K of C Officers Desk Reference – Financial Issues Officers Desk Reference
The Process of Receiving and Expending Council Money
Accountability and transparency are the hallmarks of Knights of Columbus council operations. Accountability means that justifications for expending any and all funds must be explained clearly and that the officers who expend council moneys — under authority of their council — must be identified clearly. Transparency means that members have access to all information regarding the council’s receipts and expenditures.
The Laws of the Knights of Columbus establish a fiduciary process for the receipt, custody, deposit, expenditure, and accounting of council funds with the goal of maintaining accountability and transparency. The fiduciary process ensures that no officer or member ever has discretion to receive, transfer, or expend money without explicit authorization. Failure to comply could result in removal of the responsible officer or member discipline, up to and including expulsion.
Overview of the Fiduciary Process
The Laws of the Knights of Columbus state that all moneys that come to a council from any source shall be received by the Financial Secretary. To safeguard these moneys, he delivers them to the Treasurer as soon as possible. The Treasurer gives a receipt to the Financial Secretary, who gives it to the Grand Knight, who reads it at the next council meeting. As soon as recorded, the Treasurer deposits the moneys received from the Financial Secretary to the credit of the council in a bank account approved by the Board of Trustees. He must furnish a certificate of such deposit to the Grand Knight, also for reading at the next council meeting. The amounts of
these two items must be identical, i.e., the amount of money turned over to the Treasurer by the Financial Secretary and the amount that the bank certificate shows the Treasurer deposited to the credit of the council. The receipt and the certificate must both be read by the Grand Knight at the next council meeting. The Grand Knight and the council therefore are kept informed that all moneys received by the Financial Secretary have been delivered to the Treasurer and have been properly deposited by him to the council’s credit.
All council expenditures must be authorized and approved for payment. The Treasurer makes all payments that have been signed off by the Financial Secretary and the Grand Knight. Checks are signed by the Treasurer and countersigned by the Grand Knight. The council’s bank must be informed that checks require the signatures of both the Treasurer and the Grand Knight.
An overview of each council officer’s responsibility in the fiduciary process is outlined below:
Grand Knight
Calls for council votes on motions and resolutions regarding financial transactions.
Countersigns vouchers.
Countersigns checks.
Financial Secretary
Receives all incoming council money and records each transaction.
Transfers money to the Treasurer and keeps the receipt written by the Treasurer, which is presented to the Grand Knight before the next meeting.
Treasurer
Receives council money from the Financial Secretary and gives a receipt to the Financial Secretary.
Deposits council money in authorized council accounts and maintains custody of the funds.
Presents account deposit slip to the Grand Knight before the next council meeting.
Pays all council expenditures.
Keeps records of money received and expended by the council.
Recorder
Reads bills received by the council.
Board of Trustees
Supervises all financial business of the council.
Audits the accounts of the Financial Secretary and Treasurer semiannually.
Ensures that Financial Secretary and Treasurer are properly bonded.
Receipt and Custody of Council Funds
Quick rule> Council moneys are received by the Financial Secretary and transferred to the Treasurer. The Treasurer deposits the money in the council’s approved accounts. These steps ensure accountability. Meanwhile, the Financial Secretary maintains receipts in order to track the exchange of all moneys so that there is a documented chain of custody.
All moneys received from any source are council funds. See Section 122(a). In other words, these funds are not the property of any officer or member. That is why moneys received by the council are delivered to the Financial Secretary, who is the only member of the council authorized to receive funds. Section 139.1 of the Laws of the Order provides that the Financial Secretary shall collect and receive all moneys due the council, and all funds obtained from any source . . . .” The Financial Secretary gives his official receipt when he takes custody of the funds, supplying proof of the transaction.
Upon receipt of funds, the Financial Secretary hands them over to the Treasurer, who is “the custodian of all funds of the council obtained from any source.” See Section 140.1. The Treasurer gives the Financial Secretary a receipt when he receives the funds, which must then be given to the Grand Knight, who reads it at the next council meeting.
The Financial Secretary shall deliver these moneys to the Treasurer as soon as possible.
Section 139.3 requires the Financial Secretary to pay over to the Treasurer of his council all moneys received at meetings, or between meetings, for fines, dues, contributions, death benefit assessments, initiation fees or from other sources, at and to the close of each meeting, for which said Treasurer shall forthwith give a written receipt to such Financial Secretary, specifying the funds to which the same be credited….” The Financial Secretary thereafter gives the Grand Knight said receipt “before the next succeeding meeting.” This process is reinforced by Section
140.2, which explains that the Treasurer “receives from the Financial Secretary all moneys whatever received by said Secretary” in return for which he “shall give a written receipt.”
It is important to note that the Financial Secretary is not permitted to deposit the money in the bank or to perform any other duty of the Treasurer. The two officers are intended to be a check against each other and, therefore, neither officer is permitted to perform any of the duties of the other.
Deposit of Council Funds
Quick rule> Council moneys are deposited by the Treasurer in approved accounts. Council members know that their council’s money has been deposited because of the reading of receipts and vouchers of deposit.
