Postlethwaite ISKAI & Netterville

Transcription

1 OUTREACH COMMUNITY DEVELOPMENT CORPORATION D/B/A J.S. CLARK LEADERSHIP ACADEMY OPELOUSAS. LOUISIANA FINANCIAL STATEMENTS JUNE 30,2015 Postlethwaite ISKAI & Netterville A Professional Accounting Corporation

2 OUTREACH COMMUNITY DEVELOPMENT CORPORATION D/B/A J.S. CLARK LEADERSHIP ACADEMY OPELOUSAS. LOUISIANA FINANCIAL STATEMENTS JUNE

3 TABLE OF CONTENTS Page INDEPENDENT AUDITORS' REPORT 1-2 FINANCIAL STATEMENTS Statement of Financial Position 3 Statement of Activities and Changes in Net Assets 4 Statement of Cash Flows 5 Notes to Financial Statements 6-11 SUPPLEMENTAL INFORMATION Schedule of Functional Expenses 12 Schedule of Compensation, Benefits and Other Pajmients to the Chief Executive Officer 13 OTHER REPORT REOUIRED BY GOVERNMENT A UDITING STANDARDS 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 0MB Circular A Schedule of Expenditures of Federal Awards 18 Notes to the Schedule of Expenditures of Federal Awards 19 Schedule of Findings and Questioned Costs Summary Schedule of Prior Audit Findings 24 OTHER REPORTS Independent Accountants' Report on Applying Agreed-Upon Procedures Supplemental Schedules on Performance and Statistical Data 29-37

4 Postlethwaite & Netterville A Professional Accounting Corporation Associated Offices in Principal Cities of Hie United States INDEPENDENT AUDITORS' REPORT To the Board of Directors for Outreach Community Development Corporation D/B/A J.S. Clark Leadership Academy Opelousas, Louisiana Report on the Financial Statements We have audited the accompanying financial statements of the Outreach Community Development Corporation D/B/A J.S. Clark Leadership Academy (the Corporation), a nonprofit organization, which comprise the statement of financial position as of June 30, 2015, and the related statement of activities and changes in net assets, and cash flows for the year then ended, and the related notes to the financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' 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 United Ploza Blvd, Suite Baton Rouge, LA Tel: Fox:

5 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Outreach Community Development Corporation as of June 30,2015, 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. Emphasis of Matter As discussed in Note 12 to the financial statements, the Corporation's net assets have been restated as of June 30,2014 for the correction of accounting errors. Our opinion is not modified with respect to that matter. 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 functional expenses, the schedule of compensation, benefits and other payments to the chief executive officer, and the schedule of expenditures of federal awards, as required by Office of Management and Budget Circular A-133, of States, Local Governments, and Non-Profit Organizations, are 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 fi-om 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. Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The performance and statistical data included as Schedules 1 through 9 is presented as supplementary information required by Louisiana State Law and is not a required part of the financial statements. Such information has not been subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we do not express an opinion or provide any assurance on it. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 30,2015, on our consideration of the Corporation'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 the Corporation's internal control over fmancial reporting and compliance. Baton Rouge, Louisiana December 30,

6 OUTREACH COMMUNITY DEVELOPMENT CORPORATION D/B/A J.S. CLARK LEADERSHH* ACADEMY STATEMENT OF FINANCIAL POSITION JUNE ASSETS CURRENT ASSETS; Cash Receivables: Federal grant State grant Erate program Prepaid expenses Restricted Cash Total current assets PROPERTY AND EOUffMENT tnett: Total assets $ 27,595 68,923 7,631 5,582 20,761 13, , ,565 $ 745,020 LIABILITIES AND NET ASSETS CURRENT LIABILITIES: Accounts payable Accrued expenses Line of credit Notes payable - short term portion Fimds held in custody for others Total current liabilities LONG TERM LIABILITIES: Notes payable Total long-term liabilities Total liabilities NET ASSETS: Unrestricted Total net assets 11,660 78,527 61,000 32,782 4, , , , , , ,518 Total liabilities and net assets $ 745,020 The accompanying notes are an integral part of this financial statement. -3-

