Accounting Services
For Theta Chi Fraternity
Delta Upsilon Chapter at
Arizona State University

Prepared By Wade Sarchet
Arizona State University
W.P Carey School of Business
Member of Theta Chi Fraternity

Report Distributed Dec 7th, 2012

Prepared for Jordan White
President of Theta Chi
At Arizona State University
2402 E 5th Street
Tempe, AZ 85281
December 7, 2012

Jordan White
Delta Upsilon Chapter President
Theta Chi Fraternity
1424 S. Jentilly Lane
Tempe, AZ 85281

Dear Mr. White:

This is a report regarding the current financial situation of the Delta Upsilon Chapter of Theta Chi Fraternity at Arizona State University in Tempe, Arizona (hereinafter, “Theta Chi,” or the “Fraternity”) and a proposal to improve management of Fraternity funds.

The Fraternity has been in existence since the Fall of 1956. Our chapter is among the largest and strongest active fraternities at Arizona State University and our philanthropic events are much appreciated throughout the community. Despite such success, it has been brought to my attention that we have been facing financial difficulties over the past several semesters, and I believe that with some assistance, we will struggle no more.

I am proposing the professional service of an accountant to assist our Treasurer. The addition of this third party service will provide the Fraternity with a checks and balances system as well as professional documentation of all fraternity funds available to the all brothers.

The accountant will not use Fraternity funds for personal use and will implement a sense of security among the Fraternity that will entice more brothers to pay their full amount of dues.

I have been in contact with several CPA firms in the area. Hiring an accountant isn’t cheap; however, it will save the Fraternity money over time and instill faith in the system for brothers paying dues.

Please review the attached proposal for hiring an accountant for the Fraternity.
Thank you for your time and consideration. Please contact me at mwsarchet@yahoo.com, or 510-673-1829 (mobile) to discuss this proposal.

Love and Respect.
Sincerely,

Wade Sarchet

Table of Contents
Page

Executive Summary…………………………………………………………………….…4

Introduction…………………………………...…………………….…………………….4 Background………………………………………………………………………..4 Problem-Purpose…………………………………………………………………..4 Significance………………………………………………………………………..5 Scope………………………………………………………………………………5 Sources-Method…………………………………………………………………...5

Proposed Program…………………………………………………………………...…….5

Proposed Plan……………………………………………………………………………..6 What will an account provide?................................................................................6 Selecting an accountant…………………………………………………………...6 Investing in an accountant………………………………………………………...7 Planned Schedule…………………………………………………………………………8

Treasurer……………………………………………………………………………..……8

Summary- Conclusion……………………………………………………………….……9

List of Figures

Figure 1……………………………………………………………………………………7

Figure 2……………………………………………………………………………………7

Executive Summary

This report explains financial issues within the Fraternity, describes the need for a Certified Public Accountant to assist the Fraternity’s Treasurer with his responsibilities. This report will address the current financial status of the Fraternity, the discrepancies involving the budget, candidate CPA firms, the costs involved in hiring an accountant, and the benefits associated with proper management of Fraternity funds.

Introduction

Background

The Delta Upsilon Chapter of Theta Chi Fraternity at Arizona State University has been an active chapter for more than fifty years and has gained the respect of both the University and the surrounding community by operating in a professional manner. With approximately sixty-five brothers currently living at the Fraternity house, and brothers who live elsewhere, our chapter includes over one hundred active members who are able and willing to pay dues. Money paid to the Fraternity (dues) covers national recognition and membership fees, insurance expenses, rush apparel, housing improvement projects, philanthropic events and socials with sororities. Dues range from six-hundred to nine-hundred dollars depending upon seniority. Unfortunately, when our Treasurer collects the dues and suddenly comes into control of thirty thousand dollars or more, is when problems occur. Although it is not required that a brother pay dues to remain a member, if he wishes to participate in Fraternity activities he must pay his dues.

Problem-Purpose

As a brother of Theta Chi, I have trust in every one of my brothers. However, when dealing with thousands of dollars, and without proper accounting procedures, it is possible for small sums to be inadvertently misappropriated and unaccounted for. Each semester brothers pay dues and that money funds the events held over succeeding months. Recently, however,, very few events have been held while the account balance has been decreasing, which leads to the question, “Where is our money going?”.

