COMMUNITIES IN SCHOOLS HOUSTON, INC. (A Texas Nonprofit Corporation) Annual Financial and Compliance Report Year Ended August 31, 2008 (With

Transcription

1 COMMUNITIES IN SCHOOLS HOUSTON, INC. Annual Financial and Compliance Report Year Ended August 31, 2008 (With summarized comparative financial information for 2007)

2 AUGUST 31, 2008 Page Number Independent Auditors Report 1 SECTION I: FINANCIAL STATEMENTS Statements of Financial Position 3 Statements of Activities 4 Statements of Cash Flows 5 Notes to Financial Statements 6 SECTION II: SUPPLEMENTAL SCHEDULE Schedule of Functional Expenses 14 SECTION III: SINGLE AUDIT Schedule of Expenditures of Federal Awards 15 Schedule of Expenditures of State Awards 16 Notes to Schedules of Expenditures of Federal and State Awards 17 Report on Internal Control Over Financial Reporting and on Compliance and Other Related Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 18 Report on Compliance with Requirements Applicable to Each Major Federal and State Program, and on Internal Control Over Compliance in Accordance with OMB Circular A-133 and the State of Texas Single Audit Circular 20 FINDINGS AND QUESTIONED COSTS Schedule of Findings and Questioned Costs 22 Schedule of Prior Year Findings and Questioned Costs 25

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5 STATEMENTS OF FINANCIAL POSITION AUGUST 31, 2008 (With summarized financial information for 2007) Temporarily Totals Unrestricted Restricted ASSETS CURRENT ASSETS Cash and cash equivalents $ 2,471,307 $ 669,989 $ 3,141,296 $ 4,133,419 Pledges receivable - 448, , ,914 Government grants receivable - 345, , ,392 Prepayments and other receivables 68,034 4,237 72,271 84,190 Total current assets 2,539,341 1,467,570 4,006,911 5,273,915 NONCURRENT ASSETS Capital assets, net 5, ,440 1,364 TOTAL ASSETS $ 2,544,363 $ 1,467,988 $ 4,012,351 $ 5,275,279 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payable and accrued expenses $ 186,001 $ 638 $ 186,639 $ 155,358 Due from and to other funds (172,932) 172, Total current liabilities 13, , , ,358 TOTAL LIABILITIES $ 13,069 $ 173,570 $ 186,639 $ 155,358 NET ASSETS 2,531,294 1,294,418 3,825,712 5,119,921 TOTAL LIABILITIES AND NET ASSETS $ 2,544,363 $ 1,467,988 $ 4,012,351 $ 5,275,279 The accompanying notes are an integral part of these financial statements 3

6 STATEMENTS OF ACTIVITIES (With summarized financial information for 2007) Temporarily Restricted Totals Unrestricted SUPPORT AND REVENUE Cash contributions and grants: Individuals $ 119,607 $ 324,644 $ 444,251 $ 412,998 Corporations 179, , , ,515 Foundations 471, , ,011 1,435,435 Governmental agencies - 5,348,989 5,348,989 5,937,074 Noncash contributions and donations 72, , , ,087 Other income 150,436 1, , ,105 Net assets released from restriction: Satisfaction of purpose restrictions 5,370,762 (5,370,762) - - Expiration of time restrictions 2,693,151 (2,693,151) - - TOTAL SUPPORT AND REVENUE 9,057,126 (634,474) 8,422,652 9,860,214 EXPENSES Program services: Supportive guidance 2,602,955-2,602,955 2,738,756 Employment development 273, , ,693 Education and tutorial 1,964,048-1,964,048 2,310,997 Lifeskills and enrichment 2,031,657-2,031,657 1,672,907 Parental involvement 997, ,236 1,097,896 Health and human services 581, , ,273 Total program services 8,451,152-8,451,152 8,561,522 Support services: General administration 866, , ,291 Fundraising 398, , ,621 Total support services 1,265,709-1,265,709 1,249,912 TOTAL EXPENSES 9,716,861-9,716,861 9,811,434 (DECREASE) /INCREASE IN NET ASSETS (659,735) (634,474) (1,294,209) 48,780 NET ASSETS, BEGINNING OF YEAR 3,191,029 1,928,892 5,119,921 5,071,141 NET ASSETS, END OF YEAR $ 2,531,294 $ 1,294,418 $ 3,825,712 $ 5,119,921 The accompanying notes are an integral part of these financial statements 4

