KIPP: ST. LOUIS

FINANCIAL STATEMENTS

June 30, 2014 and June 30,2013

KTPP: ST. LOUIS

TABLE OF'CONTENTS

Page

IIndependent Auditorso Report

Financial Statements

Statements of Financial Position

Statements of Activities

Statements of Cash Flows

Notes to Financial Statements

Supplementary Information

Schedule of Revenues, Expenditures and Changes in Fund Balances -Modified Cash Basis - Governmental Funds - Unaudited

Schedule of Revenues Collected by Source - Modified Cash Basis -Governmental Funds - Unaudited

Schedule of Expenditures Paid by Object - Modified Cash Basis -Governmental Funds - Unaudited

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CPAs andf4anagement Consultants

One South Memorial Drive, Ste.900St. Louis, MO 63 I 02-2439ph. 314.231.6232fax 3 14.880.9307Kerber, Eck & Braeckel .'-'www.kebcpa.com

Independent Auditors' Report

Board of DirectorsKIPP: St. Louis

Report on the Financial Statements

We have audited the accompanying financial statements of KIPP: St. Louis (a nonprofitorgarlization), which comprise the statements of financial position as of June 30,2014 and June 30,

2013, and the related statements of activities and cash flows for the years then ended, and the related

notes to the financial statements.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financialstatements in accordance with accounting principles generally acceped in the United States ofAmerica; this includes the design, implementation, and maintenance of internal control relevant tothe preparation and fair presentation of financial statements that are free from material misstatement,

whether due to fraud or enor.

Auditors' 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 UnitedStates of America and the standards applicable to financial audits contained ín Governmental

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 financialstatements 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 auditors' judgment,

including the assessment of the risks of material misstatement of the financial statements, whether

due to fraud or effor. In making those risk assessments, the auditor considers internal controlrelevant to the entity's preparation and fair presentation of the financial statements in order to design

audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an

opinion on the effectiveness of the entity's internal control. Accordingly, ws 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.

Other Locations

Belleville, lL . Carbondale, lL . Jacksonville, lL . Litchfìeld, lL . Springfìeld, lL . Cape Girardeau, MO . Milwaukee,Wl

Opinion

In our opinion, the financial statements referred to above present fairly, in all material

respects, the financial position of KIPP: St. Louis as of June 30,2014 and 2013 andthe changes in

its net assets and its cash flows for the years then ended in accordance with accounting principles

generally accepted in the United States of America.

Other Matters

Other Information

Our audit was conducted for the purpose of forming an opinion on the financial statements as

a whole. The supplementary information on pages 13 through 15, which are the responsibility ofmanagement, are presented for purposes of additional analysis and are not a required part of the

f,rnancial statements. Such information has not been subjected to the auditing procedures applied inthe audit of the financiai statements, and accordingly, we do not express an opinion or provide any

assurance on it.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated

December 9,2014 on our consideration of KIPP: St. Louis'intemal control over financial reporting

and on 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 ofinternal control over financial reporting and compliance and the results of that testing, and not toprovide 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 inconsidering KIPP: St. Louis' internal control over financial reporting and compliance.

K"þ.Ee/r f ìr**hr-tuPSt. Louis, MissouriDecember 9,2014

KIPP: ST. LOUIS

STATEMENTS OF FINANCIAL POSITIONJune 30, 2014 and June 30,2013

2014

$ 1,849,806

2,834,884169,412

77,15t11,500

1,010,962

$ 240,088

37,60290,400

460,827

828,917

1,861,769

3,263,029

$ 1,040,116

1,029,218

75,981

53,444

11,500

886,653

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ASSETS

Cash and cash equivalents

Pledges receivable - net

Federal grants receivable

Prepaid expenses

Deposits on buildingProperty and equipment - net

Total assets

LIABILITIES AND NET ASSETS

LiabilitiesAccounts payable

Accrued expenses

Deferred rentLong-term debt

Total liabilities

Net assets

UnrestrictedTemporarily restricted

Total net assets

Total liabilities and net assets

$ 5,953,715 g 3,096,912

$

39,767

109,400

531,900

681,067

1,386,628

1,029,217

5,124,798 2,415,845

$ 5,953,715 _$ 3,096912

See notes to financial statements

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KIPP: ST. LOUIS

STATEMENT OF ACTIVITIESYear ended June 30,2014

UnrestrictedTemporarilyRestricted Total

REVENUES, GAINS AND OTHER SUPPORT

Federal revenue

State revenue

Local revenue

ContributionsOtherNet assets released from restrictions

Total revenues, gains and other support

EXPENSESProgram services

Management and general

Development

Total expenses

CHANGE IN NET ASSETS

Net assets at July 1,2013

Net assets at June 30,2014

6,066,067 2,233,812 8,299,879

$ 780,063

3,085,763

371,4581,115,610

73,173

700,000

2,933,812

(700,000)

