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KEDREN COMMUNITY

HEALTH CENTER, INC.

MENTAL HEALTH, SAMHSA, CORPORATE

AND KEDREN COMMUNITY CARE CLINIC

AUDITED FINANCIAL STATEMENTS

JUNE 30, 2016

KEDREN COMMUNITY HEALTH CENTER, INC.

(MENTAL HEALTH, SAMHSA, CORPORATE AND

KEDREN COMMUNITY CARE CLINIC)

TABLE OF CONTENTS

For the Year Ended June 30, 2016

PAGE (S)

AUDITED FINANCIAL STATEMENTS

Independent Auditors’ Report 1-2

COMBINED REPORTS

Combined Statement of Financial Position 3-4

Combined Statement of Activities and Changes in Net Assets 5-6

Combined Statement of Functional Expenses 7

Combined Statement of Cash Flows 8-9

Notes to Combined Financial Statements 10-17

SUPPLEMENTARY INFORMATION

COMBINING STATEMENTS

MENTAL HEALTH, SAMHSA, CORPORATE AND

COMMUNITY CARE CLINIC

Combining Statement of Financial Position 18-19

Combining Statement of Activities and Changes in Net Assets 20-21

Combining Statement of Functional Expenses 22

Schedule of Expenditures of Federal Awards 23

Schedule of Expenditures of State Awards 24

Schedule of Los Angeles County and City Contracts 25

INDIVIDUAL FUNDS/PROGRAMS

MENTAL HEALTH FUND

Statement of Financial Position 26-27

Statement of Activities and Changes in Net Assets 28-29

SUBSTANCE ABUSE AND MENTAL HEALTH SERVICES

ADMINISTRATION (SAMHSA)


Statement of Activities and Changes in Net Assets 32

Table of Contents - Page 2

PAGE (S)

CORPORATE FUND



KEDREN COMMUNITY CARE CLINIC (KCCC)



NOTES TO SUPPLEMENTARY INFORMATION 39

INDEPENDENT AUDITORS’ REPORTS

Report on Internal Control Over Financial Reporting and on Compliance 40-42

and Other Matters Based on an Audit of Financial Statements Performed

in Accordance with Government Auditing Standards

Independent Auditor’s Report on Compliance for Each Major Program and on

Internal Control Over Compliance required by OMB Circular A-133 43-45

SCHEDULE OF FINDINGS AND QUESTIONED COSTS

Summary of Auditors’ Results 46

Federal Award Findings and Questioned Costs 47

Summary Schedule of Prior Year’s Audit Findings 48

AUDITED FINANCIAL

STATEMENT

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors

Kedren Community Health Center, Inc.

(Mental Health, SAMHSA, Corporate and

Kedren Community Care Clinic Programs)

Report on the Financial Statements

We have audited the accompanying combined financial statements of Kedren Community Health

Center, Inc. (Kedren) (a nonprofit organization) which comprise the combined statement of

financial position as of June 30, 2016, and the related combined statements of activities, functional

expenses, and cash flows for the year then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements

in accordance with accounting principles generally accepted in the United States of America; this

includes the design, implementation, and maintenance of internal control relevant to the preparation

and fair presentation of financial statements that are free from material misstatement, whether due

to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We

conducted our audit in accordance with auditing standards generally accepted in the United States

of America and the standards applicable to financial audits contained in Government Auditing

Standards, issued by the Comptroller General of the United States. Those standards require that

we plan and perform the audit to obtain reasonable assurance about whether the financial statements

are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and

disclosures in the financial statements. The procedures selected depend on the auditor’s judgment,

including the assessment of the risks of material misstatement of the financial statements, whether

due to fraud or error. In making those risk assessments, the auditor considers internal control

relevant to the entity’s preparation and fair presentation of the financial statements in order to

design audit procedures that are appropriate in the circumstances, but not for the purpose of

expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express

no such opinion. An audit also includes evaluating the appropriateness of accounting policies used

and the reasonableness of significant accounting estimates made by management, as well as

evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis

for our audit opinion.

Independent Auditors’ Report

Page 2

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the

financial position of Kedren as of June 30, 2016, and the changes in its net assets and its cash flows

for the year then ended in accordance with accounting principles generally accepted in the United

States of America.

Other Matters

Other information

Our audit was conducted for the purpose of forming an opinion on the financial statements as a

whole. The accompanying schedule of expenditures of federal awards, as required by Title 2 U.S.

Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and

Audit Requirements for Federal Awards, is presented for purposes of additional analysis and is not

a required part of the financial statements. Such information is the responsibility of management

and was derived from and relates directly to the underlying accounting and other records used to

prepare the financial statements. The information has been subjected to the auditing procedures

applied in the audit of the financial statements and certain additional procedures, including

comparing and reconciling such information directly to the underlying accounting and other records

used to prepare the financial statements or to the financial statements themselves, and other

additional procedures in accordance with auditing standards generally accepted in the United States

of America. In our opinion, the information is fairly stated, in all material respects, in relations to

the financial statements as a whole.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated

December 5, 2016, on our consideration of Kedren’s internal control over financial reporting and

on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant

agreements and other matters. The purpose of that report is to describe the scope of our testing of

internal control over financial reporting and compliance and the results of that testing, and not to

provide an opinion on internal control over financial reporting or on compliance. That report is an

integral part of an audit performed in accordance with Government Auditing Standards in

considering Kedren’s internal control over financial reporting and compliance.

Los Angeles, California

December 5, 2016


MENTAL HEALTH, SAMHSA, CORPORATE AND KEDREN COMMUNITY CARE CLINIC

COMBINING STATEMENT OF FINANCIAL POSITION

JUNE 30, 2016

CURRENT ASSETS Total

Cash and Cash Equivalents 1,127,784$

Accounts Receivable: LA County 4,895,522

Grants Receivable 143,421

Accounts Receivable 333,976

Other Receivable 749,403

Prepaid Insurance 7,633

Prepaid Expenses 414,972

Inventory 14,096

TOTAL CURRENT ASSETS 7,686,807

PROPERTY AND EQUIPMENT - AT COST

Property and Equipment,

Net of Accumulated Depreciation 6,463,448

TOTAL PROPERTY AND EQUIPMENT 6,463,448

OTHER ASSETS

Intangible Assets 223,418

TOTAL OTHER ASSETS 223,418

TOTAL ASSETS 14,373,673$

ASSETS

See accompanying notes to supplementary information.

