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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 segregation of duties, proper authorization of transactions and activities, adequate documents and records, physical control over assets and records, and independent checks on performance.

  • Segregation 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. Scrip 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. For example, many transactions by an elementary school must be approved by both the principal and pastor; if the transaction is over $3,000 or involves any construction, it must be approved by the pastor/administrator for an amount up to $20,000 and by the regional bishop and the appropriate office at the Archdiocesan Catholic Center if the amount exceeds $20,000.

  • 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 category 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, the supervisor checks the hours reported on time sheets and the reasons given for absence.​​