What standards were applied in conducting the audit? Was the audit a Single Audit? How do you know?
1) Internet-based exercise.
The objective of this exercise is to familiarize you with the key indicators and terms used by not-for-profit entities.
Go to the Forbes list of the 200 largest U.S. Charities for the most recent year available. For example, for 2011: http://www.forbes.com/lists/2011/14/200-largest-us-charities-11.htmlAnswer the following questions.
1.What criteria are used to rank the charities?
2.Explain the significance of these criteria in ranking the charities.
What are the implications for the nonprofit when donor dependency percent is low? How many charities in this Forbes list are below 50 percent in donor dependency?
2) This problem summarizes typical transactions engaged in by not-for-profit organizations.
The American Association for Freedom, a political think tank, was recently established. During its first year of operations it engaged in the following transactions and was affected by the following events (in summary form):
1.It received a $10,000,000 endowment contribution, all in stocks and bonds.
2.It received $3,000,000 in additional contributions, all restricted for its educational programs and $2,300,000 in unrestricted contributions.
3.It acquired $800,000 in furniture, fixtures, and equipment, all of which have an expected useful life of 10 years.
4.It recognized depreciation on the furniture, fixtures, and equipment, purchased earlier in the year.
5.It spent $2,400,000 on educational programs.
6.It earned $300,000 in interest and dividends on its endowment investments.
7.By year-end the value of its investments had appreciated by $600,000.
8.It incurred $1,300,000 in administrative expenses.
Near year-end it received a pledge of $4,500,000, to be fulfilled in three annual installments of $1,500,000 beginning in one year. The Association determined that a discount rate of 6 percent was appropriate.
- a.Prepare journal entries to record these events and transactions. Be sure to indicate the fund-type in which the entry would be made.
- b.Prepare a year-end statement of financial position and statement of activities.
- 3) Internet-based exercise.
- Access the website of the American Red Cross (www.redcross.com) and the American Diabetes Association (www.diabetes.org) and obtain the audited financial statements for the fiscal year 2011 and Form 990 for 2011. Form 990 can also be obtained from www.GuideStar.org. Answer the following questions for each organization.
1.What standards were applied in conducting the audit? Was the audit a Single Audit? How do you know? What reports result from single audit?
2.Identify the federal agencies (Hint: agencies are usually titled U.S. Department of …) that have extended grants to these organizations. Are these the agencies that you would expect? Why or why not?
3.For the fiscal year 2011, identify (1) any significant deficiencies or material weaknesses in the organization’s internal controls over major programs, (2) any instances of noncompliance in major programs, and (3) any findings or questioned costs.