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ST. THOMAS COMMUNITY HEALTH CENTER, INC. AND SUBSIDIARIES

Financial Statements

For the Years Ended December 31, 2014 and 2013 and Independent Auditor's Report and Supplementary Information

/A k\CR\ C A R R RIGGS & INGRAM

CPAs and Advisors

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ST. Thomas Community Health Center, Inc. And Subsidiaries Table of Contents

December 31, 2014

REPORT

INDEPENDENT AUDITOR'S REPORT

FINANCIAL STATEMENTS

Consolidated Statements of Financial Position

Consolidated Statements of Activities and Changes in Net Assets

Consolidated Statements of Functional Expenses

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

OTHER REPORTS AND SUPPLEMENTARY SCHEDULES

Consolidating Statements of Financial Position

Consolidating Statements of Activities

Schedule of Compensation, Benefits, and Other Payments to Agency Head or Chief Executive Officer

Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Consolidated 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 in Required by 0MB Circular A-133

Schedule of Expenditures of Federal Awards

Schedule of Current Year Findings and Questioned Costs

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A CRI Q ^ p p Carr, Riggs & Ingram, LLC RIGGS & 4330 Dumaine St. INGRAM New Orleans, Louisiana 70119

CPAs and Advisors (504) 833-2436 (504) 484-0807 (fax) www.CRIcpa.com

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors of

St. Thomas Community Health Center, Inc. and subsidiaries

New Orleans, Louisiana

We have audited the accompanying consolidated financial statements of St. Thomas Community Health

Center, Inc. and subsidiaries, which comprise the consolidated statement of financial position as of

December 31, 2014, and the related consolidated statements of activities and changes in net assets,

functional expenses, and cash flows for the year then ended, and the related notes to the consolidated

financial statements.

Management's Responsibility for the Financial Statements

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

statements are free from material misstatement.

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

the consolidated financial statements. The procedures selected depend on the auditor's judgment,

including the assessment of the risks of material misstatement of the consolidated 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 consolidated 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 consolidated financial statements.

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

our audit opinion.

Opinion

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

respects, the consolidated financial position of St. Thomas Community Health Center, Inc. and

subsidiaries as of December 31, 2014, and its activities, changes in net assets, functional expenses, and

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

United States of America.

Prior Period Financial Statements

The consolidated financial statements as of December 31, 2013, were audited by other auditors, whose

report dated April 22, 2014, expressed an unmodified opinion on those statements.

Other Matters

Our audit was conducted for the purpose of forming an opinion on the consolidated financial

statements as a whole. The consolidating information is presented for purposes of additional analysis of

the consolidated financial statements rather than to present the financial position, results of operations,

and cash flows of the individual companies. The Schedule of Compensation, Benefits, and Other Payments to Agency Head or Chief Executive Officer is required by Louisiana Revised Statue 24:513(A)(3)

and is presented for purposes of additional analysis and is not a required part of the consolidated

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 consolidated financial statements. The information has been subjected to the auditing procedures applied in the audit

of the consolidated financial statements and certain additional procedures, including comparing and

reconciling such information directly to the underlying accounting and other records used to prepare

the consolidated financial statements or to the consolidated 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 relation to the

consolidated 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 June 12, 2015,

on our consideration of St. Thomas Community Health Center, Inc. and subsidiaries' 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 St. Thomas Community Health Center, Inc. and subsidiaries' internal control over financial

reporting and compliance.

June 12, 2015

St. Thomas Community Health Center, Inc and Subsidiaries Consolidated Statements of Financial Position

As of December 31, ASSETS

2014 2013

Cash $ 334,637 $ 254,363

Grants receivable 144,813 263,475

Patient accounts receivable, net 181,644 125,012

Rent receivable 6,750 6,750

Interest receivable 23,062 23,062

Prepaid expenses 58,677 8,438

Total current assets 749,583 681,100

RESTRICTED CASH 1,094,855 1,272,545

PROPERTY AND EQUIPMENT, net 4,741,717 5,073,144

OTHER ASSETS

Deposits 2,971 2,971

Deferred financing fees, net 750,040 780,027

Note receivable 5,405,715 5,405,715

Total other assets 6,158,726 6,188,713

TOTAL ASSETS S 12,744,881 s 13,215,502

LIABILITIES AND NET ASSETS

CURRENT LIABILITIES

Accounts payable and accrued liabilities $ 164,130 $ 228,621

Due to plan trustee 207 5,132

Uncompensated absences 51,299 34,797

Line of credit 190,222 251,000

Current maturities of long-term debt 93,632 92,700

Total current liabilities 499,490 612,250

LONG-TERM DEBT, net of current maturities 10,598,752 10,684,711

Total liabilities 11,098,242 11,296,961

NET ASSETS

Unrestricted

Unrestricted 456,722 663,550

Noncontrolling interest 963,988 969,230

Total unrestricted net assets 1,420,710 1,632,780

Temporarily restricted 225,929 285,761

Total net assets 1,646,639 1,918,541

TOTAL LIABILITIES AND NET ASSETS S 12,744,881 $ 13,215,502

See accompanying independent auditor's report and notes to consolidated financial sfofements. -3-

St. Thomas Community Health Center, Inc and Subsidiaries

Consolidated Statement of Activities and Changes in Net Assets For the year ended December 31, 2014

Operating revenues Net patient service revenue, net of

contractual allowances and discounts Provision for bad debts Net patient service revenue,

less provision for bad debts Contributions Grant revenues Donated facilities and services Other revenues Net assets released from restriction

Total operating revenues

Operating expenses Health care Management and general

Total operating expenses

Excess of revenues over (under) expenses Less: excess of revenues over (under) expenses

attributable to noncontrolling interest

Excess of revenues over (under) expenses attributable to the Clinic

NET ASSETS - Beginning of year

Capital Contributions

NET ASSETS - End of year

Unrestricted Noncontrolling Temporarily Restricted Total

$ 3,806,396 $ (139,611)

$ 3,806,396 (139,611)

3,666,785 3,666,785 150,320 - - 150,320 451,742 - 2,344,843 2,796,585

6,450 - - 6,450 1,268,565 - - 1,268,565 2,404,675 - (2,404,675) -

7,948,537 - (59,832) 7,888,705

4,080,618 4,080,618 4,079,989 - - 4,079,989

8,160,607 8,160,607

(212,070) - (59,832) (271,902)

4,206 (4,206) - -

(207,864) (4,206) (59,832) (271,902)

664,586 968,194 285,761 1,918,541

$ 456,722 $ 963,988 $ 225,929 $ 1,646,639

See accompanying independent auditor's report and notes to consolidated financial statements.

