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Management's Discussion and Analysis
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Management of Innovations Charter Middle School (the School) offers the following narrative
overview and analysis of the financial activities of the School for the fiscal year ended June 30, 2013.
Readers are encouraged to use this information in conjunction with information furnished in the
Schools financial statements. This summary should not be taken as a replacement for the audit, which
consists of the basic financial statements and other supplemental information.
FINANCIAL HIGHLIGHTS
The School ended fiscal year 2013 with net assets of $648,987
For the fiscal year ended June 30, 2013, the Schools revenues exceeded expenses by $111,993
OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis are intended to serve as an introduction to the Schools basic financial
statements. The Schools basic financial statements consist of three components; 1) government-wide
financial statements, 2) fund financial statements, and 3) notes to the financial statements. The basic
financial statements present two different views of the School through the use of government-wide
statements and fund financial statements. In addition to the basic financial statements, this report
contains other supplemental information that will enhance the understanding of the financial condition
of the School.
Government-wide Financial Statements
The government-wide financial statements are designed to provide a broad overview of the Schools
finances, similar in format to the financial statements of a private-sector business. The governmentwide statements provide short and long-term information about the Schools financial status as a whole.
The two government-wide statements report the Schools net assets and the current year changes. Net
assets are the difference between the Schools total assets and total liabilities. Measuring net assets is
one way to evaluate the Schools financial condition.
The government-wide statements are divided into three categories: 1) governmental activities 2)
business-type activities, and 3) component units. The governmental activities include the Schools basic
services. The business-type activities are services the School charges for which are not directly related to
the Schools mission. For the year ended June 30, 2013, the School had no business-type activities or
component units.
Fund Financial Statements
The fund financial statements provide a more detailed look at the Schools most significant activities. A
fund is a grouping of related accounts used to maintain control over resources segregated for specific
activities or objectives. All of the operations of the School are presented in governmental funds only.
Governmental funds are used to account for those functions reported as governmental activities in the
government-wide financial statements. The Schools basic services are accounted for in governmental
funds. These funds focus on how assets that can readily be converted into cash, flow in and out, and
what monies are left at year-end available for spending in the next year. Governmental funds are
reported using an accounting method called modified accrual accounting. This method has a current
financial resources focus. As a result, the governmental fund financial statements provide a detailed
short-term view of the financial resources available to finance the Schools programs. The relationship
between government activities (reported in the Statement of Net Assets and the Statement of Activities)
and governmental funds is described in a reconciliation that is a part of the fund financial statements.
The School adopts an annual budget for its general fund, as required by the Florida Statutes. The budget
is legally adopted by management of the School and its Board. Budgetary comparison schedules have
been included as part of the required supplementary information. The budgetary comparison schedules
show four columns: 1) the original budget as adopted by the board, 2) the final budget as amended by
the board, 3) the actual resources, charges and ending balances in the general fund, and 4) the variance
between the final budget and the actual resources and charges. During the year ended June 30, 2013,
there were no amendments to the original budget.
Notes to Financial Statements
The notes to financial statements provide additional information essential to the full understanding of
the information reported in the government-wide and fund financial statements. The notes to the
financial statements start on page 14 of this report.
Other Reports
This report also included the Independent Auditors Report on Internal Controls Over Financial Reporting
and On Compliance and Other Matters Required by Government Auditing Standards, as well as the
management letter required by the Rules of the Auditor General, Chapter, 10.850, Audits of Charter
Schools and Similar Entities.
Restatement of Prior Year Balances
As more fully described in Note G in the notes to financial statements, subsequent to the issuance of the
prior years audited financial statements, some errors were detected relating to capital assets and the
cutoff of expenditures. Accordingly, for purposes of comparison, herein, the fiscal 2012 balances have
been restated.
2013
As Restated
2012
Increase
(Decrease)
$ 118,771)
(19,988)
$ 98,783)
Assets
Current Assets
Capital Assets, net
Total Assets
$ 563,420
117,171
$ 680,591
$ 444,649
137,159
$ 581,808
Liabilities
Current Liabilities
Net Position
Invested in Capital Assets
Unrestricted
31,604
$ 114,617
534,370
$ 648,987
44,814
$ (13,210)
$ 117,635
419,359
$ 536,994
$ (3,018)
115,011)
$ 111,993)
The increase in current assets is related to an increased cash balance resulting from operations during
the fiscal year. Unrestricted net position increased as a direct result of the increase in cash related to
current year revenues exceeding expenditures.
