Sports for All (SFA) is a not-for-profit entity with the mandate of helping make sports accessible to children of all income levels. SFA was founded by Michael Gelesz, a retired professional hockey player, to service communities in Nova Scotia. SFA began operations by gathering donations of gently used hockey equipment and recycling the equipment to children of families with financial need. Given the first year’s success, SFA expanded to include football equipment recycling and hockey training camps.

Today, SFA has a dedicated space in a community centre, and is open two days a week. The organization has one part-time staff member who takes care of the daily administration. The remaining services are provided by a strong volunteer contingent who are directly involved in program delivery, which is coordinated by Michael.

In the current year, SFA formalized its board of directors, which is chaired by Sidney Hurtsby. Sidney also has a history in professional hockey, but his career was cut short due to injuries. Aft er professional sports, Sidney pursued higher education and is now a lawyer in the community. Under the leadership of Sidney and Michael, SFA has just adopted a strategic plan, and has a clear direction to expand services and create more public awareness of the organization. Michael is excited about the opportunity to promote SFA’s vision and mission.

To supplement its current contribution level, SFA plans to research possible government grants and actively fundraise. A committee composed of three board members has been set up to oversee fundraising. Th e committee has asked that financial and non-financial information on each program be available for potential donors. SFA will soon be accountable to more parties considering the proposed expansion of services, a number of new donors, and greater public exposure.

It is February 2018. Michael has approached your firm to provide SFA with some financial and organizational advice. Michael realizes that some of the current year figures are small, and may not be material, but he would like to develop proper policies for all transactions in order to have a strong fi nancial reporting environment to deal with the significant future growth that is expected. In addition to the strong reporting environment, Michael would like to develop a strong control environment and is contemplating the formation of an audit committee to oversee the reporting process. Michael is unsure of the roles and benefi ts of an audit committee.

Wayne Limongelli, a senior manager at your fi rm, has recommended that SFA prepare fi nancial statements in accordance with GAAP. The board has never felt the need to prepare formal fi nancial statements. Monthly trial balance reports were used to monitor operations (Exhibit I). Currently, the fi nancial reporting process does not allow the board or donors to assess whether the funds contributed were used for the intended purpose and there is no clear division between the programs currently being offered: general activities, equipment recycling, training services, and endowments.

You are a senior accountant on the SFA engagement, and will be reporting to Wayne. You have reviewed the recent board minutes and other key information for the operations of the year (Exhibit II). Wayne indicated that, for its December 31, 2017, annual financial statements, the organization will follow not-for-profi t organization standards (CPA Canada Handbook, Part III). Wayne pointed out that, when accounting policy options are available, it will be necessary to explain the options to the board and make recommendations for SFA. In addition, Wayne would like you to make recommendations to strengthen the control environment and provide some insights regarding the formation of an audit committee.

Required

(a)

Prepare the statement of operations and statement of financial position for the year ended December 31, 2017. Include explanations to the board where necessary to explain the choice of accounting policy options available.

(b)

Write a memo to Wayne making recommendations to the SFA board on ways to strengthen the control environment and some insights regarding the formation of an audit committee.