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HomeMy WebLinkAboutCFR Financial COMMUNITY AND FAMILY RESOURCES AND THE RICHMOND CENTER FINANCIAL REPORT June 30, 2023 i C O N T E N T S INTRODUCTORY SECTION Table of contents Board of Directors i ii FINANCIAL SECTION Independent auditor’s report Combined financial statements: Combined statement of financial position Combined statement of activities Combined statement of functional expenses Combined statement of cash flows Notes to combined financial statements Supplementary information: Combining schedule of statement of financial position Combining schedule of statement of activities Combining schedule of statement of cash flows 1 – 3 4 5 6 7 8 – 18 19 – 20 21 – 22 23 COMPLIANCE SECTION Schedule of expenditures of federal awards Independent auditor’s report on internal control over financial reporting and on compliance and other matters based on an audit of the combined financial statements performed in accordance with government auditing standards Independent auditor’s report on compliance for each major federal program and on internal control over compliance required by the uniform guidance Schedule of findings and questioned costs 24 – 26 27 – 28 29 – 31 32 ii BOARD OF DIRECTORS NAME POSITION Board Members Bob Thode President Charlene Austin Vice President Ross Nusser Dean Kluss Associate Vice President Secretary Kim Jones Treasurer Carl Bergstrom Member Scott Becker Member Latifah Faisal Member Louis Stauter Member Gwenda Naylor Member Natasha Terrones Jerry Kloberdanz Member Member Bruce Reimers Member Shane Madsen Member Bill Lusher Member Steve Kuhl Member Organization Officials Michelle De La Riva Executive Director Pam Barkley Controller 1 SCHNURR & COMPANY, LLP Certified Public Accountants and Consultants INDEPENDENT AUDITOR’S REPORT Board of Directors Community and Family Resources and The Richmond Center Fort Dodge, Iowa Report on the Audit of the Financial Statements Opinion We have audited the accompanying combined financial statements of Community and Family Resources and The Richmond Center (a nonprofit organization), which comprise the combined statement of financial position as of June 30, 2023, the related combined statements of activities, functional expenses and cash flows for the year then ended, and the related notes to combined financial statements, (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of Community and Family Resources and The Richmond Center as of June 30, 2023 and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Basis for Opinion We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of Financial Statements section of our report. We are required to be independent of Community and Family Resources and The Richmond Center, and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about Community and Family Resources and The Richmond Center’s ability to continue as a going concern within one year after the date that the financial statements are available to be issued. 2 Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgement made by a reasonable user based on the financial statements. In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we: • Exercise professional judgement and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit 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 Community and Family Resources and The Richmond Center’s internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. • Conclude whether, in our judgement, there are conditions or events, considered in the aggregate, that raise substantial doubt about Community and Family Resources and The Richmond Center’s ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit. Supplementary Information Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The combining schedules on pages 19 – 26, including the schedule of expenditures of federal awards required by Title 2, U.S. Code of Federal Regulations, Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards, is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining schedules and the schedule of expenditures of federal awards is fairly stated, in all material respects, in relation to the financial statements taken as a whole. 3 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 23, 2023 on our consideration of Community and Family Resources and The Richmond Center’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is solely 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 the effectiveness of the Community and Family Resources and The Richmond Center’s 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 Community and Family Resources and The Richmond Center’s internal control over financial reporting and compliance. Fort Dodge, Iowa October 23, 2023 COMMUNITY AND FAMILY RESOURCES AND THE RICHMOND CENTER COMBINED STATEMENT OF FINANCIAL POSITION June 30, 2023 ASSETS Current Assets: Cash 4,655,562 $ Certificates of deposit 1,024,086 Accounts receivable, net 3,666,185 Contributions receivable, current portion 55,393 Prepaid expenses 63,757 Total current assets 9,464,983 Property and Equipment: Land 1,237,311 Buildings 15,930,615 Equipment 2,710,850 Vehicles 364,236 20,243,012 Less accumulated depreciation 4,126,127 16,116,885 Other Assets: Contributions receivable, net of current portion 1,611 Operating lease right-of-use assets 29,892 Beneficial interest in assets held by a Community Foundation 10,250 Investment in Integrated Behavioral Health Network, Inc.255,000 296,753 Total assets 25,878,621 $ See Notes to Combined Financial Statements. 4 LIABILITIES AND NET ASSETS Current Liabilities: Current maturities of long-term debt 356,897 $ Current maturities of lease liability 30,328 Accounts payable 422,307 Accrued salaries 314,938 Accrued paid time off 198,413 Accrued payroll taxes and benefits 96,657 Accrued expenses 274,110 Total current liabilities 1,693,650 Notes payable, less current maturities 4,672,156 Total liabilities 6,365,806 Net Assets: Without donor restrictions: Undesignated 17,429,845 Board designated - capital improvements 1,000,000 Board designated - operating reserve 1,000,000 19,429,845 With donor restrictions: Purpose restriction 82,970 19,512,815 Total liabilities and net assets 25,878,621 $ 5 COMMUNITY AND FAMILY RESOURCES AND THE RICHMOND CENTER COMBINED STATEMENT OF ACTIVITIES Year Ended June 30, 2023 Without Donor Restrictions With Donor Restrictions Total Revenue and Support: Federal and state grants 8,243,487 $ -$ 8,243,487 $ Medicaid 4,655,522 - 4,655,522 Contributions 16,178 49 16,227 Client private pay 319,414 - 319,414 Client third-party pay 2,822,363 - 2,822,363 Miscellaneous 847,985 - 847,985 Investment income 31,199 3 31,202 Contributed goods and services 79,164 - 79,164 Total revenue and support 17,015,312 52 17,015,364 Net Assets Released from Restrictions: Expended in accordance with donors' restrictions 49,200 (49,200) - Total revenue, support and reclassifications 17,064,512 (49,148) 17,015,364 Expenses: Program