This article is by a student in XPastor’s Course MS-203, XP Boot Camp. To preserve confidentiality, the author will be listed as anonymous. One of the assignments for those taking the class for certification was: Take one aspect in your financial operation and analyze how your church is performing. For example, this could be the look and feel of your buildings, parking lot issues, financial controls or outsourcing janitorial work. Choose an area of your church that is the highest priority and can be developed in the coming year.

Internal Control Audit

A few years ago, our church went through an internal control audit by a team of certified public accountants. At its conclusion, we received a report of their findings. The report contained a long list of recommendations surrounding considerable gaps in our internal control environment.

Their findings uncovered an unhealthy culture of trust regarding personnel and processes that lacked sufficient oversight and separation of duties. Far too many churches justify their lack of controls with the idea that church employees should be trustworthy and because we “know” this person well or they have been around a long time. Unfortunately, we were one of those churches.

A big reason for why there is only one person handling incoming funds is that we do not want a lot of people seeing what individuals are giving. That paranoia has allowed our church to operate at risk for many years. Indeed, our financial worker that has counted and handled all of our incoming funds and taken care of our reporting is trustworthy.

However, that does not excuse us from allowing the church to be at risk nor does it excuse us from allowing our financial staff to work under the risk of suspicion or false accusations. We have not protected ourselves or our staff well. The good thing is that the retirement of this financial worker provided us with a perfect opportunity to not only replace the person with a team but to also implement the recommendations from the report.

The new financial worker we hired has extensive experience in the banking industry, so they come in with a wealth of knowledge about controls as well as experience working under proper protections. They were hired knowing they would also help our church implement the findings from the report in partnership with our Operations Director.

Here is the list of action items:

  1. Create, record, and implement the following processes:
    1. Receipt and review of physical bank statements before reconciliation.
    2. Monthly review of bank account activity online.
    3. Review of bank reconciliations and reconciliation of cash balances to monthly reports. Monthly comparison.
    4. Weekly bank deposits to include another person or courier service.
  2. Create solution to incompatible duties between custody and accounting.
  3. Work with Preschool Director to create and implement the same controls for the preschool.
  4. Create processes and train ministry teams that handle money with proper controls.
  5. Create a count team to separate the accounting employees from the removal and counting of funds.
  6. Train back up staff members to take over duties of finance team when they are on vacation.
  7. Obtain an independent auditor’s report addressing internal controls from FellowshipOne and Kindred.
  8. Move the mailbox to a more secure location and create secure process for mail retrieval and handling.
  9. Replace safe with one that requires two people to open it or money bags that require two keys.
  10. Document all accounting procedures and have board approval and maintain oversight with annual checkups from finance/executive team.