COMMUNITY ACTION PARTNERSHIP OF KERN DEFINED CONTRIBUTION PENSION PLAN FINANCIAL STATEMENTS WITH INDEPENDENT AUDITOR S REPORT

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1 COMMUNITY ACTION PARTNERSHIP OF KERN DEFINED CONTRIBUTION PENSION PLAN FINANCIAL STATEMENTS WITH INDEPENDENT AUDITOR S REPORT FEBRUARY 28, 2014 AND 2013

2 COMMUNITY ACTION PARTNERSHIP OF KERN DEFINED CONTRIBUTION PENSION PLAN FEBRUARY 28, 2014 AND 2013 TABLE OF CONTENTS Independent Auditor s Report... 1 Financial Statements Statements of Net Assets Available for Benefits... 3 Statements of Changes in Net Assets Available for Benefits... 4 Notes to the Financial Statements... 5 Supplemental Schedule Schedule H, Line 4I - Schedule of Assets Held for Investment Page

3 INDEPENDENT AUDITOR S REPORT To the Board of Directors Community Action Partnership of Kern Defined Contribution Pension Plan Report on the Financial Statements We were engaged to audit the accompanying financial statements of Community Action Partnership of Kern Defined Contribution Pension Plan (the Plan), which comprise the statements of net assets available for benefits as of February 28, 2014 and 2013, and the related statements of changes in net assets available for benefits for the years 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 an opinion on these financial statements based on conducting the audit in accordance with auditing standards generally accepted in the United States of America. Because of the matter described in the Basis for Disclaimer of Opinion paragraph, however, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Basis for Disclaimer of Opinion As permitted by 29 CFR of the Department of Labor s (DOL s) Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 (ERISA), the plan administrator instructed us not to perform, and we did not perform, any auditing procedures with respect to the information summarized in Note 3, which was certified by Mutual of America, the trustee of the Plan, except for comparing the information with the related information included in the financial statements. We have been informed by the plan administrator that the trustee holds the Plan s investment assets and executes investment transactions. The plan administrator has obtained a certification from the trustee as of and for the years ended February 28, 2014 and February 28, 2013, that the information provided to the plan administrator by the trustee is complete and accurate. 1

4 Disclaimer of Opinion Because of the significance of the matter described in the Basis for Disclaimer of Opinion paragraph, we have not been able to obtain sufficient, appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on these financial statements. Other Matter We were engaged for the purpose of forming an opinion on the financial statements as a whole. The supplemental schedules, which are the responsibility of management, and are required by the DOL s Rules and Regulations for Reporting and Disclosure under ERISA, are presented for the purpose of additional analysis, and is not a required part of the financial statements. Because of the significance of the matter described in the Basis for Disclaimer of Opinion paragraph, we do not express an opinion on the supplemental schedules referred to above. Report on Form and Content in Compliance With DOL Rules and Regulations The form and content of the information included in the financial statements and supplemental schedules, other than that derived from the information certified by the trustee, have been audited by us in accordance with auditing standards generally accepted in the United States of America and, in our opinion, are presented in compliance with the DOL s Rules and Regulations for Reporting and Disclosure under ERISA. BROWN ARMSTRONG ACCOUNTANCY CORPORATION Bakersfield, California December 12,

5 COMMUNITY ACTION PARTNERSHIP OF KERN DEFINED CONTRIBUTION PENSION PLAN STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS FEBRUARY 28, 2014 AND ASSETS: Investments at Fair Value $ 13,294,325 $ 11,168,987 Employer Contribution Receivable 362, ,251 Total Assets 13,657,083 11,514,238 Net Assets Available for Benefits $ 13,657,083 $ 11,514,238 The accompanying notes are an integral part of these financial statements. 3

6 COMMUNITY ACTION PARTNERSHIP OF KERN DEFINED CONTRIBUTION PENSION PLAN STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE YEARS ENDED FEBRUARY 28, 2014 AND 2013 ADDITIONS TO NET ASSETS ATTRIBUTED TO: Investment Income: Net Increase in Fair Value of Investments $ 1,842,612 $ 836,767 Interest 15,545 18,555 Employer Contributions 908, ,480 Total Additions 2,766,857 1,795,802 DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO: Benefits Paid to Participants 623, ,418 Administrative Expenses 214 1,483 Total Deductions 624, ,901 Net Increase 2,142, ,901 Net Assets Available for Benefits: Beginning of the Period 11,514,238 10,646,337 End of the Period $ 13,657,083 $ 11,514,238 The accompanying notes are an integral part of these financial statements. 4

