INDEPENDENT AUDITOR S REPORT CHILD CARE AND NUTRITION, INC. IVANHOE, MINNESOTA FOR THE YEARS ENDED SEPTEMBER 30, 2016 AND 2015

Transcription

1 INDEPENDENT AUDITOR S REPORT CHILD CARE AND NUTRITION, INC. IVANHOE, MINNESOTA FOR THE YEARS ENDED SEPTEMBER 30, 2016 AND 2015 Meulebroeck, Taubert & Co., PLLP Certified Public Accountants P.O. Box 707 Pipestone, MN 56164

2 Child Care and Nutrition, Inc. Ivanhoe, MN CONTENTS OF REPORT Board of Directors 1 PAGE INDEPENDENT AUDITOR'S REPORT 3-5 GENERAL PURPOSE FINANCIAL STATEMENTS Exhibit A Statement of Financial Position 6 Exhibit B Statement of Activities 7 Exhibit C Statement of Functional Expenses 8-9 Exhibit D Statement of Cash Flows 10 NOTES TO THE FINANCIAL STATEMENTS Schedule 1 Schedule of Expenditures of Federal Awards 16 Schedule 2 Schedule of Findings and Questioned Costs 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 INDEPENDENT AUDITOR S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE MINNESOTA DEPARTMENT OF EDUCATION COMPLIANCE REPORT 27

3 Child Care and Nutrition, Inc. Ivanhoe, MN BOARD OF DIRECTORS Chris Clarke Chair (resigned 8/11/16) Scott Midtaune Director (10/1/15-8/11/16) Chair (began 8/11/16) Heather Furan Secretary/Treasurer (began 10/22/15) Margo Willert Director (10/1/15-12/31/16) Judy Thomsen Director Hollie Noble Director (began 9/15/16) Sharon Rasmussen Nicole Rasmussen Executive Director Associate Director 1

4 Child Care and Nutrition, Inc. Ivanhoe, MN THIS PAGE LEFT BLANK INTENTIONALLY 2

5 MEULEBROECK, TAUBERT & CO., PLLP CERTIFIED PUBLIC ACCOUNTANTS PO Box S Freeman Avenue Luverne, Minnesota Fax contactl@mtcocpa.com PO Box East Main Pipestone, Minnesota Fax contactp@mtcocpa.com Tyler, Minnesota Lake Wilson, Minnesota Marshall, Minnesota PARTNERS David L. Meulebroeck, CPA Matthew A. Taubert, CPA David W. Friedrichsen, CPA Daryl J. Kanthak, CPA WITH THE FIRM Amy L. Mollberg, CPA Blake R. Klinsing, CPA Bryce L. Schelhaas, CPA Members of the Board Child Care and Nutrition, Inc. 324 North Norman Street Ivanhoe, Minnesota INDEPENDENT AUDITOR'S REPORT Report on the Financial Statements We have audited the accompanying financial statements of the Child Care and Nutrition, Inc., Ivanhoe, Minnesota (a nonprofit organization), which comprise the statement of financial position as of September 30, 2016 and 2015, 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 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 MEMBER OF AMERICAN INSTITUTE AND MINNESOTA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS

6 Members of the Board Child Care and Nutrition, Inc. Page 2 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. Basis for Qualified Opinion As described in Note 2, the organization does not maintain detailed property and equipment records at cost and thus does not report in the financial statements the cost, current depreciation, and accumulated depreciation of its property and equipment. In our opinion accounting principles generally accepted in the United States of America require that the cost, current depreciation, and accumulated depreciation be presented in the financial statements. The effect of this departure from generally accepted accounting principles has not been determined. Qualified Opinion In our opinion, except for the effect of not maintaining property and equipment records at cost, as discussed in the preceding paragraph, the financial statements referred to above present fairly, in all material respects, the financial position of Child Care and Nutrition, Inc., Ivanhoe, Minnesota, as of September 30, 2016 and 2015, 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 Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying schedule of expenditures of federal awards, as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare 4

