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Community Support Programs, Inc.Shreveport, Louisiana

Financial Statements

As of and for the Years Ended June 30,2004 and 2003

Under provisions of state law, this report is a publicdocument. Acopy of the report has been submitted tothe entity and other appropriate public officials. Thereport is available for public inspection at the BatonRouge office of the Legislative Auditor and, whereappropriate, at the office of the parish clerk of court.

Release Date

Community Support Programs, Inc.

Table of Contents

Page No.

Independent Auditors' Report 1 - 2

Financial Statements

Statements of Financial Position 3

Statements of Activities 4

Statements of Functional Expenses 5

Statements of Cash Flows 6

Notes to Financial Statements 7-15

Supplemental Information Schedules

Combining Schedule of Activities 16-17

Schedule of Expenditures of Federal Awards 18

Report on Compliance and on Internal Control Over FinancialReporting Based on an Audit of Financial Statements Performed inAccordance With Government Auditing Standards 19 - 20

Report on Compliance With Requirements Applicable to Each MajorProgram and Internal Control over Compliance in Accordance withOMB Circular A 133 21-22

Summary Schedule of Prior Audit Findings 23 - 25

Schedule of Findings and Questioned Costs 26 - 30

Summary Schedule of Audit Findings for the Louisiana Legislative Auditor 31 - 33

COOK & MOREHART

Certified Public Accountants

1215 HAWN AVENUE • SHREVEPORT, LOUISIANA 71107 • P.O. BOX 78240 • SHREVEPORT, LOUISIANA 71137-8240

TRAVIS H. MOREHART, CPA TELEPHONE (318) 222-5415 FAX (318) 222-5441 RAYEBURN G. COOK (RET.)A. EDWARD BALL, CPAVICKIE D. NOBLE, CPA

MEMBERAMERICAN INSTITUTE

C. BRYAN COYLE, CPA CERTIFIED PUBLIC ACCOUNTANTS

SOCIETY OF LOUISIANACERTIFIED PUBLIC ACCOUNTANTS

Independent Auditors' Report

To the Board of DirectorsCommunity Support Programs, Inc.

We have audited the accompanying statements of financial position of Community Support Programs, Inc. as of June 30,2004 and 2003, and the related statements of activities, functional expenses, and cash flows for the years then ended.These financial statements are the responsibility of the Community Support Programs, Inc.'s management. Ourresponsibility 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 andthe standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller Generalof the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free of material misstatement An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well as evaluating the overall financial statementpresentation. 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 ofCommunity Support Programs, Inc. at June 30,2004 and 2003, and the changes in its net assets and its cash flows forthe years then ended, in conformity with accounting principles generally accepted in the United States of America.

In accordance with Government Auditing Standards, we have also issued our report dated February 8, 2005, on ourconsideration of Community Support Programs, Inc.'s internal control over financial reporting and our tests of itscompliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an auditperformed in accordance with Government Auditing Standards and should be read in conjunction with this report in consideringthe results of our audit.

The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as requiredby U. S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-ProfitOrganizations, and is not a required part of the basic financial statements. Such information has been subjected to theauditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all materialrespects, in relation to the basic financial statements taken as a whole.

The accompanying information on pages 16-17 is presented for additional analysis and is not a required part of the basicfinancial statements. The information has been subjected to the auditing procedures applied in the audit of the basicfinancial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statementstaken as a whole.

Cook & MorehartCertified Public AccountantsFebruary 8, 2005

Community Support Programs, Inc.Statements of Financial Position

June 30,2004 and 2003

AssetsCurrent assets:

CashGrants receivableProperty held for sale

Total current assets

Property and equipment:Property and equipmentAccumulated depreciation

Net property and equipment

Total Assets

Liabilities and Net AssetsCurrent liabilities:

Line of creditAccounts payableAccrued expensesDeferred revenueOther liabilityCurrent portion of long-term debtRefundable advance

Total current liabilities

Long-term debt, less current portion

Total liabilities

Net assets:Unrestricted:

OperatingDesignatedFixed assets

Total net assets

Total Liabilities and Net Assets

2004 2003

$

$

$

149,679271,937

421,616

876,604(311,744)564,860

986,476

138,752145,17568,59420,000

10,39125,942408,854

46,497

455,351

(275,509)241,774564,860

531,125

$ 91,905140,675162,500395,080

864,341(260,861)603,480

$ 998,560

$ 151,13447,21866,544

3,0029,54337,073314,514

56,902

371,416

(264,905)288,569603,480

627,144

$ 986.476 $ 998.560

The accompanying notes are an integral part of the financial statements.

3

Community Support Programs, Inc.Statements of Activities

For the Years Ended June 30, 2004 and 2003

Unrestricted

Revenues and Other Support:

Contractual revenue • grantsClient feesDonationsDevelopment feesMiscellaneous revenues

Total revenues and other support

Expenses:

Program servicesGeneral administration

Total expenses

Changes in net assets

Net assets, beginning of year

Net assets, end of year

2004

$ 1,869,913 $27,1693,65015,580191,986

2,108,298

2,101,682102,635

2,204,317

(96,019)

627,144

$ 531,125 $

2003

1,904,10143,037

10033,232206,211

2,186,681

1,895,575137,518

2,033,093

153,588

473,556

627,144


4

Community Support Programs, Inc.Statements of Functional Expenses


Expenses:

Salaries and wagesPayroll taxes and benefitsTravelOperating servicesSuppliesProfessional feesEquipmentInterestDepreciationHousing assistance paymentsCost of home soldCost of homes constructed -

Neighborhood Recovery ProgramMiscellaneous

Total expenses

Expenses:

Salaries and wagesPayroll taxes and benefitsTravelOperating servicesSuppliesProfessional feesEquipmentInterestDepreciationHousing assistance paymentsCost of home soldMiscellaneous

