audit report 2018-2019 - evolution fs 2019

AUDIT REPORT

EVOLUTION ACADEMY

CHARTER SCHOOL

FOR THE YEAR ENDED

AUGUST 31, 2019

TABLE OF CONTENTS

PAGE Certificate of Board 1 Independent Auditors’ Report 2-3 General–Purpose Financial Statements Statement of Financial Position 4 Statement of Activities 5 Statement of Functional Expenses 6 Statement of Cash Flows 7 Notes to Financial Statements 8-14 Supplementary Information Statement of Activities 16 Schedule of Expenditures 17 Schedule of Capital Assets 18 Budgetary Comparison Schedule 19 Overall Compliance, Internal Controls and Federal Awards 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 20-21 Schedule of Findings and Questioned Costs 22 Schedule of Expenditure of Federal Awards 23 Notes to the Schedule of Expenditure of Federal Awards 24

Mitchell T. Fontenote Certified public accountant, Inc.

2428 Nall Street • Port Neches, Texas 77651

Phone (409) 722-6300 • Fax (409) 722-6301

[email protected]

January 27, 2020

INDEPENDENT AUDITOR’S REPORT

Board of Directors Evolution Academy Charter School, Inc. Richardson, Texas

Report on the Financial Statements

We have audited the accompanying financial statements of Evolution Academy Charter School, Inc. which comprise the statement of financial position as of August 31, 2019, and the related statements of activities, functional expenses, and cash flows for the year then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Board of Directors Evolution Academy Charter School, Inc. Richardson, Texas January 27, 2020

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Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Evolution Academy Charter School, Inc. as of August 31, 2019, and the changes in its Net Position and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Other Matters

Other Information

Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The supplementary information presented on pages 16 through 19 is presented for purposes of additional analysis and is not a required part of the basic financial statements. This information has been subjected to the auditing procedure applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects, in relation to the basic financial statements taken as a whole.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated January 25, 2019, on our consideration of Evolution Academy Charter School, Inc. internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Evolution Academy Charter School, Inc.’s internal control over financial reporting and compliance.

Mitchell T Fontenote CPA, Inc.

GENERAL-PURPOSE FINANCIAL STATEMENTS

EVOLUTION ACADEMY, INC.

STATEMENT OF FINANCIAL POSITION AUGUST 31, 2019

The accompanying notes are an integral part of this financial statement. - 4 -

Current Assets

Cash and cash equivalents 838,386$

Restricted Cash 1,216,447

Account Receivable 8,424

Due from Federal Agencies 161,910

Due from State 636,143

Prepaids 14,346

Total current assets 2,875,656

Property and equipment, net 12,260,431

Other Assets

Bond Issuance Costs 231,855

Bond Discount 126,840

Total Assets 15,494,782

Current Liabilities

Accounts payable 750,825

Accrued payroll and related liabilities 59,750

Due to Federal Agency 9,236

Deferred revenue 56,849

Compass Bank LOC -

Accrued Interest 76,563

Current portion of Capital Lease Payable 80,053

Current portion of Bond Payable 50,000

Total current liabilities 1,083,276

Long Term Debt

Capital Lease Payable 7,493,592

Bond Payable 5,710,000

Total Liabilities 14,286,868

Net assets

Without Donor Restrictions 78,907

With Donor Restrictions 1,129,007

Total net assets 1,207,914

Total liabilities and net assets 15,494,782$

Liabilities and Net Assets

Assets


STATEMENT OF ACTIVITIES FOR THE YEAR ENDED AUGUST 31, 2019


Revenues and Other Support

Without Donor

Restrictions

With Donor

Restrictions Total

Local support:

