Covenant House NOLA: Financial Statements & Uniform Guidance Report (2018), Exams of Accounting

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Covenant House New Orleans Consolidated Financial Statements and Uniform Guidance Financial Report Together With Independent Auditors’ Reports June 30, 2018 Covenant House New Orleans Consolidated Financial Statements and Uniform Guidance Financial Report Together With Independent Auditors’ Reports June 30, 2018 TABLE OF CONTENTS Page Independent Auditors’ Report CONSOLIDATED FINANCIAL STATEMENTS Consolidated Statement of Financial Position 3 Consolidated Statement of Activities 4 Consolidated Statement of Functional Expenses 5 Consolidated Statement of Cash Flows 6 Notes to Consolidated Financial Statements 7-20 SUPPLEMENTARY INFORMATION Schedule of Compensation, Benefits and Other Payments to Agency Head or Chief Executive Officer 21 UNIFORM GUIDANCE SCHEDULES AND REPORTS Schedule of Expenditures of Federal Awards 22 Notes to Schedule of Expenditures of Federal Awards 23 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 Report on Compliance for Each Major Federal Program and Report on Internal Control Over Compliance Required by the Uniform Guidance Schedule of Findings and Questioned Costs 28-29 Covenant House New Orleans Consolidated Statement of Financial Position June 30, 2018 (with comparative amounts at June 30, 2017) 2018 2017 Cash and cash equivalents 958,815$ 650,342$ Grants receivable 414,928 333,114 Contributions receivable, net 42,653 253,728 Other receivables, net 130,358 346,086 Due from Parent - 34,390 Other assets 85,154 87,383 Investments 2,721,112 2,148,685 Property and equipment, net 2,757,511 2,745,095 Beneficial interest in assets held by others 382,175 352,013 7,492,706$ 6,950,836$ LIABILITIES AND NET ASSETS Liabilities Accounts payable, accrued expenses, and refundable advances 593,878$ 564,483$ Due to Parent 13,172 - Total Liabilities 607,050 564,483 Net Assets Unrestricted Undesignated 721,500 700,730 Investment in property and equipment 2,757,511 2,745,095 Designated for endowment purposes 3,070,597 2,494,967 Total Unrestricted 6,549,608 5,940,792 Temporarily restricted 336,048 445,561 Total Net Assets 6,885,656 6,386,353 7,492,706$ 6,950,836$ ASSETS See notes to consolidated financial statements 3 Covenant House New Orleans Consolidated Statement of Activities Year Ended June 30, 2018 (with summarized totals for year ended June 30, 2017) Unrestricted Temporarily Restricted Total Total 2017 CONTRIBUTIONS, REVENUE AND OTHER SUPPORT Contributions from individuals, foundations and corporations, including legacies and bequests 1,711,343$ 277,664$ 1,989,007$ 1,985,229$ Contributed services and merchandise 760,322 - 760,322 704,177 Government grants and contracts 1,310,762 - 1,310,762 1,203,508 Support from Parent 1,607,000 - 1,607,000 1,627,000 Support from Parent related to National Sleep Out Event 236,781 - 236,781 251,102 Special events revenue, net of direct benefits to donors of $29,375 and $11,378 267,184 - 267,184 208,891 Total Contributions, Revenue and Other Support 5,893,392 277,664 6,171,056 5,979,907 INVESTMENT AND OTHER INCOME Investment Income Interest and dividends 28,677 - 28,677 23,786 Net unrealized gain on investments 136,726 - 136,726 188,045 Net realized gains 9,794 - 9,794 4,245 Job-training program revenue, net of costs of $78,911 and $288,602 82,327 - 82,327 178,681 Other income 556,232 - 556,232 58,789 Total Investment and Other Income 813,756 - 813,756 453,546 Total Contributions, Revenue and Other Support and Investment 6,707,148 277,664 6,984,812 6,433,453 and Other Income Net assets released from restrictions 387,177 (387,177) - - Total Contributions, Revenue and Other Support and Investment and Other Income and Releases from Restrictions 7,094,325 (109,513) 6,984,812 6,433,453 EXPENSES Program services 5,386,503 - 5,386,503 5,058,864 Supporting Services Management and general 683,455 - 683,455 679,296 Fundraising 415,551 - 415,551 262,329 Total Supporting Services 1,099,006 - 1,099,006 941,625 Total Expenses 6,485,509 - 6,485,509 6,000,489 Change in Net Assets 608,816 (109,513) 499,303 432,964 NET ASSETS Beginning of year 5,940,792 445,561 6,386,353 5,953,389 End of year 6,549,608$ 336,048$ 6,885,656$ 6,386,353$ 2018 See notes to consolidated financial statements 4 Covenant House New Orleans Consolidated Statement of Functional Expenses Year Ended June 30, 2018 (with summarized totals for year