C O N T E N T S
Independent Auditor’s Report i – iii
Management’s Discussion and Analysis iv - 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 - 18
Supplemental Information
Budgetary Comparison Schedule – General Fund 19
Schedule of Revenues – General Fund 20
Schedule of Expenditures – General Fund 21 - 22
C O N T E N T S – Continued
Appendix- 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 A-1 – A-2
Independent Auditor’s Report on Compliance For Each Major Program and On Internal Control Over Compliance Required by the Uniform Guidance A-3 – A-4
Schedule of Expenditures of Federal Awards A-5 – A-6
Reconciliation of Basic Financial Statements Federal Receivables and Revenue with Schedule of Expenditures of Federal Awards A-7
Notes to Schedule of Expenditures of Federal Awards A-8
Schedule of Findings and Questioned Costs A-9 – A-10
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 Hanley International Academy
We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Hanley International Academy, as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the Hanley International 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 opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free 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 judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and 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 opinions.
Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of Hanley International Academy as of June 30, 2016, and the respective changes in financial position, thereof for the year 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 - ix and 19 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Hanley International Academy’s basic financial statements. The introductory section, combining and individual nonmajor fund financial statements, and statistical section, 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 Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and is also not a required part of the basic financial statements.
The combining and individual nonmajor fund financial statements, schedules of revenues and expenditures, and the schedules of expenditures of federal awards are the responsibility of management and were derived from and related 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 nonmajor fund financial statements, schedules of revenues and expenditures, and the schedule of expenditures of federal awards 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.
Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 27, 2016, on our consideration of the Hanley International 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 or on compliance. The report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Hanley International Academy’s internal control over financial reporting and compliance.
Croskey Lanni, PC
Rochester, Michigan October 27, 2016
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MANAGEMENT’S DISCUSSION AND ANALYSIS
This section of Hanley International 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, 2016. Please read it in conjunction with the school’s financial statements, which immediately follow this section.
FINANCIAL HIGHLIGHTS
The total cost of basic programs was $2,321,679.
General fund revenues were at $6,251,784 while expenditures were $5,294,002.
Blended enrollment used for state aid purposes was 651 students.
The school has a positive General Fund balance of $1,618,011.
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 school-wide financial statements that provide both short-term and longterm 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.
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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 A-1 shows how the various parts of this annual report are arranged and related to one another.
Fund Financial Statements
School-Wide 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, shortterm and long-term
Generally assets expected to be used up and liabilities that come due during the year or soon thereafter, no capital assets or long-term liabilities included
All assets and liabilities, both shortterm and long-term
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
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Figure A-1 Organization of Hanley’s Annual Financial Report
Management’s Discussion and Analysis
Basic Financial Statements
Required Supplementary Information
Notes to Financial Statements
School-Wide Financial Statements
Fund Financial Statements
Figure A-2 Major Features of School-Wide and Fund Financial Statements
Figure A-2 summarizes the major features of the school’s financial statements, including the portion of the schools 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.
SCHOOL-WIDE STATEMENTS
The school-wide statements report information about the school as a whole using accounting methods similar to those used by private-sector 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 school-wide statements report the school’s net position and how they have 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 non-financial 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 longterm debts) or to show that it is properly using certain revenues.
The school has two kinds of funds:
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 year-end that are available for spending. Consequently, the governmental funds statements provide a detailed short-term 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 long-term focus of the school-wide statements, we provide additional information with governmental funds statements that explains the relationship (or differences) between them.
Fiduciary funds – The school is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. We exclude these activities from the schoolwide financial statements because the school cannot use these assets to finance its operations.
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FINANCIAL ANALYSIS OF THE SCHOOL AS A WHOLE
The school’s financial position is the product of many factors.
School Governmental The stability of the school’s finances is a result of the following measures:
Spending is controlled to insure that it aligns with revenues received from the State.
General Fund Budgetary Analysis Over the course of the year, the school reviewed the annual operating budget monthly and amended the budget quarterly. All invoices were paid in a timely matter.
Financial Outlook Hanley International Academy’s financial forecast continues to be optimistic heading into the 2016/2017 school year.
Enrollment is anticipated to remain constant for the 2016-2017 school year.
