Question

You have been asked by the board of the local hockey club to review its accounting procedures. You have made the following observations in regards to cash collected for annual dues and for weekly entrance ticket sales.

The club's board has given financial management and audit of the financial records responsibility to the finance committee.

This team prepares the budget and approves all major cash disbursements.

No audit has been considered necessary in recent years because the same trusted employee has kept club records and served as treasurer for 15 years.

A volunteer takes the ticket sales at the weekly games. The volunteer team lead gathers the funds and counts them in the club office after each game day. She then places the funds collected and a notation of the amount in the club safe. The next morning, the treasurer opens the safe and recounts the collection. He withholds about $100 to meet cash expenditures during the coming week and deposits the remainder intact.

To facilitate the deposit, attendees who pay by check are asked to enter "Cash" on the payee line. Members are asked to pay their annual dues to the treasurer directly or to a volunteer when they pay for their weekly ticket sales. If they pay by check, they are also asked to enter "Cash" on the payee line.

The volunteer at the gate is asked to attach a note to payments that are for dues instead of gate tickets.

Some members have inquired about having annual dues automatically withdrawn from their bank account or charged to their credit card, but the club has not established procedures that would allow payments other than by cash or check.

Identify at least three deficiencies and recommend improvements in procedures for cash received at weekly games and record keeping for members' annual dues.

Answer 1

The following deficiencies are noted and improvements are suggested:

1) Audit of Accounts

Weakness

It is observed that the responsibility for financial management and audit of financial records have been given to the finance committee.

Recommended Improvements

There should be an independent Internal Audit committee or Internal Auditor responsible for audit of financial statements and reporting directly to the management. It is necessary to have an independent check on financial statements even if the same trusted employee have been keeping records for the last 15 years. Proper internal control and internal check systems are essential for smoothe and efficient running of financial transactions of an organisation.

2) Record Keeping

Weakness

It is observed that the record keeping for ticket inventory and ticket sales is not strong enough and there needs to be more internal control implemented in this area.

Recommended Improvements

i) A proper inventory for tickets has to be maintained that includes the number of tickets that were initially isuued, the number of tickets given to the volunteer, number of tickets sold and the balance remaining in the end.

ii) A proper record of ticket sales and collections made has to be maintained that ensures that there is enough control implemented in the cash collection.

3) Deposit of ticket collections

Weakness

The procedure of depositing the money in a locker should be avoided.

Recommended Improvements

The entire cash collection should be first checked with the record kept in order to ensure that total collections in hand is properly documented and this should be done by a person other than the cash collector. The amount should then be deposited in a bank and and any withdrawal and disbursements should be made thereafter. A cashbook should be maintained for any withdrawals made from the bank showing the cash balance and disbursements at any time.

4) Payments made by check

Weakness

Payments made by check should not have Cash entered on the payee line.

Recommended Improvements

The payments made by check should have the name of the club written on the payee line. On the back of the cheque, the name of the member, membership number and the purpose of payment should be mentioned. The cheque should be a crossed account payee cheque. Cheques collected should be deposited in the bank promptly.