Q5JUL 18 AIM!:

THE CHURCH UNITED FORCOMMUNITY DEVELOPMENT

FINANCIAL REPORT

December 31, 2004

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 court.

Release Date - O

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CertifiedPublicAccountants

• I« BusinessLLt Advisors

8550 United Plaza Boulevard, Suite GOO, Baton Rouge, Louisiana 70808, Phone: (225) 921-11111 Facsimile: (225) 927-9075

THE CHURCH UNITED FOR COMMUNITY DEVELOPMENTTable of Contents December 31, 2004

SECTION I - FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIALINFORMATION

INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTSAND SUPPLEMENTARY INFORMATION 1

FINANCIAL STATEMENTSStatements of Financial Position - December 31, 2004 and 2003 3Statements of Activities - Years Ended December 31, 2004 and 2003 4Statement of Functional Expenses - Year Ended December 31, 2004 5Statement of Functional Expenses - Year Ended December 31, 2003 6Statements of Cash Flows - Years Ended December 31, 2004 and 2003 7Notes to Financial Statements 8

SUPPLEMENTARY INFORMATIONSchedule of Expenditures of Federal Awards Schedule 1 16Notes to Schedule of Expenditures of Federal Awards 17

SECTION II - COMPLIANCE MATTERS AND INTERNAL ACCOUNTING ANDADMINISTRATIVE CONTROLS

Reports Required by the Government Auditing StandardsINDEPENDENT AUDITOR'S REPORT ON COMPLIANCE AND ON INTERNAL

CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OFFINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITHGO VERNMENT A UDITING STANDARDS 18

Reports Required by The Single Audit Act and OMB Circular A-133INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH

REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM ANDINTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITHOMB CIRCULAR A-133 20

Schedule of Findings and Questioned Costs Schedule 2 22

Accountants

BusinessAdvisors

INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS

Board of DirectorsThe Church United for Community Development

We have audited the accompanying statements of financial position of The Church Unitedfor Community Development (a nonprofit organization) as of December 31, 2004 and2003 and the related statements of activities, functional expenses and cash flows for theyears then ended. These financial statements are the responsibility of the Organization'smanagement. Our responsibility is to express an opinion on these financial statementsbased on our audit.

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 audit to obtain reasonable assuranceabout whether the financial statements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting the amounts and disclosures in thefinancial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financialstatement presentation. We believe that our audits provide a reasonable basis for ouropinion.

In our opinion, the financial statements referred to above present fairly in all materialrespects, the financial position of The Church United for Community Development as ofDecember 31, 2004 and 2003, and the changes in its net assets and its cash flows for theyears then ended in conformity with accounting principles generally accepted in the UnitedStates of America.

In accordance with Government Auditing Standards, we have also issued a report datedJune 23, 2005 on our consideration of The Church United for Community Development'sinternal control over financial reporting and on our tests of its compliance with certainprovisions of laws, regulations, contracts and grants. That report is an integral part of anaudit performed in accordance with Government Accounting Standards and should be readin conjunction with this report in considering the results of our audit.

Our audits were performed for the purpose of forming an opinion on the basic financialstatements of The Church United for Community Development taken as a whole. Theaccompanying schedule of expenditures of federal awards is presented for purposes ofadditional analysis as required by U.S. Office of Management and Budget Circular A-133,

8550 United Plaza Blvd., Suite GOD, Baton Rouge, looisiaoa 7GB09, Phone: (225) 924-1772 / Facsimile: (225) 927-9075

"Audits of States, Local Governments, and Non-Profit Organizations," and is not arequired part of the basic financial statements. Such information has been subjected to theauditing procedures applied in the audit of the basic financial statements and, in ouropinion, is fairly stated, in all material respects, in relation to the basic financial statementstaken as a whole.