7 STATEMENTS OF CASH FLOWS YEARS ENDED AUGUST 31, 2008 AND CASH FLOWS FROM OPERATING ACTIVITIES: (Decrease)/increase in net assets $ (1,294,209) $ 48,780 Adjustments to reconcile (decrease)/increase in net assets to net cash (used in)/provided by operating activities: Depreciation 1,428 1,590 Decrease in pledges receivable 222,609 65,335 Decrease/(increase) in government grants receivable 40,353 (16,228) Decrease/(increase) in prepayments and other receivables 11,919 (881) Increase in accounts payable and accrued expenses 31,281 33,040 Total adjustment 307,590 82,856 Net cash (used in)/provided by operating activities (986,619) 131,636 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (5,504) - Net cash used in investing activities (5,504) - NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (992,123) 131,636 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 4,133,419 4,001,783 CASH AND CASH EQUIVALENTS, END OF YEAR $ 3,141,296 $ 4,133,419 The accompanying notes are an integral part of these financial statements 5

8 NOTES TO FINANCIAL STATEMENTS 1. NATURE OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Business Communities in Schools Houston, Inc. (the Organization ) is a Texas nonprofit corporation which coordinates private and public sector participation in the Organization s alternative education program. The goal of the Organization is to help disadvantaged, urban-area youth become more self-sufficient and productive citizens. The Organization provides youth with intensive educational and social attention in the public school environment through utilization of the mutually supportive services of municipal and county agencies and voluntary health and welfare organizations. Basis of Accounting The financial statements of the Organization have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. Financial Statement Presentation The financial statements of the Organization include certain prior-year summarized comparative financial information in total but not by net asset class. Such information does not include sufficient details to constitute a presentation in conformity with accounting principles generally accepted in the United States of America. Accordingly, such information should be read in conjunction with the Organization s financial statements for the year ended August 31, 2007, from which the summarized information was derived. The Organization s funding sources include donors that have placed specific restrictions on the use of donated assets and, in certain instances, the use of income derived from those assets. Net assets and revenues, expenses, gains, and losses are classified based on the existence or absence of donor-imposed restrictions in accordance with Financial Accounting Standards Board s (FASB) Statement of Financial Accounting Standards (SFAS) No.117, Financial Statements of Not-for-Profit Organizations. Accordingly, net assets of the Organization and changes therein are classified and reported as: Unrestricted net assets net assets that are not subject to donor-imposed stipulations. Temporarily restricted net asset net assets that are subject to donor-imposed stipulations that require the passage of time or the occurrence of a specific event. 6

9 NOTES TO FINANCIAL STATEMENTS Permanently restricted net assets net assets that are required to be maintained in perpetuity with only the income to be used for the Organization s activities due to donor-imposed restrictions. As of August 31, 2008 and during the year then ended, the Organization had no permanently restricted net assets. Revenue Recognition The Organization follows the provisions of SFAS No.116, Accounting of Contributions Received and Contributions Made. Accordingly, the Organization records unconditional contributions, including promises to give, as revenues when received. Conditional contributions are recognized as revenue when the conditions on which they depend have been substantially met. Contributions are recorded net of estimated uncollectible amounts. The estimated uncollectible promises to give are determined based on management s analysis of specific contributions and promises made. Multi-year pledges are not discounted as the amount of discount is not material. The Organization reports gifts of cash and other assets as restricted support if they are received with donor stipulations that limit the use of donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. When both restricted and unrestricted resources are available for use, it is the Organization s policy to use restricted resources first, then unrestricted resources as they are needed. Government grants conditioned on the incurrence of certain qualifying expenses are recognized to the extent expenses are incurred. Revenues under performance-based contracts are recorded as the Organization performs the services required by the contracts. Gifts of land, buildings, and equipment are reported as unrestricted support unless explicit donor stipulations specify how the donated assets must be used. Gifts of long-lived assets with explicit restrictions that specify how the assets are to be used and gifts of cash or other assets that must be used to acquire long-lived assets are reported as restricted support. Absent explicit donor stipulations about how long-lived assets must be maintained, the Organization reports expirations of donor restrictions when the donated or acquired longlived assets are placed in service. 7

