Spencer CPA & Associates, P.L.L.C.

Transcription

1 Spencer CPA & Associates, P.L.L.C. PO Box East Main Street Buckhannon, WV Buckhannon, WV Phone: (304) Fax: (304) Member: American Institute of Certified Public Accountants WV Society of Certified Public Accountants MOUNTAINEER FOOD BANK, INC. INDEPENDENT AUDITORS REPORT AND RELATED FINANCIAL STATEMENTS DECEMBER 31, 2013 AND 2012

2 CONTENTS INDEPENDENT AUDITORS REPORT 1-2 Statements of financial position 3 Statements of activities 4 Statements of functional expenses 5 Statements of cash flows 6 Notes to financial statements 7-12 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 WITH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 17 NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 18 SCHEDULE OF FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS 24 CORRECTIVE ACTION PLAN 25 Page

3 Spencer CPA & Associates, P.L.L.C. PO Box East Main Street Buckhannon, WV Buckhannon, WV Phone: (304) Fax: (304) Member: American Institute of Certified Public Accountants WV Society of Certified Public Accountants To the Board of Directors of Mountaineer Food Bank, Inc. Gassaway, West Virginia Report on the Financial Statements INDEPENDENT AUDITORS REPORT We have audited the accompanying financial statements of Mountaineer Food Bank, Inc. (a nonprofit organization), which comprise the statements of financial position as of December 31, 2013 and 2012, and the related statements of activities, functional expenses, 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. Auditors 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. 1

4 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Mountaineer Food Bank, Inc. (a nonprofit organization) as of December 31, 2013 and 2012, 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. 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 Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, 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. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 2, 2014, on our consideration of Mountaineer Food Bank, Inc. s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Mountaineer Food Bank, Inc. s internal control over financial reporting and compliance. Spencer CPA & Associates, PLLC Buckhannon, West Virginia December 2,

5 STATEMENTS OF FINANCIAL POSITION DECEMBER 31, ASSETS Cash and cash equivalents $ 75,938 $ 403,192 Grants receivable 10,486 Accounts receivable, less allowance for uncollectable accounts of $2,500 for 2013 and $1,400 for ,044 60,059 Inventory 1,023,074 1,101,974 Prepaid expenses 9,251 12,169 Land, buildings, and equipment, net 1,252,815 1,345,964 TOTAL ASSETS $ 2,425,122 $ 2,933,844 LIABILITIES Notes payable $ 66,486 $ 113,488 Accounts payable 63,596 58,179 Accrued wages and vacation 23,521 22,409 Accrued payroll taxes 26,012 23,028 Due to sub-recipient food pantries 376, ,725 TOTAL LIABILITIES 555, ,829 NET ASSETS, unrestricted 1,869,228 2,261,015 TOTAL LIABILITIES AND NET ASSETS $ 2,425,122 $ 2,933,844 The accompanying notes are integral parts of these statements. 3

6 STATEMENTS OF ACTIVITIES FOR THE YEARS ENDED DECEMBER 31, UNRESTRICTED REVENUES AND OTHER SUPPORT Contributed food items, net $ 546 $ (554,554) Public support 397, ,413 Grant monies 439, ,673 Cost sharing, net 356, ,853 Fund raising 114, ,512 Interest income Investment return 1, Total revenues and other support 1,310,243 1,033,549 EXPENSES Program services 1,415,686 1,192,923 Management and general 185, ,034 Fundraising 100,814 15,938 Total expenses 1,702,030 1,427,895 NET DECREASE IN NET ASSETS (391,787) (394,346) NET ASSETS AT BEGINNING OF YEAR 2,261,015 2,715,309 PRIOR PERIOD ADJUSTMENT (59,948) NET ASSETS AT BEGINNING OF YEAR, as restated 2,261,015 2,655,361 NET ASSETS AT END OF YEAR $ 1,869,228 $ 2,261,015 The accompanying notes are an integral part of these statements. 4

