New York State School Report Card.

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2 New York State Education Department Annual Report The Equity Project Charter School New York State School Report Card. The Equity Project Charter School NY State School report card for School year can be found at 3

3 New York State Education Department Annual Report The Equity Project Charter School Appendix C Total Expenditure per pupil $15,637 Administrative Expenditure per pupil $3,672 4

4 Appendix E: The Equity Project (TEP) Charter School FY2012 Budget (version ) Income 4100 State Grants 4101 Per Pupil Allocation 4,977, Per Pupil Allocation for SpEd 1,177, NYSTL 20, NYSSL 5, NYSLIB 2, Total 4100 State Grants $ 6,184, Federal Grants 4202 IDEA 64, Title I 154, Title II 14, Total 4200 Federal Grants $ 233, Restricted Contribution 4350 Research Grants 4351 Mathematica Study 62, Total 4300 Restricted Contribution $ 62, Miscellaneous Revenue 4404 Interest Income 2, Total 4400 Miscellaneous Revenue $ 2, Total Income $ 6,482,

5 Appendix E: The Equity Project (TEP) Charter School FY2012 Budget (version ) Expenses 5000 Compensation 5100 Instructional Staff 5101 Principal 94, General Ed Teachers 2,750, Special Ed Teachers 475, Total 5100 Instructional Staff $ 3,319, Non-Instructional Staff 5201 Director of Finance & Ops 110, Office Manager 70, Facilities Manager 37, Social Worker 282, Interns & Fellows 57, Business Manager 55, Total 5200 Non-Instructional Staff $ 611, Incentives 5301 Performance Based Bonus 160, Total 5300 Incentives $ 160, Benefits 5402 Workers Compensation 21, NY State Disability 1, Medicare EmployER 59, Social Security EmployER 212, SUTA 21, Medical Insurance 300, Dental Insurance 23, Vision Insurance 4, Short & Long Term Disability and Life Insurance 17, b Matching 64, Local Tax(MTA) 13, Total 5400 Benefits $ 739, Total 5000 Compensation $ 4,830, Administrative Expenses 6101 Office Supplies & Expenses 63, Conference Fees & Subscriptions 10, Printing and Copying 17, Postage, Mailing Service 7, Janitorial Supplies 16, Health/Nursing Supplies 1, Team Building/Staff Lunch & Appreciation 15, Travel 9, Interest Paid 25, School Events 30, Financial Transaction Fees 2, Processing Fees for TransitCheks 1, Insurance - Liability, Umbrella, D&O 28, Total 6100 Administrative Expenses $ 225,

6 Appendix E: The Equity Project (TEP) Charter School FY2012 Budget (version ) 6200 Professional Services 6201 Audit/Tax Fees 18, Legal Fees 6, Training Services for Staff & BOT 25, Interpretation Services 21, Payroll Expenses 3, Security (Contracted) 56, Related Services 6, Technology Developer Services 62, Long Term Substitute 50, Total 6200 Professional Services $ 248, Marketing and Staff/Student Recruitment 6301 Recruitment Ads-Teachers/Staff 42, Recruitment Ads for Students 27, Expense Reimbursements 21, Total 6300 Marketing and Staff/Student Recruitment $ 91, Curriculum, Classroom & Student Related Expenses 7101 Curriculum Development 7, Textbooks/Equipment/Materials/Supplies 180, FieldTrips/Assemblies 25, Extended-Day Materials/Supplies 37, Student Uniforms 31, Student Food 19, Social Worker Materials/Supplies 7, Classroom Improvement/Decoration 13, NYSTL 20, NYSSL 5, NYSLIB 2, Student Incentives 20, Student Programs - External Providers 45, Total 7100 Curriculum, Classroom & Student Related Expenses $ 414, Facilities - Incubation Facility Costs 8102 Other Rental Fees & Charges 25, Maintenance Supplies 6, Miscellaneous Repairs 66, Total 8100 Facilities - Incubation Facility Costs $ 97, Technology/Communication Expense 8201 Phone/Fax Charges 4, Internet Connectivity Charges 4, Web Services 3, Technology Maintenance & Support Services 2, Computer/Data Center/Network/Cabling - Installation 2, Phone - Installation 12, Copier/Printer Lease 10, Total 8200 Technology/Communication Expense $ 38, Facilities - Permanent Facility Development Costs 8310 Fundraising Expenses 155, Total 8300 Facilities - Permanent Facility Development Costs $ 155, Total Expenses $ 6,101,

7 Appendix E: The Equity Project (TEP) Charter School FY2012 Budget (version ) 1500 Fixed Asset 1501 Teacher/Admin Computers & Laptops 12, Student Lab Desktops 50, Data Center & Network Hardware 5, LCD Projectors 8, Phones/Audio Equipment (equipment) 3, Software 1, Furniture (includes installation and delivery 100, Musical Instruments 30, Total 1500 Fixed Asset $ 209, NET INCOME (Gross Profit minus Expenses minus Fixed Assets) 171,

