Question

1. When Lorna became the executive director of a small, single-purpose Head Start agency, she
was impressed with the collegial atmosphere in the organization. People pitched in to help
wherever they were needed, so it wasn’t unusual that the agency’s receptionist was always
willing to pick up the agency mail from the Post Office box and open and distribute it. This was
a benefit to the two-person fiscal office that was made up of the fiscal director and the
bookkeeper, who together managed the office. The other agency staff members, who didn’t
want to have to leave the office in the middle of the day to fetch the mail, appreciated the
receptionist’s efforts. Direct Post Office mail delivery wasn’t an option in the community, so
the agency was resigned to mail pick up. Besides, they liked the flexibility of picking up mail
early, if needed.

After serving in her position for about nine months, Lorna received a call from the large
grocery store chain where the agency bought most of its food for preparing the meals it served
to the hundreds of children in the agency’s care. The store representative wanted to know why
the agency had failed to pay invoices on its open purchase order system. The store had records
showing that the agency was in arrears by about $8,000.

Lorna immediately talked with the fiscal manager to determine why payments were late. After
conducting research, he showed Lorna that all of the bills received had been paid. He called the
store for more information. The store provided copies of purchase orders that matched the
outstanding invoices. All the purchase orders had been signed by the receptionist. She later
admitted that she had been buying her family groceries using the agency purchase order
system; and when invoices matching these purchase orders came in the mail, she intercepted
them so that the fiscal office never received them.

1. Define the problem/control issue
2. State why it's a problem/what could go wrong because of the issue
3. Classify the issue as control deficiency, significant deficiency, or material weakness based on the magnitude and likelihood of failure or potential failure
4. State whether it is a design deficiency or an operating deficiency based on how the control failed/how it could potentially fail
5. Make a recommendation to fix the issue
6. State how your recommendation will benefit the client/fix the problem.

Answer 1

1) The problem is the leadership style being followed in the company is lassie-faire. The leader has no control over the people and their duties. There is no monitoring system as well.

2) The problem is critical to the survival of the organization. This problem has the potential of disturbing the entire organization and draining it financially. Also, the reputation of the firm is at stake. And, this matter can directly impact the organization's profit margins.

3) The issue is a control deficiency issue. The leadership is ineffective in monitoring and controlling the processes and employees.

4) Based on how the control failed, it can be classified as operating deficiency. The reason being, the operations or functioning of the organisation has failed to capture the illegal activity of Lorna.

5) There has to be a formal structure to ensure proper functioning of the organization. Each person must be allotted tasks and must be responsible for them. If someone else is helping, the responsibility is not shifted. Also, there must be a monitoring system, else employees such as Lorna are bound to commit frauds or errors which will not only financially drain the organization, but also tarnish it's culture and reputation.

6) My recommendation will help the organization become more strong and structured. There will be a sense of responsibility in all employees. Also, they will be cautious and be afraid to get involved in any activities such as the above.