Moneys received by the Treasurer from the Financial Secretary must be deposited immediately “to the credit of the council in an approved bank or other secure institution of deposit,” and any accounts the council uses to hold its money must be approved either by the Board of Trustees or by a majority vote of the council members present and voting on such a motion or resolution. See Section 140.2.
The order of council business calls for the Grand Knight to read the receipts issued by the Treasurer to the Financial Secretary and the Treasurer’s vouchers of deposit. See Section 125.15. The Grand Knight publicly reads these vouchers at the next meeting after receiving them, and then transfers custody of them to the Board of Trustees. See Section 135.6. The Grand Knight also reads all receipts and vouchers to the council that are sent by the Supreme Council to the Treasurer, announcing them at the next meeting after he receives them and before delivering them to the Treasurer. See Section 135.6.
The Expenditure of Council Funds: Authorization and Payment
Authorization
Quick rule> The baseline rule for the disposition of council funds is that any expenditure of funds must be authorized. Neither the Grand Knight nor any other council officer may disburse council funds without some type of authorization.
The expenditure of council funds is governed by the Laws of the Knights of Columbus and the ordinary rules of parliamentary procedure. These laws and rules are intended to ensure accountability and transparency.
The ordinary procedure for authorizing the expenditure of council funds is a vote of the members present at a regular business meeting. Section 122(b) sets forth the procedure required for expenditures exceeding $500
The Laws of the Order provide that all expenditures of council funds must be approved by the Board of Trustees, except in certain circumstances. The approval is not needed when a council pays out (a) Benefit Fund money; (b) demands of the Supreme Council, Board of Directors, or State Council; (c) the regular and usual stated payments of the council; or (d) payments authorized by the council after notice and vote under Section 122. See
Sections 140.4 and 145. Section 135.4 provides a procedure for these payments.
Finally, it should be noted that neither a council nor its members may compensate sports teams or athletes associated with the Knights of Columbus. Sections 162.13 and 163.6 strictly prohibit the payment of any money, directly or indirectly, to any team or team member that “represents, purports to represent, uses the name or insignia or any portion of the name or insignia, or any words, phrases, signs or symbols to indicate any present or previous connection with” the Knights of Columbus.
Payment
Quick rule>The Treasurer makes all payments of orders that are signed by the Financial Secretary and Grand Knight. The Treasurer pays by check, money order, or draft orders that are signed by the Treasurer and countersigned by the Grand Knight.
The Financial Secretary initiates the expenditure process by completing and signing a voucher (also known as an Order on Treasurer or a Warrant Voucher). There must be a signed voucher for every check issued.
The Grand Knight then countersigns the voucher, ensuring that the proposed payment has been duly authorized by the council. Upon receipt of a voucher that has been signed by the Financial Secretary and countersigned bythe Grand Knight, the Treasurer may make the proposed payment. See Section 140.4.
Once the check is drawn and signed by the Treasurer, the Grand Knight countersigns the check. See Section
135.5. The Treasurer keeps a record of the number of the check and the date it was issued by recording the disbursement in an appropriate ledger. It is recommended that the Treasurer fasten the bill or invoice to the voucher and record the check number on the voucher.
This check writing process is the same even when the Laws of the Order require the Financial Secretary to draw all orders on the Treasurer of his council when ordered by the Supreme Council, State Council, his local council, Board of Trustees or Grand Knight for the payment of all claims or demands against his council, which orders shall be signed by him and countersigned by the Grand Knight.” See Section 139.8. Even in the case of moneys due to the Supreme Council, which do not require a council vote, the Treasurer pays “the Supreme Council all moneys assessed by it or by the Board of Directors against his council upon order drawn and signed by the Financial Secretary and countersigned by the Grand Knight.” See Section 140.3. In fact, under Section 140.4, the Treasurer pays all orders drawn on him that are signed by the Financial Secretary and countersigned by the Grand Knight. To repeat, all such orders need the approval of the Board of Trustees except (a) where the order is demanded by the Supreme Council, the Board of Directors, or State Councils; or (b) where the order arises from the regular and usual stated payments of the council; or (c) where payment is authorized by the council after notice and vote in accordance with Section 122.
Accountability and Oversight
Quick rule>The Financial Secretary, Treasurer, and Grand Knight must each keep records documenting the movement of council money; the council must be notified of financial transactions during its meetings; the Board of Trustees conducts a semi-annual audit of the accounts of the Financial Secretary and Treasurer; and the State Deputy, District Deputy, Board of Trustees, and Grand Knight can demand access to and possession of the financial books of the council.
The Financial Secretary is required to serve as the accountant of the council, whose records “will show complete and accurate financial standing of the council and its members at all times.” Section 139.11. At every business meeting, the Financial Secretary must report the amounts he received, identifying the source. See Section 122(a); see also Section 125.17. In addition to reporting this information, the Financial Secretary must also keep a record of “the amount of money received and from what sources; the amount paid to the Treasurer and for what
purpose.” Section 139.7. The Financial Secretary, moreover, “keeps an account of the indebtedness of each member . . . and the amount received from each, giving credit for the whole amount paid, and the purpose for which the same is paid . . . and make[s] proper record of same in the books . . . .” Section 139.2.
