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Consolidated Financial Statements

June 30, 2016


Utah Charter Academies, Inc.

w w w. e i d e b a i l l y. c o m
Utah Charter Academies, Inc.
Table of Contents
June 30, 2016

Independent Auditor’s Report.................................................................................................................................... 1


Financial Statements
Consolidated Statement of Financial Position ....................................................................................................... 3
Consolidated Statement of Activities..................................................................................................................... 4
Consolidated Statement of Cash Flows ................................................................................................................. 5
Notes to Consolidated Financial Statements .......................................................................................................... 6
Supplementary Information
Supplementary Financial Statements ................................................................................................................... 16
Statements of Financial Position (Unaudited) ..................................................................................................... 17
Statements of Activities (Unaudited) ................................................................................................................... 18
Campus Statements of Financial Position (Unaudited) ....................................................................................... 19
Campus Statements of Activities (Unaudited) ..................................................................................................... 20
Campus Statements of Cash Flows (Unaudited).................................................................................................. 21
Schedule of Expenditures of Federal Awards ...................................................................................................... 22
Notes to Schedule of Expenditures of Federal Awards ....................................................................................... 23
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....... 24
Independent Auditor’s Report on Compliance for Each Major Federal Program; Report on Internal Control Over
Compliance Required by the Uniform Guidance ..................................................................................................... 26
Schedule of Findings and Questioned Costs ........................................................................................................ 28
Summary Schedule of Prior Year Findings ......................................................................................................... 31
Independent Auditor’s Report as Required by the State Compliance Audit Guide on Compliance with General
State Compliance Requirements, and Internal Control over Compliance ............................................................... 32
Independent Auditor’s Report

The Board of Directors


Utah Charter Academies, Inc.
Draper, Utah

Report on the Financial Statements


We have audited the accompanying consolidated financial statements of Utah Charter Academies, Inc. (a
nonprofit organization), which comprise the consolidated statement of financial position as of June 30,
2016, and the related consolidated statements of activities and cash flows for the year then ended, and the
related notes to the consolidated financial statements.

Management’s Responsibility for the Consolidated Financial Statements


Management is responsible for the preparation and fair presentation of these consolidated 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 consolidated 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 consolidated 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 consolidated financial statements are free from
material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the consolidated financial statements. The procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of the consolidated 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 consolidated 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 consolidated financial statements.

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

Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of Utah Charter Academies, Inc. as of June 30, 2016, and the changes in
net assets and its cash flows for the year then ended in accordance with accounting principles generally
accepted in the United States of America.

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Other Matters
Other Information
Our audit was conducted for the purpose of forming an opinion on the basic financial statements of the
organization taken as a whole. The accompanying schedule of expenditures of federal awards, as required
by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost
Principles, and Audit Requirements for Federal Awards, is presented for purposes of additional analysis
and is not a required part of the financial statements. Such information is the responsibility of management
and was derived from and relates directly to the underlying accounting and other records used to prepare the
consolidated financial statements. The information has been subjected to the auditing procedures applied in the
audit of the consolidated financial statements and certain additional procedures, including comparing and
reconciling such information directly to the underlying accounting and other records used to prepare the
consolidated financial statements or to the consolidated financial statements themselves, and other additional
procedures in accordance with auditing standards generally accepted in the United States of America. In our
opinion, the information is fairly stated in all material respects in relation to the financial statements as a
whole.

Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements as a
whole. The supplementary financial statements on pages 16 through 21 are presented for purposes of
additional analysis and are not a required part of the basic financial statements. Such information has not been
subjected to the auditing procedures applied in the audit of the consolidated 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 November 21, 2016,
on our consideration of Utah Charter Academies Inc.’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 Utah Charter Academies, Inc.’s internal control over financial
reporting and compliance.

Salt Lake City, Utah


November 21, 2016

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Utah Charter Academies, Inc.
Consolidated Statement of Financial Position
June 30, 2016

Assets

Current Assets
Cash and cash equivalents $ 3,266,560
Accounts receivable 558,317
Prepaid management fees 219,303
Other current assets 16,511

Total current assets 4,060,691

Restricted Cash and Cash Equivalents 4,529,571


Prepaid Management Fees 438,607
Deferred Financing Costs 1,913,426
Notes Receivable 8,542,250
Property and Equipment, Net 41,897,325

Total assets $ 61,381,870

Liabilities and Net Assets

Current Liabilities
Accounts payable $ 245,917
Accrued liabilities 2,248,942

Total current liabilities 2,494,859

Notes Payable 19,292,500


Bonds Payable 38,179,464

Total liabilities 59,966,823

Net Assets
Unrestricted
Designated 150,000
Undesignated 1,265,047

Total net assets 1,415,047

Total liabilities and net assets $ 61,381,870

See Notes to Consolidated Financial Statements 3


Utah Charter Academies, Inc.
Consolidated Statement of Activities
For the Year Ended June 30, 2016

Revenue
State $ 23,167,353
Federal 2,496,820
Interest 103,654
Other 636,464

Total revenue 26,404,291

Expenses

Program service expenses


Salaries 11,246,966
Benefits 2,146,355
Professional and technical services 4,811,970
Purchased property services 593,020
Other purchased services 374,298
Supplies and materials 2,034,070
Property 1,484,032
Interest 2,705,010

Total program service expenses 25,395,721

Administrative expenses
Salaries 692,811
Benefits 149,749
Professional and technical services 36,305
Other purchased services 6,194
Supplies and materials 120,107

Total administrative expenses 1,005,166

Total expenses 26,400,887

Change in Net Assets 3,404

Net Assets, Beginning of Year 1,411,643

Net Assets, End of Year $ 1,415,047

See Notes to Consolidated Financial Statements 4


Utah Charter Academies, Inc.
Consolidated Statement of Cash Flows
For the Year Ended June 30, 2016

Cash Flows from Operating Activities


Change in net assets $ 3,404
Adjustments to reconcile change in net assets to net cash
from operating activities:
Depreciation and amortization 1,845,930
Loss on disposal of property and equipment 2,000
Changes in operating assets and liabilities
Accounts receivable (91,470)
Prepaid management fees 219,303
Other current assets (16,511)
Accounts payable (112,852)
Accrued liabilities 341,377

Net Cash from Operating Activities 2,191,181

Cash Flows from Investing Activities


Change in restricted cash and cash equivalents (3,160,601)
Purchases of property and equipment (2,148,943)