Interest Income 62,740$ - 62,740$

Other 16,167 - 16,167

Total Local Support 78,907 - 78,907

State program revenues

Foundation School Program - 5,990,416 5,990,416

Other State Aid - 66,611 66,611

Total State Program Revenues - 6,057,027 6,057,027

Federal program revenues

ESEA Title I, Part A - 168,711 168,711

ESEA Title I Teacher Leadership - 25,496 25,496

ESEA Title I Priority & Focus - 375,000 375,000

IDEA-B Capacity And Formula - 104,828 104,828

National Breakfast Program - 66,754 66,754

National School Lunch Program - 49,871 49,871

ESEA Title II, Part A - 21,188 21,188

ESEA Title IV, Part A, Subpart 1 - 9,357 9,357

MAC Program - 11,149 11,149

Title III, Part A - 2,850 2,850

FEMA - 226,155 226,155

Total Federal Program Revenues - 1,061,359 1,061,359

Net assets released from restrictions:

Satisfaction of program restrictions 6,709,825 (6,709,825) -

Total Revenues 6,788,732 408,561 7,197,293

Expenses and Other Losses

Program services:

Instruction & Instructional-Related Services 2,632,115 - 2,632,115

Instructional & School Leadership 820,773 - 820,773

Total Program Services 3,452,888 - 3,452,888

Support services:

Administrative Support Services 395,878 - 395,878

Ancillary Services 1,061 - 1,061

Support Services - Non-Student Based 1,426,686 - 1,426,686

Support Services - Student (Pupil) 675,491 - 675,491

Debt Service 725,204 - 725,204

Fundraising 32,617 - 32,617

Total Suppport Services 6,709,825 - 6,709,825

Total Change in Net Assets 78,907 408,561 487,468

Transfer-In - 25,128 25,128

Transfer-Out - (25,128) (25,128)

Net assets at beginning of year - 720,446 720,446

Net assets at end of year 78,907$ 1,129,007$ 1,207,914$


STATEMENT OF FUNCTIONAL EXPENSES FOR THE YEAR ENDED AUGUST 31, 2019


Program

Activities

Program

Services

General &

Administrative Fundraising Total

EXPENSES

Salaries and Wages 348,728$ 2,740,011$ -$ 3,088,739$

Employee Benefits 58,544 290,262 - 348,806

Payroll Taxes 5,780 41,831 - 47,611

Total Payroll Expenses 413,052 3,072,104 - 3,485,156

Rental Expense - 154,566 - 154,566

Contract Labor 2,950 62,283 26,568 91,801

Maintenance and Repairs 245,288 394,587 - 639,875

Utilities - 162,797 - 162,797

Depreciation - 305,688 - 305,688

Supplies 157,075 55,079 - 212,154

Food 62,674 5,912 - 68,586

Travel 43,460 57,282 - 100,742

Instructional Maerials 33,125 - - 33,125

Insuranace Bonding - 95,180 - 95,180

Professional Fees and Dues 115,931 368,156 - 484,087

Transportation - 5,221 - 5,221

Interest on Debt - 700,623 - 700,623

Amortization of Bond & Other Debt

Related Costs - 17,081 - 17,081

Other Debt Service Fees - 7,500 - 7,500

Library Books and Media 423 - - 423

Other 62,564 76,608 6,048 145,220

Total Non-payroll Expenses 723,490 2,468,563 32,616 3,224,669

TOTAL OF FUNCTIONAL EXPENSES 1,136,542$ 5,540,667$ 32,616$ 6,709,825$

Supporting Activities


STATEMENT OF CASH FLOWS FOR THE YEAR ENDED AUGUST 31, 2019


Cash flows from operating activities:

Foundation School Program payments 5,836,282$

Grant payments 830,909

Miscellaneous sources 22,311

Payments to vendors for goods and services rendered (1,952,941)

Payments to charter school personnel for services rendered (3,484,697)

Interest payments (708,123)

Net cash provided by operating activities 543,741

Cash flows from investing activities:

None -

Net cash provided by investing activities -

Cash flows from financing activities:

Principal payment on Revenue Bond (45,000)

Capital Lease payments (77,138)

Repayment on LOC/ Note payable (5,747)

Net cash provided by financing activities (127,885)

Net increase in cash 415,856

Cash at beginning of year 1,638,976

Cash at the end of year 2,054,832$

Reconciliation of change in net assets to net cash

provided by operating activities:

Change in net assets 487,580$

Adjustments to reconcile change in net assets to

net cash provided by operating activities:

Depreciation/amortization 322,769

(Increase)Decrease in assets:

Accounts receivable (3,694)

Due From Federal Agencies (65,597)

Due From State (151,143)

Prepaid expenses 3,866

Increase(Decrease) in liabilities:

Accounts payable (53,356)

Accrued liabilities 459

Deferred revenue 2,857

Net cash provided by operating activities 543,741$

EVOLULTION ACADEMY, INC.