7 STATEMENTS OF FUNCTIONAL EXPENSES FOR THE YEARS ENDED DECEMBER 31, Program Services Management and General Fund Raising Total (Memorandum Only) Total (Memorandum Only) Salaries and fringe benefits $ 696,057 $ 113,496 $ $ 809,553 $ 713,498 Travel 2,317 2,984 5,301 3,673 Supplies 19,647 20,220 39,867 41,898 Transportation 382, , ,020 Communications and utilities 60, ,389 60,036 Repairs 86,496 14, ,988 86,109 Postage and other 1,101 12,679 6,592 20,372 23,878 Interest 4,590 4,590 5,675 Insurance 26,079 26,079 25,024 Professional fees 20,765 94, ,987 67,188 Membership 12,256 12,256 11,832 Depreciation 124, , ,064 Total Functional Expenses $ 1,415,686 $ 185,530 $ 100,814 $ 1,702,030 $ 1,427,895 The accompanying notes are an integral part of these statements. 5

8 STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, CASH FLOWS FROM OPERATING ACTIVITIES: Increase (Decrease) in net assets $ (391,787) $ (394,346) Adjustments to reconcile changes in net assets to net cash provided by operating activities: Depreciation 124, ,064 Bad debt expense 1,100 Donated inventory (546) 554,554 (Increase) decrease in assets: Grant receivable 10,486 24,941 Other receivable 9,735 Accounts receivable (5,085) (10,646) Prepaid expenses 2,918 5,994 Increase (decrease) in liabilities: Accounts payable 5,417 (27,834) Accrued wages and vacation 1,112 3,105 Accrued payroll taxes 2,984 3,518 NET CASH PROVIDED BY OPERATING ACTIVITIES (248,908) 306,085 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (31,344) (20,898) NET CASH USED BY INVESTING ACTIVITIES (31,344) (20,898) CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on notes payable (47,002) (45,920) NET CASH USED BY FINANCING ACTIVITIES (47,002) (45,920) NET INCREASE IN CASH AND CASH EQUIVALENTS (327,254) 239,267 CASH AND CASH EQUIVALENTS, BEGINNING 403, ,925 CASH AND CASH EQUIVALENTS, ENDING $ 75,938 $ 403,192 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for: Interest expense $ 4,590 $ 5,676 The accompanying notes are an integral part of these statements. 6

9 NOTES TO FINANCIAL STATEMENTS Note 1. Summary of Significant Accounting Policies The Mountaineer Food Bank, Inc. is a nonprofit organization with its administrative office and warehouse in Gassaway, West Virginia. The Organization s purpose is to provide educational resources on basic nutrition, cause and effects of hunger and community alternatives for alleviating hunger, to locate and collect food items from manufacturers and producers within West Virginia and surrounding areas, to serve as a distributor of food items to county/local food pantries and other nonprofit organizations who provide emergency food supplies to qualified persons, and to assist and advise interested people and groups in the formation and operation of a food pantry. The Organization provides warehousing, distribution, and development activities that facilitate food distribution through nonprofit organizations throughout West Virginia. Mountaineer Food Bank, Inc. is a member of Feeding America, a nationwide non-profit organization which collects and allocates food pantry goods to regional/state food banks through its distribution network. Feeding America solicits product suppliers and supervises the distribution of its products to member food banks. This summary of significant accounting policies of the Mountaineer Food Bank, Inc. is presented to assist in understanding the Organization s financial statements. The financial statements and notes are the representation of management, who is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements. Basis of Accounting The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (GAAP) and, accordingly, reflect all significant receivables, payables and other liabilities. The significant policies followed are described below to enhance the usefulness of the financial statements to the user. Basis of Presentation The Food Bank is required to report information regarding its financial position and activities according to three classes of net assets based on the absence or existence and nature of donor imposed restrictions as follows: Unrestricted Net Assets Amounts included in this class represent resources not subject to donor imposed restrictions which can be used for any purpose consistent with the mission of the Food Bank. Temporarily Restricted Net Assets Amounts in this class represent resources that are subject to specific donor imposed restrictions to be used for a specific purpose or a stated period of time. There were no temporarily restricted net assets at December 31, 2013 and Permanently Restricted Net Assets Amounts in this class represent resources which are to be permanently used for a specific purpose determined by the donor. There were no permanently restricted net assets as of December 31, 2013 and