Change in Net Position
The table below shows the comparative summary of changes in net position, revenues and expenses for
fiscal years 2013 and 2012.
$ 125,336
1,113,351
536
1,239,223
3
As Restated
2012
Increase
(Decrease)
$ 166,728
1,083,029
332
1,250,089
$ (41,392)
30,322)
204)
(10,866)
Expenditures
Instruction
Board
General administration
School administration
Fiscal services
Food services
Pupil transportation services
Operation of plant
Total expenditures
Change in Net Position
507,065
19,353
53,635
239,403
11,573
4,656
19,385
272,160
675,322
1,488
54,151
189,907
21,683
12,291
13,197
179,291
(168,257)
17,865)
(516)
49,496)
(10,110)
(7,635)
6,188)
92,869)
1,127,230
1,147,330
(20,100)
$ 111,993
$ 102,759
9,234)
The decrease in instruction expenses is primarily due to the purchasing of textbooks done in the prior
year in comparison to the current year. The net change has been consistent from year to year due to
careful fiscal oversight of expenses throughout the year by the Board of Directors and administration of
the school.
FINANCIAL ANALYSIS OF THE SCHOOLS FUNDS
The focus of the Schools governmental funds is to provide information on near term inflows, outflows,
and balances of usable resources. This information is useful in assessing the Schools financing
requirements. Specifically, unrestricted fund balance is a useful measure of a governments net
resources available for spending at the end of the fiscal year.
At the completion of the Schools fiscal year, its governmental funds reported a combined fund balance
of $534,370.
General Fund Budgetary Highlights
Generally, budget amendments fall into one of three categories: 1) amendments made to adjust the
estimates used to prepare the original budget; 2) amendments made to recognize changes in funding
amounts; 3) changes in appropriations necessary to maintain services. During the fiscal year, the School
did not amend its original budget.
In the general fund, actual revenues were approximately $40,500 less than budget revenues. On the
expenditure side, actual expenditures were approximately $102,300 less than budget expenditures. As a
result, there was a favorable variance of approximately $61,800.
Governmental Activities
Gross Capital Assets
2013
Capital Assets
Leasehold improvements
Furniture and equipment
Vehicle
Computer and computer software
32,479
60,812
27,284
63,918
184,493
2012 as
restated
$
32,479
48,632
27,284
63,918
172,313
Increase
(Decrease)
$
12,180
12,180
There were no major capital asset additions during the year ended June 30, 2013.
Depreciation expense of $31,973 was allocated to the school administration function in the Statement
of Activities.
More detailed information about the Schools capital assets is presented in Note B to the Basic Financial
Statements.
Long Term Debt
As of June 30, 2013, long term debt consisted of a note on the Schools vehicle with an original maturity
of November 29, 2016. During fiscal 2013, the School made prepayments of principal on the note
reducing the year-end balance to $2,554, which is shown as current based on the monthly payment
schedule. More detailed information on long term debt are in Note C to the Schools Basic Financial
Statements.
CONTACTING THE SCHOOLS FINANCIAL MANAGEMENT
This financial report is designed to provide interested parties with a general overview of the Schools
finances and to demonstrate the Schools accountability for the funding it receives. Should additional
information be required, please contact the Schools administrative offices at 2768 Hiawassee Road,
Orlando, Florida 32818.
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We have audited the accompanying financial statements of the governmental activities and each major
fund of Innovations Middle Charter School (the School), a charter school and component unit of the
District School Board of Orange County, Florida, as of and for the year ended June 30, 2013, and the
related notes to the financial statements, which collectively comprise the Schools basic financial
statements as listed in the table of contents.
Managements 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 of
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 entitys
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 entitys internal control. Accordingly, we express no such opinion. An audit also
includes evaluating the appropriateness of accounting polices used and the reasonableness of significant
accounting estimates made by management, as well as evaluating the overall presentation of the
financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Opinion
In our opinion, the financial statements referred to previously present fairly, in all material respects, the
respective financial position of the governmental activities, and each major fund of the School, as of
June 30, 2013, and the respective changes in financial position thereof for the year then ended in
conformity with accounting principles generally accepted in the United States of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the managements
discussion and analysis and budgetary comparison information on pages 1-5 and 24 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 managements 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 September
24, 2013, on our consideration of the Schools internal control over financial reporting and on our tests
of its compliance with certain provisions of laws, regulations, contracts, 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 Governmental Auditing Standards in considering the Schools internal
control over financial reporting and compliance.
