12–4. Single Audit, Internet Case. A not-for-profit organization has hired you to conduct an audit. The
audit has been requested by the organization’s board of directors. A mission of the organization is to
provide for the education of children in the economically distressed area of the city. In fulfilling its
mission, the organization operates a Head Start program, a K-3 elementary school, and an after-school
kids program. To help fund its mission, the organization receives funds from several sources, including
federal programs. The federal programs and the amount of funding expended from each program for the
fiscal year are as follows: Required It may be helpful to use the Catalog of Federal Domestic Assistance (CFDA) Web site
(www.cfda.gov) and the OMB Circular A–133 Compliance Supplement
(www.whitehouse.gov/OMB/circulars) to answer the following questions.
a. What federal departments are sponsoring the programs listed?
b. OMB allows “cluster programs” to be considered as a single program when conducting the riskbased approach to selecting programs for audits under the single audit. Of the programs listed, which (if
any) are part of the same cluster?
c. Based on size alone, are there any Type A programs or other programs that would be exempt from
audit under the risk-based approach?
d. Based on size alone, which programs would you select for audit and why?
e. If the not-for-profit has received an unqualified opinion in each of the last two years and the Head
Start program was selected for audit in both years, would the programs you select for audit change? If
not, why not? If so, what programs would you select and why?
f. Reading the objectives of the programs identified, you will notice a common underlying objective.
Since the ability to obtain funds depends on meeting this underlying objective, it should be considered a
major compliance issue for the auditor. What is the objective? What compliance item is particularly
affected by this underlying objective? (Hint: There are 14 compliance items listed in Circular A–133;
access Parts 2, 3, and 4 to help with this answer.)
14–2. Classification of Revenues/Support and Expenses. For each of the independent transactions listed
in the left-hand column below, indicate which of the revenue/support or expense classifications apply by
choosing one or more of the letters from the listed items in the right-hand column. Choose all that apply. 14–8 Prepare Financial Statements. The Children’s Counseling Center was incorporated as a not-for-profit
voluntary health and welfare organization 10 years ago. Its adjusted trial balance as of June 30, 2011,
follows. 1. Salaries and fringe benefits were allocated to program services and supporting services in the
following percentages: counseling services, 40%; professional training, 15%; community service, 10%;
management and general, 25%; and fund-raising, 10%. Occupancy and utility, supplies, printing and
publishing, and telephone and postage expense were allocated to the programs in the same manner as
salaries and fringe benefits. Depreciation expense was divided equally among all five functional expense
categories. Unrealized loss on investments was charged to the management and general function.
2. The organization had $153,314 of cash on hand at the beginning of the year. During the year, the
center received cash from contributors: $310,800 that was unrestricted and $48,100 that was restricted
for the purchase of equipment for the center. It had $9,200 of income earned and received on long-term
investments. The center spent cash of $286,410 on salaries and fringe benefits, $22,000 on the purchase
of equipment for the center, and $86,504 for operating expenses. Other pertinent information follows:
net pledges receivable increased $6,000, inventory increased $1,000, accounts payable decreased
$102,594, and there were no salaries payable at the beginning of the year. Required 7. a. Prepare a statement of financial position as of June 30, 2011, following the format in Illustration 14– b. Prepare a statement of functional expenses for the year ended June 30, 2011, following the format
in Illustration 14–10.
c. Prepare a statement of activities for the year ended June 30, 2011, following the format in
Illustration 14–8.
d. Prepare a statement of cash flows for the year ended June 30, 2011, following the format in
Illustration 14–9.
ScholarMatic: Explanation & Answer
Your ready answer from a verified tutor is just a click away for as little as $14.99
Click Order Now to get 100% Original Answer Customized to your instructions!
