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• •

· · HoustonWorks
• • • USA
O
• Working to make a difference
July 24, 2012
Mr. Mike Temple
Manager, Workforce
2118 Smith Street,
Houston, Texas 77002
P.O Box 667128
Hou,t<m, Tcx,", 77260-7128
Phone: 713.654.1919
Fax: 713.739.0751
WWw,hollston\\'orks.org
Houston-Galveston Area Council
3555 Timmons Lane
Houston, TX 77027
Dear Mr. Temple:
This correspondence is to acknowledge receipt of the Houston-Galveston Area Council's (H-GAC) letter
dated July 23, 2012 regarding the FY 2012 financial compliance review. We are grateful to H-GAC and
Weaver and Tidwell, LLC for providing us with a comprehensive monitoring report with detailed
recommendations and a summary of findings requiring immediate attention.
HoustonWorks USA's Board of Directors, Administration team and key staff have carefully reviewed the
monitor's report as well as the findings in identified areas in order to fully address issues that have been
repeatedly brought to our attention.
Attached you will find exhibits that detail our accomplishments and plans to improve our financial
situation, cash flow and payables.
We will prepare and submit a strategic plan with specific action items and prescribed deadlines no later
than August 31, 2012.
Please let me know if you have any questions or concerns.

Russell ;J.
Executive Director
Attachment
cc: Rodney Bradshaw
Millie Foster
Lucretia Hammond
Michael McLauchlan
Sharron Powell
Exhibit 1
ORGANIZATIONAL POSITION STATEMENT
This report outlines the steps the HoustonWorks USA Board of Directors and executive
team are taking to address the financial challenges that have been identified, while
preserving the excellence in performance delivered through the Workforce Solutions
career offices.
Leadership
The HWUSA Board of Directors has made significant recent changes at the executive
and administrative level. These leadership changes entailed an objective re­
examination of the organization's structure and challenging actions by our board
leadership leading to a leaner more focused management team centered on our core
business. The following steps were taken to clarify and redefine our priorities for doing
business:
1. The Director of Operations, Russell Tomlin, with responsibilities over all Workforce
Solutions career offices for the past five years was appointed as the Executive Director.
2. The Director of Facilities position was eliminated and the functions of vendor, facility
and financial operations were reassigned.
3. The Director of Finance has resigned effective July 27,2012, providing an
opportunity for additional consolidation and renewed team building.
4. Subordinate staff positions were eliminated or reassigned based upon cost allocation
studies.
In addition to the staff changes outlined above, Mr. Tomlin, with our board and staff has
initiated a fresh and aggressive examination of administrative costs with in the areas of
communications and information technology. These reviews have already yielded
immediate cost savings. In the coming weeks, these efforts will extend to a re­
examination of vendors and the organizational supply chain to ensure competition
provides for even greater savings.
Debt Elimination and Cost Management
Members of the HWUSA Board of Directors, led by our Chair, Howard Lederer, and our
board officers, and the HoustonWorks Executive Team have been in communication
with senior banking officers at Wells Fargo Bank to explore options in renewing our line
of credit or alternatively converting the line of credit to an extended payment schedule.
Our next meeting with banking officials is scheduled and early discussions have been
prornising.
Another concern involves losses sustained in the procurement and deployment of
supplemental programs designated to complement our core efforts in workforce
development. As a result of recent monitoring reviews and audits, cost allocation and
cost accounting changes are being implemented to assure accurate analysis of program
Exhibit 1
costs and the probability of positive income streams. A significant improvement in this
area is reasonably expected and will contribute towards retiring the debt involving the
line of credit.
We will also continue to broaden our relationships with foundations and corporations
that have previously supported HWUSA's workforce development projects. Any surplus
over and above the cost of products delivered will be used for retiring the line of credit.
A review of inventory has identified non-usable assets that have value and could be
considered for sale to retire the line of credit. A reduction in the cost or rental space,
created through the sale or disposal of unused items, is expected to result in savings,
as well.
Budget Adjustments
The staffing changes outlined previously will result in significant changes for the
remainder of FY 2012. Changes in the Executive Director, the elimination of the Director
of Facilities and the upcoming change to the Director of Finance position has resulted in
immediate cost savings. The elimination or reassignment of subordinate staff positions
has resulted in additional cost savings. These changes will result in immediate savings
for the remainder of FY 2012.
Annualized, the cost savings amounts are projected to yield an estimated $400,000 for
FY 2013 with promotion and replacement costs taken into consideration.
Loss Summary
The loss per our 8/31/11 audit consists of depreciation expense, a revenue
reconciliation adjustment, certain contracts that did not operate under budget and
unreimbursed administrative staff costs. The difference between the total audited loss
and depreciation expense is a result of the remaining three issues.
The most significant issue is the revenue reconciliation adjustment. Our books were
maintained on a modified cash basis while the audit report was prepared according to
GAAP. Our books were reconciled our books to agree to the FY 8/31/10 audit report
and we adopted full accrual effective September 1, 2010. That revealed a timing
difference between our H-GAC contract revenue and the amount posted to our books.
In McConnell & Jones' (our CPA/auditors) judgment, no prior period adjustment was
required.
The June 2012 interim financial statement includes a $190,601 loss related to our
9/30/11 H-GAC contract. That is the first month of FY 2012. Our costs at the end of the
contract exceeded the available funds by that amount. Our net activities between
October 1, 2011 and June 30, 2012 are relatively break even.
Exhibit 2
Fiscal and Accounting Accomplishments
2011-2012
• Converted to full accrual system; list of unpaid invoices kept manually in 2010 and
earlier.
• Reconciled HW books to prior audit reports; audit adjustments not seen as material and
not posted in prior years.
• Closed Fiscal Years books from 9/1/99 through 8/31/11.
• Replaced 2 under-performing staff with 2 high performers at $40K savings.
• Documented and streamlined purchase order process to provide proper approval and
faster/visible turn around for vendor payments.
• Eliminated vendor payment duplication risk and effort by eliminating manual check
requests.
• Reconciled all bank accounts monthly through current date within accounting system on
monthly schedule. Performed outside system in prior years with poor process.
• Created Accounting Manager position. Irma Soledad manages majority of daily
operations.
• Created Accounting Policies & Procedures Manual. Consultant (Phil King, CPA)
prepared with cooperation of HWUSA fiscal staff.
• Created Cost Allocation Plan. Consultant prepared with cooperation of fiscal staff.
• Created Budget Review Process for analysis of grant proposals.
• Created Financial Performance Reports to determine profit or loss generating programs.
• Assigned HGAC billing process to Felicia Garcia, broadening staff experience and
improving SOD.
• Assigned other granVcontract billing to Irma Soledad, improving Separation of Duties.
• Assigned routine vendor issues to Julia Smith, broadening staff capabilities and SOD
• Created bi-monthly accounting reports to comply with HGAC demand for higher
reporting standards.
• Streamlined HGAC bi-monthly billing process.
• Implemented procedure to maintain integrity of accounting system reports; months not
closed in prior years and less manual, spreadsheet, out of system efforts.
• Prepared monthly time studies beginning October 2011. Prepared sporadically in prior
periods.
• Created formal weekly cash review process, and careful vendor payments process.
Exhibit 3
Preliminary Response to the Financial Monitoring Report Results Summaries
Finding Results Summary HW Response
1. Accounting Policies and
Procedures Results Summary:
HoustonWorks policies and
procedures are adequately
documented.

However, they do not address
areas of risk that would ensure
appropriate salary amounts are
paid to meet H-GAC and Texas
Workforce Commission salary
cap requirements.

Further, they do not address
areas of risk that funds would be
obligated without available
budget amounts
1. Accounting Policies and
Procedures

HoustonWorks will modify
section 370.100 of the
HoustonWorks Financial
Policies and Procedures
Manual by 8/31/12 to address
salaries, bonuses and
maximums allowed in
accordance with the H-GAC
contract.

HoustonWorks will modify
section 340.400 of the
HoustonWorks Financial
Policies and Procedures
Manual to address risk that
funds would be obligated
without available budget
amounts.
2. Accounting Information System
Results Summary:

HoustonWorks does not have
procedures in place that ensure all
transactions are adequately
identified and recorded.

The inappropriate access levels
that are assigned to staff raises the
risk of transactions being altered or
deleted.
2. Accounting Information
System
HoustonWorks USA has taken
immediate steps to address
segregation of duties concerns
noted by the monitors.

Specifically, the Director of
Finance will no longer have
administrative ability and must
request in writing MIP
transactions through the
Associate Director of IT.

