Internal Controls
Mississippi Conference UMC
David Stotts, CPA
Treasurer/Director of Financial Administration
2008 Discipline 258 4 c
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The committee on finance shall
establish written financial polices to
document the internal controls of the
local church. The written financial
policies should be reviewed for
adequacy and effectiveness annually by
the committee on finance and submitted
as a report to the charge conference
annually.
Key Point
Church leaders have a special fiduciary
obligation to make sure that all church
assets are protected and used properly.
 15% of all churches are victimized by
unscrupulous employees or members.
 5250 UM churches in the US
 167 UM churches in Mississippi
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General Objectives
Safeguard Assets
 Reliability and accuracy of financial
records
 Compliance with managerial policies
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General Objectives Provide
Accurate recording
 Reliable reports for effective planning
and budgeting
 Efficiency of current operations
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Unreliable Financial Records and
Misappropriated Funds Result From
Separation of duties
 Establish a Crisp Organization Structure
 Recruitment of qualified personnel
 Adopted and written accounting
procedures manual
 Monitoring of accounting work
 Arena of trust
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Separation of Duties
Authorization of transactions
 Recording of transactions
 Custody of assets
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Internal Controls Must Be BeneficialFinancially and Emotionally
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Remove temptation for misappropriation
Prevent a cloud of suspicion
Save time and expense in record
reconstruction
Improve error detection
Reduce confrontations
Reduce board division
Reduce chance of losses
Reduce embarrassment and negative media
Internal Controls
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Organization Chart
Accounting procedure manual
Separation of duties
Safe guard of assets
Safe guard accounting records
Internal audit committee
Annual Audit
Personnel screening
Bonding
Cash Receipts
Use offering envelopes
 Use checks-not cash
 Receipts counted by 2 people
 Secure area for counting
 Verify envelope amounts
 Restrictive endorsements
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Cash Receipts (Continued)
Deposit Daily
 Deposit in tact
 Use of lock box
 Reports-Financial Secretary, Treasurer,
internal audit
 Mail/Drop off-not by one maintaining
accounting records
 Never cash checks payable to church
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Cash Receipts (Continued)
Never cash checks out of deposit
 Maintain contribution records
 Periodic notices to members
 Maintain copies of notices sent to
members
 Account for any differences to internal
audit committee
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Cash Disbursements
Requisition slips-indicate budget line
item
 Prenumbered purchase orders
 Approval of invoices
 Foot and verify invoices
 Check authorization form
 Pre-numbered checks
 Machine prepared checks
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Cash Disbursements-continued
Signers inspect supporting documents
 2 signatures
 Supporting documentation canceled
when paid
 Retain void checks
 Never make checks to “Cash”
 Safeguard blank checks
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Cash Disbursements-continued
Expenses in correct period
 Petty cash for minor disbursements
 Vouch petty cash expenditures
 Are transfers between bank accounts
authorized
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Reconciliation
Bank accounts not reconciled by person
involved in writing checks
 Surprise audit of Petty Cash
 Reconcile books to Financial Statements
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Other Assets
Lock box for valuables
 2 signatures to get into lock box
 Inventory of securities, valuables,
equipment, noncash assets
 Insurance adequacy
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Resources
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The Church Guide to Internal Controls by
Richard J. Vargo
 GCFA website
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Conference website
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Mississippi-umc.org
Conference wide Risk Managers
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gcfa.org
Phil Hinton Gallagher 601-956-5810
David Stotts, CPA-Conference Treasurer
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601-354-0515 david@mississippi-umc.org