LODGE AUDIT PROGRAM. A guide to conducting an audit of Lodge and Building Association Financial Records. Prepared by

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1 LODGE AUDIT PROGRAM A guide to conducting an audit of Lodge and Building Association Financial Records. Prepared by Committee on Finance & Update by the Grand Secretary 2009 Most Worshipful Grand Lodge Of Free and Accepted Masons Of Washington

2 INTRODUCTION Sections B.L. of the Washington Masonic Code directs that the Worshipful Master shall appoint an Auditing Committee (at the Stated Communication before the election of officers or at the meeting when officers are elected) to audit the books of the Secretary and Treasurer or Secretary/Treasurer and to report its findings in full to the Lodge. It states: Sec B.L. Audit Committee. Every Lodge shall have an Audit Committee which shall be appointed by the Worshipful Master at the last Stated Communication on or before the annual election of officers and no later than the meeting when officers are elected. The Audit Committee shall: 1. Audit the books of the Secretary and Treasurer or the SecretaryTreasurer; and 2. Report its findings in full to the Lodge: A. By the second Stated Communication following the annual installation of officers, or B. At the earliest, convenient time, if the date for reporting cannot be met, due to the additional time required for an audit by professional accountants as specified in the Lodge ByLaws. The report of the Audit Committee shall be recorded in the minutes of the Lodge at the Stated Communication the report is received. Rev The Committee is expected to examine the books and records of the Lodge in order to ascertain the financial condition thereof; satisfy themselves as to the existence of its various assets and liabilities, possibly including assets not previously recorded; verify the income and expenses; and to report thereon in writing to the Lodge, such report to include any discrepancies noted in the course of the examination and suggestions for improvement in handling assets or accounts. In order to facilitate the execution of the audit, the Grand Lodge Committee on Finance submits the following LODGE AUDIT PROGRAM which is not intended to be all inclusive but rather to be suggestive of minimum procedures to be implemented. SUGGESTED RECORDS TO BE OBTAINED 1. Copy of the last Audited Financial Statement (Statement submitted by Lodge Audit Committee to Lodge should be found in Lodge minutes). 2. The following for period from last audit or the past calendar or fiscal year: a. Bank statements, cancelled checks, duplicate deposit slips, savings books, certificates of deposit, paid bills file, remittance records, etc. b. Books of Account kept by Treasurer (may be in the form of Check Register, cash book, or whatever record is used to summarize financial data which show the cash receipts and disbursements in "reasonable" detail). A sample of a Check Register is enclosed as Exhibit 1. c. Financial Records kept by Secretary (includes Minute Book, Lodge ByLaws, Membership Ledger, Annual Report to Grand Lodge, detail of receipts, authorizations for payment such as voucher, and transmittal of funds to Treasurer). 3. A copy of last year s 990

3 SUGGESTED PROCEDURES TO BE UNDERTAKEN 1. Summarize Cash Receipts deposited in Checking Account and checks written during the audit period (see Exhibit A). 2. Reconcile Checking Account as of audit date using amounts summarized in procedure 1 above (Exhibit A). 3. Prepare a Trial Balance Worksheet of Lodge Accounts as of the date of the Last Audit (Exhibit B). 4. Summarize activity in all other Trial Balance Worksheet Accounts and enter on Trial Balance (Exhibit B). 5. For each Asset and Liability Account, complete Trial Balance Worksheet by adding amounts in the Receipts Column and deducting amounts in the Checks/Transfers Column to the beginning balance in the account, entering the resulting amount in the Ending Balance Column (Exhibit B). 6. The Ending Balance in the Net Worth Column of the Trial Balance Worksheet should total both across and down (Exhibit B). 7. Review Annual Report to Grand Lodge, especially noting total Lodge membership and relating same to cash summary of dues received. 8. Dedicated Funds, such as Lodge Endowment Fund, Life Membership Fund, etc. may be included in the Trial Balance as Net Worth, with the offsetting Bank Account or Savings Certificate being listed as Assets, provided each is not a separate entity. Each Fund that is a separate entity should have its own Trial Balance. (Many Lodges may authorize separate Funds within the Lodge structure which are all governed by the Lodge ByLaws. Temple Associations and Trusts generally are separate entities apart from the Lodge itself; as such, each should have its own Articles of Association and ByLaws, and maintain its own books and accounts). 9. Inquiries may include: a. Who has Bank authorization to sign checks, etc. b. Whether all assets and liabilities are included in Trial Balance. c. Whether Funds are being administered in accordance with Articles, ByLaws, and Minutes of meetings. d. Whether there has been appropriate authorization for all important transactions reflected in the books of account. 10. See also Exhibits 2 through 9 for additional suggested forms and worksheets. SUGGESTED TESTS TO BE PERFORMED 1. Trace Duplicate Deposit Slips to Cash Receipts Journal (books of Secretary and/or Treasurer) and Bank Statement for the last month and at least two other months selected at random. 2. Total (add up) all columns in the Cash Receipts Journal and crosstotal the monthly totals for the entire audit period.

