PIKES PEAK COMMUNITY ACTION AGENCY, INC. FINANCIAL STATEMENTS AND ADDITIONAL INFORMATION WITH INDEPENDENT AUDITORS' REPORT DECEMBER 31, 2010 AND 2009

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1 FINANCIAL STATEMENTS AND ADDITIONAL INFORMATION WITH INDEPENDENT AUDITORS' REPORT DECEMBER 31, 2010 AND 2009 OSBORNE, PARSONS & ROSACKER, LLP CERTIFIED PUBLIC ACCOUNTANTS

2 TABLE OF CONTENTS Independent auditors' report 1 Financial statements Statements of financial position 3 Statements of activities 4 Statements of cash flows 5 Statements of functional expense 6 Notes to financial statements 7 Additional information Schedule of expenditures of federal awards 12 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 13 Report on compliance with requirements that could have a direct and material effect on each major program and on internal control over compliance in accordance with OMB Circular A Schedule of findings and questioned costs 17 Page

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5 STATEMENTS OF FINANCIAL POSITION DECEMBER 31, ASSETS Cash Unrestricted $ 257,251 $ 182,079 Restricted for IDA program 258, ,981 Total cash 515, ,060 Investments 110, ,422 Accounts and pledges receivable 182, ,631 Other receivables - 2,195 Prepaid expenses 21,807 8,007 Deposits Property and equipment, net 13,581 16,343 Total assets $ 844,817 $ 932,558 LIABILITIES AND NET ASSETS Liabilities Accounts payable $ 18,974 $ 30,138 Accrued expenses 38,039 38,657 Capital lease payable 3,450 4,474 Total liabilities 60,463 73,269 Net assets Unrestricted Unrestricted, undesignated 289, ,265 Board designated 108,900 58,900 Total unrestricted net assets 398, ,165 Temporarily restricted 386, ,124 Total net assets 784, ,289 Total liabilities and net assets $ 844,817 $ 932,558 See notes to financial statements - 3 -

6 STATEMENT OF ACTIVITIES YEAR ENDED DECEMBER 31, 2010 Temporarily Unrestricted Restricted Total Revenue and other support Grants $ 1,054,297 $ 236,198 $ 1,290,495 Contributions 31,167-31,167 In-kind contributions 95,207-95,207 Special event and fundraising 18,819-18,819 Investment income 2,473-2,473 Miscellaneous 9,831-9,831 Total revenue and other support 1,211, ,198 1,447,992 Net assets released from restrictions Family Stabilization 108,894 (108,894) - Transition to Independence 17,965 (17,965) - Individual Development Accounts 166,112 (166,112) - Total net assets released from restrictions 292,971 (292,971) - Total revenue and other support 1,504,765 (56,773) 1,447,992 Expense Program Family Stabilization 757, ,231 Transitions to Independence 411, ,392 Individual Development Accounts 264, ,074 Total program 1,432,697-1,432,697 Support Administrative 58,242-58,242 Fund raising 31,988-31,988 Total support 90,230-90,230 Total expense 1,522,927-1,522,927 Change in net assets (18,162) (56,773) (74,935) Beginning net assets 416, , ,289 Ending net assets $ 398,003 $ 386,351 $ 784,354 See notes to financial statements - 4 -

7 STATEMENT OF ACTIVITIES YEAR ENDED DECEMBER 31, 2009 Temporarily Unrestricted Restricted Total Revenue and other support Grants $ 904,482 $ 123,194 $ 1,027,676 Contributions 76,819-76,819 In-kind contributions 109, ,676 Special event and fundraising 19,216-19,216 Investment income 11,674-11,674 Miscellaneous 21,454-21,454 Total revenue and other support 1,143, ,194 1,266,515 Net assets released from restrictions Family Stabilization 106,764 (106,764) - Transition to Independence 29,485 (29,485) - Individual Development Accounts Total net assets released from restrictions 136,249 (136,249) - Total revenue and other support 1,279,570 (13,055) 1,266,515 Expense Program Family Stabilization 642, ,706 Transitions to Independence 206, ,723 Individual Development Accounts 207, ,039 Total program 1,056,468-1,056,468 Support Administrative 51,952-51,952 Fund raising 33,338-33,338 Total support 85,290-85,290 Total expense 1,141,758-1,141,758 Change in net assets 137,812 (13,055) 124,757 Beginning net assets 278, , ,532 Ending net assets $ 416,165 $ 443,124 $ 859,289

