Dallas, Texas Financial Statements and Supplementary Information Year Ended February 28, 2017
Financial Statements and Supplementary Information Year Ended February 28, 2017 Table of Contents Independent Auditor s Report... 1 Financial Statements Statement of Financial Position... 3 Statement of Activities... 4 Statement of Cash Flows... 5 Notes to Financial Statements... 6 Supplementary Information Schedule of Program Activity... 12 Notes to the Schedule of Program Activity... 14 Schedule of Expenditures of Federal, State, and Local Awards and List of Programs... 15 Independent Auditor s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters... 16 Independent Auditor s Report on Compliance for the Major Federal Program and on Internal Control Over Compliance... 18 Schedule of Findings and Questioned Costs... 20
Independent Auditor s Report Board of Directors Head Start of Greater Dallas, Inc. Dallas, Texas Report on the Financial Statements We have audited the accompanying financial statements of Head Start of Greater Dallas, Inc. (a nonprofit organization), which comprise the statement of financial position as of February 28, 2017, and the related statements of activities and cash flows for the year then ended and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 1
Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Head Start of Greater Dallas, Inc. as of February 28, 2017, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States. Other Matters Supplementary Information Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying Schedule of Program Activity, Schedules A-1 to A-2, and the Notes to the Schedule of Program Activity, as well as the Schedule of Expenditures of Federal, State, and Local Awards and List of Programs, Schedule B, 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 State of Texas Single Audit Circular (the "Circular"), issued by the Texas Office of the Inspector General, 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. Such 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. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 5, 2017, on our consideration of Head Start of Greater Dallas, Inc. s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Head Start of Greater Dallas, Inc. s internal control over financial reporting and compliance. Wipfli LLP October 5, 2017 Madison, Wisconsin 2
Statement of Financial Position Year Ended February 28, 2017 Assets Current assets: Cash $ 292,962 Grants receivable 1,201,060 Accounts receivable 103 Prepaid expenses 31,836 Total current assets 1,525,961 Long-term assets: Property and equipment, net 11,380,950 Total long-term assets 11,380,950 TOTAL ASSETS $ 12,906,911 Liabilities and Net Assets Current liabilities: Current maturities of notes payable $ 343,745 Accounts payable 485,653 Accrued expenses 789,120 Accrued payroll 639,770 Total current liabilities 2,258,288 Long-term liabilities: Notes payable 5,436,249 Total long-term liabilities 5,436,249 Total liabilities 7,694,537 Net assets: Unrestricted 5,125,569 Temporarily restricted 86,805 Total net assets 5,212,374 TOTAL LIABILITIES AND NET ASSETS $ 12,906,911 See accompanying notes to financial statements. 3
Statement of Activities Year Ended February 28, 2017 Temporarily Unrestricted Restricted Total Revenue and support: Grant revenue $ 41,727,783 $ 31,112 $ 41,758,895 Contributions and other income 22,282 10,819 33,101 In-kind contributions 9,844,704 0 9,844,704 Net assets released from restriction through satisfaction of program restrictions 89,714 ( 89,714) 0 Total revenue and support 51,684,483 ( 47,783) 51,636,700 Expenses: Program activities: Child education 44,615,112 0 44,615,112 Food programs 1,749,746 0 1,749,746 Community 86,771 0 86,771 Discretionary 126,318 0 126,318 Total program expenses 46,577,947 0 46,577,947 Supportive services: Management and general 5,103,444 0 5,103,444 Total expenses 51,681,391 0 51,681,391 Change in net assets 3,092 ( 47,783) ( 44,691) Net assets - Beginning of year 5,122,477 134,588 5,257,065 Net assets - End of year $ 5,125,569 $ 86,805 $ 5,212,374 See accompanying notes to financial statements. 4
