The ARC of Baton Rougeapp.lla.state.la.us/PublicReports.nsf/7C3E26AB1FA7... · presentation of the...

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The Arc Baton Rouge Baton Rouge, Louisiana

June 30,2013

Under provisions of state law, this report is a public document. Acopy of the report has been submitted to the entity and other appropriate public officials. The report Is available for public inspection at the Baton Rouge office of the LegislativeAuditor and, where appropriate, at the office of the parish clerk of court.

Release Date MAR ^ 2 201^

Table of Contents

Independent Auditor's Report

Financial Statements

Statements of Financial Position

Statements of Activities

Statements of Functional Expenses

Statements of Cash Flows

Notes to Financial Statements

Lidependent Auditor's Report on Intemal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Govemment Auditing Staruiards

Schedule of Cim-ent Year Audit Findings

Schedule of Prior Year Audit Findings

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Page 25

Page 26

HAWTHORN, WAYMOUTH & CARROLL, L.L.P

LOUISC.McKNIGKT, III. C.P.A. CHAHLESR.PEVEY. JR.. C.P.A. DAVID J. BROUSSARD, C.P.A. NEAL D. KING. C.P.A. KARIN S. LEJEUNE. C.P.A. ALYCE S. SCHMrn. C.P.A.

CERTIFIED PUBLIC ACCOUNTANTS

8555 UNrTED PLAZA BLVD., SUITE 200 BATON ROUGE, UDUISIANA 7QB09

(2251 923-3000 • R0( (225) 923-3008

December 3,2013 (except for Note 12, as to which the date is March 3,2014)

Independent Auditor*s Report

Board of Directors The Arc Baton Rouge Baton Rouge, Louisiana

Report on the Financial Statements

We have audited the accompanying fmancial statements of The Arc Baton Rouge (a nonprofit organization), which comprise the statements of financial position as of June 30, 2013 and 2012, and the related statements of activities, functional expenses, and cash flows for the years then ended, and the related notes to the fmancial statements.

Management's Responsibility for the Financial Statements

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

Auditor's Responsibility

Our responsibility is to e3q}ress 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 contamed in Govemment Auditing Standards, issued by the Comptroller General of the United States. Those standards require tiiat we plan and perform the audit 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 fmancial 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 intemal control relevant to the entity's preparation and &ir 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 entity's intemal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accoimting estimates made by management, as well as evaluating the overall presentation of the fmancial statements.

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

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the fmancial position of The Arc Baton Rouge as of June 30, 2013 and 2012, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Other Reporting Required by Govemment Auditing Standards

In accordance with Govemment Auditing Standards, we have also issued oiu- report dated December 3, 2013 on our consideration of The Arc Baton Rouge's intemal control over financial reporting and on ourtests 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 intemal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on intemal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Govemment Auditing Standards in considering The Arc Baton Rouge's intemal control over fmancial reporting and compliance.

Yours truly,

/ i 4 ^ , l^^Jif r^>'^'"'^

The Arc Baton Rouge Statements of Financial Position

June 30,2013 and 2012

A s s e t s 2013 2012

Assets Cash and cash equivalents Investments Receivables

Trade State contracts Federal contracts

Inventory Property and equipment, net Deposits

Total assets

L i a b i l i t i e s a n d N e t D e f i c i t

Liabilities Accounts payable Accrued expenses Line of credit Deferred mcome Accrued pension cost

Total liabilities

Net Deficit Unrestricted Temporarily restricted

Total net deficit

$ 112,525

80,277

72,107

64,990

452,312

11,037

804,566

6,243

$1,604,057

$ 132,334

78,633

59,333

44,804

530,957

10,122

858,677

6.243

$1,721,103

Total liabilities and net deficit

$ 46,988

277,333

40.572

10,000

1,630,265

2,005,158

(416,809)

15,708

(401,101)

$1,604,057

$ 83,364

233,816

56.055

3,945

1,482,845

1,860,025

(154,630)

15,708

(138,922)

$1,721,103

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

5

The Arc Baton Rouge Statements of Activities

Years Ended June 30,2013 and 2012

Operating Activities: Revenue and Gains

Federal and state contracts Federal awards Program sales and service fees Allocations from Capital Area United Way Contributions Public grants and other income Net assets released from restrictions

Total revenue and gains

Expenses Program services General and administrative Fund raising

Total expenses

Increase (Decrease) in Net Deficit from Operating Activities

Non-Operating Activities: Pension-related changes other than

net periodic pension cost

Unrestricted

$4,156,865 215,581 246,965 333,721 208,141 272,921

5,434.194

5,152,212 497,243

8,623 5.658.078

(223,884)

