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 for youths with revenues of approximately $700,000. The organization also provides counseling and offers other services to assist the youths.

- There are 2 funding agreements with the Municipality 1) for purposes of the housing operations and 2) for community development. The funding agreements are signed annually. Any excess funding at the end of the Organizations fiscal year-end has to be repaid to the Municipality. The agreements stipulate that an annual financial statements audit is required.

- Youths are charged for housing and there is a nominal fee for the other services

- 2 paid staff members, a housing manager and community development worker

- The contracted bookkeeper moved down south two months ago

- The Board of Directors is made up of 6 members from the community. Members have varying degrees of expertise such as social work, fundraising, operations manager, teacher, nursing and a computer programmer

The Organization just hired a new housing manager, Carole. Carole has limited experience in overseeing the operations of a housing organization. Several years ago Carole took a bookkeeping course and has told the Board of Directors that she could also do the bookkeeping. Carole did not inform the Board of Directors that she does not have experience with the Organizations accounting system.

Since the bookkeepers position has been vacant for several months the Organizations receivables have increased. In addition, during the recent months the Organization has not been operating at capacity.

The Organization accepts cash for rents payments and Carole keeps the cash in the offices top desk drawer until she is able to deposit it. Carole makes two deposits a month.

Since Carole has a part-time job in the evenings working at a dry-cleaners she requests that the Organization consider her contract rather than an employee.

Work was required on the vacant units, such as new carpeting and painting so Carole hired her son and paid him cash from the rent payments she received.

The Organization purchased a new boiler during the year and it was expensed in operations. The Organizations accounting records showed a large surplus and since the Organization is required to repay surpluses from both housing and community development funding back to the Municipality Carole decided to renovate the community centre and install new cabinets and purchase new appliances in the amount of $15,000.

The board met monthly to discuss issues affecting the Organization but have not received monthly financial reports in at least six (6) months to review.