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1 BEHAVIORAL SCIENCE CENTERS dba HYPNOSIS MOTIVATION INSTITUTE (A NON-PROFIT CALIFORNIA CORPORATION) STATEMENT OF FINANCIAL POSITION June 30, 2017 and 2016 OPE ID: DUNS: EIN:

2 TABLE OF CONTENTS PAGE Independent Auditor s Report 3 4 Statement of Financial Position 5 Statement of Activities and Change in Net Assets 6 Statement of Cash Flows 7 Notes to Financial Statement 8 12 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 Report on Compliance for a Federal Program and Report on Internal Control over Compliance When Using the Program-Specific Audit Option to Satisfy the Uniform Guidance Audit Requirements Schedule of Findings and Questioned Costs 17 Schedule of Expenditures of Federal Awards 18 Notes to Schedule of Expenditures of Federal Awards 19 2

3 bg BARRY GLASSER & COMPANY A PROFESSIONAL ACCOUNTANCY CORPORATION INDEPENDENT AUDITOR S REPORT To the Board of Directors of Behavioral Science Centers dba Hypnosis Motivation Institute Report on the Financial Statements We have audited the accompanying financial statements of Behavioral Science Centers dba Hypnosis Motivation Institute (a nonprofit organization), which comprise the statement of financial position as of June 30, 2017 and 2016, and the related statements of activities and change in net assets, and cash flows for the years 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 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 Behavioral Science Centers dba Hypnosis Motivation Institute as of June 30, 2017 and 2016, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America Canwood Street, Suite 218, Agoura Hills, California (818) Fax (818)

4 Other Matters Other Information Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying Note 9 on related party transactions, Note 10 on refunds due to student financial assistance programs, Note 11 on financial responsibility and the schedule of expenditures of federal awards, as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, are 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 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 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 November 3, 2017, on our consideration of Behavioral Science Centers dba Hypnosis Motivation Institute 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 solely 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 effectiveness of Behavioral Science Centers dba Hypnosis Motivation Institute s 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 Behavioral Science Centers dba Hypnosis Motivation Institute s internal control over financial reporting and compliance. Very truly yours, Barry Glasser & Company November 3,

5 BEHAVIORAL SCIENCE CENTERS dba HYPNOSIS MOTIVATION INSTITUTE STATEMENT OF FINANCIAL POSITION AS OF JUNE 30, ASSETS Current Assets Cash - Unrestricted $ 643,653 $ 709,005 Tuition Receivable, Net of Allowance for Doubtful Accounts of $110,000 and $125,000, respectively 515, ,937 Prepaid Expenses 34,841 33,638 Total Current Assets 1,194,340 1,232,580 Property and Equipment, Net of Accumulated Depreciation of $448,035 and 417,999 respectively 70,917 75,627 Total Assets $ 1,265,257 $ 1,308,207 LIABILITIES AND NET ASSETS Current Liabilities Accounts Payable $ 29,594 $ 23,493 Accrued Expenses 15,969 13,332 Unearned Tuition 704, ,831 Total Current Liabilities 749, ,656 Long-Term Liabilities Deferred Rent 118, ,138 Total Liabilities 868, ,794 Net Assets - Unrestricted 396, ,413 Total Net Assets 396, ,413 Total Liabilities and Net Assets $ 1,265,257 $ 1,308,207 See Auditor s Report and Notes to Financial Statements. 5

6 BEHAVIORAL SCIENCE CENTERS dba HYPNOSIS MOTIVATION INSTITUTE STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS FOR THE YEAR ENDED JUNE 30, Unrestricted Revenues Tuition and Fees - Resident School $ 1,194,233 $ 1,192,224 Tuition and Fees - Distance Education 222, ,700 Clinic Income 74,700 87,300 Interest Income Other Income 1,418 2,504 Total Unrestricted Revenues 1,492,910 1,582,150 Operating Expenses Instructional Costs 283, ,549 Occupancy Expenses 199, ,377 General and Administrative 967,413 1,152,280 Advertising and Promotion 108, ,123 Depreciation and Amortization 30,036 32,770 Total Expenses 1,588,542 1,806,099 Change in Net Assets (95,632) (223,949) Net Assets - Unrestricted, Beginning of Year 492, ,362 Net Assets - Unrestricted, End of Year $ 396,781 $ 492,413 See Auditor s Report and Notes to Financial Statements. 6

