118 CHAPTER 5 THE ERINDALE HOSPITAL FOUNDATION You are a CA and work for Wilson Chartered Accountants. You are in the process of conducting the year-end financial statement audit for the Erindale Hospital Foundation (the Foundation). The Foundation is a not-for-profit organization founded ten years ago to raise funds for the Erindale Hospital's programs, medical equipment, expansion, and renovation, and to enhance the overall quality of health care in the community. Being a registered charity, it is exempt from paying income taxes and may issue income tax receipts to donors, provided certain requirements of the Income Tax Act are met. At the start of the audit, you receive a copy of the draft Statement of Operations (Exhibit 1) and you meet with Dan Michaels, the Foundation's Chief Accountant to discuss the numbers. You notice a significant increase in donations this year. Dan reminds you that historically the Foundation's only source of revenue has been from cor- porate donations. Once a year, the Foundation would mail a letter to businesses in the community asking for donations. Cheques would come in throughout the year to cover the cost of expenses and would pay for various initiatives. The funds were always unrestricted with the Foundation free to use the money however the Board of Governors saw fit. With the recent hospital expansion, there has been growing interest in the Foundation. For 2012, not only did the amount of donations quadruple, but they were from various donor sources, some of whom had specific requests for the use of the funds donated. During the meeting you write down all of the sources of donations and make some notes about each one (Exhibit 2). Afterwards, you sit down and start drafting an email to Shauna Clark, the engagement partner, advising her of the significant changes to the donations account this year, the impact to your audit, and the audit procedures you will be performing for each different donation source. Erindale Hospital Foundation Statement of Operations For the year-ended December 31, 2012 (unaudited) Externally Unrestricted Restricted 2012 2011 $ 0 Revenue: Donations: Telethon Tulip Campaign Corporate Donations Private Donation $ 300,000 500,000 800,000 $ 260,598 25,544 100,000 0 386,142 $ 260,598 25,544 400,000 500,000 1,186,142 0 300,000 0 300,000 Expenses: Wages and benefits Administrative Fundraising expenses Other 20,000 18,888 500 1,455 40,843 148,555 80,000 26,500 0 255,055 168,555 98,888 27,000 1,455 295,898 125,554 24,224 500 95 150,373 Excess of revenue over expenses before distribution Distribution of funds Excess of revenue over expenses 759,157 (700,000) $ 59,157 131,087 (130,000) $ 1,087 890,244 (830,000) $ 60,244 149,627 (140,000) $ 9,627 EXHI SUMMARY OF DONATIONS DURING THE YEAR: The Foundation follows the restricted method of accounting for contributions, which include donations and fundraising. The Unrestricted Fund accounts for the Foundation's program delivery, fundraising, and administrative activities. The Externally Restricted Fund is for donations that are to be used for designated purposes specified by the donor. 1. Donations from telethon During the year the company had a fundraising campaign that was aired on a local televi- sion station. The telethon was a twelve-hour event and many local entertainers donated their time to both perform for the television audience and try to solicit pledges. The tele- thon was a huge success and the Foundation has decided to make this an annual event. The Foundation recorded all of the pledges into the donations account at the time the pledge was made. To date, 50% of the pledges have been received. 2. Donations from tulip campaign On April 15, 2012, hundreds of volunteers showed their dedication to the Foundation by sell- ing tulips on street corners, in malls, and in other public spaces. On April 16, 2012, the money was counted and an entry was posted to the donation account. The purpose of the campaign was to raise money for a new x-ray machine for the hospital. 3. Large donation from patient On December 7, 2012, the Foundation received a significant donationits largest one everfrom an individual donor. Marjorie Williams was so happy with the care she had recently received while she was a patient at Erindale Hospital, she was determined to show her appreciation. She is in the process of selling off some of her property. I live alone and it is just becoming too much for me to handle. When I sell, I want to donate one-quarter of the Pacs was counted and an entry was posted to the donation account. The purpose of the campaign was to raise money for a new x-ray machine for the hospital. 3. Large donation from patient On December 7, 2012, the Foundation received a significant donationits largest one everfrom an individual donor. Marjorie Williams was so happy with the care she had recently received while she was a patient at Erindale Hospital, she was determined to show her appreciation. She is in the process of selling off some of her property. I live alone and it is just becoming too much for me to handle. When I sell, I want to donate one-quarter of the profit to the Hospital Dan Michaels figured that the property was worth $2 million given that it was prime real estate and bound to be bought up by a developer quickly. Marjorie did not believe in lawyers and just jotted down on a piece of paper the terms of the agreement. As of today, the land has not been sold. 4. Corporate donations The Foundation has continued to receive corporate donations this year. In addition to the unrestricted donations, this year they received a large donation from a corporation who was adamant that the funds be used to pay for the renovation of the hospital lobby. 