Casa Blanca Community School, Inc. Single Audit Reporting Package. Year Ended June 30, 2017

Transcription

1 Casa Blanca Community School, Inc. Single Audit Reporting Package Year Ended June 30, 2017

2 Casa Blanca Community School, Inc. Single Audit Reporting Package Year Ended June 30, 2017 Issued by: Business Services Department

3 CONTENTS Page INDEPENDENT AUDITOR S REPORT 1 MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) 5 BASIC FINANCIAL STATEMENTS Government-wide Financial Statements: Statement of Net Position 16 Statement of Activities 17 Fund Financial Statements: Balance Sheet Governmental Funds 20 Reconciliation of the Balance Sheet Governmental Funds to the Statement of Net Position 21 Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds 22 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds to the Statement of Activities 23 Statement of Net Position Proprietary Funds 24 Statement of Revenues, Expenses and Changes in Fund Net Position Proprietary Funds 25 Statement of Cash Flows Proprietary Funds 26 Notes to Financial Statements 27 REQUIRED SUPPLEMENTARY INFORMATION Schedule of Revenues Expenditures and Changes in Fund Balances Budget and Actual: General Fund 40 Note to Required Supplementary Information 41

4 CONTENTS Page SINGLE AUDIT SECTION 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 45 Report on Compliance for Each Major Federal Program; Report on Internal Control Over Compliance; and Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance 47 Schedule of Expenditures of Federal Awards 50 Notes to Schedule of Expenditures of Federal Awards 51 Schedule of Findings and Questioned Costs 52 Auditee Response Cover Letter 58 Corrective Action Plan 59 Summary Schedule of Prior Audit Findings 61

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6 REPORT ON AUDIT OF FINANCIAL STATEMENTS

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8 INDEPENDENT AUDITOR S REPORT The Board of Trustees Casa Blanca Community School, Inc. Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the major fund, and the aggregate remaining fund information of Casa Blanca Community School, Inc. (School), as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise 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. 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. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Casa Blanca Community School, Inc., as of June 30, 2017, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Page 1

9 Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management s Discussion and Analysis, budgetary comparison information, and net pension liability information, as listed in the table of contents, 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. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 16, 2018, on our consideration of Casa Blanca Community School, Inc. s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of 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 in considering Casa Blanca Community School, Inc. s internal control over financial reporting and compliance. Heinfeld, Meech & Co., P.C. Phoenix, Arizona March 16, 2018 Page 2

10 Page 3 MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) (Required Supplementary Information)

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12 MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2017 As management of the Casa Blanca Community School, Inc. (School), we offer readers of the School s financial statements this narrative overview and analysis of the financial activities of the School for the fiscal year ended June 30, The management s discussion and analysis is presented as required supplementary information to supplement the basic financial statements. FINANCIAL HIGHLIGHTS The School s total net position of governmental activities decreased $308,106 which represents a 12 percent decrease from the prior fiscal year as a result of the utilization of prior year carryover balances. General revenues accounted for $3.5 million in revenue, or 68 percent of all current fiscal year revenues. Program specific revenue in the form of charges for services and grants and contributions accounted for $1.6 million or 32 percent of total current fiscal year revenues. The School had approximately $5.4 million in expenses related to governmental activities, a decrease of two percent from the prior fiscal year. The General Fund had $5.1 million in current fiscal year revenues, which primarily consisted of federal aid and $5.4 million in expenditures. The General Fund s fund balance decreased $215,970 to $809,663 at the end of the current fiscal year. Net position for the Internal Service Fund increased $106,786 from the prior fiscal year. Operating revenues of $488,903 exceeded operating expenses of $382,117 at the end of the current fiscal year. OVERVIEW OF FINANCIAL STATEMENTS This discussion and analysis are intended to serve as an introduction to the School s basic financial statements. The School s basic financial statements comprise three components: 1) governmentwide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other 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 accrual basis of accounting is used for the government-wide financial statements. Page 5

13 MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2017 OVERVIEW OF FINANCIAL STATEMENTS The statement of net position presents information on all of the School s assets, liabilities, and deferred inflows/outflows of resources with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the School is improving or deteriorating. The statement of activities presents information showing how the School s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., earned but unused compensated absences). The government-wide financial statements outline functions of the School that are principally supported by property taxes and intergovernmental revenues. The governmental activities of the School include instruction, support services, operation and maintenance of plant services, student transportation services, and operation of non-instructional services. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The School uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the School can be divided into two categories: governmental funds and proprietary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements use the modified accrual basis of accounting and focus on near-term inflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating the School s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the School s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. Page 6

14 MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2017 OVERVIEW OF FINANCIAL STATEMENTS Proprietary fund. The School maintains one type of proprietary fund. The internal service fund is an accounting device used to accumulate and allocate costs internally among the School s various functions. The School uses its internal service fund to account for its employee benefit trust. Because this service predominantly benefits governmental functions, it has been included within governmental activities in the government-wide financial statements. The Employee Benefit Trust, although a legally separate component unit, functions for all employees of the School, and therefore has been included as an internal service fund. Notes to the financial statements. The notes 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 immediately following the basic financial statements. Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the School s budget process and pension plan. The School adopts an annual expenditure budget for all governmental funds. A schedule of revenues, expenditures and changes in fund balances budget and actual has been provided for the General Fund as required supplementary information. GOVERNMENT-WIDE FINANCIAL ANALYSIS Net position may serve over time as a useful indicator of a government s financial position. In the case of the School, assets exceeded liabilities by $2.3 million at the current fiscal year end. The largest portion of the School s net position reflects its investment in capital assets (e.g., land and improvements, buildings and improvements, vehicles, furniture and equipment and construction in progress), less any related outstanding debt used to acquire those assets. The School uses these capital assets to provide services to its students; consequently, these assets are not available for future spending. The School had no related debt. In addition, a portion of the School s net position represents resources that are subject to external restrictions on how they may be used. The remaining balance is unrestricted and may be used to meet the School s ongoing obligations to its citizens and creditors. Page 7

