Please read the case and answer the following questions

STATE UNIVERSITY

ACADEMIC DEPARTMENT

Background

The Internal Audit Department of a state-supported university was in the process of performing a scheduled audit of a school within the university that had several academic departments. The internal auditor developed an audit program, which included auditing academic departments within the school having potentially higher risk levels, based on factors such as funding levels, number of funding sources, and number of students. Internal Audit performed this type of audit each year rotating between the various schools within the institution. Audit objectives routinely included evaluating compliance with university policies and procedures relating to procurement, payroll, and cash collections and deposits.

Selected Department

Departments were selected based on the criteria of the audit objectives and discussions with school management. One of the academic departments selected had approximately 30 faculty members, seven administrative staff members, and a nationally recognized graduate program. In addition to being responsible for the academic programs, the department also conducted several functions that provided contract services to the community on a fee basis. Each fund source was recorded in a separate account and the department had in excess of 90 accounts. The fund types included state funding, private donations, state and federal grants and contracts, and industry sponsored contracts. Fund amounts ranged from a low of $1,500 to several which exceeded $100,000. Each type of fund had different requirements relating to how and for what the funds could be expended.

Participants

Faculty members were paid a salary for providing teaching, research, and performing community service in the name of the university. Their contracts were typically for nine months each year. They were allowed to supplement their salary for the remaining three months of the year through various types of grants and contracts. Faculty members were also allowed to work, usually as consultants, up to one day per week outside of the university and were paid directly by the party with whom they were consulting. The consulting fees were personal income for the faculty member and were not processed through the university in any manner.

The department chair had been at the university for more than ten years and was recognized as a faculty leader through various programs at the university. He had held the chair position for five years and was classified as an instructional faculty member with an administrative appointment. Under the guidelines of the university, he received additional compensation for the extra administrative duties he performed as the chair. He was considered a 12-month employee. Therefore, he was not allowed to supplement his university salary in any manner, including summer school teaching or additional funding through a grant.

The university policy stated that department chairs reported to the Dean of the academic college or school. However, in this case there had historically been little or no review of the department’s finances by the Dean or his representative.

The core administrative staff had been in the department for a number of years. The staff consisted of the chair’s secretary (three years in the department), a business manager (more than 10 years in the department), and a fiscal tech (more than 20 years in the department). The business manager was responsible for the fiscal management of the department and the fiscal tech prepared the financial transactions at the direction of the chair and the business manager.

The financial transactions of the department were initiated using the university’s on-line financial accounting system. In order to provide the chair and appropriate faculty members with timely management data, the fiscal tech also used a series of spreadsheets to manage each account. These spreadsheets provided up to the minute information regarding each account rather than the reports from the university system, which were usually received about ten days after the end of each month.

The fiscal tech prepared the financial transactions based on direction from the chair, appropriate faculty members, or the business manager. The business manager was responsible for approving all financial transactions. However, the business manager shared her password with the fiscal tech as she believed that she didn’t have time to approve each transaction. The fiscal tech then had the ability to approve and enter transactions, despite the fact that she only had the on-line authority to initiate transactions.

Within the last year, the administrative staff had received salary increases for exemplary performance. The raises were given at the direction of the chair.

Situation

The institution had numerous financial policies and procedures that were fragmented and not well communicated. These procedures were available on-line. Training was available, but it was not required. The department personnel had received the training. Implementation of the financial policies and procedures was delegated to the departmental level with minimal review by central organizations to ensure adherence to these policies and procedures.

The internal auditor performed the review. The major finding resulted in a recommendation that monthly reconciliations of each departmental account be performed and documented and that each account be signed by the business manager, signifying certification that each expenditure was made in accordance with university policy and for university related purposes. The recommendation was fully supported by the Dean and he ordered all departments to immediately implement the recommendation.

Allegations

When the audit was completed and the above finding was being implemented, university management received an anonymous tip. The caller alleged that a department chair had been paying personal bills from university accounts and that other irregularities had occurred within the chair’s department.

Required. Use diffrent codes and regualtions to answer questions (AU and SAS).

1. Upon receiving notification of the anonymous tip, outline the actions that you would take as the university’s auditor.

