gulf coast teaching family services,...

RECEIVEDLEGISLATIVE AUDITOR

05 JAN-3 AM9:««3

GULF COAST TEACHINGFAMILY SERVICES, INC.

(A NONPROFIT ORGANIZATION)

FINANCIAL REPORT ANDSUPPLEMENTARY INFORMATION

June 30, 2004 and 2003

Under provisians ef §fgte i»w, this report is a publicdocument. Acopy of the r§p0rt 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

GULF COAST TEACHING FAMILY SERVICES, INC.

TABLE OF CONTENTSJUNE 30, 2004 and 2003

INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS 1-2

FINANCIAL STATEMENTSStatements of Financial Position 3Statements of Activities 4Statement of Functional Expense - June 20, 2004 5Statements of Cash Flows 6Notes to Financial Statements 7-17

INDEPENDENT AUDITOR'S REPORT ON THE SUPPLEMENTARY 18INFORMATION

SUPPLEMENTARY INFORMATION

SCHEDULESSchedule 1 - Combined Statement of Revenues and Expenses By Cost ReportGrouping 19Schedule 2 - Statement of Expenses by Program / Fund - Year Ended June 30, 2004 20-38

SPECIAL REPORTS OF INDEPENDENT AUDITOR

Report on Compliance and on Internal Control Over Financial ReportingBased on an Audit of Financial Statements Performed in Accordance 39-40With Government Auditing Standards

Report on Compliance with Requirements Applicable to Each Major ProgramAnd On Internal Control Over Compliance Required by OMB 41-42Circular A-133

SCHEDULESSchedules of Findings and Questioned Costs

Schedule 1 - Summary of Audit Results 43Schedule 2 - Reportable Conditions - Financial Statements - Current Year 44Schedule 3 - Reportable Conditions - Major Federal Award Programs Audit 45Schedule 4 - Summary of Prior Year's Audit Findings 46Schedule 5 - Management's Corrective Action Plan for Current Year Findings 47Schedule 6 - Schedule of Expenditures of Federal Awards for the Year Ended June

30, 2004 and Related Notes 48-49

••••••••••••• JOSEPH V.FRANKS II, C.P.A.

B E R N A R D & F R A N K SA CORPORATION OF CERTIFIED PUBLIC ACCOUNTANTS NICHOLAS F. CHETTA, C.P.A.

NICHOLAS W. LAFRANZ III, C.P.A.

JAM ESL WHITE, C.P.A.

INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS

To the Board of DirectorsGulf Coast Teaching Family Services, Inc.New Orleans, Louisiana

We have audited the accompanying statements of financial position of Gulf Coast Teaching FamilyServices, Inc. (a nonprofit corporation), as of June 30, 2004 and 2003, and the related statements ofactivities and cash flows for the years then ended and the statement of functional expenses for the yearended June 30, 2004. These financial statements are the responsibility of Gulf Coast Teaching FamilyServices, Inc.'s management. Our responsibility is to express an opinion on these financial statementsbased on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United Statesof America and the standards applicable to financial audits contained in Government Auditing Standards.issued by the Comptroller General of the United States. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amountsand disclosures in the financial statements. An audit also includes assessing the accounting principlesused and significant estimates made by management, as well as evaluating the overall financial statementpresentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, thefinancial position of Gulf Coast Teaching Family Services, Inc. as of June 30, 2004 and 2003, and thechanges in its net assets and its cash flows for the years then ended in conformity with accountingprinciples generally accepted in the United States of America.

In accordance with Government Auditing Standards, we have also issued our report dated December 22,2004, on our consideration of Gulf Coast Teaching Family Services, Inc.'s internal control over financialreporting and our tests of its compliance with certain provisions of laws, regulations, contracts andgrants. That report is an integral part of an audit performed in accordance with Government AuditingStandards and should be read in conjunction with this report in considering the results of our audit.

1

MEMBERS: AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS; SOCIETY OF LOUIS IANA CERTIFIED PUBLIC ACCOUNTANTS

4141 VETERANS BLVD., SUITE 313, METAIRIE, LA 70002 | PHONE: (504) 885-0170 FAX: (504) 456-9531

Our audit was performed for the purpose of forming an opinion on the basic financial statements of GulfCoast Teaching Family Services, Inc. taken as a whole. The accompanying schedule of expenditures offederal awards is presented for purposes of additional analysis as required by U.S. Office of Managementand Budget Circular A-133, Audits of States, Local Governments, and'Non-Profit Organizations, and isnot a required part of the basic financial statements. Such information has been subjected to the auditingprocedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in allmaterial respects, in relation to the basic financial statements taken as a whole.

December 22, 2004

GULF COAST TEACHING FAMILY SERVICES, INC.(A NONPROFIT ORGANIZATION)

STATEMENTS OF FINANCIAL POSITIONJUNE 30, 2004 AND 2003

ASSETS

CURRENT ASSETSCash and cash equivalentsInvestment securitiesReceivables:

ProgramAllowance for doubtful accountsOther receivables

Total receivables

Prepaid expensesTotal current assets

PROPERTY AND EQUIPMENT - AT COSTLandBuilding and improvementsSoftwareLeasehold improvementsFurniture and equipmentTransportation equipmentLeased equipment under capitalized leases

Less accumulated depreciation and amortization

DEPOSITS

Total assets

2004 2003

$

$

$

$

$

$

2,452,913123,932

3,067,162(300,000)

21,7572,788,919

189,4815,555,245

247,3601,021,978

169,54098,706

822,260141,176

13,7832,514,803

(1,202,033)1,312,770

7,790

6,875,805

$ 602,077123,176

2,433,424(195,000)

19,2042,257,628

158,344$ 3,141,225

$ 247,360983,170130,26893,466

699,825112,16613,783

2,280,038(1,007,001)

$ 1,273,037

$ 7,790

$ 4,422,052

See Notes to Financial Statements.