15 MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2017 GOVERNMENT-WIDE FINANCIAL ANALYSIS The following table presents a summary of the School s net position for the fiscal years ended June 30, 2017 and June 30, As of June 30, 2017 As of June 30, 2016 Current and other assets $ 1,347,149 $ 1,639,277 Capital assets, net 1,210,808 1,422,179 Total assets 2,557,957 3,061,456 Current and other liabilities 207, ,803 Long-term liabilities 28,912 41,361 Total liabilities 236, ,164 Net position: Net investment in capital assets 1,210,808 1,422,179 Restricted 1,159,458 1,436,156 Unrestricted (49,080) (229,043) Total net position $ 2,321,186 $ 2,629,292 At the end of the current fiscal year the School reported positive balances in two categories of net position. Unrestricted net position, which is normally used to meet the School s mission reported a deficit of $49,080. The same situation held true for the prior fiscal year. The School s financial position is the product of several financial transactions including the net result of activities, the acquisition and payment of debt, the acquisition and disposal of capital assets, and the depreciation of capital assets. The following are significant current year transactions that had an impact on the Statement of Net Position. Accumulated depreciation increased $272,150. Cash and investments decreased $687,901 due to the utilization of prior year carryover balances. Page 8

16 MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2017 GOVERNMENT-WIDE FINANCIAL ANALYSIS Changes in net position. The School s total revenues for the current fiscal year were $5.1 million. The total cost of all programs and services was $5.4 million. The following table presents a summary of the changes in net position for the fiscal years ended June 30, 2017 and June 30, Fiscal Year Ended June 30, 2017 Fiscal Year Ended June 30, 2016 Revenues: Program revenues: Charges for services $ 10,767 $ 11,113 Operating grants and contributions 1,429,062 1,711,772 Capital grants and contributions 189,836 68,819 General revenues: Unrestricted federal aid 3,505,077 3,577,003 Total revenues 5,134,742 5,368,707 Expenses: Instruction 3,044,214 3,132,878 Support services students and staff 325, ,305 Support services administration 840, ,769 Operation and maintenance of plant services 531, ,565 Student transportation services 397, ,674 Operation of non-instructional services 302, ,122 Total expenses 5,442,848 5,550,313 Changes in net position (308,106) (181,606) Net position, beginning 2,629,292 2,810,898 Net position, ending $ 2,321,186 $ 2,629,292 Page 9

17 MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2017 GOVERNMENT-WIDE FINANCIAL ANALYSIS Student transportation services 7% Expenses - Fiscal Year 2017 Operation of noninstructional services 6% Operation and maintenance of plant services 10% Support services - administration 15% Instruction 56% Support services - students and staff 6% The following are significant current year transactions that had an impact on the change in net position. The increase in administrative expenses of $119,087 is primarily due to the hiring of an administrative assistant for Human Resources. The decrease in operating grants and contributions of $282,710 is primarily due to a decrease in special education funding. The following table presents the cost of the School s major functional activities. The table also shows each function s net cost (total cost less charges for services generated by the activities and intergovernmental aid provided for specific programs). The net cost shows the financial burden that was placed on the State and School s taxpayers by each of these functions. Page 10

18 MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2017 GOVERNMENT-WIDE FINANCIAL ANALYSIS Year Ended June 30, 2017 Year Ended June 30, 2016 Total Expenses Net (Expense)/ Revenue Total Expenses Net (Expense)/ Revenue Instruction $ 3,044,214 $ (1,957,848) $ 3,132,878 $ (1,866,581) Support services students and staff 325,853 (29,070) 362,305 (60,669) Support services administration 840,856 (840,856) 721,769 (721,769) Operation and maintenance of plant services 531,652 (531,652) 588,565 (588,565) Student transportation services 397,715 (366,061) 437,674 (413,980) Operation of non-instructional services 302,558 (87,696) 307,122 (107,045) Total $ 5,442,848 $ (3,813,183) $ 5,550,313 $ (3,758,609) The cost of all governmental activities this year was $5.4 million. Federal and State governments and charges for services subsidized certain programs with grants and contributions and other local revenues of $1.6 million. Net cost of governmental activities of $3.8 million was financed by general revenues, which are made up of primarily federal aid of $3.5 million. FINANCIAL ANALYSIS OF THE SCHOOL S FUNDS 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, unassigned fund balance may serve as a useful measure of the School s net resources available for spending at the end of the fiscal year. The financial performance of the School as a whole is reflected in its governmental funds. The General Fund is the principal operating fund of the School. The fund balance decreased $215,970 in the General Fund to $809,663 as of fiscal year end due primarily to the utilization of prior year carryover balances. General Fund revenues decreased $233,965. General Fund expenditures decreased $484,919. This was primarily a result of the completion of a water line project in the prior year. Proprietary fund. Unrestricted net position of the Internal Service Fund at the end of the fiscal year amounted to $329,627. The increase of $106,786 from the prior fiscal year was primarily due to contribution revenues exceeding expenses. Page 11

19 MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2017 BUDGETARY HIGHLIGHTS A schedule showing the original and final budget amounts compared to the School s actual financial activity for the General Fund is provided in this report as required supplementary information. There were no significant variances. CAPITAL ASSETS ADMINISTRATION Capital Assets. At year end, the School had invested $2.5 million in capital assets, including school improvements, vehicles, computers, and other equipment. This amount represents a net increase prior to depreciation of $39,941 from the prior fiscal year. Total depreciation expense for the current fiscal year was $272,150. The following schedule presents a summary of capital asset balances for the fiscal years ended June 30, 2017 and June 30, As of June 30, 2017 As of June 30, 2016 Capital assets depreciable, net $ 1,210,808 1,422,179 Total $ 1,210,808 $ 1,422,179 Additional information on the School s capital assets can be found in Note 5. ECONOMIC FACTORS AND NEXT YEAR S BUDGET AND RATES Budgeted expenditures increased 16 percent to $6.3 million in fiscal year due to increased spending related to the School s special education grant. Federal grants and contracts are expected to be the primary funding sources. No new programs were added to the budget. CONTACTING THE SCHOOL S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, and investors and creditors with a general overview of the School s finances and to demonstrate the School s accountability for the resources it receives. If you have questions about this report or need additional information, contact the Business Services Department, Casa Blanca School, 3455 W. Casa Blanca Rd., Bapchule, Arizona Page 12

