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2007 Audit

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<P CLASS="western" ALIGN=CENTER STYLE="margin-bottom: 0in"><B>Internal
Audit Report<BR></B> July 21, 2007<BR>Prepared by Bob Gaines and
Peggy Giltrow 
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" ALIGN=CENTER STYLE="margin-bottom: 0in"><B>Summary</B></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">An internal audit
committee consisting of Bob Gaines and Peggy Giltrow was appointed by
the Finance Committee in November 2006 primarily to conduct an audit
of the Meeting's financial procedures and to develop a written manual
of procedures.  The new &quot;Responsibilities and Procedures of the
Finance Committee and Treasurer&quot; was accepted by the Meeting at
the May 2007 business meeting.  The 13 recommended procedural changes
(see &quot;Recommendations&quot; below) can be carried out by the
Finance Committee and treasurer and do not require specific action by
the business meeting.  Anticipating a change of treasurers, we also
conducted an audit of the books, which we found to be in order with
only one exception (see &quot;Findings&quot; below).  
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" ALIGN=CENTER STYLE="margin-bottom: 0in"><B>Objectives
of a Church Audit </B>
</P>
<P CLASS="western" ALIGN=CENTER STYLE="margin-bottom: 0in">(Adapted
from <I>The Work of the Church Treasurer</I>)</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">1 . To determine that
adequate internal control procedures exist, and that such procedures
are being followed. 
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">2.  To determine that
all donations to the church were deposited and recorded correctly. 
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">3.  To determine that
disbursements were properly authorized -- i. e., that the budget
(including any adjustments during the year) was followed or that
changes were approved and that authorized members approved payment of
invoices. 
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">4.  To determine that
records were maintained on plant and equipment items, and that
adequate insurance coverage was obtained. 
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">5.  To determine
compliance with federal and state regulations, including properly and
timely paid employment taxes and income taxes, if applicable.</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">6.  To recommend
improved procedures and practices.</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" ALIGN=CENTER STYLE="margin-bottom: 0in"><B>Findings</B></P>
<P CLASS="western" ALIGN=CENTER STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" ALIGN=CENTER STYLE="margin-bottom: 0in">(This
checklist is adapted from <I>Friendly Audits</I><I><B> - </B></I><I>Guidance
for Those Asked to Review Quaker Accounts and for Those Who Keep
Them</I>, by Elizabeth Muench, <I>The Work of the Church Treasurer,
</I>by Thomas E. McLeod,  and <I>Zondervan Church and Nonprofit Tax
and Financial Guide: 2006 Edition</I>, by Dan Busby)</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><B>The Records in
General</B></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">&bull; Does the way in
which the records are kept provide for the efficient accumulation of
entries and avoidance of unnecessary or duplicate work?</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>The receipt and
payment accounts are kept in a paper journal.  Data for financial
reports are entered in a spreadsheet.  The procedures do not appear
to be optimal to minimize the treasurer's work or provide 
information in a form most helpful to the business meeting. 
Donations are entered in a program designed to track donations and
produce appropriate reports.</I></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">&bull; Are the records
up to date, with entries made soon after events occur?</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>Yes, entries are
generally made within a week of a transaction.</I></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">&bull; Is the
arithmetic accurate? Do sub-totals actually add up to the grand
totals in the records and financial reports?</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>The financial
reports using spreadsheets with formulas are accurate.  There have
been arithmetic errors in proposed budgets which a spreadsheet with
formulas would avoid.</I></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">&bull; Are financial
reports prepared and presented often enough to catch any
abnormalities while there is hopefully still time to do something
about them?</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>Reports are
presented in business meeting each month but without having been
reviewed first by the Finance Committee. </I>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">&bull; Do the financial
statements include a statement of financial condition (&ldquo;balance
sheet&rdquo;) and statement of income and expenses?  
