The Episcopal Diocese of the Rio Grande
The Rt. Rev. Michael Louis Vono, D.D., IX Bishop
February 9, 2016
To: Congregational Treasurers
Enclosed is the audit process and form to facilitate your Annual Congregational Audit for the year
2015. As you know, the audit is a requirement of the National Canons as well as a good and
reasonable business practice.
This year, the audit form is a fillable form that is in an electronic format that will allow you to easily
enter your information, save, and print. For those congregations using independent public accountants
to audit their accounts, you will find instructions as to what to submit in addition to the audited
financial statements and auditor’s report.
We recognize that the congregational audit sometimes becomes a tedious and burdensome task. The
audit program was designed by the Diocesan Budget and Audit Committee to provide the Church Audit
Committee with a clear step-by-step process that is intended to clarify what is required of them. In
addition, supporting reference material web links and an internal controls checklist for areas that may
be unfamiliar to the committee has been provided.
The date for submission of the completed audit is June 30, 2016. If there are questions that we can
help with, please contact the Diocesan Office. After you have completed the audit, we welcome your
comments as to any changes in procedures that you would suggest. Your comments and suggestions
will be evaluated.
Sincerely,
Dr. Guy Gronquist/s/
Dr. Guy Gronquist
Diocesan Treasurer
6400 Coors Boulevard NW

Albuquerque, New Mexico 87120
505.883.9048
 505.881.0636

fax
CONTENTS
SECTION
Page
A.
General Instructions
Notification to the Diocesan Office of Audit Committee Membership
Audit Preparation List for Audit
Internal Controls Checklist
3
4
5
6
B.
Audit by Independent Certified Public Accountant
8
C.
Committee Audit Overview
General Review
Assets
Liabilities
Accounts Receivable (Cash Receipts)
Accounts Payable (Cash Disbursements)
Payroll
Discretionary Funds
Financial Statements/Budgeting/Reporting
Audit Committee Findings Report
Audit Committee Findings Report Template
Checklist of Required Documents for Return by Committee Audit
9
10
14
18
18
20
23
26
28
28
30
31
DRG Annual Congregational Audit Process and Form…..Page 2
SECTION A
GENERAL INSTRUCTIONS
National Canon 1.7, Sec. 1. (5) Requires that all accounts of parishes and missions “be audited annually by an
independent Certified Public Accountant, or independent Licensed Public Accountant, or such audit committee
as shall be authorized …”.
The primary purpose of an audit is to assure that financial statements are fairly stated. Any person handling the
monies or investments of the church needs an audit to protect the church assets and him or her against
suspicion of mishandling those assets. Similarly, Rectors, Vestries, Treasurers and other persons in positions of
responsibility may be liable for any losses, which would have been discovered by an ordinary audit, but were not
discovered because they failed to have an audit conducted.
Upon review of this section (Section A), either Section B or Section C will apply to your congregation depending
on whether the services of an independent Public Accountant are utilized or an Audit Committee of the
congregation is formed to perform the audit. The audit should be completed and returned by JUNE 30, 2016,
and return instructions appear below.
The selection of an independent Public Accountant or appointment of an audit committee shall be approved by
the Vestry, Bishop’s Committee or management board. An audit committee should consist of three members
(very small congregations may have two members). No Member of the Vestry or Bishop’s Committee during the
year being audited is eligible to serve on the audit committee for that year. When an audit committee is
formed, the Diocesan Office should be advised of the committee members using the form (fillable form) on
page 4 and returned no later than March 31, 2016.
Should the services of an independent accountant that is not a licensed CPA be engaged, that accountant must
follow the procedures outlined for an audit committee in Section C.
Complete financial statements of the congregation or organization are required. Reference to guidelines and
further instructions is made to the Manual of Business Methods in Church Affairs that is prepared and
distributed by the National Episcopal Church and available at:
http://www.episcopalchurch.org/page/manual-business-methods
SUMMARY OF ACTION AND DATES
Advise Diocesan Office of Members Comprising Congregation Audit Committee
March 31
Return Congregation Audit Report to the Diocesan Office (see below)
June 30
Mail a hard copy of Section C and required documents to:
Diocesan Business Administrator
Episcopal Diocese of the Rio Grande
6400 Coors Blvd. NW
Albuquerque, NM 87120
DRG Annual Congregational Audit Process and Form…..Page 3
NOTIFICATION TO THE DIOCESAN OFFICE OF AUDIT COMMITTEE MEMBERSHIP
CHURCH
STREET ADDRESS
CITY, STATE, ZIP
MAILING ADDRESS
(if different from above)
AUDIT YEAR
MEMBERS OF AUDIT COMMITTEE:
Name
Position
E-Mail
1.
