Early Learning Coalition of Broward County, Inc. Audit Committee Meeting Agenda 6301 NW 5 th Way, Suite 3400, Fort Lauderdale, FL 33309 Wednesday, February 7, 2017 11:30 AM Members are reminded of conflict of interest provisions. In declaring a conflict, please refrain from voting or discussion and declare the following information: 1) Your name and position on the Board, 2) The nature of the conflict and 3) Who will gain or lose as a result of the conflict. Please also fill out form 8B prior to the meeting. I. Call to Order Meeting Call-in Number: (712) 775-7031 Enter Call ID: 673-232-836# Michael Asseff, Audit Chair II. Roll Call Irene Ramos, Executive Assistant III. Agenda a. Review and Approve FY15/16 Draft Audit Report (Tab 1) pgs.32-57 Christopher Lehman & Cynthia Borders, S B & Company IV. FYI and Discussion a. Notification of vendor payment compliance Issues b. On-line purchasing account access controls plan c. Initial administrative department assessment (Tab 2) pgs. 58-60 (Tab 3) pgs. 61-62 (Tab 4) pgs. 63-66 Christine Klima, CAO VI. Other New Business Matters from the Committee Matters from the Chair Public Comment Next Meeting: TBD Adjourn Please Note: Agenda subject to revisions and additions per the discretion of the Chair of the Coalition. Notification will be sent of any such revisions or additions. Members of the Public: Please sign up at the entry desk for public comments to be made on particular agenda items no later than five minutes after the Coalition meeting has been called to order. Pages 1 of 66
f Presentation to the Audit Committee February 7, 2017 Pages 2 of 66
INTRODUCTIONS KNOWLEDGE QUALITY CLIENT SERVICE Pages 3 of 66
KNOWLEDGE QUALITY CLIENT SERVICE Engagement Team Leadership SB & Company, LLC Cynthia Borders-Byrd, Audit Principal Chris Lehman, Audit Partner Pages 4 of 66
EXECUTIVE SUMMARY KNOWLEDGE QUALITY CLIENT SERVICE Pages 5 of 66
KNOWLEDGE QUALITY CLIENT SERVICE Scope of Services Audit of the June 30, 2016, financial statements Uniform Guidance Single Audit; Florida Single Audit; Chapter 10.650, Rules of the Auditor General; and Special Guidance Provided by the Florida Office of Early Learning Preparation of the 2015 Federal Form 990 Available for year-round consultation Pages 6 of 66
KNOWLEDGE QUALITY CLIENT SERVICE Summary of the Results Planning to issue an unmodified opinion on the financial statements No material weaknesses noted We did not discover any instances of fraud Received full cooperation from management Results: 2016 2015 2014 Change in Net Assets $ (1,405) $ (28,421) $ 43,124 Net Assets $ 261,602 $ 353,491 $ 381,912 Audit journal entries One proposed journal entry for compensated absences liability (restatement to beginning net assets) No single audit findings Pages 7 of 66
KNOWLEDGE QUALITY CLIENT SERVICE Pages 8 of 66
KNOWLEDGE QUALITY CLIENT SERVICE FORCAM Audit Approach Focus on Risk, Controls and Misstatement Pages 9 of 66
KNOWLEDGE QUALITY CLIENT SERVICE Assessment of Control Environment Area Points to Consider Our Assessment Control Environment Risk Assessment Control Activities Key executive integrity, ethics, and behavior Control consciousness and operating style Commitment to competence Exercise oversee responsibility Organizational structure, responsibility, and authority Enforce accountability HR policies and procedures Define objectives and risk tolerances Identify, analyze, and respond to risk Assess fraud risk Identify, analyze, and respond to change Mechanisms to anticipate, identify, and react to significant events Processes and procedures to identify changes in GAAP, business practices, and internal control Design control activities Design activities for the information system Implement control activities Existence of necessary policies and procedures Clear financial objectives with active monitoring Logical segregation of duties Periodic comparisons of book-to-actual and physical count-to-books Adequate safeguards of documents, records, and assets Assess controls in place Not effective Suggested improvements Effective Pages 10 of 66
KNOWLEDGE QUALITY CLIENT SERVICE Assessment of Control Environment (continued) Area Points to Consider Our Assessment Information and Communication Monitoring Not effective Suggested improvements Effective Use quality information Communicate internally Communicate externally Adequate performance reports produced from information systems Information systems are connected with business strategy Commitment of HR and finance to develop, test, and monitor IT systems and programs Business continuity and disaster plan for IT Established communication channels for employees to fulfill responsibilities Adequate communication across organization Perform monitoring activities Remediate deficiencies Periodic evaluations of internal controls Implementation of improvement recommendations Pages 11 of 66
