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ST. CHARLES COMMUNITYHEALTH CENTER, INC.

Audits of Financial Statements

February 29, 2008 and February 28, 2007

Under provisions of state law, this report is a publicdocument, A copy of the report has been submitted tothe entity and other appropriate public officials. Thereport is available for public inspection at the BatonRouge office of the Legislative Auditor and, whereappropriate, at the office of the parish, clerk of cou rt.

Release Date

e reports/LLASent by: Gina Guzzardo

11/03/2008 10:35 AM

To "Randy Buckner" <[email protected]>

cc

bcc

Subject Re: Corrected St.Charles Community Health Center IncAudited Financial Statements 2/29/2008 7295NP

Received Report.

Engagement/Report Processing DepartmentOffice of Legislative Auditor

"Randy Buckner" <[email protected]>

"Randy Buckner"<[email protected]>

10/31/2008 04:10PM

To

cc

[email protected]>

Subject Corrected St.Charles Community Health Center Inc AuditedFinancial Statements 2/29/2008 7295NP

Please note:

On October 13, 2008 we submitted the annual audit report on behalf of St.Charles CommunityHealth Center inc. There was a link in our software that is used to produce the reports thatmalfunctioned and caused a previously undetected footing issue in the 2007 column of Page 4of the financial statements. We have submitted a corrected copy of the entire pdf that waspreviously submitted. There are no other pages affected or changed from the previoussubmission.

I do not believe that the previously submitted copy has as of yet been added to your website.

We apologize for the inconvenience. Should you have any questions please feel free to contactme at the number below. The data collection form attached is unchanged from the onepreviously submitted but is attached again to avoid any confusion.

Regards,Randy

Randy C. Buckner, CPALa Porte Sehrt Romig Hand110 Veterans Blvd. Ste 200Metairie, LA 70005Direct: Dial 504-838-4827Main: 504-835-5522Fax: 504-835-5535Email: rbucknerfgilaporte.comweb: www.laporte.com

Contents

Independent Auditor's Report 1 - 2

Basic Financial Statements

Statements of Financial Position 3

Statements of Activities 4

Statements of Cash Flows 5

Notes to Financial Statements 6 - 1 2

Supplementary Information

Schedule .of Functional Expenses, for the Year Ended February 29, 2008 13

Schedule of Functional Expenses, for the Year Ended February 28, 2007 14

OMB Circular A-133 Section

Schedule of Expenditures of Federal Awards 16

Note to Schedule of Expenditures of Federal Awards 17

Report on Internal Control Over Financial Reporting and on Complianceand Other Matters Based on an Audit of Financial Statements Performedin Accordance with Government Auditing Standards 18-19

Report on Compliance with Requirements Applicable to Each MajorProgram and Internal Control Over Compliance in Accordancewith OMB Circular A-133 20 - 21

Other Supplementary Information

Schedule of Findings and Questioned Costs 22 - 24

SEHRTCERTIFIED PUBLIC ACCOUNTANTS

Independent Auditor's Report

To the Board of DirectorsSt. Charles Community Health Center, Inc.

We have audited the accompanying statements of financial position of St. Charles CommunityHealth Center, Inc. (the Center) as of February 29, 2008 and February 28, 2007, and therelated statements of activities and cash flows for the years then ended. These financialstatements are the responsibility of the Center's management. Our responsibility is to expressan opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in theUnited States of America and the standards applicable to financial audits contained inGovernment Auditing Standards, issued by the Comptroller General of the United States.Those standards require that we plan and perform the audits to obtain reasonable assuranceabout whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financial statementpresentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects,the financial position of St. Charles Community Health Center, Inc. as of February 29, 2008and February 28, 2007, and the results of its operations and its cash flows for the years thenended, in conformity with accounting principles generally accepted in the United States ofAmerica.

In accordance with Government Auditing Standards, we have also issued a report datedAugust 22, 2008, on our consideration of St. Charles Community Health Center, Inc.'s internalcontrol over financial reporting and our tests of its compliance with certain provisions of laws,regulations, contracts, grant agreements and other matters. The purpose of that report is todescribe the scope of our testing of internal control over financial reporting and compliance andthe results of that testing and not to provide an opinion on the internal control over financialreporting or on compliance. That report is an integral part of an audit performed in accordancewith Government Auditing Standards and should be read in conjunction with this report inconsidering the results of our audits.

110 VETERANS MEMORIAL BOULEVARD, Sunn 200, METAIRIE, LA 70005-4958 • 504.835.5522 • FAX 504.835.55355100 VILLAGE WAUC, SUITE 202. COVINGTON, LA 70433-4012 • 985.892.5850 • FAX 965.S92.5956

TOWN HALL WEST, 10000 PERKINS RowE, Srn. 200, BATON ROUGE, LA 70810-1797 • 225,296.5150 • FAX 225.296.5151WWW.LAFORTE.COM

RSM McGladrey Networkto Independently Owned Mernbef

Our audits were performed for the purpose of forming an opinion on the basic financial statementsof St. Charles Community Health Center, Inc. taken as a whole. The accompanying schedule ofexpenditures of federal awards is presented for purposes of additional analysis as required byU.S. Office of Management and Budget (OMB) Circular A-133, Audits of States, LocalGovernments, and Non-Profit Organizations, and is not a required part of the basic financialstatements. In addition, the accompanying financial information in the Schedule of FunctionalExpenses is presented for purposes of additional information. Such information has beensubjected to the auditing procedures applied in the audits of the basic financial statements and, inour opinion, is fairly stated, in all material respects, in relation to the basic financial statementstaken as a whole.

