MARION GOODWILL INDUSTRIES, INC. REPORT ON FINANCIAL STATEMENTS AND COMPLIANCE WITH LAWS AND REGULATIONS JUNE 30, 2017 AND 2016
CONTENTS PAGE INDEPENDENT AUDITORS REPORT... 3-4 FINANCIAL STATEMENTS: Statements of Financial Position... 5 Statements of Activities and Changes in Net Assets... 6 Statements of Functional Expenses... 7 Statements of Cash Flows... 8 NOTES TO FINANCIAL STATEMENTS... 9-14 COMPLIANCE REPORTS AND SCHEDULES: Independent Auditors Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards... 15-16
INDEPENDENT AUDITORS REPORT The Board of Directors Marion Goodwill Industries, Inc. 340 West Fairground Street Marion, Ohio 43302 We have audited the accompanying financial statements of Marion Goodwill Industries, Inc. (a non-profit organization), which comprise the statements of financial position as of June 30, 2017 and 2016, and the related statements of activities and changes in net assets, functional expenses, and cash flows for the years then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those 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. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Marion Goodwill Industries, Inc. as of June 30, 2017 and 2016, and the changes in its net assets, and cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. MEMBERS AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS - 3 - OHIO SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS
Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have issued our report dated December 5, 2017, on our consideration of the Organization 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 Marion Goodwill Industries, Inc. s internal control over financial reporting and compliance. Certified Public Accountants Marion, Ohio December 5, 2017-4 -
MARION GOODWILL INDUSTRIES, INC. STATEMENTS OF FINANCIAL POSITION JUNE 30, 2017 AND 2016 ASSETS 2017 2016 CURRENT ASSETS:- Cash and cash equivalents $ 2,603,023 $ 2,492,495 Certificates of deposit 458,522 100,706 Investments, at fair value 101,722 91,801 Inventory 518,138 512,167 Accounts receivable (less allowance for doubtful accounts of $18,000) 393,255 352,250 Prepaid expenses 169,221 117,239 Total current assets 4,243,881 3,666,658 PROPERTY AND EQUIPMENT:- Net property and equipment (Note 2) 6,759,828 6,659,968 OTHER ASSETS:- Certificates of deposit 78,897 77,200 Deposits 36,037 36,037 Total other assets 114,934 113,237 Total assets $ 11,118,643 $ 10,439,863 LIABILITIES AND NET ASSETS CURRENT LIABILITIES:- Accounts payable $ 87,068 $ 50,283 Accrued payroll and related taxes 204,880 176,157 Accrued expenses 216,647 205,220 Deferred revenue 66,700 75,400 Current portion of long-term debt 232,723 175,441 Total current liabilities 808,018 682,501 LONG-TERM LIABILITIES:- Notes payable (Note 3) 2,600,999 2,827,639 Less current portion ( 232,723) ( 175,441) Long-term liabilities 2,368,276 2,652,198 Total liabilities 3,176,294 3,334,699 NET ASSETS:- Unrestricted 7,942,349 7,105,164 Total net assets 7,942,349 7,105,164 Total liabilities and net assets $ 11,118,643 $ 10,439,863 The accompanying notes are an integral part of these financial statements. - 5 -
MARION GOODWILL INDUSTRIES, INC. STATEMENTS OF ACTIVITIES AND CHANGES IN NET ASSETS FOR THE YEARS ENDED JUNE 30, 2017 AND 2016 2017 2016 PUBLIC SUPPORT AND REVENUES:- Public Support;- Grants $ 1,148,348 $ 843,942 United Way 30,297 39,562 Wheel-a-thon 11,528 14,327 Donations 7,050 15 Other 88,703 89,018 Total unrestricted public support 1,285,926 986,864 Revenues;- Retail sales 9,250,170 9,159,683 Value of donated goods received 6,169,088 6,096,268 Salvage sales 499,210 446,972 Industrial contracts 328,327 290,554 Rent and property management fees 142,506 179,508 Janitorial services 4,088 2,941 Unrealized gain (loss) on investments 10,515 ( 1,896) Grass and snow removal 143 1,564 Gain on sale of fixed assets 4,391 2,500 Interest 7,376 3,569 Other 5,468 5,849 Total unrestricted revenues 16,421,282 16,187,512 Total unrestricted support and revenues 17,707,208 17,174,376 EXPENSES:- Affiliated organization dues 99,121 89,910 Program services 15,948,692 15,556,755 Management and general 822,210 760,424 Total expenses 16,870,023 16,407,089 Increase in unrestricted net assets 837,185 767,287 Total net assets at beginning of year 7,105,164 6,337,877 Total net assets at end of year $ 7,942,349 $ 7,105,164 The accompanying notes are an integral part of these financial statements. - 6 -