4 3. Examine (on a test basis)* the underlying receipts records and trace to the Minutes and Cash Receipts Journal entries (duplicate dues receipts, member ledger posting for dues and assessments, etc.) for the last month and at least two other months selected at random. 4. Examine (on a test basis)* paid invoices for approval for payment and trace to the Minutes and Cash Disbursements Journal for the last month and at least two other months selected at random. 5. Total (add up) all columns in the Cash Disbursements Journal and crosstotal the monthly totals for the entire audit period. 6. Perform other tests of the accounting records and such other auditing procedures as are considered necessary in the circumstances by the Audit Committee. 7. Prepare a Schedule or Record of all the tests performed and have these initialed by those performing such tests. 8. Should any questions arise with regard to this program or its implementation, the Grand Lodge Office may be consulted. * on a test basis = items, say, over $100 (the audit papers should show the test amount used, whether it be all items, or items over a specified amount). REPORT TO LODGE 1. Prepare a written report to the Lodge alluding to the tests performed and the conclusions reached and signed by all members of Audit Committee (Exhibit C). 2. Prepare a Balance Sheet and Statement of Income and Net Worth as of the audit date using the completed Trial Balance Worksheet as the basis thereof (Exhibit D) 3. The Audit Committee's working papers which show the various tests performed, etc. should be retained by the Lodge Secretary for transmittal to the next Audit Committee when appointed. 4. Have all members of the Audit Committee sign off on the audit working papers.

5 (Example of completed form) ABC LODGE #1004 CHECKING ACCOUNT ACTIVITY BANK CHECKING ACCOUNT 1/1/20 TO 12/31/20 EXHIBIT A AMOUNT RECEIPTS Dues... 1, Fees Life Membership Fees Interest Transferred from Life Membership Fund Other Interest Received Collections for Grand Lodge Charity Fund Donations Miscellaneous Total Receipts... 3, CHECKS Rent... 1, Fees Paid: Organist Tyler Grand Lodge Annual Report, etc Grand Lodge Charity Fund Transfer to Life Membership Fund Postage Trestle Board Supplies Installation Expenses Other Lodge Expenses Total Checks... 3, BANK CHECKING ACCOUNT RECONCILEMENT Balance per bank statement 12/31/20 2, Add deposits not shown on bank statement Total 2, Less outstanding checks 12/31/20 : # # # # # # , Balance per books 12/31/20 1,592.52

