EARLY LEARNING COALITION OF NORTHWEST FLORIDA, INC. Financial Statements and Independent Auditor's Report. June 30, 2011 and 2010

Transcription

1 EARLY LEARNING COALITION OF NORTHWEST FLORIDA, INC. Financial Statements and Independent Auditor's Report June 30, 2011 and 2010

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3 EARLY LEARNING COALITION OF NORTHWEST FLORIDA, INC. Financial Statements and Independent Auditor's Report June 30, 2011 and 2010 TABLE OF CONTENTS INDEPENDENT AUDITOR'S REPORT 1 FINANCIAL STATEMENTS Statements of Financial Position 3 Statements of Activities 4 Statements of Functional Expenses 5 Statements of Cash Flows 7 Notes to Financial Statements 8 COMPLIANCE SECTION Schedule of Expenditures of Federal Awards and State Financial Assistance 12 Notes to the Schedule of Expenditures of Federal Awards and State Financial Assistance 13 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 14 Independent Auditor's Report on Compliance with Requirements That Could Have a Material Effect on Each Major Program and State Project and on Internal Control over Compliance in Accordance with OMB Circular A-133 and Chapter , Rules of the Auditor General 16 Schedule of Findings and Questioned Costs 18 MANAGEMENT LETTER 21 Page

4 45 Eglin Parkway NE Suite 301 Fort Walton Beach, FL Fax: Board of Directors Early Learning Coalition of Northwest Florida, Inc. Panama City, Florida INDEPENDENT AUDITOR'S REPORT We have audited the accompanying statements of financial position of the Early Learning Coalition of Northwest Florida, Inc. (the Coalition) as of June 30, 2011 and 2010, and the related statements of activities, functional expenses and cash flows for the years then ended. These financial statements are the responsibility of management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits 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 audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Coalition's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test 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 management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Coalition as of June 30, 2011 and 2010, and the changes in its net assets and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. 1

5 Board of Directors Early Learning Coalition of Northwest Florida, Inc. Independent Auditor's Report (Continued) In accordance with Government Auditing Standards, we have also issued a report dated January 25, 2012, on our consideration of the Coalition's internal control over financial reporting and 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 the 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 Governmental Auditing Standards and should be considered in assessing the results of our audits. Our audits were performed for the purpose of forming an opinion on the basic financial statements of the Early Learning Coalition of Northwest Florida, Inc. taken as a whole. The accompanying Schedule of Expenditures of Federal Awards and State Financial Assistance on page 12 is presented for purposes of additional analysis as required by United States Office of Management and Budget (OMB) Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations and Chapter , Rules of the Auditor General, and is not a required part of the basic 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 basic 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 procedures 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 basic financial statements as a whole. January 25,

6 STATEMENTS OF FINANCIAL POSITION June 30, 2011 and ASSETS CURRENT ASSETS Cash $ 631,963 $ 312,060 Due from the State of Florida 507,329 1,530,260 Other receivables 40,721 25,032 Prepaid expenses 3,140 3,140 Total current assets 1,183,153 1,870,492 PROPERTY AND EQUIPMENT, NET 94, ,929 TOTAL ASSETS $ 1,277,642 $ 2,012,421 LIABILITIES AND NET ASSETS (DEFICIT) LIABILITIES Accounts payable and accrued expenses $ 1,235,788 $ 1,296,326 Due to the State of Florida 49,810 49,810 Advance funding 36, ,774 Total liabilities 1,322,014 1,809,910 NET ASSETS (DEFICIT) Unrestricted (138,861) 60,582 Invested in capital assets 94, ,929 Total net assets (deficit) (44,372) 202,511 TOTAL LIABILITIES AND NET ASSETS (DEFICIT) $ 1,277,642 $ 2,012,421 The accompanying notes are an integral part of these financial statements. 3