Governmental
Activities
ASSETS
Cash and cash equivalents
Accounts receivable
Prepaid Expenses
433,369
119,429
10,622
Capital assets:
Leasehold improvements
Furniture and equipment
Vehicle
Computer and computer software
Less: accumulated depreciation
Total capital assets, net
32,479
60,812
27,284
63,918
(67,322)
117,171
Total assets
LIABILITIES
Accounts payable and accrued expenses
Long-term debt:
Portion due or payable within one year:
Note payable
Total liabilities
NET POSITION
Invested in capital assets, net of related debt
Unrestricted
Total net position
Total liabilities and net position
680,591
29,050
2,554
31,604
114,617
534,370
648,987
680,591
The accompanying notes to financial statements are an integral part of this statement
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Governmental Activities:
Instruction
Board
General administration
School administration
Fiscal services
Food services
Pupil transportation services
Operation of plant
$
125,336
125,336
Operating
Grants and
Contributions
Capital
Grants and
Contributions
648,987
111,993
536,994
1,113,887
1,113,351
250
286
(381,729)
(19,353)
(53,635)
(239,403)
(11,573)
(4,656)
(19,385)
(272,160)
(1,001,894)
Governmental
Activities
648,987
111,993
536,994
1,113,887
1,113,351
250
286
(381,729)
(19,353)
(53,635)
(239,403)
(11,573)
(4,656)
(19,385)
(272,160)
$ (1,001,894)
Total
The accompanying notes to financial statements are an integral part of this statement
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General revenues:
State and local sources
Other Contributions
Interest Earnings
507,065
19,353
53,635
239,403
11,573
4,656
19,385
272,160
$ 1,127,230
Expenses
Charges
for
Services
General
Fund
ASSETS
Cash and cash equivalents
Accounts receivable
Prepaid and other assets
Total assets
433,369
119,429
10,622
563,420
LIABILITIES
Accounts payable and accrued expenses
Total liabilities
29,050
29,050
FUND BALANCE
Nonspendable:
Prepaid and other assets
Spendable:
g
Unassigned
,
523,748
534,370
10,622
563,420
The accompanying notes to financial statements are an integral part of this statement
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534,370
117,171
Long-term liabilities, including notes payable, are not due and payable
in the current period and therefore, are not reported as liabilities in the
governmental funds. Long-term liabilities at the end of the period consist of:
Notes payable
Total net position - governmental activities
(2,554)
$
648,987
The accompanying notes to financial statements are an integral part of this statement
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General
Fund
REVENUES
State and local sources
Federal - Title I
Contributions and other revenue
$ 1,113,351
536
Total revenue
EXPENDITURES
Current
Instruction
Board
General administration
School administration
Fiscal services
Food services
Pupil transportation
Operation of plant
Total expenditures
Excess (deficiency) of revenues
over expenditures
Net change in fund balances
Fund balances at beginning of year as restated
Fund balances at end of year
Other
Governmental
Fund
Total
Governmental
Funds
125,336
-
1,113,351
536
1,113,887
125,336
1,113,887
393,909
19,353
53,635
239,403
11,573
4,656
19,385
240,187
125,336
519,245
19,353
53,635
239,403
11,573
4,656
19,385
240,187
982,101
125,336
1,107,437
131,786
6,450
131,786
402,584
6,450
402,584
534,370
409,034
The accompanying notes to financial statements are an integral part of this statement
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6,450
(19,793)
(13,343)
The accompanying notes to financial statements are an integral part of this statement
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15
15
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3
17
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Use of estimates
In preparing the financial statements in conformity with accounting principles generally accepted in the
United States, management is required to make estimates and assumptions that affect the reported
amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the
period presented. Actual results could differ significantly from those estimates.
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Additions
32,479
48,632
27,284
12,180
-
63,918
$ 172,313
$ 12,180
(2,557)
(6,149)
(1,949)
(2,557)
$ (2,165)
(7,786)
(3,898)
(2,165)
(24,695)
$ (35,350)
(18,123)
$ (31,972)
Disposals
$
Ending
Balance
$
32,479
60,812
63,918
27,284
$ 184,493
$ (4,722)
(13,935)
(5,847)
(4,722)
(42,818)
$ (67,322)
Depreciation expense of $31,973 was allocated and charged to the school administration function in the
accompanying statement of activities.
