franklinton association for challenged citizens, inc ...file/0000ce37.pdf(with 2014 summarized...

Franklinton Association for Challenged Citizens, Inc.

Annual Financial Statements

As of and for the Year Ended June 30, 2015 (with 2014 summarized comparative information)

BRUCE HARRELL & COMPANY CERTIFIED PUBLIC ACCOUNTANTS

A Professional Accounting Corporation

Franklinton Association for Challenged Citizens, Inc. Annual Financial Statements


TABLE OF CONTENTS

Page

Independent Auditor's Report 3

Financial Statements:

Statement of Financial Position 5

Statement of Activities 6

Statement of Functional Expenses 7

Statement of Cash Flows 8

Notes to the Financial Statements 9

Other Supplemental Information:

Schedule of Compensation, Benefits, and Other Payments to Agency Head 17

Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 18

Schedule of Findings and Responses 20

Schedule of Prior Year Findings and Responses 24

Bruce C.Harrell, CPA

Dale H. Jones, CPA Kristi U. Bergeron, CPA Jessica H. Jones, CPA Brandy Westcott Garcia, CPA

INTERNET www.teamcpaxom

MEMBERS American Listitute of CPAs Society of Louisiana CPAs

109 West Minnesota Park Park Place Suite 7

Hammond, LA 70403 VOICE; (985) 542-6372

FAX: (985)345-3156

BRUCE HARRELL awi/COMPANY

KENTWOOD OFFICE P.O. Box 45 - 909 Avenue G

Kentwood, LA 70444 VOICE: (985) 229-5955

FAX: (985) 229-5951

CERTIFIED PUBLIC ACCOUNTANTS A Professional Accounting C«p(xatlon

Independent Auditor's Report

To the Board of Directors of the Franklinton Association for Challenged Citizens, Inc. Franklinton, Louisiana

We have audited the accompanying financial statements of the Franklinton Association for Challenged Citizens, Inc. (a non-profit organization) (the "Association"), which comprise the statement of financial position as of June 30, 2015, and the related statements of activities, functional expenses and cash flows for the year then ended, and the related notes to the financial statements.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amoimts and disclosiures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers intemal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit proeedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effeetiveness of the entity's intemal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opmion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Franklinton Association for Challenged Citizens, Inc. as of June 30, 2015, and the changes in its net assets and its cash flows for the year then ended in accordance with accoimting principles generally accepted in the United States of America.

BRUCE HARRELL & CO. CERTIFIED PUBLIC ACCOUNTANTS A Professional Accounting Corporation

Franklinton Association for Challenged Citizens, Inc. Page 2

Other Matters

Report on Summarized Comparative Information

We have previously audited the Association's 2014 financial statements, and we expressed an unmodified opinion on those audited financial statements in our report dated April 22, 2015. In our opinion, the summarized comparative information presented herein as of and for the year ended June 30, 2014, is consistent, in all material respects, with the audited financial statements from which it has been derived.

Other Supplemental Information

Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying schedule listed as Other Supplemental Information in the Table of Contents is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional proeedmes in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated January 11, 2016, on our consideration of Franklinton Association for Challenged Citizens, Ine.'s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Franklinton Association for Challenged Citizens, Ine.'s internal control over financial reporting and compliance.

Bruce Harrell & Company, CPAs A Professional Accounting Corporation Kentwood, Louisiana

January 11, 2016

Franklinton Association for ChaUenged Citizens, Inc. Statement of Financial Position

As of June 30, 2015 (with 2014 summarized comparative information)

2015 2014 Assets

Current Assets: Cash and Cash Equivalents $ 932,932 $ 792,820 Investinents 149,450 99,200 Receivables, Net:

Accounts 201,054 269,283 Total Current Assets 1,283,436 1,161,303

Property, Plant, aid Equ^ment Land 10,000 10,000 Property, Plant and Equ^ment, Net 425,835 444,939

Total Property, Plant, and Equ^ment 435,835 454,939

Total Assets $ 1,719,271 $ 1,616,242

Liabilities Current Liabilities (Payable From Current Assets):

Accounts Pa>nble $ 33,387 $ 22,834 Accrued Salaries 74,547 10,121 Lorg Term Debt - Current Portion 6,457 5,627

Total Current Liabilities (Payable From Current Assets) 114,391 38,582

Long Term Liabilities: Lorg Term Debt 11,950 17,980

Total Lorg Term Liabilities 11,950 17,980

Total Liabilities 126,341 56,562

Net Assets Unrestticted 1,592,930 1,559,680 Tenpora"ity Restticted - -Permanent^ Restticted - -

Total Net Assets 1,592,930 1,559,680

Total Liabilities and Net Assets $ 1,719,271 $ 1,616,242

The accompanying notes ^e an integral part of this statement.