10 NOTES TO FINANCIAL STATEMENTS In-Kind Contributions and Contributed Services Many individuals volunteer from time to time to perform a variety of tasks that assist the Organization in its operations. The Organization records the value of contributed services when there is an objective basis available to measure the value. During the year ended August 31, 2008, the Organization did not have any contributed volunteer services meeting the criteria for recognition in the financial statements and, accordingly, no value was recorded. Contributed professional services are recorded in the accompanying financial statements as noncash contributions and non-cash donations at their estimated fair values at the date of performance. The value of non-cash donations of materials, services, and free use of facilities that are included in the financial statements and the corresponding expenses for the year ended August 31, 2008 was $764,458. Cash and Cash Equivalents The Organization considers all monies in banks and highly liquid investments with maturities of three months or less from date of purchase to be cash equivalents. The carrying value of cash and cash equivalents approximates fair value because of the short maturities of those financial instruments. Capital Assets Capital assets are generally recorded at cost or, if donated, at their estimated fair value at the date of donation. Such donations are reported as increases in unrestricted net assets 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 or maintain capital assets are reported as restricted contributions. The Organization follows the policy of capitalizing all expenditures for property, improvements, furniture and fixtures, vehicles, office and other equipments in excess of $1,500. Capital assets are depreciated using the straight-line method based on the estimated useful lives of the related assets ranging from three to five years. Maintenance and repairs are charged to operations when incurred. Major improvements and renewals are capitalized. Functional of Expenses The costs of providing the Organization s various programs and activities have been summarized on a functional basis in the statement of activities. Expenses which cannot readily be related to a specific program have been allocated among the programs and supporting services benefited based on labor hours incurred. 8

11 NOTES TO FINANCIAL STATEMENTS Income Taxes The Organization is a not-for-profit corporation that is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code. Accordingly, income taxes are not provided for in the accompanying financial statements. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. 2. CAPITAL ASSETS The following is a summary of capital assets, less accumulated depreciation at August 31, 2008: Amount Furniture and equipment $ 53,029 Vehicles 21,450 74,479 Less: Accumulated depreciation (69,039) Capital assets, net $ 5,440 Depreciation expense for the year ended August 31, 2008 was $ 1, PROGRAM AND SUPPORTING SERVICES The following are the major programs and supporting services provided by the Organization: (1) Supportive Guidance: Students served by the Organization face an often overwhelming number of obstacles that can make it difficult to concentrate on schoolwork or perform well socially. The Organization provide both individual and group supportive guidance to help these students deal with difficult family situations and with the stresses experienced by all children growing up in poverty. 9

12 NOTES TO FINANCIAL STATEMENTS (2) Academic Support: Children often suffer academically because they have no one to help them in their studies. Teachers certainly try their best, but with a room full of students, it is difficult for teachers to provide the individual attention that some children must have to succeed in their schoolwork. Many at-risk children have parents who are high-school dropouts or have only basic reading and math skills. Since individual attention can enable a child struggling with a subject to master it, the Organization recruits adults to tutor and mentor these children, provide remedial help and serve as positive role models. (3) Cultural Enrichment: This covers a variety of activities, from field trips to guest speakers to parties and sports. The students the Organization serves are often so underprivileged that they have never been to a restaurant or a movie, or have never found their clothing anywhere but a second-hand store or charity closet. In their families, it is a struggle simply to feed them, much less provide anything beyond the necessities of physical life. This poverty leads to a lack of understanding about the world around them. A number of the Organization s students have never been outside of their immediate neighborhoods. For students who have no other life experience, the idea of academic achievement or a professional career may seem foreign. The Organization tries to provide these students with experience and information that would expand their view of the world and motivate them to higher aspirations in life. (4) Career Awareness: The Organization holds workshops for high school students on employment-related issues, and help these students to obtain after-school and/or summer jobs. Although some middle school students are too young to enter the workforce, the concept of planning for the future is heavily emphasized, and where age-appropriate, summer employment is an integral part of the Organization s program. The Organization tries to instill in all students an understanding of how academic success is linked to future career success. Students are encouraged to identify their strengths and interests, and to begin thinking about what they would like to do when they grow up. With a good education, they will be able to overcome the circumstances of their lives and achieve more than they ever may have dreamed possible. (5) Parental Involvement: Concerned and involved parents are critical for children to succeed in life. Realizing this fact, the Organization evaluates and helps children and considers their individual family situations. Often the parents of at-risk children are single mothers who lack even a high school diploma and who may have great difficulty finding consistent employment. Some parents may have trouble managing the responsibilities of a family; others face significant language barriers. Parents of at-risk 10

