LEGAL AID SERVICES OF OKLAHOMA, INC. FINANCIAL STATEMENTS AND SUPPLEMENTAL INFORMATION. For the Year Ended December 31, 2016

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1 LEGAL AID SERVICES OF OKLAHOMA, INC. FINANCIAL STATEMENTS AND SUPPLEMENTAL INFORMATION For the Year Ended December 31, 2016 LSC Grant Recipient No

2 TABLE OF CONTENTS Page Independent Auditor s Report 1 Statement of Financial Position 3 Statement of Activities and Changes in Net Assets 4 Statement of Functional Expenses 5 Statement of Cash Flows 6 Notes to Financial Statements 7 Supplemental Information: Statement of Revenues and Expenses and Changes in Net Assets All Funds 15 Reports Required by Governmental Auditing Standards and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) Independent Auditor s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 16 Independent Auditor s Report on Compliance for Each Major Program and on Internal Control over Compliance Required by the Uniform Guidance 18 Schedule of Expenditures of Federal Awards 20 Schedule of Expenditures of State Awards 22 Notes to the Schedule of Expenditures of Federal and State Awards 23 Schedule of Findings and Questioned Costs 24 Summary Schedule of Prior Audit Findings 26

3 INDEPENDENT AUDITOR'S REPORT To the Board of Directors Legal Aid Services of Oklahoma, Inc. Report on the Financial Statements We have audited the accompanying financial statements of Legal Aid Services of Oklahoma, Inc. ( LASO ), (a nonprofit organization), which comprise the statement of financial position as of December 31, 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 the 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 LASO, as of December 31, 2016, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. 309 N. Bryant Ave. Edmond, OK Fax Member of AICPA and OSCPA

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 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, is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional 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. Report on 2015 summarized comparative information We have previously audited LASO s 2015 financial statements (not presented herein), and we expressed an unmodified audit opinion on those audited financial statements in our report dated March 18, In our opinion, the accompanying summarized comparative information as of and for the year ended December 31, 2015 is consistent, in all material respects, with the audited financial statements from which it has been derived. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated April 3, 2017, on our consideration of LASO s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering LASO s internal control over financial reporting and compliance. April 3, 2017

5 STATEMENT OF FINANCIAL POSITION As of December 31, 2016 (With Comparative Totals as of December 31, 2015) ASSETS Current assets: Cash and cash equivalents $ 1,888,260 $ 2,193,908 Grants receivable 1,549,438 1,483,554 Unconditional promises to give 49,846 53,467 Prepaid expenses 114, ,298 Total current assets 3,602,523 3,856,227 Property and equipment: Land 6,500 6,500 Buildings & improvements 278, ,032 Furniture 10,000 10,000 Equipment 193, ,181 Software - 56,896 Less: accumulated depreciation (390,767) (562,940) Property and equipment, net 97, ,669 Beneficial interests in community foundations 921, ,874 TOTAL ASSETS $ 4,621,596 $ 4,781,770 LIABILITIES & NET ASSETS Current liabilities: Accounts payable $ 77,799 $ 88,839 Other payables 47,959 14,861 Deferred revenue 130, ,899 Client trust payable 17,410 14,925 Accrued salaries and benefits 188, ,487 Accrued vacation 494, ,828 Total current liabilities 956,401 1,153,839 Net assets: Unrestricted: Undesignated 1,784,504 2,070,956 Temporarily restricted Legal Services Corporation 366, ,178 Non-LSC 592, ,923 Permanently restricted 921, ,874 Total Net Assets 3,665,195 3,627,931 TOTAL LIABILITIES AND NET ASSETS $ 4,621,596 $ 4,781,770 The accompanying notes are an integral part of these financial statements. 3