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>The treasurer does
not normally present a standard balance sheet; the normal monthly
report of income and expenses includes the balances in funds but does
not show all assets, such as a CD.</I></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">&bull; Does the
treasurer keep a special file of the minutes that relate to the
meeting&rsquo;s financial affairs&mdash; i.e., budget approvals,
budget changes, general financial policies, opening and closing bank
accounts, accepting earmarked contributions, etc.&mdash;so that they
can be easily referred to?</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>The treasurer
maintains a file, but it is not arranged for easy reference.</I></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">&bull; Are the records
kept in a safe place? How long are old records kept and where? Has
the yearly meeting set up a central archive for important records and
are key financial records sent there after an appropriate period?</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>The records required
for regular use are kept in the treasurer's home; the most important
documents are kept in a safe deposit box.  The Meeting recently
approved financial procedures which include retention and disposition
directions.</I></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">&bull; If the meeting
has property, furniture or equipment, is there an inventory listing
all the assets of significant value and stating briefly when and how
they were acquired and what their value was at the time of
acquisition? Is this inventory kept with the rest of the financial
records and updated annually?</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>No general inventory
is kept, but an inventory of the art in the meetinghouse -- which is
most of the valuable objects -- was recently prepared. </I>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><B>Receipts</B></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">&bull; Are cash
handling procedures in writing?  
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>Not at the time of
the audit, but written procedures are now in place.</I></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">&bull; Are procedures
established to care for offerings and monies delivered or mailed to
the church office between Sundays?  
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>Yes, the resident
secures them</I> <I>until a member of Finance or the treasurer
collects them.</I></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">&bull; Are all checks
and cash received recorded promptly and deposited in their entirety?</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>Yes.  The resident
may write a check for the cash which she has collected and then use
the cash for personal use, but apart from that no collected cash is
used before it is deposited.</I></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">&bull; Most
unprogrammed meetings do not &ldquo;pass the plate&rdquo; on a weekly
basis but instead receive individual contributions in one or more
annual installments. Is there a confidential, detailed listing of
these contributions as they are received? Does the treasurer
acknowledge them by means of annual letters or individual receipts?
If the records are not in order it may be necessary to check with
individuals to be sure that contributions have been properly recorded
and attributed.</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>Yes.  Donations are
tracked in a program designed for that purpose.</I></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">&bull; In the case of
meetings that do pass a collection plate&mdash;or otherwise receive
multiple cash contributions&mdash;are such receipts always counted
and deposited by a committee, not by one person alone, and does the
membership of this committee rotate two or three times a year?</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>No.  Because the
Meeting is small and donations and payments for use of the building
arrive through the week, it has not been possible to design a method
for having two persons handle collections.  A new procedure for
handling collections is included in the new financial procedures, and
it provides for two members of the Finance Committee to rotate
responsibility for the weekly collection and deposits.</I></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">&bull; How are
earmarked contributions and funds handled? How does the meeting
assure that they are spent for the purpose for which they were
contributed? If the treasurer is authorized to receive contributions
for transmission to another organization, this needs to be minuted by
the meeting. Has this been done?</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>Earmarked donations
and funds are tracked and reported on regularly to the business
meeting.</I></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">&bull; If no goods or
services were provided (other than intangible religious benefits) in
exchange for a gift, does the receipt include a statement to this
effect?  
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>No, this statement
has not been included.</I></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">&bull; Are the
donations traced from the weekly counting sheets to the donor records
for a selected time period by the audit committee?</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>No.  Weekly counting
sheets have only been in use since this spring, and they have not
been used consistently (but a weekly counting sheet has been
developed and in future auditors will be able to make this check).</I></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><B>Expenditures</B></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">&bull; Are all
expenditures made in accordance with an approved budget? Has the
meeting minuted its approval, preferably beforehand, for any
expenditures not budgeted?</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>Almost all
expenditures have prior approval by the business meeting, but
occasionally the treasurer must pay bills for which no specific
authorization is available until the next business meeting; in these
cases the treasurer usually consults with the clerk or Finance
Committee.  There has not been an annual budget for most of the
expenditures from the Maintenance Fund.</I></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">&bull; Are all
expenditures, except small ones from petty cash, made by check? Are
all expenditures from petty cash funds supported by written vouchers?</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>Yes.</I></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">&bull; Are expense
accounts submitted promptly, adequately supported and, if necessary,
approved by a committee clerk before payment?</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>Yes, although
occasionally a request for payment is received long after the fact.</I></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">&bull; Are supporting
documents (bills, etc.) for checks marked in some way to avoid
duplicate payments and facilitate identifying which check paid which
bill?</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>No.  Duplicate
payments have not been a problem because so few checks are written. 
