REPORT ACORN INSTITUTE, INC.

DECEMBER 31, 2006 AND 2005

ACORN INSTITUTE, INC. INDEX TO REPORT DECEMBER 31, 2006 AND 2005

PAGE INDEPENDENT AUDITOR'S REPORT .......................................................................................... FINANCIAL STATEMENTS: Statements of Financial Position........................................................................................................ Statements of Activities ..................................................................................................................... Statements of Functional Expenses ................................................................................................... Statements of Cash Flows .................................................................................................................. 2 3 4-5 6 1

Notes to Financial Statements............................................................................................................ 7 - 13

MICHAEL J. OROURKE, C.P.A. WILLIAM G. STAMM, C.P.A. CLIFFORD J. GIFFIN, JR, C.P.A. DAVID A. BURGARD, C.P.A. LINDSAY J. CALUB, C.P.A., L.L.C. GUY L. DUPLANTIER, C.P.A. MICHELLE H. CUNNINGHAM, C.P.A DENNIS W. DILLON, C.P.A. ANN H. HEBERT, C.P.A. ROBIN A. STROHMEYER, C.P.A. GRADY C. LLOYD, III, C.P.A. HENRY L. SILVIA, C.P.A.

1340 Poydras St., Suite 2000 New Orleans, LA 70112 (504) 586-8866 FAX (504) 525-5888 www.dhhmcpa.com

A.J. DUPLANTIER JR, C.P.A. (1919-1985) FELIX J. HRAPMANN, JR, C.P.A. (1919-1990) WILLIAM R. HOGAN, JR. C.P.A. (1920-1996) JAMES MAHER, JR, C.P.A. (1921-1999) MEMBERS AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS SOCIETY OF LA C.P.A.S

INDEPENDENT AUDITOR'S REPORT

January 3, 2008 Board of Directors ACORN Institute, Inc. New Orleans, Louisiana

We have audited the accompanying statements of financial position of ACORN Institute, Inc. as of December 31, 2006 and 2005, and the related statements of activities, functional expenses and cash flows for the years then ended. These financial statements are the responsibility of the organization's management. 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. Those standards require that we plan and perform the 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 in the first paragraph present fairly, in all material respects, the financial position of ACORN Institute, Inc., as of December 31, 2006 and 2005, and its changes in net assets and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Duplantier, Hrapmann, Hogan & Maher, LLP

PAGE 2 ACORN INSTITUTE, INC. STATEMENTS OF FINANCIAL POSITION DECEMBER 31, 2006 AND 2005

2006 ASSETS: Cash Accounts receivable Accounts receivable - affiliates (Note 2) Grants receivable Prepaid expenses - affiliates (Note 2) Property and equipment, net of accumulated depreciation (Notes 1 and 5) TOTAL ASSETS $ 712,348 34,902 22,986 8,855 2,342 6,210 $ 787,643 $ $

2005 452,899 131,072 127 584,098

LIABILITIES: Accounts payable Accounts payable - affiliates (Note 2) Grants payable - affiliates (Note 2) Payroll liabilities Total liabilities

9,201 63,263 201,850 16,244 290,558

24,786 17,123 103 42,012

NET ASSETS: (Notes 1 and 4) Unrestricted Temporarily restricted Total net assets TOTAL LIABILITIES AND NET ASSETS $

114,037 383,048 497,085 787,643 $

210,323 331,763 542,086 584,098

See accompanying notes.

PAGE 3 ACORN INSTITUTE, INC. STATEMENTS OF ACTIVITIES FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

2006 UNRESTRICTED NET ASSETS: REVENUE AND SUPPORT: Gifts Grants Contractual fees Contributions and donations Other Total revenue and support Net assets released from donor restrictions (Note 4) EXPENSES: Program services Supporting services: Administrative and general Fundraising INCREASE (DECREASE) IN UNRESTRICTED NET ASSETS TEMPORARILY RESTRICTED NET ASSETS: Donations and gifts Net assets released from donor restrictions (Note 4) INCREASE IN TEMPORARILY RESTRICTED NET ASSETS TOTAL INCREASE (DECREASE) IN NET ASSETS NET ASSETS, BEGINNING OF YEAR NET ASSETS, END OF YEAR $ $ 1,430,781 146,651 61,946 172,258 26,883 1,838,519 1,668,049 3,506,568 3,398,786 154,633 49,435 3,602,854 (96,286) $

2005 164,143 305,812 909 70,647 2,550 544,061 627,335 1,171,396 942,085 44,015 15,615 1,001,715 169,681

1,719,334 (1,668,049) 51,285 (45,001) 542,086 497,085 $

959,098 (627,335) 331,763 501,444 40,642 542,086

See accompanying notes.

PAGE 4 ACORN INSTITUTE, INC. STATEMENT OF FUNCTIONAL EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2006

2006 Program Services EXPENSES: Accounting Administrative services Audit and tax services Bank charges Campaign services Contractual services Corporate services Data processing services Depreciation Employee benefits Equipment purchase Equipment repairs Express services Filing fees Gifts and grants paid Home stabilization Insurance Office leasing Miscellaneous Payroll taxes Personnel services Postage and freight Printing Program Project administrative services Recruitment and advertising Salaries Supplies Taxes, annual filings Taxes, corporate Telephone Training Travel Vehicle rental TOTAL EXPENSES $ 9,436 1,329 19,005 483 34,905 4,340 2,377 1,462 1,954 1,508,611 759,221 1,149 2,696 13,581 662,933 7,879 27,036 79,525 1,992 1,747 186,439 12,050 375 135 5,828 13,840 34,122 4,336 Administrative & General $ 46,182 267 2,696 1,927 7,162 227 138 9,973 1,240 679 418 328 770 3,880 2,251 7,725 499 53,268 3,443 107 39 1,665 9,749 $ Fund Raising 1,348 69 4,986 620 340 209 165 385 1,941 1,125 3,862 250 26,635 1,721 53 19 833 4,874 49,435 $ Total All Functional Categories 46,182 267 13,480 1,927 1,329 19,005 7,162 227 690 49,864 6,200 3,396 2,089 1,954 1,508,611 759,221 1,642 3,851 19,402 662,933 11,255 38,623 79,525 1,992 2,496 266,342 17,214 535 193 8,326 13,840 48,745 4,336

$ 3,398,786

$ 154,633

$ 3,602,854

See accompanying notes.

PAGE 5 ACORN INSTITUTE, INC. STATEMENT OF FUNCTIONAL EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2005

2005 Program Services EXPENSES: Accounting Administrative services Audit and tax services Bank charges Campaign services Contractual services Corporate services Data processing services Depreciation Employee benefits Equipment purchase Equipment repairs Express services Filing fees Gifts and grants paid Home stabilization Insurance Office leasing Miscellaneous Payroll taxes Personnel services Postage and freight Printing Program Project administrative services Recruitment and advertising Salaries Supplies Taxes, annual filings Taxes, corporate Telephone Training Travel Vehicle rental TOTAL EXPENSES $ 5,714 423 87,768 1,423 134 1,705 680,092 33,674 758 823 62,465 1,723 2,440 28,010 261 7,830 12,837 6 63 1,331 11,767 838 942,085 Administrative & General $ 12,128 100 1,633 554 407 38 217 235 17,847 492 697 2,237 3,668 2 18 380 3,362 44,015 $ Fund Raising 816 203 20 108 117 8,923 246 348 1,119 1,834 9 191 1,681 15,615 $ Total All Functional Categories 12,128 100 8,163 554 423 87,768 2,033 192 1,705 680,092 33,674 1,083 1,175 89,235 2,461 3,485 28,010 261 11,186 18,339 8 90 1,902 16,810 838

$ 1,001,715

See accompanying notes.

PAGE 6 ACORN INSTITUTE, INC. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

2006 CASH FLOWS FROM OPERATING ACTIVITIES: Change in net assets Adjustments to reconcile change in net assets to net cash provided by operations: Depreciation (Increase) decrease in operating assets: Accounts receivable Accounts receivable - affiliates Grants receivable Prepaid expenses and other assets Increase (decrease) in operating liabilities: Accounts payable Accounts payable - affiliate Payroll liabilities Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment Net cash used by investing activities CASH FLOWS FROM FINANCING ACTIVITIES: Collections on behalf of others Disbursements to others Net cash provided by investing activities NET INCREASE IN CASH . CASH AT BEGINNING OF YEAR CASH AT END OF YEAR $ $ (45,001) 690 96,170 (22,986) (8,855) (2,215) (15,585) 46,140 16,141 64,499 (6,900) (6,900) 416,380 (214,530) 201,850 259,449 452,899 712,348 $ $

2005 501,444 (119,461) (115) 20,975 14,803 (774) 416,872 313,585 (313,585) 416,872 36,201 453,073

See accompanying notes.

PAGE 7 ACORN INSTITUTE, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2006 AND 2005

ORGANIZATIONAL PURPOSE: ACORN Institute, Inc. is a nonprofit corporation, organized as an educational organization focusing on providing information concerning rights, opportunities, training and disaster recovery services. It receives gifts, grants and contractual fees from foundations, corporations, individuals, religious organizations and the government. 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The principal accounting policies applied in the preparation of the accompanying financial statements are as follows: Basis of Accounting: The financial statements of the organization are prepared on the accrual basis. Financial statement presentation follows the recommendations of the Financial Accounting Standards Board in its Statement of Financial Accounting Standards No. 117, Financial Statements of Not-for-Profit Organizations. The statement of activities presents expenses of the organization's operations divided functionally among program services, fundraising activities and administrative and general. Those expenses which cannot be functionally categorized are allocated among functions based upon management's estimate of usage applicable to conducting those functions. Promises To Give: Gifts are recognized when the donor makes a promise to give to the organization that is, in substance, unconditional. Gifts that are restricted by the donor are reported as increases in unrestricted net assets if the restrictions expire in the year in which the gifts are recognized. All other donor-restricted gifts are reported as increases in temporarily or permanently restricted net assets depending on the nature of the restrictions. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets. Unconditional promises to give that are expected to be collected within one year are recorded at net realizable value. Unconditional promises to give that are expected to be collected in future years are recorded at the present value of their estimated future cash flows. The discounts on those amounts are computed using risk-free interest rates applicable to the years in which the promises are received. Amortization of the discounts is included in gifts and grants revenue. Conditional promises to give are not included as revenue until the conditions are substantially met.

PAGE 8 ACORN INSTITUTE, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2006 AND 2005

1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued) Promises To Give: (Continued) The organization uses the allowance method to determine unconditional promises receivable. The allowance is based on historical experience and managements analysis of specific promises made. Contributed Services: During 2006 and 2005, the value of contributed services meeting the requirements for recognition in the financial statements was not material and has not been recorded. Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates. Income Tax Status: The organization has received a determination letter from the Internal Revenue Service exempting it from federal taxes under Section 501(c)(3) of the Internal Revenue Code. Property and Equipment: Property and equipment are stated at cost. The organization uses the straight-line depreciation method over the estimated useful life of its property. Depreciation expense was $690 and $0 for the years ended December 31, 2006 and 2005, respectively. Statement of Cash Flows: For purposes of the statements of cash flows, the organization considers demand deposits, certificates of deposit with an initial maturity of three months or less and cash held by a third party to be cash equivalents. The organization paid interest and income taxes during 2006 and 2005 as follows: 2006 Interest Taxes $ $ --2005 $ $ ---

PAGE 9 ACORN INSTITUTE, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2006 AND 2005

1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued) Uninsured Cash Balances: The organization maintains cash balances at two banks. Cash accounts at banks are insured by the FDIC for balances up to $100,000. Amounts in excess of insured limits were approximately $598,060 and $374,516 at December 31, 2006 and 2005, respectively.

2.

TRANSACTIONS WITH AFFILIATED ORGANIZATIONS: ACORN Institute, Inc. is one of a number of nonprofit organizations dedicated to various community service projects primarily associated with low to moderate income families. These nonprofit organizations are run by independent boards of directors, but share certain common functions and costs. They are also under certain common controls by individuals who could exercise influence over their day-to-day decisions. Accounts receivable affiliates at December 31, 2006 and 2005, consists of accrued contractual fees due from the following affiliated organizations: 2006 American Institute for Social Justice Project VOTE $ 15,625 7,361 $ 22,986 $ $ 2005 ----

Accounts payable - affiliates at December 31, 2006 and 2005, consists of accrued contractual services and other payments due to the following affiliated organizations: 2006 ACORN Associates, Inc. ACORN International, Inc. Association of Community Organizations for Reform Now Chief Organizer Fund Citizens Services, Inc. Citizens Consulting, Inc. Council Health Plan Peoples Equipment Resource Corporation $ -5,000 2005 $ 2,598 -2,070 1 -12,454 --$ 17,123

17,583 -28,213 3,356 3,725 5,386 $ 63,263

The organization received contributions from Association of Community Organizations for Reform Now in the amount of $0 and $2,300, respectively, during the years 2006 and 2005.

PAGE 10 ACORN INSTITUTE, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2006 AND 2005

2.

TRANSACTIONS WITH AFFILIATED ORGANIZATIONS: (Continued) The organization received gifts from ACORN Housing Corporation, Inc. in the amount of $100,000 and $500,000, respectively, during the years 2006 and 2005. The organization received gifts from American Institute of Social Justice in the amount of $938,403 and $0, respectively, during the years 2006 and 2005. The organization incurred approximately $52,342 and $14,134 in cost associated with Citizens' Consulting, Inc., providing accounting, legal, administrative and other services to the company during 2006 and 2005, respectively. The organization incurred $27,194 and $0 in cost associated with COUNCIL Health Plan, an ERISA health plan established to assist individuals who directly pursue philanthropic endeavors for the years ended December 31, 2006 and 2005, respectively. Employees can cover family members at their own expense. The organization incurred $22,194 and $0 during 2006 and 2005, respectively, in cost associated with COUNCIL Beneficial Association, a qualified ERISA retirement plan established for the purpose of providing retirement benefits to eligible employees in accordance with the Plan and Trust. (See also Note 6) At December 31, 2006 and 2005, the organization prepaid COUNCIL Beneficial Association $2,322 and $0, respectively. Contractual, campaign, project administrative, personnel and other services paid to other affiliated organizations during 2006 and 2005 follows: 2006 1,277 79,261 10,000 2005 $ 61,451 --104,184 423 --$ 166,058

ACORN Associates, Inc. ACORN Services, Inc. American Institute for Social Justice Association of Community Organizations for Reform Now Chief Organizer Fund Citizens Services, Inc. Project VOTE

525,678 7,929 45,967 2,759 $ 672,871

At December 31, 2006 and 2005, the organization prepaid rent to Association of Community Organizations for Reform Now in the amount of $0 and $127, respectively.

PAGE 11 ACORN INSTITUTE, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2006 AND 2005

2.

TRANSACTIONS WITH AFFILIATED ORGANIZATIONS: (Continued) The organization incurred costs for office space provided under lease agreements during 2006 and 2005 as follows: 2006 Association of Community Organizations for Reform Now $ 1,524 2005 $ 635

The organization incurred expenses for copying and printing services, postage, telephone and supplies during 2006 and 2005 as follows: 2006 Association of Community Organizations for Reform Now $ 86 2005 $ 5,976

At December 31, 2006 and 2005, the organization shared a consolidated billing arrangement with various other nonprofit organizations for long distance, e-mail and credit card charges. Peoples Equipment Resource Corporation (PERC) received a bill each month with separate totals for each organization. PERC pays the total bill and is then reimbursed by each organization. The amount incurred for reimbursement to PERC was $9,165 at December 31, 2006 and $33,013 at December 31, 2005. As of December 31, 2006 and 2005, the organization owed $5,386 and $0, respectively, to PERC. The organization receives much of its support in the form of gifts and grants. It also acts as a fiscal agent for other organizations. For certain gifts and grants, the organization receives the funds and then remits the amount received to the designated organization. ACORN Institute, Inc. served as a fiscal agent for the following organizations: Received Association of Community Organizations for Reform Now $ 416,380 2006 Paid $ 214,530 2005 Paid $ 50,000 $ 263,585 Payable $ 201,850

Received ACORN International, Inc. Association of Community Organizations for Reform Now $ 50,000 $ 263,585

Payable $ $ ---

These amounts received and paid are not included in the statement of activities as revenue and expense.

PAGE 12 ACORN INSTITUTE, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2006 AND 2005

2.

TRANSACTIONS WITH AFFILIATED ORGANIZATIONS: (Continued) ACORN Institute, Inc. made gifts and grants to the following affiliated organizations during 2006 and 2005: 2006 Association of Community Organizations for Reform Now ACORN Associates, Inc. ACORN Services, Inc. American Home Day Care Workers Association, Inc. American Institute for Social Justice, Inc. Citizens Consulting, Inc. Elysian Fields Corporation Fifteenth Street Corporation Greenwell Springs Corporation Peoples Equipment Resource Corporation 2005

$ 598,816 -889,547 ------7,560 $ 1,495,923

$ 56,327 1,125 310,637 1,000 6,819 9,951 71,418 4,340 50,673 37,090 $ 549,380

3.

LEASES: During 2006 and 2005, the organization leased equipment and office space. The leases are classified as operating leases and are on a month-to-month basis. During 2006 and 2005 rent expense totaled $3,851 and $1,083, respectively.

4.

NET ASSETS RELEASED FROM RESTRICTIONS: Net assets are released from temporary donor restrictions by incurring expenses satisfying the restricted purpose.

5.

PROPERTY AND EQUIPMENT: Property and equipment at December 31, 2006 consisted of a vehicle in the amount of $6,900. There was no property and equipment as of December 31, 2005.

PAGE 13 ACORN INSTITUTE, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2006 AND 2005

6.

DEFINED CONTRIBUTION PLAN: The organization participates in a multi-employer defined contribution retirement plan. The name of the plan is the COUNCIL Beneficial Association (see also Note 2), and it is considered to be a qualified ERISA plan. The plan has not received a tax determination letter from the Internal Revenue Service and has been operating as an exempt organization under the provisions of Section 401(k) of the Internal Revenue Code of 1986, as amended. All employees who have reached the age of twenty-one (21) and have achieved at least one thousand (1,000) hours of service and have been employed by the organization for at least twelve (12) months are eligible to participate in the plan. Employer contributions can be in the form of a discretionary contribution for eligible employees who have reached the age of twenty-one (21) and have achieved at least twelve (12) months of service or in the form of a matching contribution (the percentage to be determined by management of the organization) for eligible employees who have reached the age of twenty-one (21) and have achieved at least one thousand (1,000) hours of service and have been employed by the organization for at least twelve (12) months. The organization's contribution for the years ended December 31, 2006 and 2005 was $22,194 and $0, respectively. Participants are vested 100% in employee accounts immediately and are not vested in employer accounts until after five (5) years of service has been completed when they become 100% vested. If the employee becomes disabled or dies or if the plan is terminated prior to the employee achieving five (5) years of service, he will be considered 100% vested in both employee and employer accounts.