KNOWLEDGE QUALITY CLIENT SERVICE Significant Accounts and Processes Pages 12 of 66
KNOWLEDGE QUALITY CLIENT SERVICE A Understand the Process C What Can Go Wrong B Walk-Through D Test of Control Evaluation of Key Processes Process Function A B C D Design Operation Treasury Estimation Financial Reporting Cash Management Investment Accounting Investment Monitoring Investment Valuation Investment Policy Reconciliation Methodology Information Calculation Accounting Principles and Disclosure Closing the Books Report Preparation General Ledger and Journal Entry Processing Verification and Review of Results Not effective Suggested improvements Effective Pages 13 of 66
KNOWLEDGE QUALITY CLIENT SERVICE Evaluation of Key Processes (continued) Process Function A B C D Design Operation Expenditures Payroll Revenue Purchasing Receiving Accounts Payable and Cash Disbursement Purchase Card Transactions Hiring Attendance Reporting Payroll Accounting and Processing Payroll Disbursements Separation Billing Cash Receipts Revenue Recognition Cutoff A Understand the Process C What Can Go Wrong B Walk-Through D Test of Control Not effective Suggested improvements Effective Pages 14 of 66
KNOWLEDGE QUALITY CLIENT SERVICE A Understand the Process C What Can Go Wrong B Walk-Through D Test of Controls Evaluation of Key Processes (continued) Process Function A B C D Design Operation Fixed Assets Compliance Information Technology Physical Custody Asset Accounting Assess Internal and External Risk Regulatory Compliance Monitor Compliance Grant Compliance Program Integrity and Change Management Information Security and Transaction Authorization Segregation of Duties and Management Oversight Computer Operations Not effective Suggested improvements Effective Pages 15 of 66
KNOWLEDGE QUALITY CLIENT SERVICE Cash Grants receivable Material adjustments Immaterial adjustments No adjustments Key Accounts Assertions and Audit Results Key Accounts Assertions Results Accounts payable and accrued expenses Due to providers Revenue and support Expenses Existence Existence, Valuation Completeness Completeness Occurrence Completeness Pages 16 of 66
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KNOWLEDGE QUALITY CLIENT SERVICE Financial Statement Highlights STATEMENT OF NET ASSETS JUNE 30, 2016, 2015 and 2014 2016 2015 2014 ASSETS Cash $ 385,408 $ 416,358 $ 225,273 Grants receivable 7,373,496 6,693,130 6,769,242 Advance to providers 13,626 14,659 13,837 Prepaid expenses 36,990 27,744 28,008 Furniture and equipment, net 10,758 22,090 33,259 Total Assets $ 7,820,278 $ 7,173,981 $ 7,069,619 LIABILITIES AND NET ASSETS Accounts payable and accrued expenses $ 182,358 $ 274,098 $ 180,359 Advances from OEL 38,061 16,974 13,370 Due to providers: Family Central 161,757 6,057,878 5,906,740 School Board of Broward 174,198 189,497 325,946 Nova Southeastern University 170,863 170,702 170,776 Children's Forum 10,634 111,341 90,516 Broward Regional Health Planning Commission 6,693,914 - - 211 Broward 126,891 - - Total Liabilities 7,558,676 6,820,490 6,687,707 Net Assets Unrestricted 261,602 353,491 381,912 Total Liabilities and Net Assets $ 7,820,278 $ 7,173,981 $ 7,069,619 Pages 18 of 66
KNOWLEDGE QUALITY CLIENT SERVICE Financial Statement Highlights (continued) STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS FOR THE YEARS ENDED JUNE 30, 2016, 2015 and 2014 2016 2015 2014 Revenue and Support Federal grants $ 46,586,840 $ 44,699,749 $ 43,728,739 State grants 39,065,527 38,232,900 37,381,831 Children's Services Council of Broward County 7,028,509 4,395,576 6,012,827 Other income 85,848 57,625 26,515 Total Revenue and Support 92,766,724 87,385,850 87,149,912 Expenses Program Services School Readiness (SR) 44,591,310 39,410,957 41,881,079 Voluntary Pre-kindergarten (VPK) 37,471,489 36,715,668 34,443,335 Entrance/Refugees 74,117 - - Program support and administration 8,780,679 9,645,901 9,105,040 Total Program Services 90,917,595 85,772,526 85,429,454 General and administrative 1,850,534 1,615,055 1,627,715 Fundraising - 26,690 49,619 Total Expenses 92,768,129 87,414,271 87,106,788 Change in unrestricted net assets (1,405) (28,421) 43,124 Net assets, beginning of year 263,007 381,912 338,788 Net Assets, End of Year $ 261,602 $ 353,491 $ 381,912 Pages 19 of 66
