SAN JOAQUIN COUNTY CHILDREN AND FAMILIES COMMISSION

FINANCIAL STATEMENTS

WITH INDEPENDENT AUDITOR’S REPORT

FOR THE YEAR ENDED

JUNE 30, 2014

SAN JOAQUIN COUNTY CHILDREN AND FAMILIES COMMISSION

JUNE 30, 2014

TABLE OF CONTENTS Page Commission Membership ................................................................................................................... i Financial Section Independent Auditor’s Report ............................................................................................................ 1 Management’s Discussion and Analysis ............................................................................................ 4 Basic Financial Statements Government-Wide Financial Statements:

Statement of Net Position ............................................................................................................... 9

Statement of Activities .................................................................................................................... 10 Fund Financial Statements:

Major Governmental Fund

Balance Sheet – Governmental Fund ......................................................................................... 11

Reconciliation of the Governmental Fund Balance Sheet to the Government-Wide Statement of Net Position ..................................................................... 12

Statement of Revenues, Expenditures, and Changes in Fund Balance – Governmental Fund ........................................................................................ 13

Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance of the Governmental Fund to the Government-Wide Statement of Activities ................................................................................. 14

Notes to Financial Statements ........................................................................................................... 15 Required Supplementary Information Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual ........................................................................................................... 24 Note to Required Supplementary Information .................................................................................... 26 Supplementary Information Supplemental Schedule of First 5 California (F5CA) Funding ........................................................... 27 Other Reports Independent Auditor’s 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 and the California Children and Families First Act of 1998 .............................................................. 28 Independent Auditor’s Report on State Compliance .......................................................................... 30

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SAN JOAQUIN COUNTY CHILDREN AND FAMILIES COMMISSION COMMISSION MEMBERSHIP

JUNE 30, 2014

Name Representing Date of

Appointment Current

Term Expires

Carlos Villapudua Board of Supervisors 01/2009 Permanent

Kay G. Ruhstaller Community Based Organization Representative

03/2013 03/2017

Susan de Polo Community Based Organization Representative

04/2011 04/2015

Joseph E. Chelli County Human Services Agency Director

10/2003 Permanent

William Mitchell County Public Health Director 01/1999 Permanent

Dr. Gary F. Dei Rossi General Public Representative

04/2011 04/2015

Carl Toliver General Public Representative

04/2011 04/2015

Maggie S. Park M.D. Medical Representative 03/2014 03/2017

Linda I. Patrick General Public Representative 03/2012 03/2015

FINANCIAL SECTION

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INDEPENDENT AUDITOR’S REPORT

First 5 San Joaquin Children Board of Supervisors and Families Commission County of San Joaquin County of San Joaquin Stockton, California Stockton, California Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities and General Fund of the San Joaquin County Children and Families Commission (the Commission), a component unit of the County of San Joaquin, as of and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise the Commission’s basic financial statements as listed in the table of contents. 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 Commission’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 Commission’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.

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Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and General Fund of the Commission, as of June 30, 2014, and the respective changes in financial position thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As described in Note 1 to the financial statements, the Commission implemented Governmental Accounting Standards Board (GASB) Statement No. 65 – Items Previously Reported as Assets and Liabilities. Our opinion is not modified with respect to the matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis and budgetary comparison schedule on pages 4 through 8 and pages 24 through 26 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the GASB, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Commission’s basic financial statements. The Commission membership and Supplemental Schedule of First 5 California Funding as listed under the required supplementary information section in the table of contents and supplementary information section listed in the table of contents are presented for purposes of additional analysis and are not a required part of the financial statements. The Supplemental Schedule of First 5 California Funding as listed under the supplementary information section in the table of contents are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Supplemental Schedule of First 5 California Funding are fairly stated in all material respects in relation to the basic financial statements as a whole.

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Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 21, 2014, on our consideration of the Commission’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and 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 the Commission’s internal control over financial reporting and compliance. BROWN ARMSTRONG ACCOUNTANCY CORPORATION Bakersfield, California October 21, 2014

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SAN JOAQUIN COUNTY CHILDREN AND FAMILIES COMMISSION MANAGEMENT’S DISCUSSION AND ANALYSIS

JUNE 30, 2014 On November 3, 1998, California voters approved Proposition 10 – the Children and Families First Act (the Act). The Act imposed additional excise tax on cigarettes and tobacco related products to fund programs that promote, support, and improve the early development of children from prenatal through age five. The intent is for all California children to be healthy, to live in a healthy and supportive family environment, and to enter school ready to learn. The San Joaquin County (the County) Board of Supervisors created the San Joaquin County Children and Families Commission (the Commission) in 1999 under the provisions of the Act. The Commission consists of nine members appointed by the County Board of Supervisors. As management of the Commission, we offer readers of our financial statements this narrative overview and analysis of the financial activities for the year ended June 30, 2014. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the Commission’s basic financial statements. The Commission’s basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-Wide Financial Statements. The government-wide financial statements are designed to provide readers with a broad overview of the Commission’s finances, in a manner similar to a private sector business. The statement of net position presents information on all of the Commission’s assets and liabilities, with the difference between the two reported as net position. The statement of activities presents information showing how the Commission’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in the statement for some items that will only result in cash flows in future fiscal periods (e.g. earned but unused vacation leave). The government-wide financial statements can be found on pages 9-10 of this report. Fund Financial Statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The Commission, like other local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Fund financial statements report essentially the same functions as those reported in the government-wide financial statements. However, unlike the government-wide financial statements, fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balance provide a reconciliation to facilitate the comparison between governmental funds and government wide statements. The Commission adopts an annual appropriated budget for its fund. A budgetary comparison statement has been provided for the fund to demonstrate compliance with the budget. The fund financial statements can be found on pages 11-14 of this report.