7 BEHAVIORAL SCIENCE CENTERS dba HYPNOSIS MOTIVATION INSTITUTE STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, Cash Flows From Operating Activities: Change in Net Assets $ (95,632) $ (223,949) Adjustments to Reconcile Change in Net Assets to Net Cash Provided by Operating Activities: Depreciation and Amortization 30,036 32,770 Change in Allowance for Doubtful Accounts (15,000) (13,000) (Increase) Decrease in Tuition Receivable (10,909) 119,732 (Increase) Decrease in Employee Advance - 4,500 (Increase) Decrease in Prepaid Expenses (1,203) 2,399 Increase (Decrease) in Accounts Payable 6,101 (13,973) Increase (Decrease) in Accrued Expenses 2,637 (35,845) Increase (Decrease) in Unearned Tuition 33,299 (131,556) Increase (Decrease) in Deferred Rent 10,645 16,614 Total Adjustments 55,606 (18,359) Net Cash (Used) by Operations (40,026) (242,308) Cash Flows from Investing Activities: Purchases of Property and Equipment (25,326) (17,249) Net Cash (Used) by Investing Activities (25,326) (17,249) Net (Decrease) in Unrestricted Cash (65,352) (259,557) Cash - Unrestricted, Beginning of Year 709, ,562 Cash - Unrestricted, End of Year $ 643,653 $ 709,005 Supplemental Disclosure of Cash Flow Information: Cash Paid During the Year for: Interest $ - $ - Taxes $ - $ - See Auditor s Report and Notes to Financial Statements. 7

8 BEHAVIORAL SCIENCE CENTERS dba HYPNOSIS MOTIVATION INSTITUTE NOTES TO FINANCIAL STATEMENTS June 30, 2017 and 2016 Note 1 Organization and Nature of Business Behavioral Science Centers dba Hypnosis Motivation Institute of Tarzana, California is a non-profit institution as described in Section 501 (c)(3) of the Federal Internal Revenue Code and related state tax codes. The Institute provides educational training in the theory and practice of hypnotherapy and is accredited by the Accrediting Council for Continuing Education and Training (ACCET) and by the Distance Education and Training Council (DETC). The Company draws its students from the southern California area. Note 2 Summary of Significant Accounting Policies Financial Statement Presentation Behavioral Science Centers dba Hypnosis Motivation Institute follows the provisions of FASB ASC 958, formerly SFAS No. 117, Financial Statements of Not-for-Profit Organizations, which establishes standards for general-purpose external financial statements. FASB ASC 958 does not require a not-for-profit organization to provide a statement of financial position; however, the statement of financial position will provide information on liquidity in accordance with FASB ASC 958. FASB ASC 958 does require a statement of activities and a statement of cash flows, and to classify net assets and changes in net assets as permanently restricted, temporarily restricted, and unrestricted. Accordingly, net assets of Behavioral Science Centers dba Hypnosis Motivation Institute and changes therein are classified and reported as follows: Unrestricted net assets - net assets that are not subject to donor-imposed restrictions Temporarily restricted net assets - net assets that are subject to donor-imposed restrictions that require passage of time or the occurrence of a specific event Permanently restricted net assets - net assets subject to donor-imposed restrictions that they be maintained permanently while permitting Behavioral Science Centers dba Hypnosis Motivation Institute to use or expend part or all of the income derived from the donated assets There were no temporarily restricted or permanently restricted net assets at June 30, 2017 and Behavioral Science Centers dba Hypnosis Motivation Institute records gifts of cash and other assets as temporarily restricted net assets if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, a stipulated time restriction ends, or a purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted assets and reported in the statement of activities as net assets released from donor restrictions. Contributed services creating or enhancing non-financial assets or that require specialized skills, are provided by individuals possessing those skills and would need to be purchased if not provided by donation are recognized when received. During the years ended June 30, 2017 and 2016, the Company did not have any contributed services. Use of Estimates Preparation of the Company's financial statements in accordance with 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. 8