Total expenses

2004

$

$

Program

862,189156,06128,794

292,25044,448

117,4313,783

40,905197,017162,500

125,22471,080

2,101,682

General

$ 49,531 $10,2396,0336,813

410

13,4439,979

6,187

$ 102,635 $

Total

911,720166,30034,827

299,06344,858

117,4313,783

13,44350,884

197,017162,500

125,22477,267

2,204,317

2003

§

Program

894,355168,14322,664

147,67555,547

115,16213,216

38,120176,004162,500102,189

General

S 83,201 $14,5838,3231,274

1957,610

13415,036

7,162

Total

977,556182,72630,987

148,94955,742

122,77213,35015,03645,282

176,004162,500102,189

$ 1.895,575 $ 137.518 $ 2,033,093


5

Community Support Programs, Inc.Statements of Cash Flows


Operating Activities 2004 2003

Change in net assets $ (96,019) $ 153,588Adjustments to reconcile change in net assets to

net cash provided by operating activities:Depreciation 50,884 45,282(Increase) decrease in operating assets:

Grants receivable (131,262) 63,012Property held for sale 162,500 (162,500)

Increase (decrease) in operating liabilities:Accounts payable 97,957 26,703Accrued liabilities 2,050 (2,420)Deferred revenue 20,000Dther liability (3,002) 3,002Refundable advance (11,131) 17,611

Net cash provided by operating activities 91,977 144,278

Investing Activities

Payments for property and equipment (12,2621 (36,071)Net cash used in investing activities (12,262) (36,071)

Financing Activities

Proceeds from line of credit 213,691 492,672Payments on line of credit (226,075) (538,991)Payments of long-term debt (9,557) (8,803)

Wet cash used in financing activities (21,941) (55,122)

Net increase in cash 57,774 53,085

Cash as of beginning of year 91,905 38,820

Cash as of end of year $ 149,679 $ 91,905

Supplemental Disclosure:Operating activities reflect interest paid in 2004 and 2003 of $12,980 and $15,036, respectively.


6

Community Support Programs, Inc.Notes to Financial Statements

June 30, 2004 and 2003

(1) Summary of Significant Accounting Policies

A. Nature of Activities

Community Support Programs, Inc., (CSP) is a nonprofit corporation under the laws of the State of Louisiana.CSP exists to serve the client/family and to enhance each person's opportunity to live successfully in thecommunity. Through the provision of advocacy, direct and indirect services, housing, and coordination withother social service providers, CSP, Inc. offers unique and innovative programs. The following programs areadministered by CSP with their approximate percentages of total revenues:

QUAD (7%) - Provides funding for community services in Legislative District 4. Activities include mini-grantsto neighborhood groups and homeless programs. Funding is provided by state funds from the Governor's Officeof Urban Affairs and Development.

Portals (15%) - Provides coordinated, site or home based Respite Care focused on alleviation of stress orcrisis in the foster or adoptive home that endangers the permanence of the family for the child. Funding isprovided by federal funds passed through the State of Louisiana, Department of Social Services, Office ofCommunity Services.

Mental Health Rehabilitation - Accounted for CSP's efforts to obtain medicaid funding to provide mentalhealth rehabilitation services to needy individuals.

Access (1%) - Provides for development and management of "A Coordinated Community Education and Self-Sufficiency" program to take place in eight rural communities in northwest Louisiana. The essential focus ofACCESS is to support family stability through services to youth, teens, teen parents, families, and otherstakeholders in each community who have an effect on the well being of their neighborhood. Funding isprovided by federal funds passed through the Louisiana Department of Social Services, Office of FamilySupport.

Crossroads - Provides a 24-hour short term (45 days or less) residence to homeless chronically mentally illadults. Funding is provided by state funds from the State of Louisiana, Department of Health and Hospitals,Division of Mental Health.

Project Reach (15%) - Provides a resident facility with a capacity of nine beds for homeless dually diagnosed(mentally ill/chemical abusers) adults. Funding is provided by federal funds from the U.S. Department ofHousing and Urban Development.

Project Life (1%) - Provides supportive services for severe and persistently mentally ill individuals who haveresided in a treatment facility for at least one year or longer. Funding is provided by state funds from the Stateof Louisiana, Department of Health and Hospitals, Division of Mental Health.

(Continued)

7


June 30, 2004 and 2003(Continued)

Case Management (11%) - Provides case management and crisis services to client of the Office of MentalHealth. Funding is provided by state funds from the State of Louisiana, Department of Health and Hospitals,Office of Mental Health.

Transitions (3%) - Provides up to 24 months of supported living services for the homeless mentally ill. Thisprogram is funded with federal funds from the U.S. Department of Housing and Urban Development.

Emergency Shelter Grants (3%) - Account for certain expenditures designed to improve the quality ofemergency shelters for the homeless. This program helps maintain the agency's crisis shelter and transitionalhousing. This program is funded by federal funds from the U.S. Department of Housing and Urban Developmentpassed through the City of Shreveport.

Housing Development (1%) - Provides funding to develop housing for the homeless mentally ill. Funding isprovided by federal funds from tha.U.S. Department of Housing and Urban Development.

Section 8 Housing (11%) - Provides Section 8 housing to eligible disabled clients in need by allowing clientsto locate their own housing units and by supplementing their rent or utilities at the unit. Funding is providedby federal funds from the U.S. Department of Housing and Urban Development.

Hearthstone (8%) - Provides assistance to low-income families as well as the city's faltering neighborhoodswith the building of new energy efficient housing. Housing costs are leveraged to lower the cost for first-timehomebuyers. Funding is provided by federal funds from the U.S. Department of Housing and UrbanDevelopment passed through the City of Shreveport

Neighborhood Recovery Project (6%) - Provides housing to individuals identified by the City of Shreveportwho are residing in condemned housing, have income at or below 50% of the median income, and have nomeans of improving their living conditions. Funding is provided by federal funds passed through the City ofShreveport.

CHDO (1%) - Provides operational support in coordination with agency programs for developing low-incomehousing. Funding is provided by federal funds passed through the City of Shreveport.