KNOWLEDGE QUALITY CLIENT SERVICE Single Audit Results Major Federal Program CFDA Number Federal Expenditures Temporary Assistance for Needy Families (TANF) 93.558 $ 7,994,928 Temporary Assistance for Needy Families Maintenance of Effort Funds 93.558 5,648,389 Total TANF $ 13,643,317 Total Expenditures of Federal Awards $ 46,586,840 Percentage Coverage 29% Major Florida State Program CFDA Number Federal Expenditures Florida Office of Early Learning Voluntary Pre-Kindergarten Services 48.108 $ 38,969,526 Voluntary Pre-Kindergarten Services 48.108 96,001 Total Florida Office of Early Learning $ 39,065,527 Total Expenditures of State Financial Assistance $ 39,065,527 Percentage Coverage 100% Pages 20 of 66
KNOWLEDGE QUALITY CLIENT SERVICE Pages 21 of 66
KNOWLEDGE QUALITY CLIENT SERVICE Required Communications 1. Auditor s Responsibilities Under Generally Accepted Auditing Standards (GAAS) The financial statements are the responsibility of management. Our audit was designed in accordance with auditing standards generally accepted in the United States of America, and provide for reasonable, rather than absolute, assurance that the financial statements are free of material misstatement. 2. Significant Accounting Policies Management has the responsibility for selection and use of appropriate accounting policies. In accordance with the terms of our engagement letter, we will advise management about the appropriateness of accounting policies and their application. The significant accounting policies used by management are described in the notes to the financial statements. 3. Auditor s Judgments About the Quality of Accounting Principles We discuss our judgments about the quality, not just the acceptability, of accounting principles selected by management, the consistency of their application, and the clarity and completeness of the financial statements, which include related disclosures. We have reviewed the significant accounting policies adopted by the Early Learning Coalition of Broward County, Inc. (ELC) and have determined that these policies are acceptable accounting policies. Pages 22 of 66
KNOWLEDGE QUALITY CLIENT SERVICE 4. Audit Adjustments We are required to inform ELC s oversight body about adjustments arising from the audit (whether recorded or not) that could in our judgment either individually or in the aggregate have a significant effect on the entity s financial reporting process. We also are required to inform ELC s oversight body about unadjusted audit differences that were determined by management to be individually and in the aggregate, immaterial. There were no passed adjustments identified during the audit process. We proposed one journal entry related to compensated absences liability, which was recorded by management. 5. Fraud and Illegal Acts We are required to report to ELC s oversight body any fraud and illegal acts involving senior management and fraud and illegal acts (whether caused by senior management or other employees) that cause a material misstatement of the financial statements. Our procedures identified no instances of fraud or illegal acts. 6. Material Weaknesses in Internal Control We are required to communicate all significant deficiencies in ELC s systems of internal controls, whether or not they are also material weaknesses. Required Communications (continued) There were no material weaknesses noted during the audit. Pages 23 of 66
KNOWLEDGE QUALITY CLIENT SERVICE 7. Other Information in Documents Containing Audited Financial Statements None. 8. Disagreements with Management on Financial Accounting and Reporting Matters None. 9. Serious Difficulties Encountered in Performing the Audit None. 10. Major Issues Discussed with Management Prior to Acceptance None. 11. Management Representations We will receive certain written representations from management as part of the completion of the audit. 12. Consultation with Other Accountants To our knowledge, there were no consultations with other accountants since our appointment as the Foundation s independent public accountants. 13. Non-Attest Services We assisted with drafting the financial statements and the completion of the 990 tax return. 14. Independence Required Communications (continued) As part of our client acceptance process, we go through a process to ensure we are independent of ELC. Pages 24 of 66 We are independent of ELC.