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Consolidated Statement of Activities and Changes in Net Assets For the year ended December 31, 2013

Operating revenues Net patient service revenue, net of

contractual allowances and discounts Provision for bad debts Net patient service revenue,

less provision for bad debts Contributions Grant revenues Donated facilities and services Other revenues Net assets released from restriction

Total operating revenues

Operating expenses Health care Management and general

Total operating expenses

Excess of revenues over (under) expenses Less: excess of revenues over (under) expenses

attributable to noncontrolling interest

Excess of revenues over (under) expenses attributable to the Clinic

NET ASSETS - Beginning of year

Capital Contributions

NETASSETS-End of year

Unrestricted Noncontrolling Temporarily Restricted Total

$ 4,634,740 $ (150,326)

s 4,634,740 (150,326)

4,484,414 4,484,414 30,194 - - 30,194

1,976,801 - 433,250 2,410,051 53,350 - - 53,350

1,904,553 - - 1,904,553 601,077 - (601,077) -

9,050,389 - (167,827) 8,882,562

3,609,982 3,609,982 4,292,782 - - 4,292,782

7,902,764 7,902,764

1,147,625 - (167,827) 979,798

4,206 (4,206) - -

1,151,831 (4,206) (167,827) 979,798

(487,245) 3,162 453,588 (30,495)

- 969,238 - 969,238

$ 664,586 $ 968,194 $ 285,761 S 1,918,541


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Consolidated Statement of Functional Expenses

For the year ended December 31, 2014

Management

Health Care and General Total

Salaries, related payroll taxes and benefits S 2,908,479 $ 1,630,586 S 4,539,065 Professional fees and contract services 163,016 972,356 1,135,372

Accounting, audit and legal fees - 66,430 66,430 Billing services - 200,385 200,385 Depreciation and amortization 71,827 310,054 381,881

Insurance - 159,735 159,735

Interest - 119,392 119,392 Other 11,876 341,945 353,821 Postage - 21,029 21,029

Rent 200,275 - 200,275 Repairs and maintenance 70,273 96,583 166,856

Supplies 508,316 65,061 573,377

Donated services 4,500 2,100 6,600

Trash and waste removal 78,259 11,946 90,205 Travel, meetings and conferences 4,191 13,063 17,254

Training and continuing education 14,868 5,128 19,996 Utilities 44,738 64,196 108,934

Total expenses $ 4,080,618 $ 4,079,989 S 8,160,607


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Consolidated Statement of Functional Expenses

For the year ended December 31,2013

Salaries, related payroll taxes and benefits Professional fees and contract services Accounting, audit and legal fees Billing services Depreciation and amortization Insurance Interest Other Postage Rent Repairs and maintenance Supplies Donated medical supplies Donated facilities Donated services Trash and waste removal Travel, meetings and conferences Training and continuing education Utilities

Health Care Management and General

2,548,089 348,205

81.946

13,090

207,928 85,000 151,374

18,000 34,500 42,677 4,633

37,239 37.301

2,071,389 753,832 104,938 184,872 284,307 150,508 115,024 451,266 15,385

49,923 30,273

8,140 22,225 4,975

45.725

Total

4,619,478 1,102,037 104,938 184,872 366,253 150,508 115,024 464,356 15,385

207,928 134,923 181,647

18,000 34,500 50,817 26,858 42,214 83.026

Total expenses S 3,609,982 S 4,292,782 S 7,902,764

See accompanying Independent auditor's report and notes to consolidated financial stotements.

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St. Thomas Community Health Center, Inc and Subsidiaries Consolidated Statements of Cash Flows

For the years ended December 31, 2014 2013

Excess of revenues (under) over expenses attributable to the Clinic $ (271,902) S 979,798 Adjustments to reconcile excess of revenues over (under) expenses

attributable to the Clinic to net cash provided by operating activities: Depreciation 351,894 345,681 Amortization 29,987 20,572 Change in operating assets and liabilities:

Grants receivable 118,662 (188,508) Accounts receivable, net (56,632) 207,560 Interest receivable - 3,370 Prepaid expenses and other assets (50,239) 45,106 Deposits - (2,971) Accounts payable and accrued liabilities (64,491) (68,249) Due to plan trustee (4,925) 5,132 Accrued rent payable - (32,563) Due to related parties, net - (6,750) Uncompensated absences 16,502 (12,270)

Net cash provided by operating activities 68,856 1,295,908

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of property and equipment (20,480) (525,882) Net cash used in investing activities (20,480) (525,882)

CASH FLOWS FROM FINANCING AaiVITIES

Proceeds from line of credit 90,000 470,000

Payments of line of credit (150,778) (389,000)

Payments of long-term debt (85,014) (1,016,693) Deposits to restricted cash (941,262) Withdrawals from restricted cash 177,690 211,236 Contributions from noncontrolling interest - 969,238

Net cash provided by (used in) financing activities 31,898 (696,481)

NET CHANGE IN CASH AND CASH EQUIVALENTS 80,274 73,545

CASH AND CASH EQUIVALENTS - Beginning of year 254,363 180,818

CASH AND CASH EQUIVALENTS - End of year $ 334,637 $ 254,363

SUPPLEMENTAL DISCLOSURE FOR STATEMENTS OF CASH FLOWS Cash paid during the year for interest $ 119,392 S 131,574


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St. Thomas Community Health Center, Inc. And Subsidiaries Notes to Consolidated Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of the significant accounting policies which have been consistently applied in the preparation of the accompanying consolidated financial statements:

Nature of Activities

St. Thomas Community Health Center, Inc. and subsidiaries (the STCHC), formerly St. Thomas Health Services, Inc., is a Federally Qualified Health Center (FQHC), community-based, non-profit, primary health clinic that provides ambulatory health care services, including specialty care and diagnostic testing services. Serving both insured and uninsured patients, a large percentage of the patients are the medically indigent, under-insured and uninsured of the Greater New Orleans and surrounding areas. A description of St. Thomas Community Health Center, Inc.'s operational activities follows. Descriptions of its subsidiaries operational activities are found within Note A under Principles of Consolidation.

St. Thomas Health Services, Inc. was founded in 1987 to improve the health status in the service area with major emphasis being placed on disease prevention. Due to the lingering effects of Hurricane Katrina, St. Thomas Health Services, Inc. discontinued operations on June 30, 2006 and was reformed on July 1, 2006 as St. Thomas Community Health Center, Inc. (the Clinic).

The Clinic operates in a neighborhood where 70%-80% of the residents are uninsured and where 10% of the patients are homeless; therefore, it relies primarily on federal, state and city programs as well as private sources and various grants for on-going financial support for the operation of the Clinic.

The Clinic makes use of support services offered by neighboring social service agencies, hospitals and the New Orleans medical community. The Clinic also lends its support through the provision of specialized laboratory testing, diagnostic services and hospitalization services at low or no cost.

The Clinic is governed by a thirteen member Board of Directors (the Board), all of whom serve until their resignation or removal from the Board.