8 STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, Cash flows from operations Change in net assets $ (74,935) $ 124,757 Adjustments to arrive at net cash provided by operations Noncash items Depreciation 5,048 3,080 Non cash donation (2,279) - Loss on disposal of fixed assets Change in Accounts receivable 46,056 (96,110) Other receivables 2,195 (1,122) Prepaid expenses (13,800) 8,681 Accounts payable (11,164) 11,085 Accrued expenses (618) 10,012 Net cash (used) provided by operations (49,497) 61,204 Cash flows from investing activities Purchase of fixed assets - (8,787) Proceeds from sale of investments 49,952 85,204 Purchase of investments - (50,000) Net cash provided by investing activities 49,952 26,417 Cash flows from financing activities Payment on capital lease (1,024) (757) Net cash flow used by financing activities (1,024) (757) Net (decrease) increase in cash (569) 86,864 Beginning cash 516, ,195 Ending cash $ 515,490 $ 516,059 See notes to financial statements - 5 -

9 STATEMENT OF FUNCTIONAL EXPENSE YEAR ENDED DECEMBER 31, 2010 PROGRAM SUPPORT Family Stabilization Transitions to Independence Individual Development Accounts Total program Fund Total Administrative raising support Total expense Salaries $ 237,163 $ 98,260 $ 72,242 $ 407,665 $ 40,088 $ 16,831 $ 56,919 $ 464,584 Employee benefits 32,904 13, ,291 2,494 1,487 3,981 51,272 Payroll taxes 20,476 8,143 6,021 34,640 5,025 1,366 6,391 41,031 Staff development 1, , ,520 Client assistance 204, , , ,816 In-kind expense Donated goods 60,616 1,333 1,333 63, ,682 Facilities 22,903 3,168 3,168 29, ,239 Professional fees 84,139 10,362 5,203 99, ,787 3, ,391 Supplies 7,773 8,054 1,578 17,405 6, ,014 24,419 Insurance 12, ,010 19, ,561 Occupancy 29,442 3,880 1,241 34, ,983 Printing 2,252 1, , ,082 5,631 Postage 1, , ,757 Telephone 8,845 1, , ,764 Repairs and maintenance Marketing Travel 3, , ,626 Conferences and meetings 20, , ,203 Dues and fees 2, , ,878 Depreciation 2, ,317 4, ,048 Client savings match , , ,405 Special event and fundraising ,541 7,541 7,541 Miscellaneous , ,371 Total expense $ 757,231 $ 411,392 $ 264,074 $ 1,432,697 $ 58,242 $ 31,988 $ 90,230 $ 1,522,927 Percent of total expense 49.72% 27.01% 17.34% 94.08% 3.82% 2.10% 5.92% % See notes to financial statements - 6 -

10 STATEMENT OF FUNCTIONAL EXPENSE YEAR ENDED DECEMBER 31, 2009 PROGRAM SUPPORT Family Stabilization Transitions to Independence Individual Development Accounts Total program Administrative Fund raising Total support Total expense Salaries $ 229,058 $ 69,081 $ 83,695 $ 381,834 $ 34,790 $ 17,020 $ 51,810 $ 433,644 Employee benefits 34,412 4, ,768 5, ,468 45,236 Payroll taxes 19,240 5,387 7,148 31,775 3,428 1,372 4,800 36,575 Staff development 3, , ,180 Client assistance 183, , , ,658 In-kind expense Donated goods 55, , ,708 Facilities 29,388 10,446 10,446 50,280 1,844 1,844 3,688 53,968 Professional fees 27,970 3,588 4,561 36,119 1,661 2,818 4,479 40,598 Supplies 6,350 1,377 2,544 10,271 2, ,708 12,979 Insurance 6, ,789 15, ,862 Occupancy 24, , ,229 Printing 2, ,730 4, ,719 Postage 1, , ,980 Telephone 9, , ,438 Marketing Travel 2, ,348 4, ,887 Conferences and meetings , ,937 Dues and fees 1, , ,031 Depreciation 1, , ,080 Client savings match ,217 82, ,217 Special event and fundraising ,297 7,297 7,297 Miscellaneous 1, , ,259 Total expense $ 642,706 $ 206,723 $ 207,039 $ 1,056,468 $ 51,952 $ 33,338 $ 85,290 $ 1,141,758 - Percent of total expense 56.29% 18.11% 18.13% 92.53% 4.55% 2.92% 7.47% %

