VOYAGER FOUNDATION, INC. (A Component Unit of Voyager Academy, Inc.) AUDITED FINANCIAL STATEMENTS JUNE 30, 2017 AND 2016 DRAFT

Transcription

1 (A Component Unit of Voyager Academy, Inc.) AUDITED FINANCIAL STATEMENTS JUNE 30, 2017 AND 2016

2 TABLE OF CONTENTS JUNE 30, 2017 Independent Auditor's Report 3 FINANCIAL STATEMENTS Statement of Financial Position 6 Statement of Activities and Net Assets 7 Statement of Cash Flows 8 NOTES TO FINANCIAL STATEMENTS Notes to the Financial Statements 10 PAGE

3 INDEPENDENT AUDITOR S REPORT To the Board Members Voyager Foundation, Inc. Durham, North Carolina We have audited the accompanying financial statements of Voyager Foundation, Inc., a component unit of Voyager Academy, Inc., North Carolina (a nonprofit organization), which comprise the statements of financial position as of June 30, 2017 and 2016, and the related statements of activities and net assets, and cash flows for the years then ended, and the related notes to the financial statements. 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 an opinion 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. 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 opinion. our audit

4 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Voyager Foundation, Inc., a component unit of Voyager Academy, Inc., North Carolina as of June 30, 2017 and 2016, and the changes in its net assets and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Leslie Merritt, CPA, PC Certified Public Accountant Zebulon, North Carolina XXXX 4

5 FINANCIAL STATEMENTS

6 ASSETS EXHIBIT 1 CURRENT ASSETS Cash and cash equivalents $ 179,465 $ 28,895 Total Current Assets 179,465 28,895 PROPERTY AND EQUIPMENT Land 3,286,257 3,286,257 Elementary school building 5,446,458 5,446,458 Middle school building 5,510,285 5,510,285 High school building 6,281,233 6,281,233 School equipment 499, ,081 Media center 1,110,673 1,110,673 Caretaker house 490, ,597 22,624,584 22,624,584 Less: Accumulated depreciation (4,192,805) (3,502,788) Property and Equipment, net 18,431,779 19,121,796 OTHER ASSETS Restricted bond reserve fund 1,814,784 1,814,135 Restricted bond principal fund 303, ,757 Restricted bond interest fund 350, ,739 Restricted bond expense fund 198, ,290 Restricted bond insurance fund 45,514 26,962 Unamortized bond issuance cost, net 448, ,987 Total Other Assets 3,161,559 3,236,870 Total Long Term Assets 21,593,338 22,358,666 TOTAL ASSETS $ 21,772,803 $ 22,387,561 LIABILITIES AND NET ASSETS VOYAGER FOUNDATION, INC. (A Component Unit of Voyager Academy, Inc.) STATEMENTS OF FINANCIAL POSITION JUNE 30, 2017 AND 2016 CURRENT LIABILITIES Accounts payable $ $ 24,545 Notes payable, current portion 422, ,417 Total current liabilities 422, ,962 LONG TERM LIABILITIES Long term debt 24,094,309 24,470,994 TOTAL LIABILITIES 24,516,809 24,870,956 NET ASSETS Unrestricted (2,744,006) (2,483,395) TOTAL NET ASSETS (2,744,006) (2,483,395) TOTAL LIABILITIES AND NET ASSETS $ 21,772,803 $ 22,387,561 The notes to the financial statements are an integral part of this statement. 6

7 (A Component Unit of Voyager Academy, Inc.) STATEMENTS OF ACTVITIES AND NET ASSETS FOR THE YEARS ENDED JUNE 30, 2017 AND 2016 EXHIBIT Unrestricted Unrestricted REVENUES Rental income $ 1,998,025 $ 1,869,838 Donations 4,895 Interest income 932 TOTAL REVENUE 1,998,957 1,874,733 EXPENSES Interest expense 1,401,520 1,429,007 Depreciation expense 690, ,215 Property insurance 32,240 32,359 Bond fees 19,570 23,002 Amortization expense 32,406 32,406 Professional fees 3,025 3,847 Equipment maintenance 80,790 24,545 TOTAL EXPENSES 2,259,568 2,237,381 Decrease in Net Assets (260,611) (362,648) Net Assets at Beginning of Period (2,483,395) (2,120,747) Net Assets at End of Period $ (2,744,006) $ (2,483,395) The notes to the financial statements are an integral part of this statement. 7