services expense: Residential 4,552,362 - 4,552,362 Outpatient 7,876,910 - 7,876,910 Psychiatry 418,178 - 418,178 Therapy 513,864 - 513,864 Supporting services expense: General and administrative 3,062,905 - 3,062,905 Total expenses 16,424,219 - 16,424,219 Excess of fair value of net assets acquired in donation of Prelude Behavioral Services 9,245,200 10,000 9,255,200 Increase (decrease) in net assets 9,885,493 (39,148) 9,846,345 Net assets at beginning of year 9,544,352 122,118 9,666,470 Net assets at end of year 19,429,845 $ 82,970 $ 19,512,815 $ See Notes to Combined Financial Statements. COMMUNITY AND FAMILY RESOURCES AND THE RICHMOND CENTER COMBINED STATEMENT OF FUNCTIONAL EXPENSES Year Ended June 30, 2023 General and Administrative Residential Outpatient Operating Expenses: Salary 1,149,519 $ 2,616,251 $ 4,731,708 $ FICA/Medicare 79,957 202,748 366,650 Workers' compensation 17,308 49,472 89,071 Unemployment 14,914 19,793 35,251 Health insurance 108,218 199,540 285,892 IPERS 68,184 231,828 360,247 Dues, fees and memberships 18,321 1,217 3,951 Subscriptions/publications 954 615 824 Food/groceries 150 396,484 96,763 Medical supplies - 16,532 12,808 Program supplies 1,525 19,978 311,670 Office supplies 9,785 5,393 4,346 Operating supplies/non-food 31,101 88,372 119,628 Postage 4,175 285 1,613 Advertising/promotional items 23,542 151 200,241 Depreciation 129,275 287,074 172,226 Computer hardware, software, maintenance 279,075 466 9,286 Building repairs/maintenance 16,011 103,220 100,224 Office repairs/maintenance 3,981 4,458 12,447 Office/space rental 1,860 - 209,862 Utilities 94,081 103,326 201,108 Telephone 51,025 16,225 37,649 Insurance 196,132 - 1,743 Property tax - - 26,793 Contracted services 633,365 48,287 233,268 Recruiting expenses 8,550 21,946 28,738 In-state travel 10,944 6,912 52,823 Staff development training 6,680 4,683 46,403 Vehicle expense 75 464 1,091 In-kind - - 79,164 Interest 20,370 106,034 42,912 Miscellaneous expense 22,156 608 510 3,001,233 $ 4,552,362 $ 7,876,910 $ See Notes to Combined Financial Statements. Community and Family Resources 6 General and Administrative Psychiatry Therapy Total 104 $ 94,403 $ 248,281 $ 8,840,266 $ 8 6,222 16,960 672,545 1 2,175 5,811 163,838 6 1,309 3,596 74,869 7 3,823 11,851 609,331 10 7,648 20,678 688,595 - - 3 23,492 - - - 2,393 - - - 493,397 - - - 29,340 - 430 - 333,603 - 98 49 19,671 - 879 1,235 241,215 - 52 303 6,428 - - - 223,934 11,048 2,094 23,543 625,260 - 192 115 289,134 - 3,235 11,070 233,760 - 742 1,644 23,272 - - 9,100 220,822 - 6,330 29,455 434,300 - 13,449 5,195 123,543 29,530 - - 227,405 - - - 26,793 20,958 269,017 108,318 1,313,213 - 137 1,349 60,720 - 3,834 144 74,657 - 496 1,054 59,316 - - - 1,630 - - - 79,164 - 1,613 12,835 183,764 - - 1,275 24,549 61,672 $ 418,178 $ 513,864 $ 16,424,219 $ The Richmond Center 7 COMMUNITY AND FAMILY RESOURCES AND THE RICHMOND CENTER COMBINED STATEMENT OF CASH FLOWS Year Ended June 30, 2023 Cash Flows from Operating Activities Increase in net assets 9,846,345 $ Adjustment to reconcile increase in net assets to net cash provided by operating activities: Depreciation 625,260 Amortization of operating lease right-of-use assets 61,690 Realized and unrealized (gain) on investments (158) Satisfaction of forgivable debt requirements (345,000) Noncash excess of fair value of net assets acquired in donation of Prelude Behavioral Services (6,730,779) Effect of changes in: Accounts receivable (150,338) Contributions receivable 49,200 Prepaid expenses (25,877) Accounts payable (84,252) Accrued salaries (60,608) Accrued paid time off (5,542) Accrued payroll taxes and benefits 50,645 Accrued expenses 239,792 Operating lease liability (61,254) Net cash provided by operating activities 3,409,124 Cash Flows from Investing Activities Purchase of certificates of deposit (1,024,086) Purchase of investments (135) Purchase of property and equipment (780,922) Net cash (used in) investing activities (1,805,143) Cash Flows from Financing Activities Repayment of notes payable (329,220) Net cash (used in) financing activities (329,220) Net increase in cash 1,274,761 Cash: Beginning 3,380,801 Ending 4,655,562 $ Supplemental Disclosures of Cash Flow Information: Cash payments for interest 182,494 $ See Notes to Combined Financial Statements. COMMUNITY AND FAMILY RESOURCES AND THE RICHMOND CENTER NOTES TO COMBINED FINANCIAL STATEMENTS 8 Note 1. Nature of Activities and Significant Accounting Policies Nature of activities: Community and Family Resources is a nonprofit corporation that was established in 1968. The purpose of the Organization is to increase understanding, to alleviate the damage, and to reduce the incidence of alcoholism. The Organization operates treatment facilities in eastern and central Iowa offering outpatient, residential, and detoxification services to persons experiencing problems in living due to alcoholism and other chemical dependencies. Community and Family Resources is funded by federal, state and local governments as well as private payments from patients. The Richmond Center is a non-profit corporation providing mental health services that include outpatient mental health psychiatric services for the residents of Story and Boone counties. The financial statements combine Community and Family Resources and The Richmond Center (collectively the “Organization”), which share the same Board of Directors. In addition, The Richmond Center is financially dependent on Community and Family Resources. Significant accounting policies: A summary of the Organization’s significant accounting policies is as follows: Use of estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Principles of combination: The accompanying combined financial statements include the accounts of Community and Family Resources and The Richmond Center. All material intercompany balances and transactions have been eliminated in combination. Cash and cash equivalents: The Organization considers all highly liquid investments with maturities of three months or less, when purchased, to be cash equivalents. The Organization places its cash with high credit quality financial institutions. At times, the Organization’s cash is in excess of the FDIC limits. Accounts receivable: Accounts receivable, with the exception of private client pay, are recorded on the accrual basis of accounting. Private client pay is recognized as income in the period in which it is received due to the uncertainty of collection. The Organization uses the allowance method of recording bad debts. The allowance for bad debts is $308,290 at June 30, 2023. Contributions receivable: Contributions receivable are recorded at the fair value when pledged, assuming a discount rate of 5% at June 30, 2023. In subsequent years, amortization of the discount is included in contributions revenue in the combined statement of activities. The Organization uses the allowance method to determine uncollectible contributions receivable. The allowance is based on