CENTRAL TEXAS WORKFORCE DEVELOPMENT BOARD, INC. Belton, Texas ANNUAL FINANCIAL REPORT June 30, 2015
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FINANCIAL SECTION CENTRAL TEXAS WORKFORCE DEVELOPMENT BOARD, INC. TABLE OF CONTENTS JUNE 30, 2015 Independent Auditor s Report... 1-3 Management s Discussion and Analysis... 4-8 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position... 9 Statement of Activities... 10 Fund Financial Statements: Balance Sheet Governmental Funds... 11-12 Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds... 13-14 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities... 15 Notes to Financial Statements... 16-22 SUPPLEMENTAL INFORMATION Nonmajor Governmental Funds... 23 Combining Balance Sheet... 24 Combining Statement of Revenues, Expenditures and Changes in Fund Balances... 25 SINGLE AUDIT SECTION Independent Auditor s 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... 26-27 Independent Auditor s Report on Compliance for Each Major Program and on Internal Control Over Compliance required by OMB Circular A-133 and the State of Texas Uniform Grant Management Standards... 28-29 Schedule of Expenditures of Federal and State Awards... 30-32 Notes to Schedule of Expenditures of Federal and State Awards... 33 Schedule of Findings and Questioned Costs... 34-35 Summary Schedule of Prior Audit Findings... 36
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Financial Section
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INDEPENDENT AUDITOR'S REPORT Finance Committee Central Texas Workforce Development Board, Inc. Belton, Texas Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Central Texas Workforce Development Board, Inc. (the Board), as of and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise the Board's basic financial statements as listed in the table of contents. 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 opinions 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 opinions. AN INDEPENDENT MEMBER OF BAKER TILLY INTERNATIONAL WEAVER AND TIDWELL, L.L.P. CERTIFIED PUBLIC ACCOUNTANTS AND ADVISORS 1601 SOUTH MOPAC EXPRESSWAY, SUITE D250, AUSTIN, TX 78746 P: 512.609.1900 F: 512.609.1911
Central Texas Workforce Development Board, Inc. Page 2 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Board, as of June 30, 2015, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis on pages 4 through 8 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Board's basic financial statements. The accompanying combining nonmajor fund financial statements are presented for purposes of additional analysis and are not a required part of the basic financial statements. The schedule of expenditures of federal and state awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and the State of Texas Uniform Grant management Standards, issued by the Governor's Office of Budget and Planning, and is also not a required part of the basic financial statements. The accompanying combining nonmajor fund financial statements and the schedule of expenditures of federal and state awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements.
Central Texas Workforce Development Board, Inc. Page 3 Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining nonmajor fund financial statements and the schedule of expenditures of federal and state awards are fairly stated in all material respects in relation to the basic 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 February 11, 2016, on our consideration of the Board's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Board's internal control over financial reporting and compliance. WEAVER AND TIDWELL, L.L.P Austin, Texas February 11, 2016
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Management s Discussion and Analysis As management of the Central Texas Workforce Development Board, Inc. (the Board), we offer readers of the Board s financial statements this narrative overview and analysis of the financial activities of the Board for the fiscal year ended June 30, 2015. FINANCIAL HIGHLIGHTS The liabilities of the Board exceeded its assets as of June 30, 2015, by $68,387 which reflects an increase of $4,562 in comparison with the prior year. The Board s total net position decreased by $4,562 at June 30, 2015 and increased by $4,341 in the prior year. As of the close of the current fiscal year, the Board s governmental funds reported combined ending fund balances of zero. The majority of the Board s revenues are in the form of expenditure driven grants. Revenues for these grants are recognized as soon as all eligibility requirements are met and the related amounts have become available. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the Board s basic financial statements. The Board s basic financial statements are comprised of three components: (1) government-wide financial statements, (2) fund financial statements and (3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide financial statements The government-wide financial statements, which begin on page 9 of this report, are designed to provide readers with a broad overview of the Board s finances, in a manner similar to a private-sector business. The Statement of Net Position presents information on all of the Board s assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the Board is improving or deteriorating. The Statement of Activities presents information showing how the Board s net position changed during the fiscal year. All changes in net position are reported when the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in the future fiscal periods (e.g., earned but unused compensated absences). The government-wide financial statements report functions of the Board that are principally supported by Federal, State and other grants. The governmental functions of the Board represent regulatory responsibility and include the U.S. Department of Agriculture, U.S. Department of Labor, U.S. Department of Health and Human Services, Texas Health and Human Services Commission, and the Texas Workforce Commission. Fund financial statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The Board, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All funds of the Board fall in one category governmental funds. 4
MANAGEMENT S DISCUSSION AND ANALYSIS JUNE 30, 2015 Governmental Funds Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on current sources and uses of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government s near-term financing decisions. Both the governmental funds balance sheet and the governmental funds statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. Beginning on page 11 of this report, information is presented separately in the Governmental Funds Balance Sheet and in the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances for the U.S. Department of Labor Fund, U.S. Department of Health and Human Services Fund and the Texas Workforce Commission Fund which are considered to be major funds. Data from the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements under Supplemental Information beginning on page 23 in this report. Budgets are adopted on a grant basis, which often covers more than one year. These budgets are not considered to be legally adopted annual budgets and are therefore not presented in this report. Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 16 22 of this report. Other Information In addition to the basic financial statements and accompanying notes, this report also presents combining financial statements referred to earlier in connection with nonmajor governmental funds. These statements are located directly after the notes. GOVERNMENTAL-WIDE FINANCIAL ANALYSIS Net position may serve over time as a useful indicator of a government s financial position. In the case of the Board, the liabilities of the Board exceeded its assets by $68,387 as of June 30, 2015 and $63,825 as of June 30, 2014. 5
MANAGEMENT S DISCUSSION AND ANALYSIS JUNE 30, 2015 Central Texas Workforce Development Board s Net Position Governmental Activities 2015 2014 Current and other assets $ 1,808,340 $ 1,659,406 Total assets 1,808,340 1,659,406 Current liabilities 1,808,340 1,659,406 Long-term liabilities 68,387 63,825 Total liabilities 1,876,727 1,723,231 Net position: Unrestricted (68,387) (63,825) Total net position $ (68,387) $ (63,825) Analysis of the Board s Operations The following table provides a summary of the Board s operations for the year ended June 30, 2015. Central Texas Workforce Development Board s Changes in Net Position Governmental Activities 2015 2014 Revenues: Program revenues: Operating grants and contributions $ 18,410,085 $ 17,047,183 Total revenues 18,410,085 17,047,183 Expenses: General Government 12,927 3,687 U.S. Department of Agriculture 416,599 323,494 U.S. Department of Education 1,180 323,494 U.S. Department of Labor 4,247,818 3,791,063 U.S. Department of Health and Human Services 10,377,289 9,650,073 Texas Workforce Commission 3,079,939 2,991,524 Texas Health and Human Services Commission 278,895 283,001 Total expenses 18,414,647 17,366,336 Change in Net Position (4,562) 4,341 Net Position, June 30, 2014 (63,825) (68,166) Net Position, June 30, 2015 $ (68,387) $ (63,825) 6
MANAGEMENT S DISCUSSION AND ANALYSIS JUNE 30, 2015 As indicated by the Revenues by Source graph, the majority of the Board s revenues and associated expenditures are supported by the U.S. Department of Health and Human Services, which supports the Board s Child Care program. Texas Health and Human Services Commission Revenues by Source - Governmental Activities Texas Workforce Commission General Government U S. Department of Agriculture U.S. Department of Labor U.S. Department of Health and Human Services Financial Analysis of the Government s Funds As noted earlier, the Board uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds The focus of the Board s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the Board s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government s net resources available for spending at the end of the fiscal year. At the end of the current fiscal year, the Board s governmental funds reported combined ending fund balances of zero due to the nature of the grant reimbursable contracts handled by the Board from the Department of Labor and the Texas Workforce Commission. Capital Assets The Board s investment in capital assets for its governmental activities as of June 30, 2015, is $0 (net of accumulated depreciation). There were no major capital asset events that occurred during the current fiscal year. 7
