Good financial practices - how to protect your treasurer. (Part 2)
Last month we looked at how to handle the income side of church finance and especially service collections. Equally important is the expenditure side of the coin and, as before, these controls should be seen as a way of supporting those responsible for making and authorising payments, rather than a lack of trust in those individuals.
Some controls are set at a bank mandate level where the bank requires a set number of signatures; however some banks do not offer accounts that have the level of control a church may require. Consequently it is always good to have a written policy defining the financial authority levels and controls.
As a general rule, no payments should be made unless there is an invoice or bill associated with it, and evidence that the goods or services ordered have been received. The exception may be where gifts are made, for example to visiting preachers, in which case the recipient should be asked to sign a receipt book or form for the cheque received.
Methods of payment have changed significantly over recent years. Almost everyone has a bank account to pay cheques into, and on-line payments are becoming dominant. This means that cash payments are hardly ever required and they should be avoided wherever possible.
Payments by cheque
Generally speaking the bank mandate should be set up to require two signatures. It may be appropriate to allow a single signature on cheques below a certain value but in this case additional ‘single authoriser’ controls should be put in place (see below).
On NO account should cheques be signed that are not completed in every aspect.
Cheque stubs should also be completed with as much detail as space will allow to ensure the cheque can be cross referenced against the payment.
Cheque books should be held securely, and preferably locked away, to prevent unauthorised use.
All receipts or other payment records should include all the details of the cheque including the date of issue, payee, and cheque number. Don’t rely on the cheque stubs as a full record.
In rural areas where banks may be sparse and travel can be difficult church members may not like to be reimbursed by cheque. Similarly, many suppliers prefer on-line payments. A few banks, include CAF Bank used by Rural Ministries, allow a two-stage payment where one person can initiate a payment which can then be authorised by a second person, so mirroring the cheque signing process.
As the two individuals making the on-line payments do not necessarily meet face to face it is imperative that the first authoriser or ‘initiator’ has full details of the invoice, or payment request, and that the second authoriser is also fully aware of the payment they are authorising. Ideally the physical invoice should be signed off by two signatories before payment is completed but this is not always possible.
Although not ideal, it is acceptable to have ‘single authoriser’ on-line banking so long as additional controls exist (see below).
All on-line login details should be memorised rather than written down and should never be shared.
Debit or credit cards can be justifiable for two main reasons. Firstly, they stop someone who makes regular purchases from ‘carrying’ the debt in their own account whilst the church’s expenses payment system works through. Secondly, more and more goods and services are purchased on-line where a card payment is required in order to place the order. Cards invariably have a single authoriser so a clear policy should be laid down including criteria for a card’s use, spending limits and security.
Single user payment authorisation
As mentioned above there are situations where it is necessary to have a single person make payments. In such situations the following controls are recommended:
There is evidence such as an email (which can be printed off) from one or more individuals with the necessary authority asking for a purchase to be made, or, there is a documented policy giving an individual authority to make periodic orders for everyday items such as cleaning materials or stationery.
All invoices and payment records are submitted and signed by two authorised individuals as soon as possible, and at least monthly.
Any card statements are sent to the church’s treasurer/finance officer and not the to the individual card holder.
There is a periodic review to ensure use is in line with agreed policies.
There are many other aspects of church finances such as setting up Direct Debits or payment of salaries that need careful management and which cannot be covered here. More detailed guidance is available from the Charity Commission in their publication Internal Financial controls for Charities.