Net Cash used for Investing Activities (5,309,544)

Cash Flows from Financing Activities


Proceeds from issuance of bonds payable 30,200,865
Cash payments for debt issuance costs (1,222,445)
Principal payments on notes payable (25,355,059)

Net Cash from Financing Activities 3,623,361

Net Change in Cash and Cash Equivalents 504,998

Cash and Cash Equivalents, Beginning of Year 2,761,562

Cash and Cash Equivalents, End of Year $ 3,266,560

Supplemental Disclosure of Cash Flow Information


Cash paid for interest $ 2,066,888

See Notes to Consolidated Financial Statements 5


Utah Charter Academies, Inc.
Notes to Consolidated Financial Statements
June 30, 2016

Note 1 - Principal Activity and Significant Accounting Policies

Organization

Utah Charter Academies, Inc. (“UCA”) was originally incorporated under the name American Preparatory
Academy of Draper in May 2003, and began operations July 1, 2003 under the laws of the State of Utah operating
as a nonprofit organization under section 501(c)(3) of the Internal Revenue Code. In August 2008, American
Preparatory Academy of Draper changed its name to Utah Charter Academies, Inc. UCA continues to operate
under the name American Preparatory Academy. UCA operates four charter school campuses, which include the
Draper I and Draper II campuses located in Draper, Utah, and the West Valley I and West Valley II campuses
located in West Valley, Utah. Kindergarten through twelfth grade classes are offered by UCA. School curriculum
focuses on mastery of educational fundamentals, sequential building of conceptual knowledge, and promotion of
the expression of knowledge.

UCA Properties, Inc. (“UCA Properties”), UCA Properties II, Inc. (“UCA Properties II”), and UCA Properties III,
Inc. (“UCA Properties III”) are State of Utah nonprofit organizations under section 501(c)(3) of the Internal
Revenue Code. UCA Properties was incorporated on October 25, 2010, UCA Properties II was incorporated on
December 7, 2010, and UCA Properties III was incorporated on April 3, 2013. Substantially all of the activities
of UCA Properties, UCA Properties II, and UCA Properties III involve assets that are leased to UCA. Therefore,
the operations of UCA Properties, UCA Properties II, and UCA Properties III have been consolidated with the
operations of UCA. UCA, UCA Properties, UCA Properties II, and UCA Properties III are collectively referred to
in these financial statements as the “Academy”.

Principles of Consolidation

The accompanying consolidated financial statements present the operations of UCA, UCA Properties, UCA
Properties II, and UCA Properties III. All intercompany transactions and balances have been eliminated in
consolidation.

Cash and Cash Equivalents

Cash and cash equivalents are defined as demand deposits, savings, money market accounts, and certificates of
deposit with original maturities of three months or less. Cash held in trust that is primarily restricted for cash
payments on the Academy’s notes and bonds payable is excluded from this definition.

Receivables and Credit Policies

Accounts receivable consist primarily of noninterest-bearing amounts due for educational programs. Interest
bearing notes receivable are carried at the aggregate unpaid balance. Management determines the allowance for
uncollectable receivable based on historical experience, an assessment of economic conditions, and a review of
subsequent collections. Receivable are written off when deemed uncollectable. It is reasonably possible that the
Academy’s estimate of the uncollectable receivables will change. At June 30, 2016, management determined that
an allowance on accounts receivable and notes receivable was not necessary.

Deferred Financing Costs

Deferred financing costs are amortized using the straight-line method, which approximates the effective interest
rate method, over the life of the corresponding long-term debt.

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Utah Charter Academies, Inc.
Notes to Consolidated Financial Statements
June 30, 2016

Property and Equipment

Property and equipment additions over $2,000 are recorded at cost, or if donated, at fair value on the date of
donation. When assets are sold or otherwise disposed of, the cost and related depreciation or amortization are
removed from the accounts, and any remaining gain or loss is included in the statement of activities. Costs of
maintenance and repairs that do not improve or extend the useful lives of the respective assets are expensed
currently.

Property and equipment is depreciated using the straight-line method over the following estimated useful lives:

Property and Equipment Years

Buildings 40
Building improvements 10 to 40
Furniture and equipment 3 to 20

The Academy reviews the carrying values of property and equipment for impairment whenever events or
circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash
flows expected to result from its use and eventual disposition. When considered impaired, an impairment loss is
recognized to the extent carrying value exceeds the fair value of the asset. There were no indicators of asset
impairment during the year ended June 30, 2016.

Net Assets

Net assets, revenues, gains, and losses are classified based on the existence or absence of donor-imposed
restrictions. Accordingly, net assets and changes therein are classified and reported as follows:

Unrestricted Net Assets – Net assets available for use in general operations.

Temporarily Restricted Net Assets – Net assets subject to donor restrictions that may or will be met by
expenditures or actions of the Academy and/or the passage of time, and certain income earned on permanently
restricted net assets that has not yet been appropriated for expenditure by the Academy’s Board of Directors.

The Academy reports contributions as temporarily restricted support if they are received with donor stipulations
that limit the use of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction
ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net
assets and reported in the statement of activities as net assets released from restrictions.

Permanently Restricted Net Assets – Net assets whose use is limited by donor-imposed restrictions that neither
expire by the passage of time nor can be fulfilled or otherwise removed by action of the Academy. The
restrictions stipulate that resources be maintained permanently but permit the Academy to expend the income
generated in accordance with the provisions of the agreements.

The Academy did not have any temporarily or permanently restricted net assets as of June 30, 2016.

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Utah Charter Academies, Inc.
Notes to Consolidated Financial Statements
June 30, 2016

Revenue Recognition

State Funding – The Academy receives funding from the State of Utah as administered by the Utah State Office
of Education based on the number of students enrolled in its schools. The State provides unrestricted funding for
normal school operations and restricted funds for specific school-related activities or functions. Unrestricted
funding is recognized as revenue when received. Funding for which qualifying expenses have not been incurred is
recorded as temporarily restricted net assets in the Academy’s Statement of Financial Position.

Federal Grants – The Academy has received federal grants, which are paid through the Utah State Office of
Education. Funds are generally received on a reimbursement basis and, accordingly, revenues related to these
federal grants are recognized when qualifying expenses have been incurred and when all other grant requirements
have been met.

