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1 CertifiedPublicAccountant RAFAELPERALES&COMPANY 7170DeaneStret~ Tel(504)24-0]9NewOrleans,LA70126 ~Fax(504) REPORTONINTERNALCONTROLSTRUCTUREUSEDINADMINISTERING TotheBoardofDirectors FEDERALAWARDS DesireNarcoticsRehabilitationCenter,Inc. 416OldGentilyRoad NewOrleans,Louisiana70126 IhaveauditedthebasicfinancialstatementsoftheDesire NarcoticsRehabilitationCenter,Inc.,asofandfortheyear endedjune30,196,andhaveisuedmyreporthereondated January23,]97. Iconductedmyauditinacordancewithgeneralyacepted auditingstandards,governmentauditingstandards,isuedbythe Con~trolerGeneraloftheUnitedStates,andOficeof ManagementandBudget(OMB)CircularA-14,Auditsof InstitutionsofHigherEducationandOtherNonprofit Institutions.ThosestandardsandOMBCircularA-13requirethat Iplanandperformtheauditobtainreasonableasuranceabout whetherthedesirenarcoticsrehabilitationcenter,inc.complied withlawsandregulations,noncompliancewithwhichwouldbe materialtoamajorfederalprogram. InplaningandperformingmyauditfortheyearendedJune30, 196,IconsideredtheDesireNarcoticsRehabilitationCenter, Incascontrolstructureinordertodeterminemyauditing proceduresforthepurposeofexpresingmyopiniononthedesire NarcoticsRehabilitationCenter,Incasfinancialstatementsand onitscompliancewithrequirementsaplicabletomajorprograms andtoreportontheinternalcontrolstructureinacordance withombcirculara-13.thisreportadresesmyconsideration ofinternalcontrolstructurepoliciesandproceduresrelevantto compliancewithrequirementsaplicabletofederalprograms.i haveadresedpoliciesandproceduresrelevanttomyauditof thefinancialstatementsinaseparatereportdatedjanuary23, 197. ThemanagementoftheDesireNarcoticsRehabilitationCenter, Inc.isresponsibleforestablishingandmaintaininganinternal controlstructure.infulfilingthisresponsible,estimatesand i

2 ofthedesirenarcoticsrehabilitationcenter,inc.fortheyear endedjune30,196,iobtainedanunderstandingoftheinternal Inplaningandperformingmyauditofthefinancialstatements controlstructure.withrespectotheinternalcontrol policies,andproceduresandwhethertheyhavebenplacedin operation,andiasesedcontrolriskinordertodeterminemy structure,iobtainedanunderstandingofthedesignofrelevant auditingproceduresforthepurposeofexpresingmyopinionon opinion. thefinancialstatementsandnotoprovideanopiniononthe internalcontrolstructure.acordingly,idonotexpresuchan Myconsiderationoftheinternal necesarilydisclosealmaterscontrolstructurewouldnot establishedbytheamericaninstituteofcertifiedpublic structurethatmightbematerialweaknesesunderthestandards intheinternalcontrol Acountants.Amaterialweaknesisaconditioninwhichthe designoroperationofoneormoreoftheinternalcontrol riskthaterorsandiregularitiesinamountsthatwouldbe materialinrelationtothefinancialstatementsbeingaudited structureelementsdoesnotreducetoarelativelylowlevelthe mayocurandnotbedetectedwithinatimelyperiodbyemployes notednomatersinvolvingtheinternalcontrolstructureandits operationsthaticonsidertobematerialweaknesesasdefined inthenormalcourseofperformingtheirasignedfunctions.i ThisreportisintendedfortheinformationoftheBoardof above. Directors,management,andotherswithintheorganizationand materofpublicrecordanditsdistributionisnotlimited. apropriatestateandfederalagencies.however,thisreportisa 2 ~afaelperales Ce~tifiedPublicAcountant January23,197 i0

