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Friendly Audits

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<p class=MsoNormal align=center style='margin-bottom:6.0pt;text-align:center'><b>Friendly
Audits</b></p>

<p class=MsoNormal align=center style='margin-bottom:6.0pt;text-align:center'>Guidance
for Those Asked to Re<st1:PersonName>v</st1:PersonName>iew Quaker Accounts and
for Those Who Keep Them</p>

<p class=MsoNormal align=center style='margin-bottom:6.0pt;text-align:center'>By
Elizabeth Muench</p>

<p class=MsoNormal style='margin-bottom:6.0pt'>You ha<st1:PersonName>v</st1:PersonName>e
been asked to check the accounts of a monthly meeting to see that they are in
good order and are being properly kept. After a little arm twisting you ha<st1:PersonName>v</st1:PersonName>e
hesitantly agreed. Now what do you do? The following pages are designed to help
you with that question.</p>

<p class=MsoNormal style='margin-bottom:6.0pt'>To start with, let us define
what we mean by in good order. First and foremost, it means that the accounts
must be understandable. The basic purpose of a set of accounts is to con<st1:PersonName>v</st1:PersonName>ey
information. You should be able to arri<st1:PersonName>v</st1:PersonName>e at a
general understanding of the accounts and financial condition of a meeting of
moderate size (50 members or less), without property in less than an hour. A larger
meeting, or a meeting that owns property, may take longer. The accounts of a
meeting, with both property and endowment funds, should probably be re<st1:PersonName>v</st1:PersonName>iewed
by a professional accountant.</p>

<p class=MsoNormal style='margin-bottom:6.0pt'>Neatness and legibility are, of
course, part of what makes a set of accounts understandable, but they should
also seem logical. Do the categories (accounts) into which receipts and
expenditures are grouped seem appropriate? Are the names of the different
accounts in the budget unambiguous and do they make sense as a whole?</p>

<p class=MsoNormal style='margin-bottom:6.0pt'>What? No budget? Stop right
there. The accounts are not in good order because the meeting has not gi<st1:PersonName>v</st1:PersonName>en
its treasurer any guidance as to what is a proper outlay of money and what is
not. About all you can do is to see whether the bank and the books agree on how
much money there should be in the checking or sa<st1:PersonName>v</st1:PersonName>ings
account -- whether the total of the money coming in to the bank matches the
treasurer's figure for receipts, with any differences explained, and whether
the total of the money going out of the bank matches the total expenditures,
again with any differences explained. Actually, this may be all that <st1:PersonName>v</st1:PersonName>ery,
<st1:PersonName>v</st1:PersonName>ery small groups need. But suggest they make
up a budget next year anyway because they need to learn how to do it right for
when they are larger.</p>

<p class=MsoNormal style='margin-bottom:6.0pt'>This beginning balance plus
receipts less expenditures equals ending balance is the basic equation for
checking any account or set of accounts. This should always be the first thing
you examine. If that equation is not correct the books are not in good order
and some one needs to find out why.</p>

<p class=MsoNormal style='margin-bottom:6.0pt'>One of the reasons for ha<st1:PersonName>v</st1:PersonName>ing
accounts checked periodically by an outsider is that doing so encourages
procedures that keep a set of books in good order. When you accept the
responsibility for saying whether or not a set of books is in good order, you
are being</p>

<p class=MsoNormal style='margin-bottom:6.0pt'>asked to say, not that they
appear to be in good order, but that that appearance is based on reality. Many
of us ha<st1:PersonName>v</st1:PersonName>e had the experience of asking a
child to put his or her room in order and returning a short time later to find
the child has apparently done so in a miraculously short time -- that is, until
you look in the drawers, the closet and under the bed.</p>

<p class=MsoNormal style='margin-bottom:6.0pt'>The following specific questions
are intended to help you look into the drawers, etc. and to be sure that the
appearance of good order is real.</p>