PROVOST, SALTER, HARPER

THE CHURCH UNITED FOR COMMUNITY DEVELOPMENT

Statements of Financial Position

ASSETS

December 31, 2004 and 2003

2004 2003

Current AssetsCash and cash equivalentsNotes receivableContractual reimbursements receivablePrepaid and other

Total current assets

Land, Buildings and EquipmentNet of accumulated depreciation and amortization

Total Assets

LIABILITIES AND NET ASSETS

$ 8,074 $ 42,52290,00050,739 80,76419,751 9,233

168,564

652,174

132,519

533,746

$ 820,738 $ 666,265

Current LiabilitiesNotes payable and current maturities oflong term debtAccounts payableAccrued expenses

Total current liabilities

Long term debt less current maturities

Net Unrestricted AssetsUndesignated, available for general activitiesNet investment in fixed assets

Total unrestricted net assets

Total Liabilities and Net Assets

$ 188,270 $ 139,77035,118 20,873

3,633

223,388

277,816

133,446186,088

319,534

164,276

296,130

108,01297,847

205,859

$ 820,738 $ 666,265

See Notes to Financial Statements.

THE CHURCH UNITED FOR COMMUNITY DEVELOPMENT

Statements of Activities Years Ended December 31, 2004 and 2003

2004 2003

Unrestricted Net AssetsPublic Support and Revenue

Contractual governmental supportContributions and otherIn kind contributionsRental incomeGain on sale of property

Total Public Support

$ 1,445,682155,878148,23736,46415,368

1,801,629

$ 995,773160,332263,349

5,464-

1,424,918

ExpensesProgram services

Residential centerAfter school tutoringCharacter ClubsLiteracy trainingEmployment trainingLow income housing

Total program services

Supporting servicesManagement and general

Total Expenses

Total Increase in Unrestricted Net Assets

Temporarily Restricted Net AssetsNet assets released from restriction

Net Assets, Beginning of Year

Net Assets, End of Year

63,307331,990

-486,520495,30682,689

1,459,811

106,40851,460173,778532,936243,14312,844

1,120,569

228,143

1,687,954

113,675

205,859

236,174

1,356,743

68,175

(20,000)

157,684

$ 319,534 $ 205,859

See Notes to Financial Statements.

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THE CHURCH UNITED FOR COMMUNITY DEVELOPMENT

Statements of Cash Flows Years Ended December 31, 2004 and 2003

2004 2003

Cash Flows From Operating ActivitiesChange in net assetsAdjustments to reconcile increase in net assets to net

cash provided by operating activitiesDepreciation and amortizationGain on sale of assetsIn kind donation of property(Increase) decrease in:

Contractual reimbursements receivablePrepaid and other

Increase (decrease) in:Accounts payablesAccrued expensesDeferred revenue

Net Cash Provided (Used in) By Operating Activities

Cash Flows From Investing ActivitiesPurchase of buildings and equipmentPurchase of investmentsProceeds from sale of assets

Net Cash (Used in) Investing Activities

Cash Flows From Financing ActivitiesProceeds from notes payable and long term debtPayments on notes payable and long term debt

Net Cash Provided By Financing Activities

Net Increase (Decrease) In Cash And Cash Equivalents

Cash And Cash EquivalentsBeginning

Ending

SUPPLEMENTAL DATA

Interest Paid

$ 113,675

39,104(24,710)(17,500)

30,025(10,518)

14,245(3,633)

-

140,688

(252,054)(90,000)136,732

(205,322)

415,616(385,430)

30,186

(34,448)

42,522

$ 8,074

$ 35,311

$ 48,175

63,840-

(38,500)

(20,634)(2,157)

924(7,994)

(75,910)

(32,256)

(316,329)--

(316,329)

439,520(153,620)

285,900

(62,685)

105,207

$ 42,522

$ 10,087

See Notes to Financial Statements.

THE CHURCH UNITED FOR COMMUNITY DEVELOPMENTNotes to Financial Statements December 31, 2004

1. Nature of Activities and Significant Accounting Policies

Nature of Activities. The Church United for Community Development is a nonprofitOrganization organized under the laws of the State of Louisiana to partner with government,schools, businesses and community organizations to improve the quality of life for its citizens bybuilding strong families, providing education and training and teaching integrity, character andleadership. It operates principally in East Baton Rouge and Ascension Parishes, Louisiana.