Franklinton Association for ChaUenged Citizens, Inc. Statement of Activities

For the year ende d June 30,2015 (widi 2014 summarized conp arative information)

Tenporarily Permanent^ Totals Unrestricted Restricted Restricted 2015 2014

Operating Revenues Public Sipport

Medicaid $ 2,054,685 S 1 1 S - $ 2,054,685 $ 2,308,109 Pro\ider Contacts 152,165 • • 152,165 146,585 ConMbutions 8,726 • • 8,726 4,789

Service and Fee Revenue 69,992 • • 69,992 63,888 Investont Incon^ 1,071 • • 1,071 923 Odier Revenues • • • • • Net Assets released fromresttictions • • • • •

Total Operating Revenues 2,286,639 • • 2,286,639 2,524,294

Operating Expenses Program Services Managen^nt and Generd

2,102,048 158,059

• • 2,102,048 158,059

2,310,056 172,847

Total Operating Expenses 2,260,107 • • 2,260,107 2,482,903

Change inNet Assets from Operations 26,532 . . 26,532 41,391

Nonoperating Revenues and Expenses Insurance Proceeds 6,718 6,718 Gdn on Disposd of Property and Eqiipn^nt • • • • 3,400

Change inNet Assets 33,250 • • 33,250 44,791

TotalNet Assets, Beginning 1,559,680 . . 1,559,680 1,514,889

TotalNet Assets, Ending $ 1,592,930 S 1 1 s - $ 1,592,930 $ 1,559,680

The acconpairdrg notes are an integrd part of this staten^.

Franklinton Association for Challenged Citizens, Inc. Statement of Functional Expenses Forthe yearended June 30,2015

(with 2014 summarized comparative information) 2015

Center

Supported Independent

Living

Total Program Services

Management and General Total 2014

Expenses Salaries and Wages $ 386,290 : $ 1,194,684 $ 1,580,974 $ 137,476 $ ; 1,718,450 J e 1,859,099 Payroll Taxes 30,106 93,108 123,214 10,714 133,928 160,769 Client Payroll 30,440 - 30,440 - 30,440 37,726 Cost of Self Generated Revenue - - - - - 856 Depreciation 15,756 32,688 48,444 - 48,444 40,485 Insurance 53,326 42,982 96,308 5,824 102,132 100,820 Interest - 1,316 1,316 - 1,316 1,958 Professional Fees 17,884 17,883 35,767 - 35,767 38,461 Rent 16,172 4,921 21,093 - 21,093 34,733 Repairs ^d Maintenance 4,354 717 5,071 - 5,071 4,509 Sipplies 31,942 13,715 45,657 - 45,657 44,802 Telephone 5,676 2,188 7,864 684 8,548 9,273 Trainirg - 2,966 2,966 - 2,966 3,178 Transportation 48,291 3,442 51,733 - 51,733 77,059 Utilities 18,741 7,572 26,313 2,288 28,601 27,360 Bad Debt - - - - - 10,500 Otiier 7,441 17,447 24,888 1,073 25,961 31,315

Total Expenses $ 666,419 : $ 1,435,629 $ 2,102,048 $ 158,059 $ ; 2,260,107 J e 2,482,903

The acconp^yirg notes are an integral part of this statement.

Franklinton Association for Challenged Citizens, Inc. Statement of Cash Flows

For the years ended June 30, 2015 (with 2014 summarized comparative information)

2015 2014 Cash Flows From Operating Activities

Change in Net Assets $ 33,250 $ 44,791 Adjustments to reconcile change in net assets to net cash provided by operating activities

Depreciation 48,444 40,485 (Gain) Loss on sale of property - (3,400) Changes in operating assets and liabiKties

(Increase) decrease in receivables 68,229 (64,359) Increase (decrease) in accounts payable 10,553 (211) Increase (decrease) in accrued payables 64,426 10,121

Net Cash Provided by Operating Activities 224,902 27,427

Cash Flows From Investing Activities Purchases of property (29,340) (66,383) Proceeds from disposal of property - 3,400 Purchases ofinvestinents (50,250) -

Net Cash (Used) by Investing Activities (79,590) (62,983)

Cash Flows From Financing Activities Repajinent of debt (5,200) (5,322)

Net Cash (Used) by Financing Activities (5,200) (5,322)

Net Cash Increase (Decrease) in Cash and Cash Equivalents 140,112 (40,878) Cash and Cash Equivalents, Beginning of Year 792,820 833,698 Cash and Cash Equivalents, End of Year $ 932,932 $ 792,820

Supplemental disclosures of cash flow information Cash paid during tiie year for interest 1,316 $ 1,958

The accon^anjTng notes are an integral part of tins statement.

Franklinton Association for Challenged Citizens, Inc. Notes to the Financial Statements


Introduction

The Franklinton Association for Challenged Citizens, Inc. (the Association) was established in 1968 to assist individuals with disabilities in the Town of Franklinton, Louisiana, and the surrounding communities to increase personal independence and to facilitate an individual's integration into the community. The Association currently services approximately 90 clients and utilizes a staff of approximately 60 full and 35 part time employees. The Association provides two major programs: the work programs at the Washington Parish Activity Center and the Supported Independent Living Program.

