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Morgan • Jacoby • Thurn • Boyle j & Associates , P.A. Certified Public Accountants September 12 , 2002 Board of Directors Homeless Assistance Center, Inc . Ladies and Gentlemen : We have audited the financial statements of the Homeless Assistance Center, Inc . (Organization) for the year ended June 30, 2002, and have issued our report thereon dated September 12 , 2002 . In planning and performing our audit of the financial statements of the Organization we considered internal control in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on internal control . The maintenance of adequate internal control designed to fulfill control objectives is the responsibility of management . Because of inherent limitations in any system of internal control, errors or fraud may nevertheless occur and not be detected . Also , controls found to be functioning at a point in time may later be found deficient because of the performance of those responsible for applying them, and there can be no assurance that controls currently in existence will prove to be adequate in the future as changes take place in the organization . During the audit we noted certain matters involving the internal control structure and other operational matters that are presented for your consideration. These comments and recommendations, all of which have been discussed with the appropriate members of management, are intended to improve the internal control structure or result in other operating efficiencies and are as follows . Formalize Accounting for Grants The Organization is the beneficiary of certain U. S . Department of Housing and Urban Development contracts and Florida Department of Children and Families contracts wherein the grant recipients are Indian River County and Indian River Homeless Services Council , Inc . , as agents on behalf of the Organization . Statement of Financial Accounting Standard No . 136, Transfers of Assets to a Not-for-Profit- Organization or Charitable Trust That Raises or Holds Contributions for Others, requires that grants and donations held by others on behalf of the Organization be recorded as contributions in the period they are determined . Therefore, we recommend the Organization record such contracts and grants when they are committed and approved by the respective agencies . Improve Accounts Payable Listing The Organization ' s accounts payable detail listing as of June 30, 2002 contains several small negative balances , due in part to incorrect postings of invoices or payments relating to credit card payables and notes payable . We recommend the Organization eliminate automatic entries for notes payable and accounts payable and investigate the negative balances for proper treatment. 700 - 20th Street • Vero Beach, Florida 32960 • Phone 561 - 562 -4158 • Telefax 561 - 563 -2024