Statement of Cash Flows Year Ended February 28, 2017 Increase (decrease) in cash: Cash flows from operating activities: Change in net assets ($ 44,691) Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation 697,159 Amortization of debt issuance costs 11,963 Changes in operating assets and liabilities: Grants receivable ( 129,793) Accounts receivable 10,516 Prepaid expenses ( 14,034) Accounts payable ( 59,764) Accrued expenses 116,146 Accrued payroll 90,431 Grant funds received in advance ( 33,860) Net cash provided by operating activities 644,073 Cash flows from investing activities: Capital expenditures ( 369,202) Net cash used in investing activities ( 369,202) Cash flows from financing activities: Payments on notes payable ( 334,382) Net cash used in financing activities ( 334,382) Change in cash ( 59,511) Cash - Beginning of year 352,473 Cash - End of year $ 292,962 Supplemental schedule of other cash activity: Interest paid and expensed $ 247,556 See accompanying notes to financial statements. 5
Notes to Financial Statements Note 1: Summary of Significant Accounting Policies Nature of Operations Head Start of Greater Dallas, Inc. (HSGD) is a not-for-profit corporation organized in 1988 under the laws of the state of Texas. HSGD was formed to perform charitable or educational services, specifically to provide support or relief to the impoverished without regard to the beneficiaries ability to pay. HSGD receives 95% of its grant revenue from the U.S. Department of Health and Human Services (DHHS), under an annual grant, to operate the Head Start, Early Head Start, and Early Head Start-Child Care Partnerships programs in Dallas County. Services provided by HSGD include child development, social, health, nutrition, and special needs services to families enrolled in the Head Start programs. HSGD has delegated a portion of the program services to two other nonprofit agencies. HSGD s federal identification number is #75-2247281. Basis of Presentation The basic financial statements are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States. Classification of Net Assets Net assets and revenue, expenses, gains, and losses are classified based on the existence or absence of donor-imposed restrictions. Accordingly, net assets of HSGD and changes therein are classified and reported as follows: Unrestricted Net Assets - Net assets that are not subject to donor-imposed stipulations or where donor-imposed stipulations are met in the year of the contribution. Temporarily Restricted Net Assets - Net assets subject to donor-imposed stipulations that may or may not be met, either by actions of HSGD and/or the passage of time. When a restriction expires, temporarily restricted net assets are transferred to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. Permanently Restricted Net Assets - Net assets subject to donor-imposed stipulations that they be maintained permanently by HSGD. Generally, the donors of these assets permit HSGD to use all or part of the income earned on any related investments for general or specific purposes. Currently, HSGD does not have any permanently restricted net assets. Revenue and Expense Recognition/Grant Funds Received in Advance Contributions are recognized when the donor makes a promise to give to HSGD that is, in substance, unconditional. Contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support, depending on the existence and nature of any donor restrictions. When a restriction expires, temporarily restricted net assets are reclassified as unrestricted net assets and reported in the statement of activities as released from restrictions. Contributions that are restricted by the donor are reported as increases in unrestricted net assets if the restrictions expire in the fiscal year in which the contributions are recognized. 6