-3-



KEDREN COMMUNITY CARE CLINIC


JUNE 30, 2016

CURRENT LIABILITIES Total

Accounts Payable 1,634,901$

Accrued Payroll & Benefits 1,493,983

Accrued Expenses 825,670

Retirement Plan Payable 1,702

Deferred Revenue 4,500

NCB Capital Impact Loan, Current Portion 99,458

Line of Credit - Comerica Bank 290,819

Line of Credit - Wells Fargo Bank 1,903,830

TOTAL CURRENT LIABILITIES 6,254,863

LONG-TERM LIABILITIES

Retirement Plan Payable 1,503,705

Vacation Payable 470,405

NCB Capital Impact Loan 1,455,910

TOTAL LONG-TERM LIABILITIES 3,430,020

TOTAL LIABILITIES 9,684,883

NET ASSETS

Unrestricted 4,688,790

Temporarily Restricted -

TOTAL NET ASSETS 4,688,790

TOTAL LIABILITIES AND NET ASSETS 14,373,673$

LIABILITIES AND NET ASSETS


-4-



COMBINING STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS

FOR THE YEAR ENDED JUNE 30, 2016

REVENUES AND SUPPORT Total

Los Angeles County 32,728,364$

Grant - 330 831,665

Income - OSHPD HSD34083F 128,719

Income - EHRS 208,740

Income - SSI 18,198

SAMHSA 246,545

Miscellaneous Income 87,944

Interest Income 185

Medi-Cal 1,092,110

Medicare 56,913

Fee - Private/Self/Sliding 32,838

Fee - Capitation 203,306

Charles Drew University 85,000

Rental Income 50,334

Fund Raising 119,519

TOTAL REVENUES AND SUPPORT 35,890,380

EXPENSES

PROGRAM SERVICES

Consultants - Medical 2,061,843

Consultants - Other Professional 1,266,570

Bad Debt Expense 63,061

Dietary 28,596

Food 311,243

Employee Benefits 3,518,818

Employee Physical Exam 28,230

Flex Fund Expense 377,390

Insurance 286,857

Lab Fees 54,990

Rental/Leasing - Building, Vehicle and Equipment 590,204

Linen & Bedding 118,102

Outside Services 1,911,271

Pharmacy, In - Patient Medication 148,539

Program Supplies 295,553

Repairs & Maintenance 510,413

Salaries and Wages 19,140,070

Software - EHR 208,740

Supplies 245,817

Training, Travel and Mileage Expense 121,921

TOTAL PROGRAM SERVICES EXPENSES 31,288,228$


-5-




JUNE 30, 2016

MANAGEMENT AND GENERAL Total

Advertising 31,363$

Amortization Expense 74,595

Audit Fees 44,500

Auto Expense 93,390

Bank Charges/Data Processing 193,549

Board Stipends 20,070

Conferences & Meetings 23,942

Consultant - IT 149,056

Consultants - Other Professional 400,959

Depreciation Expense 610,927

Dues & Subscriptions 56,163

Employees Welfare Expense 3,161


Salaries and Benefits 362,251

Health Fair 170

Housekeeping 28,156

Insurance 15,051

Interest Expense 131,613

Lab Fees 45,390

Legal Fees 174,523

Licenses & Permits 20

Loss on Disposal of Assets 11,718

Minor Equipment 3,815

Miscellaneous Expenses 36,913

Office Supplies 122,249

Other Expenses 64,752

Outside Services 8,637

Payroll Fees 3,678

Printing 6,662

Postage & Delivery 10,644


Retirement Expense 496,440


Security and Alarm Services 9,828

Taxes & Licenses 117,663

Telephone 353,077

Training 5,967

Travel 19,329

Utilities 500,488

TOTAL MANAGEMENT AND GENERAL EXPENSES 4,240,614

FUND RAISING

Fund Raising Expenses 139,306

TOTAL EXPENSES 35,668,148

CHANGE IN NET ASSETS BEFORE 222,232

REVERSIONARY EQUIPMENT CAPITALIZATION

REVERSIONARY EQUIPMENT

Capitalized 461,578

Provision for Depreciation (4,616)

Total Reversionary Equipment 456,962

CHANGE IN NET ASSETS 679,194

NET ASSETS, BEGINNING OF YEAR 4,009,596

NET ASSETS, END OF YEAR 4,688,790$


-6-


MENTAL HEALTH, SAMHSA, CORPORATE FUNDS AND KEDREN COMMUNITY CARE CLINIC

COMBINING STATEMENT OF FUNCTIONAL EXPENSES

JUNE 30, 2016

TOTAL

PROGRAM SERVICES

Consultants - Medical 2,061,843$

Consultants - Other Professional 1,266,570


Dietary 28,596

Food 311,243




Insurance 286,857

Lab Fees 54,990

Leasing - Building 45,834

Rental/Leasing - Vehicles/Building 544,370



Pharmacy, In - Patient 148,539





Supplies 245,817

Training, Travel and Mileage Expense 121,921

TOTAL PROGRAM SERVICES EXPENSES 31,288,228

MANAGEMENT AND GENERAL

Advertising 31,363

Amortization Expense 74,595

Audit Fees 44,500

Auto Expense 93,390



Conferences & Meetings 23,942


Consultants - Other Professional 400,959





Salaries and Benefits 362,251

Health Fair 170

Housekeeping 28,156

Insurance 15,051


Lab Fees 45,390

Legal Fees 174,523








Payroll Fees 3,678

Printing 6,662







Telephone 353,077

Training 5,967

Travel 19,329

Utilities 500,488


FUND RAISING


TOTAL EXPENSES 35,668,148$


-7-




COMBINED STATEMENT OF CASH FLOWS


CASH PROVIDED (USED) BY OPERATING ACTIVITIES:

Increase in Net Assets 679,194$

Adjustments to Reconcile Increase in Net Assets to Net

Cash Provided (used) by Operating Activities:

Depreciation and Amortization Expenses 685,522

Disposal of Property - Imperial Court (2,447)

Decrease in Grants Receivable 83,805

Increase in Accounts Receivable (2,303,107)

Decrease in Due From LACOE 14,008

Decrease in Prepaid Expenses and Deposits 106,279

Decrease in Inventory 824

Increase in Accounts Payable 353,960

Increase in Accrued Payroll and Accrued Expenses 16,255

Decrease in Deferred Revenue (4,500)

Increase in Accrued Expenses 464,583

Net Cash Provided (used) by Operating Activities 94,376

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of Property and Equipment (1,369,431)

Net Cash Provided (used) by Investing Activities (1,369,431)

CASH FLOWS FROM FINANCING ACTIVITIES:

Increase in Lines of Credit 1,400,000

Increase in Fund Vacation Liability 56,497

Payment on Note Payable (100,034)

Net Cash Provided (used) by Financing Activities 1,356,463

NET INCREASE IN CASH AND CASH EQUIVALENTS 81,408

CASH AND CASH EQUIVALENTS, Beginning of year 1,046,376

CASH AND CASH EQUIVALENTS, End of year 1,127,784$

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

-8-




COMBINED STATEMENT OF CASH FLOWS


Unrestricted Cash, End of year 1,127,784$

Total Cash and Cash Equivalents, End of year 1,127,784$

SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid during the year for:

Interest 131,613$

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

-9-


NOTES TO COMBINED FINANCIAL STATEMENTS

JUNE 30, 2016

-10-

NOTE 1 - NATURE OF ACTIVITIES

Kedren Community Health Center, Inc., (Kedren) is a private non-

profit public benefit corporation in the State of California. Kedren

was founded in 1965 by the late James L. Jones, M.D. (1926-1971), a

child psychiatrist. Kedren operates an acute psychiatric hospital, and a

community mental health center.