KNOWLEDGE QUALITY CLIENT SERVICE 15. Our Responsibility Related to Fraud Plan and perform the audit to obtain reasonable assurance that there is no material misstatement caused by error or fraud; Comply with AU-C Section 240: Consideration of Fraud in a Financial Statement Audit Approach all audits with an understanding that fraud could occur in any entity, at any time, by anyone; and Required Communications (continued) Perform mandatory procedures required by GAAS and our firm policies. Examples of Procedures Performed Discuss thoughts and ideas on where the financial statements might be susceptible to material misstatement due to fraud; Understand pressures on the financial statement results; Understand the tone and culture of the organization; Look for unusual or unexpected transactions, relationships, or procedures; Discussions with individuals outside of finance; Evaluate key processes and controls; and Consider information gathered throughout the audit. Pages 25 of 66
KNOWLEDGE QUALITY CLIENT SERVICE Pages 26 of 66
KNOWLEDGE QUALITY CLIENT SERVICE External Auditor Responsibility for Mitigating Fraud Evaluate management programs and controls to deter and detect fraud for identified risks Reasonable assurance that financial statements are free of material misstatement due to fraudulent financial reporting or misappropriation of assets Compliance with fraud standard (SAS 99) Conversations with finance and operations personnel Disaggregated analytics Surprise audit procedures Journal entry testing Costs & Expenses Avoided by Fraud Financial Misconduct by Member(s) of Sr. Management of the Board Revenue & Assets Obtained by Fraud Fraudulent Financial Reporting Misappropriation of Assets Expenditures & Liabilities for an Improper Purpose Management: CFO/Controller: controls to deter and detect fraud General Counsel/Compliance: monitoring Audit Committee: Evaluate management identification of fraud risk Evaluate implementation of fraud controls Reinforce tone at the top Conduct special investigations Pages 27 of 66
KNOWLEDGE QUALITY CLIENT SERVICE SBC s Service Pledge to You We will consistently deliver a Quality Product and Quality Service so that we have the opportunity to establish a Quality Relationship with you, allowing us to provide you with Quality Knowledge for your continual success. Only after we have provided you with the knowledge that enables your business to grow and prosper, we have hit the bullseye! Our commitment to you is the execution of our Bullseye Philosophy. We execute this philosophy for every client, on every engagement, every time. Pages 28 of 66
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KNOWLEDGE QUALITY CLIENT SERVICE Engagement Team Contact Information Cynthia Borders, CPA, MBA Engagement Principal Office:(954) 742-7997 Cell:(954)-661-1848 Fax: 410-584-0061 Email: cborders@sbandcompany.com Executive Assistant: Kristina Ortiz Office: 410-584-9309 Email: kortiz@sbandcompany.com Chris Lehman, CPA Audit Partner Office:(410) 584-2201 Cell:(301)-785-7408 Fax: 410-584-0061 Email: clehman@sbandcompany.com Executive Assistant: Jordan Wida Office: (410) 584-0060 Email: jwida@sbandcompany.com Pages 30 of 66
KNOWLEDGE QUALITY CLIENT SERVICE Baltimore Office: 200 International Circle Suite 5500 Hunt Valley, MD 21030 410.584.0060 Philadelphia Office: 1500 Market Street 12th Floor, East Tower Philadelphia, PA 19102 215.665.5749 Washington, DC Office: 1299 Pennsylvania Ave. NW Suite 1120 Washington, DC 20004 202.803.2335 Richmond Office: 6802 Paragon Place Suite 410 Richmond, VA 23230 804.441.6206 South Florida Office: 4000 Hollywood Boulevard Suite 555-S Hollywood, FL 33021 954.843.3477 Pages 31 of 66 KNOWLEDGE QUALITY CLIENT SERVICE
TAB 1 EARLY LEARNING COALITION OF BROWARD COUNTY, INC. Financial Statements Together with Reports of Independent Public Accountants For the Years Ended June 30, 2016 and 2015 Pages 32 of 66
JUNE 30, 2016 AND 2015 CONTENTS REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 1 FINANCIAL STATEMENTS Statements of Financial Position 3 Statements of Activities and Change in Net Assets 4 Statements of Functional Expenses 5 Statements of Cash Flows 7 Notes to the Financial Statements 8 SUPPLEMENTAL INFORMATION 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 14 REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM, STATE PROJECT AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH THE UNIFORM GUIDANCE AND CHAPTER 10.650, RULES OF THE FLORIDA AUDITOR GENERAL 16 Schedule of Expenditures of Federal Awards and State Financial Assistance 18 Notes to the Schedule of Expenditures of Federal Awards and State Financial Assistance 19 Schedule of Findings and Questioned Costs 21 Summary Schedule of Prior Year Findings 24 Pages 33 of 66
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors Early Learning Coalition of Broward County, Inc. Report on the Financial Statements We have audited the statements of financial position of the Early Learning Coalition of Broward County, Inc. (ELC), as of June 30, 2016 and 2015, and the related statements of activities and change in net assets, functional expenses, 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. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Pages 34 of 66
Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Early Learning Coalition of Broward County, Inc., as of June 30, 2016 and 2015, and the change 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 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 is presented for purposes of additional analysis as required by the Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) 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 Schedule of Expenditures of Federal Awards 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, 2017, on our consideration of ELC 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 ELC s internal control over financial reporting and compliance. Hollywood, Florida, 2017 Pages 35 of 66
2016 2015 ASSETS Cash $ 385,408 416,358 Grants receivable 7,373,496 6,693,130 Advance to providers 13,626 14,659 Prepaid expenses 36,990 27,744 Furniture and equipment, net 10,758 22,090 Total Assets $ 7,820,278 $ 7,173,981 LIABILITIES AND NET ASSETS Accounts payable and accrued expenses $ 182,358 $ 274,098 Advances from OEL 38,061 16,974 Due to providers: Family Central 161,757 6,057,878 School Board of Broward 174,198 189,497 Nova Southeastern University 170,863 170,702 Children's Forum 10,634 111,341 Broward Regional Health Planning Commission 6,693,914-211 Broward 126,891 - Total Liabilities 7,558,676 6,820,490 Net Assets Unrestricted 261,602 353,491 Total Liabilities and Net Assets $ 7,820,278 $ 7,173,981 Pages 36 of 66
2016 2015 Revenue and Support Federal grants $ 46,586,840 $ 44,699,749 State grants 39,065,527 38,232,900 Children's Services Council of Broward County 7,028,509 4,395,576 Other income 85,848 57,625 Total Revenue and Support 92,766,724 87,385,850 Expenses Program Services School Readiness (SR) 44,591,310 39,410,957 Voluntary Pre-kindergarten (VPK) 37,471,489 36,715,668 Entrance/Refugees 74,117 - Program support and administration 8,780,679 9,645,901 Total Program Services 90,917,595 85,772,526 General and administrative 1,850,534 1,615,055 Fundraising - 26,690 Total Expenses 92,768,129 87,414,271 Change in unrestricted net assets (1,405) (28,421) Net assets, beginning of year, as restated 263,007 381,912 Net Assets, End of Year $ 261,602 $ 353,491 Pages 37 of 66
School Readiness Voluntary Pre- Kindergarten Program Services Children's Services Council Other Total Support Services 2016 Total 2015 Total Pass-through payments to subrecipients and quality initiatives $ 44,623,487 $ 38,489,287 $ 7,002,827 $ 84,752 $ 90,200,353 $ - $ 90,200,353 $ 84,885,794 Salaries and benefits 1,245,360 490,678 25,682 72,973 1,834,693 244 1,834,937 1,511,159 Professional fees 274,268 45,872-73,545 393,685 8,715 402,400 475,511 Insurance 9,983 1,550 - - 11,533-11,533 8,779 Printing and reproduction - - - - - - - 2,019 Rent 89,965 16,585 - - 106,550 124 106,674 135,210 Repairs and maintenance 4,663 754 75 5,492-5,492 4,974 Training and developments 6,121 851 - - 6,972-6,972 7,634 Travel 25,757 4,477 269 30,503 520 31,023 19,342 Office expense 20,067 4,013-838 24,918 3,096 28,014 80,868 Capital expense 7,367 935 - - 8,302-8,302 - Other expense 78,514 10,601 25,081 114,196 18,233 132,429 282,981 Total Expenses $ 46,385,552 $ 39,065,603 $ 7,028,509 $ 257,533 $ 92,737,197 $ 30,932 $ 92,768,129 $ 87,414,271 Pages 38 of 66
School Readiness Voluntary Pre- Kindergarten Program Services Children's Services Council Other Total Support Services 2015 Total Pass-through payments to subrecipients and quality initiatives $ 42,561,921 $ 37,880,758 $ 4,363,681 $ 50,041 $ 84,856,401 $ 29,393 $ 84,885,794 Salaries and benefits 1,174,051 218,989 31,507 85,836 1,510,383 776 1,511,159 Professional fees 431,363 26,714-17,434 475,511-475,511 Insurance 7,841 938 - - 8,779-8,779 Printing and reproduction 2,019 - - - 2,019-2,019 Rent 121,772 13,438 - - 135,210-135,210 Repairs and maintenance 4,027 598 164 185 4,974-4,974 Training and developments 6,768 766 - - 7,534 100 7,634 Travel 16,500 1,866 20 816 19,202 140 19,342 Office expense 37,360 5,708-100 43,168 37,700 80,868 Other expense 266,459 8,593 204 955 276,211 6,770 282,981 Total Expenses $ 44,630,081 $ 38,158,368 $ 4,395,576 $ 155,367 $ 87,339,392 $ 74,879 $ 87,414,271 Pages 39 of 66
2016 2015 Cash Flows from Operating Activities Change in unrestricted net assets $ (1,405) $ (28,421) Adjustments to reconcile change in net assets to net cash from operating activities: Depreciation 11,332 12,322 Effect of changes in non-cash operating assets and liabilities: Grants receivable (680,366) 76,112 Advance to providers 1,033 (822) Prepaid expenses (9,246) 264 Accounts payable and accrued expenses (182,224) 93,739 Advances from OEL 21,087 3,604 Due to providers 808,839 35,440 Net Cash from Operating Activities (30,950) 192,238 Cash Flows from Investing Activities Purchases of furniture and equipment - (1,153) Net change in cash (30,950) 191,085 Cash, beginning of year 416,358 225,273 Cash, End of Year $ 385,408 $ 416,358 Pages 40 of 66