In order to assist in meeting its goals and mission of providing services as a primary health care clinic, the Clinic has applied for and has been awarded several grants from both governmental and private programs. During the year ended December 31, 2014, the Clinic received and administered the following:

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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

GOVERNMENTAL GRANTS

Health Resources and Services Administration Grants - These grants, administered by the Department of Health and Human Services, are allocated to operational expenses associated with the care of the Medicare, Medicaid and uninsured populations, the purchase of medical exam room equipment, and for providing obstetric care.

LSU Contracts - These contracts, awarded by Louisiana State University (LSU), provide mammography and breast cancer detection and prevention. This program also provides for comprehensive breast and cervical cancer screening and education services, which may include mammograms, clinical breast exams, pap-tests and pelvic exams.

PRIVATE FOUNDATION AND TRUST PROGRAMS

Stauffer Trust Estate - The Stauffer Trust Estate primarily funds services to provide eye, ear, nose and throat care to qualified indigent and uninsured patients at normal costs.

Susan Komen Breast Cancer Foundation - The Susan Komen Breast Cancer Foundation, a private foundation, provides mammography, breast cancer education and surgical oncology consultation for uninsured and underinsured women in the New Orleans region and surrounding parishes.

Baptist Community Ministries - Baptist Community Ministries is a private foundation with a grant endowment created for the purpose of improving the quality of life for the citizens of the Greater New Orleans region. The foundation's mission is to develop and invest in a variety of strategic and tactical initiatives to improve the health of the community across a broad spectrum of issues.

March of Dimes Foundation - March of Dimes Foundation, a non-profit corporation, provides funding for a Mobile Program to provide healthcare and related services to the community in the Southeast Louisiana region.

Ella West Freeman Foundation - The Ella West Freeman Foundation, funded primarily by the A.B. Freeman Estate, provides support to health and human service organizations with an emphasis on capital projects for established agencies in the Southeast Louisiana region.

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Basis of Reporting - The consolidated financial statements are prepared on the accrual basis of accounting and in accordance with accounting principles generally accepted in the United States of America. STCHC classifies resources for accounting and reporting purposes into three net asset categories which are unrestricted, temporarily restricted, and permanently restricted net assets according to externally (donor) imposed restrictions.

• Unrestricted net assets include funds not subject to donor-imposed stipulations. The revenues received and expenses incurred in conducting the mission of STCHC are included in this category. STCHC has determined that any donor-imposed restrictions for current or developing programs and activities which are generally met within the operating cycle of STCHC and are recorded as unrestricted net assets.

• Temporarily restricted net assets include realized gains and losses on investment income, gifts and contributions for which donor-imposed restrictions have not been met.

• Permanently restricted net assets are contributions which are required by the donor-imposed restriction to be invested in perpetuity and only the investment income be made available for program operations in accordance with the donor restrictions. Such income is reflected in temporarily restricted net assets until utilized for donor-imposed restrictions. As of December 31, 2014 and 2013, STCHC had no permanently restricted net assets.

Principles of Consolidation - The accompanying consolidated financial statements include the accounts of St. Thomas Community Health Center, Inc. and its subsidiaries identified below.

• St. Thomas Real Estate, LLC (STRE) was formed solely to acquire, renovate, own and operate the property located at 1936-1938 Magazine Street, New Orleans, LA 70130 (the Property).

• St. Thomas Investments, LLC (ST!) holds a 99.00% membership interest in STRE and an unaffiliated bank subsidiary (the Master Tenant) holds the remaining 1.00%. ST! is wholly-owned by STCHC.

The entities were organized for the purpose of historically rehabilitating the Property in order to expand STCHC's capacity (the Project). The Property and its renovations were funded, in part by New Markets Tax Credits as discussed in Note 5.

Use of Estimates - The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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Cash and Cash Equivalents - Cash and cash equivalents include cash on hand and in financial institutions. For purposes of the statements of cash flows, STCHC considers all investments purchased with a maturity of three months or less to be cash equivalents.

Deposits held in noninterest-bearing transaction account are aggregated with any interest-bearing deposits the owner may hold in the same ownership category, and the combined total insured up to at least $250,000. As of December 31, 2014, STCHC had $1,004,702 over the FDIC limit. As of December 31, 2013, STCHC had $1,035,966 over the FDIC limit.

Patient Accounts Receivable, net - Patient receivables are recorded net of contractual allowances and bad debt allowances. Management estimates contractual allowances in accordance with the reimbursement rates in the contractual arrangements. Management estimates bad debt allowances based upon management's assessment of historical and expected net collections, business and economic conditions, and other collection indicators. The primary uncertainty lies within uninsured patient receivables and deductibles, co-payments and other amounts due from individual patients. Patient receivables are written off when deemed uncollectible and recoveries of receivables previously written off are recorded when received. The allowance for doubtful accounts was $289,937 and $150,326 at December 31, 2014 and 2013, respectively.

Property and Equipment - Acquisitions of property and equipment are recorded at cost. Improvements and replacements of property and equipment over $2,500 are capitalized at cost and depreciated over the estimated useful life of the improvement or replacement. Maintenance and repairs that do not improve or extend the lives of property and equipment are charged to expense as incurred. When assets are sold or retired, their cost and related accumulated depreciation are removed from the accounts and any gain or loss is reported in the consolidated statement of activities and changes in net assets. Depreciation is provided over the estimated useful life of each class of depreciable assets and is computed using the straight-line method. The classes of depreciable assets and their respective estimated useful lives are as follows:

Buildings 40 years Leasehold improvements 5-10 years Furniture, fixtures and equipment 3-7 years

Deferred Financing Fees - Deferred financing fees of $822,885 are amortized over the respective debt period beginning in December 2011 using the effective interest method. For the year ended December 31, 2014 and 2013, amortization expense was $29,987 and $20,575, respectively.

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Uncompensated Absences - STCHC allows regular full-time employees, with a minimum of three months employment, to receive compensated absences (vacation and sick leave) based on length of service: 1-4 years, 136 hours; 5-9 years, 176 hours; and 10+ years, 216 hours. Employees are eligible to carry-over to the following year up to 40 hours of accrued time. Any hours above 40 at the end of each year will be forfeited. Upon termination, all accrued hours are paid to an employee at full value based on base hourly rates as of termination date. As of December 31, 2014 and 2013, uncompensated absences are $51,299 and $34,797, respectively.

Revenue Recognition:

Patient Service Revenue - Net patient service revenue is reported at the estimated net realizable amounts from patients. Medicare, Medicaid, third party payors, and others for services as they are rendered (net of contractual and bad debt adjustments) (See Note 9).

Contributions - Contributions consisted of donations made to the Clinic to provide support to the operation of the Clinic as well as to fund specific projects as designated by the donor or the Board.

Grants - The Clinic is the recipient of various government and private grants. Included in grant revenues are funds disbursed from several funding sources to provide funds for the implementation of various community programs as well as to support the operations of the Clinic.

