NEW BEGINNINGS HIGH SCHOOL, INC. A CHARTER SCHOOL AND COMPONENT UNIT OF THE DISTRICT SCHOOL BOARD OF POLK COUNTY, FLORIDA

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1 THE DISTRICT SCHOOL BOARD OF POLK COUNTY, FLORIDA COMPILED FINANCIAL STATEMENTS FISCAL YEAR ENDED JUNE 30, 2017

2 CONTENTS Page Accountant s Compilation Report 1 Basic Financial Statements: Statement of Net Assets 2 Statement of Activities 3 Balance Sheet Governmental Funds 4 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets 5 Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds 6 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 7 Notes to Compiled Financial Statements: 8

3 GEORGE C. MIARECKI, CPA, P.L East Colonial Drive #204 Orlando, Florida Accountant s Compilation Report To the Board of Directors of New Beginnings High School, Inc., a Charter School and Component Unit of the District School Board of Polk County, Florida I have compiled the accompanying financial statements of the governmental activities, the major fund and the aggregate remaining fund information of New Beginnings High School, Inc. (the School ), a charter school and component unit of the District School Board of Polk County, Florida, as of and for the fiscal year ended June 30, 2017, which collectively comprise the School s basic financial statements as listed in the table of contents. These financial statements were compiled in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. I am not independent with respect to the School. A compilation is limited to presenting in the form of financial statements information that is the representation of management. I have not audited or reviewed the accompanying basic financial statements and, accordingly, do not express an opinion or any other form of assurance on them. George C. Miarecki, CPA, P.L. July 31,

4 STATEMENT OF NET ASSETS JUNE 30, 2017 Governmental Activities ASSETS Cash and cash equivalents $ 929,183 Accounts receivable 80,460 Other current assets 40,235 Capital assets: Buildings and improvements 804,136 Furniture, fixtures and equipment 576,888 Vehicles 465,388 Less accumulated depreciation (910,002) Total capital assets, net 936,410 Total assets $ 1,986,288 DEFERRED OUTFLOW OF RESOURCES Amount deferred on pension liability $ 631,211 LIABILITIES Accounts payable and accrued expenses $ 95,419 Deferred revenue - Long-term liabilities: Notes payable 342,911 Pension liability 498,163 Total liabilities 936,493 DEFERRED INFLOW OF RESOURCES Amount deferred on pension liability 143,538 NET ASSETS Invested in capital assets, net of related debt 593,499 Unrestricted 943,969 Total net assets 1,537,468 Total liabilities and net assets $ 2,617,499 2

5 STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2017 Net (Expense) Revenue and Program Revenues Changes in Net Assets Operating Capital Charges for Grants and Grants and Governmental Expenses Services Contributions Contributions Activities Total Governmental activities: Instruction $ 1,341,387 $ - $ 125,349 $ - $ (1,216,038) $ (1,216,038) Pupil personnel services 589, (588,288) (588,288) Curriculum development 110, (110,088) (110,088) Instructional staff training 12, (12,504) (12,504) Board 16, (16,728) (16,728) General administration 77, (77,079) (77,079) School administration 1,006,742-18,521 - (988,221) (988,221) Facilities acquisition and construction 77, (77,779) (77,779) Fiscal services 68, (68,508) (68,508) Food service 2, (2,318) (2,318) Central services 83, (83,403) (83,403) Pupil transportation 302, (302,157) (302,157) Operation of plant 1,028, ,540 (768,095) (768,095) Community services 9, (9,588) (9,588) Interest 13, (13,399) (13,399) Total primary government $ 4,739,464 $ - $ 144,731 $ 260,540 (4,334,193) (4,334,193) General revenues: Federal sources - - State and local sources 4,566,483 4,566,483 Contributions and other revenue 101, ,739 Total general revenues 4,668,222 4,668,222 Change in net assets 334, ,029 Net assets at beginning of period 1,203,439 1,203,439 Net assets at end of period $ 1,537,468 $ 1,537,468 3

