Eugenio Maria De Hostos Charter School

Charter Schools Institute State University of New York

EUGENIO MARIA DE HOSTOS CHARTER SCHOOL

FINAL CHARTERED AGREEMENT Sec. 2852(5) Submission to the Board of Regents

VOLUME > OF

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74 North Pearl Street, 4m Floor, Albany, NY 12207 tel: (518) 433-8277 fax: (518) 427-6510 e-mail: [email protected] www.newyorkcharters.org OMU NO. 1646-0047 Form 990 Return of Organization Exempt From Income Tax Under section 501(c) of the internal Revenue Code (except black lung benefit 97 trust or private foundation) or section 4847(a)(1) nonexempt charitable trust TMaFotmla 0*#*m**of@*Tmm*y OpMtoPutofle torn* Rtwnw Swvica Hetr. reorganization may have to uso a copy rfthb return to salty stata reportw InmpmcUon A For tha 1997 calendar year, OH tax year period beginning /^^r^. / , 1997, and ending Af*,*-ts.A*B I . 19 ?g B Chock* C Ntm* of organization MentmcaBon number UMIRS O Change of iddren taMor ^e.*. W4~ >c D Initial return printer Numbar and atroat (or P.O. box if mall la not daUvarad to street addreaa) Room/suits DP*. DfinaJ return City or town, stata or country, and ZIP+4 D Amandad return Inttrue- F Check »- D if exemption application (raqulrad aJao for Stata reporting) /V£&S a pending Q Type of organization—*>^ Exempt under section 501 (c)( 3 ) + (Insert number) OR • • section 4947(aK1) nonexempt charitable trust Note: Section 501(c)(3) exempt onjanfeanoni and 4947(a)(1) nonaxempt charitable trusts MUST attach a completed Schedule A (Fom 990). H|a) la thia a group return filed for affiliates? .• Yes IS No I If either box In His checked "Yea," enter fouwllgit group exemption number (GEN) • j/.J.d (b) If "Yea." enter the number of efflUatee for whlchthia return la filed:. . ML J Accounting method: 0 Caah US Accrual (c) la this a separata return filed by an organization covered by a group ruling? Q Yarn B No D Other (specify) • K Check here »Q If the organlzallon'e groae reoelpla are normally not more than $2S.0O& The organlzaUon need not file a return with the IRS; but If It received a Form 980 Package In the mall, II ahould fie a return without financial data. Some atalaa require a completa return. • Note; Form 990-EZ may be used by organizations with gross receipts less than $100,000 and total assets less than $250,000 at and of year. IJff II Revenue, Expenses, and Changes in Net Assets or Fund Balances (See Specific Instructions on page 11.) 1 Contributions, gifts, grants, and similar amounts received: a Direct public support 1a a? £~VA- b Indirect public support 1b t/06>. UK c Government contributions (grants) I 1c I %.s <7 fr£-Q

d Total (add Dnes 1a through 1c) (attach schedule of contributors)^«. ^c^"^cc^ **} (cash $ ^aaL^a2^7ibncash $ ~«r— ) 6?jF?,i?? «r 2 Program service revenue including government fees and contracts (from Part VII, line 93) =r*GL /f? "7 3 Membership dues and assessments 4 Interest on savings and temporary cash investments A? yy 5 Dividends and Interest from securities . . . . 6a Gross rents | 6a | s>.«- ^r>W«^«v ***"^

Gross revenue (not including $ &3-,g0 / 0f contributions reported on Dne 1a) rff.2^ b Less: direct expenses other than fundraising expenses 9b —/? — c Net income or (loss) from special events (subtract line 9b from line 9a) *•*#?. »y 10a Gross sales of inventory, less returns and allowances . . [10a b Less: cost of goods sold 110b c Gross profit or (loss) from sales of inventory (attach schedule) (subtract line 10b from line 10a). 10c 11 Other revenue (from Part VII, line 103) 11 ^rv, /y7 12 Total revenue (add lines 1d, 2,3,4, 5, 6c, 7, 8d, 9c, 10c, and 11) 12 ^7^,?r?. 7 13 Program services (from line 44, column (B)) . . 13 3rr&^ 4a / 14 Management and general (from line 44, column (Q) 14 y* 7,y ;?q 19 Net assets or fund balances at beginning of year (from line 73, column (A)) 19 j. Y 4/4^,9 J 20 Other changes in net assets or fund balances (attach explanation). . . 20 — o •—... 21 Net assets or fund balances at end of year (combine lines 18,19. and 20) . 21 /j-j^.2. ,"9 J2.3 For Notice, warn page lot the Instruction*. Cat No. 11282Y Form 990 (1B97) g@2 "*% Rxm 990 (1997) Pig. 2 Statement of All organtzaftms must compute column (A). Columns (B), (Q, and P an required tor section 501(c)(3) and (4) organizations Functional Expenses and section 4947(8X1) nonexarnpt craritable tnjsts M Do not include amounts reported on line (B) Program (O Management (A) Tow 6b, 8b, 96,10b, or 16 of Part I. 22 Grants and allocations (attach schedule) (cash $ -o- noncasj 22 - o~~ - O 23 Specific assistance^fe' inaividua Is (attach schedule) 23 /f ff7 /%**? 24 Benefits paid to or for members (attach schedule) 24 - <* — a — 25 Compensation of officers, directors, etc. . 25 r^ *.**:*• fru 32 r?7 !,S7I XX/,*?4? ffftf 33 Supplies ^.^^^^^ /V^*V«^ 33 /vfaYa (Xfi, tftZrr //,. (7 7r? 34 Telephone 34 ggyy^ ,?,?f:?f faf? 35 Postage and shipping 35 JT/YS ,fff.? tt?SL 38 Occupancy 36 oLZl.999 x^Y Wo *-7,a&f 37 Equipment rental and maintenance . . . 37 f?^r? 7?gT M£LS- 38 Printing and publications 38 /%/,%? s/,fet1KY 43 Other expenses (itemize): a £?.-«&:<« 43a 2-G

(Grants and allocations $ — 0 — 3V6;s2.y b

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CS...S. fa^t/V*•**(** j-Aa'/'tas- & s+i-*/rtrsr~acvjar*j**#w#***^*** />„„,* ****** ?;^^^^;;v"(Gram'a%"aoc^ons"'$"' 1 a"- ") SGG;**-* e Other program services (attach schedule) (Grants and allocations $ — o — ) — a f Total of Program Service Expenses (should equal line 44, column (B), Program services), £—^«--? *« / 803 29 Form 980 (1987) Peg* 3 Balance Sheets (See Specific instructions on page 18.) 804 Note Whan required, attached scheoWes artf arrwurte wrWn the oescri^on (A) rn column should 6s for and-of-yeer amounts only. Beginning of yea- End of year 45 Cash—non-interest-bearing . . . . /3- 45 /avf 46 Savings and temporary cash investments, 4r?oa-? 46 /(7^f<7^

47a Accounts receivable ^7/?. f ^ b Less: allowance for doubtful accounts £•*&. g/3 CTM.ZLVX

48a Pledges receivable b Less: allowance for doubtful accounts . 49 Grants receivable 49 50 Receivables from officers, directors, trustees, and key employees (attach schedule) 50 51a Other notes and loans receivable (attach schedule) • . . 51a b Less: allowance for doubtful accounts . . 51b 52 inventories for sale or use 52 53 Prepaid expenses and deferred charges . /US. 3.3. Z 53 tsfZGVft 54 Investments—securities (attach schedule) 54 55a Investments—land, buildings, and equipment basis 55a Less: accumulated depreciation (attach schedule). 55b 56 Investments—other (attach schedule) C*< *. ^JSAA^UJ!**.•**: /. /X.0V7S & 56 /zzoYVStZ* 57a Land, buildinc i^andj 157a fa fr P,^ 59 Total assets (add lines 45 through 58) (must equal line 74) a,ff/,76V 59 a^

66 Total liabilities (add lines 60 through 65) trW^eS* 66 /vf y. f^y Organizations that follow SFAS 117, check here • B and complete lines 67 through 69 and Ones 73 and 74. 67 Unrestricted. . . /,**?>* ft 67 /aatrW* 68 Temporarily restricted /fffr, g.f f? /%% >?^? 69 Permanently restricted g — — o — Organizations that do not follow SFAS 117, check here • • and m I - complete lines 70 through 74. S 70 Capital stock, trust principal, or current funds 70 71 Paid-in or capital surplus, or land, building, and equipment fund . . 71 72 Retained earnings, endowment, accumulated income, or other funds 72 I 73 Total net assets or fund balances (add lines 67 through 69 OR Ones 70 through 72; column (A) must equal line 19 and column (B) must equal line 21) ... /fff ,7 c? 73 flg-jTA^g 74 Total liabilities and net assets / fund balances (add lines 66 and 73) ?ff? t?'G( 74 ,?Afy^fTA Form 990 is available for public inspection and, for some people, serves as the primary or sole source of information about a particular organization. How the public perceives an organization in such cases may be determined by the information presented on its return. Therefore, please make sure the return is complete and accurate and fully describes, in Part 111, the organization's programs and accomplishments. 30 804 Form 990 (1897) Paga Part IV-A Reconciliation of Revenue per Audited Part IV-B Reconciliation of Expenses per Audited Financial Statements with Revenue per Financial Statements with Expenses per Return (See Specific Instructions, page 20.) Return a Total revenue, gains, and other support a Total expenses and losses per per audited financial statements. . • audited financial statements . . • b Amounts Included on line a but not on b Amounts included on line a but not line 12, Form 990: on line 17, Form 990: (1) Net unrealized gains (1) Donated services on investments . . and use of facilities $ — (2) Donated services (2) Prior year adjustments and use of facilities reported on line 20, (3) Recoveries of prior Form 990 .... $ — year grants . . . (3) Losses reported on (4) Other (specify): fine 20, Form 990 . (4) Other (specify):

Add amounts on lines (1) through (4) • -o — $ — Add amounts on lines (1) through (4)* — o — c Line a minus line b. • G32 e Line a minus line b . . . . • d Amounts included on line 12, d Amounts included on line. 17, Form 990 but not on line a: Form 990 but not on line a: (1) Investment expenses (1) Investment expenses not included on line not included on line 6b, Form 990 . . . $ ;— 8b, Form 990. . . I - (2) Other (specify): . (2) Other (specify): 'J?r.ui/:.Jkc/.9&' $ — Add amounts on lines (1) and (2) • /6-3G99 Add amounts on lines (1) and (2) • 0 • Total revenue per line 12, Form 990 Total expenses per line 17, Form 990 OneUne c plus line d) ?*?7 i c plus lined) • 2Sf?7eX List of Officers, Directors, Trustees, and Key Employees (List each one even if not compensated; see Specific Instructions on page 20.)

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75 Did any officer, director, trustee, or key employee receive aggregate compensation of more than $100,000 from your organization and all related organizations, of which more than $10,000 was provided by the related organizations? • U Yes 81 No If "Yes," attach schedule—see Specific Instructions on page 20.

SUE Form 090 (1897] Pag. 5 Other Information (See Specific Instructions on page 21.) Yes No 78 . Old the orgardzBrJon engage in any activity not previously reported to the IRS? If "Yes," attach ao^t^ed dsscription of each acthnty . 76 77 Were any changes made in the organizing or governing documents but not reported to the IRS? . . . If "Yes," attach a conformed copy of the changes. Ba Did the organization have unrelated business gross income of $1,000 or more during the year covered by this return?. 78a b If "Yes," has it filed a tax return on Form 990-T for this year? 78b 79 Was there a liquidation,' dissolution, termination, or substantial contraction during the year? If "Yes," attach a statement 80a Is the organization related (other than by association with a statewide or nationwide organization) through common membership, governing bodies, trustees, officers, etc, to any other exempt or nonexempt organization?. . b If "Yes," enter the name of the organization • ^^^.^f^^.ff.^^^.^^^:./ =k&cjS(..Mj?AC>s.x:f}^...£*j:Ji.: and check whether it is EH Exempt OR 0 nonexempt 81a Enter the amount of political expenditures, direct or indirect, as described in the instructions for line 81. . .. lllSJ ~ G — b Did the organization file Form 1120-POL for this year? 82a Did the organization receive donated services or the use of materials, equipment, or facilities at no charge or at substantially less than fair rental value? b If "Yes," you may indicate the value of these items here. Do not include this amount as revenue in Part I or as an expense in Part II. (See instructions for reporting In . A Part III.) |82b| ///f 83a Did the organization comply with the public inspection requirements for returns and exemption applications? b Did the organization comply with the disclosure requirements relating to quid pro quo contributions? . . 83b 84a Did the organization solicit any contributions or gifts that were not tax deductible? 84a b If "Yes," did the organization include with every solicitation an express statement that such contributions or gifts were not tax deductible? 85 507(c)M), (9, or (o) organizations.—a Were substantially all dues nondeductible by members? . Did the organization make only in-house lobbying expenditures of $2,000 or less? If "Yes" was answered to either 85a or 85b, do not complete 85c through 85h below unless the organization received a.waiver for proxy tax owed for the prior year. - e Dues, assessments, and similar amounts from members 85c ///f d Section 162(e) lobbying and political expenditures . 85d rfVrf * Aggregate nondeductible amount of section 6033(e)(1)(A) dues notices . . 85a JU£L f Taxable amount of lobbying and political expenditures (line 85d less 85e) . 85f *//? 9 Does the organization elect to pay the section 6033(e) tax on the amount In 85f? h If section 6033(eX1XA) dues notices were sent, does the organization agree to add the arnount in 85ftote reasonable estimate of dues allocabte to nondeductible lobbying and political expenditures for the following tax year?. . . •. 86 501(c)(7) organizations.—Enter, a Initiation fees and capital contributions induded on , , line 12 ; • • • . . Gross receipts, included on line 12, for public use of dub facilities..... *//?„ 87 501(cX12) organization.—Enter, a Gross income from members or shareholders 87a #77F b Gross Income from other sources. (Do not net amounts due or paid to other sources against amounts due or received from them.) 87b /,/# 88 At any time during the year, did the organization own a 50% or greater interest in a taxable corporation or partnership? If "Yes," complete Part K 80a 501(c)(3) organizations.—Enter. Amount of tax imposed during the year under section 4911 » - 0 — ; section 4912 *» — o— ; section 4955 *» -a — b 501(c)(3) and 501(c)(4) organizations.—D\d the organization engage in any section 4958 excess benefit transaction during the year? If "Yes," attach a statement explaining each transaction e Enter Amount of tax imposed on the organization managers or disqualified persons during the year under sections 4912, 4955, and 4958 • . — a — d Enter: Amount of tax in 89c, above, reimbursed by the organization • . — o — 90a List the states with which a copy of this return is filed *» ....Atetit.^'.e.r.&c _ b Number of employees employed in the pay period that Includes March 12,1997 (See instructions.) . . 1Mb I f? 91 The books are in care of • .JZU.£.JZO...I/J£&.&MJ£.JZ.. Telephone no. •(.7/.Cir?=$uC'.££.f?.e.. Located at • ..?/?.^:.^/.'i.«.^.^

806 Form 990 f1997) \~:y ^ Pag: Analysis of Income-Producing Activities (See Specific Instructions on page 25.) Enter gross amounts unless otherwise Unrelated business income Excluded by section 512,513, or 514 w indicated. (B) (C) exemptruHcflon „ Exclusion cade Amount 93 Program service revenue: Business code Amount income a v r&?R b /°* *»,»*,'& Astt^iep. Ao a.^-

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I Jfrla^J Information Regarding Taxable Subsidiaries (Complete this Pirt if the "Yes" box on line 88 la checked.)^ -An Name, address, and employer identification Percentage of Nature of Total End-of-yeary^"^ number of corporation or partnership ownership Interest business activities income assets 1 _Z"6&f2_^'y»a.rrct -^- XT"***-* *** &*. /67/ /o'rrf*d- £„rX*^^& ftS /VtTaV % d/martiy fejr(1t^-*\ *;*,/ /fr-//s*a-/92 % Undar perafflaa of perjury, I oadaratrtatlfcaveaxamirtadtrM Please and bdtef. It la true, comet, and eomplata. DadaraUon of preparar (other than officer) la based oh aU Information of which praparer haa any knowladoa.. (SM General Inatructton U, on paga 10.) Sign Z.//V/98 Here • Signature of Data • Type or print name and Una. Oats Paid tignatura yjAHA^A BYBONADIOaCOllJLP Prepare r"j • #r Arm'a name (or 1830 WIMON kU. L. WOUtSTER. NY 14618-3993 Use Only youra If satf-emplcyed) andaddreaa Z1P + 4 • 807 33 REDACTED SCHEDULE A Organization Exempt Under Section 501(c)(3) OMB No. 1545-004? (Form 990) (Except Private Foundation} and Section 501(e), 801(1), S0l(k), 501(n), or Section 4847(a)(1) Nonexempt Charttable Truet Supplementary Information Daprtmnt of 0M Traauy See separate instructions. #97 html RMMM tevtot • Must be completed by the above organizations and attached to thefr Form WO or 990-EZ. Huns of the organization 3?6arg /lu&s/G* *• $& r>0/* /.Act $#&. -Z> C» Compensation of the Five Highest Paid Employees Other Than Officers, Directors, and Trustees (See instructions on page 1. List each one. If there are none, enter "None.") (d) Contributions to (•) Norm and addraw of each amployma paid mora (b) Title and avaraga hour* (a) Expanse (e) Compensation imployee benefit plus i account and other than $50,000 par week davotad to position deferred compensation allowances

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Total number of other employees paid over $50,000 • XP/?^ Compensation of the Five Highest Paid Independent Contractors for Professional Services (See instructions on page 1. List each one (whether individuals or firms). If there are none, enter "None.")

(a) Name and address of each Independent contractor paid more than $50,000 (b) Type of aervica (c) Compensation

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Total number of others receiving over $50,000 for professional services • /^c"? For Paperwork Reduction Act Notice, see page 1 of the inalmctiora for Form 990 and Porrn 990-EZ. Cat No. 112B5F Schedule A (Form 980) 1807 "7 #8 REDACTED Schmdida A (Form 990) 1997

GSHD! Statements About Activities

1 During the year, has the organization attempted to Influence national, state, or local legislation, including any attempt to influence public opinion on a legislative matter or referendum? . . If "Yes," enter the total expenses paid or incurred in connection with the lobbying activities • $ /l//a Organizations that made an election under section 501(h) by filing Form 5768 must complete Part VI-A. Other organizations checking "Yes," must complete Part Vl-B AND attach a statement giving a detailed description of the lobbying activities. 2 During the year, has the organization, either directly or indirectly, engaged in any of the following acts with any of its trustees, directors, officers, creators, key employees, or members of their families, or with any taxable organization with which any such person is affiliated as an officer, director, trustee, majority owner, or principal beneficiary: a Sale, exchange, or leasing of property?

b Lending of money or other extension of credit? 2b

e Furnishing of goods, services, or facilities? 2c J"a 6/%/-/» 9?a d Payment of compensation (or payment or reimbursement of expenses if more than $1,000)? /V *-.£. K . 2d

e Transfer of any part of its income or assets? 2e If the answer to any question is "Yes," attach a detailed statement explaining the transactions.

3 Does the organization make grants for scholarships, fellowships, student loans, etc.?(^*« &f £***•&? fa-**"4/}

Attach a statement to explain how the organization determines that individuals or organizations receiving grants or loans from it in furtherance of Its charitable programs qualify to receive payments. (See Instructions on page 2.)

Reason for Non-Private Foundation Status (See instructions on pages 2 through 4.)

The organization is not a private foundation because it is: (Please check only ONE applicable box.) 5 • A church, convention of churches, or association of churches. Section 170(b)(1KA)(i). 6 • A school. Section 170(bK1XAXP). (Abo complete Part V, page 4.) 7 D A hospital or a cooperative hospital service organization. Section 170(b)(1)(A)(iii). 8 • A Federal, state, or local government or governmental unit Section l70(bX1XAXv). 9 D A medical research organization operated in conjunction with a hospital. Section 170(b)(1)(A)(iil). Enter the hospital's name, city, and state • 10 D An organization operated forthe benefit of a college or university owned or operated by a governmental unit Section 170(bK1)(AXiv). (Also complete the Support Schedule in Part IV-A.) 11a IS An organization that normally receives a substantial part of its support from a governmental unit or from the general public Section 170(b)(1KA)(vi). (Also complete the Support Schedule In Part IV-A.) 11b Q A community trust Section 170(bX1KAKvO. (Also complete the Support Schedule in Part IV-A.) 12 0 An organization that normally receives: (1) more than 33%% of its support from contributions, membership fees, and gross receipts from activities related to Its charitable, etc, functions—subject to certain exceptions, and (2) no more than 33%% of Ita support from gross Investment income and unrelated business taxable income (less section 511 tax) from businesses acquired by the organization after June 30,1975. See section 509(a)(2). (Also complete the Support Schedule In Part IV-A.) 13 0 An organization that Is not controlled by any disqualified persons (other than foundation managers) and supports organizations described in: (1) lines 5 through 12 above; or (2) section 501(e)(4), (5), or (6), if they meet the test of section 509(a)(2). (See

section 509(a)(3).) : Provide the following Information about the supported organizations. (See Instructions on page 4.) (b) Line number (a) Name(s) of supported organizations) from above

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14 D An organization organized and operated to test for public safety. Section 509(aX4). (See Instructions on page 4.)

