of financial activity, not the “hound dog.” The watchdog is there to protect and assure the managers and the stake holders that all is okay. Church audits are designed for the same purpose. Those that handle money need to be protected from real temptation, from misunderstanding and from unsubstantiated rumours.
North NSW Conference’s Audit/Review Procedure enables the Conference Treasury to identify function areas where assistance is needed and to discuss with local members particular issues that may affect the functions of the local treasury team in their financial reporting to the Local Church Board, the Business Meeting and to the Conference. An Audit/Review for the Local Church provides opportunity for liaison and relationship building. It is intended to be informative and constructive in explanations of best practice policy and accurate report presentation. This process is not an act of mistrust, but rather a protection activity.
Every church member is an auditor in reality to support and affirm each other by ensuring there are adequate resources, foundations and fences to support those in responsible positions.
Internal controls, in both detection and prevention, protect the church assets, facilitate accurate recording of financial transactions and provide conditions for reliable reporting and efficient operations. Therefore, it is not an act of mistrust for a Treasurer to have one or more assistant treasurers in sharing the responsibility of receipting, banking, recording the income and expenditure, writing cheques, counter signing payments, cross checking by random sampling the offering counts and doing the bank reconciliations. In fact it is an act of building fences around those in trust positions to protect them from criticism and failure, and ensure data integrity. In small congregations where prevention controls are difficult to implement, detection controls will need to be more heavily relied upon.
In general most irregularities (theft, fraud) in the financial realm start off when three conditions come together. These conditions are:
• The opportunity to manage financial records and funds
• Observable controls to ensure accuracy and honesty are minimal or non-existent
• There is an individual’s need for additional funds for selfish purposes
Even if the church treasurer shows a lack of interest, or takes the role and responsibility for granted, it may lead to a weakening of his or her own expectations of professionalism as a guardian of Church funds.
Documentation Required for an AuditDocuments required for an audit are as follows:
• Tithes and offerings envelopes
• Receipt books and weekly summaries
• Weekly count sheet book or similar records
• Bank deposit book/bank stamped slips
• Suppliers invoices/debit notes
• Cheques books – current and used
• GST claims
• Plant and equipment register (insurance policy)
• Authorised signatures list for each bank account
• Bank statements for all accounts
• Bank reconciliations for all bank accounts
• Minutes of Business Meeting
• Financial reports to Business/Board Meeting
• Monthly reports to the Conference
• Remittance advices, if any