Review of Audit Risks of Youth of Tomorrow

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organizations. Although Lori mentioned that the needs of youth is more than $60,000 can cover, the cash flows and the operation of this program do need more detailed audits. We also need to prepare government grant compliance report for them, and the usage of government grant is one of the areas that users will want to know about. Currently, the organization wants to apply for a larger grant for next year, so I think it is urgent to review this program in detail as soon as possible before they start to apply for the grant next year.

The total expense for the organization is expected to be about $250,000 for the year ended August 31, 2016 which is in two months. Currently, the organization has total of $360,000 cash contributions from either government or other donations, but the total expense is about $250,000. The cash excess from operation is $110,000. From donors’ point of view, the organization needs to provide some explanations for the usage of donations.

Issue #4. Board Member’s Private Loan

The building of the organization was built partially with a private loan from one of the board members. There is a possibility that this board member might provide the loan for other personal interests. For example, he or she might want to charge the organization for higher interest expense for personal favor. Therefore, I recommend that the contracts and documents for this loan is needed to provide accurate information for donors and government.

Issue #5. Asset Estimation

Lori estimates that the market value of the land and building is nearly 2 million dollars, but the costs of land and building in one and half year ago is only 1.3 million dollars. Lori might want to present a “good-looking” financial statement for the board to show that she has good leadership and management to increase the assets of the organization. She does not provide accurate financial situation of the organization to users of the financial statements. We should have an expert of real estate to review for the price of land and building, and we should also review the document of the property assessment issued from government.

Issue #6. The control of the Board

All of the board members are experts in their own field, but I think there is a risk that the board members don’t understand every parts of their duties; for example, overseeing finance. My recommendation that we need to test and inspect the control of the board on financial reporting and the budget statements, and we should start from the meeting minutes of the board to see if they are fulfilling the responsibility to control the finance of the organization.