05/21/2021
Don't Hide the Ball-Thoughts on Church Audits
This morning I have my church counsel hat on. I'd like to just speak for a moment to sound financial practices. in the church.
Picture, if you will, a church, diocese or even a national church body that has not had an audit of its books in recent memory. Indeed, the mere suggestion of such a thing is greeted with cries of, "We've never done things that way!" Despite the offer of a donation of USD10,000,, the audit is rejected as too expensive. At the same time, the church, which holds roughly USD1.3 million in funds, approves financial statements that admittedly are incorrect and a budget based on the incorrect figures.
Bait for an IRS gearing up to take on organizations like the church? You bet it is. Cause for complaints by donors? To borrow an expression from a senator, "Well, duh!"
Tammy Bunting is the Director of Not-for-Profit Services at the AcctTwo accounting firm:
• An audit provides assurance that funds received and expended are in accordance with the donor’s restrictions or the church’s mission.
• It provides a level of assurance to lenders that there aren’t any substantial misstatements of funds.
• It can protect the persons handling the funds from any accusations of misappropriation or fraud.
A common thread is assurance and protection — the value, defined. Matthew 25:21: Well done, good and faithful servant! You have been faithful with a few things; I will put you in charge of many things.
As for cost, For a church with approximately a USD1/2 million budget, a full audit would typically range from about $7,500-$12,500, depending on level of complexity with the church financial statements and competence of the accounting staff (if they have a staff) at the church. Applying standard calculations based on an outgo of 60 transactions a month, the cost is more like USD4200 - USD5200 for a financial review or USD6900 - $8550 for the full monty-a proper audit.
There are also other options, such as a review or a compilation. which would be lower in cost.
Let's face it. The risks far outweigh the expense, particularly if a generous soul is willing to front the cost. As churches and religious organizations face the challenges of an increasingly hostile environment in the next few years.