, FP-r LEGiSLAiiVE AUDI 2005JAN-3 AHii The ARC Baton Rouge Baton Rouge, Louisiana June 30, 2004 Under provisions of state law, this report is a public document. Acopy of the report has been submitted to the entity and other appropriate public officials. The report is available for public inspection at the Baton Rouge office of the Legislative Auditor and. where appropriate, ai the office of the parish clerk of court Release Date 2.' 2.- O*4
Transcript
, FP-rLEGiSLAi iVE AUDI
2005JAN-3 AHii
The ARC Baton RougeBaton Rouge, Louisiana
June 30, 2004
Under provisions of state law, this report is a publicdocument. Acopy of the report has been submitted tothe entity and other appropriate public officials. Thereport is available for public inspection at the BatonRouge office of the Legislative Auditor and. whereappropriate, ai the office of the parish clerk of court
Release Date 2.' 2.- O*4
Table of Contents
Independent Auditor's Report Page 3
Financial StatementsStatements of Financial Position Page 5Statements of Activities Page 6Statements of Functional Expenses Page 7Statements of Cash Flows Page 9Notes to Financial Statements Page 10
Report on Internal Control Over Financial Reporting and onCompliance Based on an Audit of Financial StatementsPerformed in Accordance with Government Audifing Standards Page 16
Schedule of Findings and Questioned Costs Page 18
HAWTHORN, V/AYMOUTH & CARROLL, L.L.P.
J,CHARLES PARKER, C.P.A.LOUIS c. MCKNIGHT, in. C.P.A.ANTHONY J. CRISTINA. III. C.P.A.CHARLES R. PEVEY, JR., C.P.A.DAVID J. BROUSSARD, C.P.A.
CERTIFIED PUBLIC ACCOUNTANTS
8555 UNITED PLAZA BLVD., SUITE 200
BATON ROUGE, LOUISIANA 708D9
(225) 923-300D • FAX (225) 933-3008
December 10,2004
Independent Auditor's Report
The Officers and Board of DirectorsThe ARC Baton RougeBaton Rouge, Louisiana
Members of the Board:
We have audited the accompanying statements of financial position of the
The ARC Baton Rouge(A Non-Profit Organization)
Baton Rouge, Louisiana
as of June 30,2004 and 2003, and the related statements of activities, functional expenses and cashflows for the years then ended. These financial statements are the responsibility of the Association'smanagement. Our responsibility is to express an opinion on these financial statements based on ouraudits.
We conducted our audits in accordance with auditing standards generally accepted in the UnitedStates of America and the standards applicable to financial audits contained in Government AuditingStandards, issued by the Comptroller General of the United States. Those standards require that weplan and perform the audit to obtain reasonable assurance about whether the financial statements arefree of material misstatement. An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audits provide a reasonable basis for ouropinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, thefinancial position of The ARC Baton Rouge as of June 30, 2004 and 2003, and the changes in its netassets and its cash flows for the years then ended, in conformity with accounting principles generallyaccepted in the United States of America.
In accordance with Government Auditing Standards, we have also issued our report dated December10,2004, on our consideration of The ARC Baton Rouge's internal control over financial reporting andour tests of its compliance with certain provisions of laws, regulations, contracts and grants. That reportis an integral part of an audit performed in accordance with Government Auditing Standards and shouldbe read in conjunction with this report in considering the results of our audit.
Yours truly,
/
*
The ARC Baton RougeStatements of Financial Position
Total liabilities and net assets 2.021.827 2.464,277
The ARC Baton RougeStatements of Activities
Years Ended June 30, 2004 and 2003
2004 2003Unrestricted Net Assets
Unrestricted revenue and gainsState contracts $4,379,558 $4,301,241Federal awards 446,825 275,440Program sales and service fees 586,010 551,538Capital Area United Way 301,421 290,505Contributions 72,427 127,589Investment return 13,046 12,686Other 38.180 4.912
Total unrestricted revenue and gains 5.837.467 5,563.911
ExpensesProgram services
Metro Enterprises - Business 472,889 509,974Metro Enterprises - Rehabilitation 922,829 909,432Early Intervention Programs 1,035,723 1,136,139Respite Care Programs 1,706,463 1,573,131Vocation Services - Job Placement 506,808 580,498Louisiana Career Development Center 200,695 200,356Other 1.037.215 922.003
5,882,622 5,831,533Supporting services
Management, general and other expenses 435,327 397.111
Total expenses 6.317.949 6.228.644
Transferred to unrestricted 34.509
Decrease in Unrestricted Net Assets (480.482) (630.224)
Changes in Temporarily Restricted Net AssetsInterest income 147Transferred to unrestricted (34.509)
Increase in Temporarily Restricted Net Assets (34.362)
Increase (Decrease) in Net Assets (480,482) (664,586)
Net Assets, beginning of year 1.782.265 2.446,851
Net Assets, end of year 1.301.783 1.782.265
The accompanying notes are an integral part of these statements.