LIABILITIES AND NET ASSETS

CURRENT LIABILITIESNotes payableCurrent portion of mortgage notes payableAccounts payableAccrued liabilities

Total current liabilities

2004

62,083 $40,432

494,2341,826,144

2003

61,33443,871

495,612998,457

$ 2,422,893 $ 1,599,274

LONG-TERM LIABILITIES, LESS CURRENT PORTIONMortgage notes payable $ 384,557 $ 423,711

COMMITMENTS AND CONTINGENCIES

UNRESTRICTED NET ASSETS $ 4,068,3 55_ $ 2,399,067

Total liabilities and net assets $ 6,875,805_ $ 4,422.052


STATEMENTS OF ACTIVITIESYEARS ENDED JUNE 30, 2004 AND 2003

UNRESTRICTED NET ASSETS

REVENUE, GAINS, AND SUPPORT:Grants and fees for servicesDonationsInterest incomeOther income

Total revenues, gains and support - unrestricted

2004 2003

$ 25,097,418 $ 19,838,785336,724 292,032

9,529 1,3635,999 31,863

$ 25,449,670 $20,164,043

EXPENSES:PROGRAM SERVICES:

Community group homesFoster Care/Professional CarePersonal care attendantsSupervised independent livingRespite servicesOthers, in totalHomeless/HousingElderly Services

Total program expenses

ADMINISTRATIVE AND GENERAL

Fund raising

Total expenses

INCREASE (DECREASE)IN UNRESTRICTED NET ASSETS

NET ASSETS, BEGINNING OF YEAR

NET ASSETS, END OF YEAR

$ 570,7251,451,7588,027,6325,563,7141,155,3091,526,1191,308,961

151,813

$ 19,756,031

$ 3,760,943

263,408

$ 532,6191,533,7035,203,6044,369,2943,141,0951,238,681

602,547131,106

$ 16,752,649

$ 2,904,171

232,667

$ 23,780,382 $ 19,889,487

$ 1,669,288 $ 274,556

2,399,067 2,124,511

$ 4,068,355 $ 2,399,067



(A NONPROFIT ORGANIZATION)

STATEMENT OF FUNCTIONAL EXPENSES

YEAR ENDED JUNE 30,2004

Salaries and wages

Severance package

Employee benefits

Payroll taxes

Workmen's compensation

Total payroll cost

Office supplies

Advertising

Bad debts

Telephone

Training

Travel

HUD supporting services

Professional services

Insurance

Repairs and maintenance

Depreciation

Interest

Lease expense

Client needs

Room and board

Contractual services

Utilities

Consultants

Computer expenses

Recognition expense

Care facilities fees

Rental expense

Food

Life skills training

Medical supplies

Others, in total

Total direct expenses

Program Services

Community

Group

Homes

$ 246,986

7,151

18,759

8,157

281,053

1,117

-

19,226

2,532

1,017

2,941

1,132

27,913

10,096

22,219

10,007

-

27,320

-

-

15f887

12,617

-

-

50,398

45,769

2,418

37,063

$ 570,725

Professional/

Foster

Care

$ 366,518

9,553

27,499

12,443

416,013

1,995

3,224

1,420

5,827

3,128

18,463

-

-

455

-

-

7,408

26,906

273,717

660,814

872

-

-

2,692

-

-

45

28,779

$ 1,451,758

Personal

Care

Attendants

$ 6,718,862

67,440

525,137

220,636

7,532,075

17,396

5,057

109,911

29,126

19,098

109,921

-

-

15,393

3,278

-

83,729

1,841

-

-

12,355

4,530

3,059

16,020

-

-

12,963

51,880

$ 8,027,632

Supervised

Independent

Living

$ 4,524,077

50,290

349,740

148,941

5,073,048

14,620

4,231

89,014

25,096

16,245

129,337

31,252

2,347

10,319

1,239

-

48,773

25,875

-

-

1,784

6,123

2,739

10,174

-

-

6,772

64,726

$ 5,563,714

Respite

Services

$ 876,121

15,410

67,096

32,747

991,374

3,942

1,029

41,842

9,552

6,250

19,335

1,440

-

4,676

-

-

21,621

3,611

4,125

-

3,707

2,295

-

2,784

-

-

1,731

35,995

$ 1,155.309

Administrative & general allocated 96,551 $ 269,580 $ 1,413,562 $ 949,924 $ 214,964

