CAMPBELL, RAPPOLD & YURASITS LLP Certified Public Accountants 1033 SOUTH CEDAR CREST BOULEVARD ALLENTOWN, PA 18103

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1 Financial Statements, Independent Auditors Report and Supplementary Information For the Years Ended June 30, 2015 and 2014 CAMPBELL, RAPPOLD & YURASITS LLP Certified Public Accountants 1033 SOUTH CEDAR CREST BOULEVARD ALLENTOWN, PA 18103

2 TABLE OF CONTENTS Page(s) Independent Auditors Report 1-2 Financial Statements: Statements of Financial Position 3 Statements of Activities 4 Statements of Cash Flows 5 Statements of Functional Expenses 6-7 Notes to Financial Statements 8-16 Supplementary Information: Schedule of Expenditures of Federal Awards 18 Notes to Schedule of Expenditures of Federal Awards 19 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 Independent Auditors Report on Compliance for Each Major Program and on Internal Control over Compliance Required by OMB Circular A Schedule of Findings and Questioned Costs 25-27

3 CAMPBELL, RAPPOLD & YURASITS LLP Certified Public Accountants 1033 SOUTH CEDAR CREST BOULEVARD ALLENTOWN, PA PHONE (610) FAX (610) INDEPENDENT AUDITORS REPORT JAMES S. ANDERSON, CPA TARA L. BENDER, CPA, CSEP JAMES F. BOVA, CPA MARC A. BRINKER, CPA MELISSA A. GRUBE, CPA, CSEP DENNIS S. HELLER, CPA WARREN R. HENDERSON, CPA JOHN R. ZAYAITZ, CPA DAWN C. ANDERSON, CPA MICHELLE R. BITNER, CPA ROXANNA M. BRANDLE, CPA KYLE ELSENBAUMER, CPA PAUL G. MACK, CPA, CFE NICHOLAS A. OTTOLINI, CPA JASON L. SERFASS, CPA HEIDI D. WOJCIECHOWSKI, CPA CONSULTANT LUTHER R. CAMPBELL, JR. To the Board of Directors Communities in Schools of the Lehigh Valley, Inc. Allentown, PA Report on the Financial Statements We have audited the accompanying financial statements of Communities in Schools of the Lehigh Valley, Inc. (a Not-for-Profit Corporation) which comprise the statement of financial position as of June 30, 2015 and 2014, 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. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 1 MEMBERS: AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PENNSYLVANIA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS

4 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Communities in Schools of the Lehigh Valley, Inc. as of June 30, 2015 and 2014, 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 February 4, 2016, on our consideration of Communities in Schools of the Lehigh Valley, Inc. s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Communities in Schools of the Lehigh Valley, Inc. s internal control over financial reporting and compliance. February 4, 2016 A Certified Public Accountants Allentown, PA 2

5 STATEMENTS OF FINANCIAL POSITION June 30, 2015 and ASSETS: CURRENT ASSETS: Cash and Cash Equivalents $ 283,762 $ 121,544 Accounts Receivable 183, ,090 Grants Receivable 268,487 93,510 Pledges Receivable, net (Note 4) 371,384 - Prepaid Expenses 11,182 9,723 Total Current Assets 1,118, ,867 BUILDING AND EQUIPMENT (Note 2) 40,716 65,036 Total Assets $ 1,159,510 $ 418,903 LIABILITIES AND NET ASSETS: CURRENT LIABILITIES: Accounts Payable $ 73,093 $ 27,982 Accrued Payroll 109,196 57,333 Total Liabilities 182,289 85,315 NET ASSETS: Unrestricted 303, ,191 Unrestricted - Board Designated (Note 6) 2,750 2,750 Temporarily Restricted (Note 6) 671,384 41,647 Total Net Assets 977, ,588 Total Liabilities and Net Assets $ 1,159,510 $ 418,903 See notes to financial statements. 3

