Collaborative For Children

Financial Statements and Single Audit Reports

for the year ended December 31, 2007

Blazek & Vetterling LLP C E R T I F I E D P U B L I C A C C O U N T A N T S

2900 Weslayan, Suite 200 Houston, Texas 77027-5132 (713) 439-5757 Fax (713) 439-5758

Independent Auditors’ Report To the Board of Directors of Collaborative For Children: We have audited the accompanying statements of financial position of Collaborative For Children as of December 31, 2007 and 2006 and the related statements of activities, of functional expenses, and of cash flows for the years then ended. These financial statements are the responsibility of the management of Collaborative For Children. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform our audits to obtain reasonable assurance about whether the 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 financial statements referred to above present fairly, in all material respects, the financial position of Collaborative For Children as of December 31, 2007 and 2006 and the changes in its net assets and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we also have issued a report dated June 13, 2008, on our consideration of Collaborative For Children’s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. Our audit was performed for the purpose of forming an opinion on the basic financial statements of Collaborative For Children taken as a whole. The accompanying schedule of expenditures of federal awards for the year ended December 31, 2007, is presented for purposes of additional analysis as required by U. S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is not a required part of the basic financial statements. The information in this schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.

June 13, 2008

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Collaborative For Children Statements of Financial Position as of December 31, 2007 and 2006 2007 2006 ASSETS Cash and cash equivalents (Note 2) $ 801,727 $ 706,281 U. S. Treasury securities (Note 5) 203,308 203,551 Receivables: Pledges (Note 3) 687,334 434,450 Government agencies 92,108 110,400 United Way service contracts 29,067 94,058 Other 10,535 12,921 Prepaid expenses and other assets 16,997 24,205 Property, net (Note 4) 141,430 31,540 TOTAL ASSETS $ 1,982,506 $ 1,617,406 LIABILITIES AND NET ASSETS Liabilities: Accounts payable and accrued expenses $ 217,663 $ 114,268 Space contraction liability (Note 9) 149,337 Line of credit payable (Note 5) 39,855 Deferred revenue 7,875 3,302

Total liabilities 414,730 117,570 Net assets: Unrestricted 484,938 524,140 Temporarily restricted (Note 6) 1,082,838 975,696

Total net assets 1,567,776 1,499,836 TOTAL LIABILITIES AND NET ASSETS $ 1,982,506 $ 1,617,406 See accompanying notes to financial statements.

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Collaborative For Children Statement of Activities for the year ended December 31, 2007 TEMPORARILY UNRESTRICTED RESTRICTED TOTAL REVENUE:

Government grants (Note 7) $ 1,378,128 $ 1,378,128 Contributions 483,739 $ 944,163 1,427,902 United Way service contracts 770,143 770,143 Special events 155,047 155,047 Cost of direct donor benefits (30,418) (30,418) Program service fees 126,511 126,511 Investment return 35,692 35,692 Other income 13,320 13,320

Total revenue 2,932,162 944,163 3,876,325

Net assets released from restrictions: Expenditure for program purposes 477,021 (477,021) Expiration of time restrictions 360,000 (360,000)

Total 3,769,183 107,142 3,876,325 EXPENSES:

Program services: Provider Engagement 1,782,862 1,782,862 Family Engagement 498,354 498,354 Community Engagement 376,392 376,392

Total program services 2,657,608 2,657,608

Management and general 695,447 695,447 Fundraising 289,115 289,115 Space contraction costs (Note 9) 166,215 166,215

Total expenses 3,808,385 3,808,385 CHANGES IN NET ASSETS (39,202) 107,142 67,940 Net assets, beginning of year 524,140 975,696 1,499,836 Net assets, end of year $ 484,938 $ 1,082,838 $ 1,567,776 See accompanying notes to financial statements.

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Collaborative For Children Statement of Activities for the year ended December 31, 2006 TEMPORARILY UNRESTRICTED RESTRICTED TOTAL REVENUE:

Government grants (Note 7) $ 1,515,571 $ 1,515,571 Contributions 167,465 $ 358,050 525,515 United Way service contracts 577,930 577,930 Special events 168,807 168,807 Cost of direct donor benefits (14,843) (14,843) Program service fees 103,064 103,064 Investment return 25,383 25,383 Other income 556 556

Total revenue 2,543,933 358,050 2,901,983

Net assets released from restrictions: Expenditure for program purposes 834,381 (834,381) Expiration of time restrictions 412,500 (412,500)

Total 3,790,814 (888,831) 2,901,983 EXPENSES:

Program services: Provider Engagement 1,834,943 1,834,943 Family Engagement 623,230 623,230 Community Engagement 166,463 166,463

Total program services 2,624,636 2,624,636

Management and general 756,401 756,401 Fundraising 234,189 234,189

Total expenses 3,615,226 3,615,226 CHANGES IN NET ASSETS 175,588 (888,831) (713,243) Net assets, beginning of year 348,552 1,864,527 2,213,079 Net assets, end of year $ 524,140 $ 975,696 $ 1,499,836 See accompanying notes to financial statements.