MANAGEMENT S DISCUSSION AND ANALYSIS JUNE 30, 2015 Central Texas Workforce Development Board s Capital Assets at year-end Governmental Activities 2015 2014 Furniture, fixtures and equipment $ 8,421 $ 8,421 Less: accumulated depreciation 8,421 8,421 Total Assets $ - $ - Economic Factors The Board is dependent on federal and state funding, which can vary widely from year to year. The federal economic condition and federal budget variances can impact the reauthorization of funds available to local governments. There was an increase in overall funding this year over last mainly due to the WIA and Child Care program funding increases. Request for Information This financial report is designed to provide a general overview of the Central Texas Workforce Development Board s finances for all of those with an interest in the government s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Office of the Director of Administration, Central Texas Council of Governments, P.O. Box 729, Belton, Texas 76513. 8
Statement of Net Position June 30, 2015 Governmental Activities ASSETS Current assets: Receivables Grantors $ 1,808,340 Other governments - Total current assets 1,808,340 Noncurrent assets: Capital assets: Furniture, fixtures and equipment 8,421 Less: accumulated depreciation 8,421 Total capital assets - Total noncurrent assets - Total assets 1,808,340 LIABILITIES Current liabilities: Accounts payable 1,052,255 Due to other governments 729,203 Unearned revenue 26,882 Total current liabilities 1,808,340 Noncurrent liabilities: Due within one year 68,387 Total noncurrent liabilities 68,387 Total liabilities 1,876,727 NET POSITION Unrestricted (68,387) Total net position $ (68,387) The notes to the financial statements are an integral part of this statement. 9
Statement of Activities For the Year Ended June 30, 2015 Net (Expense) Revenue and Program Revenues Changes in Net Position Operating Grants Governmental Expenses and Contributions Activities Functions/Programs Governmental activities: General Government $ 12,927 $ 8,365 $ (4,562) U.S. Department of Agriculture 416,599 416,599 - U.S. Department of Agriculture 1,180 1,180 - U.S. Department of Labor 4,247,818 4,247,818 - U.S. Department of Health and Human Services 10,377,289 10,377,289 - Texas Workforce Commission 3,079,939 3,079,939 - Texas Health and Human Services Commission 278,895 278,895 - Total governmental activities $ 18,414,647 $ 18,410,085 $ (4,562) Change in net position (4,562) Net position beginning (63,825) Net position ending $ (68,387) The notes to the financial statements are an integral part of this statement. 10
Balance Sheet Governmental Funds June 30, 2015 Special Revenue U.S. U.S. Department Department of Texas of Health and Workforce Labor Human Services Commission ASSETS Accounts receivable: Grantors $ 503,484 $ 885,689 $ 348,490 Due from other governments - - - Total assets 503,484 885,689 348,490 LIABILITIES AND FUND BALANCES Liabilities Accounts payable 274,235 533,604 242,605 Due to other governments 229,249 352,085 105,885 Unearned revenue - - - Total liabilities 503,484 885,689 348,490 Fund balances - - - Total liabilities and fund balances $ 503,484 $ 885,689 $ 348,490 Amounts reported for governmental activities in the statement of net position are different because: Long-term liabilities are not due and payable in the current period and therefore are not reported in the funds. Net position of governmental activities The notes to the financial statements are an integral part of this statement. 11
Special Revenue Other Governmental Funds Total Governmental Funds $ 70,677 $ 1,808,340 - - 70,677 1,808,340 1,797 1,052,241 41,998 729,217 26,882 26,882 70,677 1,808,340 - - $ 70,677 (68,387) $ (68,387) 12
Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Year Ended June 30, 2015 Special Revenue U.S. U.S. Department Department of Texas of Health and Workforce Labor Human Services Commission REVENUES Intergovernmental $ 4,247,818 $ 10,377,289 $ 3,079,939 Total revenues 4,247,818 10,377,289 3,079,939 EXPENDITURES Current: Workforce development 4,247,818 10,377,289 3,079,939 Total expenditures 4,247,818 10,377,289 3,079,939 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES - - - FUND BALANCES, BEGINNING - - - FUND BALANCES, ENDING $ - $ - $ - The notes to the financial statements are an integral part of this statement. 13
Special Revenue Other Governmental Funds Total Governmental Funds $ 705,039 $ 18,410,085 705,039 18,410,085 705,039 18,410,085 705,039 18,410,085 - - - - $ - $ - 14
Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds To the Statement of Activities For the Year Ended June 30, 2015 Amounts reported for governmental activities in the Statement of Activities are different because: Net change in fund balances-total governmental funds $ - The net change in long-term liabilities resulted in a decrease in expenses in the government-wide statement of activities (4,562) Change in net position of governmental activities $ (4,562) The notes to the financial statements are an integral part of this statement. 15