7 OUTREACH COMMUNITY DEVELOPMENT CORPORATION D/B/A J.S. CLARK LEADERSHIP ACADEMY STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS FOR THE YEAR ENDED JUNE Revenues: Minimum Foundation Program (MP?) Revenue Federal Sources State Sources Miscellaneous Erate Income School Events Revenue Paid Meals Total unrestricted revenues and support Expenses: Program services: Instructional and supporting programs Non-instructional servies - other program Support services: Management and general Total expenses Change in net assets Net Assets at Beginning of the Year, as restated $ 1,759, ,324 17,321 70,929 20,066 1, ,490,491 1,201, , ,064 2,458,504 31, ,531 Net Assets at the End of the Year $ 205,518 The accompanying notes are an integral part of this financial statement. -4.

8 OUTREACH COMMUNITY DEVELOPMENT CORPORATION D/B/A J.S. CLARK LEADERSHIP ACADEMY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED.HJNE CASH FLOWS FROM OPERATING ACTrVlTIES: Change in net assets Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation Decrease (increase) in: Receivables Prepaid expenses Amounts held in custody for others Increase (decrease) in: Accounts payable and accrued expenses Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES; Purchase of equipment Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES: Payments on notes payable Line of credit, net Net decrease in cash Net cash used in financing activities Beginning cash balance Ending cash balance Reconciliation to cash on statement of financial position: Cash Restricted cash Supplemental disclosure of cash flow information: Interest paid Supplemental schedule of noncash financing activities: Long term debt obligation incurred for the pmchase of land and building $ 31,987 55,964 19,346 8, (65,747) 50,811 (81,286) (81,286) (79,196) 16,000 (63,196) (93,671) 135,229 $ 41,558 $ 27,595 13,963 $ 41,558 $ 13,983 $ 382,500 The accompanying notes are an integral part of this financial statement. -5-

9 OUTREACH COMMUNITY DEVELOPMENT CORPORATION D/B/A J.S. CLARK LEADERSHIP ACADEMY NOTES TO FINANCIAL STATEMENTS 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization Outreach Community Development Corporation (the Corporation) was incorporated in January 2006 for the purpose of operating charter schools in Opelousas. The Louisiana State Board of Elementary and Secondary Education (BESE) granted the Corporation a Type 2 Charter to operate J.S. Clark Leadership Academy (the Academy), pursuant to Louisiana Revised Statute 17:3971 et seq. The charter is valid until June 2016 with an available one year extension, if approved, to June BESE is responsible for evaluating the performance of the Academy and has the authority to deny renewal of the contract at thenexpiration or terminate the contracts prior to their expiration. The Corporation operated under the direction of a seven-member board of directors. The Board of Directors is responsible for carrying out the provisions of the contract which include, but are not limited to, state-mandated provisions regarding student population, curriculum, academic goals, performance standards, admission standards, and qualifications of teachers. The Board of Directors controls the Academy's instructional/support facility. Basis of Accounting The Corporation's financial statements are prepared on the accrual basis of accounting, whereby revenue is recorded when earned and expenses are recorded when incurred. Functional Expenses The costs of providing various program and administrative services have been reported on a functional basis in the Statement of Activities. Accordingly, certain costs have been allocated among the various program and administrative services based on estimates made by management. Use of Estimates Management used estimates and assumptions in preparing the financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, and the reported revenues and expenditures. Actual results could vary fi-om the estimates that were assumed in preparing the financial statements. Public Support and Revenue Recognition The Corporation receives its support primarily from the Louisiana State Department of Education and the United States Department of Education. Contributions are recognized when the donor makes a promise to give to the Corporation that is, in substance, unconditional. All contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted depending on the existence or nature of any donor restrictions. When a 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. Contributions whose donor restrictions are met in the same reporting period are reported as unrestricted support. -6-