3 CertifiedPublicAccountant RAFAELPERALES&COMPANY 7170DeaneStret~ Tel(504)24-019NewOrleans,LA70126 ~Fax(504) REPORTONTHEINTERNALCONTROLSTRUCTUREBASEDONANAUDITOF TotheBoardofDirectors FINANCIALSTATEMENTSPERFORMEDINACORDANCEWITHGAS DesireNarcoticsRehabilitationCenter,Inc. 416OldGentilyRoad NewOrleans,Louisiana70126 IhaveauditedthefinancialstatementsoftheDesireNarcotics RehabilitationCenter,Inc.asofandfortheyearendedJune30, 196,andhaveisuedmyreporthereondatedJanuary23,197. Iconductedmyauditinacordancewithgeneralyacepted auditingstandardsandgovernmentauditingstandards,isuedby thecomptrolergeneraloftheunitedstates.thosestandards requirethatiplanandperformtheauditobtainreasonable asuranceaboutwhetherthefinancialstatementsarefreof materialmistatement. ThemanagementoftheDesireNarcoticsRehabilitationCenter, In(:.isresponsibleforestablishingandmaintaininganinternal controlstructure.infulfilingthisresponsibility,estimates andjudgmentsbymanagementarerequiredtoasesthexpected benefitsandrelatedcostsofinternalcontrolstructurepolicies andprocedures.theobjectivesofinternalcontrolstructureare toprovidemanagementwithreasonable,butnotabsolute, asurancethatasetsaresafeguardedagainstlosfrom unauthorizeduseordisposition,andthatransactionsare executedinacordancewithmanagement'sauthorizationand recordedproperlytopermitthepreparationofbasicfinancial statementsinacordancewithgeneralyaceptedacounting principles.becauseofinherentlimitationsinanyinternal controlstructure,erorsoriregularitiesmaynevertheles ocurandnotbedetected.also,projectionofanyevaluationof thestructuretofutureperiodsisubjecttotheriskthat proceduresmaybecomeinadequatebecauseofchangesinconditions orthathefectivenesofthedesignandoperationofpolicies andproceduresmaydeteriorate.

4 TheOrganization'soperatingacountwasleviedbytheCivil DistrictCourtinanactionconcerningthedefaultonthe purchaseofproperty.thetotalamountleviedwas$42,949. TheOrganizationisintheprocesofilingacounterclaim againsthepartiesbecauseithasdeterminedthatthelevy wasinapropriateandilegal.nolegalopinionhasben obtainedastotheprobabilityofarulingbeingheldin favoroftheorganization.

5 AcumulatedDepreciation PropertyatJune30,196 $41,219 NOTEC-ACOUNTSRECEIVABLE ~76,695 TheOrganizationreceivedfundingfromcertaincost reimbursementcontractswiththestateoflouisianandthe CityofNewOrleansduringtheyearendedJune30,196. ThebalanceofcostsexpendedandnotreimbursedatJune30, 196areasfolows: Chemotherapy DrugFre ShelterPlus $4,431 Infinity96 $13,810 TargetCities $4,749 Homeles $105,341 DCHCWeatherization $13,367 $17,540 $4,252 NOTED-NOTESPAYABLE $263~490 DesireNarcoticsRehabilitationCenter,Inc.hasalineof creditwiththefirstnationalbankofcomerce.thelineof creditissecuredbyapersonalpledgebytheexecutive DirectoroftheOrganization. Amount InterestRate DueDate $150,0 February2, % NOTEE-RELATEDPARTYTRANSACTIONS TheExecutiveDirectorhasprovidedfinancialsuporttothe organizationforseveralyears.duringtheyearendedjune 30,196,theExecutiveDirectorprovidedinexcesof $20,0infinancialsuporttotheorganization.Thetotal duetotheexecutivedirectorisreflectedinthedueto Oficerstotaling$612, Further,theExecutiveDirectorhaspledgedpersonalasets tosecurethelineofcreditestablishedbythe Organization. NOTEF-BTLNKLEVY