10 NOTES TO FINANCIAL STATEMENTS (CONTINUED) Note 1. Summary of Significant Accounting Policies (Continued) Estimates The preparation of financial statements in conformity 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 these estimates. Functional Allocation of Expenses The costs of providing the various programs and other activities have been summarized on a functional basis in the statements of activities. Accordingly, certain costs have been allocated among the programs and supporting services benefited. Accounts Receivable and Allowance for Uncollectible Accounts Accounts receivable represent amounts owed the Organization for food products sold ($.19/lb) and transportation ($.08/lb) for 2013 and The Organization uses the allowance method to determine uncollectible accounts receivable. The allowance is based on prior years experience and management s analysis of specific accounts receivable. Inventory Food donated to the Food Bank is accounted for as unrestricted contributions. Inventory consists of food and commodities donated primarily by Feeding America. Inventory of foods and commodities, received from Feeding America, are valued at $1.69 and $1.66 per pound as of December 31, 2013 and 2012, respectively, as determined by the most recent information available from Feeding America, the principal provider of donated foods and commodities. This valuation is adjusted periodically by Feeding America. In addition, commodities received under the U.S. Department of Agriculture TEFAP program, to be passed-through to sub-recipient pantries, are valued at $.67 per pound and $.58 per pound at December 31, 2013 and 2012, respectively. Land, Buildings, and Equipment The Organization capitalizes property and equipment over $500. Lesser amounts are expensed. Land, buildings, and equipment are carried at cost, except for gifts or donations which are reported as contributions and stated at estimated fair market value at date of receipt. Such donations are reported as unrestricted contributions unless the donor has restricted the donated asset to a specific purpose. Assets donated with explicit restrictions regarding their use and contributions of cash that must be used to acquire property and equipment are reported as restricted contributions. Absent donor stipulations regarding how long those donated assets must be maintained, the Organization reports expirations of donor restrictions when the donated or acquired assets are placed in service. The Organization reclassifies temporarily restricted net assets to unrestricted net asset at that time. Depreciation of building and equipment is computed using the straight-line method over the respective assets estimated useful lives which range from 5 to 40 years. 8

11 NOTES TO FINANCIAL STATEMENTS (CONTINUED) Note 1. Summary of Significant Accounting Policies (Continued) Grant Awards State of West Virginia West Virginia Department of Agriculture has approved grants to the Organization for the purpose of determining the eligibility of new pantries and the transportation, storage, distribution and administrative costs of USDA and non- USDA commodities. The Organization recognized $196,873 and $206,422 of the amounts awarded during its fiscal years ended December 31, 2013 and 2012, respectively. In addition, the Organization recognized West Virginia Department of Agriculture monies in the amounts of $83,402 and $62,686, during the fiscal years ended December 31, 2013 and 2012, respectively. Claude Worthington Benedum Foundation The Board of Trustees of the Claude Worthington Benedum Foundation has approved a grant in the amount of $35,000 for The grant s purpose was to restock food bank inventory depleted from the July 2012 storms in West Virginia. The Organization received and recognized $35,000 of this grant during the fiscal year ended December 31, Interest Expense Interest costs have been expensed on the statements of activities and functional expenses. Contributed Services No amounts have been reflected in the financial statements for donated services. The Food Bank generally pays for services requiring specific expertise. However, many individuals volunteer their time and perform a variety of tasks that assist the Food Bank, but these services do not meet the criteria for recognition as contributed services. Contributions Contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted net assets depending on the existence or nature of any donor restrictions. Income Taxes The Mountaineer Food Bank, Inc. is a nonprofit Organization exempt from income taxes under the provisions of Section 501(c)(3) of the Internal Revenue Code. The Organization s Form 990, Return of Organization Exempt from Income Tax, for the years ending 2013, 2012, and 2011 are subject to examination by the IRS, generally for three years after they were filed. 9