Program services are supported through allocations received from contractual governmentalsupport and grants from the State of Louisiana which amounted to $1,445,682 and $995,773 forthe years ended December 31, 2004 and 2003, respectively. This amounted to 87% of totalsupport and revenue excluding in kind contributions for the years ended December 31, 2004 and2003. As the Organization depends primarily on contractual governmental support and in kindcontributions, future operating results are contingent on the Organization's continuing ability tosecure contracts and grants from the State of Louisiana and others.

A summary of the Organization's significant accounting policies follows.

Public Support and Revenue. The financial statements are prepared on the accrual basis ofaccounting. Financial statements presentation follows the recommendations of the FinancialAccounting Standards Board Statement of Financial Accounting Standards (SFAS) No. 117,"Financial Statements of Not-for-Profit Organizations." Under SFAS No. 117, non-profitorganizations are required to report information regarding their financial position and activitiesaccording to three classes of net assets: unrestricted net assets, temporarily restricted net assets,and permanently restricted net assets.

Unrestricted Net Assets are net assets that are not subject to donor-imposed stipulations.Unrestricted net assets may be designated for specific purposes by action of the Board ofDirectors.

Temporarily Restricted Net Assets are net assets subject to donor-imposed stipulations that mayor will be met, either by actions of the Organization and /or the passage of time. When arestriction expires, temporarily restricted net assets are reclassified to unrestricted net assets andreported in the statement of activities as net assets released from restrictions.

Permanently Restricted Net Assets are net assets subject to donor-imposed stipulations that theybe maintained permanently by the Organization. Generally, the donors of these assets permit theOrganization to use all or part of the income earned on any related investments for general orspecific purposes. There are no permanently restricted assets recorded in these financialstatements.

THE CHURCH UNITED FOR COMMUNITY DEVELOPMENTNotes to Financial Statements, Continued December 31, 2004

Expenses. Program services expenses are the direct and indirect costs related to accomplishingthe Organization's objectives. Supporting services are expenses for activities not directly relatedto the purpose for which the organization exists.

Functional Allocation of Expenses. The cost of providing various programs and supportingservices have been reported on a functional basis in the statement of activities. Accordingly,certain costs have been allocated among the various programs and supporting services based onestimates made by management.

Cash and Cash Equivalents. For purposes of reporting the statement of cash flows, theOrganization includes all cash accounts, which are not subject to withdrawal restrictions orpenalties, and all highly liquid debt instruments purchased with a maturity of three months or lessas cash and cash equivalents on the accompanying statement of financial position.

Investments. The Organization has adopted Statement of Financial Accounting Standards No.124, "Accounting for Certain Investments Held by Non-Pro fit Organizations," wherebyinvestments in marketable securities with readily deterrninable fair market values and allinvestments in debt securities are reported at their fair values in the statement of financial position.

Concentration of Credit Risk. The Organization maintains cash in bank deposit accounts at highcredit quality financial institutions. The balances, at times, may exceed federally insured limits.At December 31, 2004, the Organization's bank balances were not in excess of insured limits.

Recognition of Contractual Reimbursements From State Government. The Organizationreceives most of its program support from state government. The program recovers its costs on acontracted basis with the State of Louisiana based on budgets approved by the State. Revenuesare recognized when services are performed.

Deferred Income. Deferred income represents advance payments on grants from the State ofLouisiana. These payments are recognized as income over the period earned.

Income Taxes. The Organization qualifies for taxation as a nonprofit Organization under§501(c)(3) of the Internal Revenue Code. Accordingly, no provision has been made for incometaxes. In addition, the Organization has been determined by the Internal Revenue Service not to bea private foundation within the meaning of §509(a) of the Internal Revenue Code.