6 DesireNarcoticsRehabilitationCenter,Inc. NOTESTOFINANCIALSTATEMENTS NOTEA~SUMARYOFSIGNIFICANTACOUNTINGPOLICIES June30,196 NatureofActivities DesireNarcoticsRehabilitationCenter,Inc.isanon-profit organizationwhosepurposeistoproviderehabilitationand counselingservicestosubstanceabusers. FinancialStatementPresentation UnderSFASNo.17,theOrganizationisrequiredtoreport informationregardingitsfinancialpositionandactivities acordingtothreclasesofnetasets:unrestrictednet asets,temporarilyrestrictednetasets,andpermanently restrictednetasets.inadition,theorganizationis requiredtopresentastatementofcashflows.duringthe yearendedjune30,196,theorganizationdidnot discontinuetheuseofitsfundacounting,however,the financialstatementspresentedhavebenreclasifiedto presentthethreclasesofnetasetsrequired. IncomeTaxStatus TheOrganizationqualifiesasataxexemptorganization undersection501(c)(3)oftheinternalrevenuecodeand, hasnoprovisionforfederalincometaxes. Property Thepurchaseoffurnitureandequipmentisrecordedascost. Depreciationiscomputedonthestraight-linebasisoverthe estimatedusefullifeoftheasets.alasetsare estimatedtohaveausefullifeof3years.theorganization folowsthepracticeofcapitalizingalexpendituresfor NOTEB-PROPERTYANDDEPRECIATION propertyandequipmentinexcesof$i0.0. Propertyandequipmentconsistofthefolowing Equipmentandfurnishing NoteB,continued, Vehicles $91,763 $26,151 $17,914

7 DESIRENARCOTICSREHABILATIONCENTER,INC. STATEMENTOFCASHFLOWS ForTheYearEndedJune30,196 CashFlowsfromOperatingActivities Increaseinetasets Adjustmentstoreconcileincreaseinetasestonetcash $276,367.0 providebyoperatingactivities: Changeinacountreceivable Changeinacountspayable $364,14.0 Changeinothercurentliabilities TotalAdjustments ~(12,105.0) (263,705.0) NetCashProvidedbyOperatingActivities $264,701.0 (1,6.gO~ CashFlowsusedbyInvestmentActivities Purchaseofequipment NetCashusedbyInvestmentActivities $50,81.0 $50,81.0 NetIncreaseinCash CashatBeginingofYear $315,512.0 ($305,923.0~ CashatEndofYear $9,589~0

8 DESIRENARCOTICESREHABILITATIONCENTER,INC. STATEMENTOFACTIVITIES fortheyearendedjune30,196 UnrestrictedNetAsets FederalFinancialSuport Revenue ServiceContracts TotalSuport Contributions Rents InterestIncome Other TotalRevenue Expenses PersonalServices RelatedBenefits ContractualServices OperatingServices Travel Material.,;andSuplies CapitalOutlays Other Increase(Decrease)In UnrestrictedNetAsets NetAselsAtBeginingofYear NetAsetsAtEndofYear $68, ,705, , , $1,726, $2.395,65.0 $1,098, , , , , , $2,19,28.0 $276,367.0 ($1,145,07.0~ ($868,710.0)

9 judgmentsbymanagementarerequiredtoasesthexpected benefitsandrelatedcostsofinternalcontrolstructurepolicies andprocedures.theobjectivesofaninternalcontrolstructure aretoprovidemanagementwithreasonable,butnotabsolute, asurancethatasetsaresafeguardedagainstlosfrom unauthorizeduseordisposition,thattransactionsarexecuted inacordancewithmanagement'sauthorizationandrecorded properlytopermitthepreparationoffinancialstatementsin acordancewithgeneralyaceptedacountingprinciples,and thatfederalawardsprogramsaremanagedincompliancewith aplicablelawsandregulations.becauseofinherentlimitations inanyinternalcontrolstructure,erors,iregularities,or instancesofnoncompliancemayneverthelesocurandnotbe detected,also,projectionofanyevaluationofthestructureto futureperiodsissubjectotheriskthatproceduresmaybecome inadequatebecauseofchangesinconditionsorthathe efectivenesofthedesignandoperationsofpoliciesand proceduresmaydeteriorate. AcountingAplications I Bilings(inregardstoreimbursementrequest) CashReceipts CashDisbursements RevenuesandReceivables Purchasing Payrol ControlsusedinAdministeringFederalPrograms PropertyandEquipment GeneralRequirements opoliticalactivity ocivilrights ocashmanagement ofederalfinancialreports SpecificRequirements otypesofservices OEligibilityofCosts ocostalocation OCostIncuredinAprovedPeriod Foraloftheinternalcontrolstructurecategorieslisted ograntbudgetsandrevisions 12

