$50,625,000 FLORIDA DEVELOPMENT FINANCE CORPORATION EDUCATIONAL FACILITIES REVENUE BONDS (FLORIDA CHARTER FOUNDATION, INC. PROJECTS), SERIES 2016A

Transcription

1 NEW ISSUE BOOK-ENTRY ONLY NOT RATED In the opinion of Foley & Lardner LLP, Bond Counsel, assuming continuing compliance by the Issuer and the Borrower with certain covenants, under existing statutes, regulations and judicial decisions, interest on the Series 2016A Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporation; however, Bond Counsel notes that with respect to certain corporations, such interest is taken into account in determining adjusted current earnings for purposes of computing the alternative minimum tax. Interest on the Series 2016B Bonds is not excluded from gross income for federal income tax purposes. Bond Counsel is further of the opinion that the Series 2016 Bonds and the interest thereon are exempt from taxation under the laws of the State of Florida, except as to estate taxes and taxes imposed by Chapter 220, Florida Statutes, as amended. See TAX MATTERS herein for a description of certain other tax consequences to holders of the Series 2016 Bonds. $50,625,000 FLORIDA DEVELOPMENT FINANCE CORPORATION EDUCATIONAL FACILITIES REVENUE BONDS (FLORIDA CHARTER FOUNDATION, INC. PROJECTS), SERIES 2016A $195,000 FLORIDA DEVELOPMENT FINANCE CORPORATION EDUCATIONAL FACILITIES REVENUE BONDS (FLORIDA CHARTER FOUNDATION, INC. PROJECTS), TAXABLE SERIES 2016B Dated: Date of Delivery Due: July 15 (as shown on page i) Florida Development Finance Corporation (the Issuer ) is issuing $50,625,000 aggregate principal amount Educational Facilities Revenue Bonds (Florida Charter Foundation, Inc. Projects), Series 2016A (the Series 2016A Bonds ) and $195,000 aggregate principal amount Educational Facilities Revenue Bonds (Florida Charter Foundation, Inc. Projects), Taxable Series 2016B (the Series 2016B Bonds and together with the Series 2016A Bonds, the Series 2016 Bonds ), pursuant to a resolution of the Issuer adopted on June 1, 2016 (the Resolution ) and a Trust Indenture dated as of August 1, 2016 (the Indenture ) between the Issuer and U.S. Bank National Association, as trustee (the Trustee ). The Series 2016 Bonds are being issued as fully registered bonds in denominations of $100,000 and integral multiples of $5,000 in excess thereof. Upon initial issuance, the ownership of the Series 2016 Bonds will be registered in the registration books of the Issuer kept by the Trustee, in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ( DTC ) to which principal, purchase price or redemption price of, if any, and interest payments on the Series 2016 Bonds will be made. Purchasers of the Series 2016 Bonds will not receive physical delivery of bond certificates. Principal of, and interest and premium, if any, on the Series 2016 Bonds shall be payable at the principal office of the Trustee as the same shall become due and payable. The Series 2016 Bonds will be dated their date of delivery and will mature and bear interest on the dates and at the rates per annum, set forth on page i hereof. See THE SERIES 2016 BONDS and APPENDIX H Book-Entry Only System herein. Interest on the Series 2016 Bonds is payable on January 15, 2017 and semiannually thereafter on each January 15 and July 15. The Series 2016 Bonds are subject to optional, mandatory and extraordinary mandatory redemption prior to maturity as provided herein. See THE SERIES 2016 BONDS - Redemption Provisions herein. The Series 2016 Bonds are being issued to fund a loan by the Issuer to Florida Charter Foundation, Inc. (the Borrower ), a Florida not-for-profit corporation and an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the Code ), pursuant to a Loan Agreement dated as of August 1, 2016 (the Loan Agreement ), by and between the Issuer and the Borrower. The Series 2016 Bonds are being issued for the purpose of providing funds to finance or refinance: (i) the acquisition, construction, rehabilitation, improvement and equipping of certain educational facilities (as more particularly defined herein, the Facilities ) to be owned and operated by the Borrower; (ii) the funding of capitalized interest on the Series 2016 Bonds; (iii) the funding of a debt service reserve fund for the Series 2016 Bonds; and (iv) certain costs of issuance of the Series 2016 Bonds (collectively, the Project ). See ESTIMATED SOURCES AND USES OF FUNDS, SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2016 BONDS and THE PROJECT herein. The Borrower operates two charter schools at the Facilities: the public charter school known as Franklin Academy Boynton Beach Campus (the Boynton Beach School ) and the public charter school known as Franklin Academy Cooper City Campus (the Cooper City School and together, with the Boynton Beach School, the Schools ). The Borrower operates the Boynton Beach School pursuant to a charter school contract with the School Board of Palm Beach County, Florida, and operates the Cooper City School pursuant to a charter school agreement with the School Board of Broward County, Florida (collectively, the Charters ). The Series 2016 Bonds and all Additional Bonds (as defined herein and together with the Series 2016 Bonds, the Bonds ) are payable from and secured by a pledge and assignment and grant of a security interest to the Trustee as security for the Bonds of all of the Issuer s right, title, interest and obligations in and to (i) each of the Borrower Documents (as herein defined), including the Loan Agreement (except for certain excluded rights relating to indemnification and fee payments), (ii) the Gross Revenues (as herein defined) of the Borrower and (iii) monies and securities held under the Indenture, all as more fully described in the Indenture. See SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2016 BONDS herein. Payments due under the Series 2016 Bonds are also secured by a Mortgage with Assignment of Rents, Security Agreement, and Fixture Filing, dated as of August 1, 2016 (the Mortgage ) from the Borrower to the Issuer and assigned to the Trustee encumbering the Borrower s interest in the Facilities. See SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2016 BONDS herein. INVESTMENT IN THE SERIES 2016 BONDS INVOLVES A SIGNIFICANT DEGREE OF RISK AND EACH PROSPECTIVE INVESTOR SHOULD CONSIDER ITS FINANCIAL CONDITION AND THE RISKS INVOLVED TO DETERMINE THE SUITABILITY OF INVESTING IN THE SERIES 2016 BONDS. THE SERIES 2016 BONDS ARE BEING OFFERED ONLY TO (1) QUALIFIED INSTITUTIONAL BUYERS AS DEFINED IN RULE 144A PROMULGATED UNDER THE SECURITIES ACT OF 1933 (THE SECURITIES ACT ) AND (2) ACCREDITED INVESTORS AS DEFINED IN RULE 501(A) OF THE SECURITIES ACT. UPON A TRANSFER OF A BENEFICIAL OWNERSHIP INTEREST IN A SERIES 2016 BOND (INCLUDING A TRANSFER BY THE UNDERWRITER PURSUANT TO THE INITIAL SALE OF THE SERIES 2016 BONDS), EACH PURCHASER OF SUCH BENEFICIAL OWNERSHIP INTEREST SHALL BE DEEMED TO HAVE CERTIFIED TO THE TRUSTEE AND ACKNOWLEDGED, REPRESENTED AND AGREED WITH THE BORROWER AND THE UNDERWRITER THAT SUCH PURCHASER IS ACQUIRING SUCH SERIES 2016 BOND FOR ITS OWN ACCOUNT, AND THAT IT IS (A) A QUALIFIED INSTITUTIONAL BUYER AS DEFINED ABOVE, OR (B) AN ACCREDITED INVESTOR, AS DEFINED ABOVE. THE SERIES 2016 BONDS ARE LIMITED OBLIGATIONS OF THE ISSUER PAYABLE SOLELY FROM THE SOURCES PROVIDED IN THE INDENTURE AND THE LOAN AGREEMENT. THE SERIES 2016 BONDS SHALL NOT CONSTITUTE AN INDEBTEDNESS, LIABILITY, GENERAL OR MORAL OBLIGATION OR A PLEDGE OF THE FAITH, CREDIT OR TAXING POWER OF THE STATE OF FLORIDA, THE ISSUER OR ANY MUNICIPAL CORPORATION, PUBLIC AGENCY OR POLITICAL SUBDIVISION OF THE STATE OF FLORIDA WITHIN THE MEANING OF ANY CHARTER, CONSTITUTIONAL OR STATUTORY PROVISIONS OR LIMITATIONS. NEITHER THE STATE OF FLORIDA NOR ANY MUNICIPAL CORPORATION, PUBLIC AGENCY OR POLITICAL SUBDIVISION OF THE STATE OF FLORIDA SHALL EVER BE REQUIRED TO (1) LEVY AD VALOREM TAXES ON ANY PROPERTY WITHIN ITS TERRITORIAL LIMITS TO PAY THE PRINCIPAL OF OR THE INTEREST OR REDEMPTION PREMIUM, IF ANY, ON OR THE PURCHASE PRICE OF, OR MAKE ANY OTHER PAYMENTS PROVIDED FOR IN RESPECT OF THE SERIES 2016 BONDS OR (2) PAY THE SAME FROM ANY FUNDS OTHER THAN FROM REVENUES AND THE OTHER ASSETS PLEDGED UNDER THE INDENTURE. THE ISSUER HAS NO TAXING POWER. This cover page contains certain information for quick reference only. It is not a summary of the Series 2016 Bonds. Investors must read the entire Limited Offering Memorandum, including the Appendices, to obtain information essential to the making of an informed investment decision. All summaries of documents and agreements in this Limited Offering Memorandum are qualified in their entirety by reference to such documents and agreements, and all summaries of the Series 2016 Bonds are qualified in their entirety by reference to the form included in the aforesaid documents and agreements. The Series 2016 Bonds are offered when, as and if issued by the Issuer and accepted by BB&T Capital Markets, a division of BB&T Securities, LLC (the Underwriter ), subject to prior sale or withdrawal or modification of the offer without notice and subject to the approval of validity and certain tax matters by Foley & Lardner LLP, Jacksonville, Florida, Bond Counsel, and certain other conditions. Certain legal matters will be passed upon for the Issuer by Broad and Cassel, Orlando, Florida, for the Borrower by Edwards, Cohen, Dawson, Mangu & Noble, P.A., Jacksonville, Florida and for the Underwriter by Ice Miller LLP, Columbus, Ohio. Charter School Services Corporation, Inc., Fort Lauderdale, Florida, is serving as Financial Advisor to the Borrower. The Series 2016 Bonds are expected to be delivered in book-entry form through The Depository Trust Company in New York, New York on or about August 10, Dated: July 21, 2016

2

3 AMOUNTS, MATURITIES, INTEREST RATES, PRICES, YIELDS AND INITIAL CUSIP NUMBERS $50,625,000 FLORIDA DEVELOPMENT FINANCE CORPORATION EDUCATIONAL FACILITIES REVENUE BONDS (FLORIDA CHARTER FOUNDATION, INC. PROJECTS), SERIES 2016A $9,920,000 Term Bond Due July 15, 2026 at 4.000%; Price %; Yield 4.000%; Initial CUSIP: 34061UCC0 * $15,605,000 Term Bond Due July 15, 2036 at 4.750% Price %; Yield 4.875%; Initial CUSIP: 34061UCD8 * $25,100,000 Term Bond Due July 15, 2046 at 5.000% Price %; Yield 4.950% C ; Initial CUSIP: 34061UCE6 * C Yield calculated to July 15, 2026 call date. $195,000 FLORIDA DEVELOPMENT FINANCE CORPORATION EDUCATIONAL FACILITIES REVENUE BONDS (FLORIDA CHARTER FOUNDATION, INC. PROJECTS), TAXABLE SERIES 2016B $195,000 Term Bond Due July 15, 2018 at 6.000% Price %; Yield 6.000%; Initial CUSIP: 34061UCF3 * * The above-referenced CUSIP numbers have been assigned by an independent company not affiliated with the Issuer, the Borrower, the Underwriter or Trustee, and are included solely for the convenience of the holders of the Series 2016 Bonds. None of the Issuer, the Borrower, the Underwriter or the Trustee is responsible for the selection or use of such CUSIP numbers, and no representation is made as to their correctness on the Series 2016 Bonds or as indicated above. The CUSIP number for a specific maturity is subject to change after the issuance of the Series 2016 Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part of such maturity or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certain maturities. i

4 [THIS PAGE INTENTIONALLY LEFT BLANK] ii

5 This Limited Offering Memorandum contains certain statements that are "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, both as amended. All statements other than statements of historical facts included in this Limited Offering Memorandum, including without limitation statements that use terminology such as "estimate," "expect," "intend," "anticipate," "believe," "may," "will," "continue" and similar expressions, are forward-looking statements. These forward-looking statements include, among other things, the discussions related to the Borrower's charter school operations and expectations regarding student enrollment, future operations, revenues, capital resources and expenditures for capital projects. Although the Borrower believes that the assumptions upon which the forward-looking statements contained in this Limited Offering Memorandum are based are reasonable, any of the assumptions could prove to be inaccurate and, as a result, the forward-looking statements based on those assumptions also could be incorrect. All phases of the operations of the Borrower, including the Borrower's operation of the Schools (as defined herein) involve risks and uncertainties, many of which are outside the control of the Borrower and any one of which, or a combination of which, could materially affect the results of the Borrower's operations and whether the forward-looking statements ultimately prove to be correct. Factors that could cause actual results to differ from those expected include, but are not limited to, general economic conditions such as inflation and interest rates, both nationally and in the areas of the State of Florida (the "State") where the Facilities are located; changes in general business regulation that could adversely impact the Borrower's operations; unanticipated delays in completion of the Project and/or unanticipated cost overruns; the willingness of the State to fund charter school operations at present or increased levels; competitive conditions within the Schools' markets, including the acceptance of the education services offered by the Schools; lower enrollments than projected; unanticipated expenses; the capabilities of the Borrower's management; changes in government regulation of the education industry or in the State charter school statute; future claims for accidents or other torts at the Schools' sites and the extent of insurance coverage for such claims; and other risks discussed in this Limited Offering Memorandum. Important factors that could cause actual results to differ materially from the Borrower's expectations ("cautionary statements") are disclosed in this Limited Offering Memorandum including in conjunction with the forward-looking statements included in this Limited Offering Memorandum, under "BONDHOLDERS' RISKS" and in APPENDIX A "THE BORROWER AND THE SCHOOLS" and APPENDIX B "AUDITED FINANCIAL STATEMENTS OF THE SCHOOLS FOR FISCAL YEARS ENDED JUNE 30, 2014 AND 2015." NO REPRESENTATION OR ASSURANCE CAN BE GIVEN THAT THE BORROWER WILL REALIZE REVENUES IN AMOUNTS SUFFICIENT TO MAKE THE REQUIRED PAYMENTS UNDER THE LOAN AGREEMENT. THE REALIZATION OF FUTURE REVENUES IS DEPENDENT UPON, AMONG OTHER THINGS, THE MATTERS DESCRIBED IN THE FOREGOING PARAGRAPH AND FUTURE CHANGES IN ECONOMIC AND OTHER CONDITIONS THAT ARE UNPREDICTABLE AND CANNOT BE DETERMINED AT THIS TIME. SEE "BONDHOLDERS' RISKS" HEREIN. THE UNDERWRITER MAKES NO REPRESENTATION AS TO THE ACCURACY OF THE PROJECTIONS CONTAINED HEREIN OR AS TO THE ASSUMPTIONS ON WHICH THE PROJECTIONS ARE BASED. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2016 BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. No dealer, broker, salesperson or other person has been authorized by the Issuer, the Borrower or the Underwriter to give any information or to make any representation with respect to the Series 2016 Bonds other than those contained in this Limited Offering Memorandum, and, if given or made, such other information or representations must not be relied upon as having been authorized by any of the iii

6 foregoing. This Limited Offering Memorandum does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Series 2016 Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information set forth herein has been obtained from the Issuer, the Borrower and other sources that are believed to be reliable. The information and expressions of opinion contained herein are subject to change without notice, and neither the delivery of this Limited Offering Memorandum nor any sale hereunder shall create any implication that there has been no change in the financial condition or operations of the Issuer, the Borrower, the Schools, the Project, the Facilities or other matters described herein since the date hereof. This Limited Offering Memorandum contains, in part, estimates and matters of opinion that are not intended as statements of fact, and no representation or warranty is made as to the correctness of such estimates and opinions or that they will be realized. The explanations of provisions of laws and descriptions of the documents in this Limited Offering Memorandum are summaries thereof and reference is made to the actual laws and documents for a complete understanding of the contents of such documents. Neither the Issuer nor the Trustee assumes any responsibility for this Limited Offering Memorandum and has not reviewed or undertaken to verify any information contained herein. The order and placement of materials in this Limited Offering Memorandum, including the Appendices, are not deemed to be a determination of relevance, materiality or importance, and this Limited Offering Memorandum, including the Appendices, must be considered in its entirety. The offering of the Series 2016 Bonds is made only by means of this entire Limited Offering Memorandum. In making an investment decision, investors must rely on their own examinations of the Borrower, the Schools, the Project, the Facilities and the terms of the offering, including the merits and risks involved. The Series 2016 Bonds have not been approved or disapproved by the Securities and Exchange Commission or any state securities commission, nor has the Securities and Exchange Commission or any state securities commission passed upon the accuracy or completeness of this Limited Offering Memorandum. Any representation to the contrary may be a criminal offense. The Borrower has covenanted to provide continuing disclosure as described in this Limited Offering Memorandum in APPENDIX G "FORM OF CONTINUING DISCLOSURE AGREEMENT," pursuant to Rule 15c2-12 of the Securities and Exchange Commission. The Issuer has not, and will not, undertake any responsibilities to provide continuing disclosure with respect to the Series 2016 Bonds and will have no liability to Bondholders with respect to any such disclosures. The Underwriter has provided the following sentence for inclusion in this Limited Offering Memorandum: The Underwriter has reviewed the information in this Limited Offering Memorandum in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. iv

7 SUMMARY STATEMENT The following introductory material is only a brief description of, and is qualified by, the more complete information contained throughout this Limited Offering Memorandum. A full review should be made of the entire Limited Offering Memorandum and the documents summarized or described herein. The offering of the Series 2016 Bonds to potential investors is made only by means of the entire Limited Offering Memorandum. No person is authorized to detach this Summary Statement from this Limited Offering Memorandum or otherwise use it without the entire Limited Offering Memorandum. For the definitions of certain words and terms used in this Summary Statement, see APPENDIX E "SUBSTANTIALLY FINAL FORMS OF THE PRINCIPAL DOCUMENTS." Purpose of the Issue...Florida Development Finance Corporation (the "Issuer") is issuing $50,625,000 aggregate principal amount of Educational Facilities Revenue Bonds (Florida Charter Foundation, Inc. Projects), Series 2016A (the "Series 2016A Bonds") and $195,000 aggregate principal amount of Educational Facilities Revenue Bonds (Florida Charter Foundation, Inc. Projects), Taxable Series 2016B (the "Series 2016B Bonds" and together with the Series 2016A Bonds, the "Series 2016 Bonds"), pursuant to a resolution of the Issuer adopted on June 1, 2016 (the "Resolution") and a Trust Indenture dated as of August 1, 2016 (the "Indenture") between the Issuer and U.S. Bank National Association, as trustee (the "Trustee"). The Series 2016 Bonds are being issued to fund a loan by the Issuer to Florida Charter Foundation, Inc. (the "Borrower"), a Florida not-forprofit corporation and an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), pursuant to a Loan Agreement dated as of August 1, 2016 (the "Loan Agreement"), by and between the Issuer and the Borrower. The Series 2016 Bonds are being issued for the purpose of providing funds to finance or refinance: (i) the acquisition, construction, rehabilitation, improvement and equipping of certain educational facilities (as more particularly defined herein, the "Facilities") to be owned and operated by the Borrower; (ii) the funding of capitalized interest on the Series 2016 Bonds; (iii) the funding of a debt service reserve fund for the Series 2016 Bonds; and (iv) certain costs of issuance of the Series 2016 Bonds (collectively, the "Project"). See "ESTIMATED SOURCES AND USES OF FUNDS," "SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2016 BONDS" and "THE PROJECT" herein. The Issuer...The Issuer is a public body corporate and politic and a public instrumentality of the State of Florida, authorized to issue the Series 2016 Bonds pursuant to The Florida Development Finance Corporation Act of 1993, Chapter 288, Part X, Florida Statutes, as amended and supplemented, and as a local agency under Part II, Chapter 159, Florida Statutes, as amended and supplemented, or any successor statute(s) and other applicable provisions of law (the "Act"). The Issuer is authorized by the Act to issue the Series 2016 Bonds to provide funds to loan to the Borrower to finance and refinance the costs of the Project. The Act provides that bonds such as the Series 2016 Bonds are not and cannot be a general obligation of the Issuer or a charge upon any of its property or assets other than that specifically pledged for the benefit of such bonds. See "THE ISSUER." The Borrower...Florida Charter Foundation, Inc. (the "Borrower") is a Florida not-forprofit corporation and an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended. The Borrower (i)

8 operates two charter schools from the Facilities: the Boynton Beach School and the Cooper City School. In addition, the Borrower operates five other charter schools in Florida and will operate a sixth charter school in Florida beginning in the school year (collectively, the "Other Schools"). Revenues of the Borrower derived from its operation of the Other Schools and any other charter schools that may be established and operated by the Borrower in the future and Management Payments paid by the Schools to the Borrower are not included in Gross Revenues. See "THE BORROWER, THE SCHOOLS, AND THE FACILITIES" herein. The Schools...The Borrower operates two charter schools at the Facilities: the Boynton Beach School and the Cooper City School. The Boynton Beach School is located at 7882 S. Military Trail, Boynton Beach, Palm Beach County, Florida, and is operated pursuant to the Charter School Contract dated September 2, 2011 (the "Boynton Beach School Charter"), between the School Board of Palm Beach County, Florida, and the Borrower. The Cooper City School is located at 6301 S. Flamingo Road, Cooper City, Broward County, Florida, and is operated pursuant to the Charter School Agreement dated June 19, 2012 (the "Cooper City Charter" and, together with the Boynton Beach Charter, the "Charters"), between the School Board of Broward County, Florida, and the Borrower. See "THE BORROWER, THE SCHOOLS, AND THE FACILITIES" herein. The Facilities...The Schools are operated by the Borrower at the Facilities. The Facilities consist of (a) certain educational facilities consisting of approximately 9.94 acres of land and the existing site improvements thereon located at 7882 S. Military Trail, Boynton Beach, Palm Beach County, Florida 33462, including without limitation an approximately 86,435 square foot building and ancillary facilities, which are operated by the Borrower as the Boynton Beach School (the "Boynton Beach Campus"); (b) certain educational facilities consisting of approximately 11 acres of land and the existing site improvements thereon located at 6301 S. Flamingo Road, Cooper City, Broward County, Florida 33330, including without limitation an approximately 89,937 square foot building and ancillary facilities, which are operated by the Borrower as the Cooper City School (the "Cooper City Campus"); and (c) certain furniture, fixtures and equipment for the Boynton Beach Campus and the Cooper City Campus, which are located at and forms a part of such educational facilities. See "THE BORROWER, THE SCHOOLS, AND THE FACILITIES," "THE PROJECT" and APPENDIX A "THE BORROWER AND THE SCHOOLS." The Project...The Series 2016 Bonds are being issued for the purpose of providing funds to finance or refinance: (i) the acquisition, construction, rehabilitation, improvement and equipping of the Facilities; (ii) the funding of capitalized interest on the Series 2016 Bonds; (iii) the funding of a debt service reserve fund for the Series 2016 Bonds; and (iv) certain costs of issuance of the Series 2016 Bonds. On the date of issuance of the Series 2016 Bonds, a portion of the proceeds of the Series 2016 Bonds will be used by the Borrower to purchase (i) the Boynton Beach Campus from an unrelated third party for $22,305,378 and (ii) the Cooper City Campus from an unrelated third party for $20,047,852. See APPENDIX A "THE BORROWER AND THE SCHOOLS." (ii)

9 Limited Obligations...THE SERIES 2016 BONDS ARE LIMITED OBLIGATIONS OF THE ISSUER PAYABLE SOLELY FROM THE SOURCES PROVIDED IN THE INDENTURE AND THE LOAN AGREEMENT. THE SERIES 2016 BONDS SHALL NOT CONSTITUTE AN INDEBTEDNESS, LIABILITY, GENERAL OR MORAL OBLIGATION OR A PLEDGE OF THE FAITH, CREDIT OR TAXING POWER OF THE STATE OF FLORIDA, THE ISSUER OR ANY MUNICIPAL CORPORATION, PUBLIC AGENCY OR POLITICAL SUBDIVISION OF THE STATE OF FLORIDA WITHIN THE MEANING OF ANY CHARTER, CONSTITUTIONAL OR STATUTORY PROVISIONS OR LIMITATIONS. NEITHER THE STATE OF FLORIDA NOR ANY MUNICIPAL CORPORATION, PUBLIC AGENCY OR POLITICAL SUBDIVISION OF THE STATE OF FLORIDA SHALL EVER BE REQUIRED TO (1) LEVY AD VALOREM TAXES ON ANY PROPERTY WITHIN ITS TERRITORIAL LIMITS TO PAY THE PRINCIPAL OF OR THE INTEREST OR REDEMPTION PREMIUM, IF ANY, ON OR THE PURCHASE PRICE OF, OR MAKE ANY OTHER PAYMENTS PROVIDED FOR IN RESPECT OF THE SERIES 2016 BONDS OR (2) PAY THE SAME FROM ANY FUNDS OTHER THAN FROM REVENUES AND THE OTHER ASSETS PLEDGED UNDER THE INDENTURE. THE ISSUER HAS NO TAXING POWER. Registration and Denominations...The Series 2016 Bonds are being issued as fully registered bonds in denominations of $100,000 and integral multiples of $5,000 in excess thereof. Upon initial issuance, the ownership of the Series 2016 Bonds will be registered in the registration books of the Issuer kept by the Trustee, in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC") to which principal, purchase price or redemption price of, if any, and interest payments on the Series 2016 Bonds will be made. Purchasers of the Series 2016 Bonds will not receive physical delivery of bond certificates. Purchase and Transfer Restrictions...INVESTMENT IN THE SERIES 2016 BONDS INVOLVES A SIGNIFICANT DEGREE OF RISK AND EACH PROSPECTIVE INVESTOR SHOULD CONSIDER ITS FINANCIAL CONDITION AND THE RISKS INVOLVED TO DETERMINE THE SUITABILITY OF INVESTING IN THE SERIES 2016 BONDS. THE SERIES 2016 BONDS ARE BEING OFFERED ONLY TO (1) "QUALIFIED INSTITUTIONAL BUYERS" AS DEFINED IN RULE 144A PROMULGATED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND (2) "ACCREDITED INVESTORS" AS DEFINED IN RULE 501(A) OF THE SECURITIES ACT. UPON A TRANSFER OF A BENEFICIAL OWNERSHIP INTEREST IN A SERIES 2016 BOND (INCLUDING A TRANSFER BY THE UNDERWRITER PURSUANT TO THE INITIAL SALE OF THE SERIES 2016 BONDS), EACH PURCHASER OF SUCH BENEFICIAL OWNERSHIP INTEREST SHALL BE DEEMED TO HAVE CERTIFIED TO THE TRUSTEE AND ACKNOWLEDGED, REPRESENTED AND AGREED WITH THE BORROWER AND THE UNDERWRITER THAT SUCH PURCHASER IS ACQUIRING SUCH SERIES 2016 BOND FOR ITS OWN ACCOUNT, AND THAT IT IS (A) A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED ABOVE, OR (B) AN "ACCREDITED INVESTOR," AS DEFINED ABOVE. (iii)

10 Payment Provisions...Interest on the Series 2016 Bonds is payable on January 15, 2017 and semiannually thereafter on each January 15 and July 15. Principal on the Series 2016 Bond is payable on July 15 of the years set forth on page i. Redemption...The Series 2016 Bonds are subject to optional, mandatory and extraordinary mandatory redemption prior to maturity as provided herein. See "THE SERIES 2016 BONDS - Redemption Provisions" herein. Security...The Series 2016 Bonds and all Additional Bonds (as defined herein and together with the Series 2016 Bonds, the "Bonds") are payable from and secured by a pledge and assignment and grant of a security interest to the Trustee as security for the Bonds of all of the Issuer's right, title, interest and obligations in and to (i) each of the Borrower Documents (as herein defined), including the Loan Agreement (except for certain excluded rights relating to indemnification and fee payments), (ii) the Gross Revenues (as herein defined) of the Borrower and (iii) monies and securities held under the Indenture, all as more fully described in the Indenture. "Gross Revenues" means all of the revenues, income, cash receipts and other money received by the Borrower from the operation of the Schools, or received by the Trustee on behalf of the Borrower from the operation of the Schools pursuant to the Indenture, including without limitation any Usage Charges, that are legally available for payment of the obligations of the Borrower under the Loan Agreement. Payments due under the Series 2016 Bonds are also secured by a Mortgage with Assignment of Rents, Security Agreement, and Fixture Filing, dated as of August 1, 2016 from the Borrower to the Issuer and assigned to the Trustee encumbering the Borrower's interest in the Facilities. See "SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2016 BONDS." Debt Service Coverage Ratio...Commencing with the Fiscal Year ending June 30, 2017, the Borrower's audited financial statements shall include a calculation of the Long-Term Debt Service Coverage Ratio and the Foundation Long- Term Debt Service Coverage Ratio for the Fiscal Year addressed therein. For the Fiscal Year ending June 30, 2017 and each Fiscal Year thereafter, the Borrower shall have (i) a Long-Term Debt Service Coverage Ratio of at least 1.10 to 1.00 (as evidenced by the Borrower's audited financial statements for such Fiscal Year) and (ii) a Foundation Long-Term Debt Service Coverage Ratio of at least 1.00 to 1.00 (as evidenced by the Borrower's audited financial statements for such year). See "CERTAIN FINANCIAL COVENANTS OF THE BORROWER Debt Service Coverage Ratio." Cash on Hand Requirement...Until the Series 2016 Bonds are no longer Outstanding, the Borrower covenants and agrees to have unrestricted Cash on Hand on each June 30 and December 31 (each a testing date ) in an amount not less than: (i) commencing on December 31, 2016, 30 Days Cash on Hand, (ii) commencing on June 30, 2018, 40 Days Cash on Hand, and (iii) commencing on June 30, 2019, and each June 30 thereafter, 45 Days Cash on Hand (collectively, the "Cash on Hand Requirement"). Following each testing date but not later than (A) in the case of a June (iv)

11 30 testing date, the earlier of the ensuing December 1 or three weeks after completion of the Borrower's audit for the Fiscal Year then ended or (B) in the case of a December 31 testing date, the ensuing February 14, the Borrower will provide the Trustee with a Certificate of the Borrower (1) setting forth the calculation of Days Cash on Hand as of the immediately preceding testing date and (2) stating whether the Borrower has met the Cash on Hand Requirement. The foregoing is subject to the qualification that if applicable State or federal laws or regulations, or the rules and regulations of agencies having jurisdiction, shall not permit compliance with the Cash on Hand Requirement, then the Borrower shall, in conformity with the then prevailing laws, rules, or regulations, maintain Cash on Hand equal to the maximum permissible level. See "CERTAIN FINANCIAL COVENANTS OF THE BORROWER Cash on Hand Requirement." Capital Maintenance and Operating Fund Requirement...On or before July 1, 2021 and each fifth anniversary thereafter, the Borrower agrees to employ a Management Consultant to prepare and deliver to the Trustee a capital needs assessment of the Borrower projecting the Borrower's capital needs with respect to the Schools and the total cost thereof for the five-year period commencing on the following July 1 (the "Capital Needs Assessment"). The Capital Maintenance and Operating Fund shall be funded by the Borrower through payments due on or before the 15th day of each month, commencing July 15, 2022, in an amount equal to the Monthly Capital Maintenance and Operating Fund Contribution until such time as there is on deposit therein an amount equal to the Capital Maintenance and Operating Fund Requirement. The Capital Maintenance and Operating Fund Requirement is equal to the total projected cost of the Borrower's capital needs with respect to the Schools as of the most recent Capital Needs Assessment. Bondholders' Risks...Purchase of the Series 2016 Bonds involves a degree of risk and the Series 2016 Bonds are a speculative investment. Prospective purchasers are advised to read this entire Limited Offering Memorandum and the Appendices attached hereto in their entirety, particularly the section "BONDHOLDERS' RISKS" herein, for a discussion of certain risk factors, which should be considered in connection with an investment in the Series 2016 Bonds. Continuing Disclosure...The Borrower will enter into the Continuing Disclosure Agreement with the Dissemination Agent (each as defined herein). The Continuing Disclosure Agreement is made for the benefit of the Series 2016 Bondholders and in order to assist the Underwriter in complying with its obligations pursuant to Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. See APPENDIX G "FORM OF CONTINUING DISCLOSURE AGREEMENT." Tax Status...In the opinion of Foley & Lardner LLP, Bond Counsel, assuming continuing compliance by the Issuer and the Borrower with certain covenants, under existing statutes, regulations and judicial decisions, interest on the Series 2016A Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporation; however, Bond Counsel notes that with respect to certain corporations, such interest is taken into account in determining (v)

12 adjusted current earnings for purposes of computing the alternative minimum tax. Interest on the Series 2016B Bonds is not excluded from gross income for federal income tax purposes. Bond Counsel is further of the opinion that the Series 2016 Bonds and the interest thereon are exempt from taxation under the laws of the State of Florida, except as to estate taxes and taxes imposed by Chapter 220, Florida Statutes, as amended. See "TAX MATTERS" herein for a description of certain other tax consequences to holders of the Series 2016 Bonds. Delivery Information...The Series 2016 Bonds are offered when, as and if issued by the Issuer and accepted by BB&T Capital Markets, a division of BB&T Securities, LLC (the "Underwriter"), subject to prior sale or withdrawal or modification of the offer without notice and subject to the approval of validity and certain tax matters by Foley & Lardner LLP, Jacksonville, Florida, Bond Counsel, and certain other conditions. Certain legal matters will be passed upon for the Issuer by Broad and Cassel, Orlando, Florida, for the Borrower by Edwards, Cohen, Dawson, Mangu & Noble, P.A., Jacksonville, Florida and for the Underwriter by Ice Miller LLP, Columbus, Ohio. Charter School Services Corporation, Inc., Fort Lauderdale, Florida, is serving as Financial Advisor to the Borrower. The Series 2016 Bonds are expected to be delivered in book-entry form through The Depository Trust Company in New York, New York on or about August 10, Financial Information...Audited financial statements of the Schools for the fiscal years ended June 30, 2014 and 2015 have been prepared by the Auditor, and are attached hereto as APPENDIX B. On a going forward basis, consolidated audited financial statements will be prepared for the Schools. Certain unaudited financial information of the Schools for such fiscal years and for the nine month periods ended March 31, 2015 and 2016 is included in APPENDIX A "THE BORROWER AND THE SCHOOLS." Such unaudited financial information has not been reviewed by the Auditor. Certain projected financial information for the Borrower for the fiscal years ending June 30, 2016 through 2021 is included in APPENDIX C "EXAMINED FORECAST." The Examined Forecast was prepared by CSSC, on behalf of the Borrower with information provided by the Borrower, and was examined by the Auditor. The Examined Forecast has not been independently reviewed or verified by any other party. In particular, the Underwriter has not independently verified the Examined Forecast, and makes no representations nor gives any assurances that such Examined Forecast, nor the assumptions underlying it, is complete or correct. (vi)

13 TABLE OF CONTENTS INTRODUCTION...1 THE ISSUER...2 THE BORROWER, THE SCHOOLS AND THE FACILITIES...4 The Borrower...4 The Schools...4 The Facilities...5 Discovery Schools, Inc....5 Charter School Services Corporation, Inc....6 THE PROJECT...7 ESTIMATED SOURCES AND USES OF FUNDS...7 DEBT SERVICE REQUIREMENTS...8 THE SERIES 2016 BONDS...9 General...9 Redemption Provisions...10 Selection of Series 2016 Bonds to Be Redeemed...13 Notice of Redemption...13 SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2016 BONDS...14 General...14 Pledge of Payments and Other Amounts...14 Assignment of Payments and Other Amounts, Loan Agreement and Mortgage...15 The School Revenue Funds...15 The Deposit Account Control Agreement...15 The Mortgage...16 Bond Revenue Fund...16 Capital Maintenance and Operating Fund...17 Allocation of Revenues...17 Subordination of Management Payments...18 Additional Bonds...19 Gross Revenues...21 CERTAIN FINANCIAL COVENANTS OF THE BORROWER...22 BONDHOLDERS' RISKS...32 General...32 State Financial Difficulties...32 Changes in Law; Annual Appropriation; Inadequate State Payments...33 Limited Operating History; Reliance on Examined Forecast...34 The Nature of the Examined Forecast...35 Competition for Students; School Choice Initiatives...35 Compliance with the No Child Left Behind Act of 2001 and State ESEA Waiver...35 Termination, Nonrenewal or Revocation of Charter...36 Terms of Management Agreements Shorter than Final Maturity Date of Series 2016 Bonds 37 Subordination of Management Fees...37 Reputational Risk...38 Other Schools; Potential Future Schools...38 Page vii

14 State Teacher Shortage...38 Litigation...38 No Taxing Authority...39 Transfer of Current Assets in the Ordinary Course...39 Priority of Security, Enforceability of Remedies...39 Liquidation of Security May Not Be Sufficient in the Event of a Default...40 Limited Nature of Real Estate Appraisal Reports...40 Hazard Risk; Insurance...41 Environmental Regulation...41 Remedies May be Unenforceable...42 Bankruptcy; Credit Risk of Borrower's Operations...42 No Rating...43 Failure to Provide Ongoing Disclosure...43 Secondary Market...43 Other Possible Bondholders' Risks...43 Taxation of Nonprofit Organizations...44 Compliance with Tax Covenants...44 Additional Bondholder's Risks Regarding Federal Income Tax Exemption...44 TAX MATTERS...46 Exclusion of Interest on Series 2016 Bonds from Gross Income...46 Original Issue Discount on Series 2016A Bonds...48 Original Issue Premium on Series 2016A Bonds...48 The Series 2016B Bonds...49 Other Tax Consequences of the Series 2016 Bonds...49 LEGAL MATTERS...49 LITIGATION...50 The Borrower...50 The Issuer...50 UNDERWRITING; LIMITED OFFERING...50 CONTINUING DISCLOSURE...51 FINANCIAL STATEMENTS...51 EXAMINED FORECAST...52 FINANCIAL ADVISOR...52 CERTAIN RELATIONSHIPS...52 MISCELLANEOUS...52 APPENDIX A THE BORROWER AND THE SCHOOLS APPENDIX B AUDITED FINANCIAL STATEMENTS OF THE SCHOOLS FOR FISCAL YEARS ENDED JUNE 30, 2014 AND 2015 APPENDIX C EXAMINED FORECAST APPENDIX D GENERAL INFORMATION REGARDING FLORIDA CHARTER SCHOOLS APPENDIX E SUBSTANTIALLY FINAL FORMS OF PRINCIPAL FINANCING DOCUMENTS APPENDIX F FORM OF OPINION OF BOND COUNSEL APPENDIX G FORM OF CONTINUING DISCLOSURE AGREEMENT APPENDIX H BOOK-ENTRY ONLY SYSTEM viii

15 Limited Offering Memorandum relating to $50,625,000 FLORIDA DEVELOPMENT FINANCE CORPORATION EDUCATIONAL FACILITIES REVENUE BONDS (FLORIDA CHARTER FOUNDATION, INC. PROJECTS), SERIES 2016A $195,000 FLORIDA DEVELOPMENT FINANCE CORPORATION EDUCATIONAL FACILITIES REVENUE BONDS (FLORIDA CHARTER FOUNDATION, INC. PROJECTS), TAXABLE SERIES 2016B INTRODUCTION This Limited Offering Memorandum, including the cover page, page i and Appendices, provides certain information with respect to the issuance and sale by Florida Development Finance Corporation (the "Issuer"), of $50,625,000 aggregate principal amount Educational Facilities Revenue Bonds (Florida Charter Foundation, Inc. Projects), Series 2016A (the "Series 2016A Bonds") and $195,000 aggregate principal amount Educational Facilities Revenue Bonds (Florida Charter Foundation, Inc. Projects), Taxable Series 2016B (the "Series 2016B Bonds" and together with the Series 2016A Bonds, the "Series 2016 Bonds"), pursuant to a resolution of the Issuer adopted on June 1, 2016 (the "Resolution"), and a Trust Indenture dated as of August 1, 2016 (the "Indenture") between the Issuer and U.S. Bank National Association, as trustee (the "Trustee"). Except as otherwise set forth herein, capitalized terms used but not defined in this Limited Offering Memorandum shall have the meanings assigned to them in the Indenture. See APPENDIX E "SUBSTANTIALLY FINAL FORMS OF PRINCIPAL FINANCING DOCUMENTS" attached hereto. The Series 2016 Bonds and all Additional Bonds (as defined herein and together with the Series 2016 Bonds, the "Bonds") are payable from and secured by a pledge and assignment and grant of a security interest to the Trustee as security for the Bonds of all of the Issuer's right, title, interest and obligations in and to (i) each of the Borrower's Documents (as herein defined), including the Loan Agreement (except for certain excluded rights relating to indemnification and fee payments), (ii) the Gross Revenues (as herein defined) of the Borrower and (iii) monies and securities held under the Indenture, all as more fully described in the Indenture. See "SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2016 BONDS" herein. The Series 2016 Bonds are being issued to fund a loan in the aggregate amount of $50,820,000 (the "Loan") by the Issuer to Florida Charter Foundation, Inc. (the "Borrower"), a Florida not-for-profit corporation and an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), pursuant to a Loan Agreement dated as of August 1, 2016 (the "Loan Agreement"), by and between the Issuer and the Borrower. See APPENDIX E "SUBSTANTIALLY FINAL FORMS OF PRINCIPAL FINANCING DOCUMENTS" attached hereto. The proceeds of the Series 2016 Bonds will be used to finance or refinance: (i) the acquisition, construction, rehabilitation, improvement and equipping of certain educational facilities (as more particularly defined herein, the "Facilities") to be owned and operated by the Borrower; (ii) the funding of capitalized interest on the Series 2016 Bonds; (iii) the funding of a debt service reserve fund for the Series 2016 Bonds; and (iv) certain costs of issuance of the Series 2016 Bonds (collectively, the "Project"). See "ESTIMATED SOURCES AND USES OF FUNDS," "SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2016 BONDS" and "THE PROJECT" herein. The Series 2016 Bonds are not a suitable investment for all investors (see "BONDHOLDERS' RISKS" herein). Prospective investors in the Series 2016 Bonds are invited to visit the Schools, ask questions of representatives of the Borrower and to request documents,

16 instruments and information which may not necessarily be referred to, summarized or described herein. Therefore, prospective investors should utilize the information appearing in this Limited Offering Memorandum within the context of and in conjunction with availability of such additional information and the sources thereof. The Borrower operates two charter schools from the Facilities: the public charter school known as "Franklin Academy Boynton Beach Campus" (the "Boynton Beach School") and the public charter school known as "Franklin Academy Cooper City Campus" (the "Cooper City School" and together, with the Boynton Beach School, the "Schools"). The Borrower operates the Boynton Beach School pursuant to a charter school contract with the School Board of Palm Beach County, Florida, and the Cooper City School pursuant to a charter school agreement with the School Board of Broward County, Florida (collectively, the "Charters"). See "THE BORROWER AND THE SCHOOLS" and APPENDIX A "THE BORROWER AND THE SCHOOLS." Payment of the Series 2016 Bonds is secured by a Mortgage with Assignment of Rents, Security Agreement and Fixture Filing dated as of August 1, 2016 (the "Mortgage") from the Borrower to the Issuer and assigned to the Trustee encumbering the Borrower's interest in the Facilities. See APPENDIX E "SUBSTANTIALLY FINAL FORMS OF PRINCIPAL FINANCING DOCUMENTS." THE SERIES 2016 BONDS ARE LIMITED OBLIGATIONS OF THE ISSUER PAYABLE SOLELY FROM THE SOURCES PROVIDED IN THE INDENTURE AND THE LOAN AGREEMENT. THE SERIES 2016 BONDS SHALL NOT CONSTITUTE AN INDEBTEDNESS, LIABILITY, GENERAL OR MORAL OBLIGATION OR A PLEDGE OF THE FAITH, CREDIT OR TAXING POWER OF THE STATE OF FLORIDA, THE ISSUER OR ANY MUNICIPAL CORPORATION, PUBLIC AGENCY OR POLITICAL SUBDIVISION OF THE STATE OF FLORIDA WITHIN THE MEANING OF ANY CHARTER, CONSTITUTIONAL OR STATUTORY PROVISIONS OR LIMITATIONS. NEITHER THE STATE OF FLORIDA NOR ANY MUNICIPAL CORPORATION, PUBLIC AGENCY OR POLITICAL SUBDIVISION OF THE STATE OF FLORIDA SHALL EVER BE REQUIRED TO (1) LEVY AD VALOREM TAXES ON ANY PROPERTY WITHIN ITS TERRITORIAL LIMITS TO PAY THE PRINCIPAL OF OR THE INTEREST OR REDEMPTION PREMIUM, IF ANY, ON OR THE PURCHASE PRICE OF, OR MAKE ANY OTHER PAYMENTS PROVIDED FOR IN RESPECT OF THE SERIES 2016 BONDS OR (2) PAY THE SAME FROM ANY FUNDS OTHER THAN FROM REVENUES AND THE OTHER ASSETS PLEDGED UNDER THE INDENTURE. THE ISSUER HAS NO TAXING POWER. This Limited Offering Memorandum contains brief descriptions of the Issuer, the Borrower, the Schools, and the Project, information with respect to the use of the proceeds of the Series 2016 Bonds, summaries of certain provisions of the Series 2016 Bonds, the Indenture, the Loan Agreement, the Charters and the Mortgage. The summaries of the documents contained herein are not complete or definitive, and every statement made in this Limited Offering Memorandum concerning any provision of any document is qualified by reference to such document in its entirety. Copies of certain of these documents are attached to this Limited Offering Memorandum as appendices. Further, APPENDIX F to this Limited Offering Memorandum contains a copy of the proposed approving opinion of Bond Counsel with respect to the Series 2016 Bonds. THE ISSUER The Issuer is a public body corporate and politic of the State of Florida, authorized to issue the Series 2016 Bonds pursuant to The Florida Development Finance Corporation Act of 1993, Chapter 288, Part X, Florida Statutes, as amended and supplemented, and as a local agency under Part II, Chapter 159, 2

17 Florida Statutes, as amended and supplemented, or any successor statute(s) and other applicable provisions of law (the "Act"). The Issuer is authorized by the Act to issue the Series 2016 Bonds to provide funds to loan to the Borrower to finance and refinance the costs of the Project. The Act provides that bonds such as the Series 2016 Bonds are not and cannot be a general obligation of the Issuer or a charge upon any of its property or assets other than that specifically pledged for the benefit of such bonds. The issuance of the Series 2016 Bonds was approved by resolution of the Issuer adopted on June 1, THE SERIES 2016 BONDS ARE LIMITED OBLIGATIONS OF THE ISSUER PAYABLE SOLELY FROM THE SOURCES PROVIDED IN THE INDENTURE AND THE LOAN AGREEMENT. THE SERIES 2016 BONDS SHALL NOT CONSTITUTE AN INDEBTEDNESS, LIABILITY, GENERAL OR MORAL OBLIGATION OR A PLEDGE OF THE FAITH, CREDIT OR TAXING POWER OF THE STATE OF FLORIDA, THE ISSUER OR ANY MUNICIPAL CORPORATION, PUBLIC AGENCY OR POLITICAL SUBDIVISION OF THE STATE OF FLORIDA WITHIN THE MEANING OF ANY CHARTER, CONSTITUTIONAL OR STATUTORY PROVISIONS OR LIMITATIONS. NEITHER THE STATE OF FLORIDA NOR ANY MUNICIPAL CORPORATION, PUBLIC AGENCY OR POLITICAL SUBDIVISION OF THE STATE OF FLORIDA SHALL EVER BE REQUIRED TO (1) LEVY AD VALOREM TAXES ON ANY PROPERTY WITHIN ITS TERRITORIAL LIMITS TO PAY THE PRINCIPAL OF OR THE INTEREST OR REDEMPTION PREMIUM, IF ANY, ON OR THE PURCHASE PRICE OF, OR MAKE ANY OTHER PAYMENTS PROVIDED FOR IN RESPECT OF THE SERIES 2016 BONDS OR (2) PAY THE SAME FROM ANY FUNDS OTHER THAN FROM REVENUES AND THE OTHER ASSETS PLEDGED UNDER THE INDENTURE. THE ISSUER HAS NO TAXING POWER. Although the Issuer has consented to the use of this Limited Offering Memorandum in connection with the offer and the sale of the Series 2016 Bonds, it has not participated in the preparation of this Limited Offering Memorandum and makes no representation with respect to the accuracy or completeness of any of the material contained in this Limited Offering Memorandum other than under the headings "THE ISSUER" and "LITIGATION - No Proceedings Against the Issuer." The Issuer is not responsible for providing any purchaser of the Series 2016 Bonds with any information relating to the Series 2016 Bonds or any of the parties or transactions referred to in this Limited Offering Memorandum or for the accuracy or completeness of any such information obtained by any purchaser. Rule 69W , Rules for Government Securities, promulgated by the Florida Department of Banking and Finance, Division of Securities, under Section (1), Florida Statutes ("Rule 69W "), requires the Issuer to disclose each and every default as to the payment of principal and interest with respect to an obligation issued by the Issuer after December 31, Rule 69W further provides, however, that if the Issuer in good faith believes that such disclosures would not be considered material by a reasonable investor, such disclosures may be omitted. The Issuer is merely a conduit for issuance and payment of the Series 2016 Bonds, in that the Series 2016 Bonds do not constitute a general debt, liability, or obligation of the Issuer, but are instead secured by and payable solely from payments of the Borrower under the Loan Agreement directly to the Trustee and by other security discussed herein. The Series 2016 Bonds are not being offered on the basis of the financial strength or condition of the Issuer. The Issuer believes, therefore, that disclosure of any default related to a financing not involving the Borrower or any person or entity related to the Borrower would not be material to a reasonable investor. Accordingly, the Issuer has not taken affirmative steps to 3

18 contact any trustee of any other conduit bond issue of the Issuer to determine the existence of any defaults. The Borrower THE BORROWER, THE SCHOOLS AND THE FACILITIES Florida Charter Foundation, Inc. (the "Borrower") is a Florida not-for-profit corporation and an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended. The Borrower operates two charter schools from the Facilities: the Boynton Beach School and the Cooper City School. In addition, the Borrower operates five other charter schools in Florida and will operate a sixth charter school in Florida beginning in the school year (collectively, the "Other Schools"). Revenues of the Borrower derived from its operation of the Other Schools and any other charter schools that may be established and operated by the Borrower in the future and Management Payments paid by the Schools to the Borrower are not included in Gross Revenues. The Borrower may establish other charter schools in addition to the Schools and the Other Schools the future. Except as may be otherwise provided in a Supplemental Indenture, any revenues of any school subsequently established and operated by the Borrower will not be available for repayment of or pledged as security for the Series 2016 Bonds. Bondholders should not expect revenues or assets of the Other Schools or any additional schools established in the future to secure the Series 2016 Bonds. For additional information on the Borrower, see APPENDIX A "THE BORROWER AND THE SCHOOLS." The Schools The Borrower operates two charter schools from the Facilities: the Boynton Beach School and the Cooper City School. The Boynton Beach School is located at 7882 S. Military Trail, Boynton Beach, Palm Beach County, Florida, and is operated pursuant to the Charter School Contract dated September 2, 2011 (the "Boynton Beach School Charter"), between the School Board of Palm Beach County, Florida, and the Borrower. The Cooper City School is located at 6301 S. Flamingo Road, Cooper City, Broward County, Florida, and is operated pursuant to the Charter School Agreement dated June 19, 2012 (the "Cooper City Charter" and, together with the Boynton Beach Charter, the "Charters"), between the School Board of Broward County, Florida, and the Borrower. The School Board of Palm Beach County, Florida; and the School Board of Broward County, Florida, are together referred to herein as the "School Boards." Through the school year, the Borrower operated the Cooper City School pursuant to two separate Charter School Contracts between the School Board of Broward County, Florida, and the Borrower. As such, certain historical information for the Cooper City School in this Limited Offering Memorandum is presented separately for the grade K-5 and grade 6-8 operations of the Cooper City School through the school year and the Fiscal Year ended June 30, Going forward, such information will be presented for the Cooper City School as a whole. For additional information regarding the change in operations of the Cooper City School, see APPENDIX A "THE BORROWER AND THE SCHOOLS." The table below shows certain information regarding the Schools and the Charters. For additional information regarding the Schools, see APPENDIX A "THE BORROWER AND THE SCHOOLS." 4

19 School Boynton Beach School Cooper City Elementary School Cooper City Middle School Grades Served Enrollment Projected Enrollment Charter Authorizer (School Board of) K-8 1,232 1,340 Palm Beach County, Florida K Broward County, Florida Broward County, Florida Current Charter Expiration Date June 30, 2017 June 30, 2017 June 30, 2017 The Facilities The Schools are operated by the Borrower from the Facilities. The Facilities consist of (a) certain educational facilities consisting of approximately 9.94 acres of land and the existing site improvements thereon located at 7882 S. Military Trail, Boynton Beach, Palm Beach County, Florida 33462, including without limitation an approximately 86,435 square foot building and ancillary facilities, which are operated by the Borrower as the Boynton Beach School (the "Boynton Beach Campus"); (b) certain educational facilities consisting of approximately 11 acres of land and the existing site improvements thereon located at 6301 S. Flamingo Road, Cooper City, Broward County, Florida 33330, including without limitation an approximately 89,937 square foot building and ancillary facilities, which are operated by the Borrower as the Cooper City School (the "Cooper City Campus"); and (c) certain furniture, fixtures and equipment for the Boynton Beach Campus and the Cooper City Campus, which are located at and forms a part of such educational facilities. See "THE PROJECT" and APPENDIX A "THE BORROWER AND THE SCHOOLS." Discovery Schools, Inc. The Borrower contracts with Discovery Schools, Inc. ("Discovery Schools"), Fort Lauderdale, Florida, for consulting and administrative duties, including conducting or overseeing recordkeeping, bookkeeping, staff administration, financial projections and financial statements, grant solicitation, financing solicitation and coordination, annual reporting, student assessment, school board representation, governmental compliance, charter renewals, curriculum development, and facilities identification, expansion, design, and development. Discovery Schools provides such services for the Schools to the Borrower pursuant to a Charter School Consulting Agreement dated September 20, 2012 (the "Discovery Schools Management Agreement"), between Discovery Schools and the Borrower. Discovery Schools was incorporated in 2009 and will serve six charter schools for the school year. Under the Discovery Schools Management Agreement, the Borrower is required to pay Discovery Schools a fee of $450 per full time equivalent student, payable in monthly installments. The initial term of the Discovery Schools Management Agreement is seven years, and it will automatically renew for another seven year term on October 1, 2019, unless the Borrower terminates the Discovery Schools Management Agreement with 180 days' notice prior to its scheduled expiration. The Discovery Schools Management Agreement may also be terminated for cause. Amounts payable to Discovery Schools under the Discovery Schools Management Agreement are to be paid only after (i) payment of Loan Payments and Additional Payments then due under the Loan Agreement and (ii) replenishment of certain funds described in "SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2016 BONDS Allocation of Revenues," and any such unpaid fees shall be deferred until such time as payment may be made in accordance with 5

20 the Loan Agreement. If such payments are not paid to Discovery Schools pursuant to the preceding sentence, Discovery Schools is required to continue providing management services to the Schools for up to not less than the greater of (A) the remainder of the then-current school year or (B) the next succeeding six months. As such, there can be no guarantee that Discovery Schools would continue to provide services to the Schools beyond such limited period if amounts due under the Discovery Schools Management Agreement were not timely paid. See "BONDHOLDERS' RISKS - Terms of Management Agreements Shorter than Final Maturity Date of Series 2016 Bonds" and " Subordination of Management Fees." Charter School Services Corporation, Inc. The Borrower contracts with Charter School Services Corporation, Inc. ("CSSC"), Fort Lauderdale, Florida, for accounting and human resources management services for the Schools including, but not limited to, regulatory compliance, maintenance of books and records, bookkeeping, budgeting, and financial reporting. CSSC was created as a subsidiary of Building Hope A Charter School Facilities Fund in 2008 to provide business services to charter schools. Currently, CSSC serves 38 charter schools in the State of Florida, providing various levels of business service support. CSSC also runs the Charter Support Unit ("CSU") for the Florida Department of Education ("FDOE"). The CSU provides workshops, webinars, school evaluations, and other support service free of charge to charter schools in their first five years of operations. In addition, CSSC is a registered Municipal Adviser. CSSC provides such services for the Schools to the Borrower pursuant to a Management Agreement dated as of June 6, 2016 (the "CSSC Management Agreement" and together with the Discovery Schools Management Agreement, the "Management Agreements"), between CSSC and the Borrower. The initial term of the CSSC Management Agreement expires on June 6, Under the CSSC Management Agreement, the Borrower is required to pay CSSC a fee of $50 per full time equivalent student per year. The management agreement may be terminated by the Borrower at any time upon 30 days' notice. Amounts payable to CSSC under the CSSC Management Agreement are to be paid only after (i) payment of Loan Payments and Additional Payments then due under the Loan Agreement and (ii) replenishment of certain funds described in "SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2016 BONDS Allocation of Revenues," and any such unpaid fees shall be deferred until such time as payment may be made in accordance with the Loan Agreement. If such payments are not paid to CSSC pursuant to the preceding sentence, CSSC is required to continue providing management services to the Schools for up to not less than the greater of (A) the remainder of the then-current school year or (B) the next succeeding six months. As such, there can be no guarantee that CSSC would continue to provide services to the Schools beyond such limited period if amounts due under the CSSC Management Agreement were not timely paid. See "BONDHOLDERS' RISKS - Terms of Management Agreements Shorter than Final Maturity Date of Series 2016 Bonds" and " Subordination of Management Fees." CSSC is also serving as financial advisor to the Borrower in connection with the Series 2016 Bond transaction. For additional information regarding CSSC, see "FINANCIAL ADVISOR," "CERTAIN RELATIONSHIPS," and "EXAMINED FORECAST." 6

21 THE PROJECT The Series 2016 Bonds are being issued for the purpose of providing funds to finance or refinance: (i) the acquisition, construction, rehabilitation, improvement and equipping of the Facilities; (ii) the funding of capitalized interest on the Series 2016 Bonds; (iii) the funding of a debt service reserve fund for the Series 2016 Bonds; and (iv) certain costs of issuance of the Series 2016 Bonds. On the date of issuance of the Series 2016 Bonds, a portion of the proceeds of the Series 2016 Bonds will be used by the Borrower to purchase (i) the Boynton Beach Campus from an unrelated third party for $22,305,378 and (ii) the Cooper City Campus from an unrelated third party for $20,047,852. See APPENDIX A "THE BORROWER AND THE SCHOOLS." ESTIMATED SOURCES AND USES OF FUNDS Bonds: The following table sets forth the estimated sources and uses of the proceeds of the Series 2016 Series 2016A Bonds Series 2016B Bonds Series 2016 Bonds SOURCES OF FUNDS Original Principal Amount $50,625, $195, $50,820, Net Original Issue (Discount) (151,111.30) 0.00 (151,111.30) TOTAL SOURCES $50,473, $195, $50,668, USES OF FUNDS Facilities Acquisition $42,353, $0.00 $42,353, Refinancing Furniture, Fixtures, and Equipment 2,500, ,500, Other Project Costs 159, , Costs of Issuance 1 1,009, , ,199, Capitalized Interest Account 1,197, , ,202, Reserve Account 3,253, ,253, TOTAL USES $50,473, $195, $50,668, Includes, without limitation, underwriter's discount, legal and advisory fees, printing costs and other costs associated with the issuance of the Series 2016 Bonds. 7

22 DEBT SERVICE REQUIREMENTS The following table shows the annual principal and interest requirements on the Series 2016 Bonds. On the date of issuance of the Series 2016 Bonds, the Borrower will also have outstanding Indebtedness related to the Schools in the form of the $2,000,000 line of credit provided to the Borrower by Building Hope A Charter School Facilities Fund ("Building Hope"), a District of Columbia corporation (the "Building Hope Line of Credit") and will have no other outstanding Indebtedness related to either the Schools or the Other Schools. Year Ending July 15 Series 2016A Bonds Principal Series 2016A Bonds Interest Series 2016B Bonds Principal Series 2016B Bonds Interest Total Debt Service 2017 $700, $2,226, $90, $10, $3,027, , ,365, , , ,251, , ,334, ,249, , ,297, ,252, , ,259, ,249, ,030, ,219, ,249, ,075, ,178, ,253, ,115, ,135, ,250, ,160, ,090, ,250, ,205, ,044, ,249, ,255, ,996, ,251, ,315, ,936, ,251, ,375, ,874, ,249, ,445, ,808, ,253, ,510, ,740, ,250, ,585, ,668, ,253, ,660, ,593, ,253, ,735, ,514, ,249, ,820, ,431, ,251, ,905, ,345, ,250, ,995, ,255, ,250, ,095, ,155, ,250, ,200, ,050, ,250, ,310, , ,250, ,425, , ,250, ,545, , ,248, ,675, , ,251, ,810, , ,252, ,950, , ,252, ,095, , ,249, Total $50,625, $46,467, $195, $17, $97,304,