Bridges (13%) - Provides a safe, comfortable residence for persons diagnosed with severe mental illness whocannot or will not participate in available housing and social service programs. Funding is provided by federalfunds from the U.S. Department of Housing and Urban Development.

FEMA - Provides funding to supplement agency's other programs in providing food and shelter for needyindividuals. Funding is provided by federal funds from the U.S. Federal Emergency Management Agency.

(Continued)



B. Basis of Accounting

The financial statements of CSP have been prepared on the accrual basis of accounting.

C. Basis of Presentation

Financial statement presentation follows the recommendations of the Financial Accounting Standards Boardin its Statement of Financial Accounting Standards (SFAS) No. 117, Financial Statements of Not-for-ProfitOrganizations. Under SFAS No. 117, the Organization is required to report information regarding its financialposition and activities according to three classes of net assets: unrestricted net assets, temporarily restrictednet assets, and permanently restricted net assets.

D. Income Tax Status

CSP is a tax-exempt organization as described in Section 501(c}(3) of the Internal Revenue Code, and therefore,is not subject to income taxes. However, income from certain activities not directly related to CSP's tax-exempt purpose is subject to taxation as unrelated business income. CSP had no such income for this auditperiod.

E. Use of Estimates

Management uses estimates and assumptions in preparing financial statements. Those estimates andassumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets andliabilities and the reported revenues and expenses. Actual results could differ from those estimates.

F. Cash and Cash Equivalents

CSP's cash, as stated for cash flow purposes, consists of interest bearing and non-interest bearing bankaccounts. CSP has no other assets that are considered cash equivalents.

G. Property and Equipment

All acquisitions of property and equipment in excess of $500 and all expenditures for repairs, maintenance,renewals, and betterments that materially prolong the useful lives of assets are capitalized. Property andequipment are carried at cost or, if donated, at the approximate fair value at the date of donation. Depreciationis computed using the straight-line method over the estimated useful life of each asset. The State of Louisianaand the federal government have a reversionary interest in property purchased with state and federal funds.Its disposition as well as the ownership of any proceeds therefrom is subject to state and federal regulations.

(Continued)

9

Community Support Programs, inc.Notes to Financial Statements


H. Restricted and Unrestricted Revenue

Contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support,depending on the existence and/or nature of any donor restrictions. Contractual grant revenue is reported asunrestricted support due to the restrictions placed on those funds by the funding sources being met in the samereporting period as the revenue is earned.

Support that is restricted by the donor is reported as an increase in unrestricted net assets if the restrictionexpires in the reporting period in which the support is recognized. All other donor-restricted support is reportedas an increase in temporarily or permanently restricted net assets, depending on the nature of the restriction.When a restriction expires (that is, when a stipulated time restriction ends or purpose restriction isaccomplished), temporarily restricted net assets are reclassified to unrestricted net assets and reported in theStatement of Activities as net assets released from restrictions.

I. Compensated Absences

Employees may accrue annual leave up to 15 days. Upon an employee's separation of employment, earnedand/or accrued leave will be paid up to a maximum of 15 days. Employees can also accrue sick leave, butaccumulated sick leave is forfeited upon separation of employment.

J. Expense Allocation

The costs of providing various programs and other activities have been summarized on a functional basis in theStatements of Activities and in the Statements of Functional Expenses. Accordingly, certain costs have beenallocated among the programs and supporting services benefited.

K. Reclassifications

Certain accounts in the prior year financial statements have been reclassified for comparative purposes toconform with the presentation in the current year financial statements.

(2) Concentrations of Credit Risk

Financial instruments that potentially subject CSP to concentrations of credit risk consist principally of temporarycash investments and grants receivable. Concentrations of credit risk with respect to grants receivable are limiteddue to these amounts being due from governmental agencies under contractual terms. CSP maintains cash balancesat several financial institutions. The Federal Deposit insurance Corporation (FDIC) insures accounts up to $100,000at each institution. At June 30, 2004, total cash balances held at financial institutions was $99,521. This entireamount was insured by the FDIC. At June 30, 2003, total cash balances held at financial institutions was$159,052. Of this amount, $134,920 was insured by the FDIC and the remaining $24,132 was unsecured.

(Continued)

10



(3) Grants Receivable

Various funding sources provide reimbursement of allowable costs and payment on units of service in connectionwith providing services under contracts or agreements. This balance represents amounts due from funding sourcesat June 30,2004 and 2003, but received after that date.

(4) Property and Equipment

Property and equipment consisted of the following at June 30,2004:

LandBuildings and improvementsVehiclesFurniture and equipmentAccumulated depreciation

EstimatedDepreciable

Lifen/a $

20-30 years5 years

5-7 years

Net investment in property and equipment $

Depreciation expense for the year

Property and equipment consisted

LandBuildings and improvementsVehiclesFurniture and equipmentAccumulated depreciation

PurchasedWith StateOr Federal

Funds33,774

606,70636,378

111,114( 272,902)

515.070

PurchasedWith

OperatingFunds

$ 22,04627,233

-39,353

( 38,842)

$ 49,790

Total$ 55,820

633,93936,378

150,467(311,744)

$ 564,860

ended June 30, 2004 was $50,884.

of the fallowing at June

EstimatedDepreciable

Lifen/a $

20-30 years5 years

5-7 years

Net investment in property and equipment $

30, 2003:

PurchasedWith StateOr Federal

Funds33,774

606,70636,378

101,351( 229,253)

548,956

PurchasedWith

OperatingFunds

$ 22,04627,233

-36,853

( 31,608)

$ 54,524

Total$ 55,820

633,93936,378

138,204(260,861)

$ 603,480

Depreciation expense for the year ended June 30,2D03 was $45,282.

(Continued)

11



(5) Line of Credit

The agency has a line of credit at a local bank, with an adjustable interest rate of .5% per annum less than the primelending rate of Bank One, Louisiana, National Association. The loan is secured by any and all of CSP's present andfuture accounts receivable, present and future inventory, related equipment, other personal property includingpresent and future general intangibles and agency real estate. The line of credit has a limit of $200,000, with anoutstanding balance at June 30, 2004 and 2003 of $138,752 and $151,134, respectively. Interest expenseincurred on the line of credit for the years ended June 30, 2004 and 2003 was $7,231 and $8,979, respectively.