Since the Affordable Care Act signed into law in 2010, Kedren has

started to integrate its mental health care with health care through

prevention, early intervention, continuous health, mental health and

wrap around services for children, youth, adults, and older adults

residing in Los Angeles and neighborhood communities. Kedren has

established Kedren Community Care Clinic (KCCC) in 2013, a

community clinic licensed by the State of California to provide fully

integrated health, mental and behavior health, and substance abuse

care through a comprehensive, integrated, evidenced-based,

clinic/family focused, research and outcomes driven health care

system.

The combined financial statements include the financial statements of

Mental Health, SAMHSA, Corporate and KCCC Programs which are

related through common ownership and management.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Kedren adopted "Accounting for Contributions Received and

Contributions Made" and "Financial Statements of Not-For-Profit

Organizations" as required by the Not-for-Profit Entities topic of the

FASB Accounting Standards Codification. Accounting for

contributions received and contributions made requires that

unconditional promises (pledges) be recorded as receivables and

revenues of the appropriate net asset category. Financial statements of

not-for-profit organizations require that resources be classified for

accounting and reporting purposes into the following net asset

categories according to externally (donor) imposed restrictions:

unrestricted, temporarily restricted and permanently restricted.



JUNE 30, 2016

-11-

CASH AND CASH EQUIVALENTS

Kedren considers highly liquid investments with a maturity of three

months or less to be cash equivalents.

Kedren maintains cash balances at several financial institutions located

in California. Accounts at each institution are insured under the

Federal Deposit Insurance Corporation’s policies and guidelines.

DONATIONS

Property and Equipment – Donations of property and equipment are

recorded as donations at their estimated fair value at the date of

donation. Such donations are reported as increases in unrestricted net

assets unless the donor has restricted the donated asset to a specific

purpose. Assets donated with explicit restrictions regarding their use

and contributions of cash that must be used to acquire property and

equipment are reported as restricted contributions. In the absence of

any stipulations from the donor regarding the period, these donated

assets must be maintained. Kedren reports expirations of donor’s

restrictions when the donated or acquired assets are placed in service

as instructed by the donor. At that time, Kedren reclassifies

temporarily restricted net assets to unrestricted net assets.

PROPERTY AND EQUIPMENT

All acquisitions of property and equipment, and all expenditures for

repairs, maintenance, renewals, and betterments exceeding $5,000 that

materially prolong the useful lives of assets, and which are deemed

probable that the assets will not revert back to the granting agency, are

capitalized.

Kedren records purchased property and equipment at cost, or in the

case of donated assets at estimated fair value at the date of donation.

Kedren maintains custody of reversionary assets that were acquired

with grant funds. Title to these assets vest with the grant recipient

subject to conditions. Kedren uses these assets in the project or

program for which it was acquired as long as needed and does not

encumber those assets without the approval of the grantor. When

Kedren no longer needs reversionary assets with a current fair market

value of $5,000 or more, Kedren may retain these assets for other uses

provided that compensation is made to the original grantor or its

successor.



JUNE 30, 2016

-12-

DEPRECIATION

Buildings are depreciated over estimated useful lives of 17 and 33

years using the straight-line method of depreciation. Property,

equipment, furniture and automobiles are depreciated over estimated

useful lives, which range from three to forty years, depending on the

type of asset using the straight-line method of depreciation.

ESTIMATES

The preparation of financial statements in conformity with accounting

principles generally accepted in the United States of America requires

management to make estimates and assumptions that affect certain

reported amounts and disclosures. Accordingly, actual results could

differ from those estimates.

DUE TO/DUE FROM OTHER FUND OR

INTERFUND PAYABLE/RECEIVABLE

The amounts in the due to/due from other fund or interfund

payable/receivable were created by normal operating interfund

activities, occurring when cash receipts were low in any fund. The

balances represent loans resulting from a temporary shift of the cash

resource from one fund to the other fund.

The interfund activities are eliminated on the combined balance sheet.

COST ALLOCATION

The costs of providing for the various programs have been

summarized on a functional basis in the statement of activities.

Accordingly, certain costs have been allocated among the programs

and supporting services benefited.

INCOME TAXES

Kedren is a non-profit health and human services organization exempt

from federal income taxes under Section 501 (c) (3) of the Internal

Revenue Code. Kedren is similarly exempt from California franchise

tax under Section 23701 (d) of the California Revenue and Taxation

Code. In addition, Kedren has been determined by the Internal

Revenue Service not to be a private foundation within the meaning of

Section 509 (a) of the Code. Accordingly, no provision has been made

for Federal and California income taxes in the accompanying financial

statements.



JUNE 30, 2016

-13-

NOTE 3 - GRANTS RECEIVABLE

The following unconditional grants have been awarded prior to

June 30, 2016 and are all expected to be collected within one year:

KCCC $ 119,172

SAMHSA 24,249

Total $ 143,421

NOTE 4 - PROPERTY AND EQUIPMENT

Property and Equipment consisted of the following:

Mental Health Corporate KCCC

Total

Land Improvements $ - $ 95,552 $ -

$ 95,552

Buildings - 3,538,975 -

3,538,975

Building Improvements - 1,488,416 -

1,488,416

Portable Buildings 1,502,908 - -

1,502,908

Leasehold Improvements 5,092,961 - 36,802

5,129,763

Furniture and Fixtures 1,009,481 233,043 48,457

1,290,981

Equipment 1,144,250 - -

1,144,250

Computer Hardware 957,171 - -

957,171

Computer Software 413,241 - -

413,241

Automobiles 185,430 - -

185,430

10,305,442 5,355,986 85,259

15,746,687

Less accumulated

straight-line depreciation 4,876,706 4,398,976 7,557

9,283,239

Net Property and Equipment $ 5,428,736 $ 957,010 $ 77,702

$ 6,463,448

Depreciation expense for the year ended June 30, 2016 was $610,927.



