How to Audit Lodge Financial Records

The Lodge Audit Committee helps the treasurer to ensure that the financial position of the Masonic Lodge is accurate through a series of accounting checks and balances.  

Every year, the Masonic Lodge audit committee checks the vouchers, accounts and books of the Treasurer and the secretary.

It is necessary that all auditing and reporting are carried out on time so there won’t be any omission or oversight on the part of the Treasurer. The Masonic Lodge audit is similar to the auditing carried out on a bank or company.

Lodge By-laws and Grand Lodge By-laws: The audit committee must be well versed with the Lodge and Grand Lodge By-Laws. The most important by-laws are those that relate to the Secretary, the Treasurer and the committee.

The audit committee ensures that the Lodge’s Treasurer and Secretary follow the set by-laws while ensuring that the Lodge’s financial position is accurate.

Why a Lodge Audit Committee is Necessary

The Lodge Audit Committee audits all accounts and creates a written report at the first Masonic communication in a year, so the Lodge Master can be assured that the books are very okay.

After the Lodge Audit is complete, the Lodge Master can request that the Budget Committee prepare a budget for a new year. This is just like when a store owner counts down the till of the cash register before the start of a new working day or before a new employee resumes work.

After the annual Lodge audit has been presented and accepted by the Lodge, the annual audit is then written into the minutes of Lodge meetings. This information should be supplied to Lodge members on a regular basis, so the members can be well-informed before voting on important issues.

The audited information is necessary for members to vote their conscience perfectly well as they have a good idea of how much is in the lodge checkbook. Anyone that holds the interests of the Lodge at heart must be well-informed of audited lodge finances before making vital decisions.

Financial Report from The Treasurer   

The Lodge Secretary or Treasurer must state the balance of the lodge checkbook in front of other members before important monetary decisions are taken. The Treasurer must state if there will be any other demands on the remaining lodge funds. This will help members consider how much will remain if the demands are taken care of and consider how important these demands are.    

This works like a joint bank account where partners or spouse consult each other on finances before deciding to buy new things or take care of bills.

Functions of the Masonic Lodge Financial Committee

The Masonic Lodge financial committee is responsible for determining whether or not the beginning balance of the Lodge, the income minus the expenses and other figures agree with the figures with the Treasurer’s balance.

Lodge audits can be done by hand and do not require special auditing software or a specialized accounting degree. But the whole process can be made faster with accounting software like QuickBooks. You might just need to dedicate some time to learn how these software work.

Time for Lodge Auditing

Lodge auditing should be done at a particular time that corresponds with the Masonic fiscal year of your Lodge. But for several Lodges, the usual thing is that the treasurer provides all financial back-up paperwork before November 30. This paperwork will include all the finances of the Lodge.

The audit committee will audit the accounting of the treasurer. So, the treasurer may or may not be a member of the committee.

Financial Back-up Paperwork

Financial back-up paperwork includes the following:

  1. The last 12 months of bank statements (October 31st to September 30th). All checkbooks must be properly filed in for all financial instruments.
  2. All financial interests which should be brought forward in an orderly manner.
  3. The expenditure receipts for the previous year.
  4. The interest statements from CDs and bank accounts. 

All checkbooks must be brought forward, reconciled and updated before they are presented to the Audit Committee.

All checkbook entries should contain:

  • Payee names or names of the party the check was written to
  • The amount of all expenditures
  • Interest brought forward for accounts that bear interests.
  • The description of all items that were paid for e.g. printing of by-laws, grand lodge dues.
  • Running balance of the accounts which is recorded after every transaction.

A running balance of the account is account balance stated by the checkbook after it has been reconciled to the bank statement for each month. A reconciled balance is obtained by looking at the balance figure that the bank statement shows and adjusting the checkbook to reflect the figures of the bank.

Financial Instruments

A list of all financial instruments should be made. For each financial instrument owned by the Masonic Lodge, the Treasurer will provide some information for the last 12 months starting with October 31st of the year before till September 30th of the present year. The information will contain:

  • The beginning balance of reconciled accounts
  • The income that flows into each account
  • The expenses paid out of each account
  • The balance at hand

The Treasurer will provide the Audit Committee with the following:

  1. The beginning balance and the date of the beginning balance for every financial instrument. These include Certificate of Deposit, Money Market Account, Savings Account and Bank Accounts.
  2. Up-to-date bank statements and checkbook of every account.
  3. Interest earned statements
  4. Cash where applicable. If there is cash-at-hand available, the cash-at-hand should be counted by the committee members. This does not show any distrust on the part of the Treasurer. This is just necessary to provide an accurate audit. 