We realize that inappropriate
access levels that are assigned
to staff raises the risk of
1
Exhibit 3
Finding Results Summary HW Response
transactions being altered, and
we will do a comprehensive
revelation with outside guidance
to ensure that we address all
segregation of duties,
expectations identified in the
financial monitoring report.

In order to ensure that we
adhere to documented policies
and procedures related to
accounts payable,
HoustonWorks will assign the
responsibilities of accounts
payable to one staff in the fiscal
department.
3. Procurement Results Summary: 3. Procurement
HoustonWorks policies and

We will modify the policy to
procedures are adequately include pre-approval of
documented. inventory purchases over

However, formal procedures are $5,000.
not being adhered to ensure

HoustonWorks will modify the
that H-GAC related purchases Procurement Policies and
are allowable and valid. Procedures Manual to address

Additionally, procurement maintenance of the vendor list
related responsibilities are in accordance with the TWC
informally distrivuted which Financial Manual for Grants and
allows for inappropriate Contracts, Chapter 14
segregation of duties. This Procurement: 14.6, Bidders and
raises the risk of fake vendors Vendors Lists by 8/31/12.
being added to the list and items

In addition, the Procurement
being procured and received Manager will review all active
without verification. vendors on the epls.gov site.
4. Accounts Payable Results 4. Accounts Payable
Summary:

In the case of late payments,

HoustonWorks does not adhere to Finance will utilize the aging
2
Exhibit 3
Finding Results Summary HW Response
documented policies and report to minimize late
procedures related to accounts payments.
payable. The informal process

Further, the Senior
being performed does not ensure Management team will utilize
that outstanding obligations are the aging report to prioritize
paid timely. The process currently payments to ensure that all
in place allows for increased debt major functions are continued
as payable amounts accumulate with no interruptions.
late fees and interest charges. HoustonWorks will modify the

Additionally, processing of invoices Financial Policies and
without adequate supporting Procedures Manual, Section
documentation raises the risk of 240.500 by 8/31/12 to include
unallowable items being charged to this process.
H-GAC funding streams.

We will assign a specific person
in the finance department to
review all staff reimbursements
and insure all supporting
documentation is included.

No payments will be made to
employees without proper
documentation.
5. Personnel (Human Resources 5. Personnel
and Payroll) Results Summary:

HoustonWorks USA has taken

HoustonWorks personnel immediate steps to address
procedures do not suffiCiently segregation of duties concerns
describe how job responsibilities noted by the monitors.
would be adequately distributed in

Job responsibilities will be
order to lower the risk of adequately distributed in order
inappropriate segregation of duties. to lower risk of inappropriate

Additionally, we were not provided segregation of duties.
with a documentation that indicated

Senior Director of
what the job descriptions are Administration will revise job
currently and therefore we could descriptions to reflect actual
not verify that employees where duties.
performing their intended
I
responsibilities.
3
Exhibit 3
Finding Results Summary
6. Cash Management Results
Summary: HoustonWorks is in
compliance with the minimum
requirements regarding the security
and authorization of checks.

However, we identified instances of
non-compliance regarding the
appropriate identification and
processing of payment obligations
which raises the risk that payments
will be aged beyond an acceptable
time frame or penalties will be
incurred.
7. Property Management and
Inventory Results Summary:

HoustonWorks is not in compliance
with the inventory database or
transfer documentation
requirements identified by H-GAC,
Texas Workforce Commission,
federal and state guidance which
raises the risk that inventory
records will be inaccurate,
incomplete, or insufficiently
documented.
However, our procedures concluded
that HoustonWorks is in compliance
with the requirements of inventory
purchases greater than $5,000 and
the annual inventory count.
There were no property disposals
during our testing period so we were
unable to verify HoustonWorks'
compliance with the documentation
requirements of inventory disposal.
HW Response
6. Cash Management

HoustonWorks acknowledges
that bank reconciliations should
be performed within 30 calendar
days of the bank statement
close .

As of January 2012, all bank
reconciliations have been
performed within the 30
calendar days as required.

The Director of Finance will
continue to monitor these
efforts.
7. Property Management &
Inventory

HWUSA is developing a plan of
action to eliminate inaccurate,
incomplete or insufficiently
documented inventory records.
Specifically,

HoustonWorks has taken
immediate steps to address
segregation of duties concerns
related to inventory.

We have secured the fixed
assets inventory database. The
procurement manager has
exclusive write access.

A Procurement Manager will not
have custody to the inventory.

Currently there are no items
shared between funding
streams. We will develop a
procedure to document any
purchase with shared funding
4
Exhibit 3
Finding Results Summary HW Response
streams no later than 8/31/12.

(FIN ITT-2) We have reviewed
our current inventory xis and will
make improvement in
documenting assets. We will
ensure that all items purchased
will be properly documented on
our inventory spreadsheet and
updated as needed
continuously.

Assigned staff will make this a
priority in the next 90 days.
8. Cost Allocation and Budget 8. Cost Allocation and Budget
Results Summary: HoustonWorks is

The budget increased in May
in compliance with the contractual 2012 and the Cost Allocation
requirements regarding the required Budget was adjusted at that
items to be included in the Cost time. We will closely review
Allocation Plan as well as the each line item in order to
authorization, submission and change maintain an accurate track of
notification requirements identified by funds.
H-GAC.

However, we identified instances of
non-compliance regarding the
included budget in the approve
Cost Allocation Plan which
increases the risk that
HoustonWorks will be unable to
accurately track the allocated
funds.

We also identified instances of
non-compliance regarding the
allocation of expenses in
comparison to the budgeted
amounts which increases the risk
that HoustonWorks will exceed the
budgeted line items without prior
5
Exhibit 3
Finding Results Summary HW Response
H-GAC approval.
9. Financial Reporting Results 9. Financial Reporting
Summary: HoustonWorks is in Effective immediately Financial
compliance with the minimum Reports submitted will be signed
requirements identified by H-GAC, by the preparer and the approval
Texas Workforce Commission, federal staff. These signed reports will be
and state guidance with regards to the available as a hard copy for review
documentation of close out upon request.
procedures, the performance and
reporting of an annual A-133 Single
Audit, the approval of budget amount
variances, adequately supported
financial reports and the timely
submission of financial reports.
• However, we identified instances of
non-compliance in the financial
reporting process specifically
regarding the reporting of budget to
actual variances and the review
and approval of financial reports
prior to submission to H-GAC
which raise the risk of
unauthorized, incorrect, or
inaccurate reports will be submitted
to H-GAC.
10. Customer Complaints Results 10. Customer Complaints
Summary: HoustonWorks is in
compliance with the minimum There were no findings in this area.
requirements identified by H-GAC,
Texas Workforce Commission, federal i
and state guidance.
11. Subcontracts Results • 11. Subcontracts
Summary: • Effective immediately,
• HoustonWorks cannot support their I HoustonWorks will begin to use
6
Exhibit 3
Finding Results Summary HW Response
compliance with the requirements
identified by H-GAC, Texas
Workforce Commission, federal
and state guidance because a
subcontractor review and approval
process does not exist. This
increases the risk that contracts
will be inappropriately executed, or
will not provide sufficient clauses to
maintain compliance with H-GAC
procedures.
the following website:
https:llwww.ep/s.gov to verify
that subcontractors are not
debarred and are current with
their state franchise taxes.
• Our Procurement Policies and
Procedures Manual will be
changed to accommodate this
action by 8/31112.
12. Insurance Results Summary: 12. Insurance
Insurance coverage retained by HGAC has been named as a loss
HoustonWorks meets the minimum payee on the attached certificate of
coverage threshold criteria identified insurance
by H-GAC policies and procedures,
but does not follow all minimum
requirements regarding the loss
payee designation clauses. This
raises the risk that H-GAC will not
recover their portion of the loss of
fixed assets in the event of a
catastrophic loss.
Conclusion: Based on our Conclusion
procedures, we recommend that HoustonWorks USA has an
HOlJstonWorks prepare an action active team composed of board
plan to address the identified members, management and
noncompliance items, including center staff to finalize and
expected timelines for completion, implement a comprehensive action
and submit the action plan to H­ plan to address noncompliance
GAC for review and approval. items. We will submit our plan
Subsequent monitoring procedures detailing changes made and
should be performed to ensure the remaining action items no later
issues identified have been than August 31, 2012.
appropriately addressed.
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Exhibit 4
Responses To Observations and Findings DRAFT
Summary of Issues
---------­
WP
Reference/Results
Houston Works Response To

