CHILD START, INC. AUDITED FINANCIAL STATEMENTS DECEMBER 31, 2017 AND 2016

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1 AUDITED FINANCIAL STATEMENTS DECEMBER 31, 2017 AND 2016

2 CONTENTS INDEPENDENT AUDITORS' REPORT 3-4 AUDITED FINANCIAL STATEMENTS Statements of financial position 5 Statements of activities 6 Statements of functional expenses 7-8 Statements of cash flows 9 Notes to financial statements SINGLE AUDIT SECTION Schedule of expenditures of federal awards 15 Notes to schedule of expenditures of federal awards 16 ADDITIONAL REPORTS 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 the Uniform Guidance Schedule of findings and questioned costs 21 Page

3 INDEPENDENT AUDITORS' REPORT Board of Directors and Management Child Start, Inc. Missoula, Montana Report on the Financial Statements We have audited the accompanying financial statements of Child Start, Inc. (a nonprofit organization), which comprise the statements of financial position as of December 31, 2017 and 2016, 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 the financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statements that are free of material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits 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 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 Connery Way / Missoula, MT Office: (406) / Fax: (406) / jccscpa.com

4 Board of Directors and Management Child Start, Inc. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Child Start, Inc., as of December 31, 2017 and 2016, and the changes in its net assets and its cash flows for the years then ended in conformity 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 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 June 8, 2018, on our consideration of Child Start, 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 Start, Inc.'s internal control over financial reporting and compliance. Junkermier, Clark, Campanella, Stevens, P.C. Missoula, Montana June 8,

5 STATEMENTS OF FINANCIAL POSITION December 31, 2017 and Assets Current Assets Cash $ 92,421 $ 78,601 Cash - Accrued Leave Fund 57,566 57,509 Grants Receivable 94, ,734 Prepaid Expenses Total Current Assets 245, ,452 Capital Assets Leasehold Improvements 339, ,226 Vehicles 235, ,608 Equipment 115, ,594 Less: Accumulated Depreciation (564,599) (547,908) Net Capital Assets 125, ,520 Total Assets $ 371,298 $ 390,972 Liabilities and Net Assets Current Liabilities Accounts Payable $ 70,941 $ 105,157 Salaries Payable 55,550 53,116 Payroll Taxes and Fringe Benefits Payable 9,392 7,776 Accrued Compensated Absences Payable 79,599 74,065 Total Current Liabilities 215, ,114 Net Assets Unrestricted 155, ,858 Total Liabilities and Net Assets $ 371,298 $ 390,972 See the independent auditors' report and the accompanying notes to the financial statements. -5-

6 STATEMENTS OF ACTIVITIES For the Years Ended December 31, 2017 and Unrestricted Activities Unrestricted Activities Revenues Federal Grants $ 2,892,191 $ 2,801,606 Contributed Services 472, ,995 Interest Income Contributions Other Revenue 2,890 6,580 Total Revenues 3,367,916 3,291,481 Expenses Program Services 3,050,229 2,974,505 General and Administrative 312, ,094 Total Expenses 3,362,958 3,303,599 Change in Net Assets 4,958 (12,118) Net Assets Beginning of the Year 150, ,976 End of the Year $ 155,816 $ 150,858 See the independent auditors' report and the accompanying notes to the financial statements. -6-

7 STATEMENT OF FUNCTIONAL EXPENSES For the Year Ended December 31, 2017 Program Administration 2017 Total Salaries $ 1,450,202 $ 181,435 $ 1,631,637 Taxes and Employee Benefits 628,934 36, ,221 Contractual 60,710-60,710 Professional Fees 35,448 12,356 47,804 Supplies 105,922 35, ,989 Food 125, ,332 Occupancy Costs 82,498 4,597 87,095 Training 23,941 4,986 28,927 Vehicle and Maintenance 23,969-23,969 Travel 18,050 6,312 24,362 Depreciation 16,691-16,691 Insurance 10,204 20,226 30,430 Other Costs 6, ,312 Subtotal 2,588, ,136 2,890,479 In-Kind Contributions 461,886 10, ,479 Total Expenses $ 3,050,229 $ 312,729 $ 3,362,958 See the independent auditors' report and the accompanying notes to the financial statements. -7-