8 Appendix F: Disclosure of Financial Interest Form Disclosure of Financial Interest by a New York Charter School Board of Trustees Member Annual Report *Note: This Disclosure is a public record, but asterisked data fields will be redacted. 1. Trustee Name (print) Crystal Harmon 2. Charter School Name The Equity Project Charter School 3. Charter Authorizer Entity NYC Department of Education 4. Home Address* 5. Business Address* 186 Joralemon St., Suite 300, Brooklyn, NY Daytime Phone* (443) Address* charmon@tntp.org 8. List all positions held on board (e.g., chair, treasurer, parent representative) Secretary 9. Is the trustee an employee of the school? Yes X No If Yes, please provide a description of the position you hold and your responsibilities, your salary and your start date. 10. Is the trustee an employee or agent of the management company or institutional partner of the charter school? Yes X No If Yes, please provide a description of the position you hold and your responsibilities, your salary and your start date. 11. Identify each interest/transaction (and provide the requested information) that you or any of your immediate family members or any persons who live with you in your house have held or engaged in with the charter school during the time you have served on the board, and in the sixmonth period prior to such service. If there has been no such financial interest or transaction, write None. Please note that if you answered Yes to Question 2-4 above, you need not disclose again your employment status, salary, etc.

9 Date(s) N O N E Nature of Financial Interest/Transaction Steps taken to avoid a conflict of interest, (e.g., did not vote, did not participate in discussion) Name of person holding interest or engaging in transaction and relationship to yourself 12. Identify each individual, business, corporation, union association, firm, partnership, committee proprietorship, franchise holding company, joint stock company, business or real estate trust, non-profit organization, or other organization or group of people doing business with the school and in which such entity, during the time of your tenure as a trustee, you and/or your immediate family member or person living in your house had a financial interest or other relationship. If you are a member, director, officer or employee of an organization formally partnered with the school that is doing business with the school through a management or services agreement, please identify only the name of the organization, your position in the organization as well as the relationship between such organization and the school. If there was no financial interest, write None. Organization conducting business with the school NONE Nature of business conducted Approximate value of the business conducted Name of Trustee and/or immediate family member of household holding an interest in the organization conducting business with the school and the nature of the interest Steps Taken to Avoid Conflict of Interest Signature Date: July 17, 2011

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22 Progress Towards Goal Attainment Goal or Objective Actual Result: Observed Level of Attainment Was the Goal/Objective Met? (Y/N) Explanation if Not Met/Efforts to be Undertaken 1. At least 75 percent of each cohort of TEP 8 th graders will perform at or above Level 3 on the following New York State Exams: English Language Arts (ELA), Mathematics, Science, and Social Studies. A cohort here is defined as a group of 8th graders who have been continuously enrolled at TEP for 4 years, beginning in 5th grade. TEP had only 5th and 6 th grades in so attainment of this goal will not be assessed until the school year when TEP s initial 5 th grade cohort completes 8th grade Cohort (TEP 6 th graders in ): # students in cohort : 124 (ELA), 123 (Math) # returning students in cohort in : 118 NYS ELA Exam: 31% (36 / 118) at or above Level 3 NYS Math Exam: 42% (49/118) at or above Level 3 Not Applicable. Attainment of this goal will not be assessed until the school year Cohort (TEP 5 th graders in ): # students in cohort in : 122 (ELA), 124 (Math) NYS ELA Exam: 31% (38/122) at or above Level 3 NYS Math Exam: 56% (69/124) of TEP 5 th graders performed at or above Level 3 Important Notes: New York State eliminated the NYS Social Studies exam. In addition, the NYS Science exam is given only in Grade 8.

23 2. At least 75 percent of each cohort of TEP 8th graders will perform at or above the 50th percentile on the following subtests of a national, normreferenced exam such as the Stanford 10 Achievement Test: Reading, Language, Mathematics, Science, and Social Studies. A cohort here is defined as a group of 8th graders who have been continuously enrolled at TEP for 4 years, beginning in 5 th grade. TEP had only 5th and 6 th grades in so attainment of this goal will not be assessed until the school year when TEP s initial 5 th grade cohort completes 8th grade. TEP is using the nationally norm-referenced exam called the Northwest Education Association Measures of Academic Progress (NWEA MAP) test to measure this objective. This exam has 4 subtests: Reading, Language, Mathematics, and Science. There is no Social Studies subtest on the NWEA MAP. TEP administers this exam in both the fall and spring. The data below is from the Spring 2011 administration Cohort (TEP 6 th graders in ): # students in cohort in : 123 (122 for Science test) # returning students in cohort in : 118 Not Applicable. Attainment of this goal will not be assessed until the school year. READING: 25% (30/ 118) at/above 50 th percentile LANGUAGE: 22% (26/ 118) at/above 50 th percentile MATH: 20% (24/ 118) at/above 50 th percentile SCIENCE: o GENERAL SCIENCE: 25% (29/118) at/above 50 th percentile o CONCEPTS & PROCESSES: 27% (32/ 118) at/above 50 th percentile 2014 Cohort (TEP 5 th graders in ): # students in cohort in : 124 READING: 37% (46/ 124) at/above 50 th percentile LANGUAGE: 39% (48/124) at/above 50 th percentile MATH: 41% (50/ 124) at/above 50 th percentile SCIENCE: o GENERAL SCIENCE: 36% (44/124) at/above 50th percentile o CONCEPTS & PROCESSES: 25% (31/124) at/above 50 th percentile

