providence house shreveport, louisiana financial statements as...

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05MAR 31 AH!!: 15

Providence HouseShreveport, Louisiana

Financial Statements

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

U nder provisions of state law, this report is a publicdocument. Aeopy 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 *T,

Providence House

Table of Contents

Page No.

Independent Auditors' Report 1

Financial Statements

Statements of Financial Position 2

Statements of Activities:For the Year Ended September 30, 2004 3For the Year Ended September 30,2003 4

Statements of Functional Expenses:For the Year Ended September 30, 2004 5For the Year Ended September 30, 2003 6

Statements of Cash Flows 7

Notes to Financial Statements 8-18

Schedule of Expenditures of Federal Awards 19-20

Report on Compliance and on Internal Control Over Financial 21 - 22Reporting Based on an Audit of Financial StatementsPerformed in Accordance With Government Auditing Standards

Report on Compliance with Requirements Applicable to Each Major Program 23 - 24And Internal Control over Compliance in Accordance with OMBCircular A-133

Summary Schedule of Prior Audit Findings 25

Schedule of Findings and Questioned Costs 25

Summary Schedule of Audit Findings for the Louisiana Legislative Auditor 26

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 DirectorsProvidence House

We have audited the accompanying statements of financial position of Providence House (a nonprofit organization} as of September30,2004 and 2003, and the related statements of activities, functional expenses and cash flows for the years then ended. Thesefinancial statements are the responsibility of Providence House's management. Our responsibility is to express an opinion on thesefinancial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standardsapplicable 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 statementsare free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements. An audit also includes assessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basisfor our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ProvidenceHouse as of September 30, 2004 and 2003, and the changes in its net assets and its cash flows for the years then ended, inconformity with accounting principles generally accepted in the United States of America.

In accordance with Government Auditing Standards, we have also issued a report dated March 4, 2005, on our consideration ofProvidence House's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations,contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards andshould be read in conjunction with this report in considering the results of our audit.

Our audit was performed for the purpose of forming an opinion on the basic financial statements of Providence House taken asa whole. 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-Profit Organizations,and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures appliedin the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basicfinancial statements taken as a whole.

Cook and MorehartCertified Public AccountantsMarch 4, 2005

Providence HouseStatements of Financial PositionSeptember 30, 2004 and 2003

AssetsCurrent assets:

Cash and cash equivalentsInvestmentsGrant receivablesOther receivablesPromises to give

Total current assets

Other assets:Long-term promises to give - operationsCash restricted for building renovationsPromises to give - building renovationsCash restricted - resettlement funds

Total other assets

Property and equipmentAccumulated depreciation

Net property and equipment

Total Assets

Liabilities and Net AssetsCurrent liabilities:

Accounts payableAccrued expenses

Total current liabilities

Escrowed resettlement fundsTotal liabilities

Net assets:Unrestricted:

OperatingFixed assetsBoard designated

Total unrestricted

Temporarily restricted

Total net assets

Total Liabilities and Net Assets

2004 2003

$ 124,035 $522,82277,3384,358

140,998869,551

124,354

261,5547,757

393,665

2,912,105{470,308}2,441,797

$ 3,705,013 $

$ 197,428 $49,352246,780

7,757254,537

129,5922,270,900501,774

2,902,266

548,210

3,450,476

45,864475,355109,568

1,10032,906664,793

16,104615,745644,5523,346

1,279,747

1,461,030(414,527)1,046,503

2,991,043

16,05443,78959,843

3,34663,189

82,8401,046,503462,845

1,592,188

1,335,666

2,927,854

$ 3,705,013 $ 2,991,043

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

2

Providence HouseStatement of Activities

For the Year Ended September 30, 2004

Revenues and Other Support:

Contractual revenue - grantsUnited Way allocationDonations and contributionsOther incomeInterest and investment incomeNet assets released from restrictions:

Restrictions satisfied by expendingfunds for the purpose intended

Total revenues and other support

Functional Expenses:

Program servicesGeneral administrationFund raising

Total expenses

Change in net assets

Net assets as of beginning of year

Net assets as of end of year

Unrestricted

999,37175,051

1,419,79219,87060,782

787,456

3,362,322

TemporarilyRestricted Total

(787,456)

