/2008-cc-audit by Collaborative for Children

Collaborative For Children Financial Statements and Single Audit Reports for the year ended December 31, 2008

B lazek & Vetterling CERTIFIED PUBLIC ACCOUNTANTS

Independent Auditorsâ&#x20AC;&#x2122; Report

To the Board of Directors of Collaborative For Children: We have audited the accompanying statements of financial position of Collaborative For Children as of December 31, 2008 and 2007 and the related statements of activities, of functional expenses, and of cash flows for the years then ended. These financial statements are the responsibility of the management of Collaborative For Children. 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 of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Collaborative For Children as of December 31, 2008 and 2007 and the changes in its net assets and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we also have issued a report dated August 7, 2009, on our consideration of Collaborative For Childrenâ&#x20AC;&#x2122;s internal control over financial reporting and 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 and should be considered in assessing the results of our audit. Our audit was performed for the purpose of forming an opinion on the basic financial statements of Collaborative For Children taken as a whole. The accompanying schedule of expenditures of federal awards for the year ended December 31, 2008, is presented for purposes of additional analysis as required by U. S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is not a required part of the basic financial statements. The information in this schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.

August 7, 2009

2900 Weslayan, Suite 200

Houston, Texas 77027-5132

(713) 439-5757

Fax (713) 439-5758

Collaborative For Children Statements of Financial Position as of December 31, 2008 and 2007

2007

2008 ASSETS Cash and cash equivalents (Note 3) U. S. Treasury securities (Note 6) Receivables: Pledges (Note 4) Government agencies United Way service contracts Other Prepaid expenses and other assets Property, net (Note 5)

$ 1,687,230 205,992

801,727 203,308

1,314,028 97,707 57,320 96,972 96,426 110,565

687,334 92,108 29,067 10,535 16,997 141,430

TOTAL ASSETS

$ 3,666,240

$ 1,982,506

LIABILITIES AND NET ASSETS Liabilities: Accounts payable and accrued expenses Space contraction liability (Note 10) Line of credit payable (Note 6) Deferred revenue Total liabilities Net assets: Unrestricted Temporarily restricted (Note 7) Total net assets TOTAL LIABILITIES AND NET ASSETS

See accompanying notes to financial statements.

–2–

848,879

4,630

217,663 149,337 39,855 7,875

853,509

414,730

319,412 2,493,319

484,938 1,082,838

2,812,731

1,567,776

$ 3,666,240

$ 1,982,506

Collaborative For Children Statement of Activities for the year ended December 31, 2008

UNRESTRICTED

TEMPORARILY RESTRICTED

TOTAL

REVENUE: Contributions Government grants (Note 8) United Way service contracts Program service fees Special events Cost of direct donor benefits Investment return Other income

Total revenue Net assets released from restrictions: Expenditure for program purposes Expiration of time restrictions Total

476,104 991,154 748,839 208,193 186,652 (20,583) 19,264 2,852

$ 3,549,005

2,612,475

3,549,005

1,863,361 275,163

(1,863,361) (275,163)

4,750,999

1,410,481

$ 4,025,109 991,154 748,839 208,193 186,652 (20,583) 19,264 2,852 6,161,480

6,161,480

EXPENSES: Program services: Provider Engagement Family Engagement Community Engagement Total program services Management and general Fundraising Total expenses

2,826,326 676,271 385,980

3,888,577

788,374 239,574

4,916,525

CHANGES IN NET ASSETS

(165,526)

1,410,481

1,244,955

Net assets, beginning of year

484,938

1,082,838

1,567,776

319,412

$ 2,493,319

$ 2,812,731

Net assets, end of year

See accompanying notes to financial statements.