7 Members of the Board Child Care and Nutrition, Inc. Page 3 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 basic financial statements taken as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards we have also issued a report dated January 13, 2017, on our consideration of Child Care and Nutrition, 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 the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Child Care and Nutrition, Inc. s internal control over financial reporting and compliance. Meulebroeck, Taubert & Co., PLLP Certified Public Accountants Pipestone, Minnesota January 13,

8 Child Care and Nutrition, Inc. Ivanhoe, Minnesota Exhibit A STATEMENT OF FINANCIAL POSITION SEPTEMBER 30, 2016 AND 2015 Current Assets Cash and Cash Equivalents 55,795 68,463 Accounts Receivable 1,066 2,692 Grants Receivable -State of Minnesota 431, ,215 Prepaid Expense 6,037 4,134 Total Current Assets 494, ,504 Liabilities and Net Assets Current Liabilities Accounts Payable 394, ,388 Accounts Payable - State of Minnesota 78,488 77,713 Private Party Loan 10,000 Payroll Tax Payable 2,663 2,541 Total Current Liabilities 475, ,642 Net Assets Unrestricted 19,191 10,862 Total Net Assets 19,191 10,862 Total Liabilities and Net Assets 494, ,504 See accompanying notes to the financial statements. 6

9 Child Care and Nutrition, Inc. Ivanhoe, Minnesota Exhibit B STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2016 AND 2015 Unrestricted Net Assets Revenue and Support Federal Aid 5,421,769 4,765,588 Grant Income 6,000 Interest Income 2 2 Other Income 7,223 3,007 Total Unrestricted Revenue and Support 5,434,994 4,768,597 Expenses Program Services - Child Care Food Program Provider Reimbursement 4,735,937 4,140,572 Administration 675, ,413 Fundraising 14,769 3,939 Total Expenses 5,426,665 4,782,924 Total Increase (Decrease) in Net Assets 8,329 (14,327) Net Assets Beginning of Year 10,862 25,189 Net Assets End of Year 19,191 10,862 See accompanying notes to the financial statements. 7

10 Child Care and Nutrition, Inc. Exhibit C Ivanhoe, Minnesota Page 1 of 2 STATEMENT OF FUNCTIONAL EXPENSES FOR THE YEAR ENDED SEPTEMBER 30, 2016 AND 2015 Program Services Child Care Food Program Provider 2016 Reimbursement Administration Unrestricted Total Bank Charges 4, ,533 Contracted Services 13,185 13,185 Employee Benefits 39,767 39,767 Equipment Maintenance Field Monitor Expense 50,553 50,553 Insurance 1,438 1,438 Miscellaneous 12,598 12,598 Occupancy 9,537 9,537 Payments to Providers 4,735,937 4,735,937 Payroll Taxes 32,586 32,586 Postage and Delivery 12,163 12,163 Professional Services 34,754 34,754 Rent and Equipment 5,378 5,378 Salaries and Wages 433, ,004 Supplies 23,559 23,559 Telephone/Communications 4,384 4,384 Training 5,534 1,981 7,515 Travel 5,453 5,453 Total Expense by Function 4,735, ,959 14,769 5,426,665 See accompanying notes to the financial statements. 8

11 Child Care and Nutrition, Inc. Exhibit C Ivanhoe, Minnesota Page 2 of 2 STATEMENT OF FUNCTIONAL EXPENSES FOR THE YEARS ENDED SEPTEMBER 30, 2016 AND 2015 Program Services Child Care Food Program Provider 2015 Reimbursement Administration Unrestricted Total Bank Charges 3, ,708 Contracted Services 17,702 17,702 Employee Benefits 34,960 34,960 Equipment Maintenance 7,777 7,777 Field Monitor Expense 48,660 48,660 Insurance 1,155 1,155 Miscellaneous 3,480 3,480 Occupancy 8,962 8,962 Payments to Providers 4,140,572 4,140,572 Payroll Taxes 28,995 28,995 Postage and Delivery 12,673 12,673 Professional Services 44,816 44,816 Rent and Equipment 3,381 3,381 Salaries and Wages 390, ,998 Supplies 23, ,580 Telephone/Communications 2,566 2,566 Training 4, ,170 Travel 3,769 3,769 Total Expense by Function 4,140, ,413 3,939 4,782,924 See accompanying notes to the financial statements. 9

