CATHOLIC SOCIAL SERVICES of the Greater Mobile Area FINANCIAL REPORT JUNE 30, 2016

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1 CATHOLIC SOCIAL SERVICES of the Greater Mobile Area FINANCIAL REPORT JUNE 30, 2016

2 TABLE OF CONTENTS Page INDEPENDENT AUDITOR'S REPORT 1-3 FINANCIAL STATEMENTS Statement of financial position 4 Statement of activities 5 Statement of functional expenses 6 Statement of cash flows 7 Notes to financial statements 8-14 SUPPLEMENTAL INFORMATION Schedule of expenditures of federal awards 15 Note to schedule of expenditures of federal awards 16 Schedule of income and expenses by program 17 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 and 19 REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH THE UNIFORM GUIDANCE SCHEDULE OF FINDINGS AND QUESTIONED COSTS CORRECTIVE ACTION PLAN 26 and 27

3 INDEPENDENT AUDITOR S REPORT His Excellency, The Most Reverend Thomas J. Rodi Archbishop of Mobile Mobile, Alabama Report on the Financial Statements We have audited the accompanying financial statements of Catholic Social Services of the Greater Mobile Area (a nonprofit organization), which comprise the statement of financial position as of June 30, 2016, 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 of material misstatement. -1- Smith, Dukes & Buckalew LLP Mobile 3800 Airport Blvd. Suite 101 Mobile, Alabama phone fax smithdukes.com Daphne 6475 Van Buren Ave. Suite 200 Daphne, Alabama phone fax

4 Catholic Social Services of the Greater Mobile Area Page Two An audit involves performing procedures to obtain audit evidence about the amounts and disclosures 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 internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal 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. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Catholic Social Services of the Greater Mobile Area as of June 30, 2016, and the changes in its net assets and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Other Matters Other Information Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by the audit requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), 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 procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Schedule of Expenditures of Federal Awards is fairly stated in all material respects in relation to the financial statements as a whole. -2-

5 Catholic Social Services of the Greater Mobile Area Page Three Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 3, 2017 on our consideration of Catholic Social Services of the Greater Mobile Area 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 the 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 Catholic Social Services of the Greater Mobile Area s internal control over financial reporting and compliance. Mobile, Alabama November 3,

6 FINANCIAL STATEMENTS

7 CATHOLIC SOCIAL SERVICES of the Greater Mobile Area STATEMENT OF FINANCIAL POSITION June 30, 2016 ASSETS Cash and cash equivalents $ 1,685,480 Investments 159,259 Accounts receivable: Grants 71,179 Related party 4,282 Other 12,852 Other assets 2,042 Fixed assets, net of accumulated depreciation of $359,385 3,308,164 Total assets 5,243,258 LIABILITIES AND NET ASSETS Liabilities Accounts payable 28,834 Advances from United States Catholic Conference 28,500 Total liabilities 57,334 Net assets Unrestricted 4,977,127 Temporarily restricted 208,797 Permanently restricted - 5,185,924 Total liabilities and net assets $ 5,243,258 The Notes to Financial Statements are an integral part of these statements. -4-

8 CATHOLIC SOCIAL SERVICES of the Greater Mobile Area STATEMENT OF ACTIVITIES For the Year Ended June 30, 2016 Temporarily Permanently Unrestricted Restricted Restricted Total SUPPORT AND REVENUE: Local support Contributions -- Catholic Archdiocese of Mobile $ 1,019,743 $ 85,626 $ - $ 1,105,369 Contributions -- United Way 145, ,151 Contributions -- Other 225, , ,790 Use of contributed facilities 53,695 1,468-55,163 Contributed services 61, ,748 Investment income 15,166 3,059-18,225 Unrealized gain (loss) on investments (1,290) (2,083) - (3,373) Total local support 1,519, ,116-1,912,073 Government agencies and grant support Governmental revenues 1,029, ,029,956 Non-governmental grants 12, ,741 Total government agencies and grant support 1,042, ,042,697 Total support 2,562, ,116-2,954,770 Revenue Program fees 127, ,848 Sales to the public 252, ,597 Fundraising events 34, ,352 Loss on sale of property (4,398) - - (4,398) Other 93, ,911 Total revenue 504, ,310 Net assets released from restrictions 2,055,190 (2,055,190) - - Total support and revenue 5,122,154 (1,663,074) - 3,459,080 EXPENSES: Program services 2,802, ,802,381 Supporting services 212, ,671 Total expenses 3,015, ,015,052 Change in net assets 2,107,102 (1,663,074) - 444,028 Net assets at beginning of period 2,870,025 1,871,871-4,741,896 Net assets at end of period $ 4,977,127 $ 208,797 $ - $ 5,185,924 The Notes to Financial Statements are an integral part of these statements. -5-

9 CATHOLIC SOCIAL SERVICES of the Greater Mobile Area STATEMENT OF FUNCTIONAL EXPENSES For the Year Ended June 30, 2016 SUPPORTING PROGRAM SERVICES SERVICES Community Children and and Refugee Total Management Family Social Resettlement Program and General - Programs Programs Program Services Regional/Mobile Total Salaries $ 423,557 $ 544,343 $ 336,986 $ 1,304,886 $ 147,267 $ 1,452,153 Employee benefits 39,569 43,582 39, ,784 11, ,048 Payroll taxes, etc. 32,407 44,716 28, ,460 14, ,279 Professional fees 16,991 12,737 34,650 64,378 4,422 68,800 Supplies 12,563 25,637 6,437 44,637 5,856 50,493 Telephone 12,995 17,974 4,985 35,954 1,656 37,610 Postage 1,001 2, , ,155 Rent 44,970 46,768 28, ,678 7, ,024 Utilities 32,107 52,020 7,381 91,508 3,723 95,231 Care of buildings and grounds 8,786 17, , ,208 Property and liability insurance 4,188 20,465 1,441 26, ,257 Equipment rental, maintenance and acquisition 21,619 10, , ,439 Printing and publications 1,310 1,191-2,501 1,765 4,266 Travel 13,745 3,889 21,412 39,046 2,211 41,257 Conferences and meetings 1,412 8,960-10,372 1,306 11,678 Assistance 44, , , , ,833 Membership dues (254) 638 Other 13,163 5,183 15,733 34,079 7,987 42,066 Depreciation 44,578 9, , ,617 Total expenses $ 770,364 $ 1,173,603 $ 858,414 $ 2,802,381 $ 212,671 $ 3,015,052 The Notes to Financial Statements are an integral part of these statements. -6-

10 CATHOLIC SOCIAL SERVICES of the Greater Mobile Area STATEMENT OF CASH FLOWS For the Year Ended June 30, 2016 Cash flows from operating activities: Change in net assets $ 444,028 Adjustments to reconcile change in net assets to net cash provided by operating activities: Realized gain on sale of investments (1,551) Depreciation 55,617 Unrealized loss on investments 2,494 Loss on sale of property 4,398 (Increase) decrease in: Accounts receivable (35,740) Other assets 8 Increase (decrease) in: Accounts payable (449,412) Net cash provided by operating activities 19,842 Cash flows from investing activities: Capital expenditures (925,917) Interest and dividends reinvested in investments (2,401) Net withdrawals from investment account 9,547 Net cash used in investing activities (918,771) Net decrease in cash and cash equivalents (898,929) Cash and cash equivalents at beginning of year 2,584,409 Cash and cash equivalents at end of year $ 1,685,480 The Notes to Financial Statements are an integral part of these statements. -7-

11 CATHOLIC SOCIAL SERVICES of the Greater Mobile Area NOTES TO FINANCIAL STATEMENTS Note 1 - Summary of Significant Accounting Policies Nature of activities Catholic Social Services of the Greater Mobile Area is a not-for-profit welfare agency of the Catholic Archdiocese of Mobile. The Organization provides services to promote the physical, spiritual, and social welfare of people of the greater Mobile area. Programs include counseling, pregnancy services and infant foster homes, adoption, emergency food and shelter to the needy, refugee resettlement services and post-resettlement social and employment services, and other support services. The Organization's primary funding sources are the State of Alabama Department of Human Resources, United States Conference of Catholic Bishops, United Way, Catholic Archdiocese of Mobile, and the Department of Health and Human Services Administration for Children and Families. Basis of accounting The financial statements have been prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles. Cash equivalents For purposes of the statement of cash flows, the Organization considers all cash and other highly liquid investments with initial maturities of three months or less to be cash equivalents. Cash equivalents consisted of checking and money market accounts at June 30, Investments The Organization carries investments in marketable debt and equity securities with readily determinable fair values. All investments in marketable debt and equity securities are recorded in the statement of financial position at their fair values based on quoted prices in active markets (all Level 1 measurements). Unrealized gains and losses are included in the change in net assets in the accompanying statement of activities and changes in net assets. Accounts receivable Accounts receivables are stated at face amount with no allowance for doubtful accounts. An allowance for doubtful accounts is not considered necessary because management has determined that probable uncollectible amounts are immaterial. -8-

12 Note 1 - Summary of Significant Accounting Policies (continued) Fixed assets Land, buildings, automobiles, office furniture, fixtures and equipment are recorded at cost or at estimated fair value at the date of gift. Donations are reported as unrestricted support unless the donor has restricted the donated asset to a specific purpose. The Organization follows the practice of capitalizing all expenditures for equipment in excess of $1,000. Depreciation is provided using the straight-line method over the estimated useful lives of the assets. Contributions Contributions are recognized when the donor makes a promise to give to the Organization that is, in substance, unconditional. Donor-restricted contributions are reported as increases in net assets with donor restrictions depending on the nature of the restrictions. When a restriction expires, net assets with donor restrictions are reclassified to net assets without donor restrictions. There were no unconditional promises to give at June 30, Contributed facilities and services The Organization records the value of donated facilities when there is an objective basis available to measure their value. Contributed facilities represent the estimated fair rental value of office space provided primarily by the Catholic Archdiocese of Mobile. Contributions of donated services that create or enhance nonfinancial assets or that require specialized skills are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation, are recorded at their fair values in the period received. Functional allocation of expenses The costs of providing the various programs and other activities have been summarized on a functional basis in the statement of activities. Accordingly, certain costs have been allocated among the programs and supporting services benefited. Income taxes The Internal Revenue Service has determined that Catholic Social Services, as an agency of the Catholic Church, is exempt from Federal income taxes under Section 501(a) of the Internal Revenue Code as a religious organization described in Section 501(c)(3). Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. -9-

13 Note 1 - Summary of Significant Accounting Policies (continued) New Accounting Pronouncements In May 2015, the Financial Accounting Standards Board ( FASB ) issued ASU No , Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities that Calculate Net Asset Value Per Share (or its Equivalent). This ASU removes the requirement to make certain disclosures and to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per practical expedient. The amendments in ASU are effective for annual reporting periods beginning after December 15, The amendment is required to be applied retrospectively. ASU did not have an impact on net assets of the Organization, nor did it impact the financial statement disclosure at Note 2. In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No , Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities. This ASU will simplify and improve how a not-forprofit organization classifies its net assets and presents its expenses, as well as, the information it presents in financial statements and notes about its liquidity, financial performance, and cash flows. The amendments in ASU are effective for annual financial statements issued for fiscal years beginning after December 15, The Organization is currently evaluating the impact this will have on the presentation of the financial statements. In February 2016, the FASB issued ASU , Leases. This accounting standard requires lessees to recognize assets and liabilities related to lease arrangements longer than 12 months on the balance sheet as well as additional disclosures. The updated guidance is effective for annual periods beginning after December 15, The Organization is currently evaluating the impact of the provisions of this ASU. Note 2 - Fair Value Measurements FASB ASC 820, Fair Value Measurements, establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under FASB ASC 820 are described as follows: Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets. -10-

14 Note 2 - Fair Value Measurements (continued) Level 2 Inputs to the valuation methodology include: Quoted prices for similar assets or liabilities in active markets; Quoted prices for identical or similar assets or liabilities in inactive markets; Inputs other than quoted prices that are observable for the asset or liability; Inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The asset or liability s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. Following is a description of the valuation methodologies used for assets measured at fair value. Mutual Funds: Valued at the daily closing price as reported by the fund. Mutual funds held by the Organization are open-end mutual funds that are required to publish their daily net asset value (NAV) and to transact at that price. The mutual funds held by the Organization are deemed to be actively traded. The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Organization believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. The following table sets forth by level, within the fair value hierarchy, the Organization s assets at fair value as of June 30, 2016: Level 1 Level 2 Level 3 Total Mutual funds - equities $ 159,259 $ - $ - $ 159,259 Total assets at fair value $ 159,259 $ - $ - $ 159,

15 Note 3 - Investments Investments consist of two funds with the Community Foundation of South Alabama (CFSA) which includes cash in money markets, stocks, and corporate and treasury bonds. All investment accounts are carried at fair value based on quoted prices in active markets (all Level 1 measurements). The CFSA funds from one account are restricted for program services. The original principal portion/cost of the investment is $100,000. The interest portion of the investment can be received upon written request; however, the principal portion must be approved by Catholic Social Services and the Community Foundation of South Alabama's Board of Directors before it can be received. The other CFSA account consists of funds contributed by both the organization and a donor and are unrestricted in use. Investments consist of the following at June 30, 2016: Cost Fair Value Conservative portfolio consisting of 30% common stock and 70% bonds $ 115,492 $ 131,402 Moderate portfolio consisting of 60 % common stock and 40% bonds 31,355 27,857 $ 146,847 $ 159,259 A summary of return on investments at June 30, 2016 is as follows: Unrestricted Temporarily Restricted Total Investment income $ 462 $ 1,939 $ 2,401 Unrealized gains (1,290) (1,204) (2,494) Realized gains (losses) 431 1,120 1,551 Total investment return $ (397) $ 1,855 $ 1,458 Note 4 - Grants Receivable Grants receivable are deemed to be fully collectible by management and are composed of the following amounts due at June 30, 2016: State of Alabama Department of Human Resources $ 25,947 United States Catholic Conference 31,170 $ 57,

16 Note 5 - Fixed Assets As of June 30, 2016, fixed assets consist of: Land $ 700,061 Buildings 2,590,204 Building improvements 68,342 Automobiles 5,447 Office furniture, fixtures and equipment 303,495 3,667,549 Less: accumulated depreciation (359,385) $ 3,308,164 Total depreciation expense for the year ended June 30, 2016 was $55,617. Note 6 - Operating Leases The following is a schedule by years of future minimum rental payments required under operating leases that have initial or remaining noncancellable lease terms in excess of one year as of June 30, 2016: 2017 $ 17, , , and thereafter - $ 43,857 Rental expense for the year ended June 30, 2016 amounted to $128,024. Note 7 - Federal Grants and Advance from United States Conference of Catholic Bishops The federal grants are received on a cost reimbursement basis. Revenue with respect to the federal grants are recognized to the extent of expenses incurred under the award terms. Upon completion or expiration of a grant, unexpended funds are not available to the Organization. However, the United States Conference of Catholic Bishops advanced monies to the Organization to assist with the refugee resettlement programs. As of June 30, 2016, the balance on the advances was $28,

17 Note 8 - Temporarily Restricted Net Assets Temporarily restricted net assets consist of the following at June 30, 2016: Investment with the Community Foundation of South Alabama $ 131,402 Cash restricted for disaster relief $ 77, ,797 Note 9 - Retirement Plan The Organization participates in an employer-sponsored retirement plan titled The Retirement Plan for Lay Employees of the Archdiocese of Mobile. All regular, full-time, and lay employees of the Archdiocese, including its parishes, schools, agencies, departments, and other subdivisions who work twenty or more hours per week, are eligible to become participants. Contributions to the Plan are based upon years of employment, with a two-year waiting period for discretionary employer contributions. Employees can begin making contributions at the beginning of the next quarter after their employment begins. The Organization's share of the cost of the Plan was $45,548 for Note 10 - Related Parties Related party receivables consist of $4,282 receivable from the Catholic Archdiocese of Mobile for the reimbursement of various expenses at June 30, The Organization also received contributions in the amount of $1,105,369 and the use of contributed facilities in the amount of $55,163 from the Catholic Archdiocese of Mobile for the year ended June 30, Note 11 - Concentration of Credit Risk The Organization maintains its cash in several banks located in Alabama. The amount in excess of the FDIC insured amount was $1,309,621 at June 30, Note 12 - Subsequent Events Management has evaluated subsequent events through November 3, 2017, the date at which the financial statements were available to be issued. No other subsequent events have occurred though that date that would have a material impact on the financial statements. -14-

18 SUPPLEMENTARY INFORMATION

19 CATHOLIC SOCIAL SERVICES of the Greater Mobile Area SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the Year Ended June 30, 2016 Federal Federal Grantor/Pass Through CFDA Grantor/Program Title Number Expenditures U.S. Department of Health and Human Services Refugee and Entrant Assistance Wilson/Fish Program $ 365,895 Refugee and Entrant Assistance State/Replacement Designee Administered Programs ,081 Passed through State of Alabama Department of Human Resources: Promoting Safe and Stable Families (Family Service Center) ,836 Passed through United States Conference of Catholic Bishops: Refugee and Entrant Assistance Voluntary Agency Programs (Match Grant Program) ,678 U.S. Department of State Bureau of Population, Refugees, and Migration Passed through United States Conference of Catholic Bishops: U.S. Refugee Admissions Program ,581 Total Expenditures of Federal Awards $ 977,

20 CATHOLIC SOCIAL SERVICES of the Greater Mobile Area NOTE TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the Year ended June 30, 2016 NOTE 1 - BASIS OF PRESENTATION The accompanying schedule of expenditures of federal awards includes the federal grant activity of Catholic Social Services and is presented on the accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements. NOTE 2 - INDIRECT COST RATE The Organization has not elected to use the 10-percent de minimis cost rate allowed under the Uniform Guidance. -16-

21 CATHOLIC SOCIAL SERVICES of the Greater Mobile Area SCHEDULE OF INCOME AND EXPENSES BY PROGRAM For the Year Ended June 30, 2016 Program Services Family Refugee Crisis Service Resettlement Counseling Florida Pregnancy Center Program Adoption Mobile Street Centers Catholic Archdiocese of Mobile $ - $ 20,045 $ 87,105 $ 122,095 $ 35,160 $ 94,200 United Way 16, Contributions 1,277 3,729 6, ,046 35,945 Government support 213, ,235 4, ,939 Program fees - 16,975 33,972 41, Sales to the public Fundraising events Other income Use of contributed facilities - - 3,817 17, Contributed services 12,681 49, Loss on sale of asset Investment income ,977 - Total revenues 244, , , , , ,084 Salaries 157, ,986 85, ,937-78,196 Employee benefits 18,893 39,633 9,560 7,522-3,594 Payroll taxes, etc. 12,947 28,337 5,891 7,725-5,844 Professional fees 1,722 34,650 3,626 2,349 5,624 3,670 Supplies 1,553 6, ,774 2,476 4,879 Telephone 3,759 4,985 1,848 2,333-5,055 Postage Rent 17,222 28,940 3,817 17,031-6,900 Utilities 4,492 7,381 2,950 6,280 8,235 10,150 Care of buildings and grounds 3, ,946 Property and liability insurance - 1, , Equipment rental, maintenance and acquisition ,936 15,963 2,947 Printing and publications Travel 10,789 21,412 1, ,379 Conferences and meetings Assistance 33, ,647 5, ,521 Membership dues Other , ,494 2,139 Depreciation , Total expenses 266, , , ,713 90, ,081 Net income (loss) $ (22,778) $ 47,637 $ 13,044 $ 26,917 $ 242,491 $ 2,

22 Supporting Program Services Services Management Total and General - Service Disaster Program Regional/ Center Relief Baldwin County Clarke County Services Mobile Total $ 311,844 $ 50,466 $ 110,088 $ 46,088 $ 877,091 $ 228,278 $ 1,105,369 30,000-56,500 4, ,500 37, ,151 52,275 10,000 89,356 4, ,172 32, , ,042,697-1,042, ,010 4, , ,848 50, ,032 98, , , ,618-5,618 28,734 34,352 93, ,911-93,911-1,468 25,800-48,116 7,047 55, ,748-61, (4,398) - (4,398) - (4,398) (2,182) - 7,186 1,400 10,381 4,471 14, ,786 61, , ,277 3,120, ,799 3,459, ,338 37, ,976 77,100 1,304, ,267 1,452,153 10,652 5,194 19,727 8, ,784 11, ,048 19,566 2,361 16,784 6, ,460 14, ,279 4,732 1,428 4,768 1,809 64,378 4,422 68,800 14, ,011 1,591 44,637 5,856 50,493 11, ,064 1,826 35,954 1,656 37, , , ,155-1,468 25,800 19, ,678 7, ,024 30,724 1,072 13,586 6,638 91,508 3,723 95,231 5, , , ,208 5, , , ,257 8, , , , ,501 1,765 4, , ,046 2,211 41, ,128 7,255-10,372 1,306 11, ,951 5,703 72,741 28, , , (61) 892 (254) 638 2, , ,079 7,987 42,066 1,608-7,998-54, , ,070 59, , ,348 2,802, ,671 3,015,052 $ (17,284) $ 2,528 $ 16,413 $ 6,929 $ 317,900 $ 126,128 $ 444,028

23 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 His Excellency, The Most Reverend Thomas J. Rodi Archbishop of Mobile Mobile, Alabama Independent Auditor s Report We have audited 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, the financial statements of Catholic Social Services of the Greater Mobile Area, which comprise the statement of financial position as of June 30, 2016, and the related statements of activities and cash flows for the year then ended, and the related notes to the financial statements and have issued our report thereon dated November 3, Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered Catholic Social Services of the Greater Mobile Area 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 Catholic Social Services of the Greater Mobile Area s internal control. Accordingly, we do not express an opinion on the effectiveness of Catholic Social Services of the Greater Mobile Area s internal control. 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 Smith, Dukes & Buckalew LLP Mobile 3800 Airport Blvd. Suite 101 Mobile, Alabama phone fax smithdukes.com Daphne 6475 Van Buren Ave. Suite 200 Daphne, Alabama phone fax

24 Catholic Social Services of the Greater Mobile Area Page Two A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit, we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether Catholic Social Services of the Greater Mobile Area s financial statements are free from 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 matters that we have reported to management of Catholic Social Services of the Greater Mobile Area in a separate letter dated November 3, 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 entity 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 entity s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Mobile, Alabama November 3,

25 REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH THE UNIFORM GUIDANCE His Excellency, The Most Reverend Thomas J. Rodi Archbishop of Mobile Mobile, Alabama Independent Auditor s Report Report on Compliance for Each Major Program We have audited Catholic Social Services of the Greater Mobile Area s compliance with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Compliance Supplement that could have a direct and material effect on each of Catholic Social Services of the Greater Mobile Area s major federal programs for the year ended June 30, Catholic Social Services of the Greater Mobile Area s major federal programs are identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditor s Responsibility Our responsibility is to express an opinion on compliance for each of Catholic Social Services of the Greater Mobile Area s major federal programs based on our audit of the types of compliance requirements referred to above. 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; and the audit requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance 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 occurred Smith, Dukes & Buckalew LLP Mobile 3800 Airport Blvd. Suite 101 Mobile, Alabama phone fax smithdukes.com Daphne 6475 Van Buren Ave. Suite 200 Daphne, Alabama phone fax

26 Catholic Social Services of the Greater Mobile Area Page Two An audit includes examining, on a test basis, evidence about Catholic Social Services of the Greater Mobile Area 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 on compliance for each major federal program. However, our audit does not provide a legal determination of Catholic Social Services of the Greater Mobile Area s compliance. Opinion on Each Major Federal Program In our opinion, Catholic Social Services of the Greater Mobile Area complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, Other Matters The results of our auditing procedures disclosed instances of noncompliance with the compliance requirements referred to above that are required to be reported in accordance with the Uniform Guidance and which are described in the accompanying schedule of findings and questioned costs as items and Our opinion on each major federal program is not modified with respect to these matters. Catholic Social Services of the Greater Mobile Area s response to the noncompliance findings identified in our audit are described in the accompanying corrective action plan. Catholic Social Services of the Greater Mobile Area s response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response. Report on Internal Control over Compliance Management of Catholic Social Services of the Greater Mobile Area is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered Catholic Social Services of the Greater Mobile Area s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program as a basis for designing auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of Catholic Social Services of the Greater Mobile Area s internal control over compliance. -21-

27 Catholic Social Services of the Greater Mobile Area Page Three 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 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 will not be prevented, or detected and corrected on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of 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 material weaknesses or significant deficiencies, and therefore, material weaknesses or significant deficiencies may exist that were not identified. However, we identified certain deficiencies in internal control over compliance, as described in the accompanying schedule of findings and questioned costs as items and , that we consider to be a material weakness and significant deficiency. Catholic Social Services of the Greater Mobile Area s responses to the internal control over compliance findings identified in our audit are described in the accompanying corrective action plan. Catholic Social Services of the Greater Mobile Area s response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Mobile, Alabama November 3,

28 A. SUMMARY OF AUDIT RESULTS CATHOLIC SOCIAL SERVICES of the Greater Mobile Area SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended June 30, The auditor s report expresses an unqualified opinion on the financial statements of Catholic Social Services of the Greater Mobile Area. 2. No material weaknesses were noted during the audit of the financial statements of Catholic Social Services of the Greater Mobile Area. 3. No instances of noncompliance material to the financial statements of Catholic Social Services of the Greater Mobile Area were disclosed during the audit. 4. Material weaknesses identified during the audit of the major federal award programs are reported in Part C of this report. 5. The auditor s report on compliance for the major federal award programs for Catholic Social Services of the Greater Mobile Area expresses an unqualified opinion. 6. Audit findings relative to the major federal award programs for Catholic Social Services of the Greater Mobile Area are reported in Part C of this report. 7. The programs tested as major programs included: Refugee and Entrant Assistance Wilson/Fish Program, CFDA No The threshold for distinguishing Types A and B programs was $750, Catholic Social Services of the Greater Mobile Area qualified as a low-risk auditee. B. FINDINGS - FINANCIAL STATEMENTS AUDIT NONE -23-

29 CATHOLIC SOCIAL SERVICES of the Greater Mobile Area SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended June 30, 2016 (Continued) C. FINDINGS - MAJOR FEDERAL AWARD PROGRAMS AUDIT Non-compliance: MATERIAL WEAKNESS Condition: Criteria: Cause: Effect: Recommendation: The report data submitted on the quarterly Federal Financial Reports does not agree to the Organization s accounting records. The Organization is required to submit quarterly Federal Financial Reports as a standardized format to report expenditures under Federal awards, as well as, cash status. Before submitting these reports, recipients must ensure that the information submitted is accurate, complete, and consistent with the recipient s accounting system. Due to lack of management oversight, the reported expenditures and cash status do not reconcile to the Organization s accounting records. The quarterly Federal Financial Reports submitted for the quarters ended December 31, 2015, March 31, 2016, and June 30, 2016 were incorrect. We recommend that management thoroughly review and reconcile the report data on all Federal Financial Reports to the accounting records to ensure that the information submitted is accurate, complete, and consistent with the Organization s accounting records. SIGNIFICANT DEFICIENCY Condition: Criteria: The Organization s expenditures do not support its drawdown requests. The Organization requested more than the general ledger details supported. The Organization is funded on a reimbursement payment basis. The reimbursement drawdown requests are required to be based on actual expenses which are paid by the Organization prior to the date of the reimbursement request. -24-

30 CATHOLIC SOCIAL SERVICES of the Greater Mobile Area SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended June 30, 2016 (Continued) C. FINDINGS - MAJOR FEDERAL AWARD PROGRAMS AUDIT (continued) Cause: Effect: Recommendation: Due to lack of management oversight, the drawdown requests do not reconcile to actual expenditures related to the Wilson Fish grant. The reimbursement payment request drawdowns were in excess of the actual expenditures related to the Wilson Fish grant resulting in unallowable costs of $9,533. We recommend that management thoroughly review and reconcile payment requests with the general ledger expenditures to ensure drawdowns agree to actual expenditures. -25-

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