Academy of Hope Adult PCS. Key Financial Indicators Does Not Meet Expectations Meets Expectations Exceeds Expectations. PCS Expenses by category

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1 Change in Net Assets Margin: = (Total Operating Revenue-Total Operating ) / Total Operating Revenue Aggregated Three-Year Margin: = Change in Net Assets for 3-Year Period - Operating Revenues for Same Period Enrollment Variance: = (Audited Enrollment - Budgeted - Enrollment) Budgeted Enrollment Current Ratio: = Current Assets Current Liabilities - Cash Flow from Operations Margin: = Cash Flows from Operations - Operating Revenues Days of Cash on Hand: = Unrestricted Cash /(Operating - -Depreciation)/365 Debt Ratio: = Total Liabilities Total Assets - Debt Service Coverage Ratio: = EBITDA / (Scheduled Payments Balloon - Payment* + Interest Paid) Primary Reserve Ratio: = (Unrestricted Net Assets + Temporarily Restricted - Net Assets - Intangible Assets) Total Unresolved Prior Year Findings: Opened: Audited Enrollment: Key Financial Indicators Does t Meet Expectations Meets Expectations Exceeds Expectations - Academy of Hope Adult PCS -1.5% % 15 Days.9-7.4% Debt Compliance Issue - Financial: Days % % % % 5.9% % 7.4% 18.6% % 32.6% 34.% 1.2% 6.3% Debt Compliance Issue - Reporting: * Balloon Payment Amount: = 217 Sector Median = 217 School Results = 216 School Results Comments from the School Changes: 1- Cash on hand net of LOC. 2- ST writeup implies there is $1M outstanding on LOCs vs. actual balance of $132K.The school has 56 days of cash on hand. This indicates that the school has adequate cash on hand to meet operating expenses in the event of unexpected delays in cash receipts. 7% 65% 6% 55% PCS by category Acad. of Hope PCS DC Charter Sector The school had three lines of credit totaling $1.5 million that expire in April, July, and September 218. The school is current on interest and principal payments. 2% 15% 1% 5% % Office Salaries and Benefits Direct Student Costs Occupancy General Academy of Hope Adult PCS 1

2 Academy of Hope Adult PCS Financial position Total Assets $6,313,889 $6,53,498 Current Assets $1,95,89 $1,117,188 Total Liabilities $4,538,832 $4,911,184 Current Liabilities $646,129 $798,214 Net Asset Position $1,775,57 $1,592,314 FINANCIAL ACTIVITIES Revenues and Support $5,853,94 $4,981,512 $5,667,993 $4,689,53 n-operating Revenues () -$2,358 $ Surplus (Deficit) $182,743 $292,9 Audit Findings Qualified/Modified/Adverse Opinion on the Financial Statements Material Weakness in Internal Control over Financial Reporting (GAS) n-compliance Material to the Financial Statements (GAS) Modified Opinion on Major Federal Award Programs (Uniform Guidance) Material Weaknesses in the Internal Control over Compliance with Major Federal Programs (Uniform Guidance) Findings and Questioned Costs Going-Concern Issue REVENUES/EXPENSES PER STUDENT DC Funding Grants and Contributions Per Student Total Revenues per Student 217 Sector Median $11,799 $11,719 $18,19 $2,838 $1,995 $298 $15,68 $14,915 $2,79 $15,115 $14,4 $2,387 PCSB OBSERVATIONS All of the school s key financial indicators, other than enrollment variance, are above the meets-expectations range. While enrollment fell short of budgeted levels, the school has experienced three consecutive years of enrollment growth. The school has 56 days of cash on hand and 47 days after accounting for line of credit balances. This indicates that the school has adequate cash on hand to meet operating expenses in the event of unexpected delays in cash receipts. The school has three lines of credit (LOC) totaling $1.5M that expire in April, July, and September 218. Outstanding balances on the LOC at year-end totaled $132K, required as part of the terms of the school s note payable. In April 216, the school obtained a $4.1M term note from PNC Bank to acquire a building at th Place NE, Washington, DC. The note is scheduled to mature April 15, 221, with a balloon payment of $3,661,972 due at maturity. The school also subleases office space from an unrelated private party located at 421 Alabama Avenue, SE, expiring July 1, 218. Monthly rental payments under this sublease were $18,462 through August 217 and were increased to $19,16 beginning September 1, 217, to the remainder of the lease term. Academy of Hope Adult PCS 2

3 Change in Net Assets Margin: = (Total Operating Revenue-Total Operating ) / Total Operating Revenue Aggregated Three-Year Margin: = Change in Net Assets for 3-Year Period - Operating Revenues for Same Period Enrollment Variance: = (Audited Enrollment - Budgeted - Enrollment) Budgeted Enrollment Current Ratio: = Current Assets Current Liabilities - Cash Flow from Operations Margin: = Cash Flows from Operations - Operating Revenues Days of Cash on Hand: = Unrestricted Cash /(Operating - -Depreciation)/365 Debt Ratio: = Total Liabilities Total Assets - Debt Service Coverage Ratio: = EBITDA / (Scheduled Payments Balloon - Payment* + Interest Paid) Primary Reserve Ratio: = (Unrestricted Net Assets + Temporarily Restricted - Net Assets - Intangible Assets) Total Unresolved Prior Year Findings: Achievement preparatory academy PCS Key Financial Indicators Does t Meet Expectations Meets Expectations Exceeds Expectations - Opened: Audited Enrollment: % % 7.4% 44.9% -2.% 15 Days Debt Compliance Issue - Financial: -6.8% -5.6% Days % 2.2% 3.9% % 7.8% 32.6% 33.5% 35.5% 8.7% 9.8% Debt Compliance Issue - Reporting: * Balloon Payment Amount: = 217 Sector Median = 217 School Results = 216 School Results Comments from the School 7% 65% PCS by category Achievement Preparatory Academy PCS 6% DC Charter Sector 55% 2% 15% 1% 5% % Office Salaries and Benefits Direct Student Costs Occupancy General Achievement Preparatory Acedemy PCS 1