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization The Early Learning Coalition of Broward County, Inc. (the Coalition or ELC) is a not-forprofit organization exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code. The Coalition has been classified as a publicly supported organization that is not a private foundation under Section 509(a) of the Code. The Coalition was organized as a corporation under the laws of the State of Florida on June 12, 2000. The purpose of the Coalition is to implement an integrated and quality seamless service delivery system for all publicly-funded early education and care programs in Broward County serving children from birth to thirteen years of age. The Coalition provides child-care services to school age children under statutory guidelines. Its mission is to promote voluntary pre-kindergarten education program (VPK) and school readiness programs, which will increase the achievement of future educational success for all children residing in Broward County in the specified age groups. Although the Coalition has a variety of goals and objectives, all of its goals and objectives relate to the Coalition s primary objective of school readiness for children. Program goals include preparation of children for kindergarten, provision of childcare to meet the needs of working parents with children aged birth to thirteen, and development and training of childcare centers and family childcare homes. Basis of Accounting The accompanying financial statements are presented on the accrual basis of accounting and have been prepared in accordance with accounting principles generally accepted in the United States of America. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and disclosure of contingent assets, liabilities, revenue and expenses as of the date of the financial statements. Actual results could differ from those estimates. Grants Receivable Grants receivable as of June 30, 2016 and 2015, consisted primarily of Federal and state grant receivables. Management believes that all receivables are fully collectible as of June 30, 2016 and 2015. Pages 41 of 66
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Furniture and Equipment, Net Furniture and equipment is stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method. The capitalization threshold for furniture and equipment is $1,000. Expenditures for major repairs and improvements are capitalized. Expenditures for minor repairs and maintenance are expensed as incurred. Net Assets Unrestricted net assets are assets and contributions that are not restricted by donors or for which restrictions have expired. Temporarily restricted net assets are those whose use by ELC has been restricted by donors primarily for a specific time period or purpose. When a donor restriction is met, temporarily restricted net assets are reclassified to unrestricted net assets. If a donor restriction is met in the same reporting period in which the contribution is received, the contribution (to the extent that the restrictions have been met) is reported as unrestricted net assets. Permanently restricted net assets are those that are restricted by donors to be maintained by ELC in perpetuity. As of June 30, 2016 and 2015, there were no temporarily or permanently restricted net assets. Revenue Recognition ELC s grant revenue is derived from Federal and state reimbursement type grants and is recorded as a receivable and revenue when the related expenses are incurred or services are performed. Grant money received in advance is booked as deferred revenue until funds have been spent to satisfy grant requirements. Other grants are also recorded as a receivable and revenue when the related expenses are incurred or services are performed. Revenue Concentration For both years ended June 30, 2016 and 2015, 100%, of ELC s revenues and support were from the Office of Early Learning (OEL) and the Children's Services Council of Broward County. Of the amounts received from the OEL, 54% and 54%, of ELC s revenue and support were passed-through from the U.S. Department of Health and Human Services for the years ended June 30, 2016 and 2015, respectively. Pages 42 of 66
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Functional Allocation of Expenses The costs of providing the various programs and other activities have been summarized on a functional basis in the statements of activities and change in net assets. Accordingly, certain costs have been allocated among the program and supporting services that benefit from those costs. General and administrative expenses include those expenses that are not directly identified with any other specific function but provide for the overall support and direction of ELC. Expenses in the statement of activities include general, administrative and programmatic cost funded by each funding source. Tax Exempt Status ELC has received a determination letter from the Internal Revenue Service (IRS) stating that it is exempt from Federal income tax under Section 509(a) of the Internal Revenue Code. The provisions included in accounting principles generally accepted in the United States of America provide consistent guidance for the accounting for uncertainty in income taxes recognized in an entity s financial statements and prescribe a threshold of more likely than not for recognition of tax positions taken or expected to be taken in a tax return. ELC performed an evaluation of uncertain tax positions as of June 30, 2016, and determined that there were no matters that would require recognition in the financial statements or, which may have any effect on its tax-exempt status. As of June 30, 2016, the statute of limitations for fiscal years 2013 through 2016 remains open with the U.S. Federal jurisdiction or the various states and local jurisdictions in which ELC files tax returns. It is ELC s policy to recognize interest and/or penalties related to uncertain tax positions, if any, in income tax expense. Subsequent Events ELC s management has evaluated the accompanying financial statements for subsequent events and transactions through, 2017, the date that these financial statements were available for issue and have determined that no material subsequent events have occurred that would affect the information presented in the accompanying financial statements or require additional disclosure. Pages 43 of 66
