BASIC FINANCIAL STATEMENTS, REQUIRED SUPPLEMENTARY INFORMATION, OTHER SUPPLEMENTARY FINANCIAL INFORMATION, AND INDEPENDENT AUDITORS REPORT

AUDITED FINANCIAL STATEMENTS BASIC FINANCIAL STATEMENTS, REQUIRED SUPPLEMENTARY INFORMATION, OTHER SUPPLEMENTARY FINANCIAL INFORMATION, AND INDEPENDENT AUDITORS REPORT McCay, Kiddy & Associates, LLC Certified Public Accountants and Business Advisors 496 Bramson Court, Suite 120 Mount Pleasant, SC 29464 Telephone: (843) 881-4477 www.mkaacpa.com

TABLE OF CONTENTS Page No. INDEPENDENT AUDITORS REPORT 1-2 REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) Management s Discussion and Analysis 3-10 BASIC FINANCIAL STATEMENTS Government-wide Financial Statements Statement of Net Assets 11 Statement of Activities 12 Fund Financial Statements Governmental Fund Financial Statements Balance Sheet Governmental Funds 13 Reconciliation of the Balance Sheet of the Governmental Funds to the Statement of Net Assets 14 Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds 15 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of the Governmental Funds to the Statement of Activities 16 Proprietary Funds Statement of Net Assets 17 Statement of Revenues, Expenses, and Changes in Fund Net Assets 18 Statement of Cash Flows 19 Notes to Financial Statements 20-30

TABLE OF CONTENTS REQUIRED SUPPLEMENTARY INFORMATION OTHER THAN MANAGEMENT S DISCUSSION AND ANALYSIS (UNAUDITED) Budgetary Comparison Schedule General Fund 31 Notes to Budgetary Comparison Schedule General Fund 32 OTHER SUPPLEMENTARY FINANCIAL INFORMATION Combining and Individual Fund Statements and Supporting Schedules General Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget to Actual 33-36 Special Revenue Fund Combining Schedule of Revenues, Expenditures, and Changes in Fund Balance 37-39 Notes to Combining Schedule of Revenues, Expenditures, and Changes in Fund Balance 40 Summary Schedule for Designated State Restricted Grants 41 Education Improvement Act Fund Combining Schedule of Revenues, Expenditures, and Changes in Fund Balance All Programs 42 Summary Schedule by Program 43 Food Service Fund Schedule of Revenues, Expenditures, and Changes in Net Assets 44 COMPLIANCE SECTION Report on Compliance and Internal Control over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 45-46 Schedule of Findings and Responses 47-49

Certified Public Accountants and Business Advisors INDEPENDENT AUDITORS REPORT To the Board of Directors Riverview Charter School Beaufort, South Carolina We have audited the accompanying financial statements of the governmental activities, business-type activities, each major fund, and the aggregate remaining fund information of Riverview Charter School, a component unit of Beaufort County School District, as of June 30, 2011 and for the year ended, which collectively comprise the School s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the School s management. Our responsibility is to express opinions 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 and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, business-type activities, each major fund, and the aggregate remaining fund information of Riverview Charter School, as of June 30, 2011, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America (GAAP). In accordance with Government Auditing Standards, we have also issued our report dated October 11, 2011, on our consideration of Riverview 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 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 and should be considered in assessing the results of our audit. Accounting principles generally accepted in the United States of America require that the management s discussion and analysis and budgetary comparison information on pages 3 through 10 and 31 through 32 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. 496 BRAMSON COURT, SUITE 120 MT. PLEASANT, SC 29464 (843) 881-4477 FAX: (843) 881-4478 www.mkaacpa.com

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise Riverview Charter School s basic financial statements. The other supplementary financial information on pages 33 through 44 is presented for purposes of additional analysis and is not a required part of the basic 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. McCay, Kiddy & Associates, LLC October 11, 2011 2

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) MANAGEMENT S DISCUSSION AND ANALYSIS As management of Riverview Charter School, we offer readers of Riverview Charter School s audited financial statements this narrative overview and analysis of the financial activities of Riverview Charter School for the fiscal year ended June 30, 2011. We encourage readers to read the information presented herein in conjunction with additional information that we have furnished in the School s financial statements, which follow this narrative. Financial Highlights The assets of Riverview Charter School exceeded its liabilities at the close of the fiscal year by $726,590 (net assets). The School s governmental funds reported combined fund balances of $328,150. The 2010-2011 45-day headcount was 304. The 2010-2011 135-day headcount was 303. Riverview Charter School had no long-term debt as of June 30, 2011. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to Riverview Charter School s basic financial statements. The School s basic financial statements consist of three components; 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements (see Figure 1). The basic financial statements present two distinct financial perspectives of the School through the use of government-wide statements and fund financial statements. In addition to the basic financial statements, this report contains other supplemental information that will enhance the reader s understanding of the financial condition of Riverview Charter School. 3