9 BEHAVIORAL SCIENCE CENTERS dba HYPNOSIS MOTIVATION INSTITUTE NOTES TO FINANCIAL STATEMENTS June 30, 2017 and 2016 Note 2 continued Cash and Cash Equivalents For purposes of the statement of cash flows, the Company considers cash and all highly liquid debt instruments purchased with maturity of three months or less to be cash equivalents. Fair Value of Financial Instruments FASB ASC provides the definition for fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The Company adopted the provisions of FASB ASC as of July 1, The financial assets recorded at fair value on a recurring basis relate to cash and cash equivalents. FASB ASC establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Level 1 and 2 of the hierarchy) and the reporting entity s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy). The adoption of the statement to the Company s financial assets did not have any impact on the financial statements. In accordance with the provisions of the FASB statement the Company implemented on July 1, 2010, the statement as it relates to nonfinancial assets and nonfinancial liabilities that are not permitted or required to be measured at fair value on a recurring basis. The implementation did not impact the nonfinancial assets and liabilities. The carrying amount of the Company s cash and cash equivalents approximate fair value due to the short maturity of these instruments. Accordingly, cash and cash equivalents are valued using Level 1 inputs. For other assets and liabilities not otherwise carried at fair value, fair value approximates carrying value due to the current nature of such assets and liabilities. Tuition Receivable and Allowance for Doubtful Accounts Management evaluates the collectability of tuition receivables based upon a combination of factors and has established an allowance for doubtful accounts based on past performance. Generally all accounts over six months past due are deemed uncollectible. Uncollectible accounts receivable are specifically identified and charged to allowance account. Recovered bad debts are credited to income when collected. Property and Equipment Property and equipment are stated at cost. Depreciation has been calculated using the straight line method over the estimated useful lives of the assets (generally 3-7 years for fixtures and equipment). Leasehold improvements are stated at cost and are amortized on the straight line method over their estimated useful lives of approximately seven years. Property, equipment, major repairs and betterments in excess of $600 are capitalized and depreciated. Repairs and maintenance are charged to expense as incurred. Compensated Absences A liability for compensated absences has been accrued for employee vacations and is included in accrued expenses. Tuition Revenue Recognition Tuition is earned based upon each individual student s progression throughout the program the student is enrolled in. When a student begins the program, a contract receivable is recorded for the total tuition with a corresponding amount to unearned tuition. Tuition is recognized as earned by the individual s proportional performance of the program and the unearned tuition account is reduced. For the purposes of this report, the Company has recognized income based upon the proportional performance method during the length of the program 9