Land, Buildings and Equipment. Expenditures for the acquisition of land, buildings andequipment are capitalized at cost. The fair value of donated furniture and equipment is similarlycapitalized. Depreciation is computed by the straight line and accelerated methods over thefollowing useful lives.

THE CHURCH UNITED FOR COMMUNITY DEVELOPMENTNotes to Financial Statements, Continued December 31, 2004

Years

Office EquipmentVehiclesBuildings and improvements

3 - 73

25-40

Estimates. The preparation of financial statements in conformity with generally acceptedaccounting principles requires the Organization's management to make estimates and assumptionsthat effect certain reported amounts and disclosures. Accordingly, actual results may differ fromthose estimates.

Donated Services and Non-Cash Assets. A significant portion of the Organizations functions areconducted by unpaid board members and volunteers. The value of this contributed time is notreflected in the accompanying financial statements since the volunteers' time does not meet thecriteria necessary for recognition. Contributions of donated non-cash assets are recorded at theirfair values when received.

Note Receivable

The note receivable includes an unsecured demand note dated November 15, 2004, from TheLazard Group, Inc. with simple interest on the unpaid principal of 15% per annum.

Contractual Reimbursements

December 31, 2004

State Office of Social Services

State Dept of Public SafetyMaternal & Child Health BureauDepartment of Homeland SecurityDepartment of Education

ContractNumber

598088607089607268

16810100357800

2804EPK62805EPK6

603641

Contract TotalPeriod Contract

7/1/03-6/30/05 $12/15/03-8/31/0410/1/03-9/30/047/1/03-6/30/061/1/04-12/31/042/1/04-8/31/0410/1/04-6/30/059/1/03-8/31/04

11,730147,316512,171316,096

5,000200,000110,636352,327

RecognizedSupport

$ 6,552113,552501,877323,829

5,000200,00044,240

250,632

S 1.445.682

10

THE CHURCH UNITED FOR COMMUNITY DEVELOPMENT

Notes to Financial Statements, Continued

December 31, 2003

State Office of Social Services

Maternal & Child Health BureauState Department of Education

December 31, 2004

ContractNumber

590262590316607089607268589718

16810100590489603641

Contract TotalPeriod Contract

10/1/02-9/30/03$ 76,07610/1/02-9/30/03 308,93910/1/03-9/30/04 147,36110/1/03-9/30/04 512,1719/1/02-8/31/03 204,0007/1/03-6/30/06 316,09610/1/02-8/31/03 383,1999/1/03-8/31/04 352,327

4. Contractual Reimbursements Receivable

State of Louisiana - Dept. of EducationState of Louisiana- Office of Social ServicesMaternal and Child Health Bureau

5. Land, Buildings and Equipment

2004

$ 44,2406,100

399

$ 50.739

RecognizedSupport

$ 54,425245,995

32,80910,293

143,53247,383

258,902202,434

$ 995.773

2003

$ 15,06143,10322,600

$ 80,764

A summary of land, buildings and equipment at December 31, 2004 is as follows.

Office EquipmentBuildingsRental PropertyVehiclesLand

DepreciationCost Allowed

$ 164,828 $ 80,042333,670 13,452230,682 7,678

17,500 5,83312,500

NetBook Value

$ 84,786320,218223,004

11,66712,500

Total S 759.180 S 107.005 S 652.174

11

THE CHURCH UNITED FOR COMMUNITY DEVELOPMENT

Notes to Financial Statements, Continued December 31, 2004

A summary of land, buildings and equipment at December 31, 2003 is as follows.