6 STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS For the Year Ended December 31, 2016 (With Comparative Totals for the Year Ended December 31, 2015) Temporarily Restricted Permanently Restricted Unrestricted LSC Non-LSC Sub-total REVENUES, GAINS, AND OTHER SUPPORT Government grant revenue $ 911,877 $ 4,401,753 $ 1,765,554 $ 6,167,307 $ - $ 7,079,184 $ 6,812,960 Private grant revenue 85, , , , ,686 Contract revenue 1,080, , ,402-1,413,144 1,443,366 United Way , , , ,839 Contributions 655, , ,181 61,018 1,613,909 1,077,727 Miscellaneous income 5,657 62,461 85, , , ,940 Interest income Realized/unrealized gains ,520 43, Donated services 580, , ,657 Total revenue and gains 3,319,390 4,464,487 4,158,329 8,622, ,538 12,046,744 11,177,380 Net assets released from restrictions Satisfaction of program requirements 8,403,638 (4,302,911) (4,095,083) (8,397,994) (5,644) - - Total revenues, gains and other support 11,723, ,576 63, ,822 98,894 12,046,744 11,177,380 EXPENSES Civil legal services 10,264, ,264,476 9,077,474 Public defender 395, , ,553 Management and general 1,079, ,079,839 1,432,219 Fundraising 269, , ,635 Total expenses 12,009, ,009,480 11,238,881 Change in net assets (286,452) 161,576 63, ,822 98,894 37,264 (61,501) Net assets beginning of year 2,070, , , , ,874 3,627,931 3,689,432 NET ASSETS, END OF YEAR $ 1,784,504 $ 366,754 $ 592,169 $ 958,923 $ 921,768 $ 3,665,195 $ 3,627, Totals 2015 Totals The accompanying notes are an integral part of these financial statements. 4

7 STATEMENT OF FUNCTIONAL EXPENSES For the Year Ended December 31, 2016 (With Comparative Totals for the Year Ended December 31, 2015) Civil Legal Services Public Defender Management and General Fundraising 2016 Totals 2015 Totals Salary $ 5,807,308 $ 208,713 $ 633,360 $ 76,671 $ 6,726,052 $ 6,347,307 Fringe benefits 1,725,737 54, ,268 33,068 1,981,444 1,821,214 Occupancy 649,509 62,580 40,357 10, , ,192 Office expense 118,683 4,271 31,420 7, , ,740 Telephone 212,929 2,347 31, , ,353 Travel 128, ,081 1, , ,000 Litigation 63, ,313 35,052 Training 96,378 1,530 16,035 5, ,968 89,241 Library 66,458 2,413 3,681 1,424 73,976 84,717 Dues and fees 33,165 1,303 11, ,537 50,940 Insurance 40,020-30,994 4,918 75,932 46,791 Professsional services 388,164 48,999 52, , , ,184 Equipment 121,842 2,277 7,934 1, , ,111 Other 214,241 6,007 38,831 17, , ,404 Depreciation expense 18, ,565 24,978 Donated services 580, , ,657 Total expenses $ 10,264,476 $ 395,533 $ 1,079,839 $ 269,632 $ 12,009,480 Total expenses $ 9,077,474 $ 399,553 $ 1,432,219 $ 329,635 $ 11,238,881 The accompanying notes are an integral part of the financial statements. 5

8 STATEMENT OF CASH FLOWS For the Year Ended December 31, 2016 (With Comparative Totals for the Year Ended December 31, 2015) CASH FLOWS FROM OPERATING ACTIVITIES: Change in net assets $ 37,264 $ (61,501) Adjustments to reconcile change in net assets to net cash provided (Used) by operating activities: Depreciation 18,565 24,978 Valuation adjustment to beneficial interests in community foundations (43,520) (132) Change in current assets and liabilities (Increase) decrease in receivables (62,263) (690,851) Increase (decrease) in allowance for uncollectible promises - (800) (Increase) decrease in prepaid expenses 10,319 7,361 Increase (decrease) in payables 22,058 11,255 Increase (decrease) in client trust liabilites 2,485 1,888 Increase (decrease) in accrued salaries and benefits 5,917 (385) Increase (decrease) in deferred revenue (292,338) 361,282 Increase (decrease) in accrued vacation 64,440 18,856 Total adjustments (274,337) (266,548) Net cash provided (used) by operating activities (237,073) (328,049) CASH FLOWS FROM INVESTING ACTIVITIES: Property and equipment purchases (13,201) - Contributions to investment in community foundations (61,018) - Distributions from investment in community foundations 5, ,258 Net cash Provided (used) by investing activities (68,575) 176,258 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (305,648) (151,791) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 2,193,908 2,345,699 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,888,260 $ 2,193,908 The accompanying notes are an integral part of these financial statements. 6