10 OUTREACH COMMUNITY DEVELOPMENT CORPORATION D/B/A J.S. CLARK LEADERSHIP ACADEMY NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued^ Grants Receivable Grants receivable represents amounts owed to the Corporation for costs incurred under federal and state grant contracts which are reimbursable to the Corporation. Grants receivable are stated at unpaid balances, less an allowance for doubtful accounts. The Corporation provides for losses on grants receivables using the allowance method. The allowance is based on experience with collections from granting agencies. Receivables are considered impaired if full principal payments are not received in accordance with the contractual terms. It is the Corporation's policy to charge off uncollectible contracts receivable when management determines that the receivable will not be collected. Management feels that all receivables are collectible, and as such, no allowance for doubtful accounts has been established. Propertv and Equipment The Corporation has adopted the practice of capitalizing all expenditures for depreciable assets where the xmit costs exceed $5,000. Property and equipment is recorded at cost or at fair value for donated assets. Depreciation of these assets is provided on the straight-line basis over their estimated useful lives ranging from 5 to 30 years. Maintenance and repairs are charged to expense when incurred. Leasehold improvements are amortized over 5 to 30 years. Tax Exempt Status The Corporation is a nonprofit organization exempt from the income taxes under 501(c)(3) of the Intemal Revenue Code, as such; no provision has been made for federal and state iacome taxes. If the Corporation would engage in activities unrelated to the purpose for which it was created, taxable income could result. The Corporation had no material unrelated business income for the fiscal year ended June 30,2015. The Corporation recognizes the effect of income tax positions only if the positions are more likely than not of being sustained. Recognized income tax positions are recorded at the largest amoimt that is greater than 50% likely of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-thannot recognition threshold considers the facts, circumstances and other information available at the reporting date and is subject to management's judgment. Changes in the recognition or measurement are reflected in the period in which the change in judgment occurs. The Corporation has evaluated its position regarding the accounting for uncertain income tax positions and does not believe that it has any material uncertain tax positions. Cash and Cash Equivalents Cash and cash equivalents includes all cash accounts held at financial institutions, cash on hand, and any highly liquid investments with original maturities of three months or less. -7-

11 OUTREACH COMMUNITY DEVELOPMENT CORPORATION P/B/A J.S. CLARK LEADERSHIP ACADEMY NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES fcontinued> Funds held in custody The Corporation considers all student activity funds and unexpended income from these funds to be funds held in custody. All funds held in custody are recorded in the statement of financial position at their fair values. Advertising The Corporation expenses advertising costs as they are incurred. 2. PROPERTY LEASE On June 1,2012 the Corporation entered into a lease agreement for property at 1108 West Bellevue Street, Opelousas, Louisiana. The lease terms end on June 30,2014 with an option to extend the lease for up to 12 months. This lease was canceled in October 2015 due to the Corporation purchasing the building under lease. The lease expense for the year ending June 30,2015 was $33, PROPERTY AND EQUIPMENT Property, furniture and equipment acquired by the Corporation are considered to be owned by the Corporation. However, the State of Louisiana maintains the title to the property and equipment purchased in whole or in part under contracts/grants funded by the State of Louisiana. The State has the right to require the transfer of the property and equipment (including title) to the State or to an eligible non-state party named by the State. Such transfer may occur at any time. The composition of property, furniture and equipment at June 30,2015 was as follows: Land $ 90,000 Building and improvements $ 568,759 Furniture and equipment ,178 Accumulated depreciation ( ) $ Depreciation expense totaled $55,964 for the year ended June 30, FUNDS HELD IN CUSTODY Collections from student activities are funds under the supervision of the Corporation; however, these funds belong to the Academy or their student body and are not available for use in operations. At June 30, 2015 the Corporation held $4,977 in an agency capacity. -8-