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Notes to the Financial Statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 15-23 of this report. Required Supplementary Information (RSI). RSI is presented concerning the Commission’s General Fund budgetary schedule. The Commission adopts an annual appropriated budget for its General Fund. A budgetary comparison schedule has been provided for the General Fund to demonstrate compliance with this budget. Government-Wide Financial Analysis The Commission presents its financial statements under the reporting model required by the Governmental Accounting Standards Board (GASB) Statement No. 34, Basic Financial Statements – and Management’s Discussion and Analysis (MD&A) – for State and Local Governments.   Net position may serve over time as a useful indicator of a government’s financial position. In the case of the Commission, assets exceed liabilities by $5,108 thousand at the close of the most recent fiscal year. The most significant portion of the Commission’s net position is its cash and investments balance of $6,595 thousand. Cash and investments are maintained in the County’s cash and investment pool where interest earned on the Commission’s balance is apportioned to the Commission. Another source of net position also resides in the Commission’s receivables due from the State Commission for Proposition 10 taxes in the amount of $1,308 thousand. These receivables represent taxes that were remitted by the State but, had not been received by the Commission as of June 30, 2014. The Commission also reports accounts payable of $1,722 thousand representing payments due on professional services contracts that had not been expended at year-end. The Commission’s net position decreased overall by $331 thousand during the 2013-2014 fiscal year. This decrease in net position is explained in the governmental fund analysis below and is primarily a result of a slight increase in cash and receivables offset by a slight increase in accounts payable and the classification of Race to the Top and Help Me Grow current year revenues received in advance to advances from grantors as compared to the previous year.

Difference

Current and other assets 7,938$ 7,801$ 137$

Total assets 7,938 7,801 137

Current and other liabilities 2,647 1,708 939 Long-term liabilities 183 183 -

Total liabilities 2,830 1,891 939

Net position:Restricted net position 12,865 11,969 896 Unrestricted net position (7,757) (6,059) (1,698)

Total net position 5,108$ 5,910$ (802)$

Statement of Net Position Comparison (in thousands)

Fiscal Year 2013-14

Fiscal Year 2012-13

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Difference

State Proposition 10 8,491$ 8,981$ (490)$ Race to the Top 313 442 (129) Help Me Grow 106 132 (26) General revenues 49 14 35

Total revenues 8,959 9,569 (610)

Direct program expenses 8,375 8,313 62 General and administration expenses 915 1,035 (120)

Total expenses 9,290 9,348 (58)

Change in net position (331) 221 (552)

Net position, beginning of year, as restated 5,439 5,689 (250)

Net position, end of year 5,108$ 5,910$ (802)$

Statement of Activities Comparison (in thousands)

Fiscal Year 2013-14

Fiscal Year 2012-13

Financial Analysis of the Commission’s Governmental Fund Beginning with fiscal year 2011, the Commission also implemented GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. This Statement provides more clearly defined balance categories to make the nature and extent of the constraints placed on a government’s fund balances more transparent. For the fiscal year ended 2014, the Commission’s Fund Balance of $5,263 thousand is categorized as Committed, $12,862 thousand, and Unassigned, $(7,599 thousand). A prior period adjustment to the beginning unassigned fund balance in the amount of $(477 thousand) represents a reclass to deferred revenue of Race to the Top and Help Me Grow (CalWORKs) revenues that were received in advance for expenditure in future fiscal years. In the fiscal year 2014, the Commission implemented GASB Statement No. 65 (GASB 65), “Items Previously Reported as Assets and Liabilities.” As noted earlier, fund accounting is used by the Commission to ensure and demonstrate compliance with finance-related legal requirements. A portion of the Race to the Top and Help Me Grow revenues from the prior year that were received in advance have been reclassified to advances to grantors and are shown on the financial statements as a prior period adjustment, $(477 thousand). For the year ended June 30, 2014, the Commission reported an ending fund balance of $5,263 thousand, a decrease of $353 thousand from the prior year.

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Difference

State Proposition 10 8,491$ 8,981$ (490)$ Race to the Top 313 442 (129) Help Me Grow 106 132 (26) General revenues 20 14 6

Total revenues 8,930 9,569 (639)

Direct program expenses 8,374 8,313 61 General and administration expenses 909 1,005 (96)

Total expenditures 9,283 9,318 (35)

Change in fund balance (353) 251 (604)

Fund balance, beginning of year, as restated 5,616 5,842 (226)

Fund balance, end of year 5,263$ 6,093$ (830)$

Statement of Revenues, Expenditures, and Changes in Fund BalanceComparison Statement (in thousands)

Fiscal Year 2013-14

Fiscal Year 2012-13

Total revenue consisting of Proposition 10 funds, Federal Race to the Top - Early Learning Challenge, Help Me Grow CalWORKs Outreach Plan, interest income, and State Commission matching revenue decreased by $639 thousand or 6.7 percent, from the prior fiscal year. Yearly revenues from the State of California decreased $490 thousand from the prior year, funding from the Federal Race to the Top – Early Learning Challenge Grant decreased $129 thousand, funding from the San Joaquin County Human Services Agency for the Help Me Grow CalWORKs Outreach Plan decreased by $26 thousand, and general revenues increased by $6 thousand. Total expenditures decreased by $35 thousand, an increase in direct program expenditures of $61 thousand, offset by a decrease in general and administrative expenses of $96 thousand, due to reimbursement of the cost of 75 percent of one Contracts Analyst’s salary and benefits for coordinating the Race to the Top activities and the reassignment of the Executive Director to another program for four months. The 2014-2015 revenues are expected to increase by $920 thousand from 2013-2014, due to the recognition of Federal Race to the Top – Early Learning Challenge Grant and Help Me Grow deferred revenues, offsetting slightly declining State Proposition 10 revenue, while expenditures are planned to increase about $1,800 thousand with increased spending of Race to the Top funds and higher general and administrative expenditures. Fund Budgetary Highlight Total revenues were lower than budgeted by $133 thousand or 1.5 percent, and total expenditures were less than budgeted by $561 thousand or 5.4 percent. The revenue variance was due to recognizing as deferred revenues, Race to the Top and Help Me Grow revenues that were received in advance, offset by slightly higher than budgeted Proposition 10 allocation from the State. Total expenditures were less than the budget due to less spending than budgeted on Community Programs and Race to the Top and lower than projected salary and benefits due to an allocation to Race to the Top for coordination of the program, a staff retirement and the Executive Director reassignment to another program for four months of the fiscal year.