24 3. Each cohort of TEP students will, beginning in 6 th grade, reduce by at least onehalf the gap between the percent at or above Level 3 on the previous year s New York State ELA & Mathematics Exams and 75 percent at or above Level 3 on the current year s exams. (If a grade-level cohort exceeds 75 percent at or above Level 3 in the previous year, the cohort will show an increase in the current year.) This calculation will include only students who have been continuously enrolled at TEP starting in 5 th grade. For the school year, TEP had one cohort (the 2013 Cohort) for which there are two years of data; this objective can therefore be evaluated with respect to this one cohort Cohort (TEP 6 th graders in ): # students in cohort : 124 (ELA), 123 (Math) # returning students in cohort in : 118 NYS ELA Exam: 31% (36 / 118) at or above Level 3, an increase from 24% (30/124) the previous year NYS Math Exam: 42% (49/118) at or above Level 3, an increase from 37% (46/123) the previous year Not Met. While there were significant increases in proficiency in both ELA (7% increase) and Math (5% increase), these did not reduce the gap by half. TEP made adjustments during the school year that resulted in significant increases in student proficiency, though not as large as necessary to achieve this objective. These adjustments included the addition of daily reading support classes for the lowest 20% of students, and a new Morning Block period that spirals through core Reading, Language, Writing, and Math skills. For the school year, TEP has made additional changes including the addition of math support classes for the lowest 20% of students, an after-school one-on-one tutoring program targeted to struggling students, and the addition of a 7 th grade honors class to increase rigor for higher ability students.

25 4. Each cohort of TEP students will, beginning in 6 th grade, reduce by at least onehalf the gap between the percent at or above the 50th percentile on the previous year s Reading, Language, Mathematics, Science, & Social Studies subtests of a national norm-referenced exam such as the Stanford 10 Achievement Test and 75 percent at or above the 50 th percentile on the current year s subtests. (If a grade-level cohort exceeds 75 percent at or above the 50 th percentile in the previous year, the cohort will show an increase in the current year.) This calculation will include only students who have been continuously enrolled at TEP starting in 5 th grade. For the school year, TEP had one cohort (the 2013 Cohort) for which there are two years of data; this objective can therefore be evaluated with respect to this one cohort. TEP is using the nationally norm-referenced exam called the Northwest Education Association Measures of Academic Progress (NWEA MAP) test to measure this objective. This exam has 4 subtests: Reading, Language, Mathematics, and Science. There is no Social Studies subtest on the NWEA MAP. TEP administers this exam in both the fall and spring. The data below is from the Spring 2011 administration Cohort (TEP 6 th graders in ): # students in cohort in : 123 (122 for Science test) # returning students in cohort in : 118 READING: 25% (30/ 118) at/above 50 th percentile, an increase from 24% (29/123) the previous year LANGUAGE: 22% (26/ 118) at/above 50 th percentile, a decrease from 25% (31/123) the previous year MATH: 20% (24/ 118) at/above 50 th percentile, an increase from 17% (21/123) the previous year Not Met. While there were increases in Reading, Math, and General Science these were relatively small and did not reduce the gap by half. There was a small decrease in Language and no change in Scientific Concepts & Processes. See the response in this column for objective #3 above. SCIENCE: o GENERAL SCIENCE: 25% (29/118) at/above 50 th percentile, an increase from 22% (27/122) the previous year o CONCEPTS & PROCESSES: 27% (32/ 118) at/above 50 th percentile, no change from 27% (33/122) the previous year Note: Some of the data above correct errors contained in TEP s annual report.

26 5. The percent of TEP 7 th and 8 th grade cohorts performing at or above Level 3 on the New York State ELA and Mathematics exams will place TEP in the top quartile of all similar schools. The NYCDOE will determine similar schools based on characteristics, including but not limited to, geographic location and student ethnic, racial and lowincome status. TEP had only 5 th and 6 th grade cohorts in so attainment of this goal will not be assessed until the school year when TEP s initial cohort completes 7th grade. Not Applicable. Attainment of this goal will not be assessed until the school year. 6. Each year, TEP will make Adequate Yearly Progress in ELA, math, and science. TEP made Adequate Yearly Progress (AYP) in according to the New York State School Report Card , Accountability and Overview Report. YES 7. Each year, TEP will have an average daily student attendance rate of at least 95 percent. During the school year, TEP had an average daily student attendance rate of 96.6%. YES