management’s analysis of specific promises made. The balance of the allowance for uncollectible pledges is $3,077 at June 30, 2023. NOTES TO COMBINED FINANCIAL STATEMENTS 9 Note 1. Nature of Activities and Significant Accounting Policies (Continued) Significant accounting policies (continued): Investments: The Organization has a 28.9% investment in the Iowa Behavioral Health Network, Inc. The Organization accounts for this investment by the equity method. Beneficial interest in assets held by a Community Foundation consist of assets managed by the Community Foundation of Greater Des Moines and consist of investments in the moderate growth portfolio. Beneficial interest in assets held by a Community Foundation are reported at fair value as determined by using quoted market prices. Investment income or loss is included in the statement of activities as increases or decreases in net assets without donor restrictions unless the income or loss is restricted by donor or law. Property and equipment: Expenditures for the acquisition of property and equipment over $2,000 are capitalized at cost. The fair value of donated furniture and equipment is similarly capitalized. Depreciation is computed using the straight-line method based on the following useful lives: Years Buildings 5-40 Equipment 2-20 Vehicles 5 Leases: The Organization leases real estate and equipment. The determination of whether an arrangement is a lease is made at the lease’s inception. Under ASC 842, a contract is (or contains) a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Control is defined under the standard as having both the right to obtain substantially all of the economic benefits from use of the asset and the right to direct the use of the asset. Management only reassesses its determination if the terms and conditions of the contract are changed. Operating leases are included in operating lease right-of-use (“ROU”) assets, other current liabilities, and long- term liabilities in the statement of financial position. ROU assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The Organization uses the implicit rate when it is readily determinable. Since the Organization’s leases don’t provide an implicit rate, to determine the present value of lease payments, management uses the risk-free discount rate (3.10%) according to the Organization’s elected policy. Operating lease ROU assets also include any lease payments made and excludes any lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Organization’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. The Organization’s lease agreements have lease and non-lease components, which are generally accounted for separately with amounts allocated to the lease and non-lease components based on stand-alone prices. The lease agreements do not contain any material residual value guarantee. NOTES TO COMBINED FINANCIAL STATEMENTS 10 Note 1. Nature of Activities and Significant Accounting Policies (Continued) Significant accounting policies (continued): Net assets: Net assets, revenues, gains and losses are classified based on the existence or absence of donor or grantor imposed restrictions. Accordingly, net assets and changes therein are classified and reported as follows: Net assets without donor restrictions - Net assets available for use in general operations and not subject to donor (or certain grantor) restrictions. The board has designated, from net assets without donor restrictions, net assets for capital improvements and an operating reserve. Net assets with donor restrictions - Net assets subject to donor (or certain grantor) imposed restrictions. Some donor-imposed restrictions are temporary in nature, such as those that will be met by the passage of time or other events specified by the donor. Other donor-imposed restrictions are perpetual in nature, where the donor stipulates that resources be maintained in perpetuity. The Organization reports contributions restricted by donors as increases in net assets without donor restrictions if the restrictions expire (that is, when a stipulated time restriction ends or purpose restriction is accomplished) in the reporting period in which the revenue is recognized. Donor-imposed restrictions are released when a restriction expires, that is, when the stipulated time has elapsed, when the stipulated purpose for which the resource was restricted has been fulfilled, or both. Revenue and revenue recognition: Client service revenue is reported at the amount that reflects the consideration to which the Organization expects to be entitled in exchange for providing services to the clients. These amounts are due from third-party payors (including health insurers and government programs) and clients. The Organization bills the third-party payors and clients after the services are performed. Revenue is recognized as performance obligations are satisfied. Performance obligations are determined based on the nature of the services provided by the Organization. The performance obligations are satisfied over time as the client simultaneously receives and consumes the benefits of the services. The Organization determines the transaction price based on industry rates for services provided, reduced by contractual adjustments provided to third-party payers and discounts provided to clients in accordance with the Organization’s policy. Clients who are covered by third-party payers are responsible for related deductibles and coinsurance, which vary in amount. The Organization also provides services to uninsured clients, which recognizes revenue as received due to the uncertainty of collection. A portion of the Organization’s revenue is derived from cost-reimbursable federal and state contracts and grants, which are conditioned upon certain performance requirements and/or the incurrence of allowable qualifying expenses. Amounts received are recognized as revenue when the Organization has incurred expenditures in compliance with specific contract or grant provisions. Amounts received prior to incurring qualifying expenditures are reported as refundable advances in the statement of financial position. The Organization recognizes contributions when cash, securities or other assets, an unconditional promise to give, or notification of a beneficial interest is received. Conditional promises to give, that is, those with a measurable performance or other barrier, and a right of return, are not recognized until the conditions on which they depend have been substantially met. NOTES TO COMBINED FINANCIAL STATEMENTS 11 Note 1. Nature of Activities and Significant Accounting Policies (Continued) Significant accounting policies (continued): Contributed goods and services: A large number of volunteers have given significant amounts of their time to the Organization’s programs; however, no amounts have been recognized in the financial statements for volunteer time since no objective basis is available to measure the value of such services. Contributed goods