8 CASH FLOWS FROM OPERATING ACTIVITIES EXHIBIT 4 Decrease in net assets $ (260,611) $ (362,648) Adjustments to reconcile changes in net assets to net cash provided by operating activites: Depreciation 690, ,215 Amortization 32,406 32,406 Changes in assets and liabilities Accounts payable (24,545) 24,545 Total adjustments 697, ,166 Net Cash Provided by Operating Activities 437, ,518 CASH FLOWS FROM INVESTING ACTIVITIES Acquisitions of property and equipment Net Cash Used by Investing Activities CASH FLOWS FROM FINANCING ACTIVITIES VOYAGER FOUNDATION, INC. (A Component Unit of Voyager Academy, Inc.) STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 2017 AND 2016 Net increase bond principal/interest/expense funds 42,905 (17,635) Repayment of long term debt (329,602) (365,000) Net Cash Used by Financing Activities (286,697) (382,635) NET INCREASE (DECREASE) IN CASH 150,570 3,883 Cash at Beginning of Year 28,895 25,012 Cash at End of Year $ 179,465 $ 28,895 SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION: Net cash paid during the year for: Interest Expense $ 1,401,520 $ 1,429,007 The notes to the financial statements are an integral part of this statement. 8

9 NOTES TO THE FINANCIAL STATEMENTS

10 NOTES TO FINANCIAL STATEMENTS June 30, 2017 and 2016 NOTE 1 NATURE OF ACTIVITIES Voyager Foundation, Inc., a component unit of Voyager Academy, Inc. (the Organization ) is a North Carolina nonprofit organization formed for the benefit of. To perform the functions of, or to carry out the purposes of Voyager Academy, Inc., a North Carolina Charter School. The Organization s Board of Directors is appointed by the governing body of Voyager Academy, Inc. In January 2010, the Organization entered into a sale/lease back transaction with Voyager Academy, Inc. which conveyed the School property and debt to the Organization. The Organization leases the School property back to Voyager Academy, Inc. The majority of the Organization s revenues are derived from lease payments for use of the School property paid by Voyager Academy, Inc. NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The Organization is required to report information regarding its financial position and activities according three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. Contributions Contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support, depending on the existence and/or nature of any donor restrictions. Support that is restricted by the donor is reported as an increase in unrestricted net assets if the restriction expires in the reporting period in which the support is recognized. All other donor restricted support is reported as an increase in temporarily or permanently restricted net assets, depending on the nature of the restriction. When the restriction expires (that is, when a stipulated time restriction ends or purpose restriction is accomplished), temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restriction. Cash and Cash Equivalents For purposes of the statements of cash flows, the Organization considers all highly liquid investments with an initial maturity of three months or less to be cash equivalents. Property and Equipment As the Organization is a component unit of Voyager Academy, Inc, Voyager Academy, Inc., transferred the School s fixed assets and land to the Organization at their net book value at the date of transfer. Property and equipment purchased by the Organization are stated at cost. Subsequent donations of property and equipment are recorded as support as their estimated fair value as established by the donor. Such donations are reported as unrestricted support unless the donor has restricted the donated asset to a specific purpose. During the ending June 30, 2008, acres of land and a building was donated to Voyager Academy, Inc. and recorded at tax value of $1,595,589. This tax value was considered fair value on June 30, 2008 financial statements of Voyager Academy, Inc. As appraisal was done December 21, 2007 by the donor of the property appraising the acres of land and the building at $2,900,000. Voyager Academy, Inc. decided to use the more conservative amount of $1,595,589 as the value to record the land and building on the books of the school in lieu of requesting an independent appraisal. 10

11 NOTES TO FINANCIAL STATEMENTS June 30, 2017 and 2016 Expenditures of maintenance, repairs and minor renewal are charged to expense as incurred. Major renewals and betterments are capitalized. Depreciation is calculated on the straight line method over the following estimated useful lives. School building Media center Caretaker home Equipment 30 years 39 years 27.5 years 7 years Income Tax Status The Organization is exempt from Federal income taxes under Section 501 (c)(3) of the Internal Revenue Code. In addition, the Organization has been classified as a Type 2 supporting organization under section 509 (a)(3) under the Internal Revenue Code and qualifies for the 50% charitable contribution deduction for individual donors. There was no unrelated business income for the years ended June 30, 2017 and The Organization has adopted ASC , effective for years ending after December 15, 2009, as it relates to uncertain tax positions for the years ended June 30, 2017 and The Organization is not currently under audit nor has the Organization been contacted by the Internal Revenue Service. Based on the evaluations of the Organization s tax positions, management believes all positions taken would be upheld under examination. Therefore, no provision for the effects of uncertain tax positions has been recorded for the years ended June 30, 2017 and Net Assets The net assets of the Organization therein are classified and reported as: Unrestricted net assets Net assets that are not subject to donor imposed stipulations. Temporarily restricted net assets Net assets subject to donor imposed stipulations that may, or will, be met either by actions of the Organization and/or the passage of time. The Organization did not have any temporarily net assets at year end. Permanently restricted net assets Net assets subject to donor imposed stipulations that they be maintained permanently by or for the benefit of Voyager Foundation, Inc. The Organization did not have any permanently restricted net assets at year end. Estimates Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities, and the reported revenues and expenses. Management believes its estimates are reasonable. Investments Investments in marketable securities with readily determinable fair values and all investments in debt securities are reported at their fair values in the statements of financial position. Unrealized gains and losses are included in the change in net assets. Unamortized Bond Insurance Costs Bond insurance costs in the amount of $510,260 are being amortized using the straight line method over the life of the bonds. Amortization charged to expense for the years ended June 30, 2017 and 2016 was $17,009 and $17,009, respectively, and accumulated amortization was $61,282 and $44,273 respectively. Bonded insurance cost 11