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Collaborative For Children Statement of Functional Expenses for the year ended December 31, 2007 PROVIDER FAMILY COMMUNITY MANAGEMENT TOTAL EXPENSES ENGAGEMENT ENGAGEMENT ENGAGEMENT AND GENERAL FUNDRAISING EXPENSES Salaries, related taxes and benefits $ 789,372 $ 375,196 $ 258,613 $ 520,805 $ 196,375 $ 2,140,361 Occupancy 142,597 66,205 51,640 86,083 34,866 381,391 Professional and contract services 303,626 6,749 12,666 21,783 6,236 351,060 Equipment and incentive grants 307,964 3,765 311,729 Conferences, meetings, and workshops 85,384 2,670 5,349 4,183 20,746 118,332 Travel 32,054 1,928 7,256 4,617 40 45,895 Office supplies 12,335 5,263 13,767 10,135 3,526 45,026 Staff development 20,188 4,011 1,094 4,282 8,058 37,633 College tuition, continuing education, and awards to caregivers 34,561 17 152 679 35,409 Depreciation 10,702 5,014 4,799 12,003 2,391 34,909 Telephone lease 10,081 4,624 3,373 6,804 2,437 27,319 Printing 3,821 3,741 9,824 2,761 5,715 25,862 Computer technology expense 7,685 2,436 3,148 5,780 3,829 22,878 Postage and shipping 4,759 8,155 436 1,038 1,824 16,212 Equipment rental and maintenance 3,785 1,766 1,253 2,643 918 10,365 Internet service fees 2,379 4,564 678 1,465 515 9,601 Telephone 5,384 911 727 1,554 622 9,198 Advertising 3,939 138 4,077 Other 6,185 1,339 1,617 4,893 879 14,913 Total expenses $ 1,782,862 $ 498,354 $ 376,392 $ 695,447 $ 289,115 3,642,170 Space contraction costs (Note 9) 166,215 Total $ 3,808,385 See accompanying notes to financial statements.

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Collaborative For Children Statement of Functional Expenses for the year ended December 31, 2006 PROVIDER FAMILY COMMUNITY MANAGEMENT TOTAL EXPENSES ENGAGEMENT ENGAGEMENT ENGAGEMENT AND GENERAL FUNDRAISING EXPENSES Salaries, related taxes and benefits $ 953,053 $ 432,886 $ 125,520 $ 550,292 $ 137,508 $ 2,199,259 Occupancy 156,488 75,148 21,023 96,758 23,811 373,228 Professional and contract services 201,762 41,843 7,283 59,841 14,349 325,078 Equipment and incentive grants 250,762 250,762 Conferences, meetings, and workshops 90,633 22,429 1,373 2,228 41,207 157,870 Travel 30,465 2,367 1,069 879 145 34,925 Office supplies 14,536 4,563 1,973 6,796 3,115 30,983 Staff development 12,677 1,407 12 1,012 473 15,581 College tuition, continuing education, and awards to caregivers 70,595 426 71,021 Depreciation 2,455 1,395 2,666 7,134 381 14,031 Telephone lease 14,730 7,216 1,848 9,495 2,359 35,648 Printing 5,104 10,840 938 2,191 2,096 21,169 Computer technology expense 2,868 5,248 445 1,082 2,637 12,280 Postage and shipping 7,553 9,641 239 582 3,190 21,205 Equipment rental and maintenance 3,802 2,093 525 3,667 688 10,775 Internet service fees 3,627 2,002 277 1,831 480 8,217 Telephone 8,433 1,946 376 2,269 831 13,855 Advertising 7,650 200 7,850 Other 5,400 2,206 896 2,268 719 11,489 Total expenses $ 1,834,943 $ 623,230 $ 166,463 $ 756,401 $ 234,189 $ 3,615,226 See accompanying notes to financial statements.