12 NOTES TO FINANCIAL STATEMENTS (CONTINUED) Note 1. Summary of Significant Accounting Policies (Continued) Memorandum Totals The accompanying financial statements reflect totals of all net assets and activities. The totals are shown for memorandum purposes only and do not reflect the elimination of internal organization activities using principles of consolidation. Cash and Cash Equivalents For purposes of the statements of cash flows, Mountaineer Food Bank, Inc. considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash and cash equivalents. During 2013 and 2012, net donated inventory was recorded in these financial statements, as more fully described in Note 5, in the amounts of $546 and $(554,554), respectively. Note 2. Inventory/Contributed Foods During 2013 and 2012, the Organization received approximately 54% and 66% of its food pantry merchandise inventories from Feeding America and other donors. The Organization records donated goods that are not provided by USDA as a contribution of merchandise inventory when the merchandise is received at $1.69 and $1.66 per pound for 2013 and 2012, the amount determined by Feeding America. The USDA commodities are not recorded as a contribution of merchandise inventory but are recorded in inventory on December 31, 2013 and 2012 at $.67 and $.58 per pound, respectively, the value of such commodities as determined by the West Virginia Department of Agriculture Food Distribution Division. Note 3. Property and Equipment Property and equipment consists of the following at December 31,: Land $ 120,093 $ 120,093 Warehouse equipment 766, ,830 Office equipment 37,371 26,679 Building 1,567,664 1,566,164 2,491,600 2,463,766 Less accumulated depreciation 1,238,785 1,117,802 Property and equipment, net $ 1,252,815 $ 1,345,964 10

13 Note 4. Notes Payable MOUNTAINEER FOOD BANK, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) Notes payable consisted of the following at December 31,: Note payable to City National Bank, dated November 5, 2011, with monthly payments of principle and interest of $1,887. The interest rate is fixed at 5.75%, payable until November, 2015, secured by 2011 Kenworth truck with an adjusted basis of $44,111. $ 39,197 $ 58,910 Note payable to Feeding America, dated December 9, 2010, with annual payments of principle and interest of at least 1/4 of the amount outstanding, interest rates of 0% to 4%. 27,289 54,578 66, ,488 Less current portion (48,224) (47,060) $ 18,262 $ 66,428 Note 5. Contributed Food Items, Net Contributed food items, net, consisted of donated food items from Feeding America and other donors, of which Mountaineer Food Bank, Inc. collects and distributes to county/local food pantries or other non-profit organizations recorded at $1.69 and $1.66 per pound for 2013 and 2012, as more fully described in Notes 1 and 2, as follows: Contributed food items $ 9,393,091 $ 9,462,437 (5,558,042 and 5,700,263 pounds for 2013 and 2012, respectively) Cost of food items distributed 9,392,545 10,016,991 Contributed food items, net $ 546 $ (554,554) Note 6. Prior Period Adjustment The following net assets required restatement at the beginning of the year as follows: 12/31/2012 Net assets, as previously stated $ 2,715,309 Less: Land, buildings and equipment, net (59,948) Net assets, restated $ 2,655,361 11

14 Note 7. Subsequent Events MOUNTAINEER FOOD BANK, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) The Food Bank has evaluated subsequent events through December 2, 2014, the date the financial statements were available to be issued. 12