2. FURNITURE AND EQUIPMENT Furniture and equipment consisted of the following as of June 30, 2016 and 2015: 2016 2015 Useful Life Furniture and equipment $ 24,833 $ 24,833 5 years Computers and software 103,823 103,823 3 years 128,656 128,656 Less: accumulated depreciation 117,898 106,566 Furniture and equipment, net $ 10,758 $ 22,090 Depreciation expense for the years ended June 30, 2016 and 2015, was $11,333 and $12,322, respectively. 3. LEASE COMMITMENTS The Coalition s office space is under an operating lease agreement between Lakeside IV, LLC ("Landlord") for a six-year lease term that commenced on April 30, 2015 and expires on April 30, 2020. Monthly payments for the year ended June 30, 2016 were approximately $11,345, which includes the annual base rent and an amount equal to the tenant's proportionate share of operating expenses paid or incurred by the landlord for each year. Total facility rental expense for the years ended June 30, 2016 and 2015 were $95,292 and $135,210, respectively. The minimum future lease commitments as of June 30, 2016 were as follows: 4. CONTINGENT LIABILITIES Years Ending June 30, Amount 2017 $ 124,384 2018 127,235 2019 156,524 2020 133,043 Total $ 541,186 Most grants and cost reimbursable contracts specify the types of expenditures for which the grant or contract funds may be used. The expenditures made by ELC under some of these grants and contracts are subject to audit. Management of ELC does not believe that any such audit would result in a material effect on the accompanying financial statements. Pages 44 of 66
4. CONTINGENT LIABILITIES (continued) The Coalition receives a substantial portion of its revenue from Federal and state grants. If a significant reduction in this revenue should occur, it may have an effect on the Coalition s programs. During the years ended June 30, 2016 and 2015, the Coalition earned revenue of $85,652,367 and $82,932,649, from Federal and state grants, which is 92% and 95% of the total revenue and support, respectively. 5. RELATED PARTIES The Coalition s Board of Directors is required by Florida State statute to include certain appointed individuals. Consequently, the Coalition s Board of Directors includes several individuals who are affiliated with organizations funded by the Coalition. 6. DEFINED CONTRIBUTION PENSION PLAN In September 2002, ELC started a 403(b) defined contribution pension plan. According to the plan, ELC contributes 7% of eligible employees salaries to the plan, if the employee contributes 2%. For the years ended June 30, 2016 and 2015, ELC had $86,604 and $66,942 respectively, in pension expense. 7. PRIOR YEAR RESTATEMENT During the year ended June 30, 2016, ELC discovered that it had not recorded a liability for compensated absences. ELC has restated the beginning net assets as of July 1, 2015 to record the liability. As a result of this restatement, net assets as of July 1, 2015 were decreased by $90,484. Pages 45 of 66
SUPPLEMENTAL INFORMATION Pages 46 of 66
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 Early Learning Coalition of Broward County, Inc. 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 Early Learning Coalition of Broward County, Inc. (ELC) which comprise the statements of financial position as of June 30, 2016, and the related statements of activities and change in net assets and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated, 2017. Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered ELC 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 ELC s internal control. Accordingly, we do not express an opinion on the effectiveness of ELC 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. 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. Pages 47 of 66
Compliance and Other Matters As part of obtaining reasonable assurance about whether ELC 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 entity 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 entity s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Hollywood, Florida, 2017 Pages 48 of 66
REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM, STATE PROJECT AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH THE UNIFORM GUIDANCE AND CHAPTER 10.650, RULES OF THE FLORIDA AUDITOR GENERAL To the Board of Directors Early Learning Coalition of Broward County, Inc. Report on Compliance for Each Major Federal Program We have audited Early Learning Coalition of Broward County, Inc. (ELC) compliance with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Compliance Supplement and State projects and the requirements described in the Department of Financial Services Florida State Projects Compliance Supplement, that could have a direct and material effect on each of ELC s major federal programs and State projects for the year ended June 30, 2016. ELC s major federal programs and State projects are identified in the summary of independent public accountants 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 and Florida State projects. Auditor s Responsibility Our responsibility is to express an opinion on compliance for each of the Board 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 (CFR) 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 the Board 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 and State project. However, our audit does not provide a legal determination of ELC s compliance. Pages 49 of 66