{6} Refundable Advance

CSP records federal funds received in excess of expenditures as a refundable advance until they are expended forthe purpose of the contract or until the funds are returned to the appropriate funding source.

(7) Accrued Expenses

An analysis of accrued expenses at June 30,2004 and 2003 follows:2004 2003

Accrued salaries and wages $ 36,033 $ 43,767Accrued leave payable 14,106 16,195Accrued payroll taxes 18,455 6.582

$ 68,594 $ 66.544

{8} Contractual Revenue - Grants

During the years ended June 30, 2004 and 2003, CSP received contractual revenue from federal and state grantsin the amount of $1,869,913 and $1,904,101, respectively. The continued existence of these funds is based onannual contract renewals with various funding sources.

(9) Development fees

These balances represent fees received on the apartment complexes for which CSP serves as the Managing GeneralPartner.

(Continued)

12



(10) Leases

The agency leases certain buildings and equipment under operating leases. The rental costs on these items for theyears ended June 30,2004 and 2003 were $43,722 and $40,736, respectively.

CSP has entered into an operating lease for building space. The lease allows for early termination after the twenty-fourth month of the lease term, should CSP's public funding become inadequate to meet the obligations of the lease.However, a termination penalty of $37,102 would be assessed. The maturities noted below include the remainderof the twenty-four month lease term plus the termination penalty.

Commitments under lease agreements having initial remaining terms in excess of one year are as follows:

For the Year EndingJune 30,2005 $ 71,1182006 1,8192007 1,8192008 1.516

Total minimum future rentals $ 76.272

(11) Pension Plan

CSP has a defined contribution pension plan in which employees meeting certain criteria are eligible to participatein the plan. CSP's employer's contribution on behalf of the participant is 4% of the participant's compensation. Theamount contributed by CSP during the years ended June 30, 2004 and 2003 was approximately $35,260 and$33,897, respectively.

(12) Long-term Debt

Long-term debt at June 30, 2004, consisted of the following:

Mortgage payable to a bank, interest rate 8.5%, payable in 119monthly installments of $1,238.34, including interest, with one finalpayment for the balance due February 20,2009, secured by acollateral mortage note $ 56,888

Less current installments ( 10,391)Long-term portion $ 46.497

(Continued)

13



Approximate maturities of long-term debt are summarized as follows:

For the Year Ending ApproximateJune 30, Amount2005 $ 10,3912006 11,3142007 12,3182008 13,4122009 9.453

$ 56.888

For the years ended June 30, 2004 and 2003, the Agency incurred interest expense of $5,303 and $6,057,respectively.

(13) Partnership Investments

CSP has entered into limited partnerships as a General Partner for various Louisiana Partnerships in Commendam.The partnerships are organized and operated for the construction, ownership and management of apartmentcomplexes in Louisiana. The complexes are operated under the HOME Affordable Rental Housing Program throughregulatory agreements with the Louisiana Housing Finance Agency. CSP entered into Management Sub-Contractswith Calhoun Property Management, Inc., in which they will co-manage the Partnerships. CSP's ownershippercentage of each partnership is .05%.

{14} Property Held for Sale

Under CSP's Hearthstone program, homes are built and sold to eligible families under the Federal Home InvestmentPartnerships Program. During the year ended June 30,2003, CSP built four homes and sold two of those homes.The cost of the homes built but not yet sold as of June 30,2003, was $ 162,500. Homes are to be sold within120 days of project completion. The costs of the homes built but not yet sold is reflected in the accompanyingfinancial statements as a current asset - property held for sale, at June 30,2003. These two homes were soldduring the year ended June 30, 2004.

(15) Cost of Homes Constructed - Neighborhood Recovery Program

Under CSP's NRP program, four homes are to be built and donated to eligible families under the City of ShreveportCHDO Program. During the year ended June 30,2004, CSP built and donated two homes to eligible families. Thecost of constructing those homes is shown as Cost of Homes Constructed-Neighborhood Recovery Program inthe accompanying financial statements.

(Continued)

14


June 30,2004 and 2003(Continued)

(16) Designated Net Assets

The designated net assets at June 30,2004 and 2003 consisted of the following:

2004 2003Hearthstone Program:

Property held for sale $ - $ 162,500Proceeds from sale of homes -

to be reinvested in future homes 96,914 99,601Proceeds from sale of homes-

to be used in renovations ofHUD facilities 100,000

Section 8 Housing 44,860 26.468$ 241.774 $ 288,569

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COOK & MOREHART


1215 HAWN AVENUE • SHREVEPORT, LOUISIANA 71107 - P.O. BOX 78240 • SHREVEPORT, LOUISIANA 71137-8240

TRAVIS H. MOREHART, CPA TELEPHONE (318) 222-5415 FAX (318) 222-5441 RAYEBURN G. COOK {RET)A. EDWARD BALL, CPAVICKIE D. NOBLE, CPA


C. BRYAN COYLE, CPA CERTIFIED PUBLIC ACCOUNTANTS


Report on Compliance and on Internal Control Over Financial ReportingBased on anAudit of Financial Statements Performed in Accordance

With Government Auditing Standards

To the Board of DirectorsCommunity Support Programs, Inc.Shreveport, Louisiana

We have audited the financial statements of Community Support Programs, Inc. as of and for the year ended June 30,2004, and have issued our report thereon dated February 8, 2005. We conducted our audit in accordance withauditing standards generally accepted in the United States of America and the standards applicable to financial auditscontained in Government Auditing Standards, issued by the Comptroller General of the United States.

ComplianceAs part of obtaining reasonable assurance about whether Community Support Programs, Inc.'s financial statementsare free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations,contracts and grants, noncompliance with which could have a direct and material effect on the determination offinancial statement amounts. However, providing an opinion on compliance with those provisions was not an objectiveof our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances ofnoncompliance that are required to be reported under Government Auditing Standards.