Once all the above information is available, all checks are matched with their corresponding invoices. Start with the first bank entry that is after the starting balance date. Confirm that there is a statement, invoice, bill, receipt and other relevant documents for each written check. For checks that do not have any receipt, a list should be made. Work your way down to the entire fiscal year and match all checks to invoice and receipts.

But if the expenditures incurred by your Masonic Lodge are too many, you can select random receipts and invoices and match them to the checks. Ensure that you select a good percentage of receipts and invoices. Record the fact that you only selected some receipts and invoices.

You should create a summary statement at the end. The summary statement compiles all the financial instruments and shows a summary of total funds, total cash in CDs and total cash in bank.        

Does your beginning balance plus income minus expenses correspond with the Treasurer’s figure?

If the figures correspond, you are good to go, and you can present your findings to the Masonic Lodge.

What to do if the Audit Committee figures are different from the Treasurer’s figure  

  1. If the figures do not correspond, you should go over the figures to see if you made an error.
  2. You can also add again, subtract again and check your calculator figures.
  3. You should check your beginning balance to ensure that you used the correct beginning balance or balances.
  4. You should check the bank reconciliation that the Treasurer has reconciled every month to ensure that all written checks have cleared the bank. It’s possible that there is an outstanding check that was not cashed or a deposit that was made but not recorded in your checkbook.
  5. Ask if a check was written for an amount that varied from the amount on the bank statement. You should go through the checkbook and confirm that the amounts on the statement and the description of the items match.

Presentation of Audit by the Lodge Audit Committee

The Lodge Audit Committee will present its findings before the entire Lodge. For most Lodges, this is during the first meeting in December.   

The report of the Audit Committee chairman should include the following:

  • A confirmation of whether the Audit Committee findings agree with the ending balance of the treasurer.
  • A list of written checks that did not have any receipt.
  • A list of all discrepancies
  • Thoughts on whether the Treasurer or Secretary has followed recommendations suggested by the Audit Committee and Lodge Members during the last year audit. 

Steps to be taken if the Lodge Audit Committee Is Not Satisfied   

If the Lodge Audit is not satisfied with their findings and receives unsatisfactory responses from the Treasurer, the Audit Committee has the power or the mandate to call on an accredited, third-party CPA firm to audit the Lodge’s finances.

Before the third-party auditing firm is employed, the Lodge Audit Committee should do the following:

  1. Inform the Masonic Lodge of their decision to receive bids before selecting an external auditing firm.
  2. The committee must receive at least three bids.
  3. A timeline should be established by the committee for completion of the external auditing.

After the external auditing is complete, the Lodge Audit committee shall inform the Lodge of their results at the next stated meeting after they have received results of the external audit.

Other things the Lodge Audit Committee Should Consider   

The Lodge Audit Committee should consider the following to help them carry out their duty fine and with less stress:

  1. The use of a paper trail: The audit committee should communicate with the general assembly and persuade them to begin using a paper trail. The by-laws could stipulate that all expenditures should be paid by check and not cash. So, all lodge expenditure could be made by credit card, check and other paper forms that can be tracked easily by paper. A paper trail will make things easier to track. It may be difficult to remember receipts and keep them well over time. Cash outlays without receipts should be included along with the cash expenditure, the amount of cash and the corresponding audit report.
  2. The use of PayPal to pay Lodge Dues: If your lodge has a website, you could implement a PayPal payment solution on the website. You can ask your Grand Lodge to decide if they approve individual lodge websites or not. If your lodge doesn’t have a website, the Lodge Master and other Lodge officials should see about getting one.

Collecting money through PayPal saves time, and the secretary won’t have to spend so much time receiving checks from members, writing out deposit slips and taking the checks to the bank for deposit. A simple PayPal button on your website will handle all these. Members that have PayPal accounts can transfer their annual dues from their PayPal account to the Lodge’s PayPal account. All transactions are secured and handled by PayPal.  

With the PayPal account, the Lodge Secretary can see names, amount of money, and date. The account funds can be seen anytime, and reports can be transferred to the bank account of the Lodge, and a report can be printed.

  1. The use of Lodge accounting software: Lodge accounting software will make things as easy for you as possible. This software can keep track of membership dues, financials, number of members, email addresses, lodge minutes, lodge events, visitor notices and other information. This information is difficult to keep track of, especially for large Masonic with several members.

You can use general accounting software like QuickBooks, but AssistantSecretary is a great software that is specific for Masonic Lodges. AssistantSecretary can keep track of visitors, membership, financials, inventory, lodge minutes and several other things. It can also generate reports as needed. It was created by Freemasons for Freemasons.

This software can be used by anyone regardless of their educational background and their computing experience.

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