2016 2015
3,768,263 $ 3,565,378 $ 7,291,914 7,544,398
11,060,177 11,109,776 8,487,794 8,487,794 1,531,756 1,725,935
10,019,550 10,213,729
1,040,627 $ 896,047 $
Table A-3 Hanley International Academy's Net Position
Other liabilities
Total liabilities
Total assets Long-term debt outstanding
Net position
Current and other assets Capital assets
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Revenues: 2016 2015
153,652 $ 153,268 $ 1,804,881 1,703,572
4,784,621 5,371,443 52,809 16,709
6,795,963 7,244,992
Expenses:
3,184,134 3,520,143 2,595,001 2,607,422 606,407 621,525 265,841 285,346
6,651,383 7,034,436
Increase(decrease) in net position 144,580$ 210,556 $
Table A-4
Program revenues: Charges for services
Changes in Hanley International Academy's Net Position
Unallocated depreciation
Total expenses
Support services
Total revenues
Instruction
Interest on long-term debt
Federal and state operating grants General revenues: State aid - unrestricted Miscellaneous
CAPITAL ASSET AND DEBT ADMINISTRATION
Capital Assets By the end of 2016, the school had invested $9,056,235 in capital assets, including equipment and a building. See table A-5 below for a listing of capital assets, and the accumulated depreciation.
Balance Balance June 30, 2016 June 30, 2015 Land 927,817$ 927,817 $ Building 7,045,876 7,045,876 Equipment and furniture 549,563 544,803 Computers 532,979 524,382
Subtotal 9,056,235 9,042,878
Less: accumulated depreciation 1,764,321 1,498,480
Total net capital assets 7,291,914$ 7,544,398 $
Table A-5 Hanley International Academy's Capital Assets
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FACTORS BEARING ON THE SCHOOL’S FUTURE
x Maintenance of current enrollment. x Aligning expenditures with available revenue sources.
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)731-5300
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HANLEY INTERNATIONAL ACADEMY
STATEMENT OF NET POSITION JUNE 30, 2016 See Independent Auditor’s Report
Current Assets Cash and cash equivalents 880,973 $ Investments - restricted for debt service and capital projects 1,272,517 Accounts receivable 22,353 Due from other governmental units 1,575,539 Prepaid expenses 16,881 Total current assets 3,768,263
Capital Assets - Net of Accumulated Depreciation 7,291,914 Total assets and deferred outflows 11,060,177 $
Current Liabilities Accounts payable 328,743 $ Due to other governmental units 485,104 Other accrued expenses 717,909 Long-term debt - current portion 180,000
Total current liabilities 1,711,756
Long-Term Debt 8,307,794
Net Position Net investment in capital assets (1,195,880) Restricted for debt services and capital projects 1,272,517 Unrestricted 963,990
Total net position 1,040,627 Total liabilities, deferred inflows and net position 11,060,177 $
ASSETS AND DEFERRED OUTFLOWS
LIABILITIES, DEFERRED INFLOWS AND NET POSITION
See accompanying notes to financial statements
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HANLEY INTERNATIONAL ACADEMY
STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2016 See Independent Auditor’s Report
Net (Expense) Revenues and Changes in Program Revenues Position Government Charges for Operating Type Expenses Services Grants Activities
Functions Instruction Basic programs 2,321,679$ -$ 461,474$ (1,860,205) $ Added needs 862,455 - 704,355 (158,100) Support services Pupil support services 34,983 - 23,956 (11,027) Instructional staff support services 50,515 - 40,250 (10,265) General administration 732,551 - - (732,551) School administration 527,155 - - (527,155) Business support services 31,383 - - (31,383) Operations and maintenance 448,327 - 8,718 (439,609) Pupil transportation services 19,018 17,011 (2,007) Central support services 221,298 - - (221,298) Athletic activities 29,098 25,448 - (3,650) Food services 490,863 463 543,614 53,214 Community services 9,810 - 5,503 (4,307) Unallocated depreciation 265,841 - - (265,841) Unallocated interest 606,407 127,741 - (478,666)
Total primary government 6,651,383$ 153,652$ 1,804,881$ (4,692,850)
General Purpose Revenues State school aid - unrestricted 4,784,621 Miscellaneous revenues 52,809 Total general purpose revenues 4,837,430
Change in net position 144,580
Net position - July 1, 2015 896,047
Net position - June 30, 2016 1,040,627 $
See accompanying notes to financial statements
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HANLEY INTERNATIONAL ACADEMY
COMBINED BALANCE SHEET – ALL GOVERNMENTAL FUNDS JUNE 30, 2016 See Independent Auditor’s Report
Debt Non-Major General Service Special Revenue Total
Cash and cash equivalents 716,774$ -$ 164,199$ 880,973 $ Investments 132,506 1,140,011 - 1,272,517 Accounts receivable 22,353 - - 22,353 Due from other governmental units 1,575,539 - - 1,575,539 Prepaid expenses 16,881 - - 16,881
Total assets 2,464,053$ 1,140,011$ 164,199$ 3,768,263 $
