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TOTAL COMMUNITY ACTION, INC.

FINANCIAL STATEMENTSAND

REPORT OF INDEPENDENTCERTIFIED PUBLIC ACCOUNTANT

December 31,2005

Under provisions of state law, this report is a publicdocument. Acopy 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 7 - / 3 - Q o


TABLE OF CONTENTS

PAGE

INDEPENDENT AUDITOR'S REPORT 3

STATEMENT OF FINANCIAL POSITION 5

STATEMENT OF ACTIVITIES 6

STATEMENT OF CASH FLOWS 7

NOTES TO FINANCIAL STATEMENTS 8

SUPPLEMENTAL INFORMATION

COMBINED STATEMENT OF ACTIVITIES 17

SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 21

REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ONCOMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIALSTATEMENTS PERFORMED IN ACCORDANCE WITHGOVERNMENT AUDITING STANDARDS 22

REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLETO EACH MAJOR PROGRAM AND ON INTERNAL CONTROLOVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 24

SCHEDULE OF FINDINGS AND QUESTIONED COSTS 26

CORRECTIVE ACTION PLAN

3|itstm 3. jicanlan,CERTIFIED PUBLIC ACCOUNTANT

4769 ST. ROCH AVE. NEW ORLEANS, LOUISIANA 70122TELEPHONE: (504) 288-0050

INDEPENDENT AUDITOR'S REPORT

Board of DirectorsTotal Community Action, Inc.

I have audited the accompanying statement of financial position of Total Community Action, Inc.(a nonprofit corporation) as of December 31, 2005 and the related statements of activities and cash flowsfor the year then ended. These financial statements are the responsibility of Total Community Action,Inc.'s management. My responsibility is to express an opinion on these financial statements based on myaudit. The prior year summarized comparative information has been derived from the Corporation's 2004financial statements and, in my report dated June 2, 2005, I expressed an unqualified opinion on thosefinancial statements.

I conducted my audit in accordance with auditing standards generally accepted in the UnitedStates of America and the standards applicable to financial audits contained in Government AuditingStandards, issued by the Comptroller General of the United States. Those standards require that I plan andperform the audit to obtain reasonable assurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statementpresentation. I believe that my audit provides a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all material respects, thefinancial position of Total Community Action, Inc. as of December 31, 2005, and the changes in its netassets and its cash flows for the year then ended in conformity with accounting principles generallyaccepted in the United States of America.

In accordance with Government Auditing Standards. I have also issued a report dated August 4,2006, on my consideration of Total Community Action, Inc.'s internal control over financial reporting andmy tests of its compliance with laws, regulations, contracts, and grant agreements and other matters. Thepurpose of that report is to describe the scope of my testing of internal control over financial reporting andcompliance and the results of that testing, and not to provide an opinion on the internal control overfinancial reporting or on compliance. That report is an integral part of an audit performed in accordancewith Government Auditing Standards and should be considered in assessing the results of my audit.

My audit was conducted for the purpose of forming an opinion on the basic financial statements ofTotal Community Action, Inc. as a whole. The supplemental information listed in the table of contents ispresented for the purpose of additional analysis and is not a required part of the basic financial statements.The accompanying schedule of expenditures of federal awards is presented for purposes of additionalanalysis as required by U.S. Office of Management and Budget Circular A-133, "Audits of States, LocalGovernments, and Non-Profit Organizations," and is not a required part of the basic financial statements.Such information has been subjected to the auditing procedures applied in the audit of the basic financial

MEMBERAmerican Institute of Certified Public Accountants • Society of Louisiana Certified Public Accountants

statements and, in my opinion, is fairly stated, in all material respects, in relation to the basic financialstatements taken as a whole.