Notes to Financial Statements Note 1: Summary of Significant Accounting Policies (Continued) Revenue and Expense Recognition/Grant Funds Received in Advance (Continued) Conditional promises to give are recognized only when the conditions on which they depend are substantially met and the promises become unconditional. Grants are either recorded as contributions or exchange transactions based on criteria contained in the grant award. A. Grant Awards That Are Contributions Grants that qualify as contributions are recorded as invoiced to the funding sources. Revenue is recognized in the accounting period when the related allowable expenses are incurred. Amounts received in excess of expenses are reflected as grant funds received in advance. B. Grant Awards That Are Exchange Transactions Exchange transactions reimburse based on a predetermined rate for services performed. The revenue is recognized in the period the service is performed. In-Kind Contributions HSGD has recorded in-kind contributions for space and professional services in the statement of activities in accordance with financial accounting standards. These accounting standards require that only contributions of services received that create or enhance a nonfinancial asset or require a specialized skill by the individual possessing those skills and would typically need to be purchased if not provided by donation be recorded. The requirements of these financial standards are different than the in-kind requirements of HSGD s grant awards. HSGD received contributions of nonprofessional volunteers, during the year with a value of $3,416,917 for its Head Start program which are not recorded in the statement of activities. Property and Equipment Property and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful life of the asset. HSGD capitalizes equipment purchased with a cost greater than $5,000 and a useful life of more than two years. Leasehold improvements are depreciated over the lease term. Donations of property and equipment are recorded as support at their estimated fair value. Such donations are reported as unrestricted support unless the donor has restricted the donated asset to a specific purpose. If there are no donor restrictions regarding how long a donated asset must be maintained, HSGD reports expirations of donor restrictions when the donated assets are placed in service. HSGD reclassifies temporarily restricted net assets to unrestricted net assets at that time. Property and equipment purchased with grant funds is owned by HSGD while used in the program for which it was purchased or in other future authorized programs. However, the various funding sources have a reversionary interest in the property and equipment purchased with grant funds. Its disposition, as well as the ownership of any proceeds there from, is subject to funding source regulations. The net book value of the grant-funded property and equipment is $11,195,270. 7
Notes to Financial Statements Note 1: Summary of Significant Accounting Policies (Continued) Change in Accounting Policy - Debt Issuance Costs Debt issuance costs represent costs associated with obtaining debt to finance the purchase of buildings. Unamortized financing fees have been recorded as a reduction to the related debt obligation. The costs are being amortized to interest expense over the maximum term provided in the debt agreement using the straight-line method. The above policy reflects HSGD s current year adoption of the provisions of the Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2015-03, Interest Imputation of Interest. ASU 2015-03 requires the presentation of debt issuance costs as a reduction of the carrying amount of the debt rather than as an asset. Use of Estimates The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Tax Status HSGD is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code. Uncertain Tax Positions HSGD is required to assess whether it is more likely than not that a tax position will be sustained upon examination on the technical merits of the position assuming the taxing authority has full knowledge of all information. If the tax position does not meet the more likely than not recognition threshold, the benefit of that position is not recognized in the financial statements. HSGD has determined there are no amounts to record as assets or liabilities related to uncertain tax positions. Subsequent Events Subsequent events have been evaluated through October 5, 2017, which is the date the financial statements were available to be issued. Note 2: Concentration of Credit Risk HSGD maintains cash balances at two banks. Accounts at these banks are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. HSGD has a letter of credit agreement with BBVA Compass Bank. Bank balances in excess of FDIC coverage are collaterally secured by letters of credit. 8