A Professional Accounting Corporation

August 22, 2008

ST. CHARLES COMMUNITY HEALTH CENTER, INC.Statements of Financial PositionFebruary 29, 2008 and February 28, 2007

2008 2007

AssetsCurrent Assets

Cash and Cash EquivalentsPatient Accounts Receivable, Net of Allowance for

Doubtful Accounts of $301 ,935 for 2008 and £21 9,862 for 2007Other ReceivablesPrepaid Expenses

Total Current Assets

Property and EquipmentOffice EquipmentMedical EquipmentVehiclesLeasehold ImprovementsTotal Property and EquipmentLess: Accumulated Depreciation

Total Property and Equipment, Net

Other Assetsintangibles (Note 4)Less: Accumulated Amortization

Total Other Assets

Total Assets

Liabilities and Net AssetsCurrent Liabilities

Cash OverdraftAccounts PayableAccrued ExpensesCurrent Maturities of Long-Term Debt {Note 3)Due to St. Charles Parish Hospital (Note 6)

Total Current Liabilities

Non-Current LiabilitiesLong-Term Debt, Less Current Maturities (Note 3)

Total Liabilities

Net AssetsUnrestricted

Total Net Assets

Total Liabilities and Net Assets

$

347,894295,022

6,258

649,174

178,891211,25747,804

285,151723,103

(127,765)

595,338

180,000(32,500)

147,500

$ 1,392,012

$ 172,295296,885243,390132,045116,205

960,820

132,8101,093,630

298,382298,382

$ 1,392,012

$ 46,058

291,286503,720

10,682

851,746

147,79419,722

--

167,516(61,174)

106,342

180,000(17,500)

162,500

$ 1,120,588

$224,976155,080123,446231,999

735,501

75,430810,931

309,657309,657

£ 1,120,588

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

3

ST. CHARLES COMMUNITY HEALTH CENTER, INC.Statements of ActivitiesFor the Years Ended February 29, 2008 and February 28, 2007

Unrestricted Revenues, Gains and Other SupportNet Patient Service RevenuePrimary Care Access and Stabilization GrantSocial Services Block Grant RevenueCommunity Health Centers Grant RevenueOther Grants and ContractsFEMA Public Assistance GrantsUnited Way of America GrantOther Revenues

Total Unrestricted Revenues, Gains andOther Support

ExpensesProgram ServicesManagement and General

Total Expenses

Change in Net Assets

Net AssetsBeginning of YearEnd of Year

2008

$ 2,959,690779,661694,751667,202453,072165,78262,098

511,095

6,293,351

6,144,621160,005

6,304,626

(11,275)

309,657

$ 298,382

2007

$ 2,988,795-

656,703653,202258,088

37,38047,500

249,775

4,891,443

4,185,644273,802

4,459,446

431,997

(122,340)$ 309,657


4

ST. CHARLES COMMUNITY HEALTH CENTER, INC.Statements of Cash FlowsFor the Years Ended February 29, 2008 and February 28, 2007

Cash Flows from Operating ActivitiesChange in Net AssetsAdjustments to Reconcile Changes in Net Assets to

Net Cash Provided by Operating ActivitiesDepreciation and AmortizationProvision for Bad Debts(Increase) Decrease In Operating Assets

Accounts ReceivableOther ReceivablesPrepaid Expenses

Increase (Decrease) in Operating LiabilitiesCash OverdraftAccounts PayableAccrued ExpensesDue to St. Charles Parish Hospital

Net Cash Provided by Operating Activities

Cash Flows from investing ActivitiesAdditions to Property and Equipment

Net Cash Used in investing Activities

Cash Flows from Financing ActivitiesNet Borrowing Under the Line-of-CreditProceeds from DebtPayments on Debt

Net Cash Provided by (Used in) Financing Activities

(Decrease) Increase in Cash and Cash Equivalents

Cash and Cash EquivalentsBeginning of YearEnd of Year

Supplemental Disclosures of Cash Flow InformationCash Paid During the Year for Interest

2008

$ (11,275)

81,5912,859

(59,467)208,698

4,424

172,29571,90988,310

(115,794)

443,550

(555,586)

(555,586)

-131,868(65,890)

65,978

(46,058)

46,058

$

$ 13,719

2007

$ 431,997

46,6752,166

94,617(444,252)

7,544

(62,234)23,72826,335

-

126,576

(36,669)

(36,669)

9,000-

(55,912)

(46,912)

42,995

3,063$ 46,058

$ 14,755


5

ST. CHARLES COMMUNITY HEALTH CENTER, INC,

Notes to Financial Statements

Note 1. Summary of Significant Accounting Policies

OrganizationSt. Charles Community Health Center, Inc. (the Center) was incorporatedFebruary 26, 2002, in the State of Louisiana as a non-profit organization. The Center is aFederally Qualified Health Center that provides medical supplies and treatment toresidents of St. Charles Parish, Louisiana, and the surrounding area, regardless of theirability to pay. The Center's main campus is located in Luling, Louisiana. The Center hasalso expanded its operations to include facilities in both Kenner and Norco, Louisiana.

Basis of AccountingThe financial statements of the Center have been prepared on the accrual basis ofaccounting.

Basis of PresentationFinancial statement presentation follows the recommendations of the Financial AccountingStandards Board in its Statement of Financial Accounting Standards (SFAS) No, 117,Financial Statements of Not-for-Profit Organizations, Under SFAS No. 117, the Center isrequired to report information regarding its financial position and activities according tothree classes of net assets; unrestricted net assets, temporarily restricted net assets, andpermanently restricted net assets. The Center has no temporarily or permanentlyrestricted net assets.

Use of EstimatesThe preparation of financial statements in conformity with accounting principles generallyaccepted in the United States of America requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities at the date of thefinancial statements and the reported amounts of revenues and expenses during thereporting period. Accordingly, actual results could differ from those estimates.

Patient Accounts ReceivableThe Center extends credit to patients, as well as to third party intermediaries responsib efor medical services provided to patients. In most cases, the amount collected is less thanthe amount billed. The balance in Patient Accounts Receivable is net of contractualadjustments and for the allowance for uncollectible accounts, The Center maintains anallowance to provide for uncollectible accounts based on the estimates of management.When accounts receivable are determined to be uncollectible, they are charged to thisaccount.

Property and EquipmentThe Center capitalizes fixed assets with costs of $500 or greater and useful lives of threeyears or more. Property and equipment are stated at cost. The Center uses the straight-line depreciation method over the estimated useful lives of the assets.

