episcopal presbyterian health trust new grant request ...€¦ · chair bryan lemoine partner...

Episcopal Presbyterian Health Trust Responsive Grants

New Grant Request: August 21, 2019

Epworth Children & Family Services EPHT Board Report- August 21, 2019

of 2

Organization Epworth Children & Family Services Grant Request $35,000 Purpose of Grant Epworth Psychological Services Use of Funds Salary for psychologist Persons Served 15 Grant Period 12/1/2019 – 11/30/2020 Report Summary Founded in 1864, Epworth (EPS) provides psychological services, residential treatment, abuse and neglect prevention, emergency shelter, transitional living, aging out services, homeless youth outreach, life skills and vocational training, foster care case management, and a 24-hour helpline. Epworth is seeking funds to provide psychological assessment for 15 children and youth ages 3-24 and their families who come to EPS. Youth are referred from many sources (case managers, therapists, physicians, school counselors, etc.). An EPS psychologist examines the client and produces a comprehensive report based on that assessment. The report includes information about the client’s history, systemic and cultural factors, behavioral observations, a detailed explanation and interpretation of results, and diagnostic conclusions. The report also includes recommendations for intervention and referrals to other health care providers. Reports are presented to clients and their caregivers at a feedback session where the results are explained as well as the recommended treatment options. Follow-ups occur after one month and again after three months to see if the clients are implementing the recommendations and to identify any barriers to implementation. Funding from EPHT will be used to hire a part-time psychologist to expand services into the City of St. Louis. Previously EPS has not served the City, thus client demographics are not available. Outcomes

• 95% of clients and/or their caregivers will gain knowledge about mental health conditions • 95% of clients and/or their caregivers will gain knowledge about effective treatment options • 90% of clients will implement at least one recommendation for aftercare services and/or begin to use

recommended parenting/behavior management techniques in home Financial Summary Epworth showed a deficit of more than $2 million in 2018 out of a $13 million operating budget. Half of that was due to poor performance on investments (they have an endowment of more than $5.5 million). In 2017 the organization operated at a surplus. In general, this is a well-respected organization with deep pockets. Their income stream is diversified, although they receive a significant portion of revenue from fee for service from their private clients and from contracted services with public agencies. Although not ideal, they can absorb the deficit year and continue to provide quality programs.

Funding Rationale This program fits within the Trust’s priority area; however, given the resources the organization has at its disposal, the limited history of work with children from the City, and the time it takes to hire and onboard, staff recommends partial funding for the program.

Episcopal Presbyterian Health Trust Responsive Grants

New Grant Request: August 21, 2019

Epworth Children & Family Services EPHT Board Report- August 21, 2019

of 2

Staff Recommendations At $430,000 in grants $20,000 At $270,000 in grants $20,000 At $195,000 in grants $20,000 Previous Funding N/A Total Program Budget: $ 474,079 Trust Requested Grant: $ 35,000 Trust allocation: 7.4% Cost per person (EPHT): $ 350

Governing Board Officers Zip Code of

Residence

Chair Bryan LeMoine Partner McMahon Berger P.C. 63105

Treasurer John Lindbloom

Partner Anders CPAs & Advisors 63040

Secretary Dean Kpere-Daibo

Associate Attorney McMahon Berger P.C. 63130

Directors Zip Code of Residence

Sarah Baiocchi Vice President, Finance Centene Corp. 63131

Joe Brinkmann Principal Trivers Associates 63102

Cathy Campbell Senior Vice President, Commercial Banking Officer

Providence Bank 63021

Hon. Shamed Dogan Representative, MO-98 MO House of Representatives

63021

Dan Farrell SVP, Sales and Marketing

St. Louis Cardinals 63102

Kimberly Hamacher Sr. Manager Nidec Motor Corp 63108

Steven Hill Owner FastSigns St. Louis 63338

Katie Holtgrave Senior Financial Analyst Anders CPAs & Advisors 63103

Hon. Jeanne Kirkton Former Representative, MO-91

MO House of Representatives

63119

Eric Madkins VP, Midwest Community Affairs Manager

Regions Bank 63105

Julie Morrison Sr. Director, Change Mgt.

Express Scripts 63108

Frank Neuner Partner Spencer Fane 63131

Emily Pitts Principal, Inclusion/Diversity

Edward Jones 63021

Gail Scannell SVP, Division Head U.S. Bank 63105

Rev. Sheila Sledge Associate Pastor North Park Methodist 63031

Andrew Waggoner Director of Worship Concord Trinity UMC 63017

Brooke Yamini District Sales Director United Parcel Service 63021

Ex-Officio Emeritus

Bishop Robert Farr William K. Busch

Rev. Londia Granger Wright Barbara Bush

Linda Guth-Stangl Carol Cooke

Yvette Richards Katie Cloyd

Shari Scott James Hill

Episcopal Presbyterian Health Trust

Salary and Benefits 385,339$ 35,000$ Contract Services (consulting, professional, fundraising) -$ -$ Occupancy (rent, utilities, maintenance) 30,141$ -$ Training & Professional Development 1,100$ -$ Insurance 11,250$ -$ Travel 200$ -$ Equipment -$ -$ Supplies 13,000$ -$ Printing, Copying & Postage -$ -$ Evaluation -$ -$ Marketing -$ -$

Conferences, meetings, etc. -$ -$ Administration 33,049$ -$ *Other -_____________ -$ -$ *Other -_____________ $ - $ -

TOTAL EXPENSES 474,079$ 35,000$

Contributions, Gifts, Grants, & Earned RevenueLocal Government 300,870$ -$ State Government -$ -$

Federal Government -$ -$ Individuals -$ -$

*Foundation - EPHT -$ 35,000$ *Foundation - _____________ -$ -$ *Foundation - _____________ -$ -$ *Foundation - _____________ -$ -$

*Corporation-______________ -$ -$ *Corporation-______________ -$ -$ *Corporation-______________ -$ -$ *Federation-_______________ -$ -$ *Other -__________________ -$ -$

Membership Income -$ -$ Program Service Fees -$ 12,500$

Products -$ -$ Fundraising Events (net) -$ -$

Investment Income -$ -$ In-Kind Support -$ -$

*Other -__________________ -$ -$

TOTAL REVENUES 300,870.00$ 47,500.00$

*Please specify for contributions over $1,000.

Amount Requested from FunderTotal Project Expenses

Missouri CGA - Project Budget (Required)

Committed PendingRevenues

Expenses

Epworth Children & Family Services

EPWORTH

Statement of Revenues and Expenditures

From 6/1/2019 Through 6/30/2019

(In Whole Numbers)

Monthly Actual Budget - OriginalCurrent Period

OriginalBudget Variance -

Current Period

YTD Actual OriginalYTD Budget -

Variance - OriginalYTD Budget

YTD Variance % OriginalTotal Budget -

Operating Revenue

Program fees 695,973 648,331 47,642 4,105,553 3,945,654 159,899 4.05% 7,898,309

Operating Contributions 12,693 59,625 (46,932) 307,225 357,750 (50,525) (14.12)% 715,500

Special Events 0 5,000 (5,000) 7,500 125,000 (117,500) (94.00)% 465,000

Bequests 0 0 0 2,500 0 2,500 0.00% 0

Government Grants 95,522 98,385 (2,863) 571,376 565,308 6,068 1.07% 1,155,609

Other Grants 127,396 110,973 16,423 588,281 645,838 (57,557) (8.91)% 1,291,680

Miscellaneous 3,589 4,166 (577) 89,000 24,996 64,004 256.05% 50,000

Total Operating Revenue 935,173 926,480 8,693 5,671,435 5,664,546 6,889 0.12% 11,576,098

Operating Expense

Salaries & benefits 600,498 626,964 26,466 4,013,937 4,075,256 61,319 1.50% 8,150,480

Other operating expenses 394,696 297,155 (97,541) 1,948,954 1,828,892 (120,062) (6.56)% 3,810,702

Total Operating Expense 995,194 924,119 (71,075) 5,962,891 5,904,148 (58,743) (0.99)% 11,961,182

Net gain(loss) from operations (60,021) 2,361 (62,382) (291,455) (239,602) (51,853) 21.64% (385,084)

Investment activity

Interest and royalty income 13,146 8,333 4,813 59,210 49,998 9,212 18.42% 100,000

Gain/loss on investments 96,645 8,333 88,312 248,310 49,998 198,312 396.64% 100,000

Total Investment activity 109,791 16,666 93,125 307,521 99,996 207,525 207.53% 200,000

Other

Depreciation (36,781) (40,000) 3,219 (225,354) (240,000) 14,646 (6.10)% (480,000)

Bad debt expense 0 (12,500) 12,500 0 (25,000) 25,000 (100.00)% (50,000)

Total Other (36,781) (52,500) 15,719 (225,354) (265,000) 39,646 (14.96)% (530,000)

Net Gain/Loss 12,988 (33,473) 46,461 (209,289) (404,606) 195,317 (48.27)% (715,084)

Date: 7/17/19 10:09:58 AM IS Agency Page: 1

TABLE OF CONTENTS

Page

Independent Auditor’s Report .................................................................................. 1

Financial Statements

Statement of Financial Position ............................................................................................ 3

Statement of Activities .......................................................................................................... 4

Statement of Functional Expenses ........................................................................................ 5

Statement of Cash Flows ...................................................................................................... 6

Notes to Financial Statements ............................................................................................... 7

Supplemental Information

Independent Auditor’s Report on Internal Control Over Financial Reporting

and on Compliance and Other Matters Based on an Audit of Financial Statements

Performed in Accordance with Government Auditing Standards ..................................21

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

Internal Control Over Compliance Required by Uniform Guidance ..............................23

Schedule of Expenditures of Federal Awards ....................................................................25

Notes to Schedule of Expenditures of Federal Awards .....................................................26

Schedule of Findings and Questioned Costs ......................................................................27

Corrective Action Plan .......................................................................................................31

Summary Schedule of Prior Audit Findings ......................................................................32

Independent Auditor’s Report

Board of Directors

Epworth Children & Family Services, Inc.

Saint Louis, Missouri

Report on the Financial Statements

We have audited the accompanying financial statements of Epworth Children & Family Services,

Inc. (a nonprofit organization), which comprise the statement of financial position as of December

31, 2018, and the related statements of activities, cash flows, and functional expenses for the year

then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

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

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

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

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

fraud or error.

Auditor’s Responsibility

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

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

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

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

plan and perform the audits to obtain reasonable assurance about whether the financial statements are

free from material misstatement.

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

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

assessment of the risks of material misstatement of the financial statements, whether due to fraud or

error. In making those risk assessments, the auditor considers internal control relevant to the

Organization’s preparation and fair presentation of the financial statements in order to design audit

procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion

on the effectiveness of the Organization’s internal control. Accordingly, we express no such opinion.