Monday, July 23,2012
Procedure A: Onsite Visit
N/A
No issues noted
Procedure B: Policies and Procedures
1 a.The Payroll policies and procedures do
not address review and approval of
employee payroll to ensure that all salaries
and merit bonuses remain below the
maximums identified by the H-GAC
contract.
FIN AP-1 HoustonWorks will modify
section 370.100 of the
HoustonWorks Financial
Policies and Procedures Manual
by 8/31112 to address salaries,
bonuses and maximums
allowed in accordance with the
H-GAC contract.
1b. For the areas of purchasing, accounts
payable, cash disbursements, and fixed
assets, we identified risks that are not
addressed by the internal controls to
ensure the critical activities are covered:
Purchasing and Accounts
1. Fictitious vendors are not setup.
2. Only expenditures that have available
budget are approved.
Cash Disbursements:
1. Cash disbursements are recorded in the
proper period.
Fixed Assets:
1. Recorded assets have future benefits.
2. Access to the inventory tracking system
FIN RCM-1 The Financial Policies and
Procedures Manual do not
address these specific areas of
purchasing, accounts payable,
cash disbursement and under
fixed assets, the recorded
assets and their future benefits.
HoustonWorks will modify
section 340.400 of the
HoustonWorks Financial
Policies and Procedures Manual
to address these items by
8/31/12.
Access to the inventory tracking
1
Exhibit 4
Summary of Issues WP
Reference/Results
Houston Works Response To
H-GAC
Monday, July 23,2012
is restricted
--­
system has been restricted to
one person.
1c. Based on gaps identified in internal FIN RCM-2 Accounting Policies and
control coverage, adequate controls to Procedures Manual, Section
ensure appropriate segregation of duties 210.150 (Internal Control-
and access controls are not in place. Responsibility) includes the
policy and procedure for
establishing and maintaining
sufficient levels of internal
control in order to carry out the
Board's stated policy. Duties
will be segregated where current
practice is not in compliance
with the policy and
procedure. Fiscal department
staff members, and other
administrative staff as required,
will receive training to insure
there is ongoing compliance. A
procedure will be added to
include quarterly review of
staffing duties by Director of
Finance and Executive
Director. Manual revisions will
be completed by
8/31/12. Training will be
completed by
9/30/12. Continuing Education
sessions will occur on a
quarterly basis.
2a. The Cash Disbursement Policies and
Procedures do not address the actions to
--­
FIN AP-2 Accounting Policies and
Procedures Manual, Section
2
Exhibit 4
Summary of Issues
,----­
WP
Reference/Results
Houston Works Response To
H-GAC
Monday, July 23,2012
prevent, or to be taken in the event of a
duplicate
payment.
340.400 (Purchase Orders,
Check Requests and Cash
Disbursements) is the policy and
procedure to insure
expenditures are properly
justified, requested by persons
with sufficient authority,
documented, acknowledged that
requested goods and services
were received in good order,
reviewed for accuracy, and duly
approved. Approval and
payment procedures will be
revised to incorporate
the following features:

Aged Accounts Payable
report will be reviewed
by Accounting Manager,
Director of Finance and
Executive Director
to determine vendor
payments.

An "Invoices selected for
Payment" report will be
created by Accounting
Manager subsequent to
Aged AlP Report review
with Director of Finance
and Executive Director.

Accounting Manager will
3
Exhibit 4
Summary of Issues WP
Reference/Results
Houston Works Response To
H-GAC
23, 2012
prepare and sign
payment authorization
form prior to delivery to
Contract and Billing
Assistant.

Contract and billing
assistant will print checks
as selected
by Accounting Manager
in Accounts Payable
module, sign "Invoices
selected for Payment"
report and deliver to
Director of Finance.

Director of Finance will
compare report to printed
checks.

Director of Finance will
sign checks only if listed
on the "Invoices selected
for Payment" report.

Checks not on the list will
be returned to Accounting
Manaager and marked as
void on physical check.

Check will be void by
someone other the
Contract and Billing
Assistant. in the
accounting system.

Checks and payment
authorizzation form will
4
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Exhibit 4
Summary of Issues WP Houston Works Response To
Reference/Results H-GAC
Monday, July 23,2012
be signed by Director of
Finance and routed to
Executive Director.

Executive Director will
review all documentation,
sign checks and sign
payment authorization
form..

Checks not listed on the
"Invoices selected for
Payment" report will be
marked as void on
physical check
and returned to Director
of Finance.

Check will be void in
accounting system by
someone other than
Contract and Billing
Assistant.

Checks and approved
documentation will be
routed to Administrative
Assistant for distribution.

Administrative Assistant
will compare "Invoices
selected for Payment"
report to signed checks.

Checks not listed on the
"Invoices selected for
Payment" report will be
marked as void on
5
Exhibit 4
Summary of Issues WP
Reference/Results
Houston Works Response To
H-GAC
Monday, July 23,2012 I
physical check and
returned to the Director of
Finance.

Check will be void in
accounting system by
someone other than
Contract and Billing
Assistant.

Administrative Assistant
will sign payment
authorization form
and distribute checks.

Administravie Assistant
will route completed
payment authorization
forms to Contract and
Billing Assistantfor filing
with monthly transaction
files.
As with all policies and
procedures, this policy and
procedure will be reviewed on
an annual basis to determine
effectiveness and compliance.
A procedure will be written and
added to Accounting Policies
and Procedures Manual as
Section 340.450 (Duplicate
Payment Correction) in order to
6
Exhibit 4
Summary of Issues WP
Reference/Results
Houston Works Response To
H-GAC
Monday, July 23,2012
correct duplicate payments not
identied by approval and
payment process listed in
Section 340.400. This will be
completed by 8/31/12.
2b. The Chief Financial Officer handles all FIN AIS-1 The Director of Finance will
requests to create MIP accounts for new make requests for permission
users, prepares the workflow assignments, changes via internal System
and assigns access rights based on his Request Form (SRF) system
personal judgment and expectation of job (adds, changes, removals).
duties which is a segregation of duties Designated staff in the
issue. If the employee changes roles or Information Technology (IT)
leaves Houston Works at any time, the Department will implement
Chief Financial Officer will alter his MIP changes when the SRF is
profile or remove them from the system. received and logged. The IT
Manager will report all SRF
activity at the weekly staff
meeting. The Director of
Finance right to make changes
will be removed by 7/31/12.
2b. The HoustonWorks Payroll policies and
Cash Disbursement policies do not
adequately address the requirements of H­
GAC or the Texas Workforce Commission
with regards to the review and approval of
payroll to ensure no employee's salary
breaches the salary cap and the
procedures to be taken in the event of a
duplicate payment.
FIN AP-3
HoustonWorks will modify
section 370.100 of the Financial
Policies and Procedures Manual
to address the review and
approval of payroll and
procedures of duplicate
payments by 8/31/12.
2b. We identified the following access FIN SOD-1 HoustonWorks will review our
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Exhibit 4
Summary of Issues WP
Reference/Results
Houston Works Response To
H-GAC
Monday, July 23,2012
issues:
-The IT Manager is responsible for the
purchase and record IT assets
-The Director of Finance prepares and
approves employee MIP profiles
policies and re-assign these
responsibilities to ensure
segregation of duties and
access controls are in place.
3a. The Procurement Policies and
Procedures do not address the
maintenance of an Eligible Training
Providers List, as required by the Texas
workforce Commission, for WIA Adult and
Dislocated Workers services.
FIN PP-3
This finding will be deleted from
the report per the Weaver
Monitoring Team.
3b. The Procurement Policies and
Procedures do not fully address the use of
the Request for Purchase Review form to
obtain prior approval from H-GAC for
inventory purchases over $5,000
FIN PP-1 HoustonWorks will modify our
Procurement Policies and
Procedures Manual to fully
address the use of the Request
for Purchase Review form to
obtain prior approval from H­
GAC for inventory purchases
over $5,000.00 by 8/31/12.
3b. The Procurement Policies and
Procedures do not address maintenance of
the vendor list, as recommended by the
Texas Workforce Commission's Federal
Guidelines for Contract Management to
ensure that vendors selected are from
qualified sources.
FIN PP-2 HoustonWorks will modify the
Procurement Policies and
Procedures Manual to address
maintenance of the vendor list in
accordance with the TWC
Financial Manual for Grants and
Contracts, Chapter 14
Procurement: 14.6, Bidders and
Vendors Lists by 8/31/12. In
addition, the Procurement
Manager will review all active
vendors on the e ~ . g c > v site.
8
---
Exhibit 4
Summary of Issues WP
Reference/Results
Houston Works Response To
H-GAC
Monday, 23, 2012
4b. The HoustonWorks inventory database FIN INV-1
is not secure. HoustonWorks maintains an HoustonWorks has secured the
Excel spreadsheet to track inventory which fixed assets inventory database.
the Property Control Officer, Procurement Currently only the Procurement
Manager, and Director of IT all have write Manager has access to the
access to this spreadsheet allowing them to spreadsheet. All inventory
change or edit the inventory listing at will. changes will be reported by the
Property Manager in the weekly
staff meeting.
5c. We were unable to verify the
assignment of job responsibilities and
reporting structure because accurate job
descriptions and a current organizational
chart were not made available at the time of
the engagement fieldwork.
FIN HR-3 Job descriptions and the cu rrent
organizational chart are
attached. Some of these have
been recently revised to reflect
our leaner organization and the
input of the Christine Nguyen,
CPA compliance audit,
McConne" Jones, CPAs
financial and single audits, and
this Weaver CPAs compliance
audit over recent six months.
Procedure C: Accounting Information
System and Controls Verification
1 a. We identified that while there are
systematic controls available to ensure that
the accounting system is used to capture all
program transactions, has an appropriate
back-up system, access rights and
FINAIS-2