2.
3.
4.
5.
Submitted By:
Name
Title
Date (mm/dd/yyyy)
COMPLETE AND MAIL THIS PAGE BY MARCH 31 TO:
Diocesan Business Administrator
Episcopal Diocese of the Rio Grande
6400 Coors Blvd. NW
Albuquerque, NM 87120
DRG Annual Congregational Audit Process and Form…..Page 4
ADVANCE PREPARATION LIST FOR AUDIT
The Treasurer/Bookkeeper should ensure that the following documentation is available and assembled
for the public accountant or Audit Committee members.
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Copy of prior year’s audit report
Copy of parochial report for year being audited
Copy of approved budget
Copy of approved housing allowance resolution(s)
Copy of bylaws
Copies of vestry/bishop’s committee minutes for the year
Copy of financial statements prepared for the year
For the year being audited, receipts and disbursement records and general ledger of all accounts
Bank statements, savings account statements and investment reports for all accounts being
audited with applicable reconciliation, including the first month of the next year
Check stubs and processed checks, including voided checks
List of authorized signatures for all bank or financial accounts including, but not limited to checking
and petty cash accounts
Record of plate collections and other receipts, including record of corresponding deposits (include
description of procedures and control of plate collections and other receipts)
Paid invoices, vouchers or other backup for expenditures (include description of procedures and
control of plate collections and other receipts)
Details of any mortgages or other loans, including copy of loan statement showing balance at end
of year
Details of any significant receivables or payables as of end-of-year
Evidence of property and liability insurance coverage
Building appraisals and inventory of contents
Copy of corporate annual report filed with the Secretary of State, Corporation Bureau, if applicable
Copy of space use agreements and insurance certificates for regular users of the church property,
if applicable
Reports for payroll reporting to Internal Revenue Service and State of New Mexico/Texas
(Including copies of W-2’s and 1099’s)
Copy of year-end pension statement(s)for eligible lay employees (working more than 1500/hours
per year) and all clergy
Copy of year-end medical insurance statement(s)for eligible lay employees (working more than
1000/hours per year) and all clergy
Evidence of Workers’ Compensation coverage
Copy of Manual of Business Methods in Church Affairs available at:
http://www.episcopalchurch.org/page/manual-business-methods
DRG Annual Congregational Audit Process and Form…..Page 5
INTERNAL CONTROLS CHECKLIST
The primary purposes of establishing internal controls is to: 1) Establish protocols that are followed by
staff and volunteers to bring order and cohesiveness to operations; 2) Prevent or reduce fraud and
theft; 3) Create a separation of duties by creating a system of checks and balances; 4) Organize
information thereby increasing productivity; and 5) Reduce errors.
Accounts Receivable (Cash Receipts)
 A chart of accounts that provides for the categorization of expenses is used
 Checks are endorsed “for deposit only” immediately upon receipt
 The person counting the receipts is not the person who prepares and delivers the deposit
 The person depositing receipts is not the person recording the receipts
 Duplicate deposit slips and copies of checks are retained in the files
 All cash and checks are deposited intact and on a timely basis
 Restricted contributions are clearly identified and recorded as restricted on the general ledger
 All cash received is counted and verified by two church volunteers
 Accounts receivable procedures are used for fundraising and outreach activities
Accounts Payable (Cash Disbursements)
 A chart of accounts that provides for the categorization of expenses is used
 All disbursements, except those from petty cash, are made by pre-numbered checks
 Void checks are preserved and filed after appropriate mutilation
 There is a written prohibition against issuing checks payable to “cash”
 There is a written prohibition against signing checks in advance
 A cash disbursement voucher for each invoice or a request for reimbursement that details the
description of expense account to be charged and contains authorization signature and
accompanying receipts and/or vendor invoices is prepared
 All expenses are approved in advance by authorized persons
 Accounts payable procedures are used for fundraising and outreach activities
 Checks require two signatures
 Check signors review supporting documentation of expenses and approvals at the time of signing
checks
 Check signors are independent of the accounts receivable/payable functions
 Signed checks are mailed promptly
 Paid invoices are marked paid or attached to a copy of the check prior to filing
