City Youth Services (CYS) is a not-for-profit organization established to provide counseling and other services to children under the age of 18. It concentrates on troubled teenagers who are typically referred to CYS by the courts, police, and hospitals. In years past, the majority of the operating budget of CYS has been funded by the provincial government; increasingly, however, CYS is turning to private donors for support.
Two years ago, CYS engaged in a major funding drive in order to raise funds for a group home for troubled teen agers. The drive was a success; $110,000 was raised during 2012 and a mortgage of $90,000 was negotiated so that CYS was able to purchase a house for $200,000 in January 2013. Since then, CYS continued its fundraising activities and was able to raise $125,000 in donations in 2013. The funds raised annually for the group home are used to employ several in-house social workers on an hourly basis and pay the home's operating expenses. CYS has continued to operate in separate rented premises and employs 12 social workers to provide counseling.
Increasingly, time spent by the regular social workers has involved overload group home related work that cannot be handled by in-house social workers. As a result of the increase in group home related work, and the corresponding increase in the payroll costs of regular CYS social workers, CYS is currently running a deficit in its operating fund.
Fundraising for the counseling activities, which is separate from fundraising for the group home, has been insufficient to offset the operating deficit.
A major fundraising drive to secure donations for CYS and the group home is planned for 2014.
Twenty volunteers from the community have assisted the social workers in the group home and in the regular counseling services. Two of these volunteers have also helped with clerical duties in the office.
You are Mary Roussopoulos, CMA, a friend of the Executive Director of CYS, James Bonucci. You attend a meeting of the CYS board of directors, where James says the following: "As you know, Mary, our needs for private donations are greater than ever, especially with government funding freezes. The trouble with private donations is that we are competing with so many other worthwhile causes. Some of the people we approach for donations have complained about a lack of information regarding where we spent past donations, our current financial position, and our effectiveness in achieving the purposes for which we receive money. Accordingly, we have decided to provide all donors in 2013 with a copy of our 2013 annual report. Since you are an accounting expert, perhaps you could advise us on ways in which we might improve our annual report to enhance the information value for donors." He then gave you the statement of operations and the balance sheet of CYS (see Exhibit C9-4[a]).
Required
As Mary Roussopoulos, comment in a memo to James Bonucci on ways in which the reporting of CYS might be improved to enhance the informational value for donors.
EXHIBIT C9-4(a)
CITY YOUTH SERVICES
Statement Of Operations
For the year ended December 31, 2013
Operating Fund
Revenues:
Donations to City Youth Services ............. $104,500
Program funding from provincial government ....... 300,000
Investment income .................. 500
405,000
Expenses: ...................... 70,000
Staff salaries ..................... 300,000
Payroll—social workers ................ 50,000
Office expenses .................. 420,000
Excess of expenses over revenues ........... (15,000)
Operating fund balance (deficit)—January 1 ....... (7,000)
—December 31 .................. $(22,000)
Capital Fund
Revenues:
Donations to group home ................ $125,000
Expenses:
Payroll—social workers ................ 50,000
Operating expenses ................. 30,000
Home purchase .................... 200,000
Mortgage payments .................. 10,000
290,000
Excess of expenses over revenues ............ (165,000)
Capital fund balance (deficit)—January 1 ........ 110,000
—December 31 ................... $(55,000)
Assets
Cash ...................... $ 6,000
Donor pledges .................... 10,000
$ 16,000
Liabilities
Accounts payable .................. $ 3,000
Mortgage ..................... 90,000
93,000
Fund balance (deficits)
Operating fund ..................... (22,000)
Capital fund ..................... (55,000)
$ 16,000