Dear Finance Chairs (copy to Pastors and Treasurers)
The Finance Committee is responsible for ensuring that all financial books, records and bank accounts undergo an annual audit. This is required by The Book of Discipline, the governing document of our denomination (see excerpt at end of e-mail). Included in the audit (or audited separately) must be the transactions of the church's operating account, Board of Trustees, Preschool (if controlled by the church), Memorial Funds, Endowment Funds, Mission & Outreach Ministries, etc. All funds and transactions of the church and its ministries must be audited annually.
The person(s) or committee selected by the Finance Committee to perform the audit is responsible for providing a “full and complete report to the annual Charge Conference”. The membership of the Charge Conference includes all members of the Church Council. This requirement makes the publication of financial statements of all church accounts transparent and available to all members of the Church Council.
At the bottom of this e-mail are a Local Church Audit Guide and a related FAQ document that may be helpful in understanding the requirements and methods of performing an audit. In many cases you do not need to engage a CPA or be a CPA to perform the audit. The most important aspect is for the auditor to be "independent". As described in the audit guide, to be independent the auditor must not handle church funds or prepare church books and records. In addition, the auditor must not be related to, close friends with or subject to the influence of these individuals. The auditor should be appointed by the Finance Committee, to whom it reports.
Many churches make the observation: "If we can't use people that handle money or are related to, or close friends with those that do, that pretty much rules out our entire congregation!" For small congregations where this is a problem, I suggest performing a cross audit with another Methodist church in a neighboring vicinity (your church audits them and vice versa).
Audit reports for the preceding year should be provided to your District Superintendent at your next Charge Conference.
Please keep in mind that conducting an audit is not a symbol of distrust. It is a mark of responsibility, good stewardship and sends a message to the congregation that you care about their gifts.
Please let me know if you have any questions.
Section 258.4 d) makes it mandatory that every local church finance committee "shall make provision for an annual audit of the financial statements of the local church and all its organizations and accounts. The committee shall make a full and complete report to the annual charge conference.“