FINANCIAL STATEMENTS

AMERICAN COUNCIL FOR VOLUNTARY INTERNATIONAL ACTION

AMERICAN COUNCIL FOR VOLUNTARY INTERNATIONAL ACTION

CONTENTS

PAGE NO. INDEPENDENT AUDITORS' REPORT Statements of Financial Position, as of December 31, 2011 and 2010 Statements of Activities and Changes in Net Assets, for the Years Ended December 31, 2011 and 2010 Statement of Functional Expenses, for the Year Ended December 31, 2011 Statement of Functional Expenses, for the Year Ended December 31, 2010 Statements of Cash Flows, for the Years Ended December 31, 2011 and 2010 2

EXHIBIT A -

EXHIBIT B -

4-5

EXHIBIT C -

EXHIBIT D -

EXHIBIT E -

8 9 - 15

NOTES TO FINANCIAL STATEMENTS

GELMAN, ROSENBERG & FREEDMAN

To the Board of Directors American Council for Voluntary International Action Washington, D.C. We have audited the accompanying statements of financial position of the American Council for Voluntary International Action (InterAction) as of December 31, 2011 and 2010, and the related statements of activities and changes in net assets, functional expenses and cash flows for the years then ended. These financial statements are the responsibility of InterAction'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 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 the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of InterAction's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 InterAction as of December 31, 2011 and 2010, 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. In accordance with Government Auditing Standards, we have also issued our report dated April 29, 2012 on our consideration of InterAction's internal control over financial reporting and on 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 InterAction's internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on InterAction's 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 read in conjunction with this report in considering the results of our audits.

April 29, 2012

4550 MONTGOMERY AVENUE SUITE 650 NORTH BETHESDA, MARYLAND 20814 (301) 951-9090 FAX (301) 951-3570 WWW.GRFCPA.COM ___________________________ MEMBER OF CPAMERICA INTERNATIONAL, AN AFFILIATE OF HORWATH INTERNATIONAL MEMBER OF THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS' PRIVATE COMPANIES PRACTICE SECTION

EXHIBIT A AMERICAN COUNCIL FOR VOLUNTARY INTERNATIONAL ACTION STATEMENTS OF FINANCIAL POSITION AS OF DECEMBER 31, 2011 AND 2010

ASSETS 2011 CURRENT ASSETS Cash and cash equivalents Investments (Notes 2 and 10) U.S. Government grants receivable Foundation grants receivable, current portion (Note 3) Other receivables Prepaid expenses Total current assets PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS Furniture and equipment Leasehold improvements Less: Accumulated depreciation and amortization Net property, equipment and leasehold improvements NONCURRENT ASSETS Foundation grants receivable, noncurrent portion (Note 3) Security deposits Total noncurrent assets TOTAL ASSETS LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payable Accrued employee benefits Deferred membership dues Deferred publications Deferred registrations Deferred advertisements Refundable advance Total current liabilities NET ASSETS Unrestricted Temporarily restricted (Note 4) Total net assets TOTAL LIABILITIES AND NET ASSETS $ 1,493,730 5,334,710 6,828,440 7,339,414 $ 1,417,599 1,198,970 2,616,569 2,906,828 3 $ 167,780 252,353 16,759 8,146 39,360 4,000 22,576 510,974 $ 16,835 231,870 12,617 28,937 290,259 $ 1,323,292 79,387 1,402,679 7,339,414 $ 74,014 74,014 2,906,828 269,401 97,852 367,253 (318,327) 48,926 269,401 97,852 367,253 (304,831) 62,422 $ 1,724,502 855,304 1,162,907 1,957,755 36,055 151,286 5,887,809 $ 1,384,869 899,081 239,161 24,989 57,709 164,583 2,770,392 2010

See accompanying notes to financial statements.