Liabilities Accounts payable 328,743$ -$ -$ 328,743 $ Due to other governmental units - 485,104 - 485,104 Other accrued expenses 517,299 - - 517,299
Total liabilities 846,042 485,104 - 1,331,146
Fund Balance Nonspendable 16,881 - - 16,881 Restricted - 654,907 164,199 819,106 Unassigned 1,601,130 - - 1,601,130
Total fund balance 1,618,011 654,907 164,199 2,437,117 Total liabilities, deferred inflows and fund balance 2,464,053$ 1,140,011$ 164,199$ 3,768,263 $
ASSETS
LIABILITIES, DEFERRED INFLOWS AND FUND BALANCE
See accompanying notes to financial statements
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HANLEY INTERNATIONAL ACADEMY
RECONCILIATION OF TOTAL GOVERNMENTAL FUND BALANCE TO NET POSITION OF GOVERNMENTAL ACTIVITIES JUNE 30, 2016 See Independent Auditor’s Report
Amounts reported for governmental activities in the statement of net position are different because:
Total Governmental Fund Balances 2,437,117 $
Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. The cost of the assets is $9,056,235 and the accumulated depreciation is $1,764,321. 7,291,914
Interest is not payable until due in governmental activities and, therefore, is not recorded in the funds. (200,610)
Long-term liabilities are not due and payable in the current period and, therefore, are not reported in the funds. (8,487,794)
Net Position of Governmental Activities 1,040,627 $
See accompanying notes to financial statements
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HANLEY INTERNATIONAL ACADEMY
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE – ALL GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2016 See Independent Auditor’s Report
Debt Non-Major General Service Special Revenue Total
Revenues Local sources 205,896$ 102$ 463$ 206,461 $ State sources 5,482,381 - 4,480 5,486,861 Federal sources 563,507 - 539,134 1,102,641 Total governmental fund revenues 6,251,784 102 544,077 6,795,963 Expenditures Instruction Basic programs 2,321,679 - - 2,321,679 Added needs 862,455 - - 862,455 Support services Pupil support services 34,983 - - 34,983 Instructional staff support services 50,515 - - 50,515 General administration 732,551 - - 732,551 School administration 527,155 - - 527,155 Business support services 23,756 7,627 - 31,383 Operations and maintenance 448,327 - - 448,327 Pupil transportation services 19,018 - - 19,018 Central support services 221,298 - - 221,298 Athletic activities 29,098 - - 29,098 Food services - - 490,863 490,863 Community services 9,810 - - 9,810 Capital outlay 13,357 - - 13,357 Debt principal and interest - 784,707 - 784,707 Total governmental fund expenditures 5,294,002 792,334 490,863 6,577,199 Excess (deficiency) of revenues over expenditures 957,782 (792,232) 53,214 218,764
Other Financing Sources (Uses) Operating transfers in - 790,564 - 790,564 Operating transfers out (790,564) - - (790,564) Total other financing sources (uses) (790,564) 790,564 - Excess (deficiency) of revenues and other financing sources over expenditures and other uses 167,218 (1,668) 53,214 218,764 Fund balance - July 1, 2015 1,450,793 656,575 110,985 2,218,353 Fund balance - June 30, 2016 1,618,011$ 654,907$ 164,199$ 2,437,117 $
See accompanying notes to financial statements
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HANLEY INTERNATIONAL 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, 2016 See Independent Auditor’s Report
Amounts reported for governmental activities in the statement of activities are different because:
Net Change in Fund Balances - Total Governmental Funds 218,764 $
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 13,357 $ Depreciation and amortization expense (265,841) (252,484)
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 175,000 $ Interest expense 3,300 178,300
Change in Net Position of Governmental Activities 144,580 $
See accompanying notes to financial statements
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HANLEY INTERNATIONAL ACADEMY
NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 See Independent Auditor’s Report
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies of Hanley International 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
Hanley International 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, and began operation in May 2005.
In June 2012, the Academy entered into a seven-year contract, expiring June 30, 2019, with Grand Valley State University's Board of Control to charter a public school academy. 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 University’s Board of Control 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 Grand Valley State University's Board of Control three percent of state aid as administrative fees. Total administrative fees paid for the year ended June 30, 2016 were approximately $143,600.
