Question: You have been recently elected to the position of treasurer

You have been recently elected to the position of treasurer on the board of directors for Canoes Are Us, a community-based service and NFPO that provides canoeing lessons and canoe rentals to various community groups.
Canoes Are Us is a large NFPO with annual donations and grants in excess of $2 million. For the past several years, the canoe program has been funded through lesson fees, member contributions, and donations from the community. Canoes Are Us also relies on a large number of volunteers, including volunteers for the solicitation of donations and the performance of routine bookkeeping. Volunteer instructors are allowed to borrow canoes for their personal use for a nominal rental fee of $25 per month, as long as there are spare canoes available.
The board has recently set up a program in conjunction with the local community centre to provide lessons and rentals to various groups of children from low-income families. The municipal government and the lottery commission have announced that they will provide, in total, a one-time grant of $250,000 this year to Canoes Are Us for this initiative. The grant has a number of conditions:
1. $50,000 is to be used to purchase a new truck and trailer to transport the canoes.
2. $150,000 is to be used for the purchase of new canoes and safety equipment.
3. $50,000 is restricted to covering operating costs, such as salaries, advertising, and campaign costs.
4. An external audit by independent auditors must be conducted at the end of the year and the report must be submitted to the municipal government. The books and records of Canoes Are Us were not previously audited.
During a recent fundraising campaign, Canoes Are Us raised $45,000 in cash and received an additional $20,000 in pledges. The pledges are expected to be received by the middle of the next fiscal year. In addition, a local manufacturer has donated a new canoe valued at $2,500 to the program.
The cost of the fundraising program for the year was $20,000, which includes the salary of one part-time employee and the costs of preparing and mailing brochures to past and prospective donors. The brochures describe the programs and services provided at Canoes Are Us and some tips on how to care for a canoe. You are wondering whether these fundraising costs can be classified as educational costs on the statement of operations.
When you review the financial information for Canoes Are Us, you discover that the books and records have been kept on a modified accrual basis, whereby the cash basis is used for inflows but payables are accrued for outflows. Capital expenditures have been expensed in the year of purchase. There is no master list of existing canoes, and, in fact, some of the canoes appear to be in the possession of volunteer instructors on a semi-permanent basis even though the organization has full storage facilities available. The secretary to the board of directors is one of the volunteer instructors who has a canoe in her possession. You have also been advised that several instructors have unpaid rental accounts ranging from $50 to $400 each, and it appears that no serious efforts have been made to collect these accounts.
In discussions with the previous treasurer about how the new grant and other funds are to be used and accounted for, you discover that she is very opposed to any changes in the way that the accounting records are kept and the financial statements are prepared. She says that changes would make it difficult to com pare the programs and to understand how the funds are being used. She was very active in setting up the organization and was one of the driving forces behind obtaining the grant for the new program.
Prepare a memorandum to the board of directors recommending, with supporting explanations, what changes in accounting and reporting are required in order to comply with GAAP and to fulfill the stewardship reporting objective. Assume that the deferral method is used to account for contributions.

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  • CreatedJune 09, 2015
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