13 NOTES TO FINANCIAL STATEMENTS students face challenges themselves; the Organization works to help them so that they can help their children. (6) Social Services: The Organization serves as the single point of entry on campus for service provision. Sometimes students have needs that cannot be addressed directly by the Organization s staff. On other occasions, another community agency can meet a student s needs as well or better. As such, the Organization partners with other community agencies to ensure that needs of students and their families are effectively met. 4. NET ASSETS Temporarily restricted net assets amounting to $ 1,294,418 as of August 31, 2008 represent contributed and received grants as well as pledges to contribute funds to the Organization, which the donors have restricted for use in future periods. Unrestricted net assets represent unrestricted resources available to support the program activities of the Organization. Amounts available for this purpose as of August 31, 2008 was $ 2,531, PROMISES TO GIVE Unconditional promises to give at August 31, 2008, are as follows: Amount Receivable in less than one year $ 181,639 Receivable in one to five years 266,666 Total unconditional promises to give $ 448, CONCENTRATION OF CREDIT RISK The Organization maintains demand deposits at federally insured banks. Cash in those banks as of August 31, 2008 was $1,308,259, which exceeded the FDIC insurance coverage limit by approximately $1,098,845 that was not otherwise insured. Credit risk associated with government grants receivable is limited due to the credit worthiness of the federal and state funding agencies. 11

14 NOTES TO FINANCIAL STATEMENTS 7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES The following is a summary of accounts payable and accrued expenses at August 31, 2008: 8. PENSION PLAN Amount Accounts payable $ 42,548 Accrued payroll and related expenses 144,091 Accounts payable and accrued expenses $ 186,639 The Organization sponsors a 403(b) Thrift Plan (the Plan ) covering substantially all employees. The Plan permits participant contributions to be made on a before-tax basis and provides for the Organization to contribute 1% of each participant s salary and match each participant s contributions up to 2%. The Organization s total contribution to the Plan for the fiscal year ended August 31, 2008 was $156, COMMITMENTS The Organization has entered into various non-cancelable operating lease agreements covering office space and office equipment. The minimum future lease payments under all non-cancelable operating leases for each of the next five years and thereafter at August 31, 2008 are as follows: Amount Year ending August 31, 2009 $ 202, , , , , and thereafter 301,654 $ 1,276,035 12

15 NOTES TO FINANCIAL STATEMENTS Rent expense for the year ended August 31, 2008 was $778,723, of which $592,500 was donated and included in noncash contributions and donations described in Note 1 to the financial statements. 10. CONTINGENCIES The Organization receives grant funds, principally from federal and state government agencies for various programs, which are governed by various laws and regulations. Expenditures charged to these programs are reimbursed to the Organization after review and adjustments by the grantors. The Organization may become liable to refund money to funding agencies where it fails to comply with contract provisions. Also, the ability of the Organization to collect any related receivables at August 31, 2008 is subject to the compliance approval process on the activities related to those reimbursable expenditures. Any liability for potential recoupment or reimbursement that could arise from such compliance approved processes is not considered material. 13

16 SUPPLEMENTAL SCHEDULE

17 SCHEDULE OF FUNCTIONAL EXPENSES (With summarized financial information for 2007) Program services General Total Total administration Fund-raising expenses expenses Salaries and fringe benefits $ 6,688,345 $ 658,736 $ 231,742 $ 7,578,823 $ 7,511,573 Professional and contractual services 481,321 56,294 37, , ,603 Supplies 143,267 30,918 3, , ,446 Communications 47,874 9,807 9,167 66,848 82,066 Occupancy 688,333 59,047 31, , ,088 Rental and maintenance of equipment 38,485 7,108 3,384 48,977 31,528 Printing 5,161 1,990 22,895 30,046 48,135 Travel 91,033 5,788 3, ,188 94,751 Conferences and meetings 86,014 12,544 47, , ,420 Program Support 70,066 1,748 1,280 73, ,465 Depreciation ,428 1,590 Miscellaneous 110,988 21,957 7, , ,769 $ 8,451,152 $ 866,729 $ 398,980 $ 9,716,861 $ 9,811,434 14

