Family Services of Greater Houston. Financial Statements and Single Audit Reports for the year ended June 30, 2014

Transcription

1 Financial Statements and Single Audit Reports for the year ended June 30, 2014

2 Table of Contents Page Independent Auditors Report 1 Financial Statements: Statements of Financial Position as of June 30, 2014 and Statement of Activities for the year ended June 30, Statement of Activities for the year ended June 30, Statement of Functional Expenses for the year ended June 30, Statement of Functional Expenses for the year ended June 30, Statements of Cash Flows for the years ended June 30, 2014 and Notes to Financial Statements for the years ended June 30, 2014 and Supplementary Information: Schedule of Expenditures of Federal Awards for the year ended June 30, Schedule of Expenditures of State Awards for the year ended June 30, Note to Schedules of Expenditures of Federal and State Awards for the year ended June 30, Independent Auditors Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 18 Independent Auditors Report on Compliance for Each Major Federal Program and Report on Internal Control Over Compliance Required by OMB Circular A Schedule of Findings and Questioned Costs for the year ended June 30,

3 Blazek & Vetterling C ERTIFIED P UBLIC A CCOUNTANTS Independent Auditors Report To the Board of Directors of Family Services of Greater Houston: Report on the Financial Statements We have audited the accompanying financial statements of Family Services of Greater Houston, which comprise the statements of financial position as of June 30, 2014 and 2013 and the related statements of activities, of functional expenses, and of cash flows for the years then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform our audits 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 auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Family Services of Greater Houston as of June 30, 2014 and 2013 and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America Weslayan, Suite 200 Houston, Texas (713) Fax (713)

4 Supplementary Information Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying supplementary information included in the schedule of expenditures of federal awards for the year ended June 30, 2014 as required by Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, is presented for purposes of additional analysis and is not a required part of the financial statements. Supplementary information in the schedule of expenditures of state awards for the year ended June 30, 2014 is presented for purposes of additional analysis and is 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. The 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 of America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole. Report Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 29, 2014 on our consideration of Family Services of Greater Houston 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 Family Services of Greater Houston s internal control over financial reporting and compliance. October 29,

5 Statements of Financial Position as of June 30, 2014 and ASSETS Cash and cash equivalents (Notes 3 and 5) $ 711,392 $ 1,361,329 Accounts receivable: Service provider contracts 173, ,469 Other (Note 2) 90, ,555 Prepaid expenses and other assets 67, ,410 Pledges receivable, net (Note 4): United Way 1,081,700 1,090,744 Other 1,428,358 Investments (Note 5) 1,015, ,340 Property, net (Note 6) 67,601 51,823 TOTAL ASSETS $ 4,635,686 $ 4,201,670 LIABILITIES AND NET ASSETS Liabilities: Accounts payable (Note 2) $ 112,953 $ 223,119 Accrued salaries and related expenses 457, ,893 Pension plan termination liability (Note 10) 559,000 Funds held for others 24,152 28,512 Deferred revenue 123,554 82,361 Note payable (Note 7) 152,070 Total liabilities 870,229 1,391,885 Net assets: Unrestricted 1,285,181 1,625,777 Temporarily restricted (Note 8) 2,480,276 1,184,008 Total net assets 3,765,457 2,809,785 TOTAL LIABILITIES AND NET ASSETS $ 4,635,686 $ 4,201,670 See accompanying notes to financial statements. 3

6 Statement of Activities for the year ended June 30, 2014 TEMPORARILY UNRESTRICTED RESTRICTED TOTAL REVENUE: Service provider contracts (Note 9) $ 3,089,031 $ 3,089,031 United Way contributions $ 2,171,210 2,171,210 Other contributions 397,483 1,594,346 1,991,829 Special event contributions 113, ,195 Direct donor benefit costs from special event (10,216) (10,216) Program fees 553, ,669 Investment return and other income (Note 5) 61,827 61,827 Total revenue 4,204,989 3,765,556 7,970,545 Net assets released from restrictions: Expiration of United Way restrictions 2,080,254 (2,080,254) Program expenditures 389,034 (389,034) Total 6,674,277 1,296,268 7,970,545 EXPENSES: Program services: Strengthen families and individuals 3,099,424 3,099,424 Health, wellness and self-sufficiency 1,862,127 1,862,127 Nurture children and youth 1,328,917 1,328,917 Total program services 6,290,468 6,290,468 Management and general 528, ,423 Fundraising 177, ,400 datatraq 18,582 18,582 Total expenses 7,014,873 7,014,873 CHANGES IN NET ASSETS (340,596) 1,296, ,672 Net assets, beginning of year 1,625,777 1,184,008 2,809,785 Net assets, end of year $ 1,285,181 $ 2,480,276 $ 3,765,457 See accompanying notes to financial statements. 4

7 Statement of Activities for the year ended June 30, 2013 TEMPORARILY UNRESTRICTED RESTRICTED TOTAL REVENUE: Service provider contracts (Note 9) $ 3,720,751 $ 3,720,751 United Way contributions $ 2,158,560 2,158,560 Other contributions 222, , ,032 Special event contributions 477, ,514 Direct donor benefit costs from special event (65,892) (65,892) Program fees 526, ,139 Investment return and other income (Note 5) 21,554 21,554 Total revenue 4,902,618 2,482,040 7,384,658 Net assets released from restrictions: Expiration of United Way restrictions 2,064,621 (2,064,621) Program expenditures 557,536 (557,536) Total 7,524,775 (140,117) 7,384,658 EXPENSES: Program services: Strengthen families and individuals 3,332,740 3,332,740 Health, wellness and self-sufficiency 1,821,003 1,821,003 Nurture children and youth 1,739,123 1,739,123 Total program services 6,892,866 6,892,866 Management and general 440, ,879 Fundraising 205, ,454 datatraq 32,993 32,993 Total expenses 7,572,192 7,572,192 CHANGES IN NET ASSETS (47,417) (140,117) (187,534) Net assets, beginning of year 1,673,194 1,324,125 2,997,319 Net assets, end of year $ 1,625,777 $ 1,184,008 $ 2,809,785 See accompanying notes to financial statements. 5

8 Statement of Functional Expenses for the year ended June 30, 2014 STRENGTHEN HEALTH, NURTURE MANAGEMENT FAMILIES AND WELLNESS AND CHILDREN AND TOTAL EXPENSES INDIVIDUALS SELF-SUFFICIENCY AND YOUTH TOTAL GENERAL FUNDRAISING datatraq EXPENSES Salaries and related expenses $ 2,202,523 $ 1,437,320 $ 1,083,466 $ 4,723,309 $ 118,336 $ 63,599 $ 880 $ 4,906,124 Fees and contract services 258, , , , ,849 73,070 10, ,512 Occupancy 239, ,945 63, ,160 29,986 19, ,978 In-kind rent, supplies and services 152,903 8,975 4, , ,558 Supplies 88,355 12,338 16, ,396 12,613 8, ,435 Travel 79,606 17,040 28, , ,197 Assistance to individuals 69,210 69,210 69,210 Insurance 21,083 13,736 10,190 45,009 1, ,993 Telephone 19,580 9,386 4,247 33,213 2,605 2, ,996 Equipment costs 14,300 5,678 5,019 24,997 1, ,597 Printing and publications 7,503 4,821 1,041 13,365 2,355 6,564 22,284 Depreciation 5,555 3,297 2,341 11, ,791 18,201 Membership dues 8,025 2,574 1,988 12, ,112 Postage 1,976 1, ,670 2,331 2,083 8,084 Other 16,010 16,010 28,582 44,592 Total $ 3,099,424 $ 1,862,127 $ 1,328,917 $ 6,290,468 $ 528,423 $ 177,400 $ 18,582 7,014,873 Direct donor benefit costs from special event 10,216 Total expenses $ 7,025,089 See accompanying notes to financial statements. 6

9 Statement of Functional Expenses for the year ended June 30, 2013 STRENGTHEN HEALTH, NURTURE MANAGEMENT FAMILIES AND WELLNESS AND CHILDREN AND TOTAL EXPENSES INDIVIDUALS SELF-SUFFICIENCY AND YOUTH TOTAL GENERAL FUNDRAISING datatraq EXPENSES Salaries and related expenses $ 2,385,132 $ 1,376,494 $ 1,416,604 $ 5,178,230 $ 134,906 $ 65,832 $ 1,767 $ 5,380,735 Fees and contract services 336, , , , ,785 54,948 16, ,879 Occupancy 229, ,586 79, ,233 67,080 20, ,473 In-kind rent, supplies and services 134,230 4,635 13, , ,674 Supplies 87,036 14,570 18, ,035 22,552 53, ,904 Travel 77,649 15,721 36, ,316 5, ,463 Assistance to individuals 1,599 58,368 59,967 59,967 Insurance 20,767 11,963 12,297 45, ,517 Telephone 20,693 8,951 4,943 34,587 2,064 1, ,756 Equipment costs 13,307 5,295 6,237 24,839 1,020 25,859 Printing and publications 10,617 4,311 1,160 16,088 5,153 5,661 26,902 Depreciation 7,061 3,836 3,664 14, ,767 29,690 Membership dues 6,423 2,827 2,288 11, ,531 Postage 2,134 1, ,125 2,369 2,116 8,610 Other 7,517 7,517 25,715 33,232 Total $ 3,332,740 $ 1,821,003 $ 1,739,123 $ 6,892,866 $ 440,879 $ 205,454 $ 32,993 7,572,192 Direct donor benefit costs from special event 65,892 Total expenses $ 7,638,084 See accompanying notes to financial statements. 7

10 Statements of Cash Flows for the years ended June 30, 2014 and CASH FLOWS FROM OPERATING ACTIVITIES: Changes in net assets $ 955,672 $ (187,534) Adjustments to reconcile changes in net assets to net cash provided (used) by operating activities: Net realized and unrealized (gain) loss on investments (2,869) 15,177 Depreciation 18,201 29,690 Changes in operating assets and liabilities: Accounts receivable 310,764 (144,054) Prepaid expenses and other assets 56,294 (57,148) Bequest receivable 1,000,000 Pledges receivable (1,419,314) 256,105 Accounts payable (110,166) 11,294 Accrued salaries and related expenses (41,393) 3,039 Pension plan termination liability (559,000) Funds held for others (4,360) (17,112) Deferred revenue 41,193 20,777 Net cash provided (used) by operating activities (754,978) 930,234 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of investments (13,050) (1,014,517) Purchases of property (33,979) (11,426) Net cash used by investing activities (47,029) (1,025,943) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from note payable 175,000 Repayments of note payable (22,930) Net cash provided by financing activities 152,070 NET CHANGE IN CASH AND CASH EQUIVALENTS (649,937) (95,709) Cash and cash equivalents, beginning of year 1,361,329 1,457,038 Cash and cash equivalents, end of year $ 711,392 $ 1,361,329 Supplemental disclosure of cash flow information: Interest paid $4,440 See accompanying notes to financial statements. 8

11 Notes to Financial Statements for the years ended June 30, 2014 and 2013 NOTE 1 ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Organization Family Services of Greater Houston (Family Services) is a Texas nonprofit corporation providing a wide range of health and human services for families in the greater Houston community. Family Services programs seek to strengthen individuals, families, and communities through the provision of preventive, supportive, and therapeutic services. Family Resources, Inc. is the sole member of Family Services and confirms the election of Family Services Board of Directors. Family Resources, Inc. is also the sole member of the Family Service Foundation of Houston (the Foundation), an affiliated nonprofit entity, and confirms the election of the Foundation s Board of Directors. Basis of presentation These financial statements include only the assets, liabilities, net assets, activities, and cash flows of Family Services. Significant balances and transactions with affiliated organizations are described in Note 2. Federal income tax status Family Services is exempt from federal income tax under 501(c)(3) of the Internal Revenue Code and is classified as a public charity under 509(a)(1) and 170(b)(1)(A)(vi). Family Services files annual federal information returns that are subject to routine examination; however, there are no examinations for any tax periods currently in progress. Family Services believes it is no longer subject to examinations of returns for tax years ended before June 30, Cash and cash equivalents include highly liquid investments with original maturities of three months or less. Certificates of deposit included in cash equivalents are reported at face value plus accrued interest. Pledges receivable that are due within one year are reported at net realizable value. Pledges receivable that are expected to be collected in future years are discounted to estimate the present value of future cash flows, if material. Investments are reported at fair value. Property is reported at cost or, if contributed, at the estimated fair value at the date of the gift. Depreciation is provided using the straight-line method over estimated useful lives of 2 to 12 years. Items with a cost or fair value of $2,000 or more and a useful life of more than three years are capitalized. Net asset classification Contributions and the related net assets are classified based on the existence or absence of donor-imposed restrictions, as follows: Unrestricted net assets include those net assets whose use is not restricted by donor-imposed stipulations, even though their use may be limited in other respects, such as by contract or board designation. Temporarily restricted net assets include contributions restricted by the donor for specific purposes or time periods. When a purpose restriction is accomplished or a time restriction ends, temporarily restricted net assets are released to unrestricted net assets. Fees for service Revenue from service provider contracts and program fees are recognized when the related services are provided. Amounts received in advance are deferred until earned. Contributions are recognized as revenue at fair value when an unconditional commitment is received from the donor. Contributions received with donor stipulations that limit their use are classified as restricted support. At June 30, 2014, approximately 30% or $1,300,000 of total contributions are from one donor. Non-cash contributions Donated materials and use of facilities are recognized at fair value when an unconditional commitment is received from the donor. The related expense is recognized as the item is used. Contributions of 9

12 services are recognized when services received (a) create or enhance nonfinancial assets or (b) require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation. Family Services recognized approximately $111,000 and $128,000 of contributed facility rent, supplies and services in 2014 and 2013, respectively. These amounts are included in unrestricted contribution revenue and program services expenses in these financial statements. Direct donor benefit costs represent the cost of goods and services provided to attendees of the special event. Estimates Management must make estimates and assumptions to prepare financial statements in accordance with generally accepted accounting principles. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, the amounts of reported revenue and expenses, and the allocation of expenses among various functions. Actual results could vary from the estimates that were used. NOTE 2 RELATED PARTY TRANSACTIONS Family Resources, Inc. provides management and fundraising services to Family Services. In 2014 and 2013, Family Services incurred management fees of approximately $686,000 and $690,000, respectively. Accounts payable includes a payable to Family Resources, Inc. of approximately $42,282 at June 30, 2014 and $145,000 at June 30, 2013 for management fees. At June 30, 2014 and 2013, other accounts receivable includes a receivable from Family Resources, Inc. of approximately $52,082 and $213,000, respectively, for expenses paid by Family Services on behalf of Family Resources, Inc. Family Services leases office space and equipment from the Foundation. The office space is leased under a noncancelable operating lease that expires June 30, 2017, with annual rent of $240,000. Family Services recognized office and equipment rental expense of approximately $257,000 in 2014 and 2013 related to these leases. At June 30, 2014 and 2013, other accounts receivable includes a receivable from the Foundation of approximately $10,000 for expenses paid by Family Services on behalf of the Foundation. Pledges receivable at June 30, 2014 include a receivable from the Foundation of $150,000. Family Services recognized contributions of $150,000 in 2014 and $100,000 in 2013 from the Foundation. NOTE 3 CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of the following: Demand deposits $ 526,632 $ 1,148,123 Money market mutual funds 160, ,299 Certificate of deposit non-negotiable 24,446 52,907 Total cash and cash equivalents $ 711,392 $ 1,361,329 Bank deposits exceed the federally insured limit per depositor per institution. NOTE 4 PLEDGES RECEIVABLE Pledges receivable are as follows: Pledges receivable $ 2,526,802 $ 1,090,744 Discount to present value at approximately 1% (16,744) Pledges receivable, net $ 2,510,058 $ 1,090,744 10

13 Pledges receivable at June 30, 2014 are expected to be collected as follows: 2015 $ 1,560, , , ,463 Total pledges receivable $ 2,526,802 At June 30, 2014, approximately $1,270,000 or 89% of other pledges receivable are from one donor. NOTE 5 INVESTMENTS AND FAIR VALUE MEASUREMENTS Generally accepted accounting principles require that certain assets and liabilities be reported at fair value and establish a hierarchy that prioritizes inputs used to measure fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three levels of the fair value hierarchy are as follows: Level 1 Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the reporting date. Level 2 Inputs are other than quoted prices included in Level 1, which are either directly observable or can be derived from or corroborated by observable market data at the reporting date. Level 3 Inputs are not observable and are based on the reporting entity s assumptions about the inputs market participants would use in pricing the asset or liability. Assets measured at fair value at June 30, 2014 are as follows: LEVEL 1 LEVEL 2 LEVEL 3 TOTAL Investments: Short-term bond mutual funds $ 1,015,259 $ 1,015,259 Cash equivalents: Money market mutual funds 160, ,314 Total assets measured at fair value $ 1,175,573 $ 0 $ 0 $ 1,175,573 Assets measured at fair value at June 30, 2013 are as follows: LEVEL 1 LEVEL 2 LEVEL 3 TOTAL Investments: Short-term bond mutual funds $ 999,340 $ 999,340 Cash equivalents: Money market mutual funds 160, ,299 Total assets measured at fair value $ 1,159,639 $ 0 $ 0 $ 1,159,639 Mutual funds are valued at the reported net asset value of shares held. This valuation method may produce a fair value that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while Family Services believes its valuation method is appropriate, the use of different methods or assumptions could result in a different fair value measurement at the reporting date. Investments are exposed to various risks such as interest rate, market, and credit risks. Because of these risks, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the statement of financial position and statement of activities. 11

14 Investment return includes earnings on cash and cash equivalents and consists of the following: Interest and dividends $ 13,067 $ 14,700 Net realized and unrealized gain (loss) on investments 2,869 (15,177) Total investment return $ 15,936 $ (477) NOTE 6 PROPERTY Property consists of the following: Furniture and office equipment $ 653,629 $ 619,650 Leasehold improvements 20,286 46,258 Software 175, ,567 Total property, at cost 849, ,475 Accumulated depreciation (781,881) (789,652) Property, net $ 67,601 $ 51,823 NOTE 7 NOTE PAYABLE In August 2013, Family Services entered into an unsecured promissory note agreement for $175,000 to fund a portion of the payment of the estimated liability associated with the termination of the Cash Balance Pension Plan (see Note 10). The loan bears interest at 3.5% and matures on August 1, Minimum principal payments are as follows: 2015 $ 27, , , , ,660 Total note payable $ 152,070 NOTE 8 TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets are available for the following purposes or periods: BALANCE UTILIZED FOR BALANCE JUNE 30, 2013 CONTRIBUTIONS PROGRAMS JUNE 30, 2014 Transition-Age Youth Service $ 1,314,112 $ 29,010 $ 1,285,102 United Way allocations for subsequent periods $ 1,090,744 2,071,210 2,080,254 1,081,700 Ways to Work 86, , ,828 75,000 Building Bonds 6,436 6,436 Other programs 220, ,760 38,474 Total $ 1,184,008 $ 3,765,556 $ 2,469,288 $ 2,480,276 12

15 NOTE 9 SERVICE PROVIDER CONTRACTS Revenue from service provider contracts includes: Federal and state awards: U. S. Department of Health and Human Services $ 676,476 $ 670,434 The Metropolitan Transit Authority of Harris County, Texas 158, ,020 Texas Department of State Health Services 569, ,378 Texas Veterans Commission 61, ,755 United Way THRIVE 614, ,459 United Way Baytown Area 486, ,063 Houston Independent School District 218, ,350 United Way other 116,587 67,926 Collaborative For Children 239,627 Other sources 186, ,739 Total $ 3,089,031 $ 3,720,751 NOTE 10 EMPLOYEE BENEFIT PLANS Family Services participates in a 403(b) plan administered by Mutual of America. Employees may elect to participate after one year of service by contributing up to 15% of their compensation to the plan. Each year, Family Services makes a contribution of 2% of participants compensation and, in addition, makes a matching contribution equal to 100% of the employee s contribution up to a maximum of 3% of the employee s compensation. Family Services contributed approximately $138,000 and $147,000 to this plan during the years ended June 30, 2014 and 2013, respectively. Family Services participated in a multi-employer, cash balance defined benefit pension plan (the Cash Balance Plan), as defined by the provisions of the Plan Accounting Defined Benefit Pension Plans Topic of the Financial Accounting Standards Board Accounting Standards Codification. On February 22, 2011, the Executive Committee of United Way of Greater Houston approved a termination plan for all participants in the Cash Balance Plan. On June 3, 2013, the Pension Benefits Guaranty Corporation (the PBGC) and the Internal Revenue Service approved termination of the Cash Balance Plan and the distribution of the plan assets in accordance with the provisions of the Employee Retirement Income Security Act. Based upon an actuarial valuation of the terminated plan, the Center s allocable share of the unfunded liability at June 30, 2013 was approximately $559,000. This liability was paid in full in NOTE 11 LEASE COMMITMENTS Family Services leases office space under non-cancelable operating leases (see Note 2 for related party leases). Lease expense was approximately $388,000 during 2014 and $412,000 during The future minimum lease payments at June 30, 2014 are as follows: 2015 $ 365, , , , ,384 Thereafter 11,452 Total $ 1,330,157 13

16 NOTE 12 JOB ACCESS REVERSE COMMUTE LOAN GUARANTEE FUND Family Services participates in the national Ways to Work program, which provides loans to working parents (the borrower) who are not otherwise able to obtain loans at competitive interest rates. The loans are to purchase a reliable used car or repair a car in order for the individual to sustain employment or enhance their employment. The term of the loan is typically two years. Family Services has guaranteed these loans. At June 30, 2014, there were 46 outstanding loans with outstanding balances of $198,226. At June 30, 2013, there were 54 outstanding loans with outstanding balances of $186,967. The Loan Guarantee Fund provided in the Federal Transit Administration grant reimburses 80% of any guarantee payments on loans made after April 1, 2010 up to $35,200 per year. NOTE 13 SUBSEQUENT EVENTS Management has evaluated subsequent events through October 29, 2014, which is the date that the financial statements were available for issuance. As a result of this evaluation, no events were identified that are required to be disclosed or would have a material impact on reported net assets or changes in net assets. 14

17 Schedule of Expenditures of Federal Awards for the year ended June 30, 2014 FEDERAL GRANTOR Pass-through Grantor CFDA Pass-through Award Federal Non-Federal Program Title & Period Number Grantor Number Amount Revenue Expenditures Expenditures U. S. DEPARTMENT OF HEALTH AND HUMAN SERVICES Direct federal funding: Healthy Marriage Promotion and Responsible Fatherhood Grants #1 09/30/12 09/29/ FM $736,231 $ 248,806 $ 248,806 $ 1,316 #2 09/30/13 09/29/ FM $698, , ,670 4,493 Total 676, ,476 5,809 Passed through Texas Department of State Health Services: Block Grants for Prevention and Treatment of Substance Abuse Ensueños del Futuro #3 09/01/12 08/31/ SA/YPU $357,590 68,898 68,898 5,097 #4 09/01/12 08/31/ SA/YPS $302,361 36,735 36,735 16,318 #5 09/01/12 08/31/ SA/YPI $322,565 66,156 66,156 7,333 #6 09/01/13 08/31/ SA/YPU $175, , ,951 23,353 #7 09/01/13 08/31/ SA/YPI $300, , ,053 33,243 Total 492, ,793 85,344 Total U. S. Department of Health and Human Services 1,169,269 1,169,269 91,153 FEDERAL TRANSIT ADMINISTRATION, DEPARTMENT OF TRANSPORTATION Passed through The Metropolitan Transit Authority of Harris County, Texas: Job Access Reverse Commute Program Ways to Work #8 04/01/12 03/31/ TX-037-X $342, , , ,192 #9 04/01/14 03/31/ TX-037-X $524,825 47,907 47,907 39,064 Total Federal Transit Administration, Department of Transportation 158, , ,256 TOTAL FEDERAL AWARDS $ 1,328,075 $ 1,328,075 $ 247,409 See accompanying note to schedules of expenditures of federal and state awards. 15

18 Schedule of Expenditures of State Awards for the year ended June 30, 2014 STATE GRANTOR Pass-through Grantor Pass-through Award State Non-State Program Title & Period Grantor Number Amount Revenue Expenditures Expenditures TEXAS DEPARTMENT OF STATE HEALTH SERVICES State General Revenue Funds: Ensueños del Futuro #S1 09/01/12 08/31/ SA/YPU $357,590 $ 5,886 $ 5,886 $ 435 #S2 09/01/12 08/31/ SA/YPS $302,361 2,859 2,859 1,270 #S3 09/01/12 08/31/ SA/YPI $322,565 5,998 5, #S4 09/01/13 08/31/ SA/YPU $175,000 21,969 21,969 4,241 #S5 09/01/13 08/31/ SA/YPI $300,000 40,015 40,015 6,650 Total Texas Department of State Health Services 76,727 76,727 13,261 TEXAS VETERANS COMMISSION #S6 01/01/14 12/31/14 FVA-14A-0156 $150,000 61,587 61,587 24,194 TOTAL STATE AWARDS $ 138,314 $ 138,314 $ 37,455 See accompanying note to schedules of expenditures of federal and state awards. 16

19 Note to Schedules of Expenditures of Federal and State Awards for the year ended June 30, 2014 NOTE 1 SIGNIFICANT ACCOUNTING POLICIES Basis of presentation The schedules of expenditures of federal and state awards are prepared on the accrual basis of accounting. The information in these schedules is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations and State of Texas Single Audit Circular. Federal and state expenses include allowable expenses funded by federal and state grants. Non-federal or non-state expenditures include allowable expenses funded by other sources of revenue. Allowable costs are determined according to the standards of Office of Management and Budget Circular A-122, Cost Principles for Non-Profit Organizations and Texas Uniform Grants Management Standards, and include both costs that are capitalized and costs that are recognized as expenses in Family Services financial statements in conformity with generally accepted accounting principles. 17

20 Blazek & Vetterling C ERTIFIED P UBLIC A CCOUNTANTS Independent Auditors Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards To the Board of Directors of Family Services of Greater Houston: 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 Family Services of Greater Houston (Family Services) which comprise the statement of financial position as of June 30, 2014 and the related statements of activities, of functional expenses, and of cash flows for the year then ended, and the related notes to the financial statements and have issued our report thereon dated October 29, Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered Family Services 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 Family Services internal control. Accordingly, we do not express an opinion on the effectiveness of Family Services 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 Family Services 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. 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. October 29, Weslayan, Suite 200 Houston, Texas (713) Fax (713)

21 Blazek & Vetterling C ERTIFIED P UBLIC A CCOUNTANTS Independent Auditors Report on Compliance for Each Major Federal Program and Report on Internal Control Over Compliance Required by OMB Circular A-133 To the Board of Directors of Family Services of Greater Houston: Report on Compliance for Each Major Federal Program We have audited Family Services of Greater Houston s (Family Services) compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of Family Services major federal programs for the year ended June 30, Family Services major federal programs are identified in the summary of auditors 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 programs. Auditors Responsibility Our responsibility is to express an opinion on compliance for each of Family Services major federal 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; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 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 Family Services 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 program. However, our audit does not provide a legal determination of Family Services compliance. Opinion on Each Major Federal Program In our opinion, Family Services 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 programs for the year ended June 30, Report on Internal Control Over Compliance Management of Family Services 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 Family Services internal control over compliance with the types of requirements that could have a direct and material effect on each 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 2900 Weslayan, Suite 200 Houston, Texas (713) Fax (713)

22 program and to test and report on internal control over compliance in accordance with OMB Circular A-133, 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 Family Services 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 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 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 OMB Circular A-133. Accordingly, this report is not suitable for any other purpose. October 29,

23 Schedule of Findings and Questioned Costs for the year ended June 30, 2014 Section I Summary of Auditors Results Financial Statements Type of auditors report issued: unmodified qualified adverse disclaimer Internal control over financial reporting: Material weaknesses identified? yes no Significant deficiencies identified that are not considered to be material weaknesses? yes none reported Noncompliance material to the financial statements noted? yes no Federal Awards Internal control over major programs: Material weaknesses identified? yes no Significant deficiencies identified that are not considered to be material weaknesses? yes none reported Type of auditors report issued on compliance with major programs: unmodified qualified adverse disclaimer Any audit findings disclosed that are required to be reported in accordance with.510(a) of Circular A-133? yes no Identification of major programs: CFDA Number(s) Name of Federal Program or Cluster Job Access Reverse Commute Program Block Grants for Prevention and Treatment of Substance Abuse Dollar threshold used to distinguish between Type A and Type B programs: $300,000 Auditee qualified as a low-risk auditee? yes no Section II Financial Statement Findings There were no findings related to the financial statements which are required to be reported in accordance with Government Auditing Standards. Section III Federal Award Findings and Questioned Costs There were no findings for federal awards required to be reported in accordance with.510(a) of Circular A