THE ROCKLIN ACADEMY (A CALIFORNIA NON-PROFIT PUBLIC BENEFIT CORPORATION) FINANCIAL STATEMENTS WITH INDEPENDENT AUDITOR S REPORT

Transcription

1 (A CALIFORNIA NON-PROFIT PUBLIC BENEFIT CORPORATION) FINANCIAL STATEMENTS WITH INDEPENDENT AUDITOR S REPORT FOR THE YEARS ENDED JUNE 30, 2015 ROCKLIN ACADEMY CHARTER SCHOOL #0308 ROCKLIN ACADEMY AT MEYERS STREET CHARTER SCHOOL #0900 WESTERN SIERRA COLLEGIATE ACADEMY CHARTER SCHOOL #1071 ROCKLIN ACADEMY GATEWAY CHARTER SCHOOL #1528 JAMES MARTA & COMPANY LLP 701 HOWE AVENUE, E3 SACRAMENTO, CA (916) (916) FAX

2 TABLE OF CONTENTS INDEPENDENT AUDITOR'S REPORT 1 FINANCIAL STATEMENTS Statement of Financial Position 3 Statement of Activities 4 Statement of Functional Expenses 5 Statement of Cash Flows 6 Notes to the Financial Statements 7 SUPPLEMENTARY INFORMATION Combining Schedule of Financial Position 26 Combining Schedule of Activities 27 Organization, Governing Board and Administration 28 Schedule of Average Daily Attendance 29 Schedule of Instructional Time 31 Reconciliations of State Reporting to GAAP Reporting Balance Sheet Fund Basis to GAAP Basis 32 PAGE Statement of Revenues, Expenditures and Changes in Fund Balance Fund Basis to GAAP Basis 33 Schedule of Expenditures of Federal Awards 34 Notes to Supplementary Information 35

3 TABLE OF CONTENTS OTHER INDEPENDENT AUDITOR S REPORTS Independent Auditor s Report on Compliance with State Laws and Regulations 36 Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 39 FINDINGS AND RECOMMENDATIONS Schedule of Findings and Questioned Costs 41 Status of Prior Year Recommendations 43

4 James Marta & Company LLP Certified Public Accountants Accounting, Auditing, Consulting, and Tax Board of Directors Rocklin Academy Family of Schools Rocklin, California Report on the Financial Statements INDEPENDENT AUDITOR'S REPORT We have audited the accompanying consolidated financial statements of The Rocklin Academy (the Organization ), a California non-profit public benefit corporation, which comprise the consolidated statement of financial position as of June 30, 2015, the related consolidated statements of activities, functional expenses, and cash flows for the year 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 consolidated 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 consolidated 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 consolidated 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 consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the consolidated 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 consolidated 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 consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 701 Howe Avenue Suite E3, Sacramento, California Phone: (916) Fax: (916) jmarta@jpmcpa.com 1

5 James Marta & Company LLP Certified Public Accountants Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Rocklin Academy as of June 30, 2015, and the changes in their net assets and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Change in Accounting Principle The Organization received information regarding its pension liability related to its participation in the California Public Employees Retirement System (CalPERS) and California State Teachers Retirement System (CalSTRS). As a result, the net pension liability has been recorded for the year ended June 30, 2015 as well as a prior period adjustment. The impact on the financial statements is more fully discussed in Note 2. Supplementary Information Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The accompanying supplementary information, as listed in the table of contents, and as required by the Guide for Annual Audits of K-12 Local Education Agencies and State Compliance Reporting, published by the Education Audit Appeals Panel, are presented for purposes of additional analysis and are not a required part of the consolidated financial statements. Such information is the responsibility of management and was derived from and relate directly to the underlying accounting and other records used to prepare the consolidated financial statements. The information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the consolidated financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 15, 2015 on our consideration of The Rocklin Academy s internal control over financial reporting and our tests of its compliance with provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering The Rocklin Academy s internal control over financial reporting and compliance. James Marta & Company LLP Certified Public Accountants Sacramento, California December 15,

6 CONSOLIDATED FINANCIAL STATEMENTS

7 STATEMENT OF FINANCIAL POSITION JUNE 30, 2015 ASSETS Current Assets Cash and cash equivalents $ 2,690,893 Restricted cash, current 323,548 Accounts receivable 1,870,102 Prepaid Expenses and deposits 92,607 Total Current Assets 4,977,150 Noncurrent Assets Restricted cash, noncurrent 974,938 Property & equipment, net 8,209,240 Other assets, net 444,689 Total Noncurrent Assets 9,628,867 Total Assets 14,606,017 LIABILITIES Current Liabilities Accounts payable $ 933,027 Due to student groups 48,624 Due to parent groups 102,021 Accrued interest 71,447 Capital lease obligations, current 20,892 Debt, current 65,000 Total Current Liabilities 1,241,011 Noncurrent Liabilities Capital lease obligations, noncurrent 389 Debt, noncurrent 10,295,000 Net pension liability 6,084,849 Total Noncurrent Liabilities 16,380,238 Total Liabilities 17,621,249 NET ASSETS Unrestricted net assets (3,052,952) Temporarily restricted 37,720 Total Net Assets $ (3,015,232) The accompanying notes are an integral part of these financial statements. 3