8 STATEMENT OF FUNCTIONAL EXPENSES For the Year Ended December 31, 2016 Program Administration 2016 Total Salaries $ 1,439,988 $ 194,116 $ 1,634,104 Taxes and Employee Benefits 602,563 38, ,386 Contractual 45,435-45,435 Professional Fees 34,782 13,440 48,222 Supplies 90,787 31, ,049 Food 117, ,510 Occupancy Costs 87,742 5,834 93,576 Training 24,335 4,639 28,974 Equipment Vehicle and Maintenance 18,618-18,618 Travel 3,757 1,955 5,712 Depreciation 23,279-23,279 Insurance 16,076 13,946 30,022 Other Costs 10,189 1,528 11,717 Subtotal 2,515, ,543 2,820,604 In-Kind Contributions 459,444 23, ,995 Total Expenses $ 2,974,505 $ 329,094 $ 3,303,599 See the independent auditors' report and the accompanying notes to the financial statements. -8-

9 STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2017 and Cash Flows From Operating Activities: Change in Net Assets $ 4,958 $ (12,118) Adjustments to Reconcile Change in Net Assets to Net Cash from Operating Activities: Depreciation 16,691 23,279 In-Kind Revenue (472,479) (482,995) In-Kind Expense 472, ,995 (Increase) Decrease in: Receivables 16,965 1,160 Prepaid Expenses (105) - Increase (Decrease) in: Accounts Payable (34,216) 40,178 Wages and Benefits Payable 4, Accrued Compensated Absences 5,534 16,583 Cash Flows From Operating Activities 13,877 69,912 Net Change in Cash 13,877 69,912 Cash Balances Beginning of the Year 136,110 66,198 End of the Year $ 149,987 $ 136,110 Cash Balances Cash - Unrestricted $ 92,421 $ 78,601 Cash - Accrued Leave Fund 57,566 57,509 $ 149,987 $ 136,110 See the independent auditors' report and the accompanying notes to the financial statements. -9-

10 1. Significant Accounting Policies NOTES TO FINANCIAL STATEMENTS December 31, 2017 and 2016 Organization - Child Start, Inc. is a non-profit organization incorporated under the laws of Montana and is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code. Child Start, Inc. operates the Head Start program in Missoula, Sanders, Mineral, Powell, and Granite counties and the Child and Adult Care Food Nutrition Program (CACFP) in Missoula and Powell counties in Montana. Nature of Operations - The goal of Child Start, Inc. is to develop, administer, and implement programs for the educational, social, health, nutritional, and psychological needs of low-income children and their families. Basis of Accounting - Child Start, Inc. uses the accrual basis of accounting. Revenues are recognized when earned and expenses are recorded when services are rendered and the liability is incurred. Fund Accounting - The financial statements are prepared in conformity with the standards promulgated by the Financial Accounting Standards Board Accounting Standards Codification (FASB ASC) 958, Not-for-Profit Entities. Under this guidance, the Organization is required to report information regarding its financial position and activities according to three classes of net assets: Unrestricted - Revenues received without restriction on their timing or use are reported as unrestricted funds. Grants and donor-restricted contributions received in a fiscal year whose restrictions were met in that fiscal year are reported as unrestricted revenue. Primary revenue sources include cost reimbursement grants, contributions, and program fees. Temporarily Restricted - Revenues restricted by the grantor based on timing and/or usage of funds provided where the restrictions were not met during the year. There were no temporarily restricted funds for the years ended December 31, 2017 or Permanently Restricted - Revenues permanently restricted by the grantor. There were no permanently restricted funds for the years ended December 31, 2017 or Cash Equivalents - For the purpose of the statement of cash flows, cash equivalents consist of investments with original maturities of three months or less. Cash is held in FDIC insured bank accounts. At various times during the year, cash balances may be in excess of the FDIC insurance limits. Accounts Receivable - Substantially all of the accounts receivable are considered collectible. Accordingly, management has estimated the allowance for uncollectible accounts to be zero at December 31, 2017 and If it is probable accounts are uncollectible, they are charged to operations and an allowance is established when that determination is made. Capital Assets - Child Start, Inc. capitalizes capital assets costing at least $5,000 with a useful life of two years or more. Capital assets are carried at cost and were acquired under a grant contract. Under the terms of the contract, the capital assets, or any proceeds from their sale, must be used for services pursuant to the grant contract. -10-

