COMMUNITY ACTION MARIN SAN RAFAEL, CALIFORNIA FINANCIAL STATEMENTS AND SINGLE AUDIT REPORT

Transcription

1 COMMUNITY ACTION MARIN SAN RAFAEL, CALIFORNIA FINANCIAL STATEMENTS AND SINGLE AUDIT REPORT JUNE 30, 2016

2 TABLE OF CONTENTS Independent Auditors Report 1-2 Financial Statements: Statements of Financial Position 3 Statements of Activities Exhibit A 4 Statements of Functional Expenses Exhibit B 5 Statements of Cash Flows Exhibit C 6 PAGE Notes to Financial Statements 7-17 Supplemental Information: Combining Schedule of Activities - Head Start and Early Head Start Program Schedules Dept of HHS Schedule of Revenue and Expenses Head Start and Early Head Start Program Grant No. 09CH Schedule 3 20 Combining Schedule of Activities - Energy Program Schedule 4 21 Dept of CSD Schedule of Revenue and Expenses 15B-3021, 16B-4020, 15F-2024, 16F-5024 Schedules Child Development Programs General Information Schedule Combining Schedule of Activities Child Development Program Schedule Combining Schedule of Expenses By State Categories Schedule Combining Schedule of Reimbursable Start-Up Expenses Schedule Combining Schedule of Reimbursable Administrative Costs Schedule Audited Final Attendance and Fiscal Reports - CCTR-5136 Schedules and CSPP-5254 Audited Fiscal Reports CFCC-5015 and CRPM-3036 Schedules Schedule of Capital Outlay and Equipment Expenses Utilizing Contract Funds Schedule Schedule of Renovation and Repair Expenses Utilizing Contract Funds Schedule Audited Reserve Account Activity Report Schedule 28 45

3 PAGE Independent Auditors Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditors Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by the Uniform Guidance Schedule of Expenditures of Federal and State Awards Notes to the Schedule of Expenditures of Federal Awards 52 Schedule of Findings and Questioned Costs 53 Status of Prior Year Findings and Recommendations 54

4 R. J. RICCIARDI, INC. CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITORS REPORT Board of Directors Community Action Marin San Rafael, California Report on the Financial Statements We have audited the accompanying financial statements of Community Action Marin, which comprise the statement of financial position as of June 30, 2016, and the related statements of activities, functional expenses, and cash flows for the year then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the organization s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the organization s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Community Action Marin as of June 30, 2016, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Report on Summarized Comparative Information We have previously audited Community Action Marin s 2015 financial statements, and we expressed an unmodified audit opinion on those audited financial statements in our report dated December 10, In our opinion, the summarized comparative information presented herein as of and for the year ended June 30, 2015, is consistent, in all material respects, with the audited financial statements from which it has been derived FOURTH STREET, SUITE 400 SAN RAFAEL, CA TEL (415) FAX (415)

5 Board of Directors Community Action Marin - Page 2 Other Matters Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The supplementary data in schedules 1 through 28 is presented for purposes of additional analysis and is not a required part of the financial statements. The accompanying schedule of expenditures of federal awards, as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 14, 2016 on our consideration of Community Action Marin s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Community Action Marin s internal control over financial reporting and compliance. San Rafael, California December 14, 2016 R.J. Ricciardi, Inc. R.J. Ricciardi, Inc. Certified Public Accountants - 2 -

6 STATEMENTS OF FINANCIAL POSITION June 30, 2016 (With Comparative Totals for June 30, 2015) ASSETS Current assets: Cash and cash equivalents $ 1,036,146 $ 444,640 Investments 953,176 1,300,479 Grants and contracts receivable 1,049, ,172 Prepaid expenses and other current assets 144, ,418 Total current assets 3,183,380 2,964,709 Non-current assets: Restricted cash 428, ,474 Fixed assets, net of accumulated depreciation 1,811,128 1,643,100 Total non-current assets 2,239,963 1,936,574 Total assets $ 5,423,343 $ 4,901,283 LIABILITIES AND NET ASSETS Current liabilities: Accounts payable $ 358,464 $ 320,409 Accrued liabilities 158, ,133 Accrued vacation 448, ,316 Accrued unemployment liabilities 112, ,874 Contract advances and deferred income 709, ,941 CDE reserve account 78,918 - Due to fiscal agents 122,468 24,349 Notes payable, current portion 31,864 30,327 Total current liabilities 2,019,731 1,684,349 Long-term liabilities: Notes payable, net of current portion 1,064,258 1,095,031 Total long-term liabilities 1,064,258 1,095,031 Total liabilities 3,083,989 2,779,380 Net assets - Exhibit A: Unrestricted: Unrestricted, board designated 474, ,102 Unrestricted, undesignated 1,165, ,521 Temporarily restricted 699, ,280 Total net assets 2,339,354 2,121,903 Total liabilities and net assets $ 5,423,343 $ 4,901,283 The accompanying notes are an integral part of these financial statements