7 STATEMENTS OF ACTIVITIES Years Ended June 30, 2011 and PUBLIC SUPPORT AND OTHER REVENUES Public support Federal funding $ 13,462,368 $ 12,466,096 State funding 4,274,511 4,545,050 Total public support 17,736,879 17,011,146 Other revenues Interest Local match 12,291 2,256 Other support ,330 Total other revenues 13,664 19,909 TOTAL PUBLIC SUPPORT AND OTHER REVENUES 17,750,543 17,031,055 EXPENSES Program services Direct child care 15,210,823 14,638,194 Non-direct child care 1,293,113 1,491,660 Quality initiatives 840, ,114 Total program services 17,344,648 16,522,968 Support services Management and general 652, ,407 TOTAL EXPENSES 17,997,426 17,122,375 DECREASE IN NET ASSETS FROM OPERATIONS (246,883) (91,320) Loss on disposal of equipment - (1,171) CHANGE IN UNRESTRICTED NET ASSETS (246,883) (92,491) NET ASSETS - BEGINNING OF YEAR 202, ,002 NET ASSETS (DEFICIT) - END OF YEAR $ (44,372) $ 202,511 The accompanying notes are an integral part of these financial statements. 4

8 STATEMENTS OF FUNCTIONAL EXPENSES Years Ended June 30, 2011 and 2010 Support Program Services Services Direct Child Care Non-Direct Child Care Quality Initiatives Management and General 2011 Contract for service payments to subrecipients $ 15,210,823 $ - $ - $ - $ 15,210,823 Quality enhancement , ,902 Computer software - 38,561 7,376 17,509 63,446 Depreciation ,935 48,935 Dues - 4,872 1,960 13,193 20,025 Office supplies and other - 32,905 2,390 10,126 45,421 Occupancy - 144,713 7,668 49, ,521 Supplies - 16,544 62,890-79,434 Postage - 6, ,421 7,737 Professional fees - 8,196 1,309 55,775 65,280 Outreach and awareness - 22, ,046 Salaries - 969, , ,394 1,650,194 Travel - 47,814 44,799 13, ,662 Total expenses $ 15,210,823 $ 1,293,113 $ 840,712 $ 652,778 $ 17,997,426 The accompanying notes are an integral part of these financial statements. Continued... 5

9 STATEMENTS OF FUNCTIONAL EXPENSES Years Ended June 30, 2011 and 2010 Support Program Services Services Direct Child Care Non-Direct Child Care Quality Initiatives Management and General 2010 Contract for service payments to subrecipients $ 14,638,194 $ - $ - $ - $ 14,638,194 Quality enhancement - 176, , ,429 Depreciation ,995 47,995 Dues - 1,001-6,498 7,499 Office supplies and other - 71, ,448 86,162 Occupancy - 137, , ,816 Supplies - 66,746 48, ,803 Postage - 10,386-1,417 11,803 Professional fees - 33,232 5,250 36,900 75,382 Outreach and awareness - 25, ,253 Salaries - 836, , ,238 1,431,197 Travel - 45,015 17,571 10,238 72,824 Bad debt expense - 88, ,018 Total expenses $ 14,638,194 $ 1,491,660 $ 393,114 $ 599,407 $ 17,122,375 The accompanying notes are an integral part of these financial statements. 6

10 STATEMENTS OF CASH FLOWS Years Ended June 30, 2011 and CASH FLOWS FROM OPERATING ACTIVITIES Change in unrestricted net assets $ (246,883) $ (92,491) Adjustments to reconcile change in unrestricted net assets to cash flows from operating activities Depreciation 48,935 47,995 Loss on disposal of equipment - 1,171 (Increase) decrease in Due from the State of Florida 1,022,931 (350,415) Other receivables (15,689) (11,705) Prepaid expenses - 3,160 Increase (decrease) in Accounts payable and accrued expenses (60,538) 255,248 Advance funding (427,358) 427,358 Net cash flows from operating activities 321, ,321 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of equipment (1,495) (86,192) Proceeds from sale of equipment - 1,500 Net cash flows from investing activities (1,495) (84,692) NET CHANGE IN CASH 319, ,629 CASH AT BEGINNING OF YEAR 312, ,431 CASH AT END OF YEAR $ 631,963 $ 312,060 SUPPLEMENTAL DISCLOSURES Interest paid $ - $ - Income taxes paid $ - $ - The accompanying notes are an integral part of these financial statements. 7

