What needs to be considered during the cash audit

Have you always wanted to know what the financial situation in your club is like and volunteered to be a cash auditor at the annual general meeting? Or, as is usually the case, no one else was found and you involuntarily slipped into the position of cash auditor and don't know what to expect? In this article, we explain the duties of this inconspicuous yet important position in more detail. By the way: The cash audit is not required by law, but is provided for in most association statutes. And for good reason! The cash audit serves to track the use of funds in the association, which increases transparency between the board and members. You keep a close eye on the board and inspect documents that are not accessible to other members.The cash auditors not only look at the cash register, but also at contracts with which the association has obligations. This makes the cash auditors a kind of supervisory body. As a result, the cash auditors are obliged to submit a report to the members in order to inform them of any inconsistencies. As a rule, the bookkeeping is carried out carefully so that the auditors have nothing to criticise.

We would be happy to go into more detail about the tasks involved in the cash audit. The typical tasks of a cash auditor are In the following sections, we explain the individual tasks of the cash auditor in detail.

Cash transactions and cash receipts involve the cash register. An example of this is the club restaurant, which sells drinks and takes in cash. This cash register is counted and compared with the expenditure. The invoice or receipt should be available for each expenditure (e.g. beer, water or ketchup). In many cases, the cash is paid into an account - this process can also be checked with an account receipt. If the cash balance is correct, you can tick the first box.

The principle of checking costs and correctly allocating income and expenditure is self-explanatory. Depending on the size of the organisation, you can check all items or just randomly select the most important control points. Außerdem gibt es bei der Kostenüberprüfung und der richtigen Zuordnung folgendes zu beachten:

• Own receipts: If it regularly happens that own receipts are used for ‘proper’ bookkeeping, you can kindly point out the diligence to the treasurer. Bookkeeping means: No posting without receipts! 
• Recurring costs: You can compare instalment payments for electricity and gas with the contract or the last statement from the supplier. 
• Expense allowances: Expense allowances are included in most bylaws, but not all of them. Some research can be useful here and it is worth taking a closer look at payments to the board. If the payments are authorised, you can tick the next box. 
• The ‘Other’ cost centre: One-off invoices are often recorded here, for which there is less recording experience in the association. A source of danger for errors.
  

At this point, it is important to check the collection of membership fees. The key questions here are: Have all membership fees really been collected? And were there many returns or dunning procedures against defaulting members? It makes sense to check whether the number of members corresponds to the amount of money collected. An example: With 100 members, each paying an annual contribution of 100 euros, the association must have generated 10,000 euros in contribution income. Most association statutes stipulate that every member must pay an annual membership fee. This means that if the person becomes a member during the year or leaves the club during the year, the entire annual membership fee must still be paid to the club. Depending on the membership fee collection cycle, this can be a tricky issue in sports clubs (especially team sports), as many members leave the club at the end of the year or season and have not yet paid the annual membership fee.

Liabilities are outstanding items that have not yet been settled but for which an invoice has been received. This is, for example, a bank loan for the renovation of the clubhouse. Receivables can arise if members have not yet paid a contribution for the current year. An outstanding instalment from a sponsor is also a receivable of the association.

At this point, it is best to have the cash and bank receipts or bank statements shown to you. The documents show how much money was in the account on the reporting date (usually 31 December). This ensures that the association is not insolvent or overindebted. This is extremely important because it is one of the three possible insolvency offences. In such a case, there is always the suspicion of the criminal offence of delaying insolvency. As the management board is usually personally or privately liable, you should inform the persons involved immediately in any such cases.

Compliance with the statutory accounting regulations is difficult for most cash auditors to fully comprehend because they simply lack the expertise for correct accounting procedures. Basically, it's about checking whether there are enough receipts and whether everything is logical and provable. If in doubt, you should consult experts (e.g. tax consultants or auditors) at this point.

After a thorough check, all that is missing is the cash audit report for the board or the members. Don't worry: you can find very easy-to-use templates on the Internet that contain certain standard formulations. The cash audit report is the final report of the cash auditors, in which the results are listed. They explain the procedure and provide information on the extent to which the board of directors and treasurer have made information available. In practice, this is usually a formality.

The cash audit is a random sample audit. Otherwise, the effort would be far too high for a medium-sized association. If the spot checks reveal irregularities, the cash auditor can extend the spot check and request further documents and receipts. This is how auditors also proceed in companies. There is no legal limit here. Nevertheless, the number of documents to be checked must be reasonable and appropriate. Ultimately, the tax office is responsible for auditing the organisation.

As an honorary cash auditor, you are entitled to exemption. You are only liable for intent and gross negligence. As a cash auditor, you must refrain from doing anything that jeopardises the purpose of the association or its members. You are also obliged to inform the members of important circumstances at the Annual General Meeting and warn them of any risks. If you make a mistake in doing so, you must not be burdened with the full risk of the activity carried out by the association as a result of the indemnification claim.

Yes, that is possible! In principle, outsourcing to a tax consultant or auditor is an option for every association. The significantly higher level of expertise of proven and state-certified experts is also accompanied by a change in liability. In other words, the legislator trusts the tax consultant more, which means that the liability for uncorrected errors lies with the external auditor.

I would like to describe how I carried out the cash audit in my association. In our association, another person was entrusted with the task alongside me. My organisation has a second large cash register that records all accounting transactions in the non-material area, in special-purpose operations and in asset management. There were no anomalies here, but it was interesting to gain an insight into the expense allowances paid to training instructors. Clubs need to keep an eye on the allowances here - fortunately, everything was in order for us.