20 Page 13 BASIC FINANCIAL STATEMENTS

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22 Page 15 GOVERNMENT-WIDE FINANCIAL STATEMENTS

23 STATEMENT OF NET POSITION JUNE 30, 2017 ASSETS Current assets: Cash and investments Accounts receivable Due from governmental entities Total current assets Noncurrent assets: Capital assets, net of accumulated depreciation Total noncurrent assets Total assets LIABILITIES Current liabilities: Accounts payable Claims payable Compensated absences payable Total current liabilities Noncurrent liabilities: Non-current portion of long-term obligations Total noncurrent liabilities Total liabilities NET POSITION Net investment in capital assets Restricted for: Federal projects Food service Unrestricted Total net position Governmental Activities $ 932,993 20, ,852 1,347,149 1,210,808 1,210,808 2,557, ,099 26,760 4, ,154 24,617 24, ,771 1,210,808 1,079,373 80,085 (49,080) $ 2,321,186 The notes to the basic financial statements are an integral part of this statement. Page 16

24 STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2017 Program Revenues Net (Expense) Revenue and Changes in Net Position Functions/Programs Governmental activities: Instruction Support services - students and staff Support services - administration Operation and maintenance of plant services Student transportation services Operation of non-instructional services Total governmental activities Expenses $ 3,044, , , , , ,558 $ 5,442,848 Charges for Services $ 7,882 2,885 $ 10,767 Operating Grants and Contributions $ 888, ,783 31, ,977 $ 1,429,062 Capital Grants and Contributions $ 189,836 $ 189,836 Governmental Activities $ (1,957,848) (29,070) (840,856) (531,652) (366,061) (87,696) (3,813,183) General revenues: Unrestricted federal aid Total general revenues Changes in net position Net position, beginning of year Net position, end of year 3,505,077 3,505,077 (308,106) 2,629,292 $ 2,321,186 The notes to the basic financial statements are an integral part of this statement. Page 17

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26 Page 19 FUND FINANCIAL STATEMENTS

27 BALANCE SHEET - GOVERNMENTAL FUNDS JUNE 30, 2017 ASSETS Cash and investments Due from governmental entities Total assets General $ 596, ,852 $ 990,762 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Total liabilities Fund balances (deficits): Restricted Unassigned Total fund balances Total liabilities and fund balances $ 181, ,099 1,159,458 (349,795) 809,663 $ 990,762 The notes to the basic financial statements are an integral part of this statement. Page 20

28 RECONCILIATION OF THE BALANCE SHEET - GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION JUNE 30, 2017 Total governmental fund balances $ 809,663 Amounts reported for governmental activities in the Statement of Net Position are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. Governmental capital assets $ 2,462,533 Less accumulated depreciation (1,251,725) 1,210,808 The Internal Service Fund is used by management to charge the cost of insurance to the individual funds. The assets and liabilities of the Internal Service Fund are included in the Statement of Net Position. 329,627 Compensated absences payable are not due and payable in the current period and, therefore, are not reported in the funds. (28,912) Net position of governmental activities $ 2,321,186 The notes to the basic financial statements are an integral part of this statement. Page 21

29 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2017 Revenues: Other local Federal aid, grants and reimbursements Total revenues Expenditures: Current - Instruction Support services - students and staff Support services - administration Operation and maintenance of plant services Student transportation services Operation of non-instructional services Capital outlay Total expenditures Changes in fund balances Fund balances, beginning of year Fund balances, end of year General $ 274,870 4,859,872 5,134,742 2,796, , , , , , ,243 5,350,712 (215,970) 1,025,633 $ 809,663 The notes to the basic financial statements are an integral part of this statement. Page 22

30 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2017 Net changes in fund balances - total governmental funds $ (215,970) Amounts reported for governmental activities in the Statement of Activities are different because: Governmental funds report the portion of capital outlay for capitalized assets as expenditures. However, in the Statement of Activities, the costs of those assets are allocated over their estimated useful lives as depreciation expense. Expenditures for capitalized assets $ 62,771 Less current year depreciation (272,150) (209,379) Some expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Loss on disposal of assets (1,992) Compensated absences 12,449 10,457 The Internal Service Fund is used by management to charge the cost of insurance to the individual funds. The changes in net position of the Internal Service Fund is reported with governmental activities in the Statement of Activities. 106,786 Changes in net position in governmental activities $ (308,106) The notes to the basic financial statements are an integral part of this statement. Page 23

31 STATEMENT OF NET POSITION PROPRIETARY FUNDS JUNE 30, 2017 ASSETS Current assets: Cash and investments Accounts receivable Total current assets Total assets LIABILITIES Current liabilities: Claims payable Total current liabilities Total liabilities NET POSITION Unrestricted Total net position Governmental Activities: Internal Service Funds $ 336,083 20, , ,387 26,760 26,760 26, ,627 $ 329,627 The notes to the basic financial statements are an integral part of this statement. Page 24

32 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION - PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2017 Operating revenues: Contributions Total operating revenues Operating expenses: Claims Premium Administrative fees Total operating expenses Operating income (loss) Changes in net position Total net position, beginning of year Total net position, end of year Governmental Activities: Internal Service Funds $ 488, , , ,258 17, , , , ,841 $ 329,627 The notes to the basic financial statements are an integral part of this statement. Page 25

33 STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS YEAR ENDED JUNE 30, 2017 Increase in Cash and Cash Equivalents Governmental Activities: Internal Service Funds Cash flows from operating activities: Cash received from contributions $ 488,903 Cash payments to suppliers for goods and services (203,546) Cash payments for claims (205,040) Net cash provided by operating activities 80,317 Net increase in cash and cash equivalents 80,317 Cash and cash equivalents, beginning of year 255,766 Cash and cash equivalents, end of year $ 336,083 Reconciliation of Operating income to Net Cash Provided by Operating Activities Operating income $ 106,786 Adjustment to reconcile operating income to net cash provided by operating activities: Changes in assets and liabilities: (Increase) decrease in stop loss receivable (20,304) Increase (decrease) in claims payable (6,165) Total adjustments (26,469) Net cash provided by operating activities $ 80,317 Page 26 The notes to the basic financial statements are an integral part of this statement.

