Madison Academy Flint, Michigan Audited Financial Statements June 30, 2015
C O N T E N T S Page
Independent Auditor’s Report i Ͳ iii Management’s Discussion and Analysis iv Ͳ ix Basic Financial Statements Statement of Net Position 1 Statement of Activities 2 Combined Balance Sheet – All Governmental Funds 3 Reconciliation of Total Governmental Fund Balance to Net Position of Governmental Activities 4 Statement of Revenues, Expenditures and Changes in Fund Balance – All Governmental Funds 5 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance of Governmental Funds to the Statement of Activities 6 Notes to Financial Statements 7 Ͳ 17 Supplemental Information Budgetary Comparison Schedule – General Fund 18 Schedule of Revenues – General Fund 19 Schedule of Expenditures – General Fund 20 Ͳ 21
C O N T E N T S – Continued
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AppendixͲ Federal Awards Report 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 AͲ1 Ͳ AͲ2 Independent Auditor’s Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by Omb Circular AͲ133 AͲ3 Ͳ AͲ4 Schedule of Expenditures of Federal Awards AͲ5 Ͳ AͲ6 Reconciliation of Basic Financial Statements Federal Receivables and Revenue with Schedule of Expenditures of Federal Awards AͲ7 Notes to Schedule of Expenditures of Federal Awards AͲ8 Schedule of Findings and Questioned Costs AͲ9
345 Diversion Street Ɣ Suite 400 44725 Grand River Avenue Ɣ Suite 204 2505 NW Boca Raton Blvd. Ɣ Suite 202 Rochester, Michigan 48307 Novi, Michigan 48375 Boca Raton, Florida 33431-6652 Phone: 248.659.5300 Phone: 248.659.5300 Phone: 561.241.1040 Fax: 248.659.5305 Fax: 248.659.5305 Fax: 561.368.4641
www.croskeylanni.com
David M. Croskey, CPA Thomas B. Lanni, CPA Carolyn A. Jones, CPA, CFP® MST Clifton F. Powell Jr., CPA, CFP®, PFS Roger J. DeJong, CPA Patrick M. Sweeney, CPA Leonard A. Geronemus, CPA, PFS
INDEPENDENT AUDITOR’S REPORT
To the Board of Directors of Madison Academy We have audited the accompanying financial statements of the governmental activities, each major fund and the aggregate remaining fund information of Madison Academy, as of and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise Madison Academy’s basic financial statements as listed in the table of contents. 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 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 the 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.
Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of governmental activities, each major fund, and the aggregate remaining fund information of Madison Academy, as of June 30, 2015, and the respective changes in financial position cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis and budgetary comparison information on pages iv Ͳ ix and 18 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 provided any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise Madison Academy’s basic financial statements. The introductory section, combining and individual nonͲmajor fund financial statements, statistical section, and schedules of revenues and expenditures are presented for purposes of additional analysis and are not a required part of the basic financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular AͲ 133, Audits of States, Local Governments, and NonͲProfit Organizations, and is also not a required part of the basic financial statements. The combining and individual nonͲmajor fund financial statements, the schedule of expenditures of federal awards, and schedules of revenues and expenditures are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonͲmajor fund financial statements, the schedule of expenditures of federal awards, and schedules of revenues and expenditures are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. ii
Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 12, 2015 on our consideration of Madison Academy’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 Madison Academy’s internal control over financial reporting and compliance.
Croskey Lanni, PC October 12, 2015 Rochester, Michigan iii
MANAGEMENT’S DISCUSSION AND ANALYSIS
This section of Madison Academy’s annual financial report presents our discussion and analysis of the school’s financial performance during the fiscal year that ended on June 30, 2015. Please read it in conjunction with the school’s financial statements, which immediately follow this section. FINANCIAL HIGHLIGHTS The school’s financial status remains stable. The total cost of basic programs was $2,874,876. Revenues were at 7,346,851 while expenditures were $5,817,371 in the General Fund. Blended enrollment used for state aid purposes was 865.63. The school has a positive fund balance of $1,486,535. OVERVIEW OF THE FINANCIAL STATEMENTS This annual report consists of three parts – management’s discussion and analysis (this section), the basic financial statements and required supplementary information. The basic financial statements include two kinds of statements that present different views of the school: The first two statements are schoolͲwide financial statements that provide both shortͲterm and longͲ term information about the school’s overall financial status. The remaining statements are fund financial statements that focus on individual parts of the school, reporting the school’s operations in more detail. The governmental fund statements tell how basic services like regular and special education were financed. Fiduciary funds statements provide information about the financial relationships in which the school acts solely as a trustee or agent for the benefit of others. These consist of student activity funds held by the school on behalf of the student group. iv
Summary Detail The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements with a comparison of the school’s budget for the year. Figure AͲ1 shows how the various parts of this annual report are arranged and related to one another. Fund Financial Statements SchoolͲWide Statements Government Funds Fiduciary Funds Scope Entire school (except fiduciary funds) The activities of the school that are not proprietary or fiduciary, such as special education and building maintenance. Instances in which the school administers resources on behalf of someone else, such as scholarship programs and student activities monies Required Financial Statements *Statement of net position *Statement of activities *Balance sheet *Statement of revenues, expenditures and changes in fund balances *Statement of fiduciary net assets *Statement of changes in fiduciary net assets Accounting basis and measurement focus Accrual accounting and economic resources focus Modified accrual accounting and current financial resources Accrual accounting and economic resources focus Type of asset/liability information All assets and liabilities both financial and capital, shortͲ term and longͲterm Generally assets expected to be used up and liabilities that come due during the year or soon thereafter, no capital assets or longͲterm liabilities included All assets and liabilities, both shortͲ term and longͲterm Type of inflow/outflow information All revenues and expenses during year, regardless of when cash is received or paid Revenues for which cash is received during or soon after the end of the year, expenditures when goods or services have been received and the related liability is due and payable All additions and deductions during the year, regardless of when cash is received or paid v Figure AͲ1 Organization of Madison’s Annual Financial Report Management’s Discussion and Analysis Basic Financial Statements Required Supplementary Information Notes to Financial Statements SchoolͲWide Financial Statements Fund Financial Statements Figure AͲ2 Major Features of SchoolͲWide and Fund FinancialStatements
Figure AͲ2 summarizes the major features of the school’s financial statements, including the portion of the school’s activities they cover and the types of information they contain. The remainder of this overview section of management’s discussion and analysis highlights the structure and contents of each of the statements. SCHOOLͲWIDE STATEMENTS The schoolͲwide statements report information about the school as a whole using accounting methods similar to those used by privateͲsector companies. The statement of net position includes all of the school’s assets and liabilities. All of the current year’s revenues and expenses are accounted for in the statement of activities regardless of when cash is received or paid. The two schoolͲwide statements report the school’s net position and how it has changed. Net position – the difference between the school’s assets and liabilities – are one way to measure the school’s financial health or position. Over time, increases or decreases in the school’s assets are an indicator of whether its financial position is improving or deteriorating, respectively. To assess the overall health of the school, you need to consider additional nonͲfinancial factors such as changes in the school’s enrollment and the condition of school buildings and other facilities. FUND FINANCIAL STATEMENTS The fund financial statements provide more detailed information about the school’s funds, focusing on its most significant or “major” funds – not the school as a whole. Funds are accounting devices the school uses to keep track of specific sources of funding and spending on particular programs: Governmental activities – Most of the school’s basic services are included in the general fund, such as regular and special education and administration. State foundation aid finances most of these activities. The school establishes other funds to control and manage money for particular purposes (like repaying its longͲ term debts) or to show that it is properly using certain revenues. The school has one kind of fund: Governmental funds – Most of the school’s basic services are included in governmental funds, which generally focus on (1) how cash and other financial assets that can readily be converted to cash flow in and out and (2) the balances left at yearͲend that are available for spending. Consequently, the governmental funds statements provide a detailed shortͲterm view that helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the school’s programs. Because this information does not encompass the additional longͲterm focus of the schoolͲwide statements, we provide additional information with governmental funds statements that explains the relationship (or differences) between them. vi
FINANCIAL ANALYSIS OF THE SCHOOL AS A WHOLE The school’s financial position is the product of many factors. General Fund Budgetary Analysis Over the course of the year, the school reviewed the annual operating budget several times. Financial Outlook Madison Academy’s financial forecast continues to be optimistic heading into the 2015/2016 school year. Enrollment is expected to remain constant for the 2015Ͳ2016 school year.