At the Activity Center, clients are provided daily transportation to and from the center as needed to participate in vocational and daily living skill education in a structured supportive environment. The Supported Independent Living Program provides in-home support for individual clients, designed to improve or maintain the individual's ability to take care of his or her own health and physical needs through direct training. In some cases clients require twenty-four hour care.

1. Summary of Significant Accounting Policies

A. Restrictions on Net Assets

Revenues, expenses, gains and losses are classified based on the existence or absence of donor-imposed restrictions. Accordingly, the net assets of the Association and changes therein are classified and reported as follows:

Unrestricted net assets - Net assets that are not subject to any donor-imposed stipulations.

Temporarily restricted net assets - Net assets subject to donor-imposed restrictions on their use that may be met either by actions of the Association or the passage of time.

Permanently restricted net assets - Net assets subject to donor-imposed or other legal restrictions requiring that the principal be maintained permanently by the Association. Generally, the donors permit the Association to use all or part of the income earned for either general or donor-specified purposes.

B. Comparative Information and Reclassifications

The financial statements are presented with certain prior year summarized comparative information. Such information does not include sufficient detail to constitute a presentation in conformity with generally accepted accounting principles. Accordingly, such information should be read in conjunction with the Association's financial statements for the year ended June 30, 2014, from which the summarized information was derived.

Certain amounts presented in the prior year data have been reclassified in order to be consistent with the current year's presentation.



C. Use of Estim ates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements. Estimates and assumptions may also affect disclosure of contingent assets and liabilities at the date of the financial statement, and the reported amounts of revenues and expenses. Actual results could differ from management's estimates.

D. Cash and Cash Equivalents

The Association's cash and cash equivalents are considered to be cash on hand, demand deposits, time deposits, and short-term investments with original maturities of three months or less from the date of acquisition.

E. Investments

Investments are reported at fair value. Investment income classified as operating revenue consists of interest and dividend income on investments and gains approved for use in operations. All other realized and unrealized gains or losses are classified as nonoperating activity and are available to support operations in future years and to offset potential market declines. Investments classified as current are available for operations in the next fiscal year.

Various methods and assumptions were used to estimate the fair value of each class of financial instruments. Cash and cash equivalents are valued at their carrying amount due to their short maturities. Investments are reported at fair value based on quoted market prices. Debt is valued at rates currently available to the Association for issuances with similar terms and remaining maturities.

F. Inventories and Prepaid Items

All inventories, when held, are valued at cost using the first-in/first-out method. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items.

G. Property and Equipment

Purchases of land, buildings, and other property having a unit cost per established guidelines and a useful life of three or more years are capitalized at cost. Donated assets are capitalized at the estimated fair value at date of receipt. Interest expense incurred during a period of construction, less related interest income earned on proceeds of tax-exempt borrowings, is capitalized. Property under capital leases is amortized over the lease term. Any gain or loss on sale of land, buildings and other property is reported as other revenues on the statement of activities. The Association maintains a threshold level of $500 or more for capitalization of property and equipment.

The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized.

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All capitalized assets, other than land, are depreciated using the straight-line method over their estimated useful lives as follows:

Description Estimated Useful Lives Building 5-40 Years Equipment -Work Account Assets 5-10 Years Eumiture, Eixti^es, and Equipment 5-10 Years Vehicles 5-10 Years Leasehold Improvements 5-10 Years

H. Revenue Recognition

Contributions, which include unconditional promises to give (pledges) are recognized as revenues in the period received or promised. Conditional contributions are recorded when the conditions have been met. Contributions are considered to be unrestricted unless specifically restricted by the donor.

The Association reports contributions in the temporarily or permanently restricted net asset class if they are received with donor stipulations as to their use. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are released and reclassified to unrestricted net assets in the consolidated statement of activities. Donor-restricted contributions are initially reported in the temporarily restricted net asset class, even if it is anticipated such restrictions will be met in the current reporting period.

Product or service revenue is generally recognized upon delivery of the product or services to the customer.

Gains and losses on investments and other assets and liabilities are reported as increases and decreases in unrestricted net assets unless their use is restricted by explicit donor stipulation or by law.

I. Contributed Services and Materials

Contributed services are reported at fair value in the financial statements for voluntary donations of services when those services (1) create or enhance non-financial assets or (2) require specialized skills provided by individuals possessing those skills and are services which would be typically purchased if not provided by donation. There are several volunteers which donate time in the organization's programs and supporting services, however, due to the lack of an objective basis to measure the value of these non-specialized services, no contributed service revenue has been recorded in these instances.

Donated materials are recorded at their fair value at the date of the gift. The Association does not imply time restrictions for gifts of long-lived assets. As a result, in the absence of donor-imposed restrictions, gifts of long-lived assets are reported as unrestricted revenue.

J. Income Taxes

The Eranklinton Association for Challenged Citizens, Inc. is a not-for-profit Association. The Association is exempt from federal income taxes under Section 501(c)(3) of the Intemal Revenue Code, except on net income derived from unrelated business activities. The three previous year's tax returns remain subject to examination by the Intemal Revenue Service.