Program Services Supporting Services

Housing/

Homeless

$ 498,564

-

16,203

37,196

16,351

568,314

7,730

-

-

18,153

2,348

26,715

98,802

7,375

-2,240

5,502

-

-

317,380

10,966

-

-

22,255

24,338

-

-

128,381

-

53,695

-14,767

$ 1,308,961

Elderly

Services

$ 122,443

-910

9,685

4,125

137,163

742

264

-

1,094

1,258

3,618

-

-

-

361

-

-

1,805

1,697

-

-

704

-

-

-

-

-

-

-

518

2,589

$ 151,813

Other

Programs

$ 872,971

-

21,749

67,051

28,839

990,610

6,286

3,077

2,309

19,065

8,906

150,065

-

44,596

25,409

4,574

20,873

8,539

18,207

177,091

2,934

6,426

4,353

-

2,257

549

-

-

-

-

28529,708

$ 1,526,119

Total

Program

Services

$ 14,226,542

-

188,706

1,102,163

472,239

15,989,650

53,828

16,882

263,722

110,445

58,250

460,395

98,802

85,795

55,669

48,114

53,111

18,546

181,543

581,721

291,742

667,240

39,662

47,820

32,393

32,219

50,398

128,381

45,769

53,695

24,732

265,507

$ 19,756,031

Administrative

and General

$ 1,770,366

473,148

29,625

122,458

46,576

2,442,173

82,301

8,608

68563,019

31,777

20,360

-259,358

110,412

34,111

141,164

10,661

306,139

---

15,874

-

32,358

30,760

-1,307

-

-

-

169,876

$ 3,760,943

Fund

Raising

$ 60,752

-2,653

4,338

2,045

69,788

6,130

141,817

-1,441

-

1,377

-1,081

-

1,025

608

-

-

-

-

-

-

-

422

340

-

-

-

-

-

39,379

$ 263,408

Total

Supporting

$ 1,831,118 S

473,148

32,278

126,796

48,621

2,511,961

88,431

150,425

685

64,460

31,777

21,737

-

260,439

110,412

35,136

141,772

10,661

306,139

-

-

-

15,874

-

32,780

31,100

-

1,307

-

-

-

209,255

$ 4,024,351 $

GRAND

TOTALS

16,057,660

473,148

220,984

1,228,959

520,860

18,501,61 1

142,259

167,307

264,407

174,905

90,027

482,132

98,802

346,234

166,081

83,250

194,883

29,207

487,682

581,721

291,742

667,240

55,536

47,820

65,173

63,319

50,398

129,688

45,769

53,695

24,732

474,762

23,780,382

$ 22,315 243,838 S 3,210,734 S 551,310 $ 22,099 573,409 3,784,143


STATEMENTS OF CASH FLOWSYEARS ENDED JUNE 30, 2004 AND 2003

CASH FLOWS FROM OPERATING ACTIVITIESIncrease in unrestricted net assetsAdjustments to reconcile increase in unrestricted net assets

to net cash provided by operating activities:DepreciationChanges in assets and liabilities:

(Increase) decrease in program receivables(Increase) decrease in other receivables(Increase) decrease in prepaid expensesIncrease (decrease) in accounts payable

and accrued liabilities

Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIESIncrease in investment securities, netPurchases of property and equipmentDeposits (made) returned

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTTVITIESProceeds from notes payablePrincipal payments made on notes payablePrincipal payments on mortgage notes payable

Net cash used in financing activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of year

Cash and cash equivalents, end of year

SUPPLEMENTAL DISCLOSURES OF CASH INFORMATION

Cash paid for:Interest

$

$

$

$

$

$$

$

ION

$

2004

1,669,288

195,032

(528,738)(2,553)

(31,137)

826,309

2,128,201

(756)(234,765)

(235,521)

289,771(139,022)(192,593)

(41,844)

1,850,836

602,077

2,452,913

28,571

2003

$ 274,556

176,551

(290,392)6,475

(30,658)

130,510

$ 267,042

$ (1,240)(90,112)

4,059

$ (87,293)

$ 109,134(100,196)(31,006)

$ (22,068)

$ 157,681

444,396

$ 602,077

$ 42,685


GULF COAST IE ACHING FAMILY SERVICES, INC.

NOTES TO FINANCIAL STATEMENTSJUNE 3 0,2004 and 2003

Note 1 - ORGANIZATION

Gulf Coast Teaching Family Services, Inc. is a nonprofit corporation organizedexclusively for charitable, religious, educational and scientific purposes. TheOrganization maintains group homes, child and family centers and other relatedprograms for the youth and their families and provides a program, which will give theyoung people and their families an opportunity to become normalized, independent,productive and respected citizens of the community. These services are provided in theSouth Louisiana area.

The Organization's major programs include the following:

Community Group Homes - A residential treatment facility for mentally impairedadults.

Professional Care Program - This program provides foster homes in the community forabused, neglected or troubled children and adolescents, emotionally disturbed childrenand children and adults with physical and/or mental disabilities. This program alsolocates and serves runaways and homeless youth through prevention, crisis interventionand follow up services.

Personal Care Attendant Services - PCA provides assistance for adults or children withmental or physical disabilities in performing the activities of daily living that they mightotherwise not be able to perform alone.

Supported Independent Living - The SIL program works with individuals with mentaland /or physical disabilities and for older adolescents in need of extra support,assistance and monitoring.

Respite Services - Respite Services are offered to parents with children or adults withphysical/mental illness and is designed to offer relief from the demanding care for theirspecial needs.

Housing/Homeless - Supportive Housing and services to assist the homeless transitioninto temporary housing and later to permanent housing. Services include but are notlimited to assistance in finding housing, acquiring necessary furnishings, integration intothe community and establishing community supports. Management InformationSystems are also established and maintained for present and future assistance to thehomeless.


NOTES TO FINANCIAL STATEMENTSJUNE 30, 2004 and 2003

Note 1 - ORGANIZATION (Continued)

Elderly - This type of service covers all needs of the elderly such as general hygieneneeds, assisting with grocery shopping, meal planning and preparation, teaching andassisting with activities, finding resources and encouraging interactions with otherpersons with similar interest.