34 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the Casa Blanca Community School, Inc. (School) have been prepared in conformity with accounting principles generally accepted in the United States of America as applied to government units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The more significant of the School s accounting policies are described below. A. Reporting Entity Casa Blanca Community School, Inc. is a Tribally Controlled Grant School as authorized by Public Law The membership of the Board of Trustees consists of five elected members. The Board also has broad financial responsibilities, including the approval of the annual budget, and the establishment of a system of accounting and budgetary controls. The financial reporting entity consists of a primary government and its component units. A component unit is a legally separate entity that must be included in the reporting entity in conformity with generally accepted accounting principles. The School is a primary government because it is a special-purpose government that has a separately elected governing body, is legally separate, and is fiscally independent of other state or local governments. Furthermore, component units combined with the School for financial statement presentation purposes, and the School, are not included in any other governmental reporting entity. Consequently, the School s financial statements include only the funds of those organizational entities for which its elected governing board is financially accountable. The School s major operations include education, student transportation, construction and maintenance of School facilities and food services. Blended Component Unit Blended component units, although legally separate entities, are, in substance, part of the School s operations. The Casa Blanca Community School, Inc. Employee Benefit Trust is responsible for providing health insurance for the School employees. The School s Board of Trustees is also the Trust s Board of Trustees. The Casa Blanca Community School, Inc. Employee Benefit Trust provides services entirely to the School and therefore has been included as an Internal Service Fund in accordance with the criteria established by GASB. Page 27

35 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES B. Government-Wide and Fund Financial Statements The government-wide financial statements (i.e., the statement of net position and the statement of activities) present financial information about the School as a whole. The reported information includes all of the nonfiduciary activities of the School and its component unit. For the most part, the effect of internal activity has been removed from these statements. These statements are to distinguish between the governmental and business-type activities of the School. Governmental activities normally are supported by taxes and intergovernmental revenues, and are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The School does not have any business-type activities. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Unrestricted federal aid and other items not included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds and proprietary funds. The School s major governmental fund is the General Fund and is reported as a separate column in the fund financial statements. C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation Government-Wide Financial Statements The government-wide financial statements are reported using the economic resources measurement focus and the 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. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the grantor or provider have been met. As a general rule, the effect of internal activity has been eliminated from the governmentwide financial statements; however, the effects of interfund services provided and used between functions are reported as expenses and program revenues at amounts approximating their external exchange value. Page 28

36 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Fund Financial Statements Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the School considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. Compensated absences are recorded only when payment is due. Federal aid and investment income associated with the current fiscal period are all considered to be susceptible to accrual and have been recognized as revenues of the current fiscal period. Food services and miscellaneous revenues are not susceptible to accrual because generally they are not measurable until received in cash. Grants and similar awards are recognized as revenue as soon as all eligibility requirements imposed by the grantor or provider have been met. Unearned revenues arise when resources are received by the School before it has legal claim to them, as when grant monies are received prior to meeting all eligibility requirements imposed by the provider. Receivables that will not be collected within the available period have been reported as unavailable revenues on the governmental fund financial statements. The focus of governmental fund financial statements is on major funds rather than reporting funds by type. The major fund is presented in a separate column. The internal service fund is presented in a single column on the face of the proprietary fund statements. The School reports the following major governmental fund: General Fund The General Fund is the School s primary operating fund. It accounts for all resources used to finance School maintenance and operation except those required to be accounted for in other funds. The School utilizes only the General Fund. Additionally, the School reports the following fund type: Proprietary Fund The Proprietary Fund is an Internal Service Fund that accounts for activities related to the School s self-insurance program. Page 29

37 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Proprietary Fund financial statements are reported using the economic resources measurement focus and accrual basis of accounting and are presented in a single column. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund s principal ongoing operations. The principal operating revenues of the School s internal service funds are charges for health and welfare benefits and charges to School departments for goods and services. Operating expenses for internal service funds include the cost of goods and services and administrative expenses. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. D. Cash and Investments For purposes of the Statement of Cash Flows, the School considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents at year end were cash in bank. E. Investment Income Investment income is composed of interest, dividends, and net changes in the fair value of applicable investments. Investment income is included in other local revenue in the governmental fund financial statements and in nonoperating revenues in the proprietary fund financial statements. F. Receivables and Payables All receivables are shown net of an allowance for uncollectibles. G. Prepaid Items Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both the government-wide and fund financial statements. Prepaid items are recorded as expenses when consumed in the government-wide financial statements and as expenditures when purchased in the fund financial statements. H. Capital Assets Capital assets, which include land and improvements; buildings and improvements; vehicles, furniture, and equipment; and construction in progress, are reported in the government-wide financial statements. Page 30

