Frederick Douglass International Academy
Financial Statements
June 30, 2016
Table of Contents
Page
Section
1
Members of the Board of Directors and Administration
1-1
2
Independent Auditors’ Report
2-1
3
Management’s Discussion and Analysis
3-1
4
Basic Financial Statements
Academy-wide Financial Statements
Statement of Net Position
Statement of Activities
Fund Financial Statements
Governmental Funds
Balance Sheet
Reconciliation of the Balance Sheet of
Governmental Funds to the Statement of Net Position
Statement of Revenues, Expenditures and Changes in Fund Balances
Reconciliation of the Statement of Revenues, Expenditures and
Changes in Fund Balances of Governmental Funds to the Statement of Activities
Notes to the Financial Statements
5
6
4-1
4-2
4-3
4-4
4-5
4-6
4-7
Required Supplementary Information
Budgetary Comparison Schedule – General Fund
5–1
Budgetary Comparison Schedule – Food Service Fund
5-3
Other Supplementary Information
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
6–1
Schedule of Findings and Responses
6–3
Corrective Action Plan
6–4
Frederick Douglass International Academy
Members of the Board of Directors and Administration
June 30, 2016
Members of the Board of Directors
Gregory Vishey – President
Virginia Skrzyniarz – Vice President
Margaret Mulik – Secretary
Gary Shermetaro – Treasurer
Administration
Rashid Faisal, Principal
1-1
Independent Auditors’ Report
Management and the Board of Directors
Frederick Douglass International Academy
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities and each major fund of the Frederick Douglass International
Academy, as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the Frederick
Douglass 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.
Auditors’ 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 auditors’ 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 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 and each major fund of the Frederick Douglass International Academy, as of June 30, 2016, and the respective changes in financial
position, for the year then ended in accordance with accounting principles generally accepted in the United States of America.
2-1
Adoption of New Accounting Standards
As described in Note 1 to the financial statements, during the year ended June 30, 2016, the Academy adopted GASB Statements No. 72, 76, Fair
Value Measurement and Application and The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments,
respectively. Our opinions are not modified with respect to this matter.
Emphasis of a Matter
The Academy has an accumulated unassigned deficit in the General Fund of $84,116 as of June 30, 2016, which has resulted from an operating
deficit. Our opinions are not modified with respect to this matter.
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, as identified in the table of contents, 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 Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated October 14, 2016 on our consideration of the Frederick
Douglass 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 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 Frederick
Douglass International Academy’s internal control over financial reporting and compliance.
Auburn Hills, MI
October 14, 2016
2-2
MANAGEMENT’S DISCUSSION AND ANALYSIS
Frederick Douglass International Academy
Management’s Discussion and Analysis
Year Ended June 30, 2016
Academy –Wide Financial Statements
This financial report is presented in the format required by the
Governmental Accounting Standards Board (GASB). The overall
organization of this report is shown in Figure A-1.
The Academy-wide statements provide a perspective of the Academy
as a whole. These statements use the full accrual basis of accounting
similar to private sector companies. There are two Academy-wide
statements: The Statement of Net Position and the Statement of
Activities.
Figure A-1
Academy of International Studies
Organization of Annual Financial Report
Management’s
Discussion and
Analysis
Section 3
Basic Financial
Statements
School-Wide
Financial
Statements
Page 4-1
Fund Financial
Statements
Summary
Section 4
Page 4-3
The Statement of Net Position (page 4-1) combines and consolidates
the governmental funds’ current financial resources (short-term
spendable resources) with capital assets and long-term obligations,
regardless of whether they are currently available or not.
Required
Supplementary
Information
Section 5
Consistent with the full accrual basis method of accounting, the
Statement of Activities (page 4-2) accounts for current year revenues
and expenses regardless of when cash is received or paid. The intent
of this statement is to summarize and simplify the user’s analysis of
the costs of various Academy services.
Notes to the
Financial
Statements
Page 4-8
When analyzed together, the two statements help the reader
determine whether the Academy is financially stronger or weaker as a
result of the year’s activities.
Fund Financial Statements
Detail
The fund financial statements focus on individual parts of the
Academy, reporting the Academy’s operation in more detail than the
Academy-wide statements. The fund level statements are reported
on a modified accrual basis. Only those assets that are “measurable”
and “currently available” are reported. Liabilities are recognized to the
extent they are normally expected to be paid with current financial
resources.
