LODGE AUDIT

Auditing Lodge Financial Records



The Lodge Audit Committee offsets the Treasurer's job of providing an accurate and reliable set of accounting checks and balances to ensure that the lodge's financial position is stated correctly. 

This Lodge Accounting committee annually (or as deemed necessary at any time) examines the records, books, accounts and vouchers of the Secretary and Treasurer.

Timely reporting reduces any inadvertent oversights or omissions on the Treasurer's part and is no different than an audit performed on a company or a bank. 

Lodge and Grand Lodge By-Laws: The audit committee should be familiar with both the by-laws of the lodge and the by-laws of the Grand Lodge. The most important parts of the by-laws relate to the committee, itself, the Secretary and the Treasurer.

Making sure that the Secretary or Treasurer is following the rules set forth in the by-laws is just as important as verifying the lodge's financial position.

 

WHY:  The Lodge Audit Committee audits all accounts, and makes a written report thereof at the first regular communication of the Masonic year so that the new Master of the Lodge is assured that the books are correct.

Only after the audit is performed can the Master request the Lodge Budget Committee to prepare his budget for the new year.   (This is the same as counting down the till of a cash register before the new day begins or a new employee comes on duty.)

After having been presented and accepted by the Lodge, the annual audit is to be placed into the minutes.  Each and every lodge member must have access to this data on a regular basis in order to be able to make informed choices before voting. 

Without this audited information, no member should ever make a motion to "vote their conscience" without having first ascertained how much is in the lodge checkbook.  To do so, shows that the member does not have the lodge's best interests at heart.

Treasurer's Financial Report: Before any and all monetary decisions can be voted upon, the Lodge Treasurer or Secretary should be called upon to state what the current balance of the lodge checkbook is and whether any other demands will be placed upon those funds which the new request for funds may, in fact, jeopardize.

(This is no different than a joint bank account in which you ask your spouse or partner whether they feel that a new expenditure is affordable and can be incurred.)

 

The Sole Task:   It is the job of this lodge financial committee to ascertain whether or not the lodge's beginning balance, plus income, minus expenses agrees with the Treasurer's balance-on-hand figure(s).   This is your sole task. 

You do not need an accounting degree nor special audit software to perform a lodge audit. (however, accounting software such as QuickBooks, greatly speeds up the process, once you learn how to use it.)

If you have never performed any accounting, before, (or simply need a refresher), simply follow the steps, below. 

 

WHEN:

You may adjust all dates, below, to correspond to your specific fiscal Masonic year.

Treasurer shall provide to the Lodge Auditing Committee on or before November 30 all financial back-up paperwork to include all finances of the lodge.

Since the Treasurer's accounting is what the auditing committee will be auditing, the Treasurer may not be called upon to be a member of the auditing committee.

 

_______
 

Financial Back-Up Paperwork Includes:

  • The previous 12 months of bank statements (October 31st through
    September 30th) and their corresponding checkbooks properly filled
    in for each financial instrument.
     
  • All interest brought forward in a correct and organized manner.
     
  • All interest statements from bank accounts, CDs, etc.
     
  • All receipts for each expenditure over the previous year.

_______

 

HOW: 

All checkbooks shall be reconciled and up-to-date before being
presented to the Auditing Committee.

 
           Checkbook entries must include:

  • Payee Name (to whom the check was written)
  • Amount of each expenditure
  • Description of item paid for (Grand Lodge dues, Bylaws printing, etc.)
  • Interest brought forward (up-to-date) (if account is interest-bearing)
  • Running balance of the account (which is recorded after each transaction)
     

A running balance is what your checkbook says your account balance is, after your having reconciled it with each month's bank statement. A reconciled balance is not simply using the balance figure that the bank statement shows and adjusting your checkbook to reflect the bank's figures.

 

Make a List of Financial Instruments:

Cash on Hand Where is it located?
General Fund Bank Name
Savings Accounts Bank Name
Certificates of Deposit Bank Name
Any and all Special Funds Bank Name or Where Held

      

For each financial instrument which the lodge owns, the Treasurer will make available to the Lodge Audit Committee the following information for the previous 12 months beginning with October 31st of the previous year through September 30th of the current year

  • Beginning balance of each reconciled account
  • Income received into each account
  • Expenses paid out of each account
  • Interest Earned on each account
  • Balance on hand

 In other words, the Treasurer provides the Lodge Audit Committee with a:

1.  Beginning balance and the date of that beginning balance for each
     financial instrument.   (Bank Account, Certificate of Deposit,
     Savings Account, Money Market Account, etc.)

2.  Reconciled and up-to-date checkbook and bank statements for
     each account.

3.  CDs:  Interest earned statements.

4.  Cash: (if applicable)  If there is cash-on-hand, the committee
              should physically view and count the cash-on-hand.
              (This does not show any distrust of the Treasurer.  It is
              necessary to provide an accurate audit.) 

Match Each Check with its Invoice:  Once you have the above information, you will begin with the first bank entry after the beginning balance date and ascertain that for each check written, there is a receipt, statement, bill, invoice, etc. that matches it.  If there is no receipt, make a list of checks written which do not have a corresponding receipt.