Notes to Financial Statements Note 3: Grants Receivable The grants receivable balance represents amounts due as of February 28, 2017, as follows: U.S. Department of Health and Human Services $ 774,783 Texas Department of Agriculture 426,277 Total grants receivable $ 1,201,060 Note 4: Property and Equipment The balance consists of the following: Land $ 1,163,816 Buildings 13,649,269 Leasehold improvements 3,072,737 Equipment 4,560,198 Vehicles 775,348 Total property and equipment 23,221,368 Accumulated depreciation ( 11,840,418) Property and equipment, net $ 11,380,950 Note 5: Leases HSGD is committed under several operating leases related to its centers. Rent expense for these operating leases amounted to $482,989 for the year ended February 28, 2017. Future rental commitments under operating leases with terms of greater than one year are as follows: 2018 $ 443,925 2019 375,868 2020 242,159 2021 36,000 Total $ 1,097,952 Note 6: Notes Payable Notes payable are as follows: Note payable to Bank of Texas with monthly payments of approximately $4,120, including interest at 3.74%. The note is due January 2031 and is collateralized by real estate. $ 533,984 Note payable to Bank of Texas with monthly payments of approximately $9,130, including interest at 3.76%. The note is due January 2031 and is collateralized by real estate. 1,181,458 9
Notes to Financial Statements Note 6: Notes Payable (Continued) Note payable to Bank of Texas with monthly payments of approximately $20,600, including interest at 3.76%. The note is due January 2031 and is collateralized by real estate. 2,664,030 Note payable to Bank of Texas with monthly payments of approximately $14,678, including interest at 4.66%. This note is due August 2028 and is collateralized by real estate 1,552,736 Total notes payable 5,932,208 Unamortized debt issuance costs ( 152,214) Current maturities ( 343,745) Notes payable, net of debt issuance costs and current maturities $ 5,436,249 The original cost of financing fees was $179,457 and accumulated amortization at February 28, 2017 was $27,243. Scheduled principal payments on notes payable at February 28, 2017, including current maturities, are summarized as follows: 2018 $ 343,745 2019 358,082 2020 373,023 2021 388,085 2022 404,800 Thereafter 4,064,473 Total $ 5,932,208 The terms of HSGD's notes described above are subject to performance and financial covenants. As of February 28, 2017, management believes that HSGD was in compliance with these covenants. Note 7: Temporarily Restricted Net Assets Temporarily restricted net assets are available for the following purposes: Buckeye Trail Commons Head Start/Early Head Start Center $ 2,925 Dual Language, Literacy and Fellowship Programs 16,949 Science Technology Engineering & Math (STEM) Program 27,287 Early Head Start Garland and Davids Place Centers 19,593 Other 20,051 Total $ 86,805 10
Notes to Financial Statements Note 8: Retirement Plan HSGD has a defined contribution retirement plan authorized under Section 403(b) of the Internal Revenue Code. The plan covers all employees of HSGD. HSGD matches the lesser of 50% of the employees contributions up to 6% or 3% of salary following the completion of one year of service, in which the employee works 1,000 hours within that 12-month period. Employer contributions charged to expense for the year ended February 28, 2017, were $198,720. Note 9: Delegate Expenses HSGD delegated a portion of the Head Start program for the year ended February 28, 2017, to two other nonprofit agencies. The expenditures of these agencies have been included in the accompanying statement of activities and total $4,754,762. Other independent auditors audited those agencies. Delegate expenses for the