9 NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations - Legal Aid Services of Oklahoma, Inc. ( LASO ) is a nonprofit corporation organized for the purpose of providing quality legal services in non-criminal proceedings and other matters to eligible low income and elderly people within the State of Oklahoma. The project is funded by a Legal Services Corporation ( LSC ) grant and various other grants and contracts as may be awarded during the year. LASO also conducts fundraising activities to support its mission. Basis of Accounting - The financial statements are prepared in accordance with accounting principles generally accepted (GAAP) in the United States of America, utilizing the accrual basis of accounting. Under the accrual basis of accounting, revenues are recorded when earned and expenses are recorded when incurred. Financial Statement Presentation - LASO is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. In addition, LASO is required to present a statement of cash flows. The financial statements include certain prior year summarized comparative information in total but not by net asset class and without 2015 disclosures. Such information does not include sufficient detail to constitute a presentation in conformity with GAAP. Accordingly, such information should be read in conjunction with LASO s financial statements for the year ended December 31, 2015, from which summarized information was derived. Restriction on Assets - Net assets and revenues, expenses, gains and losses are classified based on the existence or absence of donor-imposed restrictions. Accordingly, net assets of LASO and changes therein are classified and reported as follows: Unrestricted Net Assets - Net assets that are not subject to donor-imposed stipulations. Temporarily Restricted Net Assets - Net assets subject to donor-imposed stipulations that may or will be met, either by actions of LASO and/or the passage of time. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. Permanently Restricted Net Assets - Net assets subject to donor-imposed stipulations that may be maintained permanently by LASO. Generally, the donors of these assets permit LASO to use all or part of the income earned on any related investments or beneficial interests for general or specific purposes. Contributions Received and Made - Contributions, including pledges, are recognized as revenue or gain in the period received. A contribution is defined as "an unconditional transfer of cash or other assets." Beneficial Interest in Community Foundations LASO reports its beneficial interest in community foundations at fair value. Gains and losses on the beneficial interest in community foundations are reported in the statement of activities as increases or decreases in unrestricted net assets unless their use is restricted by donor stipulations. Donor restricted income in the beneficial interest in community foundations is reported as an increase or decrease to temporarily restricted or permanently restricted net assets, depending upon the type of restriction. 7

10 NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont d) Concentrations and Risks Financial instruments, which potentially subject LASO to credit risk, consist primarily of cash, equivalents, and receivables. LASO maintains its cash in bank deposit accounts, which, at times, may exceed federally insured limits. LASO receives a substantial amount of its support from LSC, and federal, state and local governments and agencies. A significant reduction in the level of this support, if this were to occur, may have an effect on LASO's programs and activities. Management is not aware of any actions that would adversely affect the amount of funds LASO will receive in the next fiscal year. Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Legal Services Corporation Grant - LASO recognizes revenue from LSC grants on a straight-line basis over the grant period. Funds remaining unexpended at the end of an accounting period are recorded in net assets. The portion of net assets related to LSC funding is subject to the provisions of LSC's Fund Balance Regulation. Under this regulation, LASO is not permitted to maintain net assets in excess of 10% of their annualized LSC support. Under certain conditions, a waiver of this policy, up to a maximum of 25% of LASO's annualized grant amount, may be obtained from LSC. In the absence of a waiver, any net asset amount in excess of 10% of LSC support is required to be repaid to LSC in a lump sum payment or by pro rata deductions from LASO's grant checks over a period specified by LSC. In the instance that LASO is not in compliance with the LSC grant requirements, LSC may, at its sole discretion, require LASO to return all current year expended and unexpended LSC funds. In addition, if LASO terminates its LSC grant activities, all unexpended funds are required to be refunded to LSC. LSC excess net assets are as shown below: Annualized Grants $ 4,254,853 Interest 273 Other 61,309 Total LSC Support $ 4,316,435 10% Allowed Retaining Without Need for a Waiver $ 431,644 Actual Net Assets End of Year $ 366,754 Excess net assets did not exceed 10 percent of total LSC support as of December 31,