Depreciation NetCost Allowed Book Value

Office Equipment $ 115,665 $ 69,478 $ 46,186Buildings 179,205 6,652 172,553Rental property 305,397 2,890 302,507Land 12,500 : 12,500

Total $ 612.766 £ 79.020 S 533.746

6. Notes Payable and Long Term Debt

2004 2003

Note payable to bank collateral zed by building andland, interest at 6.25% payable interest monthlyuntil July, 2006

Three notes to bank with interest at 7.5%collateralized by property

Two notes to individual, with interest at 8%collateralized by property

Less current maturities

$ 277,816

112,560

75,710

466,086

188,270

$ 146,380

136,760

152,760

435,900

296,130

Long term debt S 277.816 S 139.770

Aggregate maturities required on long term debt as of December 31, 2004 are due in future yearsas follows:

Years Ending December 31,

2006 S 277.816

12

THE CHURCH UNITED FOR COMMUNITY DEVELOPMENTNotes to Financial Statements, Continued December 31, 2004

7. Program Services

Residential Center. The Church United for Community Development operates a half way housefor men in Gonzales called the "Ascension House". The program is designed to help men getreacclimated into society after being incarcerated or because of addiction to drugs or alcohol. Theprogram teaches fathering skills, financial management, literacy, job skills and life skills. As partof the operation of the "Ascension House" the Organization opened a thrift store to providesupplemental funding and employment for the residents.

After School Tutoring. The Organization operates an after school tutoring program for studentsages 12 to 18. The program is abstinence based and offers a culturally diverse recreation programas well as computer training and similar types of activities.

Literacy Training. The Organization classifies expenditures as literacy training for the cost ofoperating the "Donaldsonville Dream Center" in Donaldsonville, Louisiana and the "Melrose EastDream Center" in Baton Rouge, Louisiana and centers in St. Gabriel and Brusly, Louisiana. The"Dream Center" program teaches computer skills, financial management, adult literacy, providesafter school tutoring, a GED program, a wellness program, parenting and child development,music and sewing and other programs for mothers and children.

Employment Training, The Organization also operates a "Support Through EmploymentProgram" (STEP). The program is designed to provide educational and vocational job trainingand job placement, to teach parenting and character development to improve family connections,and to increase the percentage of fathers who are supporting their children financially.

Low Income Housing. Starting in 2003, the Organization contracted with Baker Enterprises, Inc.(contractor) to purchase and remodel housing to rent or sell to low income families. As ofDecember 31, 2003, eight houses had been purchased and were being remodeled. Six of the eighthouses were purchased directly from the contractor prior to the renovations. Under the terms ofthe arrangement, the Organization purchases the houses and the contractor performs theremodeling services for a fee. When the home is sold, the net proceeds from the sale will bedivided evenly with the contractor. The homes are rented until ultimately sold. Three of the homeswere sold in 2004.

8. Contributors and Related Party Transactions

The Organization is a diverse coalition of organizations including government, businesses,schools, faith-based organizations and community agencies.

Significant contributors can significantly influence management and operating policies of theorganization. One of the most significant supporters of the Organization is the Healing Place

13

THE CHURCH UNITED FOR COMMUNITY DEVELOPMENTNotes to Financial Statements, Continued December 31, 2004

Church of Baton Rouge, Louisiana (HPC). An associate pastor of HPC manages the day to dayoperations of the Organization and his salary is paid by HPC but he was also paid $12,994 by theOrganization. Also, the Organization's program manager and an instructor in the "CharacterFirst" program are paid by HPC. Included in unrestricted contributions is $41,461 and $43,189 ofcash contributions from HPC in the years ended December 31, 2004 and 2003, respectively.Included in rental expenses is $22,500 and $9,000 paid to HPC in the years ended December 31,2004 and 2003, respectively.

The Organization also has the free use of other facilities that are used in the various programs.Included in in-kind donations and expenses is $31,325 of office and copy machine rent andtelephone expense. The Organization also received donated assets valued at $17,500 and $38,500in the years ended December 31, 2004 and 2003, respectively.

The Organization also uses facilities in Baton Rouge, Louisiana, that were rented from anorganization controlled by a former board member. That rent expense amounted to $28,200 and$11,598 for the years ended December 31, 2004 and 2003 respectively and is included inoperating expenses.