NOTES TO THE FINANCIAL STATEMENTS AUGUST 31, 2019

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Note 1: Summary of Significant Accounting Policies

The general-purpose financial statements of Evolution Academy, Inc. (the corporation) were prepared in conformity with accounting principles generally accepted in the United States. The Financial Accounting Standards Board is the accepted standard setting body for establishing not-for-profit accounting and financial reporting principles.

Reporting Entity

The corporation is a not-for-profit organization incorporated in the State of Texas in 1999 and exempt from federal income taxes pursuant to Section 501(c)(3) of the Internal Revenue Code. The corporation is governed by a Board of Directors comprised of four members. The Board of Directors is selected pursuant to the bylaws of the corporation, and significantly influence operations. The Board of Directors has the primary accountability for the fiscal affairs of the corporation.

Since the corporation received funding from local, state, and federal government sources, it must comply with the requirements of the entities providing those funds.

Corporate Operations

Evolution Academy was solely organized to provide educational services to “at-risk” students. In 2002, the State Board of Education of the State of Texas granted the corporation an open-enrollment charter pursuant to Chapter 12 of the Texas Education Code. Pursuant to the program described in the charter application approved by the State Board of Education and the terms of the applicable Contract for Charter, Evolution Academy was opened January 7, 2002. The charter was renewed for a period of ten years (through July 31, 2029). As of April 29, 2013, the commissioner approved the amendment request to add campuses to be known as Evolution Academy Spring, Evolution Academy Beaumont and Evolution Academy Port Arthur effective July 1, 2013; Port Arthur campus is still pending. The School programs, services, activities, and functions are governed by the corporation’s board of directors. The charter school

program is the only financial activity of the corporation.

Basis of Presentation

The accompanying general-purpose financial statements have been prepared using the accrual basis of accounting in accordance with generally accepted accounting principles. Net Position and revenues, expenses, gains, and losses are classified based on the existence or absence of donor-imposed restrictions. Accordingly, net assets of the organization and changes therein are classified and reported as follows: Net Assets Without Donor Restrictions - Net assets available for use in general operations and not subject to donor restrictions. Assets restricted solely through the actions of the Board of Directors are reported as net assets without donor restrictions, board-designated. Net Assets With Donor Restrictions – Net assets subject to donor-imposed restrictions. Some donor-imposed restriction are temporary in nature, such as those that will be met by the passage of time or other events specified by the donor. Donor-imposed restrictions are released when a restriction expires, that is, when the stipulated time has elapsed, when the stipulated purpose for which the resource was restricted has been fulfilled, or both. Other donor-imposed restrictions are perpetual in nature, where the donor stipulates that resources be maintained in perpetuity.



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Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principals requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Contributions

The corporation accounts for contributions as unrestricted, temporarily restricted, or permanently restricted support, depending on the existence and/or nature of any donor restrictions. Support that is restricted by the donor is reported as an increase in temporarily restricted or permanently restricted net assets in the reporting period in which the support is recognized. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions.

New Accounting Pronouncement

On August 18, 2019, FASB issued ASU 2016-14, Not for Profit Entities (Topic 958) – Presentation of Financial Statements of Not-for-Profit Entities. The update addresses the complexity and understandability of net asset classification, deficiencies in information about liquidity and availability of resources, and lack of consistency in the type of information provided about expenses and investment return. The Association has adjusted the presentation of these statements accordingly. The ASU has been applied retrospectively to all periods presented. Cash and Cash Equivalents

For financial statement purposes, the Corporation considers all highly liquid investment instruments with an original maturity of three months or less to be cash equivalents.