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Capital Assets and Debt Administration Capital Assets As of June 30, 2014, the Commission’s investment in capital assets for its governmental type activities is $0. The Commission currently leases its assets from the County. Debt Administration At the end of the current fiscal year, the Commission had a long-term obligation outstanding of $183,317. This represents the unpaid compensated absences of $70,097 (of which $55,604 is expected to be paid in the next fiscal year) and estimated other post employment benefits of $113,220 at year-end. Additional information on the long-term debt can be found in Note 3 of this audit report. Economic Factors and Next Year’s Budget The Commission is committed to focusing Proposition 10 funds on the purposes for which it is intended, to promote and sustain comprehensive, integrated programs and services that will help to nurture children 0-5 years of age so that their young minds and bodies will develop appropriately. The following economic factors were considered in preparing the Commission’s financial plan for fiscal year 2014-2015:

Continued commitment to State Commission matching funds for the Child Signature Program Number 1 and Child Signature Program Number 2 (Fully funded by the State Commission).

A decrease in Proposition 10 revenues due to declining tobacco tax collections. Supplemental funding from the Federal Government through the Race to the Top – Early

Learning Challenge Grant. A one-year continuation of funding for the Collaboration for Healthy Change component of the

Health Access Initiative. Carry-over of funding for a grant writer to investigate new channels of funding for the

Commission.

The Commission views Proposition 10 as a mechanism to establish and fund a sustainable system of results-oriented early childhood development and family support services for the 0-5 age population, not as just another funding source for programs. The Commission will continue to focus on evaluating all funded programs to determine what is working or has promise to impact the health and well being of children. This information will be used to help evaluate the overall impact of Proposition 10 in San Joaquin County. A new strategic plan is being developed to guide the Commission in making funding decisions for future years, assuming declining revenue for Proposition 10. The result of these activities will help to inform the Commission as it plans for its future fiscal year activities. As a supplement to Proposition 10 funding, the Commission continues to participate in the Federal Race to the Top – Early Learning Challenge Grant, which will provide up to $2.3 million in funding through December 31, 2015. The Race to the Top funding focuses on enhancing long lasting quality in early care and education settings. The funds will build upon existing strengths and lessons learned from existing Preschool and Child Care Retention Initiatives while enhancing their impact through greater coordination, enhancement and alignment with the statewide Quality Rating and Improvement System.

Requests for Information

This financial report is designed to provide a general overview of the San Joaquin County Children and Families Commission finances for all those interested. Questions concerning, any of the information provided in this report or requests for additional financial information should be addressed to the San Joaquin County Children and Families Commission/Human Services Agency, P.O. Box 201056, Stockton, CA 95201.

BASIC FINANCIAL STATEMENTS

The accompanying notes are an integral part of these financial statements.

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SAN JOAQUIN COUNTY CHILDREN AND FAMILIES COMMISSION STATEMENT OF NET POSITION

JUNE 30, 2014 ASSETS

Cash and investments 6,594,681$ Due from other agencies 1,339,435 Interest receivable 4,154

Total assets 7,938,270

LIABILITIES

Accounts payable 1,721,582 Due to other agencies 53,705 Accrued payroll 39,252 Advances from grantors 832,268 Long-term liabilities Compensated absences payable - due within one year 55,604 Compensated absences payable - due after one year 14,493 Other post employment benefit liability 113,220

Total liabilities 2,830,124 NET POSITION

Restricted net position 12,864,784 Unrestricted net position (7,756,638)

Total net position 5,108,146$

The accompanying notes are an integral part of these financial statements.

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SAN JOAQUIN COUNTY CHILDREN AND FAMILIES COMMISSION STATEMENT OF ACTIVITIES

FOR THE YEAR ENDED JUNE 30, 2014

PROGRAM EXPENSES

Direct program expensesAccess to Preschool Initiative 4,134,802$ Health Access Initiative 1,466,904 School Readiness Rural Services Initiative 932,953 Family Resource Center Initiative 399,389 Breastfeeding Initiative 94,033 Child Signature Program 1 Coordination Funds 100,000 Mini grants 42,518 Race to the Top 312,773 Help Me Grow 106,315 Child Signature Program 2 110,634 Community programs/Commission funded 339,637 Special projects/trainings/evaluation 317,062 Sponsorships 18,000

Total direct program expenses 8,375,020

General and administration expensesSalaries and employee benefits 762,799 Services and supplies 152,332

Total general and administration expenses 915,131

Total program expenses 9,290,151

PROGRAM REVENUES

Operating grants and contributionsProposition 10 Apportionment 7,155,250 Proposition 10 Child Signature Program 1 1,225,750 Proposition 10 Child Signature 2 107,936 Proposition 10 Surplus Money Investment Fund 1,917 Race to the Top 312,773 Help Me Grow 106,316

Total program revenues 8,909,942

Net program revenues (380,209)

GENERAL REVENUES

Interest revenue 17,410 Other revenues 31,749

Change in net position (331,050)

Net position, beginning of year, as restated 5,439,196

Net position, end of year 5,108,146$

The accompanying notes are an integral part of these financial statements.

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SAN JOAQUIN COUNTY CHILDREN AND FAMILIES COMMISSION BALANCE SHEET

GOVERNMENTAL FUND JUNE 30, 2014

General FundASSETS

Cash and investments 6,594,681$ Due from the State - Proposition 10 1,308,438 Interest receivable 4,154 Other receivables 30,997

Total assets 7,938,270$

LIABILITIES

Accounts payable 1,721,582$ Due to other funds 53,705 Advances from grantors 832,268 Accrued payroll 39,252

Total liabilities 2,646,807

DEFERRED INFLOWS OF RESOURCES

Reimbursement from SB90 28,791

Total liabilities 28,791

FUND BALANCES

Fund balanceCommitted funds 12,862,127 Unassigned funds (7,599,455)

Total fund balance 5,262,672

Total liabilitie, deferred inflows of resources, and fund balances 7,938,270$

The accompanying notes are an integral part of these financial statements.

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SAN JOAQUIN COUNTY CHILDREN AND FAMILIES COMMISSION RECONCILIATION OF THE GOVERNMENTAL FUND BALANCE

SHEET TO THE GOVERNMENT-WIDE STATEMENT OF NET POSITION JUNE 30, 2014

Fund balance - governmental fund 5,262,672$

Amounts reported for governmental activities in the statement of net position are different because:

Other long-term assets are not available to pay for current period expenditures and therefore are deferred in the governmental funds and recognized as revenue in the Statement of Activities 28,791

Long-term liabilities are not due and payable in the current period and, therefore, are not reported in the governmental fund.

Balances as of June 30, 2014, are as follows:Compensated absences (70,097) Other post employment benefits (113,220)

Net position of governmental activities 5,108,146$

The accompanying notes are an integral part of these financial statements.

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SAN JOAQUIN COUNTY CHILDREN AND FAMILIES COMMISSION STATEMENT OF REVENUES, EXPENDITURES,

AND CHANGES IN FUND BALANCE GOVERNMENTAL FUND

FOR THE YEAR ENDED JUNE 30, 2014

General FundREVENUES

Proposition 10 Apportionment 7,155,250$ Proposition 10 Child Signature Program 1 1,225,750 Proposition 10 Child Signature Program 2 107,936 Proposition 10 Surplus Money Investment Fund 1,917 Race to the Top 312,773 Help Me Grow 106,316 Use of Money 17,410 Other Revenues 2,959

Total revenues 8,930,311

EXPENDITURES

Salaries and employee benefits 756,183 Services and supplies 152,332 Access to Preschool Initiative 4,134,802 Health Access Initiative 1,466,904 School Readiness Rural Services Initiative 932,953 Family Resource Center Initiative 399,389 Breastfeeding Initiative 94,033 Child Signature Program 1 Coordination Funds 100,000 Mini Grants 42,518 Race to the Top 312,773 Help Me Grow 106,315 Child Signature Program 2 110,634 Community Programs/Commission Funded 339,637 Special projects/trainings/evaluation 317,061 Sponsorships 18,000

Total expenditures 9,283,534

Net change in fund balance (353,223)

Fund balance, beginning of year, as restated 5,615,895

Fund balance, end of year 5,262,672$

The accompanying notes are an integral part of these financial statements.

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SAN JOAQUIN COUNTY CHILDREN AND FAMILIES COMMISSION RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE OF THE GOVERNMENTAL FUND TO

THE GOVERNMENT-WIDE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2014

Net change in fund balance - governmental fund (353,223)$

Amounts reported for governmental activities in the statement of activities are different because:

Government funds report deferred inflows of resources under the modified accrualmethod, until it is recognizable. However, in the statement of activities, the deferred inflows of resources is recognized as revenue in the current year under the full accrual method. 28,791

Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in the governmental fund.

Change in other post employment benefits (OPEB) liability (8,500) Change in compensated balances 1,882

Change in net position of governmental activities (331,050)$

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SAN JOAQUIN COUNTY CHILDREN AND FAMILIES COMMISSION NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2014 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity

In November 1998, California voters approved Proposition 10 – The California Children and Families Act of 1998. This act created the California Children and Families Program for purposes of promoting, supporting, and improving the early development of children from the prenatal stage to five years of age. The Act also imposed additional excise taxes, effective January 1, 1999, on tobacco products as a means of funding this early childhood development program, which is to be administered by the State and the county commissions. In accordance with the Act, the Board of Supervisors of the County of San Joaquin (the County) created the San Joaquin County Children and Families Commission (the Commission) on January 26, 1999 through County ordinance nos. 4008, 4009 and 4011. The Commission consists of nine members, all appointed by the Board of Supervisors. The Commission adopted its bylaws on June 23, 1999 and the Board of Supervisors approved these bylaws on July 20, 1999, per Board Order no. 902. The Bylaws were amended by the Commission on March 25, 2010, and the amendments approved by the Board of Supervisors on May 11, 2010, per Board Order no. B-10-494. The Bylaws were amended again by the Commission on October 25, 2012, and those amendments were approved by the Board of Supervisors on November 20, 2012, per Board Order no. B-12-759. The County administers the San Joaquin County Children and Families Program (the Program) under Health and Safety Code Division 108 commencing with Section 130100. The Program Coordinator prepares a strategic plan that has to be approved by the Commission before implementation. The Program is a blended component unit of the County pursuant to Governmental Accounting Standards Board (GASB) Statement No. 61, The Financial Reporting Entity, since the Board of Supervisors of the County appoints all Commission members. The County Board of Supervisors can remove appointed members at will. The Commission will continue to operate as an agency of the County within the Board of Supervisors’ authority and policies with an independent authority over the strategic plan and trust fund in accordance with Assembly Bill (AB) 1910.

B. Funding

The additional excise taxes imposed on tobacco products are collected and deposited by the State Board of Equalization into the California Children and Families Trust Fund and subsequently allocated, after offsetting revenue losses to Proposition 99 (Tobacco Tax and Health Protection Act of 1988) programs and tobacco tax-supported Breast Cancer Fund programs, 20 percent to the State Commission and 80 percent to participating county commissions. Allocation of the monies to the county commissions is pro-rated to all participating counties based on the number of births recorded in all of the participating counties in California. Additional funding is being received from the California Department of Education for participation in the Federal Race to the Top – Early Learning Challenge Grant. This grant is currently funded through December 31, 2015 and from CalWORKs for the Help Me Grow project (funded year-to-year as available). On August 15, 2014, the Race to the Top was given a no-cost extension to December 31, 2016.

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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Basis of Presentation and Accounting

Government-Wide Statements The statement of net position and statement of activities display information about the primary government (Commission). These statements include the financial activities of the overall Commission. The statement of activities presents a comparison between direct expenses and program revenues for the Commission’s governmental activity. Direct expenses are those that are specifically associated with the Commission. Program revenues include grants and contributions that are restricted to meeting the operational or capital requirements of the Commission. Revenues that are not classified as program revenues, including investment income, are presented instead as general revenues. The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. When both restricted and unrestricted net position is available, restricted resources are used only after unrestricted resources are depleted. Fund Financial Statements Separate financial statements are provided for the governmental fund. The governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available to finance expenditures of the current period. Proposition 10 taxes and investment income are accrued when their receipt occurs within sixty days after the end of the accounting period so as to be both measurable and available. All receivables are expected to be collected within the year. Expenditures are generally recorded when a liability is incurred, as under the accrual basis of accounting. Non-exchange transactions, in which the Commission gives (or receives) value without directly receiving (or giving) value in exchange, include sales taxes, grants, entitlements and donations. On a modified accrual basis of accounting, revenues from sales taxes are recognized when the underlying transactions take place and have met the availability criteria. Revenues from grants, entitlements and donations are recognized in the fiscal year in which all eligibility requirements have been satisfied. The Commission reports one major governmental fund, the General Fund. The General Fund is the Commission’s primary operating fund. It accounts for all financial resources of the general government.

D. Accounting Records

A special program fund, the Children and Families Fund, was used to account for the Program receipts and payments for community programs. A separate special operating revenue fund was used to account for the Program’s administration activities. The Race to the Top funding is being received annually in advance and the revenues are being tracked in a separate revenue fund in order to track the interest earned on these Federal dollars. The financial statements are prepared on the program level basis, combining the special program fund, the special operating revenue fund and the Race to the Top fund, to provide an overall financial position and the revenues and expenditures of the Program for the fiscal year.

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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. Cash and Investments

Cash and investments represent the Commission’s share of the County Treasurer’s cash and investment pool. Pursuant to the County investment policy, the Commission is required to invest all of their cash in the County’s investment pool. The County Treasurer is responsible for the control and safekeeping of all instruments of title for all investments of the funds. Interest earned on investments is prorated to individual funds based on their daily average cash balance. The investments are reported at fair market value which is determined by the custodial agents of the investments. However, the value of the pool shares in the County, which may be withdrawn, is determined on an amortized cost basis, which is different than fair market value. The fair market value of the investments in the pool approximates 100.04 percent of the cost basis at June 30, 2014.

F. Due from Other Agencies This amount represents receivables from the State government. Management has determined the Commission’s receivables are fully collectible. Accordingly, no allowance for doubtful accounts has been made.

G. Capital Assets

Capital assets are recorded at historical costs or at estimated historical cost if actual historical cost is not available. The County defines capital assets as those assets with an initial, individual cost of more than $1,000 for equipment/furniture and $5,000 for structures and improvements, and an estimated useful life in excess of one year. Capital assets acquired by the governmental funds are accounted for as expenditures of those funds and capitalized and recorded as assets in the government-wide financial statements. Maintenance and repairs are charged to operations when incurred. Betterments and major improvements that significantly increase values, change capacities, or extend useful lives are capitalized. Upon sale or retirement of fixed assets, the cost and related accumulated depreciation are removed from the respective accounts and any resulting gain or loss is included in the results of operations.

H. Compensated Absences

It is the County’s policy to permit employees to accumulate unused vacation, holiday and sick pay benefits up to a specified maximum. Unused vacation and holiday benefits are paid at the time of termination from County employment. The unused vacation, holiday, and their related benefits, were reported as long-term liabilities on the Commission’s government-wide financial statement.

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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) I. Post Employment Health Benefits

The County does not provide employees any Other Post Employment Benefits (OPEB) other than the postemployment health benefits under the “sick leave bank” program, as described below. The sick leave bank program is administered by the County’s Retirement System. In accordance with GASB Statement No. 43 and No. 45, however, the County has an implicit subsidy liability as the County allows any member or beneficiary receiving a pension benefit to purchase post-retirement health insurance from one of the County’s sponsored plans. In some cases, the purchase of this insurance can result in an implicit subsidy payable to the County. Sick Leave Bank Benefit: The County provides full-time employees with 12 days of paid sick leave per year. Unused sick leave is allowed to accumulate. As a result of the settlement of a lawsuit, as explained later, for those regular employees who were hired on or before August 27, 2001, and meet certain requirements their accumulated unused sick leave, net of their cash-out portion, upon retirement is converted to a sick leave bank rate of $27.65 per hour, which is used to pay their post employment health insurance costs. However, the sick leave bank benefits are not vested in any way and are of a use-or-lose plan. Employees hired after that specified date are not eligible for sick leave cash payout or the sick leave bank benefits. In fiscal year 2011-12, San Joaquin County Employees’ Retirement Association (SJCERA) filed a request for a determination letter regarding the sick leave bank benefits in accordance with the Internal Revenue Service (IRS) voluntary compliance program. As a result of this filing, the SJCERA Board decided to “freeze” prefunding of this program pending a response from the IRS. The County, as a participating employer, is now funding its sick leave bank benefits on a pay-as-you-go basis. SJCERA will continue as a third-party administrator of these benefits. Any further changes will depend upon the IRS’ response to the determination letter. The pay-as-you-go costs for fiscal year 2012-13 were $5.3 million. Implicit Subsidy Benefit: The County allows any member or beneficiary receiving pension benefits to purchase post-retirement health insurance under County sponsored plans and this results in an implicit subsidy payable by the County. Currently, the County pays for these benefits on a pay-as-you-go basis. The County contributed approximately $4.2 million toward this implicit subsidy for year 2012-2013.

J. Net Position/Fund Balance

Net Position Net position represents the difference between assets and liabilities. Net position invested in capital assets, net of related debt consist of capital assets, net of accumulated depreciation, reduced by the outstanding balance of any outstanding borrowing used for the acquisition, construction or improvement of those assets. Net position is reported as restricted when there are limitations imposed on their use either through constitutional provisions or enabling legislations of other governments when those restrictions are more restrictive than the normal activities of the Commission.

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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) J. Net Position/Fund Balance (Continued)

Fund Balance Beginning with fiscal year 2011, the Commission implemented GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. This statement provides more clearly defined balance categories to make the nature and extent of the constraints placed on a government’s fund balances more transparent. The following classifications describe the relative strength of the spending constraints:

Nonspendable - This category includes elements of the fund balance that cannot be spent because of their form (such as inventory) or because they must be maintained intact.

Restricted - This category includes resources that are subject to constraints that are externally enforceable legal restrictions such as funding from the State Commission or foundations that are legally restricted to specific uses.

Committed - Amounts constrained to specific purposes by the Board of Commissioners itself, its highest level of decision-making authority. To be reported as committed, amounts cannot be used for any other purpose unless the Board of Commissioners takes the same highest level action to remove or change the constraint.

Assigned - Amounts the Commission intends to use for a specific purpose. Intent can be expressed by the Commission or by an official or body to which the Board of Commissioners delegates the authority.

Unassigned - Amounts that cannot be classified into any other categories.

The Commission establishes and modifies or rescinds fund balance commitments by passage of an ordinance or policy. This is typically done through adoption and amendment of the budget. A fund balance commitment is further indicated in the budget as a designation or commitment of the fund, such as approved contracts. For the Commission’s governmental fund, the Commission strives to maintain a budgeted total fund balance reserve of at least $2,000,000.

K. Purchase Orders Encumbered

At June 30, 2014, the Commission had $509,862 remaining on purchase orders for 2013-2014 contracted obligations. These amounts are not expected to be disbursed.

L. 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 certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Some prior year estimates have been updated to actual results for comparison purposes in this report.

M. Governmental Accounting Standards Update

During the fiscal year ending June 30, 2014, the Commission implemented the following standards:

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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) M. Governmental Accounting Standards Update (Continued)

GASB Statement No. 65 – Items Previously Reported as Assets and Liabilities. Establishes accounting and financial reporting standards that reclassify, as deferred outflows of resources or deferred inflows of resources, certain items that were previously reported as assets and liabilities and recognizes, as outflows of resources or inflows of resources, certain items that were previously reported as assets and liabilities. GASB Statement No. 67 – Financial Reporting for Pension Plans – an amendment of GASB Statement No. 25. The provisions of this statement are effective for financial statements for fiscal years beginning after June 15, 2013. There was no impact to the financial statements. GASB Statement No. 70 – Accounting and Financial Reporting for Nonexchange Financial Guarantees. The provisions of this statement are effective for financial statements for periods beginning after June 15, 2013. There was no impact to the financial statements.

NOTE 2 – CASH AND INVESTMENTS Cash and investments at June 30, 2014, consisted of the following:

Cash and investments in the County Treasury 6,594,681$

The Commission maintains all of its cash and investments with the County Treasurer in an investment pool. On a quarterly basis the Treasurer allocates interest to participants based upon their average daily balances. Required disclosure information regarding categorization of investment and other deposit and investment risk disclosures can be found in the County’s financial statements. The County’s financial statements may be obtained by contacting the County’s Auditor-Controller’s office at 44 N. San Joaquin St., Suite 550, Stockton, California 95202. The San Joaquin County Treasury Oversight Committee oversees the County Treasurer’s investments and policies. Required disclosures for the Commission’s deposit and investment risks at June 30, 2014, were as follows: Credit risk Not rated Custodial risk Not applicable Concentration of credit risk Not applicable Interest rate risk Not available Investments held in the County’s investment pool are available on demand and are stated at fair market value.

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NOTE 3 – LONG-TERM LIABILITIES The following is a summary of long-term liabilities as of June 30, 2014:

Balance AmountsJuly 1, 2013 Balance Due Within

(as restated*) Additions Retirements June 30, 2014 One Year

Compensated absences 71,980$ -$ 1,883$ 70,097$ 55,604$ Other post employment benefits 104,720 14,167 5,667 113,220 -

Total long-term liabilities 176,700$ 14,167$ 7,550$ 183,317$ 55,604$

*See prior period adjustment made at Note 7. Adjustment was made to increase prior year OPEB expense to adjust OPEB liability to actual as of June 30, 2013. NOTE 4 – DEFINED BENEFIT PENSION PLAN All full-time employees of the Commission participate in the SJCERA, a cost sharing, multiple-employer, public employee retirement system. The employees of the Commission become members of the system automatically upon appointment to a full-time permanent position. The Board of Retirement of SJCERA governs the County’s pension fund. The records of SJCERA are the responsibility of the SJCERA and are maintained on a calendar basis. The calendar year 2013 financial statements were audited by Brown Armstrong Accountancy Corporation and are available by writing to SJCERA, 6 South El Dorado Street, Suite 400, Stockton, California 95202. SJCERA provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to SJCERA members and beneficiaries. It also provides post employment health benefits (sick leave bank benefits) to certain members who meet criteria contained in the Memorandum of Understanding between the County and SJCERA (see discussion below). Funding Policy Contribution rates for employers and employees were determined in accordance with actuarially determined contribution requirements by an actuarial valuation as of January 1, 2013. Employer’s contributions are payable over each employee’s future working lifetime. The employer rates reflect the entry age normal funding method. Under this method, part of the normal cost is being paid over the future working lifetimes of the members. The past service liability is amortized over a rolling 10-year period. Annual Pension Cost The Commission’s employee contributions in fiscal year 2013-2014 were $39,886 or 8.92 percent of annual covered payroll and the employer’s contribution was $168,652 or 37.74 percent of annual covered payroll.

Three-Year Trend Information

Annual PercentagePension of APC

Fiscal Year Cost (APC) Contributed

6/30/2012 151,707$ 100%6/30/2013 168,278 100%6/30/2014 168,652 100%

Additional information can be obtained from SJCERA’s financial statements.

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NOTE 5 – OTHER POST EMPLOYMENT BENEFITS (OPEB) The County provides full-time employees with 12 days of paid sick leave per year. Unused sick leave is allowed to accumulate. Based on the current employee organizations’ Memoranda of Understanding (MOU), regular employees who were on the payroll as of August 27, 2001, upon retirement, may use a portion of their accumulated unused and un-cashed sick leave to pay for the monthly post employment health insurance premiums or to use it as part of their pension benefits. Employees hired after August 27, 2001, are not eligible for this benefit. As a blended component unit of the County, the Commission was required to implement GASB Statements No. 45 and No. 50 beginning with the fiscal year ended June 30, 2008. The County’s estimated annual OPEB cost for the fiscal year ended June 30, 2013, is $10 million. The Commission’s June 30, 2014, share is estimated to be $14,167. Amounts unpaid are recorded as a liability on the Statement of Net Position. The Commission’s net OPEB obligation for the past three fiscal years is as follows:

Net Beginning Actual Net EndingOPEB Annual Employer Percentage OPEB

Obligation OPEB Cost Contribution Contributed Obligation

2012 16,820$ 2,320$ 16.00% 95,435$ 2013 15,275 6,707 43.91% 104,720 2014 14,167 5,667 40.00% 113,220

Additional information can be obtained from the County’s Audited Financial Statements, available from the Auditor-Controller’s Department at 44 N. San Joaquin St., Fifth Floor, Suite 550, Stockton, California 95202. NOTE 6 – PROGRAM EVALUATION The Commission spent $257,454 on program evaluation during the fiscal year. NOTE 7 – PRIOR PERIOD ADJUSTMENT As of June 30, 2014, the beginning net position was restated as follows:

GovernmentalActivities

Beginning balance, as previously reported 5,910,092$

Adjusted revenues recognized in prior year to deferred inflows of resources (477,330) Changes in OPEB liability for fiscal year 2013. 6,434

Beginning governmental activities net position July 1, 2013, as restated 5,439,196$

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NOTE 7 – PRIOR PERIOD ADJUSTMENT (Continued) As of June 30, 2014, the beginning fund balance was restated as follows:

General Fund

Beginning balance, as previously reported 6,093,225$

Adjusted revenues recognized in prior year to deferred inflows of resources (477,330)

Beginning fund balance July 1, 2013, as restated 5,615,895$

NOTE 8 – SECTION 30131.4 OF THE CALIFORNIA TAX AND REVENUE CODE CERTIFICATION The Commission has certified that the supplant requirement stated in Section 30131.4 of the California Tax and Revenue Code has been met. NOTE 9 – RISK MANAGEMENT The Commission is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; natural disasters and employees’ health. Insurance for the Commission is secured through the County’s self-insurance programs for casualty, workers compensation, unemployment compensation, medical insurance, and dental insurance. The County also joins together with other counties in the State through the California State Association of Counties (CSAC) to obtain general liability and malpractice insurance coverage for claims in excess of the coverage provided by the County. The County also purchases commercial stop loss insurance for the health and dental insurance coverage in excess of the County covered portion. Settled claims have not exceeded the CSAC coverage or the commercial insurance coverage in any of the past three fiscal years. NOTE 10 – CONTINGENT LIABILITIES The Commission receives funding from the State of California Proposition 10, The California Children and Families Act of 1998, to fund programs that promote, support, and improve the early development of children from prenatal through age five. These programs must be in compliance with applicable laws and may be subject to financial and compliance audits by the State. The amount, if any, of expenditures which may be disallowed by the State cannot be determined at this time, although the Commission’s management does not expect such amounts, if any, to be material. NOTE 11 – SUBSEQUENT EVENTS In compliance with accounting standards generally accepted in the United States of America, management has evaluated events that have occurred after year-end to determine if these events are required to be disclosed in these financial statements. Management has determined that no events require disclosure in accordance with accounting standards generally accepted in the United States of America. These subsequent events have been evaluated through October 21, 2014, which is the date the financial statements were available to be issued.

REQUIRED SUPPLEMENTARY INFORMATION

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SAN JOAQUIN COUNTY CHILDREN AND FAMILIES COMMISSION SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN

FUND BALANCE – BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2014

Actual Amounts Variance with

Original Final (Budgetary Basis) Final Budget

Fund Balance, July 1, 2012 6,093,225$ 6,093,225$ 6,093,225$ -$

Resources (Inflows):Proposition 10 Apportionment 7,164,658 7,134,453 7,155,250 20,797 Proposition 10 Child Signature Program 1 1,125,750 1,125,750 1,125,750 - Proposition 10 Child Signature Program 1 Coordina 100,000 100,000 100,000 Proposition 10 Child Signature Program 2 105,000 112,087 107,936 (4,151) Proposition 10 Surplus Money Investment Fund - - 1,917 1,917 Race to the Top 438,000 423,000 312,773 (110,227) Help Me Grow - 150,365 106,316 (44,049) Use of Money 17,000 17,902 17,410 (492) Other Revenues - - 2,959 2,959

Total Resources 8,950,408 9,063,557 8,930,311 (133,246)

Amounts Available for Appropriation 15,043,633 15,156,782 15,023,536 (133,246)

Charges to Appropriations (Outflows):Community Programs 688,720 717,900 562,010 155,890 Access to Preschool Initiative 4,427,752 4,427,752 4,427,751 1 Health Access Initiative 1,571,395 1,644,923 1,603,793 41,130 School Readiness Rural Services Initiative 951,025 951,025 945,995 5,030 Family Resource Center Initiative 400,000 400,000 400,000 - Race to the Top 531,972 478,225 365,095 113,130 Child Signature Program 2 105,000 113,620 113,620 - Professional Services - Mini Grants 50,000 50,000 42,518 7,482 Public Relations - Sponsorships 18,000 18,000 18,000 - Salaries and Employee Benefits 991,631 991,631 756,183 235,448 Power of Preschool - Coordination 100,000 100,000 100,000 - Professional and Special Services 368,171 368,171 365,764 2,407 Legal Services 7,500 7,500 4,000 3,500 Administrative Services 15,975 15,975 15,975 - Communications 5,812 5,812 5,325 487 Memberships 11,679 11,679 10,844 835 Maintenance - Equipment 200 200 - 200 Office Expense 8,250 8,250 6,999 1,251 Publication and Legal Notices 500 500 - 500 Rents - Structures and Grounds 16,000 16,000 25,328 (9,328) Rents and Leases - Equipment 10,463 10,463 13,622 (3,159) Small Purchases - - - - Special Department Expenses 3,000 3,000 704 2,296 Household Expense - - - - Miscellaneous Expense - - - - Data Processing Charges 3,015 3,015 2,266 749 Insurance - Workers' Compensation 1,225 1,225 978 247 Insurance - Casualty 376 376 376 - Transportation and Travel 9,300 9,300 6,251 3,049

10,296,961 10,354,542 9,793,397 561,145

Budgetary Fund Balance, June 30, 2014 4,746,672$ 4,802,240$ 5,230,139$ 427,899$

Budgeted Amounts

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SAN JOAQUIN COUNTY CHILDREN AND FAMILIES COMMISSION SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN

FUND BALANCE – BUDGET AND ACTUAL (Continued) FOR THE YEAR ENDED JUNE 30, 2014

AmountSources/Inflows of Resources:Actual amounts (budgetary basis) "available for appropriation" from the Schedule of

Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual 15,023,536$ Differences - Budget to GAAP:

The fund balance at the beginning of the year is a budgetary resource but is nota current-year revenue for financial reporting purposes. (6,093,225)

Total Revenues as reported on the Statement of Revenues, Expenditures,and Changes in Fund Balance 8,930,311$

Uses/Outflows of Resources:Actual amounts (budgetary basis) "total charges to appropriations" from the Schedule

of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual 9,793,397$ Differences - Budget to GAAP:

Encumbrances for supplies and equipment ordered but not received are reported in the year the order is placed for budgetary purposes, but in theyear the services/supplies are received for financial reporting purposes. (509,863)

Total Expenditures as reported on the Statement of Revenues, Expenditures, and Changes in Fund Balance 9,283,534$

An explanation of the differences between budgetary inflows/outflows and revenues/expenditures

America (GAAP) is as follows:determined in accordance with accounting principles generally accepted in the United States of

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SAN JOAQUIN COUNTY CHILDREN AND FAMILIES COMMISSION NOTE TO REQUIRED SUPPLEMENTARY INFORMATION

JUNE 30, 2014 NOTE 1 – BUDGET AND BUDGETARY ACCOUNTING The Commission prepares and legally adopts an operating budget on or before August 31 of each year. Public hearings are conducted to review all proposed appropriations and the sources of financing before adoption. Until the adoption of this final budget, operations are governed by the proposed budget. The budget is prepared on a cash basis except that encumbrances are treated as budgeted expenditures in the year the purchase commitment is made. The encumbered appropriations do not lapse at the end of the year. Accordingly, encumbrances outstanding at year-end are reported as reservations of fund balance for subsequent year expenditures and become authorized encumbrance appropriations carried over. Throughout the fiscal year, the Commission may make supplemental appropriations when revenues are received from unanticipated sources. The legal level of budgetary control (the level on which expenditures may not legally exceed appropriations) is at the object level. Object levels of expenditure include: salaries and benefits, services and supplies, rent and utilities, and program expenditures.

SUPPLEMENTARY INFORMATION

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SAN JOAQUIN COUNTY CHILDREN AND FAMILIES COMMISSION SUPPLEMENTAL SCHEDULE OF FIRST 5 CALIFORNIA (F5CA) FUNDING

FOR THE YEAR ENDED JUNE 30, 2014

Beginning Program/ Ending Program/Project Balance Project Balance

(As of July 1) Revenue Expenditures (As of June 30)

Child Signature Program 1 F5CA Program Funds (562,875)$ 1,125,750$ 1,125,750$ (562,875)$ County, Local Funds - - 3,009,052 (1)

Child Signature Program 2 F5CA Program Funds (55,277) 107,936 110,634 (57,975)

Child Signature Program 1 - CoordinatioF5CA Program Funds (100,000) 100,000 100,000 (100,000)

Total F5CA Funds (718,152)$ 1,333,686$ 1,336,384$ (720,850)$ Total County funds 3,009,052$

(1) Memo: 2013-2014 Child Signature Program from Local First 5 San Joaquin Funds.

OTHER REPORTS

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INDEPENDENT AUDITOR’S 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 AND THE CALIFORNIA CHILDREN AND FAMILIES FIRST ACT OF 1998

First 5 San Joaquin Children Board of Supervisors and Families Commission County of San Joaquin County of San Joaquin Stockton, California Stockton, California We have audited, in accordance with the 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, the financial statements of the governmental activities and General Fund of the San Joaquin County Children and Families Commission (the Commission), as of and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise the Commission’s basic financial statements, and have issued our report thereon dated October 21, 2014. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the Commission’s internal control over financial reporting to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Commission’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Commission’s internal control. 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 a 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. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

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Compliance and Other Matters As part of obtaining reasonable assurance about whether the Commission’s financial statements are free from 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. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Commission’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Commission’s internal control and compliance. Accordingly, this report is not suitable for any other purpose. This report is intended solely for the information and use of the County Board of Supervisors, the County Commission, the State Commission, the State Controller’s Office, federal agencies, and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. However, this report is a matter of public records and its distribution is not limited. BROWN ARMSTRONG ACCOUNTANCY CORPORATION Bakersfield, California October 21, 2014

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INDEPENDENT AUDITOR’S REPORT ON STATE COMPLIANCE First 5 San Joaquin Children Board of Supervisors and Families Commission County of San Joaquin County of San Joaquin Stockton, California Stockton, California Compliance We have audited the San Joaquin County Children and Families Commission (the Commission), a component unit of San Joaquin County, as of and for the year ended June 30, 2014, and have issued our report thereon dated October 21, 2014. We have also audited the Commission’s compliance with the requirements specified in the State of California’s Standards and Procedures for Audits of Local Entities Administering the California Children and Families Act, issued by the State Controller’s Office, applicable to the Commission’s statutory requirements identified below for the year ended June 30, 2014. Management’s Responsibility Management is responsible for compliance with the requirements of the laws and regulations applicable to the California Children and Families Act. Auditor’s Responsibility Our responsibility is to express an opinion on the Commission’s compliance based on our audit. We conducted our audit of compliance in accordance with auditing 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 the State of California’s Standards and Procedures for Audits of Local Entities Administering the California Children and Families Act, issued by the State Controller’s Office. Those standards and the State of California’s Standards and Procedures for Audits of Local Entities Administering the California Children and Families Act Program require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the compliance requirements referred to above that could have a material effect on the statutory requirements listed below occurred. An audit includes examining, on a test basis, evidence about the Commission’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 Commission’s compliance with those requirements.

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In connection with the audit referred to above, we selected and tested transactions and records to determine the Commission’s compliance with the state laws and regulations applicable to the following items:

Description

Audit Guide Procedures

Procedures Performed

Contracting and Procurement 6 Yes Administrative Costs 3 Yes Conflict-of-Interest 3 Yes County Ordinance 4 Yes Long-Range Financial Plans 2 Yes Financial Condition of the Commission 1 Yes Program Evaluation 3 Yes Salaries and Benefit Policies 2 Yes

Opinion In our opinion, the Commission complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on the California Children and Families Program for the year ended June 30, 2014. This report is intended solely for the information of the County Board of Supervisors, the Commissioners, the County Commission, the State Commission, the State Controller’s office, and management of the San Joaquin County Children and Families Commission and is not intended to be and should not be used by anyone other than these specified parties. However, this report is a matter of public record and its distribution is not limited. BROWN ARMSTRONG ACCOUNTANCY CORPORATION Bakersfield, California October 21, 2014