Checklist of Financial Safeguards That Can Protect Your School
Larry Patapoff, CPA, is a friend of the Christian school movement. He has taught at an ACSI member college and served on several Christian school boards.
I. Internal Control Considerations
There are many similarities between the financial management of a school, church, or church-related organization and a secular for-profit company. The same accounting principles apply to each entity. What may be perceived as a major difference is simply a variation of the same concept. For example, both types of organizations would use budgets as tools for planning and control. A for-profit company has the same chance of predicting sales and rising costs as a school does by changing tuition rates. The uniqueness of the ministry is in its mission, NOT in its financial management.
Who is Responsible for Internal Financial Control?
Internal control is a very sensitive area and is potentially volatile to even discuss. Separating duties or reviewing someone’s work is sometimes misinterpreted as a sign of mistrust. The system of internal control should be treated as a routing matter and simply a part of carrying out ministry. Nothing more and certainly nothing less.
While the administration or management carries most of the responsibility for the system of internal control, I believe the board should also be very active in this area. Many recent events reported in the national newspapers should be motivation enough for everyone to take a vested interest in this area. The administration and board should readily assume the obligation to remove any financial temptations that a desperate employee may face.
Internal Control Isn’t Free
It takes a commitment of time, energy, money, and self-discipline for an organization to have good financial controls. Is it worth it? The problems that some churches and Christian schools have experienced through their failure to have such controls make for a strong argument in favor of the costs.
In some ways the cost of a good internal control system is like car insurance. You pay for it and if you never need it, it seems like a waste of money. The only time the idea of insurance may even cross your mind is when you are in an accident. Then the financial impact is of little concern because you know you are covered. Internal control is very similar. You can have confidence in your controls and your financial information.
We can even carry the analogy a bit farther. There are different types and amounts of insurance. Drivers must decide what is best for their situations. We know that the cheapest is not necessarily the best. It is the same with internal controls. The best reason for commitment to a strong system of internal control is to fulfill a ministry’s stewardship responsibility.