11 NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont d) Other Grants - A portion of LASO's support is provided by cost reimbursable grants. Funds from these grants are recognized as support when eligible costs are incurred. A receivable is recognized to the extent support earned exceeds cash advances. Conversely, a liability (deferred revenue) is recorded when contract cash advances exceed support earned. Grants and Other Receivables Due to the nature of the receivables being primarily government grants, LASO considers them to be fully collectible; accordingly, no allowance for doubtful accounts is required. LASO maintains an allowance for uncollectible promises for estimated losses resulting from the inability of donors to fulfill pledges. This estimate is based on historical collection and write-off experience. At December 31, 2016, all pledges are considered collectible. Property and Equipment - Property and equipment acquired with LSC funds are considered to be owned by LASO while used in the program or in future authorized programs. However, LSC maintains a reversionary interest in these assets and has the right to determine the use of any proceeds from the sale of assets purchased with LSC funds. Property and equipment in excess of $5,000 are carried at cost. Depreciation and amortization are computed on a straight-line basis over the estimated lives of the assets, generally using a three to sevenyear life for personal property and a twenty-five to thirty year life for real property. When fixed assets are sold or retired, the cost of the asset and related accumulated depreciation are removed from the accounts and the resulting gains or losses are recognized as revenue or expenses. Additions and improvements that extend the useful lives of the assets are capitalized. Expenditures for repairs and maintenance are expensed as incurred. Allocation of Expenses - Certain common expenses are incurred which benefit more than one grant. Salary expenses are allocated to the grants primarily based on the relationship of advocates' time devoted to cases, which qualify under the criteria of each grant. Common expenses are distributed based on advocate salary costs. Donated Services - Donated services primarily represent the estimated value of services rendered to LASO by attorneys at no charge or a reduced charge. The value of donated services is based upon the estimated average standard fee charged less any fee actually paid to the attorneys rendering the services. Donated services are recognized both as support and expenses. Non-specialized services have not been recognized as support and expense. Income Taxes and Uncertain Tax Positions - LASO qualifies as an organization exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code and is subject to a tax on income from any unrelated business, as defined by Section 509(a)(1) of the Code. LASO currently has no unrelated business income. Accordingly, no provision for income taxes has been recorded. 9

12 NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont d) Income Taxes and Uncertain Tax Positions (Cont d) - LASO has adopted the recognition requirements for uncertain income tax positions as required by generally accepted accounting principles. Income tax benefits are recognized for income tax positions taken or expected to be taken in a tax return only when it is determined that the income tax position will more-likely-than-not be sustained upon examinations by taxing authorities. LASO has analyzed tax positions taken for filing with the Internal Revenue Service and all state jurisdictions where it operates. LASO believes that income tax filing positions will be sustained upon examination and does not anticipate any adjustments that would result in a material adverse effect on LASO's financial condition, results of operations, or cash flows. Accordingly, LASO has not recorded any reserves, or related accruals for interest and penalties for uncertain income tax positions at December 31, Federal and state income tax statutes dictate that tax returns filed in any of the previous three reporting periods remain open to examination. Currently, LASO has no open examinations with the Internal Revenue Service or the Oklahoma Tax Commission. Cash and Cash Equivalents - For purposes of the statement of cash flow, cash and cash equivalents consist of demand deposits and money market funds. 2. BENEFICIAL INTERESTS IN COMMUNTY FOUNDATIONS Beneficial interest in community foundations at December 31, 2016 consist exclusively of balances held by the Tulsa Community Foundation and the Oklahoma City Community Foundation (collectively referred to as the Foundations ). LASO follows the provisions in Financial Accounting Standards Board Accounting Standards Codification (FASB ASC) to 33, Transfers of Assets to a Not-for-Profit Organization or Charitable Trust That Raises or Holds Contributions for Others. In accordance with FASB ASC to 33, the portions of the funds contributed by LASO and held by the Foundations are considered reciprocal transfers, because LASO is also a beneficiary of the funds. As a result, LASO has recorded its separated fund held by the Tulsa Community Foundation and its portion of the investment pool of the Oklahoma City Community Foundation as an investment in its December 31, 2016 statement of financial position. The Foundations have variance power assuring donors that if the charitable purpose of their contribution becomes impractical or impossible, the distributions will be directed to similar purposes in the community. Therefore, the portions of the funds held by the Foundations on behalf of LASO contributed by unrelated third party donors is included in the net assets of the Foundations and are not reflected in the accompanying financial statements. LASO s interests held by the Foundations may generally not be redeemed and are classified as permanently restricted net assets in the accompanying financial statements. 10

