Internal Audit Checklist

Internal Audit Checklist November 2021 edition

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Adapted from Second Unitarian Church of Omaha

With assistance from UUA Compensation Consultants

Auditors:

Sample months used by auditors:

I. Financial

Auditor:

A. Payroll expenses

Detail

Recommendation

A1. Review payroll information for selected time

periods. Verify that the amount paid can be

tracked to authorized time sheets for hourly

employees and contracts for monthly employees.

Verify that each time sheet contains a valid

supervisory signature.

A2. Identify federal and state withholdings for the

selected pay periods. Using IRS Form 941 and

State Form 941N verify that the withholding

payments were recorded correctly, and then verify

that they were paid in a timely manner.

A3. For the same time periods, verify Board

authorization for any benefits or voluntary

withholdings provided other than FICA match.

Verify that these payments were recorded correctly

and then verify that they were paid in a timely

manner.

A4. If any manual payroll checks were prepared

outside of the Paychex system, examine the

paperwork and authorizations

A5. Verify that W2 forms exist for all employees.

Recalculate one employee for each audited year.

A6. Examine all 1099 payments. Work with

Treasurer to verify that all necessary 1099s were

issued.

A6. Is State of Nebraska notified of all new hires?

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B. Bank statements and check register

Detail

Recommendation

B1. For the selected sampling periods, compare

the bank statement balance to the cash balance on

the monthly balance sheet. Using bank

reconciliation reports, Identify timing differences

and other discrepancies

B2. Pull 3 deposit slips for each month and track

the detail per the deposit slip to records in Power

Church. Identify discrepancies.

B3. Review check register for entire audit period,

paying special attention to any voided, missing or

reissued checks. Ask for clarifying information as

required.

B4. Identify any checks made payable to members

of the Board or non-payroll checks made payable

to church employees. Pull documentation for all

such checks over $500, and random sample

others.

C. Determine accuracy and adequacy of

Treasurer’s reports.

Detail

Recommendation

C1. Review checks written. Match the checks from

a selected sample month to the checks reflected on

the monthly income statement. Do the totals

match? Spot check the individual items. Is a check

present for the proper amount and in the proper

expense line?

C2. Examine the notes from the Treasurer’s reports

for any activity that needs follow up. Are there

items not resolved?

C3. Determine reason(s) for significant variances of

actual spending over budgeted amounts, both for

individual line items and for program groups which

are often subtotaled.

C4. Inspect the general ledger. Investigate any

checks made payable to “Cash.” Does everything

appear to be in order?

C5. Examine restricted vs. unrestricted funds as

noted on balance sheet. Recalculate for the

sample months

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D. Determine if income and expenses are

properly recorded.

Detail

Recommendation

D1. Review monthly financial reports that compare

budget projections to actual spending. Are written

explanations provided for line variances

significantly over or under projections?

D2. For the months being sampled, compare

investment balances per the Income Statement

against monthly investment records.

D3. Determine a sampling of payments being

made. Compare each invoice, date received,

check written, and date paid. Are any bills being

held or paid late?

D4. Look for duplicate Accounts Payable payments

by scanning the general ledger check amount

column. For each repeating amount verify there is

an appropriate invoice.

D5. Examine Minister’s Discretionary Fund for

adherence to Board and IRS policy. If any checks

were made to employees of the church, verify that

the amounts were included in employees’ W2s for

the year. If unable to examine the records directly,

ask for written statement from minister.

D6. Examine VISA bank cards for minister, DRE,

Office Administrator and others with cards issued

directly to them. Look for unusual activity and

adherence to Policy

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II. Documents

Auditors

A. Check that documents have been filed as

required

Detail

Recommendation

A1. Verify timely, accurate filing to government

entities of: Nonprofit Corporation Biennial Report to

the State of Nebraska, Nebraska Sales Tax-

Exempt Status Letter, and certificates to maintain

tax-exempt status on church-owned property

A2. Review employment documents including

employment contracts, current W4s and I-9s

A3. Review documents in the safe deposit box and

inspect signature cards.