JUNE 30, 2016

-14-

NOTE 5 - INTANGIBLE ASSETS

The company obtained the developed patent from KIMSCO, Inc. costs

incurred for submitting the applications to the United States Patent and

Trademark Office for this patent has been capitalized. The patent

application was approved in 2005. Patent cost is amortized using the

straight-line method over a 14-year period. Amortization expense for the year ended June 30, 2016 is $74,595.

Amortization expense for the next five years for the intangible assets

owned at June 30, 2016 is as follows:

Year Ending

June 30,

2017 $ 74,595

2018 74,595

2019 74,228

$ 223,418

NOTE 6 - RETIREMENT PLAN

Kedren Mental Health (Kedren) has a 401K plan covering all of its

employees. After six (6) months of employment, employees who work

a minimum of twenty (20) hours per week (scheduled shift) are

eligible to participate in Kedren’s Retirement Plan. Plan entry dates

will be the first day of each calendar month following completion of

six (6) months employment. Kedren will make a Safe Harbor Match

of 100% on the first 1% of compensation deferred and an additional

50% match on the next 5% of compensation deferred.

Pension expense for the year ended June 30, 2016 was $496,440.



JUNE 30, 2016

-15-

NOTE 7 - COMMITMENTS AND CONTINGENCIES

Federal Awards and Grants

Kedren has received Federal Grant for primary care services that are

subject to review and audit by the grantor agency, and the U.S.

Department of Health and Human Services: Health Resources and

Services Administration.

Contingencies

Management has related, after consultation with general counsel, that

the disposition of all pending litigations and claims will not have a

significant effect on the accompanying financial statements.

NOTE 8 - LEASE COMMITMENTS

Mental Health leases numerous service sites and equipment leases with

periods of one year to five years. Total lease expense paid during the

current year was approximately $518,330.

Future minimum rental under non-cancelable operating leases are as

follows:

Year Ended

June 30 . Total

2017 $ 380,341

2018 122,331

2019 30,000

2020 30,000

$ 562,672

NOTE 9 - ACCRUED VACATION AND SICK LEAVE

Mental Health has a vacation and sick leave plan whereby every

employee who has satisfied defined employment requirements related

to length of service and work schedules can participate in the plan.

The vacation policy provides for annual accumulation of up to 160

maximum hours. The sick leave policy provides for annual

accumulation of up to 1,040 maximum hours.



JUNE 30, 2016

-16-

NOTE 10 - NOTES PAYABLE

The Company has the following notes payable:

Promissory note for $1,800,000 term loan from a

Congressionally Chartered District of Columbia Non-Profit

Corporation. The balance at June 30, 2016 is $1,555,368. The

term of the loan is 10 years and principal and interest

amortization are based on a 180-month amortization schedule.

The interest on this note is 3.08% on the outstanding principal

balance. The maturity date is April 1, 2023. If principal or

interest is not received within 5 days of the due date, the

aggregate unpaid amount shall bear interest from the due date

until paid at 6.08%.

Total $ 1,555,368

Less Current Portion 99,458

Long Term Portion $ 1,455,910

The future scheduled maturities of long-term debt are as

follows:

Years ending June 30:

2017 $ 109,467

2018 99,717

2019 96,467

2020 96,467

Thereafter 1,053,792

$ 1,455,910

NOTE 11 - LINES OF CREDIT

The Company has the following lines of credit:

A $2,000,000 secured bank revolving line of credit with a

financial institution. The interest rate is subject to change from

time to time based on changes in an index which is the floating

rate equal to the prime rate set by the lender at its sole

discretion. Under no circumstances will the interest rate be less

than 5.00% per annum.



JUNE 30, 2016

-17-

The interest rate was 5% at June 30, 2016. The line is

collateralized by property located at 4211 S. Avalon Blvd., Los

Angeles, CA. The outstanding balance on the line of credit as

of June 30, 2016 was $1,903,830.

A $500,000 secured bank revolving line of credit with another

financial institution. The interest rate was 3.75% at June 30,

2016. All the Company’s equipment is used as collateral

excluding property or the proceeds belonging to the Federal

Government or in which the Federal Government maintains an

interest. The outstanding balance on this line of credit as of

June 30, 2016 was $290,819.

NOTE 12 - EVALUATION OF SUBSEQUENT EVENTS

Management has evaluated subsequent events through December 5,

2016, the date which the financial statements were available to be

issued.