ended June 30, 2017) Cost of Community Rights of Total Total Direct Shelter and Mother/ Service Public Passage/ Program Management Supporting Benefits Crisis Care Outreach Child Medical Center Education In-School Services and General Fundraising Services to Donors 2018 2017 Salaries and wages 1,267,772$ 104,723$ 3,190$ 63,740$ 140,937$ 17,394$ 537,526$ 2,135,282$ 344,051$ 149,905$ 493,956$ -$ 2,629,238$ 2,477,405$ Payroll taxes 102,692 8,260 255 5,054 10,823 1,234 43,143 171,461 23,545 11,858 35,403 - 206,864 226,105 Employee benefits 256,053 37,654 795 12,982 29,903 3,155 90,439 430,981 82,758 23,563 106,321 - 537,302 629,094 Total Salaries and Related Expenses 1,626,517 150,637 4,240 81,776 181,663 21,783 671,108 2,737,724 450,354 185,326 635,680 - 3,373,404 3,332,604 Accounting fees - - - - - - - - 40,000 - 40,000 - 40,000 40,000 Legal fees 38,863 - - 5,851 5,851 10,450 24,657 85,672 15,675 15,675 31,350 - 117,022 3,400 Medical fees - - - 24,782 4,130 - 12,391 41,303 - - - - 41,303 30,204 Consulting fees 37,753 - - 3,136 147,665 3,720 18,579 210,853 6,170 160,045 166,215 - 377,068 211,481 Supplies 47,654 1,396 426 8,850 5,383 58 20,158 83,925 5,608 1,627 7,235 - 91,160 74,069 Telephone 18,144 1,856 41 1,372 4,591 121 11,790 37,915 10,502 2,237 12,739 - 50,654 44,613 Postage and printing 3,349 - - 176 210 2,022 734 6,491 3,487 12,726 16,213 - 22,704 16,712 Occupancy: Fuel and utilities 91,878 - - 2,581 10,254 - 39,617 144,330 13,461 2,603 16,064 - 160,394 148,624 Repairs and maintenance 48,263 - 3,081 18 5,769 - 25,655 82,786 10,158 1,323 11,481 - 94,267 96,543 Rent and other 1,301 - 49 65 176 - 33,811 35,402 1,762 343 2,105 - 37,507 44,087 Equipment 42,622 320 150 1,835 5,456 529 16,843 67,755 34,412 7,395 41,807 - 109,562 81,828 Transportation 23,452 7,730 82 1,069 5,143 686 16,228 54,390 2,987 3,834 6,821 - 61,211 58,455 Conferences, conventions and meetings 9,307 66 - 769 1,178 501 5,021 16,842 1,189 1,077 2,266 - 19,108 - Specific Assistance to Individuals: Food 158,057 14,756 - 3 3,483 - 34,456 210,755 - - - - 210,755 211,406 Medical - - - - - - - - - - - - - 43,963 Contributed medical - - - 2,195 8,092 - 1,069 11,356 - - - - 11,356 12,280 Clothing, allowance and other 101,501 44,427 60 2,716 198,187 80 219,197 566,168 - - - - 566,168 539,039 Contributed clothing and merchandise 4,608 - - - 84 - 280 4,972 1,560 280 1,840 - 6,812 4,371 Other purchased services 40,680 1,594 1,201 814 3,443 516 14,945 63,193 33,170 3,288 36,458 - 99,651 75,984 Dues, licenses and permits 1,983 - 27 128 220 1 963 3,322 474 1,908 2,382 - 5,704 11,231 Subscriptions and publications 907 37 - 560 105 587 603 2,799 216 496 712 - 3,511 2,079 Staff recruitment 1,120 115 - 37 337 - 748 2,357 532 332 864 - 3,221 2,485 Insurance 34,384 5,538 137 1,101 8,301 108 17,460 67,029 - 1,403 1,403 - 68,432 64,914 Contributed services - - - 145,186 521,972 2,000 72,593 741,751 125 375 500 - 742,251 688,285 Miscellaneous 7,376 830 - 176 880 28 5,940 15,230 3,176 924 4,100 29,375 48,705 26,839 Bank charges and fees 1,797 - - 719 - - 1,078 3,594 8,895 10,142 19,037 - 22,631 15,966 Interest - - - - - - - - 131 - 131 - 131 - Total Functional Expenses Before Depreciation and Amortization 2,341,516 229,302 9,494 285,915 1,122,573 43,190 1,265,924 5,297,914 644,044 413,359 1,057,403 29,375 6,384,692 5,881,462 Depreciation and amortization 54,640 7,881 278 659 4,974 15 20,142 88,589 39,411 2,192 41,603 - 130,192 130,405 Total Functional Expenses 2,396,156 237,183 9,772 286,574 1,127,547 43,205 1,286,066 5,386,503 683,455 415,551 1,099,006 6,514,884 6,011,867 Less cost of direct benefits to donors - - - - - - - - - - - (29,375) (29,375) (11,378) Total Expenses Reported by Function on the Statement of Activities 2,396,156$ 237,183$ 9,772$ 286,574$ 1,127,547$ 43,205$ 1,286,066$ 5,386,503$ 683,455$ 415,551$ 1,099,006$ -$ 6,485,509$ 6,000,489$ Total Program Services Supporting Services See notes to consolidated financial statements 5 Covenant House New Orleans Notes to Consolidated Financial Statements June 30, 2018 8 1. Organization and Nature of Activities (continued) Components of Program and Supporting Services Program Services Shelter and Crisis Care The Shelter and Crisis Care program provides shelter, food, clothing, counseling, cash management, physical and behavioral health, job readiness and placement to runaway homeless and at-risk youth, 22 and under. Outreach The Outreach program is an effort to reach youths who would otherwise not