I. Summary of Significant Accounting Policies A. Reporting Entity Notes To Financial Statements June 30, 2015 The Central Texas Workforce Development Board, Inc. (the "Board"), was established in December 1997 pursuant to the Texas Workforce and Economic Competitiveness Act, Government Code, Chapter 2308, passed by the State Legislature as Senate Bill 642 (1993) and House Bill 1863 (1995), establishing the Texas Workforce Commission and creating local workforce development boards. The purpose of this nonprofit corporation is to work in tandem with the Central Texas Chief Elected Officials' Consortium Board in establishing innovative and creative employment and training programs to prepare youth and unskilled adults for entry into the labor force and to afford job training opportunities to local residents facing barriers to employment who are in need of such training to facilitate their acquisition of productive employment. The Board is exempt from federal income tax under 501(c)(3) of the Internal Revenue Code. The mission of the Central Texas Workforce Development Board, Inc. is to provide quality education, training and labor market services which give businesses and residents of the region a competitive advantage in the global economy. The Board was also established to assume the broad corporate leadership role for regional and local workforce development planning, oversight, administration, initiative development and program implementation of any and all workforce training and services in the Central Texas Workforce Development area. The members of the Board of Directors assumed office at the organizational meeting of the initial Board of Directors. All subsequent appointees to the Board of Directors shall serve staggered three-year terms, and the terms of one-third (1/3) of the directors shall expire each year. One, two and three-year terms will be spread equitably among directors as appointed by the Chief Elected Official of the CEO Consortium. The initial directors will have one, two or three-year terms and shall hold office for the remainder of that term until his/her successor is appointed. Reappointment of incumbent directors shall be for a period of three (3) years consistent with the initial categorical and demographic requirements and the regional labor market. The basic financial statements of the Board have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. Governmental Accounting Standards Board (GASB) Statement 14, "The Financial Reporting Entity, criteria for including organizations within the Board's reporting entity include entities upon which the Board is able to impose its will, or that are fiscally dependent upon the Board. Additionally, those entities that the nature and significance of their relationship with the Board is such that exclusion from the Board's financial reporting entity would render the Board's financial statements incomplete or misleading are also required to be included. However, no other organizations are required to be included in the Board's June 30, 2015 financial statements in accordance with government accounting standards. 16
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2015 B. Government-wide and fund financial statements The government-wide financial statements (i.e., the statement of net position and the statement of changes in net position) report information on all of the nonfiduciary activities of the government. The effect of interfund activity has been removed from these statements. Governmental activities are supported by federal, state and local grants. The statement of activities demonstrates the degree to which the direct expenses of a given function are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function. Program revenues include grants and contributions that are restricted to meeting the operational requirement of a particular function. Separate financial statements are provided for governmental funds. Major individual governmental funds are reported as separate columns in the fund financial statements. C. Measurement focus, basis of accounting, and financial statement presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenues as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the Board considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred. However, expenditures related to compensated absences and claims and judgments are recorded only when payment is due. Governmental funds grant resources and supportive services fees are susceptible to accrual and are recognized as revenues to the extent of qualifying expenditures recorded for the individual programs since the Board is only reimbursed for qualifying expenditures incurred for grant and contract purposes. The Board reports the following major governmental funds: U.S. Department of Labor This fund accounts for various workforce programs awarded to the Central Texas Workforce Development Board by the U.S. Department of Labor. U.S. Department of Health and Human Services This fund accounts for various workforce programs awarded to the Central Texas Workforce Development Board by the U.S. Department of Health and Human Services. Texas Workforce Commission This fund accounts for various workforce programs awarded to the Central Texas Workforce Development Board by the Texas Workforce Commission. 17
