19C - EMPOWERMENT-FINANCIAL AUDIT FY 2009-2010

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SANTA ANA EMPOWERMENT CORPORATION Notes to the Financial Statements June 30, 2010 and 2009 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Organization and Nature of Activities Santa Ana Empowerment Corporation (Organization) is a California nonprofit corporation, which was incorporated on August 16, 1999. The City of Santa Ana (City), the State of California, and the United States Department of Housing and Urban Development (HUD) entered into an agreement in which HUD designated the City as an Urban Empowerment Zone effective January 1, 1999, which will remain in effect until July 2, 2010 or the effective date of HUD's revocation of this designation. In conjunction with this designation, the Organization was created under an approved strategic plan to undertake the responsibilities of the Empowerment Zone program which includes the administration of funds received consistent with community vision, goals, and objectives of the approved strategic plan. The Empowerment Zone program is funded by HUD. (b) Basis of Accounting The preparation of these financial statements requires management to make estimates and assumptions. Those estimates and assumptions affect the reported amount of assets, liabilities, revenues, and expenses, as well as contingent assets and liabilities. Actual results could differ from those estimates. Management also determines the accounting principles to be used in the preparation of these financial statements. A description of significant accounting policies employed in the preparation of these financial statements follows. The financial statements of the Organization have been prepared on the accrual basis of accounting and accordingly reflect all significant receivables, payables, and other liabilities. (c) Financial Statement Presentation The Organization follows the financial statement presentation recommended by the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 958-205-45 (Statement of Financial Accounting Standards (SFAS) No. 117, Financial Statements ofNot for-Profit Organizations). Under this guidance, the Organization is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. (d) Cash and Cash Equivalents For purposes of the Statements of Cash Flows, the Organization considers all unrestricted, highly liquid investments with a maturity of three months or less to be cash equivalents. Cash equivalents consist of various demand deposits. As of June 30, 2010 and 2009, the Organization did not have any cash or cash equivalents Refer to Note (3) for an explanation of the advances from the City of Santa Ana. 19C-17