INSTITUTE FOR PUBLIC STRATEGIES FINANCIAL STATEMENTS AND AND INDEPENDENT AUDITOR'S REPORTS

Transcription

1 i. i INSTITUTE FOR PUBLIC STRATEGIES FINANCIAL STATEMENTS AND SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AND INDEPENDENT AUDITOR'S REPORTS JUNE 30, 2016

2 UNITED STATES DEPARTMENT OF JUSTICE BYRNE CRJMINAL JUSTICE INNOV ATTON PROGRAM CFDA NU1vfBER: Grant Number: 2012-AJ-BX-0009 UNITED STATES DEPARTMENT OF HEALTH & HUMAN SERVICES DRUG FREE CO:rvtl\1UNITIES CFDA NillvffiER: Grant Number: 1H79SP020356~02 COUNTY OF LOS ANGELES ENVIRONMENT AL PREVENTION SERVICES CFDA NUMBER: GRANTNUMBER: PH COMPREHENSIVE PREVEN.TION SERVICES CFDA NUMBER: GRANT NUMBER: PH LOS ANGELES SPF SIG CFDA NUMBER: GRANT NUMBER: PH COUNTY OF SAN BERNARDINO SAN BERNARDINO -CFDA NUMBER: GRANT NUMBER: VICTORVILLE CFDA NUMBER: GRANT NUMBER: SAN BERNARDINO SPF SIG CFDA NUMBER: GRANTNUMBER: 13-32

3 COUNTY OF SAN DIEGO BINGE AND UNDER AGE DRINKING CFDA NUMBER: GRANT NUMBER: COUNTY WIDE MEDIA ADVOCACY CFDA NUMBER: GRANT NUMBER: EAST COUNTY PREVENTION CFDA NUMBER: GRANT NUMBER: EAST COUNTY PREVENTION CFDA NUMBER: GRANT NUMBER: SOUTH BAY PREVENTION CFDA NUMBER: GRANT NUMBER: SOUTH BAY PREVENTION CFDA NUMBER: GRANT NUMBER:

4 INSTITUTE FOR PUBLIC STRATEGIES CONTENTS Independent Auditor's Report I Financial Statements Statement of Financial Position 3 Statement of Activities and Changes in Net Assets '. 4 Statement of Cash Flows 5 Notes to the Financial. Statements 6 ~llj? >l(;!ii1~11tgl!)' ~<;ll~cllll~s 5) Schedule of Expenditures of Federal Awards 11 Notes to the Schedule of Expenditures of Federal Awards 12 Summary Schedule of Prior Audit Findings 13 Supplementary Information 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 14 Independent Auditor's Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by the Uniform Guidance I 6 Schedule of Findings and Questioned Costs 18

5 ROGER S. GORDON & Co., CPA 1679EAST MAIN STREET, SUITE 105 EL CAJON, CA FAX INDEPENDENT AUDITOR'S REPORT TO THE BOARD OF DIRECTORS OF INSTITUTE FOR PUBLIC STRATEGIES Report on the Financial Statements I have audited the accompanying financial statements of Institute for Public Strategies (a nonprofit Corporation), which comprise the statement of financial position as of June 30, 2016, and the related statements of activities and changes in net assets 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 the 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 the financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility My responsibility is to express an opinion on these financial statements based on my audit. I conducted my 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 I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of 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, I express no such opinion. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.

6 INDEPENDENT AUDITOR'S REPORT (CONTJNUED) Opinion In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Institute for Public Strategies as of June 30, 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. Other Matters Other Information My audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplementary Schedules I and II are presented for purposes of additional analysis and are not a required part of the financial statements. The accompanying schedule of expenditures of federal awards, as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is presented for purposes of additional analysis and is also 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 my opinion, the information is fairly stated, in all material respects, in relation to the financial statements taken as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, I have also issued my report dated December 20, 2016, on my consideration of Institute for Public Strategies' internal control over financial reporting and on my 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 my testing of internal control over financial reporting or on 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 Institute for Public Strategies' internal control over financial reporting and compliance. Roger S Gordon & Co., CPA December 20,

7 STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED JUNE 30, 2016 ASSETS CURRENT ASSETS Cash and cash equivalents Accounts receivable Other receivables Prepaid expenditures TOT AL CURRENT ASSETS OTHER ASSETS Security deposits TOT AL OTHER ASSETS TOT AL ASSETS $ 783, ,535 22,046 65,638 1,114,608 18,193 18,193 $ 1, 132,801 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payable Accrued Expenses Accrued payroll and payroll taxes Deferred bene fits Accrued time off and illness pay TOT AL CURRENT LIABILITIES NET ASSETS Unrestricted TOT AL NET ASSETS TOT AL LIABILITIES AND NET ASSETS $ 93,962 92,041 82, , , , , ,709 $ 1,132,801 See Accompanying Notes and Independent Auditor's Report 3