year ended February 28, 2017, were as follows: Salaries and employee benefits $ 3,766,448 Payroll taxes 230,916 Professional fees and contract services 94,774 Local travel 8,604 Occupancy 97,857 Telecommunications 37,063 Utilities 132,022 Office supplies 54,546 Program supplies 73,156 Food 15,845 Equipment and equipment rental 41,977 Repairs and maintenance 142,451 Insurance 34,439 Conferences 20,960 Other expenses 3,704 Total expenses $ 4,754,762 Note 10: Commitments and Contingencies HSGD participates in a number of federally assisted and state grant programs. These programs are subject to program compliance audits by the grantors and their representatives. Any disallowed costs may constitute a liability of HSGD. HSGD is also required to match 25% of the grant funds received from the Head Start program with local resources. HSGD believes that it is in substantial compliance with all grant requirements, including those related to matching and disallowed costs, and any noncompliance, if any, would not be significant. Note 11: Grant Awards At February 28, 2017, HSGD had received a commitment for a grant award of approximately $1,485,000. This commitment is not recognized in the accompanying financial statements as it is a conditional award. 11
Supplementary Information
Schedule A-1 Schedule of Program Activity Year Ended February 28, 2017 FEDERAL PROGRAMS Department of Agriculture Department of Health and Human Services 10.558 93.600 Child Care Child Care Food Program Food Program Head Start Early Early Early Total TX-057-0054 TX-057-0054 10.558 Program Head Start Head Start Head Start 93.600 Federal Total 15/16 16/17 Subtotal 06CH7106/03 06CH7106/03 06HP0021/01 06HP0021/02 Subtotal Programs (1) (2) (3) (4) (5) (6) REVENUE AND SUPPORT Grant revenue $ 41,758,895 $ 972,013 $ 969,449 $ 1,941,462 $ 33,562,400 $ 3,584,000 $ 1,546,339 $ 1,078,054 $ 39,770,793 $ 41,712,255 Other income 33,101 0 0 0 0 0 0 0 0 0 In-kind contributions 9,844,704 0 0 0 11,618,730 1,096,593 332,158 214,140 13,261,621 13,261,621 Total Revenue 51,636,700 972,013 969,449 1,941,462 45,181,130 4,680,593 1,878,497 1,292,194 53,032,414 54,973,876 EXPENSES Salaries and employee benefits 25,374,652 457,653 359,751 817,404 19,921,101 2,847,916 1,001,884 783,725 24,554,626 25,372,030 Payroll taxes 1,552,126 28,881 25,623 54,504 1,178,608 172,138 89,646 57,029 1,497,421 1,551,925 Professional fees and contract services 2,821,566 0 0 0 2,689,584 17,657 58,593 55,474 2,821,308 2,821,308 Rent and storage 564,317 0 0 0 425,225 89,922 30,044 19,500 564,691 564,691 Mortgage principal 0 0 0 0 334,383 0 0 0 334,383 334,383 Utilities 514,424 0 0 0 414,257 83,501 10,852 4,241 512,851 512,851 Telecommunications 525,396 0 0 0 455,350 50,716 12,772 6,558 525,396 525,396 Local travel 56,228 0 0 0 50,431 4,358 660 779 56,228 56,228 Food 1,426,565 485,479 584,075 1,069,554 305,757 16,548 17,216 11,880 351,401 1,420,955 Program expenses 739,754 0 0 0 566,459 79,195 21,177 18,276 685,107 685,107 Office supplies 483,270 0 0 0 366,431 63,637 27,865 10,103 468,036 468,036 Minor equipment and equipment rental 491,284 0 0 0 418,109 15,668 39,762 10,164 483,703 483,703 Capitalized expenses 0 0 0 0 201,996 7,250 132,685 0 341,931 341,931 Repairs and maintenance 897,665 0 0 0 640,708 96,090 79,001 70,263 886,062 886,062 Vehicle expenses 116,534 0 0 0 116,534 0 0 0 116,534 116,534 Insurance 134,658 0 0 0 145,521 0 798 1,166 147,485 147,485 Interest 259,519 0 0 0 247,556 0 0 0 247,556 247,556 Out of town travel 80,228 0 0 0 52,667 10,394 7,324 9,626 80,011 80,011 Printing and publications 35,134 0 0 0 27,269 0 0 0 27,269 27,269 Conference and membership fees 161,779 0 0 0 115,115 24,617 15,305 13,847 168,884 168,884 Depreciation 697,159 0 0 0 0 0 0 0 0 0 Other expenses 149,667 0 0 0 134,577 4,393 755 5,423 145,148 145,148 Delegate expenses 4,754,762 0 0 0 4,754,762 0 0 0 4,754,762 4,754,762 In-kind expenses 9,844,704 0 0 0 11,618,730 1,096,593 332,158 214,140 13,261,621 13,261,621 Total Expenses 51,681,391 972,013 969,449 1,941,462 45,181,130 4,680,593 1,878,497 1,292,194 53,032,414 54,973,876 Change in Net Assets ( 44,691) 0 0 0 0 0 0 0 0 0 Net assets - Beginning of year 5,257,065 0 0 0 0 0 0 0 0 0 Prior period adjustment 0 0 0 0 0 0 0 0 0 0 NET ASSETS - END OF YEAR $ 5,212,374 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 See Independent Auditor's Report. 12
