by JOHN CHATBURN
When people think of an audit they may have an image of gray-suited government employees equipped with calculators ready to dive into mountains of paperwork in search of the minutest financial discrepancy. Congregational audits are different than those kinds of audits. While they still deal with financial transactions, they are usually experiences filled with grace, helpful and quantifiable information, and a reflection on the congregation’s use of its funds.
Why do we do an audit?
Congregations have an annual audit for several reasons. First, it protects the administrative officers of the congregation and the integrity of the church’s financial management. Second, it provides assurance to the congregation that congregational funds are being properly handled. Third, it provides an opportunity for helpful feedback for the congregational financial officer related to the finances of the congregation. Finally, an audit helps the congregation leaders and members to reflect on the use of their monetary assets for mission.
Can a visitor to the congregation tell what the congregation’s mission is by looking at its budget? Who does the audit?
The pastor ensures that an annual audit is performed. Auditors can be elected or appointed and can be a member of the congregations, another congregation, or friend of the church. Ideally, the auditor should have the following qualifications:
- Basic understanding of financial accounting
- Understanding of Community of Christ Enduring Principles and Basic Beliefs
- Grasp the relationship between mission and finances
- Willingness to give helpful feedback
An auditor selected from within the congregation will have the advantage of knowing the nuances of the congregation. An auditor from outside the congregation can bring a fresh perspective and could be aware of different approaches used elsewhere. The person selected to do the audit will likely depend on a congregation’s location and the pool of available people.
How does an audit work?
The audit will include, but is not limited to, these basic steps:
- Verifying final reconciliation of checkbook and bank statements
- Matching random receipts and disbursements
- Verifying profits or losses of other financial accounts such as Affiliate Investment Pool (AIP) accounts, savings, Certificates of Deposit, etc.
- Verifying a selection of offering envelopes contributions
- Reviewing World Church contributions and debits by the World Church
- Reviewing the budgeted expenses to the actual expenses
- Reviewing congregational business meeting minutes to ensure the will of the congregation is being honored
Below are links to lists of data the auditor will collect and the specific financial transactions the auditor will review (www.CofChrist.org/CFO/fiscal.asp):
It is important for the auditor to approach the audit with a sense of grace and thankfulness. The church is thankful for each congregational financial officer that serves in this role with integrity and dedication. Auditors need to be generous with grace when it comes to auditing a congregation’s records. This does not mean letting errors or discrepancies go unaddressed, but it does mean showing respect for the work the congregational financial officer has done. A good audit and auditor can empower congregations and congregational financial officers.
After the audit is complete the auditor should provide a letter to the congregation describing what she or he has done and include any recommendations the congregation may need to take action on. When the auditors recommend accounting techniques or adjustments, the recommendations should be provided by letter to the congregational financial officer with a copy to the congregational leadership. The audit report can be an appropriate place to make recommendations for how a budget may better empower mission. Finally, it is proper to offer public gratitude (when appropriate) for the congregational financial officer in the audit letter to the congregation.
Mission and Audits
How will you use the data from an audit to identify new missional opportunities?
Audits provide opportunity for the congregation to review its alignment with mission. Here are some suggestions for making the audit more mission-based.
- Explore and analyze how the congregation’s financial assets are being used in its mission. This includes not only evaluating the audit year, but looking at all the assets of a congregation and asking “What do we need to do to align more with mission?” For some congregations this may mean recommitting or selling some assets to fund mission. For other congregations it may mean reallocating assets to address a specific need in their community such as homeless youth, inaccessibility of affordable healthcare, or human trafficking.
- Review what bank the congregation currently holds accounts with. How the congregation spends its resources is important, but where it keeps them is also important. Does the bank the congregation uses match with the values and Enduring Principles of Community of Christ?