Two of the four users that
have access to MIP are
technical accounts that
are required by MIP and
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------ ------
----
Exhibit 4

Summary of Issues WP Houston Works Response To
Reference/Results H-GAC
July 23, 2012
access to data is appropriately restricted. Microix for technical
We identified multiple segregation of duties support and for the
issues with the assigned rights and profiles database to function.
as identified below: The other two accounts
were assigned to two
MIP that are not listed in the employee

There were four users with access to
consultants who needed
directory. access to perform their
assigned duties. These
can add/edit invoices, enter cash

The Executive Administrative Assistant
accesses have been
receipts, enter cash disbursements, terminated. Our access
add/edit payroll, and perform General
processes will be
Ledger transactions.
changed to timely close
access for short term use

The Contract and Billing Assistants can
enter Accounts Payable Credits, select
upon departure.
Accounts Payable invoices to pay, •
The Executive
prepare the Check Register, and
Administrative Assistant
process manual checks.
rights have been
removed.
for assigning access, can edit his own

The Director of Finance is responsible

The Contract and Billing
access rights, and has the ability to alter
Assistants job duties will
posted data.
be reviewed to ensure
that each have
segregated rights in the
accounting system.

The Director of Finance
will continue to prepare
and approve profiles but
changes will only be
applied by the
Information Technology
staff after they have been
10
-------
Exhibit 4
Summary of Issues WP
Reference/Results
Houston Works Response To
H-GAC
Monday, July 23,2012
logged. The Director of
Finance's ability to modify
his own rights has been
removed. All such
changes will be reported
by the IT Manager at the
weekly staff meetings on
Monday mornings.
The Financial Policies and
Procedures Manual will be
updated to add Section 140.600:
System Access Rights by
8/31/12.
1a. The Chief financial Officer handles all
requests to create MIP accounts for new
users, prepares the workflow assignments,
and assigns access rights based on his
personal judgment and expectation of job
duties which is a segregation of duties
issue. If the employee changes roles or
leaves Houston Works at any time, the
Chief financial Officer will alter his MIP
profile or remove them from the system.
-------­
b. There are no formal processes in place
for the late payment of selected invoices
due to shortage of cash flow that comply
with H-GAC policies and procedures.
However, there appears to be appropriate
understanding of key accounting,
procurement, accounts payable, payroll,
FIN AIS-1
----------­
The Director of Finance will
continue to prepare and approve
profiles but changes will be
applied by the Technology
Information staff once they have
been logged. All changes will be
reported by the IT Manager at
the weekly staff meeting.
FIN AS-2 In the case of late payments,
Finance will utilize the aging
report to minimize late
payments. Further, the Senior
Management team will utilize
the aging report to prioritize
payments to ensure that all
11
Exhibit 4
Summary of Issues
------------­
coding classification and cost allocation
among accounting staff.
WP
Reference/Results
Houston Works Response To
H-GAC
Monday, July 23,2012
major functions are continued
with no interruptions. A current
aging report will be provided to
the Chairman of the Board or
Board designee monthly along
with other financial statements.
HoustonWorks will modify the
Financial Policies and
Procedures Manual, Section
240.500 by 8/31/12 to include
this process.
c. We identified that while there is a
systematic control available to insure that
the access rights and access to data is
appropriately restricted, there are multiple
segregation of duties issues with the
assigned rights and profiles as identified
below:

There were four users with access to
MIP that are not listed in the employee
directory.

The Executive Administrative Assistant
can add/edit invoices, enter cash
receipts, enter cash disbursements,
add/edit payroll, and perform General
Ledger transactions.

The contract and Billing Assistants can
enter Accounts Payable Credits, select
Accounts Payable invoices to pay,
prepare the Check Register, and
process manual checks.
FINAIS-2

Two of the four users that
have access to MIP are
technical accounts that
are required by MIP and
Microix for technical
support and for the
database to function.
The other two accounts
were assigned to two
consultants who needed
access to perform their
assigned duties; their
access has been
terminated. Review of
the short term user
access process will be
modified by 8/31/12.

The Executive
Administrative Assistant
rights have been
12
----------
Exhibit 4
Summary of Issues

The Director of Finance is responsible
for assigning access and can edit his
own access rights.
Procedure D: Cash Management
WP
Reference/Results
Houston Works Response To
H-GAC
Monday, July 23, 2012
removed.

The Contract and Billing
Assistants job duties will
be reviewed to ensu re
that each have
segregated rights in the
accounting system.

The Director of Finance
will continue to assign
access but his rights to
edit his own access rights
and alter posted data will
be removed. All changes
must be reported on an
SF form. All access
changes will be reported
weekly by the IT Manager
at the weekly staff
meeting.
1e. The Accounts Payable Aging Report
shows $798,799.87 in outstanding
payables for the review period ending May
31,2012. Only $18,739.92 is current. The
remaining amount is over 30 days past due.
There is a total $70,598.32 invoices which
are over 90 days past due. We also noted
that is a total of $58,362.00 which is
attributed to rental delinquency of Comerico
Properties which is the leasing company for
FINAIS-3
ISSUE WILL CHANGE
13
----- ----
Exhibit 4
Summary of Issues
the building in which the
headquarters is located. Additionally, we
noted the following:
1-30 days past due: $491,565.37
31-60 days past due: $163,249.17
61-90 days past due: $54,647.09
Over 90 days past due: $70,598.32
WP
Reference/Results
Houston Works Response To
H-GAC
Monday, July 23,2012
2c. The November 2011 Chase General
account bank reconciliation ending balance
did not match the General Ledger. An
unreconciled difference of $29.95 was
documented for the month.
FIN BR-2 HoustonWorks will continue to
provide training and assistance
to accounting staff to ensure
accurate bank reconciliations
monthly.
2d.There were five instances of bank
reconciliations not performed within 30
calendar days of the bank statement close,
as required by H-GAC Contract
Management Policies and Procedures.
Reconciliations for November for the
General, Payroll, and Non-
Federal accounts were performed 133, 86
and 139 days, respectively, after the
statements closed. Reconciliations for
December for the General and Non-Federal
accounts were performed 72 and 78 days,
respectively, after the statements closed.
Procedure E: Cost Allocation and
Budgeting
FIN BR-1 HoustonWorks acknowledges
that bank reconciliations should
be performed within 30 calendar
days of the bank statement
close. As of January 2012, all
bank reconciliations have been
performed within the 30
calendar days as required. The
Director of Finance will continue
to monitor these efforts, and will
report the accomplishment of
the monthly closings and
reconciliations at the weekly
staff meeting.
14
----------
----------
Exhibit 4
Summary of Issues WP Houston Works Response To
Reference/Results H-GAC
23, 2012
2. We identified that there were significant FIN CA-1 HoustonWorks provided revised
differences in the Cost Allocation Plan and budgets to the Weaver
the submitted budget. The Cost Allocation monitoring team and the new
Plan budgets were in line with the H-
does not appear to have been updated for GAC contract.
the latest budget revisions in use by
HoustonWorks. See Appendix A Table 1 for

Will compare to final
additional information on the results. report ,
3. We identified that the "Prior FIN CA-2 Information pertaining to this
Expenditures" column of the Billing issue has been provided to the
documentation submitted to H-GAC was Weaver monitoring team,
inaccurate. We identified waiting on their response.
that the prior expenditures did not change
month over month with the addition of the
prior month's current expenditures which
affects the total administrative portion for

Will compare to final
each line item. We identified three report.
instances out of a sample of five where the
actual
expenditures for the month exceeded the
budgeted expenditures for that month, but
the inaccuracy of the billing reports makes
it unreliable for testing or management
review of variances in actual versus
budgeted expenditures. See Appendix A
Table 2 for
additional information on the results.