However, in future bills will be marked as paid.</I></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><B>Bank Accounts</B></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">&bull; Are personal
funds and meeting funds kept strictly segregated from each other?</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>Yes.</I></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">&bull; Are all checks
prenumbered and all numbers accounted for?</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>Yes</I>.  
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">&bull; Are all checks
recorded when issued?</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>Yes, in the check
register and in the ledger.</I></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">&bull; Are all unused
checks kept in a safe place?</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>Yes.</I></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">&bull; Are blank checks
ever signed in advance? This should never be done.  
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>No.</I></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">&bull; Are all voided
checks retained and mutilated?</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>No, they have not
been retained.</I></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">&bull; Are bank
reconciliations prepared whenever a statement is received?
Differences between the bank balance and the book balance should be
infrequent and promptly resolved.</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>The treasurer
reconciles the receipts and expenditures journal with each statement,
but he has not been able to reconcile the bank balances with the
treasurer's reports since taking over two years ago (the current
treasurer reports that they were not reconciled when he received them
from his predecessor).</I></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">&bull; Are there many
outstanding checks? If so, why? Checks that have been outstanding for
six months should probably be voided and those out standing for a
year certainly should be.</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>No.</I></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">&bull; When a check is
voided is a corresponding adjustment made in the expenditure
accounts?</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>Yes.</I></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">&bull; Look at the
backs of the returned checks: have they been cashed by the person or
business that they were made out to? If not, why not?</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>Checks are not
returned by the bank; however, there is no indication that any check
was not cashed by the person to whom it was written.</I></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">&bull; Are meeting bank
accounts provided with alternate signers in case of illness or
vacations?</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>Yes.</I></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">&bull; Do at least two
of the meeting&rsquo;s officers have an up-to-date list of all the
meeting&rsquo;s bank accounts, with the names and addresses of the
authorized signers? Are all changes of authorized signers or the
opening and closing of bank accounts made only after being properly
minuted by the monthly meeting?</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>Yes.</I></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">&bull; What taxpayer
identification number is used on the meeting&rsquo;s bank accounts?
If the meeting does not have its own number, should it?</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>The Meeting has a
TIN.</I></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><B>Information
Reporting</B></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">&bull; Has the church
filed Form 990-T for gross unrelated business income over $1,000 per
fiscal year, if required?  
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>There is no
unrelated business income, so no 990-T has been filed.</I></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">&bull; Did the church
make payments to recipients (other than corporations) of at least $10
in royalties or at least $600 in rents, payments for services, prizes
and awards, or medical and healthcare payments?  
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>Yes, primarily for
cleaning and repairs.</I></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">&bull; Did the church
obtain W-9 for all applicable recipients and file Form 1099-MISC?  
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>No.</I></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><B>General</B></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">&bull; Is the church in
full compliance with restrictions imposed by the church property
deed?</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>Yes.</I></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">&bull; Did the church
refrain from participating in or directly opposing a particular
candidate&rsquo;s political campaign?</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>Yes.</I></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><B>Test of Transactions
and Audit of Cash</B></P>
<P CLASS="western" STYLE="margin-bottom: 0in">&nbsp;</P>
<P CLASS="western" STYLE="margin-bottom: 0in">The purpose of the test
of transactions is to determine that the church's established
procedures are being followed, and that the procedures can be relied
upon to produce financial statements presenting fairly the cash
transactions of the church and the assets, liabilities, and fund
balances resulting from cash transactions.   The objective of the
test of cash is to determine that cash as shown by financial
statements is stated properly and that cash is under the church's
control.</P>
<P CLASS="western" STYLE="margin-bottom: 0in"> 
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">1. Obtain: 
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">a. A list of
individuals authorized to sign checks. 
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">b. Beginning and ending
bank reconciliations for the test period, including lists of
outstanding checks. 
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">c. Bank statements and
canceled checks for both the test months and subsequent months. 
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">d. Cash receipts and
disbursements records.</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">2. Select test months
-- The last month of the fiscal year and at least one other month. 
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">a. Trace transactions
between the bank and the books for timeliness and completeness. 
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">b. Are there any
unusual transactions in the bank statement immediately following
year-end?  