38 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Capital assets are defined by the School as assets with an initial, individual cost in excess of $5,000 and an estimated useful life of more than one year. Capital assets are recorded at historical cost if purchased or constructed. Donated capital assets are recorded at acquisition value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend the life of the asset are not capitalized. Capital assets are depreciated using the straight-line method over the following estimated useful lives: Land and improvements Buildings and improvements Vehicles, furniture and equipment 5 20 years 5 50 years 5 30 years I. Deferred Outflows/Inflows of Resources In addition to assets, the statement of financial position may report a separate section for 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 did not have any items that qualified for reporting in this category. In addition to liabilities, the statement of financial position may 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 did not have any items that qualified for reporting in this category. J. Compensated Absences The School s employee vacation and sick leave policies generally provide for granting vacation and sick leave with pay in varying amounts. Only benefits considered vested are recognized in the financial statements. The liability for vacation and sick leave is reported in the government-wide financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee leave, resignations and retirements. Generally, resources from the General Fund are used to pay for compensated absences. K. Long-term Obligations In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities on the statement of net position. Page 31

39 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES L. Net Position Flow Assumption In the government-wide and proprietary fund financial statements the School applies restricted resources first when outlays are incurred for purposes for which either restricted or unrestricted amounts are available. M. Estimates The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. NOTE 2 FUND BALANCE CLASSIFICATIONS Fund balances of the governmental funds are reported separately within classifications based on a hierarchy of the constraints placed on the use of those resources. The classifications are based on the relative strength of the constraints that control how the specific amounts can be spent. The classifications are nonspendable, restricted, and unrestricted, which includes committed, assigned, and unassigned fund balance classifications. Nonspendable. The nonspendable fund balance classification includes amounts that cannot be spent because they are not in spendable form, or are legally or contractually required to be maintained intact. Restricted. Fund balance is reported as restricted when constraints placed on the use of resources are either externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments or is imposed by law through constitutional provisions or enabling legislation. Committed. The committed fund balance classification includes amounts that can be used only for the specific purposes imposed by formal action of the Board of Trustees. Those committed amounts cannot be used for any other purpose unless the Board of Trustees removes or changes the specified use by taking the same type of action it employed to previously commit those amounts. The School does not have a formal policy or procedures for the utilization of committed fund balance, accordingly, no committed fund balance amounts are reported. Page 32

40 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 2 FUND BALANCE CLASSIFICATIONS Assigned. Amounts in the assigned fund balance classification are intended to be used by the School for specific purposes but do not meet the criteria to be classified as restricted or committed. In governmental funds other than the General Fund, assigned fund balance represents the remaining amount that is not restricted or committed. In the General Fund, assigned amounts represent intended uses established by the Board of Trustees or a management official delegated that authority by the formal Board of Trustees action. The School does not have a formal policy or procedures for the utilization of assigned fund balance, accordingly, no assigned fund balance amounts are reported. Unassigned. Unassigned fund balance is the residual classification for the General Fund and includes all spendable amounts not contained in the other classifications. In other governmental funds, the unassigned classification is used only to report a deficit balance resulting from overspending for specific purposes for which amounts had been restricted, committed, or assigned. The School applies restricted resources first when outlays are incurred for purposes for which either restricted or unrestricted (committed, assigned, and unassigned) amounts are available. Similarly, within unrestricted fund balance, committed amounts are reduced first followed by assigned, and then unassigned amounts when expenditures are incurred for purposes for which amounts in any of the unrestricted fund balance classifications could be used. The table below provides detail of the major components of the School s fund balance classifications at year end. General Fund Fund Balances: Restricted: Federal projects $ 1,079,373 Food service 80,085 Unassigned (349,795) Total fund balances $ 809,663 Page 33

41 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 3 CASH AND INVESTMENTS Custodial Credit Risk Deposits. Custodial credit risk is the risk that in the event of bank failure the School s deposits may not be returned to the School. The School does not have a deposit policy for custodial credit risk. At year end, the carrying amount of the School s deposits was $596,910 and the bank balance was $686,153. At year end, $183,728 of the School s deposits were covered by collateral held by the pledging financial institution s trust department or agent but not in the School s name. Additionally, the School had $336,083 of cash held by a fiscal agent. Fair Value Measurements. The District categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets Level 2 inputs are significant other observable inputs Level 3 inputs are significant unobservable inputs Interest Rate Risk. The School does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. NOTE 4 RECEIVABLES Receivable balances, net of allowance for uncollectibles, have been disaggregated by type and presented separately in the financial statements with the exception of due from governmental entities. Due from governmental entities, net of allowance for uncollectibles, as of year end for the School s major fund was as follows: General Fund Due from other governmental entities: Due from federal government $ 393,852 Net due from governmental entities $ 393,852 Page 34

42 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 5 CAPITAL ASSETS A summary of capital asset activity for the current fiscal year follows: Beginning Balance (as restated) Increase Decrease Ending Balance Governmental Activities Capital assets, being depreciated: Land improvements $ 1,112,734 $ 20,508 $ $ 1,133,242 Buildings and improvements 252,918 42, ,181 Vehicles, furniture and equipment 1,056,940 22,830 1,034,110 Total capital assets being depreciated 2,422,592 62,771 22,830 2,462,533 Less accumulated depreciation for: Land improvements (297,186) (151,281) (448,467) Buildings and improvements (46,966) (31,822) (78,788) Vehicles, furniture and equipment (656,261) (89,047) (20,838) (724,470) Total accumulated depreciation (1,000,413) (272,150) (20,838) (1,251,725) Total capital assets, being depreciated, net 1,422,179 (209,379) 1,992 1,210,808 Governmental activities capital assets, net $ 1,422,179 $ (209,379) $ 1,992 $ 1,210,808 Depreciation expense was charged to governmental functions as follows: Instruction $ 159,827 Support services administration 403 Operation and maintenance of plant services 98,171 Student transportation services 11,172 Operation of non-instructional services 2,577 Total depreciation expense governmental activities $ 272,150 The July 1, 2016 balance was restated $414,584 in both assets and related depreciation for assets fully depreciated removed from the prior year balance improperly. NOTE 6 OBLIGATIONS UNDER OPERATING LEASES The School leases buses and another vehicle under the provisions of a long-term lease agreement classified as an operating lease for accounting purposes. Rental expenditures under the terms of the operating lease totaled $112,139 for the current fiscal year. Page 35