â&#x20AC;&#x201C;3â&#x20AC;&#x201C;

Collaborative For Children Statement of Activities for the year ended December 31, 2007

UNRESTRICTED

TEMPORARILY RESTRICTED

TOTAL

REVENUE: Contributions Government grants (Note 8) United Way service contracts Program service fees Special events Cost of direct donor benefits Investment return Other income

Total revenue

483,739 1,378,128 770,143 126,511 155,047 (30,418) 35,692 13,320 2,932,162

Net assets released from restrictions: Expenditure for program purposes Expiration of time restrictions

477,021 360,000

Total

3,769,183

944,163

$ 1,427,902 1,378,128 770,143 126,511 155,047 (30,418) 35,692 13,320 3,876,325

(477,021) (360,000) 107,142

3,876,325

EXPENSES: Program services: Provider Engagement Family Engagement Community Engagement Total program services Management and general Fundraising Space contraction costs (Note 10) Total expenses

1,782,862 498,354 376,392

2,657,608

695,447 289,115 166,215

3,808,385

CHANGES IN NET ASSETS

(39,202)

107,142

67,940

Net assets, beginning of year

524,140

975,696

1,499,836

484,938

$ 1,082,838

$ 1,567,776

Net assets, end of year

See accompanying notes to financial statements.

â&#x20AC;&#x201C;4â&#x20AC;&#x201C;

Collaborative For Children Statement of Functional Expenses for the year ended December 31, 2008

EXPENSES

PROVIDER ENGAGEMENT

FAMILY ENGAGEMENT

Salaries, related taxes and benefits Equipment and incentive grants Professional and contract services Occupancy Conferences, meetings, and workshops Advertising Travel College tuition, continuing education, and awards to caregivers Depreciation Office supplies Computer technology expense Staff development Postage and shipping Printing Telephone Telephone lease interest expense Equipment rental and maintenance Internet service fees Other

825,406 $ 1,540,981 113,919 110,870 42,566

Total expenses

$ 2,826,326 $

49,162 48,320 13,852 19,263 10,168 7,800 6,138 7,015 6,946 4,523 4,683 2,841 11,873

See accompanying notes to financial statements.

–5–

COMMUNITY ENGAGEMENT

MANAGEMENT AND GENERAL

468,381 $ 1,221 79,657 69,425 5,648 425 5,682 125 7,273 4,987 7,590 653 7,197 6,084 2,152 2,540 2,598 1,668 2,965

254,061 $ 106 67,858 31,384 1,805 1,633 4,949 615 5,035 3,835 2,367 119 2,586 2,163 1,268 1,330 1,181 832 2,853

557,998 $

676,271 $

385,980 $

788,374 $

14,151 71,420 3,204 67,986 11,322 116 12,221 7,257 7,513 13,925 1,102 3,818 2,705 3,667 3,029 1,948 4,992

FUNDRAISING

TOTAL EXPENSES

138,586 $ 2,244,432 1,542,308 33,857 309,442 17,666 300,765 28,371 81,594 2,265 72,309 806 71,921 49,176 2,130 40,511 2,351 37,693 6,196 33,834 357 22,854 2,796 19,819 515 19,595 412 13,483 726 12,786 763 12,254 440 7,729 1,337 24,020 239,574 $ 4,916,525

Collaborative For Children Statement of Functional Expenses for the year ended December 31, 2007

EXPENSES

PROVIDER ENGAGEMENT

FAMILY ENGAGEMENT

789,372 $ 307,964 303,626 142,597 85,384

Total

$ 1,782,862 $

32,054 34,561 10,702 12,335 7,685 20,188 4,759 3,821 5,384 10,081 3,785 2,379 6,185

Space contraction costs (Note 10)

COMMUNITY ENGAGEMENT

375,196 $ 3,765 6,749 66,205 2,670 1,928 17 5,014 5,263 2,436 4,011 8,155 3,741 911 4,624 1,766 4,564 1,339 498,354 $

MANAGEMENT AND GENERAL

258,613 $ 12,666 51,640 5,349 7,256 152 4,799 13,767 3,148 1,094 436 9,824 727 3,373 1,253 678 1,617 376,392 $

520,805 $ 21,783 86,083 4,183 3,939 4,617 679 12,003 10,135 5,780 4,282 1,038 2,761 1,554 6,804 2,643 1,465 4,893 695,447 $

FUNDRAISING

TOTAL EXPENSES

196,375 $ 2,140,361 311,729 6,236 351,060 34,866 381,391 20,746 118,332 138 4,077 40 45,895 35,409 2,391 34,909 3,526 45,026 3,829 22,878 8,058 37,633 1,824 16,212 5,715 25,862 622 9,198 2,437 27,319 918 10,365 515 9,601 879 14,913 289,115

3,642,170 166,215

Total expenses

$ 3,808,385

See accompanying notes to financial statements.

