ENERGIZED FOR STEM ACADEMY, INC. ANNUAL FINANCIAL AND COMPLIANCE REPORT FOR THE FISCAL YEAR ENDING JULY 31, 2014 GEORGE EDWARD GRIGSBY, CPA STAFFORD, TEXASENERGIZED FOR STEM ACADEMY, INC. TABLE OF CONTENTS, REPORT NAME Certificate of the Board Independent Auditor's Report General-Purpose Financial Statements Statement of Financial Position Statement of Activities Statement of Cash Flows Notes to the Financial Statements Notes to the Financial Statements Supplementary Data Schedule of Expenses for Campus #321 Schedule of Expenses for Campus #390 Schedule of Expenses for Campus #455 Schedule of Expenses for Campus #459 Statement of Capital Assets for Campus #321 Statement of Capital Assets for Campus #390 Statement of Capital Assets for Campus #455 Statement of Capital Assets for Campus #459 Budgetary Comparison Schedule Campus #321 Budgetary Comparison Schedule Campus #390 Budgetary Comparison Schedule Campus #455 Budgetary Comparison Schedule Campus #459 Compliance and Internal Control 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 Schedule of Findings and Questioned Costs PAGE 14 15 16 7 18 19 20 22 22 23 24 25 26 28CERTIFICATE OF THE BOARD Name of Charter Holder: Energized for STEM Academy, Inc. Name of School: Energized for STEM Academy, Inc. HISD Campus Numbers: 321, 390, 455, and 459 We, the undersigned, certify that the attached Annual Financial and Compliance Report of Energized for STEM ACADEMY, Inc. was reviewed and Xx Approved Disapproved for the year ended July 31, 2014 at a meeting of the governing body of seid Charter Holder on the 13" day of January, 2015, 0 a Signattre of Board Secrefary Signature of Board President| believe that the audit evidence | have obtained is sufficient and appropriate to provide a basis for my audit opinion. Opinion In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ESTEM as of July 31, 2014 and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Other Information My audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying Supplementary Schedules are presented for purposes of additional analysis as required by the Texas Education Agency and are not required part of the financial statements. Such 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 my opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, | have also issued my report dated January10,2015, on my consideration of ESTEM's internal control over financial reporting and on my 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 my 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 ESTEM’s internal control over financial reporting and compliance. Chg ts alin l Dizol, Cf? George Edward Grigsby CPA Stafford, Texas January 10, 2015.GENERAL-PURPOSE FINANCIAL STATEMENTSEnergized for STEM Academy, Inc. Statement of Financial Position July 31, 2014 Assets Curront Assets Gash and Cash Equivalents $866,148 Due From Affliates 319,084 ‘Accounts Receivable 72,899 Total Current Assets 77258, 131 Property and Equipment (Net) Total Assets Current Liabilities Deferred Revenues 1,652,310 ‘Accounts Payable 94,369 Accrued Liabilities 208,592 Due To Affliates 938,135 Due to Management 55,080 Note Payable 220,000, Total Current Liabilities 3.168.486 Not Assets Unrestricted Deficit (1,907,228) Temporarily Restricted E Total Not Assets Total Liabilities and Net Assets See the accompanying notes to the financial statements. 3Energized for STEM Academy, Inc. ‘Statement of Acti ies. For the Year Ended July 31, 2014 Revenues and Other Suppo! Local Support: Other Revenue from Local Sources State Program Revenues: Foundation School Program Other State Grants & Fees Total State Program Revenues Federal Program Revenues: Title |, Part A, Regular Grant Title Wl, LEP Grant Total Federal Program Revenues Total Revenues Net Assets Released from Restrictions: Restrictions Satisfied by Payments Total Revenues & Other Support 5740 5812 5820 5920 5920 Expenses: 11 Instruction 43. Curriculum Dev. And Instructional Staff Dev. 23 School Leadership 30 Support Services - Students 33. Health Services 34 Student (Pupil) Transportation 35 Food Services 36. Cocurricular/Extracurricular Activites 41 General Administration 51 Faciities