11 NOTES TO FINANCIAL STATEMENTS June 30, 2011 and 2010 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Organization and Purpose The Early Learning Coalition of Northwest Florida, Inc. (the Coalition) was organized as a not-for-profit corporation under the laws of the State of Florida on September 26, The Coalition maintains offices in Bay, Calhoun, Franklin, Gulf, Holmes, Jackson, and Washington Counties in the State of Florida. The Coalition is primarily funded by support from federal and state agencies contracted through the Florida Agency for Workforce Innovation. The purpose of the Coalition is to provide a coordinated delivery system of school readiness programs that will prepare children to enter the local kindergarten school systems. In addition, part of the Coalition's mission is to increase the availability, affordability and quality of child care services to children. The children who qualify for these programs are at-risk and/or from low-income families. The Coalition operates three major programs: Direct Child Care - payments to approved providers for child care. Non-Direct Child Care - directly incurred costs for support of child care services such as eligibility determination, training for providers, and resource and referral services. Quality Initiatives - payments for directly incurred costs designed to enhance experiences for children, staff, or other early childhood professionals. B. Basis of Accounting The financial statements of the Coalition have been prepared on the accrual basis of accounting and accordingly reflect all significant receivables, payables, and other liabilities. Federal, state and local government, and public grants are recorded as support when performance occurs under the terms of the grant agreement. C. Financial Statement Presentation Financial statement presentation follows the recommendations of the Financial Accounting Standards Board Accounting Standards Codification. The Coalition is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. Net assets are classified based on donor restrictions, if any, that may or may not be met by actions of management or by the passage of time. Currently, there are no permanently restricted net assets. 8

12 NOTES TO FINANCIAL STATEMENTS June 30, 2011 and 2010 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. E. Cash and Cash Equivalents For purposes of the Statements of Cash Flows, the Coalition considers all highly liquid investments available for use with an original maturity of three months or less to be cash equivalents. F. Receivables Funds to be received from the State of Florida as reimbursement for contract services are considered past due if not received in accordance with contract terms. Contract receivables are stated at the amount management expects to collect at year-end. Management believes an allowance for doubtful accounts is not necessary based on terms of the service contracts. G. Property and Equipment The Coalition follows the practice of capitalizing all costs for property and equipment in excess of $1,000. If donated, fixed assets are recorded at fair market value at the date of the donation. Depreciation of property and equipment is computed using straight-line depreciation over the estimated useful lives of the assets, which is five years. Property acquired with governmental funds is considered to be owned by the Coalition while used in the program for which it was purchased, or in future authorized programs. However, its disposition as well as the ownership of any proceeds from the sale of assets is subject to applicable regulations. H. Due to the State of Florida Reimbursed contract service expenses in excess of actual contract service expenses incurred. This excess amount is payable to the State of Florida. I. Advance Funding The Coalition is authorized to receive advanced funds for projected direct and administrative expenses of the school readiness and voluntary pre-kindergarten programs. The advance payments are reconciled and adjusted to actual program attendance. 9

13 NOTES TO FINANCIAL STATEMENTS June 30, 2011 and 2010 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) J. Federal and State Awards Public support revenue from federal and state grants is recorded based upon the terms of the grantor agreement, which generally provides that revenue is earned when the allowable costs of the specific grant provisions have been incurred. The majority of public support is received on a reimbursement basis for costs already incurred. Revenue is recorded as unrestricted when received. K. Expense Allocation The costs of providing the various programs and other activities have been detailed in the Statements of Functional Expenses and summarized in a functional basis on the Statements of Activities. Expenses directly related to a program or supporting service are charged to the individual program or supporting service. Indirect expenses are allocated between non-direct child care, quality initiative program services, management and general expenses based an allocation to the program's total direct costs less federal and state funded capital asset purchases. L. Income Taxes The Coalition has been granted an exemption from income taxes under Internal Revenue Code, Section 501(c)(3) as a not-for-profit corporation. The Coalition is not aware of any uncertain tax positions that would require disclosure or accrual in accordance with generally accepted accounting principles. With few exceptions, the Coalition is no longer subject to federal, state, or local income tax examination by tax authorities for fiscal years before M.Subsequent Events The Coalition has evaluated events and transactions that occurred between June 30, 2011 and January 25, 2012, which is the date the financial statements were available to be issued, for possible recognition or disclosure in the financial statements. NOTE 2 - PROPERTY AND EQUIPMENT The following is a summary of property and equipment as of June 30, 2011 and 2010: Furniture and equipment $ 252,535 $ 251,040 Less accumulated depreciation (158,046) (109,111) Property and equipment, net $ 94,489 $ 141,929 Depreciation expense for the years ended June 30, 2011 and 2010 was $48,935 and $47,995, respectively. 10