10 . BEHAVIORAL SCIENCE CENTERS dba HYPNOSIS MOTIVATION INSTITUTE NOTES TO FINANCIAL STATEMENTS June 30, 2017 and 2016 Note 2 continued Income Taxes The corporation was organized in California and is exempt from income taxes under Section 501 (c) (3) of the Internal Revenue Code and corresponding provisions of the California Revenue and Taxation Code. Accordingly, there is no provision for Federal income tax or California franchise tax. The Company files its income tax return on a fiscal year basis, and accordingly the Company's tax return for the year ended June 30, 2014 and subsequent are subject to examination by the tax authorities. Advertising The Company expenses advertising costs as incurred at the time the advertising takes place. Note 3 Fair Value Measurements Fair values of assets and liabilities measured on a recurring basis at June 30, 2017 are as follows: Quoted Prices in Active Significant Significant Markets for Identical Other Unobservable Fair Assets/Liabilities Observable Inputs Inputs Value (Level 1) (Level 2) (Level 3) Cash $ 643,653 $ 643,653 $ - $ - Total Assets $ 643,653 $ 643,653 $ - $ - Note 4 Property and Equipment Property and equipment consists of the following as of June 30: Fixtures and Equipment $ 98,584 $ 98,584 Computer Equipment 312, ,146 Leasehold Improvements 107, , , ,626 Accumulated Depreciation (448,035) (417,999) $ 70,917 $ 75,627 Depreciation expense was $30,036 and $32,770 for the years ended June 30, 2017 and 2016, respectively. Note 5 Unearned Tuition Unearned tuition is the tuition portion received or to be received from students in accordance with the revenue recognition policy based on the number of course hours not completed. Note 6 403(B) Plan The Company offers a tax-deferred annuity plan qualified under Section 403(b) of the Internal Revenue Code. The plan covers full-time employees of the Company. Employees may make contributions to the plan up to the maximum amount allowed by the Internal Revenue Code if they wish. The Company did not make a contribution to the plan for the years ended June 30, 2017 and Note 7 Commitments The Company is in a ten year lease agreement for its main facility as well as additional office space. The lease expires on August 31, The base monthly rent payments for the main facility and the additional office space are $16,363 and $1,117 respectively, with annual increases of 3% for each. For the main facility, the agreement provides rent abatements for months 1-6, 61-64, and For the additional office space, the agreement provides rent abatements for months 1 & 2. 10

11 BEHAVIORAL SCIENCE CENTERS dba HYPNOSIS MOTIVATION INSTITUTE NOTES TO FINANCIAL STATEMENTS June 30, 2017 and 2016 Note 7 continued Due to the rent abatements, the monthly rent expense has been recognized on a straight-line basis over the life of the agreements. The difference between the amounts paid, per the monthly rent schedule and scheduled abatements, and the monthly rent expense is recorded as deferred rent on the accompanying balance sheet as a liability. Future minimum annual rental commitments are as follows: Year Ended June 30, , , , ,761 Total $ 711,230 Rent expense was $173,724 and $174,177 for the years ended June 30, 2017 and 2016, respectively. Note 8 Concentration of Credit Risk A significant number of enrolling students depend upon financial aid (federal and state grants) to pay tuition. Accordingly, a substantial portion of the revenues and tuition receivables for the period ended June 30, 2017 and 2016 are a direct result of the Company's participation in the government student financial assistance programs. The Company must meet federal and state standards to maintain accreditation to receive these funds. Without accreditation, the school's ability to continue in business would be severely threatened. Financial instruments, which potentially subject the Company to concentrations of credit risk, consist of several cash accounts. The Company places its temporary cash with creditworthy, high-quality financial institutions. The standard deposit insurance amount is $250,000 per depositor, per insured bank, for each account ownership category. For the purposes of determining FDIC insured amounts, all deposits owned by the same corporation are insured under the same ownership category. Accounts owned by the same corporation but designated for different purposes are not separately insured. Balances in accounts with one institution at June 30, 2017, are in excess of Federal Deposit Insurance Corporation (FDIC) insured limits. At June 30, 2017, the cash exceeded federally insured limits by $372,797. The Company has not incurred any loss related to its cash. Note 9 Related Party Transactions The Company participates in Student Financial Aid under Title IV programs administered by the U.S. Department of Education pursuant to the Higher Education Act of 1965, as amended (HEA). The Company must comply with the regulations promulgated under the HEA. Those regulations require that all related party transactions be disclosed, regardless of their materiality to the financial statement. This information is required by the U.S. Department of Education and is presented for purposes of additional analysis and is not a required part of the basic financial statement. During the year ended June 30, 2017, the Company had related party transactions with American Hypnosis Association (AHA) of $750 and Panorama Publishing Company (PPC) of $1,727 for services rendered for the Company. The three companies have common officers and are under common control. 11