Contributions and Donated Services – Unrestricted contributions are recognized as revenue when received.
Contributions of goods are recorded at fair value. Contributions of services are recorded at fair value as revenue at
the time the service is rendered when specialized skills are required and when the Academy would otherwise
purchase the services. Restricted contributions received are recorded as increases in temporarily restricted or
permanently restricted net assets depending on the nature of the restriction. Temporarily restricted net assets are
recognized as revenue when the terms of the restrictions are met. Temporarily restricted donations are recorded as
unrestricted if the restriction is met in the same period as the donation. All contributions are considered to be
available for unrestricted use unless specifically restricted by the donor. No amounts have been reflected in the
accompanying financial statements for contributed goods or services during the year ended June 30, 2016.

Allocation of Expenses

Expenses by function have been allocated among program and supporting administrative service classifications on
the basis of time records and supporting documentation for expenses incurred.

Income Taxes

UCA, UCA Properties, UCA Properties II, and UCA Properties III are organized as Utah nonprofit corporations
and have been recognized by the Internal Revenue Service (IRS) as exempt from federal income taxes under
Section 501(a) of the Internal Revenue Code as organizations described in Section 501(c)(3), qualify for the
charitable contribution deduction under Section 170(b)(1)(A)(vi) and (viii), and have been determined not to be
private foundations under Sections 509(a)(1) and (3), respectively. Each entity is annually required to file a
Return of Organization Exempt from Income Tax (Form 990) with the IRS. In addition, the entities are subject to
income tax on net income that is derived from business activities that are unrelated to their exempt purposes. Each
entity has determined it is not subject to unrelated business income tax and has not filed an Exempt Organization
Business Income Tax Return (Form 990-T) with the IRS.

Each entity believes that it has appropriate support for any tax positions taken affecting its annual filing
requirements, and as such, does not have any uncertain tax positions that are material to the financial statements.
The entities would recognize future accrued interest and penalties related to unrecognized tax benefits and
liabilities in income tax expense if such interest and penalties are incurred.

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Utah Charter Academies, Inc.
Notes to Consolidated Financial Statements
June 30, 2016

Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates and those differences could be material.

Concentration of Credit Risk

The Academy manages deposit concentration risk by placing cash, money market accounts, and certificates of
deposit with financial institutions believed by management to be creditworthy. At times, amounts on deposit may
exceed insured limits or include uninsured investments in money market mutual funds. To date, the Academy has
not experienced losses in any of these accounts. Credit risk associated with accounts receivable is considered to
be limited due to high historical collection rates and because substantial portions of the outstanding amounts are
due from governmental agencies supportive of the Academy’s mission.

New Accounting Standards

In April 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)
No. 2015-03, Interest – Imputation of Interest, which will simplify the presentation of debt issuance costs. The
new guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance
sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The new
guidance will be effective for fiscal years beginning on or after December 15, 2015, with early adoption
permitted. The adoption of this guidance is not expected to have a material impact on the Academy’s financial
position or results of operation.

In August 2016, the FASB issued ASU No. 2016-014, Not-for-Profit Entities, which will modify presentation
requirements of net assets and will require enhanced financial statement footnote disclosures. The new guidance
will be effective for fiscal years beginning on or after December 15, 2017, with early adoption permitted.
Management of the Academy is currently evaluating the impact this accounting guidance will have on the
financial statements.

Subsequent Events

The Academy has evaluated subsequent events through November 21, 2016, the date these financial statements
were available to be issued.

Note 2 - Notes Receivable

During the year ended June 30, 2011, the Academy obtained two notes receivable as part of a financing agreement
to obtain funding for the construction of an Academy charter school, which is described in detail in Note 3. The
face amounts of the notes receivable are $8,017,250 and $525,000. Both notes bear interest at a rate of 1%.
Interest payments are due to the Academy on a monthly basis. The principal balance of the $8,017,250 note is due
to the Academy upon the maturity of the note in December 2017. The principal balance of the $525,000 note is
due to the Academy upon the maturity of the note in December 2045. The Academy’s notes receivable serve as
collateral on its Series 2010 bonds payable.

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Utah Charter Academies, Inc.
Notes to Consolidated Financial Statements
June 30, 2016

Note 3 - Property and Equipment

Property and equipment consists of the following at June 30, 2016:

Buildings $ 33,801,900
Building improvements 817,899
Furniture and equipment 3,873,746
Land 7,787,271
Construction in progress 1,217,226
47,498,042
Less accumulated depreciation (5,600,717)

$ 41,897,325

During the year ended June 30, 2016, the Academy recognized $1,484,032 of depreciation expense.

Note 4 - Long Term Obligations

In February 2011, UCA Properties obtained debt financing to purchase a building from UCA and land from a
third party. UCA Properties signed three promissory notes, all of which have an interest rate of 5.644%. The face
amounts of the promissory notes are $4,320,282, $1,904,457, and $1,670,261. The $4,320,282 and $1,904,457
notes call for monthly interest payments. The full principal balance on each of the two notes is due upon maturity
of the notes in July 2018. The $1,670,261 note calls for monthly interest payments through July 2018. Beginning
in August 2018, monthly interest and principal payments on the note are due each month through the maturity of
the note in July 2041. The notes are secured by the building and land purchased with the debt proceeds. UCA
Properties must maintain a certain debt coverage ratio as part of the debt agreement. As of June 30, 2016, UCA
Properties is not aware of any noncompliance with the covenant.

In December 2010, UCA obtained financing of $8,017,250 through the issuance of Series 2010 bonds. The bonds
have an interest rate of 3%. Interest payments are due monthly, and the principal balance on the debt is due upon
maturity of the bonds in December 2028. The bonds are secured by substantially all property of the Academy.
UCA capitalized $535,465 in debt issuance costs that were incurred in conjunction with the issuance of the Series
2010 bonds. The issuance costs are being amortized on a straight-line basis over the life of the bonds, which
approximates the effective interest method. UCA must maintain minimum net asset and minimum liquid asset
ratios as part of the debt financing agreement. As of June 30, 2016, UCA is not aware of any noncompliance with
the covenants.