14 NOTES TO FINANCIAL STATEMENTS June 30, 2011 and 2010 NOTE 3 - CONCENTRATIONS For the years ended June 30, 2011 and 2010, the Coalition received 100% of public support from the Florida Agency for Workforce Innovation, Office of Early Learning (the Agency). Funding received from the Agency is derived from both federal and state sources. For the years ended June 30, 2011 and 2010, funding derived from federal sources was 76% and 73%, respectively, and funding derived from the State of Florida was 24% and 27%, respectively. NOTE 4 - SCHOOL READINESS MONTHLY RECONCILIATIONS The Coalition prepared monthly reconciliations of its financial records to the statewide School Readiness data and reporting system in a timely and satisfactory manner. NOTE 5 - COMMITMENTS AND CONTINGENCIES In June 2010, the Coalition entered into a funding agreement with the Agency for the period of July 1, 2011 through June 30, The Agency awarded the Coalition $11,675,086 to be expended for school readiness programs and services as prescribed in the Coalition's School Readiness Plan and $4,977,188 to be expended for Voluntary Pre- Kindergarten (VPK) programs and services as prescribed in the Coalition's VPK Plan. The Coalition's School Readiness and Voluntary Pre-Kindergarten Plans provide for a comprehensive program of readiness services that enhance the cognitive, social, and physical development of children to achieve the performance standards and outcome measures as specified by the Agency. 11

15 COMPLIANCE SECTION

16 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AND STATE FINANCIAL ASSISTANCE Year Ended June 30, 2011 Federal/State Agency Pass-Through Entity Federal Program/State Project CFDA CSFA Number Contract/ Grant Number Expenditures U.S. Department of Health and Human Services Indirect programs Pass-Through from Agency Workforce Innovation Temporary Assistance for Needy Families N/A $ 4,330,243 Child Care and Development Block Grant N/A 3,508,193 Child Care Mandatory and Matching Funds of the Child Care and Development Fund N/A 3,725,808 ARRA - Child Care and Development Block Grant (CCDBG) N/A 972,927 Total U.S. Department of Health and Human Services 12,537,171 U.S. Department of Education Indirect programs Pass-Through from Agency Workforce Innovation ARRA - State Fiscal Stabilization Funds (SFSF) N/A 909,068 Total U.S. Department of Education 909,068 TOTAL EXPENDITURES OF FEDERAL AWARDS $ 13,446,239 Florida Agency for Workforce Innovation Direct programs Voluntary Pre-Kindergarten Education Program SV 341 $ 4,261,762 Total Florida Agency for Workforce Innovation 4,261,762 TOTAL EXPENDITURES OF STATE FINANCIAL ASSISTANCE $ 4,261,762 The accompanying notes are an integral part of this schedule. 12

17 NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AND STATE FINANCIAL ASSISTANCE Year Ended June 30, 2011 NOTE 1 - BASIS OF PRESENTATION The accompanying Schedule of Expenditures of Federal Awards and State Financial Assistance includes the federal and state activity of the Early Learning Coalition of Northwest Florida, Inc., and is presented on the accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations and Chapter , Rules of the Auditor General; therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements. 13

18 45 Eglin Parkway NE Suite 301 Fort Walton Beach, FL Fax: Board of Directors Early Learning Coalition of Northwest Florida, Inc. Panama City, Florida 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 We have audited the financial statements of the Early Learning Coalition of Northwest Florida, Inc. (the Coalition) as of and for the year ended June 30, 2011, and have issued our report thereon dated January 25, 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. Internal Control over Financial Reporting In planning and performing our audit, we considered the Coalition's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness the Coalition's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Coalition's internal control over financial reporting. 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. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. 14

19 Board of Directors Early Learning Coalition of Northwest Florida, Inc. 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 (Continued) Compliance and Other Matters As part of obtaining reasonable assurance about whether the Coalition's financial statements are free of 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 no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. We noted certain other matters that we reported to the Coalition's management in a separate letter dated January 25, This report is intended solely for the information and use of the audit committee, management and Board of Directors, federal and state awarding agencies, and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. January 25,