80S)(P SdMduto A (Form 990) 1997 Page. Part IV-A Support Schedule (Complete only if you checked a box on Une 10,11, or 12.) Use cash method of accounting. Note; You may use the woriaheet In the instructions for converting from the accrua/ to the cash method of ac Calendar year (or nscal year beginning In) . • (a) 1998 (0)1995 (C)1994 (d)1993 (e) Total 18 Gifts, grants, and contributions received. (Do not Include unusual grants. See line 28.). . /arffgcfO •tfa'??iSafl /±a/?tt /A/suf/JZ .ra.ixex-*' 16 Membership fees received 17 Gross receipts from admissions, merchandise sold or services performed, or furnishing of facilities In any activity that is not a business unrelated to the organization's charitable, etc., purpose. 18 Gross income from interest, dividends, amounts received from payments on securities loans (section 512(a)(5)), rents, royalties, and unrelated business taxable income (less section 511 taxes) from businesses acquired by the organization after June 30,1975 . . = 3*7 /•/?/ 3-fS^ /**

Total support for section 509(a)(1) test Enter line 24, column (e) . Add: Amounts from column (e) for lines: 18 6" 920 -jg -f— 22 -a — 26b - a — Public support (line 26c minus line 26d total) PubCc support percentage (Htie 26e (numerator) divided by One 26c (denominator)) . . . . . • MX? * 27 Organizations described online 12: a For amounts included In lines 15, 16, and 17 that were received from a "disqualified person," attach a list to show the name of, and total amounts received in each year from, each "disqualified person." Enter the sum of such amounts for each yean. 4/a± /$^^ JL'.,&^A»^€_ (1998) (1995) .' (1994) T. (1993) ., b For any amount Included In line 17.that was received from a nondisquallned person, attach a list to show the name of, and amount received for each year, that was more than the larger of (1) the amount on Rne 25 for the year or (2) $5,000. (Include In the list organizations described in lines 5 through 11, as well as individuals.) After computing the difference between the amount received and the larger amount described In (1) or (2), enter the sum of these differences (the excess amounts) for each yean

(1998) (1995)(1995) (1994) (1993)

Add: Amounts from column (e) for linr ' _ 16 17 20 _ 21 d Add: Line 27a total . and line 27b total. e Public support (line 27c total minus Bne 27d total). . • f Total support for section 509(a)(2) test Enter amount on line 23, column (e) . . » I 2711$ g PubMe support percentage (One 27e (numerator) divided by One 27f (denominator)) • h Investment Income percentage (line 18, column (e) (numerator) divided by line 27f (denominator)). • 28 Unusual Grants: For an organization described in line 10. 11. or 12 that received any unusual grants during 1993 through 1996, attach a tat (which is not open to public inspection) for each year showing the name of the contributor, the date and amount of the grant, and a brief description of the nature of the grant Do not Include these grants In line 15. (See Instructions on page 4.)^/ //}

3*10 H Sctwduto A (Form 990) 1997 Pate-.. Private School Questionnaire) (See instructions on page 4.) (To be completed ONLY by schools that checked the box on line 6 in Part IV)

29 Does the organization have a racially nondiseriminatory policy toward students by statement In its charter, bylaws, other governing instrument, or in a resolution of its governing body? 30 Does the organization include a statement of its racially nondiseriminatory policy toward students in all its brochures, catalogues, and other written communications with the public dealing with student admissions, programs, and scholarships? 31 Has the organization publicized its racially nondiseriminatory policy through newspaper or broadcast media during the period of solicitation for students, or during the registration period if it has no solicitation program, in a way that makes the policy known to all parts of the general community it serves? If "Yes." please describe; if "No," please explain, (if you need more space, attach a separate statement)

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32 Does the organization maintain the following: a Records indicating the racial composition of the student body, faculty, and administrative staff? b Records documenting-that scholarships and other financial assistance are awarded on a racially nondiseriminatory basis? , 32b e Copies of all catalogues, brochures, announcements, and other written communications to the public dealing with student admissions, programs, and scholarships?. 32c d Copies of all material used by the organization or on its behalf to sofieit contributions? 32d

If you answered "No" to any of the above, please explain. (If you need more space, attach a separate statement)

33 Does the organization discriminate by race in any way with respect to:

a Students'rights or privileges? 33a

b Admissions policies?

c Employment of faculty or administrative staff? . . . . _, y . / 33c

d Scholarships or other financial assistance? . . .^ ...>... J ./. 33d

e Educational policies? 33e

f Use of facilities? . ; 33f

8 Athletic programs? . . . 33£

h Other extracurricular'activities? 33h

If you answered "Yes" to any of the above, please explain. (If you need more space, attach a separate statement)

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34a Does the organization receive any financial aid or assistance from a governmental agency? 34a

b Has the organization's right to such aid ever been revoked or suspended? 34b if you answered "Yes" to either 34a or b, please explain using an attached statement

35 Does the organization certify that it has complied with the applicable requirements of sections 4.01 through 4.05 of Rev. Pnx. 75-50.1975-2 C.B. 587, covering racial nondiacriminatlon? If "No," attach an explanation ...

37 811 Schoduh A (Form 990) 1997 pag* 5 Pnrt Vl-A Lobbying Expenditures by Electing Public Charities (See instructions on page 6.) (To be completed ONLY by an eligible organization that filed Form 5768) Check here • a D If the organization belongs to an affiliated group. Check here • b D if you checked "a" above and 'limited control" provisions apply. , M Limits on Lobbying Expenditures To be complatsd far AU. electing (The term "expenditures' means amounts paid or incurred.) organizations Total lobbying expenditures to influence public opinion (grassroots lobbying) . . . 37 Total lobbying expenditures to influence a legislative body (direct lobbying) .... 38 Total lobbying expenditures (add lines 36 and 37) . rf/o 7t. 39 Other exempt purpose expenditures . . . ./£ * ^o *• Se*a, &J~-e^> • 40 Total exempt purpose expenditures (add lines 38 and39) 41 Lobbying nontaxabie amount. Enter the amount from the following table— If the amount on line 40 to— The lobbying nontaxabie amount to— Not over $500,000 20% of the amount on line 40 Over $500,000 but not over $1,000,000. . $100,000 plus 15% of the excess over $500,000 Over $1,000,000 but not over $1,500,000 .$175,000 plus 10% of the excess over $1,000,000 Over $1,500,000 but not over $17,000,000 . $225,000 plus 5% of the excess over $1,500,000 Over$17,000,000 . . .$1,000,000 . . . 42 Grassroots nontaxabie amount (enter 25% of line 41) . . 43 Subtract line 42 from line 36. Enter -0- if line 42 is more than line 36 44 Subtract line 41 from line 38. Enter -O- if line 41 is more than line 38

Caution: If there is an amount on either Una 43 or line 44, you must fUe Form 4720. 4-Year Averaging Period Under Section 501(h) (Some organizations that made a section 501(h) election do not have to complete all of the five columns below. • • See the instructions for lines 45 through 50 on page 7.) ^ • Lobbying Expenditures During 4-Year Averaging Period

Calendar year (or (a) (b) (e) (d) (*) fiscal year beginning In) • 1997 1996 1995 1994 Total

46 Lobbying nontaxabie amount.

46 Lobbying ceiling amount (150% of line 45(e)).

47 Total lobbying expenditures . /l/o*.

50 Grassroots lobbying expenditures Part Vl-B Lobbying Activity by Noneiecting Public Charities (For reporting only by organizations that did not complete Part Vl-A) (See instructions on page 7.) During the year, did the organization attempt to influence national, state or local legislation, including any Yes No Amount attempt to influence public opinion on a legislative matter or referendum, through the use oft a Volunteers b Paid staff or management (Include compensation in expenses reported on Unas c through h.) . . . e Media advertisements Sfo^ d Mailings to members, legislators, or the public . . . . . ft .^ .^ . i • -. fo J . • Publications, or published or broadcast statements . . .*f P p. f Grants to other organizations for lobbying purposes g Direct contact with legislators, their staffs, government officials, era legislative body . h Rallies, demonstrations, seminars, conventions, speeches, lectures, or any other means I Total lobbying expenditures (add lines c through h).

If "Yes" to any of the above, also attach a statement giving a detailed description of the lobbying activities.

¥i: II Schmduk A (Forni 990) 1897 ±a&. Information Regarding Transfers To and Transactions and Relationships WKh Noncharitabie^l Exempt Organizations v c L o 13 » 51 Did the reporting organization directly or indirectly engage in any of the following with any other organization described in section 501(c) of the Code (other than section 501(c)(3) organizations} or in section 527, relating to political organizations? a Transfers from the reporting organization to a noncharitable exempt organization of: Yes (1) Cash . 51a& 2 (if) Other assets ML £ b Other transactions: (I) Sales of assets to a noncharitable exempt organization bfl) (II) Purchases of assets from a noncharitable exempt organization ML k (HO Rental of facilities or equipment Mi (lv) Reimbursement arrangements bgyl I M Loans or loan guarantees ML z (vO Performance of services or membership or fundraiaing solicitations . . . . bivfl. Sharing of facilities, equipment, mailing lists, other assets, or paid employees I If the answer to any of the above is "Yes," complete the following schedule. Column (b) should always show the fair market value of the goods, other assets, or services given by the reporting organization. If the organization received less than fair market value in any transaction or sharing arrangement, show In column (d) the value of the goods, other assets, or services received:

(a) (b) Ic) «0 Una no. Amount Involved Name of noncharitable exempt organization Description of transfers, transactions, and sharing arrangements

//r*- /?/>/* /~/o a. 6t-e—

52a Is the organization directly or indirectly affiliated with, or related to, one or more tax-exempt organizations

b If "Yes." complete the following schedule: M w (0 Type of organization

//- * /f / / / " tr *> ^ /L. / /C ^. &.

•

8139 Ibero American Action League, Inc. IDNI Form 990 Schedule II 814 FYE 03/31/98

Form 990 Part II Line 42 'Depreciation, Depletion etc." and Part IV Line 57aM> 'Land, Buildings and Equipment less Accumulated Depreciation* : Accumulated Book Current Original Depreciation Value Year Depreciable Description Cost 03/31/98 03/31/98 Depreciation Life

Land,Buildings & Building Improvements 760,663 126,933 633,730 25,743 5 - 30 Yrs. Office Equipment jWV^ _=»217,B62 167,960 49,902 12,769 5 - 7 Yrs. Furniture & Fixtures ' i$oo_ 50,081 44,530 5,251 924 5 - 10 Yrs. Motor Vehicles 52,313 44,400 7,913 4,784 5 Yrs. Leasehold Improvements 486,039 237,778 248,261 16,921 5- 30 Yrs.

1,566,958 621,901 945,057 61,141

Line Number 57a 57b 57c

Amortization of Deferred Financing Costs 3,756

1 'art II Line %L $64,897

Form 990 Part IV Line 56 "Investments-Other" :

"investment in Ibero American Investors Corp.(a wholly owned subsidiary) $1,204,786 (See Form 990 Page 6 Part II Information Regarding Taxable Subsidiaries)

Form 990 Part IV Line 58 "Other Assets" :

Due From Ibero American Development Corp. 31,897 Due From Ibero Housing Corp. 1,400

$33,297

Form 990 Part IV Line 62 "Deferred Revenue":

United Way 2,360 New York State 344,384 Other 17,352 Monroe County Dept. of Social Services 841 Rochester Area Foundation 3,834

$368,771

40 814 REDACTED R1S Ibero American Action League, Inc. *•** Form 990 m^Tm^mmmmmm^mw Schedule tl FYE 03/31/92 Form 990 Part IV Line 64b 'Mortgages and Other Notes Payable* :

Mortgage Payable - Facilities Development Corp. 7.60% 221,605 Due 02/06 Mortgage Payable - Manufacturers & Traders Trust Prime + 2.00% 23,571 Due 02/92 Mortgage Payable - Ibero American Investors Corp. 8.00% 44* 16,152 Due 04/02 Loan Payable - AI Credit Corp. 2.1% 22,331 Due 12/98 Loan Payable - Consolidated Risk Services Inc. 12,095 Due 12/98 Loan Payable - Capital Lease Obligation 19.6% 10,720 Due 07/00 Loan Payable - Citibank Renovation Loan 10.40% 8,675 Due 03/00 Loan Payable - Citibank Line of Credit 150,000 Due 02/98 $525,149

*** A Small Business Investment Company, a seperate taxable entity.

REDACTED

W: H (^ federalI^orm 99^ publicInsoectionRules^ontinued^

However, new IRS regulations allow an organization to post these documents on the Internet to satisfv thelRS^ reo^uirementof having the documents widelv available, ^his relieves an organization of providing copiestoanvmemberofthe public.

We recommend that the Organizations make arrangements to ensure compliance with the regulations as the effective date forthese regulations was ^une^,1999.

(6) Chart of Accounts

During fiscal 1999, the U.S. Department of Housing and Urban Development (HUD) revised the chart of accounts required to be used by HUD projects.

We recommend that Ibero Housing Corporation (Housing) and Edison Housing Development Fund Corporation (Edison) change its chart of accounts to conform to HUD guidelines.

(7) Residual Receipts

Housing and Edison's HUD Regulatory Agreements require that any surplus cash, determined in accordance with the HUD calculation, held by HUD projects be deposited into a separate interest bearing bank account within 60 days after year-end. Any subsequent use of these funds requires HUD approval. We recommend that Housing and Edison comply with their respective HUD Regulatory Agreements and calculate and deposit surplus cash, if any, within 60 days after year-end.

-3-

816 ^^7

^ mandatory vacations

The Organisations do not currently haveamandatoryvacationpolicyfor all employees.

vBe recommend that the Organisations adoptapolicy requiring all employees to take at least one week of vacation time per year, ^n additions this week must be taken with consecutive days, f^urin^ the employees absences another employee should assume the absent employees responsibilities for the duration of the vacation. This will serve as an added internal controls as well as provide all employees witharelieffrom the pressures and demands oftheir job.

^ ^ccountin^for restricted contributions

Ourin^ fiscal 1^^ the amount and number ofrestricted contributions made to the Organisations continued toincrease. These contributions are subject tothe provisions of bothStatement of financial ^ccountin^ Standards ^S^Sô. l^^ccountin^ for contributions deceived and Oontributions âde^ and S^Sô.^l^înancial Statements ofôt^for^rofitOrâniâtions^. These Statements require the Organisations toaccountforcontributionsandreportoperatin^ results and therelated net assets aseither unrestricted^ temporarily restrictedor permanently restricted, ^saresult^ any contributions received which have temporary restrictions placed on mem must be reported as êt assets released from restrictions upon satisfaction of the donors imposed restriction. These restrictions may beintheform of time restrictions ^resources may be used inalater period or afteraspecifieddateôr purpose restrictions^resources may be used fbra specified purposeôr both.

ê recommend thatthe Organisations develop new general ledger accounts that would be used to record the assets^ the net assets and the release of the restrictions placed on these assets. This would provide the means to be able to identifyfor financial statement purposes those temporarily restricted net assets which have and have not been released from their restriction, m addition accounts designated as temporarily or permanently restricted will provide management with information as to what funds are not availableforuse in the Orâniâtions^ daily operations.

^ conflict ofmterest^olicv

The Or^ani^ation^sdonotrequire key employees to si^n an annual conflict ofinterestpolicy.

vê recommend that all key employees si^n an annual statement that specifies that personnel ina position of trust are not related to each otherêmployees are prohibited from having business dealing with companies that are major customers or vendors of the Orâniâtions^ transactions with officials of the Organisations are adequately controlled and disclosed^ and that such transactions occur only in the normal course of business and are approvedby theBoard of directors.

^ federal ^orm^^ public inspection ^ules

ml^^ the mtemal revenue Service enacted laws which required all organisations exempt under Section Ôl^toprovideacopy of the orâniâtion^sthree most recent ôrmÔ returns^ except for contributor lists^ and exemption application to any member of the public who makesarequest at the orâniâtion^sprincipal office during business hours, ^fthe request is made in persons the copymust be provided on the day ofthe request. Ifthe request is made in writing an organisation has ^0 days from the date the request is received to provideacopy. ôr any requests received^ the organisation may charge the appropriate copying and mailing costs. 818

IBERO-AMERICAN ACTION LEAGUE. INC. AND AFFILIATES

SUGGESTIONS FOR THE CONSIDERATION OF MANAGEMENT

JULY. 1999

(1) Review of Prior Year Suggestions

In connection with our audit of the financial statements of Ibero-American Action League, Inc. (Ibero) and Affiliates as of and for the year ended March 31, 1999, we reviewed the status of our prior year management letter recommendations. These recommendations related to the following:

Accounts Receivable, Accounting Department Staffing, Retirement Plan Regulatory Compliance, Outsourcing Opportunities, Cost Reporting and Allocation, Governmental Auditors and Their Focus on Tax-Exempts, and The Year 2000.

We are pleased to report that all of these recommendations were addressed by the Organizations' management during fiscal 1999. However, the following recommendations require further attention during fiscal 2000: Accounts Receivable -

At March 31, 1999, Ibero's accounts receivable balance had increased $406,000, or 66%, to $1,024,000. In addition, this balance had many long outstanding receivables related to services provided under the day care, Medicaid waiver and residential habilitation programs.

We realize that obtaining reimbursement from third-party payers is often a long and arduous effort However, we continue to recommend that Ibero's management make billing and collections a financial priority during fiscal 2000.

We also recommend that management continue in pursuit of its goal to identify and employ an additional employee in the finance department to assist in the billing and collection function. An individual familiar with third-party billing requirements and equipped with collection skills will more than offset the cost of the position with the anticipated increase in cash flow.

The Year 2000 -

The Organizations have taken and are in the process of taking the steps necessary to ensure that all internal systems will be compliant in the year 2000. We recommend that the Organizations continue in these efforts. In addition, we also recommend that the Organizations obtain written assurance from all significant funders and vendors that they will be compliant in the year 2000.

During fiscal 1999, Ibero increased its borrowing capacity under its lines-of-credits from $300,000 to $335,000. We recommend that Ibero consider increasing its borrowing capacity to a minimum of $500,000 which represents approximately 10% of fiscal 2000's operating expenses. As Ibero continues to grow through the addition of deficit-funded programs, it will become increasingly important to cash flow these programs before reimbursement from third-party payers is obtained. In addition, this increase would provide added insurance if any funders were to experience cash disbursement problems in the year 2000. 44

81 i" BONADIO

Rochester, NY H618-39S

July, 1999

To the Boards of Directors of

Ibero-American Action League, Inc., Ibero-American Development Corporation, Ibero Housing Corporation and Edison Housing Development Fund Corporation:

In planning and performing our audit of the financial statements of Ibero-American Action League, Inc. and Affiliates (the Organizations) for the year ended March 31,1999, we considered the Organizations' internal control structure to determine our auditing procedures for the purpose of expressing an opinion on the financial statements and not to provide assurance on the internal control structure.

/However, during our audit we became aware of several matters that are opportunities for strengthening internal controls and operating efficiency. The memorandum that accompanies this letter summarizes our comments and suggestions regarding those matters. This letter does not affect our report dated July 7,1999 on the financial statements of Ibero-American Action League, Inc. and Affiliates.