27 8. Each year, at least 95 percent of all 5 th, 6 th, and 7 th graders enrolled at TEP for at least 150 days during that school year will enroll at TEP at the beginning of the subsequent school year. This calculation will take place on October 1 of the subsequent school year, and will include all students who were enrolled for at least 150 days during the prior school year and whose current home address has not changed from the prior school year. During the school year, TEP had 124 students enrolled in Grade 5 for 150 school days or more. 1 of these students (student initials: VC) re-located to a new address after the school year, leaving 123 students eligible for this calculation. As of October 1 st 2011, 119 of these 123 students (97%) were enrolled at TEP for the school year while 4 students (student initials: NR, RR, DM AS) had withdrawn from TEP. During the school year, TEP had 123 students enrolled in Grade 6 for 150 school days or more. 3 of these students (student initials: AC, AO, KS) re-located to a new address after the school year, leaving 120 students eligible for this calculation. As of October 1 st 2011, 119 of these 120 students (99%) were enrolled at TEP for the school year while 1 student (student initials: NA) had withdrawn from TEP. [Note: 3 of the re-enrolled students are repeating Grade 6 at TEP during the school year.] YES In sum, 98% (238/243) of students eligible for this calculation were enrolled at TEP as of October 1, Each year, at least 85% of full-time teachers who have taught at TEP for the majority of that school year and who are invited to continue teaching at TEP, will return to teach at TEP for the following school year. 15 teachers were employed at TEP for the majority of the school year. 11 of these teachers were invited to continue teaching at TEP for the school year. 9 (81%) of these 11 teachers returned to teach at TEP for the school year. Not Met. Although 9 of the 11 teachers who were invited back to TEP returned for the school year, this falls slightly short of the 85% target. TEP continues to adjust teacher roles and responsibilities to ensure sustainability for teachers. Among the changes instituted for the school year is a new worklife balance initiative called Take-off Tuesdays, as well as a re-alignment of teacher whole-school service roles.

28 10. Each year, the school will comply with all applicable laws, rules, regulations and contract terms including, but not limited to, the New York Charter Schools Act, the New York Freedom of Information Law, the New York Open Meetings Law, the federal Individuals with Disabilities Education Act, and federal Family Educational Rights and Privacy Act. 11. Each year, student enrollment will be within 15% of full enrollment as defined in the school s contract. This will be maintained on an ongoing basis and monitored bimonthly. 12. Upon completion of the school s first year of operation and every year thereafter, the school will undergo an independent financial audit that will result in an unqualified opinion and no major findings. The NYCDOE will determine a finding to be major if it indicates a deliberate act of wrongdoing, reckless conduct or causes a loss of confidence in the abilities or integrity of the school or seriously jeopardizes the continued operation of the school. To the best of our knowledge, TEP has complied with all applicable laws, rules, regulations, and contract terms. Full enrollment for the school year as defined in TEP s charter was 240 students. TEP maintained an enrollment of between 240 and 248 students during the school year. This was within 5% of TEP s full student enrollment. Fruchter, Rosen & Company, PC completed an audit of TEP for the period from July 1, 2010 to June 30, This independent financial audit resulted in an unqualified opinion and no major findings. YES YES YES

29 13. Each year, the school will operate on a balanced budget and maintain a stable cash flow. A budget will be considered balanced if revenues equal or exceed expenditures for the fiscal year, as calculated on June 30, the final day of the fiscal year. The New York City Department of Education (NYC DOE) will monitor the school via quarterly financial statements (including statement of activities), liquidity, and liabilities accumulated by the school. A ratio analysis will be used by the NYC DOE to determine financial stability of the school. All financial elements, including cash flow, will be reviewed holistically by NYC DOE while making this determination. Specifically for cash flow, NYC DOE will review liquid assets the school has on hand versus short term liabilities, notes payable (short term), accounts payable and other dues (if funds due to NYC DOE) to determine if the school can continue being financially solvent. As demonstrated by TEP s audited financial statements, TEP maintained a balanced budget and maintained a stable cash flow for the audited period from July 1, 2010 to June 30, YES

30 14. Each year, parents will express satisfaction with the school s program, based on the school s Parent Satisfaction Survey. Satisfaction will have been met if each survey item receives a positive response from at least 80% of all parents. All parents include those who do not respond to the survey. A positive response is defined as either of the two responses to the item that reflect most favorably on the school s learning environment. (For example, for the survey item My child is safe at school, there are five possible responses: (1) strongly agree, (2) agree, (3) disagree, (4) strongly disagree, and (5) don t know. The responses strongly agree and agree are considered positive responses.) The NYC DOE School Survey was given to all TEP parents. Relative to other NYC middle schools, TEP rated in the highest of five satisfaction level in all 4 categories of questions: Academic Expectations, Communication, Engagement, Safety & Respect. Questions related to all 4 major survey categories generated a positive response from at least 80% of the school s parents. YES

