You were asked in February 2002 by the board of management of your church to review its accounting proce¬ dures. As part of this review, you have prepared the follow¬ ing comments relating to the collections made at weekly services and record keeping for members' pledges and con¬ tributions:

1. The finance committee is responsible for preparing an annual budget based on the anticipated needs of the var¬ ious church committees and for the annual fall "pledge campaign" during which most members make a commit¬ ment to contribute a certain amount to the church over the following year.

2. The financial records are maintained by the treasurer who has authority to sign cheques drawn on the church bank account.

3. The ushers each Sunday take up the collection during the services and place it uncounted in a deposit bag in the church safe. The term "safe" is a misnomer: the lock does not work and the door is merely closed. This fact is well known to church members since most have ushered at one time. The board of management and finance com¬ mittee are not concerned since they believe that the mem¬ bers, as good church-goers, can be trusted.

4. The treasurer, who is retired, comes in Monday morning, counts the collection and deposits it into the church's bank account. Some members use predated numbered envelopes but most do not. The treasurer does not keep a record of members' contributions.

5. The treasurer issues receipts to each member every Janu¬ ary based on the amounts pledged for the preceding year by that member. The contributions up to 2000 had always exceeded the amounts pledged so that the value of receipts given out was less than total contributions; the excess was recorded as "loose" or "open" collection. In 2001, the total of the receipts given out by the treasurer exceeded the total funds received by the church.

6. The church is registered as a charity under the Income Tax Act and is required to file a return each year to comply with its rules. The chairperson of the finance committee is upset because the church has received a letter from the Canada Customs and Revenue Agency in connection with the return for 2001 because the return showed receipts given exceeded the funds actually received. The letter indicated that such differences could result in removal of the church's ability to issue income tax receipts.

Required Identify the weaknesses and recommend improvements in procedures for

a. collections made at weekly services.

b. record keeping for members' pledges and contributions. Use the methodology for identifying weaknesses that was discussed in Chapter 9. Organize your answer sheets as follows:

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WEAKNESS RECOMMENDED IMPROVEMENT