Various Links on this Web Site:
ABOUT US | OUR PURPOSE | TABLE OF CONTENTS | SEARCH MATTERS | HELP DETAILS | FUND ACCTG VIA COMPUTERS | GLOSSARY
FROM: Jim Bramer, Retired Auditor CPA
RE: Internal Financial Controls, Ideals Originated: December 1992
The TRUISM mentioned when you Click Here is essential for Ministries as they exercise internal control over their finances by separating duties among staff members even though accounting staff members are few. Strive for some of these ideals below. Please Go Here for coverage of such issues within a QuickBooks (TM) (QB) system.
DEFINITION OF "INTERNAL CONTROLS" INCLUDES:
"Steps and procedures by which what one independent person does in carrying out their financial tasks becomes a check and balance on what another independent person does."
Two people sign authorized Journal Voucher forms (see Non-Cash info below for more specifics); regular comparison of Actual to Budget; the Bank Statement is opened by non-bookkeeper; the regular Bank Reconciliation is done by someone not doing Cash receipts or authorizing Paid outs; Receivables are proofed to a control account by someone not doing Cash receipts (see Non-Cash info below for more details); Periodic historical statements go out to Donors and Unpaid Receivables by non-cashier; Cashier has no responsibilities in accounting for Donors and Receivables (see Non-Cash info below for more details) Use of Imprest Petty Cash system; Equipment/furniture are physically inventoried and balanced to a control account; Important records are in a Safe Deposit Box.
All of these Internal Control Processes are regularly evaluated by a qualified third party, like a CPA Auditor.
Money is always in view of at least two unrelated people; Cash receipts are provable by other records; Documentation occurs by the first person handling cash; Cash receipts staff has limited access to other accounting records - especially the donation records and the accounts receivable data; All cash receipts are promptly deposited intact - or there are no cash paid outs from receipts.
Cash/check paid outs:
Cash paid outs are limited -- use pre-numbered checks; people producing checks have limited access to other accounting records; Invoices/check requests are authorized by non-accounting staff; payroll changes are authorized by non-accounting staff; Invoices are balanced to vendor's statements; Invoices/check requests accompany checks to be signed - plus they are voided so they can not be used again; two signatures of unrelated parties on larger checks after they have been written .... no pre-signing of checks.
Non-Cash - Documented "Buy Now Pay Later" Activity
As emphasized above, two unrelated people should be involved in all Non-Cash transactions - the bookkeeper, or transaction processor, should NOT handle this activity alone.
Most entities (People, Companies or Ministries, etc.) have Non-Cash or "Buy now pay later" activity.
Such examples include the following:
>> Money owed to your entity (Accounts Receivable):
One entity charges another entity for some type of product or services rendered. A Church has events or self-funding endeavors and allow participants to acquire now and pay later. Of course, Schools allows students (or parents, etc) to pay for Tuition/Fees over a period of time. Such Accounts Receivable transactions must be under control. Please Go Here for more School info..
>> Money that your entity owes to someone else (Account Payable):
Multiple authorized purchases are made by an entity on credit. Rather than write a check for each purchase, they once a month pay off the vendor, or the credit provider --- like a Plastic, or Credit Card Company. Please Go Here and indicated links for methods and needed controls for buying via Plastic. Sometimes the use of approved Purchase Orders gives an entity the needed control.
Non-Cash - Documented "Journal Entry" Activity
An earlier posted authorized transactions was improperly posted, so you make a correction via a Journal Entry process whereby you back out the transaction from where it is and you re-post it to where it belongs. Or money at a Ministry is originally authorized to be placed within an area (or Fund - see info Here ) but it is later re-assigned by applicable authorizer.
Another Non-Cash Journal Entry example is when discretionary money within a Ministry is SetASide (for more info Go Here to related links) by the Ministry's leadership -- usually as a General Fund budget item.
Please Go Here and see about a method of such non-cash Journal Entry management and control when you use the QuickBooks software.
Agreement of "Control Account" and "Subsidiary List"
You can identify, no doubt, with the need for the total of amounts due from each entity owing you money (subsidiary list) agreeing with the Accounts Receivable (control account) amount appearing within your Balance Sheet. And the same for Account Payable ... the amount (control account) appearing within the Balance Sheet must be be in agreement with a total of the individual amounts (subsidiary list) due to your vendors. Such agreement is made easy within most accounting software like QuickBooks by their use of integrated and affiliated databases, etc.
But when you use an unaffiliated database (like DonaMail software described Here ) then this vital "Internal Control" feature is missing.
I suggest that you maintain a separate Excel file of calendar year totals. Or you accumulate the cash basis batch totals of the donations that have been posted into the General Ledger and, at least at a Church you verify weekly that it agrees with the accumulated calendar year-to-date donation totals as posted to this separate DonaMail database, etc. Of course, if for some reason you change the bank deposit info, (like NSF checks, etc) then you will need to reflect this within the subsidiary separate DonaMail database file, etc.
The bulk of this Publication originated in December 1992 and was . UPTD: May 23, 2010