NOTE C - DEBT
On October 15, 2011 the School financed the purchase of a vehicle over a five year period. The note is
secured by the vehicle. The total amount financed was $25,284. Principal and interest payments of $461
are due monthly at an interest rate of 5.22%. During the year ended June 30, 2013, the School prepaid a
substantial amount of the principal. The balance outstanding at June 30, 2013 amounted to $2,554.
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$ 19,525)
(16,971)
$ 2,554 )
663,524
166,900
80,630
56,531
39,174
14,138
44,890
43,367
5,674
4,010
225
(2,728)
(2,984)
$ 1,113,351
The administrative fee paid to the School District during the year ended June 30, 2013 totaled $53,635,
and is reflected as a general administration expense in the accompanying statement of activities and
statement of revenues, expenditures and changes in fund balances governmental funds.
NOTE E RISK MANAGEMENT PROGRAM
The School is exposed to various risks of loss related to torts, theft of, damage to, and destruction of
assets, errors and omissions, general liabilities, and natural disasters for which the school carries
commercial insurance. Under the plan for property insurance, the Schools liability is $1 million. There
have been no significant reductions in insurance coverage during the fiscal year ending June 30, 2013.
Settled claims resulting from these risks have not historically exceeded commercial coverage. The School
is in compliance with coverage parameters dictated by the charter with the School District.
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$111,377
117,690
81,304
$310,371
22
$ 437,698
(35,114 )
$ 402,584
The above adjustments increased the current year change in fund balance by $35,114 and decreased the
prior year change in fund balance by a like amount.
Governmental Activities
The beginning net position of the governmental activities in the government-wide statement of net
position has also been restated to record prior period adjustments to correct the Schools accounting for
textbooks which were treated as capital assets, and to correct for improper cutoff of expenses in the
statement of activities. A reconciliation of the prior period ending net position to the current year
beginning net position for the governmental activities is as follows:
Beginning net position
Adjustment to correct expense
cutoff
Adjustment to correct textbooks
$ 617,848
$ 536,994
(37,863)
(42,991)
The above adjustment decreased the change in net position $80,854 for the prior year and increased the
current year change in net position by $37,863.
NOTE H SUBSEQUENT EVENTS
In accordance with GASB Codification Section 2250.106, the School has evaluated subsequent events
and transactions for potential recognition or disclosure through September 24, 2013, which is the date
the financial statement were available to be issued.
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Budgeted Amounts
Original
Final
REVENUES
State and local sources
Contributions and other revenue
Total revenues
EXPENDITURES
Current:
Instruction
Board
General administration
School administration
Fiscal services
Food service
Pupil transportation services
Operation of plant
Total expenditures
Excess of expenditures over
revenues
Fund balances at the beginning of year, as restated
Fund balances at end of year
Actual
Variance
$ 1,279,732
-
$ 1,279,732
-
$ 1,113,351
536
$ (166,381)
$
536
1,279,732
1,279,732
1,113,887
(165,845)
640,500
10,500
57,987
238,750
8,000
10,000
20,000
224,000
640,500
10,500
57,987
238,750
8,000
10,000
20,000
224,000
519,245
19,353
53,635
239,403
11,573
4,656
19,385
240,187
121,255
(8,853)
4,352
(653)
(3,573)
5,344
615
(16,187)
1,209,737
1,209,737
1,107,437
69,995
69,995
6,450
402,584
402,584
402,584
$ 472,579
$ 472,579
$ 409,034
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102,300
(63,545)
$ (63,545)
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Orlando, Florida
September 24, 2013
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Section 10.854(1)(e)5., Rules of the Auditor General, requires the name or official title of the
school. The official title of the School is Innovations Middle Charter School.
Pursuant to Sections 10.854(1)(e)6.a and 10.855(11), Rules of the Auditor General, we applied
financial condition assessment procedures. It is managements responsibility to monitor the
Schools financial condition, and our financial conditional assessment was based in part on
representations made by management and the review of the financial information provided by
the same.
Our management letter is intended solely for the information and use of the Legislative Auditing
Committee, members of the Florida Senate and Florida House of Representative, the Florida Auditor
General and applicable management and is not intended to be and should not be used by anyone
other than these specific parties.
Orlando, Florida
September 24, 2013
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