Internal Controls Can Keep Cash Secure
(Originally published as an article within ECCU’s former e-publication, Ministry Banking Today.)
The pastor was dreading addressing his congregation on Sunday, but not because he wasn’t prepared to preach. He couldn't bear the thought of publicly admitting that the church contributions had been stolen.
You’d be hard pressed to find a silver lining in this cloud. Nobody wants to deliver this kind of message or confront a staff member or volunteer who has misappropriated funds.
Incidents like this happen more often than you may think. Many are caused by people intentionally stealing cash. Others result from honest errors. They all underscore a primary objective and challenge for ministries—safeguarding financial assets, most notably their cash donations.
Your ministry is vulnerable to financial loss if you have not implemented a system of internal controls.
Every ministry has some level of policies and procedures for handling cash, even if they are not expressed in writing. Many have simply grown lax in following their current procedures. One reason for this lapse, ironically, is trust—the conviction that “our people would never steal money.” This culture of trust is why many ministries don’t think internal controls are necessary.
A wiser alternative is to protect the people who handle your cash by never allowing them to be in a compromising position. It’s not a personal issue. You do trust your people. With controls in place, you are simply removing situations that could result in the violation of that trust.
Handling cash is actually pretty simple. It comes in, it’s stored, and it goes out. Each of these steps presents a need for controls as cash is "handled."
A simple but crucial principle in cash handling is dual custody, which means that two or more unrelated individuals are present whenever cash is handled. The principle of dual custody should be followed from wherever cash is collected to the bank. It is required when the cash is being counted for a deposit, put into a safe, or sealed in a bank deposit bag.
Options for securely handling cash vary from ministry to ministry. Here are some for you to consider:
- Always be sure cash is counted in a secure area, preferably a locked room, where there are no distractions or interruptions.
- Secure your premises. Security cameras in the counting area and at key places around your facility are great deterrents. Lock doors and windows after hours.
- Always require two people (preferably unrelated) to open a safe or vault. A two-party system ensures that no one person has sole access to the safe’s contents.
Separation of Duties
Another important cash-handling principle is separation of duties. When different people handle separate aspects of a transaction, chances of an error throughout the process diminish. Many ministries overlook this principle. Proper separation of duties means that:
- The person who makes deposits does not also record accounting entries.
- The person responsible for petty cash does not approve requests to replenish the petty cash fund.
- The person who writes checks does not also reconcile bank statements.
- The person who approves expenses does not also sign the checks or initiate payment.
Smaller offices may not have enough staff members to follow these principles. If that is your situation, bring volunteers into the process to implement these checks and balances. Doing so is vital to ensure the accuracy of your financial information and to protect your ministry’s assets.
This article was excerpted and adapted from the white paper Handling Cash: A Common-Sense Approach to Securing Your Ministry’s Most Liquid Asset.