7 STATEMENTS OF ACTIVITIES For the Year Ended June 30, 2016 (With Comparative Totals for the Year Ended June 30, 2015) Exhibit A Temporarily Unrestricted Restricted Subtotal Elimination Total Total Revenues: Government contracts $ 12,884,875 $ 5,006 $ 12,889,881 $ (524,063) $ 12,365,818 $ 11,925,088 Child care food program 524, , , ,232 Grants income 1,167,390 1,990 1,169,380-1,169,380 1,299,849 Contributions 10,541 3,905 14,446-14,446 33,917 Fundraising 7,416 6,515 13,931-13,931 37,360 Other income 40,971 1,719 42,690-42,690 27,976 Parent fees 587, , , ,438 Program service fees 14,989 18,397 33,386-33,386 18,195 Rental income 56,897 1,900 58,797-58,797 45,210 Interest and dividends 83,146-83,146-83,146 93,210 Unrealized losses on investments (44,111) - (44,111) - (44,111) (82,085) Losses on disposal of fixed assets (6,428) - (6,428) - (6,428) - Net assets released from restrictions 56,721 (56,721) Total revenues 15,383,894 (17,289) 15,366,605 (524,063) 14,842,542 14,423,390 Expenses: Program services: Emergency Family Needs 292, , , ,319 Energy and Housing Programs 383, , , ,647 Mental Health Programs 2,063,570-2,063,570-2,063,570 1,935,863 Food Service Program 424, , , ,389 Child Development Programs 5,958,401-5,958,401 (339,222) 5,619,179 5,471,757 Head Start Programs 4,654,798-4,654,798 (184,841) 4,469,957 4,602,724 Marin Asian Advocacy 168, , , ,696 Prosperity Partners 302, , , ,083 Administration services 1,143,138-1,143,138-1,143,138 1,218,614 Special Events Fundraising 28,639-28,639-28, ,256 Total expenses 15,419,417-15,419,417 (524,063) 14,895,354 15,127,348 Change in net assets (35,523) (17,289) (52,812) - (52,812) (703,958) Net assets, beginning of period 1,675, ,280 2,121,903-2,121,903 2,839,713 Prior period adjustments ,444 Net assets, beginning of period as restated 1,675, ,280 2,121,903-2,121,903 2,889,157 Changes to Net Assets Additions of restricted fixed assets - 325, , ,972 - Depreciation of restricted fixed assets - (55,709) (55,709) - (55,709) (63,296) Net assets, end of period $ 1,640,100 $ 699,254 $ 2,339,354 $ - $ 2,339,354 $ 2,121,903 The accompanying notes are an integral part of these financial statements

8 STATEMENTS OF FUNCTIONAL EXPENSES All Program Services For the Year Ended June 30, 2016 Exhibit B Program Services Emergency Child Head Start Program Special Family LIHEAP Mental Health Food Development and Early Marin Asian Prosperity Services Events Management Needs Programs Programs Services Programs Head Start Advocacy Partners Total Fundraising and General Total Total Expenses: Salaries $ 15,886 $ 125,544 $ 1,312,774 $ 144,724 $ 3,253,698 $ 2,968,377 $ 129,534 $ 149,100 $ 8,099,637 $ - $ 656,599 $ 8,756,236 $ 8,931,549 Payroll taxes 1,259 12, ,449 12, , ,151 11,960 13, ,645-54, , ,489 Employee benefits 1,637 5, ,698 25, , ,546 4,118 10,146 1,114,566-52,484 1,167,050 1,554,474 Client expenses 273,276 39, , , , ,781 6,266 6,532 1,389, ,389, ,503 Professional fees - 167,468 2, ,898 80,732-89, ,471 27,546 58, , ,915 Contract services - - 2, ,135 59,719-15, , , ,416 Facility costs ,723 60,131 13, ,241-2,616 79,857 48,944 Occupancy - 1, ,305 16, , ,556 1,074 2, ,410-8, , ,565 Tools & equipment - 1,779 9, ,843 23,098 4,257 8,884 61,189-4,937 66,126 65,437 Equipment & vehicle maintenance - 9,079 11,838 2,911 14,317 3, ,709-11,065 52,774 78,901 Building repairs & maintenance ,363 10, , , ,670-11, , ,375 Miscellaneous 62 13, ,390 11,233 10,792 6, ,558-52, ,841 78,068 Program supplies ,375 45,631 45,397 90, , , ,709 Insurance - 1,344 18,531 8,083 23,445 26, ,156-37, , ,739 Employee development , ,540 46, ,072-10,002 97,074 91,072 Telephone (19) ,960 2,908 29,224 15,394 1,444 1,314 70,888-9,228 80,116 88,389 Travel - 2,066 34,455 3,612 11,450 19, ,493 73,437-3,061 76,498 82,198 Printing & publications ,621-2,124 2, , ,288 14,674 16,727 Interest ,791 52,791 53,217 Office supplies - 1,278 6, ,814 10, ,418 37,014-7,269 44,283 49,417 Equipment rental - - (406) - 7, ,743-11,253 17,996 13,857 Advertising - 1, , ,958 7,630 2,503 Food service charge (147,791) 85,738 62, Indirect cost allocation 11,900 19, ,162 49, , ,588 14,122 32,519 1,265,483 - (1,265,483) - - Total expenses before 304, ,288 2,277, ,074 6,388,463 5,138, , ,582 15,503,715 28,639 (208,744) 15,323,610 15,028,464 Depreciation , ,408-86,399 95,807 98,884 Total expenses $ 304,266 $ 403,288 $ 2,277,732 $ 474,074 $ 6,397,871 $ 5,138,386 $ 182,924 $ 334,582 $ 15,513,123 $ 28,639 $ (122,345) $ 15,419,417 $ 15,127,348 The accompanying notes are an integral part of these financial statements