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies used in the preparation of theaccompanying financial statements follows:

1. Basis of Accounting and Financial Statement Presentation

The accompanying financial statements are presented on the accrual basis ofaccounting in accordance with generally accepted accounting principles.

The Organization follows the financial statement presentation recommended byStatement of Financial Accounting Standards (SFAS) No. 117, Financial Statementsof Not-For-Profit Organizations. Under SFAS No. 117, the Organization is requiredto report information regarding its financial position and activities according to threeclasses of net assets (unrestricted net assets, temporarily restricted net assets, andpermanently restricted net assets) based upon the existence or absence of donor-imposed restrictions. In addition, the Organization is required to present a statementof cash flows. At present, all of the Organizations funds are included in theUnrestricted category,

The Organization also follows the recommendations included in SFAS No. 116,Accounting for Contributions Received and Contributions Made. In accordance withSFAS No. 116, contributions received are recorded as unrestricted, or permanentlyrestricted support, depending on the existence and/or nature of any donorrestrictions. As of June 30, 2004 and 2003, the Organization has not received anycontributions with donor-imposed restrictions that would result in temporarily orpermanently restricted net assets.

2. Use of Estimates

The preparation of financial statements in conformity with generally accepted accountingprinciples requires management to make estimates and assumptions that affect certainreported amounts and disclosures. Accordingly, actual results could differ from thoseestimates.


NOTES TO FINANCIAL STATEMENTS (CONTINUED)JUNE 30, 2004 and 2003

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

3. Income Taxes

The Organization is a nonprofit organization and exempt from income taxes underSection 501(c)(3) of the Internal Revenue Code and classified by the Internal RevenueCode as other than a private foundation.

4. Cash and Cash Equivalents

For purposes of the statement of cash flows, the Organization considers cash on handand demand deposits to be cash equivalents.

5. Allowance For Doubtful Accounts

The Organization has established an allowance for doubtful accounts in order to allowfor corrections and billing adjustments that may be related to accounts receivablebalances at June 30, 2004 and 2003.

Actual billing adjustments and bad debts, if any, are charged to the specific fund orprograms as determined. Bad debt expense for the years ended June 30, 2004 and 2003was $264,407 and $256,686, respectively.

6. Depreciation and Amortization

Property and equipment are carried at cost. Depreciation and amortization are calculatedusing the straight-line method. Depreciable lives for most assets in the class are asfollows: Buildings, 20 years; Leasehold improvements, 10 years or lease term if shorter;Furniture and fixtures, 10 years; Computers and related equipment, 3 to 5 years;Transportation equipment, 3 to 5 years. When assets are retired or disposed o£ the costand related accumulated depreciation are removed from the accounts, and any resultinggain or loss is reflected in income for the period. The cost of maintenance and repairs ischarged to income as incurred; significant renewals and betterments are capitalized.Donated property is capitalized at fair value. Depreciation and amortization expenseamounted to $195,032 and $176,551 for the years ended June 30, 2004 and 2003,respectively.




7. Capital Leases

For financial reporting, the Organization has capitalized certain leased equipment. Thestatement of financial position reflects all capitalized lease equipment as assets andobligations under capital lease. The capital lease obligations are recorded at the presentvalue of the future minimum lease payments discounted at the interest rate implicit ineach lease.

8. Employee Vacation Benefits

Employee vacation benefits are accrued and expensed in the period earned by theemployee.

9. Program Revenues

Program revenues earned under reimbursement type contracts are recorded as revenuesin the appropriate program when the related expenses are incurred.

Program revenues earned on fee for service and per-diem contracts are recorded asrevenues when services are provided.

10. Allocated Costs

Expenses are charged to each program directly when the charge is identified to theprogram. Program expenditures which cannot be directly identified to a program areallocated based on square footage, usage statistics and ratio of program payrollexpenses to total payroll expenses as appropriate. Management and general expensesinclude those expenses that are not directly identifiable with any other specificfunction but provide the overall support and direction of the Center.

For management analysis purposes, the Organization allocated administrative costs ofthe central and regional offices in the amount of $3,210,734 and $2,526,809 to thevarious programs it administered during the years ended June 30, 2004 and 2003,respectively. The allocation is based on proportion of direct program cost to total directprogram costs. These allocated costs are included in Administrative and Generalexpenses in the Statement of Activities.

10




11. Contributions - Donations

Contributed property and equipment is recorded at fair value at the date of donation. Ifthe donors stipulate how long the assets must be used, the contribution is recorded asrestricted support. In the absence of such stipulation, contributions of property andequipment are recorded as unrestricted support. To date, all contributions have beenincluded in unrestricted support.

12. In Kind - Matching

Independent Living Program and HUD contracts require a match of Program B funds byGulf Coast Teaching Family Services, Inc. of an equal amount. This match is providedthrough in-kind services. These services are reported to the funding agency on monthlybillings. They are not included in the revenues and expenditures in the Statements ofActivities of the financial statements, or in the supplemental information schedules.During the year ended June 30, 2004 in-kind services provided as match were $33,631in Lafayette and $37,531 in Houma. During the year ended June 30, 2004, in-kindservices provided as match were $147,485 for the HUD program. During the year endedJune 30, 2003, in-kind services provided as match were $32,266 in Lafayette and$25,177 in Houma. During the year ended June 30, 2003, in-kind services provided asmatch were $8,678 for the HUD program.