–6–

Collaborative For Children Statements of Cash Flows for the years ended December 31, 2008 and 2007

2007

2008 CASH FLOWS FROM OPERATING ACTIVITIES: Changes in net assets Adjustments to reconcile changes in net assets to net cash provided by operating activities: Unrealized gain on U.S. Treasury securities Depreciation Changes in operating assets and liabilities: Receivables Prepaid expenses and other assets Accounts payable and accrued expenses Space contraction liability Deferred revenue

$ 1,244,955

67,940

(5,201) 40,511

(7,547) 34,909

(746,983) (79,429) 631,216 (149,337) (3,245)

(167,215) 7,208 103,395 149,337 4,573

932,487

192,600

412,000 (409,483) (9,646)

412,000 (404,210) (144,799)

(7,129)

(137,009)

(39,855)

39,855

Net cash provided (used) by financing activities

(39,855)

39,855

NET CHANGE IN CASH AND CASH EQUIVALENTS

885,503

95,446

Cash and cash equivalents, beginning of year

801,727

706,281

Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from maturities of U. S. Treasury securities Purchases of U. S. Treasury securities Purchases of property Net cash used by investing activities CASH FLOWS FROM FINANCING ACTIVITIES: Advances (payments) on line of credit

Cash and cash equivalents, end of year

$ 1,687,230

See accompanying notes to financial statements.

–7–

801,727

Collaborative For Children Notes to Financial Statements for the years ended December 31, 2008 and 2007

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization – Collaborative For Children (CC) is located in Houston, Texas and was formed in 2004 through a merger of the Greater Houston Collaborative For Children (GHCC) and Initiatives for Children, Inc. (IFC), two non-profit organizations with more than 20 years of combined experience in serving the community. CC works with families and those that deliver educational and other support services to children to positively impact the care and education of young children. CC works to fulfill its mission of building a strong education foundation for young children to succeed in school and life by focusing its programs and services on the following goal areas: • Provider Engagement programs support and develop child care and early education professionals through oneon-one consulting, training and mentoring for teachers and directors in early care and education centers, scholarships for professional development conferences, and wage enhancement programs to reward teachers for obtaining higher educational credentials. • Family Engagement programs provide families with information, resources and support to launch their children toward academic and life success by providing parent education, printed parenting tips, resource materials, and referrals for early education, after-school programs and children with special needs. • Community Engagement programs provide a speaker’s bureau, partnerships to promote healthy child development and strengthen policy and regulations impacting young children. Early childhood education is promoted as a high priority public policy issue in our region with adequate support necessary to deliver quality programs for parents, children, and teachers. Tax status – CC is exempt from federal income taxes under §501(c)(3) of the Internal Revenue Code and is classified as a public charity under §509(a)(2). 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.

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 reported as revenue and expenses, and the allocation of expenses among various functions. Actual results could vary from the estimates that were used. Cash equivalents include highly liquid financial instruments with original maturities of three months or less. U. S. Treasury securities are recorded at fair value. Investment return includes interest and realized and unrealized gains and losses. Investment return is reported in the statement of activities as an increase in unrestricted net assets unless the use of the income is limited by donor-imposed restrictions. Investment return whose use is restricted by the donor is reported as an increase in temporarily restricted net assets.

–8–

Pledges receivable that are expected to be collected within one year are recorded at net realizable value. Amounts expected to be collected in future years are discounted to the present value of their estimated future cash flows. Discounts are computed using interest rates applicable to the years in which the promises are received. Amortization of discounts is included in contribution revenue. Property is recorded at cost if purchased or at fair value at the date of gift if donated. Depreciation is calculated using the straight-line method over estimated useful lives of 5 years. Additions and improvements that have a cost of more than $500 are capitalized. Government grants and program service fees are recognized when the related services are provided. Amounts billed or received but unearned are included in the statement of financial position as deferred revenue. Contributions are recorded as revenue at fair value when an unconditional commitment is received from the donor. Contributions received with donor stipulations that limit their use are recorded as restricted support. Conditional contributions are recognized in the same manner when the conditions are substantially met. In-kind contributions – Donated materials and services are recorded at fair value as contributions when an unconditional commitment is received from the donor. The related expense is recorded as the item is used. Contributions of 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. Grants made – Equipment and incentive grants are awarded to child care providers for equipment and facilities renovation and expansion. Grants awarded are recorded as expense at their fair value when a commitment is made to a recipient.