Internal Control Over Financial ReportingIn planning and performing our audit, we considered Community Support Programs, Inc.'s internal control over financialreporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financialstatements and not to provide assurance on the internal control over financial reporting. However, we noted certainmatters involving the internal control over financial reporting and its operation that we consider to be reportableconditions. Reportable conditions involve matters coming to our attention relating to significant deficiencies in thedesign or operation of the internal control over financial reporting that, in our judgment, could adversely affectCommunity Support Programs, Inc.'s ability to record, process, summarize and report financial data consistent withthe assertions of management in the financial statements. The reportable conditions are described in the accompanyingschedule of findings and questioned costs as items 2004-B1 and 2004-B2.

A material weakness is a condition in which the design or operation of one or more of the internal control componentsdoes not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the

19

financial statements being audited may occur and not be detected within a timely period by employees in the normalcourse of performing their assigned functions. Our consideration of the internal control over financial reporting would notnecessarily disclose all matters in the internal control over financial reporting that might be reportable conditions andaccordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses.

However, of the reportable conditions described above, we consider item 2004-B1 to be a material weakness. We alsonoted other matters involving the internal control over financial reporting which we have reported to management ofCommunity Support Programs, Inc. in a separate management letter dated February 8, 2005.

This report is intended solely for the information and use of management, the Board of Directors and federal awardingagencies and pass-through entities and is not intended to be and should not be used by anyone other than these specifiedparties.

Cook & MorehartCertified Public AccountantsFebruary 8,2005

20

COOK & MOREHART


1215 HAWN AVENUE - SHREVEPORT, LOUISIANA 71107 • P.O. BOX 78240 • SHREVEPORT, LOUISIANA 71137-8240

TRAVIS H MOREHART, CPA TELEPHONE (318) 222-5415 FAX (318) 222-5441 RAYEBURN G COOK (RET.)A. EDWARD BALL, CPAVICKIE D. NOBLE, CPA


C. BRYAN COYLE. CPA CERTIFIED PUBLIC ACCOUNTANTS


Report on Compliance With Requirements Applicable to EachMaior Program and Internal Control Over Compliance In

Accordance With OMB Circular A-133

To the Board of DirectorsCommunity Support Programs, Inc.Shreveport, Louisiana

ComplianceWe have audited the compliance of Community Support Programs, Inc. with the types of compliance requirementsdescribed in the U. S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that areapplicable to each of its major federal programs for the year ended June 30,2004. Community Support Programs,Inc.'s major federal program is identified in the summary of auditor's results section of the accompanying scheduleof findings and questioned costs. Compliance with the requirements of laws, regulations, contracts and grantsapplicable to each of its major federal programs is the responsibility of Community Support Program, Inc.'smanagement. Our responsibility is to express an opinion on Community Support Program, Inc.'s compliance based onour audit.

We conducted our audit 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 ComptrollerGeneral of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-ProfitOrganizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtainreasonable assurance about whether noncompliance with the types of compliance requirements referred to above thatcould have a direct and material effect on a major federal program occurred. An audit includes examining, on a testbasis, evidence about Community Support Program, Inc.'s compliance with those requirements and performing suchother procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonablebasis for our opinion. Our audit does not provide a legal determination on Community Support Program, Inc.'scompliance with those requirements.

As described in item 2004-C3 in the accompanying schedule of findings and questioned cost, Community SupportPrograms, Inc., did not comply with requirements regarding allowable costs / cost principles that are applicable to itsReach, Transitions, Bridges, Crossroads II, and Portals programs. Compliance with such requirements is necessary,in our opinion, for Community Support Programs, Inc., to comply with requirements applicable to those programs.

In our opinion, except for the noncompliance described in the preceding paragraph. Community Support Program, Inc.complied, in all material respects, with the requirements referred to above that are applicable to its major federalprograms for the year ended June 30,2004.

21

Internal Control Over Compliance

The management of Community Support Programs, Inc. is responsible for establishing and maintaining effectiveinternal control over compliance with requirements of laws, regulations, contracts and grants applicable to federalprograms. In planning and performing our audit, we considered Community Support Program, Inc/s internal controlover compliance with requirements that could have a direct and material effect on a major federal program in orderto determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and reporton internal control over compliance in accordance with OMB Circular A-133.

We noted certain matters involving the internal control over compliance and its operation that we consider to bereportable conditions. Reportable conditions involve matters coming to our attention relating to significant deficienciesin the design or operation of the internal control over compliance that, in our judgment could adversely affectCommunity Support Program's ability to administer a major federal program in accordance with the applicablerequirements of laws, regulations, contracts, and grants. Reportable conditions are described in the accompanyingschedule of findings and questioned costs as items 2004-C1 and 2004-C2.

A material weakness is a condition in which the design or operation of one or more of the internal control componentsdoes not reduce to a relatively low level the risk that noncompliance with applicable requirements of laws, regulations,contracts and grants that would be material in relation to a major federal program being audited may occur and notbe detected within a timely period by employees in the normal course of performing their assigned functions. Ourconsideration of the internal control over compliance would not necessarily disclose all matters in the internal controlthat might be reportable conditions, and accordingly, would not necessarily disclose all reportable conditions that arealso considered to be material weaknesses. However, we believe none of the reportable conditions described aboveis a material weakness.

This report is intended solely for the information and use of management, the Board of Directors and federal awardingagencies and pass-through entities and is not intended to be and should not be used by anyone other than these specifiedparties.

Cook & MorehartCertified Public AccountantsFebruary 8,2005

22

Community Support Programs, Inc.Summary Schedule of Prior Audit Findings

June 30, 2004

2003-B1 • REPORTABLE CONDITION -MATERIAL WEAKNESS

Statement of Condition: During our audit, we noted that the agency's operating net asset (deficit) increased from($139,135) at June 30, 2002 to ($264,905} at June 30,2003.

