James Madison Charter Academy
A Component Unit of
Widefield School District No. 3
FINANCIAL REPORT AND INDEPENDENT AUDITORS’
REPORT
FOR THE FISCAL YEAR ENDED
JUNE 30, 2010
James Madison Charter Academy
Table of Contents
June 30, 2010
Page
Independent Auditors’ Report
1
Management’s Discussion and Analysis
3
BASIC FINANCIAL STATEMENTS
Statement of Net Assets
7
Statement of Activities
8
Comparative Balance Sheet – General Fund
9
Comparative Statement of Revenues, Expenditures and Change in
Fund Balance – General Fund
10
Comparative Statement of Net Assets- Enterprise Fund
11
Comparative Statement of Revenues, Expenses and Change in
Net Assets - Enterprise Fund
12
Comparative Statement of Cash Flows – Enterprise Fund
13
Notes to the Basic Financial Statements
14
REQUIRED SUPPLEMENTARY INFORMATION
Budgetary Comparison Schedule – General Fund
22
OTHER SUPPLEMENTARY INFORMATION
Comparative Schedule of Revenues, Expenses, and Change in
Net Assets- Enterprise Fund- Budget and Actual
23
INDEPENDENT AUDITORS’ REPORT
Board of Directors
James Madison Charter Academy
Colorado Springs, Colorado
We have audited the accompanying financial statements of the governmental activities, the business-type
activities, and each major fund of James Madison Charter Academy, a component unit of El Paso School
District No. 3, as of and for the year ended June 30, 2010, which collectively comprise James Madison
Charter Academy’s basic financial statements, as listed in the table of contents. These financial
statements are the responsibility of James Madison Charter Academy’s management. 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. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable
basis for our opinions.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
respective financial position of the governmental activities, the business-type activities, and each major
fund of James Madison Charter Academy, as of June 30, 2010, and the respective changes in financial
position and, where applicable, cash flows thereof for the year then ended in conformity with accounting
principles generally accepted in the United States of America.
Accounting principles generally accepted in the United States of America require that the management’s
discussion and analysis and required supplementary information as listed 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.
1
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively
comprise the James Madison Charter Academy financial statements as a whole. The other supplementary
information is presented for purposes of additional analysis and is not a required part of the financial
statements. The other supplementary information is the responsibility of management and was derived
from and relates directly to the underlying accounting and other records used to prepare the financial
statements. The information has been subjected to the auditing procedures applied in the audit of the
financial statements and certain additional procedures, including comparing and reconciling such
information directly to the underlying accounting and other records used to prepare the financial
statements or to the financial statements themselves, and other additional procedures in accordance with
auditing standards generally accepted in the United States of America. In our opinion, the information is
fairly stated in all material respects in relation to the financial statements as a whole.
Colorado Springs, Colorado
October 29, 2010
2
MANAGEMENT’S DISCUSSION AND ANALYSIS
The management of James Madison Charter Academy (JMCA), offers readers of the
financial statements this narrative overview and analysis of the financial activities of the
Academy for the fiscal year ended June 30, 2010. Readers are encouraged to consider
the information presented here in conjunction with additional information that can be
found in the notes to the financial statements.
FINANCIAL HIGHLIGHTS
The liabilities of JMCA exceeded its assets at the close of fiscal year 2009-2010 by
$36,058 with $289,263 in unrestricted net assets. In comparison, at June 30, 2009,
liabilities exceeded assets by $15,900 with $270,389 in unrestricted net assets.
The total liabilities at June 30, 2010 were $1,960,940 compared to $1,985,188 at June 30,
2009. For the 2009-2010 fiscal year, JMCA’s revenues were $1,045,997 compared to
$1,202,542 for fiscal year 2008-2009. Total expenses for the fiscal year 2009-2010 were
$1,066,155 compared to $1,098,871 for the fiscal year 2008-2009.
OVERVIEW OF THE FINANCIAL STATEMENTS
Management’s discussion and analysis is intended to serve as an introduction to JMCA’s
basic financial statements. This report consists of three parts: 1) Management’s
Discussion and Analysis, 2) Basic Financial Statements, including Notes to the Financial
Statements, and 3) Required and Other Supplementary Information.
SCHOOL-WIDE FINANCIAL STATEMENTS
The School-wide financial statements are designed to provide readers with a broad
overview of the school’s finances, in a manner similar to a private sector business.
The Statement of Net Assets presents information on all of the School’s assets and
liabilities, with the difference between the two reported as net assets. Over time, increase
or decreases in net assets may serve as a useful indicator of whether the financial position
of the school is improving or deteriorating.
The Statement of Activities presents information showing how the School’s net assets
changed during the most recent fiscal year. All changes in net assets are reported as soon
as the underlying event giving rise to the change occurs, regardless of the timing of
related cash flows. Thus, revenues and expenses are reported in this statement for some
items that will result in cash flows in future fiscal periods (e.g. earned but unpaid salary
and benefits).