6 STATEMENTS OF ACTIVITIES For the Years Ended June 30, 2015 and UNRESTRICTED SUPPORT AND REVENUE: Public Support and Grants $ 470,840 $ 516,392 School District Grants 855, ,316 Government Grants 641, ,942 In-kind Contributions: In-kind Services 707,991 1,847,910 In-kind Facilities 431, ,331 In-kind Supplies and Other 22,770 40,278 In-kind Equipment 9,761 2,800 1,172,013 2,354,319 Special Events Gross Revenue 64,125 44,135 Direct Event Expenses (17,312) (10,920) 46,813 33,215 Other Income (Expense) Miscellaneous Income 1,637 1,695 Interest Income Total Unrestricted Support and Revenue 3,188,557 4,205,164 Net Assets Released from Restrictions 177, ,042 Total Unrestricted Support, Releases, and Revenue 3,366,546 4,316,206 EXPENSES: Program Services 3,121,088 4,027,167 Management and General 140, ,119 Fund Raising 90,922 40,180 Total Expenses 3,352,650 4,189,466 Increase in Unrestricted Net Assets 13, ,740 TEMPORARILY RESTRICTED ASSETS Contributions 807, ,984 Net Assets Released From Restrictions (177,989) (111,042) Increase in Temporarily Restricted Net Assets 629,737 3,942 Increase in Net Assets 643, ,682 Net Assets, Beginning of Year 333, ,906 Net Assets, End of Year $ 977,221 $ 333,588 See notes to financial statements. 4

7 STATEMENTS OF CASH FLOWS For the Years Ended June 30, 2015 and 2014 Cash Flows from Operating Activities: Change in Net Assets $ 643,633 $ 130,682 Adjustments to Reconcile Change in Net Assets to Net Cash Provided by Operating Activities: Depreciation 25,197 20,563 (Increase) Decrease in Accounts Receivable (54,889) (86,767) (Increase) Decrease in Grants Receivable (174,977) (48,516) (Increase) Decrease in Pledges Receivable (371,384) - (Increase) Decrease in Prepaid Expenses (1,459) 327 Increase (Decrease) in Accounts Payable 45,111 4,328 Increase (Decrease) in Accrued Payroll 51,863 25,702 Net Cash Provided by Operating Activities 163,095 46,319 Cash Flows from Investing Activities: Additions to Building and Equipment (877) (60,555) Net Cash Used by Investing Activities (877) (60,555) Net Increase/(Decrease) in Cash and Cash Equivalents 162,218 (14,236) Cash and Cash Equivalents, Beginning of Year 121, ,780 CASH AND CASH EQUIVALENTS, END OF YEAR $ 283,762 $ 121,544 Supplemental Data: Interest Paid $ - $ 401 See notes to financial statements. 5

8 STATEMENT OF FUNCTIONAL EXPENSES For the Year Ended June 30, 2015 Year Ended June 30, 2015 Program Services Supporting Services In-Kind Total Management Program Program Program & General Fund Raising Total Salaries and Benefits $ 701,561 $ 1,533,630 $ 2,235,191 $ 111,284 $ 72,724 $ 2,419,199 Awards and Scholarships Bad Debt Allowance - 20,000 20, ,000 Classroom and Administrative Facilities 431,491 2, , ,774 Conferences and Training 6,430 2,350 8,780 3,572-12,352 Consulting - 173, , ,430 Computer Support - 1,291 1, ,228 Printing & Reproduction - 8,973 8, ,902 15,415 Depreciation - 23,937 23,937 1,260-25,197 Dues and Subscriptions Interest Insurance - 10,272 10,272 2,575-12,847 Incentives - 2,005 2, ,111 Other - 9,270 9,270 1,285 1,623 12,178 Payroll Processing ,959-3,959 Postage ,242 Professional Fees , ,040 Public Relations ,500 2,350 Equipment 9, , ,960 Rent - 19,711 19,711 1,159 2,318 23,188 Utilities - 5,665 5, ,665 Supplies 22,770 57,414 80,184 1,295 1,663 83,142 Telephone and Communications - 1,930 1, ,487 3,873 Travel - 75,691 75,691 3, ,756 $ 1,172,013 $ 1,949,075 $ 3,121,088 $ 140,640 $ 90,922 $ 3,352,650 6