Management Response: Community Support Programs, Inc. suffered a catastrophic set of circumstances in FiscalYear 2002 through 2003 which led to the lack of proper budgeting within the existing programs. CSP had toreplace two chief financial officers due to health reasons. In January 2003, two different CPA firms were hiredto assist in correcting the accounting concerns of CSP. CSP has since hired a different accounting and financialmanagement firm with experience much more closely related to the type of business - programs that areadministered by CSP.

CSP has analyzed forthcoming unencumbered revenue sources which should help to reduce the amount of debtand absorb administrative and operating expenses.

Current Status: See repeat finding in current year audit.

2003-B2 REPORTABLE CONDITION

Statement of Condition and Criteria: During our audit, we noted the following concerning the agency's financialmanagement system:

• The accounting records, including general ledger and bank reconciliations, were not maintained on anaccurate and current basis throughout the year.

• Financial reports submitted to the various funding sources were not easily reconcilable to the underlyingaccounting records.

• In-house budgetary financial statements comparing budgeted to actual results were not utilized throughoutthe year for monitoring purposes.

• Revenue received from the various programs / contracts administered by the agency was not recordedproperly in the general ledger.

Management Response: To correct this deficiency immediately, the Chief Executive Officer with the help of theConsulting Management Company, will review the job description and qualifications for the Director of Accountingand begin recruiting for this position. The Consulting Management Company, in consultation with the ChiefExecutive Officer, will choose from available agency staff, someone to work with the Management Companyimmediately to ensure that the agency's accounting records, including the general ledger and bank reconciliations,are brought up to date immediately and maintained on an accurate and current basis.

(Continued)

23


June 30, 2004(Continued)

To ensure that this deficient practice does not occur again, Management will ensure that monthly a report issubmitted by the outside Consulting Management Company as to the completeness of bank reconciliations,reconciliation of various financial reports submitted to funding sources, and posting of revenues. In addition, eachdivision director is to review their division's budget verses their actual division program costs quarterly, to seewhere any expenses/revenues are over/under budget. Differences are to be discussed with the CFO and reportedto the Chief Executive Officer for consideration.


2003-C1 Supportive Housing Program - Project Reach, Transitions, and Bridges - CFDA # 14.235Home Investment Partnership Program - CFDA #14.239

REPORTABLE CONDITION

Statement of Condition: As discussed in Reportable Condition 2003-B2, we noted the following concerning theagency's financial management system:


• Financial reports submitted to the various funding sources were not easily reconcilable to the underlyingaccounting records.


• Revenue received from the various programs / contracts administered by the agency was not recordedproperly in the general ledger.

Management Response: See response at 2003-B2.


(Continued)

24



2Q03-C2 Supportive Housing Program - Project Reach, Transitions, and Bridges - CFDA # 14.235


Statement of Condition: During our audit, we tested the required match for the Reach, Transitions, and Bridgesprograms. We noted that the match requirement was initially calculated incorrectly by agency staff and theamounts claimed as match were not correct.

Management Response: To correct this deficiency immediately, the Chief Executive Officer with the help of theDivision Directors reviewed the match requirements for these grants and where needed will submit a correctedamendment to the Supported Housing Program, U. S. Department of Housing and Urban Development.

To ensure that this deficient practice does not occur again, Management will ensure that monthly, a report issubmitted to each division director by the accounting department to review their divisions match for the month,including how it was calculated and what items were allowed in the calculation. Each division director will theninitial and date their division match report and submit it with any corrections to the Chief Executive Officer whowill then review each report and submit it to the accounting department for correction and follow-up.Management, in consultation with the consulting Management Company, will establish, in the accountingdepartment, a system for tracking, summarizing, and filing supporting documents for the match requirements inan organized manner.


25

Community Support Programs, Inc.Schedule of Findings and Questioned Costs

June 30, 2004

A. Summary of Audit Results

1. The auditor's report expresses an unqualified opinion on the financial statements of Community SupportPrograms, Inc.

2. Two reportable conditions are reported in the Report on Compliance and on Internal Control Over FinancialReporting Based on an Audit of Financial Statements Performed in Accordance with Government AuditingStandards. One of these conditions, item 2004-B1, is reported as a material weakness.

3. No instances of noncompliance material to the financial statements of Community Support Programs, Inc.were disclosed during the audit.

4. Two reportable conditions relating to the audit of the major federal award programs are reported in theReport on Compliance With Requirements Applicable to Each Major Program and Internal Control OverCompliance in Accordance With OMB Circular A-133. The conditions are not reported as materialweaknesses.

5. The auditor's report on compliance for the major federal award programs for Community Support Programs,Inc. expresses a qualified opinion.

6. Audit findings that are required to be reported in accordance with Section 510(a) of OMB Circular A-133 arereported in this Schedule.

7. The programs tested as major programs were: Project Reach, Transitions, Bridges, and Crossroads II, CFDA#14.235; and Portals, CFDA #93.556.

8. The threshold for distinguishing Type A and B programs was $300,000.

9. Community Support Programs, Inc. did not qualify as a low-risk auditee.

B. Findings - Financial Statements Audit:

2004-B1 - REPORTABLE CONDITION-MATERIAL WEAKNESS

Statement of Condition: During our audit, we noted that the agency's operating net asset (deficit) increased from($264,905) at June 30,2003 to ($275,509) at June 30,2004.

Cause: The operating net asset (deficit) is the result of the agency's operations not being properly budgetedwithin the existing programs being administered by the agency.

(Continued)

26


June 30,2004(Continued)

Recommendation: We recommend that the agency employ better budgeting practices to eliminate deficit spendingin the future and that management and the Board of Directors meet on a periodic basis to monitor the agency'sfinancial position and to formulate financial plans to eliminate the deficits.

