HOSPITALITY HIGH SCHOOL OF WASHINGTON, DC, A PUBLIC CHARTER SCHOOL AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION YEARS ENDED JUNE 30, 2013 AND 2012
Table of Contents Page Independent Auditor s Report 1-2 Financial Statements Statements of Financial Position 3 Statements of Activities and Changes in Net Assets 4 Statements of Cash Flows 5 Notes to Financial Statements 6 11 Schedules of Functional Expenses 12 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 13-14 Independent Auditor s Report on Compliance for Each Major Program and on Internal Control over Compliance Required by OMB Circular A-133 15-17 Schedule of Expenditures of Federal Awards 18 Notes to Schedule of Expenditures of Federal Awards 19 Schedule of Findings and Questioned Costs 20-21 Independent Auditor s Report on Compliance with the District of Columbia School Reform Act, As Amended 22
Independent Auditor s Report Board of Directors Hospitality High School of Washington, DC, A Public Charter School Baltimore, MD We have audited the accompanying Statements of Financial Position of Hospitality High School of Washington, DC, A Public Charter School (a nonprofit School) as of June 30, 2013 and 2012, and the related Statements of Activities and Changes in Net Assets and Cash Flows for the years then ended. 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 audits. We conducted our audits 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 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. - 1 -
Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Hospitality High School of Washington, DC, A Public Charter School as of June 30, 2013 and 2012, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Our audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The schedule of functional expenses is presented for purposes of additional analysis and is not a required part of the financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is also 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 audits 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. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 28, 2013, on our consideration of Hospitality High School of Washington, DC, A Public 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 Hospitality High School of Washington, DC, A Public Charter School s internal control over financial reporting and compliance. Rockville, Maryland October 28, 2013-2 -
Statements of Financial Position June 30, 2013 2012 Assets Current assets Cash and cash equivalents $ - $ 338,602 Restricted cash 33,721 - Accounts receivable 372,417 219,299 Contributions receivable, net 285,000 330,000 Loan proceeds receivable 181,800 1,194,000 Prepaid expenses 29,366 20,419 Deposits 1,400 1,000 Total current assets 903,704 2,103,320 Restricted cash, net of current 331,073 - Contributions receivable, net of current 10,000 33,744 Property and equipment, net 9,790,438 8,047,182 Total assets $ 11,035,215 $ 10,184,246 Liabilities and Net Assets Current liabilities Accounts payable $ 47,088 $ 28,187 Accrued payroll and related liabilities 53,606 115,944 Deferred revenue 127,963 114,049 Notes payable - current portion 247,508 125,897 Total current liabilities 476,165 384,077 Notes payable, less current portion 6,798,676 7,131,761 Total liabilities 7,274,841 7,515,838 Net assets Unrestricted net assets 3,356,481 2,178,332 Temporarily restricted assets 403,893 490,076 Total net assets 3,760,374 2,668,408 Total liabilities and net assets $ 11,035,215 $ 10,184,246 The accompanying Notes to Financial Statements are an integral part of these financial statements. -3-
Statements of Activities and Changes in Net Assets 2013 2012 Temporarily Total Temporarily Total Years Ended June 30, Unrestricted Restricted 2013 Unrestricted Restricted 2012 Revenues and support Charter School - Per Pupil Funding $ 3,755,700 $ - $ 3,755,700 $ 3,447,566 $ - $ 3,447,566 Government grants 1,353,813-1,353,813 1,402,065-1,402,065 Contributions 120,660 28,335 148,995 110,142 747,425 857,567 Interest 9,280-9,280 2,490-2,490 Other income 93,282-93,282 12,445-12,445 Release from restriction 114,518 (114,518) - 349,757 (349,757) - Total revenues and support 5,447,253 (86,183) 5,361,070 5,324,465 397,668 5,722,133 Expenses Program 3,577,390-3,577,390 3,344,517-3,344,517 Management and general 625,280-625,280 580,286-580,286 Fundraising 66,434-66,434 63,884-63,884 Total expenses 4,269,104-4,269,104 3,988,687-3,988,687 Increase (decrease) in net assets 1,178,149 (86,183) 1,091,966 1,335,778 397,668 1,733,446 Net assets, beginning of year 2,178,332 490,076 2,668,408 842,554 92,408 934,962 Net assets, end of year $ 3,356,481 $ 403,893 $ 3,760,374 $ 2,178,332 $ 490,076 $ 2,668,408 The accompanying Notes to Financial Statements are an integral part of these financial statements. - 4 -
