What About Those Auditors?
Every Northwest Adventist institution has an obligation to carry out its mission with an honest regard for financial accountability. Part of that accountability comes in the form of regular audits of financial records — many of which are done by the staff from the regional office of the General Conference Auditing Services (GCAS) located in Vancouver, Washington. Recently the Gleaner asked Don Lloyd, the regional GCAS manager, for an overview of the typical auditing process.
What are the main duties of an auditor who audits the finances of a church/school or conference?
Our main responsibility is to report whether church entities (academies, Adventist Book Centers, conferences, the union, etc.) have prepared their financial statements in accordance with generally accepted accounting principles and complied with denominational policies. We examine the financial records of each organization and determine if their financial statements are compliant. In addition, we perform a review of core policies. These are a specific list of financial policies compiled by the General Conference (GC) and adopted by the North American Division (NAD). Each church entity is required to follow the working policies of the church/NAD.
Once we have completed our work, we issue a report to that institution’s operating board on whether its financial statements are presented fairly and if they comply with generally accepted accounting principles as accepted by the denomination. We also include a report on our evaluation of the organization’s internal controls.
GCAS only audits institutions that are included in the Seventh-day Adventist Yearbook. Local churches, junior academies and elementary schools have reviews done by the local conference.
What limitations or guarantees do your audits provide?
Even though we are employed by and perform our duties on behalf of the General Conference, our work is performed in accordance with the same standards as if we were in public practice.
What does a typical school or conference audit NOT do?
A financial audit does not make a final determination on whether an organization is financially healthy, although we do evaluate whether the organization will be able to operate at least 12 months after the end of the fiscal year. Our goal is to ensure that the financial statements are fairly, accurately and honestly stated so the organization’s management and governing board can make informed decisions regarding its direction.
What specific kinds of anomalies do you watch for?
We look carefully at the internal controls of the organization. Does the provided documentation adequately support the record of balances and transactions in the financial statements? Or are there gaps in that documentation that leave the records open to question?
What process is in place to deal with fraud if it is found by a GCAS auditor?
Fraud is not a common occurrence in our audit work; however, it does unfortunately happen at times. If fraud is discovered or suspected, the auditor will discuss the findings with their regional manager. Then the issue will be discussed with the officers of the organization and, depending on the nature of the item, the next higher organization. We will also include this in our report to the local organization’s board. It is up the management and/or the board to determine the actions the organization will take.
What does an audit cost? Who pays for the school or conference audits?
The North American Division pays for 50 percent of the cost of the audit. Within the Northwest, the North Pacific Union Conference pays 25 percent, and the remaining 25 percent is passed on to the local conference where the audited institution is based. Our billing structure is on a cost-recovery basis. We have no profit margin based into our rates. Our goal is to provide excellent audit services to the Seventh-day Adventist Church at the best value possible.
How often do you perform an institutional audit?
We perform a financial audit for each organization on our list annually. We also do a review of each local conference trust program once every three years. So, each year we generally have 26 financial audits and a couple of conference trust reviews.
How many auditors work for the Northwest GCAS team?
We have six currently. Four of our staff hold CPA licenses, and the others are in the process of obtaining their licenses.
Is audit work usually a stepping stone to other financial careers, or is it often a career in itself?
Working for GCAS can be a career in itself. We have an internship program across North America, which serves as an entry-level position, and additional opportunities to work in other GCAS offices throughout North America. We also frequently see staff move to other careers in treasury for our church, as well as outside the denomination.
Why do you personally find fulfillment in managing financial auditing for our church?
This work has enabled me to use my interest in financial accountability to help the mission of our church. As followers of Jesus and His teachings, we need to be honest and transparent with everything we do — including how we carefully manage the resources that so many of our members have sacrificed to share. That’s something I care about deeply and am gratified to have a role that helps us toward that goal.