Schedule A-2 Schedule of Program Activity Year Ended February 28, 2017 STATE AND LOCAL PROGRAMS DISCRETIONARY Total Dual Language, Center State and Buckeye Literacy/Fellowship EHS-Garland and Gardens and Local GAAP TOTAL Center Programs STEM Program David's Place Program Supplies Programs Adjustments PROGRAMS Corporate (7) (8) (9) (10) (11) (12) (13) REVENUE AND SUPPORT Grant revenue $ 0 $ 2,640 $ 40,000 $ 0 $ 4,000 $ 46,640 $ 0 $ 41,758,895 $ 0 Other income 0 0 0 3,000 0 3,000 0 3,000 30,101 In-kind contributions 0 0 0 0 0 0 ( 3,416,917) 9,844,704 0 Total Revenue 0 2,640 40,000 3,000 4,000 49,640 ( 3,416,917) 51,606,599 30,101 EXPENSES Salaries and employee benefits 0 2,622 0 0 0 2,622 0 25,374,652 0 Payroll taxes 0 201 0 0 0 201 0 1,552,126 0 Professional fees and contract services 0 0 0 0 0 0 0 2,821,308 258 Rent and storage 0 0 0 0 0 0 ( 3,779) 560,912 3,405 Mortgage principal 0 0 0 0 0 0 ( 334,383) 0 0 Utilities 0 0 0 0 0 0 0 512,851 1,573 Telecommunications 0 0 0 0 0 0 0 525,396 0 Local travel 0 0 0 0 0 0 0 56,228 0 Food 433 0 0 0 0 433 0 1,421,388 5,177 Program expenses 6,442 500 35,514 413 4,500 47,369 ( 1,900) 730,576 9,178 Office supplies 11,495 0 0 0 0 11,495 0 479,531 3,739 Minor equipment and equipment rental 8,911 0 0 0 0 8,911 ( 2,788) 489,826 1,458 Capitalized expenses 0 0 0 14,000 0 14,000 ( 369,202) ( 13,271) 13,271 Repairs and maintenance 11,247 0 0 0 0 11,247 0 897,309 356 Vehicle expenses 0 0 0 0 0 0 0 116,534 0 Insurance 0 0 0 0 0 0 ( 12,827) 134,658 0 Interest 0 0 0 0 0 0 11,963 259,519 0 Out of town travel 0 0 0 0 0 0 0 80,011 217 Printing and publications 0 0 0 0 0 0 ( 138) 27,131 8,003 Conference and membership fees 0 0 0 0 0 0 ( 10,405) 158,479 3,300 Depreciation 0 0 0 0 0 0 611,455 611,455 85,704 Other expenses 0 0 0 0 0 0 0 145,148 4,519 Delegate expenses 0 0 0 0 0 0 0 4,754,762 0 In-kind expenses 0 0 0 0 0 0 ( 3,416,917) 9,844,704 0 Total Expenses 38,528 3,323 35,514 14,413 4,500 96,278 ( 3,528,921) 51,541,233 140,158 Change in Net Assets ( 38,528) ( 683) 4,486 ( 11,413) ( 500) ( 46,638) 112,004 65,366 ( 110,057) Net assets - Beginning of year 41,453 17,450 22,847 28,023 8,929 118,702 8,404,312 8,523,014 ( 3,265,949) Prior period adjustment 0 0 0 0 0 0 0 0 0 NET ASSETS - END OF YEAR $ 2,925 $ 16,767 $ 27,333 $ 16,610 $ 8,429 $ 72,064 $ 8,516,316 $ 8,588,380 ($ 3,376,006) See Independent Auditor's Report. 13
Notes to the Schedule of Program Activity Note 1: Head Start Nonfederal Matching Requirement The Head Start program funded by DHHS requires that the program receive a nonfederal share equal to 25% of total Head Start expenses. HSGD uses the following Head Start expenditures paid for from its nonfederal programs to fulfill its matching requirements as follows: In-kind (A-1) $ 13,261,621 Buckeye Trail Commons Early Head Start/Head Start Center (A-2) 38,528 Dual Language, Literacy and Fellowship Programs 3,323 Science Technology Engineering Math Program (A-2) 35,514 Early Head-Garland and David s Place (A-2) 14,413 Center Gardens and Program Supplies (A-2) 4,500 Total nonfederal share $ 13,357,899 See Independent Auditor s Report. 14
Schedule B Schedule of Expenditures of Federal, State, and Local Awards and List of Programs Year Ended February 28, 2017 Federal Grantor/ CFDA Pass-Through Entity Passed-Through Federal Program Title Number Identifying Number to Subrecipients Expenditures DEPARTMENT OF AGRICULTURE Passed through Texas Department of Agriculture ( 1) Child Care Food Program 10.558 TX-057-0054 15/16 $ 0 $ 972,013 ( 2) Child Care Food Program TX-057-0054 16/17 0 969,449 Total Federal Expenditures CFDA 10.558 0 1,941,462 DEPARTMENT OF HEALTH AND HUMAN SERVICES Direct ( 3) Head Start Program 93.600 06CH7106/03 4,754,762 33,562,400 ( 4) Early Head Start 06CH7106/03 0 3,584,000 ( 5) Early Head Start Child Care Partnership 06HP0021/01 0 1,546,339 ( 6) Early Head Start Child Care Partnership 06HP0021/02 0 1,078,054 