and services are recognized as in-kind revenues at the time the goods and services are received. These in-kind contributions and the corresponding expenses are valued at their fair market value as estimated by management and/or donors and recognized in the financial statements and amounted to $79,164 for the year ended June 30, 2023. Advertising costs: Advertising costs are expensed as incurred. Advertising expense for the year ended June 30, 2023 was $223,934. Functional allocation of expenses: The costs of program and supporting services activities have been summarized on a functional basis in the statements of activities. The statements of functional expenses present the natural classification detail of expenses by function. Accordingly, certain costs have been allocated among the programs and supporting services benefited. Income taxes: Both Organizations are non-profit corporations exempt from income taxes under § 501(c)(3) of the Internal Revenue Code. Accordingly, no provision for income tax has been made in the financial statements. Subsequent events: Subsequent events have been evaluated through October 23, 2023, which is the date the financial statements were available to be issued. Events occurring after that date have not been evaluated to determine whether a change in the financial statements would be required. Note 2. Liquidity and Availability Financial assets available for general expenditures, that is, without donor or other restrictions limiting their use, within one year of the balance sheet date, comprise the following: Cash 4,639,596 $ Certificates of deposit 1,024,086 Accounts receivable 3,666,185 Less: board designations (2,000,000) 7,329,867 $ As part of the Organization’s liquidity management plan, cash in excess of daily requirements is invested in money market or sweep accounts and certificates of deposit. The Organization designated a portion of its operating surplus to a reserve for capital improvements and a reserve for operations, which could be made available, if necessary. NOTES TO COMBINED FINANCIAL STATEMENTS 12 Note 2. Liquidity and Availability (Continued) The Organization has funds available at the Community Foundation of Greater Des Moines (the Foundation). These funds are invested for long-term appreciation but are available at the discretion of the Foundation. Note 3. Pledges Receivable Pledges receivable as of June 30, 2023 are due as follows: Year ending June 30, 2024 59,766 $ 2025 1,775 61,541 Less: Discounts for time value of money (1,460) Allowance for doubtful pledges (3,077) 57,004 $ Note 4. Investments Investments are stated at fair value and are summarized as follows: Cost or Donated Value Fair Value Unrealized Appreciation Beneficial interest in assets held by a Community Foundation 10,000$ 10,250$ 250$ 10,000$ 10,250$ 250$ June 30, 2023 FASB Accounting Standards Codification 820, Fair Value Measurements and Disclosures, establishes a three- tier fair value hierarchy, which categorizes the inputs used in measuring fair value. These categories include: Level 1, defined as unadjusted quoted prices in active markets accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. NOTES TO COMBINED FINANCIAL STATEMENTS 13 Note 4. Investments (Continued) The asset’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The following is a description of the value methodology used for assets measured at fair value. There have been no changes in the methodology used at June 30, 2023 and 2022. Beneficial interest in assets held by a Community Foundation – These investments are value at the pro rata share of the Community Foundation’s investment portfolio. This diversified portfolio of global stocks, fixed income and alternative investments through indexed funds is allocated approximately 70% equity and 30% fixed income and alternative investments. The unobservable inputs are the underlying assets in the Community Foundation and follow their investment policy. Level 3 Total Beneficial interest in assets held by a Community Foundation 10,250$ 10,250$ 10,250$ 10,250$ Investments at Fair Value as of June 30, 2023 The following is a reconciliation of the beginning and ending balances of assets measured at fair value on a recurring basis using significant unobservable (Level 3) inputs during the years ended June 30, 2023 and 2022: Beginning Balance Interest Income Ending Balance Beneficial interest in assets held by a Community Foundation 9,957$ 293$ 10,250$ 9,957$ 293$ 10,280$ NOTES TO COMBINED FINANCIAL STATEMENTS 14 Note 5. Pledged Assets and Note Payable Long-term debt consists of the following as of June 30, 2023: 3,535,666 $ 1,493,387 5,029,053 Less: Current portion 356,897 4,672,156 $ 3.70% note payable to First Interstate Bank payable in monthly installments of $25,206, including interest, through May, 2030. Monthly installments of $18,343, including interest, through May, 2035. Monthly installments of $15,559 with a final payment due May, 2040. The interest rate may change every five years with interest calculated at 2.50% plus the Federal reserve five-year treasury constant maturities rate. The note is secured by real estate. 2.72% mortgage note with the Iowa Finance Authority, payable in monthly installments of $18,389, including interest to December 1, 2030, collateralized by real estate and certain property and equipment. This bond has been assigned to Hills Bank as purchaser. Aggregate maturities required on long-term debt as of June 30, 2023 are due in future years as follows: 2024 356,897 $ 2025 368,488 2026 380,465 2027 392,841 2028 405,629 Thereafter 3,124,733 5,029,053 $ Note 6. Lease Agreement The Organization adopted FASB ASC 842 due to the Organization entering into long-term lease agreements. Those leases are the only leases to be included on the statement of financial position under FASB ASC 842. As a result, adopting FASB ASC 842 had no impact on prior year balance sheet information, and because these leases are operating leases, the adoption of this standard had no impact on the results of operations. The Organization has elected to apply the short-term lease exception to all leases with a term of one year or less. As of June 30, 2023, the operating lease right-of-use (ROU) asset had a balance of $29,892, as shown in other assets on the statement of financial position and the lease liability is included in current liabilities, $30,328. The lease asset and liability were calculated utilizing the risk-free discount rate of 3.10%, according to the Organization’s elected policy. NOTES TO COMBINED FINANCIAL STATEMENTS 15 Note 6. Lease Agreement (Continued) Additional information about the Company’s leases is as follows: Year Ended 2023 Lease Costs (included in operating expenses): Operating leases cost 63,424 $ Short-term lease cost 157,398 Total lease cost 220,822 $ Amortization 61,690 $ Interest expense 1,734 Other Information: Cash paid for amounts included in measuring operating lease liabilities: Operating cash flows from operating