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Collaborative For Children Statements of Cash Flows for the years ended December 31, 2007 and 2006 2007 2006 CASH FLOWS FROM OPERATING ACTIVITIES:

Changes in net assets $ 67,940 $ (713,243) Adjustments to reconcile changes in net assets to net cash provided by operating activities: Unrealized gain on U.S. Treasury securities (7,547) (8,784) Depreciation 34,909 14,031 Changes in operating assets and liabilities: Receivables (167,215) 892,646 Prepaid expenses and other assets 7,208 (3,406) Accounts payable and accrued expenses 103,395 (106,508) Space contraction liability 149,337 Deferred revenue 4,573 (5,448)

Net cash provided by operating activities 192,600 69,288 CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from maturities of U. S. Treasury securities 412,000 410,000 Purchases of U. S. Treasury securities (404,210) (402,855) Purchases of property (144,799)

Net cash provided (used) by investing activities (137,009) 7,145 CASH FLOWS FROM FINANCING ACTIVITIES:

Advances on line of credit 39,855

Net cash provided by financing activities 39,855 NET CHANGE IN CASH AND CASH EQUIVALENTS 95,446 76,433 Cash and cash equivalents, beginning of year 706,281 629,848 Cash and cash equivalents, end of year $ 801,727 $ 706,281 See accompanying notes to financial statements.

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Collaborative For Children Notes to Financial Statements for the years ended December 31, 2007 and 2006 NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization – Collaborative For Children (CC) is located in Houston, Texas and was formed in 2004 through a merger of the Greater Houston Collaborative For Children (GHCC) and Initiatives for Children, Inc. (IFC), two non-profit organizations with more than 20 years of combined experience in serving the community. CC works with families and those that deliver educational and other support services to children to positively impact the care and education of young children. CC works to fulfill its mission of building a strong education foundation for young children to succeed in school and life by focusing its programs and services on the following goal areas: • Provider Engagement programs support and develop child care and early education professionals through one-

on-one consulting, training and mentoring for teachers and directors in early care and education centers, scholarships for professional development conferences, and wage enhancement programs to reward teachers for obtaining higher educational credentials.

• Family Engagement programs provide families with information, resources and support to launch their children

toward academic and life success by providing parent education, printed parenting tips, resource materials, and referrals for early education, after-school programs and children with special needs.

• Community Engagement programs provide a speaker’s bureau, partnerships to promote healthy child

development and strengthen policy and regulations impacting young children. Early childhood education is promoted as a high - priority public policy issue in our region with adequate support necessary to deliver quality programs for parents, children, and teachers.

Tax status – CC is exempt from federal income taxes under §501(c)(3) of the Internal Revenue Code and is classified as a public charity under §509(a)(2). Net asset classification – Contributions and the related net assets are classified based on the existence or absence of donor-imposed restrictions, as follows: • Unrestricted net assets include those net assets whose use is not restricted by donor-imposed stipulations even

though their use may be limited in other respects such as by contract or board designation. • Temporarily restricted net assets include contributions restricted by the donor for specific purposes or time

periods. When a purpose restriction is accomplished or a time restriction ends temporarily restricted net assets are released to unrestricted net assets.

Estimates – Management must make estimates and assumptions to prepare financial statements in accordance with generally accepted accounting principles. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, the amounts reported as revenue and expenses, and the allocation of expenses among various functions. Actual results could vary from the estimates that were used. Cash equivalents include highly liquid financial instruments with original maturities of three months or less. U. S. Treasury securities are recorded at fair value. Investment return includes interest and realized and unrealized gains and losses. Investment return is reported in the statement of activities as an increase in unrestricted net assets unless the use of the income is limited by donor-imposed restrictions. Investment return whose use is restricted by the donor is reported as an increase in temporarily restricted net assets.

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Pledges receivable that are expected to be collected within one year are recorded at net realizable value. Amounts expected to be collected in future years are discounted to the present value of their estimated future cash flows. Discounts are computed using risk-free interest rates applicable to the years in which the promises are received. Amortization of discounts is included in contribution revenue. Property is recorded at cost if purchased or at fair value at the date of gift if donated. Depreciation is calculated using the straight-line method over estimated useful lives of 5 years. Additions and improvements that have a cost of more than $500 are capitalized. Government grants and program service fees are recognized when the related services are provided. Amounts billed or received but unearned are included in the statement of financial position as deferred revenue. Contributions are recorded as revenue at fair value when an unconditional commitment is received from the donor. Contributions received with donor stipulations that limit their use are recorded as restricted support. Conditional contributions are recognized in the same manner when the conditions are substantially met. In-kind contributions – Donated materials and services are recorded at fair value as contributions when an unconditional commitment is received from the donor. The related expense is recorded as the item is used. Contributions of services are recognized when services received (a) create or enhance nonfinancial assets or (b) require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation. Grants made – Equipment and incentive grants are awarded to child care providers for equipment and facilities renovation and expansion. Grants awarded are recorded as expense at their fair value when a commitment is made to a recipient. Reclassifications – Certain reclassifications have been made to the prior year financial statements to conform with the current presentation. NOTE 2 – CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of the following: 2007 2006

Demand deposits $ 48,195 $ 410,491 Money market funds 753,532 295,790

Total cash and cash equivalents $ 801,727 $ 706,281 CC maintains cash for daily operations at several banking institutions. At times, bank deposits exceeded the federally insured limit of $100,000 per depositor per institution. CC has entered into a collateral agreement with one of its depository institutions to collateralize deposits in excess of the federally insured limit with U. S. government debt securities with a fair value of $590,047. NOTE 3 – PLEDGES RECEIVABLE Pledges receivable at December 31, 2007 are expected to be collected as follows: Receivable in 2008 $ 378,163 Receivable in 2009 328,000

Total pledges receivable 706,163 Discount to present value at 3% (18,829)

Pledges receivable, net $ 687,334

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NOTE 4 – PROPERTY Property consists of the following: 2007 2006

Furniture and equipment $ 178,232 $ 258,219 Lease hold improvements 24,984

Total property, at cost 203,216 258,219 Accumulated depreciation (61,786) (226,679)

Property, net $ 141,430 $ 31,540 Property with a cost of $47,681 is used in operations but not included in the statement of financial position at December 31, 2007 because title is held by grantors. NOTE 5 – LINE OF CREDIT CC has a $200,000 revolving line of credit with a bank that is collateralized by U. S. Treasury securities having a face value of $206,000. The line expires in May 2009. Draws on the line bear interest at the bank’s prime lending rate, which was 7.25% at December 31, 2007. The $39,855 balance at December 31, 2007 was repaid in 2008. NOTE 6 – TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets are available for the following purposes: 2007 2006

Use in future periods $ 525,163 $ 355,000 Neighborhood Initiative 338,338 Corporate H. A. N. D. S. projects 81,913 176,573 Community Engagement 160,073 Baby Basics 62,814 122,998 Inclusive Care 34,610 116,052 Parents as Partners in Preschool 20,000 25,000 Educational Video 20,000 20,000

Total temporarily restricted net assets $ 1,082,838 $ 975,696 NOTE 7 – GOVERNMENT GRANTS Sources of government grants are as follows: 2007 2006 U. S. Department of Health and Human Services: Child Care Training and Quality Improvement $ 887,326 $ 956,617 Early Learning 380,898 471,874 U. S. Department of Education: Quality Rating System 69,330 66,429 Coaching Program 20,651 Corporation for National and Community Service 31,416 Other 9,158

Total $ 1,378,128 $ 1,515,571

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NOTE 8 – EMPLOYEE BENEFIT PLAN CC participates in a §403(b) tax deferred annuity plan. Employees may elect to participate upon employment by contributing up to 15% of their salary. After three months of employment, the employee is eligible to receive an employer matching contribution, which is determined annually as a percentage of the employee’s base salary. CC’s contribution to this plan totaled approximately $29,000 during 2007 and $27,000 during 2006. NOTE 9 – COMMITMENTS CC leases office space and office equipment under noncancelable operating leases. Future minimum lease payments are payable as follows: 2008 $ 262,879 2009 262,879 2010 262,879 2011 262,361 2012 225,616 Thereafter 569,216

Total $ 1,845,830 Lease expense for office space and equipment was approximately $334,000 in 2007 and $395,000 in 2006. In December 2007, CC incurred costs of $166,215 to release office space held under long-term operating leases. The costs are payable to the office management company over a six-month period through May 2008. At December 31, 2007, the balance due on this liability is $149,337.

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Collaborative For Children Schedule of Expenditures of Federal Awards for the year ended December 31, 2007 FEDERAL GRANTOR Pass-through Pass-through Grantor CFDA Contract Award Program Title & Period Number Number Amount Revenue Expenditures U. S. DEPARTMENT OF EDUCATION Passed through The Center for Houston’s Future: Quality Rating System: #1 09/30/05 – 03/31/08 84.215K None $198,400 $ 69,330 $ 69,330 U. S. DEPARTMENT OF HEALTH AND HUMAN SERVICES Early Learning Opportunity Act: #2 09/30/05 – 08/31/07 93.577 90LO0185 $965,512 380,898 380,898 Passed through the Houston-Galveston Area Council: Child Care Mandatory and Matching Funds of the Child Care and Development Fund: #3 11/01/06 – 09/30/07 93.596 301-07 $965,959 743,340 743,340 #4 11/01/07 – 09/30/08 93.596 301-08 $775,000 143,986 143,986

Total U.S. Department of Health and Human Services 1,268,224 1,268,224 CORPORATION FOR NATIONAL AND COMMUNITY SERVICE Passed through the OneStar National Service Commission: Americorps Early Education Assessment Program: #5 01/01/07 – 01/31/08 94.006 15.0607.080 $49,282 31,416 31,416 TOTAL FEDERAL AWARDS $ 1,368,970 $ 1,368,970 See accompanying note to schedule of expenditures of federal awards.

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Collaborative For Children Note to Schedule of Expenditures of Federal Awards for the year ended December 31, 2007 SIGNIFICANT ACCOUNTING POLICIES Basis of presentation – The schedule of expenditures of federal awards includes the government grant activity of CC and is presented on the accrual basis of accounting. The information in this schedule is presented in accordance with requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Allowable expenses are determined according to the standards of OMB circular A-122, Cost Principles for Non-Profit Organizations and are expensed in the statement of activities in conformity with generally accepted accounting principles.

Blazek & Vetterling LLP C E R T I F I E D P U B L I C A C C O U N T A N T S

2900 Weslayan, Suite 200 Houston, Texas 77027-5132 (713) 439-5757 Fax (713) 439-5758 – 14 –

Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements

Performed in Accordance with Government Auditing Standards To the Board of Directors of Collaborative For Children: We have audited the financial statements of Collaborative For Children (CC) for the year ended December 31, 2007, and have issued our report thereon dated June 13, 2008. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting – In planning and performing our audit, we considered CC’s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of CC’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of CC’s internal control over financial reporting. A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the entity’s ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the entity’s financial statements that is more than inconsequential will not be prevented or detected by the entity’s internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the entity’s internal control. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. Compliance and Other Matters – As part of obtaining reasonable assurance about whether CC’s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. This report is intended solely for the information and use of management, the board of directors, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.

June 13, 2008

Blazek & Vetterling LLP C E R T I F I E D P U B L I C A C C O U N T A N T S

2900 Weslayan, Suite 200 Houston, Texas 77027-5132 (713) 439-5757 Fax (713) 439-5758 – 15 –

Report on Compliance with Requirements Applicable to Each Major Program and Internal Control Over Compliance in

Accordance with OMB Circular A-133 To the Board of Directors of Collaborative For Children: Compliance – We have audited the compliance of Collaborative For Children (CC) with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that are applicable to each of its major federal programs for the year ended December 31, 2007. The CC’s major federal program is identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major federal programs is the responsibility of CC’s management. Our responsibility is to express an opinion on CC’s compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about CC’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination of CC’s compliance with those requirements. In our opinion, CC complied, in all material respects, with the requirements referred to above that are applicable to each of its major federal programs for the year ended December 31, 2007. Internal Control Over Compliance – The management of CC is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts, and grants applicable to federal programs. In planning and performing our audit, we considered CC’s internal control over compliance with the requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of CC’s internal control over compliance. A control deficiency in an entity’s internal control over compliance exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect noncompliance with a type of compliance requirement of a federal program on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects an entity’s ability to administer a federal program such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a federal program that is more than inconsequential will not be prevented or detected by an entity’s internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement of a federal program will not be prevented or detected by an entity’s internal control. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant

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deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. This report is intended solely for the information and use of management, the board of directors, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.

June 13, 2008

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Collaborative For Children Schedule of Findings and Questioned Costs for the year ended December 31, 2007 Section I – Summary of Auditor’s Results Financial Statements Type of auditor’s report issued: unqualified qualified adverse disclaimer Internal control over financial reporting: • Material weakness(es) identified? yes no • Significant deficiencies identified that

are not considered to be material weakness(es)? yes none reported Noncompliance material to the financial statements noted? yes no Federal Awards Internal control over major programs: • Material weakness(es) identified? yes no • Significant deficiencies identified that

are not considered to be material weakness(es)? yes none reported Type of auditor’s report issued on compliance for major programs: unqualified qualified adverse disclaimer Any audit findings disclosed that are required to be reported in accordance with §510(a) of Circular A-133? yes no Identification of major programs: CFDA Number(s) Name of Federal Program or Cluster 93.577 Early Learning Opportunity Act Dollar threshold used to distinguish between Type A and Type B programs: $300,000 Auditee qualified as a low-risk auditee? yes no Section II – Financial Statement Findings There were no findings related to the financial statements which are required to be reported in accordance with section .510(a) of Circular A-133. Section III – Federal Award Findings and Questioned Costs There were no findings for federal awards required to be reported in accordance with section .510(a) of Circular A-133.