Financial Statement Template

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Financial Statement Template

  1. 1. The SEED Public Charter School Of Washington, D.C. Financial Report June 30, 2008
  2. 2. Contents Independent Auditor’s Report 1 Financial Statements Balance Sheets 2 Statements Of Activities 3 Statement Of Activities – 2007 4 Statements Of Cash Flows 5 Notes To Financial Statements 6 – 12 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 Schedule Of Findings And Responses 15
  3. 3. Independent Auditor’s Report To the Board of Trustees The SEED Public Charter School of Washington, D.C. Washington, D.C. We have audited the accompanying balance sheets of The SEED Public Charter School of Washington, D.C. (the School) as of June 30, 2008 and 2007, and the related statements of activities and cash flows for the years then ended. These financials statements are the responsibility of the School’s management. 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 of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The SEED Public Charter School of Washington, D.C. as of June 30, 2008 and 2007, and the changes in its net assets and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report, dated November 3, 2008, on our consideration of the School’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. Gaithersburg, Maryland November 3, 2008 McGladrey & Pullen, LLP is a member firm of RSM International, an affiliation of separate and independent legal entities. 1
  4. 4. The SEED Public Charter School Of Washington, D.C. Balance Sheets June 30, 2008 And 2007 Assets 2008 2007 Cash and Cash Equivalents $ 3,699,174 $ 3,199,031 Restricted Cash 1,067,523 998,501 Accounts Receivable 45,924 184,071 Promises to Give 3,130 10,283 Prepaid Expenses 17,317 - Due from The SEED Foundation, Inc. 239,166 16,378 Property and Equipment, net 21,193,897 21,418,596 Bond Issuance Costs, net 222,985 262,095 $ 26,489,116 $ 26,088,955 Liabilities And Net Assets Liabilities Accounts payable and accrued expenses $ 479,069 $ 478,733 Deferred revenue 203,725 153,039 Capital lease obligation 153,196 21,091 Bonds payable 10,030,000 10,605,000 10,865,990 11,257,863 Commitments and Contingencies (Notes 7 and 10) Net Assets Unrestricted 14,840,223 14,295,354 Temporarily restricted 682,903 535,738 Permanently restricted 100,000 - 15,623,126 14,831,092 $ 26,489,116 $ 26,088,955 See Notes To Financial Statements. 2
  5. 5. The SEED Public Charter School Of Washington, D.C. Statement Of Activities Year Ended June 30, 2008 (With Comparative Totals for 2007) 2008 Temporarily Permanently 2007 Unrestricted Restricted Restricted Total Total Support and revenue: Per-pupil allocation $ 11,300,457 $ - - $ 11,300,457 $ 10,584,123 Contributions from donors 462,309 385,000 100,000 947,309 623,626 Gifts-in-kind - - - - 89,693 Local and federal grants and awards 457,480 - - 457,480 358,159 Other 192,891 - - 192,891 222,301 Net assets released from restrictions 237,835 (237,835) - - - Total support and revenue 12,650,972 147,165 100,000 12,898,137 11,877,902 Expenses: Salaries and benefits 7,460,252 - - 7,460,252 6,326,839 Supplies and services 3,281,541 - - 3,281,541 3,438,219 Depreciation and amortization 982,530 - - 982,530 831,913 Interest expense 381,780 - - 381,780 475,230 Total expenses 12,106,103 - - 12,106,103 11,072,201 Change in net assets 544,869 147,165 100,000 792,034 805,701 Net assets: Beginning 14,295,354 535,738 - 14,831,092 14,025,391 Ending $ 14,840,223 $ 682,903 $ 100,000 $ 15,623,126 $ 14,831,092 See Notes To Financial Statements. 3
  6. 6. The SEED Public Charter School Of Washington, D.C. Statement Of Activities Year Ended June 30, 2007 Temporarily Unrestricted Restricted Total Support and revenue: Per-pupil allocation $ 10,584,123 $ - $ 10,584,123 Contributions from donors 291,965 331,661 623,626 Gifts-in-kind 89,693 - 89,693 Local and federal grants and awards 358,159 - 358,159 Other 222,301 - 222,301 Net assets released from restrictions 181,661 (181,661) - Total support and revenue 11,727,902 150,000 11,877,902 Expenses: Salaries and benefits 6,326,839 - 6,326,839 Supplies and services 3,438,219 - 3,438,219 Depreciation and amortization 831,913 - 831,913 Interest expense 475,230 - 475,230 Total expenses 11,072,201 - 11,072,201 Change in net assets 655,701 150,000 805,701 Net assets: Beginning 13,639,653 385,738 14,025,391 Ending $ 14,295,354 $ 535,738 $ 14,831,092 See Notes To Financial Statements. 4
  7. 7. The SEED Public Charter School Of Washington, D.C. Statements Of Cash Flows Years Ended June 30, 2008 And 2007 2008 2007 Cash Flows From Operating Activities Change in net assets $ 792,034 $ 805,701 Adjustments to reconcile changes in net assets to net cash provided by operating activities: Depreciation and amortization 982,530 831,913 Loss on disposal of property and equipment 12,330 - Changes in assets and liabilities: (Increase) decrease in: Accounts receivable 138,147 103,456 Promises to give 7,153 38,499 Prepaid expenses (17,317) 21,024 Increase (decrease) in: Accounts payable and accrued expenses 336 28,945 Deferred revenue 50,686 13,284 Net cash provided by operating activities 1,965,899 1,842,822 Cash Flows From Investing Activities Purchases of property and equipment (589,871) (193,538) (Increase) decrease in due from The SEED Foundation, Inc. (222,788) 43,871 (Increase) decrease in restricted cash (69,022) 255,680 Net cash (used in) provided by investing activities (881,681) 106,013 Cash Flows From Financing Activities Principal payments on capital lease obligation (9,075) (23,250) Principal payments on bonds payable (575,000) (990,000) Net cash used in financing activities (584,075) (1,013,250) Net increase in cash and cash equivalents 500,143 935,585 Cash And Cash Equivalents Beginning 3,199,031 2,263,446 Ending $ 3,699,174 $ 3,199,031 Supplemental Disclosure Of Cash Flow Information Cash paid during the year for interest $ 381,780 $ 475,230 Supplemental Schedule Of Noncash Investing And Financing Activities Acquisition of equipment through capital lease obligation $ 141,180 $ - See Notes To Financial Statements. 5