find their way to the Crisis Center. Outreach teams cruise the city streets, searching for these youths and providing them with food, a trained counselor and a safe ride to shelter. Mother/Child The Mother/Child program provides emergency shelter, food and counseling to homeless mothers (22 and under) and their children. Medical Services Medical services include basic medical services, referrals, HIV testing, mental health and counseling. Community Service Center The Community Service Center provides comprehensive services to former Covenant House youth, and other youths in the community who need support to maintain themselves in stable living situations. Within this program, the Organization also provides counseling and intervention services, and work-related instruction and experience through the White Dove Landscaping program. The Organization’s partners in service include Tulane Medical Center’s Adolescent drop-in clinic, and Catholic Charities Archdiocese of New Orleans Head Start Program. Public Education The Public Education program informs and educates the public on how to identify potential “runaway” and “throwaway” adolescents, the public and private resources available to help such adolescents before they leave home and the public support services available to these families to improve their home environment. Rights of Passage/In-School The Rights of Passage program provides transitional living services to youths for up to 24 months, including individual counseling and help with their education and finding jobs and ultimately long term housing. Covenant House New Orleans Notes to Consolidated Financial Statements June 30, 2018 9 1. Organization and Nature of Activities (continued) Components of Program and Supporting Services (continued) Supporting Services Management and General Management and general services include administration, finance and general support activities. Certain administrative costs that relate to specific programs have been allocated to those programs. Fundraising Development services relate to the activities of the development program in raising general and specific contributions. Direct Benefit-to-Donor Costs Direct benefit-to-donor are costs incurred in conjunction with items such as meals and entertainment benefiting attendees of special events. 2. Summary of Significant Accounting Policies Basis of Presentation and Use of Estimates The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Accordingly actual results could differ from those estimates. Principles of Consolidation The accompanying consolidated financial statements include the accounts of Covenant House New Orleans and Covenant Landscaping, LLC. All significant intercompany transactions and balances have been eliminated in consolidation. Net Asset Presentation The Organization reports information regarding its financial position and activities according to three classes of net assets: unrestricted, temporarily restricted and permanently restricted. Donor-restricted support is reported as an increase in temporarily or permanently restricted net assets depending on the nature of the restriction. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the consolidated statement of activities as net assets released from restrictions. It is the Organization’s policy to record temporarily restricted contributions received and expended in the same accounting period in the unrestricted net asset class activity. Permanently restricted net assets represent those resources that have been designated by the donor to be held and invested in perpetuity. There were no permanently restricted net assets as of June 30, 2018 and 2017. Covenant House New Orleans Notes to Consolidated Financial Statements June 30, 2018 10 2. Summary of Significant Accounting Policies (continued) Revenue Recognition Revenue is recognized as services are performed or expenditures are incurred under the Organization’s contracts with its clients and funders. Functional Allocation of Expenses The costs of providing the various programs and other activities have been summarized on a functional basis in the consolidated statement of activities. Accordingly, certain costs have been allocated among the program and supporting services benefited. Cash and Cash Equivalents The Organization considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. Fair Value of Financial Instruments The Organization follows U.S. GAAP guidance on fair value measurements