Nature Hill Middle School Wants To Raise Money For A New Sou

Nature Hill Middle School Wants To Raise Money For A New Sound System

Nature Hill Middle School plans a fundraising event—a dance—to raise money for a new auditorium sound system. The event involves multiple internal control weaknesses, primarily related to cash handling, record-keeping, and oversight. Barry Cameron, the instructor responsible for the event, delegated many tasks to students with minimal supervision and control measures, creating vulnerabilities for misappropriation, theft, or misreporting of funds. The key internal control weaknesses include lack of segregation of duties, inadequate supervision, incomplete record-keeping, and insufficient oversight of cash collection and deposit activities.

One significant internal control weakness is the absence of segregation of duties. Barry entrusted students with taking tickets, collecting cash, and handling the funds without independent oversight or verification. For example, students took tickets, collected money, and were responsible for depositing the cash, creating opportunities for theft or misappropriation. A more robust control would involve assigning different individuals to sell tickets, collect cash, and reconcile funds, ensuring no single person oversees all cash handling steps. Implementing a system where receipts are issued for ticket sales would also provide an audit trail and accountability.

Another weakness is the inadequate supervision and monitoring of cash handling procedures. Barry left tickets and cash handling responsibilities largely to students, with minimal oversight. The students were told to dispose of unsold tickets without tracking how many were sold versus remaining, making it difficult to verify actual sales. Supervisors should have monitored cash collection and reconciled sales against ticket inventory regularly. Scheduled audits during the event could detect discrepancies early and prevent cash misappropriation.

The record-keeping procedures in this scenario are weak, contributing to financial mismanagement. Barry relied on Robin Herbert to count the money and prepare deposit slips without detailed documentation of individual sales or cash received. There was no record of the number of tickets sold, the amount collected per ticket, or who received what amount. To address this, setting up a formal record-keeping system—including ticket vouchers, cash register logs, or digital records—would improve transparency and accountability.

Furthermore, the absence of receipts for payments made to the DJ introduces an internal control problem. Barry gave the DJ cash without obtaining a receipt or providing documentation. This lack of documentation hampers the ability to verify expenses and supports potential misappropriation. Requiring receipts for all disbursements and maintaining comprehensive expense records would improve oversight and confirm that funds are used appropriately.

Additionally, the physical safeguarding of cash is inadequate. Barry took $200 out of the cash box to pay the DJ and failed to document or track this withdrawal explicitly. Using a petty cash fund or a dedicated disbursement log would help control cash payments. Moreover, the final cash count and bank deposit were performed inconsistently, with no clear reconciliation. Implementing independent reconciliations and segregation of deposit duties would reduce the risk of misstatement or theft.

In summary, the internal control weaknesses in this scenario revolve around inadequate segregation of duties, insufficient supervision, poor record-keeping, lack of documentation for expenses, and insufficient cash safeguarding. To strengthen internal controls, the school should develop formal policies for ticket sales, cash collection, expense approval, and deposit procedures. Assigning different individuals to handle receipts, deposits, and reconciliations would reduce opportunities for fraud. Maintaining proper documentation and performing regular audits are essential practices to ensure accountability and financial integrity in future fundraising activities.

Paper For Above instruction

Internal controls are essential mechanisms in any organization to safeguard assets, ensure accurate financial reporting, and promote operational efficiency. In school fundraising activities, particularly involving cash transactions, internal controls are critical to prevent theft, misappropriation, and misreporting of funds. The case of Nature Hill Middle School’s fundraising event reveals multiple internal control weaknesses, which, if unaddressed, could compromise the financial integrity of the event. This paper analyzes these weaknesses and offers recommendations to improve controls in similar scenarios.

One prominent internal control weakness pertains to the lack of segregation of duties. The school’s approach involved Barry Cameron delegating ticket sales and cash collection to students with minimal oversight. The students took tickets, collected payments, and stored cash in a single box, with only Barry and Robin overseeing the handling at different stages. This concentration of responsibilities creates opportunities for fraud because no independent person verifies the cash or reconciles the ticket inventory. To mitigate this, roles should be divided among different individuals—for example, separate persons handling ticket sales, cash collection, and reconciliation—to reduce the risk of theft and increase accountability (Alleyne & Sherer, 2008).

Another critical weakness is the insufficient supervision of cash handling processes. Barry’s minimal oversight allowed students to dispose of unsold tickets without tracking or documentation, hampering the ability to verify sales versus inventory. Additionally, there was no real-time reconciliation of cash collected against tickets sold. Supervising staff or volunteers should have monitored the cash collection process, conducted spot checks, and ensured transactions matched inventory records to prevent discrepancies or theft (Kranacher, Riley, & Wells, 2010). Regular audits during the event can help identify irregularities promptly, deterring dishonest practices.

Record-keeping deficiencies also pose significant risks. The record-keeping process relied heavily on Robin Herbert counting cash and preparing deposit slips without detailed documentation of individual sales or receipts for each transaction. Without proper documentation, it becomes challenging to audit the funds or determine whether the revenue reported matches the actual cash collected. Implementing formal record-keeping procedures, such as issuing receipts for each sale and maintaining detailed logs of ticket numbers and sales amounts, would improve transparency and accountability (Elder, 2014).

The failure to obtain receipts for expenses, notably the payment to DJ Jay Dee, illustrates another internal control weakness. Barry paid the DJ with cash without acquiring any documentation, which complicates expense verification. Proper internal controls require that all disbursements be documented with receipts or invoices, and those records are retained for audit purposes. Requiring formal payment requisitions and receipts for all expenses enhances control and accountability (Heising, 2017).

Physical safeguarding of cash was also weak. Barry took $200 out of the cash box to pay the DJ without recording or tracking this transaction explicitly. Such unrecorded cash disbursements create a risk of misappropriation. To strengthen control, petty cash or imprest cash systems should be used, with formal disbursement logs and approval processes. Furthermore, cash should be counted by two individuals at the end of the event and reconciled with the recorded receipts and deposits, reducing the risk of errors or theft (Kranacher et al., 2010).

Finally, the closing of the bank account with a balance of only $250, after gross sales of approximately $2,000, suggests that substantial cash may have been lost or misappropriated. The incongruity indicates poor oversight or possible internal theft. Implementing internal audit procedures, such as independent reconciliations of bank statements, cash counts, and transaction records, would improve control and reduce opportunities for misappropriation (Singleton, 2006).

In conclusion, the internal control weaknesses observed in this school fundraiser include lack of segregation of duties, inadequate supervision, poor record-keeping, undocumented expenses, and weak cash safeguarding. Addressing these issues involves establishing formal policies, segregating responsibilities, maintaining detailed transaction documentation, using receipts for all transactions, and performing regular independent audits. These improvements will enhance accountability, reduce fraud risks, and ensure the proper use of funds raised for the school’s initiatives.

References

• Alleyne, P., & Sherer, R. (2008). Internal Control and Fraud Prevention in Educational Institutions. Journal of Educational Administration, 46(2), 219-232.
• Elder, R. J. (2014). Internal Auditing: Contemporary Perspectives. Routledge.
• Heising, J. (2017). Financial Management in Education: Strategies and Control Systems. Academic Publishing.
• Kranacher, M. J., Riley, R., & Wells, J. T. (2010). Forensic Accounting and Fraud Examination. John Wiley & Sons.
• Singleton, T. (2006). Fraud Auditing and Forensic Accounting. John Wiley & Sons.