The value of all in kind donations has been estimated by management to be $148,237 and$263,349 in the years ended December 31, 2004 and 2003, respectively. This is reflected on thestatement of activities as in kind revenue and expense and is reported as:

2004 2003

Healing Place ChurchSalaries and benefits $ 99,412 $ 138,324Office equipment rental 2.400 -

101,812 138.324

Ascension Parish School BoardRent and utilities - 61.500

OthersRent 28,550 23,825Utilities 375 1,200Assets 17,500 38,500

46,425 63.525

S 148.237 S 263.349

14

THE CHURCH UNITED FOR COMMUNITY DEVELOPMENTSupplementary Information December 31, 2004

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THE CHURCH UNITED FOR COMMUNITY DEVELOPMENTNotes to Schedule of Expenditures of Federal Awards December 31, 2004

Basis of Presentation

The accompanying schedule of expenditures of federal awards includes the federal grant activity of TheChurch United for Community Development and is presented on the accrual basis of accounting. Theinformation in this schedule is presented in accordance with the requirements of OMB Circular A-133,Audits of States, Local Governments, and Non-Profit Organizations. Therefore, some amounts presentedin this schedule may differ from amounts presented in, or used in the preparation of, the basic financialstatements.

17

.ProvostifknulOHarpeririii*

CertifiedPublicAccountants

Advisors

INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE AND ON INTERNALCONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF

FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITHGO VERNMENT AUDITING STANDARDS

Board of DirectorsThe Church United for Community Development

We have audited the financial statements of The Church United for CommunityDevelopment (a nonprofit organization) as of and for the year ended December 31, 2004and have issued our report thereon dated June 23, 2005. We conducted our audit inaccordance with auditing standards generally accepted in the United States of America andthe standards applicable to financial audits contained in Government Auditing Standards,issued by the Comptroller General of the United States.

Internal Control Over Financial Reporting

In planning and performing our audit, we considered The Church United for CommunityDevelopment's internal control over financial reporting in order to determine our auditingprocedures for the purpose of expressing our opinion on the financial statements and not toprovide an opinion on the internal control over financial reporting. However, we notedcertain matters involving internal control over financial reporting and its operation that weconsider to be reportable conditions. Reportable conditions involve matters coming to ourattention relating to significant deficiencies in the design or operation of the internal controlover financial reporting that, in our judgment, could adversely affect The Church United forCommunity Development's ability to record, process, summarize, and report financial dataconsistent with the assertions of management in the financial statements. Reportableconditions are described in the accompanying schedule of findings and questioned costs asitems 2004-1, 2004-2 and 2004-3.

A material weakness is a reportable condition in which the design or operation of one ormore of the internal control components does not reduce to a relatively low level the riskthat misstatements caused by error or fraud in amounts that would be material in relation tothe financial statements being audited may occur and not be detected within a timely periodby employees in the normal course of performing their assigned functions. Ourconsideration of the internal control over financial reporting would not necessarily discloseall matters in the internal control that might be reportable conditions and, accordingly,would not necessarily disclose all reportable conditions that are also considered to bematerial weaknesses. However, -we consider items 2004-1 and 2004-2 to be materialweaknesses.

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8550 United Plaza Blvd., Suite GOB, Baton Rouge, Looisiana 70009, Phone: [W\ mill I Facsimile: (ZZb) 827-9OT5

Compliance

As part of obtaining reasonable assurance about whether The Church United for CommunityDevelopment's financial statements are free of material misstatement, we performed tests ofits compliance with certain provisions of laws, regulations, contracts, and grants,noncompliance with which could have a direct and material effect on the determination offinancial statement amounts. However, providing an opinion on compliance with thoseprovisions was not an objective of our audit, and accordingly, we do not express such anopinion. The results of our tests disclosed instances of noncompliance or other matters that arerequired to be reported under Government Auditing Standards and which are described in theaccompanying schedule of findings and questioned costs as items 2004-1, 2004-2 and 2004-3.