which defines fair value and establishes a fair value hierarchy organized into three levels based upon the input assumptions used in pricing assets. Level 1 inputs have the highest reliability and are related to assets with unadjusted quoted prices in active markets. Level 2 inputs relate to assets with other than quoted prices in active markets which may include quoted prices for similar assets or liabilities or other inputs which can be corroborated by observable market data. Level 3 inputs are unobservable inputs and are used to the extent that observable inputs do not exist. Investment Valuation and Income Recognition Investments are carried at fair value in the consolidated statement of financial position. Interest, dividends, realized and unrealized gains and losses on the sale of investments are included in the consolidated statement of activities. Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis and dividends are recorded on the ex-dividend date. Realized and unrealized gains and losses are included in the determination of change in net assets. Beneficial Interest in Assets Held by Others During fiscal year 2005, the Organization transferred $250,000 of its cash reserves to four foundations to establish endowment funds. The agreement with each foundation designated the Organization as beneficiary and states that the transfer is irrevocable and that transferred assets will not be returned. The Organization values these investments based on quarterly statements received from the respective foundations. In addition, the foundations will make annual distributions of the income earned on the endowment funds, subject to their respective spending policies. Covenant House New Orleans Notes to Consolidated Financial Statements June 30, 2018 13 3. Receivables Grants Receivable All grants receivable as of June 30, 2018 are expected to be collected within one year. Contributions Receivable Contributions receivable primarily consists of promises to give related to the Organization’s Rights of Passage Program and a life insurance policy. Those receivables that are due in more than one year have been discounted to their present value using a discount rate of 6.75%. Contributions receivable as of June 30, are due as follows: 2018 2017 Within one year 20,819$ 233,316$ More than five years 75,000 75,000 95,819 308,316 Discount to present value (53,166) (54,588) 42,653$ 253,728$ Other Receivables Other receivables primarily include the White Dove Landscaping training program sales and / or services, net of allowances for doubtful accounts as of June 30, as follows: 2018 2017 White Dove Landscaping 127,624$ 344,656$ Other 4,799 1,989 132,423 346,645 Allowance for doubtful accounts (2,065) (559) 130,358$ 346,086$ For the years ended June 30, 2018 and 2017, 91% and 96% of other receivables are from one customer. Covenant House New Orleans Notes to Consolidated Financial Statements June 30, 2018 14 4. Fair Value of Investments The following are major categories of investments and beneficial interest in assets held by others measured at fair value as of June 30, categorized by the fair value hierarchy: Level 1 Level 2 Level 3 Total Affiliated pooled investments -$ 2,688,422$ -$ 2,688,422$ Investment cash 32,690 Total Investments 2,721,112 Beneficial Interest in Assets Held by Others Greater New Orleans Foundation - - 256,092 256,092 Jewish New Orleans Foundation - - 44,586 44,586 The Catholic Foundation - - 47,034 47,034 Baton Rouge Area Foundation - - 34,463 34,463 Total Beneficial Interest in Assets Held by Others - - 382,175 382,175 Total Investments and Beneficial Interest in Assets Held by Others -$ 2,688,422$ 382,175$ 3,103,287$ 2018 Level 1 Level 2 Level 3 Total Affiliated pooled investments -$ 2,142,955$ -$ 2,142,955$ Investment cash 5,730 Total Investments 2,148,685 Beneficial Interest in Assets Held by Others Greater New Orleans Foundation - - 237,561 237,561 Jewish New Orleans Foundation - - 41,789 41,789 The Catholic Foundation - - 39,910 39,910 Baton Rouge Area Foundation - - 32,753 32,753 Total Beneficial Interest in Assets Held by Others - - 352,013 352,013 Total Investments and Beneficial Interest in Assets Held by Others -$ 2,142,955$ 352,013$ 2,500,698$ 2017 Covenant House New Orleans Notes to Consolidated Financial Statements June 30, 2018 15 4. Fair Value of Investments (continued) The following table summarizes the changes in financial assets measured on a recurring basis at fair value