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4 Total Revenue related to Government Programs 29.163.397 The sustainability of DSFRC is inexorably tied to the successful continuation of these programs and the related Grants and Program Service Revenues. Presentation of Financial Data At the end of this report, Appendix A: Summary Financials and Projections contains a consolidated summary financial statement and individual summary fmancial statements for each of the major departments at DSFRC -APP, Mental Health, Rotacare, Basic Needs, Childcare, Administration, and Development. These summary statements are drawn from the comprehensive data which is provided in Appendix B: Detailed Financial Data, and are presented in "Contribution Margin" format, wherein variable costs are first subtracted from Support and Revenue to provide a contribution margin and related percentage for analysis purposes. From this, fixed expenses are subtracted to illustrate the net surplus or deficit generated by the program. This format of financial statement facilitates the preparation of projections based on various assumptions about growth rates and increases in fixed costs. For illustrative purposes, we have provided projections for each department and we have disclosed the assumptions we used in this process. For the most part, our assumptions were based on existing trends and what an independent, intelligent outside observer might consider to be a likely possibility for the results of future operations based on past performance. We have used a 6% inflationary factor for fixed expenses. These assumptions have not been validated against budgets or planned changes in the operation of the Center. Accordingly, these projections should be used with extreme caution. Discussion of Individual Programs APP (60% of Revenue and Support): The largest of these programs, the Alternative Payment Program, is sponsored by the California Department of Education, funded with State and Federal money, and has its operating protocol defined by Calworks. As discussed later in this report, the staff of DSFRC is extremely experienced in following these protocols and has received high praise from outside audit agencies for its accuracy and thoroughness in fulfilling operational guidelines. The sustainability of DSFRC relies heavily on the successful continuation of this Program, which contributed a surplus of $942,575 over the 4-year period; accordingly, this financial report looks closely at the results of operations of this program. The APP represents both the greatest strength and the greatest vulnerability for the Center as a whole. As other programs grow and provide more contribution to results, the importance of the APP should be more counterbalanced -such diversification would contribute greatly to the sustainability of the organization in the event that the APP has an unexpected setback. The State of California has a large stake in preserving the Alternative Payment Program, which provides an array of childcare arrangements for parents such as in-home care, Sustainability Study: Davis Street Family Resource Center - 4/08 Page 8 of 96