9 STATEMENT OF FUNCTIONAL EXPENSES For the Year Ended June 30, 2014 Year Ended June 30, 2014 Program Services Supporting Services In-Kind Total Management Program Program Program & General Fund Raising Total Salaries and Benefits $ 1,847,910 $ 1,379,485 $ 3,227,395 $ 97,052 $ 26,096 $ 3,350,543 Awards and Scholarships - 1,000 1, ,000 Bad Debt - 1,050 1, ,050 Classroom and Administrative Facilities 463, , ,331 Conferences and Training 5,000 1,184 6, ,184 Consulting - 115, ,180 4, ,814 Computer Support Printing & Reproduction - 1,811 1, ,859 8,481 Depreciation - 19,535 19,535 1,028-20,563 Dues and Subscriptions Interest Insurance - 11,891 11,891 2,973-14,864 Incentives - 13,013 13, ,013 Other - 6,005 6, ,842 Payroll Processing ,641-3,641 Postage ,031 2,928 Professional Fees - 3,000 3,000 7, ,756 Public Relations Equipment 2, , ,058 Rent - 19,423 19,423 1,143 2,285 22,851 Utilities - 2,474 2, ,911 Supplies 35,278 24,034 59, ,607 Telephone and Communications - 5,324 5, ,224 6,840 Travel - 66,560 66,560 2, ,781 $ 2,354,319 $ 1,672,848 $ 4,027,167 $ 122,119 $ 40,180 $ 4,189,466 7

10 NOTES TO FINANCIAL STATEMENTS June 30, 2015 and Operations and Summary of Significant Accounting Policies Nature of Activities Communities In Schools of the Lehigh Valley, Inc. (CIS) is part of a nationwide network of independent 501(c)(3) organizations dedicated to ending the dropout epidemic in America s public schools. Organized under the laws of the Commonwealth of Pennsylvania, CIS serves 1.4 million students each year in 25 states and the District of Columbia. The mission is to surround students with a community of support, empowering them to stay in school and achieve in life. Communities In Schools of the Lehigh Valley is one of four CIS affiliates in Pennsylvania. CIS leverages community resources and provides an array of services that address students academic and non-academic needs. CIS attributes success to building strong one-to-one relationships with students. While teachers teach, CIS addresses the human needs including low academic performance, behavior and attendance and may also include anger management, family instability, mental and physical health and substance abuse. Parent/guardian engagement, mentoring, tutoring, case management, enrichment activities, and life skills are some of the support services offered. CIS services significantly impact a student s quality of life and therefore school performance. The goal of CIS is to make every student a high school graduate. Services CIS services include three distinct departments: Integrated Student Services - CIS provides Integrated Student Services for nearly 15,000 students at sixteen schools in five school districts. Integrated Student Services (ISS) utilizes site coordinators who leverage community resources while also providing support services, life skills, targeted interventions, after school programs, parent engagement and basic needs. The site coordinators bring together many partners to offer a range of supports and opportunities for children, youth, families, and communities. Three of the ISS sites specifically target students in alternative education. Following the guidelines for Alternative Education for Disruptive Youth (AEDY), these programs are designed to support students with significant behavioral problems as well as attendance and academic concerns. CIS provides case management, truancy intervention, behavior modification, parent engagement activities, and at least 2.5 hours of counseling per week. Alternative Education services help students succeed and often return to their home schools. After School Programming - CIS provides intensive afterschool programming for 600 elementary and middle school students at six 21 st Century Community Learning Center (21 st Century CLC) sites. The programs meet four days per week for three hours a day and target low income students with documented academic needs. Students are provided with academic intervention focused on math and reading and enrichment activities that build on core instructional learning, each delivered by certified teachers. Students also benefit from homework help and tutoring. Free afternoon snacks and dinners are also available daily. Additionally, 8