2015 2014
3,410,823$ 3,383,366 $ 9,089,173 9,371,753
12,499,996 12,755,119
10,605,000 10,814,554 1,995,020 2,460,092
12,600,020 13,274,646
(212,029) (171,115) 112,005 (348,412)
(100,024)$ (519,527) $
Figure AͲ3 Madison Academy Net Position
Current and other assets Capital assets
Total assets
LongͲterm debt outstanding Other liabilities
Total liabilities
Net position: Restricted Unrestricted
Total net position
vii
Revenues: 2015 2014
4,118$ 5,720 $ 1,184,701 932,325
6,331,828 6,208,120 49,237 45,175
7,569,884 7,191,340
Expenses:
3,432,188 3,298,114 2,495,692 2,371,017 892,400 914,245 330,101 335,691
7,150,381 6,919,067
Change in net position 419,503 $ 272,273 $
Support services Interest on longͲterm debt Unallocated depreciation
Figure AͲ4 Changes in Madison Academy Net Position
Federal and state operating grants General revenues: State aid Ͳ unrestricted Miscellaneous
Total revenues
Instruction
Charges for services Program revenues:
Total expenses
CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets By the end of 2015, the school had invested $11,120,980 in capital assets, including buildings, computers and software. See table AͲ5 below for a listing of capital assets, and the accumulated depreciation.
Balance Balance June 30, 2015 June 30, 2014
Land 30,000 $ 30,000 $ Building 10,238,209 10,238,209 Equipment 852,771 805,251
Subtotal 11,120,980 11,073,460
Less: accumulated depreciation 2,031,807 1,701,706
Total capital assets 9,089,173 $ 9,371,754 $
Figure AͲ5 Madison Academy's Capital Assets
viii
FACTORS BEARING ON THE SCHOOL’S FUTURE x Continuation of positive enrollment trends x State aid foundation grant stabilization CONTACTING THE SCHOOL’S FINANCIAL MANAGEMENT This financial report is designed to provide our students, parents and creditors with a general overview of the school’s finances and to demonstrate the school’s accountability for the money it receives. If you have questions about this report or need additional information, contact the management office at: The Romine Group 7877 Stead, Utica, MI 48317 (586)731Ͳ5300 ix
MADISON ACADEMY STATEMENT OF NET POSITION JUNE 30, 2015 See Independent Auditor’s Report
Current Assets
Cash and cash equivalents 490,346 $ Investments 1,303,798 Due from other governmental units 1,565,134 Prepaid expenses 51,545
Total current assets 3,410,823
Capital Assets Ͳ Net of Accumulated Depreciation 9,089,173
Total assets and deferred outflows 12,499,996 $
Current Liabilities
Accounts payable 464,870 $ Notes payable 90,821 Due to other governmental units 1,022,866 Other accrued expenses 416,463 LongͲterm debt Ͳ current portion 135,000
Total current liabilities 2,130,020
LongͲTerm Debt Ͳ LongͲTerm Portion 10,470,000
Net Position
Net investment in capital assets (1,515,827) Restricted for debt services and capital projects 1,303,798 Unrestricted 112,005
Total net position (100,024)
Total liabilities, deferred inflows and net position 12,499,996 $
ASSETS AND DEFERRED OUTFLOWS
LIABILITIES, DEFERRED INFLOWS AND NET POSITION
See accompanying notes to financial statements
Ͳ 1 Ͳ
MADISON ACADEMY STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2015 See Independent Auditor’s Report
Net (Expense) Revenues and Changes in Program Revenues Net Position Government Charges for Operating Type Expenses Services Grants Activities
Functions Instruction Basic programs 2,874,876 $ Ͳ $ 367,314 $ (2,507,562) $ Added needs 557,312 Ͳ 557,312 Ͳ Support services Pupil support services 44,315 Ͳ 44,315 Ͳ Instructional staff support services 30,547 Ͳ 10,077 (20,470) General administration 922,025 Ͳ Ͳ (922,025) School administration 542,574 Ͳ Ͳ (542,574) Business support services 43,698 Ͳ Ͳ (43,698) Operations and maintenance 479,154 Ͳ Ͳ (479,154) Pupil transportation services 161,035 Ͳ Ͳ (161,035) Central support services 2,069 Ͳ Ͳ (2,069) Athletic activities 31,660 Ͳ Ͳ (31,660) Food services 233,656 4,118 205,683 (23,855) Community services 4,959 Ͳ Ͳ (4,959) Unallocated depreciation 330,101 Ͳ Ͳ (330,101) Unallocated interest 892,400 Ͳ Ͳ (892,400)
Total primary government 7,150,381 $ 4,118 $ 1,184,701 $ (5,961,562)
General Purpose Revenues State school aid Ͳ unrestricted 6,331,828 Miscellaneous revenues 49,237 Total general purpose revenues 6,381,065
Change in net position 419,503
Net position Ͳ July 1, 2014 (519,527) Net position Ͳ June 30, 2015 (100,024) $
