Parish Administration Ministry Finance Standard Operations Procedures Purpose The purpose of these procedures is to define the general policies and procedures associated with the financial management within the Parish Operations - Finance Program of St. Mark s Episcopal Parish. For each of the areas noted in this document, there can be more detailed written policies to support the Vestry s decision. If there are any questions or areas not addressed in this document or referenced policies, please contact the Church Secretary or the Sr. Warden of the Vestry. I. Record Keeping All financial records kept for the church should be clear and easy to follow. The records and associated documentation should be maintained in the Church Office. II. Church Assets a. Internal Controls - The documented internal controls 1 support the policies and procedures for handling receipts for both checks and cash and payments. 1. Assignments for financial tasks, such as counting the offering, writing checks, recording individual contributions, and reconciling the bank statement, should be assigned to different people. 2. At least two people should be in custody of the offering until it has been safely deposited in the bank or placed in a night depository or safe. 3. Promptly deposit all money - cash or checks - received on Sunday or during the week. A list of checks received should be compared regularly with the bank statement. 4. Encourage all members to contribute by using envelopes. 5. Access to the offerings and to the checking account should be limited to persons approved by the Vestry. The Vestry should vote annually on the individuals designated with the financial authority. The results of the vote should always be recorded in the minutes. 6. Recommend payments be made by check to create a more reliable record of payment. 7. Require two signatures on every check over $1000 (one thousand dollars). Exceptions to this rule are monthly payments for items as defined by the Vestry with an approved budget would require only one signature, i.e. electric bill. 1 This list of internal controls is extracted from Internal Controls for Churches by Manfred Holck (published by Church Management, Inc., and unfortunately out of print. ) Parish Administration Finance SOP- 2012 Page 1
8. Assign someone other than those handle cash or keep financial records, the responsibility for receiving and reconciling the bank statement. 9. Expenditures should be consistent with the planned budget and all unanticipated needs should be approved by the Vestry. 10. Unpaid pledges should not be written off by any financial authority but approved by the Vestry and documented in the minutes. Any unpaid pledge that is written off, removes it from the list of pledges that the church expects to collect. 11. Keep marketable securities, notes, valuable personal property, cash (coins, bills, or checks) in a safe place. 12. Create and maintain an inventory of assets. 13. Conduct an annual audit. 14. Cash handling procedures should be documented in a written policy. 15. Get a fidelity bond for all cash handlers. b. Signatory and Approval All checks issued by St. Mark s Episcopal Church can only be signed by the designated signatories. Each check that is issued for non-recurring monthly bills must have an authorized approver. These responsibilities are based on the position held at St. Mark s Episcopal Church. Checks can only be signed by the Treasurer, the Senior Warden, or the Junior Warden. The list of current signatories is maintained by the Church Secretary. Each check that is issued for non-recurring monthly bills, as defined in the budget list, requires an approver. The approver cannot be the requester or the Treasurer. c. Treasurer s Reports The Treasurer should provide monthly financial reports and an annual report to the Vestry, which should show actual income and expenses compared with budgeted amounts. There should be a report concerning the assets and liabilities of the church - that is, cash balances and investments as well as any debts owed by the church. d. Audits In accordance with the audit guidelines of the Diocese of Virginia, financial statements and the Treasurer s reports must be reviewed on an annual basis to ensure that the documents represent the assets and liabilities of the church and that the receipts and expenditures and changes in all fund balances for the audit year are in accordance with the principles authorized by General Convention of the Episcopal Church, and the Diocese of Virginia. An annual internal audit shall be performed between July and September for the previous year. During the audit process, some of the terminology used in the Diocese of Virginia Audit forms may conflict with the terminology used by the church s financial software. The financial nomenclature identified for the audit includes: Parish Administration Finance SOP- 2012 Page 2