20 45 Eglin Parkway NE Suite 301 Fort Walton Beach, FL Fax: Board of Directors Early Learning Coalition of Northwest Florida, Inc. Panama City, Florida INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH REQUIREMENTS THAT COULD HAVE A MATERIAL EFFECT ON EACH MAJOR PROGRAM AND STATE PROJECT AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 AND CHAPTER , RULES OF THE AUDITOR GENERAL Compliance We have audited the compliance of the Early Learning Coalition of Northwest Florida, Inc. (the Coalition) with the types of compliance requirements described in the United States Office of Management and Budget (OMB) Circular A-133, Compliance Supplement, and the requirements described in the Executive Office of the Governor's State Projects and Compliance Supplement that are applicable to each of its major federal programs and state projects and the special audit guidance provided by the Agency for Workforce Innovation (AWI) for the year ended June 30, The Coalition's major federal programs and state projects are identified in the summary of auditor's results section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major federal programs and state projects is the responsibility of the Coalition's management. Our responsibility is to express an opinion on the Coalition's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and Chapter , Rules of the Auditor General. Those standards, OMB Circular A-133; and Chapter , Rules of the Auditor General, require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program or state project occurred. An audit includes examining, on a test basis, evidence about the Coalition's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on the Coalition's compliance with those requirements. 16

21 Board of Directors Early Learning Coalition of Northwest Florida, Inc. Independent Auditor's Report on Compliance with Requirements That Could Have a Material Effect on Each Major Program and State Project and on Internal Control over Compliance in Accordance with OMB Circular A-133 and Chapter , Rules of the Auditor General (Continued) Compliance (Continued) In our opinion, the Coalition complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major federal programs and state projects, and requirements set forth by AWI for the year ended June 30, Internal Control over Compliance The management of the Coalition is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts, and grants applicable to federal and state projects. In planning and performing our audit, we considered the Coalition's internal control over compliance with requirements that could have a direct and material effect on a major federal program or state project in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133 and Chapter , Rules of the Auditor General, but not for the purpose of expressing an opinion on the effectiveness of the Coalition's internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program or state project on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program or state project will not be prevented, or detected and corrected, on a timely basis. Our consideration of the internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. This report is intended solely for the information and use of the audit committee, management, Board of Directors, federal and state awarding agencies, and pass-through entities and is not intended to be, and should not be, used by anyone other than these specified parties. January 25,

22 SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended June 30, 2011 I. SUMMARY OF AUDITOR'S RESULTS Financial Statements Type of auditor's report issued: Unqualified Internal control over financial reporting: Material weakness(es) identified? Yes X No Significant deficiency(ies) identified that is/are not considered to be material weakness(es)? Yes X None Reported Noncompliance material to financial statements noted? Yes X No Federal Awards and State Projects Internal control over major programs: Material weakness(es) identified? Yes X No Significant deficiency(ies) identified that is/are not considered to be material weakness(es)? Yes X Type of auditor's report issued on compliance for major programs: Unqualified None Reported Any audit findings disclosed that are required to be reported in accordance with section 510(a) of Circular A-133 and Chapter , Rules of the Auditor General? Yes X No 18 Continued...

23 SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended June 30, 2011 I. SUMMARY OF AUDITOR'S RESULTS (CONTINUED) Identification of major programs: CFDA Number Name of Federal Program or Cluster U.S. Department of Health and Human Services Temporary Assistance for Needy Families Childcare and Development Fund Cluster Child Care and Development Block Grant Child Care Mandatory and Matching Funds of the Child Care and Development Fund ARRA - CCDBG U.S. Department of Education ARRA - SFSF CSFA Number Name of State Project Voluntary Pre-Kindergarten Education Program Dollar threshold used to distinguish between type A and type B programs for federal awards: $300,000 Dollar threshold used to distinguish between type A and type B programs for state awards: $300,000 Auditee qualified as a federal low-risk auditee? Yes X No Auditee qualified as a state low-risk auditee? Yes X No II. FINANCIAL STATEMENT FINDINGS The results of our audit of the Coalition did not disclose any findings required to be reported under GAGAS. III. FINDINGS AND QUESTIONED COSTS FOR FEDERAL AWARDS AND STATE PROJECTS We noted no matters involving noncompliance that are required to be reported in accordance with the U.S. Office of Management and Budget Circular A-133 and Chapter , Rules of the Auditor General. 19 Continued...