6
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The ARC Baton RougeStatements of Cash Flows
Years Ended June 30, 2004 and June 30, 2003
Cash Flows From Operating ActivitiesDecrease in net assetsAdjustments to reconcile change in net assets to net
cash provided by operating activitiesDepreciationChanges in operating assets and liabilities
(Increase) decrease in:Accounts receivableAccrued interest receivableInventoryDepositsMarket value of investments
Cash Flows From Investing ActivitiesPurchase of property and equipment, netMaturity of investments
Net cash provided (used) by investing activities
Cash Flows From Financing ActivitiesProceeds on notes payable - vehiclePayments on notes payable - vehicleCollections on notes receivableCapital leasePayments on notes payable - line of credit
Net cash provided (usedt by financing activities
Net Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents, beginning of year
Cash and Cash Equivalents, end of year
Supplemental Disclosure of Cash Flow InformationCash paid during the year for
Interest
2004
($480,482)
122,911
29,770
(6,449)(19,646)(2,646)
9,426(8,666)
134.700
(221.0821
21,600(7,945)2,032
(10,106)(100.9771
(95.396)
(243,477)
354.889
111,412
2003
($664,586)
130,475
404,8004,2788,935
1,156
(64,183)48,069
141.843
10.787
(30,612)103.613
73.001
(76,686)98.821
22,135
(3,495)2,292
32,120213.410
244.327
277,249
77.640
354.889
The accompanying notes are an integral part of these statements.
9
The ARC Baton RougeNotes to Financial Statements
June 30,2004
Note 1-Nature of Organization
The ARC Baton Rouge (Association), formally known as Association for Retarded Citizens - BatonRouge, is a not-for-profit organization which promotes, develops, monitors, supports and directlyprovides services to improve the well being of people with disabilities and their families from EastBaton Rouge and surrounding parishes. Major programs include Infant Habitation Sendees to assistfamilies with children through three years of age who have or who are at risk of developmentaldisabilities, providing support/training/services that are needed to achieve self-identified employmentand habilitative outcomes for adults with developmental disabilities, and to provide special instruction,speech therapy, occupational therapy, physical therapy, nursing services, travel and transportation,related material and supplies, family counseling and home visits and Child Specific Property for Infantsand Toddlers with Special Needs, for whom insurance, Medicaid and OCDD funds are not available.Funding to provide these services and programs comes from the Capital Area United Way Agency andvarious federal and state contracts and grants.
Note 2-Significant Accounting Policies
A- Cash and Cash Equivalents
Cash equivalents are considered to be highly liquid investments with maturities of three months or lessfor the purpose of statement of financial position presentation. At various times during the year cashand cash equivalents on deposit with one banking institution exceeded the $100,000 insured by theFederal Deposit Insurance Corporation. Management monitors the financial condition of the financialinstitution on a regular basis, along with their balances in cash and cash equivalents to minimize thispotential risk.
B. Investments
Investments in equity securities with readily determinable fair values and all investments in debtsecurities are measured at fair value in the statement of financial position.
C. Support and Expenses
Contributions received and unconditional promises to give are measured at their fair values and arereported as an increase in net assets. The Association reports gifts of cash and other assets as restrictedsupport if they are received with donor stipulations that limit the use of the donated assets, or if theyare designated as support for future periods. When a donor restriction expires,that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarilyrestricted net assets are reclassified to unrestricted net assets and reported in the statement of activityas net assets released from restrictions. Donor-restricted contributions whose restrictions are met in thesame reporting period are reported as unrestricted support.
The Association reports gifts of goods and equipment as unrestricted support unless explicit donorstipulations specify how the donated assets must be used. Gifts of long-lived assets with explicitrestrictions that specify how the assets are to be used and gifts of cash or other assets that must be usedto acquire long-lived assets are reported as restricted support. Absent explicit donor stipulations abouthow long those long-lived assets must be maintained, the Association reports expirations of donorrestrictions when the donated or acquired long-lived assets are placed in service.
Expenses are recorded when incurred in accordance with the accrual basis of accounting.
D. Uncollectible Receivables
The Association considers accounts receivable to be fully collectible; accordingly, no allowance fordoubtful accounts is required. If amounts become uncollectible, they will be charged to operationswhen that determination is made.
E. Concentration of Credit Risk
Credit receivables have significant concentrations of credit risk in the governmental sector in the BatonRouge, Louisiana area. At June 3 0,2004 and 2003, the portion of these receivables related to this sectorwas approximately 86% and 92%, respectively.