Maintenance and Operations 52 Security & Monitoring Services Total Expenses Change in Net Assets Net Deficit at Beginning of Year Net Deficit at End of Year Temporarily Unrestricted Restricted Total S$ 151,247 $ - $151,247 = 3,262,490 3,262,499 7 255,142 255.142 Tei2a7___ 3,517,641 3,668,888 S 152,383, 152,383, S 5,837 5,837 758,220 758,220 Tot 247 3,675,861 827,108 3,675,861 _ (3,675,861) - 3,807,108 3,827,108 = 2,087,249 - 2,087,249 41,000 - 11,000 867,805 : 567,805 63,469 - 63,469 377 - 377 90,629 - 90,629 27,742 - 27,742 73,824 - 73,824 142,577 - 142.577 990,909 - 990,809 441,403 : 141,403 7176.28 = 4,176,983 (349.875) : (349,875) (957,350) : (957,350) $4,307,225) § = S__ (4,307,225) See the accompanying notes to the financial statements. 4Energized for STEM Academy, Inc. Statement of Cash Flows For the Year Ended July 31, 2014 Cash Flows from Operating Activities: Local Foundation School Program Payments Grant Payments Payments to Vendors for Goods and Services Rendered Payments to Charter Schoo! Personnel for Services Rendered Interest Payments Net Cash Provided by Operating Activities, Cash Flows from Investing Activities: Purchase of Land and Building Purchase of Equipment Net Cash Provided by Investing Activities Cash Flows from Financing Activities Issuance of Long-Term Debt Principal Payments on Long-Term Debt Net Cash Provided by Financing Activities Net increase(decrease) in Cash Cash at Beginning of Year Cash at Ending of Year Reconciliation of Change in Net Assets to Net Cash Provided by Operating Activites: Change in Net Assets Adjustments to Reconcile Change in Net Assets to Net Cash Provided by Operating Activities: Depreciation (increase) Decrease in Assets Accounts Receivable Increase (Decrease) in Liabilities Accounts Payable Accrued Liabilities Net Cash Provided by Operating Activities, Interest Expense $ 217,640 3,262,499 413,362 (2,177,621) (11307,052) A828 (408,828) 457,320 (349,875) 153,980, 66,393 (212,423) 750,753 $__ 22,302 See the accompanying notes to the financial statements. 5NOTES TO THE FINANCIAL STATEMENTS(1) Energized for STEM Academy, Inc. Notes to the Financial Statements July 31, 2014 Summary of Significant Accounting Policies The general-purpose financial statements of ESTEM Charter Holder (the corporation) were prepared in conformity with accounting principles generally accepted in the United States. The Financial Accounting Standards Board is the accepted standard setting body for establishing non-for-profit accounting and financial reporting principles. Corporate Operations Energized for STEM Academy, Inc. (ESTEM) started operations in July 2008 and was registered as a Texas Corporation May 22, 2008. ESTEM operates as a charter school through the Houston Independent School District (HISD) and is funded through an annual agreement with HISD. ESTEM is recognized as an exempt organization for federal income taxes under section 501 (c) (3) of the Internal Revenue Code, effective July 14, 2008. ESTEM operated 4 Alternative Education Campuses (AEC) and was funded through HISD contracts identified as ESTEM Central and ESTEM West. Reporting Entity The corporation is a not-for-profit organization incorporated in the State of Texas in 2008 and exempt from federal income taxes pursuant to Section 501(c)(3) of the Internal Revenue Code. The corporation is governed by a Board of Directors comprised of three members. The Board of Directors is selected pursuant to the bylaws of the corporation and has the authority to make decisions, appoint the chief executive office of the corporation, and significantly influence operations. The Board of Directors has the primary accountability for the fiscal affairs of the corporation Since the corporation received funding from local, state, and federal government sources, it must comply with the requirements of the entities providing those funds. ESTEM Central and ESTEM West The purpose of the Energized for Science, Technology, Engineering, and Mathematics Academy (ESTEM Central and ESTEM West) is to increase student achievement in Houston Independent School District by engaging and exposing students to innovative science and math