15 Spencer CPA & Associates, P.L.L.C. PO Box East Main Street Buckhannon, WV Buckhannon, WV Phone: (304) Fax: (304) Member: American Institute of Certified Public Accountants WV Society of Certified Public Accountants INDEPENDENT AUDITORS 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 Mountaineer Food Bank, Inc. Gassaway, West Virginia 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 Mountaineer Food Bank, Inc. (a nonprofit organization), which comprise the statement of financial position as of December 31, 2013, and the related statements of activities, and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated December 2, Internal Control over Financial Reporting In planning and performing our audit, we considered Mountaineer Food Bank, Inc. 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 Mountaineer Food Bank, Inc. s internal control. Accordingly, we do not express an opinion on the effectiveness of the Organization s internal control. Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as described in the accompanying schedule of findings and questioned costs, we identified certain deficiencies in internal control that we consider to be material weaknesses and significant deficiencies. 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 combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. We consider the deficiencies described in the accompanying schedule of findings and questioned costs, items number and , to be material weaknesses. 13

16 A significant deficiency is a deficiency, or 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. We consider the deficiencies described in the accompanying schedule of findings and questioned costs, items number and , to be significant deficiencies. Compliance and Other Matters As part of obtaining reasonable assurance about whether Mountaineer Food Bank, Inc. 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 instances of noncompliance or other matters that are required to be reported under Government Auditing Standards and which are described in the accompanying schedule of findings and questioned costs as items as , , and Mountaineer Food Bank, Inc. s Response to Findings Mountaineer Food Bank, Inc. s response to the finding identified in our audit is described in the accompanying schedule of findings and questioned costs. Mountaineer Food Bank, Inc. s response was not subjected to the auditing procedures applied in the audit of the financial statements and accordingly, we express no opinion on it. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the organization s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the organization s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Spencer CPA & Associates, PLLC Buckhannon, West Virginia December 2,

17 Spencer CPA & Associates, P.L.L.C. PO Box East Main Street Buckhannon, WV Buckhannon, WV Phone: (304) Fax: (304) Member: American Institute of Certified Public Accountants WV Society of Certified Public Accountants INDEPENDENT AUDITORS REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133 To the Board of Directors Mountaineer Food Bank, Inc. Gassaway, West Virginia Report on Compliance for Each Major Federal Program We have audited Mountaineer Food Bank, Inc. s (a nonprofit organization) compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of Mountaineer Food Bank, Inc. s major federal programs for the year ended December 31, Mountaineer Food Bank, Inc. s major federal programs are identified in the summary of auditors results section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditors Responsibility Our responsibility is to express an opinion on compliance for each of Mountaineer Food Bank, Inc. 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 OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 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 Mountaineer Food Bank, Inc. 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 Mountaineer Food Bank, Inc. s compliance. Opinion on Each Major Federal Program In our opinion, Mountaineer Food Bank, Inc. 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,

18 Report on Internal Control over Compliance Management of Mountaineer Food Bank, Inc. 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 Mountaineer Food Bank, Inc. 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 and report on internal control over compliance in accordance with OMB Circular A-133, 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 Mountaineer Food Bank, Inc. 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 OMB Circular A-133. Accordingly, this report is not suitable for any other purpose. Spencer CPA & Associates, PLLC Buckhannon, West Virginia December 2,

19 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED DECEMBER 31, 2013 Federal Pass-Through Federal Grantor/Pass-Through CFDA Entity Identifying Grantor/Program or Cluster Title Number Number Federal Expenditures U.S. Department of Agriculture Pass-Through Programs From: State of West Virginia-The Emergency Food Assistance Program (Food Commodities) $ 3,219,596 State of West Virginia-The Emergency Food Assistance Program (Administrative Costs) ,275 Total U.S. Department of Agriculture 3,499,871 Total Expenditures of Federal Awards $ 3,499,871 17

20 NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED DECEMBER 31, 2013 NOTE A. BASIS OF PRESENTATION The accompanying schedule of expenditures of federal awards (the Schedule) includes the federal grant activity of Mountaineer Food Bank, Inc. under programs of the federal government for the year ended December 31, The information in this Schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Because the Schedule presents only a selected portion of the operations of the Mountaineer Food Bank, Inc., it is not intended and does not present the financial position, changes in net assets, or cash flows of Mountaineer Food Bank, Inc. NOTE B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (1) Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in OMB Circular A-122, Cost Principles for Non-Profit Organizations, wherein certain types of expenditures are not allowable or are limited as to reimbursement. (2) Pass-through entity identifying numbers are presented where available. NOTE C. FOOD DONATION Nonmonetary assistance is reported in the Schedule at the fair market value of the commodities received and disbursed. At December 31, 2013, the Organization had food commodities totaling $1,023,074 in inventory. 18

