TMC DEVELOPMENT WORKING SOLUTIONS. Financial Statements. and. Reports Required Under OMB Circular A-133. Year ended September 30, 2014.

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1 TMC DEVELOPMENT WORKING SOLUTIONS Financial Statements and Reports Required Under OMB Circular A-133 Year ended with Independent Auditors Reports

2 Table of Contents Financial Statements Independent Auditors Report... 1 Statement of Financial Position... 3 Statement of Activities and Changes in Net Assets... 4 Statement of Functional Expenses... 5 Statement of Cash Flows Schedule of Expenditures of Federal Awards Report of 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 OMB Circular A Schedule of Findings and Questioned Costs.28

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5 Statement of Financial Position As of Assets Current assets Cash and cash equivalents $ 587,351 $ 244,828 Restricted cash and cash equivalents 1,299,531 1,889,673 Grants and contributions receivable 33,500 14,053 Interest receivable 14,438 11,295 Loans receivable due within one year 767, ,411 Prepaid expenses 1,831 1,795 Total current assets 2,704,208 2,708,055 Furniture and equipment, at cost Furniture and equipment 28,582 22,254 Accumulated depreciation (18,782) (15,596) Furniture and equipment, net 9,800 6,658 Loans receivable, net of amounts due within one year 2,344,150 1,805,608 Allowance for loan loss (32,896) (23,383) Loans receivable, net 2,311,254 1,782,225 Cash and cash equivalents restricted for loan loss reserve 240, ,298 Rent deposit Total assets $ 5,266,552 $ 4,679,211 Liabilities and Net Assets Current liabilities Accounts payable and accrued expenses $ 58,373 $ 24,634 Loans payable due within one year 182, ,139 Total current liabilities 240, ,773 Loans payable, net of amounts due within one year 829, ,182 Total liabilities 1,069,918 1,074,955 Net assets Unrestricted 3,687,433 2,770,833 Temporarily restricted 509, ,423 Total net assets 4,196,634 3,604,256 Total liabilities and net assets $ 5,266,552 $ 4,679,211 See accompanying notes. -3-

6 Statement of Activities and Changes in Net Assets For the year ended with Comparative totals for the year ended September 30, 2013 Temporarily Unrestricted restricted Totals Totals only Support and revenue Contributions $ 424,815 $ 201,721 $ 626,536 $ 454,641 Contributed services 1,351,654-1,351, ,192 Grants and awards City and County of San Francisco - 191, , ,176 Department of the Treasury - 600, , ,000 Others - 258, , ,328 Interest income on loans 165, , ,447 Loan closing and other fees 99,558-99,558 68,943 Interest income on bank deposits 2,218-2,218 4,813 Net assets released from restrictions - (on purpose and time) 1,576,526 (1,576,526) - - Total support and revenue 3,620,504 (324,222) 3,296,282 2,587,540 Expenses Program services 2,450,609-2,450,609 1,467,271 Management and general 114, ,861 86,634 Fundraising and development 138, ,435 66,825 Total expenses 2,703,904-2,703,904 1,620,730 Change in net assets 916,600 (324,222) 592, ,810 Net assets, beginning of year 2,770, ,423 3,604,256 2,637,446 Net assets, end of year $ 3,687,433 $ 509,201 $ 4,196,634 $ 3,604,256 See accompanying notes. -4-

7 Statement of Functional Expenses For the year ended with Comparative totals only for the year ended September 30, 2013 Management Fundraising Program and and services general development Totals Totals only Salaries $ 494,423 $ 15,000 $ 45,000 $ 554,423 $ 451,212 Payroll taxes 41,160 1,315 3,693 46,168 38,624 Employee benefits 78,378 1,433 6,940 86,751 66,584 Total salaries and related expenses 613,961 17,748 55, , ,420 Legal, accounting and administrative services donated 1,329,131 22,523-1,351, ,192 Consulting and other professional fees 24,158 61,250 46, ,626 64,136 Rent 40,520 1,155 1,000 42,675 31,800 Interest 16, ,967 14,235 Loan servicing 58, ,869 41,182 Insurance 3, ,608 4,794 Fundraising ,624 28,624 26,821 Office supplies, equipment and maintenance 10,707 7,600 1,906 20,213 7,602 Travel and transportation 12,423 1,000-13,423 10,760 Telephone 7, ,189 6,123 Marketing 3,747-3,748 7,495 10,384 Membership dues and licenses 8, ,001 7,102 Utilities 2, ,900 1,056 Conferences and meetings 3,326 1,000-4,326 1,399 Loan losses 111, ,086 57,184 Grants - passthrough 201, ,721 - Depreciation 1,596 1, ,186 2,540 $ 2,450,609 $ 114,861 $ 138,435 $ 2,703,905 $ 1,620,730 See accompanying notes. -5-