New Orleans, LouisianaAugust 4, 2006

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STATEMENT OF FINANCIAL POSITION

December 31, 2005

ASSETS

Cash, including certificates of deposit of $197,845

Investment securities (Notes A5 and B)

ReceivablesGrants (Notes A6 and C)Travel advancesInterestOther

Property and equipment-at cost (Note A4 and D)

Economic interest - Economic DevelopmentUnit, Inc. (Note E)

$ 981,404

632,595

2,739,8833,824

56439.009

2.783.280

1,354,210

433.200

Total assets

Notes payable (Note F)

Accounts payable and accrued liabilities

Pension contribution payable (Note G)

Total liabilities

Commitments (Note H)

Net assetsUnrestrictedTemporarily restricted (Note I)Permanently restricted (Note J)

Total net assets

Total liabilities and net assets

S 6.184.689

LIABILITIES AND NET ASSETS

$ 88,991

, 2,062,865

1.470.462

3,622,318

708,3461,449,718

404.307

2,562.371

TOTALMEMORANDUM ONLY

December 31. 2004

S 900,074

657,683

1,430,837

459107.716

1.539.012

383,880

433.200

S 88,981

882,360

956.924

1,928,265

938,625519,637527.322

1.985.584

The accompanying notes are an integral part of this financial statement.

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STATEMENT OF CASH FLOWS

For the year ended December 31,2005

Increase <decrease> in cash and cash equivalents

Cash flows from operating activities:Increase in net assets $ 576,787Adjustments to reconcile increase in net assets to net

cash provided by operating activities:Unrealized depreciation of investments $ 11,676Depreciation expense 14,398Loss on sale of securities 6,265

Changes in assets and liabilities:Increase in grants receivable < 1,309,046>Increase in travel advances < 3,824>Increase in accrued interest < 105>Decrease in other receivables 68,707Increase in accounts payable and accrued liabilities 1,180,505Increase in pension contribution payable 513,538 482,114

Net cash provided by operating activities 1.058.901

Cash flows from investing activities:Purchase of investments < 47,864>Proceeds from sale of investments 55.011

Net cash provided by investing activities 7.147

Cash flows from financing activities:Payment of notes payable 10Construction-in-progress < 984,728>

Net cash used in financing activities < 984,718>

Net increase in cash and cash equivalents 81,330

Cash and cash equivalents, beginning of year 900,074

Cash and cash equivalents, end of year S 981T4Q4

The accompanying notes are an integral part of this financial statement.


NOTES TO FINANCIAL STATEMENTS

December 31, 2005

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies consistently applied in the preparation of theaccompanying financial statements follows:

1. Nature of Activities

Total Community Action, Inc. was organized to promote and develop economic opportunityin the City of New Orleans, to promote the education and welfare of the people of NewOrleans, and to mobilize such human and financial resources as may be available to combatpoverty in New Orleans.

2. Presentation of Financial Statements

The corporation's financial statements are presented in accordance with requirementsestablished by the Financial Accounting Standards Board (FASB) as set forth in theStatement of Financial Accounting Standards No. 117, "Financial Statements of Not-For-Profit Organizations," dated June 1993. Accordingly, the net assets of the corporation areclassified to present the following classes: (a) unrestricted net assets, (b) temporarilyrestricted net assets, and (c) permanently restricted net assets.

Net assets of the restricted class are created only by donor-imposed restrictions on their use.All other net assets, including board-designated or appropriated amounts, are legallyunrestricted, and are reported as part of the unrestricted class.

3. Revenue Recognition

For financial reporting, the corporation recognizes all contributed support as income in theperiod received. Contributed support is reported as unrestricted or restricted depending on theexistence of donor stipulations that limit the use of the support. When a donor restrictionexpires, that is, when a stipulated time restriction ends or purpose restriction is accomplished,temporarily restricted net assets and permanently restricted net assets are reclassified tounrestricted net assets and reported in the statement of activity as "net assets released fromrestrictions".

Grant revenue is recognized as it is earned in accordance with approved contracts.

4. Property and Equipment

Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets tooperations over their estimated service lives, principally on the straight-line method. Thedepreciation expense for the year ended December 31, 2005 totaled $14,398.