8 STATEMENT OF ACTIVITIES UNRESTRICTED NET ASSETS Revenues Federal revenue $ 437,942 State revenue State aid portion of general purpose funding 8,947,178 State lottery revenue 264,330 All other 274,822 Local revenue Cash in-lieu of property taxes 3,326,490 Interest Income 284 All other 1,597,143 Net assets released from restrictions 3,097,096 Total revenues 17,945,285 Expenses Program expenses Educational program 12,763,704 Supporting services Management and general 2,885,843 Total expenses 15,649,547 Change in Unrestricted Net Assets 2,295,738 TEMPORARILY RESTRICTED NET ASSETS EPA revenue 1,948,063 State lottery revenue 70,893 Other state revenue 940,490 Net assets released from restrictions (3,097,096) Change in Temporarily Restricted Net Assets (137,650) Change in Net Assets 2,158,088 Net Assets, Beginning of Period, As originially reported 1,839,296 Prior Period Adjustment (7,012,616) Net Assets, Beginning of Period, As restated (5,173,320) Net Assets, End of Period $ (3,015,232) The accompanying notes are an integral part of these financial statements. 4

9 SCHEDULE OF FUNCTIONAL EXPENSES Program Supporting Expenses Services Total Certificated Salaries $ 6,420,084 $ 152,716 $ 6,572,800 Classified Salaries 1,217, ,191 1,849,801 Employee Benefits 866, ,536 1,113,621 Books and supplies 1,575,193 70,410 1,645,603 Services and other operating expenses 2,684,732 1,782,990 4,467,722 Total Expenses $ 12,763,704 $ 2,885,843 $ 15,649,547 The accompanying notes are an integral part of these financial statements. 5

10 STATEMENT OF CASH FLOWS Net Cash Flows Provided (Used) by Operating Activities Change in net assets $ 2,158,088 Reconciliation to net cash provided by operating activities: Depreciation and Amortization 397,706 Changes in: Accounts receivable (404,302) Prepaid expense and deposits 75,381 Accounts payable 222,598 Due to student groups 12,224 Due to parent groups 102,021 Deferred revenue (78,750) Net Pension Liability (927,767) Net cash provided (used) by operating activities 1,557,199 Net Cash Flows Provided (Used) by Investing Activities Purchase of property and equipment (535,065) Net Cash Flows Provided (Used) by Financing Activities Payments on debt (30,000) Payments on capital lease obligations (33,674) Net cash provided (used) by financing activities (63,674) Net Increase (Decrease) in Cash and Cash Equivalents 958,460 Cash and Cash Equivalents, Beginning of Year 3,030,919 Cash and Cash Equivalents, End of Year $ 3,989,379 Cash and cash equivalents 2,690,893 Restricted Cash 1,298,486 Total $ 3,989,379 Supplemental Disclosure Cash paid for interst $ 864,044 Non-Cash investing and financing activities Property and equipment financed through accounts payable $ 132,312 The accompanying notes are an integral part of these financial statements. 6

11 NOTES TO THE FINANCIAL STATEMENTS 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES A. ORGANIZATION The Rocklin Academy (the Organization) is a California non-profit public benefit corporation that was incorporated in May 2000 and is organized to manage, operate, guide, direct, and promote California public charter schools. Charters granted to the Organization by Rocklin Unified School District (RUSD), the Sponsoring District, include three schools: Rocklin Academy (Turnstone) received its third charter renewal from RUSD in February The renewal of the charter is effective through June 30, Turnstone serves students in Kindergarten through 6 th grade. The charter school number is Rocklin Academy at Meyers Street (Meyers) received its first renewal by RUSD in September The renewal of the charter is effective through June 30, Meyers serves students in Kindergarten through 6th grade. The charter school number is Western Sierra Collegiate Academy (WSCA) received its first charter renewal from RUSD in November The renewal of the charter is effective through June 30, WSCA serves students in grades The charter school number is Charters granted to the Organization by Newcastle Elementary School District (NESD), the Sponsoring District) include one school: Rocklin Academy Gateway (Gateway) received its charter from NESD in March The charter is effective through June 30, Gateway serves students in transitional Kindergarten through 8th grade. The charter school number is The charters could be revoked by the authorizers for material violations of the charter, failure to meet pupil outcomes identified in the charter, failure to meet generally accepted standards of fiscal management, or violation of any provision of the law. The Organization is funded principally through State of California public education monies received through the California Department of Education, RUSD and NESD. The Organization is governed by a Board of Directors consisting of seven members. 7

