RURAL UTAH CHILD DEVELOPMENT (A Non-Profit Organization)

FINANCIAL STATEMENTS

November 30, 2017

RURAL UTAH CHILD DEVELOPMENT TABLE OF CONTENTS

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

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

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

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

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

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

Independent Auditor’s Report on Internal Control Over Financial Reporting

and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards ................................................................................................................... 11

Independent Auditor’s Report on

Compliance for each Major Program and on Internal Control Over Compliance Required by Uniform Guidance ............................................................................................................................. 13

Schedule of Expenditures of Federal Awards ............................................................................................................. 15

Notes to Schedule of Expenditures of Federal Awards .............................................................................................. 16

Schedule of Awarded Grant Revenues Over Actual Expenses ................................................................................... 17

Schedule of Findings and Questioned Costs ............................................................................................................... 18

Summary Schedule of Prior Audit Findings ............................................................................................................... 20

INDEPENDENT AUDITOR’S REPORT

Board of Directors Rural Utah Child Development

Report on the Financial Statements

We have audited the accompanying statement of financial position of Rural Utah Child Development (a non-profit organization) as of November 30, 2017, and the related statements of activities, functional expenses, and cash flows for the year then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

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

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the 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 financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Rural Utah Child Development as of November 30, 2017, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United State of America.

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Other Matters

Other Information

Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying schedule of expenditures of federal awards, as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated August 27, 2018 on our consideration of Rural Utah Child Development’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Rural Utah Child Development’s internal control over financial reporting and compliance.

Salt Lake City, Utah August 27, 2018

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RURAL UTAH CHILD DEVELOPMENT STATEMENT OF FINANCIAL POSITION November 30, 2017

Assets

Current Assets

Cash $ - Accounts Receivable: U.S. Department of Agriculture 15,188 Head Start 449,334 E-Rate 2,634 Other 7,675

Total Current Assets 474,831

Property and equipment - net 1,172,416

Total Assets $ 1,647,247 Liabilities and Net Assets

Current Liabilities

Cash overdraft $ 75,613 Accounts payable 189,402 Accrued expenses 208,928

Total Current Liabilities 473,943

Total Liabilities 473,943

Net Assets

Unrestricted 1,173,304

Total Net Assets 1,173,304

Total Liabilities and Net Assets $ 1,647,247 The accompanying notes are an integral part of these financial statements.

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RURAL UTAH CHILD DEVELOPMENT STATEMENT OF ACTIVITIES For Year Ended November 30, 2017

Unrestricted Net Assets

Support

Federal Grant CAN 4122 $ 3,198,828 Federal Grant CAN 4120 32,959 Federal Grant CAN 4125 838,294 Federal Grant CAN 4121 15,915 In-kind Services and Supplies 940,628 USDA Food Grant 129,673 E-Rate Grant 12,865 Other revenue 359

Total Support 5,169,521

Expenses

Program Services:

Head Start Program CAN 4122 3,038,886 Head Start Program CAN 4122 In-Kind 775,581 Head Start Program CAN 4120 32,959 Head Start Program CAN 4125 753,537 Head Start Program PA25 In-Kind 165,047 Head Start Program CAN 4121 15,915 USDA Food Grant 129,673 E-Rate Grant 12,865 Other program expenses 15

Total Program Services 4,924,478

Support Services

Head Start program CAN 4122 280,929

Total Expenses 5,205,407

Change in Unrestricted Net Assets (35,886)

Net Assets at Beginning of Year 1,209,190

Net Assets at End of Year $ 1,173,304 The accompanying notes are an integral part of these financial statements.