(787,456)

999,37175,051

1,419,79219,87060,782

2,574,866

1,685,807216,202150,235

2,052,244

1,310,078

1,592,188

$ 2,902,266

1,685,807216,202150,235

2,052,244

(787,456} 522,622

1,335,666 2,927,854

$ 548,210 $ 3,450,476


Providence HouseStatement of Activities


Revenues and Other Support:

Contractual revenue - grantsUnited Way allocationDonations and contributionsOther incomeInterest and investment incomeNet assets released from restrictions:

Restrictions satisfied by expendingfunds for the purpose intended

Total revenues and other support

Functional Expenses:

Program servicesGeneral administrationFund raising

Total expenses

Change in net assets

Net assets as of beginning of year

Net assets as of end of year

Unrestricted

1,364,40785,559550,69227,96367,901

43,153

2,139,675

TemporarilyRestricted Total

1,027,325

(43,153)

984,172

1,364,40785,559

1,578,01727,96367,901

3,123,847

1,759,514229,114122,382

2,111,010

28,665

1,563,523

$ 1,592,188

1,759,514229,114122,382

2,111,010

984,172 1,012,837

351,494 1,915,017

$ 1,335,666 $ 2,927,854


Providence HouseStatement of Functional Expenses

For the Year Ended September 30,2004

Expenses:

Salaries and wagesEmployee benefitsPayroll taxes and workers compensationOffice expenseLegal and accountingTelephoneUtilitiesInsuranceRepairs and maintenanceVehiclesResident transportation programResident expensesChildrens1 summer programResident graduation programResident counseling programOffsite supportive housingTravel and trainingOtherDepreciation

Total expenses

ProgramServices

$ 796,937125,88081,98867,829

17,42755,78256,91217,4159,449

12,34476,584

7,08911,6524,350

245,75011,84736,66049,912

GeneralAdministration

$ 98,49615,7599,850

10,42133,347

2,1782,3245,096

434244

13,89518,727

5,431

FundRaising

$ 92,42114,7879,242

30,414

2,178

196558439

Total

$ 987,854156,426101,080108,66433,34721,78358,10662,00817,8499,693

12,34476,584

7,08911,6524,350

245,75025,93855,94555,782

$ 1,685,807 $ 216,202 $ 150,235 $ 2,052,244


5

Providence HouseStatement of Functional Expenses


Expenses:

Salaries and wagesEmployee benefitsPayroll taxes and workers compensationOffice expenseLegal and accountingTelephoneUtilitiesInsuranceRepairs and maintenanceVehiclesResident transportation programResident expensesChildrens' summer programResident graduation programResident counseling programOffsite supportive housingTravel and trainingOtherDepreciation

Total expenses

ProgramServices

GeneralAdministration

FundRaising Total

$ 840,349 $132,83672,57741,676

13,26379,46756,90057,490

6,825154,87664,40621,21513,844

7,005108,775

15,13318,15754,720

111,044 $17,5569,594

31,67214,221

1,6583,2192,9951,647

185

5,04623,0967,181

75,57211,9486,529

25,550

1,658

855270

$ 1,026,965162,34088,70098,89814,22116,57982,68659,89559,137

7,010154,87664,40621,21513,8447,005

108,77520,17942,10862,171

$ 1,759,514 $ 229,114 $ 122,382 $ 2,111,010


6

Providence HouseStatements of Cash Flows

For the Years Ended September 30, 2004 and 2003

2004 2003Operating Activities

Change in net assetsAdjustments to reconcile change in net assets to

net cash provided by (used in) operating activities:DepreciationContributions restricted for building renovationsNet realized and unrealized gains and losses on investments(Increase) decrease in operating assets:

Grant receivablesOther receivablesPromises to give

Increase (decrease) in operating liabilities:Accounts payableAccrued expenses

Net cash provided by (used in) operating activities

Investing Activities

Payments for equipmentPayments for building renovationsRelease of assets restricted for building renovationsProceeds from sale of fixed assets

Net cash provided by (used in) investing activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents as of beginning of year

Cash and cash equivalents as of end of year

$ 522,622

54,105

(45,790)

32,230(3,258)

(216,342)

181,3745,563

530,504

(8,286)(1,442,790)998,743

(452,333)

