Audit Training Convention 2013

1. Audit Training Convention 2013

2. Today’s Topics • Introductions • Why have an audit? • Audit Terms Defined • Audit Team and Participants • Audit Process • Internal Controls Checklist • Audit Program Checklist • Audit Report

3. Two things to remember! • 1. Thank your treasurer! • 2. We are here to help: • Julie Young, Diocesan Treasurer and Canon for Finance and Administration • jyoung@edsd.org • 619-481-5453 • Rosa Feeney, Diocesan Assistant Treasurer • rfeeney@edsd.org • 619-481-5457

4. Audits: Why do we need to have an audit? Benefits of Audit • Compliance with law and church canon • Assure that financial statements are accurate • Protects those handling finances • Other People’s money • Increase stewardship • Learning Experience • Chance to celebrate!

5. New this year! Audit Workbook • Workbook has been mailed to your church • Workbook is a step by step guide on audit process • Workbook has been tested in another diocese and was successfully used and warmly received • To be used whether you have an external audit, audit exchange, audit review or internal audit

6. New This Year! Diocesan Auditors • Rosa Feeney, EDSD Assistant Treasurer will be spending approximately half her time starting in June 2013 on Diocesan Audits • She will be leading up a team of volunteer diocesan auditors who will help her conduct audits of selected congregations

7. Terms Defined • External Audit • Audit Review • Committee Audit • Internal audit • Audit exchange • Diocesan Audit

8. Terms Defined • External Audit: A complete audit conducted by an outside Certified Public Accountant (CPA) • Audit Review: A review of the financial statements conducted by an outside Certified Public Accountant (CPA). Typically, and audit review does not offer the same depth as an external audit nor does it usually provide an internal controls review. As such, it does not meet the requirements set forth below for churches that are required to have an external audit but can be used in place of a committee audit. • Committee Audit: Audits that are conducted by committee. There are two types of committee audits. • Internal audit -- a committee audit that is done by its own church • Audit exchange -- a committee audit done on another church in exchange for that church conducting a committee audit on yours • Diocesan Audit: This is an audit conducted by the diocesan audit team. It is not as thorough as an external audit and does not take the place of one.

9. 2012 Audit Guidelines: External Audits • Churches over $1.5 million in total revenues will have external audits unless they are between $1.5 and $2 million AND had an audit of 2011. • Churches in transition of rector, vicar, priest in charge should have an external audit unless granted a waiver.  A waiver might be granted if they had had an external audit recently and are smaller than $1 million in revenue • Revenue is for all business units including schools and thrift shops

10. 2012 Guidelines: Diocesan Audits • Diocesan Audits would be required of all churches that did not conduct an audit of 2011unless church is conducting an external audit or is granted a waiver • A fee of $1,000 would be charged of churches over $500,000 in revenue and $500 for smaller churches. Missions and aided parishes can apply for scholarship.

11. 2012 Audit Guidelines -- Other • All other churches must conduct a committee audit -- audit exchange or internal audit. • If they cannot do this, they can apply for a diocesan audit with fee schedule above. • Audit reviews are allowed to take the place of internal audits provided an internal controls assessment is done by the auditor or internally. Letter of engagement must be approved by diocesan treasurer

12. Audit Process: Decide on Type of Audit • Churches not required to conduct a specific type of audit must decide what type of audit to have • This is a vestry or bishop’s committee decision • Decision on type of audit and composition of audit team needs to be conveyed to the diocese by April 15 using the form on page 8 in the book

13. Audit Process: Identify Audit Committee • Find committee members – should not include anyone involved in the finances of the church unless participating in an audit exchange • Preparation: Review audit workbook that will be mailed • Meet with priest and treasurer plus person doing the accounting • Audit team will conduct committee audit or oversee external audit

14. Audit Workbook: General Instructions Advance preparation for audit • Regardless of what type of audit is being conducted, financial staff or volunteers need to prepare for audit by assembling documentation listed in general instructions section of audit workbook (page 9)

15. Audit: Key Points • Preparation is critical; read chapters II and VI of business manual thoroughly • If your understanding of accounting is limited, read chapter III as well • All business units and accounts must be audited

16. External Audit • Audit Committee function is to select auditor, meet with auditor to review findings, and recommend to vestry or bishop’s committee to accept (or not accept audit) • Vestry must provide oversight, making sure that they receive timely reports from the audit committee and receive the final audit report for acceptance • See Section A of Audit Workbook

17. Committee AuditInternal Audit/Audit Exchange • Section B of audit workbook provides a step by step instructions on how to conduct an internal audit or audit exchange • Questions incorporate internal controls questions and audit questions • Transactions testing is required • A number of documents should be included in audit and audit workbook that is turned in

18. What is transaction testing? • Sampling deposits and disbursements to assure that backup is available and they are correctly recorded • Sample size is 10% or 25 transactions whichever is smaller • From list of transactions made, choose some that are large and others that are made out to key people and ask for invoices and other backup

19. Financial Statements • Ask for year end balance sheet (Statement of Financial Position) and income statement (Statement of Activities) • Should be in format on next slides

21. Statement of Activities

22. Filing of Audit • Upon completion of audit, committee should present audit report to treasurer, rector/vicar, vestry • A copy of the audit workbook with all attachments should be filed with the Bishop’s Office • If at any time during process, records indicate something seriously wrong, contact wardens and Diocesan Treasurer immediately

23. Questions?