Healthy Learning Academy, Inc.

A Component Unit of the Alachua County District School Board

Financial Statements

And

Independent Auditors’ Report

June 30, 2014

KATTELL AND COMPANY, P.L.

A professional accounting firm serving the nonprofit community

808-B NW 16th Avenue Gainesville, Florida 32601

(352) 395-6565

FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS’ REPORTS JUNE 30, 2014

HEALTHY LEARNING ACADEMY, INC.

A Component Unit of the Alachua County District School Board

Contents

INDEPENDENT AUDITORS’ REPORT………………………………………………………………………………… 1 REQUIRED SUPPLEMENTARY INFORMATION:

Management’s Discussion and Analysis (MD&A)…………………………………………………………….. 2 BASIC FINANCIAL STATEMENTS:

Government-wide Financial Statements:

Statement of Net Position………………………………………………………………………..……… 5 Statement of Activities………………………………………………………………………….………. 6

Governmental Fund Financial Statements:

Balance Sheet…………………………………………………………………………………………… 7 Reconciliation of the Balance Sheet to the Statement of Net Position………………………………… 8 Statement of Revenues, Expenditures and Changes in Fund Balances…………………………………. 9 Reconciliation of the Statement of Revenues, Expenditures and Changes

in Fund Balances to the Statement of Activities………………………………………………….….. 10 Notes to Financial Statements……………………………………………………………………………….…. 11

REQUIRED SUPPLEMENTARY INFORMATION:

Budgetary Comparison Schedule – General Fund………………………………………………….………….. 17 ADDITIONAL ELEMENTS:

Communication with Those Charged with Governance……………………………………………………….. 18 Management Letter…………………………………………………………………………….……….……. ……………………. 19

Independent Auditors’ Report on Internal Control Over Financial Reporting and on

Compliance and Other Matters……………………………………………………….……………..…. 20 Schedule of Findings…………………………………………………………………………..…………….… 21

School’s Response……………………………………………………………………………..…………….… 22

Kattell and Company, P.L.

Certified Public Accountants Serving the Nonprofit Community

808-B NW 16th Avenue Gainesville, Florida 32601 TEL: 352-395-6565 FAX: 352-395-6636 www.kattell.com

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors October 22, 2014

Healthy Learning Academy, Inc.

Report on Financial Statements

We have audited the accompanying financial statements of the governmental activities and each major fund of the Healthy Learning Academy, Inc. (the School), a component unit of the Alachua County District School Board, as of and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise the School’s basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements. Management is responsible for the preparation and fair presentation of these financial statements in accordance with the 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 required that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

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

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

Opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of the School as of June 30, 2014, and the respective changes in financial position thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Emphasis-of-Matter. As discussed in Note 6 to the financial statements, the 2013 financial statements have been restated to correct a misstatement. Our opinion is not modified with respect to this matter.

Other Matters – Required Supplementary Information. Accounting principles generally accepted in the United States of America require that management’s discussion and analysis and the budgetary comparison schedule, 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.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated October 22, 2014, on our consideration of the School’s internal control over financial reporting (internal control) and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on internal control or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the School’s internal control and compliance.

This discussion and analysis of the School’s financial performance provides an overview of the School’s financial activities for the fiscal year ended June 30, 2014. Please read it in conjunction with the School’s financial statements, which follow this section.

The following are various financial highlights for fiscal year 2014:

The School’s overall net position increased by approximately $43,000, which is about 46%.
Unrestricted net position at June 30, 2014 was $46,264.
The School had total expenses for the year of approximately $622,000, compared to revenues of approximately $665,000.
The School educated 90 students in the school year ending June 30, 2014, in grades K through

OVERVIEW OF THE BASIC FINANCIAL STATEMENTS

This annual report contains government-wide financial statements that report on the School’s activities as a whole and fund financial statements that report on the School’s individual funds.

Government-wide Financial Statements

The first financial statement is the Statement of Net Position. This statement includes all of the School’s assets and liabilities using the accrual basis of accounting. Accrual accounting is similar to the accounting used by most private-sector companies. All of the current year revenues and expenses are recorded, regardless of when cash is received or paid. Net position – the difference between assets and liabilities – can be used to measure the School’s financial position.