12 NOTES TO FINANCIAL STATEMENTS June 30, 2017 and 2016 amortization expense the each of the five years subsequent to the year ended June 30, 2017 is estimated to be $17,009 per year. Subsequent Events Management has evaluated subsequent events through XXXX, the date the financial statements were available to be issued. NOTE 3 CONCENTRATIONS OF CREDIT RISK The Organization places its cash and cash equivalents on deposit with financial institutions in the United States. The Federal Deposit Insurance Corporation (FDIC) covers $250,000 for substantially all depository accounts. As of year end, the Organization s cash balances did not exceed these insured amounts. NOTE 4 FAIR VALUE OF FINANCIAL INSTRUMENTS The Organization s financial instruments include cash and investments related to the Bond Funds. The Restricted Bond Funds are held by the Bank of New York Mellon Trust Company. The Organization estimates that the fair value of all financial instruments at June 30, 2017 and 2016 does not differ materially from the aggregate carrying values of its financial instruments recorded in the accompanying statements of financial position. The estimated fair value amounts have been determined by the Organization using available market information and appropriate valuation methodologies. Fair values for investments are determined by reference to quoted market prices and other relevant information generated by market transactions. Investments are componed of the following at June 30, 2017: Investments at fair value Fair Value Cost Unrealized Gain (Loss) Dreyfus Gov't Prime Cash Management Fund $ 2,712,581 $ 2,712,581 $ Fair values of assets measured on a recurring basis at June 30, 2017 are as follows: Quoted Prices in Active Markets for Identical Assets Fair Value (Level 1) Investment in Bond Funds $ 2,712,581 $ 2,712,581 Total Assets $ 2,712,581 $ 2,712,581 Fair values for investments are determined by reference to quoted market prices and other relevant information generated by market transactions. 12

13 NOTES TO FINANCIAL STATEMENTS June 30, 2017 and 2016 Investments are componed of the following at June 30, 2016: Investments at fair value Fair Value Cost Unrealized Gain (Loss) Dreyfus Gov't Prime Cash Management Fund $ 2,770,883 $ 2,770,883 $ Fair values of assets measured on a recurring basis at June 30, 2016 are as follows: Quoted Prices in Active Markets for Identical Assets Fair Value (Level 1) Investment in Bond Funds $ 2,770,883 $ 2,770,883 Total Assets $ 2,770,883 $ 2,770,883 Fair values for investments are determined by reference to quoted market prices and other relevant information generated by market transactions. NOTE 5 FIXED ASSETS Composition of fixed assets is as follows: Beginning Increases Decreases Ending Business type activities: Capital assets not being depreciated: Land $ 3,286,257 $ $ $ 3,286,257 Total capital assets not being depreciated 3,286,257 3,286,257 Capital assets being depreciated: School buildings 17,237,976 17,237,976 Caretaker house 490, ,597 Equipment 499, ,081 Media center 1,110,673 1,110,673 Total capital assets being depreciated 19,338,327 19,338,327 Less accumulated depreciation for: School buildings 2,843, ,600 3,418,131 Caretaker house 151,640 16, ,993 Equipment 265,546 71, ,843 Media center 242,071 27, ,838 Total accumulated depreciation 3,502,788 $ 690,017 $ 4,192,805 Total capital assets being depreciated, net 15,835,539 15,145,522 Business type activities capital assets, net $ 19,121,796 $ 18,431,779 Depreciation expense for each of the years ended June 30, 2017 and 2016 was $690,017 and $692,215, respectively. 13

14 NOTES TO FINANCIAL STATEMENTS June 30, 2017 and 2016 NOTE 6 LONG TERM DEBT Note Payable Series 2012A Bonds On October 9, 2012, the Public Finance Authority Charter School Revenue Bonds of the State of Wisconsin issued $16,165,000 of tax exempt educational facilities revenue bonds (the Bonds ) with final maturity on October 1, The bonds were issued in two series, Series A (Tax Exempt) was $15,990,000 and Series B (Taxable) was $175,000. The proceeds have been loaned to the Voyager Foundation, Inc. Such proceeds were used to purchase the elementary school and high school including equipment which the School leases from the Foundation. The Foundation is the obligor under the Series 2012 Bonds; however, the rental revenue from the School under the lease agreement between the Foundation, as lessor, and the School, as lessee, is the primary source of repayment of the Series 2012 Bonds. Series 2014A Bonds and Series 2014B Bonds On November 19, 2014, the Public Finance Authority Charter School Revenue Bonds of the State of Wisconsin issued $9,865,000 of the tax exempt educational facilities revenue bonds (the Bonds ) with final maturity on September 25, The bonds were issued in two series, Series A (Tax Exempt) was $9,680,000 and Series B (Taxable) was $185,000. The proceeds have been loaned to the Voyager Foundation, Inc. Such proceeds were used to pay off the Hock Note and the Self Help Note related to the middle school building, which the School leases from the Foundation. The Foundation is the obligor under the Series 2014 Bonds; however, the rental revenue from the School under the lease agreement between the Foundation, as lessor, and the School, as lessee, is the primary source of repayment of the Series 2014 Bonds. The 2012 and 2014 bond issuances involved a total discount of $461,931. As of June 30, 2017, the unamortized discount was $403,191 and the carrying amount of bonds payable on the statement of net position is reduced by this amount. On the day of issuance, the Foundation deposited $1,177,030, into the 2012 Bond Reserve Fund as required for these 2012 Bonds and $636,557 into the 2014 Bond Reserve Fund as required by the 2014 Bonds. The Bond Reserve Fund is restricted for payment and interest due to the extent revenues are insufficient to make such payments. All loan payments and other amounts required to be paid by the Organization are deposited into various 2012 and 2014 Bond Funds. Amounts are disbursed from these funds when principal, interest and other payments are due. At June 30, 2017, the amount is these funds for the 2012 Bonds and the 2014 Bonds combined were, Bond Principal Fund $303,839, Bond Interest Fund $350,242, Bond COI/Insurance Fund $45,514, and the Bond Expense/Project Fund $198,201. The following is a summary of changes in the Organization s long term liabilities for the fiscal year ended June 30, Balance July 1, 2016 Increases Decreases Balance June 30, 2017 Current Portion Bond Payable 2012 $ 15,545,000 $ 230,000 $ 15,315,000 $ 255,000 Bond Payable ,720, ,000 9,605, ,500 Less Bond Discount (418,589) 15,398 (433,987) Total $ 24,846,411 $ $ 360,398 $ 24,486,013 $ 422,500 14

15 NOTES TO FINANCIAL STATEMENTS June 30, 2017 and 2016 Required principal payments on long term debt are as follows: Year Ending June 30, 2018 $ 422,500 Year Ending June 30, ,750 Year Ending June 30, ,500 Year Ending June 30, ,750 Year Ending June 30, ,500 Years Ending June 30, ,005,000 Years Ending June 30, ,952,500 Years Ending June 30, ,236,250 Years Ending June 30, ,906,250 Years Ending June 30, ,480,000 $ 24,920,000 Interest expense for the years ended June 30, 2017 and 2016 was $1,401,520 and $1,429,007, respectively. NOTE 7 CONCENTRATIONS Sources of Revenue The Organization obtained 99% of its funding from Voyager Academy, Inc. for the years ended June 30, 2017 and NOTE 8 RELATED PARTY TRANSACTIONS All of the Board members of the Organization, with the exception of Donald Draughon and Jeff White, also serve on the Board of Voyager Academy, Inc. In January 2010, the Organization entered into an agreement to lease all middle school property and equipment to Voyager Academy, Inc. The contract ends on June 30, 2027 with options to extend the agreement for up to three successive renewal terms of ten years each. In October 2013, the Organization entered into an agreement to lease all elementary and high school property and equipment to Voyager Academy, Inc. The contract ends on October 31, Total rental income received from Voyager Academy, Inc. for the years ended June 30, 2017 and 2016 was $1,998,025 and $1,869,838, respectively. 15