The method of payment on the grants depends on the grant agreement. Some grants are received on a lump sum basis and expenses are applied against the funds. Other grant expenses are on a cost reimbursement basis.

Donated Medical Supplies, Services and Facilities - Donated medical supplies are recorded at fair value as received and include medications and related medical supplies donated to the Clinic. Donated services are recorded at fair value and recognized as contributions if the services (a) create or enhance nonfinancial assets or (b) require specialized skills, are performed by people with those skills, and would otherwise be purchased by the Clinic. Donated facilities are recorded at fair market value in the consolidated statements of activities and changes in net assets and include the Clinic's parking lot surface, which is not included in the Clinic's building lease.

Electronic Health Records (EHR) Incentive Payments - The American Recovery and Reinvestment Act of 2009 established incentive payments under the Medicare and Medicaid programs for certain professionals and hospitals that adopt and meaningfully use certified EHR technology. These incentive payments are determined based on a formula.

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including inputs such as charity charges and total discharges. The revenue associated with EHR incentive payments is recognized by the Clinic when management can provide reasonable assurance that the Clinic will be able to demonstrate compliance with the meaningful use objectives for that reporting period and that the incentive payments will be received by the Clinic. Because these incentive payments are based on management's best estimate, the amounts recognized are subject to change. Any changes resulting from a change in estimate would be recognized within operations in the period with they occur. In addition, these payments and the related attestation of compliance with meaningful use objectives are subject to audit by the federal government or its designee.

For the years ended December 31, 2014 and 2013, the Clinic recognized $182,500 and $62,500, respectively, of revenue related to EHR incentive payments which is included in other revenues in the accompanying consolidated statement of activities and changes in net assets. This amount was recognized in full at the date of attestation and is included within other revenues on the consolidated statement of activities and changes in net assets.

NOTE 2 - RESTRICTED CASH

As required by the terms set forth in multiple agreements with the Lenders (identified in Note E), STCHC must maintain certain reserve accounts for the receipt of proceeds from and payment of debt obligations, for purposes of the Project. As of December 31, 2014 and 2013, these reserves were in accordance with lender agreements. Restricted cash at December 31, 2014 and 2013 consisted of:

2014 2013

Rent reserve s 322,227 $ 414,476 LRA principal reserve 772,628 858,069

s 1,094,855 s 1,272,545

Rent Reserve - During 2011, STCHC transferred funds of $597,270 from bridge loan proceeds to the rent reserve account. This amount is sufficient to cover 6 years of rent expense. During the initial lease term, STCHC will make annual sub-lease rent payments to the Master Tenant as discussed in Note 5.

LRA Principal Reserve - STCHC established a LRA principle reserve account for the purpose of satisfying the loan guaranty as discussed in Note 5. The proceeds from the loan guaranty fee are used by STCHC to make principal payments on the non-forgivable portion of the LRA note payable (defined below in Note 5).

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NOTE 3 - PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at December 31:

2014 2013

Land $ 43,600 $ 43,600 Building 4,437,696 4,437,696 Leasehold improvements 1,312,653 1,312,653 Furniture and fixtures 241,093 199,891 Computer equipment 73,697 73,697 Medical equipment 553,814 574,582

6,662,553 6,652,119 Less: accumulated depreciation (1,920,836) (1,568,975)

$ 4,741,717 $ 5,073,144

Depreciation expense for the years ended December 31, 2014 and 2013 is $351,863 and $345,681, respectively.

NOTE 4 - LINES OF CREDIT

A non-revolving line of credit up to $450,000 available to use and with a $110,000 unused balance at December 31, 2014. The line bears interest at a rate of the Wall Street Journal Prime Rate plus 0.50% {3.75% at December 31, 2014), is provided to the Clinic under terms of a credit agreement which was executed June 12, 2014 and matures on June 12, 2020. The Clinic had an outstanding balance of $190,222 on this line at December 31, 2014. The line of credit was secured by a pledge of substantially all the Clinic's assets.

A revolving line of credit up to $200,000, which bears interest at a rate of the Wall Street Journal Prime Rate plus 0.50% (3.75% at December 31, 2014), is provided to the Clinic under terms of a credit agreement which was executed on July 7, 2013 and matured on July 7, 2014. The Clinic had an outstanding balance of $76,000 on this line at December 31, 2013, which was subsequently paid off in March 2014. The line of credit is secured by a pledge of substantially all the Clinic's assets.

A revolving line of credit up to $300,000, which bears interest at a rate of the Wall Street Journal Prime Rate plus 0.50% (3.75% at December 31, 2013), is provided to the Clinic under terms of a credit agreement which was executed on November 13, 2013 and matured on March 14, 2014. The Clinic had an outstanding balance of $175,000 on this line at December 31, 2013, which was subsequently paid off in January 2014. The line of credit is secured by a pledge of substantially all the Clinic's assets.

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NOTE 5 - LONG-TERM DEBT

Long-term debt consisted of the following at December 31, 2014:

Note payable to Louisiana Primary Care Association (LPGA) $ 1,904,210

Note payable to Louisiana Recovery Authority (LRA) 1,724,309

New Markets Tax Credits - Facility A 5,405,715

New Markets Tax Credits - Facility B 1,658,150

Total debt outstanding 10,692,384

Less: current maturities (93,632)

Long-term debt $ 10,598,752

On March 28, 2011 (the Closing Date), STCHC closed on a series of transactions to secure New Markets Tax Credits (NMTC) Facilities as outlined in detail below. In summary, the Bridge Loan funds borrowed by STCFIC were passed through a Leveraged Loan to a bank affiliate (see Note Receivable) and were subsequently passed through and combined with the Federal NMTC/FITC Investor contributions to arrive at the Community Development Entity (CDE). The CDE executed loan agreements with STRE to enter into NMTC Facilities. Finally, notes payable to the LPCA and LRA were entered into by STCHC and proceeds were included in the Leveraged Loan.

LPCA Loan - A loan agreement was executed between STCHC and the LPCA in the amount of $1,904,210, maturing 7 years from the Closing Date, and an interest rate of 1.00%. Interest only is payable monthly, with principal due at maturity.

At any time after the 7^^ anniversary of the Closing Date, the LPCA can put to STCHC the outstanding balance of the loan in exchange for $1,000 plus any accrued but unpaid interest on the loan.

LRA Loan - A loan agreement was executed between STCHC and the LRA, a division of the State of Louisiana's Office of Community Development (the CCD), in the amount of $2,000,000 which matures 20 years from the Closing Date, and an interest rate of 1.00%. Interest only was payable monthly until February 2012, when principal and interest payments began monthly until the maturity date. As of December 31, 2014, the unpaid principal balance of this loan was $1,724,309.

As collateral, STCHC granted to the OCD a continuing security interest in substantially all of its assets.