NOTE 2 – FAIR VALUE MEASUREMENTS Effective January 1, 2008, CC adopted Statement of Financial Accounting Standard 157, Fair Value Measurements (SFAS 157), which provides a framework for measuring fair value of certain assets and liabilities and expands disclosures about fair value measurements. As defined in SFAS 157, 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. SFAS 157 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy defined by SFAS 157 and a description of the valuation methodology used for assets or liabilities measured at fair value are as follows: • • •

Level 1 – Pricing inputs include 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 – Pricing inputs other than quoted prices included in Level 1, that are either directly observable or that can be derived from or corroborated by observable market data as of the reporting date. Level 3 – Pricing inputs include those that are unobservable for the asset or liability and reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

U.S. Treasury securities are valued using prices obtained from active market makers and inter-dealer brokers on a daily basis. These valuation methods may produce a fair value that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while CC believes its valuation methods are appropriate, the use of different methods or assumptions could result in a different fair value measurement at the reporting date.

–9–

The summary of the inputs used as of December 31, 2008 are as follows: LEVEL 1

LEVEL 2

Money market funds U.S. Treasury securities

1,620,341 205,992

Total

1,826,333

LEVEL 3

TOTAL

1,620,341 205,992

1,826,333

NOTE 3 – CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of the following: 2007

2008 Money market funds Demand deposits

1,620,341 66,889

620,282 181,445

Total cash and cash equivalents

1,687,230

801,727

CC maintains cash for daily operations at several banking institutions. At times, bank deposits exceeded the federally insured limit per depositor per institution. CC has entered into a collateral agreement with one of its depository institutions to collateralize deposits in excess of the federally-insured limit with U. S. government debt securities with a fair value of $909,047 at December 31, 2008.

NOTE 4 – PLEDGES RECEIVABLE Pledges receivable are as follows: 2007

2008 Pledges receivable Discount to present value at 3%

1,315,750 (1,722)

706,163 (18,829)

Pledges receivable, net

1,314,028

687,334

Receivable in 2009 Receivable in 2010

1,285,750 30,000

Total pledges receivable

1,315,750

Pledges receivable at December 31, 2008 are expected to be collected as follows:

At December 31, 2008, approximately 84% of pledges are due from two foundations.

NOTE 5 – PROPERTY Property consists of the following: 2007

2008 Furniture and equipment Leasehold improvements

Total property at cost Accumulated depreciation

187,390 25,710

213,100 (102,535)

Property, net

– 10 –

110,565

178,232 24,984 203,216 (61,786)

141,430

Property with a cost of $47,681 is used in operations but not included in the statement of financial position at December 31, 2008 because title is held by grantors.

NOTE 6 – LINE OF CREDIT CC has a $200,000 revolving line of credit with a bank that is collateralized by U. S. Treasury securities having a face value of $206,000. The line expires in May 2010. Draws on the line bear interest at the bank’s prime lending rate, which was 3.25% at December 31, 2008. There are no outstanding draws against this line of credit at December 31, 2008.

NOTE 7 – TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets are available for the following purposes: 2008

2007

Neighborhood Initiative Use in future periods Hurricane Ike Childcare Recovery Project Corporate H. A. N. D. S. projects Baby Basics Parents as Partners in Preschool Inclusive Care Educational Video

$ 1,270,242 600,000 464,345 93,085 57,462 8,185

338,338 525,163

Total temporarily restricted net assets

$ 2,493,319

$ 1,082,838

2008

2007

81,913 62,814 20,000 34,610 20,000

NOTE 8 – GOVERNMENT GRANTS Sources of government grants are as follows: U. S. Department of Health and Human Services: Child Care Mandatory and Matching Funds Early Learning Opportunity Act U. S. Department of Education: Quality Assessment System Corporation for National and Community Service Other

Total

761,495

887,326 380,898

120,632 9,407 99,620

69,330 31,416 9,158

991,154

$ 1,378,128

NOTE 9 – EMPLOYEE BENEFIT PLAN Substantially all employees are eligible to participate in a §403(b) tax deferred annuity plan. Employees may elect to participate upon employment by contributing up to 15% of their salary. After three months of employment, the employee is eligible to receive an employer matching contribution, which is determined annually as a percentage of the employee’s base salary. CC’s contribution to this plan totaled approximately $29,000 during 2008 and 2007.