Fair Value Measurement of Financial Instruments

The requirements of Fair Value Measurements and Disclosures of the FASB Accounting Standards Codification (ASC) apply to all financial instruments and all nonfinancial assets and nonfinancial liabilities that are being measured and reported on a fair value basis. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FASB also establishes a fair value hierarchy that categorizes the inputs used in valuation methodologies into three levels.

Inputs may be observable or unobservable. Observable inputs are inputs that are developed using market data, such as publicly available information about actual events or transactions, and that reflect the assumptions that market participants would use when pricing the asset or liability. Unobservable inputs are inputs for which market data are not available and that are developed using the best information available about the assumptions that market participants would use when pricing the asset or liability. A three-tier hierarchy categorizes the inputs used to measure the fair value as follows:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets for liabilities that the charter holder can access at the measurement date.

• Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include: quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active,



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and inputs other than quoted prices that are observable for the asset or liability, and market-corroborated inputs.

• Level 3 inputs are unobservable inputs for the asset or liability.

Assets measured at fair value at August 31, 2019 are as follows:

Level 1 Level 2 Level 3 Total

Bond proceeds held in trust:

Money market mutual funds $1,216,447 $ 0 $ 0 $1,216,447

Total assets measured at fair value $1,216,447 $ 0 $ 0 $1,216,447

Capital Assets

Capital assets, which include buildings and improvements, furniture and equipment, vehicles, and other personal property, are reported in the general-purpose and specific purpose financial statements. Capital assets are defined by the corporation as assets with an individual cost of more than $5,000. Such assets are recorded at historical cost and are depreciated over the estimated useful lives of the assets, which range from three to twenty years, using the straight-line method of depreciation. Expenditures for additions, major renewals and betterments are capitalized, and maintenance and repairs are charged to expense as incurred. Donations of assets are recorded as direct additions to net assets at fair value at the date of donation, which is then treated as cost.

Note 2: Capital Assets Capital assets at August 31, 2019 were as follows:

Capital assets acquired with public funds received by the corporation for the operation for Evolution Academy, Inc. constitute public property pursuant to Chapter 12 of the Texas Education Code. These assets are specifically identified on the Schedule of Capital Assets for each individual charter school.

Note 3: Long-Term Debt

During the year ended August 31, 2011, the corporation issued revenue bonds in the aggregate amount of $6,040,000, designated Evolution Charter School, Inc. Series 2010A (the "Series 2010A, 2010B, 2010Q Bonds"). The proceeds of the bonds were used to finance and refinance the cost of certain land, building, facilities and improvements on the campus of Evolution Charter School in Richardson, Texas, and to pay certain cost of issuing such bonds. The bonds are secured by a pledge of all revenues and all amounts at any time deposited in the Construction Fund and by mortgage on the properties financed or refinanced from proceeds of the bonds, including all revenues thereon. The bonds are payable annually with the bond holder requiring monthly payments to a restricted account for the payment of principal and interest. The first

Buildings and Improvements 14,674,260$

Equipment 754,216

Vehicles 74,834

Software 149,685

Total property and equipment 15,652,995

Less: Accumulated Depreciation (3,392,564)

Property and equipment, net 12,260,431$



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payment was due August 31, 2011 and was interest only. The remainder principal is payable on August 1 of each year with interest payments required to be paid February 1 and August 1 of each year. The interest rate required through the year 2023 is 9.00% and 6.50% thereafter.

The capitalized bond issuance costs and the discount on the bonds as displayed as "Other Assets" on the statement of financial position are being amortized over the life of the bonds at a total of $ 1,423 per month. For the year ending August 31, 2019, a total of $ 17,081 was amortized with a charge to bond issuance expense. Long-term debt at August 31, 2019 consists of the following: Note payable to a bank, 9% interest, principal and interest $ 5,760,000 due monthly in installments of $44,643 commencing August 25, 2019. Final payment is due August 31, 2040.