7 COMMUNITY ACTION PARTNERSHIP OF KERN DEFINED CONTRIBUTION PENSION PLAN NOTES TO THE FINANCIAL STATEMENTS FEBRUARY 28, 2014 AND 2013 NOTE 1 PLAN DESCRIPTION The following description of the Community Action Partnership of Kern (the Organization) Defined Contribution Pension Plan (the Plan) provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan s provisions. General The Plan is a defined contribution plan covering all employees who have been employed by the Organization for one year or more with at least 800 hours worked during the year and who are at least 21 years of age. It is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). Contributions The Plan s provisions stipulate that the Organization will contribute to the Plan an amount equal to 5% of the participant s compensation for the Plan year. Participants direct the investment of the Organization s contribution into various investment options offered by the Plan. The Plan offers participants 38 investment options and an Interest Accumulation Account from 10 different investment companies. Contributions are subject to certain limitations. Participants Accounts Each participant s account is credited with an allocation of (a) the Organization s contribution and (b) Plan earnings. Allocations are based on participants earnings, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant s vested account. Any contributions made on behalf of a participant, for whom no investment direction is in effect, shall be allocated to a retirement fund appropriate to his or her age at the time of allocation. Vesting Vesting in the Organization s contributions plus earnings thereon is based on years of continuous service. A participant is 100 percent vested after 5 years of credited service. Year(s) of Vesting Service Vesting Percentage Less than 2 years 0% 2 years 25% 3 years 50% 4 years 75% 5 years 100% Payment of Benefits On termination due to death, disability, or retirement, a participant may elect to receive an amount equal to the value of the participant s vested interest in his or her account either in a lump sum amount, or as a joint and survivor annuity. For termination of service due to other reasons, a participant may receive the value of the vested interest in his or her account as a rollover distribution. Amounts allocated to accounts of persons who have elected to withdraw from the Plan but have not yet been paid as of February 28, 2014 and 2013, were $0 and $0, respectively. 5

8 NOTE 1 PLAN DESCRIPTION (Continued) Forfeited Accounts During fiscal years 2014 and 2013, forfeitures were allocated among the participants who were employees on the last day of the Plan year in the ratio that each such participant s compensation for that Plan year bears to the compensation of all such Plan participants for that Plan year. As of February 28, 2014, forfeitures reallocated to participant accounts were $79,775. In fiscal year 2013, forfeitures reallocated to participant accounts were $75,988. NOTE 2 SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The financial statements of the Plan are prepared on the accrual basis of accounting. Plan revenues and expenses are recognized when they become measurable. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of net assets available for benefits and changes therein. Actual results could differ from those estimates. Investment Valuation and Income Recognition Investments are recorded at fair value as determined by quoted market prices of the securities held in the funds. The unrealized appreciation or depreciation of the investments, based on the quoted market value at February 28, 2014 and 2013, is recorded as an increase or decrease to Net Assets Available for Plan Benefits. See Note 3 for discussion of fair value measurements. Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Net appreciation (depreciation) includes the Plan s gains and losses on investments bought and sold as well as held during the year. NOTE 3 FAIR VALUE MEASUREMENTS The Organization has adopted the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic , Fair Value Measurements (formerly Statement of Financial Accounting Standards (SFAS) No. 157). ASC Topic defines fair value, establishes a framework for measuring fair value, and expands disclosures regarding fair value measurements. ASC Topic defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic also establishes a fair value hierarchy which requires the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value: Level 1 Level 2 Asset value is based on actual quoted prices in active markets for identical securities (mark-to-market). Other significant observable inputs are used to arrive at fair value (including yield, quality, coupon rate, maturity, issue type, quoted prices for similar securities, prepayment speeds, trading characteristics, etc.). 6