11 NOTES TO FINANCIAL STATEMENTS June 30, 2015 and Operations and Summary of Significant Accounting Policies (Continued) CIS and partner school districts ensure that students with needs are transported home after program. Parent engagement activities including literacy classes, newsletters, and ESL classes. Activities with families are integral components of the programs. Collaboration with the DaVinci Science Center provides students with a STEM (Science, Technology, Engineering, and Math) curriculum and college students from DeSales University, Lafayette College, and Muhlenberg College assist students as mentors. College and Career - The Education Leading to Employment and Career Training (ELECT) Initiative was created to expand the services provided to teen fathers who meet the income eligibility requirements. The program is voluntary and all ELECT students receive intensive case management, home visits, parenting skills and career readiness training and assistance. CIS has collaborated with ELECT since 2001 and serves fathers each year. CIS provides career services at the William Penn Alternative Education program and Whitehall High School. Serving more than 90 students, these programs provide career readiness, career interest inventories and assessment tools, job shadowing employment assistance, interview skills and creation of resume, cover letter and thank you letter. Students in the program gain valuable career knowledge and direction. Through a one to one relationship with a caring adult, CIS works intensely with students to empower them to achieve goals and stay in school. At a cost of $256 per student, CIS services can mean the difference between drop-out and graduation. Across the United States, CIS recorded the following statistics on students in % remained in school 97% of students were promoted to the next grade 96% of seniors graduated on time In the Lehigh Valley, CIS recorded the following statistics on Students in school year. 92% remained in school 79% at risk seniors graduated on time 83% were promoted to the next grade level 70% improved/maintained academics 68% improved/maintained attendance 150 Community partners 9

12 NOTES TO FINANCIAL STATEMENTS June 30, 2015 and Operations and Summary of Significant Accounting Policies (Continued) Financial Statement Presentation The accompanying financial statements are presented on an accrual basis in accordance with generally accepted accounting principles. Net assets and revenues, expenses, gains, and losses are classified based on the existence or absence of donor-imposed restrictions. Accordingly, net assets of the Organization and changes therein are classified and reported as follows: Unrestricted Net Assets Unrestricted amounts represent all net assets that are not subject to donor-imposed stipulations. They may be designated for specific purposes or locations by action of the Board of Directors. Temporarily Restricted Net Assets Temporarily restricted amounts represent gifts that are subject to donor-imposed restrictions, either for a specific purpose or subject to the passage of time. When the restriction expires (either by spending in accordance with the donor s restriction or by the passage of time), the net assets of this fund are reclassified to unrestricted net assets. Permanently Restricted Net Assets Permanently restricted amounts are subject to donor-imposed stipulations that they be maintained permanently by the Organization. Generally, the donors of these assets permit the Organization to use all or part of the income earned on related investments for general or specific purposes. The Organization does not have any permanently restricted net assets. 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 estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents CIS considers cash held in checking accounts, savings accounts, and other investments purchased with original maturities of less than 90 days to be cash and cash equivalents. CIS s cash balances are deposited in two banks guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. Amounts on deposit at various time through the year exceeded the federally insured limit. The Organization had cash balances totaling $30,932 and $0 in excess of federally insured limits at June 30, 2015 and 2014, respectively. 10

13 NOTES TO FINANCIAL STATEMENTS June 30, 2015 and Operations and Summary of Significant Accounting Policies (Continued) Accounts Receivable Accounts receivable primarily consists of amounts due from school district contracts and nongovernmental grants. The Organization considers accounts receivable as of June 30, 2015 and 2014 to be fully collectible; accordingly, no allowance for doubtful accounts is required. Grants Receivable Grants receivable consists of grant revenue receivable from governmental agencies. The Organization has determined that an uncollectible allowance is not required, and the balance is expected to be fully collectible within one year of the year end. Building and Equipment Purchased property and equipment are reported at cost and donated assets are reported at their estimated fair value on the date donated. All assets are depreciated over estimated useful lives on a straight line basis. Repairs and maintenance and equipment purchases less than $250 are expenses as incurred. Expenditures that significantly increase asset values or extend useful lives are capitalized. Upon retirement, sale or other disposition of property and equipment, the cost and accumulated depreciation are eliminated from the accounts and gains or losses are included on the statement of activities. Estimated useful lives are as follows: Years Equipment 3 10 Vehicles 5 Revenue Recognition Revenue is recorded in the period earned. Contributions, including unconditional pledges, are recognized in the period the commitment is made. Conditional pledges are not recognized until the conditions on which they depend are substantially met. Contributions of assets other than cash are recorded at estimated fair value at the date of gift. Pledges receivable are stated at the present value of the expected future cash flows; discounts are amortized to contribution revenue consistent with donor restrictions. Gifts of property and equipment are reported as unrestricted support unless donor stipulations specify how the assets are to be used. Gifts of long-lived assets with restrictions specifying 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 temporarily restricted revenue. The Organization reports expirations of donor restricted when the donated or acquired long-lived assets are placed in service. Revenue from government grant and contract agreements is recognized as it is earned through expenditure or service delivery in accordance with the agreement. 11