COMBINED REPORTS

COMBINING STATEMENTS

Mental Health, SAMHSA, Corporate and KCCC

Combining Statement of Financial Position

Combining Statement of Activities and Changes in Net Assets

Combining Statement of Functional Expenses

Schedule of Expenditures of Federal Awards

Schedule of Expenditures of State Awards

Schedule of Los Angeles County and City Contracts




JUNE 30, 2016

CURRENT ASSETS Mental Health SAMHSA Corporate

Kedren

Community Care

Clinic

Total

Cash and Cash Equivalents 123,344$ 4,384$ 605,131$ 394,925$ 1,127,784$

Accounts Receivable: LA County 4,895,522 - - - 4,895,522

Grants Receivable - 24,249 - 119,172 143,421

Accounts Receivable - - - 333,976 333,976

Other Receivable 254,097 - 490,545 4,761 749,403

Due from Primary Care - - 60,311 - 60,311

Due from Kedren CMHC - - 3,155,588 - 3,155,588

Due from SAMHSA - - 8,290 13 8,303

Security Deposit - - - 3,662 3,662

Prepaid Insurance - - - 7,633 7,633

Prepaid Expenses 404,494 164 2,852 7,462 414,972

Inventory 14,096 - - - 14,096

TOTAL CURRENT ASSETS 5,691,553 28,797 4,322,717 871,604 10,914,671

PROPERTY AND EQUIPMENT - AT COST

Property and Equipment,

Net of Accumulated Depreciation 5,428,735 - 957,010 77,703 6,463,448

TOTAL PROPERTY AND EQUIPMENT 5,428,735 - 957,010 77,703 6,463,448

OTHER ASSETS

Intangible Assets - - 223,418 - 223,418

TOTAL OTHER ASSETS - - 223,418 - 223,418

TOTAL ASSETS 11,120,288$ 28,797$ 5,503,145$ 949,307$ 17,601,537$

ASSETS


-18-




JUNE 30, 2016

CURRENT LIABILITIES Mental Health SAMHSA Corporate

Kedren

Community Care

Clinic

Total

Accounts Payable 1,471,963$ 20,168$ 528$ 142,242$ 1,634,901$

Accrued Payroll & Benefits 1,493,983 - - - 1,493,983

Accrued Expenses 824,678 - 992 - 825,670

Retirement Plan Payable - 326 - 1,376 1,702

Due to Corporate - 8,290 - 60,311 68,601

Due to Primary Care - 13 - - 13

Deferred Revenue - - 4,500 - 4,500

Security Deposit - - 3,662 - 3,662

NCB Capital Impact Loan, Current Portion 99,458 - - - 99,458

Line of Credit - Comerica Bank - - 290,819 - 290,819

Line of Credit - Wells Fargo Bank - - 1,903,830 - 1,903,830

TOTAL CURRENT LIABILITIES 3,890,082 28,797 2,204,331 203,929 6,327,139


Retirement Plan Payable 1,503,705 - - - 1,503,705

Vacation Payable 470,405 - - - 470,405

NCB Capital Impact Loan 1,455,910 - - - 1,455,910

Due to Corporate 3,155,588 - - - 3,155,588

TOTAL LONG-TERM LIABILITIES 6,585,608 - - - 6,585,608

TOTAL LIABILITIES 10,475,690 28,797 2,204,331 203,929 12,912,747

NET ASSETS

Unrestricted 644,598 - 3,298,814 745,378 4,688,790

Temporarily Restricted - - - - -

TOTAL NET ASSETS 644,598 - 3,298,814 745,378 4,688,790

TOTAL LIABILITIES AND NET ASSETS 11,120,288$ 28,797$ 5,503,145$ 949,307$ 17,601,537$



-19-





REVENUES AND SUPPORT Mental Health SAMHSA Corporate

Kedren

Community Care

Clinic

Total

Los Angeles County 32,728,364$ -$ -$ -$ 32,728,364$

Grant - 330 - - - 831,665 831,665

Income - OSHPD HSD34083F 128,719 - - - 128,719

Income - EHRS 208,740 - - - 208,740

Income - SSI 18,198 - - - 18,198

SAMHSA - 246,545 - - 246,545

Miscellaneous Income 57,215 - 30,729 - 87,944

Interest Income 144 - 13 28 185

Medi-Cal - - - 1,092,110 1,092,110

Medicare - - - 56,913 56,913

Fee - Private/Self/Sliding - - - 32,838 32,838

Fee - Capitation - - - 203,306 203,306

Charles Drew University - - 85,000 - 85,000

Rental Income - - 50,334 - 50,334

Fund Raising - - 119,519 - 119,519

TOTAL REVENUES AND SUPPORT 33,141,380 246,545 285,595 2,216,860 35,890,380

EXPENSES

PROGRAM SERVICES

Consultants - Medical 2,061,843 - - - 2,061,843

Consultants - Other Professional 935,524 62,849 - 268,197 1,266,570

Bad Debt Expense - - - 63,061 63,061

Dietary 28,596 - - - 28,596

Food 311,243 - - - 311,243

Employee Benefits 3,441,864 - - 76,954 3,518,818

Employee Physical Exam 28,230 - - - 28,230

Flex Fund Expense 377,390 - - - 377,390

Insurance 286,857 - - - 286,857

Lab Fees 54,990 - - - 54,990

Rental/Leasing - Building, Vehicle and Equipment 544,370 - - 45,834 590,204

Linen & Bedding 118,102 - - - 118,102

Outside Services 1,911,271 - - - 1,911,271

Pharmacy, In - Patient 148,539 - - - 148,539

Program Supplies 295,553 - - - 295,553

Repairs & Maintenance 499,781 - - 10,632 510,413

Salaries and Wages 18,474,627 164,117 - 501,326 19,140,070

Software - EHR 208,740 - - - 208,740

Supplies - - - 245,817 245,817

Training, Travel and Mileage Expense 117,404 4,517 - - 121,921

TOTAL PROGRAM SERVICES EXPENSES 29,844,924$ 231,483$ -$ 1,211,821$ 31,288,228$


-20-




JUNE 30, 2016

MANAGEMENT AND GENERAL Mental Health SAMHSA Corporate

Kedren

Community

Care Clinic

Total

Advertising 21,053$ -$ -$ 10,310$ 31,363$

Amortization Expense - - 74,595 - 74,595

Audit Fees 44,500 - - - 44,500

Auto Expense 93,390 - - - 93,390

Bank Charges/Data Processing 173,142 1,892 16,899 1,616 193,549

Board Stipends - - 20,070 - 20,070

Conferences & Meetings - - - 23,942 23,942

Consultant - IT 148,775 - 281 - 149,056

Consultants - Other Professional 245,413 - 60,665 94,881 400,959

Depreciation Expense 496,743 - 108,025 6,159 610,927

Dues & Subscriptions 51,465 - 3,704 994 56,163

Employees Welfare Expense - - 3,161 - 3,161

Employee Physical Exam - - - 1,225 1,225

Salaries and Benefits - - 142,591 219,660 362,251

Health Fair - - - 170 170

Housekeeping - - - 28,156 28,156

Insurance - 117 678 14,256 15,051

Interest Expense 119,722 - 11,891 - 131,613

Lab Fees - - - 45,390 45,390

Miscellaneous Expenses - - - 36,913 36,913

Legal Fees 145,016 - 29,507 - 174,523

Licenses & Permits - - 20 - 20

Loss on Disposal of Assets - - 11,718 - 11,718

Minor Equipment 3,815 - - - 3,815

Office Supplies 116,488 4,944 817 - 122,249

Other Expenses 5,690 - 59,062 - 64,752

Outside Services - - 8,637 - 8,637

Payroll Fees - - - 3,678 3,678

Printing - - - 6,662 6,662

Postage & Delivery 10,644 - - - 10,644

Rental/Leasing - Building, Vehicle and Equipment - - 5,865 - 5,865

Retirement Expense 481,824 - - 14,616 496,440

Repairs & Maintenance - - 2,815 - 2,815

Security and Alarm Services 9,828 - - - 9,828

Taxes & Licenses 86,477 - 1,084 30,102 117,663

Telephone 349,789 - - 3,288 353,077

Training - - 5,967 - 5,967

Travel - 8,109 11,220 - 19,329

Utilities 488,407 - - 12,081 500,488

TOTAL MANAGEMENT AND GENERAL EXPENSES 3,092,181 15,062 579,272 554,099 4,240,614

FUND RAISING

Fund Raising Expenses - - 139,306 - 139,306

TOTAL EXPENSES 32,937,105 246,545 718,578 1,765,920 35,668,148

Change in Net Assets Before

Reversionary Equipment Capitalization 204,275 - (432,983) 450,940 222,232

Reversionary Equipment

Capitalized 461,578 - - - 461,578

Provision for Depreciation (4,616) - - - (4,616)

