Internal Controls

Mississippi Conference UMCDavid Stotts, CPA

Treasurer/Director of Financial Administration

2008 Discipline 258 4 c

The committee on finance shall establish written financial polices to document the internal controls of the local church. The written financial policies should be reviewed for adequacy and effectiveness annually by the committee on finance and submitted as a report to the charge conference annually.

Key Point

Church leaders have a special fiduciary obligation to make sure that all church assets are protected and used properly.

15% of all churches are victimized by unscrupulous employees or members.

5250 UM churches in the US167 UM churches in Mississippi

General Objectives

Safeguard AssetsReliability and accuracy of financial

recordsCompliance with managerial policies

General Objectives Provide

Accurate recordingReliable reports for effective planning

and budgetingEfficiency of current operations

Unreliable Financial Records and Misappropriated Funds Result From

Separation of dutiesEstablish a Crisp Organization StructureRecruitment of qualified personnelAdopted and written accounting

procedures manualMonitoring of accounting workArena of trust

Separation of Duties

Authorization of transactionsRecording of transactionsCustody of assets

Internal Controls Must Be Beneficial-Financially and Emotionally

Remove temptation for misappropriation Prevent a cloud of suspicion Save time and expense in record

reconstruction Improve error detection Reduce confrontations Reduce board division Reduce chance of losses Reduce embarrassment and negative media

Internal Controls

Organization Chart Accounting procedure manual Separation of duties Safe guard of assets Safe guard accounting records Internal audit committee Annual Audit Personnel screening Bonding

Cash Receipts

Use offering envelopesUse checks-not cashReceipts counted by 2 peopleSecure area for countingVerify envelope amountsRestrictive endorsements

Cash Receipts (Continued)

Deposit DailyDeposit in tactUse of lock boxReports-Financial Secretary, Treasurer,

internal auditMail/Drop off-not by one maintaining

accounting recordsNever cash checks payable to church

Cash Receipts (Continued)

Never cash checks out of depositMaintain contribution recordsPeriodic notices to membersMaintain copies of notices sent to

membersAccount for any differences to internal

audit committee

Cash Disbursements

Requisition slips-indicate budget line item

Prenumbered purchase ordersApproval of invoicesFoot and verify invoicesCheck authorization formPre-numbered checksMachine prepared checks

Cash Disbursements-continued

Signers inspect supporting documents2 signaturesSupporting documentation canceled

when paidRetain void checksNever make checks to “Cash”Safeguard blank checks

Cash Disbursements-continued

Expenses in correct periodPetty cash for minor disbursementsVouch petty cash expendituresAre transfers between bank accounts

authorized

Reconciliation

Bank accounts not reconciled by person involved in writing checks

Surprise audit of Petty CashReconcile books to Financial Statements

Other Assets

Lock box for valuables2 signatures to get into lock boxInventory of securities, valuables,

equipment, noncash assetsInsurance adequacy

Resources

The Church Guide to Internal Controls by Richard J. Vargo

GCFA website gcfa.org

Conference website Mississippi-umc.org

Conference wide Risk Managers Phil Hinton Gallagher 601-956-5810

David Stotts, CPA-Conference Treasurer 601-354-0515 david@mississippi-umc.org