ST. CHARLES COMMUNITY HEALTH CENTER, INC.


Note 1. Summary of Significant Accounting Policies (Continued)

Intangible AssetsFinancial Accounting Standards Board Statement No. 142 addresses the initial recognitionand measurement of intangible assets acquired outside a business combination and therecognition and measurement of goodwill and other intangible assets subsequent to theiracquisition. In accordance with Statement No. 142, intangible assets that have anindefinite useful life are not amortized, but rather are subject to an impairment test.Intangible assets that have a finite useful life are amortized over the asset's estimateduseful life. Amortization is calculated using the straight-line method unless anothermethod better reflects the pattern of consumption of the economic benefits of theintangible asset.

Funding SourceThe Center receives funds from the United States Department of Health and HumanServices (DHHS) through the Health Resources and Services Administration. Inaccordance with DHHS policies, all funds disbursed should be in compliance with thespecific terms of the grant agreements. DHHS may, at its discretion, requestreimbursement for expenses or return of unexpended funds, or both, as a result of non-compliance by the Center with the terms of the grants. In addition, if the Center terminatesthe activities of the grants, all unexpended federal funds are to be returned to DHHS. Thegrant agreement requires the Center to provide primary healthcare to all requestingindividuals; however, the amount an individual actually pays is based on the individual'spersonal income.

Net Patient Service RevenueThe Center has agreements with third-party payers that provide for payments to theCenter at amounts different from its established rates. Payment arrangements includeprospectively determined rates, reimbursed costs, and discounted charges. Net patientservice revenue is reported at the estimated net realizable amount from patients, third-party payors, and others for services rendered, including estimated retroactiveadjustments under reimbursement agreements with third-party payors. Retroactiveadjustments are accrued on an estimated basis in the period the related services arerendered and adjusted in future periods as final settlements are determined.

Income TaxesThe Center is a not-for-profit corporation and has been recognized as tax-exempt pursuantto Section 501(c)(3) of the Internal Revenue Code.

Non-Direct Response AdvertisingThe Center expenses advertising costs as incurred.

Compensated AbsencesEmployees of the Center are entitled to paid time off depending on their length of serviceand other factors. Accrued compensated absences included as a component of AccruedExpenses on the Center's Statement of Financial Position was $98,806 and $82,591, as ofFebruary 29, 2008 and February 28, 2007, respectively.



Note 1. Summary of Significant Accounting Policies (Continued)

Cash Flow InformationFor purposes of the Statements of Cash Flows, the Center considers all highly liquiddebt instruments purchased with maturity of three months or less to be cash equivalents.

Note 2. Donated Facilities

St. Charles Parish provides the Center, on an in-kind basis, office space which housesthe administrative offices as well as the patient care facilities located in Luling,Louisiana. The estimated value associated with these facilities that has beenrecognized in the Statements of Activities totaled $336,681 and $232,282, as ofFebruary 29, 2008 and of February 28, 2007, respectively.

Note 3. Debt

Details of the Center's long and short-term debt obligations are as follows:

2008 2007

Note Payable - Bank - Revolving lineof credit dated April 18, 2007.Credit limit $75,000. MaturityApril 18, 2008. Renewable upon maturity.Interest at 8.75%.Secured by deposit accounts. . $ 59,900 $ 74,788

Practice Acquistion Loan Payable (A) 73,086 124,088

Installment Loan - Choice Leasing - Payablein monthly installments of $2,386.Including interest at 8.6%. Collateralizedby equipment. Maturing April 2012. 93,873

Installment Loan - Choice Leasing - Payablein monthly installments of $969.Including interest at 8.76%. Collateralizedby equipment. Maturing May 2012. 37,996

264,855 198,876Less: Current Maturities (132,045) (123.446)

Long-Term Debt $ 132,810 $ 75,430



Note 3, Debt (Continued)

(A) During the year ended February 28, 2006 the Center recognized a debt of $180,000due to a physician in connection with the acquisition of the assets of that physician'spractice as detailed in Note 4, On May 30, 2006, the Center signed a promissorynote in connection with this obligation with the following terms:

The Center shall pay principal and interest in the amount of $25,861.92 onJune 15, 2006, and shall pay $4,650.20 on the fifteenth day of each calendar monththereafter, until maturity on December 15, 2009. The note bears interest at 7% perannum.

Accordingly, this obligation has been reflected on the Center's statement of financialposition in accordance with these terms of repayment.

Maturities by year for the Center's long and short-term debt instruments detailed aboveare as follows:

Year Ended February 28, Amount2009 $ 132,0452010 52,7292011 34,6842012 37,8102013 7,587

Total $ 264,855

The Center paid $13,719 and $14,755 in interest on financed obligations, for the yearsended February 29, 2008 and February 28, 2007, respectively.

Note 4. Intangible Asset

Effective May 13, 2005, the Center entered into a physician practice acquisitionagreement with a licensed pediatrician in Kenner, Louisiana, to acquire certain assetsassociated with that practice. To affect the purchase, the Center entered into a separateemployment contract under which the Center engaged the services of the physician asan employee of the Center. The term of the employment contract is 120 months andbecame effective'January 1, 2006. The employment contract also contains a non-compete agreement, which includes the term of the employment contract and anadditional period of 24 months upon any termination of the contract.

The acquisition was financed by the debt obligation detailed in Note 3 above.Management recorded a value associated with the non-compete agreement in theamount of $180,000, which is being amortized over 144 months, (the term of theagreement plus the period following termination). Amortization expense for the yearsended February 29, 2008 and February 28, 2007, was $15,000 and $17,500,respectively.



Note 5. Commitments, Concentrations, and Contingencies

Property LeasesAs mentioned in Note 2, the Center recognized $336,681 and $232,282 as an in-kindcontribution for the years ended February 29, 2008 and February 28, 2007, respectively,for the value of the estimated rental cost associated with the Center's administrativeoffices and patient care facilities that are provided by St. Charles Parish.