– 11 –

NOTE 10 – COMMITMENTS CC leases office space and office equipment under noncancelable operating leases. Future minimum lease payments are payable as follows: 2009 2010 2011 2012

262,879 262,360 260,804 217,337

Total

$ 1,003,380

Lease expense for office space and equipment was approximately $263,000 in 2008 and $334,000 in 2007. In December 2007, CC incurred costs of $166,215 to release office space held under long-term operating leases.

– 12 –

Collaborative For Children Schedule of Expenditures of Federal Awards for the year ended December 31, 2008

FEDERAL GRANTOR Pass-through Grantor Program Title & Period

CFDA Number

Pass-through Contract Number

Award Amount

Revenue

Expenditures

U. S. DEPARTMENT OF EDUCATION Passed through The Center for Houston’s Future: Fund for the Improvement of Education Earmark Grant Award Quality Assessment System #1 09/30/05 – 03/31/08 84.215K* None $198,400

120,632

116,668

U. S. DEPARTMENT OF HEALTH AND HUMAN SERVICES Passed through the Houston-Galveston Area Council: Child Care Mandatory and Matching Funds of the Child Care and Development Fund #2 10/01/07 – 10/31/08 93.596* 301-08 $800,000 656,014 #3 11/01/08 – 09/30/09 93.596* 301-09 $700,000 105,481

656,014 105,481

Total U. S. Department of Health and Human Services

761,495

9,407

CORPORATION FOR NATIONAL AND COMMUNITY SERVICE Passed through the OneStar National Service Commission: Americorps Early Education Assessment Program #4 01/01/07 – 01/31/08 94.006 15.0607.080

$49,282

TOTAL FEDERAL AWARDS

*Denotes a major program

See accompanying note to schedule of expenditures of federal awards.

– 13 –

891,534

887,570

Collaborative For Children Note to Schedule of Expenditures of Federal Awards for the year ended December 31, 2008

SIGNIFICANT ACCOUNTING POLICIES Basis of presentation – The schedule of expenditures of federal awards includes the government grant activity of CC and is presented on the accrual basis of accounting. The information in this schedule is presented in accordance with requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Allowable expenses are determined according to the standards of OMB circular A-122, Cost Principles for NonProfit Organizations and are expensed in the statement of activities in conformity with generally accepted accounting principles.

– 14 –

B lazek & Vetterling CERTIFIED PUBLIC ACCOUNTANTS

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 Collaborative For Children: We have audited the financial statements of Collaborative For Children (CC) for the year ended December 31, 2008, and have issued our report thereon dated August 7, 2009. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting – In planning and performing our audit, we considered CC’s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of CC’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of CC’s internal control over financial reporting. A control deficiency 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 misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the entity’s ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the entity’s financial statements that is more than inconsequential will not be prevented or detected by the entity’s internal control. We consider the deficiency described in the accompanying schedule of findings and questioned costs as finding #08-1 to be a significant deficiency in internal control over financial reporting. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the entity’s internal control. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies and, accordingly, would not necessarily disclose all significant deficiencies that are also considered to be material weaknesses. However, we consider finding #08-1 to be a material weakness. Compliance and Other Matters – As part of obtaining reasonable assurance about whether CC’s financial statements are free of 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. CC’s response to the findings identified in our audit is described in the accompanying schedule of findings and questioned costs. We did not audit CC’s response and, accordingly, we express no opinion on it.

2900 Weslayan, Suite 200

Houston, Texas 77027-5132

– 15 –

(713) 439-5757

Fax (713) 439-5758

This report is intended solely for the information and use of management, the board of directors, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.