3-1
Frederick Douglass International Academy
Management’s Discussion and Analysis
Year Ended June 30, 2016
The fund statements are formatted to comply with the legal
requirements of the Michigan Department of Education’s Public
School Accounting Manual. In the State of Michigan, the School’s
major instructional and instructional support activities are reported in
the General Fund. Additional activities are reported in their relevant
funds.
Statement of Net Position from Operating Results
Governmental
Activities 2016
Revenues
Program revenues
Food services
Operating grants and contributions
General revenues
State foundation allowance
Interest and investment earnings
Other
Total revenues
Financial Analysis of the Academy as a Whole
Summary of Net Position
Governmental
Activities
June 30, 2016
Assets
Current assets
$
Liabilities
Current Liabilities
Long-term Liabilities
Total Liabilities
227,058
33,576
260,634
$
(117,692)
50,170
189,618
524,909
60,895
825,592
Expenses
Instruction
Supporting services
Food services
Total expenses
142,942
Decrease in net position
Net Position
Unrestricted (deficit)
$
350,334
541,369
51,581
943,284
$
(117,692)
The Academy’s General Fund
The Academy decreased the fund balance by $84,116.
The net position for the Academy decreased $30,704 during the 201516 school year. The Statement of Net Position from Operating
Results (below) shows the details of this change.
The Academy’s actual general fund revenues were less than the
revised budget by $80,446 a variance of 10%.
The Academy’s actual general fund expenditures were greater than
the revised budget by $45,891 a variance of 5%.
3-2
Frederick Douglass International Academy
Management’s Discussion and Analysis
Year Ended June 30, 2016
General Fund Revenues
Foundation Allowance
Eighty-eight percent of the Academy’s revenues are received from
state sources. The net state foundation grant is based on two
variables:
Total Revenues Revised Budget
Total Revenues Original Budget
1. The State of Michigan State Aid Act per student foundation
allowance
2. Student enrollment calculated by blending 90 percent of the
current year’s fall count and 10 percent of the prior year’s
winter count.
2015-16
855,868
1,117,650
$ (261,782)
$
The change reflects adjustments to revenues.
General Fund Expenditures
Total Expenditures Revised Budget
Total Expenditures Original Budget
Annually, the State of Michigan establishes the per student foundation
allowance. Frederick Douglass International Academy’s foundation
allowance for 2015-16 was $7,391 per student.
2015-16
853,004
1,109,377
$ (256,373)
$
The 2015-2016 School Year was the first year of operation for
Frederick Douglass International Academy (FDIA). Like most new
school openings, this was a year in which a large focus was on
establishing the brand and culture of the Academy in the community.
This first year, FDIA was able to service 71 elementary students and
16 Pre-school students. We held true to the mission to provide a
challenging and differentiated learning experience to student. During
the 2016-2017 school year FDIA will be expanding the scope of the
education program even further to include more technology in each
room.
Capital Assets
The Academy did not have any capital assets as of June 30, 2016.
Long-Term Debt
The Academy did not have any long-term obligations during the 201516 school year.
Original versus Revised Budget
During the first year of operation, the Academy budget must utilize the
available funds to first align with the educational portion of the mission
while establishing the brand and culture of the school then funds can
be made available to further enrich the program. This is an obstacle
that occurs with many start-up school where a new program
generates low enrollment and consequentially challenging financial
planning. Since FDIA has now made its impression on the community
as a morality based educational program in a safe environment where
college readiness is stressed even at the elementary level, we
The Uniform Budget Act of the State of Michigan requires that a local
Board of Education approve the original budget for the upcoming
fiscal year prior to July 1, the start of the fiscal year. The budget for
2016 was approved on July 9, 2015 and amended on May 19, 2016.
3-3
Frederick Douglass International Academy
Management’s Discussion and Analysis
Year Ended June 30, 2016
anticipate that our student body will grow substantially over the next
few years. The increased enrollment will provide additional funding
for the investment in technology resources to expand upon the
mission of delivering a superior educational experience to the
students.
Requests for Information
This financial report is designed to give our citizens, taxpayers,
parents, students, investors and creditors with a general overview of
the Academy’s finances and to demonstrate the Academy’s
accountability for the money it receives. If you have questions about
this report or need additional information, we welcome you to contact
the business office (248) 953-2003 at 21700 Marlow St., Oak Park, MI
48237.