Jane 30.2013 Temporarily

Restricted

$ -

-

-

-

Totel

$4,156,865 215.581 246,965 333,721 208,141 272,921

5,434,194

5,152,212 497.243

8,623 5.658,078

(223,884)

Unrestricted

$ 4,442,600 219,345 300,610 285.793 154,318 314.799

5,717,465

5,522,171 434,970

10,780 5.967.921

(250.456)

June 30,2012 Temporarily

Restricted

$ -

(30,811) (30,811)

-

(30.811)

Totel

$ 4.442,600 219,345 300,610 285.793 154,318 314,799 (30.811)

5,686.654

5,522.171 434.970

10,780 5,967.921

(281.267)

(38,295) (38.295) (410.624) (410.624)

Increase (Decrease) in Net Deficit

Net Assets (Deficit), beginning of year

Net Assets (Deficit), end of year

(262,179)

(154.630) 15.708

(262,179)

(138.922)

(661,080)

506.450

(30,811)

46.519

(691,891)

552,969

$ (416,809) $ 15,708 $ (401,101) $ (154,630) $ 15.708 $ (138,922)


The Arc Baton Rouge Statement of Functional Expenses

Year Ended June 30,2013

Compensation and Related Benefits

Salaries

Payroll taxes

Employee health

Retirement plan

Total compensation and

related benefits

Contractual services

Professional services

Supplies

Utilities and telephone

Maintenance and equipment rental

Membership dues

Travel and transportation

Office expenses

General insurance

Worker's compensation

Vehicle expenses

Program transportation

Interest expense

Other expenses

Assistance to individuals

Depreciation

Total functional ejq)enses

Metro

Enterprises

Sssin^

$153,420

12,160

-_

165,580

31,678

-224

11.398

6,307

-158

--4,648

10.795

-12

793

-—

j231,593

Metro Enterprises Habilitatios

S489.518

38.323

39.999

57.99L

625,831

-171

6,700

37.601

12.789

1.983

854

-S6306

9.609

17.858

38,500

211

4,983

-45.Q72

^858468

Early Intervention

$443,131

31,688

34.306

63319

572,444

-131.253

91.777

38.758

25.570

275

18.093

531

12.640

9.962

--

72

4.230

-9.618

;S915,223

Respite Care

Programs

$1,102,332

87.679

54.079

19.852

1,263.949

-

1.169

6.857

15.275

8.777

-20.184

256

6.894

34,385

309

--5,114

-

$1-375121

Louisiana Career

Development Center

S 62.552

4,368

8,523

8.6?3.

84,136

--

560

9.415

1,543

30

U 6 3

12

8.066

763

---

143

-23.166

S129.197

Vocational Services

$44,698

2.817

4,727

6.7Q5

58,947

-14,975

262

4.212

494

-1,203

35

2.276

496

---

71

-?.986

Community Community ^CTlccs

$36,125

2,748

3.824

47,286

-1,000

4,436

361

57

-1,425

799

-711

---1.151

151.667

-

Ufe

$1,111320

88.041

61,389

H.143

1,274.893

-1,027

4,578

7,350

3,137

-16.778

256

2.298

33326

---3.981

536

-

$I.348.16Q

Total Program Services

$3,443,096

267,824

206.847

175.292

4.093,066

31.678

149.595

115394

124370

58,674

2.288

60,058

1,889

88,480

93.900

28,962

38.500

295

20,466

152.203

92.224

55.152.212

General and

Admin-irtrativi;

$237,190

17395

19.975

56.432

330,992

-45336

10.238

13,811

8,201

17,593

7.063

8.201

32326

1351

--1,926

14,871

-5J34

S497.243

Fund

Raising

$ -

---

-

-------------

8,623

-

$8.623

2013

Tqjal?

$3,680,286

285319

226.822

231.731

4,424.058

31.678

194,931

125.632

138.181

66,875

19,881

67,121

10.090

120.806

95351

28.962

38.500

2321

43.960

152303

97.72?

