Question

Blue Bayou Middle School wants to raise money for a new sound system for its auditorium. The primary fund-raising event is a dance at which the famous disc jockey Kray Zee will play classic and not-so-classic dance tunes. Grant Hill, the music and theater instructor, has been given the responsibility for coordinating the fund-raising efforts. This is Grant’s first experience with fund-raising. He decides to put the eighth-grade choir in charge of the event; he will be a relatively passive observer. Grant had 500 unnumbered tickets printed for the dance. He left the tickets in a box on his desk and told the choir students to take as many tickets as they thought they could sell for $5 each. In order to ensure that no extra tickets would be floating around, he told them to dispose of any unsold tickets. When the students received payment for the tickets, they were to bring the cash back to Grant, and he would put it in a locked box in his desk drawer. Some of the students were responsible for decorating the gymnasium for the dance. Grant gave each of them a key to the money box and told them that if they took money out to purchase materials, they should put a note in the box saying how much they took and what it was used for. After 2 weeks, the money box appeared to be getting full, so Grant asked Lynn Dandi to count the money, prepare a deposit slip, and deposit the money in a bank account that Grant had opened. The day of the dance, Grant wrote a check from the account to pay Kray Zee. The DJ said, however, that he accepted only cash and did not give receipts. So Grant took $200 out of the cash box and gave it to Kray. At the dance, Grant had Dana Uhler working at the entrance to the gymnasium, collecting tickets from students and selling tickets to those who had not pre-purchased them. Grant estimated that 400 students attended the dance. The following day, Grant closed out the bank account, which had $250 in it, and gave that amount plus the $180 in the cash box to Principal Sanchez. Principal Sanchez seemed surprised that, after generating roughly $2,000 in sales, the dance netted only $430 in cash. Grant did not know how to respond. Identify as many internal control weaknesses as you can in this scenario, and suggest how each could be addressed.

Answer 1

1. Eigth grade choir was made in charge of this huge event

Instead a manager who is well versed with managing the affairs should have been appointed. Being eighth grade choir (minor) he can be easily conned by the others, whereas a manager who is well versed with these management skills would have handled that well.

2. Unnumbered tickets printed for the event.

The tickets should be serially numbered and within the custody of a responsible person so that proper control can be done and would be easy to determine, how many tickets have actually been sold and exact revenue that would have been earned.

3. Left tickets on his desk and guided choirs to take as many tickets they can sell

Tickets should have been in proper custody and proper control should have been place how many tickets (with Sr. No X to Y) have been issued to whom

4. Multiple keys of the cash box:

The function of lock was defeated as many of them had access to the cash boxes and even if the keys to the lock was misplaced, no one was aware of this fact. There should be proper custody and recording of cash receipts and payments so that one is answereable where every single penny is spent

5. Estimate number of students

Since this event was organised by issuing tickets on the day of event as well as before the event, there is no question of estimates. Exact number of students would have known with proper controls in place while the students were entering the hall.

This event was organised full of loopholes as a result it is not surprising that the cash receipts/profit did not tally.

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