Note 3 - INVESTMENT SECURITIES

Investment securities at June 30, 2004 and 2003 consist of the following:

2004 2003

Mutual Fund - US. Government Obligations Fund $ 123.932 $ 123r176

Cost and fair market value are the same at June 30, 2004 and 2003.

These funds earned approximately $876 and $1,363 and incurred expenses of approximately$58 and $123 for the years ended June 30, 2004 and 2003, respectively.

11



Note 4 - PROGRAM RECEIVABLES

Program receivables consist of reimbursements for expenses incurred or revenue earned onfee for service and per-diem contracts. Program receivables consist of the following as ofJune 30, 2004 and 2003:

2004 2003

U.S. Department of Health and Human Services $ 101,640 $Medicaid 2,012,246 1,540,423U.S. Department of Housing and Urban Development 172,920 69,852State of Louisiana:

Department of Public Safety and Corrections 39,497 61,652Office of Mental Health 139,585 210,817Office of Community Services 408,266 395,152Office of Citizens with Developmental Disabilities 20,879 35,296Louisiana Rehabilitation Services 39,572 24,110Department of Health & Hospitals CAHSD 16,440 9,356Office of Youth Development 63,336

Other:Capital Area Agency on Aging 22,044 27,270Private 3,960 22,658JPHSA 26,361 36,423Various 416 415

Subtotal $ 3,067,162 $2,433,424Less: Allowance for Doubtful Accounts (300.000> (195.000^Total, net S 2.767.162 S 2.238.424

Note 5 - NOTES PAYABLE

Notes payable consist of the following at June 30, 2004:

Note payable to Cannanwill, Inc. dated 2-16-2004 in theoriginal amount of $139,771 and payable in nine monthlypayments of $15,521. Note bears interest at 5.5%.Final payment due 11-14-2004. $ 62.083

Notes payable consist of the following at June 30, 2003:

Note payable to Cannanwill, Inc. dated 3-12-2003 inthe original amount of $109,134 and payable in nine monthlypayments of $12,438. Note bears interest at 6.14%,Final payment due 11-12-2003. S 61.334

12



Note 6 - ADDITIONAL BREAKDOWN OF PROGRAM AND OPERATING EXPENSES

For reporting purposes, the Organization has separated two additional Program Groups,Homeless/Housing and Elderly Services, which in the past were included with in the OtherProgram grouping. In addition, the Organization has separated its Fund Raising expensesfrom Administrative and general for the current reporting period.

Note 7 - MORTGAGE NOTES PAYABLE

Mortgage notes payable consist of the following at June 30,2004:

Current Long-termNote payable to Hibemia National Bank, datedOctober 21, 2003 in the original amount of $150,000and payable in 59 monthly installments of $1,252 with afinal payment of $114, 923 due October 21, 2008.Note bears interest at the rate of 5.75 percent. $ 6,832 $ 138,826

Note payable to Hibernia National Bank dated6-4-98 in the original amount of $ 400,000 andpayable in 180 monthly payments of $3,876.Note bears interest at 4.9%. Note is secured byreal estate having an appraisal value of $648,000. 33.600 245.731

Total $ 40.432 $ 384.557

Mortgage notes payable consist of the following at June 30, 2003:

Current Long-termNote payable to Richard X. Patin dated 7-1-97in the original amount of $180,000 and payable in 180monthly payments of $1,772. Note bears interest at8.5 % and is secured by real estate.Final payment was due July 2012. Paid ofFin 2003. $ 10,320 $ 123,160

13



Note 7 - MORTGAGE NOTES PAYABLE (Continued)

Note payable to Richard X. Patin dated 11-12-97in the original amount of $30,000 and payablein 180 monthly payments of $295. Note bearsinterest at 8.5 % and is secured by real estate.Final payment due 11-12- 2012. Paid offin 2003.

Note payable to Hibernia National Bank dated6-4-98 in the original amount of $ 400,000 andpayable in 180 monthly payments of $3,876.Note bears interest at 2.55 % over the interestrate on 1-5 year U.S. Treasury Securities. Rateat issue was 8.11%. Note is secured by realestate having an appraisal value of $648,000.

Total

Current

1,651

31.900

S 43.871

Long-term

21,266

279.285

S 423.711

The maturities for the mortgage notes payable are as follows:Year Ending June 30:

2005

2006 $ 42,2352007 44,6632008 162,8282009 40,800Thereafter 94,031Total S 384.557

Interest expense for the years ended June 30, 2004 and 2003 amounted to $28,571 and$42,685, respectively.

14



Note 8 - ACCRUED LIABILITIES

Accrued liabilities consist of the following at June 30, 2004 and 2003:

Accrued salaries and payroll taxesRefunds due State of LouisianaCompensated absencesOtherSeverance package

Total

2004

S 1.826.144

2003

$ 708,055157,087426,33061,524473.148

$ 465,221195,871333,5343,831__.

S 998.457

Severance Package

The Organization has signed a severance agreement with its former Executive Director. TheAgreement calls for an initial payment of $60,000 and a monthly payment of $4,231 fromJanuary, 2004 until October, 2008. The Agreement has been recorded as expense for thecurrent year and the related liability has been recorded at its net present value as of June 30,2004.

Due to State of Louisiana

This liability is being paid off monthly by offsetting current amounts due from the Stateagainst the liability.