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) MANAGEMENT S DISCUSSION AND ANALYSIS Figure 1 - Required Components of Annual Financial Report Management s Discussion and Analysis Basic Financial Statements Government-wide Financial Statements Fund Financial Statements Notes to the Financial Statements Summary Detail Basic Financial Statements The first two statements (Exhibits 1 and 2) in the basic financial statements are the Government-wide Financial Statements. They provide both short and long-term information about the School s financial standing. The next statements (Exhibits 3 through 6) are Fund Financial Statements. These statements focus on the activities of the individual segments of the School s government. These statements are more detailed than the government-wide financial statements. There are two parts to the Fund Financial Statements: 1) the governmental funds statements; and 2) the proprietary fund statements. Immediately following the fund financial statements are the Notes to the Financial Statements (i.e. Notes ). The Notes offer a detailed explanation of the data contained in those statements. Next, supplemental information is provided to show details about the School s funds. Budgetary information for the School also can be found in this section of the statements. 4

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) MANAGEMENT S DISCUSSION AND ANALYSIS Government-wide Financial Statements The government-wide financial statements are designed to provide the reader with a broad overview of the School s finances, similar in format to the financial statements of a private-sector business. The government-wide statements provide short and long-term information about the School s financial status, as a whole. The two government-wide statements report the School s net assets and how they have changed. Net assets equal the difference between the School s total assets and total liabilities. Measuring net assets is one way to gauge the School s financial condition. The government-wide statements are divided into two categories: 1) governmental activities; and 2) business-type activities. The governmental activities include most of the School s basic functions such as instructional services and business services. These functions are funded almost entirely through state, county, and federal educational funds. The business-type activities are those services that the School charges its students and other customers. These include the Food Service Activities services carried out by Riverview Charter School. The government-wide financial statements are enumerated on pages 11 and 12 of this report. Fund Financial Statements The fund financial statements provide a more detailed look at the School s most significant activities. A fund is a grouping of related accounts used to maintain control over resources that have been segregated for specific activities or objectives. Riverview Charter School uses fund accounting to ensure and reflect compliance (or non-compliance) with finance-related statutory requirements, such as the School s budget ordinance, where and when applicable. All of the funds of Riverview Charter School can be divided into two categories: governmental funds and proprietary funds. Governmental Funds Governmental funds are used to account for functions reported as governmental activities in the government-wide financial statements. Most of the School s basic services are accounted for in governmental funds. These funds focus on how assets can readily be converted into cash flow in and out, and monies remaining at year-end that will be available for spending in the next fiscal year. Governmental funds are reported using the modified accrual accounting method, which provides a short-term spending focus. The governmental fund financial statements assist the reader in determining whether there has been an increase or a decrease in the financial resources available to finance the School s programs. The relationship between government activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds is described in a reconciliation, which is an integral part of the fund financial statements. 5

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) MANAGEMENT S DISCUSSION AND ANALYSIS Riverview Charter School has elected to adopt an annual budget. The budget incorporates input from the faculty, management, and the Board of Directors of the School and specifies which activities will be pursued and which services the School will provide during the year. It also authorizes the School to obtain funds from identified sources to finance current period activities. The budgetary statement demonstrates how well the School has complied with the budget ordinance and whether or not the School has succeeded in providing the services as originally planned. Proprietary Funds Riverview Charter School has one proprietary fund, which is an enterprise fund. Enterprise Funds are used to report the same functions presented as business-type activities in the government-wide financial statements. Riverview Charter School uses enterprise funds to account for its Student Nutrition functions. Notes to the Financial Statements The notes provide additional information essential to facilitating a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements begin on page 20 of this report. Government-Wide Financial Analysis As noted earlier, net assets may serve over time as one useful indicator of a school s financial condition. The assets of Riverview Charter School exceeded liabilities by $726,590 as of June 30, 2011. $397,217 reflects the School s investment in capital assets (e.g. furniture and fixtures, and equipment), less any related debt still outstanding that was issued to acquire those items. Riverview Charter School uses these capital assets to provide services to its students; consequently, these assets are not available for future spending. Although Riverview Charter School s investment in its capital assets is reported net of the outstanding related debt, the resources needed to repay that debt must be provided by other sources, since the capital assets cannot be used to liquidate these liabilities. The remaining balance of $329,373 is unrestricted. 6