See accompanying notes to financial statements
Ͳ 2 Ͳ
MADISON ACADEMY COMBINED BALANCE SHEET – ALL GOVERNMENTAL FUNDS JUNE 30, 2015 See Independent Auditor’s Report
Debt NonͲMajor General Service Special Revenue Total
Cash and cash equivalents 490,346 $ Ͳ $ Ͳ $ 490,346 $ Investments 280,932 1,022,866 Ͳ 1,303,798 Due from other governmental units 1,565,134 Ͳ Ͳ 1,565,134 Due from other funds Ͳ Ͳ 3,037 3,037 Prepaid expenses 51,545 Ͳ Ͳ 51,545
Total assets 2,387,957 $ 1,022,866 $ 3,037 $ 3,413,860 $
Liabilities Accounts payable 464,870 $ Ͳ $ Ͳ $ 464,870 $ Notes payable 90,821 Ͳ Ͳ 90,821 Due to other governmental units Ͳ 1,022,866 Ͳ 1,022,866 Due to other funds 3,037 Ͳ Ͳ 3,037 Other accrued expenses 342,694 Ͳ Ͳ 342,694
Total liabilities 901,422 1,022,866 Ͳ 1,924,288
Fund Balance Nonspendable 51,545 Ͳ Ͳ 51,545 Restricted Ͳ Ͳ 3,037 3,037 Unassigned 1,434,990 Ͳ Ͳ 1,434,990
Total fund balance 1,486,535 Ͳ 3,037 1,489,572
Total liabilities and fund balance 2,387,957 $ 1,022,866 $ 3,037 $ 3,413,860 $
ASSETS
LIABILITIES AND FUND BALANCE
See accompanying notes to financial statements
Ͳ 3 Ͳ
MADISON ACADEMY RECONCILIATION OF TOTAL GOVERNMENTAL FUND BALANCE TO NET POSITION OF GOVERNMENTAL ACTIVITIES JUNE 30, 2015 See Independent Auditor’s Report Amounts reported for governmental activities in the statement of net position are different because:
Total Governmental Fund Balances 1,489,572 $
Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. The cost of the assets is $11,120,980 and the accumulated depreciation is $2,031,807. 9,089,173
Interest is not payable until due in governmental activities and, therefore, is not recorded in the funds. (73,769)
LongͲterm liabilities are not due and payable in the current period and, therefore, are not reported in the funds. (10,605,000)
Net Position of Governmental Activities (100,024) $
See accompanying notes to financial statements
Ͳ 4 Ͳ
MADISON ACADEMY STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE – ALL GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2015 See Independent Auditor’s Report Debt NonͲMajor General Service Special Revenue Total
Revenues Local sources 49,237 $ Ͳ $ 4,118 $ 53,355 $ State sources 6,866,736 Ͳ 1,677 6,868,413 Federal sources 384,954 Ͳ 217,238 602,192 Interdistrict sources 45,924 Ͳ Ͳ 45,924
Total governmental fund revenues 7,346,851 Ͳ 223,033 7,569,884
Expenditures Instruction Basic programs 2,874,876 Ͳ Ͳ 2,874,876 Added needs 557,312 Ͳ Ͳ 557,312 Support services Pupil support services 44,316 Ͳ Ͳ 44,316 Instructional staff support services 30,547 Ͳ Ͳ 30,547 General administration 922,025 Ͳ Ͳ 922,025 School administration 542,574 Ͳ Ͳ 542,574 Business support services 31,639 12,059 Ͳ 43,698 Operations and maintenance 479,154 Ͳ Ͳ 479,154 Pupil transportation services 161,035 Ͳ Ͳ 161,035 Central support services 2,069 Ͳ Ͳ 2,069 Athletic activities 31,660 Ͳ Ͳ 31,660 Food services Ͳ Ͳ 233,656 233,656 Community services 4,959 Ͳ Ͳ 4,959 Capital outlay 47,521 Ͳ Ͳ 47,521 Debt principal and interest 87,684 1,015,075 Ͳ 1,102,759
Total governmental fund expenditures 5,817,371 1,027,134 233,656 7,078,161
Excess (deficiency) of revenues over expenditures 1,529,480 (1,027,134) (10,623) 491,723 Other Financing Sources (Uses) Operating transfers in Ͳ 1,027,134 Ͳ 1,027,134 Operating transfers out (1,027,134) Ͳ Ͳ (1,027,134)
Total other financing sources (uses) (1,027,134) 1,027,134 Ͳ Ͳ Excess (deficiency) of revenues and other financing sources over expenditures and other uses 502,346 Ͳ (10,623) 491,723 Fund balance Ͳ July 1, 2014 984,189 Ͳ 13,660 997,849 Fund balance Ͳ June 30, 2015 1,486,535 $ Ͳ $ 3,037 $ 1,489,572 $ See accompanying notes to financial statements Ͳ 5 Ͳ
MADISON ACADEMY RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2015 See Independent Auditor’s Report Amounts reported for governmental activities in the statement of activities are different because:
Net Change in Fund Balances Ͳ Total Governmental Funds 491,723 $
Governmental funds report capital outlays as expenditures. However, in the statement of activities, assets are capitalized and the cost is allocated over their estimated useful lives and reported as depreciation and amortization expense. This is the amount by which capital outlays exceeded depreciation and amortization in the current period.