NOTES TO FINANCIAL STATEMENTS - CONTINUED

December 31,2005

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

4. Property and Equipment - continued

It is the policy of the corporation to capitalize all property, furniture, and equipment with anacquisition cost in excess of $5,000.

5. Investment Securities

Under FASB No. 124, "Accounting for Certain Investments Held by Not-for-ProfitOrganizations," investments in marketable securities with readily determinable fair valuesand all investments in debt securities are reported at their fair values in the statement offinancial position. Unrealized gains or losses are included in the change in net assets.

6. Receivables

The corporation considers accounts receivable to be fully collectable since the balanceconsists principally of payments due under governmental contracts. If amounts due becomeuncollectible, they will be charged to operations when that determination is made.

7. Cash Equivalents

For purposes of the statement of cash flows, the corporation considers all investments withoriginal maturities of three months or less to be cash equivalents.

8. Estimates

The preparation of financial statements in conformity with generally accepted accountingprinciples requires management to make estimates and assumptions that affect certainreported amounts and disclosures. Accordingly, actual results could differ from theseestimates.

9. Fair Values of Financial Investments

Cash, and cash equivalent amounts reported in the statement of financial positionapproximate fair values because of the short maturities of those investments.

The fair values of investment securities are based upon quoted market prices for those orsimilar investments.



December 31, 2005

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

10. Total Columns of Combined Statements - Overview

Total columns are captioned "Memorandum Only" to indicate that they are presented only toassist with financial analysis. Data in these columns do not present financial position orchanges in net assets in conformity with generally accepted accounting principles. Neitheris such data comparable to a consolidation.

NOTE B - INVESTMENT SECURITIES

Investment securities, cost and approximate market value at December 31, 2005, consists of thefollowing:

Fair MarketValue Cost

Corporate bonds $ 14,714 $ 20,000Government securities 380,421 392,304Mutual funds 237.460 235.901

$ 632.595

The unrealized depreciation for the year ended December 31, 2005, totaled $11,676. As ofDecember 31, 2005, the cumulative unrealized depreciation totaled $15,610.

Investment income for the year ended December 31, 2005, consists of the following:

Interest income $ 43,171Dividend income 11,053Loss on sale of securities < 6.265>

NOTE C - GRANTS RECEIVABLE

The grants receivable consist of the following as of December 31, 2005:

State of Louisiana Department of Social Services $ 31,841City of New Orleans 39,572State of Louisiana - Department of Labor 91,446U.S. Department of Health and Human Services 2,510,105Louisiana Housing Finance Agency 66.919

10



December 31,2005

NOTE D - PROPERTY AND EQUIPMENT

Property and equipment at December 31, 2005, consist of the following:

Transportation equipmentless accumulated depreciation

Construction-in-progress

$ 62,486<62.486>

1.354.210..210

NOTE E - ECONOMIC INTEREST - ECONOMIC DEVELOPMENT UNIT, INC.

On November 2, 1999, Total Community Action, Inc. cancelled its note receivable with EconomicDevelopment Unit, Inc. totaling $433,200. In consideration of the cancellation of the note, TotalCommunity Action, Inc. received three appointments to the Board of Directors of EconomicDevelopment Unit, Inc. The Board of Directors shall consist of between six and nine members. Inaddition, upon dissolution of Economic Development Unit, Inc., the property and assets shall bedonated and distributed to Total Community Action, Inc. The Articles of Incorporation ofEconomic Development Unit, Inc. has been amended to reflect the change in the Board ofDirector's composition and the distribution of its assets and property upon dissolution.