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2015 D. Assets, Liabilities, and Net Position 1. Deposits and investments The Board s cash is deposited with the fiscal agent for the reimbursement of expenditures. 2. Grants receivable Receivables from grantors represent amounts due from federal and state agencies for various programs administered by the Board. The receivable includes amounts due on completed programs and those in progress as of June 30, 2015. 3. Capital assets Capital assets, which include furniture, fixtures and equipment, are reported in the governmental activities column in the government-wide financial statements. Capital assets are defined by the Board as assets with an initial, individual cost of $5,000 or more and an estimated useful life in excess of two years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Furniture, fixtures and equipment of the Board is depreciated using the straight line method over their estimated useful life of three years. 4. Compensated absences Employees accrue vacation leave based on years of service with the Board. Employees may accrue up to a maximum of 30 vacation days for which payment is made to the employee upon termination of employment. Employees will be paid for accrued vacation upon termination of employment provided they have been in full time employment for six months of service. The Board's sick leave policy permits the accumulation of 18 sick days per year up to a maximum accumulation of 90 days. Employees are not paid for unused sick days upon termination of employment; therefore, no accrual for unused sick leave is recorded. Sick pay is charged as an expenditure as taken. 5. Fund Balance Classification The governmental fund financial statements present fund balances based on classifications that comprise a hierarchy that is based primarily on the extent to which the Board is bound to honor constraints on the specific purposes for which amounts in the respective governmental funds can be spent. The classifications used in the governmental fund financial statements are as follows: Nonspendable: This classification includes amounts that cannot be spent because they are either (a) not in spendable form or (b) are legally or contractually required to be maintained intact. Nonspendable items are not expected to be converted to cash or are not expected to be converted to cash within the next year. Restricted: This classification includes amounts for which constraints have been placed on the use of the resources either (a) externally imposed by creditors, grantors, contributors, or laws or regulations of other governments, or (b) imposed by law through constitutional provisions or enabling legislation. 18
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2015 Committed: This classification includes amounts that can be used only for specific purposes pursuant to constraints imposed by the Board s highest level of decision making authority. These amounts cannot be used for any other purpose unless the Board of Directors removes or changes the specified use by taking the same type of action that was employed when the funds were initially committed. This classification also includes contractual obligations to the extent that existing resources have been specifically committed for use in satisfying those contractual requirements. Assigned: This classification includes amounts that are constrained by the Board s intent to be used for a specific purpose but are neither restricted nor committed. This intent can be expressed by the Board of Directors. Unassigned: This classification includes the residual fund balance for the General Fund. The unassigned classification also includes negative residual fund balance of any other governmental fund that cannot be eliminated by offsetting of assigned fund balance amounts. When an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available, the Board considers restricted funds to have been spent first. When an expenditure is incurred for which committed, assigned, or unassigned fund balances are available, the Board considers amounts to have been spent first out of committed funds, then assigned funds, and finally unassigned funds. II. Budgetary information The Board s budget is controlled at the fund and project level with management authorized to make transfers of budgeted amounts between object class levels within a fund or project, within restrictions imposed by grantor agencies. The budget for the Special Revenue Funds is made on a project/grant basis and often covers more than one year. Budgets for all projects in the Special Revenue Funds lapse at the end of a contract period which may not coincide with the fiscal year-end of the Board. Although budgets are reviewed and approved by the Board, they are not considered legally adopted annual budgets or appropriations. Accordingly, comparative budget and actual results are not presented in this report. III. Detailed notes on all funds A. Unearned Revenue Governmental funds defer revenue recognition in connection with resources that have been received, but not yet earned. At the end of the current fiscal year, the various components of unearned revenue reported in the governmental funds were as follows: Unearned Grant drawdowns prior to meeting all eligibility requirements $ 26,882 19
