How the Experts View Accountability


The American Institute of Certified Public Accountants (AICPA), the professional association for Certified Public Accountants throughout the United States, has long recognized that the mere absence of mathematical discrepancies does not guarantee all is well.  In 1972 the AICPA issued an authoritative guideline entitled Statement on Auditing Standards - Codification of Auditing Standards and Procedures.  Of particular interest for churches is Section 320.44 which states, in pertinent part:

"..... agreement of a cash count with the recorded balance does not provide evidence that all cash received has been properly recorded.  This illustrates an unavoidable distinction between fiduciary and recorded accountability: the former arises immediately upon acquisition of an asset; the latter arises only when the initial record of the transaction is prepared.  [emphasis added]

In the case of a church's Sunday collection, fiduciary accountability begins when members of the congregation place their offerings in the collection basket.  In a typical parish, however, the number of people (clergy, employees and volunteers) having lone, unobserved access to the collection or a portion thereof prior to its tabulation and deposit (recorded accountability) would leave even the greenest of auditors aghast.  Section 320.42 of the AICPA statement addresses that critical interval, declaring:

"The objective of safeguarding assets requires that access be limited to authorized personnel.  The number and caliber of personnel to whom access is authorized should be influenced by the nature of the assets and the related susceptibility to loss through errors and irregularities.  Limitation of direct access to assets requires appropriate physical segregation and protective equipment or devices."  [emphasis added]

The terms errors and irregularities are employed to differentiate between accidental and intentional wrongdoing, respectively.  When one considers "the nature of the assets" involved, i.e., significant amounts of uncounted currency, their "related susceptibility to loss" as a result of intentional wrongdoing should be glaringly evident to any objective reviewer.

Some churches have good or perhaps even excellent control over their cash disbursements and thus might conclude that their revenue is secure.  Section 320.67 of the AICPA statement addresses that misconception, in pertinent part, as follows:

Controls and weaknesses affecting different classes of transactions are not offsetting in their effect.  For example, weaknesses in cash receipts procedures are not mitigated by controls in cash disbursements procedures;...”

For a church, of course, the “cash receipts procedures” are represented by all stages of the Sunday collection process up to and including the deposit of all monies into the parish bank account.

Finally, it is relevant to note that senior managers sometimes have a tendency to cling to old policies and procedures in spite of the emergence of new technology and more secure and efficient procedures.  For those organizations whose continued existence depends upon their ability to show a financial profit, new technology and more efficient procedures are quickly adopted whenever such action is seen as a way to improve the so-called bottom line.  But churches and other non-profit organizations lack the for profit motive, and that absence can serve to strengthen, even institutionalize, that old, inane rationale which usually concludes with the words "because this is the way we've always done it."  Any church leader who recognizes they might fit into that category would be well advised to consider and heed the AICPA’s position on management’s fiscal responsibilities as stated in Section 110.02:

Management has the responsibility for adopting sound accounting policies, for maintaining an adequate and effective system of accounts, for safeguarding assets, and for devising a system of internal control that will, among other things, help assure the production of proper financial statements.

We respectfully suggest that church leaders who refuse or otherwise fail to ensure the absolute safety of their Sunday collections are failing to fulfill a major aspect of their management and pastoral responsibilities.