An audit also includes evaluating the appropriateness of accounting policies used and the

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

overall presentation of the financial statements.

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

for our audit opinion.

Opinion

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

financial position of Epworth Children & Family Services, Inc. as of December 31, 2018, and the

changes in its net assets and its cash flows for the year then ended in conformity with accounting

principles generally accepted in the United States of America.

Other Matters

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

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

Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost

Principles, and Audit Requirements for Federal Awards, is presented for purposes of additional

analysis and is not a required part of the financial statements. Such information is the responsibility

of management and was derived from and relates directly to the underlying accounting and other

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

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

including comparing and reconciling such information directly to the underlying accounting and

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

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

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

to the financial statements as a whole.

Other Reporting Required by Government Auditing Standards

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

April 25, 2019 on our consideration of the Organization’s internal control over financial reporting

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

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

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

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

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

considering the Organization’s internal control over financial reporting and compliance.


April 25, 2019

Statement of Financial Position

ASSETS

Cash and cash equivalents 980,576$

Investments, at fair value 5,213,538

Accounts receivable, less allowance

for doubtful accounts of $149,331 1,229,076

Contributions receivable, less allowance

for doubtful accounts of $56,536 97,709

Grants receivable 791,978

Prepaids and other assets 165,331

Property and equipment, net 3,609,488

Beneficial interest in trusts, at fair value 2,626,280

TOTAL ASSETS 14,713,976$

LIABILITIES AND NET ASSETS

Liabilities

Accounts payable 104,778$

Accrued expenses 416,712

Other liabilities 155,512

Total Liabilities 677,002

Net Assets

Without donor restrictions:

Undesignated 1,728,868

Board designated for investments 2,050,068

Investment in property and equipment 3,609,486

Total Without Donor Restrictions 7,388,422

With donor restrictions 6,648,552

Total Net Assets 14,036,974

TOTAL LIABILITIES AND NET ASSETS 14,713,976$

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

EPWORTH CHILDREN & FAMILY SERVICES, INC.

December 31, 2018

-3-


Statement of ActivitiesYear ended December 31, 2018

Without Donor With Donor

Restrictions Restrictions Total

REVENUE AND PUBLIC SUPPORT

Revenue:

Fees for service 7,571,034$ -$ 7,571,034$

Federal and state grants 1,187,108 - 1,187,108

Investment income (224,839) (208,368) (433,207)

Other income 94,678 - 94,678

Total revenue 8,627,981 (208,368) 8,419,613

Public support:

Contributions 1,185,693 302,625 1,488,318

Special events 474,315 - 474,315

Change in value of perpetual trusts - (435,602) (435,602)

Legacies, bequests and trusts 303,623 - 303,623

In-kind rent 70,500 - 70,500

United Way of Greater St. Louis - 664,058 664,058

Total public support 2,034,131 531,081 2,565,212

Net assets released from restrictions 1,202,346 (1,202,346) -

TOTAL REVENUE AND PUBLIC SUPPORT 11,864,458 (879,633) 10,984,825

EXPENSES

Program services:

Residential treatment 3,057,998 - 3,057,998

Community services 1,607,387 - 1,607,387

Emergency shelter 883,714 - 883,714

Foster care 2,130,982 - 2,130,982

Older youth services 1,277,918 - 1,277,918

Family support services 1,181,984 - 1,181,984

Prevention services 360,010 - 360,010

Psychological services 411,577 - 411,577

Total program services 10,911,570 - 10,911,570

Supporting services:

Management and general 1,371,219 - 1,371,219

Fundraising 891,627 - 891,627

Total supporting services 2,262,846 - 2,262,846

TOTAL EXPENSES 13,174,416 - 13,174,416

CHANGE IN NET ASSETS (1,309,958) (879,633) (2,189,591)

Net assets, beginning of year 8,698,380 7,528,185 16,226,565

Net assets, end of year 7,388,422$ 6,648,552$ 14,036,974$


-4-


Statement of Functional ExpensesYear ended December 31, 2018

Residential Community Emergency Foster Older Youth Family Support Prevention Psychological Management Total

Treatment Services Shelter Care Services Services Services Services Total and General Fundraising Total Expenses

Salaries 1,740,647$ 581,805$ 536,483$ 736,135$ 592,701$ 746,197$ 177,820$ 257,220$ 5,369,008$ 1,025,081$ 478,621$ 1,503,702$ 6,872,710$

Employee benefits and payroll taxes 309,937 84,902 129,292 306,102 121,352 232,748 57,261 49,307 1,290,901 115,783 112,829 228,612 1,519,513

Total salaries and related expenses 2,050,584 666,707 665,775 1,042,237 714,053 978,945 235,081 306,527 6,659,909 1,140,864 591,450 1,732,314 8,392,223

Professional fees 253,911 56,655 19,451 631,784 48,541 47,672 24,270 15,169 1,097,453 10,712 161,780 172,492 1,269,945

Supplies 14,470 4,196 8,662 7,115 8,098 9,201 2,094 2,121 55,957 11,516 29,474 40,990 96,947

Food service 138,528 121 86,547 130 24 403 - 244 225,997 1,900 1,289 3,189 229,186

Telephone 35,200 20,560 9,524 14,894 22,715 12,786 11,132 7,170 133,981 2,645 4,308 6,953 140,934

Utilities 60,700 19,077 13,874 15,609 20,811 6,937 6,937 8,671 152,616 17,343 3,469 20,812 173,428

Printing and postage 3,680 2,208 883 1,619 2,355 1,383 1,178 958 14,264 442 28,466 28,908 43,172

Repairs and maintenance 71,978 22,622 16,452 18,509 24,678 8,226 8,226 10,283 180,974 10,361 4,113 14,474 195,448

Training, travel, meetings and

memberships 20,895 36,882 7,247 37,721 29,815 42,803 9,708 4,673 189,744 2,269 5,889 8,158 197,902

Automobile expense 6,568 3,941 1,576 2,890 4,204 2,365 2,102 1,314 24,960 788 525 1,313 26,273

Client assistance 44,594 665,736 10,886 285,946 154,090 5,993 6,303 7,425 1,180,973 - - - 1,180,973

Insurance 39,310 23,586 9,434 17,296 25,158 14,151 12,579 7,862 149,376 4,717 3,145 7,862 157,238

Interest - - - 703 1,406 - - 703 2,812 - - - 2,812

Bad debt 67,610 40,566 16,226 29,748 43,270 24,340 21,635 13,522 256,917 8,113 49,830 57,943 314,860

Rent 67,696 15,116 6,820 15,311 14,067 13,552 12,673 4,396 149,631 11,802 3,873 15,675 165,306

Miscellaneous 2,836 332 798 329 51,653 1,726 239 84 57,997 62,043 4,016 66,059 124,056

Total expenses before depreciation 2,878,560 1,578,305 874,155 2,121,841 1,164,938 1,170,483 354,157 391,122 10,533,561 1,285,515 891,627 2,177,142 12,710,703

Depreciation 179,438 29,082 9,559 9,141 112,980 11,501 5,853 20,455 378,009 85,704 - 85,704 463,713

Total expenses 3,057,998$ 1,607,387$ 883,714$ 2,130,982$ 1,277,918$ 1,181,984$ 360,010$ 411,577$ 10,911,570$ 1,371,219$ 891,627$ 2,262,846$ 13,174,416$


Program Services Supporting Services

-5-

Statement of Cash Flows

Cash flows from operating activities:

Change in net assets (2,189,591)$

Adjustments to reconcile change in net assets to

net cash provided by operating activities:

Depreciation 463,713

Loss on disposal of property and equipment 229

Change in allowance for receivables 112,539

Change in value of beneficial interest in trusts 435,602

Net unrealized losses on investments 630,564

Net realized gains on investments (183,923)

(Increase) decrease in assets and liabilities:

Accounts receivable (361,150)

Grants and contributions receivable 6,516

Prepaids and other assets 95,752

Accounts payable (42,992)

Accrued expenses and other liabilities 77,601

Net cash used in operating activities (955,140)

Cash flows from investing activities:

Purchases of property and equipment (89,868)

Proceeds from sales of investments 279,260

Purchases of investments (78,157)

Net cash provided by investing activities 111,235

Cash flows from financing activities

Payments on note payable (319,861)

Net cash used in financing activities (319,861)

NET DECREASE IN CASH

AND CASH EQUIVALENTS (1,163,766)

Cash and cash equivalents, beginning of year 2,144,342

Cash and cash equivalents, end of year 980,576$

Supplemental disclosure:

Cash paid during the year for interest 2,812$



Year ended December 31, 2018

-6-

EPWORTH CHILDREN & FAMILY SERVICES, INC. Notes to Financial Statements December 31, 2018

-7-

Note A - Operations and Summary of Significant Accounting Policies

Operations

Epworth Children & Family Services, Inc. (“Epworth” or “the Organization”) is a not-

for-profit charitable corporation that provides a wide array of services to children, youth

and families in need, strengthening the capacity of each to thrive in society. For more

than 150 years, Epworth has provided the community with essential youth development

services that have helped thousands of children overcome severe emotional and

behavioral challenges. Epworth’s innovative, holistic, and comprehensive treatment

approach helps youth focus on solutions, build on inherent strengths and communicate

more effectively. Youth and families turn to Epworth for foster care, emergency shelter,

residential treatment, transitional living services, educational day treatment services,

family support services, prevention services and psychological services each year.

Epworth’s revenue and support are derived primarily from local, state and federal

agencies, along with public contributions.

In addition, Epworth is a member of the Children’s Permanency Partnership, LLC, a

for-profit LLC, which provides foster care case management services to youth in the

custody of the State of Missouri.

Financial Statements Presentation

The following is a description of the two classes of net assets of the Organization:

Net Assets Without Donor Restrictions – Net assets available for use in the general

operations and not subject to donor (or certain grantor) restrictions. The governing

board has designated funds, from net assets without donor restrictions for specific

operating purposes.

Net Assets With Donor Restrictions – Net assets subject to donor imposed restrictions

that are either temporary or perpetual in nature. Temporary donor-imposed restrictions

will be met by events specified by the donor or the passage of time. Perpetual donor-

imposed restrictions are indefinite, with the income from the contribution being

available for expenditure, as defined by the donor. Donor-imposed restrictions are

released when a restriction expires, that is, when the stipulated purpose for which the

resource was restricted has been fulfilled.

Donor-restricted contributions are reported as increases in net assets with donor

restrictions. When a restriction expires, net assets with donor restriction are reclassified

to net assets without donor restrictions and reported in the statements of activities as net

assets released from restrictions. Donor-restricted contributions received and satisfied

in the same year are reported as increases in contributions without donor restrictions.