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NOTE 5 - LONG-TERM DEBT (CONTINUED)

Note Receivable - A leveraged loan agreement was executed between an affiliate of the Federal NMTC/HTC Investor and STCHC in the amount of $5,405,715, maturing 40 years from the Closing Date, and a holiday interest of 0.00% with subsequent interest of 0.72% (the Leveraged Loan). Interest only is receivable monthly, with principal due at maturity. The Federal NMTC/HTC Investor has pledged and granted a security interest to STCHC for substantially all assets of its entities involved in the financing transactions on the Closing Date. The Leveraged Loan collaterally assigns all present and future payments, distributions (cash or otherwise), proceeds, profits, income, compensation, property, assets and rights due or to become due and payable to STCHC in connection with all of the Federal NMTC/HTC Investor's membership interest.

New Markets Tax Credits Facilities - Loan agreements were executed between STRE and the CDE. Facilities A and B were funded for $5,405,715 and $1,658,150, respectively, both maturing 40 years from the Closing Date, and bearing a holiday interest of 0.48% in year one with subsequent interest of 1.03%. Interest is payable monthly, with principal amortization payments due monthly over the last 33 years of the loans. Proceeds from these loans financed the Project.

The CDE funded the New Markets Tax Credits Facilities with the intention that the proceeds will qualify as a "qualified low-income community investment" (QLICI) for purposes of generating tax credits called New Markets Tax Credits (NMTCs) under section 45D of the Internal Revenue Code of 1986, as amended. The tax credits provide 39 percent of the qualified equity investment and are claimed over a seven year credit allowance period.

To qualify, STRE must comply with certain guarantees and certain reserves, including but not limited to, business operations in compliance with applicable NMTCs program rules and regulations; qualified construction and development; required insurance coverage; and maintenance of required reserves.

If, as a result of a breach of the agreements or loan documents by STRE, the CDE is required to recapture all or any part of the New Markets Tax Credits previously claimed by the Federal NMTC/HTC Investor, STRE agrees to pay to the applicable Federal NMTC/HTC Investor an amount equal to the sum of the credits recaptured. The maximum aggregate amount due under the clause in the agreements governing these recaptures is $2,754,907 for STRE.

At the end of the seven year tax credit compliance period, the Federal NMTC/HTC Investor may exercise a put option during the 6-month put option period (the Put Option Period) whereby the Federal NMTC/HTC Investor will tender the NMTCs Facilities to STCHC for the put price of $1,000.

In the event the Federal NMTC/HTC Investor does not exercise the put and STRE remains in compliance with the loan terms and the NMTCs rules and regulations, STCHC may exercise a call

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option during the six months following the Put Option Period to purchase the NMTCs Facilities for an amount equal to the loans' fair market value determined by mutual agreement among the parties or a qualified independent appraiser.

In January 2013, SIRE received $1,223,639 of Federal Historic Tax Credits (FHTCs) under section 47 of the Internal Revenue Code for qualified rehabilitation expenditures it made to the Property. SIRE'S Members agreed that these credits will be allocated to the Federal NMTC/HTC Investor in exchange for an equity contribution of $969,238.

SIRE entered into a net lease agreement with an affiliated financial institution subsidiary to lease the Property for annual lease payments of $81,000 and additional rent equal to their share of impositions, which includes all taxes and assessments, liens, charges or expenses of any nature whatsoever in connection with the leasehold ownership, maintenance, repair and operation of the Property, except as otherwise stated in the lease agreement. The lease term began in 2012 and extends for three years with the option to renew. Rental income for the years ended December 31, 2014 and 2013 were $81,000 and $120,294, respectively. Future minimum rental payments, excluding additional rent as this amount is based on varying estimates and it is impractical to provide future estimates, to be received in 2015 are $81,000.

STCHC entered into a triple net lease agreement with an unaffiliated financial institution subsidiary to sublease the Property for annual lease payments of $84,983 the first year, $88,774 the second year and $92,565 the third year. The lease term began January 1, 2012 and extends for three years with the option to renew. The funds required to make the sub-lease payments were set aside in the Rent Reserve by STCHC at closing. Rent expense for the year ended December 31, 2014 and 2013 was $92,249 and $88,774, respectively.

Long-term debt outstanding at December 31, 2014 matures as follows:

Year Ending December 31,

2014

2015 $ 93,632

2016 94,494

2017 95,363

2018 2,107,907

2019 241,698 Thereafter 8,059,290

$ 10,692,384

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Interest expense was $119,392 and $115,024 for the years ended December 31, 2014 and 2013, respectively.

NOTE 6 - RELATED PARTY TRANSACTIONS

Loan Guaranty Fee - SIRE will make annual loan guaranty fee payments to STCHC (as guarantor on the notes payable of $7,063,865 to CDE). The annual loan guaranty fee payments will be approximately $140,000 for six years, and shall be payable annually over the seven year compliance period, with the first such payment of $108,548 being due at Closing. As of December 31, 2014, SIRE made the required payment of $140,000 and prepaid $311,452 in loan guaranty fees. As of December 31, 2013, SIRE made the required payment of $140,000 and prepaid $451,452 in loan guaranty fees.

Incentive Management Fee - To the extent there is Available Cash Flow as defined in the Management Agreement, STRE shall pay to STCHC an incentive management fee annually amounting to 10% of STRE's gross revenue to compensate for STCHC's management of STRE's operations and assets and coordinating the preparation of the required federal, state, and local tax and other required filings and financial reports. As of December 31, 2014, $6,433 of incentive management fee was incurred and paid. As of December 31, 2013, $20,721 of incentive management fee was incurred and paid.

NOTE 7 - ECONOMIC DEPENDENCY

The state Medicaid program (GNOCHC) was originally scheduled to end in December 31, 2013 but was extended through June 2015. During the years ended December 31, 2014 and 2013, the Clinic received 18% and 35% of its revenue from the GNOCHC program, respectively. As of June 12, 2015, the state legislature voted in favor of extending this funding through the end of the State'snext fiscal year, June 30, 2016.

The primary source of revenue for STCHC is federal, state and local grants and contracts provided through various funding agencies. The continued success of STCHC is dependent upon the renewal of contracts from current funding sources as well as STCHC's ability to obtain new funding. During 2015, STCHC had attained additional funding sources and has expanded its utilization of the 340B Drug Discount program. This combined with an increase in the Medicaid payor mix has allowed STCHC to become less reliant on contracts from the state. Also, the Clinic has been able to increase patient visits from approximately 140 visits per day to approximately 200 per day. Finally, STCHC is in negotiations with two separate groups to expand their services to different areas of the city which will increase exposure of the clinic, bring in new patient traffic and increase its current funding contracts.