6 (Example of completed form) ABC LODGE #1004 TRIAL BALANCE WORKSHEET EXHIBIT B BALANCE SHEET 12/31/20 (+) () = BALANCE CHECKS / SHEET RECEIPTS TRANSFERS 12/31/20 ASSETS Bank Checking Account.. 1, , (3,874.66) 1, Bank Savings Account: Balance 12/31/20 15, Interest 1/1/20 to 12/31/ Transfer to Cert of Deposit. (10,000.00) Balance 12/31/20 5, Certificate of Deposit: Transfer from Savings Acct. 10, Interest 1/1/20 to 12/31/ Balance 12/31/20 10, Life Membership Bank Account: Balance 12/31/20 3, Interest 1/1/20 to 12/31/ Life membership payments received Transfer Interest to Checking Account... (352.53) Balance 12/31/ % Time Deposit due 2/15/20 4, Total Assets... 21, , (14,227.19) 22, LIABILITIES Due to Grand Lodge Charity Fund: Unremitted 12/31/ Collections 1/1/20 to 12/31/ Remitted to Grand Lodge. (395.87) Unremitted 12/31/ Total Liabilities (395.87) 0.00 NET WORTH... 21, , (13,831.32) 22,361.56

7 ABC LODGE #1004 AUDIT COMMITTEE REPORT February 21, 20 EXHIBIT C Pursuant to the request of the Worshipful Master, audit functions described hereinafter have been performed on certain of the financial records of ABC Lodge #1004, F. & A. M. for the year ended December 31, 20. All cancelled checks and bank statements for the audit period were examined, and the checking and savings account balances as at December 31, 20 were reconciled. Various items of cash receipts and disbursements were tested with various receipts, billings and invoices being traced to the records of account and found to be in order. Additionally, various underlying documents were examined in order to be satisfied as to the existence of certificate of deposit and time deposit. The audit committee believes the Lodge to be ably served by its Secretary and Treasurer, and that the records maintained are adequate to account for the business of the Lodge. The accompanying Balance Sheet and Statement of Income and Net Worth have been prepared there from. Respectfully submitted, Audit Committee

8 (Example of completed form) ABC LODGE #1004, F. & A. M. BALANCE SHEET DECEMBER 31, 20 EXHIBIT D ASSETS & NET WORTH: Checking Account... 1, Savings Account... 5, Certificate of Deposit 8.2% due 6/10/20 10, Life Membership Time Deposit 8.6% due 2/15/20 4, TOTAL ASSETS AND NET WORTH... 22, ABC LODGE #1004, F. & A. M. STATEMENT OF INCOME AND NET WORTH FOR THE YEAR ENDED DECEMBER 31, 20 INCOME: Dues & Initiation Fees... 1, Life Membership Fees Interest Received: Checking Account Savings Account Certificate of Deposit Time Deposit , Collection for Grand Lodge Charity Fund Donations and Miscellaneous TOTAL RECEIPTS AS RECORDED... 4, EXPENSES: Rent... 1, Fees Paid Organist & Tyler Grand Lodge Fees and Assessments Remitted to Grand Lodge Charity Fund ( paid less due at beginning of year) Supplies & Postage Trestle Board, Installation and Other Lodge Expenses TOTAL DISBURSEMENTS...3, EXCESS OF INCOME OVER EXPENSES... 1, NET WORTH, BEGINNING OF YEAR... 21, NET WORTH, END OF YEAR... 22,361.56

9 Check Register with Running Balance EXHIBIT 1 Opening Balance: Date Check # Payee Name Purpose/Notes Payment/Debit Deposit Balance Reconciled

10 LODGE, NO. EXHIBIT 2 BALANCE SHEET December 31, 20 Assets Current Assets: Cash: Checking Account Bank.. Savings Account Bank.. Savings Account Bank... Petty Cash... Sub Total... Investments: Certificate of Deposit # Certificate of Deposit # Life Membership Balance 12/31... Other Investment Account 12/31 Sub Total Total Current Assets... Fixed Assets Furniture and Fixtures... Paraphernalia... Office Equipment (files, safe, computer) Other... Total Fixed Assets Total Assets... Liabilities: Grand Lodge Fees & Dues... Installment Purchases (Balance)... Building Fund... Other Designated Funds... Total Liabilities... Net Worth...