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RURAL UTAH CHILD DEVELOPMENT STATEMENT OF FUNCTIONAL EXPENSES For Year Ended November 30, 2017

Program Services CAN 4122 / CAN 4122 CAN 4120 CAN 4125 CAN 4125 CAN 4121 USDA / Total Support

4123 In-Kind In-Kind E-Rate Other Program Services Total

Wages $ 1,954,443 $ 775,581 $ $ 467,120 $ 165,047 $ $ $ - $ 3,362,191 $ 223,125 $ 3,585,316 Employee benefits 248,183 - 67,977 - 316,160 31,829 347,989 Travel 27,377 - 32,959 24,621 - - 84,957 - 84,957 Supplies

Instructional 17,175 - 17,925 35,100 35,100 Other 51,813 - - 11,808 - - 63,621 570 64,191 Child Nutrition 9,152 2,080 129,673 140,905 140,905 Health 7,232 17,527 24,759 - 24,759 Transportation 258,973 - 258,973 258,973 Occupancy

Rent & maintenance 110,054 52,608 162,662 - 162,662 Utilities 68,517 24,348 12,865 105,730 2,425 108,155 Parent programs 16,358 3,913 20,271 - 20,271 Depreciation * 92,196 2,911 95,107 95,107 Other 177,413 - 60,699 15,915 15 254,042 22,980 277,022

$ 3,038,886 $ 775,581 $ 32,959 $ 753,537 $ 165,047 $ 15,915 $ 142,538 $ 15 $ 4,924,478 $ 280,929 $ 5,205,407 * Depreciation expense is permitted by Generally Accepted Accounting Procedures, however, it is not for the Schedule of

Expenditures of Federal Awards since federal funds were used to purchase the related capital assets.

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

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RURAL UTAH CHILD DEVELOPMENT STATEMENT OF CASH FLOWS For Year Ended November 30, 2017

Cash Flows From Operating Activities

Increase in unrestricted net assets $ (35,886) Adjustments to reconcile the change in unrestricted net assets

to net cash provided (used)

Depreciation 95,107 (Gain)/loss on disposal of assets 33,412

(Increase) decrease in operating assets:

Accounts receivable (145,427) Prepaid expenses 7,445

Increase (decrease) in operating liabilities:

Cash Overdraft 75,613 Accounts payable 137,135 Accrued liabilities (88,099)

Net Cash From Operating Activities 79,300

Cash Flows From Investing Activities

Purchase of property and equipment (92,287)

Net Cash From Investing Activities (92,287)

Net Increase (Decrease) in Cash (12,987)

Cash Balance, Beginning of Year 12,987

Cash Balance, End of Year $ - Supplemental Disclosures of Cash Flow Information

Cash paid during the year for:

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

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RURAL UTAH CHILD DEVELOPMENT NOTES TO FINANCIAL STATEMENTS

NOTE 1 NATURE OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Activities The Rural Utah Child Development (the Organization) was organized as a Utah private non-profit corporation under the provisions of chapter 6 of Title 16, Utah code Annotated, 1953 on March 6, 1966. The Organization is to administer and operate Head Start and Early Head Start programs throughout the southeastern part of the State of Utah, and is funded by grants from the Department of Health and Human Services.

Significant Accounting Policies

Basis of Accounting The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.

Statement of Cash Flows For purposes of the statement of cash flows, cash and cash equivalents includes all demand deposits and highly liquid debt instruments with original maturities of three months or less.

Concentration of Risk The Organization maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Organization has not experienced any losses in such accounts. The Organization believes it is not exposed to any significant risk on cash and cash equivalents.

The Organization receives substantially all of its funding from governmental sources. Decreases in governmental support would have an adverse effect upon the Organization.

Accounts Receivable Accounts receivable are stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollectible amounts through a provision for bad debt expense and an adjustment to a valuation allowance based on its assessment of the current status of individual receivables. Receivables are written off when they are determined to be uncollectible. The allowance for doubtful accounts at November 30, 2017 was $0.

Property and Equipment The Organization capitalizes all equipment acquisitions in excess of $5,000. Purchased property and equipment is capitalized at cost, when property and equipment are donated as support it is capitalized at its estimated market value at the date of the donation. Such donations are reported as unrestricted support unless the donor has restricted the donated asset to a specific purpose. Assets donated with explicit restrictions regarding their use and contributions of cash that must be used to acquire property and equipment are reported as restricted support. Absent donor stipulations regarding how long those donated assets must be maintained, the Organization reports expirations of donor restrictions when the donated or acquired assets are placed in service as instructed by the donor. The Organization reclassifies temporarily restricted net assets to unrestricted net assets at that time. Fixed assets are depreciated using the straight-line method over the estimated useful lives of the assets.