43 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 7 CHANGES IN LONG-TERM LIABILITIES Long-term liability activity for the current fiscal year was as follows: Beginning Balance Additions Reductions Ending Balance Due Within One Year Governmental activities: Compensated absences payable $ 41,361 $ 41,254 $ 53,703 $ 28,912 $ 4,295 Governmental activity long-term liabilities $ 41,361 $ 41,254 $ 53,703 $ 28,912 $ 4,295 NOTE 8 CONTINGENT LIABILITIES Compliance Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies, principally the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures/expenses that may be disallowed by the grantor cannot be determined at this time, although the School expects such amounts, if any, to be immaterial. NOTE 9 ECONOMIC DEPENDENCY The School s revenue sources are based primarily on federal financial assistance subject to availability of funds and the School s compliance with federal rules and regulations. NOTE 10 RISK MANAGEMENT The School is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The School carries commercial insurance for all risks of loss, including property and liability, workers compensation and employee health and accident insurance. Settled claims resulting from these risks have not exceeded commercial insurance coverage in any of the past three fiscal years. The School established an Employee Benefit Trust Fund (an Internal Service Fund) to account for and finance its uninsured risks of loss related to employee health claims. Under this program, the Fund provides coverage for up to a maximum of $30,000. The Fund purchases commercial insurance for claims in excess of this coverage. Page 36

44 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 10 RISK MANAGEMENT Liabilities of the fund are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. Liabilities include an amount for claims that have been incurred but not reported (IBNRs). The result of the process to estimate the claims liability is not an exact amount as it depends on many complex factors, such as inflation, changes in legal doctrines, and damage awards. Accordingly, claims are reevaluated periodically to consider the effects of inflation, recent claim settlement trends (including frequency and amount of payouts), and other economic and social factors. The estimate of the claims liability also includes amounts for incremental claim adjustment expenses related to specific claims and other claim adjustment expenses regardless of whether allocated to specific claims. Estimated recoveries, for example from salvage or subrogation, are another component of the claims liability estimate. Changes in the balances of claims liabilities during the past two years are as follows: Claims Payable Beginning of Year Current Year Claims and Changes in Estimates Claim Payments Claims Payable at End of Year Employment Insurance $ 32,925 $ 198,875 $ 205,040 $ 26, , , ,573 32,925 NOTE 11 RETIREMENT PLAN The School contributes to the Casa Blanca Community School s Retirement Plan, a selfadministered defined contribution plan. The retirement plan is subject to the provisions of the Employee Retirement Income Securities Act of 1974 (ERISA). Coverage under the retirement plan requires at least 12 months of services by the employee. Employees do not contribute to the retirement plan. All contributions are invested by a Trustee. The total contributions by the School for the fiscal year end were $116,815. Page 37

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47 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL YEAR ENDED JUNE 30, 2017 Revenues: Other local Federal aid, grants and reimbursements Total revenues Budgeted Amounts Original & Final $ 264,103 4,730,629 4,994,732 Actual $ 274,870 4,859,872 5,134,742 Variance with Final Budget Positive (Negative) $ 10, , ,010 Expenditures: Current - Instruction Support services - students and staff Support services - administration Operation and maintenance of plant services Student transportation services Operation of non-instructional services Capital outlay Total expenditures 2,850, , , , , , ,445 5,446,702 2,796, , , , , , ,243 5,350,712 54,233 6,405 16,731 7,594 7,603 (1,778) 5,202 95,990 Changes in fund balances (451,970) (215,970) 236,000 Fund balances, beginning of year 1,025,633 1,025,633 Fund balances (deficits), end of year $ (451,970) $ 809,663 $ 1,261,633 See accompanying notes to this schedule. Page 40

48 NOTES TO REQUIRED SUPPLEMENTARY INFORMATION JUNE 30, 2017 NOTE 1 BUDGETARY BASIS OF ACCOUNTING The School budget is prepared on a basis consistent with accounting principles generally accepted in the United States of America. Page 41

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52 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 The Board of Trustees Casa Blanca Community School, Inc. Independent Auditor s Report 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, the major fund, and the aggregate remaining fund information of Casa Blanca Community School, Inc., as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise Casa Blanca Community School, Inc. s basic financial statements, and have issued our report thereon dated March 16, Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered Casa Blanca Community School, Inc. s internal control over financial reporting (internal control) 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 Casa Blanca Community School, Inc. s internal control. Accordingly, we do not express an opinion on the effectiveness of Casa Blanca Community School, Inc. 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 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 and therefore, material weaknesses or significant deficiencies may exist that were not identified. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. We did identify certain deficiencies in internal control, described in the accompanying schedule of findings and questioned costs as items FS and FS that we consider to be significant deficiencies. Page 45

53 Compliance and Other Matters As part of obtaining reasonable assurance about whether Casa Blanca Community School, Inc. s financial statements are free from 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. Casa Blanca Community School, Inc. s Response to Findings Casa Blanca Community School, Inc. s responses to the findings identified in our audit are described in the accompanying schedule of findings and questioned costs. Casa Blanca Community School, Inc. s responses were not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on the responses. 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. Heinfeld, Meech & Co., P.C. Phoenix, Arizona March 16, 2018 Page 46

54 Report on Compliance for Each Major Federal Program; Report on Internal Control Over Compliance; and Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance Independent Auditor s Report The Board of Trustees Casa Blanca Community School, Inc. Report on Compliance for Each Major Federal Program We have audited Casa Blanca Community School, Inc. s compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of Casa Blanca Community School, Inc. s major federal programs for the year ended June 30, Casa Blanca Community School, Inc. s major federal programs are identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with the requirements of federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditor s Responsibility Our responsibility is to express an opinion on compliance for each of Casa Blanca Community School, Inc. s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Casa Blanca Community School, Inc. s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of Casa Blanca Community School, Inc. s compliance. Page 47