12 Child Care and Nutrition, Inc. Ivanhoe, Minnesota Exhibit D STATEMENT OF CASH FLOWS FOR THE YEAR ENDED SEPTEMBER 30, 2016 AND 2015 Cash Flows From Operating Activities Cash Received from Support and Revenue 5,395,870 4,762,145 Cash Paid to Suppliers, Providers and Employees (5,398,538) (4,760,198) Net Cash Provided (Used) by Operating Activities (2,668) 1,947 Cash Flows From Financing Activities Proceeds from Private Party Loan 10,000 Principal Paid on Private Party Loan (10,000) (30,000) Net Cash Provided (Used) by Financing Activities (10,000) (20,000) Net Increase (Decrease) in Cash and Cash Equivalents (12,668) (18,053) Cash and Cash Equivalents Beginning 68,463 86,516 Cash and Cash Equivalents Ending 55,795 68,463 Reconciliation Of Change In Net Assets To Net Cash Provided by Operating Activities Change in Net Assets 8,329 (14,327) Adjustments to Reconcile Change in net Cash Provided by Operating Activities: (Increase) Decrease in Receivables (39,124) (6,452) (Increase) Decrease in Prepaid Expense (1,903) 2,366 Increase (Decrease) in Accounts Payable 30,030 20,360 Net Cash Provided (Used) by Operating Activities (2,668) 1,947 See accompanying notes to the financial statements. 10

13 Child Care and Nutrition, Inc. Ivanhoe, MN NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2016 Note 1 Description of Nonprofit Organization Organization Child Care and Nutrition, Inc., (CCNI), is a nonprofit organization incorporated under the laws of the State of Minnesota in Board of Directors CCNI is governed by its Board of Directors, which is composed of five directors, and in accordance with MN Statute Ch Each director is a voting member and serves a term of three years. History On October 1, 1984, CCNI was approved by the Minnesota Department of Education to operate as an independent sponsor of licensed family day care home providers. Note 2 Summary of Significant Accounting Policies A. Business Activities Child Care Food Program Funds Providers Reimbursement Fund The Providers Fund receives payments from the Minnesota Department of Education, Child Nutrition Section to reimburse CCNI for payments made to the child care home providers for approved claims for meals and supplements served at the child care homes.. Administration Fund The Administration Fund receives payments from the Minnesota Department of Education, Child Nutrition Section to reimburse CCNI for its actual costs in administering the Child Care Food Program. Unrestricted Fund The unrestricted fund involves the receipt of the sales of promotional items. This revenue is then used to supplement services in other funds. Income Tax Child Care and Nutrition, Inc., is exempt from income taxes under IRS code section 501(c)(3) of the United States Internal Revenue Code of Therefore, no provision for income tax is made in these statements although Form 990, Return of Organization Exempt from Income Tax, is filed annually. The organization has evaluated for uncertain tax positions and management has expressed that there are no uncertain positions as of September 30, Tax returns for the past three years remain open for examination by tax jurisdictions. 11