EPWORTH CHILDREN & FAMILY SERVICES, INC. Notes to Financial Statements - Continued

December 31, 2018

-8-

Note A - Operations and Summary of Significant Accounting Policies (Continued)

Basis of Accounting

The accompanying financial statements have been prepared on the accrual basis of

accounting in accordance with accounting principles generally accepted in the United

States of America and accordingly, reflect all significant receivables, payables and

other liabilities. Revenues and expense are recognized in the period which they are

earned or incurred.

Change in Accounting Principle

On August 18, 2016, FASB issued Accounting Standards Update (ASU) 2016-14, Not-

for-Profit Entities (Topic 958) – Presentation of Financial Statements for Not-for-Profit

Entities. The update addresses the complexity and understandability of net asset

classifications, deficiencies in information about liquidity and availability of resources,

and the lack of consistency in the type of information provided about expenses and

investment return. The Organization has implemented ASU 2016-14 and has adjusted

the presentation of the 2018 financial statements accordingly.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Organization considers all highly

liquid financial instruments, excluding cash held in the investment accounts, with a

maturity as of the financial statement date of three months or less to be cash

equivalents. The Organization maintains cash balances at various major domestic

financial institutions in amounts that at times may exceed federally insured limits. The

Organization has not incurred any losses as a result of the excess balances.

Accounts and Grants Receivable

Accounts and grants receivable are fees for services and grants which are stated at the

amount management expects to collect from outstanding balances. Invoices are

considered past due once they are outstanding over 30 days. Management provides for

probable uncollectible amounts through a charge against earnings and a corresponding

increase in a valuation allowance based on its assessment of the current status of

individual accounts. Balances still outstanding after management has used reasonable

collection efforts are written off through a reduction in the valuation allowance and the

receivable.

Investments

Investments are stated at fair value. Investment income is recognized when earned.


December 31, 2018

-9-


Property and Equipment

Property and equipment in excess of $1,000 is recorded at cost or, if received by gift or

bequest, at the market value at the date of donation. If the donors stipulate how long the

assets must be used, the contributions are recorded as restricted support. In absence of

such stipulations, contributions of property and equipment are reported as support

without donor restrictions. In 2018, the Organization did not receive contributions of

property and equipment considered restricted support.

Depreciation is recorded on the straight-line basis over the estimated useful lives of the

assets as follows: buildings and improvements, five to thirty years; furniture and

equipment, three to fifteen years; automobiles, five years; and computers and software,

three to five years. Expenditures for major renewals and improvements, which increase

the useful lives of respective assets, are capitalized. Maintenance and repairs are

expensed as incurred.

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in

circumstances indicate that the carrying amount may not be recoverable. If the sum of

the expected future undiscounted cash flows is less than the carrying amount of the

asset, a loss is recognized for the difference between the fair value and the carrying

value of the asset. For the year ended December 31, 2018, management determined that

no impairment loss needs to be recognized.

Other Liabilities

Other liabilities primarily consist of a medical claims reserve for the year ended

December 31, 2018. As the Organization is self-funded for medical insurance purposes,

a medical claims reserve has been established to capture the estimated incurred, but not

reported claims liability. This reserve amounted to $110,000 for the year ended

December 31, 2018.

Contributions

The Organization recognizes contributions as revenue when an unconditional promise

is made. All contributions are considered to be available for unrestricted use unless

specifically restricted by the donor. Amounts received that are designated for future

periods or restricted by the donor for specific purposes are reported as support with

donor restrictions that increase the related net asset class. Support is released from

restrictions once timing or donor stipulations have been satisfied.


December 31, 2018

-10-


Contributions (Continued)

In addition to receiving cash contributions, the Organization receives in-kind

contributions of rental space and other items from donors. It is the Organization’s

policy to record the estimated fair value of certain in-kind donations as an expense in its

financial statements and similarly increase in contribution revenue by a like amount.

The Organization records those donations if their value is readily ascertainable and if

the services performed require expertise.

Functional Expense Allocation

The Organization allocates expenses on a functional basis among various programs and

supporting activities. Expenses that can be identified with a specific program and

supporting activities are allocated directly according to their natural expenditure

classifications.

Certain categories of expenses are attributable to more than one program or supporting

function and are allocated on a reasonable basis that is consistently applied. The

expenses that are allocated are salaries and benefits, professional fees, supplies, food

service expense, telephone expense, utilities, printing and postage, repairs and

maintenance, training and travel, automobile expense, insurance, interest, based debt,

debt, and rent. The allocable expenses are allocated based on time and effort estimates

for the various departments. Depreciation expense is allocated based on the location at

which the asset is utilized.

Donated Services and Goods

The Organization records donated services and goods in accordance with FASB ASC

958-605, Revenue Recognition. As such, donated services are recognized when the

service either creates or enhances a non-financial asset or requires specialized skill that

would be purchased if the service was not donated. There were no such services during

the year ended December 31, 2018.

Additionally, the Organization records donated goods as support at their estimated

values, if determinable. For the year ended December 31, 2018, the Organization

received donated rent valued at $70,500. During the year ended December 31, 2018, the

Organization received $0 of donated assets.


December 31, 2018

-11-


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

disclosure 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.

Tax Status

The Organization constitutes a qualified not-for-profit organization under Section

501(c)(3) of the Internal Revenue Code and is, therefore, exempt from federal income

taxes.

In that regard, the Organization has evaluated its tax positions, expiring statutes of

limitations, audits, proposed settlements, changes in tax law and new authoritative

rulings and believes that no provision for income taxes is necessary, at this time, to

cover any uncertain tax positions.

Subsequent Events

The Organization evaluated all subsequent events through April 25, 2019, the date the

financial statements were available to be issued.

Note B - Liquidity and Availability of Resources

Financial assets available for general expenditure, that is, without donor or management

restrictions limiting their use, within one year of the statement of financial position

date, comprise the following:

Cash and cash equivalents $ 980,576

Accounts receivable 1,229,076

Grants receivable 791,978

Contributions receivable 97,709

Less non-current annuities (73,480)

Endowment spending-rate distributions and appropriations (5%) 59,512

Board-designated investment distributions and appropriations (5%) 102,503

Distributions from beneficial interests in assets held by others 127,000

Less cash and receivables with donor restrictions (662,358)

$ 2,652,516


December 31, 2018

-12-

Note B - Liquidity and Availability of Resources (Continued)

In addition to the above resources, the Organization also holds a $500,000 line-of-credit

with a maturity date of June 30, 2019. See Note H for more information on the line-of-

credit.

The Organization has an endowment fund in which the investment income is restricted

for building maintenance and improvements. The Organization has adopted a 5%

spending policy for the endowment based on the prior calendar year’s ending

investment balance. For the year ending December 31, 2019, the Organization may

withdraw up to $98,661 to assist with building maintenance and improvements.

The Organization has a board-designated investment fund with an annual spending rate

of 5% as described in Note K. Although the Organization does not intend to exceed the

spending policy rate, these amounts could be made available, if necessary.

Note C - Contributions Receivable

At December 31, 2018, contributions receivable was as follows:

Short-term contributions receivable $ 80,765

Annuities receivable 73,480

Allowance for uncollectible accounts (56,536)

$ 97,709

Substantially all short-term contributions receivable are expected to be collected within

one year.

Note D - Prepaid and Other Assets

At December 31, 2018, prepaid and other assets were as follows:

Prepaid expenses $ 149,525

Investment in Children’s Permanency Partnership 15,806

$ 165,331

The Investment in Children’s Permanency Partnership represents Epworth’s share of

the partnership assets for which it is a member and is calculated using the equity

method of accounting.


December 31, 2018

-13-

Note D - Prepaid and Other Assets (Continued)

On April 22, 2005, the Organization became a member of the Children’s Permanency

Partnership, LLC, which entitles the Organization to a percentage of the overall

earnings based on their case load. As of December 31, 2018, the Organization was a

35% member of the for-profit entity. Although ownership in the Limited Liability

Corporation reflects a noncontrolling interest, the percentage of ownership can fluctuate

and, as a result, the Organization accounts for this investment under the equity method.

Following is a summary of the financial position and results of operations of Children’s

Permanency Partnership, LLC, as of and for the year ended December 31, 2018:

Unaudited

Total assets $ 833,044

Total liabilities 666,137

Members’ equity $ 166,907

Revenue $ 15,174,736

Net loss $ (309,963)

Note E - Beneficial Interest in Trusts

The Organization is a named beneficiary of irrevocable deferred gifts. These amounts

are held by third-party trustees and are included in net assets with donor restrictions by

the Organization. At December 31, 2018, these assets, including investments and real

estate, were valued at $2,626,280.

Note F - Property and Equipment

Property and equipment at December 31, 2018, are comprised of the following:

Land, buildings and improvements $ 10,120,517

Furniture and equipment 1,134,902

Computers and software 801,142

Automobiles 222,903

12,279,464

Less: accumulated depreciation (8,669,976)

$ 3,609,488


December 31, 2018

-14-

Note F - Property and Equipment (Continued)

The Organization leases a major portion of its land at no cost from the Women’s

Division of the United Methodist Church, a related party. In the event the Organization

resolves to vacate this leased property, the Women’s Division, at its option, shall either

sell the leased property and invest the proceeds in a new site for the Organization under

similar lease terms or reimburse the Organization for the fair value of the buildings and

the improvements it made on the leased property. For the year ended December 31,

2018, Epworth has recorded an estimated fair value for this lease of $70,500 as both in-

kind contribution income and rent expense.

On February 4, 2014, the Organization entered into a Missouri Affordable Housing

Credit Program agreement with the Missouri Housing Development Commission. As a

part of the agreement, the Organization’s building utilized by the YES program is

subject to a Land Use Restriction Agreement. Under the agreement, Epworth must

operate, maintain, and manage the building as a homeless shelter under the YES

program.

Note G - Defined Contribution Plan

The Organization’s 401(k) Plan allows full and part time employees to defer a portion

of their wages and receive a discretionary match on those deferrals not to exceed

federal limits. Employees are eligible to enroll upon completion of their first year of

service (12 months) and 1,000 work hours following their date of hire. If an employee

does not meet the eligibility requirements in the first 12 months after hire, s/he can

meet these requirements if 1,000 hours are worked in the following calendar year.

Enrollment entry dates are January 1 or July 1 of the plan year.

The plan is a 2-year vesting plan. Epworth matches a maximum of 50% of the first 3%

contributed by the employee. The Organization did not make a discretionary

contribution to the 401(k) plan during 2018.