Capital outlay 47,521 $ Depreciation and amortization expense (330,101) (282,580)
The governmental funds report loan proceeds as an other financing source, while repayment of loan principal is reported as an expenditure. Interest is recognized as an expenditure in the governmental funds when it is due. The net effect of these differences in the treatment of general loan obligations is as follows:
Repayment of loan principal 209,554 $ Interest expense 806 210,360
Change in Net Position of Governmental Activities 419,503 $
See accompanying notes to financial statements
Ͳ 6 Ͳ
MADISON ACADEMY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2015 See Independent Auditor’s Report NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies of Madison Academy (the “Academy”) conform to generally accepted accounting principles applicable to public school academies. The following is a summary of the significant accounting policies: Reporting Entity Madison Academy was formed as a public school academy pursuant to the Michigan School Code of 1976, as amended by Act No. 362 of the Public Acts of 1993 and Act No. 416 of the Public Acts of 1994. The Academy filed articles of incorporation as a nonprofit corporation pursuant to the provisions of the Michigan Nonprofit Corporation Act of 1982, as amended, on March 25, 2004, and began operation in July 2004. In August 2004, the Academy entered into an eightͲyear contract with the Bay Mills Community College Board of Trustees to charter a public school academy. The contract has been subsequently renewed another 8 years through June 30, 2020. The contract requires the Academy to act exclusively as a governmental agency and not undertake any action inconsistent with its status as an entity authorized to receive state school aid funds pursuant to the State constitution. The College’s Board of Trustees is the fiscal agent for the Academy and is responsible for overseeing the Academy’s compliance with the contract and all applicable laws. The Academy pays the Bay Mills Community College Board of Trustees three percent of state aid as administrative fees. Total administrative fees paid for the year ended June 30, 2015 were approximately $197,700. In July 2008, the Academy entered into a threeͲyear agreement with The Romine Group Inc., “TRG”. That agreement has been subsequently renewed to run concurrently with the authorizer agreement. Under the terms of this agreement, TRG provides a variety of services including financial management, educational programs and consulting as well as teacher training. The Academy is obligated to pay TRG ten percent of its state aid and federal program funds. The total paid for these services amounted to approximately $692,100 for the year ended June 30, 2015. The accompanying financial statements have been prepared in accordance with criteria established by the Governmental Accounting Standards Board for determining the various governmental organizations to be included in the reporting entity. These criteria include significant operational or financial relationships with the public school Academy. Based on application of criteria, the Academy does not contain component units. Fund Financial Statements Fund financial statements report detailed information about the Academy. The focus of governmental fund financial statements is on major funds rather than reporting funds by type. Each major fund is presented in a separate column. NonͲmajor funds are aggregated and presented in a single column. Basis of Presentation – Fund Accounting The accounts of the Academy are organized on the basis of funds. The operations of a fund are accounted for with a separate set of selfͲbalancing accounts that comprise its assets, liabilities, fund balance, revenue and expenditures. Government resources are allocated to and accounted for in individual funds based on the purposes for which they are to be spent and the means by which spending activities are controlled. The various funds are grouped, in the combined financial statements in this report, into generic fund types in two broad fund categories. Ͳ 7 Ͳ
MADISON ACADEMY NOTES TO FINANCIAL STATEMENTS Ͳ Continued FOR THE YEAR ENDED JUNE 30, 2015 See Independent Auditor’s Report
NOTE 1 Ͳ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Ͳ Continued Governmental Funds A governmental fund is a fund through which most academy functions typically are financed. The acquisition, use and balances of the Academy’s expendable financial resources and the related current liabilities are accounted for through a governmental fund. General Fund Ͳ The general fund is used to record the general operations of the Academy pertaining to education and those operations not provided for in other funds. Included are all transactions related to the approved current operating budget. Special Revenue Fund Ͳ The special revenue fund is used to account for the food service program operations. The special revenue fund is a subsidiary operation and is an obligation of the general fund. Therefore any shortfall in the special revenue fund will be covered by an operating transfer from the general fund. Debt Service Fund Ͳ The debt service fund is used to record certain revenue and the payment of interest, principal and other expenditures on longͲterm debt. Capital Projects Fund Ͳ The capital projects fund, which the Academy does not currently maintain, accounts for financial resources to be used for the acquisition, construction, or improvement of capital facilities. Fiduciary Fund Ͳ The fiduciary fund, which the Academy dos not currently maintain, is used to account for assets held by the Academy in a trustee capacity or as an agent. The agency fund is custodial in nature and does not involve the measurement of results of operations. Governmental and agency funds utilize the modified accrual basis of accounting. Modifications in such method from the accrual basis are as follows: a. Revenue that is both measurable and available for use to finance operations is recorded as revenue when earned. 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 Academy considers revenues to be available if they are collected within sixty days of the end of the current fiscal period. b. Payments for inventoriable types of supplies, which are not significant at year end, are recorded as expenditures at the time of purchase. c. Principal and interest of general longͲterm debt are not recorded as expenditures until their due dates. d. Revenue that is both measurable and available for use to finance operations is recorded as revenue when earned. 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 Academy considers revenues to be available if they are collected within sixty days of the end of the current fiscal period. Ͳ 8 Ͳ
MADISON ACADEMY NOTES TO FINANCIAL STATEMENTS Ͳ Continued FOR THE YEAR ENDED JUNE 30, 2015 See Independent Auditor’s Report