11 NOTES TO FINANCIAL STATEMENTS SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This summary of significant accounting policies of the Pikes Peak Community Action Agency, Inc. is presented to assist in understanding the financial statements. History and purpose Pikes Peak Community Action Agency, Inc. (Agency) was created in 1964 as a result of the Economic Opportunity Act. In 1984 the Agency was established as a human services nonprofit organization. The Agency provides services to low-income families and individuals in El Paso County, Colorado. The Agency achieves its objectives through the following programs: Family Stabilization Services Designed to meet the emergency and basic needs of lowincome individuals and families. Services include rental and utility assistance, food and clothing pantries, transportation vouchers, income tax preparation, and medical prescription assistance. Transitions to Independence Addresses the barriers to self-sufficiency by offering services to economically disadvantaged individuals. Services include education assistance, job coaching, transportation, uniform assistance, testing costs, and goal setting. Individual Development Accounts (Save Up to Step Out and Youth Education Savings) Addresses self-sufficiency and elimination of poverty through asset acquisition. Save Up to Step Out offers incentives for individuals to set savings goals to acquire a first home, post-secondary education, or start or expand a small business. Savings by program participants are matched $4 for every $1 saved for a maximum match of $4,000. The Youth Education Savings program offers incentives for youth ages to set savings goals to acquire educational related assets and post-secondary education. Savings by program participants are matched $2 for every $1 saved for a maximum match of $4,000. Basis of accounting Information regarding financial position and activities is reported in three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. At December 31, 2010 and 2009, the Agency had no permanently restricted net assets. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The significant accounting estimates used in the preparation of the Agency s financial statements relate to the estimated collectability of accounts and pledges receivable and the allocation of indirect expenses. Income tax status The Agency is exempt under Section 501(c)(3), of the Internal Revenue Code from tax on income derived from donations, income generated by activities carried on in furtherance of its exempt purpose and certain other specified income and, in addition, is qualified to receive tax deductible contributions

12 NOTES TO FINANCIAL STATEMENTS Definition of cash For the purpose of the statement of cash flows, cash is defined as all cash on hand, demand deposits and money market accounts. Investments Investments consist of certificates of deposit. Accounts and pledges receivable Accounts and pledges receivable are reported at the amount the Agency expects to collect on balances outstanding at year-end. Management closely monitors outstanding balances and establishes an allowance for doubtful accounts, as required. All receivables are due within one year. Management believes all outstanding receivables at December 31, 2010, are fully collectible, therefore no allowance has been established. Furniture and equipment Furniture and equipment are carried at cost. Donated property is carried at its fair value at the time of the donation. Assets costing over $500 with a useful life of more than one year are capitalized. Depreciation is provided using the straight-line method over the estimated useful life of assets ranging from 5 to 20 years. Contributions Contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support based on the existence or nature of any donor restrictions. Temporarily restricted contributions and grants are recorded as unrestricted contributions if the restrictions are met in the same reporting period in which the contribution is received. Contributions and grants with unmet restrictions are reported as temporarily restricted at the end of the year. Gifts of land, buildings, and equipment are reported as unrestricted support unless explicit donor stipulations specify how the donated assets must be used. Gifts of long-lived assets with explicit restrictions specifying how the assets are to be used and gifts of cash or other assets that must be used to acquire long-lived assets are reported as restricted support. Absent explicit donor stipulation, expirations of donor restrictions are reported when the donated or acquired long-lived assets are placed in service. Donated Services and Facilities The value of donated services is recorded if the services received create or enhance a non-financial asset or require specialized skills that would typically need to be purchased if not provided by donation. Donated services meeting the above criteria, as well as donated facilities, and other items are reflected as contributions in-kind in the accompanying statements at the estimated fair values at the date of receipt