Procedure F: Expenditure Transaction
Testing
15
Exhibit 4
Summary of Issues WP
Reference/Results
Houston Works Response To
H-GAC
Monday, July 23,2012
1a. We found two issues out of a sample of
eight, or and error rate of 25%, with
mileage reimbursement transactions. There
was one instance where the Travel
Authorization Request form required by
HoustonWorks' Policies and Procedures
was not on file for a request and one
instance where the required Travel
Expense Report detailing mileage incurred
was not signed and approved by an
appropriate employee prior to being paid,
as required by HoustonWorks.
FIN-EX-8 Managers and supervisors will
ensure that Houston Works staff
follows the current written policy
regarding travel and the
authorization of such. Training
for this and other administrative
issues will be conducted for all
staff at either the semi-annual
"all hands" meetings or at the
monthly center meetings.
1a. We were unable to verify the validity of
the monetary amount of the transfer from
the General account to the Chase Payroll
account on February 29, 2012 in our
selected sample or the amount of vacation
pay covered by the transfer to the Payroll
account on May 3, 2012 due to a lack of
sufficiently detailed support.
FIN EX-9 We have attached the detailed
support for the payroll transfer of
May 3, 2012. See attachment
"121241DFG Cash Transfer."
We have attached the detail
support for the payroll transfer
completed on February 29,
2012. See attachment
"120601 DFG Payroll Cash
Transfer."
1a. We identified one SOD issue for an
account transfer from the General to Payroll
account. We confirmed with Irma Soledad,
Accounting Manager, that the transaction
was performed on December 23, 2011 by
Rudy Martinez, CFO to reconcile a
FIN EX-10 This creation and approval of
duties will be separated prior to
payroll of 8/1/12. HoustonWorks
will modify the Financial Policies
and Procedures Manual Section
370.310: Processing Regular
16
-----
Exhibit 4
Summary of Issues WP Houston Works Response To
Reference/Results H-GAC
Monday, July 23,2012
-------­
mathematical error on his part. He initially
transferred $282,745.05 to the Payroll
account and the correct amount should
have
been $287,745.05, so there are two
transfers to Payroll documented for
December 23,2011 and no documented
approval for the second transfer. The CFO
was should not be able to initiate and
complete the transfer transaction without
additional approval.
2a. There were three instances where an
employee's time sheet was prepared or
approved, but the employee did not certify
or approve the prepared timesheet prior to
payment.
2a. There were two instances where an
employee's time sheet was prepared and
submitted, but never approved prior to
payment.
- ~ ~ ~ - - ~
FIN EX-1
FIN EX-2
Payroll by 8/31/12.
HoustonWorks will modify the
Financial Policies and
Procedure Manual by 8/31/12 to
indicate that when employees
are unavailable to approve their
timesheet efforts will be made to
complete and approve them by
the pay date. If employees are
out for an extended period of
time, certification and/or
approval will be sought upon
their return to work. Same for
timesheets that need
supervisor/manager approval.
HoustonWorks will modify the
Financial Policies and
Procedure Manual by 8/31/12 to
indicate that when employees
are unavailable to approve their
timesheet efforts will be made to
17
Exhibit 4
Summary of Issues WP
Reference/Results
Houston Works Response To
H-GAC
Monday, July 23,2012
complete and approve them by
the pay date or at their
immediate return to work. Same
for timesheets that need
supervisor/manager approval.
2a. We identified three instances where the
employee's time sheet was not available.
One transaction in the amount of $1,807.84
was for merit pay and two transactions, in
the amounts of $3,667.45 and $4,823.23,
were for vacation pay. Without the
completed timesheet, there is no
documented approval for the merit payout
amount and no validation for the vacation
hours paid.
FIN EX-3 Attached are the vacation
approvals for all three samples
in the amounts of $1 ,807.84,
$3,667.45 and $ 4,823.23. See
attachment entitled "Vacation
Payment."
2a. We noted two instances where
HoustonWorks provided payroll information
for the selected employee for the wrong
time period.
We were unable to verify payroll details for
these transactions due to a lack of
sufficiently detailed support.
FIN EX-4 HoustonWorks acknowledges
the incorrect information was
inadvertently provided for review
at the time requested. Since
then, HoustonWorks has located
the correct information and it is
attached.
3a. We found one instance where the
required application for reimbursement of
tuition costs through the Educational
Assistance
benefit was not signed and approved at
time of payout.
FIN EX-5 Fiscal staff will review the
request to ensure that
requesting staff meet all agency
requirements to receive the
tuition assistance. Once
information is verified, fiscal staff
will sign the form. The current
f()rm will be changed b ~ 8/31112
18
Exhibit 4
Summary of Issues WP
Reference/Results
Houston Works Response To
H-GAC
Monday, July 23,2012
to comply with the above.
3a. There were five instances where no
Purchase Requisition or Expense Report,
as required by HoustonWorks' Policies and
Procedures, was submitted prior to payout
of a reimbursement.
FIN EX-6 HoustonWorks finance staff will
require all staff to follow the
policies set forth in the Financial
Policies and Procedures
Manual, Section 350.700:
Reimbursing Other Employee
Expenses when approving and
paying reimbursements.
3a. While the policies point to the use of
expense reports, in practice HoustonWorks
does not follow documented policies and
procedures. HoustonWorks relies on
purchase orders for employee
reimbursements. We found one instance
where an employee was reimbursed for
expenses, but no purchase order was
submitted.
FIN EX-7 HoustonWorks staff will be
reminded with a notice to all
Center Managers immediately to
follow the policies and
procedures in place currently
and all staff will receive a
training segment on expense
procedures as well as other
administrative issues at our
semi-annual "all hand" meetings
or at our monthly center
meetings. We currently use
Purchase Orders to make
payments including staff
reimbursements, we will
continue to reiterate this policy
to all staff and fiscal staff will
follow and enforce the policies.
Procedure G: Financial Reporting
2b. Financial reporting for the sampled
periods of October 2001, December, 2011,
FIN FR-1 The report for December 2011
was accounted for in the billing
19
--------
Exhibit 4
Summary of Issues WP
Reference/Results
Houston Works Response To
H-GAC
Monday, July 23, 2012
February 2012 and April 2012 did not have
variances in the total amounts reported to
H-GAC. However, there was a variance
within cost allocation category in
Administration costs for WIA Adult funding
stream for the month of December 2012 of
$2,977.52. (Note: This variation is pending
verification from the CFO)
report of January 2012.
2e. There is no documented review and