15



Note 9 - COMMITMENTS

The Organization leases facilities and equipment under operating leases expiring through theyear 2011. Rental expense related to these leases was $481,846 and $440,818 for the yearsended June 30, 2004 and 2003, respectively. Minimum future rental payments due underthese leases as of June 30, 2004 are as follows:

Year EndingJune 30. All Renewed Non-Cancelable

2005 $ 453,000 $ 285,0002006 463,000 296,0002007 473,000 305,0002008 483,000 305,0002009 483.000 305.000

Total $ 2.355.000 $ 1.496.000

Management expects that in the normal course of business leases will be renewed or replacedby other leases.

Note 10 - CONCENTRATIONS OF CREDIT RISK

State law requires that deposits of all political subdivisions be fully collateralized at all times.Acceptable collateralizations includes FDIC/FSLIC insurance and the market value ofsecurities purchased and pledged to the political subdivision. The Organization, being aquasi-public nonprofit entity, is required to comply with these regulations. Obligations of theUnited States, the State of Louisiana and certain political subdivisions are allowed as securityfor deposits. Obligations furnished as security must be held by the political subdivision orwith an unaffiliated bank or trust company for the account of the political subdivision. Atvarious times during the year, deposits in excess of FDIC insurance were collateralized by thesecurities described above.

Note 11 - UNEMPLOYMENT INSURANCE FUND

Effective July 1, 1992, the Organization became self-insured for employee unemploymentcompensation claims through the establishment of an Organization unemployment insurancefund.

16


NOTES TO FINANCIAL STATEMENTS (CONTINUED)JUNE 3 0,2004 and 2003

Note 11 - UNEMPLOYMENT INSURANCE FUND (Continued)

Actual payments to the State for Unemployment benefits paid totaled $46,126 in 2004 and$50,963 in 2003.

All known claims as of June 30, 2004 have been recorded in the financial statements. Thefond balance of the Unemployment Insurance Fund totaled $65,539 and $64,787 as of June30, 2004 and 2003, respectively. The Unemployment Insurance Fund balance is included inunrestricted net assets for financial statement presentation.

Note 12 - ECONOMIC DEPENDENCY

The Organization receives a majority of its revenue from funds provided through programsadministered by the State of Louisiana. The program amounts are appropriated each year bythe federal and state governments. If significant budget cuts are effected at the federal and/orstate level, the amount of the funds the Organization receives could be reduced significantlyand have an adverse impact on its operations. Management is not aware of any actions thatwill adversely affect the amount of funds the Organization will receive in the next fiscal year.

Note 13 - CONTINGENCIES

Programs administered by the Organization are subject to review and audit by the variousfunding agencies. Accordingly, any disallowed payments which may arise as a result of theseaudits, may be recovered by the funding agencies in subsequent years.

Note 14 - LINE OF CREDIT

The Organization signed a Line of Credit Agreement on July 1, 2004 with a local nationalbank. The agreement has a principal amount of $750,000, a maturity date of July 1, 2005,and a variable interest rate equal to the Wall Street Journal Prime Rate. Any loans againstthe line will be secured by a Security Agreement that includes most of the Organization'sassets. The agreement also calls for several financial covenants and ratio requirements. Therewere no outstanding loans against the line at June 30, 2004. Fees of $7,500 each year werepaid to secure the agreement in 2004 and 2003.

17

SUPPLEMENTARY INFORMATION

— -— — •••••••• JOSEPH V.FRANKS II, C.P.A.

B E R N A R D & F R A N K SA CORPORATION OF CERTIFIED PUBLIC ACCOUNTANTS NICHOLAS F.CHETTA, C.P.A.

NICHOLAS W. LAFRANZIH, C.P.A.

JAMES L WHITE, C.P.A.

INDEPENDENT AUDITOR'S REPORT ON THE SUPPLEMENTARY INFORMATION


Our audit was made for the purpose of forming an opinion on the basic financial statements taken asa whole. The supplementary information contained on pages 19 to 38 is presented for purposes ofadditional analysts and is not a required part of the basic financial statements. Such information hasbeen subjected to the auditing procedures applied in the audit of the basic financial statements and,in our opinion, is fairly stated in all material respects in relation to the basic financial statementstaken as a whole.

December 22, 2004

MEMBERS: AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS; SOCIETY OF LOUISIANA CERTIFIED PUBLIC ACCOUNTANTS

4141 VETERANS BLVD., SUITE 313, METAIRIE, LA 70002 | PHONE: (504) 885-0170 FAX: (504) 456 -9531


SCHEDULE 1 - COMBINED STATEMENT OF REVENUESAND EXPENSES BY COST REPORT GROUPING

YEARS ENDED JUNE 30, 2004 AND 2003

2004 2003

REVENUEProgramsDonationsInterest incomeOther income

Total revenue

$ 25,097,418336,724

9,5295,999

$ 19,838,785292,032

1,36331,863

$ 25,449,670 $ 20,164,043

EXPENSES:Administrative and generalPlant operation and maintenanceCost related to capital assetsDietary, laundry, and linenHousekeepingPersonal client needsTherapeutic and trainingMedical and nursingRecreationalConsultants

Total expenses

INCREASE (DECREASE)IN UNRESTRICTED NET ASSETS

$ 9,253,299138,782843,37068,2009,361

642,66012,711,540

24,82740,36847,975

$ 7,573,181131,459782,48560,76910,180

291,16610,915,869

17,53174,76632,081

$ 23,780,382 $ 19,889,487

$ 1,669,288 $ 274,556

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SPECIAL REPORTS OF INDEPENDENT AUDITOR

JOSEPH V.FRANKS II, C.P.A.B E R N A R D & F R A N K SA CORPORATION OF CERTIFIED PUBLIC ACCOUNTANTS NICHOLAS F. CHETTA, C.P.A.