Substantially all of the property and equipment have been purchased with funds from the Department of Health and Human Services. In the event that these items are disposed of, the Department of Health and Human Services may require any proceeds be refunded to them.

Income Taxes The Organization qualifies as exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code, and therefore, has no provision for income taxes.

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RURAL UTAH CHILD DEVELOPMENT NOTES TO FINANCIAL STATEMENTS (Continued)

NOTE 1 NATURE OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(Continued)

Significant Accounting Policies (Continued)

Net Assets The Organization reports information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. As of November 30, 2017, the Organization did not have any temporarily or permanently restricted net assets.

Grant Revenue Grant revenues are recognized as expended up to the authorized grant award. The federal grants awarded to the Organization relating to funds included in this audit report consist of the following:

a. Federal Grant CAN-4122, CAN-4120, CAN-4125, CAN-4121, Can -4123: U.S. Department of Health and Human Services, Head Start Grant No. 08CH1059/03, grant period December 1, 2016 through November 30, 2017. This grant is restricted for the purpose the grant was awarded and any excess is to be returned to the funding agency.

b. USDA Food Grant: Utah State Office of Education Grant for periods October 1, 2016 through September 30, 2017, October 1, 2017 through September 30, 2018. These grants are restricted for the purposes the grants were awarded and any excesses are to be returned to the funding agency.

Pension Plan The Organization sponsors a defined contribution pension plan that covers substantially all employees. Contributions to the plan are based on a percentage of gross wages under Code Section 401(k) deferment.

Contributed Support The Organization occupies at reduced or no charge certain premises owned by private individuals. The estimated fair rental value of the premises is reported as in-kind support and expense in the period in which the premises are used.

A substantial number of unpaid volunteers have made significant contributions of their time to develop the Organization programs, principally in educational assistance. The value of this contributed time is accounted for by recognizing as in-kind support and expense the numbers of hours provided multiplied by the wage rate that would have to be paid if the volunteers were employees of the Organization.

Supplies and transportation are provided by various individuals and entities at reduced or no cost to the Organization. The value of these supplies and transportation is accounted for by recognizing as in-kind support and expense the fair value of the supplies or transportation in excess of actual payment as if actual cash payment had occurred.

Advertising The Organization expenses advertising costs as incurred.

Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

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RURAL UTAH CHILD DEVELOPMENT NOTES TO FINANCIAL STATEMENTS (Continued)

NOTE 2 PROPERTY AND EQUIPMENT

Property and equipment consisted of the following as of November 30, 2017.

Beginning Ending

Balance Additions Deletions Balance

Land $ 205,000 $ - $ - $ 205,000 Building 1,243,226 93,889 1,149,337 Vehicles 413,396 92,287 - 505,683 Office equipment 137,040 - 113,061 23,979 Center equipment 168,185 - 73,445 94,740

2,166,847 92,287 280,395 1,978,739

Accumulated depreciation (958,197) (95,111) 246,985 (806,323)

$ 1,208,650 $ (2,824) $ (33,410) $ 1,172,416 NOTE 3 LEASE COMMITMENTS

The Organization presently uses various facilities, which are not owned by Organization, to provide office space and classrooms. These facilities are leased under short-term agreements that can be renewed under similar terms contingent upon grant funding being renewed. Lease payments for the year ended November 30, 2017 were $54,785.