13 NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, BENEFICIAL INTERESTS IN COMMUNTY FOUNDATIONS (Cont d) Activity related to the Tulsa Community Foundation for the year ended December 31, 2016 is as follows: Reciprocal Third Party Balances Balances Totals Balance at December 31, 2015 $ 798,211 $ 101,198 $ 899,409 Contributions 61,018-61,018 Distributions (4,615) (655) (5,270) Gains (losses) on investments and third party contributions 35,943 6,956 42,899 Balance at December 31, 2016 $ 890,557 $ 107,499 $ 998,056 Activity related to the Oklahoma City Community Foundation for the year ended December 31, 2016 is as follows: Reciprocal Third Party Balances Balances Totals Balance at December 31, 2015 $ 24,663 $ 97,529 $ 122,192 Distributions (1,029) (4,777) (5,806) Gains (losses) on investments and third party contributions 7,577 9,220 16,797 Balance at December 31, 2016 $ 31,211 $ 101,972 $ 133, CLIENT DEPOSITS LASO is the custodian of funds deposited by clients for court costs and other related expenses. Such amounts totaled $17,410 at December 31, FAIR VALUE MEASUREMENTS Various inputs may be used to determine the value of an asset or liability. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value the asset or liability are not necessarily an indication of the risk associated with those assets or liabilities. 11

14 NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, FAIR VALUE MEASUREMENTS (Cont d) The fair value hierarchy is as follows: Level 1: Quoted prices in active markets for identical assets or liabilities. Level 2: Significant other observable inputs including quoted prices for similar assets or liabilities in active markets, quoted prices for similar assets and other observable inputs. Level 3: Significant unobservable inputs including the funds own assumptions used to determine the fair value of the assets or liabilities. The following table summarizes LASO s financial assets measured at fair value on a recurring basis as of December 31, 2016, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value: Total fair value Level 1 Level 2 Level 3 Tulsa Community Foundation $ 890,557 $ - $ 890,557 $ - Oklahoma City Foundation 31, ,211 Total Investments $ 921,768 $ - $ 890,557 $ 31,211 The beneficial interest in assets held at the Oklahoma City Community Foundation (the Foundation ) of $31,211 as of December 31, 2016 reported as beneficial interest in community foundations in the accompanying statement of financial position, has been valued as a practical expedient, at the fair value of LASO s share of the Foundation s investment pool as of the measurement date. The Foundation values securities and other financial instruments on a fair value basis of accounting. The estimated fair values of certain investments of the Foundation, which includes private placements and other securities for which prices are not readily available, are determined by management of the Foundation and may not reflect amounts that could be realized upon immediate sale, nor amounts that ultimately may be realized and are considered Level 3 measurements. Accordingly, the estimated fair values may differ significantly from the values that would have been used had a ready market existed for these investments. A reconciliation of the activities for these Level 3 financial instruments is included in Note 2. 12

15 NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, LEASES LASO is obligated on lease agreements for equipment and office facilities which are classified as operating leases for accounting purposes. With the exception of the equipment lease and one facility lease, the leases contain cancellation clauses in the event funding is substantially decreased or terminated. Rent expense incurred for leases during 2016 was $668,409. Future minimum lease payments of noncancelable leases are as follows: December 31, 2017 $ 452, , ,114 $ 642, CONTINGENT LIABILITIES LASO participates in a number of federal and state assisted programs. These programs are audited in accordance with Government Auditing Standards and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) as applicable, in accordance with the required levels of Federal Financial assistance. Audits of prior years have not resulted in any significant disallowed costs. Additionally, the grant programs are subject to audits by the granting authority, the purpose of which is to insure compliance with conditions precedent to the granting of the funds. Management believes that any liability for reimbursement which may arise as the result of audits of grant funds would not be material. 7. PENSION PLAN LASO has a 401(a) defined contribution pension plan covering all full-time and part-time employees who work 18 hours or more per week. LASO contributes 4% of each participant's qualified compensation to the plan. Participants become fully vested in the plan after three years. Contributions to the plan by LASO were $256,410 for PRIVATE ATTORNEY INVOLVEMENT For 2016, LASO was required to devote an amount equal to at least $533,136 (12.5% of basic field grant of $4,265,091) to the involvement of private attorneys. This requirement was met. 9. SUBSEQUENT EVENTS Management of LASO has evaluated subsequent events through April 3, 2017, which is the date the financial statements were available to be issued. 13