21 SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED DECEMBER 31, 2013 Section I - Summary of Auditors Results Financial Statements Type of auditors report issued: Unqualified Internal Control over Financial Reporting: Material weakness identified? Significant deficiencies identified that are not considered to be material weakness? Noncompliance material to the financial statements noted? Yes Yes Yes Federal Awards Internal Control over Major Programs: Material weakness identified? Significant deficiencies identified that are not considered to be material weakness? Type of auditors report issued on compliance for major programs: Any audit findings disclosed that are required to be reported in accordance with _.510(a) of Circular A-133? No No Unqualified No Identification of major program: Name of Federal Program CFDA Number Expenditures U.S. Department of Agriculture-Emergency Food Assistance Program (Food Commodities) $ 3,219,596 Dollar threshold used to distinguish between Type A and Type B Program: $ 300,000 Auditee qualify as a low-risk auditee? No 19

22 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2013 Section II Financial Statement Findings Segregation of Duties Condition: We noted during our audit that Mountaineer Food Bank, Inc. did not have adequate segregation of duties in the financial and accounting office. Criteria: Cause: Effect: During our analysis of internal control, we noted that duties related to the custody of assets, authorization of transactions, accounting function, and the record keeping responsibility are not properly separated. The financial and accounting department consists of only three employees and a fee accountant. The office staff at Mountaineer Food Bank, Inc. is not adequate enough to have proper segregation of duties. Because of the failure to segregate duties, internal accounting control does not reduce to a relatively low level, the risk that irregularities in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Recommendation: Responsibilities of accounting and financial duties should be distributed among office staff to the best degree possible to assure proper segregation of duties. However, we recognize the Organization is not large enough to obtain complete segregation of duties from a financial standpoint. Organization s Response: To the extent possible, the organization has segregated duties. However, any further segregation of duties is not economically feasible. 20

23 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, Supporting Documentation for Expenses Condition: Accounting records including supporting invoices could not be readily located. Criteria: Cause: Effect: Documentation should be retained regarding expenditures to ensure proper accountability in the area of expenditures. The Organization has not retained adequate documentation for all expenditures. The Organization is failing to exercise proper control over disbursements and record keeping. Recommendation: All statements and invoices for all expenditures should be maintained in a proper filing system for accessibility in the event of inspection. Organization s Response: The executive director was able to provide requested documentation after contacting various vendors and the fee accountant for copies of invoices and payroll tax documents that could not be located during the audit fieldwork. In the future, all documents and invoices required for record keeping will retained and properly filed at the Food Bank Delinquent Payments Condition: The Organization did not make all payments for vendor invoices by the required due date. Criteria: Cause: Effect: Proper control dictates that all remittances for liabilities be paid on or by the prescribed due date. The Organization failed to ensure all invoices were paid on time. By not paying invoices in a timely manner, the Organization could incur penalties and interest charges on overdue balances. Additionally, vendors may refuse to provide the Organization with materials, supplies, and services necessary to carry out the Organization s activities. Recommendation: The Organization should take steps to ensure all invoices are paid on or before the due date. Organization s Response: The Organization has experienced cash flow and staff shortages making it difficult to meet all financial due dates. In the future, the Organization will take steps to make payments on time or negotiate more favorable payment terms. 21

