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Tipton Academy GSRP

Audited Financial Statements June 30, 2015
C O N T E N T S 
Independent Auditor’s Report i Ͳ ii 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 iii Ͳ iv Management’s Discussion and Analysis v Ͳ x Basic Financial Statements Statement of Net Position 1 Statement of Activities 2 Combined Balance Sheet – All Governmental Funds 3 Reconciliation of Total Governmental Fund Balance to Net Position of Governmental Activities 4 Statement of Revenues, Expenditures and Changes in Fund Balance – All Governmental Funds 5 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance of Governmental Funds to the Statement of Activities 6 Notes to Financial Statements 7 Ͳ 16 Supplemental Information Budgetary Comparison Schedule – General Fund 17 Schedule of Revenues – General Fund 18 Schedule of Expenditures – General Fund 19 – 20


345 Diversion Street Ɣ Suite 400 44725 Grand River Avenue Ɣ Suite 204 2505 NW Boca Raton Blvd. Ɣ Suite 202 Rochester, Michigan 48307 Novi, Michigan 48375 Boca Raton, Florida 33431-6652 Phone: 248.659.5300 Phone: 248.659.5300 Phone: 561.241.1040 Fax: 248.659.5305 Fax: 248.659.5305 Fax: 561.368.4641

www.croskeylanni.com
David M. Croskey, CPA Thomas B. Lanni, CPA Carolyn A. Jones, CPA, CFP® MST Clifton F. Powell Jr., CPA, CFP®, PFS Roger J. DeJong, CPA Patrick M. Sweeney, CPA Leonard A. Geronemus, CPA, PFS

INDEPENDENT AUDITOR’S REPORT
To the Board of Directors of Tipton Academy We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Tipton Academy, as of and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise Tipton Academy’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the 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 the 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 opinion. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of governmental activities, each major fund, and the aggregate remaining fund information of Tipton Academy, as of June 30, 2015, 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. 

Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis and budgetary comparison information on pages v – x and 17 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 provided 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 Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise Tipton Academy’s basic financial statements. The introductory section, combining and individual nonͲmajor fund financial statements, statistical section, and schedules of revenues and expenditures are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonͲmajor fund financial statements and schedules of revenues and expenditures are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonͲmajor fund financial statements and schedules of revenues and expenditures are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 15, 2015, on our consideration of Tipton Academy’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Tipton Academy’s internal control over financial reporting and compliance. Croskey Lanni, PC October 15, 2015 Rochester, Michigan ii


345 Diversion Street Ɣ Suite 400 44725 Grand River Avenue Ɣ Suite 204 2505 NW Boca Raton Blvd. Ɣ Suite 202 Rochester, Michigan 48307 Novi, Michigan 48375 Boca Raton, Florida 33431-6652 Phone: 248.659.5300 Phone: 248.659.5300 Phone: 561.241.1040 Fax: 248.659.5305 Fax: 248.659.5305 Fax: 561.368.4641

www.croskeylanni.com
David M. Croskey, CPA Thomas B. Lanni, CPA Carolyn A. Jones, CPA, CFP® MST Clifton F. Powell Jr., CPA, CFP®, PFS Roger J. DeJong, CPA Patrick M. Sweeney, CPA Leonard A. Geronemus, CPA, PFS
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 of Tipton Academy We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Tipton Academy, as of and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise Tipton Academy’s basic financial statements, and have issued our report thereon dated October 15, 2015. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered Tipton Academy’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Tipton Academy’s internal control. Accordingly, we do not express an opinion on the effectiveness of Tipton Academy’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 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. 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. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 