16 SUPPLEMENTAL INFORMATION

17 STATEMENT OF REVENUES AND EXPENSES AND CHANGES IN NET ASSETS ALL FUNDS For the Year Ended December 31, 2016 (With Comparative Totals for the Year Ended December 31, 2015) LSC Basic Non Private Attorney LSC Migrant Grant LSC Basic Private Attorney LSC Other Grants Total LSC Grants Non LSC Private Attorney Non LSC Non Private Attorney 2016 Totals 2015 Totals SUPPORT AND REVENUE Government grant revenue $ 3,855,112 $ 64,207 $ 335,534 $ 146,900 $ 4,401,753 $ 425,952 $ 2,251,479 $ 7,079,184 $ 6,812,960 Private grant revenue , , ,686 Contract revenue ,413,144 1,413,144 1,443,366 United Way , , ,839 Contributions ,613,909 1,613,909 1,077,727 Miscellaneous income 62, ,461-90, , ,940 Interest income Realized/unrealized gains ,520 43, Donated services , , ,657 Total support and revenue 3,917,846 64, , ,900 4,464,487 1,006,307 6,575,950 12,046,744 11,177,380 EXPENSES Salaries 2,886,741 9, ,595 14,579 3,077, ,266 3,492,306 6,726,052 6,347,307 Fringe benefits 825,305 3,695 44,463 3, ,383 41,382 1,062,679 1,981,444 1,821,214 Occupancy 272,051 1,362 21, ,183 17, , , ,192 Office expense 75, , ,190 3,107 78, , ,740 Telephone 137,323 1,002 5, ,386 4,426 99, , ,353 Travel 42,538-4,237 1,476 48,251 1,864 92, , ,000 Litigation 14, , ,537 63,313 35,052 Training 33,062 2,544 5,818-41,424 5,098 72, ,968 89,241 Library 30, , ,636 1,020 40,320 73,976 84,717 Dues and fees 20, , ,684 46,537 50,940 Insurance 70, ,925-5,007 75,932 46,791 Professional services 102,184-26,410 8, , , , , ,184 Equipment 112, , , , ,111 Other 412,086-2,392 (16,856) 397,622 6,033 (127,575) 276, ,404 Depreciation expense 2, ,130-16,435 18,565 24,978 Donated services , , ,657 Litigation service support (97,938) 259 4, (92,794) 4,095 88, Administrative support (1,009,553) 2,391 47,352 3,924 (955,886) 37, , Total expenses 3,929,557 21, ,534 16,393 4,302,911 1,006,307 6,700,262 12,009,480 11,238,881 Change in net assets (11,711) 42, , ,576 - (124,312) 37,264 (61,501) Net assets - beginning of year 11, , ,178-3,422,753 3,627,931 3,689,432 NET ASSETS - END OF YEAR $ - $ 236,247 $ - $ 130,507 $ 366,754 $ - $ 3,298,441 $ 3,665,195 $ 3,627,931 15

18 INDEPENDENT AUDITOR S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Board of Directors Legal Aid Services of Oklahoma, Inc. 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 Legal Aid Services of Oklahoma, Inc. (a nonprofit organization) ( LASO ), which comprise the statement of financial position as of December 31, 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, and have issued our report thereon dated April 3, Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered LASO 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 LASO s internal control. Accordingly, we do not express an opinion on the effectiveness of LASO 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. Compliance and Other Matters As part of obtaining reasonable assurance about whether LASO 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. 309 N. Bryant Ave. Edmond, OK Fax Member of AICPA and OSCPA

19 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 LASO s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering LASO s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. April 3, 2017

20 INDEPENDENT AUDITOR S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE To the Board of Directors Legal Aid Services of Oklahoma, Inc. Report on Compliance for Each Major Federal Program We have audited Legal Aid Services of Oklahoma, Inc. s ( LASO ) compliance with the types of compliance requirements described in the OMB Compliance Supplement and the LSC Audit Guide and Compliance Supplement that could have a direct and material effect on each of LASO s major federal programs for the year ended December 31, LASO 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 federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditor s Responsibility Our responsibility is to express an opinion on compliance for each of LASO 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 Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) and the LSC Audit Guide and Compliance Supplement. Those standards and the Uniform Guidance and the LSC Audit Guide and Compliance Supplement 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. An audit includes examining, on a test basis, evidence about LASO 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 LASO s compliance. Opinion on Each Major Federal Program In our opinion, LASO 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 December 31, Report on Internal Control over Compliance Management of LASO 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 LASO s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the 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 309 N. Bryant Ave. Edmond, OK Fax Member of AICPA and OSCPA