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Utah Charter Academies, Inc.
Notes to Consolidated Financial Statements
June 30, 2016

UCA, UCA Properties II and several third party companies were involved in the Series 2010 bond financing
transaction. Bond proceeds and additional cash were used by UCA to purchase two notes receivable from a third
party. Funding obtained by the third party flowed through additional third party companies in the form of
investments and loans. The funding was eventually loaned to UCA Properties II in the form of three notes
payable. UCA’s debt in the form of Series 2010 bonds payable essentially funded a portion of the notes payable
of UCA Properties II after passing through several third party companies. Structuring the financing transaction in
this manner gave the Academy access to new market tax credits through one of the third party companies
involved in the financing transaction. The new market tax credits will potentially reduce the principal balance
owed on the Academy’s debt upon the successful refinance of the debt. Because multiple third parties were
involved in the flow of funding between UCA and UCA Properties II, no right of offset exists between the notes
receivable and interest income of UCA and the notes payable and interest expense of UCA Properties II.
Therefore, the notes receivable, notes payable, interest income, and interest expense relating to the financing
transaction are not eliminated in consolidation.

UCA Properties II financed the construction of an Academy charter school with proceeds from the three notes
payable issued in December 2010. The face amounts of the promissory notes are $8,017,250, $2,855,250, and
$525,000. All three notes carry an interest rate of 3.41%. The $8,017,250 note requires monthly interest
payments through the maturity of the note in December 2017. The full principal balance of the note is due upon
maturity of the note. The $2,855,250 and $525,000 notes require monthly interest payments through December
2017. Beginning in January 2018, both notes require monthly interest and principal payments through the
maturity date of the notes in December 2045. All three notes are secured by substantially all property of the
Academy. UCA is a guarantor of the debt and must maintain minimum net asset levels and minimum net asset,
liquidity, and facility coverage ratios. As of June 30, 2016, UCA is not aware of any noncompliance with the
covenants.

In July 2015, UCA obtained financing of $29,590,000 through the issuance of Series 2015 bonds. The bonds
have interest rates ranging from 3% to 5%. Interest payments are due monthly through October 2018. Beginning
November 2018, principal and interest payments are due monthly through maturity of the bonds, which ranges
from October 2019 through October 2045. The bonds are secured by substantially all property of the Academy.
The bonds issued at a $610,865 premium, and UCA capitalized $1,222,445 in debt issuance costs that were
incurred in conjunction with the issuance of the Series 2015 bonds. The premium and issuance costs are being
amortized on a straight-line basis over the life of the bonds, which approximates the effective interest method.
Bond proceeds were used to pay off existing long-term debt and fund the construction of an additional phase of an
existing school building. UCA must maintain minimum net asset and minimum liquid asset ratios as part of the
debt financing agreement. As of June 30, 2016, UCA is not aware of any noncompliance with the covenants.

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Utah Charter Academies, Inc.
Notes to Consolidated Financial Statements
June 30, 2016

The following is a summary of future maturities of outstanding notes payable as of June 30, 2016:

Deferred
Notes Financing
Year Ending June 30, Payable Costs

2017 $ - $ 16,158
2018 8,053,998 16,158
2019 6,332,026 16,158
2020 115,715 16,158
2021 120,842 16,158
2022-2026 685,373 80,789
2027-2031 845,686 80,789
2032-2036 1,046,838 80,789
2037-2041 1,300,521 73,300
2042-2045 791,501 -

Total $ 19,292,500 $ 396,457

The following is a summary of future maturities of outstanding bonds payable as of June 30, 2016:

Deferred
Financing
Year Ending June 30, Principal Interest Total Costs

2017 $ - $ 1,518,443 $ 1,518,443 $ 107,094


2018 373,333 1,518,443 1,891,776 107,094
2019 570,000 1,505,376 2,075,376 107,094
2020 588,333 1,487,193 2,075,526 99,385
2021 608,333 1,469,468 2,077,801 92,663
2022 - 2026 3,461,667 6,914,205 10,375,872 407,664
2027 - 2031 12,402,250 5,398,961 17,801,211 288,829
2032 - 2036 5,545,000 3,629,167 9,174,167 157,241
2037 - 2041 6,895,000 2,281,733 9,176,733 102,483
2042 - 2046 7,163,334 787,933 7,951,267 47,422
Bond Premium 572,214 - - -

Total $ 38,179,464 $ 26,510,922 $ 64,118,172 $ 1,516,969

Note 5 - Net Assets

During the year ended June 30, 2004, the Board of Directors determined that $100,000 of the unrestricted net
assets be designated as an operating reserve for the Academy. The Board of Directors increased the designated
operating reserve by $50,000 to $150,000 during the year ended June 30, 2007.

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Utah Charter Academies, Inc.
Notes to Consolidated Financial Statements
June 30, 2016

Note 6 - Retirement Plans

In September 2011, the Academy began contributing to a safe harbor defined contribution plan under Section
401(k) of the Internal Revenue Code. Under the terms of the plan, the Academy contributes 4% of salaries to the
plan for eligible employees. An additional employee matching contribution of up to 2% is made by the Academy.
All contributions to the plan vest immediately and all full-time employees are eligible to participate in the plan.
The Academy contributed $261,470 to the plan during the year ended June 30, 2016.

Note 7 - Related Party

In February 2011, UCA entered into a two contracts with American Preparatory Schools, Inc (“APS”), a Utah
Corporation, for management services to be rendered on behalf of the Academy. One agreement governs the
services provided by APS for the Academy’s West Valley I campus, and the other agreement governs the services
provided by APS for the Academy’s Draper I and West Valley II campuses. In July 2013, UCA entered into a
third contract with APS for management services to be rendered to the Academy’s Draper II campus. Two
members of the Board of Directors of APS are siblings of the former Chairman of the Board of Directors of UCA,
who now serves on the Board of Directors of UCA Properties, UCA Properties II, and UCA Properties III.

The agreement that governs services provided by APS to the West Valley I campus commenced in February 2011
and terminates in June 2018. Under the terms of the agreement, UCA is required to pay APS an annual fixed base
fee and an annual variable fee, which is based on student enrollment in excess of 485 students. Both the fixed fee
and the variable fee are subject to biennial increases based on the change in the weighted pupil unit funding
provided to UCA or the consumer price index, whichever is less.

The agreement that governs services provided by APS to the Draper I and West Valley II campuses commenced
in February 2011. UCA and APS renewed the agreement during 2014 and extended the initial agreement
expiration date of the agreement from February 2014 to February 2017. Under the terms of the agreement, UCA
is required to pay an annual variable fee, which is based on total student enrollment. The variable fee is subject to
biennial increases based on the change in weighted pupil unit funding provided to UCA or the consumer index,
whichever is less.

The agreement that governs services provided by APS to the Draper II campus commenced in July 2013 and
expires in July 2017. Under the terms of the agreement, UCA is required to pay an annual variable fee, which is
based on total student enrollment. The variable fee is subject to biennial increases based on the change in
weighted pupil unit funding provided to UCA or the consumer index, whichever is less.