18 SINGLE AUDIT SECTION

19 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Agency on Federal Grantor/Pass-Through Federal CFDA Pass- Through Federal Grantor/Program Title Number Number Expenditures U.S. Department of Education: Direct Federal Funding: Federal Health, Education and Welfare - Dropout Prevention Program A N/A $ 40,000 Pass-Through Houston Independent School District: Title I Part A - Improving Basic Programs A N/A 428,243 Title One, School Improvement A N/A 39,060 Gaining Early Awareness and Readiness for Undergraduate A N/A 826,496 * Pass-Through Spring Branch Independent School District: Title I Part A - Improving Basic Programs A N/A 423,840 Passed-Through Aldine Independent School District: Title Five, Part A - Innovative Program A N/A 39,060 Pass-Through Educational Leadership Inc. at Southwest High School: 21st Century Community Learning Centers Program C N/A 40,200 Pass-Through University of Houston: College Work Study 07/ N/A 3,696 Passed-Through Criminal Justice Division: Safe Schools Healthy Students A N/A 45,000 Total for U.S. Department of Education 1,885,595 U.S. Department of Health and Human Services Commission: Pass-Through Texas Education Agency: Temporary Assistance to Needy Families (TANF) N/A 286,763 * Award # Total for U.S. Department of Health and Human Services Commission 286,763 Total Expenditures of Federal Awards $ 2,172,358 * Denotes a major program See accompanying notes to schedule of expenditures of federal and state awards 15

20 SCHEDULE OF EXPENDITURES OF STATE AWARDS State State Grantor/Pass Through Grantor/ Identification State Program Title Number Expenditures Texas Education Agency: Compensatory Education Program - 07/ $ 1,082,050 * Educational Leadership Inc. at Southwest High School: High School Allotment N/A 22,800 Criminal Justice Division: Delinquency Prevention Program SF ,000 Total Expenditures of State Awards $ 1,164,850 * Denotes a major program See accompanying notes to schedule of expenditures of federal and state awards 16

21 NOTES TO SCHEDULES OF EXPENDITURES OF FEDERAL AND STATE AWARDS 1. Basis of Presentation: The accompanying Schedules of Expenditures of Federal and State Awards include federal and state grant activities of Communities in Schools Houston, Inc. (the Organization ) and are presented on the accrual basis of accounting. The information in these schedules is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations and the State of Texas Single Audit Circular. Therefore, some amounts presented in these schedules may differ from amounts presented in or used in the preparation of the financial statements. 2. Relationship to Financial Report Submitted to Grantor Agencies: Amounts reflected in the financial reports filed with grantor agencies for the programs and the supplementary schedules may not agree because of accruals which would be included in the next report filed with the agencies, matching requirements not included in the Schedules of Expenditures of Federal and State Awards are due to different program year ends. 3. Commitments and Contingencies: The Organization receives grant funds, principally from federal and state governmental agencies for various programs, which are governed by various rules and regulations. Expenditures charged to these programs are reimbursed to the Organization after review and adjustments by the grantors. The ability of the Organization to collect any amounts receivable from governmental entities at August 31, 2008 is subject to the compliance approval process on the activities related to those reimbursable expenditures. 17

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26 FINDINGS AND QUESTIONED COSTS

27 SCHEDULE OF FINDINGS AND QUESTIONED COSTS SECTION 1: SUMMARY OF AUDITORS RESULTS Financial Statements: 1. Type of auditors report issued: Unqualified 2. Internal control over financial reporting: a) Significant deficiency identified? No b) Significant deficiencies identified that are not considered to be material weaknesses? c) Noncompliance material to financial statements noted? No No Federal and State Awards: 1. Internal control over major programs: a) Significant deficiency identified? No b) Significant deficiencies identified that are not considered to be material weaknesses? No 2. Type of auditors report issued on compliance for major programs: Unqualified 3. Any audit findings disclosed that are required to be reported in accordance with section 510(a) of Circular A-133? No 4. Identification of major programs: Federal - CFDA Number Name of Federal Program or Cluster A Gaining Early Awareness and Readiness for Undergraduate Temporary Assistance to Needy Families (TANF) State - Identification Number Name of State Program or Cluster Compensatory Education Program /

28 SCHEDULE OF FINDINGS AND QUESTIONED COSTS 5. Dollar threshold used to distinguish between type A and type B programs: Federal $300,000 State $300, Auditee qualified as low-risk auditee under OMB Circular A-133, Section 530 or the State of Texas Audit Circular? Federal State Yes Yes 23

29 SCHEDULE OF FINDINGS AND QUESTIONED COSTS SECTION 2: FINDINGS FINANCIAL STATEMENT AUDIT None SECTION 3: FINDINGS AND QUESTIONED COSTS - MAJOR FEDERAL AND STATE AWARD PROGRAMS None 24

30 SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED AUGUST 31, 2007 There were no prior year audit findings to report on. 25