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NOTE 8 - CONTINGENCIES AND REGULATORY COMPLIANCE

The Company's new markets tax credits, rehabilitation tax credits, and enterprise zone tax credits are contingent on the ability of the Company to maintain compliance with Sections 4SD and 47 of the Internal Revenue Code, Louisiana Revised Statutes 47:6019, and Louisiana Administration Code Title 13. Failure to maintain compliance with certain guarantees and certain reserves and business operations in compliance with applicable NMTCs, rehabilitation tax credits, and enterprise zone tax credits program rules and regulations could result in recapture of previously taken credits plus interest. For the years ended December 31, 2014 and 2013, management believes it is in compliance with the aforementioned regulations and the administrative directives, rules and regulations of federal and state regulatory agencies.

NOTE 9 - MEDICARE, MEDICAID, AND GNOCHC REVENUES

As an FQHC, the Clinic receives a fixed rate per encounter for its Medicare, Medicaid and GNOCFIC patients. The Clinic has agreements with third party payors that provide for payments to the Clinic at amounts different from its established billing rates. The Clinic provides medical assistance to eligible Medicaid and Medicare recipients and receives reimbursements from the State of Louisiana's Department of Health and Hospitals and the U.S. Department of Health and Human Services' Centers for Medicare and Medicaid Services (CMS) for claims submitted in conjunction with those services provided. For the year ended December 31, 2014 and 2013, the Clinic received $1,668,222 and $1,088,567, respectively, in reimbursements for Medicaid and Medicare claims submitted. The Clinic also received $1,443,490 and $3,182,262, respectively, of Medicaid funds from the Greater New Orleans Community Health Connection (GNOCHC) waiver program. The GNOCHC program period has been extended through June 30, 2016 (see Note 7).

The Medicare intermediary for Medicare patients reimburses for services rendered to Medicare program beneficiaries under an all-inclusive rate for each visit that is subject to audit and retroactive adjustments. Management does not believe that the ultimate outcome of any cost report audit will have a significant impact on the Clinic's consolidated financial statements.

The table below shows the sources of net patient service revenue before provision for bad debts:

2014 2013 Medicaid and Medicare $ 1,668,252 $ 1,088,597 GNOCHC 1,443,490 3,182,262 Commercial 285,130 122,213 Private pay 409,524 241,698

Total s 3,806,396 $ 4,634,740

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NOTE 10 - CONCENTRATION OF CREDIT RISK

The Clinic grants credit without collateral to its patients. At December 31, 2014, the mix of the Clinic's net patient accounts receivable balances were as follows:

2014 2013

Medicaid 24% 22% Medicare 20% 10% GNOCHC 18% 42% Other 38% 26%

Total 100% 100%

NOTE 11 - OTHER REVENUES

As of December 31, 2014, other revenues consisted of the following:

2014 2013

340B funding s 552,169 s Sale of Historic Tax Credits - 966,788 State Funding- GNOCHC

waiver programs 400,000 607,800 Federal grants -

meaningful use 182,750 62,500 Lease income 81,000 81,000 Enterprise Zone credits - 86,912 Other revenue 52,646 99,553

Total s 1,268,565 $ 1,904,553

NOTE 12 - PENSION PLAN

Effective January 1, 2006, STCHC established the St. Thomas Community Healthcare Center Retirement Plan {the Plan), a 401(k) Plan. Employees over the age of 18, who have worked for STCHC for more than 90 days, and have 1,000 hours of service in a plan year, are eligible to participate in the Plan. Plan expenses may be paid by STCHC or by the Plan. Matching contributions are determined annually by STCHC. STCHC matches 100% of employee contributions up to 6% of gross pay. For the year ended December 31, 2014 and 2013, STCHC incurred $105,069 and $101,774, respectively, of administrative costs and matching contributions related to the Plan.

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NOTE 13 - INCOME TAXES

STCHC is exempt from federal income taxes through Section 501(c)(3) of the Internal Revenue Code. Therefore, no provision or liability for income taxes has been included in the consolidated financial statements.

SIRE, with the consent of its members, has elected to be a limited liability company. In lieu of corporation income taxes, the members of the limited liability company are taxed on their proportionate share of each member's taxable income. Therefore, no provision or liability for income taxes has been included in the consolidated financial statements.

STI, with the consent of its member, has elected to be taxed as a "C" corporation and accounts for income taxes under an asset and liability approach that recognizes deferred income tax assets and liabilities for the estimated future tax consequences of differences between the financial statements and tax bases of assets and liabilities. As of December 31, 2014 and 2013, no deferred taxes or income taxes have been included in the consolidated financial statements due to STI's net loss position.

Management does not believe its financial statements include any uncertain tax positions.

NOTE 14 - COMMITMENTS AND CONTINGENCIES

Operating Leases - Exclusive of the lease and sublease referenced in Note 5, STCHC is obligated as a lessee under various operating leases. Total rent expense for operating leases related to facilities and equipment, excluding the lease and sublease referenced in Note 5, was $108,026 and $100,969 for the year ended December 31, 2014 and 2013, respectively.

The following schedule details future minimum lease payments annually for five years as of December 31, 2014, for operating leases with initial or remaining lease terms in excess of one year, excluding the lease and sublease referenced in Note 5.

Year Ending December 31, 2014

2015 $ 78,000 2016 $ 31,350

Commitments - STCHC is a recipient of several grants and awards of federal and state funds. These grants and awards are governed by various federal and state guidelines, regulations, and contractual agreements. The administration of the programs and activities funded by these grants and awards is under the contract and administration of STCHC and is subject to audit and/or review by the applicable funding sources. Any grant or award funds found to be not properly spent in

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accordance with the terms, conditions, and regulations of the funding sources may be subject to recapture.

NOTE 14 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

Contingencies - Certain claims, suits and complaints arising in the ordinary course of operations have been filed or are pending against STCHC. In the opinion of management, all such matters are without merit or are of such kind, or involve such amounts, as would not have a significant effect on the financial position or results of operations of STCHC if disposed of unfavorably.

NOTE 15 - SUBSEQUENT EVENTS

Management has evaluated subsequent events through the date that the consolidated financial statements were available to be issued, June 12, 2015, and determined that no events occurred that require disclosure. No subsequent events occurring after this date have been evaluated for inclusion in these consolidated financial statements.

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OTHER REPORTS AND SUPPLEMENTARY SCHEDULES


Consolidating Statement of Financial Position

As of December 31, 2014

ASSETS

CURRENT ASSETS

Cash

Grants receivable

Accounts receivable, net

Interest receivable

Rent receivable

Due from related party

Current portion of prepaid expenses

LIABILITIES AND NET ASSETS

CURRENT LIABILITIES

Accounts payable and accrued liabilities

Due to plan trustee

Accrued rent payable

Uncompensated absences

Due to related party

Line of credit

Current portion of deferred revenue

Current maturities of long-term debt

Total current liabilities

DEFERRED REVENUE, net of current portion

LONG-TERM DEBT, net of current maturities

Total liabilities

COMMITMENTS AND CONTINGENCIES

NET ASSETS

Unrestricted

Unrestricted

Noncontrolling interest

St. Thomas

Community

Health

Center, Inc.