9 STATEMENTS OF CASH FLOWS For the Year Ended June 30, 2016 (With Comparative Totals for the Year Ended June 30, 2015) Exhibit C Cash flows from operating activities: Change in net assets $ (52,812) $ (703,958) Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation 95,807 98,884 Unrealized losses on investments 44,111 82,085 Loss on disposal of fixed assets 6,428 - Changes in certain assets and liabilities: Grants and contracts receivable (74,139) (149,181) Prepaid expenses and other current assets 99,671 (80,489) Accounts payable including payments in transit 38,055 81,278 Accrued liabilities 21,990 56,409 Accrued vacation (24,306) (27,696) Accrued unemployment liabilities 6,712 54,772 Contract advances and deferred income 114,357 47,471 CDE reserve account 78,918 - Due to fiscal agents 98,119 (185,095) Net cash used by operating activities 452,911 (725,520) Cash flows from investing activities: Purchase of property and equipment - (43,208) Sales of investments 834, ,086 Purchases of investments (531,475) (575,626) Net cash provided by investing activities 303, ,252 Cash flows from financing activities: Payments on notes payable (29,236) (28,648) Net cash used by financing activities (29,236) (28,648) Net decrease in cash during the year 726,867 (475,916) Cash balance, beginning of period 738,114 1,214,030 Cash balance, end of period $ 1,464,981 $ 738,114 Cash balance at June 30 includes the following: Cash and cash equivalents $ 1,036,146 $ 444,640 Restricted cash 428, ,474 Total cash and cash equivalents $ 1,464,981 $ 738,114 Supplemental disclosures of cash flow information: Interest paid $ 52,791 $ 53,217 The accompanying notes are an integral part of these financial statements

10 NOTES TO FINANCIAL STATEMENTS June 30, 2016 NOTE 1 - GENERAL A. Organization Community Action Marin is a local community action agency serving Marin County. Created in 1966 with federal Economic Opportunity Act funds, Community Action Marin set about meeting its mission to assist low-income Marin residents in achieving a quality of life based on self-sufficiency and the reduction of dependency through the following programs: Emergency Family Needs - provides a modest financial loan or grant to families or individuals who are at risk due to an immediate crisis in their lives. Low Income Home Energy Assistance Program (LIHEAP) - provides low income Marin residents with essential funding for winter heating bills. Mental Health - assists mentally ill adults who have gone off medication, are in denial, are unwilling to access the traditional system of mental health care, or are living with caregivers and are at-risk because the living situation is becoming increasingly untenable. This program also offers refuge, support and companionship for persons struggling with mental illness and the social stigma attached. Food Services - provides meals to children of low-income working parents who attend a licensed family daycare center. In addition, this program offers basic nutritional training for provider, parent and child. Head Start and Early Head Start - provides comprehensive educational services for approximately 366 preschool children, health exams and dental care, nutritious meals, therapy for special needs children, parent education, and social services for children who are economically or educationally disadvantaged. Child Development - provides school and after-school care for approximately 500 low-income children in addition to firm, consistent, appropriate guidance in the development of social skills, and one-to-one assistance with homework for after-schoolers. Marin Asian Advocacy Program to help Southeast Asian immigrants and refugees become selfsufficient through a range of services. Prosperity Partners is a collaborative of agencies and businesses providing a continuum of assetbuilding services to help Marin s low-to-moderate income families and individuals achieve economic stability, opportunity and upward mobility. Administration Services represent management and general expenses, indirect costs, and the administrative costs portion of program services. Community Action Marin receives its principal funding from the United States Department of Health & Human Services and the State of California Department of Education and accordingly, operates under the guidelines and regulations of these funding sources

11 NOTES TO FINANCIAL STATEMENTS June 30, 2016 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Basis of Accounting The financial statements and records of Community Action Marin (the Organization) are prepared on the accrual basis of accounting and, therefore, include all support and revenues when earned and all expenses when incurred, regardless of whether the support and revenues or expenses were received or paid as of the end of a period. Grants are recognized as support when earned in accordance with the terms of each grant or agreement. B. Basis of Presentation The statements are presented in accordance with the provisions of Financial Accounting Standards Board Accounting Standards Codification (FASB ASC ), Financial Statements of Not-for-Profit Organizations. Under FASB ASC , the Organization is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. C. Unrestricted Net Assets Unrestricted net assets generally result from revenues obtained by providing services, receiving unrestricted contributions, and receiving interest and dividends from income-producing assets. The only limits on the use of unrestricted net assets are the broad limits resulting from the nature of the Organization and the purposes specified in its Articles of Incorporation or Bylaws and limits resulting from contractual agreements entered into by the Organization in the course of its operations. D. Temporarily Restricted Net Assets Temporarily restricted net assets represent the portion of net assets that contains donor-imposed stipulations that either expire by passage of time or can be fulfilled and removed by actions of the Organization. E. Permanently Restricted Net Assets Permanently restricted net assets represent the portion of net assets that contains donor-imposed stipulations that neither expire by passage of time nor can otherwise be removed by actions of the Organization. F. Cash and Cash Equivalents For purposes of reporting the statement of cash flows, cash and cash equivalents include cash on deposit with financial institutions and highly liquid debt instruments purchased with maturities of three months or less. Cash that is considered as an investment of the Organization is not included as part of cash and cash equivalents for the purposes of the statement of cash flows. G. Investments Investments consisting of certificates of deposit, money market funds, fixed income obligations and equities are recorded at their estimated fair market value based on quoted market values. Interest and dividend income is recognized as it is earned