Economic Factors and Next Year’s Budget and
Rates
The Academy’s administration and Board of Directors consider many
factors in the budget process. One of the most important factors
affecting the budget is student enrollment. The state foundation
revenue is determined by multiplying the blended student count by the
foundation allowance per pupil. The Academy’s funding is heavily
dependent on the State’s ability to fund local school operations. Once
the final student count and related per pupil funding is validated, state
law requires the Academy to amend the budget if actual Academy
resources are not sufficient to fund original appropriations.
Under State Law, the Academy cannot assess property taxes to fund
general operations. As a result, the Academy revenue heavily
depended on State funding and the health of the State’s School Aid
Fund, the actual revenue received depends on the State’s ability to
collect revenues to fund its appropriation to school districts. The state
periodically holds a revenue estimating conference to forecast
revenues.
3-4
BASIC FINANCIAL STATEMENTS
Frederick Douglass International Academy
Statement of Net Position
June 30, 2016
Governmental
Activities
Assets
Cash
Accounts receivable
$
4,734
138,208
142,942
Total assets
Liabilities
Accounts payable
Accrued expenditures
Noncurrent liabilities
Due within one year
Due in more than one year
189,884
37,174
10,069
23,507
260,634
Total liabilities
Net Position
Unrestricted (deficit)
$
See Accompanying Notes to the Financial Statements
4-1
(117,692)
Frederick Douglass International Academy
Statement of Activities
For the Year Ended June 30, 2016
Program Revenues
Expenses
Functions/Programs
Governmental activities
Instruction
Supporting services
Food services
Total governmental activities
Charges for
Services
Operating
Grants and
Contributions
Net (Expense)
Revenue and
Changes in
Net Position
$
$
350,334
541,369
51,581
$
50,170
$
189,618
-
$
943,284
$
50,170
$
189,618
(160,716)
(541,369)
(1,411)
(703,496)
General revenues
State aid - unrestricted
Other
Contributions
524,909
895
60,000
Total general revenues
585,804
Change in net position
(117,692)
-
Net position - beginning
Net position - ending
See Accompanying Notes to the Financial Statements
4-2
$
(117,692)
Frederick Douglass International Academy
Governmental Funds
Balance Sheet
June 30, 2016
General
Fund
Assets
Cash
Accounts receivable
Due from other funds
Total assets
Liabilities
Accounts payable
Due to other funds
Accrued expenditures
$
4,734
138,208
-
$
16,870
$
4,734
138,208
16,870
$
142,942
$
16,870
$
159,812
$
173,014
16,870
37,174
$
16,870
-
$
189,884
16,870
37,174
Total liabilities
Fund Balance
Unassigned (deficit)
Total liabilities and fund balance
Total
Food Service Governmental
Fund
Funds
$
See Accompanying Notes to the Financial Statements
4-3
227,058
16,870
243,928
(84,116)
-
(84,116)
142,942
$
16,870
$
159,812
Frederick Douglass International Academy
Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position
June 30, 2016
Total fund balances for governmental funds
$
(84,116)
Total net position for governmental activities in the statement of net position is different because:
Long-term liabilities applicable to governmental activities are not due and payable in the current period and accordingly
are not reported as fund liabilities.