approval process. Reports submitted to H­
GAC for the months of March, April and
May do not indicate that the CFO reviewed
the reports prior to submission. These
reports were submitted by the Contract and
Billing Assistant.
FIN FR-2 Moving forward the Director of
Finance will review and approve
all billing reports before they are
submitted to H-GAC. Section
610.500 of the Financial Policies
and Procedures Manual will be
adjusted to note this change by
8/31/12.
Procedure H: Property Management and
Control Verification
1a. The percentage of purchase price
covered by H-GAC or other funding
streams was not documented for any of the
40 items in our sample and there is
currently no area in the Inventory
Spreadsheet to record this data.
FIN ITT-1 The inventory sheet will be
modified to indicate the
percentage by funding stream
by 8/31/12. The complete
inventory listing Ispreadsheet
will be reviewed by the
Executive Director and Property
Control Officer at least semi­
annually by the Property Control
Officer.
20
---- ----- ----
Exhibit 4
Summary of Issues WP
Reference/Results
Houston Works Response To
H-GAC
Monday, July 23, 2012
1a. The make, model, and/or serial number
was not recorded for two inventory items in
use during the review period, one being a
set of hand dryers, and the other a Sony
TV.
FIN ITT-2 We have reviewed our current
inventory xis and will make
improvement in documenting
assets. We will ensure that all
items purchased will be properly
documented on our inventory
spreadsheet and updated as
needed continuously. Assigned
staff will make this a priority in
the next 90 days. In the
meantime, the items identified
on this report have been
properly documented. The
Sony TV has the following
identifying information: Make-
SONY, model-KDL52V41 00.
The hand dryers Make is
Bodrick.
1c. There were two instances out of a
sample of fifteen transfers, or 13.2%, where
Notice of Transfer forms for equipment
moved
between locations were not signed and
approved by the releasing or receiving
manager at the time of transfer.
FIN ITT-3 HoustonWorks will take
corrective action with staff that
does not follow the written
policies on moving equipment.
All inventory (asset) transfers
will be reported by the
Information Technology
Manager or Property Control
Officer at the weekly staff
meeting.
Procedure I: Customer Complaints
i
No issues HoustonWorks is proud of its
I
work with customers.
21
---------------- ----------------
Exhibit 4
Summary of Issues WP
Reference/Results
Houston Works Response To
H-GAC
Monday, July 23, 2012
Procedure J: Subcontracts
1a. HoustonWorks does not currently have
a process in place to verify that
subcontractors are not debarred and are
current with their state franchise taxes.
FIN SUB-1 Effective immediately,
HoustonWorks will begin to use
the following website:
https:llwww.ep/s.govto verify
that subcontractors are not
debarred and are current with
their state franchise taxes. Our
Procurement Policies and
Procedures Manual will be
changed to accommodate this
action 8/31112.
Procedure K: Insurance
1a. The Texas Workforce Commission's
Financial Management of Grant Contracts
and H-GAC's contract management
policies and procedures require that
HoustonWorks, as a workforce services
provider, list H-GAC as the loss payee on
all insurance and bonding certificates. For
each of the five policies reviewed, H-GAC
was not listed as a loss payee.
FIN IN-1 HoustonWorks has requested
the insurance policies be
amended to have H-GAC listed
as a loss payee. The insurance
brokers have been instructed to
provide these certificates
directly to HGAC with a copy to
HoustonWorks now and upon
any changes or renewals.
22
HoustonWorks USA
Executive Summary - Financial Position
Expenditures and cash activity for March 2012 through July 2012 have been analyzed in order to
establish financial stability through December 31,2012. These financial reports represent the results of
that analysis. Please note the following observations:.
Description
Page
Number(s)
Projected change in net current assets for period ending December 31, 2012.
Activity for period is expected to increase net current assets by $252,328.
2
Current cash status report extended through December 31, 2012. Anticipated
revenues, cost reimbursements and other cash items are basis for anticipated
revenues noted on page 1. December 31,2012 cash position noted on page 4 is
anticipated to be approximately $93,000. This cash management report has been
utilized by executive team since February 1, 2012 to determine weekly cash
disbursements.
3-5
H-GAC contract 103-12 projected financial status as of September 30, 2012. Total
expenditures are on a downward trend beginning April 1, 2012. Personnel salaries
and payroll taxes projections are based on July 20, 2012 payroll cycle. Seven cycles
remain in contract period. Other expenditures based on June 2012 activity.
Monthly costs include recurring activities only in order to fairly represent fourth
quarter projection.
6
Condensed Balance Sheet and Statement of Cash Flow for fiscal years August 31,
2004 through August 31, 2011. Amounts are summarized from fiscal year audit
reports. Detail by year is available upon request.
7-8
Unaudited June 30, 2012 Interim balance sheet, statement of activities and
statement of cash flow.
9-11
Cumulative net loss tracked by month for period September 1, 2011 through June
30,2012. September 2011 loss includes of unreimbursed H-GAC contract costs of
$190,601.
12
Prepared: July 24, 2012 Page 1 of 12
HoustonWorks USA
Pro-Forma Cash Projection
July 1, 2012 through 12/31/12
FYE 8/31/12
Personnel Vacation
Salaries payout
Anticieated revenyes &Qther j;ash receiets
H-GAC cost reimbursements (2012 actual + 2013 estimate)
H-GAC 2013 contract advance
Amy Young Barrier Removal Project
OARS
METRO
DARPA
CPS
C-Core
Energy Efficiency program
Northside office space cost reimbursements
Personnel
Benefits
Vendor &
Rent
Expense
Payroll
Taxes Total
8,lS0,OOO
500,000
27,500
20,000
225,000
410,000
3,000
21,250
150,000
27,500
Total projected revenues & other cash receipts 9,534,250
Prolected erogram & administrative exeenses:
944/922 H-GAC Programs
911 Administrative
325 C-Core
326 OARS
327 Amy Young Barrier Removal
328 Starbucks
383 DARPA STEM
386 METRO
388 Frontier Associates - Energy Efficiency
391 CPS - Harris County
392 Stafford
966 General &Administrative (non-billable)
3,978,390
218,470
5,190
15,300
20,600
6,900
199,410
67,430
31,780
2,700
28,480
10,890
156,170
8,580
200
600
810
270
7,830
2,650
1,250
110
1,120
430
732,580
40,230
960
2,820
3,790
1,270
36,720
12,420
5,850
500
5,240
2,010
1,948,630
299,400
83,500
76,940
70
285,420
15,670
370
1,100
1,480
500
14,310
4,840
2,280
190
2,040
780
7,101,190
582,350
6,720
19,820
26,680
8,940
341,770
87,340
118,100
3,500
36,950
14,110
4,585,540 180,020 844,390 2,408,540 328,980 8,347,470
Other cash disbyrsements through 12l31l12
911 Larry V. Green severance pay plus taxes
911 Rudy Martinez July-12 pay plus taxes
911 McConnell Jones audit fees
H-GAC 2012 contract advance pay-off
H-GAC 2013 contract advance pay-off