12 BEHAVIORAL SCIENCE CENTERS dba HYPNOSIS MOTIVATION INSTITUTE NOTES TO FINANCIAL STATEMENTS June 30, 2017 and 2016 Note 9 continued During the year ended June 30, 2016, the Company had related party transactions with American Hypnosis Association (AHA) of $750 and Panorama Publishing Company (PPC) of $14,208 for services rendered for the Company. The three companies have common officers and are under common control. Note 10 Refunds Due Student Financial Assistance Programs At June 30, 2017 and 2016, the Company did not owe refunds to the student financial assistance programs. During the years ended June 30, 2017 and 2016, the Company has recorded refunds due generally within two weeks of the student withdrawal. Note 11 Financial Responsibility Regulations The U.S. Department of Education requires an institution to meet the Financial Responsibility Regulations of Title IV using the Ratio Methodology for Proprietary Institutions as defined in Appendix F of the Title IV regulations. Using the Ratio Methodology for Proprietary Institutions as defined in Title IV regulations, the Company s composite score was 1.5 and 2.7 for the years ended June 30, 2017 and 2016, respectively. Student Loan Default Rates A Company s student loan cohort default rate may not exceed 30% for three consecutive years or 40% for one year. If a Company s cohort default rate exceeds either of these thresholds it risks losing eligibility to participate in Title IV student loan programs. The Company was in compliance with default rate thresholds for the current and two preceding years. Gainful Employment A Company s programs subject to gainful employment (GE) regulation must meet debt-to-earnings (D/E) ratio minimum requirements. A GE program passes if its discretionary income rate is less than or equal to 20% or its annual earnings rate is less than or equal to 8%. A GE program fails if its discretionary income rate is greater than 30% and its annual earnings rate is greater than 12%. A GE program with D/E rates that are neither passing nor failing is in the zone under the D/E rates measure. The zone provides a buffer to account for the year-to-year variations. A program becomes ineligible for Title IV program funds if it (1) fails the D/E rates measure for two of any three consecutive award years for which rates were calculated for the program, or (2) has a combination of zone and failing D/E rates for four consecutive award years for which rates were calculated for the program. The Company s 2015 D/E rate is 5.7%. Note 12 Subsequent Events Management has evaluated the impact of all subsequent events in the Company through the date the financial statements were available to be issued (November 3, 2017) and has determined that there were no subsequent events requiring adjustment or disclosure in the financial statements. 12

13 bg BARRY GLASSER & COMPANY A PROFESSIONAL ACCOUNTANCY CORPORATION Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Preformed in Accordance With Government Auditing Standards (No Material Weaknesses Identified; No Significant Deficiencies Identified; No Reportable Instances of Noncompliance or Other Matters Identified) To the Board of Directors of Behavioral Science Centers dba Hypnosis Motivation Institute 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 Behavioral Science Centers dba Hypnosis Motivation Institute (a nonprofit organization), which comprise the statement of financial position as of June 30, 2017 and 2016, and the related statements of activities, and cash flows for the years 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 Behavioral Science Centers dba Hypnosis Motivation Institute 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 Behavioral Science Centers dba Hypnosis Motivation Institute s internal control. Accordingly, we do not express an opinion on the effectiveness of Behavioral Science Centers dba Hypnosis Motivation Institute 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. 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 Canwood Street, Suite 218, Agoura Hills, California (818) Fax (818)

14 Compliance and Other Matters As part of obtaining reasonable assurance about whether Behavioral Science Centers dba Hypnosis Motivation Institute 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. 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 communication is not suitable for any other purpose. BARRY GLASSER & COMPANY Agoura Hills, California November 3,