Statements of Cash Flows Years Ended June 30, 2013 2012 Cash flows from operating activities Change in net assets $ 1,091,966 $ 1,733,446 Adjustments to reconcile change in net assets to net cash provided by operating activities Depreciation 172,700 433,038 Reduction of allowance for doubtful accounts (11,256) - Grant funding for building purchase - (750,000) Contributions for building acquisition and renovation - (700,000) Loss on disposal of fixed assets 21,820 - (Increase) decrease in Accounts receivable (141,862) 84,880 Contributions receivable 68,744 (273,000) Prepaid expenses (8,947) 17,431 Deposit (400) - Increase (decrease) in Accounts payable 18,901 (118,202) Accrued payroll and related liabilities (62,338) (1,760) Deferred revenue 13,914 45,169 Net cash provided by operating activities 1,163,242 471,002 Cash flows from investing activities Purchase of property and equipment (1,937,776) (1,820,734) Net cash used in investing activities (1,937,776) (1,820,734) Cash flows from financing activities Grant funding for building purchase - 750,000 Contributions for building acquisition and renovation - 700,000 Cash restricted under loan terms (364,794) - Loan proceeds received 1,012,200 - Principal payments on note payable (211,474) (17,054) Net cash provided by financing activities 435,932 1,432,946 Net change in cash (338,602) 83,214 Cash and cash equivalents, beginning of year 338,602 255,388 Cash and cash equivalents, end of year $ - $ 338,602 Supplemental cash flow information Payment of interest $ 177,828 $ 1,816 Non-cash investing and financing activities Purchase of property partially funded by note payable $ - $ 6,056,000 Loan proceeds receivable $ - $ 1,194,000 The accompanying Notes to Financial Statements are an integral part of these financial statements. - 5 -
Notes to Financial Statements 1. School and significant accounting policies Organization: Hospitality High School of Washington, DC, A Public Charter School (the School) was incorporated as a not-for-profit corporation operated in the District of Columbia. The School was opened in 1999 as a four-year academic public charter high school dedicated to training young people for careers in the hospitality industry. Basis of accounting: The School prepares its financial records on the accrual basis of accounting. Under this basis, support and revenue are recognized when earned, and expenses are recognized as incurred. Basis of presentation: The School classifies revenues as restricted or unrestricted based on the existence or absence of donor-imposed restrictions. Accordingly, the net assets of the School and changes therein are classified and reported as follows: Unrestricted net assets - net assets that are not subject to donor-imposed stipulations. Resources are available for general operations. Temporarily restricted net assets - net assets subject to donor-imposed stipulations that will be met either by actions of the School and/or the passage of time. When a donor restriction expires, that is, when a stipulated time restriction ends or a purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statements of activities and changes in net assets as released from restrictions. Cash and cash equivalents: The School considers all checking and savings accounts and highly liquid investments purchased with an original maturity date of three months or less to be cash and cash equivalents. Balances may exceed federally insured limits. Management does not believe that this results in any significant credit risk. Loan proceeds receivable: The School closed on the purchase of real property on June 26, 2012, funded by notes payable that restrict a portion of the loan proceeds as cash to be held as collateral. At June 30, 2013, the restricted cash had not yet been fully transferred to the School. Property and equipment: Equipment costing $1,000 or more is recorded at cost and depreciated over estimated useful lives of two to seven years using the straight-line method. Leasehold improvements are depreciated over the shorter of the life of the lease or the improvement. Property consists of the building and land purchased as the home of the School. - 6 -
Notes to Financial Statements Renovations were conducted on the building during the year ended June 30, 2013 and the school moved into the facility in June 2013 for the upcoming 2013 2014 school year. The building will be depreciated over 39 years. Building improvements have an estimated useful life of 15 years. Revenue recognition: Charter School Per Pupil Funding A substantial portion of the School s revenue is derived from the District of Columbia Public School system, which is based on a student allocation formula linked to enrollment. Amounts received in advance for summer school are deferred. The average cost per student was approximately $21,239 and $20,350 for the years ended June 30, 2013 and 2012, respectively. Government grants The School recognizes grant revenue in amounts equal to total allowable cost. The School believes all related receivables are fully collectible and therefore no allowance for doubtful accounts has been recorded. Contributions The School recognizes all unconditional contributions received as income in the period received or pledged. Contributions receivable are shown net of an allowance for doubtful accounts. The allowance reflects the best estimate of possible losses determined principally on the basis of historical experience. All accounts, or portions thereof, that are deemed uncollectable are written off to the allowance for doubtful accounts. Allowance for doubtful accounts was $11,256 for the year ended June 30, 2012. Management determined there was no allowance needed for the year ended June 30, 2013. Income taxes: The School is exempt from Federal income tax under Section 501(c)(3) of the Internal Revenue Code and is not classified as a private foundation. Uncertainties in income taxes: The School evaluates uncertainty in income tax positions taken or expected to be taken on a tax return based on a more-likelythan-not recognition standard. If that threshold is met, the tax position is then measured at the largest amount that is greater than 50% likely of being realized upon ultimate settlement. As of June 30, 2013 and 2012, there are no accruals for uncertain tax positions. If applicable, the School records interest and penalties as a component of income tax expense. Tax years from June 30, 2010 through the current year remain open for examination by taxing authorities. - 7 -
Notes to Financial Statements Use of accounting 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 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 during the reporting period. Actual results could differ from these estimates. Functional allocation of expenses: The costs of providing the various programs and other activities have been summarized on a functional basis in the Statements of Activities and Changes in Net Assets. Costs that can be identified with particular programs or support functions are charged directly to the program or function. Accordingly, certain costs have been allocated among the programs and supporting services benefited. Subsequent events: Management has evaluated subsequent events for disclosure in these financial statements through October 28, 2013, which was the date the financial statements were available to be issued. 2. Contributions receivable At June 30, 2013 and 2012, the School had unconditional contributions receivable that included amounts due in: 2013 2012 Less than one year $ 285,000 $ 330,000 Two to five years 10,000 45,000 Total 295,000 375,000 Less: allowance for doubtful accounts - (11,256) Contributions receivable, net $ 295,000 $ 363,744 3. Property and equipment As of June 30, 2013 and 2012, property and equipment consisted of the following: 2013 2012 Land $ 1,177,900 $ 1,177,900 Building 6,639,267 6,639,267 Building improvements 1,896,413 - Leasehold improvements - 1,770,535 Furniture and equipment 595,052 553,688 10,308,632 10,141,390 Accumulated depreciation (518,194) (2,094,208) Total $ 9,790,438 $ 8,047,182-8 -
Notes to Financial Statements Depreciation expense was $172,700 and $433,038 for the years ended June 30, 2013 and 2012, respectively. Depreciation on the acquired building commenced when it was placed in service, after the renovations were substantially complete in the summer of 2013. 4. Notes payable On May 31, 2012, the School entered into a borrowing arrangement for the acquisition and renovation of property located at 1851 9 th Street, NW, Washington, D.C. The School obtained a note payable from a senior creditor in the amount of $6,750,000 which has an interest rate of 5% and is amortized based on a 25 year schedule with a balloon payment due at the maturity date of October 1, 2018. Payments commence August 1, 2012 and were interest only through December 1, 2012. Covenants on the loans took effect for the year ended June 30, 2013. The School was in compliance for the year ended June 30, 2013. As a requirement of the borrowing arrangement, the School must make monthly deposits of $1,220 into the reserve accounts. On approval from the senior