12 OUTREACH COMMUNITY DEVELOPMENT CORPORATION D/B/A J.S. CLARK LEADERSHIP ACADEMY NOTES TO FINANCTAL STATEMENTS 5. RETIREMENT PLAN The employees of the corporation participate in a Specimen ERISA 403 (b) retirement plan. Participants vest after completing three years of service. The employer has discretion on amounts of contributions of the plan. Total employer contributions to the plan were approximately $12,809 for the year ended June 30, COMPENSATED ABSENCES All full-time employees are granted three vacation days at the beginning of each year. If an employee starts after the beginning of the school year, vacation days are pro-rated. Upon termination of employment any unused vacation days are paid at the employee's base rate of pay at termination. Compensated absences at June 30,2015 totaled $21,256 and are included in accrued expenses on the statement of fmancial position. 7. NOTES PAYABLE The Corporation received a $100,000 start-up loan from the Louisiana Department of Education. The loan shall be repaid with no interest and repayment occurs by having the state Department of Education automatically reduce the state payment by one third ($33,333) of the original loan amount, in each of the first three years. The Department of Education reduced payment for the year ended June 30, 2015 by $35,844. The funds were utilized to purchase inventory and various supplies of the Academy. As of June 30, 2015, there was no remaining balance due as the loan was fully repaid. On April 27, 2012, the Corporation entered into an advanced loan agreement with a local financial institution not to exceed $200,000 with an annual interest rate of 5.75%. This loan required interest only payments on the outstanding balance. On February 1, 2013, the Corporation refinanced the principal amount of the advanced loan of $82,593 at an interest rate of 5.75%. The loan requires monthly payments of $2,714 until the loan matures on November 1, 2015 and is collateralized by a commercial security agreement on all equipment, receivables, and general intangibles of the Corporation. The outstanding balance of this loan at June 30,2015 was $13,382. On October 13, 2014, the Corporation borrowed $382,500 in a multiple indebtedness mortgage loan agreement with a local fmancial institution to finance the purchase of the school building facility with an annual interest rate of 4.00%. The loan requires 59 monthly payments of $2,840 through September 13, 2019 and one balloon payment of $282,613 when the loan matures on October 13, 2019 and is collateralized by the building, building improvements, and machinery and equipment. The outstanding balance of this loan at June 30, 2015 was $369,

13 OUTREACH COMMUNITY DEVELOPMENT CORPORATION D/B/A J.S. CLARK LEADERSHIP ACADEMY NOTES TO FINANCIAL STATEMENTS 7. NOTES PAYABLE (continued^ The notes payable are scheduled to mature as follows: Years Ending June 30*^ ,782 20,242 21,078 21, LINE OF CREDIT On April 15, 2015, the Corporation entered into a revolving loan agreement with a local financial institution not to exceed $100,000, the agreement requires a variable daily interest rate, and is due on demand and is scheduled to mature on April 14, The interest on this loan is based on the daily prime rate published by the Wall Street Journal. The interest rate at June 30,2015 was 3.25%. This credit line is also collateralized by a commercial security agreement on all equipment, receivables, and general intangibles of the Corporation. At June 30, 2015, the outstanding balance on this line of credit was $61, COMMITMENTS On July 20,2015, the Corporation renewed its contract with its food service vendor that originally entered into on April 15, The contract renewal is for the school year totaling approximately $400,000 for furnishing meals with a third party vendor. 10. OPERATING LEASE In August 2014, the Corporation entered into several operating lease agreements for school busses with a third party vendor. These lease agreements are on a month to month basis and require the Corporation to provide liability and physical damage insurance coverage of the leased assets. The monthly rent under these obligations was $6,300 for 3 months and $7,475 for 6 months. The total rent paid during the year ended June 30,2015 was $63,

14 OUTREACH COMMUNITY DEVELOPMENT CORPORATION D/B/A J.S. CLARK LEADERSHIP ACADEMY NOTES TO FINANCIAL STATEMENTS 11. CONCENTRATIONS/CONTINGENCIES The Corporation received approximately 71% of its support from the MFP and 25% of its support from federal grants passed through the Louisiana Department of Education. The continuation of the Academy is contingent upon legislative appropriation or allocation of funds necessary to fulfill the requirements of the charter contract with the Board of Elementary and Secondary Education. If the legislatme fails to appropriate sufficient monies to provide for the continuation of the charter contract, or if such appropriation is reduced by veto of the governor or by any means provided in the appropriations act to prevent the total appropriation for the year from exceeding revenues for that year, or for any other lawful purpose, and the effect of such reduction is to provide insufficient monies for the continuation of the charter contract. The contract shall terminate on the date of the begiiming of the first fiscal year for which funds are not appropriated. 12. RESTATEMENT OF PRIOR YEAR NET ASSETS The Corporation's net assets have been restated to correct accounting errors (recording of capital leases and fixed assets that was below the capitalization policy and not amortizing lease prepayments) made in the prior year. The net effects to net assets for the correction of these errors are as follows: Total net assets, June 30, 2014, as previously reported $ 294,390 Adjustment to assets and capital lease liability previously capitalized, net (90,996) Adjustment to record amortization of prepayments on leases ( Total net assets, June 30,2014, restated $ SUBSEQUENT EVENTS Management has evaluated subsequent events through the date that the financial statements were available to be issued, December 30,2015, and determined no other events require additional disclosure. No events occurring after this date have been evaluated for inclusion in these financial statements