<p class=MsoNormal style='margin-bottom:6.0pt'><b>The Records in General</b></p>

<p class=MsoNormal style='margin-bottom:6.0pt'>* Does the way in which the
records are kept pro<st1:PersonName>v</st1:PersonName>ide for the efficient
accumulation of entries and a<st1:PersonName>v</st1:PersonName>oidance of
unnecessary or duplicate work?</p>

<p class=MsoNormal style='margin-bottom:6.0pt'>* Are the records up to date,
with entries made soon after e<st1:PersonName>v</st1:PersonName>ents occur?</p>

<p class=MsoNormal style='margin-bottom:6.0pt'>* Is the arithmetic accurate? Do
sub-totals actually add up to the grand totals in the records and financial
reports?</p>

<p class=MsoNormal style='margin-bottom:6.0pt'>* 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=MsoNormal style='margin-bottom:6.0pt'>* Does the treasurer keep a
special file of the minutes that relate to the meeting's financial affairs --
i.e., budget appro<st1:PersonName>v</st1:PersonName>als, budget changes,
general financial policies, opening and closing bank accounts, accepting
earmarked contributions, etc. -- so that they can be easily referred to?</p>

<p class=MsoNormal style='margin-bottom:6.0pt'>* Are the records kept in a safe
place? How long are old records kept and where? Has the yearly meeting set up a
central archi<st1:PersonName>v</st1:PersonName>e for important records and are
key financial records sent there after an appropriate period?</p>

<p class=MsoNormal style='margin-bottom:6.0pt'>* If the meeting has property,
furniture or equipment, is there an in<st1:PersonName>v</st1:PersonName>entory
listing all the assets of significant <st1:PersonName>v</st1:PersonName>alue
and stating briefly when and how they were acquired and what their <st1:PersonName>v</st1:PersonName>alue
was at the time of acquisition? Is this in<st1:PersonName>v</st1:PersonName>entory
kept with the rest of the financial records and updated annually?</p>

<p class=MsoNormal style='margin-bottom:6.0pt'><b>Receipts</b></p>

<p class=MsoNormal style='margin-bottom:6.0pt'>* Are all checks and cash recei<st1:PersonName>v</st1:PersonName>ed
recorded promptly and deposited in their entirety?</p>

<p class=MsoNormal style='margin-bottom:6.0pt'>* Most unprogrammed meetings do
not &quot;pass the plate&quot; on a weekly basis but instead recei<st1:PersonName>v</st1:PersonName>e
indi<st1:PersonName>v</st1:PersonName>idual contributions in one or more annual
installments. Is there a confidential, detailed listing of these contributions
as they are recei<st1:PersonName>v</st1:PersonName>ed? Does the treasurer
acknowledge them by means of annual <st1:PersonName>letters</st1:PersonName> or
indi<st1:PersonName>v</st1:PersonName>idual receipts? If the records are not in
order it may be necessary to check with indi<st1:PersonName>v</st1:PersonName>iduals
to be sure that contributions ha<st1:PersonName>v</st1:PersonName>e been
properly recorded and attributed.</p>

<p class=MsoNormal style='margin-bottom:6.0pt'>* In the case of meetings that
do pass a collection plate or otherwise receive multiple cash contributions --
are such receipts always counted and deposited by a committee, not by one
person alone, and does the membership of this commit tee rotate two or three
times a year?</p>

<p class=MsoNormal style='margin-bottom:6.0pt'>* 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 recei<st1:PersonName>v</st1:PersonName>e contributions for
transmission to another organization, this needs to be minuted by the meeting.
Has this been done?</p>

<p class=MsoNormal style='margin-bottom:6.0pt'><b>Expenditures</b></p>

<p class=MsoNormal style='margin-bottom:6.0pt'>* Are all expenditures made in
accordance with an appro<st1:PersonName>v</st1:PersonName>ed budget? Has the
meeting minuted its appro<st1:PersonName>v</st1:PersonName>al, preferably
beforehand, for any expenditures not budgeted?</p>

