rural cmmunityo assistance corporation - rcac€¦ · 30/09/2015 · g le ndale • roseville •...

Rural Community Assistance Corporation

Consolidated Financial Statements with Supplementary Information Including Federal Government Reports and Findings

September 30, 2015 and 2014

The Cover Story:

RCAC’s graphic designer, Dustin Love, designed this poster to commemorate 50 years and 50,000 homes completed through U.S. Department of Agriculture’s (USDA) Mutual Self-Help Housing program. Low-income borrowers in the self-help program work together under the guidance of a nonprofit housing entity (self-help grantee) to help each other build their homes. With a construction supervisor on site, these families provide at least 65 percent of the labor (known as “sweat equity”) to construct their homes. As an intermediary technical assistance provider under this program, RCAC assists 50 grantee organizations in the western United States to successfully produce single-family financed homes. In addition, RCAC’s Loan Fund lends to self-help housing projects in our 13 state service area. The logo’s wall raising graphic expresses community, opportunity and stability.

Table of Contents

Pages

Independent Auditor's Report ................................................................................................................................................. 1

Consolidated Financial Statements

Consolidated Balance Sheets as of September 30, 2015 and 2014 ................................................................................ 3 Consolidated Statements of Activity and Changes in Net Assets for the year ended September 30, 2015 .................. 5 Consolidated Statements of Activity and Changes in Net Assets for the year ended September 30, 2014 .................. 6 Consolidated Statements of Functional Expenses for the year ended September 30, 2015 .......................................... 7 Consolidated Statements of Functional Expenses for the year ended September 30, 2014 .......................................... 8 Consolidated Statements of Cash Flows for the years ended September 30, 2015 and 2014 ........................................ 9 Notes to the Consolidated Financial Statements .......................................................................................................... 11

Supplementary Information

15-Year History of Unrestricted and Temporarily Restricted Revenue, Gains, Expenses and Net Asset Changes and Year-End Balances ................................................................................................................ 40 Schedule of Expenditures of Federal Awards ............................................................................................................. 41 Notes to the Schedule of Expenditures of Federal Awards ......................................................................................... 46 Schedule of Federal Grant Pass-through Expenditures ............................................................................................... 48 Schedule of Indirect Costs by Expenditure Type ........................................................................................................ 50 Schedule of Indirect Cost Rate .................................................................................................................................... 51

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 ................................................................................................ 52

Independent Auditor’s Report on Compliance with Requirements That Could Have a Direct and Material Effect On Each Major Program and Internal Control over Compliance in Accordance with OMB Circular A-133 .................................................................................................................. 54

Findings and Questioned Costs

Schedule of Findings and Questioned Costs ................................................................................................................ 56 Status of Prior Year Findings....................................................................................................................................... 58

MANN • URRU T IA • N ELSON CPAs & ASSOC I A TE S , LLP G LE NDALE • ROSEVILLE • SAC RAMENTO • SOU TH LAKE TAHOE • KAUAI, HAWAII

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors Rural Community Assistance Corporation West Sacramento, California

Report on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Rural Community Assistance Corporation as of September 30, 2015 and 2014, and the related consolidated statement of activities and changes in net assets, functional expenses, and cash flows for the year then ended, and the related notes to the consolidated financial statements.

Management's Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated fmancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated 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 entity'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 consolidated fmancial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

SACRAMENTO OFFICE . 2515 V ENTURE OAKS W AY, SUITE 135 . SACRAMENTO, CA 95833 .0. 916 .929.0540 . F. 916.929 .0541

WWW.MUNCPAS.COM

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Rural Community Assistance Corporation as of September 30, 2015 and 2014, and the changes in their net assets and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Other Matters

Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The accompanying schedule of expenditures of federal awards, as required by Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the consolidated financial statements as a whole.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated December 8, 2015, on our consideration of Rural Community Assistance Corporation'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 Rural Community Assistance Corporation's internal control over financial reporting and compliance.

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Rural Community Assistance Corporation Consolidated Balance Sheets


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

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Assets

2015 2014 Current assets: Cash and cash equivalents (Notes 2 & 3) $ 5,530,704 $ 10,073,492 Investments (Note 3) 15,219,472 10,975,593 Receivables, prepaids & deposits (Note 6) 3,154,963 2,436,210 Loans receivable - current portion (Note 4) 11,902,459 27,177,333 Allowance for loan loss - current (Note 5) (1,215,000) (2,200,000) Land & property held for sale (Note 7) 3,002,800 1,536,530

Total current assets 37,595,398 49,999,158

Non-current assets: Loans receivable - non current portion (Note 4) 51,311,227 34,530,553 Allowance for loan loss - non current (Note 5) (2,750,000) (2,600,000) Other non-current assets (Note 10 & 11) 453,960 399,347 Land held for investment (Note 7) 770,000 945,000 Land, building, & equipment, net of accumulated depreciation (Note 7) 2,847,654 2,713,666

Total non-current assets 52,632,841 35,988,566

Total assets $ 90,228,239 $ 85,987,724

Rural Community Assistance Corporation Consolidated Balance Sheets September 30, 2015 and 2014


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Liabilities and Net Assets

2015 2014 Current liabilities: Accounts payable and accrued expenses $ 1,620,278 $ 2,141,809 Grants payable (Note 2) 1,124,741 1,122,131 Notes payable - current portion (Note 8) 3,102,629 4,435,284

Total current liabilities 5,847,648 7,699,224

Notes payable - less current portion (Note 8) 48,911,710 45,533,162 Bonds payable (Note 11) 2,030,000 2,030,000 Other long-term liabilities (Notes 9 & 10) 584,778 551,763

Total long-term liabilities 51,526,488 48,114,925

Total liabilities 57,374,136 55,814,149

Unrestricted net assets: General unrestricted net assets 2,758,868 2,541,477 Board designated lending capital 19,500,000 17,000,000

Total unrestricted net assets 22,258,868 19,541,477

Temporarily restricted net assets: Temporarily restricted net assets-lending capital (Note 12) 6,962,683 7,903,682 Temporarily restricted net assets-other (Note 12) 3,632,552 2,728,416

Total temporarily restricted net assets 10,595,235 10,632,098

Total net assets 32,854,103 30,173,575

Total liabilities and net assets $ 90,228,239 $ 85,987,724

Rural Community Assistance Corporation Consolidated Statement of Activity and Changes in Net Assets

For the Year Ended September 30, 2015


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Temporarily Unrestricted Restricted Totals

Revenue: Grants and contracts $ 9,941,350 $ 3,321,429 $ 13,262,779 Loan fees revenue 359,507 - 359,507 Loan servicing fees revenue 248,305 - 248,305 Interest on loans 1,835,438 1,051,124 2,886,562 Investment income (Note 3) 55,750 54,417 110,167 Loss on sale of assets (44,377) - (44,377) Rental and other income 89,276 - 89,276 Net assets released from restrictions 4,463,833 (4,463,833) -

Total revenue 16,949,082 (36,863) 16,912,219

Expenses: Program expenses: Loan fund 2,031,986 - 2,031,986 Housing 3,240,044 - 3,240,044 Community & Environmental 5,556,047 - 5,556,047 Other 594,742 - 594,742

Total program expenses 11,422,819 - 11,422,819

Fundraising 268,006 268,006 Management and general 2,391,491 - 2,391,491 Rental operations 149,375 - 149,375

Total expenses 14,231,691 - 14,231,691

Increase in net assets 2,717,391 (36,863) 2,680,528

Net assets at October 1, 2014 19,541,477 10,632,098 30,173,575

Net assets at September 30, 2015 $ 22,258,868 $ 10,595,235 $ 32,854,103

Rural Community Assistance Corporation Consolidated Statement of Activity and Changes in Net Assets



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Temporarily Unrestricted Restricted Totals

Revenue: $ 9,467,550 $ 2,592,305 $ 12,059,855

181,881 - 181,881 285,691 - 285,691 1,616,587 888,318 2,504,905 32,615 121,246 153,861 5,581 - 5,581 90,693 - 90,693

161,423 - 161,423

Grants and contracts Loan fees revenue Loan servicing fees revenue Interest on loans Investment income (Note 3) Revenue from partnership (Note 1) Gain on foreclosure Rental and other income Net assets released from restrictions 3,118,778 (3,118,778) -

Total revenue 14,960,799 483,091 15,443,890

Expenses: Program expenses: Loan fund 2,226,148 - 2,226,148 Housing 3,242,238 - 3,242,238 Community & Environmental 4,294,412 - 4,294,412 Other 774,359 - 774,359

Total program expenses 10,537,157 - 10,537,157

Fundraising 247,675 247,675 Management and general 2,431,485 - 2,431,485 Rental operations 132,053 - 132,053

Total expenses 13,348,370 - 13,348,370

Increase in net assets 1,612,429 483,091 2,095,520

Net assets at October 1, 2013 17,929,048 10,149,007 28,078,055

Net assets at September 30, 2014 $ 19,541,477 $ 10,632,098 $ 30,173,575

Rural Community Assistance Corporation Consolidated Statement of Functional Expenses



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P

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Direct salaries ( Note2 ) $ 786,017 $ 1,385,237 $ 2,494,743 $ 139,047 $ 167,128 $ 1,237,965 $ 11,705 $ 6,221,842 Fringe benefits 366,435 646,302 1,167,388 65,201 80,422 578,525 5,488 2,909,761 Bank service charges 3,397 24 174 4,163 - - - 7,758 Consultants 58,219 174,107 82,865 71,898 602 127,967 6,981 522,639 Consumable supplies 17,847 30,881 54,656 3,106 2,524 27,447 242 136,703 Grant specific expense-supplies 2 1,673 126,640 1,057 - 713 - 130,085 Telephone 21,348 37,412 67,288 3,873 4,161 33,626 328 168,036 Grant specific expense- telephone 1,592 5,530 8,231 772 - 1,975 - 18,100 Postage 2,423 4,241 7,643 461 384 3,784 40 18,976 Grant specific expense-postage 2,037 2,508 34,687 819 - 430 - 40,481 Office space ( Note 2 ) 53,860 95,109 171,333 9,630 11,231 85,253 959 427,375 Equipment rental/maintenance 10,296 18,125 31,695 1,847 1,554 15,631 117 79,265 Printing and copying 4,903 6,602 67,684 2,362 - 889 - 82,440 Training costs 3,383 29,622 82,170 22,204 - 23,541 - 160,920 Travel 36,953 336,682 576,438 43,589 - 110,178 113 1,103,953 Interest and bond expense ( Note 11 ) 578,754 - - - - - 55,376 634,130 Depreciation 7,028 - - - - 37,659 184,784 229,471 Insurance 877 - 3,919 - - 50,831 28,419 84,046 Dues and subscriptions 7,977 6,520 48,869 72,390 - 17,980 - 153,736 Conference registration and staff training 7,147 18,787 14,457 6,269 - 12,710 - 59,370 Provision for loan loss (Note 5) 155,275 - - - - - - 155,275 Loan loss recovery (286,020) - - - - - - (286,020) Write down of asset value 155,000 - - - - - - 155,000 Taxes, licenses and fees 33,460 1,953 39 1,224 - 4,150 5,624 46,450 Recruitment 26 845 832 345 - 20,237 - 22,285 Contributions 3,750 5,047 - 11,000 - - - 19,797 Grants and pass-through awards - 332,505 486,671 133,485 - - - 952,661 Scholarship - 100,332 27,625 - - - - 127,957 Other building management - - - - - - 137,349 137,349 Owner occupancy allocated to office space - - - - - - (288,150) (288,150)

Total expenses 2,031,986 3,240,044 5,556,047 594,742 268,006 2,391,491 149,375 14,231,691 Indirect expenses allocated to programs 353,842 775,891 1,314,069 112,938 67,028 (2,623,768) - 0 Total expenses $ 2,385,828 $ 4,015,935 $ 6,870,116 $ 707,680 $ 335,034 $ (232,277) $ 149,375 $ 14,231,691

Program Expenses

Total Loan Fund Housing Community & Environmental Other

Management and General

Rental Operations Fundraising

Rural Community Assistance Corporation Consolidated Statement of Functional Expenses



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Direct salaries (Note2 ) $ 752,617 $ 1,391,901 $ 2,168,151 $ 181,736 $ 155,771 $ 1,303,003 $ 14,788 $ 5,967,967Fringe benefits 338,561 625,615 976,090 81,271 71,265 588,285 6,588 2,687,675Bank service charges 79 1,248 467 825 - - 10 2,629Consultants 77,001 90,153 64,346 11,939 - 82,059 229 325,727Consumable supplies 19,820 36,722 57,777 4,429 3,427 35,590 414 158,179Grant specific expense-supplies 5,445 8,537 14,631 1,194 - 409 81 30,297Telephone 20,324 37,722 58,587 4,991 4,128 35,378 405 161,535Grant specific expense - telephone 521 6,656 8,003 282 - 1,354 - 16,816Postage 2,755 5,048 7,803 642 389 4,386 65 21,088Grant specific expense-postage 269 4,740 18,608 593 - 411 - 24,621Office space (Note 2 ) 49,948 93,191 145,614 11,622 10,904 87,872 963 400,114Equipment rental/maintenance 12,051 21,096 34,442 2,800 1,791 19,613 286 92,079Printing and copying 3,583 11,008 71,690 3,112 - 2,830 - 92,223Training costs 3,163 94,255 114,625 22,961 - 41,665 - 276,669Travel 43,104 323,894 453,955 32,004 - 127,838 - 980,795Interest and bond expense (Note 11 ) 552,599 - - - - - 63,567 616,166Depreciation 10,541 - - - - 26,665 160,356 197,562Insurance 784 - - - - 48,101 23,804 72,689Dues and subscriptions 5,458 6,954 9,276 60,577 6,508 - 88,773Conference registration and staff training 7,442 18,126 7,806 4,931 - 3,476 - 41,781Provision for loan loss (Note 5) 286,646 - - - - - - 286,646Loss on sale of asset 13,000 - - - - - - 13,000Taxes, licenses and fees 19,171 1,026 5,137 - - 5,364 2,912 33,610Recruitment 266 - - - - 10,678 - 10,944Contributions 1,000 3,625 - 9,000 - - - 13,625Grants and pass-through awards - 378,587 77,404 339,450 - - - 795,441Scholarship - 82,134 - - - - - 82,134Other building management - - - - - - 117,470 117,470Owner occupancy allocated to office space - - - - - - (259,885) (259,885)

Total expenses 2,226,148 3,242,238 4,294,412 774,359 247,675 2,431,485 132,053 13,348,370Indirect expenses allocated to programs 340,706 785,828 1,074,676 115,183 61,944 (2,378,337) - (0)

Total expenses $ 2,566,854 $ 4,028,066 $ 5,369,088 $ 889,542 $ 309,619 $ 53,148 $ 132,053 $ 13,348,370

Program Expenses

TotalLoan Fund Housing Community & Environmental Other

Management and General

Rental OperationsFundraising

Rural Community Assistance Corporation Consolidated Statements of Cash Flows

For the Years Ended September 30, 2015 and 2014


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2015 2014 Cash flows from operating activities:

Cash received from grants and contracts $ 12,541,315 $ 12,031,258 Interest and fees paid 3,617,682 2,968,604 Cash received from partnership - 5,581 Cash received from recovery of previously charged loan loss 286,020 - Cash received from rental and other activities 89,276 161,423 Cash paid for operating expenses (13,939,733) (12,251,470) Interest paid (578,754) (616,166)

Net cash provided by operating activities 2,015,806 2,299,230

Cash flows from investing activities: Loans made to borrowers (32,381,743) (39,960,970) Principal receipts on loans receivable 27,134,469 28,245,190 Proceeds from sale of loans 851,200 2,521,788 Proceeds from sale of land held for sale 409,353 224,927 Purchase of property and equipment (363,459) (218,912) Purchases of investments (31,935,247) (54,913,677) Proceeds from sale of investments 27,680,941 62,091,688

Net cash used for investing activities (8,604,486) (2,009,966)

Cash flows from financing activities: Proceeds from notes payable 6,581,176 8,643,375 Principal payments on notes payable (4,535,284) (3,378,858) Partial redemption of bonds payable - (800,000)

Net cash provided by financing activities 2,045,892 4,464,517

Increase (decrease) in cash and cash equivalents (4,542,788) 4,753,781

Cash and cash equivalents, beginning of year 10,073,492 5,319,711

Cash and cash equivalents, end of year $ 5,530,704 $ 10,073,492

Rural Community Assistance Corporation Consolidated Statements of Cash Flows

For the Years Ended September 30, 2015 and 2014


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2015 2014 Reconciliation of change in net assets to cash flows from operating activities:

Change in net assets $ 2,680,528 $ 2,095,520 Adjustments to reconcile increase in net

assets to net cash provided by operating activities: Depreciation 229,471 197,562 Amortization of bond and letter of credit costs 8,482 9,213 Net unrealized losses (gains) on investments 10,427 (68,287) Losses/(gains) on sale of assets 44,377 (90,693)

Provision for loan loss 155,275 286,646 Loss on sale/adjustment of asset value 155,000 13,000

Changes in operating assets and liabilities: Receivables, prepaids & deposits (718,752) (117,619) Other non-current assets (63,094) (51,075) Accounts payable and accrued expenses (521,531) 51,910

Grants payable 2,610 (426) Other long-term liabilities 33,014 (26,522)

Net cash flows provided by operating activities $ 2,015,806 $ 2,299,230

Schedule of noncash investing and financing activities: Land acquired through foreclosure $ 1,900,000 $ 1,293,800 Cancellation of loans receivable (1,900,000) (1,293,800)

Total noncash investing and financing activities $ - $ -

Note terms extended with new notes payable $ 1,400,000 $ 225,000

Rural Community Assistance Corporation Notes to the Consolidated Financial Statements


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Note 1: Organization:

Rural Community Assistance Corporation (RCAC) (Organization) is a nonprofit organization founded in 1978. RCAC is a tax-exempt organization formed under 501(c)(3) of the Internal Revenue Code and registered with the California Franchise Tax Board under Section 23701(d). RCAC has been classified as a public supported organization that is not a private foundation under Section 509(a) of the Internal Revenue Code. The U.S. Treasury has certified RCAC as a Community Development Financial Institution (CDFI).

RCAC's Mission Statement: RCAC provides training, technical and financial resources and advocacy so rural communities can achieve their goals and visions.

Core Values: ● Leadership: identifies innovative strategies to further rural community and economic

development and inspires partners to achieve great outcomes. ● Collaboration: achieves superior results by respectfully and inclusively identifying partners.● Commitment: works with passion and dedication to improve rural communities and the

lives of their low-income residents.

● Quality: produces exceptional work products to help our partners meet their goals.● Integrity: practices the highest professional standards and cultural competency in our work.

RCAC's Strategic Directions: To support our local partners, RCAC will pursue the following strategic directions:

● Form regional collaborations to achieve economies of scale and take advantage of newopportunities.

● Ensure communities, and especially schools, have access to and increase consumption of safe drinking water.

● Expand the quantity and types of training available to rural communities and organizations.● Diversify local nonprofit services to build more sustainable organizations.● Enhance the skills of organizations that provide infrastructure, housing and other essential

services in Indian Country. ● Provide development services to increase housing opportunities in rural communities.● Increase access to affordable mortgages for rural organizations and residents.● Build partnerships with local economic development organizations to expand small business

lending.

Rural Community Assistance Corporation Notes to the Consolidated Financial Statements, continued


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Note 1: Organization, continued:

Our work builds rural community organizations' capacity; strengthens rural communities; expands affordable housing and community facility availability; protects rural community health and environment through improved infrastructure (water, wastewater and solid waste); and promotes economic opportunity and job creation through our economic development and lending activities.

RCAC's major program areas are affordable housing, environmental infrastructure and lending. RCAC also offers programs in leadership development training and economic development. Core services are technical, managerial and financial assistance; development assistance; financial packaging; training; advocacy; and information exchange.

RCAC is a financial resource for rural communities. We work with rural water, wastewater and solid waste systems to make them sustainable. RCAC supports organizations that develop affordable single and multifamily homes and operate programs that prepare rural residents for homeownership. RCAC also offers cross-cutting programs in leadership development training and economic development. Nearly all RCAC services are available to and have a priority to work with Tribes and Native communities. In addition, there are three programs designed specifically for Tribes.

RCAC serves rural communities in 13 western states and certain Pacific islands including Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington and Wyoming. Related Organizations: RCAC is a member of the GSAF, LLC. RCAC formed this consortium in March 2012, with three other nonprofit Community Development Financial Institutions (CDFIs). The State of California established the Golden State Acquisition Fund and will provide money to the fund through the Department of Housing and Community Development (HCD). The Golden State Acquisition Fund (state controlled) will provide $23.25 million to GSAF, LLC. GSAF, LLC allows its members and other originating lenders to borrow funds for the purpose of making affordable housing loans through their respective loan funds. (Note 8). For the year ended September 30, 2015, RCAC recognized no revenue and $17,431 of interest expense to GSAF. For the year ended September 30, 2014, RCAC recognized no revenue and $4,761 of interest to GSAF.

RCAC is a sole member of Rural Quality, LLC (RQLLC), a limited liability company created in September 2012 to provide affordable housing to low-income communities in Hawaii. The Rural Quality, LLC financial statements balances and activities are incorporated into the RCAC consolidated financial statements. Rural Quality, LLC had no revenue and expenses of $260,280 in the year ended September 30, 2015 and no revenue and expenses of $262,522 in the year ended September 30, 2014.

RCAC is a sole member of Rural Integrity, LLC (RILLC), a limited liability company created in January 2015 to provide affordable housing to low-income communities in Montana. Rural Integrity, LLC had no revenue and expenses in the year ended September 30, 2015.



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Note 1: Organization, continued:

Principles of Consolidation: The accompanying consolidated financial statements include the accounts of RCAC and the wholly owned entity Rural Quality, LLC for the year ended September 30, 2015 and 2014. All intercompany accounts and transactions have been eliminated.

Note 2: Summary of Significant Accounting Policies:

Net Assets Presentation: For accounting and reporting purposes, the Organization classifies net assets into three categories

according to externally imposed restrictions. A description of the three net asset categories is as follows:

●Unrestricted net assets have no donor-imposed restrictions.●Temporarily restricted net assets have donor- imposed restrictions that can be satisfied either by thepassage of time or expenditures that meet the donor-specified purpose. CDFI Funds, (a component of the U.S. Treasury), grants are treated as temporarily restricted net assets until the sooner of three years after receipt or the expenditure of the funds. ● Permanently restricted net assets have donor-imposed restrictions which do not expire. Expenses are reported as decreases in net assets. Gains and losses on investments and other assets or liabilities are reported as increases or decreases in unrestricted net assets unless their use is restricted by explicit donor stipulation or by law.

Accounting Method: The financial statements of RCAC have been prepared using the accrual method of accounting wherein revenue is recognized when earned and expenses are recognized when incurred.

Cash and Cash Equivalents:

The Organization considers all financial instruments purchased with a maturity of three months or less to be cash equivalents. Concentrations: Credit Risk:

The Organization maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Organization has not experienced any losses in such accounts. The Organization believes it is not exposed to any significant credit risk on cash and cash equivalents. The Organization grants credit to its clients and partners, substantially all of whom are non-profit organizations, tribal communities, small business or governmental agencies. Management believes that its loan underwriting, billing, and collection policies are adequate to minimize potential credit risk.



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Note 2: Summary of Significant Accounting Policies, continued:

Building and Equipment:

The Organization records building and equipment at cost and depreciates cost over the estimated useful life of the related asset. The Organization follows the practice of capitalizing all expenditures for building and equipment in excess of $5,000. Costs of repairs and maintenance are charged to expense. Upon retirement or disposal of property and equipment, the costs and related depreciation are removed from the accounts, and gains or losses, if any, are reflected in the earnings for financial and income tax reporting purposes. Depreciation is computed on the straight-line method for financial statement reporting purposes. Estimated useful lives are as follows:

Useful Life Building 30 years Office building improvements 3 to 23 years Solar power production system 20 years Office furniture, equipment, and software 3 to 10 years

Impairment of Long-Lived Assets: The Organization reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of these assets is determined by comparing the forecasted undiscounted net cash flows of the operation to which the assets relate to the carrying amount. If the Organization determines it is unable to recover the carrying amount of an asset, that asset is written down to fair value. Fair value is determined based on discounted cash flows or appraised values, depending on the nature of the assets. There were no impairment losses recognized for property and equipment for the years ended September 30, 2015 and 2014.

Functional Allocation of Expenses and Indirect Costs:

The costs of providing various programs and other activities have been summarized on a functional basis in the statement of functional expenses. Fringe benefits, consumable supplies, telephone postage, office space, and equipment rental/maintenance were allocated based on monthly activity, based on salary expense.



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Each funding source of direct expenses was charged its proportionate share of indirect costs based on adjusted direct costs. Adjusted direct costs were computed as total direct costs, less expenses for contributions, bank service charges, interest, provision for loan loss, rental operations, scholarships, and the portion of each sub-award in excess of $25,000. Expenditures for capital items are not included in direct costs. RCAC’s indirect cost rates based on this methodology were 22.80% and 25.57% for the years ending September 30, 2015 and 2014 respectively. RCAC negotiated an Indirect Cost Negotiation Agreement with the U.S. Government. That agreement established a predetermined indirect cost recovery rate of 25.01% for both years.

Grants Payable: Grants payable includes amounts owed as of September 30, 2015 and 2014 to grantees under the Agricultural Health and Housing Program and the Homeownership Counseling Program. These funds will be disbursed to grantees based on progress made on their projects. Direct Salaries: The Direct Salaries as listed in the consolidated statement of functional expenses is the cost of salaries charged directly to revenue centers for activity performed. Salary expense incurred for Paid Time Off, including vacation and sick leave and paid holidays is included in the Fringe Benefit expense.

Rental Operations: RCAC owns the building that houses its corporate offices in West Sacramento. RCAC occupies the majority of the building space and leases the other portion to tenants. The expenses related to the ownership and management of the building are shown on the consolidated statement of functional expenses under the heading rental operations. The owner occupied portion of the building ownership and management expenses are subtracted from the total building expenses to arrive at the rental operation expense. The expense of providing office space to RCAC staff, whether through rental arrangements or through the owner occupied building, is reported as office space.

Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. The more significant areas requiring the use of management estimates relate to allowances for uncollectible receivables and loan losses and useful lives for depreciation. Actual results could differ from those estimates, although management does not believe that any differences would materially affect the Organization's financial position or reported results.



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Below-Market Interest Rate Loans:

Accounting principles generally accepted in the United States of America require not-for-profit organizations to record interest expense and contribution revenue in connection with loans payable that are interest free or that have below-market interest rates. Likewise, money lent (loans receivable) at below-market interest rates should result in imputed interest revenue and contribution expense. Interest rates on loans payable are disclosed in Note 8. Interest rates on loans receivable are disclosed in Note 4. The Organization believes the benefits derived from below-market-rate loans received are passed through to the borrowers via below-market-rate loans made. Therefore, RCAC does not recognize an imputed contribution for low interest loans received nor an imputed contribution expense for low interest loans made.

Loan Origination Revenue and Expense:

Accounting principles generally accepted in the United States of America require loan fees (revenue) charged in the lending process be deferred and recognized over the life of the loan as an adjustment of yield (interest revenue). Likewise, direct loan origination costs (expenses) shall be deferred and recognized as a reduction in the yield (revenue) of the loan. Loan origination fees and related direct loan origination costs for a given loan shall be offset and only the net amount shall be deferred and amortized. RCAC recognizes loan origination fees as revenue when the loan closes, usually defined as when loan proceeds are initially disbursed. RCAC recognizes loan origination costs as expenses as they are incurred.

This treatment approximates the effect of capitalizing and amortizing the net amount over the life of the loan, yet is less costly to administer. The Organization believes that any difference in the accounting treatment for loan origination fees and their related costs is not material to the financial statements.

Loan and Performance Guarantee Fees:

Revenue from loan guarantees and performance guarantees issued by RCAC is recognized over the original life of the guarantee.

Matching Funds:

In fiscal year 2015 and 2014, certain activities were funded by t he U.S. Department of Agriculture, the U.S. Department of Housing and Urban Development, the U.S. Department of the Treasury, and the U.S. Environmental Protection Agency. The activities required cost sharing (matching funds) from other sources. Rural Community Assistance Corporation is in compliance with matching requirements.



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Uncertain Tax Positions: Accounting guidance issued by Financial Accounting Standards Board (FASB) prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Organization did not have unrecognized tax benefits as of September 30, 2015 and 2014 and does not expect this to change significantly over the next twelve months. The Organization will recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. As of September 30, 2015 and 2014, the Organization has not accrued interest or penalties related to uncertain tax positions. (The federal and state income tax returns of the Organization for 2013, 2012, and 2011, are subject to examination by the taxing authorities, generally for four years, after the due date).

Reclassifications: Certain amounts in the prior year financial statements have been reclassified to conform with current year presentation. Subsequent Events: The Organization has evaluated all subsequent events through December 1, 2015, the date the consolidated financial statements were available to be issued.



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Note 3: Cash, Cash Equivalents and Investments:

Cash, Cash Equivalents and Investments consist of the following at September 30, 2015 and 2014:

2015 2014 Cost Fair Value Cost Fair Value

Cash and Cash Equivalents $ 5,530,704 $ 5,530,704 $ 10,073,492 $ 10,073,492 Investments: Commercial Paper - - 828,731 829,237 Corporate medium term notes 3,105,116 3,067,858 3,878,060 3,851,255 Certificates of deposit 10,904,953 10,903,427 4,997,227 4,996,519 U.S. Government and Agencies 232,316 237,438 280,000 283,326 Other Investments 767,201 1,010,749 758,359 1,015,256

Total Investments 15,009,586 15,219,472 10,742,377 10,975,593

Total of cash, cash equivalents and investments $ 20,540,290 $ 20,750,176 $ 20,815,869 $ 21,049,085

Restrictions on Cash, Cash Equivalents and Investments:

Certain bank and investment accounts contain restrictions and access to the accounts require either the permission of other entities, or the funds are limited to specific uses. The controlling other entity and the account fair values at September 30, 2015 and 2014 are as follows:

2015 2014 Cash Investment Cash Investment

Union Bank (Note 11) $ 142,828 $ - $ 42,953 $ - Union Bank (Note 8) 58 - 743,675 - California Endowment 391,966 3,892,106 1,154,521 2,027,835 Ford Foundation 57,837 850,000 201,926 700,000 Rasmuson Foundation 1,426,412 1,014,580 523,765 1,903,252 JP Morgan Chase - - 1,000,000 - U.S. Department of Agriculture 840,000 2,025,595 155,662 490,781 U.S. Department of the Treasury 10,000 1,442,488 1,324,042 547,666

Total restricted cash, cash equivalents and investments $ 2,869,101 $ 9,224,769 $ 5,146,544 $ 5,669,534



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Note 3: Cash, Cash Equivalents and Investments, continued:

Restrictions on Cash and Investments, continued:

In addition to the above restrictions on various bank and investment accounts, RCAC has obtained loans and has solicited charitable contributions for specific purposes. The cash and investments related to these loans and contributions are not formally restricted, but RCAC considers the use of such proceeds limited to the purpose for which they were obtained. Loans obtained for lending capital, as listed in Note 8, and charitable contributions that retain restrictions, as listed in Note 12, have such limited uses.

Total Return on Cash Balances and Investments:

For the years ended September 30, 2015 and 2014:

2015 2014 Dividends and Interest Unrestricted $ 53,061 $ 35,021 Temporarily Restricted 70,975 44,931 Total Dividends and Interest 124,036 79,952 Net Realized Gains Unrestricted (932) 1,907 Temporarily Restricted (2,510) 3,715 Change in Unrealized Gains Unrestricted 3,621 (4,313) Temporarily Restricted (14,048) 72,600

Total return on cash and investments $ 110,167 $ 153,861

Fair Value Measurement of Investments:

The Financial Accounting Standards Board establishes a framework for measuring fair value under accounting principles generally accepted in the United States of America. The framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value and specifies disclosure requirements for fair value measurement. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy are described below:

Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Organization has the ability to access.



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Note 3: Cash, Cash Equivalents and Investments, continued:

Level 2- Inputs to the valuation methodology include: quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; inputs other than quoted prices that are observable for the asset or liability; inputs that are derived principally from or corroborated by observable market data by correlation or other means.

If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.

Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value of measurement.

The asset's or liability's fair value measurement level within the fair value hierarchy is based on the lowest level that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

The following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at September 30, 2015 and 2014.

Level 1: Commercial paper, corporate medium term notes, U.S. Government and agencies, and other investments.

(Valued at lower of cost or market).

Other investments (value based on comparable sales in active markets).

Level 2: Certificate of deposits (value based on investments measured at net asset value that are redeemable at the

reporting date).

Level 3: Land held for investment and other investments (value based on comparable investments in active

markets discounted due to an inactive market).

The methods described above may produce a fair value calculation that may not be as indicative of net realizable value or reflective of future fair values. Furthermore, while the Organization believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.



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Note 3: Cash, Cash Equivalents and Investments: The following table sets forth by level, within the fair value hierarchy, the Organization's investments at fair value as of September 30, 2015:

Significant Other Significant

Quoted Observable Unobservable Prices Inputs Inputs Total Fair

(Level 1) (Level 2) (Level 3) Value Corporate medium term notes $ 3,067,858 $ - $ - $ 3,067,858 Certificates of deposit - 10,903,427 - 10,903,427 Land held for investment - - 770,000 770,000 U.S. Government and Agencies 237,438 - - 237,438 Other investments 530,749 - 480,000 1,010,749

Total investments at fair value $ 3,836,045 $ 10,903,427 $ 1,250,000 $ 15,989,472

During the year ending September 30, 2015, RCAC sold $403,730 and wrote down asset value by $30,000 in land held for sale. RCAC sold $50,000 and wrote down asset value by $125,000 in land held for investment.

The following table sets forth by level, within the fair value hierarchy, the Organization's investments at fair value as of September 30, 2014:

Significant Other Significant

Quoted Observable Unobservable Prices Inputs Inputs Total Fair

(Level 1) (Level 2) (Level 3) Value Commercial paper $ 829,237 $ - $ - $ 829,237 Corporate medium term notes 3,851,255 - - 3,851,255 Certificates of deposit - 4,996,519 - 4,996,519 Land held for investment - - 945,000 945,000 U.S. Government and Agencies 283,326 - - 283,326 Other investments 535,256 - 480,000 1,015,256 Total investments at

fair value $ 5,499,074 $ 4,996,519 $ 1,425,000 $ 11,920,593

During the year ending September 30, 2014, RCAC transferred $442,730 of land held for investment to land & property held for sale, a current asset.



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Note 4: Loans Receivable

Loans receivable represent short-term and long-term loans made to non-profit organizations, small businesses, individuals and governmental entities including Native American tribal entities. These loans support the development of affordable housing; community facilities; water, wastewater, and solid waste systems; small businesses and non-profit operating lines of credit.

Loans receivable as of September 30, 2015 and 2014 were composed of the following:

2015 2014 Number Loans Number Loans of Loans Receivable of Loans Receivable

Grouped by Principal Due Dates Current assets

Loans more than 90 days past maturity $ 9,760 3 $ 2,984,385 Other loans due within 12 months 31 9,982,458 28 22,179,240

1,919,503 2,013,708 Current portion of amortizing loans Loans receivable current portion 31 11,911,722 31 27,177,333

Non-current assets

Non-amortizing

Loans due in one to five years 19 11,574,167 19 6,854,340 Loans due, more than five, less than ten years 3 2,201,859 1 155,244 Loans due in more than ten years 4 152,913 2 437,248

Amortizing 154 107

Principal due in one to five years 9,562,254 6,623,792 Principal due in five to ten years 10,429,430 8,226,287 Principal due in more than ten years 17,381,442 12,233,642 Loans receivable non-current portion 180 51,301,964 129 34,530,553

Total loans receivable 211 $ 63,213,686 160 $ 61,707,886

Weighted Average Maturity (months) 139 98

1



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Note 4: Loans Receivable, continued: 2015 2014

Number Loans Number Loans

of Loans Receivable of Loans Receivable

Grouped by Type of Project and Security Low income housing - real estate secured 40 $ 28,811,642 37 $ 26,933,004 Low income housing - other security 3 1,551,140 3 384,248 Community facilities - real estate secured 30 18,280,215 33 19,535,608 Community facilities - other security 9 891,551 6 4,108,398

Wastewater/solid waste systems 51 5,106,109 43 5,168,082

Water well loans 50 378,350 18 137,293

Small business loans 22 5,751,721 16 2,613,628 Wetlands preservation - real estate secured 1 1,737,415 1 1,811,456

Nonprofit operating lines of credit 4 605,543 2 916,169

Other loans 1 100,000 1 100,000 Total loans receivable 211 $ 63,213,686 160 $ 61,707,886

Grouped by Interest Rate

Interest Free 3 $ 2,285,729 3 $ 2,285,729

1.00% 52 9,335,513 31 9,774,129

3.00%-3.99% 13 1,817,581 2 1,838,845

4.00%-4.99% 20 7,531,169 4 888,836

5.00%-5.99% 81 31,447,249 71 31,036,146

6.00%-6.99% 18 7,197,203 21 10,903,595

7.00%-9.00% 24 3,599,242 28 4,980,606

Total loans receivable 211 $ 63,213,686 160 $ 61,707,886

Weighted Average Interest Rate 4.68% 4.81%



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Note 4: Loans Receivable, continued:

Criticized Assets

A portion of the above portfolio has been identified as loans that need to be monitored more frequently for signs of deterioration in respect to RCAC loan standards. The Criticized Asset loans are grouped into the following four categories:

2015 2014

Number Loans Number Loans of Loans Receivable of Loans Receivable

Foreclosure - - 1 $ 2,679,005

Doubtful 4 2,354,019 5 2,548,060

Substandard 6 1,958,886 8 3,471,605

Special Mention 8 3,605,908 3 2,173,343 Total criticized asset loans 18 $ 7,918,812 17 $ 10,872,013

Percent of criticized assets over total loans receivable portfolio 13% 18%

Allowance for loan loss related to criticized assets $ 1,681,585 $ 2,600,000

Total allowance for loan loss $ 3,965,000 $ 4,800,000

Percent of allowance for loan loss related to criticized assets over total allowance for loan loss 42% 54%



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Note 5:

Allowance for Loan Loss:

An allowance for loan loss is increased by charges to income and decreased by charge-offs (net of recoveries). Management assigns a risk rating in every outstanding loan at loan origination. The rating is reviewed and, if necessary, adjusted not less than quarterly. Based on the risk rating, each loan is assigned a percentage based on loan loss experience and the perceived future risk of loan loss. The percentage is applied to the outstanding loan balance and their product is used to determine the appropriate level of the allowance.

Allowance for loan loss as of September 30, 2015 and 2014:

Allowance for loan loss: 2015 2014

Beginning of year $ 4,800,000 $ 5,080,000 Additions to allowance 155,275 286,646 Charges against allowance (990,275) (566,646)

End of year $ 3,965,000 $ 4,800,000

Allowance/loans receivable 6.27% 7.78%

Consisting of allowance for: Current loans receivable $ 1,215,000 $ 2,200,000 Noncurrent loans receivable 2,750,000 2,600,000

Total Allowance for loan loss $ 3,965,000 $ 4,800,000

During the year ended September 30, 2015: RCAC was a participant in a loan to a California not-for-profit organization along with another lender. RCAC and the participating lender owned 20% and 80% of the loan respectively. The loan was secured by real estate. The borrower defaulted which ultimately resulted in a short sale of the related real estate. At the time of the sale, the unpaid portion of the loan owned by RCAC was $198,084. RCAC received $663,361 as a result of the short sale and disbursed 80% or $530,688 to the participating lender and retained 20% or $132,672 for our portion of the proceeds. This transaction resulted in a charge to the allowance for loan loss in the amount of $65,412.

RCAC foreclosed on a undeveloped subdivision on the island of Oahu, Hawaii. RCAC accepted the property in settlement of the loan. At the time of foreclosure, the balance of the loan receivable along with related receivables was $2,747,621. The property was valued at $1,900,000. This transaction resulted in a reduction to allowance for loan loss in the amount of $847,621.



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Note 5:

Allowance for Loan Loss, continued: Also during the year ended September 30, 2015, RCAC wrote- off a l oan to a non- prof it o rganization in Alaska that went out of business and had defaulted on the loan. The loan balance was $77,243 when written off.

During the year ended September 30, 2014, RCAC accepted three properties in partial settlement of four loans receivable from a Utah-based nonprofit organization. The principal balance of the four loans totaled $1,610,446. The properties were valued at $1,043,800 at the time of acquisition. This resulted in a charge of $566,646 to the allowance for loan loss. Interest free loans were $2,285,729 at September 30, 2015 and 2014.

In addition to the allowance for loan loss, the following pools of loans have special primary coverage of potential loan losses as of September 30, 2015 and 2014:

Loans Receivable Primary Loss Coverage/Loan Name of loan/guarantee program at 9/30/2015 Coverage Receivable Ratio

● Agricultural Workers Health & Housing Program $ 8,112,666 $ 1,468,068 18.10%

● USDA Community Facilityor Business & Industry Guarantee 12,553,040 11,115,077 88.54%

● HUD Title VI Guarantee 598,830 568,889 95.00%

● State of California Small BusinessCredit Initiative Guarantee 1,797,031 1,423,326 79.20%

Total loans with guarantees $ 23,061,567 $ 14,575,360 63.20%

Loans Receivable Primary Loss Coverage/Loan

Name of loan/guarantee program at 9/30/2014 Coverage Receivable Ratio

● Agricultural Workers Health & Housing Program $ 9,636,837 $ 1,246,361 12.93%

● USDA Community Facilityor Business & Industry Guarantee $ 5,395,926 $ 4,661,564 86.39%

● State of California Small BusinessCredit Initiative Guarantee $ 1,558,064 $ 1,246,451 80.00%

Total loans with guarantees $ 16,590,827 $ 7,145,376 43.12%



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Note 6: Receivables, Prepaids, and Deposits:

Receivables, prepaids, and deposits as of September 30, 2015 and 2014 were composed of the following:

2015 2014 Accounts receivable (net) $ 5,250 $ 29,868 Grants & contracts receivable (net) 2,494,529 1,912,042 Contributions receivable 223,001 - Interest receivables 364,565 349,505 Prepaids, deposits, & other 67,618 144,795

Total receivables, prepaids and deposits $ 3,154,963 $ 2,436,210

The Accounts receivable amounts are net of an allowance for doubtful accounts of $30,000, as of September 30, 2015 and 2014. The Grants & contract receivable amounts are net of an allowance for doubtful accounts of $46,000 as of September 30, 2015 and 2014, respectively.

Note 7: Land, Building, and Equipment

Land, Building, and Equipment were composed of the following at September 30, 2015 and 2014:

2014 Additions Deletions 2015 Current assets:

Land and property held for sale $ 1,536,530 $ 1,900,000 $ (433,730) $ 3,002,800

Non-current assets:

Land held for investment $ 945,000 $ - $ (175,000) $ 770,000

Land (office building) 427,000 - - 427,000 Office building improvements 3,896,447 154,489 4,050,936 Less: Accumulated depreciation (1,764,221) (184,784) - (1,949,005) Equipment and software 325,020 208,970 (31,866) 502,124 Less: Accumulated depreciation (170,580) (44,687) 31,866 (183,401)

Total land, building and equipment $ 2,713,666 $ 133,988 $ - $ 2,847,654



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Note 7: Land, Building, and Equipment, continued:

Depreciation expense for the years ended September 30, 2015 and 2014 was $229,471 and $197,562, respectively.

Land and property held for sale: As of September 30, 2015:

a. Land in Page, Arizona, valued at $250,000.b. Finished lots in Kanab, Utah, valued at $388,800.c. Finished lots in La Verkin, Utah valued at $94,000.d. Finished lots in Belen, New Mexico, valued at $370,000.e. Undeveloped lots in Walanae, Hawaii valued at $1,900,000.

Land held for investment: As of September 30, 2015:

a. Land in Pinetop, Arizona, valued at $225,000.b. Land in Moab, Utah, valued at $420,000.c. Land in Springdale, Utah, valued at $125,000.

Land and property held for sale: As of September 30, 2014:

a. Land in Dayton, Nevada, valued at $372,730.b. Land in Page, Arizona, valued at $250,000.c. Finished lots in Kanab, Utah, valued at $388,800.d. Finished lots in La Verkin, Utah valued at $155,000.e. Finished lots in Belen, New Mexico, valued at $370,000.

Land held for investment: As of September 30, 2014:

a. Land in Pinetop, Arizona, valued at $225,000.b. Land in Moab, Utah, valued at $420,000.c. Land in Springdale, Utah, valued at $300,000.

Expenses related to ownership of land and property held for sale and land held for investment are included in Loan Fund expenses on the consolidated statements of activity.



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Note 8: Notes Payable:

Notes payable consisted of the following at September 30, 2015 and 2014:

Interest Rate Maturity 2015 2014

Bank of the West 3.50% Feb-18 $ 1,000,000 $ 1,000,000 California Bank & Trust-COIN 0.00% Aug-19 500,000 500,000 California Endowment 0.00% Mar-29 14,900,000 15,700,000 California United Bank-COIN 0.00% Mar-18 1,000,000 1,000,000 Catholic Health Initiatives * 2.00% Sep-15 250,000 250,000 Community Economics 0.00% Various 150,000 150,000 Dignity Health 3.00% Jun-17 500,000 500,000 Dominican Sisters of Hope 2.00% Jun-17 50,000 50,000 F.B. Heron Foundation 3.50% Sep-15 - 450,000 First Foundation Bank ** 3.00% Dec-15 249,992 249,992 Ford Foundation 1.00% Feb-22 3,000,000 3,000,000 GSAF, LLC (Note 1) 2.00% Dec-17 1,193,875 468,375 Housing California 2.50% May-16 150,000 150,000 JP Morgan Chase Bank, N.A.-COIN 0.00% Jul-16 415,000 415,000 JP Morgan Chase Bank, N.A.-COIN 0.00% May-17 585,000 585,000 JP Morgan Chase Bank, N.A.-COIN 0.00% Aug-19 1,000,000 1,000,000 Mercy Investment Services, Inc. 3.00% Jun-17 1,000,000 1,000,000 Merrick Bank Corporation 2.00% Jun-17 500,000 500,000 Monarch Community Fund LLC 3.00% Jul-15 - 500,000 Morgan Stanley-$10 million line of credit variable May-16 - 500,000 Opportunity Finance Network 3.00% Sep-24 1,818,182 - Pacific Western Bank-COIN 0.00% May-20 500,000 - Rabobank- COIN 0.00% Aug-19 2,000,000 2,000,000 Rasmuson Foundation 0.00% -1.00% Dec-24 2,500,000 2,500,000 Religious Communities Investment Fund 3.00% Jul-19 350,000 350,000

Sachs (Erich & Hannah) Foundation 2.50% Jul-17 200,000 200,000 Sisters of Charity - Incarnate Word 2.00% Jun-19 250,000 250,000 Sisters of Holy Names of Jesus and Mary 2.00% Nov-19 250,000 - Sisters of St. Francis of Philadelphia 1.00% Oct-18 50,000 50,000 Sisters of the Holy Cross 3.00% Sep-20 200,000 200,000



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Note 8: Notes Payable, continued:

St. Joseph Health System 2.00% Jun-18 500,000 500,000 Tahoe Truckee Community Foundation 2.50% Jun-17 100,000 100,000 The Episcopal Church 3.70% Jun-15 - 300,000 Trinity Health Corporation 2.50% Mar-18 1,000,000 1,000,000 Union Bank 2.00% Apr-19 750,000 750,000 US Bancorp CDC 2.50% Aug-17 - 1,000,000 US Department of Agriculture IRP 1 1.00% Aug-21 474,090 550,842 US Department of Agriculture IRP 2 1.00% Mar-25 803,913 880,013 US Department of Agriculture IRP 3 1.00% Sep-38 651,180 676,255 US Department of Agriculture IRP 4-A 1.00% Aug-39 676,255 701,082 US Department of Agriculture IRP 4-B 1.00% Dec-39 233,694 241,887 US Department of Agriculture IRP 5 1.00% Sep-41 725,663 750,000 US Department of Agriculture IRP 6 1.00% Jan-44 400,000 400,000 US Department of Agriculture IRP 7 1.00% Nov-44 728,632 - US Department of Treasury, CDFI Fund 3.00% May-16 850,000 850,000 US Department of Treasury, CDFI Fund 2.42% Jul-20 1,700,000 1,700,000 US Department of Treasury, CDFI Fund 1.95% Jun-28 558,863 - US Department of Treasury, SBLF 2.00% Sep-19 4,300,000 4,300,000 Wells Fargo Bank 2.00% Jun-26 2,000,000 1,000,000 Wells Fargo Bank 2.00% Aug-16 - 750,000 Wells Fargo Bank-COIN 0.00% Aug-27 1,000,000 -

Total notes payable 52,014,339 49,968,446

Less: Amounts payable within one year (3,102,629) (4,435,284)

Notes payable, less current portion $ 48,911,710 $ 45,533,162

Weighted average maturity (monthly) 107 107

Weighted average interest rate 1.11% 1.12%



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Note 8: Notes Payable, continued:

Principal maturities for the fiscal years ending September 30:

2016 $ 3,102,629 2017 3,966,655 2018 5,749,183 2019 10,257,861 2020 4,710,440 Thereafter 24,227,571

Total $ 52,014,339

Loan Covenants:

Many of the above notes payable contain loan covenants that require RCAC to maintain specific financial ratios, achieve certain performance levels, or maintain certain management controls. RCAC is not aware of any violations of loan covenants as of September 30, 2015 and 2014.

* Catholic Health Initiatives and RCAC are in the process of extending the term of this loan. Catholic HealthInitiatives has advised RCAC to retain the capital and continue to pay interest at the stated rate.

** Formerly Pacific Rim Bank

Note 9: Post-Employment Benefits RCAC offers post-employment medical insurance benefits with an option for eligible former employees to continue medical coverage for a limited period after employment. If the medical insurance carrier allows the continued coverage, RCAC will contribute to the cost of the coverage. The Plan benefits were frozen in 2008. Eligible participants may opt to receive cash in-lieu of this benefit.

The plan is unfunded. A liability of $247,343 and $277,423 as of September 30, 2015 and 2014, is included on the Consolidated Balance Sheets in other long-term liabilities.



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Note 10: Retirement and Deferred Compensation Plans:

RCAC maintains a tax-deferred annuity plan qualified under section 403(b) of the Internal Revenue Code (IRC). All employees may make voluntary pre-tax contributions to the plan, up to the maximum amount allowed by the Internal Revenue Service. Under the plan, RCAC may also contribute to the account of eligible participants. Employees become eligible for RCAC contributions after six months of full-time employment. In fiscal year 2015 and 2014, the RCAC employer contribution was 7% of qualified employee gross salaries. The retirement plan expense recognized by RCAC (as a component of fringe benefits) for the years ended September 30, 2015 and 2014 was $482,797 and $466,211 respectively. RCAC also offers an IRC Section 457(b) deferred compensation plan. The Plan allows management employees to voluntarily defer compensation to the extent allowed by law. No other contribution is made to the 457(b) Plan. The 457(b) plan assets as of September 30, 2015 and 2014 were $337,435 and $274,340, respectively. The asset is included in other non-current assets on the RCAC Balance Sheet and the corresponding liability is included in other long-term liabilities.

Note 11: Bonds Payable:

On June 3, 2004, RCAC obtained financing for the Organization's headquarters building in West Sacramento, California via the issuance of $2,830,000 variable rate demand revenue bonds by the California Infrastructure and Economic Development bank, an entity within the Business, Transportation, and Housing Agency of the State of California. The bonds mature on June 1, 2029.

On June 2, 2014 RCAC initiated a partial redemption of the bonds in the amount of $800,000. On July 16, 2014, an alternate letter of credit, with an annual fee of 1.45%, was issued in the amount of $2,060,033 by Union Bank of California. The letter of credit is secured by a first lien position on the aforementioned headquarters building and expires on June 1, 2029.

Interest on the bonds is exempt from California State and Federal income taxes and is not subject to alternative minimum tax. The interest rate is determined weekly. RCAC capitalized bond issuance cost of $96,462, and Union Bank of California letter of credit issuance cost of $69,347. Bond issuance costs are amortized over the 25 year life of the bond and the letter of credit issuance cost is amortized over a 15 year life. The unamortized balances of both are listed below. The short-term portion of these unamortized costs are included on the Consolidated Balance Sheets within receivables, prepaid, and deposits, and the non-current portion is included within Other non-current asset as of September 30, 2015 and 2014.

2015 2014 Bond related assets:

Bank balance in bond sinking fund $ 142,324 $ 40,007 Unamortized bond issuance costs 52,764 56,623 Unamortized letter of credit origination 63,761 68,384

2,847,654 2,713,666 Land, building, improvements, net

Total bond related assets $ 3,106,503 $ 2,878,680



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Note 11: Bonds Payable, continued:

Bond related liability:

Bonds payable $ 2,030,000 $ 2,030,000

Bond related expenses:

Amortization of bond and letter of credit costs $ 8,482 $ 9,213 Letter of credit fees 38,317 38,678 Interest expense 1,472 2,802 Trustee and administration fees 7,105 9,672

Total bond expenses $ 55,376 $ 60,364

Interest rate range, rate determined weekly 0.05%-0.14% 0.06%-0.18% Weighted average annualized interest rate 0.07% 0.11% Weighted average bond annualized expense rate 2.73% 2.38%

The bonds are subject to early redemption on any business day at the discretion of RCAC. A bond sinking fund deposit account has been established at Union Bank of California. Per the agreement, the following are the annual sinking fund payments:

For the Year Ending September 30:

2016 $ 102,498 2017 111,252 2018 116,247 2019 121,251 2020 126,252 Thereafter 1,438,749

Total payments $ 2,016,249



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Note 12: Temporarily Restricted Net Assets:

RCAC receives support for its operations that include donor-imposed restrictions. The restrictions may be time restricted (the donation cannot be used until a later date), purpose restricted (the donation may only be used for a specific activity), or both time and purpose restricted. The donor imposed restrictions will expire when (a) the donor imposed time limitation has elapsed, or (b) the donor stipulated purpose for which the donation was restricted has been fulfilled by RCAC. The balances of temporarily restricted net assets reflect that support already recorded as revenue, but for which donor-imposed restrictions still apply, the balances of temporarily restricted net assets at September 30, 2015 and 2014 are as follows:

2015 2014

Lending Capital:

California Endowment (Sinking Fund – accumulated earnings) $ 1,468,068 $ 1,246,361 Capital Magnet Fund 1,900,000 1,900,000 Ford Foundation 150,000 150,000 JP Morgan Chase Bank - 1,000,000 USDA Rural Development 31,842 - USDA Rural Utility Service 975,776 907,655 U.S. Treasury, CDFI Fund 2,436,997 2,699,666

Total temporarily restricted net assets-lending capital 6,962,683 7,903,682

Other: American Express 53,988 - Anonymous Donor 1 111,611 - Bank of America 596,199 85,874 California Endowment (Tall Trees) 640,000 640,000 California Endowment 403,274 551,864 CIT Bank 46,500 - Ford Foundation 421,132 351,802 Joe Serna Jr Farmworker Housing Loan Servicing Fund 536,560 543,819 Morgan Stanley Bank, NA 78,963 95,403 OFN Wells Fargo Next Award 142,051 - PNC Bank 219,326 311,720 USDA Rural Development 122,997 - USDA Rural Utility Service 100,004 - Wells Fargo Foundation 90,063 79,874

69,884 68,060

3,632,552 2,728,416

Other various donors

Total temporarily restricted ne t assets - other than lending capital Total temporarily restricted net assets $ 10,595,235 $ 10,632,098



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Note 13:

Concentration of Revenue Sources:

During the fiscal years ended September 30, 2015, and 2014, RCAC's operations and program activities were funded by the following sources of revenue:

2015 2014

Temporarily restricted contributions:

U.S. Treasury, CDFI Fund $ 1,191,137

$ 1,245,860 Temporarily Restricted Loan Interest Income 1,051,124 888,318 The Bank of America Corporation 565,000 - The California Endowment 425,000 700,000 USDA Rural Utilities Service 321,513 275,655 OFN Wells Fargo Next Award 181,818 - Weingart Foundation 77,600 - Morgan Stanley Bank 75,000 75,000 American Express 65,000 - Wells Fargo Foundation 55,000 50,000 Temporarily Restricted Investment Income 54,417 121,246 Rabobank 50,000 - CIT Bank 46,500 - The Community Foundation Grant 25,000 - U.S. Bankcorp Foundation 25,000 20,000 NeighborWorks America 15,000 35,000 The Bank of America Foundation - 65,000 Rasmuson Foundation - 21,090 Citibank - 20,000 Anonymous 111,611 - All others 91,250 84,700

Total temporarily restricted contributions 4,426,970 3,601,869



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Note 13:

Concentration of Revenue Sources, continued: 2015 2014

Grants & contracts unrestricted: U.S. Department of Agriculture 3,710,757 3,302,384 U.S. Environmental Protection Agency 3,343,846 3,223,388 U.S. Department of Health & Human Services 1,010,918 825,460 U.S. Department of Housing & Urban Development 852,402 845,782 Neighborhood Reinvestment Corporation Act 178,200 225,223 U.S. Department of Labor 100,453 91,986

U.S. Department of State 139,903 355,032 All others 604,871 598,294

Total unrestricted grants & contracts income 9,941,350 9,467,550

Unrestricted lending: Loan interest income 1,835,438 1,616,587 Loan fees 607,811 467,572 Gain on foreclosure - 90,693 Gain (Loss) on sale of assets (44,377) -

Total unrestricted lending 2,398,872 2,174,852

Unrestricted investment income Unrestricted investment income 55,750 32,615

Other and rental income Other and rental income 89,276 167,003

Total other and rental income 89,276 167,003

Total revenue $ 16,912,219

$ 15,443,890

Grants and contracts unrestricted - U.S. Government departments and agency amounts include grants and contracts in which RCAC was either the primary recipient or a sub-recipient of the funding.



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Note 14: Grant Liens

RCAC has provided grants to other non-profit organizations. The conditions of these grants require the recipient organization to maintain services to a targeted population for a period of time or requires that ownership of real estate is continued by specific parties. When possible, RCAC secures performance via a grant lien on real estate. The liens enable RCAC to recover the amount of the grant if the use of the real estate is altered or ownership is transferred. RCAC expects the grant recipients to perform per the conditions of the grant and therefore RCAC does not carry a value for these liens on its Consolidated Balance Sheets. The grants were expensed when the grants were awarded. The amounts of outstanding grant liens as of September 30 are:

2015 2014 Number of Number of

Grant Liens: Amount Grant

Liens: Amount

Health related facilities grants expiring in 2027 to 2030 7 $ 721,991 7 $ 721,991

Total 7 $ 721,991 7 $ 721,991

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Note 15:

Other Loan Servicing Commitments:

RCAC makes long-term loans for which the borrower obtains a USDA Rural Development guarantee for a portion of the loan. The guarantee is typically for 80% or 90% of the total loan amount. Under the conditions of the guarantee, RCAC is required to retain 5% of the loan, and is allowed to sell up to 95%. RCAC typically sells the guaranteed portion of these loans, but retains the servicing (for a fee) of the entire loan and management of the guarantee requirements. The portion of the loan retained by RCAC is included on the Balance Sheet under loans receivable. The portion of the loan sold, but with servicing commitment retained, is not carried on the RCAC Balance Sheet.

2015 2014 RCAC Loan Servicing Provided to Other Lenders

Number of Loans or Grants

Amount Number of Loans or Grants

Amount

Loans sold to other lenders with servicing retained, USDA guaranteed loans 34 $ 26,238,353 34 $ 26,798,706

Loan servicing provided for loans and grants made by the California Department of Housing and Community Development 10 14,433,836 10 14,433,836

Other loans serviced by RCAC 0 0 4 10,458,701

Total 44 $ 40,672,189 48 $ 51,691,243





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Note 16: Commitments and Contingencies:

a) Off-Balance-Sheet Risk: To meet the financing needs of borrowers, RCAC is party to certain financial instruments with off-

balance sheet risk. These financial instruments include financial guarantees, conditionalcommitments to lend more on existing loans (undisbursed portion of existing loans) and conditionalcommitments to make new loans. These arrangements involve elements of credit risks. RCAC usesthe same credit policies in making guarantees and conditional commitments as it does for on-balance-sheet obligations.

The composition of financial instruments with off-balance-sheet risk, as of September 30,2015 and 2014 are:

2015 2014 Undisbursed portion of existing loans $ 17,541,217 $ 17,259,990 Conditional commitments to make new loans 11,085,169 12,112,997

Total $ 28,626,386 $ 29,372,987

b) Water System Operation and Maintenance:

In fiscal year 2014, RCAC obtained State of California Proposition 84 funding (The Safe DrinkingWater, Water Quality and Supply, Flood Control, River and Coastal Protection Bond Act) for waterinfrastructure projects in California. RCAC was awarded two grants totaling $2.4 million and plans tosub-grant $2.1 million of that amount to local water entities. Two sub-grants were awarded as ofSeptember 30, 2015 and two more sub-grants are still in development. The conditions of the grants toRCAC require RCAC to operate and maintain the infrastructure created with grant funds, for thereasonable useful life of such infrastructure, if the sub-grantees fail to do so. RCAC will require allsub-grantees to operate and maintain the related infrastructure, but acknowledges that RCAC has anobligation, if the sub-grantee fails to do so. RCAC believes that all sub-grantees will operate andmaintain these projects and, therefore, does not recognize a liability to do the same.

c) Operating Leases: Rural Community Assistance Corporation rents office spaces under operating leases expiring atvarious dates through 2017. Rent expense under these operating leases amounted to $128,432 and$129,956 for the years ended September 30, 2015 and 2014, respectively. The minimum future leasepayments over the next two years are as follows:

Year Ending September 30: 2016 $ 83,848

2017 11,394 Total payments $ 95,242

Rural Community Assistance Corporation 15-Year History of Unrestricted and Temporarily Restricted Revenue, Gains, Expenses and Net Asset Changes and Year-End Balances

For the Fiscal Years Ended September 30, 2001 through 2015

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Unrestricted Temporarily Restricted Year End Net Assets

Temporarily Total

Year Ending Revenue & Gains Restricted Net Assets Temporarily

September 30, before Releases Released Expenses Net Change Revenue (Released) Net Change Net Change Unrestricted Restricted Total 2001 9,271,654 3,210,277 12,435,597 46,334 6,227,558 (3,210,277) 3,017,281 3,063,615 1,151,391 25,704,278 26,855,669 2002 10,006,791 5,092,057 15,114,847 (15,999) 831,484 (5,092,057) (4,260,573) (4,276,572) 1,135,392 21,443,705 22,579,097 2003 9,828,175 4,845,376 11,971,607 2,701,944 1,094,426 (4,845,376) (3,750,950) (1,049,006) 3,837,336 17,692,755 21,530,091 2004 11,283,753 2,228,816 12,118,575 1,393,994 501,981 (2,228,816) (1,726,835) (332,841) 5,231,330 15,965,920 21,197,250 2005 10,792,671 7,163,366 17,784,081 171,956 4,041,017 (7,163,366) (3,122,349) (2,950,393) 5,403,286 12,843,571 18,246,857

2006 11,863,526 10,377,828 13,137,728 9,103,626 1,325,056 (10,377,828) (9,052,772) 50,854 14,506,912 3,790,799 18,297,711 2007 12,438,118 1,623,724 13,639,130 422,712 1,232,826 (1,623,724) (390,898) 31,814 14,929,624 3,399,901 18,329,525 2008 11,862,967 1,634,368 13,263,401 233,934 1,408,413 (1,634,368) (225,955) 7,979 15,163,558 3,173,946 18,337,504 2009 12,480,384 1,304,915 13,748,543 36,756 2,827,489 (1,304,915) 1,522,574 1,559,330 15,200,314 4,696,520 19,896,834 2010 14,408,810 2,033,080 16,361,043 80,847 1,252,318 (2,033,080) (780,762) (699,915) 15,281,161 3,915,758 19,196,919

2011 13,507,015 526,197 13,829,452 203,760 4,122,600 (526,197) 3,596,403 3,800,163 15,484,921 7,512,121 22,997,082 2012 13,033,296 1,930,168 13,169,787 1,793,677 1,075,602 (1,930,168) (854,566) 939,111 17,278,598 6,657,555 23,936,153 2013 14,097,517 627,199 14,074,267 650,450 4,118,651 (627,199) 3,491,452 4,141,902 17,929,047 10,149,007 28,078,055 2014 11,842,021 3,118,778 13,348,370 1,612,429 3,601,869 (3,118,778) 483,091 2,095,520 19,541,477 10,632,098 30,173,575 2015 12,485,248 4,463,833 14,231,690 2,717,391 4,426,970 (4,463,833) (36,863) 2,680,528 22,258,868 10,595,235 32,854,103

Generally accepted accounting principles in the United States of America require that contributions with donor-imposed restrictions be recognized as revenue by a nonprofit organization upon the transfer of assets, including promises to give. RCAC recognizes such contributions as temporarily restricted revenue and maintains temporarily restricted net assets until the restrictions on the contribution are met.

Revenue is recognized in the year of receipt of the asset. Expenses incurred to meet the donor imposed restrictions may occur in the same or in a subsequent fiscal year. Temporarily restricted assets are released from restrictions upon appropriate use of the funds or upon expiration of the restriction period.

Rural Community Assistance Corporation Schedule of Expenditures of Federal Awards


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Grantor: Federal CFDA

Number Expenditures

10.761 $ 48,721 AG-31ME-C-10-0005 261,750 AG-31ME-C-10-0005 2,028,940

10.761 752,702

U.S. Department of Agriculture: Colonias Phase Assessment Project *Rural Housing Service Self-Help Housing 14*Rural Housing Service Self-Help Housing 15Rural Utilities Service Technical Assistance & Training Project 15 (Pass-through from RCAP) Rural Utilities Service Technical Assistance & Training Project 16 (Pass-through from RCAP) 10.761 63,481 Tribal Rural Utilities Service Technical Assistance & Training Project 15 (Pass-through from RCAP) 10.761 210,489 Rural Community Development Initiative 12 10.446 102,449 Rural Community Development Initiative 13 10.446 75,154 Native American Development Corporation 10.769 15,303 Nevada Tribal Housing Training Institute 5,000 Rural Utilities Service, Household Water Wells 10.862 25,400

Rural Business and Cooperative Service Grant Agreement 10.775 12,488 Rural Community Innovations 10.446 28,879 Solid Waste Management 15 10.762 76,252 USDA Rural Development 3,749

Total U.S. Department of Agriculture 3,710,757

U.S. Department of Health and Human Services:

Community Services Block Grant 14 (Pass-through from State of California) (Contract # 14F-3066) 93.569 51,316

Community Services Block Grant 15 (Pass-through from State of California) (Contract # 15F-2304) 93.569 59,005 Community Services Block Grant (Pass-through from States of California and Nevada via CalNeva) (Contract # 14F-3036) 93.569 42,702 Rural Community Facilities Development 93.570 857,895

Total U.S. Department of Health and Human Services 1,010,918



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Number Expenditures

U.S. Department of Labor: Migrant and Seasonal Farmworker Housing Program 13 17.264 17,565 Migrant and Seasonal Farmworker Housing Program 14 17.264 82,888

Total U.S. Department of Labor 100,453

U.S. Environmental Protection Agency: Conejos County Clean Water Inc. 66.306 $ 10,235 Pre-Planning Set Aside Project # 0049001-002L 66.468 31,014 Pre-Planning Set Aside Project # 0027001-001L 66.468 43,259 Pre-Planning Set Aside Project # 0027001-001L 66.468 36,424 National Priority Area 1 Training & TA for Small Drinking Water Systems 66.424 436,550 Small Community Wastewater Project 12 (Pass-through from RCAP) 66.202 17,237 Wastewater Operator Training (Pass-through from Department of Environmental Quality Idaho) C907 17,775 Public Water System Supervision & Training Region 8 EP-R8-13-06 50,292 Public Water System Supervision & Training Region 9 EP-G159-00271 48,948 Public Water System Supervision & Training Region 9 (Pass-through from PG Environmental) EP-S149-00213 986,000 Capacity Development Assistance 09 (Pass-through from Dept of Enviro Quality of Idaho) 66.468 8,574

66.468 198,378

66.468 889,070

*Capacity Development Assistance (Pass-throughfrom State of Hawaii Dept of Health) Capacity Development Assistance 11D (Pass-through from State of California Dept of Health Services) Capacity Development Assistance 15A (Pass-through from State of California Dept. of Health Services) 66.468 227,614 Drinking Water Training and Outreach 14 (Pass-through from State of Washington) 66.468 126,180 State Water Resources Control Board (Pass-through from CA Dept. of Public Health) 13-409-550 216,296

Total U.S. Environmental Protection Agency 3,343,846



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Number Expenditures

U.S. Department of State Sustainable Development in Siberia 19.345 132,403 WSOS Community Action Commission 19.9 7,500

Total U.S. Department of State 139,903

Tribal/Indian Health Services Water Quality Assurance Project Plan GS-10F-0255X 469 Smith River Rancheria CT-1440-0641 9,306 Technical/Managerial & Financial (TMF) Wastewater Assessment (Pass-through from various tribes) IHSCA13 6,610

GS-10F-0255X 6,215

Total Tribal/Indian Health Services 22,601

U.S. Department of Housing and Urban Development: Housing Counseling Program 14 14.169 $ 237,208 Housing Counseling Program 15 14.169 187,803 Rural Capacity Building 13 14.265 175,255 Rural Capacity Building 15 14.265 38,223

Technical Assistance Pass-through; from: MOU between El Camino Hsg Authority and NM Western Regional Hsg Authority (Pass-through from New Mexico Mortgage Finance Authority) NMMFA14 7,032 Lea County Housing Development Corporation Assessment (Pass-through from New Mexico Mortgage Finance Authority) NMMFA14LEA 19,042 Financial Management Training (Pass-through from New Mexico Mortgage Finance Authority) NMMFA14TR 3,964 Capacity Building for Sustainable Communities (Pass-through from Minnesota Housing Partnership) 14.705 42,941 OneCPD Integrated Practitioner Assistance System Services (pass-through from Housing Assistance Council) 14.259 9,361 Office of Native American Programs T&TA Program 14.894 104,165



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Number Expenditures

Section 4 Funds (Pass-through from Rural Local Initiatives Support Corporation) 14.252 27,409 Total U.S. Department of Housing and Urban Development 852,402

Neighborhood Reinvestment Corporation Act: National Foreclosure Mitigation Counseling Round 8 (Pass-through from California Housing Finance Agency)

21.000 PL112-55:95X1350 20,134

National Foreclosure Mitigation Counseling Round 9 (Pass-through from California Housing Finance Agency)

21.000 PL112-55:95X1350 3,123

Total Neighborhood Reinvestment Corporation Act 23,257

Emergency Economic Stabilization Act of 2008 Housing Finance Agency Innovation Fund known in California as Keep Your home California (Pass-through from California Housing Finance Agency) A10-014 154,943

Total Federal Awards Expended $ 9,359,080

RCAC received a $400,000 loan from USDA Intermediate Relending Program, 30 year, 1% interest rate, with a maturity date of January 2044. $49,463 was lent in the current fiscal year and $192,134 was lent in the prior fiscal year. RCAC received a $1,245,860 award from the U.S. Treasury, Community Development Finance Institution (CDFI) for lending capital to be lent to qualified borrowers. $885,225 was lent in the current fiscal year and no funds were lent in the prior fiscal year.

RCAC received a $250,000 award from USDA Rural Utilities Service for lending capital. $166,674 of the proceeds from this award were lent to qualified borrowers in fiscal year 2015.

RCAC received a $254,000 award from USDA Rural Utilities Service for lending capital for the Household Water Wells program. $154,839 of the proceeds from this award were lent to qualified borrowers in fiscal year 2015.



-45-

RCAC received a $728,632 award from USDA, Intermediary Relending Program (IRP), 30 year, 1% interest rate, with a maturity date of November, 2044. $478,509 of the proceeds from this award were lent to qualified borrowers in fiscal year 2015. RCAC received a $1,191,137 award and a $558,863 loan from US Treasury, Community Development Finance Institution (CDFI). The entire award and $527,419 of the loan were lent to borrowers in fiscal year 2015.

Federal Award Program selected for additional testing. *



-46-

Note 1: Scope of Audit Pursuant to OMB Circular A-133:

All federal grant operations of the Rural Community Assistance Corporation are included in the scope of the Office of Management and Budget (OMB) Circular A-133 Audit (the "Single Audit"). The Single Audit was performed in accordance with the provisions of the OMB Circular A-133 Compliance Supplement. Compliance testing of all requirements, as described in the Compliance Supplement, were performed for RCAC. USDA Rural Housing Services grant, EPA Public Water System Supervision and Training grant, Safe Drinking Water State Revolving Fund grant, U.S. Department of Housing and Urban Development grant. These programs represent all major federal award programs and other grants with fiscal 2015 cash and noncash expenditures in excess of $300,000 to ensure coverage of at least 25% of federally granted funds. Actual coverage is approximately 46% of total cash and noncash federal award program expenditures.

Note 2: Basis of Presentation:

The accompanying Schedule of Expenditures of Federal Awards (SEFA) includes all Federal grants and contracts to RCAC that had activity during the year ended September 30, 2015. This schedule has been prepared on the accrual basis of accounting. Grant and contract revenue is recorded for financial reporting purposes when RCAC has met the qualifications for the respective grants and contracts. Grants that have expired and procurement contracts that do not have an individual CFDA number, have been identified by contract number in the SEFA.

Note 3: Relationship to consolidated Financial Statements:

The amounts reported in the accompanying Schedule of Expenditures of Federal Awards agree, in all material respects, to amounts reported within the consolidated financial statements. Federal award revenues are reported principally in the Organization's consolidated financial statements as grant revenue.

Note 4: Amounts Provided to Sub-recipients:

Amounts provided to sub-recipients under Federal and non-federal award programs during the year ended September 30, 2015 were as follows: HHS Community Services Block Grants $ 5,166 USDA Technitrain National Demonstration Water Projects 16,000 DOL Migrant and Seasonal Farm Workers 4,576 HUD Housing Counseling and Rural Capacity Building 327,929 EPA Clean Water State Revolving Fund 87,048 State Dept. International Sustainable Development 128,118 Non-Federal Award Program Grants and Pass-through Awards 383,824 Total Grants and Pass-through Awards $ 952,661



-47-

Note 5: Federal Awards Expended with Common CFDA Number:

When there is more than one program under a single CFDA number, the Schedule of Expenditures of Federal Awards totals all programs under the one CFDA number. Occasionally, however, this total could not be conveniently displayed because all programs under one CFDA number were not contiguous. When this occurred, this total is not shown in the Schedule, but instead, is provided below:

CFDA No. Federal Expenditures

10.446 $ 206,482 10.761 1,075,393 14.169 425,011 14.265 213,478 17.264 100,453 21.000 PL112-55:95X1350 23,257 66.468 1,560,514 93.569 153,023 AG-31ME-C-10-0005 2,290,690 GS-10F-0255X 6,684

Note 6: Pass-Through Entities' Identifying Number:

When federal awards were received from a pass-through entity, the Schedule of Expenditures of Federal Awards shows, if available, the identifying number assigned by the pass-through entity. When no identifying number is shown, the Organization either determined that no identifying number is assigned for the program, or was simply unable to obtain an identifying number from the pass-through entity.

Rural Community Assistance Corporation Schedule of Federal Award Pass-through Awards


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U.S. Department of Health and Human Services: Community Services Development Block Grant 14 and 15 Self-Help Enterprises $ 5,166 Total U.S. Department of Health and Human Services 5,166 U.S. Department of Agriculture: Technitrain 15 National Demonstration Water Project 15 Self-Help Enterprises 16,000

Total U.S. Department of Agriculture 16,000

U.S. Department of Labor: Migrant and Seasonal Farm Workers 1 Kunia Village Title 4,576

Total U.S. Department of Labor 4,576 U.S. Department of Housing and Urban Development:

Rural Capacity Building Program: Native Home Capital 18,303 Housing Counseling 2014 and 2015:

AAA Fair Credit 17,106 ACCESS, Inc. 24,576 Campesinos Sin Fronteras 8,128 Comité De Bien Estar 13,910 Community Action Human Resources Agency (266) Community Action Team Inc. 16,527 Community in Action (CinA) 9,488 Hawaiian Community Assets, Inc. 14,108 Housing Hope 10,750 Housing Solutions of Northern Arizona 27,491 Interfaith of Natrona County 12,005 Klamath & Lake Community Action 9,690 LaPlata Home Funds 19,683 National Affordable Housing Network 17,872 Neighborhood Non-profit Housing Corporation 17,608 Northern Circle Indian Housing Authority 26,789 Old Pueblo Community Foundation 24,288 Western Arizona Council of Governments 21,625 Ventura County Comm Development Corp 18,250

309,625 Total U.S. Department of Housing and Urban Development 327,929

Rural Community Assistance Corporation Schedule of Federal Award Pass-through Awards


-49-

U.S. Department of Environmental Protection Agency CA State Water Resources Control Board Community Development on Call $ 13,178 Katin Engineering Consulting 24,614 Self Help Enterprises 49,256

Total U.S Department of Environmental Protection Agency 87,048

U.S. Department of State Sustainable Development in Siberia 128,118

Total U.S. Department of State 128,118

Total Federal Award Pass-through Expenditures $ 568,837

Rural Community Assistance Corporation Schedule of Indirect Costs by Expenditure Type


-50-

Expenditures:

Direct Salaries $ 1,237,965 Fringe Benefits 578,525 Consultant - Temporary 14,825 Consultant - Audit 40,400 Consultant - Legal 170 Consultant - General 72,572 Consumable Supplies 27,447 Grant Specific Expense-Supplies 713 Telephone 33,626 Grant Specific Expense-Telephone 1,975 Postage 3,784 Grant Specific Expense-Postage 430 Office Space 85,253 Equipment Rental/Maintenance 15,631 Printing & Copying 889 Staff Educational Materials 3,432 Training Costs 20,110 Travel 110,178 Depreciation 37,659 Insurance 50,831 Dues & Subscriptions 17,980 Conference Registration & Staff Training 12,710 Taxes, Licenses & Fees 4,150 Recruitment 20,236

Total Indirect Costs $ 2,391,491

Rural Community Assistance Corporation Schedule of Indirect Cost Rate


-51-

The indirect cost rate for the fiscal year ended September 30, 2015 is computed as follows:

Total expenditures $ 14,231,691

Less: indirect costs (2,391,491)

Total direct costs 11,840,200

Excluded items: Contributions 19,797 Bank service charge 7,758 Interest on notes payable 578,754 Depreciation expense 7,028 Grants excluded from indirect 434,505 Scholarship 127,957 Provision for loan loss 155,275 Loan loss recovery (286,020) Write down of asset value 155,000 Rental operations 149,375

Total excluded items 1,349,429

Total adjusted direct costs $ 10,490,771

Indirect costs $ 2,391,491

Indirect costs rate 22.80%

Note: RCAC's Negotiated Indirect Cost Rate Agreement (NICRA) with the U.S. Government is a predetermined rate of 25.01%.

Other Reports

MANN · URRU TI A • N ELSO N CPAs & ASSOC I ATES , LLP GLENDALE • ROSEVILLE • SACRAMENTO • SOUTH LAKE TAHOE • KAUAI, HAWAII

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


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 Rural Community Assistance Corporation (a nonprofit organization), which comprise the consolidated balance sheet as of September 30, 2015 and 2014, and the related consolidated statement of activities, and cash flows for the year then ended, and the related notes to the consolidated financial statements, and have issued our report thereon dated December 8, 2015.

Internal Control Over Financial Reporting

In planning and performing our audit of the consolidated financial statements, we considered Rural Community Assistance Corporation's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the consolidated financial statements, but not for the purpose of expressing an opinion on the effectiveness of Rural Community Assistance Corporation's internal control. Accordingly, we do not express an opinion on the effectiveness of Rural Community Assistance Corporation'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 fmancial 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.

SACRAMENTO OFFICE • 25 15 VENTURE OAKS WAY, SuiTE 135 • SACRAMENTO, CA 95833 • o . 916.929 .0540 • F. 916.929.0541

WWW.MUNCPAS.COM

Compliance and Other Matters

As part of obtaining reasonable assurance about whether Rural Community Assistance Corporation's consolidated 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 organization'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 organization's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

t2 Vt(~ Jrrte(}rr~ vr¥r(VL C!!J

Sacramento, California ~ December 8, 2015

M AN N • URRU T I A • N ELSON C PAs & ASSOC I AT ES , LLP GLENDALE • ROSEVILLE • SAC RAMENTO • SOUTH LAKE TAHOE • KAUAI, HAWAII

INDEPENDENT AUDITOR'S REPORT ON CO:MPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY


OMB CIRCULARA-133

Report on Compliance for Each Major Federal Program

We have audited Rural Community Assistance Corporation's compliance with the types of compliance requirements described in the OMB Circular A -133 Compliance Supplement that could have a direct and material effect on each of Rural Community Assistance Corporation's major federal programs for the year ended September 30, 2015. Rural Community Assistance Corporation's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of fmdings and questioned costs.

Management's Responsibility

Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs.

Auditor's Responsibility

Our responsibility is to express an opinion on compliance for each of Rural Community Assistance Corporation's major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to fmancial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Rural Community Assistance Corporation'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 on compliance for each major federal program. However, our audit does not provide a legal determination of Rural Community Assistance Corporation's compliance.

Opinion on Each Major Federal Program

In our opinion, Rural Community Assistance Corporation's complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended September 30,2015.

SACRAMENTO OFFICE . 2515VENTURE0AKSWAY, SUITE 135 . SACRAMENTO, CA95833 . 0. 916 .929.0540 . F. 916.929.0541

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Report on Internal Control Over Compliance

Management of Rural Community Assistance Corporation is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered Rural Community Assistance Corporation's internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of Rural Community Assistance Corporation's internal control over compliance.

A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.

Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133 . Accordingly, this report is not suitable for any other purpose.

:!l~mi~/(~~ VklJ~ c4 December 8, 2015

Findings and Questioned Costs

RURAL COMMUNITY ASSISTANCE CORPORATION Schedule of Findings and Questioned Costs


SECTION 1 - SUMMARY OF AUDITOR'S RESULTS

Financial Statements

Type of auditor's report issued: Unmodified

Internal control over financial reporting: Material weakness(es) identified? No

Significant deficiencies identified that are not considered to be material weakness(es)? None Reported

Noncompliance material to consolidated financial statements noted? No

Federal Awards

Internal control over major programs: Material weakness (es) identified? No

Significant deficiencies identified that are not considered to be material weakness(es)? None Reported

Type of auditor's report issued on compliance for major programs: Unmodified

Any audit findings disclosed that are required to be reported in accordance with section 510(a) of Circular A-133? No

Identification of major programs:

CFDA/Contract Name of Federal Program AG-31ME-C-10-005 Rural Housing Service Self-Help Housing 66.424 National Priority Area 1 Training & TA for Small

Drinking Water Systems 66.468 EPA Safe Drinking Water State Revolving Fund

The dollar threshold used to distinguish between type A and type B programs was $300,000.

Auditee qualified as a low-risk auditee under OMB Circular A-133, Section 530? Yes

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RURAL COMMUNITY ASSISTANCE CORPORATION Schedule of Findings and Questioned Costs, continued


SECTION II – FINANCIAL STATEMENT FINDINGS

No current year findings.

SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No current year findings or questioned costs for federal awards defined in section 510(a)

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RURAL COMMUNITY ASSISTANCE CORPORATION Schedule of Findings and Questioned Costs, continued


No prior year findings.

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rural cmmunityo assistance corporation - rcac€¦ · 30/09/2015 · g le ndale • roseville •...

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