Management Response: Community Support Programs, Inc. has placed the accounting oversight function witha reputable accounting firm, Heard, McElroy and Vestal, which is proficient in fund accounting as of June, 2005.Daily bookkeeping functions will take place at the agency with close oversight by the firm's personnel. All policies,procedures and practices are being reviewed to determine if they are appropriate; if not new ones will beimplemented to employ better budgeting practices. Management staff will be continually informed regarding theirbudgets and financial reports will be rendered monthly or more frequently if warranted. The Board of Directorswill be furnished with the financial reports to monitor the agency's financial position and formulate plans toeliminate the deficits. Further, a director of development has been employed to improve fundraising activities andagency community awareness.

2004 B2 - REPORTABLE CONDITION

Statement of Condition and Criteria: During our audit, we noted the following concerning the agency's financialmanagement system:


• Financial reports submitted to the various funding sources were not reconcilable to the underlyingaccounting records.


Cause: The agency did not have proper monitoring procedures in place during the year to ensure that its financialmanagement system was adequate and functioning properly.

Recommendation: We recommend that the agency establish procedures to ensure that it has an appropriatefinancial management system in place and that all financial activity is properly monitored on a regular andconsistent basis. We further recommend the following:

• The agency's accounting records, including general ledger and bank reconciliations, should be brought up todate immediately and should be maintained on an accurate and current basis.

• Financial reports submitted to the various funding sources should be prepared from / reconciled to theunderlying accounting records prior to submission. Such reconciliations should be kept in an orderly andorganized manner to allow for subsequent reviews.

• In-house budgetary financial statements should be utilized in monitoring the agency's financial positionthroughout the year.

(Continued)

27



Management Response: Community Support Programs, Inc. has engaged an accounting firm to provide oversightto the accounting function in the agency. The general ledger and the hank reconciliations will be maintained in anaccurate and current basis. The financial reports will be reconciled with the underlying accounting records. Thegeneral ledger will be utilized to compare actual and budgeted expenses with budget adjustments made asappropriate. All policies, procedures and practices are under going review to ensure an accurate financialmanagement system.

C. Findings and Questioned Costs - Major Federal Award Programs Audit:

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

2004-C1 Supportive Housing Program - Project Reach, Transitions, Bridges, and Crossroads II - CFDA # 14.235Portals Program - CFDA # 93.556


As discussed in Reportable Condition 2004-B2, we noted the following concerning the agency's financialmanagement system:


• Financial reports submitted to the various funding sources were not reconcilable to the underlyingaccounting records.


Management Response: Community Support Programs, Inc. has engaged an accounting firm to provide oversightto the accounting function in the agency. The genera! ledger and the bank reconciliations will be maintained in anaccurate and current basis. The financial reports will be reconciled with the underlying accounting records. Thegenera! ledger will be utilized to compare actual and budgeted expenses with budget adjustments made asappropriate. All policies, procedures and practices are under going review to ensure an accurate financialmanagement system.

(Continued)

28



2004-C2 Supportive Housing Program - Project Reach, Transitions, Bridges, and Crossroads II - CFDA # 14.235


Statement of Condition: During our audit, we tested the required match for the Reach program. We noted thatthe match requirement was initially calculated incorrectly by agency staff and the amounts claimed as matchwere not correct.

Criteria: The contract documents set forth the match requirements for these programs.

Effect: The match documentation had to be revised during our audit fieldwork to support the required match forthese grants.

Recommendation: We recommend a supervisory review by agency personnel who understand the matchrequirements, calculations, and allowable items to be claimed as match. We further recommend that the agencyestablish a system for tracking, summarizing, and filing supporting documents for the match requirements in anorganized manner.

Management Response: This was a calculation error. Once discovered, management correctly computed andidentified appropriate match. The division directors will compute match on a monthly basis with documentationmaintained in a folder. Management as well as the accounting firm will review match on a monthly basis.

2004-C3 Supportive Housing Program - Project Reach, Transitions, Bridges, and Crossroads II - CFDA # 14.235Portals Program - CFDA # 93.556

FINDING

Statement of Condition: During our audit, we tested various agency disbursements for compliance with applicablecost allocation provisions contained in OMB Circular A-133 Compliance Supplement and OMB Circular A-122, CostPrinciples forNon-Profit Organizations.. We noted that the agency was utilizing a cost allocation plan; however,no supporting documentation was available to test the allocation rates used in the plan. In addition, it did notappear that the basis for allocation used by the agency was a reasonable basis for all costs allocated.

Cause: The agency did not have adequate procedures in place to ensure its cost allocation plan was preparedcorrectly and was adequately supported by underlying documentation. There was no supervisory review of thecost allocation plan to ensure the appropriateness of the basis and rates used.

(Continued)

29



Recommendation: We recommend that the agency update its cost allocation plan utilizing reasonable bases forcosts being allocated. We further recommend that the agency retain all supporting documentation used inpreparing the cost allocation plan to allow for subsequent testing of the plan.

Management Response: New cost allocation plans are currently being developed based on sound accountingpractices and in compliance with OMB Circulars A-133 and A-122. They will be reviewed by the agency'smanagement and the accounting firm prior to being implemented.

30

Community Support Programs, Inc.Summary Schedule of Audit Findings for the Louisiana Legislative Auditor

June 30, 2004

Summary Schedule of Prior Audit Findings

Prior audit findings are addressed in the accompanying Summary Schedule of Prior Audit Findings.

Prior year management letter comments are addressed below:

Comment #1: Procurement

See repeat comment in current year management letter.

Comment #2: Fixed Assets

See repeat comment in current year management letter.

Comment #3: Cost Allocations

See finding in current year audit.

(Continued)

31



Corrective Action Plan for Current Year Audit Findings

There are four findings for the current year audit ended June 30,2004, as described in the accompanying Scheduleof Findings and Questioned Costs.

There are eight management letter comments for the year ended June 30, 2004. Management's response to thesecomments is as follows:

Comment 81: Procurement

Community Support Programs, Inc. will implement a centralized purchasing system including the use of purchase orderscompliance with pricing analysis requirements of various funding sources. All applicable provisions of OMB CircularA-110 will be included in the purchasing policies and procedures. A master list of materials and supplies will beavailable to all staff prior to purchase.