Jn September 2005, the Center entered into a Jease agreement with Lifemark Hospitalfor office space in Kenner, LA. The term of the lease is thirty-six months and commitsthe Center to monthly payments in the amount of $2,172, The lease expires onSeptember 30, 2008.

In September 2007, the Center entered into a lease agreement with Ochsner MedicalCenter for office space in Kenner, LA. The term of the lease is twelve months andcommits the Center to monthly payments in the amount of $2,034. The lease expires onSeptember 30, 2008.

The following is a schedule of future minimum lease payments as of February 29, 2008;

2009 $ 25,235

Concentrations of Credit RiskThe Center grants credit without collateral to its patients, most of whom are local residentsand are insured under third-party payor agreements. The mix of receivables from patientsand third-party payers as of February 29, 2008, was as follows:

Payqr Percent^Medicaid 26%Medicare - 35%Patients 21%Managed Care and

Other Third-Party Payers 18%

Total 100%

Additionally, 34% and 27% of the Center's total unrestricted revenue and support wereprovided by the U. S. Department of Health and Human Services during the fiscal yearsended February 29, 2008 and February 28, 2007, respectively.

The Center has responsibility for expending grant funds in accordance with specifiedinstructions from its funding sources. Any deficits resulting from over expendituresand/or questioned costs are the responsibility of the Center.

10



Note 5. Commitments, Concentrations, and Contingencies (Continued)

Laws and RegulationsThe healthcare industry is subject to numerous laws and regulations of federal, state,and local governments. Compliance with such laws and regulations can be subject tofuture government review and interpretation, as well as regulatory actions unknown orunasserted at this time. These laws and regulations include, but are not limited to,accreditation, licensure, government healthcare program participation requirements,reimbursement for patient services, and Medicare and Medicaid fraud and abuse.Recently, government activity has increased with respect to investigations andallegations concerning possible violations of fraud and abuse statutes and regulations byhealthcare providers. Violations of these laws and regulations could result in exclusionfrom government healthcare program participation, together with the imposition ofsignificant fines and penalties, as well as significant repayment for past reimbursementfor patient services received. While the Center is subject to similar regulatory reviews,management believes the outcome of any such regulatory review will not have amaterial adverse effect on the Center's financial position,

Risk ManagementEffective August 13, 2003, the Bureau of Primary Health Care, in accordance withSection 224(h) of the Public Health Services Act, deemed the Center to be an employeeof the Federal Government. Section 224(a) of the Public Health Services Act providesliability protection under the Federal Tort Claims Act for damage for personal injury,including death, resulting from the performance of medical, surgical, dental, and relatedfunctions, and is exclusive of any other civil action or proceeding. This coverage isapplicable to deemed entities and their officers, governing board members, employees,and contractors who are physicians or other licensed or certified healthcare practitionersworking full-time or part-time providing family practice, general internal medicine, generalpediatrics, or obstetrics/gynecological services.

Note 6. Due to St. Charles Parish Hospital

St. Charles Parish Hospital (the Hospital) paid costs associated with the operations ofthe Center in prior years. The Center is obligated to reimburse the Hospital for theirpayment of these costs. The amount due to the Hospital as of February 29, 2008 andFebruary 28, 2007, is $116,205 and $231,999, respectively.

Note 7. Subsequent Events

During 2007, the Center began the loan application process to obtain a guaranteed loanthrough a United States Department of Agriculture sponsored program in the amount of$499,000, which if secured will be used to finance the purchase of the Center's leasedfacilities at 853 Milling Avenue. Currently, this application is still pending approval.

11



Note 8. Hurricane Katrina

On August 29, 2005 the economy and infrastructure of southeastern Louisiana wasseverely impacted by the effects of Hurricane Katrina. As a result, the Center receivednew grants to assist in servicing the influx of patients due to damages sustained byphysician's offices, hospitals, and other healthcare providers in the surrounding areas.The total amounts of new grants recognized due to Hurricane Katrina were $165,782and $37,380, as of February 29, 2008 and February 28, 2007, respectively. Theseamounts, are included in the Statement of Activities for the years then ended under thecaption, FEMA Public Assistance Grants. Additionally, during the year endedFebruary 29, 2008, the Center recognized $779,661 in "Primary Care Access andStabilization Grant" funding from the Louisiana Department of Health and Hospitalsdesigned to assist the Center in meeting the increased demand for health care servicesin the Greater New Orleans area post-Katrina.

Note 9. Non-Recurring Costs of Dental Program Start-Up

During the year ended February 29, 2008, the Center incurred start-up costs ofapproximately $154,000 in connection with the development of patient dental services atits main campus in St. Charles Parish. The costs were expensed as incurred and includedas a component of program service expenses in accordance with AICPA Statement ofPosition 98-5 Reporting on the Costs of Start-up Activities.

12

ST. CHARLES COMMUNITY HEALTH CENTER, INC.Schedule of Functional ExpensesFor the Year Ended February 29, 2008

Salaries and WagesContractual ServicesBenefitsRentOtherPatient SuppliesMaintenanceTravelInsurancePharmaceuticalsDepreciation and, AmortizationLaboratoryCommunicationsSuppliesAdvertisingDues and MembershipsPrinting and ShippingUtilitiesBad Debt Expanse

Total Expenses

ProgramServices

$ 3,607,874712,064571,718375,923

90,397118,70993,72888,03390,04690,22375,66558,36743,58336,94229,48522,92518,46517,6152,859

$ 6,144,621

Managementand General

$ 55,99143,19714,60224,161

3,720-

2,6965,8841,182

-5,926

-425871-615468267-

S 160,005

Total

$ 3,663,865755,261586,320400,084

94,117118,70996,42493,91791,22890,22381,59158,36744,00837,81329,48523,54018,93317,8822,859

$ 6,304,626

See independent auditor's report.13

ST. CHARLES COMMUNITY HEALTH CENTER, INC.Schedule of Functional ExpensesFor the Year Ended February 28, 2007