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

The Arc Baton Rouge Statement of Functional Expenses


Compensation and Related Benefits

Salaries

Payroll taxes

Employee health

Retirement plan

Total compensation and

related benefits

Metro Metro Early Respite Enterprises Enterprises Intervention Care

Business Habilitation Programs Programs

$232,946 $529,197

18,152 40.714

237 50.537

244 34.948

252.079 655396

$ 583,795 $1.157396

42.762 90,704

34,510 65,340

30-839 . 10,feU

691.906 1323.951

Louisiana Career Vocational Total General

Development Services Community Community Program and Fund Center Placement Services Life Services Administrative Raising

$ 63.005 $53,976

6,692 3,602

10393 4,485

4.971 2.994

$51,045 $1,064,740

4,089 82.851

4.036 64.769

2.432 10.107

$3,736,000 $231346

289.566 16,456

234307 16.845

97.646 32.622

$ -

85.061 65.057 61,602 1322,467 4357.519 297369

2012 Totals

$3.967346

306,022

251.152

130.268

4.654,788

Contractual services

Professional services

Supplies

Utilities and telephone

Maintenance and equipment rental

Membership dues

Travel and transportation

Office expenses

General insurance

Worker's compensation

Vehicle expenses

Program transportation

Interest expense

Other expenses

Assistance to individuals

Depreciation

Total functional expenses

28,836

275

1,747

17.940

8,426

153

99

54

-6,727

13,516

--863

-20.614

$351329

-1,418

6.518

37,462

13,478

-570

54

51.626

10,541

14,029

38.542

435

5.960

-27.522

-139.674

73.912

38397

28,628

357

31.578

544

12,572

13322

43

--

2.183

-11.545

S1,Q44.661

-524

7.119

16.493

10.748

76

24.760

209

12,572

35.710

26

--5,456

-12.911

$1,450.555

--

824

12360

1.154

38

18.034

18

11.426

1.577

---

211

-25.138

$155.841

-12330

414

5,464

702

-2.142

571

3,143

583

---

1.458

-2:243

$94.107

-2,541

5330

562

-76

1,108

1.067

-812

---12,585

170329

-

-216

8.114

6.759

4,762

76

24,748

209

1.109

33.119

---4.636

--

28.836

156,978

103,978

135.437

67,898

776

103.039

2,726

92,448

102391

27,614

38.542

435

33352

170329

99.973

-45336

8,587

14324

7.925

17.483

9.629

8.560

13384

1.054

--813

6.810

-3.896

$434.970

28.836

202314

112.565

149,761

75,823

18359

112.668

11386

105,732

103,445

27,614

38.542

1348

10,780 50.942

170329

- 103.869

$10.780 ;t5.967.921


The Arc Baton Rouge Statements of Cash Flows

Years Ended June 30,2013 and 2012

2013 2012 Cash Flows From Operating Activities

Increase (decrease) in net assets $ (262,179) $ (691,891) Adjustments to reconcile increase (decrease) in net assets to net

cash provided by (used in) operating activities Depreciation 97.728 103,869 Loss on disposal/sale of property and equipment 411 78 Net unrealized (gain) loss on investments (1»376) (643) Pension cost 147,420 424,215 (hicrease) decrease in assets:

Accounts receivable 45,685 (145,965) Inventory (915) 7,100

Increase (decrease) in liabilities: Accounts payable (36,376) (38,975) Accrued expenses 43,517 (27,779) Deferred income 6,055 (28,349)

Net cash provided by (used in) operating activities 39,970 (398,340)

Cash Flows From Investing Activities Purchase of property and equipment (44,028) (40,023) Purchase of investments (268) -

Net cash used in investing activities (44,296) (40,023)

Cash Flows From Financing Activities Increase (decrease) in line of credit (15,483) 41,570

Net cash provided by (used in) fmancing activities (15,483) 41,570

Net Increase (Decrease) in Cash and Cash Equivalents (19,809) (396,793)

Cash and Cash Equivalents, beginning of year 132,334 529,127

Cash and Cash Equivalents, end of year $ 112,525 $ 132,334

Supplemental Disclosure of Cash Flow Infonnation Cash paid during the year for:

Interest $ 2,221 $ 1,248

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

9

The Arc Baton Rouge Notes to Financial Statements

June 30,2013

Note 1-Nature of Organization

The Arc Baton Rouge (the "Organization") is a not-for-profit organization which promotes, develops, monitors, supports, and directly provides services to improve the well-being of people with disabilities and their families from East Baton Rouge and surrounding parishes. The Organization's funding sources include the Capital Area United Way agency and federal and state contracts and grants.

The Arc Baton Rouge offers the following service programs:

Metro Enterprises (Metro Business and Metro Habilitation): Day program services offer opportunities for people (age 22 and over) with mental retardation or other developmental disabilities to become more independent, integral, and productive members of society. Services include work adjustment training, community life enrichment, and paid work experience.

