This financial news is brought to you by the Alfred Johnson blog.
A number of years ago I was contacted by a pastor wanting to know how he could log in to their accounting application. I told him that his church accountant could give him access. His answer? “She will not let me look at the books.” On another occasion, I was assigned to assist a church with their accounting approach. I contacted their accountant about one week before scheduled to arrive. She asked how much I knew about accounting. When I told her, she canceled the training.
From what I have observed and read, churches that have a long time highly trusted employee or volunteer with access to church funds are guilty of either tempting an employee to steal from the church or allowing the possibility of undetected theft.
It does not matter how small or large your church is. You need to create and enforce a separation of duties protocol if for no other reason than protecting the integrity of your employees. Using the tools in Shelby Financials along with common sense will help you structure tasks so that there is less chance of becoming a victim of an internal theft or someone questioning staff integrity.
Accounts Payable: Let’s start here.
- Do you allow staff or volunteers to take a blank check on a shopping trip? That check can be made payable to anyone. Oh, I know you always get a receipt to enter into AP. Well anyone can alter or simply create a receipt that looks legit. Just do not allow this practice.
- Does the same person who enters an invoice into AP, also print, sign, and post the entries to GL? It would be better to have someone not associated with the purchase or entry of the invoice be the one to sign the check. If you use electronic signatures when printing checks, then there needs to be some multiple person control with this process.
- Do you allow credit card holders to purchase anything they want? It would be better to have a purchase approval process prior to making a purchase and a routine to validate charge was actually for church use. Using a credit card can be similar to giving someone a blank check.
Bank Account Management: This one is simple.
- Balance the bank statement into the accounting system and do it each month. Don’t let statements stack up. Just do it.
- The person assigned to reconcile the bank statement should not be associated with any of the payments or receipts posted to the bank account. And, it has been suggested by some auditors that every so often an additional person should examine a copy of the bank statement.
General Ledger: Watch for the following.
- If you have the staff, then have your accounting manager of business manager finalize all postings into the ledger.
- Be alert for an unusual number of correcting entries. If you see this with some frequency, then start asking questions. If it continues, ask more questions.
- Be alert for a large number of manual journals. If your chart of accounts is set up correctly, and the applications used correctly, then there should not be an unusual number of this type of activity. However, with outsourced payroll and other third-party providers, you might see more manual entries than usual. Just remember that it is easy to change journals from outside applications/services.
Accounts Receivable: This can be tricky.
- Accounts Receivable is most often used by churches that support a daycare or have a school. By the very nature of the required structure, the daycare / school operation becomes separated from the church’s general operation. This separation can result in a lack of proper accounting oversight.
- Create an internal audit committee to periodically check on the following:
- Review amounts being charged to each student to verify compliance with established fees.
- Check accounts receivable overdue accounts to be sure that customers are staying current with billings.
- Assign the church business manager the task of finalizing all accounts receivable general ledger postings.
- Church business manager should verify that accounts receivable balances with the general ledger at least once a quarter.
- Checks and cash received should be secured and daily transferred to the church business office.
Payroll: Paychecks are important.
- Access to the Payroll application should be closely controlled. That said, more than one person should be able to run scheduled payments.
- The employees that can process a payroll should not have access to change compensation or deduction.
- Any changes to employee records affecting pay should be reviewed in the application by management.
Source: alfredjohnson.net