23 THE SERIES 2016 BONDS General The Series 2016 Bonds are being issued pursuant to the Indenture securing the Series 2016 Bonds in the aggregate principal amount set forth on the cover of this Limited Offering Memorandum. The Series 2016 Bonds will be delivered as registered Bonds in minimum denominations of $100,000 or any integral multiple of $5,000 in excess thereof, and will be transferable and exchangeable only as set forth in the Indenture and as described herein. The Series 2016 Bonds will be dated the date of issuance and will bear interest at the rates set forth on page i hereof from their dated date. Interest on the Series 2016 Bonds will be calculated on the basis of a 360-day year of twelve 30-day months and will be payable in arrears on January 15, 2017 and semiannually thereafter on each January 15 and July 15 (each an "Interest Payment Date"). The Series 2016 Bonds will mature in the amounts and in each of the years as set forth on page i hereof. The Series 2016 Bonds, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"), and will be evidenced by one Series 2016 Bond for each maturity in the total aggregate principal amount of the Series 2016 Bonds of such maturity. Registered ownership of the Series 2016 Bonds, or any portion thereof, may not thereafter be transferred except as set forth in the Indenture. So long as Cede & Co. is the registered owner of the Series 2016 Bonds, as nominee of DTC, references herein to the bondholders, holders or registered owners will mean Cede & Co. as aforesaid and will not mean the "beneficial owners" of the Series 2016 Bonds. See APPENDIX H "BOOK-ENTRY ONLY SYSTEM." The principal of and interest on the Series 2016 Bonds will be payable in lawful money of the United States of America upon surrender at the corporate trust office of the Trustee. The interest on any Series 2016 Bond will be payable to the person whose name appears on the registration books of the Trustee as the registered owner thereof as of the close of business on the fifteenth day of the calendar month next preceding the Interest Payment Date (the "Record Date"), such interest to be paid by check mailed by first class mail, postage prepaid, on the Interest Payment Date, to the registered owner at his or her address as it appears on such registration books. Notwithstanding the foregoing, however, any holder of all the Series 2016 Bonds and any holder of $1,000,000 or more in an aggregate principal amount of the Series 2016 Bonds will be entitled to receive payments of interest on the Series 2016 Bonds held by it by wire transfer of immediately available funds to such bank or trust company located within the United States of America as any such holder has designated in writing to the Trustee by the first Record Date for such payment. So long as Cede & Co. is the registered owner of the Series 2016 Bonds, principal of and interest on the Series 2016 Bonds are payable in same day funds by the Trustee to Cede & Co., as nominee for the Depository. Any interest not punctually paid or duly provided for will thereafter cease to be payable to the bondholder on such Record Date and will be paid to the person in whose name the Series 2016 Bond is registered at the close of business on the date established by the Trustee pursuant to the Indenture as a record date for the payment of defaulted interest on the Series 2016 Bonds (the "Special Record Date"). The Special Record Date will be fixed by the Trustee, notice thereof being given to the bondholders not less than 10 days prior to such Special Record Date. 9

24 Redemption Provisions The Series 2016A Bonds are subject to redemption prior to their respective stated maturities, at the option of the Issuer (which option shall be exercised upon Request of the Borrower), in whole or in part, on any date on or after July 15, 2026, at a redemption price equal to 100% of the outstanding principal amount of the Series 2016A Bonds called for redemption, plus accrued interest to the date fixed for redemption. The Series 2016B Bonds are not subject to optional redemption prior to their stated maturity. Extraordinary Redemption Upon Ceasing to Operate a Charter School. The Series 2016 Bonds are subject to redemption prior to their stated maturities, at the option of the Issuer (which option shall be exercised as directed by the Borrower) as a whole on any date from moneys delivered to the Trustee for deposit to the Special Redemption Account pursuant to the Loan Agreement at a redemption price equal to the principal amount thereof together with interest accrued thereon to the date fixed for redemption, without premium. Mandatory Redemption of the Series 2016 Bonds Upon Determination of Taxability. The Series 2016A Bonds are subject to mandatory redemption prior to maturity, as a whole (or, with respect to the Series 2016A Bonds, in part if, in the opinion of Bond Counsel, such partial redemption will preserve the excludability of a portion of the interest on the Series 2016A Bonds from gross income for federal income tax purposes), at any time for which the required notice can be given following the occurrence of a Determination of Taxability with respect to the Series 2016A Bonds at a redemption price equal to 105% of the principal amount thereof plus accrued interest to the date fixed for redemption, from any available funds. "Determination of Taxability" means a determination that the interest income on any of the Tax Exempt Bonds is included in gross income of any then-current or former Holder or Beneficial Owner for federal income tax purposes, which determination shall be deemed to have been made upon the occurrence of the first to occur of the following: (a) the day on which the Borrower or the Issuer is advised in writing by the Commissioner or any District Director of the Internal Revenue Service that, based upon any filings of the Borrower or the Issuer, or upon any review or audit of the Borrower or the Issuer, or upon any other grounds whatsoever, the interest on the Bonds is includable for federal income tax purposes in the gross income of any current or former Holder or Beneficial Owner thereof; (b) the day on which the Borrower receives notice from the Trustee in writing that the Trustee has been advised in writing by any current or former Holder or Beneficial Owner of such Bond that the Internal Revenue Service has issued a statutory notice of deficiency or similar notice to such current or former Holder or Beneficial Owner which asserts in effect that the interest on the Series 2016A Bonds received by such current or former Holder or Beneficial Owner is includable for federal income tax purposes in the gross income of such current or former Holder or Beneficial Owner; (c) the day on which the Borrower or the Issuer is advised in writing by the Commissioner or any District Director of the Internal Revenue Service that there has been issued a public or private ruling of the Internal Revenue Service or a technical advice memorandum issued by the national office of the Internal Revenue Service that the interest on the Series 2016A Bonds is includable for federal income tax purposes in the gross income of any current or former Holder or Beneficial Owner of such Bond; 10

25 (d) the day on which the Borrower or the Issuer is advised in writing that a final determination, from which no further right of appeal exists, has been made by a court of competent jurisdiction in the United States of America in a proceeding with respect to which the Borrower has been given written notice and an opportunity to participate and defend that the interest on the Series 2016A Bonds is includable for federal income tax purposes in the gross income of any current or former Holder or Beneficial Owner of such Bond; or (e) the date specified in a written opinion to the Borrower from Bond Counsel as the day on which interest on the Series 2016A Bonds first became or will become includable for federal income tax purposes in the gross income of any current or former Holder or Beneficial Owner of such Bond. Mandatory Sinking Fund Redemption. The Series 2016A Term Bonds maturing July 15, 2026, are also subject to redemption prior to their stated maturity in part, randomly, from Mandatory Sinking Account Payments established pursuant to the Indenture on each July 15 on and after July 15, 2017 at the principal amount thereof together with interest accrued thereon to the date fixed for redemption, without premium. Such Series 2016A Term Bonds will be redeemed (or paid at maturity, as the case may be) by application of Mandatory Sinking Account Payments in the following amounts and on the following dates: Series 2016A Term Bonds maturing July 15, 2026: Year Amount 2017 $700, , , , , ,030, ,075, ,115, ,160, * 1,205,000 *Final Maturity [Remainder of page intentionally left blank] 11

26 The Series 2016A Term Bonds maturing July 15, 2036, are also subject to redemption prior to their stated maturity in part, randomly, from Mandatory Sinking Account Payments established pursuant to the Indenture on each July 15 on and after July 15, 2027, at the principal amount thereof together with interest accrued thereon to the date fixed for redemption, without premium. Such Series 2016A Term Bonds will be redeemed (or paid at maturity, as the case may be) by application of Mandatory Sinking Account Payments in the following amounts and on the following dates: Series 2016A Term Bonds maturing July 15, 2036: Year Amount 2027 $1,255, ,315, ,375, ,445, ,510, ,585, ,660, ,735, ,820, * 1,905,000 *Final Maturity The Series 2016A Term Bonds maturing July 15, 2046, are also subject to redemption prior to their stated maturity in part, randomly, from Mandatory Sinking Account Payments established pursuant to the Indenture on each July 15 on and after July 15, 2037, at the principal amount thereof together with interest accrued thereon to the date fixed for redemption, without premium. Such Series 2016A Term Bonds will be redeemed (or paid at maturity, as the case may be) by application of Mandatory Sinking Account Payments in the following amounts and on the following dates: Series 2016A Term Bonds maturing July 15, 2046: Year Amount 2037 $1,995, ,095, ,200, ,310, ,425, ,545, ,675, ,810, ,950, * 3,095,000 *Final Maturity 12

27 The Series 2016B Term Bonds maturing July 15, 2018, are also subject to redemption prior to their stated maturity in part, randomly, from Mandatory Sinking Account Payments established pursuant to the Indenture on July 15, 2017 and July 15, 2018, at the principal amount thereof together with interest accrued thereon to the date fixed for redemption, without premium. Such Series 2016B Term Bonds will be redeemed (or paid at maturity, as the case may be) by application of Mandatory Sinking Account Payments in the following amounts and on the following dates: Series 2016B Term Bonds maturing July 15, 2018: Year Amount 2017 $90, * 105,000 *Final Maturity Extraordinary Optional Redemption from Insurance and Condemnation Proceeds. The Series 2016 Bonds are subject to redemption prior to their stated maturity, at the option of the Issuer (which option will be exercised as directed by the Borrower) as a whole or in part on any date from moneys required to be transferred from the Insurance and Condemnation Proceeds Fund to the Special Redemption Account at a redemption price equal to the principal amount thereof together with interest accrued thereon to the date fixed for redemption, without premium. See APPENDIX E "SUBSTANTIALLY FINAL FORMS OF PRINCIPAL FINANCING DOCUMENTS." Selection of Series 2016 Bonds to Be Redeemed When any redemption is made pursuant to any of the provisions of the Indenture and less than all of the Outstanding Series 2016 Bonds are to be redeemed, the Trustee will select the Series 2016 Bonds to be redeemed pro-rata among maturities and the Mandatory Sinking Fund Payments will be reduced pro-rata. In no event will Series 2016 Bonds be redeemed in amounts other than whole multiples of authorized denominations. For purposes of redeeming Series 2016 Bonds in denominations greater than minimum authorized denominations, the Trustee will assign to such Series 2016 Bonds a distinctive number for each such principal amount and, in selecting Series 2016 Bonds for redemption randomly, will treat such amounts as separate Series 2016 Bonds. The Trustee will promptly notify the Issuer in writing of the numbers of the Series 2016 Bonds selected for redemption. "Outstanding" under the Indenture means all Bonds theretofore, or thereupon being, authenticated and delivered to the Trustee under the Indenture except: (a) Bonds theretofore canceled by the Trustee or surrendered to the Trustee for cancellation; (b) Bonds with respect to which all liability of the Issuer will have been discharged in accordance with the Indenture; and (c) Bonds for the transfer or exchange of which, or in lieu of or in substitution for which other Bonds will have been authenticated and delivered by the Trustee pursuant to the Indenture. See APPENDIX E "SUBSTANTIALLY FINAL FORMS OF PRINCIPAL FINANCING DOCUMENTS." Notice of Redemption Notice of any redemption of Series 2016 Bonds will be mailed postage prepaid, not less than thirty (30) nor more than sixty (60) days prior to the redemption date (i) by first class mail to the respective holders thereof at the addresses appearing on the Series 2016 Bond registration books described in the Indenture, and (ii) as may be further required in accordance with the Continuing Disclosure Agreement. Each notice of redemption will contain all of the following information: (a) the 13

28 date of such notice; (b) the series of the Series 2016 Bonds to be redeemed and the date of issue of such Series 2016 Bonds; (c) the redemption date; (d) the redemption price, if available; (e) the dates of maturity of the Series 2016 Bonds to be redeemed; (f) (if less than all of the Series 2016 Bonds of any maturity are to be redeemed) the distinctive numbers of the Series 2016 Bonds of each maturity to be redeemed; (g) (in the case of Series 2016 Bonds redeemed in part only) the respective portions of the principal amount of the Series 2016 Bonds of each maturity to be redeemed; (h) the CUSIP number, if any, of each maturity of Series 2016 Bonds; (i) a statement that such Series 2016 Bonds must be surrendered by the holders at the corporate trust office of the Trustee, or at such other place or places designated by the Trustee; and (j) notice that further interest on such Series 2016 Bonds, if any, will not accrue from and after the designated redemption date. Such redemption notices may state that no representation is made as to the accuracy or correctness of the CUSIP numbers provided therein or on the Series 2016 Bonds. Such notice may also state that the redemption is conditioned upon the availability of sufficient moneys to pay the full redemption price of the Series 2016 Bonds on the redemption date; if such condition is not met, the redemption shall be cancelled and of no effect. See APPENDIX E "SUBSTANTIALLY FINAL FORMS OF PRINCIPAL FINANCING DOCUMENTS." General SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2016 BONDS THE SERIES 2016 BONDS ARE LIMITED OBLIGATIONS OF THE ISSUER PAYABLE SOLELY FROM THE SOURCES PROVIDED IN THE INDENTURE AND THE LOAN AGREEMENT. THE SERIES 2016 BONDS SHALL NOT CONSTITUTE AN INDEBTEDNESS, LIABILITY, GENERAL OR MORAL OBLIGATION OR A PLEDGE OF THE FAITH, CREDIT OR TAXING POWER OF THE STATE OF FLORIDA, THE ISSUER OR ANY MUNICIPAL CORPORATION, PUBLIC AGENCY OR POLITICAL SUBDIVISION OF THE STATE OF FLORIDA WITHIN THE MEANING OF ANY CHARTER, CONSTITUTIONAL OR STATUTORY PROVISIONS OR LIMITATIONS. NEITHER THE STATE OF FLORIDA NOR ANY MUNICIPAL CORPORATION, PUBLIC AGENCY OR POLITICAL SUBDIVISION OF THE STATE OF FLORIDA SHALL EVER BE REQUIRED TO (1) LEVY AD VALOREM TAXES ON ANY PROPERTY WITHIN ITS TERRITORIAL LIMITS TO PAY THE PRINCIPAL OF OR THE INTEREST OR REDEMPTION PREMIUM, IF ANY, ON OR THE PURCHASE PRICE OF, OR MAKE ANY OTHER PAYMENTS PROVIDED FOR IN RESPECT OF THE SERIES 2016 BONDS OR (2) PAY THE SAME FROM ANY FUNDS OTHER THAN FROM REVENUES AND THE OTHER ASSETS PLEDGED UNDER THE INDENTURE. THE ISSUER HAS NO TAXING POWER. Pledge of Payments and Other Amounts The Issuer has executed and delivered the Indenture and has pledged, to secure the payment of the principal of and interest on the Bonds, including without limitation the Series 2016 Bonds, in accordance with the terms of the Indenture, all of the Payments and any other amounts (excluding the right to receive any administrative fees and expenses payable to the Issuer, the right to receive any indemnification and the right to receive any notices and reports, referred to, collectively, as the "Reserved Rights") held in any fund or account established pursuant to the Indenture (other than the Rebate Fund). Said pledge will constitute a lien on and security interest in such assets and will attach and be valid and binding from and after delivery of the Series 2016 Bonds, without any physical delivery thereof or further act. 14

29 "Payments," under the Indenture, means (i) all moneys, if any, received by the Trustee from the Borrower pursuant to the Loan Agreement, including Loan Repayments, and (ii) all income derived from the investment of any money in any fund or account established pursuant to the Indenture. "Loan Repayments," under the Indenture, means the amounts due and payable from the Borrower to the Issuer (other than Additional Payments) pursuant to the Loan Agreement. See APPENDIX E "SUBSTANTIALLY FINAL FORMS OF PRINCIPAL FINANCING DOCUMENTS." The Gross Revenues of the Borrower will be used by the Borrower to make the Loan Payments. Revenues of the Borrower derived from its operation of the Other Schools and any other charter schools that may be established and operated by the Borrower in the future and Management Payments paid by the Schools to the Borrower are not included in Gross Revenues. Assignment of Payments and Other Amounts, Loan Agreement and Mortgage The Issuer assigns to the Trustee, for the benefit of the Holders from time to time of the Bonds, (i) all of the Payments and other amounts pledged under " Pledge of Payments and Other Amounts" above, (ii) all of the right, title and interest of the Issuer in, to and under the Loan Agreement (except for the Reserved Rights), (iii) the School Revenue Funds (as further described below) and (iv) the Mortgage. The Trustee will be entitled to and will receive all of the Payments (except to the Reserved Rights), and any Payments collected or received by the Issuer will be deemed to be held, and to have been collected or received, by the Issuer as the agent of the Trustee and will forthwith be paid by the Issuer to the Trustee. The Trustee also will be entitled to and will (subject to the provisions of the Indenture) take all steps, actions and proceedings following any event of default under the Loan Agreement reasonably necessary in its judgment to enforce, either jointly with the Issuer or separately, all of the rights of the Issuer assigned to the Trustee and all of the obligations of the Borrower under the Loan Agreement and the Mortgage. The School Revenue Funds As long as any of the Bonds remain Outstanding or any Additional Payments remain unpaid, all of the Gross Revenues related to each School will be deposited as soon as practicable upon receipt thereof in a deposit account maintained for such School, collectively referred to as the "School Revenue Funds" which the Borrower has established and maintains and shall continue to maintain, in separate accounts, at an accredited, federally insured banking institution or institutions, as the Borrower designates in writing to the Trustee for such purpose; provided, however, that any funds transferred to the Trustee for deposit in the Rebate Fund pursuant to the Indenture shall not be deposited in the School Revenue Funds. Subject to the provisions of the Loan Agreement, the Borrower pledges, and to the extent permitted by law, grants a security interest to the Trustee, as assignee of the Issuer (for the benefit of the Holders), in each of the School Revenue Funds and all of the Gross Revenues to secure the payment of the Loan Repayments and Additional Payments and the performance by the Borrower of its other obligations under the Loan Agreement. The Borrower will execute and deliver such documents (including, but not limited to, account control agreements) as may be necessary in order to perfect or maintain as perfected such security interest. See APPENDIX E "SUBSTANTIALLY FINAL FORMS OF PRINCIPAL FINANCING DOCUMENTS." The Deposit Account Control Agreement The Bonds will be further secured by two Deposit Account Control Agreements, each dated as of August 1, 2016 (collectively, the "Deposit Account Control Agreement"), among the Borrower, the Trustee, and City National Bank of Florida, relating to the Boynton Beach Revenue Fund and the Cooper City Revenue Fund. After transfers are made in full in each calendar month as described under 15

30 "Allocation of Revenues," the Trustee shall transfer any remaining moneys in the Bond Revenue Fund to the School Revenue Funds. The Borrower shall apply the moneys in the School Revenue Funds to the payment of Loan Repayments and Additional Payments. Only after the payment of such Loan Repayments and Additional Payments then due, the Borrower may withdraw amounts from the School Revenue Funds to pay Operating Expenses, including without limitation Management Payments, subject to the Loan Agreement. The Mortgage Contemporaneously with the execution of the Loan Agreement, the Borrower will execute the Mortgage, pursuant to which the Borrower will grant and convey to the Issuer a first priority lien on and security interest in the Borrower's interest in the Facilities, subject to certain Permitted Encumbrances, in order to secure the payment of the Bonds, and the performance and observance by the Borrower of all of its covenants contained in the Loan Agreement and the Indenture. The Issuer will execute an Assignment of Mortgage dated as of August 1, 2016, assigning its rights under the Mortgage (other than Reserved Rights) to the Trustee for the benefit of the Bondholders. A title insurance policy on the Facilities subject to the Mortgage will be delivered at the time of delivery of the Series 2016 Bonds. The title insurance policy will provide protection against defects in title to the real estate, but not against failure by the Borrower to make payments under the Loan Agreement. See APPENDIX E "SUBSTANTIALLY FINAL FORMS OF PRINCIPAL FINANCING DOCUMENTS." Bond Revenue Fund The Trustee will establish, maintain and hold in trust a special fund designated as the "Bond Revenue Fund." The Trustee will establish within the Bond Revenue Fund an Interest Account, a Principal Account, and a Reserve Account with a separate subaccount for each series of Bonds in each such account. For purposes of the Reserve Account, the Series 2016 Bonds constitute a single series of Bonds, which will be secured by one subaccount. Interest Account. All amounts in the Interest Account will be used and withdrawn by the Trustee solely for the purpose of paying interest on the Bonds as it will become due and payable (including accrued interest on any Bonds purchased or redeemed prior to maturity pursuant to the Indenture). Principal Account. All amounts in the Principal Account applicable subaccount will be used and withdrawn by the Trustee solely for the purpose of paying the principal or Mandatory Sinking Account Payments of the applicable Bonds, as provided in the Indenture. The Term Bonds, which are Bonds payable on or before their specified maturity dates from Mandatory Sinking Account Payments, will be redeemed (or paid at maturity, as the case may be) by application of Mandatory Sinking Account Payments as set forth in "THE SERIES 2016 BONDS Redemption Mandatory Sinking Fund Redemption." Reserve Account. All amounts in each subaccount of the Reserve Account related to a particular series of Bonds will be used and withdrawn by the Trustee solely for the purpose of making up any deficiency in the subaccount in the Interest Account or the subaccount in the Principal Account relating to such series of Bonds, or (together with any other funds available) for the payment or redemption of all Outstanding Bonds of such series. For purposes of the Reserve Account, the Series 2016 Bonds constitute a single series of Bonds, which will be secured by one subaccount. 16

31 Amounts on deposit in the Reserve Account will be valued by the Trustee at their fair market value each February 1 and the Trustee will notify the Borrower of the results of such valuation. If the amount on deposit in the Reserve Account on the first Business Day following such valuation is less than one-hundred percent (100%) of the Reserve Account Requirement (as defined below), the Borrower has agreed in the Loan Agreement to make the deposits to the Reserve Account required by the Indenture. If the amount on deposit in the Reserve Account on the first Business Day following such valuation is greater than the Reserve Account Requirement, the excess will be withdrawn from the Reserve Account and transferred to the Bond Revenue Fund. See APPENDIX E "SUBSTANTIALLY FINAL FORMS OF PRINCIPAL FINANCING DOCUMENTS." Capital Maintenance and Operating Fund The Indenture establishes a Capital Maintenance and Operating Fund, to be funded by the Borrower. The Capital Maintenance and Operating Fund shall be funded by the Borrower through payments due on or before the 15 th day of each month, commencing July 15, 2022, in an amount equal to the Monthly Capital Maintenance and Operating Fund Contribution until such time as there is on deposit therein an amount equal to the Capital Maintenance and Operating Fund Requirement. The Capital Maintenance and Operating Fund Requirement is equal to the total projected cost of the Borrower's capital needs with respect to the Schools as of the most recent Capital Needs Assessment (as defined below). On or before July 1, 2021, and each fifth anniversary thereafter, the Borrower agrees to employ a Management Consultant to prepare and deliver to the Trustee a capital needs assessment of the Borrower projecting the Borrower's capital needs with respect to the Schools and the total cost thereof for the fiveyear period commencing on the following July 1, 2022 (the "Capital Needs Assessment"). See APPENDIX E "SUBSTANTIALLY FINAL FORMS OF PRINCIPAL FINANCING DOCUMENTS." Allocation of Revenues The Trustee will, on or before the last day of each month, transfer from the Bond Revenue Fund and deposit into the following respective accounts (each of which the Trustee shall establish and maintain within the Bond Revenue Fund, with separate subaccounts for each series of Bonds in the Interest Account, the Principal Account, and the Reserve Account) and funds, the following amounts, in the following order of priority, the requirements of each such account or fund (including the making up of any deficiencies in any such account resulting from lack of revenues sufficient to make any earlier required deposit) at the time of deposit to be satisfied before any transfer is made to any account or fund subsequent in priority: (1) To each applicable subaccount in the Interest Account, one-sixth of the aggregate amount of interest becoming due and payable on the next succeeding Interest Payment Date on all Bonds related to such subaccount then Outstanding (after credit for any amounts to be deposited to such subaccount from the Series 2016A Capitalized Interest Account and the Series 2016B Capitalized Interest Account and any other capitalized interest account established within the Project Fund for other series of Bonds pursuant to a Supplemental Indenture, on such Interest Payment Date pursuant the Indenture), on a pro rata basis based on the required amounts until the balance in said account is equal to said aggregate amount of interest, provided that from the date of delivery of the Bonds until the first Interest Payment Date with respect to the Bonds (if less than six months), transfers to the Interest Account shall be sufficient on a monthly pro rata basis to pay the interest becoming due and payable on said Interest Payment Date; 17

32 (2) To each applicable subaccount in the Principal Account, one-twelfth of the aggregate amount of principal becoming due and payable on the next Principal Payment Date (by maturity or redemption from Mandatory Sinking Account Payments) with respect to all Bonds related to such subaccount then Outstanding, on a pro rata basis based on the required amounts until the balance in said account is equal to said aggregate amount of principal; provided that from the date of delivery of the Bonds until the first Principal Payment Date with respect to the Bonds (if less than twelve months), transfers to the Principal Account shall be sufficient on a monthly pro rata basis to pay the principal becoming due and payable on said Principal Payment Date; (3) To each applicable subaccount in the Reserve Account, (i) one-twelfth of the aggregate amount of each prior withdrawal from such subaccount in the Reserve Account for the purpose of making up a deficiency in the related subaccount in the Interest Account or Principal Account (until deposits on account of such withdrawal are sufficient to fully restore the amount withdrawn), on a pro rata basis based on the required amounts provided that no deposit need be made into such subaccount in the Reserve Account if the balance in said subaccount is at least equal to the Reserve Account Requirement, and (ii) in the event the balance in said subaccount shall be less than the applicable Reserve Account Requirement due to valuation of the Eligible Securities deposited therein in accordance with the Indenture, the amount necessary to increase the balance in said subaccount to an amount at least equal to the Reserve Account Requirement (until deposits on account of such valuation deficiency are sufficient to increase the balance in said subaccount to said amount); (4) To the Capital Maintenance and Operating Fund, on or before the 15th day of each month, commencing July 15, 2022, an amount equal to the Monthly Capital Maintenance and Operating Fund Contribution until such time as the amount on deposit in the Capital Maintenance and Operating Fund is equal to the Capital Maintenance and Operating Fund Requirement; (5) To the Rebate Fund, such amounts as are required to be deposited therein by this Indenture (including the Tax Agreement); and (6) To the Trustee and the Issuer, as applicable, an amount necessary to pay any Additional Payments payable to the Trustee or the Issuer, respectively, billed to the Borrower by the Trustee and not paid by the Borrower directly to the Trustee or the Issuer, as applicable. After the foregoing transfers are made in full in each calendar month, the Trustee shall (i) pay to the Trustee and the Issuer, as applicable, an amount necessary to pay any Additional Payments payable to the Borrower or the Issuer, respectively, billed to the Borrower by the Trustee and not paid by the Borrower directly to the Trustee or the Issuer, as applicable and (ii) transfer any remaining moneys in the Bond Revenue Fund to the School Revenue Funds, in such amounts and to such deposit accounts therein identified to the Trustee by the Borrower in writing. Until the School Revenue Funds are identified to the Trustee in writing and the Trustee has executed a deposit account control agreement with respect to each School Revenue Fund, the Trustee shall hold any excess moneys referenced in clause (ii) above in the Bond Revenue Fund. See APPENDIX E "SUBSTANTIALLY FINAL FORMS OF PRINCIPAL FINANCING DOCUMENTS." Subordination of Management Payments Amounts payable to Discovery Schools and CSSC under the Management Agreements are to be paid only after (i) payment of Loan Payments and Additional Payments then due under the Loan Agreement and (ii) replenishment of certain funds described in "SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2016 BONDS Allocation of Revenues," and any such unpaid fees shall be deferred until such time as payment may be made in accordance with the Loan Agreement. If such 18

33 payments are not paid to Discovery Schools or CSSC pursuant to the preceding sentence, Discovery Schools or CSSC, as applicable, is required to continue providing management services to the Schools for up to not less than the greater of (A) the remainder of the then-current school year or (B) the next succeeding six months. As such, there can be no guarantee that Discovery Schools or CSSC, as applicable, would continue to provide services to the Schools beyond such limited period if amounts due under the Management Agreements were not timely paid. See "BONDHOLDERS' RISKS - Terms of Management Agreements Shorter than Final Maturity Date of Series 2016 Bonds" and " Subordination of Management Fees." The Borrower shall not discontinue any services provided in connection with its management and administration of the Schools due to the nonpayment of any Management Payments. In connection with the subordination of Management Payments described in the preceding paragraph, the Borrower shall not withdraw amounts from the School Revenue Funds to pay a Management Payment if the payment of such Management Payment shall cause the Borrower to fail to satisfy the Long-Term Debt Service Coverage Ratio requirement or the Days Cash on Hand Requirement included in the Loan Agreement. In the event the Borrower shall fail to satisfy the Long-Term Debt Service Coverage Ratio requirement or the Days Cash on Hand Requirement included in the Loan Agreement or in the event the Borrower shall fail to make any Loan Payment or Additional Payment when due, the Borrower, Discovery Schools, CSSC, and any future management service provider shall, within 30 days of receipt of written notice from the Borrower or the Trustee, return any Management Payment paid or allocated to the Borrower during the 12 calendar month period immediately preceding the applicable Fiscal Year end or testing date and cause such amount to be deposited in the applicable School Revenue Fund. The Loan Agreement provides that the Borrower shall not enter into a management agreement which does not expressly (i) subordinate any payments thereunder to the payment of Loan Payments and Additional Payments hereunder, (ii) include an agreement not to discontinue any services provided pursuant to such management agreement because of the nonpayment of any amounts due to such management services provider thereunder for a period of not less than the greater of (A) the remainder of the then-current school year or (B) six months, and (iii) require the management services provider to repay any amounts previously paid by the Borrower but required to be returned pursuant the Loan Agreement above within 30 days of receipt of written notice from the Borrower or the Trustee. Management Payments are not added back to Net Income Available for Debt Service for purposes of calculating Days Cash on Hand. Additional Bonds At the request of the Borrower, and upon satisfaction of such conditions precedent as shall be established in a Supplemental Indenture authorizing the issuance of additional Bonds of the Issuer, the Issuer may execute and the Trustee may authenticate and deliver additional Bonds ("Additional Bonds") from time to time for any purpose as provided by the Loan Agreement, to provide funds to pay the costs of refunding any Indebtedness relating to the Schools, to pay the costs of making any modifications or improvements to facilities owned by the Borrower relating to the Schools, or to acquire facilities for the Schools, as the Borrower deems necessary or desirable, subject to any restrictions on issuing additional Long-Term Indebtedness (as defined in the Loan Agreement) as set forth in the Loan Agreement; provided, however, that if an Event of Default hereunder or under the Loan Agreement has occurred and is continuing, no Additional Bonds shall be executed by the Issuer and authenticated and delivered by the Trustee. Any Additional Bonds shall not be senior in right of payment to the Series 2016 Bonds. Except as otherwise provided in a Supplemental Indenture, any Additional Bonds shall be on a parity with the 19

34 Series 2016 Bonds authorized by the Indenture and any Additional Bonds theretofore or thereafter executed, delivered and Outstanding as to the assignment to the Trustee of the Issuer's right, title and interest in the trust estate. Before the Issuer shall execute and before the Trustee shall authenticate and deliver any Additional Bonds, the Issuer and the Trustee shall receive the following items: (a) Original executed counterparts of any amendments or supplements to the Loan Agreement and the Indenture entered into in connection with the execution and delivery of the Additional Bonds, which are necessary or advisable, in the opinion of nationally recognized bond counsel, to provide that the Additional Bonds will be issued in compliance with the provisions of the Indenture. The Supplemental Indenture shall provide for the Additional Bonds being included in one or more new series of Bonds, and the Facilities shall include any property being financed by the Additional Bonds. (b) A copy of the resolution of the governing board of the Borrower (i) authorizing the execution and delivery of any amendments or supplements to the Loan Agreement entered into in connection with the issuance of such Additional Bonds and (ii) the authentication and delivery by the Trustee of such Additional Bonds, certified by an Authorized Borrower Representative. (c) A certified copy of the resolution(s) of the Issuer authorizing the issuance of such Additional Bonds and the execution and delivery of any amendments or supplements to the Loan Agreement and the Indenture entered into in connection with the issuance of such Additional Bonds. (d) An Opinion of Counsel to the effect that: (i) the documents submitted to the Trustee in connection with the request then being made comply with the requirements of the Indenture; (ii) the issuance of the Additional Bonds has been duly authorized; (iii) all filings required to be made to secure the Bonds have been made; and (iv) all conditions precedent to the delivery of the Additional Bonds have been fulfilled. (e) An Opinion of Bond Counsel to the effect that (i) when executed and delivered, the Additional Bonds and any related bond and/or security documents will be legal, valid, binding and enforceable in accordance with their respective terms, except to the extent that the binding effect and enforceability thereof are subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditor's rights heretofore or hereafter enacted to the extent constitutionally applicable and that the enforcement of such documents may also be subject to consideration of public policy or to the exercise of judicial discretion in appropriate cases and (ii) when executed by the Issuer and authenticated and delivered by the Trustee, those Additional Bonds will be secured hereunder equally and on a parity with all other Bonds at the time outstanding hereunder as to the assignment to the Trustee of the trust estate; and (iii) to the extent Bonds are outstanding immediately prior to the signing and delivery of such Additional Bonds, the signing and delivery of the Additional Bonds will not adversely affect the exemption of the interest on such Outstanding Bonds from gross income for federal income tax purposes. (f) A written certificate of the Authorized Borrower Representative certifying that (i) the useful life of any property added to the Facilities in connection with the execution and delivery of such Additional Bonds extends beyond the final maturity of such Additional Bonds and (ii) any property added to the Facilities in connection with the execution and delivery of such Additional Bonds is necessary to the operation of the Borrower relating to the Schools. (g) A written certificate of the Authorized Borrower Representative to the effect that the Borrower has complied with the requirements of providing for additional Long-Term Indebtedness as described below under the caption "CERTAIN FINANCIAL COVENANTS OF THE BORROWER" and 20

35 that the Borrower is in compliance, and will be in compliance upon the issuance of any additional Long- Term Indebtedness, including the Additional Bonds, with all financial covenants set forth in the Loan Agreement, including without limitation, the covenants described below under the caption "CERTAIN FINANCIAL COVENANTS OF THE BORROWER"; and provided further that the there is no Event of Default existing under the Indenture, the Loan Agreement or the Mortgage. (h) A written certificate of the Authorized Borrower Representative, certifying that the Gross Revenues and the Payments are expected to be sufficient to pay the principal of, premium, if any, and interest on the Additional Bonds and all other Outstanding Bonds when due and such other obligations required to be paid when due from the amounts pledged under the Indenture to secure the payment of the Borrower's obligations under the Loan Agreement. (h) A binding commitment to issue a mortgagee's policy of title insurance, or an endorsement to a prior such policy in favor of the Trustee for the benefit of the Holders of the Series 2016 Bonds and any Additional Bonds, if applicable. (i) If there is an addition to the Facilities, a mortgage or similar instrument is recorded creating a lien on such addition to the Facilities for the benefit of the Trustee (as assignee of the Issuer), as trustee for the Holders of the Bonds, if necessary to subject such addition to a Lien in favor of the Trustee for the benefit of the Holders of the Bonds. See APPENDIX E "SUBSTANTIALLY FINAL FORMS OF PRINCIPAL FINANCING DOCUMENTS." Gross Revenues Payments made by the Borrower under the Loan Agreement will be paid from and secured by Gross Revenues. "Gross Revenues" means all of the revenues, income, cash receipts and other money received by the Borrower from the operation of the Schools, or received by the Trustee on behalf of the Borrower from the operation of the Schools pursuant to the Indenture, including without limitation any Usage Charges, that are legally available for payment of the obligations of the Borrower under the Loan Agreement. The Gross Revenues include but are not limited to, (i) funds payable to the Borrower from the School Boards under the Charters for the Schools in accordance with a statutory formula based on the number of weighted full-time equivalent students ("FTEs") attending the Schools, (ii) state revenues otherwise received by the Borrower pursuant to the Charter (collectively, "Charter Revenues") and (iii) any Usage Charges. Charter Revenues are broken down into two primary components, operating revenues and capital outlay funds, each of which is described below. Revenues of the Borrower derived from its operation of the Other Schools and any other charter schools that may be established and operated by the Borrower in the future and Management Payments paid by the Schools to the Borrower are not included in Gross Revenues. Operating Revenues. A charter school may not charge tuition or fees, except those fees normally charged by other public schools. Instead, a charter school receives operating funding from the State, via the applicable School Board, as well as its per pupil share of the local operating revenues required of the local school district in order for the local school district to receive State educational funding. Charter schools receive operating funding on the same basis as traditional public schools, except that the applicable School Board deducts statutorily authorized administrative fees. The amount of operating revenues available to a charter school, including each of the Schools, is calculated by (i) dividing (a) the sum of (1) the school district's operating funds from the Florida Educational Finance Program ("FEFP"), and (2) the school district's operating funds from the General Appropriations Act, including gross state and local funds, discretionary lottery funds and funds from the 21

36 school district's current operating discretionary millage levy, by (b) the total funded weighted FTEs in the school district, and (ii) multiplying the result by the weighted FTEs for the charter school, and deducting administrative fees. The calculation of weighted FTEs assigns more weight to students in grades K-3 and 9-12 on the grounds that the supplies required at such grade levels are greater than for other grade levels. More weight is also given to students with disabilities. Total funding for each charter school is subject to recalculation during the year to reflect revised calculations by the State under the FEFP and the actual full-time equivalent students reported by the charter school during the survey periods designated by the FDOE. Capital Outlay Funds. Florida charter schools do not participate in local tax revenues generated by school districts for capital purposes. However, a charter school may be eligible for state capital outlay funding, if the charter school serves students in facilities not provided by the charter school's authorizer. Capital outlay funds are determined annually in the discretion of the Florida legislature during the budget process, and funds are not guaranteed to be so appropriated in any given year. Further, a charter school is only eligible to receive capital outlay funds if, generally, (a) it has been in operation three or more years; (b) it has "financial stability for future operation as a charter school"; (c) it has "satisfactory student achievement based on state accountability standards applicable to the charter school"; and d) it has received final approval from its authorizer for operation during that fiscal year. A charter school may also be eligible if it is an expanded feeder chain of a charter school within the same school district that is currently receiving capital outlay funds. A charter school that receives a school grade of "F" will not be eligible for capital outlay funding the following school year. All of the Schools are currently eligible to receive capital outlay funds if and to the extent the same are authorized by the Florida legislature. The capital outlay fund from which charter schools may receive appropriations is limited, and priority is given to those charter schools that received capital outlay funding in the past. A charter school's governing body may use charter school capital outlay funds for any capital outlay purpose that is directly related to the facilities for the operations of the charter school, including the purchase of real property; construction, renovation, repair and maintenance of school facilities; purchase, lease-purchase or lease of permanent or re-locatable school facilities; or the purchase of vehicles to transport students to and from the charter school or property insurance premiums. The agreement pursuant to which a charter school receives capital outlay funds must provide that all equipment and property purchased with such funds and any unencumbered funds revert (subject to satisfaction of lawful liens and encumbrances) to the local district school board if the charter school terminates operations. See APPENDIX E "SUBSTANTIALLY FINAL FORMS OF PRINCIPAL FINANCING DOCUMENTS." CERTAIN FINANCIAL COVENANTS OF THE BORROWER Pursuant to the Loan Agreement, the Borrower has agreed to certain financial covenants. For more information on the covenants listed below, including the definitions of certain capitalized terms used but not defined herein, see APPENDIX E "SUBSTANTIALLY FINAL FORMS OF PRINCIPAL FINANCING DOCUMENTS." Cash on Hand Requirement. Until the Series 2016 Bonds are no longer Outstanding, the Borrower covenants and agrees to have unrestricted Cash on Hand on each June 30 and December 31 (each a testing date ) in an amount not less than: (i) commencing on December 31, 2016, 30 Days Cash on Hand, (ii) commencing on June 30, 2018, 40 Days Cash on Hand, and (iii) commencing on June 30, 2019, and each June 30 thereafter, 45 Days Cash on Hand (collectively, the "Cash on Hand Requirement"). Following each testing date but not later than (A) in the case of a June 30 testing date, the earlier of the ensuing December 1 or three weeks after completion of the Borrower's audit for the Fiscal Year then ended or (B) in the case of a December 31 testing date, the ensuing February 14, the Borrower will provide the Trustee with a Certificate of the Borrower (1) setting forth the calculation of Days Cash on Hand as of the immediately preceding testing date and (2) stating whether the Borrower has met the 22

37 Cash on Hand Requirement. The foregoing is subject to the qualification that if applicable State or federal laws or regulations, or the rules and regulations of agencies having jurisdiction, shall not permit compliance with the Cash on Hand Requirement, then the Borrower shall, in conformity with the then prevailing laws, rules, or regulations, maintain Cash on Hand equal to the maximum permissible level. If the Days Cash on Hand for any testing date is less than the Cash on Hand Requirement, then the Borrower will promptly employ a Management Consultant to review and analyze the operations and administration of the Schools and the Borrower, inspect the Facilities and other facilities of the Borrower, and submit to the Borrower and Trustee written reports, and make such recommendations as to the operation and administration of the Schools and the Borrower as such Management Consultant deems appropriate, including any recommendation as to a revision of the methods of operation thereof. The Borrower agrees to consider any recommendations by the Management Consultant and, to the fullest extent practicable, to adopt and carry out such recommendations. The Borrower shall pay for all reasonable costs associated with such Management Consultant. So long as the Borrower is otherwise in full compliance with its obligations under the Loan Agreement, including following, to the fullest extent practicable, the recommendations of the Management Consultant, it shall not constitute an Event of Default under the Loan Agreement if the Days Cash on Hand for any testing date is less than the Cash on Hand Requirement. "Cash on Hand" means the sum of (i) unrestricted cash, cash equivalents, liquid investments, and unrestricted marketable securities (valued at the lower of cost or market) of the Borrower related to the Schools (including without limitation board-designated assets and amounts deposited in the School Revenue Funds), but excluding any trustee-held or similar funds held under the Indenture or similar debt documents (except as provided in clause (iii) below); plus (ii) for the Fiscal Years ending June 30, 2017 and June 30, 2018, amounts available to be drawn under the Building Hope Line of Credit, and (iii) for the December 31, 2016 testing date, the amount on deposit in the Series 2016 Capitalized Interest Account. For the purposes of calculations of the Cash on Hand Requirement, (a) an unrestricted contribution from a third party or affiliate shall be treated as being made during the period of such calculation so long as the unrestricted contribution is made prior to the date the applicable Certificate of the Borrower is required to be delivered with respect to such calculation and (b) a Management Payment returned by the Borrower or any management service provider pursuant to the Loan Agreement shall be included in Cash on Hand on such testing date so long as such amount is deposited in the applicable School Revenue Fund prior to the date the applicable Certificate of the Borrower is required to be delivered with respected to such calculation. "Days Cash on Hand" means (a) for any June 30 testing date, (i) Cash on Hand, as shown on the audited financial statement of the Schools for the Fiscal Year then ended, divided by (ii) the quotient of Operating Expenses, as shown on the audited financial statement of the Schools for such Fiscal Year, divided by 365, and (b) for any December 31 testing date, (i) Cash on Hand, as shown on the unaudited financial statement of the Schools as of such testing date, divided by (ii) the quotient of Operating Expenses, as shown on the unaudited financial statement of the Schools for the immediately preceding Fiscal Year, divided by 365. "Management Consultant" means a Person which is not, and which has no member, holder of 5% or more of any class of its stock, director, officer or employee which is, an officer or employee of the Borrower, and which is a recognized professional consultant in the charter school industry having the skill and experience necessary to render the particular report required by the provision hereof in which such requirement appears, and which is acceptable to the Borrower and not rejected by the Majority Bondholder pursuant to the Loan Agreement. 23

38 "Management Payments" means all payments due to the Borrower in connection with its management and administration of the Schools or allocated to the Borrower from the revenues of the Schools in order to pay amounts due to Discovery Schools and CSSC under the Management Agreements. "Operating Expenses" means fees and expenses of Borrower related to the Schools, including but not limited to lease payments under operating leases, interest payments, maintenance, repair expenses, utility expenses, real estate taxes, if any, insurance premiums, administrative and legal expenses, miscellaneous operating expenses, the cost of materials and supplies used for current operations of the Schools, the cost of vehicles, equipment leases and service contracts, taxes, if any, upon the operations of the Schools not otherwise mentioned in the Loan Agreement, charges for the accumulation of appropriate reserves (excluding deposits to the Capital Maintenance and Operating Fund) for current expenses not annually recurrent, but which are such as may reasonably be expected to be incurred in accordance with Generally Accepted Accounting Principles, all in such amounts as reasonably determined by the Borrower; provided, however, that "Operating Expenses" shall not include (a) spending for items which could reasonably be accounted for as capital expenditures under Generally Accepted Accounting Principles, (b) deposits into and expenditures from the Capital Maintenance and Operating Fund or the Costs of Issuance Fund, (c) depreciation and amortization expenses, and (d) replenishments of the Reserve Account. "Usage Charges" means amounts charged by the Borrower to any user occupying any portion of the Facilities pursuant to a lease or other use agreement. Debt Service Coverage Ratio. Commencing with the Fiscal Year ending June 30, 2017, the Borrower's audited financial statements shall include a calculation of the Long-Term Debt Service Coverage Ratio and the Foundation Long-Term Debt Service Coverage Ratio for the Fiscal Year addressed therein. For the Fiscal Year ending June 30, 2017 and each Fiscal Year thereafter, the Borrower shall have (i) a Long-Term Debt Service Coverage Ratio of at least 1.10 to 1.00 (as evidenced by the Borrower's audited financial statements for such Fiscal Year) and (ii) a Foundation Long-Term Debt Service Coverage Ratio of at least 1.00 to 1.00 (as evidenced by the Borrower's audited financial statements for such year). If the Borrower does not comply with the preceding paragraph, then the Trustee shall give notice thereof to the Bondholders, and the Borrower will promptly employ a Management Consultant to review and analyze the operations and administration of the Schools and the Borrower, inspect the Facilities and other facilities of the Borrower, and submit to the Borrower and Trustee written reports, and make such recommendations as to the operation and administration of the Borrower as such Management Consultant deems appropriate, including any recommendation as to a revision of the methods of operation thereof. The Borrower agrees to consider any recommendations by the Management Consultant and, to the fullest extent practicable, to adopt and carry out such recommendations. So long as the Borrower is otherwise in full compliance with its obligations under the Loan Agreement, including following, to the fullest extent practicable, the recommendations of the Management Consultant, it shall not constitute an Event of Default under the Loan Agreement if (i) the Long-Term Debt Service Coverage Ratio is less than 1.10 to 1.00 (as evidenced by the Borrower's audited financial statements for such Fiscal Year) or (ii) the Foundation's Long-Term Debt Service Coverage Ratio is less than 1.00 to 1.00 (as evidenced by the Borrower's audited financial statements for such Fiscal Year). 24

39 Notwithstanding the immediately preceding paragraph, regardless of whether the Borrower has retained a Management Consultant, if at the end of the Fiscal Year ending June 30, 2017 or any subsequent Fiscal Year, the Long-Term Debt Service Coverage Ratio for such Fiscal Year is less than 1.00 to 1.00 (as evidenced by the Borrower's audited financial statements for such Fiscal Year), then the Trustee shall give notice thereof to the Bondholders and the Majority Bondholder may (A) direct the Trustee to declare an Event of Default under the Indenture and Loan Agreement and (B) direct the Trustee to exercise one or more of the remedies permitted under the Loan Agreement and the Indenture. "Long-Term Debt Service Coverage Ratio" means for any Fiscal Year, the ratio determined by dividing the Net Income Available for Debt Service by the Maximum Principal and Interest Requirements. "Long-Term Indebtedness" means all Indebtedness (other than Short-Term Indebtedness or any Guaranty which if it were a direct obligation of the Borrower, would constitute Short-Term Indebtedness) for any of the following: (a) payments of principal and interest with respect to money borrowed for an original term, or renewable at the option of the Borrower for a period from the date originally incurred, longer than one (1) year; (b) payments under leases which are capitalized in accordance with Generally Accepted Accounting Principles having an original term, or renewable at the option of the lessee for a period from the date originally incurred, longer than one (1) year; (c) payments under operating leases or similar instruments where amounts paid under such instruments are pledged or reasonably expected to be used for the repayment of principal and/or interest with respect to money borrowed, with a term in excess of one (1) year; and (d) (1) year. payments under installment purchase contracts having an original term in excess of one Any Variable Rate Long-Term Indebtedness originally determined to be Long-Term Indebtedness, shall continue to be Long-Term Indebtedness for purposes of the Loan Agreement, notwithstanding any "put," optional tender or similar feature of such Indebtedness, whether such feature was an original attribute of the Variable Rate Long-Term Indebtedness or becomes effective with the passage of time, provided there is no event of default. Not by way of limitation, but for instance, Indebtedness originally determined to be Long-Term Indebtedness, shall continue to be Long-Term Indebtedness for purposes of the Loan Agreement, even though, solely by the passage of time, the original term is within one (1) year or less of maturity, or with the passage of time, a renewal or tender option may be exercised within one (1) year or less. "Majority Bondholder" means, collectively, the holders of a majority in aggregate principal amount of the Bonds Outstanding. "Maximum Principal and Interest Requirements" means, as of any date of calculation, the highest Principal and Interest Requirements with respect to the Borrower's outstanding Long-Term Indebtedness relating to the Schools, including without limitation the Bonds Outstanding, for the then current or any succeeding Fiscal Year; provided, however, that for the purposes of computing Maximum Principal and Interest Requirements: (a) For Variable Rate Long-Term Indebtedness, the interest rate on such Variable Rate Long-Term Indebtedness for periods when the actual interest rate cannot yet be determined 25

40 shall be assumed to be equal to (i) if such Variable Rate Long-Term Indebtedness is subject to a Financial Product Agreement that effectively converts the interest rate on such Variable Rate Long-Term Indebtedness to a fixed rate of interest, the fixed rate of interest specified in such Financial Product Agreement during the stated term of such Financial Product Agreement and (ii) otherwise, a fixed rate of interest equal to (A) as to Indebtedness which is not issued on a federally tax exempt basis, the then current swap rate as shown in the most recent H.15 Report of the Federal Reserve System for the closest similar tenor plus 150% of the spread between the Aaa and Baa Moody's Seasoned Corporate Bonds as shown in such report for such date, and (B) as to Indebtedness which is issued on a federally tax exempt basis, 70% of the interest rate that would be computed under clause (A) above if such Indebtedness had not been issued on a federally tax exempt basis; and (b) With respect to Balloon Indebtedness, such Balloon Indebtedness shall be treated as Long-Term Indebtedness with substantially level debt service over a period equal to the shorter of (i) the remaining term of such Balloon Indebtedness or (ii) the remaining weighted average useful life (as computed under Generally Accepted Accounting Principles) of the assets financed with such Balloon Indebtedness, and the interest rate on such Balloon Indebtedness shall be assumed to be such interest rate (as certified in a Certificate of the Borrower delivered to the Trustee and confirmed by an investment banker or other responsible financial institution) which the Borrower could reasonably expect to obtain on Long-Term Indebtedness with a term equal to such longer period. "Net Income Available for Debt Service" means, for any period of determination thereof, Gross Revenues for such period, minus the total Operating Expenses for such period, adjusted by (i) excluding from Net Income Available for Debt Service; (a) any profits or losses which would be regarded as extraordinary items under Generally Accepted Accounting Principles; (b) gain or loss in the extinguishment of Indebtedness; (c) proceeds of the Bonds and any other Indebtedness permitted under the Loan Agreement; and (d) proceeds of insurance policies, other than policies for business interruption insurance, the proceeds of any sale, transfer or other disposition of the Property, or any other of the Borrower's assets related to the Schools, and any condemnation or any other damage award received by or owing to the Borrower related to the Schools and (ii) adding back any Operating Expenses that are also included in the Principal and Interest Requirements (for the avoidance of doubt, principal payments on Indebtedness are not included in Operating Expenses). "Principal and Interest Requirements" means, for any Fiscal Year, the amount required to pay the interest and principal for Indebtedness in such Fiscal Year, excluding "funded interest" from the proceeds of the Bonds on deposit in any capitalized interest account (including without limitation the Series 2016A Capitalized Interest Account and the Series 2016B Capitalized Interest Account) established within the Project Fund and excluding interest earnings on the Reserve Account at the then current interest rate per annum, to be determined on the assumption that the Bonds will be retired at the stated maturities thereon except those Bonds which are required by the Indenture to be redeemed prior to their stated maturities from sinking fund payments which the Borrower is required to make for such purpose, which Bonds will be assumed to be retired on their respective scheduled mandatory redemption dates; provided, however, that if a Financial Product Agreement has been entered into by the Borrower with respect to any such Indebtedness, interest on such Indebtedness shall be included in the calculation of the Principal and Interest Requirements for each Fiscal Year by including an amount equal to the amount of interest payable on such Indebtedness in such Fiscal Year at the rate or rates stated for such Indebtedness plus any Financial Product Payments payable in such Fiscal Year and less any Financial Product Receipts receivable in such Fiscal Year. "Short-Term Indebtedness" means all Indebtedness incurred or any Guaranty undertaken in the ordinary course of business which (a) has an original maturity of one (1) year or less and (b) is not 26

41 renewable at the option of the borrower beyond the original one (1) year maturity. Short-Term Indebtedness shall not include Indebtedness which has a maturity of one (1) year or less which is attributable to a temporary delay in the receipt of funds due from third party payers. "Variable Rate Long-Term Indebtedness" shall mean any portion of Long-Term Indebtedness the interest rate to maturity on which is not established at the time of incurrence at a fixed interest rate. Limitations on Additional Indebtedness. (a) Indebtedness relating to the Schools. (i) The Borrower may incur Short-Term Indebtedness relating to the Schools if (1) the aggregate principal amount of the outstanding Short-Term Indebtedness and such proposed additional Short-Term Indebtedness relating to the Schools does not exceed 15% of the Gross Revenues for the most recently completed Fiscal Year and (2) such Short-Term Indebtedness is (A) unsecured or (B) subordinate to the lien of the Bondholders on Gross Revenues and any real property collateral (other than fixtures or other personal property to be acquired with the proceeds of such Indebtedness) securing the then Outstanding Bonds. (ii) The Borrower shall not incur additional Long-Term Indebtedness relating to the Schools without the consent of the Majority Bondholder, except that without such consent the Borrower may incur Long-Term Indebtedness relating to the Schools on a parity with or subordinated to the then Outstanding Bonds: (A) for the purpose of providing additional funds in order to complete the payment of costs of improvements or alterations under a construction contract for which Long-Term Indebtedness relating to the Schools has already been issued; (B) for the purpose of refinancing the principal amount of any outstanding Long-Term Indebtedness relating to the Schools, provided that the Maximum Principal and Interest Requirements (including such requirements for the proposed additional Long-Term Indebtedness but excluding such requirements for the Long-Term Indebtedness to be refinanced thereby) through the final stated maturity of all then Outstanding Bonds will not exceed the Maximum Principal and Interest Requirements through the final stated maturity of all then Outstanding Bonds had such proposed additional Long-Term Indebtedness not been incurred; and (C) as provided in subsection (a)(iii) below. (iii) Except to the extent otherwise permitted by the provisions of subsection (ii) above, the Borrower shall not incur additional Long-Term Indebtedness relating to the Schools without the consent of the Majority Bondholder, except that without such consent the Borrower may incur Long-Term Indebtedness relating to the Schools on parity with or subordinated to the then Outstanding Bonds if the Borrower provides the Trustee with (A) an opinion or report of an independent certified public accountant to the effect that the Long-Term Debt Service Coverage Ratio for the most recent Fiscal Year for which audited financial statements are available is not less than 1.10 to 1.00 (including such requirements for the proposed additional Long-Term Indebtedness, but excluding such requirements for any outstanding Long-Term Indebtedness to be refunded (or refinanced) by the proposed additional Long-Term Indebtedness and giving effect to any capitalized interested related to Long-Term Indebtedness), and (B) a forecast accompanied by an accountant's examination report stating that the estimated Long-Term Debt Service Coverage Ratio (including such requirements for the proposed additional Long-Term Indebtedness, but excluding such requirements for any then Outstanding Bonds or other outstanding Long-Term Indebtedness to be refunded (or refinanced) by the proposed additional Long-Term Indebtedness and excluding any Eliminated Expenses) will be at least 1.25 to 1.00 for each of two consecutive Fiscal Years beginning with the second Fiscal Year after the Fiscal Year in which any improvements being financed by such proposed additional Long-Term Indebtedness are to be placed-in-service (or if no improvements are to be financed thereby, beginning with the 27

42 first Fiscal Year after the Fiscal Year in which the proposed additional Long-Term Indebtedness is to be incurred). (b) Indebtedness relating to the Other Schools. (i) The Borrower may incur Short-Term Indebtedness relating to one or more Other School if: (1) the aggregate principal amount of the outstanding Short-Term Indebtedness and such proposed additional Short-Term Indebtedness relating to such Other School or Other Schools does not exceed 15% of the Other School Revenues for such Other School or Other Schools, as applicable, for the most recently completed Fiscal Year and (2) such proposed additional Short-Term Indebtedness is (A) unsecured or (B) secured only by such Other School Revenues or the Borrower's property relating to such Other School or Other Schools. (ii) The Borrower shall not incur additional Long-Term Indebtedness relating to an Other School or Other Schools without the consent of the Majority Bondholder, except that without such consent the Borrower may incur Long-Term Indebtedness relating to such Other School or Other Schools which is unsecured or secured only by the related Other School Revenues or the Borrower's property relating to such Other School or Other Schools: (A) for the purpose of providing additional funds in order to complete the payment of costs of improvements or alterations under a construction contract for which Long-Term Indebtedness relating to such Other School or Other Schools has already been issued; (B) for the purpose of refinancing the principal amount of any outstanding Long-Term Indebtedness relating to such Other School or Other Schools, provided that the Other School Maximum Principal and Interest Requirements relating to such Other School or Other Schools (including such requirements for the proposed additional Long-Term Indebtedness but excluding such requirements for the Long-Term Indebtedness to be refinanced thereby) through the final stated maturity of all then Outstanding Bonds will not exceed the Other School Maximum Principal and Interest Requirements relating to such Other School or Other Schools through the final stated maturity of all then Outstanding Bonds had such proposed additional Long-Term Indebtedness not been incurred; and (C) as provided in subsection (b)(iii) below. (iii) Except to the extent otherwise permitted by the provisions of subsection (ii) above, the Borrower will not be permitted to incur additional Long-Term Indebtedness relating to an Other School or Other Schools without the consent of the Majority Bondholder, except that without such consent the Borrower may incur Long-Term Indebtedness relating to an Other School or Other Schools which is unsecured or secured only by the related Other School Revenues or the Borrower's property relating to such Other School or Other Schools if the Borrower provides the Trustee with a forecast accompanied by an accountant's examination report stating that the estimated Other School Long-Term Debt Service Coverage Ratio for such Other School or Other Schools (including such requirements for the proposed additional Long- Term Indebtedness, but excluding such requirements for any then outstanding Long-Term Indebtedness to be refunded (or refinanced) by the proposed additional Long-Term Indebtedness and excluding any Eliminated Expenses) will be at least 1.10 to 1.00 for each of two consecutive Fiscal Years beginning with the second Fiscal Year after the Fiscal Year in which any improvements being financed by such proposed additional Long-Term Indebtedness are to be placed-in-service (or if no improvements are to be financed thereby, beginning with the first Fiscal Year after the Fiscal Year in which the proposed additional Long-Term Indebtedness is to be incurred). 28

43 (c) Indebtedness not related to the Schools or any Other School. (i) The Borrower may incur Short-Term Indebtedness not related to a particular School or Other School if: (1) the aggregate principal amount of all of the Borrower's outstanding Short-Term Indebtedness and such proposed additional Short-Term Indebtedness does not exceed 6% of the Foundation Revenues for the most recently completed Fiscal Year and (2) such proposed additional Short-Term Indebtedness is (A) unsecured or (B) subordinate to the lien of the Bondholders on Gross Revenues and any real property collateral (other than fixtures or other personal property to be acquired with the proceeds of such Indebtedness) securing the then Outstanding Bonds. (ii) Except to the extent otherwise permitted by the provisions of subsections (a) and (b) above, the Borrower shall not incur additional Long-Term Indebtedness without the consent of the Majority Bondholder, except that without such consent the Borrower may incur Long-Term Indebtedness which is unsecured or secured by the Borrower's revenues and property, other than the Gross Revenues, the Property and the Current Assets related to the Schools: (A) for the purpose of refinancing the principal amount of any outstanding Long-Term Indebtedness, provided the aggregate Foundation Principal and Interest Requirements on Long-Term Indebtedness (including such requirements for the proposed additional Long-Term Indebtedness but excluding such requirements for the Long-Term Indebtedness to be refinanced thereby) for each Fiscal Year after the Fiscal Year in which the proposed additional Long-Term Indebtedness is to be incurred but before the final stated maturity of all then Outstanding Bonds will not exceed the amount of the aggregate Foundation Principal and Interest Requirements on Long-Term Indebtedness that would have been payable for each such Fiscal Year had such proposed additional Long-Term Indebtedness not been incurred; and (B) as provided in subsection (c)(iii) below. (iii) Except to the extent otherwise permitted by the provisions of subsections (a), (b) or (c)(ii) above, the Borrower shall not incur additional Long-Term Indebtedness without the consent of the Majority Bondholder, except that without such consent the Borrower may incur Long-Term Indebtedness which is unsecured or secured by the Borrower's revenues and property, other than the Gross Revenues, the Property and the Current Assets related to the Schools, if the Borrower provides the Trustee with a forecast accompanied by an accountant's examination report stating that the estimated Foundation Long-Term Debt Service Coverage Ratio (including such requirements for the proposed additional Long-Term Indebtedness, but excluding such requirements for any then Outstanding Bonds or other outstanding Long-Term Indebtedness to be refunded (or refinanced) by the proposed additional Long-Term Indebtedness and excluding any Eliminated Expenses) will be at least 1.10 to 1.00 for each two consecutive Fiscal Years beginning with the second Fiscal Year after the Fiscal Year in which any improvements being financed by such proposed additional Long-Term Indebtedness are to be placed-in-service (or if no improvements are to be financed thereby, beginning with the first Fiscal Year after the Fiscal Year in which the proposed additional Long-Term Indebtedness is to be incurred). Limitation on Disposition of Current Assets and Other Property. (a) The Borrower covenants and agrees that it will not sell or otherwise dispose of any Current Assets except in the ordinary course of the Borrower s operations (including without limitation pursuit of its educational mission). (b) The Borrower covenants and agrees that it will not sell or otherwise dispose, including any disposition by lease, of the Property, Plant and Equipment, except for the disposition or transfer: 29