Note H - Line-of-Credit

During the year ended December 31, 2018, the Organization renewed its $500,000

uncommitted line-of-credit agreement with U.S. Bank, which matures on June 30,

2019. The interest rate on the line was 4.63% as of December 31, 2018. The balance is

collateralized by receivables. As of December 31, 2018, there was no balance

outstanding on the line-of-credit.


December 31, 2018

-15-

Note I - Fair Value Measurements of Assets and Liabilities

The Organization follows FASB ASC 820-10, Fair Value Measurements and

Disclosures. FASB ASC 820-10 establishes a framework for measuring fair value and

expands disclosures about fair value measurements.

FASB ASC 820-10 defines fair value as the price that would be received to sell an asset

or paid to transfer a liability in an orderly transaction between market participants at the

measurement date. FASB ASC 820-10 also establishes a fair value hierarchy, which

requires an entity to maximize the use of observable inputs and minimize the use of

unobservable inputs when measuring fair value. The standard describes three levels of

inputs that may be used to measure fair value:

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar

assets or liabilities, quoted prices in active markets that are not active, or other inputs

that are observable or can be corroborated by observable market data for substantially

the full term of the assets or liabilities.

Level 3: Unobservable inputs that are supported by little or no market activity and that

are significant to the fair value of the assets or liabilities.

Following is a description of the valuation methodologies used for instruments

measured at fair value on a recurring basis and recognized in the accompanying

statements of financial position, as well as the general classification of such instruments

pursuant to the valuation hierarchy.

Common stocks, corporate bonds and U.S. government securities: Valued at the

closing price reported on the active market on which the individual securities are

traded.

Mutual Funds: Valued at the net assets value (NAV) of shares held at year end.

Beneficial interests in trusts: Measured at fair value on a recurring basis using

significant third-party trust valuations and management’s estimate of the value of the

Organization’s share of the investment.

Management determines the fair value measurement valuation policies and procedures,

which are subject to Board assessment and approval. At least annually, management

determines if the current valuation techniques used in fair value measurements are still

appropriate.


December 31, 2018

-16-

Note I - Fair Value Measurements of Assets and Liabilities (Continued)

The Organization recognizes transfers between levels in the fair value hierarchy at the

end of the reporting period. There were no transfers between levels for the year ending

December 31, 2018.

The following table present the fair value measurements of investments recognized in

the accompanying statement of financial position measured at fair value on a recurring

basis and the level within the FASB ASC 820-10 fair value hierarchy in which the fair

value measurements fall at December 31, 2018:

Description Level 1 Level 2 Level 3

Balance

12/31/2018

Investments:

Money market funds $ 159,882 $ - $ - $ 159,882

Domestic exchange funds 154,609 - - 154,609

Domestic mutual funds 1,894,664 - - 1,894,664

International mutual funds 861,534 - - 861,534

Credit funds 194,012 - - 194,012

Diversified taxable mutual funds 1,795,792 - - 1,795,792

Taxable high yield funds 71,376 - - 71,376

Domestic preferred stock 61,084 - - 61,084

Emerging markets 20,585 - - 20,585

Total - Investments $ 5,213,538 $ - $ - $ 5,213,538

Beneficial interest in trusts $ - $ - $ 2,626,280 $ 2,626,280

The following is a reconciliation of the beginning and ending balances for assets

measured at fair value on a recurring basis using significant unobservable inputs (Level

3) during the year ended December 31, 2018:

Beginning balance $ 3,061,882

Decrease in fair value (435,602)

Ending balance $ 2,626,280


December 31, 2018

-17-

Note J - Endowment Funds

The Organization follows the Uniform Prudent Management of Institutional Funds Act

(UPMIFA). The Organization’s endowment consists only of donor-designated funds;

there were no board designated endowment funds during 2018. The named endowment

funds are for general operating purposes except for the Odom funds, the earnings of

which are restricted for building maintenance and improvements.

The Board of Directors has interpreted state law as requiring the preservation of the fair

value of the original gift as of the date of the donor-restricted endowment funds absent

explicit donor stipulations to the contrary. As a result of this interpretation, the

Organization retains in perpetuity (a) the original value of initial and subsequent gift

amounts (including promises to give net of discount and allowance for doubtful

accounts donated to the endowment and (b) any accumulations to the endowment made

in accordance with the direction of the applicable donor gift instrument at the time the

accumulation is added. Donor-restricted amounts not retained in perpetuity are subject

to appropriation for expenditure by us in a manner consistent with the standard of

prudence prescribed by UPMIFA. The Organization considers the following factors in

making a determination to appropriate or accumulate donor-restricted endowment

funds:

• The duration and preservation of the fund

• The purposes of the organization and the donor-restricted endowment fund

• General economic conditions

• The possible effect of inflation and deflation

• The expected total return from income and the appreciation of investments

• Other resources of the organization

• The investment policies of the organization

The Board of Directors adopted a spending rate of 5% per year based on the market

value at the end of the previous calendar year for the endowment funds to provide a

predictable stream of funding for operations while seeking to maintain the purchasing

power of the endowment assets.


December 31, 2018

-18-

Note J - Endowment Funds (Continued)

Endowment asset composition as of December 31, 2018:

Without

Donor

Restrictions

With Donor

Restrictions Total

Donor-restricted endowment funds:

Original donor-restricted gift amount

and amounts required to be maintained

in perpetuity by donor $ - $ 5,277,887 $ 5,277,887

Accumulated investment earnings - 511,862 511,862

$ - $ 5,789,749 $ 5,789,749

Changes in endowment assets for the year ended December 31, 2018:

Without Donor With Donor

2018 Restrictions Restrictions Total

Endowment Net Assets,

Beginning of Year $ - $6,611,244 $6,611,244

Investment return - (208,368) (208,368)

Change in value of

perpetual trusts - (435,602) (435,602)

Amounts released for

expenditure - (177,525) (177,525)

Endowment Net Assets,

End of Year $ - $5,789,749 $5,789,749

From time to time, certain donor-restricted endowment funds may have fair values less

than the amount required to be maintained by donors or by law (underwater

endowments). The Organization have interpreted UPMIFA to permit spending from

underwater endowments in accordance with prudent measures required under law. At

December 31, 2018, funds with original gift values of $2,651,607, fair values of

$3,163,471, and no deficiencies were reported in net assets with donor restrictions.

Note K - Net Assets Board Designated for Investments

The Organization holds an investment account that is restricted for long-term growth by

the Board of Directors. Board restricted net assets at December 31, 2018, were

$2,050,068. The investments are governed by a 5% annual spending rate policy. With

Board approval, the Organization may exceed the annual spending rate.


December 31, 2018

-19-

Note L - Net Assets With Donor Restrictions

The Organization’s net assets as of December 31, 2018, are restricted for the following

purposes:

Subject to expenditure for specific purpose:

United Way support $ 664,078

Endowment earnings for operating expenses 423,612

Endowment earnings for capital improvements 88,250

Older youth services projects 150,496

1,326,436

Subject to the passage of time:

Promises to give that are not restricted by donors,

but which are unavailable for expenditures until due 44,229

Endowments:

Subject to endowment spending policy and appropriation:

Gambrill funds 250,000

Adams funds 102,288

Hart funds 232,611

Odom funds 1,620,565

Other 446,143

Total Endowments 2,651,607

Not subject to spending policy or appropriation:

Beneficial interest in trusts 2,626,280

$ 6,648,552

Net assets were released from donor restrictions by incurring expenses satisfying the

restricted purpose or by occurrence of the passage of time or other events specified by

the donors as follows for the year ended December 31, 2018.

Net assets released:

Expiration of time restrictions 728,898

Satisfaction of program restrictions 473,448

$ 1,202,346


December 31, 2018

-20-

Note M - Leases

The Organization leases equipment under operating leases expiring at various dates

through 2020. Rental expense from these agreements was $99,646 for the year ended

December 31, 2018.

Future minimum lease payments as of December 31, 2018, are as follows:

Years ending

December 31, Amount

2019 $ 72,954

2020 17,496

Note N - Concentrations

For the year ended December 31, 2018, approximately 20% of the Organization’s

revenue and public support is provided by one local government agency.

Supplemental Information

Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters

Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards

Board of Directors



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

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

Standards issued by the Comptroller General of the United States, the financial statements of

Epworth Children & Family Services, Inc., which comprise the statement of financial position as of

December 31, 2018, and the related statements of activities, functional expenses, and cash flows for

the year then ended, and the related notes to the financial statements, and have issued our report

thereon dated April 25, 2019.

Internal Control Over Financial Reporting

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

Family Services, Inc.’s internal control over financial reporting (internal control) to determine the

audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions

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

Epworth Children & Family Services, Inc.’s internal control. Accordingly, we do not express an

opinion on the effectiveness of Epworth Children & Family Services, Inc.’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 the internal control was for the limited purpose described in the first paragraph

of this section and was not designed to identify all deficiencies in internal control that might be

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

identify any deficiencies in internal control that we consider to be material weaknesses. However,

material weaknesses may exist that have not been identified.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether Epworth Children & Family Services, Inc.’s

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

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

could have a direct and material effect on the determination of financial statement amounts.

However, providing an opinion on compliance with those provisions was not an objective of our

audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no

instances of noncompliance but did identify other matters that are required to be reported under

Government Auditing Standards and which are described in the accompanying schedule of findings

and questioned costs as items 2018-001.

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.


April 25, 2019

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

Required by Uniform Guidance

Board of Directors



Report on Compliance for Each Major Federal Program

We have audited Epworth Children & Family Services, Inc.’s compliance with the types of

compliance requirements described in the OMB Compliance Supplement that could have a direct and

material effect on each of Epworth Children & Family Services, Inc.’s major federal programs for the

year ended December 31, 2018. Epworth Children & Family Services, Inc.’s major federal programs

are identified in the summary of auditor’s results section of the accompanying schedule of findings

and questioned costs.

Management’s Responsibility

Management is responsible for compliance with the federal statutes, regulations, and the terms and

conditions of its federal awards applicable to its federal programs.

Auditor’s Responsibility

Our responsibility is to express an opinion on compliance for each of Epworth Children & Family

Services, Inc.’s major federal programs based on our audit of the types of compliance requirements

referred to above. We conducted our audit of compliance in accordance with auditing standards

generally accepted in the United States of America; the standards applicable to financial audits

contained in Government Auditing Standards, issued by the Comptroller General of the United

States; and the audit requirements of Title 2 U.S. Code Federal Regulations Part 200, Uniform

Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform

Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to

obtain reasonable assurance about whether noncompliance with the types of compliance

requirements referred to above that could have a direct and material effect on a major federal

program occurred. An audit includes examining, on a test basis, evidence about Epworth Children &

Family Services, Inc.’s compliance with those requirements and performing such other procedures as

we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion on compliance for each major

federal program. However, our audit does not provide a legal determination of Epworth Children &

Family Services, Inc.’s compliance.

Opinion on Each Major Federal Program

In our opinion, Epworth Children & Family Services, Inc. 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 December 31, 2018.

Report on Internal Control over Compliance

Management of Epworth Children & Family Services, Inc. is responsible for establishing and

maintaining effective internal control over compliance with the types of compliance requirements

referred to above. In planning and performing our audit of compliance, we considered Epworth’s

internal control over compliance with the types of requirements that could have a direct and material

effect on each major federal program to determine the auditing procedures that are appropriate in the

circumstances for the purpose of expressing an opinion on compliance for each major federal

program and to test and report on internal control over compliance in accordance with the Uniform

Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control

over compliance. Accordingly, we do not express an opinion on the effectiveness of Epworth’s

internal control over compliance.

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

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

assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance

requirement of a federal program on a timely basis. A material weakness in internal control over

compliance is a deficiency, or 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.

Our consideration of internal control over compliance was for the limited purpose described in the

first paragraph of this section and was not designed to identify all deficiencies in internal control over

compliance that might be material weaknesses or significant deficiencies and therefore, material

weaknesses or significant deficiencies may exist that have not been identified. We did not identify

any deficiencies in internal control over compliance that we consider to be material weaknesses.

However, we identified certain deficiencies in internal control over compliance, as described in the

accompanying schedule of findings and questioned costs as items 2018-002 to 2018-005, that we

consider to be significant deficiencies.

Epworth Children & Family Services, Inc.’s response to the internal control over compliance

findings identified in our audit is described in the accompanying corrective action plan. Epworth’s

response was not subjected to the auditing procedures applied in the audit of compliance and,

accordingly, we express no opinion on the response.

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

Uniform Guidance. Accordingly, this report is not suitable for any other purpose.


April 25, 2019

Schedule of Expenditures of Federal Awards

Federal Pass-through

CFDA Entity Identifying Federal

Federal Grantor/Pass-through Grantor/ Program Titles Number Number Expenditures

Department of Health & Human Services

Direct programs:

Basic Center Program 10/1/16 - 9/30/19 93.623 200,000$

Transitional Living Program 4/01/14 - 3/31/19 93.550 186,000

386,000

Pass Through From:

Missouri Department of Health and Senior Services

Prep Foster Youth Program 10/1/17 - 9/30/18 93.092 CS160541002 21,187

Total Department of Health and Human Services 407,187

Department of Housing and Urban Development

Pass Through From:

St. Louis County Department of Human Services *

Emergency Solutions Grant 5/1/17 - 4/30/18 14.231 6,664




Supportive Housing Program 11/1/17 - 10/31/18 14.235 29,339


Total Department of Housing and Urban Development 306,910

Department of Agriculture

Child Nutrition ClusterPass Through Missouri Department of Elementary and

Secondary Education *

School Breakfast Program 10.553 16,854

National School Lunch Program 10.555 22,974

Total Child Nutrition Cluster 39,828

Total Department of Agriculture 39,828

Total Expenditures of Federal Awards 753,925$

* Information not available.


Year ended December 31, 2018

-25-

EPWORTH CHILDREN & FAMILY SERVICES, INC. Notes to Schedule of Expenditures of Federal Awards Year ended December 31, 2018

-26-

Note A - Basis of Presentation

The accompanying schedule of expenditures of federal awards includes the federal

grant activity of Epworth Children & Family Services, Inc. and is presented on the

accrual basis of accounting. 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). Therefore, some amounts presented in this schedule may

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

statements.

Note B - Indirect Cost Rate

For the year ended December 31, 2018, Epworth Children & Family Services, Inc. has

elected to use the 10% de minimis indirect cost rate as allowed under Uniform

Guidance.

EPWORTH CHILDREN & FAMILY SERVICES, INC. Schedule of Findings and Questioned Costs Year ended December 31, 2018

-27-

Summary of Auditor’s Results

1. Financial Statements:

a. The auditor’s report expresses an unmodified opinion on the financial statements

of Epworth Children & Family Services, Inc.

b. Internal control over financial reporting:

i. Material weakness identified? No

ii. Significant deficiencies identified? No

c. Noncompliance material to financial statements noted? No

2. Federal Awards:

a. Internal Control over major programs:

i. Material weakness identified? No

ii. Significant deficiencies identified? Yes

b. Noncompliance material to financial statements noted? No

c. The auditor’s report on compliance for the major federal award program

expresses an unmodified opinion on all major federal programs.

d. There were no audit findings relative to the major federal award program for

Epworth Children & Family Services, Inc. noted that are required to be reported

in accordance with 2 CFR section 200.516(a).

e. The program tested as major program include:

CFDA Number Name of Federal Program

93.550 Transitional Living Program/

Independent Living Program

f. The threshold used for distinguishing between Type A and B programs was

$750,000.

g. Epworth Children & Family Services, Inc. is considered a low-risk auditee.

EPWORTH CHILDREN & FAMILY SERVICES, INC. Schedule of Findings and Questioned Costs - Continued Year ended December 31, 2018

-28-

Findings – Financial Statements Audit – Year Ended December 31, 2018

2018-001 Review and Reporting of Grant Expenses

Criteria- Epworth Children & Family Services is responsible for tracking expenses applied to

the grant to allow for proper monitoring of grant utilization.

Condition- Expenses attributed to grant clients and related services could not be segregated from

overall program expenses.

Context- We noted expenses attributed to grant clients and services performed could not be

segregated to provide reporting for those expenses applied against the grant.

Cause- The Organization does not track expenses by grant.

Effect- Failure to track expenses by grant for cost reimbursable grants could result in inaccurate

reporting and the use of grant funding on clients unrelated to the grant.

Recommendation- Implement a formal procedure to track expenses by grant and evaluate actual

expenses applied against the grant on a monthly basis.

Findings and Questioned Costs – Major Federal Awards Program

DEPARTMENT OF HEALTH & HUMAN SERVICES

Transitional Living Program—CFDA No. 93.550

2018-002 Internal Control Over Eligibility

Criteria- Epworth Children & Family Services is responsible for maintaining a proper internal

control system over a client’s administrative file record and initial eligibility determination.

Condition- The preventative review of a client’s file and eligibility to be coded as a Basic Center

Program recipient upon intake was not documented.

Context- We noted a lack of documentation of a review of a client’s file at intake in 4 out of 6

instances.

Cause- The Organization did not consistently apply procedures calling for a documented

preventative review of these files.


-29-

Findings and Questioned Costs – Major Federal Awards Program (Continued)

Effect- The lack of a documented preventative review could result in a client’s program

eligibility not being reviewed which could lead to potential noncompliance. However, no

instances of noncompliance were noted as the result of the lack of a documented review.

Recommendation- Implement a formal procedure to review the client’s file and eligibility upon

intake to ensure they can be coded to the Basic Center Program.

2018-003 Internal Control to Monitor Days of Services


control system over a client’s admittance and discharge to ensure they do not exceed the

maximum allowable days of service as permitted by program compliance requirements.

Condition- A control did not exist to formally monitor clients and their related length of stays to

ensure they did not exceed maximum allowable days of service.

Context- We noted a lack of documentation of a review of a client’s days of service for 6 out of

6 instances.

Cause- The Organization did not implement a control to monitor the number of days of services

a client receives.

Effect- The lack of a documented preventative review could result in clients exceeding the

maximum allowable days of service resulting in excess grant expenses being utilized on the

ineligible client.

Recommendation- Implement a formal procedure to review clients and their number of days of

services to ensure no clients exceed the maximum allowable days as noted in compliance

requirements.

2018-004 Review and Reporting of Grant Expenses

See finding 2018-001 under Financial Statements Audit.


-30-

Findings and Questioned Costs – Major Federal Awards Program (Continued)

2018-005 Review of Performance and Financial Reporting

Criteria- Epworth Children & Family Services is responsible for implementing and

documenting controls over grant reporting.

Condition- Control and/or documentation of control related to reporting oversight did not exist.

Context- We noted a lack of review of performance reporting during 2018 and the lack of

documentation of review of financial reporting during 2018.

Cause- Due to transition in staffing, the Organization did not implement a control to monitor or

document oversight of grant reporting.

Effect- The lack of review may result in incorrect grant reporting and the loss or return of

funding.

Recommendation- Implement a formal procedure documenting review of both performance and

financial reporting prior to submission to the grantee.

EPWORTH CHILDREN & FAMILY SERVICES, INC. Corrective Action Plan Year ended December 31, 2018

-31-

Views of responsible officials and planned corrective action for item 2018-001:

While Epworth Children & Family Services, Inc. believes that we have properly monitored grant

utilization, we are in agreement that there is no formal procedure to track expenses by grant.

Based upon this finding, Epworth’s accounting department will implement an additional

procedure during our monthly evaluation of all program expenses that will identify and track

expenses by grant and allow Epworth to evaluate actual expenses applied against each grant on a

monthly basis. This enhanced process will allow for precise tracking and reporting of all grant

expenses.


Beginning in 2018, Epworth implemented a formal review of client eligibility at weekly

Admissions staff meetings. Of the 6 participants selected for testing, the two without exceptions

were new clients in 2018 that underwent the formal review during the Admissions meeting.

Epworth will continue to use this process going forward.


Program management reviews client information and their number of days of services at weekly

Admission staff meetings. While discussed, the review is not documented in meeting minutes.

Going Forward, management will include a listing of the clients reviewed for maximum

allowable days of service in the meeting minutes. Program management will then sign off on

their attendance at the meeting, confirming their review of the listing of clients.


See management’s response for finding 2018-001 above.


While Epworth Children & Family Services, Inc. program personnel do review all documents

related to grant reporting, we are in agreement that there is not a formal procedure documenting

the review of both performance and financial reporting prior to submission of information to

grantees. Based upon this finding, Epworth’s Supportive Housing Program is immediately

implementing additional oversight and a formal procedure to document the review of both

performance and financial reporting prior to submission to the grantee. This additional

procedure will help assure that grant reporting is timely and accurate.

EPWORTH CHILDREN & FAMILY SERVICES, INC. Summary Schedule of Prior Audit Findings Year ended December 31, 2018

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Findings and Questioned Costs – Major Federal Awards Program

DEPARTMENT OF HEALTH & HUMAN SERVICES

Basic Center Program—CFDA No. 93.623


Condition- The review of a client’s file and eligibility to be coded as a Basic Center Program

recipient upon intake was not documented.

Recommendation- Implement a formal procedure to review the client’s file and eligibility upon

intake to ensure they can be coded to the Basic Center Program.

Current Status- The finding does not warrant further action. The recommendation was adopted

in May 2018 for all new clients going forward. The Organization did not implement a

retrospective review of clients who entered the program prior to 2018.

..................................................................................1

Statements of Financial Position...........................................................................................3

Statements of Activities ........................................................................................................4

Statements of Cash Flows.....................................................................................................6

Statements of Functional Expenses ......................................................................................7

Notes to Financial Statements...............................................................................................9

ol Over Financial Reportingand on Compliance and Other Matters Based on an Audit of Financial StatementsPerformed in Accordance with Government Auditing Standards ..................................24

Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by Uniform Guidance..............................26

Schedule of Expenditures of Federal Awards....................................................................28

Note to Schedule of Expenditures of Federal Awards.......................................................29

Schedule of Findings and Questioned Costs......................................................................30

Corrective Action Plan.......................................................................................................32

Board of DirectorsEpworth Children & Family Services, Inc.Saint Louis, Missouri

Report on the Financial Statements

We have audited the accompanying financial statements of Epworth Children & Family Services, Inc. (a nonprofit organization), which comprise the statements of financial position as of December 31, 2017 and 2016 and the related statements of activities, cash flows, and functional expenses for the years then ended, and the related notes to the financial statements.

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the

procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the OrganizaAn audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Epworth Children & Family Services, Inc. as of December 31, 2017 and 2016and the changes in its net assets and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Other Matters

Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying schedule of expenditures of federal awards, as required by Title 2 U.S. Code of Federal Regulations (CFR) 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 otherrecords used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated April 26, 2018and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in

Restatement of Prior Year Financial Statements

As discussed in Note O to the financial statements, certain changes in trust restrictions were brought to the attention of management of Epworth Children & Family Services during the current year. Accordingly, amounts reported for trust assets and change in value of perpetual trusts have been restated in the December 31, 2016, financial statements now presented, and an adjustment has been made to net assets to account for the change in restriction. Our opinion is not modified with respect to these matters.

Saint Louis, MissouriApril 26, 2018

2017 2016

ASSETS

Cash and cash equivalents 2,144,342$ 1,668,950$

Investments, at fair value 5,861,282 5,340,981

Accounts receivable, less allowance for doubtful accounts of

$88,616 and $25,600 in 2017 and 2016, respectively 928,641 1,296,112

Contributions receivable, less allowance for doubtful accounts of

$4,712 and $31,000 in 2017 and 2016, respectively 113,116 266,634

Grants receivable 834,911 833,344

Prepaid and other assets 261,083 399,122

Property and equipment, net 3,983,562 4,336,771

Beneficial interest in trusts, at fair value 3,061,882 2,838,934

TOTAL ASSETS 17,188,819$ 16,980,848$

LIABILITIES AND NET ASSETS

LiabilitiesNote payable 319,861$ 335,468$

Accounts payable 147,770 184,308

Accrued expenses 376,778 389,469

Other liabilities 117,845 166,147

Total Liabilities 962,254 1,075,392

Net Assets

Unrestricted:

Undesignated 5,034,679 4,919,308

Investment in property and equipment 3,663,701 4,001,303

Total Unrestricted 8,698,380 8,920,611

Temporarily restricted 1,814,698 1,494,306

Permanently restricted 5,713,487 5,490,539

Total Net Assets 16,226,565 15,905,456

TOTAL LIABILITIES AND NET ASSETS 17,188,819$ 16,980,848$


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Temporarily PermanentlyUnrestricted Restricted Restricted Total

REVENUE AND PUBLIC SUPPORTRevenue:

Fees for service 8,430,709$ -$ -$ 8,430,709$ Federal and state grants 1,341,280 - - 1,341,280Investment income 796,132 488,041 - 1,284,173Other income 158,277 - - 158,277

Total revenue 10,726,398 488,041 - 11,214,439Public support:

Contributions 614,272 409,913 - 1,024,185Special events 463,581 - - 463,581Change in value of beneficial interest in trusts - - 222,948 222,948Legacies, bequests and trusts 69,386 - - 69,386In-kind rent 70,500 - - 70,500United Way of Greater St. Louis - 681,182 - 681,182

Total public support 1,217,739 1,091,095 222,948 2,531,782

Net assets released from restrictions 1,258,744 (1,258,744) - -

TOTAL REVENUE AND PUBLIC SUPPORT 13,202,881 320,392 222,948 13,746,221

EXPENSESProgram services:

Residential treatment 3,211,264 - - 3,211,264Community services 1,580,385 - - 1,580,385Emergency shelter 888,011 - - 888,011Foster care 1,888,887 - - 1,888,887Older youth services 1,246,959 - - 1,246,959Family support services 1,139,008 - - 1,139,008Prevention services 568,652 - - 568,652Psychological services 527,947 - - 527,947

Total program services 11,051,113 - - 11,051,113

Supporting services:Management and general 1,465,669 - - 1,465,669Fund raising 908,330 - - 908,330

Total supporting services 2,373,999 - - 2,373,999

TOTAL EXPENSES 13,425,112 - - 13,425,112

CHANGE IN NET ASSETS (222,231) 320,392 222,948 321,109

Net assets, beginning of year 8,920,611 1,494,306 5,490,539 15,905,456

Net assets, end of year 8,698,380$ 1,814,698$ 5,713,487$ 16,226,565$


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Temporarily PermanentlyUnrestricted Restricted Restricted Total

REVENUE AND PUBLIC SUPPORTRevenue:

Fees for service 7,543,366$ -$ -$ 7,543,366$ Federal and state grants 1,383,141 - - 1,383,141Investment income 399,188 228,876 - 628,064Other income 128,371 - - 128,371

Total revenue 9,454,066 228,876 - 9,682,942Public support:

Contributions 560,510 320,086 - 880,596Special events 764,985 - - 764,985Change in value of beneficial interest in trusts - - 72,898 72,898Legacies, bequests and trusts 949,667 - - 949,667In-kind rent 70,500 - - 70,500United Way of Greater St. Louis - 681,182 - 681,182

Total public support 2,345,662 1,001,268 72,898 3,419,828

Net assets released from restrictions 1,301,495 (1,301,495) - -

TOTAL REVENUE AND PUBLIC SUPPORT 13,101,223 (71,351) 72,898 13,102,770

EXPENSESProgram services:

Residential treatment 2,836,244 - - 2,836,244Community services 1,515,264 - - 1,515,264Emergency shelter 800,284 - - 800,284Foster care 1,404,395 - - 1,404,395Older youth services 1,369,826 - - 1,369,826Family support services 1,049,454 - - 1,049,454Prevention services 877,662 - - 877,662Psychological services 512,597 - - 512,597

Total program services 10,365,726 - - 10,365,726

Supporting services:Management and general 1,933,812 - - 1,933,812Fund raising 1,004,041 - - 1,004,041

Total supporting services 2,937,853 - - 2,937,853

TOTAL EXPENSES 13,303,579 - - 13,303,579

CHANGE IN NET ASSETS (202,356) (71,351) 72,898 (200,809)

Net assets, beginning of year 9,122,967 2,427,689 4,555,609 16,106,265Change in Beneficial Interest in Trust Restriction - (862,032) 862,032 -

(See note O)Net assets, end of year 8,920,611$ 1,494,306$ 5,490,539$ 15,905,456$


-5-

2017 2016

Cash flows from operating activities:

Change in net assets 321,109$ (200,809)$

Adjustments to reconcile change in net assets to

net cash provided by operating activities:

Non-cash property and equipment donation (5,696) -

Depreciation 465,491 510,725

Change in allowance for receivables 36,728 16,100

Change in value of beneficial interest in trusts (222,948) (72,898)

Net unrealized gains on investments (594,526) (207,828)

Net realized gains on investments (112,555) (65,383)

(Increase) decrease in assets and liabilities:

Accounts receivable 304,455 457,970

Grants and contributions receivable 178,239 52,472

Prepaids and other assets 138,039 (149,032)

Accounts payable (36,538) 106,093

Accrued expenses and other liabilities (60,993) 39,828

Net cash provided by operating activities 410,805 487,238

Cash flows from investing activities:

Purchases of property and equipment (106,586) (118,896)

Proceeds from sales of investments 439,444 1,329,150

Purchases of investments (252,664) (1,135,826)

Net cash provided by investing activities 80,194 74,428

Cash flows from financing activities

Payments on note payable (15,607) (16,220)

Net cash used in financing activities (15,607) (16,220)

NET INCREASE IN CASH

AND CASH EQUIVALENTS 475,392 545,446

Cash and cash equivalents, beginning of year 1,668,950 1,123,504

Cash and cash equivalents, end of year 2,144,342$ 1,668,950$

Supplemental disclosure:Cash paid during the year for interest 9,018$ 10,501$


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Note A - Operations and Summary of Significant Accounting Policies

Operations

Epworth Children & Family Services, Inc. ( Epworth ) is a not-for-profit charitable corporation that provides a wide array of services to children, youth and families in need, strengthening the capacity of each to thrive in society. For more than 150 years, Epworth has provided the community with essential youth development services that have helped thousands of children overcome severe emotional and

approach helps youth focus on solutions, build on inherent strengths and communicate more effectively. Youth and families turn to Epworth for foster care, emergency shelter, residential treatment, transitional living services, educational day treatment services, family support services, prevention services and psychological services each year.

local, state and federal agencies, along with public contributions.

In addition, Epworth is a member of the anency Partnership, LLC, afor-profit LLC, which provides foster care case management services to youth in the custody of the State of Missouri.

Financial Statements Presentation

The following is a description of the three classes of net assets of the Organization:

Unrestricted Net Assets represent those net assets whose use is not restricted by donors.

Temporarily Restricted Net Assets represent those net assets whose use has been limited by donor-imposed stipulations that either expire by passage of time or can be fulfilled and removed by actions of the Organization pursuant to those stipulations.

Permanently Restricted Net Assets represent those net assets whose use has been limited by donor-imposed stipulations requiring principal to be maintained in perpetuity, while the income earned on the principal is expendable on general operating expenses, unless otherwise restricted by the donor.

Basis of Accounting

The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America and accordingly, reflect all significant receivables, payables and other liabilities. Revenues and expense are recognized in the period which they are earned or incurred.

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Cash and Cash Equivalents

For purposes of the statement of cash flows, the Organization considers all highly liquid financial instruments, excluding cash held in the investment accounts, with a maturity as of the financial statement date of three months or less to be cash equivalents. The Organization maintains cash balances at various major domestic financial institutions in amounts that at times may exceed federally insured limits. The Organization has not incurred any losses as a result of the excess balances.

Accounts and Grants Receivable

Accounts and grants receivable are fees for services and grants which are stated at the amount management expects to collect from outstanding balances. Invoices are considered past due once they are outstanding over 30 days. Management provides for probable uncollectible amounts through a charge against earnings and a corresponding increase in a valuation allowance based on its assessment of the current status of individual accounts. Balances still outstanding after management has used reasonable collection efforts are written off through a reduction in the valuation allowance and thereceivable.

Investments

Investments are stated at fair value. Investment income is recognized when earned.

Property and Equipment

Property and equipment in excess of $1,000 is recorded at cost or, if received by gift or bequest, at the market value at the date of donation. If the donors stipulate how long the assets must be used, the contributions are recorded as restricted support. In absence of such stipulations, contributions of property and equipment are reported as unrestricted support. In 2017 and 2016, the Organization did not receive contributions of property and equipment considered restricted support.

Depreciation is recorded on the straight-line basis over the estimated useful lives of the assets as follows: buildings and improvements, five to thirty years; furniture and equipment, three to fifteen years; automobiles, five years; and computers and software, three to five years. Expenditures for major renewals and improvements, which increase the useful lives of respective assets, are capitalized. Maintenance and repairs are expensed as incurred.

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Impairment of Long Lived Assets

Long lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the sum of the expected future undiscounted cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and the carrying value of the asset. For the years ended December 31, 2017 and 2016, management determined that no impairment loss needs to be recognized.

Other Liabilities

Other liabilities primarily consist of a medical claims reserve for the year ended December 31, 2017. As of December 31, 2016, the balance consisted of both a medical claims reserve and a direct subsidy received by the Organization from an Affordable Housing Program As the Organization is self-funded for medical insurance purposes, a medical claims reserve has been established to capture the estimated incurred, but not reported claims liability. This reserve amounted to $80,000 for each of the years ended December 31, 2017 and 2016. The direct subsidy of $50,000 had an initial 15-year retention period through December 2017 and was recorded as income as of December 2017.

Contributions

The Organization recognizes contributions as revenue when an unconditional promise is made. All contributions are considered to be available for unrestricted use unless specifically restricted by the donor. Amounts received that are designated for future periods or restricted by the donor for specific purposes are reported as temporarily or permanently restricted support that increase those net asset classes. Support is released from restrictions once timing or donor stipulations have been satisfied.

In addition to receiving cash contributions, the Organization receives in-kind contributions of rental space and other items from donors. It is the Organizationpolicy to record the estimated fair value of certain in-kind donations as an expense in its financial statements and similarly increase in contribution revenue by a like amount. The Organization records those donations if their value is readily ascertainable and if the services performed require expertise.

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Donated Services and Goods

The Organization records donated services and goods in accordance with FASB ASC 958-605, Revenue Recognition. As such, donated services are recognized when the service either creates or enhances a non-financial asset or requires specialized skill that would be purchased if the service was not donated. There were no such services during the years ended December 31, 2017 and 2016.

Additionally, the Organization records donated goods as support at their estimated values, if determinable. For each of the years ended December 31, 2017 and 2016, the Organization received donated rent valued at $70,500. During the years ended December 31, 2017 and 2016, the Organization received $5,696 and $0, respectively, of donated assets.

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 disclosure 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.

Tax Status

The Organization constitutes a qualified not-for-profit organization under Section 501(c)(3) of the Internal Revenue Code and is, therefore, exempt from federal income taxes.

In that regard, the Organization has evaluated its tax positions, expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings and believes that no provision for income taxes is necessary, at this time, to cover any uncertain tax positions.

Subsequent Events

The Organization evaluated all subsequent events through April 26, 2018, the date the financial statements were available to be issued.

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Note B - Investment Income

Investment income consists of the following:2017 2016

Interest and dividend income $ 108,619 $ 103,898Net realized gains on investments 112,555 65,383Net unrealized gains (losses) on investments 594,526 207,828Trust income 130,689 119,332Other 337,784 131,623

$ 1,284,173 $ 628,064

Note C - Contributions Receivable

At December 31, 2017 and 2016, contributions receivable were as follows:

Short-term contributions receivable $ 31,415 $ 207,226Annuities receivable 86,413 90,408Allowance for uncollectible accounts (4,712) (31,000)

$ 113,116 $ 266,634

Substantially all short-term contributions receivable are expected to be collected within one year.

Note D - Prepaid and Other Assets

At December 31, 2017 and 2016, prepaid and other assets were as follows:

2017 2016

Prepaid expenses $ 134,464 $ 184,421126,619 214,701

$ 261,083 $ 399,122

the partnership assets for which it is a member and is calculated using the equity method of accounting.

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Note D - Prepaid and Other Assets (Continued)

y Partnership, LLC, which entitles the Organization to a percentage of the overall earnings based on their case load. As of December 31, 2017 and 2016, the Organization was a 35% and 21% member, respectively, of the for-profit entity. Although ownership in the Limited Liability Corporation reflects a noncontrolling interest, the percentage of ownership can fluctuate and, as a result, the Organization accounts for this investment under the equity method.

Permanency Partnership, LLC, as of and for the years ended December 31, 2017 and 2016:

(Unaudited) (Audited)2017 2016

Total assets $ 1,404,772 $ 1,686,414

Total liabilities 917,620 625,101

Members $ 487,152 $ 1,061,313

Revenue $ 15,632,831 $ 12,799,305

Net income $ 972,655 $ 313,538

Note E - Beneficial Interest in Trusts

The Organization is a named beneficiary of irrevocable deferred gifts. These amounts are held by third-party trustees and are included in permanently restricted net assets by the Organization. At December 31, 2017 and 2016, these assets, including investments and real estate, were valued at $3,061,882 and $2,838,934, respectively.

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Note F - Property and Equipment

Property and equipment at December 31, 2017 and 2016 are comprised of the following:

2017 2016

Land, buildings and improvements $ 10,070,930 $ 10,020,746Furniture and equipment 1,131,669 1,117,740Computers and software 787,491 767,799Automobiles 233,855 271,990Construction in progress - 1,640

12,223,945 12,179,915Less: accumulated depreciation (8,240,383) (7,843,144)

$ 3,983,562 $ 4,336,771

The Organization leases a major portion of its land at no cost from the WoDivision of the United Methodist Church, a related party. In the event the Organization

ion, shall either sell the leased property and invest the proceeds in a new site for the Organization under similar lease terms or reimburse the Organization for the fair value of the buildings and the improvements it made on the leased property. For each the years ended December 31, 2017 and 2016, Epworth has recorded an estimated fair value for this lease of $70,500 as both in-kind contribution income and rent expense.

Note G - Defined Contribution Plan

ws full and part time employees to defer a portion of their wages and receive a discretionary match on those deferrals not to exceed federal limits. Employees are eligible to enroll upon completion of their first year of service (12 months) and 1,000 work hours following their date of hire. If an employee does not meet the eligibility requirements in the first 12 months after hire, s/he can meet these requirements if 1,000 hours are worked in the following calendar year. Enrollment entry dates are January 1 or July 1 of the plan year.

The plan is a 2-year vesting plan. Epworth matches a maximum of 50% of the first 3% contributed by the employee. The Organization did not make a discretionary contribution to the 401(k) plan during 2017 or 2016.

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Note H - Note Payable and Line-of-Credit

Note payable at December 31, 2017 and 2016 consists of the following:

2017 2016Note payable to bank due in monthly installmentsof $2,227 including annual interest at 3.46% throughMarch 31, 2018, at which time all outstandingprincipal and accrued interest is due. Note iscollateralized by the building at 7520 NaturalBridge Rd. As of March 31, 2018, the outstanding balance was paid in full. $ 319,861 $ 335,468

During the year ended December 31, 2017, the Organization renewed their $500,000 uncommitted line-of-credit agreement with U.S. Bank, which matures on June 30, 2018. The interest rate on the line was 3.625% and 2.5% as of December 31, 2017 and 2016, respectively. The balance is collateralized by real estate at 7520 Natural Bridge Road. As of December 31, 2017 and 2016, there was no balance outstanding on the line-of-credit.

Note I - Fair Value Measurements of Assets and Liabilities

The Organization follows FASB ASC 820-10, Fair Value Measurements and Disclosures. FASB ASC 820-10 establishes a framework for measuring fair value, and expands disclosures about fair value measurements.

FASB ASC 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FASB ASC 820-10 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in active markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

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Following is a description of the valuation methodologies used for instruments measured at fair value on a recurring basis and recognized in the accompanying statements of financial position, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Common stocks, corporate bonds and U.S. government securities: Valued at the closing price reported on the active market on which the individual securities are traded.

Mutual Funds: Valued at the net assets value (NAV) of shares held at year end.

Beneficial interests in trusts: Measured at fair value on a recurring basis using significant third party trust valuations a

.

Management determines the fair value measurement valuation policies and procedures, which are subject to Board assessment and approval. At least annually, management determines if the current valuation techniques used in fair value measurements are still appropriate.

The Organization recognizes transfers between levels in the fair value hierarchy at the end of the reporting period. There were no transfers between levels for the years ending December 31, 2017 and 2016.

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The following tables present the fair value measurements of investments recognized in the accompanying statement of financial position measured at fair value on a recurring basis and the level within the FASB ASC 820-10 fair value hierarchy in which the fair value measurements fall at December 31, 2017 and 2016:

Description Level 1 Level 2 Level 3Balance

12/31/2017Investments:Money market funds $ 101,126 $ - $ - $ 101,126Domestic exchange funds 180,529 - - 180,529Domestic mutual funds 1,861,798 - - 1,861,798International mutual funds 1,514,406 - - 1,514,406Credit funds 205,377 - - 205,377Diversified taxable mutual funds 1,828,991 - - 1,828,991Taxable high yield funds 77,889 - - 77,889Domestic preferred stock 67,727 - - 67,727Emerging markets 23,439 - - 23,439



Description Level 1 Level 2 Level 3Balance

12/31/2016Investments:Money market funds $ 169,740 $ - $ - $ 169,740Domestic exchange funds 170,914 - - 170,914Domestic mutual funds 1,668,161 - - 1,668,161International mutual funds 1,267,351 - - 1,267,351Credit funds 206,950 - - 206,950Diversified taxable mutual funds 1,754,885 - - 1,754,885Taxable high yield funds 79,428 - - 79,428Emerging markets 23,552 - - 23,552



-19-


The following is a reconciliation of the beginning and ending balances for assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the years ended December 31, 2017 and 2016:

2017 2016

Beginning balance $ 2,838,934 $ 2,766,036Increase in fair value 222,948 72,898

Ending balance $ 3,061,882 $ 2,838,934

Note J - Endowment Funds

The Organization follows the Uniform Prudent Management of Institutional Funds Act (UPMIFA). -designated funds; there were no board designated endowment funds during 2017 and 2016. The named endowment funds are for general operating purposes except for the Odom funds, the earnings of which are restricted for building maintenance and improvements.

The Board of Directors has interpreted state law as requiring the preservation of the fair value of the original gift as of the date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. Therefore, the Organization classifies as permanently restricted net assets a) the original value of gifts donated to the permanent endowment; b) the original value of subsequent gifts to the permanent endowment fund; and 3) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund.

The Board of Directors adopted a spending rate of 5% per year based on the market value at the end of the previous calendar year for the endowment funds.

Temporarily Permanently2017 Unrestricted Restricted Restricted Total

Endowment Net Assets,Beginning of Year $ - $ 587,839 $5,490,539 $6,078,378

Investment return (loss) - 488,041 - 488,041

Change in value ofperpetual trusts - - 222,948 222,948

Amounts released for expenditure - (162,188) - (162,188)

Endowment Net Assets,End of Year $ $ $ $6

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Note J - Endowment Funds (Continued)

Temporarily Permanently2016 Unrestricted Restricted Restricted Total

Endowment Net Assets,Beginning of Year $ - $1,380,676 $4,555,609 $5,936,285

Investment return (loss) - 228,876 - 228,876

Change in value ofperpetual trusts - - 72,898 72,898

Change in perpetual trust

Restriction (862,032) 862,032 -

Amounts released for expenditure - (159,681) - (159,681)

Endowment Net Assets,End of Year $ $ 587,839 $5,490,539 $6,078,378

Note K - Temporarily Restricted Net Assets

December 31, 2017 and 2016are available for the following purposes or periods:

2017 2016

United Way support $ 681,182 $ 681,182S 642,104 653,674Capital improvements 319,329 123,825Older youth services projects 172,083 27,625Other - 8,000

$ 1,814,698 $ 1,494,306

Net assets released:Expiration of time restrictions $ 789,957 $ 909,222Satisfaction of program restrictions 468,787 392,273

$ 1,258,744 $ 1,301,495

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Note L - Permanently Restricted Net Assets

restricted net assets as of December 31, 2017 and 2016are comprised as follows:

2017 2016

Gambrill funds $ 250,000 $ 250,000Adams funds 102,288 102,288Hart funds 232,611 232,611Odom funds 1,620,565 1,620,565Beneficial interest in trusts 3,061,882 2,838,934Other 446,141 446,141

$ 5,713,487 $ 5,490,539

Note M - Leases

The Organization leases equipment under operating leases expiring at various dates through 2020. Rental expense from these agreements was $101,892 and $90,684 for the years ended December 31, 2017 and 2016, respectively.

Future minimum lease payments as of December 31, 2017 are as follows:

Years endingDecember 31, Amount

2018 $ 78,4562019 72,9542020 17,496

Note N - Concentrations

For the years ended December 31, 2017 and 2016, approximately 23% and 25%, respectivel is provided by one local government agency.

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Note O - Restatement of Prior Year Balances

Subsequent to year end, it came to the attention of management that a court case involving a trust in which the Organization holds a beneficial interest was settled in August of 2016. As a result of the litigation, it was determined the trustee was not required to terminate the trust following the death of the last annuitant, but rather may hold the trust in perpetuity for the permanent and continuous benefit of charitable organizations. Therefore, this trust and its related change in value were reclassed from temporarily restricted net assets and income to permanently restricted net assets and income for the year ended December 31, 2016.

Previously

Reported As Restated Restatement

December 31, 2016

Statement of Financial Position:

Permanently Restricted Net Assets $ 4,607,316 $ 5,490,539 $ 883,223

Temporarily Restricted Net Assets 2,377,529 1,494,306 (883,223)

Statement of Activities:

Permanently Restricted - Change in Value

of Beneficial Interest in Trusts 51,707 72,898 21,191

Permanently Restricted - Change in Net Assets 51,707 72,898 21,191

Temporarily Restricted - Change in Value

of Beneficial Interest in Trusts 21,191 - (21,191)

Temporarily Restricted - Change in Net Assets (50,160) (71,351) (21,191)

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Note P - Programmatic Changes

FSN ) Program expanded its services into St. Charles County offering home-based family therapy in that community for the

e Board of St. Charles County. FSN also obtained funding in 2017 through the Lutheran Foundation to pay for interpreter services for foreign-born client families to participate in family therapy and for a cultural competency training series for FSN staff. This allowed Epworth to increase capacity in the FSN Program and become more proficient in serving immigrant and refugee clients.

In May 2017, Epworth admitted its first clients into a new Residential Behavioral Health ( RBH ) Program. This Program is designed to assist families with children facing mental health crises that have resulted in unsafe situation including aggression, self-harm and suicidality. The RBH Program has multiple levels of focus including strength based and trauma informed care. Clients come from many different referral sources including hospitals and schools and are admitted into a residential setting with the availability of aftercare services upon discharge. Funding for these services generally comes from the Client or Guardian directly or through their private health insurance coverage.

OYS ) Programs received new funding from Missouri Housing Development Commission and St. Louis County/HUD to extend our Street Outreach services to literally homeless youth through the age of 24. Previous funding only supported youth aged 19 and under. Drop-In Center became an emergency diaper distribution site for our clients through our partnership with the Diaper Bank.

In December 2017, Epworth announced plans to discontinue its Teen Outreach Program ( TOP ) due to the loss of funding for the program as of December 31, 2017. The TOP Program will continue through the end of the 2017-2018 school year and will officially end in June 2018.


We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of Epworth Children & Family Services, Inc., which comprise the statement of financial position as of December 31, 2017, and the related statements of activities, functional expenses, and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated April 26, 2018.

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered Epworth Children & Family Services, Inc.audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Epworth Children & Family Services, Inc.opinion on the effectiveness of Epworth Children & Family Services, Inc.

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 misst etected 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 the internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether Epworth Children & Family Services, Inc.financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

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

rformed in accordance with Government Auditing Standardsand compliance. Accordingly, this communication is not suitable for any other purpose.



Report on Compliance for Each Major Federal Program

We have audited Epworth Children & Family Services, Inc. compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of Epworth Children & Family Services, Inc.programs for the year ended December 31, 2017. Epworth Children & Family Services, Inc.

ion of the accompanying schedule of findings and questioned costs.

Management is responsible for compliance with the federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs.

Our responsibility is to express an opinion on compliance for each of Epworth Children & Family Services, Inc. liance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Epworth Children & Family Services, Inc.we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of Epworth Children & Family Services, Inc. iance.

Opinion on Each Major Federal Program

In our opinion, Epworth Children & Family Services, Inc. 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 December 31, 2017.

Report on Internal Control over Compliance

Management of Epworth Children & Family Services, Inc. is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered Epworthinternal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of Epworthinternal 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.

Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that have not been identified. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, we identified certain deficiencies in internal control over compliance, as described in the accompanying schedule of findings and questioned costs as item 2017-001, that we consider to be a significant deficiency.

Epworth Children & Family Services, Inc.findings identified in our audit is described in the accompanying corrective action plan. Epworthresponse was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response.

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 Uniform Guidance. Accordingly, this report is not suitable for any other purpose.


Federal Pass-through

CFDA Entity Identifying Federal

Federal Grantor/Pass-through Grantor/ Program Titles Number Number Expenditures

Department of Health & Human Services

Direct programs:

Basic Center Program 10/1/16 - 9/30/19 93.623 200,000$

Transitional Living Program 4/01/14 - 3/31/19 93.550 186,000

Teen Outreach Program 10/1/15 - 9/30/17 93.060 140,313

Prep Foster Youth Program 10/1/16 - 9/30/17 93.092 25,036

Prep Foster Youth Program 10/1/17 - 9/30/18 93.092 8,800

Total Department of Health and Human Services 560,149

Department of Housing and Urban Development

Pass Through From:

Missouri Housing Development Commission *



St. Louis County Department of Human Services *

Emergency Soutions Grant 5/1/16 - 4/30/17 14.231 20,218





Total Department of Housing and Urban Development 387,765

Department of Agriculture

Pass Through Missouri Department of Elementary and Secondary *

National School Lunch and Breakfast Program 7/1/16 - 6/30/17 10.555 19,916

National School Lunch and Breakfast Program 7/1/17 - 6/30/18 10.555 20,450

Total Department of Agriculture 40,366

Total Expenditures of Federal Awards 988,280$

* Information not available.

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Note A - Basis of Presentation

The accompanying schedule of expenditures of federal awards includes the federal grant activity of Epworth Children & Family Services, Inc. and is presented on the accrual basis of accounting. 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). Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements.

Note B - Indirect Cost Rate

For the year ended December 31, 2017, Epworth Children & Family Services, Inc. has elected to use the 10% de minimis indirect cost rate as allowed under Uniform Guidance.

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1. Financial Statements:

a. report expresses an unmodified opinion on the financial statements of Epworth Children & Family Services, Inc.

b. Internal control over financial reporting:

i. Material weakness identified? Noii. Significant deficiencies identified? No

c. Noncompliance material to financial statements noted? No

2. Federal Awards:

a. Internal Control over major programs:

i. Material weakness identified? Noii. Significant deficiencies identified? Yes

b. Noncompliance material to financial statements noted? No

c. the major federal award program expresses an unmodified opinion on all major federal programs.

d. There were no audit findings relative to the major federal award program for Epworth Children & Family Services, Inc. noted that are required to be reported in accordance with 2 CFR section 200.516(a).

e. The program tested as major program include:

CFDA Number Name of Federal Program93.623 Basic Center Program

f. The threshold used for distinguishing between Type A and B programs was $750,000.

g. Epworth Children & Family Services, Inc. is considered a low-risk auditee.

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Findings Financial Statements Audit Year Ended December 31, 2017

None

Findings and Questioned Costs Major Federal Awards Program



Condition-recipient upon intake was not documented.

Context- We noted ainstances.

Cause- The Organization did not consistently apply procedures calling for a documented review of these files.

Effect- The lack of a documented review could resureviewed which could lead to potential noncompliance. However, no instances of noncompliance were noted as the result of the lack of a documented review.

Recommendation- Implement a formal procedure to revieintake to ensure they can be coded to the Basic Center Program.

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complete Admission Forms for the client files referenced above, we are in agreement that no documentation was included to show that the admission forms were reviewed to ensure eligibility. Based upon this

immediately implementing a procedure to specifically address the verification of admissions. This enhanced process will require an on-site Supervisor to perform timely revi and include documentation of that review in the individual file.

episcopal presbyterian health trust new grant request ...€¦ · chair bryan lemoine partner...

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