Community Chest $($CC$)$ is a not$-$for$-$profit charitable organization serving domestic violence victims in Ontario's York Region since $2011.$ It is now January $2024.$ You, CPA, have been an active volunteer at CC since October $2022$ and were recently appointed Treasurer. In your meeting with the outgoing Treasurer, he told you that CC uses fund accounting in its financial statements and uses the deferral method to account for contributions. CC has never recorded revenue from donated prizes or for volunteer hours. Given that CC leases its current shelter and has very limited assets, it has never capitalized any capital assets. For fiscal $2022$ and $2023,$ CC$\text{'}$s annual revenue was approximately $$450,000$ each year. The outgoing Treasurer also briefed you on CC$\text{'}$s key fundraising event $-$ the annual New Year's Eve Fundraising Ball $($the Ball$).$ CC has chosen New Year's Eve as its annual fundraising date because donors tend to be more generous during the holiday season. Raffle tickets were introduced at the $2023$ Ball. CC received positive feedback from the donors. However, when you met with the Event Manager, Roger McDonald, he said that he experienced some problems surrounding the donation cash count at the end of the Ball $($Appendix I$).$ McDonald mentioned to you that he wants to present a proposal at the next Board meeting to expand the raffle ticket sales. However, if he cannot identify and resolve the cash collecting and counting issues, he knows that the Board will reject his proposal and cancel the raffle tickets. Admitting that he is no expert on controls, McDonald asked for your assistance identifying the control weaknesses and recommending improvements. You also met with the Chair of the Board of Directors $($the Board$)$ to discuss some of the issues facing the organization $($Appendix II$).$ You decide to write a memo to the Board that discusses the financial statement impact of the issues raised by the Board's Chairperson for the year ending March $31,2024.$ APPENDIX I NOTES FROM CONVERSATION WITH EVENT MANAGER, ROGER MCDONALD To provide some context, McDonald described what happened at the December $31,2023,$ Ball: $$ Raffle tickets were sold by volunteers during the six weeks prior to and up to the day prior to the Ball. $$ The raffle tickets were sold individually at $$10$ each or as a book of ten for $$90.$ CC printed $500$ books of tickets. Each volunteer was given ten books of tickets. $$ Some volunteers asked for additional tickets as they had sold their allotment. Since all the tickets had been given to the volunteers, McDonald asked those individuals to get tickets from other volunteers who still had tickets for sale. $$ The volunteers were to submit the cash collected from ticket sales to Harvey Davidson at the Ball. When the volunteers handed the cash to Davidson, he put the money into a box. $$ By $9$:$00$ pm$,$ Davidson thought that he had collected all raffle ticket proceeds from all the volunteers, so he began to count the money. Since McDonald was busy socializing with the guests during the Ball, there was nobody to help Davidson with the cash count. $$ Raffle ticket sales totaled to $$41,700.$ MacDonald was disappointed as it was much lower than the $$50,000$ he expected. The volunteers said that many tickets were sold as a book of ten but they did not track the actual numbers. $$ Only three unsold tickets were returned to Davidson. Many volunteers did not know that they had to return the unsold tickets. McDonald could not reconcile the actual number of tickets sold because they either threw them away or lost them. $$ Davidson took all the money collected from the raffle ticket sales that night home with him and deposited it to CC$\text{'}$s bank account the day after the Ball. McDonald also mentioned that several volunteers complained about not knowing what to do with the raffle tickets. $$ On the next day, two volunteers called McDonald. They said that they could not find Davidson at the Ball, so they took the raffle money for the tickets they sold home with them after the Ball. McDonald then asked Davidson to pick up the cash from the volunteers' homes and deposit it to the bank as soon as possible, which he did by the end of the week. APPENDIX II NOTES FROM MEETING WITH THE BOARD'S CHAIRPERSON Starting with the $2023$ Ball, all funds raised from the event will go towards the new building construction fund instead of general fundraising as in prior years as approved by a resolution of the Board. Donors at the Ball were informed of this change in the use of funds. In September $2023,$ the Town of Markham $($the Town$)$ approved CC$\text{'}$s request to construct a new multi$-$functional facility. The Board plans to divide the facility construction into three phases. Phase $1$ of the project is to build a new shelter