NOTE 4 401(k) PLAN EXPENSES

The Rural Utah Child Development Retirement Savings Plan (the Plan), filed under Section 401(k) of the Internal Revenue Code, covers eligible employees of the Organization. Employees who complete six months of continuous service and work more than 1,000 hours per year are eligible to participate. Employees who work less than 1,000 hours per year, but were employed by RUCD prior to May 1, 1984 are also eligible to participate in the plan and receive RUCD’s contribution. If an employee is hired on as full time, then changed to part time, they will still be eligible for the retirement plan. The Organization contributes 5% of the employee’s wages to the Plan. The employee may contribute up to the maximum allowed by the IRS which was $18,000 ($24,000 for participants age 50 or older), for the year ended November 30, 2017. The Organization has the right under the Plan to discontinue contributions to the Plan at any time or terminate the Plan. If the employee elects to contribute some of their own salary to the plan, RUCD will add an additional 2% for a total of 7% employer contribution. In the event of termination of the Plan, the net assets of the Plan are available for payment of benefits to the participants. Expenses charged to the Organization for contributions to the Plan were $164,720 for the year ended November 30, 2017. The amounts payable to the Plan was $13,090 at November 30, 2017 and are included in accrued liabilities.

NOTE 5 SUBSEQUENT EVENTS

The Organization has evaluated subsequent events through August 27, 2018, the date which the financial statements were available to be issued.

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INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

Board of Directors Rural Utah Child Development

We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of Rural Utah Child Development (a nonprofit organization), which comprise the statement of financial position as of November 30, 2017, and the related statements of activities, and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated August 27, 2018.

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered Rural Utah Child Development’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Rural Utah Child Development’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Organization’s internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the 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 internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

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

Compliance and Other Matters

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

Rural Utah Child Development’s Response to Findings

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Rural Utah Child Development’s response to the findings identified in our audit is described in the accompanying schedule of findings and questioned costs. Rural Utah Child Development’s response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it.

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the organization’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the organization’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Salt Lake City, Utah August 27, 2018

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INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE

Board of Directors Rural Utah Child Development

Report on Compliance for Each Major Federal Program

We have audited Rural Utah Child Development’s compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of Rural Utah Child Development’s major federal programs for the year ended November 30, 2017. Rural Utah Child Development’s major federal programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs.

Management’s Responsibility

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

Auditor’s Responsibility

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

We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of Rural Utah Child Development’s compliance.

Opinion on Each Major Federal Program

In our opinion, Rural Utah Child Development complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended November 30, 2017.

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Report on Internal Control Over Compliance

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

A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.

Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.

Salt Lake City, Utah August 27, 2018

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RURAL UTAH CHILD DEVELOPMENT SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the Year Ended November 30, 2017

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Federal Pass-Through Federal Grantor/Pass-Through CFDA Grantor's Grantor/Program Title Number Number Expenditures

U.S. Department of Health and Human Services

Direct Program:

CAN 4122 Head Start 93.600 NA $ 3,198,828 CAN 4120 Head Start Training 93.600 NA 32,959 CAN 4125 Early Head Start 93.600 NA 838,294 CAN 4121 Early Head Start Training 93.600 NA 15,915

Total U.S. Department of Health and

Human Services 4,085,996

U.S. Department of Agriculture

Pass Through The Utah State Office Of Education

Food Distribution 10.558 G-4 129,673

Total U.S. Department of Agriculture 129,673

Total Federal Financial Assistance $ 4,215,669 See notes to Schedule of Expenditures of Federal Awards.

RURAL UTAH CHILD DEVELOPMENT NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the Year Ended November 30, 2017

Significant Accounting Policies The following information regarding the Schedule of Expenditures of Federal Awards is provided to assist the reader in understanding the accounting policies regarding, and the nature of the federal awards.

a. Basis of Accounting - The Schedule of Expenditures of Federal Awards is presented on the accrual basis of accounting, the same basis used by the Organization in its financial reporting. Receivables are recorded when appropriate program expenditures are made and the Organization has a claim for reimbursement. For purpose of the Schedule of Expenditures of Federal Awards, the Organization considers equipment that has been capitalized, purchased with Federal funds, to be expenditures.

b. Depreciation is not included in the Schedule of Expenditures of Federal Awards because all property and equipment has been purchased with Federal grant money. Therefore, including depreciation would result in the Organization being reimbursed for the expenditure twice.

c. Pass-Through Source of Awards - The Organization receives the majority of its federal award

programs from the U.S. Department of Health and Human Services.