using Level 3 inputs for the years ended June 30: 2018 2017 Balance, beginning of year 352,013$ 332,878$ Purchases 8,810 4,172 Sales (2,984) (12,460) Realized gain 9,783 4,581 Unrealized gain 14,553 22,842 Balance, end of year 382,175$ 352,013$ 5. Property and Equipment Property and equipment consists of the following as of June 30: 2018 2017 Land 1,543,752$ 1,568,752$ Buildings 992,262 992,262 Building improvements 646,067 555,225 Equipment 1,826,632 1,750,226 5,008,713 4,866,465 Accumulated depreciation and amortization (2,251,202) (2,121,370) 2,757,511$ 2,745,095$ 6. Commitments and Contingencies Leases The Organization has entered into various noncancelable operating leases used in the daily operations of the business. These leases expire at various dates through October 2028. Rental expenses under all operating leases amounted to $18,523 and $16,290 for the years ended June 30, 2018 and 2017. Covenant House New Orleans Notes to Consolidated Financial Statements June 30, 2018 18 10. Board Designated Endowment Funds (continued) During fiscal year 2014, the Organization agreed to pool a significant portion of its board designated reserves with that of Covenant House International and its investment advisor to garner greater returns through economies of scale. During 2010 the State of Louisiana adopted its version of the Uniform Prudent Management of Institutional Funds Act (“UPMIFA”), which governs endowment spending of charitable institutions. The Organization classifies donor-restricted endowment funds as permanently restricted net assets, unless otherwise stipulated by the donor. Board designated or permanently restricted net assets represent (a) the original value of gifts donated to the endowment, (b) the original value of subsequent gifts donated to the endowment, and (c) accumulations to the endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the funds. According to UPMIFA, the ordinary income of an endowed fund may be distributed annually. While UPMIFA does not place limitations on what can be distributed when market conditions are favorable, it does limit what can be distributed if the current value is near or below the Historical Dollar Value – defined as the aggregate of original, subsequent and accumulation contributions. In utilizing the appreciation in value of the endowments for distributions, the Organization follows the provisions of the Louisiana Uniform Prudent Management of Institutional Funds Act (“LUPMIFA”) of 2010. In accordance with LUPMIFA, the Organization considers the following factors in making a determination to appropriate or accumulate donor restricted or board designated endowment funds – the purpose, duration, and preservation of the endowment fund; expected total return on investments; general economic conditions; the possible effects of inflation and deflation; other resources, and the investment policy of the Organization. The Organization has adopted investment management and spending policies for endowment assets that support the objective of providing a sustainable and increasing level of endowment income distribution to its activities while seeking to maintain the purchasing power of the endowment assets. The Organization’s primary investment objectives are to maximize total return within reasonable and prudent levels of risk while maintaining sufficient liquidity to meet disbursement needs and ensure preservation of capital. To satisfy its long-term rate-of-return objectives, the Organization relies on a total return strategy that achieves a return through a combination of current income and capital appreciation, without regard to an emphasis on either, recognizing that changes in market conditions and interest rates will result in varying strategies in an attempt to optimize results. The Organization believes that the decision to pool its investments with the Parent affiliate meets its long-term investment objectives. Covenant House New Orleans Notes to Consolidated Financial Statements June 30, 2018 19 10. Board Designated Endowment Funds (continued) Changes in net assets for the Organization’s board designated endowment funds for the years ended June 30, are as follows: 2018 2017 Balance, beginning of year 2,494,967$ 2,017,154$ Contributions 403,561 274,629 Investment income 28,546 22,876 Net realized and unrealized appreciation 146,508 192,894 Appropriation for expenditures - (9,502) Fees (2,985) (3,084) Balance, end of year 3,070,597$ 2,494,967$ 