 Requests for reimbursement are checked for mathematical accuracy and reasonableness before
approval
 Check-signing authority is approved by the Vestry/Bishop’s Committee
 Bank statements and cancelled checks are received and reconciled by a person independent of the
accounts receivable/payable functions
 Bank reconciliations are reviewed by a person independent of the accounts receivable/payable
functions and bank reconciliation function
Petty Cash
 A petty cash fund is maintained for payment of small, incidental expenses
DRG Annual Congregational Audit Process and Form…..Page 6
 The church follows a policy limiting the amount that can be reimbursed by the petty cash fund
 Supporting documentation is required for all petty cash disbursements
 A petty cash voucher is filled out with supporting documentation, name of person being
reimbursed, and proper authorization
 Access to petty cash is limited to one person who is the fund custodian
 Unannounced counts of petty cash is made by someone within the organization other than the
petty cash fund custodian
Payroll
 Employment records are maintained for each employee that detail wage rates, benefits, and other
pertinent information
 Withheld employment taxes and employer taxes are paid on a timely basis to the taxing authorities
(if an external payroll service is not being used)
 Written policies and procedures exist for accounting for vacations, holidays, sick leave, and other
benefits
Financial Statements/Budgeting/Reporting
 Journal entries are made by a person independent of the accounts receivable/payable functions
 A statement of financial position is prepared monthly and reviewed by the Vestry/Bishop’s
Committee
 Monthly reports comparing income and expenses with approved budget are prepared and
reviewed by the Vestry/Bishop’s Committee
 Accounting records are up-to-date and monthly financial statements are prepared on a timely basis
 The Vestry/Bishop’s Committee submits the annual budget for approval by the congregation
 All appropriate federal, state, and local information returns are filed on a timely basis
DRG Annual Congregational Audit Process and Form…..Page 7
SECTION B
AUDIT BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
This section applies to those congregations using the services of a licensed independent public
accountant.
Any congregation may elect to have the annual audit performed by an Independent Licensed Certified
Public Accountant or other Independent Licensed Public Accountant.
Those congregations with Revenues, Gains and Other Support of $500,000 or more annually are
required to have their audit performed by an Independent Licensed Certified Public Accountant or
other Independent Licensed Public Accountant. (Please contact Cindy Frost for additional information
related to this requirement.)
Our Congregation’s Audit Was Performed By:
Firm:
Street Address:
City, State, Zip:
SUBMIT the following to the Diocesan Office:
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Complete Independent Auditor’s Report, including Auditor’s Management Representation
Letter with Audited Financial Statements
Approved annual budget
Parochial report
Approved housing allowance(s)
Bylaws (if changed)
Pension and medical insurance year-end statements
Summary description of coverage found in the property and liability insurance policy
Reconciliation of amounts reported in the parochial report and the financial statement, if
amounts are different.
SECTION C (COMMITTEE AUDIT), WHICH FOLLOWS, DOES NOT APPLY IF
SECTION B IS USED.
DRG Annual Congregational Audit Process and Form…..Page 8
SECTION C
COMMITTEE AUDIT OVERVIEW
These audit guidelines are prepared for use by the Audit Committee as a guide for their work.
Audit Committee members should be independent of the decision-making and financial record-keeping
functions of the congregation. The members of the Audit Committee should have sufficient financial
skills and experience to conduct a competent audit.
The Audit Committee should consist of three individuals. The size and scope of the audit may warrant
a lesser number of individuals.
The scope of the audit shall include:
a.
Sufficient tests of transactions to assure compliance with these guidelines and adequate control
of the assets of the congregation.
b.
Verification (or preparation) of financial statements in the form approved for the Episcopal
Church as set forth in the Manual of Business Methods in Church Affairs available at:
http://www.episcopalchurch.org/page/manual-business-methods
c.
A review of management control practices using the Internal Control Questionnaire found in
Chapter II (Internal Controls) of the manual referred to in paragraph b.
DRG Annual Congregational Audit Process and Form…..Page 9
SECTION C – COMMITTEE AUDIT
PROCEDURES
NOTE: ITEMS IN SHADED BOXES ARE TO BE SUBMITTED WITH THIS REPORT
General Review
1.