Go through the entire previous year and match the check to the invoice/receipt.  

If your lodge has a large quantity of expenditures, you can make a selction of random invoices and receipts and match them with the checks. A good selection contains 5-10% of the total number of invoices and receipts which were paid. It is a good practice to document that you only review a selection of invoices and receipts in your report.

A summary statement is the compilation of each of these financial instruments and summarizes the following:

Total Cash in Bank

Total Cash in CDs 

Total Funds


Does your beginning balance, plus income, minus expenses agree with the Treasurer's balance-on-hand figure(s)?

 

If Yes:  You simply need to present your findings to the lodge.

If No:   Possible problem resolutions are: 

  1. Go back over your numbers to see if you have made an error.
  2. Re-add and re-subtract, then double check your adding machine tapes.
  3. Double check your beginning balance(s) to make sure you used the correct beginning balance(s). (The (s) denotes the balances in more than one account. If you only have 1 General fund, then you will only have 1 checkbook beginning balance.
  4. Check each bank reconciliation, which the Treasurer has reconciled each month to make sure all checks written have cleared the bank.You may have an outstanding check(s) which was never cashed, or a deposit which was made, but not entered in the checkbook.
  5. Was a check written for an amount which differs from the amount on the bank statement? If so, go through the checkbook and match the amounts on the statement with the amount and description of each item entered in the checkbook.

Lodge Audit Committee Presentation:

The Lodge Audit Committee shall present its findings to the lodge during the first meeting in December.


  • At this time, the Committee Chairman's report should include:
     

    1. Whether the Committee agrees with the Treasurer's ending balance.

    2. Read the list of checks written which did not have a corresponding receipt.

    3. Report on any discrepancies found.

    4. Report on whether the Secretary or Treasurer has followed through with any recommendations from the previous year's audit.






    Dissatisfaction with the Lodge Auditing Committee's Findings

    Should the Lodge Audit Committee not be fully satisfied, receive any unsatisfactory responses, or non-documentation from the Treasurer, in the interests of all members of the lodge, the committee should be empowered by the lodge's By-Laws to employ an outside, disinterested, third party such as a CPA firm to perform an outside audit of the lodge’s accounting practices without approval of the general membership. 

    Before employing a third party auditing service, the Lodge Audit Committee should:

    1. Advise the lodge of their decision to entertain bids for the services of an outside auditing firm.

    2. Receive a minimum of three (3) bids for services.
    3. Establish a timeline for completion. 


      1. After completion of the outside audit, the Lodge Audit Committee shall advise the lodge of the results in a timely manner at the next stated communication after receiving the results of the outside audit. 





        Here are a couple other time saving things you may want to consider:

        Paper Trail:   If your Lodge By-Laws do not state that all expenditures be paid in check form and not cash, you may wish to change your Lodge By-Laws to state that all lodge expenditures be made by check only and not cash.

        You may want to amend this to state that all lodge expenditures over a specific amount must be made by check, credit card or other trackable paper form.

        The reason for this is that many times it is difficult to remember to receive receipts for cash expenditures, thus making the Audit Committee's task much more difficult to match up a cash expenditure with no matching receipt.

        Expenditures paid by check create an easy to follow paper trail and make the task of Lodge Accounting much, much easier and expedient to perform. 

        If the Lodge Audit Committee finds cash outlays without receipts, it should include this fact, along with the number of these cash expenditures and the amounts in question, in its Audit report back to the lodge.






        Pay Lodge Dues With PayPal: If your lodge has a website, (check with your individual Grand Lodge as to whether they approve individual lodge websites in your jurisdiction), an excellent method of greatly reducing the Secretary's time spent receiving individual lodge dues checks from each member, making out numerous deposit slips and taking the checks to the bank for deposit is to place a PayPal button on the lodge's website.

        If your members have a PayPal account, (and many do), annual dues can be paid using either their credit card or from the member's Paypal account directly into the lodge's Paypal account. This transaction is handled through Paypal and is secure.

        PayPal provides the Lodge's Secretary with reports of name, date and amount paid. The lodge's Paypal account funds can be viewed at any time by the Secretary and can be transferred at any time directly to the lodge's bank account and a report can be printed.

        So, if your lodge has a website, check with your Grand Lodge, first, and consider creating an annual dues payment button on your site to streamline this part of your Lodge Secretary's accounting and financial duties.




        Accounting Software:

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        Lodge accounting software removes much of what can be quite tedious when performed manually.

        Keeping track of membership, dues, dues notices, visitors, widows, financials, sending letters, keeping e-mail addresses, lodge minutes, lodge events and multiple lodge information within a district, etc. can become very time consuming if you are not highly organized.

        Many Lodge Secretaries choose to use general accounting software such as QuickBooks, but there is also specific Masonic lodge accounting software available such as Assistant Secretary in which you can set up this information in a database.

        This accounting software automates most of a lodge Secretary's duties and is relatively inexpensive when considering the number of hours saved. So, even if you don't have a Master's degree in Accounting, lodge accounting software is definitely worth taking a look at.




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        Feel free to print this Lodge Audit page to put into your lodge notebook to refer to at a later date.





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