12 NOTES TO FINANCIAL STATEMENTS June 30, 2016 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) H. Fixed Assets Fixed assets are stated at cost and depreciation is computed on the straight-line basis of accounting over the estimated useful lives of the assets. The aggregate cost of assets over $5,000 acquired through unrestricted grant resources is capitalized in the statement of financial position. Assets acquired through grant resources are considered to be owned by the grantor while such assets are in use under the funded program, or while they are being used for a similar program. Any disposition of restricted assets or any funds derived therefrom are subject to grant regulations. I. Revenue Recognition Contributions are recognized at their fair value when the donor makes an unconditional promise to give to the Organization. Contributions restricted by the donor are reported as an increase in unrestricted net assets if the restriction is released in the same reporting period in which the support is received. All other contributions with donor restrictions are reported as an increase in temporarily or permanently restricted net assets, depending on the nature of the restrictions. When a restriction expires (that is, when a stipulated time restriction ends or purpose restriction is accomplished), temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. Government grants and revenue are recognized when the Organization incurs expenditures related to the required services. Amounts billed or received in advance are recorded as contract advances and deferred revenue until the related services are performed. Amounts due the Organization for services performed at June 30, 2016 and 2015 are included in accounts receivable. The Organization has not accrued a loss for allowances for uncollectible receivables since it is the opinion of management that it is highly probable that all receivables will be collected. This was based on previous experiences and management s analysis and assurances made by the staff. No provision for uncollectible receivables is reserved at June 30, 2016 and J. Donated Services Donated services are recognized as contributions in accordance with FASB ASC 958, Accounting for Contributions and Presentation of Financial Statements, if the services (a) create or enhance nonfinancial assets or (b) require specialized skills, are performed by people with those skills, and would otherwise be purchased by the Organization. Volunteers also provided services that are not recognized as contributions in the financial statements since the recognition criteria under FASB ASC 958 were not met. Donated services are not recognized as contributions in the financial statements since the recognition criteria under FASB ASC 958 were not met. The Head Start Program requires 20% of the total expenses to be provided by the sponsor and participants in the program. To comply with this requirement, the Organization has developed a reporting system to determine all in-kind contributions, which consist primarily of parent volunteer services valued at a nominal hourly rate, to the Head Start Program. The value of Head Start in-kind contributions for the fiscal years ended June 30, 2016 and 2015 of $1,288,134 and $1,147,321, respectively has not been reflected in the financial statements

13 NOTES TO FINANCIAL STATEMENTS June 30, 2016 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (concluded) K. Functional Expenses and Indirect Costs Directly identifiable expenses are charged to program services. Expenses related to more than one function are charged to program services on the basis of periodic time and expense studies. Administration services include those expenses that are not directly identifiable with any other specific function but provide for the overall support and direction of the Organization. Charging of costs will be determined on the basis of whether that expense is a direct cost or indirect (allocable) cost. Direct cost expenses will be charged directly to the grant or project and specific cost category. Once that determination is made the expense will be coded and recorded in the accounting system. Charging of allocable costs must be determined on whether the expense benefits multiple grants or projects. Once the determination is made on which program(s) received the benefit, then the expense will be coded accordingly and recorded in the accounting system. Indirect costs represent administrative costs recorded in the general administration fund which are allocable to the restricted programs as indirect administrative costs. L. Fundraising Expenses Fundraising expenses are recognized when incurred, regardless of the campaign year to which they relate. M. Use of Estimates The financial statements have been prepared in conformity with U.S. generally accepted accounting principles and, as such, include amounts based on informed estimates and judgments of management with consideration given to materiality. Actual results could differ from those estimates. N. Risk Management The Organization is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; and natural disasters for which the Organization carries commercial insurance. O. Contingencies The Organization s grants and contracts are subject to inspection and audit by the appropriate governmental funding agency. The purpose of such audits is to determine whether program funds were used in accordance with their respective guidelines and regulations. The potential exists for disallowance of previously funded program costs. The ultimate liability, if any, which may result from these governmental audits cannot be reasonably estimated and, accordingly, the Organization has no provisions for the possible disallowance of program costs on its financial statements. P. Concentrations The Organization receives a substantial amount of revenue for its programs funded by the U.S. Department of Health and Human Services. During the year ended June 30, 2016 and 2015, the Organization received $6,750,865 and $6,999,772. This amounts to 44% and 46% of total revenue for the fiscal year ended June 30, 2016 and 2015, respectively