Total Federal Expenditures CFDA 93.600 4,754,762 39,770,793 TOTAL FEDERAL EXPENDITURES $ 4,754,762 $ 41,712,255 Other STATE AND LOCAL PROGRAMS Expenditures ( 7) Buckeye Trail Commons Head Start Harold Simmons Foundation, Sturgis Charitable Trust, 38,528 ORIX Foundation ( 8) Dual Language, Literacy and Fellowship Program Dallas Foundation, Stockman Bank 3,323 ( 9) Science Technology Engineering Math Program Von Ahnen Family Trust, ORIX Foundation, 35,514 Ernst & Young ( 10) Early Head Start-Garland and David's Place PNC Foundation and D. Martin 14,413 ( 11) Center Gardens and Supplies Comfort N Joy and Walmart Foundation 4,500 TOTAL STATE AND LOCAL EXPENDITURES $ 96,278 GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ADJUSTMENTS ( 12) GAAP Adjustments N/A 03/01/16-02/28/17 ($ 3,528,921) DISCRETIONARY ACTIVITY ( 13) Corporate N/A 03/01/16-02/28/17 $ 140,158 Notes to Schedule of Expenditures of Federal, State, and Local Awards and List of Programs Note 1 - Basis of Presentation The accompanying schedule of expenditures of federal, state, and local awards and list of programs (the Schedule ) includes the federal award activity of Head Start of Greater Dallas, Inc. under programs of the federal government for the year ended February 28, 2017. 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 Head Start of Greater Dallas, Inc., it is not intended to and does not present the financial position, changes in net assets or cash flows of Head Start of Greater Dallas, Inc. 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 Head Start of Greater Dallas, Inc has not elected to use the 10-percent de minimis indirect cost rate as allowed under Uniform Guidance. See Independent Auditor's Report. 15
Independent Auditor s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Board of Directors Head Start of Greater Dallas, Inc. Dallas, Texas We have audited, in accordance with the auditing standards generally accepted in the United States 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 Head Start of Greater Dallas, Inc., which comprise the statement of financial position as of February 28, 2017, and the related statements of activities and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated October 5, 2017. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered Head Start of Greater Dallas, 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 Head Start of Greater Dallas, Inc. s internal control. Accordingly, we do not express an opinion on the effectiveness of Head Start of Greater Dallas, 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 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 Head Start of Greater Dallas, 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. 16
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 Head Start of Greater Dallas, Inc. s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Head Start of Greater Dallas, Inc. s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Wipfli LLP October 5, 2017 Madison, Wisconsin 17
Independent Auditor s Report on Compliance for the Major Federal Program and on Internal Control Over Compliance Board of Directors Head Start of Greater Dallas, Inc. Dallas, Texas Report on Compliance for the Major Federal Program We have audited Head Start of Greater Dallas, Inc. s compliance with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Compliance Supplement and the State of Texas Single Audit Circular (the Circular ), issued by the Texas Office of the Inspector General, that could have a direct and material effect on the major federal program for the year ended February 28, 2017. Head Start of Greater Dallas, Inc. s major federal program is identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. Management s Responsibility for Compliance 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 Head Start of Greater Dallas, Inc. s major federal program 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; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; 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); and the State of Texas Single Audit Circular, issued by the Texas Office of the Inspector General. Those standards, the Uniform Guidance and the Circular 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 Head Start of Greater Dallas, Inc. s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for the major federal program. However, our audit does not provide a legal determination on Head Start of Greater Dallas, Inc. s compliance. Opinion In our opinion, Head Start of Greater Dallas, Inc. complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on its major federal program for the year ended February 28, 2017. 18