<p class=MsoNormal style='margin-bottom:6.0pt'>* Are all expenditures, except small
ones from petty cash, made by check? Are all expenditures from petty cash funds
supported by written <st1:PersonName>v</st1:PersonName>ouchers?</p>

<p class=MsoNormal style='margin-bottom:6.0pt'>* Are expense accounts submitted
promptly, adequately supported and, if necessary, appro<st1:PersonName>v</st1:PersonName>ed
by a committee clerk before payment?</p>

<p class=MsoNormal style='margin-bottom:6.0pt'>* Are supporting documents
(bills, etc.) for checks marked in some way to a<st1:PersonName>v</st1:PersonName>oid
duplicate payments and facilitate identifying which check paid which bill?</p>

<p class=MsoNormal style='margin-bottom:6.0pt'><b>Bank Accounts</b></p>

<p class=MsoNormal style='margin-bottom:6.0pt'>* Are personal funds and meeting
funds kept strictly segregated from each other?</p>

<p class=MsoNormal style='margin-bottom:6.0pt'>* Are all checks prenumbered and
all numbers accounted for?</p>

<p class=MsoNormal style='margin-bottom:6.0pt'>* Are all checks recorded when
issued?</p>

<p class=MsoNormal style='margin-bottom:6.0pt'>* Are all unused checks kept in
a safe place?</p>

<p class=MsoNormal style='margin-bottom:6.0pt'>* Are all <st1:PersonName>v</st1:PersonName>oided
checks retained and mutilated?</p>

<p class=MsoNormal style='margin-bottom:6.0pt'>* Are bank reconciliations
prepared whene<st1:PersonName>v</st1:PersonName>er a statement is recei<st1:PersonName>v</st1:PersonName>ed?
Differences between the bank balance and the book balance should be infrequent
and promptly resol<st1:PersonName>v</st1:PersonName>ed.</p>

<p class=MsoNormal style='margin-bottom:6.0pt'>* Are there many outstanding
checks? If so, why? Checks that ha<st1:PersonName>v</st1:PersonName>e been
outstanding for six months should probably be <st1:PersonName>v</st1:PersonName>oided
and those out standing for a year certainly should be.</p>

<p class=MsoNormal style='margin-bottom:6.0pt'>* When a check is <st1:PersonName>v</st1:PersonName>oided
is a corresponding adjustment made in the expenditure accounts?</p>

<p class=MsoNormal style='margin-bottom:6.0pt'>* Look at the backs of the
returned checks: ha<st1:PersonName>v</st1:PersonName>e they been cashed by the
person or business that they were made out to? If not, why not?</p>

<p class=MsoNormal style='margin-bottom:6.0pt'>* Are meeting bank accounts pro<st1:PersonName>v</st1:PersonName>ided
with alternate signers in case of illness or <st1:PersonName>v</st1:PersonName>acations?</p>

<p class=MsoNormal style='margin-bottom:6.0pt'>* Do at least two of the
meeting's officers ha<st1:PersonName>v</st1:PersonName>e an up-to-date list of
all the meeting'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=MsoNormal style='margin-bottom:6.0pt'>* What taxpayer identification
number is used on the meeting's bank accounts? If the meeting does not ha<st1:PersonName>v</st1:PersonName>e
its own number, should it?</p>

<p class=MsoNormal style='margin-bottom:6.0pt'><b>In Conclusion</b></p>

<p class=MsoNormal style='margin-bottom:6.0pt'>No meeting will ha<st1:PersonName>v</st1:PersonName>e
their records in perfect order. There will always be room for impro<st1:PersonName>v</st1:PersonName>ement.
But once records are correctly put in order it takes surprisingly little work
to keep them there, usually less than straightening out the messes resulting
from carelessness. If the system is properly designed the treasurer of the
&quot;typical&quot; meeting should not ha<st1:PersonName>v</st1:PersonName>e to
spend more than about two hours a month to maintain the records and handle the
meeting's financial affairs.</p>

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