15 SUPPLEMENTAL INFORMATION

16 OUTREACH COMMUNITY DEVELOPMENT CORPORATIOM P/B/A J.S. CLARK I^EADERSHTP ACADEMY SCHEDULE OF FUNCTIONAL EXPENSES FOR THE YEAR ENDED.HJNE Program Services Support Services Instructional Non-instructional Management and General Totals EXPENSES: Advertising and promotional $ $ $ $ Depreciation - 55,964-55,964 Employee benefits 77,367-43, ,011 Food service - 223, ,062 Insurance 6,346-57,338 63,684 Interest expense ,983 13,983 Legal fees ,404 15,404 Materials, supplies, books & periodicals 221,618 34,888 8, ,801 Non-capitalized equipment purchases 4, ,372 Other 10,015-1,036 11,051 Payroll taxes 53,352-26,493 79,845 Postage, internet, and telephone ,611 44,611 Rent - 26,480 6,620 33,100 Repairs and maintenance - 47,801 11,950 59,751 Salaries 736, ,545 1,096,762 School uniforms and club activities 56,927 14,339-71,266 Support services - - 9,405 9,405 Technical and professional services 5,675 6, , ,474 Transportation - 87,820-87,820 Travel 29,207-7,443 36,650 Utilities - 18,790 4,698 23,488 Total Expenses $ 1,201,096 $ 515,344 $ 742,064 $ 2,458,504 See independent auditors' report. -12-

17 OUTREACH COMMUNITY DEVELOPMENT CORPORATION D/B/A J.S. CLARK LEADERSHIP ACADEMY SCHEDULE OF COMPENSATION. BENEFITS AND OTHER PAYMENTS TO THE CHIEF EXECUTIVE OFFICER FOR THE YEAR ENDED JUNE Mrs. Tiffanie Lewis. CEO Purpose Salary Bonus Benefits-Health insurance Benefits-Retirement Benefits-FICA and Medicare Benefits-Life insurance Benefits-Workers Comp Benefits-Vacation Severance Operational Allowance Car allowance Vehicle provided by government (enter amount reported on W-2) Reimbursements Registration fees Conference travel Other-Phone Other-Professional Dues Total compensation, Benefits and Other Payments to the Chief Executive Officer Amount 94,362 14,000 15,400 1,800 8,087 3,800 10,519 7,088 $ 155,

18 P&N Postlethwaite & Netterville A Professional AccounHng Corporation Associated Offices in Principal Cities of the United States INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Board of Directors for Outreach Community Development Corporation D/B/A JS Clark Leadership Academy Opelousas, Louisiana 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 the Outreach Community Development Corporation D/B/A JS Clark Leadership Academy (the Corporation), a not-for-profit organization, which is comprised of the statement of financial position as of June 30,2015, and the related statement of activities and changes in net assets, cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated December 30, Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the Corporation'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 the Corporation's internal control. Accordingly, we do not express an opinion on the effectiveness of the Corporation'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. See items through United Plaza Blvd, Suite 1001 Baton Rouge, LA Tel: Fox:

19 Compliance and Other Matters As part of obtaining reasonable assurance about whether the Corporation'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. Response to Findings The Corporation's responses to the findings identified in our audit are described in the accompanying schedule of findings and questioned costs. The Corporation's responses were not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on them. 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 intemal 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 intemal control and compliance. Accordingly, this communication is not suitable for any other purpose. Baton Rouge, Louisiana December 30,

