To: Rectors, Vicars, Finance Chairs and Treasurers

From: Michael J. Kerr, Chief Financial Officer

Date: March 17, 2003

Re: 2002 Audit of Church Accounts

The diocesan canons require that an annual audit of church financial records be submitted to the Office of the Bishop. The canonical deadline for filing the 2002 audit is August 31, 2003.

There are two forms that your church audit may take. First, an outside audit firm may be employed, but please be sure to attach a copy of their supporting management letter and your church response to issues raised by the auditors. Second, your church may use the Diocese of Virginia audit program which is based on the Manual of Business Methods in Church Affairs (January 2000). This internal audit program lays out a usable and proactive process for an audit committee to assure each congregation of their financial position. The provided program should be directed to the person or persons responsible for the audit process. The "short-form" audit has been continued for churches with total operating budgets of less than $150,000. This was increased from last year’s $125,000, and in raising the operating budget threshold represents one-third of our churches. These colored pages should be detached from the longer form for your use. A major change for 2002 audits is the return of a "proof of cash" form in both versions of the audit program. A proof of cash form is to be completed for all church accounts.

Please make every effort to use one of these methods to review your financial records. As a matter of due diligence and responsibility, I encourage every vestry to look at all internal business practices, particularly the control issues related to receipt and management of cash. Of course, annual reviews should always cover investments, property and insurance coverages, etc.

MJK:

Attachment

cc: The Rt. Rev. Peter James Lee

Diocesan Finance Committee