FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED AUGUST 31, 2014
TABLE OF CONTENTS Page No. CERTIFICATE OF BOARD Independent Auditor's Report 1 FINANCIAL STATEMENTS Statement of Financial Position 3 Statement of Activities 4 Statement of Cash Flows 5 Notes to Financial Statements 6 Independent Auditor s Report on Supplementary Information 12 SUPPLEMENTAL FINANCIAL STATEMENTS - Schedule of Expenses for Individual Charter School 13 - Schedule of Capital Assets for Individual Charter School 14 - Budgetary Comparison Schedule for Individual Charter School 15 - Budgetary Variance Explanation 16 Independent Auditor s 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 18 Schedule of Findings and Questioned Costs 20 Schedule of Prior Year Findings and Questioned Costs 21
046-802 (Federal Employer Identification Number: 74-2314606) CERTIFICATE OF BOARD August 31, 2014 We, the undersigned, certify that the attached..;nnual Financial and Compliance Report of Casa Gracia, dba Trinity Charter Schools was reviewed and ----.2l.approved disapproved for the year ended August 31, 2014, at a meeting of the..boverning body of said charter school on the ;);;;- day of _-:::rjd_~y_' 20 J S. Signature of Board Sec ary
GOMEZ & COMPANY CERTIFIED PUBLIC ACCOUNTANTS 5177 RICHMOND AVE. SUITE 1100 HOUSTON, TX 77056 TEL: (713) 666-5900 FAX: (713) 666-1049 http://www.gomezandco.com INDEPENDENT AUDITOR S REPORT To The Board of Trustees of Casa Gracia, dba Trinity Charter Schools Austin, Texas We have audited the accompanying financial statements of Casa Gracia, dba Trinity Charter Schools (a nonprofit organization), which comprise the statement of financial position as of August 31, 2014, and the related statements of activities 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 financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Casa Gracia, dba Trinity Charter Schools as of August 31, 2014, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. -1-
Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated January 14, 2015, on our consideration of Casa Gracia, dba Trinity Charter School s internal control over financial reporting and on our tests of its compliance with certain 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 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 Casa Gracia, dba Trinity Charter School s internal control over financial reporting and compliance. Houston, TX January 14, 2015-2-
STATEMENT OF FINANCIAL POSITION AUGUST 31, 2014 ASSETS Current Assets: Cash $ 1,158,150 Grants Receivable 316,051 Total Current Assets 1,474,201 Property, Plant & Equipment: Furniture and Equipment 58,046 Accumulated Depreciation (58,046) Total Property, Plant & Equipment Other Assets: Prepaid Assets 6,049 Total Assets $ 1,480,250 Current Liabilities: Accounts Payable $ 156,425 Payroll Liabilities 115,561 Total Current Liabilities 271,986 Net Assets: Temporarily Restricted 1,208,264 Total Liabilities and Net Assets $ 1,480,250 See accompanying notes to financial statements. -3-
STATEMENT OF ACTIVITIES FOR THE YEAR ENDED AUGUST 31, 2014 Temporarily Unrestricted Restricted Total REVENUES Local Support: 5710 Revenue Passed Through by School Districts $ $ 19,028 $ 19,028 5740 Other Revenues from Local Sources 347,272 347,272 Total Local Support 347,272 19,028 366,300 State Program Revenues 5810 Foundation School Program Act Revenues 4,344,387 4,344,387 5820 State Program Revenues Distributed by Texas Education Agency 870 870 Total State Program Revenues 4,345,257 4,345,257 Federal Program Revenues: 5920 Federal Revenues Distributed by Texas Education Agency 424,278 424,278 Total Federal Program Revenues 424,278 424,278 Net assets released from restrictions: Restrictions satisfied by payments 4,592,560 (4,592,560) Total Revenues 4,939,832 196,003 5,135,835 EXPENSES 11 Instruction 3,012,743 3,012,743 13 Curriculum Development and Instructional Staff Development 43,008 43,008 21 Instructional Leadership 56,177 56,177 23 School Leadership 490,966 490,966 31 Guidance, Counseling, and Evaluation Services 318,428 318,428 41 General Administration 560,764 560,764 51 Plant Maintenance and Operations 410,315 410,315 52 Security and Monitoring Services 7,096 7,096 53 Data Processing Services 38,313 38,313 61 Community Services 2,022 2,022 Total Expenses 4,939,832 4,939,832 Change in Net Assets 196,003 196,003 Net Assets, Beginning of Year, as Restated 1,012,261 1,012,261 Net Assets, End of Year $ $1,208,264 $1,208,264 See accompanying notes to financial statements. -4-
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED AUGUST 31, 2014 Cash Flows From Operating Activities Change in net assets $ 196,003 Adjustments to reconcile change in net assets to net Cash provided (used) by operating activities: Depreciation 10,182 (Increase) decrease in Grants Receivable (151,497) (Increase) decrease in Other Assets 1,715 Increase (decrease) in Accounts Payable 115,611 Increase (decrease) in Accrued Liabilities (94,590) Total Adjustments (118,579) Net Cash Provided (Used) by Operating Activities 77,424 NET INCREASE ( DECREASE ) IN CASH 77,424 CASH AT BEGINNING OF YEAR 1,080,726 CASH AT END OF YEAR $ 1,158,150 See accompanying notes to financial statements. -5-
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2014 A. Organization: Casa Gracia, dba Trinity Charter Schools (the Organization ) is a not-for-profit organization incorporated in the state of Texas in 2003. The Board of Trustees is comprised of five members who govern the Organization. The Board of Trustees is selected pursuant to the bylaws of the Organization and has the authority to make decisions, appoint the president, and significantly influence operations. The Board of Trustees has the primary accountability for the fiscal affairs of the Organization. In March 2004, the State Board of Education of the State of Texas granted Casa Gracia, dba Trinity Charter Schools an open-enrollment charter pursuant to Chapter 12 of the Texas Education Code. Pursuant to the program described in the charter application approved by the State Board of Education and the terms of the applicable Contract for Charter, Trinity Charter Schools was opened for the remaining 2003-2004 academic year. The Organization was organized to provide educational services to students in grades K-12. The Organization s Board of Trustees governs its programs, services, activities, and functions. The Organization receives the majority of its funding from the Texas Education Agency ( TEA ) based on the school s average daily attendance. Since the Organization receives funding from local, state, and federal government sources, it must comply with the requirements of the entities providing those funds. The charter holder, Casa Gracia dba Trinity Charter Schools, only operates charter schools under its state charter and does not conduct any other charter or non-charter activities. B. Summary of Significant Accounting Policies: BASIS OF PRESENTATION The Organization presents its financial statements in accordance with Financial Accounting Standards Board Accounting Standards Codification (ASC) 958 Not-for-Profit Entities- 205 Presentation of Financial Statements. Under FASB ASC 958-205, an organization is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. Unrestricted net assets Unrestricted net assets include unrestricted resources which represent the portion of funds that are available for the operating objectives of the Organization. Temporarily restricted net assets Temporarily restricted net assets consist of donor restricted contributions and grants. Amounts restricted by donors for a specific purpose are deemed to be earned and reported as temporarily restricted revenue, when received, and such unexpended amounts are reported as temporarily restricted net assets at year-end. When the donor restriction expires, that is, when a stipulated time or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. -6-
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2014 B. Summary of Significant Accounting Policies: (continued) BASIS OF PRESENTATION (continued) Permanently restricted net assets Permanently restricted net assets consist of donor restricted contributions, which are required to be held in perpetuity. Income from the assets held is available for either general operations or specific purposes, in accordance with donor stipulations. CONTRIBUTIONS Contributions are recorded at fair value when the Organization is in possession of or receives an unconditional promise to give. In accordance with Financial Accounting Standards Board Accounting Standards Codification 958 Not-for-Profit Entities- 605 Revenue Recognition, contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support depending on the existence or nature of any donor restrictions. As donor or time restrictions are satisfied, net assets are reclassified to unrestricted net assets. The Organization s policy is to report restricted support that is satisfied in the year of receipt as restricted and then fully released in the same year. Contributed services that create or enhance nonfinancial assets or that require specialized skills that are provided by individuals possessing those skills, and which would typically need to be purchased if not provided by donation, are recorded at their fair values in the period received. Contributed goods are recorded at their fair value in the period received. GRANTS The Organization considers all government grants as exchange transactions rather than contributions. The Organization recognizes revenue from grants as eligible expenditures are incurred. Advances from government agencies are recorded as refundable advances. Eligible expenditures incurred in excess of grant fund reimbursements are recorded as receivables. Any funding sources may, at their discretion, request reimbursement for expenses or return of funds, or both, as a result of any noncompliance with the terms of the grant. SUPPORT AND REVENUE Support and revenue are recorded based on the accrual method. CASH DONATIONS AND DONATED SERVICES Cash donations are considered to be available for unrestricted use unless specifically restricted by the donor. No amounts have been reflected in the financial statements for donated services since no objective basis is available to measure the value of such donations. Nevertheless, a substantial number of volunteers have donated their time in connection with the program service and administration of the Organization. -7-
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2014 B. Summary of Significant Accounting Policies: (continued) PROPERTY AND EQUIPMENT Property and equipment purchased by the Organization are recorded at cost. Donations of property and equipment are recorded at their fair value at the date of the gift. All assets acquired with a value in excess of $5,000 are recorded as fixed assets. Depreciation is provided on the straight-line method based upon the following estimated useful lives: furniture and office equipment 3 to 10 years. Gains or losses from retirement or sale of property and equipment are reflected in income for the period. The proceeds from such sales which are not legally required or expected to be reinvested in property and equipment are transferred to unrestricted net assets. PLEDGES AND ACCOUNTS RECEIVABLE Contributions which are in substance, unconditional, are recognized when received by the Organization. Contributions that are restricted by the donor are reported as increases in unrestricted net assets if the restrictions expire in the year in which the contributions are recognized. All other donor-restricted contributions are reported as increases in temporarily or permanently restricted net assets depending on the nature of the restrictions. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets. No provision has been made for uncollectible promises to give for accounts receivable as of the statement of financial position date, given that none have been identified. INCOME TAXES The Organization qualifies as a tax-exempt organization under section 501 (c) (3) of the Internal Revenue Code and is exempt from federal income taxes except to the extent it has unrelated business activities. As such, no provision for federal income taxes has been made in the accompanying financial statements. The Organization s policy is to record interest and penalty expense related to income taxes as interest and other expense, respectively. At August 31, 2014, no interest or penalties have been or are required to be accrued. The Organization, generally, is no longer subject to income tax examinations by federal authorities for years prior to August 31, 2011. CASH AND CASH EQUIVALENTS The Organization considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash is held in non-interest bearing demand accounts at domestic financial institutions. Accounts at these institutions are insured by the Federal Deposit Insurance Corporation up to $250,000. From time to time, bank depository accounts exceeded federally insured limits. The Organization has not experienced any losses on uninsured amounts. -8-
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2014 B. Summary of Significant Accounting Policies: (continued) ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires the Organization s management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. CONCENTRATION OF RISK Financial instruments that potentially subject the Organization to off-balance-sheet credit risk include cash on deposit with financial institutions which were insured for up to $250,000 by the U.S. Federal Deposit Insurance Corporation. At various times throughout the period ended August 31, 2014, the Organization s balance in its accounts has exceeded these federally insured limits. C. Pension Plan Obligations: Plan Description The charter school contributes to the Teacher Retirement System of Texas (TRS), a cost sharing, multiple-employer defined benefit pension plan with one exception; all risks and costs are not shared by the charter school, but are the liability of the State of Texas. TRS administers retirement and disability annuities, and death and survivor benefits to employees and beneficiaries of employees of the public school systems of Texas. It operates primarily under the provisions of the Texas Constitution, Article XVI, Sec. 67, and Texas Government code, Title 8, Chapters 803 and 805, respectively. The Texas State legislature has the authority to establish and amend benefit provisions of the pension plan and may, under certain circumstances, grant special authority to the TRS Board of Trustees. TRS issues a publicly available financial report that includes financial statements and required supplementary information for the defined benefit plan. That report may be obtained by writing to the TRS Communications Department, 1000 Red River Street, Austin, Texas 78701 or by calling the TRS Communications Department at 1-800- 223-8778, or by downloading the report form the TRS Internet website, www.trs.state.tx.us, under the TRS Publications Heading. Funding Policy Contribution requirements are not actuarially determined but are established and amended by the Texas state legislature. The state funding policy is as follows: (1) the state constitution requires the legislature to establish a member contribution rate of not less than 6.0% of the member s annual compensation and a state contribution rate of not less than 6.0% and not more than 10% of the aggregate annual compensation of all members of the system; (2) A state statute prohibits benefit improvements or contribution reductions if, as a result of a particular action, the time required to amortize TRS unfunded actuarial liabilities would be increased to a period that exceeds 31 years, or, if the amortization period already exceeds 1 year, the period would be increased by such action. State law provides for a member contribution rate of 6.4%, and a state contribution rate of 6.8% for fiscal year 2014. The Organization s employees contributions to the System for the period ended August 31, 2014 were $205,227, equal to the required contribution for the year. Other contributions made from federal and private grants and from the charter school for salaries above the statutory minimum for the year ended August 31, 2014 were $17,329, equal to the required contribution for the period. -9-
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2014 D. Budget: The official school budget is prepared for adoption for required Governmental Fund Types. The annual budget is adopted on a basis consistent with generally accepted accounting principles and is formally adopted by the Board of Directors. E. Commitments and Contingencies: The Organization receives funds through state and federal programs that are governed by various statutes and regulations. State program funding is based primarily on student attendance data submitted to the Texas Education Agency and is subject to audit and adjustment. Expenses charged to federal programs are subject to audit and adjustment by the grantor agency. The programs administered by the charter school have complex compliance requirements, and should state or federal auditors discover areas of noncompliance, charter school funds may be subject to refund if so determined by the Texas Education Agency or the grantor agency. F. Health Care Coverage: During the period ended August 31, 2014, employees of the Organization were covered by a health insurance plan. The school contributed $273 per month per employee to the plan and employees, at their option, authorized payroll withholdings to pay premiums for dependents. All premiums were paid to a licensed insurer. The plan was authorized by Article 3.51-2, Texas Insurance Code, and was documented by contractual agreement. G. Operating Lease Commitment: The Organization s minimum annual lease commitment is as follows: Year Ending August 31, Amount 2015 $ 312,485 2016 36,252 2017 9,063 Total $ 357,800 Operating lease expense for the Organization amounted to $337,567 for the period ended August 31, 2014. H. Temporarily Restricted Net Assets: Temporarily restricted net assets at August 31, 2014, are available for the following periods: Periods after August 31, 2014 $ 1,208,264 Total temporarily restricted $ 1,208,264-10-
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2014 H. Temporarily Restricted Net Assets: (continued) Net assets were released from restrictions by incurring expenses satisfying the restricted purposes or by occurrence of other events specified by donors as follows: Revenue Passed Through by School Districts $ 19,028 Texas Education Agency-Federal 424,278 Texas Education Agency-State 4,149,254 Total restrictions released $ 4,592,560 I. Prior Period Adjustment: During the year, individual fund balances were adjusted to better reflect the presentation of net asset categories at year end. Unrestricted net assets were reduced by $419,489 and reclassified to the temporarily restricted net asset class. J. Subsidiary Relationship: The Organization operates as a subsidiary of Lutheran Social Services of the South, Inc. ( LSSS ), a 501 (c)(3) tax-exempt organization. LSSS effectively controls the Organization in a relationship that is permitted under Title 19 of the Texas Administrative Code Section 100.1011 (14)(B) and has been expressly recognized and approved by the Texas Education Commissioner and the State Board of Education. Three of the four schools currently operated by the Organization provide on-site, specialized education for residents of treatment centers operated by LSSS. At these sites, as well as a fourth residential treatment center not operated by LSSS, the Organization leases physical space from the respective treatment center in providing on-site education services. Transactions between the organizations have been negotiated in a manner that substantially reflects arms-length