  8. 8. The SEED Public Charter School Of Washington, D.C. Notes To Financial Statements Note 1. Nature Of Activities And Significant Accounting Policies Nature of activities: The SEED Public Charter School of Washington, D.C. (the School) is a corporation organized for the purpose of operating a public charter school for children residing in Washington, D.C. The School’s two principal goals are first to prepare the children attending the School for admission to colleges and universities and/or success in the professional world, and second to develop a model for education targeted at inner-city children to be successfully duplicated in urban areas throughout the country. A summary of the School’s significant accounting policies follows: Basis of accounting: The accompanying financial statements are presented in accordance with the accrual basis of accounting, whereby, revenue is recognized when earned and expenses are recognized when incurred. Basis of presentation: The financial statement presentation follows the recommendation of the Financial Accounting Standards Board (FASB) in its Statement of Financial Accounting Standards (SFAS) No. 117, Financial Statements of Not-for-Profit Organizations. Under SFAS No. 117, the School is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. The School did not have any permanently restricted net assets at June 30, 2007. Charter school agreement: On September 4, 1998, the School entered into a 15-year charter school agreement with the District of Columbia Public Charter School Board. Under the terms of this agreement, the School will operate a charter school for students of certain ages in grades seven through 12, in accordance with the mission established in the School’s by-laws. Cash and cash equivalents: For purposes of reporting cash flows, the School considers all money market accounts and certificates of deposit with an original maturity of three months or less to be cash equivalents. Financial risk: The School maintains cash in bank deposit accounts which, at times, may exceed federally insured limits. The School has not experienced any losses in such accounts. The School believes it is not exposed to any significant financial risk on cash. Accounts receivable: Accounts receivable is carried at original invoice amounts less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by identifying troubled accounts and using the historical experience applied to an aging of accounts. Accounts receivable are written off when deemed uncollectible. Recoveries of accounts receivable previously written off are recorded when received. Management believes that an allowance was not required based on its evaluation of collectibility of accounts receivable at June 30, 2008 and 2007. Promises to give: Contributions are recognized when the donor makes a written promise to give that is, in substance, unconditional. Contributions that are restricted by the donor are reported as increases in unrestricted net assets if the restrictions expire in the fiscal year in which the contributions are recognized. The allowance for doubtful promises to give is based on management’s evaluation of the status of existing promises to give and historical results. Management believes all promises are collectible and no allowance was necessary at June 30, 2008 and 2007. At June 30, 2008 and 2007, all promises to give were expected to be collected during the next fiscal year. 6
  9. 9. The SEED Public Charter School Of Washington, D.C. Notes To Financial Statements Note 1. Nature Of Activities And Significant Accounting Policies (Continued) Property and equipment: Property and equipment are recorded at cost and are being depreciated using the straight-line method over the estimated useful life of the related asset, ranging from three to 40 years. Artwork is not being depreciated. Normal repairs and maintenance are expensed as incurred. The School capitalizes all property and equipment purchased with a cost of $1,000 or more. Impairment of long-lived assets: The School accounts for the valuation of long-lived assets under SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS No. 144 requires that long-lived assets and certain identifiable intangible assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the long-lived asset is measured by a comparison of the carrying amount of the assets to future undiscounted net cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. Assets to be disposed of are reportable at the lower of the carrying amount or fair value, less costs to sell. Bond issuance costs: Legal, accounting, printing costs and other expenses associated with bond issuances are being amortized on the effective interest rate method over the term of the bonds. Net assets: Unrestricted net assets are the net assets that are neither permanently restricted nor temporarily restricted by donor-imposed stipulations. Temporarily restricted net assets result from contributions whose use is limited by donor-imposed stipulations that either expire by passage of time or can be fulfilled and removed by actions of the School pursuant to these stipulations. Temporarily restricted net assets are reported as unrestricted net assets if the restrictions are met in the same period received. Net assets may be temporarily restricted for various purposes, such as use in future periods or use for specified purposes. At June 30, 2008 and 2007, temporarily restricted net assets represented amounts restricted for specific education-related expenses. Gifts-in-kind: Gifts-in-kind are reported at their fair value on the date of the gift. Per-pupil allocation: The School receives a student allocation from the District of Columbia to cover the cost of residential and academic expenses. The revenue is recognized in the period it is earned, which is the school year for which the allocation is made. Unearned per-pupil allocation received is recorded as deferred revenue. Recognition of salary expense: Salary expense is recognized in the year the service is rendered, which coincides with an academic year. Salaries unpaid at June 30th are recognized as expense and accrued. Fair value of financial instruments: The carrying amounts including cash and cash equivalents, accounts receivable, and accounts payable and accrued liabilities approximate fair value because of the short-term maturity of these instruments. The carrying amount of long-term debt approximates fair value, because the interest rate on these instruments fluctuates with market interest rates offered to the School for debt with similar terms and maturities. Tax status: The School is a tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code (IRC) and is not considered to be a private foundation. Under Section 501(c)(3) of the IRC, the School is exempt from federal taxes on income other than unrelated business income. The School did not have any net unrelated business income for the years ended June 30, 2008 and 2007. 7
  10. 10. The SEED Public Charter School Of Washington, D.C. Notes To Financial Statements Note 1. Nature Of Activities And Significant Accounting Policies (Continued) During the year ended June 30, 2008, the School adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). Under FIN 48, when tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above, if any, is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets, along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The adoption of FIN 48 had no effect on the School’s changes in net assets for the year ended June 30, 2008. Estimates: The preparation of financial statements 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 those estimates. Upcoming accounting pronouncements: In September 2006, FASB issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurement. SFAS No. 157 also emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and sets out a fair value hierarchy with the highest priority being quoted market prices in active markets. Under SFAS No. 157, fair value measurements are disclosed by level within that hierarchy. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, except for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis, for which delayed application is permitted until fiscal years beginning after December 15, 2008. The adoption of SFAS No. 157 is not expected to have a material impact on the School’s financial position, changes in net assets or cash flows. Note 2. Restricted Cash Restricted cash represents bond proceeds, which have been placed with a bond trustee, for the following purposes at June 30, 2008 and 2007: 2008 2007 Principal sinking fund $ 320,371 $ 299,394 Interest and program expense reserve 371,216 329,613 Capital reserve 375,936 369,494 $ 1,067,523 $ 998,501 8
  11. 11. The SEED Public Charter School Of Washington, D.C. Notes To Financial Statements Note 3. Property And Equipment Property and equipment at June 30, 2008 and 2007, are as follows: Asset Category 2008 2007 Buildings and improvements $ 23,671,582 $ 23,509,369 Furniture and fixtures 1,833,440 1,773,415 Computer equipment 1,005,872 914,742 Books 102,662 102,661 Vans 100,110 100,110 26,713,666 26,400,297 Less accumulated depreciation 5,519,769 4,981,701 $ 21,193,897 $ 21,418,596 Note 4. Bonds Payable The School issued $8,105,000 of District of Columbia Pooled Loan Program Revenue Bonds in April 2001, and another $6,000,000 of similar bonds in October 2001. All bonds mature on January 1, 2021, with principal due in variable semi-annual installments on July 1st and January 1st. The interest rate is reset weekly based on a competitive auction. At June 30, 2008, this rate was approximately 2.30%. The bonds are supported by a bank letter of credit that expires in March 2009 and is guaranteed by The SEED Foundation, Inc. (the Foundation). The letter of credit balance is reduced on a pro-rata basis with each principal