Obtain and review the audit report covering the period immediately preceding this period being
audited. Have prior audit recommendations been implemented?
Yes
No
If some prior recommendations have not been implemented, explain what they are and reason
for not being implemented.
2.
Review the Vestry/Bishop’s Committee minutes for:
(a) Budget approval. Date approved (mm/dd/yyyy):
(b) Clergy housing allowance. Date approved (mm/dd/yyyy):
(c) Other matters that will affect the financial reports:
INSERT:
The Approved Budget and Approved Clergy Housing Allowance Resolution
A template for clergy housing resolutions is available under Congregational Audit Materials at:
http://www.dioceserg.org/pages/view/edrg_forms
3.
Are monthly financial reports prepared?
Explain any exceptions or a “No” response
Yes
No
4.
Are financial reports provided to the Vestry/Bishop’s Committee monthly?
Explain any exceptions or a “No” response
5.
Are reports of contributions provided to parishioners?
Explain any exceptions or a “No” response
Yes
Yes
No
No
How often are they provided (monthly, quarterly?)
DRG Annual Congregational Audit Process and Form…..Page 10
INSERT:
Approved Budget
Approved Clergy Housing Allowance Resolution
DRG Annual Congregational Audit Process and Form…..Page 11
6.
Are periodic reviews of insurance coverage made to determine adequacy of each type of
insurance?
Yes
No
Explain any exceptions or a “No” response
Date of last insurance review (mm/dd/yyyy)
7.
Are inventories of furnishings and equipment current and complete?
Explain any exceptions or a “No” response
Yes
No
Date of last update (mm/dd/yyyy)
8.
If incorporated in the state of New Mexico, has the required annual report been timely filed with
the Secretary of State, Corporation Bureau? (Not applicable to Texas Congregations.)
Yes
No
Explain any exceptions or a “No” response
INSERT:
The Annual Corporate Report
9.
Does the Parish/Mission have a separate entity or fund, such as an endowment, foundation,
corporation or 501(C)(3) organization?
Yes
No
If so, provide name of entity or responsible parties:
10.
Have there been any changes to the bylaws since the last audit?
Yes
No
INSERT:
Revised Bylaws
A template for parish and mission bylaws is available under Congregational Audit Materials at:
http://www.dioceserg.org/pages/view/edrg_forms
11. Is building space currently being provided to other organizations on a regular basis?
Yes
No
If so, list those organizations:
Are written agreements concerning the use of the facilities and insurance certificates from the
user on file?
Yes
No
Explain any exceptions or a “No” response
12. If there is a school on-site, is it
a separate entity renting space?
OR
does the Parish sponsor it?
DRG Annual Congregational Audit Process and Form…..Page 12
INSERT:
The Annual Corporate Report
Revised Bylaws
DRG Annual Congregational Audit Process and Form…..Page 13
13. Obtain a copy of the Parochial Report for the year being audited and compare the information
with reports being audited. Explain any differences.
INSERT:
The Parochial Report
14. Are financial reports manually or electronically maintained? If manual, what steps are being
taken to become automated? (Please contact the Business Administrator at Diocesan Office for
recommendations.)
15. If electronic, briefly describe the computer system and program being used.
16. It is strongly recommended that financial records be maintained on-site at the church. Where are
financial records being maintained?
17. It is strongly recommended that backup for financial data be performed daily and stored off-site.
How often are financial files backed up and where are they stored?
Assets
18. List all checking, savings, investment, discretionary, and related organization accounts.
If account(s) is not included in this audit, state why.
(a) Were the accounts in the name of, and addressed to, the church?
Explain any exceptions or a “No” response
Yes
(b) Was the church’s tax ID number used for all accounts?
Explain any exceptions or a “No” response
No
Yes
No
(c) Were statements of each account available to show activity for the year?
Yes
No
Explain any exceptions or a “No” response
(d) Is the bank account reconciliation completed by someone other than the person who
participates in the receipt or disbursement of cash?
Yes
No
Explain any exceptions or a “No” response
(e) Are bank accounts being reconciled with the books promptly after receipt?
