The following Internal Control Policies apply to all parishes and schools, including Archdiocesan, Collaborative (ACS), and Inter-parish/Regional schools.
All parishes and schools shall prepare and submit an annual “line-by-line” budget to Fiscal Services.
A) The budget should describe in financial terms how the parish or school plans to allocate its resources during the coming fiscal year (July 1 to June 30).
B) The budget should be submitted to Fiscal Services of the Archdiocese of Baltimore as part of the annual financial report due August 15th of each year.
C) Both the final accounting for the year ended and the current budget shall be submitted via the Archdiocesan financial reporting website.
D) In creating the budget, the parish/school should review previous years’ financial records to determine its financial status and to identify income and expense trends.
The budget should be prepared in a collaborative process.
A) The budget should be prepared by some combination of the pastor/PLD, principal (in the case of a school), appropriate staff, and the parish or school finance committee.
B) The individuals in charge of different programs or ministries at a parish/school should submit a projection of their expenses and a careful estimate of possible revenues to assist in creation of the parish/school budget.
In the case of a parish or parish school, the budget is approved by the pastor. In the case of an incorporated school, the budget is approved by the Board of Directors (School Board).
A) After initial preparation, the finance committee should present the budget to the pastoral council for review.
B) In the case of a parish or parish school, the parish council should review and, if acceptable, recommend the budget to the pastor. The budget should then be reviewed and given final approval by the pastor.
C) In the case of an incorporated school, the School Board should review and, if acceptable, approve the budget.
On a monthly basis, the budget should be compared to actual results.
A) Actual results should be compared to the budget monthly and reviewed with the finance committee, the pastor/pld and/or principal at least quarterly.
B) Variations between the budget and actual results should be researched, documented and communicated to those responsible for the variations.
C) Quarterly budget reports shall also be made via the Archdiocesan financial reporting website.
The following section explains various accounting and internal control procedures as they relate to parishes and schools within the Archdiocese of Baltimore. More explanation and information on the components of internal control is available here.
If a parish or school suffers a loss and did not follow the required internal controls, the parish/school will be assessed a higher deductible and risks denial of its insurance claim.
All parishes and schools shall maintain a computerized general ledger.
A) The general ledger should contain a complete and accurate accounting of all activity and holdings at the parish/school.
B) The general ledger should contain a detailed listing of transactions for every account classification used by the organization.
C) All transactions, activities, assets and liabilities of a parish or school must be accounted for/maintained in the general ledger.
Income and expenses shall never be netted against one another because netting understates both income and expenses and violates a basic accounting principle.
Note: The only exception to the principle of no-netting of income and expenses is in the case of school fundraisers. For more information, please contact the Department of Fiscal Services.
Exchange accounts are not used for parish/school revenue and expenditures. The exchange account (#1290) should be used only to record receipts and expenditures connected with actual exchanges, where funds are collected and disbursed, such as for a bus trip.
A) The exchange account should never be used to net or record income and expenses.
B) The account should be recorded on the general ledger and should be clearly marked or otherwise analyzed to show the offsetting receipts and expenditures.
C) The exchange account must net to zero at fiscal year-end.
D) Exchange accounts should not be sued for miscellaneous changes that are not true exchanges.
A trial balance – typically, a report found in the general ledger system providing the number, name and balance on each account in the general ledger — shall be maintained on a monthly and annual basis.
A) Accounts with debit balances should be listed in one column, while accounts with credit balances are listed in an adjacent column.
B) The total of the accounts with debit balance must equal the total of the accounts with credit balances.
C) All asset and liability accounts on the general ledger should be reconciled monthly and quarterly to supporting documentation (e.g., invoices, receipts, etc.)
All notes receivable, notes payable, debenture payable, mortgage payable, etc. shall be set up in the general ledger as their own individual accounts.
Each asset or liability must have appropriate documentation to support its current balance.
When the mortgage payable or notes payable (liability) is set up in the general ledger, payments on the mortgage or loan must be applied to reduce this payable.
Monies received from Special Parish Collections such as drives to defray the cost of repairing or repainting the church or rectory, decorations for holidays, or other festive occasions, school collections, fuel collections, etc., shall be recorded in account #4050 – Special Collection Funds for Operating Needs. Note, special collections to reduce a mortgage balance must receive written exemption from the Archbishop in order to be tax-exempt.
Proceeds from a special campaign for new construction or major renovations shall be recorded in account #4150 – Special Approved Campaign Funds. A special campaign must be limited to a definite period of time and dollar goal, and must have prior written approval of the Archbishop.
The parish share from Capital Campaigns and any Grants shall be recorded in account #4151 – Archdiocesan Capital Campaigns – Parish Share & Grants Received. Parishes that are self-administering the Capital Campaign should show their net parish share in this account.
The rebate to the parish of 25% of the Lenten Appeal funds raised as well as Lenten Appeal Grants must be recorded in account #4160 – Lenten Appeal Rebates & Grants.
Donations, gifts, and bequests received shall be recorded in the general ledger and posted according to the following procedures.
A) General donations, gifts, and bequests lacking a specific purpose or use of the funds should be posted to account #4220.
B) Donations, gifts, and bequests received that specifically state the donor’s intended use of the funds should be posted to #4720 – Specific Bequests under a Will, or #4370 Specific Gifts/Grants Restricted for Non-Operating Use.
C) Gifts in Kind (in lieu of cash) should not go unrecorded. The Donation Income and Other Expense (depending on the church expense paid) accounts should be increased. The books should reflect every church expense paid by the parish or for it, and every donation as income, whether received in actual dollars or in-kind, such as fixed assets, supplies, or repairs.
Fixed assets shall be posted according to the following procedures.
A) Fixed Assets, such as furniture, fixtures, machinery, equipment, building, and building improvements and extensions are recorded in account #5930 – Capital Expenditures in the Church, account #5500 – Capital Expenditures and New Non-Instructional Equipment in the School, or account #5080 – New Instructional Equipment in the School.
B) Supporting records should be kept for each capital expenditure category of fixed assets, such as Furniture & Fixtures, Machinery & Equipment, Building, Land, and Building Improvements. These supporting records should reflect the date of expenditure, vendor name, asset description and cost of each fixed asset item purchased