MARION GOODWILL INDUSTRIES, INC. STATEMENTS OF FUNCTIONAL EXPENSES FOR THE YEARS ENDED JUNE 30, 2017 AND 2016 PROGRAM MANAGEMENT 2017 PROGRAM MANAGEMENT 2016 SERVICES AND GENERAL TOTAL SERVICES AND GENERAL TOTAL Salaries and wages $ 4,900,460 $ 430,619 $ 5,331,079 $ 4,709,040 $ 399,979 $ 5,109,019 Employee benefits 304,861 148,795 453,656 276,790 133,496 410,286 Payroll taxes 501,376 20,201 521,577 473,253 5,138 478,391 Cost of goods sold 6,163,117 0 6,163,117 6,087,773 0 6,087,773 Advertising 32,969 4,372 37,341 24,348 3,612 27,960 Professional fees 44,272 51,050 95,322 347 76,980 77,327 Supplies 199,228 8,757 207,985 183,573 12,178 195,751 New goods 150,601 0 150,601 142,197 0 142,197 Service charge 126,978 11,220 138,198 130,949 2,031 132,980 Occupancy 1,754,017 0 1,754,017 1,809,494 0 1,809,494 Insurance 102,700 9,470 112,170 108,341 11,533 119,874 Utilities 452,902 17,921 470,823 407,117 17,211 424,328 Interest 114,071 0 114,071 123,588 3,325 126,913 Repairs and maintenance 181,064 82,105 263,169 264,073 20,834 284,907 Property tax 92,587 0 92,587 87,853 1,790 89,643 Vehicle and travel 44,928 8,958 53,886 47,720 5,741 53,461 Depreciation 458,400 11,922 470,322 438,607 14,082 452,689 Dues and subscriptions 631 4,878 5,509 1,598 4,935 6,533 CARF accreditation 990 1,072 2,062 743 1,387 2,130 ACA penalties 0 0 0 6,982 15,049 22,031 Training and conferences 13,040 9,183 22,223 14,164 10,208 24,372 Mission programs 173,206 12 173,218 134,792 29 134,821 Bad debt expense 47 17 64 18,000 0 18,000 Miscellaneous 136,247 1,658 137,905 65,413 20,886 86,299 Total functional expenses $ 15,948,692 $ 822,210 $ 16,770,902 $ 15,556,755 $ 760,424 $ 16,317,179 The accompanying notes are an integral part of these financial statements. - 7-
MARION GOODWILL INDUSTRIES, INC. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 2017 AND 2016 2017 2016 CASH FLOWS FROM OPERATING ACTIVITIES:- Increase in net assets $ 837,185 $ 767,287 Adjustments to reconcile the increase in net assets to net cash provided by operating activities;- Depreciation expense 470,322 452,689 Gain on sale and disposal of fixed assets ( 4,391) ( 2,500) Increase in inventory ( 5,971) ( 9,405) Increase in receivables ( 41,005) ( 87,891) Increase in prepaids and deposits ( 51,982) ( 27,788) Increase (decrease) in accounts payable 36,785 ( 28,142) Increase (decrease) in accrued payroll and taxes 28,723 ( 102,409) Increase in accrued expenses 11,427 22,038 Decrease in deferred revenue ( 8,700) ( 8,700) Net cash provided by operating activities 1,272,393 975,179 CASH FLOWS FROM INVESTING ACTIVITIES:- Purchase of property and equipment ( 571,059) ( 119,707) (Purchases) proceeds of certificates of deposits, net ( 359,513) 101,775 Proceeds from sale of property and equipment 5,268 2,500 Net (purchases) proceeds of investments ( 9,921) 1,666 Net cash used by investing activities ( 935,225) ( 13,766) CASH FLOWS FROM FINANCING ACTIVITIES:- Payment of long-term debt ( 226,640) ( 424,653) Net cash used by financing activities ( 226,640) ( 424,653) Net increase in cash and cash equivalents 110,528 536,760 Cash and cash equivalents at beginning of year 2,492,495 1,955,735 Cash and cash equivalents at end of the year $ 2,603,023 $ 2,492,495 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:- Cash paid for:- Interest $ 114,071 $ 126,913 The accompanying notes are an integral part of these financial statements. - 8 -
MARION GOODWILL INDUSTRIES, INC. NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2017 AND 2016 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization - Marion Goodwill Industries, Inc. (the Organization) is an organization offering assistance to individuals with disabilities and other special needs to attain self-sufficiency through employment and training, thus enabling them to reach their full potential within the community. In addition to offering assistance to individuals in need, the Organization also accepts and processes donations from the general public which are then offered for sale in its retail stores at significant discounts. Select donations are offered for auction on Shopgoodwill.com. The Organization provides various contract services within the communities it serves on a fee for service basis. The Organization serves individuals living within Marion, Crawford, Delaware, Morrow and Union counties of Ohio. The Organization is a member agency of Goodwill Industries International. Basis of Presentation - The Organization s financial statements are presented in accordance with Accounting Standards Codification (ASC) No. 958-205-45, Financial Statements for Not-for-Profit Organizations. Under ASC No. 958-205-45, the Organization is required to report information regarding its financial position and activities according to three classes of net