The note is secured by a pledge of all revenues and by mortgage on the property financed or refinanced from proceeds of the bonds of the charter school. Less current portion of long-term debt 50,000 Total long-term debt $ 5,710,000

Future maturities of long-term debt at August 31, 2019 are as follows:

Capital Lease

The School entered a lease for their Houston facility in August 2013 with an original balance of $7,996,340 for 47 years with a fixed interest rate of 3.714% due in monthly installments of $30,000 principal and interest. Interest and principal payments are due as follows:

Current portion of Bond Payable

Year Ending

August 31, Principal Interest Total

2020 50,000 409,150 459,150

Bond Payable

Year Ending August 31,Principal Interest Total

2021 55,000 404,650 459,650

2022 60,000 399,700 459,700

2023 100,000 394,300 494,300

2024 100,000 387,800 487,800

2025-2029 640,000 1,624,575 2,264,575

2030-2034 1,310,000 987,675 2,297,675

2035-2039 1,790,000 503,425 2,293,425

2040 1,655,000 27,950 1,682,950

5,710,000$ 4,730,075$ 10,440,075$



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Note 4: Pension Plan Obligations

Plan Description

The charter school contributes to the Teacher Retirement System of Texas (TRS), a cost-sharing, multiple-employer defined benefit pension plan with one exception; all risks and costs are not shared by the charter school, but are the liability of the State of Texas. TRS administers retirement and disability annuities, and death and survivor benefits to employees and beneficiaries of employees of the public school systems of Texas. It operates primarily under the provisions of the Texas Constitution, Article XVI, Sec. 67, and Texas Government code, Title 8, Chapters 803 and 805, respectively. The Texas state legislature has the authority to establish and amend benefit provisions of the pension plan and may, under certain circumstances, grant special authority to the TRS Board of Trustees. TRS issues a publicly available financial report that includes financial statements and required supplementary information for the defined benefit plan. That report may be obtained by writing to the TRS Communications Department, 1000 Red River Street, Austin, Texas 78701 or by calling the TRS Communications Department at 1-800-223-8778, or by downloading the report from the TRS Internet website, www.trs.state.tx.us, under the TRS Publications Heading. Funding Policy Contribution requirements are not actuarially determined but are established and amended by the Texas state legislature. The state funding policy is as follows: (1) the state constitution requires the legislature to establish a member contribution rate of not less than 6.0% of the member’s annual compensation and a state contribution rate of not less than 6.0% and not more than 10% of the aggregate annual compensation of all members of the system; (2)A state statute prohibits benefit improvements or contribution reductions if, as a result of a particular action, the time required to amortize TRS’ unfunded actuarial liabilities would be increased to a period that exceeds 31 years, or, if the amortization period already exceeds 1 years, the period would be increased by such action. State law provides for a member contribution rate of 7.7% for fiscal year 2019, 2018 and 2017, and a state contribution rate of 6.8% for fiscal years 2019, 2018 and 2017. The charter school’s employees' contributions to the System for the year ending August 31, 2019 were $249,473, equal to the required contributions for the year. Other contributions made from federal and private grants and from the charter school for salaries above the statutory minimum for the year ending August 31, 2019 were $25,999, equal to the required contributions for the year.

Current Capital Lease Payable

Houston Facility Lease

Year Ending


2020 80,053 279,947 360,000

Capital Lease Payable

Houston Facility Lease

Year Ending


2021 83,077 276,923 360,000

2022 86,216 273,784 360,000

2023 89,473 270,527 360,000

2024 92,853 267,147 360,000

2025 - 2060 7,141,973 5,818,028 12,960,001

7,493,592 6,906,409 14,400,001



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Note 5: Health Care Coverage

During the year ended August 31, 2019, employees of the charter school were covered by a Health Insurance Plan (the Plan). The charter school contributed $405.67 per month per employee to the Plan. Employees, at their option, authorized payroll withholding to pay contributions or premiums for dependents. All premiums were paid to licensed insurers. Note 6: Deferred Revenue

Deferred revenue at August 31, 2019 consisted of the following:

Note 7: Net Assets with Donor Restrictions

Net Assets with Donor Restrictions for the years ending August 31, 2019 consisted of the following:

Note 8: Leases

The School leases seven copiers under non-cancelable operating leases that as of January 15, 2018 required monthly rental payments totaling $2,019.91. The lease term for the four copiers in Richardson is for four (4) years and expires September 2019 and required monthly rental payments totaling $1,032.36. The lease term for two other copiers in Spring is four (4) years and expires October 2019 and required monthly rental payments totaling $586.42. The lease term for the copier in Beaumont is four (4) years and expires January 2022 and required a monthly rental payment in the amount of $401.13. The School also leases a campus facility in Beaumont. The lease term for the Beaumont campus is renewable year to year. Future minimum payments under the non-cancelable operating leases as of August 31, 2019 are as follows:

Rental expense for all operating leases for the twelve months ended August 31, 2019 was $154,236.

Child Nutrition 8$

Title III, Part A 2,850

Title IV, Part A, Sub Part 1 43,890

Date Cycle 2 Year 1 10,101

Total 56,849$

Foundation School Program 1,129,007$

1,129,007$

2020 11,851

2021 11,851

2022 2,592

26,293$



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Note 9: Related Party Transactions

The corporation paid Cynergy Collaboration Consultants, Inc., a company owned by the spouse of the charter school’s CEO, $938,135 for the year ended August 31, 2019. Cynergy Collaboration provides janitorial and technology support services to the charter school and owns the facility of the Spring location. The building is a commercial property used as an administrative office and classroom campus I Spring, TX. The corporation pays $30,000 per month on a forty-seven year lease which began in August 2013.

Note 10: Commitments and Contingencies

The charter school receives funds through state and federal programs that are governed by various statutes and regulations. State program funding is based primarily on student attendance data submitted to the Texas Education Agency and is subject to audit and adjustment. Expenses charged to federal programs are subject to audit and adjustment by the grantor agency. The programs administered by the charter school have complex compliance requirements, and should state or federal auditors discover areas of noncompliance, the charter school funds may be subject to refund if so determined by the Texas Education Agency or the grantor agency. Note 11: Budgetary Variances

The budget to actual comparison revealed the following functions for which the variance is greater than ten percent:

Function 13 - The significant increase noted is due to EACS being awarded an additional Teacher Leadership Grant that covered FY18-19 and rolls into Fy19-20. The excess remaining amount in the budget represents the outstanding balance available for the current school year.

Function 51 - The variance noted is due to additional grant funds received from FEMA related to Hurricane Harvey and associated repairs.

Function 52 - Budgeted amounts for staff salaries were less than expected; however, the budget amount was not amended.

Function 53 - Support personnel for a position that was partially federally funded was not refilled until the end of the fiscal year.

Federal funds originally budgeted were not amended.

Function 61 - Title I funds budgeted for parental involvement activities via community services were not used but allocated elsewhere. However, the original budget allotment was not amended.

Note 12: Legal

None.

SUPPLEMENTARY INFORMATION


SCHEDULE OF ACTIVITIES FOR THE YEAR ENDED AUGUST 31, 2019

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Without Donor

Restrictions

With Donor

Restrictions Total

Revenues

Local support:

5740 Other Revenues from Local Sources 78,795$ -$ 78,795$

5750 Revenues from Cocurricular and Enterprising 112 - 112

Total local support 78,907 - 78,907


5810 Foundation School Program Act Revenues - 5,990,416 5,990,416

5820 State Program Revenues Distributed by

Texas Education Agency 66,611 66,611

Total state program revenues - 6,057,027 6,057,027

Federal program revenues:

5920 Federal Revenues Distributed by the Texas

Education Agency - 1,050,210 1,050,210

5930 MAC Program - 11,149 11,149

Total federal program revenues - 1,061,359 1,061,359

Net assets released from restrictions:

Restrictions satisfied by payments 6,709,825 (6,709,825) -

Total Revenues 6,788,732 408,561 7,197,293

Expenses

11 Instruction 2,554,124 - 2,554,124

13 Curriculum Development and Instructional 77,991 - 77,991

Staff Development

23 School Leadership 820,773 - 820,773

31 Guidance, Counseling & Evaluation Services 381,719 - 381,719

34 Student (Pupil Services) 123,608 - 123,608

35 Food Services 170,164 - 170,164

41 General Administration 395,878 - 395,878

51 Plant Maintenance and Operations 1,221,697 - 1,221,697

52 Security and Monitoring Services 111,045 - 111,045

53 Data Processing Services 93,944 - 93,944

61 Community Services 1,061 - 1,061

71 Debt Services 725,204 - 725,204

81 Fundraising 32,617 - 32,617

Total expenses 6,709,825 - 6,709,825

Change in net assets 78,907 408,561 487,468

Transfer-In - 25,128 25,128 Transfer-Out - (25,128) (25,128)

Net assets at beginning of year - 720,446 720,446

Net assets at end of year 78,907$ 1,129,007$ 1,207,914$


SCHEDULE OF EXPENDITURES FOR THE YEAR ENDED AUGUST 31, 2019

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Expenses

6100 Payroll Costs 3,485,156$

6200 Professional and Contracted Services # 1,533,125

6300 Supplies and Materials 319,086

6400 Other Operating Costs 647,254

6500 Debt 725,204

Total Expenditures 6,709,825$


SCHEDULE OF CAPITAL ASSETS FOR THE YEAR ENDED AUGUST 31, 2019

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Local State Federal

1110 Cash 1,861$ 836,525$ -$

1510 Land and Improvements - - -

1520 Buildings and Improvements - 14,600,462 73,798

1531 Vehicles - 74,834 -

1539 Furniture and Equipment - 754,216 -

1569 Software - 149,685 -

Total Capital Assets 1,861$ 16,415,722$ 73,798$

Ownership Interest


BUDGETARY COMPARISON SCHEDULE FOR THE YEAR ENDED AUGUST 31, 2019


Actual Variance from

Original Final Amounts Final Budget

Revenues

Local support:

5740 Other Revenues from Local Sources -$ -$ 78,795$ 78,795$

5750 Revenues from Cocurricular and Enterprising - - 112 112

Total local support - - 78,907 78,907


5810 Foundation School Program Act Revenues 5,718,187 5,718,187 5,990,416 272,229

5820 State Program Revenues Distributed

Texas Education Agency - - 66,611 66,611

Total state program revenues 5,718,187 5,718,187 6,057,027 338,840

Federal program revenues:

5920 Federal Revenues Distributed by the Texas

Education Agency 808,111 904,154 1,050,210 146,056

5930 MAC Program - - 11,149 11,149

Total federal program revenues 808,111 904,154 1,061,359 157,205

Total Revenues 6,526,298 6,622,341 7,197,293 574,952

Expenses

11 Instruction 2,611,623 2,597,806 2,554,124 (43,682)

13 Curriculum Development and Instructional 85,100 131,935 77,991 (53,944)

Staff Development

23 School Leadership 737,394 826,383 820,773 (5,610)

31 Guidance, Counseling and Evaluation 378,016 366,900 381,719 14,819

Services

34 Student (Pupil Services) 137,403 129,903 123,608 (6,295)

35 Food Services 172,167 171,366 170,164 (1,202)

41 General Administration 529,460 427,757 395,878 (31,879)

51 Plant Maintenance and Operations 977,900 977,900 1,221,697 243,797

52 Security and Monitoring Services 126,762 126,762 111,045 (15,717)

53 Data Processing Services 92,175 109,650 93,944 (15,706)

61 Community Services 4,000 4,000 1,061 (2,939)

71 Debt Services 711,700 711,700 725,204 13,504

81 Fund Raising - 33,000 32,617 (383)

Total expenses 6,563,700 6,615,062 6,709,825 94,763

Change in net assets (37,402) 7,279 487,468 480,189

Transfer-In - - 25,128 25,128

Transfer-Out - - (25,128) (25,128)

Net assets at beginning of year 720,446 720,446 720,446 -

Net assets at end of year 683,044$ 727,725$ 1,207,914$ 480,189$

Budgeted Amounts

OVERALL COMPLIANCE AND INTERNAL CONTROLS

Mitchell T. Fontenote Certified public accountant, Inc.