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) MANAGEMENT S DISCUSSION AND ANALYSIS Figure 2 - Riverview Charter School s Net Assets Governmental Activities 2011 Governmental Activities 2010 Business Activities 2011 Business Activities 2010 Current and other assets $ 367,207 $ 294,685 $ 1,223 $ - Capital assets, net of depreciation 396,098 344,774 1,119 1,472 Total assets 763,305 639,459 2,342 1,472 Total liabilities 39,057 63,494 - - Invested in capital assets, net of related debt 396,098 344,774 1,119 1,472 Unrestricted 328,150 231,191 1,223 - Total net assets $ 724,248 $ 575,965 $ 2,342 $ 1,472 Several aspects of the School s financial operations positively influenced the total unrestricted governmental net assets: The School adopted an annual budget. The School s performance was measured using this budget on a monthly basis, allowing changes to be made in spending as needed to remain within the confines of the budget. 7

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) MANAGEMENT S DISCUSSION AND ANALYSIS Figure 3 - Riverview Charter School s Changes in Net Assets Governmental Activities 2011 Business Activities 2011 Total Governmental Activities 2010 Business Activities 2010 Total Donations and Other Revenues $ 232,441 $ - $ 232,441 $ 202,249 $ - $ 202,249 Charges for Services - 48,047 48,047-42,718 42,718 County, State, and Federal Funds 3,018,502 38,549 3,057,051 2,641,246 16,434 2,657,680 Total revenues 3,250,943 86,596 3,337,539 2,843,495 59,152 2,902,647 Instructional Programs 1,852,516-1,852,516 1,452,236 1,452,236 Support services 1,174,464 161,406 1,335,870 838,381 122,448 960,829 Total expenses 3,026,980 161,406 3,188,386 2,290,617 122,448 2,413,065 Increase (Decrease) in net assets before transfers 223,963 (74,810) 149,153 552,878 (63,296) 489,582 Transfers (75,680) 75,680 - (64,768) 64,768 - Increase (Decrease) in net assets 148,283 870 149,153 488,110 1,472 489,582 Net assets, July 1 575,965 1,472 577,437 87,855-87,855 Net assets, June 30 $ 724,248 $ 2,342 $ 726,590 $ 575,965 $ 1,472 $ 577,437 Governmental activities. Governmental activities increased the School s net assets by $223,963. There was a transfer of ($75,680) to the business type activities resulting in a net asset increase of $148,283. Business-type activities. Business-type activities decreased Riverview Charter School s net assets by $74,810; however, $75,680 was transferred in from the governmental activities. The School elects to continue to operate the School Food Service Fund to meet the daily dietary demands of the student population. The school considers a nutritional program an essential part of a healthy learning environment even though the program generates a decrease in net assets. 8

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) MANAGEMENT S DISCUSSION AND ANALYSIS Financial Analysis of the School s Funds As noted earlier, Riverview Charter School uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds. The focus of Riverview Charter School s governmental funds is to provide information on near-term inflows, outflows, and balances of usable financial resources. Such information is useful in assessing Riverview Charter School s financing requirements. Specifically, unreserved fund balance can be a useful measure of a government s net resources available for spending at the end of the fiscal year. The general fund is the chief operating fund of Riverview Charter School. At the end of the current fiscal year, unreserved fund balance of the General Fund was $328,150. Proprietary Funds. The School s proprietary funds provide the same type of information found in the government-wide statements but in more detail. Unrestricted net assets of the School Food Service Fund at the end of the fiscal year amounted to $1,223. The total loss in net assets for the School Food Service fund was $74,810. Other factors concerning the finances of this fund have already been addressed in the discussion of the School s business-type activities. Capital Asset and Debt Administration Capital assets. Riverview Charter School s investment in capital assets for its governmental and business activities as of June 30, 2011, totals $397,217 (net of accumulated depreciation). Capital assets include furniture and equipment and leasehold improvements. Figure 4 - Riverview Charter School s Capital Assets (net of depreciation) Gov. Activities Bus. Activities 2011 2011 Total Furniture, fixtures, and equipment $ 243,783 $ 1,119 $ 244,902 Leasehold improvements 152,315-152,315 Total $ 396,098 $ 1,119 $ 397,217 2010 2010 Total Furniture, fixtures, and equipment $ 262,460 $ 1,472 $ 263,932 Leasehold improvements 82,314-82,314 Total $ 344,774 $ 1,472 $ 346,246 Additional information about the School s capital assets can be found in Note II. of the Basic Financial Statements. 9