11. Pension Plans Effective January 1, 2007, the Parent adopted a defined contribution 403(b) savings and retirement plan. Employees are immediately eligible to participate in the plan. Employees who work at least 1,000 hours per year are eligible to receive an employer contribution. The Organization makes annual contributions into the plan on behalf of employees ranging from 1% to 9% of employee compensation and are determined using a formula based on points, which equal the sum of age and years of service. Employer contributions to the plan are 100% vested after employees have completed three years of service. Total expense related to the 403(b) plan was $115,807 and $102,603 for the years ended June 30, 2018 and 2017. The Organization participates in a noncontributory defined benefit pension plan (the “Plan”), which was established on August 1, 1982, sponsored by the Parent covering substantially all of the employees of the Parent and its domestic affiliates. Benefits are generally based on years of service and final average salary. Effective August 1, 2009, the Board of Directors of the Parent approved to freeze the future benefit accruals of all employees of Covenant House participating in the Plan. As set forth in the provisions of the Employee Retirement Income Security Act of 1974 (ERISA), the Parent is responsible for maintaining an annual minimum funding requirement that is reported and paid by the Parent. Although the Parent is responsible for maintaining the total annual minimum funding requirement, the Plan's actuary has determined the respective allocable share to the various affiliates that participate in the Plan. Beginning in the year ended June 30, 2018, the Organization contributed $0 for its allocable share of the Parent’s minimum funding requirement, due to overpayment in prior years, which is included in employee benefits on the statement of functional expense. Covenant House New Orleans Notes to Consolidated Financial Statements June 30, 2018 20 12. Concentration of Credit Risks Financial instruments that potentially subject the Organization to concentrations of credit risk consist primarily of cash, cash equivalents and receivables from contracts. The Organization maintains its cash in bank deposit accounts which generally exceed federally insured limits. The Organization has not experienced any losses in such accounts. * * * * * Covenant House New Orleans Uniform Guidance Schedules and Reports June 30, 2018 Covenant House New Orleans Schedule of Expenditures of Federal Awards Year Ended June 30, 2018 Pass- Federal Through/Entity Passed Federal Grantor/Pass-Through Grantor/ CFDA Identifying Through to Federal Program Title or Cluster Title Number Number Subrecipients Expenditures U.S. Department of Housing and Urban Development Direct Program Continuum of Care Program 14.267 -$ 65,831$ Pass-through City of New Orleans Emergency Solutions Grant Program 14.231 ESG-031D - 59,965 Emergency Solutions Grant Program 14.231 ESG-032D - 78,673 Pass-through UNITY for the Homeless, Inc. Continuum of Care Program 14.267 LA0273L6H031600 - 36,588 Continuum of Care Program 14.267 LA0278L6H031600 - 111,879 Continuum of Care Program 14.267 LA0230L6H031402 - 38,862 Continuum of Care Program 14.267 LA0230L6H031503 - 62,675 Continuum of Care Program 14.267 LA0077L6H031609 - 60,021 Continuum of Care Program 14.267 LA0077L6H031508 - 38,773 Continuum of Care Program 14.267 LA0086L6H031609 - 79,589 Total U.S. Department of Housing and Urban Development - 632,856 U.S. Department of Agriculture Pass-through Louisiana Department of Education School Breakfast Program 10.553 7547 - 30,048 Department of Homeland Security Pass-through United Way Emergency Food and Shelter National Board Program 97.024 34-3658-024 - 19,402 U.S. Department of Justice Direct Program Services for Trafficking Victims 16.320 127,003 277,344 Pass-through Louisiana Commission on Law Enforecement and Administration of Criminal Justice Crime Victim Assistance 16.575 2016-VA-01-3793 - 49,710 Pass-through Jefferson Parish Sheriff Office Services for Trafficking Victims 16.320 2015-VT-BX-KO57 - 31,290 Total U.S. Department of Justice 127,003 358,344 U.S. Department of Health and Human Services Direct Program Transitional Living for Homeless Youth 93.550 - 107,055 Education and Prevention Grants to Reduce Sexual Abuse of Runaway, Homeless and Street Youth 93.557 90YO2230-01 - 125,972 Education and Prevention Grants to Reduce Sexual