You have
been asked by the board of trustees of a local church to review its internal
controls. As a part of this review, you have prepared the following
comments relating to the collection made at weekly services and record keeping
for members’ pledges and contributions:
The
church’s board of trustees has delegated responsibility for financial
management and audit of the financial records to the finance committee. This
group prepares the annual budget and approves major disbursements, but is not
involved in collections or record keeping. No audit has been considered
necessary in recent years because the same trusted employee has kept church
records and has served as financial secretary for fifteen years.
The
collection at the weekly service is taken by a team of ushers. The head
usher counts the collection in the church office following each service.
He then places the collection and a notation of the amount counted in the
church safe. Next morning, the financial secretary opens the safe and
recounts the collection. She withholds about $100 to meet cash
expenditures during the coming week and deposits the remainder of the
collection intact. In order to facilitate the deposit, members who
contribute by check are asked to draw their checks to “cash”.
At
their request, a few members are furnished prenumbered, predated envelopes in
which to insert their weekly contributions. The head usher removes the
cash from the envelopes to be counted with the loose cash included in the
collection and discards the envelopes. No record is maintained of
issuance or return of the envelopes and the envelope system is not encouraged.
Each
member is asked to prepare a contribution pledge card annually. The
pledge is regarded as a moral commitment by the member to contribute a stated
weekly amount. Based upon the amounts shown on the pledge cards, the
financial secretary furnishes a letter to the members that supports the tax
deductibility of their contributions.
Required : Describe the weakness and recommend improvements
in procedures for:
(a) Offerings given at weekly services.
(b) Record keeping for members' pledges and contributions.
Answers below :