21,546
16,667
50,000
2,906
3,333
24,452
20,000
50,000
665,000
175,000
Total cash disbursements 4,623,753 180,020 844,390 2,458,540 335,219 9,281,922
Change in net current assest for period 9/1/11 through 6/30/12 252,328
Prepared: July 24.2012 Page 2 of 12
Available Cash
Payroll Account
Non-Federal Account
General Account
Wells Fargo
Carryforward balance from prior period
Total
Anticipated Revenues / Cost Reimbursements
METRO (net of sub-contractor payments)
SER
HGAC
DARPA
Other; C-Core, Frontier Associates
Space Cost Reimbursements
CPS
Draw on Line of Credit
Total
Anticipated Non-Personnel Costs
Vendor Payments
Rent - Astrodome
Comercio Properties (Corporate)
Comercio Properties (Northside)
Gobare, Inc (N.East)
Harrisburg Plaza LTD (East End)
Northline Mall limited Partnership (N.Line)
Pasadena Mall Investments, LTD (Pasadena)
Pine Forest Associates (NShore)
Post Avenue Commons (Southwest)
Super LLC, (Hobby)
Repay H-GAC 103-12 advance
Digitech
Aetna Health Insurance (due by end of month)
Personnel Costs
403b Employee & Employer Match Contributions
HGAC Payroll Taxes
Non HGAC Payroll Taxes
401a & 403b Loans
METRO net payroll
DARPA net payroll
Other program payroll
HGAC net payroll
Payments on line of Credit
Total Anticipated Disbursements
NOI 07/19/12
5,000
11,219
293,003
17,456
-
326,678
-
30,000
54,924
136,337
16,810
238,071
07/26/12
88,607
88,607
-
30,000
30,000
08/02/12
58,607
58,fi07
906,085
906,085
30,000
17,500
5,230
15,677
34,247
21,148
12,480
15,700
15,593
75,000
54,924
60,135
153,859
7,750
17,500
3,650
16,575
8,700
237,000
802,668
08/09/12
162,024
162,024
3,603
3,603
20,000
20,000
08/16/12
145,627
145,627
39,144
125,000
3,542
167,686
20,000
7,650
3,650
16,575
7,770
237,000
292,645
08/23/12
20,668
20,668
675,000
5,500
680,500
30,000
130,GOO
33,104
74,250
17,500
285,454
08/30/12
415,714
415,714
-
20,000
54,924
7,650
17,500
3,650
16,575
7,770
237,000
365,069
09/06/12
50,645
50,645
750,000
750,000
20,000
17,500
33,104
74,250
144,854
09/13/12
655,791
655,791
38,147
3,542
41,689
40,000
18,515
3ASO
5,230
15,677
34,247
21,148
12,480
15,700
15,593
54,924
74,250
7,650
17,500
3,650
16,575
7,770
237,000
601,360
Projected Excess !(Deficit) Cash
Balance on line of Credit
88,607
490,000
58,607
490,000
162,024
490,000
145,627
490,000
20,668
490,000
415,714
490,000
50,645
490,000
655,791
490,000
96,121
490,000
Total Current Payroll Cash requirements by pay period
Prepared: July 24, 2012
487,669 272,645 107,354 272,645 107,354 346,895
Page 3 of 12
Available Cash
Payroll Account
Non-federal Account
General Account
Wells fargo
Carryforward balance from prior period
Total
Anticipated Revenues / Cost Reimbursements
METRO (net of sub-contractor payments)
SER
HGAC
DARPA
Other; C-Core, Frontier Associates
Space Cost Reimbursements
CPS
Draw on Line of Credit
Total
Anticipated Non-Personnel Costs
Vendor Payments
Rent - Astrodome
Comercio Properties (Corporate)
Comercio Properties (Northside)
Gobare, Inc (N.East)
Harrisburg Plaza LTD (East End)
Northline Mall Limited Partnership (N.Line)
Pasadena Mall Investments, L TO (Pasadena)
Pine forest Associates (NShore)
Post Avenue Commons (Southwest)
Super LLC, (Hobby)
Repay H-GAC 103-12 advance
Digitech
Aetna Health Insurance (due by end of month)
Personnel Costs
403b Employee & Employer Match Contributions
HGAC Payroll Taxes
Non HGAC Payroll Taxes
401a & 403b Loans
METRO net payroll
DARPA net payroll
Other program payroll
HGAC net payroll
Payments on Line of Credit
Disbursements
N 09/20/12
96,121
96,121
5,500
5,500
30,000
33,104
63,104
09/27/12
38,517
38,517
625,000
100,000
725,000
30,000
120,000
130,600
33,104
7,650
17,500
3,650
16,575
7,770
237,000
603,849
10/04/12
159,668
159,668
600,000
600,000
30,000
18,515
3,450
5,230
15,677
34,247
21,148
12,480
15,700
15,593
425,000
74,250
671,291
10/11/12
88,377
88,377
38,000
500,000
3,542
541,542
30,000
17,500
54,924
33,104
74,250
7,650
11,500
3,650
16,575
7,770
234,600
497,523
10/18/12
132,396
132,396
5,500
5,500
50,000
50,000
10/25/12
87,896
87,896
653,391
653,391
75,000
75,000
130,600
33,104
74,250
7,650
17,500
3,650
16,575
7,770
234,600
-
11/01/12
65,588
65,588
100,000
100,000
60,000
17,500
54,924
132,424
11/08/12
33,164
33,164
35,000
700,000
3,542
738,542
60,000
18,515
3,450
5,230
15,677
34,247
21,148
12,480
15,700
15,593
130,600
33,104
74,250
7,650
17,500
3,650
16,575
7,770
234,600
727,7IW
11/15/12
43,966
43,966
5,500
5,500
40,000
IW,ooo
Projected Excess I (Deficit) Cash
8alance on Line of Credit
38,517
490,000
159,668
490,000
88,377
490,000
132,396
490,000
87,896
490,000
65,588
490,000
33,164
490,000
43,966
490,000
9,466
490,000
Total Current Payroll Cash requirements by pay period
Prepared: July 24, 2012
33,104 305,749 74,250 377,599 377,599 377,599
Page 4 of12
Available Cash Ne 11/22/12 11/29/12 12/06/12 12./13/12 12/20/12 12./27/12 01/03/13
Payroll Account
Non-Federal Account
General Account
Wells Fargo
Carryforward balance from prior period 9,466 204,367 144,367 57,745 3,245 216,371 14,330
Total 9,466 204,367 144,367 57,745 3,245 216,371 14,330
Anticipated Revenues/ Cost Reimbursements
METRO (net of sub-contractor payments) 35,000 35,000
5ER
HGAC 600,000 700,000 675,000 675,000
DARPA 75,000
Other; C-Core, Frontier Associates 3,542 3,542
Space Cost Reimbursements 5,500
CPS
Draw on line of Credit I
Total 675,(100 - 738,542 5,500 675,000 - 713,542
Anticipated Non-Personnel Costs
Vendor Payments 60,000 60,000 60,000 60,000 60,000 60,000 30,000
Rent - Astrodome 17,500 17,500
Comercio Properties (Corporate) 18,515 18,515
Comercio Properties (Northside) 3,450 3,450
Gobare, Inc (N.East) 5,230 5,230
Harrisburg Plaza lTD (East End) 15,677 15,677
Northline Mall limited Partnership (N.line) 34,247 34,247
Pasadena Mall Investments, lTD (Pasadena) 21,148 21,148
Pine Forest Associates (N5hore) 12,480 12,480
Post Avenue Commons (Southwest) 15,700 15,700
Super llC, (Hobby) 15,593 15,593
Repay H-GAC 103-12 advance 25,000 25,000 25,000 25,000
Digitech 54,924 54,924
Aetna Health Insurance (due by end of month) 130,600 130,600
Personnel Costs
403b Employee & Employer Match Contributions 33,104 33,104 33,104 33,104
HGAC Payroll T a ~ e s 74,250 74,250 74,250 74,250
Non HGAC Payroll T a ~ e s 7,650 7,650 6,000 6,000
401a & 403b loans 17,500 17,500 17,500 17,500
METRO net payroll 3,650 3,650 3,650 3,650
DARPA net payroll 16,575 16,575
Other program payroll 7,770 7,770 7,770 7,770
HGAC net payroll 234,600 234,600 234,600 234,600
Payments on line of Credit
Total Anticipated Disbursements 480,099 60,000 825,164 60,000 461,874 202,041 634,898
Projected Excess / (Deficit) Cash
Balance on line of Credit
204,367
490,000
144,367
490,000
57,745
490,000
3,245
490,000
216,371
490,000
14,330
490,000
92,974
490,000
Total Current Payroll Cash requirements by pay period
Prepared: July 24, 2012
377,599 377,599 359,374 359,374
Page 5 of 12
HoustonWorks USA
H-GAC Contract 103-12 Projected Financial Results
September 30,2012
Direct Qly:! M&G Mar-12
Personnel Salaries 676,274
Personnel Benefits 142,916
Vendor & Rent Expense 329,293
Payroll Taxes 93,240
Total Direct services plus M&G 1,241,723
Admin Costs Mar-12

