You have been asked by the board of trustees of a local church to review its acc

Question

You have been asked by the board of trustees of a local church to review its accounting procedures. As part of this review you have prepared the following comments relating to the collections made at weekly services and recordkeeping for members’’ pledges and contributions: (1) The church’s board of trustees has delegated responsibilities for financial management and internal audit of the financial records to the finance committee. This group prepares the annual forecast and approves major disbursements, but is not involved in collections or recordkeeping. No internal or independent audit has been considered necessary in recent years because the same trusted employee has kept church and served as financial secretary for 15 years. (2) The offering at the weekly services is taken by a team of ushers. The head usher counts the offering in the church office following each service. He then places the offering and a notation of the amount counted in the church safe. The next morning the financial secretary opens the safe and recounts the offering. He withholds about $100 to meet cash expenditures during the coming week and deposits the remainder of the offering intact. In order to facilitate the deposit, members who contribute by check are asked to draw their checks to cash. (3) 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 offering and discards the envelopes. No record is maintained of issuance or return of the envelopes, and the envelope system is not encouraged. (4) 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 state weekly amount. Based upon the amounts shown on the pledge cards, the financial secretary furnishes a letter to requesting members to support the tax deductibility of their contributions. Required: Describe the weakness and recommend improvements in procedures for: a. Offerings given at weekly services. b. Recordkeeping for member’s pledge and contributions. Organize your answer sheets as follows: Weakness Recommended Improvement

Explanation / Answer

WEAKNESSES

RECOMMENDED IMPROVEMENTS

FLOWCHART

RESPONSIBLE

PERSONS

MEMBERS

( AT CHURCH)

HEAD USHER

& OTHER USHERS

FINANCE SECRETARY

FINANCE

COMMITTEE

WHAT HAPPENS

PLEDGE

COMMITMENT

FORECAST

AND

DISBURSEMENTS

OFFERINGS COLLECTED

RECORD

KEEPING

BANKING

AFTER

$100

DEDUCTED

USE THE

PRE NUMBERED

PRE DATED

ENVELOPES

GIVEN BY HEAD USHER

SAFE

FURNISHES LETTER TO MEMBERS

AS

RECEIPT

FOR TAX

PROBLEMS

PLEDGE A SAID AMOUNT

BUT PAY

ANOTHER AMOUNT

USHERS

COULD TAKE THE CASH AND

DEPOSIT IN SAFE THE BALANCE

FINANCE SECY COULD TAKE WHAT HE WANTS

AND BANK BALANCE

COMMITTEE

COULD TAKE CASH AND

CHEQUES

WITHOUT ANY

AUTHORITY

IMPACT

BUDGET

WOULD BE

INCORRECT

FUNDS

MISAPPROPRIATED

FUNDS

MISAPPROPRIATED

FUNDS

MISAPPROPRIATED

ERROR

CORRECTION

INTERNAL CHECK HAS TO BE CARRIED OUT FOR PROMISE

RECEIPT ISSUED FOR

AMOUNT GIVEN,

PLUS INTERNAL AUDIT

INTERNAL AUDIT

BANKINGS

RECONCILED

INTERNAL AUDIT

BANKINGS

RECONCILED

RESPONSIBLE

PERSONS

MEMBERS

( AT CHURCH)

HEAD USHER

& OTHER USHERS

FINANCE SECRETARY

FINANCE

COMMITTEE

WHAT HAPPENS

PLEDGE

COMMITMENT

FORECAST

AND

DISBURSEMENTS

OFFERINGS COLLECTED

RECORD

KEEPING

BANKING

AFTER

$100

DEDUCTED

USE THE

PRE NUMBERED

PRE DATED

ENVELOPES

GIVEN BY HEAD USHER

SAFE

FURNISHES LETTER TO MEMBERS

AS

RECEIPT

FOR TAX

PROBLEMS

PLEDGE A SAID AMOUNT

BUT PAY

ANOTHER AMOUNT

USHERS

COULD TAKE THE CASH AND

DEPOSIT IN SAFE THE BALANCE

FINANCE SECY COULD TAKE WHAT HE WANTS

AND BANK BALANCE

COMMITTEE

COULD TAKE CASH AND

CHEQUES

WITHOUT ANY

AUTHORITY

IMPACT

BUDGET

WOULD BE

INCORRECT

FUNDS

MISAPPROPRIATED

FUNDS

MISAPPROPRIATED

FUNDS

MISAPPROPRIATED

ERROR

CORRECTION

INTERNAL CHECK HAS TO BE CARRIED OUT FOR PROMISE

RECEIPT ISSUED FOR

AMOUNT GIVEN,

PLUS INTERNAL AUDIT

INTERNAL AUDIT

BANKINGS

RECONCILED

INTERNAL AUDIT

BANKINGS

RECONCILED

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