assets; unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. Use of Estimates - The financial statements of the Organization are presented in conformity with the accounting principles generally accepted in the United States. This presentation requires the use of estimates and assumptions made by management that affect depreciation on property and equipment, receivables, inventory and allocation of functional expenses. Accordingly, actual results could differ from those estimates. Cash and Cash Equivalents - Cash and cash equivalents include cash on hand and on deposit and highly liquid cash investments with original maturities of three months or less. Investments - The Organization has adopted ASC No. 958-320-45, Investments Held by Not-for-Profit Organizations. Under ASC No. 958-320-45, investments in marketable securities with readily determinable fair values are reported at their fair values in the statement of financial position. Unrealized gains and losses are included in the change in net assets. Investment income and gains restricted by a donor are reported as increases in unrestricted net assets if the restrictions are met (either by passage of time or by use) in the reporting period in which the income and gains are recognized Certificates of Deposit - The Organization periodically purchases certificates of deposit, which are fully insured by the Federal Deposit Insurance Corporation (FDIC). Certificates of deposit are recorded at cost plus accrued interest less actual interest received. Accounts Receivable - The accounts receivable balances consists primarily of billings for contracted services. Additionally, accounts receivable also include short term financing of large retail purchases, short term loans, and short term financing of automobile purchases through the Wheels to Work program. Interest is not charged on open accounts. Receivables are carried at original invoice amount and are presented net of an allowance for doubtful accounts. Management provides for doubtful accounts through a provision for bad debt expense and an adjustment to a valuation allowance based on its assessment of the current status of individual receivables. Receivables are written off when deemed uncollectible. Recoveries of receivables previously written off are recorded as income when received. Inventory - The Organization receives contribution of goods and materials (inventory) and processes these contributions as merchandise available for sale in its retail thrift stores. Accounting standards require that contributions be recognized as revenues or gains in the period received and as assets, decreases of liabilities or expenses depending on the form of benefits received. Contributions are measured at their fair value. - 9 -
MARION GOODWILL INDUSTRIES, INC. NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2017 AND 2016 The Organization believes that the inventory of donated goods and materials does not possess an attribute that is easily measureable or verifiable with sufficient reliability to determine an inventory value at the time of the donation. It is only through the value-added processes that prepare the donated inventory for sale that the donated inventory has value. Accordingly, contributed goods and materials inventory are valued at zero prior to being offered for sale. The Organization considers the costs (donation collection, sorting and pricing expenses, transportation, store expenses, and retail management) associated with bringing the donated inventory to sale in its estimate of the fair value of the inventory. The estimate of the inventory value of donated goods and material in its retail stores is based on a twelve month rolling average of retail sales less cost of sales multiplied by the estimated shelf life of inventory on hand at June 30. Property and Equipment - Property and equipment is stated at cost less accumulated depreciation. The Organization capitalizes assets with a cost of $1,000 or more. Maintenance and repairs are charged to operations as incurred. Depreciation for financial reporting purposes is computed using the straight-line method over the following useful lives:- Buildings and improvements Machinery & Equipment Vehicles 20-40 years 10 years 3 years Contributions - In accordance with ASC No. 958-605-25, contributions received are recorded as unrestricted, temporarily restricted or permanently restricted support depending on the existence or nature of any donor imposed restrictions. Contributions are recognized as revenue when received or unconditionally promised. The Organization received contributions that were all recorded as unrestricted. Functional