This report is intended solely for the information and use of the Board of Directors,management, the State of Louisiana Legislative Auditor, and federal awarding agencies andpass-through entities and is not intended to be and should not be used by anyone other thanthese specified parties. Under Louisiana Revised Statutes 24:513, this report is distributed bythe Legislative Auditor as a public document.

PROVOST, SALTER, HARPER

ProvostIfknuloHarperi

Fiio

CertifiedPublicAccountants

BusinessAdvisors

INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH REQUIREMENTSAPPLICABLE TO EACH MAJOR PROGRAM AND INTERNAL CONTROL OVER

COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133

Board of DirectorsThe Church United for Community Development

Compliance

We have audited the compliance of The Church United for Community Development, with thetypes 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 December 31, 2004. The Church United for CommunityDevelopment's major federal programs are identified in the summary of auditor's resultssection of the accompanying schedule of findings and questioned costs. Compliance with therequirements of laws, regulations, contracts and grants applicable to each of its major federalprograms is the responsibility of The Church United for Community Development'smanagement. Our responsibility is to express an opinion on The Church United forCommunity Development's compliance based on our audit.

We conducted our audit of compliance in accordance with auditing standards generallyaccepted in the United States of America; the standards applicable to financial auditscontained in Government Auditing Standards, issued by the Comptroller General of the UnitedStates; and OMB Circular A-133 Audits of States, Local Governments and Non-ProfitOrganizations. Those standards and OMB Circular A-133 require that we plan and performthe audit to obtain reasonable assurance about whether noncompliance with the types ofcompliance requirements referred to above that could have a direct and material effect on amajor federal program occurred. An audit includes examining, on a test basis, evidence aboutThe Church United for Community Development's compliance with those requirements andperforming such other procedures as we considered necessary in the circumstances. Webelieve that our audit provides a reasonable basis for our opinion. Our audit does not providea legal determination on The Church United for Community Development's compliance withthose requirements.

As described in item 2004-1 and 2004-2 in the accompanying schedule of findings andquestioned costs, The Church United for Community Development did not comply withrequirements regarding adequate source documentation and record keeping that are applicableto its Temporary Assistance for Needy Families (TANF) program and its Maternal and ChildHealth Program. Compliance with such requirements is necessary, in our opinion, for TheChurch United for Community Development to comply with requirements applicable to theseprograms.

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United Plaza Bind., Suite GOO, Baton Rouge, Looisiana 70809, Phone: (225) mill I Facsimile: (225) 927-9075

In our opinion, except for the noncompliance described in the preceding paragraph, TheChurch United for Community Development complied, in all material respects, with therequirements referred to above that are applicable to each of its major federal programs for theyear ended December 31, 2004.

Internal Control Over Compliance

The management of The Church United for Community Development is responsible forestablishing and maintaining effective internal control over compliance with requirements oflaws, regulations, contracts and grants applicable to federal programs. In planning andperforming our audit, we considered The Church United for Community Development'sinternal control over compliance with requirements that could have a direct and material effecton a major federal program in order to determine our auditing procedures for the purpose ofexpressing our opinion on compliance and to test and report on internal control overcompliance in accordance with OMB Circular A-133.

We noted certain matters involving internal control over compliance and its operation that weconsider to be reportable conditions. Reportable conditions involve matters coming to ourattention relating to significant deficiencies in the design or operation of the internal controlover compliance that, in our judgment, could adversely affect The Church United forCommunity Development's ability to administer a major federal program in accordance withthe applicable requirements of laws, regulations, contracts and grants. Reportable conditionsare described in the accompanying schedule of findings and questioned costs as items 2004-1,2004-2 and 2004-3.

A material weakness is a condition in which the design or operation of one or more of theinternal control components does not reduce to a relatively low level the risk thatnoncompliance with applicable requirements of laws, regulations, contracts and grants thatwould be material in relation to a major federal program being audited may occur and not bedetected within a timely period by employees in the normal course of performing theirassigned functions. Our consideration of the internal control over compliance would notnecessarily disclose all matters in the internal control that might be reportable conditions and,accordingly, would not necessarily disclose all reportable conditions that are also consideredto be material weaknesses. However, we consider findings 2004-1 and 2004-2 to be a materialweakness.