14 Child Care and Nutrition, Inc. Ivanhoe, MN NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2016 Note 2 Summary of Significant Accounting Policies-continued B. Basis of Presentation - Fund Accounting To ensure the observance of the limitations placed on the use of resources available to CCNI, the accounts are maintained in accordance with the principles of fund accounting. This is the procedure of which resources for various purposes are classified into funds established according to their nature and purpose. C. Basis of Accounting Revenue and Expense Recognition For financial reporting purposes, in conformance with generally accepted accounting principles, grant revenue relating to the Child Care Food Program is recognized when reimbursable costs are incurred up to the maximum allowable under the program. For all other programs, revenue is recognized when earned and expenses when incurred (accrual basis). D. Cash and Deposits For purposes of the statement of cash flows, CCNI considers all deposits to be cash and cash equivalents as all have a maturity of three months or less. E. Grants Receivable (Program Advances) Grants receivable for program advances represent the unreimbursed payments to home care providers under the sponsorship of the Corporation. F. Prepaid Expenses Prepaid Expenses consist of items which will ultimately be used by member providers. G. Fixed Assets CCNI follows a policy of expensing fixed assets at the time of their purchase. Accounting principles generally accepted in the United States of America require that property and equipment be recorded at cost and that depreciation be taken over the estimated useful life of the asset. H. Advertising Costs The Organization expenses advertising costs as incurred. Advertising costs expensed to operations for the year ended September 30, 2016 and 2015, were $-0- and $-0-, respectively. I. 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. Actual results may differ from those estimates. 12

15 Child Care and Nutrition, Inc. Ivanhoe, MN NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2016 Note 3 Grants Receivable - State of Minnesota Receivable from State of Minnesota consisted of the following at September 30, Provider Reimbursement Due from MDE for Pre-September Claims 372, ,859 Administration Due From MDE Other Items to be Reimbursed 59,504 52,356 Total 431, ,215 Note 4 Accounts Receivable Administration Due from Various Entities 1, Provider Reimbursement Due from Provider 2,609 Total 1,066 2,692 Note 5 Accounts Payable Administration Pre-September 30 Expenditures 21,940 26,274 Provider Reimbursement Payable to Providers for Pre-September 30 Claims 372, ,114 Total 394, ,388 Note 6 Note 7 Accounts Payable - State of Minnesota Administration Amount Overpaid as of September 30 by MDE 78,488 77,713 Total 78,488 77,713 Private Party Loan In August of 2015 CCNI borrowed $10,000 from Tax & Management Solutions, Inc. The loan was unsecured, interest free and had no specific due date. Tax & Management Solutions, Inc. is a related party as Sharon Rasmussen, Executive Director of CCNI, is also a shareholder of Tax & Management Solutions, Inc. The loan was paid off on November 2,

16 Child Care and Nutrition, Inc. Ivanhoe, MN NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2016 Note 8 Note 9 Contingencies The restricted program activities are subject to audit by federal and state agencies. To the extent that these agencies may disallow expenses claimed, a liability to the respective program could result. Operating Leases CCNI leases equipment (copier and postage machine) under non-cancelable operating leases. Total costs for such leases were $6,354 for the year ended September 30, The future minimum lease payments for these leases are as follows: Year Ending September 30, Amount , , , ,996 Total 15,177 Note 10 Related Party Transactions Sharon Rasmussen, Executive Director of CCNI, is a shareholder of Tax & Management Solutions, Inc. Operating Lease An agreement exists between CCNI and Tax & Management Solutions, Inc. to provide for rental of office space, including reimbursements for a pro-rata share of building supplies, maintenance, insurance, property taxes, and utilities. The lease agreement runs through September 30, Payments made to Tax & Management Solutions, Inc. during the year ended September 30, 2016 under this lease agreement and for other services are as follows: Office Space and Related Occupancy Costs 12,080 Private Party Loan See Note 7 Note 11 Vulnerability Due To Certain Concentrations Since CCNI's primary activity consists of serving as a sponsoring organization for the Child and Adult Care Food Program, its continuing existence is dependent upon federal funding and state pass-through of monies in this program. 14

17 Child Care and Nutrition, Inc. Ivanhoe, MN NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2016 Note 12 Note 13 Note 14 Accrued Absences All regular part and full time staff members are eligible for Paid Time Off (PTO) benefit monthly based on length of service and hours worked. A maximum of 5 days unused PTO hours can be carried over to the next fiscal year, yet may only be used when a long-term illness depletes the current PTO accrual. However, since most PTO benefits are used in the year it is earned, CCNI does not record a liability for unused PTO benefits. Concentrations of Credit Risk CCNI maintains its cash balances at Bank of the West of Ivanhoe, Minnesota. Accounts at this financial institution are insured by the Federal Deposit Insurance Corporations up to $250,000. As of September 30, 2016, the bank balance of the accounts was $85,194 with no amount uninsured/uncollateralized. Subsequent Events Subsequent events were evaluated through January 13, 2017, which is the date the financial statements were available to be issued. No significant, unusual or infrequent events or transactions have occurred after the financial statement date but before the issuance of the financial statements. 15