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2015 B. Capital assets Capital asset activity for the year ended June 30, 2015 was as follows: Beginning Ending Balance Increases Decreases Balance Governmental activities: Capital assets being depreciated: Furniture, fixtures and equipment $ 8,421 $ - $ - $ 8,421 Less accumulated depreciation for: Furniture, fixtures and equipment 8,421 - - 8,421 Governmental activities capital assets, net $ - $ - $ - $ - C. Lease The Board leases office space under annual operating leases. The total costs were $638,075 in 2015. The future minimum lease payments are as follows: Fiscal Year Total 2016 $ 662,555 2017 652,499 2018 652,643 2019 292,467 Total $ 2,260,164 D. Long-term liabilities Governmental activities: Beginning Ending Amount Due Balance Additions Deletions Balance in One Year Compensated absences $ 63,825 61,040 56,478 $ 68,387 $ 68,387 20
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2015 IV. Other information A. Risk management The Board is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The Board maintains workers' compensation and other risks of loss coverage. The Board management believes such coverage is sufficient to preclude any significant uninsured losses to the Board. The Board retains a risk of loss of $1,000 for each property loss claim. There were no significant reductions in insurance coverage from coverage in the prior year. There were no insurance settlements which exceeded insurance coverage in any of the past three years. B. Contingent liabilities Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. Any disallowed claims, including amounts already collected, may constitute a liability of the general fund. The amount, if any, of expenditures, which may be disallowed by the grantor, cannot be determined at this time although the Board expects such amounts, if any, to be immaterial. A substantial portion of the Board s revenue is in the form of performance contracts with the Texas Workforce Commission. As a result, the Board s overall operations are contingent upon future funding by the Commission. C. Retirement system and pension plans Retirement Plan The Board is a member of the National Association of Regional Boards - Multiple Employer Retirement Plan (the "Plan"). The Plan is a defined contribution retirement plan, administered by the Central Texas Council of Governments. After 90 days of employment the Plan provides retirement benefits for all full-time employees. The Board of Directors has the authority to amend the retirement plan. Employees contribute 3% of gross salaries to the Plan after 90 days of employment. The Board contributes to the Plan an amount equal to 7% of gross salaries for full-time employees who have worked at least 1,000 hours in the Plan year. These contributions totaled $54,752 in fiscal year 2015. Employees are 100% vested in the Board's contributions after two full years of employment. Employee contributions totaled $23,465 in fiscal year 2015. Deferred Compensation Plan (Plan) A tax-deferred compensation plan, which meets the requirements of Internal Revenue Code Section 457, as amended, is available for the Board employees participation. The Board s fiduciary responsibility under the plan is to remit employee contributions to Nationwide Retirement Solution on a regular basis. The Board has no legal access to the plan assets. The plan assets are not reported in the financial statements because the assets are held in a custodial account. 21
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2015 D. Negative Equity The government-wide financial statements have negative net position of $68,387 as of June 30, 2015. The negative net position balance in the government-wide statements is a result of the difference in how accrued compensated absences are recorded in full accrual accounting compared to modified accrual accounting. The Board recovers these costs from grants using the modified accrual basis of accounting, which is used in the fund statements. Under this basis, compensated absences are charged to grants as they are used. However, the government-wide statements use full accrual accounting. Under this basis, compensated absences are expensed when earned. As the accrued compensated absences in the government-wide statements are used, they will be recovered from grants. E. Related Party Transaction The Workforce Board contracts with Hill Country Community Action Association (HCCAA) for child care and elderly services. The organization s executive director is a member of the Board of Directors. The Board spent $7,999,548 with HCCAA during fiscal year 2015. At June 30, 2015, $678,771 was due and payable to the organization. 22
Supplemental Information
NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS Special revenue funds are used to account for specific revenues that are legally restricted to expenditure for particular purposes. U.S. Department of Agriculture This fund accounts for various workforce programs awarded to the Central Texas Workforce Development Board by the U.S. Department of Agriculture. Texas Health and Human Services Commission This fund accounts for various workforce programs awarded to the Central Texas Workforce Development Board by the Texas Health and Human Services Commission. Miscellaneous Grants and Contracts This fund accounts for miscellaneous local grants and contracts awarded to the Central Texas Workforce Development Board. 23