The Arc Baton Rouge Children Services (The Arc Early Head Start and Child Care Center and Early Intervention): Promotes the rights and full inclusion of children with special needs and their families. Together with community partners, the program provides services, support, and advocacy that inspire the community and individuals. The program provides child development services through The Arc Early Head Start and Child Care Center. Early Intervention services are provided for children with disabilities and families in home and community settings. The program supports inclusion through training and technical assistance projects to support Early Childhood teachers and child care providers to include children with disabilities in natural settings. The program also provides services to families of children with disabilities through parent support and training.

Respite Care Program: The primary objective of the Respite Care Program is to help prevent or delay institutionalization of individuals with developmental disabilities. The program provides relief, whether through physical assistance, supervision, or accompaniment on outings, for the primary care providers of children and adults with developmental disabilities. The support may occur in the individual's home, the community, or the Respite Center. It may occur regularly, or the family may only request assistance in an emergency situation.

Louisiana Career Development Center: Provides individuals who are deaf or deaf/blind with comprehensive assessments, travel training, work ethics training (including an internship), individual job placement in area businesses, and follow-up support to employees and employers.

Baton Rouge Vocational Services: Develops and creates employment opportunities for individuals (age 16 and older) with disabilities through a parmership with Louisiana Rehabilitation Services (LRS), Provides vocational assessments, job readiness skills, job placement and training services, and follow-up services.

Community Services: Provides disability education to the general public, service referral, advocacy, crisis assistance, and coordination of volunteer efforts, as well as recreational and leisure activities. Works with other established agencies to provide inclusive recreational opportunities for individuals with developmental disabilities and coordinates an array of recreational and special events. An adaptive swim program with individual therapy and lessons is offered every summer.

10


June 30,2013

Note 1-Nature of Organization (Continued)

Community Life: Provides supported living services to adults with developmental disabilities who requke assistance or support to live in their own homes in the community. The goal of Community Life is to provide opportunities and support for individuals in their quest to live as independently as possible and to be successfiilly included in the community.

Note 2-Summary of Significant Accounting Policies

A. Basis of Accounting

The financial statements are prepared using the accrual basis of accounting, recording revenue when eamed and expenses when incurred.

B. Basis of Presentation

Financial statement presentation follows the recommendations of FASB ASC 958, Not-for-Profit Entities. Under FASB ASC 958, the Organization is required to report information regarding its fmancial position and activities accordmg to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. These net asset classifications are described as follows:

Unrestricted Net Assets - not subject to donor-imposed restrictions. Unrestricted net assets may be designated for specific purposes or locations by action of the Board of Directors.

Temporarily Restricted Net Assets - subject to donor-imposed stipulations that may be fulfilled by actions of the Organization to meet the stipulations or become unrestricted at the date specified by the donor.

Permanently Restricted Net Assets - subject to donor-imposed stipulations that they be retained and invested permanently by the Organization.

At June 30,2013 and 2012, the Organization had no permanently restricted net assets.

C. Use of Estimates

The preparation of financial statements in conformity with generally accepted accountmg principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the 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. Accordingly, actual results could differ from those estimates.

D. Cash and Cash Equivalents

For purposes of the statements of cash flows, the Organization considers all funds on hand and with financial institutions to be cash equivalents.

11

The Arx: Baton Rouge Notes to Financial Statements

June 30,2013

Note 2-Summary of Significant Accounting Policies (Continued)

E. Investments

Investments in marketable securities with readily determinable fair values are reported in the Statement of Financial Position. Unrealized gains and losses are included in the Statement of Activities.

P. Receivables

Grants, which are considered exchange transactions, are recognized as revenue when allowable costs are incurred to provide the service under the terms of the grant agreement. Advances under the grants are recorded as deferred income until such time as they can be recognized as revenue.

As of June 30,2013 and 2012, the Organization considered Its receivables to be fully collectible; therefore, no allowance for doubtful accounts was recorded.

G. Inventory

Inventory is stated at the lower of cost or market using the first-in first-out method.

H. Property and Equipment

Property and equipment are recorded at cost. Property and equipment donated for operations are recorded as additions to net assets at fair value at the date of receipt and depreciated using the straight-line method of depreciation over the estimated useful lives of the assets, which arc as follows:

Buildings and improvements 3-35 years Fumiture and equipment 3-10 years Vehicles 5 years

Expenditures for additions of property and equipment in excess of $500 arc capitalized. Expenditures for maintenance and repairs are charged to expense as incurred.