Compliance and Other Matters As part of obtaining reasonable assurance about whether Tipton Academy’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Croskey Lanni, PC October 15, 2015 Rochester, Michigan iv
MANAGEMENT’S DISCUSSION AND ANALYSIS
This section of Tipton Academy’s, annual financial report presents our discussion and analysis of the school’s financial performance during the fiscal year that ended on June 30, 2015. Please read it in conjunction with the school’s financial statements, which immediately follow this section. FINANCIAL HIGHLIGHTS ™ The total cost of basic programs was $1,499,372. ™ Revenues were at $3,119,155 while expenditures were $2,865,769 in the General Fund. ™ Blended enrollment used for state aid purposes was 327.94. ™ The school invested $136,827 in capital assets. ™ The school has a positive General Fund balance of $317,254. OVERVIEW OF THE FINANCIAL STATEMENTS This annual report consists of three parts – management’s discussion and analysis (this section), the basic financial statements and required supplementary information. The basic financial statements include two kinds of statements that present different views of the school: ƒ The first two statements are schoolͲwide financial statements that provide both shortͲterm and longͲ term information about the school’s overall financial status. ƒ The remaining statements are fund financial statements that focus on individual parts of the school, reporting the schools operations in more detail. ƒ The governmental fund statements tell how basic services like regular and special education were financed. ƒ Fiduciary funds statements provide information about the financial relationships in which the school acts solely as a trustee or agent for the benefit of others. These consist of student activity funds held by the school on behalf of the student group. v
iii
Summary Detail The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements with a comparison of the school’s budget for the year. Figure AͲ1 shows how the various parts of this annual report are arranged and related to one another. Fund Financial Statements SchoolͲWide Statements Government Funds Fiduciary Funds Scope Entire school (except fiduciary funds) The activities of the school that are not proprietary or fiduciary, such as special education and building maintenance. Instances in which the school administers resources on behalf of someone else, such as scholarship programs and student activities monies Required financial statements *Statement of net position *Statement of activities *Balance sheet *Statement of revenues, expenditures and changes in fund balances *Statement of fiduciary net assets *Statement of changes in fiduciary net assets Accounting basis and measurement focus Accrual accounting and economic resources focus Modified accrual accounting and current financial resources Accrual accounting and economic resources focus Type of asset/liability information All assets and liabilities both financial and capital, shortͲterm and longͲterm Generally assets expected to be used up and liabilities that come due during the year or soon thereafter, no capital assets or longͲ term liabilities included All assets and liabilities, both shortͲ term and longͲterm Type of inflow/outflow information All revenues and expenses during year, regardless of when cash is received or paid Revenues for which cash is received during or soon after the end of the year, expenditures when goods or services have been received and the related liability is due and payable All additions and deductions during the year, regardless of when cash is received or paid vi Figure AͲ1 Organization of Tipton’s Annual Financial Report Management’s Discussion and Analysis Basic Financial Statements Required Supplementary Information Notes to Financial Statements SchoolͲWide Financial Statements Fund Financial Statements Figure AͲ2 Major Features of SchoolͲWide and Fund Financial Statements
Figure AͲ2 summarizes the major features of the school’s financial statements, including the portion of the schools activities they cover and the types of information they contain. The remainder of this overview section of management’s discussion and analysis highlights the structure and contents of each of the statements. SCHOOLͲWIDE STATEMENTS The schoolͲwide statements report information about the school as a whole using accounting methods similar to those used by privateͲsector companies. The statement of net position includes all of the school’s assets and liabilities. All of the current year’s revenues and expenses are accounted for in the statement of activities regardless of when cash is received or paid. The two school wide statements report the school’s net position and how it has changed. Net position – the difference between the school’s assets and liabilities – are one way to measure the school’s financial health or position. ™ Over time, increases or decreases in the school’s assets are an indicator of whether its financial position is improving or deteriorating, respectively. ™ To assess the overall health of the school, you need to consider additional nonͲfinancial factors such as changes in the school’s enrollment and the condition of school buildings and other facilities. FUND FINANCIAL STATEMENTS The fund financial statements provide more detailed information about the school’s funds, focusing on it’s most significant or “major” funds – not the school as a whole. Funds are accounting devices the school uses to keep track of specific sources of funding and spending on particular programs: ™ Governmental activities – Most of the school’s basic services are included in the general fund, such as regular and special education and administration. State foundation aid finances most of these activities. ™ The school establishes other funds to control and manage money for particular purposes (like repaying its longͲ term debts) or to show that it is properly using certain revenues. The school has one kind of fund: ™ Governmental funds – Most of the school’s basic services are included in governmental funds, which generally focus on (1) how cash and other financial assets that can readily be converted to cash flow in and out and (2) the balances left at yearͲend that are available for spending. Consequently, the governmental funds statements provide a detailed shortͲterm view that helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the school’s programs. Because this information does not encompass the additional longͲterm focus of the schoolͲwide statements, we provide additional information with governmental funds statements that explains the relationship (or differences) between them. vii
FINANCIAL ANALYSIS OF THE SCHOOL AS A WHOLE The school’s financial position is the product of many factors. General Fund Budgetary Analysis Over the course of the year, the school reviewed and amended the annual operating budget several times. Financial Outlook The Tipton Academy’s financial forecast continues to be optimistic heading into the 2015/2016 school year. ™ Enrollment continues to grow for the 2015Ͳ2016 school year with an expected enrollment of 440 up from 328 for the 2014Ͳ2015 school year. ™ The Academy will add a second site to accommodate increased enrollment for the coming year.
2015 2014
Current and other assets 1,188,055 $ 502,046 $ Capital assets 275,107 167,079
Total assets and deferred outflows 1,463,162 669,125
Other liabilities 870,801 427,585
Net position: Restricted 275,107 167,079 Unrestricted 317,254 74,461
Total net position 592,361 $ 241,540 $
Figure AͲ3 Tipton Academy’s Net Position




viii
Revenues: 2015 2014 Program revenues: Charges for services 55,155 $ 5,148 $ Federal and state operating grants 740,363 602,053 General revenues: State aid – unrestricted 2,389,288 1,402,605 Miscellaneous 35,475 53,181
Total revenues 3,220,281 2,062,987
Expenses: Instruction 1,499,372 1,021,488 Support services 1,341,289 792,075 Depreciation 28,799 7,884
Total expenses 2,869,460 1,821,447
Change in net position 350,821 $ 241,540 $
Figure AͲ4 Changes in Tipton Academy’s Net Position

CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets By the end of 2015, the school had invested $311,790 in capital assets, including computers and software. See table AͲ5 below for a listing of capital assets, and the accumulated depreciation.
Balance Balance June 30, 2015 June 30, 2014
Furniture 98,503 $ 60,573 $ Technology 213,287 114,390
SubͲtotal 311,790 174,963
Less: accumulated depreciation 36,683 7,884
Net book value of assets 275,107 $ 167,079 $
Tipton Academy's Capital Assets Figure AͲ5


ix
FACTORS BEARING ON THE SCHOOL’S FUTURE x Continuation of positive enrollment trends x State aid foundation grant stabilization CONTACTING THE SCHOOL’S FINANCIAL MANAGEMENT This financial report is designed to provide our students, parents and creditors with a general overview of the school’s finances and to demonstrate the school’s accountability for the money it receives. If you have questions about this report or need additional information, contact the management office at: The Romine Group 7877 Stead, Utica, MI 48317 (586)731Ͳ5300 x
TIPTON ACADEMY STATEMENT OF NET POSITION JUNE 30, 2015 See Independent Auditor’s Report
Current Assets
Cash and cash equivalents 521,438 $ Accounts receivable 6,030 Deposits 10,000 Due from other governmental units 644,059 Prepaid expenses 6,528
Total current assets 1,188,055
Capital Assets Ͳ Net of Accumulated Depreciation 275,107
Total assets and deferred outflows 1,463,162 $
Current Liabilities
Accounts payable 568,884 $ Notes payable 80,730 Other accrued expenses 221,187
Total current liabilities 870,801
Net Position
Net investment in captial assets 275,107 Unrestricted 317,254
Total net position 592,361
Total liabilities, deferred inflows and net position 1,463,162 $
ASSETS AND DEFERRED OUTFLOWS
LIABILITIES, DEFERRED INFLOWS AND NET POSITION
See accompanying notes to financial statements
Ͳ 1 Ͳ
TIPTON ACADEMY STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2015 See Independent Auditor’s Report
Net (Expense) Revenues and Changes in Program Revenues Net Assets Government Charges for Operating Type Expenses Services Grants Activities
Functions Instruction Basic programs 1,191,681 $ Ͳ $ 352,850 $ (838,831) $ Added needs 307,691 Ͳ 218,995 (88,696) Support services Pupil support services 5,872 Ͳ 5,872 Ͳ Instructional staff support services 14,367 Ͳ 1,230 (13,137) General administration 357,487 Ͳ Ͳ (357,487) School administration 248,335 Ͳ 9,788 (238,547) Business support services 295,539 Ͳ 30,000 (265,539) Operations and maintenance 229,977 Ͳ 26,073 (203,904) Pupil transportation services 7,606 Ͳ Ͳ (7,606) Other support services 14,378 Ͳ Ͳ (14,378) Food services 111,719 5,571 95,555 (10,593) Community services 56,009 49,584 Ͳ (6,425) Unallocated depreciation 28,799 Ͳ Ͳ (28,799)
Total primary government 2,869,460 $ 55,155 $ 740,363 $ (2,073,942)
General Purpose Revenues State school aid Ͳ unrestricted 2,389,288 Miscellaneous revenues 35,475 Total general purpose revenues 2,424,763
Change in net position 350,821
Net position Ͳ July 1, 2014 241,540 Net position Ͳ June 30, 2015 592,361 $ See accompanying notes to financial statements Ͳ 2 Ͳ
TIPTON ACADEMY COMBINED BALANCE SHEET – ALL GOVERNMENTAL FUNDS JUNE 30, 2015 See Independent Auditor’s Report ASSETS
Cash and cash equivalents 521,438 $ Accounts receivable 6,030 Deposits 10,000 Due from other governmental units 644,059 Prepaid expenses 6,528
Total assets 1,188,055 $
LIABILITIES AND FUND BALANCE
Liabilities Accounts payable 568,884 $ Notes payable 80,730 Other accrued expenses 221,187
Total liabilities 870,801
Fund Balance Nonspendable 16,528 Unassigned 300,726
Total fund balance 317,254
Total liabilities and fund balance 1,188,055 $

See accompanying notes to financial statements
Ͳ 3 Ͳ
TIPTON ACADEMY RECONCILIATION OF TOTAL GOVERNMENTAL FUND BALANCE TO NET POSITION OF GOVERNMENTAL ACTIVITIES JUNE 30, 2015 See Independent Auditor’s Report Amounts reported for governmental activities in the statement of net position are different because:
Total Governmental Fund Balances 317,254 $
Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. The cost of the assets is $311,790 and the accumulated depreciation is $36,683. 275,107
Net Position of Governmental Activities 592,361 $


See accompanying notes to financial statements
Ͳ 4 Ͳ
TIPTON ACADEMY STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE – ALL GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2015 See Independent Auditor’s Report NonͲMajor General Special Revenue Total
Revenues Local sources 85,058 $ 5,571 $ 90,629 $ State sources 2,887,948 2,100 2,890,048 Federal sources 125,111 93,455 218,566 Interdistrict sources 21,038 Ͳ 21,038 Total governmental fund revenues 3,119,155 101,126 3,220,281 Expenditures Instruction Basic program 1,191,681 Ͳ 1,191,681 Added needs 307,691 Ͳ 307,691 Support services Pupil support services 5,872 Ͳ 5,872 Instructional staff support services 14,367 Ͳ 14,367 General administration 357,487 Ͳ 357,487 School administration 248,335 Ͳ 248,335 Business support services 295,539 Ͳ 295,539 Operations and maintenance 229,977 Ͳ 229,977 Pupil transportation services 7,606 Ͳ 7,606 Other support services 14,378 Ͳ 14,378 Food services Ͳ 111,719 111,719 Community services 56,009 Ͳ 56,009 Capital outlay 136,827 Ͳ 136,827 Total governmental fund expenditures 2,865,769 111,719 2,977,488
Excess (deficiency) of revenues over expenditures 253,386 (10,593) 242,793 Other Financing Sources (Uses) Operating transfers in Ͳ 10,593 10,593 Operating transfers out (10,593) Ͳ (10,593) Total other financing sources (uses) (10,593) 10,593 Ͳ Excess (deficiency) of revenues and other financing sources over expenditures and other uses 242,793 Ͳ 242,793 Fund balance Ͳ July 1, 2014 74,461 Ͳ 74,461 Fund balance Ͳ June 30, 2015 317,254 $ Ͳ $ 317,254 $

See accompanying notes to financial statements
Ͳ 5 Ͳ
TIPTON ACADEMY RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2015 See Independent Auditor’s Report Amounts reported for governmental activities in the statement of activities are different because:
Net Change in Fund Balances Ͳ Total Governmental Funds 242,793 $
Governmental funds report capital outlays as expenditures. However, in the statement of activities, assets are capitalized and the cost is allocated over their estimated useful lives and reported as depreciation and amortization expense. This is the amount by which capital outlays exceeded depreciation and amortization in the current period
Capital outlay 136,827 $ Depreciation and amortization expense (28,799) 108,028
Change in Net Position of Governmental Activities 350,821 $ 

See accompanying notes to financial statements
Ͳ 6 Ͳ
TIPTON ACADEMY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2015 See Independent Auditor’s Report NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies of Tipton Academy (the “Academy”) conform to generally accepted accounting principles applicable to public school academies. The following is a summary of the significant accounting policies: Reporting Entity Tipton Academy was formed as a public school academy pursuant to the Michigan School Code of 1976, as amended by Act No. 362 of the Public Acts of 1993 and Act No. 416 of the Public Acts of 1994. The Academy filed articles of incorporation as a nonprofit corporation pursuant to the provisions of the Michigan Nonprofit Corporation Act of 1982, as amended, on July 30, 2012, and began operation in July 2013. In July 2013, the Academy entered into a fiveͲyear contract with Lake Superior State University's Board of Trustees to charter a public school academy. The contract requires the Academy to act exclusively as a governmental agency and not undertake any action inconsistent with its status as an entity authorized to receive state school aid funds pursuant to the State constitution. The University's Board of Trustees is the fiscal agent for the Academy and is responsible for overseeing the Academy's compliance with the contract and all applicable laws. The Academy pays Lake Superior State University's Board of Trustees three percent of State aid as administrative fees. Total administrative fees paid for the year ended June 30, 2015 were approximately $75,900. In July 2013, the Academy entered into an agreement with The Romine Group, Inc., "TRG" to run coterminous with the Contract issued between the Academy and the Lake Superior State University Board of Trustees. Under the terms of this agreement, TRG will provide a variety of services including financial management, educational programs and consulting, as well as teacher training. The Academy is obligated to pay TRG ten percent of its state school aid revenue and all other governmental revenue sources. Total compensation for these services shall not be less than $175,000 nor exceed $350,000 in any one fiscal year of the Academy. The total paid for these services amounted to approximately $262,000 for the year ended June 30, 2015. The accompanying financial statements have been prepared in accordance with criteria established by the Governmental Accounting Standards Board for determining the various governmental organizations to be included in the reporting entity. These criteria include significant operational or financial relationships with the public school Academy. Based on application of criteria, the Academy does not contain component units. Fund Financial Statements Fund financial statements report detailed information about the Academy. The focus of governmental fund financial statements is on major funds rather than reporting funds by type. Each major fund is presented in a separate column. NonͲmajor funds are aggregated and presented in a single column. Ͳ 7 Ͳ
TIPTON ACADEMY NOTES TO FINANCIAL STATEMENTS Ͳ Continued FOR THE YEAR ENDED JUNE 30, 2015 See Independent Auditor’s Report
NOTE 1 Ͳ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Ͳ Continued Basis of Presentation – Fund Accounting The accounts of the Academy are organized on the basis of funds. The operations of a fund are accounted for with a separate set of selfͲbalancing accounts that comprise its assets, liabilities, fund balance, revenue and expenditures. Government resources are allocated to and accounted for in individual funds based on the purposes for which they are to be spent and the means by which spending activities are controlled. The various funds are grouped, in the combined financial statements in this report, into generic fund types in two broad fund categories. Governmental Funds A governmental fund is a fund through which most academy functions typically are financed. The acquisition, use and balances of the Academy’s expendable financial resources and the related current liabilities are accounted for through a governmental fund. General Fund Ͳ The general fund is used to record the general operations of the Academy pertaining to education and those operations not provided for in other funds. Included are all transactions related to the approved current operating budget. Special Revenue Fund Ͳ The special revenue fund is used to account for the food service program operations. The special revenue fund is a subsidiary operation and is an obligation of the general fund. Therefore any shortfall in the special revenue fund will be covered by an operating transfer from the general fund. The special revenue fund does not maintain its own assets and liabilities; accordingly, no balance sheet is presented for this fund. Debt Service Fund Ͳ The debt service fund, which the Academy does not currently maintain, is used to record certain revenue and the payment of interest, principal and other expenditures on longͲterm debt. Capital Projects Fund Ͳ The capital projects fund, which the Academy does not currently maintain, accounts for financial resources to be used for the acquisition, construction, or improvement of capital facilities. Fiduciary Fund Ͳ The fiduciary fund, which the Academy does not currently maintain, is used to account for assets held by the Academy in a trustee capacity or as an agent. The agency fund is custodial in nature and does not involve the measurement of results of operations. Activity (Agency) Fund Ͳ The activity fund, which the Academy does not currently maintain, is used to record the transactions of a student group for school and schoolͲrelated purposes. Governmental and agency funds utilize the modified accrual basis of accounting. Modifications in such method from the accrual basis are as follows: Ͳ 8 Ͳ
TIPTON ACADEMY NOTES TO FINANCIAL STATEMENTS Ͳ Continued FOR THE YEAR ENDED JUNE 30, 2015 See Independent Auditor’s Report
NOTE 1 Ͳ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued a. Revenue that is both measurable and available for use to finance operations is recorded as revenue when earned. 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 Academy considers revenues to be available if they are collected within sixty days of the end of the current fiscal period. b. Payments for inventoriable types of supplies, which are not significant at year end, are recorded as expenditures at the time of purchase. c. Principal and interest of general longͲterm debt are not recorded as expenditures until their due dates. d. The State of Michigan utilizes a foundation allowance funding approach, which provides for specific annual amount of revenue per student based on a stateͲwide formula. The foundation allowance is funded from a combination of state and local sources. Revenue from state sources is primarily governed by the School Aid Act and the School Code of Michigan. The state portion of the foundation is provided from the State’s School Aid Fund and is recognized as revenue in accordance with state law. A major portion of the Academy’s revenue is derived from this state aid. As such, the Academy is considered to be economically dependent on this aid. The Academy’s existence is dependent upon qualification for such aid. GovernmentͲWide Financial Statements The governmentͲwide financial statements (i.e. the statement of Net Position and the Statement of Activities) report information on all of the nonͲfiduciary activities of the primary government. The governmentͲwide financial statements are prepared using the economic resources measurement focus and the accrual basis of accounting. This approach differs from the manner in which governmental fund financial statements are prepared. Therefore, governmental fund financial statements include reconciliations with brief explanations to better identify the relationships between the governmentͲwide statements and the statements for governmental funds. The governmentͲwide Statement of Activities presents a comparison between expenses and program revenues for each segment of the businessͲtype activities of the Academy and for each governmental program. Direct expenses are those that are specifically associated with a service, program or department and are therefore clearly identifiable to a particular function. The Academy does not allocate indirect expenses to programs. Program revenues include charges paid by the recipients of the goods or services offered by the programs and grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues not classified as program revenues are presented as general revenues. The comparison of program revenues and expenses identifies the extent to which each program or function is selfͲfinancing or draws from the general revenues of the Academy. When both restricted and unrestricted resources are available for use, it is the Academy’s policy to use restricted resources first. Ͳ 9 Ͳ
TIPTON ACADEMY NOTES TO FINANCIAL STATEMENTS Ͳ Continued FOR THE YEAR ENDED JUNE 30, 2015 See Independent Auditor’s Report
NOTE 1 Ͳ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Ͳ Continued Net position should be reported as restricted when constraints placed on net position’s use is either externally imposed by creditors, grantors, contributors, or laws or regulations of other governments or imposed by law through constitutional provisions or enabling legislation. The Academy first utilizes restricted resources to finance qualifying activities. Separate financial statements are provided for governmental funds and fiduciary funds, even though the latter are excluded from the government Ͳ wide financial statements. Cash and Cash Equivalents The Academy's cash and cash equivalents are considered to be cash on hand, demand deposits and shortͲterm investments with maturities of three months or less from the date of acquisition. The Academy reports its investments in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools and GASB No. 40, Deposit and Investment Risk Disclosures. Under these standards, certain investments are valued at fair value as determined by quoted market prices or by estimated fair values when quoted market prices are not available. The standards also provide that certain investments are valued at cost (or amortized cost) when they are of a shortͲterm duration, the rate of return is fixed, and the Academy intends to hold the investment until maturity. The Academy held no investments during the year ended June 30, 2015. State statutes authorize the Academy to invest in bonds and other direct and certain indirect obligations of the U.S. Treasury; certificates of deposit, saving accounts, deposit accounts, and or depository receipts of a bank, savings and loan association, or credit union, which is a member of the Federal Deposit Insurance Corporation, Federal Savings and Loan Corporation or National Credit Union Administration, respectively; in commercial paper rated at the time of purchase within the three highest classifications established by not less than two standard rating services and which matures not more than 270 days after the date of purchase. The Academy is also authorized to invest in U.S. Government or Federal agency obligation repurchase agreements, bankers' acceptances of U.S. banks, and mutual funds composed of investments as outlined above. Receivables Receivables at June 30, 2015 consist primarily of state school aid due from the State of Michigan and the federal government. All receivables are expected to be fully collected in July and August of 2015 and are considered current for the purposes of these financial statements. Prepaid Assets Payments made to vendors for services that will benefit periods beyond June 30, 2015, are recorded as prepaid items using the consumption method. A current asset for the prepaid amount is recorded at the time of the purchase and an expenditure is reported in the year in which services are consumed. Ͳ 10 Ͳ
TIPTON ACADEMY NOTES TO FINANCIAL STATEMENTS Ͳ Continued FOR THE YEAR ENDED JUNE 30, 2015 See Independent Auditor’s Report
NOTE 1 Ͳ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Ͳ Continued Capital Assets and Depreciation All capital assets are capitalized at cost (or estimated historical cost) and updated for additions or retirements during the year. The Academy follows the policy of not capitalizing assets with a useful life of less than one year. The Academy does not possess any infrastructure assets. All reported capital assets, with the exception of land, are depreciated. Improvements are depreciated over the remaining useful lives of the related capital assets. Depreciation is computed using the straightͲline method over the following useful lives: Building and improvements 10 – 50 years Furniture and equipment 5 – 15 years Computers and software 3 – 10 years Accrued Liabilities and LongͲTerm Obligations All payables, accrued liabilities and longͲterm obligations are reported in the governmentͲwide financial statements. In general, payables and accrued liabilities that will be paid from governmental funds are reported on the governmental fund financial statements regardless of whether they will be liquidated with current resources. However, the nonͲ current portion of capital leases that will be paid from governmental funds are reported as a liability in the fund financial statements only to the extent that they will be paid with current, expendable, available financial resources. In general, payments made within sixty days after yearͲend are considered to have been made with current available financial resources. Other longͲterm obligations that will be paid from governmental funds are not recognized as a liability in the fund financial statements until due. Net Position Net position represents the difference between assets, deferred outflow and liabilities and deferred inflows. Net position is reported as restricted when there are limitations imposed on their use either through the enabling legislation adopted by the Academy or through external restrictions imposed by creditors, grantors or laws of regulations of other governments. Fund Equity The Academy has adopted GASB 54 as part of its fiscal year reporting. The intention of the GASB is to provide a more structured classification of fund balance and to improve the usefulness of fund balance reporting to the users of the Academy’s financial statements. The reporting standard establishes a hierarchy for fund balance classifications and the constraints imposed on those resources. Ͳ 11 Ͳ
TIPTON ACADEMY NOTES TO FINANCIAL STATEMENTS Ͳ Continued FOR THE YEAR ENDED JUNE 30, 2015 See Independent Auditor’s Report NOTE 1 Ͳ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Ͳ Continued GASB 54 provides for two major types of fund balances, which are nonspendable and spendable. Nonspendable fund balances are balances that cannot be spent because they are not expected to be converted to cash or they are legally or contractually required to remain intact. This category typically includes prepaid items and inventories. In addition to nonspendable fund balance, GASB 54 has provided a hierarchy of spendable fund balances, based on a hierarchy of spending constraints. a. Restricted fund balance – amounts constrained to specific purposes by their providers (such as grantors, bondholders, and higher levels of government), through constitutional provisions, or by enabling legislation. b. Committed fund balance – amounts constrained to specific purposes by the Board; to be reported as committed, amounts cannot be used for any other purpose unless the Board takes action to remove or change the constraint. c. Assigned fund balance – amounts the Board intends to use for a specific purpose; intent can be expressed by the Board or by an official or committee to which the Board delegates the authority. d. Unassigned fund balance – amounts that are available for any purpose; these amounts are reported only in the general fund. The Academy follows the policy that restricted, committed, or assigned amounts will be considered to have been spent when an expenditure is incurred for purposes for which both unassigned and restricted, committed, or assigned fund balances are available. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. NOTE 2 Ͳ STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY Annual budgets are adopted on a consistent basis with accounting principles generally accepted in the United States of America and state law for the general fund. All annual appropriations lapse at fiscal year end and encumbrances are not formally recorded. The budget document presents information by fund and function. The legal level of budgetary control adopted by the governing body is the function level. State law requires the Academy to have its budget in place by July 1. Expenditures in excess of amounts budgeted is a violation of Michigan Law. The Academy is required by law to adopt general and special revenue fund budgets. During the year ended June 30, 2015 the budget was amended in a legally permissible manner. Ͳ 12 Ͳ
TIPTON ACADEMY NOTES TO FINANCIAL STATEMENTS Ͳ Continued FOR THE YEAR ENDED JUNE 30, 2015 See Independent Auditor’s Report NOTE 3 Ͳ DEPOSITS AND INVESTMENTS Interest Rate Risk In accordance with its investment policy, the Academy will minimize interest rate risk, which is the risk that the market value of securities in the portfolio will fall due to changes in market interest rates, by; structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities in the open market; and, investing operating funds primarily in shorterͲterm securities, liquid asset funds, money market mutual funds, or similar investment pools and limiting the average maturity in accordance with the Academy's cash requirements. Credit Risk State law limits investments in commercial paper and corporate bonds to a prime or better rating issued by nationally recognized statistical rating organizations (NRSROs). As of June 30, 2015, the Academy had no investments. Concentration of Credit Risk The Academy will minimize concentration of credit risk, which is the risk of loss attributed to the magnitude of the Academy's investment in a single issuer, by diversifying the investment portfolio so that the impact of potential losses from any one type of security or issuer will be minimized. As of June 30, 2015, the Academy had no investments. Custodial Credit Risk Ͳ Deposits In the case of deposits, this is the risk that in the event of a bank failure, the Academy's deposits may not be returned to it. As of June 30, 2015, $346,351 of the Academy's cash was exposed to custodial credit risk as it was not covered by federal deposit insurance. All cash balances were uncollateralized as of June 30, 2015. Custodial Credit Risk Ͳ Investments For an investment, this is the risk that, in the event of the failure of the counterparty, the Academy will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The Academy will minimize custodial credit risk, which is the risk of loss due to the failure of the security issuer or backer, by; limiting investments to the types of securities allowed by law; and preͲqualifying the financial institutions, broker/dealers, intermediaries and advisors with which the Academy will do business. Foreign Currency Risk The Academy is not authorized to invest in investments which have this type of risk. Ͳ 13 Ͳ
TIPTON ACADEMY NOTES TO FINANCIAL STATEMENTS Ͳ Continued FOR THE YEAR ENDED JUNE 30, 2015 See Independent Auditor’s Report NOTE 4 Ͳ DUE FROM OTHER GOVERNMENTAL UNITS Amounts due from other governmental units consist of the following: State sources 518,948 $ Federal sources 125,111
Total 644,059 $

NOTE 5 Ͳ CAPITAL ASSETS Capital asset activity of the Academy's governmental activities was as follows: Balance Balance July 1, 2014 Additions Disposals June 30, 2015
Capital assets subject to depreciation Furniture 60,573 $ 37,930 $ Ͳ $ 98,503 $ Technology 114,390 98,897 Ͳ 213,287
SubͲtotal 174,963 136,827 Ͳ 311,790
Accumulated depreciation Furniture 4,953 8,637 Ͳ 13,590 Technology 2,931 20,162 Ͳ 23,093
SubͲtotal 7,884 28,799 Ͳ 36,683
Total net capital assets 167,079 $ 108,028 $ Ͳ $ 275,107 $
Depreciation and amortization expense was not charged to activities as the Academy considers its assets to impact multiple activities and allocation is not practical. Ͳ 14 Ͳ
TIPTON ACADEMY NOTES TO FINANCIAL STATEMENTS Ͳ Continued FOR THE YEAR ENDED JUNE 30, 2015 See Independent Auditor’s Report NOTE 6 – NOTES PAYABLE Loan Information Interest Maturity Rate Date
SAAN 14/15 2.83% August, 2015
Loan Activity
Balance Retirements Balance July 1, 2014 Additions and Payments June 30, 2015
SAAN 14/15 Ͳ $ 400,000 $ 319,270 $ 80,730 $
Other Issued to provide Academy with operating funds and secured by future state school aid.
NOTE 7 Ͳ ACCRUED EXPENSES Accrued expenses may be summarized as follows: Purchased services Ͳ payroll and benefits 152,147 $ Management fee 55,317 University oversight fee 13,723
Total accrued expenses 221,187 $

NOTE 8 – OPERATING LEASES Lease Information Maturity Approximate Date Payment
Facility Lease June, 2018 $23,000 monthly
Other Monthly rent calculated at 1/12th of 10% of per pupil state aid. Additional rent of approximately $1,700 through 2015 and $900 through 2018 for facility improvements to open the Academy.

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TIPTON ACADEMY NOTES TO FINANCIAL STATEMENTS Ͳ Continued FOR THE YEAR ENDED JUNE 30, 2015 See Independent Auditor’s Report NOTE 8 – OPERATING LEASES Ͳ Continued The approximate amount of lease obligations coming due during the next three years are as follows: Facilities 2016 272,000 $ 2017 272,000 2018 272,000

Total rent expense included in the statement of activities for the year ended June 30, 2015 amounted to $271,974. NOTE 9 Ͳ RETIREMENT PLAN All employees leased by the Academy are eligible to participate in a retirement plan established by The Romine Group, which qualifies under the provisions of Section 401(k) of the Internal Revenue Code. The employer under this plan will contribute 4% of salaries regardless of the amount of the employee contribution. The employer will additionally match up to 4% of employee contributed funds. Eligible employees may contribute up to 15% of their salaries under the terms of this plan. NOTE 10 – INTERFUND TRANSFERS During the normal course of the school year, the Academy transferred amounts between its funds as follows: General Special Revenue
Transfer In Ͳ $ 10,593 $ Transfer Out 10,593 Ͳ
NOTE 11 Ͳ RISK MANAGEMENT The Academy is exposed to various risks of loss related to property loss, torts, errors and omissions and employee injuries (worker’s compensation), as well as medical benefits provided to employees. The Academy has purchased commercial insurance for all claims. Settled claims relating to the commercial insurance have not exceeded the amount of insurance coverage since the Academy’s inception. Ͳ 16 Ͳ

SUPPLEMENTAL INFORMATION

TIPTON ACADEMY REQUIRED SUPPLEMENTAL INFORMATION BUDGETARY COMPARISON SCHEDULE – GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2015 See Independent Auditor’s Report Original Final Budget Budget Actual Variance
Revenues Local sources 64,934 $ 79,667 $ 85,058 $ 5,391 $ State sources 2,779,703 2,887,556 2,887,948 392 Federal sources 128,599 122,111 125,111 3,000 Interdistrict sources 29,000 21,104 21,038 (66) Total governmental fund revenues 3,002,236 3,110,438 3,119,155 8,717 Expenditures Instruction Basic programs 1,241,033 1,221,376 1,191,681 (29,695) Added needs 330,375 311,560 307,691 (3,869) Support services Pupil support services 6,008 5,875 5,872 (3) Instructional staff support services 34,510 23,984 14,367 (9,617) General administration 361,610 374,358 357,487 (16,871) School administration 249,600 254,839 248,335 (6,504) Business support services 272,350 297,423 295,539 (1,884) Operations and maintenance 333,534 243,041 229,977 (13,064) Pupil transportation services 10,200 9,788 7,606 (2,182) Other support services 24,000 22,000 14,378 (7,622) Community services 56,989 65,459 56,009 (9,450) Capital outlay 47,000 148,748 136,827 (11,921) Total governmental fund expenditures 2,967,209 2,978,451 2,865,769 (112,682) Excess (deficiency) of revenues over expenditures 35,027 131,987 253,386 121,399 Other Financing Sources (Uses) Operating transfers out (25,349) (17,909) (10,593) 7,316
Excess (deficiency) of revenues and other financing sources over expenditures and other uses 9,678 114,078 242,793 128,715 Fund balance Ͳ July 1, 2014 74,461 74,461 74,461 Ͳ Fund balance Ͳ June 30, 2015 84,139 $ 188,539 $ 317,254 $ 128,715 $

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TIPTON ACADEMY SCHEDULE OF REVENUES – GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2015 See Independent Auditor’s Report Local Sources 85,058 $
State Sources At risk 114,752 Great start readiness program 341,447 Special education 42,461 State aid 2,389,288 Total state sources 2,887,948
Federal Sources IDEA 26,190 Title I 86,899 Title II A 9,022 Other program revenue 3,000 Total federal sources 125,111
Interdistrict Sources 21,038 Total general fund revenues 3,119,155 $



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TIPTON ACADEMY SCHEDULE OF EXPENDITURES – GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2015 See Independent Auditor’s Report
Basic Programs Purchased services 1,046,118 $ Supplies and materials 133,677 Other expenditures 11,886
Total basic programs 1,191,681
Added Needs Purchased services 305,094 Supplies and materials 1,741 NonͲdepreciable capital assets 856
Total added needs 307,691
Pupil Support Services Guidance services 5,872
Instructional Staff Support Services Purchased services 9,674 Supplies and materials 4,693
Total instructional staff support services 14,367
General Administration Purchased services 19,257 Management fees 262,246 University oversight 75,859 Other expenditures 125
Total general administration 357,487
School Administration Purchased services 229,631 Supplies and materials 12,190 Other expenditures 6,514
Total school administration 248,335

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TIPTON ACADEMY SCHEDULE OF EXPENDITURES – GENERAL FUND Ͳ CONTINUED FOR THE YEAR ENDED JUNE 30, 2015 See Independent Auditor’s Report
Business Support Services Purchased services 17,930 Rentals 271,974 Other expenditures 5,635
Total business support services 295,539
Operations and Maintenance Purchased services 87,169 Repairs and maintenance 68,915 Supplies and materials 55,116 NonͲdepreciable capital assets 16,769 Other expenditures 2,008
Total operations and maintenance 229,977
Pupil Transportation Services Purchased services 3,824 Supplies and materials 2,367 Other expenditures 1,415
Total pupil transportation services 7,606
Other Support Services Other expenditures 14,378
Community Services Purchased services 48,955 Other expenditures 7,054
Total community services 56,009
Capital Outlay 136,827
Total general fund expenditures 2,865,769 $

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