Total Reversionary Equipment 456,962 - - - 456,962

CHANGE IN NET ASSETS 661,237 - (432,983) 450,940 679,194

NET ASSETS, BEGINNING OF YEAR (16,639) - 3,731,797 294,438 4,009,596

NET ASSETS, END OF YEAR 644,598$ -$ 3,298,814$ 745,378$ 4,688,790$


-21-


MENTAL HEALTH, SAMHSA, CORPORATE FUNDS AND KEDREN COMMUNITY CARE CLINIC

COMBINING STATEMENT OF FUNCTIONAL EXPENSES

JUNE 30, 2016

Mental Health SAMHSA Corporate

Kedren

Community

Care Clinic

TOTAL

PROGRAM SERVICESConsultants - Medical 2,061,843 - - - 2,061,843$ Consultants - Other Professional 935,524 62,849 - 268,197 1,266,570 Bad Debt Expense - - - 63,061 63,061 Dietary 28,596 - - - 28,596 Food 311,243 - - - 311,243 Employee Benefits 3,441,864 - - 76,954 3,518,818 Employee Physical Exam 28,230 - - - 28,230 FSP Members - - - - - Flex Fund Expense 377,390 - - - 377,390 Insurance 286,857 - - - 286,857 Lab Fees 54,990 - - - 54,990 Leasing - Building - - - 45,834 45,834 Linen & Bedding 118,102 - - - 118,102 Outside Services 1,911,271 - - - 1,911,271 Payroll Taxes - - - - - Pharmacy, In - Patient 148,539 - - - 148,539 Program Supplies 295,553 - - - 295,553 Rental / Leasing Equipment - - - - - Retirement Expense - - - - - Rental/Leasing - Vehicles/Building 544,370 - - - 544,370 Repairs & Maintenance 499,781 - - 10,632 510,413 Salaries and Wages 18,474,627 164,117 - 501,326 19,140,070 Software - EHR 208,740 - - - 208,740 Supplies - - - 245,817 245,817 Training, Travel and Mileage Expense 117,404 4,517 - - 121,921 Use Allowance - - - - - Other Costs - - - - -

TOTAL PROGRAM SERVICES EXPENSES 29,844,924 231,483 - 1,211,821 31,288,228

MANAGEMENT AND GENERALAdvertising 21,053$ -$ -$ 10,310$ 31,363 Amortization Expense - - 74,595 - 74,595 Audit Fees 44,500 - - - 44,500 Auto Expense 93,390 - - - 93,390 Bank Charges/Data Processing 173,142 1,892 16,899 1,616 193,549 Board Stipends - - 20,070 - 20,070 Conferences & Meetings - - - 23,942 23,942 Consultant - IT 148,775 - 281 - 149,056 Consultants - Other Professional 245,413 - 60,665 94,881 400,959 Data Processing - - - - - Depreciation Expense 496,743 - 108,025 6,159 610,927 Dietary - Canteen - - - - - Dues & Subscriptions 51,465 - 3,704 994 56,163 Employees Welfare Expense - - 3,161 - 3,161 Employee Physical Exam - - - 1,225 1,225 Salaries and Benefits - - 142,591 219,660 362,251 Health Fair - - - 170 170 Housekeeping - - - 28,156 28,156 Insurance - 117 678 14,256 15,051 Interest Expense 119,722 - 11,891 - 131,613 Lab Fees - - - 45,390 45,390 Legal Fees 145,016 - 29,507 - 174,523 Licenses & Permits - - 20 - 20 Loss on Disposal of Assets - - 11,718 - 11,718 Minor Equipment 3,815 - - - 3,815 Miscellaneous Expenses - - - 36,913 36,913 Office Supplies 116,488 4,944 817 - 122,249 Other Expenses 5,690 - 59,062 - 64,752 Outside Services - - 8,637 - 8,637 Payroll Fees - - - 3,678 3,678 Printing - - - 6,662 6,662 Postage & Delivery 10,644 - - - 10,644 Rental/Leasing - Building, Vehicle and Equipment - - 5,865 - 5,865 Retirement Expense 481,824 - - 14,616 496,440 Repairs & Maintenance - - 2,815 - 2,815 Security and Alarm Services 9,828 - - - 9,828 Taxes & Licenses 86,477 - 1,084 30,102 117,663 Telephone 349,789 - - 3,288 353,077 Training - - 5,967 - 5,967 Travel - 8,109 11,220 - 19,329 Utilities 488,407 - - 12,081 500,488

- - - - -

TOTAL MANAGEMENT AND GENERAL EXPENSES 3,092,181 15,062 579,272 554,099 4,240,614

FUND RAISINGFund Raising Expenses - - 139,306 - 139,306

TOTAL EXPENSES 32,937,105$ 246,545$ 718,578$ 1,765,920$ 35,668,148$


-22-

SUPPLEMENTARY INFORMATION


(MENTAL HEALTH, SAMHSA, CORPORATE AND KEDREN COMMUNITY CARE CLINIC)

SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS


Pass-Through

Federal Entity

Federal Grant/Pass-Through CFDA Identifying Federal

Grantor/Program or Cluster Title Number Number SAMHSA KCCC Expenditures

U.S. Department of Health and Human Services:

Primary Care - Health Centers Program 93.224 776,674$ 776,674$

SAMHSA - Integrating Programs 93.243 246,545$ 246,545

SAMHSA - Block Grant - Federal 93.958 LAC-DMH 40,000$ 40,000

TOTAL EXPENDITURES OF FEDERAL AWARDS 286,545$ 776,674$ 1,063,219$

See accompanying notes to schedule of expenditures of federal awards.

-23-


(MENTAL HEALTH, SAMHSA, CORPORATE

AND KEDREN COMMUNITY CARE CLINIC)

SCHEDULE OF EXPENDITURES OF STATE CONTRACTS


State Awards/Contracts Mental Health

Contracts

Post Release CSCI - AB 109 1,354,540$

MHSA 3,046,785

TOTAL AWARDS 4,401,325$


-24-


(MENTAL HEALTH, SAMHSA, CORPORATE AND

KEDREN COMMUNITY CARE CLINIC)