9 NOTE 3 FAIR VALUE MEASUREMENTS (Continued) Level 3 Significant unobservable inputs (including management s own assumptions in determining the fair value of investments). Mutual of America determined that the fair value input for all investments as of February 28, 2014 and 2013, are considered Level 1. These investments consist solely of investments in mutual funds registered with the Securities and Exchange Commission and are carried at the net asset value at which the mutual funds shares are actively traded. The preceding method described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Plan believes its valuation method is appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. Investments at Fair Value as of February 28, 2014 Description (Level 1) (Level 2) (Level 3) Total Mutual of America General Account Fund $ 1,328,994 $ - $ - $ 1,328,994 Pooled Separate Funds: Mutual of America All America Fund 1, ,365 Mutual of America Bond Fund 407, ,012 Mutual of America Composite Fund 11, ,268 Mutual of America Mid-Term Bond Fund 166, ,474 Mutual of America Mid-Cap Equity Index 38, ,262 Mutual of America Equity Index Fund 352, ,180 Mutual of America Conservative Allocation 238, ,076 Mutual of America Moderate Allocation 419, ,720 Mutual of America Aggressive Allocation 208, ,028 Mutual of America Mid-Cap Value Fund 7, ,735 Mutual of America Small Cap Growth Fund 143, ,515 Mutual of America Small Cap Value Fund 188, ,729 Mutual of America International Fund 4, ,975 Mutual of America Retirement Income Fund 20, ,332 Mutual of America 2010 Retirement Fund 10, ,489 Mutual of America 2015 Retirement Fund 598, ,386 Mutual of America 2020 Retirement Fund 1,348, ,348,948 Mutual of America 2025 Retirement Fund 1,502, ,502,801 Mutual of America 2030 Retirement Fund 1,108, ,108,639 Mutual of America 2035 Retirement Fund 964, ,305 Mutual of America 2040 Retirement Fund 942, ,064 Mutual of America 2045 Retirement Fund 952, ,073 Mutual of America 2050 Retirement Fund 19, ,685 DWS Bond DWS Capital Growth 12, ,950 DWS International VP Capital Appreciation 252, ,115 Calvert VP SRI Balanced Portfolio 18, ,559 Fidelity Investments VIP Asset Manager 297, ,733 Fidelity Investments VIP Equity Income 101, ,659 Fidelity Investments VIP Contra Fund 714, ,399 Fidelity Investments VIP Mid-Cap 341, ,121 Vanguard VIF Diversified Value 223, ,113 Vanguard VIF International 333, ,315 T.Rowe Price Blue Chip Growth Fund 8, ,450 Oppenheimer Main Street VA 6, ,856 Total: $ 13,294,325 $ - $ - $ 13,294,325 7

10 NOTE 3 FAIR VALUE MEASUREMENTS (Continued) Investments at Fair Value as of February 28, 2013 Description (Level 1) (Level 2) (Level 3) Total Mutual of America General Account Fund $ 1,220,948 $ - $ - $ 1,220,948 Pooled Separate Funds: Mutual of America All America Fund 1, ,018 Mutual of America Bond Fund 432, ,281 Mutual of America Composite Fund 9, ,177 Mutual of America Mid-Term Bond Fund 189, ,190 Mutual of America Mid-Cap Equity Index 30, ,044 Mutual of America Equity Index Fund 266, ,379 Mutual of America Conservative Allocation 280, ,949 Mutual of America Moderate Allocation 361, ,811 Mutual of America Aggressive Allocation 169, ,550 Mutual of America Mid-Cap Value Fund 6, ,136 Mutual of America Small Cap Growth Fund 105, ,058 Mutual of America Small Cap Value Fund 155, ,956 Mutual of America International Fund 3, ,486 Mutual of America Retirement Income Fund 17, ,968 Mutual of America 2010 Retirement Fund 8, ,779 Mutual of America 2015 Retirement Fund 491, ,627 Mutual of America 2020 Retirement Fund 1,157, ,157,275 Mutual of America 2025 Retirement Fund 1,272, ,272,124 Mutual of America 2030 Retirement Fund 895, ,611 Mutual of America 2035 Retirement Fund 735, ,924 Mutual of America 2040 Retirement Fund 768, ,336 Mutual of America 2045 Retirement Fund 689, ,207 Mutual of America 2050 Retirement Fund DWS Bond 9, ,542 DWS Capital Growth 11, ,156 DWS International 3, ,406 VP Capital Appreciation 203, ,581 Calvert VP SRI Balanced Portfolio 14, ,409 Fidelity Investments VIP Asset Manager 279, ,963 Fidelity Investments VIP Equity Income 86, ,719 Fidelity Investments VIP Contra Fund 557, ,990 Fidelity Investments VIP Mid-Cap 270, ,998 Vanguard VIF Diversified Value 178, ,255 Vanguard VIF International 277, ,970 Oppenheimer Main Street VA 5, ,996 Total: $ 11,168,987 $ - $ - $ 11,168,987 NOTE 4 CERTIFIED INFORMATION The 2014 and 2013 financial statements and the financial information presented in Note 3 are prepared from information supplied by the Plan s trustee, Mutual of America. Specifically, investments and contributions received as of and for the years ended February 28, 2014 and 2013, were supplied by the trustee and such information has been certified by the trustee as being complete and accurate. 8

11 NOTE 5 PLAN ADMINISTRATION The Plan s assets are held by the trustee, Mutual of America. The trustee provides record keeping and investment services to the Plan. The Organization s contributions are managed by Mutual of America which invests cash received and interest income and makes distributions to participants. Administrative functions are jointly performed by the trustee and by officers or employees of the Organization. No officer or employee receives compensation from the Plan. Trustee administrative expenses are absorbed by the Plan and allocated to the participants accounts. The independent auditor s fees are paid directly by the Organization. NOTE 6 PLAN TERMINATION Although it has not expressed any intent to do so, the Organization has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants shall become 100 percent vested in their accounts. Upon such termination, the Organization may direct either a complete distribution of the Plan assets in a manner consistent with Plan requirements, or continue to hold the investments of the Plan as though the Plan had not been terminated. In the event that the Plan is terminated, the trustee will have the right to charge a fair value assessment on funds withdrawn prior to maturity. The amount of this assessment is equal to the amount required to cover the investment losses, if any, resulting from making an early payment of funds. NOTE 7 TAX STATUS The Internal Revenue Service has determined and informed the Organization with a letter dated September 28, 1992, that the Plan and related trust are designed in accordance with applicable sections of the Internal Revenue Code (IRC). The Plan has been amended since receiving the determination letter. However, the Plan administrator and the Plan s tax counsel believe the Plan is currently being operated in compliance with the applicable provisions of the IRC. The FASB issued new guidance on accounting for uncertainty in income taxes. The Plan adopted this new guidance for the year ended February 28, Management evaluated the Plan s tax positions and concluded that the Plan had maintained its tax exempt status and had taken no uncertain tax positions that require adjustment to the financial statements. Therefore, no provision for income taxes has been included in the financial statements. Uncertain Tax Positions ASC Topic 740 requires that amounts recognized in the Statement of Net Assets Available for Plan Benefits related to uncertain tax positions be classified as a current or noncurrent liability, based on the expected timing of the payment to a taxing authority. Management has determined that the Plan does not have any uncertain tax positions or associated unrecognized benefits that materially impact the financial statements or related disclosures. NOTE 8 RECONCILIATION BETWEEN THE FINANCIAL STATEMENTS AND FORM 5500 February 28, 2014 February 28, 2013 Ending Net Assets Available for Benefits per Form 5500 $ 13,294,325 $ 11,168,987 Accrual of Employer Contributions 362, ,251 Ending Net Assets Available for Benefits per the Financial Statements $ 13,657,083 $ 11,514,238 9

12 NOTE 9 SUBSEQUENT EVENTS Subsequent to February 28, 2014, and through December 12, 2014, the date through which management evaluated subsequent events and on which the financials statements were issued, the Organization did not identify any subsequent events that require disclosure. 10

13 SUPPLEMENTAL SCHEDULE

14 COMMUNITY ACTION PARTNERSHIP OF KERN DEFINED CONTRIBUTION PENSION PLAN SCHEDULE H, LINE 4I SCHEDULE OF ASSETS HELD FOR INVESTMENT FEBRUARY 28, 2014 (B) (C) Identity of Issuer, Description of Investment, Including * (E) Borrower, Lessor, Maturity Date, Rate of Interest, (D) Carrying (A) or Similar Party Collateral, Par, or Maturity Value Cost Value * Mutual of America General Account Fund $ - $ 1,328,994 * Mutual of America Money Market Fund - - * Mutual of America All America Fund - 1,365 * Mutual of America Bond Fund - 407,012 * Mutual of America Composite Fund - 11,268 * Mutual of America Mid-Term Bond Fund - 166,474 * Mutual of America Mid-Cap Equity Index - 38,262 * Mutual of America Equity Index Fund - 352,180 * Mutual of America Conservative Allocation - 238,076 * Mutual of America Moderate Allocation - 419,720 * Mutual of America Aggressive Allocation - 208,028 * Mutual of America Mid-Cap Value Fund - 7,735 * Mutual of America Small Cap Growth Fund - 143,515 * Mutual of America Small Cap Value Fund - 188,729 * Mutual of America International Fund - 4,975 * Mutual of America Retirement Income Fund - 20,332 * Mutual of America 2010 Retirement Fund - 10,489 * Mutual of America 2015 Retirement Fund - 598,386 * Mutual of America 2020 Retirement Fund - 1,348,948 * Mutual of America 2025 Retirement Fund - 1,502,801 * Mutual of America 2030 Retirement Fund - 1,108,639 * Mutual of America 2035 Retirement Fund - 964,305 * Mutual of America 2040 Retirement Fund - 942,064 * Mutual of America 2045 Retirement Fund - 952,073 Mutual of America 2050 Retirement Fund - 19,685 * Deutsche Bank Group DWS Bond - - * Deutsche Bank Group DWS Capital Growth - 12,950 * Deutsche Bank Group DWS International - - * American Century VP Capital Appreciation - 252,115 * Calvert Investments VP SRI Balanced Portfolio - 18,559 * Fidelity VIP Asset Manager - 297,733 * Fidelity VIP Equity Income - 101,659 * Fidelity VIP Contra Fund - 714,399 * Fidelity VIP Mid-Cap - 341,121 * Vanguard VIF Diversified Value - 223,113 * Vanguard VIF International - 333,315 * T.Rowe Price Blue Chip Growth Fund - 8,450 * Oppenheimer Main Street VA - 6,856 Total assets held for investment purposes $ - $ 13,294,325 *Omitted as investments are participant directed. 11

15 COMMUNITY ACTION PARTNERSHIP OF KERN DEFINED CONTRIBUTION PENSION PLAN SCHEDULE H, LINE 4I SCHEDULE OF ASSETS HELD FOR INVESTMENT FEBRUARY 29, 2013 (B) (C) Identity of Issuer, Description of Investment, Including * (E) Borrower, Lessor, Maturity Date, Rate of Interest, (D) Carrying (A) or Similar Party Collateral, Par, or Maturity Value Cost Value * Mutual of America General Account Fund $ - $ 1,220,948 * Mutual of America Money Market Fund - - * Mutual of America All America Fund - 1,018 * Mutual of America Bond Fund - 432,281 * Mutual of America Composite Fund - 9,177 * Mutual of America Mid-Term Bond Fund - 189,190 * Mutual of America Mid-Cap Equity Index - 30,044 * Mutual of America Equity Index Fund - 266,379 * Mutual of America Conservative Allocation - 280,949 * Mutual of America Moderate Allocation - 361,811 * Mutual of America Aggressive Allocation - 169,550 * Mutual of America Mid-Cap Value Fund - 6,136 * Mutual of America Small Cap Growth Fund - 105,058 * Mutual of America Small Cap Value Fund - 155,956 * Mutual of America International Fund - 3,486 * Mutual of America Retirement Income Fund - 17,968 * Mutual of America 2010 Retirement Fund - 8,779 * Mutual of America 2015 Retirement Fund - 491,627 * Mutual of America 2020 Retirement Fund - 1,157,275 * Mutual of America 2025 Retirement Fund - 1,272,124 * Mutual of America 2030 Retirement Fund - 895,611 * Mutual of America 2035 Retirement Fund - 735,924 * Mutual of America 2040 Retirement Fund - 768,336 * Mutual of America 2045 Retirement Fund - 689,207 Mutual of America 2050 Retirement Fund * Deutsche Bank Group DWS Bond - 9,542 * Deutsche Bank Group DWS Capital Growth - 11,156 * Deutsche Bank Group DWS International - 3,406 * American Century VP Capital Appreciation - 203,581 * Calvert Investments VP SRI Balanced Portfolio - 14,409 * Fidelity VIP Asset Manager - 279,963 * Fidelity VIP Equity Income - 86,719 * Fidelity VIP Contra Fund - 557,990 * Fidelity VIP Mid-Cap - 270,998 * Vanguard VIF Diversified Value - 178,255 * Vanguard VIF International - 277,970 * Oppenheimer Main Street VA - 5,996 Total assets held for investment purposes $ - $ 11,168,987 *Omitted as investments are participant directed. 12