Explain any exceptions or a “No” response
Yes
No
INSERT:
The Year-End Bank Reconciliations (Including Year-End Bank Statements) For Each Of The
DRG Annual Congregational Audit Process and Form…..Page 14
Accounts
INSERT:
The Parochial Report
The Year-End Bank Reconciliations (Including Year-End Bank
Statements) For Each Of The Accounts
DRG Annual Congregational Audit Process and Form…..Page 15
NOTE: You will be asked to examine or test on a “Sample Basis”. The definition of “Sample Basis”
is: the lessor of 10% of all transactions or 25 transactions, whichever is smaller.
19. Examine on a sample basis of available backup documentation (i.e., paid bills, invoices, etc.) to
support disbursement and accounting of cash funds. How many items were tested?
20. For savings and investment accounts, examine on a sample basis, activity for the period being
audited. Was activity in accordance with the investment plan and appear to be in the normal
course of business?
Yes
No Explain any exceptions or a “No” response
21.
Is a petty cash fund maintained for payment of small, incidental expenses?
Yes
No
Explain any exceptions or a “No” response
22. Does the church follow a policy limiting the amount that can be reimbursed by the petty cash
fund?
Yes
No
Explain any exceptions or a “No” response
23. Is supporting documentation required for all petty cash disbursements?
Yes
No
Explain any exceptions or a “No” response
24. Is a petty cash voucher filled out with supporting documentation, name of person being
reimbursed, and proper authorization?
Yes
No
Explain any exceptions or a “No” response
25. Is access to petty cash limited to one person who is the fund custodian?
Yes
No
Explain any exceptions or a “No” response
26. Are unannounced counts of petty cash made by someone within the organization other than the
petty cash fund custodian?
Yes
No Explain any exceptions or a “No” response
27. Review methods and procedures used to report expenditures for property and equipment. Has
property and equipment been appropriately reflected on the balance sheet?
Yes
No
Explain any exceptions or a “No” response
28. Has depreciation of property and equipment been recorded in the accounts?
Explain any exceptions or a “No” response
Yes
No
INSERT:
The Summary Page Of Coverage Found In The Property And Liability Insurance Policy
29. Review any major receivables, deferred or prepaid expenses, or other assets. Investigate, or
consider confirmation of, any significant amount. List significant items.
DRG Annual Congregational Audit Process and Form…..Page 16
INSERT:
The Summary Page Of Coverage Found In The Property And
Liability Insurance Policy
DRG Annual Congregational Audit Process and Form…..Page 17
Liabilities
30. Are mortgage payments being made on a current basis?
Explain any exceptions or a “No” response
Yes
No
State balance and verify if considered necessary.
31. Are pension payments up-to-date for participants?
Explain any exceptions or a “No” response
Yes
No
32. Are clergy pension payments equal to 18 percent of salary and housing?
Explain any exceptions or a “No” response
Yes
No
33. Are lay employees that work more than 1,500 hours a year covered by a pension plan?
Yes
No
Explain any exceptions or a “No” response
INSERT:
Year-End Pension Statements For Eligible Lay Employees And Clergy
34. Are fair share contributions to the Diocese being paid on a current basis?
Explain any exceptions or a “No” response
Yes
No
35. Are operating costs (salaries, utilities, etc.) being paid on a current basis?
Explain any exceptions or a “No” response
Yes
No
36. Are payroll taxes being paid on a current basis and applicable payroll reports being filed timely?
Yes
No
Explain any exceptions or a “No” response
Accounts Receivable (Cash Receipts)
Review procedures and controls for accounts receivable including the collections from services and the
deposit of such monies.
INSERT:
The Accounts Receivable Procedures
DRG Annual Congregational Audit Process and Form…..Page 18
A template for accounts receivable procedures is available under Congregational Audit Materials
at:
http://www.dioceserg.org/pages/view/edrg_forms
INSERT:
Year-End Pension Statements For Eligible Lay Employees And
Clergy
The Accounts Receivable Procedures
DRG Annual Congregational Audit Process and Form…..Page 19
37. Is a chart of accounts used that provides for the categorization of expenses?
Explain any exceptions or a “No” response
38. Are checks endorsed “for deposit only” immediately upon receipt?
Explain any exceptions or a “No” response
Yes
Yes
No
No
39. Is the person counting the receipts someone other than the person who prepares and delivers
the deposit?