4 Achievement Preparatory Academy PCS Financial position Total Assets $41,112,73 $45,92,533 Current Assets $9,18,211 $14,386,738 Total Liabilities $35,373,419 $41,216,834 Current Liabilities $1,88,79 $6,786,9 Net Asset Position $5,739,311 $4,73,699 FINANCIAL ACTIVITIES Revenues and Support $17,395,316 $12,32,1 $16,164,385 $11,9,168 n-operating Revenues () -$195,319 -$61,438 Surplus (Deficit) $1,35,612 $88,395 Audit Findings Qualified/Modified/Adverse Opinion on the Financial Statements Material Weakness in Internal Control over Financial Reporting (GAS) n-compliance Material to the Financial Statements (GAS) Modified Opinion on Major Federal Award Programs (Uniform Guidance) Material Weaknesses in the Internal Control over Compliance with Major Federal Programs (Uniform Guidance) Findings and Questioned Costs Going-Concern Issue REVENUES/EXPENSES PER STUDENT DC Funding Grants and Contributions Per Student Total Revenues per Student 217 Sector Median $16,951 $16,332 $18,19 $24 $682 $298 $18,665 $18,342 $2,79 $17,344 $16,96 $2,387 PCSB OBSERVATIONS The school had a surplus of $1.M and a change in net assets margin of 7.1%, well above expectations. While most of the school s key financial indicators are at or above the meets-expectations range, the school s cash flow from operations margin, which measures whether a school s operations are using or generating cash, did not meet expectations at (18.7%). This was largely due to a large contruction payables at FY216 and is not a cause for concern. The school has 195 days of cash on hand. This indicates that the school has adequate cash on hand to meet operating expenses in the event of unexpected costs or delays in cash receipts. During May 215, the school secured three associated loans to finance construction and renovation of the its facility and payment of facility rent. These loans were $24.1M from Bank of America, $2.M from the District of Columbia s Office of Public Charter School Financing and Support, and $2.5M from Building Hope. In August 215, the school entered into a ground lease agreement with the District of Columbia to lease the property at Wahler Place for 3 years beginning August 1, 215. Rent will be abated for 12 consecutive calendar months for each $1M of expense incurred for construction, capital alteration, and leasehold acquisition costs. Since construction, capital alteration and leasehold acquisitions costs were higher than the rent expense for the lease term, there is no rent expensed for the life of the lease. Rent expense for the years ended June 3, 217, and June 3, 216, totaled $ and $297,148, respectively. Achievement Preparatory Academy PCS 2

5 School Name FY17 Revenues FY17 Operating Result Achievement Prep PCS $17,395,316 $1,35,612 Management Organization ( MO ) / Related Party ( RP ) AppleTree Institute for Education Innovation MO/RP Tax Status n-profit Highest Paid Employee / Head of MO / RP Title Total Compensation William J. McCarthy President and CEO $244,996 Services Provided FY17 Payment % of School Revenue Educational Program for Pre-School and Pre- Kindergarten $2,14, % Total $2,14, % DC PCSB Comments Effective July 1, 216, the school entered into a management agreement with AppleTree Institute for Education Innovation (AppleTree). AppleTree fully manages and operates the educational program for PK3 and PK4. As a management fee for these services, AppleTree receives an amount equal to the per-pupil funding the school receives for its enrolled PK3 and PK4 students, excluding the facilities allotment and less any administrative fees. Management fees incurred for 217 were $2.1M. Please note that the highest paid employee above was taken from the most recent 99 available at the time this report was produced. School Comments 3

6 Change in Net Assets Margin: = (Total Operating Revenue-Total Operating ) / Total Operating Revenue Aggregated Three-Year Margin: = Change in Net Assets for 3-Year Period - Operating Revenues for Same Period Enrollment Variance: = (Audited Enrollment - Budgeted - Enrollment) Budgeted Enrollment Current Ratio: = Current Assets Current Liabilities - Cash Flow from Operations Margin: = Cash Flows from Operations - Operating Revenues Days of Cash on Hand: = Unrestricted Cash /(Operating - -Depreciation)/365 Debt Ratio: = Total Liabilities Total Assets - Debt Service Coverage Ratio: = EBITDA / (Scheduled Payments Balloon - Payment* + Interest Paid) Primary Reserve Ratio: = (Unrestricted Net Assets + Temporarily Restricted - Net Assets - Intangible Assets) Total Unresolved Prior Year Findings: Opened: Audited Enrollment: Key Financial Indicators Does t Meet Expectations Meets Expectations Exceeds Expectations - appletree early learning PCS -1.5% % 15 Days.9 Debt Compliance Issue - Financial: Operates with a Management Organization: AppleTree Institute for Education Innovation Days % 2.2% 3.9% -3.% -2.9% % % 7.4% 8.5% 32.6% % 6.8% % % 44.3% Debt Compliance Issue - Reporting: * Balloon Payment Amount: = 217 Sector Median = 217 School Results = 216 School Results Comments from the School Too much info for a 3% variance. The school currently serves 631 children at six public charter preschool campuses across the District. In , the school successfully concluded its ten-year charter review with its authorizer, the DC Public Charter School Board, and received approval to increase its enrollment cap to 833 students for the school year. This fluctuation in enrollment may be one of the reasons why the school s enrollment variance was below the target range of % for both 217 and % 65% 6% 55% 2% 15% PCS by category Appletree Early Learning PCS DC Charter Sector 1% 5% % Office Salaries and Benefits Direct Student Costs Occupancy General Appletree Early Learning PCS 1