leases 61,254 $ Lease assets obtained in exchange for lease obligations: Operating leases 91,582 Weighted-average remaining lease term (years)0.64 Weighted-average discount rate 3.10% Maturities of operating lease liabilities as of June 30, 2023: Years Ending June 30: 2024 30,667 $ Less: interest (339) Present value of lease liabilities 30,328 $ Note 7. Support From Governmental Units The Organization receives a substantial amount of its support from the federal government and the State of Iowa. A significant reduction in the level of this support, if this were to occur, may have a significant effect on the Organization's programs and activities. NOTES TO COMBINED FINANCIAL STATEMENTS 16 Note 8. Risk Management The Organization is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. These risks are covered by commercial insurance purchased from independent third parties. Settled claims from these risks have not exceeded commercial insurance coverage for the past three years. Note 9. Pension and Retirement Benefits Plan Description – IPERS membership is mandatory for employees of the Organization, except for those covered by another retirement system. Employees of the Organization are provided with pensions through a cost-sharing multiple employer defined benefit pension plan administered by the Iowa Public Employees’ Retirement System (IPERS). IPERS issues a stand-alone financial report which is available to the public by mail at P.O. Box 9117, Des Moines, Iowa 50306-9117 or at www.ipers.org. IPERS benefits are established under Iowa Code Chapter 97B and the administrative rules thereunder. Chapter 97B and the administrative rules are the official plan documents. The following brief description is provided for general informational purposes only. Refer to the plan documents for more information. Pension Benefits – A Regular member may retire at normal retirement age and receive monthly benefits without an early-retirement reduction. Normal retirement age is age 65, any time after reaching age 62 with 20 or more years of covered employment, or when the member’s years of service plus the member’s age at the last birthday equals or exceeds 88, whichever comes first. These qualifications must be met on the member’s first month of entitlement to benefits. Members cannot begin receiving retirement benefits before age 55. The formula used to calculate a Regular member’s monthly IPERS benefit includes: • A multiplier based on years of service. • The member’s highest five-year average salary, except members with service before June 30, 2012 will use the highest three-year average salary as of that date if it is greater than the highest five-year average salary. If a member retires before normal retirement age, the member’s monthly retirement benefit will be permanently reduced by an early-retirement reduction. The early-retirement reduction is calculated differently for service earned before and after July 1, 2012. For service earned before July 1, 2012, the reduction is 0.25% for each month the member receives benefits before the member’s earliest normal retirement age. For service earned on or after July 1, 2012, the reduction is 0.50% for each month that the member receives benefits before age 65. Generally, once a member selects a benefit option, a monthly benefit is calculated and remains the same for the rest of the member’s lifetime. However, to combat the effects of inflation, retirees who began receiving benefits prior to July 1990 receive a guaranteed dividend with their regular November benefit payments. NOTES TO COMBINED FINANCIAL STATEMENTS 17 Note 9. Pension and Retirement Benefits (Continued) Disability and Death Benefits – A vested member who is awarded federal Social Security disability or Railroad Retirement disability benefits is eligible to claim IPERS benefits regardless of age. Disability benefits are not reduced for early retirement. If a member dies before retirement, the member’s beneficiary will receive a lifetime annuity or a lump-sum payment equal to the present actuarial value of the member’s accrued benefit or calculated with a set formula, whichever is greater. When a member dies after retirement, death benefits depend on the benefit option the member selected at retirement. Contributions – Contribution rates are established by IPERS following the annual actuarial valuation which applies IPERS’ Contribution Rate Funding Policy and Actuarial Amortization Method. State statute limits the amount rates can increase or decrease each year to 1 percentage point. IPERS Contribution Rate Funding Policy requires the actuarial contribution rate be determined using the “entry age normal” actuarial cost method and the actuarial assumptions and methods approved by the IPERS Investment Board. The actuarial contribution rate covers normal cost plus the unfunded actuarial liability payment based on a 30-year amortization period. The payment to amortize the unfunded actuarial liability is determined as a level percentage of payroll, based on the Actuarial Amortization Method adopted by the Investment Board. In fiscal year 2023, pursuant to the required rate, Regular members contributed 6.29% of covered payroll and the Organization contributed 9.44% of covered payroll for a total rate of 15.73%. The Organization’s contribution to IPERS for the year ended June 30, 2023 was $688,595. At June 30, 2023, the Organization reported payables to IPERS of $95,406 for legally required Organization contributions and employee contributions withheld from employee wages which had not yet been remitted to IPERS. IPERS Fiduciary Net Position – Detailed information about IPERS’ fiduciary net position is available in the separately issued IPERS financial report which is available on IPERS’ website at www.ipers.org. Note 10. Functional Expenses The financial statements report certain categories of expenses that are attributed to more than one program or supporting function. Therefore, expenses required allocation on a reasonable basis that is consistently applied. Salaries, payroll taxes and employee benefits are allocated on the basis of estimates of time and effort. The additional expenses that are allocated are done so in proportion to the percentage reflected in the Organization’s budget. NOTES TO COMBINED FINANCIAL STATEMENTS 18 Note 11. Net Assets With Donor Restrictions Net assets with donor restrictions at June 30, 2023 are available for the following purposes: Subject to expenditure for specific purpose: Special needs programs for clients 25,966$ New facility construction 57,004 Future operations 10,000 92,970$ At June 30, 2023, net assets with donor restrictions consisted of the following: Cash 25,966$ Contributions receivable 57,004 Beneficial interest in assets held in a Community Foundation 10,000 92,970$ Net assets were released from donor restrictions by incurring expenses related to the new facility construction. Total net assets released from donor restrictions were $49,200 