21 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 LASO 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 the Uniform Guidance and the LSC Audit Guide and Compliance Supplement. Accordingly, this report is not suitable for any other purpose. April 3, 2017

22 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the Year Ended December 31, 2016 Federal Federal Grantor/Pass-Through CFDA Grant Grantor/Program Title Number Period Federal Support Recognized Federal Program Expenditures U.S. Department of Health and Human Services Passed Through State of Oklahoma Department of Human Services and Area Agencies on Aging: Special Programs for the Aging - Title III Part B - Grants for Supportive Services and Senior Centers: Areawide Aging Agency /1/15 to 6/30/16 $ 14,469 $ 14,469 7/1/16 to 6/30/17 40,364 40,449 Association of South Central Oklahoma Government /1/15 to 6/30/16 9,695 9,695 7/1/16 to 6/30/17 16,772 16,772 Central Oklahoma Economic Development District /1/15 to 6/30/16 5,558 5,558 7/1/16 to 6/30/17 10,482 10,482 Eastern Oklahoma Development District /1/15 to 6/30/16 12,547 12,547 7/1/16 to 6/30/17 16,229 16,280 Grand Gateway Economic Development Association /1/15 to 6/30/16 15,070 15,070 7/1/16 to 6/30/17 21,276 21,327 Kiamichi Economic Development District of Oklahoma /1/15 to 6/30/16 9,456 9,456 7/1/16 to 6/30/17 16,078 16,078 Long Term Care Authority of Enid /1/15 to 6/30/16 8,571 8,571 7/1/16 to 6/30/17 9,238 9,238 Oklahoma Economic Development Association /1/15 to 6/30/16 13,032 13,032 7/1/16 to 6/30/17 7,789 9,524 Southern Oklahoma Development Association /1/15 to 6/30/16 7,336 7,336 7/1/16 to 6/30/17 15,943 15,943 Southwestern Oklahoma Development Authority /1/15 to 6/30/16 8,197 8,197 7/1/16 to 6/30/17 18,331 18,331 Indian Nations Council of Governments /1/15 to 6/30/16 17,606 17,606 7/1/16 to 6/30/17 16,511 16,588 Corporation for National and Community Service: Passed Through Equal Justice Works Americorps /1/14 to 8/31/15 71,768 71,768 9/1/15 to 8/31/16 25,060 25,060 Passed Through Oklahoma Community Service Commission Americorps /1/15 to 9/30/16 4,800 4,800 8/1/16 to 9/30/17 5,060 5,060 Passed through New Mexico Legal Aid Americorps /1/16 to 10/31/17 1,433 1,433 20

23 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the Year Ended December 31, 2016 Federal Federal Grantor/Pass-Through CFDA Grant Grantor/Program Title Number Period Federal Support Recognized Federal Program Expenditures U.S. Department of Health and Human Services - Admin on Aging: Special Programs for the Aging: Title IV and Title II Discretionary: Model Approaches to Statewide Legal Assistance Programs /1/15 to 7/31/16 30,426 30,426 Legal Services Corporation: Basic Field Grant /1/16 to 12/31/16 4,190,646 4,264,360 Migrant Component /1/16 to 12/31/16 64,207 21,428 Technology Grant /1/13 to 7/1/16 16,000 16,000 10/1/16 to 9/30/19 52, /1/16 to 3/31/19 78, U.S. Department of Housing and Urban Development: Passed through West Tennessee Legal Services, Inc. Fair Housing Organization Initiatives /01/15 to 11/30/16 253, ,729 Passed Through City of Oklahoma City Emergency Solutions Grant Program /01/15 to 6/30/16 6,948 6,948 7/01/16 to 6/30/17 8,375 6,522 Passed Through City of Tulsa Community Development Block Grants/Entitlement Grants /1/16 to 6/30/17 16,300 16,300 U.S. Department of Justice: Passed through Oklahoma District Attorney's Council Crime Victim Assistance /01/15 to 6/30/16 212, ,329 7/01/16 to 6/30/17 391, ,858 Violence Against Women Formula Grants /1/15 to 3/31/16 12,073 12,073 Legal Assistance for Victims /1/14 to 9/30/16 105, ,962 Rural Domestic Violence, Dating Violence, Sexual Assault, and Stalking Assistance Program /1/15 to 9/30/18 156, ,328 U.S. Department of Veterans Affairs: Passed through Oklahoma Goodwill Industries, Inc. VA Supportive Services for Veteran Families Program /01/15 to 09/30/16 34,759 34,759 10/01/16 to 9/30/17 12,864 12,864 TOTAL EXPENDITURES OF FEDERAL AWARDS $ 6,061,875 $ 5,965,947 21