NOTE 1 Ͳ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Ͳ Continued e. Payments for inventoriable types of supplies, which are not significant at year end, are recorded as expenditures at the time of purchase. f. Principal and interest of general longͲterm debt are not recorded as expenditures until their due dates. g. The State of Michigan utilizes a foundation allowance funding approach, which provides for specific annual amount of revenue per student based on a stateͲwide formula. The foundation allowance is funded from a combination of state and local sources. Revenue from state sources is primarily governed by the School Aid Act and the School Code of Michigan. The state portion of the foundation is provided from the State’s School Aid Fund and is recognized as revenue in accordance with state law. A major portion of the Academy’s revenue is derived from this state aid. As such, the Academy is considered to be economically dependent on this aid. The Academy’s existence is dependent upon qualification for such aid. GovernmentͲWide Financial Statements The governmentͲwide financial statements (i.e. the statement of Net Position and the Statement of Activities) report information on all of the nonͲfiduciary activities of the primary government. The governmentͲwide financial statements are prepared using the economic resources measurement focus and the accrual basis of accounting. This approach differs from the manner in which governmental fund financial statements are prepared. Therefore, governmental fund financial statements include reconciliations with brief explanations to better identify the relationships between the governmentͲwide statements and the statements for governmental funds. The governmentͲwide Statement of Activities presents a comparison between expenses and program revenues for each segment of the businessͲtype activities of the Academy and for each governmental program. Direct expenses are those that are specifically associated with a service, program or department and are therefore clearly identifiable to a particular function. The Academy does not allocate indirect expenses to programs. Program revenues include charges paid by the recipients of the goods or services offered by the programs and grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues not classified as program revenues are presented as general revenues. The comparison of program revenues and expenses identifies the extent to which each program or function is self financing or draws from the general revenues of the Academy. When both restricted and unrestricted resources are available for use, it is the Academy’s policy to use restricted resources first. Net position should be reported as restricted when constraints placed on net position’s use are either externally imposed by creditors, grantors, contributors, or laws or regulations of other governments or imposed by law through constitutional provisions or enabling legislation. The Academy first utilizes restricted resources to finance qualifying activities. Separate financial statements are provided for governmental funds and fiduciary funds, even though the latter are excluded from the government Ͳ wide financial statements. Ͳ 9 Ͳ
MADISON ACADEMY NOTES TO FINANCIAL STATEMENTS Ͳ Continued FOR THE YEAR ENDED JUNE 30, 2015 See Independent Auditor’s Report
NOTE 1 Ͳ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Ͳ Continued Cash and Cash Equivalents The Academy's cash and cash equivalents are considered to be cash on hand, demand deposits and shortͲterm investments with maturities of three months or less from the date of acquisition. The Academy reports its investments in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools and GASB No. 40, Deposit and Investment Risk Disclosures. Under these standards, certain investments are valued at fair value as determined by quoted market prices or by estimated fair values when quoted market prices are not available. The standards also provide that certain investments are valued at cost (or amortized cost) when they are of a shortͲterm duration, the rate of return is fixed, and the Academy intends to hold the investment until maturity. The Academy held investments in mutual funds that invest solely in U.S. Treasury obligations. The funds are held in trust for debt service and capital projects. State statutes authorize the Academy to invest in bonds and other direct and certain indirect obligations of the U.S. Treasury; certificates of deposit, saving accounts, deposit accounts, and or depository receipts of a bank, savings and loan association, or credit union, which is a member of the Federal Deposit Insurance Corporation, Federal Savings and Loan Corporation or National Credit Union Administration, respectively; in commercial paper rated at the time of purchase within the three highest classifications established by not less than two standard rating services and which matures not more than 270 days after the date of purchase. The Academy is also authorized to invest in U.S. Government or Federal agency obligation repurchase agreements, bankers' acceptances of U.S. banks, and mutual funds composed of investments as outlined above. Receivables Receivables at June 30, 2015 consist primarily of state school aid due from the State of Michigan and the federal government. All receivables are expected to be fully collected in July and August of 2015 and are considered current for the purposes of these financial statements. Prepaid Assets Payments made to vendors for services that will benefit periods beyond June 30, 2015, are recorded as prepaid items using the consumption method. A current asset for the prepaid amount is recorded at the time of the purchase and expenditure is reported in the year in which services are consumed. Capital Assets and Depreciation All capital assets are capitalized at cost (or estimated historical cost) and updated for additions or retirements during the year. The Academy follows the policy of not capitalizing assets with a useful life of less than one year. The Academy does not possess any infrastructure assets. All reported capital assets, with the exception of land, are depreciated. Improvements are depreciated over the remaining useful lives of the related capital assets. Depreciation is computed using the straightͲline method over the following useful lives: Building and improvements 10 – 50 years Furniture and equipment 5 – 15 years Computers and software 3 – 10 years Ͳ 10 Ͳ
MADISON ACADEMY NOTES TO FINANCIAL STATEMENTS Ͳ Continued FOR THE YEAR ENDED JUNE 30, 2015 See Independent Auditor’s Report
NOTE 1 Ͳ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Ͳ Continued Accrued Liabilities and LongͲTerm Obligations All payables, accrued liabilities and longͲterm obligations are reported in the governmentͲwide financial statements. In general, payables and accrued liabilities that will be paid from governmental funds are reported on the governmental fund financial statements regardless of whether they will be liquidated with current resources. However, the nonͲ current portion of capital leases that will be paid from governmental funds are reported as a liability in the fund financial statements only to the extent that they will be paid with current, expendable, available financial resources. In general, payments made within sixty days after yearͲend are considered to have been made with current available financial resources. Other longͲterm obligations that will be paid from governmental funds are not recognized as a liability in the fund financial statements until due. Net Position Net position represents the difference between assets, deferred outflows, and liabilities, and deferred inflows. Net position is reported as restricted when there are limitations imposed on their use either through the enabling legislation adopted by the Academy or through external restrictions imposed by creditors, grantors or laws of regulations of other governments. Fund Equity The Academy has adopted GASB 54 as part of its fiscal year reporting. The intention of the GASB is to provide a more structured classification of fund balance and to improve the usefulness of fund balance reporting to the users of the Academy’s financial statements. The reporting standard establishes a hierarchy for fund balance classifications and the constraints imposed on those resources. GASB 54 provides for two major types of fund balances, which are nonspendable and spendable. Nonspendable fund balances are balances that cannot be spent because they are not expected to be converted to cash or they are legally or contractually required to remain intact. This category typically includes prepaid items and inventories. In addition to nonspendable fund balance, GASB 54 has provided a hierarchy of spendable fund balances, based on a hierarchy of spending constraints. a. Restricted fund balance – amounts constrained to specific purposes by their providers (such as grantors, bondholders, and higher levels of government), through constitutional provisions, or by enabling legislation. b. Committed fund balance – amounts constrained to specific purposes by the Board; to be reported as committed, amounts cannot be used for any other purpose unless the Board takes action to remove or change the constraint. c. Assigned fund balance – amounts the Board intends to use for a specific purpose; intent can be expressed by the Board or by an official or committee to which the Board delegates the authority. Ͳ 11 Ͳ