15 bg BARRY GLASSER & COMPANY A PROFESSIONAL ACCOUNTANCY CORPORATION Report on Compliance for a Federal Program and Report on Internal Control over Compliance When Using the Program-Specific Audit Option to Satisfy the Uniform Guidance Audit Requirements (Unmodified Opinion on Compliance; No Material Weaknesses or Significant Deficiencies in Internal Control Over Compliance Identified) Independent Auditor s Report To the Board of Directors of Behavioral Science Centers dba Hypnosis Motivation Institute Report on Compliance for Each Major Federal Program We have audited Behavioral Science Centers dba Hypnosis Motivation Institute s compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on Behavioral Science Centers dba Hypnosis Motivation Institute s Student Financial Assistance Programs Cluster for the years ended June 30, 2017 and Behavioral Science Centers dba Hypnosis Motivation Institute s Financial Assistance Programs Cluster 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 federal statutes, regulations, and the terms and conditions of federal awards applicable to the Student Financial Assistance Programs Cluster. Auditor s Responsibility Our responsibility is to express an opinion on compliance for Behavioral Science Centers dba Hypnosis Motivation Institute s Student Financial Assistance Programs Cluster 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 Award (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 the Student Financial Assistance Programs Cluster have occurred. An audit includes examining, on a test basis, evidence about Behavioral Science Centers dba Hypnosis Motivation Institute 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 Behavioral Science Centers dba Hypnosis Motivation Institute s compliance. Opinion on Each Major Federal Program In our opinion, Behavioral Science Centers dba Hypnosis Motivation Institute 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 years ended June 30, 2017 and Canwood Street, Suite 218, Agoura Hills, California (818) Fax (818)

16 Report on Internal Control Over Compliance Management of Behavioral Science Centers dba Hypnosis Motivation Institute 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 Behavioral Science Centers dba Hypnosis Motivation Institute s internal control over compliance with the types of requirements that could have a direct and material effect on its Student Financial Assistance Programs Cluster to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for its Student Financial Assistance Programs Cluster and to test and report on internal control over compliance in accordance with 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 Behavioral Science Centers dba Hypnosis Motivation Institute 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 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. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 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 Uniform Guidance. Accordingly, this report is not suitable for any other purpose. BARRY GLASSER & COMPANY Agoura Hills, California November 3,

17 BEHAVIORAL SCIENCE CENTERS dba HYPNOSIS MOTIVATION INSTITUTE SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2017 Section I: Summary of Auditor's Results Financial Statements Type of auditor's report issued: Internal control over financial reporting: Material weakness (es) identified? Significant deficiency (ies) identified? Noncompliance material to financial statements noted? Federal Awards Internal control over major programs: Material weakness (es) identified? Significant deficiency (ies) identified? Type of auditor's report issued on compliance for major programs. Any audit findings that are required to be reported in accordance with Section of the Uniform Guidance Unqualified No No No No No Unqualified No Identification of major programs: , , and Student Financial Assistance Programs Cluster Dollar threshold used to distinguish between type A and type B programs? $750,000 Auditee qualified as a low-risk auditee? No Section II: Financial Statement Findings There are no financial statement findings to be reported. Section III: Federal Award Findings and Questioned Costs There are no federal award findings to be reported. Section IV: Corrective Action Plan N/A No findings. Section V: Summary Schedule of Prior Findings N/A No prior findings. 17

18 BEHAVIORAL SCIENCE CENTERS dba HYPNOSIS MOTIVATION INSTITUTE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2017 CFDA Disbursements/ Federal Agency/Program Title: Number Expenditures U.S. Department of Education Federal SEOG Program $ 5,479 Federal Pell Grant Program ,400 Federal Direct Loan Program ,444 Total Federal Disbursements/Expenditures $ 837,323 The accompanying notes are an integral part of this schedule. 18