instruction 6Basis of Presentation ESTEM's financial statements have been prepared in conformity with generally accepted accounting principles as applied to non-profit organizations in conjunction with the Texas Education Agency's Financial Accountability System Resource Guide. Use of Estimates The accompanying financial statements have been prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. Accordingly, management made certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts as revenues and expenses during the reporting period Actual results could differ from those estimates. Net Assets Net assets and revenues, expenses, gains and losses are classified based on the existence and nature or absence of donor-imposed restrictions. Restricted revenues whose restrictions are met in the same year as received are shown as unrestricted revenues. Accordingly, net assets of the organization and changes therein are classified and reported as follows: Unrestricted net assets — net assets that are not subject to donor- imposed stipulations, Temporarily restricted — net assets subject to donor-imposed stipulations that may or will be met, either by actions of the corporation, the charter school and/or the passage of time. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. Permanently restricted net_assets - net assets required to be maintained in perpetuity with only the income to be used for the School's activities due to donor-imposed restrictions,Cash and Cash Equivalents For purposes of the statement of cash flows, the School considers all highly liquid investment instruments purchased with original maturities of three months or less to be cash equivalents. Property, Equipment, and Depreciation Property and equipment are stated at cost. Depreciation and amortization of property and equipment with a value of $5,000 or more are calculated using the straight-line method over the estimated useful lives of the net assets, which range from three to twenty years. Donations of property and equipment are recorded at fair value at the date of donation. HISD agrees to provide (a) district adopted state textbooks at no cost; and (b) student desk and other appropriate furnishings as currently available at no cost. Al tile to HISD furnished supplies, equipment, furniture, materials, and/or textbooks shall remain the sole property of HISD. Contributions The school records unconditional contributions, including promises to give, as revenue when received. Conditional contributions are recognized as revenue when the conditions on which they depend have been substantially met. Contributions are recorded net of estimates of uncollectible amounts. The School reports gifts of cash and other assets as restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or a purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statements of activities and changes in net assets as net assets released from restrictions. Gifts of property and equipment are reported as unrestricted support unless explicit donor stipulations specify how the donated assets must be used.(2) Revenues Revenues from HISD are a flow-through from the State of Texas. School funds are earned (a) based on reported attendance and (b) project-by- project approved reimbursable expenses. Revenues for (a) are recognized as eamed and billed based on the monthly Average Daily Attendance (ADA). The billing rates per enrolled student are stipulated in the agreement HISD's support per student (ADA billing) is per school year, which is estimated at 180 school days. These anticipated allotments are disbursed quarterly, in advance, with the final settlement on or before the end of the school year; and (b) reimbursable expenses are recognized as earned when the related program expenditures are incurred. These reimbursable expenses are project specific. Consequently, the use of these funds are temporarily restricted and released from restriction as the projects are completed. Should the cumulative attendance rate fall below 96% for either campus, HISD has the option of implementing a revised payment schedule based ‘on the actual cumulative attendance rate. Related Organizations Related