24 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, Lack of Governance Condition: The Circuit Court of Braxton County, West Virginia mandated the reconstitution of a new Board of Directors as a result of action taken by the executive director. The food bank was appointed a receiver to appoint a legally constituted Board of Directors to assure the continued operation of the food bank. Criteria: Cause: Effect: Proper internal control and the member contract for Feeding America dictate that the Organization be governed by an independent board of directors. The receiver appointed by the circuit court has not appointed the new board of directors. The Organization is not in compliance with the member contract for Feeding America. Additionally, the Organization does not have proper governance and oversight in place. Recommendation: It is recommended that the Organization ensure a legally constituted board of directors is seated and continuously maintained in the future. Organization s Response: At the time of this report, a new board has been seated. The Organization will ensure that a board is continuously seated Non-Compliance with Feeding America Member Contract Condition: The Organization is not in compliance with certain aspects of the Feeding America Member Contract. Criteria: Cause: Effect: Feeding America requires the Organization to adhere a member contract that specifies policies and procedures for recipient food banks. The Organization failed to comply with the Member Contract. The Organization has been placed on probation without product hold. Recommendation: It is recommended that the Organization take steps necessary to bring the Food Bank into compliance with the Member Contract. Organization s Response: On October 22, 2014, Feeding America released the Food Bank from probation citing considerable improvement in non-compliance areas. However, the Organization is continuing to work with Feeding America representatives to come into full compliance. 22

25 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, Compensatory Time Condition: Three employees of the Organization have accrued compensatory time. However, the Organization does not have a formal policy in reference to payment of compensatory time upon separation. Criteria: Cause: Effect: Proper accounting procedures require all liabilities be included in financial reports. A potential unrecorded liability could exist upon employee separation. The Organization could be misrepresenting liabilities. Recommendation: We recommend the board adopt a written policy regarding compensatory time as this could result in a liability to the Organization at the time of employee separation. The Organization should evaluate laws and regulations in reference to compensatory time. Organization s Response: The Organization will review laws and regulations in reference to compensatory time and develop a formal policy in reference to payment of compensatory time upon separation Timeliness of Audit Condition: The Organization did not provide the required independent annual audit report for the year ended December 31, 2013 to the West Virginia Department of Agriculture within the required timeframe. Criteria: Cause: Effect: The Emergency Food Assistance Program Sub-Recipient Agency Agreement to Participate with the West Virginia Department of Agriculture requires the Food Bank to provide copies of the independent annual audit report within 180 days of its fiscal year end. The Organization and its fee accountant did not provide the independent auditor with December 31, 2013 financial records until September, 2014, which is after the 180 day required due date for the audit report. The Organization is not in compliance with the sub-recipient agreement. As such, the total contract costs may be disallowed and funds may be required to be returned to the State Distributing Agency. In addition to disallowance of contract funds, the Organization may become ineligible for future grant awards. Recommendation: We recommend the Organization set policies for completion of the independent annual audit prior to the required due date and ensure the report is filed by the due date in the future. Organization s Response: The Organization will provide the current audit report as soon as possible and ensure all future audit reports are submitted on time. 23

26 SUMMARY OF SCHEDULE OF PRIOR AUDIT FINDINGS FOR THE YEAR ENDED DECEMBER 31, 2013 Finding Number Title Status Segregation of Duties Repeated 24

27 484 ENTERPRISE DRIVE GASSAWAY, WV CORRECTIVE ACTION PLAN FOR THE YEAR ENDED DECEMBER 31, 2013 Mountaineer Food Bank, Inc. respectfully submits the following corrective action plan for the year ended December 31, Name and address of independent accounting firm: Buckhannon, WV Spencer CPA & Associates, PLLC, Audit period: January 1, 2013 through December 31, The findings from the December 31, 2013 schedule of findings and questioned costs are discussed on pages 20 to 23 of this report. The findings are numbered consistently with the numbers assigned in the schedule. Section III of the schedule does not include findings and is not addressed. Section II. Findings Financial Statement Audit The Organization s planned corrective action is noted under each finding in the Schedule of Findings and Responses under Organization s Response on pages 20 to 23. If a lending agency has questions regarding this plan, please contact Carla Nardella, Executive Director, at (304) Sincerely yours, Carla Nardella, Executive Director 25