I. Support

Contributions received and unconditional promises to give are measured at their fair values and are reported as an increase in net assets. The Organization reports gifts of cash and other assets as restricted support if they arc received with donor stipulations that limit the use of the donated assets or if they are designated as support for fimire periods. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. Donor-restricted contributions whose restrictions are met in the same reporting period as received are reported as unrestricted revenue.

12


June 30,2013


I. Support (Continued)

The Organization reports gifts of goods and equipment as unrestricted support unless explicit donor stipulations specify how the donated assets must be used. Gifts of long-lived assets with explicit restrictions that specify how the assets are to be used and gifts of cash or other assets that must be used to acquire long-lived assets are reported as restricted support. Absent explicit donor stipulations about how long those long-lived assets must be maintained, the Organization reports expirations of donor restrictions when the donated or acquired long-lived assets are placed in service.

J. Contributed Services

The Arc Baton Rouge receives a significant amount of donated services from unpaid volunteers who assist in ftmd-raising and special projects. No amounts have been recognized in the statement of activities because the criteria for recognition under FASB ASC 958-605, Not-for-Profit Entities - Revenue Recognition, have not been satisfied

K. Income Taxes

The Organization is exempt from income taxes under Section 501(c)(3) of the Intemal Revenue Code and is not classified as a private foundation. Accordingly, no provision for income taxes on related income has been included in the financial statements.

The Organization follows FASB ASC 740, Income Taxes, which sets out a consistent framework to determine the appropriate level of tax reserves to maintain for uncertain tax positions. The Organization recognizes the effect of mcome tax positions only if the positions are more likely than not of being sustained. Recognized income tax positions are recorded at the largest amount that is greater than 50% likely of bemg realized. Changes in the recognition or measurement are reflected in the period in which the change in judgment occurs.

The Organization evaluated its position regarding the accounting for uncertain income tax positions and does not believe that it has any material uncertain tax positions. With few exceptions, the Organization is no longer subject to federal, state, or local tax examinations by tax authorities for years before June 30, 2010.

From time to time, the Organization may be subject to interest and penalties assessed by various taxing authorities. These amounts have historically been insignificant and are classified as other expenses when they occur.

L. Deferred Income

Income from plane pull sponsorships are deferred and recognized in the period to which they relate.

13


June 30,2013


M. Functional Expenses

The Organization allocates functional expenses primarily by specific identification of program expenses which include salaries of personnel assigned to specific programs. However, certain administrative salaries and related expenses and other general expenses are allocated using percentages which are adjusted annually. These percentages coincide with grant agreements and budgets.

Note 3-Fair Value Measurements

FASB ASC 820, Fair Value Measurements^ provides the framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measurc fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or Uabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under FASB ASC 820 are described as follows:

Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets.

Level 2 Inputs to the valuation methodology include:

• quoted prices for similar assets or liabilities in active markets;

• quoted prices for identical or similar assets or liabilities in inactive markets;

• inputs other than quoted prices that are observable for the asset or liability; and

• inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The asset or liability's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at June 30,2013:

Mutual Funds: Valued at the quoted net asset value of shares held by the Organization

at year end.

Money Market Funds: Valued using amortized cost, which approximates fair value.

Common Stocks: Valued at the closing price reported in the active market in which the individual securities are traded.

14


June 30,2013

Note 3-Fair Value Measurements (Continued)

The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fan- values. Furthermore, although the Organization believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could resuh in a different fair value measurement at the reporting date.

The following table sets forth by level, within the fair value hierarchy, the Organization's assets at fair value measurements as of June 30,2013 and 2012:

Mutual Funds Money Market Funds Common Stocks

Mutual Funds Money Market Funds Common Stocks

Assets at Fair Value

(Level 1)

$ 5,225 59.005 16,047

$ 80,277

June 30.2013 (Level 2)

$ ---

$ -

Assets at Fair Value

(Level 1)

$ 5,224 58,738 14,671

$ 78,633

June 30,2012 (Level 2)

$ ---

$ -

as of

(Level 3>

$ ---

$ -

as of

(Level 3)

$ ---

$ -

Total

$ 5,225 59,005 16,047

$ 80,277

Total

$ 5,224 58,738 14.671

$ 78,633

Investment income from investments is comprised of the following for the years ended June 30,2013 and 2012:

2013 2012

Dividends and interest Net uru*ealized gain

$ 4 5 7 $ -1,376 643

$ 1,833 S 643

15


June 30,2013

Note 4-Property and Equipment

A sunmaary of property and equipment at June 30, 2013 and 2012 is as follows:

2013 2012

Buildings and improvements $2,290,706 $2,262,241 Fumiture and equipment 598,263 584,144 Vehicles 161,395 162,121

3,050,364 3,008,506 Less depreciation to date 2,455,795 2,359,826

594,569 648,680 Land 209,997 209,997

Property and equipment, net $ 804,566 $ 858,677

Note 5-Line of Credit

The Arc Baton Rouge has a $200,000 line of credit with a financial institution, due on demand, of which $40,572 and $56,055 were drawn at June 30, 2013 and 2012, respectively. The interest rate at June 30, 2013 and 2012 was the prime rate of 3.25%. The line is secured by the building on Kelwood Avenue.

Note 6-Pension Plan

The Organization has a defined benefit pension plan which covers substantially all of its employees who meet eligibility requirements. Benefits under the plan are generally based on the employee's compensation during the highest five consecutive calendar years' salary during die last ten completed calendar years of service before reth-ement. The pension plan is funded in accordance with the requirements of the Employee Retirement Income Security Act of 1974.

Effective July 1, 2012, die Organization elected to do a soft fi^ze of the Defined Benefit Pension Plan. Under the soft freeze, employees that were employed prior to the effective date are allowed to participate and continue earning full benefits, but any employees hired after the effective date are excluded from participating in the plan.

The following table presents the changes in benefit obligations, changes in Plan assets, and the composition of accrued benefit costs in the statements of financial position for the years ended June 30,2013 and 2012.

16


June 30,2013

Note 6-Pension Plan (Continued)

Changes in Benefit Obligations Benefit obligations at beginning of year Service cost Interest cost Change due to assumption changes Actuarial (gain) loss Benefits paid Expense charges

Benefit obligations at end of year

Changes in Plan Assets Fair value of plan assets at beginning of year Actual return on plan assets Employer contributions Benefits paid (including expense charges)

Fair value of plan assets at end of year

Funded status/accrued benefit costs

Pension Benefits 2013

$4,599,154 190,820 195,202 (96,616) 200,369

(177,344) (43,260)

4,868,325

3,116,309 234,355 108,000

(220,604) 3,238,060

$(1,630,265)

2012

$4,161,227 150.469 211,043 471,657

(188,428) (172,314)

(34,500) 4,599,154

3,102,597 113,526 107,000

(206,814) 3,116,309

$(1,482,845)

The Organization follows FASB ASC 715, Compensation-Retirement Benefits, which requires companies to recognize an asset or liability for the overfunded or underfunded status of their benefit plans in their financial statements.

Pension related changes other than net periodic cost under FASB ASC 715 are as follows:

Pension Benefits 2013 2012

Prior service credit (cost) Net actuarial gain (loss) Transition obligation or asset

$ (74,477) 41,113 (4.931)

$ (74,477) (331,216)

(4.931)

Total $ (38.295) $ (410,624)

17


June 30,2013


Items not yet recognized as a component of net periodic benefit costs:

2013

Unrecognized prior service credit (cost) Unrecognized net actuarial loss Transition obligation or asset

Total

(4>188)

2012

$ (73.813) $(148,290) 1,345,913 1.387,026

(9,119)

$1,267,912 $1,229,617

The accumulated benefit obligation for the pension plan was approximately $4.2 million and $3.9 million as of June 30,2013 and 2012, respectively.

The significant actuarial assumptions used in the valuations as of June 30, 2013 and 2012 are as follows:

1. Measurement Date 06/30/2013 06/30/2012

2. Assumptions: a) Discount Rate

b) Post-retirement Interest Rate

c) Expected Long-term Rate of Return on Plan Assets

d) Salary Increase

e) Social Security Wage Base Increase

4.25%

6.00%

7.00%

3.5% per year.

4.0% per year.

4.00%

6.00%

7.00%

3.5% per year.

4.0% per year.

f) Employee Withdrawal Rates

g) Retirement Age

h) Mortality Rates

(Continued)

150% of T-5 Rates of Wididrawal from the Pension Actuary's Handbook, as illustrated below:

Annual Percent Age Withdrawing in Year 25 11.5863% 40 7.7256% 55 1.4091%

Age 65 or immediate if beyond age 65.

2012 Unisex Mortality Table specified in IRS Notice 2008-85.

18


June 30,2013


(Continued) 2. Assumptions (Continued):

i) Pre-retirement Expense Loading

j) Post-retirement Expense Loading

k) Spouse Age

1) Marital Status

m) Maximum Benefit and Maximum Includable Compensation Increase

n) Cost of Living Supplement

Armual Estimated Administrative Charge.