Allocation - Expenses have been summarized on a functional basis in the statements of functional expenses. Accordingly, certain estimates have been made to allocate between program and management and general expenses. Advertising Costs - The Organization charges advertising costs to operations when incurred. Advertising expenses were $37,341 and $27,960 for the years ended June 30, 2017 and 2016, respectively. Federal Income Taxes - The Organization has been determined, by the Internal Revenue Service, as exempt from Federal income taxes under Section 501(c)(3) of the Internal Revenue Code and classified by the Internal Revenue Service as other than a private foundation and, as a result, a provision for taxes is not required. The Organization has adopted ASC No. 740-10 Accounting for Uncertainty in Income Taxes. The Organization records interest and penalties, if any, in interest expense and miscellaneous expense, respectively, in operating expenses. During the years ended June 30, 2017 and 2016, the Organization did not have any interest or penalties related to taxes. Management believes that there were no uncertain tax positions as of June 30, 2017 and 2016. NOTE 2 - PROPERTY AND EQUIPMENT Property and equipment consists of machinery and equipment recorded at cost or fair market value if donated. For financial reporting purposes, depreciation for machinery and equipment is computed using the straight-line basis over the estimated useful lives of the assets. - 10 -
MARION GOODWILL INDUSTRIES, INC. NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2017 AND 2016 Property and equipment at June 30, 2017 and 2016 consisted of the following: 2017 2016 Land $ 53,383 $ 53,383 Building & improvements 8,918,973 8,596,055 Machinery & equipment 141,519 132,939 Vehicles 550,970 336,651 9,664,845 9,119,028 Accumulated depreciation ( 2,905,017) ( 2,459,060) Net property and equipment $ 6,759,828 $ 6,659,968 NOTE 3 - LONG TERM DEBT Long term debt at June 30, 2017 and 2016 consisted of the following: 2017 2016 Note payable to bank at 4.24% per annum with variation. Monthly $ 2,335,011 $ 0 payments of principal and interest are $24,640 and matures in February 2027. The note is secured by real property located on Columbus Pike in Delaware, Ohio. Note payable to bank at 3.25% per annum. Monthly payments of 69,200 0 principal and interest are $2,021 and matures in July 2020. The note is secured by a truck. Note payable to third party, WSOS Community Action, that matures in 196,788 209,905 June 2032. Note payable to bank at 4.50% per annum with variation. Monthly payments of principal and interest are $23,048 and was paid in full in February 2017. The note was secured by real property located on Columbus Pike in Delaware, Ohio. 0 2,617,732 Total notes payable 2,600,999 2,827,637 Less current portion ( 232,723) ( 175,441) Total long-term debt $ 2,368,276 $ 2,652,196 Interest paid on the previous notes for the years ended June 30, 2017 and 2016 was $114,071 and $126,913, respectively. - 11 -
MARION GOODWILL INDUSTRIES, INC. NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2017 AND 2016 Future principal payments of long-term debt are as follows: Year ended June 30, 2018 $ 232,723 Year ended June 30, 2019 244,034 Year ended June 30, 2020 253,704 Year ended June 30, 2021 241,674 Year ended June 30, 2022 249,591 Thereafter 1,379,273 Total $ 2,600,999 NOTE 4 - FAIR VALUE MEASUREMENTS The Organization follows the Accounting Standards Codification (ASC) No. 820, Fair Value Measurements. ASC No. 820 establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC No. 820 are described below: Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Organization has the ability to access. Level 2: Inputs to the valuation methodology include: Quoted prices for similar assets or liabilities in active markets; Quoted prices for identical or similar assets or liabilities in inactive markets; Inputs other than quoted prices that are observable for the asset or liability; Inputs that are derived principally from or corroborated by observable market data by correlation or other means. If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability. Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The asset's or liability's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at June 30, 2017 and 2016. Mutual funds: Valued based on quoted prices in an active market (Level 1). The methods described above may produce a fair value that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Organization believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. - 12 -