12 NOTES TO THE FINANCIAL STATEMENTS B. BASIS OF ACCOUNTING AND FINANCIAL STATEMET PRESENTATION The financial statements are prepared on the accrual basis of accounting and in conformity with accounting standards applicable to not-for-profit entities. The Organization reports information regarding its financial position and activities according to three classes of net assets: unrestricted, temporarily restricted, and permanently restricted. The Organization s temporarily restricted net assets were restricted in purpose for Special Education as of June 30, The Organization had no permanently restricted net assets at June 30, C. REVENUE RECOGNITION Contributions and grants are recognized in full when received or unconditionally promised. All contributions are considered available for unrestricted use unless specifically restricted by donors for future periods or specific purposes. Donor-restricted amounts are reported as increases in temporarily or permanently restricted net assets. Temporarily restricted net assets become unrestricted, and are reported in the statement of activities as net assets released from restrictions, when time restrictions expire or the contributions are used for the restricted purpose. Conditional promises to give, which depend on the occurrence of specified future and uncertain events, are not recorded until the conditions are met. Government grants are recognized as revenue in accordance with the terms of the applicable grant agreement, which is generally upon the incurrence of expenditures related to the required services. Donated materials, equipment, and professional services are recorded as in-kind contributions and recognized at the estimated fair value as of the date of donation or service. Contributed services are recorded when they create or enhance non-financial assets or require a specialized skill that the Organization would otherwise need to purchase. D. CASH AND CASH EQUIVALENTS The Organization considers investments with maturity at purchase of three months or less to be cash equivalents. E. ACCOUNTS RECEIVABLE Management provides for uncollectable amounts through a provision for bad debt expense and an adjustment to a valuation allowance based on its assessment of the current status of individual accounts. It is estimated that all of the accounts receivable will be collected; accordingly, no allowance for doubtful accounts has been established. F. OTHER ASSETS Consist of debt costs incurred related to the issuance of the bond and are amortized using the effective interest method over the term of bond. 8

13 NOTES TO THE FINANCIAL STATEMENTS G. PROPERTY AND EQUIPMENT Property and equipment are stated at cost or, if donated, at the estimated fair market value at the date of donation. The Organization capitalizes all expenditures for property and equipment in excess of $5,000. Depreciation is computed using the straight-line method over estimated useful lives of individual assets ranging from 3 to 30 years. H. DUE TO STUDENT GROUPS WSCA has an Associated Student Body (ASB) which consists of the various clubs. Funds raised by the various student groups are held in a separate bank account by the Organization. The Organization provides oversight and monitors the activities of these groups. The current restricted cash balance on the Statement of Financial Position includes $48,624 at June 30, 2015, that was held on behalf of the ASB. Revenues and expenses of the ASB are generated separately from the Organization and therefore not included on the Organization s Statements of Activities. I. DUE TO PARENT GROUPS Each school has a Parent Student Partnership (PSP), which consists of various programs. Funds raised by the various PSPs are held in separate bank accounts by the Organization. The Organization provides oversight and monitors the activities of these programs. The cash and cash equivalent balances on the Statement of Financial Position includes $102,021 at June 30, 2015, that was held on behalf of the respective PSPs. Revenues and expenses of the PSP are generated separately from the Organization and therefore not included on the Organization s Statements of Activities. J. INCOME TAXES The organization is organized pursuant to General Nonprofit Law of the State of California and is exempt from State and Federal income taxes under I.R.C. Section 501(c)(3) and California Revenue and Taxation Code Section 23701d. Accordingly, no provision for income taxes has been made in the accompanying financial statements. K. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Significant estimates included in these financial statements are management s estimate of the collectability of accounts receivable, the useful lives of property and equipment, and the functional allocation of expenses. Accordingly, actual results could differ from those estimates. 9

14 NOTES TO THE FINANCIAL STATEMENTS L. FUNCTIONAL ALLOCATION OF EXPENSES The cost of providing the Organization s school programs and supporting services have been summarized on a functional basis in the statements of activities. Accordingly, certain costs have been allocated based on employees time incurred and management s estimate of the usage of resources. M. CONCENTRATIONS OF CREDIT RISK Financial instruments which potentially subject the Organization to concentrations of credit risk consist primarily of cash and cash equivalents. Amounts held as cash and cash equivalents are insured by the Federal Deposit Insurance Corporation. The Organization minimizes credit risk associated with cash by periodically evaluating the credit quality of its primary financial institutions. The balance at times may exceed federally insured limits. The Organization has not experienced any losses in such accounts and management believes the Organization is not exposed to any significant credit risk related to cash. 2. CHANGE IN ACCOUNTING PRINCIPLE In September 2015, information became available to estimate the Organization s liability arising from its participation in the California Public Employees Retirement System (CalPERS) and California State Teachers Retirement System (CalSTRS) defined benefit pension plans at June 30, This information was not previously available. Therefore, the previous pension liability as of June 30, 2014 in the amount of $7,012,616 has been shown as a restatement of net assets on the Statement of Activities as a separate line item. In the current year, the Organization had pension expenses of $456,284 resulting from this change in accounting principle. 10