55 Opinion on Each Major Federal Program In our opinion, Casa Blanca Community School, Inc. complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs for the year ended June 30, Other Matters The results of our auditing procedures disclosed instances of noncompliance, which are required to be reported in accordance with Uniform Guidance and which are described in the accompanying schedule of findings and questioned costs as items and Our opinion on each major federal program is not modified with respect to these matters. Casa Blanca Community School, Inc. s responses to the noncompliance findings identified in our audit are described in the accompanying schedule of findings and questioned costs. Casa Blanca Community School, Inc. s responses were not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the responses. Report on Internal Control Over Compliance Management of Casa Blanca Community School, Inc. is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered Casa Blanca Community School, Inc. s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of Casa Blanca Community School, Inc. s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, we identified certain deficiencies in internal control over compliance, as described in the accompanying schedule of findings and questioned costs as items and that we consider to be significant deficiencies. Page 48

56 Casa Blanca Community School, Inc. s responses to the internal control over compliance findings identified in our audit are described in the accompanying schedule of findings and questioned costs. Casa Blanca Community School, Inc. s responses were not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the responses. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance We have audited the financial statements of the governmental activities, the major fund, and the aggregate remaining fund information of Casa Blanca Community School, Inc. as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise Casa Blanca Community School, Inc. s basic financial statements. We issued our report thereon dated March 16, 2018, which contained unmodified opinions on those basic financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by the Uniform Guidance and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated in all material respects in relation to the basic financial statements taken as a whole. Heinfeld, Meech & Co., P.C. Phoenix, Arizona March 16, 2018 Page 49

57 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2017 Total CFDA Federal Award Expenditures Expenditures Federal/Pass-Through/Agency Number Number and Transfers and Transfers U.S. Department of Education Direct Program: Indian Education - Grants to Local Educational Agencies N/A $ $ 25,510 Passed through Bureau of Indian Affairs: Title I Grants to Local Educational Agencies A16AV ,256 Special Education Cluster: Special Education - Grants to States A16AV ,872 School Safety National Activities A16AV Twenty-First Century Community Learning Centers A16AV ,161 Education Technology State Grants A16AV ,081 Teacher Quality Partnership Grants A16AV ,310 Rural Education A16AV ,901 Grants for State Assessments and Related Activities A16AV ,723 Total U.S. Department of Education 1,290,256 U.S. Department of Agriculture Passed through Arizona Department of Education: Child Nutrition Cluster: Non-Cash Assistance (Commodities): National School Lunch Program AZ300AZ3 10,801 Cash Assistance: School Breakfast Program AZ300AZ3 71,837 National School Lunch Program AZ300AZ3 129,339 Cash Assistance Subtotal 201,176 Total Child Nutrition Cluster 211,977 U.S. Department of Interior Passed through Bureau of Indian Affairs: Indian School Equalization A16AV ,118,824 Indian Child and Family Education A16AV ,194 Indian Schools - Student Transportation A16AV ,188 Administrative Cost Grants for Indian Schools A16AV ,976 Indian Education Facilities, Operations, and Maintenance A16AV ,640 FOCUS on Student Achievement A16AV ,673 Education Enhancements A16AV ,377 Total U.S. Department of Interior 3,593,872 Total Expenditures of Federal Awards $ 5,096,105 Page 50 See accompanying notes to schedule.

58 NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2017 NOTE 1 BASIS OF PRESENTATION The accompanying Schedule of Expenditures of Federal Awards (Schedule) includes the federal grant activity of Casa Blanca Community School, Inc. under programs of the federal government for the year ended June 30, The information in the Schedule is presented in accordance with the requirements of the Uniform Guidance. Because the Schedule presents only a selected portion of the operations of the School, it is not intended to and does not present the financial position, changes in net position or cash flows of the School. NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Expenditures reported on the Schedule are reported on the modified accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the applicable Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Any negative amounts shown on the Schedule represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years. Pass-through entity identifying numbers are presented where available. NOTE 3 CATALOG OF FEDERAL DOMESTIC ASSISTANCE (CFDA) NUMBERS The program titles and CFDA numbers were obtained from the federal or pass-through grantor or the 2017 Catalog of Federal Domestic Assistance. When no CFDA number had been assigned to a program, the two-digit federal agency identifier, a period, and the federal contract number were used. When there was no federal contract number, the two-digit federal agency identifier, a period, and the word unknown were used. NOTE 4 INDIRECT COST RATE The School has not elected to use the 10% de minimis cost rate as covered in Indirect (F&A) costs. Page 51

59 SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2017 Summary of Auditor s Results: Financial Statements Type of auditor s report issued: Unmodified Internal control over financial reporting: Significant deficiency(ies) identified: Yes Material weakness(es) identified: No Noncompliance material to financial statements noted: No Federal Awards Internal control over major programs: Significant deficiency(ies) identified: Yes Material weakness(es) identified: No Type of auditor s report issued on compliance for major programs: Unmodified Any audit findings disclosed that are required to be reported in accordance with of Uniform Guidance: Yes Identification of major programs: CFDA Numbers Name of Federal Program or Cluster Indian School Equalization Dollar threshold used to distinguish between Type A and Type B programs: $750,000 Auditee qualified as low-risk auditee: No Findings Related to Financial Statements Reported in Accordance with Government Auditing Standards: Yes Findings and Questioned Costs Related to Federal Awards: Yes Summary Schedule of Prior Audit Findings required to be reported: Yes Page 52