St. Thomas

Investments, LLC

St. Thomas

Real

Estate, LLC Eliminations Consolidated

332,273 $

144,813

181,644

23,062

58,677

24 $ 2,340 S

6,750

308,403

140,000

(308,403) (140,000)

334,637 144,813 181,644

23,062 6,750

58,677

Total current assets 740,469 24 457,493 (448,403) 749,583

RESTRICTED CASH 1,094,855 - - - 1,094,855

PROPERTY AND EQUIPMENT, net 516,463 - 5,314,252 (1,088,998) 4,741,717

OTHER ASSETS

Prepaid expenses, net of current portion

Deposits

Deferred financing fees, net

Note receivable 5,405,715

- 171,452

2,971

750,040

(171,452)

2,971

750,040

5,405,715

Total other assets 5,405,715 924,463 (171,452) 6,158,726

TOTAL ASSETS S 7,757,502 $ 24 S 6,696,208 S (1,708,853) $ 12,744,881

164,130 $ 207

51,299

308,403

190,222

140,000

93,632

(308,403)

(140,000)

S 164,130

207

51,299

190,222

93,632

947,893

171,452

3,534,887

(448,403)

(171,452)

7,063,865

499,490

10,598,752

4,654,232

2,877,341 24

7,063,865

(1,331,645)

963,988

(619,855)

(1,088,998)

11,098,242

456,722

963,988

Total unrestricted net assets 2,877,341 24 (367,657) (1,088,998) 1,420,710

Temporarily restricted 225,929 - - - 225,929

Total net assets 3,103,270 24 (367,657) (1,088,998) 1,646,639

TOTAL LIABILITIES AND NET ASSETS S 7,757,502 $ 24 S 6,696,208 S (1,708,853) S 12,744,881


-24-


Consolidating Statement of Financial Position

As of December 31, 2013

St. Thomas

Community

Health

Center, Inc.

St. Thomas

Investments, LLC

St. Thomas

Real

Estate, LLC Eliminations Consolidated

ASSETS

CURRENT ASSETS

Cash

Grants receivable

Accounts receivable, net

Interest receivable

Rent Receivable

Due from related party

Current portion of prepaid e3q)enses

$ 213,349

263,475

125,012

23,062

8,438

$ 24 $ 40,990

6,750

316,906

140,000

$

(316,906)

(140,000)

$ 254,363

263,475

125,012

23,062

6,750

8,438

Total current assets 633,336 24 504,646 (456,906) 681,100

RESTRICTED CASH 1,272,545 - - - 1,272,545

PROPERTY AND EQUIPMENT, net 703,754 - 5,487,820 (1,118,430) 5,073,144

OTHER ASSETS

Prepaid expenses, net of current portion

Deposits

Deferred financing fees, net

Note receivable 5,405,715

- 311,452

2,971

780,027

(311,452)

2,971

780,027

5,405,715

Total other assets 5,405,715 1,094,450 (311,452) 6,188,713

TOTAL ASSETS $ 8,015,350 S 24 S 7,086,916 S (1,886,788) S 13,215,502

LIABILITIES AND NET ASSET

CURRENT LIABILITIES

Accounts payable and accrued liabilities

Due to plan trustee

Accrued rent payable

Uncompensated absences

Due to related party

Line of credit

Current portion of deferred revenue

Current maturities of long-term debt

S 228,621

5,132

34,797

316,906

251,000

140,000

92,700

$ $ $

(316,906)

(140,000)

S 228,621

5,132

34,797

251,000

92,700

Total current liabilities 1,069,156 - - (456,906) 612,250

DEFERRED REVENUE, net of current portion 311,452 - - (311,452) -

LONG-TERM DEBT, net of current maturities 3,620,846 - 7,063,865 - 10,684,711

COMMITMENTS AND CONTINGENCIES - - - - -

NET ASSETS

Unrestricted

Unrestricted

NoncontroUing interest

2,728,135 24 (946,179)

969,230

(1,118,430) 663,550

969,230

Total unrestricted net assets 2,728,135 24 23,051 (1,118,430) 1,632,780

Temporarily restricted 285,761 _ . _ 285,761

Total net assets 3,013,896 24 23,051 (1,118,430) 1,918,541

TOTAL T.TARTT.I 1 IKS AND NET ASSETS S 8,015,350 S 24 S 7,086,916 S (1,886,788) S 13,215,502


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Consolidating Statement Of Activities


St. Thomas

Community St. Thomas

Health St. Thomas Real

Center, Inc. Investments, LLC Estate, LLC Eliminations Consolidated

Operating revenues

contractual allowances and discounts

Provision for bad debts

$ 3,806,396 $

(139,611)

s - s - $ 3,806,396

(139,611)

Net patient service revenue,

less provision for bad debts

Contributions

3,666,785

150,320

- - 3,666,785

150,320

Grant revenues

Donated facilities and services

Other revenues

2,796,585

6,450

1,327,565 120,326 (179,326)

2,796,585

6,450

1,268,565

Total operating revenues 7,947,705 120,326 (179,326) 7,888,705

Operating expenses

Health care

Management and general

4,080,618

3,738,357 511,032 (169,400)

4,080,618

4,079,989

Total operating expenses 7,818,975 511,032 (169,400) 8,160,607

Nonoperating expenses

Loss on equity investments

attributable to noncontrolling interest 4,206 (4,206) - -

Excess of revenues over {under) expenses

attributable to the Clinic s 124,524 $ S (386,500) s (9,926) s (271,902)


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Consolidating Statement of Activities


St. Thomas

Community St. Thomas

Health St. Thomas Real

Center, Inc. Investments, LLC Estate, LLC Eliminations Consolidated

Operating revenues

contractual allowances and discounts

Provision for bad debts

$ 4,634,740 $

(150,326)

s - s - $ 4,634,740

(150,326)

Net patient service revenue,

less provision for bad debts

Contributions

4,484,414

30,194

- - 4,484,414

30,194

Grant revenues

Donated facilities and services

Other revenues

2,410,051

53,350

1,858,068 207,206 (160,721)

2,410,051

53,350

1,904,553

Total operating revenues 8,836,077 207,206 (160,721) 8,882,562

Operating expenses

Health care

Management and general

3,609,982

3,958,703 524,232 (190,153)