organizations are excluded from the financial reporting entity because ESTEM's accountability does not extend beyond its own actions. Audited financial statements are available from the respective organizations. Related organizations are described as follows: Academy for Accelerated Learning (AAL), Energized for Excellence Academy (EEA) and Inspired for Excellence Academy (IEA) are charter schools and have been organized by the same individuals. EEA and AAL share board members while IEA and ESTEM have the same board of directors. AAL, EEA and IEA maintain separate books and records, and separate bank accounts, from those of ESTEM. Title to all property owned by AAL, EEA and IEA are recorded in their respective names. Educational Learning and Enrichment Center, Inc. (ELEC) is a for-profit organization owned by the School's Founder and Head of Schools.(3) (4) (5) Related Party Transactions From time to time non-interest bearing advances are made between these related organizations based on cash flow needs. The advances and repayments are approved by the Board but are not subject to any written agreements between the entities. The amounts due from EEA for operating expense reimbursements was $319,083. Due to IEA, AAL, and ELEC was $83,358, $220,000, and $635,349 respectively and due to officers is $55,080. There is no independent guarantee of the collectability of the receivable due from the related entities, however based upon prior experience of the related party transactions, payments are being made on the outstanding balance. Management believes the related entity receivables are 100% collectible and therefore no allowance for bad debt has been recorded. ELEC donated classroom space for some ESTEM West classes valued at $133,590. The board chairman of EEA (a related entity), served as legal counsel and management consultant for ESTEM. There is a written agreement. The legal counsel/consultant was paid $34,000. There were no unpaid or outstanding fees at July 31, 2014 Property and Equipment Property and equipment as of July 31, 2014 is as follows: Land Improvements $ 303,909 Building and Improvements 203,432 Furniture and Equipment 439,708 Leasehold Improvement 469,238 Total Property and Equipment 1,416,287 Less: Accumulated Depreciation (813,157) Net Property and Equipment $603,130 Depreciation of property and equipment for the year ended July 31, 2014 was $157,111 Operating Leases In July 2011, ESTEM Central entered a Lease Agreement with HISD (funding agency) for the Grimes School building located at 9220 Jutland Road, for a monthly lease of $14,816 10(6) (7) (8) (9) The lease is for the period July 14, 2011 to July 13, 2016. ESTEM West utilizes space owned by ELEC at 6107 Bissonnet Street at no cost to ESTEM. In-kind rent income of $133,590 is recorded as local revenues. Future minimum lease payments related to operating leases are detailed as follows: Year Ended July 34, Jutland Total 2015 $177,792 $177,792 2016 471,104 171,101 Total 3 Total rental expense for the year ended July 31, 2014 was $177,792 Legal Issues ESTEM is defendant to several legal claims. However, management does not consider the results to be material to its continued operations, Commitments and Contingencies ESTEM receives pass-through funds from HISD that are governed by various statues and regulations. State program funding is based primarily on student attendance; data submitted to HISD and is subject to audit and adjustments. The programs administered by ESTEM have complex compliance requirements, and should State or Federal auditors discover areas of noncompliance, charter school funds may be subject to refund, Concentrations of Credit Risk Arising from Cash Deposits in Excess of Insured Limits ESTEM maintains its cash accounts in one financial institution located in Houston. The accounts are insured by the Federal Deposit Insurance Corporation up to $250,000 each. At July 31, 2014 $591,623 of ESTEM's cash balances were not fully insured. Campus Locations The charter holder operates 2 campuses (Central campus located at 9220 Jutland Street and West campus at 6107 Bissonnet Street) in Houston, Texas, "(14) Going Concern (15) ESTEM incurred a net loss of $349,875 during the year ended July 31 2014, and as of that date, the ESTEM's current liabilities exceeded its, current assets by $1,910,355 and its total liabilities exceeded its total assets by $1,307,225. Those factors as well as the uncertain conditions ESTEM faces regarding its loan agreements, create an uncertainty about ESTEM's ability to continue as a going concer. Management of ESTEM is developing a plan to reduce its liabilities through forgiveness of debt. In addition, in June 2014, the new negotiated contract with HISD increased Average Daily Attendance (ADA) payments substantially. The financial statements do not include any adjustments that might be necessary if ESTEM is unable to continue as a going concern Subsequent Events The date through which subsequent events have been evaluated is January 10, 2015, which is the date the financial statements were available to be issued. ESTEM paid off the note payable of $220,000 with interest in September 2014. 13SUPPLEMENTARY DATAObject Code 6100 6200 6300 6400 Energized for STEM Academy, Inc. Schedule of Expenses by Campus Campus #321 For the year ended July 31, 2014 Expenses Payroll Costs $493,234 Professional and Contracted Services 339,930, ‘Supplies and Materials 46,717 Other Operating Costs 144,919, Total Expenses 51,024.80 See the accompanying notes to the financial statements. 14Energized for STEM Academy, linc. Schedule of Expenses by Campus ‘Campus #390 For the year ended July 31, 2014 ObjectCode Expenses 6100 Payroll Costs S$ 670,958 6200 Professional and Contracted Services 213,086 6300 Supplies and Materials 47,005 6400 Other Operating Costs Total Expenses See the accompanying notes to the financial statements. 15Energized for STEM Academy, Inc. Schedule of Expenses by Campus Campus #455 For the year ended July 31, 2014 Object Code Expenses 6100 6200 6300 6400 Payroll Costs $ 625,651 Professional and Contracted Services 284,363 Supplies and Materials 51,651 Other Operating Costs 219,358 Total Expenses S_1,181,023 See the accompanying notes to the financial statements. 16Energized for STEM Academy, linc. ‘Schedule of Expenses by Campus Campus #459 For the year ended July 31, 2014 Object Code Expenses 6100 Payroll Costs $ 451,108 6200 Professional and Contracted Services 333,315 6300 Supplies and Materials 33,019, 6400 Other Operating Costs 422.133 Total Expenses See the accompanying notes to the financial statements. 171510 1520 1539 1520 Energized for STEM Academy, Inc. ‘Schedule of Capital Assets Campus #321 For the year ended July 31, 2014 Ownership interest State Total__Local Land and Improvements Buildings and Building Equipment Furniture and Equipment Leasehold Improvement Total Property and Equipment See the accompanying notes to the financial statements. 18Energized for STEM Academy, Inc. ‘Schedule of Capital Assets Campus #390 For the year ended July 31, 2014 ‘Ownership Interest Total Local St 1510 Land Improvements $ 166,361 $ - $ 166,361 1520 Buildings and Building Equipment 411/382 > 1411382 1538 Furniture and Equipment 183,924 > 183,924 1520 Leasehold Improvements 271,606. : 271,606. Total Property and Equipment See the accompanying notes to the financial statements, 19Energized for STEM Academy, Inc. ‘Schedule of Capital Assets Campus #455 For the year ended July 31, 2014 Ownership Interest Total Local__State 1510 Land Improvements $ 137,548 $ = - $ 137,548 1520 Buildings and Building Equipment 92,080 92,080 4639 Furniture and Equipment 148,037 = 148,037 1520 Leasehold Improvements 188,744 ~ 188,744 Total Property and Equipment See the accompanying notes to the financial statements. 20Energized for STEM Academy, Inc. ‘Schedule of Capital Assets Campus #458 For the year ended July 31, 2014 Ownership Interest Total Local____State 1510 Land and Improvements 1520 Buildings and Building Equipment 1539 Furniture and Equipment 1520 Leasehold Improvements Total Property and Equipment See the accompanying notes to the financial statements. 