Yes
No Explain any exceptions or a “No” response
40. Is the person depositing receipts someone other than the person recording the receipts?
Yes
No
Explain any exceptions or a “No” response
41. Are duplicate deposit slips and copies of checks retained in the files?
Explain any exceptions or a “No” response
42. Are all cash and checks deposited intact and on a timely basis?
Explain any exceptions or a “No” response
Yes
Yes
No
No
43. Are restricted contributions clearly identified and recorded as restricted on the general ledger?
Yes
No Explain any exceptions or a “No” response
44. Is all cash received counted and verified by two church volunteers?
Explain any exceptions or a “No” response
Yes
No
45. Are accounts receivable procedures used for fundraising and outreach activities?
Yes
No Explain any exceptions or a “No” response
46. Test on a sample basis, counter sheets, deposit records, recordings of cash receipts and
determine that revenues are properly recorded and appropriately classified in the financial
reports. Test the procedure by following selected cash receipts from original receipt to final
reporting in the financial reports. Comment on any unusual items.
Accounts Payable (Cash Disbursements)
Review procedures and controls for accounts payable from the operating account and any other
accounts.
INSERT:
Accounts Payable Procedures
DRG Annual Congregational Audit Process and Form…..Page 20
DRG Annual Congregational Audit Process and Form…..Page 21
INSERT:
Accounts Payable Procedures
DRG Annual Congregational Audit Process and Form…..Page 22
A template for accounts payable procedures is available under Congregational Audit Materials at:
http://www.dioceserg.org/pages/view/edrg_forms
47. Is a chart of accounts used that provides for the categorization of expenses?
Explain any exceptions or a “No” response
48
Yes
No
Are all disbursements, except those from petty cash, made by pre-numbered checks?
Yes
No Explain any exceptions or a “No” response
49. Are void checks preserved and filed after appropriate mutilation?
Explain any exceptions or a “No” response
Yes
50. Is there a written prohibition against issuing checks payable to “cash”?
Explain any exceptions or a “No” response
51. Is there a written prohibition against signing checks in advance?
Explain any exceptions or a “No” response
Yes
No
Yes
No
No
52. Is a cash disbursement voucher for each invoice or a request for reimbursement that details the
description of expense account to be charged and contains authorization signature and
accompanying receipts and/or vendor invoices prepared?
Yes
No
Explain any exceptions or a “No” response
53. Are all expenses approved in advance by authorized persons?
Explain any exceptions or a “No” response
Yes
No
54. Are accounts payable procedures used for fundraising and outreach activities?
Explain any exceptions or a “No” response
55. Do checks require two signatures?
Yes
Explain any exceptions or a “No” response
Yes
No
No
56. Do check signors review supporting documentation of expenses and approvals at the time of
signing checks? ?
Yes
No
Explain any exceptions or a “No” response
57. Are check signors independent of the accounts receivable/payable functions?
Explain any exceptions or a “No” response
58. Are signed checks mailed promptly?
Yes
Explain any exceptions or a “No” response
Yes
No
No
59. Are paid invoices marked paid or attached to a copy of the check prior to filing?
Explain any exceptions or a “No” response
Yes
No
DRG Annual Congregational Audit Process and Form…..Page 23
60. Are requests for reimbursement checked for mathematical accuracy and reasonableness before
approval?
Yes
No
Explain any exceptions or a “No” response
61. Is check-signing authority approved by the Vestry/Bishop’s Committee?
Explain any exceptions or a “No” response
Yes
No
62. Are bank statements and cancelled checks received and reconciled by a person independent of
the accounts receivable/payable functions?
Yes
No
Explain any exceptions or a “No” response
63. Are Bank reconciliations reviewed by a person independent of the accounts receivable/payable
functions and bank reconciliation function?
Yes
No
Explain any exceptions or a “No” response
64. Determine who was authorized to sign checks during the period being audited and test on a
sample basis, cancelled checks to assure that authorized individuals signed checks. Note any
discrepancies.
65. Examine on a sample basis, for supporting documentation, including receipt of goods and
approval for payment. Comment on any unusual items.
66. Examine on a sample basis, the records of cash disbursements and determine that expenditures
are appropriately reflected and classified in the records and financial reports. Comment on any
unusual items.
Payroll
It is strongly recommended that all churches outsource their payroll. For more information, please
contact the Business Administrator at Diocesan House or contact Episcopal Payroll Services of the
Church Pension Group at 1.800.223.6602.
67. Are employment records maintained for each employee that detail wage rates, benefits, and
other pertinent information?
Yes
No Explain any exceptions or a “No” response
68. Are there written policies and procedures for accounting for vacations, holidays, sick leave, and
other benefits?