11 LODGE, NO. EXHIBIT 3 INCOME AND EXPENSE STATEMENT For the year ended 20 Income: Dues... Petitioners Fees... Interest Certificates of Deposit... Interest Savings Account... Interest Money Market Checking... Life Membership Fund... Withdrawals Interest Investment account Fund Raising Efforts (net)... (May be Listed or Give Total of All) Donations... Other... Total Income... Expenses: Grand Lodge Fees and Dues... Masonic Service Bureau Dues... Rent... Office Expenses & Supplies... Officer Salaries (if any)... Lodge Charity... Lodge Trestleboard... Life Memberships... Lodge Investment Account Refreshments... Activities: Installation of Officers... School Awards and/or scholarships Past Master's Nite/Friend's Nite Holiday Baskets... Widow's Program... Other... Net Gain/Loss Total Expenses...

12 LODGE, NO. TRIAL BALANCE EXHIBIT 4 ASSETS BALANCE RECEIPTS CHECKS / BALANCE 12/31/20 TRANSFERS 12/31/20 Bank Checking Account.. Bank Savings Account. Interest 1/1/20_ to 12/31/20. Transfers (if any)... Balance... Certificate of Deposit... Interest 1/1/20_ to 12/31/20_ Interest Transferred to Checking... Balance (if any) Investment Account Interest/Earnings 1/1/20_ to 12/31/20_. Withdrawls... Balance... TOTAL ASSETS LIABILITIES (If any See Suggested Balance Sheet) NET WORTH

13 EXHIBIT 5 RECONCILIATION LODGE, NO. CHECKING ACCOUNT BALANCE per Bank Statement 12/31/20 Add Deposits Not Shown... ADJUSTED BALANCE Less Outstanding Checks 12/31/20_ #... #... #... #... TOTAL OUTSTANDING CHECKS.. BALANCE per Books 12/31/20..

14 BUILDING ASSOCIATION EXHIBIT 6 BALANCE SHEET December 31, 20 Current Assets: Cash: Checking Account Bank.. Savings Account Bank.. Petty Cash... SubTotal... Investments: Certificate of Deposit # Lodge Cash Management Account 12/31... Other... SubTotal... Fixed Assets: Total Current Assets Building & Real Property Furniture and Fixtures... Equipment (Define mechanical, kitchen etc.) Office Equipment (files, safe, computer).... Other... Total Fixed Assets Total Assets Liabilities: Installment Purchases (Balance)... Mortgage... Loans (Balance)... Total Liabilities Net Worth...

15 BUILDING ASSOCIATION EXHIBIT 7 INCOME AND EXPENSE STATEMENT For the year ended 20 INCOME Rentals... Interest Certificates of Deposit... Interest Savings Account... Interest Money Market Checking... Withdrawls Cash Management Fund Fund Raising Efforts (net)... Donations... Other... Total Income EXPENSES: Utilities... Insurance... Taxes... Salaries (if any)... Telephone... Maintenance Expense... Major Repairs... Garbage... Office Expenses... Loan/Mortgage/Installment Payments Lodge Cash Management Deposits. Other Net Gain/Loss Total Expenses...

16 BUILDING ASSOCIATION EXHIBIT 8 TRIAL BALANCE ASSETS Bank Checking Account. Bank Savings Account. Interest 1/1/20_ to 12/31/20_ Transfers (if any)... Balance... Certificate of Deposit... Interest 1/1/20_ to 12/31/20_ Interest Transferred to Checking... Balance (if any) Other Investment Account Interest/Earnings 1/1/20_ to 12/31/20_. Withdraws... Balance... BALANCE RECEIPTS CHECKS / BALANCE 12/31/20_ TRANSFERS 12/31/20_ TOTAL ASSETS LIABILITIES (If any See Suggested Balance Sheet) NET WORTH

17 RECONCILIATION EXHIBIT 9 BUILDING ASSOCIATION CHECKING ACCOUNT BALANCE per Bank Statement 12/31/20 Add Deposits Not Shown... ADJUSTED BALANCE Less Outstanding Checks 12/31/20 #... #... #... #... TOTAL OUTSTANDING CHECKS BALANCE per Books 12/31/20...