SCHEDULE OF LOS ANGELES COUNTY AND CITY CONTRACTS


Mental Health

COUNTY CONTRACTS

County General Fund 12,487,073$

MHSA 8,368,954

DCFS (MAT) 36,100

First 5 LA 3,781

Healthy Families, or MAA FFP 7,175,431

DCFS - Family Preservation 215,700

EHRS Technology Grant 208,740

TOTAL COUNTY AND CITY CONTRACTS 28,495,779$


-25-

INDIVIDUAL FUNDS/PROGRAMS

Mental Health Fund

SAMSHA

Corporate Fund

KCCC

MENTAL HEALTH FUND

CURRENT ASSETS

Cash and Cash Equivalents 123,344$

Accounts Receivable: Due from LA County 4,895,522



Inventory 14,096



Property and Equipment at Cost,

Less: Accumulated Depreciation of $4,876,706 5,428,735

TOTAL PROPERTY AND EQUIPMENT 5,428,735


ASSETS


MENTAL HEALTH FUND

STATEMENT OF FINANCIAL POSITION

June 30, 2016


-26-


LIABILITIES

CURRENT LIABILITIES

Accounts Payable 1,471,963$

Accrued Payroll & Benefits 1,493,983

Accrued Expenses 824,678

NCB Capital Impact Loan, Current Portion 99,458



Retirement Plan Payable 1,503,705

Vacation Payable 470,405

NCB Capital Impact Loan 1,455,910

Due To Corporate 3,155,588

TOTAL LONG-TERM LIABILITIES 6,585,608


NET ASSETS

Unrestricted 644,598

TOTAL NET ASSETS 644,598



-27-

REVENUES AND SUPPORT

Los Angeles County - DMH 32,728,364$

Income - OSHPD HSD34083F 128,719

Income - EHRS 208,740

Income - SSI 18,198


Interest Income 144

TOTAL REVENUES AND SUPPORT 33,141,380

EXPENSES

PROGRAM SERVICES


Consultants - Medical 2,061,843

Consultants - Other 935,524


Pharmacy - In - Patient 148,539


Food 311,243

Dietary Supplies 28,596


Insurance 286,857




Travel, Training and Mileage Expense 117,404




Lab Fees 54,990

TOTAL PROGRAM SERVICES EXPENSES 29,844,924$

For the Fiscal Year Ended June 30, 2016


MENTAL HEALTH FUND

STATEMENT OF ACTIVITIES

AND CHANGES IN NET ASSETS


-28-


Consultants - Other 245,413

Utilities 488,407



Telephone 349,789



Audit Fees 44,500


Legal Fees 145,016








Auto Expense 93,390

Advertising 21,053


FUND RAISING

Fund Raising Expenses -

TOTAL FUND RAISING EXPENSES -


Change in Net Assets Before

Reversionary Equipment Capitalization 204,275

Reversionary Equipment

Capitalized 461,578

Provision for Depreciation (4,616)

Total Reversionary Equipment 456,962


NET ASSETS, BEGINNING OF YEAR (16,639)

NET ASSETS, END OF YEAR 644,598


-29-

SAMHSA

ASSETS

CURRENT ASSETS



Prepaid Expenses 164

TOTAL CURRENT ASSETS 28,797



Less Accumulated Depreciation -

TOTAL PROPERTY AND EQUIPMENT -

OTHER ASSETS

Intangible Assets, Net -

TOTAL OTHER ASSETS -

TOTAL ASSETS 28,797$


SAMHSA


June 30, 2016


-30-


LIABILITIES

CURRENT LIABILITIES

Accounts Payable 20,168$

Retirement Plan Payable 326

Due to Primary Care 13

Due to Corporate 8,290

TOTAL CURRENT LIABILITIES 28,797

LONG-TERM LIABILITIES -

TOTAL LONG-TERM LIABILITIES -

TOTAL LIABILITIES 28,797

NET ASSETS

Unrestricted -

TOTAL NET ASSETS -

TOTAL LIABILITIES AND NET ASSETS 28,797$


-31-


Income - SAMHSA 246,545$

TOTAL REVENUES AND SUPPORT 246,545$

EXPENSES

PROGRAM SERVICES

Consultants - Professional Fees 62,849$

Salaries & Benefits 164,117

Training 4,517

TOTAL PROGRAM SERVICES EXPENSES 231,483


Bank Charges/Data Processing 1,892$

Insurance 117


Travel 8,109

TOTAL MANAGEMENT AND GENERAL EXPENSES 15,062

FUND RAISING



TOTAL EXPENSES 246,545

CHANGE IN NET ASSETS -

NET ASSETS, BEGINNING OF YEAR -

NET ASSETS, END OF YEAR -$


SAMHSA





-32-

CORPORATE FUND

ASSETS

CURRENT ASSETS




Due from Kedren CMHC 3,155,588

Due from SAMHSA 8,290

Due from Primary Care 60,311




Less Accumulated Depreciation of $4,398,976 957,010

TOTAL PROPERTY AND EQUIPMENT 957,010

OTHER ASSETS

Intangible Assets, Net 223,418

TOTAL OTHER ASSETS 223,418



CORPORATE FUND


June 30, 2016


-33-


LIABILITIES

CURRENT LIABILITIES

Accounts Payable 528$

Accrued Expenses 992

Deferred Revenue 4,500

Security Deposit 3,662

Line of Credit - Wells Fargo Bank 1,903,830

Line of Credit - Comerica Bank 290,819





NET ASSETS

Unrestricted 3,298,814

TOTAL NET ASSETS 3,298,814



-34-


Charles Drew University 85,000$

Fund Raising 119,519

Rental Income 50,334

Interest Income 13


TOTAL REVENUES AND SUPPORT 285,595$

EXPENSES


Amortization Expense 74,595$

Bank Charges 16,899


Consultants - IT 281

Consultants - Professional Fees 60,665





Insurance 678

Legal Fees 29,507




Office Supplies 817


Rental - Vehicle 5,865




Training 5,967

Travel 11,220


FUND RAISING


TOTAL FUND RAISING EXPENSES 139,306

TOTAL EXPENSES 718,578

CHANGE IN NET ASSETS (432,983)

NET ASSETS, BEGINNING OF YEAR 3,731,797

NET ASSETS, END OF YEAR 3,298,814$


CORPORATE FUND





-35-

ASSETS

CURRENT ASSETS


Accounts Receivable 333,976


Others Receivable 4,761

Security Deposit 3,662

Prepaid Insurance 7,633


Due from SAMHSA 13

TOTAL CURRENT ASSETS 871,604



Less Accumulated Depreciation of $7,557 77,703

TOTAL PROPERTY AND EQUIPMENT 77,703

OTHER ASSETS

Intangible Assets, Net -

TOTAL OTHER ASSETS -

TOTAL ASSETS 949,307$




June 30, 2016


-36-


LIABILITIES

CURRENT LIABILITIES

Accounts Payable 142,242$

Retirement Payable 1,376

Due to Corporate 60,311

TOTAL CURRENT LIABILITIES 203,929



TOTAL LIABILITIES 203,929

NET ASSETS

Unrestricted 745,378

TOTAL NET ASSETS 745,378

TOTAL LIABILITIES AND NET ASSETS 949,307$


-37-


Grant - 330 831,665$

Medi-Cal 1,092,110

Medicare 56,913

Fee - Self/Private/Sliding/IPA 32,838

Fee - Capitation 203,306

Interest Income 28

TOTAL REVENUES AND SUPPORT 2,216,860$

EXPENSES

PROGRAM SERVICES

Salaries & Wages 501,326$


Supplies 245,817

Employee Benefits 76,954


Leasing - Building 45,834


TOTAL PROGRAM SERVICES EXPENSES 1,211,821


Advertising 10,310$

Bank Charges 1,616


Conference & Meeting 23,942


Dues & Subscriptions 994


Health Fair 170

Housekeeping 28,156

Insurance 14,256

Lab Fees 45,390


Payroll Fees 3,678

Printing 6,662

Retirement 14,616



Telephone 3,288

Utilities - Water/Power/Gas 12,081


FUND RAISING





NET ASSETS, BEGINNING OF YEAR 294,438

NET ASSETS, END OF YEAR 745,378$







-38-


NOTES TO SUPPLEMENTARY SCHEDULES


-39-

NOTE #1 – PURPOSE OF SCHEDULES

Combining Statements of Financial Position and Combining Statements of Activities

The combining statements of financial position, and the combining statements of activities

present the individual program’s financial position and results of operation for each significant

agency program.