14 NOTES TO FINANCIAL STATEMENTS June 30, 2015 and Operations and Summary of Significant Accounting Policies (Continued) Donated Services and Assets Donated services are recorded in the financial statements to the extent that those services create or enhance a nonfinancial asset or meet all of the following criteria: a) the service requires specialized skills, b) the service is provided by individuals who possess those skills, and c) the service would typically need to be purchased if not contributed. CIS receives a substantial amount of donated services in the form of teacher and administrative support in providing its program services and in its operations. The value of these donated professional services is reported on the statement of activities as donations at their fair value, and the corresponding expenses, are summarized as follows: Program Services $ 701,561 $ 1,847,910 CIS also receives donated facilities in the form of classroom space, office space, parking, and other support for use in providing its program services and in its operation. These donated facilities are recorded at fair value in the statement of activities as donations and the corresponding expenses are summarized in program services as follows: Classroom Facilities $ 431,491 $ 463,331 Supplies and Other 29,200 40,278 Equipment 9,761 2,800 Total $ 470,452 $ 506,409 In addition, a substantial number of volunteers have made significant contributions of their time and resources to develop CIS s educational programs within the local high schools and middle schools. The value of such services is not recognized in the financial statements because they did not meet the criteria for recognition under Financial Accounting Standards Board ASC Functional Allocation of Expenses The costs of providing the Organization s various programs and supporting services 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. 12

15 NOTES TO FINANCIAL STATEMENTS June 30, 2015 and Summary of Significant Accounting Policies (Continued) Income Taxes The Organization is a not-for-profit corporation as described in Section 501(c)(3) of the Internal Revenue Code and is exempt from federal income taxes on related income pursuant to Section 501(a) of the Code. The accounting standard for uncertainty in income taxes addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under that guidance, the Organization may recognize the tax benefits from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities based on the technical merits of the position. Examples of tax positions include the tax-exempt status of the Organization and various positions related to the potential sources of unrelated business taxable income (UBIT). The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. There were no unrecognized tax benefits identified or recorded as liabilities for fiscal years 2015 and The Organization files its 990 with the United State Internal Revenue Service. The Organization is generally no longer subject to examination by the Internal Revenue Service for years before Building and Equipment Building and Equipment consist of the following: Computer Equipment $ 87,524 $ 87,274 Classroom Equipment 27,280 26,653 Vehicles 29,022 29, , ,949 Accumulated Depreciation (103,110) (77,913) $ 40,716 $ 65,036 Depreciation and amortization charged to expense was $25,197 and $20,563 for 2015 and 2014, respectively. 13

16 NOTES TO FINANCIAL STATEMENTS June 30, 2015 and Line of Credit CIS has a $250,000 unsecured line of credit with an interest rate of 4.75% at June 30, There was no outstanding balance at June 30, 2015 and The line was not utilized during the fiscal year ended June 30, Interest expense paid for the line of credit was $-0- and $401 during the years ended June 30, 2015 and 2014, respectively. 4. Pledges Receivable Pledges receivable, net of allowance for uncollectible pledges and unamortized discount, are summarized as follows: Less than one year $ 200,000 $ - One to five years 200,000 - Over five years - - Total 400,000 - Less: Unamortized Discount (4.75%) (8,616) - Less: Allowance for Uncollectible Pledges (5%) (20,000) - 371, Lease Commitments On April 1, 2014 CIS entered into a signed lease for the utilization of office space on Lehigh Street, the term of the lease is three years. Additionally, CIS maintains a copier equipment lease with a monthly obligation of $92. Future minimum lease payments for years subsequent to June 30, 2015 are as follows: Year Ending June 30, , Rent expense pertaining to these two leases was $17,902 and $24,071 for 2015 and 2014, respectively. 14