for the year ended June 30, 2023. Note 12. Business Combination On July 1, 2022, the Organization merged with Prelude Behavioral Services, a nonprofit organization. As a result of the merger, the Organization will continue providing services in the same geographical area while utilizing the Organization’s management team to achieve economies of scale. Following is a summary of the assets acquired and liabilities assumed at July 1, 2022. Financial assets 2,524,421$ Accounts receivable 1,951,045 Property and equipment 7,267,713 Other assets 119,840 Notes payable (2,000,439) Accrued expenses (607,380) Inherent contribution received 9,255,200$ On the statement of activities, the inherent contribution received is recorded as the excess of fair value of net assets acquired in donation of Prelude Behavioral Services and increase both net assets without donor restrictions, $9,245,200 and net assets with donor restrictions, $10,000. SUPPLEMENTARY INFORMATION COMMUNITY AND FAMILY RESOURCES AND THE RICHMOND CENTER COMBINING SCHEDULE OF STATEMENT OF FINANCIAL POSITION June 30, 2023 Community and Family Resources The Richmond Center Subtotal ASSETS Current Assets: Cash 4,473,611 $ 181,951 $ 4,655,562 $ Certificates of deposit 1,024,086 - 1,024,086 Accounts receivable, net 6,901,056 216,808 7,117,864 Contributions receivable, current portion 55,393 - 55,393 Prepaid expenses 56,652 7,105 63,757 Total current assets 12,510,798 405,864 12,916,662 Property and Equipment: Land 1,237,311 - 1,237,311 Buildings 15,762,283 168,332 15,930,615 Equipment 2,460,287 250,563 2,710,850 Vehicles 364,236 - 364,236 19,824,117 418,895 20,243,012 Less accumulated depreciation 3,816,163 309,964 4,126,127 16,007,954 108,931 16,116,885 Other Assets: Contributions receivable, net of current portion 1,611 - 1,611 Operating lease right-of-use assets 29,892 - 29,892 Beneficial interest in assets held by a Community Foundation 10,250 - 10,250 Investment in Integrated Behavioral Health Network, Inc. 255,000 - 255,000 296,753 - 296,753 Total assets 28,815,505 $ 514,795 $ 29,330,300 $ 19 Eliminations Total -$ 4,655,562 $ - 1,024,086 (3,451,679) 3,666,185 - 55,393 - 63,757 (3,451,679) 9,464,983 - 1,237,311 - 15,930,615 - 2,710,850 - 364,236 - 20,243,012 - 4,126,127 - 16,116,885 - 1,611 - 29,892 - 10,250 - 255,000 - 296,753 (3,451,679) $ 25,878,621 $ (Continued on next page) COMMUNITY AND FAMILY RESOURCES AND THE RICHMOND CENTER COMBINING SCHEDULE OF STATEMENT OF FINANCIAL POSITION (CONTINUED) June 30, 2023 Community and Family Resources The Richmond Center Subtotal LIABILITIES AND NET ASSETS Current Liabilities: Current maturities of long-term debt 356,897 $ -$ 356,897 $ Current portion of lease liability 30,328 - 30,328 Accounts payable 405,322 3,468,664 3,873,986 Accrued salaries 299,991 14,947 314,938 Accrued paid time off 188,710 9,703 198,413 Accrued payroll taxes and benefits 96,657 - 96,657 Accrued expenses 274,110 - 274,110 Total current liabilities 1,652,015 3,493,314 5,145,329 Notes payable, less current maturities 4,672,156 - 4,672,156 Total liabilities 6,324,171 3,493,314 9,817,485 Net Assets: Without donor restrictions: Undesignated 20,421,320 (2,991,475) 17,429,845 Board designated - capital improvements 1,000,000 - 1,000,000 Board designated - operating reserve 1,000,000 - 1,000,000 22,421,320 (2,991,475) 19,429,845 With donor restrictions: Purpose restrictions 70,014 12,956 82,970 22,491,334 (2,978,519) 19,512,815 Total liabilities and net assets 28,815,505 $ 514,795 $ 29,330,300 $ 20 Eliminations Total -$ 356,897 $ - 30,328 (3,451,679) 422,307 - 314,938 - 198,413 - 96,657 - 274,110 (3,451,679) 1,693,650 - 4,672,156 (3,451,679) 6,365,806 - 17,429,845 - 1,000,000 - 1,000,000 - 19,429,845 - 82,970 - 19,512,815 (3,451,679) $ 25,878,621 $ COMMUNITY AND FAMILY RESOURCES AND THE RICHMOND CENTER COMBINING SCHEDULE OF STATEMENT OF ACTIVITIES Year Ended June 30, 2023 Community and Family Resources The Richmond Center Subtotal Net Assets Without Donor Restrictions: Revenue and Support: Federal and state grants 8,243,487 $ -$ 8,243,487 $ Medicaid 4,249,637 405,885 4,655,522 Contributions 16,178 - 16,178 Client private pay 293,889 25,525 319,414 Client third-party pay 2,576,567 245,796 2,822,363 Miscellaneous 763,466 84,519 847,985 Investment income 30,448 751 31,199 Contributed goods and services 79,164 - 79,164 Total revenue and support 16,252,836 762,476 17,015,312 Net Assets Released from Restrictions: Expended in accordance with donors' restrictions 49,200 - 49,200 Unrestricted revenue, support and reclassifications 16,302,036 762,476 17,064,512 Expenses: Program services expense: Residential 4,552,362 - 4,552,362 Outpatient 7,876,910 - 7,876,910 Psychiatry - 418,178 418,178 Therapy - 513,864 513,864 Supporting services expense: General and administrative 3,001,233 61,672 3,062,905 Total expenses 15,430,505 993,714 16,424,219 Excess of fair value of net assets acquired in donation of Prelude Behavioral Services 9,245,200 - 9,245,200 Increase (decrease) in net assets without donor restrictions 10,116,731 (231,238) 9,885,493 21 Eliminations Total -$ 8,243,487 $ - 4,655,522 - 16,178 - 319,414 - 2,822,363 - 847,985 - 31,199 - 79,164 - 17,015,312 - 49,200 - 17,064,512 - 4,552,362 - 7,876,910 - 418,178 - 513,864 - 3,062,905 - 16,424,219 - 9,245,200 - 9,885,493 (Continued on next page) COMMUNITY AND FAMILY RESOURCES AND THE RICHMOND CENTER COMBINING SCHEDULE OF STATEMENT OF ACTIVITIES (CONTINUED) Year Ended June 30, 2023 Community and Family Resources The Richmond Center Subtotal Net Assets With Donor Restrictions: Contributions -$ 49 $ 49 $ Investment income 3 - 3 Excess of fair value of net assets acquired in donation of Prelude Behavioral Services 10,000 - 10,000 Net assets released from restrictions: Expended in accordance with donors' restrictions (49,200) - (49,200) Increase (decrease) in net assets with donor restrictions (39,197) 49 (39,148) Increase (decrease) in net assets 10,077,534 (231,189) 9,846,345 Net assets at beginning of year 12,413,800 (2,747,330) 9,666,470 Net assets at end of year 22,491,334 $ (2,978,519) $ 19,512,815 $ 22 Eliminations Total -$ 49 $ - 3 - 10,000 - (49,200) - (39,148) - 9,846,345 - 9,666,470 -$ 19,512,815 $ COMMUNITY AND FAMILY RESOURCES AND THE RICHMOND CENTER COMBINING SCHEDULE OF STATEMENT OF CASH FLOWS Year Ended June 30, 2023 Community and Family Resources The Richmond Center Subtotal Cash Flows from Operating Activities Increase (decrease) in net assets 10,077,534 $ (231,189) $ 9,846,345 $ Adjustment to reconcile increase (decrease) in net assets to net cash provided by operating activities: Depreciation 621,072 4,188 625,260 Amortization of operating lease right-of-use assets 61,690 - 61,690 Realized and unrealized (gain) on investments (158) - (158) Satisfaction of forgivable debt requirements (345,000) - (345,000) Noncash excess of fair value of net assets acquired in donation of Prelude Behavioral Services (6,730,779) - (6,730,779) Effect of changes in: Accounts receivable (452,735) (94,938) (547,673) Contributions receivable 49,200 - 49,200 Prepaid expenses (19,649) (6,228) (25,877) Accounts payable (101,237) 414,320 313,083 Accrued salaries (67,254) 6,646 (60,608) Accrued paid time off (6,522) 980 (5,542) Accrued payroll taxes and benefits 51,726 (1,081) 50,645 Accrued expenses 239,792 - 239,792 Operating lease liability (61,254) - (61,254) Net cash provided by operating activities 3,316,426 92,698 3,409,124 Cash Flows from Investing Activities: Purchase of certificates of deposit (1,024,086) - (1,024,086) Purchase of investments (135) - (135) Purchase of property and equipment (780,922) - (780,922) Net cash (used in) investing activities (1,805,143) - (1,805,143) Cash Flows from Financing Activities: Repayment of note payable (329,220) - (329,220) Net cash (used in) financing activities (329,220) - (329,220) Net increase in cash 1,182,063 92,698 1,274,761 Cash: Beginning 3,291,548 89,253 3,380,801 Ending 4,473,611 $ 181,951 $ 4,655,562 $ 23 Eliminations Total -$ 9,846,345 $ - 625,260 - 61,690 - (158) - (345,000) - (6,730,779) 397,335 (150,338) - 49,200 - (25,877) (397,335) (84,252) - (60,608) - (5,542) - 50,645 - 239,792 - (61,254) - 3,409,124 - (1,024,086) - (135) - (780,922) - (1,805,143) - (329,220) - (329,220) - 1,274,761 - 3,380,801 -$ 4,655,562 $ COMMUNITY AND FAMILY RESOURCES AND THE RICHMOND CENTER 24 COMMUNITY AND FAMILY RESOURCES AND THE RICHMOND CENTER SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Year Ended June 30, 2023 Federal Grantor/Pass-Through Grantor/ Program Title Assistance Listing Number Pass-through Entity Identifying Number Expenditures Indirect: U.S. Department of the Treasury: Passed through the Iowa Medicaid Enterprise: COVID-19 Coronavirus Relief Fund 21.019 1,303,782 $ U.S. Department of Health and Human Services: Passed through Iowa Department of Public Health: Block Grants for Prevention and Treatment of Substance Abuse: IDPH Substance Use and Problem Gambling Services Integrated Provider Network 93.959 5883PN17 388,285 IDPH Substance Use and Problem Gambling Services Integrated Provider Network 93.959 5883PN14C 85,520 IDPH Substance Use and Problem Gambling Services Integrated Provider Network 93.959 5881PN06 431,476 905,281 COVID-19 - Emergency Grants to Address Mental and Substance Use Disorders During COVID-19 93.665 5881SA162 21,512 COVID-19 - Emergency Grants to Address Mental and Substance Use Disorders During COVID-19 93.665 5881SA166A 27,053 48,565 Opioid STR: State Opioid Response in Iowa 93.788 5883SA104A 76,180 State Opioid Response in Iowa 93.788 5882SA104A 33,809 State Opioid Response in Iowa 93.788 5883SA93 135,089 State Opioid Response in Iowa 93.788 5882SA93 72,683 State Opioid Response Corrections Liaison 93.788 5881SA142 89,560 State Opioid Response Corrections Liaison 93.788 5881SA142E 57,227 (Continued on next page) 25 COMMUNITY AND FAMILY RESOURCES AND THE RICHMOND CENTER SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (CONTINUED) Year Ended June 30, 2023 Federal Grantor/Pass-Through Grantor/ Program Title Assistance Listing Number Pass-through Entity Identifying Number Expenditures Indirect (Continued): U.S. Department of Health and Human Services (continued): Passed through Iowa Department of Public Health (continued): Iowa Treatment for Individuals Experiencing Homelessness 93.788 5882SA153 57,718 $ Iowa Treatment for Individuals Experiencing Homelessness 93.788 5883SA153 24,748 Iowa Treatment for Individuals Experiencing Homelessness 93.788 5884SA156 49,478 Iowa Treatment for Individuals Experiencing Homelessness 93.788 5883SA156A 39,771 636,263 Injury Prevention and Control Research and State and Community Based Programs: Strategic Initiatives to Prevent Drug Overdoses 93.136 5881IP04E 38,668 Strategic Initiatives to Prevent Drug Overdoses 93.136 5881IP04 77,833 116,501 Substance Abuse and Mental Health Services Projects of Regional and National Significance: Partnerships for Success to Prevention Alcohol Misuse 93.243 5883IP15 531 Partnerships for Success to Prevention Alcohol Misuse 93.243 5883IP17 8,626 Partnerships for Success to Prevention Alcohol Misuse 93.243 5883IP18 362 Promoting the Integration of Primary and Behavioral Health Care 93.243 5882SA125A 65,376 Promoting the Integration of Primary and Behavioral Health Care 93.243 5883SA125 209,009 Zero Suicide Iowa - IPN 93.243 5882SM15 3,000 Zero Suicide Iowa - IPN 93.243 5883SM15 9,000 Zero Suicide Iowa - IPN 93.243 5882SM24A 3,000 298,904 3,309,296 $ SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (CONTINUED) 26 Basis of Presentation – The accompanying Schedule of Expenditures of Federal Awards (Schedule) includes the federal grant activity of Community and Family Resources and The Richmond Center under programs of the federal government for the year ended June 30, 2023. The information in this Schedule is presented in accordance with the requirements of Title 2, U.S. Code of Federal Regulations, Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards, (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of Community and Family Resources and The Richmond Center, it is not intended to and does not present the financial position, changes in net assets or cash flows of Community and Family Resources and The Richmond Center. Summary of Significant Accounting Policies – Expenditures reported in the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Community and Family Resources and The Richmond Center had no grants passed through to subrecipients. Indirect Cost Rate – Community and Family Resources and The Richmond Center has elected not to use the 10% de minimis indirect cost rate as allowed under the Uniform Guidance. 27 SCHNURR & COMPANY, LLP Certified Public Accountants and Consultants INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF THE COMBINED FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Board of Directors Community and Family Resources and The Richmond Center Fort Dodge, Iowa We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the combined financial statements of Community and Family Resources and The Richmond Center (the “Organization”) which comprise the combined statement of financial position as of June 30, 2023, and the related combined statements of activities, functional expenses and cash flows for the year then ended, and the related notes to combined financial statements (collectively, the financial statements), and have issued our report thereon dated October 23, 2023. Report on Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the Organization’s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Organization’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Organization’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 Organization’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 a material weakness. However, material weaknesses or significant deficiencies may exist that were not identified. 