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RURAL UTAH CHILD DEVELOPMENT SCHEDULE OF AWARDED GRANT REVENUES OVER ACTUAL EXPENSES DEPARTMENT OF HEALTH AND HUMAN SERVICES – HS & EHS For the Year Ended November 30, 2017

Award Number

Budget Period 12/1/2016 - 11/30/2017

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08CH1059/03 CAN 4122 /

4123 CAN 4120 CAN 4125 CAN 4121 Total

Grant budgeted

award amount $ 3,216,331 $ 32,959 $ 838,294 $ 15,915 $ 4,103,499 Actual grant expenses (3,198,827) (32,959) (838,294) (15,915) (4,085,995)

Grant budgeted award amount over (under) actual expenses $ 17,504 $ - $ - $ - $ 17,504 The above schedule shows the grant amounts that were awarded by the U.S. Department of Health and Human Services compared to the actual grant expenditures.

RURAL UTAH CHILD DEVELOPMENT SCHEDULE OF FINDINGS AND QUESTIONED COSTS For the Year Ended November 30, 2017

A. SUMMARY OF AUDIT RESULTS

1. The auditor’s report expresses an unqualified opinion on the financial statements of Rural Utah

Child Development.

2. Significant deficiencies disclosed during the audit of the financial statements are reported in this

schedule. The deficiency reported as 2017-001 is considered to be a material weakness.

3. No instances of noncompliance material to the financial statements of Rural Utah Child Development, which would be required to be reported in accordance with Government Auditing Standards, were disclosed during the audit.

4. No significant deficiencies in internal control over major federal award programs disclosed during the audit is reported in this schedule. Therefore, there are no significant deficiencies that are reported as a material weakness.

5. The auditor’s report on compliance for the major federal award programs for Rural Utah Child

Development expresses an unqualified opinion on all major federal programs.

6. No Audit findings that are required to be reported in accordance with the Uniform Guidance 2 CFR

section 200.516(a) are reported in this schedule.

7. The programs tested as major programs included:

Department of Health and Human Services – Head Start – CFDA No. 93.600

8. The threshold for distinguishing Types A programs was $750,000.

9. Rural Utah Child Development was determined to be a low-risk auditee.

B. FINDINGS – FINANCIAL STATEMENTS AUDIT AND GOVERNMENT AUDITING STANDARDS

2017-001 MISSTATEMENTS IN THE FINANCIAL STATEMENTS (Material Weakness) Finding: During our audit, we identified material misstatements in the financial statements that were not prevented or detected and corrected by the RUCD’s internal control system.

A. USDA Receivable was understated by approximately $15,000 B. Prepaid Assets were over stated by approximately $7,000 C. Accrued Liabilities were each understated by approximately $75,000 D. Accounts Payable was understated by approximately $8,000 E. Net Assets was understated by approximately $9,000 F. The effect of each of the above was Expenditures were understated by approximately $84,000 Each of these is the result of improper cut off, or not getting the expenditures into the correct fiscal period. This appears to have been an oversight by management, based on not having a full understanding accrual accounting for a non-profit entity. This makes it difficult for management to determine the amount which can be expended and remain within the constraints of the grant.

Recommendation We recommend that RUCD install procedures that will eliminate these types of problems in the future.

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RURAL UTAH CHILD DEVELOPMENT SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) For the Year Ended November 30, 2017

Management’s Response RUCD acknowledges the immediate need for new accounting software that will allow for the proper handling of accrual accounting for a non-profit and will be adding procedures to the internal controls including periodic oversight by an outside accounting firm to avoid this finding recurring.

C. FINDINGS AND QUESTIONED COSTS – MAJOR FEDERAL AWARD PROGRAMS AUDIT

There are no current year findings.

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RURAL UTAH CHILD DEVELOPMENT SUMMARY SCHEDULE OF PRIOR YEAR AUDIT FINDINGS For the Year Ended November 30, 2017

2016 No findings noted

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