15 NOTES TO THE FINANCIAL STATEMENTS 3. CASH AND CASH EQUIVALENTS Cash and cash equivalents as of June 30, 2015 consisted of the following: Unrestricted Restricted Total Cash in county treasury $ 2,072,320 $ - $ 2,072,320 Cash in banks 618,573 1,298,486 1,917,059 Total cash and cash equivalents $ 2,690,893 $ 1,298,486 $ 3,989,379 Cash in Banks Cash balances held in deposits with financial institutions are insured up to $250,000 by the Federal Depository Insurance Corporation (FDIC). The amount held in banks in excess of FDIC as of June 30, 2015 was $1,417,059. The Organization has not experienced any losses in bank deposit accounts that exceed federally insured limits. Management believes the Organization is not exposed to any significant credit risk related to cash. Cash in County Treasury In accordance with Education Code Section 41001, the Organization maintains a portion of its cash in the Placer County Treasury (the County Treasury). The County Treasury pools these funds with those of other school districts in the county and invests the cash. The share of each fund in the pooled cash account is separately accounted for and interest earned is apportioned quarterly to funds that are legally required to receive interest based on the relationship of a fund s daily balance to the total of pooled cash and investments. Participants equity in the investment pool is determined by the dollar amount of the participant deposits, adjusted for withdrawals and distributed income. This method differs from the fair value method used to value investments in these financial statements in that unrealized gains or losses are not distributed to pool participants. The County Treasury is authorized to deposit cash and invest excess funds by California Government Code Section et seq. The funds maintained by the County Treasury are either secured by federal depository insurance or are collateralized. The County Treasury is restricted by Government Code Section 53635, pursuant to Section 53601, to invest in time deposits; U.S. government securities; state registered warrants, notes, or bonds; the State Treasurer s investment pool; bankers acceptances; commercial paper; negotiable certificates of deposit; and repurchase or reverse repurchase agreements. Restricted Cash Restricted cash represents bond proceeds from bonds issued in 2011 that are required to be maintained for a debt service reserve, as well as cash accumulated for principal and interest payments. The total restricted balance at June 30, 2015 was $1,1298,486. $172,903 of the current portion is for principal and interest payments as of June 30, The other $150,645 of the current portion is held on behalf of student and parent groups. 11

16 NOTES TO THE FINANCIAL STATEMENTS 4. PROPERTY AND EQUIPMENT Property and equipment as of June 30, 2015 consisted of the following: Land $ 923,472 Buildings and improvements 7,850,678 Buildings and improvements in process 229,531 Equipment 448,641 Leashold improvements 255,424 9,707,746 Less accumulated depreciation (1,498,506) Property and equipment, net $ 8,209,240 Depreciation expense was $380,603 for the year ended June 30, Various components of the land and building shown above are pledged as collateral for the bond debt disclosed in Note DEBT In June 2011, the Organization issued California Statewide Communities Development Authority Charter School Revenue Bonds Series 2011 A and B with interest rates ranging from percent. Interest payments are due monthly with principal repayments beginning June 15, Final maturity is May 15, The bond proceeds were to be used for the purchase and renovation of a facility for the WSCA campus. The purchase of the property occurred during the fiscal year and the renovations to the facility were completed and placed in service during the fiscal year. The debt is secured by the land and building as disclosed in Note 4. The outstanding balance on the obligation at June 30, 2015 was $10,360,000. The loan agreement has several covenants that the Organization is required to meet annually, beginning June 30, The most significant of these covenants are as follows: Cash on Hand greater than or equal to 30 days; Debt Service Coverage Ratio of 1.0 if Cash on Hand is greater than or equal to 60 days or Debt Service Coverage Ratio of 1.10 if Cash on Hand is less than 60 days; Short-term debt cannot exceed the lesser of 10 percent of gross revenue or $500,000 and the Organization shall not incur any long-term indebtedness without written consent of a majority of the beneficial owners of the outstanding bonds unless it s for equipment financing that is secured solely by a security interest in personal property and does not exceed $75,000. The Organization was in compliance with the covenants at June 30,

17 NOTES TO THE FINANCIAL STATEMENTS 5. DEBT (CONTINUED) Future minimum payments relating to debt were as follows as of June 30, 2015: Year Ending June 30, 2016 $ 65, , , , ,000 Thereafter 9,745,000 Total $ 10,360,000 Interest expense related to debt was $864,044 for the year ended June 30, LINE OF CREDIT The Organization has a $150,000 line of credit with a bank with an interest rate of prime plus 1.75% currently 5% per annum. This line of credit has no maturity date but is subject to a yearly annual fee and periodic financial review. There were no amounts outstanding on this line of credit at June 30, CAPITAL LEASES The Organization leases copiers under non-cancelable capital lease agreements. The agreements expire at various times through fiscal year The leased equipment valued upon acquisition totaling $287,271 is included in property and equipment. The leased equipment is being depreciated over the term of the lease and depreciation expense for the equipment is included in the total depreciation and amortization expense. Future minimum payments under these leases as of June 30, 2015 were as follows: Year Ending June 30, 2016 $ 20, Total $ 21,281 13

18 NOTES TO THE FINANCIAL STATEMENTS 8. EMPLOYEE BENEFIT PLANS Qualified employees are covered under multiple-employer defined benefit pension plans maintained by agencies of the State of California. Certificated employees are members of the State Teachers' retirement System (STRS), and classified employees are members of the California Public Employees' Retirement System (CalPERS). Plan Description California Public Employees Retirement System (CalPERS) The Organization contributes to the School Employer Pool under the California Public Employees' Retirement System (CalPERS), a cost-sharing multiple-employer public employee retirement system defined benefit pension plan administered by CalPERS. The plan provides retirement and disability benefits, annual cost-ofliving adjustments, and death benefits to plan members and beneficiaries. Benefit provisions are established by state statutes, as legislatively amended, within the Public Employees' Retirement Law. CalPERS issues a separate comprehensive annual financial report that includes financial statements and required supplementary information. Copies of the CalPERS annual financial report may be obtained from the CalPERS Executive Office, 400 P Street, Sacramento, California State Teachers Retirement System (STRS) The Organization contributes to the State Teachers' Retirement System (STRS), a cost-sharing, multipleemployer, public employee retirement system defined benefit pension plan administered by STRS. The plan provides retirement and disability benefits and survivor benefits to beneficiaries. Benefit provisions are established by state statutes, as legislatively amended, within the State Teachers' Retirement Law. STRS issues a separate comprehensive annual financial report that includes financial statements and required supplementary information. Copies of the STRS annual financial report may be obtained from the STRS, 7667 Folsom Boulevard, Sacramento, California The Plans provisions and benefits in effect at June 30, 2015 are summarized as follows: CalPERS STRS Prior to On or after Prior to On or after Hire date January 1, 2013 January 1, 2013 January 1, 2013 January 1, 2013 Benefit formula Benefit vesting schedule 5 years service 5 years service 5 years service 5 years service Benefit payments monthly for life monthly for life monthly for life monthly for life Retirement age Monthly benefits, as a % of eligible compensation 2.0% 2.0% 2.0% 2.0% Required employee contribution rates 7.00% 6.00% 8.15% 8.15% Required employee contribution rates % % 8.880% 8.880% 14

19 NOTES TO THE FINANCIAL STATEMENTS Contributions California Public Employees Retirement System (CalPERS) Section 20814(c) of the California Public Employees Retirement Law requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. Funding contributions for the Plans are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The Organization is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. State Teachers Retirement System (STRS) Required member, employer and state contribution rates are set by the California Legislature and Governor and detailed in Teachers Retirement Law. Contribution rates are expressed as a level percentage of payroll using the entry age normal actuarial cost method. For the year ended June 30, 2015, the contributions recognized as part of pension expense for the Plans were: CalPERS STRS Total Contributions - employer $ 168,395 $ 395,641 $ 564,036 On behalf contributions - state - 166, ,098 Total $ 168,395 $ 561,739 $ 730,134 Pension Liabilities, Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions As of June 30, 2015, the Organization reported net pension liabilities for its proportionate share of the net pension liability of the Plans of: CalPERS $ 953,605 STRS 4,674,960 Total Net Pension Liability, under GASB $ 5,628,565 The Organization s net pension liability for the Plans is measured as the proportionate share of the net pension liability. The net pension liability of the Plans is measured as of June 30, 2014, and the total pension liability for the Plans used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2013 rolled forward to June 30, 2014 using standard update procedures. The Organization s proportion of the net pension liability was based on a projection of the Organization s long-term share of contributions to the pension plan relative to the projected contributions of all participating employers, actuarially determined. 15

20 NOTES TO THE FINANCIAL STATEMENTS The Organization s proportionate share of the net pension liability for the Plan as of June 30, 2013 and 2014 was as follows: CalPERS STRS Proportion - June 30, % % Proportion - June 30, % % Change - Increase (Decrease) % % For the year ended June 30, 2015, the Organization recognized pension expense of $184,697 and $743,070 for CalPERS and STRS, respectively. At June 30, 2015, the Organization reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: CalPERS Deferred Outflows Deferred Inflows Deferred Outflows Deferred Inflows of Resources of Resources of Resources of Resources Pension contributions subsequent to measurement date $ 168,395 $ - $ 561,739 $ - Net differences between projected and actual earnings on plan investments - (327,669) - (858,749) Total $ 168,395 $ (327,669) $ 561,739 $ (858,749) STRS The amounts reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, Other amounts reported as deferred inflows of resources related to pensions will be recognized as pension expense as follows: Year Ended June Thereafter CalPERS Deferred Outflows/(Inflows) of Resources $ (81,917) (81,917) (81,917) (81,917) - - STRS Deferred Outflows/(Inflows) of Resources $ (214,687) (214,687) (214,687) (214,687)

21 NOTES TO THE FINANCIAL STATEMENTS Separate disclosure of deferred inflows and outflows related to Net Pension Liability is required by Governmental Accounting Standards Board (GASB) financial statement presentation standards. The Rocklin Academy presents financial statements based on standards for financial statement presentation by not-forprofit entities provided by the Financial Accounting Standards Board (FASB). Under FASB requirements, the Organization is to net deferred inflows and outflows with Net Pension Liability. The components of Net Pension Liability at June 30, 2015 are as follows: Actuarial Assumptions Pension Liability $ 5,628,565 Pension Deferred Inflows 1,186,418 Pension Deferred Outflows (730,134) Net Pension Liability $ 6,084,849 The total pension liabilities in the June 30, 2013 actuarial valuations were determined using the following actuarial assumptions: PERS STRS Valuation Date June 30, 2013 June 30, 2013 Measurement Date June 30, 2014 June 30, 2014 Actuarial Cost Method Entry-Age Normal Entry-Age Normal Actuarial Assumptions Discount Rate 7.5% 7.6% Inflation 2.75% 3.00% Payroll Growth 2.75% 3.75% Projected Salary Increase (1) 2% simple for DB Not applicablefor DBS/CBB Investment Rate of Return 7.5% (2) 7.6% Mortality (3) (4) (1) Varies by entry age and service (2) Net of pension plan investment and administrative expenses, includes inflation (3) Derived using CalPERS' Membership Data for all Funds (4) STRS uses custom mortality tables to best fit the patterns of mortality among its members. 17

22 NOTES TO THE FINANCIAL STATEMENTS Discount Rate California Public Employees Retirement System (CalPERS) The discount rate used to measure the total pension liability was 7.50% for the Plan. To determine whether the municipal bond rate should be used in the calculation of a discount rate for each plan, CalPERS stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing, none of the tested plans run out of assets. Therefore, the current 7.50 percent discount rate is adequate and the use of the municipal bond rate calculation is not necessary. The long term expected discount rate of 7.50 percent will be applied to all plans in the Public Employees Retirement Fund (PERF). The stress test results are presented in a detailed report called GASB Crossover Testing Report that can be obtained from the CalPERS website under the GASB 68 section. According to Paragraph 30 of Statement 68, the long-term discount rate should be determined without reduction for pension plan administrative expense. The 7.50 percent investment return assumption used in this accounting valuation is net of administrative expenses. Administrative expenses are assumed to be 15 basis points. An investment return excluding administrative expenses would have been 7.65 percent. Using this lower discount rate has resulted in a slightly higher Total Pension Liability and Net Pension Liability. CalPERS checked the materiality threshold for the difference in calculation and did not find it to be a material difference. CalPERS is scheduled to review all actuarial assumptions as part of its regular Asset Liability Management (ALM) review cycle that is scheduled to be completed in February Any changes to the discount rate will require Board action and proper stakeholder outreach. For these reasons, CalPERS expects to continue using a discount rate net of administrative expenses for GASB 67 and 68 calculations through at least the fiscal year. CalPERS will continue to check the materiality of the difference in calculation until such time as we have changed our methodology. The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. In determining the long-term expected rate of return, CalPERS took into account both short-term and longterm market return expectations as well as the expected pension fund cash flows. Using historical returns of all the funds asset classes, expected compound returns were calculated over the short-term (first 10 years) and the long-term (11-60 years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent. 18

23 NOTES TO THE FINANCIAL STATEMENTS The table below reflects the long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. These rates of return are net of administrative expenses. Asset Class New Strategic Allocation Real Return Ye ars 1-10(a) Real Return Years 11+(b) Global Equity 47% 5.25% 5.71% Global Fixed Income 19% 0.99% 2.43% Inflation Sensitive 6% 0.45% 3.36% Private Equity 12% 6.83% 6.95% Real Estate 11% 4.50% 5.13% Infrastructure and Forestland 3% 4.50% 5.09% Liquidity 2% -0.55% -1.05% Total 100% (a) An expected inflation of 2.5% used for this period (b) An expected inflation of 3.0% used for this period State Teachers Retirement System (STRS) The discount rate used to measure the total pension liability was 7.60 percent. The projection of cash flows used to determine the discount rate assumed that contributions from plan members and employers will be made at statutory contribution rates in accordance with the rate increase per AB Projected inflows from investment earnings were calculated using the long-term assumed investment rate of return (7.60 percent) and assuming that contributions, benefit payments and administrative expense occur midyear. Based on those assumptions, the Plan s fiduciary net position was projected to be available to make all projected future benefit payments to current plan members. Therefore, the long-term assumed investment rate of return was applied to all periods of projected benefit payments to determine the total pension liability. The table below reflects the long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. These rates of return are net of administrative expenses. 19

24 NOTES TO THE FINANCIAL STATEMENTS Asset Class Assumed Asset Allocation Long-Term Expected Real Rate of Return Global Equity 47% 4.50% Private Equity 12% 6.20% Real Estate 15% 4.35% Inflation Sensitive 5% 3.20% Fixed Income 20% 0.20% Cash/Liquidity 1% 0.00% Total 100% Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in the Discount Rate The following presents the Charter School s proportionate share of the net pension liability for each Plan, calculated using the discount rate for each Plan, as well as what the Organization s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage point lower or 1-percentage point higher than the current rate: CalPERS Discount Rate - 1% Current Discount Rate Discount Rate + 1% 6.50% 7.50% 8.50% Net Pension Liability $ 1,672,840 $ 953,605 $ 352,611 STRS Discount Rate - 1% Current Discount Rate Discount Rate + 1% 6.60% 7.60% 8.60% Net Pension Liability $ 7,287,040 $ 4,674,960 $ 2,496,960 Pension Plan Fiduciary Net Position Detailed information about each pension plan s fiduciary net position is available in the separately issued CalPERS and STRS financial reports. Payable to the Pension Plan At June 30, 2015, the Organization had no outstanding amount of contributions to the pension plans required for the year ended June 30,

25 NOTES TO THE FINANCIAL STATEMENTS CalPERS June 30, 2014 (1) Proportion of the net pension liability % Proportionate share of the net pension liability $ 1,297,576 Covered-employee payroll (2) $ 881,175 Proportionate share of the net pension liability as percentage of covered-employee payroll % Plans fiduciary net position as a percentage of the total pension liability 83.38% Proportionate share of aggregate employer contributions (3) $ 101,058 STRS June 30, 2014 (1) Proportion of the net pension liability % Proportionate share of the net pension liability $ 5,715,040 Covered-employee payroll (2) $ 3,563,224 Proportionate share of the net pension liability as percentage of covered-employee payroll % Plans fiduciary net position as a percentage of the total pension liability 76.52% Proportionate share of aggregate employer contributions (3) $ 292,451 (1) Historical information is required only for measurement periods for which GASB 68 is applicable. (2) Covered-employee payroll represented above is based on pensionable earnings provided by the employer. (3) The plans' proportionate share of aggregate contributions may not match the actual contributions made by the employer during the measurement period. The plans' proportionate share of aggregate contributions is based on the plans' proportion of fiduciary net position as well as any additional side fund (or unfunded liability) contributions made by the employer during the measurement period. 21

26 NOTES TO THE FINANCIAL STATEMENTS CalPERS Fiscal Year (1) Actuarially determined contribution (2) $ 100,824 Contributions in relation to the actuarially determined contributions (101,058) Contribution deficiency (excess) $ (234) Covered-employee payroll (3) $ 881,175 Contributions as a percentage of covered-employee payroll (3) % STRS Fiscal Year (1) Actuarially determined contribution (2) $ 293,966 Contributions in relation to the actuarially determined contributions (292,451) Contribution deficiency (excess) $ 1,515 Covered-employee payroll (3) $ 3,563,224 Contributions as a percentage of covered-employee payroll (3) 8.25% (1) Historical information is required only for measurement periods for which GASB 68 is applicable. (2) Employers are assumed to make contributions equal to the actuarially determined contributions (which is the actuarially determined contribution). However, some employers may choose to make additional contributions towards their side fund or their unfunded liability. Employer contributions for such plans exceed the actuarially determined contributions. The Plans have determined that employer obligations referred to as "side funds" do not conform to the circumstances described in paragraph 120 of GASB 68, therefore are not considered separately financed specific liabilities. (3) Covered-employee payroll represented above is based on pensionable earnings provided by the employer. 22

27 NOTES TO THE FINANCIAL STATEMENTS 9. AGREEMENTS Turnstone and Meyers Charter Schools each had a Memorandum of Understanding (MOU) with Rocklin Unified School District (RUSD) for the period of July 1 through June 30, 2015 and 2014, which outlined the supervisorial oversight provided by RUSD, special education responsibilities, and facility use fees for the site provided by RUSD at Ruhkala Elementary and Rocklin Elementary. As stated in the Education Code, up to 1% of all Charter Schools revenues (excluding grants and private monies outside of the funding model), can be paid to the Sponsoring District for the actual expenses incurred in monitoring and overseeing. The fees paid to RUSD for rent and oversight in accordance with these agreements were $393,875 for the year ended June 30, WSCA Charter School has a MOU with RUSD for the period of July 1 through June 30, 2015 and had a MOU with the State Board of Education (SBE) for the period of July 1 through June 30, 2014, which outlined the supervisorial oversight provided to WSCA. As stated in the Education Code, up to 1% of all Charter Schools revenues (excluding grants and private monies outside of the funding model), can be paid to the charter authorizer for the actual expenses incurred in monitoring and overseeing. The fees paid to RUSD and SBE for oversight in accordance with this agreement were $48,236 for the year ended June 30, The Organization entered into a legal settlement agreement with RUSD effective January 2012 whereby the Organization has agreed to a waiver of all current and future facility rights and obligations of RUSD to WCSA under Proposition 39 in exchange for $1,100,000. Payments under this agreement are four equal installments of $275,000 annually through September Per the agreement, payments to the Organization are contingent upon the Organization remaining in good standing as a non-profit corporation and remaining current with all obligations to its creditors. The Organization recognized the settlement income from this agreement of $1,100,000 as of The outstanding accounts receivable was $275,000 and $550,000 as of June 30, 2015 and 2014, respectively. The current portion of this receivable included in accounts receivable on the Statements of Financial Position was $275,000 at June 30, RESTRICTED NET ASSETS Temporarily restricted net assets as of June 30, 2015 are available for the following purposes: 11. JOINT VENTURES Purpose Restricted: Instructional Materials $ 24,545 California Clean Energy Jobs Acts Funds 13,175 Total Restricted Net Assets $ 37,720 For the year ended June 30, 2015 the Organization participated in a joint venture under joint powers agreement (JPA) with the California Charter Schools Association Joint Powers Authority (CharterSAFE). CharterSAFE arranges for and provide workers compensation, property, and liability insurance coverage for their members. The JPA is governed by a board consisting of a representative from each member. The board controls the operations of the JPA, including selection of management and approval of operating budgets, independent of any influence by the member beyond their representation on the board. Each member pays a premium commensurate with the level of coverage requested and shares, surpluses and deficits proportionate to their participation in the JPA. 23

28 NOTES TO THE FINANCIAL STATEMENTS 11. JOINT VENTURES (CONTINUTED) Nature of Participation A. Workers Compensation JPA s SIR: $250,000 Great American Insurance Company: $250,001 to $500,000 Safety National Insurance Company: Statutory limits B. Property Organization Deductible: $0 - $1,000 Coverage: (chartersafe) $1,001 - $25,000 (Travelers) $25,001 to $100,000,000 Excess Insurance: None C. Liability Organization Deductible: $0 - $50,000 Coverage (chartersafe) (Great American Insurance Company) $100,000 - $300,000 depending on coverage Excess of chartersafe limits to $1,000,000 per claim/occurrence with no aggregate. (Brit Insurance) $1,000,001 to $5,000,000 (Lexington Insurance Company) $5,000,001 to $20,000,000 D. Directors & Officers/Employment Practice Liability Organization Deductible: $0 - $50,000 (Scottsdale Insurance) Excess of deductibles - $1,000,000 (Brit Insurance) $1,000,001 to $10,000,000 (Lexington Insurance Company) $10,000,001 to $25,000,000 Complete separate financial statements for the JPA may be obtained from CharterSAFE at th Street, Suite 200, Sacramento, California

29 NOTES TO THE FINANCIAL STATEMENTS 11. JOINT VENTURES (CONTINUTED) The latest condensed financial information available for the JPAs is as follows: June 30, 2015 (in thousands) Total Assets $ 15,062 Total Liabilities $ 12,509 Net Position 2,553 Total Liabilities and Net Position $ 15,062 Total Revenues $ 17,154 Total Expenses 17,153 Net Increase in Net Position $ CONTINGENCIES The Organization has received state and federal funds for specific purposes that are subject to review and audit by the grantor agencies. Although such audits could generate disallowances under terms of the grants, it is believed that any reimbursement, if required, would not be material. 13. SUBSEQUENT EVENTS Management has reviewed its financial statements and evaluated subsequent events for the period of time from its year ended June 30, 2014 through December 15, 2015, the date the financial statements were issued. Management is not aware of any subsequent events that would require recognition or disclosure in the accompanying financial statements other than what is disclosed. 25

30 SUPPLEMENTARY INFORMATION

31 COMBINING SCHEDULE OF FINANCIAL POSITION JUNE 30, 2015 Western Admin Turnstone Meyers Sierra Gateway Totals ASSETS CURRENT ASSETS Cash and cash equivalents $ 637,899 $ 1,437,994 $ 674,335 $ (117,464) $ 58,129 $ 2,690,893 Restricted cash, current - 28,367 14, ,007 35, ,548 Accounts receivable - 299, , , ,419 1,870,102 Due from (to) (8,251) 1,275,888 (409,119) (858,518) - - Prepaid expenses and deposits ,595 90,012 92,607 Total current assets 629,648 3,041, , , ,244 4,977,150 Noncurrent Assets Restricted cash, net , ,938 Property & equipment, net 202,282 9,025 81,259 7,672, ,871 8,209,240 Other assets, net , ,689 Total noncurrent assets 202,282 9,025 81,259 9,092, ,871 9,628,867 TOTAL ASSETS $ 831,930 $ 3,050,635 $ 506,778 $ 9,318,559 $ 898,115 $ 14,606,017 LIABILITIES CURRENT LIABILITIES Accounts payable $ 138, , ,531 87,230 $ 304, ,027 Due to student groups ,624-48,624 Due to parent groups - 28,367 14,490 23,480 35, ,021 Accrued interest ,447-71,447 Deferred revenue Capital lease obligations, current - - 4,274 16,618-20,892 Debt, current ,000-65,000 Total current liabilities 138, , , , ,035 1,241,011.. NONCURRENT LIABILITIES Capital lease obligation, net Debt, net ,295,000-10,295,000 Net pension liability 6,084, ,084,849 Total noncurrent liabilities 6,084, ,295,000-16,380,238 TOTAL LIABILITIES 6,223, , ,684 10,607, ,035 17,621,249 NET ASSETS Unrestricted (5,391,622) 2,747, ,137 (1,314,256) 558,080 (3,052,952) Temporary restricted - 9,347 2,957 25,416 37,720 Total net balances (5,391,622) 2,757, ,094 (1,288,840) 558,080 (3,015,232) TOTAL LIABILITIES AND NET ASSETS $ 831,930 $ 3,050,635 $ 506,778 $ 9,318,559 $ 898,115 $ 14,606,017 26