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2. Cash and Cash Equivalents

Cash and cash equivalents were as follows at Jiuie 30, 2015 and 2014

2015 2014

Interest Bearing Demand Deposits

Total cash and cash equivalents

932,932 $ 792,820

932,932 $ 792,820

Franklinton Association for Challenged Citizens, Inc. has deposits held in four banks totaling $1,105,892 at June 30, 2015 ($956,442 in cash and cash equivalents and $149,450 in certificates of deposit held in investments). Federal Deposit Insurance covers $250,000 at each institution. At various times during the year, the deposits with financial institutions exceeded $250,000. At June 30, 2015, the amount on deposit widi financial institutions exceeding $250,000 was $526,728. These deposits above $250,000 are uncollateralized (GASB Category 3) and are exposed to custodial credit risk since in the event of bank failure, the Association's deposits may not be retumed and the Association retains the risk for uninsured or uncollateralized bank balances.

3. Revenue and Receivables

The primary revenues for the Association come from the following sources: Medicaid revenue in the form of supportive services for the independent living program and for the vocational services program (Center); provider contracts; and self-generated. Supportive service revenue is eamed through three forms of Medicaid billings: the new opportunities waiver (N.O.W.), the supports waiver, and the elderly disabled adult waiver. The new opportunities waiver is billed based on fifteen minute units of service and can apply to both the activity center and the supported independent living programs. The supports waiver is billed in day units and can only be applied to the work programs at the activity center. The supports waiver provides fewer services than the other waiver forms and is utilized as a bridge to partially meet the needs of clients due to the lengthy waiting list for the other waiver forms on a state-wide basis.

The provider contract revenue comes from one primary source. Res Care, which is a private health services provider to Medicaid qualified clients. Res Care transports their clients to utilize the services at the activity center for a per diem rate, and Res Care is directly billed based on attendance. The primary amount included in accounts receivable at year end is from Res Care in the amount of $10,605 and $200,949 in Medicaid billings. The Association's accounts receivable consist of the following:

Year Ended Account Receivable June 30, 2015

Accrued Billings $ 200,949 Current 10.605 Subtotal 211,554 Less Allowance for Bad Debt (10,500) Total Aceoiuits Receivable $ 201.054

The Association maintains several sources of self-generated revenue through multiple work programs conducted by the clients, where revenue eamed is put back into the program to fund ongoing supplies and equipment required to continue the program. These work programs include lawn care, cutlery packing, newspaper recycling, and janitorial services. The Franklinton Association for Challenged Citizens also operates a gift shop selling some products produced by the clients and other purchased directly for resale.

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The Association utilizes these forms of self generated revenue to carry out the mission of the Association while becoming less dependent on external supportive sources.

4. Property and Equipment

The cost and accumidated depreciation of land, buildings, and other property were as follows at Jime 30, 2015 and 2014:

2015 2014

Land

Buildings Equipment - Work Account Assets

Furniture, Fixtures, and Equipment

Vehicles Leasehold Improvements

Total cost of assets placed in service

Less accumulated depreciation

Property and equipment, net

10,000 $ 10,000 442,984 434,509 119,169 113,369 33,304 33,304

200,611 185,546 23,186 23,186

829,254 799,914

(393,419) (344,975)

435,835 $ 454,939

Significant property and equipment activity in 2015 included building improvements in the amount of $8,475, a bus for $15,065, and a lawn mower in the amount $5,800. There were no property and equipment dispositions in 2015.

Significant property and equipment activity in 2014 included building improvements in the amount of $2,135; a 2008 Dodge Caravan for $29,000; a 2005 bus in die amount of $16,000; and a 2012 Ford E350 in the amount of $19,248. The Association sold a van in the amount of $400 and a bus in the amount of $3,000.

Depreciation expense was $48,444 and $40,485 for the years ended June 30, 2015 and 2014, respectively.

5. Certificates of Deposit and Investments

The Association carries all investments at fair value. Fair values are based on quoted market prices. The only investments carried by the Association are the certificates of deposit at financial institutions as described in Note 2. These investments are started at cost, with approximates market.

The fair value of investments was as follows at June 30. 2015 and 2014:

2015

Certificates of Deposits with a matwity over three months

Total investments at fair value

2014

149,450 $ 99,200

149,450 $ 99,200

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6. Debt

On May 5, 2003, the Association purchased a tract of land and the building located on the land at 2005 Main Street, Franklinton, Louisiana for $67,000 and financed it for fifteen years through Citizens Bank. The Association placed the building and land up for collateral on the loan for the same piece of land. In addition, the Association must hold a $25,000 Certificate of Deposit with Citizens Savings Bank and $10,000 will be pledged as collateral.