44 (i) of Property, Plant and Equipment which have or will within the next 12 months become inadequate, obsolete, worn out, unsuitable, unprofitable, undesirable or unnecessary and the sale or other disposition thereof will not impair the structural soundness, efficiency, or economic value of the Facilities; (ii) of Property, Plant and Equipment replaced by Property, Plant and Equipment of similar type and/or of substantially equivalent function with a substantially equivalent value; or (iii) of Property, Plant and Equipment to the extent that the aggregate net book value of such Property, Plant and Equipment and any other Property, Plant and Equipment transferred pursuant to this clause (iii) in the five (5) preceding Fiscal Years, does not exceed five percent (5%) of the net book value of all Property, Plant and Equipment of the Borrower, as shown in the audited financial statements for the most recent Fiscal Year. (c) In addition to the foregoing limitations, the Borrower may not sell, lease or otherwise dispose (other than with respect to the public dedication in connection with the development of the Facilities) of any Property unless: (i) with respect to a sale, lease or other disposition of all or any portion of the Facilities, the Borrower delivers an Opinion of Bond Counsel that such sale or other disposition will not adversely affect the exclusion from gross income for federal income tax purposes of the interest on the Tax Exempt Bonds; (ii) such sale, lease or other disposition is permitted under paragraph (b) above; and (iii) with respect to any sale, lease or other disposition of all or any portion of any real property constituting land or buildings encumbered by the Mortgage, the Borrower delivers to the Trustee (A) the prior written consent of the Majority Bondholder and (B) an Opinion of Counsel that: (1) the security of the Mortgage and the ability thereunder to foreclose upon the remaining Property encumbered by the Mortgage will not be impaired as a result of the disposition of such Property, and (2) the Borrower shall have mortgaged in favor of the Trustee such rights-of-way, easements and other rights in land as are required for ingress to and egress from the remaining Property, for the utilization of the facilities located thereon and for utilities required to serve such facilities. Capital Needs Assessment. On or before July 1, 2021 and each fifth anniversary thereafter, the Borrower agrees to employ a Management Consultant to prepare and deliver to the Trustee a capital needs assessment of the Borrower projecting the Borrower's capital needs with respect to the Schools and the total cost thereof for the five-year period commencing on the following July 1 (the "Capital Needs Assessment"). The Capital Maintenance and Operating Fund shall be funded by the Borrower through payments due on or before the 15th day of each month, commencing July 15, 2022, in an amount equal to the Monthly Capital Maintenance and Operating Fund Contribution until such time as there is on deposit therein an amount equal to the Capital Maintenance and Operating Fund Requirement. The Capital Maintenance and Operating Fund Requirement is equal to the total projected cost of the Borrower's capital needs with respect to the Schools as of the most recent Capital Needs Assessment. Clawback and Subordination of Management Payments. The Borrower shall not withdraw amounts from the School Revenue Funds to pay a Management Payment if the payment of such Management Payment shall cause the Borrower to fail to satisfy the Long-Term Debt Service Coverage 30

45 Ratio requirement or the Days Cash on Hand Requirement included in the Loan Agreement or fail to make any Loan Payment or Additional Payment when due. In the event the Borrower shall fail to satisfy the Long-Term Debt Service Coverage Ratio requirement or the Days Cash on Hand Requirement included in the Loan Agreement or shall fail to make any Loan Payment or Additional Payment when due, the Borrower shall return Management Payments paid or allocated to the Borrower in an amount equal to the lesser of (i) the aggregate Management Payments paid or allocated to the Borrower during the 12 calendar month period immediately preceding the applicable Fiscal Year end or testing date or (ii) the amount necessary to bring the Borrower in compliance with the Long-Term Debt Service Coverage Ratio requirement or the Days Cash on Hand Requirement included in the Loan Agreement or to permit the Borrower to make any Loan Payment and Additional Payment then due. The Borrower shall cause any amount returned pursuant to the preceding sentence to be deposited in the applicable School Revenue Fund. The Borrower shall not discontinue any services provided in connection with its management and administration of the Schools due to the nonpayment of any Management Payments. Under each of the Management Agreements, Discovery Schools and CSSC have agreed not to discontinue any services provided pursuant to the applicable Management Agreement because of the nonpayment of any amounts due to such management services provider thereunder for a period of not less than the greater of (A) the remainder of the then-current school year or (B) six months. The Loan Agreement provides that the Borrower shall not enter into a management agreement which does not expressly (i) subordinate any payments thereunder to the payment of Loan Payments and Additional Payments hereunder, (ii) include an agreement not to discontinue any services provided pursuant to such management agreement because of the nonpayment of any amounts due to such management services provider thereunder for a period of not less than the greater of (A) the remainder of the then-current school year or (B) six months, and (iii) require the management services provider to repay any amounts previously paid by the Borrower but required to be returned pursuant the Loan Agreement above within 30 days of receipt of written notice from the Borrower or the Trustee. Management Consultants. Upon the selection of a Management Consultant by the Borrower as may be required in connection with the Cash on Hand Requirement, the Debt Service Coverage Ratio covenant, conducting a Capital Needs Assessment, or any notice, report or communication with respect to Charter non-compliance that would allow a School Board to begin any process or proceedings toward Charter revocation or which indicate an intent not to renew any Charter, the Borrower shall cause a notice of the selection of such Management Consultant, including the name of such Management Consultant and a brief description of such Management Consultant (the "Management Notice"), to be filed with EMMA. The Management Notice must also state each Beneficial Owner of the Bonds then Outstanding shall be deemed to have consented to the selection of such Management Consultant unless such Beneficial Owner submits to the Trustee a written objection to the Management Consultant in a manner acceptable to the Trustee (an "Objection Notice"), within thirty days of the date the Management Notice is posted to EMMA (the "Objection Period"). If the Beneficial Owners of at least a majority in aggregate principal amount of the Bonds then Outstanding provide Objection Notices to the Trustee within the Objection Period, then the Borrower shall select an alternate Management Consultant and post a new Management Notice with respect to the newly selected Management Consultant. Maintenance of Charters and Tax-Exempt Status. The Borrower covenants to maintain, in good standing, its corporate existence under the laws of the State, its status as an organization described in Section 501(c)(3) of the Code, and to maintain the Charters. 31

46 BONDHOLDERS' RISKS This Limited Offering Memorandum contains summaries of pertinent portions of the Series 2016 Bonds and forms of the Indenture and Loan Agreement. Summaries and references are qualified in their entirety by reference to the full text of such documents. The following discussion of some of the BONDHOLDERS' RISKS associated with the Series 2016 Bonds is not, and is not intended to be, exhaustive, and such risks are not necessarily presented in the order of their magnitude. This Limited Offering Memorandum does not describe all of the risks of an investment in the Series 2016 Bonds, and BB&T Capital Markets, a division of BB&T Securities, LLC (the "Underwriter") disclaims any responsibility to advise prospective investors of such risks as they exist at the date of this Limited Offering Memorandum or as they change from time to time. Prospective investors should consult their own legal and tax advisors as to the risks entailed by an investment in the Series 2016 Bonds and the suitability of investing in the Series 2016 Bonds in light of their particular circumstances. Prospective investors should be able to bear the risks relating to an investment in the Series 2016 Bonds and should carefully consider, among other factors, the matters described below. General THE SERIES 2016 BONDS ARE LIMITED OBLIGATIONS OF THE ISSUER PAYABLE SOLELY FROM THE SOURCES PROVIDED IN THE INDENTURE AND THE LOAN AGREEMENT. THE SERIES 2016 BONDS SHALL NOT CONSTITUTE AN INDEBTEDNESS, LIABILITY, GENERAL OR MORAL OBLIGATION OR A PLEDGE OF THE FAITH, CREDIT OR TAXING POWER OF THE STATE OF FLORIDA, THE ISSUER OR ANY MUNICIPAL CORPORATION, PUBLIC AGENCY OR POLITICAL SUBDIVISION OF THE STATE OF FLORIDA WITHIN THE MEANING OF ANY CHARTER, CONSTITUTIONAL OR STATUTORY PROVISIONS OR LIMITATIONS. NEITHER THE STATE OF FLORIDA NOR ANY MUNICIPAL CORPORATION, PUBLIC AGENCY OR POLITICAL SUBDIVISION OF THE STATE OF FLORIDA SHALL EVER BE REQUIRED TO (1) LEVY AD VALOREM TAXES ON ANY PROPERTY WITHIN ITS TERRITORIAL LIMITS TO PAY THE PRINCIPAL OF OR THE INTEREST OR REDEMPTION PREMIUM, IF ANY, ON OR THE PURCHASE PRICE OF, OR MAKE ANY OTHER PAYMENTS PROVIDED FOR IN RESPECT OF THE SERIES 2016 BONDS OR (2) PAY THE SAME FROM ANY FUNDS OTHER THAN FROM REVENUES AND THE OTHER ASSETS PLEDGED UNDER THE INDENTURE. THE ISSUER HAS NO TAXING POWER. The Borrower expects, based upon present circumstances (i.e., executed Charters, current and projected enrollment), that it will generate sufficient Gross Revenues to meet its obligations under the Loan Agreement; however, any Charter may be terminated or not renewed, or the basis of the assumptions used by the Borrower to formulate this expectation may otherwise change. NO REPRESENTATION OR ASSURANCE CAN BE MADE THAT THE BORROWER WILL CONTINUE TO GENERATE SUFFICIENT GROSS REVENUES TO MEET ITS OBLIGATIONS UNDER THE LOAN AGREEMENT. State Financial Difficulties Charter schools depend on revenues from the State for a large portion of their operating budgets. The availability of State funds for public education is a function of legal provisions affecting school district revenues and expenditures, the condition of the State economy and the annual budget process. Decreases in State revenues may adversely affect education appropriations made by the Florida Legislature. As noted, the Florida Legislature bases its decisions about appropriations on many factors, 32

47 including the State's economic performance, and, because some public officials, their constituents, commentators, and others have viewed charter schools as controversial, political factors may also come to bear on charter school funding. See "BONDHOLDERS' RISKS Changes in Law; Annual Appropriation; Inadequate State Payments." In 2006, Florida voters adopted a constitutional amendment that required the development of a Long-Range Financial Outlook, setting out recommended fiscal strategies for the State and its departments in order to assist the legislature in making budget decisions. A report entitled State of Florida Long-Range Financial Outlook Fiscal Year through (the "Outlook"), jointly prepared by the State's Senate Committee on Appropriations, House Appropriations Committee and Legislative Office of Economic and Demographic Research was adopted in September For fiscal year , total general revenues are expected to exceed expenditures for critical and other high priority needs, including the holdback of a $1 billion reserve, by approximately $336 million. In fiscal years and , total general revenues are also expected to exceed expenditures for critical and other high priority needs and the reserve holdback. If anticipated revenues are lower than expected, anticipated expenses are higher than expected, or reserves are used, the expectations described in the Outlook may not be met. For example, an unanticipated reduction in total general revenues or unexpected emergency expenditures related to a disaster could cause a budget gap to develop. If such gap were to exceed the amount of total general revenues available to be applied to expenses, it would impact the State's ability to fund reserves. Such an occurrence in one or more of the fiscal years covered by the Outlook could decrease the availability of State revenues. Any future decreases in State revenues may adversely affect education appropriations made by the Florida Legislature. The adverse effect may be exacerbated in the future to the extent that the State relies in part on federal stimulus funding in the near term. Neither the Borrower nor any other party to the Series 2016 Bond transaction can predict how State income or State education funding will vary over the entire term of the Series 2016 Bonds. No parties to the Series 2016 Bond transaction take any responsibility for informing owners of the Series 2016 Bonds about any such changes. Information about the financial condition of the State, as well as its budget and spending for education, is available and regularly updated on various State-maintained websites. Such information is prepared by the respective State entity maintaining each such website and not by any of the parties to this transaction. The parties to this transaction take no responsibility for the accuracy, completeness or timeliness of such information and no such information is incorporated herein by these references. Changes in Law; Annual Appropriation; Inadequate State Payments The Florida Legislature has amended the State's charter school laws a number of times since they were originally enacted. Future amendments may adversely affect the Borrower by altering charter school funding, by decreasing the maximum allowable charter term, by implementing an assessment of each school's effectiveness every year, by limiting the number of students for which State funds are available, by limiting the enrollment of or the population of pupils eligible for enrollment in charter schools, by mandating new facilities or programs which may cost more than has been projected, by reducing the maximum amount payable by the State for students enrolled by the Schools, by revising the relative responsibilities between school districts and the State for financing schools (including charter schools), or by eliminating the authority for charter schools. In addition, the Florida Legislature must appropriate funds for public education each year and could appropriate funds at a level insufficient to enable the Borrower to make Loan Repayments and meet its budgeted expenses. Similarly, the State per pupil allocation may be reduced or not keep pace with expenses such that the aggregate payments to the Borrower are inadequate to allow the Borrower to make 33

48 Loan Repayments and meet its budgeted expenses. The Florida Legislature may base its decisions about appropriations on many factors, including the State's economic performance. Further, because some public officials, their constituents, commentators, and others have viewed charter schools as controversial, political factors may also come to bear on charter school funding. As a result, the Florida Legislature may not appropriate funds, or may not appropriate funds in a sufficient amount, for the Borrower to make Loan Repayments and meet its budgeted expenses. No liability would accrue to the State in such event and the State would not be obligated or liable for any future payments or any damages. State educational funding flows to the Borrower through the School Boards. If the State or the School Boards were to withhold the funding for the Borrower for any reason, even for a reason that is ultimately determined to be invalid or unlawful, the Borrower would likely be forced to cease operations at one or more Schools. Also, amendments to federal legislation, including the No Child Left Behind Act ("NCLB"), could have an adverse effect on federal grant funds available to the Schools. Limited Operating History; Reliance on Examined Forecast The ability of the Borrower to make debt service payments when due is dependent on payments to be received by the Borrower as payment for educating students. The Borrower has operated the Schools since The forecast in APPENDIX C "EXAMINED FORECAST" (the "Examined Forecast") was prepared by CSSC, on behalf of the Borrower with information provided by the Borrower, and was examined by HLB Gravier, LLP (the "Auditor"), but has not been independently reviewed or verified by any other party. In particular, the Underwriter has not independently verified the Examined Forecast, and makes no representations nor gives any assurances that such Examined Forecast, nor the assumptions underlying it, is complete or correct. Further, the Examined Forecast relates only to the fiscal years of the Borrower ending June 30, 2016 through 2021 and consequently does not cover the entire period that the Series 2016 Bonds will be outstanding. The Examined Forecast is derived from the actual operation of the Schools and from the Borrower's assumptions about future student enrollment and expenses. There can be no assurance that the actual enrollment revenues and expenses for the Schools will be consistent with the assumptions underlying the Examined Forecast. Moreover, no guarantee can be made that the projections of revenues and expenses contained in the Examined Forecast will correspond with the results actually achieved in the future because there is no assurance that actual events will correspond with the assumptions made by the Borrower. Actual operating results may be affected by many factors, including, but not limited to, increased costs, lower than anticipated revenues (as a result of insufficient enrollment, reduced state funding, or otherwise), employee relations, changes in taxes, changes in applicable government regulation, changes in demographic trends, changes in elementary and secondary education competition and changes in local or general economic conditions. Refer to APPENDIX C "EXAMINED FORECAST" to review the Examined Forecast and to consider the various factors that could cause actual results to differ significantly from projected results. NO GUARANTEE CAN BE MADE THAT THE EXAMINED FORECAST WILL CORRESPOND WITH THE RESULTS ACTUALLY ACHIEVED IN THE FUTURE BECAUSE THERE IS NO ASSURANCE THAT ACTUAL EVENTS WILL CORRESPOND WITH THE ASSUMPTIONS MADE BY THE BORROWER. ACTUAL OPERATING RESULTS MAY BE AFFECTED BY MANY FACTORS, INCLUDING BUT NOT LIMITED TO INCREASED COSTS, LOWER THAN ANTICIPATED REVENUES (AS A RESULT OF INSUFFICIENT ENROLLMENT, REDUCED STATE FUNDS, OR OTHERWISE), EMPLOYEE RELATIONS, CHANGES IN TAXES, CHANGES IN APPLICABLE GOVERNMENTAL REGULATION, CHANGES IN DEMOGRAPHIC TRENDS, CHANGES IN ELEMENTARY AND SECONDARY EDUCATION COMPETITION AND LOCAL OR GENERAL ECONOMIC CONDITIONS. 34

49 The Nature of the Examined Forecast The projected enrollment and the Examined Forecast included in APPENDIX C "EXAMINED FORECAST" (the "Examined Forecast") is based upon assumptions made by management of the Borrower which are summarized in APPENDIX A "THE BORROWER AND THE SCHOOLS" and APPENDIX C "EXAMINED FORECAST." There are usually differences between forecasted and actual results, because events and circumstances frequently do not occur as expected, and those differences may be material. In addition, the Examined Forecast relates only to the fiscal years of the Borrower ending June 30, 2016 through June 30, 2020, and consequently does not cover the entire period that the Series 2016 Bonds may be outstanding. Prospective investors in the Series 2016 Bonds should read APPENDIX C "EXAMINED FORECAST" in its entirety. NO GUARANTEE CAN BE MADE THAT THE EXAMINED FORECAST WILL CORRESPOND WITH THE RESULTS ACTUALLY ACHIEVED IN THE FUTURE BECAUSE THERE IS NO ASSURANCE THAT ACTUAL EVENTS WILL CORRESPOND WITH THE ASSUMPTIONS MADE BY MANAGEMENT OF THE BORROWER. ACTUAL OPERATING RESULTS MAY BE AFFECTED BY MANY FACTORS, INCLUDING, BUT NOT LIMITED TO, INCREASED COSTS, LOWER THAN ANTICIPATED REVENUES (AS A RESULT OF INSUFFICIENT ENROLLMENT, REDUCED STATE FUNDS, CONCESSIONS OR OTHERWISE), EMPLOYEE RELATIONS, CHANGES IN TAXES, CHANGES IN APPLICABLE GOVERNMENTAL REGULATION, CHANGES IN DEMOGRAPHIC TRENDS, CHANGES IN ELEMENTARY AND SECONDARY EDUCATION GENERALLY, COMPETITION AND LOCAL OR GENERAL ECONOMIC CONDITIONS. Competition for Students; School Choice Initiatives The Schools are and will be competing with public schools and other charter schools for students within the districts in which the Schools are located and with private schools within or near such districts. There can be no assurance that the Schools will attract and retain the number of students sufficient to produce the revenues necessary to operate the Schools. As charter schools become more common, and as existing charter schools demonstrably provide an attractive educational choice, the number of charter schools may increase, leading to increased competition for existing charter schools, such as the Schools. Similarly, expansion of the State's existing voucher plan or adoption of a general voucher plan also could adversely impact the operation of charter schools in the State. A continued or expanded voucher program could provide significant competition to the Schools by providing parents who could not otherwise afford tuition at a private, independent school, with resources to cover all or a portion of such costs. Continuation or expansion of such voucher program would likely increase demand for private, independent schools, possibly adversely affecting enrollment at other schools, including both public schools and charter schools, like the Schools. The Borrower cannot determine the specific impact the State's continuation or expansion of such voucher program would have on the operation or financial performance of the Schools. Compliance with the No Child Left Behind Act of 2001 and State ESEA Waiver NCLB strengthened requirements for State assessments, accountability systems, and aims to provide support for school improvement. The law also establishes minimum qualifications for teachers and paraprofessionals. In compliance with NCLB, schools identified for improvement for failing to make Adequate Yearly Progress ("AYP") for two consecutive years must develop a two-year school improvement plan and submit the plan for review and approval. They must also use at least 10 percent of their Title I funds for each of the next two years for professional development that directly addresses the achievement problems that caused the school to be identified for improvement, in addition to certain other 35

50 requirements. Failure to make AYP for years subsequent to the second year carries further consequences under NCLB, including required replacements of school staff, school reorganization and curriculum redesign and required payment of supplemental education and transportation costs for eligible students. If a school fails to make AYP for four years, the State must take corrective action, including at least one of the following: deferring programmatic funds or reducing administrative funds; implementing a new curriculum (with professional development); replacing personnel; establishing alternative governance arrangements; appointing a receiver or trustee to administer the district in place of the superintendent and school board; or abolishing or restructuring the school district. The State may also authorize students to transfer to higher-performing public schools operated by another school district (with transportation). If a school fails to make AYP for a fifth year, the school district must initiate plans to fundamentally restructure the school. This restructuring may include replacing all or most of the school staff who are relevant to the failure to make AYP, or turning over school operations either to the State or to a private company with a demonstrated record of effectiveness. As part of NCLB, all students were required to be proficient in reading and math by However, on February 9, 2012, the Obama Administration announced that it would waive the proficiency requirement, as well as other provisions of NCLB, for the State. As part of the waiver, the State is permitted to substitute its own accountability system for AYP. The waiver was granted contingent on the State making additional modifications to its inclusion policy, particularly for English learners and all students with disabilities. The initial waiver lasted through the school year and was extended through the school year. The Florida Department of Education submitted an updated draft waiver application for the school year, which was approved by the United States Department of Education. The Secretary of Education may terminate a waiver in advance of the expiration date if, after notice and a hearing, the Secretary determines that the performance of the entity affected by the waiver has been inadequate to justify a continuation of the waiver or if the waiver is no longer necessary to achieve its original purpose. Failure of a School to meet the requirements of NCLB or a revised State accountability system may have a material adverse effect on the Borrower and its ability to make Loan Repayments. Termination, Nonrenewal or Revocation of Charter The primary source of revenues to the Borrower is expected to be payments made pursuant to the Charters. The Borrower holds the Charter for each of the Schools. The current expiration dates for the Charter for each School are set forth above under "THE BORROWER AND THE SCHOOLS The Schools." Each Charter provides that it may be renewed but there can be no assurance that the School Board will renew any Charter for any period or additional periods. A Charter may be terminated by the School Board or the School Board may choose not to renew a Charter upon any of the following statutory grounds: (i) if the Borrower fails to participate in the State's education accountability system created in Section of the Florida Statutes or fails to meet the requirements for student performance stated in the Charter; (ii) if the Borrower fails to meet generally accepted standards of fiscal management; (iii) if violations of law occur; or (iv) for good cause shown. State law also provides that a Charter may be terminated immediately if the School Board determines that good cause has been shown or if the health, safety, or welfare of the students is threatened. See APPENDIX D - "GENERAL INFORMATION REGARDING FLORIDA CHARTER SCHOOLS." 36

51 In addition to the statutory revocation provisions, each of the Charters provides that it may be terminated by the related School Board if the Borrower makes insufficient progress toward the student achievement objectives included in the Charter, and if it is not likely that such objectives can be met before the expiration of the Charter. The School Board may also terminate the Charter if the Borrower consistently fails to submit required financial and annual reports in a timely fashion as stated in the Charter. If a Charter is terminated or not renewed, the Borrower would be forced to cease operations of that School. Terms of Management Agreements Shorter than Final Maturity Date of Series 2016 Bonds The initial Management Agreements between the Borrower and each of Discovery Schools and CSSC have initial terms expiring on October 1, 2019, and on June 6, 2021, respectively, which terms are shorter than the period the Series 2016 Bonds are expected to be outstanding. The Borrower relies on Discovery Schools and CSSC for all aspects of operation of the Schools described under the heading "THE BORROWER, THE SCHOOLS, AND THE FACILITIES Discovery Schools, Inc." and " Charter School Services Corporation, Inc." In the event any Management Agreement expires or is terminated in accordance with its terms, the Borrower would be forced to contract with another management company for certain aspects of the operation and management of the Schools, or assume such management itself. Under the Indenture, payment of management fees is subordinate to payment of debt service on the Series 2016 Bonds, replenishment of certain funds described in "SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2016 BONDS Allocation of Revenues," if required, and Operating Expenses. In the event any Management Agreement expires or is terminated in accordance with its terms, there can be no assurance that the Borrower would be able to contract with another qualified charter school manager in a timely manner and on terms that reflect subordination of payment of management fees as required in the Loan Agreement. Subordination of Management Fees Payment of management fees is subordinate to (i) payment of Loan Payments and Additional Payments then due under the Loan Agreement and (ii) replenishment of certain funds described in "SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2016 BONDS Allocation of Revenues" then due. Such subordination is accomplished through the Indenture and the Loan Agreement and, for limited durations, by agreement between the Borrower and each of Discovery Schools and CSSC. Neither Discovery Schools nor CSSC has a contractual obligation to continue providing management services to the Schools beyond the greater of (A) the remainder of the then-current school year or (B) the next succeeding six months if management fees are not paid when due. As such, there can be no guarantee that either Discovery Schools or CSSC would continue to provide services to the Schools beyond such limited periods if amounts due under the applicable Management Agreement were not timely paid. While the Borrower has covenanted in the Loan Agreement to continue providing management services to the Schools regardless of the subordination of any fees due to the Borrower for such services, the management services the Borrower provides to the Schools are secondary to the management services provided to the Schools by Discovery Schools and CSSC. If either Discovery Schools or CSSC ceased to provide management services to the Schools after the limited periods described in the foregoing paragraph due to the subordination of management fees, there can be no guarantee that the Borrower would be able to contract with another entity to provide the same or similar services on a subordinated basis, whether by operation of the Loan Agreement or otherwise. 37

52 Reputational Risk Each School is subject to financial and other risks, which risks may differ from those of other private, charter or public schools. For example, changes in the reputation of a School or a School's faculty or student body, either generally or with respect to certain academic or extracurricular areas, may affect the School's ability to attract students to projected enrollment levels or the School's ability to attract quality teachers and staff at competitive salaries. Such changes in reputation may include, but are not limited to, those changes arising out of faculty or student behavior and actions within and outside of the school environment, including any media coverage and/or public discussion thereof. In addition, litigation brought against a School or the Borrower by parents, civil authorities, students or former or potential employees (see "LITIGATION" and APPENDIX A "THE BORROWER AND THE SCHOOLS Litigation" herein) may have a materially adverse impact on the reputation of the School or the Borrower. There can be no assurance that these or other factors will not adversely affect the Borrower's ability to generate Gross Revenues from the Schools in an amount sufficient to make Loan Repayments. Other Schools; Potential Future Schools As described herein and in APPENDIX A "THE BORROWER AND THE SCHOOLS," the Borrower operated eight schools for the school year, including the Schools and the Other Schools. Each of the Other Schools is operated pursuant to its own charter contract (the "Other Charters"). Although none of the revenues or assets of the Borrower generated from its operation of the Other Schools are pledged as security for Borrower's payment obligations under the Loan Agreement in respect of the Series 2016 Bonds, the Borrower's operation of the Other Schools could have an impact on the operations or financial performance of the Borrower or the Schools. For example, if operations at one of the Other Schools produced poor academic performance or resulted in the termination of any Other Charter, the Borrower might face additional scrutiny in an attempt to renew any of the Charters. In addition, operation of the Other Schools or any future operations of the Borrower unrelated to the Schools could result in the Borrower being subject to a voluntary or involuntary case under State or federal bankruptcy, insolvency or similar laws, which event would be an Event of Default under the Loan Agreement and could lead to an acceleration of the payment of the Series 2016 Bonds. Moreover, as discussed herein under "BONDHOLDERS' RISKS Reputational Risks," because of the integrated nature of the Borrower's operation of the Schools and the Other Schools, events affecting one or more of the Other Schools could indirectly impact the Schools if such events were to impact the reputation or financial condition of the Borrower, or were to require extraordinary attention from or resources of the Borrower at one or more of the Other Schools in response. State Teacher Shortage The State has faced in the past, and may face in the future, a teacher shortage. If a shortage materializes in future years, the Borrower may have to pay increased salaries or incur increased costs in recruiting new teachers. Teacher salaries and benefits are significant operating expenses for the Schools and increases in such expenses may decrease the amount of revenues of the Borrower available to make Loan Repayments. Litigation Schools are often the subject of litigation. Educator's professional liability and other actions alleging wrongful conduct and seeking punitive damages often are filed against education providers such as the Borrower and a School. Litigation may also arise from the corporate and business activities of the Borrower or a School, such as employee-related matters. As with educator's professional liability, many 38

53 of these risks are covered by insurance, but some are not. For example, some business disputes and workers' compensation claims are not covered by insurance or other sources and, in whole or in part, may be a liability of the Borrower or a School if determined or settled adversely. Although the Borrower maintains insurance policies covering educator's professional and general liability, management of the Borrower is unable to predict the availability, cost or adequacy of such insurance in the future. No Taxing Authority The Schools are Florida charter schools and have no taxing power. None of the Borrower or any of the Schools possesses the ability to assess ad valorem taxes now or in the future. As such, the Borrower is completely dependent upon FEFP funding and other available revenues to make the loan payments and other payments due under the Loan Agreement. Any event that would delay, reduce or eliminate FEFP funding from the State would have a material adverse effect on the ability of the Borrower to make such Loan Repayments and other payments under the Loan Agreement coming due thereafter. See "BONDHOLDERS' RISKS Termination, Revocation or Non-Renewal of Charter" hereunder. Transfer of Current Assets in the Ordinary Course The Borrower is permitted to sell or otherwise dispose of Current Assets in the ordinary course of its operations (including without limitation pursuit of its educational mission). As such, the Borrower could transfer Current Assets derived from its operation of the Schools to be applied for the benefit of any of the Other Schools or to be held by the Borrower separately from its operation of the Schools. If the Borrower were to transfer Current Assets, including unrestricted cash, cash equivalents, liquid investments, and unrestricted marketable securities, that would otherwise constitute Cash on Hand, such Current Assets would no longer constitute Cash on Hand and the Borrower's Days Cash on Hand would decrease accordingly. Because there is no limitation on the timing of the Borrower's sale or disposition of Current Assets in the ordinary course of its operations (including without limitation pursuit of its educational mission), there can be no guarantee that the Borrower's Cash on Hand as of a particular date, including any testing date, will be indicative of its Cash on Hand immediately preceding or immediately following any such date. See "CERTAIN FINANCIAL COVENANTS OF THE BORROWER Limitation of Disposition of Current Assets and Other Property." Priority of Security, Enforceability of Remedies The Series 2016 Bonds are payable from the payments to be made under the Loan Agreement. The Series 2016 Bonds are secured by a Mortgage on the Facilities. The Borrower has also pledged the Gross Revenues to the payment of the Borrower's obligations under the Loan Agreement. In order to perfect the security interest of the Trustee in the Gross Revenues deposited in the School Revenue Funds, the Borrower has entered into a Deposit Account Control Agreement with the Trustee and City National Bank of Florida relating to each School Revenue Fund. The effectiveness of any security interest granted in the Gross Revenues may be limited if the proceeds thereof are commingled with other moneys not subject to such security interest and if the Trustee does not take possession of cash constituting such receipts or the proceeds thereof. The practical realization of value from these funds upon any default will depend upon the exercise of various remedies specified by the Loan Agreement. These and other remedies may, in many respects, require judicial actions, which are often subject to discretion and delay. Under existing law (including particularly the U.S. Bankruptcy Code), the remedies specified by the Loan Agreement may not be readily available or may be limited. A court may decide not to order the specific performance of the covenants contained in the Loan Agreement. The various legal opinions to be delivered concurrently 39

54 with the delivery of the Series 2016 Bonds will be qualified as to the enforceability of the various legal instruments by limitations imposed by state and federal laws, rulings and decisions affecting remedies, and by bankruptcy, reorganization, or other laws affecting the enforcement of creditors' rights generally. If a Charter is terminated or not renewed, then all of the related School's unencumbered funds, except for capital outlay funds and federal charter school program grant funds (both of which shall revert to the State Department of Education), shall revert to the School Board. Such funds and all district school board property and improvements, furnishings and equipment purchased with public funds shall revert to the School Board, subject to complete satisfaction of all lawful liens, in accordance with the Charter School Act. If the School's accounting records fail to clearly establish whether a particular asset was purchased with public or non-public funds, then it shall be presumed that public funds were utilized, and ownership of the asset shall automatically revert to the School Board. Any unencumbered funds, district school board property and improvements, furnishings and equipment purchased with public funds in the possession of anyone other than the School shall be held in trust upon the district school board's request until any appeal status is resolved. The Borrower shall be responsible for its own debts and obligations and shall not pledge the full faith and credit of the School Board in regard to any debt. Liquidation of Security May Not Be Sufficient in the Event of a Default The Trustee and the Issuer must look solely to the Borrower's interest in the Facilities and any other assets of the Schools, to the extent not otherwise encumbered, and any monies held by the Trustee in the Reserve Account to pay and satisfy the Series 2016 Bonds in accordance with their terms. In the event the Gross Revenues are insufficient to pay the Series 2016 Bonds, then, after the Borrower's interest in the Mortgaged Property and any other security for the Series 2016 Bonds have been exhausted, the Series 2016 Bondholders will have no person to pursue for any deficiency which may exist. The exercise of remedies under the Mortgage will be subject to Permitted Encumbrances. If a Charter is terminated or not renewed, then all of the related School's unencumbered funds, except for capital outlay funds and federal charter school program grant funds (both of which shall revert to the State Department of Education), shall revert to the School Board. Such funds and all district school board property and improvements, furnishings and equipment purchased with public funds shall revert to the School Board, subject to complete satisfaction of all lawful liens, in accordance with the Charter School Act. If the School's accounting records fail to clearly establish whether a particular asset was purchased with public or non-public funds, then it shall be presumed that public funds were utilized, and ownership of the asset shall automatically revert to the School Board. Any unencumbered funds, district school board property and improvements, furnishings and equipment purchased with public funds in the possession of anyone other than the School shall be held in trust upon the district school board's request until any appeal status is resolved. Each School shall be responsible for its own debts and obligations and shall not pledge the full faith and credit of the School Board in regard to any debt. Limited Nature of Real Estate Appraisal Reports In April 2016, real estate Appraisal Reports were completed with respect to the Facilities. The Appraisal Reports (the "Appraisal Reports"), were prepared by an Appraisal Institute MAI-certified appraiser (the "Appraiser"). The Appraisal Reports estimate the market value of a fee simple interest the Boynton Beach Campus to be approximately $22,500,000 as of April 8, 2016, and the market value of a fee simple interest the Cooper City Campus to be approximately $23,500,000 as of April 8, Reference is made to the full Appraisal Reports for the assumptions and bases on which such valuation was made. Copies of the Appraisal Reports are available from the Borrower during the offering period for the Series 2016 Bonds and following issuance of the Series 2016 Bonds. 40

55 The value of the Facilities as indicated in the Appraisal Reports is only the opinion of the Appraiser at the time that the Appraisal Reports were completed. The actual value of the Facilities in the future will vary from conclusions in the Appraisal Reports, which variance may be material and adverse. In the event of a foreclosure of the Mortgage, the value of the Facilities in such event cannot be determined and may be substantially less than the value indicated in the Appraisal Reports. The Facilities, like other such buildings, require ongoing capital repairs and improvements to maintain their value and, although the Borrower intends to maintain the Facilities in good condition and a Capital Maintenance and Operating Fund will be established pursuant to the Indenture, no assurance can be given that the Borrower will have sufficient revenue to be able to maintain a regular capital improvements program for the Facilities in the future. Hazard Risk; Insurance Broward and Palm Beach Counties, Florida, are located on the Atlantic Coast, and are exposed to the risk of hurricanes. In the event of a hurricane in the vicinity of the Facilities, the operations of the Borrower could be impacted severely, by virtue of damage to the Facilities and delay in repairing, reconstructing or replacing them; delay in receiving insurance proceeds and Federal Emergency Management Administration payments; disruption of utilities; population and employment losses following hurricanes and other disruptions. Whether or not a hurricane causes damage to the Facilities, the occurrence of hurricane losses generally may create instability in and contraction of the Florida voluntary insurance market, and the Borrower may not be able to continue to obtain windstorm insurance at commercially reasonable rates. Accordingly, in the event of windstorm casualty, the Borrower may not have sufficient funds to repair the Facilities and to be able to pay debt service on the Series 2016 Bonds. Environmental Regulation There are potential risks relating to liabilities for environmental hazards with respect to the ownership of any real property. If hazardous substances are found to be located on a property, owners of such property may be held liable for costs and other liabilities related to the removal of such substances, which costs and liabilities with respect to the Facilities could exceed the value of the Facilities or any portion thereof. U.S. South Engineering & Testing Lab, Inc. (the "Consultant") conducted Phase I Environmental Site Assessments of the land comprising the Boynton Beach Campus and the Cooper City Campus and summarized its findings in reports dated April 2016 (the "Phase I Reports"). As set forth in the Phase I Reports, the Consultant found no evidence of any Recognized Environmental Conditions on the properties on which the Facilities are located and did not recommend further investigation thereof. For additional information regarding the Phase I Report, see APPENDIX A - "THE BORROWER AND THE SCHOOLS Environmental Reports." The intent of the Phase I Environmental Site Assessments was to identify the potential for recognized environmental conditions; however, no environmental assessment can completely eliminate the uncertainty regarding the potential for recognized environmental conditions. In addition, observations and conclusions pertaining to environmental conditions are necessarily limited to the conditions observed, and or materials reviewed at the time the assessment was performed. In the event environmental enforcement actions are initiated, the Borrower could be liable for the costs of removing or otherwise treating pollutants or contaminants located at the Facilities. Such obligations could adversely affect the Borrower's budget and cash flow and could adversely affect the Borrower's ability to generate revenues 41

56 sufficient to meet its Loan Repayment obligations. In addition, under certain environmental statutes, in the event an enforcement action is initiated, a lien could be attached to the Facilities, or a portion thereof. When hazardous substances are found on real property, owners or secured lenders may be held liable for costs and other damages relating to such hazardous substances unless they comply with provisions of law designed to provide them with liability protection. The Trustee as mortgagee on behalf of the Series 2016 Bondholders may avoid such liability with respect to the Facilities, if it does not directly participate in the ownership or management of the Facilities. In the event of a foreclosure on the Mortgage, the Borrower may be held liable for costs and other liabilities relating to hazardous materials, if any, on the site of the Facilities, or any portion thereof, on a strict-liability basis, and such costs might exceed the value of such property. Remedies May be Unenforceable Remedies provided for in the Loan Agreement, the Mortgage and the Indenture may be unenforceable as a result of the application of principles of equity or of state and federal laws relating to bankruptcy, other forms of debtor relief, and creditors' rights generally. Furthermore, it is not certain whether a court would permit the exercise of the remedies of repossession and sale or leasing with respect thereto. The enforcement of any remedies provided in the Loan Agreement, the Mortgage and the Indenture could prove both expensive and time consuming. Bankruptcy proceedings by the Borrower also could have adverse effects on the holders of the Series 2016 Bonds, including (a) delay in the enforcement of their remedies, (b) subordination of their claims to claims of those supplying goods and services to the Schools after initiation of bankruptcy proceedings and to the administrative expenses of bankruptcy proceedings, and (c) imposition without their consent of a plan of reorganization reducing or delaying payment of Series 2016 Bonds. The United States Bankruptcy Code contains provisions intended to ensure that, in any plan of reorganization not accepted by a least a majority of any call of secured creditors such as the holders of the Series 2016 Bonds, such class of creditors are treated fairly. The plan may, however, alter a secured creditor's rights. Specifically, the Bankruptcy Code provides that debtors have three choices with respect to secured creditors: (i) the debtor may keep the collateral so long as the plan provides that the creditor retains its lien and receives payments equal to the present value of the secured claim; (ii) the debtor may surrender the collateral to the secured creditor, or (iii) the debtor can sell the collateral and use the proceeds to pay off the secured claim. To the extent that the collateral is not sufficient to secure the payment of the secured debt, the secured creditor is entitled to an unsecured claim for the deficiency. Like all aspects of the bankruptcy process, however, the ultimate result in any particular case may be affected significantly by judicial interpretation of the specific facts and circumstances of the case. Bankruptcy; Credit Risk of Borrower's Operations The rights and remedies of the owners of the Series 2016 Bonds are subject to various provisions of the Federal Bankruptcy Code (the "Bankruptcy Code"). If the Borrower were to become a debtor in a bankruptcy case (including as a result of credit challenges related to the Borrower's operation of the Other Schools or any Potential Future Schools), its revenues and certain of its accounts receivable and other property created or otherwise acquired after the filing of such petition and for up to 90 days prior to the filing of such petition may not be subject to the security interest created under the Mortgage for the benefit of the owners of the Series 2016 Bonds. The filing would operate as an automatic stay of the commencement or continuation of any judicial or other proceeding against the Borrower, and its property, and as an automatic stay of any act or proceeding to enforce a lien upon or to otherwise exercise control over its property. If the bankruptcy court so ordered, the property of the Borrower, including accounts receivable and proceeds thereof, could be used for the financial rehabilitation of the Borrower despite the 42

57 security interest of the Trustee therein. While the Bankruptcy Code requires that the interest of the Trustee as lien owner be adequately protected before the collateral may be used by the Borrower, such protection could take the form of a replacement lien on assets of the Borrower acquired or created after the bankruptcy petition is instituted. The rights of the Trustee to enforce liens and security interests against the Borrower's assets could be delayed during the pendency of the rehabilitation proceedings. The Borrower could file a plan for the reorganization of its debts in any such proceeding which could include provisions modifying or altering the rights of creditors generally, or any class of them, secured or unsecured. The plan, when confirmed by a court, binds all creditors who had notice or knowledge of the plan and discharges all claims against the debtor provided for in the plan. No plan may be confirmed unless certain conditions are met, among which are that the plan is in the best interests of creditors, is feasible and has been accepted by each class of claims impaired thereunder. Each class of claims has accepted the plan if at least two thirds in dollar amount and more than one half in number of the class cast votes in its favor. Even if the plan is not so accepted, it may be confirmed if the court finds that the plan is fair and equitable with respect to each class of non-accepting creditors impaired thereunder and does not discriminate unfairly. No Rating The Series 2016 Bonds are not rated by a nationally recognized rating agency. Neither the Issuer nor the Borrower requested or applied for a rating on the Series 2016 Bonds from any rating service. Typically, unrated bonds lack liquidity in the secondary market. Because of the lack of credit rating, Bondholders may not be able to sell their Series 2016 Bonds in the secondary market. Failure to Provide Ongoing Disclosure The Borrower has agreed for the benefit of the Series 2016 Bondholders to provide certain financial information, including certain quarterly and annual financial information, other operating data, and notices of material events. The Borrower will enter into a Continuing Disclosure Agreement (the "Continuing Disclosure Agreement") with Digital Assurance Certification, L.L.C. ("DAC"), as dissemination agent (the "Dissemination Agent"), for the purpose ensuring ongoing compliance with its continuing disclosure filing requirements. Failure to comply with the Continuing Disclosure Undertaking Agreement in the future may adversely affect the liquidity of the Series 2016 Bonds and their market price in the secondary market. Failure to comply with the Continuing Disclosure Agreement in the future may adversely affect the liquidity of the affected Series 2016 Bonds and their market price in the secondary market. Secondary Market There is no guarantee that a secondary trading market will develop for the Series 2016 Bonds. Subject to applicable securities laws and prevailing market conditions, the Underwriter intends, but is not obligated, to make a market in the Series 2016 Bonds. Consequently, prospective bond purchasers should be prepared to hold their Series 2016 Bonds to maturity or prior redemption. Other Possible Bondholders' Risks Regulatory and other changes resulting from the factors mentioned above, among others, or the occurrence of other unanticipated events, could have a material adverse effect on the Borrower's operations and the Examined Forecast contained in APPENDIX C "EXAMINED FORECAST." 43

58 The occurrence of any of the following events, or other unanticipated events, could adversely affect the operations of the Borrower: (a) Establishment of mandatory governmental wage, rent or price controls; (b) Inability to control increases in operating costs, including salaries, wages and fringe benefits, supplies and other expenses; (c) Unionization, employee strikes and other adverse labor actions which could result in a substantial increase in expenditures without a corresponding increase in revenues; and (d) Adoption of other federal, state or local legislation or regulations having an adverse effect on the future operating or financial performance of the Borrower. Taxation of Nonprofit Organizations The Subcommittee on Oversight and Investigation of the Committee on Ways and Means of the U.S. House of Representatives has held public hearings on the issue of unfair competition between nonprofit and for-profit organizations. Similar hearings have been conducted by certain state legislative bodies. These hearings have focused on the need for changes in the law relating to the taxation of nonprofit organizations in connection with revenue producing activities in which they are engaged. In addition, taxing authorities in certain state and local jurisdictions have recently sought to impose or increase taxes related to the properties and operations of nonprofit organizations, particularly where such authorities have been dissatisfied with the amount of service provided to indigent persons. There can be no assurance that future changes in the law, rules, regulations and policies relating to the taxation of nonprofit organizations will not have a material adverse effect upon the revenues of the Borrower. Compliance with Tax Covenants The possible modification or repeal of certain existing federal income or State tax laws or other loss by the Borrower of the present advantages of certain provisions of the federal income or State tax laws could materially and adversely affect the status of the Borrower, and thereby the revenues of the Borrower. As an exempt organization, the Borrower is subject to a number of requirements affecting its operations. The failure of the Borrower to remain qualified as an exempt organization would affect the funds available to the Borrower for payments under the Loan Agreement. Failure of the Borrower to comply with certain requirements of the Code, or adoption of amendments to the Code to restrict the use of tax-exempt bonds for facilities such as the Facilities, could cause interest on the Series 2016A Bonds to be included in the gross income for federal income tax purposes of the Owners or former Owners. The tax-exempt status of the Series 2016A Bonds is based on the continued compliance by the Issuer and the Borrower with certain covenants contained in the Loan Agreement and in certificates executed by the Issuer and the Borrower in connection therewith. These covenants relate generally to arbitrage limitations, rebate of certain excess investment earnings to the federal government, restrictions on the amount of issuance costs financed with the proceeds of the Series 2016A Bonds and maintenance of the Borrower's status as an organization described in Section 501(c)(3) of the Code. Failure to comply with any of these covenants may result in the treatment of interest on the Series 2016A Bonds as taxable income to the Owners thereof, retroactive to their date of issuance. See "TAX MATTERS" herein. Additional Bondholder's Risks Regarding Federal Income Tax Exemption The tax-exempt status of the Series 2016A Bonds currently depends, among other things, upon the maintenance by the Borrower of its status as an organization described in Section 501(c)(3) of the 44

59 Code. The maintenance by the Borrower of its status as an organization described in Section 501(c)(3) of the Code is contingent upon compliance with general rules promulgated in the Code and related regulations regarding the organization and operation of tax-exempt entities, including their operation for charitable purposes and their avoidance of transactions that may cause their assets to inure to the benefit of private individuals. As these general principles were developed primarily for public charities that do not conduct large-scale technical operations and business activities, they often do not adequately address the myriad of operations and transactions entered into by organizations such as the Borrower. The Internal Revenue Service has announced that it intends to closely scrutinize transactions between not-forprofit corporations and for-profit entities. In addition, neither Bond Counsel nor counsel to the Borrower has rendered any opinion relating to whether actions that may be taken upon default by the Borrower under covenants relating to the Series 2016A Bonds or other obligations of the Borrower may adversely affect the status of the Borrower as an organization described in Section 501(c)(3) of the Code. If a tax-exempt entity is found to have operated in such a manner as to result in an inurement or unlawful private benefit, the only remedy available to the IRS under the Code against that entity is revocation of that entity's tax-exempt status. Although the IRS has not often revoked such 501(c)(3) taxexempt status of an organization, it could do so in the future. The loss of tax-exempt status by the Borrower could result in loss of the tax exempt status of the Series 2016A Bonds and of other tax-exempt debt of the Borrower retroactively to the date of issuance of such Series 2016A Bonds or such debt, and, in turn, could cause defaults in the Borrower's covenants relating to the Series 2016A Bonds and other exempt debt. With increasing frequency, the IRS has imposed substantial monetary penalties and future public benefit obligations on certain tax-exempt organizations in lieu of revoking tax-exempt status, as well as requiring that certain transactions be altered, terminated or avoided in the future and/or requiring governance or management changes. These penalties and obligations typically are imposed on the taxexempt organization pursuant to a "closing agreement." The imposition of such penalties could have an adverse effect on the Borrower. Less onerous sanctions have been enacted, which sanctions focus enforcement on private persons that transact business with an exempt organization rather than the exempt organization itself, but these sanctions do not replace the other remedies available to the IRS as mentioned above. For example, the Taxpayers Bill of Rights 2, referred to for purposes of this Limited Offering Memorandum as the Intermediate Sanctions Law, allows the Internal Revenue Service to impose "intermediate sanctions" against certain individuals in circumstances involving the violation by tax-exempt organizations of the prohibition against private inurement. Intermediate sanctions may be imposed in situations in which a "disqualified person" (such as an "insider") (i) engages in a transaction with a tax-exempt organization on other than a fair market value basis, (ii) receives unreasonable compensation from a tax-exempt organization or (iii) receives payment in an arrangement that violates the prohibition against private inurement. These transactions are referred to as "excess benefit transactions." Intermediate sanctions may be imposed in addition to revocation of tax-exempt status. In recent years, the Internal Revenue Service and state, county and local taxing authorities have been undertaking audits and reviews of the operations of tax-exempt organizations with respect to their exempt activities and the generation of unrelated business taxable income. An investigation or audit could lead to a challenge which could result in taxes, interest and penalties with respect to unreported unrelated business taxable income and in some cases could ultimately affect the tax-exempt status of the Borrower as well as the exclusion from gross income for federal income tax purposes of the interest payable on the Series 2016A Bonds and other tax-exempt debt of the Borrower. In addition, legislation, if any, which may be adopted at the federal, state and local levels with respect to unrelated business income 45

60 cannot be predicted. Any legislation could have the effect of subjecting a portion of the income of the Borrower to federal or state income taxes. In addition to the foregoing proposals with respect to income by not-for-profit corporations, various state and local governmental bodies have challenged the tax-exempt status of not-for-profit institutions and have sought to remove the exemption from real estate taxes of part or all of the property of various not-for-profit institutions on the grounds that a portion of its property was not being used to further the charitable purposes of the institutions or that the institutions did not provide sufficient services to indigent persons so as to warrant exemption from taxation as a charitable institution. Several of these disputes have been determined in favor of the taxing authorities or have resulted in settlements. The Code includes requirements which the Issuer and the Borrower must continue to meet after the issuance of the Series 2016A Bonds in order that interest thereon not be included in gross income for federal income tax purposes. The Issuer or the Borrower's failure to meet the requirements may cause interest on the Series 2016A Bonds to be included in gross income for federal income tax purposes retroactive to their date of issuance. The Issuer and the Borrower have covenanted in the Indenture and the Loan Agreement to take the actions required by the Code in order to maintain the exclusion from gross income for federal income tax purposes of interest on the Series 2016A Bonds. INVESTORS, INCLUDING THOSE WHO ARE SUBJECT TO SPECIAL PROVISIONS OF THE CODE, SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX TREATMENT WHICH MAY BE ANTICIPATED TO RESULT FROM THE PURCHASE, OWNERSHIP AND DISPOSITION OF TAX-EXEMPT OBLIGATIONS BEFORE DETERMINING WHETHER TO PURCHASE THE SERIES 2016A BONDS. TAX MATTERS Exclusion of Interest on Series 2016 Bonds from Gross Income In the opinion of Foley & Lardner LLP, Bond Counsel, based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Series 2016A Bonds is excludable from gross income for federal income tax purposes under Section 103 of the Code. Bond Counsel is of the further opinion that interest on the Series 2016A Bonds is not a preference item for purposes of the alternative minimum tax imposed on individuals and corporations under the Code; however, it should be noted that such interest is included in adjusted current earnings of certain corporations for purposes of calculating the alternative minimum tax on corporations under the Code. A complete copy of the proposed form of opinion of Bond Counsel is set forth in APPENDIX F "FORM OF OPINION OF BOND COUNSEL" hereto. The Code imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Series 2016A Bonds. The Issuer and the Borrower have covenanted to comply with certain restrictions, conditions and requirements designed to ensure that interest on the Series 2016A Bonds will not be included in federal gross income. Failure to comply with these covenants may result in interest on the Series 2016A Bonds being included in gross income for federal income tax purposes, possibly from the date of original issuance of the Series 2016A Bonds. The opinion of Bond Counsel assumes compliance with these covenants. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken) or events occurring (or not occurring) or any matters coming to Bond Counsel's attention after the date of issuance of the Series 2016A Bonds may adversely affect the value of, or the tax status of interest on, the Series 2016A Bonds. 46

61 The opinion of Bond Counsel relies on factual representations made by the Issuer, the Borrower and other persons, including but not limited to the Underwriter. These factual representations include but are not limited to certifications by the Borrower regarding the investment of proceeds of the Series 2016A Bonds and regarding use of property financed and refinanced with proceeds of the Series 2016A Bonds that is reasonably expected to occur during the entire term of the Series 2016A Bonds. Bond Counsel has not verified these representations by independent investigation. Bond Counsel does not purport to be an expert in financial analysis, financial projections or similar disciplines. Failure of any of these factual representations to be correct may result in interest on the Series 2016A Bonds being included in gross income for federal income tax purposes, possibly from the date of original issuance of the Series 2016A Bonds. In addition, Bond Counsel has relied, among other things, on the opinion of Edwards, Cohen, Dawson, Mangu & Noble, P.A., counsel to the Borrower, regarding, among other matters, the current qualification of the Borrower as an organization described in Section 501(c)(3) of the Code. We note that such opinion is subject to a number of qualifications and limitations. Failure of the Borrower to be organized and operated in accordance with the Internal Revenue Service's requirements for the maintenance of its status as an organization described in Section 501(c)(3) of the Code may result in interest on the Series 2016A Bonds being included in gross income for federal income tax purposes, possibly from the date of issuance of the Series 2016A Bonds. Certain requirements and procedures contained or referred to in the Indenture, the Loan Agreement, the Tax Agreement, and other relevant documents may be changed and certain actions may be taken or omitted under the circumstances and subject to the terms and conditions set forth in such documents. Bond Counsel expresses no opinion as to any Series 2016A Bond or the interest thereon if any such change occurs or action is taken or omitted upon the advice or approval of bond counsel other than Foley & Lardner LLP. Current and future legislative proposals, if enacted into law, may cause the interest on the Series 2016A Bonds to be subject, directly or indirectly, to federal income taxation or otherwise prevent the owners of the Series 2016A Bonds from realizing the full current benefit of such interest. As one example, the Obama Administration previously announced a legislative proposal that would to some extent limit the exclusion from gross income of interest on obligations like the Series 2016A Bonds (regardless of when they were issued) for taxpayers who are individuals and whose income is subject to higher marginal income tax rates. Other legislative proposals have been made that could significantly reduce the benefit of, other otherwise affect, the exclusion from gross income of interest on obligations like the Series 2016A Bonds. The introduction or enactment of any such legislative proposals may also affect, perhaps significantly, the market price for, or marketability of, the Series 2016A Bonds. Prospective purchasers of the Series 2016A Bonds should consult their own tax advisers regarding any pending or proposed federal tax legislation, as to which Bond Counsel expresses no opinion. Further, no assurance can be given that any action of the Internal Revenue Service, including but not limited to selection of the Series 2016A Bonds for examination, or the course or result of any IRS examination of the Series 2016A Bonds, or bonds which present similar tax issues, will not affect the market price for or marketability of the Series 2016A Bonds. The opinion of Bond Counsel is based on current legal authority and represents Bond Counsel's judgment as to the proper treatment of the Series 2016A Bonds for federal income tax purposes. It is not binding on the IRS or the courts and is not a guarantee of result. In recent years, the IRS has implemented an active program to examine tax-exempt bond issues for compliance with federal income tax requirements, including examinations of qualified 501(c)(3) bonds. Under current procedures, parties other than the Issuer, including the Series 2016 Bondholders, will have little if any right to participate in the IRS examination process. Moreover, because achieving judicial review in connection with an 47

62 examination of tax-exempt bonds may be difficult, obtaining an independent review of IRS positions with which the Issuer legitimately disagrees may not be practical. If such a situation arises, the Issuer or the Series 2016 Bondholders may incur significant expense, loss of market value to the Series 2016 Bondholders, or both. Original Issue Discount on Series 2016A Bonds Some of the Series 2016A Bonds may have an issue price that is less than the amount payable at the maturity of such Series 2016A Bonds (hereinafter called the "Discount Series 2016A Bonds"). Under existing law, the original issue discount in the selling price of the Discount Series 2016A Bonds, to the extent properly allocable to each owner of such Discount Series 2016A Bond, is excluded from gross income for federal income tax purposes to the same extent that any interest payable on such Discount Series 2016A Bond is or would be excluded from gross income for federal income tax purposes. The original issue discount is the excess of the stated redemption price at maturity of such Discount Series 2016A Bond over the initial offering price to the public, excluding underwriters or other intermediaries, at which price a substantial amount of such Discount Series 2016A Bonds were sold (the "issue price"). Under Section 1288 of the Code, original issue discount on tax-exempt obligations accrues on a compound interest basis. The amount of original issue discount that accrues to an owner of a Discount Series 2016A Bond during any accrual period generally equals (i) the issue price of such Discount Series 2016A Bond plus the amount of original issue discount accrued in all prior accrual periods multiplied by (ii) the yield to maturity of such Discount Series 2016A Bond (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of each accrual period), less (iii) any interest payable on such Discount Series 2016A Bond during such accrual period. The amount of original issue discount so accrued in a particular accrual period will be considered to be received ratably on each day of the accrual period, and will increase the owner's tax basis in such Discount Series 2016A Bond. The adjusted tax basis in a Discount Series 2016A Bond will be used to determine taxable gain or loss upon a disposition (e.g., upon a sale, exchange, redemption, or payment at maturity) of such Discount Series 2016A Bond. Owners of Discount Series 2016A Bonds who did not purchase such Discount Series 2016A Bonds in the initial offering at the issue price should consult their own tax advisors with respect to the tax consequences of owning such Discount Series 2016A Bonds. Owners of Discount Series 2016A Bonds should consult their own tax advisors with respect to the state and local tax consequences of such Series 2016A Bonds. It is possible that under the applicable provisions governing the determination of state and local income taxes, accrued original issue discount on such Series 2016A Bonds may be deemed to be received in the year of accrual, even though there will not be a corresponding cash payment until a later year. Original Issue Premium on Series 2016A Bonds Some of the Series 2016A Bonds may have an issue price that is greater than the amount payable at the maturity of such Series 2016A Bonds (hereinafter called the "Premium Series 2016A Bonds"). Any Premium Series 2016A Bond purchased in the initial offering at the issue price will have "amortizable bond premium" within the meaning of Section 171 of the Code. An owner of a Premium Series 2016A Bond which is a Series 2016A Bond and has amortizable bond premium is not allowed any deduction for the amortizable bond premium. During each taxable year, such an owner must reduce his or her tax basis in such Premium Series 2016A Bond by the amount of the amortizable bond premium that is allocable to the portion of such taxable year during which the owner held such Premium Series 2016A Bond. The 48