Schedule of Expenditures of Federal and Non-Federal Awards

The accompanying Schedule of Expenditures of Federal Awards, the Schedule of Expenditures

of State Awards and the Schedule of Los Angeles County Contracts include the federal and

nonfederal grant activity of Kedren and is presented on the accrual basis of accounting. The

information in these schedules 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. Therefore, some amounts presented in this

schedule may differ from amounts presented in, or used in, the preparation of the financial

statements.

The Primary Care Program

KCCC implemented the cost accounting requirements and the procedures used by KCCC

meets the financial and program reporting requirements.

KCCC uses the e-clinicalworks software to generate performance reports both for

financial and program purposes.

Billing and collection is performed by a third party and is monitored by KCCC.

- 40 -

INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL

OVER FINANCIAL REPORTING AND ON COMPLIANCE

AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL

STATEMENTS PERFORMED IN ACCORDANCE WITH

GOVERNMENT AUDITING STANDARDS



We have audited, in accordance with the auditing standards generally accepted in

the United States of America and the standards applicable to financial audits

contained in Government Auditing Standards issued by the Comptroller General of

the United States, the financial statements of Kedren Community Health Center,

Inc. (Kedren) (a nonprofit organization) which comprise the statement of financial

position as of June 30, 2016, and the related statements of activities, and cash

flows for the year then ended, and the related notes to the financial statements, and

have issued our report thereon dated December 5, 2016.

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered

Kedren’s internal control over financial reporting (internal control) to determine

the audit procedures that are appropriate in the circumstances for the purpose of

expressing our opinion on the financial statements, but not for the purpose of

expressing an opinion on the effectiveness of Kedren’s internal control.

Accordingly, we do not express an opinion on the effectiveness of the

Organization’s internal control.

- 41 -

Board of Directors


Page 2

A deficiency in internal control exists when the design or operation of a control

does not allow management or employees, in the normal course of performing

their assigned functions, to prevent, or detect and correct misstatements on a

timely basis. A material weakness is a deficiency, or a combination of

deficiencies, in internal control such that there is a reasonable possibility that a

material misstatement of the entity’s financial statements will not be prevented, or

detected and corrected on a timely basis. A significant deficiency is a deficiency,

or a combination of deficiencies, in internal control that is less severe than a

material weakness, yet important enough to merit attention by those charged with

governance.

Our consideration of internal control over financial reporting was for the limited

purpose described in the first paragraph of this section and was not designed to

identify all deficiencies in internal control that might be material weaknesses or

significant deficiencies. Given these limitations, during our audit we did not

identify any deficiencies in internal control that we consider to be material

weaknesses. However, material weaknesses may exist that have not been

identified.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether Kedren's financial

statements are free of material misstatement, we performed tests of its compliance

with certain provisions of laws, regulations, contracts, and grant agreements,

noncompliance with which could have a direct and material effect on the

determination of financial statement amounts. However, providing an opinion on

compliance with those provisions was not an objective of our audit, and

accordingly, we do not express such an opinion. The results of our tests disclosed

no instances of noncompliance or other matters that are required to be reported

under Government Auditing Standards.

- 42 -

Board of Directors


Page 3

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal

control and compliance and the results of that testing, and not to provide an

opinion on the effectiveness of the organization’s internal control or on

compliance. This report is an integral part of an audit performed in accordance

with Government Auditing Standards in considering the organization’s internal

control and compliance. Accordingly, this communication is not suitable for any

other purpose.


December 5, 2016

INDEPENDENT AUDITORS’ REPORTS

Internal Control on Compliance and Other

Matters

Compliance on Each Major Program

- 43 -

INDEPENDENT AUDITORS’ REPORT ON COMPLIANCE FOR

EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER

COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE



Report on Compliance for Each Major Federal Program

We have audited Kedren Community Health Center, Inc.’s (Kedren)

compliance with the types of compliance requirements described in the OMB

Compliance Supplement that could have a direct and material effect on each of

Kedren’s major federal programs for the year ended June 30, 2016. Kedren's

major federal programs are identified in the summary of auditor’s results

section of the accompanying schedule of findings and questioned costs.

Management’s Responsibility

Management is responsible for compliance with federal statutes, regulations,

and the terms and conditions of its federal awards applicable to its federal

programs.

Auditor’s Responsibility

Our responsibility is to express an opinion on compliance for each of Kedren’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 Kedren's compliance with those

requirements and performing such other procedures as we considered

necessary in the circumstances.

- 43 -

Board of Directors


Page 2

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 Kedren's compliance.

Opinion on Each Major Federal Program

In our opinion, Kedren 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, 2016.

Report on Internal Control Over Compliance

Management of Kedren 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 Kedren'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 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 Kedren’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

- 44 -

Board of Directors


Page 3

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.


December 5, 2016

SCHEDULE OF FINDINGS

AND QUESTIONED COTS

- 46 -




SUMMARY OF AUDITORS’ RESULTS

FINANCIAL STATEMENTS

Type of auditors’ report issued: Unqualified

Internal control over financial reporting:

Material weaknesses identified? No

Reporting conditions identified not considered to be material weaknesses? Yes

Noncompliance material to financial statements noted: No

FEDERAL AWARDS

Internal control over major programs:

Material weaknesses identified? No

Reporting condition identified not considered to be material weaknesses? Yes

Type of auditors’ report issued on compliance for major programs: Unqualified

Any audit findings disclosed that are required to be reported

in accordance with Uniform Guidance. None

Identified as major programs:

CFDA Number(s) Name of Federal Program or Cluster

93.224 Primary Care – Health Center Program

Dollar threshold used to distinguish between Type A and Type B programs: $ 750,000

Auditee qualified as low-risk auditee? No

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FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

None reported

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SUMMARY SCHEDULE OF PRIOR YEAR’S AUDIT FINDINGS

None reported

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