In June 2012, the Academy entered into a seven-year agreement with The Romine Group, Inc. Under the terms of this agreement, The Romine Group, Inc. provides a variety of services including financial management, educational programs and consulting, as well as teacher training. The Academy is obligated to pay The Romine Group, Inc. ten percent of its state school aid revenue and all other governmental revenue sources. The total paid for these services amounted to approximately $564,300 for the year ended June 30, 2016.
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. Non-major funds are aggregated and presented in a single column.
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HANLEY INTERNATIONAL ACADEMY
NOTES TO FINANCIAL STATEMENTS - Continued FOR THE YEAR ENDED JUNE 30, 2016 See Independent Auditor’s Report
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued
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 self-balancing 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.
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 - 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 - 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 - The debt service fund is used to record certain revenue and the payment of interest, principal and other expenditures on long-term debt.
Capital Projects Fund - 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 - The fiduciary fund, which the Academy does 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.
Activity (Agency) Fund - The Academy does not presently maintain an activity fund, which would be used to record the transactions of a student group for school and school-related purposes. The fund would be segregated and held in trust for the students.
Governmental and agency funds utilize the modified accrual basis of accounting. Modifications in such method from the accrual basis are as follows:
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HANLEY INTERNATIONAL ACADEMY
NOTES TO FINANCIAL STATEMENTS - Continued FOR THE YEAR ENDED JUNE 30, 2016 See Independent Auditor’s Report
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
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 long-term debt are not recorded as expenditures until their due dates.
d. The State of Michigan utilizes a foundation allowance funding approach, which provides for specific annual amount of revenue per student based on a state-wide 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.
Government-Wide Financial Statements
The government-wide financial statements (i.e. the statement of Net Position and the Statement of Activities) report information on all of the non-fiduciary activities of the primary government. The government-wide 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 government-wide statements and the statements for governmental funds.
The government-wide Statement of Activities presents a comparison between expenses and program revenues for each segment of the business-type 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.
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HANLEY INTERNATIONAL ACADEMY
NOTES TO FINANCIAL STATEMENTS - Continued FOR THE YEAR ENDED JUNE 30, 2016 See Independent Auditor’s Report
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Net position should be reported as restricted when constraints placed on net position’s use is 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 - wide financial statements.
Cash and Cash Equivalents
The Academy's cash and cash equivalents are considered to be cash on hand, demand deposits and short-term 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 short-term 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, 2016 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 2016 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, 2016, 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 an expenditure is reported in the year in which services are consumed.
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HANLEY INTERNATIONAL ACADEMY
NOTES TO FINANCIAL STATEMENTS - Continued FOR THE YEAR ENDED JUNE 30, 2016 See Independent Auditor’s Report
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
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 straight-line method over the following useful lives:
Building and improvements 10 – 50 years Furniture and equipment 5 – 15 years Computers and software 3 – 10 years
Accrued Liabilities and Long-Term Obligations
All payables, accrued liabilities and long-term obligations are reported in the government-wide 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 noncurrent 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 year-end are considered to have been made with current available financial resources. Other long-term obligations that will be paid from governmental funds are not recognized as a liability in the fund financial statements until due.
Deferred Inflows of Resources
In addition to liabilities, the statement of net position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The Academy reports unavailable revenue under a modified accrual basis of accounting, as deferred inflow of resources in the governmental funds balance sheet. Revenues are considered unavailable if they are not received within 60 days of the Academy’s year end.
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 its 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.
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HANLEY INTERNATIONAL ACADEMY
NOTES TO FINANCIAL STATEMENTS - Continued FOR THE YEAR ENDED JUNE 30, 2016 See Independent Auditor’s Report
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
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.
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.
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HANLEY INTERNATIONAL ACADEMY
NOTES TO FINANCIAL STATEMENTS - Continued FOR THE YEAR ENDED JUNE 30, 2016 See Independent Auditor’s Report
NOTE 2 - 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 a general fund budget. During the year ended June 30, 2016 the budget was amended in a legally permissible manner. During the year ended June 30, 2016 the Academy incurred expenditures that were in excess of the amounts appropriated, as detailed on page 19 of these financial statements.