NICHOLAS W. IAFRANZ til, C.P.A.

JAM ESL WHITE, C.P.A.

REPORT ON COMPLIANCE AND ON INTERNALCONTROL OVER FINANCIAL REPORTING BASED

ON AN AUDIT OF FINANCIAL STATEMENTSPERFORMED IN ACCORDANCE WITH

GOVERNMENT AUDITING STANDARDS


We have audited the financial statements of Gulf Coast Teaching Family Services, Inc. (a nonprofitorganization), as of and for the years ended June 30, 2004 and 2003, and have issued our reportthereon dated December 22, 2004. We conducted our audits in accordance with auditing standardsgenerally accepted in the United States of America and the standards applicable to financial auditscontained in Government Auditing Standards, issued by the Comptroller General of the UnitedStates.

COMPLIANCE

As part of obtaining reasonable assurance about whether Gulf Coast Family Teaching Services,Inc.'s financial statements are free of material misstatement, we performed tests of its compliancewith certain provisions of laws, regulations, contracts and grants, noncompliance with which couldhave 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 ofnoncompliance that are required to be reported under Government Auditing Standards.

*INTERNAL CONTROL OVER FINANCIAL REPORTING

In planning and performing our audit, we considered Gulf Coast Family Teaching Services, Inc.'sinternal control over financial reporting in order to determine our auditing procedures for thepurpose of expressing our opinion on the financial statements and not to provide assurance on theinternal control over financial reporting. Our consideration of the internal control over financialreporting would not necessarily disclose all matters in the internal control over financial reportingthat might be material weaknesses. A material weakness is a condition in which the design or

MEMBERS: AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTS; SOCIETY OF L O U I S I A N A CERTIFIED PUBLIC ACCOUNTANTS

4141 VETERANS BLVD., SUITE 313, METAIRIE, LA 70002 | PHONE: (504) 885-0170 FAX: (504) 456-9531

operation of one or more of the internal control components does not reduce to a relatively lowlevel the risk that misstatements in amounts that would be material in relation to the financialstatements being audited may occur and not be detected within a timely period by employees in thenormal course of performing their assigned functions. We noted no matters involving the internalcontrol over financial reporting and its operation that we consider to be material weaknesses.

This report is intended for the information of the Board of Directors, management and the State ofLouisiana and pass-through entities and is not intended to be and should not be used by anyoneother than these specified parties.

December 22. 2004

40

JOSEPH V. FRANKS II, C.P.A.

B E R N A R D & F R A N K SA CORPORATION OF CERTIFIED PUBLIC ACCOUNTANTS NICHOLAS F. CHETTA, C.P.A

NICHOLAS W. LAFRANZ III, C.P.A.

JAMES L WHITE, C.PA

REPORT ON COMPLIANCE WITH REQUIREMENTSAPPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL

CONTROL OVER COMPLIANCE IN ACCORDANCEWITH OMB CIRCULAR A-133


COMPLIANCE

We have audited the compliance of Gulf Coast Teaching Family Services, Inc. (a nonprofitorganization) with the types of compliance requirements described in the "U.S. Office ofManagement and Budget (OMB) Circular A-133 Compliance Supplement" that are applicable toeach of its major federal programs for the year ended June 30, 2004. Gulf Coast Teaching FamilyServices, Inc.'s (the Organization's) major federal programs are identified in the summary of auditresults section and on the accompanying schedule of findings and questioned costs. Compliancewith the requirements of laws, regulations, contracts, and grants applicable to each of its majorfederal programs is the responsibility of the Organization's management. Our responsibility is toexpress an opinion of the Organization's compliance based on our audit.

We conducted our audit of compliance in accordance with auditing standards generally accepted inthe United States of America; the standards applicable to financial audits contained in GovernmentAuditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, "Audits of States, Local Governments, and Non-profit Organizations." Those standards andOMB Circular A-133 require that we plan and perform the audit to obtain reasonable assuranceabout 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 includesexamining, on a test basis, evidence about the Organization's compliance with those requirementsand performing such other procedures as we considered necessary in the circumstances. We believethat our audit provides a reasonable basis for our opinion. Our audit does not provide a legaldetermination of the Organization's compliance with those requirements.

In our opinion, the Organization complied, in all material respects, with the requirements referred toabove that are applicable to each of its major federal programs for the year ended June 30, 2004.

MEMBERS: AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTS; SOCIETY OF LOUISIANA CERTIFIED PUBLIC ACCOUNTANTS

4141 VETERANS BLVD., SUITE 313, METAIR1E, LA 70002 | PHONE: (504) 885-0170 FAX: (504) 456-9531

INTERNAL CONTROL OVER COMPLIANCE

The Organization's management is responsible for establishing and maintaining effective internalcontrol over compliance with the requirements of laws, regulations, contracts, and grants applicableto federal programs. In planning and performing our audit, we considered the Organization'sinternal control over compliance with requirements that could have a direct and material effect on amajor federal program in order to determine our auditing procedures for the purpose of expressingour opinion on compliance and to test and report on the internal control over compliance inaccordance with OMB Circular A-133.