creditor, portions of the reserve funds may be utilized to renovate the property. At the maturity of the note, any remaining reserve funds may be used towards the balloon payment. This note is collateralized by a security interest on the property and the reserve accounts held. These reserve accounts are included as restricted cash on the accompanying Statements of Financial Position. The School obtained a note payable from the District of Columbia Office of Public Charter School Financing and Support, a subordinate lender, in the amount of $1,320,000 of which $500,000 was disbursed and $820,000 remains available to use on renovations. The note has an interest rate of 4.5% and is amortized over a five year period commencing January 1, 2013. Borrower payments began August 1, 2012 and were interest only through December 1, 2012. A reserve account was established with required monthly deposits of $8,400 which commenced August 1, 2012 and continues until August 1, 2013. This reserve account is included in restricted cash on the accompanying Statements of Financial Position. In addition to regular payments, the School must also make monthly prepayment in the amount of $7,500. The subordinate lender retains a secondary security interest on the property as collateral. In November 2007, the School purchased a 25 passenger van which was financed by a 60-month note payable with an effective annual rate of 11%. The note was secured by the passenger van and was paid in its entirety in 2012. The balances related to the notes payable are as follows at June 30: - 9 -
Notes to Financial Statements 2013 2012 Senior creditor note $ 6,685,315 $ 6,750,000 Subordinate lender note 360,869 500,000 Vehicle loan - 7,658 $ 7,046,184 $ 7,257,658 Total restricted cash held in reserve accounts was $364,794 at June 30, 2013. Total principal payments on the notes are as follows: Year ending June 30, Amount 2014 $ 247,508 2015 259,740 2016 271,671 2017 204,634 2018 172,883 Thereafter 5,889,748 Total $ 7,046,184 Interest paid for the year ended June 30, 2013 was $177,828. Interest incurred during construction was capitalized in the amount of $171,918 as of June 30, 2013. 5. Lease commitments The School is obligated under an operating lease for office equipment for the following as of June, 30: Years ending Amount 2014 10,152 2015 9,306 Total $ 19,458 Rent expense paid for office equipment for the years ended June 30, 2013 and 2012 was $10,152 and $2,905, respectively. On June 8, 2007, the School entered into a memorandum of agreement with the District of Columbia Public Schools (DCPS) to co-locate at Roosevelt Senior High School at 4301 13 th Street, NW, Washington, D.C. As done in prior years, the leasing fees for the year ended June 30, 2013 and 2012 were waived in lieu of renovation and maintenance expenses undertaken by the School. - 10 -
Notes to Financial Statements 6. Temporarily restricted net assets Temporarily restricted net assets as of June 30, 2013 and 2012 were comprised of funds held for the following: 2013 2012 Scholarships $ 108,893 $ 115,076 Capital campaign - 300,000 Time restricted 295,000 75,000 Total temporarily restricted net assets $ 403,893 $ 490,076 7. Retirement plan The School participates in a 401(k) retirement plan. Eligible employees may contribute up to 100% of salary and are vested immediately. The School matches up to 3% of yearly pay. For the years ended June 30, 2013 and 2012, the School contributed $51,882 and $50,447, respectively. 8. Concentration The School is supported primarily through local and federal allocations and grants. Approximately 80% and 60% of total revenue for the years ended June 30, 2013 and 2012, respectively, was provided through one government agency. The School is required to comply with its school charter in order to retain its status. - 11 -
Schedules of Functional Expenses Years Ended June 30, 2013 2012 General General Program and 2013 Program and 2012 Services Administrative Fundraising Total Services Administrative Fundraising Total Salaries $ 1,777,444 $ 410,869 $ 45,232 $ 2,233,545 $ 1,617,149 $ 373,816 $ 41,153 $ 2,032,118 Direct student cost 802,506 - - 802,506 637,847 - - 637,847 Employee benefits 358,782 82,935 9,130 450,847 324,275 74,959 8,252 407,486 Depreciation and amortization 137,434 31,769 3,497 172,700 344,610 79,659 8,770 433,039 Food service 95,839 - - 95,839 120,915 - - 120,915 Occupancy 148,960 34,433 3,791 187,184 74,870 17,307 1,905 94,082 Consultants 40,586 - - 40,586 17,488 - - 17,488 Legal and accounting 27,185 6,284 692 34,161 56,925 13,159 1,448 71,532 Office expenses 43,891 10,146 1,117 55,154 42,213 9,758 1,074 53,045 Insurance 45,315 10,475 1,153 56,943 34,274 7,923 872 43,069 Accreditation 27,855 - - 27,855 22,107 - - 22,107 Interest 4,703 1,087 120 5,910 1,445 334 37 1,816 General expenses 66,890 15,462 1,702 84,054 50,399 3,371 373 54,143 Loss on disposal - 21,820-21,820 - - - - Total expenses $ 3,577,390 $ 625,280 $ 66,434 $ 4,269,104 $ 3,344,517 $ 580,286 $ 63,884 $ 3,988,687 Refer to Independent Auditor's Report on Supplementary Information. - 12 -
