Does my church need an Audit?
Often within discussions about church finances, the question comes up, “should my church have an audit done?” Well, similar to other questions asked in church, the answer is, “it all depends…” The real question behind the question is what needs to be addressed. What is it you are attempting to accomplish?
Some churches absolutely require an audit. There are three basic reasons a church would require an audit to be completed:
- Lender requirement – When a church seeks to borrow money, it is often required by the lender to have a Financial Audit to ensure the church is able to pay back the loan.
- Grant requirement – similarly to lenders, grantors such as the Lilly Foundation often require a Financial Audit prior to approving the funding of a grant to ensure their investment is being made into a sustainable organization with healthy financial practices.
- Bylaw or Membership requirement – some churches have within their bylaws or denominational membership a requirement for an annual audit of the finances.
It is important at this point to understand exactly what is a Financial Audit and what is its intended purpose. A Financial Audit is an independent, objective evaluation of an organization’s financial reports and financial reporting processes. The primary purpose for financial audits is to give regulators, investors, directors, and managers reasonable assurance that financial statements are accurate and complete. If you aren’t required to do an audit by one of the three reasons above, you probably don’t need a Financial Audit.
Now that doesn’t mean you don’t need a financial check-up. Engaging with someone from the outside who can ensure your policies and procedures are current, properly safeguard your resources, and protect your valuable volunteers from unnecessary accusations is extremely valuable. The reality is, every church has room for improvement in their financial controls and procedures. New processes are being developed all of the time as technology is allowing us to do more in new ways (e.g. online giving, online banking, etc.). Knowing your church is in compliance with the law, is a safe place for people to contribute their financial resources, and that your volunteers are protected while they do this important work behind the scenes is worth the effort.
Church Procedures Audit offers multiple ways to assist you in ensuring your congregation is up to date and safe. We offer a Financial Controls & Procedures Audit, looking through your cash receipts process, cash disbursements process, internal controls and segregation of duties. We audit your payroll process and categorization of employees vs independent contractors. We also review your fund management, including endowments, restricted funds and designated funds to ensure you are in compliance with the Uniform Prudent Management of Institutional Funds Act (UPMIFA).
We also provide consulting and coaching for those who wish to conduct an internal audit, helping direct your process to ensure you thoroughly check through every detail. We will train a team to do the investigation and guide them through the reporting process.
Finally, we offer consulting and coaching for church leadership in the development of sound Financial Controls & Procedures. If you simply want to ensure you have the right processes in place from this point forward, we will help you customize your own Policies & Procedures Manual, tailor fit to your congregation.
So, how do you know if you need to contact us? Here are a few questions to help you decide. If you say “No” to any of these questions, you should be contacting us to bring your church finances up to date:
- Do you have a Financial Policies & Procedures Manual?
- Is your Financial Policies & Procedures Manual more than 3 years old?
- Is your Financial Policies & Procedures Manual more than 20 pages long?
- Do you understand your Financial Policies & Procedures Manual?
- Are you confident your Church Council is fulfilling its legal fiduciary duty to the congregation?
A recent study revealed 1 in 10 churches have experienced embezzlement. Same study shows that more than 50% of the churches surveyed had not had a recent audit of any kind.
Contact Keith to discuss your church’s needs at Keith@ChurchProceduresAudit.com or (626) 657-0146.