11 1. Significant Accounting Policies (Continued) NOTES TO FINANCIAL STATEMENTS December 31, 2017 and 2016 Capital Assets (Continued) - Depreciation is computed using the straight-line method over the following estimated useful lives: Leasehold improvements Equipment Vehicles years 5-10 years 9 years Grant Revenue - Grant revenue is recognized when earned, generally when related expenses are recorded. Grants receivable consist primarily of grant revenue due to Child Start, Inc. for reimbursement of grant expenses. Generally, Child Start, Inc. expends donor restricted funds first. Consequently, individual project net assets are usually considered unrestricted. Contributed Services and Materials - Contributed services and materials are recorded at estimated cost and consist of in-kind donations of services and goods received. Professional services and space costs donated to Child Start, Inc. that are included in the financial statements for 2017 and 2016 were $472,479 and $482,995, respectively. Other contributions of volunteer time and miscellaneous items with an estimated value of $104,982 in 2017 and $168,272 in 2016, have not been included in these financial statements because they do not meet the requirements for recognition under accounting principles generally accepted in the United States of America. Fundraising - Fundraising costs are not significant and are included in administration expenses. Compensated Absences - Employees earn vacation leave at the rate of one (1) hour for each seventeen (17) hours worked and sick leave at the rate of one (1) hour for each nineteen (19) hours worked. Vacation leave is payable upon separation from employment or at the end of each school year with a written request and must be used within fifteen (15) working months from when it was earned or it is lost. Sick leave may be accumulated to a maximum of forty-five (45) days and employees with three (3) or more years of service are paid 30% of unused sick leave upon termination. Employees of the Organization are entitled to vacation and sick leave benefits. The value of accumulated vacation and sick leave accrued for employees is estimated at $79,599 and $74,065 as of December 31, 2017 and 2016, respectively. The Organization has established an accrued leave fund to pay accrued leave liabilities that come due during the year. At December 31, 2017, the balance of the accrued leave fund is $57,566 in cash and $22,033 in accounts receivable for a total of $79,599. At December 31, 2016, the balance of the accrued leave fund is $57,509 in cash and zero in accounts receivable for a total of $57,509. Concentration of Risk - Child Start, Inc. receives approximately 95% of its revenues from the Head Start grant. The loss of this grant would have a serious impact on Child Start, Inc.'s operations. Functional Expense Reporting - The cost of providing program and supporting services has been summarized by function, based on estimates developed by management. -11-

12 1. Significant Accounting Policies (Continued) NOTES TO FINANCIAL STATEMENTS December 31, 2017 and 2016 Income Taxes - There is no provision for income taxes because the Organization had no business income unrelated to its exempt activities in 2017 and Estimates - The preparation of the 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, liabilities, revenues, and expenses. Actual results could differ from reported estimates. 2. Grants Receivable Grants receivable are as follows at December 31: Head Start Grant $ 78,049 $ 89,221 Training Grant 1,182 8,472 Child and Adult Care Food Program 14,523 13,188 Child Care Reimbursement Program 1, Total $ 94,769 $ 111, Capital Assets The major classes of capital assets are as follows at December 31, 2017: Balance 2016 Additions Disposals Balance 2017 Cost of Assets: Leasehold Improvements $ 339,226 $ - $ - $ 339,226 Vehicles 235, ,608 Equipment 115, ,594 Total 690, ,428 Accumulated Depreciation: Leasehold Improvements (235,095) (2,130) - (237,225) Vehicles (227,691) (2,703) - (230,394) Equipment (85,122) (11,858) - (96,980) Total (547,908) (16,691) - (564,599) Net Capital Assets $ 142,520 $ (16,691) $ - $ 125,

