Barclayville Housing Society Barclayville Housing Society (BHS) is a not-for-profit organization providing housing assistance and counselling services to people who need affordable housing or other types of community support. BHS was founded 10 years ago. BHS has 3 sources of funding: 1. The provincial government provides a core operating grant. 2. The municipal social services department provides a fee-for-service grant that is directly linked to the number of clients served and type of services provided. 3. Clients who can afford the services are charged a fee, which they pay in cash. The amount of the core grant and the fee-for-service grant rates are periodically adjusted for inflation. The terms of the grant include strict adherence to budgeted amounts. If these terms are violated, the grant may not be renewed and the current grant may be subject to repayment. The government conducted a compliance audit on BHS in its second year of operations and found the requirements had been met. You are a CPA, and your close friend, James, has come to you for advice. James is a new CPA who has been working as an accounting manager for a small, family-owned manufacturing plant. James has recently been elected as a volunteer treasurer on the board of directors of BHS. Because James is new to volunteering, he has obtained permission from the BHS board to approach you, in confidence, as a mentor to advise him in his new role. To prepare himself for this new role, James has obtained information about BHS, including the organization's financial statements and budgets, which are provided in Exhibit 1. Service statistics are in Exhibit 2. The services listed in Exhibit 2 are those for which BHS receives fees, either from the clients directly or from the municipal social services department (the fee-for-service grant). James attended his first board meeting as an observer and, as the new treasurer, was invited to meet with the organization's accountant and executive director. James made notes on events at the board meeting and his meetings with the 2 staff members. These notes are provided as Exhibit 3.

Draft notes from the Board Meeting and 2 Interviews Board meeting observations: The board meets monthly for 1 hour. The board chair has been on the board for 8 years, and has been the chair for 6 of the 8 years. One board member is just completing her first 2-year term; all of the others have been on the board for less than 1 year. 6 of the 10 board members attended this meeting and 2 of the board members are attending their second meeting. All information on the agenda is handed out at the beginning of the meeting (including Exhibits 1 and Exhibit 2). The projected 20X2 information referred to in Exhibit 1 and 2 represents the summed total of 20X2 actual costs and revenues to the end of the previous month and budgeted costs and revenue for the balance of the year. This is the standard format for these reports and no adjustments are made to reflect any trends that would impact the budget numbers. Once the budget is finalized prior to the start of the new fiscal year, no further review takes place other the coding of expenses to budget categories. There is no opportunity to review the board material in detail until after the meeting. There are no committee reports or references to any committees. There is very little discussion. The executive director (ED) reports on various programs and statistical results and takes questions. No questions were asked in this meeting. During coffee after the meeting, the chair and the ED were overheard discussing the housing cost statistics per client used by another non profit organization but this was not on the meeting agenda. Interview with the executive director: The Executive Director has held the position since the organization was founded 10 years ago and she was responsible for recruiting the board chair. The Executive Director provided James with a copy of the grant contracts. The terms include the conditions that BHS must strictly adhere to the approved budget or the grant will not be renewed and the current year's grant could be subject to repayment. During the meeting, she asked James to prepare a brief memo on the benefit of using key performance indicators to measure the organization's ability to deliver financial and non financial results. The Executive Director was late for the meeting and had to leave the meeting before all of James' questions had been answered. Prior to her departure, she mentioned to James that she was pleased to see that he had accepted the position of Treasurer. She noted that she would ensure that BHS would now use the services of James' wife, who runs a catering business, to provide food for the board meetings and any office event that takes place. She also mentioned that they would be willing to pay a premium for this service since James would be a valued member of the Board.

Interview with the accountant: The accountant has been with the organization since BHS was founded. Her only previous job was assistant bookkeeper in a medical office for 1 year and she has learned accounting "on the job." She is responsible for billing clients for their share of fees, making the monthly fee-for-service grant claims and does all the coding of expenses to budget categories. She codes expenses based on where there is "room" in the budget, because that is how the ED explained that the granting agency wants it done. The Executive Director recently travelled to Aruba with 2 other staff members as a celebration of BHS's 10-year anniversary. This has been coded to "Office and Miscellaneous". All cheques must be signed by 2 of: the ED, the accountant, or the board chair. For practical reasons, it is usually the ED and the accountant. Invoices do not need to be approved prior to payment, ("after all, the cheques have 2 signatures on them"). The accountant does not save the invoices that are submitted by employees with their expense reports. She pays the amount on the expense report and then files the signed copy of the expense report, returning the original invoices to the employees for their records. There is one invoice not yet coded. It is for the insurance of a new company vehicle purchased for the Executive Director's use while on company business. The accountant mentioned that the Executive Director will be driving this vehicle to meetings with BHS clients and will also be driving from home to work each day. The Executive Director lives more than 80 kilometres away from the office and has noted that it will be helpful to have this "free" travel Service fees paid by the clients are usually received in cash; the cash is received by the program staff person who is seeing the client, and the deposit is prepared and taken to the bank by "whoever has time" (most often the accountant, the ED, or her executive assistant, and occasionally the receptionist). Several times a year the workload at BHS increases and the accountant takes one of the available laptops home. She saves many of her files on the laptop, only saving them to the office computer when she needs the information contained in these files. Occasionally, she has lost some of her files when the next employee to borrow the laptop accidentally deleted her files. There are 6 laptops which are stacked on a shelf in the accountant's office. The accountant noted that they are available to any of the counsellors who would like to take electronic notes when they are out in the field. There are 4 laptops that are currently out on loan but she is not sure who has them. Questionnaires are filled out by housing and counselling clients on the quality and effectiveness of the service provided by BHS. These are filed by the accountant each month and then transferred to the storage locker at the back of the office building. Some of the questionnaires have been filled out electronically by workers when they have been with the client but the accountant has not had time to extract this information from the laptops.

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