78,171

45,864

$ 124,035

$ 1,012,837

62,171(515,745)(55,419}

(43,399)(979)

(501,412)

(107,126)(26,467)

(175,539)

(3,817)

125,904

122,087

(53,452)

99,316

$ 45,864


7

Providence HouseNotes to Financial StatementsSeptember 30, 2004 and 2003

(1) Summary of Significant Accounting Policies

A. Nature of Activities

Providence House is a nonprofit corporation organized under the laws of the State of Louisiana. ProvidenceHouse was established to provide housing services, training, employment and opportunities for breaking thecycle of homelessness. The support for Providence House comes primarily from private donations and grantswhich represent approximately 58% of revenues.

Approximately 39% of total revenues consist of contractual revenue of federal and state funds. A briefdescription of the programs - contracts which are funded with those federal and state funds are listed:

Emergency Shelter Grants Program - Provides funds to assist in maintaining a shelter for homelessfamilies. Funding is provided by federal funds passed through the City of Shreveport and the City of BossierCity.

Emergency Food and Shelter - FEMA - Provides funds to assist in emergency shelter for homelessfamilies. Funding is provided by federal funds passed through the local FEMA Board.

Children's Trust Fund - Provides funds to assist homeless children to aid in the prevention of child abuseand neglect. Specifically to implement a resource support system to provide emotional, medical, educationaland recreational support services for homeless children. Funding is provided by federal and state fundspassed through the State of Louisiana, Department of Social Services.

Supplemental Assistance for Facilities to Assist the Homeless (SAFAH) - Provides funds for theoperation of a child care center and program for the residents of a homeless shelter and other homelesschildren. Funding is provided by federal funds passed through Shreveport SRO, Inc.

Community Development Block Grant - Provides funds to provide shelter for the homeless and to assistfamilies with breaking the cycle of homelessness. Specifically, to ensure that families will be allowed tomove from a structured program to an unstructured, independent program through a series of levels showinga proven responsibility and disciplined lifestyle. Funding is provided by federal and state funds passedthrough the City of Shreveport and the City of Bossier City.

Supportive Housing Program - Transitional Living Program - Provides funds to facilitate themovement of homeless individuals and families to permanent housing. The temporary housing is combinedwith supportive services to enable homeless individuals and families to live as independently as possible.This program funds the education, counseling, housing and follow-up programs for Providence House.Funding is provided by federal funds from the U.S. Department of Housing and Urban Development.

(Continued)

8


(Continued)

Supportive Housing Program - Project Next Step - Provides funds to facilitate the movement ofhomeless individuals and families to permanent housing. The funds will provide lease arrangements forindividuals and families along with supportive services to enable homeless individuals and families to breakthe cycle of homelessness. Funding is provided by federal funds from the U.S. Department of Housing andUrban Development.

TANF - Provides education and literacy services, employment training, life skills training, counseling,children's program, budgeting, housing/shelter, childcare, meals, transportation, and other services to enableadults and their children to begin again. Funding is provided by federal funds passed through the State ofLouisiana, Department of Social Services.

CACFP - Provides a food service program to children who are residents of the homeless shelter. Fundingis provided by federal funds passed through the State of Louisiana, Department of Education.

B. Basis of Accounting

The financial statements of Providence House have been prepared on the accrual basis of accounting inaccordance with accounting principles generally accepted in the United States of America.

C. Basis of Presentation

Financial statement presentation follows the recommendations of the Financial Accounting Standards Boardin its Statement of Financial Accounting Standards ISFAS) 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, temporarilyrestricted net assets, and permanently restricted net assets.

D. Investments

Investments consist of money market funds and marketable securities. Money market funds are stated atcost, which approximates the market value. Marketable securities are stated at fair value. Realized andunrealized gains and losses are included in the statement of activities.

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.

(Continued)


(Continued)

F. Cash and Cash Equivalents

Cash equivalents, as stated for cash flow purposes, consist of non-interest bearing bank accounts and shortterm highly liquid investments which are readily convertible into cash within ninety (90) days of purchase.