Opinion on Each Major Federal Program and State Project In our opinion, ELC complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major Federal programs and State projects for the year ended June 30, 2016. Report on Internal Control over Compliance The management of ELC 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 ELC s internal control over compliance with requirements that could have a direct and material effect on each major Federal program and State project as a basis for designing auditing procedures that are appropriate in these circumstances for the purpose of expressing our opinion on compliance for each major Federal program and State project and to test and report on internal control over compliance in accordance with the Uniform Guidance, and Chapter 10.650, Rules of the Florida Auditor General, 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 ELC 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 and State project 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 and State project 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 or State project 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. Hollywood, Florida, 2017 Pages 50 of 66
Pass-Through Entity Identifying Number CFDA/ Federal Grantor/ State Agency Pass-Through Grantor/ Program or Cluster Title CSFA Number Expenditures U.S. Department of Health and Human Services Pass-through State of Florida Office of Early Learning Child Care Mandatory and Matching Funds of the Child Care and Development Fund Block Grant 93.596 SR096 $ 13,253,774 Child Care Development State Matching Funds of the Child Care Maintenance of Effort Funds 93.596 SR096 1,975,545 Child Care and Development Block Grant 93.575 SR096 17,459,923 Temporary Assistance for Needy Families 93.558 SR096 7,994,928 Temporary Assistance for Needy Families Maintenance of Effort Funds 93.558 SR096 5,648,389 Social Services Block Grant 93.667 SR096 41,737 Child Care and Dev.Block grant Trust Fund 93.575 PP604 86,265 46,460,561 Pass-through Florida Department of Children and Families Refugee and Entrant Assistance State Administrered Programs 93.566 XK048 86,975 Total U.S. Department of Health and Human Services 46,547,535 Center for Disease Control Partnership To Improve Community Health 93.331 1U58DP005790-01 39,305 Total Expenditures of Federal Awards $ 46,586,840 Florida Office of Early Learning Voluntary Pre-Kindergarten Services 48.108 SV096 $ 38,969,526 Voluntary Pre-Kindergarten Services 48.108 OA096 96,001 Total Florida Office of Early Learning $ 39,065,527 Total Expenditures of Federal Awards and State Financial Assistance $ 85,652,367 Pages 51 of 66
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES All Federal grant operations of Early Learning Coalition of Broward County, Inc. (ELC) are included in the scope of Title 2 U.S. Code of Federal Regulations part 200, Uniform Administration Requirement, Cost Principles, and Audit Requirements for Federal Awards (the Single Audit). The Single Audit was performed in accordance with the provisions of the OMB Compliance Supplement (the Compliance Supplement). Compliance testing of all requirements, as described in the Compliance Supplement, was performed for the major grant programs noted below. The programs on the Schedule of Expenditures of Federal Awards and State Financial Assistance (the Schedule) represent all Federal award programs and other grants with fiscal year 2016, cash or non-cash expenditure activities. For our single audit testing, we tested the Federal award programs below to ensure coverage of at least 25% of Federally granted funds. Our actual coverage was 29%. Expenditures reported on the Schedule of expenditures of Federal awards are reported on the accrual basis of accounting. Such expenditures are recognized following, as applicable, either the cost principles in OMB Circular A-122, Cost Principles for Non-Profit Organizations, or the cost principles contained in Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, wherein certain types of expenditures are not allowable or are limited as to reimbursement. ELC has elected not to use the 10-percent de minimis indirect cost rate as allowed under the Uniform Guidance. Major Programs CFDA Number Federal Expenditures Temporary Assistance for Needy Families 93.558 $ 7,994,928 Temporary Assistance for Needy Families- Maintenance of Effort Funds 93.558 $ 5,648,389 13,643,317 All Florida State grant operations of ELC are included in the scope of the Department of Financial Services Florida State Projects Compliance Supplement (the Compliance Supplement). The audit was performed in accordance with the provisions of the Compliance Supplement. Compliance testing of all requirements, as described in the Compliance Supplement, was performed for the major Florida State program noted below. The State programs on the Schedule represent all State awards and other grants with fiscal year 2016 cash or non-cash expenditure activities. For our Florida State single audit testing, we tested the Florida State financial assistance with 2016 cash and non-cash expenditures to ensure coverage of at least 50% of the Florida State programs. Our actual coverage was 100% of Florida State projects. Pages 52 of 66