63 adjusted tax basis in a Premium Series 2016A Bond will be used to determine taxable gain or loss upon a disposition (e.g., upon a sale, exchange, redemption, or payment at maturity) of such Premium Series 2016A Bond. Owners of Premium Series 2016A Bonds who did not purchase such Premium Series 2016A Bonds in the initial offering at an issue price should consult their own tax advisors with respect to the tax consequences of owning such Premium Series 2016A Bonds. Owners of Premium Series 2016A Bonds should consult their own tax advisors with respect to the state and local tax consequences of the Premium Series 2016A Bonds. The Series 2016B Bonds The interest on the Series 2016B Bonds is not excluded from gross income for federal income tax purposes. Other Tax Consequences of the Series 2016 Bonds In the opinion of Bond Counsel, the Series 2016 Bonds and the interest thereon are not subject to taxation under the laws of the State of Florida, except as to estate taxes and taxes on interest, income or profits on debt obligations owed to corporations as imposed by Chapter 220, Florida Statutes, as amended. The ownership or disposition of, or the accrual or receipt of interest on, the Series 2016 Bonds may otherwise affect a Series 2016 Bondholder's federal, state or local tax liability. The nature and extent of these other tax consequences will depend upon the particular tax status of the Series 2016 Bondholder or the Series 2016 Bondholder's other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences. The above discussion is only a brief summary of the effects of the Code, and each prospective purchaser of the Series 2016 Bonds should consult with his or her own tax advisor regarding the federal, state and local tax consequences of owning the Series 2016 Bonds. LEGAL MATTERS Certain legal matters incident to the authorization and issuance of the Series 2016 Bonds are subject to the legal opinion of Foley & Lardner LLP, Jacksonville, Florida. The signed legal opinions, dated and premised on law in effect as of the date of original delivery of the Series 2016 Bonds, will be delivered to the Underwriter at the time of original delivery. See "TAX MATTERS" herein. Certain legal matters will be passed upon for the Issuer by Broad and Cassel, Orlando, Florida, for the Borrower by Edwards, Cohen, Dawson, Mangu & Noble, P.A., Jacksonville, Florida, and for the Underwriter by Ice Miller LLP, Columbus, Ohio. The proposed text of the legal opinion of Bond Counsel is set forth in APPENDIX F attached hereto. The actual legal opinion to be delivered may vary from that text if necessary to reflect facts and law on the date of delivery. The opinion will speak only as of its date, and subsequent distribution of such opinion by recirculation of this Limited Offering Memorandum or otherwise will create no implication that Bond Counsel has reviewed or express any opinion concerning any of the matters referenced in the opinions subsequent to its date. The opinion of Bond Counsel is issued in reliance on, among other things, the opinion of counsel to the Borrower. 49

64 Bond Counsel has not been engaged nor undertaken to review (1) the accuracy, completeness or sufficiency of this Limited Offering Memorandum or any other offering material related to the Series 2016 Bonds, except as may be provided in a supplemental opinion of Bond Counsel to the Underwriter, upon which only the Underwriter may rely, and which may relate only to certain information contained under the captions "THE SERIES 2016 BONDS," "SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2016 BONDS," "TAX MATTERS," and "BONDHOLDERS' RISKS Additional Bondholders' Risks Regarding Federal Income Exemption" and in APPENDIX E "SUBSTANTIALLY FINAL FORMS OF PRINCIPAL FINANCING DOCUMENTS," or (2) the compliance with any federal or state law with regard to the sale or distribution of the Series 2016 Bonds The Borrower LITIGATION There is no litigation pending or, to the knowledge of the Borrower, threatened, against the Borrower, which in any manner questions the right or ability of the Borrower to enter into the Loan Agreement or to fulfill the obligations imposed upon the Borrower thereby. The Borrower may, from time to time, be involved in various legal actions consistent with the general experience of entities of similar nature and size. The Issuer Notwithstanding pending litigation associated with conduit bond issues which are unrelated to the Series 2016 Bonds, there is no litigation pending or, to the knowledge of the Issuer, threatened restraining or enjoining the issuance or delivery of the Series 2016 Bonds or questioning or affecting the validity of the Series 2016 Bonds or the proceedings or authority under which they are to be issued or which in any manner questions the right of the Issuer to enter into the Indenture or the Loan Agreement or to secure the Series 2016 Bonds in the manner provided in the Indenture. UNDERWRITING; LIMITED OFFERING The Series 2016 Bonds will be purchased by BB&T Capital Markets, a division of BB&T Securities, LLC (the "Underwriter"), at an aggregate purchase price for the Series 2016A Bonds of $50,041, (representing the par amount of $50,625,000.00, less the underwriting discount of $432, and less net original issue discount of $151,111.30) and at an aggregate purchase price for the Series 2016B Bonds of $113, (representing the par amount of $195,000.00, less the underwriting discount of $81,171.24), subject to the terms of a Bond Purchase Agreement among the Issuer, the Borrower and the Underwriter. The Bond Purchase Agreement provides that the Underwriter shall purchase all Series 2016 Bonds if any are purchased, and that the obligation to make such purchase is subject to certain terms and conditions set forth in the Bond Purchase Agreement, the approval of certain legal matters by counsel and certain other conditions. The initial offering prices set forth on page i hereof may be changed from time to time by the Underwriter. The Borrower has agreed under the Bond Purchase Agreement to indemnify the Underwriter and the Issuer against certain liabilities, including certain liabilities under federal and state securities laws. INVESTMENT IN THE SERIES 2016 BONDS INVOLVES A SIGNIFICANT DEGREE OF RISK AND EACH PROSPECTIVE INVESTOR SHOULD CONSIDER ITS FINANCIAL CONDITION AND THE RISKS INVOLVED TO DETERMINE THE SUITABILITY OF INVESTING IN THE SERIES 2016 BONDS. 50

65 THE SERIES 2016 BONDS ARE BEING OFFERED ONLY TO (1) "QUALIFIED INSTITUTIONAL BUYERS" AS DEFINED IN RULE 144A PROMULGATED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND (2) "ACCREDITED INVESTORS" AS DEFINED IN RULE 501(A) OF THE SECURITIES ACT. UPON A TRANSFER OF A BENEFICIAL OWNERSHIP INTEREST IN A SERIES 2016 BOND (INCLUDING A TRANSFER BY THE UNDERWRITER PURSUANT TO THE INITIAL SALE OF THE SERIES 2016 BONDS), EACH PURCHASER OF SUCH BENEFICIAL OWNERSHIP INTEREST SHALL BE DEEMED TO HAVE CERTIFIED TO THE TRUSTEE AND ACKNOWLEDGED, REPRESENTED AND AGREED WITH THE BORROWER AND THE UNDERWRITER THAT SUCH PURCHASER IS ACQUIRING SUCH SERIES 2016 BOND FOR ITS OWN ACCOUNT, AND THAT IT IS (A) A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED ABOVE, OR (B) AN "ACCREDITED INVESTOR," AS DEFINED ABOVE. CONTINUING DISCLOSURE The Borrower will enter into the Continuing Disclosure Agreement with Digital Assurance Certification, L.L.C. ("DAC"), as dissemination agent (the "Dissemination Agent"). The Continuing Disclosure Agreement is made for the benefit of the Series 2016 Bondholders and in order to assist the Underwriter in complying with its obligations pursuant to Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the "Continuing Disclosure Rule"). See APPENDIX G "FORM OF CONTINUING DISCLOSURE AGREEMENT." The Borrower has not previously been subject to the Continuing Disclosure Rule. Pursuant to the Continuing Disclosure Agreement, the Borrower will agree to provide, or cause to be provided, annually to designated information repositories certain quantitative financial information and operating data of the type specified in the Continuing Disclosure Agreement; and to provide in a timely manner to designated information repositories notice of the occurrence of certain events, if material (within the meaning of the Continuing Disclosure Rule), and of any failure to provide required information when due. The Continuing Disclosure Agreement does not require that information be provided to all registered owners or Beneficial Owners of the Series 2016 Bonds, but rather requires only that such information be provided to certain information repositories. The Dissemination Agent provides its clients with automated filing of rating events, templates consolidating all outstanding filing requirements that accompany reminder notices of annual or interim mandatory filings, review of all template filings by professional accountants, as well as a time and date stamp record of each filing along with the unique ID from EMMA accompanying the copy of the actual document filed. The Dissemination Agent also offers its clients a series of training webinars each year qualified for NASBA certified CPE credits, as well as model secondary market compliance policies and procedures. FINANCIAL STATEMENTS Audited financial statements of the Schools for the fiscal years ended June 30, 2014 and 2015 have been prepared by the Auditor, and are attached hereto as APPENDIX B. On a going forward basis, consolidated audited financial statements will be prepared for the Schools. Certain unaudited financial information of the Schools for such fiscal years and for the nine month periods ended March 31, 2015 and 2016 is included in APPENDIX A "THE BORROWER AND THE SCHOOLS." Such unaudited financial information has not been reviewed by the Auditor. 51

66 Through the school year, the Borrower operated the Cooper City School pursuant to two separate Charter School Contracts between the School Board of Broward County, Florida, and the Borrower. As such, certain historical information for the Cooper City School in this Limited Offering Memorandum, including the audited financial statements of the Cooper City School for the fiscal years ended June 30, 2014 and 2015, is presented separately for the grade K-5 and grade 6-8 operations of the Cooper City School through the school year and the Fiscal Year ended June 30, Going forward, such information will be presented for the Cooper City School as a whole. For additional information regarding the change in operations of the Cooper City School, see APPENDIX A "THE BORROWER AND THE SCHOOLS." EXAMINED FORECAST Certain projected financial information for the Borrower for the fiscal years ending June 30, 2016 through 2021 is included in APPENDIX C "EXAMINED FORECAST." The Examined Forecast was prepared by CSSC, on behalf of the Borrower with information provided by the Borrower, and was examined by the Auditor. The Examined Forecast has not been independently reviewed or verified by any other party. In particular, the Underwriter has not independently verified the Examined Forecast, and makes no representations nor gives any assurances that such Examined Forecast, nor the assumptions underlying it, is complete or correct. FINANCIAL ADVISOR CSSC, which provides certain management services to the Schools, has been engaged by the Borrower to provide financial advisory services with respect to the issuance and the sale of the Series 2016 Bonds. CERTAIN RELATIONSHIPS Ice Miller LLP has previously represented or currently represents the Trustee in transactions unrelated to the issuance of the Series 2016 Bonds. CSSC, which provides certain management services to the Schools and has been engaged by the Borrower to provide financial advisory services with respect to the issuance and the sale of the Series 2016 Bonds, is an affiliate of Building Hope. MISCELLANEOUS The Borrower has furnished the information in this Limited Offering Memorandum relating to itself, the Schools, the Facilities, and the Project and has reviewed the information related to the plan of financing and related documents and information. The Issuer has furnished only the information in this Limited Offering Memorandum under the captions "THE ISSUER" and "LITIGATION The Issuer." The Underwriter has furnished the information in this Limited Offering Memorandum with respect to the offering prices of the Series 2016 Bonds and the information under the caption "UNDERWRITING; LIMITED OFFERING." ANY STATEMENTS MADE IN THIS LIMITED OFFERING MEMORANDUM INVOLVING MATTERS OF OPINION OR OF ESTIMATES, WHETHER OR NOT SO EXPRESSLY STATED, ARE SET FORTH AS SUCH AND NOT AS REPRESENTATIONS OF FACT, AND NO REPRESENTATION IS MADE THAT ANY OF THE ESTIMATES WILL BE REALIZED. 52

67 The information contained above is neither guaranteed as to accuracy or completeness nor to be construed as a representation by the Issuer or the Underwriter. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Limited Offering Memorandum nor any sale made hereunder is to create, under any circumstances, any implication that there has been no change in the affairs of the Borrower or the Issuer from the date hereof. The Limited Offering Memorandum is submitted in connection with the sale of the securities referred to herein and may not be reproduced or used, as a whole or in part, for any other purpose. 53

68 The distribution and use of this Limited Offering Memorandum have been approved by the Issuer and the Borrower. This Limited Offering Memorandum is not to be construed as an agreement or contract between the Issuer or the Borrower and any purchaser, owner, or holder of any Series 2016 Bond. FLORIDA DEVELOPMENT FINANCE CORPORATION By: /s/ William Franklin Spivey, Jr. Executive Director FLORIDA CHARTER FOUNDATION, INC. By: /s/ Dr. David Thomas Chairman of the Board of Directors 54

69 APPENDIX A THE BORROWER AND THE SCHOOLS

70 [THIS PAGE INTENTIONALLY LEFT BLANK]

71 THE BORROWER AND THE SCHOOLS General Florida Charter Foundation, Inc. (the "Borrower") is a not-for-profit corporation organized under the laws of the State of Florida (the "State"). The Borrower was incorporated in 2006 for the purpose of establishing charter public schools pursuant to applicable Florida law. The Borrower is an organization described under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), is exempt from federal income taxation under Section 501(a) of the Code (except with respect to "unrelated business taxable income" within the meaning of Section 512(a) of the Code), and is not a "private foundation" as defined in Section 509(a) of the Code. The Borrower's bylaws provide that it is governed by and under the authority of a board of directors (the "Board"). The Franklin Academies The Borrower currently operates eight charter schools on five campuses in South Florida, as further described below. The Borrower's sixth campus, which will house the Borrower's first high school, is currently under construction and projected to open for the school year. The Borrower leases each of the facilities that house its charter schools via long-term lease and development agreements, although the Borrower will acquire the Boynton Beach Campus and the Cooper City Campus (each as further described herein) using a portion of the proceeds of the Series 2016 Bonds. All of the Borrower's charter schools operate as a "Franklin Academy." The mission of Franklin Academy is to "build better people every day" through a rigorous educational program that integrates project-based learning, inquiry, creativity, continuous improvement, and character education, while addressing each individual's learning style and specific needs. Since opening the first campus in 2011, the Borrower expanded to five campuses in two counties, and is scheduled to open its sixth campus and first high school in the fall of The Borrower has continued to grow its operations, and will maintain its history of success by continuing to implement its research-based curriculum plan and character education at each of its charter schools. To date, two of the Borrower's charters have received designation as high performing charter schools by the State of Florida. A-1

72 Franklin Academies 1 County Campus Location Campus Code Grades Served ( ) School Grade ( ) School Grade ( ) Broward Pines Boulevard Franklin Academy A 2 Pembroke Pines, Florida Franklin Academy Broward 4500 NW 103 rd Avenue B Sunrise, Florida PP K-7 A A SUN K-6 B A Cooper City Elementary School (Franklin Academy E) 3 Broward 6301 S. Flamingo Road Cooper City, Florida CC K-5 C A Cooper City Middle School (formerly Franklin Academy F) 3 Broward 6301 S. Flamingo Road Cooper City, Florida CC 6-8 A A Broward Pines Boulevard Franklin Academy 3 4 Pembroke Pines, Florida Boynton Beach Palm 7882 S. Military Trail School (Franklin Beach Boynton Beach, Florida Academy B (PB)) PP 8 A -- BB K-8 B A Franklin C (PB) Franklin D Academy Academy Palm Beach Palm Beach 5651 Hood Road Palm Beach Gardens, Florida Hood Road Palm Beach Gardens, PBG K-5 B B PBG 6-7 C A Florida Franklin Academy A, Franklin Academy B, Franklin Academy 3, Franklin Academy C, and Franklin Academy D are referred to herein as the "Other Schools." The Cooper City Schools (see footnote 2) and the Boynton Beach School are herein referred to as the "Schools." The Other Schools and the Schools are herein referred to collectively as the "Franklin Academies." 2 Franklin Academy A will serve grades K-8 in the school year. 3 Through the school year, the Borrower operated the Cooper City School pursuant to two separate Charter School Contracts between the School Board of Broward County, Florida, and the Borrower (Franklin Academy E and Franklin Academy F). Commencing July 1, 2016, the Borrower will operate the Cooper City School pursuant to the Cooper City Charter for Franklin Academy E. Franklin Academy F is expected to serve grades 6-8 in the school year at 5000 SW 207 th Terrace, Pembroke Pines, Florida The Borrower expects to receive formal approval of this change from the School Board of Broward County on July 26, Franklin Academy 3 will serve Grades 9-10 in the school year, and will relocate to Franklin's new high school campus, to be located at 5000 SW 207 th Terrace, Pembroke Pines, Florida Franklin Academy 3 received no grade for because it was not yet in operation. School Grades The school grades calculation was revised substantially in the State for the school year to implement statutory changes made by the 2014 Legislature and incorporate the new Florida Standards Assessments ("FSA"). The new school grading system focuses the school grading formula on student success measures: Achievement A-2

73 Learning gains Graduation Acceleration success Maintaining a focus on students who need the most support On July 8, 2016, the Florida Department of Education ("FDOE") released the school grades. The school grades model uses the new school grades model adopted for , but also includes the new learning gains components for the first time. Results released by the FDOE, which utilized data as an informational baseline, indicated that 991 schools (31%) decreased their grade in Further, the number of A schools dropped from 1,184 (36%) to 741 (23%), and the number of C schools increased from 880 (27%) to 1,246 (39%) in Process to Appeal School Grades In the case of the Borrower, there are two bases upon which school grades may be appealed: (1) if a student was included or excluded in the grade calculation in error, or (2) if learning gains were incorrectly calculated. The Borrower is currently awaiting the individual ("INDV") reports, which will list students included in the grade calculation. According to the FDOE, preliminary INDV reports will be released in July Once the INDV reports are received, the Borrower will have a period of thirty (30) days in which to file an appeal with FDOE. During that timeframe, the Borrower will use the INDV reports to cross reference students against FTE reporting periods to confirm accurate inclusion data was used by the State in calculating the grade to determine whether it has a basis to appeal one or more school grades. Responses to appeals are generally handled expeditiously by the FDOE. However, the Borrower anticipates a higher than usual rate of appeals given implementation of a new grading system and dramatic decreases in school grades from , which may delay response time by the FDOE. The Schools For the school year, the Borrower opened two new charter schools at its Cooper City and Boynton Beach campuses. "Cooper City Elementary School," a K-8 charter but serving grades kindergarten through five, and "Cooper City Middle School," a K-8 charter but serving grades six through eight, were co-located at the Cooper City campus, located in Broward County, Florida. This charter school opened in the fall of 2013 and served approximately 1,300 students (combined) in its inaugural year. "Boynton Beach School," serving grades kindergarten through seven on the Borrower's Boynton Beach campus, is located in Palm Beach County, Florida. This charter school also opened in the fall of 2013 and served approximately 1,100 students in its inaugural year Cooper City Elementary School, Cooper City Middle School, and Boynton Beach School are herein referred to collectively as the "Schools". Through the school year, the Borrower operated the Cooper City School pursuant to two separate K-8 Charter School Contracts between the School Board of Broward County, Florida, and the Borrower. Beginning July 1, 2016, the Borrower will operate the Cooper City School pursuant to the K-8 Cooper City Charter for Franklin Academy E. The Borrower expects to receive formal approval of this change from the School Board of Broward County on July 26, Such change is the result of A-3

74 the School Board of Broward County, Florida's preference against co-location of charter schools serving the same grade levels, and the Borrower's willingness to accommodate this change. 1 The Borrower does not anticipate any change in future enrollment at the Cooper City School as a result of this change. As a result of this operational change, certain historical information for the Cooper City School in this Limited Offering Memorandum is presented separately for the grade K-5 and grade 6-8 operations of the Cooper City School through the school year and the Fiscal Year ended June 30, Going forward, such information will be presented for the Cooper City School as a whole. The Borrower will use a portion of the proceeds of the Series 2016 Bond to acquire the facilities from which the Schools are operated. The Other Schools The Borrower opened its first charter school in 2011 at its Pembroke Pines campus, operating through its Franklin Academy A and Franklin Academy B charters. Beginning with the school year, "Franklin Academy A," serving grades kindergarten through seven, and "Franklin Academy B," serving grade 8, were co-located at the Pembroke Pines campus, located in Broward County, Florida. As a flagship, this charter school opened in the fall of 2011 with approximately 1,112 students. Is a significant feat, as the average charter school in the state of Florida opens with only 200 students. The school went on to set a precedent of excellence by receiving an "A" in the State's accountability system during its first year of operation, a feat that only about a quarter of schools that are graded in the first year in Florida are able to achieve. For the school year, the Borrower opened a new charter school at its Palm Beach Gardens campus, located in Palm Beach County, Florida. "Franklin Academy C (PB)", serving grades kindergarten through five, and "Franklin Academy D (PB)", serving grade six, are co-located at the Palm Beach Gardens campus. This charter school opened in the fall of 2014 with approximately 850 students. For the school year, Franklin Academy B relocated to its permanent location at the Borrower's new Sunrise campus, and has increased enrollment to serve over 1,100 students in grades kindergarten through six. Franklin Academy B is authorized and approved as a K-8 charter, and plans to add grade seven in the school year, and grade eight in the school. For the school year, Franklin Academy 3 served grade eight at the Pembroke Pines campus, and will relocate to its permanent location at the Borrower's new Pembroke Pines High School campus in the fall of Organization and Governance The Borrower is governed by the Board, which must consist of no fewer than three and no more than nine members. The Board currently has five members. The Board oversees the overall operations of the Borrower. The Board establishes the policies of the Borrower by majority vote and only directors are entitled to vote on the business and affairs of the Borrower. The Board is responsible for the legal and fiduciary oversight of the Borrower. The Board is responsible for hiring the Executive Director, who is then responsible for overseeing day-to-day operations of the Borrower. The Board is dedicated to the 1 The second K-8 charter school contract under which the Borrower previously operated one of the co-located Cooper City Schools (Franklin Academy F) will be co-located and operated by the Borrower with its first high school, commencing with the school year. The performance of this new high school will have no bearing on the potential renewal of the Cooper City Charter (Franklin Academy E) operated at the Cooper City School. A-4

75 mission and goals of the Borrower and the success of its students. No member of the Board shall receive compensation for services rendered as Board member, but a Board member may be reimbursed for reasonable and necessary expenses authorized and approved by the Board. Present Officers and Members of the Board The Borrower may have a President, Vice President, Secretary and Treasurer, which officers of the Borrower would be elected by a majority vote of the Board at any regular or special meeting where of a quorum is present. The Board may remove any officer, with or without cause, at any time, by a majority vote of the Board at any regular or special meeting where of a quorum is present. Any officer may resign at any time by given written notice to the Borrower, the resignation taking effect upon receipt of the notice or at different date specified in the notice. Officers do not receive compensation for services rendered as officers of the Borrower. The Borrower currently has no officers. The current members of the Board are as follows: Name Office Profession Member Since Dr. David Thomas Chairman Professor 2011 Ms. Catherine Arcabascio Board Member Graduate School Associate Dean 2013 Dr. Jacqueline Greenberg Board Member Dermatologist/Surgeon 2013 Ms. Alexandra Lonsdale Board Member Teacher 2013 Ms. Debbie Platz Board Member Attorney 2013 Biographies Dr. David Thomas, Chairman - David Thomas is a fully-certified Florida Law Enforcement Officer, attorney and doctor. He is currently the Professor and Chairman of the Department of Surgery and the Professor and Chairman of the Division of Correctional Medicine at Nova Southeastern College of Osteopathic Medicine. Dr. Thomas served as a member of the Florida House for a decade beginning in He held the Leadership position of Republican Whip for over six years and served on the Rules and Calendar, Appropriations, Health Care, and Judiciary Committees among others. Dr. Thomas brings expertise in the areas of public health, Florida law, advocacy, accreditation processes, juvenile justice, and grants. Ms. Catherine Arcabascio, Board Member Ms. Arcabascio is Associate Dean for International Programs at Nova Southeastern University, Shepard Broad Law Center ("NSU Law"), where she also has been a law professor for 20 years. Her teaching and research interests include criminal law, criminal procedure, post-conviction litigation, scientific evidence, clinical legal education, and the transnational practice of law. She is co-founder of the Florida Innocence Project and also served as Clinic Director for the NSU Law Criminal Justice Clinic for more than a decade. Before joining the faculty at NSU Law, she worked as an assistant district attorney in Brooklyn, New York and also as a litigation associate at Shutts & Bowen in Miami, Florida. Ms. Arcabascio received her J.D. from Boston College Law School, her B.A. from New York University, and is admitted to practice law in New York, Florida, the following Federal courts: the Eastern District of New York, the Southern District of Florida, and the Second Circuit Court of Appeals. Ms. Arcabascio also has authored numerous legal articles. A-5

76 Dr. Jacqueline Greenberg, Board Member Dr. Greenberg, DO, FAOCD is a Board-Certified Dermatologist and Fellowship-Trained Mohs Surgeon. Dr. Greenberg earned her medical degree at Nova Southeastern University and completed her internship at Palmetto General Hospital in Miami, Florida. Dr. Greenberg went on to residency in General Surgery and Dermatology at Palms West Hospital and Columbia Hospital, respectively, in West Palm Beach, Florida. Following her residency training, she attended the ACGME and American College of Mohs Surgery Certified Fellowship for training in Mohs Surgery at The Skin Institute in Fort Lauderdale, Florida. Dr. Greenberg is a Fellow of the American Osteopathic College of Dermatology, and is a member of numerous professional organizations, including the American College of Mohs Surgery, American Osteopathic Association, American Medical Association, and the American Academy of Dermatology. Ms. Alexandra Lonsdale, Board Member - Alexandra Lonsdale is a graduate of the University of Florida with a Master's degree in Elementary Education. She specialized in reading and earned her Reading Endorsement in She is also certified in the areas of ESE, gifted, ESOL, middle grades, and elementary areas. Ms. Lonsdale previously taught middle school Language Arts for four years at charter schools in Hillsborough County. She has taught Kindergarten at a Pinellas County charter school for the past two years and is currently employed there. Ms. Debbie Platz, Board Member Ms. Platz is General Counsel of the Nemours Children's Hospital in Orlando, Florida and Deputy General Counsel for the Nemours Foundation, whose home office is in Jacksonville, Florida. Nemours Children's Hospital opened in Lake Nona Medical City in October of 2012 with a team of internationally recognized pediatric specialists who not only treat children but also search for new treatments and cures. Nemours Children's Hospital is operated by the Nemours Foundation the legacy of Alfred I. DuPont. Nemours has cared for millions of children in locations throughout Delaware, Florida, New Jersey and Pennsylvania. Nemours is now one of the nation's leading pediatric health care systems with two freestanding children's hospitals. Most recently, Ms. Platz assisted in the licensure and Joint Commission Accreditation of the Nemours Children's Hospital which successfully opened its doors on October 22, As General Counsel, Ms. Platz manages all legal affairs for the Nemours Children's Hospital. In addition, she serves with the CEO, the CMO, the CNO and CAO on the Executive Team for the hospital. Previously Ms. Platz was in private practice in Ft. Lauderdale as a partner at Panza, Maurer and Maynard, P.A., where she specialized in health care and regulatory law. Ms. Platz received her B.A. from the University of Arizona, and her J.D. from Nova Southeastern Law School. She is admitted to the Florida Bar. Administration and Faculty Mr. Scott E. Sznitken, Executive Director Mr. Sznitken has been employed by the Borrower since In his current capacity as Executive Director, Mr. Sznitken oversees operational efficiencies among the Borrower's charter school network. Areas of responsibility include school-wide compliance with health and safety laws, charter applications and contracts and state education mandates. Mr. Sznitken supervises the school leadership teams, oversees human resource policies and procedures and marketing efforts needed to ensure budgeted enrollment targets. Mr. Sznitken has more than 14 years of information technology experience with a proven track record for developing and designing systems and solutions to improve productivity and efficiency. Prior to joining the Borrower, Mr. Sznitken was a senior consultant for CBIZ, a nationally located professional services organization and specialized in document management tools, customer relationship management projects, and system integration tools to link data between disjunctive systems; all in an effort to enable the clients to grow and better manage their finances and organizations. As an Educational Technology Specialist at Charter Schools USA, Mr. Sznitken worked with many of the faculty members to integrate technology into their lessons. Mr. Sznitken also designed a business development tool enabling corporate departments to efficiently track statistical data on school populations to assist with future growth and a comprehensive Student Information System A-6

77 designed for the management of K-12 schools. As a former web architect and systems analyst, Mr. Sznitken has also designed and implemented numerous technology based solutions including tools to better manage job applications, IT help desk tickets and marketing traffic. Mr. Sznitken holds a Bachelor of Arts degree in Political Science from Syracuse University, a Juris Doctorate degree from Nova Southeastern University and is a member of the state and federal bars of Florida and the state bar of New York. He currently lives in Plantation with his wife and two daughters. Employees Each campus employs a principal, two or more assistant principals, a business manager, director of operations (usually employed in the second year of school operations), three or more administrative assistants, information technology coordinator, registrar, school nurse, one or more guidance counselor, curriculum specialist, RTI coordinator, and other instructional and non-instructional staff. The Schools' teachers are certified and meet highly qualified requirements as required by applicable Florida and federal law. The Board may employ or contract with skilled selected non-certified personnel to provide instructional services or to assist instructional staff as educational paraprofessionals in the same manner as authorized by Florida law and as provided by applicable Florida Department of Education rules. The Schools' teachers, support staff and additional employees are employees of and are compensated by the Borrower. All employees are employed at will. The Borrower believes that the faculty, administration and the Board have a strong and collaborative working relationship. The Borrower monitors its teachers and makes determinations about their ongoing status with the Schools. The Borrower considers relations with the teachers to be excellent. None of the Schools' current teachers or other employees is represented by a union. As shown in the table below, for school year, the Schools had 219 staff positions. Staffing Requirements Full-Time Equivalency (Full time = 1.0, part time = 0.5) Cooper City Elementary School Cooper City Middle School Boynton Beach School Administrators Classroom Teachers Specialists Teachers Educ. Assistants Admin. Assistants Bef/Aft Care Staff Maintenance Staff Totals Third Party Service Providers Discovery Schools, Inc. The Borrower has entered into a charter school Discovery Schools Management Agreement with Discovery Schools, Inc. (the "Discovery Schools") dated September 20, A-7

78 2012 and effective October 1, 2012 (the "Discovery Schools Management Agreement"). Discovery Schools is a Florida profit corporation, incorporated in July, 2009, to provide professional planning, accountability, compliance, consulting and support services to public charter schools, and will serve six charter schools for the school year. The current term of the Discovery Schools Management Agreement is for a period of seven years from October 1, 2012 through September 30, The Discovery Schools Management Agreement automatically renews for successive seven year terms unless terminated by the Borrower, notice of which termination must be provided 180 days prior to the expiration of the current term. The Discovery Schools Management Agreement superseded and replaced a prior agreement between the parties which covered services to the Schools only with respect to Franklin Academy A. Pursuant to the Discovery Schools Management Agreement, Discovery Schools provides consulting and administrative services to the Schools with respect to its network of Franklin Academy charter schools. Consulting and administrative services provided pursuant to the Discovery Schools Management Agreement include, but are not limited to: identification, design and procurement of facilities; staffing recommendations; human resource coordination; day to day administration support; regulatory compliance; coordination and monitoring of contracted professional and support service providers; monitoring and oversight of maintenance of the books and records of the Schools; and monitoring of the contracted provider for bookkeeping, budgeting and financial forecasting that is required by the governing Board for its oversight. Discovery Schools also serves as the Borrower's primary liaison with the local district School Boards, and coordinates on behalf of the Borrower to the timely renewal of the Borrower's charter contracts. In exchange for its consulting services, the Borrower pays Discovery Schools a consulting fee of $450 per student Full Time Equivalent ("FTE") per annum during the term of the Agreement, subject to receipt of such funds by the Borrower (the "Consulting Fee"). The Consulting Fee is paid in equal monthly installments. Amounts payable to Discovery Schools under the Discovery Schools Management Agreement are to be paid only after (i) payment of Loan Payments and Additional Payments then due under the Loan Agreement and (ii) replenishment of certain funds described in "SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2016 BONDS Allocation of Revenues," and any such unpaid fees shall be deferred until such time as payment may be made in accordance with the Loan Agreement. If such payments are not paid to Discovery Schools pursuant to the preceding sentence, Discovery Schools is required to continue providing management services to the Schools for up to not less than the greater of (A) the remainder of the then-current school year or (B) the next succeeding six months. As such, there can be no guarantee that Discovery Schools would continue to provide services to the Schools beyond such limited period if amounts due under the Discovery Schools Management Agreement were not timely paid. See "BONDHOLDERS' RISKS - Terms of Management Agreements Shorter than Final Maturity Date of Series 2016 Bonds" and " Subordination of Management Fees." Charter School Services Corporation, Inc. The Borrower contracts with Charter School Services Corporation, Inc. ("CSSC"), Fort Lauderdale, Florida, for accounting and human resources management services for the Schools including, but not limited to, regulatory compliance, maintenance of books and records, bookkeeping, budgeting, and financial reporting. CSSC was created as a subsidiary of Building Hope in 2008 to provide business services to charter schools. Currently, CSSC serves 38 charter schools in the State of Florida, providing various levels of business service support. CSSC also runs the Charter Support Unit ("CSU") for the Florida Department of Education ("FDOE"). The CSU provides workshops, webinars, school evaluations, and other support service free of charge to charter schools in their first five years of operations. In addition, CSSC is a register Municipal Adviser. A-8

79 CSSC provides such services for the Schools to the Borrower pursuant to a Management Agreement dated as of June 6, 2016 (the "CSSC Management Agreement" and together with the Discovery Schools Management Agreement, the "Management Agreements"), between CSSC and the Borrower. Under the CSSC Management Agreement, the Borrower is required to pay CSSC a fee of $50 per full time equivalent student per year. The management agreement may be terminated by the Borrower at any time upon 30 days' notice. Amounts payable to CSSC under the CSSC Management Agreement are to be paid only after (i) payment of Loan Payments and Additional Payments then due under the Loan Agreement and (ii) replenishment of certain funds described in "SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2016 BONDS Allocation of Revenues," and any such unpaid fees shall be deferred until such time as payment may be made in accordance with the Loan Agreement. If such payments are not paid to CSSC pursuant to the preceding sentence, CSSC is required to continue providing management services to the Schools for up to not less than the greater of (A) the remainder of the then-current school year or (B) the next succeeding six months. As such, there can be no guarantee that CSSC would continue to provide services to the Schools beyond such limited period if amounts due under the CSSC Management Agreement were not timely paid. See "BONDHOLDERS' RISKS - Terms of Management Agreements Shorter than Final Maturity Date of Series 2016 Bonds" and " Subordination of Management Fees." CSSC is also serving as financial advisor to the Borrower in connection with the Series 2016 Bond transaction. For additional information regarding CSSC, see "FINANCIAL ADVISOR," "CERTAIN RELATIONSHIPS," and "EXAMINED FORECAST." The Project THE PROJECT On the date of issuance of the Series 2016 Bonds, a portion of the proceeds of the Series 2016 Bonds will be used by the Borrower to purchase (i) the Boynton Beach Campus from an unrelated third party for $22,305,378 and (ii) the Cooper City Campus from an unrelated third party for $20,047,852. Mortgaged Property Payment of the Series 2016 Bonds is secured by a Mortgage with Assignment of Rents, Security Agreement and Fixture Filing dated as of August 1, 2016 (the "Mortgage") from the Borrower to the Issuer and assigned to the Trustee encumbering the Borrower's interest in the Facilities. The Facilities consist of (a) certain educational facilities consisting of approximately 9.94 acres of land and the existing site improvements thereon located at 7882 S. Military Trail, Boynton Beach, Palm Beach County, Florida 33462, including without limitation an approximately 86,435 square foot building and ancillary facilities, which are operated by the Borrower as the Boynton Beach School (the "Boynton Beach Campus"); (b) certain educational facilities consisting of approximately 11 acres of land and the existing site improvements thereon located at 6301 S. Flamingo Road, Cooper City, Broward County, Florida 33330, including without limitation an approximately 89,937 square foot building and ancillary facilities, which are operated by the Borrower as the Cooper City School (the "Cooper City Campus"); and (c) certain furniture, fixtures and equipment for the Boynton Beach Campus and the Cooper City Campus, which are located at and forms a part of such educational facilities. A-9

80 In particular, the Boynton Beach Campus consists of a 80,435 square foot, two-story building and a gymnasium on 9.94 acres. This developed plat is located on Military Road and Old Military Trail. This state-of-the-art facility, which allows for shared spaces for elementary and middle school, accommodates 69 classrooms, a well-appointed gymnasium with locker rooms, a cafeteria, kitchen, specialty rooms for music, art rooms, computer lab, large multipurpose rooms, science lab, administration offices, and support space for the charter school's programs. The campus is equipped with athletic fields, ageappropriate playgrounds, a jogging path with fitness stations located throughout. This campus also includes an on-site car pick-up/drop-off area, a dedicated bus loop area, and a 129-space parking lot. The Cooper City Campus consists of a 91,365 square foot, two-story building on 9.25 acres. It is located on south Flamingo Road and Schott Circle, immediately adjacent to Schott Memorial. This stateof-the-art facility, which allows for shared spaces for elementary and middle school, accommodates 65 classrooms, a cafeteria, kitchen, specialty rooms for music, art rooms, computer lab, large multipurpose rooms, science lab, administration offices, locker rooms, and support space for the charter school's programs. The campus is equipped with athletic fields, age-appropriate playgrounds, and a jogging path with fitness stations located throughout. This campus also includes an on-site car pick-up/drop-off area, a dedicated bus loop area, a 122-space parking lot, and a 159-car onsite stacking space. Appraisal Reports An Appraisal Institute MAI-certified appraiser (the "Appraiser") has been engaged by the Borrower to appraise the Facilities. In that connection, the Appraiser has prepared its appraisal reports of the Boynton Beach Campus and the Cooper City Campus, each dated June 6, 2016 (the "Appraisal Reports"). The Appraisal Reports estimate the market value of a fee simple interest the Boynton Beach Campus to be approximately $22,500,000 as of April 8, 2016, and the market value of a fee simple interest the Cooper City Campus to be approximately $23,500,000 as of April 8, Such appraised values, in the aggregate, are less than the amount of Series 2016 Bonds to be issued. The summary of the Appraisal Reports contained in this section is not meant to be exhaustive, and reference should be made to the Appraisal Reports for a complete recital of their terms. Complete copies of the Appraisal Reports are available upon request from the Borrower. The value of the Facilities as estimated in the Appraisal Reports represent only the opinion of the Appraiser, and only as of the effective date of the Appraisal Reports. The Appraiser will not be engaged to update or revise the estimates contained in the Appraisal Reports after their date. See "BONDHOLDERS' RISKS Limited Nature of Real Estate Appraisals." Environmental Reports U.S. South Engineering & Testing Lab, Inc. (the "Consultant") conducted Phase I Environmental Site Assessments of the land comprising the Boynton Beach Campus and the Cooper City Campus and summarized its findings in reports dated April 2016 (the "Phase I Reports"). The Phase I Reports state that no recognized environmental conditions were revealed in connection with either site. The Phase I Reports speak only as of their dates, and the Consultant has not been asked to perform any additional assessment since the time of the Phase I Reports. Further, the Phase I Reports are subject to the limitations specified in such reports. More generally, no environmental assessment can completely eliminate uncertainty regarding the potential for recognized environmental conditions in connection with a subject property. Potential investors must refer to the complete Phase I Reports for a full understanding of such limitations, and for additional information pertinent to the assessment. Copies of the Phase I Reports are available upon request from the Borrower. Costs incurred by the Borrower A-10

81 with respect to environmental remediation or liability could adversely affect its financial condition. See "BONDHOLDERS' RISKS Environmental Regulation." Charter Contracts THE FRANKLIN ACADEMIES As noted above, Franklin Academy currently operates pursuant to eight charter contracts between Broward and Palm Beach Counties in Florida. Each charter contract governs the major issues involving the recipient's authority to operate a public charter school, the recipient's mission, the students to be served, the grades to be included, the focus on the curriculum, student performance, admissions procedures, financial and administrative management, and governance and operations, among other matters. Under the Florida Statutes, a charter school operated by a private, not-for-profit, 501(c)(3) organization that meets certain academic and financial conditions is eligible for up to a 15-year charter. However, initial charters in Florida are often of five-year duration. Each of the current charter contracts is detailed below: ID Internal Identifier County Contract Approved on Contract Expires On Franklin Academy B Broward June 15, 2016 June 30, 2031 Franklin Academy A Broward June 15, 2016 June 30, Cooper City School (Franklin Academy E) New middle school (formerly Cooper City Middle School) (Franklin Academy F) Broward June 19, 2012 June 30, 2017 Broward June 19, 2012 June 30, Franklin Academy 3 Broward October 7, 2014 June 30, Boynton Beach School (Franklin Academy B (PB)) Palm Beach September 2, 2011 June 30, Franklin Academy C (PB) Palm Beach January 14, 2014 June 30, Franklin Academy D (PB) Palm Beach January 14, 2014 June 30, 2019 Under the terms of Florida law, charters may be renewed, upon application, for a term of up to 15 years for charter schools that have been operating for at least three years and demonstrate exemplary academic programming and fiscal management. Florida law allows a charter to be renewed provided that a program review demonstrates that the criteria set forth in the charter as described in (7)(a), Florida Statutes (which includes the school's mission, the students to be served, the focus of the curriculum, academic achievement and measurement, admissions and dismissal procedures, the ways by A-11

82 which a school will achieve racial/ethnic balance, the financial and administrative management of the school, and other matters), have been met and that none of the grounds for non-renewal have been documented. Franklin Academy A and Franklin Academy B, both received approval from the School District of Broward County, Florida on June 15, In the future, the Borrower will likewise seek 15-year renewal charters for each of its expiring charter contracts. The Borrower's charter contracts may be terminated by a School Board, or a School Board may choose not to renew a charter contract, only upon a determination by the applicable School Board that one of the following has occurred: the charter school fails to participate in the State's education accountability system created in Section of the Florida Statutes, or fails to meet the requirements for student performance stated in its charter the school fails to meet generally accepted standards of fiscal management there is a violation of law by the school or its operator other good cause shown Florida law provides that a charter contract may be terminated immediately if the health, safety, or welfare of the students is threatened. Florida Statutes provide that at least 90 days prior to renewing or terminating charter contract (except in the case of immediate termination where certain different requirements apply), the School Board must notify the board of the charter school operator of the proposed action in writing. The notice must state in reasonable detail the grounds for the proposed action and stipulate that the charter school operator may, within 14 calendar days after receiving the notice, request an informal hearing before the School Board or an administrative law judge. If the hearing is conducted by the School Board, the School Board must conduct the informal hearing within 60 calendar days after receiving a written request. If the hearing is conducted by an administrative law judge, the hearing must be conducted within 60 days after receipt of the request for a hearing. The judge's recommended order is then submitted to the School Board for adoption or modification. If a charter contract is not renewed or is terminated, the School Board must, within ten calendar days, articulate in writing the specific reasons for its nonrenewal or termination of the Charter Contract and must provide the letter of nonrenewal or termination and documentation supporting the reasons to the board of the charter school operator, the school's principal, and the Florida Department of Education. The charter school operator may, within 30 calendar days after receiving the School Board's final written decision to refuse to renew or to terminate a charter contract, appeal the decision pursuant to the procedure established in (6), Florida Statutes, to the State Board of Education. Florida amended its charter school law most recently in 2011 and Among the most significant changes made are the addition of criteria for high performing charter schools and high performing charter school systems, and amendments to the process for approval, denial and appeal of charter school applications. The law now provides that a high performing charter school may increase its student enrollment once per school year by 15%, add grade levels if any annual enrollment increase is within the 15% limit, consolidate under a single charter the charters of multiple high performing charter schools operated in the same school district by the charter schools' governing body regardless of renewal cycle, and submit an application in any school district in the State to establish and operate a new charter school that will substantially replicate its educational program. A high performing charter school is A-12

83 defined as a charter school which meets all of the following criteria: (1) received at least two school grades of "A" and no school grade below a "B" during each of the previous three school years, (2) received an unqualified opinion on each annual financial audit in the most recent three years for which such audits are available, and (3) did not receive a financial audit that revealed one or more financial emergency conditions set forth in Section (1), Florida Statutes in the most recent three years for which such financial audits are available. Two of the Borrower's charters, Franklin Academy A and Franklin Academy B, have already received the high performing charter school designation from the State of Florida, and the Borrower anticipates that more of its charters will likewise receive the high performing charter school designation once they have finished the third year of operation. In its 2016 Session, the Florida Legislature made relatively modest changes to the Act and other laws affecting charter public schools in the State. Florida public schools, including charter public schools, are organized by districts, which correspond to counties although the district school boards are separate and distinct from their respective co-jurisdictional county commissions. In 2016, the Florida legislature blurred the jurisdictional boundaries for public schools (including charter public schools) via the so-called "controlled open enrollment" mechanism. Under controlled open enrollment, students from other counties may be enrolled in a traditional or charter public school outside of their county of residence, provided that such enrollment does not act to displace students resident within the county in which the target school is located. In addition, the legislature amended the Act to allow a charter school applicant to defer, for up to two years, commencement of school operations following the grant of a charter. Prior to this change, a charter applicant could defer opening only with the consent of the local school district. Given the timing of the charter granting cycle, the prior requirement of opening in the year in which the charter was granted, was a significant burden on charter applicants. Mission and Goals The mission of Franklin Academy is to "build better people every day" through a rigorous educational program that integrates project-based learning, inquiry, creativity, continuous improvement, and character education, while addressing each individual's learning style and specific needs. Franklin Academy meets its mission through a hands-on rigorous academic program centered around Benjamin Franklin's quote "Tell me and I forget, Teach me and I remember, Involve me and I learn." Highly qualified staff and administration work with students, parents, and all stakeholders within the educational landscape to ensure that each student sets learning goals and empowers him/herself by mastering all core academic areas and developing a well-rounded education through special area classes that include art, chess, Spanish, technology, physical education, and music. Through a sustained and integrated program of character development, students explore the sense of community, integrity and obligations to self and our world. The core values of Trustworthiness, Respect, Responsibility, Fairness, Caring, and Citizenship are the Six Pillars of Character upon which the foundation of Franklin Academy's Character Education program is built. To meet Franklin Academy's mission, teachers are considered the first learners and have enthusiastically participated in aligned professional development opportunities to sharpen their knowledge and skills in utilizing current brain-based research, instructional strategies, technology, cooperative learning strategies, higher-order questioning techniques, multiple intelligences, and differentiation of instruction. Applying new learning to the classroom has resulted in students becoming active rather than passive learners. Students are observed working in cooperative learning groups, completing research on topics of their interest, utilizing technology on a daily basis, and using hands-on manipulative learning materials. Assessment data is routinely used to assess student performance and guide decision-making with regard to planning for instruction. A-13

84 Another factor in the success of Franklin Academy has been the emphasis on creating a warm, caring environment for learning. Franklin Academy's focus on positive discipline and character education provides opportunities for students to develop self-discipline and community responsibility. Characterbased lessons encourage students to compliment other students and problem solve together on classroom concerns. One character trait from the School's Six Pillars of Character is studied each month during the school year. Information about the monthly character trait is communicated in school calendars and on the morning news broadcast. The focus on character education is enhanced by each school's "Student of the Month" program. Students who exemplify the character trait of the month are nominated by their peers and are recognized as model citizens. Emphasis on the importance of daily attendance, direct instruction on organizational skills, and high standards for quality work performance contributes to an overall positive, productive learning environment for all students. Franklin Academy's rigorous approach to learning, individual needs-based instructional delivery system, differentiated instructional model, and student empowerment supplemented with classroom-based technology, continuous progress monitoring and assessments helps in delivery of its mission. The decentralization of services and shared decision making by all professionals within each campus, a high level of parental involvement, and a web-based student information system allows parents to communicate with their school and track their child's progress. Holistically, the implementation of these mission-specific goals has encouraged a team-oriented framework that is conducive to the success of the overall program. Population Served The Borrower currently operates schools in Broward and Palm Beach Counties. Each of these counties are large counties located in South Florida. The number of schools and combined enrollment of schools with each county is highlighted in the chart below School Counts and Enrollment Broward County Palm Beach County Traditional Charter Traditional Charter Elementary Schools 150 (102,457) 37 (12,099) 109 (78,174) 8 (1,899) Middle / Jr High Schools 39 (45,485) 14 (4,510) 33 (35,359) 4 (1,632) High Schools 42 (72,770) 25 (9,507) 36 (52,555) 20 (5,404) Combination Schools 15 (4,022) 29 (17,715) 11 (2,276) 21 (11,451) Totals 246 (224,734) 105 (43,831) 189 (168,364) 53 (20,386) A-14

85 Map of Campus Locations The map below shows the locations of the Boynton Beach Campus and the Cooper City Campus. Broward County Service Area The Cooper City Schools are located within the district served by Broward County Public Schools ("BCPS"), which is the sixth largest public school system in the United States. During the school year, BCPS served more than 265,000 students and approximately 175,000 adult students in 341 total schools, consisting of 137 elementary schools, 40 middle schools, 33 high schools, six combination schools, 19 centers, and three colleges. In addition, 103 charter schools operated within the district served by BCPS. The population of Broward County 1,748,066 in 2010, and grew to an estimated 1,896,425 in 2015, each according to the United States Census Bureau, with an estimated 21.5% of the population under 18 years old. A-15

86 Palm Beach County Service Area The Boynton Beach School is located within the district served by the School District of Palm Beach County ("SDPBC"). During the school year, SDPBC served approximately 183,000 students in 187 schools, consisting of 108 elementary schools, 35 middle schools, 23 high schools, and 21 alternative schools. The population of Palm Beach County was 1,320,134 in 2010, and grew to an estimated 1,422,789 in 2015, each according to the United States Census Bureau, with an estimated 19.5% of the population under 18 years old. Enrollment Florida law requires charter schools to enroll eligible students who submit timely applications, unless the number of applications exceeds the capacity of a program, class, grade level, or building. In such case, all applicants must have an equal chance of being admitted through a random selection process. Florida law permits a charter school to give enrollment preference to: (i) students who are siblings of a student enrolled in the charter school; (ii) students who are children of a member of the governing board of the charter school; (iii) students who are children of an employee of a charter school, (iv) students who are the children of an employee of the business partner of a charter school-in-the-workplace or a resident of the municipality in which such charter school is located, or a resident of a municipality that operates a charter school-in-a-municipality, (v) students who have successfully completed a voluntary prekindergarten education program provided by the charter school or the charter school's governing board during the previous year, or (vi) students who are the children of an active-duty member of any branch of the United States Armed Forces. The Schools may enroll students who reside in other counties on the basis of an inter-district agreement between the School Board and the school board of the student's county of residence. Any such inter-local agreement must be conditioned upon an agreement that all funding for such student shall be paid by the student's county of residence and that no funds of the School Board shall be required. No qualified County resident student is denied enrollment in the Schools by reason of lack of space or ability to provide service due to the enrollment of non-county resident students as herein permitted, with the exception of the preferences set forth (i), (ii) or (iii) above. The school endeavors to maintain an ethnically diverse enrollment of students and may not deny enrollment to any qualified applicant on account of race, religion, national origin or gender. Waiting List and Retention When a charter school receives applications that exceed the capacity of a program, grade, class or building, applicants who apply prior to the annual lottery deadline are selected through a random selection process. Those who are not selected and those who apply after the lottery deadline are put on a waiting list. When seats become available, vacancies are filled with applicants from the waiting list, in the order they were added to the waiting list, contingent on review of the student's specific special needs resource requirements (where applicable and required). The Schools fill vacancies as they occur, including prior to and after the start of the school year. The Schools make inquiries of students on its waiting list annually. Students that indicate a desire to remain on the waiting list must submit a new application to stay on the list from one year to the next. A-16

87 Enrollment numbers fluctuate throughout the year for most schools, including the Schools. In Florida, actual enrollment numbers are reported to the State of Florida in October and then again in February of each year. Actual revenue amounts are based on an average of these two counts, and this average is the reported attendance for each year. A waiting list is maintained throughout the year. Historical and Projected Enrollment and Waiting List Data The following two tables set forth the historical and projected enrollment at the Cooper City School and the Boynton Beach School for the years set forth in such tables. Cooper City School Historical Projected K Total 1,315 1,322 1,321 1,340 1,340 1,340 1,340 1,340 Boynton Beach School Historical Projected K Total 1,127 1,264 1,232 1,340 1,340 1,340 1,340 1,340 A-17

88 The following two tables set forth the end of year waiting lists at the Cooper City School and the Boynton Beach School for the years set forth in such tables. The data for is as of June 10, Boynton Beach School Cooper City School K K Total Total 1,069 1,507 1,339 1,729 The following table presents (i) historical and projected student retention rates, calculated by dividing the number of students enrolled at such School on the last day of the preceding school year by the number of such students re-enrolling at such School for the listed school year, for each of the Schools for the indicated school years and (ii) historical teacher retention rates, calculated by dividing the number of teachers teaching at such School on the last day of the preceding school year by the number of such teachers teaching at such School for the listed school year, for each of the Schools for the indicated school years. Boynton Beach School Cooper City School * Student Retention Rate 62% 67% 86% 99% 99% 92% Teacher Retention Rate N/A N/A School Grade and Accountability The Franklin Academies are required to participate in Florida's System of School Improvement and Accountability testing. The system utilized the Florida Comprehensive Assessment Test ("FCAT") prior to academic year , and now utilizes the Florida Standards Assessment ("FSA"), as part of Florida's overall plan to increase student achievement by implementing higher standards. Florida schools are assigned a grade based primarily upon student achievement data from the FCAT/FSA. School grades communicate to the public how well a school is performing relative to state standards. School grades are calculated based on annual learning gains of each student, toward achievement of the Next Generation Sunshine State Standards, the progress of the lowest quartile of 2 Student retention rates for the school year are as projected by the Borrower on July 15, A-18

89 students, and the meeting of proficiency standards. The following table sets forth data regarding the Borrower's grades by school year: Certain Franklin Academies' Grades and Other Statistics Franklin A School Academic Performance Grade (Includes Learning Gains) A A A A % Meeting High Standards in Reading 78% 82% 86% 75% % Meeting High Standards in Math 74% 72% 79% 78% % Meeting High Standards in Writing 88% 84% 67% n/a % Meeting High Standards in Science 75% 81% 76% 73% % Making Learning Gains in Reading 78% 72% 78% n/a % Making Learning Gains in Math 70% 60% 76% n/a % of Lowest 25% Making Learning Gains in Reading 76% 80% 87% n/a % of Lowest 25% Making Learning Gains in Math 62% 53% 66% n/a Percent Tested 100% 100% 100% 100% Free and Reduced Lunch 27% 32% 33% 41% Minority 80% 81% 77% 79% Cooper City Elementary School Academic Performance Grade (Includes Learning Gains) C A % Meeting High Standards in Reading 72% 67% % Meeting High Standards in Math 68% 70% % Meeting High Standards in Writing 35% n/a % Meeting High Standards in Science 65% 63% % Making Learning Gains in Reading 65% n/a % Making Learning Gains in Math 62% n/a % of Lowest 25% Making Learning Gains in Reading 63% n/a % of Lowest 25% Making Learning Gains in Math 58% n/a Percent Tested 100% 99% Free and Reduced Lunch 60% 69% Minority 73% 75% 3 In the state released a new assessment, moving from the FCAT to the FSA, which moved from Florida's older state standards to standards which were originally based on the Common Core Standards. The new assessment made direct comparisons of student learning gains inapt, so the state did not release learning gain data, nor did they release competency scores in Writing, for the academic year. For certain School Grade data for the school year, see "The Franklin Academies" and "School Grades" herein. A-19

90 Cooper City Middle School Academic Performance Grade (Includes Learning Gains) A A % Meeting High Standards in Reading 72% 74% % Meeting High Standards in Math 68% 75% % Meeting High Standards in Writing 49% n/a % Meeting High Standards in Science 63% 62% % Making Learning Gains in Reading 77% n/a % Making Learning Gains in Math 77% n/a % of Lowest 25% Making Learning Gains in Reading 76% n/a % of Lowest 25% Making Learning Gains in Math 74% n/a Percent Tested 100% 100% Free and Reduced Lunch 47% 78% Minority 74% 73% Boynton Beach School Academic Performance Grade (Includes Learning Gains) C A % Meeting High Standards in Reading 69% 59% % Meeting High Standards in Math 54% 54% % Meeting High Standards in Writing 50% n/a % Meeting High Standards in Science 50% 57% % Making Learning Gains in Reading 68% n/a % Making Learning Gains in Math 46% n/a % of Lowest 25% Making Learning Gains in Reading 64% n/a % of Lowest 25% Making Learning Gains in Math 48% n/a Percent Tested 100% 100% Free and Reduced Lunch 36% 42% Minority 45% 52% 4 In the state released a new assessment, moving from the FCAT to the FSA, which moved from Florida's older state standards to standards which were originally based on the Common Core Standards. The new assessment made direct comparisons of student learning gains inapt, so the state did not release learning gain data, nor did they release competency scores in Writing, for the academic year. For certain School Grade data for the school year, see "The Franklin Academies" and "School Grades" herein. A-20

91 The following table shows the district results in the same categories as listed above for each school for purposes of comparison of the results of the Franklin Academies. Broward County District Performance Grade (Includes Learning Gains) B C B B % Meeting High Standards in Reading 58% 58% 59% 55% % Meeting High Standards in Math 62% 61% 61% 55% % Meeting High Standards in Writing 85% 66% 65% n/a % Meeting High Standards in Science 49% 55% 55% 55% % Making Learning Gains in Reading 67% 65% 68% n/a % Making Learning Gains in Math 68% 65% 67% n/a % of Lowest 25% Making Learning Gains in Reading 66% 63% 66% n/a % of Lowest 25% Making Learning Gains in Math 59% 57% 62% n/a Percent Tested 99% 99% 98% 98% Free and Reduced Lunch 57% 57% 60% 69% Minority 74% 75% 76% 77% Palm Beach County District Performance Grade (Includes Learning Gains) A B B A % Meeting High Standards in Reading 58% 59% 59% 55% % Meeting High Standards in Math 61% 62% 63% 56% % Meeting High Standards in Writing 87% 70% 70% n/a % Meeting High Standards in Science 54% 60% 60% 61% % Making Learning Gains in Reading 67% 68% 67% n/a % Making Learning Gains in Math 69% 68% 71% n/a % of Lowest 25% Making Learning Gains in Reading 68% 66% 66% n/a % of Lowest 25% Making Learning Gains in Math 66% 60% 63% n/a Percent Tested 99% 99% 99% 98% Free and Reduced Lunch 53% 55% 60% 61% Minority 64% 65% 66% 62% 5 In the state released a new assessment, moving from the FCAT to the FSA, which moved from Florida's older state standards to standards which were originally based on the Common Core Standards. The new assessment made direct comparisons of student learning gains inapt, so the state did not release learning gain data, nor did they release competency scores in Writing, for the academic year. For certain School Grade data for the school year, see "The Franklin Academies" and "School Grades" herein. A-21

92 AYP Status In Florida, under the accountability provisions of Title I of the Elementary and Secondary Education Act, as reauthorized by the No Child Left Behind Act of 2001 ("NCLB"), all public school campuses, school districts, and the State are evaluated for Adequate Yearly Progress ("AYP"). A Florida public school or school district makes AYP if the following criteria are met: Participation: At least 95% of all students enrolled in a public school participate in the State assessment program. Students must be tested using the FCAT or an appropriate alternate assessment for students with disabilities. This requirement applies to all students and each subgroup for reading and mathematics. Reading Proficiency: The State has set annual objectives for reading proficiency based on the ultimate goal to have 100% of all students proficient in reading by For , the State objective is to have at least 79% of all students and each subgroup reading at or above their grade level. Math Proficiency: The State has also set annual objectives for math proficiency based on the ultimate goal to have 100% of all students proficient in math by For , the state objective is to have at least 80% of all students and each subgroup scoring at or above their grade level in math. Other Criteria: NCLB requires the state definition of AYP to include a graduation rate and at least one additional academic indicator as determined by the state. In Florida, the writing assessment will be used as the additional indicator and school grades will be used as an additional condition. Thus, in addition to the three criteria listed above, schools must meet three other criteria: Improve performance in writing by 1%: The writing target is also met if the school has a writing performance rate of 90% or better. Improve the graduation rate by 1%: The target is also met if a school attains a rate of 85% or better in the current year. The school is not given a grade of D or F. Litigation As of the date of the Limited Offering Memorandum, neither the Borrower nor any of the Schools is the subject of any litigation or administrative proceeding related to its operations that, in the judgment of the Borrower, would have a material adverse effect on the ability of the Borrower to make Loan Repayments and meet its budgeted expenses. Litigation may arise in the normal course of business of either the Borrower or the Schools. See "BONDHOLDERS' RISKS Litigation" for an explanation of risks associated with any potential litigation that may arise in the normal course of business for the Borrower or the Schools. Statements of Net Position and Statements of Revenues, Expenditures and Changes in Fund Balances The following Statements of Net Position for each of the Schools present a summary of the audited financial position as of the end of the Fiscal Years ended June 30, 2014 and 2015 and as of the end of the nine-month periods ended March 31, 2015 and The Statements of Revenues, Expenditures and Changes in Fund Balances for the Schools present a summary of the financial activities for the Schools during the Fiscal Years or nine-month periods reported, thereby reconciling the beginning and end of year net asset positions contained in the Statements of Net Position. Such summary statements are based on the audited financial statements of the Schools for the Fiscal Years June 30, 2014 and 2015, and on unaudited financial information of the Schools for the nine-month periods ending March 31, 2015 and The financial statements of the Schools for the Fiscal Years ended June 30, 2014 and 2015, as audited by HLB Gravier, LLP (the "Auditor"), are included as APPENDIX B "AUDITED FINANCIAL A-22