Program ManagementServices and General

Salaries and WagesContractual ServicesBenefitsRentPharmaceuticalsOtherTravelMaintenanceInsuvancePatient SuppliesCommunicationsDepreciation and AmortizationAdvertisingDues and MembershipsPrinting and ShippingSuppliesLaboratoryUtilitiesBad Debt Expense

Tota! Expenses

$ 2,351,360 i600,875305,818280,082

99,41782,24570,60465,48453,83853,75946,83542,30232,16028,75724,08622,16119,0604,6352,166

$ 4,185,644

5 98,52792,60434,00321,765

-2,7866,5142,7934,249

-2,4484,373

-434

1,9061,400

---

$ 273,802

Total

$ 2,449,887693,479339,821301,847

99,41785,03177,11868,27758,08753,75949,28346,67532,16029,19125,99223,56119,0604,6352,166

$ 4,459,446

See independent auditor's report.14

OMB CIRCULAR A-133 SECTION

ST. CHARLES COMMUNITY HEALTH CENTER, INC.Schedule of Expenditures of Federal AwardsFor the Year Ended February 29, 2008

Federal Grantor/Pass-Through GrantorProgram Title

FederalCFDA

NumberPass-Through

Entity No.

FederalRevenue/

ExpendituresRecognized

U.S. Department of Health and Human ServicesDirect Award

Community Health Centers Program 93.224

Passed through Louisiana Public HealthInstitute

Primary Care Access and Stabilization Grant 93.776

Social Services Block Grants 93.667

Total U.S. Department of Health andHuman Services

U.S. Department of Homeland Security

Passed through Louisiana Military Department,

Office of Homeland Security and EmergencyPreparedness - Public Assistance Grants

Total U.S. Department of Homeland Security

U.S. Department of Agriculture

Passed through State of LA Department ofHealth and Hospitals, Office of Public Health,

Special Supplemental Nutrition Program ForWomen, Infants, and Children 10.557

Total U.S. Department of Agriculture

Total Expenditures of Federal Awards

NA

NA

NA

97.036 FEMA-1603-DR-LA

NA

$ 667,202

779,661

694,751

S 2,141,614

165,782

$ 165,782

186,617

186,617

$ 2,494,013

CFDA = Catalog of Federal Domestic Assistance

See accompanying notes to schedule of expenditures of federal awards,

16


Note to Schedule of Expenditures of Federal Awards

Note 1. Basis of Presentation

The accompanying schedule of expenditures of federal awards includes the federalgrant activity of St. Charles Community Health Center, Inc. and is presented on theaccrual basis of accounting. The information in this schedule is presented in accordancewith the requirements of OMB Circular A-l 33, Audits of States, Local Governments, andNon-Profit Organizations. Certain costs have been allocated to the federal program inaccordance with OMB Circular A-122, Cost Principles for Non-Profit Organizations. Theamounts presented in this schedule do not differ from amounts presented in, or used inthe preparation of, the financial statements.

17

CERTIFIED PUBLIC ACCOUNTANTS

Independent Auditor's Report on Internal Control Over FinancialReporting and on Compliance and Other Matters Based

on an Audit of Financial Statements Performed inAccordance with Government Auditing Standards


We have audited the financial statements of St. Charles Community Health Center, Inc. (theCenter), as of and for the years ended February 29, 2008 and February 28, 2007, and haveissued our report thereon dated August 22, 2008. We conducted our audits in accordance withauditing standards generally accepted in the United States of America and the standardsapplicable to financial statements contained in Government Auditing Standards, issued by theComptroller General of the United States.

Internal Control Over Financial Reporting

In planning and performing our audit, we considered the Center's internal control over financialreporting as a basis for designing our auditing procedures for the purpose of expressing ouropinion on the financial statements, but not for the purpose of expressing an opinion on theeffectiveness of the Center's internal control over financial reporting. Accordingly, we do notexpress an opinion on the effectiveness of the Center's internal control over financial reporting.

Our consideration of internal control over financial reporting was for the limited purposedescribed in the preceding paragraph and would not necessarily identify alt deficiencies ininternal control over financial reporting that might be significant deficiencies or materialweaknesses. However, as discussed below, we identified certain deficiencies in internal controlover financial reporting that we consider to be significant deficiencies.

A control deficiency exists when the design or operation of a control does not allowmanagement or employees, in the normal course of performing their assigned functions, toprevent or detect misstatements on a timely basis. A significant deficiency is a controldeficiency, or combination of control deficiencies, that adversely affects the Center's ability toinitiate, authorize, record, process, or report financial data reliably in accordance with generallyaccepted accounting principles such that there is more than a remote likelihood that amisstatement of the Center's financial statements that is more than inconsequential will not beprevented or detected by the Center's internal control. We consider the deficiency No. 08-01described in the accompanying schedule of findings and questioned costs to be a significantdeficiency in internal control over financial reporting.

110 VETERANS MEMORIAL BOULEVARD, SUITE 200, METAIRIE, LA 70005-4958 - 504.835.5522 • FAX 504.835.55355100 VILLAGE WALX, SUITE 202, COVINGTON, LA 70433-4012 • 985.892.5850 • FAX 985,892.5956

TOWN HALL WEST, 10000 PERKINS Rowt3, STE. 200, BATON ROUGR, LA 70810-1797 • 225.296.5150 - FAX 225,296.5151WWW.LAPORTE.COM

RSM McGladrey NetworkATI independently Owed Menber

A material weakness is a significant deficiency, or combination of significant deficiencies, thatresults in more than a remote likelihood that a material misstatement of the financial statementswill not be prevented or detected by the Center's internal control.

Our consideration of internal control over financial reporting was for the limited purpose describedin the first paragraph of this section and would not necessarily identify all deficiencies in internalcontrol that might be significant deficiencies and, accordingly, would not necessarily disclose allsignificant deficiencies that are also considered to be material weaknesses. However, we believethat the significant deficiency described above is not a material weakness.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the Center's financial statements arefree of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements, noncompliance with which could have a directand material effect on the determination of financial statement amounts. However, providing anopinion on compliance with those provisions was not an objective of our audits and, accordingly,we do not express such an opinion. The results of our tests disclosed no instances ofnoncompliance or other matters that are required to be reported under Government AuditingStandards. However, we noted certain other matters that we reported to management of CheCenter in a separate letter dated August 22, 2008.