During the year ended June 30, 2015, UCA and APS agreed to modify the terms of the management services
agreements. The agreement modification reduced the fiscal year 2015 fee per student and resulted in prepaid
management fees that contractually reduce cash payments made by UCA to APS between fiscal years 2016
through 2019. At June 30, 2016, prepaid management fees are $657,910. The prepaid management fees have
been classified between current and long-term based on expected fiscal year amortization. During the year ended
June 30, 2016, UCA incurred $3,814,153 in management fee expense.

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Utah Charter Academies, Inc.
Notes to Consolidated Financial Statements
June 30, 2016

Note 8 - Concentrations

During the year ended June 30, 2016, the Academy received a substantial amount of its support, approximately
88%, from the Utah State Office of Education. The loss of support from this major source of funds could have an
adverse effect on the Academy’s programs and activities.

14
Supplementary Information
June 30, 2016
Utah Charter Academies, Inc.

w w w. e i d e b a i l l y. c o m
Utah Charter Academies, Inc.
Supplementary Financial Statements
June 30, 2016

The supplementary financial statements include individual and consolidated financial statements of UCA, UCA
Properties, UCA Properties II, and UCA Properties III. All intercompany activity has been eliminated in consolidation.

The supplementary financial statements also include individual and consolidated campus financial statements of UCA.
UCA Properties, UCA Properties II, and UCA Properties III are not included in the supplementary campus financial
statements. At June 30, 2016, UCA has four campuses: Draper I, Draper II, West Valley I, and West Valley II. The
consolidated operations of these four campuses represent the operations of UCA. All interschool activity has been
eliminated in consolidation.

The preparation of the supplementary financial statements requires management to make estimates. The supplementary
financial statements and estimates made by management have not been audited. The supplementary financial statements
are for presentation purposes only.

16
Utah Charter Academies, Inc.
Supplementary Financial Statements
Statements of Financial Position (Unaudited)
June 30, 2016

Utah Charter
UCA UCA UCA Intercompany Academies
UCA Properties Properties II Properties III Eliminations Consolidated
Assets

Current Assets
Cash and cash equivalents $ 3,068,065 $ 143,205 $ 50,033 $ 5,257 $ - $ 3,266,560
Accounts receivable 558,317 - - - - 558,317
Accounts receivable - intercompany 439,574 - - - (439,574) -
Prepaid management fees 219,303 - - - - 219,303
Other current assets 16,511 - - - - 16,511

Total current assets 4,301,770 143,205 50,033 5,257 (439,574) 4,060,691

Restricted Cash and Cash Equivalents 4,239,589 - 289,982 - - 4,529,571


Prepaid Management Fees 438,607 - - - - 438,607
Deferred Financing Costs 1,516,969 - 1,085,579 - (689,122) 1,913,426
Notes Receivable 8,542,250 - - - - 8,542,250
Property and Equipment 30,505,064 7,907,179 18,577,665 - (9,491,866) 47,498,042
Accumulated Depreciation (3,209,801) (908,697) (1,412,929) - (69,290) (5,600,717)

Total assets $ 46,334,448 $ 7,141,687 $ 18,590,330 $ 5,257 $ (10,689,852) $ 61,381,870

Liabilities and Net Assets (Deficit)

Current Liabilities
Accounts payable $ 242,134 $ - $ - $ 3,783 $ - $ 245,917
Accounts payable - intercompany - 5,712 58,460 375,402 (439,574) -
Accrued liabilities 2,211,809 37,133 - - - 2,248,942

Total current liabilities 2,453,943 42,845 58,460 379,185 (439,574) 2,494,859

Notes Payable, Net of Current Portion - 7,895,000 11,397,500 - - 19,292,500


Leasehold Liability - - 8,746,798 - (8,746,798) -
Bonds Payable 38,179,464 - - - - 38,179,464

Total liabilities 40,633,407 7,937,845 20,202,758 379,185 (9,186,372) 59,966,823

Net Assets (Deficit)


Unrestricted
Deignated 150,000 - - - - 150,000
Undesignated 5,551,041 (796,158) (1,612,428) (373,928) (1,503,480) 1,265,047

Total net assets (deficit) 5,701,041 (796,158) (1,612,428) (373,928) (1,503,480) 1,415,047

Total liabilities and net assets (deficit) $ 46,334,448 $ 7,141,687 $ 18,590,330 $ 5,257 $ (10,689,852) $ 61,381,870

17
Utah Charter Academies, Inc.
Supplementary Financial Statements
Statements of Activities (Unaudited)
For the Year Ended June 30, 2016

Utah Charter
UCA UCA UCA Intercompany Academies
UCA Properties Properties II Properties III Eliminations Consolidated
Revenue
State $ 23,167,353 $ - $ - $ - $ - $ 23,167,353
Federal 2,496,820 - - - - 2,496,820
Lease - 480,048 459,216 99,063 (1,038,327) -
Interest 103,653 - 1 - - 103,654
Other 636,464 - - - - 636,464

Total revenue 26,404,290 480,048 459,217 99,063 (1,038,327) 26,404,291


Expenses
Program service expenses
Salaries 11,246,966 - - - - 11,246,966
Benefits 2,146,355 - - - - 2,146,355
Professional and technical services 4,798,970 - 13,000 - - 4,811,970
Purchased property services 1,631,347 - - - (1,038,327) 593,020
Other purchased services 342,810 1,053 30,435 - - 374,298
Supplies and materials 2,034,070 - - - - 2,034,070
Property 943,712 169,304 393,147 - (22,131) 1,484,032
Interest 1,563,627 453,021 632,638 83,289 (27,565) 2,705,010
Total program service expenses 24,707,857 623,378 1,069,220 83,289 (1,088,023) 25,395,721
Administrative expenses
Salaries 692,811 - - - - 692,811
Benefits 149,749 - - - - 149,749
Professional and technical services 36,305 - - - - 36,305
Other purchased services 5,995 - - 199 - 6,194
Supplies and materials 120,107 - - - - 120,107
Total administrative expenses 1,004,967 - - 199 - 1,005,166
Total expenses 25,712,824 623,378 1,069,220 83,488 (1,088,023) 26,400,887
Change in Net Assets 691,466 (143,330) (610,003) 15,575 49,696 3,404
Net Assets (Deficit), Beginning of Year 5,009,575 (652,828) (1,002,425) (389,503) (1,553,176) 1,411,643
Net Assets (Deficit), End of Year $ 5,701,041 $ (796,158) $ (1,612,428) $ (373,928) $ (1,503,480) $ 1,415,047