60 SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2017 FINDINGS RELATED TO FINANCIAL STATEMENTS REPORTED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Finding Number: FS Repeat Finding: Yes FS Type of Finding: Significant Deficiency Description: Journal Entries CRITERIA School management is responsible for establishing and maintaining internal controls that include controls for the general ledger and generally accepted accounting principles (GAAP) basis financial statements issued by the School. CONDITION The School does not have appropriate controls over journal entries. CAUSE School policies over journal entries were not followed. EFFECT Journal entries were posted to the School s general ledger without proper approval, review by someone other than the preparer and supporting documentation. CONTEXT During review of journal entries, it was noted that the majority of journal entries were prepared and posted by the same individual, and numerous journal entries did not have supporting documentation. RECOMMENDATION The School s journal entries procedures should require all journal entries to be accompanied by supporting documentation, proper approval of the entries and review of the entries by someone other than the preparer. VIEWS OF RESPONSIBLE OFFICIALS See Corrective Action Plan. Page 53

61 SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2017 FINDINGS RELATED TO FINANCIAL STATEMENTS REPORTED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Finding Number: FS Repeat Finding: No Type of Finding: Significant Deficiency Description: Expenditure Cutoff CRITERIA School management is responsible for establishing and maintaining internal controls over disbursements that are adequate to ensure that all financial activities are properly processed and recorded. CONDITION School management did not have adequate internal controls in place to ensure expenditures were recorded in the correct fiscal year. CAUSE The School experienced turnover during the year and there was a lack of training over year end processing. EFFECT Audit adjustments were necessary to properly state the financial statements. CONTEXT The School s fiscal year retirement contribution of $108,605 was recorded in fiscal year , rather than fiscal year RECOMMENDATION The School should review all year end transactions to ensure the transaction is recorded in the proper fiscal year. VIEWS OF RESPONSIBLE OFFICIALS See Corrective Action Plan. Page 54

62 SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2017 FINDINGS AND QUESTIONED COSTS RELATED TO FEDERAL AWARDS Finding Number: Repeat Finding: Yes Program Names/CFDA Titles: CFDA Numbers: Federal Award No.: Questioned Costs: Indian School Equalization A16AV00786 N/A Administrative Cost Grants for Indian Schools A16AV00786 N/A Federal Agency: Bureau of Indian Affairs Pass-Through Agency: U.S. Department of Interior Type of Finding: Noncompliance, Significant Deficiency Compliance Requirements: Procurement, Suspension and Debarment CRITERIA Non-Federal entities are prohibited from contracting with or making sub-awards under covered transactions to parties that are suspended or debarred. Covered transactions include those procurement contracts for goods and services awarded under a nonprocurement transaction that are expected to equal or exceed $25,000 or meet certain criteria as specified in 2 CFR section CONDITION Verification of suspension and debarment was not performed for all vendors with whom the School spent at least $25,000 using federal grant monies. CAUSE The School was unaware the requirement to perform the verification check was for cumulative purchases expected to equal or exceed $25,000, and not just one-time purchases. EFFECT The School was not in compliance with the requirements set forth by the federal government. However, it was determined that the vendors in question were not suspended or debarred. CONTEXT For two of 12 vendors reviewed with purchases in excess of $25,000, the School did not verify if the vendor was suspended or debarred until the vendors were selected for audit testing. RECOMMENDATION The School should develop a process to more closely monitor cumulative purchases using federal grant monies to ensure checks for suspension and debarment are performed. VIEWS OF RESPONSIBLE OFFICIALS See Corrective Action Plan. Page 55

63 SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2017 FINDINGS AND QUESTIONED COSTS RELATED TO FEDERAL AWARDS Finding Number: Repeat Finding: Yes Program Names/CFDA Titles: CFDA Numbers: Federal Award No.: Questioned Costs: Indian Schools-Student Transportation A16AV00786 N/A Administrative Cost Grants for Indian Schools A16AV00786 N/A Indian Education Facilities, Operations, and Maintenance A16AV00786 N/A Title I Grants to Local Educational Agencies A16AV00786 N/A Federal Agencies: U.S. Department of Interior, U.S. Department of Education Pass-Through Agency: Bureau of Indian Affairs Type of Finding: Noncompliance, Significant Deficiency Compliance Requirements: Cash Management CRITERIA School management is responsible for establishing and maintaining internal controls over disbursements that are adequate to ensure that all financial activities are properly processed and recorded. Further, Indian tribes and tribal organizations may without the approval of the BIA expend funds provided under a self-determination contract for purposes identified in 25 USC 450j-1(k), to the extent that the expenditure of the funds is supportive of a contracted program. The School must ensure sufficient cash is available in cash-controlled funds prior to authorizing expenditures (2 CFR section ) CONDITION The School lacked adequate internal controls to ensure funds were available in cash-controlled funds before authorizing expenditures. CAUSE The School was not monitoring the cash balance for each fund individually. EFFECT The School was not in compliance with federal regulations and guidelines. CONTEXT At year end, the School had the following negative cash balances: Indian Schools Student Transportation: $350,181 Administrative Cost Grants for Indian Schools: $12,261 Indian Education Facilities, Operations, and Maintenance: $219,704 Title I Grants to Local Educational Agencies: $113,160 Page 56

64 SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2017 FINDINGS AND QUESTIONED COSTS RELATED TO FEDERAL AWARDS Finding Number: RECOMMENDATION The School should monitor the cash balance for each fund individually and verify cash exists before authorizing expenditures. VIEWS OF RESPONSIBLE OFFICIALS See Corrective Action Plan. Page 57

65 Casa Blanca Community School Post Office Box Bapchule, Arizona School Office: Fax: Administration: Fax: March 16, 2018 To Whom It May Concern: The accompanying Corrective Action Plan has been prepared as required by U.S. Office of Management and Budget Uniform Guidance. The name of the contact person responsible for corrective action, the planned corrective action, and the anticipated completion date for each finding included in the current year s Schedule of Findings and Questioned Costs have been provided. In addition, we have also prepared the accompanying Summary Schedule of Prior Audit Findings which includes the status of audit findings reported in the prior year s audit. Sincerely, Patricia Avalos Principal A GREAT PLACE TO LEARN Page 58