negotiations. During the year, LSSS also donated $343,190 toward administration of summer school programs operated by Trinity Charter School. K. Campus Merger Subsequent to Year-end: In a decision letter dated September 5, 2014, TEA formally allowed the Organization to add charter campuses formerly operated by Azleway, Inc., and approved an increase to the Organization s maximum student enrollment. Maximum student enrollment was increased from 525 to 650, and the General Equivalency Diploma (GED) was added to the charter s approved grade levels. The Organization received increased funding related to the campus merger in October 2014. L. Evaluation of Subsequent Events: The Organization has evaluated subsequent events through January 14, 2015, the date which the financial statements were available to be issued. -11-
GOMEZ & COMPANY CERTIFIED PUBLIC ACCOUNTANTS 5177 RICHMOND AVE. SUITE 1100 HOUSTON, TX 77056 TEL: (713) 666-5900 FAX: (713) 666-1049 http://www.gomezandco.com INDEPENDENT AUDITOR S REPORT ON SUPPLEMENTARY INFORMATION To The Board of Trustees of Casa Gracia, dba Trinity Charter Schools Austin, Texas We have audited the financial statements of Casa Gracia, dba Trinity Charter Schools as of and for the year ended August 31, 2014, and our report thereon dated January 14, 2015, which expressed an unmodified opinion on those financial statements, appears on page 1. Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The Schedules for Individual Charter School are presented for purposes of additional analysis and are not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the 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 financial statements as a whole. Houston, TX January 14, 2015-12-
SCHEDULE OF EXPENSES FOR THE YEAR ENDED AUGUST 31, 2014 Expenses 6100 Payroll Costs $ 3,263,621 6200 Professional and Contracted Services 1,263,458 6300 Supplies and Materials 275,018 6400 Other Operating Costs 137,735 Total Expenses $ 4,939,832 See accompanying notes to financial statements. -13-
SCHEDULE OF CAPITAL ASSETS FOR THE YEAR ENDED AUGUST 31, 2014 Ownership Interest Local State Federal 1110 Cash $ $ 1,158,150 $ 1539 Furniture and Equipment 58,046 Total Property and Equipment $ $ 1,158,150 $ 58,046 See accompanying notes to financial statements. -14-
BUDGETARY COMPARISON SCHEDULE FOR THE YEAR ENDED AUGUST 31, 2014 Budgeted Amounts Variance Actual from Final Original Final Amounts Budget REVENUES Local Support: 5710 Revenue Passed Through by School District $ $ $ 19,028 $ 19,028 5740 Other Revenues from Local Sources Total Local Support 347,272 366,300 347,272 366,300 State Program Revenues: 5810 Foundation School Program Act Revenues 4,367,678 4,194,402 4,344,387 149,985 5820 State Program Revenues Distributed by Texas Education Agency 870 870 Total State Program Revenues 4,367,678 4,194,402 4,345,257 150,855 Federal Program Revenues: 5920 Federal Revenues Distributed by Texas Education Agency 421,177 462,260 424,278 (37,982) Total Federal Program Revenues 421,177 462,260 424,278 (37,982) Total Revenues 4,788,855 4,656,662 5,135,835 479,173 EXPENSES 11 Instruction 2,780,261 2,983,393 3,012,743 (29,350) 13 Curriculum Development and Instructional Staff Development 14,729 48,867 43,008 5,859 21 Instructional Leadership 64,655 64,905 56,177 8,728 23 School Leadership 417,539 492,754 490,966 1,788 31 Guidance, Counseling, and Evaluation Services 177,186 301,352 318,428 (17,076) 41 General Administration 532,908 531,891 560,764 (28,873) 51 Plant Maintenance and Operations 360,730 376,230 410,315 (34,085) 52 Security and Monitoring Services 4,260 3,912 7,096 (3,184) 53 Data Processing Services 12,410 21,969 38,313 (16,344) 61 Community Services 3,000 16,000 2,022 13,978 Total Expenses 4,367,678 4,841,273 4,939,832 (98,559) Change in Net Assets 421,177 (184,611) 196,003 380,614 Net Assets, Beginning of Year, as Restated 1,012,261 1,012,261 1,012,261 Net Assets, End of Year $ 1,433,438 $ 827,650 $1,208,264 $ 380,614 See accompanying notes to financial statements. -15-
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2014 MATERIAL BUDGET VARIANCE REVENUE (1) The following is an explanation of the 10% variances from final budget to actual revenue reported on the Budgetary Comparison Schedule for the year ending August 31, 2014. Object 5710 This revenue is from our local regional service center, as part of the Chapter 41 share-thewealth technology program. We use this money to supplement the already existing technology program. This revenue source is unknown at the time the original budget was adopted since we did not receive it until June 2014. Object 5740 This revenue is recognized as our summer school donation, which we receive once our summer school program is over. Object 5820 This revenue of $870 is used to help offset the cost of textbooks. The school receives this money in the middle of the year after the original budget is adopted. MATERIAL BUDGET VARIANCE EXPENDITURES (1) The following is an explanation of the 10% variances from original budget to final budget reported on the Budgetary Comparison Schedule for the year ending August 31, 2014. Function 13 Increase of new hires for a new school and additional Title I training was needed after the original budget was adopted. In addition, the district invested heavily in new teacher orientation to Trinity Charter Schools. Function 23 The budget was increased to help train our new school leaders. A principal mentor helped facilitate leadership training and compliance support and we extended the contract to ensure the new school leader s success. Function 31 We added contracted services and additional employees to help train new special education staff, in order to maintain compliance with our special education records. The contracted services staff also mentored the new special education staff longer than originally anticipated due to some staff having difficulty grasping the high special education standards of the district. Function 53 The new school required existing technology infrastructure after the original budget was approved. The infrastructure cost increased substantially due the rural area and location next to a regional airport. All of these factors increased the technology costs unexpectedly. Function 61 We increased the budget to account for additional funds needed to help recruit and retain surrogates parents due to the remote, rural location of the school. -16-
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2014 (2) The following is an explanation of the 10% variances from final budget to actual expenses reported on the Budgetary Comparison Schedule for the year ending August 31, 2014. Function 13 There were fewer training sessions and conferences attended in the summer, than originally anticipated. We were notified in late July that we would be adding additional schools and our attention was directed towards onboarding those schools and staff. Therefore, the actual expenses were lower than the final board approved budget. Function 21 Our instructional leaders did not participate in the conferences scheduled for the summer due to the late notice of opening additional schools, so their expenses were lower than the final board approved budget. Function 52 In anticipation of adding the additional schools we purchased security devices to prepare the school and staff for the upcoming year. Therefore the expenses were higher than the final board approved budget. Function 53 In anticipation of adding the additional schools we purchased more computer and network equipment to prepare the school and staff for the upcoming year. Therefore the expenses were higher than the final board approved budget. Function 61 We were able to keep the costs lower than anticipated for our surrogate parent program. So, our expenses were lower than the final board approved budget. -17-
GOMEZ & COMPANY CERTIFIED PUBLIC ACCOUNTANTS 5177 RICHMOND AVE. SUITE 1100 HOUSTON, TX 77056 TEL: (713) 666-5900 FAX: (713) 666-1049 http://www.gomezandco.com INDEPENDENT AUDITOR S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To The Board of Trustees of Casa Gracia, dba Trinity Charter Schools Austin, Texas We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of Casa Gracia, dba Trinity Charter Schools ( Trinity ) (a nonprofit organization), which comprise the statement of financial position as of August 31, 2014, and the related statements of activities, and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated January 14, 2015. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered Trinity s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Trinity s internal control. Accordingly, we do not express an opinion on the effectiveness of Trinity s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether Trinity s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. -18-
However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the organization s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the organization s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Houston, TX January 14, 2015-19-
SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED AUGUST 31, 2014 Summary of Audit Results 1. The auditor s report expresses an unmodified opinion on the financial statements. 2. No significant deficiencies or material weaknesses on internal control over financial statements. 3. No instances of noncompliance material to the financial statements, which would be required to be reported in accordance with Government Auditing Standards, were disclosed during the audit. 4. An audit of major programs was not required because expenditures of federal awards were less than $500,000. Findings Relating to the Financial Statements No audit findings were noted as per governmental auditing standards. -20-
SCHEDULE OF PRIOR YEAR FINDINGS FOR THE YEAR ENDED AUGUST 31, 2014 Findings Relating to the Financial Statements No audit findings were noted as per governmental auditing standards. -21-