You are to assume the role of an accounting auditor hired by Operation Care, a local nonprofit organization. The chair of the board of trustees wants to increase accounting controls and has asked you to review current controls, report weaknesses and make recommendations.
Operation Care’s mission is to provide free childcare education for new parents and soon-to-be parents. Funding for the nonprofit is raised by monetary donations by community members and local businesses.
Operation Care’s office is staffed by the executive director and a secretary. There are 10-15 volunteers that work as facilitators or in the office each day. You were provided the following information:
- The nonprofit’s board of trustees has delegated responsibility for the management of finances to the finance committee. This group prepares the annual budget and approves major disbursements but is not involved in collections or record keeping. No audit has been done in over ten years, because the same trusted person has kept records and served as secretary for over 15 years. The nonprofit does not carry fidelity insurance.
- The cash donations are counted by two volunteers twice a week in the break room of the office. One volunteer then places the cash in the office safe along with a notation of the amount counted.
- The secretary opens the safe and counts the collection once a week. The secretary withholds $200 in cash for expenditures for the week and deposits the rest in the bank. To facilitate the deposit, community members that donate with personal checks are asked to make them payable to cash.
- Each month the secretary reconciles the bank statement and submits a copy of the reconciliation to the board of trustees. The reconciliations have rarely contained any bank errors and have never shown any errors on the general ledger.
The chair of the board of trustees wants you to review these procedures and report any weaknesses in the handling of monetary donations. You will also list any internal control procedures that you recommend. The list should include new responsibilities for volunteers handling donations, secretary and finance committee, and what policies should be changed to improve internal control.