Debt consists ofthe following at June 30, 2015 and 2014: 2015 2014

Note Payable: $ 67,000

Dated 5/5/2003 due in monthly installments of principal and interest of $ 592 tiirough 5/5/2018 interest at 6.75% $ 18,407 $ 23,607

Total long term debt 18,407 23,607

Less cmrent portion (6,457) (5,627)

Debt, noncmrent portion $ 11,950 $ 17,980

Schedided matiuities for long term obligations at Jiuie 30, 2015:

Year Ending June 30,

2016

2017 2018

Total

Note on Building FYincipal Interest Total

6,520 $

6,451 5.436

1,187 $

664

215

7,707

7,115

5.651

18,407 $ 2,066 $ 20.473

7. Leases

The Association leases the location for its main activity center from the Town of Franklinton. The term of this lease is 99 years with lease payments of $181.33 per month. Future lease payments under this lease are $2,175.96 per year for the next five years. Rent expense under this lease was $1,994.33 and $2,175.96 for the years ended June 30, 2015 and 2014.

The Association leases a building for its gift shop on a month to month basis with a monthly rental amount of $800. Rent expenses under this lease was $9,600 and $9,600 for the years ended June 30, 2015 and 2014.

The Association leases a warehouse on a month to month basis with a monthly rental amount of $150 per month. Rent expense under this lease was $750 in 2014. The lease ended April 30, 2014.

During the year ended June 30, 2011 the Association entered into an operating lease for a 14 passenger bus. The annual lease payments are $12,000 for three years commencing in July 2010. The lease expired in the year ending June 30, 2013. This lease was extended one year until June 30, 2014. Lease expense under the lease was $12,000 for the year ended 2014. At the end of the extended lease date, the Association approved to purchase the bus for $15,065. See Note 4.

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The Association leases three printers. During the year ended June 30, 2011, three printers with combined minimum monthly lease payments of $507.54 were traded in for three printers with combined minimum monthly lease payments of $585.09. The lease term on the prior lease ranged from 48 months to 60 months. The lease term on the new printers' lease is 60 months. Future minimum lease payments under this lease are $7,021.08 for the next year and $5,265.81 for the second year. Total lease expense under the printers' lease totaled $9,490 for the year ended June 30, 2015 and $9,034 for the year ended June 30, 2014.

8. Concentrations

The Association receives a substantial amount of its support for its programs, of providing day services to challenged individuals, from governmental sources. These revenue streams require the Association to furnish habilitation services to clients to be reimbursed at an amount stipulated in each contract. A significant reduction in the level of this support, if it were to occur, may have an effect on programs and activities. In relation, at June 30, 2015, approximately 95% ($200,949) of the Association's accounts receivable are due from governmental sources - Medicaid. The remainders of the Association's accounts receivable at year end are due from one party related to a provider contract - Res Care.

9. Commitments and Contingencies

At June 30, 2015, the Association was not involved in any other outstanding litigations or claims requiring adjustment or disclosure in the financial statements.

On January 15, 2015, the Association entered into a line of credit agreement with Whitney Bank for $50,000 which is secured by a certificate of deposit in the same amount at Whitney Bank. The agreement matures on January 15, 2020. The interest rate at the fiscal year end was 3.25%. No amounts were outstanding on this agreement as of June 30, 2015.

10. Subsequent Events

Subsequent events have been evaluated by management through January 11, 2016, the date the financial statements were available for issuance. No events were noted that require recording or disclosure in the financial statements for the fiscal year ending June 30, 2015.

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Other Supplemental Information

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Schedule 1 Franklinton Association for Challenged Citizens, Inc.

Schedule of Compensation, Benefits, and Other Payments to Agency Head For the year ended June 30, 2015

Agency Head Name: Debbie Brock, Executive Director

Purpose Amount Salary $ 55,942 Employer Paid Payroll Taxes 4,280

Mileage Reimbiffsement 181 Cell Phone 653

Total $ 61.056

See Independent Auditor's Report.

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Bruce C.Harrell, CPA

Dale H. Jones, CPA Kristi Bergeron, CPA Jessica H. Jones, CPA Brandy Westcott Garcia, CPA

INTERNET www.teamcpaxom

MEMBERS American Listitute of CPAs Society of Louisiana CPAs

109 West Minnesota Park Park Place Suite 7

Hammond, LA 70403 VOICE; (985) 542-6372

FAX: (985) 345-3156

BRUCE HARRELL COMPANY

KENTWOOD OFFICE P.O. Box 45 - 909 Avenue G

Kentwood, LA 70444 VOICE: (985) 229-5955

FAX: (985) 229-5951

CERTIFIED PUBLIC ACCOUNTANTS

A Professional Accounling Corporation

INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON

AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

To the Board of Directors of the Franklinton Association for Challenged Citizens, Inc. Franklinton, Louisiana

We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of Franklinton Association for Challenged Citizens, Inc. (a nonprofit organization) (the "Association"), which comprise the statement of financial position as of June 30, 2015, and the related statements of activities, functional expenses, and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated January 11, 2016.

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered the Association's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Association's internal control. Accordingly, we do not express an opinion on the effectiveness of the Association's internal control.

Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as described in the accompanying schedule of findings and responses, we identified certain deficiencies in internal control that we consider to be material weaknesses.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. We consider the deficiencies described in the accompanying schedule of findings and responses as finding 2015-11 and 2015-12, to be material weaknesses.

