Church members and others provide substantial financial resources to local churches, and expect church staff and lay leadership to provide proper oversight of such resources to ensure these resources are (1) used in a manner consistent with that expressed through the church’s annual operating budget and designated gifts, and (2) adequately safeguarded from improper use or loss. In light of expectations, every local United Methodist church, at a minimum, shall conduct an audit (review) as defined and described in the Local Church Audit Guide published by the General Church Council on Finance and Administration. The guide may be obtained at www.gcfa.org.
In addition to such minimum requirements for all churches, and consistent with the expectations for integrity, transparency and accountability described above, larger churches shall periodically subject their accounting records and controls to assessment by an independent certified public accountant. Specifically, larger churches (i.e., those with annual total receipts of more than $500,000) shall adopt one of the following two options (for purposes of this section, “total receipts” of each local church shall be annual total combined funds received through the operating budget; designated or restricted gifts given for a particular purpose, including special offerings collected throughout the year; monies received for capital buildings or improvements or for debt service; contributions received for endowed funds, preschool tuition and fees received; and any funds received from other sources):
1) Have an audit performed by an independent certified public accountant (CPA) in accordance with generally accepted auditing standards; OR
2) Have independent CPA perform a set of agreed-upon procedures established by the Council on Finance and Administration.
For purposes of this requirement, the frequency of having either option 1 or option 2 performed shall depend on the annual total receipts of each local church from all sources as described above. For purposes of determining the applicability of this requirement, “total funds received” shall be the average annual total receipts (as defined above) for the prior three years. (For example, for purposes of applying this test in 2014, local churches would determine the average of total funds received for the years 2011-2013.) If average total funds received by a local church exceed $2,000,000, the local church should have audit work performed by an independent CPA under either option 1 or option 2 annually.
For those local churches who have average total funds received of less than $2,000,000 but more than $1 million, those churches should have audit work performed by an independent CPA under option 1 or option 2 once every two years. For those who have average total funds received of less than $ 1 million but more than $500,000, those churches should have audit work performed by an independent CPA under option 1 or option 2 once every three years. For any year in which a larger church (as defined above) is not required to have work done by an independent CPA under option 1 or 2, such churches shall conduct an audit (review) as described in the first paragraph of this section.