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) MANAGEMENT S DISCUSSION AND ANALYSIS Long-term Debt. As of June 30, 2011, Riverview Charter School had no long-term debt. General Fund Budgetary Highlights The positive instruction variance of $39,966 is due to several expense line items being covered by special revenue funds versus having to come out of the general fund. The positive variance in Support Services of $64,577 is due to 1) several expense line items being covered by special revenue funds versus having to come out of the general fund and 2) several items and services for information technology came in under the budgeted amount. Economic Factors The following key economic indicators reflect the growth and prosperity of the School: Riverview Charter School continues to see community support as evidenced by the volunteerism, local organizations donating classroom and office supplies, private donations, and support through fundraising. The School has a returning staff of professionals that are committed to the School. The School continues to seek both federal and private grant funds to supplement its Base Student funding. The School s headcount has increased for FY 11. The School continues to upgrade their current facility to better serve its students. Requests for Information This report is designed to provide an overview of the School s finances for those with an interest in this area. Questions concerning any of the information found in this report or requests for additional information should be directed to the Director, Riverview Charter School, 302 Burroughs Avenue Beaufort, South Carolina 29902, and telephone number (843) 379-0123. 10

BASIC FINANCIAL STATEMENTS

GOVERNMENT-WIDE FINANCIAL STATEMENTS

STATEMENT OF NET ASSETS JUNE 30, 2011 Governmental Activities Primary Government Business-type Activities Total Assets Cash and Cash Equivalents $ 332,035 $ - $ 332,035 Due from Other Governmental Units 25,172-25,172 Inventory - 1,223 1,223 Other Assets 10,000-10,000 Capital Assets, Net of Depreciation 396,098 1,119 397,217 Total Assets 763,305 2,342 765,647 Liabilities Accounts Payable and Other Current Liabilities 39,057-39,057 Total Liabilities 39,057-39,057 Net Assets Invested in Capital Assets, Net of Related Debt 396,098 1,119 397,217 Unrestricted Net Assets 328,150 1,223 329,373 Total Net Assets $ 724,248 $ 2,342 $ 726,590 See accompanying notes to financial statements and independent auditors' report. 11

STATEMENT OF ACTIVITIES Program Revenues Net (Expense) Revenue and Changes In Net Assets Functions/ Programs Expenses Charges for Services Operating Grants and Contributions Governmental Activities Business-type Activities Total Governmental Activities: Instruction $ 1,852,516 $ - $ 187,621 $ (1,664,895) $ - $ (1,664,895) Support Services 1,174,464-158,004 (1,016,460) - (1,016,460) Intergovernmental - - 2,672,877 2,672,877 2,672,877 Total Governmental Activities 3,026,980-3,018,502 (8,478) - (8,478) Business-type Activities: 161,406 48,047 38,549 - (74,810) (74,810) Total Primary Government $ 3,188,386 $ 48,047 $ 3,057,051 (8,478) (74,810) (83,288) General Revenues: Investment Earnings 212-212 Miscellaneous 232,229-232,229 Transfers (75,680) 75,680 - Total General Revenues 156,761 75,680 232,441 Change in Net Assets 148,283 870 149,153 Net Assets - July 1, 2010 575,965 1,472 577,437 Net Assets - June 30, 2011 $ 724,248 $ 2,342 $ 726,590 See accompanying notes to financial statements and independent auditors' report. 12

FUND FINANCIAL STATEMENTS

BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2011 Total General Special Revenue Governmental Funds Assets Cash and Investments $ 332,035 $ - $ 332,035 Due from Other Funds 25,172-25,172 Due from Other Governmental Units - 25,172 25,172 Deposits 10,000-10,000 Total Assets $ 367,207 $ 25,172 $ 392,379 Liabilities and Fund Balances Liabilities: Accounts Payable and Accrued Liabilities $ 39,057 $ - $ 39,057 Due To Other Funds - 25,172 25,172 Total Liabilities 39,057 25,172 64,229 Fund Balances: Nonspendable Deposits 10,000-10,000 Assigned to Other purposes 20,663-20,663 Unassigned 297,487-297,487 Total Fund Balances 328,150-328,150 Total Liabilities and Fund Balances $ 367,207 $ 25,172 $ 392,379 See accompanying notes to financial statements and independent auditors' report. 13