This report is intended solely for the information of the Audit Committee, Board of Directors,management 'Louisiana Department of Health and Human Services, and the Legislative Auditorof the State of Louisiana, and is not intended to be, and should not be, used by anyone other thanthese specified parties. Under Louisiana Revised Statute 24:513, this report is distributed by theLegislative Auditor as a public document.


August 22, 2008

CFRTIF1ED PUBLIC ACCOUNTANTS

Report on Compliance with Requirements Applicableto Each Major Program and Internal Control

Over Compliance in Accordance with OMB Circular A-1 33


Compliance

We have audited the compliance of St. Charles Community Health Center, Inc. (the Center) withthe types of compliance requirements described in the U. S. Office of Management and Budget(OMB) Circular A-133, Compliance Supplement that are applicable to each of its major federalprograms for the year ended February 29, 2008. The Center's major federal programs areidentified in the summary of auditor's results section of the accompanying Schedule of Findingsand Questioned Costs. Compliance with the requirements of laws, regulations, contracts andgrants applicable to each of its major federal programs is the responsibility of the Center'smanagement. Our responsibility is to express an opinion on the Center's compliance based onour audit.

We conducted our audit of compliance in accordance with auditing standards generallyaccepted in the United States of America; the standards applicable to financial audits containedin Government Auditing Standards, issued by the Comptroller General of the United States; andOMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations.Those standards and OMB Circular A-133 require that we plan and perform the audit to obtainreasonable assurance about whether noncompliance with the types of compliance requirementsreferred to above that could have a direct and material effect on a major federal programoccurred. An audit includes examining, on a test basis, evidence about the Center's compliancewith those requirements and performing such other procedures as we considered necessary inthe circumstances. We believe that our audit provides a reasonable basis for our opinion. Ouraudit does not provide a legal determination on the Center's compliance with thoserequirements.

In our opinion, the Center complied, in all material respects, with the requirements referred toabove that are applicable to each of its major federal programs for the year endedFebruary 29, 2008.

Internal Control Over Compliance

The management of the Center is responsible for establishing and maintaining effective internalcontrof over compd'ance with requirements of laws, regufations, contracts and grants applicable tofederal programs.

110 VETERANS MEMORIAL BOULEVARD, SUITE 200, METAIRIE, LA 70005-4958 • 504.835.5522 • FAX 504.835.55355100 VHIAOB WALK, SUITE 202, CoVINGTON, LA 70433-4012 • 985.892.5850 • FAX 985.892.5956

TOWN HALL WEST, iOOOO PERK.INS ROWE, STB. 200, BATON ROUGE, LA 70810-1797 • 225.296.5lSO - FAX 225.296.5151WWW.LAPORTE.COM

RSM McGladrey Network

In planning and performing our audit, we considered the Center's internal control over compliancewith requirements that could have a direct and material effect on a major federal program in orderto determine our auditing procedures for the purpose of expressing our opinion on compliancebut, not for the purpose of expressing an opinion on the effectiveness of internal control overcompliance. Accordingly, we do not express an opinion on the effectiveness of the Center'sinternal control over compliance.

A control deficiency in an entity's internal control over compliance exists when the design oroperation of a control does not allow management or employees, in the normal course ofperforming their assigned functions, to prevent or detect noncompliance with a type of compliancerequirement of a federal program on a timely basis. A significant deficiency is a control deficiencyf

or combination of control deficiencies, that adversely affects the entity's ability to administer afederal program such that there is more than a remote likelihood that noncompliance with a typeof compliance requirement of a federal program that is more than inconsequential will not beprevented or detected by the entity's internal control.

A material weakness is a significant deficiency, or combination of significant deficiencies, thatresults in more than a remote likelihood that material noncompliance with a type of compliancerequirement of a federal program will not be prevented or detected by any entity's internalcontrol. Our consideration of internal control over compliance was for the limited purposedescribed in the first paragraph of this section and would not necessarily identify all deficiencies ininternal control that might be significant deficiencies or material weaknesses. We did not identifyany deficiencies in internal control over compliance that we consider to be material weaknesses,as defined above,

This report is intended solely for the information of the Audit Committee, Board of Directors,management, Louisiana Department of Health and Human Services, and the Legislative Auditorof the State of Louisiana, and is not intended to be, and should not be, used by anyone other thanthese specified parties. Under Louisiana Revised Statute 24:513, this report is distributed by theLegislative Auditor as a public document.


August 22, 2008


Schedule of Findings and Questioned CostsFor the Year Ended February 29. 2QQ8

I. Summary of Independent Auditor's ResultsFinancial Statements

Type of auditor's report issued: Unqualified

Internal control over financial reporting;

• Material weakness identified?

• Significant deficiency identified that isnot considered to be a materialweakness?

Non-compliance material to financialstatements noted?

Federal Awards

Internal control over major programs:

• Material weakness identified?

• Significant deficiency identified that

is not considered to be a material

weakness?

Yes

X Yes

Yes

Yes

Yes

X No

None Reported

X No

X No

X None Reported

Type of auditor's report issued on compliance for major programs: Unqualified

Any audit findings disclosed that arerequired to be reported in accordance withsection 510(a) of Circular A-133? Yes X No

Identification of major programs

CFDA Numberfs) Name of Federal Program or Cluster

93.776

10.557

Department of Health and Human Services,Primary Care Access and Stabilization Grant

Department of Agriculture, Special SupplementalNutrition Program for Women, Infants, and Children

22


Schedule of Findings and Questioned Costs (Continued)For the Year Ended February 2S,

Dollar threshold used to distinguish betweenType A and Type B programs

Auditee qualified as low-risk auditee? X Yes

$ 300.000

No

II. Findings Related to the Basic Financial Statements

Finding 2008-01 Accounts Receivable Subsidiary to General Ledger Reconciliation.