24 SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended June 30, 2011 IV. SUMMARY OF SCHEDULE OF PRIOR YEAR AUDIT FINDINGS The results of our prior year audit of the Coalition disclosed one finding that we considered to be a material weakness in the Coalition's internal control over financial reporting and was required to be reported under GAGAS. FINDING NUMBER FINDING RECONCILIATION OF GENERAL LEDGER TO SUBSIDIARY LEDGERS AND OTHER SUPPORTING SCHEDULES Finding: We noted that, other than for the reconciliations of the Coalition's cash/checking accounts, the general ledger balances as of and for the year ended June 30, 2010 had not been reconciled to subsidiary ledgers and other supporting schedules. Further, because of not having performed these reconciliations, the Coalition was unaware that the general ledger balances as of July 1, 2009 had not been entered into the Coalition's new accounting program upon conversion from the old accounting program in July As a result, the Coalition's June 30, 2010 financial statements were materially misstated and required a significant number of adjustments in order to correct for these material misstatements. Current Status: During the year ended June 30, 2011 the Coalition implemented a corrective action plan to eliminate the material weakness. No similar findings were noted during the audit of the Coalition for the year ended June 30, In the prior year, we noted one finding involving noncompliance that we considered to be a material weakness in the Coalition's internal control over major programs that was required to be reported in accordance with the U.S. Office of Management and Budget Circular A-133 and Chapter , Rules of the Auditor General. FINDING NUMBER FINDING RECONCILIATION OF FINANCIAL RECORDS TO AWI SINGLE STATEWIDE INFORMATION SYSTEM Criteria: The AWI grant agreement requires that the Coalition's financial records for child care provider payments are reconciled in the Agency's Single Statewide Information System on a monthly basis; no more than sixty days from the close of the monthly reporting period. Condition: We noted that despite the Coalition having performed the procedural aspect of the required monthly reconciliations, such reconciliations could not have been completed without having unreconciled differences between the Coalition's financial records and that of the Agency. This finding is supported by the identification of material misstatements in the Coalition's financial records of the amount due from AWI as of June 30, 2010 and the amount of state funding (public support revenues) passed through from AWI for the year ended June 30, Current Status: During the year ended June 30, 2011 the Coalition implemented a corrective action plan to eliminate the material weakness. No similar findings were noted during the audit of the Coalition for the year ended June 30,

25 MANAGEMENT LETTER

26 45 Eglin Parkway NE Suite 301 Fort Walton Beach, FL Fax: Board of Directors Early Learning Coalition of Northwest Florida, Inc. Panama City, Florida MANAGEMENT LETTER We have audited the basic financial statements of the Early Learning Coalition of Northwest Florida, Inc. (the Coalition), as of and for the fiscal year ended June 30, 2011, and have issued our report thereon dated January 25, We conducted our audit in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations and Chapter , Rules of the Auditor General. We have issued our 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, Independent Auditor's Report on Compliance with Requirements That Could Have a Material Effect on Each Major Program and State Project and on Internal Control over Compliance in Accordance with OMB Circular A-133 and Chapter , Rules of the Auditor General, and Schedule of Findings and Questioned Costs. Disclosures in those reports and schedule, which are dated January 25, 2012, should be considered in conjunction with this management letter. Additionally, our audit was conducted in accordance with the Rules of the Auditor General, Chapter , which require disclosure in the management letter of violations of provisions of contracts or grant agreements or abuse that have an effect on the financial statements that is less than material but more than inconsequential. In addition, for matters that are inconsequential, consideration of both quantitative and qualitative factors, the following may be reported based on professional judgment: (1) violations of laws, rules, regulations, and contractual provisions that have occurred, or are likely to have occurred; (2) improper or illegal expenditures; (3) improper or inadequate accounting procedures (e.g., the omission of required disclosures from the financial statements); (4) failures to properly record financial transactions; and (5) other inaccuracies, shortages, defalcations, and instances of fraud discovered by, or that come to the attention of, the auditor. Our audit did not disclose any of the above matters required to be disclosed by Rules of the Auditor General under this section. 21

27 Board of Directors Early Learning Coalition of Northwest Florida, Inc. Management Letter (Continued) This management letter is intended solely for the information of the Early Learning Coalition of Northwest Florida, Inc. and management, grantor agencies, and the State of Florida Office of the Auditor General and is not intended to be, and should not be, used by anyone other than these specified parties. We greatly appreciate the assistance and cooperation extended to us during our audit. January 25,