Audit Requirement (80481-LC-¶259.4c-!)
Amend ¶259 by deleting current ¶259.4.c) and substituting the following:
The committee shall make provision for an annual audit of the financial statements of the local church and all of its organizations and accounts. The committee shall make a full and complete report to the annual charge conference. Annual audit for purposes of this paragraph shall be defined as follows:
1) For a local church with an operating budget in excess of $2,000,000 the audit of the local church should be performed by an independent certified public accountant or accounting firm (CPA).
2)For a church with an operating budget of more than $1,000,000 and less than $2,000,000, the local church has the option to engage a CPA to perform an "agreed upon procedures" engagement or have a CPA audit if this is preferred. The agreed upon procedures engagement should be designed to verify the existence of material cash and investments as well as testing the compliance with the church's written financial policies. The "procedures" may include: i) a review of the cash and investment reconciliations; ii) interviews of the treasurer, financial secretary, pastor(s), finance committee chair, business manager, those who count offerings, church secretary, etc. (a minimum of three people annually) with inquiries regarding compliance with existing written financial policies and as well questions designed to discover fraud or opportunities for fraud in the church; iii) a review of the journal entries made during the year; iv) obtain a list of the authorized check signers for each checking and investment account and review to insure that all names are appropriate; and v) other procedure(s), which may vary annually, by the decision of the committee on finance.
3) For a church with an operating budget of less than $1,000,000, the committee on finance can elect to have an "informal" audit or agreed upon procedures performed by an audit committee composed of persons unrelated to the persons listed in ii) above instead of a CPA audit.
The application of the current audit requirement is inconsistent and vague. The substitute will provide exact guidance. The cost of an audit should be weighed with the potential benefits. The potential benefits to the local church are more significant when the budget is larger.