Audit Forms and Updates
A Letter from the Treasurer
To: Vestries and Vestry Committees and their respective Treasurers
From: Treasurer/Chief Financial Officer
Re: Audit of Church Accounts
The diocesan canons require that an annual audit of church financial records be submitted to the Office of the Bishop. The canonical deadline for filing your audit is August 31.
The documents you will need to complete your audit are posted below. The forms have been changed so that going forward you may fill in the year that you are auditing, should more than one year’s audit need to be done.
There are three methods for completing your church audit:
First, an outside audit firm may be employed. Please forward a copy of their entire audit report, the supporting management letter and your response to issues raised by the auditors. An “audit” or a “review” are acceptable levels of reporting, however the third level of audit work, a “compilation,” is not acceptable. If your church’s year-end financial documents and supporting papers are in a clean and accessible format, this will reduce the billable hours required by the auditor. We provide a list of external auditors here; please make sure you read the legend at the top of the list.
Second, your church may use the Diocese of Virginia internal audit program which is based on the Manual of Business Methods in Church Affairs (Revised 2023). This internal audit program is a usable and proactive process for an audit committee to assure each congregation of their financial position. The provided program should be directed to the person(s) responsible for the audit process. There is a “short-form” audit for churches with total operating budgets of less than $150,000, and these pages should be used rather than the longer format. The attached proof of cash form is to be completed for all separate church accounts in accordance with national and diocesan canons.
The third form is a process known as “Agreed Upon Procedures,” or AUP, and involves the contracting of a CPA, or audit firm, to test specific information. This is not meant to be a GAAP audit and there should be no expectation that an opinion will be issued by the involved CPA or audit firm. It is my continued hope that this option provides a hybrid model for churches that seek external assurance of their financial position at a reasonable cost.
There are three posted documents for the AUP option. The first is a sample engagement letter that the auditor/firm will provide to the church once they have reviewed what is asked of them in this model. Included with this document is a sample of the procedures the firm is to use. A firm may have an existing form for limited engagements, but please be certain of what they intend to accomplish for you and submit based on their testing of the Church Financial Report.
The second and third documents are the instructions for the report and an excel template for the production of the Church Financial Report. The fields will self-adjust as you enter data. As a reminder, the church is responsible for the completion of the underlying Church Financial Report that the auditor or firm will test against.
One item to be clear on is that charitable contributions must be claimed in the year they were delivered. A contribution must either be in the hands of the church or postmarked by December 31 to be considered a contribution for that year. Pre-dated checks delivered after the end of the year are contributions for the previous year. If you have questions on this, please call me or Mr. Stas Jones.
Please make every effort to complete a review of your financial records using one of these approved forms of documentation. Simply sending me a letter stating that you consider your finances to be in order does not qualify as submitting an audit. The absence of one of the three forms of audit documentation could result in a Directors and Officers Liability claim being made against the church.
Being current in your audits is a condition for approval of church debt, should your church require Standing Committee approval per the diocesan Canons. As a matter of due diligence and responsibility, I encourage every vestry and vestry committee to look at all internal business practices, particularly control issues related to receipt and management of cash. Of course, annual reviews should always cover investments, property and insurance coverages, etc.
A list of prior year’s audits is maintained in the Journal of Annual Council. If you have questions or need assistance, please feel free to contact Mr. Stas Jones or me at 1-800-DIOCESE, or you may email us at sjones@episcopalvirginia.org or tsmith@episcopalvirginia.org.