Our consideration of the internal control over compliance would not necessarily disclose all mattersin the internal control that might be material weaknesses. A material weakness is a condition inwhich the design or operation of one or more of the internal control components does not reduce toa relatively low level the risk that noncompliance with applicable requirements of laws, regulations,contracts, and grants that would be material in relation to a major federal program being auditedmay occur and not be detected within a timely period by employees in the normal course ofperforming their assigned functions. We noted no matters involving the internal control overcompliance and its operation that we consider to be material weaknesses.

This report is intended for the information and use of the Board of Directors, management and theState of Louisiana and pass-through entities and is not intended to be and should not be used byanyone other than the specified parties.

December 22, 2004

42


SCHEDULE OF FINDINGS AND QUESTIONED COSTSSCHEDULE 1 - SUMMARY OF AUDIT RESULTS

YEAR ENDED JUNE 30, 2004

1. The independent auditor's report on the financial statements expressed an unqualifiedopinion.

2. The statement that reportable conditions in internal control were disclosed by the audit ofthe financial statements and whether any such conditions were material weaknesses is notapplicable.

3. No instances of noncompliance considered to be material to the financial statements weredisclosed by the audit.

4. No instances of reportable conditions were disclosed during the audit of major federalaward programs. No management letter was issued during this period.

5. The auditor's report on compliance for major federal award programs for Gulf CoastTeaching Family Services, Inc. expressed an unqualified opinion on all major federalprograms.

6. There were no findings to be reported on the Schedule of Federal Awards Findings andQuestioned Costs.

7. Major programs for the fiscal year ended June 30, 2004 were as follows:

Department of Health and Human Services - Title <CFDA # 93.674>IV-E - Independent Living

Department of Housing and Urban Development <CFDA # 14.235>

Department of Health and Human Services <CFDA # 95.550>Transitional Living Program

8. The threshold for distinguishing Types A and B programs was $500,000.

9. Gulf Coast Teaching Family Services, Inc. was not determined to be a low-risk auditee.

43


SCHEDULE OF FINDINGS AND QUESTIONED COSTSSCHEDULE 2 - REPORTABLE CONDITIONS -FINANCIAL STATEMENTS - CURRENT YEAR


No instances of reportable conditions found.

44


SCHEDULE OF FINDINGS AND QUESTIONED COSTSSCHEDULE 3 - REPORTABLE CONDITIONS -

MAJOR FEDERAL AWARDS PROGRAMS AUDITYEAR ENDED JUNE 30, 2004


45


SCHEDULE 4 - SUMMARY OF PRIOR YEAR'SAUDIT FINDINGS



46


SCHEDULE 5 - MANAGEMENT'S CORRECTIVE ACTION PLANFOR CURRENT YEAR FINDINGS



47


SCHEDULE 6 - SCHEDULE OF EXPENDITURES OF FEDERALAWARDS FOR THE YEAR ENDED JUNE 30,2004

AND RELATED NOTES

Federal Grantor/Pass-Through Grantor/Program Title

FederalCFDA

Number

Agency orPass-Through

NumberFederal

Expenditures

MAJOR PROGRAMS:U.S. Department of Housing and Urban Development

Supportive Housing ProgramMoving Up - RenewalVisionsVisions IIThe NetworkBridging the GapService Net

U.S. Department of Health and Human ServicesAdministration for Children and FamiliesLouisiana Dept. of Social Services-Office of Community ServicesTransitional Living Program

Title IV - Independent Living ProgramTitle IV - Independent Living ProgramChafTee Educational & Training VoucherChaffee Educational & Training Voucher

TOTAL MAJOR PROGRAMS

OTHER FEDERAL PROGRAMSU.S. Department of Health and Human Services

Louisiana Department of Social ServicesOffice of Community ServicesBasic Center Grant

14.23514.23514.23514.23514.23514.235

Services93.550

93.67493.67493.67493.674

LA48B008002LA48B108002LA48B208002LA48B908002LA48B802001LA48B304002

06CX0732/02

567051568903601408601439

93.623 06CY076401

Foster Parent TrainingFoster Parent Training

Respite Camp - Camp Nuff

TOTAL OTHER FEDERAL AWARDS

93.958 597921

$$$$$$$

$

$$$$$

$

276,360121,972140,683111,75025,551

996677,312

230,657

76,307115,12920,78744,378256,601

1,164,570

$ 111,334

93.66793.667

587148575092

$

$

13,81622,78236,598

TOTAL EXPENDITURES OF FEDERAL AWARDS48

$ 15,201

163,133

$ 1,327,703


SCHEDULE 6 - SCHEDULE OF EXPENDITURES OF FEDERALAWARDS FOR THE YEAR ENDED JUNE 30, 2004

AND RELATED NOTES

Note A - Basis of Accounting

The accompanying Schedule of Expenditures of Federal Awards includes the federal grantactivity of the Organization and is presented on the accrual basis of accounting. The informationin this schedule is presented in accordance with the requirements of OMB Circular A-133,"Audits of States, Local Governments, and Non-Profit Organizations." Therefore, some amountspresented in this schedule may differ from amounts presented in, or used in the preparation of thebasic financial statements.

Note B - Risk-Based Audit Approach

The dollar threshold used to distinguish between Type A and Type B programs is $500,000. TheOrganization does not qualify as a low-risk auditee.

Note C - Matching Contributions

U.S. Department of Health and Human Services federal awards passed through the State ofLouisiana Office of Community Service required matching funds as follows:

Title IV-E Independent Living Lafayette $ 33,631

Title IV-E Independent Living Houma $ 37,531

HUD Program matching funds were: $ 147,485

49

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