19 BEHAVIORAL SCIENCE CENTERS dba HYPNOSIS MOTIVATION INSTITUTE NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2017 Note 1 Basis of Presentation The accompanying schedule of expenditures of federal awards includes the federal grant and loan activity of Behavioral Science Centers dba Hypnosis Motivation Institute under programs of the federal government for the year ended June 30, 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 Award (Uniform Guidance). Therefore, some of the amounts presented in this schedule may differ from amounts presented in, or used in the preparation of the basic financial statements. Note 2 Summary of Significant Accounting Policies Expenditures reported on the schedule are reported on the cash basis of accounting. Such expenditures are recognized following the cost principles contained in 2 CFR 200 Uniform Guidance. Behavioral Science Centers dba Hypnosis Motivation Institute did not elect to use the 10% de minimis cost rate. 19

20 COMPLIANCE REPORT SECTION BEHAVIORAL SCIENCE CENTERS, INC dba HYPNOSIS MOTIVATION INSTITUTE Tarzana, California EIN NUMBER: OPE ID NUMBER: DUNS NUMBER: COMPLIANCE ATTESTATION EXAMINATION OF THE TITLE IV STUDENT FINANCIAL ASSISTANCE PROGRAMS AT: Ventura Blvd Suite 310 Tarzana, CA FEDERAL PELL GRANT PROGRAM (84.063) FEDERAL SUPPLEMENTAL EDUCATIONAL OPPORTUNITY GRANT PROGRAM (84.007) FEDERAL DIRECT STUDENT LOANS (84.268) FOR THE FISCAL YEAR ENDING JUNE 30, 2017 BARRY GLASSER & COMPANY A Professional Accountancy Corporation 20

21 bg BARRY GLASSER & COMPANY A Professional Accountancy Corporation To the Stockholders Behavioral Science Centers, Incorporated Dba Hypnosis Motivation Institute Tarzana, California Independent Auditor s Report Report in Compliance for Student Financial Assistance Program We have audited Behavior Science Centers, Inc dba Hypnosis Motivation Institute compliance with the specified compliance requirements regarding Institutional Eligibility and Participating; Reporting; Student Eligibility; Disbursements; Return of Title IV Funds; G5 and Cash Management; Perkins Loan Program; Administrative Requirements, and Close Out Audit Requirements described in Chapter 3 of the 2016 edition of the U.S. Department of Education s Guide For Audits of Proprietary Schools and For Compliance Attestation Engagements of Third-Party Servicers Administering Title IV Programs (Guide) relative to Behavior Science Centers, Inc dba Hypnosis Motivation Institute Student Financial Assistance (SFA) programs, for the year ended June 30, 2017 Management s Responsibility Management is responsible for the Institution s compliance with the requirements of laws, regulations, contracts, and grants applicable to its SFA programs. Auditor s Responsibility Our responsibility is to express an opinion on compliance for Behavior Science Centers, Inc dba Hypnosis Motivation Institute s SFA programs based on our audit of the 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 standard applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the Guide. Those standards and the Guide require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the compliance requirements referred to above occurred. An audit includes examining, on a test basis, evidence about Behavior Science Centers, Inc dba Hypnosis Motivation Institute 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 SFA programs. However, our audit does not provide a legal determination of Behavior Science Centers, Inc dba Hypnosis Motivation Institute s compliance. Opinion on SFA Program In our opinion Behavior Science Centers, Inc dba Hypnosis Motivation Institute complied, in all material respects, with the compliance requirements referred to above for the year ended June 30,

22 Report on Internal Control Over Compliance Management of Behavior Science Centers, Inc dba Hypnosis Motivation Institute is responsible for establishing and maintaining effective internal control over compliance with the compliance requirements referred to above. In planning and performing our audit of compliance, we considered Behavior Science Centers, Inc dba Hypnosis Motivation Institute s internal control over compliance with the compliance requirements to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on compliance for SFA programs and to test and report on internal control over compliance in accordance with the Guide, 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 Behavior Science Centers, Inc dba Hypnosis Motivation Institute 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 compliance requirement applicable to SFA programs 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 a material noncompliance with a compliance requirement applicable to SFA programs will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance requirements of applicable SFA programs that 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 a material weakness or significant deficiencies. We did not identify any deficiencies in internal control over compliance to be material weaknesses. However, material weaknesses may exist that have not been identified. 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 Guide. Accordingly, this report is not suitable for any other purpose. BARRY GLASSER & COMPANY Agoura Hills, California November 10, Canwood Street, Suite 218, Agoura Hills, California (818) Fax (818)