8 Statement of Cash Flows For the year ended Cash flows from operating activities Change in net assets $ 592,378 $ 966,810 Adjustments to reconcile change in net assets to net cash provided (used) by operating activities Depreciation 3,186 2,540 Loan loss reserve 111,086 57,184 Changes in operating assets and liabilities Grants receivable (19,447) (14,053) Interest receivable (3,143) (7,071) Prepaid expenses (36) 6,546 Accounts payable and accrued liabilities 33,739 11,343 Net cash provided by operating activities 717,763 1,023,299 Cash flows from investing activities Purchases of furniture and equipment (6,328) - Net increase in loans receivable (861,261) (801,362) Net cash used in investing activities (867,589) (801,362) Cash flows from financing activities Net increase (decrease) in loans payable (38,776) 381,058 Net cash (used) provided by financing activities (38,776) 381,058 Net (decrease) increase in cash and cash equivalents (188,602) 602,995 Cash and cash equivalents, beginning of year 2,315,799 1,712,804 Cash and cash equivalents, end of year $ 2,127,197 $ 2,315,799 Cash paid during the year for interest $ 16,967 $ 14,235 See accompanying notes. -6-

9 Note 1 Basis of presentation TMC Development Working Solutions (Working Solutions) is a California non-profit corporation whose purpose is to assist underserved entrepreneurs in the nine San Francisco Bay Area counties by providing them with access to capital, technical assistance and resources to successfully start and grow a business. Working Solutions supports microenterprise growth as a strategy to strengthen the local economy, create jobs and build strong communities. Working Solutions provides the following services: Micro-loans/small business loans of from $5,000 to $50,000 Technical assistance consisting of business coaching, advising, education and mentoring Referrals for free and low-cost business resources Education presentations on access to capital Note 2 Summary of significant accounting policies Basis of accounting The accompanying financial statements of Working Solutions have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States. Under the accrual basis of accounting, contributions are recognized when promised, revenues are recognized when earned and expenses are recognized when incurred. Working Solutions 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. Unrestricted net assets include those assets over which the Board of Directors has discretionary control in carrying out the operations of Working Solutions. Under this category, Working Solutions maintains its operating funds plus any other net assets that have been designated by the Board of Directors for specific purposes. Temporarily restricted net assets include resources available for use, but expendable only for those purposes or time periods specified by the donor or funding source. Temporarily restricted net assets originate from grants and contributions to Working Solutions. -7-

10 Note 2 Summary of significant accounting policies (continued) Basis of accounting (continued) Permanently restricted net assets include gifts and bequests accepted with the donor stipulation that the principal be held in perpetuity. Working Solutions currently does not have any permanently restricted net assets. Use of estimates Working Solutions prepares its financial statements in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although management bases these estimates on its knowledge of current events and actions it may undertake in the future, actual results could differ from those estimated. The most significant estimates relate to an allowance for loan losses. This estimate may be adjusted as more current information becomes available and any adjustment could be significant. Contributions, grants and awards Contributions consist primarily of amounts received from financial institutions. Contributions, including unconditional promises to give, are recognized in the period the promise is received. All contributions are considered to be available for unrestricted use unless specifically restricted by the donor. Contributions with donor restrictions are recognized as restricted net assets. Generally, donors place restrictions on contributions for a specific time and/or a or purpose. Conditional contributions and promises to give are not recognized until they become unconditional; that is when the conditions on which they depend are substantially met. Restrictions on gifts of property or equipment or gifts restricted to the purchase of property or equipment are satisfied when the assets are placed in service. Contributions of assets other than cash are recorded at their estimated fair value at the date of receipt. Contributions to be received after one year are discounted at an appropriate rate commensurate with the anticipated cash flow and risks involved. Amortization of the discount is recorded as additional contribution revenue in -8-