G. Promises to Give

Unconditional promises to give are recognized as revenues or gains in the period received and as assets,decreases of liabilities or expenses, depending on the form of the benefits received. Promises to give inexcess of one year are recorded at their net present value. All contributions-pledges are considered forunrestricted use unless specifically restricted by donor. Conditional promises to give are recognized onlywhen the conditions on which they depend are substantially met and the promises become unconditional.

H. Property and Equipment

Property and equipment are carried at cost or, if donated, at the approximate fair value at the date ofdonation. Depreciation is computed using the straight-line method over the estimated useful life of eachasset. The funding sources and the federal government may have a reversionary interest in certain propertypurchased with those funds. Its disposition as well as the ownership of any proceeds therefrom is subjectto certain funding source regulations.

I. Revenue and Support

Donations and contributions received are recorded as unrestricted, temporarily restricted, or permanentlyrestricted support, depending on the existence and/or nature of any donor restrictions.

Contractual grant revenue is reported as unrestricted support due to the restrictions placed on those fundsby the funding sources being met in the same reporting 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 (that is, when a stipulated time restriction ends or purpose of restriction is accomplished) in thereporting period in which the support is recognized. All other donor-restricted support is reported as anincrease 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 inthe Statement of Activities as net assets released from restrictions.

(Continued)

10

Providence HouseNotes to Financial Statements

September 30, 2004 and 2003(Continued)

J. Income Tax Status

Providence House is exempt from federal income tax under Section 501(c)(3| of the Internal Revenue Code.However, income from certain activities not directly related to the organization's tax-exempt purpose issubject to taxation as unrelated business income. Providence House had no such income during this auditperiod.

K. Retirement Plan

Providence House established a profit-sharing plan with a 401 (k) option for eligible employees. The nameof the plan is Providence House Retirement Plan. The plan shall cover only employees having completed atleast one year of service and having attained age 21. The employer contribution amount is determined byappropriate action of the Employer as of the time prescribed by law. Providence House accrued $15,909for the plan for the year ended September 30,2004 and $37,128 for the year ended September 30,2003.

L. Donated Assets

Non-cash donations are recorded as contributions at their estimated fair value at the date of donation.

M. Donated Property and Equipment

Donations of property and equipment are recorded as contributions at their estimated fair market value atthe date of donation. Such donations are reported as increases in unrestricted net assets unless the donorhas restricted the donated asset to a specific purpose. Assets donated with explicit restrictions regardingtheir use and contributions of cash that must be used to acquire property and equipment are reported asrestricted contributions.

N. Expense Allocation

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

(Continued)

11


(Continued)

(2) Concentrations of Credit Risk

Financial instruments that potentially subject Providence House to concentrations of credit risk consist principallyof temporary cash investments, grant receivables, and promises to give.

Concentrations of credit risk with respect to grant receivables are limited due to these amounts being due fromgovernmental agencies under contractual terms. As of September 30, 2004 and 2003, Providence House had nosignificant concentrations of credit risk in relation to grant receivables.

Providence House maintains cash balances at local financial institutions. Accounts at those institutions are insuredby the Federal Deposit Insurance Corporation (FDIC) up to $100,000. At September 30, 2004 and 2003 there wereuninsured balances at those institutions of $1,873 and $476,695, respectively.

Concentrations of credit risk with respect to promises to give are limited due to the number of contributionscomprising Providence House's contributor base.

(3) Investments

The historical cost and fair value of investments at September 30,2004 and 2003 were as follows:

2004 2003

U.S. Government SecuritiesMutual FundsStocks - equitiesMoney Market account

Investment income (loss) for the

$

$

years

Cost53,117

114,368316,811

8,983

493,279

Fair Value$

$

ended September

Interest and dividend income $Realized gain (loss) on sale on investmentsUnrealized gains (losses)on investments

$

53,206115,347

345,2868,983

522,822

30, 2004 and

200414,992

9545,695

60,782

$

$

2003

$

$

Cost53,11776,020

321,604

37,520488,261

consisted of the

2003

13,470{ 16,839)

71,27067,901

Fair Value

$ 55,68074,409

307,74637,520

$ 475,355

following:

(Continued)

12


(Continued)

(4) Grant Receivables

Various funding sources provide reimbursement of allowable costs under contracts or agreements. Thesebalances represent amounts due from the funding sources at September 30, 2004 and 2003 but not receiveduntil after that date.