7 AppleTree Early Learning PCS Financial position Total Assets $8,56,591 $8,77,287 Current Assets $4,615,341 $4,258,859 Total Liabilities $2,889,97 $3,444,838 Current Liabilities $982,713 $1,137,1 Net Asset Position $5,616,621 $5,325,449 FINANCIAL ACTIVITIES Revenues and Support $12,97,221 $13,574,345 $12,679,49 $12,835,494 n-operating Revenues () $ $ Surplus (Deficit) $291,172 $738,851 Audit Findings Qualified/Modified/Adverse Opinion on the Financial Statements Material Weakness in Internal Control over Financial Reporting (GAS) n-compliance Material to the Financial Statements (GAS) Modified Opinion on Major Federal Award Programs (Uniform Guidance) Material Weaknesses in the Internal Control over Compliance with Major Federal Programs (Uniform Guidance) Findings and Questioned Costs Going-Concern Issue REVENUES/EXPENSES PER STUDENT DC Funding Grants and Contributions Per Student Total Revenues per Student 217 Sector Median $18,128 $18,6 $18,19 $58 $422 $298 $2,555 $2,788 $2,79 $2,94 $19,656 $2,387 PCSB OBSERVATIONS All of the school s key financial indicators, other than the enrollment variance, are at or above the meets-expectations range. The school has 126 days of cash on hand. This indicates that the school has adequate cash on hand to meet operating expenses in the event of unexpected costs or delays in cash receipts. The school has lease agreements with AppleTree Institute (ATI), a related party, for facilities at Columbia Heights, Oklahoma Avenue, Parkland, and Lincoln Park. The school also has a sublease with ATI for office space at Michigan Avenue. Moreover, the school leases certain property from AppleTree Columbia Heights LLC, which is an affiliate of ATI. In addition to these leases, the school has a license to occupy agreement with the District of Columbia to provide a public charter school on the premises of Jefferson Middle School. In total, the school had rent expenses and licensing fees of $1.3M in both 217 and 216. AppleTree Early Learning PCS 2

8 School Name FY17 Revenues FY17 Operating Result AppleTree Early Learning PCS $12,97,221 $291,172 Management Organization ( MO ) / Related Party ( RP ) AppleTree Institute for Education Innovation MO/RP Tax Status n-profit Highest Paid Employee / Head of MO / RP Title Total Compensation William J. McCarthy President and CEO $244,996 Services Provided FY17 Payment % of School Revenue Rent expense to the Institute $859, % Services provided to the Institute ($798,153) -6.15% Shared services provided by the Institute $31, % Total $371, % DC PCSB Comments The school was designed by AppleTree Institute for Education Innovation Inc. (the Institute). The Institute supports the school as a strategic partner, with a commitment to fund any operating shortfalls of the school. The school and AppleTree Institute share common board members. The school rents four facilities from the Institute. Effective July 1, 215, the school entered into a services agreement with the Institute outlining the division of specific operating costs. Please note that the highest paid employee above was taken from the most recent 99 available at the time this report was produced. School Comments 3

9 Change in Net Assets Margin: = (Total Operating Revenue-Total Operating ) / Total Operating Revenue Aggregated Three-Year Margin: = Change in Net Assets for 3-Year Period - Operating Revenues for Same Period Enrollment Variance: = (Audited Enrollment - Budgeted - Enrollment) Budgeted Enrollment Current Ratio: = Current Assets Current Liabilities - Cash Flow from Operations Margin: = Cash Flows from Operations - Operating Revenues Days of Cash on Hand: = Unrestricted Cash /(Operating - -Depreciation)/365 Debt Ratio: = Total Liabilities Total Assets - Debt Service Coverage Ratio: = EBITDA / (Scheduled Payments Balloon - Payment* + Interest Paid) Primary Reserve Ratio: = (Unrestricted Net Assets + Temporarily Restricted - Net Assets - Intangible Assets) Total Unresolved Prior Year Findings: Opened: Audited Enrollment: Key Financial Indicators Does t Meet Expectations Meets Expectations Exceeds Expectations - Basis DC PCS -1.5% % 15 Days.9 Debt Compliance Issue - Financial: Operates with a Management Organization: BASIS ED 14.4% 17.4% % -5.2% 45 Days % 2.2% 3.9% -.5% % 7.4% 14.2% % 4.6% 32.6% % Debt Compliance Issue - Reporting: * Balloon Payment Amount: = 217 Sector Median = 217 School Results = 216 School Results Comments from the School PCS by category 7% 65% Basis DC PCS 6% DC Charter Sector 55% 2% 15% 1% 5% % Office Salaries and Benefits Direct Student Costs Occupancy General Basis DC PCS 1

10 BASIS DC PCS Financial position Total Assets $1,819,912 $1,769,86 Current Assets $1,62,698 $1,552,29 Total Liabilities $484,447 $376,71 Current Liabilities $484,447 $376,71 Net Asset Position $1,335,465 $1,393,96 FINANCIAL ACTIVITIES Revenues and Support $9,221,215 $9,97,74 $9,277,183 $8,14,91 n-operating Revenues () -$1,663 $ Surplus (Deficit) -$57,631 $1,82,83 Audit Findings Qualified/Modified/Adverse Opinion on the Financial Statements Material Weakness in Internal Control over Financial Reporting (GAS) n-compliance Material to the Financial Statements (GAS) Modified Opinion on Major Federal Award Programs (Uniform Guidance) Material Weaknesses in the Internal Control over Compliance with Major Federal Programs (Uniform Guidance) Findings and Questioned Costs Going-Concern Issue REVENUES/EXPENSES PER STUDENT DC Funding Grants and Contributions Per Student Total Revenues per Student 217 Sector Median $14,544 $14,25 $18,19 $357 $366 $298 $15,446 $15,188 $2,79 $15,54 $13,381 $2,387 PCSB OBSERVATIONS All of the school s key financial indicators are at or above the meets-expectations range. The school s current ratio, a measure of the financial resources available to meet short-term obligations, remains strong at 3.35 versus a meets-expectations range of.7 to 1.. The school also has 59 days of cash on hand against the range of 15 to 45 days, indicating that it has adequate cash to meet operating expenses in the event of unexpected expenses or delays in cash receipts. The school has a management contract with BASIS Educational Group (BEG). Although the school has metrics that currently meet or exceed expectations, many of these key metrics declined year-over-year. For example, the school had a deficit of ($58K) compared with a surplus the prior year of $1.8M, driven by a $568K increase in personnel costs and a $582K increase in rent. This led to an increase of $2,115 in the average cost per student. The school also experienced declines in its current ratio, cash flows from operations margin, and days cash on hand, though they continue to exceed expectations. While not a cause for concern, the school should monitor these numbers to ensure the downward trend does not continue, especially given that enrollment has been essentially unchanged for the past three years. The school leases its current facility from BASIS School, its management organization. Rent expense for the year ended June 3, 217, was $1.7M compared with $1.1M the prior year. Lease payments are based on the amounts that BASIS School is obligated to pay for debt service on the loans on the property, as well as taxes, insurance, etc. Future lease obligations are $1.9M in 218 and increase up to $2.M by 222. BASIS DC PCS 2