Condition;

Effect:

Recommendation:

The Center's patient accounts receivable ledger and relatedallowance account does not reconcile to individual controlaccounts on the Center's Quickbooks® general ledger. Regularmonthly general ledger reconciliations of both patient and "other"accounts receivables are not performed.

The lack of such a specific reconciliation of patient accountsreceivable, and the related estimated allowance account directlyto individual general ledger account on a monthly basis representsa weakness in internal control over cash receipts and financialreporting of net accounts receivable balances.

We recommend that the monthly summary of activity (billings,collections and write-offs) of patient accounts receivable activitybe journalized to a specific general ledger control account inQuickbooks® rather than to the receivables account which is alsoused to track the balance of other receivables. Similarly aseparate allowance for doubtful accounts on the general ledgershould be established to account for the monthly bad debtprovision net of write-offs. These two accounts should be setup inQuickbooks® as "other current assets" to accommodate theseparation from other receivables balances which are maintaineddirectly through Quickbooks® accounts receivable module. Afterthe monthly activity is journalized to Quickbooks® the EHSaccounts receivable detailed aging report should agree to thecontrol account without exception. Further a schedule should bemaintained that specifically relates the balance of the allowancefor doubtful accounts general ledger control account to theestimated uncollectible accounts in the EHS subsidiary as ofmonth end. We believe that this will eliminate the likelihood ofvariances between the actual amount of patient accountsreceivable in the EHS system and the related general ledgercontrol account.

23


Schedule of Findings and Questioned Costs (Continued)For the Year Ended February 29, 2008

Managements1 Responseand Corrective Action: The Health Center agrees with this recommendation and effective

November 1st, 2008 will make the necessary account changes inthe Quickbooks® system to accommodate them. From that pointforward monthly reconciliation of the EHS (accounts receivable)sub-ledger to the Quickbooks® accounts will be performed.

Finding 2008-02 Compliance with LRS 24:513

Condition:

Effect:

Recommendation:

Managements' Responseand Corrective Action:

Per Louisiana Revised Statute 24:513, quasi-public entities arerequired to submit their audited financial statements to theLegislative Auditor of Louisiana within six months of the close ofthe entity's fiscal year. St. Charles Community Health Center wasunable to comply with this statute for the fiscal year endedFebruary 29,2008.

An instance of non-compliance with state law.

We recommend that the Center undertake measures to allowcompletion and submission of the audited financial statementswithin the required reporting deadline.

The Health Center was anticipating compliance with thisrequirement to have its audit submission delivered to theLegislative Auditor by August 31,2008, however during the weekof August 25, 2008 the Center had to begin preparations for theexpected landfall of Hurricane Gustav and the resulting mandatoryevacuation of the Parish. The Center suffered damages to itsfacilities and business interruption from the storm which hasdelayed submission. Measures are being undertaken to ensurecompliance with revised statute 24:513 regarding future auditsubmissions.

111. Findings and Questioned Costs for Federal Awards

None

24

ROM IG HANDCERTIFIED PUBLIC ACCOUNTANT!;

WRITER'S DIRECT DIM. (504) 838-4812

August 22, 2008

Management and the Board of DirectorsSt. Charles Community Health Center, Inc.843 Milling AvenueLuling, LA 70070

Ladies and Gentlemen:

In planning and performing our audit of the financial statements of St Charles CommunityHealth Center, Inc. (the Center) for the year ended February 29, 2008, (on which we haveissued our report dated August 22, 2008), in accordance with auditing standards generallyaccepted in the United States of America, we considered the Center's internal control overfinancial reporting (internal control) as a basis for designing our auditing procedures for thepurpose of expressing our opinion on the financial statements, but not for the purpose ofexpressing an opinion on the effectiveness of the Center's internal control. Accordingly, wedo not express an opinion on the effectiveness of the Center's internal control.

A control deficiency exists when the design or operation of a control does not allowmanagement or employees, in the normal course of performing their assigned functions, toprevent or detect misstatements on a timely basis. A significant deficiency is a controldeficiency, or a combination of control deficiencies, that adversely affects the entity's abilityto initiate, authorize, record, process, detect or report financial data reliably in accordancewith generally accepted accounting principles such that there is more than a remotelikelihood that a misstatement of the Center's financial statements that is more thaninconsequential will not be prevented or detected by the entity's internal control.

A material weakness is a significant deficiency, or a combination of significant deficiencies,that results in more than a remote likelihood that a material misstatement of the financialstatements will not be prevented or detected by the Center's internal control.

Our consideration of internal control was for the limited purposes described in the firstparagraph and would not necessarily identify all deficiencies in internal control that might besignificant deficiencies or material weaknesses. We did not identify any deficiencies ininternal control that we consider to be material weaknesses, as defined above.

110 VETERANS MEMORIAL BOULBVAITO, Surra 200, MHTAIRIB, LA 70005-4958 • 504.835.5522 • FAX 504.835.55355100 VILLAGE WAI.K, Surra 202, CoviNcrroN, LA 70433-4012 • 985.892.5850 • FAX 985,892.5956

TOWN HALL WEST* 10000 PERKINS ROWB, STO. 200, BATON ROUGH, LA 70810-1797 • 225.296.5150 • FAX 225.296.5151WWW.1-APOUTE.COM

RSM McGladrey Network

However, during our audit we became aware of several matters that are opportunities forstrengthening internal controls and operating efficiency. The memorandum that accompaniesthis letter summarizes our comments and suggestions concerning those matters.

This communication is intended solely for the information and use of management, membersof the board of directors, and others within the organization, and is not intended to be andshould not be used by anyone other than these specified parties.

CURRENT YEAR AUDIT RECOMMENDATIONS AND OBSERVATIONS:

MO8-01 Grant Contract Compliance

Observation: The Center's Primary Care Access and Stabilization grant agreement with theLouisiana Public Health Institute (LPHI) requires that an interest bearing money marketaccount be established to hold the proceeds of the grant award. The agreement states thattransfers of PCASG funds to another bank account maintained by the Center shall be limitedto the reimbursement of PCASG related expenditures paid out of that account andreimbursements for PCASG related expenditures paid from the Center's operating accounts.During the audit we noted that the Center had transferred funds from the money marketaccount to its operating account on two occasions in advance of the incurrence of sufficientexpenditures to support the transfer.