17 NOTES TO FINANCIAL STATEMENTS June 30, 2015 and Net Assets Temporarily restricted net assets are available for the following purposes: Graduate Allentown $ 575,847 $ - College Bound 33,858 - ISS Services 33,500 - Student Scholarships - Fuller 10,385 10,285 Youth Mentoring 10,000 10,000 Art of Relaxation 6,840 6,840 Winter Clothing Lincoln Books Adopt a Family Lincoln Elementary - 2,444 College Fund - 4,818 After School Programs - 4,127 Lincoln Field Trip - 1,000 Easton Area Academy Lowe's Family Project $ 671,384 $ 41,647 Net assets were released from restrictions related to the following purposes: College Bound $ 66,142 $ 5,182 Graduate Allentown 51,653 - Youth Mentoring 20,000 10,000 Community Schools Program 15,000 18,000 Lincoln Elementary 7, Cops and Community 6,450 - College Fund 4,818 - After School Programs 4,127 12,135 Lincoln Field Trip 1,000 - Easton Area Academy Lowe's Family Project Student Scholarships - Fuller - 1,000 Art of Relaxation - 3,160 Lincoln Books - 1,211 Comprehensive Site Services - 5,000 Health and Wellness Programs - 3,350 Van - 20,000 Bikes Lehigh County - 30,000 Time Restricted - 1,000 $ 177,989 $ 111,042 15

18 NOTES TO FINANCIAL STATEMENTS June 30, 2015 and Net Assets (Continued) Board Designated net assets are available for the following purposes: Student Scholarships - Fuller $ 2,750 $ 2, Contingencies CIS participates in various government assisted grant programs. These programs are subject to program compliance audits by the grantors or their representatives. CIS is potentially liable for any expenditure which may be disallowed pursuant to the terms of these grant programs. Management is not aware of any material items of noncompliance, which would result in the disallowance of program expenditures. 8. Concentrations CIS operates in Lehigh and Northampton Counties of Pennsylvania. Two local school districts accounted for 74% and 93% of the accounts receivable balances at June 30, 2015 and 2014, respectively. CIS recognized $1,158,580 and $2,352,191 for the years ended June 30, 2015 and 2014, respectively, of its total in kind and contributed services and facilities from these two school districts. 9. Employee Benefit Plans The Organization offers its employees the opportunity to participate in a Section 408(p) Simple IRA Retirement Plan (Retirement Plan). The Retirement Plan allows for employee and employer contributions. Employer contributions consist of a match of employee contributions up to a maximum limit of 3% of employee compensation for all eligible employees. Employer contributions to the Retirement Plan were $15,416 and $12,623 for the years ended June 30, 2015 and 2014, respectively. 10. Subsequent Events Management has evaluated subsequent events through February 4, 2016, which is the date the financial statements were available to be issued. The Organization entered into a new lease agreement with Harris Weinstein Revocable Trust on August 11, 2015 for additional space at the Lehigh Street Address. The lease is for the period from August 1, 2015 to July 31, The monthly rent expenses will be $1,388, plus monthly common area maintenance fees. 16

19 SUPPLEMENTARY INFORMATION 17

20 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the Year Ended June 30, 2015 Receivable/ Receivable/ Federal Grantor/Pass-Through CFDA Project/Contract Grant Grant (Deferral) Cash Revenue Expenditures (Deferral) Grantor/Program or Cluster Title Number Number Period Amount as of 7/1/14 Receipts Recognized Incurred as of 6/30/15 PASS-THROUGH AWARDS U.S. DEPARTMENT OF EDUCATION Passed Through the State of Pennsylvania: 21st Century Community Learning Center Cohort 6a /1/2012-9/30/2015 $ 1,492,539 $ 36,452 $ 390,583 $ 557,303 $ 557,303 $ 203,172 Total U.S. Department of Education 557,303 U.S. DEPARTMENT OF JUSTICE Passed Through the State of Pennsylvania: Byrne Justice Assistance Grant Program JG /1/2012-9/30/ ,929 6,156 6, Total U.S. Department of Justice - U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Passed Through the County of Lehigh: Community Development Block Grant None 10/1/2013-9/30/ ,650 4,838 11,835 6,997 6,997 - Community Development Block Grant None 10/1/2014-9/30/ ,000-10,441 16,708 16,708 6,267 Passed Through the City of Allentown: Community Development Block Grant None 7/1/2013-6/30/ ,000 5,389 5, Community Development Block Grant None 7/1/2014-6/30/ , ,000 10,000 9,048 Total U.S. Department of HUD 33,705 $ 52,835 $ 425,356 $ 591,008 $ 591,008 $ 218,487 18