Community Support Programs, Inc. will implement procedures to conduct an agency wide fixed asset inventory at leastonce every two years. Specific personnel are assigned to conduct this procedure.

Comment #3: Pay Rate Authorizations

The policies and procedures reflect that no-pay rate can be changed without the specific authorization of the executivedirector. All personnel files will be reviewed and updated annually by the employees' direct supervisor and the agencydirector.

Comment #4: Bank Reconciliations

The policy and procedure manual and the practice reflects that the bank reconciliatons are completed monthly andapproved by the executive director.

Comment #5: Issuance of Checks

The custody of the checks after signature and before mailing is handled by a person independent of all payable,disbursing, cash, receiving and general ledger functions.

(Continued)

32


June 30,2004(Continued)

Comment #6: Late Submission of Audit

Every effort will be made to ensure the audit report will be issued in a timely manner and within 6 months of the endof the fiscal year.

Comment #7: Monitoring of Sub-Grants

The agency will not rendered payment to the mini-grant organizations unless appropriate documentation is providedby the other not-for-profit organizations.

Comment #8: Section 8 Housing

A letter has been issued by HUD removing the Troubled designation for the fiscal year ending 2003. This will beprovided to the auditors.

33

COOK & MOREHART


1215 HAWN AVENUE • SHREVEPORT, LOUISIANA 71107 • P.O. BOX 78240 • SHREVEPORT, LOUISIANA 71137-8240

TRAVIS H. MOREHART, CPA TELEPHONE (318) 222-5415 FAX (318) 222-5441 RAYEBURN G. COOK (RET.)A. EDWARD BALL, CPAVICKIED.NOBLE, CPA

MEMBERAMERICAN INSTITUTE {^3 —-,

C. BRYAN COYLE, CPA CERTIFIED PUBLIC ACCOUNTANTS C/l -•

SOCIETY OF LOUISIANA 5=^ >CERTIFIED PUBLIC ACCOUNTANTS r -• ' \~1

Management Letter

February 8, 2005

Board of DirectorsCommunity Support Programs, Inc.Shreveport, Louisiana

We have audited the financial statements of Community Support Programs, Inc., for the year ended June 30,2004,and have issued our report thereon dated February 8, 2005. In planning and performing our audit of the financialstatements of Community Support Programs, Inc., we considered its internal control over financial reporting in orderto determine our auditing procedures for the purpose of expressing our opinion on the financial statements and notto provide assurance on the internal control over financial reporting.

During our audit the following items were noted involving internal control over financial reporting and other operationalmatters which appear to merit your attention for consideration to improve the internal control over financial reportingor operations of Community Support Programs, Inc.

Comment #1: Procurement

During our audit, we noted that the agency is not utilizing a purchase order system. In addition, we noted that theagency needs to amend its procurement policies to include suspension and debarment provisions and implementprocedures to ensure that all applicable provisions specified in OMB Circular A-110, Uniform AdministrativeRequirements for Grants and Agreements with Institutions of Higher Education, Hospitals, and Other Non-profitOrganizations, are included in agency contracts with contractors.

We recommend that the agency establish a centralized purchasing system, to include the use of purchase orders andcompliance with pricing analysis requirements of the various funding sources. We further recommend that the agencyamend its procurement policy to include all applicable provisions of OMB Circular A-110, Uniform AdministrativeRequirements for Grants and Agreements with Institutions of Higher Education, Hospitals, and Other Non-profitOrganizations.


During our audit, we noted that the agency does not have procedures in place to ensure that an agency-wide fixedasset inventory is conducted at least once every two years.

We recommend that the agency implement procedures to ensure that a complete fixed asset inventory is done at leastonce every two years. We also recommend that specific personnel be assigned the duties of updating the fixed assetrecords on a timely basts.

Comment #3: Pay Rate Authorizations

During our testing of payroll transactions, we noted six pay rate authorizations which were not physically approvedby the Executive Director.

We recommend that procedures be implemented to ensure that all pay rate authorizations are physically approved bythe Executive Director prior to the effective date of such authorizations.

Comment #4: Bank Reconciliations

During our audit, we noted that bank reconciliations were not being reviewed and approved by a responsible individual.

We recommend that procedures be implemented to ensure all bank reconciliations are approved by a responsibleindividual on a monthly basis.

Comment #5: Issuance of Checks

During our audit, we noted that checks were being returned to the accounting department for mailing after necessarysignatures had been obtained.

We recommend that the custody of checks after signature and before mailing be handled by an employee independentof all payable, disbursing, cash, receiving, and general ledger functions

Comment #6: Late Submission of Audit Report

Community Support Programs, Inc. did not submit its audit report for the year ended June 30, 2004, with six monthsof its year end as required by state law.

We recommend that the agency make every effort necessary to complete and submit its audit within six months afteryear end.

Comment #7: Monitoring of Sub-Grants

During our audit, we noted that the agency was providing payment to various other not-for-profit organizations forservices and activities under the agency's QUAD Mini-Grants program. We noted that, while the agency did have somemonitoring procedures in place, documentation was not available to support some of the payments made to thoseorganizations.

We recommend that the agency increase its monitoring procedures over the mini-grants programs to ensure appropriatedocumentation exists prior to payments being made.

Comment #8: Section 8 Housing

During our audit, we noted that the agency had been monitored by the U.S. Department of Housing and UrbanDevelopment (HUD) and was designated Troubled for the fiscal year ending 2003. HUD has yet to schedule a follow-up confirmatory review to officially remove the Troubled designation.

We recommend that the agency continue to work with HUD to ensure its removal from the Troubled designation andto ensure compliance in the future.

We express sincere thanks to the Community Support Programs, Inc. personnel for the cooperation and assistanceprovided us during our audit. We are available to provide you assistance and consultation in the implementation of theabove mentioned items. This letter is furnished solely for the use of management and is not intended to be used forany other purpose.

Cook & MorehartCertified Public Accountants

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