RECONCILIATION OF THE BALANCE SHEET OF THE GOVERNMENTAL FUNDS TO THE STATEMENT OF NET ASSETS JUNE 30, 2011 Total Fund Balances - Governmental Funds $ 328,150 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources, and therefore are not reported in the funds. Cost of the assets $ 617,127 Less: accumulated depreciation (221,029) 396,098 Total Net Assets - Governmental Activities $ 724,248 See accompanying notes to financial statements and independent auditors' report. 14

STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS General Special Revenue Education Improvement Act Total Governmental Funds Revenues Earnings on Investments $ 212 $ - $ - $ 212 Other Local 232,229 - - 232,229 Total Local 232,441 - - 232,441 Intergovernmental Revenue 2,672,877 - - 2,672,877 State Sources - 73,894 57,034 130,928 Federal Sources - 214,697-214,697 Total Revenues 2,905,318 288,591 57,034 3,250,943 Expenditures Current: Instruction 1,594,314 136,744 50,877 1,781,935 Support Services 968,101 124,198-1,092,299 Capital Outlay 170,264 27,649 6,157 204,070 Total Expenditures 2,732,679 288,591 57,034 3,078,304 Excess (Deficiency) of Revenues Over Expenditures 172,639 - - 172,639 Other Financing Sources (Uses) Transfers Out (75,680) - - (75,680) Total Other Financing Sources (Uses) (75,680) - - (75,680) Net Change in Fund Balances 96,959 - - 96,959 Fund Balances - July 1, 2010 231,191 - - 231,191 Fund Balances - June 30, 2011 $ 328,150 $ - $ - $ 328,150 See accompanying notes to financial statements and independent auditors' report. 15

RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF THE GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES Net Change in Fund Balances - Governmental Funds $ 96,959 Amounts reported for the governmental activities in the statement of activities are different because: Governmental funds report capital outlay as expenditures. However, in the statement of activities the cost of these assets is allocated over their estimated useful lives and reported as depreciation expense. Capitalized capital outlays in the current period 204,070 Depreciation expense in the current period (152,746) 51,324 Change in Net Assets - Governmental Activities $ 148,283 See accompanying notes to financial statements and independent auditors' report. 16

STATEMENT OF NET ASSETS PROPRIETARY FUNDS JUNE 30, 2011 Enterprise Fund - Food Services Assets Current assets: Inventory $ 1,223 Total Current Assets 1,223 Noncurrent assets: Equipment 1,766 Less accumulated depreciation (647) Total Noncurrent Assets 1,119 Total Assets $ 2,342 Liabilities and Net Assets Net Assets: Invested in Capital Assets $ 1,119 Unreserved, Undesignated 1,223 Total Net Assets 2,342 Total Liabilities and Net Assets $ 2,342 See accompanying notes to financial statements and independent auditors' report. 17

STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS PROPRIETARY FUNDS Enterprise Fund - Food Services Revenues Proceeds from Sale of Meals $ 48,047 Total revenues 48,047 Operating Expenses Food Costs 66,906 Salaries and Wages 58,154 Supplies and Materials 2,117 Depreciation 353 Other Operating Costs 33,876 Total Operating Expenses 161,406 Operating Income (Loss) (113,359) Nonopearting Revenues (Expenses) USDA Reimbursements 38,549 Total Nonoperating Revenue (Expenses) 38,549 Income (Loss) Before Operating Transfers (74,810) Transfers In (Out) 75,680 Change in Net Assets 870 Net Assets - July 1, 2010 1,472 Net Assets - June 30, 2011 $ 2,342 See accompanying notes to financial statements and independent auditors' report. 18

STATEMENT OF CASH FLOWS PROPRIETARY FUNDS Enterprise Fund - Food Services Cash Flows From Operating Activities Operating Cash Receipts from Customers and Users $ 48,047 Payments to Employee for Services (58,154) Payments for Employee Benefits (20,236) Payments to Suppliers for Goods and Services (82,663) Net Cash Used By Operating Activities (113,006) Cash Flows From Noncapital Financing Activities Nonoperating Grants Received 37,326 Transfers (to) from Other Funds 75,680 Net Cash Provided By Noncapital Financing Activities 113,006 Net Increase (Decrease) in Cash and Cash Equivalents - Cash and Cash Equivalents, July 1, 2010 - Cash and Cash Equivalents, June 30, 2011 $ - Reconiliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities Operating Income (Loss) $ (113,359) Adjustments to reconcile operating income to net cash received from (used by) operating activities: Depreciation 353 Net cash received from (used by) operating activies $ (113,006) See accompanying notes to financial statements and independent auditors' report. 19

NOTES TO FINANCIAL STATEMENTS I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Riverview Charter School (the School ) was created in March 2008 through a ten year charter granted by Beaufort County School District (BCSD). The School began operation July 1, 2009. The School is a discretely presented component unit of BCSD. The School teaches in the traditional style with one grade level learning in one classroom area. In fiscal year 2011, the School consisted of thirteen primary classrooms with kindergarten through sixth grade students. A. Reporting Entity The Board of Directors (the Board ) of the School determines the operating policies and such policies are implemented by the School s staff. Under Charter law all terms of the Board are one year; therefore the Board must be elected in full each year. As of June 30, 2011, the School s volunteer Board of Directors is as follows: Board Members Robert White Executive Committee Chair Mallory Baches Facilities Chair Stephanie Ford Volunteers Chair Jody Hayward Fund Development Chair Mike Hudson Outreach Chair Mike Freeman Enrichment Chair Courtney Smith Communications Chair As required by generally accepted accounting principles, these financial statements present the School which is a component unit of Beaufort County School District. The School is a legally separate entity that is in substance part of the School District s operation. B. Basis of Presentation Government-wide Financial Statements: The government-wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the non-fiduciary activities of the primary School. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Fund Financial Statements: The School uses funds to maintain its financial records during the fiscal year. Fund accounting is designed to demonstrate legal compliance and to aid management by segregating transactions related to certain School functions and activities. A fund is defined as a fiscal and accounting entity with a self-balancing set of accounts. Separate financial statements are provided for governmental funds and enterprise funds. Major individual governmental funds are reported as separate columns in the fund financial statements. 20

NOTES TO FINANCIAL STATEMENTS I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued B. Basis of Presentation - Continued The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All governmental fund types are accounted for using a flow of current financial resources measurement focus. The financial statements for governmental funds are a balance sheet, which generally includes only current assets and current liabilities, and a statement of revenues, expenditures, and changes in fund balances, which reports on the sources (i.e., revenues and other financing sources) and uses (i.e., expenditures and other financing uses) of current financial resources. The following are the School s major governmental funds: 1. General Fund - The General Operating Fund of the School is used to account for all financial resources except those required to be accounted for in another fund. All revenue, charges for services, Education Finance Act revenue, and miscellaneous revenue are recorded in this fund except amounts which are specifically collected in a fiduciary capacity. Operational expenditures for general instruction, support services, general administration, and other departments of the School are paid through the General Fund. 2. Special Revenue Fund - Special Revenue Funds account for the operations of federal and state projects, which are required by the South Carolina State Department of Education to be accounted for in separate funds. 3. Education Improvement Act Fund - This fund is used to account for the School s expenditures as a result of receiving state funds used in a comprehensive education reform plan which are required to be accounted for in separate programs and strategies. The School did not have any non-major funds as of June 30, 2011. Proprietary Funds Proprietary funds are used to account for activities where the determination of net income is necessary or useful to provide sound financial administration. Goods or services from such activities can be provided either to outside parties (enterprise funds) or to other departments or agencies primarily within the government (internal service funds). Within proprietary funds, operating revenues and expenses are presented in the statement of revenue, expenses, and changes in fund net assets. Operating revenues are those revenues that are generated directly from the primary activity of the proprietary funds. Sales for food service represent the operating revenues of the School s enterprise fund. Nonoperating revenues consist primarily of reimbursements from the United States Department of Agriculture. Operating expenses are necessary costs incurred to provide the goods or services that are the primary activity of the fund. For purposes of the statement of cash flows, the proprietary fund considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. 21

NOTES TO FINANCIAL STATEMENTS I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued B. Basis of Presentation - Continued Enterprise Funds To account for operations (a) that are financed and operated in a manner similar to private business enterprises where the intent of the governing body is that costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or covered primarily through user charges; or (b) where the governing body has decided that periodic determination of revenue earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. The Food Service Fund is the School s only enterprise fund and is used to account for the United States Department of Agriculture (USDA) approved school breakfast and lunch programs. C. Measurement Focus and Basis of Accounting The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred regardless of the timing of related cash flows. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the School considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term debt and acquisitions under capital leases are reported as other financing sources. All proprietary fund types are accounted for on a flow of economic resources measurement focus. With this measurement focus, all assets and all liabilities associated with the operation of these funds are included on the statement of net assets. The statement of revenues, expenses and changes in fund net assets presents increases (i.e., revenues) and decreases (i.e., expenses) in net total assets. The statement of cash flows provides information about how the School finances and meets cash flow needs of its proprietary activities. Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in the government-wide financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Non-exchange transactions are transactions in which the School receives value without directly giving equal value in return, including grants, entitlements and donations. Revenue from grants, entitlements and donations are recognized in the fiscal year in which all eligibility requirements have been met. On the modified accrual basis, revenue from non-exchange transactions must also be available before it can be recognized. Amounts reported as program revenues include operating grants and contributions. When both restricted and unrestricted resources are available for use, it is the School s policy to use restricted resources first, then unrestricted resources as they are needed. The effect of inter-fund activity has been eliminated from the government-wide financial statements. 22