While we noted that over the course of the Center's fiscal year documented eligible grantexpenditures exceeded the amount of the grant award, we recommend that the Center,implement measures to ensure compliance with all terms of the grant agreement, includingthe timing of the transfer of funds to its operating account.

Management Response: An explanation of the "early" grant fund transfers was given withsupporting documentation to PCASG and was subsequently deemed as "satisfies allobligations as outlined in the letter of findings and remedies any contract violations asrepresented" by Daniel Cocran, Finance & Compliance Manager of Louisiana Public HealthInstitute.

There were many changes in the beginning of the PCASG grant in what funds could andcould not be spent on, and when draws should be made. Over time this has been clarifiedand we are currently carefully reviewing to ensure that we do not have any "early" grantfunding transfers or other grant compliance issues going forward.

The following recommendation has been reproduced from the prior year's audit in itsentirety because of continued significance:

M08-02 Company Charge Cards

Recommendation: While it is not uncommon for corporate entities to issue charge cards tosenior employees and directors to facilitate efficiencies involved in connection with certaintypes of transactions, a strict written policy as to their use must be adhered to minimizeinternal control risk, and to be consistent with the organization's established purchasing andapproval policies.

In this area we specifically recommend that the Center review their policy for charge cardpurchases, to ensure it remains compatible with the growth of the Center. We encouragethe Center to strongly consider the following policies related to charge card distribution anduse:

1. Only directors (board members) and senior management should be issued chargecards based on a demonstrated business purpose.

2. A master listing of parties who have been issued charge cards and the related creditlimits should be maintained and reviewed by the Board. Upon termination orresignation procedures should be in place to immediately retrieve the card from theseparated employee and deactivate.

3. To allow for segregation of incompatible duties, no employee with access to accountspayable invoices input in Quickbooks or the check writing module should have accessto a Center issued charge card.

4. The Center's written policy should detail the types of transactions that are authorizedto be made through use of charge cards.

5. In all cases receipts and other documentation for each purchase which details thebusiness purpose of the transaction should be retained and matched with the monthend charge card statement before it is approved and entered into the accountspayable system.

6. The types and nature of transactions for which the charge cards are to be used suchas, travel and business related meals should be documented. The use of Centerissued charge cards for purchases of materials and supplies should be limited toemergency situations and should ordinarily be made through use of the purchaseorder system. Employee expenditures for business related purposes such as, localtravel should be the responsibility of the employee and submitted on an expensereimbursement form to be approved.

7. Mileage and purchases of gas for company owned vehicles, when necessary throughthe use of charge cards, should be noted on the receipt and monitored periodically.

8. Approval of monthly charge card statements should be restricted to directors forsenior management statements. Another director should approve the statementsrelated to director issued charge cards. In all cases this approval should be noted onthe face of the statement as a prerequisite for entry into the accounts payablesystem.

9. Payments of monthly charge card statements should flow through the Center'snormal check processing routine and should not be made through the use ofautomatic drafts, or other online payment methods.

We believe that strict adherence to these policies will minimize internal control risk factorsassociated with corporate charge cards, and decrease the likelihood that an unsubstantiatedtransaction would be disallowed for federal grant reimbursement or cost reporting purposes.

Management Response:

1. Charge cards are issued to senior management (CEO, COO & CFO). the ExecutiveSecretary and the Controller are the only staff with cards.

It is necessary for the Executive Secretary and the Controller to have credit cards becausethey often have to purchase items for meetings, make travel arrangements, and make onlinepurchases for supplies and materials. We fee! that limiting the credit cards to fewer thanthese people would create a hardship or require the senior management to have to performtasks such as supply pick ups at Wal-Mart, etc.

2. A master list will be created for review and maintenance by the Board of Directors.

3. Having a small accounting division consisting of only 3 staff performing accounting duties,two of which being the Controller and the CFO, it is not feasible to limit access to A/P andcheck writing capabilities for staff with credit cards as that is 2/3 of the accounting staff. A/Pand check writing duties are segregated, purchasing is also segregated and Pos require theCFO, CEO or COOs approval, and checks are signed by the CEO or COO and one of threeBoard Member signers. With these controls in place, we feel that although we cannot meetthe segregation you suggested we have sufficient controls in place.

4. A written policy will be created detailing the types of transactions authorized to be madethrough charge cards.

5. It is the policy of the health center to require receipts or charge card purchases besubmitted. In some instances receipts are misplaced.

Staff with charge cards will be reminded of the importance of submitting receipts forpurchases with correct documentation and future purchases without receipts turned in willrequire a written explanation of the purchases and circumstances to be reviewed andapproved by one of the senior managers. Non-approved written explanations will result inthe charge being deducted from the card holder's payroll.

6. Types of charges will be documented. Purchase of materials and supplies is limited tosituations that do not lend themselves to utilizing the PO system and being billed andprocessed through A/P. In general, local travel by employees is tracked on an employeereimbursement form and reimbursed via A/P check. The senior administrative staff will oftenhave repetitive local travel that supports use of the charge card for gas and other purchases,and the center will now require that mileage information be documented on the receipt tosubstantiate the purchases.

7. See number 6 above.

8. Senior managers will review each others' charge statements and sign off on the statementtheir approval prior to A/P entry.

9. When possible, charge card statements will be paid via the normal A/P process.However, there are often times when due to immediacy of need to pay the charge card toallow usage for someone, the normal A/P process may not be possible. In those cases, withthe approval of the CEO, the charge card may be paid using online payments or automaticdraft.

Other General Comments 2008:

Audit Assistance and Cooperation

We would like to thank the management and staff of the Center for the cooperation andassistance afforded us during the audit fieldwork and throughout the past year. Weappreciate the opportunity to present these comments for your consideration and we will beglad to discuss them with you at your convenience. This report is intended solely formanagement and should not be used for any other purpose.


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