13 NOTES TO FINANCIAL STATEMENTS NOTE 1 ACCOUNTS AND PLEDGES RECEIVABLE Receivables consist of: Accounts receivable $ 84,428 $ 166,523 Pledges receivable 98,147 62,108 Total accounts and pledges receivable $ 182,575 $ 228,631 All receivables are due within one year. NOTE 2 PROPERTY AND EQUIPMENT Property and equipment consist of: Building $ 1,200 $ 1,200 Website Furniture and equipment 58,740 56,454 Total 60,540 58,254 Less Accumulated depreciation (46,959) (41,911) Net $ 13,581 $ 16,343 Depreciation expense was $5,048 and $3,080 for 2010 and NOTE 3 TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets consist of: Restriction Family Stabilization $ 37,637 $ 17,541 Transitions to Independence 23,611 14,077 Individual Development Accounts 226, ,398 Time 98,147 62,108 $ 386,351 $ 443,

14 NOTES TO FINANCIAL STATEMENTS NOTE 4 BOARD DESIGNATED NET ASSETS Board designated net assets consist of: Program Youth Education Savings $ 58,900 $ 8,900 Individual Development Accounts 50,000 25,000 Family Stabilization - 25,000 $ 108,900 $ 58,900 NOTE 5 IN-KIND CONTRIBUTIONS In-kind contributions consist of: Goods $ 63,682 $ 55,708 Equipment 2,286 - Facilites 29,239 53,968 $ 95,207 $ 109,676 In addition, volunteers, whose time did not qualify for recording in these financial statements, donated approximately 5,740 hours of time with an estimated value of $101,000 during Approximately 5,400 hours of time with an estimated value of $94,000 was donated during NOTE 6 LEASE OBLIGATIONS The Agency is currently operating under two month-to-month lease agreements and three annual lease agreements for five facilities. Rent expense for 2010 was $25,766 and $13,400 for The future minimum lease payments are $5,057 for The agency has acquired equipment valued at $5,321 under a capital lease. The asset is being depreciated over 5 years. Future minimum lease payments are: 2011 $ 1, , , Total minimum lease payments 3,552 Amount representing interest (102) Adjusted total $ 3,

15 NOTES TO FINANCIAL STATEMENTS NOTE 7 CONCENTRATIONS OF CREDIT RISK Throughout the year, the Agency has cash deposits at a financial institution in excess of federally insured limits. Pikes Peak Community Action Agency, Inc. has not experienced losses as a result of following this policy and believes it is not exposed to any significant credit risk. Approximately 27% and 31% of revenue resulted from one contract during the years ended December 31, 2010 and Stimulus funds accounted for 26% of revenue in NOTE 8 FAIR VALUE MEASUREMENTS Level 1 inputs: Quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date. Level 2 inputs: Other than quoted market prices included in Level 1 that are observable for the asset or liability, either directly or indirectly (e.g., quoted market prices of similar assets or liabilities in an active markets, or quoted market prices for identical or similar assets or liabilities in markets that are not active). Level 3 inputs: Unobservable inputs (e.g., a company s own data) and should be used to measure fair value to the extent that observable inputs are not available. The following is a summary the major categories of assets measured at fair value on a recurring basis during the years ended December 31, 2010: Description 2010 Fair value inputs Fair value Level 1 Level 2 Level 3 Certificates of deposit $ 110,463 $ 110,463 $ - $ - Description 2009 Fair value Level 1 Level 2 Level 3 Certificates of deposit $ 160,422 $ 160,422 $ - $ - NOTE 9 PENSION PLAN The Agency sponsors tax deferred annuity plans for the benefit of its employees but does not match employee contributions. NOTE 10 SUBSEQUENT EVENTS Management has evaluated subsequent events through February 23, 2011, the date on which the financial statements were available to be issued

