SCHOOLS INTEROPERABILITY FRAMEWORK ASSOCIATION REVIEWED FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION FOR FOUR MONTHS ENDED DECEMBER 31, 2007

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1 REVIEWED FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION FOR FOUR MONTHS ENDED DECEMBER 31, 2007

2 TABLE OF CONTENTS TITLE PAGE INDEPENDENT ACCOUNTANTS REVIEW REPORT 3 FINANCIAL STATEMENTS Statement of Financial Position 4 Statement of Activities 5 Statement of Cash Flows 6 NOTES TO FINANCIAL STATEMENTS 7-10 SUPPLEMENTAL FINANCIAL INFORMATION INDEPENDENT ACCOUNTANTS REVIEW REPORT ON OTHER FINANCIAL INFORMATION 11 SCHEDULE OF FUNCTIONAL EXPENSES 12

3 INDEPENDENT AUDITORS REPORT Board of Directors Schools Interoperability Framework Association Washington, DC We have reviewed the accompanying statement of financial position of Schools Interoperability Framework Association as of December 31, 2007 and the related statements of activities, functional expenses, changes in net assets, and cash flows for the four-month period ended December 31, 2007, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. All information included in these financial statements is the representation of the management of Schools Interoperability Framework Association. 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 our 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. Our review was made for the purpose of expressing limited assurance that there are no material modifications that should be made to the financial statements in order for them to be in conformity with generally accepted accounting principles. The information included in the accompanying schedules of general and administrative expenses is presented only for supplementary analysis purposes. Such information has been subjected to the inquiry and analytical procedures applied in the review of the basic financial statements, and we are not aware of any material modifications that should be made to it. Silver Spring, Maryland September 30, bkey@bkeycpa.com Website bkeycpa.com Beatrice P. Key, CPA 8630 Fenton Street, Suite 316 Silver Spring, MD

4 STATEMENT OF FINANCIAL POSITION December 31, 2007 ASSETS 2007 CURRENT ASSETS Cash and cash equivalents $ 276,321 Dues receivable 460,236 Other Current receivable - Total current assets 736,557 PROPERTY EQUIPMENT Furniture,fixtures and equipment 46,224 Less: Accumulated depreciation (15,455) Net property and equipment 30,769 OTHER ASSETS Investments 383,041 Software net of accumulated Amortization of $4,171 and $3,367 3,067 Total other assets 386,108 TOTAL ASSETS $ 1,153,434 Refer to Notes to Financial Statements and Accompanying Independent Accountants Review Report. 4

5 LIABILITIES AND NET ASSETS 2007 CURRENT LIABILITIES Accounts payable and accrued expenses $ 46,356 Deferred dues 573,995 Other deferred income 117,300 Total current liabilities 737,651 COMMITMENTS AND CONTINGENCIES - Total liabilities 737,651 NET ASSETS Unrestricted 415,783 Temporary Restricted - Total net assets 415,783 TOTAL LIABILITIES AND NET ASSETS $ 1,153,434

6 STATEMENT OF FINANCIAL POSITION FOR THE FOUR-MONTH PERIOD ENDED DECEMBER 31,2007 Temporary Unrestricted Restricted 2007 SUPPORT AND REVENUE Membership Dues $ 378,181 $ - $ 378,181 Grants 115, ,381 Registration fees 1,420-1,420 Program fees 11,900-11,900 Interest income 9,054-9,054 Other income Total Support and revenue 516, ,866 EXPENSES Program services 331, ,191 Support services 130, ,679 Total expenses 461, ,870 CHANGE IN NET ASSETS 54,996-54,996 NET ASSETS,BEGINNING OF YEAR 360, ,787 NET ASSETS,END OF YEAR $ 415,783 $ - $ 415,783 Refer to Notes to Financial Statements and Accompanying Independent Accountants Review Report. 5

7 STATEMENT OF CASH FLOWS FOR THE FOUR-MONTH PERIOD ENDED DECEMBER 31, CASH FLOWS FROM OPERATING ACTIVITIES Change in net assets $ 54,996 Adjustments to reconcile change in net assets to net cash (used) provided by operating activities Amortization and depreciation expense 3,706 (Increase) Decrease in assets: Dues receivable (189,904) Other dues receivable 9,040 Increase (Decrease) in liabilities: Accounts payable 10,786 deferred dues 157,044 Other deferred revenue - Net cash provided (used) by operating activities 45,668 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of equipment and software (16,733) Investment made (113,041) Net cash used by investing activities (129,774) NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (84,106) CASH, BEGINNING OF YEAR 360,427 CASH, END OF YEAR 276,321 SUPPLEMENTAL CASH FLOW INFORMATION Actual cash payments for: Federal and state income taxes - Interest - Refer to Notes to Financial Statements and Accompanying Independent Accountants Review Report. 6

8 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Organization The Schools Interoperability Framework Association (SIF) is a non-profit organization formed on April 16, The Association s mission is the establishment of independent platform and vendor neutral interoperable specifications for PK12 Software. The Association s primary source of revenues is membership dues based on a Company s annual revenues, ranging from $1,000 to $27,000. Accounting Method The Association s policy is to prepare its financial statements using the accrual method of accounting, whereby revenue is recognized when earned and expenses are recognized when incurred. Membership Dues SIF membership is open to all Companies that have agreed to adhere to SIF Implementation Specifications. Annual dues are invoiced based on revenue levels and anniversary dates and accounted as deferred dues. Revenue is recognized when earned over the remaining period of the membership agreement. Cash and Cash Equivalents Cash and cash equivalent include demand deposits and undeposited collections. For the purpose of the statement of cash flows, the Association considers all highly liquid debt instruments with original maturities of 90 days or less to be cash equivalents. As of December 31, 2007 there was $276,321 in cash equivalents. Dues Receivable Dues receivable are stated at the amount management expect to collect from outstanding balances. Management provides for probable uncollectible amounts through a provision for bad debt expense and an adjustment to a valuation allowance based on its assessment of the current status of individual accounts. The allowance for doubtful amounts as of December 31, 2007 was $39,587. 7

9 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Fixed Assets Property and equipment are recorded at the original cost to the Association or, if donated, the appraised value at the time of donation. The assets are being depreciated using the estimated useful lives of the respective assets on a straight-line basis. Cost of repairs and maintenance are expensed as incurred. Software Costs Costs associated with the purchase of software are being amortized using the straight-line method over an estimated useful life of 36 months. Income Tax Under Section 501 (c) (3) of the Internal Revenue Code, the Association is exempt from payments on income other than net unrelated business income. As of December 31, 2007 no provision for taxes was made as the Association had no unrelated business income. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. 8

10 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 NOTE 2 INVESTMENTS Investments include Certificates of Deposit with maturity dates in excess of 90 days. Investments are recorded at fair value. The fair value of investments at December 31, 2007 is as follows: 2007 Certificates of Deposits $ 271,000 NOTE 3 PEO SERVICES AND EMPLOYEE BENEFIT PLAN SIF has a Professional Employer Organization ( PEO ) Service agreement with Ambrose Group LLC, who provides the Association with a comprehensive Personnel Management System which encompasses a broad range of services, including payroll administration and employer benefit programs. The benefit programs include 401(k) plan which cover all the employees of the Association. The Association must contribute an amount equal to 2% of participants compensation to the plan each year. For the year ended December 31, 2007, $3,273 was contributed to the plan. NOTE 4 SERVICE AGREEMENT In April 2003, the Association entered into service agreement with Software and Information Industry Association (SIIF), formally the Parent Company. Pursuant to the agreement, SIIF agrees to provide office space and equipment and administrative support services in consideration of a monthly fee of $5,000. This agreement was terminated on December 31, In January 2006, the Association extended the agreement with SIF for a monthly fee of $2,000. Total occupancy and administration service fees for the year ended December 31, 2007 was $8,000. 9

11 NOTE 5 CHANGE IN YEAR END NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 During the year ended August 31, 2007, SIF applied with the Internal Revenue Service (IRS) to change its year end from a fiscal to a calendar year end. The IRS approved SIF s request in September This change becomes effective on January 1,

12 INDEPENDENT ACCOUNTANTS' REVIEW REPORT ON OTHER FINANCIAL INFORMATION Board of Directors Schools Interoperability Framework Association Washington, DC Our report on our review of the basic financial statements of Schools Interoperability Framework Association for the year ended December 31, 2007 appears on page 3. This review was made for the purpose of expressing limited assurance that there are no material modifications that should be made to the financial statements in order for them to be in conformity with U.S. generally accepted accounting principles. The accompanying Schedules of Functional Expenses on page 12 are presented for purpose of additional analysis and are not required part of the basic financial statements. Such information has been subjected to the inquiry and analytical procedures applied in the review of the basic financial statements. All information in this schedule is the representation of the management of Schools Interoperability Framework Association. We did not become aware of any material modifications that should be made to this other financial information Silver Spring, Maryland September 30, 2008 Beatrice P. Key, CPA 8630 Fenton Street, Suite 316 Silver Spring, Md Website bkeycpa.com

13 SCHEDULE OF FUNCTIONAL EXPENSES FOR THE FOUR-MONTH PERIOD ENDED DECEMBER 31, 2007 Program Support Total Service Service 2007 Accounting $ - $ 12,900 $ 12,900 Advertising and Marketing 10,251-10,251 Bad Debts 18,974-18,974 Conferences and meetings - 26,988 26,988 Depreciation - 3,705 3,705 Equipment 1,505-1,505 Grant expenses Insurance International support 30,264-30,264 Legal fees 6,772-6,772 Meals and entertainment - 5,669 5,669 Occupancy and administrative 8,000-8,000 service fees Other expenses 6,342-6,342 Postage and shipping Printing Professional fees - 3,742 3,742 Repairs and Maintenance Salaries and fringe benefits 193,849 77, ,375 Supplies 1,110-1,110 Telecommunications 11,068-11,068 Travel and lodging 41,891-41,891 Total $ 331,191 $ 130,679 $ 461,870 12