Capital lease payable
(33,576)
$
Net position of governmental activities
See Accompanying Notes to the Financial Statements
4-4
(117,692)
Frederick Douglass International Academy
Governmental Funds
Statement of Revenues, Expenditures and Changes in Fund Balances
For the Year Ended June 30, 2016
General
Fund
Revenues
Local sources
State sources
Federal sources
$
Total revenues
Expenditures
Current
Education
Instruction
Supporting services
Food services
Capital outlay
Total expenditures
Excess (deficiency) of
revenues over expenditures
Other Financing Sources (Uses)
Proceeds from capital lease
Transfers in
Transfers out
Total other financing sources (uses)
Net change in fund balance
Fund balance - beginning
$
Fund balance (deficit) - ending
See Accompanying Notes to the Financial Statements
4-5
60,895
683,320
31,207
Total
Food Service Governmental
Fund
Funds
$
50,170
$
60,895
683,320
81,377
775,422
50,170
825,592
299,490
541,369
58,036
51,581
-
299,490
541,369
51,581
58,036
898,895
51,581
950,476
(123,473)
(1,411)
(124,884)
40,768
(1,411)
1,411
-
40,768
1,411
(1,411)
39,357
1,411
40,768
(84,116)
-
(84,116)
-
-
-
(84,116) $
-
$
(84,116)
Frederick Douglass International Academy
Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances
of Governmental Funds to the Statement of Activities
For the Year Ended June 30, 2016
Net change in fund balances - Total governmental funds
$
(84,116)
Total change in net position reported for governmental activities in the statement of activities
is different because:
Bond and note proceeds and capital leases are reported as financing sources in the governmental funds and thus contribute
to the change in fund balance. In the statement of net position, however, issuing debt increases long-term liabilities and does
not affect the statement of activities. Similarly, repayment of principal is an expenditure in the governmental funds but reduces
the liability in the statement of net position. Also, governmental funds report the effect of premiums, discounts and similar
items when debt is first issued, whereas these amounts are recorded as liabilities and amortized in the statement of
activities. When debt refunding occurs, the difference in the carrying value of the refunding debt and the amount applied to the
new debt is reported the same as regular debt proceeds or repayments, as financing source or expenditure in the governmental
funds. However, in the statement of net position, debt refunding may result in deferred inflows of resources or deferred outflows
of resources, which are then amortized in the statement of activities.
Debt issued
Repayments of long-term debt
Change in net position of governmental activities
See Accompanying Notes to the Financial Statements
4-6
(40,768)
7,192
$
(117,692)
Frederick Douglass International Academy
Notes to the Financial Statements
June 30, 2016
Academy-wide Financial Statements
The Academy’s basic financial statements include both Academywide (reporting for the Academy as a whole) and fund financial
statements (reporting the Academy’s major funds). The Academy–
wide financial statements categorize all nonfiduciary activities as
either governmental or business type. All of the Academy’s activities
are classified as governmental activities.
Note 1 – Summary of Significant Accounting Policies
The accounting policies of the Frederick Douglass International
Academy (Academy) conform to accounting principles generally
accepted in the United States of America as applicable to
governmental units. The following is a summary of the Academy’s
significant accounting policies:
The statement of net position presents governmental activities on a
consolidated basis, using the economic resources measurement
focus and accrual basis of accounting. This method recognizes all
long-term assets and receivables as well as long-term debt and
obligations. The Academy’s net position is reported in three parts (1)
net investment in capital assets, (2) restricted net position, and (3)
unrestricted net position. The Academy first utilizes restricted
resources to finance qualifying activities.
Reporting Entity
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 financial relationships that determine
which of the governmental organizations are a part of the Academy’s
reporting entity, and which organizations are legally separate
component units of the Academy. The Academy has no component
units.
The statement of activities reports both the gross and net cost of
each of the Academy’s functions. The functions are also supported
by general government revenues (property taxes and certain
intergovernmental revenues). The statement of activities reduces
gross expenses (including depreciation) by related program
revenues, operating and capital grants. Program revenues must be
directly associated with the function. Operating grants include
operating-specific and discretionary (either operating or capital)
grants.
The Academy was formed as a charter 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 has entered into a contract with Ferris State University
(FSU) to charter a public school academy through June 30, 2019. 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. FSU 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 FSU three
percent of the state aid foundation as administrative fees. The total
administrative fees for the year to FSU was approximately $15,747.
The net costs (by function) are normally covered by general revenue
(state sources and federal sources, interest income, etc.). The
Academy does not allocate indirect costs. In creating the Academywide financial statements the Academy has eliminated interfund
transactions.
The Academy-wide focus is on the sustainability of the Academy as
an entity and the change in the Academy’s net position resulting from
current year activities.
4-7
Frederick Douglass International Academy
Notes to the Financial Statements
June 30, 2016
Assets, Liabilities and Net Position or Equity
Receivables and Payables – Generally, outstanding amounts owed
between funds are classified as “due from/to other funds”. These
amounts are caused by transferring revenues and expenses between
funds to get them into the proper reporting fund. These balances are
paid back as cash flow permits.
Fund Financial Statements
Separate financial statements are provided for governmental funds.
Major individual governmental funds are reported as separate columns
in the fund financial statements.
Governmental fund financial statements are reported using the current
financial resources measurement focus and the modified accrual basis
of accounting.
Revenue is recognized as soon as it is both
measurable and available. Revenue is considered to be available if it
is collected 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 60 days
of the end of the current fiscal period. Expenditures generally are
recorded when a liability is incurred, as under accrual accounting.
