The Sassawinni First Nation is located adjacent to a town in northern Saskatchewan. The Nation is

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The Sassawinni First Nation is located adjacent to a town in northern Saskatchewan. The Nation is under the jurisdiction of the federal government’s Aboriginal Affairs and Northern Development Canada, and for years has received substantial funding from that department. The money has been used mainly to fund housing construction on the reserve and to provide maintenance payments to families that do not have a source of income. The houses are the property of the Sassawinni First Nation, and the band council allocates them to families on the basis of need. In addition to the housing, the band has been able to build a recreational centre, which also contains the band’s council chamber and administrative offices. A few years ago, some council members with an entrepreneurial flair persuaded the Nation’s members to build a shopping centre containing a large grocery store and several small specialty stores. The shopping centre is located on reserve land, and the band provided approximately 20% of the financing, with the balance coming from a provincially guaranteed bank loan. The shopping centre operates under the name Great Northern Centre Inc., and the Sassawinni First Nation owns 100% of its outstanding common shares. The centre has been a finan- cial success, drawing a large proportion of its business from the adjoining town and surrounding agricultural area. Not only has it been a source of employment for First Nation families, but it has also generated enough cash to keep its loan payments current and has recently been able to declare and pay a dividend. Flushed with its success, the Sassawinni First Nation has submitted to the pro- vincial government a business plan to construct a gambling casino on band prop- erty. It will be an incorporated entity and will be under the complete control of the Nation, subject only to provincial government gambling regulations. Up to the present time, the band has provided stewardship reports to the Department of Indian Affairs and Northern Development that outline the funds received from the federal government and the manner in which they have been spent. Government auditors have verified these statements, but no formal audit reports have been considered necessary. Now, with all of this new business activ- ity taking place, proper audited financial statements will be required for the next fiscal year. You are employed by Fox, Fox, and Jameson, the public accounting firm that is the auditor of Great Northern Centre Inc. Your firm has just been appointed auditor of Sassawinni First Nation, and this will be the firm’s first audit of an organization of this nature. Jane Fox, the managing partner in charge of this audit, has asked you to provide her with a written report outlining the specific account- ing principles that will be applicable in this case. “I am going to have to catch up quickly,” she said. “I am aware that there have been some changes in GAAP recently, but because our firm has not been involved with audits of this nature I have not paid much attention to what has been going on. One of the benefits of hiring new university grads like yourself is that you provide us with up-to-date technical knowledge.” You have just returned from interviewing the band chief, Joe Sullivan. “I am absolutely certain that we are going to get this casino,” he said. “The announce- ment will be made by the premier within two weeks, and I have received informa- tion from a knowledgeable insider that we will be on the list of First Nations to be granted casino licences. It will be a financial godsend to our people, employing well over 100 band members and providing us with substantial profits, a portion of which will have to be devoted entirely to accommodations in accordance with the licensing agreement. This will allow us to build more housing for our mem- bers, but with all the jobs that we now have, we will probably start charging rent for housing provided to those with jobs. Not only that, we have three permanent employees who have been with us for a while, and council has instructed me to investigate the possibility of providing a pension plan for them as well as for the permanent employees in our business enterprises.” When asked about the band’s accounting records, Sullivan responded, “We have a very good bookkeeper, and the government auditor has always compli- mented her on the accuracy of her records. She provides timely statements show- ing us how much we have to spend. Our records are all here and go back at least 20 years. I would just as soon carry on the way we have been doing things, but with this new casino we’ll have to provide audited financial statements to the two governments—and, of course, to our members.” Required: Prepare the report requested by your firm’s managing partner. Confidence Private is a high school in the historic city of Jeanville. It engages stu- dents in a dynamic learning environment and inspires them to become intellectu- ally vibrant, compassionate, and responsible citizens. The private school has been run as an NFPO since its inception 20 years ago. In an effort to attract sports-minded students from a variety of economic backgrounds, Confidence initiated a fundraising program in July Year 8, to raise $5 million to build a new gymnasium, swimming pool, and fitness centre, and to create an endowment fund for scholarships. The fundraising campaign was a huge success. By May 31, Year 9, the school had received the following contributions: 1. $2.0 million in cash contributions specifically designated for construction and maintenance of the facilities. 2. $3.1 million in cash contributions specifically designated for the scholarship fund. 3. Fitness equipment valued at $0.2 million. On June 15, Year 9, at the graduation ceremony, the headmaster thanked the parents, students, alumni, and staff for all their support, and officially closed the capital campaign. He provided the following details of the campaign: • The construction of the facility was nearing completion and would be ready for classes in September Year 9. The final cost for the facility would be approx- imately $1.9 million. • The contribution of fitness equipment would more than adequately equip the fitness centre. • $3.1 million in cash would be invested and managed by a professional invest- ment adviser. The income earned on the endowment fund would be used to provide schol- arships to students. Five students would receive full or partial scholarships in the fall of Year 10. Each year thereafter, it was expected that 25 to 30 students would receive full or partial scholarships to offset the annual tuition fee of $15,000. You are proud to be an alumnus of Confidence. You attended the graduation ceremony. At the garden reception after the ceremony, you accepted the headmas- ter ’s request to help out with the accounting for the capital campaign and related events. He was unsure of whether the school should use the restricted fund or deferral method of accounting for contributions. You agreed to provide a memo in which you would provide recommendations for accounting policies to be applied for the year ended June 30, Year 9, and for future years when the facilities are being used and the scholarships are disbursed. Required: Prepare a memo for the headmaster. Explain the rationale for your recommenda tions and state your assumptions. Dec 04 2014 07:52 AM

 

Solution ID:609190 | This paper was updated on 26-Nov-2015

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