MADISON ACADEMY NOTES TO FINANCIAL STATEMENTS Ͳ Continued FOR THE YEAR ENDED JUNE 30, 2015 See Independent Auditor’s Report
NOTE 1 Ͳ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Ͳ Continued d. Unassigned fund balance – amounts that are available for any purpose; these amounts are reported only in the general fund. The Academy follows the policy that restricted, committed, or assigned amounts will be considered to have been spent when an expenditure is incurred for purposes for which both unassigned and restricted, committed, or assigned fund balances are available. 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 amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. NOTE 2 Ͳ STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY Annual budgets are adopted on a consistent basis with accounting principles generally accepted in the United States of America and state law for the general fund. All annual appropriations lapse at fiscal year end and encumbrances are not formally recorded. The budget document presents information by fund and function. The legal level of budgetary control adopted by the governing body is the function level. State law requires the Academy to have its budget in place by July 1. Expenditures in excess of amounts budgeted is a violation of Michigan Law. The Academy is required by law to adopt general and special revenue fund budgets. During the year ended June 30, 2015 the budget was amended in a legally permissible manner. NOTE 3 Ͳ DEPOSITS AND INVESTMENTS As of June 30, 2015, the Academy had the following investments: Type S&P Rating Maturities Carrying Value
Deposits: Demand deposits 490,346 $
Investments: U.S. Treasury and agency obligations AAAm Various 1,303,798
Total deposits and investments 1,794,144 $
Ͳ 12 Ͳ
MADISON ACADEMY NOTES TO FINANCIAL STATEMENTS Ͳ Continued FOR THE YEAR ENDED JUNE 30, 2015 See Independent Auditor’s Report NOTE 3 Ͳ DEPOSITS AND INVESTMENTS Ͳ Continued The above amounts are reported in the financial statements as follows: Deposits: Cash Ͳ General Fund 490,346 $
Investments: Investments Ͳ General Fund 280,932 Investments Ͳ Debt Service 1,022,866
Total deposits and investments 1,794,144 $
Interest Rate Risk In accordance with its investment policy, the Academy will minimize interest rate risk, which is the risk that the market value of securities in the portfolio will fall due to changes in market interest rates, by; structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities in the open market; and, investing operating funds primarily in shorterͲterm securities, liquid asset funds, money market mutual funds, or similar investment pools and limiting the average maturity in accordance with the Academy's cash requirements. Credit Risk State law limits investments in commercial paper and corporate bonds to a prime or better rating issued by nationally recognized statistical rating organizations (NRSROs). As of June 30, 2015, the Academy's investments were rated AAAm by Standards & Poor's and Aaa by Moody's Investors Service. Concentration of Credit Risk The Academy will minimize concentration of credit risk, which is the risk of loss attributed to the magnitude of the Academy's investment in a single issuer, by diversifying the investment portfolio so that the impact of potential losses from any one type of security or issuer will be minimized. More than 5% of the Academy's investments are in pooled investment accounts which represent 100% of the Academy's total investments. Custodial Credit Risk Ͳ Deposits In the case of deposits, this is the risk that in the event of a bank failure, the Academy's deposits may not be returned to it. As of June 30, 2015, $302,354 of the Academy's cash was exposed to custodial credit risk because it was uninsured. All cash balances were uncollateralized as of June 30, 2015. Custodial Credit Risk Ͳ Investments For an investment, this is the risk that, in the event of the failure of the counterparty, the Academy will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. Ͳ 13 Ͳ
MADISON ACADEMY NOTES TO FINANCIAL STATEMENTS Ͳ Continued FOR THE YEAR ENDED JUNE 30, 2015 See Independent Auditor’s Report NOTE 3 Ͳ DEPOSITS AND INVESTMENTS Ͳ Continued The Academy will minimize custodial credit risk, which is the risk of loss due to the failure of the security issuer or backer, by; limiting investments to the types of securities allowed by law; and preͲqualifying the financial institutions, broker/dealers, intermediaries and advisors with which the Academy will do business. Foreign Currency Risk The Academy is not authorized to invest in investments which have this type of risk. NOTE 4 – DUE FROM OTHER GOVERNMENTAL UNITS Amounts due from other governmental units consist of the following: Local sources 17,873 $ State sources 1,295,654 Federal sources 251,607
Total 1,565,134 $
NOTE 5 Ͳ CAPITAL ASSETS Capital asset activity of the Academy's governmental activities was as follows: Balance Balance July 1, 2014 Additions Disposals June 30, 2015 Capital assets not subject to depreciation Land 30,000 $ Ͳ $ Ͳ $ 30,000 $
Capital assets subject to depreciation Building 10,238,209 Ͳ Ͳ 10,238,209 Equipment 805,250 47,521 Ͳ 852,771 SubͲtotal 11,073,459 47,521 Ͳ 11,120,980
Accumulated depreciation Building 1,224,053 255,955 Ͳ 1,480,008 Equipment 477,653 74,146 Ͳ 551,799 SubͲtotal 1,701,706 330,101 Ͳ 2,031,807 Total net capital assets 9,371,753 $ (282,580) $ Ͳ $ 9,089,173 $
Ͳ 14 Ͳ
MADISON ACADEMY NOTES TO FINANCIAL STATEMENTS Ͳ Continued FOR THE YEAR ENDED JUNE 30, 2015 See Independent Auditor’s Report NOTE 5 Ͳ CAPITAL ASSETS – Continued Depreciation and amortization expense was not charged to activities as the Academy considers its assets to impact multiple activities and allocation is not practical. NOTE 6 – NOTE PAYABLE Notes payable as of June 30, 2015 can be summarized as follows: Loan Information Interest Maturity Rate Date 14/15 SAAN 2.83% August, 2015
Loan Activity
Balance Retirements Balance July 1, 2014 Additions and Payments June 30, 2015 14/15 SAAN Ͳ $ 450,000 $ 359,179 $ 90,821 $
Other Issued to provide operating funds for school before first state aid payment is received. Secured by future state school aid payments and Academy assets.
NOTE 7 – ACCRUED EXPENSES Accrued expenses may be summarized as follows:
Net Position Funds
Accrued expenses 152,431 $ 152,431 $ Management fee 154,220 154,220 University oversight fee 36,043 36,043 Interest 73,769 Ͳ
Total accrued expenses 416,463 $ 342,694 $
Ͳ 15 Ͳ
MADISON ACADEMY NOTES TO FINANCIAL STATEMENTS Ͳ Continued FOR THE YEAR ENDED JUNE 30, 2015 See Independent Auditor’s Report NOTE 8 Ͳ LONGͲTERM OBLIGATIONS PAYABLE Loan Information Interest Maturity Rate Date Capital lease 7.00% May, 2015 Revenue bond 1 8.29% June, 2040
Revenue bond 2 8.25% June, 2040 Collateralized by a mortgage on the Academy's facility as well as a pledge for 20% of the state school aid payments and funds held in trust for debt service. MFA contribution of $354,010.
Other Monthly payment of $8,768, secured by equipment. Collateralized by a mortgage on the Academy's facility as well as a pledge for 20% of the state school aid payments and funds held in trust for debt service. MPEFA contribution of $668,856.