Yes
No Explain any exceptions or a “No” response
69. Examine payroll tax reports, W-2 forms, 1099 forms, etc., to determine that filing requirements
have been met and taxes properly remitted. Comment on any unusual items.
70. Was clergy compensation reported at end of year on form W-2? (Required)
Explain any exceptions or a “No” response
Yes
No
(a) Was the value of life insurance premiums on coverage in excess of $50,000 included on
form W-2? (Required)
Yes
No Explain any exceptions or a “No” response
DRG Annual Congregational Audit Process and Form…..Page 24
(b) Was Vestry/Bishop’s Committee approved clergy housing allowance reported or not
reported in Box 14 of the form W-2? (Optional)
Yes
No
Explain any exceptions or a “No” response
(c) Was federal income tax withheld or not withheld from compensation of clergy?
(Optional)
Yes
No
Explain any exceptions or a “No” response
(d) Assure that Social Security and Medicare taxes have not been withheld from
compensation of clergy.
(e) Were travel expenses of clergy disbursed on the basis of
a predetermined travel allowance?
OR
an actual accounting of cost submitted by the individual?
(f) If travel expenses of clergy were disbursed on the basis of a travel allowance, was that
amount, as required, reported on Form W-2 as taxable income to the individual?
Yes
No
Explain any exceptions or a “No” response
(g) If the parish has one or more employees (including clergy), has a Workers’
Compensation insurance policy been obtained? (Required)
Yes
No
Explain any exceptions or a “No” response
(h) For New Mexico parishes, has form WC-1, New Mexico Workers’ Compensation Fee,
been filed on a quarterly basis with the NM Taxation & Revenue Department?
(Required if workers compensation insurance is carried.)
Yes
No
Explain any exceptions or a “No” response
(i)
When new employees are hired (including clergy), did you complete the required State
and Federal forms?
Yes
No Explain any exceptions or a “No” response
INSERT:
Workers’ Compensation Certificate of Liability Insurance
71. Compare salaries paid to approved budgets and comment on any differences.
72. Have those non-employee individuals or unincorporated companies, who received payments of
$600 or more during the year, been issued a form 1099-MISC to report their earnings?
Yes
No
Explain any exceptions or a “No” response
INSERT:
Year-End W-2’s, W-3’s, 1099’s, & 1096’s
DRG Annual Congregational Audit Process and Form…..Page 25
INSERT:
Workers’ Compensation Certificate of Liability Insurance
Year-End W-2’s, W-3’s, 1099’s, & 1096’s
DRG Annual Congregational Audit Process and Form…..Page 26
73. Ascertain that benefits and policies applicable to individuals working less than full-time are in
accordance with church policies, compatible with benefits for full-time employees and in
compliance with any Federal and State requirements. Especially consider those who work more
than 1500 hours per year. Comment on any unusual situations.
INSERT:
Year-End Medical Insurance Statements
.
74. Ascertain that clergy employment packages are in adherence with the Diocesan Clergy
Compensation Policy available at:
http://www.dioceserg.org/pages/view/edrg_policy
Discretionary Funds
75. Identify and list all discretionary funds and clergy positions holding these funds.
76. For each discretionary fund:
(a)
Is the account in the name of the church?
Explain any exceptions or a “No” response
Yes
No
(b)
Is the church’s tax ID number used to identify the account at the bank?
Yes
No
Explain any exceptions or a “No” response
(c)
What is the source of monies contributed to the discretionary fund?
(d)
Examine disbursements from discretionary funds to ensure funds were used for
discretionary purposes and not for operating fund expenditures. Comment on any
variations.
(e)
List those individuals authorized to sign checks on the discretionary bank account.
(f)
Are periodic reports of expenditures, in summary form by purpose of disbursement,
provided to the vestry or other designated supervisory committee?
Yes
No
Explain any exceptions or a “No” response
Refer to the Manual of Business Methods in Church Affairs for review of Discretionary Fund
requirements available at:
http://www.episcopalchurch.org/page/manual-business-methods
DRG Annual Congregational Audit Process and Form…..Page 27
INSERT:
Year-End Medical Insurance Statements
DRG Annual Congregational Audit Process and Form…..Page 28
Financial Statements/Budgeting/Reporting
Obtain a copy of the adjusted year-end financial statements (Revenue and Expense Report and the
Balance Sheet.) Review the financial statements and satisfy yourself that the statements appropriately
account for the financial activity of the church for the year.