(5) Restricted Cash - Resettlement Funds

The balance represents funds held by Providence House on behalf of the tenants of Providence House.Providence House has implemented a program whereby the tenants agree to escrow-deposit a certain percentof their support - wages into this account as they receive those funds. Upon graduation and/or leaving theshelter those funds will be distributed to the tenant or retained by Providence House. This amount is also shownas escrowed resettlement funds in the liability section on the statement of financial position.

{6} Promises to Give

At September 30, 2004 and 2003, contributors have made unconditional promises to give of $265,352 and$49,010, respectively to Providence House. Promises receivable expected to be collected over more than oneyear are discounted at 6% for the year ended September 30,2003 and 4% for the year ended September 30,2004. The allowance for uncollectible promises receivable at September 30,2004 and September 30,2003 was$92,905 and $17,150, respectively.

Receivable in less than one yearReceivable in one to five years

Total unconditional promises to giveLess discounts to net present valueNet unconditional promises to give

2004$ 140,998

137,717278,715

( 13,363)$ 265,352

200332,90618,544

51,4502.440)

49.010

(Continued)

13

(7)


(Continued)

Assets Restricted for Building Renovations

Assets restricted for building renovations at September 30,2004 and 2003 consisted of the following:

2004 2003

CashPromises to give

$261,554

615,745644.552

261.554 $ 1.260.297

Promises receivable expected to be collected over more than one year are discounted at 6% for the year endedSeptember 30,2003 and 4% for the year ended September 30,2004. The allowance for uncollectible promisesreceivable at September 30, 2004 and September 30,2003 was $89,688 and $54,458, respectively.

Receivables in less than one yearReceivables in two to five years

Less discounts to net present value

Net promises to give

2004190,06778.998269,065

7.511)

261,554 $

2003309,211385.897695,10850.556)

644.552

(Continued)

14


(Continued)

(8) Fixed Assets

A summary of fixed assets as of September 30,2004 follows:

LandBuildingsBuilding improvementsConstruction in progress-buildingFurniture & fixturesOffice equipmentKitchen equipmentPlayground equipmentClassroom computer labVehicles

Depreciation expense for the year ended September 30,2004 was $55,782.

A summary of fixed assets as of September 30, 2003 follows:

EstimatedUseful Life

N/A25 years25 years

N/A7 years5 years7 years7 years5 years5 years

Cost /Basis

$ 117,830941,271

57,0221,442,790

62,47999,14929,14640,10572,96949,344

$2,912,105

AccumulatedDepreciation

$143,42322,127

-57,20680,65520,87930,51872,96942,531

$ 470,308

LandBuildingsBuilding improvementsFurniture & fixturesOffice equipmentKitchen equipmentPlayground equipmentClassroom computer labVehicles

Depreciation expense for the year ended September 30,2003 was $62,171.

(Continued)

EstimatedUseful Life

N/A25 years25 years7 years5 years7 years7 years5 years5 years

Cost/Basis

$ 117,830941,27157,02261,65492,32128,51440,10572,96949,344

$1,461,030

AccumulatedDepreciation

$110,91718,53554,14874,78518,83426,78772,96937,552

$ 414,527

15


(Continued)

(9) Unrestricted Net Assets - Board Designated

Included in the unrestricted net assets are amounts designated by the Board for the following:

2004 2003Funds received from insurance company designatedfor repairs to roofing structure $ - § 10,025

Funds designated by Board for internal endowment fund 501.774 452.820$ 501.774 $ 462.845

(10) Temporarily Restricted Net Assets

Temporarily restricted net assets consists of grants and donations received for specific purposes which werenot expended as of September 30, 2004 and 2003 and detailed as follows:

2004 2003General operating campaign $ 265,352 $ 49,010Education Fund 21,048 22,535Building renovation 261,554 1,260,297Uniforms 256 3.824

$ 548.210 $ 1.335.666

(11) Contractual Revenue - Grants

Revenues shown as contracts with governmental agencies for the years ended September 30,2004 and 2003consist of the following:

2004 2003City of Shreveport and Bossier - ESG $ 96,061 $ 68,331City of Shreveport and Bossier - CDBG 45,765 50,717FEMA 19,522 23,560Childrens Trust Fund 20,000 20,000SAFAH Grant 25,000 100,000U.S. Department of HUD Supportive Housing 252,875 238,641Children and Adult Care Food Program 34,426 65,258TANF 413,238 785,762Child Care Assistance and vouchers 92.484 12.138

$ 999.371 $ 1.364.407

(Continued)

16


(Continued)

(12) Accrued Expenses

An analysis of Providence House's accrued expenses at September 30,2004 and 2003 is as follows:

2004 2003Payroll taxes $ 844 $ 9,506Retirement 15,909 26,224Salaries and wages 13,416 8,059Vacation - leave 19.183 -

$ 49.352 $ 43.789

(13) Leases

Providence House leases certain facilities under operating leases in conjunction with its supportive housingprogram and during the renovation of its building. The rental costs on these leases for the years ended September30, 2004 and 2003 were $245,750 and $102,925, respectively. As of September 30, 2004, there were noobligations under these lease agreements in excess of one year.

Providence House leases certain office equipment. The rental costs on these leases for the years ended September30,2004 and 2003 was $5,103 and $3,723, respectively. As of September 30, 2004, obligations under leasesin excess of one year is as follows:

Year Ended Amount9/30/05 $ 4,7139/30/06 4,7139/30/07 3,516

9/30/08 548$ 13.490

(14) Line of Credit

Providence House obtained a line of credit on August 17,2004 for $350,000. The line of credit is secured by realestate and building owned by Providence House. Interest rate is prime rate as published in the Wall Street Journal.The loan matures December 31,2006. Interest is to be paid monthly. At September 30,2004, no borrowings wereoutstanding under this loan.

(Continued)

17


(Continued)

(15) Related Party Transaction

During the year ended September 30,2004, Providence House paid a board member $111,440 for architecturalservices in regards to the building renovation project.

(16) Subsequent Event

Subsequent to September 30, 2004 and as of March 4, 2005, Providence House had borrowed approximately$150,000 on the line of credit.

18

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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 RAVEBURN 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 Reporting Based on an Auditof Financial Statements Performed In Accordance With Government Auditing Standards

To the Board of DirectorsProvidence HouseShreveport, Louisiana

We have audited the financial statements of Providence House as of and for the year ended September 30, 2004, andhave issued our report thereon dated March 4, 2005. We conducted our audit in accordance with auditing standardsgenerally accepted in the United States of America and the standards applicable to financial audits contained inGovernment Auditing Standards, issued by the Comptroller General of the United States.

ComplianceAs part of obtaining reasonable assurance about whether Providence House's financial statements are free of materialmisstatement, 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 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 that are requiredto be reported under Government Auditing Standards.

Internal Control Over Financial ReportingIn planning and performing our audit, we considered Providence House's internal control over financial reporting inorder to determine our auditing procedures for the purpose of expressing our opinion on the financial statements andnot to provide assurance on the internal control over financial reporting. Our consideration of the internal control overfinancial reporting would not necessarily disclose all matters in the internal control over financial reporting that mightbe material weaknesses. A material weakness is a condition in which the design or operation of one or more of theinternal control components does not reduce to a relatively low level the risk that misstatements in amounts thatwould be material in relation to the financial statements being audited may occur and not be detected within a timelyperiod by employees in the normal course of performing their assigned functions. We noted no matters involving theinternal control over financial reporting and its operation that we consider to be material weaknesses. However, wenoted other matters involving the internal control over financial reporting which we have reported to management ofProvidence House in a separate management letter dated March 4, 2005.

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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 AccountantsMarch 4, 2005

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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 With Requirements Applicable to EachMajor Program and Internal Control Over Compliance In

Accordance With OMB Circular A-133

To the Board of DirectorsProvidence HouseShreveport, Louisiana

ComplianceWe have audited the compliance of Providence House with the types of compliance requirements described in theU.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that are applicable to each ofits major federal programs for the year ended September 30, 2004. Providence House's major federal program isidentified in the summary of auditors' results section of the accompanying schedule of findings and questioned costs.Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major federalprograms is the responsibility of Providence House' s management. Our responsibility is to express an opinion onProvidence House's compliance based on our 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 Providence House's compliance with those requirements and performing such other proceduresas we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for ouropinion. Our audit does not provide a legal determination on Providence House's compliance with those requirements.