18 Child Care and Nutrition, Inc. Schedule 1 Ivanhoe, Minnesota SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED SEPTEMBER 30, 2016 Pass Federal Grantor/ Federal Through Pass Through Grantor/ CFDA Grantor Federal Program Title Number Number Expenditures US Department of Agriculture/ Minnesota Department of Education, Child Nutrition Section/ Child and Adult Care Food Program ,421,769 * Total 5,421,769 Notes 1) * Denotes Major Program 2) Major programs were determined using the 40% coverage rules. Child and Adult Care Food Program is Type A. 3) Basis of Presentation The accompanying schedule of expenditures of federal awards includes the federal grant activity of Child Care and Nutrition, Inc. and is presented on the accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirement s, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements. 4) The organization had no sub recipients. 16

19 hild Care and Nutrition, Inc Schedule 2 Ivanhoe, Minnesota Page 1 of 4 SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2016 I. Summary of Auditor s Results A. The report was qualified, as the organization does not maintain detailed property and equipment records at cost and thus does not report in the financial statements the cost, current depreciation, and accumulated deprecation of its property and equipment. Generally accepted accounting principles require that the cost, current deprecation and accumulated depreciation be presented in the financial statements. The effect of this departure from generally accepted accounting principles has not been determined. B. Matters involving internal control over financial reporting were reported in the 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. Items and are material weaknesses. C. No instances of noncompliance material to the financial statements of the Child Care and Nutrition, Inc were disclosed during the audit. D. One significant deficiency in internal control over major federal award programs disclosed during the audit is reported in the Independent Auditor s Report on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Program and on Internal Control over Compliance in Accordance with the Uniform Guidance. Item is reported as a material weakness. E. The auditor s report on compliance for the major federal award programs for the Child Care and Nutrition, Inc expresses an unqualified opinion. F. Audit findings that are required to be reported in accordance with the Uniform Guidance are reported in this schedule. G. The programs tested as major programs included: CFDA Program Number Child and Adult Care Food Program H. The threshold for distinguishing between Types A and B programs was $750,000. I. The Child Care and Nutrition, Inc. was not determined to be a low-risk auditee. 17

20 Child Care and Nutrition, Inc Schedule 2 Ivanhoe, Minnesota Page 2 of 4 SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2016 II. Financial Statement Audit Internal Controls Previously Reported Items Not Resolved: Internal Accounting Controls Criteria: Internal control should include an adequate segregation of duties in the accounting functions. Condition: Due to a limited number of office personnel, proper segregation of duties in the accounting functions is not always possible. Cause: This condition is not unusual where staffing size can result in an improper segregation of duties. Management has determined that given the size and resource limitations the desirable level of segregation of duties necessary may not be feasible. Effect: Without an adequate segregation of duties these are opportunities for errors or fraudulent activities to occur and remain undetected. Recommendation: We recommend that the organization s management be aware of the lack of segregation of the accounting functions and implement oversight procedures to ensure that the internal control policies and procedures are being implemented by staff and encourage additional controls as they become available due to changes in staff, etc GAAP Financial Statements Personnel that lack the necessary expertise are responsible for financial statements required to be prepared in accordance with generally accepted accounting principles. Criteria: Personnel in the organization should prepare the financial statements in accordance with generally accepted accounting principles. Condition: It was determined that the personnel lacked the necessary expertise to prepare the financial statements in accordance with generally accepted accounting principles. Cause: Personnel in the organization do not have the experience or expertise to prepare the financial statements in accordance with generally accepted accounting principles. 18