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BRUCE HARRELL & CO. CERTIFIED PUBLIC ACCOUNTANTS A Professional Accounting Corporation

Franklinton Association for Challenged Citizens, Inc. Page 2

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the Association's financial statements are Ifee Ifom material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed an instance of noncompliance or other matters that is required to be reported under Government Auditing Standards and which is listed and described in the accompanying schedule of findings and responses as Finding 2015-Cl.

Franklinton Association for Challenged Citizens, Inc.'s Response to Findings

The Association's responses to the findings identified in our audit are described in the accompanying schedule of findings and responses. The Association's responses were not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it.

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the organization's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the organization's internal control and compliance. Accordingly, this eommunieation is not suitable for any other purpose.

Bruce Harrell & Company, CPAs A Professional Accounting Corporation Kentwood, Louisiana

January 11, 2016

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Franklinton Association for Challenged Citizens, Inc. Schedule of Findings and Responses For the Year Ended June 30, 2015

We have audited the financial statements of Franklinton Association for Challenged Citizens, Inc. (a nonprofit organization) (the "Association"), as of and for the year ended June 30, 2015, and have issued our report thereon dated January 11, 2016. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our audit of the financial statements as of June 30, 2015, resulted in an unmodified opinion.

Section I Summary of Auditor^s Reports

a. Report on Internal Control and Compliance Material to the Financial Statements

Internal Control Material Weaknesses K Yes • No Significant Deficiencies • Yes K No

Compliance Compliance Material to Financial Statements K Yes • No

b. Federal Awards K Not Applicable

Internal Control Material Weaknesses • Yes • No Significant Deficiencies • Yes • No

Type of Opinion On Compliance Unmodified • Qualified • For Major Programs Disclaimer • Adverse •

Are there findings required to be reported in accordance with Circular A-133, Section .510(a)? • Yes • No

Was a management letter issued? • Yes K No

c. Identification of Major Programs:

CFDA Number(s) Name of Federal Program (or Cluster)

Dollar threshold used to distinguish between Type A and Type B Programs: $

Is the auditee a Tow-risk' auditee, as defined by 0MB Circular A-133? • Yes • No

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Section II Financial Statement Findings

Finding Number: 2015-Cl Audit Filing Requirement (Noncompliance)

Criteria: Franklinton Association for Challenged Citizens, Inc. is subject to statutory audit requirements as specifically defined in Revised Statutes 24:513(A) related to submitting audit reports. The deadline for submitting an audit is six months after the end of the entity's fiscal year, but may be extended per Legislative Auditor approval. The Organization must comply with the statutory deadline for submitting audit reports, but must also ensure that sufficient time is available to complete procedures required for an audit performed in accordance with Government Auditing Standards.

Condition: The Organization did not submit its audit for year ending June 30, 2015 within the statutory guidelines.

Effect: The Organization is not in compliance with the statutory deadline noted above.

Cause: Additional time was needed to review the progress of recommendations from prior year findings. The audit report will be filed by January 14, 2015, which is before the historical grace period date.

Management's Response: We will monitor auditing filing deadlines and comply with filing requirements.

Finding 2015-11 Management Override of Controls (Material Weakness) Continued from prior fiscal year.

Criteria: A properly designed and implemented internal control system provides, among other things, for the accurate recording of transactions. The Association has maintained that part of its internal control system includes preventative and detective control activities designed and implemented to accurately record transactions. As it relates to revenue transactions, such control activities included, but were not limited to, review and approval of source documents as well as review and reconciliation of billings to source documents. Additional control activities also included, but were not limited to, the reconciliation of billings and collections to the general ledger and the reconciliation of collections to billings with timely follow up on collections and investigation of billing/revenue discrepancies. Finally, the Association has maintained that final determination and approval authority of uncollectible billings is vested with the Executive Director.

Condition: As it relates to a portion of the self-generated revenues of the Association's Activity Center (work crew revenue), the account receivable sub ledger (billings) is not reconciled to the general ledger. As it relates to Medicaid billings, billings were not reviewed and reconciled to source documents throughout the year. Additionally, collections were not reconciled to billings and there was a lack of follow up on collections and investigation of discrepancies. The lack of reconciliation, follow up and investigation created an unreconciled difference between the billings amount (AR subledger) and the general ledger recorded amount and therefore a de-facto write off of accounts receivable and an misstatement of revenue during the year with no review or approval by anyone separate of the billing process. Audit procedures uncovered a material adjustment to Medicaid revenue due to this condition.

Cause: The specific control activity was not operating effectively throughout the year due to management override of controls.

Effect: When there is management override of controls, otherwise effective internal controls cannot be relied upon to prevent or detect and correct a material misstatement to the Association's financial statements and thus deem the designed internal control ineffective. This lack of effectively designed and operating controls exposes the Association to several risks, including, but not limited to misappropriation of assets and inaccurate, improper and fraudulent financial reporting.

