Sample reading from Churches Step Up to the Next Level:
A Guide for Local Churches to Improve
Their Accounting Operations and Internal Control
After showing a new way of looking at internal controls, the book walks through a few of the basic procedures that should be in place. Here are three ideas presented in chapter 4:
Let the wise listen and add to their learning,
and let the discerning get guidance.
Proverbs 1:5
Bookkeeper does not sign checks
As discussed earlier, the person doing most of the bookkeeping should never sign checks. Otherwise, the bookkeeper—one person—would have access to money, the means to get it out of the organization, and the ability to hide having done so. This is a recipe for disaster. The very first step for your church, if it hasn’t taken it already, is to make sure the bookkeeper is removed from the bank signature cards and that he or she does not ever sign checks. Skipping this step invalidates all the other procedures you could put in place. Do this immediately.
Pastor never signs checks
The pastor should never sign checks.
Prohibiting the pastor from signing checks can provide protection from the cloud of suspicion that might arise in the event something goes wrong in the cash disbursement process. Obviously, the pastor, as senior executive in the organization, will have to stand up in front of the congregation and answer painful questions in the event something goes wrong. The pastor will have to take reporters’ calls. That is part of the job. However, these conversations will be less difficult and much more credible if the pastor cannot sign, and has never signed, a check.
There is also a spiritual reason the pastor should never sign checks. If there is a serious problem in the disbursement process, there will be a cloud over the bookkeeper and check signers while the investigation proceeds (and perhaps even after the situation is resolved). This would be a very painful time. But think how much worse it would be if the pastor were among those being investigated. A body of believers cannot afford to have a cloud linger over the shepherd who teaches, preaches, and leads them. Let the cloud rest where it belongs—over the finance team. The spiritual health and well-being of the believers is too important to put at risk.
Who, then, should sign instead of the pastor? Look in your organization for someone who is spiritually mature, reasonably well-informed about what is going on at the church, and available. Also, make sure you choose someone who will keep private things private. It does not have to be someone in a senior leadership position. You might find a great candidate in your informal leadership network, such as a deacon or deaconess, a Bible-study leader, or an astute member of the body who has not yet become involved in the leadership.
Pastor, please tell your board that you will not sign any more checks! Board of elders, insist that your shepherd be removed from the signature cards right away!
Review of unopened bank statement
As an alternative (or enhancement) to having someone other than the bookkeeper prepare bank reconciliations, a senior person in the organization (such as the pastor, chair of the board of elders, or the board treasurer) could receive the unopened bank statement. The best approach is to have the statement mailed directly to the home of the reviewer. The second-best approach is to have the statement mailed to the church and to have the person handling the incoming mail route the statement to the reviewer.
The reviewer would then open the statement and look for unusual or unexpected items, and then review the checks for signer, the payee, the amount paid, and the endorser (which shows who really received the money). After finishing, the reviewer should initial and date the statement to document that the review has been performed.
The value of this control lies in the fact that most transactions of a local church are routine expenses. After a few months, the reviewer would have a good feel for the transactions that are typical for the church. A person familiar with the church’s activities would quickly recognize any unusual or out-of-the-ordinary entries. Within probably ten minutes or less, an informed person could make sure there were no unusual transactions during the month.
While this procedure is not quite as good as the reviewer actually doing the bank reconciliation, it captures most of that value and is an important alternative to have at this crucial step of internal control.
This page is extracted and adapted from Churches Step Up to the Next Level: A Guide for Local Churches to Improve Their Accounting Operations and Internal Control. Copyright 2009. James L. Ulvog. Used by permission.