NOTE 3 - DEPOSITS AND INVESTMENTS
As of June 30, 2016, the Academy had the following investments:
Type S&P Rating Maturities Carrying Value Deposits: Demand deposits 880,973 $ Investments: U.S. Treasury and agency obligations AAAm Various 1,272,517 Total deposits and investments 2,153,490 $
Deposits: Cash - General fund 716,774 $ Cash - Special revenue fund 164,199
Total cash 880,973
Investments: Investments - General fund 132,506 Investments - Debt service fund 1,140,011
Total investments 1,272,517 Total deposits and investments 2,153,490 $
The above amounts are reported in the financial statements as follows:
Cash is split between unrestricted and restricted amounts. General Fund and Debt Service Fund investments are restricted for use in servicing debt obligations. - 13
HANLEY INTERNATIONAL ACADEMY
NOTES TO FINANCIAL STATEMENTS - Continued FOR THE YEAR ENDED JUNE 30, 2016 See Independent Auditor’s Report
NOTE 3 - DEPOSITS AND INVESTMENTS - Continued
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 shorter-term 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, 2016, 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 represents 100% of the Academy's total investments.
Custodial Credit Risk - 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, 2016, $702,074 of the Academy's cash was exposed to custodial credit risk because it was uninsured. All cash balances were uncollateralized as of June 30, 2016.
Custodial Credit Risk - 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.
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 pre-qualifying the financial institutions, broker/dealers, intermediaries and advisors with which the District will do business.
Foreign Currency Risk
The Academy is not authorized to invest in investments which have this type of risk.
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HANLEY INTERNATIONAL ACADEMY
NOTES TO FINANCIAL STATEMENTS - Continued FOR THE YEAR ENDED JUNE 30, 2016 See Independent Auditor’s Report
NOTE 4 – DUE FROM OTHER GOVERNMENTAL UNITS
Amounts due from other governmental units consist of the following:
State sources 999,895 $ Federal sources 575,644
Total 1,575,539 $
NOTE 5 - CAPITAL ASSETS
Capital asset activity of the Academy's governmental activities was as follows:
Balance Balance July 1, 2015 Additions Disposals June 30, 2016
Capital assets not subject to depreciation Land 927,817$ -$ -$ 927,817 $
Capital assets subject to depreciation Building 7,045,876 - - 7,045,876 Equipment 142,230 - - 142,230 Furniture 402,573 4,760 - 407,333 Computer 524,382 8,597 - 532,979
Sub-total 9,042,878 13,357 - 9,056,235
Accumulated depreciation Building 671,080 176,147 - 847,227 Equipment 101,572 11,733 - 113,305 Furniture 271,256 33,554 - 304,810 Computer 454,572 44,407 - 498,979
Sub-total 1,498,480 265,841 - 1,764,321
Total net capital assets 7,544,398$ (252,484)$ -$ 7,291,914 $
Depreciation and amortization expense was not charged to activities as the Academy considers its assets to impact multiple activities and allocation is not practical.
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HANLEY INTERNATIONAL ACADEMY
NOTES TO FINANCIAL STATEMENTS - Continued FOR THE YEAR ENDED JUNE 30, 2016 See Independent Auditor’s Report
NOTE 6 – ACCRUED EXPENSES
Accrued expenses can be summarized as follows:
Net Position Funds
Purchased services - payroll and benefits 327,987$ 327,987 $ Management fee 137,855 137,855 University oversight fee 26,112 26,112 Other accrued expenses 25,345 25,345 Interest 200,610
Total accrued expenses 717,909$ 517,299 $
NOTE 7 - LONG-TERM OBLIGATIONS PAYABLE
The following is a summary of long-term obligations for the Academy during the year ended June 30, 2016:
Loan Information
Interest Maturity Rate Date
Revenue bond 6.125% - 9.0% September, 2040
Loan Activity
Balance Retirements Balance Due Within July 1, 2015 Additions and Payments June 30, 2016 One Year
Revenue bond 8,710,000$ -$ 175,000$ 8,535,000 180,000 $ Less unamortized discount 47,206 8,487,794$
Other
Twice yearly payments of principal and interest. Secured by facilities, funds held in trust, and a pledge for 20% of future State School Aid payments.
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HANLEY INTERNATIONAL ACADEMY
NOTES TO FINANCIAL STATEMENTS - Continued FOR THE YEAR ENDED JUNE 30, 2016 See Independent Auditor’s Report
NOTE 7 - LONG-TERM OBLIGATIONS PAYABLE - Continued
Following are maturities of long-term obligations for principal and interest for the next five years and in total:
Principal Interest
2017 180,000$ 591,781 $ 2018 190,000 575,131 2019 195,000 557,806 2020 205,000 539,806 2021 215,000 520,906 2022 - 2026 1,205,000 2,302,881 2027 - 2031 1,505,000 1,738,134 2032 - 2036 2,005,000 1,189,934 2037 - 2041 2,835,000 471,778
NOTE 8 – OPERATING LEASES
Lease Information
Maturity Approximate Date Payment
Bus leases (4) June, 2018 $200,000 yearly
The approximate amount of lease obligations coming due during the next two years are as follows:
2017 200,000 $ 2018 200,000
Other
Payable in 11 installments of $18,180
Total lease expense included in the statement of activities for the year ended June 30, 2016 amounted to $164,694.
NOTE 9 - RETIREMENT PLAN
All leased employees of the Academy are eligible to participate in a retirement plan established by the Academy's management company (the employer) which qualifies under the provisions of Section 401(k) of the Internal Revenue Code. The Academy, under this plan, will reimburse the employer’s contribution of 4% of salaries regardless of the amount the employee contributes. The Academy will additionally reimburse the employer’s match up to 4% of employee contributed funds. Eligible employees may contribute up to 15% of their salaries under the terms of this plan. - 17
HANLEY INTERNATIONAL ACADEMY
NOTES TO FINANCIAL STATEMENTS - Continued FOR THE YEAR ENDED JUNE 30, 2016 See Independent Auditor’s Report
NOTE 10 - INTERFUND TRANSFERS
During the normal course of the school year the Academy transferred amounts between its major funds as follows:
General Debt Service
Transfer In -$ 790,564 $
Transfer Out 790,564
As stipulated by the Academy's revenue bond agreement as described in Note 7, 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.
NOTE 11 - 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.
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SUPPLEMENTAL INFORMATION
HANLEY INTERNATIONAL ACADEMY
REQUIRED SUPPLEMENTAL INFORMATION BUDGETARY COMPARISON SCHEDULE – GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2016 See Independent Auditor’s Report
Original Budget Final Budget Actual Variance
Revenues Local sources 192,414$ 212,983$ 205,896$ (7,087) $ State sources 5,323,669 5,482,970 5,482,381 (589) Federal sources 511,262 587,370 563,507 (23,863)
Total general fund revenues 6,027,345 6,283,323 6,251,784 (31,539) Expenditures Instruction Basic programs 2,211,018 2,400,662 2,321,679 (78,983) Added needs 906,170 863,017 862,455 (562) Support services Pupil support services 35,764 35,500 34,983 (517) Instructional staff support services 49,376 52,046 50,515 (1,531) General administration 724,411 742,657 732,551 (10,106) School administration 534,247 537,177 527,155 (10,022) Business support services 46,000 31,000 23,756 (7,244) Operations and maintenance 422,064 488,954 448,327 (40,627) Pupil transportation services - 30,800 19,018 (11,782) Central support services 205,500 243,000 221,298 (21,702) Athletic activities 21,150 31,900 29,098 (2,802) Community services 1,000 10,312 9,810 (502) Capital outlay - 13,357 13,357
Total general fund expenditures 5,156,700 5,480,382 5,294,002 (186,380) Excess (deficiency) of revenues over expenditures 870,645 802,941 957,782 154,841
Other Financing Sources (Uses) Operating transfers out (766,801) (794,977) (790,564) 4,413
Excess (deficiency) of revenues and other financing sources over expenditures and other uses 103,844 7,964 167,218 159,254
Fund balance - July 1, 2015 1,450,793 1,450,793 1,450,793 Fund balance - June 30, 2016 1,554,637 $ 1,458,757 $ 1,618,011 $ 159,254 $
- 19
HANLEY INTERNATIONAL ACADEMY
SCHEDULE OF REVENUES – GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2016 See Independent Auditor’s Report
Local Sources Student activities 25,448 $ Other local revenues 180,448
Total local sources 205,896
State Sources At risk 336,239 Great start readiness program 270,928 Special education 90,593 State aid 4,784,621
Total state sources 5,482,381
Federal Sources IDEA 103,108 Title I 408,169 Title II A 23,222 Title III 20,456 Other program revenue 8,552
Total federal sources 563,507
Total general fund revenues 6,251,784 $
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HANLEY INTERNATIONAL ACADEMY
SCHEDULE OF EXPENDITURES – GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2016 See Independent Auditor’s Report
Basic Programs Purchased services 2,120,088 $ Supplies and materials 174,054 Other expenditures 27,537
Total basic programs 2,321,679
Added Needs Purchased services 811,025 Supplies and materials 51,430
Total added needs 862,455
Pupil Support Services Social work services 34,983
Instructional Staff Support Services Purchased services 43,772 Supplies and materials 6,743
Total instructional staff support services 50,515
General Administration Purchased services 23,783 Management fees 564,264 University oversight 143,550 Other expenditures 954
Total general administration 732,551
School Administration Purchased services 467,345 Supplies and materials 41,020 Other expenditures 18,790
Total school administration 527,155
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HANLEY INTERNATIONAL ACADEMY
SCHEDULE OF EXPENDITURES – GENERAL FUND - CONTINUED FOR THE YEAR ENDED JUNE 30, 2016 See Independent Auditor’s Report
Business Support Services Purchased services 19,525 Other expenditures 4,231
Total business support services 23,756
Operations and Maintenance Purchased services 203,458 Repairs and maintenance 131,202 Supplies and materials 113,667
Total operations and maintenance 448,327
Pupil Transportation Services Purchased services 19,018
Central Support Services Other expenditures 221,298
Athletic Activities Purchased services 18,071 Supplies and materials 4,567 Other expenditures 6,460
Total athletic activities 29,098
Community Services Purchased services 9,810
Capital Outlay 13,357
Total general fund expenditures 5,294,002 $
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APPENDIX
Federal Awards
Supplementary 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, PF
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 Hanley International 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 the Hanley International Academy, as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the Hanley International Academy’s basic financial statements, and have issued our report thereon dated October 27, 2016.
Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the Hanley International 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 the Hanley International Academy’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Hanley International 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 the Hanley International 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
Rochester, Michigan October 27, 2016
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 THE UNIFORM GUIDANCE
To the Board of Directors of Hanley International Academy
Report on Compliance for Each Major Federal Program We have audited the Hanley International Academy’s compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of the Hanley International Academy’s major federal programs for the year ended June 30, 2016. Hanley International 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 federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs.
Auditor’s Responsibility Our responsibility is to express an opinion on compliance for each of the Hanley International 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 the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance 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 the Hanley International 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 the Hanley International Academy’s compliance.
Opinion on Each Major Federal Program In our opinion, Hanley International 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, 2016.
Report on Internal Control over Compliance Management of Hanley International 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 the Hanley International 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 the Uniform Guidance, 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 the Hanley International 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 the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.
Croskey Lanni, PC
Rochester, Michigan October 27, 2016
A-4
HANLEY INTERNATIONAL ACADEMY
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2016
AccruedFederal Funds/AccruedCurrent Year Grant/Approved(Memo Only)(Deferred)AdjustmentsPayments(Deferred)Cash ProjectCFDAAwardsPrior YearRevenue atandIn-kindRevenue at Transferred To NumberNumberAmountExpendituresJuly 1, 2015TransfersReceivedExpendituresJune 30, 2016Subrecipient
Clusters: Child Nutrition Cluster - U.S. Department of Agriculture Passed through Michigan Department of Education: Noncash Assitstance (Commodities) National Lunch Program Commodities 2015-16N/A10.55515,781$ -$ -$ -$ 15,781$ 15,781$ -$ $
Cash Assistance: National School Lunch Program 2014-201515196010.555318,326 314,873 14,704 - 14,704 - - National School Lunch Program 2015-201616196010.555323,999 - - - 323,999 341,217 17,218
National School Lunch Program (including commodities) Subtotal10.555658,106 314,873 14,704 - 354,484 356,998 17,218
National School Breakfast Program 2014-201515197010.553164,665 161,481 8,155 - 8,155 - - National School Breakfast Program 2015-201616197010.553170,819 - - - 170,819 182,136 11,317
National School Breakfast Program Subtotal10.553335,484 161,481 8,155 - 178,974 182,136 11,317
Total Child Nutrition Cluster993,590 476,354 22,859 - 533,458 539,134 28,535
Special Education Cluster - U.S. Department of Ed. Passed through the Wayne County RESA IDEA Flowthrough: IDEA Flowthrough 141515145084.027A11,774 103,928 103,928 - 111,774 7,846 - IDEA Flowthrough 151616145084.027A95,262 - - - - 95,262 95,262
Total Special Education Cluster107,036 103,928 103,928 - 111,774 103,108 95,262
Program Title/Project Number Subrecipient Name
See accompanying notes to schedule of expenditures of federal awards
A-5
HANLEY INTERNATIONAL ACADEMY
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS - Continued FOR THE YEAR ENDED JUNE 30, 2016
AccruedFederal Funds/AccruedCurrent Year Grant/Approved(Memo Only)(Deferred)AdjustmentsPayments(Deferred)Cash ProjectCFDAAwardsPrior YearRevenue atandIn-kindRevenue at Transferred To NumberNumberAmountExpendituresJuly 1, 2015TransfersReceivedExpendituresJune 30, 2016Subrecipient
Other federal awards: Passed through the Michigan Department of Education: Title I Part A: Title I Part A 141515153084.010466,557 397,176 397,176 - 397,176 - - Title I Part A 151616153084.010440,581 - - - - 408,169 408,169
Total Title I Part A84.010907,138 397,176 397,176 - 397,176 408,169 408,169
Title III Limited English: Title III Limited English 141515058084.36525,948 25,948 25,948 - 25,948 - - Title III Limited English 151616058084.36520,456 - - - - 20,456 20,456
Total Title III Limited English84.36546,404 25,948 25,948 - 25,948 20,456 20,456
Title II Part A - Improving Teacher Quality Title II Part A 151615052084.36740,284 36,767 36,767 - 36,767 - - Title II Part A 151616052084.36723,222 - - - - 23,222 23,222
Total Title I Part A84.36763,506 36,767 36,767 - 36,767 23,222 23,222
Total noncluster programs passed through the Michigan Department of Education1,017,048 459,891 459,891 - 459,891 451,847 451,847
Other federal awards (Continued): Passed through the Michigan Association of Public School Academies (MAPSA):
T.E.A.M.S Grant: T.E.A.M.S. Grant 1516S385A10014484.374- - - - 8,552 8,552 -
Total noncluster programs passed through the Michigan Association of Public School Academies- - - - 8,552 8,552 -
Total Federal Awards2,117,674$ 1,040,173$ 586,678$ -$ 1,113,675$ 1,102,641$ 575,644$ $
Program Title/Project Number Subrecipient Name
See accompanying notes to schedule of expenditures of federal awards
A-6
HANLEY INTERNATIONAL ACADEMY
RECONCILIATION OF BASIC FINANCIAL STATEMENTS FEDERAL RECEIVABLES AND REVENUE WITH SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2016
Revenues to Expenditures
Revenue from federal sources - As reported on modified accrual financial statements (includes all funds):
General Fund 563,507 $ Special Revenue Fund 539,134
Federal expenditures per the schedule of expenditures of federal awards 1,102,641 $
A-7
HANLEY INTERNATIONAL ACADEMY
NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2016
NOTE 1 – BASIS OF PRESENTATION
The accompanying schedule of expenditures of federal awards (the “Schedule”) includes the federal award activity of Hanley International Academy under programs of the federal government for the year ended June 30, 2016. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of Hanley International Academy, it is not intended to and does not present the financial position, changes in net assets, or cash flows of Hanley International Academy.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Negative amounts shown on the Schedule represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years.
NOTE 3 – INDIRECT COST RATE
Hanley International Academy has elected to not use the 10-percent de minimis indirect cost rate allowed under the Uniform Guidance.
NOTE 4 - NONCASH ASSISTANCE
The value of the noncash assistance received was determined in accordance with the provisions of Uniform Guidance.
NOTE 5 - GRANT AUDITOR'S REPORT
Management has utilized the Grant Auditor's report in preparing the schedule of expenditures of federal awards. Unreconciled differences, if any, have been disclosed to the auditor.
A-8
HANLEY INTERNATIONAL ACADEMY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2016
SECTION I - 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_none reported
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_none reported
Type of auditor’s report issued on compliance for major programs: Unmodified
Any audit findings disclosed that are required to be reported in accordance with 2 CFR section 200.516(a)? ___yes _X_no
Identification of major programs:
CFDA Number(s) Name of Federal Program or Cluster #10.553, 10.555 Child Nutrition Cluster 10.556 & 10.559
Dollar threshold used to distinguish between Type A and Type B programs as described in 2 CFR section 200.518(b): $ 750,000
Auditee qualified as low-risk auditee? ___yes _X_no
SECTION II – FINANCIAL STATEMENT FINDINGS None
SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS None
A-9
HANLEY INTERNATIONAL ACADEMY
SUMMARY SCHEDULE OF PRIOR YEAR AUDIT FINDINGS FOR THE YEAR ENDED JUNE 30, 2016
1) Audit findings that have been fully corrected:
Fiscal Year: 2015
Finding Number: 2015-001
Finding: The Academy was overcharged for meals by its food service vendor. The amounts did not agree with the approved contract.
Comments: The corrective action was taken.