1. Chart of Accounts: built into monthly and yearly Treasurer s reports 2. General Ledger: built into monthly and yearly Treasurer s reports 3. Cash Receipts Journal (Transaction Journal): Use the Binder of Deposits, Contributions and Bank Statements/Transaction Journal 4. Cash Disbursement Journal (Transaction Journal): paid out expenses. Use the Folder of accounts payable invoices and receipts 5. Reconciliation Data Summary (Transaction Journal): This is both the Cash Receipts Journal and the Cash Disbursement Journal. For more information, the Business Manual of Church Affairs is useful resource: www.episcopalchurch.org/page/manual-business-methods. Each year, in preparation for the audit, the Vestry Finance Lead will: 1. Assemble an audit committee of at least 3 church members who have no other role in the financial operations of the church. The Vestry Finance Lead will schedule the first audit committee meeting. 2. Download the long version (to include the proof of cash form) of the Audit form from the Diocese of Virginia website for the appropriate year: (http://www.thediocese.net/resources/finance/audits/). 3. The audit committee will need: a. copy of Insurance policy declaration page (front page of policy) b. Treasurer s Final year-end report for audit year. c. Credit card and membership accounts report d. Parish Parochial Report, with date of submittal e. Clergy Housing Resolutions (verification from Vestry Meeting Minutes that Vestry voted to approve the housing allowance) f. Verification of authorized signatory names and Federal Tax ID #s on all church bank accounts. Also need a list of persons authorized for check signing, funds transfer or withdrawal, etc. g. List of current trustees and year of appointment h. Printout(s) for audit year voided checks and/or missing checks i. Folder of voided checks (in locked drawer in Church Administrator s office) j. End of Year reports (e.g., from Quick Book or ChurchBooks) for all funds, e.g., flower guild, discretionary fund, etc. k. Employee Tax Forms: i. Form 941 - Employer s Quarterly Federal Tax Return (4 th Q of audit year) ii. Form 1096 - Annual Summary and Transmittal of U.S. Information Returns (compilation form which provides totals for all 1099 forms) iii. Form 1099 - Miscellaneous iv. Form VA-6 - Employer s Annual or Final Summary of VA Income Tax Withheld, with W2 forms v. Form 3333 - W3 Transmittal of Wage and Tax Statements, with W2 forms l. Binders/Folders of: i. Vestry Minutes for audit year ii. Monthly Teller reports which includes envelopes and receipts iii. Bank Statements (for audit year as well as for December of previous year and January of the next year). See Financial Binders of Bank Deposits, Contributions, and Bank Statements iv. Paycheck reports (white) binder Parish Administration Finance SOP- 2012 Page 3
v. Folder of accounts payable invoices and receipts (see Financial Binders of Bank Deposits) 4. Once majority of reports are organized, coordinate a date for the first audit committee meeting. The formed audit committee will select a chairperson at the first meeting. The Audit Committee Chair: 1. Sets the agenda and schedules future meetings. 2. Invites a church member who has knowledge of the church s finances so that any questions that arise during the audit process can be addressed as soon as possible. 3. Documents information on each Proof of Cash form (downloaded by the Vestry Finance Lead). The Audit Year s Proof of Cash Form is required for each church bank account this includes checking, savings and the Rector s Discretionary account). 4. Review the recommendations from the previous audit years reports to ascertain if those recommendations have been implemented or otherwise addressed. 5. Throughout the audit process, document recommendations for the current audit year to be included with the Audit Report. 6. Prepares the final Audit Recommendations, Proof of Cash forms, and other attachments, completes Audit Committee Certificate with signature. 7. Presents the Audit package to the Church Administrator to mail to the Office of the Bishop. Forms and attachments should be sent to the Church administrator as pdf files to be archived with other Church records. e. Bonding of Staff and Volunteers A purchase of a fidelity bond to cover staff and volunteers who have responsibility for handling money should be made. Such a bond is a form of insurance, which compensates the church in the event that it loses money due to the dishonesty of employees or volunteers. III. Investments The management of investments requires good control procedures and a written policy to support the decision of the Vestry. Investments involve some degree of risk; no protocol can fully safeguard against the possibility that an investment made in good faith may turn out in retrospect to have been a poor one. However, good procedures can reduce the risk that the church will suffer from the results of dishonesty or poor judgment on the part of a key officer. A written policy defines the procedures, the responsibilities, and the investment vehicle(s) that the Vestry has approved to be used. Any investments made will be subject to an annual audit. IV. Rector s Discretionary Funds Parish Administration Finance SOP- 2012 Page 4
The Church has a special fund set aside for the discretionary use of the Rector in response to personal needs or crises in the church or community. A written policy defines the procedures to be used for this fund. The use of this fund is to provide confidential assistance to church or community members facing emergency financial need. No distribution may be made for the benefit of any particular recipient or may be made to the pastor or to any member of his or her family at any time. The pastor shall report to the Parish Board annually all amounts paid out of the fund, listing the dates and purposes of the payments (but not the names of recipients). The Rector s Discretionary Fund is subject to an annual audit. Parish Administration Finance SOP- 2012 Page 5