21 NOTES TO THE SCHEDULE OF EXPEDITURES OF FEDERAL AWARDS For the Year Ended June 30, 2015 NOTE A BASIS OF PRESENTATION The accompanying schedule of expenditures of federal awards includes the federal grant activity of Communities in Schools of the Lehigh Valley (the Organization ) and is presented on the accrual basis of accounting. 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. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements. 19

22 CAMPBELL, RAPPOLD & YURASITS LLP Certified Public Accountants 1033 SOUTH CEDAR CREST BOULEVARD ALLENTOWN, PA PHONE (610) FAX (610) JAMES S. ANDERSON, CPA TARA L. BENDER, CPA, CSEP JAMES F. BOVA, CPA MARC A. BRINKER, CPA MELISSA A. GRUBE, CPA, CSEP DENNIS S. HELLER, CPA WARREN R. HENDERSON, CPA JOHN R. ZAYAITZ, CPA DAWN C. ANDERSON, CPA MICHELLE R. BITNER, CPA ROXANNA M. BRANDLE, CPA KYLE ELSENBAUMER, CPA PAUL G. MACK, CPA, CFE NICHOLAS A. OTTOLINI, CPA JASON L. SERFASS, CPA HEIDI D. WOJCIECHOWSKI, CPA CONSULTANT LUTHER R. CAMPBELL, JR. 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 Board of Directors Communities in Schools of the Lehigh Valley, Inc. Allentown, PA 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 Communities in Schools of the Lehigh Valley, Inc. (a Not-for-Profit Corporation), which comprise the statement of financial position as of June 30, 2015, and the related statements of activities, functional expenses, and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated February 4, Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered Communities in Schools of the Lehigh Valley, 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 Communities in Schools of the Lehigh Valley, Inc.'s internal control. Accordingly, we do not express an opinion on the effectiveness of the Organization s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of 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 and therefore, material weaknesses or significant deficiencies may exist that were not identified. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. We did identify certain deficiencies in internal control, described in the accompanying schedule of findings and questioned costs that we consider to be significant deficiencies (findings and ). 20 MEMBERS: AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PENNSYLVANIA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS

23 Compliance and Other Matters As part of obtaining reasonable assurance about whether s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Communities in Schools of the Lehigh Valley s Response to Findings Communities in Schools of the Lehigh Valley, Inc. s response to the findings identified in our audit is described in the accompanying schedule of findings and questioned costs. Communities in Schools of the Lehigh Valley, 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. February 4, 2016 A Certified Public Accountants Allentown, PA 21

24 CAMPBELL, RAPPOLD & YURASITS LLP Certified Public Accountants 1033 SOUTH CEDAR CREST BOULEVARD ALLENTOWN, PA PHONE (610) FAX (610) JAMES S. ANDERSON, CPA TARA L. BENDER, CPA, CSEP JAMES F. BOVA, CPA MARC A. BRINKER, CPA MELISSA A. GRUBE, CPA, CSEP DENNIS S. HELLER, CPA WARREN R. HENDERSON, CPA JOHN R. ZAYAITZ, CPA DAWN C. ANDERSON, CPA MICHELLE R. BITNER, CPA ROXANNA M. BRANDLE, CPA KYLE ELSENBAUMER, CPA PAUL G. MACK, CPA, CFE NICHOLAS A. OTTOLINI, CPA JASON L. SERFASS, CPA HEIDI D. WOJCIECHOWSKI, CPA CONSULTANT LUTHER R. CAMPBELL, JR. INDEPENDENT AUDITORS REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133 Board of Directors Communities in Schools of the Lehigh Valley, Inc. Allentown, PA Report on Compliance for Each Major Federal Program We have audited Communities in Schools of the Lehigh Valley, Inc.'s 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 Communities in Schools of the Lehigh Valley, Inc.'s major federal programs for the year ended June 30, Communities in Schools of the Lehigh Valley, Inc.'s major federal programs are identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with 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 Communities in Schools of the Lehigh Valley, 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 Communities in Schools of the Lehigh Valley, 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 Communities in Schools of the Lehigh Valley, Inc.'s compliance. MEMBERS: AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PENNSYLVANIA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS 22

