Church Internal Controls

Church Internal Controls


Ross Williams

5/22/2018

Dear Treasures, Finance Chairs and Pastors,

In this environment of scarce resources for vital ministry it is more important than ever that we protect our churches from financial fraud and administrative lapses.  The financial impact of such situations can often be easily prevented or at least minimized through implementing the controls listed below.  This list is not intended to be all-inclusive and if you have questions on these or other controls, please let me know!  

Sincerely,  Ross 

  • The Finance Committee should review the church’s bank signatories at least annually (those who are authorized to sign checks).  Don’t rely on the church’s list but instead go to the bank to see who they have on file.  Remove any signatories who no longer serve in the capacity in which they were originally added as soon as they step down from their role.  Please note:  clergy must not be bank signatories on any church account.
  • Reconcile bank statements to the church’s books monthly.  This should be done by someone other than the Treasurer, individuals that have signing authority on the account and those that handle church accounting.  This is one of the best controls that a church can institute to prevent financial fraud.
  • The Finance Committee must arrange for an annual audit on all accounts of all entities of the church.  For example:  the church's operating account, Trustees account, preschool account, brokerage and endowment accounts, UMW, UMM, etc.  “All” means all!   Audit reports should be sent to your District Superintendent as soon as they are completed and presented at your annual Charge Conference.  You can download a UMC Audit Guide and FAQ at https://www.nyac.com/church-audits.
  • Institute an internal policy and with the bank that require all checks to have two signatures. 
  • Address all church mail, including bank statements, to the church - not the homes of individuals.  All mail should be opened by someone other than the Treasurer. 
  • Deposit cash immediately - it should not be taken home by a parishioner awaiting deposit.  Arrange a night-drop service with your bank for Sunday offerings or other times when the bank may be closed.
  • Ensure that the Treasurer and Financial Secretary are two unrelated individuals.
  • Ensure that invoices are approved by the party that ordered the goods or services prior to payment.
  • Ensure that the church has adequate bonding (insurance against financial misappropriation).  Bonding is typically included in your insurance package policy.  Check with your broker or agent to see how much insurance you have and purchase coverage if it is absent.
  • Ensure that two unrelated individuals count the offering.  The Treasurer or those related to the Treasurer must be excluded from this activity.
  • If you see something on a statement or report that does not make sense, question it.  This is an act of transparency - not mistrust.  If you have raised questions with church leadership and have not received satisfactory answers, contact your District Superintendent (contact details at: https://www.nyac.com/conferencestaff).   

And one last suggestion: 

  • Do not ignore notices from municipal officials or taxing / regulatory authorities.  Also, make sure they have your correct mailing address.  We have churches that have put property at risk and paid significant fines and penalties for the failure to address taxation and utility matters in a timely fashion.