The Treasurer is responsible for obtaining proof of deposit of council moneys into authorized council accounts through vouchers or certificates of deposit. He gives copies of this proof to the Grand Knight before the next succeeding council meeting. See Sections 140.2 and 135.6. The Laws of the Order require the Treasurer to “keep separate accounts of the moneys placed in his hands by his council or the officers thereof that shall plainly show at all times the amount of moneys in the general expense fund of the council, and the amount of moneys in each and every special fund of such council and the dates of receiving and disbursing the same; such accounts to be kept in books furnished by the Supreme Secretary to such Treasurers at the expense of their respective councils.” Section 140.5. The Treasurer “shall retain all orders of the Grand Knight as his vouchers.” Section 140.6
In order to keep council members informed about the receipt and disposition of council funds, and to ensure financial transparency, Section 125 prescribes the reading of reports, which may not be skipped or dispensed. The reports to be presented to council members include the following:
Grand Knight’s Report
Treasurer’s Report
Reading by Grand Knight of Receipts of Treasurer to Financial Secretary and Treasurer’s Voucher of Deposit
Reading of Bills and Communications by the Recorder
Financial Secretary’s Report on Receipts of Meeting
Report of Auditors and Trustees
The financial accountability safeguards described above are further enhanced by Sections 243 and 41.9. Under Section 243, State Deputies, the District Deputies, Boards of Trustees, and Grand Knights may take possession of and examine the books, records, and files of the councils within their respective jurisdictions. Council officers must “permit such access to, and make delivery of such books, records and files upon request to any of the above officers, and members of councils shall deliver their council account books, records and files upon request to any of such officers for examination, provided that all such books, records and files of councils, officers or members shall not be demanded capriciously, but for legitimate purposes, and be returned with such promptness as will be consistent with the nature of the examinations.” Under Section 41.9, the Committee on Audit of the Board of Directors also has a right to possess and examine “books and accounts of any and all officers of the Order, including those of subordinate councils.”
The Responsibilities of the Board of Trustees
Section 145 establishes a Board of Trustees, consisting of the Grand Knight (chairman) and three elected trustees. The duties of the Board include the following:
Supervision of all financial business of the council. This implies a duty: (1) to ensure that all council expenditures are properly aligned with the Catholic identity and mission of the Knights of Columbus; (2) to identify and address conflicts of interest and self-dealing; and (3) to ensure compliance with statutory procedures for handling council funds.
Audit the accounts of the Financial Secretary and Treasurer at least every six months. The Trustees are required to submit an audit report every January and July to the council, the State Deputy, the District Deputy and the Supreme Secretary. During the semi-annual audits, Trustees make certain that there is agreement between the stubs in the possession of the Financial Secretary and the vouchers held by the Treasurer. The vouchers should be compared with the checks actually issued. Some Treasurers, after receiving the cancelled checks from the bank, clip the vouchers and the checks together, thus facilitating the work of the Trustees.
Ensure that the Financial Secretary and Treasurer are properly bonded. Pursuant to Section 130, both the Financial Secretary and the Treasurer are required to be bonded. The Board of Directors has established an Officer Bonding Program, which is available to all councils at no cost. The Financial Secretary and the Treasurer are not permitted to take office and to receive council moneys unless and until the council has fulfilled the conditions and requirements of the Officer Bonding Program, or unless and until these two officers are otherwise bonded. The Officer Bonding Program provides a bond of up to $5,000 for these two officers, though councils may purchase additional coverage at their own expense. The Trustees are charged with (1) ensuring that the council maintains eligibility for the bonding program, and (2) obtaining additional protection, to the extent deemed necessary and authorized by the council.
Discipline for Misconduct or Negligence
There are severe penalties for misconduct or negligence relating to the disposition of council funds. Section 162.2 provides for the expulsion of any member who misappropriates funds belonging to the council or the Order. Sections 163.3 and 163.4 provide for the removal of any officer for misfeasance or nonfeasance in office or for “any cause rendering his continuance in office injurious.”
Conclusion
Although the Laws of the Order provide for checks, balances, oversight, and penalties in order to ensure transparency and accountability with respect to a council’s financial affairs, the single most important feature for maintaining the integrity of council finances is the good character of the men elected or appointed to serve in the critical positions that involve the handling of money. All council members should strive to cultivate an environment in which the virtues of honesty and humility are expected and encouraged. The council members must then discern who among their Brother Knights is best qualified to serve in these positions, carefully considering their intellect, their fraternal disposition, their organizational and leadership abilities, and most of all their character as Catholic gentlemen. If such men are elected and appointed to positions of trust and leadership within a council, it is very unlikely that the council will experience misconduct relating to its financial affairs.
1 The guidance contained in this entry also applies to Assembly expenditures under Section 24(k)(ii) of the Laws and Rules Governing the Fourth Degree.
2 The Order recommends using Robert’s Rules of Order Newly Revised (11th Ed.).
3 Refer to Method of Conducting Council Meetings (Knights of Columbus Publication #10318) for a summary about how a motion is made, debated, and approved.