18
Utah Charter Academies, Inc.
Supplementary Financial Statements
Campus Statements of Financial Position (Unaudited)
June 30, 2016

Interschool
Draper I Draper II West Valley I West Valley II Eliminations UCA
Assets

Current Assets
Cash and cash equivalents $ 957,854 $ 1,365,263 $ 3,997 $ 740,951 $ - $ 3,068,065
Accounts receivable 77,960 133,353 94,686 252,318 - 558,317
Accounts receivable - intercompany 948 377,024 948 60,654 - 439,574
Accounts receivable - interschool 701,810 614,233 - - (1,316,043) -
Prepaid management fees 35,088 65,792 35,088 83,335 - 219,303
Other current assets 571 14,046 571 1,323 - 16,511

Total current assets 1,774,231 2,569,711 135,290 1,138,581 (1,316,043) 4,301,770

Restricted Cash and Cash Equivalents 415,964 1,172,352 1,147,776 1,503,497 - 4,239,589
Prepaid Management Fees 74,084 120,953 74,084 169,486 - 438,607
Deferred Financing Costs 198,492 551,245 - 767,232 - 1,516,969
Notes Receivable - - - 8,542,250 - 8,542,250
Property and Equipment 5,546,395 13,055,140 554,916 11,348,613 - 30,505,064
Accumulated Depreciation (819,729) (1,044,220) (409,296) (936,556) - (3,209,801)

Total assets $ 7,189,437 $ 16,425,181 $ 1,502,770 $ 22,533,103 $ (1,316,043) $ 46,334,448

Liabilities and Net Assets

Current Liabilities
Accounts payable $ 40,181 $ 68,732 $ 40,181 $ 93,040 $ - $ 242,134
Accounts payable - interschool - - 564,073 751,970 (1,316,043) -
Accrued liabilities 310,611 531,310 310,719 1,059,169 - 2,211,809

Total current liabilities 350,792 600,042 914,973 1,904,179 (1,316,043) 2,453,943

Bonds Payable 5,228,333 14,519,961 - 18,431,170 - 38,179,464

Total liabilities 5,579,125 15,120,003 914,973 20,335,349 (1,316,043) 40,633,407

Net Assets

Total net assets 1,610,312 1,305,178 587,797 2,197,754 - 5,701,041

Total liabilities and net assets $ 7,189,437 $ 16,425,181 $ 1,502,770 $ 22,533,103 $ (1,316,043) $ 46,334,448

19
Utah Charter Academies, Inc.
Supplementary Financial Statements
Campus Statements of Activities (Unaudited)
For the Year Ended

Interschool
Draper I Draper II West Valley I West Valley II Eliminations UCA
Revenue
State $ 3,726,149 $ 6,938,699 $ 3,870,953 $ 8,631,552 $ - $ 23,167,353
Federal 80,179 282,588 503,444 1,630,609 - 2,496,820
Interest - 5,719 - 97,934 - 103,653
Other 63,048 180,845 31,323 361,248 - 636,464

Total revenue 3,869,376 7,407,851 4,405,720 10,721,343 - 26,404,290


Expenses
Instruction 137,260 396,837 133,868 350,755 - 1,018,720
Student support 57,014 35,190 16,299 50,261 - 158,764
Instruction support 55,467 66,849 66,286 79,341 - 267,943
School board 612,052 1,321,710 612,052 1,400,984 - 3,946,798
Administrative 22,941 38,813 26,492 74,162 - 162,408
Central 106,725 122,144 68,058 121,686 - 418,613
Operations 200,650 244,013 744,151 849,938 - 2,038,752
Transportation 790 11,394 1,968 103,700 - 117,852
Foodservice 48,495 64,182 227,622 464,211 - 804,510
Community service 128 389 326 4,066 - 4,909
Debt service 238,484 549,883 - 706,820 - 1,495,187
Other financing - - - 2,500 - 2,500
Wages 2,047,006 3,925,669 2,329,186 5,936,891 - 14,238,752
Credit card clearing 4,000 8,000 4,000 3,636 - 19,636
Depreciation and amortization 238,355 453,693 68,357 251,750 - 1,012,155
Other - 1,040 - 4,285 - 5,325

Total expenses 3,769,367 7,239,806 4,298,665 10,404,986 - 25,712,824


Change in Net Assets 100,009 168,045 107,055 316,357 - 691,466
Net Assets, Beginning of Year 1,510,303 1,137,133 480,742 1,881,397 - 5,009,575
Net Assets, End of Year $ 1,610,312 $ 1,305,178 $ 587,797 $ 2,197,754 $ - $ 5,701,041

20
Utah Charter Academies, Inc.
Supplementary Financial Statements
Campus Statements of Cash Flows (Unaudited)
For the Year Ended June 30, 2016

Interschool
Draper I Draper II West Valley I West Valley II Eliminations UCA
Cash Flows from Operating Activities
Change in net assets $ 100,009 $ 169,718 $ 107,054 $ 314,685 $ - 691,466
Adjustments to reconcile change in net assets to
net cash from operating activities:
Depreciation and amortization 199,076 502,025 55,630 255,424 - 1,012,155
Changes in operating assets and liabilities
Accounts receivable (13,105) 47,358 (29,831) (95,892) - (91,470)
Accounts receivable - intercompany (948) (212,672) 3,710 (60,654) - (270,564)
Accounts receivable - interschool (265,331) (614,233) - - 879,564 -
Prepaid management fee 33,730 73,736 33,729 78,108 - 219,303
Other current assets (571) (14,046) (571) (1,323) - (16,511)
Accounts payable (16,528) (34,637) (16,528) (40,769) - (108,462)
Accounts payable - intercompany - - (40,004) (11,437) - (51,441)
Accounts payable - interschool - - 127,594 751,970 (879,564) -
Accrued liabilities 22,557 6,244 22,665 392,098 - 443,564
Net Cash from (used for) Operating Activities 58,889 (76,507) 263,448 1,582,210 - 1,828,040
Cash Flows from Investing Activities
Change in restricted cash and cash equivalents (415,964) (1,172,352) (215,207) (1,289,014) - (3,092,537)
Purchases of property and equipment (4,613,077) (12,181,234) (44,244) (10,084,870) - (26,923,425)
Net Cash used for Investing Activities (5,029,041) (13,353,586) (259,451) (11,373,884) - (30,015,962)