Other Matters The results of our auditing procedures disclosed an instance of noncompliance, which is required to be reported in accordance with the Uniform Guidance and which is described in the accompanying schedule of findings and questioned costs as item 2017-001. Our opinion on the major federal program is not modified with respect to these matters. Head Start of Greater Dallas, Inc. s response to the noncompliance finding identified in our audit is described in the accompanying schedule of findings and questioned costs. Head Start of Greater Dallas, Inc. s response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response. Report on Internal Control Over Compliance Management of Head Start of Greater Dallas, 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 Head Start of Greater Dallas, Inc. s internal control over compliance with the types of requirements that could have a direct and material effect on a major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance and the Circular, 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 Head Start of Greater Dallas, 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 is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance and the Circular. Accordingly, this report is not suitable for any other purpose. Wipfli LLP October 5, 2017 Madison, Wisconsin 19
Schedule of Findings and Questioned Costs Year Ended February 28, 2017 Section I - Summary of Auditor s Results Financial Statements Type of auditor s report issued? Internal control over financial reporting: Material weakness(es) identified? Significant deficiency(ies) identified? Noncompliance material to financial statements noted? Unmodified No No No Federal Awards Internal control over major federal program: Material weakness(es) identified? Significant deficiency(ies) identified? Type of auditor s report issued on compliance for major program Any audit findings disclosed that are required to be reported in accordance with the Uniform Guidance [2 CFR 200.516(a)]? No No Unmodified Yes Identification of major federal programs: Name of Federal Major Program or Cluster CFDA No. Head Start 93.600 Dollar threshold used to distinguish between Type A and Type B programs: Federal $1,251,368 Auditee qualified as low-risk auditee? Yes Section II - Financial Statement Findings None Section III - Federal Award Findings and Questioned Costs Finding: Out of Period Costs (2017-001) Questioned Costs: None Program Affected: Head Start Program CFDA #93.600, Grant #06CH7106-03, Grant period March 1, 2016 through February 28, 2017. Condition: HSGD drew down cash under the grant year ended February 28, 2017, for allowable costs incurred during the grant period ended February 28, 2016. 20
Schedule of Findings and Questioned Costs Year Ended February 28, 2017 Section III - Federal Award Findings and Questioned Costs (Continued) Criteria: Uniform Guidance, 2 CFR, Part 200, Subpart D, Sec. 200.343(b) states, a non-federal entity must liquidate all obligations incurred under the Federal Award not later than 90 calendar days after the end date of the period of performance as specified in the terms and conditions of the Federal award. Effect: Since HSGD liquidated the grant ending February 28, 2016 out of the current year grant s funds, HSGD is not in compliance with the closeout requirement. Recommendation: We recommend HSGD liquidate its obligations from the grant under which they were incurred. View of Responsible Officials: A new process has been implemented to address the finding. Section IV - Summary Schedule of Prior Year Findings None 21