The second financial statement is the Statement of Activities. This statement is also shown using the accrual basis of accounting. It shows the increases and decreases in net position during the fiscal year. Over time, the increases or decreases in net position are useful indicators of whether the School’s financial health is improving or deteriorating. However, other non-financial factors, such as enrollment levels or changes in state funding, must also be considered when assessing the overall health of the School.

In these statements, all of the School’s activities are considered to be governmental activities. The School has no business-type activities, which are generally financed in whole or in part by fees charged to external parties for goods or services.

Fund Financial Statements

Following the government-wide financial statements are the fund financial statements. They provide more detailed information about the School’s funds.

The School maintains two individual governmental funds, the General Fund and Capital Projects Fund. These funds are considered to be major funds and, accordingly, they are separately displayed.

Governmental funds are accounted for using modified accrual accounting. Modified accrual accounting focuses on available cash and other financial assets that can readily be converted to cash. This provides a shorter-term view of the governmental fund’s financial position. A reconciliation is provided with these statements, which helps to explain the differences between the fund financial statements and the government-wide financial statements.

CONDENSED FINANCIAL INFORMATION

The following table presents condensed, government-wide current year and prior year data about net position and changes in net position.

	2014 Governmental Activities	(Restated) 2013 Governmental Activities
Net Position
Assets:
Non-capital Assets	$ 103,191	$ 70,218
Capital Assets, Net	476,887	424,183
Total Assets	580,078	494,401
Liabilities:
Current Liabilities	56,927	55,103
Noncurrent Liabilities	387,226	346,171
Total Liabilities	444,153	401,274
Net Position:
Net Investment in Capital Assets	89,661	78,012
Unrestricted	46,264	15,115
Total Net Position	$ 135,925	$ 93,127
Change in Net Position
Program Revenues:
Charges for Services	$ 67,813	$ 49,340
Capital Grants & Contributions	36,832	20,354
General Revenues:
Florida Education Finance Program	544,778	477,706
Other State Revenues	4,369	—
Unrestricted Grants & Contributions	11,047	15,183
Total Revenues	664,839	562,583
Program Expenses:
Instruction	409,786	345,309
Instructional Support Services	13,736	9,940
General Support	165,031	184,886
Community Services	196	1,796
Maintenance of Plant	9,596	—
Interest on Long-Term Debt	23,696	22,510
Total Expenses	622,041	564,441
Change in Net Position	42,798	(1,858)
Beginning Net Position	93,127	94,985
Ending Net Position	$ 135,925	$ 93,127

OVERALL FINANCIAL POSITION AND RESULTS OF OPERATIONS

Governmental Activities. The governmental activities generated $104,645 in program revenues and

$560,194 of general revenues, and incurred $622,041 of program expenses. This resulted in a $42,798 increase in net position.

THE SCHOOL’S INDIVIDUAL FUNDS

General Fund. The fund balance of the General Fund has increased by $31,149, from $15,115 to $46,264.

Capital Projects Fund. The fund balance of the Capital Projects Fund remained at $0. The School’s debt payments and capital purchases exceeded the capital outlay funds for the year.

BUDGETARY HIGHLIGHTS

General Fund. The budget was amended for refinancing and capital expenditures. There were no differences between the final budget and actual amounts.

CAPITAL ASSETS AND DEBT ADMINISTRATION

Capital Assets. The School purchased some instructional equipment and made some capital improvements. Please refer to a note to the accompanying financial statements entitled Capital Assets and Depreciation for more detailed information about the School’s capital asset activity.

Debt Administration. The School refinanced and increased one debt obligation and made scheduled payments on both obligations. Please refer to a note to the accompanying financial statements entitled Long Term Liabilities for more detailed information about the School’s long-term debt activity.

ECONOMIC FACTORS

The School currently is not aware of any conditions that are expected to have a significant effect on the School’s financial position or results of operations.

CONTACTING THE SCHOOL’S FINANCIAL MANAGEMENT

This financial report is designed to provide a general overview of the School’s finances and to show the School’s accountability for the money it receives. If you have any questions about this report or need additional financial information, contact Anni Egan (Principal), Healthy Learning Academy, 13505 West Newberry Road, Newberry, Florida 32669.

