FINANCIAL STATEMENTS AND AUDITOR S REPORTS JUNE 30, 2016 AND 2015
TABLE OF CONTENTS Independent Auditor s Report on Financial Statements and Supplementary Information Exhibit A - Balance Sheet B - Statement of Activities C - Statement of Cash Flows Notes to Financial Statements
2. TABLE OF CONTENTS (continued) Schedule 1 - Schedule of Functional Expenses 2 - Schedule of Expenditures of Federal Awards Notes to Schedule of Expenditures of Federal Awards 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 Report on Compliance for Each Major Federal Program; and Report on Internal Control Over Compliance Required by the Uniform Guidance Schedule of Findings and Questioned Costs
Independent Auditor s Report on Financial Statements and Supplementary Information Board of Directors Highbridge Advisory Council Family Services, Inc. Report on the Financial Statements We have audited the accompanying financial statements of Highbridge Advisory Council Family Services, Inc., which comprise the balance sheet as of June 30, 2016 and 2015, and the related statements of activities, and cash flows for the years then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our 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 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. Auditors Auditors and Consultants and Consultants Serving Serving the Health the Health Care & Care Not for & Not Profit for Sectors Profit Sectors 655 Third 655 Avenue, Third Avenue, 12th Floor, 12th New Floor, York, New NY York, 10017 NY 10017 (212) 867-4000 (212) 867-4000 / Fax (212) / Fax 867-9810 (212) 867-9810 / / www.loebandtroper.com
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Highbridge Advisory Council Family Services, Inc. as of June 30, 2016 and 2015, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter The accompanying financial statements have been prepared assuming that Highbridge Advisory Council Family Services, Inc. will continue as a going concern. As discussed in Note 11 to the financial statements, Highbridge Advisory Council Family Services, Inc. has suffered recurring losses, has negative working capital, and has a net assets deficit. This condition raises substantial doubt about Highbridge Advisory Council Family Services, Inc. s ability to continue as a going concern. Management s plans in regard to this matter are also described in Note 11. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter. Supplementary Information Our audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The schedule of expenditures of federal awards, as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and the information in schedule of functional expenses are presented for purposes of additional analysis and are 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. 2.
3. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 7, 2016 on our consideration of Highbridge Advisory Council Family Services, Inc. s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Highbridge Advisory Council Family Services, Inc. s internal control over financial reporting and compliance. December 7, 2016, except for the Schedule of Expenditures of Federal Awards as to which the date is February 8, 2017.
EXHIBIT A BALANCE SHEET JUNE 30, 2016 AND 2015 2016 2015 ASSETS Cash $ 336,695 $ 1,166,870 Government contracts receivable - net (Note 3) 679,408 424,900 Prepaid expenses 69,783 94,606 Security deposits 119,524 87,696 Fixed assets - net (Note 4) 44,565 95,036 Total assets $ 1,249,975 $ 1,869,108 LIABILITIES AND NET ASSETS Liabilities Accounts payable, accrued expenses and payroll $ 1,861,050 $ 1,606,189 Deferred rent 65,958 78,814 Contract advances (Note 5) 488,104 200,925 Due to government agencies (Note 8) 8,559,108 9,235,154 Loan payable (Note 6) 121,257 121,257 Total liabilities 11,095,477 11,242,339 Net assets (deficit) Unrestricted (Exhibit B) (9,845,502) (9,373,231) Total liabilities and net assets $ 1,249,975 $ 1,869,108 See independent auditor's report. The accompanying notes are an integral part of these statements.
EXHIBIT B STATEMENT OF ACTIVITIES YEARS ENDED JUNE 30, 2016 AND 2015 2016 2015 Revenues and other support Government contract fees and reimbursements Contract fees and reimbursements $ 9,783,575 $ 9,100,590 Tuition 4,017,679 4,087,123 Donated costs (Note 2) 111,659 61,259 Day care parent fees 527,192 539,555 Private fees 33,075 35,958 Special events income $ 46,083 $ 57,865 Direct costs of special events (21,356) 24,727 (25,294) 32,571 Interest and other revenue 67,293 105,160 Total revenues and other support 14,565,200 13,962,216 Expenses (Schedule 1) Program services Child care services 9,579,123 9,342,660 Special education programs 3,838,882 4,322,501 Total program services 13,418,005 13,665,161 Supporting services Management and general 1,603,837 1,352,236 Fund raising 15,629 16,231 Total supporting services 1,619,466 1,368,467 Total expenses 15,037,471 15,033,628 Change in unrestricted net assets (Exhibit C) (472,271) (1,071,412) Net assets (deficit) - unrestricted - beginning of year (9,373,231) (8,301,819) Net assets (deficit) - unrestricted - end of year (Exhibit A) $ (9,845,502) $ (9,373,231) See independent auditor's report. The accompanying notes are an integral part of these statements.
EXHIBIT C STATEMENT OF CASH FLOWS YEARS ENDED JUNE 30, 2016 AND 2015 2016 2015 Cash flows from operating activities Change in net assets (Exhibit B) $ (472,271) $ (1,071,412) Adjustments to reconcile change in net assets to net cash used by operating activities Depreciation and amortization 50,471 64,455 Decrease (increase) in assets Government contracts receivable (254,508) 374,367 Prepaid expenses 24,823 10,896 Security deposits (31,828) (3,300) Increase (decrease) in liabilities Accounts payable, accrued expenses and payroll 254,861 (627,682) Deferred rent (12,856) 23,584 Contract advances 287,179 55,235 Due to government agencies (676,046) 54,318 Net cash used by operating activities (830,175) (1,119,539) Cash - beginning of year 1,166,870 2,286,409 Cash - end of year $ 336,695 $ 1,166,870 See independent auditor's report. The accompanying notes are an integral part of these statements.
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 NOTE 1 - NATURE OF ENTITY Highbridge Advisory Council Family Services, Inc. ( HAC ) was incorporated in 1970 pursuant to Section 402 of the Not-for-Profit Corporation Laws of New York State, and under an amended certificate of incorporation dated 1992, pursuant to Section 803 of the same law. HAC provides a variety of family services including child care services, preschool programs for children, child and adult care food program, evaluation and therapeutic services, and family support in the Bronx, New York. The mission of HAC is to develop and strengthen the cognitive and physical development of the children by engaging the parent in a supported developmental and learning process through the provision of quality educational and social services, as well as the creation of linkages with other service institutions in the community. HAC s primary sources of funding are government contracts and government funded tuition. HAC is exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of accounting - The financial statements are prepared on the accrual basis of accounting. Use of estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Government contracts receivable and allowance for doubtful accounts - HAC records revenues and government contracts receivable based on established rates or contracts for services provided. HAC determines whether an allowance for uncollectibles should be provided for government contracts receivable. Such estimates are based on management s assessment of the aged basis of its receivables, current economic conditions, subsequent receipts and historical information. Government contracts receivable are written off against the allowance for doubtful accounts when all reasonable collection efforts have been exhausted. Management has determined that there was no allowance for doubtful accounts as of June 30, 2016 and 2015. HAC does not charge interest on outstanding receivables. -continued-
2. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Fixed assets - Fixed assets are recorded at cost. Items with a cost of $1,000 and an estimated useful life of greater than one year are capitalized. Depreciation is recorded on the straight-line method over the estimated useful lives of the assets. Leasehold improvements are recorded at cost and are amortized over the lesser of their estimated useful lives or the term of the lease. Net assets - Unrestricted net assets include funds having no restriction as to use or purpose imposed by donors. In addition, resources whose use is limited under terms of third party reimbursement arrangements are unrestricted. Revenue recognition - HAC receives substantially all its revenues for services provided to approved participants from third-party reimbursement agencies, primarily Administration for Children s Services (ACS), Department of Education (DOE), and the State Education Department (SED) of New York. These revenues are based on predetermined rates based on cost reimbursement principles and are subject to audit and retroactive adjustment by the respective third parties, which may result in adjustments or disallowances. In the opinion of management, any retroactive adjustments have been accounted for in due to government agencies. Reimbursements for program expense and overhead applicable to various programs conducted under contract with governmental agencies are based on complex laws and regulations. Noncompliance with such laws and regulations could result in fines, penalties and exclusion from such programs. No such fines or penalties were imposed on HAC. The amount of disallowance, if any, cannot be determined. Therefore, no provision is made for these potential liabilities. Management does not anticipate any material adjustments as a result of these audits. Government contract fees and reimbursements - Revenues from government contracts are recognized when reimbursable expenses are incurred under the terms of the contracts or based on established rates for services provided, as applicable. Contract payments in excess of or less than qualified expenses are accounted for as contract advances payable or government contracts receivable, respectively. Tuition revenue - Tuition revenues from New York State are based on approved rates and number of students enrolled. Tuition revenue is recorded when services are rendered. Day care parent fees and private fees - Day care parent and private fees are paid by program participants or third-party payors for participation in certain HAC programs. -continued-
3. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Rent expense - All leases are operating leases and are reflected on the straight-line basis over the term of the lease. Deferred rent is recorded when there is a material difference between the fixed payments and the rent expense. Donated costs - Donated costs represent the value assigned to space contributed by ACS based on the square footage used in an ACS owned property. Total donated costs for the fiscal years ended June 30, 2016 and 2015 was $111,659 and $61,259, respectively. Functional allocation of expenses - The costs of providing the organization s programs and other activities have been summarized on a functional basis. Accordingly, certain costs have been allocated among the programs and supporting services benefited. Uncertainty in income taxes - HAC has determined that there are no material uncertain tax positions that require recognition or disclosure in the financial statements. Periods ending June 30, 2013 and subsequent remain subject to examination by applicable taxing authorities. Subsequent events - Subsequent events have been evaluated through December 7, 2016, which is the date the financial statements were available to be issued. NOTE 3 - GOVERNMENT CONTRACTS RECEIVABLE At June 30, 2016 and 2015, HAC had contract receivables due from City of New York and New York State agencies in the amounts of $679,408 and $424,900, respectively. A summary of HAC s contract receivables by source is as follows: 2016 2015 New York City Department of Education $ 433,474 $ 213,318 New York City Administration for Children s Services 100,369 New York State Child and Adult Care Food Program 145,565 211,582 $ 679,408 $ 424,900 -continued-
4. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 NOTE 4 - FIXED ASSETS 2016 2015 Useful Lives Furniture $ 132,754 $ 132,754 10 years Equipment 269,643 269,643 10 years Leasehold improvements 656,391 656,391 3-10 years 1,058,788 1,058,788 Accumulated amortization and depreciation (1,014,223) (963,752) $ 44,565 $ 95,036 NOTE 5 - CONTRACT ADVANCES At June 30, 2016 and 2015, HAC had contract advances from government agencies in the amounts of $488,104 and $200,925, respectively. A summary of HAC s contract advances by source is as follows: 2016 2015 New York City Administration for Children s Services $ 488,104 $ 200,925 NOTE 6 - LOAN PAYABLE HAC has a loan payable to The Bronx Overall Economic Development Corporation ( BOEDC ). The loan is secured by all assets of HAC including furniture, equipment, and accounts receivable. This loan was due in fiscal year 2006. HAC has requested of BOEDC that they forgive the loan. As of June 30, 2016 and 2015, the outstanding loan amount was $121,257, with an interest rate of 5.1825%. Accrued interest payable at June 30, 2016 and 2015, which is included in accounts payable, accrued expenses and payroll, was $42,288. Interest was accrued through June 30, 2010. Interest was not accrued from July 1, 2010 through June 30, 2016 as it was not considered material to be recorded in these financial statements. -continued-
5. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 NOTE 7 - PENSION PLAN (a) Employees in day care programs administered by HAC have a pension plan administered and paid for by ACS. Pension expense for these employees amounted to $69,669 in 2016 and $78,635 in 2015. (b) HAC also maintains a defined 401(k) contribution plan on behalf of its employees. HAC matched 50% of each employee s contribution up to a maximum of 3% of gross salary. The amount expensed for the plan was $21,831 in 2016 and $21,199 in 2015. NOTE 8 - COMMITMENTS AND CONTINGENCIES Lease Commitments HAC entered into a lease agreement which expires on June 30, 2020. In addition, on January 1, 2014 HAC entered into a 15-year lease agreement for commercial space located at Melrose Avenue in Bronx, NY which expires on December 31, 2028. Future minimum rental payments are estimated as follows: Year Ending June 30 2017 $ 700,945 2018 717,383 2019 734,223 2020 751,474 2021 272,311 Thereafter 2,219,101 $ 5,395,437 Rent expense for the years ended June 30, 2016 and 2015 was $1,072,209 and $940,000, respectively (including donated rent of $111,659 and $61,259 for 2016 and 2015, respectively). -continued-
6. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 NOTE 8 - COMMITMENTS AND CONTINGENCIES (continued) Government Agency Audits (a) HAC is responsible for reporting to various third parties. SED, New York State Department of Health (DOH), ACS, DOE, the New York State Office of the Attorney General, Office of the Medicaid Inspector General (OMIG) and the Internal Revenue Service have the right to audit HAC. (b) The New York State Comptroller s office completed a program and fiscal audit for the two years ended June 30, 2000 and 2001. Their finding was that, for the two years then ended, approximately $2.5 million of the expenses included on the agency s cost reports to SED were not reported in compliance with the cost-reporting manual. This has resulted in significant negative retroactive adjustments to the tuition rates paid, resulting in amounts due back to the New York City Department of Education (the DOE). Also, the DOE reconciled enrollment and rates for the years ended June 30, 2000 through June 30, 2007. The initial repayment balance totaled $4,264,098. Based on these factors, HAC entered into a repayment agreement with the DOE to repay $20,000 a month through recoupment. Balance as of June 30, 2016 and 2015 was $3,365,894 and $3,590,894, respectively. The DOE reconciled enrollment and rates for the years ended June 30, 2007 through June 30, 2011. The initial repayment balance totaled $490,339. Based on these factors, HAC entered into a repayment agreement with the DOE to repay $4,066 a month through recoupment. Balance as of June 30, 2016 and 2015 was $238,880 and $284,623, respectively. The provisional rate set by SED at the beginning of the school year was adjusted based on the final expenditures of the program. Related liabilities are estimated and accrued on the financial statements for the years ended June 30, 2013 through June 30, 2016. Total liabilities including estimated roll-forward adjustments and other adjustments of $19,818 and $63,121 due to SED/DOE as of June 30, 2016 and 2015, respectively, were $3,624,592 and $3,938,638, respectively. (c) Total liabilities due to ACS as of June 30, 2016 and 2015 were $2,861,029 and $3,103,029, respectively. These amounts include accrued liability for rent of $1,034,027 in 2016 and $850,251 in 2015 for the use of office space by non-acs Programs at facilities where ACS has direct lease. These liability amounts have not been finalized by ACS and are subject to change. -continued-
7. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 NOTE 8 - COMMITMENTS AND CONTINGENCIES (continued) Government Agency Audits (continued) (d) HAC owes New York State Child and Adult Care Food Program (CACFP) $2,073,487 and $2,193,487, respectively, as of June 30, 2016 and 2015 as part of a litigation settlement. The agreement calls for a payment plan of $10,000 per month until the balance is fully paid. Combined required payments are as follows: 2017 $ 873,304 2018 648,792 2019 648,792 2020 648,792 2021 648,792 Thereafter 5,090,636 $ 8,559,108 NOTE 9 - CONCENTRATIONS Financial instruments which potentially subject HAC to a concentration of credit risk consist primarily of cash accounts in financial institutions which, from time to time, exceed federal insurance limits. HAC earned revenue of $12,656,254 in 2016 and $12,156,217 in 2015, from the City of New York, which is 87.38% and 87.45% of the agency s revenues. -continued-
8. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 NOTE 10 - FUNCTIONAL EXPENSES The costs of providing services are summarized as follows: 2016 2015 Program services Child care services $ 9,579,123 $ 9,342,660 Special education programs 3,838,882 4,322,501 Supporting services Management and general 1,603,837 1,352,236 Fund raising 15,629 16,231 15,037,471 15,033,628 Direct cost of special events 21,356 25,294 $ 15,058,827 $ 15,058,922 NOTE 11 - FINANCIAL CONDITION AND MANAGEMENT S FINANCIAL PLAN As of June 30, 2016, HAC s prior years cumulative losses primarily resulting from government agency audits discussed in Note 8 continue to plague the organization resulting in current negative working capital and a net assets deficit. Management s plans for addressing the adverse effect of these conditions include: HAC has been working with ACS, DOE, DOH and the SED with an understanding that since July 2002, HAC has implemented a corrective action plan that has focused on governance and management. All program funders agree that HAC has made outstanding improvements in the program area, which is supported by the fact that HAC currently has five (5) programs that are accredited by the National Association for the Education of Young Children (NAEYC). Additionally, HAC has completed the entire Quality Assurance monitoring process with the SED and has been determined to be in full compliance with educational law and regulation. HAC has full intentions of maintaining quality programs by earning the highest level of accreditation by the NAEYC. -continued-
9. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 NOTE 11 - FINANCIAL CONDITION AND MANAGEMENT S FINANCIAL PLAN (continued) Over the last several years, HAC has made sustained payments to ACS, SED/DOE and CACFP in accordance with the terms of repayment agreements. In fiscal year 2016, HAC paid $270,743 to SED/DOE, $240,000 to ACS and $120,000 to CACFP. HAC is currently repaying DOE $24,066 monthly through recoupment. HAC had its fund-raising events in November 2016 and 2015. HAC intends to continue future fund-raising efforts to improve working capital. As a consequence of HAC s above arrangements with the government agencies, HAC has received the forbearance from several of those agencies in pursuing the immediate processing of their claims.
SCHEDULE 1 SCHEDULE OF FUNCTIONAL EXPENSES YEAR ENDED JUNE 30, 2016 (With Summarized Financial Information for the Year Ended June 30, 2015) Program Services Supporting Services Total Child Care Services Child Care Child Care Total Special Management Direct Cost Services - Services - Child Care Education and Fund of Special ACS DOE Services Programs Total General Raising Events 2016 2015 Salaries $ 4,342,690 $ 367,706 $ 4,710,396 $ 2,645,142 $ 7,355,538 $ 688,732 $ 13,024 $ 8,057,294 $ 7,946,622 Payroll taxes and employee benefits 964,737 82,158 1,046,895 548,234 1,595,129 157,523 2,605 1,755,257 1,701,764 Total salaries and related expenses 5,307,427 449,864 5,757,291 3,193,376 8,950,667 846,255 15,629 9,812,551 9,648,386 Food 879,355 879,355 879,355 879,355 808,571 Repairs and maintenance 101,634 2,499 104,133 1,999 106,132 2,396 108,528 139,053 Occupancy costs (Note 8) 758,250 85,762 844,012 101,121 945,133 250,304 1,195,437 1,067,618 Staff travel 4,071 97 4,168 154 4,322 672 4,994 5,547 Participant incidentals 40,724 5,499 46,223 15,097 61,320 61,320 60,940 Staff development 12,351 12,351 1,030 13,381 3,056 16,437 29,943 Contracted services 1,562,185 9,300 1,571,485 442,110 2,013,595 386,235 2,399,830 2,461,512 Supplies 201,592 10,299 211,891 16,972 228,863 13,904 242,767 316,362 Telephone 47,280 3,450 50,730 14,891 65,621 14,954 80,575 83,645 Insurance 47,451 2,024 49,475 27,990 77,465 9,313 86,778 88,836 Equipment rental and minor equipment purchases 15,710 3,865 19,575 6,597 26,172 15,870 42,042 104,186 Miscellaneous 25,623 1,079 26,702 9,326 36,028 20,358 56,386 64,935 Catering and entertainment $ 21,356 21,356 25,294 Depreciation and amortization 1,732 1,732 8,219 9,951 40,520 50,471 64,455 Bad debt 89,639 Total expenses 9,005,385 573,738 9,579,123 3,838,882 13,418,005 1,603,837 15,629 21,356 15,058,827 15,058,922 Less expenses deducted directly from revenues on the statement of activities (21,356) (21,356) (25,294) Total expenses reported by function (Exhibit B) $ 9,005,385 $ 573,738 $ 9,579,123 $ 3,838,882 $ 13,418,005 $ 1,603,837 $ 15,629 $ - $ 15,037,471 $ 15,033,628 See independent auditor's report.
SCHEDULE 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2016 Pass-through Federal Entity Total Federal Grantor/Pass-through Grantor/ CFDA Identifying Federal Program or Cluster Title Number Number Expenditures U.S. Department of Agriculture Child and Adult Care Food Program (CACFP) 10.558 Pass-through program from New York State Department of Health 3280 $ 772,289 3329 291,922 Total Child and Adult Care Food Program 1,064,211 Total U.S. Department of Agriculture 1,064,211 U.S. Department of Health and Human Services Child Care and Development Block Grant 93.575 Pass-through program from New York City Administration for Children's Services 00217 3,074,849 Head Start 93.600 Pass-through program from New York City Administration for Children's Services 00217 1,281,425 Total U.S. Department of Health and Human Services 4,356,274 Total expenditures of federal awards $ 5,420,485 See independent auditor's report. The accompanying notes are an integral part of this schedule.
NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2016 NOTE 1 - BASIS OF PRESENTATION The accompanying schedule of expenditures of federal awards (the Schedule ) includes the federal award activity of Highbridge Advisory Council Family Services, Inc. (HAC) under programs of the federal government for the year ended June 30, 2016. 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 HAC, it is not intended to and does not present the financial position, changes in net assets or cash flows of HAC. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Negative amounts shown on the Schedule represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years. NOTE 3 - INDIRECT COST RATE HAC has elected not to use the 10-percent de minimis indirect cost rate allowed under the Uniform Guidance. NOTE 4 - SUBRECIPIENTS For federal awards expended during the year ended June 30, 2016, there were no payments made to subrecipients.
Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditor s Report Board of Directors Highbridge Advisory Council Family Services, 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 Highbridge Advisory Council Family Services, Inc., which comprise the balance sheet as of June 30, 2016 and 2015, and the related statements of activities, and cash flows for the years then ended, and the related notes to the financial statements, and have issued our report thereon dated December 7, 2016. Internal Control over Financial Reporting In planning and performing our audits of the financial statements, we considered Highbridge Advisory Council Family Services, 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 Highbridge Advisory Council Family Services, Inc. s internal control. Accordingly, we do not express an opinion on the effectiveness of Highbridge Advisory Council Family Services, 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. Auditors Auditors and Consultants and Consultants Serving Serving the Health the Health Care & Care Not for & Not Profit for Sectors Profit Sectors 655 Third 655 Avenue, Third Avenue, 12th Floor, 12th New Floor, York, New NY York, 10017 NY 10017 (212) 867-4000 (212) 867-4000 / Fax (212) / Fax 867-9810 (212) 867-9810 / / www.loebandtroper.com
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. Compliance and Other Matters As part of obtaining reasonable assurance about whether Highbridge Advisory Council Family Services, Inc. s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. 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. 2. December 7, 2016
Report on Compliance for Each Major Federal Program; and Report on Internal Control Over Compliance Required by the Uniform Guidance Independent Auditor s Report Board of Directors Highbridge Advisory Council Family Services, Inc. Report on Compliance for Each Major Federal Program We have audited Highbridge Advisory Council Family Services, 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 Highbridge Advisory Council Family Services, Inc. s major federal programs for the year ended June 30, 2016. Highbridge Advisory Council Family Services, Inc. s major federal programs are identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditor s Responsibility Our responsibility is to express an opinion on compliance for each of Highbridge Advisory Council Family Services, Inc. s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Highbridge Advisory Council Family Services, Inc. s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. Auditors Auditors and Consultants and Consultants Serving Serving the Health the Health Care & Care Not for & Not Profit for Sectors Profit Sectors 655 Third 655 Avenue, Third Avenue, 12th Floor, 12th New Floor, York, New NY York, 10017 NY 10017 (212) 867-4000 (212) 867-4000 / Fax (212) / Fax 867-9810 (212) 867-9810 / / www.loebandtroper.com
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 Highbridge Advisory Council Family Services, Inc. s compliance. Opinion on Each Major Federal Program In our opinion, Highbridge Advisory Council Family Services, Inc. complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2016. Report on Internal Control Over Compliance Management of Highbridge Advisory Council Family Services, 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 Highbridge Advisory Council Family Services, Inc. s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with 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 Highbridge Advisory Council Family Services, Inc. s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. 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. 2.
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. 3. February 8, 2017
SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2016 Section I - Summary of Auditor s Results Financial Statements Type of auditor s report issued: Unmodified Internal control over financial reporting: Material weakness(es) identified? yes X no Significant deficiency(ies) identified? yes X none reported Noncompliance material to financial statements noted? yes X no Federal Awards Internal control over major federal programs: Material weakness(es) identified? yes X no Significant deficiency(ies) identified? yes X none reported Type of auditor s report issued on compliance for major federal programs: Unmodified Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.516(a)? yes X no Identification of major federal programs: CFDA Number Name of Federal Program or Cluster 93.575 Child Care and Development Block Grant Dollar threshold used to distinguish between Type A and Type B programs: $750,000 Auditee qualified as low-risk auditee? yes X no
2. SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2016 Section II - Financial Statement Findings No matters were reported. Section III - Federal Award Findings and Questioned Costs No matters were reported.