11 Note 2 Summary of significant accounting policies (continued) Contributions, grants and awards (continued) accordance with donor-imposed restrictions, if any, on the contributions. As of, Working Solutions did not have contributions to be received after one year. Grants and awards consist primarily of amounts received from the federal government and are utilized to support Working Solutions micro-loan program. The grants are recognized as temporarily restricted earnings until the related loans are funded. Interest income Interest income consists of interest earned on loans and interest earned on certificates of deposits and money market accounts. Interest income is recognized in the period earned. Donated services Donated services are reflected in the financial statements at the fair value of the services received only if the services received (a) create or enhance non-financial assets or (b) require specialized skills that are provided by individuals possessing those skills and would typically need to be purchased if not provided by donation. During the year ended, Working Solutions received legal services for its micro-loan program of approximately $1,329,400 ( $765,534), and management and accounting services of $22,254 ( $11,658). Donated services have been reflected in the accompanying financial statements as contributions, with an equivalent amount included in program costs or supporting services as an in-kind expense. Cash and cash equivalents Working Solutions considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. Working Solutions places its cash and temporary cash investments only with high credit quality institutions. As of, cash and cash equivalents consisted of funds held in checking, savings and money market accounts. Working Solutions considers money market accounts to be cash and cash equivalents as there are no limitations on withdrawals associated with these accounts that would have a material effect on their liquidation value. -9-

12 Note 2 Summary of significant accounting policies (continued) Cash and cash equivalents (continued) Working Solutions holds funds received from certain commercial banks in separate accounts as required by the grant and the loan agreements. Cash on these accounts is designated for micro-lending and is presented on the financial statements as restricted cash in the current assets section. Funds restricted for long-term purposes are classified as non-current in the financial statements. Restricted Cash Cash or cash equivalents received with lender imposed restrictions for funding the micro-loan program are classified as restricted cash. As of, Working Solutions has $1,299,531 in cash restricted for future loans ( $1,889,673). This is Working Solutions revolving loan fund. The following table shows the amount of restricted cash per institution: Banking Institution Bank of San Francisco $ 521,838 $ 690,571 California Bank & Trust 91, ,721 Comerica 61, ,465 First Bank 110,307 - Mechanics Bank 343, ,583 Wells Fargo Bank 170, ,333 Total $ 1,299,531 $ 1,889,673 As of, Working Solutions has $240,316 in restricted cash for loan loss reserves. $195,071 of the loan loss reserve account relates to loan guaranty programs through the California Capital Access Program (CalCap) and $45,245 relates to cash reserves required for loans through the Small Business Administration loan program. Contributions and interest receivable Contributions receivable consist of the amounts due from donors or grantors on their promises to give. Contributions receivable are stated at the amounts Working Solutions expects to collect. Working Solutions records an allowance for estimated uncollectible contributions in an amount approximating anticipated losses. Individual uncollected promises to give are written off against the allowance when collection of the individual account appears doubtful. -10-

