Question

20-25 2 3 Ballantine Church has been located on a central downtown street in Toronto for over 120 years. Originally, the church was in the middle of farmland, but is now surrounded by high-rise apartments and condominiums. The church has an active parish community that engages in fundraising in the neighbourhood, assisting the homeless, and providing drop-in housing during the winter. Francine, the parish priest, and the church board have decided it is time to have a review engagement completed for the church finances. In the past, this work has been done by church members on a part-time basis.
The church organizes its finances based on five funds: operating, endowment, youth, homeless, and music scholarship. Any transfers from the endowment fund to the operating fund must be approved by the board. The church has about $1.2 million in cash and marketable securities in the bank. The church is valued at zero on the balance sheet.
The church also owns a large house. Francine lives in a section of the house and the rest of the property is used for storage, as office space for three permanent church staff, and as meeting space.
Required

a) What should you do before you accept the review engagement?
b) Outline the process for conducting the review engagement and describe any analytical review procedures that you would conduct specific to the church. What type of questions would you ask that are specific to the church to address plausibility of financial information?

Answer 1

a) Things to be done before accepting the review engagement:

1) Prepare financial statements for the current situation of church with details of all the funds and expenses. This exercise should be done professional accountants.

2) Put the information of point (1) in front of all stakeholders of the church. Stakeholders include fund providers, donators, government agencies, church followers and to general public.

3) Ask the opinion of stakeholders on the issue of review engagement and if given a go ahead then decide to go for the review.

b) Process is outlined in following steps.

1) Do a review of the past fund providers (the major ones). Get a professional opinion whether they will be willing to provide more funds to the Church in future.

2) The church board should decide which are the less important welfare work that they need to cut down so as to have more money for the more important welfare work.

3) The church board should decide whether to invest some money in revenue generating business activities. This will lessen the dependence of church on donations and grants and will make the Church finances more secure.