11 School Name FY17 Revenues FY17 Operating Result BASIS DC PCS $9,221,215 $(57,631) Management Organization ( MO ) / Related Party ( RP ) BASIS Educational Group (d.b.a. BASIS.ed) Highest Paid Employee / Head of MO / RP MO/RP Tax Status For Profit Title Total Compensation Peter Bezanson CEO Unknown Services Provided FY17 Payment % of School Revenue Leased employees $5,236, % Management fees $992, % Total $6,229, % DC PCSB Comments BASIS Educational Group (BASIS.ed), a for-profit organization that provides comprehensive educational and support services to charter and independent schools, is the school s management organization. The board chairperson of BASIS DC is also the board chairperson of BASIS Schools, Inc. In addition, two of the BASIS DC board members serve together in a business capacity with a separate and unrelated not-forprofit 51 (c)(3) corporation. School Comments 3

12 School Name FY17 Revenues FY17 Operating Result BASIS DC PCS $9,221,215 $(57,631) Management Organization ( MO ) / Related Party ( RP ) BASIS Schools, Inc. Highest Paid Employee / Head of MO / RP MO/RP Tax Status n-profit Title Total Compensation Unknown Unknown Unknown Services Provided FY17 Payment % of School Revenue Rent $1,711, % Total $1,711, % DC PCSB Comments BASIS Schools, Inc., an Arizona nonprofit organization that operates multiple charter schools, is the sole member of Basis DC PCS. The School entered into a lease agreement with BASIS Schools, Inc. for the rental of office space located at Eighth Street NW, which expires on June 3, 242. Base rent payments have been defined as the amount equal to the amount the Lessor is obligated to pay for the debt service of the loans on the occupied property as well as any other taxes, insurance, etc. on the leased property. School Comments 4

13 Change in Net Assets Margin: = (Total Operating Revenue-Total Operating ) / Total Operating Revenue Aggregated Three-Year Margin: = Change in Net Assets for 3-Year Period - Operating Revenues for Same Period Enrollment Variance: = (Audited Enrollment - Budgeted - Enrollment) Budgeted Enrollment Current Ratio: = Current Assets Current Liabilities - Cash Flow from Operations Margin: = Cash Flows from Operations - Operating Revenues Days of Cash on Hand: = Unrestricted Cash /(Operating - -Depreciation)/365 Debt Ratio: = Total Liabilities Total Assets - Debt Service Coverage Ratio: = EBITDA / (Scheduled Payments Balloon - Payment* + Interest Paid) Primary Reserve Ratio: = (Unrestricted Net Assets + Temporarily Restricted - Net Assets - Intangible Assets) Total Unresolved Prior Year Findings: Key Financial Indicators Does t Meet Expectations Meets Expectations Exceeds Expectations - BREAKTHROUGH MONTESSORI PCS Opened: Audited Enrollment: % % 15 Days.9 Debt Compliance Issue - Financial: Days %.9% 2.2% % 3.9% -.1% 32.6% % % % Debt Compliance Issue - Reporting: * Balloon Payment Amount: = 217 Sector Median = 217 School Results = 216 School Results Comments from the School PCS by category 7% 65% Breakthrough PCS 6% DC Charter Sector 55% 2% 15% 1% 5% % Office Salaries and Benefits Direct Student Costs Occupancy General Breakthrough Montessori PCS 1

14 Breakthrough Montessori PCS Financial position Total Assets $755,844 $ Current Assets $619,58 $ Total Liabilities $124,91 $ Current Liabilities $112,569 $ Net Asset Position $631,753 $ FINANCIAL ACTIVITIES Revenues and Support $2,229,334 $ $1,968,474 $ n-operating Revenues () $ $ Surplus (Deficit) $26,86 $ Audit Findings Qualified/Modified/Adverse Opinion on the Financial Statements Material Weakness in Internal Control over Financial Reporting (GAS) n-compliance Material to the Financial Statements (GAS) Modified Opinion on Major Federal Award Programs (Uniform Guidance) Material Weaknesses in the Internal Control over Compliance with Major Federal Programs (Uniform Guidance) Findings and Questioned Costs Going-Concern Issue REVENUES/EXPENSES PER STUDENT DC Funding Grants and Contributions Per Student Total Revenues per Student 217 Sector Median $17,9 $ $18,19 $5,573 $ $298 $25,49 $ $2,79 $22,118 $ $2,387 PCSB OBSERVATIONS The school s cash flow from operations margin, a measure of the amount of cash generated from revenues, is above the meets-expectations range. One of the drivers behind this was the result of grants receivable of $371.6K converting into cash during 217. The school has 15 days of cash on hand. This indicates that the school has substantial cash on hand to meet operating expenses in the event of unexpected expenses or delays in cash receipts. On April 5, 216, the school entered into a sublease agreement with another DC public charter school for use of its current facility at Taylor Road, NW, Washington, DC. The sublease commenced August 1, 216, and will expire July 3, 221. Rent expense for the year ended June 3, 217, totaled $397K. The school recently announced its intent to lease a second facility and to operate with two campuses before moving to a new facility at the expiration of the lease. Breakthrough Montessori PCS 2

15 Change in Net Assets Margin: = (Total Operating Revenue-Total Operating ) / Total Operating Revenue Aggregated Three-Year Margin: = Change in Net Assets for 3-Year Period - Operating Revenues for Same Period Enrollment Variance: = (Audited Enrollment - Budgeted - Enrollment) Budgeted Enrollment Current Ratio: = Current Assets Current Liabilities - Cash Flow from Operations Margin: = Cash Flows from Operations - Operating Revenues Days of Cash on Hand: = Unrestricted Cash /(Operating - -Depreciation)/365 Debt Ratio: = Total Liabilities Total Assets - Debt Service Coverage Ratio: = EBITDA / (Scheduled Payments Balloon - Payment* + Interest Paid) Primary Reserve Ratio: = (Unrestricted Net Assets + Temporarily Restricted - Net Assets - Intangible Assets) Total Unresolved Prior Year Findings: Opened: Audited Enrollment: Key Financial Indicators Does t Meet Expectations Meets Expectations Exceeds Expectations - Bridges PCS -1.5% % 15 Days.9-8.9% Debt Compliance Issue - Financial: % 24.4% 45 Days % 1.3% 2.2% % % 3.4% 3.9% 4.1% % 6.4% 7.4% % Debt Compliance Issue - Reporting: * Balloon Payment Amount: = 217 Sector Median = 217 School Results = 216 School Results Comments from the School The school s amount of days of cash on hand dropped from 48.6 in 216 to 42.9 in 217. This was largely due to a 14.3% increase in operating expenses from 216 to 217. Despite this drop, the school is still close to the acceptable range of 45 days. The school s cash flow from operations margin of 3.4% is well above expectations. 7% 65% 6% 55% PCS by category Bridges PCS DC Charter Sector The school s enrollment variance decreased from -3.2% in 216 to -8.9% in 217. This is below the acceptable range of %. Given that the school s per student funding accounts for the majority of the school s funding, it is important that the school accurately forecast their enrollment numbers. 2% 15% 1% 5% % Office Salaries and Benefits Direct Student Costs Occupancy General Bridges PCS 1

16 Bridges PCS Financial position Total Assets $3,328,697 $2,794,47 Current Assets $1,941,465 $1,582,846 Total Liabilities $1,94,67 $687,639 Current Liabilities $826,386 $687,25 Net Asset Position $2,234,9 $2,16,48 FINANCIAL ACTIVITIES Revenues and Support $9,988,829 $9,276,538 $9,857,183 $8,627,21 n-operating Revenues () -$3,964 $ Surplus (Deficit) $127,682 $649,337 Audit Findings Qualified/Modified/Adverse Opinion on the Financial Statements Material Weakness in Internal Control over Financial Reporting (GAS) n-compliance Material to the Financial Statements (GAS) Modified Opinion on Major Federal Award Programs (Uniform Guidance) Material Weaknesses in the Internal Control over Compliance with Major Federal Programs (Uniform Guidance) Findings and Questioned Costs Going-Concern Issue REVENUES/EXPENSES PER STUDENT DC Funding Grants and Contributions Per Student Total Revenues per Student 217 Sector Median $25,269 $24,57 $18,19 $1,3 $1,68 $298 $3,454 $27,858 $2,79 $3,52 $25,98 $2,387 PCSB OBSERVATIONS Despite an enrollment variance of -8.9%, the school had a 22% increase in enrollment in 217. During the period, operating expense grew just 14.3%, indicating that expenses appear to be well-managed. The school s cash flow from operations margin of 3.4% is well above expectations. Mamie D. Lee LLC was formed on October 1, 215, by Bridges PCS and Briya PCS for the purpose of leasing property from the District of Columbia and to renovate, remodel, operate, manage, maintain, improve, repair, and rent space to the two member charter schools. Each school has equal 5 percent voting rights in the LLC. On vember 25, 215, the school entered into a 3-year use agreement with Mamie D. Lee to occupy a portion of a new school building at 1 Gallatin Street, NE, Washington, DC. Rent expense related to this lease for the year ended June 3, 217, was $1.3M. On June 27, 214, the school entered into a seven-year lease agreement with JRK Family Investments LLC for a building at Taylor Street, NW. Total rent expense for the year ended June 3, 217, was $36,67K. On June 8, 216, the school entered into a five-year sublease agreement with Breakthrough Montessori Public Charter School for its location at Taylor Street, NW. During the year ended June 3, 217, the school received payments of $272.5K for rent. The school also had a lease agreement with Daniel and Shirley Sokolowski for its previous location at 125 Taylor Street, NW, which ended in July 216. Total rent expense for the year ended June 3, 217, was $22.1K. Bridges PCS 2

17 Change in Net Assets Margin: = (Total Operating Revenue-Total Operating ) / Total Operating Revenue Aggregated Three-Year Margin: = Change in Net Assets for 3-Year Period - Operating Revenues for Same Period Enrollment Variance: = (Audited Enrollment - Budgeted - Enrollment) Budgeted Enrollment Current Ratio: = Current Assets Current Liabilities - Cash Flow from Operations Margin: = Cash Flows from Operations - Operating Revenues Days of Cash on Hand: = Unrestricted Cash /(Operating - -Depreciation)/365 Debt Ratio: = Total Liabilities Total Assets - Debt Service Coverage Ratio: = EBITDA / (Scheduled Payments Balloon - Payment* + Interest Paid) Primary Reserve Ratio: = (Unrestricted Net Assets + Temporarily Restricted - Net Assets - Intangible Assets) Total Unresolved Prior Year Findings: Opened: Audited Enrollment: Key Financial Indicators Does t Meet Expectations Meets Expectations Exceeds Expectations - BRIYA PCS -1.5% % 15 Days.9 Debt Compliance Issue - Financial: Operates with a Management Organization: Mary s Center for Maternal and Childcare, Inc Days % 2.2% % -1.8% 32.6% % 7.4% 17.8% 25.1% % 22.1% 26.1% 1.5% % 23.2% Debt Compliance Issue - Reporting: * Balloon Payment Amount: = 217 Sector Median = 217 School Results = 216 School Results Comments from the School The school generated a surplus of $1.2 million. The school experienced a 29.6% increase in enrollment year-overyear, which drove an increase of $1.3 million in the per pupil funding allocation. in educational services increased accordingly by $2.2 million. The school should monitor its expenses to ensure increasing expenses do not outpace revenue growth. 7% 65% 6% 55% PCS by category Briya PCS DC Charter Sector 2% 15% 1% 5% % Office Salaries and Benefits Direct Student Costs Occupancy General Briya PCS 1

18 Briya PCS Financial position Total Assets $17,74,771 $15,539,795 Current Assets $12,14,171 $7,414,823 Total Liabilities $2,424,826 $2,75,146 Current Liabilities $657,692 $497,749 Net Asset Position $14,649,945 $13,464,649 FINANCIAL ACTIVITIES Revenues and Support $9,291,53 $7,877,152 $8,15,57 $5,849,421 n-operating Revenues () -$25 $ Surplus (Deficit) $1,185,296 $2,27,731 Audit Findings Qualified/Modified/Adverse Opinion on the Financial Statements Material Weakness in Internal Control over Financial Reporting (GAS) n-compliance Material to the Financial Statements (GAS) Modified Opinion on Major Federal Award Programs (Uniform Guidance) Material Weaknesses in the Internal Control over Compliance with Major Federal Programs (Uniform Guidance) Findings and Questioned Costs Going-Concern Issue REVENUES/EXPENSES PER STUDENT DC Funding Grants and Contributions Per Student Total Revenues per Student 217 Sector Median $12,67 $12,725 $18,19 $695 $726 $298 $14,427 $15,849 $2,79 $12,586 $11,769 $2,387 PCSB OBSERVATIONS All of the school s key financial indicators are well above the meets-expectations range. The school generated a surplus of $1.2M. The school experienced an increase in enrollment of nearly 3%, which drove a 18% increase in revenues. While expense growth of 38% exceeded the growth in revenues, this is not a cause for concern given the school s ample reserves. The school has 529 days of cash on hand. This indicates that the school has more than adequate cash on hand to meet operating expenses in the event of unexpected costs or delays in cash receipts and may have opportunities to invest some of these funds back into the school. The school entered into a 3-year lease with Mary s Center for Maternal and Child Care Inc. on vember 1, 21. Rent increases at 1% each year over the previous year s rate per square foot. Briya has the option to buy in 1 years. The lease has been capitalized and is being amortized over 3 years. Briya PCS 2

19 School Name FY17 Revenues FY17 Operating Result Briya PCS $9,291,53 $1,185,296 Management Organization ( MO ) / Related Party ( RP ) Mary s Center for Maternal and Childcare, Inc. Highest Paid Employee / Head of MO / RP MO/RP Tax Status n-profit Title Total Compensation Maria Gomez Chief Executive Officer $235,2 Services Provided FY17 Payment % of School Revenue Capital lease payments - Georgia Avenue $12, % Contracted employees $4,194, % Human resource services management fee $1, 1.8% Rent - Ontario Road/Kalorama Road $169, % Total $4,567, % DC PCSB Comments Mary s Center for Maternal and Child Care Inc. (Mary s Center) provides contracted employees, facilities, and HR and payroll services to Briya PCS. The school also leases three facilities from Mary s Center, detailed above. $4,194,814 paid to Mary s Center for contracted employees. This is based on actual hours and Mary s Center fringe benefit rate. $1, paid to Mary s Center for HR services fee. $169,877 paid to Mary s Center for the Ontario Road and Kalorama Road properties. $12,789 paid to Mary s Center for the Georgia Avenue property. Please note that the highest paid employee above was taken from the most recent 99 available at the time this report was produced. School Comments 3

20 Change in Net Assets Margin: = (Total Operating Revenue-Total Operating ) / Total Operating Revenue Aggregated Three-Year Margin: = Change in Net Assets for 3-Year Period - Operating Revenues for Same Period Enrollment Variance: = (Audited Enrollment - Budgeted - Enrollment) Budgeted Enrollment Current Ratio: = Current Assets Current Liabilities - Cash Flow from Operations Margin: = Cash Flows from Operations - Operating Revenues Days of Cash on Hand: = Unrestricted Cash /(Operating - -Depreciation)/365 Debt Ratio: = Total Liabilities Total Assets - Debt Service Coverage Ratio: = EBITDA / (Scheduled Payments Balloon - Payment* + Interest Paid) Primary Reserve Ratio: = (Unrestricted Net Assets + Temporarily Restricted - Net Assets - Intangible Assets) Total Unresolved Prior Year Findings: Opened: Audited Enrollment: Key Financial Indicators Does t Meet Expectations Meets Expectations Exceeds Expectations - Capital City PCS -1.5% % 15 Days.9 Debt Compliance Issue - Financial: Days % 2.2% % 3.9% -.1%.9% % 5.8% 6.% 7.4% 14.2% 18.2% % % 67.9% Debt Compliance Issue - Reporting: * Balloon Payment Amount: = 217 Sector Median = 217 School Results = 216 School Results Comments from the School Error: Debt ratio of.6 is in the meets expectatons range The school s financial indicators are at or above the meets expectations range with the exception of the school s debt ratio which measures the extent to which the school relies on borrowed funds to finance its operation. Although this ratio is slightly higher than the target, this ratio is not currently a cause for concern. 7% 65% 6% 55% 2% PCS by category Capital City PCS DC Charter Sector 15% 1% 5% % Office Salaries and Benefits Direct Student Costs Occupancy General Capital City PCS 1

21 Capital City PCS Financial position Total Assets $35,832,298 $35,611,26 Current Assets $1,789,463 $12,762,223 Total Liabilities $22,48,636 $22,822,962 Current Liabilities $2,211,81 $2,35,538 Net Asset Position $13,783,662 $12,788,244 FINANCIAL ACTIVITIES Revenues and Support $2,891,917 $2,412,416 $2,299,553 $19,27,9 n-operating Revenues () $43,54 -$311,516 Surplus (Deficit) $995,418 $1,141,516 Audit Findings Qualified/Modified/Adverse Opinion on the Financial Statements Material Weakness in Internal Control over Financial Reporting (GAS) n-compliance Material to the Financial Statements (GAS) Modified Opinion on Major Federal Award Programs (Uniform Guidance) Material Weaknesses in the Internal Control over Compliance with Major Federal Programs (Uniform Guidance) Findings and Questioned Costs Going-Concern Issue REVENUES/EXPENSES PER STUDENT DC Funding Grants and Contributions Per Student Total Revenues per Student 217 Sector Median $18,67 $18,23 $18,19 $385 $41 $298 $21,253 $21,125 $2,79 $2,651 $19,644 $2,387 PCSB OBSERVATIONS The school s net assets increased by $995.4K in 217, and approximately 4% of that increase was driven by a change in the fair value of the interest rate swap on its loan payable, a non-operating expense. Change in net assets margin, which excludes nonoperating items, was a strong 2.8%. The school has 198 days of cash on hand. This indicates that the school has ample cash on hand to meet operating expenses in the event of unexpected costs or delays in cash receipts and may have opportunities to invest some of these funds back into the school. On October 17, 211, Capital City PCS entered into a 25-year ground lease with the District of Columbia for the school facility at 1 Peabody Street, NW, Washington, DC. The ground lease contains a credit for the amount spent on leasehold improvements and renovations of the building to be applied to the first 15 years of rent on a dollar-for-dollar basis. Any remaining amount of renovation costs not used by year 15 will be taken as a credit and amortized over the remaining term. Under the terms of the original ground lease and the additional credit approved during 217, the available credit is approximately $29,51,. If Capital City PCS uses the entire credit available, it would not pay rent until September 1, 227. Assuming that the entire credit is used, the future minimum ground lease payments are expected to be approximately $8.3M. Capital City PCS 2

22 Change in Net Assets Margin: = (Total Operating Revenue-Total Operating ) / Total Operating Revenue Aggregated Three-Year Margin: = Change in Net Assets for 3-Year Period - Operating Revenues for Same Period Enrollment Variance: = (Audited Enrollment - Budgeted - Enrollment) Budgeted Enrollment Current Ratio: = Current Assets Current Liabilities - Cash Flow from Operations Margin: = Cash Flows from Operations - Operating Revenues Days of Cash on Hand: = Unrestricted Cash /(Operating - -Depreciation)/365 Debt Ratio: = Total Liabilities Total Assets - Debt Service Coverage Ratio: = EBITDA / (Scheduled Payments Balloon - Payment* + Interest Paid) Primary Reserve Ratio: = (Unrestricted Net Assets + Temporarily Restricted - Net Assets - Intangible Assets) Total Unresolved Prior Year Findings: Carlos Rosario International PCS Opened: Audited Enrollment: ,64 Key Financial Indicators Does t Meet Expectations Meets Expectations Exceeds Expectations % -1.5% % 15 Days.9-3.8% Debt Compliance Issue - Financial: -.3% 45 Days % 1.9% 2.2% % 4.2% 32.6%.7% % % % % 16.9% Debt Compliance Issue - Reporting: * Balloon Payment Amount: = 217 Sector Median = 217 School Results = 216 School Results Comments from the School Based on the consolidated financials of the school, Community Capital Corp (CCC) and Community Capital corp-sonia Gutierrez Campus ((CCC-SGC). CCC and CCC-SGC hold and finance the school s facilities. 7% 65% 6% PCS by category Carlos Rosario International PCS DC Charter Sector 55% 2% 15% 1% 5% % Office Salaries and Benefits Direct Student Costs Occupancy General Carlos Rosario International PCS 1

23 Carlos Rosario International PCS Financial position Total Assets $56,751,96 $58,6,484 Current Assets $2,533,899 $21,968,171 Total Liabilities $29,81,583 $31,92,68 Current Liabilities $3,127,193 $3,412,47 Net Asset Position $27,67,323 $26,914,416 FINANCIAL ACTIVITIES Revenues and Support $26,379,71 $25,355,637 $25,882,283 $26,255,571 n-operating Revenues () $259,119 $63,917 Surplus (Deficit) $755,97 -$899,934 Audit Findings Qualified/Modified/Adverse Opinion on the Financial Statements Material Weakness in Internal Control over Financial Reporting (GAS) n-compliance Material to the Financial Statements (GAS) Modified Opinion on Major Federal Award Programs (Uniform Guidance) Material Weaknesses in the Internal Control over Compliance with Major Federal Programs (Uniform Guidance) Findings and Questioned Costs Going-Concern Issue REVENUES/EXPENSES PER STUDENT DC Funding Grants and Contributions Per Student Total Revenues per Student 217 Sector Median $11,914 $11,67 $18,19 $141 $123 $298 $12,781 $12,577 $2,79 $12,54 $13,56 $2,387 PCSB OBSERVATIONS Based on the consolidated financials of the school, Community Capital Corp. (CCC) and Community Capital Corp. Sonia Gutierrez Campus (CCC SGC). CCC and CCC SGC hold and finance the school s facilities. All of the school s key financial indicators are at or above the meets-expectations range and all improved from the prior year. The school s current ratio, a measure of the financial resources available to meet short-term obligations, remains strong at 6.6 against the meets-expectations range of.7 to 1.. The school also has 28 days of cash on hand against the range of 15 to 45 days, indicating the school likely has more than adequate cash on hand to meet operating expenses in the event of unexpected cost or delays in cash receipts and may have opportunities to invest some of these funds back into the school. The school generated a surplus of $755K after having a deficit of ($87K) the prior year. CCC/CCC SGC rental operations expense declined by $567K in the current year, which, along with an increase in the per-pupil funding and a slight increase in enrollment, led to the surplus. The school has two campuses: the Harvard Street campus and the Sonia Gutierrez Campus (SGC). Land for the SGC was purchased in 211 to develop into an additional campus for the school using a $2.2M grant from OSSE. The development costs, including furniture and fixtures, were approximately $19M and were financed by Bank of America through the New Markets Tax Credit Program. The school has a long-term operating lease with DC for the Harvard Street campus, which expires in 221. Carlos Rosario International PCS 2

24 Change in Net Assets Margin: = (Total Operating Revenue-Total Operating ) / Total Operating Revenue Aggregated Three-Year Margin: = Change in Net Assets for 3-Year Period - Operating Revenues for Same Period Enrollment Variance: = (Audited Enrollment - Budgeted - Enrollment) Budgeted Enrollment Current Ratio: = Current Assets Current Liabilities - Cash Flow from Operations Margin: = Cash Flows from Operations - Operating Revenues Days of Cash on Hand: = Unrestricted Cash /(Operating - -Depreciation)/365 Debt Ratio: = Total Liabilities Total Assets - Debt Service Coverage Ratio: = EBITDA / (Scheduled Payments Balloon - Payment* + Interest Paid) Primary Reserve Ratio: = (Unrestricted Net Assets + Temporarily Restricted - Net Assets - Intangible Assets) Total Unresolved Prior Year Findings: Opened: Audited Enrollment: Key Financial Indicators Does t Meet Expectations Meets Expectations Exceeds Expectations - Cedar tree Academy PCS -1.5% % 15 Days.9 Debt Compliance Issue - Financial: Days % % 3.9% % % 12.5% 13.8% % 1.1% 1.9% 12.3% 1.7% % % 196.6% Debt Compliance Issue - Reporting: * Balloon Payment Amount: = 217 Sector Median = 217 School Results = 216 School Results Comments from the School In August 24, the school purchased the main campus for $7,,. The purchase was financed with a $6,215, short-term bridge loan from a bank and a $1,25, loan from the D.C. Office of Public Charter School Financing and Support which was subsequently paid in full in 29. In vember 24, the District issued in $6,295, Series 24 bonds. The bond proceeds were used to pay-off the school s short-term bridge loan. 7% 65% 6% 55% 2% PCS by category Cedar Tree Academy PCS DC Charter Sector 15% 1% 5% % Office Salaries and Benefits Direct Student Costs Occupancy General Cedar Tree Academy PCS 1

25 Cedar Tree Academy PCS Financial position Total Assets $2,66,647 $19,789,15 Current Assets $1,786,8 $1,52,959 Total Liabilities $6,59,381 $6,99,345 Current Liabilities $79,187 $1,54,382 Net Asset Position $14,7,266 $12,879,85 FINANCIAL ACTIVITIES Revenues and Support $7,928,798 $7,86,57 $7,124,757 $6,763,84 n-operating Revenues () $323,42 -$363,6 Surplus (Deficit) $1,127,461 $323,486 Audit Findings Qualified/Modified/Adverse Opinion on the Financial Statements Material Weakness in Internal Control over Financial Reporting (GAS) n-compliance Material to the Financial Statements (GAS) Modified Opinion on Major Federal Award Programs (Uniform Guidance) Material Weaknesses in the Internal Control over Compliance with Major Federal Programs (Uniform Guidance) Findings and Questioned Costs Going-Concern Issue REVENUES/EXPENSES PER STUDENT DC Funding Grants and Contributions Per Student Total Revenues per Student 217 Sector Median $17,885 $17,545 $18,19 $82 $259 $298 $2,594 $2,354 $2,79 $18,56 $18,478 $2,387 PCSB OBSERVATIONS All of the school s key financial indicators are well above the meets-expectations range. The school generated a surplus of $1.1M. The surplus included a gain in the fair value of the interest rate swap on its loan payable, which made up approximately 29% of the increase in net assets for the year. The school has 551 days of cash on hand. This indicates that it has adequate cash on hand to meet operating expenses in the event of unexpected delays in cash receipts and may have opportunities to invest some of these funds back into the school. In August 24, the school purchased the main campus for $7.M. In vember 24, the District issued $6.3M in Series 24 bonds to refinance the short-term financing of the school. Pursuant to the bond issuance, the school entered into a loan agreement with the District secured by all of the school s assets and properties, including without limitation all existing and future property of the school. On August 31, 29, the school obtained a $3.M loan to purchase a building on Martin Luther King Jr. Avenue, SE for a second campus. In 213, the school leased the building to Community College Preparatory PCS. The lease expires in June 218. The loan matures on September 1, 219. Cedar Tree Academy PCS 2

26 Change in Net Assets Margin: = (Total Operating Revenue-Total Operating ) / Total Operating Revenue Aggregated Three-Year Margin: = Change in Net Assets for 3-Year Period - Operating Revenues for Same Period Enrollment Variance: = (Audited Enrollment - Budgeted - Enrollment) Budgeted Enrollment Current Ratio: = Current Assets Current Liabilities - Cash Flow from Operations Margin: = Cash Flows from Operations - Operating Revenues Days of Cash on Hand: = Unrestricted Cash /(Operating - -Depreciation)/365 Debt Ratio: = Total Liabilities Total Assets - Debt Service Coverage Ratio: = EBITDA / (Scheduled Payments Balloon - Payment* + Interest Paid) Primary Reserve Ratio: = (Unrestricted Net Assets + Temporarily Restricted - Net Assets - Intangible Assets) Total Unresolved Prior Year Findings: Opened: Audited Enrollment: ,442 Key Financial Indicators Does t Meet Expectations Meets Expectations Exceeds Expectations - CENTER CITY PCS -1.5% % 15 Days.9 Debt Compliance Issue - Financial: Days % -4.3% 2.2% % 4.4% % % 32.6% 35.6% 36.8% 7.9% 9.8% % 8.7% 1.5% Debt Compliance Issue - Reporting: * Balloon Payment Amount: = 217 Sector Median = 217 School Results = 216 School Results Comments from the School PCS by category 7% 65% Center City PCS 6% DC Charter Sector 55% 2% 15% 1% 5% % Office Salaries and Benefits Direct Student Costs Occupancy General Center City PCS 1

27 Center City PCS Financial position Total Assets $11,988,19 $1,539,188 Current Assets $1,88,29 $8,72,395 Total Liabilities $2,167,549 $1,942,641 Current Liabilities $2,148,722 $1,775,734 Net Asset Position $9,82,641 $8,596,547 FINANCIAL ACTIVITIES Revenues and Support $27,933,413 $26,868,425 $26,79,319 $24,166,331 n-operating Revenues () $ $ Surplus (Deficit) $1,224,94 $2,72,94 Audit Findings Qualified/Modified/Adverse Opinion on the Financial Statements Material Weakness in Internal Control over Financial Reporting (GAS) n-compliance Material to the Financial Statements (GAS) Modified Opinion on Major Federal Award Programs (Uniform Guidance) Material Weaknesses in the Internal Control over Compliance with Major Federal Programs (Uniform Guidance) Findings and Questioned Costs Going-Concern Issue REVENUES/EXPENSES PER STUDENT DC Funding Grants and Contributions Per Student Total Revenues per Student 217 Sector Median $16,831 $16,144 $18,19 $146 $49 $298 $19,371 $18,685 $2,79 $18,522 $16,86 $2,387 PCSB OBSERVATIONS The school generated a surplus of $1.2M, and all of the school s key financial indicators are well above the meets-expectations range. The school s aggregated three-year margin, which measures over the long term whether a school s revenues are exceeding its expenses, is 9.8%, well above the meets-expectations range of -1.5% to %. The school has 126 days of cash on hand. This indicates that the school has ample cash on hand to meet operating expenses in the event of unexpected delays in cash receipts and may have opportunities to invest some of these funds back into the school. The school has lease agreements for its school campus properties. The agreements provide for a rent escalation rate of 3% each year. The leases expire in July 223. The school also has a lease agreement for its central office in Washington, DC. The lease commenced on August 1, 213, and is due to expire on September 3, 218. The agreement provides for a rent escalation rate of 3.5% each year. Center City PCS 2