INSERT:
The Financial Statements
77. Are journal entries made by a person independent of the accounts receivable/payable functions?
Yes
No
Explain any exceptions or a “No” response
78. Is a statement of financial position prepared monthly and reviewed by the Vestry/Bishop’s
Committee?
Yes
No Explain any exceptions or a “No” response
79. Are monthly reports comparing income and expenses with approved budget prepared and
reviewed by the Vestry/Bishop’s Committee?
Yes
No
Explain any exceptions or a “No” response
80. Are accounting records up-to-date and monthly financial statements prepared on a timely basis?
Yes
No
Explain any exceptions or a “No” response
81. Does the Vestry/Bishop’s Committee submit the annual budget for approval by the congregation?
Yes
No
Explain any exceptions or a “No” response
82. Are all appropriate federal, state, and local information returns filed on a timely basis?
Yes
No
Explain any exceptions or a “No” response
Audit Committee Findings Report
Review the Internal Control Questionnaire found in Section II of the Manual of Business Methods in
Church Affairs as it applies to this parish and make notes for the preparation of the Audit Committee’s
Findings Report.
83. Prepare and distribute an Audit Committee Findings Report (template on page 26) as a result of
your review of the financial records and the review of the internal control procedures of the
church.
INSERT:
The Audit Committee Findings Report
DRG Annual Congregational Audit Process and Form…..Page 29
INSERT:
The Financial Statements
The Audit Committee Findings Report
DRG Annual Congregational Audit Process and Form…..Page 30
AUDIT COMMITTEE FINDINGS REPORT
Date (mm/dd/yyyy)
To the Rector, Wardens and Vestry of
Church:
Street Address:
City, State, Zip
Subject:
Financial Audit
(Year)
We have reviewed the financial statements resulting from financial transactions of the aforementioned
church as of December 31,
. Our review was made in accordance with audit guidelines issued by
the Diocese of the Rio Grande and other procedures deemed appropriate by the Audit Committee.
Our objective was to assure that the accompanying financial statements present fairly, in all material
respects, except as noted below, the financial position and results of its operations of the Parish at
December 31,
, in accordance with accounting principles promulgated by the National Episcopal
Church, on a consistent basis. Our examination and report is not and is not meant to be construed as an
audit and opinion rendered by an Independent Public Accountant.
During the course of the audit referred to above, the following items pertaining to internal control and
other operational matters, which we believe to be of a significant nature, were noted:
Areas where prior year auditors’ recommendations have been implemented:
1.
2.
Prior year’s auditor’s recommendations that still exist but still worthy of consideration:
1.
2.
Comments and recommendations of current year auditors for improvements in control and/or
procedures:
1.
2.
This letter should be made a part of the minutes of a Vestry meeting.
Members of the Audit Committee:
_____________________________________________________
(Signature)
_____________________________________________________
(Signature)
_____________________________________________________
DRG Annual Congregational Audit Process and Form…..Page 31
(Signature)
DRG Annual Congregational Audit Process and Form…..Page 32
CHECK LIST OF REQUIRED DOCUMENTS FOR RETURN BY COMMITTEE AUDIT
Assure that copies of the following required documents are inserted in the applicable insert
location:
Approved Budget
Approved Clergy Housing Allowance Resolution
Annual Report to the Secretary of State, Corporation Bureau, if incorporated (New Mexico
Only)
Bylaws (if changed from prior year)
Parochial Report
Year-End Bank Reconciliations & Year-End Bank Statements (including Church Discretionary
Fund)
Property and Liability Insurance Summary Page of Coverage
Year-End Pension Statements
Accounts Receivable (Cash Receipts) Procedures
Accounts Payable (Cash Disbursements) Procedures
Workers’ Compensation Certificate of Liability Insurance
Year-End W-2’s, W-3’s, 1099’s, 1096’s and Reports
Year-End Medical Insurance Statements
Year-End Financial Statements
Audit Committee Findings Report
Upon completion of Section C:
Mail a hard copy of Section C and the documents listed above to: Diocesan Business Administrator
Episcopal Diocese of the Rio Grande
6400 Coors Blvd. NW
Albuquerque, NM 87120
DRG Annual Congregational Audit Process and Form…..Page 33