13 3. Capital Assets (Continued) NOTES TO FINANCIAL STATEMENTS December 31, 2017 and 2016 The major classes of capital assets are as follows at December 31, 2016: Balance 2015 Additions Disposals Balance 2016 Cost of Assets: Leasehold Improvements $ 339,226 $ - $ - $ 339,226 Vehicles 341,340 - (105,732) 235,608 Equipment 188,087 - (72,493) 115,594 Total 868,653 - (178,225) 690,428 Accumulated Depreciation: Leasehold Improvements (232,964) (2,131) - (235,095) Vehicles (329,217) (4,206) 105,732 (227,691) Equipment (140,673) (16,942) 72,493 (85,122) Total (702,854) (23,279) 178,225 (547,908) Net Capital Assets $ 165,799 $ (23,279) $ - $ 142, Operating Leases Child Start, Inc. has a lease with Missoula County Public School District No. 1 (the District) for operating space used for the Head Start program. The lease is currently renewed through July 31, 2014 and has continued on an annual basis. Under this lease, Child Start, Inc. is required to pay the District one dollar per year. The donated space represents approximately 27% and 28% of Child Start, Inc.'s non-federal matching requirement for 2017 and 2016, respectively. Child Start, Inc. also leased space from approximately five (5) other organizations with leases extending one year. The total cash operating lease costs in 2017 and 2016 were $24,360 and $22,976 and total donated space was valued at $260,869 and $265,407, respectively. 5. Risk Management Child Start, Inc. faces a number of risks including (a) loss or damage to property, (b) general liability, (c) workers compensation, and (d) employee medical insurance. Commercial insurance policies are purchased to cover these risks. -13-

14 NOTES TO FINANCIAL STATEMENTS December 31, 2017 and Employee Benefit Plan The Health Benefit Plan for employees of Child Start, Inc. is self-insured for vision and dental benefits to an annual maximum. Excess losses are covered by insurance with a commercial carrier. Hospital, illness, and accident incidents are fully insured, beyond the plan's $1,000 deductible, by a commercial carrier. Through January of 2017, Child Start, Inc. employees participated in a Code Section 403(b) Defined Contribution Retirement Plan and Tax Deferred Annuity Plan. In February of 2017, Child Start, Inc. switched to a Code Section 401(k) Defined Contribution Retirement Plan. Child Start, Inc. matches employee contributions to the Defined Contribution Retirement Plan up to 1% of the employee's salary and 3% for administrative employees. Employees are eligible to participate on a voluntary basis on the plan entry date following employment and are fully vested upon contribution. For the years ended December 31, 2017 and 2016, Child Start, Inc. contributed $5,721 and $3,647 in matching contributions, respectively. The Tax Deferred Annuity Plan is available to all employees of Child Start, Inc. upon employment. Employees may elect to contribute up to the maximum amount allowed by law and are fully vested upon contribution. Employees may also participate in a flexible benefit plan for medical and child care costs under Section 125 of the Internal Revenue Code. Regular status employees are eligible to participate in the first month following attainment of regular status. 7. Labor Subject to Collective Bargaining Agreement Approximately 90% of Child Start, Inc.'s labor force is covered by a collective bargaining agreement. 8. Subsequent Events Management has evaluated subsequent events through June 8, 2018, the date through which the financial statements were available to be issued. -14-

15 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the Year Ended December 31, 2017 Federal CFDA Number Amounts Passed Through to Subrecipients Federal Grantor/Pass-Through Program Title 2017 Expenditures U.S. Department of Health and Human Services Federally Administered Head Start (Contract #08CH ) $ 2,740,424 $ - Administered by Child Care Resources of Montana Child Care Reimbursement ,151 - Total U.S. Department of Health and Human Services 2,745,575 - U.S. Department of Agriculture Administered by Montana Dept. of Public Health and Human Services Child and Adult Care Food Program (Contract #12-02-CACFP-120) ,923 - Total Federal Expenditures $ 2,888,498 $ - See accompanying notes to the schedule of expenditures of federal awards. -15-