Abuse of Runaway, Homeless and Street Youth 93.557 90YO2230-02 - 37,085 Total U.S. Department of Health and Human Services - 270,112 Total Expenditures of Federal Awards 127,003$ 1,310,762$ t House New Orleans Schedule of xpenditures of Federal Awards Year Ended June 30, 2018 See independent auditors' report and notes to schedule of expenditures of federal awards 22 Covenant House New Orleans Notes to Schedule of Expenditures of Federal Awards Year Ended June 30, 2018 23 1. Basis of Presentation The Schedule of Expenditures of Federal Awards (the “Schedule”) includes the federal award activity of Covenant House New Orleans (the “Organization”) under programs of the federal government for the year ended June 30, 2018. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of the Organization, it is not intended to and does not represent the financial position, changes in net assets or cash flows of the Organization. 2. Summary of Significant Accounting Policies Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Pass-through entity identifying numbers are presented when available. 3. Indirect Cost Rate The Organization has elected not to use the 10-percent de minimis indirect cost rate allowed under the Uniform Guidance. 4. Nonmonetary Assistance For the year ended June 30, 2018, the Organization received no nonmonetary assistance. PKF O’CONNOR DAVIES, LLP 665 Fifth Avenue, New York, NY 10022 I Tel: 212.867.8000 or 212.286.2600 I Fax: 212.286.4080 I www.pkfod.com PKF O’Connor Davies, LLP is a member firm of the PKF International Limited network of legally independent firms and does not accept any responsibility or liability for the actions or inactions on the part of any other individual member firm or firms. Report on Compliance for Each Major Federal Program and Report on Internal Control Over Compliance Required by the Uniform Guidance Independent Auditors’ Report Board of Directors Covenant House New Orleans Report on Compliance for Each Major Federal Program We have audited Covenant House New Orleans’ (the “Organization”) compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of the Organization’s major federal programs for the year ended June 30, 2018. The Organization’s 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 the Organization’s 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 the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (“Uniform Guidance”). Those standards and the Uniform Guidance 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 the Organization’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the Organization’s compliance. Opinion on Each Major Federal Program In our opinion, the Organization 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, 2018. Board of Directors Covenant House New Orleans Page 2 Report on Internal Control Over Compliance Management of the Organization 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 the Organization’s 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 program and to test and report on internal control over compliance in accordance with the Uniform Guidance, 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 the Organization’s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency 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 the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. November 29, 2018 Covenant House New Orleans Schedule of Findings and Questioned Costs Year Ended June 30, 2018 28 Section I - Summary of Auditors’ Results Financial Statements Type of report the auditor issued on whether the financial statements audited were prepared in accordance with GAAP: Unmodified Internal control over financial reporting:  Material weakness(es) identified? yes X no  Significant deficiency(ies) identified? yes X none reported Noncompliance material to financial statements noted? yes X no Federal Awards Internal control over major federal programs:  Material weakness(es) identified? yes X no  Significant deficiency(ies) identified? yes X none reported Type of auditors’ report issued on compliance for major federal programs: Unmodified Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.516(a)? yes X no Identification of major federal programs: CFDA Number(s) Name of Federal Program or Cluster 14.267 Continuum of Care Program 16.320 Services for Trafficking Victims Dollar threshold used to distinguish between Type A and Type B programs $750,000 Auditee qualified as low-risk auditee? X yes no