20 IgiSAi Postlethwalte ^ Netterville A Professional Accounting Corporation Associated Offices in Principal Cities of the United States INDEPENDENT AUDITORS' REPORT N COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133 To the Board of Directors for Outreach Commimity Development Corporation D/B/A JS Clark Leadership Academy Opelousas, Louisiana Report on Compliance for Each Major Federal Program We have audited the Outreach Community Development Corporation D/B/A JS Clark Leadership Academy (the Corporation), a not-for-profit organization's, compliance with the types of compliance requirements described in the U. S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that could have a direct and material effect on each of the Corporation's major federal programs for the year ended June 30, The Corporation's major federal programs are identified in the summary of auditors' results section of the accompanying Schedule of Findings and Questioned Costs. Management's Responsibilitv Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditors' Responsibilitv Our responsibility is to express an opinion on compliance for each of the Corporation'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 ChcaXss k-\33. 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 the Corporation'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 the Corporation's compliance. Opinion on Each Major Federal Program In our opinion, the Corporation 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, United Plaza Blvd, Suite 1001 Baton Rouge, LA Tel: Fox:

21 Report on Internal Control Over Compliance Management of the Corporation is responsible for establishing and maintaining effective internal control over compliance with requirements referred to above. In planning and performing our audit of compliance, we considered the Corporation'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 0MB 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 the Corporation's internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A Accordingly, this report is not suitable for any other purpose. Baton Rouge, Louisiana December 30,

22 OUTREACH COMMUNITY DEVELOPMENT CORPORATION D/B/A J.S. CLARK LEADERSHIP ACADEMY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR FISCAL YEAR ENDED JUNE 30,2015 FEDERAL GRANTOR/ PASS-THROUGH GRANTOR/PROGRAM NAME United States Department of Agriculture Passed Through Louisiana Department of Education: Child Nutrition Cluster: Cash Assistance School Breakfast Program National School Lunch Program Child and Adult Care Food Program Total United States Department of Agriculture United States Department of Education Passed Through Louisiana Department of Education: Title I Grants to Local Educational Agencies IDEA Part B Twenty First Century Community Learning Centers Title II Part A - Teacher and Principal Training and Recruiting Direct Programs: Rural Education Achievement Program Total United States Department of Education TOTAL FEDERAL AWARDS CFDA Number ' Pass-Through Grantor No. 13-SFS ' 13-SFS SFS-003A A Tl-VN A'' Bl-VN C A VN A S358A Expenditures 22, ,701 73, , ,572 46, ,000 14,546 11, , ,324 Child Nutrition Cluster ' Special Education Cluster See the accompanying notes to the schedule of expenditures of federal awards. -18-

23 OUTREACH COMMUNITY DEVELOPMENT CORPORATION D/B/A J.S. CLARK LEADERSHIP ACADEMY NOTES TO FINANCIAL SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the Year Ended June 30,2015 NOTE 1- GENERAL The accompanying Schedule of Expenditures of Federal Awards presents the activity of all federal awards programs of the Outreach Community Development Corporation D/B/A JS Clark Leadership Academy (the Corporation), a not-for-profit organization's. The Corporation reporting entity is defined in Note 1 to the Corporation's financial statements. Federal awards received directly from federal agencies, as well as federal awards passed through other government agencies, is included on the schedule. NOTE 2 - BASIS OF ACCOUNTING The accompanying Schedule of Expenditures of Federal Awards is presented using the accrual basis of accounting, which is described in Note 1 to the Corporation's financial statements. NOTE 3 - RELATIONSHIP TO FEDERAL FINANCIAL REPORTS Amounts reported in the accompanying schedule agree with the amounts reported in the related federal financial reports except for changes made to reflect amounts in accordance with accounting principles generally accepted in the United States of America. -19-

24 OUTREACH COMMUNITY DEVELOPMENT CORPORATION D/B/A J.S. CLARK LEADERSHIP ACADEMY SCHEDULE OF FINDINGS AND OUESTIONED COSTS For the Year Ended June 30,2015 A. Summary of Auditors' Results Financial Statements Type of auditor's report issued: Unmodified Material weakness(es) identified? Significant deficiencies identified that are not considered to be material weaknesses? _x yes yes no _none reported Noncompliance material to financial statements noted?.yes no Federal Awards Internal control over major programs: Material weakness(es) identified? Significant deficiencies identified that are not considered to be material weaknesses?.yes yes _x no none reported Type of auditor's report issued on compliance for major programs: Unmodified Any audit findings disclosed that are required to be reported in accordance with section 510(a) of Circular A-133? Identification of major programs: yes no CFDA Numbers C Name of Federal Program or Cluster Child Nutrition Cluster: National School Breakfast Program National School Lunch Program Twenty First Century Community Learning Centers The threshold for distinguishing types A & B programs was program expenditures exceeding $300,000. The Outreach Community Development Corporation D/B/A JS Clark Leadership Academy was determined not to be a low-risk auditee. -20-

25 OUTREACH COMMUNITY DEVELOPMENT CORPORATION D/B/A J.S. CLARK LEADERSHIP ACADEMY B. Findings - Financial Statement Audit ) School Activity Account Balances SCHEDULE OF FINDINGS AND OUESTIONED COSTS For the Year Ended June 30,2015 Criteria: Condition: Cause: Effect: Recommendation: A system of internal controls should be in place to provide reasonable assurance that restricted student activity funds are properly recorded in the accounting system and the transaction is evidenced by appropriate approved documentation that includes proper allocation of the deposits and expenses recorded in each activity fund. In cases where other cash accounts recorded deposits to payments that should have been recorded in the activity account, control procedures should also be in place to complete the process of transferring funds from or to the school activity cash accounts at the time of occurrence or during the periodic reconciliation process. The Corporation's school activity fund cash balance of $13,963 did not agree with the funds held in custody for others liability balance of $4,977 at year end. The funds held in custody for others included two accoimts that had a deficit balance at year end. The Corporation's accounting policy manual requires all deficit balances in school activity accounts to be cleared on June 30* of each year. As a result, the internal control processes to ensure proper accounting and reconciliation of transactions within the school activity funds were lacking. The above condition resulted from procedures in the Corporation's accounting policy manual not being followed for timely reconciling school activity fund deposits and expenses. Without proper internal controls being followed over the accounting of school activity transactions and reconciliations of the accounts, a potential exists that activities which are intended to be funded by the student organizations are paid by the Corporation. The Corporation should follow its accounting policy manual, which requires reconciling the transactions recorded in the student activity fund accounts to determine that items recorded are appropriate deposits or expenses. View of Responsible Official and Planned Corrective Action-. Student activity liability accounts and corresponding student activity bank account will be reviewed and reconciled quarterly. Any deficits will be cleared and student cash account balanced to the liabilities. The Corporation's accounting policy manual will be updated to reflect these changes

26 OUTREACH COMMUNITY DEVELOPMENT CORPORATION D/B/A J.S. CLARK LEADERSHIP ACADEMY ) Emplovees Paid as Contractors SCHEDULE OF FINDINGS AND OUESTIONED COSTS For the Year Ended June 30,2015 Criteria: Condition: Cause: Effect: The Internal Revenue Service (IRS) has guidelines to distinguish a contractor from an employee and has a 20 point criterion for determining the categorization. Under the IRS guidelines, an employee generally cannot also be considered a contractor. A system of internal controls should be in place to provide reasonable assurance that payments to individuals for contract services are not considered employees of the Corporation. The Corporation's is currently paying several school employees for services provided after regular school hours for the operating of an after-school program. These payments have been identified as contractor payments with an IRS form 1099 being issued at year end. As such, a possibility exists that the Corporation may be liable for unpaid payroll taxes on these individuals being paid as contractors who may meet the defmition of an employee. The IRS determination test was not completed to conclude these employees could also be considered a contractor. Without the proper IRS determination and conclusion, the Corporation may be liable for payroll taxes and penalties on the payments being paid to employees as contractors. The Corporation should consider a policy to use the IRS criteria and document the determination that payments to employees identified as contractors are exempt for payroll taxes. View of Responsible Official and Planned Corrective Action: The school employees that are being paid as contractors for the after-school program have separate and distinct responsibilities for the program that are unrelated to their responsibilities as school employees. As a result, the school treats the after-school services as contracted services rather than employment. The school will draft a letter to be signed by each employee acknowledging that the after-school program is a contractor relationship and that the employee is responsible for all related payroll taxes. -22-