Loan Activity
Balance Retirements Balance Due Within July 1, 2014 Additions and Payments June 30, 2015 One Year
Capital lease 84,554 $ Ͳ $ 84,554 $ Ͳ $ Ͳ $ Revenue bond 1 6,970,000 80,000 6,890,000 85,000 Revenue bond 2 3,760,000 Ͳ 45,000 3,715,000 50,000 10,814,554$ Ͳ $ 209,554 $ 10,605,000 $ 135,000 $
Following are maturities of longͲterm obligations for principal and interest for the next five years and in total:
Principal Interest 2016 135,000 $ 880,016 $ 2017 145,000 869,178 2018 160,000 857,375 2019 170,000 844,606 2020 185,000 830,863 2021Ͳ2025 1,180,000 3,895,581 2026Ͳ2030 1,785,000 3,294,134 2031Ͳ2035 2,705,000 2,370,556 2036Ͳ2040 4,140,000 938,747
Ͳ 16 Ͳ
MADISON ACADEMY NOTES TO FINANCIAL STATEMENTS Ͳ Continued FOR THE YEAR ENDED JUNE 30, 2015 See Independent Auditor’s Report NOTE 9 Ͳ RETIREMENT PLAN All employees leased by the Academy are eligible to participate in a retirement plan established by TRG which qualifies under the provisions of Section 401(k) of the Internal Revenue Code. The employer under this plan will contribute 4% of salaries regardless of the amount of the employee contribution. The employer will additionally match up to 4% of employee contributed funds. Eligible employees may contribute up to 15% of their salaries under the terms of this plan. NOTE 10 Ͳ INTERFUND TRANSFERS During the normal course of the school year the Academy transferred amounts between its major funds as follows: General Debt Service Transfer In Ͳ $ 1,027,134 $ Transfer Out 1,027,134 Ͳ As stipulated by the Academy's revenue bond agreement as described in Note 8, the Academy must transfer 20% of its state aid to a trustee. The trustee retains the required portion for debt service and returns the remainder to the Academy. These above transactions account for the major activity in the Academy's interfund transfer accounts. NOTE 11 Ͳ RISK MANAGEMENT The Academy is exposed to various risks of loss related to property loss, torts, errors and omissions and employee injuries (worker’s compensation), as well as medical benefits provided to employees. The Academy has purchased commercial insurance for all claims. Settled claims relating to the commercial insurance have not exceeded the amount of insurance coverage in any of the past three fiscal years. Ͳ 17 Ͳ
SUPPLEMENTAL INFORMATION
MADISON ACADEMY REQUIRED SUPPLEMENTAL INFORMATION BUDGETARY COMPARISON SCHEDULE – GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2015 See Independent Auditor’s Report Original Final Budget Budget Actual Variance
Revenues Local sources 54,000 $ 49,746 $ 49,237 $ (509) $ State sources 6,774,283 6,851,170 6,866,736 15,566 Federal sources 358,927 422,021 384,954 (37,067) Interdistrict sources 26,000 28,052 45,924 17,872 Total governmental fund revenues 7,213,210 7,350,989 7,346,851 (4,138)
Expenditures Instruction Basic programs 3,057,082 3,065,634 2,874,876 (190,758) Added needs 924,623 605,734 557,312 (48,422) Support services Pupil support services Ͳ 45,602 44,316 (1,286) Instructional staff support services 22,855 48,374 30,547 (17,827) General administration 886,167 930,410 922,025 (8,385) School administration 439,495 533,874 542,574 8,700 Business support services 32,000 49,107 31,639 (17,468) Operations and maintenance 428,289 552,538 479,154 (73,384) Pupil transportation services 150,000 166,000 161,035 (4,965) Central support services 13,000 6,000 2,069 (3,931) Athletic activities 43,600 43,600 31,660 (11,940) Community services Ͳ 5,425 4,959 (466) Capital outlay Ͳ Ͳ 47,521 47,521 Debt principal and interest 120,221 87,684 87,684 Ͳ Total governmental fund expenditures 6,117,332 6,139,982 5,817,371 (322,611)
Excess (deficiency) of revenues over expenditures 1,095,878 1,211,007 1,529,480 318,473
Other Financing Sources (Uses) Operating transfers out (1,034,193) (1,027,000) (1,027,134) (134)
Excess (deficiency) of revenues and other financing sources over expenditures and other uses 61,685 184,007 502,346 318,339 Fund balance Ͳ July 1, 2014 984,189 984,189 984,189 Ͳ
Fund balance Ͳ June 30, 2015 1,045,874 $ 1,168,196 $ 1,486,535 $ 318,339 $
Ͳ 18 Ͳ
MADISON ACADEMY SCHEDULE OF REVENUES – GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2015 See Independent Auditor’s Report
Local Sources Authorizer grant 5,270 $ Other local revenues 43,967
Total local sources 49,237
State Sources At risk 313,378 Great start readiness program 167,838 Special education 53,692 State aid 6,331,828
Total state sources 6,866,736
Federal Sources IDEA 149,233 Title I 225,644 Title II A 10,077
Total federal sources 384,954
Interdistrict Sources 45,924
Total general fund revenues 7,346,851 $
Ͳ 19 Ͳ
MADISON ACADEMY SCHEDULE OF EXPENDITURES – GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2015 See Independent Auditor’s Report
Basic Programs Purchased services 2,672,200 $ Supplies and materials 34,428 Other expenditures 168,248
Total basic programs 2,874,876
Added Needs Purchased services 557,312
Pupil Support Services Social work services 44,316
Instructional Staff Support Services Purchased services 18,268 Supplies and materials 12,279
Total instructional staff support services 30,547
General Administration Purchased services 9,963 Management fees 692,112 University oversight 197,743 Other purchased services 21,387 Other expenditures 820
Total general administration 922,025
School Administration Purchased services 523,335 Supplies and materials 9,230 Other expenditures 10,009
Total school administration 542,574
Business Support Services Purchased services 15,500 Other expenditures 16,139
Total business support services 31,639
Ͳ 20 Ͳ
MADISON ACADEMY SCHEDULE OF EXPENDITURES – GENERAL FUND Ͳ CONTINUED FOR THE YEAR ENDED JUNE 30, 2015 See Independent Auditor’s Report Operations and Maintenance Purchased services 196,976 Repairs and maintenance 106,160 Other purchased services 36,307 Supplies and materials 124,570 NonͲdepreciable capital assets 3,707 Other expenditures 11,434
Total operations and maintenance 479,154
Pupil Transportation Services Other expenditures 161,035
Central Support Services Other expenditures 2,069
Athletic Activities Other expenditures 31,660
Community Services Purchased services 4,959 Capital Outlay 47,521
Debt Principal and Interest 87,684
Total general fund expenditures 5,817,371 $
Ͳ 21 Ͳ
APPENDIX Federal Awards Supplemental Information
345 Diversion Street Ɣ Suite 400 44725 Grand River Avenue Ɣ Suite 204 2505 NW Boca Raton Blvd. Ɣ Suite 202 Rochester, Michigan 48307 Novi, Michigan 48375 Boca Raton, Florida 33431-6652 Phone: 248.659.5300 Phone: 248.659.5300 Phone: 561.241.1040 Fax: 248.659.5305 Fax: 248.659.5305 Fax: 561.368.4641
www.croskeylanni.com
David M. Croskey, CPA Thomas B. Lanni, CPA Carolyn A. Jones, CPA, CFP® MST Clifton F. Powell Jr., CPA, CFP®, PFS Roger J. DeJong, CPA Patrick M. Sweeney, CPA Leonard A. Geronemus, CPA, PFS
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 Directors of Madison Academy 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 the governmental activities, each major fund, and the aggregate remaining fund information of Madison Academy, as of and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise Madison Academy’s basic financial statements, and have issued our report thereon dated October 12, 2015. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered Madison Academy’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 opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Madison Academy’s internal control. Accordingly, we do not express an opinion on the effectiveness of Madison Academy’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 Madison Academy’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 entity’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 entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Croskey Lanni, PC October 12, 2015 Rochester, Michigan AͲ2
345 Diversion Street Ɣ Suite 400 44725 Grand River Avenue Ɣ Suite 204 2505 NW Boca Raton Blvd. Ɣ Suite 202 Rochester, Michigan 48307 Novi, Michigan 48375 Boca Raton, Florida 33431-6652 Phone: 248.659.5300 Phone: 248.659.5300 Phone: 561.241.1040 Fax: 248.659.5305 Fax: 248.659.5305 Fax: 561.368.4641
www.croskeylanni.com
David M. Croskey, CPA Thomas B. Lanni, CPA Carolyn A. Jones, CPA, CFP® MST Clifton F. Powell Jr., CPA, CFP®, PFS Roger J. DeJong, CPA Patrick M. Sweeney, CPA Leonard A. Geronemus, CPA, PFS
INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR AͲ133
To the Board of Directors of Madison Academy Report on Compliance for Each Major Federal Program We have audited Madison Academy’s compliance with the types of compliance requirements described in the OMB Circular AͲ133 Compliance Supplement that could have a direct and material effect on each of Madison Academy’s major federal programs for the year ended June 30, 2015. Madison Academy’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 Madison Academy’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 AͲ133, Audits of States, Local Governments, and NonͲProfit Organizations. Those standards and OMB Circular AͲ133 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 Madison Academy’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 Madison Academy’s compliance. Opinion on Each Major Federal Program In our opinion, Madison Academy, 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, 2015.
