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M3A3 1091689

Date: March 1, 2014
To: SLP Moderators and Group Members
Re: Middletown Community Centre
I agree that Middletown Community Centre (MCC) should adopt Fund Accounting
method as it provides clarity, segregation of funds and visibility of the use of each fund.
This financial reporting method will meet the overall information needs of MCC’s key
Below are additional factors of how fund accounting helps to meet the information
needs of MCC’s stakeholders:
1. Board of Directors and management team who are responsible for the
stewardship of MCC’s resources and make strategic decisions, can easily
monitor and closely examine individual funds for each program, review the
performance of each fund and manage budgets

2. Bank who will finance half of the needed funds, can easily determine and track if
the funds provided meets the specific purpose and also to accurately know the
MCC’s solvency status

3. Government who requires financial information and annual filing of financial
statements, can easily track MCC’s spending whether it is in accordance with
laws and regulations

4. Members and user fees who help boost the finances of MCC and have general
interest on how MCC is performing, can easily determine how their fees have
been used

M3A3 1091689

5. Donors can easily determine whether their donations have been spent

6. For volunteers who support MCC with service, MCC should include costs of
wages for the services rendered
However, the executive team who has little background in financial accounting will find
fund accounting as more complex and therefore might require additional time,
resources, training and detailed interpretation of financial statements.

I agree that Middletown Community Centre (MCC) should change its accounting
method to fund accounting. This method will provide detailed and accurate financial
statements and will satisfy the overall information needs of the external and internal
The use of fund accounting gives the following additional advantages to MCC’s
- Internal users:
 Board of Directors and executive committees – can track and review the
performance of each activity, manage budgets easily and be able to
conduct benchmarking with other non-profit organization in the industry.
This information would be able to help them make strategic decisions.
 Members who have voting rights - can easily identify and track how their
fees are being spent and how much funds are being used up for each
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- External users:
 Bank who will provide half of the financing needed - can rely on the
accuracy of financial statements that depicts MCC’s solvency position. In
addition, bank will have confidence that MCC would be able to meet their
requirements of audited financial statements
 Donors - can track the movement of their donations restricted for specific
 Government can assure that their reporting requirements and detailed
financial information needs will be satisfied by MCC’s financial statements
under fund accounting reporting framework
Although the use of fund accounting addresses most of the stakeholders information
needs and reporting issues, additional training, time and resources might be incurred so
that the board and management who have little accounting background, can better
understand the complexities associated with fund accounting.