16 ADDITIONAL INFORMATION

17 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED DECEMBER 31, 2010 Federal Grantor/ Pass-Through Grantor/ Program Title Federal CFDA Number Expenditures U.S. Department of Health and Human Services: Pass-through from El Paso County, Colorado, Department of Human Services: Community Service Block Grant $ 369,323 Temporary Assistance for Needy Families ,750 Community Service Block Grant (ARRA) ,771 Pass-through from Colorado Department of Local Affairs: Community Service Block Grant ,880 Community Service Block Grant (ARRA) ,286 Total U.S. Department of Health and Human Services 872,010 U.S. Department of Housing and Urban Development Pass-through from Colorado Department of Local Affairs: Emergency Shelter Grant ,000 Pass-through from City of Colorado Springs: Community Development Block Grant ,313 Pass-through from El Paso County, Colorado: Community Development Block Grant ,698 Total U.S. Department of Housing and Urban Development 58,011 U.S. Federal Emergency Management Agency Direct award: Emergency Food and Shelter National Board Program ,820 Total U.S. Federal Emergency Management Agency 8,820 Total Federal Awards Expended $ 938,

18 OSBORNE, PARSONS & ROSACKER, LLP CERTIFIED PUBLIC ACCOUNTANTS 720 NORTH TEJON STREET COLORADO SPRINGS, COLORADO GREGORY P. PARSONS, CPA PARTNER TELEPHONE (719) JEFFREY S. ROSACKER, CPA PARTNER FAX (719) 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 Board of Directors Pikes Peak Community Action Agency, Inc. Colorado Springs, Colorado We have audited the accompanying financial statements of Pikes Peak Community Action Agency, Inc. (Agency) as of and for the year ended December 31, 2010, and have issued our report thereon dated February 23, 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. Internal Control over Financial Reporting In planning and performing our audit, we considered the Agency s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Agency s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Agency's internal control over financial reporting. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to indentify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. Compliance and Other Matters As part of obtaining reasonable assurance about whether the Agency s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. MEMBERS AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS AND COLORADO SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS MEMBER AICPA PRIVATE COMPANIES PRACTICE SECTION

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20 OSBORNE, PARSONS & ROSACKER, LLP CERTIFIED PUBLIC ACCOUNTANTS 720 NORTH TEJON STREET COLORADO SPRINGS, COLORADO GREGORY P. PARSONS, CPA PARTNER TELEPHONE (719) JEFFREY S. ROSACKER, CPA PARTNER FAX (719) REPORT ON COMPLIANCE WITH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 Board of Directors Pikes Peak Community Action Agency, Inc. Colorado Springs, Colorado Compliance We have audited the compliance of Pikes Peak Community Action Agency, Inc. (Agency) with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that could have a direct and material effect on each of Pikes Peak Community Action Agency, Inc. major federal programs for the year ended December 31, The Agency s major federal programs are identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major federal programs is the responsibility of the Agency s management. Our responsibility is to express an opinion on the Agency s compliance based on our audit. We conducted our audit of compliance in accordance with standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the Ageny s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination of the Agency s compliance with those requirements. In our opinion, Pikes Peak Community Action Agency, Inc. complied, in all material respects, with the requirements referred to above that are applicable to each of its major federal programs for the year ended December 31, MEMBERS AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS AND COLORADO SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS MEMBER AICPA PRIVATE COMPANIES PRACTICE SECTION

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22 SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED DECEMBER 31, 2010 Summary of Audit Results 1. The auditor's report expresses an unqualified opinion on the financial statements of Pikes Peak Community Action Agency, Inc. 2. No significant deficiencies relating to internal control were disclosed in the audit of the financial statements. 3. No instances of noncompliance material to the financial statements of the Pikes Peak Community Action Agency, Inc. were disclosed during the audit. 4. No significant deficiencies were disclosed during the audit of the major federal award program of the Pikes Peak Community Action Agency, Inc. 5. Our report on page 15 on compliance for the major federal award programs for the Pikes Peak Community Action Agency, Inc. expresses an unqualified opinion on all major federal programs. 6. There were no audit findings relative to the major federal award program for the Pikes Peak Community Action Agency, Inc. 7. The programs tested as major programs were: Community Service Block Grant CFDA and Community Service Block Grant (ARRA) The threshold for distinguishing Types A and B programs was $300, Pikes Peak Community Action Agency, Inc. was determined to be a high-risk auditee. Findings - Financial Statements Audit None Findings and Questioned Costs - Major Federal Award Program Audit None