25 Opinion on Each Major Federal Program In our opinion, Communities in Schools of the Lehigh Valley, 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 June 30, Other Matters The results of our auditing procedures disclosed an instance of noncompliance, which is required to be reported in accordance with OMB Circular A-133 and which is described in the accompanying schedule of findings and questioned costs as item Our opinion on each major federal program is not modified with respect to these matters. Communities in Schools of the Lehigh Valley, Inc. s response to the noncompliance findings identified in our audit is described in the accompanying schedule of findings and questioned costs. Communities in Schools of the Lehigh Valley, Inc. s response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response. Report on Internal Control over Compliance Management of Communities in Schools of the Lehigh Valley, 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 Communities in Schools of the Lehigh Valley, 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 Communities in Schools of the Lehigh Valley, 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 and therefore, material weaknesses or significant deficiencies may exist that were not identified. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, we identified a deficiency in internal control over compliance, as described in the accompanying schedule of findings and questioned costs as item , that we consider to be a significant deficiency. 23

26 Communities in Schools of the Lehigh Valley, Inc. s response to the internal control over compliance findings identified in our audit is described in the accompanying schedule of findings and questioned costs. Communities in Schools of the Lehigh Valley, Inc. s response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response. 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. A Certified Public Accountants Allentown, PA February 4,

27 SCHEDULE OF FINDINGS AND QUESTIONED COSTS For the Year Ended June 30, 2015 A. SUMMARY OF AUDIT RESULTS 1. The auditors report expresses an unmodified opinion on whether the financial statements of the Communities in Schools of the Lehigh Valley, Inc. were prepared in accordance with GAAP. 2. Significant deficiencies related to the audit of the financial statements are reported in part B of this schedule. 3. No instances of noncompliance material to the financial statements of Communities in Schools of the Lehigh Valley, Inc. were disclosed during the audit. 4. No significant deficiencies relating to the audit of the major federal award programs were disclosed during the audit. 5. The auditors report on compliance for the major federal award programs for Communities in Schools of the Lehigh Valley, Inc. expresses an unmodified opinion. 6. Audit findings relative to the major federal award programs for Communities in Schools of the Lehigh Valley, Inc. are reported in Part C of this Schedule. 7. The program tested as major program includes: Dept. of Education (21st CCLC) Cohort 6a CFDA # The threshold for distinguishing Types A and B programs was $300, Communities in Schools of the Lehigh Valley, Inc. did not qualify as a low-risk auditee. 25

28 SCHEDULE OF FINDINGS AND QUESTIONED COSTS For the Year Ended June 30, 2015 B. FINDINGS FINANCIAL STATEMENTS AUDIT SIGNIFICANT DEFICIENCIES Preparation of Annual Financial Statements and Footnote Disclosures Condition: Criteria: Effect: The Audit firm prepared the financial statements, including required footnote disclosures. The Organization's system of internal controls should include the ability to accurately prepare complete financial statements, including notes, in conformity with the accrual basis of accounting. Audit standards prohibit the audit firm from being part of management s internal control design and operations. This condition may indicate that the Organization does not have sufficient controls or expertise over the auditors' preparation on the financial statements or footnote disclosures. Recommendation: Management should consider what steps can be taken to prepare financial statements with disclosures. Management Response: Management recognizes the importance of complete and accurate financial statements. Not having the in-house expertise or resources available to obtain such, management believes that continued reliance on the audit firm to prepare year-end financial statements is most cost effective for the Organization at this time. Management will continue to evaluate the condition for possible future remediation. Management does have the ability to accept the financial statements Inadequate Segregation of Duties Condition: Criteria: Effect: The size of the Organization's accounting and administrative staff precludes certain internal controls that would be preferred if the staff were large enough to provide optimum segregation of duties. A proper internal control structure requires the performance of accounting functions by separate employees. Lack of segregation of duties increases the Organization's exposure to fraud. Recommendation: Management should consider what steps can be taken to minimize the effects from the lack of segregation of duties. Management Response: Management has determined that the hiring of additional staff solely for the purpose of segregation of duties would not be cost effective for the Organization. Therefore, Members of the Board should remain involved in the affairs of the Organization to provide additional oversight controls. 26