AMERICAN COUNCIL FOR VOLUNTARY INTERNATIONAL ACTION STATEMENTS OF ACTIVITIES AND CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

Unrestricted SUPPORT AND REVENUE U.S. Government grants (Notes 8 and 9) $ Foundation grants Member contributions Membership dues Publications Forum, meetings and workshops Interest and dividends Sublease income (Note 6) Donated professional fees Other income Net assets released from donor restrictions (Note 5) Total support and revenue EXPENSES Program Services: Member Services Federal and Non-Federal Awards Legislative Activities Total program services Supporting Services: General and Administrative Fundraising Total supporting services Total expenses Changes in net assets before other item OTHER ITEM Unrealized and realized (losses) gains on investments (Note 2) Changes in net assets Net assets at beginning of year NET ASSETS AT END OF YEAR $ (45,610) 76,131 1,417,599 1,493,730 1,910,324 5,697,507 19,828 7,627,659 688,513 96,438 784,951 8,412,610 121,741 1,868,638 95,813 33,855 2,639,194 193,699 387,978 26,065 52,359 37,604 45,530 3,153,616 8,534,351

2011 Temporarily Restricted $ $ 7,289,356 (3,153,616) 4,135,740

Total 1,868,638 7,385,169 33,855 2,639,194 193,699 387,978 26,065 52,359 37,604 45,530 12,670,091

4,135,740

1,910,324 5,697,507 19,828 7,627,659 688,513 96,438 784,951 8,412,610 4,257,481

4,135,740 1,198,970 $ 5,334,710 $

(45,610) 4,211,871 2,616,569 6,828,440

See accompanying notes to financial statements.

EXHIBIT B

Unrestricted $ 1,594,105 45,629 2,536,532 186,491 404,185 20,180 41,067 12,810 3,218,173 8,059,172

2010 Temporarily Restricted $ $ 886,318 (3,218,173) (2,331,855)

Total 1,594,105 886,318 45,629 2,536,532 186,491 404,185 20,180 41,067 12,810 5,727,317

1,722,580 5,542,292 97,206 7,362,078 537,179 24,548 561,727 7,923,805 135,367

(2,331,855)

1,722,580 5,542,292 97,206 7,362,078 537,179 24,548 561,727 7,923,805 (2,196,488)

93,763 229,130 1,188,469 $ 1,417,599 $

(2,331,855) 3,530,825 1,198,970 $

93,763 (2,102,725) 4,719,294 2,616,569

See accompanying notes to financial statements.

EXHIBIT C AMERICAN COUNCIL FOR VOLUNTARY INTERNATIONAL ACTION STATEMENT OF FUNCTIONAL EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2011

Federal and Member Non-Federal Legislative General and Total Services Awards Activities Administrative Fundraising Expenses Salaries $ Fringe benefits (Note 7) Consulting and professional fees Temporary help Computer technical support Telephone Office supplies Postage Printing and duplication Subscriptions and publications Travel, hotels and meals Meetings and conferences Legal and audit fees Bank charges Other Insurance Occupancy (Note 6) Depreciation and amortization Furniture and equipment Repairs, maintenance and equipment rental Education and training Subgrants Donated professional services Sub-total Allocation of General and Administrative expenses TOTAL 895,680 $ 2,258,766 $ 297,331 749,824 176,072 455 18,027 12,894 12,307 17,487 11,167 70,072 373,220 5,342 93 1,287 13,639 5,251 1,910,324 509,562 4,508 45,649 25,276 9,025 102,847 11,867 166,155 116,601 5,025 7,489 50,077 15,408 63,745 300 118,541 4,260,665 1,436,842 11,169 $ 3,708 1,597 65 705 1,899 5 571 109 19,828 19,828 $ 602,380 $ 199,967 133,608 52,205 (3,469) 14,741 6,317 2,180 20,527 1,015 23,154 34,785 67,035 13,237 8,949 38,634 786,608 13,496 9,219 55,693 7,470 37,604 2,125,355 (1,436,842) 688,513 $ 60,551 $ 3,828,546 20,101 1,270,931 501 2,435 749 126 643 162 7,130 3,413 360 236 31 96,438 819,743 52,660 1,039 82,449 45,301 24,343 143,403 24,216 267,082 528,128 72,060 13,237 22,140 38,634 836,778 13,496 26,150 133,108 13,021 118,541 37,604 8,412,610 -

$ 1,910,324 $ 5,697,507 $

96,438 $ 8,412,610

See accompanying notes to financial statements.

EXHIBIT D AMERICAN COUNCIL FOR VOLUNTARY INTERNATIONAL ACTION STATEMENT OF FUNCTIONAL EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2010

Federal and Member Non-Federal Legislative General and Total Services Awards Activities Administrative Fundraising Expenses Salaries $ Fringe benefits (Note 7) Consulting and professional fees Temporary help Computer technical support Telephone Office supplies Postage Printing and duplication Subscriptions and publications Travel, hotels and meals Meetings and conferences Legal and audit fees Bank charges Other Insurance Occupancy (Note 6) Depreciation and amortization Furniture and equipment Repairs, maintenance and equipment rental Education and training Subgrants Sub-total Allocation of General and Administrative expenses TOTAL 687,188 $ 2,092,098 $ 242,921 739,557 179,013 24,722 22,235 15,291 23,393 13,509 125,080 364,096 800 1,820 10,421 1,612 10,479 1,722,580 502,573 10,530 77,340 25,591 16,568 86,643 1,776 265,261 116,475 5,865 185 5,398 34,018 26,230 62,200 1,561 152,358 4,222,227 1,320,065 59,041 $ 20,869 1,048 2,880 487 8 1,922 9,625 1,321 5 97,206 97,206 $ 473,315 $ 167,341 100,834 46,972 (10,530) 8,431 10,736 2,360 7,475 3,324 3,114 16,936 66,124 16,801 7,351 42,145 801,770 52,725 1,329 38,691 1,857,244 (1,320,065) 537,179 $ 17,907 $3,329,549 6,330 1,177,018 176 118 17 24,548 783,468 46,972 113,549 59,167 34,244 119,433 28,234 394,776 497,512 72,789 16,986 14,569 42,145 835,788 52,725 27,559 111,312 3,173 162,837 7,923,805 -

$ 1,722,580 $ 5,542,292 $

24,548 $7,923,805

See accompanying notes to financial statements.

EXHIBIT E AMERICAN COUNCIL FOR VOLUNTARY INTERNATIONAL ACTION STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

2011 CASH FLOWS FROM OPERATING ACTIVITIES Changes in net assets Adjustments to reconcile changes in net assets to net cash provided by operating activities: Depreciation and amortization Realized gains on sales of investments Unrealized losses (gains) on investments (Increase) decrease in: U.S. Government grants receivable Foundation grants receivable Other receivables Prepaid expenses Security deposits Increase (decrease) in: Accounts payable Accrued employee benefits Deferred membership dues Deferred publications Deferred registrations Deferred advertisements Refundable advance Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sales of investments Purchases of investments Net cash used by investing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year CASH AND CASH EQUIVALENTS AT END OF YEAR $ 586,926 (588,759) (1,833) 339,633 1,384,869 1,724,502 $ 13,496 (86,482) 132,092 (923,746) (3,256,058) 21,654 13,297 (5,373) 150,945 20,483 4,142 (20,791) 39,360 4,000 22,576 341,466 $ 4,211,871

2010 $ (2,102,725)

52,725 (30,651) (63,112) (239,161) 2,620,154 (42,373) (4,346) 8,956 (112,977) 10,617 23,745 (84,944) 35,908

436,160 (439,471) (3,311) 32,597 1,352,272 1,384,869

See accompanying notes to financial statements.

AMERICAN COUNCIL FOR VOLUNTARY INTERNATIONAL ACTION NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2011 AND 2010

1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL INFORMATION Organization The American Council for Voluntary International Action (InterAction) was incorporated on August 23, 1984 under the laws of the State of New York. InterAction is the largest coalition of U.S.-based international nongovernmental organizations (NGOs) focused on the worlds poor and most vulnerable people. With more than 190 members operating in every developing country, InterAction works to overcome poverty, exclusion and suffering by advancing social justice and dignity for all. Basis of presentation The accompanying financial statements are presented on the accrual basis of accounting, and in accordance with FASB ASC 958, Not-for-Profit Entities. Income taxes InterAction is exempt from Federal income taxes under Section 501(c)(3) of the Internal Revenue Code. Accordingly, no provision for income taxes has been made in the accompanying financial statements. InterAction is not a private foundation. Uncertain tax positions In June 2006, the Financial Accounting Standards Board (FASB) released FASB ASC 740-10, Income Taxes, that provides guidance for reporting uncertainty in income taxes. For the years ended December 31, 2011 and 2010, InterAction has documented its consideration of FASB ASC 740-10 and determined that no material uncertain tax positions qualify for either recognition or disclosure in the financial statements. The Federal Form 990, Return of Organization Exempt from Income Tax, is subject to examination by the Internal Revenue Service, generally for three years after it is filed. Cash and cash equivalents InterAction considers all cash and other highly liquid investments with initial maturities of three months or less to be cash equivalents. Grants receivable Grants receivable approximate fair value. Management considers all amounts to be fully collectible. Accordingly, an allowance for doubtful accounts has not been established. Property, equipment and leasehold improvements All purchases of furniture and equipment in excess of $1,500 are capitalized and stated at cost. Furniture and equipment are depreciated using the straight-line method of depreciation, over the useful life of the assets, generally three to five years. Leasehold improvements are capitalized and amortized over the life of the lease. Furniture and equipment purchased with grant funds are recorded as an expense and charged directly to the grant, which provided funding for the purchases. 9

AMERICAN COUNCIL FOR VOLUNTARY INTERNATIONAL ACTION NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2011 AND 2010

1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL INFORMATION (Continued) Revenue recognition Grant revenue, under cost reimbursable federal and non-federal grants, is recognized based upon direct costs incurred plus allowable indirect costs. Revenue recognized but not received from the granting agency is reported as grants receivable in the accompanying statement of financial position. Conversely, revenue received in advance of incurring allowable direct and indirect costs is reported as a refundable advance in the accompanying statements of financial position. Unconditional grants and contributions are recognized as revenue when received or promised and are reported as temporarily restricted support if they are received with donor or grantor stipulations that limit the use of donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. Certain contributions of donated services are recorded at their fair values in the period received. Membership dues are billed to members annually. The dues are recognized as revenue over the membership period, which is on a calendar year basis. Dues received, which are applicable to the following fiscal year, are presented as deferred dues in the accompanying financial statements. Revenue from all other sources is recognized when earned. Investments Investments at December 31, 2011 and 2010, consisted of mutual funds. Investments are recorded at their readily determinable fair value. Gains and losses, due to market fluctuations and from the sale or redemption of investments, are recorded as unrealized and realized gains and losses in the accompanying Statements of Activities and Changes in Net Assets. Classification of net assets The net assets are reported in two self-balancing groups as follows: Unrestricted net assets represent funds that are not subject to donor-imposed stipulations and are available for support of InterActions operations. Temporarily restricted net assets represent funds subject to donor-imposed restrictions that are met either by actions of InterAction and/or the passage of time. Functional allocation of expenses The costs of InterAction's programs and administration have been summarized on a functional basis in the accompanying Statements of Activities and Changes in Net Assets. Accordingly, certain costs have been allocated among the programs benefited. Allocation of indirect costs During 2011 and 2010, indirect costs were allocated to Federal grants based upon actual rates of 40.84% and 44.21%, respectively. 10

AMERICAN COUNCIL FOR VOLUNTARY INTERNATIONAL ACTION NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2011 AND 2010

1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL INFORMATION (Continued) Allocation of indirect costs (continued) The indirect rate is calculated using a base of salaries, benefits, temporary help and consultant expenses. Indirect costs have been allocated to non-Federal grants to the extent the donors have provided for the recovery of such costs. Use of estimates The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Concentration of credit risk At times during the year, InterAction maintains cash balances at financial institutions in excess of Federal Deposit Insurance Corporation (FDIC) limits. Management believes the risk in these situations to be minimal. Risks and uncertainties InterAction invests in various investment securities. Investment securities are exposed to various risks such as interest rates, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the accompanying financial statements. Fair value measurement InterAction adopted the provisions of FASB ASC 820, Fair Value Measurements and Disclosures. FASB ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs (assumptions that market participants would use in pricing assets and liabilities, including assumptions about risk) used to measure fair value, and enhances disclosure requirements for fair value measurements. InterAction accounts for a significant portion of its financial instruments at fair value or considers fair value in their measurement.

2.

INVESTMENTS Investments consisted of the following at December 31, 2011 and 2010: 2011 Cost Mutual Funds $ 851,428 $ Fair Value 855,304 $ Cost 763,113 $ 2010 Fair Value 899,081

Included in the accompanying Statements of Activities and Changes in Net Assets are unrealized and realized losses on investments of $45,610 and unrealized and realized gains on investments of $93,763 for 2011 and 2010, respectively; these losses and gains have been presented as an other item in the Statements of Activities and Changes in Net Assets as this activity is not a direct result from InterAction's operations. 11

AMERICAN COUNCIL FOR VOLUNTARY INTERNATIONAL ACTION NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2011 AND 2010

3.

FOUNDATION GRANTS RECEIVABLE Foundation grants receivable, due in more than one year, have been recorded at the present value of the estimated cash flows, using a discount rate of 3.25%. Foundation grants receivable are due as follows at December 31, 2011 and 2010: 2011 Less than one-year One to five years Total Less: Allowance to discount balance to present value FOUNDATION GRANTS RECEIVABLE, NET $ 1,957,755 1,366,299 3,324,054 (43,007) $ 3,281,047 $ $ 2010 24,989 24,989 24,989

4.

TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets consisted of the following at December 31, 2011 and 2010: 2011 The Bill and Melinda Gates Foundation - Agenda for U.S. Foreign Assistance IFAD 2009 Connect USA - Partner Vetting System Child Sponsorship Strategic Impact Team - Other Project Sphere Project UN OCHA Better World 2010 WFDA Exxon Water Aid America Rockefeller Foundation Youth Alliance Haiti Mapping - FedEx Rural Development Wal-Mart - 1000 Days Movement U.S. Foreign Assistance NGO Aid Map The Bill and Melinda Gates Foundation - U.S. Development Assistance that Ends Poverty and Saves Lives The Bill and Melinda Gates Foundation - 1000 Days Movement Cost Recovery Project TOTAL TEMPORARILY RESTRICTED NET ASSETS $ 551 19,211 2,538 100,414 84,006 1,190 155,508 166,663 14,421 168,665 3,355,281 1,264,662 1,600 $ 5,334,710 $ $ 2010 879,987 24,806 37,820 19,211 29,673 3,104 475 25,000 4,672 2,635 96,349 35,000 35,138 5,100 1,198,970

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AMERICAN COUNCIL FOR VOLUNTARY INTERNATIONAL ACTION NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2011 AND 2010

5.

NET ASSETS RELEASED FROM RESTRICTIONS The following is a summary of net assets, which were released from donor restrictions by incurring expenses which satisfied the donor-specified restrictions at December 31, 2011 and 2010: 2011 The Bill and Melinda Gates Foundation - Agenda for U.S. Foreign Assistance IFAD 2009 Hewlett Foundation UNFPA 2008-2010 Connect USA - Partner Vetting System Strategic Impact Team - Other Project Better World 2010 WFDA - Exxon Water Aid America Rockefeller Foundation Youth Alliance IFP Development Financing Haiti Mapping 2010 - FedEx UNFPA E Learn Aid Effectiveness Rural Development Wal-Mart - 1000 Days Movement U.S. Foreign Assistance NGO Aid Map The Bill and Melinda Gates Foundation - U.S. Development Assistance that Ends Poverty and Saves Lives The Bill and Melinda Gates Foundation - 1000 Days Movement Increasing Civil Society Input Saving Lives Together UNOCHA UNMDG - Task Force InterAction Grasstops Outreach Program International Forum of NGO's Cost Recovery Project Sphere Project TOTAL NET ASSETS RELEASED FROM RESTRICTIONS $ 879,988 24,806 37,269 29,673 25,000 4,671 97 67,134 23,494 33,948 44,492 133,337 256,684 81,335 1,134,312 235,338 6,494 45,000 475 25,000 23,365 38,600 3,104 $ 3,153,616 $ $ 2010 2,328,609 114,723 135,490 77,098 25,300 10,363 4,865 3,651 1,083 214,862 100,000 119,234 82,895 3,218,173

6.

LEASE COMMITMENT During 2007, InterAction signed an amended lease for additional office space. The amended lease expires December 30, 2012. On that date, InterAction has the option to extend the lease until November 30, 2016. The lease provides for an annual rental increase of 3%. The lease also requires InterAction to pay its proportionate share of the building's real estate taxes and operating expenses. InterAction also leases a portion of its office space to several unrelated organizations. 13

AMERICAN COUNCIL FOR VOLUNTARY INTERNATIONAL ACTION NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2011 AND 2010

6.

LEASE COMMITMENT (Continued) Future minimum lease payments required under the non-cancelable operating lease as of December 31, 2011 total $816,926 (payable during the year ended December 31, 2012). Occupancy expense for the years ended December 31, 2011 and 2010 totaled $836,778 and $835,788, respectively. Total sublease income received during the years ended December 31, 2011 and 2010 totaled $52,359 and $41,067, respectively.

7.

RETIREMENT PLANS InterAction has a non-contributory defined contribution pension plan in accordance with Section 401(a) of the Internal Revenue Code. The plan covers all employees who meet certain age and employment requirements. Currently, InterAction contributes a percentage of each eligible employee's annual compensation. All contributions vest immediately. Total retirement expense under this plan were $304,464 and $284,440 for the years ended December 31, 2011 and 2010, respectively, and is included in fringe benefits in the accompanying Statements of Functional Expenses. InterAction also administers a 403(b) tax-deferred annuity plan on behalf of its employees. There were no employer contributions made during 2011 and 2010.

8.

CONTINGENCY The funds which InterAction receives from U.S. Government grants are subject to audit under the provisions of OMB Circular A-133. The ultimate determination of amounts received under the U.S. Government grants is based upon the allowance of costs reported to and accepted by the U.S. Government as a result of the audits. Audits in accordance with the provisions of OMB Circular A133 have been completed for all required fiscal years through 2011. Until such audits have been accepted by the U.S. Government, there exists a contingency to refund any amount received in excess of allowable costs. Management is of the opinion that no material liability will result from such audits.

9.

FUTURE COMMITMENTS FROM THE U.S. GOVERNMENT InterAction receives program funding from the United States Agency for International Development (USAID) and the United States Department of State (DOS). As of December 31, 2011, InterAction has received awards from the U.S. government totaling $7,825,483, of which $6,184,173 has been obligated and disbursed; as of December 31, 2011, InterAction has an unobligated balance of $1,641,310 (these figures reflect InterAction's current/open awards). Total U.S. government awards received and obligations have not been included in the accompanying financial statements.

10.

FAIR VALUE MEASUREMENTS In accordance with FASB ASC 820, Fair Value Measurements and Disclosures, InterAction has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy.

14

AMERICAN COUNCIL FOR VOLUNTARY INTERNATIONAL ACTION NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2011 AND 2010

10.

FAIR VALUE MEASUREMENTS (Continued) The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. Investments recorded in the Statements of Financial Position are categorized based on the inputs to valuation techniques as follows: Level 1. These are investments where values are based on unadjusted quoted prices for identical assets in an active market that InterAction has the ability to access. Level 2. These are investments where values are based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, or model-based valuation techniques that utilize inputs that are observable either directly or indirectly for substantially the full-term of the investments. Level 3. Inputs to the valuation methodology are unobservable and significant to the fair value measurement. Following is a description of the valuation methodology used for investments measured at fair value. There have been no changes in the methodologies used at December 31, 2011 and 2010. Mutual funds - The fair value is equal to the price at which additional shares can be obtained (based on the quoted market price). The table below summarizes, by level within the fair value hierarchy, InterAction's investments as of December 31, 2011 and 2010: 2011 Level 1 Asset Category (Investments): Mutual Funds $ 855,304 $ Level 2 $ 2010 Level 1 Asset Category (Investments): Mutual Funds $ 899,081 $ Level 2 $ Level 3 $ Total 899,081 Level 3 $ Total 855,304

11.

SUBSEQUENT EVENTS In preparing these financial statements, InterAction has evaluated events and transactions for potential recognition or disclosure through April 29, 2012, the date the financial statements were issued.

15