Accounting Internal Controls and Church Groups

One of the most important accounting internal controls you can put in place is...

establishing clear guidelines for the handling of your organization's funds.

Included in those guidelines should ...

be proper procedures for handling church groups opening separate checking accounts.

Personally I do not think church groups should open separate checking accounts and have unlimited access to the funds.

It makes it difficult to maintain accounting internal controls and may even open the door for mishandling of church funds or at the very least...the appearance of wrong doing.

Phil Collins addressed some of these concerns in his post on this site titled: Risk of Church Losing Tax Exempt Status?

If separate checking accounts for church groups are kept open, they should be under the general accounting structure of the church and should be balanced monthly by the church treasurer or someone that has no signature authority on those separate accounts.

This How To Book for Churches is packed full of tips for:

setting up internal controls,
cash out-controls for debit/credit cards
setting up an effective fund accounting system,
handling and tracking contributions,
setting up compensations for a minister,
handling a payroll for a church
preparing nonprofit financial statements,
and much more.

Read more!

One of my readers commented that for decades in his church...each group (ladies auxiliary, men's club, youth group, stitchers, etc) have had their own bank accounts and handled their own finances, all while using the churches ID number on their accounts.

His concern was that while these groups take in contributions and do fundraisers, that the accounting for these funds is never reconciled with the church and never included on church financial statements.

He was right to be concerned. All church-related funds should flow through and be monitored and reported on by the church's financial administrators.

In addition, the more accounts a church has set up the more work it is for your volunteer or paid staff to reconcile, monitor, and oversee those accounts.

See an accounting internal control checklist that you can use to see how your church handles some of these internal control issues.

Need help setting up an effective accounting system!

Overwhelmed with the accounting part of your ministry?

Have a high turnover of individuals keeping the books?

Hiring a full time in-house bookkeeper not affordable or even a possibility at this time?

Let us take care of your books!

We can also set up an accounting system and train you how to use!

Some additional accounting internal controls to consider:

All counted and especially uncounted offerings should be kept in a locked safe until deposit is made
All blank check stock should be kept in a locked safe
Require two signatures on all checks or on larger amounts such as $500
Pre-print on checks the amount requiring a second signature (For example “Any check over $500 is required to have two signatures”)… the signature card on file at your bank should show this restriction also.
Update the signature card annually
Reconcile the bank statement within 10 days of receiving it
The person who does the bank reconciliations should not be the same person that signs checks, keep the books, or process receipts.
Another person such as the pastor, business manager, or finance board member should review the bank reconciliations monthly.
Require receipts or some kind of supporting documents for EVERY expenditure
Require an annual audit (some churches will perform an annual internal audit and then every 4-5 years pay for external audit)
More accounting internal controls

Another good article on internal controls is: Guarding Against Church Embezzlement

I know I harp on internal controls a lot, but in the last few years there has been such a sad increase in “reported” church embezzlements.

So many lives are hurt (both the embezzler and the church members), and trust destroyed by these senseless acts and many times...a few simple accounting internal controls in place could have diverted the devil’s temptation.

I know that with some people you can never make it tight enough that they won’t find a way to get past your internal controls and steal from the church and God …but don’t make it easy for the devil to tempt those that may have just fallen on hard times…but whose lives will be forever changed by following through on the devil’s suggestion.

Be good stewards of the trust invested in you by your church!

Reference:

Five reasons church treasurers should keep accounts to a minimum by Matt Branaugh