14 NOTES TO FINANCIAL STATEMENTS June 30, 2016 NOTE 3 - INCOME TAXES The Organization is exempt from Federal income taxes under Section 501(c)(3) of the Internal Revenue Code. The Organization is also exempt from California franchise taxes under Section 23701(d) of the Revenue and Taxation Code and, therefore, has made no provision for Federal or California income taxes. Contributors, donors and grantors may obtain tax benefits. In addition, the Organization has been determined by the Internal Revenue Service not to be a private foundation within the meaning of Section 509(a) of the Code. The Organization adopted the recognition requirements for uncertain income tax positions as required by generally accepted accounting principles, with no cumulative effect adjustment required. Income tax benefits are recognized for income tax positions taken or expected to be taken in a tax return, only when it is determined that the income tax position will more-likely-than-not be sustained upon examination by taxing authorities. The Organization has analyzed tax positions taken for filing with the Internal Revenue Service and all state jurisdictions where it operates. The Organization believes that income tax filing positions will be sustained upon examination and does not anticipate any adjustments that would result in a material adverse effect on the Organization s financial condition, results of operations or cash flows. Accordingly, the Organization has not recorded any reserves, or related accruals for interest and penalties for uncertain income tax positions at June 30, 2016 and The Organization is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. NOTE 4 - CASH Cash balances at June 30 are as follows: Unrestricted: Wells Fargo $ 1,034,743 $ 443,553 Petty cash 1,403 1,087 Total unrestricted cash and cash equivalents 1,036, ,640 Restricted: Bank of Marin 122,356 12,392 Wells Fargo 306, ,082 Total restricted cash and cash equivalents 428, ,474 Total cash and cash equivalents $ 1,464,981 $ 738,114 At June 30, 2016 and 2015, the respective bank balances of $1,626,934 and $897,686 were insured up to the $250,000 blanket umbrella by the Federal Deposit Insurance Corporation (FDIC). The remaining bank balances were uninsured and held by the financial institutions in the Organization s name. At June 30, 2016 and 2015, the restricted cash and cash equivalents of $428,835 and $293,474, respectively, was the amount the Organization maintains for the funds that have restrictions for Season of Sharing, California Department of Education reserve account, and the Harriet Richard Bequest

15 NOTES TO FINANCIAL STATEMENTS June 30, 2016 NOTE 5 - INVESTMENTS Investments at June 30 consisted of the following: Money market funds $ 57,303 $ 28,035 Fixed income 297, ,687 Equities 266, ,983 Bond funds 28,914 30,038 Equity funds 207, ,503 Other assets 95, ,233 Total $ 953,176 $ 1,300,479 NOTE 6 - SUMMARY OF FAIR VALUE EXPOSURE FASB ASC and subsections, Fair Value Measurements and Disclosures clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value, and requires additional disclosure about the use of fair value measurements in an effort to make the measurement of fair value more consistent and comparable. The Organization has adopted FASB ASC for its financial assets and liabilities measured on a recurring and nonrecurring basis. FASB ASC defines fair value as the amount that would be received from the sale of an asset or paid for the transfer of a liability in an orderly transaction between market participants, i.e. an exit price. To estimate an exit price, a three-tier hierarchy is used to prioritize the inputs: Level 1: Quoted prices in active markets for identical securities. Level 2: Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment spreads, credit risk, etc.) Level 3: Significant unobservable inputs (including the Organization s own assumptions in determining the fair value of investments). The inputs and methodology used for valuing the Organization s financial assets and liabilities are not indicators of the risks associated with those investments. The following table provides fair value measurement information for financial assets and liabilities measured at fair value on a recurring basis as of June 30: Level 1: Quoted prices $ 953,176 $ 1,300,479 Level 2: Other significant observable inputs - - Level 3: Significant unobservable inputs - - Total $ 953,176 $ 1,300,

16 NOTES TO FINANCIAL STATEMENTS June 30, 2016 NOTE 6 - SUMMARY OF FAIR VALUE EXPOSURE (continued) FSP FAS which supersedes FSP FAS provides further clarification on SFAS 157 in determining an inactive market and a non-distressed transaction. The above investments for June 30, 2016 are further classified in accordance with FSP FAS as follows: Total Investment Level 1 Level 2 Level 3 Money market funds $ 57,303 $ 57,303 $ - $ - Fixed income 297, , Equities 266, , Bond funds 28,914 28, Equity funds 207, , Other assets 95,720 95, Total $ 953,176 $ 953,176 $ - $ - The above investments for June 30, 2015 are further classified in accordance with FSP FAS as follows: Total Investment Level 1 Level 2 Level 3 Money market funds $ 28,035 $ 28,035 $ - $ - Fixed income 358, , Equities 104, , Bond funds 30,038 30, Equity funds 580, , Other assets 198, , Total $ 1,300,479 $ 1,300,479 $ - $ - NOTE 7 - GRANTS/CONTRACTS RECEIVABLE Grants/contracts receivable at June 30 consisted of the following: U.S. DHHS Head Start and Early Head Start Program $ 68,057 $ 86,094 California Department of Education Child Development 186, ,425 California Department of Education CCFP 93,643 83,647 California CSD CSBG 57,620 - California CSD LIHEAP 165, ,635 County of Marin Mental Health Program 354, ,077 County of Marin Head Start and Early Head Start Program 11,161 10,600 County of Marin Marin Asian Advocacy 33,937 34,296 United Way - 11,000 Marin County Foundation 28,870 69,632 Parent fees 30,533 24,283 Other 18,444 13,483 Total $ 1,049,311 $ 975,