NOTES TO FINANCIAL STATEMENTS I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued D. Assets, Liabilities, and Equity Deposits and Investments The School s cash and cash equivalents are defined as short-term, highly liquid investments with an original maturity of three months or less, that are both readily convertible to known amounts of cash, and so near their maturity that they present no significant risk of changes in value because of changes in interest rates. State statutes authorized the School to invest in the following: 1. Obligations of the United States and agencies thereof; 2. General obligations of the State of South Carolina or any of its political units; 3. Savings and loan association deposits to the extent insured by the Federal Deposit Insurance Corporation; 4. Certificates of deposit and repurchase agreements collateralized by securities of the type described in (1) and (2) above held by a third party as escrow agent or custodian, of a market value not less than the amount of the certificates of deposit and repurchase agreements so secured, including interest; and 5. No-load open and closed-end management type investment companies or investment trusts registered under the Investment Company Act of 1940, as amended, where the investment is made by a bank or trust company or savings and loan association or other financial institution when acting as trustee or agent for a bond or other debt issue of that local government unit. In addition, South Carolina State statutes authorize the School to invest in the South Carolina Local Government Investment Pool (SCLGIP). The SCLGIP is an investment trust fund created pursuant to Section 6-6-10 of the South Carolina Code of Laws, and administered by the South Carolina State Treasurer, in which public monies under the custody of any political subdivision in excess of current needs may be deposited. The SCLGIP is permitted to purchase obligations of the United States, its agencies and instrumentalities, and any corporation within the United States if such obligations bear any of the three highest ratings of at least two nationally recognized rating services. The SCLGIP is a 2a7-like pool, which is not registered with the Securities and Exchange Commission (SEC) as an investment company, but has a policy that it will operate in a manner consistent with the SEC s rule 2a7 of the Investment Company Act of 1940. In accordance with Governmental Accounting Standards Board (GASB) Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, investments are carried at fair value determined annually based upon quoted market prices. The total fair value of the Pool is apportioned to the entities with funds invested on an equal basis for each share owned which are acquired at a cost of $1.00. The School has not formally adopted a deposit and investment policy. The School has no investments as of June 30, 2011. Receivables/Payables Transactions between funds that are representative of reimbursement arrangements outstanding at the end of the fiscal year are referred to as Due to/from other funds. 23

NOTES TO FINANCIAL STATEMENTS I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued D. Assets, Liabilities, and Equity Continued Inventory The Enterprise Fund inventory includes food and supplies, recorded at fair market value at the time of receipt and has not been consumed at fiscal year end. Due from Other Governmental Units Amounts due from other governmental units represents amounts owed to the School from South Carolina Department of Education for grant/contractual funding related to the School year ending June 30, 2011 that has been earned but not yet received as of June 30, 2011. Capital Assets Capital assets, which include leasehold improvement, classroom equipment, office equipment, and construction in progress, are reported in the governmental activities in the government-wide financial statements. Capital assets are defined by the government as assets with an initial, individual cost of more than $1,000 and an estimated useful life in excess of two years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Property and equipment are depreciated using the straight line method over the following estimated useful lives: Assets Years Leasehold Improvements Life of the lease Furniture and Fixtures 3-5 Equipment 3-5 Deferred and Unearned Revenues Deferred revenues arise when potential revenue does not meet both the measurable and available criteria for recognition in the current period. Unearned revenues arise when resources have been received but not yet earned. Federal, state, local and private program grant revenues received and not yet expended by the School are recorded as unearned revenue. In subsequent periods, when both revenue recognition criteria are met, or when the School has a legal claim to the grant proceeds, the liability for unearned revenue is removed from the balance sheet and revenue is recognized. Transfers From and To Other Funds Funds were transferred from the General Fund to the Food Service Fund of $75,680 to finance food costs and administrative costs for the food service fund. 24