Combining Balance Sheet Nonmajor Governmental Funds June 30, 2015 Special Revenue U.S. U.S. Texas Total Department Department Health and Miscellaneous Nonmajor of of Human Services Grants and Governmental Agriculture Education Commission Contracts Funds ASSETS Accounts receivable: Grantors $ 40,357 $ 180 $ 30,140 $ - $ 70,677 Due from other governments - - - - - Total assets 40,357 180 30,140-70,677 LIABILITIES AND FUND BALANCES Liabilities Accounts payable 1,797 - - - 1,797 Due to other governments 38,560 180 3,258-41,998 Unearned revenue - - 26,882-26,882 Total liabilities 40,357 180 30,140-70,677 Fund balances - - - - - Total liabilities and fund balance $ 40,357 $ 180 $ 30,140 $ - $ 70,677 24
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended June 30, 2015 Special Revenue U.S. U.S. Texas Total Department Department Health and Miscellaneous Nonmajor of of Human Services Grants and Governmental Agriculture Education Commission Contracts Funds REVENUES Intergovernmental $ 416,599 $ 1,180 $ 278,895 $ 8,365 $ 705,039 Total revenues 416,599 1,180 278,895 8,365 705,039 EXPENDITURES Current: Workforce development 416,599 1,180 278,895 8,365 705,039 Total expenditures 416,599 1,180 278,895 8,365 705,039 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES - - - - - FUND BALANCES, BEGINNING - - - - - FUND BALANCES, ENDING $ - $ - $ - $ - $ - 25
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Single Audit Section
INDEPENDENT AUDITOR'S 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 Finance Committee Central Texas Workforce Development Board, Inc. Belton, Texas 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 governmental activities, each major fund, and the aggregate remaining fund information of the Central Texas Workforce Development Board, Inc. (the Board), as of and for the year ended June 30, 2015, which collectively comprise the Board's basic financial statements, and have issued our report thereon dated February 11, 2016. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the Board'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 the Board's internal control. Accordingly, we do not express an opinion on the effectiveness of the Board's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether the Board'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. AN INDEPENDENT MEMBER OF BAKER TILLY INTERNATIONAL WEAVER AND TIDWELL, L.L.P. CERTIFIED PUBLIC ACCOUNTANTS AND ADVISORS 1601 SOUTH MOPAC EXPRESSWAY, SUITE D250, AUSTIN, TX 78746 P: 512.609.1900 F: 512.609.1911
Central Texas Workforce Development Board, Inc. Page 2 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. WEAVER AND TIDWELL, LLP. Austin, Texas February 11, 2016 27
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133 AND THE STATE OF TEXAS UNIFORM GRANT MANAGEMENT STANDARDS To the Finance Committee of Central Texas Workforce Development Board, Inc. Belton, Texas Report on Compliance for Each Major Federal and State Program We have audited the Central Texas Workforce Development Board, Inc.'s (the Board) compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement and the State of Texas Uniform Grant Management Standards (UGMS) that could have a direct and material effect on each of the Board's major federal and state programs for the year ended June 30, 2015. The Board's major federal and state 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 the requirements of laws, regulations, contracts, and grants applicable to its federal and state programs. Auditor's Responsibility Our responsibility is to express an opinion on compliance for each of the Board's major federal and state 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; OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and the State of Texas Uniform Grant Management Standards. Those standards, OMB Circular A- 133 and UGMS, 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 or state 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 and state program. However, our audit does not provide a legal determination of the Board's compliance. Opinion on Each Major Federal and State Program In our opinion, the Board 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 and state programs for the year ended June 30, 2015. AN INDEPENDENT MEMBER OF BAKER TILLY INTERNATIONAL WEAVER AND TIDWELL, L.L.P. CERTIFIED PUBLIC ACCOUNTANTS AND ADVISORS 1601 SOUTH MOPAC EXPRESSWAY, SUITE D250, AUSTIN, TX 78746 P: 512.609.1900 F: 512.609.1911
Central Texas Workforce Development Board, Inc. Page 2 Report on Internal Control Over Compliance Management of the Board 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 the Board's internal control over compliance with the types of requirements that could have a direct and material effect on each major federal and state 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 and state program and to test and report on internal control over compliance in accordance with OMB Circular A-133 and UGMS, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Board'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 or state 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 or state 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 or state program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of our testing, based on the requirements of OMB Circular A-133 and UGMS. Accordingly, this report is not suitable for any other purpose. WEAVER AND TIDWELL, L.L.P. Austin, Texas February 11, 2016 29