23 SCHEDULE OF FINDINGS AND QUESTIONED COSTS 23

24 BEHAVIORAL SCIENCE CENTERS dba HYPNOSIS MOTIVATION INSTITUTE FYE 06/30/2017 Total Population: Pell IASG FDLP FSEOG Perkins TEACH FWS Total Universe Dollars 154, ,973 7, ,239 Number of Students Students Enrolled, Graduated or Students on an Approved Leave of Absence: Pell IASG FDLP FSEOG Perkins TEACH FWS Total Universe Dollars 143, ,644 6, ,562 Number of Students Sample Dollars 41, ,412 1, ,191 Number of Students Withdrew, dropped out, enrolled but never began attendance during the audit, or terminated students Universe Dollars Returned/Refunded Number of Students Sample Dollars Returned/Refunded Number of Students Pell IASG FDLP FSEOG Perkins TEACH FWS Total 0 0 6, , , ,

25 THERE ARE NO FINDINGS DURING THE CURRENT AUDIT PERIOD; THEREFORE, SCHEDULES A, B, AND C ARE NOT APPLICABLE. 25

26 There are no prior findings INDEPENDENT AUDITOR S COMMENTS ON RESOLUTION OF PRIOR AUDIT FINDINGS 26

27 AUDITOR INFORMATION SHEET NAME OF INSTITUTION Behavioral Science Centers, Inc dba Hypnosis Motivation Institute INSTITUTIONAL ADDRESS Ventura Blvd Suite 310 Tarzana, CA EIN NUMBER OPE ID NUMBER DUNS NUMBER TEL. NO. (818) FAX NO. (818) PRESIDENT: George Kappas CONTACT PERSON & TITLE: Richard Ortiz, Financial Aid Director LEAD AUDITOR: Barry Glasser ADDRESS: Barry@glasser-cpa.com HOME STATE LICENSE: FIRM S NAME: BARRY GLASSER & COMPANY ADDRESS: Canwood Street Suite # 218 Agoura Hills, CA TEL. NO FAX NO PROGRAMS EXAMINED: FSEOG X FFELP FWS FPL PELL X FDLP X ACG For the award year that ended during the audit period, provide the audited ratios for establishing institutional eligibility required by 34.CFR Correspondence to total courses 0.00% Regular students enrolled in correspondence courses to total regular students 0.00% Regular students who are incarcerated to total regular students 0.00% Regular students enrolled based on ability to benefit to total regular students 0.00% 27

28 Provide the audited completion rate (as calculated under 34.C.F.R 668.8(f)) and the audited placement rate (as calculated under 34.C.F.R (g)) for all of the school s short term programs (as described in 34.C.F.R. 668(d) (3)). The Institution does not have any short term programs. List the campuses/locations considered as part of the school and provide the requested information about each location. >50% of Location Notice to Program On ED Prior to CPA All Eligibility Offering Date Date Visit Exclusion Locations Site Letter Instruction Opened Closed Date Reason Tarzana, Yes Yes Yes 07/23/1969 N/A 10/17/2017 N/A CA Institution s Primary Accrediting Organization: Accrediting Council for Continuing Education & Training Other Accrediting Organization: None Does the school use a servicer to help it administer all or any portion of its Title IV program responsibilities? No If yes, how many servicers does the school use? N/A Records for the accounting and administration of the SFA programs are located at the Institution. Has the school stopped participating in all Title IV programs? No 28