The School-wide statement of activities distinguishes functions of the School supported
primarily by per pupil revenue or other revenues passed through from Widefield School
District No. 3. The governmental activities of the School include instruction and
supporting services.
3
Fund Financial Statements
A fund is a grouping of related accounts that is used to maintain control over resources
that have been segregated for specific activities or objectives. The School, like other
governmental units or charter schools, uses fund accounting to ensure and demonstrate
compliance with finance related legal requirements.
Governmental funds. Governmental funds are used to account for essentially the same
functions reported as governmental activities in the School-wide financial statements.
However, unlike the school-wide financial statements, governmental funds financial
statements focus on near term inflows and outflows of resources available to spend at the
end of the fiscal year. Such information may be useful in evaluating the school’s near
term financing requirements.
Because the focus of governmental funds is narrower than that of the School-wide
financial statements, it is useful to compare the information presented for governmental
funds with similar information presented for governmental activities in the School-wide
financial statements. By doing so, readers may better understand the long-term impact of
the school’s near-term financing decisions. Both the governmental fund balance sheet
and the governmental fund statement of revenues, expenditures, and changes in fund
balances provide a reconciliation to facilitate this comparison between governmental
funds and governmental activities.
Proprietary funds. JMCA reports one proprietary fund. Enterprise funds are used to
report the same functions presented as business-type activities in the district-wide
financial statements. The School uses an enterprise fund to account for its building lease
activities. Proprietary funds provide the same type of information as the district-wide
financial statements, only in more detail. Individual fund data for the Enterprise fund is
provided in the other supplementary information in this report.
Notes to the financial statements. The notes provide additional information that is
essential to a full understanding of the data provided in the School-wide and fund
financial statements.
FINANCIAL ANALYSIS OF THE SCHOOL
One of the most important questions asked about a school’s finances is “Is the school as a
whole better off or worse off as a result of this year’s activities?” The Statement of Net
Assets and the Statement of Activities report information about the School’s activities in
a way that can help answer that question. These two statements report the net assets of
the school and changes in them. The School’s net assets (the difference between assets
and liabilities) are one way to measure financial health or financial position. In addition,
readers also need to consider other non-financial factors such as changes in economic
conditions, student population growth, or changes in governmental legislation.
4
NET ASSETS
As part of the analysis, below is a summary of the school’s comparative Statement of Net
Assets and Statement of Activities below.
Condensed Statement of Net Assets
June 30, 2010 and 2009
Governmental Activities
2010
2009
Current assets
Noncurrent assets
Capital assets (net)
Total Assets
$
57,890
57,890
$
51,046
51,046
Business-Type Activities
2010
2009
$
27,727
276,557
1,562,708
1,866,992
$
27,976
269,858
1,620,408
1,918,242
Totals
2010
$
2009
85,617
276,557
1,562,708
1,924,882
$
79,022
269,858
1,620,408
1,969,288
Current liabilities
Long-term liabilities
Total Liabilities
22,566
22,566
27,897
27,897
24,375
1,913,999
1,938,374
24,625
1,932,666
1,957,291
46,941
1,913,999
1,960,940
52,522
1,932,666
1,985,188
Invested in capital assets, net of debt
Restricted funds
Unrestricted funds
Total Net Assets
25,970
9,354
35,324
25,969
(2,820)
23,149
(351,291)
279,909
$ (71,382)
(312,258)
273,209
$ (39,049)
(351,291)
25,970
289,263
$ (36,058)
(312,258)
25,969
270,389
$ (15,900)
$
$
Condensed Statement of Activities and Change in Net Assets
For the Years Ended June 30, 2010 and 2009
Governmental Activities
2010
2009
Revenues
Program revenues:
Charges for services
Operating grants and contributions
General revenues:
Property taxes
State equalization
Other
Total Revenues
69,183
914,198
23,150
1,038,490
177,500
1,008
164,052
Expenses
Instructional
Support services
Enterprise operations
Total Expenses
361,564
494,758
856,322
417,919
469,619
887,538
209,833
209,833
211,333
211,333
361,564
494,758
209,833
1,066,155
417,919
469,619
211,333
1,098,871
Change in net assets
Beginning net assets
Ending Net Assets
12,175
23,149
35,324
150,952
(127,803)
$
23,149
(32,333)
(39,049)
(71,382)
(47,281)
8,232
(39,049)
(20,158)
(15,900)
(36,058)
103,671
(119,571)
$ (15,900)
$
5
$
$
177,500
-
$
$
163,044
-
$
2009
55,439
784,186
4,489
868,497
24,383
1,800
30,159
Totals
2010
177,500
24,383
55,439
784,186
4,489
1,045,997
$
$
Business-Type Activities
2010
2009
$
$
164,844
30,159
69,183
914,198
24,158
1,202,542
GENERAL FUND BUDGETARY HIGHLIGHTS
The School developed its budget for Fiscal Year 2010 in the spring of 2009. The actual
expenditures for the year were less than the final budget for expenditures by $12,692.
