By: Mack Tennyson

Now and then, headlines tell of pastors or church treasurers caught with their hands in the offering plate. What’s to keep that from happening in your church? Or, on the other hand, how do you defend a financial secretary who is the subject of false accusations of financial wrongdoing?

Answer: Good internal control can prevent such problems.

* Money: A Controlled Substance

Internal control is accounting jargon for a checks-and-balances system to catch errors and prevent mishandling of money.

Internal control accomplishes four tasks:

* It makes it difficult for someone to steal the church’s money. Just as we lock the church doors to discourage thievery, we also should set up the books to make embezzling next to impossible.

* By making it difficult to take money, internal control removes useless snares. The church is to be a refuge – not a trap – for those who handle the money.

* Good internal control reduces errors in the records. It forces the treasurer to resolve these errors, and that ultimately is a comfort to treasurers.

* It protects that treasurer and others from false charges of stealing.

The Key: Control of assets is kept apart from the record keeping of assets.

Example: At a grocery store, the cash register makes one tape for you and one for management. If the system is run right, the cashier cannot touch the manager’s tape, and the manager cannot touch the money. At shift’s end, the cash in the drawer is compared with the tape. Cashier and manager watch each other.

This simple process of separating the assets from the record keeping brings about the four benefits listed above:

* It tells the manager whether the cashier is stealing from the store.

* It keeps the cashier from undue temptation.

* It aids in record keeping by giving the manager a correct sales record.

* It gives the cashier peace to know that the manager cannot make false claims.

In the church setting this process has two parts: internal control over cash receipts and internal control over cash payments.

Control over the Cash You Get

A church often receives cash, so it needs a good cash-handling system. To set up internal control, the church board appoints a treasurer and a helper:

* The helper controls the cash and keeps the checkbook. A good helper can add and subtract and can keep an accurate checkbook.

* The treasurer keeps the records. This person understands the church and its priorities, and works well with the leadership.

Important: The helper is not the assistant treasurer. That is, if the treasurer is to be absent, the church must find someone other than the helper to take over the treasurer’s duties. Likewise, the helper must find someone other than the treasurer to take over the helper’s duties. This keeps the duties separate.

Example: Suppose a church names Trish as church treasurer and Hank as the helper. They process receipts like this: After the service, Hank (the helper) and an appointed deacon take the offering into a back room. They count the loose offerings. The deacon makes a note of the amount of loose receipts and later gives it to Trish (the treasurer). Hank puts the loose offering into an envelope.

Then they open the offering envelopes and compare the amount in the envelopes to the amount written on the envelopes. Next Hank makes a list of the names of each person who gave and the amount given. One name on this list is “loose receipts.” He totals the list and fills out a deposit slip.

Note: Three figures must agree:

* The total on the list of donors (including “loose receipts”).

* The deposit slip total.

* The sum of cash and checks.

Problem: This process is simple if Hank is careful. Careless counting or writing down wrong amounts will cause the totals to differ.

When all three amounts are reconciled, Hank takes the money to the bank. He gives Trish the donor list and bank receipt, keeping copies for himself. He also gives Trish the offering envelopes, which tell her which funds to put the money in.

Trish checks to make sure the list and the bank receipt agree. She records the week’s income, using Hank’s list, just as though she had received the money. She compares the “loose receipts” amount from Hank’s list to the amount on the note given her by the deacon.

The benefit: No one has the opportunity to pocket any money. The deacon watches Hank, and Trish never touches the money, since Hank does that.

Hank, if he were crooked, could take the money and run, but he could never embezzle secretly.

* If Hank filches some cash and lies about the loose receipts, the amount for loose receipts on his list will differ from the amount the deacon reports to Trish.

* If Hank slips a twenty from a member’s envelope and doesn’t record it, the receipt Trish gives to the member will show the lower amount, and the member will question the difference.

* If Hank tells the truth on the list but does not deposit the full amount, the bank receipt will differ from the list, and Trish will question him when she balances the bank account.

This process may appear rather negative and distrusting, but it works to protect each party in the transaction. A good system covers every angle.

Control over the Cash You Pay

Internal control over cash payments is even simpler.

The rule: All payments must start with a written request giving:

* The reason for the request.

* Which fund to charge.

* Whom to pay.

Explanation: These requests are useful later if someone questions a payment and the treasurer has forgotten why it was made.

Although most claims are bills, such as the electric bill or water bill, some are cash-advance or reimbursement requests from the pastor or a member. These requests must be made in writing.

Example: If the youth leader wants a check for what he spent on a campout, he must scribble out a note asking for the money and telling the treasurer (Trish) what fund to take it from. Trish then decides if it is a proper expense.

Then, say twice a month, Trish lists the people who need checks, including the youth leader in this case. She gives Hank a copy of the list and the bills, which he also reviews to ensure that each payment is proper. He would find any suspicious entries by Trish, such as payments for her own water bill or checks to her mother.

After his quick review, Hank writes and distributes the checks to the people on the list, thus reimbursing the youth leader. Hank jots down the check numbers on the list and gives it back to Trish.

Trish keeps track of the bank balance. From her point of view, Hank is just writing the checks she would have written anyway.

The safeguard: Trish does not deal with the bank. Hank makes all deposits and writes all checks. Trish isn’t even on the signature card at the bank. Likewise, Hank keeps away from the records.

Without a two-person system, Trish could write checks to herself and never be caught. But the two-person system makes it hard for Trish to take money she does not touch. Since Hank does not handle the records, crooked checks from him would show up when Trish balances the bank account.

Good Stewardship

A good internal-control system is a central part of proper stewardship over the money God gives us. It heads off countless problems and keeps reputations above reproach.

(The above material appeared in the March/April 1991 issue of Your Church.)

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