31 THE EQUITY PROJECT CHARTER SCHOOL (A Not-For-Profit Corporation) FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010

32 THE EQUITY PROJECT CHARTER SCHOOL (A Not-For-Profit Corporation) FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010 CONTENTS PAGE INDEPENDENT AUDITORS' REPORT 1 FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION: Statements of financial position 2 Statements of activities 3 Statements of cash flows 4 Notes to the financial statements 5-10 Independent auditors report on supplementary information 11 Schedule of functional expenses 12 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 13-14

33 FRUCHTER ROSEN & COMPANY, P.C. CERTIFIED PUBLIC ACCOUNTANTS 156 WEST 56 TH STREET NEW YORK, NEW YORK TEL: (212) FAX: (212) INDEPENDENT AUDITORS REPORT TO THE BOARD OF TRUSTEES THE EQUITY PROJECT CHARTER SCHOOL We have audited the accompanying statements of financial position of The Equity Project Charter School (the School ) (a not-for-profit corporation) as of June 30, 2011 and 2010, and the related statements of activities, and cash flows for the year ended June 30, 2011 and for the period from January 15, 2008 (inception) to June 30, These financial statements are the responsibility of the School s management. Our responsibility is to express an opinion on these financial statements based on our audits. The prior period s summarized comparative information has been derived from the School s 2010 financial statements, and in our report dated October 7, 2010 we expressed an unqualified opinion on those financial statements. We conducted our audits in accordance with auditing standards generally accepted in the United States of America, and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the School as of June 30, 2011 and 2010, and the changes in its net assets and its cash flows for the year ended June 30, 2011 and for the period from January 15, 2008 (inception) to June 30, 2010, in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated October 24, 2011 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, and grants. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and on 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 read in conjunction with this report in considering the results of our audits. New York, New York October 24, 2011

34 THE EQUITY PROJECT CHARTER SCHOOL (A Not-For-Profit Corporation) STATEMENTS OF FINANCIAL POSITION JUNE 30, ASSETS Current assets: Cash and cash equivalents $ 352,614 $ 516,764 Grants and contracts receivable 98,404 84,110 Prepaid expenses and other current assets 15,269 30,553 Total current assets 466, ,427 Property and equipment, net of accumulated depreciation and amortization of $132,504 and $47,223, respectively 342, ,593 Due from related party 1,599,408 - Restricted cash 30,142 10,044 TOTAL ASSETS $ 2,438,567 $ 872,064 LIABILITIES AND UNRESTRICTED NET ASSETS Current liabilities: Accounts payable and accrued expenses $ 126,728 $ 105,140 Accrued payroll and payroll taxes 143,068 56,801 Refundable advances 2,381 3,065 Note payable - current portion 218, ,000 Total current liabilities 490, ,006 Note payable - long-term portion - 52,083 Total liabilities 490, ,089 Unrestricted net assets 1,947, ,975 TOTAL LIABILITIES AND UNRESTRICTED NET ASSETS $ 2,438,567 $ 872,064 The accompanying notes are an integral part of the financial statements

35 THE EQUITY PROJECT CHARTER SCHOOL (A Not-For-Profit Corporation) STATEMENTS OF ACTIVITIES For the period from For the year January 15, 2008 ended (inception) to June 30, 2011 June 30, 2010 Revenue and support: State and local per pupil operating revenue $ 3,929,464 $ 1,848,053 Federal grants 327, ,939 State and city grants 18, ,085 Contributions and private grants 18, ,019 Capital campaign 1,055, ,569 Donated goods - 5,625 Interest income 2,977 1,565 Total revenue and support 5,353,030 3,208,855 Expenses: Program services Regular education 2,865,100 1,692,947 Special education 483, ,261 Total program services 3,348,733 2,089,208 Supporting services Management and general 405, ,090 Fundraising 180,779 69,998 Total expenses 3,935,365 2,571,296 Surplus from operations 1,417, ,559 Other expense: Facility development cost - 107,584 Changes in unrestricted net assets 1,417, ,975 Unrestricted net assets - beginning of period 529,975 - Unrestricted net assets - end of period $ 1,947,640 $ 529,975 The accompanying notes are an integral part of the financial statements

36 THE EQUITY PROJECT CHARTER SCHOOL (A Not-For-Profit Corporation) STATEMENTS OF CASH FLOWS For the period from For the year January 15, 2008 ended (inception) to June 30, 2011 June 30, 2010 CASH FLOWS FROM OPERATING ACTIVITIES Changes in unrestricted net assets $ 1,417,665 $ 529,975 Adjustments to reconcile changes in unrestricted net assets to net cash provided by operating activities: Depreciation and amortization 85,303 47,223 Changes in certain assets and liabilities: (Increase) in grants and contracts receivable (14,294) (84,110) Decrease (Increase) in prepaid expenses and other current assets 15,284 (30,553) (Increase) in due from related party (1,599,408) - Increase in accounts payable and accrued expenses 21, ,140 Increase in accrued payroll and payroll taxes 86,267 56,801 (Decrease) Increase in refundable advances (684) 3,065 NET CASH PROVIDED BY OPERATING ACTIVITIES 11, ,541 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (197,440) (277,816) (Increase) in restricted cash (20,098) (10,044) NET CASH (USED IN) INVESTING ACTIVITIES (217,538) (287,860) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from note payable 500, ,000 Principal payments on note payable (458,333) (72,917) NET CASH PROVIDED BY FINANCING ACTIVITIES 41, ,083 NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (164,150) 516,764 CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 516,764 - CASH AND CASH EQUIVALENTS - END OF PERIOD $ 352,614 $ 516,764 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash during the year for interest $ 20,365 $ 9,401 The accompanying notes are an integral part of the financial statements

