Audit TrainingConvention 2013

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Today’s Topics

• Introductions• Why have an audit?• Audit Terms Defined• Audit Team and Participants• Audit Process• Internal Controls Checklist• Audit Program Checklist• Audit Report

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Two things to remember!

• 1. Thank your treasurer!• 2. We are here to help:

– Julie Young, Diocesan Treasurer and Canon for Finance and Administration

• jyoung@edsd.org• 619-481-5453

– Rosa Feeney, Diocesan Assistant Treasurer• rfeeney@edsd.org• 619-481-5457

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Audits: Why do we need to have an audit?

Benefits of Audit• Compliance with law and church

canon• Assure that financial statements are

accurate• Protects those handling finances• Other People’s money• Increase stewardship• Learning Experience• Chance to celebrate!

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New this year! Audit Workbook

• Workbook has been mailed to your church • Workbook is a step by step guide on audit

process• Workbook has been tested in another diocese

and was successfully used and warmly received• To be used whether you have an external audit,

audit exchange, audit review or internal audit

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New This Year! Diocesan Auditors

• Rosa Feeney, EDSD Assistant Treasurer will be spending approximately half her time starting in June 2013 on Diocesan Audits

• She will be leading up a team of volunteer diocesan auditors who will help her conduct audits of selected congregations

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Terms Defined

• External Audit

• Audit Review

• Committee Audit

– Internal audit

– Audit exchange

• Diocesan Audit

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Terms Defined• External Audit: A complete audit conducted by an outside Certified Public

Accountant (CPA)• Audit Review: A review of the financial statements conducted by an outside

Certified Public Accountant (CPA). Typically, and audit review does not offer the same depth as an external audit nor does it usually provide an internal controls review. As such, it does not meet the requirements set forth below for churches that are required to have an external audit but can be used in place of a committee audit.

• Committee Audit: Audits that are conducted by committee. There are two types of committee audits.

• Internal audit -- a committee audit that is done by its own church • Audit exchange -- a committee audit done on another church in exchange for that

church conducting a committee audit on yours• Diocesan Audit: This is an audit conducted by the diocesan audit team. It is not

as thorough as an external audit and does not take the place of one.

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2012 Audit Guidelines: External Audits

• Churches over $1.5 million in total revenues will have external audits unless they are between $1.5 and $2 million AND had an audit of 2011.

• Churches in transition of rector, vicar, priest in charge should have an external audit unless granted a waiver. A waiver might be granted if they had had an external audit recently and are smaller than $1 million in revenue

• Revenue is for all business units including schools and thrift shops

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2012 Guidelines: Diocesan Audits

• Diocesan Audits would be required of all churches that did not conduct an audit of 2011 unless church is conducting an external audit or is granted a waiver

• A fee of $1,000 would be charged of churches over $500,000 in revenue and $500 for smaller churches. Missions and aided parishes can apply for scholarship.

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2012 Audit Guidelines -- Other

• All other churches must conduct a committee audit -- audit exchange or internal audit.

• If they cannot do this, they can apply for a diocesan audit with fee schedule above.

• Audit reviews are allowed to take the place of internal audits provided an internal controls assessment is done by the auditor or internally. Letter of engagement must be approved by diocesan treasurer

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Audit Process: Decide on Type of Audit

• Churches not required to conduct a specific type of audit must decide what type of audit to have

• This is a vestry or bishop’s committee decision

• Decision on type of audit and composition of audit team needs to be conveyed to the diocese by April 15 using the form on page 8 in the book

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Audit Process: Identify Audit Committee

• Find committee members – should not include anyone involved in the finances of the church unless participating in an audit exchange

• Preparation: Review audit workbook that will be mailed

• Meet with priest and treasurer plus person doing the accounting

• Audit team will conduct committee audit or oversee external audit

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Audit Workbook: General Instructions

Advance preparation for audit– Regardless of what type of audit is being

conducted, financial staff or volunteers need to prepare for audit by assembling documentation listed in general instructions section of audit workbook (page 9)

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Audit: Key Points

• Preparation is critical; read chapters II and VI of business manual thoroughly

• If your understanding of accounting is limited, read chapter III as well

• All business units and accounts must be audited

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External Audit

• Audit Committee function is to select auditor, meet with auditor to review findings, and recommend to vestry or bishop’s committee to accept (or not accept audit)

• Vestry must provide oversight, making sure that they receive timely reports from the audit committee and receive the final audit report for acceptance

• See Section A of Audit Workbook16

Committee AuditInternal Audit/Audit Exchange

• Section B of audit workbook provides a step by step instructions on how to conduct an internal audit or audit exchange

• Questions incorporate internal controls questions and audit questions

• Transactions testing is required• A number of documents should be included in

audit and audit workbook that is turned in

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What is transaction testing?

• Sampling deposits and disbursements to assure that backup is available and they are correctly recorded

• Sample size is 10% or 25 transactions whichever is smaller

• From list of transactions made, choose some that are large and others that are made out to key people and ask for invoices and other backup

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Financial Statements

• Ask for year end balance sheet (Statement of Financial Position) and income statement (Statement of Activities)

• Should be in format on next slides

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Balance Sheet December 31, 2012

Cash and Investments Net Assets

Checking $3,330 Temporarily Restricted

Investments $12,000 ECW $4,569

Total Current Assets $15,330 Building Fund $23,599

Altar Guild $2,359

Fixed Assets Pastoral Fund $599

Church Building $325,000 Total Temporarily Restricted $31,126

Church Land $250,000

Furnishings $49,231 Permanently Restricted $10,000

Less Accumulated Depreciation $32,000

Total Fixed Assets $592,231 Unrestricted $441,435

Total

Total Net Assets $482,561

Total Assets $607,561

Liabilities

Note payable on church $125,000

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Statement of ActivitiesIncome Statement February 2012

February Year to Date

Actual Budget Actual Budget Variance

Revenue

Pledge 5,100 5,000 11,123 10,000 1,123

Plate 349 500 795 1,000 -205

Other 25 100 53 200 -147

Total 5,474 5,600 11,971 11,200 771

Expenses

Personnel 4,000 4,000 8,000 8,000 0

Liturgy 250 400 599 800 201

Office 99 200 315 400 85

Maintenance 1,000 750 3,523 1,500 -2,023

Total 5,349 5,350 12,437 10,700 -1,737

Net Income (Loss) 125 250 -466 500 -966

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Filing of Audit

• Upon completion of audit, committee should present audit report to treasurer, rector/vicar, vestry

• A copy of the audit workbook with all attachments should be filed with the Bishop’s Office

• If at any time during process, records indicate something seriously wrong, contact wardens and Diocesan Treasurer immediately

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Questions?

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