28 Report on Compliance and Other Matters As part of obtaining reasonable assurance about whether the Organization’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 financial statements. 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 Organization’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Organization’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Fort Dodge, Iowa October 23, 2023 29 SCHNURR & COMPANY, LLP Certified Public Accountants and Consultants INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE Board of Directors of Community and Family Resources and The Richmond Center Fort Dodge, Iowa Report on Compliance for Each Major Federal Program Opinion on Each Major Federal Program We have audited Community and Family Resources and The Richmond Center’s compliance with the types of compliance requirements identified as subject to audit in the OMB Compliance Supplement that could have a direct and material effect on each of Community and Family Resources and The Richmond Center’s major federal programs for the year ended June 30, 2023. Community and Family Resources and The Richmond Center’s major federal programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs. In our opinion, Community and Family Resources and The Richmond Center complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2023. Basis for Opinion on Each Major Federal Program We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Our responsibilities under those standards and the Uniform Guidance are further described in the Auditor’s Responsibilities for the Audit of Compliance section of our report. We are required to be independent of Community and Family Resources and The Richmond Center and to meet our other ethical responsibilities, in accordance with relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on compliance for each major federal program. Our audit does not provide a legal determination of Community and Family Resources and The Richmond Center’s compliance with the compliance requirements referred to above. 30 Responsibilities of Management for Compliance Management is responsible for compliance with the requirements referred to above and for the design, implementation, and maintenance of effective internal control over compliance with the requirements of laws, statutes, regulations, rules, and provisions of contracts or grant agreements applicable to Community and Family Resources and The Richmond Center’s federal programs. Auditor’s Responsibilities for the Audit of Compliance Our objectives are to obtain reasonable assurance about whether material noncompliance with the compliance requirements referred to above occurred, whether due to fraud or error, and express an opinion on Community and Family Resources and The Richmond Center’s compliance based on our audit. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards, Government Auditing Standards, and the Uniform Guidance will always detect material noncompliance when it exists. The risk of not detecting material noncompliance resulting from fraud is higher than for that resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Noncompliance with the compliance requirements referred to above is considered material if there is a substantial likelihood that, individually or in the aggregate, it would influence the judgment made by a reasonable user of the report on compliance about Community and Family Resources and The Richmond Center’s compliance with the requirements of each major federal program as a whole. In performing an audit in accordance with generally accepted auditing standards, Government Auditing Standards, and the Uniform Guidance, we: • Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material noncompliance, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding Community and Family Resources and The Richmond Center’s compliance with the compliance requirements referred to above and performing such other procedures as we considered necessary in the circumstances. • Obtain an understanding of Community and Family Resources and The Richmond Center’s internal control over compliance relevant to the audit in order to design audit procedures that are appropriate in the circumstances and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of Community and Family Resources and The Richmond Center’s internal control over compliance. Accordingly, no such opinion is expressed. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and any significant deficiencies and material weaknesses in internal control over compliance that we identified during the audit. Report on 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 a 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. 31 Our consideration of internal control over compliance was for the limited purpose described in the Auditor’s Responsibilities for the Audit of Compliance section above and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies in internal control over compliance. Given these limitations, during our audit we did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. However, material weaknesses or significant deficiencies in internal control over compliance may exist that were not identified. Our audit was not designed for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, no such opinion is expressed. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Fort Dodge, Iowa October 23, 2023 32 COMMUNITY AND FAMILY RESOURCES AND THE RICHMOND CENTER Schedule of Findings and Questioned Costs Year Ended June 30, 2023 Part I: Summary of the Independent Auditor’s Results: a. An unmodified opinion was issued on the combined financial statements, prepared in accordance with accounting principles generally accepted in the United States of America. b. No significant deficiencies or material weaknesses in internal control over financial reporting were disclosed by the audit of the combined financial statements. c. The audit did not disclose any noncompliance that is material to the combined financial statements. d. No significant deficiencies or material weakness in internal control over the major federal programs were disclosed by the audit of combined financial statements. e. An unmodified opinion was issued on compliance with requirements applicable to each major federal program. f. The audit did not disclose audit findings that are required to be reported in accordance with Uniform Guidance, Section 200.516. g. The major program was Assistance Listing Number 21.019 – Coronavirus Relief Fund. h. The dollar threshold used to distinguish between Type A and Type B programs was $750,000. i. Community and Family Resources and The Richmond Center qualified as low-risk auditees. Part II: Findings Related to the Financial Statements: Internal Control Deficiencies: No matters were reported. Instances of Non-compliance: No matters were reported. Part III: Findings and Questioned Costs For Federal Awards: Instances of Non-Compliance: No matters were reported. Internal Control Deficiencies: No matters were reported.