93 STATEMENTS OF THE SCHOOLS FOR FISCAL YEARS ENDED JUNE 30, 2014 AND 2015." These financial statements were prepared using the standards applicable to governmental entities. The audited financial statements included in Appendix B are an integral part hereof and should be read in their entirety. The following tables set forth summaries of the Boynton Beach School's Statement of Net Position and Statement of Revenues, Expenditures and Changes in Fund Balances for the Fiscal Years ended June 30, 2014 and 2015, as well as unaudited financial information for the nine-month periods ended March 31, 2015 and Statement of Net Position Boynton Beach School As of June 30, As of March 31, (Audited) (Audited) (Unaudited) (Unaudited) Assets Current assets: Cash and cash equivalents $371,410 $257,424 $330,722 $70,181 Due from other agencies 9,933 99,118-68,839 Due from other charter schools 148, Deposits receivable $529,676 $356,542 $330,722 $139,020 Capital assets, depreciable $1,240,985 $1,544,906 $1,408,838 $1,593,660 Less: accumulated depreciation (171,790) (496,220) (394,172) (752,521) $1,069,195 $1,048,686 $1,014,666 $841,139 Deposits - 148, , ,333 Total Assets $1,598,871 $1,553,561 $1,493,721 $1,128,492 Deferred Outflows of Resources $- $- $- $- Liabilities Current liabilities: Salaries and wages payable $424,767 $494,014 $123,172 $558,438 Accounts payable and accrued 103, ,712 64, ,732 liabilities Total Current Liabilities $528,566 $627,726 $188,133 $704,170 Long-Term Payable to Florida Charter 787,407 30, ,833 0 Foundation Total Liabilities $1,315,973 $657,846 $464,966 $704,170 Deferred Inflows of Resources Net Position Net investment in capital assets $281,788 $1,166,899 $886,166 $989,472 Unrestricted 1,110 (271,184) 142,589 (565,150) Total Net Position $282,898 $895,715 $1,028,755 $424,322 A-23

94 Statement of Revenues, Expenditures, and Changes in Fund Balance Boynton Beach School Nine Months Ended March Fiscal Year Ended June 30, 31, (Audited) (Audited) (Unaudited) (Unaudited) Revenues: State capital outlay funding $- $342,825 $- $254,594 State passed through local 7,464,251 8,229,106 5,221,515 6,208,805 Federal sources 129, , ,000 - Lunch program 103,384 61,337 48, ,628 Charges and other revenue 270, , , ,307 Total Revenues $7,967,717 $9,867,843 7,421,298 6,915,334 Expenditures: Current Instruction $3,767,699 $4,392,099 $3,729,302 $3,664,839 Curriculum development 262, , , ,714 General administration 53,564 31,919 21,474 25,487 School administration 822, , , ,670 Fiscal services 826, , , ,526 Food services 224, , , ,694 Pupil transportation 261, , , ,734 Operation of plant 1,011,986 1,690,797 1,216,738 1,077,333 Maintenance of plant 283, , ,302 12,053 Capital Outlay: Other capital outlay 1,240, , ,594 Total Expenditures $8,754,014 $9,234,517 $7,408,319 $7,171,644 Excess (deficit) of revenues over expenditures $(786,297) $633,326 $12,979 (256,310) Other financing sources (uses) Transfers in (out) Deposits - (148,333) (148,333) (148,333) Long term payable to Florida Charter 787,407 (757,287) 276, ,677 Foundation, net Net change in fund balance $1,110 $(272,294) $141,479 $(293,966) Fund Balance at beginning of year $- $1,110 $1,110 $(271,184) Fund Balance at end of year $1,110 $(271,184) $142,589 $(565,150) A-24

95 The following tables set forth summaries of the Cooper City Elementary School's Statement of Net Position and Statement of Revenues, Expenditures and Changes in Fund Balances for the Fiscal Years ended June 30, 2014 and 2015, as well as unaudited financial information for the nine-month periods ended March 31, 2015 and Statement of Net Position Cooper City Elementary School As of June 30, As of March 31, (Audited) (Audited) (Unaudited) (Unaudited) Assets Current assets: Cash and cash equivalents $125,997 $352,973 $456,456 $446,616 Due from other agencies 19,445 3, Due from other charter schools 100, , Deposits receivable 159, $405,794 $637,179 $456,456 $446,616 Capital assets, depreciable $1,253,733 $1,554,858 $1,554,858 $1,618,440 Less: accumulated (160,668) (446,841) (376,064) (662,636) depreciation $1,093,065 $1,108,017 $1,178,794 $955,804 Deposits $- $159, , ,643 Total Assets Deferred Outflows of Resources $1,498,859 $1,904,839 $1,794,893 $1,562,063 $- $- $- $- Liabilities Current liabilities: Salaries and wages payable $386,851 $426,599 $323,141 $432,070 Accounts payable and accrued 77,158 91,453 15,027 33,821 liabilities Total Current Liabilities $464,009 $518,052 $338,168 $465,891 Due to Florida Charter - 491,531 51,321 98,686 Foundation Total Liabilities $464,009 $1,009,583 $389,489 $564,577 Deferred Inflows of Resources Net Position Net investment in capital $1,093,065 $776,129 $1,287,116 $1,016,761 assets Unrestricted (58,215) 119, ,288 (19,275) Total Net Position $1,034,850 $895,256 $1,405,404 $997,486 A-25

96 Statement of Revenues, Expenditures, and Changes in Fund Balance Cooper City Elementary School Nine Months Ended March Fiscal Year Ended June 30, 31, (Audited) (Audited) (Unaudited) (Unaudited) Revenues: State capital outlay funding $- $211,059 $- $91,319 State passed through local 5,786,980 5,695,064 4,432,758 4,463,553 Federal sources 74, , ,000 - Lunch program 111,065 45, , ,980 Charges and other revenue 335, , , ,249 Total Revenues $6,307,666 $6,755,508 $5,022,127 $4,978,101 Expenditures: Current Instruction $2,607,018 $3,307,701 $2,363,446 $2,477,334 Curriculum development 203, , ,814 53,399 School administration 528, , , ,397 Fiscal services 536, , , ,966 Food services 204, , , ,975 Pupil transportation 146, , , ,088 Operation of plant 844,354 1,312,122 1,202,734 1,023,172 Maintenance of plant 41,848 76,004 71,442 35,896 Capital Outlay: Other capital outlay 1,253, , ,319 Total Expenditures $6,365,881 $6,910,054 $4,737,302 $5,005,546 Excess (deficit) of revenues over $(58,215) $(154,546) $284,825 $(77,445) expenditures Other financing sources (uses) Deposits - 491,531 51,321 98,686 Due to Florida Charter - (159,643) (159,643) (159,643) Foundation Net change in fund balance $(58,215) $177,342 $176,503 $(138,402) Fund Balance at beginning of year - (58,215) (58,215) 119,127 Fund Balance at end of year $(58,215) $119,127 $118,288 $(19,275) A-26

97 The following tables set forth summaries of the Cooper City Middle School's Statement of Net Position and Statement of Revenues, Expenditures and Changes in Fund Balances for the Fiscal Years ended June 30, 2014 and 2015, as well as unaudited financial information for the nine-month periods ended March 31, 2015 and Statement of Net Position Cooper City Middle School As of June 30, As of March 31, (Audited) (Audited) (Unaudited) (Unaudited) Assets Current assets: Cash and cash equivalents $ 30,867 $ 5,545 27, ,483 Due from other agencies Due from Florida Charter Foundation 186,223 - Deposits receivable - - $ 217,185 $ 5,796 $27, ,483 Due from Florida Charter Foundation, long-term $ - $ 536, , ,346 Capital assets, depreciable $ - $ 44,439 $44,439 $44,439 Less: accumulated depreciation - (7,090) (5,162) (12,655) $ - $ 37,349 $39,276 $31,784 Deposits - - Total Assets $ 217,185 $ 579,368 $220,078 $438,613 Deferred Outflows of Resources $ - $ - Liabilities Current liabilities: Salaries and wages payable $ - $ 96, ,725 Accounts payable and accrued liabilities 30,401 3,951 91,628 2,165 Due to other charter schools 100, ,647 Total Current Liabilities $ 131,110 $ 381,323 91,628 98,890 Long-Term Payable to Florida Charter Foundation - - Total Liabilities $ 131,110 $ 381,323 91,628 98,890 Deferred Inflows of Resources - - Net Position Net investment in capital assets $ - $ 573,572 $192, ,130 Unrestricted 86,075 (375,527) (63,752) 150,593 Total Net Position $ 86,075 $ 198,045 $128, ,723 A-27

98 Statement of Revenues, Expenditures, and Changes in Fund Balance Cooper City Middle School Nine Months Ended March Fiscal Year Ended June 30, 31, (Audited) (Audited) (Unaudited) (Unaudited) Revenues: State capital outlay funding $ - $ 56,606 55,282 State passed through local 2,555,658 2,623,584 2,049,068 2,141,363 Federal sources 54,028 32,670 Lunch program 36,293 52,622 51,414 Local sources - - Charges and other revenue - 250,000 Total Revenues $ 2,645,979 $ 3,015,482 $ 2,049,068 2,248,059 Expenditures: Current Instruction $ 1,338,489 $ 1,374, , ,501 General administration ,604 School administration 217, , , ,073 Fiscal services 414, , , ,463 Food services 90,321 85, ,393 Pupil transportation 75,237 77,693 62,129 64,227 Operation of plant 397, , , ,992 Maintenance of plant 25,868 38,436 33,839 26,750 Capital Outlay: Other capital outlay - 44, ,282 Total Expenditures $ 2,559,904 $ 2,940,861 $1,746,315 1,902,285 Excess (deficit) of revenues over expenditures $ 86,075 $ 74, , ,774 Other financing sources (uses) Long-term receivable from Florida Charter Foundation Transfers in (out) - (536,223) (152,926) (157,346) Long term advances to other schools, net Net change in fund balance $ 86,075 $ (461,602) (149,827) 503,120 Fund Balance at beginning of year - 86,075 86,075 (352,527) Fund Balance at end of year $ 86,075 $ (375,527) (63,752) 150,593 A-28

99 Debt On the date of issuance of the Series 2016 Bonds, the Borrower will also have outstanding Indebtedness related to the Schools in the form of the $2,000,000 line of credit provided to the Borrower by Building Hope A Charter School Facilities Fund ("Building Hope"), a District of Columbia corporation (the "Building Hope Line of Credit") and will have no other outstanding Indebtedness related to either the Schools or the Other Schools. The Borrower is permitted to incur additional Indebtedness under certain circumstances. See APPENDIX E "FORMS OF PRINCIPAL FINANCING DOCUMENTS Limitations on Additional Indebtedness." Financial Projections The forecast in APPENDIX C "EXAMINED FORECAST" (the "Examined Forecast") was prepared by CSSC, on behalf of the Borrower with information provided by the Borrower, and was examined by the Auditor, but has not been independently reviewed or verified by any other party. The Examined Forecast constitutes "forward-looking" statements of the type described in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of Although Management believes that the assumptions upon which the Examined Forecast is based are reasonable, any of the assumptions could prove to be inaccurate and, as a result, the forward-looking statements based on those assumptions could also be incorrect. All phases of the operations of the Schools involve risks and uncertainties, many of which are outside of the Borrower's control and any one of which, or a combination of which, could materially affect the Borrower's results with respect to the Schools' operations. Factors that could cause actual results to differ from those expected include, but are not limited to, general economic conditions; the willingness of Florida to fund public schools, including charter schools, at present or increased levels; competitive conditions within the Schools' service areas; lowerthan-projected enrollment; unanticipated expenses; changes in government regulation including changes in the law governing charter schools in Florida; future claims for accidents against the Borrower, the Borrower, or the Schools and the extent of insurance coverage for such claims; and other risks discussed in this Limited Offering Memorandum. See "BONDHOLDERS' RISKS" above. The Examined Forecast have not been independently verified by any party other than the Borrower. No feasibility studies have been conducted with respect to operations of the Borrower pertinent to these financial Examined Forecast or the Series 2016 Bonds. The Underwriter has not independently verified the Examined Forecast, and makes no representations nor gives any assurances that the Examined Forecast, or the assumptions underlying them, are complete or correct. NO REPRESENTATION OR ASSURANCE CAN BE GIVEN THAT THE BORROWER WILL REALIZE REVENUES IN AMOUNTS SUFFICIENT TO MAKE ALL REQUIRED DEBT SERVICE PAYMENTS ON THE SERIES 2016 BONDS. THE REALIZATION OF FUTURE REVENUES DEPENDS ON, AMONG OTHER THINGS, THE MATTERS DESCRIBED IN "BONDHOLDERS' RISKS," AND FUTURE CHANGES IN ECONOMIC AND OTHER CONDITIONS THAT ARE UNPREDICTABLE AND CANNOT BE DETERMINED AT THIS TIME. THE UNDERWRITER MAKES NO REPRESENTATION AS TO THE ACCURACY OF THE EXAMINED FORECAST CONTAINED HEREIN, NOR AS TO THE ASSUMPTIONS ON WHICH THE EXAMINED FORECAST ARE BASED. In addition to the information set forth in the Examined Forecast, the Borrower has prepared the following breakeven analyses. The table below assumes that Revenues from State sources drop from the forecasted amounts to maintain the necessary debt service coverage of 1.10 to 1.00 after the payment of A-29

100 management services. This assumes no other changes to either revenues or expenses, including no change to facility costs and no decreases in staffing and per student expenses, such as books and supplies. The Borrower would evaluate cost saving measures on a case-by-case basis Percentage of reduction in State funding: -1.2% -2.0% -2.2% -3.3% -4.1% Total Revenues 20,129,936 20,372,169 20,714,341 20,886,405 21,226,503 Expenses Operating Expenses 14,736,564 14,978,797 15,320,969 15,493,033 15,833,132 Mangement Fees 1,541,000 1,541,000 1,541,000 1,541,000 1,541,000 Depreciation 1,491,372 1,493,621 1,495,892 1,498,186 1,500,504 Interest Expense 2,742,220 2,633,906 2,597,794 2,559,544 2,519,594 Total Expenses 20,511,156 20,647,324 20,955,655 21,091,763 21,394,229 Net Income Available for Debt Service 1 3,852,372 3,852,372 3,852,372 3,852,372 3,852,372 Maximum Principal and Interest Requirements 1 3,502,156 3,502,156 3,502,156 3,502,156 3,502,156 Long-Term Debt Service Coverage Ratio (before Management Payments) Long-Term Debt Service Coverage Ratio (after Management Payments) Calculated in accordance with the Indenture and Loan Agreement. 2 Not calculated in accordance with the Indenture and Loan Agreement. The table below assumes that Revenues from State sources drop from the forecasted amounts to maintain the necessary debt service coverage of 1.00 to 1.00 after the payment of management services. This assumes no other changes to either revenues or expenses, including no change to facility costs and no decreases in staffing and per student expenses, such as books and supplies. The Borrower would evaluate cost saving measures on a case-by-case basis Percentage of reduction in State funding: -3.1% -3.8% -4.0% -5.1% -5.9% Total Revenues 19,779,720 20,021,953 20,364,125 20,536,189 20,876,288 Expenses Operating Expenses 14,736,564 14,978,797 15,320,969 15,493,033 15,833,132 Mangement Fees 1,541,000 1,541,000 1,541,000 1,541,000 1,541,000 Depreciation 1,491,372 1,493,621 1,495,892 1,498,186 1,500,504 Interest Expense 2,742,220 2,633,906 2,597,794 2,559,544 2,519,594 Total Expenses 20,511,156 20,647,324 20,955,655 21,091,763 21,394,229 Net Income Available for Debt Service 1 3,502,156 3,502,156 3,502,156 3,502,156 3,502,156 Maximum Principal and Interest Requirements 1 3,502,156 3,502,156 3,502,156 3,502,156 3,502,156 Long-Term Debt Service Coverage Ratio (before Management Payments) Long-Term Debt Service Coverage Ratio (after Management Payments) Calculated in accordance with the Indenture and Loan Agreement. 2 Not calculated in accordance with the Indenture and Loan Agreement. A-30

101 APPENDIX B AUDITED FINANCIAL STATEMENTS OF THE SCHOOLS FOR FISCAL YEARS ENDED JUNE 30, 2014 AND 2015

102 [THIS PAGE INTENTIONALLY LEFT BLANK]

103 Franklin Academy B2 W/L# 4020 (A charter school under Florida Charter Foundation, Inc.) Boynton Beach, Florida Financial Statements and Independent Auditors' Report June 30, 2015

104 TABLE OF CONTENTS General Information Independent Auditors' Report Management's Discussion and Analysis (Required Supplementary Information) Basic Financial Statements: Government-wide Financial Statement: Statement of Net Position.... Statement of Activities..... Fund Financial Statements: Balance Sheet - Governmental Funds..... Reconciliation of the Governmental Fund Balance Sheet to the Statement of Net Position.... Statement of Revenues, Expenditures and Changes in Fund Balance - Governmental Funds..... Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance of Governmental Funds to the Statement of Activities Notes to the Basic Financial Statements Required Supplementary Information: Budgetary comparison schedules Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards... Management Letter

105 Franklin Academy B2 W/L# 4020 (A charter school under Florida Charter Foundation, Inc.) 7882 Military Trail Boynton Beach, FL Dr. Dave Thomas, Chair and President Alexandra Lonsdale Catherine Arcabascio Debbie Platz J aqueline Greenberg BOARD OF DIRECTORS Marjorie Waldo, Principal SCHOOL ADMINISTRATION Scott E. Sznitken, Executive Director OTHER CORPORATE OFFICERS

106 .._... GRAVIER, LLP CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITORS' REPORT To the Board of Directors of Franklin Academy B2 Boynton Beach, Florida We have audited the accompanying financial statements of the governmental activities and each major fund of Franklin Academy B2 (the "School"), a charter school under Florida Charter Foundation, Inc., as of, and for the year ended June 30, 2015, which collectively comprises the School's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit 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 of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 396 Alhambra Circle, Suite 900, Coral Gables, FL Tel: Fax: HLB Gravier, LLP is a member of International. A world wide organization of accounting firms and business advisers.

107 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of Franklin Academy B2 at June 30, 2015, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters As described in Note 1, the accompanying financial statements referred to above present only the financial position of Franklin Academy B2 at June 30, 2015, and the respective changes in financial position for the year then ended, and is not intended to be a complete presentation of Florida Charter Foundation, Inc. These financial statements do not purport to and do not present fairly the financial position of Florida Charter Foundation, Inc. as of June 30, 2015 and its changes in financial position for the year then ended in conformity with accounting principles generally accepted in the United States of America. Required Supplementary Information In accordance with Government Auditing Standards, we have also issued our report dated September 30, 2015 on our consideration of the School's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the 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 considered in assessing the results of our audit. Accounting principles generally accepted in the United States of America require that the management's discussion and analysis and budgetary comparison information on pages 4 through 8 and 26 through 27 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Coral Gables, Florida September 30, CERTIFIED PUBLIC ACCOUNTANTS

108 Management's Discussion and Analysis Franklin Academy B2 (A Charter school Under Florida Charter Foundation, Inc.) June 30, 2015 The corporate officers of Franklin Academy B2 have prepared this narrative overview and analysis of the school's financial activities for the year ended June 30, Financial Highlights 1. The net asset position of the School at June 30, 2015 was $895, At year-end, the School had current assets on hand of $356, The net position of the School increased by $612,817 during the year. 4. The unassigned fund balance at year end was a deficit of$(271,184). Overview of the Financial Statements This discussion and analysis are intended to serve as an introduction to the School's basic financial statements. The School's financial statements for the year ended June 30, 2015 are presented in accordance with GASB Codification Section The financial statements have three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other required supplementary information in addition to the basic financial statements themselves. Government- Wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the School's finances, in a manner similar to a private-sector business. The Statement of Net Position presents information on all of the School's assets, deferred out flows of resources, liabilities, and deferred in flows of resources. The difference between the four is reported as net positions. Over time increases or decreases in net position may serve as an indicator of whether the financial position of the School is improving or deteriorating. The Statement of Activities presents information on how the School's net position changed during the fiscal year. All changes in net position are reported when the underlying event occurs without regard to the timing of related cash flows. Accordingly, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. The government-wide financial statements can be found on pages 9-10 of this report. Fund Financial Statements A "fund" is a collection of related accounts grouped to maintain control over resources that have been segregated for specific activities, projects, or objectives. The School like other state and local governments uses fund accounting to ensure and report compliance with finance-related legal requirements. All of the funds of the School are governmental funds. Government Funds are used to account for essentially the same functions reported as governmental activities in the government-wide 4

109 financial statements. Government Fund financial statements, however, focus on near-term inflows and outflows of spendable resources, as well as on the balances of spendable resources which are available at the end of the fiscal year. Such information may be used to evaluate a government's requirements for near-term financing. The Board of the School adopts an annual appropriated budget for its general fund. A budgetary comparison statement has been provided for the general fund to demonstrate compliance with the School's budget. The basic governmental fund financial statements can be found on pages of this report. Notes to Financial Statements The notes to the financial statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages of this report. GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net position may serve over time as a useful indicator of a charter school's financial position. In the case of the School, the net position was $895,715 at the close of the fiscal year. A summary of the School's net position as of June 30, 2015 and 2014 follows: Cash and cash equivalents Due from other agencies Deposits receivable Capital Assets, net Total Assets $ ,424 99, ,333 1,048,686 1,553,561 $ ,41 0 9, ,333 1,069,1 95 1,598,871 Deferred outflows of resources Salaries and wages payable Accounts payable and accrued liabilities Long-term payable to Florida Charter Foundation Total Liabilities 494, ,712 30, , , , ,407 1,315,973 Deferred inflows of resources Net Position: Net investment in capital assets and deposits Unrestricted Total Net Position 1,166,899 (271, 184) $ 895, ,788 1 '1 10 $ 282,898 At the end of the year, the School is able to report positive balances in total net position. 5

110 A summary and analysis of the School's revenues and expenses for the years ended June 30, 2015 and 2014 follows: REVENUES Program Revenues Capital Outlay Funding $ 342,825 $ Federal sources 873, ,747 Lunch Program 61, ,384 Charges for Services 263, ,889 General Revenues Local Sources(FTE non specific) 8,229,106 7,464,251 Other Revenues 96,928 88,446 Total Revenues $ 9,867,843 $ 7,967,71 7 EXPENSES Component Unit Activities: Instruction $ 4,392,099 $ 3,767,699 Curriculum development 550, ,059 General administration 31,919 53,564 School administration 763, ,435 Fiscal services 890, ,070 Food services 251, ,530 Pupil transportation 252, ,1 80 Operation of plant 1,690,797 1,011,986 Maintenance of plant 106, ,506 Unallocated depreciation 324, ,790 Total Expenses 9,255,026 7,684,819 Increase in Net Position 61 2, ,898 Net Position at Beginning of Year 282,898 Net Position at End of Year $ 895,715 $ 282,898 Student enrollment increased for 2015 by approximately 70 students. As a result, the School's revenues and expenses increased by $1,900,126 and $1,570,207, respectively. The School had an increase in its net position of$612,817 for the year. School Location and Lease of Facility The School leases a facility located at 7882 Military Trail, Boynton Beach. Capital Improvement Requirements The School maintains a continuous capital improvements program to enhance facilities and update fixtures and equipment as required. School Enrollment This past year, the School had approximately 1,268 students enrolled in grades kindergarten through eighth grade. 6

111 Accomplishments The School emolled approximately 1270 kindergarten through eighth grade students during the school year. The academic achievement proficiency scores are as follows: 5th Grade Science - 54% 7th Grade Civics End-of-Course Exam (ECO)- 74% 8th Grade Science - 74o/o Algebra I End-of-Course Exam - 91% We are waiting for the State of Florida to release the Florida Standards Assessment (FSA) K- 8th English Language Arts and math scores. The school grade is expected to be released in late October The many emichment activities at Franklin Academy - B include chess, band, cheerleading, Art History, arts & crafts, kickball. Our Athletic opportunities included Middle School Boys and Girls Basketball and Middle School Girls and Boys Soccer. The Chess Team competed and placed loth in the Junior High National Chess Tournament in Kentucky and placed 1st in the Florida Eastern Regional Championship Tournament. Our Bolt Band performed at Disney World Orlando and the Band Director, Rachel Slotnick, was named as quarterfinalists for the Music Educator A ward presented by The Recording Academy and the GRAMMY Foundation. FINANCIAL ANALYSIS OF THE GOVERNMENT'S FUND As noted earlier, the School uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds The focus of the School's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the School's financing requirements. In particular, the unassigned fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. Most of the School's operations are funded in the General Fund. The majority of the General Fund revenues are distributed to the School by the District through the Florida Education Finance Program (FEFP), which uses formulas to distribute state funds and an amount of local property taxes (i.e., required local effort) established each year by the Florida Legislature. At the end of the fiscal year, the School's governmental general fund reported ending fund deficit of $(271,184). The fund balance unassigned and available for spending at the School's discretion is a deficit of$(271,184). 7

112 Capital Assets The School's investment in capital assets as of June 30, 2015 amounts to $1,048,686 (net of accumulated depreciation). This investment in capital assets includes furniture, fixtures and computer equipment. The school has $30,120 of outstanding debt associated to Capital Assets. Governmental Fund Budget Analysis and Highlights Prior to the start of the School's fiscal year, the Board of the Charter School adopted an annual budget. A budgetary comparison statement has been provided for the governmental funds to demonstrate compliance with the School's budget. Governmental Fund Ongmal Budget Final Budget Actual REVENUES Program Revenues State capital outlay funding $ $ 342,825 $ 342,825 Federal sources 873, ,882 Lunch program 61,337 61,337 General Revenues FTE nonspecific revenues 8,583,404 8,500,000 8,229,106 Local sources Charges and other revenues 383, , ,693 Total Revenues 8,966,612 10,138,044 9,867,843 CURRENT EXPENDITURES Component Unit Activities Instruction 4,520,649 4,400,000 4,392,099 Curriculum development 553, ,853 General administration 32,000 31,919 Schoo 1 administration 907, , ,983 Fiscal services 782, , ,226 Food services 270, , ,91 8 Central services 255, ,142 Operation of pi ant 1,890,313 2,042,825 1,690,797 Maintenance of plant 234, , ,659 Total Current Expenditures $ 8,606,428 $ 9,298,009 $ 8,930,596 Requests for Information This financial report is intended to provide a general overview of the finances of the Charter School. Requests for additional information may be addressed to Marjorie Waldo, 7882 Military Trail, Boynton Beach, Florida, Deficit Unrestricted Net Position At the end of the School's second full year of operations (June 30, 2015), it had accumulated unrestricted deficits net position due to investments in receivables from its charter holder. However, the school has adequate enrollment and financing resources to eliminate the deficit in the near future. 8

113 Franklin Academy B2 (A charter school under Florida Charter Foundation, Inc.) Statement of Net Position June 30, 2015 Governmental activities Current assets: Cash and cash equivalents Due from other agencies $ 257,424 99, ,542 Capital assets, depreciable Less: accumulated depreciation 1,544,906 (496,220) 1,048,686 Deposits 148,333 Total Assets 1,553,561 Deferred Outflows of Resources Liabilities Current liabilities: Salaries and wages payable Accounts payable and accrued liabilities Total Current Liabilities 494, , ,726 Long-term payable to Florida Charter Foundation Total Liabilities 30, ,846 Deferred Inflows of Resources Net Position Net investment in capital assets and deposits Unrestricted Total Net Position $ 1,166,899 (271,184) 895,715 The accompanying notes are an integral part of this financial statement. 9

114 Franklin Academy B2 (A charter school under Florida Charter Foundation, Inc.) Statement of Activities For the year ended June 30, 2015 Program Revenues Operating Capital Net (Expense) Revenue Charges for Grants and Grants and and Changes FUNCTIONS Expenses Services Contributions Contributions in Net Position Governmental activities: Instruction $ 4,392,099 $ $ 720,266 $ $ (3,671,833) Curriculum development 550, ,765 (287,088) General adminstration 31,919 (31,919) School administration 763,983 (763,983) Fiscal services 890,226 (890,226) Food services 251,918 61, ,616 (36,965) Pupil transportation 252,142 (252,142) Operation of plant 1,690, ,825 (1,347,972) Maintenance of plant 106,659 (106,659) Unallocated depreciation 324,430 (324,430) Total governmental activities 9,255, , , ,825 (7,713,217) General revenues: FTE nonspecific revenues 8,229,106 Interest and other revenue 96,928 Change in net position 612,817 Net position, beginning Net position, ending $ 282, ,715 The accompanying notes are an integral part of this financial statement. 10

115 Franklin Academy B2 (A charter school under Florida Charter Foundation, Inc.) Balance Sheet - Governmental Funds June 30, 2015 General Fund Special Revenue Fund Total Governmental Funds Assets Cash and cash equivalents Due from other agencies Due from fund Total Assets $ 257,424 99, ,542 $ $ 257,424 99,118 99,118 99,118 99, ,660 Deferred Outflows of Resources Liabilities Salaries and wages payable Deposits Due to fund Total Liabilities 494, , , , ,712 99,118 99,118 99, ,844 Deferred Inflows of Resources Fund balance Nonspendable, not in spendable form Unassigned Total Liabilities, Deferred Inflows of Resources and Fund Balance (271,184) (271' 184) $ 356,542 (271,184) (271,184) $ 99,118 $ 455,660 The accompanying notes are an integral part of this financial statement. 11

116 Franklin Academy B2 (A charter school under Florida Charter Foundation, Inc.) Reconciliation of the Goven1mental Fund Balance Sheet to the Statement ofnet Position For the year ended June 30, 2015 Total Fund Balance - Governmental Funds $ (271,184) Amounts reported for governmental activities in the statement of net position are different because: Capital assets of $1,544,906 net of accumulated depreciation of $496,220 used in governmental activities are not financial resources and therefore are not reported in the fund. 1,048,686 Deposits of $148,3 3 3 used in governmental activities are not financial resources and therefore are not reported in the fund. 148,333 Long term payables in governmental activities are financial obligations but are not reported in the governmental funds. (30, 120) Total Net Position - Governmental Activities $ 895,715 The accompanying notes are an integral part of this financial statement. 12

117 Franklin Academy B2 (A charter school under Florida Charter Foundation, Inc.) Statement of Revenues, Expenditures, and Changes in Fund Balance - Govermnental Funds For the year ended June 30, 2015 Revenues: State capital outlay funding State passed through local Federal sources Lunch program Charges and other revenue Total Revenues Expenditures: Current Instruction Curriculum development General administration School administration Fiscal services Food services Pupil transportation Operation of plant Maintenance of plant Capital Outlay: Other capital outlay Total Expenditures Excess (deficit) of revenues over expenditures General Fund $ 8,229, ,589,799 4,392, ,587 31, , , ,142 1,347, , ,245 8, ,967 Special Revenue Fund Total Governmental Funds $ 342,825 $ 342,825 8,229, , ,882 61,337 61, ,278,044 9,867,843 4,392, , ,853 31, , , , , , ,825 1,690, , , , , ,326 Other financing sources (uses) Transfers in (out) Deposits L/T payable to Florida Charter Foundation, net 335,359 (148,333) { } (335,359) (148,333) { } Net change in fund balance (272,294) (272,294) Fund Balance at beginning of year Fund Balance at end of year $ {271,184} $ $ {271,184} The accompanying notes are an integral part of this financial statement. 13

118 Franklin Academy 82 (A charter school under Florida Charter Foundation, Inc.) Reconciliation of the Statement of Revenues, Expenditures an Changes in Fund Balance of Governmental Funds to the Statement of Activities For the year ended June 30, 2015 Net Change in Fund Balance - Governmental Funds $ (272,294) Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which capital outlays of $303,921 exceeded depreciation expense of $324,430. (20,509) Governmental funds report deposits as expenditures. However, in the statement of activities, the cost of those deposits is allocated over future periods. 148,333 Decrease in long term payables is an expenditure in the governmental funds, but decreases long-term liabilities in the statement of net position. This is the amount by which long-term payables decreased in the current period. 757,287 Change in Net Position of Governmental Activities $ 612,817 The accompanying notes are an integral part of this financial statement. 14

119 Franklin Academy B2 (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2015 Note 1 - Summary of Significant Accounting Policies Reporting Entity Franklin Academy B2 (the "School"), is a charter school located in the school district of the School Board of Palm Beach County, Florida (the "District"). The Schools charter is held by Florida Charter Foundation, Inc., a not-for-profit corporation organized pursuant to Chapter 617, Florida Statutes, the Florida Not-For-Profit Corporation Act. The governing body of the School is the board of directors of Florida Charter Foundation, Inc., which is composed of five members and also governs other charter schools. The board of directors has determined that no component unit exist that would require inclusion in the school financial statement. The general operating authority of the School is contained in Section , Florida Statutes. The School operates under a charter granted by the sponsoring district, the School Board of Palm Beach County, Florida. The current charter expires on June 30, 2017 and is renewable for an additional term pursuant to law and/or by a mutual written agreement between the School and the District. At the end of the term of the charter, the District may choose not to renew the charter under the grounds specified in the charter in which case the District is required to notify the School in writing at least 90 days prior to the charters expiration. During the term of the charter, the District may terminate the charter if good cause is shown. The School's location is in Boynton Beach, Florida for children from kindergarten through seventh grade and is funded by the District. These financial statements are for the year ended June 30, 2015, when a total of approximately 1,268 students were enrolled for the school year. Basis of presentation The School's accounting policies conform to accounting principles generally accepted in the United States as applicable to state and local governments. The Governmental Accounting Standards Board ("GASB") is the accepted standard setting body for establishing governmental accounting and financial reporting principles. Deferred Outflows/Inflows of Resources In addition to assets, the statement of financial position will sometimes report a separate section of deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period and so will not be recognized as an outflow of resources (expense/expenditure) until then. The School does not have any items that qualify for reporting in this category. In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources (revenue) until that time. The School does not have any items that qualify for reporting in this category. 15

120 Franklin Academy B2 (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2015 Note 1 -Summary of Significant Accounting Policies (continued) Government-wide and Fund Financial Statements The government-wide financial statements include the statement of net position and the statement of activities. These statements report information about the School as a whole. Any internal interfund activity has been eliminated from these financial statements. Both statements report only governmental activities as the School does not engage in any business type activities. These statements also do not include fiduciary funds. The statement of activities reports the expenses of a given function offset by program revenues directly connected with the functional program. A function is an assembly of similar activities and may include portions of a fund or summarize more than one fund to capture the expenses and program revenues associated with a distinct functional activity. Program revenues include: (1) charges for services which report fees; (2) operating grants such as the National School Lunch Program, Federal grants, and other state allocations; and (3) capital grants specific to capital outlay. Other revenue sources not properly included with program revenues are reported as general revenues. Fund Financial Statements Fund financial statements are provided for governmental and fiduciary funds, even though the fiduciary funds are not included in the government-wide financial statements. The operations of the funds are accounted for with a separate set of self-balancing accounts that comprise its assets, deferred outflows of resources, and liabilities, deferred inflows of resources, equity, revenues and expenditures. Major individual governmental funds are reported as separate columns in the fund financial statements: General Fund- is the School's primary operating fund. It accounts for all financial resources of the school, except those required to be accounted for in another fund. Special Revenue Fund - accounts for specific revenue, such as capital outlay funding and federal lunch program that are legally restricted to expenditures for particular purposes. Measurement Focus and Basis of Accounting The financial statements of the School are prepared in accordance with generally accepted accounting principles (GAAP). The School's reporting entity applies all relevant Governmental Accounting Standards Board (GASB) Codification of Accounting and Financial Reporting Guidance. 16

121 Franklin Academy B2 (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2015 Note 1- Summary of Significant Accounting Policies (continued) The government-wide statements report using the economic resources measurement focus and the full accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. The School recognizes assets of non-exchange transactions in the period when the underlying transaction occurs, when an enforceable legal claim has arisen, or when all eligibility requirements are met. Revenues are recognized, on the modified accrual basis, when they are measurable and available. Non-exchange transactions occur when the school provides (or receives) value to (from) another party without receiving (or giving) equal or nearly equal value in return. Most donations are examples of non-exchange transactions. Revenues from grants and donations are recognized on the accrual basis, in the fiscal year in which all eligibility requirements have been satisfied. Governmental fund financial statements report using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized when they are both measurable and available. "Measurable" means the amount of the transaction can be determined. Available means collectible within the current period or soon enough thereafter to pay liabilities of the current period. The School considers revenues to be available if they are collected within 60 days of the end of the fiscal year. Florida Education Finance Program (FEFP) revenues are recognized when received. A one-year availability period is used for revenue recognition for all other governmental fund revenues. Charges for services and fees are recognized when cash is collected as amounts are not measurable. When grant terms provide that the expenditure of funds is the prime factor for determining eligibility for federal, state, and other grant funds, revenue is recognized at the time the expenditure is made. Expenditures are recorded when the related fund liability is incurred, except for long-term debt principal and interest which are reported as expenditures in the year due. Budgets and Budgetary Accounting In compliance with Florida Statutes, the Board of Directors adopts an annual budget using the modified accrual basis of accounting. During the fiscal year, expenditures were controlled at the object level (e.g. salaries and benefits, purchased services, materials and supplies and capital outlay) within each activity (e.g. instruction, pupil personnel services and school administration). Revisions to the annual budget are approved by the Board. 17

122 Franklin Academy B2 (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2015 Note 1 - Summary of Significant Accounting Policies (continued) Cash Cash and cash equivalents include all highly investments with a maturity of three months or less. Inter-fund Transfers Outstanding balances between funds are reported as "due to/from" other funds. Inter-fund transfers are made to move any excess or shortage of funds derived from the National School Lunch Program from the Special Revenue Fund to the General Fund. Due from Other Governments or Agencies Amounts due to the School by other governments or agencies are for grants or programs under which the services have been provided by the School. Capital Assets The School's property, plant and equipment with useful lives of more than one year are stated at historical cost and comprehensively reported in the statement of net position in the governmentwide financial statements. Donated capital assets are recorded at their estimated fair market value on the date donated. The School generally capitalizes assets with a cost of $500 or more. Building improvements, additions and other capital outlays that significantly extend the useful life of an asset are capitalized. The costs of normal maintenance and repairs that do not add to the asset value or materially extend useful lives are not capitalized. Capital assets are depreciated using the straight-line method. When capital assets are disposed, the cost and applicable accumulated depreciation are removed from the respective accounts, and the resulting gain or loss is recorded in operations. Estimated useful lives, in years, for depreciable assets are as follows: Improvements Furniture, Equipment and Software Textbooks 15 Years 5 Years 3 Years 18

123 Franklin Academy B2 (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2015 Note 1- Summary of Significant Accounting Policies (continued) Compensated Absences The School grants a specific number of sick days. Full time instructional employees are eligible to five days per school year. (a "benefit year"). In the event that available time is not used by the end of the benefit year, employees may "rollover" five unused days for use in future benefit years. However, at no time can the maximum amount of unused sick days exceed ten days. There is no termination payment for accumulated unused sick days. GASB Codification Section C60, Accounting fo r Compensated Absences, provides that compensated absences that are contingent on a specific event that is outside the control of the employer and employee should be accounted for in the period those events take place. Accordingly, these financial statements do not include an accrual for sick days available to be used in future benefits years. The School also provides certain days to be used for specific personal matter such as family death and jury duty. Because the use of such days is contingent upon those events taking place and such events are out of the control of both the employer and the employee, there is no accrual for such days. Revenue Sources Revenues for current operations are received primarily from the District pursuant to the funding provisions included in the School's charter. In accordance with the funding provisions of the charter and Section , Florida Statutes, the School will report the number of full-time equivalent (FTE) students and related data to the District. Under the provisions of Section , Florida Statutes, the District reports the number of the full-time equivalent (FTE) students and related data to the Florida Department of Education (FDOE) for funding through the FEFP. Funding for the School is adjusted during the year to reflect the revised calculations by the FDOE under the FEFP and the actual weighted full-time equivalent students reported by the School during the designated full-time equivalent student survey periods. After review and verification of FTE reports and supporting documentation, the FDOE may adjust subsequent fiscal period allocations of FEFP funding for prior year errors disclosed by its review as well as to prevent statewide allocations from exceeding the amount authorized by the Legislature. Normally, such adjustments are treated as reductions of revenue in the year the adjustment is made. In addition, the School receives state funds through the District under charter school capital outlay funding pursuant to Section , Florida Statutes. Funds are based on a capital outlay plan submitted to the District and are to be used for lease of school facilities. 19

124 Franklin Academy B2 (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2015 Note 1- Summary of Significant Accounting Policies (continued) Finally, the School also receives Federal awards for the enhancement of various educational programs. Federal awards are generally received based on applications submitted to and approved by various granting agencies. For Federal awards in which a claim to these grant proceeds is based on incurring eligible expenditures, revenue is recognized to the extent that eligible expenditures have been incurred. Any excess amounts are recorded as deferred revenues until expended. Additionally, other revenues may be derived from various fundraising activities and certain other programs. Net position and Fund balance classifications Government-wide financial statements Equity is classified as net position and displayed in three (3) components: a) Net investment in capital assets & deposit - consists of capital assets net of accumulated depreciation and reduced by the outstanding balances of any borrowings that are attributable to the acquisition or improvement of those assets. b) Restricted net position - consists of net position with constraints placed on their use either by external groups such as creditors, grantors, contributors or laws or regulations of other governments. c) Unrestricted net position - all other net position that do not meet the definition of "restricted" or "invested in capital assets, net of related debt." Fund financial statements Under GASB Codification Section , Fund Balance Reporting and Governmental Fund Type Definitions. This Statement defines the different types of fund balances that a governmental entity must use for financial reporting purposes. GASB requires the fund balance amounts to be properly reported within one of the fund balance categories list below: a) Nonspendable - includes amounts that cannot be spent because they are either not in spendable form or legally or contractually required to be maintained intact. Consists of fund balance associated with inventories, prepaid expenses, long-term loans and notes receivable, and property held for resale (unless the proceeds are restricted, committed, or assigned). b) Restricted - fund balance category includes amounts that can be spent only for the specific purposes stipulated by constitution, external resource providers, or through enabling legislation. Restricted fund balance of the School relate to reserves required by the landlord for property maintenance and repairs. These are not restricted balances at year end. c) Committed - fund balance classification includes amounts that can be used only for the specific purposes determined by a formal action of the School's Board of Directors. There are no committed fund balances at year end. 20

125 Franklin Academy B2 (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2015 Note 1 - Summary of Significant Accounting Policies (continued) d) Assigned - fund balance classification are intended to be used by the School's management for specific purposes but do not meet the criteria to be classified as restricted or committed. There are no assigned fund balances at year end. e) Unassigned - portion of the fund balance that has not been restricted, committed or assigned for a specific purpose. This is the residual classification for the School's general fund. Order of Fund Balance Spending Policy The School's policy is to apply expenditures against non-spendable fund balance, restricted fund balance, committed fund balance, assigned fund balance, and unassigned fund balance at the end of the fiscal year by adjusting journal entries. First Non-spendable fund balances are determined. Then restricted fund balances for specific purposes are determined (not including non-spendable amounts). Then any remaining fund balance amounts for the non-general funds are classified as restricted fund balance. It is possible for the non-general funds to have negative unassigned fund balance when non-spendable amounts plus the restricted fund balances for specific purposes amounts exceed the positive fund balance for the non-general fund. Income Taxes Florida Charter Foundation, Inc. qualifies as a tax-exempt organization under Internal Revenue Code Section 501(c)(3), and is, therefore, exempts from income tax. Accordingly, no tax provision has been made in the accompanying financial statements Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenditures during the reporting period. Actual results could differ from those estimates. Subsequent Events In accordance with GASB Codification Section , the School has evaluated subsequent events and transactions for potential recognition or disclosure through September 30, 2015, which is the date the financial statements were available to be issued. 21

126 Franklin Academy B2 (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2015 Note 2 -Capital Assets The following schedule provides a summary of changes in capital assets, acquired substantially with public funds, for the period ended June 30, 2015: Balance Balance 07/01/1 4 Additions Retirements 06/30/1 5 Capital Assets: Buildings and Improvements $ 13,889 $ 121,517 $ $ 135,406 Computer equipment and software 262,221 43, ,105 Furniture, equipment and textbooks 964, ,520 1,103,395 Total Capital Assets $ 1,240,985 $ 303,921 $ $ 1,544,906 Less Accumulated Depreciation: Buildings and Improvements (2, 156) (25,474) (27,630) Computer equipment and software (62,444) (98, 1 96) (1 60,640) Furniture, equipment and textbooks (107,190) (200,760) (307,950) (1 71,790) (324,430) (496,220) Capital Assets, net $ 1,069,195 $ (20,509) $ $ 1,048,686 Depreciation expense for the year ended June 30, 2015 was $324,430. Note 3 -Deposits and Investments Deposits The School's policy is to maintain its cash and cash equivalents in major banks and in high grade investments. As of June 30, 2015, the carrying amount of the School's deposits was $257,424 and the respective bank balances totaled $262,171. Deposits at FDIC-insured institutions are insured up to $250,000 per depositor, per financial institution. The School is a charter school under Florida Charter Foundation, Inc., which also operates various other charter schools. All bank accounts are opened under the account ownership of Florida Charter Foundation, Inc., therefore, bank balances at times may potentially be in excess of FDIC coverage. As of June 30, 2015, bank balances in potential excess of FDIC coverage totaled $262,

127 Franklin Academy B2 (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2015 Note 4 -Management Agreement The School uses Florida Charter Foundation Inc, (the holder of the School's charter) to provides complete administrative and management services to all Franklin Academy schools. These services include but are not limited to: administration of support services (facility maintenance, food service, transportation, etc); governmental compliance reporting; coordination of legal support for school operations; district management/liaison; parent customer service; grant application/management; charter application development/submission/approval; site selection/development; construction project management; school marketing/enrollment management; financing management; and public relations. There is no written agreement with Florida Charter Foundation, Inc. During the year, the School made payments totaling $687,500. In addition, Charter School Services Corporation, Inc., a professional charter school management company, provides accounting and human resources management services to the School including, but not limited to, regulatory compliance, maintenance of the books and records, bookkeeping, budgeting and financial reporting. The agreement between the School and the management company calls for a fee of $100 per full time equivalent (FTE) student per year up to 1,500 students with a reduction of $10 per student for every additional 500 students. The agreement can be terminated at any time by the board with 30 day notice. During the year ended June 30, 2015, the School incurred approximately $98,240 in management fees. Charter School Services Corporation, Inc. is located at 1225 SE 2n d Avenue, Fort Lauderdale, Florida, Note 5 -Related Party Transactions Pursuant to the Charter School contract with the School District, the District withholds an administrative fee of up to 5% of the qualifying revenues of the School and up to and including 250 students. For the year ended June 30, 2015, administrative fees totaled $84,163, of which $342,825 was credited back for capital outlay purposes. 23

128 Franklin Academy B2 (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2015 Note 6 -Commitments, Contingencies and Concentrations The School entered into a lease and development agreement with CA Miami 7788 OMT, LLC for its main campus facility. Initial fixed annual payments under this agreement are approximately $740,000 adjusted annually based on the lease schedule, plus additional property expenses including repairs, maintenance and insurance. The agreement continues through June 2042 with an option to renew for up to two additional ten year periods. For 2015, rent expense for the School totaled $971,664. Future minimum payments for the lease are as follows: Year ,239, ,3 1 7, ,849, ,019, ,064, ,042,980 (total for five year period) ,342,495 (total for five year period) ,794,931 (total for five year period) ,418,286 (total for five year period) ,663,923 (total for two year period) Contingencies and Concentrations The School receives substantially all of its funding from the District under the Florida Education Finance Program (FEFP), which is based in part on a computation of the number of full-time equivalent (FTE) students attending different instructional programs. The accuracy of FTE student data submitted by individual schools and used in the FEFP computations is subject to audit by the state and, if found to be in error, could result in refunds to the state or in decreases to future funding allocations. Additionally, the School receives various forms of federal, state and local funding which are subject to financial and compliance audits. It is the opinion of management that the amount of funding, if any, which may be remitted back to the state due to errors in the FTE student data or the amount of grant expenditures which may be disallowed by grantor agencies would not be material to the financial position of the School. 24

129 Franklin Academy B2 (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2015 Note 7 - Risk Management The School is exposed to various risks of loss related to torts, thefts of, damage to and destruction of assets, errors and omissions and natural disasters for which the School carries commercial insurance. Settlement amounts have not exceeded insurance coverage for the past years. In addition, there were no reductions in insurance coverage from those in the prior year. Note 8 - Defined Contribution Retirement Plan The School's personnel are eligible to participate in a defined contribution 401 (k) plan covering employees who meet certain age and tenure requirements. Under the Plan, the School provides a match of 2.5% of the employee's compensation. The School contributed to the Plan $ for the year ended June 30, The School does not exercise any control or fiduciary responsibility over the Plans' assets. 25

130 REQUIRED SUPPLEMENTARY INFORMATION

131 Franklin Academy B2 (A charter school under Florida Charter Foundation, Inc.) Statement of Revenues, Expenditures, and Changes in Fund Balance For the year ended June 30, 2015 General Fund Original Budget Final Budget Actual REVENUES State passed through local $ 8,583,404 $ 8,500,000 $ 8,229, 106 Charges and other revenue 383, , ,693 Total Revenues 8,966,6 12 8,860,000 8,589,799 EXPENDITURES Current: Instruction 4,520,649 4,400,000 4,392,099 Curriculum development 408, ,587 General administration 32,000 31,919 School Administration 907, , ,983 Fiscal Services 782, , ,226 Food Services 270,601 Central Services 255, ,142 Operation of Plant 1,890,3 13 1,700,000 1,347,972 Maintenance of Plant 234, , ,659 Total Current Expenditures 8,606,428 8,558,000 8,190,587 Excess of Revenues Over Current Expenditures 360, , ,212 Capital Outlay 101, ,245 Total Expenditures 8,606,428 8,659,245 8,291,832 Excess of Revenues Over Expenditures 360, , ,967 Other financing sources (uses): Transfers in (out) 335, ,359 Deposits (148,333) (148,333) Long term advances from other schools, net (757,287) (757,287) Net change in fund balance 360,184 (369,506) (272,294) Fund Balance at beginning of year 1,110 1,110 1,110 Fund Balance at end of year $ 361,294 $ (368,396) $ (27 1, 184) Notes to Budgetary ComQarison Schedule An annual budget is adopted on the modified accrual basis of accounting, consistent with generally accepted accounting principles. Amendments to the budget can only be made with the approval of the Board of Directors. 26

132 Franklin Academy B2 (A charter school under Florida Charter Foundation, Inc.) Statement of Revenues, Expenditures, and Changes in Fund Balance For the year ended June 30, Special Revenue Fund Original Budget Final Budget Actual REVENUES State capital outlay funding $ $ 342,825 $ 342,825 Federal sources 873, ,882 Lunch program 61,337 61,337 Total Revenues 1,278,044 1,278,044 EXPENDITURES Current: Instruction Curriculum development 145, ,266 Food services 251, ,91 8 Operation of Plant 342, ,825 Total Current Expenditures 740, ,009 Excess of Revenues Over Current Expenditures 538, ,035 Debt Service: Redemption of Principal Capital Outlay 202, ,676 Other Capital Outlay Total Capital Outlay and Debt Service Expenditures 202, ,676 Total Expenditures 942, ,685 Excess of Revenues Over Expenditures 335, ,359 Other financing sources (uses) Transfers in (out) (335,359) (335,359) Net change in fund balance Fund Balance at beginning of year Fund Balance at end of year $ $ $ Notes to Budgetary Comparison Schedule An annual budget is adopted on the modified accrual basis of accounting, consistent with generally accepted accounting principles. Amendments to the budget can only be made with the approval of the Board of Directors. 27

133 liliilliilillll.- GRAVIER, LLP CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Board of Directors of Franklin Academy B2 Boynton Beach, Florida We have audited, in accordance with the 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, the financial statements of the governmental activities and each major fund of Franklin Academy B2 (the "School") as of, and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise the School's basic financial statements and have issued our report thereon dated September 30, Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the School's internal control over financial reporting to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the School's internal. Accordingly, we do not express an opinion on the effectiveness of the School's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected. on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified 396 Alhambra Circle, Suite 900, Coral Gables. FL Tel : Fax: HLB Gravie\ LLP is a member of International. A world-wide organization of accounting firms and business advisers

134 Compliance and Other Matters As part of obtaining reasonable assurance about whether the School's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. We issued a separate management letter dated September 30, 2015 pursuant to Chapter , Rules of the Auditor General. Purpose of this report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. /It$ J! / CERTIFIED PUBLIC ACCOUNTANTS Coral Gables, Florida September 30,

135 l._.ilillilililill. GRAVIER, LLP CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT LETTER Board of Directors of Franklin Academy B2 Boynton Beach, Florida Report on the Financial Statements We have audited the financial statements of the governmental activities and each major fund of Franklin Academy B2 as of and for the year ended June 30, 2015 and have issued our report thereon dated Septe1nber 30, Auditor's Responsibility We conducted our audit 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; and Chapter , Rules of the Auditor General Other Reports and Schedules We have issued our Independent Auditors' Report on Internal Control over Financial Reporting and Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards. Disclosure in those reports, which are dated September 30, 2015, should be considered in conjunction with this management letter. Prior Audit Findings Section (1 )(e) 1., Rules of the Auditor General, requires that we determine whether or not corrective actions have been taken to address findings and recommendations made in the preceding annual financial audit report. There were no findings and recmnmendations in the preceding financial audit report. Official Title Section (1)(e)5., Rules of the Auditor General, requires the name or official title of the entity. The official title of the entity is Franklin Academy B2. Financial Condition Sections (1 )( e )2, Rules of the Auditor General, requires that we report the results of our determination as to whether or not Franklin Academy B2 has met one or more of the conditions described in Section (1), Florida Statutes, and identification of the specific condition(s) met. 396 Alhambra Circle, Suite 900, Coral Gables, FL Tel: Fax: HLB Gravier. LLP is a member of!ill International. A world-wide organization of accounting firms and business advisers.

136 In connection with our audit, we determined that Franklin Academy B2 did not meet any of the conditions described in Section (1 ), Florida Statutes. Sections (1)(e)6.a and (12), Rules of the Auditor General, require that we apply financial condition assessment procedures for Franklin Academy B2. It is management's responsibility to monitor Franklin Academy B2 financial condition, and our financial condition assessment was based in part on representations made by management and the review of financial information provided by same. We have applied such procedures as of the fiscal year end and no deteriorating financial condition has been noted. Transparency Sections (1)(e)7 and (13), Rules of the Auditor General, require that we report the results of our determination as to whether Franklin Academy B2 maintains on its Web site the information specified in Section (9)(p ), Florida Statutes. In connection with our audit, we determined that Franklin Academy B2 maintained on its Web site the information specified in Section (9)(p ), Florida Statutes. Other Matters Section (1)(e)3., Rules of the Auditor General, requires that we address in the management letter any recommendations to iinprove financial management. In connection with our audit, we did not have any such findings. Section (1 )( e )4., Rules of the Auditor General, requires that we address noncompliance with provisions of contracts or grant agreements, or abuse, that have occurred, or are likely to have occurred, that have an effect on the financial statements that is less than material but which warrants the attention of those charged with governance. In connection with our audit, we did not have any such findings. Purpose of this Letter Our management letter is intended solely for the information and use of the Legislative Auditing Committee, members of the Florida Senate and Florida House of Representatives, the Florida Auditor General, School Board of Palm Beach County, Federal and other granting agencies, the Board of Directors, and applicable management and is not intended to be and should not be used by anyone other than these specified parties. Coral Gables, Florida September 30, 2015 /It/{ r!! CERTIFIED PUBLIC ACCOUNTANTS 31

137 Franklin Academy B2 (A charter school under Florida Charter Foundation, Inc.) Boynton Beach, Florida Financial Statements and Independent Auditors's Report June 30, 2014

138 TABLE OF CONTENTS General Information Independent Auditors' Report Management's Discussion and Analysis (Required Supplementary Information) Basic Financial Statements: Government-wide Financial Statement: Statement of Net Position.... Statement of Activities..... Fund Financial Statements: Balance Sheet - Governmental Funds..... Reconciliation of the Governmental Fund Balance Sheet to the Statement of Net Position.... Statement of Revenues, Expenditures and Changes in Fund Balance - Governmental Funds..... Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance of Governmental Funds to the Statement of Activities Notes to the Basic Financial Statements Required Supplementary Information: Budgetary comparison schedules Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards... Management Letter

139 Franklin Academy B2 (A charter school under Florida Charter Foundation, Inc.) 7882 Military Trail Boynton Beach, FL Dr. Dave Thomas, Chair and President Alexandra Lonsdale Catherine Arcabascio Debbie Platz J aqueline Greenberg BOARD OF DIRECTORS Marjorie Waldo, Principal SCHOOL ADMINISTRATION

140 ..._iliillill.. GRAVIER, LLP CERTIFIED PUBLIC ACCOUNTANTS To the Board of Directors of Franklin Academy B2 Boynton Beach, Florida INDEPENDENT AUDITOR'S REPORT We have audited the accompanying financial statements of the governmental activities and each major fund of Franklin Academy B2 (the "School"), a charter school under Florida Charter Foundation, Inc., as of, and for the year ended June 30, 2014, which collectively comprises the School's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit 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 of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 396 Alhambra Circle, Suite 900, Cora l Gables, FL Tel: Fax: HLB Gravie( LLP is a member of International. A world wide organization of accounting firms and business advisers.