2. What controls would you look for to determine where the potential weaknesses were located?

3. How would you strengthen controls at the university level to decrease the likelihood of this type of occurrence?

“Bankrupt” Corporation is in a deep financial crisis. You are one of the financial avengers “Bankrupt” is desperately seeking help from. CEO of the company informed you that he is considering the two risky projects “Thanos” and “Loki” to protect the firm from financial collapse. Both projects have similar risk characteristics. Bankrupt’s WACC is 11%. The initial investments for both the projects are $200 million. Cashflow from the projects are as follows;

Year           1                2                3                4

Thanos       10M           60M           80M           160M

Loki           70M           50M           20M           160M

Now, your job is to explain the following questions in great detail so that the CEO understands your plans to protect the firm.

1. Explain the concept of capital budgeting decisions. How it is different from the firm’s investing decisions.
2. Explain the concepts of independent and mutually exclusive projects
3. What is NPV -explain with an example?
4. Calculate NPV for both the projects and show the steps
5. Explain your decision when Thanos and Loki are mutually exclusive, and when they are independent.
6. WACC has increased to 15%. What change you will see in NPV?
7. What is IRR and how it is different from NPV? What is the IRR for Thanos and Loki? Based on IRR which project you should accept?
8. How is IRR identical to Bond’s YTM?
9. WACC has increased to 15%. What change you will see in IRR? Is it good for the firm?
10. What is the reinvestment assumption for NPV and IRR? Why NPV is better than IRR?
11. Find the MIRR for both projects and explain the difference with IRR.
12. Is MIRR a better measure than NPV? Why and why not?
13. Calculate the pay-back and discounted pay-back for both the project. Discuss the differences between the two methods.

Analyze the ways in which an advance directive might support a patient’s legal and ethical rights. Considering the interview you conducted, describe any questions, comments, or concerns your interviewee expressed regarding how an advance directive supports their legal and ethical rights. Then, evaluate the impact an advance directive might have on end-of-life care from the perspective of health care providers and organizations. Apply ACHE policy for end-of-life planning for patients.

Part A: Evaluating a Company’s Budget Procedures and Behavioural Aspects of Budgeting Allenby Ltd is a distributor of earrings to various retail outlets located in shopping malls across the country. The company operates on a financial year basis and begins its annual budgeting process in late March when the Chief Executive Officer (CEO) establishes targets for total sales dollars and net operating income before taxes for the next financial year. The sales target is given to Marketing Department, where the Marketing manager, Ms Dory Thompson formulates a sales budget in both units and dollars. Ms Thompson also estimates the cost of the marketing activities required to support target sales volume and prepares a tentative marketing expense budget. The Deputy CEO uses the sales and profit targets, and the tentative marketing expense budget to determine the dollar amounts that can be devoted to purchases and office expense. The Deputy CEO prepares the budget for office expenses, and then forward to the Purchases Department, the sales budget in units and total dollar amount that can be devoted to purchases. The purchases manager is Mr Mark Treble. The purchases manager develops a purchases plan that will acquire the required inventory units when needed within the cost constraints set by the Deputy CEO. The budgeting process usually comes to a halt at this point because the purchases manager does not consider the financial resources allocated to his department to be adequate. When this standstill occurs, the Chief Finance Officer (CFO), the Deputy CEO, the marketing manager, and the purchases manager meet to determine the final budgets for each of the areas. This normally results in a modest increase in the total amount available for inventory costs, while the marketing expense and office expense budgets are cut. The total sales and net operating income targets proposed by the CEO are seldom changed. Although the managers are hardly pleased with the compromise, these budgets are final. The marketing and purchases managers then develop a new detail budget for their own departments. However, none of these departments has achieved their budgets in recent years. Sales often run below the target. When budgeted sales are not achieved, each department is expected to cut costs so that the CEO’s profit 3 target can still be met. Nonetheless, the profit target is hardly met since costs are not cut enough. In fact, costs often run above the original budget in all departments. The CEO is concerned that the company had not been able to meet its sales and profit targets. He employed a consultant with considerable relevant industry experience. The consultant suggested a participatory budgeting approach where the marketing and production managers would be requested by the CEO to coordinate in order to estimates sales and purchases quantities. Ms Thompson decided that she would start out by looking at recent sales history, potential customers, and customers’ spending patterns. Subsequently, she would intuitively forecast the best sales quantity and pass it to Mr Treble so he can estimate a purchases quantity. Since Ms Thompson and Mr Treble did not want to fall short of the sales estimates, they gave themselves ‘a little breathing room’ by lowering the initial sales estimates by between 5% and 10%. As a result, they had to adjust the projected purchases as the year progressed, which changes the estimated ending inventory. They also made similar adjustments to expenses by adding at least 10% to the initial estimates. Required:

You are required to prepare a to the CEO discussing the follow aspects.

Please discuss in details the questions

3. The new budget approach recommended by the consultant.

4. Ms Thompson and Mr Treble behaviour under the new budget approach, and the potential impact of their behaviour.

Allenby Ltd is a distributor of earrings to various retail outlets located in shopping malls across the country. The company operates on a financial year basis and begins its annual budgeting process in late March when the Chief Executive Officer (CEO) establishes targets for total sales dollars and net operating income before taxes for the next financial year.

The sales target is given to Marketing Department, where the Marketing manager, Ms Dory Thompson formulates a sales budget in both units and dollars. Ms Thompson also estimates the cost of the marketing activities required to support target sales volume and prepares a tentative marketing expense budget.

The Deputy CEO uses the sales and profit targets, and the tentative marketing expense budget to determine the dollar amounts that can be devoted to purchases and office expense. The Deputy CEO prepares the budget for office expenses, and then forward to the Purchases Department, the sales budget in units and total dollar amount that can be devoted to purchases. The purchases manager is Mr Mark Treble.

The purchases manager develops a purchases plan that will acquire the required inventory units when needed within the cost constraints set by the Deputy CEO. The budgeting process usually comes to a halt at this point because the purchases manager does not consider the financial resources allocated to his department to be adequate.

When this standstill occurs, the Chief Finance Officer (CFO), the Deputy CEO, the marketing manager, and the purchases manager meet to determine the final budgets for each of the areas. This normally results in a modest increase in the total amount available for inventory costs, while the marketing expense and office expense budgets are cut. The total sales and net operating income targets proposed by the CEO are seldom changed. Although the managers are hardly pleased with the compromise, these budgets are final. The marketing and purchases managers then develop a new detail budget for their own departments.

However, none of these departments has achieved their budgets in recent years. Sales often run below the target. When budgeted sales are not achieved, each department is expected to cut costs so that the CEO’s profit target can still be met. Nonetheless, the profit target is hardly met since costs are not cut enough. In fact, costs often run above the original budget in all departments.

The CEO is concerned that the company had not been able to meet its sales and profit targets. He employed a consultant with considerable relevant industry experience. The consultant suggested a participatory budgeting approach where the marketing and production managers would be requested by the CEO to coordinate in order to estimates sales and purchases quantities.

Ms Thompson decided that she would start out by looking at recent sales history, potential customers, and customers’ spending patterns. Subsequently, she would intuitively forecast the best sales quantity and pass it to Mr Treble so he can estimate a purchases quantity.

Since Ms Thompson and Mr Treble did not want to fall short of the sales estimates, they gave themselves ‘a little breathing room’ by lowering the initial sales estimates by between 5% and 10%. As a result, they had to adjust the projected purchases as the year progressed, which changes the estimated ending inventory. They also made similar adjustments to expenses by adding at least 10% to the initial estimates.

Prepare a report to the CEO discussing the follow aspects.

1. The company’s original budget approach that contributed to the failure to achieve the CEO’s sales and profit targets.

2. Whether the departments should be expected to cut their costs when sales volume falls below budget.

3. The new budget approach recommended by the consultant.

4. Ms Thompson and Mr Treble behaviour under the new budget approach, and the potential impact of their behaviour.

help with part 4

At your university, 40% of the undergraduates are from out of state. If you randomly select six of the undergraduates, what is the probability that

(a) All are from within the state?


(b) All are from out of state?


(c) Exactly two are from within the state?


(d) At least four are from within the state?