Cash Flows from Financing Activities


Proceeds from issuance of notes payable 5,235,033 14,538,567 - 10,427,265 - 30,200,865
Cash payments for issuance costs (217,551) (604,175) - (400,719) - (1,222,445)

Net Cash from Financing Activities 5,017,482 13,934,392 - 10,026,546 - 28,978,420

Net Change in Cash and Cash Equivalents 47,330 504,299 3,997 234,872 - 790,498
Cash and Cash Equivalents, Beginning of Year 910,524 860,964 - 506,079 - 2,277,567
Cash and Cash Equivalents, End of Year $ 957,854 $ 1,365,263 $ 3,997 $ 740,951 $ - $ 3,068,065

Supplemental Disclosure of Cash Flow Information


Cash paid for interest $ 170,946 $ 391,827 $ - $ 554,544 $ - $ 1,117,317

21
Utah Charter Academies, Inc.
Schedule of Expenditures of Federal Awards
For the Year Ended June 30, 2016

Pass-through
Federal Entity
Federal Grantor/Pass-Through CFDA Identifying
Grantor/Program or Cluster Title Number Number Expenditures

Department of Agriculture
Passed through the State of Utah
School Lunch Program 10.555 46-8072 $ 510,823
School Breakfast Program 10.553 46-8074 7,528
Total - Child Nutrition Cluster 518,351

Fresh Fruits and Vegetables 10.582 48-8079 48,282

Total - Department of Agriculture 566,633

Department of Education
Passed Through the State of Utah
Special Education - Grants to States 84.027A 19-7524 421,469
Title I Grants to Local Educational Agencies 84.010A 08-7801 596,988
21st Century Community Living Centers 84.287C 60-7910 196,836
English Language Acquisition 84.365A 73-7880 44,918
Improving Teacher Quality 84.367A 74-7860 85,846
Passed through Utah State University
Gear Up 84.334A 12005802 316,288

Total - Department of Education 1,662,345

Department of Health and Human Services


Passed Through the Utah Department of Workforce Services
Child Care and Development Block Grant 93.575 136247058 153,641

Total Federal Financial Assistance $ 2,382,619

See Notes to Schedule of Expenditures of Federal Awards 22


Utah Charter Academies, Inc.
Notes to Schedule of Expenditures of Federal Awards
For the Year Ended June 30, 2016

Note A – Basis of Presentation

The accompanying schedule of expenditures of federal awards includes the federal grant activity of Utah
Charter Academies, Inc. (the “Academy”), and is presented on the full accrual basis of accounting. The
information in this schedule is presented in accordance with the requirements of Uniform Guidance. The
Academy received federal awards indirectly through pass-through entities.

Note B – Significant Accounting Policies

Expenditures are recognized following the cost principles contained in Subpart E – Cost Principles of the
Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to
reimbursement. The Academy’s summary of significant accounting policies is presented in Note 1 in the
Academy’s basic financial statements.

The organization has not elected to use the 10% de minimis cost rate.

23
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

The Board of Directors


Utah Charter Academies, Inc.
Draper, Utah

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 consolidated financial statements of Utah
Charter Academies, Inc. (the “Academy”), which comprise the consolidated statement of financial
position as of June 30, 2016, and the related consolidated statements of activities, and cash flows for the
year then ended, and the related notes to the financial statements, and have issued our report thereon dated
November 21, 2016.

Internal Control over Financial Reporting


In planning and performing our audit of the financial statements, we considered the 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 the Academy’s internal control. Accordingly, we
do not express an opinion on the effectiveness of the Academy’s internal control.

Our consideration of internal control over financial reporting was for the limited purpose described in the
preceding paragraph and was not designed to identify all deficiencies in internal control over financial
reporting that might be material weaknesses or significant deficiencies and therefore, material weaknesses
or significant deficiencies may exist that were not identified. However, as described in the accompanying
schedule of findings and questioned costs, we identified a deficiency in internal control that we consider
to be a material weakness.

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. We
consider the deficiency described in the accompanying schedule of findings and questioned costs as
finding 2016-A to be a material weakness.

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.

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Compliance and Other Matters
As part of obtaining reasonable assurance about whether the 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.

Utah Charter Academy’s Response to Findings


The Academy’s response to the finding identified in our audit are described in the accompanying
schedule of findings and questioned costs. The Academy’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 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.

Salt Lake City, Utah


November 21, 2016

25
Independent Auditor’s Report on Compliance for Each Major Federal Program;
Report on Internal Control Over Compliance Required by the Uniform Guidance

The Board of Directors


Utah Charter Academies, Inc.
Draper, Utah

Report on Compliance for Each Major Federal Program

We have audited Utah Charter Academies Inc.’s (the “Academy”) compliance with the types of
compliance requirements described in the OMB Compliance Supplement that could have a direct and
material effect on the Academy’s major federal program for the year ended June 30, 2016. The
Academy’s major federal program is identified in the summary of auditor’s results section of the
accompanying schedule of findings and questioned costs.

Management’s Responsibility
Management is responsible for compliance with federal statutes, regulations, and the terms and conditions
of its federal awards applicable to its federal programs.

Auditor’s Responsibility
Our responsibility is to express an opinion on the compliance for the Academy’s major federal program
based on our audit of the types of compliance requirements referred to above. We conducted our audit of
compliance in accordance with auditing standards generally accepted in the United States of America; the
standards applicable to financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal
Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements
for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we
plan and perform the audit to obtain reasonable assurance about whether noncompliance with the
compliance requirements referred to above that could have a direct and material effect on a major federal
program occurred. An audit includes examining, on a test basis, evidence about the Academy’s
compliance with those requirements and performing such other procedures as we considered necessary in
the circumstances.

We believe that our audit provides a reasonable basis for our opinion on compliance for the major federal
program. However, our audit does not provide a legal determination of the Academy’s compliance.

Opinion on Each Major Federal Program


In our opinion, the Academy complied, in all material respects, with the compliance requirements referred
to above that could have a direct and material effect on its major federal program for the year ended June
30, 2016.