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Recommendation: The Association's management should perform or ensure the performance of all control activities designed and implemented as part of the Association's internal control system. The Association should immediately increase the review of Medicaid billings by having another member of management review the bills prior to submission and ensure that billings and collections are reconciled to the source documents and agree with GL amounts. Finally, the Association should separate revenue into separate accounts by type and source for review by Board members so that major revenue sources might be more easily and effectively reviewed.

Management's Response: Billing clerks will ensure that they are reviewing and reconciling the bills to the source documents. Additionally, the Executive Director will perform a final review of the bills and approve the bill prior to submission. As it relates only to Medicaid billings, all billings for the year will be obtained from the billing software and reconciled by personnel within the office of the Association's outside CPA. Outstanding items and all discrepancies will be reviewed with the Executive Director. The Association began implementing recommendations near the end of the year ended June 30, 2015. However, due to the timing of the prior year audit report, the recommendations were not fully implemented at the end of the fiscal year.

Finding 2015-12 Inadequate Segregation of Duties (Material Weakness) Continued from prior fiscal year.

Criteria: Proper segregation of incompatible duties requires that there be different individuals responsible for authorizing transactions, recording transactions and maintaining custody of related assets.

Condition: As it relates to a portion of the self-generated revenues of the Association's Activity Center (work program), some duties, which are considered incompatible, are being performed by one individual, the billings clerk. As it relates to Medicaid billings, the person responsible for billings is also responsible for reconciling the related accounts receivable and revenue as well as following up on collections and investigating discrepancies. Additionally, the person responsible for collections and investigating discrepancies did not adequately perform these duties as described in Finding 2015-11. By not following up on collections and investigating discrepancies, this created a de-facto write off of accounts receivable and misstatement of revenue during the year with no review or approval by anyone separate. Audit procedures uncovered a material adjustment to Medicaid revenue due to this condition.

Cause: Due to the size and nature of the Association, there are few administrative employees and as such, some incompatible duties are not adequately segregated. Additionally, specific controls that were not operating effectively as described in Finding 2015-11 created an additional lack of segregation as further discussed above.

Effect: Inadequate segregation of duties exposes the Association to several risks, including, but not limited to misappropriation of assets and inaccurate or fraudulent financial reporting.

Recommendation: The Association should attempt to segregate incompatible duties possibly through the use of other Association personnel or staff and the Association's outside CPA firm as appropriate. The Association's management should perform or ensure the performance of all control activities designed and implemented as part of the Association's internal control system. The Association should immediately increase the review of Medicaid billings by having another member of management review the bills prior to submission and ensure that billings and collections are reconciled to the source documents and agree with GL amounts. Finally, the Association should separate revenue into separate accounts by type and source for review by Board members so that major revenue sources might be more easily and effectively reviewed.

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Management's Response: The Association will segregate as many incompatible duties as possible through the use of its personnel and outside CPA, effective immediately. Billing clerks will ensure that they are reviewing and reconciling the bills to the source documents. Additionally, the Executive Director will perform a final review of the bills and approve the bill prior to submission. As it relates only to Medicaid billings, all billings for the year will be obtained from the billing software and reconciled by personnel within the office of the Association's outside CPA. Outstanding items and all discrepancies will be reviewed with the Executive Director. The Association began implementing recommendations near the end of the year ended June 30, 2015. However, due to the timing of the prior year audit report, the recommendations were not fully implemented at the end of the fiscal year.

Section III Federal Award Findings and Questioned Costs

No Section III Findings

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Franklinton Association for Challenged Citizens, Inc. Schedule of Prior Year Findings and Responses

For the Year Ended June 30, 2015

Section I Internal Control and Compliance Material to the Financial Statements

Finding Number: 2014-Cl Audit Filing Requirement (Noncompliance)

Criteria: Franklinton Association for Challenged Citizens, Inc. is subject to statutory audit requirements as specifically defined in Revised Statutes 24:513(A) related to submitting audit reports. The deadline for submitting an audit is six months after the end of the entity's fiscal year, but may be extended per Legislative Auditor approval. The Organization must comply with the statutory deadline for submitting audit reports, but must also ensure that sufficient time is available to complete procedures required for an audit performed in accordance with Government Auditing Standards.

Condition: The Organization did not submit its audit for year ending June 30, 2015 within the statutory guidelines.

Effect: The Organization is not in compliance with the statutory deadline noted above.

Cause: Internal Control deficiencies noted herein created substantial delays in the financial reporting process and prevented the timely completion of procedures required for an audit performed in accordance with Government Auditing Standards.

Recommendation: The Association should immediately implement the recommendations related to the internal control deficiencies noted herein. The Association should retroactively review transactions and implement the recommendations retroactively or design new procedures to address transactions already occurring in FY 2015.

Current Year Status: Cause of this condition resolved. However, finding repeated for late submission in the current year with a different cause in the current year.