6 BALANCE SHEET - GOVERNMENTAL FUNDS JUNE 30, 2017 Capital Total General Projects Governmental Fund Fund Funds ASSETS Cash and cash equivalents $ 929,183 $ - $ 929,183 Accounts receivable - 80,460 80,460 Other current assets 40,235-40,235 Total assets $ 1,049,878 $ 80,460 $ 1,130,338 LIABILITIES AND FUND BALANCES Accounts payable and accrued expenses $ 71,901 $ - $ 71,901 Deferred revenue Due to general fund - 80,460 80,460 Total liabilities 71,901 80, ,361 Fund balances: Nonspendable: Other current assets 40,235-40,235 Assigned: Designated for school-based student activity organizations 7,187-7,187 Spendable: Unassigned 930, ,555 Total fund balances 977, ,977 Total liabilities and fund balances $ 1,049,878 $ 80,460 $ 1,130,338 4

7 RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30, 2017 Total fund balances - governmental funds $ 977,977 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported as assets in the governmental funds. The cost of the assets is $1,846,412, and the accumulated depreciation is $910, ,410 Deferred amounts are reported in the Statement of Net Position as deferred outflows or deferred inflows of resources but are not reported in the funds. 487,673 Amounts accrued for compensated absences are not due and payable in the current period and, therefore, and not reported as liabilities in the governmental funds. (23,518) Long-term liabilities, including notes payable, are not due and payable in the current period and, therefore, are not reported as liabilities in the governmental funds. Long-term liabilities at the end of the period consist of: Notes Payable (342,911) Pension liability (498,163) Total net assets - governmental activities $ 1,537,468 5

8 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2017 Special Other Total General Revenue Governmental Governmental Fund Fund Funds Funds REVENUES Federal sources passed through local school district $ - $ 144,731 $ - $ 144,731 State and local sources 4,566, ,540 4,827,023 Contributions and other revenue 101, ,739 Total revenues 4,668, , ,540 5,073,493 EXPENDITURES Current: Instruction 1,132, ,349-1,257,669 Pupil personnel services 588, ,149 Curriculum development 110, ,088 Instructional staff training 12, ,504 Board 16, ,728 General administration 77, ,079 School administration 975,344 18, ,865 Facilities acquisition and construction Fiscal services 68, ,508 Food service 2, ,318 Central services 83, ,403 Pupil transportation 235, ,471 Operation of plant 761, ,540 1,022,418 Community services 9, ,588 Debt service: - Principal ,617 53,617 Interest ,399 13,399 Capital outlay 591, ,750 Total expenditures 4,665, , ,556 5,137,554 Excess (deficiency) of revenues over expenditures 2,955 - (67,016) (64,061) OTHER FINANCIAL SOURCES (USES) Proceeds from notes payable 396, ,528 Operating transfer in ,016 67,016 Operating transfer out (67,016) - - (67,016) Total other financial sources (uses) 329,512-67, ,528 Net changes in fund balances 332, ,467 Fund balances at beginning of period 645, ,510 Prior period adjustment (see Note 7) Fund balances at end of period $ 977,977 $ - $ - $ 977,977 6

9 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2017 Net changes in fund balances - total governmental funds $ 332,467 Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays ($591,750) exceed depreciation expense ($238,989) in the current period. 352,761 Compensated absences included in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in the governmental funds. (8,288) Cash inflows from issuance of long-term debt are other financial sources in the governmental funds, but the borrowings increase long-term liabilities in the statement of net assets. (396,528) Principal payments on long-term debt are expenditures in the governmental funds, but the repayments reduce long-term liabilities in the statement of net assets. 53,617 Change in net assets of governmental activities $ 334,029 7

10 NOTES TO COMPILED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization New Beginnings High School, Inc. (the School ) is a not-for-profit corporation organized pursuant to Chapter 617, Florida Statutes, the Florida Not For Profit Corporation Act and Section , Florida Statutes. The governing body of the School is the not-for-profit corporation Board of Directors, which is composed of not less than three members. The general operating authority of the School is contained in Section , Florida Statutes. The School operates under a charter of the sponsoring school district, the District School Board of Polk County, Florida (the School Board ). The current charter is effective until June 30, 2031 and may be renewed in increments of five or fifteen years by mutual written agreement between the School and the School Board. At the end of the term of the charter, the School Board may choose not to renew the charter under grounds specified in the charter. In this case, the School Board is required to notify the School in writing at least 90 days prior to the charter s expiration. During the term of the charter, the School Board may also terminate the charter if good cause is shown. In the event of termination of the charter, any property purchased by the School with public funds and any unencumbered public funds revert back to the School Board. The School is considered a component unit of the School Board and meets the definition of a governmental entity under the Audit and Accounting Guide State and Local Governments issued by the American Institute of Certified Public Accountants; therefore, for financial reporting purposes, the School is required to follow generally accepted accounting principles applicable to state and local government units. Criteria for determining if other entities are potential component units of the School which should be reported with the School s basic financial statements are identified and described in the Governmental Accounting Standards Board s (GASB) Codification of Governmental Accounting and Financial Reporting Standards, Sections 2100 and The application of these criteria provides for identification of any entities for which the School is financially accountable and other organizations for which the nature and significance of their relationship with the School are such that exclusion would cause the School s basic financial statements to be misleading or incomplete. Based on these criteria, no component units are included within the reporting entity of the School. Basis of presentation The School s financial statements have been prepared in accordance with generally accepted accounting principles as prescribed by the Governmental Accounting Standards Board. Accordingly, both governmentwide and fund financial statements are presented. 8

11 NOTES TO COMPILED FINANCIAL STATEMENTS (continued) The government-wide financial statements report information about the School as a whole using accounting methods similar to those used by private-sector companies. The statement of net assets includes all of the School s assets and liabilities. All of the current year s revenues and expenses are accounted for in the statement of activities regardless of when cash is received or paid. The government-wide financial statements of the School are generally divided into three categories: Governmental activities - most of the School s basic services are included here, such as instruction and school administration. Funds received through the Florida Education Finance Program (FEFP) and state and federal grants finance most of these activities. Business-type activities - in certain instances, the School may charge fees to help it cover the costs of certain services it provides. The School currently has no business-type activities. Component units - there currently are no component units included within the reporting entity of the School. The fund financial statements provide more detailed information about the School s most significant funds, not the School as a whole. A fund is an accounting entity having a self-balancing set of accounts for recording assets, liabilities, fund balance, revenues, expenditures, and other financing sources and uses. Resources are allocated to and accounted for in individual funds based on the purposes for which they are to be spent and the means by which spending activities are controlled. The funds in the financial statements of this report are as follows: Governmental Funds: General Fund - to account for all financial resources not required to be accounted for in another fund. Special Revenue Fund - to account for the proceeds of specific revenue sources that are legally restricted to expenditure for specified purposes. Debt Service Fund - to account for the accumulation of resources for, and payment of, general long-term debt principal, interest and related costs. For purposes of these statements, the general fund and special revenue fund are major funds. The debt service fund is non-major. Basis of accounting Basis of accounting refers to when revenues and expense/expenditures are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurements made, regardless of the measurement focus applied. The government-wide financial statements are presented using the accrual basis of accounting and an economic resources focus. Under the accrual basis of accounting, revenues and expenses are recognized when they occur. The modified accrual basis of accounting and current financial resources focus is followed by the governmental funds. Under the modified accrual basis, revenues are recognized when they become measurable and available. Available means collectible within the current period or soon enough thereafter to pay current liabilities. The School considers revenues to be available if they are collected within sixty days of 9

12 NOTES TO COMPILED FINANCIAL STATEMENTS (continued) the end of the fiscal year. Under the modified accrual basis of accounting, expenditures are generally recognized when the related fund liability is incurred. The principal exceptions to this general rule are: (1) interest on general long-term debt is recognized when due and (2) expenditures related to liabilities reported as general long-term debt are recognized when due. Budgetary basis accounting Budgets are presented on the modified accrual basis of accounting. During the fiscal year, expenditures were controlled at the object level (e.g., salaries, purchased services and capital outlay). Deposits and investments Cash deposits are held by banks qualified as public depositories under Florida law. Most deposits are insured by federal depository insurance and collateralized with securities held in Florida s multiple financial institution collateral pool as required by Chapter 280, Florida Statutes. The School s cash consists primarily of demand deposits with financial institutions. Capital assets and depreciation Expenditures for capital assets acquired for general School purposes are reported in the governmental fund that financed the acquisition. Purchased capital assets are reported at cost, net of accumulated depreciation, in the government-wide financial statements. Donated assets are recorded at fair value at the date of donation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which are as follows: Years Leasehold improvements Furniture, fixtures and equipment 2 5 Vehicles 2 Information relative to changes in capital assets is described in Note 2. Long-term liabilities Long-term obligations that will be financed by resources to be received in the future by the General Fund are reported in the government-wide financial statements, not in the General Fund. Changes in long-term liabilities for the current year are reported in Note 3. Revenue sources Revenues for current operations are received primarily from the District School Board of Polk County, Florida pursuant to the funding provisions included in the School s charter. As such, the School s revenue stream is largely dependent upon the general state of the economy and the amounts allotted to the Florida Department of Education ( FDOE ) by the state legislature. In accordance with the funding provisions of the 10

13 NOTES TO COMPILED FINANCIAL STATEMENTS (continued) charter and Section (18), Florida Statutes, the School reports the number of full-time equivalent students and related data to the School Board. Under the provisions of Section , Florida Statutes, the School Board reports the number of full-time equivalent students and related data to the FDOE for funding through the FEFP. Funding for the School is adjusted during the year to reflect the revised calculations by the FDOE under the FEFP and the actual weighted full-time equivalent students reported by the School during the designated full-time equivalent student survey periods. The School Board receives a 5% administrative fee from the School, which is reflected as a general administration expense/expenditure in the accompanying statement of activities and statement of revenues, expenditures and changes in fund balances - governmental funds. The School may receive federal awards for the enhancement of various educational programs. This assistance is generally received based on applications submitted to and approved by various granting agencies. For federal awards in which a claim to these grant proceeds is based on incurring eligible expenditures, revenue is recognized to the extent that eligible expenditures have been incurred. Use of estimates In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and affect revenues and expenditures for the period presented. Actual results could differ significantly from those estimates. 2 CHANGES IN CAPITAL ASSETS Capital asset activity for the fiscal year ended June 30, 2017 was as follows: Governmental activities: Capital assets being depreciated: Buildings and improvements 793,511 Beginning Ending Balance Increases Decreases Balance $ $ 10,625 $ - $ 804,136 Furniture, fixtures and equipment 413, , ,888 Vehicles 58, , ,388 Total capital assets at historical cost 1,265, ,749-1,846,412 Less accumulated depreciation for: Buildings and improvements $ (378,924) $ (80,524) $ - $ (459,448) Furniture, fixtures and equipment (262,250) (91,778) - (354,028) Vehicles (40,840) (55,686) - (96,526) Total accumulated depreciation (682,014) (227,988) - (910,002) Governmental activities capital assets, net $ 583,649 $ 352,761 $ - $ 936,410 11

14 NOTES TO COMPILED FINANCIAL STATEMENTS (continued) Depreciation for the fiscal year ended June 30, 2017 was comprised of $83,718 charged to instructional expenses, $6,951 charged to administrative expenses, $77,779 charged to facilities acquisition, $66,686 charged to transportation and $6,217 charged to operations. 3 SCHEDULE OF STATE AND LOCAL REVENUE SOURCES The following is a schedule of state and local revenue sources and amounts: District School Board of Orange County, Florida: Florida Education Finance Program $ 4,403,128 Teacher lead 2,112 Transportation 161,243 Total $ 4,566,483 The administration fee paid to the School Board during the fiscal year ended June 30, 2017 totaled approximately $77,000 which is reflected as a general administration expense/expenditure in the accompanying statement of activities and statement of revenues, expenditures and changes in fund balances - governmental funds. 4 RISK MANAGEMENT PROGRAM Workers compensation coverage, health and hospitalization, general liability, professional liability and property coverage are being provided through purchased commercial insurance with minimum deductibles for each line of coverage. Settled claims resulting from these risks have not historically exceeded commercial coverage. 12

15 NOTES TO COMPILED FINANCIAL STATEMENTS (continued) 5 COMMITMENTS AND CONTINGENT LIABILITIES Grants The School participates in state and federal grant programs, which are governed by various rules and regulations of the grantor agencies. Costs charged to the respective grant programs are subject to audit and adjustment by the grantor agencies; therefore, to the extent that the School has not complied with the rules and regulations governing the grants, refunds of any money received may be required and the collectibility of any related receivable at June 30, 2017 may be impaired. In the opinion of the School, there are no significant contingent liabilities relating to compliance with the rules and regulations governing the respective grants; therefore, no provision has been recorded in the accompanying financial statements for such contingencies. Legal matters In the normal course of conducting its operations, the School occasionally becomes party to various legal actions and proceedings. In the opinion of management, the ultimate resolution of such legal matters will not have a significant adverse effect on the accompanying financial statements. 13