We will review the status of these comments during our next audit engagement We have already discussed these comments and suggestions with the Organizations' management, and will be pleased to discuss them in further detail at your convenience, to perform any additional study of these matters, or to assist you in implementing the recommendations.

inuMtifCo.,^

819 820

IBERO-AMERICAN ACTION LEAGUE, INC. AND AFFILIATES

SUGGESTIONS FOR THE

CONSIDERATION OF MANAGEMENT

JULY. 1999

BONADIO CO., LLP

CERTIFIE»1»imiC/o\ ACCOUNTANTS L&&MORE 46 820 IBERO-AMEmr 0NHA01IF. lyr STATEMENT Of 1 rfJRRiiTTtlCTED FUNCTIO) jUC SUPPngT WD REVENUE AND EXPENSES MABpmi. 1)1) (Wrth Completive Toub for 1991)

P ogram Services— Total Management Family Developmental Emergency Senior Education and Housing and Child dr. Support PiwNliiin Assistance CIliieM aaTJPJzyrrjejrj Services Ojha IotaJ General 1222 1221

PUBLIC SUPPORT AND REVENUE: 04 Government Tecs and grime S 110.713 1 1,774,762 S 1.705.163 S - S 52.339 < 144.142 1 - I 203.614 S 3.06I.SO3 S 756 1 3.061.161 S Program ecrvw* fees 346.611 277.151 3.173 626.944 616,944 UmWW.y 45.755 153.629 119,134 53.481 4.876 17,317 41.397 192 418.498 418.498 Contributions 16.414 160 9,417 70.364 96.541 1,011 97,337 Olho 10 1.016 18.7II 16 390 170.101 39.100 229.572 244.174 473.746

ToUl public aipporl end revenue 519.770 1.431.477 1.611.900 53.514 70,215 161.469 111.499 313.270 4.453.064 345.941 4.699.006 3.897.6IJ

SUarica, payroll taxea and employe* benefit* 479.679 519,597 958.895 30.301 32.169 118.143 172.816 139.780 2.S4I.6O0 115.840 2,767.440 2.438.014 Profesiional and nibcontracting fees 11,806 471.436 163.461 595 1,471 983 400 51.915 702.078 11.004 713.082 403.857 Occupancy 43,835 55.630 94.596 3.913 3,497 40.799 10.125 38.977 295.492 17.178 312.670 181.999 Bupplita 70.116 9.193 107.652 675 19,231 1.707 500 11.549 222.733 19.111 241.056 176.599 Overhead allocaUon 11.025 195.193 16.327 1,250 4.100 338.397 138,397 111.156 Depreciation 57 3,110 10,769 14.036 36.278 70.314 64.897 Conference* end mcetingi 3,049 6,973 6,143 239 365 SCO 14.789 41.760 14.311 66,572 81.875 10 3.506 33,131 113 39 100 4.059 44.939 9,361 54.311 46,434 10,000 17,330 9.671 37.001 17.011 34.014 30.917 Ttlephone 2,687 8.181 13,080 •41 911 6.081 1,800 1,710 37.313 4.067 41.380 18.981 Dwuiedfundi 31.877 32.877 32.877 (1.791) Liability ineiuanca 7.169 1.181 9.118 80 417 1.174 5.441 27.041 4,641 31,683 16.501 Auiitinoe to individual* 2.125 11.513 638 12.500 26,796 1,700 18.496 21.889 Printing and publication* 1.366 512 1445 1)5 81 508 100 8.733 11.907 4.169 17.076 14.123 Rental and maintenance of equipment 3.364 1.322 3,177 111 131 1,143 326 9.773 1.794 11.569 1.851 Potuga and ihipptnc 391 2.179 1,046 40 84 141 300 3.109 7.292 2.117 9.409 8.145 00 ^ Eouipment ptuchaacj 100 3,437 1,141 1,209 300 6.189 1.868 8.157 13.241 INJ •^ Other 7.461 39.430 17.090 4 11 32 179 74.139 7.439 81.678 68.876

Total enpeme* 644.218 1,397,658 1.473.383 4.8.791 83,159 107,776 186.761 331,117 4.173,085 408.106 4,781,191 1,959,708

CHANGE IN NET ASSETS BEFORE ALLOCATION OF MANAGEMENT AND GENERAL EXPENSES (54,498) 31,819 148.515 4.723 (11.144) (46.107) 14.71* (17.867) 79,979 (161.164) (81.185) (61,095)

ALLOCATION OF MANAGEMENT AND GENERAL EXPENSES (11.889) (51.818) (54.636) (1.809) (3.091) (7,705) (6.916) (11.180) (161.1641 161.164 .

t _. W") * (18,009) t 93.879 S 2.914 t . CM') « (34,011) t 17,811 S (30,147) « • $ (82.185) S (61.095)

The accompanying notes art an intej-nl part of the** exhibit*.

-H-

00 IBERO-AMERICAN ACTION Li_. ..UE. INC. AND AFFILIATES -xhibil VI COMBINING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED MARCH 31. 1998

Ihero- Ibero- Ibero- Ainerican American Ihero American Aciioti Development Housing Investors Leacuc. Inc. Corporation Corporation Corporation Total

CASH FLOW FROM OPERATING ACTIVITIES: Change in net assets 116,619 $ 268,767 $ (6,429) $ 13,667 $ 392,624 Adjustments to reconcile change in net assets to net cash How from operating activities: Depreciation and amortization 64,897 32,735 15,350 14,971 127,953 L.oss on sale of securities - - - 108,543 108,543 Provision tor doubtful accounts 56,196 - - - 56,196 Changes in: Receivables (164,295) 1.997 . 7.454 (154,844) United Way receivable (30,336) • - - (30,336) Prepaid expenses and other assets (8.175) (68,376) (10,329) 18,202 (68,678) Accounts payable 22,487 67.043 3,011 (11,194) 81,347 Accrued payroll and employee benefits 23,634 - - - 23,634 Deferred revenue mud oilier liabilities (32,052) 80,749 40,929 10,178 99,804

Net cash flow from operating activities 48,975 382,915 42,532 161.821 636,243

00 00 CASH FLOW FROM INVESTING ACTIVITIES: Purchases of property (46,022) (336.665) (43,396) (1,777) (427,860) Proceeds from sale of property 116,222 116,222 Collection of loans receivable 947,872 947,872 Extensions of loans and purchases of investments ('.073.000) (1,073,000)

Net cash flow front investing activities (46,022) (220,443) (43,396) (126,905) (436.766)

CASH FLOW FROM FINANCING ACTIVITIES: Change in amounts due from (to) Affiliates 5,186 (308) (4,878) Change in line-of-credit 50,000 - 50,000 Borrowings on mortgages and notes payable 47.913 . 47.913 Repayments on long-term debt (63,100) (43,288) (120,751) (227,139) Proceeds from sale of preferred stock 350,000 350,000

Net cash flow from financing activities 39,999 (43,596) (4,878) 229,249 220,774

CHANGE IN CASH 42,952 118,876 (5,742) 264,165 420,251

CASH - beginning of year 60,274 186,220 27,983 475,866 750,343

CASH - end of year 103,226 $ 305,096 $ 22,241 $ 740,031 $ 1.170.594

The accompanying notes are an infeprnl part nf Ihese exhibits. -22- IUERO-AMER1CAN ACTION U ,E. INC. AND A1TIUATES Jiibit V COMD1NINO STATEMENT OF ACTIVITIES FOR THE YEAR ENDED MARCH 31. 1998

Ibero- Ibero- Ibero- American Ainerican Ibero American Action Deveiopinent Housing Investors League. Inc. Corporation Corporation Corporation Eliminations Total

PUBLIC SUPPORT AND REVENUE:

Government tees and grants 2.555,421 $ 50,468 $ 19,341 $ 2.625.230 Program service lees 479,698 176,512 24,593 (107.525) 573,278 United Way 406,175 - 406,175 Contributions 93,890 235,000 328.890 Investment income 604.811 (12,000) 592.811 Other 377,444 22,474 2,103 (111,972) 290,049

Total public support and revenue 3,912,628 484.454 46,037 604,811 (231,497) 4.816,433

EXPENSES:

Program services 3,552,401 204,067 51.057 (198,151) 3.609,374 Management and general 407,307 11.620 1,409 (33,346) 386,990 Operating expenses 476,205 - 476,205 Loss on investments and other assets 118,221 - CO VO 118.221 Ul Total expenses 3,959,708 215,687 52.466 594,426 (231.497) 4.590,790

EXCESS (DEFICIENCY) OF PUBLIC SUPPORT AND REVENUE OVER EXPENSES (47,080) 268,767 (6,429) 10,385 225,643

PRIOR YEAR THIRD-PARTY SETTLEMENTS 163,699 - 163,699

INCOME TAX BENEFIT 3.282 3.282

CHANGE IN NET ASSETS 116,619 268,767 (6.429) 13,667 392,624

NET ASSETS - beginning of year, as previously reported 1,445,709 177.294 5.418 (513.592) 1,114,829

PRIOR PERIOD ADJUSTMENT (Note 3) (127.219) (127,219)

NET ASSETS - beginning of year, as restated 1,445.709 177,294 5,418 (640,811) 987,610

CHANGE IN UNREALIZED LOSS ON SECURITIES (168,277) (168.277)

DIVIDENDS (81,640) (81.640) c NET ASSETS - end of year 1,562,328 $ 446,061 $ (1,011) $ (877,061) $^ 1,130.317 oo The accompanying notes are an integral part of these exhibits. CO -21- IBKRO-AMERICAN ACTION L E. INC. AND AFFILIATES ihitlV COMBINING BALANCE SHEET MARCH 31. 1998

Ibero- Ibero- Ibero- American American Ibero American Action Development Housing Investors League. Inc. Corporation Corporation Corporation Eliminations Total

ASSETS

Cash 103,226 $ 305,096 $ 22,241 $ 740,031 $ 1,170,594 Receivables, less allowance for doubtful accounts of approximately $77,000 544,406 21.853 109,436 675,695 United Way receivable 99,842 99,842 Prepaid expenses and other assets 126,648 117,500 70,182 106,336 420,666 Loans receivable and investments 6,211,916 6,211,916 Amounts due form (to) affiliates 33,297 (31,206) (2,091) Property, net 945,057 811,299 411.957 230.952 2,399,265 Investment in subsidiary 1.204.786 (1.204.786)

10,977.978

LIABILITIES AND STOCKHOLDERS' EQUITY AND NET ASSETS

LIABILITIES: 00 Line of credit 150,000 $ - $ - $ - 150,000 •Ek o Accounts payable 376.052 138,903 12,584 49,465 577,004 Accrued payroll and employee benefits 164,962 - - - 164.962 Deferred revenue and other liabilities 368,771 124.177 490,716 140,272 1,123,936 Mortgages, notes payable and capital lease obligation 435,149 515,401 - 1,508,504 2,459.054 Redeemable preferred stock - 4% cumulative, $100 par value; 30,000 shares authorized, 20,410 shares issued and outstanding 2.378,243 2,378,243

Total liabilities 1,494,934 778,481 503.300 4,076,484 6,853.199

STOCKHOLDERS' EQUITY AND NET ASSETS: Stockholders' equity: Preferred slock - Class A non-voting, 4% cumulative, $1,000 par value; 5,000 shares authorized, 1,575 shares issued and outstanding 1,575,000 - 1,575,000 Common slock - Class A voting, $1 par value; 5,000 shares authorized, 2,975 shares issued and outstanding 2,975 (2,975) - Common stock - Class B non-voting, $1 par value; 5,000 shares authorized and unissued Additional paid-in capital 2,621,273 0.201,811) 1.419.462 Accumulated deficit (877,061) - (877,061) Net assets: Unrestricted 1,386.975 254,033 0.011) 1,639,997 Temporarily restricted 175,353 192,028 367,381

Total stockholders' equity and net assets 1,562,328 446,061 (1.011) 3,322,187 (1,204,786) 4.124.779 oo

$ 3,057,262 $ 1,224,542 502,289 10,977,978 The accompanying notes are an integral part of these exhibits. -20- IBKHO-AMEHICAN ACTION L •- INC. AND At-i-HUIKS 'bit III COMBINING STATEMfc. •. OF CASH FLOWS FOR THE YEAR ENDED MARCH 31.1999

Ibero- Ibero- Edison Housing Ibero American Aniericah Ibero Development American Action Development Housing Fund Investors Leaeue. Inc. Corporation Comoration Corporation Corporation Total CASH FLOW FROM OPERATING ACTIVITIES: Change in net assets (12.872) $ 118,859 $ 912 $ 65 5 50,742 5 157,706 Adjustments to reconcile change in net assets to net cash tlow from operating activities: Depreciation and amortization 70.314 62,263 16,607 8,060 16,913 174,157 I .oss on sale of securities - . - - 75,352 75,352 Provision for doubtful accounts 71,117 - . - - 71.117 Gain on sale of property - (11,281) - - - (11,281) Gain on forgiveness of loan - (55,000) - - (55,000) Changes in: Receivables (445.581) (26.816) (5.165) 2,933 (474.629) United Way receivable (12,003) - - - - (12,003) Contribution receivable (88.650) - - - (88,650) Prepaid expenses and other assets (23,275) (9,976) (83) (68,824) (17.764) (119,922) Accounts payable 167,802 (20,740) (6,970) 12,037 16.775 168,904 Accrued payroll and employee benefits 33,072 - - - - 33,072 Deferred revenue and other liabilities 31,722 450.144 (16,608) 488,838 (8,739) 945,357 oo VI Net cash How from operating activities (208.354) 507,453 (6.H2) 435,011 136,212 864,180 LA CASH FLOW FROM INVESTING ACTIVITIES: Purchases of properly (227,192) (1,597,827) (420,011) (9,808) (2,254,838) Proceeds from sale of property - 118.735 . - - 118,735 Collection of loans receivable - - - - 700,390 700,390 Extensions of loans and purchases of investments . . - - (617,827) (617,827)

Net cash flow from investing activities (227.192) (1.479,092) (420,011) 72,755 (2,053,540)

CASH FLOW FROM FINANCING ACTIVITIES: Change in amounts due from (to) affiliates 139,496 (147,062) 66 7,500 Change in lincs-of-credit 185,000 - - - - 185,000 Borrowings on mortgages and notes payable 271,564 872,898 - - - 1,144,462 Repayments on long-term debt (118,670) (35,344) - - (71,081) (225,095) Net proceeds from sale of preferred stock - - - - 410,000 410,000

Net cash flow from financing activities 477,390 690,492 66 7,500 338,919 1.514.367

CHANGE IN CASH 41,844 (281,147) (6.076) 22,500 547,886 325.007 CASH - beginning of year 103,226 305,096 22,241 740,031 1.170,594 c CASH-end of year $ 145,070 $ 23,949 S 16,165 $ 22,500 S 1.287,917 $ 1,495,601 00 en The accompanying notes are an integral part of these exhibits. -19. 1BERO-AMER1CAN ACTION L. E. INC. AND .AFFILIATES •liliil II COMBINING STATEMENT OF ACTIVITIES FOR THE YEAlt ENDED MARCH 31.1999

Ibeio- Ibero- Edison Housing Ibero- American Americaii Ibero Development Aincrican Action Development Housing Fund Investors Leacue. Lie. Corporation Corporation Corporation Corporation Eliminations Total

PUBLIC SUPPORT AND REVENUE:

Government lees and grants 3.062,261 S 77,462 S 21.315 $ 23.475 $ s - $ 3.184,713 Program service tees 626,944 195,373 27.107 2.941 (125,293) 727,072 United Way 406,744 - - - 406,744 Contributions 198.624 106,500 - - 305.124 Investment income 642,914 (7,000) 635,914 Other 473.746 45,204 4,791 1.716 (185.324) 340,133

Total public support and revenue 4,768,319 424,539 53,413 28,132 642,914 (317.617) 5,599,700

EXPENSES:

Program services 4,373,085 327.801 48,272 28.064 (293.644) 4.483.578 Management and general 408,106 32.879 4,229 3 (23.973) 421.244 00 Operating expenses 510,754 510,754 LWi on investments and oilier assets 75.352 75.332 to Total expenses 4,781,191 360,680 52,501 28,067 586.106 (317,617) 5,490,928

EXCESS (DEFICIENCY) OF PUBLIC SUPPORT AND REVENUE OVER EXPENSE BEFORE EXTRAORDINARY ITEM (12,872) 63,859 912 65 56.808 108,772

EXTRAORDINARY ITEM: f lain on forgiveness ol loan 55.000 55,000 (12,872) 118,859 912 65 56,808 - 163,772

INCOME TAX EXPENSE (6,066) (6.066)

CHANGE IN NET ASSETS (12,872) 118,859 912 65 50,742 - 157.706

NET ASSETS - begimiing of year 1,562,328 446,061 0.011) (877,061) - 1,130.317

CHANGE IN UNREALIZED LOSS ON SECURITIES (200.641) - (200.641)

DIVIDENDS (81.640) (81,640)

NET ASSETS-end of year 1.549,456 $ 564.920 S (99) $ s (1,108,600) S - $ 1,005,742

The accompanying notes are an integral part of these exhibits. -18. Jiibil 1 COMBINING BALANCE SHEET MARCH 31,|999

Ibero- Ibero- Edison Housing lbero- Ainerican American Ibero Development American Action Development Housing Fund Investors League, Jnc. Corporation Corporation Corooration Corporation Eliminations Total

ASSETS

Cash $ 145.070 $ 23,949 $ 16,165 $ 22,500 $ 1,287,917 $ - $ 1.495,601 Receivables, less allowance for doubtful accounts of approximately $118,000 918.870 48,669 5.165 116,097 . 1,088,801 United Way receivable 111.845 - - - - - 111.845 Contribution receivable 88.650 - - - - - 88,650 Prepaid expenses and other assets 146,169 121,592 67,745 67,685 110,121 - 513.312 Loans receivable and investments - - - - 5.853,501 - 5.853,501 Amounts due from (to) affiliates (106.199) 115,856 (2,157) (7,500) - - - Property, net I.I 11.309 2,245,293 397,870 413.090 226,091 - 4,393.653 Investment in subsidiary 1,204.786 - - - - (1,204,786) -

$ 3,620,500 $ 2,555.359 $_ 479.623 $ 500,940 L 7,593,727 $ (1.204,786) $ 13.545.363

LIABILITIES AND STOCKHOLDERS' EQUITY AND NET ASSETS LIABILITIES: L^es-of credit $ 335,000 $ $ $ $ . $ . $ 335,000 00 AWounls payable 543.854 118,163 5.614 12,037 46,740 - 726,408 Accrued payroll and employee benefits 198.034 - - - - - 198.034 Deferred revenue and oilier liabilities 400,493 574,321 474,108 488,838 131.533 - 2,069,293 Mortgages, notes payable and capital lease obligations 593,663 1,297,955 - - 4437.423 - 3.329.041 Redeemable preferred stock - A% cumulative, $100 par value; 30,000 shares authorized, 20,410 shares issued and outstanding 2,459.883 2,459,883

Total liabilities 2,071,044 1,990,439 479,722 500,875 4,075.579 . 9,117,659

STOCKHOLDERS' EQUITY AND NET ASSETS: Stockholders' equity: Preferred stock - Class A non-voting, 4% cumulative, $1,000 par value; 5,000 shares authorized, 2,025 shares issued and outstanding 2,025,000 - 2,025,000 Common stock - Class A voting, $1 par value; 5,000 shares authorized, 2,975 shares issued and outstanding 2,975 (2,975) - Common slock - Class B non-voting, $1 par value; 5,000 shares authorized and unissued Additional paid-in capital 2,598,773 (1,201,811) 1.396.962 Accumulated deficit (1,108,600) (1,108,600) Net assets: Unrestricted 1,304,790 462.996 (99) 65 - - 1,767,752 Temporarily restricted 244,666 101.924 346.590 C < Total stockholders' equity and net assets 1,549.456 564,920 J99) 65 3,518,148 (1,204,786) 4,427,704 00 $ 3.620.S0O $ 2,555,359 S 479,623 $ 500,940 $ 7,593,727 $ (1,204.786) $ 13,545,363 ro — i •• • - • 11 - •--— — - -ii I » • • i The accompanying notes are an integral part of these exhibits. «vl -17- (14) Related Partv Transactions (Continued)

During 1999, Ibero entered into a second operating lease with Development for certain program and administrative space through 2004.

Future minimum lease payments required under the terms of this agreement are as follows for the years ending March 31:

2000 $ 67,980 2001 70,019 2002 72,120 2003 74,284 2004 76.512

$ 360.915

Services -

Ibero provides management and maintenance services to Development, Housing and Edison. For the years ended March 31, 1999 and 1998, Ibero charged Development, Housing and Edison a total of $173302 and $107,765, respectively. These amounts have been eliminated in the combined statements of activities.

Deposits and Investments -

Investors conducts business with a bank at which Investors' former President and Chief Executive Officer and current board member serves as Chairman of the Board. At February 28, 1999 and \ 1998, Investors had $114,000 and $14,000 of cash equivalents invested in the bank at the market rate of interest and held an equity investment in the bank of $330,100 and $300,100, respectively.

8286- 829

(12) Income Taxes (Continued)

The tax effects of temporary differences that gave rise to the deferred tax asset at February 28 were as follows:

1999 1998 Deferred tax asset: Provision for losses on receivables $ 4,100 $ 1,200 Net operating loss carryforward 112,545 137,200 Capital loss carryforward 38.715

155,360 138,400

Less: Valuation allowance (114.6541 (97.694)

$ 40.706 $ 40.706

Income tax benefit (expense) for 1999 and 1998 differs from the "expected" tax benefit (expense), computed by applying the U.S. federal corporate income tax rate of 34% to income before income taxes, as follows:

1999 1998

Computed "expected" federal tax expense $ (19,315) $ (7,000) State income taxes, net of federal income tax benefit (8,885) (3,050) Effect of graduated federal tax rates 11,435 3,900 Permanent tax differences 22,351 43,132 Other, net (11.652) (33.700)

$ (6.066) $ 3.282

Investors has available net operating loss carryforwards of approximately $331,000 and capital loss carryforwards of $193,573 which begin to expire in 2006. Since it is anticipated that these loss carryforwards will not be utilized prior to their expiration dates, a valuation allowance has been established.

Income taxes paid during the years ended March 31, 1999 and 1998 were $3,430 and $8,187, respectively.

(13) Commitments and Guarantees

In the normal course of business, Investors enters into commitments to lend money to qualified borrowers. At February 28,1999, outstanding commitments were $850,483.

Investors continues to guarantee short-term bank borrowings for some of its existing clients. At February 28,1999, these guarantees were $14,000.

(14) Related Party Transactions

Leases -

Ibero leases space from Development for administrative offices and program services under operating lease agreements renewable annually. The total rent paid by Ibero to Development for the years ended March 31,1999 and 1998 was $%5,293 and $107,525, respectively. These amounts have been eliminated in the accompanying combined statements of activities.

%. . 830 (9) Redeemable Preferred Stock - Investors (Continued)

The preferred stock contains a mandatory redemption feature whereby Investors must fully redeem the stock as follows:

January, 2007 $ 400,000 September, 2008 641,000 November, 2009 1.000.000

$ 2.041.000

The redemption cost is the par value of the outstanding shares plus accumulated and unpaid dividends, whether or not declared. Accordingly, cumulative, undeclared dividends of $418,883 and $337,243 have been recorded as a reduction of retained earnings and have been added to the redeemable preferred stock value as of February 28,1999 and 1998, respectively.

(10) Stockholders' Equity of Whollv-Owned Subsidiary

In 1994, Investors purchased from the SBA all of its previously outstanding shares of 3% cumulative preferred stock having a stated value of $1,749,500. The number of shares purchased and subsequently retired was 17,495 at a cost of $35.7158 per share for a total consideration of approximately $625,000. The discount of approximately $1,125,000 has been included as paid-in capital to conform with SBA guidelines.

(11) Retirement Plan

Ibero purchases group annuity contracts in the form of tax-deferred annuities for all full-time employees who have completed eighteen months of service. The expense associated with this plan was approximately $80,200 and $47,200 for the years ended March 31,1999 and 1998, respectively.

(12) Income Taxes

Investors' (provision for) benefit from income taxes consisted of the following for the years ended February 28: 1999 1998 Current: Federal $ - $ State (6.0661 3.282

$ (6.0661 $ 3.282

830 14- 831

(8) Financing Arrangements ("Continued)

Principal repayments under the terms of these agreements are as follows for the years ending March 31:

2000 $ 545,855 2001 100,805 2002 111,178 2003 839,097 2004 626,562 Thereafter 1.105.544

$ 3.329.041

Under the terms of Ibero's mortgage payable to Facilities Development Corporation, payments on this mortgage are satisfied through a reduction in Ibero's reimbursement for the operation of a community residence.

Development is in the process of refinancing its $267,898 mortgage payable to an organization.

Under the terms of Development's $250,000 mortgage payable to the City of Rochester, Development is required to make principal and interest payments if Development achieves a debt coverage ratio of 1.2. Upon attaining this ratio, 50% of available cash is required to be remitted for principal and interest repayment. Interest will accrue at 2% for the years that the debt coverage ratio is not 12 or greater. The balance of the loan shall be repaid to the City at the end of the thirty-year .term if all terms and conditions of this agreement are complied with.

During fiscal 1999, the City of Rochester forgave $55,000 of the mortgage due in June, 2029.

Lines-of-Credit -

lbero has available a $300,000 line-of-credit with a bank and a $35,000 line-of-credit with another bank, both of which are renewable annually. Amounts borrowed on the $300,000 line-of-credit bear interest at the bank's prime interest rate plus 1%. Amounts borrowed on the $35,000 line-of-credit bear interest at 9.25%. All amounts borrowed are collateralized by a general lien on all of Ibero's assets. At March 31, 1999 and 1998, $335,000 and $150,000 respectively, was outstanding under the terms of these lines-of-credit

Interest -

Interest paid on all financing arrangements was $204,442 and $186,347 during the years ended March 31,1999 and 1998, respectively.

(9) Redeemable Preferred Stock - Investors

The redeemable preferred stock of Investors consisted of the following at both March 31,1999 and 1998:

Preferred stock - Series II, 4% cumulative, $100 par value, 30,000 shares authorized, 20,410 shares issued and outstanding $ 2.041.000

831 13- 832

(8) Financing Arrangements (Continued) 1999 1998

Ibero-American Development Corporation: (continued)

Mortgage payable to a bank, due in monthly payments of $1,937, including interest at 9.55%, through September, 2004, collateralized by the related property. 153,776 161,912

Mortgage payable to the City of Rochester, due June, 2029, collateralized by the related property. Effective January, 2000, interest will be payable annually at the prevailing interest rate of Section 108 of the Housing and Development Act of 1974. 100,000

Term note payable to the City of Rochester payable in a lump sum in April, 1999. 25,000 25,000

Mortgage payable, due in monthly installments of $625, including interest at 10%, through January, 1997. Monthly installments of $625 were made through June, 1993. Scheduled payments have not been made for July, 1993 through June, 1999. 22,509 22,509

Note repaid in fiscal 1999. 11.649

1,297.955 515.401

Ibero-American Investors Corporation:

Unsecured debentures and notes payable to the SBA:

3.59% debenture, interest only is payable through June 1, 2003 with principal payable in full on June 1, 2003. The interest rate changes to 6.59% in June, 510,000 510,000 1999.

7.15% debenture, interest only is payable through September 1, 2002 with principal payable in full on September 1,2002. 400,000 400,000

8.25% debenture, interest only is payable through March 1,2002 with principal payable in full on March 1,2002. 330,000 330,000

Mortgage payable to a bank, due in monthly installments of $2,322, including interest at 7.0%, through November, 2008, collateralized by the related building. 197,423

Notes and mortgages repaid in fiscal 1999 268.504

1.437.423 1.508.504

$ 3.329.041 $ 2.459.054 58

832 -12- 833

(8) Financing Arrangements (Continued)

1999 1998

Ibero-American Action League, Inc.: (continued)

Third mortgage payable to a bank, requiring monthly payments of $1,548, including interest at 8.62%, through May, 2014, collateralized by the related property. 156,078

Fourth mortgage payable to a bank, requiring monthly payments of $675, including interest at 9.25%, through May, 2004, collateralized by the related property. 32,321

Unsecured notes payable, requiring monthly payments of $5,521, through December, 1999. 50,890

Note payable, requiring monthly payments of $445, including interest at 8.2%, through May, 2002, collateralized by the related equipment. 14,150

Capital lease obligation, requiring monthly payments of $480, including interest at 19.6%, through July, 2000. 6,713 10,720

Capital lease obligation, requiring monthly payments of $ 196, including interest at 15.4%, through October, 2002. 4,985

Term note payable to a bank, requiring monthly payments of $429, including interest at 10.4%, through March, 2000. 4,300 8,675

Notes repaid in fiscal 1999. : 34.426

593.663 435.149

Ibero-American Development Corporation:

Mortgage payable to a bank, due in monthly payments of $3,581, including interest at 9.55%, through September, 2004, collateralized by the related property. 278,797 294,331

Mortgage payable to an organization collateralized by the related property. The unpaid principal, plus interest at 6%, is due August, 1999. This mortgage payable is guaranteed by Ibero. 267,898

Mortgage payable to the City of Rochester. 250,000

Mortgage payable to the County of Monroe, due in increasing annual installments from $5,000 to $20,000, plus interest at UBOR plus 0.2%, through August, 2013, collateralized by an assignment of leases on the property at 777 Clifford Avenue. 199,975

833 11- 834

(7) Property

Property consisted of the following at March 31:

1999 1998

Land and land improvements $ 262,183 $ 254,383 Buildings, building improvements and leasehold improvements 4,524,344 2,812,695 Equipment, furniture and fixtures 722,902 313,866 Vehicles 76.313 52.313

5,585,742 3,433,257

Less: Accumulated depreciation and amortization H. 192.089) fl.033.992)

$ 4.393.653 $ 2.399.265

During 1999, Ibero capitalized equipment costs of $5,620 under the terms of a capital lease agreement At March 31, 1999 and 1998, the costs of all assets under capital lease agreements was approximately $25,000 and $19,000, respectively, and the related accumulated amortization was approximately $13,500 and $9,500, respectively.

Development incurs costs on residential houses that are currently held as investment properties. These houses are in the process of being refurbished to be sold through Development's Homestead program. At March 31, 1999 and 1998, costs of $130,463 and $52,597, respectively, were included in buildings and building improvements.

(8) Financing Arrangements

Mortgages, Notes Payable and Capital Lease Obligations -

Mortgages, notes payable and capital lease obligations consisted of the following at March 31:

1999 1998

Ibero-American Action League, Inc.:

Mortgage payable to a bank, requiring monthly payments of $922, including interest at the bank's prime interest rate plus 2%, collateralized by the related property. This mortgage payable is due on demand. 81,391 83,571

Second mortgage payable to a bank, requiring monthly payments of $394, including interest at 8%, through March, 2002, collateralized by the related property. 12,5 83 16,152

-8H»- - 835 (5) Temporarily Restricted Net Assets (Continued) In fiscal 1999 and 1998, temporarily restricted net assets were released from donor restrictions by incurring costs satisfying restricted purposes as follows:

1999 - Ibero- Ibero- Ibero- American Ibero- American American Develop- American Develop- Action ment Action ment League. Inc. Corporation Total League. Inc. Corporation Total

Program activities $ 454,981 $ $ 454,981 $391,160 $ 5 391,160 Purchases of property 196.604 196.604 - 207.194 207.194

S 454.981 S 196.604 $ 651.585 S 391.160 S 207.194 $ 598.354

(6) Loans Receivable and Investments

At February 28, 1999 and 1998, Investors had an investment in equity securities that have been recorded at $630,130 and $600,120, respectively, which approximates market value. Market value for these equity securities has been based on a good faith valuation by Investors' Board of Directors. The market value assigned to these investments is considered to be the amounts which could be realized from an orderly sale or other disposition of the investments. It is Investors' intention to hold these securities on a long-term basis.

In making its good faith valuation, Investors' Board of Directors took into account the cost of the equity securities to Investors, developments since their acquisition and other factors pertinent to the valuation of investments. There is no public market for the equity securities held. Investors' Board, in making its valuation, has, in many instances, relied on financial data of the investees and on estimates by the management of Investors and of the investee companies as to the effect of potential future developments. Investors' Board has reviewed such documentation as is available.

Investors acquired all of the securities by direct purchase from the issuer under investment representation, and Investors' Board of Directors has valued the securities on the premise that they may not be sold without registration under the Securities Act of 1933. The price of securities purchased by Investors from the issuer has been determined by direct negotiation between Investors and the issuer.

In addition, Investors has an investment in unsecured subordinated debentures totaling $549,157 and $524,990 at February 28, 1999 and 1998, respectively. Investors' Board of Directors has evaluated the realization of these investments by considering developments that have occurred since the investments were made, reviewed financial data of the investees, evaluated the effect of future developments, and considering other factors pertinent to the investments. Based on this evaluation, Investors' recorded an unrealized loss on securities held of $200,000 at February 28, 1999. Investors' Board of Directors has concluded that the remaining investments are realizable in the normal course of operations. If, however, Investors is unable to liquidate the subordinated debentures in the normal course of operations, a material loss could result because of the absence of sufficient collateral.

An allowance for unrealized depreciation, related primarily to the decline in the value of certain other investments' underlying collateral, has been established based on the good faith valuation of Investors' Board of Directors and totaled $842,289 and $641,648 at February 28, 1999 and 1998, respectively.

8&" — 836

(3) Deferred Compensation (Continued)

Future anticipated payments under the terms of this deferred compensation agreement are as follows for the years ending February 28:

2000 $ 20,000 2001 20,000 2002 20,000 2003 20,000 2004 20,000 Thereafter 83.333

183,333

Less: Amount representing interest (53.675")

$ 129.658

(4) Concentrations

For the years ended March 31, 1999 and 1998, approximately 32% and 34%, respectively, of the Companies' public support and revenue was provided through grants and contracts with two governmental agencies. At March 31, 1999 and 1998, the Companies had net receivables related to services provided under the terms of these grants and contracts of approximately $711,000 and $440,000, respectively.

(5) Temporarily Restricted Net Assets

Temporarily restricted net assets are available for the following purposes at March 31:

1770 Ibero- Ibero- Ibero- American Ibero- American American Develop- American Develop- Action ment Action ment League. Inc. Corporation Total League. Inc. Corporation Total

Contributions received for property purchases $ $ 101,924 $ 101,924 $ S 192,028 $ 192,028

Contributions received for program activities 244.666 . 244.666 175.353 . 175.353

S 244.666 S 101.924 $ 346.590 $175.353 S 192.028 $ 367.381

62 ^ ^nmmarvofî^nificantAccotmtin^ôliciesôntiniied^

OlosingOosts^

Olosmg costs associated with certain properties are bemg amortized tising the straight^line method over thirty years and areincltidedinprepaid expenses and other assetsinthe accompanying combined balance sheets.

Income Taxes^

The Organizations are not-for-profit corporations exempt ^rom income taxes as corporations âlified tinder section ^^l^c^ôfthe Internal IêvenneOode. The Organizations have also been classified byme Internal Iêvenne service as entities thatarenotprivate foundations.

Investors provides ^or income taxes on its earnings. Oelerred income taxes are provided to reflect theimpact of temporary differences between amonntsreportedinthefinancialstatementsand amonnts measured bytax laws andregtilations. Thesetemporarydifferences relate primarilyto loss carryforwards and the provision ^or losses onreceivables,which are deductible for income tax purposes usingthedirectwriteDoffmethod.

shared ^ervices^

The costs of providing shared services are allocated to the Organizations based npon estimated visage.

^stimates^

The preparation of financial statementsmconfornîtywim generally accepted accoîntin^ principles retires management to malê estimates and assnrnptions mat affect the amoimts reported in the financial statements and accompanying notes. Actnal results cotilddifferfrom those estimates.

^ deferred compensation

Inlây, 19^7, Investors pnrohaseda^^,^01ifeinsnrance policy on thelile of its former I^resident.Investors is the beneficiary ofthis policy which hadacashsnrrendervalneof^^^ at êbrâry^,1999. Anni^premitim expense Iorthispolicywasapproximately^l,^^^br both the yearsendedêbmary^,1999and!99^.

At the same time, Investors entered into adeêrredcompensation agreement with its former president which re^tiired,iipon his retirement, monthly payments of ^1,^7 ôraten^year period. The financial effect of this deferred compensation agreement had not been recorded. Therefore,a priorperiodad^nstmentof^l^,Î9wasrecordedatêbrnary^^, 1997 which represents the present valêofmeanticipatedf^tnrepaymentsto me lornêr president, discounted at^toreflectme value of money. Investors isnotreîredtomalêany payments inthe event of thefbrmer ^resident^sdeath prior to the end of the ten^year payment period. The former president retired in fiscal 1999 and, in connection with payments made to him. Investors recognized interest expense of ^,9^1relatedtothisagreementdnringtheyearendedêbrâry^,1999.

7^ ^37 ^

(^ nummary of^i^nificant^ccountin^^olicies(Oontinued)

^inanciall^eporting^

The Organizations categorize net assets and activities as unrestricted and temporarily restricted^ contributions are reported as temporarily restricted if they are received with donor stipulations that limittheiruse^ v^henadonorrestriction empires, temporarily restricted net assets are reclassified as unrestricted netassets and reportedmme combined statement of change in stocl^holders^eonity and netassetsasnetassets released from restriction unrestricted net assets include operating resources whi^h areavailableforthesupport ofthe Organizations operating activities' Temporarily restricted netassetsare restricted by donorsforspecified capital e^pendituresand certain program activities'

^upportand^evenue^

The Organizations recognize capital grants ^rom government agencies and other organizations as support and revenue usmg me straight^line method over the estimated useful lives of the related capital assets^The Organizations recognize revenuefromother funding sources as support and revenue when eligible costs are incurred amounts received in advance of incurring eligible costs are reportedas deferred revenue

r^inaldetermmationofcertain revenue earned by me Organizations is sub^ectto audit by third^party payers^ differences between amounts provided and final settlements are included in the combined statement ofactivities in the year of settlement Duringfiscal 1998, theOrganizations received prior yearthird^partysettlementsof^l^,^99^

rô^sing has received êction811 capitaladvancesofapproîmately^^^fromtheU^ Department of Housing and Urban Development (HUD) to construct two residential facilities ôr developmentally disabled individuals These advances are nonînterest bearing and repayment is not retired as long as the related housing remains availableforaperiodof^yearsforlov^ income individuals with disabilities^

f^^rmg ^999, Edison receivedaêction^^ capital advance from HUT^ of appro^matelyÔ^^^ Thisadvancewasusedtoconstructaresidential housingfacilityôr elderly and handicapped individuals' This advance is nonînterest bearing and repayment is not retired aslong as the related housingremainsavailableforaperiodof^yearsforelderly and handicapped individuals'

Oash^

The companies maintain their cash in banl^ demand deposit accounts and certificates of depositwith a maturity ofthree months or less at the time of purchase^ These accounts may, at times, exceed federally insured limits^ The companies have not experienced any losses in mese accounts and believetheyarenote^posedtoany significantcreditrisl^with respecttothese cash balances^

^roperty^

property is recorded atcost, if purchased, or the fair market value at the date of donation depreciation is provided usmg the straight^line method over the estimated useful lives of the related assets which range from five to thirtyyears^ amortization ofthe cost ofleasehold improvements is provided usingthestraight^line method over the term of the lease^ The Organizations^ policy is to capitalizeall property purchasesover^l,OOOwithauseful lifegreaterthanoneyear^

^ 839

IBERO-AMERICAN ACTION LEAGUE. INC. AND AFFILIATES NOTES TO COMBINED FINANCIAL STATEMENTS MARCH 31.1999 AND 1998

(1) The Companies

The combined financial statements include the accounts of the following New York not-for-profit corporations (the Organizations):

Ibero-American Action League, Inc. (Ibero) fosters the growth and development of Hispanics and other minorities in Rochester, New York and the surrounding area by providing culturally sensitive programs and services intended to raise socioeconomic status, well-being and citizenship awareness. Its goals are to strengthen families and to provide the tools and resources that enable its constituents to achieve social and economic independence.

Ibero-American Development Corporation (Development), formerly known as Pueblo Development Corporation, was incorporated by certain officers and directors of Ibero to maintain and manage real property for Ibero. In addition, Development, in conjunction with other third-parties, identifies, refurbishes or builds and markets homes to eligible purchasers in the Rochester, New York area.

Ibero Housing Corporation (Housing) was incorporated to develop, own and operate two residential facilities in Rochester, New York.

Edison Housing Development Fund Corporation (Edison) was incorporated in fiscal 1999 to develop, own and operate a housing project for elderly or disabled persons of low income in Rochester, New York.

In addition, the combined financial statements include the accounts of Ibero-American Investors Corporation (Investors), a wholly-owned for-profit subsidiary of Ibero:

Investors is a small business investment company with a fiscal year ending February 28. Investors is a Section 301(d) Licensee, licensed by the Small Business Administration (SBA) under the Small Business Investment Act of 1958, as amended. Investors' investment policy is limited to making investments primarily in small businesses in the Monroe County, New York area in an effort to facilitate ownership in these businesses by persons whose participation in the free enterprise system is hampered because of social or economic disadvantages.

All significant intercompany account balances and transactions have been eliminated in the accompanying combined financial statements.

<2) Summary of Significant Accounting Policies

Basis of Accounting -

The combined financial statements have been prepared using the accrual basis of accounting.

65 V v. 840 IBERO-AMERICAN ACTION LEAGUE. INC. AND AFFILIATES

COMBINED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED MARCH 31.1999 AND 1998

1999 1998

CASH FLOW FROM OPERATING ACTIVITIES: Change in net assets 157,706 $ 392,624 Adjustments to reconcile change in net assets to net cash flow from operating activities: Depreciation and amortization 174,157 127,953 Loss on sale of securities 75,352 108,543 Provision for doubtful accounts 71,117 56,196 Gain on sale of property (11,281) - Gain on forgiveness of loan (55,000) - Changes in: Receivables (474,629) (154,844) United Way receivable (12,003) (30,336) Contribution receivable (88,650) - Prepaid expenses and other assets (119,922) (68,678) Accounts payable 168,904 81,347 Accrued payroll and employee benefits 33,072 23,634 Deferred revenue and other liabilities 945,357 99,804

Net cash flow from operating activities 864,180 636,243

CASH FLOW FROM INVESTING ACTIVITIES: Purchases of property (2,254,838) (427,860) Net proceeds from sale of property 118,735 116,222 Collection of loans receivable 700,390 947,872 Extension of loans and purchases of investments (617,827) (1,073,000)

Net cash flow from investing activities (2,053,540) (436,766)

CASH FLOW FROM FINANCING ACTIVITIES: Change in lines-of-credit 185,000 50,000 Borrowings on mortgages and notes payable 1,144,462 47,913 Repayments on long-term debt (225,095) (227,139) Net proceeds from sale of preferred stock 410,000 350,000

Net cash flow from financing activities 1,514,367 220,774

CHANGE IN CASH 325,007 420,251

CASH - beginning of year 1,170,594 750,343

CASH - end of year $ 1,495,601 $ 1.170,594

66 The accompanying notes are an integral part of these statements. -4- 840 IBERO-AMERICAN ACTION LL £. INC. AND AFFILIATES COMBINED STATEMENTS OF CHANGE IN STOCKHOLDERS' EQUITY AND NET ASSETS FOR THE YEARS ENDED MARCH 31. 1999 AND 1998

-Stockholders' Equity- — Net Assets- Additional Preferred Common Paid-in Accumulated Temporarily Stock Stock Capital Deficit Unrestricted Restricted Total

BALANCE - March 31, 1997, as previously reported 1.225.000 $ 1.436,962 $ (513.592) $ 1.303.341 $ 325,080 $ 3,776,791

PRIOR PERIOD ADJUSTMENT (Note 3) (127.219) (127,219)

BALANCE - March 31, 1997, as restated 1,225,000 1.436.962 (640.811) 1.303,341 325,080 3,649,572

NET INCOME 13,667 13,667

CHANGE IN NET ASSETS: Change in net assets before release of restrictions (261.698) 640,655 378,957 Net assets released from restrictions 598,354 (598,354)

13,667 336,656 42.301 392,624

PROCEEDS FROM ISSUANCE OF PREFERRED STOCK 350,000 - - - 350,000

<&OSTS OF ISSUANCE OF PREFERRED STOCK (17.500) - - - (17,500) 2 CHANGE IN UNREALIZED LOSS ON SECURITIES (168,277) - - (168.277)

DIVIDENDS (81.640) - . (81.640)

BALANCE - March 31.1998 1,575,000 1,419,462 (877,061) 1,639,997 367.381 4.124.779

NET INCOME 50.742 50,742

CHANGE IN NET ASSETS: Change in net assets before release of restrictions (523,830) 630,794 157.706 Net assets released front restrictions 651,585 (651,585)

50,742 127,755 (20,791) 157,706

PROCEEDS FROM ISSUANCE OF PREFERRED STOCK 450.000 - - - 450,000

COSTS OF ISSUANCE OF PREFERRED STOCK (22.500) - - - (22.500)

CHANGE IN UNREALIZED LOSS ON SECURITIES (200,641) - - (200,641) C < DIVIDENDS (81,640) - . (81,640)

BALANCE-March 31,1999 $ 2.025,000 $ $ (1,108,600) $ 1,767,752 $ 346,590 $ 4,427,704 00 The accompanying notes are an integral part of these statements. -3- 842 IBERO-AMERICAN ACTION LEAGUE. INC. AND AFFILIATES

COMBINED STATEMENTS OF ACTIVITIES

FOR THE YEARS ENDED MARCH 31.1999 AND 1998

1999 1998

PUBLIC SUPPORT AND REVENUE:

Government fees and grants 3,184,713 $ 2,625,230 Program service fees 727,072 573,278 United Way 406,744 406,175 Contributions 305,124 328,890 Investment income 635,914 592,811 Other 340,133 290,049

Total public support and revenue 5,599,700 4,816,433

EXPENSES:

Program services 4,483,578 3,609,374 Management and general 421,244 386,990 Operating expenses 510,754 476,205 Loss on investments and other assets 75,352 118.221

Total expenses 5,490,928 4,590,790

EXCESS OF PUBLIC SUPPORT AND REVENUE OVER EXPENSES BEFORE EXTRAORDINARY ITEM 108,772 225,643

EXTRAORDINARY ITEM: Gain on forgiveness of loan 55.000

163,772 225,643

PRIOR YEAR THIRD-PARTY SETTLEMENTS 163,699

INCOME TAX BENEFIT (EXPENSE) (6,066) 3,282

CHANGE IN NET ASSETS $ 321,478 $ 618,267

68 The accompanying notes are an integral part of these statements. 842 -2- 1DERO-AMERICAN ACTION LEAGUE. INC. AND AFFILIATES

COMBINED BALANCE SHEETS

MARCH 31. 1999 AND 1998

1999 1998 1999 1998

ASSETS LIABILITIES AND STOCKHOLDERS' EQUITY AND NET ASSETS

LIABILITIES: Cash 1,495,601 1,170,594 Lines -of-credit s 335,000 $ 150.000 Receivables, less allowance tor doubtful accounts of Accounts payable 726,408 577,004 approximately SI 18,000 and $77,000 in 1999 Accrued payroll and employee benefits 198,034 164.962 and 1998, respectively 1,088,801 675,695 Deferred revenue and other liabilities 2.069,293 1.123.936 United Way receivable 111,845 99,842 Mortgages, notes payable and capital lease obligations 3,329,041 2,459,054 Contribution receivable 88,650 - Redeemable preferred stock - 4% cumulative, SI00 par Prepaid expenses and other assets 513,312 420,666 value; 30,000 shares authorized, 20,410 shares Loans receivable and investments 5,853,501 6,211,916 issued and outstanding 2,459,883 2.378,243 Property, net 4,393,653 2,399,265 Total liabilities 9,117,659 6,853,199 s

STOCKHOLDERS' EQUITY AND NET ASSETS: 2 Stockholders' equity: Ul Preferred stock - Class A non-voting, 4% cumulative, $ 1,000 par value; 5,000 shares authorized, 2,025 and 1,575 shares issued and outstanding in 1999 and 1998, respectively 2.025,000 1.575.000 Common stock - Class D nun-voting, $1 par value; 5,000 shares authorized and unissued Additional paid-in capital 1,396.962 1.419,462 Accumulated deficit (1.108,600) (877,061) Net assets: Unrestricted 1,767,752 1.639,997 Temporarily restricted 346.590 367,381

Total stockholders' equity and net assets 4,427.704 4."4t77»

13.545,363 10,977,978 13,545,363 10,977,978

co Hie accompanying notes are on integral part of these statements. CO I- BONADIO -" 8i CO LLP One Cambridge Place ' 1850 Winton Road South Rochester, NY 14618-3993

INDEPENDENT AUDITORS' REPORT

July 7,1999

To the Boards of Directors of

Ibero-American Action League, Inc. and Affiliates:

We have audited the accompanying combined balance sheets of Ibero-American Action League, Inc. and affiliates (the Companies) as of March 31,1999 and 1998, and the related combined statements of activities, change in stockholders' equity and net assets, and cash flows for the years then ended. These combined financial statements are the responsibility of the Companies' management Our responsibility is to express an opinion on the combined financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the combined financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of the Companies as of March 31, 1999 and 1998, and the results of their combined operations and cash flows for the years then ended, in conformity with generally accepted accounting principles.

As discussed in Note 6, the investment securities included in the combined financial statements have been valued by the Board of Directors of Ibero-American Investors Corporation using valuation criteria applicable to the licensee. These criteria were established in accordance with Section 301(d)(2) of the Small Business Investment Act of 1958, as amended.

Our audits were made for the purpose of forming an opinion on the basic combined financial statements taken as a whole. The information contained in Exhibits I through VII is presented for purposes of additional analysis and is not a required part of the basic combined financial statements. Such information has been subjected to the auditing procedures applied in the audits of the basic combined financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic combined financial statements taken as a whole.

PeviacUt i Co. f LLp

844 B

IBERO-AMERICAN ACTION LEAGUE, INC. AND AFFILIATES

COMBINED FINANCIAL STATEMENTS

AS OF MARCH 31. 1999 AND 1998

TOGETHER WITH

INDEPENDENT AUDITORS' REPORT

BONADIO CO., LLP

ACCOUNTANTS L&&MORE 84571 ^

^ ^fhe^ear^^

^ere has been considerable discussion durmgmepastfewyearswithrespectto the year ^^ and the effect it will have on computer systems. At the beginning of the new millennium, many systems that use dates may become obsolete and may be sub^ectto gross and unpredictable errors, ^rior to the year ^^0, all existing systems must be evaluated to ensure that dates after 1^ will be accurate and controls and calculations will be reliable.

We recommend that managementfocus its efforts to ensureasmooth transition related to this issue. Action steps thatshould be considered are asfollows^

^ As part ofthe budgeting process, allocate fundsforanynecessary conversions,

^ develop the approach and timetableforthe conversion, and

D r^onitorthe conversion to ensure the conversion is doneonatimely basis.

Wealso recommend thatthe Organization seekthe advice ofits software vendors and anypotential newvendors as soon as possible toensurethat all software will be compliant, m addition to advice from vendors, it may be necessary to engage professional consultants in assessing and solving any potential problems.

^5 ^7

(^ governmental ûditorsand Their rôcus on Ta^^êmpts

In thepastseveralyears,govemmentauditors,(Medicare,Medicaid, StateDepartment audit groups, l^S,êwôrl^ State sales ta^,etc.^have substantially increased theirlevel of review and enforcement of regulations in the ta^êêmpt sector. The increased scrutiny isaresult of various audit results and studies byme general ^ccountmg Office which indicates that between 1^ and 20% of government payments forthe Medicaid programs may be ôrunnecessary,fraudulentorfor excessive services, ^saresult, the bar of expectation of compliance has been raised significantly. In addition, technical regulations are now being strictly enforced.

behave compiled me following list of issues ^or government auditors based on our experience over the last several years and the approach and findings ofgovemment auditors in recently issued auditreports.

^ ^smentionedmme previous suggestion, supporting analysis ^or cost allocations in third^party costreportsmustbethorough, fair, reasonableand result inproper allocation ofcoststo individual program components.

D Minutes talên at ôardofDirectorsmeetingsmustdocument significant discussions and decisions of the 8oard by resolution and vote, ôard and Oommittee minutes must thoroughly document discussions and decisions related to all lêy issues (e.g., banl^ debt, property purchases, operating budget, salary increases, etc.^.

^ ^ny loans, advances or capital contributionstoaf^liated^af^irmative^ businessesmustbe supportedbyabusinessplanandincludethe source and use of funds including plansfor repaymentwith related interest charges.

^ ^ny program or non^program real estate purchases should be supported byavalidthird^party appraisal, active price negotiations andabusiness plan includingacalculation of anticipated return on investment.

^ Documentation in clientrecords must be in technical compliance wimthird^party regulations.

D ^11 payments to related organizations or affiliated entities must be reflected at cost for thirds party costreports.ô^profitmarginôrmarlûp is allowed onrelated party transactions.

^ There must beaperiodic documented 0^0 performance evaluation in the 0^0 personnel file, preferably annually. The ôardOhairandôraôardOommittee should perform this review and include documentation ofcompensation adjustments and comparison to market based 0^0 compensation packages forreasonableness.

^ ^deoBiate, authorized and proper documentation ^or all travel, lodging and food expense reimbursements with particular emphasis on those submitted by management level employees.

D finally, and perhaps most importantly, documentation signed by each and every management team and^oardmemberregardingtheirunderstanding and adherence toaOorporate conflict of Interest^olicy.

The list above is not intended asacriticismofthe Organizations. However, we believe that it can be u^edas an effective roadmap^oran internal auditprogramforthe Organizations.

^7 ^

^ Outsourcin^Opportunities^ontmued^

If it is determmed that any of the ahove items, or any other functions not identified, can he performed more efficiently hyanotherparty or atareducedcostto the Organizations,apotential outsourcing opportunity exists. Atme same time, the Organizations should identify its strengths or functionsmatmey may he ahle to perform more cost effectivelythan other organizations. In these cases,apotentialinsourcingopportunitymay exist.

^ ^ost^eportin^ and Allocation

government and mird-partymnders are mcreasmgmeir audit efforts related to agency compliance with their cost reporting principles, ^fhis focus is now pervasive in the health and human services sector, morderto comply wim their cost reporting principles, Ihero must haveacost accounting system in place that is periodically updatedfor accuracy of cost allocation and accumulation as well as related reporting of service statistics. Unfortunately, most non-profit accounting software does not provide sophisticated cost accounting modules that provide for interim accumulation of costs onaunit of service or program component oasis. Asaresult,lhero expends considerable manual staffeffort at year end to develop the datanecessary to complete the year^end cost reports required hythird^partyfunders.

In order to improve Ihero^scost reporting procedures, werecommend the following hegiven appropriate evaluation and consideration.

D periodic time studies ^preferahly weekly time reports^should he prepared hy each staff memher involvedinmultipleprogram activities.

^ A review toverifytheoccupancyallocationtoprogramcomponentsshouldhe performed annually orwheneverchangesinprogram location occur.

^ policies should he established regardmg segregation and identification of all agency fundraising costs as mesecostsarenotallov^hleformird-partycostreporting.

D All common costs, ^e.g., insurance, professionalfe^s, utilities, office supplies, transportation, etc.^musthe identified andallocated to program components onafairandreasonahle allocation method.

^ ^ach year, cost allocation documentation should he accumulated and summarized in one file to support that year^scost allocation, ^tisimportant that this documentationhe maintained consistently from yearto year, ^fhis documentation will he invaluahle to third-party auditors in suhstantiatingcosts reported in each year^scostreports.

finally, we recommend that one individual in the finance department he designated as the individual responsihleforcostallocationsandrelatedsupport. ^fhispersonshouldalsohave responsihilityfor ensuring accurate program service statistical documentation.

7^1 ^

^ retirement r^lan^e^ulatorv compliance

înce me enactment of me ^ployee retirement Income êcurity^ct of 1^7^ ^^1^^, there have been substantial and dramatic changes in the regulationsgoveming employee retirement plans, rôst recently, me mternal revenue service and the department ofâbor have focused on section ^^^ Tax sheltered annuity I^lans. This scrutiny is the result oftheir audits indicating thatamaôrityofthese plans ^vere not in regulatory compliance. Therefore, the T^ and fÔI^ are conductingaTaxpayerôluntary Oompliance^rogramaimedattax-exempt employers^ho sponsor ^3^plans^vho voluntarily identify and remedy instances of regulatory noncompliance for their plans. This program is in effect through December 31,1^^. The 0^5 and ^0^ have strongly indicated that employers ^vho do not participate in the voluntary compliance program ^vill have me qualified tax deferral stams of meirplar^ revoked if subsequent audits identify instances ofnoncompliance.

Westrongly recommend that management follow through^vith itsplansofhavingaspecial procedural audit done of the ^^^ plan to ensure compliance ^vith 11^5 and ^^regulations, specifically, ^e recommend thatastatistical sample of employee participants in the plan be tested for proper documentation and approval of all^

D ^lectivedeferrals, ^ ârryforârdsofexcess deferrals for long-term employees, ^ spousal consentforms, ^ Iôan withdrawals, ^ Iôanrepayments, D Timeliness of deposits, and ^ employee transfer authorisation.

We have also been made avâre that the ôard has approved the annual deposit of the employees contribution to me ^^^Tax sheltered ^ruûity^lansofits eligible employees to be made within sixmonths ofthe fiscal yearend.Werecommendthatmanagementadhere to this policy.

^ Outsourcing Opportunities

boards and management of tax-exempt organi^tionscontmuetofaceincreasedpressurefrom government and mird-partyfunders for improved service outcomes and increased cost efficiencies. This fundmg environment requires continued evaluation of the cost effectiveness of program and administrative support services. Webelieve that thereareopportunitiesfbr every tax-exempt orgaru^ation to evaluate me cost^benefitofoutsourcing certain functions.

mmepastseveralyears,merehasbeenasignificantincreaseinthe number and qualityof outsourcing service providers. What used to be limited to payroll and retirement plan administration has increased toa^videarrayofêrviceproviders^vhomay offer tax-exempt organisations an opportunity to improve service quality and reduce cost. We believe that the Organisations^ management and ôard shouldconsiderthe following functions for potential outsourcings ^ document production and retention, ^ ^luman resources compliance, etc., ^ Internal audit functions, and ^ ôstreportpreparation. 850

IBERO-AMERICAN ACTION LEAGUE. INC. AND AFFILIATES

SUGGESTIONS FOR THE CONSIDERATION OF MANAGEMENT

JUNE. 1998

(1) Review of Prior Year Suggestions

In connection with our audit of the financial statements for the year ended March 31, 1998, we reviewed the status of our prior year management letter recommendations. These recommendations related to the following:

• Expense Allocations, • Retirement Plan, • Process Re-engineering, • Shared Service Agreements, • Fixed Assets, • CHDO Budget Modifications, • Tenant File Documentation, and • Tenant Selection Plan.

We are pleased to report that all of these recommendations were fully implemented or have been appropriately addressed during fiscal 1998.

(2) Accounts Receivable

During fiscal 1998, Ibero-American Action League, Inc's (Ibero) accounts receivable increased by approximately $195,000, or 37%. In addition, there are many long outstanding receivables in the Family Care, Foster Care and Medicaid Waiver programs.

We recommend that Ibero's management make billings and collections a priority in the current fiscal year. Improved accounts receivable management will significantly improve Ibero's cash flow situation.

(3) Accounting Department Staffing

The Organizations' accounting staff complement has remained consistent for the past few years. However, since fiscal 1995 the Organizations' public support and revenue has increased approximately $1,460,000, or 50%. This growth is due to an increase in the Organizations' historical program activities, as well as expansion into new programmatic areas and the formation of new corporations.

We recommend that the Organizations' management evaluate the current staffing complement in its accounting department to determine if it is adequate to meet the expected short-term organizational needs.

76 -1- 850 851 BONADIO CO., LLP One Cambridge Place 7 1850 Winton Road South Rochester, NY 14618-3993

June, 1998

To the Boards of Directors of

Ibero-American Action League, Inc., Ibero-American Development Corporation and Ibero Housing Corporation:

In planning and performing our audit of the financial statements of Ibero-American Action League, Inc. and affiliates (the Organizations) for the year ended March 31,1998, we considered the Organizations' internal control structure to determine our auditing procedures for the purpose of expressing an opinion on the financial statements and not to provide assurance on the internal control structure. However, during our audit we became aware of several matters that are opportunities for strengthening internal controls and operating efficiency. The memorandum that accompanies this letter summarizes our comments and suggestions regarding those matters. This letter does not affect our report dated June 25, 1998 on the financial statements of Ibero-American Action League, Inc. and affiliates.

tQ^+dxO**- hklf

851 852

IBERO-AMERICAN ACTION LEAGUE, INC. AND AFFILIATES

SUGGESTIONS FOR THE

CONSIDERATION OF MANAGEMENT

JUNE, 1998

BONADIO CO., LLP

CERTIFIED%BLIC Xo\ ACCOUNTANTS VJ&0MORE

852 78 IBERO-AMERlr,,, • .CTION LEAGUE. INC.

STATEMENT OF FUNCTIONAL FUBUC SUPPORT AND REVENUE AND EXPENSES

FOR THE YEAR ENDED MARCH3I. I9M

(Will, CorapKidvc Touli br 1997)

-Program Soviets-

Mintgement Fsmlly Development!! Emergouy Senior Educslloo end Housing mnd CWMCja Support DhibllUltl AsslBmct CilUens Enmlovmcm Other. Isui 1998 Ji22

PUBLIC SUPPORT AND REVENUE:

Oovcnuncm lees ind grants S S0J96 S 1,190,692 t - I.049JI9 S - % 50,300 S 121.022 S - s 93,036 8 2.554.665 S 756 S 2.155.421 S 2,180.814 Program service fees 232,551 243.642 3,286 217 479,698 479,698 449.651 United Way 41,191 142,500 109.715 31,281 4,461 15.865 17,905 520 391.160 391,160 371.867 Contributions 2,330 150 10,510 79.438 92,428 1,462 93,890 102.241 Other I.IIT 2.112 t* ... 39.816 337.638 377.444 385.708

Tout public support and' revenue 327 262 U34J79 14*4.911 1IJ0I 61.561 m,m 37.905 209.554 3,517,767 H9.846 3897.613 M?,,,,;

EXPENSES:

Sauries, payroll tales tn) employee bencfits 244.S7I 77IJ74 181.510 24,199 41,671 93,722 41.841 87.497 2.200.987 237,027 2.438.014 2236.873 Profesiiorul and subcontracting fees 10,911 I92J62 I25J63 197 1,156 627 4.375 18.681 393.842 12,015 405,857 185.946 Occupancy 31)52 S4J93 97JP9 2.523 1,116 17.298 2J26 33.361 234.740 27.259 181.999 269.831 Supplies 41.901 10.232 90.853 331 • 6v>ll 1,146 515 3.133 166.861 9.738 176,599 170.817 Conferences and meetings I.I II 10.463 9.566 310 116 341 635 33.053 15.746 26.129 11.873 40.171 Dtprednlonandamortlullon 30 3.211 10,771 14.013 10.884 64,697 66,819 Travel 13 6.921 34,114 203 46 1.739 43.736 7.221 10.917 48.841 Interest 2IJI0 10.451 31.761 14,673 46.414 47,818 CO :H in VO Telephone 3.564 1.171 14.817 519 843 3,864 408 1.446 33.634 5.349 38,981 14,204 (JO Usbilllly Insurance 3,159 W> 9.419 97 368 1,474 4,590 22,040 4,456 26.502 28.177 Assistance to Individuals 63 5,210 1,126 9.750 23,889 21.889 16,452 Equipment pu/rtaiei 350 911 7,131 6 1.123 3.648 5 13.901 U40 11.241 4.110 Printing and publications 1.041 367 1,021 26 2 628 8.313 II.40U 2,723 14.121 11,863 Rental and maintenance of equipment I.U4 1.292 2.375 48 100 1.257 778 7,684 1,169 8.811 11.436 Postage and shipping 161 1.665 969 44 52 82 2.793 5.773 2.372 8.141 8.839 Donated nurds (2,791) (2.792) (2.792) 12.097 Other 2.170 20,016 41,416 4 13 II 204 63.924 4,952 68.876 12.700 Overhead allocation 116.634 Mm ITS 375 3300 211.256 229.975 Total npensu 346.524 IJ7I.910 14*7,11! . H2M 71.974 IJ1,lv7 50,000 272.467 ?,1«,401 <0?,307 1.959.708 j-mwi

CHANGE IN NET ASSETS BEFORE ALLOCATION OF MANAGEMENT AND GENERAL (19.262) 62,449 17,799 16 (3.413) 2,781 (12.095) (62.913) 5.366 (67.461) (62.091) 4U4I

ALLOCATION OF MANAGEMENT AND GENERAL (6JIII 14.154) M*,*%) 1727) (IM) . _ P.J1') (949) (5.174) . K7,4,6|) _., 67.461 I, _(2JJ4J) l_ i ma L= (7ID 1 m !_ JI3.044) I_. (61.087) S , ,nm> t . Aim

The accompanying notes are an Integral part of these eihUnu.

-21

00 en CO Exhibit VI IBERO-AMERICAN ACTION LEAGUE. INC. AND SUBSIDIARY AND AFFILIATES COMBINING STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED MARCH 31. 1997

Ibero- Ibero- Ibero- American American Ibero American Action Development Housing Investors League, Inc. Corporation Corporation Corporation Total CASH FLOW FROM OPERATING ACTIVITIES:

Change in net assets 203,099 $ 156.957 $ 9.310 $ 49,137 $ 418,503 Adjustments to reconcile changes In net assets to net cash flow from operating activities: Depreciation and amortization 66.839 34,034 13,699 14.095 128,667 Loss on investments 85,942 85.942 Provision Tor doubtful accounts 2,500 2,231 4.731 Changes in: Receivables (119,344) 5,216 (6,475) (120,603) United Way receivable (69,506) (69,506) Prepaid expenses and other assets (4,300) (15.354) 2,727 53.754 36,827 Accounts payable (52,713) 69,828 (138.087) (12,217) (133,189) 00 Accrued payroll and employee benefits 32.265 32,265 in § Deferred revenue and other liabilities (184.598) 54.852 40.593

Net cash flow from operating activities (125.758) 305.533 (71.758) 186.467 294.484 CASH FLOW FROM INVESTING ACTIVITIES:

Purchases of property (5,576) (100.388) (4,914) (2.741) (113.619) Collection of loans receivable 519,533 519,533 Purchases of loans and investments (558.895) (558.895)

Net cash flow from investing activities (5,576) (100.388) (4-914. (42.103) (152.981) CASH FLOW FROM FINANCING ACTIVITIES:

Change in amounts due from (to) affiliates (3,581) 148 3,433 Change in line-of-crcdit 50,681 50,681 Mortgages and notes payable borrowings 31,621 31,621 Repayments on long-term debt (35146) (39.467) (462.318) (536.931)

Net cash flow from financing activities 43,575 (39.319) 3.433 (462.318) (454.629)

CHANGE IN CASH (87,759) 165,826 (73.239) (317,954) (313,126) CASH - beginning of year 148.033 20.394 101.222 793.820 1.063.469 CASH - end of year 60,274 186.220 £_ 27.983 475.866 750.343 00 The accompanying notes are an integral part of these exhibits. en

-20- Exhibit V IBERO-AMERICAN ACTION LEAGUE. INC. AND SUBSIDIARY AND AFFILIATES

COMBINING STATEMENT OF ACTIVITIES

AND CHANGES IN NET ASSETS

FOR THE YEAR ENDED MARCH 31. 1997

Ibero- Ibero- Ibero- American American Ibero American Action Development Housing Investors League. Inc. Corporation Corporation Corporation Eliminations Total

PUBLIC SUPPORT AND REVENUE:

Government lees and grants $ 2.180,814 $ 50,106 $ 27.760 $ $ - $ 2.258.680 Program service fees 449,651 139,170 19.708 (107,525) 501.004 United Way 533,725 533.725 Contributions 102,242 164.500 266.742 Investment income 623,638 (12,000) 611,638 Other 385.708 14.148 979 (108.697) 292.138

Total public support and revenue 3.652.140 367.924 48.447 623.638 (228.222) 4.463.927 oo 22 EXPENSES: Program 3,083,184 199.326 37,994 (125.344) 3,195.160 Management and general 365.857 11.641 1.143 (102.878) 275.763 Operating expenses of subsidiary 480,055 480,055 Loss on investments and other assets 83.218 83.218 Total expenses 3.449.041 210.967 39.137 563.273 (228.222) 4.034.196 CHANGE IN NET ASSETS BEFORE INCOME TAXES 203,099 156,957 9.310 60,365 - 429,731

INCOME TAX EXPENSE (I 1.228) (11.228)

CHANGE IN NET ASSETS 203,099 156,957 9,310 49,137 - 418.503 NET ASSETS - beginning of year 1,242.610 20,337 (3.892) (402,209) - 856,846 CHANGE IN UNREALIZED LOSS ON SECURITIES HELD - - - (78,880) - (78,880) DIVIDENDS (81.640) (81.640) NET ASSETS - end of year $ 1.445.709 S 177.294 $ 5.418 $ (513.592) $ • $ 1.114.829

00 en The accompanying notes are an integral part of these exhibits. cr? -19- Exlltim IV IBERO-AMER1CAN ACTION LEAGUE. INC. AND SUBSIDIARY AND AFFILIATES

COMBINING BALANCE SHEET

MARCH ?l, ,1997

Ibero- lbero- Ibero- Amcrican Amcrican Ibero Amcrican Action Development Housing Investors League. Inc. Corporation Corporation Corporation Eliminations Total ASSETS:

Cash S 60,274 S 186,220 S 27,983 S 475,866 $ - $ 750,343 Receivables, less allowance Tor doubtful accounts of approximately $89,000 436.307 23,850 137.066 597.223 United Way receivable 69.506 69.506 Prepaid expenses and other assets 122,228 54,743 62,203 95.525 334.699 Loans receivable and investments 6.366,610 6,366.610 Amounts due from (to) affiliates 38,483 (31,514) (6,969) Property, net 960.177 617,972 381.561 242,097 2.201.807 Investment in subsidiary 1,204,786 (1, ,204.786) $ 2.891.761 $ 851.271 S 464.778 S 7.317.164 s (1 .204.786) $ 10.320.188 00 in LIABILITIES:

B Line-of credit $ 100,000 $ s $ s $ 100,000 Accounts payable 353,565 71.860 9.573 35,500 470.498 Accrued payroll and employee benefits 141,328 141,328 Deferred revenue and other liabilities 400,823 68.428 449.787 2.650 921,688 Mortgages, notes payable and capital lease obligation 450.336 533.689 1.629,255 2.613.280 Redeemable preferred stock - 4% cumulative, $100 par value; 30.000 shares authorized, 20,410 shares issued and outstanding . - . 2.296.603 2.296.603

Total liabilities 1.446.052 673.977 459.360 3.964.008 6.543.397 STOCKHOLDERS' EQUITY AND NET ASSETS:

Preferred slock - Class A, 4% cumulative, $1,000 par value; 5,000 shares authorized, 1,225 shares issued and outstanding 1,225,000 1.225.000 Common stock - Class A voting. $1 par value: 5.000 shares authorized. 2,975 shares issued and outstanding 2,975 (2.975) Common stock - Class B non-voting, $ I par value; 5,000 shares authorized and unissued Additional paid-in capital 2.638.773 (1.201,811) 1.436,962 Accumulated deficit (513,592) (513,592) Net assets: Unrestricted 1.284,851 13.072 5,418 1.303,341 Temporarily restricted 160.858 164.222 325.080

Total stockholders' equity and net assets 1,445.709 177.294 5.418 3.353.156 (1.204.786) _ 3.776,791 2.891.761 $ $ 851.271 464.778 $ 7.317.164 $_ (1.204.786) $_ '0-320.188 oo en a* The accompanying notes are an integral part of these exhibits. Exhibit Hi IBERO-AMERICAN ACTION LEAGUE. INC. AND SUBSIDIARY AND AFFILIATES

COMBINING STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED MARCH 31.1998

Ibero- Ibero- Ibero- American American Ibero American Action Development Housing Investors League. Inc. Corporation Corporation Corporation Total

CASH FLOW FROM OPERATING ACTIVITIES:

Change in net assets $ 116,619 $ 268,767 $ (6,429) $ 23,845 S 402,802 Adjustments to reconcile changes in net assets to net cash flow from operating activities: Depreciation and amortization 64,897 32.735 15,350 14,971 127,953 Loss on investments 108.543 108,543 Provision for doubtful accounts 56,196 56,196 Changes in: Receivables (164.295) 1,997 7.454 (154,844) United Way receivable (30,336) (30,336) Prepaid expenses and other assets (8.175) (68.376) (10.329) 18,202 (68,678) Accounts payable 22,487 67.043 3,011 (11.194) 81.347 Accrued payroll and employee benefits 23,634 23,634 00 Deferred revenue and other liabilities (32,052) 80.749 40.929 89.626 00 in w Net cash flow from operating activities 48.975 382.915 42.532 161.821 636,243 CASH FLOW FROM INVESTING ACTIVITIES: Purchases of property (46,022) (336.665) (43,396) (1.777) (427.860) Proceeds from sale of property 116.222 116.222 Collection of loans receivable 947.872 947,872 Purchases of loans and investments (1.073.000) (1.073.000) Net cash flow from investing activities (46.022) (220.443) (43.396) (126.905) (436.766)

CASH FLOW FROM FINANCING ACTIVITIES: Change in amounts due from (to) affiliates 5,186 (308) (4.878) Change In line-or-credit 50.000 50,000 Mortgages and notes payable borrowings 47,913 47.913 Repayments on long-term debt (63,100) (43.288) (120.751) (227.139) Proceeds from sale of preferred stock 350.000 350.000 Net cash flow from financing activities 39.999 (43.596) (4.878) 229.249 220.774 CHANGE IN CASH 42.952 118,876 (5.742) 264.165 420.251 CASH - beginning of year 60,274 186.220 27.983 475.866 750.343

CASH - end of year $ 103.226 $ 305.096 $ 22.241 $ 740.031 $ 1.170.594 00 The accompanying notes are an integral part of these exhibits. en 17. Exhibit ll IBERO-AMERJCAN ACTION LEAGUE. INC. AND SUBSIDIARY AND AFFILIATES

COMBINING STATEMENT OF ACTIVITIES

AND CHANGES IN NET ASSETS

FOR THE YEAR ENDED MARCH 31.1998

Ibero- Ibero- Ibero- American American Ibero American Action Development Housing Investors League. Inc. Corporation Corporation Corporation Eliminations Total PUBLIC SUPPORT AND REVENUE:

Government fees and grants 2.555,421 $ 50,468 $ 19,341 $ $ - $ 2,625,230 Program service fees 479,698 176,512 24,593 - (107.525) 573.278 United Way 406,175 - - - - 406,175 Contributions 93,890 235,000 - - - 328,890 Investment income - - - 604,811 (12,000) 592,811 Olher 377.444 22.474 2,103 - (111,972) 290.049 Total public support and revenue 3.912.628 484.454 46.037 604.811 (231.497, 4.816.433 EXPENSES: oo oo Program 3,552,401 204,067 51,057 (198.151) 3,609,374 in *• Management and general 407,307 CO 11.620 1,409 (33,346) 386,990 Operating expenses of subsidiary 466.027 466.027 Loss on investments and other assets 118.221 118221

Total expenses 3.959.708 215.687 52.466 584.248 (231.497, 4,580,612 CHANGE IN NET ASSETS BEFORE INCOME TAXES AND PRIOR YEAR THIRD-PARTY SETTLEMENTS (47,080) 268,767 (6,429) 20,563 - 235.821

PRIOR YEAR THIRD-PARTY SETTLEMENTS 163,699 - - - - 163,699

INCOME TAX BENEFIT . . 3.282 3.282

CHANGE IN NET ASSETS 116.619 268,767 (6,429) 23.845 - 402,802

NET ASSETS - beginning of year 1,445,709 177.294 5,418 (513,592) - I.I 14.829 CHANGE IN UNREALIZED LOSS ON SECURITIES HELD - - - (168,277) - (168,277)

DIVIDENDS - - - (81.640) . (81.640)

NET ASSETS - end of year 1.562.328 $_ 446.061 |_ CO") S (739.6641 $_ J.267.714

00 en The accompanying notes are an Integral part of these exhibits. oo

-16- Exhibit I IBERO-AMERICAN ACTION LEAGUE. INC. AND SUBSIDIARY AND AFFILIATES COMBINING BALANCE SHEET MARCH 31 . I?98

Ibero- Ibero- Ibero- American American Ibero American Action Development Housing Investors League. Inc. Corrjoration Corporation Corporation Eliminations Total ASSETS:

Cash $ 103,226 $ 305,096 $ 22.241 $ 740,031 $ . $ 1,170,594 Receivables, less allowance for doubtful accounts of approximately $77,000 544,406 21,853 109,436 675,695 United Way receivable 99,842 99,842 Prepaid expenses and other assets 126.648 117,500 70.182 106,336 420,666 Loans receivable and investments 6.211.916 6.2! 1,916 Amounts due from (to) affiliates 33,297 (31,206) (2.091) Property, net 945.057 811,299 411,957 230,952 2.399,265 Investment in subsidiary 1.204.786 fl.204.786i

$ 3.057.262 $ 1.224.542 $ 502.289 $ 7,398.671 $ (1.204.786) $ 10.977.978 LIABILITIES: 00 Line-of-credit VO $ 150,000 $ $ $ $ $ 150.000 Accounts payable 376,052 138,903 12,584 49,465 - 577,004 Accrued payroll and employee benefits 164,962 164,962 Deferred revenue and other liabilities 368,771 149.177 490,716 2.875 1.011,539 Mortgages, notes payable and capital lease obligation 435,149 490.401 1,508,504 2,434,054 Redeemable preferred stock - 4% cumulative, $100 par value; 30,000 shares authorized, 20,410 shares issued and outstanding . _ 2.378243 2.378.243 Total liabilities |.494.934 778.481 503.300 3.939.087 6.715.802 STOCKHOLDERS' EQUITY AND NET ASSETS: Preferred slock - Class A, 4% cumulative, $1,000 par value; 5,000 shares authorized, 1,575 shares issued and outstanding 1,575,000 - 1,575,000 Common stock -Class A voting, $1 par value; 5,000 shares authorized, 2,975 shares issued and outstanding 2,975 (2.975) Common stock - Class B non-voting, $1 par value; 5,000 - shares authorized and unissued Additional paid-in capital 2.621.273 (1.201,811) 1,419,462 Accumulated deficit (739,664) Net assets: (739.664) Unrestricted 1.386,975 254.033 (1,011) 1,639,997 Temporarily restricted 175.353 192.028 367.381

Total stockholders' equity and net assets 1.562.328 446.061 CO") 3.459.584 n.204.786) 4.262.176 $ 3.057.262 $ 1.224.542 302.289 $ 7.398.671 $ (1.204.786) $ 10.977.978 oo en The accompanying notes are an integral part of these exhibits. CO

-15- 86

(11) Income Taxes (Continued)

Income tax benefit (expense) for 1998 and 1997 differs from the "expected" tax expense (computed by applying the U.S. federal corporate income tax rate of 34% to income before income taxes) as follows: 1998 1997

Computed "expected" federal tax expense $ (7,000) $ (20,524) State income taxes, net of federal income tax benefit (3,050) (3,622) Effect of graduated federal tax rates 3,900 11,469 Permanent tax differences 43,132 34,000 Other, net (33.700) 02.55 n

$ 3.282 $ (11.228)

Investors has available net operating loss carryforwards of approximately $225,000 and capital loss carryforwards of $118,000 which begin to expire in 2006. Since it is anticipated that these loss carryforwards will not be utilized prior to their expiration dates, a valuation allowance has been established.

Income taxes paid for the years ended March 31, 1998 and 1997 was $8,187 and $12,855, respectively.

(12) Commitments and Guarantees

In the normal course of business, Investors enters into commitments to lend money to qualified borrowers. At February 28, 1998 and 1997, these commitments totalled $54,030 and $884,319, respectively.

Investors continues to guarantee short-term bank borrowings for some of its existing clients. At February 28,1998 and 1997, these guarantees totalled $14,000.

Investors pays the premium and is the beneficiary of a $200,000 life insurance policy for Investors' President.

(13) Related Party Transactions

Under annual renewable operating leases, Ibero leases space from Development for administrative offices and program services. The total rent paid by Ibero to Development for both 1998 and 1997 was $107,525. These amounts have been eliminated in the accompanying combined statements of activities.

Ibero provides management and maintenance services to Development and Housing. Management and maintenance services consist of personnel expense as well as other administrative service expenses necessary for Development's and Housing's daily operations. For the years ended March 31, 1998 and 1997, Ibero charged Development and Housing $107,765 and $96,920, respectively. These amounts have been eliminated in the combined statements of activities.

Investors conducts business with a bank at which Investors' former President and Chief Executive Officer and current board member serves as Chairman of the Board. At February 28, 1998 and 1997, Investors had $14,000 of cash and equivalents on deposit in the bank at the market rate of interest and held an equity investment in the bank of $300,100.

86 -14-

860 861

(9) Stockholders' Equity of Wholly-Owned Subsidiary

In 1994, Investors purchased from the SBA all of its previously outstanding shares of 3% cumulative preferred stock having a stated value of $1,749,500. The number of shares purchased and subsequently retired totalled 17,495 at a cost of $35.7158 per share for a total consideration of approximately $625,000. The discount of approximately $1,125,000 has been included as paid-in- capital to conform with SBA guidelines.

(10) Retirement Plan

Ibero purchases group annuity contracts in the form of tax-deferred annuities for all full-time employees who have completed eighteen months of service. The expense associated with this plan was approximately $47,200 and $59,300 for the years ended March 31,1998 and 1997, respectively.

(11) Income Taxes

Investors' income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to the provision for losses on receivables, which are deductible for income tax purposes using the direct write-off method, and loss carryforwards.

Investors' (provision for) benefit from income taxes consisted of the following for the years ended February 28: 1998 1997 Current: Federal $ $ State (4.600) (6.000)

(4.600) (6.000) Deferred: Federal 7,882 (4,444) State (784)

7.882 (5.228)

$ 3.282 $ (11228)

The tax effects of temporary differences that give rise to the deferred tax asset and deferred tax liability at February 28 are as follows:

1998 1997 Deferred tax asset: Provision for losses on receivables $ uoo $ 28,786 Loss carryforwards 137200 53.178

138,400 81,964 Deferred tax liability: Other (7.881)

138,400 74,083 Valuation allowance (97.694) (41.259)

87 $ 40.706 $ 32.824 -sK- 862

(7) Financing Arrangements (Continued)

Investors is currently in the process of refinancing the 10% mortgage payable to an individual. It is anticipated that the mortgage will be refinanced with a bank at 7.65% over a ten year period.

Principal repayments under the terms of these agreements are as follows for the years ending March 31:

1999 $ 480,456 2000 64,541 2001 62,146 2002 395,608 2003 466,614 Thereafter 964.689 $ 2.434.054

Under the terms of Ibero's mortgage payable to Facilities Development Corporation, payments on this mortgage are made through a reduction in Ibero's reimbursement for the operation of a community residence.

Investors' mortgages are collateralized by its office building.

Line-of-Credit -

Ibero has available a $300,000 line-of-credit with a bank renewable annually. Amounts borrowed on mis line-of-credit bear interest at the bank's prime interest rate plus 1% and are collateralized by a genera] lien on all of Ibero's assets. At March 31, 1998 and 1997, $150,000 and $100,000 respectively, was outstanding under the terms of this line-of-credit.

Interest-

Interest paid on all financing arrangements was $186,347 and $218,545 for the years ended March 31,1998 and 1997, respectively.

(8) Redeemable Preferred Stock - Investors

Redeemable preferred stock of Investors consisted of the following at March 31,1998 and 1997:

Preferred stock, Series E, 4% cumulative, $100 par value, 30,000 shares authorized, 20,410 shares issued and outstanding $ 2.041.000

The preferred stock contains a mandatory redemption feature whereby Investors must fully redeem the stock in full as follows:

January, 2007 $ 400,000 September, 2008 641,000 November, 2009 1.000.000

$ 2.041.000

The redemption cost is the par value of the outstanding shares plus accumulated and unpaid dividends whether or not declared. Accordingly, cumulative, undeclared dividends totalling $337,243 and $255,603 have been recorded as a reduction of retained earnings and have been added to the redeemable preferred stock value as oSIFebruary 28,1998 and 1997, respectively.

-12- 86%g 863 (7) Financing Arrangements (Continued)

1998 1997

Ibero-American Development Corporation:

Mortgage payable to a bank, due in monthly installments of $3,581, including interest at 9.55%, through September, 2004, collateralized by the related property. 294,331 308,455

Mortgage payable to a bank, due in monthly installments of $ 1,93 7, including interest at 9.55%, through September, 2004, collateralized by the related property. 161,912 169,310

Term note payable to a bank, due in monthly installments of $1,991, including interest at 9%, through August, 1998, collateralized by a building at 938 Clifford Avenue. 11,649 33,415

Mortgage payable, due in monthly installments of $625, including interest at 10%, through January, 1998. Monthly installments of $625 were made through June, 1993, scheduled payments have not been made for July, 1993 through June, 1998. 22.509 22.509

490.401 533.689 Ibero-American Investors Corporation:

Debentures and notes payable to the SBA:

3.59% debenture, interest only is payable through June 1, 2003 with principal payable in full on June 1, 2003. The interest rate changes to 6.59% in June, 510,000 510,000 1998.

7.15% debenture, interest only is payable through September 1, 2002 with principal payable in full on September 1,2002. 400,000 400,000 825% debenture, interest only is payable through March 1,2002 with principal payable in full on March 330,000 330,000 1,2002.

722% note payable, due in quarterly installments of $30,006, including interest, through June, 1998. 58,425 169,188

10% mortgage payable to an individual. 204,654 209,029 Mortgage payable to a bank, due in monthly installments of $517, including interest at 7%, through December, 1998. 5.425 11.038

1.508.504 1.629.255

89 $ 2.434.054 $ 2.613280

11- 863 864

(6) Property (Continued)

At March 31,1998, the costs of all assets under capital lease agreements was approximately $19,000 and the related accumulated amortization was approximately $9,500.

At March 31, 1998 and 1997, Development has included in property, equipment and leasehold improvements costs of $52,597 and $98,927, respectively. These costs are related to residential houses being held as investment properties. These houses are in the process of being refurbished and will then be sold through Development's Homestead program.

(7) Financing Arrangements

Mortgages, Notes Payable and Capital Lease Obligation -

Mortgages, notes payable and capital lease obligation consisted of the following at March 31 :

1998 1997

Ibero-American Action League, Inc.:

Mortgage payable to Facilities Development Corporation, requiring semi-annual payments of $21,745, including interest at 7.6%, through February, 2006, collateralized by the related property. $ 281,605 $ 291,010 Mortgage payable to a bank, requiring varying principal payments, plus interest at the bank's prime interest rate plus 2%, through February, 1998, collateralized by the related property. This mortgage payable is currently in the process of being refinanced. 83,571 86,768

Second mortgage payable to a bank, requiring monthly installments of $394, including interest at 8%, through March, 2002, collateralized by the related property. 16,152 19,447

Installment note payable, requiring monthly installments of $2,566, including interest at 8.1%, through December, 1998. 22,331 26,044

Installment note payable, requiring monthly installments of $1,512, through December, 1998. 12,095

Capital lease obligation, requiring monthly installments of $480, including interest at 19.6%, through July, 2000. 10,720 14,020

Term note payable to a bank, requiring monthly installments of $429, including interest at 10.4%, through March, 2000. 8.675 13.047

435.149 450.336

-10- 864 ^5

^ I^oans^eceivableand Investments

^February ^,1^ and 1^7,mvestors had an mvestmentmeoûity securities totals recorded at cost, which approximates âirvalue. Fair value ôrmese securities has been estimated based onagood faith valuation by Investors'Board oflîrectors. ^Fheâir value assigned to these investments is considered to be the amounts which could be realised from an orderly sale or other disposition ofmemvestments. It islnvestors'mtention to hold these securities onalong^term basis.

mmal^g its goodfaim valuation. Investors'Board ofOii^ctors took into account the cost of the equity securmes to Investors, developments smcemeirac^uisition and omerfactorspertinenttom^ valuation ofinvestments.^fhere is no public marketforthe equity securities held. Investors'Board, mmakmg its valuation, has,mmany instances, relied on fmancial data of the investees and on estimates byme management ofmvestors and ofmeinvestee companies as to the effect of potential future developments.^heBoardhasreviewedsuch documentation as is available.

Investors acquired all of the securities by direct purchase f^om the issuer under investment representation, and Investors'Board ofOirectors has valued the securities on the premise that they may not be sold without registration under the securities ^ct of 1^^. ^he price of securities purchased by mvestorsf^m me issuer has been determmed by directnegotiation between Investors and the issuer.

maddition,mvestors has an mvestmentmunsecuredsubordmated debentures totalling ^^,^^ February ^,1^ and 1^7. Investors'Board ofl^irectors has evaluated the realisation of these investments by consideringdevelopments that have occurred since their ac^uisition,reviewing fmancial data of me mvestees, estimating me effect of future developments, and considering om^ factors pertinentto the investments, ^he Board has concluded mat the mvestment^ are real^^^n the normal course of operations. Iflnvestors is unable to liquidate the subordinated debentures in the normal course of operations,amaterial loss could result because of the absence of sufficient collateral.

^allowance ^r unreal!^ depreciation, related primarily to me declmemme value of certam omer investments'underlymg collateral, has been established based on me goodfaith valuation of mvestors'Board ofl^irectors and mtalled^l,^^ and ^73^71 at February ^,1^^ and 1^^ respectively.

(6) Property

Property consisted of the following at March 31:

1998 1997

Land and land improvements $ 254,383 $ 255,383 Buildings and leasehold improvements 2,812,695 2,539,324 Equipment, furniture and fixtures 313,866 276,761 Vehicles 52313 52.313

3,433,257 3,123,781

Less: Accumulated depreciation and amortization (1.033.992) (921.9741

$ 2.399265 $ 2.201.807

865 866 (3) Temporarily Restricted Net Assets (Continued)

In fiscal 1998 and 1997, temporarily restricted net assets were released from donor restrictions by incurring costs satisfying restricted purposes as follows:

1998 — 1997 Ibero- Ibero- Ibero- American Ibero- American American Develop- American Develop- Action ment Action ment League. Inc. Corporation Total League. Inc. Corporation Total

Satisfaction of restricted purpose: Program activities $ 391,160 $ $391,160 $ 372,867 $ $ 372,867 Purchases of property 207.194 207.194 278 278

$ 391.160 $ 207.194 $ 598.354 $ 372.867 $ 278 $ 373.145

(4) Prepaid Expenses and Other Assets

Prepaid expenses and other assets consisted of the following at March 31:

1998 1997 Ibero-American Action League, Inc.: Closing costs, net $ 78370 $ 91,949 Prepaid insurance 48.278 30.279

126.648 122.228 Ibero-American Development Corporation: Closing costs, net 113,869 52,641 Prepaid real estate taxes 2,691 1,912 Prepaid insurance 940 190

117.500 54.743 Ibero Housing Corporation: Prepaid construction fees, net 69,957 62,162 Prepaid real estate taxes 225 41

70.182 62.203 Ibero-American Investors Corporation: Deferred tax asset 40,706 32,824 Cash value of officer's life insurance 39,290 36,289 Prepaid expenses 18394 24,062 Other 7.946 2.350

106.336 95.525

$ 420.666 $ 334.699

8$5. 867 (2) Summary of Significant Accounting Policies (Continued)

Property -

Property is recorded at cost, if purchased, or the fair market value at the date of donation. Depreciation is provided using the straight-line basis over the estimated useful lives of the assets which range from five to thirty years. Amortization of the cost of leasehold improvements is provided using the straight-line method over the term of the lease. It is the Organizations' policy to capitalize all property purchases over $1,000 with a useful life greater than one year.

Closing Costs -

Closing costs associated with certain properties are being amortized using the straight-line basis over thirty years and are included in prepaid expenses and other assets on the accompanying combined balance sheets.

Income Taxes -

The Organizations are not-for-profit corporations exempt from income taxes as corporations qualified under Section 501(c)(3) of the Internal Revenue Code. The Organizations have also been classified by the Internal Revenue Service as corporations that are not private foundations.

Investors provides for income taxes on its earnings. Deferred income taxes are provided to reflect the impact of temporary differences between the amounts of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws and regulations. These temporary differences relate primarily to the provision for losses on receivables, which are deductible for income tax purposes using the direct write-off method, and loss carryforwards.

Shared Services -

The costs of providing shared services are allocated to the Organizations based upon estimated usage.

Estimates -

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

(3) Temporarily Restricted Net Assets

Temporarily restricted net assets are available for the following purposes at March 31:

1998 —1997 Iberc- Ibero- Ibero- American Ibero- American American Develop- American Develop- Action ment Action ment League. Inc. Corporation Total League. Inc. Corporation Tog!

Contributions received for property purchases $ 192,028 $ 192,028 $164,222 $164,222

Contributions received for program activities 175.353 175.353 160.858 160.858

$ 175.353 S 367.381 $ 160.858 $164222 $ 325.080

-7- 8@% 8^

^ ûmmarvofî^nificant^ccountm^ôliciesôntinued^

Financial ^eporting^

êOiânizations categorize net assets and activities as unrestricted and temporarily restric^^ ôntrihuîons are rer^rted as temporarily restricted if mey are received ^vimdono^ limittheiruse^ ^ênadonorrestriction expires, temporarilyrestrictednetassets are reclassified as unrestricted net assets and reported in the comhined statement of activities and change in net assets as netassets released from restriction^^rêstrictednetassetsmcludeoperatmgresourc^ available ôrthe support ofthe Organizations operating activities' êmporarilyrestrictednet assets are restricted hy donors ^rspecifiedcapitalexpendituresandcertam program acuvities^

^upportand^evenue^

reorganizations recogmze capital grants fimd^n^m government agenciesandomer organize as support and revenue onastraight^linehasisoverthe estimated usefiil lives ofthe related assets^ reorganizations recognize rovenuen^omcertam other funding sources as support and revenue v^heneligihle costs areincurred^ ^mountsreceivedin advance of incurringeligihle costs are reportedas deferred revenue^

Fmal determination ofcertam revenue earned hyme Organizations is suh^ectto audit hythird^party payers^ Dif^rencesl^t^een amounts provided and fmalsetdements are mcludedmthe combined statement ofactivities in the year of settlement During fiscal 1998, the Organization recorded prior yearthirdpartysettlementsof^l^3,^99B

During fiscal 1998 and 1997,ôusing received êction811 capitaladvances^romthel^ Department ofôusmg and ^rân Development ^^Dôfapproximately ^5^,00^ and ^47^,^^, respective^ êse advances ^vere used to construct tô residential facilities ôrdevelopmentally disahled individual êse advances are non^mterest hearing and repayment is not required as long as me related housing remains available ^raperiod of 4^ years ^rlov^mcome individuals ^vith disahilities^

concentration of^isl^^

FortheyearsendedMarch31,1998andl997,approximately33%and32%,respectively,of^hero^ support andrevenue^vas provided hyOountyofMonroe grants and contracts^

For the years ended March 31, 1998 and!997, approximately 19% and 25%, respectively, of Developments supportandrevenue^vas provided hytheOiryof^ochester^

For me years ended March 31, 1998 and!997, approximately 42% and 57%, respectively, of ^ousing^ssupportand revenue ^vasprovidedhy^lD^

Oash

^eOompamesmamtainmeircashmhari^ demand depositaccounts and certificates of deposit^vith a maturity of three months or less at the time of purchase^ ^fhese accounts may, at times, exceed federally insured limits^ ^he companies have not experienced any losses in mese accounts and helievemey are not exposed to any significant credit risl^^vithrespectto these cash halances^

^^^ 869

IBERO-AMERICAN ACTION LEAGUE. INC. AND SUBSIDIARY AND AFFILIATES NOTES TO COMBINED FINANCIAL STATEMENTS MARCH 31.1998 AND 1997

(1) The Companies

The combined financial statements include the accounts of the following New York not-for-profit corporations (the Organizations):

Ibero Housing Corporation (Housing) was incorporated in fiscal 1997 to develop, own and operate residential facilities in Rochester, New York.

In addition, the combined financial statements include the accounts of Ibero-American Investors Corporation (Investors), a wholly-owned for-profh subsidiary of Ibero:

All significant intercompany account balances and transactions have been eliminated in the accompanying combined financial statements.

(2) Summary of Significant Accounting Policies

Basis of Accounting -

The combined financial statements have been prepared using the accrual basis of accounting.

95 5 869 870

IBERO-AMERICAN ACTION LEAGUE. INC. AND SUBSIDIARY AND AFFILIATES COMBINED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED MARCH 31.1998 AND 1997

1998 1997

CASH FLOW FROM OPERATING ACTIVITIES: Change in net assets 402,802 $ 418,503 Adjustments to reconcile change in net assets to net cash flow from operating activities: Depreciation and amortization 127,953 128,667 Loss on sale of securities 108,543 85,942 Provision for doubtful accounts 56,196 4,731 Changes in: Receivables (154,844) (120,603) United Way receivable (30336) (69,506) Prepaid expenses and other assets (68,678) 36,827 Accounts payable 81347 (133,189) Accrued payroll and employee benefits 23,634 32,265 Deferred revenue and other liabilities 89,626 (89.153) Net cash flow from operating activities 636.243 294.484

CASH FLOW FROM INVESTING ACTIVITIES: Purchases of property (427,860) (113,619) Proceeds from sale of property 116,222 Collection of loans receivable 947,872 519,533 Extension of loans and purchases of investments (1.073.000) (558.895)

Net cash flow from investing activities (436.766) (152.981) CASH FLOW FROM FINANCING ACTIVITIES: Change in line-of-credit 50,000 50,681 Mortgages and notes payable borrowings 47,913 31,621 Repayments on long-term debt (227,139) (536,931) Proceeds from sale of preferred stock 350.000

Net cash flow from financing activities 220.774 (454.629)

CHANGE IN CASH 420,251 (313,126)

CASH - beginning of year 750343 1.063.469

CASH-end of year $ 1.170.594 S! 750.343

The accompanying notes are % integral part of these statements.

-4- 1BERO-AMER1CAN ACTION LEAGUE. mC. AND SUBSIDIARY AND AFFILIATES

COMBINED STATEMENTS OF CHANGE IN STOCKHOLDERS' EQUITY AND NET ASSETS

FOR THE YEARS ENDED MARCH 31.1998 AND 1997

'• Net Asset: Additional Preferred Common Paid-in accumulated Temporarily Stock Stock Capital Deficit Unrestricted Restricted Total

BALANCE - March 31, 1996 $ 1,225,000 $ $ 1,436,962 $ (402,209) $ 1,259,055 $ $ 3.518,808

CHANGE IN NET ASSETS - - 49,137 44.286 325.080 418,503

CHANGE IN UNREALIZED LOSS ON SECURITIES - - (78,880) - - (78,880)

DIVIDENDS . . (81.640) (81.640)

So BALANCE-March 31, 1997 1,225,000 1,436,962 (513,592) 1,303,341 325,080 3,776,791 CHANGE IN NET ASSETS - - 23,845 336,656 42,301 402.802

ISSUANCE OF PREFERRED STOCK 350,000 - - - - 350,000 COSTS OF ISSUANCE OF PREFERRED STOCK - (17,500) - - - (17,500)

CHANGE IN UNREALIZED LOSS ON SECURITIES - - (168,277) - - (168,277)

DIVIDENDS (81.640) (81.640)

BALANCE-March 31,1998 S 1.575.000 $ 1.419.462 $ (739.664) S 1.639.997 $ 367.381 $ 4.262.176

C (

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

-3- uv 872

IBERO-AMERICAN ACTION LEAGUE. INC. AND SUBSIDIARY AND AFFILIATES COMBINED STATEMENTS OF ACTIVITIES FOR THE YEARS ENDED MARCH 31.1998 AND 1997

1998 1997

PUBLIC SUPPORT AND REVENUE:

Government fees and grants 2,625,230 2,258,680 Program service fees 573,278 501,004 United Way 406,175 533,725 Contributions 328,890 266,742 Investment income of subsidiary 592,811 611,638 Other 290.049 292.138

Total public support and revenue 4.816.433 4.463.927

EXPENSES:

Program 3,609,374 3,195,160 Management and general 386,990 275,763 Operating expenses of subsidiary 466,027 480,055 Loss on investments and other assets 118.221 83.218

Total expenses 4.580.612 4.034.196

CHANGE IN NET ASSETS BEFORE INCOME TAXES AND PRIOR YEAR THIRD-PARTY SETTLEMENTS 235,821 429,731

PRIOR YEAR THIRD-PARTY SETTLEMENTS 163,699

INCOME TAX BENEFIT (EXPENSE) 3.282 HU28)

CHANGE IN NET ASSETS 402.802 $ 418.503

The accompanying notes are ajgintegral part of these statements.

-2- 893 IBERO-AMERICAN ACTION LEAGUE. INC. AND SUBSIDIARY AND AFFILIATES

COMBINED BALANCE SHEETS

MARCH3J. J998AND 1997

1998 1997 1998 1997

ASSETS LIABILITIES AND STOCKHOLDERS' EQUITY AND NET ASSETS

LIABILITIES: Cash s 1.170,594 $ 750343 Line-of-crcdit 150,000 S 100,000 Receivables, less allowance for doubtful accounts of Accounts payable 577,004 470,498 approximately $77,000 and 89,000 in 1998 and 1997, Accrued payroll and employee benefits 164,962 141,328 respectively 675,695 597.223 Deferred revenue and oilier liabilities 1,011,539 921.688 United Way receivable 99,842 69,506 Mortgages, notes payable and capital lease obligation 2.434,054 2,613,280 Prepaid expenses and other assets 420,666 334,699 Redeemable preferred stock - 4% cumulative, $100 par Loans receivable and Investments 6,211,916 6,366,610 value; 30,000 shares authorized, 20,410 shares 2.201.807 issued and outstanding oo Property, net 2.399.265 2J78J43 2.296.603 w Total liabilities 6.715.802 6,543,397 3 STOCKHOLDERS' EQUITY AND NET ASSETS: Preferred stock - Class A, 4% cumulative, $1,000 par value; 5,000 shares authorized, 1,575 and 1,225 shares Issued and outstanding in 1998 and 1997, respectively 1,575,000 1,225.000 Common stock - Class B non-voting, $1 par value; 5,000 shares authorized and unissued Additional paid-in capital 1,419,462 1,436,962 Accumulated deficit (739,664) (513.592) Net assets: Unrestricted 1,639,997 1,303341 Temporarily restricted 367381 325.080

Total stockholders' equity and net assets 4.262.176 _ 3.776.791

$ 10.977.978 $ 10.320.188 $ 10.977.978 J_ HU20.188

oc Co The accompanying notes are an Integral part of these statements. XJUNADIU CO., LLP 0ne Cambridge Plan 7 1850 Winton %^d Soutf Rochester, NY 14618-399:

INDEPENDENT AUDITORS' REPORT

June 25,1998

To the Boards of Directors of

Ibero-American Action League, Inc. and Subsidiary and Affiliates:

We have audited the accompanying combined balance sheets of Ibero-American Action League, Inc. and subsidiary and affiliates (the Companies) as of March 31, 1998 and 1997, and the related combined statements of activities, change in stockholders' equity and net assets, and cash flows for the years then ended. These combined financial statements are the responsibility of the Companies' management Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the combined financial statements are free of material misstatement An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of the Companies as of March 31, 1998 and 1997, and the results of their operations and cash flows for the years then ended, in conformity with generally accepted accounting principles.

As discussed in Note 5, the investment securities included in the combined financial statements have been valued by the Board of Directors of lbero-American Investors Corporation using valuation criteria applicable to the licensee. These criteria were established in accordance with Section 301(dX2) of the Small Business Investment Act of 1958, as amended.

100

874 87

IBERO-AMERICAN ACTION LEAGUE, INC. AND SUBSIDIARY AND AFFILIATES

COMBINED FINANCIAL STATEMENTS

AS OF MARCH 31.1998 AND 1997

TOGETHER WITH

INDEPENDENT AUDITORS' REPORT

BONADIO CO., LLP

CERTIFIED WjBLIC/'oN ACCOUNTANTS V&6MORE

875 WritKfc lUlALMjmjKl AJNU lUiVCJNUt M>: • - ./ ' —" -• -" 'K? — 0 7

INDEPENDENT PUBLIC ACCOUNTANTS REPORT (REVIEW)

We have reviewed the accompanying balance sheet (Part IV) of Form 990 of . as of . . and the related statement of support, revenue and expenses and changes in fund balances (Part I) and statement of functional expenses (Part H) of Form 990 for the year then ended, macrardance with standards established by the American Iiisiin^ All information included in these financial statements is the representation of the management of the charitable organization. A review consists principally of inquiries of company personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on this review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with generally accepted accounting principles.

NAME OF FIRM OR INDIVIDUAL PRACTmONER ADDRESS DATE

SIGNATURE OF FIRM OR INDIVIDUAL PRACTITIONER IF FIRM. NAME OF ENGAGEMENT PARTNER

INDEPENDENT PUBLIC ACCOUNTANT'S REPORT (AUDIT)

We have audited the balance sheet (Part IV) of Form 990 of >^"*» <° /r/êâi/ ÂSJ&S.C./SZ.^ NSV^TSI

NAME OF FIRM OR INDIVIDUAL PRACTITIONER ADDRESS DATE

SIGNATURE OF FIRM OR INDIVIDUAL PRACTITIONER IF FIRM, NAME OF ENGAGEMENT PARTNER

CERTIFICATION BY CHARITABLE ORGANIZATION Under penalties of perjury, we declare that we reviewed this report, accompanying Federal Form 990 with attached schedules and, to the best of our knowledge and belief, it is true, correct and complete in accordance with the rules of the New York State Office of the Attorney General, Charities Bureau and the instructions applicable to this report

Title Date Signed CA*,'•**. */» ^a /£*^ S//3/ff Title Date Signed

After this report has been fully executed by two distinct officials, send it with appropriate ATTACHMENTS and FEE to: Office of the Anomey General, Charities Bureau, 120 Broadway, New York. New York 10271 If contributions received exceed $25,000, submit the appropriate fee, indicated below: $10, if total support and revenue is $150,000 or less; $25, if total support and revenue exceeds $150,000.

102 CHAR497 2/99 PAGE 4

STFNY18014F4 876 SCHEDULE 2: fKUFESSlUNAL FUND KA1M!,K5 (fFK) „ u g 7 .

ITEM EVENT EVENT EVENT EVENT

1. Brief description of campaign, drive or event 2. Date or period covered 3. PFR name and address J/ -e^

4. Total public donations* 5. All payments to PFR 6. All other fund raising expenses of the organization for each event 7. Total expenses (line 5 plus line 6) 8. Net proceeds (line 4 minus 7)

•On line 4, DO NOT exclude amounts retained by PFR (e.g. amounts reported on line 5).

SCHEDULE 3: FUND RAISING COUNSEL (FRC)

ITEM COUNSEL COUNSEL COUNSEL COUNSEL

1. Brief description of services 2. Date or period covered 3. FRC name and address

//^

4. All payments to FRC

SCHEDULE 4: COMMERCIAL CO-VENTURERS (CCV)

ITEM EVENT EVENT EVENT EVENT

1. Brief description of sale or event 2. Date or period covered 3. CCV name and address A/ait zA^ 4. Brief description of financial terms and conditions of written contract

5. Has your organization received an accounting from the DYES DYES DYES DYES commercial co-venturer as prescribed by section 173-a(3) DNO DNO DNO DNO of Article 7-A of the Executive Law? 103 CHAR497 2/99 PAGE 3

S7FNY1B014F.3 877 SCHEDULE 1: CONTRIBUTIONS ^ w g 7 g NOTE: Do not report donated services or facilities in this schedule.

TOTAL Portion other AMOUNT than cash Direct Public Support 1. Direct mail 2. Telephone solicitation campaigns 3. Commercial cc-venturers (complete Schedule 4) 4. Door-to-Door 5. Special events (contribution portion only) fe;e/f —

10. Total general public support (add lines 1 through 9) ... — e? •— 11. Foundation and trust grants /a. % — — n —

14. Total direct public support (add lines 10 through 13)... — tr> (Transfer total line 14 to page 1, line 1.)

Indirect Public Support 15. From Federated Fund Raising Agencies — 0 — 16. From affiliates — o- o — 17. From other fund raising agencies — o — 18. Total indirect public support (add lines IS through 17) . — a — (Transfer total line 18 to page 1, line 2.)

Government Grants 19. Specify Agency: (a) A/etfAeP* &}6frt£: (e) All other government grants o — — 0 —

20. Total government grants (add lines 19(a) through 19(e)) —

ACTIVITY STATEMENTS

1. Have your books/records been audited by or for any government agency/funding source this fiscal year? • YES* g NO •If YES, specify agency: V/# Period audited: A?//? 2. Does your organization allocate costs of multipurpose activities among program services, management and general, and fund raising; i.e., Direct Mail, Telethon? • YES* g] NO *If YES, See INSTRUCTIONS: Reporting Joint Costs of Multi-Purpose Activities. 3. Did your organization receive donated services or the use of materials, equipment or facilities at no charge or at substantially less than fair rental value? Q YES* |gNO *If YES, indicate the value: A/ //? Do not include this amount as support or as an expense on page 1. 104 CHAR497 2/99 PAGE 2

STFNY18014F.2 878 FULL OFFICIAL NAME AND ADDRESS OF ORGANIZATION ANNUAL FINANCIAL REPORT CHA*, (Charitable Organization) /fC, FOR THE YEAR ENDED 3/3/'/?? STATE OF NEW YORK, OFFICE OF THE ATTORNEY GENERAL CHARITIES BUREAU r OH P 120 Broadway, New York. NY 10271 V G . J, http://www.oag.stalejiy.us/charities • "X" BOX, IF ADDRESS HAS BEEN CHANGED ORGANIZATION'S TELEPHONE NUMBER Area Code: -//0" Number. X-SG-gfoQ Extension: 3 g"

STATE REGISTRATION NUMBER This form, including any attachments, FOR OFFICE USE ONLY is a public record and a copy will be DATE RECEIVED EXAMINED BY/DATE provided upon request to any FEDERAL I.D. NUMBER interested persons. RECEIPT NO. AMOUNT /G-07SV7K5 Q "X" box if your total contributions did not exceed $25,000 and you did not engage the services of a professional fund raiser or a commercial co-venturer during this fiscal year (See INSTRUCTIONS: REPORT CATEGORIES AND FEES). Q This is a combined report for. . organizations (See INSTRUCTIONS: REPORT CATEGORIES AND FEES). FINANCIAL SUMMARY TOTAL Support and Revenue 1. Direct public support (line 14, Schedule 1, page 2) 2. Indirect public support (line 18, Schedule 1, page 2) .. 223P- 3. Government grants (line 20, Schedule 1, page 2) X,Af% 4. Program service revenue 5. Other revenue 6. Total support and revenue (add lines 1 through 5) Expenses Program services (list individually): 7. (*A'!A(6 £«.rS- Zffr ***? 11. Public information combined with fund raising. — o — 12. Payments to affiliates/services to affiliates — a — 13. Total program services (add lines 7 through 12) %fi73j°2£ 14. Management and general expenses to*, 7a £— 15. Fund raising expenses — o —

16. Total expenses (add lines 13 through 15) %7*Q/7/

17. Excess (deficit) of support and revenue over expenses (line 6 minus line 16)

Summary of Balance Sheet (as of /? /3 / /? J ) 21. Assets 22. Liabilities 23. Fund balances (line 21 minus line 22)

Explanation of income and expense items, If required:

CHAR497 2/99 Ta*

Form 990 Partll Statement Of Functional Expenses Line 25'Compensation Of Officers, Directors, etcB

F B Health Dental Life Retirement Name Ins. Ins. Ins. Contributions TOTAL

Vazquez, Julio 0 0 505 3,163 3,668 Santiago, Gladys 1,020 203 430 2,686 4,339 Preish, Ralph 2,225 618 390 2,215 5,448 DeJesus, Elisa 2,225 618 380 2,095 5,318 Dwyer, Betty 1,020 203 400 2,501 4,124

6,490 1,642 2,105 12,660 22,897

106

880 -w 881

Ibero American Action League, Inc. IDN 16-0954745 Form 990 Schedule 15 FYE 03/31/99

Form 990 Part II Line 23 'Specific Assistance To Individuals'

All payments are for food, shelter and clothing for indigents or disaster victims.

Form 990 Part I Line 9 'Special Events and Activities'

Special Events: (A) (B) (0 Total

Gross Receipts 7,180 43,750 430 51,360

i.ess: Contributions (7,180) (38,200) (430) (45,810)

or055 Revenue 0 5,550 0 5,550

Less: Direct Expenses 0 0 0 0

Net Income or (Loss) 0 5,550 0 5,550

(A) Total Agency Annual Dinner

(6) Annual Hispanic Scholarship Gala

(0 Merchants Association Annual Dinner

107

881 88

Ibero American Action League, Inc. IDN 16-0954745 Form 990 Schedule 14 FYE 03/31/99

Form 990 Schedule A Part III 'Statements About Activities'

Lines 3 & 4

Recipients of scholarship funds apply for such funds through a selection committee. Recipients of emergency funds for food and shelter are required to prove that they are eligible for public assistance. Acceptable proof is presentation of documentation authorized by the local Department of Social Services.

108

882 883

NOTE:

Tiie devoted to the business is on an as needed basis.

109

883 884

CarmenJ^anche^^_ Board Member As Needed RochesterT^^ff

Wanda 0. Markert Board Member As Needed Rochester, NY

Harjj Board Member As Needed Rochester, NYI

Diana Ortiz Board Member As Needed Ber^Yl

Body Board Member As Needed Rochester, NY

naSerrano Board Member As Needed jcnesterTNYl

Board Member As Needed

Gladys Santiago Vice President of 59,861 4,339 Program Operations Rochester/ 35 hrs/week

Vice President of 49,316 5,448 Finance 35 hrs/week

Elisa DeJesus Vice President of 46,657 5,318 Children & Families !ocnester7NY( 35 hrs/week

Vice President of 56,909 4,124 Community Development 35 hrs/week 110 REDACTED

884 Ibero American Action League, Inc.

For: 990 ^^^^^^ Schedule 13 885 FYE 03/31/99 Part V List of Officers, Directors and Trustees (b) (d) (e) Title and Contribution Expense Avg. hours per To Employee Accounts (a) week devoted to (c) Benefit And Other Name & Address position Compensation Plans Allowances

Chairman of the Board s Needed

Flor M. Colon Vice Chairman of the Assessment Committee As Needed

Irene Rivera de Royston Vice Chairman of the anning Committee esTer, NY^^^TTs Needed

Emeter.io B. Otero Treasurer ^^___ Needed "Chester, NYI

Galo Proano Secretary As Needed •Rochester,^

Julic^azquez President k CEO 69,491 3,668 35 hrs/week Behester,

Board Member As Needed

?afael E. Cestero Board Member &s Needed nester^yl

arlos A. Garcia Board Member As Needed ester^Yl 111

REDACTED 885 8 b;;

Ibero American Action League, Inc. IDNflHMjH ^^^^^" Schedule $2 Form 990 FYE 03/31/99

Form 990 Part I Line Id Total Support Schedule of Contributors ***

Rochester Area Foundation $12,063 Daisy Marquis Jones Foundation 88,650 Dorothea Haus Ross Foundation 28,900 Citibank 10,000 Visiting Nurse Service 9,437 United Way of Greater Rochester 406,744 NOTE: The four contributors listed above are all located in the City of Rochester, N.Y.

Monroe County Department of Social Services 475,277 City of Rochester 96,720 Monroe County Office For The Aging 26,039 Federal Government 96,252 New York State OMRDD 261,795 New York State Office of Mental Health 56,020 New York State Homeless Housing & Assistance Cor 10,718 New York State Dept. of Health 31,322 Amounts under $5,000 Scope 49,424

TOTAL (Line Id) $1,659,361

*** Included are contributions of $5,000 or greater.

REDACTED

112

886 887

Mortgage Payable - Manufacturers & Traders Trust Prime + 2.00% 81,391 Due 02/98 Mortgage Payable - Ibero American Investors Corp. 8.00% 12,583 Due 04/02 Mortgage Payable - Key Bank. 8.62% 156,078 Due 05/14 Mortgage Payable - Key Bank. 9.25% 32,321 Due 05/04 Loan Payable - Philadelphia Insurance Company 33,600 Due 01/00 Loan Payable - Consolidated Risk Services Inc. 17,290 Due 12/99 Loan Payable - Capital Lease Obligation 19.6% 6,713 Due 07/00 Loan Payable - Citibank Renovation Loan 10.402 4,300 Due 03/00 Loan Payable - Citibank Vehicle Loan 8.20! 14,150 Due 05/02 Loan Payable - Capital Lease Obligation 15.4% 4,985 Due 10/02 Loan Payable - Citibank/Key Bank Line of Credit 335,000 Due 12/99

$928,663

$*$ A Small Business Investment Company, a separate taxable entity.

113

887 888

Ibero American Action League, Inc. IDN Form 990 Schedule #1 FYE 03/31/99

Form 990 Part II Line 42 'Depreciation, Depletion etc.' and Part IV Line 57a&b 'Land, Buildings and Equipment less Accumulated Depreciation* : Accumulated Book Current Original Depreciation Value Year Depreciable Description Cost 03/31/98 03/31/98 Depreciation Life

Land,Buildings & Buildin 955,509 156,090 799,419 29,157 5 - 30 Yrs. Office Equipment 225,605 179,696 45,909 11,737 5 - 7 Yrs. Furniture & Fixtures 56,304 45,791 10,513 960 5 - 10 Yrs. Motor Vehicles 76,313 52,184 24,129 7,784 5 Yrs. Leasehold Improvements 486,039 254,700 231,339 16,921 5- 30 Yrs.

1,799,770 688,461 1,111,309 66,559

Line Number 57a 57b 57c

Amortization of Deferred Financing Costs 3,755

1 Part II Line 42. $70,314

.orm 990 Part IV Line 56 'Investments-Other' :

•"Investment in Ibero American Investors Corp.(a wholly owned subsidiar $1,204,786 (See Form 990 Page 6 Part II Information Regarding Taxable Subsidiaries) ======

Form 990 Part IV Line 62 'Deferred Revenue': »WM»»»»MMMMMMM»WMW — W»»»»»—»MJ—»MM — MM Ml»•••• Jnited Way 1,641 few York State 335,243 Ither 13,588 loordinated Care Services, Inc. 46,521 ochester Area Foundation 3,500

$400,493

' 990 Part IV Line 64b "Mortgages and Other Notes Payable' :

irtgage Payable - Facilities Development Corp. 7.60% 114 230,252 Due 02/06

888 REDACTED OMB No. 1545-0047 Form 990 Return or Organization Exempt From Income Tax Under section 501(c) of the Internal Revenue Code (except black lung benefit #98W trust or private foundation) or section 4947(a)(1) nonexempt charitable trust This Form is Department of the Treasury Open to Public Internal Revenue Service Note; The organization may nave to use a copy of this return to satisfy state repotting requirements. Inspection A For the 1998 calendar year, OR tax year period beginning AfiJS J:Z / , 1998, and ending /t/4 £LCJ>L. 3 / . 19 f f 0 Employer identification number B Check if: Plena C Name of organization use IRS D Change of address label or D Initial return print or Number and street (or P.O. box if maii is not delivered t6 street address) Room/suite >ne number type. 0 Final return See gyp ^iSTJ- s^/a.''is •S'^re.e.^ Specific City or town, state or country, and ZIP+4 • Amended return Instruc- F Check > • if exemption application (required also for tions. state reporting) /V6~oS is pending G Type of organizat'ion-^-r^ig Exempt under section 501 (cH O ) * (insert number) OR • Q section 4947(a)(1) nonexempt charitable trust Note: Section 501(c)(3) exempt organizations and 4947(a)(1) nonexompt charitable trusts MUST attach a completed Schedule A (form 990).

H(a) Is this a group return filed for affiliates? U Yes IS No I If either box in H is checked "Yes." enter four-digit group exemption number (GEN) • Ji./jft (b) If "Yes." enter the number of affiliates for which this return is filed:. . ///* J Accounting method: 0 Cash W Accrual c( ^4^". /%/?#/**// /S &J" g.gga^ €73,o// 7$7/ 33 Supplies &/%/ ^%f//"7 x-V.3/^ — 41 Interest . ^^ .^, /g_^/%yg_; f$*"/\)' 41 f-y,?/y &?.{& — 42 Depreciation, depletion1, etc. (anach schedule) i?—7f'£ 7%?7 — a — d kona±fy^...^u/tO^S..J£:/^.9^2S.f<..... 43d 33-:S7 7 ^X?? e %W^&4&%d*a d?S. __/f^P o . /a.JToa /f^2 =. 44 Total functional expenses (add lines 22 through 43) Organizations completing coiumns (BhfDl cany these totals to Snts 13-15 . 44 | Reporting of Joint Costs.—Did you report In column (B) (Program services) any joint costs from a c'dmbinoc: educational campaign and fundraising solicitation? • D Yes El No If "Yes." enter (!) the aggregate amount of these joint costs $ ///# ; (li) the amount allocated to Program services & *f /# (IH) the amount allocated to Management and general $ ^ //) ; and (tv) the amount allocated to Fundraising $ jt//rf Statement of Program Service Accomplishments (See Specific Instructions on page 20.) What is the organization's primary exempt purpose? ^&a

£ e. rf£#rg...Z?!.e64'*a{&s.. .&.. .<#*#&?. •if.y.ar.^ ^AS/nor. ejr. d^s>?^?^a a of. ££?/ ) (Grants and allocations $ — a —

//3?7JfSi sewet^ a.lvs^feg-ar;/^^ <;ojrUe)jr£) (Grartts and allocations $ __^ ) c ^f/e^maaaW. fZAf.4% c e^- f. /k%fa afz^r ^Ae. .^$^dK?: .af. ^g^B^y@^w^6^. ^4*^^g^ /?7 'A0f/ .Ah^.f.'jf^Or^Ls. A>$.ffjtr.*afi?Al.. J?A#A>.-sg.4#\pJ c^xe.e.-tJee*,. ease. j%f/w#'&ae.a/i.G

•sKi'Vtj-, J0j) re^a^^'a.'-i^s' ifr*/*/*^ t'-£e/i>trf £/f/ia*>Jr £'rr/?'•+£''~a*&'''Aa*'e. aur/>osJr%//* ) 0S7, 2.2 y e Other program services (attach schedufe) (Grants and allocations $~ - a — ) — o 1 Total of Program Service Expenses (should equal line 44, column (B), Program services) • %??^o& li«0 REDACTED Form 990 (1998)^-^^ V,*.,,^, /,/,^*X^&^,^/^ JCV* ' Balance Sheets (See Specific Instructions on page 20.)

Note: Where required, attached schedules and amounts within the description (A) (B) column should be for end-of-year amounts only. Beginning of year End of year 45 Cash—non-interest-bearing .... /,F/8 45 2~*6~* 2 46 Savings and temporary cash investment? /«h V* 46 /?3.^a7

47a Accounts receivable U3(*, 30% b Less: allowance for doubtful accounts . c-yv.^y^ /^^^,,7/<

48a Pledges receivable b Less: allowance for doubtful accounts — o 48c 28G&& 49 Grants receivable 49 50 Receivables from officers, directors, trustees, and key employees (attach schedule) 50 51a Other notes and loans receivable (attach schedule). . 51a b Less: allowance for doubtful accounts . . 51b 52 Inventories for sale or use 52 53 Prepaid expenses and deferred charges . jaêV? 53 /**,/#? 54 Investments—securities (attach schedule) 54 55a Investments—land, buildings. and equipment: basis 55a Less: accumulated depreciation (attach schedule) 55b 55c 56 Investments—other (attach schedule)ê- Sêat* Z*. ->*/J 4*

59 Total assets (add lines 45 through 58) (must equal line 74) <*&,* 7, &- 6-** 59 60 Accounts payable and accrued expenses *f?Q A^>>f**£>£.?£. sxs, /*? 64b %2f.g%-=? 65 Other liabilities, (describe »Aya 6> JPeJi-t&zt /%_, ' — a — 65 /e7,7f8 •&- 66 Total liabilities (add lines 60 through 65) tffK&f 66 jsu.ys-z.3.2*- Organizations that follow SFAS 117, check here • D9 and complete lines 67 through 69 and lines 73 and 74. BBSS 67 !c 67 Unrestricted f%x(r?7<& /;,?«?. 77° S 68 Temporarily restricted 68 .y^.g-g-^r a /7&,3tt m 69 Permanently restricted — o — 69 _— g> —. Organizations that do not follow SFAS 117, check here • D and complete lines 70 through 74. 70 Capital stock, trust principal, or current funds 70 71 Paid-in or capital surplus, or land, building, and equipment fund . . 71 72 Retained earnings, endowment, accumulated income, or other funds 72 5v5 73 Total net assets or fund balances (add lines 67 through 69 OR lines 70 through 72; column (A) must equal line 19 and column (B) must equal line 21) 74 Total liabilities and net assets / fund balances (add lines 66 and 73) Form 990 is available for public inspection and, for soo^a people, serves as the primary or sole source of ;nforination aooul a particular organization. How the public perceives an organization in such cases may be determined by the information presented on its return. Therefore, please make sure the return is complete and accurate and fully describes, in Part III, the organization's programs and accomplishments. 891 REDACTED Schedule A (Font, 990) HHJZAM A,y^ „A /^V,^ ZP^.***. -ZT^ >//\ Private School Questh aim (See instructions on page 4.) (To be completed ONLY by schools that checked the box on line 6 in Part IV) /%%f ^/»//l>«.^^ Yes No 29 Does the organization have a racially nondiscnminatory policy toward students by statement in Its charter, bylaws, other governing instrument, or in a resolution of Its governing body? 29 30 Does the organization include a statement of its racially nondiscnminatory policy toward students in all its brochures, catalogues, and other written communications with the public dealing with student admissions, programs, and scholarships? 31 Has the organization publicized its racially nondiscnminatory policy through newspaper or broadcast media during the period of solicitation for students, or during the registration period if it has no solicitation program, in a way &» that makes the policy known to all parts of the general community it serves?. If "Yes," please describe; if "No," please explain. (If you need more space, attach a separate statement.)

!^!!i£!!!^^.2/ft!

32 Does the organization maintain the following: a Records indicating the racial composition of the student body, faculty, and administrative staff? 32a b Records documenting that scholarships and other financial assistance are awarded on a racially nondiscnminatory basis? 32b c Copies of all catalogues, brochures, announcements, and other written communications to the public dealing with student admissions, programs, and scholarships? 32c d Copies of all material used by the organization or on Its behalf to solicit contributions? 32d

If you answered "No" to any of the above, please explain. (If you need more space, attach a separate statement.)

33 Does the organization discriminate by race in any way with respect to:

a Students' rights or privileges? 33a

b Admissions policies? 33b

c Employment of faculty or administrative staff? . . 33c

d Scholarships or other financial assistance? /^^ 33d

e Educational policies? >

f Use of facilities? 33f

g Athletic programs? 33a

h Other extracurricular activities? ... 33h

If you answered "Yes" to any of the above, please explain. (If you need more space, attach a separate statement.)

/%^./?^/^..^Z^!%^"""Z^%..%....