CAPITAL ASSET AND DEBT ADMINISTRATION
Capital assets. The School-wide investment in capital assets for the primary government,
including business-type activities, as of June 30, 2010 totaled $1,562,708 (net of
accumulated depreciation of $168,292).
Long-term debt At the end of the current fiscal year, the School had total long-term debt
outstanding of $1,950,000 including $20,000 due within the next twelve months. The
School’s debt is non-rated. For comparison, at the end of the previous fiscal year, the
School had total long-term debt outstanding, of $1,970,000 including $20,000 due within
the next twelve months.
For more detailed information on capital assets and debt administration, see Notes 3 and
7 in the Notes to the Basic Financial Statements.
CAPITAL ASSET AND DEBT ADMINISTRATION
Assets with a useful life of more than one year and a unit cost of greater than $5,000 are
capitalized. Assets are recorded at cost and depreciated using the straight-line method
over the estimated useful life of the assets, ranging from three to 100 years. JMCA itself
does not own any assets that meet these criteria, however, James Madison Building
Corporation acquired the building in which JMCA is operating the Charter School,
therefore, the cost and accumulated depreciation for this building are reported in the
financial statements of the reporting entity.
ECONOMIC FACTORS AND NEXT YEAR’S BUDGET
The primary factor driving the budget for the school is student enrollment. The
enrollment projected for the 2010-2011 school year is 123.76 FTE. The School is also
projecting grant revenue of over $20,000 for the 2010-2011 school year.
REQUESTS FOR INFORMATION
This financial report is designed to provide a general overview of the James Madison
Charter Academy’s finances for all those with an interest in them. Questions concerning
any of the information provided in this report should be directed to the school at James
Madison Charter Academy, 660 Syracuse Street, Colorado Springs, CO 80911.
6
JAMES MADISON CHARTER ACADEMY
Statement of Net Assets
June 30, 2010
ASSETS
Cash in bank, unrestricted (Note 2)
Due from Widefield School District
Other receivables
Cash in bank, restricted (Note 2)
Deferred costs, net of accumulated amortization
Capital assets (Note 3)
Building
Less: accumulated depreciation
Governmental
Activities
Business-type
Activities
$
$
5,262
52,033
595
-
Total Assets
LIABILITIES
Accounts payable
Accrued interest payable
Accrued salaries and benefits
Long term liabilities:
Revenue bonds payable- current portion (Note 7)
Revenue bonds payable- long term portion (Note 7)
Total Liabilities
NET ASSETS
Invested in capital assets, net of related debt
Restricted (Note 11)
Unrestricted
$
32,989
52,033
595
187,457
89,100
1,731,000
(168,292)
57,890
1,866,992
1,924,882
4,232
18,334
24,375
-
4,232
24,375
18,334
-
20,000
1,893,999
20,000
1,893,999
22,566
1,938,374
1,960,940
35,324
(351,291)
279,909
$
(71,382)
The accompanying notes are an integral part of the financial statements.
7
$
1,731,000
(168,292)
25,970
9,354
Total Net Assets
27,727
187,457
89,100
Total
(351,291)
25,970
289,263
$
(36,058)
JAMES MADISON CHARTER ACADEMY
Statement of Activities
For the Year Ended June 30, 2010
Functions/Programs
Expenses
Governmental Activities:
Instruction
Pupil activities
Instructional support
General administration
School administration
Business services
Maintenance and operations
Total governmental activities
$
361,564
125
10,752
14,737
181,416
17,329
270,399
856,322
Program Revenue
Operating
Charges for
Grants and
Services
Contributions
Governmental
Activities
$
$
-
$
7,156
5,831
11,396
24,383
Net (Expense) Revenue and Change in Net Assets
(354,408)
(125)
(4,921)
(14,737)
(181,416)
(17,329)
(259,003)
(831,939)
Business-type
Activities
$
-
Total
$
(354,408)
(125)
(4,921)
(14,737)
(181,416)
(17,329)
(259,003)
(831,939)
8
Business-type activities:
Enterprise fund
Total business-type activities
Total primary government
209,833
209,833
177,500
177,500
$ 1,066,155
$ 177,500
General revenues:
Property taxes
State equalization
Interest revenues
Other revenues
Total general revenues
Change in net assets
Net assets - beginning
Net assets - ending
$
-
24,383
$
(32,333)
(32,333)
(32,333)
(32,333)
(831,939)
(32,333)
(864,272)
55,439
784,186
4,489
844,114
12,175
23,149
35,324
(32,333)
(39,049)
(71,382)
55,439
784,186
4,489
844,114
(20,158)
(15,900)
(36,058)
The accompanying notes are an integral part of these financial statements.