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 Board of Directors Hospitality High School of Washington, DC, A Public Charter School Washington, D.C. 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 Hospitality High School of Washington, DC, A Public Charter School (a nonprofit School), which comprise the Statement of Financial Position as of June 30, 2013, and the related Statement of Activities and Changes in Net Assets, and Cash Flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated October 28, 2013. Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered Hospitality High School of Washington, DC, A Public Charter School 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 Hospitality High School of Washington, DC, A Public Charter School s internal control. Accordingly, we do not express an opinion on the effectiveness of the School 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. - 13 -
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 (Continued) Compliance and Other Matters As part of obtaining reasonable assurance about whether Hospitality High School of Washington, DC, A Public Charter School 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. 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. Rockville, Maryland October 28, 2013-14 -
Independent Auditor s Report on Compliance for Each Major Program and on Internal Control over Compliance Required by OMB Circular A-133 Board of Directors Hospitality High School of Washington, DC, A Public Charter School Washington, D.C. Report on Compliance for Each Major Federal Program We have audited Hospitality High School of Washington, DC, A Public Charter School s compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of Hospitality High School of Washington, DC, A Public Charter School s major federal programs for the year ended June 30, 2013. Hospitality High School of Washington, DC, A Public Charter School s major federal programs are identified in the summary of auditor s results section of the accompanying Schedule of Findings and Questioned Costs. Management s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditor s Responsibility Our responsibility is to express an opinion on compliance for each of Hospitality High School of Washington, DC, A Public Charter School s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Hospitality High School of Washington, DC, A Public Charter School s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of Hospitality High School of Washington, DC, A Public Charter School s compliance. - 15 -
Independent Auditor s Report on Compliance for Each Major Program and on Internal Control over Compliance Required by OMB Circular A-133 (Continued) Opinion on Each Major Federal Program In our opinion, Hospitality High School of Washington, DC, A Public Charter School complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2013. Report on Internal Control over Compliance Management of Hospitality High School of Washington, DC, A Public Charter School is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered Hospitality High School of Washington, DC, A Public Charter School s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of Hospitality High School of Washington, DC, A Public Charter School s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. - 16 -
Independent Auditor s Report on Compliance for Each Major Program and on Internal Control over Compliance Required by OMB Circular A-133 (Continued) The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose. Rockville, Maryland October 28, 2013-17 -
Schedule of Expenditures of Federal Awards Year Ended June 30, 2013 Federal Federal Federal Grantor/Program Title CFDA number Expenditures Pass-through from the D.C. Office of State Superintendent of Education Department of Education Title I Grants to Local Education Agencies 84.010A $ 161,497 Carl Perkins Career and Technical Education Act of 2006 84.048 32,045 Title II - Preparing, Training, and Recruiting High Quality Teachers and Principals 84.367A 27,701 Title II - Improving Teacher Quality State Grant 84.367B 250,977 Title III - English Language Acquisition Grant 84.365A 1,029 Race to the Top 84.395A 25,321 Subtotal Department of Education 498,570 Congressional Appropriation Public Charter School Teacher Compensation Grant PL 111-322 7,980 Subtotal Congressional appropriation 7,980 Total passed-through the D.C. Office of State Superintendent of Education 506,550 Pass-through from D.C. Public Schools, Division of Food and Nutrition Services, State Agency Department of Agriculture National School Lunch Program 10.555 54,658 Federal Communications Commission Universal Service Administrative Company Schools and Libraries Division E-Rate 32.001 292,605 Total expenditures of federal awards $ 853,813 The accompanying Notes to Schedule of Expenditures of Federal Awards are an integral part of this schedule. - 18 -
Notes to Schedule of Expenditures of Federal Awards 1. Basis of presentation 2. Summary of significant accounting policies The accompanying Schedule of Expenditures of Federal Awards (the Schedule) includes the federal grant activity of Hospitality High School of Washington, DC, A Public Charter School under programs of the federal government for the year ended June 30, 2013. The information in this Schedule is presented in accordance with the requirements of OMB Circular A-133, Audits Of States, Local Governments, and Non-Profit Organizations. Because the Schedule presents only a selected portion of the operations of Hospitality High School of Washington, DC, A Public Charter School, it is not intended to and does not present the financial position, changes in net assets, or cash flows of Hospitality High School of Washington, DC, A Public Charter School. Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in OMB Circular A-122, Cost Principles for Non-profit Organizations, wherein certain types of expenditures are not allowable or are limited as to reimbursement. - 19 -
Schedule of Findings and Questioned Costs For The Year Ended June 30, 2013 Section I - Summary of Auditor s Results Financial Statements Type of auditor s report issued: Unmodified Internal control over financial reporting: Material weakness(es) identified? yes X no Significant deficiency(s) identified? yes X none reported Noncompliance material to financial statements noted? yes X no Federal Awards Internal control over major programs: Material weakness(es) identified? yes X no Significant deficiency(s) identified? yes X none reported Type of auditor s report issued on compliance for major programs: Unmodified Any audit findings disclosed that are required to be reported in accordance with section 510(a) of Circular A-133? yes X no Identification of Major Programs: CFDA Federal Grantor 84.367B Department of Education 32.001 Federal Communications Commission Dollar threshold used to distinguish between type A and type B programs: $300,000 Auditee qualified as low-risk auditee? X yes no - 20 -
Schedule of Findings and Questioned Costs For The Year Ended June 30, 2013 Section II - Financial Statement Findings None Section III - Federal Award Findings and Questioned Costs None - 21 -
Independent Auditor s Report on Compliance with the District of Columbia School Reform Act, As Amended Board of Directors Hospitality High School of Washington, DC, A Public Charter School Washington, D.C. We have examined Hospitality High School of Washington, DC, A Public Charter School s compliance with the types of compliance requirements described in the District of Columbia School Reform Act, as amended, for the year ended June 30, 2013. Management is responsible for Hospitality High School of Washington, DC, A Public Charter School s compliance with those requirements. Our responsibility is to express an opinion on Hospitality High School of Washington, DC, A Public Charter School s compliance based on our examination. Our examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants and, accordingly, included examining, on a test basis; evidence about Hospitality High School of Washington, DC, A Public Charter School s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our examination provides a reasonable basis for our opinion. Our examination does not provide a legal determination of Hospitality High School of Washington, DC, A Public Charter School s compliance with specified requirements. In our opinion, Hospitality High School of Washington, DC, A Public Charter School complied, in all material respects, with the aforementioned requirements for the year ended June 30, 2013. This report is intended solely for the information of management, the Board of Directors, the District of Columbia Public Charter School Board, and awarding agencies, and is not intended to be and should not be used by anyone other than these specified parties. Rockville, Maryland October 28, 2013-22 -