3,609,982

4,292,782

Total operating expenses 7,568,685 524,232 (190,153) 7,902,764

Nonoperating expenses

Loss on equity investments

attributable to noncontrolling interest 3,170 (3,170) - -

Excess of revenues over {under) expenses

attributable to the Clinic s 1,264,222 $ S (313,856) s 29,432 s 979,798


-27-

ST. THOMAS COMMUNITY HEALTH CENTER, INC. SCHEDULE OF COMPENSATION, BENEFITS, AND OTHER PAYMENTS TO AGENCY

HEAD OR CHIEF EXECUTIVE OFFICER

Agency Head Name: Dr. Donald Erwin, MD

Purpose Amount Salary $ 193,179 Benefits-insurance Benefits-retirement Benefits-medicare Benefits-worker's compensation Benefits-unemployment Cell phone and Ipad dues Uniforms Per diem Reimbursements-advertising Travel Fuel usage Conference travel Continuing professional education fees 685 Housing Unvouchered expenses 3,322 Special meals 1,969 Total $ 199.155

See accompanying independent auditor's report 28



INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF CONSOLIDATED FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

To the Board of Directors of St. Thomas Community Health Center, Inc. and subsidiaries New Orleans, Louisiana

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 St. Thomas Community Health Center, Inc. and subsidiaries (the Clinic) which comprise of the consolidated statement of financial position as of December 31, 2014, and the related consolidated statements of activities and changes in net assets, functional expenses and cash flows for the year then ended, and the related notes to consolidated financial statements, which collectively comprise the Clinic's basic financial statements, and have issued our report thereon dated June 12, 2015.

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered the Clinic'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 opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Clinic's internal control. Accordingly, we do not express an opinion on the effectiveness of the Clinic's internal control.

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 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 the Clinic's financial statements are free from 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.

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 Clinic'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 entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

June 12, 2015



INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY 0MB CIRCULAR A-133

To the Board of Directors of St. Thomas Community Health Center, Inc. and subsidiaries New Orleans, Louisiana

Report on Compliance for Each Major Federal Program

We have audited St. Thomas Community Health Center, Inc. and subsidiaries' (the Clinic) compliance with the types of compliance requirements described in the 0MB Circular A-133 Compliance Supplement that could have a direct and material effect on each of the Clinic's major federal programs for the year ended December 31, 2014. The Clinic's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of current year findings and questioned costs.

Management's Responsibility

Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs.

Auditor's Responsibility

Our responsibility is to express an opinion on compliance for each of the Clinic'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 0MB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the Clinic's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the Clinic's compliance.

Opinion on Each Major Federal Program

In our opinion; the Clinic compiled; in ail 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 December 31; 2014.

Report on Internal Control Over Compliance

Management of the Clinic is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above, in planning and performing our audit of compliance; we considered the Clinic's internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with 0MB Circular A-133; but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly; we do not express an opinion on the effectiveness of the Clinic's internal control over compliance.

A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees; in the normal course of performing their assigned functions; to prevent; or detect and correct; noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency; or combination of deficiencies; in internal control over compliance; such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented; or detected and corrected; on a timely basis. A significant deficiency in internal control over compliance is a deficiency; or a combination of deficiencies; in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance; yet important enough to merit attention by those charged with governance.

Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify ail 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 0MB Circular A-133. Accordingly; this report is not suitable for any other purpose.

Report on Schedule of Expenditures of Federal Awards Required by 0MB Circular A-133

We have audited the financial statements of the Clinic as of and for the year ended December 31, 2014; and have issued our report thereon dated June 12, 2015, which contained an unmodified opinion on those financial statements. 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 is presented for purposes of additional analysis as required by 0MB Circular A-133 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 schedule of expenditure of federal awards is fairly stated in all material respects in relation to the financial statements as a whole.

June 12, 2015


Schedule of Expenditures of Federal Awards

CFDA

Number Expenditures

EXPENDITURES OF FEDERAL AWARDS:

Awards made directly to St. Thomas Community Health Center, Inc. -

U.S. Department of Health and Human Services:

Health Centers Cluster-Cluster Department of Health and Human Services Direct Programs

Consolidated Health Centers (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) 93.224 $ 997,650

Affordable Care Act (ACA) Grants for New and Expanded Services under the Health Center Program 93.527 64,798

Total Health Centers Cluster-Cluster 1,062,448

Passed through Louisiana State University:

Centers for Disease Control and Prevention

Cancer Prevention and Control Programs for State, Territorial and Tribal

Organizations financed in part by Prevention and Public Health Funds 93.752 101,493

Total expenditures of federal awards $ 1,163,941

FEDERAL LOANS:

Loans made directly to St. Thomas Community Health Center, Inc. -

U.S. Department of Housing and Urban Development:

Passed through State of Louisiana, Office of Community Development,

Louisiana Recovery Authority: 14.228 $ 1,724,309

Total federal loans S 1,724,309


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St. Thomas Community Health Center, Inc. And Subsidiaries Notes to the Schedule of Expenditures of Federal Awards

NOTE 1 - GENERAL

The accompanying Schedule of Expenditures of Federal Awards presents the revenues from federal awards of STCHC as defined in Note 1 to STCHC's basic financial statements. All federal awards were received directly from Federal agencies.

NOTE 2 - BASIS OF ACCOUNTING

The accompanying Schedule of Expenditures of Federal Awards includes the federal grant activity of STCHC and is presented on the accrual basis of accounting.

NOTE 3 - RELATIONSHIP TO BASIC FINANCIAL STATEMENTS

Federal awards revenues are reported in STCHC's basic financial statements as program revenues.

NOTE 4 - RELATIONSHIP TO FEDERAL FINANCIAL REPORTS

Amounts reported in the accompanying Schedule of Expenditures of Federal Awards are derived from revenues as expenditures related to federal financial reports were not available.

NOTE 5 - FEDERAL AWARDS

Federal awards do not include STCHC's operating income from rents or income from investments (or other non-federal sources).

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St. Thomas Community Health Center, Inc. And Subsidiaries Schedule of Current Year Findings And Questioned Costs

PART I - SUMMARY OF AUDITOR'S RESULTS

1. Type of report issued on the consolidated financial statements: Unmodified.

2. Did the audit disclose any reportable conditions in internal control: None Reported.

3. Were any of the reportable conditions material weaknesses: Not Applicable.

4. Did the audit disclose any noncompliance which is material to the consolidated financial statements of the organization: None Reported.

5. Did the audit disclose any reportable conditions in internal control over major programs: None Reported.

6. Were any of the reportable conditions in internal control over major programs material weaknesses: Not Applicable.

7. Type of report issued on compliance for major programs: Unmodified.

8. Did the audit disclose any audit findings which the independent auditors are required to report under 0MB Circular A-133, Section 510(a): None reported.

9. The following is an identification of major programs:

Consolidated Health Centers, CFDA #93.224 Community Development Block Grant, CFDA# 14.228

10. The dollar threshold used to distinguish between Type A and Type B Programs, as described in 0MB Circular A-133, Section S20(b) was SSOO.OOO.

11. Did the auditee qualify as low-risk under 0MB Circular A-133, Section 530: Yes.

PART II - FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

There are neither findings nor questioned costs.

PART III - FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

There are neither findings nor questioned costs.

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