A church audit is a process that provides reasonable assurance that good stewardship is being used in handling and accounting for the funds and other assets of your organization.
Note: another process to "check the books" is a Church Checkup engagement. See more in this article written by a CPA:
If you follow church accounting news, you know there has been quite a controversy surrounding the IRS, the Freedom From Religion Foundation (FFRF), and church audits.
It all began in 2009, when a Minnesota church successfully challenged the IRS over its procedures for auditing churches. The judge in that case ruled in favor of the church. The court decision meant the IRS could no longer audit churches until its church audit procedures was revised.
Then in 2012, the FFRF filed lawsuit against the IRS's alleged “preferential treatment of churches”. In July 2014, the FFRF agreed to drop its lawsuit after "receiving satisfactory assurances from the IRS that it has resolved internal policies preventing examination of church politicking claims, and no longer has a blanket policy or practice of non-enforcement of political activity restrictions."
According to an article on the ECFA site: IRS Commits to Auditing Churches but Keeps Procedures a Secret ... "The IRS has declined requests to comment on the case or to provide details regarding the settlement. So, while FFRF has reportedly been provided with information on the IRS’s policies and procedures for auditing churches, everyone else is left to wonder for now."
So in light of what is happening in this "not so church-friendly" administration, it is imperative church administrators ensure their organizations are "in order".
One way is through church audits internal and external and/or hiring a qualified accounting firm such as Wisdom Over Wealth to do a Church Checkup engagement.
The 2 types of audits are:
Audits or AUPs are the best way to:
In addition to tracking the cash through the system, an auditor typically will evaluate:
Whether it is an external or internal audit, there are certain documents you will need to have available.
An internal nonprofit or church audit consists of selected auditing procedures performed by individuals inside your organization rather than by an outside CPA.
Internal audits can be a very cost effective means of improving the organization’s system of internal controls without the expense of a full scope outside audit. They can ensure that the organization’s system of internal controls are operating as intended.
The internal auditors should develop an audit program and an audit schedule.
Your nonprofit or church may want to consider consulting with a CPA who is familiar with auditing to assist the organization in designing the internal audit program and training the internal auditors.
Once the audit program has been effectively designed and documented, the nonprofit or church should be able to use the program for several years with only limited involvement of the outside CPA.
Generally, a person(s) who is "qualified" to perform an internal nonprofit or church audit will have some experience with accounting principles,
such as those gained through bookkeeping, office management, or accounting courses.
The person(s) must have the time to devote to the internal audit as it is quite a lengthy process.
Sometimes a small church or nonprofit will agree with another small church or nonprofit in the same locale to have the treasurer of each audit the other.
Often churches have accounting professionals in their congregations who are not serving that church in any of the financial positions who are willing to perform the audit as a donation of services.