However, debt service expenditures, as well as expenditures related to
compensated absences and claims and judgments, are recorded only
when payment is due.
All trade and property tax receivables are shown net of an allowance
for uncollectible amounts. The Academy considers all accounts
receivable to be fully collectible; accordingly, no allowance for
uncollectible amounts is recorded.
Capital Assets – Purchased or constructed capital assets are
reported at cost or estimated historical cost. Donated capital assets
are recorded at their estimated fair market value at the date of
donation. The Academy defines capital assets as assets with an
initial individual cost in excess of $1,000. Costs of normal repair and
maintenance that do not add to the value or materially extend asset
lives are not capitalized. The Academy does not have infrastructure
assets. Equipment is depreciated using the straight-line method over
5 years. The Academy does not have any capital assets as June 30,
2016.
Unrestricted state aid, intergovernmental grants, and interest
associated with the current fiscal period are all considered to be
susceptible to accrual and so have been recognized as revenue of the
current fiscal period.
The Academy reports the following major governmental funds:
Fund Equity – In the fund financial statements, governmental funds
report fund balance in the following categories:
General Fund – The General Fund is used to record the general
operations of the Academy pertaining to education and those
operations not required to be provided for in other funds.
Non-spendable – amounts that are not available in a
spendable form.
Special Revenue Funds – Special Revenue Funds are used to
account for the proceeds of specific revenue sources that are
restricted to expenditures for specified purposes. The Academy’s
Special Revenue Funds include the Food Service Fund. Operating
deficits generated by these activities are generally transferred from
the General Fund.
Restricted – amounts that are legally imposed or otherwise
required by external parties to be used for a specific purpose.
Committed – amounts that have been formally set aside by
the Board of Directors for specific purposes. A fund balance
commitment may be established, modified, or rescinded by a
resolution of the board of education.
4-8
Frederick Douglass International Academy
Notes to the Financial Statements
June 30, 2016
Assigned – amounts intended to be used for specific purposes,
as determined the board of directors. Residual amounts in
governmental funds other than the general fund are
automatically assigned by their nature.
Adoption of New Accounting Standards
The Governmental Accounting Standards Board (“The GASB”) has
issued Statement No. 72 Fair Value Measurements and Applications.
Statement 72 provides guidance for accounting and financial
reporting issues related to fair value measurement. This Statement
provides guidance for determining a fair value measurement for
financial reporting purposes. This Statement also provides guidance
for applying fair value to certain investments and disclosures related
to all fair value measurements. The guidance establishes a three
level hierarchy of inputs for valuation of fair value. Statement 72 is
effective for the year ending June 30, 2016. The Academy is
evaluating the impact GASB 72 will have on its financial reporting.
Unassigned – all other resources; the remaining fund balances
after
non-spendable,
restrictions,
commitments
and
assignments.
When an expenditure is incurred for purposes for which both restricted
and unrestricted fund balance is available, the Academy’s policy is to
consider.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities, as well as deferred inflows and deferred outflows
of resources at the date of the financial statements and the reported
amounts of revenue and expenditures during the reporting period.
Actual results could differ from those estimates.
GASB No. 76, The Hierarchy of Generally Accepted Accounting
Principles for State and Local Governments. The objective of this
Statement is to identify the hierarchy of generally accepted
accounting principles (GAAP). The “GAAP hierarchy” consists of the
sources of accounting principles used to prepare financial statements
of state and local governmental entities in conformity with GAAP and
the framework for selecting those principles. This Statement reduces
the GAAP hierarchy to two categories of authoritative GAAP and
addresses the use of authoritative and nonauthoritative literature in
the event that the accounting treatment for a transaction or other
event is not specified within a source of authoritative GAAP. This
Statement supersedes Statement No. 55, The Hierarchy of Generally
Accepted Accounting Principles for State and Local Governments.
Statement 76 is effective for the year ending June 30, 2016.
Eliminations and Reclassifications
In the process of aggregating data for the statement of net position and
the statement of activities, some amounts reported as Interfund activity
and balances in the funds were eliminated or reclassified. Interfund
receivables and payables were eliminated to minimize the “grossing
up” effect on assets and liabilities within the governmental activities
column.
Upcoming Accounting and Reporting Changes
GASB Statement No. 77, Tax Abatement Disclosures requires
disclosure of tax abatement information about (1) a reporting
government’s own tax abatement agreements and (2) those that are
entered into by other governments and that reduce the reporting
government’s tax revenues. The requirements of this Statement are
effective for the fiscal year ending June 30, 2017.
When an expenditure is incurred for purposes for which committed,
assigned, or unassigned amounts could be used, the Academy’s policy
is to consider the funds to be spent in the following order: (1)
committed, (2) assigned, (3) unassigned.
4-9
Frederick Douglass International Academy
Notes to the Financial Statements
June 30, 2016
GASB Statement No. 80, Blending Requirements for Certain
Component Units—an amendment of GASB Statement No. 14
amends the blending requirements for the financial statement
presentation of component units of all state and local governments.
The additional criterion requires blending of a component unit
incorporated as a not-for-profit corporation in which the primary
government is the sole corporate member. The requirements of this
Statement are effective for the fiscal year ending June 30, 2017.
The Principal is authorized to transfer budgeted amounts between
functions within any fund; however, any revisions that alter the total
expenditures of any fund must be approved by the Board of
Directors.
GASB Statement No. 81, Irrevocable Split-Interest Agreements. The
objective of this Statement is to improve accounting and financial
reporting for irrevocable split-interest agreements by providing
recognition and measurement guidance for situations in which a
government is a beneficiary of the agreement. Statement No. 81 is
effective for the fiscal year ending June 30, 2018.
Fund Deficit
The Academy has an accumulated fund balance deficit in the
General Fund in the amount of $84,116 as of June 30, 2016.
Budgeted amounts are as originally adopted or as amended by the
Board of Directors throughout the year. Individual amendments were
not material in relation to the original appropriations.
Academy-Wide Deficit
The Academy has an unrestricted net position deficit for AcademyWide activities in the amount of $117,692 as of June 30, 2016.
The Academy is evaluating the impact that the above GASBs will have
on its financial reporting.
Excess of Expenditures over Appropriations
Note 2 – Stewardship, Compliance, and Accountability
During the year, the Academy incurred expenditures in certain
budgetary funds which were in excess of the amounts appropriated,
as follows:
Budgetary Information
Annual budgets are adopted on a basis consistent with accounting
principles generally accepted in the United States of America and state
law for the General and Special Revenue Funds.
All annual
appropriations lapse at fiscal year end, thereby canceling all
encumbrances.
These appropriations are reestablished at the
beginning of the year.
Final
Budget
Function
General Fund
General administration
Capital outlay
Transfers out
Food Service Fund
Food services
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. The Academy is not considered in violation of the law
if reasonable procedures are in use by the Academy to detect
violations.
4 - 10
$
34,838
47,000
Amount of
Expenditures
$
95,376
58,036
1,411
51,581
Budget
Variances
$
60,538
58,036
1,411
4,581
Frederick Douglass International Academy
Notes to the Financial Statements
June 30, 2016
Note 3 – Deposits and Investments
Note 4 – Interfund Receivable and Payable and Transfers
The Academy’s deposits and investments were reported in the basic
financial statements in the following categories:
Governmental
Activities
Individual interfund receivable and payable balances at year end
were:
Cash
$
Due From Fund
4,734
General fund
Due to Fund
Food service fund
Amount
$
16,870
Interest rate risk – The Academy does not have a formal investment
policy to manage its exposure to fair value losses arising from changes
in interest rates.
The outstanding balances between funds result mainly from the time
lag between the dates that transactions are recorded in the
accounting system and payments between funds are made.
Credit risk – State statutes authorize the Academy to make deposits in
the accounts of federally insured banks, credit unions, and savings and
loan associations that have an office in Michigan; the Academy is
allowed to invest in U.S. Treasury or Agency obligations, U.S.
government repurchase agreements, bankers’ acceptances,
commercial paper rated prime at the time of purchase that matures not
more than 270 days after the date of purchase, mutual funds, and
investment pools that are composed of authorized investment vehicles.
The Academy has no investment policy that would further limit its
investment choices.
Management does not anticipate individual interfund balances to
remain outstanding for periods in excess of one year.
Transfers of $1,411 were made from the General fund to cover the
deficit in the Food Service Fund.
Concentration of credit risk – The Academy has no policy that would
limit the amount that may be invested with any one issuer.
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. The Academy does not have a deposit policy for
custodial credit risk. As of year-end, the Academy’s bank balance was
fully insured.
4 - 11
Frederick Douglass International Academy
Notes to the Financial Statements
June 30, 2016
Note 5 – Leases
Note 6 – Long-Term Debt
Capital Lease
The Academy has a capital lease for furniture. The future minimum
payments are as follows:
The Academy issues notes and other contractual commitments to
provide for the acquisition and construction of major capital facilities
and the acquisition of certain equipment.
Year ending June 30,
2017
2018
2019
$
Long-term obligation activity summarized as follows:
15,012
15,012
12,510
Amount Due
Beginning
Additions
Balance
Total minimum lease payments
Less amount representing interest
Present value of minimum lease payments
$
42,534
8,958
Capital lease
33,576
Note 7 – Contingent Liabilities
Operating Leases
As described in note 7, the Academy leases their premises from
Harper Global Enterprises (HGE) under an operating lease that
expires June 2018. The Academy is also operating under a lease
agreement for a copier. The lease agreement expires September
2017. The future minimum payments under these leases are as
follows:
$
273,444
309,861
Total
$
583,305
-
$
40,768
$
7,192
$
Within One
Balance
Year
33,576
$
10,069
Amounts received or receivable from grantor agencies are subjected
to audit and adjustment by grantor agencies, principally the federal
government. Any disallowed claims, including amounts already
collected, may constitute a liability of the applicable funds. The
amount, if any, of costs which may be disallowed by the grantor
cannot be determined at this time, although the Academy expects
such amounts, if any, to be immaterial.
In regards to the furniture, assets totaling $40,768 were expensed
because they did not meet the capitalization threshold.
Year ending June 30,
2017
2018
$
Reductions
Ending
Note 8 – Management Company
The Academy has a management agreement with Hanley Harper
Group (HHG). Under the terms of this agreement, HHG provides a
variety of services including management, curriculums, education
programs and teacher training. The Academy is obligated to pay
HHG ten percent of its applicable revenues from federal and state
governments. The total charged for these services amounted to
approximately $60,000 for the year ended June 30, 2016. There is a
balance due to HHG of $60,708 as of June 30, 2016.
The Academy currently leases their premises on a three-year lease
with Harper Global Enterprise, LLC, (HGE), which will end on June
4 - 12
Frederick Douglass International Academy
Notes to the Financial Statements
June 30, 2016
30, 2018. HGE is owned by the President of Hanley Harper Group.
The amount paid during fiscal year 2015-16 accumulated to $145,150.
Note 9 – Risk Management
The Academy is exposed to various risks of loss related to property
loss, torts, errors and omissions. The Academy has purchased
commercial insurance for general liability and property. Settled claims
relating to the commercial insurance have not exceeded the amount of
insurance coverage in the past year.
4 - 13
REQUIRED SUPPLEMENTARY INFORMATION
Frederick Douglass International Academy
Required Supplementary Information
Budgetary Comparison Schedule - General Fund
For the Year Ended June 30, 2016
Budgeted Amounts
Original
Revenues
Local sources
State sources
Federal sources
$
Total revenues
Expenditures
Instruction
Basic programs
Added needs
Supporting services
Pupil
Instructional staff
General administration
School administration
Business
Operations and maintenance
Pupil transportation services
Central
Capital outlay
Total expenditures
Excess (deficiency) of revenues
over expenditures
5-1
1,500
1,111,650
4,500
Final
$
114,000
692,307
49,561
Over
(Under)
Budget
Actual
$
60,895
683,320
31,207
$
(53,105)
(8,987)
(18,354)
1,117,650
855,868
775,422
(80,446)
320,256
88,302
266,388
70,852
230,868
68,622
(35,520)
(2,230)
38,742
4,500
159,521
155,345
940
304,885
36,886
-
13,440
15,844
34,838
145,968
925
227,939
51,362
25,448
-
9,828
12,456
95,376
138,373
798
212,538
49,975
22,025
58,036
(3,612)
(3,388)
60,538
(7,595)
(127)
(15,401)
(1,387)
(3,423)
58,036
1,109,377
853,004
898,895
45,891
8,273
2,864
(123,473)
(126,337)
Frederick Douglass International Academy
Required Supplementary Information
Budgetary Comparison Schedule - General Fund
For the Year Ended June 30, 2016
Budgeted Amounts
Original
Other Financing Sources (Uses)
Proceeds from capital lease
Transfers out
$
Total other financing sources (uses)
Net change in fund balance
Fund balance - beginning
$
Fund balance (deficit) - ending
5-2
Final
Over
(Under)
Budget
Actual
$
(5,000)
-
(5,000)
40,768 $
(1,411)
40,768
(1,411)
-
39,357
39,357
3,273
2,864
(84,116)
(86,980)
-
-
-
-
3,273
$
2,864
$
$
(84,116) $
(86,980)
Frederick Douglass International Academy
Required Supplementary Information
Budgetary Comparison Schedule - Food Service Fund
For the Year Ended June 30, 2016
Budgeted Amounts
Original
Revenues
Federal sources
$
Expenditures
Current
Education
Food services
Excess (deficiency) of
revenues over expenditures
Other Financing Sources (Uses)
Transfers in
Net change in fund balance
Fund balance - beginning
$
Fund balance - ending
5-3
56,750
Final
$
Over
(Under)
Budget
Actual
47,000
$
50,170
$
3,170
61,750
47,000
51,581
4,581
(5,000)
-
(1,411)
(1,411)
5,000
-
1,411
1,411
-
-
-
-
-
-
-
-
-
$
-
$
-
$
-
OTHER SUPPLEMENTARY INFORMATION
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
Independent Auditors’ Report
Management and the Board of Directors
Frederick Douglass 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 and each major fund of Frederick Douglass International Academy as of and for the year ended June 30, 2016, and the
related notes to the financial statements, which collectively comprise Frederick Douglass International Academy’s basic financial statements, and
have issued our report thereon dated October 14, 2016.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered Frederick Douglass 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
opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Frederick Douglass International
Academy’s internal controls. Accordingly, we do not express an opinion on the effectiveness of Frederick Douglass International Academy’s internal
controls.
Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all
deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant
deficiencies may exist that were not identified. However, as described in the accompanying schedule of findings and responses, we identified a
deficiency in internal control that we consider to be a material weakness.
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
6-1
deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with
governance. We consider the deficiency described in the accompanying schedule of findings and responses to be a material weakness: 2016-001.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Frederick Douglass 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.
Frederick Douglass International Academy’s Response to Finding
Frederick Douglass International Academy’s responses to the finding identified in our audit are described in the accompanying schedule of findings
and responses. Frederick Douglass International Academy’s responses were not subjected to the auditing procedures applied in the audit of the
financial statements and, accordingly, we express no opinion on them.
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.
Auburn Hills, Michigan
October 14, 2016
6-2
Frederick Douglass International Academy
Schedule of Findings and Responses
June 30, 2016
2016-001 – Material Weakness and Material Noncompliance – Deficit Fund Balance
Specific requirement: Per State School Aid Act of 1979 section 102(1), the Academy should not have a deficit unrestricted fund balance in
any individual fund.
Condition: The Academy has a cumulative deficit in the General Fund of $84,116.
Cause: Due to an operating deficit incurred in the General Fund during the year ended June 30, 2016.
Effect: Had the Academy not have an operating deficit incurred during the year ended June 30, 2016, the General Fund would not have a
deficit unrestricted fund balance.
Recommendation: In accordance with Public Act 621 of 1978, the Academy should submit a Deficit Elimination Plan to the Michigan
Department of Education for approval and make the necessary changes to reduce the deficit in-line with the submitted Deficit Elimination
Plan.
Views of responsible officials: Management believes cause for the operating deficit relates to unforeseen issues with the opening of the
Academy resulting from the negligent actions performed by a third party directly negatively affecting the Academy’s enrollment count.
Corrective action plan: See the attached corrective action plan.
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Frederick Douglass International Academy
21700 Marlow St.
Oak Park, Ml 48237
October 7, 2016
CORRECTIVE ACTION PLAN: 2016-001- Material Weakness and Material NoncomplianceDeficit Fund Balance:
The Academy Board is aware of the deficit created by the operation on the school during the 20152016 school year and we will see that a deficit elimination plan is created and filed with the Michigan
Department of Education. This plan will address how the shortage will be eliminated and within what
time frame the Academy will be out of deficit Furthermore, the Academy will closely monitor the
actual spending in comparison to the deficit elimination budget on a monthly basis to insure that the
Academy remains on target as budgeted for the 2016-2017 year of operation.
Greg Vishey, Board President
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