21 Child Care and Nutrition, Inc Schedule 2 Ivanhoe, Minnesota Page 3 of 4 SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2016 II. III. Financial Statement Audit Internal Controls - continued Previously Reported Items Not Resolved: GAAP Financial Statements - continued Effect: As the organization personnel were unable to prepare the financial statements in accordance with generally accepted accounting principles, the organization had the audit firm assist with the preparation of the financial statements in accordance with generally accepted accounting principles. Major Federal Award Programs Internal Controls Over Compliance Previously Reported Items Not Resolved: Internal Accounting Controls Criteria: Internal control should include an adequate segregation of duties in the accounting functions. Condition: Due to a limited number of office personnel, proper segregation of duties in the accounting functions is not always possible. Cause: This condition is not unusual where staffing size can result in an improper segregation of duties. Management has determined that given the size and resource limitations the desirable level of segregation of duties necessary may not be feasible. Effect: Without an adequate segregation of duties there are opportunities for errors or fraudulent activities to occur and remain undetected. Recommendation: We recommend that the organization s management be aware of the lack of segregation of the accounting functions and implement oversight procedures to ensure that the internal control policies and procedures are being implemented by staff and encourage additional controls as they become available due to changes in staff, etc. 19

22 Child Care and Nutrition, Inc. Schedule 2 Ivanhoe, Minnesota Page 4 of 4 SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2016 IV. Corrective Action Plan Name and Contact Person Responsible For Corrective Action Sharon Rasmussen, Executive Director Corrective Action Plan (CAP) Because it is economically infeasible to hire additional staff to adequately provide for the proper segregation of duties, the organization will utilize staff and board members to segregate duties to the extent possible. In addition, some transactions entered into by the organization are reviewed and observed by staff members of Brian Hildebrant, CPA., an independent consulting company. The company does not perform audit services but their observation does create an additional element of oversight. Planned completion date for CAP: N/A requires ongoing monitoring Plan to monitor completion of CAP: The Executive Director and Board Members will monitor the internal control system to ensure oversight procedures are functioning as intended. 20

23 MEULEBROECK, TAUBERT & CO., PLLP CERTIFIED PUBLIC ACCOUNTANTS PO Box S Freeman Avenue Luverne, Minnesota Fax contactl@mtcocpa.com PO Box East Main Pipestone, Minnesota Fax contactp@mtcocpa.com Tyler, Minnesota Lake Wilson, Minnesota Marshall, Minnesota PARTNERS David L. Meulebroeck, CPA Matthew A. Taubert, CPA David W. Friedrichsen, CPA Daryl J. Kanthak, CPA WITH THE FIRM Amy L. Mollberg, CPA Blake R. Klinsing, CPA Bryce L. Schelhaas, CPA 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 Members of the Board Child Care and Nutrition, Inc. 324 North Norman Street Ivanhoe, Minnesota 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 Child Care and Nutrition, Inc. (a nonprofit organization), which comprise the statement of financial position as of September 30, 2016, and the related statement 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 January 13, Our report was qualified because the organization does not report the cost, current depreciation, or accumulated depreciation on its fixed assets. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered Child Care and Nutrition, 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 Child Care and Nutrition, Inc. s internal control. Accordingly, we do not express an opinion on the effectiveness of Child Care and Nutrition, Inc. s internal control. Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as described in the accompanying schedule of findings and questioned costs, we identified certain deficiencies in internal control over financial reporting that we consider to be material weaknesses. MEMBER OF AMERICAN INSTITUTE AND MINNESOTA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS

24 Members of the Board Child Care and Nutrition, Inc. Page 2 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 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. We consider the deficiencies described in the accompanying schedule of findings and questioned costs to be material weaknesses (Items and ). Compliance and Other Matters As part of obtaining reasonable assurance about whether Child Care and Nutrition, Inc.'s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Child Care and Nutrition, Inc. s Response to Findings Child Care and Nutrition, Inc. s response to the findings identified in our audit is described in the accompanying schedule of findings and questioned costs. Child Care and Nutrition, 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. Meulebroeck, Taubert & Co., PLLP Certified Public Accountants Pipestone, Minnesota January 13,

25 MEULEBROECK, TAUBERT & CO., PLLP CERTIFIED PUBLIC ACCOUNTANTS PO Box S Freeman Avenue Luverne, Minnesota Fax contactl@mtcocpa.com PO Box East Main Pipestone, Minnesota Fax contactp@mtcocpa.com Tyler, Minnesota Lake Wilson, Minnesota Marshall, Minnesota PARTNERS David L. Meulebroeck, CPA Matthew A. Taubert, CPA David W. Friedrichsen, CPA Daryl J. Kanthak, CPA WITH THE FIRM Amy L. Mollberg, CPA Blake R. Klinsing, CPA Bryce L. Schelhaas, CPA INDEPENDENT AUDITOR S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE Members of the Board Child Care and Nutrition, Inc. 324 North Norman Street Ivanhoe, Minnesota Report on Compliance for Each Major Federal Program We have audited Child Care and Nutrition, Inc. s compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of Child Care and Nutrition, Inc. s major federal programs for the year ended September 30, Child Care and Nutrition, 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. Auditor s Responsibility Our responsibility is to express an opinion on compliance for each of Child Care and Nutrition, 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 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 we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above could have a direct and material effect on a major MEMBER OF AMERICAN INSTITUTE AND MINNESOTA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS

26 Members of the Board Child Care and Nutrition, Inc. Page 2 federal program occurred. An audit includes examining, on a test basis, evidence about Child Care and Nutrition, 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 Child Care and Nutrition Inc.'s compliance. Opinion on Each Major Federal Program In our opinion, Child Care and Nutrition, 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 September 30, Report on Internal Control Over Compliance Management of Child Care and Nutrition, Inc. is responsible for establishing and maintaining effective internal control over compliance with the types of compliance referred to above. In planning and performing our audit of compliance, we considered Child Care and Nutrition, Inc.'s internal control over compliance with the 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 the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of Child Care and Nutrition, Inc. s internal control over compliance. Our consideration of internal control over compliance was for the limited purpose described in the preceding paragraph 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. However, as discussed below, we identified certain deficiencies in internal control over compliance that we consider to be material weaknesses. 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. We consider the deficiencies in internal control over compliance described in the accompanying schedule of findings and questioned costs as item to be a material weakness. 24

27 Members of the Board Child Care and Nutrition, Inc. Page 3 Child Care and Nutrition, 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. Child Care and Nutrition, 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 the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Meulebroeck, Taubert & Co., PLLP Certified Public Accountants Pipestone, Minnesota January 13,

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29 MEULEBROECK, TAUBERT & CO., PLLP CERTIFIED PUBLIC ACCOUNTANTS PO Box S Freeman Avenue Luverne, Minnesota Fax contactl@mtcocpa.com PO Box East Main Pipestone, Minnesota Fax contactp@mtcocpa.com Tyler, Minnesota Lake Wilson, Minnesota Marshall, Minnesota PARTNERS David L. Meulebroeck, CPA Matthew A. Taubert, CPA David W. Friedrichsen, CPA Daryl J. Kanthak, CPA WITH THE FIRM Amy L. Mollberg, CPA Blake R. Klinsing, CPA Bryce L. Schelhaas, CPA Minnesota Department of Education Child Nutrition Section Capital Square 550 Cedar Street St. Paul, MN MINNESOTA DEPARTMENT OF EDUCATION COMPLIANCE REPORT We have examined the claims for reimbursements submitted by Child Care and Nutrition, Inc. of Ivanhoe, Minnesota (CCNI) under the CACFP and in our opinion, the aforementioned claims present fairly the number of meals eligible for reimbursement for the period October 1, 2015 through September 30, Meulebroeck, Taubert & Co, PLLP Certified Public Accountants Pipestone, Minnesota January 13, 2017 MEMBER OF AMERICAN INSTITUTE AND MINNESOTA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS