A cleanup usually starts with a handoff. A new treasurer opens the file and finds a bank balance that does not match the statement, a building fund that shows a negative number, and a note saying the last reconciliation was "sometime last spring". The books are not empty; they are unreliable. A cleanup is the work of making them reliable again, and it helps to know what that does and does not include before asking anyone to do it.
For the difference between cleanup and catch-up, where records are missing instead of wrong, see QuickBooks cleanup vs catch-up bookkeeping. This guide covers what is particular to a church.
What a church cleanup works through
- Unreconciled months. Each bank, card and loan account is reconciled to its statement, month by month, from the last point where the books and the bank agreed.
- Miscoded deposits. Deposits recorded as one lump of "income" are split by fund using the count sheets and giving records. Transfers and loan proceeds recorded as income are corrected.
- Fund balances that do not tie. Each fund's balance is rebuilt from its gifts and spending, and the total of all funds is brought into agreement with cash and net assets.
- Giving records against deposits. The giving system's totals are compared with what reached the bank and with contribution income in the ledger, and the differences are explained or corrected.
- Payroll liabilities. Withholding and payroll tax balances in the books are compared with the payroll reports and the payments actually made.
- Opening balances. The starting figures for the cleanup period are checked against a known good point: a prior reconciliation, a prior year-end report, or the bank statements themselves.
The order matters. Bank reconciliation comes first because the bank statement is an outside record. Fund balances come after it, because a fund total cannot be trusted while cash is still wrong.
What determines the effort
- How many months are affected, and whether they are consecutive
- How many bank accounts, cards and funds there are
- How many transactions a typical month holds
- Whether count sheets, giving reports and receipts exist for the period
- Whether payroll ran through a service that can reproduce its reports
- Whether anyone who kept the books is available to answer questions
- Whether the software was set up for funds in the first place
The last point changes the nature of the job. If funds were never set up properly, part of the cleanup is rebuilding the structure, not only correcting entries. See a church chart of accounts that matches how your church works.
What the church must supply
- Bank, credit card and loan statements for every month in the cleanup period
- Count sheets and deposit records
- Reports from the giving system: gifts by giver and fund, and payouts
- Payroll reports, and copies of the payroll returns filed for the period
- The fund list, with any board minutes or donor letters that created a fund or restricted a gift
- The approved budget, and the last set of financial reports leadership relied on
- Access to the accounting software as a separate named user
IRS Publication 1828 lists the kinds of records a church is generally expected to keep, including ledgers, receipts and disbursements journals, payroll records, banking records and invoices. Where those records do not exist, the cleanup can only go as far as the evidence allows.
Decisions that stay with leadership
A cleanup turns up questions a bookkeeper should not answer alone. Was this gift restricted by the donor or designated by the board? What should happen to a fund that was overspent? Should an old uncleared check be reissued or written off? The bookkeeper sets out the facts and the options, and the treasurer or board decides and records the decision in the minutes. Where a decision has tax or legal consequences, it goes to the church's CPA or attorney first.
What a cleanup cannot do
- It is not an audit and gives no assurance. An audit or review is performed by an independent CPA under professional standards. A cleanup corrects the books; it does not result in an opinion on them.
- It is not a fraud investigation. A cleanup may surface something that needs explaining. If it does, leadership should take that to the church's CPA or attorney.
- It does not file or amend returns. If corrected books change figures already reported on a payroll return or elsewhere, the church's CPA or tax adviser advises on what to do.
- It cannot recreate evidence. A deposit with no count sheet and no giving record can be recorded in total, but not reliably split by giver or purpose.
- It does not keep the books clean. Without a monthly routine afterwards, the same problems return.
About timelines
A cleanup's length depends mostly on the items above and on how quickly documents arrive, so a dependable estimate comes after a records review, not before it. A sensible scope breaks the work into stages, such as reconciliations first and fund balances second, and reports progress at each one.
Doing it yourselves
A church can do its own cleanup when the gap is short and the structure is sound. Start from the last reconciled month and work forward one month at a time, and have a second person review each reconciliation. If the structure itself is the problem, or the months run into years, outside help is likely to cost less than the volunteer hours it replaces. A month-end checklist keeps the books current once they are right.
Danielson Bookkeeping handles QuickBooks cleanup and catch-up for churches as a defined project; see QuickBooks services. Whoever does the work, the first step is the same: gather the records. Use what to gather before a consultation.