This report is intended for the information and use of the Board of Directors, management, theState of Louisiana Legislative Auditor, and federal and state awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than thesespecified parties. Under Louisiana Revised Statutes 24:513, this report is distributed by theLegislative Auditor as a public document.

PROVOST, SALTER, HARPER

Schedule 2

THE CHURCH UNITED FOR COMMUNITY DEVELOPMENTSchedule of Findings and Questioned Costs Year Ended December 31, 2004

Section I-Summary of Auditor's Results

Financial Statements.

Type of auditor's report issued: UnqualifiedInternal control over financial reporting:

Material weakness identified? YesReportable condition identified not considered to be material weaknesses? No

Noncompliance material to financial statements noted? Yes

Federal Awards.

Internal Control over major programs:Material weakness identified? YesReportable condition identified not considered to be material weaknesses? No

Type of auditor's report issued on compliance for major programs: QualifiedAny audit findings disclosed that are required to be reported in accordance

with Circular A-133, § 510(a)? YesIdentification of major programs:

CFDA Number Name of Federal Program or Cluster93.558 Temporary Assistance for Needy Families CTANF')93.110 ___ Maternal and Child Health Programs

Dollar threshold used to distinguish between Type A and Type B programs: $ 300,000

Auditee qualified as low risk auditee? No

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Schedule 2

THE CHURCH UNITED FOR COMMUNITY DEVELOPMENTSchedule of Findings and Questioned Costs, Continued Year Ended December 31, 2004

Section II- Financial Statement Findings

Questioned Costs

Finding 2004-1. Duplicate payments of invoices

Criteria. Payments should only be made from an approved invoice.

Condition. The Church United for Community Development doublepaid three invoices for purchases for a program.

Cause and Effect. The invoices were submitted for reimbursementand they were paid a second time from a credit card statementsubmitted separately. The duplicate payments totaled $2,577. $2,577

Recommendation. The Church United for CommunityDevelopment should only make payments to vendors or employeesfrom an approved original invoice.

Auditee response. Management considers this an isolated incident.All three invoices were submitted together and related to the sameprogram. Reimbursement has been obtained from the employee andall future payments will be made only from an approved invoice.

Finding 2004-2. Insufficient documentation of expenses

Criteria. Payments should only be made from an approved invoice.

Condition. The Church United for Community Development paidsome items without invoices to support the purchase.

Perspective information. In a random sample of 60 disbursementstotaling $39,440, five totaling $2,963 were found which were notsupported by an invoice. In vouching an additional 80 items totaling$97,147, 27 items totaling $8,062 were not supported by an invoice. $11,025

Cause and Effect. Payments were made from an approved voucherrequest that did not have an invoice attached. Improper paymentscould occur and not be detected.

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Schedule 2

THE CHURCH UNITED FOR COMMUNITY DEVELOPMENTSchedule of Findings and Questioned Costs, Continued Year Ended December 31, 2004

Recommendation. The Church United for Community Developmentshould only make payments based on an approved original invoice.

Auditee response. Management has reviewed the charges inquestion and has determined that the amounts are valid programexpenditures. The payments were supported by approved voucherrequest and a copy of a detailed credit card statement. All futurepayments will also be supported by an approved invoice.

Finding 2004-3. Report was not filed timely

Criteria. The financial statements are required to be filed with theLegislative Auditor's Office within six months of year end.

Condition. The Church United for Community Development filedthe financial statements after the deadline.

Cause and Effect. The financial statements were not submittedtimely.

Recommendation. The Church United for Community Developmentshould file its financial statements timely.

Auditee response. Procedures have been implemented to insuretimely submission of all required reports

Section III - Federal Award Findings

Finding 2004-1 and 2004-2 are related to federal awards.

Section IV - Independent Auditor's Comment on Resolution of Prior Audit Findings

There were no prior year findings.

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