2428 Nall Street • Port Neches, Texas 77651

Phone (409) 722-6300 • Fax (409) 722-6301

[email protected]

January 27, 2020

INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL

REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF

FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENTAL

AUDITING STANDARDS

Board of Directors Evolution Academy Charter School Richardson, Texas

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 Evolution Academy Charter School (“the Academy”) (a nonprofit organization), which comprise the statement of financial position as of August 31, 2019, and the related statements of activities and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated January 27, 2020.

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered The 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 opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of The Academy’s internal control. Accordingly, we do not express an opinion on the effectiveness of The 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.

Board of Directors Evolution Academy Charter School, Inc. Richardson, Texas January 27, 2020

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Compliance and Other Matters

As part of obtaining reasonable assurance about whether The 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 Academy’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 Academy’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Mitchell T Fontenote CPA, Inc.


SCHEDULE FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED AUGUST 31, 2019

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Summary of Auditor's Results

Type of Report of Financial Statements Unqualified

Internal Control over Financial Reporting:

Material weakness(es) identified? No

Noncompliance which is material to the basic

financial statements: None Reported

Internal Control over Major Programs:

Material weakness(es) identified? No

Reportable condition(s) identified are

not considered to be material weakness(es)? None Reported

Noncompliance which is material to the basic

financial statements: None

Type of report on compliance with major programs: Unqualified

Findings and Questioned costs for federal

awards as defined in Uniform Guidance None

Dollar threshold considered between Type A

and Type B Federal Programs $750,000

Low Risk auditee statements The District was classified as a

low-risk auditee in the context

of Uniform Guidance

Major Federal Programs 84.010A Title I - Improving Basic Programs

Findings relating to the financial statements which are

required to be reported in accordance with Generally

Accepted Accounting Principles (GAAP) None

Findings and Questioned Costs for federal and state awards None


SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED AUGUST 31, 2019

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Data Federal Grantor/ Federal Pass-Through

Control Pass-Through Grantor/ CFDA Entity Identifying Federal

Codes Program Title Number Number Expenditures

U.S. DEPARTMENT OF EDUCATION

Pass Through Texas Education Agency:

211 Title I, Part A - Improving Basics Programs 84.010A S010A180043 168,711$

211 Teacher Leadership Grant Program 84.010A S010A180043 25,496$

211 Title I, Priority & Focus 84.010A S010A180043 375,000$

224 IDEA B Formula 84.027A H027A180008 104,828$

255 Title II, Part A - Supporting Effective Instruction 84.367A S367A180041 21,188$

289 Title IV, Part A, Sub Part 1 84.424A S424A180045 9,357$

Pass Through Other than Texas Education Agency:

263 Title III, Part A 84.365 2,850$

Total U.S. Department of Education 707,430$

U.S. DEPARTMENT OF AGRICULTURE


240 School Breakfast Program* 10.553 71401201 66,754$

240 National School Lunch Program* 10.555 71301101 49,871$

Total U.S. Department of Agriculture 116,625$

FEDERAL EMERGENCY MANAGEMENT ADMINISTRATION

Pass Through Texas Division of Emergency Management:

289 Public Assistance Grant 97.036 4332DRTXP000001 226,155$


420 Disaster Aid Assistance Grant 76,970$

Total Federal Emergency Management Administration 303,125$

Medicaid Administration Claiming Program 11,149$

TOTAL EXPENDITURES OF FEDERAL EXPENDITURES 1,138,329$


NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED AUGUST 31, 2019

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Note 1: Standard of Financial Accounting System For all federal programs, the corporation used the net asset classes and codes specified by the Texas Education Agency in the Module 3: Charter Schools – Financial Accounting and Reporting Non-profit Chart of Accounts, Nonprofit Charter Schools Chart of Accounts, Temporarily restricted net assets codes are used to account for resources restricted to or designated for specific purposes by a grantor. Federal and state financial assistance is generally accounted for in temporarily restricted net asset codes.

audit report 2018-2019 - evolution fs 2019

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