Internal Controls: Best Practices

Transcription

1 Internal Controls: Best Practices Christie Rice Diocese of Des Moines

2 What are internal controls? Systems of checks and balances: Detect errors Discourage/reveal fraud

3 Why do we need them? Maintain accurate financial records Protect employees Safeguard assets/prevent loss Fulfil donor intent Adhere to applicable state/federal laws Adhere to diocesan polices Promote ethical conduct

4 Separation of Duties Where possible, have separate individuals do the following duties: Access to receipts/cash Recording of transactions in General Ledger/tithes Signing checks/withdrawing funds Preparation/review of bank and investment reconciliations

5 Duties: 4 Person Office

6 Duties: 3 Person Office

7 Duties: 2 Person Office

8 Duties: 1 Person Office Seek assistance from Finance Council Detailed review of reconciliations Review of monthly check register Review of general ledger transactions for the month

9 Cash Handling Bookkeeper/Business Manager (or any employee with recording responsibilities should not handle cash or deposit cash) Should not have access to cash in secured file cabinet or safe Should not take deposit to the bank

10 Case A Problem: People continuously walking into the parish office during the week and handing money to the bookkeeper - who we now know should not have access to receipts. Sometimes the bookkeeper wouldn t be available, so the people would leave money on the bookkeeper s desk.

11 Case A Solution: Parish purchased a built-in drop safe that was installed in the wall. People could now drop their funds directly into the drop safe without handing it to the bookkeeper or leaving it on someone s desk. The safe is opened weekly in the presence of at least two people.

12 Weekend Mass Collections Prior to Mass, pre-assign tamper-resistant bags (TRBs) to each Mass Record on Bag Tracking Form and leave for the head usher After ushers collect the gifts, two of them should place gifts in the pre-assigned, pre-numbered, TRB and then sign the bag with a pen or marker Secure in a drop safe or take up front to the altar

13 Sample Bag Tracking Form C. Sample Bag Tracking Form

14 Weekend Mass Collections (cont d.) After Mass, 2 ushers retrieve the bags and give to counters when there are at least 2 unrelated counters present. Counters record bag #s and verify with bag #s assigned. The counting area should be off the beaten path of church traffic. All counting supplies should be available in the counting area before the count begins.

15 Weekend Mass Collections (cont d) Add envelopes/information on loose checks. Reconcile with counted money plus loose cash/coin. All recorded on Cash Count Sheet. Counters sign form and prepare deposit. Place in tamper-resistant bag and have two unrelated counters take to bank Rotate counters periodically

16 Weekend Cash Collections (cont d) Cash Count Sheet

17 Reconcile Recorded Tithes to GL Bookkeeper should receive original count sheet with deposit slip attached. Tithe recorder should receive the envelopes and information on loose checks and a copy of the count sheet Reconcile the two systems.

18 Other Receipt Controls to Protect You Prenumbered receipts book One goes to individual/payer One attaches to the check/cash One stays in the book Lock box for wall Drop in box before individual leaves Keys secured, but not available to you

19 Cash Disbursements Blank check stock should be stored in a locked location accessibility limited Blank checks should never be signed and signature stamps should never be used. The individual preparing checks should not be the one to sign the checks.

20 Cash Disbursements Proper backup documentation should be given to the individual signing the check. Second signer for checks over $XXXX. Mark documentation with Paid and date, so it cannot be accidently paid twice. Have two people approve electronic withdrawals over certain amount. Banks may be willing to enforce.

21 Credit Cards Have Pastor/Finance Council authorize the use and users of the card and credit limits. No cash advances or debit purchases allowed No personal use allowed No going over credit limit without approval To be paid in full each month

22 Credit Cards If multiple users, implement check-out system. Users need to turn in receipts monthly note purpose/gl account #/sign legibly. Match receipts to statement monthly If reconciler has use of card, supervisor needs to review reconciler s use of card.

23 Bank Statements Bank statements should be sent directly, unopened, to the Pastor (or his designee who has no recording duties) for an initial review. Review images of checks front and back Proper payees Proper endorsements Authentic check signatures

24 Bank Statements (cont d) Review electronic transfers description, timing, amounts Review ending balance does it look reasonable? Document review sign and date Give to person who will reconcile

25 Case B A treasurer of a school s Home & School group was experiencing financially difficult times. At some point he started taking funds. Since the bank statement came directly to him, he altered it, made a copy to hide the alterations, and forwarded the copy along with a reconciliation to a finance council member for review.

26 Case B If the H&S volunteer had not received the bank statement directly from the bank, he may never have perpetuated this crime. o Twist: Volunteer was only signer on account Do we have a responsibility to have controls in place to help those who might have a moment of weakness?

27 Bank Reconciliations: How important are they? Besides separation of duties, they may be the most important internal control Prepare monthly/quarterly, depending on frequency of statements Reviewed by a supervisory level person

28 Bank Reconciliations: Reviewers Zeroes in the Difference box does not mean the reconciliation is correct. Ensure that the (bank) Ending Balance is the bank balance for the date noted.

29 Bank Reconciliations: Reviewers Look at the reconciling items Any journal entries not cleared? Any deposits with a date that really should have cleared Any older outstanding checks to an organization that normally processes deposits quickly?

30 Bank Reconciliations: Reviewers Reviewer should be in a supervisory or peer position to the preparer

31 Bank Reconciliations: Reviewers Reviewer should be in a supervisory position to preparer. Reviewer should sign and date reconciliation indicating his/her review.

32 ConnectNow Audit Tab

33 In Summary Administration of the parish/school finances is a sacred trust. To be good stewards, help your parish/school/diocese establish a strong system of internal controls Protect your staff/yourself. Don t leave staff vulnerable to false accusations.

34 Thank you!