In our opinion. Providence House complied, in all material respects, with the requirements referred to above that areapplicable to its major federal program for the year ended September 30, 2004.

Internal Control Over ComplianceThe management of Providence House is responsible for establishing and maintaining effective internal control overcompliance with requirements of laws, regulations, contracts and grants applicable to federal programs. In planningand performing our audit, we considered Providence House's internal control over compliance with requirements thatcould have a direct and material effect on a major federal program in order to determine our auditing procedures forthe purpose of expressing our opinion on compliance and to test and report on internal control over compliance inaccordance with OMB Circular A-133.

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Our consideration of the internal control over compliance would not necessarily disclose all matters in the internalcontrol that might be material weaknesses. A material weakness is a condition in which the design or operation ofone or more of the internal control components does not reduce to a relatively low level the risk that noncompliancewith applicable requirements of laws, regulations, contracts and grants that would be material in relation to a majorfederal program being audited may occur and not be detected within a timely period by employees in the normal courseof performing their assigned functions. We noted no matters involving the internal control over compliance and itsoperation that we consider to be material weaknesses.

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 thesespecified parties.


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Providence HouseSummary Schedule of Prior Audit Findings

September 30,2003

There were no findings or questioned costs for the prior audit period ending September 30, 2003.

Schedule of Findings and Questioned CostsSeptember 30, 2004

A. Summary of Audit Results

1. The auditor's report expresses an unqualified opinion on the financial statements of Providence House.

2. No 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.

3. No instances of noncompliance material to the financial statements of Providence House were disclosedduring the audit.

4. No reportable conditions relating to the audit of the major federal award program are reported in the Reporton Compliance With Requirements Applicable to Each Major Program and Internal Control Over Compliancein Accordance With OMB Circular A-133.

5. The auditor's report on compliance for the major federal award program for Providence House expresses anunqualified opinion.

6. There are no audit findings relative to the major federal award program for Providence House reported inPart C. of this Schedule.

7. The program tested as a major program included: 1.) TANF CFDA #93.558.

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

9. Providence House qualifies as a low-risk auditee.

B. Findings - Financial Statements Audit: None

C. Findings and Questioned Costs - Major Federal Award Programs Audit: None

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Providence HouseSummary Schedule of Audit Findings for the

Louisiana Legislative AuditorSeptember 30, 2004

Summary Schedule of Prior Audit Findings

There were no findings and two management letter comments for the prior year ended September 30,2003.

Comment #1: Credit Card Receipts

No comment in current year audit.

Comment #2: TANF Reimbursement

No comment in current year audit.

Corrective Action Plan for Current Year Audit Findings

There are no current year findings or questioned costs for the year ended September 30,2004.

The corrective action plan for the management letter comments for the year ended September 30, 2004 are addressedbelow:

Comment #1: Signature Requirements on Checks

Providence House will follow our two-signature policy by reviewing all checks each month and correcting those notfollowing the policy.

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COOK & MOREHART


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

TRAVIS H. MOREHART, CPAA. EDWARD BALL, CPAVICKIE D NOBLE, CPA

C. BRYAN COYLE. CPA

March 4, 2005

The Board of DirectorsProvidence HouseShreveport, Louisiana

TELEPHONE (318) 222-5415 FAX (318) 222-5441 RAYEBURN G COOK (RET.)


CERTIFIED PUBLIC ACCOUNTANTS

Management Letter

We have audited the financial statements of Providence House for the year ended September 30, 2004, and haveissued our report thereon dated March 4, 2005. In planning and performing our audit of the financial statements ofProvidence House, we considered its internal control over financial reporting in order to determine our auditingprocedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on theinternal 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 or operations ofProvidence House. These comments have been discussed with the appropriate members of management.

Comment #1: Signature Requirements on Checks

During our audit we noted numerous instances where only one signature was obtained on checks issued. It isProvidence House's policy to have (2) two signatures on checks.

We recommend that Providence House follow its policy of two signature requirements on checks.

We express sincere thanks to Providence House personnel for the cooperation and assistance provided us during ouraudit. We are available to provide you assistance and consultation with the above mentioned items. This letter isfurnished solely for the use of management, Board of Directors and various funding sources.


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