F. Inventory
Inventory is stated at the lower of cost or market using the first-in, first-out method.
G. Depreciation
Fixed assets are recorded at cost and depreciated using the straight-line method over their estimateduseful lives. Useful lives range from 3 to 30 years.
H. Retirement Plan
The retirement plan is a defined benefit plan which covers substantially all full-time employees.
I. Income Taxes
The Association is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Codeand is not classified as a private foundation.
The Association depends significantly on grant contract reimbursements to carry out its programactivities. This revenue is disclosed as program revenue on the statement of support, revenue andexpenses.
Grant revenue is recorded as related expenses are incurred, and reimbursement requests are submittedto the grantor agency.
K. Functional Expenses
The Association allocates functional expenses primarily by specific identification of program expenseswhich include salaries of personnel assigned to specific programs. However, certain administrativesalaries and related expenses and other general expenses are allocated using percentages which areadjusted annually. These percentages coincide with grant agreements and budgets.
L. Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principlesrequires management to make estimates and assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the date of the financial statements andthe reported amounts of revenue and expenses during the reporting period. Actual results could differfrom those estimates.
M. Reclassifications
Certain reclassifications have been made to the prior year's financial statements to conform with thecurrent year's financial statement presentation.
Note 3-Investments
Investments in certificates of deposits are stated at cost and other investments are stated at market valueas quoted by national publications. At June 30, 2004 and 2003 investments are as follows:
2004 2003Unrestricted
Investments in certificates of deposit withmaturities from one to two years and interestrates from 4.15% to 4.8%. $65.508 $169.121
The Association sold facilities on Wayne Drive for $57,000 in 1995 and financed the sale. Terms aremonthly installments of $500, and include 9% interest per annum maturing January, 2016.Maturities of note receivable for the five years following June 30, 2004 are as follows:
20052006200720082009Thereafter
Note 5-Property and Equipment
A summary of property and equipment at June 30, 2004 and 2003, is as follows:
2004 2003
Buildings and improvements $2,167,627 $2,164,637Furniture and equipment 577,260 571,239Vehicles 149.229 127.629
2,894,116 2,863,505Less depreciation to date 1.826.887 1.703.977
1,067,229 1,159,528Land 319.997 319.997
Property and equipment, net 1.387.226 1.479.525
13
The ARC Baton RougeNotes to Financial Statements
June 30,2004
Note 6-Temporarily Restricted Net Assets
Temporarily restricted net assets from the Building Fund was eliminated in 2002.
Note 7-Letter of Credit Agreement
The Association entered into a standby letter of credit agreement with a financial institution originallyfor $300,000, however, this amount was lowered to $200,000 in 2004 after paying down the balancesignificantly. The amount due on the letter of credit at June 30, 2004 and 2003 was $198,121 and$299,098, respectively, and is classified as notes payable - letter of credit, on the statements of financialposition. The interest rate at December 31,2004 was 4.25%. The obligation is secured by the buildingon Kelwood Ave. and payable on demand,
Note 8-Note Payable - Vehicle
The Association obtained a vehicle loan in April of 2002 for $19,927 with monthly payments of $397for 5 years at an annual interest rate of 1.25%. The balance at June 30, 2004 and 2003, was $11,844and $15,599.
The Association financed three vehicles in September of 2003 for $21,600 with monthly payments of$681 for 3 years at a annual interest rate of 8.10%. The balance at June 30, 2004 was $17,410.
Future maturities of these notes are as follows:
2005 $10,9682006 11,8552007 6.431
29.254
The Association entered into a capital lease agreement for the purchase of major air conditioningequipment in May 2003. The terms are monthly payments of $1,208 for 33 months as an impliedinterest rate of 15.89%. Minimum lease payments are as follows:
2005 $14,4952006 10.865
25,360Amount representing interest 3.346
Present value of lease payments 22.014
14
The ARC Baton RougeNotes to Financial Statements
June 30, 2004
Note 9-Pension Plan
The Association has a pension plan which covers substantially all of its employees who meet eligibilityrequirements. Benefits under the plan are generally based on the employee's compensation during thehighest five consecutive calendar years' salary during the last ten completed calendar years of servicebefore retirement. The pension plan is funded in accordance with the requirements of the EmployeeRetirement Income Security Act of 1974.
Pension expense for the years ended June 30,2004 and 2003 was $300,080 and $325,779, respectfully.
The following sets forth the plan's funding status and the amounts recognized in the Company'sstatement of financial position at June 30, 2004 and 2003 as prepared by Mutual of America.