17 NOTES TO FINANCIAL STATEMENTS June 30, 2016 NOTE 8 - FIXED ASSETS Fixed assets as of June 30 were as follows: Unrestricted fixed assets Land $ 363,030 $ 363,030 Buildings and improvements 2,146,424 2,146,424 Leasehold improvements 30,428 30,428 Equipment 40,091 40,091 Vehicle 42,790 60,322 Total 2,622,763 2,640,295 Less accumulated depreciation (1,281,008) (1,196,305) Unrestricted fixed assets, net 1,341,755 1,443,990 Restricted fixed assets Buildings and improvements 540, ,631 Construction in progress 137,070 - Leasehold improvements 210, ,770 Equipment 55,529 50,344 Vehicle 67,167 89,038 Total 1,010, ,783 Less accumulated depreciation (541,510) (507,673) Restricted fixed assets, net 469, ,110 Total fixed assets, net $ 1,811,128 $ 1,643,100 Depreciation expense was $151,516 and $162,180, of which $95,807 and $98,884 was expensed and $55,709 and $63,296 was charged directly to temporarily restricted net assets for the years ended June 30, 2016 and 2015, respectively. NOTE 9 - ACCRUED VACATION Accumulated unpaid employee vacation benefits are recognized as liabilities of the Organization. The amount of accumulated vacation was $448,010 and $472,316 as of June 30, 2016 and 2015, respectively. NOTE 10 - ACCRUED UNEMPLOYMENT LIABILITIES The Organization has elected to be self-insured for the purpose of California State Unemployment Insurance. At June 30, 2016 and 2015, the amount of accrued unemployment liability was $112,586, and $105,874, which represents the estimated future claims arising from payroll paid through June 30, 2016 and 2015, respectively. Unemployment claims paid for the years ended June 30, 2016 and 2015 were $138,693 and $87,988, respectively. NOTE 11 - CDE RESERVE Beginning July 1, 2015, the Organization maintains a reserve account for Center Based contracts. Reserve funds are deposited into an interest bearing account. Upon termination of all child development center-based contracts with California Department of Education, the Organization would have to return the reserve funds; thus the reserve account is recorded as a liability (deferred revenue)

18 NOTES TO FINANCIAL STATEMENTS June 30, 2016 NOTE 11 - CDE RESERVE (concluded) Reserve account as of June 30, 2016 was $78,918 which includes interest of $1 that the bank paid on the account balances during the fiscal year ended June 30, NOTE 12 - CONTRACT ADVANCES AND DEFERRED INCOME Contract advances and deferred income as of June 30 consisted of the following: CSD CSBG contracts $ 63,233 $ 23,495 CSD LIHEAP contracts - 27,484 County of Marin 47, ,950 Marin County Foundation 101,534 72,848 United Way 76,683 72,503 Marin Schools 61,971 - Marin Childcare Council 61,798 - Harriet Richard Bequest - Mental Health program 250, ,345 Other 46,438 28,316 Total $ 709,298 $ 594,941 NOTE 13 - NOTES PAYABLE Notes payable as of June 30, 2016 are as follows: Note payable to a bank, secured by a deed of trust of real property, at an interest rate of 6.55%, payable in monthly installments of $2,419 through August 2018 and a balloon payment of $321,209 on September 24, $ 336,684 Note payable to a bank, secured by a deed of trust of real property, at an interest rate of 4.25%, payable in monthly installments of $4,346 through August 2018 and a balloon payment of $592,333 on September 22, ,497 Note payable to a government agency, secured by a real property (see note below)*. 63,236 Note payable to a government agency, secured by a real property (see note below)**. 44,705 Total 1,096,122 Less current portion (31,864) Total, net of current portion $ 1,064,258 *The Organization purchased a building as a site for its administrative headquarters. To finance the purchase, the Organization obtained Community Development Block Grant funds in the amount of $63,236 from the County of Marin. If the Organization, for any reason whatsoever, sells, conveys, encumbers, grants, leases, or otherwise alienates the premises, the greater of $63,236, or 9.7% of the proceeds of such sale, conveyance, encumbrance, grant, or lease minus the costs of closing, shall be paid to the County of Marin, as an implementer of the Community Development Block Grant Program, which entity shall have a lien for such sums

19 NOTES TO FINANCIAL STATEMENTS June 30, 2016 NOTE 13 - NOTES PAYABLE (concluded) **The Organization purchased modular buildings for the Head Start and Marin Community Child Development programs. To finance the purchase, the Organization obtained Community Development Block Grant funds in the amount of $44,705 from the County of Marin. Similar to the previous loan, the Community Development Block Grant has a reversionary interest in the modular buildings. Contingent payments for the notes payable to the banks are as follows: Fiscal Year Ending June 30 Principal Interest Current portion $ 31,864 $ 49, ,418 47, ,899 11, Thereafter 107,941 - Total $ 1,096,122 $ 108,925 NOTE 14 - BOARD DESIGNATED NET ASSETS Board designated net assets of June 30 include: Fund I $ 856,102 $ 1,256,102 Released and used for program expenses (382,000) (400,000) Total unrestricted, board designated net assets $ 474,102 $ 856,102 The assets related to the Fund I as shown on the Statement of Financial Position are as follows: Investments - Charles Schwab $ 474,102 $ 856,102 Total $ 474,102 $ 856,102 NOTE 15 - TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets as of June 30 were available for the following programs: Head Start and Early Head Start $ 11,426 $ 9,724 Child Development 30,458 51,163 LIHEAP Mental Health program MAAP 3,441 2,135 Prosperity equipment 5,949 3,738 CACFP equipment 3,203 6,407 Head Start modular buildings and equipment 306, ,942 CDP modular buildings and equipment 337, ,740 Total $ 699,254 $ 446,