Governmental Activities
Assets
Cash and Cash Equivalents	$ 99,235
Receivables	3,956
Capital Assets:
Non-Depreciable Capital Assets	190,723
Depreciable Capital Assets, Net	286,164
Total Assets	580,078
Liabilities
Accounts Payable	3,591
Salaries Payable	53,336
Long-Term Liabilities:
Due Within One Year	13,038
Due in More Than One Year	374,188
Total Liabilities	444,153
Net Position
Net Investment in Capital Assets	89,661
Unrestricted	46,264
Total Net Position	$ 135,925

Program Revenues
Net (Expense)
			Operating	Capital	Revenue and
		Charges for	Grants and	Grants and	Change in Net
	Expenses	Services	Contributions	Contributions	Position
Functions/Programs:
Governmental Activities:
Instruction	$ (409,786)	$ 67,813	$ —	$ —	$ (341,973)
Instructional Support Services	(13,736)	—	—	—	(13,736)
General Support	(165,031)	—	—	13,136	(151,895)
Community Service	(196)	—	—	—	(196)
Maintenance of Plant	(9,596)	—	—	—	(9,596)
Interest on Long-Term Debt	(23,696)	—	—	23,696	—
Total	$ (622,041)	$ 67,813	$ —	$ 36,832	(517,396)

General Revenues:
State Revenue:
Florida Education Finance Program	544,778
Other State Revenues	4,369
Unrestricted Grants and Contributions	11,047
Total General Revenues	560,194
Change in Net Position	42,798
Net Position – Beginning of Year:
As Previously Reported	141,778
Adjustment	(48,651)
As Restated	93,127
Net Position – End of Year	$ 135,925

Total
	General	Capital	Governmental
	Fund	Projects Fund	Funds
Assets
Cash	$ 99,235	$ —	$ 99,235
Receivables	3,956		3,956
Total Assets	$ 103,191	$ —	$ 103,191

Liabilities and Fund Balances
Liabilities:
Accounts Payable	$ 3,591	$ —	$ 3,591
Salaries Payable	53,336	—	53,336
Total Liabilities	56,927	—	56,927
Fund Balances:
Unassigned	46,264	—	46,264
Total Fund Balances	46,264	—	46,264
Total Liabilities and Fund Balances	$ 103,191	$ —	$ 103,191

Reconciliation of the Balance Sheet to the Statement of Net Position – Governmental Funds

June 30, 2014

Healthy Learning Academy, Inc.

A Component Unit of the Alachua County District School Board

Fund Balances – Total Governmental Funds	$ 46,264
Amounts reported for Governmental activities in the statement of net position are different because:
Capital assets used in governmental activities are not reported in the governmental funds.
Capital Assets – Net of Accumulated Depreciation	476,887
Long-term liabilities are not reported in the governmental funds
Notes Payable	(387,226)
Net Position of Governmental Activities	$ 135,925

Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds

For the Year Ended June 30, 2014

Healthy Learning Academy, Inc.

A Component Unit of the Alachua County District School Board

Total
	General	Capital	Governmental
	Fund	Projects Fund	Funds

Revenues
State Revenue:
Florida Education Finance Program	$ 544,778	$ —	$ 544,778
Public Education Capital Outlay	—	36,832	36,832
Other State Revenues	4,369	—	4,369
Local Revenue:
School Age Child Care Fees	65,659	—	65,659
Other Local Revenues	13,201	—	13,201
Total Revenues	628,007	36,832	664,839
Expenditures and Changes in Fund Balances
Expenditures:
Current:
Instruction	422,418	—	422,418
Instructional Support Services	13,736	—	13,736
General Support	204,329	—	204,329
Community Services	196	—	196
Maintenance of Plant	9,596	—	9,596
Capital Outlay	—	774	774
Debt Service:
Principal	26,583	12,362	38,945
Interest	—	23,696	23,696
Total Expenditures	676,858	36,832	713,690
Excess of Revenues Over/(Under) Expenditures	(48,851)	—	(48,851)
Other Financing Sources (Uses)
Debt Issuance	80,000	—	80,000
Net Change in Fund Balance	31,149	—	31,149
Fund Balances, July 1, 2013:
As Previously Reported	63,766	—	63,766
Adjustment	(48,651)	—	(48,651)
As Restated	15,115	—	15,115
Fund Balances, June 30, 2014	$ 46,264	$ —	$ 46,264

Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance to the Statement of Activities – Governmental Funds

For the Year Ended June 30, 2014

Healthy Learning Academy, Inc.

