The purpose of an audit is to determine if the organization is in compliance with generally accepted accounting principles (GAAP) and whether the financial statements are comparable to previous year’s financial statements. If your church does not have the budget for a full-fledged audit, there are still some things you can do. The following is a compilation of best practices for informational purposes only. Shelby Systems is not responsible for the conduct of church audits, nor does it provide legal advice through this resource. Donations vs. Accounting Compare a sampling of donation dates to the deposits on the bank statement for the given week and to the deposits in the Accounting module. Compare hand-written source documents (i.e., teller sheets, money counter deposit records or randomly selected dates of giving envelopes) with the summary from the Donation module for a given week(s). If the church utilizes pass-through liability accounts, check to ensure that the amounts were forwarded to the proper parties. Randomly select 10-15 names of members who donate to the church. Send each person or family a donation statement for the prior year that prints amounts given to ALL accounts. In the accompanying letter to them ask them to verify that what they gave in the prior year as shown on the CW statement matches their personal information. If this includes accounts not printed typically on a statement, such as non-deductible amounts, explain those accounts. You may have already sent them a donation statement, but it is advised that you send this one as well. Bank Reconciliation Ensure that bank reconciliations are being completed within the Bank Reconciliation area of Accounting. The finalized bank reconciliation (with a $0 difference to reconcile) should be filed with the bank statement for that month. Review the bank reconciliation for each month and compare to the bank statement paying particular attention to debit memos and other charges from the bank. You are trying to verify each transaction as to purpose and amount. Summary of Cash Activity, General Ledger and Bank Reconciliation in Accounting. Make sure that all check numbers are accounted for in the Check Register. If there are any checks on the check register made out to cash or to the check signer, verify the legitimacy of the transaction. Look at the supporting documentation for the payment. Budget vs. Actual Expenditures If the church has a budget for expenses, compare actual amounts spent to the budget amounts and investigate all differences over a certain dollar amount as determined by the Audit Committee. Select a small sample of checks that have cleared the bank and go back to the supporting documentation (i.e., paid invoices, expense reimbursement, etc.) to make sure that the charge was approved, that the church received the item/service and that it was charged to the proper account. Also, ensure that the check signer is authorized. Payroll Compare the payroll amounts to the salary/wage authorized or budgeted. Make sure that the related payroll reports (941, W-2, etc.) and tax deposits were filed and remitted to the proper taxing authorities on a timely basis. The bank statement will show the withdrawals that should match the payments made. It is recommended that a printed copy of each 941 be signed, dated as to date it was filed and then stored with payroll information. Accounts Payable Scan the list of accounts payable vendors for any new or unknown vendors. Review supporting documentation for any payments to unknown vendors. General Ledger and Other Items Review a transaction journal for items such as journal entries and transfers to make sure they were handled correctly. Is there a sufficient explanation in the comments area on journal entries? If the church has designated or restricted funds (other than the General/Operating fund), are expenditures from the fund in compliance with the purpose of the fund? Source: Ministry Tech Shelby Systems has decades of experience working with ministries of all sizes, for more creative ideas and suggestions contact your Shelby Sales Consultant today!