Funded StatusBenefit obligation at June 30Fair value of plan assets at June 30
Funded status (deficit)
Prepaid (accrued) benefit cost recognized inthe Statement of Financial Position
Change in benefit obligation due toplan amendments
Change due to assumption changes
Assumptions as of June 30Discount rateExpected long-term rate of return
on plan assetsRate of compensation increase per year
Other DataBenefit costEmployer contributionEmployee contributionBenefits paid
2004
$3,230,4482.466.443
764.005
6.5%
8.0%5.0%
2003
$3,071,1682.247,736
823,432
($276,543) ($142,470)
$0 $0($78,396) $123,783
6.5%
8.0%5.0%
$300,080$166,007
None$139,922
$325,779$183,936
None$38,612
15
HAWTHORN,.WAYMOUTH & CARROLL, L.L.P.
J,CHARLES PARKER, C.P.A.LOUIS c. MCKNIGHT, in C.P.A.ANTHONY J. CRISTINA, III, C.P.A.CHARLES R. PEVEY. JR., C.P.A.DAVID J. BROUSSARD, C.P.A.
CERT FIED PUBLIC ACCOUNTANTS
8555 UNITED PLAZA BLVD., SUITE 200
BATON ROUGE, LOUISIANA 70809
(225) 923-3000 • FAX [2251 923-3008
December 10,2004
Report on Internal Control Over Financial Reporting andon Compliance Based on an Audit of Financial Statements Performed
in Accordance with Government Auditing Standards
Board of DirectorsThe ARC Baton RougeBaton Rouge, Louisiana
Members of the Board:
We have audited the financial statements of
The ARC Baton Rouge(A Non-Profit Organization)
Baton Rouge, Louisiana
as of and for the year ended June 30,2004, and have issued our report thereon dated December 10,2004.We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards,issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered The ARC Baton Rouge's internal control overfinancial reporting in order to determine our auditing procedures for the purpose of expressing our opinionon the financial statements and not to provide assurance on the internal control over financial reporting.However, we noted certain matters involving the internal control over financial reporting and its operationthat we consider to be reportable conditions. Reportable conditions involve mattes coming to our attentionrelating to significant deficiencies in the design or operation of the internal control over financial reportingthat, in our judgment, could adversely affect The ARC Baton Rouge's ability to record, process,summarize, and report financial data consistent with the assertions of management in the financialstatements. Reportable conditions are described in the accompanying schedule of findings and questionedcosts as item 2004-01.
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A material weakness is a reportable condition in which the design or operations of one or more of theinternal control components does not reduce to a relatively low level the risk that mis statements beingaudited may occur and not be detected within a timely period by employees in the normal course ofperforming their assigned functions. Our consideration of the internal control over financial reportingwould not necessarily disclose all matters in the internal control that might be reportable conditions and,accordingly, would not necessarily disclose all reportable conditions that are also considered to be materialweaknesses. However, we believe that none of the reportable conditions described above is a materialweakness.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether The ARC Baton Rouge's, financialstatements are free of material misstatement, we performed tests of its compliance with certain provisionsof laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct andmaterial effect on the determination of financial statement amounts. However, providing an opinion oncompliance with those provisions was not an objective of our audit, and accordingly, we do not expresssuch an opinion. The results of our tests disclosed no instance of noncompliance or other matters that arerequired to be reported under Government Auditing Standards
This report is intended solely for the information and use of management, Board of Directors, federalawarding agencies, pass-through entities, and the Louisiana Legislative Auditor and is not intended to beand should not be used by anyone other than these specified parties. Under Louisiana Revised Statute24:513, this report is distributed by the Legislative Auditor as a public document.
Yours truly,
17
The ARC Baton RougeSchedule of Findings and Questioned Costs
Year Ended June 30,2004
Findings - Financial Statement Audit
2004-1 Audit Report
Condition
Accounts receivable subsidiary ledgers are not being reconciled to the general ledger.
Recommendation
We recommend that the subsidiary ledgers and the general ledger be reconciled in a timelymanner.
Management's Response
Management agrees with the recommendation and it will be implemented.
18
The ARC Baton RougeSchedule of Prior Year Findings and Questioned Costs
Year Ended June 30, 2003
Findings - Financial Statement Audit
2003-1 Audit Report
Condition
The audit report is to be submitted no more than six months after the end of the fiscal year. Thereport has been delayed due to the unexpected scheduling conflicts with the auditing firm.
Recommendation
Planning and preparations should be made to anticipate circumstances which would delay reportsbeyond the required filing date and plan accordingly.
Management's Response
Management agrees with the recommendation.
Corrective Action
Proper planning and scheduling was implemented and the June 30, 2004 audit report will befiled timely.