241Energized for STEM Academy, Inc. Budgetary Comparison Schedule Campus #32 For the year onded July 31, 2014 Variance Budgeted Amounts Actual from Final ginal Final ‘Amounts Budget ‘Revenues and Other Suppor Local Support 5740 Other Revenve from Local Sources 8 s - 36453 36.45, Total Local Support 36.455 33 ‘State Program Revenues: 5812 Foundation School Program 229859 20.889 5820 Other Stat Grants & Fees Distrib. by HISD 18820 18,20 Total Stato Program Revenues E 3a67o 548.679 Federal Program Revenues: 5820 Federal Revenues Distrbuted by HISD 36,805 36,605 Total Federal Program Revenues : 36,605 36,606 Releatad from Restctons autiey Total Revonuee & Othor Support 281,938 Expenses: 41 Instruction 295,890 295.600 203,692 (1,998) 13. Curiculum Development and Instructional 8,000, 8,000 8.000 - 23 Sehool Leadership 285,800 265,800 201,892,039 30. Suppott Services- Students 53,000 53,000, 52,763 (237) 34 Student Transportation 17,000, 17,000 16.692 (108) 35. Food Services 12,000 12,000 12082 2 38 Co-CuricularfEdtracurioula Activities 22,000 22,000 21,188 (802) 41 General Administration 30,000 30,000 29,839 (is) 51 Facilly Plant Maintenance and Operations 195,500 195,500 286824 T1,324 52, Securty & Monitoring 31,200 31,200 iris 513, Total Expenses 320.180, 320,190 7,024,800 94610 CChange in Net Assets (41,055) (541,055) (602,862) (61,807) Not Assets at Beginning of Yoar 2.105531) 2.108.531) _ 2,106,531) Net Assets at End of Year S (2.647.586) $ (2.647.586) $ (2.709.299) $ (61,607) See the accompanying notes to the financial statements. 22Energized for STEM Academy, Inc. Budgetary Comparison Schedule ‘Campus #390 For the year endod July 31, 2014 Variance Budgeted Amounts, Actual from Final Original ___Final_ Amounts _Budgot Revenues and Other Suppor Local Support: ‘5740 Other Reverue from Local Sources s a8 S358 $34,598 Total Local Support 34588 34.56 ‘State Program Revenues: 15812 Foundation Schoo! Program 1,270,266 1,270,256 5820 Other State Grants & Fees Distrib. by HISD ‘Total State Program Revenues z 270,205 1.270266 Federal Program Revenues: ‘5920 Federal Reverues Distrbuted by HISD 70.306 Total Federal Program Revenues z 78,306 ‘Total Revenues & Other Support 7383,170) Exponses: 11 Instruction 575,000 575,000, 11326 23. Schoo! Leadership 14600 149,500 24485 20. Support Services- Students 128 125 1 34 Student Transportation 16500 16,500 2) 35 Food Services 400 400 ® 36 Co.CurriculariEracuricula Actes 8,70 8,700 2 41 General Administration 37500 37,500 388 51 Facility Maintenance and Operations 130,000 130,000 72,886 52. Security & Monitoring 46,000 46,000 (148) ‘Total Expenses 257,725 957,725 3,92 Change in Net Assets son7e1 392,047 (65.464) Not Assets at Beginning of Year eoase9 004.689 i Net Assets at End of Year See the accompanying notes to the financial statements. 23Energized for STEM Academy, Inc. ‘Budgetary Comparison Schedule ‘Campus #485, Forthe year ended July 31, 2014 Revenues and Other Suppo 5740 5012 5820 Local Support ‘Other Revenve from Local Sources Total Local Support ‘State Program Revenues: Foundation School Program Other State Grants & Fees Distrb, by HISD Total State Program Revenues Federal Program Revenues: 5920 Federal Revenues Distributed by HISD Total Federal Program Revenues Total Revenues & Other Support Expenses: 11 Instruction 13. Cuticulum Development and Instructional 23 School Leadership 30 Suppott Servoes-Students 24 Student Transportation 35 Food Services 38 Co-CuriclarEtrecuricula Activites 41 General Administration 51 Facility Maintenance and Operations 52 Securty & Monitoring Total Expenses Change in Net Assets Not Assets at Beginning of Year Net Assets at End of Year Budgeted Amounts 721,000 3,000 22,500 10,000 41,500 7.500 35,000 0,000 126,000 42,000 7057.50 144,085 226,132 Final 721,000 3.000 22,500 10,000 41,500 7.800 35,000 50,000 126,000 42,000 7057.50 144,885 225,132 s S_s70017 § 370017 § 270.286 § See the accompanying notes to the financial statements. 