MARION GOODWILL INDUSTRIES, INC. NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2017 AND 2016 The following table sets forth by level, within the fair value hierarchy, the Organization's assets at fair value as of June 30, 2017 and 2016: 6/30/2017 6/30/2016 Market Market Value Value Mutual funds (level 1) $ 101,722 $ 91,801 Total investments $ 101,722 $ 91,801 NOTE 5 - RETIREMENT PLAN Effective June 1, 2012, the Organization offers a 401(k) Profit Sharing Safe Harbor Plan. The Plan s contribution types are elective deferrals including Roth Contributions with 401(k) safe harbor contributions match. The Organization s contribution to the plan for the years ended June 30, 2017 and 2016 was $57,117 and $64,181, respectively. NOTE 6 - OPERATING LEASES The Organization maintains operating leases for warehouse space and on several of its store locations. These leases are with unrelated parties. They have terms ranging from three to ten years, and rental payments ranging from $2,535 to $22,234 per month. Some of the leases contain renewal options. Building lease expense for the years ended June 30, 2017 and 2016 amounted to $1,764,274 and $1,796,448, respectively. Schedule of Minimum Future Rental Payments is as follows: Year ended June 30, 2018 $ 1,320,012 Year ended June 30, 2019 1,266,862 Year ended June 30, 2020 1,248,968 Year ended June 30, 2021 1,150,897 Year ended June 30, 2022 1,134,322 Thereafter 4,763,422 Total $ 10,884,483 NOTE 7 - RENTAL INCOME The Organization owns ten rental properties located in Marion many of which are rented by Goodwill employees. All rental agreements automatically renew on a month to month basis. Rental income for the properties range from $300 to $765 per month. Rental revenue recognized for the years ended June 30, 2017 and 2016 amounted to $115,942 and $123,522, respectively. NOTE 8 - RISKS AND UNCERTAINTIES Uninsured Risk Cash Deposits The Organization maintains its cash balances in both interest-bearing and noninterest-bearing accounts at various financial institutions located in central Ohio. Effective January 1, 2013, noninterest-bearing accounts are no longer insured separately from the Organization s other accounts at the same FDIC-insured depository institution (IDI). Instead, noninterest-bearing and interest-bearing accounts are collectively insured up to a coverage limit of $250,000 at each separately chartered IDI. As a result, the Organization may have balances that exceed the insured limit. - 13 -
MARION GOODWILL INDUSTRIES, INC. NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2017 AND 2016 Investments As of June 30, 2017 and 2016, the Organization s investment portfolio consisted of mutual funds. Such investments are exposed to various risks such as interest rate, market, and credit. Due to the level of risk associated with such investments and the levels of uncertainty related to changes in the value of such investments, it is at least reasonably possible that changes in risks in the near term would material affect investment balances and the amounts reported in the financial statements. NOTE 9 - SUBSEQUENT EVENTS The Organization s management has evaluated subsequent events through December 5, 2017, the date which the financial statements were available to be issued. - 14 -
INDEPENDENT AUDITORS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS The Board of Directors Marion Goodwill Industries, Inc. 340 West Fairground Street Marion, Ohio 43302 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 Marion Goodwill Industries, Inc. (the Organization), which comprise the statement of financial position as of June 30, 2017, and the related statements of activities and changes in net assets, functional expenses and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated December 5, 2017. Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered Marion Goodwill Industries 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 opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Marion Goodwill Industries Inc. s internal control. Accordingly, we do not express an opinion on the effectiveness of Marion Goodwill Industries, Inc. s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies. 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. Compliance and Other Matters As part of obtaining reasonable assurance about whether Marion Goodwill Industries 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. MEMBERS AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS OHIO - SOCIETY 15 - OF CERTIFIED PUBLIC ACCOUNTANTS
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. Certified Public Accountants Marion, Ohio December 5, 2017-16 -