20 NOTES TO FINANCIAL STATEMENTS June 30, 2016 NOTE 16 - COMMITMENTS AND CONTINGENCIES Operating leases The Organization leases various facilities and equipment under operating leases with various terms. Future minimum payments, by year, and in the aggregate, under non-cancellable leases with initial or remaining terms of one year or more consist of the following: Fiscal Year Ending June $ 347, , , , ,414 Thereafter 110,414 Total $ 1,048,659 Rent expense under operating leases for the years ended June 30, 2016 and 2015 was $580,240 and $463,035, respectively. NOTE 17 - PRIOR PERIOD ADJUSTMENTS During fiscal year ended June 30, 2015, the Organization increased beginning net assets in the amount of $49,444 to recognize revenues and receivables that were not recognized in the prior year in error. The net effect of this change for the year ended June 30, 2015 was an increase to net assets in the amount of $49,444. NOTE 18 - RECLASSIFICATIONS AND ELIMINATION Certain amounts in the June 30, 2015 financial statements have been reclassified to conform with the June 30, 2016 presentation, specifically the revenue categories in the Statement of Activities. These reclassifications have no effect on the change in net assets as previously reported. In the June 30, 2016 and 2015 financial statements, government contracts revenue for the Food Services program was eliminated for the amount presented as Child Care Food Program revenues to off-set the elimination of the internal allocation of expenses in the Child Development program and Head Start and Early Head Start program. The presentation of internal allocation of Child Care Food program expenses in the Statement of Functional Expenses to the Child Development program and the Head Start and Early Head Start program is to meet the reporting purposes required by the Head Start and Early Head Start grant and California Department of Education contracts in Schedule 1 and Schedule 12. NOTE 19 - SUBSEQUENT EVENTS The Organization has evaluated events and transactions for potential recognition or disclosure through December 14, 2016, the date the financial statements were available to be issued

21 COMBINING SCHEDULE OF ACTIVITIES HEAD START AND EARLY HEAD START PROGRAM For the Year Ended June 30, 2016 Schedule 1 Grant No. 09CH Head Start & Head Head Start Head Start Head Start Head Start Other Grants/ Schedule 1 Schedule 2 EHS Start* T&A Calworks First 5 MCF Contracts Total Total Total Revenues: Government contracts $ 2,524,112 $ 26,026 $ 4,821 $ - $ 39,510 $ 660 $ 2,595,129 $ 2,321,255 $ 4,916,384 Grants income , ,487 2, , ,450 Contributions Program service fees Fundraising ,202 4,202 1,084 5,286 Other income ,703 2,703-2,703 In-kind revenue 1,010, ,010, ,914 1,288,134 Total revenues 3,534,332 26,026 4,821 33, ,997 9,809 3,838,876 2,600,253 6,439,129 Expenses: Salaries 1,432,933 6,352-17, ,473-1,618,668 1,349,709 2,968,377 Payroll taxes 102, ,370 11, ,146 98, ,733 Worker's compensation 72, ,741 7,522-81,787 64, ,414 Employee benefits 173, ,218 14,694 (91) 190, , ,548 Client expenses 119, ,283 2, ,236 73, ,781 Professional fees 70, , ,747 59, ,451 Facility costs 6, ,077 7,160 13,237 Occupancy 100, , , ,555 Tools and equipment 12, ,204 9,896 23,100 Equipment & vehicle maintenance 2, ,099 1,465 3,564 Building repairs & maintenance 65, ,367-68,951 45, ,198 Miscellaneous 6, ,468 3,544 10,012 Program supplies 35, ,941 3,074 41,585 46,318 87,903 Insurance 17, ,047 9,572 26,619 Employee development 4,031 17, ,616 24,505 46,121 Telephone 9, ,604 5,790 15,394 Travel 7, ,947 11,725 19,672 Printing & publications 1, ,791 1,194 2,985 Office supplies 8, ,842 5,237 14,079 In-kind expenses 1,010, ,010, ,914 1,288,134 Food service charge 39, ,937 22,117 62,054 Indirect cost allocation 237, , , , ,589 Total expenses 3,534,332 26, , ,996 7,129 3,831,832 2,594,688 6,426,520 Change in net assets - - 4, ,680 7,044 5,565 12,609 Net assets, beginning of period Net assets, end of period $ - $ - $ 4,363 $ - $ 1 $ 2,680 $ 7,044 $ 5,565 $ 12,609 * Includes in-kind revenue and expenses which are not recognized in the financial statements

