1. Identify the risks and2. Internal control procedure(s) to mitigate the riskCharacteristics of the...1....

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Accounting

1. Identify the risks and
2. Internal control procedure(s) to mitigate the risk
Characteristics of the Organization
- A small non-profit organization that provides housing foryouths with revenues of approximately $700,000. The organizationalso provides counseling and offers other services to assist theyouths.
- There are 2 funding agreements with the Municipality – 1) forpurposes of the housing operations and 2) for communitydevelopment. The funding agreements are signed annually. Any excessfunding at the end of the Organization’s fiscal year-end has to berepaid to the Municipality. The agreements stipulate that an annualfinancial statements audit is required.
- Youths are charged for housing and there is a nominal fee forthe other services
- 2 paid staff members, a housing manager and communitydevelopment worker
- The contracted bookkeeper moved down south two months ago
- The Board of Directors is made up of 6 members from thecommunity. Members have varying degrees of expertise such as socialwork, fundraising, operations manager, teacher, nursing and acomputer programmer
The Organization just hired a new housing manager, Carole.Carole has limited experience in overseeing the operations of ahousing organization. Several years ago Carole took a bookkeepingcourse and has told the Board of Directors that she could also dothe bookkeeping. Carole did not inform the Board of Directors thatshe does not have experience with the Organization’s accountingsystem.
Since the bookkeeper’s position has been vacant for severalmonths the Organization’s receivables have increased. In addition,during the recent months the Organization has not been operating atcapacity.
The Organization accepts cash for rents payments and Carolekeeps the cash in the office’s top desk drawer until she is able todeposit it. Carole makes two deposits a month.
Since Carole has a part-time job in the evenings working at adry-cleaner’s she requests that the Organization consider hercontract rather than an employee.
Work was required on the vacant units, such as new carpeting andpainting so Carole hired her son and paid him cash from the rentpayments she received.
The Organization purchased a new boiler during the year and itwas expensed in operations. The Organization’s accounting recordsshowed a large surplus and since the Organization is required torepay surpluses from both housing and community development fundingback to the Municipality Carole decided to renovate the communitycentre and install new cabinets and purchase new appliances in theamount of $15,000.
The board met monthly to discuss issues affecting theOrganization but have not received monthly financial reports in atleast six (6) months to review.

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3.9 Ratings (587 Votes)

RISK 1 RISK OF INAPPROPRIATE SEGREGATION OF DUTIES In the given NonProfit Organisation Carole who is hired as housing manager is responsible for authorising transactions like purchasing assets incurring operation expenses etc recordingbook keeping of transactions handling cash of the organisation managing receipts and payments etc All the dealings are done by only one person which poses risk of frauds by making unauthorised transactions causing loss to the organisation RISK 2 RISK OF NONCOMPLIANCE OF MAINTAINING STATU TORY BOOKS OF ACCOUNTS In the given NonProfit Organisation books of accounts are not updated and maintained since last 6 months The organisation needs to conduct annual audit of books of accounts which might not get complied due to nonmaintenance of books of accounts RISK 3 RISK OF THIRD PARTY IN CHARGE OF OPERATIONS AND ASSETS OF THE ORGANISATION In the given NonProfit Organisation Carole who See Answer

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Transcribed Image Text

In: Accounting1. Identify the risks and2. Internal control procedure(s) to mitigate the riskCharacteristics of the...1. Identify the risks and2. Internal control procedure(s) to mitigate the riskCharacteristics of the Organization- A small non-profit organization that provides housing foryouths with revenues of approximately $700,000. The organizationalso provides counseling and offers other services to assist theyouths.- There are 2 funding agreements with the Municipality – 1) forpurposes of the housing operations and 2) for communitydevelopment. The funding agreements are signed annually. Any excessfunding at the end of the Organization’s fiscal year-end has to berepaid to the Municipality. The agreements stipulate that an annualfinancial statements audit is required.- Youths are charged for housing and there is a nominal fee forthe other services- 2 paid staff members, a housing manager and communitydevelopment worker- The contracted bookkeeper moved down south two months ago- The Board of Directors is made up of 6 members from thecommunity. Members have varying degrees of expertise such as socialwork, fundraising, operations manager, teacher, nursing and acomputer programmerThe Organization just hired a new housing manager, Carole.Carole has limited experience in overseeing the operations of ahousing organization. Several years ago Carole took a bookkeepingcourse and has told the Board of Directors that she could also dothe bookkeeping. Carole did not inform the Board of Directors thatshe does not have experience with the Organization’s accountingsystem.Since the bookkeeper’s position has been vacant for severalmonths the Organization’s receivables have increased. In addition,during the recent months the Organization has not been operating atcapacity.The Organization accepts cash for rents payments and Carolekeeps the cash in the office’s top desk drawer until she is able todeposit it. Carole makes two deposits a month.Since Carole has a part-time job in the evenings working at adry-cleaner’s she requests that the Organization consider hercontract rather than an employee.Work was required on the vacant units, such as new carpeting andpainting so Carole hired her son and paid him cash from the rentpayments she received.The Organization purchased a new boiler during the year and itwas expensed in operations. The Organization’s accounting recordsshowed a large surplus and since the Organization is required torepay surpluses from both housing and community development fundingback to the Municipality Carole decided to renovate the communitycentre and install new cabinets and purchase new appliances in theamount of $15,000.The board met monthly to discuss issues affecting theOrganization but have not received monthly financial reports in atleast six (6) months to review.