Many churches offer the option of electronic giving. Just like cash and checks, you need a procedure in place to keep integrity with electronic contributions.

Here’s an example:

Jane Smith indicates on her pledge card that she wants an automatic charge to her credit card on the 15^th of each month for $200. Your church business manager inputs the credit card information into the credit card processor that you use. On the 15^th of the month, the credit card processor charges the credit card account $200 and deposits the contribution to the designated church bank account.

James Nash, a senior auditor with our firm, suggests the following solution for internal controls with electronic contributions:

Access to inputting or changing information into the credit card processor should be segregated from the access to donor records and reconciliation of amounts charged.

The church needs to establish a procedure to regularly review electronic contributions. The Church should reconcile the batch report from the credit card processor to the bank deposit.  A process to ensure that the donors receive contribution credit on their giving statements should also be implemented.

All changes (new automatic authorization requests and termination of giving) should be kept separate and reviewed to ensure that the request was properly completed.

More importantly, the Church should review various credit card processors and review the Service Organization Controls Report (SOC 1, formerly SAS 70).  This report will give the Church or ministry the comfort that the processor has the proper controls in place to safeguard the information of their donors.

Churches are often relaxed about a very important fraud-prevention duty – opening mail and copying checks. To help eliminate temptation and any opportunity for misappropriation, procedures must be in place for handling checks and mail that contains checks. It is best to have one person, such as an administrative assistant or receptionist, open all the mail,  copy the checks received, and restrictively endorse those checks.  They can also prepare the deposit slip and ultimately make the deposit, if that helps. That person would have no further duties regarding checks received via mail. Specifically, the following duties must be kept separate:

-         Maintaining the cash receipts journal

-         Posting journal entries to the general ledger

-         Reconciling the bank account

-         Investigating discrepancies related to cash

Another duty of the administrative assistant or receptionist is receiving cash donations from mid-week walk-ins. For receipt of such donations, we recommend putting the money in an envelope and putting the envelope in a drop safe. The person receiving the cash should note the date, amount and his or her name on a log sheet.   If cash/currency (not checks) is received, a receipt book should be maintained with a copy to the donor being required. Cash must be protected at all times.

An alternative to completely separate duties is to have two people present for the opening of mail and copying of checks. However, these two people should rotate duties so that collusion is not a likely possibility.

Additionally, the person who investigates discrepancies related to cash should be someone not connected to the day-to-day cash/check receipt and bank account responsibility.

Internal controls can make or break a church. One of the most important internal controls is proper segregation of duties. We’ve seen many churches miss the fact that money is going out the door instead of into the bank account due to a lack of standard procedures. To protect your church’s Sunday collection cash and donations, follow these guidelines:

Segregate the duties between individuals who collect, count, prepare the deposit slip, take the deposit to the bank and post entries to the contribution module and general ledger.

1. Ask ushers to place the collected cash and checks in a sealed envelope. Two ushers should sign the envelope and not the service date and time. Put the envelope in a locked safe.
2. Place a log sheet on the safe for individuals to sign their name and purpose each time money is placed or removed from the safe. (Use a drop safe for higher security, to prevent many people from having the combination or key.)
3. Rotate counters (minimum of two) each week. Counters take the cash and checks to the business manager’s office and double-count the cash, recording the amounts on a count sheet. Make a copy of each check and retain with the counting tape. Counters sign the count sheet and prepare a deposit slip.
4. Place cash, checks and deposit slip in a pre-numbered bank bag. A copy of the deposit slip is kept with the check copies.
5. Designate who will take the deposit to the bank.
6. Ask the Treasurer to review and confirm a rotation of counters to deter collusion.
7. Provide a copy of the deposit slip to the business manager, who will reconcile the amount with the count sheet and note reconciliation. This can be done by adding a line to the count sheet to sign once the funds have proof of deposit.

Paying attention to a high level of detail, combined with redundant accountability, prevents fraud and the resulting trauma to your church body.

Churches want to be good stewards of cash. Here are ways to safeguard your donations.

1. Use a separate bank for the payroll account and only keep sufficient funds in it to cover the payroll expense.
2. Use Positive Pay. The positive pay system allows a bank to compare checks presented for payment against its commercial customer’s account with items the customer has indicated it has written. This system will help uncover instances where the amount has been altered, a counterfeit has been created using a different check number, or the payee has been altered. The customer transmits a file that reflects all the checks it has written. The data elements may vary from one piece of software to the next, but typically it will include the date, amount, payee, account number, and check number. Before the institution pays a check drawn on the customer’s account, it compares the information on the check against the data in the file sent by the customer. If the information doesn’t match, further investigation is warranted before the check may be paid.
3. Use ACH debit block. An ACH Debit Block is similar to a stop payment in that it disallows the transaction; ACH Debit Block is an inexpensive “insurance” policy for business customers who receive ACH debits and want to ensure that the originators are authorized to receive these funds. CONSUMERS ONLY HAVE 48 HOURS TO CATCH ELECTRONIC FRAUD, which could be difficult to do. If the fraud is not caught in a timely manner the consumer is responsible for the debit.
4. Use a dormant account to raise funds.  This allows the account number to be given without worries of who might be able to gain access to the account.  This is particularly helpful during capital campaigns where multiple individuals need access to the bank account number.
5. Review investment policy on a regular basis.
6. Use a card, at the very least for payables, that will allow the charity to get cash back.