Finance Best Practices

5.�� Best Practices

Internal Control

�Accounting controls are defined by the American Institute of Certified Public Accountants (AICPA) as �the plan of organization and the procedures and records that are concerned with the safeguarding of assets and the reliability of financial records.�

�

Establishing adequate internal control procedures is the number one deterrent to internal fraud and embezzlement.� The establishment of effective internal controls takes an investment of time and serious attention more than it does money.� If a new church implements strong internal controls,�it can prevent or early detect careless mistakes,�fraud, theft, and risky transactions.

�

CONTROLS IN U.S. CHURCHES

�� All payments are by serially numbered checks.

�� Buildings are locked when not in use.

�� Contribution records are maintained.

�� All cash is deposited in bank.

�� Voided checks are marked and retained.

�� Budgeted expenditures are compared to actual expenditures.

�� Invoices are checked for accuracy before paid.

�� Balances in books are periodically reconciled with the financial statements.

�� Members receive contribution notices.

�� Supporting documents are marked �paid� when checks are issued.

�� Pastor does not handle cash and is not involved in the accounting process.

�� There is a periodic review of insurance coverage.

�� Money counters ensure that the amount on an offering envelope equals its contents.

�� Invoices are approved before payment.

�� The use of offering envelopes is encouraged.

�� Check signers inspect supporting documentation.

�

Discourage post-dated and third party checks.

�

Never cash checks from currency collections.

�

Miscellaneous currency and check collections.

To the extent possible, miscellaneous collections should be processed quickly in a centralized location.� The objective is to avoid negotiable checks and currency floating around in a loosely controlled environment.

�

Provide accountability forms for collectors.� Collectors should issue duplicate receipt forms.

�

Collections documented and processed quickly are much less likely to be lost or stolen.

�

FINANCIAL CONTROLS

Should have Session-approved policies for�endowments and gifts the church is�willing�to accept
�Should have Session-approved Fully Accountable Expense Reimbursement Plan
�Should have Session-authorized Procedure for Counting Offerings
�No one person should handle all aspects of a transaction from beginning to end
Divide and segregate duties
�The person responsible for custody of an asset should not record transactions.
Deposit all cash receipts immediately.�� Record all cash receipts immediately.
�Payments should be made by serial numbered checks except for very�small�transactions�� that are necessary to handle through petty cash.
�If petty cash is used, there must be a receipt for the money expended and the petty cash reconciled at least monthly.
�Reconcile bank account monthly.
Balance subsidiary ledgers to general ledger accounts on a regular basis.
�Review comparative financial statements in sufficient detail every month to disclose significant variations in revenue and expenses.
�Bank statements and cancelled checks should be opened and reviewed by someone who is not a payee or authorized to write checks.
Investigate unusual items, such as checks to unfamiliar vendors, checks for large amounts� and checks to employees or other insiders.
�Use serial numbers on sales and purchase�invoices, checks, tickets, purchase orders, receiving reports and debit or credit memos.
�Use duplicate deposit tickets and retain copy�in the office; keep bank deposit receipts.
�Deposits should be made promptly.
�Use budget or forecast to detect whether goals are achieved.� Investigate differences � what happened and why.
�It is essential that records are retained.

Last Modified 5/26/05 11:10 AM

Hide Tools

Site
Changes
Index
Search

User
Log In