8 STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS FOR THE YEAR ENDED JUNE 30, 2016 UNRESTRICTED NET ASSETS Revenues: Program grantors Contributions Interest income Total unrestricted revenues Functional expenses Program services Management and general Total functional expenses Change in unrestricted net assets Unrestricted net assets, beginning of year Unrestricted net assets, end of year $ 3,052, ,053,235 2,509, ,873 3,054,333 (1,098) 444,807 $ 443,709 See Accompanying Notes and Independent Auditor's Report 4

9 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2016 CASH FLOWS FROM OPERATING ACTIVITIES (Decrease) in net assets Adjustments to reconcile change in net assets to cash provided by operating activities: (Increase) decrease in current assets: Accounts receivable Other receivables Prepaid expenditures Increase (decrease) in current liabilities: Accounts payable Accrued expenses Accrued payroll and payroll taxes Deferred benefits Accrued time off and illness pay NET CASH PROVIDED BY OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Increase in security deposits NET CASH PROVIDED BY INVESTING ACTIVITIES NET INCREASE IN CASH CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR CASH AND CASH EQUIVALENTS AT END OF YEAR $ (1,098) 195,628 (22,046) 10,629 (39,947) 34,638 6,847 17,744 (56,721) 145,674 (316) (316) 145,358 $ 638,031 $ 783,389 See Accompanying Notes and Independent Auditor's Report 5

10 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2016 NOTE A -- DESCRIPTION OF REPORTING ENTITY AND BASIS OF ACCOUNTING Reporting Entity: Institute of Public Strategies (IPS) is a nonprofit corporation that receives its funding from. private foundations and from governmental agencies, primarily located within Southern California but also from agencies located elsewhere. All of IPS's activities are related to its educational purpose.. No monies are spent on public fund raising. The purpose of JPS is to serve as an educational training, technical assistance, and operational center on issues of public health, public safety, community planning, and various other issues. IPS provides consulting services to other non-profit organizations and governmental agencies and works on long-term contracts to provide direct services within specified communities. Basis of Accounting: The financial statements of JPS have been prepared on the accrual basis of accounting. Under this method revenues are recognized in the accounting period in which they become measurable and available. Expenses are recognized in the period in which the expense is incurred. No funds are restricted. NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cash and Cash Equivalents: Cash includes cash in checking and savings accounts as well as money market accounts and certificates of deposit with maturities of three months or less. Office Furnishings and Éguipment: The costs of office furnishings and equipment are consistently charged to expense, except for major items of furnishings and computer equipment, because JPS does not deem such amounts to be sufficiently material to warrant capitalization and depreciation. All capitalized assets are depreciated over their estimated useful life, usually between 3 and 7 years, using the straight line method. As of the date of the financial statements, all fixed assets are fully depreciated. Cash Flows: Cash as used in the statement of cash flows includes cash on hand and cash in bank accounts, including overdrafts.. 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 those estimates. Subsequent Events: Management evaluates data and events for potential subsequent event disclosure through the date the financial statements were. available to be issued which was December 20,

11 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2016 NOTE C -- CASH AND CASH EQUIVALENTS As of June 30, 2016, cash and cash equivalents was comprised of the following: Cashon hand Checking accounts Savings accounts $ , ,884 $ 783,389 Financial instruments that potentially subject the Company to credit risk consist principally of cash and cash equivalents. The Company attempts to limit its credit risk associated with cash and cash equivalents by utilizing highly rated financial institutions. At times, such amounts exceed the Federal deposit insurance limit of $250,000. As of the date of the financial statements the Company's cash and cash equivalent balances exceeded the Federal insurance limits by approximately $286, 748 NOTE D -- INCOME TAXES IPS has been classified as a nonprofit foundation under Section l 70(b)(l)(A)(vi). As such, IPS is considered a Section 501(c)(3) organization and is exempt from income tax under Section 50l(a). Thus, no provision for income taxes has been provided in these financial statements. The open tax years for audit are 2016, 2015, and 2014 for Federal purposes and 2016, 2015, 2014, and 2013 for California purposes. NOTE E -- PENSION PLANS IPS has a 403(b) plan which is similar to a 40 I (k) plan. The 403(b) plan allows eligible employees to defer up to 25% of their wages up to certain annual limits. JPS can also make discretionary contributions to the employees' retirement accounts. During the year ended June 30, 2016 IPS's contributions of 15% of eligible employee's pay totaled $248,035. Due to a forfeiture credit of $70,865, the actual amount paid was reduced to $177,170. In addition, JPS paid pension administration costs of $2, 700. During the year ended June 30, 2016, IPS terminated its section 457 salary reduction plan that covered the Company's top executives. The plan was an ineligible Code section 457(f) plan. Under this code section, deferred compensation contributions are subject to taxation when they no longer are subject to substantial risk of forfeiture. All monies were paid out to the participants during the year ended June 30,

