What does an audit have to do with ministry?

May 07, 2010

We have auditors in our office this week. At my mere mention of “We have auditors . . .” people respond with sympathy, ask how they can help, recommend I go out for a latte.

The auditors themselves are not a problem. They are nice people doing important work. Their work—to determine if the conference financial statements “present fairly, in all material respects, the consolidated financial position of the Minnesota Annual Conference”—is vital for our maintaining trust and accountability for donors, lenders, and others that have financial dealings with the conference.

The problem with the annual audit is that it has become increasingly complex and cumbersome. Some of the newer requirements can be traced back to recent accounting scandals. (Remember Enron? WorldCom? Tyco? Adelphia?) Sarbanes-Oxley regulations, Financial Accounting Standards Board new pronouncements, and new audit guidelines require new time-consuming procedures.

For example, we are preparing responses to a 60 (yes, sixty) page questionnaire about disclosures, the information that goes in the footnotes to the financial statements. We also have many documented processes that we review every year and provide to the auditors. (The entire audit report, including the footnotes, is published in each year’s Official Journal and Yearbook.)

Another level of complexity arises from the accounting method that the conference uses as a nonprofit organization. We are required to use fund accounting, which means that we have separate departments for separate functions, based on purpose or donor restrictions. That results in many balance sheets and many income statements in our general ledger that are combined to provide the final audited financial statements.

The demands of the audit illustrate the rather complex financial picture of the annual conference—and how important it is that our complex system be reviewed carefully.

Wait, there’s more

You may rightly perceive that the apportioned budget—approved by annual conference session members and supported by the members’ churches—is complex. Yet that represents only a part of the entire annual conference financial picture.

In fact, the sum of the other parts of the annual conference‘s finances exceeds the apportioned budget. For example, the MAC Plan, the conference’s health insurance plan, had almost $5 million in claims and premiums in 2009. (The 2009 total apportioned budget was $6.5 million.) We also have invested funds at the United Methodist General Board of Pension and Health Benefits (almost $20 million at the end of 2009).

We receive many gifts each year that are restricted for mission and ministry, such as for United Methodist Committee on Relief, the Minnesota/Russia Church Partnership, General and Minnesota Conference Advances, and Special Sundays. Other significant ministries for which we process gifts and provide accounting include Volunteers in Mission, Minnesota disaster relief, OC Ministries, ministerial education, camperships, Urban Servants, youth events, voluntary group workers’ compensation policy, gift annuities, charitable remainder trusts, camping registrations, and more. (You can see more information about some of these in the preconference materials.)

The whole elephant

I sometimes say that the annual conference is like the elephant in the poem “The Blind Men and the Elephant” that I loved when I was a child. Different people touch specific parts of the work of the annual conference and only know the part they touch. Those of us who work in the finance area may have the best overall view of the conference. We are privileged to touch the full extent of the mission and ministry that is accomplished.

An audit opinion that the financial statements “present fairly” means that churches and individual donors can rely on the conference’s financial statements as an accurate picture of the conference’s current financial condition. The audit serves as a tool for management but also as an assurance to donors and others about the accuracy of the financial statements.

Minnesota United Methodists are providing varied and important ministry in Christ’s name here and around the world. Our finances reflect that. The audit of our financial processes—as demanding as it is—is part of making sure those ministries grow and continue to enjoy the trust of their supporters.

Barbara Carroll (barbara.carroll@minnesotaumc.org) is director of finance and administration for the Minnesota Annual Conference.

Minnesota Annual Conference of the United Methodist Church

122 West Franklin Avenue, Suite 400 Minneapolis, MN 55404


(612) 870-0058