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">c. Are there any checks
that have been outstanding over three months?</P>
<P CLASS="western" STYLE="margin-bottom: 0in">d. Compare monthly
statements to the books and to financial reports.</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>The audit committee
traced the bank and the books transactions in January and June and
compared the available collection records to the receipt journal
entries (the treasurer and Finance members only recently began using
a collection record).  No discrepancies were found.</I></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><I>The one exception
noted was that the treasurer reported being unable to reconcile the
monthly bank statement with his monthly reports to the Meeting, which
the audit committee verified.  Because the bank statement
consistently showed that cash in Meeting accounts was greater than
the treasurer's records indicated, the audit committee did not
believe the discrepancy should concern the Meeting (see
Recommendation 10 for a way to correct this in future reports).  The
discrepancy is most likely to have arisen from the fact that no
reconciliation was made when the current treasurer took over from the
previous treasurer, as well as the difficulty of working with the
paper records and report formats used by both treasurers.</I></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" ALIGN=CENTER STYLE="margin-bottom: 0in"><B>Recommendations</B></P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">1.  At the time of the
audit, there were no written procedures.  Written procedures are now
in place.  These procedures should be reviewed after one year and
again each time an audit is conducted (preferably annually, but at
least as frequently as the change of treasurers).</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">2.  Currently the
accounts are kept in a paper journal and the data for financial
reports are transferred to a spreadsheet.  A church-specific
bookkeeping program with financial report capabilities should be
implemented to increase efficiency and reduce errors.  The new
bookkeeping program should provide the same functions as the existing
donation tracking program, so entering data again into a separate
program would not be necessary.</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">3.  Financial reports
are typically presented in business meeting without having been
reviewed by the Finance Committee.<I> </I> The treasurer should
submit all reports to the Finance Committee in advance of business
meetings, and the Committee should note in its report to business
meeting that it has reviewed the treasurer's reports.</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">4.  The treasurer has
not presented a standard balance sheet.  The normal monthly report
does include the balances in each fund but does not show all
financial assets, such as a CD and a small account required by the
credit union, or any fixed assets, such as the value of the art
donated to the Meeting.  The treasurer should present a separate
standard balance sheet and a statement of income and expenses, such
as described in the PYM <I>Treasurer's Guide</I>.</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">5.  No general
inventory is kept, although an inventory of the art in the
meetinghouse -- which is most of the valuable objects -- was recently
prepared.  However, there are also other objects of significant
value, and the Finance Committee should insure that an inventory is
conducted and that the insurance is adequate.</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">6.  At the time of the
audit, the treasurer normally collected, recorded, and deposited all
donations and other receipts, usually with some assistance from the
resident.  New procedures are in place for members of the Finance
Committee to handle this function.  Since it is new and relies on
close cooperation between the resident and the committee, the
procedures should be reviewed regularly.</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">7.  A statement should
be included in the annual acknowledgement that no goods or services
were provided (other than intangible religious benefits) in exchange
for a donation.</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">8.  There has not been
an annual budget for most of the expenditures from the Maintenance
Fund.  The Finance Committee should prepare a formal Maintenance Fund
budget and make regular reports on income and expenditures in regard
to that budget, just as is done for the General Fund.  For the
current year the committee should use the expenditures already
authorized this year by business meeting to develop the budget.</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">9.  Supporting
documents (bills, etc.) for payments should be marked in some way to
avoid duplicate payments and facilitate identifying which check paid
which bill.</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">10.  The treasurer has
not been able to reconcile the bank balances and the treasurer's
reports since taking over two years ago.  To resolve the discrepancy
between the balances shown by the treasurer's reports and the bank
statements, the new treasurer should use the beginning balance in the
January 2007 bank statement as the beginning balance for the
remaining 2007 financial reports (in order to provide reports with a
software bookkeeping program, it will be necessary to enter all prior
2007 transactions).  
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">11.  All voided checks
should be retained and mutilated.</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in">12.  The treasurer
should obtain W-9 for all applicable recipients and file Form
1099-MISC.</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><BR>
</P>
<P CLASS="western" STYLE="margin-bottom: 0in"><A NAME="DDE_LINK1"></A>
13.  The treasurer has a supply of Gross Receipts Tax exemption
forms.  However, according to the NM Taxation and Revenue
Department's <I>FYI 103 Information for Nonprofit Organizations</I>,
we are not eligible for exemption from the GRT for any purchase
because we are not a 501(c)(3) organization.&nbsp; Unless further
investigation shows that we are eligible for exemption, these forms
should not be used.</P>
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