10 hasbensubjectedtotheauditingproceduresapliedinthe thebasicfinancialstatements.theinformationinthatschedule auditofthebasicfinancialstatementand,inmyopinionis fai:clystatedinalmaterialrespectsinrelationtothebasic financialstatementstakenasawhole. a~ PublicAcountant January30,296

11 CertifiedPublicAcountant RAFAELPERALES&COMPANY 7170DeaneStret' Tel(504)24-019NewOrleans,LA70126 ~Fax(504) REPORTONCOMPLITLNCEWITHTHESPECIFICREQUIREMENTSAPLICABLETO M3~JORFEDERALFINANCI~]ASISTANCEPROGRAMS BoardofDirectors DesireNarcoticsRehabilitationCenter,Inc. 416OldGentilyRoad NewOrleans,Louisiana70126 IhaveauditedthefinancialstatementsoftheDesireNarcotics RehabilitationCenter,Inc.asofandfortheyearendedJune30, 196,andisuedmyreporttbereondatedJanuary23,197. IhavealsoauditedtheDesireNarcoticsRehabilitationCenter, Inc's,compliancewiththerequirementsgoverning;typesof servicesalowedornotalowed,eligibility,matching,levelof efort,orearmarking,reporting,specialtestsandprovisions, thatareaplicabletoeachofitsmajorfederalfinancial asistanceprograms,whichareidentifiedintheacompanying ScheduleofFederalAwards,fortheyearendedJune30,196.The managementofdesirenarcoticsrehabilitationcenter,inc.,is responsibleforthedesirenarcoticsrehabilitationcenter, Inc.'scompliancewiththoserequirements.Myresponsibilityis toexpresanopiniononcompliancewiththoserequirementsbased onmyaudit. Iconductedmyauditofcompliancewiththoserequirementsin acordancewithgeneralyaceptedauditingstandards,government AuditingStandards,isuedbytheComptrolerGeneralofthe UnitedStates,andOficeofManagementandBudget(OMB)Circular a-13,auditsofinstitutionsofhighereducationandother NonprofitInstitutions.ThosestandardsandOMBCircularA-13 requirethatiplanandperformtheaudittobtainreasonable asuranceaboutwhethermaterialnoncompliancewiththe requirementsreferedtoaboveocured.anauditincludes examining,onatestbasis,evidenceabouthedesirenarcotics RehabilitationCenter,Inc.'scompliancewiththoserequirements. Ibelievethatmyauditprovidesareasonablebasisformy opinion. Theresultsofmyauditproceduresdisclosedimaterialinstances 16

12 CertifiedPublicAccountant RAFAELPERALES&COMPANY 7170DeaneStret. Tel(504)24-019NewOrleans,LA70126 ~Fax(504) REPORTONBASICFINANCIALSTATEMENTSANDSCHEDULEOFFEDERAL AWARDS TotheBoardofDirectors DesireNarcoticsRehabilitationCenter,Inc. 416OldGentilyRoad NewOrleans,Louisiana70126 Ihaveauditedtheacompanyingstatementofinancialposition ofthedesirenarcoticsrehabilitationcenter,inc.asofjune 30,196,andtherelatedstatementsofactivitiesandcashflows fortheyearthenended.thesefinancialstatementsarethe responsibilityofthedesirenarcoticsrehabilitationcenter, Inc.'smanagement.Myresponsibilityistoexpresanopinionon thesefinancialstatementsbasedonmyaudit. Inmyopinion,thefinancialstatementsreferedtointhefirst paragraphpresentfairlythefinancialpositionofthedesire NarcoticsRehabilitationCenter,Inc.asofJune30,196,and theresultsofitsoperationsandfundbalancefortheyearthen endedinconformitywithgeneralyaceptedacountingprincipals apliedonabasisconsistentwiththatoftheprecedingyear. InacordancewithGovernmentAuditingStandards,Ihaveisueda reportdatedjanuary23,197onmyconsiderationofthedesire NarcoticsRehabilitationCenter,Inc.'sinternalcontrol structureandreportdatedjanuary30,196oncompliancewith lawsandregulations. Myauditwasmadeforthepurpose basisfinancialstatementsoftheofforminganopiniononthe Center,Inc.takenasawhole.TheacompanyingScheduleof FederalAwardfortheyearthenendedJune30,196ispresented DesireNarcoticsRehabilitation forpurposesofaditionalanalysisandisnotarequiredpartof

13 DESIRENARCOTICSREHABILITATIONCENTER,INC. TABLEOFCONTENTS ReportOnBasicFinancialStatements AndScheduleOfFederalAwards StatementOfFinancialPosition 3 StatementOfActivities 4 StatementOfCashFlows NotesToFinancialStatements 5 6 ReportOnTheInternalControlStructure BasedOnAnAuditOfFinancialStatements PerformedInAcordanceWithGAS 9 ReportOnInternalControlStructureUsed InAdministeringFederalAwards i ReportOnComplianceWithLaws,Regulations, ContractsAndGrantsBasedOnAnAuditOf BalticFinancialStatementsPerformedIn AcordanceWithGovernmentAuditingStandards 14 ReportOnComplianceWithTheSpecific RequirementsAplicableToMajorFederal FinancialAsistancePrograms 16 ReportOnComplianceWithTheGeneral RequirementsAplicableToFederal FinancialAsistancePrograms 18 SuplementaryInformation StatementOfActivitiesByProgram ScheduleOfFederalAwards ManagementComents 25

14 DESIRENARCOTICSREHABILITATIONCENTER,INC. STATEMENTOFINANCIALPOSITION JUNE30,196 ASETS Cash AcountsReceivable OtherReceivables PropertyandEquipment Liabilities AcountsPayable LineofCredit WagesPayable DuetoOficers DuetoEmployes NetAsets Unrestricted 273,580.0 $9, TotalAsets $402,813.0 $379, , ,460.0 $1,271, ,80.0 ($868,710.0) $402,813.0 TotalLiabilities TotalNetAsets TotalLiabilitiesandNetAsets

15 Center,Inc.hadnotcomplied,inalmaterialrespects,with thoserequirements. ThiDirHowd limited. RC ountant January23,197 19

16 DESIRENARCOTICSREHABILITATIONCENTER,INC. ManagementComents June30,196 AcountingSystem Duringtheauditengagement,itwasnotedthatheorganizationusesthe"Quicken" acountingpackagetorecordandsumarizeitsfinancialtransactionsandthe administrationofitgrantandcontractfunds.thesystemisnotspecificalygearedto handlethetypesoftransactionsandacountingproceduresrequiredintheacountability ofgovernmentalandprivategrantsandcontracts. Itisrecomendedthatheorganizationchangetoamoresophisticatedacounting packagewhichisdesignedforhandlingthetypesoftransactionswhicharemadebythe organization.anacountingpackageforfundacountingshouldbeutilizetotrackthe transactionsandprovidefinancialreportsrequiredbythevariousfundingagencies. 2.Cash Thecashbalancepertheboksreflectsamaterialdeficitinthecashacount.Thereason isthathexpensesincuredbytheorganization,whetherpaidorunpaid(acounts payable)arerecordedtocashinsteadofacountspayable.theocurenceofthismethod ofacountingdistortsthetruebalanceofthecashacountandrendersmanagementata disadvantageintrackingcashonadailybasis.theresultsisthatmanagementcanot adequatelydeterminethedailycashbalanceatanygiventime. Itisrecomendedthathepracticeofrecordingexpensesincuredbutnotpaidinthecash acountbediscontinued.thisisnotaceptableacountingproceduresinacordancewith generalyaceptedacountingprinciples.alexpensesincuredbutnotpaidshouldbe recordedtotheacountspayableacountwithacorespondingentryintotheapropriate 3.Property expenseacount. Duringthexaminationoftheasetsoftheorganization,itwasnotedthathefurniture andequipmentownedbytheorganizationwasnot"taged"foridentification.the organizationoperatesorhasoperatedseveralfederalcontractsaswelastateandlocal contracts.regulationsfortheadministrationofederal,stateandlocalfundspecifythat propertyandequipmentpurchasedwithgrantorcontractfundshouldbeproperly 25

17 DESIRENARCOTICSREHABILITATIONCENTER,INC SCHEDULEOFEDERALAWARDS ForTheYearEndedJune30,196 FederalGrantor/Pas-Through Grantor/ProgramTitle Federal Number CFDA RevenueExpenditures U.S.DepartmentofHealthend HumanServices NationalInstituteonDrugAbuse CoperativeAgrement PasThroughFromStateDept 13.9 $492,80.0$569,482.0 ofhumanservices,divisionof AlcoholandDrugAbuse ResidentialHousing ,294.0 DrugFre Chemotherapy , , TargetCilies ShelterPlus , , ,23.0 PasThroughFromCityof NewOrleans Homeles,; 13.9 nfinity TotalDirectandPasThrough , ,914.0 FederalFinancialAsistance 1.60,984.0$1,63,

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21 CertifiedPublicAcountant RAFAELPERALES&COMPANY 7170DeaneStret~NewOrleans,LA70126 Tel(504)24-019~Fax(504) REPORTONCOMPLIANCEWITHLAWS,REGULATIONS,CONTRACTSANDGRANTS BASEDONANAUDITOFBASICFINANCIALSTATEMENTSPERFORMEDIN ACORDANCEWITHGOVERNMENTAUDITINGSTANDARDS IhaveauditedthebasicfinancialstatementsoftheDesire NarcoticsRehabilitationCenter,Inc.,asofandfortheyear endeddecember31,196,andhaveisuedmyreportthereondated January23,197. auditingstandardsandgovernmentauditingstandards,isuedby thecomptrolergeneraloftheunitedstates.thosestandards Iconductedmyauditinacordancewithgeneralyacepted requirethatiplanandperformtheauditoobtainreasonable asuranceaboutwhetherthefinancialstatementsarefreof materialmistatements. Compliancewithlaws,regulations,contracts,andgrants aplicabletothedesirenarcoticsrehabilitationcenter,inc.is theresponsibilityofdesirenarcoticsrehabilitationcenter, mistatement,iperformedtestsofdesirenarcotics Inc.'smanagement.Aspartofobtainingreasonableasurance RehabilitationCenter,Inc.'scompliancewithcertainprovisions aboutwhetherthefinancialstatementsarefreofmaterial oflaws,regulations,contractsandgrants.however,myobjective wasnotoprovideanopiniononoveralcompliancewithsuch provisions.acordingly,idonotexpresuchanopinion. Theresultsofmytestsdisclosednoinstancesofnoncompliance thatarerequiredtobereportedhereinundergovernmentauditing 14

22 SUPLEMENTARYINFORMATION

23 above,iobtainedanunderstandingofthedesignofrelevant policiesandproceduresandwhethertheyhavebenplacedin operation,andiasesedcontrolrisk. DuringtheyearendedJune30,196,theDesireNarcotics RehabilitationCenter,Inc.expended97%ofitstotalfederal awardsundermajorprograms. Amaterialweaknesisareportableconditioninwhichthedesign oroperationofoneormoreoftheinternalcontrolstructure elementsdoesnotreducetoarelativelylowleveltheriskthat erorsoriregularitiesinamountsthatwouldbematerialin relationtothefinancialstatementbeingauditedmayocurand notbedetectedwithinatimelyperiodbyemployesinthenormal courseofperformingtheirasignedfunctions. Myconsiderationoftheinternalcontrolstructurewouldnot necesarilydisclosealmatersintheinternalcontrol st~ucturethatmightbereportableconditionsand,acordingly, wouldnotdisclosealreportableconditionsthatarealso consideredtobematerialweaknesasdefinedabove. Th~sreportisintendedfortheinformationoftheBoardof Directors,management,andotherswithintheorganizationand apropriatestateandfederalagencies.however,thisreportisa materofpublicrecordanditsdistributionisnotlimited. P~f~lPerales CertifiedPublicAcountant January23,197 13

24 CashManagement PoliticalActivity CivilRights Federalfinancialreports AlowableCosts/CostPrinciples Administrativerequirements DrugFreWorkplace Myprocedureswerelimitedtotheaplicableproceduresdescribed intheoficeofmanagementandbudget'scompliancesuplement NonprofitInstitutions.Myproceduresweresubstantialylesin forauditsofinstitutionsofhighereducationsandother scopethananaudit,theobjectiveofwhichistheexpresionof anopiniononthedesirenarcoticsrehabilitationcenter,inc.'s compliancewiththerequirementslistedinthepreceding paragraph.acordingly,idonotexpressuchanopinion. Withrespectotheitemstested,theresultsofthoseprocedures disclosednomaterialinstancesofnoncompliancewiththe requirementslistedinthesecondparagraphofthisreport.with respectoitemsnottested,nothingcametomyatentionthat causedmetobelievethatthedesirenarcoticsrehabilitation 18

25 ofnoncompliancewiththerequirementsreferedtoabove.i consideredtheseinstancesofnoncomplianceinformingmyopinion oncompliance,whichisexpresedinthefolowingparagraph. ThisreportisintendedfortheinformationoftheBoardof Directors,management,andcognizantstateandfederalagencieṣ However,thisreportisamaterofpublicrecordandits distributionisnotlimited. R~'a~Perales O~r~fiedPublicAcountant January23,197 17

26 acountedforinordertomaintainadequatecontrolsoverthesafeguardingoftileasets Thisincludestherecordingandtrackingoftheasetsundercontroloftheorganization. Itisrecomendedthathepropertyandequipmentunderthecontroloftheorganization betagedforidentificationastothecontract~grantpurchased,locationoftheasetand 4.Budgets recordedintheasetledger. Theorganizationhasanaprovedindirectcostrateof31%percentobeusedinits administrationofederalcontractsbudgets.however,theorganizationalsoatemptsto utilizetheindirectcostrateinitsbudgetaplicationsforstateandlocalcontracts.the resultsisthathegeneralfiredoesnotrecoveritsindirectcost(i.e.,acounting,auditing, travel)incuredintheadministration&thestateandlocalcontractsadministered. Itisrecomendedthatinthefuture,theorganization'sbudgetincludecostscategoriesto includethedirectcostofthosebudgetcategorieswhicharenowconsideredindirectcost. 5.Triaining Themployesoftheorganizationhoetheknowledgeofaplyingdailyproceduresto makingthedisbursementsandrecordingthereceiptsoftheorganziation.however,it apearsthatheacountingstafislimitedinsomeofthetechnicalareasofacountingfor nonprofitorganizations. Itisrecomendedthathemanagementoftheorganizationconsidersendingthe acountingstaftotrainingsesionspecificalydesignintheareaofacountingfor 6.AnualAuditReport nonprofitorganizations. cognizantorganizationsbytheduedateofdecember31,196.theresultsisthatile TheAnualAuditReportfortheyearendingJune30,196wasnotsubmitedtothe organizationinisnoncomplianceinsubmisionofitsfinancialreports. Theauditreportwasnotsubmitedinatimelymanerwasdueto;(1)theorganization atemptedtocontractwithseveralauditorsduringthetimeperiod.theauditoreither whenfinalyanauditorwascontractedtherewasalatestartintheperformanceofthe couldnotperformtheauditorthepricewasnotinlinewithtbeorganization'sbudget,(2) audit,and(3)theauditorhadtowaitforcertainconfirmationstoariveinorderto completefieldwork,and(4)tileauditwasconducteduringthechristmasholidayswhen muchoftherelevantstafwerenotavailable. Itisrecomendedthatheorganizationcontractwithanauditpriortothendofitsfisca yearinordertohaveatimelysubmisionofitsanualauditreport.

27 distributionofthisreport,whichisamaterofpublicrecord. l~fa~lperales CertifiedPublicAcountant January30,197 15

28 01;~t~li*L FtL[.COI~'~ -i]l-iit+; DESIRENARCOTICSREHABILITATIONCENTER,INC. AUDITOFINANCIALSTATEMENTS ForTheYearEndedJune30,196 ~ċrḷ.j Preparedby CertifiedPublicAcountant RafaelPerales anoerprovisionsofstatelaw reportisap COpyOft,rer":'p,~,i+ tedto,r ~.'.i:(icltrl~!-iṭa,.,~:c+;~-:!:,mit-,this entity;~,ndc*~,~.,. oficialṣfi:.~ir~:,;-[it;,.-.j+ ~-.](~-;~:r;:~2!;(~rcv.~,w(~r~ PubNcir~:;~.':.e(:~i'cr:;.,~th9~-., <-%~f+!.,";t:/,i.()~-"~})i!c Rougeof.ice0[~"1,:)I~.~.".~';~.:~/~,.,. -",.t.,;,a",+~.,"or cjc+toil torand,whereapropriateathe oficeoftheparishcerkofcourt ~elnasedate~ ~7

29