payment. Substantially, all the assets of the School, as well as future pupil allocation revenues, are pledged as collateral for the loan. The bonds require that certain financial covenants be met, including debt service coverage and limits on further indebtedness. As a condition to the letter of credit, the School entered into a reimbursement agreement requiring the School to make monthly sinking fund payments to debt service escrow accounts for the payment of principal, interest, and any bond redemptions payable to the Trustee for the bonds (See Note 2 for balances at June 30, 2008). Principal maturities of the bonds payable at June 30, 2008, are due in future years as follows: Years Ending June 30, 2009 $ 610,000 2010 640,000 2011 670,000 2012 710,000 2013 750,000 Thereafter 6,650,000 $ 10,030,000 Interest expense on the bonds at June 30, 2008 and 2007, was $379,533 and $472,081, respectively. 9
  12. 12. The SEED Public Charter School Of Washington, D.C. Notes To Financial Statements Note 5. Capital Lease Obligation The School is indebted under an equipment lease entered into during the year ended June 30, 2008, which has been capitalized at the present value of future lease payments. The cost of the equipment approximated $160,297 at June 30, 2008, and the depreciation expense of the leased asset amounted to $16,030 at June 30, 2008. The future minimum lease payments discounted to reflect their net present value at June 30, 2008, are as follows: Years Ending June 30, 2009 $ 36,300 2010 36,300 2011 36,300 2012 36,300 2013 27,225 172,425 Less imputed interest 19,229 Present value of minimum lease payments $ 153,196 Note 6. Temporarily Restricted Net Assets Temporarily restricted net assets at June 30, 2008 and 2007, are as follows: Balance Release From Balance June 30, 2007 Additions Restriction June 30, 2008 Time restriction: General operating $ 10,000 $ - $ 10,000 $ - Purpose restriction: Seeds for Classics – field trips 466,858 5,000 - 471,858 Huck O’Connor - 11,000 - 11,000 Summer bridge MS/HS - 20,000 - 20,000 Ottaway scholarship - 7,000 - 7,000 College search support 39,834 - - 39,834 VPP - 342,000 217,835 124,165 Athletics 19,046 - 10,000 9,046 $ 535,738 $ 385,000 $ 237,835 $ 682,903 10
  13. 13. The SEED Public Charter School Of Washington, D.C. Notes To Financial Statements Note 6. Temporarily Restricted Net Assets (Continued) Balance Release From Balance June 30, 2006 Additions Restriction June 30, 2007 Time restriction: General operating $ 50,000 $ 10,000 $ 50,000 $ 10,000 Purpose restriction: Seeds for Classics – field trips 266,858 200,000 - 466,858 College search support 39,834 101,561 101,561 39,834 Athletics 29,046 20,100 30,100 19,046 $ 385,738 $ 331,661 $ 181,661 $ 535,738 Note 7. Lease Commitments The School entered into a 15-year operating lease for land use beginning February 4, 2000. The School has the right to renew the lease for three additional 15-year terms. The lease agreement provides for rent credits relating to capital improvements at the site. The School will receive a dollar-for-dollar credit based on capital improvements, except that the School shall pay a minimum rental amount as stipulated in the lease. The School made improvements in excess of the total rent provided over the lease term. The future minimum lease payments under this arrangement are as follows: Years Ending June 30, 2009 $ 12,000 2010 12,000 2011 12,000 2012 12,000 2013 12,000 Thereafter 24,000 $ 84,000 Rent expense under the above leasing arrangements was $12,000 and $12,000 for the years ended June 30, 2008 and 2007, respectively. Note 8. Defined Contribution Retirement Plan The School participates in a defined contribution retirement plan covering eligible employees. The School contributes an amount equal to 3% of all eligible participants’ pay. For every 1% of salary that each employee contributes to their retirement account through payroll deductions up to 6%, the School will add another 0.5%. The maximum total contribution, including matching contributions made by the School, would be 6% of employee pay. Total expense under this plan amounted to $281,899 and $243,774 at June 30, 2008 and 2007, respectively. 11
  14. 14. The SEED Public Charter School Of Washington, D.C. Notes To Financial Statements Note 9. Related Party Transactions The Foundation has both an economic interest in the School and controls membership of the School’s Board of Trustees. During the years ended June 30, 2008 and 2007, the School paid the Foundation $150,000 and $214,375, respectively, for management and other services. Note 10. E-Rate Dispute The School has been notified of the Universal Service Administrative Company’s (USAC) assertion that the School is in violation of the e-rate funds program’s rules. According to USAC, the School must pay back funds used by the School to develop its information technology, which totaled approximately $426,000. On behalf of the School, in April 2003, its attorneys filed an appeal of the USAC actions with the Federal Communications Commission. This appeal is still pending. No amounts have been accrued for this possible liability for the years ended June 30, 2008 and 2007. Note 11. Economic Dependency During the years ended June 30, 2008 and 2007, the School was heavily dependent on pupil allocations and entitlements from the District of Columbia. These funds aggregated 88% and 92% of the School’s revenue at June 30, 2008 and June 30, 2007, respectively. Reduction of funding from the District of Columbia would have a significant impact on the operations of the School. Note 12. Functional Expenses Functional expenses of the School at June 30, 2008 and 2007, are as follows: 2008 2007 Program services: School operations $ 11,350,755 $ 10,363,555 Supporting services: Management and general 680,633 615,859 Fundraising 74,715 92,787 $ 12,106,103 $ 11,072,201 12