The unaudited financial statements of Economic Development Unit, Inc. as of and for the yearended December 31, 2005, consist of the following:

STATEMENT OF FINANCIAL POSITIONDECEMBER 31, 2005

ASSETS

Cash

Receivables

Property and equipment-at costBuildingImprovements

less accumulated depreciation

Land

Deposits

Total assets

$ 64,359

4,133

604,03078.365

682,395<682.395>

200.000200.000

180

LIABILITIES AND NET ASSETS

Note payable-financialinstitutions $ 167,174

Accounts payable and accruedliabilities 15.890

Total liabilities 183,064

Net assets - unrestricted 85.608

Total net assets 85.608

Total liabilities and net assets $ 268.672

11



December 31,2005

NOTE E - ECONOMIC INTEREST - ECONOMIC DEVELOPMENT UNIT, INC. - CONTINUED

STATEMENT OF ACTIVITIESFor the year ended December 31,2005

REVENUERental income, less direct expenses of $236,193 $ < 77,434>Interest income 1,227

Total revenue < 76.207>

EXPENSESManagement and general 5.238

Total expenses 5,238

Decrease in net assets < 81,445>Net assets, beginning of year 167.053Net assets, end of year

NOTE F - NOTE PAYABLE

The note payable consists of the following as of the December 31, 2005:

Note payable to bank, at a 7.25% interest rate, due March,2006. Payable in monthly installments of $800, and a balloonpayment of $86,714. The note is secured by a certificate ofdeposit totaling $143,455.

The interest expense for the year ended December 31, 2005 totaled $6,419.

The aggregate maturities of the note payable consist of the following:

Year endedDecember 31.

2005 $ 2,8302006 86.161

12



December 31,2005

NOTE G - PENSION PLAN

Total Community Action, Inc. sponsors a defined contribution employee pension plan covering allemployees twenty-one years or older who have worked for the corporation a minimum of threeyears. The corporation decides the amount, if anything, to contribute each year to the individualretirement accounts for the eligible employees based on a percentage of annual compensation. Thepercentage for the year ended December 31, 2005 was 17.5% or $1,470,462. The percentageamount increased by 8% from December 31, 2004.

NOTE H - COMMITMENTS

The corporation leases its administrative and program offices. The offices located at SouthJefferson Davis Parkway, New Orleans are leased through December 31, 2050. All other officesare leased annually. The rental expense for the year ended December 31, 2005 totaled $493,020.The aggregate maturities of the long-term lease consist of the following:

Year endedDecember 31,

2006 $ 209,9752007 209,9752008 209,9752009 209,975

2010-2014 1,019,8752015-2019 1,019,8752020-2024 1,019,8752025-2029 1,019,8752030-2034 1,019,8752035-2039 1,019,8752040-2044 1,019,8752045-2049 1,019,8752050 209.975

Since Hurricane Katrina damaged the facility as of August 29, 2005, lease payments were suspendedfor offices not occupied by Total Community Action, Inc. As the facility is repaired, lease paymentswill continue accordingly.

As of December 31, 2005, Total Community Action, Inc.'s renovation of the Head Start facility at1420 South Jefferson Davis Parkway, New Orleans, Louisiana was partially completed. Theconstruction-in-progress for the year ended December 31, 2005 totaled $1,354,210.

13



December 31,2005

NOTE I - TEMPORARILY RESTRICTED NET ASSETS

As of December 31, 2005, the temporarily restricted net assets consist of the following:

Assets For Independence Demonstration $ 27,015District 2 12,066Home Energy Assistance Program 35,889Food Distribution Program 9,229Weatherization Program 4,292Construction-in-Progress Head Start 1,354,210American Red Cross 1,497Louisiana Public Health Institute 1,728Community Services Block Grant 3,792

NOTE J - PERMANENTLY RESTRICTED NET ASSETS

Total Community Action, Inc. is self-insured for employee unemployment compensation claimsthrough the establishment of an unemployment insurance fund.

Transfers of $189,677 were made from program funds to the unemployment insurance fund for theyear ended December 31, 2005, which is accounted for as revenue of the unemployment insurancefund and an expense of the related program. The unemployment insurance fund reimburses theunrestricted fund for all direct costs in administering the program and transfers all net interestincome earned on unemployment insurance funds to the unrestricted fund.

All known claims as of December 31,2005 have been recorded in the financial statements.

NOTE K- RELATED PARTY TRANSACTIONS

The principal premises of Total Community Action, Inc. is leased from an affiliated non-profitcorporation. The lease is a long-term lease expiring December 31, 2050. The rental payments forthe year ended December 31, 2005 totaled $106,436.

Additionally, Total Community Action, Inc. presently provides administrative and technicalassistance to a program it sponsors. This program sells janitorial supplies to the public, its sponsors,and the private sector. The purchases for the year ended December 31, 2005 totaled $35,641.

NOTE L - INCOME TAXES

The corporation is exempt from corporation income taxes under Section 501(c)(3) of the InternalRevenue Code.

14



December 31, 2003

NOTE M - BOARD OF DIRECTORS

The Board of Directors is a voluntary board; therefore, no compensation has been paid to anymember.

NOTE N - CASH FLOW INFORMATION

The interest paid for the year ended December 31, 2005 totaled $6,419.

NOTE O - CONCENTRATION OF CREDIT RISK

The corporation's cash balance as of December 31, 2005, before deducting outstanding checks,consists of the following:

Financial institutions $ 1,763,774Less: FDIC and FSLIC insurance $ 500,000

Pledged securities 820.337 1320.337

Unsecured balance $ 443.437

Total Community Action, Inc. invests in corporate bonds, government securities, and mutual funds.Investment securities are subject to various risks; such as interest rate, credit, and overall marketvolatility risk. Due to the level of risk associated with certain investment securities, it is reasonablypossible that changes in the value of investment securities will occur in the near term.

NOTE P - ECONOMIC DEPENDENCY

Total Community Action, Inc. receives a majority of its revenues from funds provided throughgrants administered by the Department of Human Services and the State of Louisiana. The grantamounts are appropriated each year by the federal and state governments. If significant budget cutsare effected at the federal and/or state level, the amount of the funds Total Community Action, Inc.receives could be reduced significantly and have an adverse impact on its operations. Managementis not aware of any actions that will adversely affect the amount of funds Total Community Action,Inc. will receive in the next fiscal year.

The corporation is supported primarily through grants from governmental agencies. Approximately99% of the corporation support for the year ended December 31, 2005 came from these grants.

NOTE Q - HURRICANE KATRINA

As of August 29, 2005, Hurricane Katrina devastated the New Orleans' area. Its employees andclients were displaced. Personal property and leased facilities were destroyed by flood waters.Insurance claims were filed with various insurance carriers, and the final resolution should occurduring the year 2006. The future outlook for its operations is undeterminable at this time.

15

SUPPLEMENTAL INFORMATION

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SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

For the year ended December 31, 2005

PROGRAM TITLE

U. S. DEPARTMENT OF HEALTH AND HUMAN SERVICESHead Start - Full Year Center & Home Based & Training/

Technical Assistance

Assets for Independence Demonstration (IDA Program)

Passed through State of Louisiana:Home Energy Assistance ProgramCommunity Services Block GrantTeen Pregnancy PreventionAdult and Family LiteracyEarned Income Tax Credit ProgramHealthy Marriage and Responsible Fatherhood Community Demonstration Initiative

TOTAL U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES

U.S. DEPARTMENT OF AGRICULTUREPassed through State of Louisiana:

Child Care Food Program

TOTAL U.S. DEPARTMENT OF AGRICULTURE

U.S. DEPARTMENT OF ENERGYPassed through State of Louisiana:

Weatherization Assistance Program

TOTAL U.S. DEPARTMENT OF ENERGY

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENTPassed through City of New Orleans:

HSNG - TCA - Weatherization Assistance Program

TOTAL U.S. DEPARTMENT OF HOUSING AND URBANDEVELOPMENT

FEDERALCFDA

NUMBER

93.600

93.602

93.56893.56993.55893.55893.55893.563

10.558

81.042

EXPENDITURES

$ 19,476,006

39,785

94,5131,863,511

35,2368,663

109,502158.788

14.218

21.786.004

689.006

689.006

272.132

272.132

63.733

63.733

SUBRECIPIENTCOSTS

$5,545,931

5.545.931

TOTAL FEDERAL AWARDS

NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

1. The Schedule of Expenditures of Federal Awards was prepared on the accrual basis of accounting.2. The Head Start grant requires non-federal matching funds totaling 20% of the grant. The in-kind contributions totaled $3,217,870 for the year ended

December 31,2005. The corporation was not in compliance with the matching requirements of the grant.

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CERTIFIED PUBLIC ACCOUNTANT4769 ST. ROCH AVE. NEW ORLEANS, LOUISIANA 70122

TELEPHONE: (504) 288-0050

REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTINGAND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT

OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCEWITH GOVERNMENT AUDITING STANDARDS


I have audited the financial statements of Total Community Action, Inc. (a nonprofit corporation)as of and for the year ended December 31, 2005, and have issued my report thereon dated August 4, 2006.I conducted my audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial statements contained in Government Auditing Standards,issued by the comptroller General of the United States.

Internal Control Over Financial Reporting

In planning and performing my audit, I considered Total Community Action, Inc.'s internalcontrol over financial reporting in order to determine my auditing procedures for the purpose of expressingmy opinion on the financial statements and not to provide an opinion on the internal control over financialreporting. However, I noted certain matters involving the internal control over financial reporting and itsoperation that I consider to be reportable conditions. Reportable conditions involve matters coming to myattention relating to significant deficiencies in the design or operation of the internal control over financialreporting that, in my judgment, could adversely affect Total Community Action, Inc.'s ability to initiate,record, process, and report financial data consistent with the assertions of management in the financialstatements. Reportable conditions are described in the accompanying schedule of findings and questionedcosts as item 2005-1.

A weakness is a reportable 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 that misstatements caused byerror or fraud in amounts that would be material in relation to the financial statements being audited mayoccur and not be detected within a timely period by employees in the normal course of performing theirassigned functions. My consideration of the internal control over financial reporting would not necessarilydisclose all matters in the internal control that might be reportable conditions and, accordingly, would notnecessarily disclose all reportable conditions that are also considered to be material weaknesses. However,I believe that none of the reportable conditions described above is a material weakness.

Compliance

As part of obtaining reasonable assurance about whether Total Community Action, Inc.'s financialstatements are free of material misstatement, I performed tests of its compliance with certain provisions oflaws, regulations, contracts, and grant agreements, noncompliance with which could have a direct andmaterial effect on the determination of financial statement amounts. However, providing an opinion oncompliance with those provisions was not an objective of my audit, and accordingly, I do not express suchan opinion. The results of my tests disclosed no instances of noncompliance or other matters that arerequired to be reported under Government Auditing Standards.

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This report is intended for the information of management, Louisiana Legislative Auditor, Boardof Directors, and federal awarding agencies and pass-through entities, and is not intended to be and shouldnot be used by anyone other than these specified parties. Under Louisiana Revised Statute 24:513, thisreport is distributed by the Legislative Auditor as a public document.


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JjustmCERTIFIED PUBLIC ACCOUNTANT

4769 ST. ROCH AVE. NEW ORLEANS, LOUISIANA 70122TELEPHONE: (504) 288-0050

REPORT ON COMPLIANCE WITH REQUIREMENTSAPPLICABLE TO EACH MAJOR PROGRAM AND ON

INTERNAL CONTROL OVER COMPLIANCE INACCORDANCE WITH OMB CIRUCLAR A-133


Compliance

I have audited the compliance of Total Community Action, Inc. (a nonprofit corporation) 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 federal programs for theyear ended December 31, 2005. Total Community Action, Inc.'s major federal programs are identified inthe summary of auditor's results section of the accompanying schedule of findings and questioned costs.Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its majorfederal programs is the responsibility of Total Community Action, Inc.'s management. My responsibility isto express an opinion on Total Community Action, Inc.'s compliance based on my audit.

I conducted my audit of compliance in accordance with auditing standards generally accepted inthe United States of America; the standards applicable to financial audits contained in GovernmentAuditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133,"Audits of States, Local Governments, and Non-Profit Organizations." Those standards and OMB CircularA-133 require that I plan and perform the audit to obtain reasonable assurance about whethernoncompliance with the types of compliance requirements referred to above that could have a direct andmaterial effect on a major federal program occurred. An audit includes examining, on a test basis, evidenceabout Total Community Action, Inc.'s compliance with those requirements and performing such otherprocedures as I considered necessary in the circumstances. I believe that my audit provides a reasonablebasis for my opinion. My audit does not provide a legal determination of Total Community Action, Inc.'scompliance with those requirements. In my opinion, Total Community Action, Inc. complied, in allmaterial respects, with the requirements referred to above that are applicable to each of its major federalprograms for the year ended December 31, 2005.

As described in item 2005-2 in the accompanying schedule of findings and questioned costs, TotalCommunity Action, Inc. did not comply with requirements regarding matching that are applicable torequirements regarding matching that are applicable to its Head Start Program. Compliance with suchrequirements is necessary, in my opinion, for Total Community Action, Inc. to comply with requirementsapplicable to that program. In my opinion, except for the noncompliance described in the precedingparagraph, Total Community Action, Inc. complied, in all material respects, with the requirements referredto above that are applicable to each of its major federal programs for the year ended December 31, 2005.

Internal Control Over Compliance

The management of Total Community Action, Inc. is responsible for establishing and maintainingeffective internal control over compliance with the requirements of laws, regulations, contracts, and grantsapplicable to federal programs. In planning and performing my audit, I considered Total CommunityAction, Inc.'s internal control over compliance with requirements that could have a direct and materialeffect on a major federal program in order to determine my auditing procedures for the purpose of

24


expressing my opinion on compliance and to test and report on the internal control over compliance inaccordance with OMB Circular A-133.

My consideration of the internal control over financial reporting would not necessarily disclose allmatters in the internal control over financial reporting that might be material weaknesses. A materialweakness is a condition in which the design or operation of one or more of the internal control componentsdoes not reduce to a relatively low level the risk that noncompliance with applicable requirements of laws,regulations, contracts, and grants caused by error or fraud that would be material in relation to the majorfederal programs being auditing may occur and not be detected within a timely period by employees in thenormal course of performing their assigned functions. I noted no matters involving the internal controlover compliance and its operation that I consider to be material weaknesses.

This report is intended for the information of management, Louisiana Legislative Auditor, Boardof Directors and federal awarding agencies and pass-through entities, and is not intended to be and shouldnot be used by anyone other than these specified parties. Under Louisiana Revised Statute 24:513, thisreport is distributed by the Legislative Auditor as a public document.


w(7

25


SCHEDULE OF FINDINGS AND QUESTIONED COSTS


A. SUMMARY OF THE AUDIT RESULTS

1. The auditor's report expresses an unqualified opinion on the financial statements of TotalCommunity Action, Inc.

2. One reportable condition was disclosed during the audit of the financial statements and isreported in the report titled "Report On Internal Control Over Financial Reporting AndOn Compliance And Other Matters Based on an Audit of Financial StatementsPerformed In Accordance With Government Auditing Standards". The condition is notreported as a material weakness.

3. No instances of noncompliance material to the financial statements of Total CommunityAction, Inc. were disclosed during the audit.

4. The statement that reportable conditions in internal control over major programs weredisclosed by the audit and whether any such conditions were material weaknesses is notapplicable.

5. The auditor's report on compliance for the major federal award programs for TotalCommunity Action, Inc. expresses a qualified opinion.

6. Audit findings that are required to be reported in accordance with Section 510(a) of OMBCircular A-133 are reported in this Schedule.

7. The major programs tested as major programs included:

1. Head Start-Full Year Center & Home Based & Training and TechnicalAssistance - CFDA No. 93.600

2. Community Services Block Grant - CFDA No. 93.569

3. Child Care Food Program - CFDA No. 10.558

8. The threshold for distinguishing between Type A and Type B programs was $684,326.

9. Total Community Action, Inc. did not qualify as a low-risk auditee.

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SCHEDULE OF FINDINGS AND QUESTIONED COSTS - CONTINUED


B. FINDINGS - FINANCIAL STATEMENTS AUDIT

REPORTABLE CONDITION

2005-1 ACCOUNTING SYSTEM

Condition: A review of the accounting system noted the following:

1. The 2005 insurance liability was not determined timely. Since variousprograms administered by the corporation ceased operation, insurancecosts had to be absorbed by the general fund.

2. A general ledger was not maintained for the IDA program. Activityhad to be summarized and recorded after year-end.

Criteria: All program costs must be recorded in the general ledger on a timely basis.

Effect: Failure to properly record program costs may result in under reporting the financial resultsof the programs.

Recommendation: Procedures should be implemented to assure all costs are properly accruedand recorded.

Response: See Correction Action Plan.

C. FINDINGS AND QUESTIONED COSTS - MAJOR FEDERAL AWARD PROGRAMSAUDIT

DEPARTMENT OF HEALTH AND HUMAN SERVICES

2005-2 Head Start - Full Year Center & Home Based & Training/Technical Assistance - CFDANo. 93.600; Grant No. 06CH0473/40; Grant Period - Year ended December 31, 2005

Statement of Condition: Matching requirement was not met for the year ended December 31,2005.

Criteria: Grantees are required to contribute at least 20% of the costs of the program throughcash or in-kind contribution,

Effect of Condition: Costs may be disallowed by the grantor.

Questioned Costs: None.

Cause of Condition: Matching funds totaled $3,217,870 for the year ended December 31, 2005.The total in-kind contribution equals 14% of total costs.

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SCHEDULE OF FINDINGS AND QUESTIONED COSTS - CONTINUED


C. FINDINGS AND QUESTIONED COSTS - MAJOR FEDERAL AWARD PROGRAMSAUDIT - CONTINUED

Recommendation: The percentage of in-kind contributions should be monitored monthly toassure the matching requirement meets the federal grant condition.

Response: See Corrective Action Plan.

D. STATUS OF PRIOR YEAR AUDIT FINDINGS

There were no prior year audit findings.

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Tc\ TOTAL COMMUNITY ACTION, INCORPORATED1420 South Jefferson Davis Parkway

New Orleans, LA 70125

CORRECTIVE ACTION PLAN

Findings - Financial Statement Audit

2005-1 Accounting System

Condition 1 response: Because of Hurricane Katrina and the disruption of work-relatedactivities the 2005 insurance liability was not determined timely. Corrective measureswill be taken to assure that all costs are properly accrued and recorded in a timelymanner.

Condition 2 response: Activities for the IDA program were inadvertently closed out ofthe general ledger and recorded on the ledger of the institution that administers theprogram. Because the IDA program is a TCA program the IDA activities will be recordedhi TCA's general ledger.

Findings and Questioned Costs — Major Federal Award Programs Audit

2005-2 Head Start In-kind match response: Due to hurricane Katrina and the damagecaused by the storm, 85% of the head start program facilities were destroyed. Matchingrequirements were not met because there was no activity in the program from August 26,2005 through December 31,2005. Monthly monitoring will continue to assure thematching requirement meets the federal grant guidelines.

P.O. Box 13848 • New Orleans, LA 70185(504) 872-0329 / FAX (504) 872-0339

www.tca-nola.org"An Equal Opportunity Employer Program"

"Auxiliary aids and services are available upon request to individuals with disabilities"LA RELAY-1-800-947-5277

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