677,955
110,202
311,774
49,632
1,149,563

May-12
688,941
104,641
334,158
49,715
1,177,454
May-12
Jun-12
701,571
100,016
324,771
50,249
1,176,608
Jun-12 Jul-12
Personnel Salaries 40,779 41,619 44,907 39,056
Personnel Benefits 23,795 23,147 24,619 21,657
Vendor & Rent Expense 54,826 53,333 56,725 49,900
Payroll Taxes 5,622 3,047 2,797 2,797
Total Admin 125,022 121,146 129,048 113,410
Total recurring costs 1,356,743 1,261,017 1,296,178 1,280,945
(100% direct plus 92% of admin)
Projection 7/1/12 through 9/30/12
Direct Service plus MIG costs
Reverse Jun-12 personnel cost accrual against paid in Jul-12 (433,814)
Personnel Salaries (based on 7/20/12 payroll * 7 pay periods) 2,320,726
Sep-12 personnel costs accrual for pay period in Oct-12 196,054
Personnel Benefits (based on Jun-12 * 3 months)
Vendor & Rent Expense (based on Jun-12 * 3 months)
Payroll Taxes (based on 7/20/12 payroll * 7 pay periods)
300,049
974,314
166,496
Total Direct services plus M&G A 3,523,825
Admin Costs
Reverse Jun-12 personnel cost accrual against paid in Jul-12
Personnel Salaries (based on 7/20/12 payroll * 7 pay periods)
(41,974)
109,233
Sep-12 personnel costs accrual for pay period in Oct-12
Personnel Benefits (based on Jun-12 * 3 months)
Vendor & Rent Expense (based on Jun-12 * 3 months)
Payroll Taxes (based on 7/20/12 payroll * 7 pay periods)
18,969
64,971
149,699
7,837
Total Admin 8 308,734
Projected for recurring costs C = A + (8 * 92%) 3,807,860
Non-recurring 4th guarter items:
Comercio rent adjustment (92% of 3 months rent) - Admin (51,101)
Larry V. Green severance pay plus taxes - Admin 24,452
Rudy Martinez July-12 pay plus taxes - Admin 20,000
Estimated End of contract year invoices (those usually posted in subsequent month) 40,000
Additional consultant & professional service costs (related to executive team transition) 20,000
FYE 8/31/12 vacation payoff 180,000
McConnell Jones audit fees posted in July not included above - Admin cost category 33,263
Total projected non-recurring costs for last quarter of contract D 266,613
Cumulative contract costs per H-GAC 6/30/12 bill E 12,877,241
Total projected costs through 9/30/12 C + D + E 16,951,714
Contract 103-12 budget 16,951,714
(Negative) / Positive variance (0)
Prepared: July 24, 2012 Page 6 of 12
36,411
2,612
HoustonWorks USA
Comparative Statement of Financial Position
Fiscal Years Ending August 31, 2004,2005,2006,2007,2008,2009,2010 & 2011
08/31/04 08/31/05 08/31/06 08/31/07 08/31/08 08/31/09 08/31/10 08/31/11
Current Assets
Cash 439,759 1,363,840 1,005,973 1,717,851 997,982 1,682,883 1,258,374 962,100
AIR Grants 3,030,141 2,142,155 1,430,181 1,451,903 1,441,477 1,000,193 930,246 653,875
Annuity Investment 216,508 224,765 227,088 231,984 246,710 203,535
Note Receivable 49,750
Total current assets 3,736,158 ~ 7 3 0 , 7 6 0 2,663,242 3,401,738 2,686,169 2,886,611 2,188,620 1,615,975
Other AIR 20,194 12,552 12,145 10,850 16,565 25,109 23,612
Other Assets 54,567 39,981 310,774 8,496 118,149 134,531 20,474
Net Property & Equipment 2,919,291 3,077,759 5,600,593 5,767,713 3,403,398 2,844,219 2,975,978 2,338,080
Deposits 44,174 43,674 46,383 46,383 46,384 48,102 48,102 42,902
Total other assets 3,038,226 3,173,966 5,969,895 5,833,442 3,584,496 3,051,961 3,068,166 2,380,982
Total Assets 6,774,384 6,904,726 8,633,137 9,235,180 6,270,665 5,938,572 5,256,786 3,996,957
Liabilities
AlP 2,120,234 1,572,911 301,884 321,305 370,809 270,931 551,151 280,158
Accruals 1,437,470 1,333,489 2,020,336 2,601,899 2,140,463 1,575,340 1,304,337 1,056,637
Deferred Revenues 262,144 457,889 583,048 1,038,885 367,154 1,119,603 360,000 835,119
Current portion long-term debt 2,888 3,054 86,222 86,222 3,653
LaC 150,000 150,000 150,000 490,000
Total current liabilities 3,822,736 3,367,343 2,991,490 4,048,311 3,032,079 3,115,874 2,365,488 2,661,914
Long-term portion of note payable 13,311 10,269 1,553,432 1,467,713
Total Liabilities 3,836,047 3,377,612 4,544,922 5,516,024 3,032,079 3,115,874 2,365,488 2,661,914
Net Assets 2,938,337 3,527,114 4,088,215 3,719,156 3,238,586 2,822,698 2,891,298 1,335,043
Liabilities & Net Assets 6,774,384 6,904,726 8,633,137 9,235,180 6,270,665 5,938,572 5,256,786 3,996,957
Income/(Loss) from continuing operations (312,261) 588,777 748,803 (95,033) (315,569) (233,604) 68,600 (1,556,255)
Income/(Loss) - Ben & Jerry's (187,702) (274,026) (165,001) (182,284)
Annual Totals (312,261) 588,777 561,101 (369,059) (480,570) (415,888) 68,600 (1,556,255)
Cumulative Totals - continuing operations
Cumulative Totals - Ben & Jerry's
(1,106,542)
(809,013)
Current Ratio
Working Capital / (Deficit)
0.98
(86,578)
1.11
363,417
0.89
(328,248)
0.84
(646,573)
0.89
(345,910)
0.93
(229,263)
0.93
(176,868)
0.61
(1,045,939)
Prepared: July 24, 2012 Page 7 of 12
HoustonWorks USA
Comparative Statement of cash Flow
Fiscal Years Ending August 31,2004,2005,2006,2007,2008,2009,2010 & 2011
08/31/04 08/31/05 08/31/06 08/31/07 08/31/08
Net Cash provided / (used) by operating activities (27,014) 2,221,328
Net Cash provided / (used) by investing activities (269,629) (1,294,371)
Net cash provided / (used) by financing activities (92,139) (2,876)
Net increase / (decrease) in cash (388,782) 924,081
Cash, beginning of year 828,541 439,759
cash, end of year 439,759 1,363,840
Depreciation included in operating activities 896,492 1,123,895
1,955,134
(3,939,332)
1,626,331
(357,867)
1,363,840
1,005,973
1,416,498
2,927,510
(2,129,913)
(85,719)
711,878
1,005,973
1,717,851
1,143,433
(541,236)
1,221,649
(1,400,282)
(719,869)
997,982
981,495
08/31/09
1,069,311
(380,757)
(3,653)
684,901
997,982
1,682,883
748,850
08/31/10 08/31/11 cumulative
502,764 (600,955) 7,506,842
(927,273) (35,319) (7,754,945)
340,000 381,662
(424,509) (296,274) 133,559
1,682,883 1,258,374 ~ 5 4 1
1,258,374 962,100 962,100
795,514 821,737 7,927,914
Prepared: July 24, 2012 Page 8 of 12
Cash
Grants receivable
Accounts receivable
Prepaid expenses
Current Assets
Property and equipment, net
Deposits
Noncurrent Assets
Total assets
Accounts payable
Accrued payroll and related liabilities
Line of Credit
Due to grantors
Unearned revenue
Total liabilities
Net assets
HoustonWorks USA
Balance Sheet
As of 6/30/2012
(In Whole Numbers)
Current Year
107,861
1,555,949
4,345
47,058
1,715,213
2,338,081
52,901
2,390,982
836,258
809,062
490,000
50,205
756,620
2,942,145
1,164,050
_. __.. _---­
Total Liabilities and Net Assets . 4,106,195
Prepared: July 24, 2012 Page 9 of 12
Revenues
Federal and state grant revenue
Contract and service revenue
Contributions
Total Revenues
Expenditures
Personnel Salaries
Personnel Benefits
Personnel Incentive Pay
Audit, Legal and Non-Staff Services
Consulting Services
Facilities - career Centers
Facilities Other than career centers
Equipment Computers &IT
Equipment - Other
Communications IT
Communications - Other than IT
Travel - In Region
Travel - Out of Region
Insurance
Office Supplies
Printing / Photocopying
Public Information I Outreach
Subscriptions / Dues
Resource Room materials
Subcontracts
Stipends
Tuition
Support Services
Other Expenditures
Total Expenditures
Net Change in Fund Balance
HoustonWorks USA
Statement of Revenues and Expenditures by Budget Lines
From 6/1/2012 Through 6/30/2012
(In Whole Numbers)
Current Period Act... Current Year Actual
1,380,306 15,638,950
37,204 405,908
334,846
1.436,787 16,379.104
885,144 9,196,378
194,949 2,395,054
(248) 64,855
22,910 201,753
4,362 41,331
197,050 2,341,289
17,721 212,357
0 41,047
26,710 477,492
406 15,632
30,604 379,183
3,167 45,229
(136) 9,742
(25,152) 108,544
20,366 341,082
(1,898) 56,103
6,595 220,989
300 2,005
0 (3,240)
360 38,238
0 32,839
17,100 68,400
0 15,955
248,439
1,406,582 1:6,550,698
Prepared: July 24, 2012 Page 10 of 12
HoustonWorks USA
Statement of Cash Flow
As of 6/30/2012
(In Whole Numbers)
Cash Flows From Operating Activities:
Change in net assets
Adjustments to reconcile net cash from operating activities
Grants receivable
Accounts receivable
Prepaid expenses
Accounts payable
Accrued payroll and related liabilities
Unearned revenue
Total Adjustments to reconcile net cash from operating activities
Total Cash Flows From Operating Activities:
Net change in cash
Cash, beginning of year
Cash, end of year
Current Period
(170,994)
(767,757)
(138,661)
(57,058)
388,874
(246,302)
137,660
(683,245)
(854,239)
(854,239)
962,101
107,861
Prepared: July 24,2012 Page 11 of 12
HoustonWorks USA
Net Cumulative loss
For period beginning September 1, 2011 and ending June 3D, 2012
(155,000) I Sep-ll Oct-ll Nov-ll Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12
(17 5 ,000) I :3II"'f17fl ~ QJ \
(195,000) I\; ...... 'f"'= {J.:;I{.J,u"'J , ........., ........ ,
(215,000)
(235,000) I .. "
(240,826)
I
(255,000) tl-----------------------------------------­
(275,000) -'-------------------------------------------­
_loss net of fund raising
Prepared: July 24, 2012 Page 12 of 12