Washburn center for children Maria Thanks for having us, we are excited about the opportunity We have prepared materials, but welcome this to be conversational Ask questions throughout Washburn center for children Proposed Audit Approach – December 31, 2017 February 22, 2018

Agenda Service Team Engagement Scope Audit Objectives Audit Engagement Timeline Planned Audit Approach Required Communications Nonprofit Accounting Standards Update

Service Team Maria Schwingler, Audit Partner 612.253.6555 mschwingler@eidebailly.com Tyler Bernier, Quality Review Audit Partner 405.594.2006 tbernier@eidebailly.com Kim Hunwardsen, Tax Partner 612.253.6517 khunwardsen@eidebailly.com Deb Nelson, Tax Senior Manager 612.253.6560 ddnelson@eidebailly.com

Engagement Scope Audit of the consolidated financial statements as of and for the year ended December 31, 2017 Preparation of federal and state information returns for the year ended December 31, 2017

Audit Objectives Complete audit procedures to enable us to issue an opinion on the consolidated financial statements taken as a whole. Conducted in accordance with auditing standards generally accepted in the United States (U.S. GAAS). Plan and perform audit to obtain reasonable, not absolute, assurance about whether the consolidated financial statements are free of material misstatement.

Audit Objectives Consolidated financial statement audit procedures will: Include examining, on a test basis, evidence supporting amounts and disclosures Obtain an understanding of internal controls, but no assurance on the controls Assess quality of accounting principles and significant estimates

2017 Audit Engagement Timeline November: Initial planning discussions with management November - February: Audit planning February 22: Finance Committee planning meeting January 18: On site pre-audit February 26 – March 2: On site audit fieldwork April 6: Final draft statements and letters due to management April 19: Reporting to Finance Committee/Issue final audit report

Planned Audit Approach Planning and Pre-Audit Business changes and environment, including risk assessment Communication of expectations and document requests Discussions with Finance Committee and management Preliminary analytic review Internal control understanding New or significant transactions Establish materiality Develop audit plan and testing procedures Consideration of group audit standards

Planned Audit Approach Fieldwork Risk-based approach Test account balances Review and test estimates Final analytical procedures Review audit documentation and financial statements Reporting Meet with Finance Committee Items to be included in formal written communication Ongoing Year-round access to auditors

Planned Audit Approach Washburn Center for Children preliminary risks assessed: Overall Risks: Significant risks by audit area: Management override of controls Support receivables and receipts Intercompany transactions Revenue recognition, proper valuation Debt covenants Program service fees receivables and receipts Net assets – Investments - Endowment Proper release from restriction, classification of net assets Long-term debt and leases Completeness of debt and leases, including related disclosures Other Items: Accounting for solar panels installed in December 2017 Pay-off of bridge loan in 2017 Changes in financial management in 2017

Required Communications Consolidated Financial Statement Audit Our responsibility under U.S. GAAS Our audit does not relieve management of responsibilities Planned scope and timing of the audit Obtain understanding of entity and environment Assess risks of material misstatement and design audit procedures Will communicate any significant difficulties encountered Will communicate significant financial statement and internal control related findings at the conclusion of the audit Engagement Letters Provided to management

Nonprofit Accounting Standard Update FASB Issuance of ASU 2016-14 – Presentation of Financial Statements for Non-Profit Entities Two net asset categories Implied time restrictions no longer allowed – will require restatement Enhanced disclosures on underwater endowments Enhanced disclosures on board designated net assets Disclosures regarding liquidity Qualitative and quantitative requirements Net investment return presentation Presentation of expenses by both function and nature Optional direct method Statement of Cash Flow simplification Effective for fiscal years beginning after December 15, 2017 (effective for Washburn Center for Children for 12/31/2018 year end) Early adoption is permitted

Nonprofit Accounting Standard Update FASB Issuance of ASU 2016-19 – Revenue from Contracts with Customers Contributions are excluded from the standard Transactions that include elements of both a contribution and exchange transaction Government grants Effective for fiscal years beginning after December 15, 2018 (effective for Washburn Center for Children for 12/31/2019 year end) FASB Issuance of ASU 2016-02 – Leases All leases to be recognized as capital leases Final rules issued February 25 Effective for fiscal years beginning after December 15, 2019 (effective for Washburn Center for Children for 12/31/2020 year end)

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