A Component Unit of the Alachua County District School Board

Excess of Revenues over Expenditures – Total Governmental Funds	$ 31,149
Amounts reported for governmental activities in the statement of activities are different because:
Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is depreciated over their estimated useful lives.
Current Year Expenditures for Capital Assets	64,918
Current Year Depreciation Expense	(12,214)
Issuance of long term debt provides current financial resources to governmental funds, but has no effect on net assets. Repayment of principal is an expenditure in governmental funds, but reduces long-term liabilities in the statement of net assets.
Current Year Debt Issuance	(80,000)
Current Year Principal Payments	38,945
Change in Net Position of Governmental Activities	$ 42,798

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies of Healthy Learning Academy, Inc. conform to generally accepted accounting principles as applicable to governments. The more significant accounting policies are described below to enhance the usefulness of the financial statements to the reader.

Reporting Entity

Healthy Learning Academy, Inc. is a not-for-profit corporation organized in 2004 pursuant to Chapter 617, Florida Statutes, the Florida Not-For-Profit Corporation Act, and Section 1002.33, Florida Statutes. The not-for-profit corporation conducts business as Healthy Learning Academy (the School). The governing body of the School is the not-for-profit corporation’s Board of Directors.

The general operating authority of the School is contained in Section 1002.33, Florida Statutes. The School operates under a charter of the sponsoring school district, the Alachua County District School Board (the District). The current charter is effective until June 30, 2015, and may be renewed up to an additional 10 years provided that a program review demonstrates that certain criteria addressed in Section 1002.33(7), Florida Statutes, have been successfully accomplished. At the end of the term of the charter, the District may choose not to renew the charter under grounds specified in the charter, in which case the District is required to notify the School in writing at least 90 days prior to the charter’s expiration. Pursuant to Section 1002.33(8)(e), Florida Statutes, the charter school contract provides that in the event the School is dissolved or terminated, any unencumbered funds and all School property purchased with public funds automatically revert to the District. During the term of the charter, the District may also terminate the charter if good cause is shown. The School is considered a component unit of the District.

Criteria for determining if other entities are potential component units of the School which should be reported with the School’s basic financial statements are identified and described in the Governmental Accounting Standards Board’s (GASB) Codification of Governmental Accounting and Financial Reporting Standards, Sections 2100 and 2600. The application of these criteria provide for identification of any entities for which the School is financially accountable and other organizations for which the nature and significance of their relationship with the School are such that exclusion would cause the School’s basic financial statements to be misleading or incomplete. Based on these criteria, no component units are included within the reporting entity of the School.

Government-wide Financial Statements

The government-wide financial statements (the Statement of Net Position and the Statement of Activities) report information on all of the activities of the School. Governmental activities are reported separately from business-type activities, which rely on fees charged to external parties as their primary revenues. The School has no business-type activities.

Any internal inter-fund activity has been eliminated from the government-wide financial statements.

The Statement of Net Position reports the School’s financial position as of the end of the fiscal year. In this statement, the School’s net position is reported in two categories: net investment in capital assets; and unrestricted net position.

Government-wide Financial Statements (concluded)

The Statement of Activities is displayed using a net-cost format and reports the degree to which the direct expenses of a given function are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function. Program revenues include 1) charges for services that are directly related to a given function and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Other items not properly included among program revenues are reported instead as general revenues.

Fund Financial Statements

The financial transactions of the School are reported in individual funds in the fund financial statements. The governmental fund statements include reconciliations with brief explanations to better identify the relationship between the government-wide statements and the statements for the governmental funds.

The following funds are used by the School: GOVERNMENTAL FUNDS

General Fund – The General Fund is the general operating fund of the School. It is used to account for all financial resources, except those associated with grants that are restricted to specified uses.

Capital Projects Fund – The Capital Projects Fund is used to account for financial resources associated with grants that are restricted to capital uses.

In the accompanying fund financial statements, the General Fund and Capital Projects Fund are both considered to be major funds and, therefore, are separately displayed. The School has no non-major funds.