22 COMBINING SCHEDULE OF ACTIVITIES EARLY HEAD START PROGRAM For the Year Ended June 30, 2016 Schedule 2 Grant No. 09CH Early Head Early Head EHS Other Grants/ Start* Start T&A CalWorks Contracts Total Revenues: Government contracts $ 2,262,335 $ 51,869 $ 7,051 $ - $ 2,321,255 Grants income Fundraising ,084 1,084 Other income In-kind revenue 277, ,914 Total revenues 2,540,249 51,869 7,051 1,084 2,600,253 Expenses: Salaries 1,327,827 21, ,349,709 Payroll taxes 97,037 1, ,587 Worker's compensation 63,418 1, ,627 Employee benefits 139,511 1, ,120 Client expenses 73, ,545 Professional fees 59, ,704 Facility costs 7, ,160 Occupancy 112, ,233 Tools and equipment 8, ,345 9,896 Vehicle and Equipment maintenance 1, ,465 Building repairs & maintenance 45, ,247 Miscellaneous 3, ,544 Program supplies 46, ,318 Insurance 9, ,572 Employee development , ,505 Telephone 5, ,790 Travel 9,828 1, ,725 Printing & publications ,194 Office supplies 5, ,237 In-kind expenses 277, ,914 Food service charge 22, ,117 Indirect cost allocation 222, ,479 Total expenses 2,540,249 51, ,900 2,594,688 Change in net assets - - 6,381 (816) 5,565 Net assets, beginning of period Net assets, end of period $ - $ - $ 6,381 $ (816) $ 5,565 * Includes in-kind revenue and expenses which are not recognized in the financial statements

23 SCHEDULE OF REVENUE AND EXPENSES HEAD START AND EARLY HEAD START PROGRAM Grant No. 09CH For the Period July 1, 2015 through June 30, 2016 Schedule 3 Audited Audited Total Costs* Costs* Audited Total Head Start Early Head Start Costs* Budgets Revenues: U.S. Dept. of Health & Human Services $ 2,436,784 $ 2,242,717 $ 4,679,501 $ 4,839,717 Child Care Food Program 113,354 71, ,841 - In-kind revenue 1,010, ,914 1,288,134 1,209,929 Total revenues 3,560,358 2,592,118 6,152,476 6,049,646 Expenses: Personnel 1,542,244 1,448,296 2,990,540 2,901,799 Fringe benefits 247, , , ,313 Travel 7,947 11,725 19,672 5,342 Equipment 12,203 8,551 20,754 - Supplies 43,686 51,500 95,186 88,892 Contractual 70,282 59, ,986 - Facilities/construction 6,077 7,160 13,237 - Other 342, , , ,242 Food 39,937 22,117 62,054 - In-kind expenses 1,010, ,914 1,288,134 1,209,929 Indirect costs 237, , , ,129 Total expenses 3,560,358 2,592,118 6,152,476 6,049,646 Revenue over (under) expenses $ - $ - $ - $ - * Revenue and expenses include in-kind of $1,288,134 which is not recognized in the financial statements

24 COMBINING SCHEDULE OF ACTIVITIES ENERGY PROGRAM For the Year Ended June 30, 2016 Schedule 4 LIHEAP 15B-3021 EHA LIHEAP 15B-3021 Weatherization LIHEAP 16B-4020 EHA LIHEAP 16B-4020 Weatherization Other Grants and Contracts Revenues: Government contracts $ 106,446 $ 111,034 $ 68,951 $ 50,031 $ - $ 336,462 Other income ,424 70,424 Total revenues 106, ,034 68,951 50,031 70, ,886 Expenses: Salaries 55,774 2,243 30,105 1,277 36, ,544 Employee benefits 8, , ,561 17,738 ECIP and HEAP payments 23,595-15, ,707 Supplies ,415 Equipment ,243 1,778 Communication Occupancy ,035 Travel and training 1, ,417 Indirect costs 7,958-6,550-5,441 19,949 Program support - 108,026 6,488 48,641 5, ,623 Other 6, ,520-13,646 25,419 Total expenses 106, ,034 68,951 50,031 66, ,288 Change in net assets ,598 3,598 Net assets, beginning of period Net assets, end of period $ - $ - $ - $ - $ 3,598 $ 3,598 Total

25 DEPT OF CSD SCHEDULE OF REVENUE AND EXPENSES Contract No. 15B-3021 (LIHEAP EHA) For the Year Ended June 30, 2016 Schedule 5 1/1/2015 7/1/2015 Total Total through through Actual Reported Total 6/30/2015 6/30/2016 Costs Expenses Budgets Revenues: Contract revenue $ 82,897 $ 106,446 $ 189,343 $ 189,343 $ 227,543 Revenue adjustment (deferred) Total revenues 82, , , , ,543 Expenses: Administrative costs: Assurance 9,928 27,739 37,667 37,667 41,041 Intake 11,212 14,789 26,001 26,001 40,624 Administration 21,757 18,623 40,380 40,379 46,522 ECIP Outreach 7,635 7,091 14,726 14,727 14,727 HEAP Outreach / WPO 7,635 7,091 14,726 14,726 14,726 Technical and Training assistance 3,570 1,381 4,951 4,951 11,781 Subtotal administrative costs 61,737 76, , , ,421 Program costs: ECIP Wood Propane Oil 7,510 10,350 17,860 17,860 15,346 HEAP Furnace - 8,045 8,045 8,045 13,361 HEAP Wood, Propane, Oil/WPO 13,650 5,200 18,850 18,850 22,915 General operating - 6,137 6,137 6,137 6,500 Technical and Training assistance ,160 29,732 50,892 50,892 58,122 Total expenses 82, , , , ,543 Revenue over (under) expenses $ - $ - $ - $ - $