NOTES TO FINANCIAL STATEMENTS I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued D. Assets, Liabilities, and Equity - Continued Reservations and Designations of Fund Balances Government-wide Financial Statements Equity is classified as net assets and displayed in three components: a. Invested in capital assets, net of related debt Consists of capital assets including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. b. Restricted net assets Consists of net assets with constraints placed on the use either by (1) external groups such as creditors, grantors, contributors, or laws or regulations of other governments; or (2) law through constitutional provisions or enabling legislation. c. Unrestricted net assets All other net assets that do not meet the definition of restricted or invested in capital assets, net of related debt. Fund Financial Statements The Governmental Accounting Standards Board (GASB) has issued Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions (GASB 54). This Statement defines the different types of fund balances that a governmental entity must use for financial reporting purposes. GASB 54 requires the fund balance amounts to be properly reported within one of the fund balance categories list below. a. Non-spendable includes fund balance amounts that cannot be spent either because it is not in spendable form or because of legal or contractual constraints (such as inventories, prepaids, longterm loans and notes receivable and property held for resale). b. Restricted includes fund balance amounts that are constrained for specific purposes which are externally imposed by providers, such as creditors or amounts constrained due to constitutional provisions or enabling legislation. c. Committed includes fund balance amounts that are constrained for specific purposes that are internally imposed by the government through formal action of the highest level of decision making authority and does not lapse at year-end. d. Assigned includes fund balance amounts that are intended to be used for specific purposes that are neither considered restricted or committed. Fund Balance may be assigned by the Director. e. Unassigned is the residual classification for the government s general fund and includes all spendable amounts not contained in the other classifications. 25

NOTES TO FINANCIAL STATEMENTS I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued D. Assets, Liabilities, and Equity - Continued Reservations and Designations of Fund Balances - Continued Order of Fund Balance Spending Policy The School s policy is to apply expenditures against non-spendable fund balance, restricted fund balance, committed fund balance, assigned fund balance, and unassigned fund balance at the end of the fiscal year. The School does not currently have policies in place for committed and assigned fund balances. First non-spendable fund balances are determined. Then restricted fund balances for specific purposes are determined (not including non-spendable amounts). Then any remaining fund balance amounts for the nongeneral funds are classified as restricted fund balance. It is possible for the non-general funds to have negative unassigned fund balance when non-spendable amounts plus the restricted fund balances for specific purposes amounts exceed the positive fund balance for the nongeneral fund. Encumbrances The School does not currently have an encumbrance policy. All encumbrances are classified as either Assigned Fund Balance or Restricted Fund Balance in the General Fund, or as Restricted Fund Balance in the non-general funds. A significant encumbrance as of June 30, 2011 was for furniture of $20,663. E. Accounting Estimates The preparation of financial statements in accordance with generally accepted accounting principles requires the School s management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses/expenditures during the reporting period. Actual results could differ from those estimates. II. DETAILED NOTES ON ALL FUNDS A. Deposits and Investments Deposits Custodial credit risk for deposits. Custodial credit risk for deposits is the risk that, in the event of a bank failure, the government s deposits might not be recovered. The School does not have a deposit policy for custodial credit risk but follows the investment policy statues of the State of South Carolina. As of June 30, 2011, none of the School s bank balances of $410,146 is exposed to custodial credit risk. 26

NOTES TO FINANCIAL STATEMENTS II. DETAILED NOTES ON ALL FUNDS Continued B. Capital Assets Capital asset activity for the year ended June 30, 2011, is as follows: Governmental Activites: June 30, 2010 Increases Decreases June 30, 2011 Captial Assets, Being Depreciated Furniture and Equipment $ 317,466 $ 51,516 $ - $ 368,982 Leasehold Improvements 95,591 152,554-248,145 Total Capital Assets, Being Depreciated 413,057 204,070-617,127 Total Capital Assets, Cost 413,057 204,070-617,127 Less Accumulated Depreciation: Furniture and Equipment 55,006 70,193-125,199 Leasehold Improvements 13,277 82,553-95,830 Total Accumulated Depreciation 68,283 152,746-221,029 Total Capital Assets, Being Depreciated, Net 344,774 51,324-396,098 Total Governmental Activites Capital Assets, Net $ 344,774 $ 51,324 $ - $ 396,098 Depreciation expense is charged to function of the School as follows: Instruction $ 70,582 Support Services 82,164 Total depreciation $ 152,746 27