The Realties of Our World Today

OK so I've been debating on writing about this since the "incident" happened, but after a week of thinking about it, I've decided that since parents aren't always aware about what goes on around their children that it may inspire some of you to be "more watchful".
Last weekend on Friday, Dejah was outside playing with her little friend Austin (4) who lives right across the street from me. This is something that she has been doing lately since the weather has been warmer. I usually always have my eye on them weather they are in the front or in the back. I don't watch like a hawk, but I am always aware of where Dejah is. OK, so just a couple houses down from Austin, is a family of Mexicans. Now I am not racist by any means, but I am very disappointed at how many of these families lack "structure". There are a few children that live there. Two which I know, Richard (6) and his little brother (4). Their mom is single and 21 years old. She works full time and supports all that live in this house. The kids grandmother watches the kids (if you want to call it watching), is pregnant, and doesn't speak English. There are Uncles and others that also live in the house. OK so back to my story. Well sometimes these Mexican boys like to play with Austin, and when he is playing with Dejah sometimes they come around to play also. Well Friday they were all out in the front and I noticed them go to the side of the house. After waiting for a minute for them to emerge to the back I stepped out in front and asked what they were up to. I could only see Austin because Dejah and the other two boys were on the side of the house. Well Austin said to me, "They are going to hump her." In total shock at what I just heard I asked "What!?", and he repeated "they are going to hump her". I asked one more time because I was in absolute shock at what was coming out of this 4 year old's mouth. Once I understood, I yelled to Richard and the other kids to get over here right now. I asked him what was going on and the kids said that they were going in the back to play. I immediately sent all the boys home and had Dejah come inside. I was shaking with nerves and didn't know what to do. After talking with my sister on the phone, I walked over to Austin's house to talk to his mom. I told her what Austin had told me and she said she would help me get to the bottom of it. So after talking to her son and the younger Mexican boy, they told her that Richard pulled his pants down and so did Dejah, and that was it. I sat down with Dejah and looked at her in the face and asked what was going on...no pressure. I confronted her about Richard pulling his pants down and she absolutely DID NOT know what I was talking about. When I changed my wording and told her that Richard was in trouble for pulling his pants down she said very innocently "He did??". When I asked what was going on she said they were going to the back to play. I didn't get any of the same story out of her, and she was completely ovlivious to anything that just happened. I was having a really difficult time explaining to my 3 1/2 year old what was not appropriate. I used simple and factual words and was right to the point, but I don't think she got it. Anyway, Austin's mother informed me that she knows for a fact that Richard has seen pornography in his home. So the question is this, do I report this to child protective services out of concern for all the children, or do I continue the way I am by only allowing her to play with Austin in the back yard where I can see them? I know I've already talked to some of you about this. It is pretty scary for me. I feel like a Mother way out of my element, and not prepared to take on this world. I am trying to be courageous, and step up by taking action, but I don't want to overstep my bounds. I have had extended family members that have had to deal with this stuff directly and for that I am so sorry. I can only imagine the trials they have had. I just want to do whats best for my children, and keep them as safe as I possibly can. So parents, keep an eye on your children. Try to talk to them plainly about the dangers in the world while encouraging them to live life to its fullest. I am comforted in knowing that nothing bad happend to my daughter. I am glad I was there. Be aware. Be involved. This whole experience has opened my eyes.