24 SCHEDULE OF EXPENDITURES OF STATE AWARDS For the Year Ended December 31, 2016 State Grantor/Pass-Through Grantor/Program Title Grant Period Support Recognized Program Expenditures Oklahoma Department of Human Services/ Passed Through Area Agencies on Aging: Areawide Aging Agency 7/1/15 to 6/30/16 $ 2,553 $ 2,553 7/1/16 to 6/30/17 7,123 7,138 Association of South Central Oklahoma Government 7/1/15 to 6/30/16 1,711 1,711 7/1/16 to 6/30/17 2,960 2,960 Central Oklahoma Economic Development District 7/1/15 to 6/30/ /1/16 to 6/30/17 1,850 1,850 Eastern Oklahoma Development District 7/1/15 to 6/30/16 2,214 2,214 7/1/16 to 6/30/17 2,864 2,292 Grand Gateway Economic Development Association 7/1/15 to 6/30/16 2,659 2,659 7/1/16 to 6/30/17 3,755 3,764 Kiamichi Economic Development District of Oklahoma 7/1/15 to 6/30/16 1,669 1,669 7/1/16 to 6/30/17 2,837 1,883 Long Term Care Authority of Enid 7/1/15 to 6/30/16 1,513 1,513 7/1/16 to 6/30/17 1,630 1,630 Oklahoma Economic Development Association 7/1/15 to 6/30/16 2,300 2,300 7/1/16 to 6/30/17 1,375 1,681 Southern Oklahoma Development Association 7/1/15 to 6/30/16 1,295 1,295 7/1/16 to 6/30/17 2,813 2,813 Southwestern Oklahoma Development Authority 7/1/15 to 6/30/16 1,447 1,447 7/1/16 to 6/30/17 3,235 3,235 Indian Nations Council of Governments 7/1/15 to 6/30/16 3,107 3,107 7/1/16 to 6/30/17 2,914 2,927 Oklahoma Attorney General's Office: Civil Family Law Legal Services for Indigent Persons 7/1/15 to 6/30/16 24, ,846 7/1/16 to 6/30/17 824, ,625 TOTAL EXPENDITURES OF STATE AWARDS $ 903,736 $ 826,093 22

25 NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AND STATE AWARDS For the Year Ended December 31, BASIS OF PRESENTATION The accompanying schedules of expenditures of federal and state awards include the federal and state grant activity of LASO, under programs of the federal and state government for the year ended December 31, The information in the schedule of expenditures of federal awards is presented in accordance with the requirement of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the schedules present only a selected portion of the operations of LASO, they are not intended to and do not present the financial position, changes in net assets or cash flows of LASO. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Expenditures reported on the schedules are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. 3. CONTINGENT LIABILITIES LASO participated in a number of federal and state assisted programs. These programs are audited in accordance with Government Auditing Standards and the Uniform Guidance, if applicable, in accordance with the required levels of Federal Financial assistance. Audits of prior years have not resulted in any significant disallowed costs. Additionally, the grant programs are subject to audits by the granting authority, the purpose of which is to ensure compliance with conditions precedent to the granting of the funds. Management believes that any liability for reimbursement which may arise as the result of audits of grant funds would not be material. 4. RELATIONSHIP TO FEDERAL FINANCIAL REPORTS Amounts reported in the accompanying schedule may not agree with the amounts reported in the related Federal financial reports filed with the grantor agencies because of accruals made in the schedule which will be included in future reports with agencies. 23