118 CHAPTER 5 THE ERINDALE HOSPITAL FOUNDATION You are a CA and work for Wilson Chartered Accountants. You are in the process of conducting the year-end financial statement audit for the Erindale Hospital Foundation (the Foundation). The Foundation is a not-for-profit organization founded ten years ago to raise funds for the Erindale Hospital's programs, medical equipment, expansion, and renovation, and to enhance the overall quality of health care in the community. Being a registered charity, it is exempt from paying income taxes and may issue income tax receipts to donors, provided certain requirements of the Income Tax Act are met. At the start of the audit, you receive a copy of the draft Statement of Operations (Exhibit 1) and you meet with Dan Michaels, the Foundation's Chief Accountant to discuss the numbers. You notice a significant increase in donations this year. Dan reminds you that historically the Foundation's only source of revenue has been from cor- porate donations. Once a year, the Foundation would mail a letter to businesses in the community asking for donations. Cheques would come in throughout the year to cover the cost of expenses and would pay for various initiatives. The funds were always unrestricted with the Foundation free to use the money however the Board of Governors saw fit. With the recent hospital expansion, there has been growing interest in the Foundation. For 2012, not only did the amount of donations quadruple, but they were from various donor sources, some of whom had specific requests for the use of the funds donated. During the meeting you write down all of the sources of donations and make some notes about each one (Exhibit 2). Afterwards, you sit down and start drafting an email to Shauna Clark, the engagement partner, advising her of the significant changes to the donations account this year, the impact to your audit, and the audit procedures you will be performing for each different donation source. Erindale Hospital Foundation Statement of Operations For the year-ended December 31, 2012 (unaudited) Externally Unrestricted Restricted 2012 2011 $ 0 Revenue: Donations: Telethon Tulip Campaign Corporate Donations Private Donation $ 300,000 500,000 800,000 $ 260,598 25,544 100,000 0 386,142 $ 260,598 25,544 400,000 500,000 1,186,142 0 300,000 0 300,000 Expenses: Wages and benefits Administrative Fundraising expenses Other 20,000 18,888 500 1,455 40,843 148,555 80,000 26,500 0 255,055 168,555 98,888 27,000 1,455 295,898 125,554 24,224 500 95 150,373 Excess of revenue over expenses before distribution Distribution of funds Excess of revenue over expenses 759,157 (700,000) $ 59,157 131,087 (130,000) $ 1,087 890,244 (830,000) $ 60,244 149,627 (140,000) $ 9,627 EXHI SUMMARY OF DONATIONS DURING THE YEAR: The Foundation follows the restricted method of accounting for contributions, which include donations and fundraising. The Unrestricted Fund accounts for the Foundation's program delivery, fundraising, and administrative activities. The Externally Restricted Fund is for donations that are to be used for designated purposes specified by the donor. 1. Donations from telethon During the year the company had a fundraising campaign that was aired on a local televi- sion station. The telethon was a twelve-hour event and many local entertainers donated their time to both perform for the television audience and try to solicit pledges. The tele- thon was a huge success and the Foundation has decided to make this an annual event. The Foundation recorded all of the pledges into the donations account at the time the pledge was made. To date, 50% of the pledges have been received. 2. Donations from tulip campaign On April 15, 2012, hundreds of volunteers showed their dedication to the Foundation by sell- ing tulips on street corners, in malls, and in other public spaces. On April 16, 2012, the money was counted and an entry was posted to the donation account. The purpose of the campaign was to raise money for a new x-ray machine for the hospital. 3. Large donation from patient On December 7, 2012, the Foundation received a significant donationits largest one everfrom an individual donor. Marjorie Williams was so happy with the care she had recently received while she was a patient at Erindale Hospital, she was determined to show her appreciation. She is in the process of selling off some of her property. I live alone and it is just becoming too much for me to handle. When I sell, I want to donate one-quarter of the Pacs was counted and an entry was posted to the donation account. The purpose of the campaign was to raise money for a new x-ray machine for the hospital. 3. Large donation from patient On December 7, 2012, the Foundation received a significant donationits largest one everfrom an individual donor. Marjorie Williams was so happy with the care she had recently received while she was a patient at Erindale Hospital, she was determined to show her appreciation. She is in the process of selling off some of her property. I live alone and it is just becoming too much for me to handle. When I sell, I want to donate one-quarter of the profit to the Hospital Dan Michaels figured that the property was worth $2 million given that it was prime real estate and bound to be bought up by a developer quickly. Marjorie did not believe in lawyers and just jotted down on a piece of paper the terms of the agreement. As of today, the land has not been sold. 4. Corporate donations The Foundation has continued to receive corporate donations this year. In addition to the unrestricted donations, this year they received a large donation from a corporation who was adamant that the funds be used to pay for the renovation of the hospital lobby