Accusations of wrongdoing have been made based on the opinions of several brothers within our chapter. Whether or not these are true, we do not know. What we do know is that when the Fraternity asked for documentation of expenditures, none were provided. When asked where the funds are being spent, the Treasurer replied, without providing appropriate documentation, that they have gone towards old debt and other national fees from previous semesters. Regardless of how our money is being spent, I believe that the responsibility of Fraternity Treasurer is too great for a twenty year old college student without the supervision of a professional bookkeeper or accountant.

Significance

It is due to these issues that I strongly believe an accountant is what our Fraternity needs in order to more carefully track the source and usage of Fraternity funds. I guarantee that if this proposal is implemented, more brothers will pay dues because they know their money will be spent appropriately and with a full accounting.

Currently, the Treasurer is the only person with access to our Fraternity’s money. He has a safe in his room filled with cash and a Fraternity debit card. The ready access to so much cash, with no system of checks and balances, is causing monies to be spent for unknown purposes, and brothers who are refusing to pay dues because of the growing distrust in the executive board.

Scope

The intention of my proposal is to create a reliable and transparent system for managing Fraternity money by hiring an accountant, and thereby clear the cloud of doubt and suspicion held by certain Fraternity members regarding the proper use of Fraternity funds.

Sources-Methods

Important things to consider in this proposal are mainly budget oriented, which include: the amount of money collected this past semester from brothers who paid dues; what events were planned; which events were actually held; and, how much money is considered to be unaccounted for. Other things to consider include the cost to employ an accountant each semester, the money that would be saved because of external management and the increase in due paying brothers if an accountant were hired. It is also important to recognize that this proposal is meant to improve the overall well-being of our Fraternity, and provide for the proper accounting of the Fraternity’s funds, not to assign blame or cause an issue with any one brother.

Proposed Program

This proposal is between me, a Certified Public Accountant, and the Delta Upsilon Chapter of Theta Chi Fraternity at Arizona State University. I will assist in the search and selection of a trustworthy accountant who will assist our Treasurer in properly managing the Fraternity’s money and accounts each semester, and also in providing documentation, such as copies of the budget and cash flow statements.

Proposed Plan

What will an accountant provide?

An accountant is a practitioner of accountancy, which is the measurement, disclosure or provision of assurance about financial information that helps managers, investors, tax authorities and others make decisions about allocating resources. Finding the right accountant will not only save our Fraternity time and money, but will also help us grow financially. The accountant will provide the business acumen that has been absent recently within our Fraternity. The accountant will also create an overall sense of security and trust within the chapter.

A budget is a financial plan; a list of all planned revenues and expenses. It is a plan for saving, borrowing and spending. Theta Chi has been unable to produce a budget because our money hasn’t been managed properly. With the assistance of an accountant, the Treasurer will be able to develop a budget and present it to our chapter during meeting. We can then vote to approve the budget and have the accountant carry out our desired expenditures.

Debt is an obligation owed by one party to a second party; usually this refers to assets granted by the creditor to the debtor, but the term can also be used metaphorically to cover moral obligations and other interactions not based on economic value. The most common reason given for our chapter’s unaccounted funds is that they went towards our Fraternity’s debt. With an accountant, we will be able to see via cash flow statements how much money went towards debt repayment, and eventually our debt will be paid off. The only reason our chapter accrued debt in the first place was because we were spending more than the Fraternity had in its account, which an accountant will prevent from happening.

I personally do not appreciate when things are taken from me, and I am assuming that applies to the majority of the brothers. When I give a large sum of cash in exchange for a semester’s worth of events, I expect to get what I’ve paid for. It makes me and many other brothers reluctant to pay dues when we are not receiving what we are paying for. With an accountant, we will no longer have to worry about fraud and our money being spent on other things.

Selecting an Accountant

Initially, if we are willing to take this proposal to the next level, I will arrange for several CPAs to come to our chapter meeting and explain to us their services and how they would provide assistance. They will also explain what it is they would charge to manage our accounts. I believe this will, if this proposal has not already, convince the brothers that this is what ou chapter needs in order to succeed as a fraternity. We can then select the accountant that we feel best suits our needs and carry on from there.

Investing in an Accountant

It may seem unnecessary to some that I am proposing we hire an accountant like many businesses do, but in reality it is not. Our Fraternity brings in nearly one-hundred thousand dollars annually, none of which has been officially accounted for. The Treasurer may know some figures, but as a large organization we need more. If Theta Chi wants to realize its potential, it is going to take some reconstruction. All of my brothers are great individuals, and I wouldn’t ever accuse any of them of malfeasance; however, in the world of business, we must make a careful accounting of the monies that are entrusted to us. It is only necessary that an accountant is hired. It will eliminate any suspicions that have been raised, and will allow for the Fraternity to run more smoothly. I have done some research and created some scenarios to demonstrate the benefits of hiring an accountant.

Figure 1

* On average a brother pays $700 per semester. * Roughly 55/100 potential active brothers paid their semester dues. * That equates to $38,500 in dues each semester. * An accountant at most charges $500 an hour. * We need our accountant once or twice a month. * Total fees are then $2,000/ month or $8,000 per semester. * Leaving $30,800 to spend for Fraternity activities.

If we implement this proposal and an accountant is hired, more brothers will pay dues.

Figure 2

* On average a brother pays $700 per semester. * Roughly 80/100 potential active brothers pay their semester dues. * That equates to $56,000 (+$17,500) in dues each semester. * Less the $8,000 in total fees for the accountant. * Leaving $48,000 to spend for Fraternity activities.

As you can see, if we hired an accountant, not only would they basically be paying their own fees because of the increase in brothers paying dues, but we are left with almost $10,000 more in funds per semester.

Plan Schedule

With this semester coming to an end, now is the time to begin planning for next semester. With that in mind, we have several more chapter meetings before we leave for Winter break; and, that leaves us with enough time to present this proposal to the chapter as a whole.

Sunday December 9, 2012……….……………………… Present Proposal to our chapter

Sunday December 16, 2012……………………. CPAs present to chapter/ votes are taken

Monday January 7, 2013………………………………………….. Spring semester begins

Sunday January 13, 2013………………………………..…… Accountant presents budget

Sunday January 20, 2013…………………………………..…… Final budget is approved

The 1st day of each month……………. Cash flow statements are provided to the chapter

Treasurer

The executive position of Treasurer will not be replaced by the accountant. Although he will be held less responsible for the accounting for the Fraternity’s money, he is still expected to collect dues and make reports during meetings. He will relay notes from the accountant and assist in any way possible.

Summary and Conclusion

As I have mentioned previously in this proposal, the Delta Upsilon Chapter of Theta Chi Fraternity at Arizona State University has financial issues; problems ranging from poor record keeping to possible misappropriation. In order to turn things around and help our Fraternity prosper, a change needs to be made. We need a professional to manage our money. Thirty thousand dollars does not belong in the hands of a young adult with no experience managing such funds. Due to the unorganized nature of the situation, and the possible disappearance of Fraternity monies, many brothers have opted not to pay these past few semesters, which is sending the wrong message to new initiates.

I strongly believe that if we hired an accountant to manage all of our fraternity’s finances, money would not go missing and more brothers will pay dues because they will be reassured that their money is being spent appropriately. Not only will an accountant relieve the Fraternity of the drama due accusations of misappropriation, but that person will help us raise more money in the long run. An accountant will cut down on unnecessary expenses and bring in more money as well. Yes, we will have to pay for their services, but overall, these services will be paying for themselves.

Monthly statements will be provided for to each member. Statements will include how much was spend the previous month, and on what it was spent. It will also include the amount of any money we’ve collected. Hiring an accountant will decrease the likelihood of funds being misappropriated through lack of transparency and accountability. Security will be ensured by installation of appropriate checks and balances, and the Fraternity will be able to concentrate on issues other than the possibility of internal fraud. I make this proposal because I believe we truly need to improve the accounting practices of the Fraternity.