August 7, 2009

â&#x20AC;&#x201C; 16 â&#x20AC;&#x201C;

B lazek & Vetterling CERTIFIED PUBLIC ACCOUNTANTS

Report on Compliance with Requirements Applicable to Each Major Program and Internal Control Over Compliance in Accordance with OMB Circular A-133

To the Board of Directors of Collaborative For Children: Compliance – We have audited the compliance of Collaborative For Children (CC) with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that are applicable to each of its major federal programs for the year ended December 31, 2008. CC’s major federal program is identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major federal programs is the responsibility of CC’s management. Our responsibility is to express an opinion on CC’s compliance based on our audit. 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 CC’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. Our audit does not provide a legal determination of CC’s compliance with those requirements. In our opinion, CC complied, in all material respects, with the requirements referred to above that are applicable to each of its major federal programs for the year ended December 31, 2008. Internal Control Over Compliance – The management of CC is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts, and grants applicable to federal programs. In planning and performing our audit, we considered CC’s internal control over compliance with the requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance, 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 CC’s internal control over compliance. A control deficiency in an entity’s internal control over compliance 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 noncompliance with a type of compliance requirement of a federal program on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects an entity’s ability to administer a federal program such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a federal program that is more than inconsequential will not be prevented or detected by an entity’s internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement of a federal program will not be prevented or detected by an entity’s internal control.

2900 Weslayan, Suite 200

Houston, Texas 77027-5132

– 17 –

(713) 439-5757

Fax (713) 439-5758

Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. This report is intended solely for the information and use of management, the board of directors, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.

August 7, 2009

â&#x20AC;&#x201C; 18 â&#x20AC;&#x201C;

Collaborative For Children Schedule of Findings and Questioned Costs for the year ended December 31, 2008

Section I – Summary of Auditor’s Results Financial Statements Type of auditor’s report issued:

unqualified

qualified

Internal control over financial reporting: • Material weakness(es) identified? • Significant deficiencies identified that are not considered to be material weakness(es)? Noncompliance material to the financial statements noted?

adverse

disclaimer

yes

none reported

yes

none reported

adverse

disclaimer

yes

Federal Awards Internal control over major programs: • Material weakness(es) identified? • Significant deficiencies identified that are not considered to be material weakness(es)? Type of auditor’s report issued on compliance for major programs:

unqualified

qualified

Any audit findings disclosed that are required to be reported in accordance with §510(a) of Circular A-133? Identification of major programs: CFDA Number(s)

Name of Federal Program or Cluster

84.215K 93.596

Fund for the Improvement of Education Earmark Grant Award Child Care Mandatory and Matching Funds of the Child Care and Development Fund

Dollar threshold used to distinguish between Type A and Type B programs:

$300,000 yes

Auditee qualified as a low-risk auditee?

Section II – Financial Statement Findings Finding #08-1 Material weakness: Approximately $1.2 million of restricted contributions were recorded directly into net asset accounts. An audit adjustment was required to adjust contributions to comply with generally accepted accounting principles (GAAP). Criteria: The management of CC is responsible for establishing a system of internal control over financial reporting.

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Effect: Failure to adequately establish and maintain a system of internal control over the financial reporting of contributions adversely affects the CC’s ability to provide the information for audit prepared in accordance with generally accepted accounting principles. Recommendation: Implement procedures to report contributions in accordance with generally accepted accounting principles (GAAP). Management’s response and corrective action plan: In connection with our monthly and year end closing process, CC will prepare its financial reports in accordance with both internal and external requirements adequate for audit. During 2008, CC management implemented a new financial reporting format to assist with monitoring multi-year contributions and program restricted contributions for internal reporting. The new process was adopted so that management and board members would be aware of funds available for the current period separate from funds available for future periods as well as clearly identify funds restricted to program expenses from those that were unrestricted. CC management has the necessary skills and knowledge to report its financial statements in the format required for generally accepted accounting principles (GAAP). Given the change in reporting format for internal purposes during 2008, additional steps were necessary to properly present the financial statements under GAAP prior to final submission to the auditors. CC management has traditionally worked with the auditors in preparing the financial statements as a part of the audit, and CC management has always approved the final version once the trial balance was provided to the auditors. CC management provided the proper entries necessary to the auditor to properly reflect the CC financial statement under GAAP. Responsible officer: Chief Financial Officer Estimated completion date: The corrective action plan has been implemented effective May 2009.

Section III – Federal Award Findings and Questioned Costs There were no findings for federal awards required to be reported in accordance with section .510(a) of Circular A133.

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