37 THE EQUITY PROJECT CHARTER SCHOOL (A Not-For-Profit Corporation) NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010 NOTE 1 - PRINCIPAL BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Organization The Equity Project Charter School (the School ) is a New York State, not-for-profit educational corporation that was incorporated on January 15, 2008 to operate a Charter School pursuant to Article 56 of the Education Law of the State of New York. The School was granted a provisional charter on January 15, 2008 valid for a term of five years and renewable upon expiration by the Board of Regents of the University of the State of New York. The School is focused on providing students from low-income families with equal access to outstanding teachers as a means of achieving educational equality. The School is uniquely focused on attracting and retaining master teachers. To do so, the School uses a three-pronged strategy of Rigorous Qualifications, Redefined Expectations, and Revolutionary Compensation. Classes commenced in the Washington Heights neighborhood of New York City, in September 2009 and the School provided education to approximately 246 students in grades fifth and sixth during the academic year. Beginning in September 2009, the School has been operating in transportable classroom units ( TCUs ) located on the campus of a New York City public school. The School pays for its own security guards and for a portion of maintenance and custodial costs. The School does not pay annual rent but pays for rental permits to accommodate School programs that take place outside the district s school day. The School is in the process of securing permanent facilities in Washington Heights and plans to start classes in the new facilities by September Food and Transportation Services The New York City Department of Education provides free lunches and transportation directly to a majority of the School s students. Such costs are not included in these financial statements. The School covers the cost of lunches for children not entitled to the free lunches. Tax Status The School is exempt from Federal income tax under Section 501(a) of the Internal Revenue Code as an organization described in Section 501(c)(3) and a similar provision under New York State income tax laws. The School has also been classified as an entity that is not a private foundation within the meaning of Section 509(a) and qualifies for deductible contributions as provided in section 170(b)(l)(A)(ii). The School did not have net unrelated business income for the year ended June 30, 2011 and for the period from January 15, 2008 (inception) to June 30,

38 THE EQUITY PROJECT CHARTER SCHOOL (A Not-For-Profit Corporation) NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010 NOTE 1 - PRINCIPAL BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Tax Status (Continued) The School s accounting policy provides that a tax expense or benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. The School has no uncertain tax position resulting in an accrual of tax expense or benefit. Basis of Presentation The financial statement presentation follows the requirements of the Financial Accounting Standards Board, Accounting Standards Codification No which provides guidance for the classification of net assets. The amounts for each of the three classes of net assets are based on the existence or absence of donor-imposed restrictions described as follows: Unrestricted Net assets of the School whose use has not been restricted by an outside donor or by law. They are available for any use in carrying out the operations of the School. Temporarily Restricted Net assets of the School whose use has been limited by donor-imposed stipulations that either expire with the passage of time or can be fulfilled and removed by actions of the School. When such stipulations end or are fulfilled, such temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities and changes in net assets, as net assets released from restrictions. Permanently Restricted Net assets of the School whose use has been permanently limited by donorimposed restrictions. Such assets include contributions required to be invested in perpetuity, the income from which is available to support charitable purposes designated by the donors. The School has no temporarily or permanently restricted net assets at June 30, 2011 and Revenue and Support Contributions are recognized when the donor makes a promise to give to the School that is, in substance, unconditional. Grants and other contributions of cash are reported as temporarily restricted support if they are received with donor stipulations. Restricted contributions and grants that are made to support the school s current year activities are recorded as unrestricted revenue. Contributions of assets other than cash are recorded at their estimated fair value

39 THE EQUITY PROJECT CHARTER SCHOOL (A Not-For-Profit Corporation) NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010 NOTE 1 - PRINCIPAL BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Revenue and Support (Continued) Revenue from the state and local governments resulting from the School s charter status and based on the number of students enrolled is recorded when services are performed in accordance with the charter agreement. Federal and other state and local funds are recorded when expenditures are incurred and billable to the government agencies. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Accordingly, actual results could differ from those estimates. Cash and Cash Equivalents For the purpose of the Statement of Cash Flows, the School considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Concentration of Credit Risk Financial instruments which potentially subject the School to concentrations of credit risk are cash and cash equivalents. The School places its cash and cash equivalents on deposit in what it believes to be highly credited financial institutions. Cash balances may exceed the FDIC insured levels of $250,000 per institution at various times during the year. The School believes that there is little risk in any losses and has not experienced any losses in such accounts. Property and Equipment Purchased property and equipment are recorded at cost. Property and equipment acquired with certain government funding are recorded as expenses pursuant to the terms of the contract, in which ownership of such property and equipment is retained by the funding source. Maintenance and repairs are expensed as incurred. No depreciation is recorded on construction-in-progress until property and equipment is placed into service. Depreciation and amortization is provided on the straight line method over the estimated useful lives as follows: Equipment Furniture and fixtures Software Musical instruments 5 years 5 years 5 years 3 years Restricted Cash Under the provisions of its charter, the School established an escrow account to pay for legal and audit expenses that would be associated with a dissolution should it occur

40 THE EQUITY PROJECT CHARTER SCHOOL (A Not-For-Profit Corporation) NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010 NOTE 1 - PRINCIPAL BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Refundable Advances The School records grant revenue as refundable advances until it is expended for the purpose of the grant, at which time it is recognized as revenue. Reclassifications Certain 2010 accounts have been reclassified to the 2011 Financial Statements presentation. The reclassification has no effect on 2010 total assets, liabilities, net assets, and change in net assets. NOTE 2 - GRANTS AND CONTRACTS RECEIVABLE Grants and contracts receivable consist of federal and city entitlements and grants. The School expects to collect these receivables within one year. NOTE 3 - CONDITIONAL PROMISES TO GIVE During the year ended June 30, 2011, the School received a grant in the amount of $500,000 that contained donor conditions regarding the development of permanent facilities. Since this grant represents a conditional promise to give it s not recorded as a contribution until donor conditions are met. As of June 30, 2011, donor conditions had not been met. NOTE 4 - PROPERTY AND EQUIPMENT Property and equipment consists of the following as of June 30,: Equipment $ 178,480 $ 112,096 Furniture and fixtures 230, ,303 Software 35,997 7,372 Musical instruments 30,417 28, , ,816 Less: Accumulated depreciation and amortization 132,504 47,223 $ 342,730 $ 230,593 Depreciation and amortization expense was $85,303 and $47,223 for the year ended June 30, 2011 and for the period from January 15, 2008 (inception) to June 30,

41 THE EQUITY PROJECT CHARTER SCHOOL (A Not-For-Profit Corporation) NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010 NOTE 5 - RELATED PARTY TRANSACTIONS The School is closely connected to TEP Charter School Assistance, Inc. ( TEPCSA ), a New York State not-for-profit corporation, an entity related by one common Board member. During the year ended June 30, 2011, the School entered into a demand note for expenses paid on behalf of TEPCSA related to the development of permanent facilities. Balance of the note at June 30, 2011 amounted to $1,599,408. The School expects to collect this note during the year ending June 30, NOTE 6 - NOTE PAYABLE AND CREDIT AGREEMENT On June 4, 2009, the School entered into a working capital credit agreement with The Prudential Foundation. The aggregate borrowing under this agreement may not exceed $750,000. Subject to the terms and conditions of the agreement, the School may drawdown, from time to time during the period from June 4, 2009 to September 16, The credit agreement is guaranteed by a third party affiliated with the School s founder. During the year ended June 30, 2011 and for the period from January 15, 2008 (inception) to June 30, 2010, the School borrowed $500,000 and $250,000 under this credit agreement and entered into a promissory note payable maturing on November 15, The promissory note is payable in monthly installments of fixed principal payments of approximately $43,750 and $10,417 plus interest at 5% for the year ended June 30, 2011 and for the period from January 15, 2008 (inception) to June 30, 2010, respectively Balance at June 30, $ 218,750 $ 177,083 Less: Current portion (218,750) (125,000) Long-term portion $ - $ 52,083 NOTE 7 - CONTINGENCY Certain grants and contracts may be subject to audit by the funding sources. Such audits might result in disallowances of costs submitted for reimbursements. Management is of the opinion that such cost disallowances, if any, will not have a material effect on the accompanying financial statements. Accordingly, no amounts have been provided in the accompanying financial statements for such potential claims. NOTE 8 - REVENUE CONCENTRATION The School receives a substantial portion of its support and revenue from the New York City Department of Education. If the charter school laws were modified, reducing or eliminating these revenues, the School s finances could be materially adversely affected

42 THE EQUITY PROJECT CHARTER SCHOOL (A Not-For-Profit Corporation) NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010 NOTE 9 - FUNCTIONAL ALLOCATION OF EXPENSE Directly identifiable expenses are charged to programs and supporting services. Expenses related to more than one function are charged to programs and supporting services on the basis of periodic time and expense studies. Management and general expense includes those expenses that are not directly identifiable with any other specific function, but provide for the overall support and direction of the School. NOTE 10 - RETIREMENT PLAN The School maintains a retirement plan qualified under Internal Revenue Code 403(b), for the benefit of its eligible employees. Under the plan, the School will match employee contributions up to 3% of annual compensation. Employer match the year ended June 30, 2011 and for the period from January 15, 2008 (inception) to June 30, 2010 amounted to $39,021 and $22,471, respectively. NOTE 11 - FACILITY DEVELOPMENT COST Facility development cost consists of architectural fees and other costs related to a potential permanent School site. During the period from January 15, 2008 (inception) to June 30, 2010, the School decided to pursue other options and secured an alternative free facility owned by The New York City Department of Education in the Washington Heights neighborhood of New York City, resulting in a onetime charge in the amount of $107,584. NOTE 12 - SUBSEQUENT EVENTS In preparing these financial statements, the School has evaluated events and transactions for potential recognition or disclosure through October 24, 2011, the date the financial statements were available to be issued

43 FRUCHTER ROSEN & COMPANY, P.C. CERTIFIED PUBLIC ACCOUNTANTS 156 WEST 56 TH STREET NEW YORK, NEW YORK TEL: (212) FAX: (212) INDEPENDENT AUDITORS REPORT ON SUPPLEMENTARY INFORMATION TO THE BOARD OF TRUSTEES THE EQUITY PROJECT CHARTER SCHOOL Our report on our audits of the basic financial statements of The Equity Project Charter School (a notfor-profit corporation) as of and the year ended June 30, 2011 and for the period from January 15, 2008 (inception) to June 30, 2010, appears on Page 1. We conducted our audits in accordance with auditing standards generally accepted in the United States of America for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule of functional expenses is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements as a whole. New York, New York October 24, 2011

44 THE EQUITY PROJECT CHARTER SCHOOL (A Not-For-Profit Corporation) SCHEDULE OF FUNCTIONAL EXPENSES For the year ended June 30, 2011 For the period from Program Services Management January 15, 2008 Regular Special and (inception) to Education Education Total General Fundraising Total June 30, 2010 Salaries $ 1,869,792 $ 280,469 $ 2,150,261 $ 258,635 $ 20,700 $ 2,429,596 $ 1,472,290 Payroll taxes and employee benefits 329,766 49, ,231 45,612 3, , ,648 Audit and accounting fees ,200-18,200 25,500 Legal fees ,645 Consulting fees ,275 Contractual services 77,438 21,393 98,831 22, , ,324 Professional development 25,910 6,034 31,944 3,548-35,492 37,053 Teacher and student recruitment 76,068 16,582 92,650 4,813-97, ,711 Curriculum and classroom expenses 214,462 47, , , ,363 Student food service 10,661 2,188 12, ,849 7,981 Field trips 11,285 2,315 13, ,600 5,420 Special events 17,673 3,626 21, ,299 17,564 Fundraising for capital campaign , ,213 Interest expense ,365-20,365 9,401 Office supplies 38,939 9,068 48,007 4, ,340 41,744 Printing and copying 8,379 1,951 10,330 1, ,479 37,359 Postage and delivery 3, , ,976 9,200 Telephone and internet services 9,093 2,118 11,211 1, ,456 7,231 Information technology 28,656 6,673 35,329 3, ,256 35,378 Insurance 14,568 3,393 17,961 1,996-19,957 10,244 Dues and subscriptions 5,740 1,178 6, ,918 1,475 Rent expense 9,268 2,158 11,426 1,270-12,696 38,277 Repairs and maintenance 51,499 11,993 63,492 7,055-70,547 45,076 Depreciation and amortization 62,271 14,502 76,773 8,530-85,303 47,223 Miscellaneous ,635-2,635 6,914 Total $ 2,865,100 $ 483,633 $ 3,348,733 $ 405,853 $ 180,779 $ 3,935,365 $ 2,571,

45 FRUCHTER ROSEN & COMPANY, P.C. CERTIFIED PUBLIC ACCOUNTANTS 156 WEST 56 TH STREET NEW YORK, NEW YORK TEL: (212) FAX: (212) 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 TO THE BOARD OF TRUSTEES THE EQUITY PROJECT CHARTER SCHOOL We have audited the financial statements of The Equity Project Charter School (the School ) as of and for the year ended June 30, 2011 and for the period from January 15, 2008 (inception) to June 30, 2010, and have issued our report thereon dated October 24, We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control over Financial Reporting In planning and performing our audits, we considered the School s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the School s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the School s internal control over financial reporting. 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. Our consideration of internal control over financial reporting 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 deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above

46 TO THE BOARD OF TRUSTEES THE EQUITY PROJECT CHARTER SCHOOL 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 audits, 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 noted certain matters that were reported to the management of the School in a separate letter October 24, This report is intended solely for the information and use of management, Board of Trustees, federal, state and local awarding agencies, The Department of Education of the City of New York, The State Education Department of the State University of New York, and others within the School and is not intended to be and should not be used by anyone other than these specified parties. New York, New York October 24,