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It is often recommended that a church have a Certified Audit of its Annual Financial Report the same way we do for the District Council. As a former auditor, it is my opinion that this recommendation is unrealistic for a small-to-medium sized church. [I would define a small-to-medium sized church as having Sunday Morning attendance of less than 500; some have used total revenue of $ 1,000,000 as a benchmark instead of attendance.] The cost of an audit is generally very expensive and in my opinion, not good stewardship of such a small-to-medium sized church’s finances.

However, I do believe it is very important to have someone examine the Annual Financial Report of a church of any size for the following reasons:

  1. It is a prudent step to ensure that the finances are being properly handled, recorded and reported to the Board of Deacons and Congregation.
  2. It removes any question about the performance or integrity of the Treasurer (and Financial Secretary if one is used) as it relates to the church’s finances.
  3. It provides the Congregation, as well as others who know of this procedure, with confidence that financial matters are being handled in an accurate and proper manner.

So, if a Certified Audit is too expensive for a small-to-medium sized church, how do we accomplish such an examination? At Maple Grove Assembly, we developed an Internal Review process that was performed each year on the Annual Financial Report before it was published to the Congregation. The District’s auditor looked over these procedures and I made some adjustments to the procedures at his recommendation.

An overview of such an Annual Internal Review is listed on the reverse side of this paper. This is only an overview. I have more detailed procedures available in both printed and electronic form for those who would like to implement an Annual Internal Review process in their church.

I am willing to meet with your Board of Deacons or a Review Team to tailor the detailed procedures to your situation and Annual Financial Report. Then I can answer any specific questions that may arise.

Alternatives for a Larger Church

If your church is over 500 in attendance or has more than $ 1,000,000 in total revenue, there are alternatives to a full certified audit that might keep a review more affordable. Accounting firms offer three types of financial reviews — Audit: most involved form of review and thus, the most expensive. — Review: less involved than an Audit, but does provide some assurance that finances are being handled and reported properly. The

Church Administration Matters Page 2 of 3

more limited nature of a Review results in a lower cost than an Audit. — Compilation: very little reviewing of accounting procedures and so is probably not a good alternative to demonstrate propriety in financial matters. [I have an article that gives a detailed description of each of these accounting services.]

A hybrid of the Audit and Review approach might be affordable and offer a greater degree of confidence than just a Review. An accounting firm might be willing to perform a Review for 2 years and then an Audit in the third or even a Review for 4 years and an Audit for the 5th.