In 2020 and 2019, your cash was 4,563 and 3,597, your accounts receivables were 7,531 and 6,423, and your inventory was 10,235 and 11,563. Similiarly, in 2020 and 2019 your accounts payable was 8,423 and 5,789, and your other current liabilities were 7,413 and 10,356. Lastly from the balance sheet, in 2020 and 2019 your net fixed assets were 74,562 and 71,246. In 2020 your net sales were 111,425, your costs of good sold was 38,999, rent was 48,543, and depreciation was 2,015. You paid interest of 1,728 and your tax rate was 20.36%. What is cash flow from assets (i.e. free cash flow) in 2020?

• -4,786

• 10,452

• 11,453

• 13,396

• -8,476

• 5,478

College Graduation Rates. Data from the College Results Online website compared the 2011 graduation rate and median SAT score for 92 similar-sized public universities and colleges in the United States. The scatterplot below shows the relationship between these two variables along with the least squares fit. Round all calculated results to 4 decimal places.

1. The relationship between median SAT score and graduation rate is  ? positive negative ,  ? weak strong , and  ? linear non-linear .

2. The explanatory variable is  ? graduation rate median SAT college year  and the response variable is  ? graduation rate median SAT college year .

The summary statistics for graduation rate and median SAT score are listed below. The correlation between graduation rate and median SAT score is 0.649.

Median SAT score: mean = 1033.3, standard deviation = 80.1
Graduation rate: mean = 51.8, standard deviation = 13.7

3. The equation of the regression line is y =  +  x

4. Complete the following sentence to interpret the slope of the regression line:

An increase of  in Median SAT score corresponds to a/an  ? decrease increase  of  in Graduation Rate.

5. The recorded median SAT score for Northern Michigan University is 1028. Use the regression equation to estimate the graduation rate for Northern Michigan University.  

6. The recorded graduation rate for Northern Michigan University is 47.6. Complete the following sentence.

The residual for Northern Michigan University is  . This means the graduation rate at Northern Michigan University is
A. higher than
B. lower than
C. the same as
the rate predicted by the regression model.

7. Stanford University (an elite private university in California not included in this data set) has a median SAT score of 1455. Would it be appropriate to use this linear model to predict the graduation rate for Stanford?

A. No, because 1455 is beyond the range of the data used to build the regression model.
B. No, because 98.610% is too large to be a reasonable graduation rate, even for an elite university.
C. Yes, because 1455 is a reasonable median SAT score for an elite university.

College Graduation Rates. Data from the College Results Online website compared the 2011 graduation rate and median SAT score for 92 similar-sized public universities and colleges in the United States. The scatterplot below shows the relationship between these two variables along with the least squares fit. Round all calculated results to 4 decimal places.

1. The relationship between median SAT score and graduation rate is  ? positive negative ,  ? weak strong , and  ? linear non-linear .

2. The explanatory variable is  ? graduation rate median SAT college year  and the response variable is  ? graduation rate median SAT college year .

The summary statistics for graduation rate and median SAT score are listed below. The correlation between graduation rate and median SAT score is 0.649.

Median SAT score: mean = 1033.3, standard deviation = 80.1
Graduation rate: mean = 51.8, standard deviation = 13.7

3. The equation of the regression line is y =  +  x

4. Complete the following sentence to interpret the slope of the regression line:

An increase of  in Median SAT score corresponds to a/an  ? decrease increase  of  in Graduation Rate.

5. The recorded median SAT score for Northern Michigan University is 1028. Use the regression equation to estimate the graduation rate for Northern Michigan University.  

6. The recorded graduation rate for Northern Michigan University is 47.6. Complete the following sentence.

The residual for Northern Michigan University is  . This means the graduation rate at Northern Michigan University is
A. lower than
B. higher than
C. the same as
the rate predicted by the regression model.

7. Stanford University (an elite private university in California not included in this data set) has a median SAT score of 1455. Would it be appropriate to use this linear model to predict the graduation rate for Stanford?

A. Yes, because 1455 is a reasonable median SAT score for an elite university.
B. No, because 1455 is beyond the range of the data used to build the regression model.
C. No, because 98.610% is too large to be a reasonable graduation rate, even for an elite university.