Q&A: Who Owns A Church’s Accounting Records?

Allowing a church treasurer to work on these records at home is problematic.

Our treasurer frequently brings some of the church’s financial records home to work on them. He claims that the records are his property, and not the church’s, when they are in his home. Is that correct? Who does own a church’s accounting records?

Let me make six observations in response to your question.

1. An incorporated church must maintain its financial books

The nonprofit corporation laws under which most churches are incorporated require that corporations maintain various kinds of records, including financial books of account.

To illustrate, the Model Nonprofit Corporation Act, which has been adopted by most states, provides that “a corporation shall maintain appropriate accounting records.” While this language does not directly address ownership, the fact is that how can a church maintain appropriate accounting records if they are possessed and “owned” by the treasurer? As a result, it should be assumed that the church is the owner of its financial records, and not a volunteer treasurer who takes them home.

The takeaway point is that location, and even possession, does not determine ownership.

2. This practice violates principles of internal controls and other practical concerns

Allowing a volunteer treasurer to take the church’s accounting records home is not recommended, for several reasons, including the following:

  1. Such a procedure violates two of the core principles of internal control: segregation of duties and oversight over operations. Imagine the financial improprieties that could go undetected under such an arrangement.
  2. Irreplaceable financial records may be lost, stolen, or destroyed while in the home of the church treasurer, and confidential information may be accessed by family members.
  3. Church staff will be frustrated in the performance of their duties because of the inaccessibility of the church’s financial records.
  4. Such an arrangement can provide a treasurer with “leverage” that can be exerted to achieve ulterior objectives.
  5. Such an arrangement may result in the permanent inaccessibility of church records in the event of a dispute with the treasurer, or at such time as the treasurer leaves office voluntarily or involuntarily.
  6. 3. What do church bylaws say about this practice?
  7. Church leaders should check the church’s bylaws or other governing document to determine what, if any, authority the treasurer may have over the church’s financial records.
  8. Some church bylaws state that the treasurer shall have “custody” of the church’s financial records, or “be responsible” for them. But custody and responsibility are not the same as ownership, although such terminology suggests that the treasurer is authorized to remove the church’s financial records to his or her home. For the reasons stated, this generally is not advisable, and so church leaders should review their governing document in order to identify and amend such a provision should one exist.
  9. 4. Paid employees and FLSA considerations
  10. The same reasoning above applies to paid treasurers, bookkeepers, business administrators, or other employees. A paid church worker should not keep financial records at home.
  11. An additional consideration applies to all nonexempt employees: the federal Fair Labor Standards Act (FLSA). The FLSA guarantees overtime pay for hours worked in excess of 40 during the same week. States have their own requirements.
  12. Nonexempt employees would need be paid for work down at home. Some churches allow employees to take church records home to work on them as unpaid “volunteers.” But this is not permissible, according to Department of Labor interpretations of the FLSA.
  13. The bottom line is that allowing church employees to take church records home in order to work with them may expose a church to significant liability under the FLSA or a state counterpart.
  14. 5. Risk management concerns
  15. Some church leaders allow financial records to be kept in the private residence of a treasurer or other church officer or employee to preserve them from theft or a natural disaster affecting the church office. This risk can be managed by storing the records in a locked and immovable fireproof cabinet. After data on financial records is integrated into the church’s computer software, backup copies can be stored off-site.
  16. 6. The AICPA Statment on Auditing Standards and document ownership
  17. 6. The American Institute of Certified Public Accountants (AICPA) Statement on Auditing Standards requires CPAs to maintain specified kinds of documentation when performing an audit (no. 96, “Audit Documentation”). Most states have enacted laws specifying that CPAs own the working papers and other documentation they prepare in performing their duties. As a result, a church ordinarily cannot assert ownership in the working papers of CPAs who are retained to perform an audit of the church.
Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations." Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.

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