$
$
JAMES MADISON CHARTER ACADEMY
Comparative Balance Sheet
General Fund
June 30, 2010 and 2009
2010
ASSETS
Cash and cash equivalents
Due from Widefield School District
Other receivables
$
Total Assets
5,262
52,033
595
2009
$
5,049
45,555
442
57,890
51,046
LIABILITIES
Accounts payable
Accrued salaries and benefits
4,232
18,334
3,429
24,468
Total Liabilities
22,566
27,897
FUND BALANCE
Reserved for Constitutional Amendment
Unreserved
25,970
9,354
25,969
(2,820)
Total Fund Balance
35,324
23,149
LIABILITIES AND FUND BALANCE
$ 57,890
Total Liabilities and Fund Balance
$
51,046
The accompanying notes are an integral part of these financial statements.
9
JAMES MADISON CHARTER ACADEMY
Comparative Statement of Revenues, Expenditures and Change in Fund Balance
General Fund
For the Years Ended June 30, 2010 and 2009
2010
REVENUES
Federal sources
State sources
Local sources
$
12,987
795,582
59,928
2009
$
20,012
924,344
94,134
Total revenues
868,497
1,038,490
EXPENDITURES
Instruction
Pupil Activities
Instructional support services
General administration
School administration
Business services
Maintenance and operations
361,564
125
10,752
14,737
181,416
17,329
270,399
417,919
6,340
6,521
2,873
168,757
249
284,879
Total expenditures
856,322
887,538
Net change in fund balance
12,175
150,952
Fund balance - beginning
23,149
(127,803)
Fund balance - ending
$
35,324
$
The accompanying notes are an integral part of these financial statements.
10
23,149
JAMES MADISON CHARTER ACADEMY
Comparative Statement of Net Assets
Enterprise Fund
June 30, 2010 and 2009
2010
ASSETS
Current assets
Cash in bank, unrestricted
Total current assets
$
Noncurrent assets
Cash in bank, restricted
Deferred costs, net of accumulated amortization
Building
Less: accumulated depreciation
Total noncurrent assets
Total Assets
LIABILITIES
Current liabilities
Accrued interest payable
Revenue bonds payable- current portion
Total current liabilities
Noncurrent liabilities
Revenue bonds payable
Total noncurrent liabilities
Total Liabilities
Invested in capital assets, net of related debt
Unrestricted
Total Net Assets
27,727
27,727
2009
$
187,457
89,100
1,731,000
(168,292)
1,839,265
177,458
92,400
1,731,000
(110,592)
1,890,266
1,866,992
1,918,242
24,375
20,000
44,375
24,625
20,000
44,625
1,893,999
1,893,999
1,912,666
1,912,666
1,938,374
1,957,291
(351,291)
279,909
$
27,976
27,976
(71,382)
(312,258)
273,209
$
(39,049)
The accompanying notes are an integral part of these financial statements.
11
JAMES MADISON CHARTER ACADEMY
Comparative Statement of Revenues, Expenses and Change in Net Assets - Budget and Actual
Enterprise Fund
For the Years Ended June 30, 2010 and 2009
2010
OPERATING REVENUES
Lease revenue
Repair and maintenance fees
Total operating revenues
$
OPERATING EXPENSES
Interest expense
Depreciation
Other expenses
Total operating expenses
Operating income (loss)
NONOPERATING REVENUES
Interest income
2009
167,500
10,000
177,500
$
156,427
6,617
163,044
152,133
57,700
209,833
153,633
57,700
211,333
(32,333)
(48,289)
-
1,008
Change in net assets
(32,333)
(47,281)
Net assets, beginning of year
(39,049)
8,232
Net assets, end of year
$
(71,382)
$
The accompanying notes are an integral part of these financial statements.
12
(39,049)
JAMES MADISON CHARTER ACADEMY
Comparative Statement of Cash Flows
Enterprise Fund
For the Years Ended June 30, 2010 and 2009
2010
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from lessee
Interest payments to bondholders
Net cash provided by operating activities
$
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
Principal payment on bonds
Net cash used in capital and related financing activities
2009
177,500
(147,750)
29,750
$
(20,000)
(20,000)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest income
Net increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
169,263
(149,250)
20,013
(20,000)
(20,000)
-
1,008
9,750
1,021
205,434
204,413
Cash and cash equivalents, end of year
$
215,184
$
205,434
Cash in bank, unrestricted
Cash in bank, restricted
Total cash and cash equivalents
$
$
$
27,727
187,457
215,184
$
27,976
177,458
205,434
$
(32,333)
$
(48,289)
Reconciliation of operating loss to net cash
provided by operating activities
Operating loss
Adjustments to reconcile operating loss
to net cash provided by operating activities
Depreciation
Amortization of bond issue costs and discount
Change in assets and liabilities
Accrued interest receivable
Accrued interest payable
57,700
4,633
57,700
4,633
(250)
Total adjustments
6,219
(250)
62,083
Net cash provided by operating activities
$
29,750
The accompanying notes are an integral part of these financial statements.
13
68,302
$
20,013
JAMES MADISON CHARTER ACADEMY
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2010
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
James Madison Charter Academy (“JMCA”/ “the Charter School”) began operations on July 1,
2005, pursuant to the Colorado Charter Schools Act, to form and operate a charter school within
Widefield School District No. 3 (“the District”).
The financial statements of JMCA have been prepared in conformity with accounting principles
generally accepted in the United States of America, as applied to government units. The
Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for
establishing governmental accounting and financial reporting principles. The more significant
accounting policies of JMCA are described below.
Reporting Entity
The financial reporting entity consists of JMCA and organizations for which JMCA is financially
accountable. All funds, organizations, institutions, agencies, departments and offices that are not
legally separate, are part of JMCA. In addition, any legally separate organization for which
JMCA is financially accountable is considered part of the reporting entity. In July, 2007, James
Madison Building Corporation (“JMBC”) was formed and qualifies as a blended component unit
of James Madison Charter Academy. This is because the two entities share a common governing
body, specifically their board of directors, and JMBC provides leasing services exclusively to
JMCA. JMBC does not issue separate financial statements.
JMCA is considered a component unit of Widefield School District No. 3, under GASB
statements 14 and 39. JMCA is deemed to be fiscally dependent upon the District, because the
District provides the majority of support to the school in the form of per pupil operating revenue.
Measurement Focus, Basis of Accounting and Financial Statement Presentation
The government-wide financial statements are reported using the economic resources
measurement focus and the accrual basis of accounting. Revenues are recorded when earned and
expenses are recorded when a liability is incurred, regardless of the timing of the related cash
flows. Grants and similar items are recognized as revenue in the fiscal year in which all
eligibility requirements imposed by the provider have been met.
The statement of activities demonstrates the degree to which the direct expenses of a given
function or program is offset by program revenues. Direct expenses are those that are clearly
identifiable with a specific function or program. Any indirect expense allocations that have been
made in the funds have been reversed for the statement of activities. Any internal activities are
eliminated to minimize double counting. Program revenues include operating grants and
contributions, charges for services and capital contributions and grants that are restricted to use in
the operational or capital requirements of a specific function or program. Other revenues that are
not directly related to a particular function or program are reported separately as general
revenues.
14
JAMES MADISON CHARTER ACADEMY
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2010
NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Governmental fund financial statements are reported using the current financial resources
measurement focus and the modified accrual basis of accounting. Under the modified accrual
basis of accounting, revenues are recognized when susceptible to accrual, i.e., when they become
both measurable and available. Revenues are considered to be available when they are collectible
within the period or soon enough thereafter to pay liabilities of the current fiscal period. For this
purpose, the government considers revenues to be available if they are collected within 60 days of
the end of the current fiscal period.
Intergovernmental revenues, grants and interest associated with the current fiscal period are all
considered to be susceptible to accrual and so have been recognized as revenues of the current
fiscal period. Expenditure-driven grants recognize revenue when the qualifying expenditures
have been incurred and all other grant requirements have been met. All other revenue items are
considered to be measurable and available only when cash is received by the government.
Expenditures generally are recorded when a liability is incurred, as under accrual accounting.
When both restricted and unrestricted resources are available for use, it is JMCA’s policy to use
restricted resources first, then unrestricted resources as they are needed.
The accounts of JMCA are organized and operated on the basis of funds. A fund is an
independent fiscal accounting entity with a self-balancing set of accounts. Fund accounting
segregates funds according to their intended purpose and is used to aid management in
demonstrating compliance with finance-related legal and contractual provisions. The minimum
number of funds maintained is consistent with legal and managerial requirements.
JMCA reports the following major governmental fund:
The General Fund is the primary operating fund. It accounts for all general operating financial
resources of JMCA, except for those required to be accounted for in another fund.
Additionally, JMCA reports the following major enterprise fund:
Proprietary funds distinguish operating revenues and expenses from non-operating items, and
operate in a manner similar to private businesses. JMCA has just one proprietary fund, which is
an Enterprise Fund. The operating revenues for this fund are charges for leasing services, and
operating expenses include interest expense and depreciation on capital assets. All revenues and
expenses not meeting the definition of operating type are reported as non-operating revenues and
expenses.
Governments are required to follow the pronouncements of the Financial Accounting Standards
Board (FASB) issued through November 30, 1989 (when applicable) that do not conflict with or
contradict GASB pronouncements. Although the government has the option to apply FASB
pronouncements issued after that date to its business-type activities and enterprise fund, the
government has chosen not to do so.
15
JAMES MADISON CHARTER ACADEMY
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2010
NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Asset, Liabilities and Net Assets or Equity
Cash and cash equivalents
Cash and cash equivalents include cash on hand and in the bank and short-term investments with
original maturities of three months or less from the date of acquisition.
Receivables
All receivables are reported at their gross value and, where appropriate, are reduced by the
estimated portion that is expected to be uncollectible.
Capital assets
Capital assets, which include equipment, are reported in the government-wide financial
statements. All purchased capital assets are valued at cost where historical records are available
and at an estimated historical cost where no historical records exist. The capitalization level for
equipment is $5,000. Donated capital assets are valued at their estimated fair market value on the
date received. Major capital outlays for capital assets and improvements are capitalized as
projects are constructed. The cost of normal maintenance and repairs that do not add to the value
of the asset, or materially extend asset lives, are not capitalized. Improvements are capitalized
and are depreciated using the straight-line method over the remaining useful lives of the related
capital assets.
JMCA itself does not own any assets that meet these criteria; however, James Madison Building
Corporation acquired the building in which JMCA is operating the Charter School, therefore, the
cost and accumulated depreciation for this building are reported in the financial statements of the
reporting entity. Buildings and improvements are depreciated over 30 years; furniture and
equipment are depreciated over 5 - 15 years.
Long-term obligations
In the government-wide financial statements, and proprietary fund types in the fund financial
statements, long-term debt obligations are reported as liabilities in the applicable governmental
activities, business-types activities, or proprietary fund type statement of net assets. Bond
premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the
bonds using the straight-line method. Bonds payable are reported net of the applicable bond
premium or discount. Bond issuance costs are reported as deferred charges and amortized over
the term of the related debt.
Fund Equity
In the fund financial statements, governmental funds report reservations of fund balance for
amounts that are not available for appropriation or are legally restricted by outside parties for a
specific purpose. Designations of fund balance represent tentative management plans that are
subject to change.
16
JAMES MADISON CHARTER ACADEMY
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2010
NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Reclassifications
Certain amounts presented in the prior year’s data have been reclassified in order to be consistent
with the current year’s presentation.
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 certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
Budgets
Annual budgets are adopted on a basis consistent with generally accepted accounting principles
for all funds. All annual appropriations lapse at fiscal year end. The operating budget includes
proposed expenditures and the means of financing them for the upcoming year, along with
estimates for the current year and actual data for the preceding year. Budgets are required by
Colorado State Statue for all funds. On or before June 1 of each year, management submits a
proposed budget to the Board of Directors for all funds for the fiscal year commencing the
following July 1. Prior to June 30, the budget is adopted by formal resolution. A final budget is
adopted by December 31.
NOTE 2 – CASH AND CASH EQUIVALENTS
The Colorado Public Deposit Protection Act (PDPA) requires that all units of local government
deposit cash in eligible public depositories. Eligibility is determined by state regulations.
Amounts on deposit in excess of federal insurance levels must be collateralized by eligible
collateral as determined by the PDPA. PDPA allows the financial institution to create a single
collateral pool for all public funds held. The pool is to be maintained by another institution, or
held in trust for all the uninsured public deposits as a group. The market value of the collateral
must be at least equal to 102% of the uninsured deposits. Cash deposits for JMCA’s businesstype activities totaled $215,184 at year end, of which $187,457 was restricted for debt service.
These cash deposits are invested in Dreyfus money market funds which are not rated by rating
agencies. In addition, these funds are not covered by PDPA, or by the Federal Deposit Insurance
Corporation. The Charter School has not formally adopted deposit or investment policies.
17
JAMES MADISON CHARTER ACADEMY
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2010
NOTE 3 – CAPITAL ASSETS
On July 31, 2007, James Madison Building Corporation issued Series 2007 Charter School
Revenue bonds, with a par amount of $2,040,000, due in varying annual installments with a final
maturity of May 1, 2037. The average coupon rate is 7.50%. The principal amount outstanding at
June 30, 2010 was $1,950,000. James Madison Building Corporation used debt proceeds to
acquire the building in which JMCA is operating the Charter School.
Capital asset activity for the year ended June 30, 2010 was as follows:
Beginning
Balance
Additions
Ending
Balance
Business-type Activities:
Depreciable assets:
Building
Less accumulated depreciation
Net capital assets, business-type activities
$ 1,731,000
(110,592)
$ 1,620,408
$
$
(57,700)
(57,700)
$ 1,731,000
(168,292)
$ 1,562,708
Depreciation expense was charged to functions/ programs as follows:
Non-instructional enterprise operations:
$
57,700
NOTE 4 – CONCENTRATION OF RISK
JMCA is funded directly by the Widefield School District No. 3 based on their per pupil count.
For the fiscal year ended June 30, 2010, this funding accounts for approximately 75% of JMCA’s
revenues.
NOTE 5 – DEFINED BENEFIT PENSION PLAN
Plan Description. JMCA contributes to the School Division Trust Fund (SDTF), a cost-sharing
multiple-employer defined pension plan administered by the Public Employees’ Retirement
Association of Colorado (PERA). The SDTF provides retirement and disability, post-retirement
annual increases, and death benefits for members or their beneficiaries. All employees of JMCA
are members of the SDTF. Title 24, Article 51 of the Colorado Revised Statutes (C.R.S.), as
amended, assigns the authority to establish benefit provisions to the State Legislature.
PERA issues a publicly available Comprehensive Annual Financial Report that includes financial
statements and required supplementary information for the SDTF. That report may be obtained
online at www.copera.org or by writing to Colorado PERA, 1301 Pennsylvania Street, Denver,
Colorado 80203, or by calling PERA at 1-800-759-PERA (7372).
18
JAMES MADISON CHARTER ACADEMY
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2010
NOTE 5 – DEFINED BENEFIT PENSION PLAN (continued)
Funding Policy. James Madison Charter Academy is required to contribute member and
employer contributions to PERA at a rate set by statute. The contribution requirements of plan
members and JMCA are established under Title 24, Article 51, Part 4 of the C.R.S., as amended.
The contribution rate for members is 8.0 percent and for JMCA it is 10.15 percent of covered
salary. A portion of JMCA’s contribution (1.02 percent of covered salary) is allocated to the
Health Care Trust Fund (see Note 6). JMCA is also required to pay an amortization equalization
disbursement (AED) equal to 2.20 percent of the total payroll for the calendar year 2010 (1.70
percent of total payroll for the calendar year 2009, and 1.40 percent of total payroll for the
calendar year 2009). Additionally, JMCA is required to pay a supplemental amortization
equalization disbursement (SAED) equal to 1.50 percent of the total payroll for the calendar year
2010 ( 1.00 percent of total payroll for the calendar year 2009, and 0.50 percent of total payroll
for the calendar year ended 2008.) If JMCA rehires a PERA retiree as an employee or under any
other work arrangement, it is required to report and pay employer contributions (including the
AED and SAED) on the amounts paid for the retiree; however no member contributions are
required. For the years ended June 30, 2008, 2009, and 2010, JMCA’s employer contributions to
the SDTF were $60,951, $55,979, and $49,405, respectively, equal to their required contributions
for each year.
NOTE 6 – POST EMPLOYMENT HEALTH CARE BENEFITS
Plan Description. JMCA contributes to the Health Care Trust Fund (HCTF), a cost-sharing
multiple-employer post-employment health care plan administered by PERA. The HCTF
provides a health care premium subsidy to PERA participating benefit recipients and their eligible
beneficiaries. Title 24, Article 51, Part 12 of the C.R.S., as amended, assigns the authority to
establish the HCTF benefit provisions to the State Legislature. PERA issues a publicly available
Comprehensive Annual Financial Report that includes financial statements and required
supplementary information for the HCTF. That report may be obtained online at www.copera.org
or by writing to Colorado PERA, 1301 Pennsylvania Street, Denver, Colorado 80203 or by
calling PERA at 1-800-759-PERA (7372).
Funding Policy. JMCA is required to contribute at a rate of 1.02 percent of covered salary for all
PERA members as set by statute. No member contributions are required. The contribution
requirements for JMCA are established under Title 24, Article 51, Part 4 of the C.R.S., as
amended. The apportionment of the contribution to the HCTF from the defined benefit plan
employer contribution (see Note 5) is established under Title 24, Article 51, Section 208 of the
C.R.S., as amended. For the years ended June 30, 2008, 2009, and 2010 were $5,876, $4,990, and
$4,075, respectively, equal to their required contributions for each year.
19
JAMES MADISON CHARTER ACADEMY
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2010
NOTE 7- LONG-TERM DEBT
Revenue Bonds Payable
Revenue bonds payable at June 30, 2010, are as follows:
Principal
Balance
Description, Interest Rates and Maturity Dates
Series 2007 Charter School Revenue Bonds in the original par amount of
$2,040,000 issued on July 31, 2007 for the purpose of acquiring the building
in which James Madison Charter Academy operates a charter school.
The Bonds are due in varying annual installments through May 1, 2037
with a coupon rate of 7.50%.
$ 1,950,000
Total Outstanding Bonds
Changes in Long-Term Debt
The changes in business activities long-term debt for the year ended June 30, 2010 are as follows:
Balance at
June 30, 2009
Long-Term Debt
Additions
Deletions
Balance at
June 30, 2010
Due Within
One Year
Bonds payable:
Revenue Bonds- Series 2007
Unamortized bond discount
$ $
Total bonds payable
$
1,970,000 $
(37,334)
- $
-
20,000 $
(1,333)
1,950,000 $
(36,001)
20,000
-
1,932,666
- $
18,667 $
1,913,999 $
20,000
Debt Service Requirements
The following schedule reflects the debt service requirements to maturity of the Charter School’s
business activities long-term debt payable as of June 30, 2010.
Series 2007 Revenue Bonds
2011
2012
2013
2014
2015
2016-2020
2021-2025
2026-2030
2031-2035
2036-2037
Total
Principal
20,000
25,000
25,000
30,000
30,000
185,000
265,000
375,000
545,000
450,000
$1,950,000
Interest
146,250
144,750
142,875
141,000
138,750
657,375
576,000
461,250
297,000
57,375
$2,762,625
Debt Service
Reserve Fund
Total
166,250
8,500
169,750
8,500
167,875
8,500
171,000
8,500
168,750
8,500
842,375
42,500
841,000
42,500
836,250
42,500
842,000
42,500
507,375
187,000
$4,712,625
$399,500
20
Net Debt
Service
157,750
161,250
159,375
162,500
160,250
799,875
798,500
793,750
799,500
320,375
$4,313,125
JAMES MADISON CHARTER ACADEMY
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2010
NOTE 8 – OPERATING LEASE
On July 1, 2007, JMCA executed a new lease agreement with their blended component unit,
James Madison Building Corporation. The lease term includes the initial term from July 1, 2007
through June 30, 2008 and successive one year renewal terms. For the fiscal year ended June 30,
2010, the lease payments were $167,750. For the subsequent fiscal year ending June 30, 2011, the
lease payments are scheduled to be $166,833. The annual lease payments vary for the subsequent
years.
NOTE 9 – RISK MANAGEMENT
JMCA is exposed to various risks of loss related to torts; thefts of, damage to, or destruction of
assets; errors or omissions; injuries to employees; natural disasters; or environmental liabilities
due to the nature of its operations. JMCA maintains commercial insurance for these risks.
Settlement amounts did not exceed insurance coverage during the last three years.
NOTE 10 – COMMITMENTS AND CONTINGENCIES
Grants
JMCA has received federal and state grants for specific purposes that are subject to review and
audit by grantor agencies. Such audits could lead to a request for reimbursement to grantor
agencies for expenditures disallowed under terms of the grant.
NOTE 11 – AMENDMENT TO COLORADO CONSTITUTION
Colorado voters passed an amendment to the State Constitution, Article X, Section 20, which has
several limitations, including revenue raising, spending abilities and other specific requirements
of state and local governments.
The amendment requires emergency reserves be established. These reserves must be at least 3%
of fiscal year spending. JMCA is not allowed to use the emergency reserves to compensate for
economic conditions, revenue shortfalls or salary and benefit increases. There is a $25,970
reservation of fund balance in the General Fund for the amendment.
The amendment is complex and subject to judicial interpretation. JMCA believes it is in
compliance with the requirements of the amendment. However, JMCA has made certain
interpretations of the amendment’s language in order to determine it compliance.
21
JAMES MADISON CHARTER ACADEMY
Budgetary Comparison Schedule
General Fund
For the Year Ended June 30, 2010
Budget
Original
Resources (inflows)
Fund balance, beginning of year
Federal sources
State sources
Local sources
Resources available for appropriation
$
Appropriations (outflows)
Current
Instructional services
Pupil activities
Instructional support services
General administration
School administration
Business services
Maintenance and operations
Reserves
Total Charges to appropriations
Excess of resources over charges to
appropriations
$
Final
-
$
Variance with
Final Budget
Actual
23,149
$
-
$
(23,149)
16,323
18,323
12,987
(5,336)
894,366
803,874
795,582
(8,292)
60,000
67,000
59,928
(7,072)
970,689
912,346
868,497
(43,849)
366,354
368,703
361,564
7,139
-
-
125
(125)
15,536
10,201
10,752
(551)
26,248
17,925
14,737
3,188
176,731
159,089
181,416
(22,327)
21,760
19,849
17,329
2,520
314,171
293,247
270,399
22,848
45,213
40,882
-
40,882
966,013
909,896
856,322
53,574
2,450
12,175
4,676
$
Fund balance, beginning of year
23,149
Fund balance, end of year
$
35,324
Notes to Required Supplementary Information
The basis of budgeting is the same as under Generally Accepted Accounting Principles (GAAP).
This schedule is presented on the GAAP basis.
See the accompanying independent auditors' report.
22
$
9,725
JAMES MADISON CHARTER ACADEMY
Comparative Schedule of Revenues, Expenses and Change in Net Assets - Budget and Actual
Enterprise Fund
For the Years Ended June 30, 2010 and 2009
2010
Final
Budget
OPERATING REVENUES
Lease revenue
Repair and maintenance fees
Total operating revenues
$
OPERATING EXPENSES
Interest expense
Depreciation
Other expenses
Total operating expenses
Operating income (loss)
NONOPERATING REVENUES
Interest income
Change in net assets
167,500
10,000
177,500
$
167,500
10,000
177,500
20,000
20,000
(52,333)
(32,333)
20,000
-
(51,733)
(32,333)
(39,049)
$
(71,382)
See the accompanying independent auditors' report.
23
-
152,133
57,700
209,833
Net assets, beginning of year
Net assets, end of year
$
152,133
57,700
20,000
229,833
600
$
Variance with
Final Budget
Actual
(600)
$
19,400
2009
Final
Budget
Actual
$ 157,000
7,000
164,000
$ 156,427
6,617
163,044
155,000
57,700
212,700
153,633
57,700
211,333
(48,700)
(48,289)
1,000
1,008
(47,700)
(47,281)
$
Variance with
Final Budget
$
(573)
(383)
(956)
1,367
1,367
411
8
$
419
8,232
$
(39,049)
See the accompanying independent auditors' report.
24