0.0% of estimated cost of armuity.

Females 3 years younger than males.

80% married.

3.75% per year.

3.0% per year on benefits accumulated to 09/30/03.

3.75% per year.

3.0% per year on benefits accumulated to 09/30/03.

The Expected Long-Term Rate of Return on Plan Assets assumption of 7.00% was selected using the "building block" approach described by the Actuarial Standards Board in Actuarial Standards of Practice No. 27-Selection of Economic Assiunptions for Measuring Pension Obligations. Based on The Arc Baton Rouge's investment policy for the pension plan in effect as of the beginning of fiscal year, a best estimate range was determined for both the real rate of return (net of inflation) and for inflation based on historical thirty year period rolling averages. An average inflation rate within the range equal to 3.00% was selected and added to the real rate of return range to arrive at a best estimate range of 5.43% to 8.01%. A rate within the best estimate range of 7.00% was selected.

The components of net periodic benefit costs for the years ended June 30.2013 and 2012 are as follows:

Pension Benefits

Service cost Interest cost Expected return on plan assets Amortization of unrecognized transitional

obligation or (asset) Amount of recognized actuarial (gains) or losses Amount of prior service cost recognized

Net periodic benefit costs

2013

$ 190,820

195,202

(214,201)

(4.931)

124,712

(74,477)

$217,125

2012

$ 150,469

211,043

(213,689)

(4.931)

52,176

(74,477)

$ 120.591

19


June 30,2013


The Organization expects to contribute approximately $ 110,000 to the plan in 2013. Benefits expected to be paid during the ensuing five years and thereafter, are approximately as follows:

Fiscal Year Beginning Pension Benefits

Plan Assets bv Catesorv

Equity Fixed Income General Account

Total

Julyl, Julyl, Julyl, Julyl

2014 2015 2016 2017

July 1,2018-2022

As of June 30,2013 Amount

$1,313,331 1,652,690

272,039

$3,238,060

Percent

40.56 51.04 8.40

100.00

$ 293,000 783,000 195,000 488,000

1,734,000

AsofJune30.2012 Amount

$1,202,072 1,645,882

268,355

$3,116,309

Percent

38.57 52.82 8.61

100.00

All investments are categorized Level 1 as defined in Note 3.

The Organization's investment strategy is a long-term investment mix of forty percent common stocks and sixty percent fixed income investments which include bonds and cash equivalents. The permitted range by investment category is 25% - 75% for common stock and bond funds and up to 40% for cash equivalent funds.

Note 7-Pension Plan - Defined Contribution

The Organization has a non-contributory defined contribution plan subject to Section 403(b) of the Internal Revenue Code. The plan covers all of its employees who meet eligibility requirements. Employees may contribute 100% of eligible compensation, not to exceed federal limits.

Note 8-Temporarily Restricted Net Assets

Temporarily restricted net assets at June 30,2013 and June 30, 2012 are as follows:

Deaf/Blind Camp

2013

$15.708

2012

20


June 30,2013

Note 9-Concentration of Risk

Receivables have significant concentrations of credit risk in the govemmental sector in the Baton Rouge, Louisiana area. At June 30, 2013 and 2012, the portion of these receivables related to this sector was approximately 88% and 91%, respectively.

Note 10-Economic Dependency

The Organization receives a majority of its revenue from funds provided through programs administered by the State of Louisiana and Capital Area United Way. The program amounts are appropriated each year by the Federal and State governments and die Capital Area United Way agency. If sigaificant budget cuts are enacted at the Federal and/or State level, the amount of the funds the Organization receives could be reduced significantly and have an adverse impact on its operations. Management is not aware of any actions that will adversely affect the amount of funds the Organization will receive in the next fiscal year.

Note 11-Contingencies - Federal and State Programs

The Organization participates in Federal and State programs, which are governed by various rules and regulations. Costs charged to the grant programs are subject to audit and adjustment by the grantor agency; therefore, to the extent that the Organization has not complied with the rules and regulations governing the grants, refunds of any money received and the collectibility of any related receivable at year end may be impaired.

In management's opinion, there are no significant contingent liabilities relating to compliance with the rules and regulations governing the grants; therefore, no provision has been recorded in the accompanying financial statements for such contingencies. Audits of prior years have not resulted in any significant disallowed costs or refunds. Any costs that would be disallowed would be recognized in the period agreed upon by the grantor agency and the Organization.