Report on Internal Control Over Compliance Management of Madison Academy 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 Madison Academy’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 AͲ133, 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 Madison Academy’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. 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 AͲ133. Accordingly, this report is not suitable for any other purpose. Croskey Lanni, PC October 12, 2015 Rochester, Michigan AͲ4
MADISON ACADEMY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2015
AccruedFederal Funds/Accrued Approved(Memo Only)(Deferred)AdjustmentsPayments(Deferred) CFDAAwardsPrior YearRevenue atandInͲkindRevenue at NumberAmountExpendituresJuly 1, 2014TransfersReceivedExpendituresJune 30, 2015
US Department of Agriculture Passed through Michigan Department of Education:
Child Nutrition Cluster School Breakfast Program10.55343,389 $ Ͳ $ 2,198 $ Ͳ $ 43,389 $ 43,389 $ Ͳ $ National School Lunch Program10.555160,113 Ͳ 8,074 Ͳ 160,113 160,617 10,776 Entitlement 14Ͳ1510.55513,232 Ͳ Ͳ Ͳ 13,232 13,232 Ͳ
Total US Department of Agriculture, Passed through Michigan Department of Education216,734 Ͳ 10,272 Ͳ 216,734 217,238 10,776
US Department of Education Passed through Genesse County ISD
I.D.E.A. Cluster 140450 131484.027153,267 137,212 15,271 Ͳ 15,271 16,055 16,055 150450 1415 149,282 Ͳ Ͳ Ͳ Ͳ 133,178 133,178
Total US Department of Education Passed through Genesse County ISD302,549 137,212 15,271 Ͳ 15,271 149,233 149,233
Program Title/Project Number Subrecipient Name
See accompanying notes to schedule of expenditures of federal awards
AͲ5
MADISON ACADEMY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Ͳ Continued FOR THE YEAR ENDED JUNE 30, 2015 AccruedFederal Funds/Accrued Approved(Memo Only)(Deferred)AdjustmentsPayments(Deferred) CFDAAwardsPrior YearRevenue atandInͲkindRevenue at NumberAmountExpendituresJuly 1, 2014TransfersReceivedExpendituresJune 30, 2015
US Department of Education Passed through the Michigan Department of Education
Title I84.010 141530 1314288,064 230,927 230,927 Ͳ 230,927 Ͳ Ͳ 151530 1415249,607 Ͳ Ͳ Ͳ 161,886 225,644 63,758
Total Title I Cluster537,671 230,927 230,927 Ͳ 392,813 225,644 63,758
Title II A 84.367 140520 131410,855 6,697 6,697 Ͳ 6,697 10,077 10,077
Total US Department of Education Passed through from Michigan Department of Education548,526 237,624 237,624 Ͳ 399,510 235,721 73,835
Total Federal Awards1,067,809 $ 374,836 $ 263,167 $ Ͳ $ 631,515 $ 602,192 $ 233,844 $
Program Title/Project Number Subrecipient Name
See accompanying notes to schedule of expenditures of federal awards
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MADISON ACADEMY RECONCILIATION OF BASIC FINANCIAL STATEMENTS FEDERAL RECEIVABLES AND REVENUE WITH SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2015 Revenues to Expenditures Revenue from federal sources Ͳ As reported on financial statements (includes all funds):
General Fund 384,954 $ Special Revenue Fund 217,238
Federal expenditures per the schedule of expenditures of federal awards 602,192 $
Receivables
Receivables from federal sources Ͳ As reported on financial statements 251,607 $
Timing differences between MDE payment and Academy receipt 17,763
Federal receivables per the schedule of expenditures of federal awards 233,844 $
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MADISON ACADEMY NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2015 NOTE 1 Ͳ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying schedule of expenditures of federal awards (the “Schedule”) includes the federal grant activity of Madison Academy under programs of the federal government for the year ended June 30, 2015. Expenditures reported on the Schedule are reported on the same basis of accounting as the basic financial statements, although the basis for determining when federal awards are expended is presented in accordance with requirements of OMB Circular AͲ133, Audits of States, Local Governments, and NonͲProfit Organizations. In addition, expenditures reported on the Schedule are recognized following the cost principles contained in OMB Circular AͲ87, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Therefore, some amounts presented in this Schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements. Because the Schedule presents only a selected portion of the operations of Madison Academy, it is not intended to and does not present the financial position, changes in net assets, or cash flows, if applicable, of Madison Academy. PassͲ through entity identifying numbers are presented where available. NOTE 2 Ͳ NONCASH ASSISTANCE The value of the noncash assistance received was determined in accordance with the provisions of OMB Circular AͲ133. NOTE 3 Ͳ GRANT AUDITOR'S REPORT Management has utilized the Grant Auditor's report in preparing the schedule of expenditures of federal awards. UnͲ reconciled differences, if any, have been disclosed to the auditor. AͲ8
MADISON ACADEMY SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2015
SECTION I Ͳ SUMMARY OF THE AUDITOR’S RESULTS Financial Statements Type of auditor’s report issued: Unmodified Internal control over financial reporting: x Material weakness(es) identified? ___yes _X__no x Significant deficiency(ies) identified that are not considered to be a material weakness(es)? ___yes _X__no Noncompliance material to financial statements noted? ___yes _X__no Federal Awards Internal control over major programs: x Material weakness(es) identified? ___yes _X__no x Significant deficiency(ies) identified that are not considered to be a material weakness(es)? ___yes _X__no 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 AͲ133? ___yes __X_no Identification of major programs: CFDA Number(s) Name of Federal Program or Cluster #84.010 Title I Dollar threshold used to distinguish between Type A and Type B programs: $ 300,000 Auditee qualified as lowͲrisk auditee? _X__yes ___no SECTION II – FINANCIAL STATEMENT FINDINGS None SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS None