Business and CPA Management
Case

Healthy Steps Charity (HSC) was founded 30 years ago by Vlad Sabakin, a business entrepreneur who has a passion for health and fitness. HSC is a private-sector not-for-profit organization that provides free fitness classes, use of exercise equipment, and nutritional advice to mature low-income residents. With humble beginnings, HSC now has drop-in fitness centers in all the major Canadian cities. HSC’s head office, which is attached to its first fitness centre, is located in Canada’s fastest growing city, Barrie, Ontario, where HSC was founded and where Vlad still lives.
Over the past year HSC has experienced substantial turnover at its head office. With the local economy struggling, many families have left the city of Barrie, resulting in vacancies at HSC’s head office. Even though HSC has managed to fill these vacancies quickly, due to the high rate of local unemployment, the new hires often do not have the ideal qualifications. In particular, the accounting department has been in disarray, resulting in questionable accounting information being produced. HSC is one of the largest employers in Barrie.
HSC is a registered charity with the CRA and issues official receipts to its donors. HSC has been fortunate enough to receive government support, as well as corporate and individual donations from across Canada to achieve all its initiatives. Since day one, the Barrie Healthcare community continues to be a big supporter of HSC. HSC has received a number of endowment contributions in the past and continues to receive donations restricted in use, for example to be used only for the purchase of fitness equipment. In order to qualify for government grants, audited financial statements are required using the restricted fund method.
You, CPA, were recently hired to fill the vacant CFO position at HSC’s head office. In your first meeting with Carla Jenkins, HSC’s executive director, she advises you of HSC’s priorities (see Exhibit 1) and provides you with the current up-to-date variance report (Exhibit 2) as well as the most recent statement of financial position (Exhibit 3). Carla would like you to prepare a memo to her, addressing her concerns and any other matters you deem important.