Note 12-Management's Plan Regarding Net Deficit

Management of the Organization considers the primary cause of the increasing net deficit to be its Defmed Benefit Plan and has taken the following actions which it believes will alleviate the net deficit in the future:

1. Legislation titled Moving Ahead for Progress in the 21'* Centtay (MAP'2I) included a pension provision which provided funding relief dirough higher prescribed bond rates. This bill modified the rate basis from 2-year average corporate bond rates to a decreasing percentage of the 25-year average bond rates. This change lowercd the plan liability by providing funding relief to employers through smoothing out minimum funding requirements. This change will help the Organization manage its funding obligations over time. The pension liability on the financial statements is determined based on corporate bond rates (discount rate) in effect as of June 30,2013. Management believes corporate bond rates will rise toward their long-term averages over the next several years, reducing the pension liability.

21


June 30,2013

Note 12-Management's Plan Regarding Net Deficit (Continued) j

2. In the spring of 2012, the Board of Directors elected a "soft freeze." The soft fiwze prevents any new employees from entering the defined benefit plan. The freeze became effective July 1, 2012. (Consequently, in succeeding years, the long-term liability will decrease through attrition.

3. The investment policy for the defmed benefit plan, approved by the Board of Directors, stipulates a ratio of investments of 60% fixed income and 40% equity securities. As the bond and stock markets improve, the plan's assets will increase and the long-term liability will be reduced.

4. The Board of Directors is aware of the status of the defined benefit plan and the Organization will continue to receive outside advice and counsel from Mutual of America, in addition to investment advisors and CPAs on the Board.

Note 13-Sub5equent Events

The Organization evaluated all subsequent events through December 3, 2013, the date the fmancial statements were available to be issued, except for Note 12, as to which the date is March 3, 2014. As a result, the Organization noted no subsequent events that required adjustment to, or disclosure in, these financial statements.

22

HAWTHORN. WAYMOUTH & CARROLL L.L.P.

LOUIS c. MCKNIGHT, in. C.P.A.

CHARLES H. PEVEY. JR.. C.P.A. DAVID J. BROUSSARD, C.P.A. NEAL D. KING. C.P.A. KARIN S. LEJEUNE. C.P.A. ALYCE S. SCHMITT. C.P.A.

i

CERTIFIED PUBLIC ACCOUNTANTS |

9555 UNITED PLAZA BLVD.. SUITE 2D0 BATON RDUGE. LOUISIANA 70609

(225) 923-3000 • FAX (225) 923-3008

December 3,2013 (except for reference to Note 12, as to which the date is March 3,2014)

Independent Auditor's Report on Intemal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with

Govemment Auditing Standards

Board of Directors The Arc Baton Rouge Baton Rouge, Louisiana

We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Govemment Auditing Standards issued by the Comptroller General of the United States, the financial statements of The Arc Baton Rouge (a nonprofit organization), which comprise the statement of financial position as of Jime 30, 2013, and the rclated statements of activities, fimctional expenses, and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated December 3, 2013 (except for Note 12, as to which the date is March 3,2014).

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered The Arc Baton Rouge's intemal control over financial reporting (intemal control) to detemiine the audit procedurcs that arc appropriate in the circumstances for the purpose of exprcssing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of The Arc Baton Rouge*s intemal control. Accordingly, we do not express an opinion on the effectiveness of the Organization's intemal control.

A deficiency in intemal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned fimctions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in intemal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in intemal control that is less severe than a material weakness, yet important enough to merit attention by those charged with govemance.

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

23

Compliance and Other Matters i

As part of obtaining reasonable assurance about whether The Arc Baton Rouge's financial statements j are free from material misstatement, we performed tests of its compliance with certain provisions of laws, L regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect j on the determination of financial statement amounts. However, providing an opinion on compliance with i 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 Govemment Auditing Standards.

Purpose of this Report

The pur[)Ose of this report is solely to describe the scope of our testing of mtemal control and ! compliance and the results of that testing, and not to provide an opinion on the effectiveness of the organization's intemal control or on compliance. This report is an integral part of an audit performed in \ accordance with Govemment Auditing Standards in considering the organization's intemal control and compliance. Accordingly, this communication is not suitable for any other purpose. i

Yours tmly.

/Ju4fi , A^ymi/^^^, ^^^

24

The Arc Baton Rouge Schedule of Current Year Audit Findings


Findings - Financial Statement Audit

None.

25

The Arc Baton Rouge Schedule of Prior Year Audit Findings


Findings - Financial Statement Audit

None.

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