- Review the vendors the church has used over the past year. Savings is important, but do the church’s vendors contribute to a better world? Do the vendors offer their employees fair wages? What is the environmental impact of this product? The Better World Shopping Guide (www.betterworldshopper.com) evaluates products, vendors, and banks.1 This resource does not represent official positions of Community of Christ, but it is a useful resource for helping people think about the impact of their spending and investments.
- Some congregations may want to contribute financially to organizations whose mission is consistent with the church’s mission. While the church is supportive of financial contributions to worthy organizations, financial contributions alone can signal a distant engagement in mission. Generous disciples pay tithing to the church and give to other organizations, but they never expect anyone to take their place as disciples who are personally engaged in mission.
What to Do if There Is a Problem
How will I react if there is a problem revealed by the audit?
Most of the problems or issues that audits reveal pertain to bookkeeping, records, or internal financial procedures. Auditors can take care of these in a straightforward manner. Minor issues can be addressed between the auditor, the congregation financial officer, and, if necessary, the congregational leadership team.
Auditors may occasionally face difficult problems. Typically, congregational financial officers are well-intentioned people who have good hearts and work hard. On a rare occasion auditors may identify a problem in the audit that needs immediate attention. These problems can be mixing of church and personal funds, opening a new bank account without proper notice or authorization, or making unapproved payments of congregational funds.
If such a problem does occur the auditor should notify the pastor, mission center financial officer, and mission center president. It is not the auditor’s responsibility or role to intervene where administrative attention may be needed.
Audits support mission by providing data relevant to where the congregation has been and where it can go in the future. Audits provide protection for leaders and integrity of the church’s financial operations. Congregational audits can be sterile, but with thought and focus they can be one of the tools that help congregations become healthier.
It’s always good to ask oneself questions that are pertinent to ministry and church leadership. Take a moment and reflect on the questions asked in this article:
- Can a visitor to the congregation tell what the congregation’s mission is by looking at its budget?
- How will you use the data from an audit to identify new missional opportunities?
- How will I react if there is a problem revealed by the audit?
1Ellis Jones, The Better World Shopping Guide, 3rd Edition (Gabriola Island, BC, Canada: New Society Publishers, 2010).
|Initiating an Audit|
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To help the pastor properly initiate an audit.
This may be the easiest practice in the field guide. If you are uncertain about how audits are properly conducted in your mission center, simply call or write to your mission center financial officer. Tell them that you’d like to talk about setting up a congregational audit.
|Sample Auditor’s Letter|
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The following is an example of what a sample Auditor’s Letter might look like.
City, State, Zip
The audit for the <Name> congregation is complete and in excellent order. I have applied certain procedures to your financial documentation, described below, in order to evaluate the internal control procedures, comply with the Presiding Bishopric’s requirement for an annual audit, and provide support to the congregational financial officer. This report is intended only for the use of the <Name> congregation, the leadership of the <Name> mission center, and the Presiding Bishopric. It is not intended for circulation beyond these bodies.
I have applied the following procedures as follows:
- Verified signatures and endorsements on checks
- Reconciled the final bank statement (12/31/11)
- Matched all receipts to disbursements
- Verified the amounts of congregational savings account
- Verified balances of the congregational AIP account
- Verified all offering envelopes to bank deposits
- Verified World Church contributions and debits to bank statements
- Verified budget items to actual expenses
- Reviewed congregational minutes to ensure the wishes of the congregation are honored in budget
In the process of the audit I noticed that the congregational utility bills have increased significantly over the last couple of years primarily from increased consumption of electricity and natural gas. I recommend that the congregation do an energy audit to determine how you may decrease the consumption of these resources to reduce the congregation’s environmental impact.
John Doe’s skill in serving as a congregational financial officer is abundantly apparent in the faithfulness and attention to detail with which he approaches this role. The church as a whole, and <Name> in particular, is blessed to have a minister like John to take on this sometimes tedious, but always important task in the life of the church.
Should there be any questions regarding this audit please feel free to contact me.
Peace and blessings,