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Report on Internal Control over Compliance

Management of the Academy is responsible for establishing and maintaining effective internal control over
compliance with the compliance requirements referred to above. In planning and performing our audit of
compliance, we considered the Academy’s internal control over compliance with the types of requirements that
could have a direct and material effect on its major federal program to determine the auditing procedures that are
appropriate in the circumstances for the purpose of expressing an opinion on compliance for its major federal
program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but
not for the purpose of expressing an opinion on the effectiveness of internal control over compliance.
Accordingly, we do not express an opinion on the effectiveness of the Academy’s internal control over
compliance.

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

Our consideration of internal control over compliance 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. We did not identify any deficiencies in internal control over compliance
that we consider to be material weaknesses. However, material weaknesses may exist that have not been
identified.

The purpose of this report on internal control over compliance is solely to describe the scope of our testing of
internal control over compliance and the results of that testing based on the requirements of the Uniform
Guidance. Accordingly, this report is not suitable for any other purpose.

Salt Lake City, Utah


November 21, 2016

27
Utah Charter Academies, Inc.
Schedule of Findings and Questioned Costs
For the Year Ended June 30, 2016

Section I – Summary of Auditor’s Results

FINANCIAL STATEMENTS

Type of auditor's report issued Unmodified

Internal control over financial reporting:


Material weaknesses identified Yes
Significant deficiencies identified not
considered to be material weaknesses None Reported

Noncompliance material to financial statements noted? No

FEDERAL AWARDS

Internal control over major program:


Material weaknesses identified No
Significant deficiencies identified not
considered to be material weaknesses None reported

Type of auditor's report issued on compliance for major programs: Unmodified

Any audit findings disclosed that are required to be reported in


accordance with Uniform Guidance 2 CFR 200.516: No

Identification of major programs:

Name of Federal Program CFDA Number

Title I Grants to Local Educational Agencies 84.010A

Dollar threshold used to distinguish between type A


and type B programs: $750,000

Auditee qualified as low-risk auditee? Yes

28
Utah Charter Academies, Inc.
Schedule of Findings and Questioned Costs
For the Year Ended June 30, 2016

Section II – Financial Statement Findings

2016-A – Financial Statement Preparation and Adjusting Journal Entries

Criteria: Utah Charter Academies, Inc. (the “Academy”) is responsible for maintaining appropriate internal
controls over financial reporting.

Condition: Multiple journal entries were recorded as a result of audit procedures. In addition, in conjunction with
the audit, the auditors assisted in the preparation of the financial statements and the accompanying notes to the
financial statements.

Cause: The Academy’s internal control system is not designed adequately to prevent and detect misstatements
from occurring in its financial statements.

Potential Effect: An inadequate internal control system could lead to materially misstated financial statements,
which may affect decisions made by management and other users of the financial statements.

Recommendation: The Academy should design and implement internal controls over financial reporting that
prevents misstatements from occurring in the Academy’s financial statements.

Views of Responsible Officials: Utah Charter Academies will implement controls which will ensure that its
financial statements are prepared according to generally accepted accounting principles (GAAP). These controls
will include, among others; inter-departmental peer review of reconciliations and journal entries as well as a
contracted review of its financial statements prior to engaging a firm to audit Utah Charter Academies’ financial
transactions and statements.

29
Utah Charter Academies, Inc.
Schedule of Findings and Questioned Costs
For the Year Ended June 30, 2016

Section III – Federal Award Findings and Questioned Costs

No matters were reported.

30
Utah Charter Academies, Inc.
Summary Schedule of Prior Year Findings
Year Ended June 30, 2016

No findings reported in the prior year.

31
Independent Auditor’s Report as Required by the State Compliance Audit
Guide on Compliance with General State Compliance Requirements, and
Internal Control over Compliance

To the Board of Directors


Utah Charter Academies, Inc.

Report on Compliance with General State Compliance Requirements


We have audited Utah Charter Academies, Inc.’s (the “Academy”) compliance with the applicable general state
compliance requirements described in the State Compliance Audit Guide, issued by the Office of the Utah State
Auditor, that could have a direct and material effect on the Academy for the year ended for the year ended June
30, 2016.

General state compliance requirements were tested for the year ended June 30, 2016 in the following areas:

Budgetary Compliance
Restricted Taxes and Related Revenues
Open and Public Meetings Act
Treasurer’s Bond
School Fees
Minimum School Program

Management’s Responsibility
Management is responsible for compliance with the general state requirements referred to above.

Auditor’s Responsibility
Our responsibility is to express an opinion on the Academy’s compliance based on our audit of the compliance
requirements referred to above. We conducted our audit of compliance in accordance with auditing standards
generally accepted in the United States of America; the standards applicable to financial audits contained in
Government Auditing Standards issued by the Comptroller General of the United States; and the State
Compliance Audit Guide. Those standards and the State Compliance Audit Guide require that we plan and
perform the audit to obtain reasonable assurance about whether noncompliance with the compliance requirements
referred to above that could have a direct and material effect on the Academy or its major state programs
occurred. An audit includes examining, on a test basis, evidence about the Academy’s compliance with those
requirements and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion on compliance with general state
compliance requirements and for each major state program. However, our audit does not provide a legal
determination of the Academy’s compliance.

Opinion on General State Compliance Requirements and Each Major State Program
In our opinion, Utah Charter Academies, Inc., complied, in all material respects, with the compliance
requirements referred to above that could have a direct and material effect on Utah Charter Academies, Inc. for
the year ended June 30, 2016.

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Report on Internal Control over Compliance
Management of the Academy is responsible for establishing and maintaining effective internal control over
compliance with the compliance requirements referred to above. In planning and performing our audit of
compliance, we considered the Academy’s internal control over compliance with the compliance requirements
that could have a direct and material effect on the Academy to determine the auditing procedures that are
appropriate in the circumstances for the purpose of expressing our opinion on compliance with general state
compliance requirements and to test and report on internal control over compliance in accordance with the State
Compliance Audit Guide, but not for the purpose of expressing an opinion on the effectiveness of internal control
over compliance. Accordingly, we do not express an opinion on the effectiveness of the Academy’s internal
control over compliance.

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

Our consideration of internal control over compliance was for the limited purpose described in the first paragraph
of this section and was not designed to identify all deficiencies in internal control over compliance that might be
material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over
compliance that we consider to be material weaknesses, as defined above. However, material weaknesses may
exist that have not been identified.

The purpose of this report on internal control over compliance is solely to describe the scope of our testing of
internal control and compliance and the results of that testing based on the requirements of the State Compliance
Audit Guide. Accordingly, this report is not suitable for any other purpose.

Salt Lake City, Utah


November 21, 2016

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