141 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of Franklin Academy B2 at June 30, 2014, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters As described in Note 1, the accompanying financial statements referred to above present only the financial position of Franklin Academy B2 at June 30, 2014, and the respective changes in financial position for the year then ended, and is not intended to be a complete presentation of Florida Charter Foundation, Inc. These financial statements do not purport to and do not present fairly the financial position of Florida Charter Foundation, Inc. as of June 30, 2014 and its changes in financial position for the year then ended in conformity with accounting principles generally accepted in the United States of America. Required Supplementary Information In accordance with Government Auditing Standards, we have also issued our report dated September 29, 2014 on our consideration of the School's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the 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 considered in assessing the results of our audit. Accounting principles generally accepted in the United States of America require that the management's discussion and analysis and budgetary comparison information on pages 4 through 8 and 26 through 27 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Coral Gables, Florida September 29, 2014 /It$ /" CERTIFIED PUBLIC ACCOUNTANTS

142 Management's Discussion and Analysis Franklin Academy B2 (A Charter school Under Florida Charter Foundation, Inc.) June 30, 2014 The corporate officers of Franklin Academy B2 have prepared this narrative overview and analysis of the school's financial activities for the year ended June 30, Financial Highlights 1. The fiscal year ending June 30, 2014 was the school's first year of operations. 2. The net position of the School at June 30, 2014 was $282, At year-end, the School had current assets on hand of $529, The net position of the School increased by $282,898 during the year. 5. The unassigned fund balance at year end was a deficit of $(147,223). Overview of the Financial Statements This discussion and analysis are intended to serve as an introduction to the School's basic financial statements. The School's financial statements for the year ended June 30, 2014 are presented in accordance with GASB Codification Section The financial statements have three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other required supplementary information in addition to the basic financial statements themselves. Government- Wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the School's finances, in a manner similar to a private-sector business. The Statement of Net Position presents information on all of the School's assets, deferred out flows of resources, liabilities, and deferred in flows of resources. The difference between the four is reported as net positions. Over time increases or decreases in net position may serve as an indicator of whether the financial position of the School is improving or deteriorating. The Statement of Activities presents information on how the School's net position changed during the fiscal year. All changes in net position are reported when the underlying event occurs without regard to the timing of related cash flows. Accordingly, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. The government-wide financial statements can be found on pages 9-10 of this report. Fund Financial Statements A "fund" is a collection of related accounts grouped to maintain control over resources that have been segregated for specific activities, projects, or objectives. The School like other state and local governments uses fund accounting to ensure and report compliance with finance-related legal requirements. 4

143 All of the funds of the School are governmental funds. Government Funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. Government Fund financial statements, however, focus on near-term inflows and outflows of spendable resources, as well as on the balances of spendable resources which are available at the end of the fiscal year. Such information may be used to evaluate a government's requirements for near-term financing. The Board of the School adopts an annual appropriated budget for its general fund. A budgetary comparison statement has been provided for the general fund to demonstrate compliance with the School's budget. The basic governmental fund financial statements can be found on pages of this report. Notes to Financial Statements The notes to the financial statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages of this report. GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net position may serve over time as a useful indicator of a charter school's financial position. In the case of the School, the net position was $282,898 at the close of the fiscal year. A summary of the School's net position as of June 30, 2014 follows: Cash and cash equivalents Due from other agencies Deposits receivable Capital Assets, net Total Assets 2014 $ 371,410 9, ,333 1,069,195 1,598,871 Deferred outflows of resources Salaries and wages payable Accounts payable and accrued liabilities Long-term payable to Florida Charter Foundation Total Liabilities 424, , ,407 1,315,973 Deferred inflows of resources Net Position: Net investment in capital assets Unrestricted Total Net Position 281,788 1,110 $ 282,898 At the end of the year, the School is able to report positive balances in total net position. 5

144 A summary and analysis of the School's revenues and expenses for the years ended June 30, 2014 follows: REVENUES Program Revenues Federal sources Lunch Program Charges for Services General Revenues Local Sources(FTE non specific) Other Revenues Total Revenues 2014 $ 129, , ,889 7,464,251 88,446 $ 7,967,717 EXPENSES Component Unit Activities: Instruction Curriculum development General administration School administration Fiscal services Food services Pupil transportation Operation ofplant Maintenance of plant Unallocated depreciation Total Expenses Increase in Net Position Net Position at Beginning of Year Net Position at End of Year $ 3,767, ,059 53, , , , ,180 1,011, , ,790 7,684, ,898 $ 282,898 This was the school's first year and thus, comparative information is not presented. School Location and Lease of Facility The School leases a facility located at 7882 Military Trail, Boynton Beach, FL. Capital Improvement Requirements The School maintains a continuous capital improvements program to enhance facilities and update fixtures and equipment as required. School Enrollment This past year, the School had approximately 1,127 students enrolled in grades kindergarten through seventh. 6

145 Accomplishments The School enrolled approximately 1130 kindergarten through seventh grade students during the school year. The K-7 educational program earned a "C" in our first year. Franklin Academy B offered many enrichment opportunities including chess taught by a Chess Master, band, cheerleading, Art History, arts & crafts, yoga, kickball, and dodgeball clubs. Athletic opportunities included MS Boys Basketball and MS Girls Soccer. The chess team won first place in the K-8 division of local competition and our new gymnasium hosted basketball games for our Middle School Boys basketball team who competed against local private and charter schools. Our Bolt Band performed locally at BB King's Blues Club and other local venues, including community outreach performances at local nursing homes and senior centers. FINANCIAL ANALYSIS OF THE GOVERNMENT'S FUND As noted earlier, the School uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds The focus of the School's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the School's financing requirements. In particular, the unassigned fu nd balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. Most of the School's operations are funded in the General Fund. The majority of the General Fund revenues are distributed to the School by the District through the Florida Education Finance Program (FEFP), which uses formulas to distribute state funds and an amount of local property taxes (i.e., required local effort) established each year by the Florida Legislature. At the end of the fiscal year, the School's governmental general fund reported ending fund balance of $1, 110. The fund balance unassigned and available for spending at the School's discretion is a deficit of $(147,223). 7

146 Capital Assets The School's investment in capital assets as of June 30, 2014 amounts to $1,069,195 (net of accumulated depreciation). This investment in capital assets includes furniture, fixtures and computer equipment. The school has no outstanding debt associated to Capital Assets. Governmental Fund Budget Analysis and Highlights Prior to the start of the School's fiscal year, the Board of the Charter School adopted an annual budget. A budgetary comparison statement has been provided for the governmental funds to demonstrate compliance with the School's budget. REVENUES Program Revenues Federal sources Lunch program General Revenues FTE nonspecific revenues Charges and other revenues Total Revenues CURRENT EXPENDITURES Component Unit Activities Instruction Curriculum development General administration School administration Fiscal services Food services Pupil transportation Operation of plant Maintenance of plant Total Current Expenditures $ Ongmal Budget 7,396, ,068 7,806,859 3,800,532 38,000 50, , ,692 25,000 1,892, ,000 $ 7,529,749 Governmental Fund Final Budget Actual $ 129,747 $ 129, , ,384 7,460,000 7,464, , ,335 7,963,131 7,967,717 3,800,532 3,767, , ,059 54,000 53, , , , , , , , ,180 1,015,000 1,011, , ,506 $ 7,561,062 $ 7,513,029 Requests for Information This financial report is intended to provide a general overview of the finances of the Charter School. Requests for additional information may be addressed to Marjorie Waldo, 7882 Military Trail, Boynton Beach, Florida,

147 Franklin Academy B2 (A charter school under Florida Charter Foundation, Inc.) Statement of Net Position June 30, 2014 Assets Current assets: Cash and cash equivalents Due from other agencies Deposits receivable $ 371,410 9, , ,676 Capital assets, depreciable Less: accumulated depreciation 1,240,985 (171,790) 1,069,195 Total Assets 1,598,871 Deferred Outflows of Resources Liabilities Current liabilities: Salaries and wages payable Accounts payable and accrued liabilities Total Current Liabilities 424, , ,566 Long-term payable to Florida Charter Foundation Total Liabilities 787,407 1,315,973 Deferred Inflows of Resources Net Position Net investment in capital assets Unrestricted Total Net Position 281,788 1 '11 0 $ 282,898 The accompanying notes are an integral part of this financial statement. 9

148 Franklin Academy B2 (A charter school under Florida Charter Foundation, Inc.) Statement of Activities For the year ended June 30, 2014 Program Revenues Net (Expense) Operating Capital Revenue Charges for Grants and Grants and and Changes FUNCTIONS Expenses Services Contributions Contributions in Net Position Governmental activities: Instruction $ 3,767,699 $ $ 25,000 $ $ (3,742,699) Curriculum development 262, ,889 (80,170) General adminstration 53,564 (53,564) School administration 822,435 (822,435) Fiscal services 826,070 (826,070) Food services 224, , ,747 (16,399) Pupil transportation 261' 180 (261 '180) Operation of plant 1,011,986 (1,011,986) Maintenance of plant 283,506 (283,506) Unallocated depreciation 171,790 (171,790) Total governmental activities 7,684, , ,747 (7,269,799) General revenues: FTE nonspecific revenues 7,464,251 Interest and other revenue 88,446 Change in net position 282,898 Net position, beginning Net position, ending $ 282,898 The accompanying notes are an integral part of this financial statement. 10

149 Franklin Academy 82 (A charter school under Florida Charter Foundation, Inc.) Balance Sheet - Governmental Funds June 30, 2014 General Fund Special Revenue Fund Total Governmental Funds Assets Cash and cash equivalents Due from other agencies Due from fund Deposits receivable Total Assets $ 371,410 9, , ,676 $ $ 371,410 9,933 9,933 9, ,333 9, ,609 Deferred Outflows of Resources Liabilities Salaries and wages payable Deposits Due to fund Total Liabilities 424, , , , ,799 9,933 9,933 9, ,499 Deferred Inflows of Resources Fund balance Nonspendable, not in spendable form Unassigned Total Liabilities, Deferred Inflows of Resources and Fund Balance 148,333 (147,223) 1,110 $ 529, ,333 (147,223) 1' 110 $ 9,933 $ 539,609 The accompanying notes are an integral part of this financial statement. 11

150 Franklin Academy B2 (A charter school under Florida Charter Foundation, Inc.) Reconciliation of the Governmental Fund Balance Sheet to the Statement of Net Position For the year ended June 30, 2014 Total Fund Balance - Governmental Funds $ 1,110 Amounts reported for governmental activities m the statement of net position are different because: Capital assets of $1,240,985 net of accumulated depreciation of $1 71,790 used in governmental activities are not financial resources and therefore are not reported in the fund. 1,069,195 The proceeds from debt issuance provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the statetnent of net position. Repayment of debt principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net position. This is the amount by which repayments of $0 exceeded proceeds of $787,407 in the current period. (787,407) Total Net Position - Governmental Activities $ 282,898 The accompanying notes are an integral part of this financial statement. 12

151 Franklin Academy B2 (A charter school under Florida Charter Foundation, Inc.) Statement of Revenues, Expenditures, and Changes in Fund Balance- Governmental Funds For the year ended June 30, 2014 Revenues: State capital outlay funding State passed through local Federal sources Lunch program Charges and other revenue Total Revenues Expenditures: Current Instruction Curriculum development General administration School administration Fiscal services Food services Pupil transportation Operation of plant Maintenance of plant Capital Outlay: Other capital outlay Total Expenditures Excess (deficit) of revenues over expenditures General Fund $ 7,464, ,335 7,734,586 3,767, ,059 53, , , ,180 1,011, ,506 1,240,985 8,529,484 (794,898) Special Revenue Fund Total Governmental Funds $ $ 7,464, , , , , )35 233,131 7,967,717 3,767, ,059 53, , , , , ,180 1,011, ,506 1,240, ,530 8,754,014 8,601 (786,297) Other financing sources (uses) Transfers in (out) L/T payable to Florida Charter Foundation, net 8, (8,601) Net change in fund balance 1' 110 1,110 Fund Balance at beginning of year Fund Balance at end of year $ 1,110 $ $ The accompanying notes are an integral part of this financial statement. 13

152 Franklin Academy 82 (A charter school under Florida Charter Foundation, Inc.) Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance of Governmental Funds to the Statement of Activities For the year ended June 30, 2014 Net Change in Fund Balance- Governmental Funds $ 1,110 Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which capital outlays of $1,240,985 exceeded depreciation expense of $171,790. 1,069,195 The proceeds from debt issuance provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the statetnent of net position. Repayment of debt principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net position. This is the amount by which repayments of $0 exceeded proceeds of $787,407 in the current period. (787,407) Change in Net Position of Governmental Activities $ 282,898 The accompanying notes are an integral part of this financial statement. 14

153 Franklin Academy B2 (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2014 Note 1- Summary of Significant Accounting Policies Reporting Entity Franklin Academy B2 (the "School"), is a charter school located in the school district of the School Board of Palm Beach County, Florida (the "District"). The Schools charter is held by Florida Charter Foundation, Inc., a not-for-profit corporation organized pursuant to Chapter 617, Florida Statutes, the Florida Not-For-Profit Corporation Act. The governing body of the School is the board of directors of Franklin Academy B2, which is composed of five members and also governs other charter schools. The general operating authority of the School is contained in Section , Florida Statutes. The School operates under a charter granted by the sponsoring district, the School Board of Palm Beach County, Florida. The current charter expires on June 30, 2017 and is renewable for an additional term pursuant to law and/or by a mutual written agreement between the School and the District. At the end of the term of the charter, the District may choose not to renew the charter under the grounds specified in the charter in which case the District is required to notify the School in writing at least 90 days prior to the charters expiration. During the term of the charter, the District may terminate the charter if good cause is shown. The School's location is in Boynton Beach, Florida for children from kindergarten through seventh grade and is funded by the District. These financial statements are for the period from inception through June 30, 2014, when a total of approximately 1,127 students were enrolled for the school year. Basis of presentation The School's accounting policies conform to accounting principles generally accepted in the United States as applicable to state and local governments. The Governmental Accounting Standards Board ("GASB") is the accepted standard setting body for establishing governmental accounting and financial reporting principles. Government-wide and Fund Financial Statements The government-wide financial statements include the statement of net position and the statement of activities. These statements report information about the School as a whole. Any internal interfund activity has been eliminated from these financial statements. Both statements report only governmental activities as the School does not engage in any business type activities. These statements also do not include fiduciary funds. The statement of activities reports the expenses of a given function offset by program revenues directly connected with the functional program. A function is an assembly of similar activities and may include portions of a fund or summarize more than one fund to capture the expenses and program revenues associated with a distinct functional activity. Program revenues include: (1) charges for services which report fees; (2) operating grants such as the National School Lunch Program, Federal grants, and other state allocations; and (3) capital grants specific to capital outlay. Other revenue sources not properly included with program revenues are reported as general revenues. 15

154 Franklin Academy B2 (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2014 Note 1- Summary of Significant Accounting Policies (continued) New Accounting Pronouncements The School implemented GASB Statement No. 63, "Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position." GASB 63 identifies net position, rather than net assets, as the residual of all other elements presented in a statement of financial position. Deferred outflows of resources represent consumption of resources that is applicable to future reporting periods that will be reported in a separate section after assets. Deferred inflows of resources represent acquisition of resources that is applicable to future reporting periods that will be reported in a separate section after liabilities. This change was incorporated in the Schools financial statements; however there was no effect on beginning net position/fund balance. Additionally, the School implemented GASB Statement No. 65, "Items previously reported as Assets and Liabilities". GASB 65 establishes accounting and financial reporting standards that reclassify as deferred outflows of resources or deferred inflows of resources, certain items that were previously report as assets and liabilities. This change was incorporated in the Schools financial statements; however there was no effect on beginning net position/fund balance. Fund Financial Statements Fund financial statements are provided for governmental and fiduciary funds, even though the fiduciary funds are not included in the government-wide financial statements. The operations of the funds are accounted for with a separate set of self-balancing accounts that comprise its assets, deferred outflows of resources, and liabilities, deferred inflows of resources, equity, revenues and expenditures. Major individual governmental funds are reported as separate columns in the fund financial statements: General Fund- is the School ' s primary operating fund. It accounts for all financial resources of the school, except those required to be accounted for in another fund. Special Revenue Fund- accounts for specific revenue, such as capital outlay funding and federal lunch program that are legally restricted to expenditures for particular purposes. Measurement Focus and Basis of Accounting The financial statements of the School are prepared in accordance with generally accepted accounting principles (GAAP). The School's reporting entity applies all relevant Governmental Accounting Standards Board (GASB) Codification of Accounting and Financial Reporting Guidance. 16

155 Franklin Academy B2 (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2014 Note 1- Summary of Significant Accounting Policies (continued) The government-wide statements report using the economic resources measurement focus and the full accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. The School recognizes assets of non-exchange transactions in the period when the underlying transaction occurs, when an enforceable legal claim has arisen, or when all eligibility requirements are met. Revenues are recognized, on the modified accrual basis, when they are measurable and available. Non-exchange transactions occur when the school provides (or receives) value to (from) another party without receiving (or giving) equal or nearly equal value in return. Most donations are examples of non-exchange transactions. Revenues from grants and donations are recognized on the accrual basis, in the fiscal year in which all eligibility requirements have been satisfied. Governmental fund financial statements report using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized when they are both measurable and available. "Measurable" means the amount of the transaction can be determined. "Available" means collectible within the current period or soon enough thereafter to pay liabilities of the current period. The School considers revenues to be available if they are collected within 60 days of the end of the fiscal year. Florida Education Finance Program (FEFP) revenues are recognized when received. A one-year availability period is used for revenue recognition for all other governmental fund revenues. Charges for services and fees are recognized when cash is collected as amounts are not measurable. When grant terms provide that the expenditure of funds is the prime factor for determining eligibility for federal, state, and other grant funds, revenue is recognized at the time the expenditure is made. Expenditures are recorded when the related fund liability is incurred, except for long-term debt principal and interest which are reported as expenditures in the year due. Budgets and Budgetary Accounting In compliance with Florida Statutes, the Board of Directors adopts an annual budget using the modified accrual basis of accounting. During the fiscal year, expenditures were controlled at the object level (e.g. salaries and benefits, purchased services, materials and supplies and capital outlay) within each activity (e.g. instruction, pupil personnel services and school administration). Revisions to the annual budget are approved by the Board. 17

156 Franklin Academy B2 (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2014 Note 1- Summary of Significant Accounting Policies (continued) Cash Cash and cash equivalents include all highly graded investments with a maturity of three months or less. Inter-fund Transfers Outstanding balances between funds are reported as "due to/from" other funds. Inter-fund transfers are made to move any excess or shortage of funds derived from the National School Lunch Program from the Special Revenue Fund to the General Fund. Due from Other Governments or Agencies Amounts due to the School by other governments or agencies are for grants or programs under which the services have been provided by the School. Capital Assets The School's property, plant and equipment with useful lives of more than one year are stated at historical cost and comprehensively reported in the statement of net position in the governmentwide financial statements. Donated capital assets are recorded at their estimated fair market value on the date donated. The School generally capitalizes assets with a cost of $500 or more. Building improvements, additions and other capital outlays that significantly extend the useful life of an asset are capitalized. The costs of normal maintenance and repairs that do not add to the asset value or materially extend useful lives are not capitalized. Capital assets are depreciated using the straight-line method. When capital assets are disposed, the cost and applicable accumulated depreciation are removed from the respective accounts, and the resulting gain or loss is recorded in operations. Estimated useful lives, in years, for depreciable assets are as follows: Improvements Furniture, Equipment and Software Textbooks 15 Years 5 Years 3 Years Compensated Absences The School grants a specific number of sick days. Full time instructional employees are eligible to five days per school year. (a "benefit year"). In the event that available time is not used by the end of the benefit year, employees may "rollover" five unused days for use in future benefit years. However, at no time can the maximum amount of unused sick days exceed ten days. There is no termination payment for accumulated unused sick days. 18

157 Franklin Academy B2 (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2014 Note 1- Summary of Significant Accounting Policies (continued) Compensated Absences (continued) GASB Codification Section C60, Accounting fo r Compensated Absences, provides that compensated absences that are contingent on a specific event that is outside the control of the employer and employee should be accounted for in the period those events take place. Accordingly, these financial statements do not include an accrual for sick days available to be used in future benefits years. The School also provides certain days to be used for specific personal matter such as family death and jury duty. Because the use of such days is contingent upon those events taking place and such events are out of the control of both the employer and the employee, there is no accrual for such days. Revenue Sources Revenues for current operations are received primarily from the District pursuant to the funding provisions included in the School's charter. In accordance with the funding provisions of the charter and Section , Florida Statutes, the School will report the number of full-time equivalent (FTE) students and related data to the District. Under the provisions of Section , Florida Statutes, the District reports the number of the full-time equivalent (FTE) students and related data to the Florida Department of Education (FDOE) for funding through the FEFP. Funding for the School is adjusted during the year to reflect the revised calculations by the FDOE under the FEFP and the actual weighted full-time equivalent students reported by the School during the designated full-time equivalent student survey periods. After review and verification of FTE reports and supporting documentation, the FDOE may adjust subsequent fiscal period allocations of FEFP funding for prior year errors disclosed by its review as well as to prevent statewide allocations from exceeding the amount authorized by the Legislature. Normally, such adjustments are treated as reductions of revenue in the year the adjustment is made. In addition, the School receives state funds through the District under charter school capital outlay funding pursuant to Section , Florida Statutes. Funds are based on a capital outlay plan submitted to the District and are to be used for lease of school facilities. Finally, the School also receives Federal awards for the enhancement of various educational programs. Federal awards are generally received based on applications submitted to and approved by various granting agencies. For Federal awards in which a claim to these grant proceeds is based on incurring eligible expenditures, revenue is recognized to the extent that eligible expenditures have been incurred. Any excess amounts are recorded as deferred revenues until expended. Additionally, other revenues may be derived from various fundraising activities and certain other programs. 19

158 Franklin Academy B2 (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2014 Note 1 - Summary of Significant Accounting Policies (continued) Net position and Fund balance classifications Government-wide financial statements Equity is classified as net position and displayed in three (3) components: a) Net investment in capital assets - consists of capital assets net of accumulated depreciation and reduced by the outstanding balances of any borrowings that are attributable to the acquisition or improvement of those assets. b) Restricted net position - consists of net position with constraints placed on their use either by external groups such as creditors, grantors, contributors or laws or regulations of other governments. c) Unrestricted net position - all other net position that do not meet the definition of "restricted" or "net investment in capital assets." Fund financial statements Under GASB Codification Section , Fund Balance Reporting and Governmental Fund Type Definitions. This Statement defines the different types of fund balances that a governmental entity must use for financial reporting purposes. GASB requires the fund balance amounts to be properly reported within one of the fund balance categories listed below: a) Nonspendable - includes amounts that cannot be spent because they are either not in spendable form or legally or contractually required to be maintained intact. Consists of fund balance associated with inventories, prepaid expenses, long-term loans and notes receivable, and property held for resale (unless the proceeds are restricted, committed, or assigned). b) Restricted - fund balance category includes amounts that can be spent only for the specific purposes stipulated by constitution, external resource providers, or through enabling legislation. Restricted fund balance of the School relate to reserves required by the landlord for property maintenance and repairs. There are no restricted balances at year end. c) Committed - fund balance classification includes amounts that can be used only for the specific purposes determined by a formal action of the School's Board of Directors. There are no committed fund balances at year end. d) Assigned - fund balance classification are intended to be used by the School's management for specific purposes but do not meet the criteria to be classified as restricted or committed. There are no assigned fund balances at year end. e) Unassigned - portion of the fund balance that has not been restricted, committed or assigned for a specific purpose. This is the residual classification for the School's general fund. 20

159 Franklin Academy B2 (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2014 Note 1- Summary of Significant Accounting Policies (continued) Order of Fund Balance Spending Policy The School's policy is to apply expenditures against non-spendable fund balance, restricted fund balance, committed fund balance, assigned fund balance, and unassigned fund balance at the end of the fiscal year by adjusting journal entries. First Non-spendable fund balances are determined. Then restricted fund balances for specific purposes are determined (not including non-spendable amounts). Then any remaining fund balance amounts for the non-general funds are classified as restricted fund balance. It is possible for the non-general funds to have negative unassigned fund balance when non-spendable amounts plus the restricted fund balances for specific purposes amounts exceed the positive fund balance for the non-general fund. Income Taxes Florida Charter Foundation, Inc. had previously qualified as a tax-exempt organization under Internal Revenue Code Section 501(c)(3). During the year, the tax-exempt status was revoked for failure to file timely Form 990. Management has applied for re-instatement and fully expect to be approved. Accordingly, no tax provision has been made in the accompanying financial statements. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenditures during the reporting period. Actual results could differ from those estimates. Subsequent Events In accordance with GASB Codification Section , the School has evaluated subsequent events and transactions for potential recognition or disclosure through September 29, 2014, which is the date the financial statements were available to be issued. 21

160 Franklin Academy B2 (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2014 Note 2 -Capital Assets The following schedule provides a summary of changes in capital assets, acquired substantially with public funds, for the period ended June 30, 2014: Balance Balance 07/01/13 Additions Retirements 06/30/14 Capital Assets: Buildings and Improvements Computer equipment and software $ $ 13, ,221 $ $ 13, ,221 Furniture, equipment and textbooks 964, ,875 Total Capital Assets $ $ 1,240,985 $ $ 1,240,985 Less Accumulated Depreciation: Buildings and Improvements (2, 156) (2, 156) Computer equipment and software (62,444) (62,444) Furniture, equipment and textbooks (107,190) (107, 190) (171,790) (171,790) Capital Assets, net $ $ 1,069,195 $ $ 1,069,195 Depreciation expense for the year ended June 30, 2014 was $171,790. Note 3 - Deposits Deposits The School's policy is to maintain its cash and cash equivalents in major banks and in high grade investments. As of June 30, 2014, the carrying amount of the School's deposits was $371,410 and the respective bank balances totaled $579,813. Deposits at FDIC-insured institutions are insured up to $250,000 per depositor, per financial institution. The School is a charter school under Florida Charter Foundation, Inc., which also operates various other charter schools. All bank accounts are opened under the account ownership of Florida Charter Foundation, Inc., therefore, bank balances at times may potentially be in excess of FDIC coverage. As of June 30, 2014, bank balances in potential excess of FDIC coverage totaled $579,

161 Franklin Academy B2 (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2014 Note 4 -Management Agreement The School uses Florida Charter Foundation Inc, (the holder of the School's charter) to provides complete administrative and management services to all Franklin Academy schools. These services include but are not limited to: administration of support services (facility maintenance, food service, transportation, etc); governmental compliance reporting; coordination of legal support for school operations; district management/liaison; parent customer service; grant application/management; charter application development/submission/approval; site selection/development; construction project management; school marketing/enrollment management; financing management; and public relations. There is no written agreement with Florida Charter Foundation, Inc. During the year, the School made payments totaling $621,500. In addition, Charter School Services Corporation, Inc., a professional charter school management company, provides accounting and human resources management services to the School including, but not limited to, regulatory compliance, maintenance of the books and records, bookkeeping, budgeting and financial reporting. The agreement between the School and the management company calls for a fee of $1 00 per full time equivalent (FTE) student per year up to 1,500 students with a reduction of $10 per student for every additional 500 students. The agreement can be terminated at any time by the board with 30 day notice. During the year ended June 30, 2014, the School incurred approximately $96,604 in management fees. Charter School Services Corporation, Inc. is located at 1225 SE 2n d Avenue, Fort Lauderdale, Florida, Note 5 -Related Party Transactions Pursuant to the Charter School contract with the School District, the District withholds an administrative fee of 5% (or 2% for high performing schools) of the qualifying revenues of the School. For the year ended June 30, 2014, net administrative fees withheld by the School District totaled $80,

162 Franklin Academy B2 (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2014 Note 6 -Commitments and Contingencies The School entered into a lease and development agreement with CA Miami 7788 OMT, LLC for its main campus facility. Initial fixed annual payments under this agreement are approximately $740,000 adjusted annually based on the lease schedule, plus additional property expenses including repairs, maintenance and insurance. The agreement continues through June 2042 with an option to renew for up to two additional ten year periods. Lease payments are allocated among the two schools based on FTE. For 2014, rent expense for the School totaled $616,764. Future minimum payments for the lease are as follows: Year 2015 $ 971, $ 1,239, $ 1,317, $ 1,849, $ 2,0 1 9, $ 10,800,000 (total for five year period) $ 12,069,8 16 (total for five year period) $ 13,491,372 (total for five year period) $ 15,078,876 (total for five year period) $ 9,886,296 (total for three year period) Contingencies The School receives substantially all of its funding from the District under the Florida Education Finance Program (FEFP), which is based in part on a computation of the number of full-time equivalent (FTE) students attending different instructional programs. The accuracy of FTE student data submitted by individual schools and used in the FEFP computations is subject to audit by the state and, if found to be in error, could result in refunds to the state or in decreases to future funding allocations. Additionally, the School participates in a number of federal, state and local grants which are subject to financial and compliance audits. It is the opinion of management that the amount of revenue, if any, which may be remitted back to the state due to errors in the FTE student data or the amount of grant expenditures which may be disallowed by grantor agencies would not be material to the financial position of the School. The School participates in a number of Federal and State grant programs which are subject to audit in accordance with Office of Management and Budget Circular A-133 "Audits of States, Local Governments, and Non-Profit Organizations". The School expects such expenditures, if any, which may be disallowed by the granting agencies to be immaterial. 24

163 Franklin Academy B2 (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2014 Note 7-Risk Management The School is exposed to various risks of loss related to torts, thefts of, damage to and destruction of assets, errors and omissions and natural disasters for which the School carries commercial insurance. Settlement amounts have not exceeded insurance coverage for the past years. In addition, there were no reductions in insurance coverage from those in the prior year. Note 8-Defined Contribution Retirement Plan The School's personnel are eligible to participate in a defined contribution 401(k) plan covering employees who meet certain age and tenure requirements. Under the Plan, the School provides a match of 2.5% of the employee's compensation. The School contributed to the Plan $29,201 for the year ended June 30, The School does not exercise any control or fiduciary responsibility over the Plans' assets. 25

164 REQUIRED SUPPLEMENTARY INFORMATION

165 Franklin Academy B2 (A charter school under Florida Charter Foundation, Inc.) Statement of Revenues, Expenditures, and Changes in Fund Balance For the year ended June 30, 2014 General Fund Original Budget Final Budget Actual REVENUES State passed through local $ 7,396,791 $ 7,460,000 $ 7,464,251 Charges and other revenue 410, , ,335 Total Revenues 7,806,859 7,730,000 7,734,586 EXPENDITURES Current: Instruction 3,800,532 3,800,532 3,767,699 Curriculum development 38, , ,059 General administration 50,000 54,000 53,564 School Administration 625, , ,435 Fiscal Services 957, , ,070 Pupil Transportation 25, , ,180 Operation of Plant 1,892,009 1,015,000 1,011,986 Maintenance of Plant 141, , ,506 Total Current Expenditures 7,529,749 7,336,532 7,288,499 Excess of Revenues Over Current Expenditures 277, , ,087 Capital Outlay 1,240,985 1,240,985 Total Expenditures 7,529,749 8,577,517 8,529,484 Excess of Revenues Over Expenditures 277, 110 (847,517) (794,898) Other financing sources (uses): Transfers in (out) 8,601 8,601 Long term advances from other schools, net 787, ,407 Net change in fund balance 277,1 10 (51,509) 1,110 Fund Balance at beginning of year Fund Balance at end of year $ 277,1 10 $ (51,509) $ 1' 110 Notes to Budgetary ComQarison Schedule An annual budget is adopted on the modified accrual basis of accounting, consistent with generally accepted accounting principles. Amendments to the budget can only be made with the approval of the Board of Directors. 26

166 Franklin Academy B2 (A charter school under Florida Charter Foundation, Inc.) Statement of Revenues, Expenditures, and Changes in Fund Balance For the year ended June 30, 2014 Special Revenue Fund OriBinal BudBet Final BudBet Actual REVENUES State capital outlay funding $ $ $ Federal sources 129, ,747 Lunch program 103, ,384 Total Revenues 233, ,131 EXPENDITURES Current: Instruction Food services 224, ,530 Operation of Plant Total Current Expenditures 224, ,530 Excess of Revenues Over Current Expenditures 8,601 8,601 Capital Outlay Total Expenditures 224, ,530 Excess of Revenues Over Expenditures 8,601 8,601 Other financing sources (uses) Transfers in (out) (8,601) (8,601) Net change in fund balance Fund Balance at beginning of year Fund Balance at end of year $ $ $ Notes to Budgetary Comparison Schedule An annual budget is adopted on the modified accrual basis of accounting, consistent with generally accepted accounting principles. Amendments to the budget can only be made with the approval of the Board of Directors. 27

167 .._ilillill_. GRAVIER, LLP CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Board of Directors of Franklin Academy B2 Boynton Beach, Florida We have audited, in accordance with the 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, the financial statements of the governmental activities and each major fund of Franklin Academy B2 (the "School") as of, and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise the School's basic financial statements and have issued our report thereon dated September 29, Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the School's internal control over financial reporting to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the School's internal control. Accordingly, we do not express an opinion on the effectiveness of the School's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 396 Alhambra Circle, Suite 900, Coral Gables, FL Tel: Fax: HLB Gravier. LLP is a member of International. A world wide organization of accounting firms and business advisers.

168 Compliance and Other Matters As part of obtaining reasonable assurance about whether the School's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. We issued a separate management letter dated September 29, 2014 pursuant to Chapter , Rules of the Auditor General. Purpose of this report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. CERTIFIED PUBLIC ACCOUNTANTS Coral Gables, Florida September 29,

169 ... iliilll... GRAVIER, LLP CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT LETTER Board of Directors of Franklin Academy B2 Boynton Beach, Florida Report on the Financial Statements We have audited the financial statements of the governmental activities and each major fund of Franklin Academy B2 as of and for the year ended June 30, 2014 and have issued our report thereon dated September 29, Auditor's Responsibility We conducted our audit 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. Other Reporting Required by Government Auditing Standards We have issued our Independent Auditors' Report on Internal Control over Financial Reporting and Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards. Disclosure in those reports, which are dated September 29, 2014, should be considered in conjunction with this management letter. Prior Audit Findings Section (1 )(e) 1., Rules of the Auditor General, requires that we determine whether or not corrective actions have been taken to address findings and recommendations made in the preceding annual financial audit report. This is the first year of operations, thus no findings or recommendations were made in the past. Financial Condition Sections (l )(e)2, and (11), Rules of the Auditor General, require that we apply appropriate procedures to determine whether or not Franklin Academy B2 has met one or more of the conditions described in Section (1 ), Florida Statutes, and identification of the specific condition(s) met. In connection with our audit, we determined that Franklin Academy B2 did not meet any of the conditions described in Section (1 ), Florida Statutes. 396 Alhambra Circle. Suite 900, Coral Gables. FL Te l: Fax: www. hi bgravier.com HLB Gravier, LLP is a member of III Internationai. A world-wide organization of accounting firms and business advisers.

170 Financial Condition (Continued) Sections (1)(e)6.a and (12), Rules of the Auditor General, require that we apply financial condition assessment procedures for Franklin Academy B2. It is management's responsibility to monitor Franklin Academy B2 financial condition, and our financial condition assessment was based in part on representations made by management and the review of financial information provided by same. We have applied such procedures as of the fiscal year end and no deteriorating financial condition has been noted. Transparency Sections (1 )( e )7 and (13), Rules of the Auditor General, require that we apply appropriate procedures to determine whether Franklin Academy B2 maintains on its Web site the information specified in Section (9)(p ), Florida Statutes. In connection with our audit, we determined that Franklin Academy B2 maintained on its Web site the information specified in Section (9)(p ), Florida Statutes. Other Matters Section (1)(e)3., Rules of the Auditor General, requires that we address in the management letter any recommendations to improve financial management. In connection with our audit, we have no findings or recommendations. Section (1)(e)4., Rules of the Auditor General, requires that we address noncompliance with provisions of contracts or grant agreements, or abuse, that have occurred, or are likely to have occurred, that have an effect on the financial statements that is less than material but which warrants the attention of those charged with governance. In connection with our audit, we did not have any such findings. Section (1)(e)5., Rules of the Auditor General, requires the name or official title of the entity. The official title of the entity is Franklin Academy B2. Purpose of this Letter Our management letter is intended solely for the information and use of the Legislative Auditing Committee, members of the Florida Senate and Florida House of Representatives, the Florida Auditor General, School Board of Palm Beach County, Federal and other granting agencies, the Board of Directors, and applicable management and is not intended to be and should not be used by anyone other than these specified parties. Coral Gables, Florida September 29, /Ill? /} :@ CERTIFIED PUBLIC ACCOUNTANTS

171 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) W/L# 5037 (A Charter School and Component Unit of the School Board of Broward County, Florida) Cooper City, Florida Financial Statements and Independent Auditors' Report June 30, 2015

172 TABLE OF CONTENTS General Information Independent Auditors' Report Management's Discussion and Analysis (Required Supplementary Information) Basic Financial Statements: Government-wide Financial Statement: Statement of Net Position.... Statement of Activities..... Fund Financial Statements: Balance Sheet - Governmental Funds..... Reconciliation of the Governmental Fund Balance Sheet to the Statement of Net Position.... Statement of Revenues, Expenditures and Changes in Fund Balance - Governmental Funds..... Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance of Governmental Funds to the Statement of Activities Notes to the Basic Financial Statements Required Supplementary Information: Budgetary comparison schedules Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards... Management Letter

173 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) W/L# S. Flamingo Road Cooper City, FL Dr. Dave Thomas, Chair and President Alexandra Lonsdale Catherine Arcabascio Debbie Platz J aqueline Greenberg BOARD OF DIRECTORS Dr. Daniel Sandberg, Principal SCHOOL ADMINISTRATION Scott E. Sznitken, Executive Director OTHER CORPORATE OFFICERS

174 ililil.._..._ GRAVIER, LLP CERTIFIED PUBLIC ACCOUNTANTS To the Board of Directors of Franklin Academy E Cooper City, Florida INDEPENDENT AUDITORS' REPORT We have audited the accon1panying financial statements of the governmental activities and each major fund of Franklin Acaden1y E (the "School"), a charter school under Florida Charter Foundation, Inc., which is a co1nponent unit of the District School Board of Broward County, as of, and for the year ended June 30, 2015, which collectively comprises the School's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and 1naintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial staten1ents based on our audit. We conducted our audit 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 of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstaten1ent. An audit involves performing procedures to obtain audit evidence about the mnounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In 1naking those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 396 Alhambra Circle, Suite 900, Coral Gables. FL Tel: Fax: HLB Gravie( LLP is a member of International. A world-wide organization of accounting firms and business advisers

175 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fuhd of Franklin Academy Eat June 30, 2015, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters As described in Note 1, the accompanying financial statements referred to above present only the financial position of Franklin Academy E at June 30, 2015, and the respective changes in financial position for the year then ended, and is not intended to be a complete presentation of Florida Charter Foundation, Inc. These financial statements do not purport to and do not present fairly the financial position of Florida Charter Foundation, Inc. as of June 30, 2015 and its changes in financial position for the year then ended in conformity with accounting principles generally accepted in the United States of America. Required Supplementary Information In accordance with Government Auditing Standards, we have also issued our report dated September 30, 2015 on our consideration of the School's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the 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 considered in assessing the results of our audit. Accounting principles generally accepted in the United States of America require that the management's discussion and analysis and budgetary comparison information on pages 4 through 8 and 26 through 27 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Coral Gables, Florida September 30,2015 /ltjj IJ CERTIFIED PUBLIC ACCOuNTANTS 3

176 Management's Discussion and Analysis Franklin Academy E (A Charter school Under Florida Charter Foundation, Inc.) June 30, 2015 The corporate officers of Franklin Academy E have prepared this narrative overview and analysis of the school's financial activities for the year ended June 30, Financial Highlights 1. The net position of the School at June 30, 2015 was $895, At year-end, the School had current assets on hand of $63 7, The net position of the School decreased by $139,594 during the year. 4. The unassigned fund balance at year end was $119,127. Overview of the Financial Statements This discussion and analysis are intended to serve as an introduction to the School's basic financial statements. The School's financial statements for the year ended June 30, 2015 are presented in accordance with GASB Codification Section The financial statements have three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other required supplementary information in addition to the basic financial statements themselves. Government- Wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the School's finances, in a manner similar to a private-sector business. The Statement of Net Position presents information on all of the School's assets, deferred out flows of resources, liabilities, and deferred in flows of resources. The difference between the four is reported as net positions. Over time increases or decreases in net position may serve as an indicator of whether the financial position of the School is improving or deteriorating. The Statement of Activities presents information on how the School's net position changed during the fiscal year. All changes in net position are reported when the underlying event occurs without regard to the timing of related cash flows. Accordingly, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. The government-wide financial statements can be found on pages 9-10 of this report. Fund Financial Statements A "fund" is a collection of related accounts grouped to maintain control over resources that have been segregated for specific activities, projects, or objectives. The School like other state and local governments uses fund accounting to ensure and report compliance with finance-related legal requirements. 4

177 All of the funds of the School are governmental funds. Government Funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. Government Fund financial statements, however, focus on near-term inflows and outflows of spendable resources, as well as on the balances of spendable resources which are available at the end of the fiscal year. Such information may be used to evaluate a government's requirements for near-term financing. The Board of the School adopts an annual appropriated budget for its general fund. A budgetary comparison statement has been provided for the general fund to demonstrate compliance with the School's budget. The basic governmental fund financial statements can be found on pages of this report. Notes to Financial Statements The notes to the financial statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial staternents can be found on pages of this report. GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net position may serve over time as a useful indicator of a charter school's financial position. In the case of the School, the net position was $895,256 at the close of the fiscal year. A summary of the School's net position as of June 30, 2015 and 2014 follows: Cash and cash equivalents Due from other agencies Deposits receivable Due from other charter schools Capital Assets, net Total Assets $ ,973 3, , ,647 1' 108,017 1,904,839 $ ,997 19, , ,709 1,093,065 1,498,859 Deferred outflows of resources Salaries and wages payable Accounts payable and accrued liabilities Due to Florida Charter Foundation Total Liabilities 426,599 91, ,531 1,009, , , ,009 Deferred inflows of resources Net Position: Net investment in capital assets and deposits Unrestricted Total Net Position 776, ,127 $ 895,256 1,093,065 (58,215) $ 1,034,850 At the end of the year, the School is able to report positive balances in total net position. 5

178 A summary and analysis of the School's revenues and expenses for the years ended June 30, 2015 and 2014 follows: REVENUES Program Revenues Capital Outlay Funding $ 211,059 $ Federal sources 475,864 74,606 Lunch Program 45, ,065 Charges for Services 192, ,85 1 General Revenues Local Sources(FTE non specific) 5,695,064 5,786,980 Other Revenues 134, ,164 Total Revenues $ 6,755,508 $ 6,307,666 EXPENSES Component Unit Activities: Instruction $ 3,307,701 $ 2,607,018 Curriculum development 218, ,385 School administration 673, ,428 Fiscal services 650, ,130 Food services 198, ,584 Pupil transportation 171, ,401 Operation of plant 1,3 12, ,354 Maintenance ofplant 76,004 41,848 Unallocated depreciation 286, ,668 Total Expenses 6,895,102 5,272,8 16 Increase in Net Position (139,594) 1,034,850 Net Position at Beginning of Year 1,034,850 Net Position at End of Year $ 895,256 $ 1,034,850 The School's revenues and expenses increased by $447,842 and $1,622,286, respectively, in the current year. The School had an decrease in its net position of $139,594 for the year. School Location and Lease of Facility The School leases a facility located at 6301 South Flamingo Road, Cooper City. Capital Improvement Requirements The School maintains a continuous capital improvements program to enhance facilities and update fixtures and equipment as required. School Enrollment This past year, the School had approximately 884 students enrolled 1n grades kindergarten through fifth. 6

179 Accomplishments Franklin Academy in Cooper City began the school year with 884 students in August of Utilizing a single-gender educational model, teachers and staff are provided with professional development opportunities which augment the educational programs and opportunities for all students. Franklin Academy provides an outstanding academic program to address Florida Standards and continues to implement a variety of intervention opportunities for struggling students, including before and after school tutorial programs, as well as Academic Olympics, which is held on Saturdays. In the previous year, Franklin Academy's sixth through eighth grade program which earned an "A" rating, sent students to district level math competitions where they outperformed many neighboring schools in various reporting categories on its State Report Card. Franklin Academy also laid the ground work to implement a new STEM lab to promote additional opportunities to create a desire to learn through engaging problem-based scenarios about the world around them. Franklin Academy implemented a new sports program in 2014 to include basketball, football, and soccer and competed against local schools. Franklin Academy's chess competitions have expanded from our Cooper City campus and regional locations to national matches. In addition to chess, the school competed in speech and debate tournaments, including the Broward Champs in which Franklin Academy achieved a district champion in Extemporaneous Speaking. Franklin Academy has a flourishing arts department. Students are involved in a Winter Showcase, fall and spring musicals, dance recitals, the International Day of Peace Celebration, and twenty-two student selected clubs. The school was recently recognized by the National Wildlife Federation for successfully creating a Certified Wildlife Habitat through the Garden for Wildlife Program. Franklin Academy has a positive relationship with the community and benefits from a dynamic and generous Parent Teacher Organization (PTO). In second semester of its inaugural year, Franklin Academy applied for and was awarded candidacy to the International Baccalaureate. To follow up on the candidacy, the school recently submitted the authorization application to be an International Baccalaureate World School. The middle school IB teachers are continuing to participate in professional development toward this goal. Franklin Academy received full school accreditation through SACS-CASI in June, FINANCIAL ANALYSIS OF THE GOVERNMENT'S FUND As noted earlier, the School uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds The focus of the School's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the School's financing requirements. In particular, the unassigned fu nd balance may serve as a useful measure of a government's net resources avaitable for spending at the end of the fiscal year. 7

180 Most of the School's operations are funded in the General Fund. The majority of the General Fund revenues are distributed to the School by the District through the Florida Education Finance Program (FEFP), which uses formulas to distribute state funds and an amount of local property taxes (i.e., required local effort) established each year by the Florida Legislature. At the end of the fiscal year, the School's governmental general fund reported ending fund balance of $119,127. The fund balance unassigned and available for spending at the School's discretion is a deficit of $119,127. Capital Assets The School's investment in capital assets as of June 30, 2015 amounts to $1,108,017 (net of accumulated depreciation). This investment in capital assets includes furniture, fixtures and computer equipment. The school has no outstanding debt associated to Capital Assets. Governmental Fund Budget Analysis and Highlights Prior to the start of the School's fiscal year, the Board of the Charter School adopted an annual budget. A budgetary comparison statement has been provided for the governmental funds to demonstrate compliance with the School's budget. REVENUES Program Revenues State capital outlay funding Federal sources Lunch program General Revenues FTE nonspecific revenues Charges and other revenues Total Revenues $ Ongmal Budget 5,938, ,867 6,33 1,326 Governmental Fund Final Budget Actual $ 211,059 $ 211, , ,864 45,801 45,801 5,900,000 5,695, , ,720 6,957,724 6,755,508 CURRENT EXPENDITURES Component Unit Activities Instruction Curriculum development School administration Fiscal services Food services Central services Operation of plant Maintenance ofplant Unallocated depreciation Total Current Expenditures 3,067,269 15, , , ,564 60,000 1,395,589 35,000 $ 6,034, 113 3,348,875 3,307, , , , , , , , , , ,455 1,315,000 1,3 12, ,000 76, ,173 $ 6,867,827 $ 6,895,102 Requests for Information This financial report is intended to provide a general overview of the finances of the Charter School. Requests for additional information may be addressed to Dr. Daniel Sandberg, 6301 South Flamingo Road, Cooper City, Florida,

181 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) Statement of Net Position June 30, 2015 Assets Current assets: Cash and cash equivalents Due from other agencies Due from other charter schools Capital assets, depreciable Less: accumulated depreciation Deposits Total Assets $ 352,973 3, , ,179 1,554,858 (446,841) 1,108, ,643 1,904,839 Deferred Outflows of Resources Liabilities Current liabilities: Salaries and wages payable Accounts payable and accrued liabilities Total Current Liabilities Due to Florida Charter Foundation Total Liabilities 426,599 91, , ,531 1,009,583 Deferred Inflows of Resources Net Position Net investment in capital assets and deposits Unrestricted Total Net Position 776, ,127 $ 895,256 The accompanying notes are an integral part of this financial statement. 9

182 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) Statement of Activities For the year ended June 30, 2015 Program Revenues Operating Capital Net (Expense) Revenue Charges for Grants and Grants and and Changes FUNCTIONS Expenses Services Contributions Contributions in Net Position Governmental activities: Instruction Curriculum development $ 3,307,701 $ 218,588 $ 350,000 $ $ (2,957,701) (2 18,588) School administration 673, 179 (673, 179) Fiscal services 650,987 (650,987) Food services 198,893 45, ,864 (27,228) Pupil transportation 171,455 (17 1,455) Operation of plant 1,3 12, ,059 (1,10 1,063) Maintenance of plant 76,004 (76,004) Unallocated depreciation Total governmental activities 286, 173 6,895, , , ,059 (286, 173) (6, 162,378) General revenues: FTE nonspecific revenues 5,695,064 Interest and other revenue 327,720 Change in net position (139,594) Net position, beginning 1,034,850 Net position, ending $ 895,256 The accompanying notes are an integral part of this financial statement. 10

183 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) Balance Sheet - Governmental Funds June 30, 2015 General Fund Special Revenue Fund Total Governmental Funds Assets Cash and cash equivalents Due from other agencies Due from fund Due from other charter schools Total Assets $ 352,973 3, , ,179 $ $ 352,973 3,559 3,559 3, ,647 3, ,738 Deferred Outflows of Resources Liabilities Salaries and wages payable Accounts payable Due to fund Total Liabilities 426,599 91, , ,599 91,453 3,559 3,559 3, ,6 11 Deferred Inflows of Resources Fund balance Nonspendable, not in spendable form Unassigned Total Liabilities, Deferred Inflows of Resources and Fund Balance 119, ,127 $ 637, , ,127 $ 3,559 $ 640,738 The accompanying notes are an integral part of this financial statement. 11

184 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) Reconciliation of the Governmental Fund Balance Sheet to the Statement ofnet Position For the year ended June 30, 2015 Total Fund Balance- Governmental Funds $ 119,127 Amounts reported for governmental activities in the statement of net position are different because: Capital assets of $1,554,858 net of accumulated depreciation of $446,841 used in govermnental activities are not financial resources and therefore are not reported in the fund. 1,108,017 Deposits used in governmental activities are not financial resources and therefore are not reported in the fund. 159,643 Long term payables in governmental activities are financial obligations but are not reported in the governmental funds. (491,531) Total Net Position - Governmental Activities $ 895,256 The accompanying notes are an integral part of this financial statement. 12

185 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) Statement of Revenues, Expenditures, and Changes in Fund Balance - Governmental Funds For the year ended June 30, Revenues: State capital outlay funding State passed through local Federal sources Lunch program Charges and other revenue Total Revenues Expenditures: Current Instruction Curriculum development School administration Fiscal services Food services Pupil transportation Operation of plant Maintenance of plant Capital Outlay: Other capital outlay Total Expenditures Excess (deficit) of revenues over expenditures General Fund $ 5,695, ,720 6,022,784 3,258, , , , ,455 1, 101,063 76, , 102 (127,318) Special Revenue Fund Total Governmenta l Funds $ 211,059 $ 211,059 5,695, , ,864 45,801 45, , ,724 6,755,508 48,875 3,307, , , , , , , ,059 1,312, , ,054 (27,228) (154,546) Other financing sources (uses) Transfers in (out) Deposits Due to Florida Charter Foundation (27,228) 491,531 ( , ,531 ( Net change in fund balance 177, ,342 Fund Balance at beginning of year (58,2152 ( Fund Balance at end of year $ 119,127 $ $ The accompanying notes are an integral part of this financial statement. 13

186 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) Reconciliation of the Statement of Revenues, Expenditures an Changes in Fund Balance of Governmental Funds to the Statement of Activities For the year ended June 30, 2015 Net Change in Fund Balance - Governmental Funds $ 177,342 Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which capital outlays of $301,125 exceeded depreciation expense of $286, ,952 Governmental funds report deposits as expenditures. However, in the statement of activities, the cost of those deposits is allocated over future periods. 159,643 Increase in long term payables is an resource in the governmental funds, but increases long-term liabilities in the statement of net position. This is the amount by which longterm payables increased in the current period. (491,531) Change in Net Position of Governmental Activities $ (139,594) The accompanying notes are an integral part of this financial statement. 14

187 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2015 Note 1 -Summary of Significant Accounting Policies Reporting Entity Franklin Academy E (the "School"), is a component unit of the School Board of Broward County, Florida (the "District"). The Schools charter is held by Florida Charter Foundation, Inc., a not-for-profit corporation organized pursuant to Chapter 617, Florida Statutes, the Florida Not For-Profit Corporation Act. The governing body of the School is the board of directors of Florida Charter Foundation, Inc., which is composed of five members and also governs other charter schools. The board of directors has determined that no component units exists that would require inclusion in the School's financial statements. The general operating authority of the School is contained in Section , Florida Statutes. The School operates under a charter granted by the sponsoring district, the School Board of Broward County, Florida. The current charter expires on June 30, 2017 and is renewable for an additional term pursuant to law and/or by a mutual written agreement between the School and the District. At the end of the term of the charter, the District may choose not to renew the charter under the grounds specified in the charter in which case the District is required to notify the School in writing at least 90 days prior to the chmiers expiration. During the term of the charter, the District may terminate the charter if good cause is shown. The School's location is in Cooper City, Florida for children from kindergarten through seventh grade and is funded by the District. These financial statements are for the year ended June 30, 2015, when a total of approximately 884 students were enrolled for the school year. Basis of presentation The School's accounting policies conform to accounting principles generally accepted in the United States as applicable to state and local governments. The Governmental Accounting Standards Board ("GASB") is the accepted standard setting body for establishing governmental accounting and financial reporting principles. Deferred Outflows/Inflows of Resources In addition to assets, the statement of financial position will sometimes report a separate section of deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period and so will not be recognized as an outflow of resources (expense/expenditure) until then. The School does not have any items that qualify for reporting in this category. In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources (revenue) until that time. The School does not have any items that qualify for reporting in this category. 15

188 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2015 Note 1 - Summary of Significant Accounting Policies (continued) Government-wide and Fund Financial Statements The government-wide financial statements include the statement of net position and the statement of activities. These statements report information about the School as a whole. Any internal interfund activity has been eliminated from these financial statements. Both statements report only governmental activities as the School does not engage in any business type activities. These statements also do not include fiduciary funds. The statement of activities reports the expenses of a given function offset by program revenues directly connected with the functional program. A function is an assembly of similar activities and may include portions of a fund or summarize more than one fund to capture the expenses and program revenues associated with a distinct functional activity. Program revenues include: (1) charges for services which report fees; (2) operating grants such as the National School Lunch Program, Federal grants, and other state allocations; and (3) capital grants specific to capital outlay. Other revenue sources not properly included with program revenues are reported as general revenues. Fund Financial Statements Fund financial statements are provided for governmental and fiduciary funds, even though the fiduciary funds are not included in the government-wide financial statements. The operations of the funds are accounted for with a separate set of self-balancing accounts that comprise its assets, deferred outflows of resources, and liabilities, deferred inflows of resources, equity, revenues and expenditures. Major individual governmental funds are reported as separate columns in the fund financial statements: General Fund- is the School's primary operating fund. It accounts for all financial resources of the school, except those required to be accounted for in another fund. Special Revenue Fund - accounts for specific revenue, such as capital outlay funding and federal lunch program that are legally restricted to expenditures for particular purposes. Measurement Focus and Basis of Accounting The financial statements of the School are prepared in accordance with generally accepted accounting principles (GAAP). The School's reporting entity applies all relevant Governmental Accounting Standards Board (GASB) Codification of Accounting and Financial Reporting Guidance. 16

189 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2015 Note 1- Summary of Significant Accounting Policies (continued) The government-wide statements report using the economic resources measurement focus and the full accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. The School recognizes assets of non-exchange transactions in the period when the underlying transaction occurs, when an enforceable legal claim has arisen, or when all eligibility requirements are met. Revenues are recognized, on the modified accrual basis, when they are measurable and available. Non-exchange transactions occur when the school provides (or receives) value to (from) another party without receiving (or giving) equal or nearly equal value in return. Most donations are examples of non-exchange transactions. Revenues from grants and donations are recognized on the accrual basis, in the fiscal year in which all eligibility requirements have been satisfied. Governmental fund financial statements report using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized when they are both measurable and available. "Measurable" means the amount of the transaction can be determined. Available means collectible within the current period or soon enough thereafter to pay liabilities of the current period. The School considers revenues to be available if they are collected within 60 days of the end of the fiscal year. Florida Education Finance Program (FEFP) revenues are recognized when received. A one-year availability period is used for revenue recognition for all other governmental fund revenues. Charges for services and fees are recognized when cash is collected as amounts are not measurable. When grant terms provide that the expenditure of funds is the prime factor for determining eligibility for federal, state, and other grant funds, revenue is recognized at the time the expenditure is made. Expenditures are recorded when the related fund liability is incurred, except for long-term debt principal and interest which are reported as expenditures in the year due. Budgets and Budgetary Accounting In compliance with Florida Statutes, the Board of Directors adopts an annual budget using the modified accrual basis of accounting. During the fiscal year, expenditures were controlled at the object level (e.g. salaries and benefits, purchased services, materials and supplies and capital outlay) within each activity (e.g. instruction, pupil personnel services and school administration). Revisions to the annual budget are approved by the Board. 17

190 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2015 Note 1- Summary of Significant Accounting Policies (continued) Cash Cash and cash equivalents include all highly investments with a maturity of three months or less. Inter-fund Transfers Outstanding balances between funds are reported as "due to/from" other funds. Inter-fund transfers are made to move any excess or shortage of funds derived from the National School Lunch Program from the Special Revenue Fund to the General Fund. Due from Other Governments or Agencies Amounts due to the School by other governments or agencies are for grants or programs under which the services have been provided by the School. Capital Assets The School's property, plant and equipment with useful lives of more than one year are stated at historical cost and comprehensively reported in the statement of net position in the governmentwide financial statements. Donated capital assets are recorded at their estimated fair market value on the date donated. The School generally capitalizes assets with a cost of $500 or more. Building improvements, additions and other capital outlays that significantly extend the useful life of an asset are capitalized. The costs of normal maintenance and repairs that do not add to the asset value or materially extend useful lives are not capitalized. Capital assets are depreciated using the straight-line method. When capital assets are disposed, the cost and applicable accumulated depreciation are removed from the respective accounts, and the resulting gain or loss is recorded in operations. Estimated useful lives, in years, for depreciable assets are as follows: Improvements Furniture, Equipment and Software Textbooks 15 Years 5 Years 3 Years 18

191 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2015 Note 1- Summary of Significant Accounting Policies (continued) Compensated Absences The School grants a specific number of sick days. Full time instructional employees are eligible to five days per school year. (a "benefit year"). In the event that available time is not used by the end of the benefit year, employees may "rollover" five unused days for use in future benefit years. However, at no time can the maximum amount of unused sick days exceed ten days. There is no termination payment for accumulated unused sick days. GASB Codification Section C60, Accounting fo r Compensated Absences, provides that compensated absences that are contingent on a specific event that is outside the control of the employer and employee should be accounted for in the period those events take place. Accordingly, these financial statements do not include an accrual for sick days available to be used in future benefits years. The School also provides certain days to be used for specific personal matter such as family death and jury duty. Because the use of such days is contingent upon those events taking place and such events are out of the control of both the employer and the employee, there is no accrual for such days. Revenue Sources Revenues for current operations are received primarily from the District pursuant to the funding provisions included in the School's charter. In accordance with the funding provisions of the charter and Section , Florida Statutes, the School will report the number of full-time equivalent (FTE) students and related data to the District. Under the provisions of Section , Florida Statutes, the District reports the number of the full-time equivalent (FTE) students and related data to the Florida Department of Education (FDOE) for funding through the FEFP. Funding for the School is adjusted during the year to reflect the revised calculations by the FDOE under the FEFP and the actual weighted full-time equivalent students reported by the School during the designated full-time equivalent student survey periods. After review and verification of FTE reports and supporting documentation, the FDOE may adjust subsequent fiscal period allocations of FEFP funding for prior year errors disclosed by its review as well as to prevent statewide allocations from exceeding the amount authorized by the Legislature. Normally, such adjustments are treated as reductions of revenue in the year the adjustment is made. In addition, the School receives state funds through the District under charter school capital outlay funding pursuant to Section , Florida Statutes. Funds are based on a capital outlay plan submitted to the District and are to be used for lease of school facilities. 19

192 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, Note 1 - Summary of Significant Accounting Policies (continued) Finally, the School also receives Federal awards for the enhancement of various educational programs. Federal awards are generally received based on applications submitted to and approved by various granting agencies. For Federal awards in which a claim to these grant proceeds is based on incurring eligible expenditures, revenue is recognized to the extent that eligible expenditures have been incurred. Any excess amounts are recorded as deferred revenues until expended. Additionally, other revenues may be derived from various fundraising activities and certain other programs. Net position and Fund balance classifications Government-wide financial statements Equity is classified as net position and displayed in three (3) components: a) Net investment in capital assets - consists of capital assets net of accumulated depreciation and reduced by the outstanding balances of any borrowings that are attributable to the acquisition or improvement of those assets. b) Restricted net position - consists of net position with constraints placed on their use either by external groups such as creditors, grantors, contributors or laws or regulations of other governments. c) Unrestricted net position - all other net position that do not meet the definition of "restricted" or "net investment in capital assets, net of related debt." Fund financial statements Under GASB Codification Section , Fund Balance Reporting and Governmental Fund Type Definitions. This Statement defines the different types of fund balances that a governmental entity must use for financial reporting purposes. GASB requires the fund balance amounts to be properly reported within one of the fund balance categories list below: a) Nonspendable - includes amounts that cannot be spent because they are either not in spendable form or legally or contractually required to be maintained intact. Consists of fund balance associated with inventories, prepaid expenses, long-term loans and notes receivable, and property held for resale (unless the proceeds are restricted, committed, or assigned). b) Restricted - fund balance category includes amounts that can be spent only for the specific purposes stipulated by constitution, external resource providers, or through enabling legislation. Restricted fund balance of the School relate to reserves required by the landlord for property maintenance and repairs. These are not restricted balances at year end. c) Committed - fund balance classification includes amounts that can be used only for the specific purposes determined by a formal action of the School's Board of Directors. There are no committed fund balances at year end. 20

193 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2015 Note 1- Summary of Significant Accounting Policies (continued) d) Assigned - fund balance classification are intended to be used by the School's management for specific purposes but do not meet the criteria to be classified as restricted or committed. There are no assigned fund balances at year end. e) Unassigned - portion of the fund balance that has not been restricted, committed or assigned for a specific purpose. This is the residual classification for the School's general fund. Order of Fund Balance Spending Policy The School's policy is to apply expenditures against non-spendable fund balance, restricted fund balance, committed fund balance, assigned fund balance, and unassigned fund balance at the end of the fiscal year by adjusting journal entries. First Non-spendable fund balances are determined. Then restricted fund balances for specific purposes are determined (not including non-spendable amounts). Then any remaining fund balance amounts for the non-general funds are classified as restricted fund balance. It is possible for the non-general funds to have negative unassigned fund balance when non-spendable amounts plus the restricted fund balances for specific purposes amounts exceed the positive fund balance for the non-general fund. Income Taxes Florida Charter Foundation, Inc. qualifies as a tax-exempt organization under Internal Revenue Code Section 501(c)(3), and is, therefore, exempt from income tax. Accordingly, no tax provision has been made in the accompanying financial statements Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenditures during the reporting period. Actual results could differ from those estimates. Subsequent Events In accordance with GASB Codification Section , the School has evaluated subsequent events and transactions for potential recognition or disclosure through September 30, 2015, which is the date the financial statements were available to be issued. 21

194 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2015 Note 2 -Capital Assets The following schedule provides a summary of changes in capital assets, acquired substantially with public funds, for the period ended June 30, 2015: Balance Balance 07/ Additions Retirements 06/30115 Capital Assets: Buildings and Improvements $ $ 106,820 $ $ 106,820 Computer equipment and software 238,467 69, ,927 Furniture, equipment and textbooks 1,015, ,845 1, 140,111 Total Capital Assets 1,25 3, ,125 1,554,858 Less Accumulated Depreciation: Computer equipment and software (39, 15 1) (99,958) (139,109) Furniture, equipment and textbooks (121,5 17) (186,215) (307,732) Total Accumulated Depreciation (160,668) (286,173) (446,841) Capital Assets, net $ 1,093,065 $ 14,952 $ $ 1,108,017 Depreciation expense for the year ended June 30, 2015 was $286,173. Note 3 -Deposits and Investments Deposits The School's policy is to maintain its cash and cash equivalents in major banks and in high grade investments. As of June 30, 2015, the carrying amount of the School's deposits was $352,973 and the respective bank balances totaled $365,876. Deposits at FDIC-insured institutions are insured up to $250,000 per depositor, per financial institution. The School is a charter school under Florida Charter Foundation, Inc., which also operates various other charter schools. All bank accounts are opened under the account ownership of Florida Charter Foundation, Inc., therefore, bank balances at times may potentially be in excess of FDIC coverage. As of June 30, 2015, bank balances in potential excess of FDIC coverage totaled $365,

195 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2015 Note 4 -Management Agreement The School uses Florida Charter Foundation Inc, (the holder of the School's charter) to provides complete administrative and management services to all Franklin Academy schools. These services include but are not limited to: administration of support services (facility maintenance, food service, transportation, etc); governmental compliance reporting; coordination of legal support for school operations; district management/liaison; parent customer service; grant application/management; charter application development/submission/approval; site selection/development; construction project management; school marketing/enrollment management; financing management; and public relations. There is no written agreement with Florida Charter Foundation, Inc. During the year, the School made payments totaling $486,200. In addition, Charter School Services Corporation, Inc., a professional charter school management company, provides accounting and human resources management services to the School including, but not limited to, regulatory compliance, maintenance of the books and records, bookkeeping, budgeting and financial reporting. The agreement between the School and the management company calls for a fee of $100 per full time equivalent (FTE) student per year up to 1,500 students with a reduction of $10 per student for every additional 500 students. The agreement can be terminated at any time by the board with 30 day notice. During the year ended June 30, 2015, the School incurred approximately $68,341 in management fees. Charter School Services Corporation, Inc. is located at 1225 SE 211 d Avenue, Fort Lauderdale, Florida, Note 5 -Related Party Transactions The School shares its campus with Franklin Academy F, another charter school under Florida Charter Foundation, Inc. Certain funding provided to the School is shared by the two schools. In addition, certain costs are allocated to each school using a logical basis such as the ratio of FTE for each school. At June 30, 2015, the School had a receivable of $280,647 from the other charter school. During 2015, the School received funds from Florida Charter Foundation and has recorded such transfers as long-term due to Florida Charter Foundation, Inc. At June 30, 2015, the School had a long-term liability of $491,531. Pursuant to the Charter School contract with the School District, the District withholds an administrative fee of up to 5% of the qualifying revenues of the School and up to and including 250 students. For the year ended June 30, 2015, administrative fees totaled $294,341 of which $211,059 was credited back for capital outlay purposes. 23

196 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2015 Note 6 -Commitments, Contingencies and Concentrations The School entered into a lease and development agreement with CA Cooper City 6271 SFR, LLC for its main campus facility. This facility is shared with Franklin Academy F, another charter school under Florida Charter Foundation, Inc. Initial fixed annual payments under this agreement are approximately $7 40,000 adjusted annually based on the lease schedule, plus additional property expenses including repairs, maintenance and insurance. The agreement continues through June 2042 with an option to renew for up to two additional ten year periods. Lease payments are allocated among the two schools based on FTE. The allocation used for 2015, was approximately 67o/o for the School and 33% for Franklin Academy F. For 2015, rent expense for the School totaled $881,648. Future minimum payments for the full lease (shared with Franklin Academy F) are as follows: Year 2016 $ 1,650, $ 1,789, $ 1,789, $ 1,898, $ 1,941, $ 10,380,734 (total for five year period) $ 11,602,3 18 (total for five year period) $ 12,967,652 (total for five year period) $ 14,493,654 (total for five year period) $ 6,264,283 (total for two year period) Contingencies and Concentrations The School receives substantially all of its funding from the District under the Florida Education Finance Program (FEFP), which is based in part on a computation of the number of full-time equivalent (FTE) students attending different instructional programs. The accuracy of FTE student data submitted by individual schools and used in the FEFP computations is subject to audit by the state and, if found to be in error, could result in refunds to the state or in decreases to future funding allocations. Additionally, the School receives various forms of federal, state and local funding which are subject to financial and compliance audits. It is the opinion of management that the amount of funding, if any, which may be remitted back to the state due to errors in the FTE student data or the amount of grant expenditures which may be disallowed by grantor agencies would not be material to the financial position of the School. 24

197 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2015 Note 7 - Risk Management The School is exposed to various risks of loss related to torts, thefts of, damage to and destruction of assets, errors and omissions and natural disasters for which the School carries commercial insurance. Settlement amounts have not exceeded insurance coverage for the past years. In addition, there were no reductions in insurance coverage from those in the prior year. Note 8 - Defined Contribution Retirement Plan The School's personnel are eligible to participate in a defined contribution 401 (k) plan covering employees who meet certain age and tenure requirements. Under the Plan, the School provides a match of 2.5o/o of the employee's compensation. The School contributed to the Plan $32,196 for the year ended June 30, The School does not exercise any control or fiduciary responsibility over the Plans' assets 25

198 REQUIRED SUPPLEMENTARY INFORMATION

199 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) Statement of Revenues, Expenditures, and Changes in Fund Balance For the year ended June 30, General Fund Original Budget Final Budget Actual REVENUES State passed through local $ 5,938,459 $ 5,900,000 $ 5,695,064 Charges and other revenue 392, , ,720 Total Revenues 6,33 1,326 6,225,000 6,022,784 EXPENDITURES Current: Instruction 3,067,269 3,300,000 3,258,826 Curriculum development 15, , ,588 School Administration 58 1, , , 179 Fiscal Services 572, , ,987 Food Services 306,564 Central Services 60, , ,455 Operation of Plant 1,395,589 1,3 15,000 1,101,063 Maintenance of Plant 35,000 77,000 76,004 Total Current Expenditures 6,034,113 6,409,000 6,150,102 Excess of Revenues Over Current Expenditures 297,213 (184,000) (127,318) Capital Outlay Total Expenditures 6,034, 113 6,409,000 6,150,102 Excess of Revenues Over Expenditures 297,213 (184,000) (127,3 18) Other fmancing sources (uses): Transfers in (out) (27,228 ) (27,228) Deposits 49 1, ,53 1 Due to Florida Charter Foundation (159,643) (159,643) Net change in fund balance 297, , ,342 Fund Balance at beginning of year (58,215) (58,215) (58,215) Fund Balance at end of year $ 238,998 $ 62,445 $ 119,127 Notes to Budgetary Comgarison Schedule An annual budget is adopted on the modified accrual basis of accounting, consistent with generally accepted accounting principles. Amendments to the budget can only be made with the approval of the Board of Directors. 26

200 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) Statement of Revenues, Expenditures, and Changes in Fund Balance For the year ended June 30, 2015 Special Revenue Fund Original Budget Final Budget Actual REVENUES State capital outlay funding $ $ 211,059 $ 211,059 Federal sources 475, ,864 Lunch program 45,801 45,801 Total Revenues 732, ,724 EXPENDITURES Current: Instruction 48,875 48,875 Food services 198, ,893 Operation of Plant 211, ,059 Total Current Expenditures 458, ,827 Excess of Revenues Over Current Expenditures 273, ,897 Capital Outlay 301, , 125 Total Expenditures 759, ,952 Excess of Revenues Over Expenditures (27,228) (27,228) Other financing sources (uses) Transfers in (out) 27,228 27,228 Net change in fund balance Fund Balance at beginning of year Fund Balance at end of year $ $ $ Notes to Budgetary Comparison Schedule An annual budget is adopted on the modified accrual basis of accounting, consistent with generally accepted accounting principles. Amendments to the budget can only be made with the approval of the Board of Directors. 27

201 GRAVIER, LLP CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Board of Directors of Franklin Academy E Cooper City, Florida We have audited, in accordance with the 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, the financial statements of the governmental activities and each major fund of Franklin Academy E (the "School") as of, and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise the School's basic financial statements and have issued our repo1i thereon dated September 30, Internal Control Over Financial Reporting In planning and performing our audit of the financial staten1ents, we considered the School's internal control over financial reporting to determine the audit procedures that are appropriate in the circun1stances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the School's internal. Accordingly, we do not express an opinion on the effectiveness of the School's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, 1nisstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify an deficiencies in internal control that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 396 Alhambra Circle, Suite 900, Coral Gables, FL Tel: Fax: HLB Gravier. LLP is a member of Ill International. A world-wide organization of accounting firms and business advisers.