Measurement Focus and Basis of Accounting

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 related cash flows.

Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the School considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when the related fund liability is incurred. However, debt service expenditures are recorded only when payment is due.

Most revenues are considered to be susceptible to accrual and have been measured in the current fiscal period. Certain other items are considered to be measurable and available only when cash is received.

Cash and Cash Equivalents

Cash consists of deposits in financial institutions. At times, such deposits may be in excess of the Federal Deposit Insurance Corporation (FDIC) insurance limit. At June 30, 2014, there were no amounts in excess of FDIC insurance coverage. The School has no policy regarding deposit custodial credit risk.

Capital Assets and Depreciation

Capital assets are defined by the School as assets with an initial, individual cost of $1,000 or more and an estimated useful life of more than one year. These assets are recorded at historical cost. Donated capital assets are recorded at estimated fair value on the date of donation.

Depreciable capital assets are depreciated using the straight-line method over the following estimated useful lives:

Assets

Years

Buildings 10 – 39

Furniture, Fixtures and Equipment 5

Revenue Sources

Revenues for current operations are received primarily from the District pursuant to the funding provisions included in the School’s charter. In accordance with the funding provisions of the charter and Florida Statutes, the School reports the number of full-time equivalent (FTE) students and related data to the District. Under the provisions of Florida Statutes the District reports the number of FTE students and related data to the Florida Department of Education (FDOE) for funding through the Florida Education Finance Program. Funding for the School is adjusted during the year to reflect the revised calculations by the FDOE under the Florida Educational Finance Program and the actual weighted FTE students reported by the School during the designated FTE student survey periods. The School also receives other financial assistance. This assistance is generally based on applications submitted to and approved by the granting agency.

Compensated Absences

The School does not pay for employees’ unused sick time and vacation time does not accumulate. Therefore, no liability for compensated absences is recorded.

Long-term Liabilities

Long-term debt and other long-term obligations are reported in the government-wide financial statements. Long-term liabilities are not reported in the governmental funds because governmental funds use the current financial resources measurement focus.

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (concluded)

Net Position

Net position represents the difference between assets and liabilities and is reported in three categories as hereafter described. Net investment in capital assets represents capital assets, net of accumulated depreciation and any outstanding debt related to those assets. Net position is reported as restricted when there are legal limitations imposed on their use by legislation, or external restrictions imposed by other governments, creditors, or grantors. The balance of the net position is reported as unrestricted.

When both restricted and unrestricted resources are available for use, it is the School’s policy to use restricted resources first, and then unrestricted resources as they are needed.

Fund Balance Classifications

Governmental funds report separate classifications of fund balance.

Non-Spendable. The non-spendable fund balance classification includes amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact.

Restricted. The restricted fund balance is defined as having restrictions (a) externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments, or (b) imposed by law through constitutional provisions or enabling legislation.

Committed. Committed fund balance is defined as amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the School’s Board of Directors.

Assigned. Assigned fund balance is defined as amounts that are constrained by the intent of the School’s Board of Directors to be used for specific purposes, but are neither restricted nor committed. The School has given the authority to assign fund balance to the School’s Director. Assigned fund balance includes spendable fund balance amounts established by the Director that are intended to be used for specific purposes that are neither considered restricted nor committed. Assignment of fund balance may be (a) made for a specific purpose that is narrower than the general purposes of the government itself; and/or (b) used to reflect the appropriation of a portion of existing unassigned fund balance to eliminate a projected deficit in the subsequent year’s budget in an amount no greater than the projected excess of expected expenditures over expected revenues. Assigned fund balance shall reflect management’s intended use of resources as set forth each year by the Director. Assigned fund balance may or may not be appropriated for expenditure in the subsequent year depending on the timing of the project/reserve for which it was assigned.

Unassigned. Unassigned fund balance is the residual classification for the general fund.

It is the policy of the School that they will use restricted resources to the extent which they are available, then committed resources, followed by assigned resources. Once these are consumed, the School will then use unassigned resources. The School does not have a formal policy requiring a minimum fund balance.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make various estimates. Actual results could differ from those estimates.

NOTE 2 – CAPITAL ASSETS AND DEPRECIATION

Capital asset activity for the year ended June 30, 2014 was as follows:

	Balance July 1, 2013	Additions	Deletions	Balance June 30, 2014
Capital Assets not Being Depreciated:
Land	$ 190,723	$ —	$ —	$ 190,723
Capital Assets Being Depreciated:
Buildings	240,056	50,959	—	291,015
Furniture, Fixtures & Equipment	82,815	13,959	11,710	85,064
Total Capital Assets	513,594	64,918	11,710	566,802
Accumulated Depreciation:
Buildings	9,327	10,210	—	19,537
Furniture, Fixtures & Equipment	80,084	2,004	11,710	70,378
Total Accumulated Depreciation	89,411	12,214	11,710	89,915
Net Capital Assets	$ 424,183	$ 52,704	$ —	$ 476,887

Depreciation was charged to functions/programs as follows:

Instruction	$ 1,327
General Support	10,887
Total	$ 12,214

NOTE 3 – RISK MANAGEMENT

The School is exposed to various risks of loss, including general liability, personal injury, workers compensation, and errors and omissions. To manage its risks, the School has purchased commercial insurance. Settled claims resulting from these risks have not exceeded commercial coverage in the current and previous two years.

NOTE 4 – LONG-TERM LIABILITIES

	Balance			Balance	Amount
	June 30,			June 30,	Due
	2013	Additions	Deletions	2014	In 1 Year
Note Payable – Mortgage	$ 319,278	$ —	$ 6,268	$ 313,010	$ 6,600
Note Payable	26,893	—	26,893	—	—
Note Payable	—	80,000	5,784	74,216	6,438
	$ 346,171	$ 80,000	$ 38,945	$ 387,226	$ 13,038

At June 30, 2014, The School’s long-term liabilities consisted of the following: A summary of changes in long-term liabilities follows:

NOTE 4 – LONG-TERM LIABILITIES (concluded)

Notes Payable

In 2011, the School borrowed $328,000 to purchase its facilities. The note payable is a fixed rate loan; is collateralized by the School’s real property; is amortized over 30 years; carries an interest rate of 6.25%; and includes a balloon payment of $271,047 due December 2019. The payments are $2,165 per month.

In July, 2013, the School refinanced its second mortgage and borrowed additional funds for capital improvements. The note is collateralized by the School’s real property and is payable in monthly installments of $878, with 5.75% financing, maturing July 2023. In July, 2018, the interest rate will adjust to a fixed rate equal to the five-year constant maturity treasury plus a margin of 2.75%, never to be less than 5.75% for the remaining term.

Future debt service requirements are as follows:

Fiscal Year
Ending June 30,	Principal	Interest	Total
2015	$ 13,038	$ 23,476	$ 36,514
2016	13,843	22,671	36,514
2017	14,697	21,817	36,514
2018	15,605	20,909	36,514
2019	16,568	19,946	36,514
2020-2023	313,475	12,711	326,186
Total	$ 387,226	$ 121,530	$ 508,756

NOTE 5 – EMPLOYEE RETIREMENT PLAN

The School maintains a 403(b) defined contribution pension plan. All employees are eligible for the Plan and may contribute the maximum amount permitted by law.

Year Ended June 30	Employee Contributions	Employer Contributions
2012	$ 6,500	$ 2,400
2013	$ 9,700	$ 2,400
2014	$ 10,363	$ 2,400

NOTE 6 – PRIOR PERIOD ADJUSTMENT

The School adjusted the financial statements in order to accurately reflect beginning fund balance and net position at June 30, 2013. The fund balance and net position decreased by $48,651 due to the accrual of salaries payable at the same date.

Budgetary Comparison Schedule – General Fund

For the Year Ended June 30, 2014

Healthy Learning Academy, Inc.

A Component Unit of the Alachua County District School Board

BUDGETED AMOUNTS
			Actual	Variance with
	Original	Final	Amounts	Final Budget
Revenues
State Revenue:
Florida Education Finance Program	$ 516,736	$ 544,778	$ 544,778	$ —
Other State Revenues	2,000	4,369	4,369	—
Local Revenue:
School Age Child Care Fees	52,500	65,659	65,659	—
Other Local Revenues	12,400	13,201	13,201	—
Total Revenues	583,636	628,007	628,007	—
Expenditures and Changes in Fund Balances
Expenditures:
Current:
Instruction	372,498	422,418	422,418	—
Instructional Support Services	10,341	13,736	13,736	—
General Support	144,502	204,329	204,329	—
Community Services	3,000	196	196	—
Maintenance of Plant	11,095	9,596	9,596	—
Debt Service:
Principal	—	26,583	26,583	—
Interest	22,150	—	—
Total Expenditures	563,586	676,858	676,858	—
Excess of Revenues Over (Under)Expenditures	20,050	(48,851)	(48,851)	—
Other Financing Sources (Uses)
Debt Issuance	—	80,000	80,000	—
Net Change in Fund Balance	20,050	31,149	31,149	—
Fund Balances, July 1, 2013	—	15,115	15,115	—
Fund Balances, June 30, 2014	$ 20,050	$ 46,264	$ 46,264	$ —

Note to Schedule:

An annual budget is adopted on the modified accrual basis of accounting, consistent with generally accepted accounting principles. Amendments to the budget can only be made with the approval of the Board of Directors. The fund is the legal level of control.

A Certified Public Accounting Firm Serving the Nonprofit Community

808-B NW 16th Avenue Gainesville, Florida 32601 TEL: 352-395-6565 FAX: 352-395-6636 www.kattell.com

COMMUNICATION WITH THOSE CHARGED WITH GOVERNANCE

October 22, 2014

To the Board of Directors Healthy Learning Academy, Inc.

We have audited the financial statements of Healthy Learning Academy, Inc. (the School) for the year ended June 30, 2014, and have issued our report thereon dated October 22, 2014. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our engagement letter to you dated July 11, 2014. Professional standards also require that we communicate to you the following information related to our audit.

Qualitative Aspects of Accounting Practices

Accounting Policies. Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the School are described in the notes to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during the year. We noted no transactions entered into by the School during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period.

Accounting Estimates. Accounting estimates are an integral part of the financial statements prepared by management and are based on management’s knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. There are no estimates that are particularly sensitive.

Disclosures. There are no disclosures that are particularly sensitive.

Corrected and Uncorrected Misstatements. Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. Management has reviewed and approved a listing of proposed adjustments. There are no uncorrected misstatements.

Our Working Relationship with Management

Difficulties Encountered in Performing the Audit. We encountered no difficulties in dealing with management in performing and completing our audit.

Disagreements with Management. For purposes of this letter, professional standards define a disagreement with management as a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor’s report. We are pleased to report that no such disagreements arose during the course of our audit.

Management Representations. We have requested certain representations from management that are included in the management representation letter.

Management Consultations with Other Independent Accountants. In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a “second opinion” on certain situations. If a consultation involves application of an accounting principle to the School’s financial statements or a determination of the type of auditor’s opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants.

Consultations Prior to Engagement. We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the School’s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention.

* * * * * * * *

This information is intended solely for the use of management and the Board of Directors of the School and is not intended to be and should not be used by anyone other than these specified parties.

Very truly yours,

To the Board of Directors,

Healthy Learning Academy, Inc.

MANAGEMENT LETTER

Report on the Financial Statements. We have audited the financial statements of Healthy Learning Academy, Inc. (the School), as of and for the fiscal year ended June 30, 2014, and have issued our report thereon dated October 22, 2014.

Auditors’ Responsibility. 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.

Other Reporting Required by Government Auditing Standards. We have issued our Independent Auditor’s Report on Internal Control over Financial Reporting and Compliance and Other Matters based on an audit of the financial statements performed in accordance with Government Auditing Standards, and Schedule of Findings. Disclosures in that report, which is dated October 22, 2014, and the Schedule of Findings, should be considered in conjunction with this management letter.

Prior Audit Findings. Section 10.854(1)(e)1., Rules of the Auditor General, requires that we determine whether or not corrective actions have been taken to address findings and recommendations made in the preceding annual financial audit report. In that regard, there were no prior audit findings.

Financial Condition.

Sections 10.854(1)(e)2. and 10.855(11), Rules of the Auditor General, require that we apply appropriate procedures to determine whether or not The School has met one or more of the conditions described in Section 218.503(1), Florida Statutes, and identification of the specific condition(s) met. In connection with our audit, we determined that the School did not meet any of the conditions described in Section 218.503(1), Florida Statutes.

Sections 10.854(1)(e)6.a. and 10.855(12), Rules of the Auditor General, require that we apply financial condition assessment procedures for the School. It is management’s responsibility to monitor The School’s financial condition, and our financial condition assessment was based in part on representations made by management and the review of financial information provided by same.

Transparency. Sections 10.854(1)(e)7. and 10.855(13), Rules of the Auditor General, require that we apply appropriate procedures to determine whether The School maintains on its Web site the information specified in Section 1002.33(9)(p), Florida Statutes. In connection with our audit, we determined that The School maintained on its Web site the information specified in Section 1002.33(9)(p), Florida Statutes.

Other Matters.

Section 10.854(1)(e)3., Rules of the Auditor General, requires that we address in the management letter any recommendations to improve financial management. In connection with our audit, we did not have any such recommendations.

Section 10.854(1)(e)4., Rules of the Auditor General, requires that we address noncompliance with provisions of contracts or grant agreements, or abuse, that have occurred, or are likely to have occurred, that have an effect on the financial statements that is less than material but which warrants the attention of those charged with governance. We have two such findings identified as 2014-02 and 2014-03 in the Schedule of Findings.

Section 10.854(1)(e)5, Rules of the Auditor General, requires the name or official title of the entity. The official title of the entity is Healthy Learning Academy, Inc.

Purpose of this Letter. Our management letter is intended solely for the information and use of the Legislative Auditing Committee, members of the Florida Senate and the Florida House of Representatives, the Florida Auditor General, the local district school board, and the Board of Directors and management of the School and is not intended to be and should not be used by anyone other than these specified parties.

* * * * * * *

Thank you for the cooperation and courtesies extended to us during the course of the audit. Please let us know if you have any questions or comments concerning this letter, our accompanying reports, or any other matters.

October 22, 2014

INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS

To the Board of Directors, Healthy Learning Academy, Inc.

We have audited, 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, the financial statements of the governmental activities and each major fund of Healthy Learning Academy, Inc. (the School) as of and for the year ended June 30, 2014, and the related notes to financial statements, which collectively comprise the School’s basic financial statements, and have issued our report thereon dated October 22, 2014.

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered the School’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expression our opinions on the financial statements but not for the purpose of expressing an opinion on the effectiveness of the School’s internal control. Accordingly, we do not express an opinion on the effectiveness of the School’s internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the School’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. We consider the deficiency identified as 2014-01 in the accompanying Schedule of Findings to be a material weakness.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the School’s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

School’s Response to Findings

The School’s responses to the findings identified in our audit are described in the accompanying letter from the School. The School’s response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it.

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the School’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 School’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

* * * * * * *

As required by the Rules of the Auditor General of the State of Florida, we noted certain matters that we reported to management of the School in the management letter dated October 22, 2014.

For the Year Ended June 30, 2014

Healthy Learning Academy, Inc.

A Component Unit of the Alachua County District School Board

Material Weakness in Internal Control

– Audit Adjustments

Finding – As a result of our auditing procedures we recommended an adjustment to the financial statements of a prior year. When posted to the accounting records, this entry decreased the fund balance and net position by almost

$49,000. Under generally accepted standards for internal controls, the School should have procedures in place to identify and make adjustments.

Recommendation – The School should gain an understanding of the adjustment made and make efforts to ensure that similar adjustments are made on an ongoing basis and especially as part of year end preparations for the audit.

Immaterial Noncompliance

– Indemnification of School District

Finding – The School entered into a new debt agreement; however the agreement did not include language to indemnify the Alachua County District School Board as required by Section 1002.33(14), Florida Statutes.

Recommendation – The School should indemnify the District School Board as required.

– Employee Health Insurance Reimbursements

Finding – The School reimbursed their employees for health insurance premiums after January 1, 2014 but failed to report the amounts paid as taxable compensation.

Perspective – The Affordable Care Act, which became effective January 1, 2014, prohibits reimbursing employees on a pre-tax basis for health insurance payments. Prior to this date, these reimbursements were pre-tax.

Recommendation – The School should review its procedures for reporting in accordance with IRS regulations.