A4. Examine and verify that properly executed

signature cards exist for safe deposit box, checking

account and money market accounts

A5. Verify that safe deposit box keys are in the

possession of the Board Chair and the Treasurer.

A6. Examine Letter of Credit or mortgage payments

for authorization by the Board

A7. Key procedures

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III. Records

Auditor:

A. Verify records are being properly maintained

and secured.

Detail

Recommendation

A1. Review copies of letters sent to those who

pledge or contribute to the church. Randomly call

or write a few members asking them to verify that

the information sent is accurate. Also verify

pledged amount.

A2. Check policies manual of the congregation for

any policies added. Verify consistency between

Board policies and meeting Minutes.

A3. Verify rental agreements are being charged in

accordance with policies and that payments are

current.

A4. Examine actual records retention vs. the policy

guidelines.

A 5. Current policy requires file cabinets to be

locked when not in use, and office computer to be

password protected.

A6. Are network files backed up regularly with data

stored offsite?

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IV. Processes

Auditors:

A. Verify there is proper authorization for

expenditures.

Detail

Recommendation

A1. Are the policies regarding invoice authorization

and approval being followed? Do the owners of

each budget line provide written approval of the

expense?

A2. Trace a sample of approved invoices to the

ledger and to canceled checks showing payment.

Are the amount, date, check number, and payee

the same?

A3. Trace a sample of canceled checks to the

expense ledger and to approved invoices.

B. Verify cash receipt process is documented,

complete, and adequate.

Detail

Recommendation

B1. Observe the process for counting the plate

collection and documentation for deposits.

Are any discrepancies explained?

B2. Review the procedures for counting cash and

check collections. Are the procedures clear and

complete?

B3. Review the forms used to record the count.

Can all cash be properly accounted for and

classified?

B4. Are any funds received which do not go

through the counting process?

Do all funds collected flow through this process?

B5. Review the list of accounting personnel and

compare it to the group of record-keeping people to

ensure that none of the people counting funds are

also doing record-keeping.

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C. Policy checks. The auditors should check

that Board policies and motions are being

carried out, in this case, in the financial area

and review the budgeting process for

adequacy.

Detail

Recommendation

C1. Read Board Minutes, annual meeting Minutes,

and special meeting Minutes to look for any policies

that affect the financial area.

C2. Check that expenditures are being made in

accordance with policies and resolutions of the

Board and congregation.

C3. Is the current budget development process

adequate with representation of both the Finance

Coordinating Council and the Board?

D. Electronic Transactions

Detail

Recommendation

D1. Check for appropriate segregation of duties

and roles/responsibilities.

D1. Check who can authorize electronic

transactions.

D2. Check who has login and password information

on online accounts.

D3. Are passwords periodically updated? Who is

responsible?

D4. Is there a current list of electronic accounts

listing who has access?

E. Endowments

Detail

Recommendation

D1. Are withdrawals from endowments consistent

with purpose?

D2. Are endowment investments consistent with

policy?

F. Insurance and Bonding

Detail

Recommendation

F1. Is there adequate insurance and/or bonding for

directors, officers, and those who handle money?

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G. Transitions

Detail

Recommendation

G1. Is there a clear set of instructions for what

needs to be changed when those who handle

financial issues and/or accounts change - the

treasurer, bookkeeper, congregational

administrator, and others?

G2. Are there clear instructions for key financial

and security processes (payroll, benefits, year-end

process, etc.) so the new incumbent can perform

their job?

H. Payroll and Benefits Administration

Detail

Recommendation

H1. Are benefit plans being administered

consistently with Plan rules?

H2. How are appropriate staff and lay leaders

trained regarding key benefit plan information,

including eligibility, enrollment windows, and payroll

and tax implications?

H3. Who is making use of UUA resources,

including the Pay Administration Checklist, Benefits

Administration Checklist, and Benefits Tune-up

Workbook? (See Legal Requirements on

https://www.uua.org/leadership/library/uua-

compensation-standards)