12 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2016 NOTE E -- PENSION PLANS, continued To replace the terminated section 457 salary reduction plan, a new 401 (a) retirement plan was established. A 40l(a) plan is a defined contribution plan that provides retirement funding for selected employees. The 40l(a) plan has a structure similar to the existing 403(b) that covers all employees and the 401(a) plan includes a vesting schedule so that there is the required risk of forfeiture on the part of the employee.. NOTE F -- SIGNIFICANT LEASE OBLIGATIONS IPS entered into a non-cancellable lease obligation commencing on October 1, 2012 for office facilities for a 57 month period that will expire of June 30, The remaining payments on this lease total $129,915 plus IPS's share of common area expenses. All other lease obligations are on a month-to-month basis. Total building rental expense for the year ended June 30, 2016 was $204,231. NOTE G - COMMITMENTS AND CONTINGENCIES JPS has a $250,000 line of credit with a local bank. Nothing was drawn on the line at June 30, 2016 The line bears interest at the bank's reference rate of interest (3.5% at June 30, 2016) plus l.50o/o with a minimum interest rate of 5%. The line of credit is callable by the bank at any time. JPS is in litigation with a former employee regarding the payment of overtime wages. The success of the plaintiff is considered reasonably possible. If the plaintiff prevails the monetary damages could range from $9,500 to $25,000, plus the plaintiffs legal costs. NOTE H -- CONCENTRATIONS During the year ended June 30, 2016, four program sponsors each represented at least 10% of IPS's revenues. The revenue amounts and related receivables at June 30, 2016 were as follows: Revenues Accounts Receivable Sponsor A $ 1,353,971 44% $ 63,800 26o/o Sponsor B $ 731,096 24% $ 44,154 18% Sponsor C $ 628,212 21% $ 38,076 16% Sponsor D $ 3514,803 10% $ 93,295 38% 8

13 SUPPLEMENTAL SCHEDULE I STATEMENT OF PROGRAM SERVICES FOR THE YEAR ENDED JUNE 30, 2016 PROGRAM SERVICES: Salaries and wages Subcontracted services Employee benefits Building rental expense Payroll taxes Duplication, printing and advertising Travel Communication Office supplies Mileage reimbursement Web and internet expense Education and training Consultants Meetings Stipends and incentives Insurance Licenses and fees Utilities Equipment rental Equipment under $5,000 Dues and subscriptions Postage and delivery Equipment repair and maintenance Building repair Total program services $ 1,251, , , , ,559 46,443 35, ,875 27,882 21,215 20,243 15,044 14, ,656 11,633 10,297 8,806 6,551 5,930 3,601 2,660 1,905 1,528 8 $ 2,509,460 See Accompanying Notes and Independent Auditor's Report 9

14 SUPPLEMENTAL SCHEDULE II STATEMENT OF MANAGEMENT AND GENERAL EXPENSES FOR THE YEAR ENDED JUNE 30, 2016 MANAGEMENT AND GENERAL EXPENSES: Salaries and wages Subcontracted services Employee benefits Building rental expense Payroll taxes Duplication, printing and advertising Travel Communication Office supplies Mileage reimbursement Web and internet expense Education and training Consultants Meetings Stipends and incentives Insurance Licenses and fees Utilities Equipment rental Equipment under $5,000 Dues and subscriptions Postage and delivery Equipment repair and maintenance Building repair expense GIPS Management fee reimbursement Total management and general expenses $ 221, ,500 60,969 29,906 17, ,091 9,209 4, ,304 1,318 15, o 5, 163 4, , 189 3,871 1, o (275) $ 544,873 See Accompanying Notes and Independent Auditor's 10 Report

15 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2016 Federal Grantor/Program Title Federal CFDA Number Grant Number Agency or Pass-through Entity Expenditures Major Programs U S. Department of Justice Byrne Criminal Justice Innovation Program AJ-BX-0009 NIA $ 187, '--- U.S. Department of Health and Human Services Direct Grant Drug Free Communities l H79SP I 128,271 County of Los Angeles Environmental Prevention services Comprehensive Prevention Services Los Angeles SPF SIG PH PH PH Yes Yes Yes 360, , ,250 County of San Bernardino San Bernardino Victorville San Bernardino SPF SIG Yes Yes Yes 286, ,234 80,211 County of San Diego Binge and Underage Drinking Yes 602,500 County Wide Media Advocacy Yes 97,500 East County Prevention Yes 108,976 East County Prevention Yes 217,995 South Bay Prevention Yes 109,000 South Bay Prevention Yes 218,000 Total U.S. Department of Health and Human Services 2,841,548 Total Expenditures of Federal Awards $ 3,028,811 See Accompanying Notes and Independent Auditor's Report 11

