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​​​6.1.4 Internal Controls

​​The archdiocese requires all locations to establish strong internal controls for managing their financial affairs in accordance with archdiocesan policies and procedures in this handbook. "Internal controls" is the bookkeeping and accounting process designed to ensure reliable financial reporting, effective and efficient operations, and compliance with applicable laws and regulations. Safeguarding assets against theft and unauthorized use, acquisition, or disposal is also part of internal controls.

When a proper system of internal controls is enforced, more than one person will be involved in every transaction, especially relating to cash. This provides the cross-checking of one against the other for the protection of both, as well as protection for the location and the assets.

  • Control activities are the specific policies and procedures a location uses. The most important control activities involve separtion of duties, proper authorization of transactions and activities, adequate documents and records, physical control over assets and records, and independent checks on performance.

  • Separation of duties requires that different individuals be assigned responsibility for different elements of related activities, particularly those involving authorization, custody, or record-keeping. For example, the person responsible at a location for making the bank deposits should not be the person recording contributions or receipts. Sc​rip programs must follow the procedures in this chapter.

Having different individuals perform these functions creates a system of checks and balances.

  • Proper authorization of transactions and activities helps ensure that location activities adhere to established guidelines. The specifics of the range of spending approval and contract signing authority are set forth in Location A​uthority and Approvals​.

  • Adequate documents and records provide evidence that financial statements are accurate. Controls designed to ensure adequate record-keeping include creating and maintaining invoices, fully accounting for weekly contributions and tuition payments, and maintaining appropriate payroll records and other documents that are easy to use and sufficiently informative. See Document Retention and its Record Retention Schedule (entries sorted by cate​gory and record type).

  • Physical control over assets and records helps protect the location's assets. These control activities may include electronic or mechanical controls (such as a safe, employee ID cards, fences, cash boxes, fireproof files, and locks) or computer-related controls dealing with access privileges or established backup and recovery procedures.

  • Independent checks on performance are carried out by employees who did not do the work being checked, helping ensure the reliability of accounting information and the efficiency of operations. For example, a person who records a deposit should not be the one responsible for approving the bank account reconciliation​​.​​​

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