16 NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the Year Ended December 31, Basis of Accounting The accompanying Schedule of Expenditures of Federal Awards (the Schedule) includes the federal award activity of Child Start, Inc. under programs of the federal government for the year ended December 31, 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 Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of Child Start, Inc., it is not intended to and does not present the financial position, changes in net assets, or cash flows of Child Start, Inc. 2. Summary of Significant Accounting Policies The accounting policies used in preparing the Schedule of Expenditures of Federal Awards are the same as those used in the preparation of the basic financial statements as described in Note 1 to the financial statements, except that reported Federal expenditures include building improvements, which are capitalized as assets and not reported as expenses in the financial statements. The information included in this schedule is presented in accordance with the requirements of the Uniform Guidance. Some amounts may differ from amounts presented in, or used in the preparation of, the basic financial statements. Reported Federal expenditures include only expenditures paid with Federal funds or reportable program income. 3. Indirect Cost Rate Child Start, Inc. did not elect to use the 10 percent de-minimis indirect cost rate as allowed under the Uniform Guidance. 4. Subrecipients Child Start, Inc. did not pass-through any funds to subrecipients during the year ended December 31,

17 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 and Management Child Start, Inc. Missoula, Montana 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 Start, Inc. (a nonprofit organization), which comprise the statement of financial position as of December 31, 2017, 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 June 8, Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered Child Start, 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 Start, Inc.'s internal control. Accordingly, we do not express an opinion on the effectiveness of Child Start, Inc.'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 internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified Connery Way / Missoula, MT Office: (406) / Fax: (406) / jccscpa.com

18 Board of Directors and Management Child Start, Inc. Compliance and Other Matters As part of obtaining reasonable assurance about whether Child Start, Inc.'s financial statements are free of 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. 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. Junkermier, Clark, Campanella, Stevens, P.C. Missoula, Montana June 8,

19 INDEPENDENT AUDITORS' REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE Board of Directors and Management Child Start, Inc. Missoula, Montana Report on Compliance for Each Major Federal Program We have audited Child Start, 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 Start, Inc. s major federal programs for the year ended December 31, Child Start, Inc.'s major federal programs are identified in the summary of auditors' results section of the accompanying schedule of findings and questioned costs. Management's Responsibility Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditors' Responsibility Our responsibility is to express an opinion on compliance for each of Child Start, 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 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 that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Child Start, 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 Start, Inc. s compliance. Opinion on Each Major Federal Program In our opinion, Child Start, 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 December 31, Connery Way / Missoula, MT Office: (406) / Fax: (406) / jccscpa.com

20 Board of Directors and Management Child Start, Inc. Report on Internal Control Over Compliance Management of Child Start, 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 Child Start, Inc. s internal control over compliance with the types of requirements that could have a direct and material effect on a 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 Start, 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 a 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 the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Junkermier, Clark, Campanella, Stevens, P.C. Missoula, Montana June 8,

21 SCHEDULE OF FINDINGS AND QUESTIONED COSTS For the Year Ended December 31, 2017 I. Summary of Auditors' Results 1. The independent auditors' report expresses an unmodified opinion on whether the financial statements of Child Start, Inc. were prepared in accordance with U.S. GAAP. 2. No material weaknesses relating to the audit of the financial statements were reported in the 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. 3. No instances of noncompliance material to the financial statements of Child Start, Inc., which would be required to be reported in accordance with Government Auditing Standards, were disclosed during the audit. 4. No material weaknesses relating to the audit of the major federal award programs were reported in the Independent Auditors' Report on Compliance For Each Major Program and on Internal Control Over Compliance Required by the Uniform Guidance. 5. The independent auditors' report on compliance for the major federal award programs for Child Start, Inc. expresses an unmodified opinion on all major federal programs. 6. There are no audit findings that are required to be reported in accordance with 2 CFR Section (a). 7. The program tested as a major program included the following: Head Start CFDA No The threshold for distinguishing Types A and B programs was $750,000 in expenditures. 9. Child Start, Inc. was determined to be a low-risk auditee. II. Findings - Financial Statements Audit No matters were reported. III. Findings and Questioned Costs - Major Federal Award Programs No matters were reported. IV. Status of Prior Year Findings No matters were reported. -21-