202 Compliance and Other Matters As part of obtaining reasonable assurance about whether the School's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. We issued a separate management letter dated September 30, 2015 pursuant to Chapter , Rules of the Auditor General. Purpose of this report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. CERTIFIED PUBLIC ACCOUNTANTS Coral Gables, Florida September 30,

203 ll-.llllilll.. GRAVIER, LLP CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT LETTER Board of Directors of Franklin Academy E Cooper City, Florida Report on the Financial Statements We have audited the financial statements of the governmental activities and each major fund of Franklin Academy E as of and for the year ended June 3 0, 2015 and have issued our report thereon dated September 30, Auditor's Responsibility We conducted our audit 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; and Chapter , Rules of the Auditor General Other Reports and Schedules We have issued our Independent Auditors' Report on Internal Control over Financial Reporting and Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards. Disclosure in those reports, which are dated September 30, 2015, should be considered in conjunction with this management letter. Prior Audit Findings Section (1 )(e) 1., Rules of the Auditor General, requires that we determine whether or not corrective actions have been taken to address findings and recommendations made in the preceding annual financial audit report. There were no findings and recommendations in the preceding financial audit report. Official Title Section (1)(e)5., Rules of the Auditor General, requires the name or official title of the entity. The official title of the entity is Franklin Academy E. Financial Condition Sections (1 )( e )2, Rules of the Auditor General, requires that we report the results of our determination as to whether or not Franklin Academy E has met one or more of the conditions described in Section (1 ), Florida Statutes, and identification of the specific condition(s) met. In connection with our audit, we determined that Franklin Academy E did not meet any of the conditions described in Section (1 ), Florida Statutes. 396 Alhambra Circle, Suite 900, Coral Gables, FL Tel: Fax: HLB Gravie( LLP is a member of III Internationai. A world-wide organization of accounting firms and business advisers.

204 Financial Condition (Continued) Sections (1 )( e )6.a and (12), Rules of the Auditor General, require that we apply financial condition assessment procedures for Franklin Academy E. It is management's responsibility to monitor Franklin Academy E financial condition, and our financial condition assessment was based in part on representations made by management and the review of financial information provided by same. We have applied such procedures as of the fiscal year end and no deteriorating financial condition has been noted. Transparency Sections (1 )( e )7 and (13), Rules of the Auditor General, require that we report the results of our determination as to whether Franklin Academy E maintains on its Web site the information specified in Section (9)(p ), Florida Statutes. In connection with our audit, we determined that Franklin Academy E maintained on its Web site the information specified in Section (9)(p ), Florida Statutes. Other Matters Section (1 )( e )3., Rules of the Auditor General, requires that we address in the management letter any recommendations to improve financial management. In connection with our audit, we have the following findings or recommendations. ML SCHOOLS TRANSACTIONS WITH CHARTER HOLDER AND OTHER CHARTER Observation We noted a number of transactions involving the school and its charter holder, Florida Charter Foundation. In addition, we noted transactions with other charters schools under Florida Charter Foundation that share a facility with the school. These transactions included advances, allocation of costs and revenue that create balances due to and from, recoverable grants, and payments for management and administrative services. We noted that there are no complete agreements or policies that govern these transactions and thus, there are large due to/from balances and offsetting balances that have been created. Recommendation Because of the significance of these transactions, management should establish with the Board, policies that govern these transactions. These policies should establish rates for services, criteria for receiving recoverable grants, basis for allocations, procedures for fund transfers. The objective of these policies would be to establish a basis and purpose for these transactions that follow overall strategy and thus supports the reason and necessity for their existence. Management' Response Management will present to the board a set of policies to support such transactions. 31

205 Section (1 )( e )4., Rules of the Auditor General, requires that we address noncompliance with provisions of contracts or grant agreements, or abuse, that have occurred, or are likely to have occurred, that have an effect on the financial statements that is less than material but which warrants the attention of those charged with governance. In connection with our audit, we did not have any such findings. Purpose of this Letter Our management letter is intended solely for the information and use of the Legislative Auditing Committee, members of the Florida Senate and Florida House of Representatives, the Florida Auditor General, School Board of Broward County, Federal and other granting agencies, the Board of Directors, and applicable management and is not intended to be and should not be used by anyone other than these specified parties. Coral Gables, Florida September 30, 2015 Iliff ;!/ Jd) / CERTIFIED PUBLIC ACCOUNTANTS 32

206 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) (A Charter School and Component Unit of the School Board of Broward County, Florida) Cooper City, Florida Financial Statements and Independent Auditors' Report June 30, 2014

207 TABLE OF CONTENTS General Information Independent Auditors' Report Management's Discussion and Analysis (Required Supplementary Information) Basic Financial Statements: Government-wide Financial Statement: Statement of Net Position.... Statement of Activities..... Fund Financial Statements: Balance Sheet - Governmental Funds..... Reconciliation of the Governmental Fund Balance Sheet to the Statement of Net Position.... Statement of Revenues, Expenditures and Changes in Fund Balance - Governmental Funds..... Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance of Governmental Funds to the Statement of Activities Notes to the Basic Financial Statements Required Supplementary Information: Budgetary comparison schedules..... Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards... Management Letter

208 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) 6301 S. Flamingo Road Cooper City, FL Dr. Dave Thomas, Chair and President Alexandra Lonsdale Catherine Arcabascio Debbie Platz J aqueline Greenberg BOARD OF DIRECTORS Dr. Daniel Sandberg, Principal SCHOOL ADMINISTRATION

209 .._... GRAVIER, LLP CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITORS' REPORT To the Board of Directors of Franklin Academy E Cooper City, Florida We have audited the accompanying financial statements of the governmental activities and each major fund of Franklin Academy E (the "School"), a charter school under Florida Charter Foundation, Inc., which is a component unit of the District School Board of Broward County, as of, and for the year ended June 30, 20 14, which collectively comprises the School's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit 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 of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 396 Alhambra Circle, Suite 900, Coral Gables, FL Tel: Fax: HLB Gravie( LLP is a member of III Internationai. A world-wide organization of accounting firms and business advisers.

210 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of Franklin Academy E at June 30, 2014, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters As described in Note 1, the accompanying financial statements referred to above present only the financial position of Franklin Academy E at June 30, 2014, and the respective changes in financial position for the year then ended, and is not intended to be a complete presentation of Florida Charter Foundation, Inc. These financial statements do not purport to and do not present fairly the financial position of Florida Charter Foundation, Inc. as of June 30, and its changes in financial position for the year then ended in conformity with accounting principles generally accepted in the United States of America. Required Supplementary Information In accordance with Government Auditing Standards, we have also issued our report dated September 29, 2014 on our consideration of the School's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the 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 considered in assessing the results of our audit. Accounting principles generally accepted in the United States of America require that the management's discussion and analysis and budgetary comparison information on pages 4 through 8 and 26 through 27 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Coral Gables, Florida September 29, 2014 /#-!! _slj? / CERTIFIED PUBLIC ACCOUNTANTS 3

211 Management's Discussion and Analysis Franklin Academy E (A Charter school Under Florida Charter Foundation, Inc.) June 30, 2014 The corporate officers of Franklin Academy E have prepared this narrative overv1ew and analysis of the school's financial activities for the year ended June 30, Financial Highlights 1. The fiscal year ending June 30, 2014 was the school's first year of operations. 2. The net position of the School at June 30, 2014 was $1,034, At year-end, the School had current assets on hand of $405, The net position of the School increased by $1,034,850 during the year. 5. The unassigned fund balance at year end was a deficit of $(318,567). Overview of the Financial Statements This discussion and analysis are intended to serve as an introduction to the School's basic financial statements. The School's financial statements for the year ended June 30, 2014 are presented in accordance with GASB Codification Section The financial statements have three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other required supplementary information in addition to the basic financial statements themselves. Government- Wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the School's finances, in a manner similar to a private-sector business. The Statement of Net Position presents information on all of the School's assets, deferred out flows of resources, liabilities, and deferred in flows of resources. The difference between the four is reported as net positions. Over time increases or decreases in net position may serve as an indicator of whether the financial position of the School is improving or deteriorating. The Statement of Activities presents information on how the School's net position changed during the fiscal year. All changes in net position are reported when the underlying event occurs without regard to the timing of related cash flows. Accordingly, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. The government-wide financial statements can be found on pages 9-10 of this report. Fund Financial Statements A "fund" is a collection of related accounts grouped to maintain control over resources that have been segregated for specific activities, projects, or objectives. The School like other state and local governments uses fund accounting to ensure and report compliance with finance-related legal requirements. 4

212 All of the funds of the School are governmental funds. Government Funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. Government Fund financial statements, however, focus on near-term inflows and outflows of spendable resources, as well as on the balances of spendable resources which are available at the end of the fiscal year. Such information may be used to evaluate a government's requirements for near-term financing. The Board of the School adopts an annual appropriated budget for its general fund. A budgetary comparison statement has been provided for the general fund to demonstrate compliance with the School's budget. The basic governmental fund financial statements can be found on pages of this report. Notes to Financial Statements The notes to the financial statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages of this report. GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net position may serve over time as a useful indicator of a charter school's financial position. In the case of the School, the net position was $1,034,850 at the close of the fiscal year. A summary of the School's net position as of June 30, 2014 follows: Cash and cash equivalents Due from other agencies Deposits receivable Due from other charter schools Capital Assets, net Total Assets 2014 $ 125,997 19, , ,709 1,093,065 1,498,859 Deferred outflows of resources Salaries and wages payable Accounts payable and accrued liabilities Total Liabilities 386,851 77, ,009 Deferred inflows of resources Net Position: Net investment in capital assets Unrestricted Total Net Position 1,093,065 (58,215) $ 1,034,850 At the end of the year, the School is able to report positive balances in total net position. 5

213 A summary and analysis of the School's revenues and expenses for the years ended June 30, 2014 follows: REVENUES Program Revenues Federal sources Lunch Program Charges for Services General Revenues Local Sources(FTE non specific) Other Revenues Total Revenues , , ,851 5,786, ,164 $ 6,307,666 EXPENSES Component Unit Activities: Instruction Curriculum development School administration Fiscal services Food services Pupil transportation Operation of plant Maintenance of plant Unallocated depreciation Total Expenses Increase in Net Position Net Position at Beginning of Year Net Position at End of Year $ 2,607, , , , , , ,354 41, ,668 5,272,816 1,034,850 $ 1,034,850 This was the school's first year and thus, comparative information is not presented. School Location and Lease of Facility The School leases a facility located at 6301 South Flamingo Road, Cooper City. Capital Improvement Requirements The School maintains a continuous capital improvements program to enhance facilities and update fixtures and equipment as required. School Enrollment This past year, the School had approximately 885 students enrolled 1n grades kindergarten through fifth. Accomplishments 6

214 Franklin Academy in Cooper City opened to a full student body of 886 students in August of Utilizing a single-gender educational model, teachers and staff are provided with professional development opportunities which augment the educational programs and opportunities for all students. Franklin Academy implemented a "Gifted Education" program in its inaugural year with phenomenal success. Franklin Academy's chess competitions became a mainstay across our campus and the Cooper City campus became the location of the first inter-campus venue for multi-level tournaments. Franklin Academy implemented several intervention opportunities for its most struggling students including before and after school tutorial programs, as well as Academic Olympics, which is held on Saturdays. Franklin Academy's sixth through eighth grade program which earned an "A" rating sent students to district level math competitions where they outperformed many neighboring schools. Franklin Academy also outscored several of the neighboring schools in various reporting categories on its State Report Card. Most notably, Franklin Academy in Cooper City was the number 5 ranking school in the area of Science. Franklin Academy boasts a thriving arts department. Students are involved in a Winter Showcase, Fall and Spring Musicals, Dance Recitals, The International Day of Peace Celebration and twenty-two student selected clubs. The school also grows and learns in a bio-dynamic organic garden led by students and faculty members. In the winter of its inaugural year, Franklin Academy applied for and was awarded candidacy to the International Baccalaureate. The school is currently embarking on the authorization process to become an International Baccalaureate World School. Currently, the middle school IB teachers are participating in intensive professional development toward this goal. Additionally, Franklin Academy is involved in the school accreditation process through SACS-CASI. FINANCIAL ANALYSIS OF THE GOVERNMENT'S FUND As noted earlier, the School uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds The focus of the School's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the School's financing requirements. In particular, the unassigned fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. Most of the School's operations are funded in the General Fund. The majority of the General Fund revenues are distributed to the School by the District through the Florida Education Finance Program (FEFP), which uses formulas to distribute state funds and an amount of local property taxes (i.e., required local effort) established each year by the Florida Legislature. At the end of the fiscal year, the School's governmental general fund reported ending fund balance of $(58,215). The fund balance unassigned and available for spending at the School's discretion is a deficit of $(318,567). Capital Assets 7

215 The School's investment in capital assets as of June 30, 2014 amounts to $1,093,065 (net of accumulated depreciation). This investment in capital assets includes furniture, fixtures and computer equipment. The school has no outstanding debt associated to Capital Assets. Governmental Fund Budget Analysis and Highlights Prior to the start of the School's fiscal year, the Board of the Charter School adopted an annual budget. A budgetary comparison statement has been provided for the governmental funds to demonstrate compliance with the School's budget. REVENUES Program Revenues State capital outlay funding Federal sources Lunch program General Revenues FTE nonspecific revenues Charges and other revenues Total Revenues $ Ongmal Budget 6,047, ,840 6,410,505 Governmental Fund Final Budget Actual $ $ 74,606 74, , ,065 5,700,000 5,786, , ,015 6,215,671 6,307,666 CURRENT EXPENDITURES Component Unit Activities Instruction Curriculum development School administration Fiscal services Food services Pupil transportation Operation of plant Maintenance of plant Unallocated depreciation Total Current Expenditures 3,269,789 20, , ,564 25,000 1,876,098 34,269 $ 6,408,544 2,650,000 2,607, , , , , , , , , , , ,354 42,000 41, ,668 $ 5,352,255 $ 5,272,816 Requests for Information This financial report is intended to provide a general overview of the finances of the Charter School. Requests for additional information may be addressed to Dr. Daniel Sandberg, 6301 South Flamingo Road, Cooper City, Florida, Deficit Unrestricted Net Position At the end of the School's first full year of operations (June 30, 201 4), it had accumulated unrestricted deficits net position due to heavy investments in capital assets. However, the school has adequate enrollment and financing resources to eliminate the deficit in the near future. 8

216 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) Statement of Net Position June 30, 2014 Assets Current assets: Cash and cash equivalents Due from other agencies Due from other charter schools Deposits receivable $ 125,997 19, , , ,794 Capital assets, depreciable Less: accumulated depreciation Total Assets 1,253,733 (160,668) 1,093,065 1,498,859 Deferred Outflows of Resources Liabilities Current liabilities: Salaries and wages payable Accounts payable and accrued liabilities Total Current Liabilities 386,851 77, ,009 Deferred Inflows of Resources Net Position Net investment in capital assets Unrestricted Total Net Position $ 1,093,065 (58,215) 1,034,850 The accompanying notes are an integral part of this financial statement. 9

217 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) Statement of Activities For the year ended June 30, 2014 Program Revenues Operating Capital Net (Expense) Revenue Charges for Grants and Grants and and Changes FUNCTIONS Expenses Services Contributions Contributions in Net Position Governmental activities: Instruction Curriculum development $ 2,607,018 $ 203, ,851 $ $ $ (2,607,018) 9,466 School administration 528,428 (528,428) Fiscal services 536,130 (536, 130) Food services 204, ,065 74,606 (18,913) Pupil transportation 146,401 (146,401) Operation of plant 844,354 (844,354) Maintenance of plant 41,848 (41,848) Unallocated depreciation 160,668 (160,668) Total governmental activities 5,272, ,916 74,606 ( 4,874,294) General revenues: FTE nonspecific revenues 5,786,980 Interest and other revenue 122,164 Change in net position 1,034,850 Net position, beginning Net position, ending $ 1,034,850 The accompanying notes are an integral part of this financial statement. 10

218 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) Balance Sheet - Governmental Funds June 30, 2014 General Fund Special Revenue Fund Total Governmental Funds Assets Cash and cash equivalents Due from other agencies Due from fund Due from other charter schools Deposits receivable Total Assets $ 125,997 19, , , ,794 $ $ 125,997 19,445 19,445 19, , ,643 19, ,239 Deferred Outflows of Resources Liabilities Salaries and wages payable Accounts payable Due to fund Total Liabilities 3 86,851 77, , ,851 77,158 19,445 19,445 19, ,454 Deferred Inflows of Resources Fund balance Nonspendable, not in spendable form Unassigned Total Liabilities, Deferred Inflows of Resources and Fund Balance 260,352 (318,567) (58,215) $ 405, ,352 (318,567) (58,215) $ 19,445 $ 425,239 The accompanying notes are an integral part of this financial statement. 11

219 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) Reconciliation of the Governmental Fund Balance Sheet to the Statement of Net Position For the year ended June 30, 2014 Total Fund Balance - Governmental Funds $ (58,215) Amounts reported for governmental activities in the statement of net position are different because: Capital assets of $1,253,733 net of accumulated depreciation of $160,668 used in governmental activities are not financial resources and therefore are not reported in the fund. 1,093,065 Total Net Position- Governmental Activities $ 1,034,850 The accompanying notes are an integral part of this financial statement. 12

220 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) Statement of Revenues, Expenditures, and Changes in Fund Balance- Governmental Funds For the year ended June 30, 2014 Revenues: State capital outlay funding State passed through local Federal sources Lunch program Charges and other revenue Total Revenues Expenditures: Current Instruction Curriculum development School administration Fiscal services Food services Pupil transportation Operation of plant Maintenance of plant Capital Outlay: Other capital outlay Total Expenditures Excess (deficit) of revenues over expenditures Other financing sources (uses) Transfers in (out) Long term advances to other schools, net Net change in fund balance Fund Balance at beginning of year Fund Balance at end of year General Fund $ 5,786, ,015 6,121,995 2,607, , , , , ,354 41,848 1,253)33 6,161,297 (39,302) (18,913) (58,215) $ {58,2152 Special Revenue Fund Total Governmental Funds $ $ 5,786,980 74,606 74, , , , ,671 6,307,666 2,607, , , , , , , ,354 41,848 1,253, ,584 6,365,881 (18,913) (58,215) 18,913 (58,215) $ $ {58,2152 The accompanying notes are an integral part of this financial statement. 13

221 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) Reconciliation of the Statement of Revenues, Expenditures an Changes in Fund Balance of Governmental Funds to the Statement of Activities For the year ended June 30, 2014 Net Change in Fund Balance- Governmental Funds $ (58,215) Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which capital outlays of $1,253,733 exceeded depreciation expense of $160,668. 1,093,065 Change in Net Position of Governmental Activities $ 1,034,850 The accompanying notes are an integral part of this financial statement. 14

222 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2014 Note 1 - Summary of Significant Accounting Policies Reporting Entity Franklin Academy E (the "School"), is a component unit of the School Board of Broward County, Florida (the "District"). The Schools charter is held by Florida Charter Foundation, Inc., a not-for-profit corporation organized pursuant to Chapter 617, Florida Statutes, the Florida Not For-Profit Corporation Act. The governing body of the School is the board of directors of Franklin Academy E, which is composed of five members and also governs other charter schools. The general operating authority of the School is contained in Section , Florida Statutes. The School operates under a charter granted by the sponsoring district, the School Board of Broward County, Florida. The current charter expires on June 30, 2017 and is renewable for an additional term pursuant to law and/or by a mutual written agreement between the School and the District. At the end of the term of the charter, the District may choose not to renew the charter under the grounds specified in the charter in which case the District is required to notify the School in writing at least 90 days prior to the charters expiration. During the term of the charter, the District may terminate the charter if good cause is shown. The School's location is in Cooper City, Florida for children from kindergarten through seventh grade and is funded by the District. These financial statements are for the period from inception through June 30, 2014, when a total of approximately 885 students were enrolled for the school year. Basis of presentation The School's accounting policies conform to accounting principles generally accepted in the United States as applicable to state and local governments. The Governmental Accounting Standards Board ("GASB") is the accepted standard setting body for establishing governmental accounting and financial reporting principles. Government-wide and Fund Financial Statements The government-wide financial statements include the statement of net position and the statement of activities. These statements report information about the School as a whole. Any internal interfund activity has been eliminated from these financial statements. Both statements report only governmental activities as the School does not engage in any business type activities. These statements also do not include fiduciary funds. The statement of activities reports the expenses of a given function offset by program revenues directly connected with the functional program. A function is an assembly of similar activities and may include portions of a fund or summarize more than one fund to capture the expenses and program revenues associated with a distinct functional activity. Program revenues include: (1) charges for services which report fees; (2) operating grants such as the National School Lunch Program, Federal grants, and other state allocations; and (3) capital grants specific to capital outlay. Other revenue sources not properly included with program revenues are reported as general revenues. 15

223 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2014 Note 1- Summary of Significant Accounting Policies (continued) New Accounting Pronouncements The School implemented GASB Statement No. 63, "Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position." GASB 63 identifies net position, rather than net assets, as the residual of all other elements presented in a statement of financial position. Deferred outflows of resources represent consumption of resources that is applicable to future reporting periods that will be reported in a separate section after assets. Deferred inflows of resources represent acquisition of resources that is applicable to future reporting periods that will be reported in a separate section after liabilities. This change was incorporated in the Schools financial statements; however there was no effect on beginning net position/fund balance. Additionally, the School implemented GASB Statement No. 65, "Items previously reported as Assets and Liabilities". GASB 65 establishes accounting and financial reporting standards that reclassify as deferred outflows of resources or deferred inflows of resources, certain items that were previously report as assets and liabilities. This change was incorporated in the Schools financial statements; however there was no effect on beginning net position/fund balance. Fund Financial Statements Fund financial statements are provided for governmental and fiduciary funds, even though the fiduciary funds are not included in the government-wide financial statements. The operations of the funds are accounted for with a separate set of self-balancing accounts that comprise its assets, deferred outflows of resources, and liabilities, deferred inflows of resources, equity, revenues and expenditures. Major individual governmental funds are reported as separate columns in the fund financial statements: General Fund- is the School's primary operating fund. It accounts for all financial resources of the school, except those required to be accounted for in another fund. Special Revenue Fund - accounts for specific revenue, such as capital outlay funding and federal lunch program that are legally restricted to expenditures for particular purposes. Measurement Focus and Basis of Accounting The financial statements of the School are prepared in accordance with generally accepted accounting principles (GAAP). The School's reporting entity applies all relevant Governmental Accounting Standards Board (GASB) Codification of Accounting and Financial Reporting Guidance. 16

224 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2014 Note 1- Summary of Significant Accounting Policies (continued) The government-wide statements report using the economic resources measurement focus and the full accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. The School recognizes assets of non-exchange transactions in the period when the underlying transaction occurs, when an enforceable legal claim has arisen, or when all eligibility requirements are met. Revenues are recognized, on the modified accrual basis, when they are measurable and available. Non-exchange transactions occur when the school provides (or receives) value to (from) another party without receiving (or giving) equal or nearly equal value in return. Most donations are examples of non-exchange transactions. Revenues from grants and donations are recognized on the accrual basis, in the fiscal year in which all eligibility requirements have been satisfied. Governmental fund financial statements report using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized when they are both measurable and available. "Measurable" means the amount of the transaction can be determined. Available means collectible within the current period or soon enough thereafter to pay liabilities of the current period. The School considers revenues to be available if they are collected within 60 days of the end of the fiscal year. Florida Education Finance Program (FEFP) revenues are recognized when received. A one-year availability period is used for revenue recognition for all other governmental fund revenues. Charges for services and fees are recognized when cash is collected as amounts are not measurable. When grant terms provide that the expenditure of funds is the prime factor for determining eligibility for federal, state, and other grant funds, revenue is recognized at the time the expenditure is made. Expenditures are recorded when the related fund liability is incurred, except for long-term debt principal and interest which are reported as expenditures in the year due. Budgets and Budgetary Accounting In compliance with Florida Statutes, the Board of Directors adopts an annual budget using the modified accrual basis of accounting. During the fiscal year, expenditures were controlled at the object level (e.g. salaries and benefits, purchased services, materials and supplies and capital outlay) within each activity (e.g. instruction, pupil personnel services and school administration). Revisions to the annual budget are approved by the Board. 17

225 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2014 Note 1-Summary of Significant Accounting Policies (continued) Cash Cash and cash equivalents include all highly investments with a maturity of three months or less. Inter-fund Transfers Outstanding balances between funds are reported as "due to/from" other funds. Inter-fund transfers are made to move any excess or shortage of funds derived from the National School Lunch Program from the Special Revenue Fund to the General Fund. Due from Other Governments or Agencies Amounts due to the School by other governments or agencies are for grants or programs under which the services have been provided by the School. Capital Assets The School's property, plant and equipment with useful lives of more than one year are stated at historical cost and comprehensively reported in the statement of net position in the governmentwide financial statements. Donated capital assets are recorded at their estimated fair market value on the date donated. The School generally capitalizes assets with a cost of $500 or more. Building improvements, additions and other capital outlays that significantly extend the useful life of an asset are capitalized. The costs of normal maintenance and repairs that do not add to the asset value or materially extend useful lives are not capitalized. Capital assets are depreciated using the straight-line method. When capital assets are disposed, the cost and applicable accumulated depreciation are removed from the respective accounts, and the resulting gain or loss is recorded in operations. Estimated useful lives, in years, for depreciable assets are as follows: Improvements Furniture, Equipment and Software Textbooks 15 Years 5 Years 3 Years 18

226 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2014 Note 1- Summary of Significant Accounting Policies (continued) Compensated Absences The School grants a specific number of sick days. Full time instructional employees are eligible to five days per school year. (a "benefit year"). In the event that available time is not used by the end of the benefit year, employees may "rollover" five unused days for use in future benefit years. However, at no time can the maximum amount of unused sick days exceed ten days. There is no termination payment for accumulated unused sick days. GASB Codification Section C60, Accounting for Compensated Absences, provides that compensated absences that are contingent on a specific event that is outside the control of the employer and employee should be accounted for in the period those events take place. Accordingly, these financial statements do not include an accrual for sick days available to be used in future benefits years. The School also provides certain days to be used for specific personal matter such as family death and jury duty. Because the use of such days is contingent upon those events taking place and such events are out of the control of both the employer and the employee, there is no accrual for such days. Revenue Sources Revenues for current operations are received primarily from the District pursuant to the funding provisions included in the School's charter. In accordance with the funding provisions of the charter and Section , Florida Statutes, the School will report the number of full-time equivalent (FTE) students and related data to the District. Under the provisions of Section , Florida Statutes, the District reports the number of the full-time equivalent (FTE) students and related data to the Florida Department of Education (FDOE) for funding through the FEFP. Funding for the School is adjusted during the year to reflect the revised calculations by the FDOE under the FEFP and the actual weighted full-time equivalent students reported by the School during the designated full-time equivalent student survey periods. After review and verification of FTE reports and supporting documentation, the FDOE may adjust subsequent fiscal period allocations of FEFP funding for prior year errors disclosed by its review as well as to prevent statewide allocations from exceeding the amount authorized by the Legislature. Normally, such adjustments are treated as reductions of revenue in the year the adjustment is made. In addition, the School receives state funds through the District under charter school capital outlay funding pursuant to Section , Florida Statutes. Funds are based on a capital outlay plan submitted to the District and are to be used for lease of school facilities. 19

227 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2014 Note 1 -Summary of Significant Accounting Policies (continued) Finally, the School also receives Federal awards for the enhancement of various educational programs. Federal awards are generally received based on applications submitted to and approved by various granting agencies. For Federal awards in which a claim to these grant proceeds is based on incurring eligible expenditures, revenue is recognized to the extent that eligible expenditures have been incurred. Any excess amounts are recorded as deferred revenues until expended. Additionally, other revenues may be derived from various fundraising activities and certain other programs. Net position and Fund balance classifications Government-wide financial statements Equity is classified as net position and displayed in three (3) components: a) Net investment in capital assets - consists of capital assets net of accumulated depreciation and reduced by the outstanding balances of any borrowings that are attributable to the acquisition or improvement of those assets. b) Restricted net position - consists of net position with constraints placed on their use either by external groups such as creditors, grantors, contributors or laws or regulations of other governments. c) Unrestricted net position - all other net position that do not meet the definition of "restricted" or "net investment in capital assets, net of related debt." Fund financial statements Under GASB Codification Section , Fund Balance Reporting and Governmental Fund Type Definitions. This Statement defines the different types of fund balances that a governmental entity must use for financial reporting purposes. GASB requires the fund balance amounts to be properly reported within one of the fund balance categories list below: a) Nonspendable - includes amounts that cannot be spent because they are either not in spendable form or legally or contractually required to be maintained intact. Consists of fund balance associated with inventories, prepaid expenses, long-term loans and notes receivable, and property held for resale (unless the proceeds are restricted, committed, or assigned). b) Restricted - fund balance category includes amounts that can be spent only for the specific purposes stipulated by constitution, external resource providers, or through enabling legislation. Restricted fund balance of the School relate to reserves required by the landlord for property maintenance and repairs. These are not restricted balances at year end. c) Committed - fund balance classification includes amounts that can be used only for the specific purposes determined by a formal action of the School's Board of Directors. There are no committed fund balances at year end. 20

228 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2014 Note 1- Summary of Significant Accounting Policies (continued) d) Assigned - fund balance classification are intended to be used by the School's management for specific purposes but do not meet the criteria to be classified as restricted or committed. There are no assigned fund balances at year end. e) Unassigned - portion of the fund balance that has not been restricted, committed or assigned for a specific purpose. This is the residual classification for the School's general fund. Order of Fund Balance Spending Policy The School's policy is to apply expenditures against non-spendable fund balance, restricted fund balance, committed fund balance, assigned fund balance, and unassigned fund balance at the end of the fiscal year by adjusting journal entries. First Non-spendable fund balances are determined. Then restricted fund balances for specific purposes are determined (not including non-spendable amounts). Then any remaining fund balance amounts for the non-general funds are classified as restricted fund balance. It is possible for the non-general funds to have negative unassigned fund balance when non-spendable amounts plus the restricted fund balances for specific purposes amounts exceed the positive fund balance for the non-general fund. Income Taxes Florida Charter Foundation, Inc. had previously qualified as a tax-exempt organization under Internal Revenue Code Section 501(c)(3). During the year, the tax-exempt status was revoked for failure to file timely Form 990. Management has applied for re-instatement and fully expect to be approved. Accordingly, no tax provision has been made in the accompanying financial statements. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenditures during the reporting period. Actual results could differ from those estimates. Subsequent Events In accordance with GASB Codification Section , the School has evaluated subsequent events and transactions for potential recognition or disclosure through September 29, 2014, which is the date the financial statements were available to be issued. 21

229 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2014 Note 2 -Capital Assets The following schedule provides a summary of changes in capital assets, acquired substantially with public funds, for the period ended June 30, 2014: Capital Assets: Balance Balance 07/01/13 Additions Retirements 06/30/14 Computer equipment and software $ $ 238,467 $ $ 238,467 Furniture, equipment and textbooks 1,015,266 1,015,266 Total Capital Assets $ $ 1,253,733 $ $ 1,253,733 Less Accumulated Depreciation: Computer equipment and software (39,151) (39,151) Furniture, equipment and textbooks (121,517) (121,517) Total Accumulated Depreciation (160,668) (160,668) Capital Assets, net $ $ 1,093,065 $ $ 1,093,065 Depreciation expense for the year ended June 30, 2014 was $160,668. Note 3 - Deposits and Investments Deposits The School's policy is to maintain its cash and cash equivalents in major banks and in high grade investments. As of June 30, 2014, the carrying amount of the School's deposits was $125,997 and the respective bank balances totaled $264,870. Deposits at FDIC-insured institutions are insured up to $250,000 per depositor, per financial institution. The School is a charter school under Florida Charter Foundation, Inc., which also operates various other charter schools. All bank accounts are opened under the account ownership of Florida Charter Foundation, Inc., therefore, bank balances at times may potentially be in excess of FDIC coverage. As of June 30, 2014, bank balances in potential excess of FDIC coverage totaled $264,

230 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2014 Note 4 -Management Agreement The School uses Florida Charter Foundation Inc, (the holder of the School's charter) to provides complete administrative and management services to all Franklin Academy schools. These services include but are not limited to: administration of support services (facility maintenance, food service, transportation, etc); governmental compliance reporting; coordination of legal support for school operations; district management/liaison; parent customer service; grant application/management; charter application development/submission/approval; site selection/development; construction project management; school marketing/enrollment management; financing management; and public relations. There is no written agreement with Florida Charter Foundation, Inc. During the year, the School made payments totaling $325,441. In addition, Charter School Services Corporation, Inc., a professional charter school management company, provides accounting and human resources management services to the School including, but not limited to, regulatory compliance, maintenance of the books and records, bookkeeping, budgeting and financial reporting. The agreement between the School and the management company calls for a fee of $100 per full time equivalent (FTE) student per year up to 1,500 students with a reduction of $10 per student for every additional 500 students. The agreement can be terminated at any time by the board with 30 day notice. During the year ended June 30, 2014, the School incurred approximately $75,771 in management fees. Charter School Services Corporation, Inc. is located at 1225 SE 2n d Avenue, Fort Lauderdale, Florida, Note 5 -Related Party Transactions The School shares its campus with Franklin Academy F, another charter school under Florida Charter Foundation, Inc. Certain funding provided to the School is shared by the two schools. In addition, certain costs are allocated to each school using a logical basis such as the ratio of FTE for each school. At June 30, 2014, the School had a receivable of $100,709 from the other charter school. Pursuant to the Charter School contract with the School District, the District withholds an administrative fee of 5o/o (or 2% for high performing schools) of the qualifying revenues of the School. For the year ended June 30, 2014, net administrative fees withheld by the School District totaled $79,

231 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2014 Note 6 -Commitments and Contingencies The School entered into a lease and development agreement with CA Cooper City 6271 SFR, LLC for its main campus facility. This facility is shared with Franklin Academy F, another charter school under Florida Charter Foundation, Inc. Initial fixed annual payments under this agreement are approximately $740,000 adjusted annually based on the lease schedule, plus additional property expenses including repairs, maintenance and insurance. The agreement continues through June 2042 with at). option to renew for up to two additional ten year periods. Lease payments are allocated among the two schools based on FTE. The allocation used for 2014, was approximately 67% for the School and 33o/o for Franklin Academy F. For 2014, rent expense for the School totaled $414,864. Future minimum payments for the full lease (shared with Franklin Academy F) are as follows: Year 2015 $ 971, $ 1,202, $ 1,304, $ 1,731, $ 1,950, $ 10,536,600 (total for five year period) $ 11,776,542 (total for five year period) $ 13,162,374 (total for five year period) $ 14,711,284 (total for five year period) $ 9,645,208 (total for three year period) Contingencies The School receives substantially all of its funding from the District under the Florida Education Finance Program (FEFP), which is based in part on a computation of the number of full-time equivalent (FTE) students attending different instructional programs. The accuracy of FTE student data submitted by individual schools and used in the FEFP computations is subject to audit by the state and, if found to be in error, could result in refunds to the state or in decreases to future funding allocations. Additionally, the School participates in a number of federal, state and local grants which are subject to financial and compliance audits. It is the opinion of management that the amount of revenue, if any, which may be remitted back to the state due to errors in the FTE student data or the amount of grant expenditures which may be disallowed by grantor agencies would not be material to the financial position of the School. The School participates in a number of Federal and State grant programs which are subject to audit in accordance with Office of Management and Budget Circular A-133 "Audits of States, Local Governments, and Non-Profit Organizations". The School expects such expenditures, if any, which may be disallowed by the granting agencies to be immaterial. 24

232 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2014 Note 7 - Risk Management The School is exposed to various risks of loss related to torts, thefts of, damage to and destruction of assets, errors and omissions and natural disasters for which the School carries commercial insurance. Settlement amounts have not exceeded insurance coverage for the past years. In addition, there were no reductions in insurance coverage from those in the prior year. Note 8 - Defined Contribution Retirement Plan The School's personnel are eligible to participate in a defined contribution 401 (k) plan covering employees who meet certain age and tenure requirements. Under the Plan, the School provides a match of 2.5% of the employee's compensation. The School contributed to the Plan $29,848 for the year ended June 30, The School does not exercise any control or fiduciary responsibility over the Plans' assets 25

233 REQUIRED SUPPLEMENTARY INFORMATION

234 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) Statement of Revenues, Expenditures, and Changes in Fund Balance For the year ended June 30, 2014 REVENUES General Fund Original Budget Final Budget Actual State passed through local $ 6,047,665 $ 5,700,000 $ 5,786,980 Charges and other revenue 362, , ,015 Total Revenues 6,410,505 6,030,000 6,121,995 EXPENDITURES Current: Instruction 3,269,789 2,650,000 2,607,018 Curriculum development 20, , ,385 School Administration 483, , ,428 Fiscal Services 699, , ,130 Central Services 25, , ,401 Operation of Plant 1,876, , ,354 Maintenance of Plant 34,269 42,000 41,848 Total Current Expenditures 6,408,544 4,962,000 4,907,564 Excess of Revenues Over Current Expenditures 1,961 1,068,000 1,214,431 Capital Outlay 1,253,733 1,253,733 Total Expenditures 6,408,544 6,215,733 6,161,297 Excess of Revenues Over Expenditures 1,961 (185,733) (39,302) Other fmancing sources (uses): Transfers in (out) (18,913) (18,913) Long term advances from other schools, net Net change in fund balance 1,961 (204,646) (58,215) Fund Balance at beginning of year Fund Balance at end of year $ 1,961 $ (204,646) $ (58,215) Notes to Budgetary ComQarison Schedule An annual budget is adopted on the modified accrual basis of accounting, consistent with generally accepted accounting principles. Amendments to the budget can only be made with the approval of the Board of Directors. 26

235 Franklin Academy E (A charter school under Florida Charter Foundation, Inc.) Statement of Revenues, Expenditures, and Changes in Fund Balance For the year ended June 30, REVENUES Special Revenue Fund Original Budget Final Budget Actual State capital outlay funding $ $ $ Federal sources 74,606 74,606 Lunch program 111, ,065 Total Revenues 185, ,67 1 EXPENDITURES Current: Instruction Food services 204, ,584 Operation of Plant Total Current Expenditures 204, ,584 Excess of Revenues Over Current Expenditures ( 18,913) ( 18,913) Capital Outlay Total Expenditures 204, ,584 Excess of Revenues Over Expenditures ( 18,9 13) ( 18,913) Other fmancing sources (uses) Transfers in (out) 18, ,9 13 Net change in fund balance Fund Balance at beginning of year Fund Balance at end of year $ $ $ Notes to Budgetary Comparison Schedule An annual budget is adopted on the modified accrual basis of accounting, consistent with generally accepted accounting principles. Amendments to the budget can only be made with the approval of the Board of Directors. 27

236 ......_.... GRAV IER, LLP CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Board of Directors of Franklin Academy E Cooper City, Florida We have audited, in accordance with the 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, the financial statements of the governmental activities and each major fund of Franklin Academy E (the "School") as of, and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise the School's basic financial statements and have issued our report thereon dated September 29, Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the School's internal control over financial reporting to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the School's internal. Accordingly, we do not express an opinion on the effectiveness of the School's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 396 Alhambra Circle, Suite 900, Coral Gables, FL Tel: Fax: HLB Gravier. LLP is a member of International. A world-wide organization of accounting firms and business advisers.

237 Compliance and Other Matters As part of obtaining reasonable assurance about whether the School's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. We issued a separate management letter dated September 29, 2014 pursuant to Chapter , Rules of the Auditor General. Purpose of this report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. /fji? /) I!;; CERTIFIED PUBLIC ACCOUNTANTS Coral Gables, Florida September 29,

238 GRAVIER, LLP CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT LETTER Board of Directors of Franklin Academy E Cooper City, Florida Report on the Financial Statements We have audited the financial statements of the governmental activities and each major fund of Franklin Academy E as of and for the year ended June 30, and have issued our report thereon dated September 29, Auditor's Responsibility We conducted our audit 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. Other Reporting Required by Government Auditing Standards We have issued our Independent Auditors' Report on Internal Control over Financial Reporting and Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards. Disclosure in those reports, which are dated September 29, 2014, should be considered in conjunction with this management letter. Prior Audit Findings Section (1 )(e) 1., Rules of the Auditor General, requires that we determine whether or not corrective actions have been taken to address findings and recommendations made in the preceding annual financial audit report. This is the first year of operations, thus no findings or recommendations were made in the past. Financial Condition Sections (1)(e)2, and (1 1), Rules of the Auditor General, require that we apply appropriate procedures to determine whether or not Franklin Academy E has met one or more of the conditions described in Section (1 ), Florida Statutes, and identification of the specific condition(s) met. In connection with our audit, we determined that Franklin Academy E did not meet any of the conditions described in Section (1), Florida Statutes. 396 Alhambra Circle, Suite 900, Coral Gables, FL Tel: Fax: HLB Gravier, LLP is a member of III Internationai. A world-wide organization of accounting firms and business advisers.

239 Financial Condition (Continued) Sections (1 )( e )6.a and (12), Rules of the Auditor General, require that we apply financial condition assessment procedures for Franklin Academy E. It is management's responsibility to monitor Franklin Academy E financial condition, and our financial condition assessment was based in part on representations made by management and the review of financial information provided by same. We have applied such procedures as of the fiscal year end and no deteriorating financial condition has been noted. Transparency Sections (l)(e)7 and (13), Rules of the Auditor General, require that we apply appropriate procedures to determine whether Franklin Academy E maintains on its Web site the information specified in Section (9)(p ), Florida Statutes. In connection with our audit, we determined that Franklin Academy E maintained on its Web site the information specified in Section (9)(p ), Florida Statutes. Other Matters Section (1)(e)3., Rules of the Auditor General, requires that we address in the management letter any recommendations to improve financial management. In connection with our audit, we have no findings or recommendations. Section (1 )( e )4., Rules of the Auditor General, requires that we address noncompliance with provisions of contracts or grant agreements, or abuse, that have occurred, or are likely to have occurred, that have an effect on the financial statements that is less than material but which warrants the attention of those charged with governance. In connection with our audit, we did not have any such findings. Section (1)(e)5., Rules of the Auditor General, requires the name or official title of the entity. The official title of the entity is Franklin Academy E. Purpose of this Letter Our management letter is intended solely for the information and use of the Legislative Auditing Committee, members of the Florida Senate and Florida House of Representatives, the Florida Auditor General, School Board of Broward County, Federal and other granting agencies, the Board of Directors, and applicable management and is not intended to be and should not be used by anyone other than these specified parties. Coral Gables, Florida September 29, 2014 /r 1?.r/;/ 41)> CERTIFIED PUBLIC ACCOUNTANTS 31

240 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) W/L# 5046 (A Charter School and Component Unit of the School Board of Broward County, Florida) Cooper City, Florida Financial Statements and Independent Auditors' Report June 30, 2015

241 TABLE OF CONTENTS General Information Independent Auditors' Report Management's Discussion and Analysis (Required Supplementary Information) Basic Financial Statements: Government-wide Financial Statement: Statement of Net Position.... Statement of Activities..... Fund Financial Statements: Balance Sheet - Governmental Funds..... Reconciliation of the Governmental Fund Balance Sheet to the Statement of Net Position.... Statement of Revenues, Expenditures and Changes in Fund Balance - Governmental Funds..... Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance of Governmental Funds to the Statement of Activities..... Notes to the Basic Financial Statements Required Supplementary Information: Budgetary comparison schedules..... Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards.... Management Letter

242 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) W/L# S. Flamingo Road Cooper City, FL Dr. Dave Thomas, Chair and President Alexandra Lonsdale Catherine Arcabascio Debbie Platz J aqueline Greenberg BOARD OF DIRECTORS Dr. Daniel Sandberg, Principal SCHOOL ADMINISTRATION Scott E. Sznitken, Executive Director OTHER CORPORATE OFFICERS

243 lliiiill.._..._ GRAVIER, LLP CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITORS' REPORT To the Board of Directors of Franklin Academy F Cooper City, Florida We have audited the accompanying financial statements of the governmental activities and each 1najor fund of Franklin Academy F (the "School"), a charter school under Florida Charter Foundation, Inc., which is a component unit of the District School Board of Broward County, as of, and for the year ended June 30, 2015, which collectively comprises the School's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit 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 of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 396 Alhambra Circle, Suite 900, Coral Gables, FL Tel: Fax: HLB Gravie( LLP is a member of International. A world wide organization of accounting firms and business advisers.

244 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of Franklin Academy F at June 30, 2015, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters As described in Note 1, the accompanying financial statements referred to above present only the financial position of Franklin Academy F at June 30, 2015, and the respective changes in financial position for the year then ended, and is not intended to be a complete presentation of Florida Charter Foundation, Inc. These financial statements do not purport to and do not present fairly the financial position of Florida Charter Foundation, Inc. as of June 30, 2015 and its changes in financial position for the year then ended in conformity with accounting principles generally accepted in the United States of America. Required Supplementary Information In accordance with Government Auditing Standards, we have also issued our report dated September 30, 2015 on our consideration of the School's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the 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 considered in assessing the results of our audit. Accounting principles generally accepted in the United States of America require that the management's discussion and analysis and budgetary comparison information on pages 4 through 8 and 26 through 27 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Coral Gables, Florida September 30, /ff!1/Q CERTIFIED PUBLIC ACCOUNTANTS 3

245 Management's Discussion and Analysis Franklin Academy F (A Charter school Under Florida Charter Foundation, Inc.) June 30, 2015 The corporate officers of Franklin Academy F have prepared this narrative overview and analysis of the school's financial activities for the year ended June 30, Financial Highlights 1. The net asset position of the School at June 30, 2015 was $198, At year-end, the School had current assets on hand of $5, The net position of the School increased by $111,971 during the year. 4. The unassigned fund balance at year end was a deficit of $(375,527). Overview of the Financial Statements This discussion and analysis are intended to serve as an introduction to the School's basic financial statements. The School's financial statements for the year ended June 30, 2015 are presented in accordance with GASB Codification Section The financial statements have three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other required supplementary information in addition to the basic financial statements themselves. Government- Wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the School's finances, in a manner similar to a private-sector business. The Statement of Net Position presents information on all of the School's assets, deferred outflows of resources, liabilities, and deferred inflows of resources. The difference between the four is reported as net positions. Over time increases or decreases in net position may serve as an indicator of whether the financial position of the School is improving or deteriorating. The Statement of Activities presents information on how the School's net position changed during the fiscal year. All changes in net position are reported when the underlying event occurs without regard to the timing of related cash flows. Accordingly, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. The government-wide financial statements can be found on pages 9-10 of this report. Fund Financial Statements A "fund" is a collection of related accounts grouped to maintain control over resources that have been segregated for specific activities, projects, or objectives. The School like other state and local governments uses fund accounting to ensure and report compliance with finance-related legal requirements. All of the funds of the School are governmental funds. Government Funds are used to account for essentially the same functions reported as governmental activities in the government-wide 4

246 financial statements. Government Fund financial statements, however, focus on near-term inflows and outflows of spendable resources, as well as on the balances of spendable resources which are available at the end of the fiscal year. Such information may be used to evaluate a government's requirements for near-term financing. The Board of the School adopts an annual appropriated budget for its general fund. A budgetary comparison statement has been provided for the general fund to demonstrate compliance with the School's budget. The basic governmental fund financial statements can be found on pages of this report. Notes to Financial Statements The notes to the financial statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages of this report. GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net position may serve over time as a useful indicator of a charter school's financial position. In the case of the School, the net position was $198,045 at the close of the fiscal year. A sutnmary of the School's net position as of June 30, 2015 and 2014 is as follows: Cash and cash equivalents $ 5,545 $ 30, 867 Due from other agencies Due from Florida Charter Foundation, Inc., long term 536, ,223 Capital Assets, net 37,349 Total Assets 579, ,185 Deferred outflows of resources Salaries and wages payable 96,725 Accounts payable 3, ,401 Due to other charter schools 280, ,709 Total Liabilities 381, ,11 0 Deferred inflows of resources Net Position: Net investment in capital assets and long-term receivables 573,572 Unrestricted (375,527) 86,075 Total Net Position $ 198,045 $ 86,075 At the end of the year, the School is able to report positive balances in total net position. 5

247 A summary and analysis of the School's revenues and expenses for the years ended June 30, 2015 and 2014 follows: REVENUES General Revenues Local Sources(FTE non specific) $ 2,623,584 $ 2,555,65 8 Federal Sources 32,670 54,028 Lunch Program 52,622 36,293 Other Revenues 250,000 Total Revenues $ 2,958,876 $ 2,645,979 EXPENSES Component Unit Activities: Instruction $ 1,374,596 $ 1,338,489 General administration School administration 335, ,480 Fiscal services 363, ,602 Food services 85,292 90,321 Pupil transportation 77,693 75,237 Operation of plant 620, ,294 Maintenance of plant 38,436 25,868 Unallocated depreciation 7,090 Total Expenses 2,903,5 12 2,559,904 Increase in Net Position 55,364 86,075 Net Position at Beginning of Year 86,075 Net Position at End of Year $ 141,439 $ 86,075 The School's revenues and expenses increased by $369,503 and $343,608, respectively, in the current year. The School had an increase in its net position of $111,970 for the year. School Location and Lease of Facility The School leases a facility located at 6301 South Flamingo Road, Cooper City, Florida. Capital Improvement Requirements The School maintains a continuous capital improvements program to enhance facilities and update fixtures and equipment as required. School Enrollment This past year, the School had approximately 439 students enrolled in grades sixth through eighth. 6

248 Accomplishments Franklin Academy in Cooper City began the school year with 439 students in August of Utilizing a single-gender educational model, teachers and staff are provided with professional development opportunities which augment the educational programs and opportunities for all students. Franklin Academy provides an outstanding academic program to address Florida Standards and continues to implement a variety of intervention opportunities for struggling students, including before and after school tutorial programs, as well as Academic Olympics, which is held on Saturdays. In the previous year, Franklin Academy's sixth through eighth grade program which earned an "A" rating, sent students to district level math competitions where they outperformed many neighboring schools in various reporting categories on its State Report Card. Franklin Academy also laid the ground work to implement a new STEM lab to promote additional opportunities to create a desire to learn through engaging problem-based scenarios about the world around them. Franklin Academy implemented a new sports program in 2014 to include basketball, football, and soccer and competed against local schools. Franklin Academy's chess competitions have expanded from our Cooper City campus and regional locations to national matches. In addition to chess, the school competed in speech and debate tournaments, including the Broward Champs in which Franklin Academy achieved a district champion in Extemporaneous Speaking. Franklin Academy has a flourishing arts department. Students are involved in a Winter Showcase, fall and spring musicals, dance recitals, the International Day of Peace Celebration, and twenty-two student selected clubs. The school was recently recognized by the National Wildlife Federation for successfully creating a Certified Wildlife Habitat through the Garden for Wildlife Program. Franklin Academy has a positive relationship with the community and benefits from a dynamic and generous Parent Teacher Organization (PTO). In second semester of its inaugural year, Franklin Academy applied for and was awarded candidacy to the International Baccalaureate. To follow up on the candidacy, the school recently submitted the authorization application to be an International Baccalaureate World School. The middle school IB teachers are continuing to participate in professional development toward this goal. Franklin Academy received full school accreditation through SACS-CAS! in June, FINANCIAL ANALYSIS OF THE GOVERNMENT'S FUND As noted earlier, the School uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds The focus of the School's governmental fu nds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the School's financing requirements. In particular, the unassigned fu nd balance may serve as a measure of a government's net resources available for spending at the end of the fiscal year. 7

249 Most of the School's operations are funded in the General Fund. The majority of the General Fund revenues are distributed to the School by the District through the Florida Education Finance Program (FEFP), which uses formulas to distribute state funds and an amount of local property taxes (i.e., required local effort) established each year by the Florida Legislature. At the end of the fiscal year, the School's governmental general fund reported an ending fund balance deficit of $(375,527). The fund balance unassigned and available for spending at the School's discretion is a deficit of $(3 75,527). Deficit Unrestricted Net Position At the end of the School's second full year of operations (June 30, 2015), it had accumulated unrestricted deficits net position due to investments in receivables from its charter holder. However, the school has adequate enrollment and financing resources to eliminate the deficit in the near future. Governmental Fund Budget Analysis and Highlights Prior to the start of the School's fiscal year, the Board of the Charter School adopted an annual budget. A budgetary comparison statement has been provided for the governmental funds to demonstrate compliance with the School's budget. Ongmal Budget Governmental Fund Final Budget Actual REVENUES Program Revenues State capital outlay funding Federal sources Lunch program General Revenues FTE nonspecific revenues Charges and other revenues Total Revenues $ 2,568, ,568, 85 8 $ 56,606 $ 56,606 32,670 32,670 52,622 52,622 2,675,000 2,623, , ,000 3,066, 898 3,0 15,482 CURRENT EXPENDITURES Component Unit Activities Instruction General administration School administration Fiscal services Food services Pupil transportation Operation of plant Maintenance of plant Unallocated depreciation Total Current Expenditures 1,267, 101 7, , ,576 98, ,750 30,000 $ 2,554,588 1,375,000 1,374, , , , ,572 85,292 85,292 78,000 77, , ,946 40,000 38,436 7,090 $ 2,964,998 $ 2,903,5 12 Requests for Information This financial report is intended to provide a general overview of the finances of the Charter School. Requests for additional information may be addressed to Dr. Daniel Sandberg, 6301 South Flamingo Road, Cooper City, Florida,

250 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) Statement ofnet Position June 30, 2015 Assets Current assets: Cash and cash equivalents Due from other agencies Due from Florida Charter Foundation, Inc., long term Capital assets, depreciable Less: accumulated depreciation Total Assets $ 5, , ,223 44,439 (7,090) 37, ,368 Deferred Outflows of Resources Liabilities Current liabilities: Salaries and wages payable Accounts payable Due to other charter schools Total Current Liabilities 96,725 3, , ,323 Deferred Inflows of Resources Net Position Net investment in capital assets and long-tenn receivables Unrestricted Total Net Position 573,572 (375,527) $ 198,045 The accompanying notes are an integral part of this financial statement. 9

251 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) Statement of Activities For the year ended June 30, 2015 Program Revenues Net (Expense) Operating Capital Revenue Charges for Grants and Grants and and Changes FUNCTIONS Expenses Services Contributions Contributions in Net Position Governmental activities: Instruction General adminstration School administration Fiscal services Food services Pupil transportation Operation of plant Maintenance of plant Unallocated depreciation Total governmental activities $ 1,374,596 $ , , ,292 52,622 77, ,946 38,436 7,090 2,903,512 52,622 $ $ $ (1,374,596) (99) (335,7 88) (363, 572) 32,670 (77,693) 56,606 (564,340) (38,436) (7,090) 32,670 56,606 (2,76 1,614) General revenues: FTE nonspecific revenues Interest and other revenue 2,623, ,000 Change in net position 111,970 Net position, beginning Net position, ending 86,075 $ 198,045 The accompanying notes are an integral part of this financial statement. 10

252 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) Balance Sheet - Governmental Funds June 30, 2015 General Fund Special Revenue Fund Total Governmental Funds Assets Cash and cash equivalents Due from other agencies Due from fund Total Assets $ 5, ,796 $ $ 5, ,047 Deferred Outflows of Resources Liabilities Salaries and wages payable Accounts payable Due to fund Due to other charter school Total Liabilities 96,725 3, , ,323 96,725 3, , ,574 Deferred Inflows of Resources Fund balance Nonspendable, not in spendable form Unassigned Total Liabilities, Deferred Inflows of Resources and Fund Balance (375,527) (375,527) $ 5,796 (375,527) (375,527) $ 251 $ 6,047 The accompanying notes are an integral part of this financial statement. 11

253 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) Reconciliation of the Governmental Fund Balance Sheet to the Statement of Net Position For the year ended June 30, 2015 Total Fund Balance- Governmental Funds $ (375,527) Capital assets of $44,439 net of accumulated depreciation of $7,090 used in governmental activities are not financial resources and therefore are not reported in the fund. 37,349 Long term receivables in govermnental activities are financial assets but are not reported in the governmental funds. 536,223 Total Net Position - Governmental Activities $ 198,045 The accompanying notes are an integral part of this financial statement. 12

254 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) Statement of Revenues, Expenditures, and Changes in Fund Balance- Governmental Funds For the year ended June 30, 2015 Revenues: State capital outlay funding State passed through local Federal sources Lunch program Local sources Charges and other revenue Total Revenues Expenditures: Current Instruction General ad1ninistration School administration Fiscal services Food services Pupil transportation Operation of plant Maintenance of plant Capital Outlay: Other capital outlay Total Expenditures Excess (deficit) of revenues over expenditures Other financing sources (uses) L/T receivable from Florida Charter Foundation Net change in fund balance Fund Balance at beginning of year Fund Balance at end of year General Fund $ 2,623, ,000 2,873,584 1,374, , ,572 77, ,340 38, ,798,963 74,621 (536,223) (461,602) $ { Special Revenue Fund Total Governmental Funds $ 56,606 $ 56,606 2,623,584 32,670 32,670 52,622 52, , ,898 3,01 5,482 1,374, , ,572 85,292 85,292 77,693 56, ,946 38, ,940,861 74,621 (536,223) (461,602) $ $ { The accompanying notes are an integral part of this financial statement. 13

255 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance of Governmental Funds to the Statement of Activities For the year ended June 30, 2015 Net Change in Fund Balance - Governmental Funds $ (461,602) Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which capital outlays of $44,439 exceeded depreciation expense of $7, ,349 Increase in long term receivables is an expenditure in the governmental funds, but increases long-term assets in the statement of net position. This is the amount by which longterm receivable increased in the current period. 536,223 Change in Net Position of Governmental Activities $ 111,970 The accompanying notes are an integral part of this financial statement. 14

256 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2015 Note 1 - Summary of Significant Accounting Policies Reporting Entity Franklin Academy F (the "School"), is a component unit of the School Board of Broward County, Florida (the "District"). The Schools charter is held by Florida Charter Foundation, Inc., a not-for-profit corporation organized pursuant to Chapter 617, Florida Statutes, the Florida Not For-Profit Corporation Act. The governing body of the School is the board of directors of Florida Charter Foundation, Inc., which is composed of five members and also governs other charter schools. The board of directors has determined that no component unit exists that would require inclusion in the School's financial statements. The general operating authority of the School is contained in Section , Florida Statutes. The School operates under a charter granted by the sponsoring district, the School Board of Broward County, Florida. The current charter expires on June 30, 2017 and is renewable for an additional term pursuant to law and/or by a mutual written agreement between the School and the District. At the end of the term of the charter, the District may choose not to renew the charter under the grounds specified in the charter in which case the District is required to notify the School in writing at least 90 days prior to the charters expiration. During the term of the charter, the District may terminate the charter if good cause is shown. The School's location is in Cooper City, Florida for children from sixth through eighth grade and is funded by the District. These financial statements are for the year ended June 30, 2015, when a total of approximately 439 students were enrolled for the school year. Basis of presentation The School's accounting policies conform to accounting principles generally accepted in the United States as applicable to state and local governments. The Governmental Accounting Standards Board ("GASB") is the accepted standard setting body for establishing governmental accounting and financial reporting principles. Deferred Outflows/Inflows of Resources In addition to assets, the statement of financial position will sometimes report a separate section of deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period and so will not be recognized as an outflow of resources (expense/expenditure) until then. The School does not have any items that qualify for reporting in this category. In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources (revenue) until that time. The School does not have any items that qualify for reporting in this category. 15

257 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2015 Note 1-Summary of Significant Accounting Policies (continued) Government-wide and Fund Financial Statements The government-wide financial statements include the statement of net pos1t1on and the statement of activities. These statements report information about the School as a whole. Any internal interfund activity has been eliminated from these financial statements. Both statements report only governmental activities as the School does not engage in any business type activities. These statements also do not include fiduciary funds. The statement of activities reports the expenses of a given function offset by program revenues directly connected with the functional program. A function is an assembly of similar activities and may include portions of a fund or summarize more than one fund to capture the expenses and program revenues associated with a distinct functional activity. Program revenues include: (1) charges for services which report fees; (2) operating grants such as the National School Lunch Program, Federal grants, and other state allocations; and (3) capital grants specific to capital outlay. Other revenue sources not properly included with program revenues are reported as general revenues. Fund Financial Statements Fund financial statements are provided for governmental and fiduciary funds, even though the fiduciary funds are not included in the government-wide financial statements. The operations of the funds are accounted for with a separate set of self-balancing accounts that comprise its assets, deferred outflows of resources, and liabilities, deferred inflows of resources, equity, revenues and expenditures. Major individual governmental funds are reported as separate columns in the fund financial statements: General Fund- is the School ' s primary operating fund. It accounts for all financial resources of the school, except those required to be accounted for in another fund. Special Revenue Fund - accounts for specific revenue, such as capital outlay funding and federal lunch program funds that are legally restricted to expenditures for particular purposes. Measurement Focus and Basis of Accounting The financial statements of the School are prepared in accordance with generally accepted accounting principles (GAAP). The School's reporting entity applies all relevant Governmental Accounting Standards Board (GASB) Codification of Accounting and Financial Reporting Guidance. 16

258 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2015 Note 1 - Summary of Significant Accounting Policies (continued) The government-wide statements report using the economic resources measurement fo cus and the full accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. The School recognizes assets of non-exchange transactions in the period when the underlying transaction occurs, when an enforceable legal claim has arisen, or when all eligibility requirements are met. Revenues are recognized, on the modified accrual basis, when they are measurable and available. Non-exchange transactions occur when the school provides (or receives) value to (from) another party without receiving (or giving) equal or nearly equal value in return. Most donations are examples of non-exchange transactions. Revenues from grants and donations are recognized on the accrual basis, in the fiscal year in which all eligibility requirements have been satisfied. Governmental fund financial statements report using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized when they are both measurable and available. "Measurable" means the amount of the transaction can be determined. Available means collectible within the current period or soon enough thereafter to pay liabilities of the current period. The School considers revenues to be available if they are collected within 60 days of the end of the fiscal year. Florida Education Finance Program (FEFP) revenues are recognized when received. A one-year availability period is used for revenue recognition for all other governmental fund revenues. Charges for services and fees are recognized when cash is collected as amounts are not measurable. When grant terms provide that the expenditure of funds is the prime factor for determining eligibility for federal, state, and other grant funds, revenue is recognized at the time the expenditure is made. Expenditures are recorded when the related fund liability is incurred, except for long-term debt principal and interest which are reported as expenditures in the year due. Budgets and Budgetary Accounting In compliance with Florida Statutes, the Board of Directors adopts an annual budget using the modified accrual basis of accounting. During the fiscal year, expenditures were controlled at the object level (e.g. salaries and benefits, purchased services, materials and supplies and capital outlay) within each activity (e.g. instruction, pupil personnel services and school administration). Revisions to the annual budget are approved by the Board. 17

259 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2015 Note 1 - Summary of Significant Accounting Policies (continued) Cash Cash and cash equivalents include all highly investments with a maturity of three months or less. Inter-fund Transfers Outstanding balances between funds are reported as "due to/from" other funds. Inter-fund transfers are made to move any excess or shortage of funds derived from the National School Lunch Program from the Special Revenue Fund to the General Fund. Due from Other Governments or Agencies Amounts due to the School by other governments or agencies are for grants or programs under which the services have been provided by the School. Capital Assets The School's property, plant and equipment with useful lives of more than one year are stated at historical cost and comprehensively reported in the statement of net position in the governmentwide financial statements. Donated capital assets are recorded at their estimated fair market value on the date donated. The School generally capitalizes assets with a cost of $500 or more. Building improvements, additions and other capital outlays that significantly extend the useful life of an asset are capitalized. The costs of normal maintenance and repairs that do not add to the asset value or materially extend useful lives are not capitalized. Capital assets are depreciated using the straight-line method. When capital assets are disposed, the cost and applicable accumulated depreciation are removed from the respective accounts, and the resulting gain or loss is recorded in operations. Estimated useful lives, in years, for depreciable assets are as follows: Furniture, Equipment and Software Textbooks 5 Years 3 Years 18

260 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2015 Note 1- Summary of Significant Accounting Policies (continued) Compensated Absences The School grants a specific number of sick days. Full time instructional employees are eligible to five days per school year. (a "benefit year"). In the event that available time is not used by the end of the benefit year, employees may "rollover" five unused days for use in future benefit years. However, at no time can the maximum amount of unused sick days exceed ten days. There is no termination payment for accumulated unused sick days. GASB Codification Section C60, Accounting fo r Compensated Absences, provides that compensated absences that are contingent on a specific event that is outside the control of the employer and employee should be accounted for in the period those events take place. Accordingly, these financial statements do not include an accrual for sick days available to be used in future benefits years. The School also provides certain days to be used for specific personal matter such as family death and jury duty. Because the use of such days is contingent upon those events taking place and such events are out of the control of both the employer and the employee, there is no accrual for such days. Revenue Sources Revenues for current operations are received primarily from the District pursuant to the funding provisions included in the School's charter. In accordance with the funding provisions of the charter and Section , Florida Statutes, the School will report the number of full-time equivalent (FTE) students and related data to the District. Under the provisions of Section , Florida Statutes, the District reports the number of the full-time equivalent (FTE) students and related data to the Florida Department of Education (FDOE) for funding through the FEFP. Funding for the School is adjusted during the year to reflect the revised calculations by the FDOE under the FEFP and the actual weighted full-time equivalent students reported by the School during the designated full-time equivalent student survey periods. After review and verification of FTE reports and supporting documentation, the FDOE may adjust subsequent fiscal period allocations of FEFP funding for prior year errors disclosed by its review as well as to prevent statewide allocations from exceeding the amount authorized by the Legislature. Normally, such adjustments are treated as reductions of revenue in the year the adjustment is made. In addition, the School receives state funds through the District under charter school capital outlay funding pursuant to Section , Florida Statutes. Funds are based on a capital outlay plan submitted to the District and are to be used for lease of school facilities. 19

261 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2015 Note 1- Summary of Significant Accounting Policies (continued) Finally, the School also receives Federal awards for the enhancement of various educational programs. Federal awards are generally received based on applications submitted to and approved by various granting agencies. For Federal awards in which a claim to these grant proceeds is based on incurring eligible expenditures, revenue is recognized to the extent that eligible expenditures have been incurred. Any excess amounts are recorded as deferred revenues until expended. Additionally, other revenues may be derived from various fundraising activities and certain other programs. Net position and Fund balance classifications Government-wide financial statements Equity is classified as net position and displayed in three (3) components: a) Net investment in capital assets - consists of capital assets net of accumulated depreciation and reduced by the outstanding balances of any borrowings that are attributable to the acquisition or improvement of those assets. Restricted net position - consists of net position with constraints placed on their use either by external groups such as creditors, grantors, contributors or laws or regulations of other governments. c) Unrestricted net position - all other net position that do not meet the definition of "restricted" or "net investment in capital assets." b) Fund financial statements Under GASB Codification Section , Fund Balance Reporting and Governmental Fund Type Definitions. This Statement defines the different types of fund balances that a governmental entity must use for financial reporting purposes. GASB requires the fund balance amounts to be properly reported within one of the fund balance categories list below: a) Nonspendable - includes amounts that cannot be spent because they are either not in spendable form or legally or contractually required to be maintained intact. Consists of fund balance associated with inventories, prepaid expenses, long-term loans and notes receivable, and property held for resale (unless the proceeds are restricted, committed, or assigned). There are no nonspendale balances at year end. b) Restricted - fund balance category includes amounts that can be spent only for the specific purposes stipulated by constitution, external resource providers, or through enabling legislation. Restricted fund balance of the School relate to reserves required by the landlord for property maintenance and repairs. There are no restricted balances at year end. c) Committed - fund balance classification includes amounts that can be used only for the specific purposes determined by a formal action of the School's Board of Directors. There are no committed fund balances at year end. 20

262 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2015 Note 1- Summary of Significant Accounting Policies (continued) d) Assigned - fund balance classification are intended to be used by the School's management for specific purposes but do not meet the criteria to be classified as restricted or committed. There are no assigned fund balances at year end. Unassigned - portion of the fund balance that has not been restricted, committed or assigned for a specific purpose. This is the residual classification for the School's general fund. e) Order of Fund Balance Spending Policy The School's policy is to apply expenditures against non-spendable fund balance, restricted fund balance, committed fund balance, assigned fund balance, and unassigned fund balance at the end of the fiscal year by adjusting journal entries. First Non-spendable fund balances are determined. Then restricted fund balances for specific purposes are determined (not including non-spendable amounts). Then any remaining fund balance amounts for the non-general funds are classified as restricted fund balance. It is possible for the non-general funds to have negative unassigned fund balance when non-spendable amounts plus the restricted fund balances for specific purposes amounts exceed the positive fund balance for the non-general fund. Income Taxes Florida Charter Foundation, Inc. qualifies as a tax -exempt organization under Internal Revenue Code Section 501(c)(3), and is, therefore, exempt from income tax. Accordingly, no tax provision has been made in the accompanying financial statements. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenditures during the reporting period. Actual results could differ from those estimates. Subsequent Events In accordance with GASB Codification Section , the School has evaluated subsequent events and transactions for potential recognition or disclosure through September 30, 2015, which is the date the financial statements were available to be issued. 21

263 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2015 Note 2 -Capital Assets The following schedule provides a summary of changes in capital assets, acquired substantially with public funds, for the period ended June 30, 2015: Balance Balance 07/0 1/14 Additions Retirements 06/30/15 Capital Assets: Furniture, equipment and textbooks Total Capital Assets $ $ 44,439 44,439 $ $ 44,439 44,439 Less Accumulated Depreciation: Furniture, equipment and textbooks (7,090) (7,090) (7,090) (7,090) Capital Assets, net $ $ 37,349 $ $ 37,349 Depreciation expense for the year ended June 30, 2015 was $7,090. Note 3 -Deposits and Investments Deposits The School's policy is to maintain its cash and cash equivalents in major banks and in high grade investments. As of June 30, 2015, the carrying amount of the School's deposits was $5,545 and the respective bank balances totaled $5,545. Deposits at FDIC-insured institutions are insured up to $250,000 per depositor, per financial institution. The School is a charter school under Florida Charter Foundation, Inc., which also operates various other charter schools. All bank accounts are opened under the account ownership of Florida Charter Foundation, Inc., therefore, bank balances at times may potentially be in excess of FDIC coverage. As of June 30, 2015, bank balances in potential excess of FDIC coverage totaled $5,

264 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2015 Note 4 -Management Agreement The School uses Florida Charter Foundation Inc, (the holder of the School's charter) to provides complete administrative and management services to all Franklin Academy schools. These services include but are not limited to: administration of support services (facility maintenance, food service, transportation, etc); governmental compliance reporting; coordination of legal support for school operations; district management/liaison; parent customer service; grant application/management; charter application development/submission/approval; site selection/ development; construction project management; school marketing/ enrollment management; financing management; and public relations. There is no written agreement with Florida Charter Foundation, Inc. During the year, the School made payments totaling $242,000. In addition, Charter School Services Corporation, Inc., a professional charter school management company, provides accounting and human resources management services to the School including, but not limited to, regulatory compliance, maintenance of the books and records, bookkeeping, budgeting and financial reporting. The agreement between the School and the management company calls for a fee of $100 per full time equivalent (FTE) student per year up to 1,500 students with a reduction of $10 per student for every additional 500 students. The agreement can be terminated at any time by the board with 30 day notice. During the year ended June 30, 2015, the School incurred approximately $34,403 in management fees. Charter School Services Corporation, Inc. is located at 1225 SE 2n d Avenue, Fort Lauderdale, Florida, Note 5 -Related Party Transactions The School shares its campus with Franklin Academy E, another charter school under Florida Charter Foundation, Inc. Certain funding provided to the School is shared by the two schools. In addition, certain costs are allocated to each school using a logical basis such as the ratio of FTE for each school. At June 30, 2015, the School had a payable of $280,647 to the other charter school. In addition, during the year ended June 30, 2015, Florida Charter Foundation, Inc. assumed $250,000 of the School's payable to Franklin Academy E as a recoverable grant. The purpose of the grant is for the School to use on operating expenses. Under the terms of the grant, the School would repay the grant in the event the it experiences a surplus of its operating budget for any period ending on June 30, following the execution of the agreement. Pursuant to the Charter School contract with the School District, the District withholds an administrative fee of up to 5% of the qualifying revenues of the School and up to and including 250 students. For the year ended June 30, 2015, administrative fees totaled $131,358, of which $56,606 was credited back for capital outlay purposes. 23

265 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2015 Note 6 -Commitments, Contingencies and Concentrations The School entered into a lease and development agreement with CA Cooper City 6271 SFR, LLC for its main campus facility. This facility is shared with Franklin Academy E, another charter school under Florida Charter Foundation, Inc. Initial fixed annual payments under this agreement are approximately $740,000 adjusted annually based on the lease schedule, plus additional property expenses including repairs, maintenance and insurance. The agreement continues through June 2042 with an option to renew for up to two additional ten year periods. Lease payments are allocated among the two schools based on FTE. The allocation used for 2015, was approximately 33o/o for the School and 67% for Franklin Academy E. For 2015, rent expense for the School totaled $43 8,3 54. Future minimum payments for the full lease (shared with Franklin Academy E) are as follows: Year 2016 $ 1,650, $ 1,789, $ 1,789, $ 1,898, $ 1,941 ' $ 10,380,734 (total for five year period) $ 11,602,3 18 (total for five year period) $ 12,967,652 (total for five year period) $ 14,493,654 (total for five year period) $ 6,264,283 (total for two year period) Contingencies and Concentrations The School receives substantially all of its funding from the District under the Florida Education Finance Program (FEFP), which is based in part on a computation of the number of full-time equivalent (FTE) students attending different instructional programs. The accuracy of FTE student data submitted by individual schools and used in the FEFP computations is subject to audit by the state and, if found to be in error, could result in refunds to the state or in decreases to future funding allocations. Additionally, the School receives various forms of federal, state and local funding which are subject to financial and compliance audits. It is the opinion of management that the amount of funding, if any, which may be remitted back to the state due to errors in the FTE student data or the amount of grant expenditures which may be disallowed by grantor agencies would not be material to the financial position of the School. 24

266 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2015 Note 7 -Risk Management The School is exposed to various risks of loss related to torts, thefts of, damage to and destruction of assets, errors and omissions and natural disasters for which the School carries commercial insurance. Settlement amounts have not exceeded insurance coverage for the past years. In addition, there were no reductions in insurance coverage from those in the prior year. Note 8 -Defined Contribution Retirement Plan The School's personnel are eligible to participate in a defined contribution 401(k) plan covering employees who meet certain age and tenure requirements. Under the Plan, the School provides a match of 2.5% of the employee's compensation. The School contributed to the Plan $18,357 for the year ended June 30, The School does not exercise any control or fiduciary responsibility over the Plan's assets 25

267 REQUIRED SUPPLEMENTARY INFORMATION

268 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) Statement of Revenues, Expenditures, and Changes in Fund Balance For the ear ended June 30, 2015 General Fund Original Budget Final Budget Actual REVENUES State passed through local $ 2,568,858 $ 2,675,000 $ 2,623,584 Charges and other revenue 250, ,000 Total Revenues 2,568,858 2,925,000 2,873,584 EXPENDITURES Current: Instruction 1,267' 101 1,375,000 1,374,596 General administration 7, School Administration 217, , ,788 Fiscal Services 350, , ,572 Pupil transportation 98,266 78,000 77,693 Operation of Plant 583, , ,340 Maintenance of Plant 30,000 40,000 38,436 Total Current Expenditures 2,554,588 2,823,100 2,754,524 Excess of Revenues Over Current Expenditures 14, , ,060 Debt Service: Redemption of Principal Capital Outlay 44,439 44,439 Total Expenditures 2,554,588 2,867,539 2,798,963 Excess of Revenues Over Expenditures 14,270 57,461 74,62 1 Other financing sources (uses): Transfers in (out) L/T receivable from Florida Charter Foundation (536,2232 {536,2232 Long term advances to related party Net change in fund balance 14,270 (478,762) (461,602) Fund Balance at beginning of year (58, ,075 86,075 Fund Balance at end of year $ ( 43,9452 $ (392,6872 $ (375,5272 Notes to Budgetary Com12arison Schedule An annual budget is adopted on the modified accrual basis of accounting, consistent with generally accepted accounting principles. Amendments to the budget can only be made with the approval of the Board of Directors. 26

269 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) Statement of Revenues, Expenditures, and Changes in Fund Balance For the year ended June 30, 2015 REVENUES Special Revenue Fund Original Budget Final Budget Actual State capital outlay funding $ $ 56,606 $ 56,606 Federal sources $ $ 32,670 $ 32,670 Federal lunch program 52,622 52,622 Total Revenues 141, ,898 EXPENDITURES Current: Food services 85,292 85,292 Operation of Plant 56,606 56,606 Total Current Expenditures 141, ,898 Excess of Revenues Over Current Expenditures Capital Outlay Total Expenditures 141, ,898 Excess of Revenues Over Expenditures Other fm ancing sources (uses) Transfers in (out) Net change in fund balance Fund Balance at beginning of year Fund Balance at end of year $ $ $ Notes to Budgetary Comparison Schedule An annual budget is adopted on the modified accrual basis of accounting, consistent with generally accepted accounting principles. Amendments to the budget can only be made with the approval of the Board of Directors. 27

270 IIIJIII._..._ GRAVIER, LLP CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Board of Directors of Franklin Academy F Cooper City, Florida We have audited, in accordance with the auditing standards generally accepted in the United States of An1erica and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities and each major fund of Franklin Academy F (the "School") as of, and for the year ended June 30, 201 5, and the related notes to the financial statements, which collectively comprise the School's basic financial statements and have issued our report thereon dated September 30, Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the School's internal control over financial reporting to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the School's internal control. Accordingly, we do not express an opinion on the effectiveness of the School's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 396 Alhambra Circle, Suite 900, Coral Gables, FL Tel: Fax: HLB Gravie( LLP is a member of International. A world-wide organization of accounting firms and business advisers.

271 Compliance and Other Matters As part of obtaining reasonable assurance about whether the School's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an obj ective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. We issued a separate management letter dated September 30, 2015 pursuant to Chapter , Rules of the Auditor General. Purpose of this report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.!fq /}fll CERTIFIED PUBLIC ACCOUNTANTS Coral Gables, Florida September 30,

272 ..._-... GRAVIER, LLP CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT LETTER Board of Directors of Franklin Academy F Cooper City, Florida Report on the Financial Statements We have audited the financial statements of the governmental activities and each major fund of Franklin Academy F as of and for the year ended June 30, 2015 and have issued our report thereon dated September 30, Auditor's Responsibility We conducted our audit 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; and Chapter , Rules of the Auditor General Other Reports and Schedules We have issued our Independent Auditors' Report on Internal Control over Financial Reporting and Compliance and Other Matters Based on an Audit of the Financial Statements Perfo rmed in Accordance with Government Auditing Standards. Disclosure in those reports, which are dated September 30, 2015, should be considered in conjunction with this management letter. Prior Audit Findings Section (1 )(e) 1., Rules of the Auditor General, requires that we determine whether or not corrective actions have been taken to address findings and recom1nendations made in the preceding annual financial audit report. There were no findings and recommendations in the preceding financial audit report. Official Title Section (1)(e)5., Rules of the Auditor General, requires the name or official title of the entity. The official title of the entity is Franklin Academy F. Financial Condition Sections ( 1 )( e )2, Rules of the Auditor General, requires that we report the results of our determination as to whether or not Franklin Academy F has met one or more of the conditions described in Section (1 ), Florida Statutes, and identification of the specific condition(s) met. In connection with our audit, we determined that Franklin Academy F did not meet any of the conditions described in Section (1 ), Florida Statutes. 396 Alhambra Circle. Suite 900, Coral Gables, FL Tel: Fax: HLB Gravier. LLP is a member of International. A world-wide organization of accounting firms and business advisers

273 Financial Condition (Continued) Sections (1 )( e )6.a and (12), Rules of the Auditor General, require that we apply financial condition assessment procedures for Franklin Academy F. It is management's responsibility to monitor Franklin Academy F financial condition, and our financial condition assessment was based in part on representations made by management and the review of financial information provided by same. We have applied such procedures as of the fiscal year end and no deteriorating financial condition has been noted. However, it should be noted that the School's financial health would depend on the collection of the long-term receivable from Florida Charter Foundation, Inc. Transparency Sections (1 )( e )7 and (13), Rules of the Auditor General, require that we report the results of our determination as to whether Franklin Academy F maintains on its Web site the information specified in Section (9)(p ), Florida Statutes. In connection with our audit, we determined that Franklin Academy F maintained on its Web site the information specified in Section (9)(p ), Florida Statutes. Other Matters Section (1 )(e)3., Rules of the Auditor General, requires that we address in the management letter any recommendations to improve financial management. In connection with our audit, we have the following findings or recommendations. ML SCHOOLS TRANSACTIONS WITH CHARTER HOLDER AND OTHER CHARTER Observation We noted a number of transactions involving the school and its charter holder, Florida Charter Foundation. In addition, we noted transactions with other charters schools under Florida Charter Foundation that share a facility with the school. These transactions included advances, allocation of costs and revenue that create balances due to and from, recoverable grants, and payments for management and administrative services. We noted that there are no complete agreements or policies that govern these transactions and thus, there are large due to/from balances and offsetting balances that have been created. Recommendation Because of the significance of these transactions, management should establish with the Board, policies that govern these transactions. These policies should establish rates for services, criteria for receiving recoverable grants, basis for allocations, procedures for fund transfers. The objective of these policies would be to establish a basis and purpose for these transactions that follow overall strategy and thus supports the reason and necessity for their existence. Management' Response Management will present to the board a set of policies to support such transactions 31

274 Section (1 )( e )4., Rules of the Auditor General, requires that we address noncompliance with provisions of contracts or grant agreements, or abuse, that have occurred, or are likely to have occurred, that have an effect on the financial statements that is less than material but which warrants the attention of those charged with governance. In connection with our audit, we did not have any such findings. Purpose of this Letter Our management letter is intended solely for the information and use of the Legislative Auditing Committee, members of the Florida Senate and Florida House of Representatives, the Florida Auditor General, School Board of Broward County, Federal and other granting agencies, the Board of Directors, and applicable management and is not intended to be and should not be used by anyone other than these specified parties. Coral Gables, Florida September 30, 2015 CERTIFIED PUBLIC ACCOUNTANTS 32

275 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) (A Charter School and Component Unit of the School Board of Broward County, Florida) Cooper City, Florida Financial Statements and Independent Auditors' Report June 30, 20 14

276 TABLE OF CONTENTS General Information Independent Auditors' Report Management's Discussion and Analysis (Required Supplementary Information) Basic Financial Statements: Government-wide Financial Statement: Statement of Net Position.... Statement of Activities..... Fund Financial Statements: Balance Sheet - Governmental Funds..... Reconciliation of the Governmental Fund Balance Sheet to the Statement of Net Position.... Statement of Revenues, Expenditures and Changes in Fund Balance - Governmental Funds..... Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance of Governmental Funds to the Statement of Activities..... Notes to the Basic Financial Statements.... Required Supplementary Information: Budgetary comparison schedules..... Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards.... Management Letter

277 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) W/L# S. Flamingo Road Cooper City, FL Dr. Dave Thomas, Chair and President Alexandra Lonsdale Catherine Arcabascio Debbie Platz J aqueline Greenberg BOARD OF DIRECTORS SCHOOL ADMINISTRATION Dr. Daniel Sandberg, Principal

278 GRAVIER, LLP lilliillilillill-.. CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITORS' REPORT To the Board of Directors of Franklin Academy F Cooper City, Florida We have audited the accompanying financial statements of the governmental activities and each major fund of Franklin Academy F (the ''School"), a charter school under Florida Charter Foundation, Inc., which is a component unit of the District School Board of Broward County, as of, and for the year ended June 30, 2014, which collectively comprises the School's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit 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 of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 396 Alhambra Circle, Suite 900, Coral Gables. FL Tel: Fax: HLB Gravier, LLP is a member of International. A world-wide organization of accounting firms and business advisers.

279 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of Franklin Academy F at June 30, 2014, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters As described in Note 1, the accompanying financial statements referred to above present only the financial position of Franklin Academy F at June 30, 2014, and the respective changes in financial position for the year then ended, and is not intended to be a complete presentation of Florida Charter Foundation, Inc. These financial statements do not purport to and do not present fairly the financial position of Florida Charter Foundation, Inc. as of June 30, 2014 and its changes in financial position for the year then ended in conformity with accounting principles generally accepted in the United States of America. Required Supplementary Information In accordance with Government Auditing Standards, we have also issued our report dated September 29, 2014 on our consideration of the School's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the 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 considered in assessing the results of our audit. Accounting principles generally accepted in the United States of America require that the management's discussion and analysis and budgetary comparison information on pages 4 through 8 and 26 through 27 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Coral Gables, Florida September 29, /Z/5 ;1/.!11 CERTIFIED PUBLIC ACCOUNTANTS / 3

280 Management's Discussion and Analysis Franklin Academy F (A Charter school Under Florida Charter Foundation, Inc.) June 30, 2014 The corporate officers of Franklin Academy F have prepared this narrative overview and analysis of the school's financial activities for the year ended June 30, Financial Highlights 1. The fiscal year ending June 30, 2014 was the school's first year of operations. 2. The net asset position of the School at June 30, 2014 was $86, At year-end, the School had current assets on hand of $217, The net position of the School increased by $86,075 during the year. 5. The unassigned fund balance at year end was a deficit of $(1 00, 148). Overview of the Financial Statements This discussion and analysis are intended to serve as an introduction to the School's basic financial statements. The School's financial statements for the year ended June 30, 2014 are presented in accordance with GASB Codification Section The financial statements have three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other required supplementary information in addition to the basic financial statements themselves. Government- Wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the School's finances, in a manner similar to a private-sector business. The Statement of Net Position presents information on all of the School's assets, deferred outflows of resources, liabilities, and deferred inflows of resources. The difference between the four is reported as net positions. Over time increases or decreases in net position may serve as an indicator of whether the financial position of the School is improving or deteriorating. The Statement of Activities presents information on how the School's net position changed during the fiscal year. All changes in net position are reported when the underlying event occurs without regard to the timing of related cash flows. Accordingly, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. The government-wide financial statements can be found on pages 9-10 of this report. Fund Financial Statements A "fund" is a collection of related accounts grouped to maintain control over resources that have been segregated for specific activities, projects, or objectives. The School like other state and local governments uses fund accounting to ensure and report compliance with finance-related legal requirements. 4

281 All of the funds of the School are governmental funds. Government Funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. Government Fund financial statements, however, focus on near-term inflows and outflows of spendable resources, as well as on the balances of spendable resources which are available at the end of the fiscal year. Such information may be used to evaluate a government's requirements for near-term financing. The Board of the School adopts an annual appropriated budget for its general fund. A budgetary comparison statement has been provided for the general fund to demonstrate compliance with the School's budget. The basic governmental fund financial statements can be found on pages of this report. Notes to Financial Statements The notes to the financial statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages of this report. GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net position may serve over time as a useful indicator of a charter school's financial position. In the case of the School, the net position was $86,075 at the close of the fiscal year. A summary of the School's net position as of June 30, 2014 is as follows: Cash and cash equivalents Due from other agencies Due from Florida Charter Foundation, Inc. Total Assets $ 30, , ,185 Deferred outflows of resources Salaries and wages payable Accounts payable and accrued liabilities Due to other charter schools Total Liabilities 30, , ,1 10 Deferred inflows of resources Net Position: Net investment in capital assets and long-term receivables Unrestricted Total Net Position 86,075 $ 86,075 At the end of the year, the School is able to report positive balances in total net position. 5

282 A summary and analysis of the School's revenues and expenses for the years ended June 30, fo llows: REVENUES General Revenues Local Sources(FTE non specific) Federal Sources Lunch Program Total Revenues $ 2,555,658 54,028 36,293 $ 2,736,300 EXPENSES Component Unit Activities: Instruction General administration School administration Fiscal services Food services Pupil transportation Operation of plant Maintenance of plant Unallocated depreciation Total Expenses Increase in Net Position Net Position at Beginning of Year Net Position at End of Year $ 1,338, , ,602 90,321 75, ,294 25,868 2,559, ,396 $ 176,396 This was the school's first year and thus, comparative information is not presented. School Location and Lease of Facility The School leases a facility located at 6301 South Flamingo Road, Cooper City, Florida. Capital Improvement Requirements The School maintains a continuous capital improvements program to enhance facilities and update fixtures and equipment as required. School Enrollment This past year, the School had approximately 43 1 students enrolled in grades sixth through eighth. Accomplishments Franklin Academy in Cooper City opened to a full student body of 43 1 students in August of Utilizing a single-gender educational model, teachers and staff are provided with professional development opportunities which augment the educational programs and opportunities for all students. 6

283 Franklin Academy implemented a "Gifted Education" program in its inaugural year with phenomenal success. Franklin Academy's chess competitions became a mainstay across our campus and the Cooper City campus became the location of the first inter-campus venue for multi-level tournaments. Franklin Academy implemented several intervention opportunities for its most struggling students including before and after school tutorial programs, as well as Academic Olympics, which is held on Saturdays. Franklin Academy's sixth through eighth grade program which earned an "A" rating sent students to district level math competitions where they outperformed many neighboring schools. Franklin Academy also outscored several of the neighboring schools in various reporting categories on its State Report Card. Most notably, Franklin Academy in Cooper City was the number 5 ranking school in the area of Science. Franklin Academy boasts a thriving arts department. Students are involved in a Winter Showcase, Fall and Spring Musicals, Dance Recitals, The International Day of Peace Celebration and twenty-two student selected clubs. The school also grows and learns in a bio-dynamic organic garden led by students and faculty members. In the winter of its inaugural year, Franklin Academy applied for and was awarded candidacy to the International Baccalaureate. The school is currently embarking on the authorization process to become an International Baccalaureate World School. Currently, the middle school IB teachers are participating in intensive professional development toward this goal. Additionally, Franklin Academy is involved in the school accreditation process through SACS-CASI. FINANCIAL ANALYSIS OF THE GOVERNMENT'S FUND As noted earlier, the School uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds The focus of the School's governmental fu nds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the School's financing requirements. In particular, the unassigned fu nd balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. Most of the School's operations are funded in the General Fund. The majority of the General Fund revenues are distributed to the School by the District through the Florida Education Finance Program (FEFP), which uses formulas to distribute state funds and an amount of local property taxes (i.e., required local effort) established each year by the Florida Legislature. At the end of the fiscal year, the School's governmental general fund reported an ending fund balance of $86,075. The fund balance unassigned and available for spending at the School's discretion is a deficit of $(1 00, 148). 7

284 Governmental Fund Budget Analysis and Highlights Prior to the start of the School's fiscal year, the Board of the Charter School adopted an annual budget. A budgetary comparison statement has been provided for the governmental funds to demonstrate compliance with the School's budget. Ongmal Governmental Fund Budget Final Budget Actual REVENUES Program Revenues Federal sources Lunch program General Revenues FTE nonspecific revenues Total Revenues $ $ 2,565,628 2,581,013 $ 54,028 36,293 $ 2,500,000 2,590,321 $ 54,028 36,293 $ 2,555,658 2,645,979 CURRENT EXPENDITURES Component Unit Activities Instruction General administration School administration Fiscal services Food services Pupil transportation Operation of plant Maintenance of plant Unallocated depreciation Total Current Expenditures 1,453, , , ,339 15,231 $ 2,574,418 1,350,000 90, , ,321 76, ,000 26,000 $ 2,664,292 1,338, , ,602 90,321 75, ,294 25,868 $ 2,559,904 Requests for Information This financial report is intended to provide a general overview of the finances of the Charter School. Requests for additional information may be addressed to Dr. Daniel Sandberg, 6301 South Flamingo Road, Cooper City, Florida, Deficit Unrestricted Net Position At the end of the School's first full year of operations (June 30, ), it had accumulated unrestricted deficits net position due to investments in receivables from its charter holder. However, the school has adequate enrollment and financing resources to eliminate the deficit in the near future. 8

285 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) Statement of Net Position June 30, 2014 Assets Current assets: Cash and cash equivalents Due from other agencies Due from Florida Charter Foundation, Inc. $ 30, , ,185 Total Assets 217,185 Deferred Outflows of Resources Liabilities Current liabilities: Salaries and wages payable Accounts payable and accrued liabilities Due to other charter schools Total Current Liabilities 30, , ,110 Total Liabilities 131,110 Deferred Inflows of Resources Net Position Unrestricted Total Net Position 86,075 $ 86,075 The accompanying notes are an integral part of this financial statement. 9

286 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) Statement of Activities For the year ended June 30, 2014 Program Revenues Net (Expense) Operating Capital Revenue Charges for Grants and Grants and and Changes FUNCTIONS Expenses Services Contributions Contributions in Net Position Governmental activities: Instruction General adminstration School administration Fiscal services Food services Pupil transportation Operation of plant Maintenance of plant Total governmental activities $ 1,338,489 $ , ,602 90,321 36,293 75, ,294 25,868 2,559,904 36,293 $ $ $ (1,338,489) (613) (21 7,480) (414,602) 54,028 (75,237) (397,294) (25,868) 54,028 (2,469,583) General revenues: FTE nonspecific revenues Interest and other revenue 2,555,658 Change in net position 86,075 Net position, beginning Net position, ending $ 86,075 The accompanying notes are an integral part of this financial statement. 10

287 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) Balance Sheet - Governmental Funds June 30, 2014 General Fund Special Revenue Fund Total Governmental Funds Assets Cash and cash equivalents Due from other agencies Due from fund Due from Florida Charter Foundation, Inc. Total Assets $ 30, , ,185 $ $ 30, , ,280 Deferred Outflows of Resources Liabilities Deposits Due to fund Due to other charter school Total Liabilities 30, , ,110 30, , ,205 Deferred Inflows of Resources Fund balance Nonspendable, not in spendable form Unassigned Total Liabilities, Deferred Inflows of Resources and Fund Balance 186,223 (100,148) 86,075 $ 217, ,223 (100, 148) 86,075 $ 95 $ 217,280 The accompanying notes are an integral part of this financial statement. 11

288 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) Reconciliation of the Governmental Fund Balance Sheet to the Statement of Net Position For the year ended June 30, 2014 Total Fund Balance - Governmental Funds $ 86,075 There were no differences between the amounts reported for governmental activities in the statement of net position and the governmental fund balance sheet. Total Net Position - Governmental Activities $ 86,075 The accompanying notes are an integral part of this financial statement. 12

289 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) Statement of Revenues, Expenditures, and Changes in Fund Balance - Governmental Funds For the year ended June 30, 2014 Revenues: State passed through local Federal sources Lunch program General Fund Special Total Governmental Revenue Fund Funds $ 2,555,658 $ $ 2,555,658 54,028 54,028 36,293 36,293 Total Revenues Expenditures: Current Instruction General administration School administration Facilities acquisition Fiscal services Food services Pupil transportation Operation of plant Maintenance of plant Capital Outlay: Other capital outlay Total Expenditures 2,555,658 90,321 2,645,979 1,338,489 1,338, , , , ,602 90,321 90,321 75,237 75, , ,294 25,868 25,868 2,469,583 90,321 2,559,904 Excess (deficit) of revenues over expenditures 86,075 86,075 Other financing sources (uses) Transfers in (out) Net change in fund balance 86,075 86,075 Fund Balance at beginning of year Fund Balance at end of year $ 8 6, ;$;:;....;$;:;..;;;..86.;;..o.,.;...07;...:;5_ The accompanying notes are an integral part of this financial statement. 13

290 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) Reconciliation ofthe Statement of Revenues, Expenditures and Changes in Fund Balance of Governmental Funds to the Statement of Activities For the year ended June 30, 2014 Net Change in Fund Balance - Governmental Funds $ 86,075 There were no differences between the amounts reported for governmental activities in the statement of activiies and the governmental statement of revenues, expenditures and changes in fund balance. Change in Net Position of Governmental Activities $ 86,075 The accompanying notes are an integral part of this financial statement. 14

291 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, Note 1 - Summary of Significant Accounting Policies Reporting Entity Franklin Academy F (the "School"), is a component unit of the School Board of Broward County, Florida (the "District"). The Schools charter is held by Florida Charter Foundation, Inc., a not-for-profit corporation organized pursuant to Chapter 617, Florida Statutes, the Florida Not For-Profit Corporation Act. The governing body of the School is the board of directors of Franklin Academy F, which is composed of five members and also governs other charter schools. The general operating authority of the School is contained in Section , Florida Statutes. The School operates under a charter granted by the sponsoring district, the School Board of Broward County, Florida. The current charter expires on June 30, 2017 and is renewable for an additional term pursuant to law and/or by a mutual written agreement between the School and the District. At the end of the term of the charter, the District may choose not to renew the charter under the grounds specified in the charter in which case the District is required to notify the School in writing at least 90 days prior to the charters expiration. During the term of the charter, the District may terminate the charter if good cause is shown. The School's location is in Cooper City, Florida for children from sixth through eighth grade and is funded by the District. These financial statements are for the period from inception through June 30, 2014, when a total of approximately 43 1 students were enrolled for the school year. Basis of presentation The School's accounting policies conform to accounting principles generally accepted in the United States as applicable to state and local governments. The Governmental Accounting Standards Board ("GASB") is the accepted standard setting body for establishing governmental accounting and financial reporting principles. Government-wide and Fund Financial Statements The government-wide financial statements include the statement of net position and the statement of activities. These statements report information about the School as a whole. Any internal interfund activity has been eliminated from these financial statements. Both statements report only governmental activities as the School does not engage in any business type activities. These statements also do not include fiduciary funds. The statement of activities reports the expenses of a given function offset by program revenues directly connected with the functional program. A function is an assembly of similar activities and may include portions of a fund or summarize more than one fund to capture the expenses and program revenues associated with a distinct functional activity. Program revenues include: (1) charges for services which report fees; (2) operating grants such as the National School Lunch Program, Federal grants, and other state allocations; and (3) capital grants specific to capital outlay. Other revenue sources not properly included with program revenues are reported as general revenues. 15

292 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2014 Note 1 -Summary of Significant Accounting Policies (continued) New Accounting Pronouncements The School implemented GASB Statement No. 63, "Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position." GASB 63 identifies net position, rather than net assets, as the residual of all other elements presented in a statement of financial position. Deferred outflows of resources represent consumption of resources that is applicable to future reporting periods that will be reported in a separate section after assets. Deferred inflows of resources represent acquisition of resources that is applicable to future reporting periods that will be reported in a separate section after liabilities. This change was incorporated in the Schools financial statements; however there was no effect on beginning net position/fund balance. Additionally, the School implemented GASB Statement No. 65, "Items previously reported as Assets and Liabilities". GASB 65 establishes accounting and financial reporting standards that reclassify as deferred outflows of resources or deferred inflows of resources, certain items that were previously report as assets and liabilities. This change was incorporated in the Schools financial statements; however there was no effect on beginning net position/fund balance. Fund Financial Statements Fund financial statements are provided for governmental and fiduciary funds, even though the fiduciary funds are not included in the government-wide financial statements. The operations of the funds are accounted for with a separate set of self-balancing accounts that comprise its assets, deferred outflows of resources, and liabilities, deferred inflows of resources, equity, revenues and expenditures. Major individual governmental funds are reported as separate columns in the fund financial statements: General Fund- is the School's primary operating fund. It accounts for all financial resources of the school, except those required to be accounted for in another fund. Special Revenue Fund - accounts for specific revenue, such as capital outlay funding and federal lunch program funds that are legally restricted to expenditures for particular purposes. Measurement Focus and Basis of Accounting The financial statements of the School are prepared in accordance with generally accepted accounting principles (GAAP). The School's reporting entity applies all relevant Governmental Accounting Standards Board (GASB) Codification of Accounting and Financial Reporting Guidance. 16

293 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2014 Note 1 -Summary of Significant Accounting Policies (continued) The government-wide statements report using the economic resources measurement focus and the full accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. The School recognizes assets of non-exchange transactions in the period when the underlying transaction occurs, when an enforceable legal claim has arisen, or when all eligibility requirements are met. Revenues are recognized, on the modified accrual basis, when they are measurable and available. Non-exchange transactions occur when the school provides (or receives) value to (from) another party without receiving (or giving) equal or nearly equal value in return. Most donations are examples of non-exchange transactions. Revenues from grants and donations are recognized on the accrual basis, in the fiscal year in which all eligibility requirements have been satisfied. Governmental fund financial statements report using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized when they are both measurable and available. "Measurable" means the amount of the transaction can be determined. Available means collectible within the current period or soon enough thereafter to pay liabilities of the current period. The School considers revenues to be available if they are collected within 60 days of the end of the fiscal year. Florida Education Finance Program (FEFP) revenues are recognized when received. A one-year availability period is used for revenue recognition for all other governmental fund revenues. Charges for services and fees are recognized when cash is collected as amounts are not measurable. When grant terms provide that the expenditure of funds is the prime factor for determining eligibility for federal, state, and other grant funds, revenue is recognized at the time the expenditure is made. Expenditures are recorded when the related fund liability is incurred, except for long-term debt principal and interest which are reported as expenditures in the year due. Budgets and Budgetary Accounting In compliance with Florida Statutes, the Board of Directors adopts an annual budget using the modified accrual basis of accounting. During the fiscal year, expenditures were controlled at the object level (e.g. salaries and benefits, purchased services, materials and supplies and capital outlay) within each activity (e.g. instruction, pupil personnel services and school administration). Revisions to the annual budget are approved by the Board. 17

294 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2014 Note 1-Summary of Significant Accounting Policies (continued) Cash Cash and cash equivalents include all highly investments with a maturity of three months or less. Inter-fund Transfers Outstanding balances between funds are reported as "due to/from" other funds. Inter-fund transfers are made to move any excess or shortage of funds derived from the National School Lunch Program from the Special Revenue Fund to the General Fund. Due from Other Governments or Agencies Amounts due to the School by other governments or agencies are for grants or programs under which the services have been provided by the School. Capital Assets The School's property, plant and equipment with useful lives of more than one year are stated at historical cost and comprehensively reported in the statement of net position in the governmentwide financial statements. Donated capital assets are recorded at their estimated fair market value on the date donated. The School generally capitalizes assets with a cost of $500 or more. Building improvements, additions and other capital outlays that significantly extend the useful life of an asset are capitalized. The costs of normal maintenance and repairs that do not add to the asset value or materially extend useful lives are not capitalized. Capital assets are depreciated using the straight-line method. When capital assets are disposed, the cost and applicable accumulated depreciation are removed from the respective accounts, and the resulting gain or loss is recorded in operations. Estimated useful lives, in years, for depreciable assets are as follows: Improvements Furniture, Equipment and Software Textbooks 15 Years 5 Years 3 Years 18

295 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2014 Note 1 -Summary of Significant Accounting Policies (continued) Compensated Absences The School grants a specific number of sick days. Full time instructional employees are eligible to five days per school year. (a "benefit year"). In the event that available time is not used by the end of the benefit year, employees may "rollover" five unused days for use in future benefit years. However, at no time can the maximum amount of unused sick days exceed ten days. There is no termination payment for accumulated unused sick days. GASB Codification Section C60, Accounting fo r Compensated Absences, provides that compensated absences that are contingent on a specific event that is outside the control of the employer and employee should be accounted for in the period those events take place. Accordingly, these financial statements do not include an accrual for sick days available to be used in future benefits years. The School also provides certain days to be used for specific personal matter such as family death and jury duty. Because the use of such days is contingent upon those events taking place and such events are out of the control of both the employer and the employee, there is no accrual for such days. Revenue Sources Revenues for current operations are received primarily from the District pursuant to the funding provisions included in the School's charter. In accordance with the funding provisions of the charter and Section , Florida Statutes, the School will report the number of full-time equivalent (FTE) students and related data to the District. Under the provisions of Section , Florida Statutes, the District reports the number of the full-time equivalent (FTE) students and related data to the Florida Department of Education (FDOE) for funding through the FEFP. Funding for the School is adjusted during the year to reflect the revised calculations by the FDOE under the FEFP and the actual weighted full-time equivalent students reported by the School during the designated full-time equivalent student survey periods. After review and verification of FTE reports and supporting documentation, the FDOE may adj ust subsequent fiscal period allocations of FEFP funding for prior year errors disclosed by its review as well as to prevent statewide allocations from exceeding the amount authorized by the Legislature. Normally, such adjustments are treated as reductions of revenue in the year the adj ustment is made. In addition, the School receives state funds through the District under charter school capital outlay funding pursuant to Section , Florida Statutes. Funds are based on a capital outlay plan submitted to the District and are to be used for lease of school facilities. 19

296 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, Note 1-Summary of Significant Accounting Policies (continued) Finally, the School also receives Federal awards for the enhancement of various educational programs. Federal awards are generally received based on applications submitted to and approved by various granting agencies. For Federal awards in which a claim to these grant proceeds is based on incurring eligible expenditures, revenue is recognized to the extent that eligible expenditures have been incurred. Any excess amounts are recorded as deferred revenues until expended. Additionally, other revenues may be derived from various fundraising activities and certain other programs. Net position and Fund balance classifications Government-wide financial statements Equity is classified as net position and displayed in three (3) components: a) Net investment in capital assets - consists of capital assets net of accumulated depreciation and reduced by the outstanding balances of any borrowings that are attributable to the acquisition or improvement of those assets. b) Restricted net position - consists of net position with constraints placed on their use either by external groups such as creditors, grantors, contributors or laws or regulations of other governments. c) Unrestricted net position - all other net position that do not meet the definition of "restricted" or "net investment in capital assets." Fund financial statements Under GASB Codification Section , Fund Balance Reporting and Governmental Fund Type Definitions. This Statement defines the different types of fund balances that a governmental entity must use for financial reporting purposes. GASB requires the fund balance amounts to be properly reported within one of the fund balance categories list below: a) Nonspendable - includes amounts that cannot be spent because they are either not in spendable form or legally or contractually required to be maintained intact. Consists of fund balance associated with inventories, prepaid expenses, long-term loans and notes receivable, and property held for resale (unless the proceeds are restricted, committed, or assigned). There are no nonspendale balances at year end. b) Restricted - fund balance category includes amounts that can be spent only for the specific purposes stipulated by constitution, external resource providers, or through enabling legislation. Restricted fund balance of the School relate to reserves required by the landlord for property maintenance and repairs. There are no restricted balances at year end. c) Committed - fund balance classification includes amounts that can be used only for the specific purposes determined by a formal action of the School's Board of Directors. There are no committed fund balances at year end. 20

297 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2014 Note 1-Summary of Significant Accounting Policies (continued) d) Assigned - fund balance classification are intended to be used by the School's management for specific purposes but do not meet the criteria to be classified as restricted or committed. There are no assigned fund balances at year end. e) Unassigned - portion of the fund balance that has not been restricted, committed or assigned for a specific purpose. This is the residual classification for the School's general fund. Order of Fund Balance Spending Policy The School's policy is to apply expenditures against non-spendable fund balance, restricted fund balance, committed fund balance, assigned fund balance, and unassigned fund balance at the end of the fiscal year by adjusting journal entries. First Non-spendable fund balances are determined. Then restricted fund balances for specific purposes are determined (not including non-spendable amounts). Then any remaining fund balance amounts for the non-general funds are classified as restricted fund balance. It is possible for the non-general funds to have negative unassigned fund balance when non-spendable amounts plus the restricted fund balances for specific purposes amounts exceed the positive fund balance for the non-general fund. Income Taxes Florida Charter Foundation, Inc. had previously qualified as a tax-exempt organization under Internal Revenue Code Section 501 (c)(3). During the year, the tax-exempt status was revoked for failure to file timely Form 990. Management has applied for re-instatement and fully expect to be approved. Accordingly, no tax provision has been made in the accompanying financial statements. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenditures during the reporting period. Actual results could differ from those estimates. Subsequent Events In accordance with GASB Codification Section , the School has evaluated subsequent events and transactions for potential recognition or disclosure through September 29, 20 14, which is the date the financial statements were available to be issued. 21

298 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2014 Note 2 -Capital Assets The School shares facilities with Franklin Academy E and therefore have no capital assets activity during the year. There was no depreciation expense for the year ended June 30, Note 3 - Deposits and Investments Deposits The School's policy is to maintain its cash and cash equivalents in major banks and in high grade investments. As of June 30, 2014, the carrying amount of the School's deposits was $30,867 and the respective bank balances totaled $34,363. Deposits at FDIC-insured institutions are insured up to $250,000 per depositor, per financial institution. The School is a charter school under Florida Charter Foundation, Inc., which also operates various other charter schools. All bank accounts are opened under the account ownership of Florida Charter Foundation, Inc., therefore, bank balances at times may potentially be in excess of FDIC coverage. As of June 30, 20 14, bank balances in potential excess of FDIC coverage totaled $34,

299 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2014 Note 4 -Management Agreement The School uses Florida Charter Foundation Inc, (the holder of the School's charter) to provides complete administrative and management services to all Franklin Academy schools. These services include but are not limited to: administration of support services (facility maintenance, food service, transportation, etc); governmental compliance reporting; coordination of legal support for school operations; district management/liaison; parent customer service; grant application/management; charter application development/submission/approval; site selection/development; construction project management; school marketing/enrollment management; financing management; and public relations. There is no written agreement with Florida Charter Foundation, Inc. During the year, the School made payments totaling $291,500. In addition, Charter School Services Corporation, Inc., a professional charter school management company, provides accounting and human resources management services to the School including, but not limited to, regulatory compliance, maintenance of the books and records, bookkeeping, budgeting and financial reporting. The agreement between the School and the management company calls for a fee of $100 per full time equivalent (FTE) student per year up to 1,500 students with a reduction of $10 per student for every additional 500 students. The agreement can be terminated at any time by the board with 30 day notice. During the year ended June 30, 20 14, the School incurred approximately $36,859 in management fees. Charter School Services Corporation, Inc. is located at 1225 SE 2n d Avenue, Fort Lauderdale, Florida, Note 5 -Related Party Transactions The School shares its campus with Franklin Academy E, another charter school under Florida Charter Foundation, Inc. Certain funding provided to the School is shared by the two schools. In addition, certain costs are allocated to each school using a logical basis such as the ratio of FTE for each school. At June 30, 20 14, the School had a payable of $100,709 to the other charter school. Pursuant to the Charter School contract with the School District, the District withholds an administrative fee of 5% (or 2o/o for high performing schools) of the qualifying revenues of the School. For the year ended June 30, 2014, net administrative fees withheld by the School District totaled $71,

300 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, Note 6 -Commitments and Contingencies The School entered into a lease and development agreement with CA Cooper City SFR, LLC for its main campus facility. This facility is shared with Franklin Academy E, another charter school under Florida Charter Foundation, Inc. Initial fixed annual payments under this agreement are approximately $740,000 adjusted annually based on the lease schedule, plus additional property expenses including repairs, maintenance and insurance. The agreement continues through June 2042 with an option to renew for up to two additional ten year periods. Lease payments are allocated among the two schools based on FTE. The allocation used for 2014, was approximately 33o/o for the School and 67o/o for Franklin Academy E. For 2014, rent expense for the School totaled $201,814. Future minimum payments for the full lease (shared with Franklin Academy E) are as follows: Year $ 971, $ 1,202, $ 1,304, $ 1,73 1, $ 1,950, $ 10,536,600 (total for five year period) $ 11,776,542 (total for five year period) $ 13,162,374 (total for five year period) $ 14,711,284 (total for five year period) $ 9,645,208 (total for three year period) Contingencies The School receives substantially all of its funding from the District under the Florida Education Finance Program (FEFP), which is based in part on a computation of the number of full-time equivalent (FTE) students attending different instructional programs. The accuracy of FTE student data submitted by individual schools and used in the FEFP computations is subj ect to audit by the state and, if found to be in error, could result in refunds to the state or in decreases to future funding allocations. Additionally, the School participates in a number of federal, state and local grants which are subj ect to financial and compliance audits. It is the opinion of management that the amount of revenue, if any, which may be remitted back to the state due to errors in the FTE student data or the amount of grant expenditures which niay be disallowed by grantor agencies would not be material to the financial position of the School. The School participates in a number of Federal and State grant programs which are subj ect to audit in accordance with Office of Management and Budget Circular A-133 "Audits of States, Local Governments, and Non-Profit Organizations". The School expects such expenditures, if any, which may be disallowed by the granting agencies to be immaterial. 24

301 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) Notes to Financial Statements June 30, 2014 Note 7 - Risk Management The School is exposed to various risks of loss related to torts, thefts of, damage to and destruction of assets, errors and omissions and natural disasters for which the School carries commercial insurance. Settlement amounts have not exceeded insurance coverage for the past years. In addition, there were no reductions in insurance coverage from those in the prior year. Note 8 -Defined Contribution Retirement Plan The School's personnel are eligible to participate in a defined contribution 401 (k) plan covering employees who meet certain age and tenure requirements. Under the Plan, the School provides a match of 2.5% of the employee's compensation. The School contributed to the Plan $14,218 for the year ended June 30, The School does not exercise any control or fiduciary responsibility over the Plan's assets 25

302 REQUIRED SUPPLEMENTARY INFORMATION

303 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) Statement of Revenues, Expenditures, and Changes in Fund Balance For the year ended June 30, REVENUES General Fund Original Budget Final Budget Actual State passed through local $ 2,565,628 $ 2,500,000 $ 2,555,658 Charges and other revenue 15,385 Total Revenues 2,581,013 2,500,000 2,555,658 EXPENDITURES Current: Instruction 1,453,240 1,350,000 1,338,489 General administration School Administration 214, , ,480 Fiscal Services 310, , ,602 Central Services 76,000 75,237 Operation of Plant 580, , ,294 Maintenance of Plant 15, ,000 25,868 Total Current Expenditures 2,574,418 2,483,650 2,469,583 Excess of Revenues Over Current Expenditures 6,595 16,350 86,075 Debt Service : Redemption of Principal Capital Outlay Total Expenditures 2,574,418 2,483,650 2,469,583 Excess of Revenues Over Expenditures 6,595 16,350 86,075 Other financing sources (uses): Transfers in (out) LIT receivable from Florida Charter Foundation (186,223) L/T advances from other schools, net Net change in fund balance 6,595 (169,873) 86,075 Fund Balance at beginning of year Fund Balance at end of year $ 6,595 $ (169,873) $ 86,075 Notes to Budgetary Com arison Schedule An annual budget is adopted on the modified accrual basis of accounting, consistent with generally accepted accounting principles. Amendments to the budget can only be made with the approval of the Board of Directors. 26

304 Franklin Academy F (A charter school under Florida Charter Foundation, Inc.) Statement of Revenues, Expenditures, and Changes in Fund Balance For the year ended June 30, REVENUES Special Revenue Fund Original Budget Final Budget Actual Federal sources $ $ 54,028 $ 54,028 Lunch program 36,293 36,293 Total Revenues 90,321 90,321 EXPENDITURES Current: Food services 90,321 90,321 Total Current Expenditures 90,321 90,321 Excess of Revenues Over Current Expenditures Capital Outlay Total Expenditures 90,321 90,321 Excess of Revenues Over Expenditures Other financing sources (uses) Transfers in (out) Net change in fund balance Fund Balance at beginning of year Fund Balance at end of year $ $ $ Notes to Budgetary Comparison Schedule An annual budget is adopted on the modified accrual basis of accounting, consistent with generally accepted accounting principles. Amendments to the budget can only be made with the approval of the Board of Directors. 27