  15. 15. Report On Internal Control Over Financial Reporting And On Compliance And Other Matters Based On An Audit Of Financial Statements Performed In Accordance With Government Auditing Standards To the Board of Trustees The SEED Public Charter School of Washington, D.C. Washington, D.C. We have audited the financial statements of The SEED Public Charter School of Washington, D.C. (the School) as of and for the year ended June 30, 2008, and have issued our report thereon dated November 3, 2008. 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. Internal Control Over Financial Reporting In planning and performing our audit, we considered the School’s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the School’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the School's internal control over financial reporting. Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses. However, as discussed below, we identified certain deficiencies in internal control over financial reporting that we consider to be significant deficiencies. A control deficiency 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 misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the School’s ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles, such that there is more than a remote likelihood that a misstatement of the School’s financial statements that is more than inconsequential will not be prevented or detected by the School’s internal control. We consider the deficiencies described in the accompanying schedule of findings and responses as Item 2008-1 to be significant deficiencies in internal control over financial reporting. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the School’s internal control. McGladrey & Pullen, LLP is a member firm of RSM International, an affiliation of separate and independent legal entities. 13
  16. 16. Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in the internal control that might be significant deficiencies and accordingly, would not necessarily disclose all significant deficiencies that are also considered to be material weaknesses. However, we believe that the significant deficiencies described above are not material weaknesses. Compliance And Other Matters As part of obtaining reasonable assurance about whether the School’s financial statements are free of 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. The School’s response to the findings identified in our audits is described in the accompanying schedule of findings and responses. We did not audit the School’s response and accordingly, we express no opinion on it. This report is intended solely for the information and use of the Board of Trustees, management, and the District of Columbia Charter School Board and is not intended to be and should not be used by anyone other than these specified parties. Gaithersburg, Maryland November 3, 2008 14
  17. 17. The SEED Public Charter School Of Washington, D.C. Schedule Of Findings And Responses Year Ended June 30, 2008 Finding 2008-1: Financial Reporting In Accordance With Generally Accepted Accounting Principles (GAAP) Condition: The School’s ability to produce timely and accurate financial statements was hampered during the year ended June 30, 2008. Certain reconciliations, namely intercompany reconciliations, were not maintained during the year. Criteria: As reinforced by new auditing standards, management is responsible for the financial statements in accordance with GAAP and related internal controls. As such, the School’s internal controls over accounting reconciliation and financial reporting should ensure accurate financial statements prepared in a timely manner and audit adjustments should be few, if any. Cause: Staff turnover caused delays in certain account reconciliations. Effect: The School’s ability to produce timely and accurate financial statements in accordance with GAAP was hampered. Recommendation: We recommend that the School produce interim statements on a GAAP basis throughout the year on a set schedule. All accounts should be fully reconciled to supporting schedules or subsidiary ledgers, and intercompany balances should be reconciled with the related party’s books and records. This should ensure a smooth year-end closing process and ideally result in an audit with few, if any, audit adjustments either proposed by auditors or discovered by management post-closing. Views of responsible officials: In FY09 we will be switching to a more robust accounting system. In the last twelve months we have hired a Managing Director and new Finance Director to manage monthly financial reporting for the school. The Chair of the Finance Committee and the CFO of the SEED Foundation will make sure quarterly financial statements are timely issued. 15

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