13 Note 2 Summary of significant accounting policies (continued) Contributions and interest receivable (continued) As of, Working Solutions determined that no allowance for doubtful accounts was required. Interest receivable consisted of interest income earned on loans receivable outstanding as of. The interest was collected monthly. Loans receivable and allowance for loan loss Working Solutions in the normal course of business makes micro-loans of up to $50,000 to new and existing businesses that do not qualify for such loans through conventional channels. The loans can be unsecured, partially secured or fully secured. Loans are not held for sale and management has the intent and ability to hold them for the foreseeable future or until maturity or payoff. Loans are reported at cost equal to the outstanding principal balance adjusted for any charge-offs, the allowance for loan losses and any deferred fees or costs. Working Solutions maintains the allowance for loan losses in the amount adequate to cover all losses inherent in its year-end loan portfolio. Accordingly, the allowance should cover losses on both specifically identified loans and likely losses that cannot yet be associated with specific loans. As of, four loans totaling $71,612 were specifically identified as uncollectible loans. As such, these loans were written off and reimbursements for the losses were requested from a loan loss program in which Working Solutions participates. As of, $12,500 was received from the program and another $7,500 was recorded as a receivable on the accompanying statement of financial porsition. Loans receivable are considered delinquent when an account has been outstanding for more than 120 days. At that time, the loans are placed on non-accrual status and no interest is accrued on the outstanding balances. Loans receivable are determined to be uncollectible when all collection efforts have been exhausted and collection appears unlikely. Based on Working Solutions' historically incurred losses, loans are deemed uncollectible and charged off generally after 120 days. Credit losses for loans, which may be for all or part of a particular loan, are deducted from the allowance. The related loan balance is charged off in the period in which the loans are deemed uncollectible. Recoveries of loans previously charged off are recorded when received. -11-

14 Note 2 Summary of significant accounting policies (continued) Furniture and equipment Office furniture and equipment are recorded at cost when purchased or at estimated fair value at the date of receipt, if donated. Working Solutions' capitalization policy is to capitalize property and equipment with an original cost in excess of $1,000. Furniture and equipment are depreciated by using the straight-line method over the assets' estimated useful lives. Deferred Revenue Working Solutions recognizes support and revenue as earned. Amounts billed in advance of the period in which service is rendered are recorded as a liability under "Deferred revenue" in the accompanying statement of financial position. Fair Value Measurements Working Solutions follows the standards for fair value measurements contained in accounting principles generally accepted in the United States. These standards apply to financial instruments and define 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 (exit price)." These standards establish a consistent framework for measuring fair value, expand disclosure requirements about fair value measurements, and suggest the use of observable inputs rather than unobservable inputs when measuring fair value. The standards utilize a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels: Level 1 Valuation is based upon quoted prices for identical instruments traded in active markets. Level 2 Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. Level 3 Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect our estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flows models and similar techniques. -12-

15 Note 2 Summary of significant accounting policies (continued) Income taxes Working Solutions is exempt from federal and California income tax under Section 501(c) (3) of the Internal Revenue Code and Section 23701(d) of the State Revenue and Taxation Code. Working Solutions has been classified as a publicly supported organization as described in Section 509(a) (1) of the Internal Revenue Code. Accordingly, donors are entitled to the maximum charitable contribution allowed by law. The management of Working Solutions believes that no activities of Working Solutions jeopardized its exemption from income taxes, its classification as a public charity or subjected Working Solutions to taxes on unrelated business income. Consequently, Working Solutions provided no income tax provision herein. Working Solutions follows accounting principles generally accepted in the United States relating to the accounting for uncertainty in income taxes. Adoption of these provisions did not have any impact on Working Solutions' accounting for unrecognized tax liabilities. Management believes that Working Solutions has adequately addressed all tax positions and that there are no unrecorded tax liabilities. Tax years ended September 30, 2011 to 2014 are open for examination by the Internal Revenue Service and years 2010 to 2014 by the California Franchise Tax Board. Functional expenses The costs of Working Solutions' various activities have been summarized on a functional basis in the accompanying statement of functional expenses. Expenses are allocated to program and supporting services based upon employees' time for each function, purpose of each expenditure and service provided for each program. Advertising costs Advertising costs are charged to expense at the time that the advertising occurs. Advertising costs were insignificant during the years ended and Prior year totals The columns on the accompanying financial statements captioned 2013 totals only represent certain prior-year summarized comparative information in total but not by net asset class. Such information does not include sufficient detail to constitute a presentation in conformity with accounting principles generally accepted in the United States. -13-

16 Note 2 Summary of significant accounting policies (continued) Prior year totals (continued) Accordingly, such information should be read in conjunction with the financial statements for the year ended September 30, 2013, from which the summarized information was derived. Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation. Note 3 Loans receivable Working Solutions in the ordinary course of its business makes micro-loans of $5,000 to $50,000. The loans are for a five-year period, and can be unsecured, partially secured or fully secured by business inventory and other assets and personal guarantees. Working Solutions filed UCC-l statements for all collateral assets. The interest rate ranges from four to ten percent. As of September 30, 2014, Working Solutions had 175 outstanding loans totaling $3,111,707 ( outstanding loans totaling $2,352,018): Loans receivable due within one year $ 767,557 Loans receivable, net of amounts due within one year 2,344,150 3,111,707 Allowance for loan loss (32,896) Loans receivable, net $ 3,078,811 Loss on loan loss reserve amounted to $111,086 (including $71,612 in loans directly written off) for the year ended. Loan losses are partially guaranteed by the Northern California Small Business Financial Development Corporation, a public benefit corporation chartered and regulated by the California Business, Transportation and Housing Agency ("Nor-Cal FDC"). Loans are also partially guaranteed by the California Capital Access Program (CalCap). Loans guaranteed from 2009 through 2014 total $2,816,177. Working Solutions does not make allowance for loan loss on the amounts guaranteed by Nor-Cal FDC and CalCap. -14-

17 Note 3 Loans receivable (continued) At, of the 175 loans in total, 2 loans were past due greater than 120 days. Additionally, 1 loan was 60 days past due and 1 loan was 30 days past due. Total loan principal repaid by borrowers as of was $957,761. Note 4 Grants and contributions receivable As of, grants and contributions receivable was $33,500. This includes $25,000 due from an affiliated organization. As of September 30, 2013, grant and contribution receivable was $14,053. This receivable was related to the Kiva loan program. Note 5 Loans payable Loans payable as of and 2013 consist of the following: Lending Institution Wells Fargo Community Development Corporation $ 70,541 $ 117,001 Wells Fargo Community Investment Holdings 250, ,000 U.S. Small Business Administration 201, ,170 City of San Francisco Office of Economic and Workforce Development 313, ,936 Kiva Payable 11,110 19,214 First Community Bank 25,000 - Opus Bank 50,000 - First Bank 15,000 - Presidio Bank 25,000 - Redwood Credit Union Sustainable Fund 50,000 - $ 1,011,545 $ 1,050,321 The proceeds from the loans are used for financial assistance for micro-loans. -15-

18 Note 5 Loans payable (continued) The Wells Fargo Community Development Corporation (WFCDC) loan (EQ2 loan #1) bears a fixed interest rate of 2% per annum for the first ten years, payable quarterly. The principal and any outstanding interest is due on January 5, 2015 (maturity date). WFCDC is obligated to extend the loan's maturity date for an additional year if Working Solutions continues to satisfactorily perform all its obligations under the loan agreement. WFCDC no onger has an option to extend the loan's maturity date. This debt is subordinated to all other creditors, except that this debt shall be on par with any other subordinated loan that is made on the same or similar terms. The total interest paid on this loan is $1,877 for the year ended ( $2,602). The Wells Fargo Community Investment Holdings (WFCIH) loan (EQ2 loan #2) bears an interest rate of 2% per annum for the first ten years, payable quarterly. The principal and any outstanding interest is due on November 21, 2021 (maturity date). Unless Working Solutions delivers to WFCIH within thirty days prior to the maturity date a written request not to extend, the maturity date shall be automatically extended for two additional years, provided that Working Solutions continues to satisfactorily perform all its obligations under the loan agreement. Under the new extended maturity date, the loan will be subject to the following terms: (a) the outstanding principal balance of the loan shall bear interest at a fixed interest rate of 2% per annum; (b) Working Solutions shall continue to make interest payments quarterly; (c) Working Solutions shall make quarterly principal payments in eight equal installments of $31,250, commencing three months after the extension; and (d) Working Solutions shall continue to comply with all of the other provisions of the loan. This debt is subordinated to all other creditors, except that this debt shall be on par with any other equity equivalent investments and program related investments structured as loans that are made on concessionary below-market terms. The total interest paid on this loan is $5,069 for the year ended September 30, 2014 ( $5,069) The U.S. Small Business Administration (SBA) loan bears an interest rate of 1.625% per annum. Interest will be reduced as follows: (i) during the first through the twelfth month, interest will be brought down by 2 percentage points so that interest will accrue on the outstanding balance of the loan at a rate of 0.00% per annum, (ii) during the thirteenth through the twenty-fourth -16-

19 Note 5 Loans payable (continued) TMC Development Working Solutions month, if the average size of the microloans is equal to $10,000 or less, interest will continue to accrue as above. If the average size of the microloans exceeds $10,000, interest will be calculated at a base rate of 1.625% minus a buy down of 1.25% for an accrual rate of 0.375%. This rate will be retroactively applied to the first year through the 23rd month of the note; and (iii) recalculation of interest will take place on the 24th month and annually thereafter. The loan is payable as follows: (i) no payment of principal or interest will be required during the first twelve months. Interest accrued during the first year will be divided into 108 equal installments and added to the monthly payments beginning on the thirteenth-month of the note; and (ii) monthly payments on the note, based on the 2% buy down, will be $2,720 beginning on the thirteenth month of the note. Interest accrued during the first year amounted to $201. Total monthly payments including interest accrued during the first year will be $2,827. This loan is secured by all loans made under the SBA microloan program and all funds in two bank accounts. The total interest paid on this loan is $844 for the year ended ( $972). The City of San Francisco Office of Economic and Workforce Development (OEWD) loan bears an interest rate of 2% per annum with interest only payments due quarterly. Additionally, Working Solutions is required to provide the OEWD with a quarterly statement which shows the total small business loan payments (relating to the OEWD loan) received by working solutions for the preceding quarter and shall pay to the OEWD any small business loan principal portion of payments received by the borrower. The total interest paid on this loan is $9,307 for the year ended. The Kiva payable relates to a loan program which allows Working Solutions to provide smaller micro-loans to borrowers through crowd sourcing. The way the program works is when Working Solutions is successful in funding a loan through the Kiva loan program, Kiva will track the loan principle payments and bill Working solutions for the principle amount due for each loan. Thus, the loan is reduced by the principal payments made by the organizations that received loans through the program. Kiva charges working solutions zero percent interest on the loan fund and the loan is secured by the loans capitalized through the loan program. The First Community Bank loan is unsecured and bears an interest rate of 1% per annum and is subject to interest only payments. The principal amount is due June 19, 2024 and extensions of the due date are allowed. Total interest paid on this loan as of the year ended was $22.71 ( $0). The Opus Bank loan is unsecured and bears an interest rate of 1% per annum and -17-

20 Note 5 Loans payable (continued) TMC Development Working Solutions is subject to interest only payments. The principal amount is due June 19, 2024 and extensions of the due date are allowed. Total interest paid on this loan as of the year ended was $45.43 ( $0). The First Bank loan is unsecured and bears an interest rate of 1% per annum and is subject to interest only payments. The principal amount is due June 19, 2024 and extensions of the due date are allowed. Total interest paid on this loan as of the year ended was $13.63 ( $0). The Presidio Bank loan is unsecured and bears an interest rate of 1% per annum and is subject to interest only payments. The principal amount is due June 19, 2024 and extensions of the due date are allowed. Total interest paid on this loan as of the year ended was $22.71 ( $0). The Redwood Credit Union Sustainable Fund loan is unsecured and bears an interest rate of 1% per annum and is subject to interest only payments. The principal amount is due June 19, 2024 and extensions of the due date are allowed. Total interest paid on this loan as of the year ended was $45.43 ( $0). Scheduled principal payment under the loans payable for the years ending September 30 is as follows: 2015 $ 182, , , , ,000 Thereafter 434,104 Total $ 1,011,545 Note 6 Unrestricted net assets As of, Working Solutions' unrestricted funds includes $1,299,531 of revolving loan funds. -18-

21 Note 7 Temporarily restricted net assets Temporarily restricted net assets and net assets released from restrictions (by grantor/donor) during the year ended consist of the following: Grantor/Donor Name September 30, 2013 Balance Additions Releases September 30, 2014 Balance City and County of San Francisco $ - $ 191,742 $ 191,742 $ - Department of the Treasury 292, , ,971 - U.S. Small Business Administration - 39,658 39,658 - Genentech - 87,500 87,500 - Wells Fargo Bank 358,885-90, ,885 Bank of America 45, ,000 Opportunity Finance Network 3,292-3,292 - Marin Loan Fund 15,000 45,500 60,500 - JP Morgan Chase & Co. 8,167-8,167 - Other 110, , , ,316 Total $ 833,423 $ 1,252,304 $ 1,576,526 $ 509,201 Temporarily restricted net assets and net assets released from restrictions during the year ended (by purpose and time) consist of the following: Purpose September 30, 2013 Balance Additions Releases September 30, 2014 Balance Microlending and Operations $ 651,856 $ 1,063,721 $ 1,446,692 $ 268,885 Loan Loss Reserve 155,108 86, ,316 Administrative Fee - 62,742 62,742 - Technical Assistance - 39,658 39, ,964 1,252,304 1,550, ,201 Time 26,459-26,459 - Total $ 833,423 $ 1,252,304 $ 1,576,526 $ 509,

22 Note 8 Transactions with affiliates The Mortgage Capital Development Corporation ("TMC") is an affiliated non-profit organization that assists small businesses and individuals to acquire Small Business Administration (SBA) loans and then to monitor those loans on behalf of the SBA. The president of TMC is also the board president of Working Solutions, and the two organizations have other board members in common. TMC does not have a controlling financial interest or an economic interest in Working Solutions, or vise versa. TMC contributed to Working Solutions $100,000 of unrestricted funds and donated management, human resource and accounting services in the total amount of $22,253 ( $13,699). TMC shares office space with Working Solutions under a month-to-month lease. Annual rent expenses amounted to $34,875 for the year 2014 ( $24,000). Working Solutions reimburses TMC for its share of the utility, telephone, and office expenses. The reimbursement in the year 2014 totaled $6,629 ( $10,472). The TMC president provides consulting services to Working Solutions. In 2013 and 2014, Working Solutions paid TMC $15,000 for these consulting services. The TMC chief financial officer provides accounting services to Working Solutions. In 2013 and 2014, Working Solutions paid TMC $17,000 for these accounting services. Note 9 Valuation of financial instruments For certain of Working Solutions' financial instruments, including cash and cash equivalents, contributions receivable, accounts payable and other current liabilities, the carrying amounts approximate their fair value due to the relatively short maturity of these items. Loans receivable are valued at net realizable value, and long-term debt is valued at present value of future interest and principal cash flows. As of, Working Solutions had no assets or liabilities recorded at fair value on a recurring or nonrecurring basis. -20-

23 Note 10 Concentrations, risks and uncertainties Working Solutions has cash on deposit with federally insured banks. Periodically, such deposits may be in excess of federally insured limits. Working Solutions makes micro-loans in the normal course of business. Loan losses are partially guaranteed by the Northern California Small Business Financial Development Corporation (Nor-Cal FDC) and the California Capital Access Program (CalCap). Management performs ongoing credit evaluations and maintains adequate reserve for loss. In 2014, Working Solutions received $600,000 from one federal agency, which represented 18% of total support and revenue. Three firms provided $1,329,400 in pro-bono legal services to working solutions. Each firm provided 45%, 35% and 20% of the services, respectively. Contingencies contained within grants awarded to Working Solutions are subject to the donor's established criteria under which loans may be funded from the related grants. Should the loans funded not comply with the established criteria, Working Solutions could be held responsible for the repayments to the funding source for any disallowed loans. Management is not aware of any material questioned lending. Note 11 Operating leases Working Solutions rents additional office space in San Rafael under a noncancelable operating lease that expired August 31, That lease has now reverted to month-to-month. For the year ended, rent expense totaled $7,800 (2013 $7,800). Note 12 Employee benefit plan Working Solutions offers a 401(k) plan (Plan) for the benefit of its employees. The Plan covers all employees who have completed 3 months of service and have attained age 21. Contributions to the plan may not exceed the IRS annual contribution limits. The Plan provides for discretionary matching contributions equal to a uniform percentage of the employee s contribution not to exceed $1,500. The Plan also provides for a discretionary profit sharing contribution. The employer contributions are vested at 20% after 2 years of employment, 40% after 3 years, -21-

24 Note 12 Employee benefit plan (continued) 60% after 4 years, 80% after 5 years and 100% after 6 years of employment. Working Solutions incurred employer contributions expenses during the year ended totaling $10,800 ( $6,000). Note 13 Subsequent events Working Solutions evaluated subsequent events for recognition and disclosure through January 26, 2015, the date which these financial statements were available to be issued. Management noted no issue related to subsequent events which required disclosure in the financial statements. -22-

25 TMC DEVELOPMENT WORKING SOLUTIONS SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Year ended Agency, title and number Expenditures Cash Loan CFDA Award 2014 Cumulative Available Receivable Department of Commerce Title IX Economic Adjustment Assistance 1. CCSF - OEWD&MOH ,000 4, ,000 57, ,485 Total Department of Commerce 250,000 4, ,000 57, ,485 Department of Housing & Urban Development Community Development Block Grant 1. CCSF - OEWD&MOH ,000 5, , , ,475 Community Development Block Grant 1. CCSF - OEWD&MOH ,000-50, Total Department of Housing & Urban Development 600,000 5, , , ,475 Department of the Treasury Community Development Financial Institutions Program 121FA , , , , ,559 Community Development Financial Institutions Program 131FA , , , Total Department of the Treasury 1,200, ,971 1,200, , ,559 U.S. Small Business Administration SBA Microloan ,000 34, ,970 91, ,236 SBA Microloan - Technical Assistance SBAHQ-12-Y ,583-44, SBA Microloan - Technical Assistance SBAHQ-13-Y ,658 39,658 39, Total U.S. Small Business Administration 384,241 73, ,211 91, ,236 TOTALS 2,434, ,044 2,386, ,723 1,521,755 Pass-through entities 1 - City and County of San Francisco, Office of Economic and Workforce Development or Mayor's Office of Housing Note A - Basis of presentation The accompanying schedule of expenditures of federal awards includes the federal grant activity of TMC Development Working Solutions under programs of the federal government for the year ending. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133, "Audits of States, Local Governments and Non-Profit Organizations." Because the Schedule presents only a selected portion of the operations of TMC Development Working Solutions, it is not intended to and does not present the financial position, changes in net assets, or cash flows of TMC Development Working Solutions. Note B - Summary of significant accounting principles (1) Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in OMB Circular A-122, "Cost Principles for Non-profit Organizations" wherein certain types of expenditures are not allowable or are limited as to reimbursement. (2) Pass-through entity identifying numbers are presented where available. -23-

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30 TMC DEVELOPMENT WORKING SOLUTIONS Schedule of Findings and Questioned Costs Summary of Audit Results 1. The auditor s report expresses an unqualified opinion on the financial statements of TMC Development Working Solutions. 2. The audit disclosed no deficiencies considered to be material weaknesses related to the audit of the financial statements in the 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. 3. The audit disclosed no instances of noncompliance material to the financial statements of TMC Development Working Solutions, which Government Auditing Standards would require to disclose, in the 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. 4. The audit disclosed no deficiencies considered to be material weaknesses related to internal control over major federal award programs in the Independent Auditor s 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 The auditor s report on compliance for the major federal award programs for TMC Development Working Solutions expresses an unqualified opinion on all major federal award programs. 6. The audit disclosed no audit findings that Section 510(a) of OMB Circular A-133 requires auditors to report in this Schedule (below). 7. The program(s) tested as major programs included: Department of the Treasury CFDA : Community Development Financial Institutions Program 8. The threshold for distinguishing Type A and B programs was $300, TMC Development Working Solutions qualifies as a low-risk auditee. Findings Financial Statements Audit None found or reported. Findings and Questioned Costs Major Federal Award Programs Audit None found or reported. -28-