27 OUTREACH COMMUNITY DEVELOPMENT CORPORATION D/B/A J.S. CLARK LEADERSHIP ACADEMY SCHEDULE OF FINDINGS AND OUESTIONED COSTS For the Year Ended June 30, ) Issuance of Purchase Orders and Controls Over Debit Card Transactions Criteria: Condition: Cause: Effect: Recommendation: A system of internal controls should be in place to provide reasonable assurance that purchases are completed in a manner that follow adopted policies in order to safeguard the use of funds and to document the business purpose of the transaction. The Corporation's accounting policy manual allows for purchases to be paid with the use of debit cards, along with a check or credit cards, but only after a completed approved purchase order signed by the Chief Executive Officer after the purchase is made. Transactions that we selected for review included some paid for with the debit card and not all required documentation was available or provided. The purchase order approved by the Chief Executive Officer that is required by the accounting policy manual was not provided. In addition, we could not identify the business purpose of the transaction on the documentation provided. The accounting policy manual was not followed. Without all transactions following all of the requirements of the accounting policy manual, a potential exists for misappropriation with purchases being made that are not for an approved business purpose. The Corporation needs to follow all of the requirements of its accounting policy manual for all transactions or amend the manual for circumstances where a different policy should be followed. View of Responsible Official and Planned Corrective Action: The school is currently updating its accounting policy manual to reflect procedures and business practices that align with the school's current size and staffing. The requirements of using purchase orders will be addressed in the updated accounting policy manual. C. Findings - Federal Award Programs None -23-

28 OUTREACH COMMUNITY DEVELOPMENT CORPORATION D/B/A J.S. CLARK LEADERSHIP ACADEMY SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS For the Year Ended June 30,2015 None -24-

29 P&N Postlethwaite & Netterville A Professional Accounting Corporation Associated Offices in Principal Cities of the United States INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING AGREED-UPON PROCEDURES To the Board of Directors for Outreach Community Development Corporation D/B/A JS Clark Leadership Academy We have performed the procedures included in the Louisiana Governmental Audit Guide and enumerated below, which were agreed to by the management of the Outreach Community Development Corporation and the Legislative Auditor, State of Louisiana, solely to assist users in evaluating management's assertions about the performance and statistical data accompanying the annual fmancial statements of the Outreach Community Development, Corp. and statistical data accompanying the annual financial statements of the Outreach Community Development, Corp. and to determine whether the specified schedules are free of obvious errors and omissions as provided by the Board of Elementary and Secondary Education (BESE) Bulletin. This agreed-upon procedures engagement was performed in accordance with standards established by the American Institute of Certified Public Accountants and applicable standards of Government Auditing Standards. The sufficiency of these procedures is solely the responsibility of the specified users of the report. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose. Our procedures and findings relate to the accompanying schedules of supplemental information and are as follows: General Fund Instructional and Support Expenditures and Certain Local Revenue Sources (Schedule 1) Procedure #] P&N selected a random sample of 25 transactions and reviewed supporting documentation to determine if the expenditures/revenues are classified correctly and are reported in the proper amounts for each of the following amounts reported on the schedule: Total General Fund Instructional Expenditures Total General Fund Equipment Expenditures Total Local Taxation Revenue Total Local Earnings on Investment in Real Property Total State Revenue in Lieu of Taxes Nonpublic Textbook Revenue, and Nonpublic Transportation Revenue Results of procedure # 1 In performing the testing on the expenditures/revenues, we noted no transactions that were inappropriately classified or were recorded at an inappropriate amount United Plaza Blvd, Suite 1001 Baton Rouge, LA Tel: Fox: