Subject: Inspection Report (I)

From: Hongguang Zhou <[email-masked]>
Date: Fri, 19 Nov 1993 02:10:21 -0500 (EST)

Dear Colleagues and CSS:

The following is Part I of Inspection Report on the site-examination of
the IFCSS HQ financial operation, prepared by Mr. Yan Bai, the guest
consultant to the Council Financial Inspection Team. The Progress Report from
the Inspection Team is mainly based on it.

Thank you for your attention.

Zhou Hongguang  
Coordinator
Council Financail Inspection 

---------- Forwarded message ----------
From: [email-masked]
To: [email-masked]
Subject: Inspection Report (I)

Part I:

			     OPINION REPORT
			OF FINANCIAL STATEMENT AUDIT
				11/11/93

	We have audited the general purpose financial statements for 
Fiscal Year 1992-93 and Fiscal Year 1993-94 (1st Quarter) of the IFCSS, as of 
September 30, 1993. These financial statements are the responsibility of the
Executive Office of the IFCSS. Our responsibility is to express an opinion on 
these financial statements based on our audit.

	We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the general purpose financial statements are
free of material misstatement. An audit includes examing, on an on-site
inspection basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by the Executive Office of the IFCSS, as 
well as evaluating the overall general purpose financial statements 
presentation. We believe that our audit provides a reasonable basis for our 
opinion.

	In our opinion, the general purpose financial statements referred to 
above does not present fairly, in most material respects, the financial position
of the IFCSS, as of September 30, 1993, and the results of its operations, and 
the changes in financial position of the IFCSS's budget for the entire fiscal 
period of 1993-1994 in conformity with generally accepted accounting principles.

	Our audit was made for the purpose of forming an opinion on the general
purpose financial statements taken as a whole. Our concrete comments with
regard to both combining and individual fund and account and the financial
statements as a whole are appended as evidential matter and as recommendations
for further operating imporvement.

Financial Inspection Team,
Council of the IFCSS

				Appendix

1. The financial statements for the above mentioned two fiscal periods of time
are incomplete. Cash Flow Statements are not prepared to reflect available 
working capitals.

2. No financial statements are made for the restricted accounts--June 4th, CSS,
Insurance, and NED for Fiscal Year 1992-93. Therefore, the primary users of the
financial statements, namely the Council, donors, and investors, have no way 
of knowing the financial situation affected by those accounts and the changes
in the accounts themselves..

3. Common and necessary categories of both Operating Statements (also called
Income Statement) and Balance Sheets are omitted to the extent of mispresenting 
the entire financial situation of the IFCSS. For instance, Operating Statements
miss Beginning Fund Balance; Balance Sheets miss Noncurrent Assets.

4. In the accounts presented in the financial statements, Ending Fund Balances
of the previous fiscal period do not match with Beginning Fund Balances of the 
following time period. This does not accord with the time-period assumption of 
accounting.

5. The annual information return with the IRS for "unrelated business income"
on the Form 990 is inadequate in support of the IFCSS's tax-exempt status.
Since the IFCSS, Foundation Account and the IFCSS, Inc. Account are different  
respectively for not-for-profit and for-profit activities, "unrelated business
income" should be file under Form 990-T.

6. Residual equity transfers of such program accounts as CSS, 5th Congress,
CSPA, and Flood Relief are not reported in the financial statements, thus
distorting spendable financial resources.

7. Capital outlays (assets purchased at and above $500) are not reported as a
reduction of financial resources in the Operating Statements. Nor are the
depreciation expenses reported.

8. The cash amount in the financial statements are reported while the bank
reconciliation is not conducted, thus generating incorrect cash balance. A
bank reconciliation must be made immediately after each bank statement is
received.

9. Some financial data are not verifiable due to a lack of availability of 
evidence, i.e., original invoices and receipts. This leads to the difficulty
of ascertaining the validity of accounting transactions and balances
reasonable doubt.

10. Miscellaneous items (revenues and expenses) are overstated to create
unnecessary uncertainty for financial forecasting. Miscellaneous items can
be further grouped according to ordinary categories.