24 Variance ‘Actual from Final Amounts Budget 47933 $47,133, 47.133 _47.193 4979,762 1,070,762 e968 39,968, 7119,730 1,119,790 casts 68.314 oasi4 68,314 235,177 1235.17 787742474 3.000 474es 2904 9.885 ns) 41497 ° 6.045 655) 35398 398, 50/623 23 100g? 73,407 41,981 “9 1181,023 123.523 54,154 (80,731) 225,132 worst)Enorgizod for STEM Academy, Inc. Budgetary Comparison Schedule ‘Campus #469 Forthe year ended July 31, 2014 Variance Budgeted Amounts Actual ‘rom Final Original Final “Amounts Budget ‘Revenues and Other Support: Local Support 5740 Other Revenue from Local Sources s = - 8 33398 $ 33.308 ‘otal Local Support a 33.398 33.308 State Program Revenues: ae a 8812 Foundation School Program “ = sa5e25 923,825 $820 Other State Grants 8 Fees Distib.by HISO 195,742 195,742 “Total State Program Revonues 719,507 719.567 Federal Program Revenues: 5920 Federal Reverues Distributed by HISD 2 _ e194 34.108 Total Federal Program Revenues ~ 34.194 24.198 Total Revenues & Othor Support 767.159 787.159 Expenses: 11 Instruction 479,000 479000 479,088 58 23 School Leadershin 35,500 3550060497 2aee7 30. Support Services ~Stuents 70 700 695 6 33. Hoalth Services 330 390 a 13) 34 Student Transportation 14,500 14,500 14.599 8 38 Food Senvices 8,400 8.400 8.358 «) 36 Co-CurricuartEstracuricula Activities 8.500 8.500 8.498 4 41 Goneral Administration 25,000 25000 © 24,109 ei) 51 Facility Maintenance and Operations 280,000 250000 321,487 7487 52 Security & Monitoring 22,000 22000 21,855 (145) Total Expenses 843.360 43.980 039.575 95.586 Change in Net Assets (60,986) (90.996) (182.416) (1.420) Not Assots at Beginning of Year 119.360, 118.360 118.360 oes Not Assets at End of Year S__28368 3 26.264 § (93.056) Gi.420) See the accompanying notes to the financial statements. 25COMPLIANCE AND INTERNAL CONTROLGEORGE EDWARD GRIGSBY CPA PO BOX 1824 STAFFORD TX 77497 713-777-5236 INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING ‘STANDARDS To: the Board of Directors and Management | 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 Auaiting Standards issued by the Comptroller General of the United States, the financial statements of Inspired for Excellence Academy Inc ESTEM (a nonprofit organization), which comprise the statement of financial position as of July 31, 2074, and the related statements of activities, and cash flows for the year then ended, and the related notes to the financial statements, and have issued my report thereon dated January 10, 2015. Internal Control Over Financial Reporting In planning and performing my audit of the financial statements, | considered ESTEM'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 (IEA’s) internal control Accordingly, | do not express an opinion on the effectiveness of (IEA’s) internal control. A deficiency in internal contro! exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. My consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during my audit | did not identify any deficiencies in internal control that | consider to be material weaknesses. However, material weaknesses may exist that have not been identified 26Compliance and Other Matters As part of obtaining reasonable assurance about whether ESTEM's financial statements are free from material misstatement, | 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 my audit, and accordingly, | do not express such an opinion. The results of my tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. However | noted certain matters that | reported to management in my management letter dated January 10, 2015 Purpose of this Report The purpose of this report is solely to describe the scope of my testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the organization’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 organization's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. be c#A Ga eautcaleigas, CK ety Stafford TX January 10, 2015 27Energized for STEM Academy, Inc. Schedule of Findings and Questioned Costs For the year ended July 31, 2014 Summary of Auditor's Results Type of auditor's report issued on the financial statements: Unqualified Significant deficiencies identified that were not considered to be material weaknesses: None, Material weaknesses identified, None, Noncompliance material to the financial statements: None. Findings disclosed by the audit of the financial statements which the auditor is required to report None. Federal Awards: Auditee did not meet the $500,000 threshold for a Single Audit. Findings related to the Financial Statements None noted 28