BC Cultural Club On August 15, 2016, the British Columbia Cultural Club of (BCCC) was formed in an effort to ereate a united social group out of several separate regional clubs in the vicinity. of the city of Decker, located in central BC. The purpose of the group is to combine resources to meet the recreational, cultural, and social needs of their collective members. BCCC was formed through the collaboration of the following clubs and their memberships: It is now October 2020. BCCC's executives have spent the past few ycars planning and preparing for its operation. The club's community centre is expected to be fully completed next year. The facilities of the club will include the following: - a multi-purpose building to house banquets, meetings and arts activities - hiking trails - indoor/outdoor tennis facilities - bicycle trails - bascball diamonds - an indoorioutdoor pool - a soccer field The multi-purpose building is 75 percent complete, and BCCCs executives have stated that it is "approximately within budget." Estimated building costs were outlined in a 2016 feasibility study, is follows: The four acres of land on which the facility is built were provided by the provincial goverment by way of a five-year lease at $1 a year. The adjacent land of 60 acres was contributed to the club by The Italian Clubs of Canada. Previously, this land had been leased to a farmer for $54,000 a year. The 64 acres will be used for the following projects, which will incur the additional costs listed bclow: In addition to these development costs, the club faces annual operating costs of approximately \$740,000, outlined in Exhibit I. John Mendez-Fence, the newly elected president of the club, has approached your firm, Young and Keen Chartered Accountants, to prepare a report that provides recommendations on accounting, finance, and internal control issues. He has also asked you to identify the merits of an audit and potential problems that may exist. Mr. Mendez-Fence had been informed by another CPA firm that audit opinions for non-profit organizations are normally qualified and have little or no usefulness. You took the notes appearing in Exhibit II at a meeting with the club's president and executive committee. Required: Prepare the report. Exhibit I British Columbia Cultural Club Yearly Budget Exhibit II Notes taken from your Meeting with Mr. Mendex-Fence and the Executive Committee 1. Under the lease agreement with the Province, BCCC is responsible for maintenance and all costs of improvements. The lease agreement provides for 20 renewal terms of five years' duration each. Renewal is based on the condition that BCCC makes the club's services available to all present and future BCCC member-clubs and their membership. 2. BCCC has requested an operating grant from the provincial govermment. Its proposal requests the Province to provide BCCC with annual funds to cover 50% of "approved" operating costs incurred to provide services to all club members. The City of Decker wishes to construct an arena and a swimming pool and has opposed the proposed operating grant. The City has asked to be the first in line for available provincial funds. The Province has informed BCCC that if funds are granted, BCCC will have to supply audited financial statements of the organization for all future fiscal year ends. The committee members suspect that they will have to compromise on their proposal and are having problems determining the minimum annual funds required by the club from the Province. 3. The Russian and Italian clubs have been arguing with other clubs over the equalization payments required from each club. Currently, each club makes payments to BCCC based upon their proportionate membership. Payments for each calendar year are made on Febraary I of the following year. The Russian group performs the administrative functions of BCCC and has charged, and will continue to charge, the club only 50% of the market value of these services. 4. The accounting function is a major concern of the member-club representatives. In particular, they have raised the following issues: a) Several fund raising events are organized by individual member clubs. b) Any donations to BCCC are received through the member clubs. e) No accounting has been made of services donated to BCCC by the members of the individual clubs. d) BCCC has approached a bank to assist in future phases of the club's development. The bank has informed BCCC that it is interested in asset values and BCCC's ability to repay the loans