Finding 2014-11 Management Override of Controls (Material Weakness)

Criteria: A properly designed and implemented internal control system provides, among other things, for the accurate recording of transactions. The Association has maintained that part of its internal control system includes preventative and detective control activities designed and implemented to accurately record transactions. As it relates to revenue transactions, such control activities included, but were not limited to, review and approval of source documents as well as review and reconciliation of billings to source documents. Additional control activities also included, but were not limited to, the reconciliation of billings and collections to the general ledger and the reconciliation of collections to billings with timely follow up on collections and investigation of billing/revenue discrepancies. Finally, the Association has maintained that final determination and approval authority of uncollectible billings is vested with the Executive Director.

Condition: As it relates to a portion of the self-generated revenues of the Association's Activity Center (work crew revenue), the account receivable sub ledger (billings) is not reconciled to the general ledger. As it relates to Medicaid billings, billings were not reviewed and reconciled to source documents throughout the year. Additionally, collections were not reconciled to billings and there was a lack of follow up on collections and investigation of discrepancies. The lack of reconciliation, follow up and investigation created an unreconciled difference between the billings amount (AR subledger) and the general ledger recorded amount and therefore a de-facto write off of accounts receivable and an misstatement of revenue during the year with no review or approval by anyone separate of the billing process. Audit procedures uncovered a material adjustment to Medicaid revenue due to this condition.

Cause: The specific control activity was not operating effectively throughout the year due to management override of controls.

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Effect: When there is management override of controls, otherwise effective internal controls cannot be relied upon to prevent or detect and correct a material misstatement to the Association's financial statements and thus deem the designed internal control ineffective. This lack of effectively designed and operating controls exposes the Association to several risks, including, but not limited to misappropriation of assets and inaccurate, improper and fraudulent financial reporting.

Recommendation: The Association's management should perform or ensure the performance of all control activities designed and implemented as part of the Association's internal control system. The Association should immediately increase the review of Medicaid billings by having another member of management review the bills prior to submission and ensure that billings and collections are reconciled to the source documents and agree with GL amounts. Finally, the Association should separate revenue into separate accounts by type and source for review by Board members so that major revenue sources might be more easily and effectively reviewed.

Current Year Status: Partially Resolved. The Association began implementing recommendations at the end of the year ended June 30, 2015. However, due to the timing of the prior year audit report, the recommendations were not fully implemented at the end of the fiscal year. This finding is continued as current year finding, 2015-11.

Finding 2014-12 Inadequate Segregation of Duties (Material Weakness)

Criteria: Proper segregation of incompatible duties requires that there be different individuals responsible for authorizing transactions, recording transactions and maintaining custody of related assets.

Condition: As it relates to a portion of the self-generated revenues of the Association's Activity Center (work program), some duties, which are considered incompatible, are being performed by one individual, the billings clerk. As it relates to Medicaid billings, the person responsible for billings is also responsible for reconciling the related accounts receivable and revenue as well as following up on collections and investigating discrepancies. Additionally, the person responsible for collections and investigating discrepancies did not adequately perform these duties as described in Finding 2014-11. By not following up on collections and investigating discrepancies, this created a de-facto write off of accounts receivable and misstatement of revenue during the year with no review or approval by anyone separate. Audit procedures uncovered a material adjustment to Medicaid revenue due to this condition.

Cause: Due to the size and nature of the Association, there are few administrative employees and as such, some incompatible duties are not adequately segregated. Additionally, specific controls that were not operating effectively as described in Finding 2014-11 created an additional lack of segregation as further discussed above.

Effect: Inadequate segregation of duties exposes the Association to several risks, including, but not limited to misappropriation of assets and inaccurate or fraudulent financial reporting.

Recommendation: The Association should attempt to segregate incompatible duties possibly through the use of other Association personnel or staff and the Association's outside CPA firm as appropriate. The Association's management should perform or ensure the performance of all control activities designed and implemented as part of the Association's internal control system. The Association should immediately increase the review of Medicaid billings by having another member of management review the bills prior to submission and ensure that billings and collections are reconciled to the source documents and agree with GL amounts. Finally, the Association should separate revenue into separate accounts by type and source for review by Board members so that major revenue sources might be more easily and effectively reviewed.

Management's Response: The Association will segregate as many incompatible duties as possible through the use of its personnel and outside CPA, effective immediately. Billing clerks will ensure that they are reviewing and reconciling the bills to the source documents. Additionally, the Executive Director will perform a final review of the bills and approve the bill prior to submission. As it relates to work crew revenue only, personnel within the office of the Association's outside CPA will be reconciling accounts receivable and revenue regularly. Finally, as it relates only to

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Medicaid billings, all billings for the year will be obtained from the billing software and reconciled by personnel within the office of the Association's CPA. Outstanding items and all discrepancies will be reviewed with the Executive Director.

Current Year Status: Partially Resolved. The Association began implementing recommendations at the end of the year ended June 30, 2015. However, due to the timing of the prior year audit report, the recommendations were not ftilly implemented at the end of the fiscal year. This finding is continued as current year finding, 2015-12.

Section II Internal Control and Compliance Material to Federal Awards

No Section II Findings. Section III Management Letter

No Section III Findings.

This schedule was prepared by management.

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franklinton association for challenged citizens, inc ...file/0000ce37.pdf(with 2014 summarized...

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