The control environment at EJ Charity may be weak for several reasons: [1] lack of control over funds and how donations are used; [2] unclear segregation of duties among staff; [3] lack of professional qualifications for staff. To improve the control environment, EJ Charity should: [1] implement formal risk management procedures to identify and respond to risks; [2] comply with laws and guidelines requiring annual audits, conflict of interest policies, and reserves policies to establish basic risk management.
The control environment at EJ Charity may be weak for several reasons: [1] lack of control over funds and how donations are used; [2] unclear segregation of duties among staff; [3] lack of professional qualifications for staff. To improve the control environment, EJ Charity should: [1] implement formal risk management procedures to identify and respond to risks; [2] comply with laws and guidelines requiring annual audits, conflict of interest policies, and reserves policies to establish basic risk management.
The control environment at EJ Charity may be weak for several reasons: [1] lack of control over funds and how donations are used; [2] unclear segregation of duties among staff; [3] lack of professional qualifications for staff. To improve the control environment, EJ Charity should: [1] implement formal risk management procedures to identify and respond to risks; [2] comply with laws and guidelines requiring annual audits, conflict of interest policies, and reserves policies to establish basic risk management.
The control environment at EJ Charity may be weak for several reasons: [1] lack of control over funds and how donations are used; [2] unclear segregation of duties among staff; [3] lack of professional qualifications for staff. To improve the control environment, EJ Charity should: [1] implement formal risk management procedures to identify and respond to risks; [2] comply with laws and guidelines requiring annual audits, conflict of interest policies, and reserves policies to establish basic risk management.
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TEODORO,CLARISSA C.
BSA3A
Case Probe: EJ Charity
1. Explain why the control environment may be weak at EJ Charity.
We all know that charitable organizations are one example of example of non-profit organizations so the funds that helps the organization is caught by the different donations of different organizations or individuals . Base on the given scenario EJ Charity is weaked because of unorganized control environment in the perspective of how to control the funds ,how do they use their funds that they get in the donations? How did they implement segregation of duties and responsibilities of their staffs or volunteers ? Is their a qualifications for hiring a staff ? How board of trustees complies and adopt risk related to the control system of the charity ? and How did they audit the cash inflows and outflows of their resources ?
To emphasize this here are some causes that EJ Charity experience that effects his control environment to be weak;
(1)Control of funds. Donations are so important to implement some programs or events of a specific charitable organizations .Because of lack of control funds , many individuals committed fraud for their own needs. So in this view ,funds will be organized and budgeted to the personel who have a knowledge about financing funds. That person is the one who control and budget the inflow and outflow of cash in order to prevent fraud and conflict of interest from those staffs of charity. (2)Lack of segregation of duties. This is the one of main causes of a charitable organization ,because of limited staff or employees ,their is unclear personification between the staffs. Because of this ,power is equally divided to all. (3) Lack of qualified staffs. In terms of charitable organizations , volunteers are accepted there is no professional qualification are amended ,Because mostly of the staff are irregular and they basis to work are their free time only and it is limited. (4) Attitude of trustees. It is not clear how the charity’s trustees view risk. However, where trustees are not professionally trained or have little time to devote to the charity, then there may be an impression that controls are not important. The overall control environment may therefore be weak as other charity workers do not see the importance of maintaining good controls. (5) Lack of Organizational Structure . Any control system will not be monitored effectively, mainly due to the lack of any internal audit department. The charity will not have the funds or experience to establish internal audit.
2. Give recommendations on how to further improve the control environment.
1. Having a formal risk management procedures that identify risks will help EJ Charities to promptly respond and effectively deal with such risks when they occur. For example, when one Charity discovered missing funds from its accounts, its board was able to swiftly respond to the incident. Formal risk management procedures were already in place, which allowed the misconduct to be quickly detected. Most of the funds were recovered and the negative implications were thereby minimized. 2. As to the regulatory measure, there are laws and guidelines to ensure that Charities have at least the basic risk management policies. For example, the Charities Act stipulates that Charities are required to conduct annual audits or an examination of accounts. Additionally, both the Charities Act and Code of Governance for Charities and Institutions of a Public Character (IPCs) specify that IPCs should have policies for the management and avoidance of conflicts of interest, as well as related party transactions. Beyond these requirements, Charities could also include a “reserves” policy in their annual reports, and undertake a regular review of the policy and reserves levels, as this could also help them identify potential financial and operating risks. These requirements form a baseline of the risk management procedures Charities have to possess in order to demonstrate good governance.