16 NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AW ARDS YEAR ENDED JUNE 30, 2016 NOTE A-- BASIS OF PRESENTATION. The accompanying Schedule of Expenditures of Federal Awards (the: Schedule) includes the federal award activity of Institute for Public Strategies under programs of the federal government for the year ended June 30, The information in the Schedule is presented in accordance with the requirements of Title 2 US. Code of Federal Regulations Part ZOO, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of Institute for Public Strategies, it is not intended to and does not present the financial position, changes in net asset, or cash flows of Institute for Public Strategies. 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 the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. 12

17 SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS YEAR ENDED JUNE 30, 2016 US Department of Justice CFDA # US Department of Health and Human Services CFDA # and Grant Period-Year ended June 30, 2015 No Prior Year Audit Findings 13

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 GOVERNMENTAUDITING STANDARDS TO THE BOARD OF DIRECTORS OF INSTITUTE FOR PUBLIC STRATEGIES I 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 the Government Auditing Standards, issued by the Comptroller General of the United States, the financial statements of Institute for Public Strategies (a nonprofit Corporation), which comprise the statement of financial position as of June 30, 2016, and the related statements of activities and cash flows for the year then ended, and the related notes to the financial statements, and have issued my report thereon dated December 20, Internal Control over Financial Reporting In planning and performing my audit of the financial statements, I considered Institute for Public Strategies' internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing my opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Institute for Public Strategies' internal control. Accordingly, I do not express an opinion on the effectiveness of the Company's internal control. A deficiency in internal control exists when the design or operation of 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 entities' 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. My consideration of the 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 my audit I did not identify any deficiencies in internal control that I consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 14

19 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 (CONTINUED) Compliance and Other Matters As part of obtaining reasonable assurance about whether Institute for Public Strategies' financial statements are free of material misstatement, I 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 my audit, and accordingly, I do not express such an opinion. The results of my tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of my 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. Roger S. Gordon & Co., CPA December 20,

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 OF INSTITUTE FOR PUBLIC STRATEGIES Report on Compliance for Each Major Federal Program I have audited Institute for Public Strategies' compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of Institute for Public Strategies' major federal programs for the year ended June 30, Institute for Public Strategies' major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Management's Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditor's Responsibility My responsibility is to express an opinion on compliance for each of Institute for Public Strategies' major federal programs based on my audit of the types of compliance requirements referred to above. I conducted my 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). Those standards and the Uniform Guidance require that I 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 Institute for Public Strategies' compliance with those requirements and performing such other procedures as Iconsidered necessary in the circumstances. Ibelieve that my audit provides a reasonable basis for my opinion on compliance for each major federal program. However, my audit does not provide a legal detemiination of Institute for Public Strategies' compliance. Opinion on Each Major Federal Program In my opinion, Institute for Public Strategies complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30,

21 INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133 (CONTINUED) Report on Internal Control over Compliance Management of Institute for Public Strategies is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing my audit of compliance, I considered Institute for Public Strategies' 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, I do not express an opinion on the effectiveness of Institute for Public Strategies' 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. My 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. I did not identify any deficiencies in internal control over compliance that I 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 my testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this communication is not suitable for any other purpose. Roger S. Gordon & Co., CPA December 20,

22 SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2016 SUMMARY OF AUDITOR'S RESULTS 1. The auditor's report expresses an unmodified opinion on the financial statements of Institute for Public Strategies. 2. No significant deficiencies in internal control were disclosed during the audit of the financial statements. 3. No instances of noncompliance material to the financial statements of Institute for Public Strategies, which would be required to be reported in accordance with Government Auditing Standards, were disclosed during the audit 4. No significant deficiencies ininternal control over major programs were disclosed during the audit. 5. The auditor's report on compliance for the major federal award programs for Institute for Public Strategies expresses an unmodified opinion on all major federal programs 6. There were no audit findings relating to major programs that are required to be reported under the Uniform Guidance. 7. The programs tested as major programs include: US Dept. of Health and Human Services CFDA US Dept. of Health and Human Services CFDA US Dept. of Health and Human Services CFDA The threshold amount used for Type A programs was $750,000. The threshold amount for Type B Programs was $187,500 ($750,000 X 25%). 9. Institute for Public Strategies did qualify as a low-risk auditee for the year ended June 30, However, the three cluster programs, CFDA , the CFDA , and the CFDA represented 8%, 4o/o, and 82% of total federal expenditures, respectively, for the year ended June 30, Thus, the reduced coverage granted low-risk auditees did not apply. 18