$ 780,063

3,085,763

371,458

4,049,422

13,173

$

4,329,1541,091,524

170,248

4,329,1541,091,524

170,248

5,590,926 5,590,926

475,141 2,233,812 2,709,953

1,386,628 7,029,217 2,415,845

$ 1,861,769 s 3,263,029 S 5,124,799

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KIPP: ST. LOUIS

STATEMENT OF ACTIVITIESYear ended June 2013

REVENUES, GAINS AND OTHER SUPPORT

Federal revenue

State revenue

Local revenue

ContributionsOther

Net assets released from restrictions

Total revenues, gains and other support

EXPENSES

Program services

Management and general

Development

Total expenses

CHANGE IN NET ASSETS

Net assets at July 1,2012

Net assets at June 30,2013

Total

s 677,7572,952,363

268,099

1,338,860

19,908

(887,457)

5,269,543 (11,556) 5,256,987

Unrestricted

TemporarilyRestricted

s 677,757

2,952,363268,099

462,95919,908

887,457

875,901

$

3,885,579

734,797

148,685

3,885,579

734,797148,685

4,769,061 4,769,061

499,482 (1 1,556) 487,926

1,040,773 1,927,919

$ 1,396,628 S 1,029,217 g 2,415,845

887,146

See notes to fìnancial statements.

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KIPP: ST. LOUIS

STATEMENTS OF CASH FLO\ilSYear ended June 30,2014 and June 30,2013

Increase (decrease) in cash and cash equivalents

Cash flows from operating activitiesChange in net assets

Adjustments to reconcile change in net assets to net cash

provided by operating activitiesDepreciation

(Increase) decrease in assets

Pledges receivable

Federal grants receivable

Prepaid expenses

Increase (decrease) in liabilitiesAccounts payable

Accrued expenses

Deferred rentTotal adjustments

Net cash provided by operating activities

Cash flows from investing activityCapital expenditures

Cash flows from financing activityPrincipal payments on long-term debt

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Supplemental disclosure of cash flow information:

Cash paid during the year for interest

See notes to financial statements.

20r4 20r3

s 2,708,953 $ 487,926

r99,t70 232,r83

(1,805,666)

(93,431)(23,707)

240,088(2,r65)

(19,000)

11,556

50,030

(3,167)

(16,94t)5,13 8

(19,000)

(1,504,711) 259 199

r,204,242 741,725

(323,479) (136,630)

(71,073) (67,480)

809,690 543,615

1,040,116 496,501

$ 1,849,806 $ 1,040,116

s 24,995 $ 29,891

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KIPP: ST. LOUIS

NOTES TO FINANCIAL STATEMENTS

NOTE 1 _ SUMMARY OF ACCOUNTING POLICIES

Nature of Organization

KIPP: St. Louis (KIPP), a not-for-profit corporation, is an independent publicly supportedcharter school located in the metropolitan area of the St. Louis Missouri Public School District.KIPP was organized in 2008 under Chapter 355 Revised Statutes of Missouri (RSMo) andgoverned by Senate Bill No. 781 of the 89th General Assembly of the Missouri legislature.

Under the RSMo, Washington University (Sponsor) granted KIPP a charter effective untilJune 30, 2018. The sponsorship agreement has a term of ten years and is renewable by mutualagreement provided that KIPP is in ccmpliance with the terms of the charter agreement andunless a written notice of non-renewal is given by either party. During the term of the charter,the Sponsor may also terminate the charter if good cause is shown.

The Organization's charter provides for the education of low income, disadvantaged, at-risk boysand girls. KIPP provided education at the fifth through eighth grade levels for the 2013-2014school year with approximately 330 students in attendance.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and highly liquid investments with maturities, whenacquired, of three months or less.

Net Assets

Unrestricted net assets are not restricted by donors or the donor-imposed restrictions haveexpired. Temporarily restricted net assets contain donor-imposed restrictions that permit KIPPto use or expend the assets as specified. The restrictions are satisfied either by the passage oftime or by action of KIPP. Permanently restricted net assets contain donor-imposed restrictionsthat stipulate the resources be maintained permanently but permit KIPP to use or expend part orall of the income derived from the restricted assets for either specified or unspecified purposes.

Governmental Funding

Revenue from federal, state, or local grants and contracts are recognized as revenue by KIPPwhen expenses are incurred and billed.

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KIPP: ST. LOUIS

NOTES TO FINANCIAL STATEMENTS

Contributed Services

Contributed services are reported as contributions at their fair value if such services create orenhance nonfinancial assets or would have been purchased ifnot provided by donation, requirespecial skills and are provided by individuals possessing such skills. A number of volunteershave made a contribution of their time to KIPP to develop academic and other programs and toserve on the board of trustees. The value of this contributed time is not reflected in the financialstatements as such services either do not require specialized skills or would not typically be

purchased had they not been provided as donations.

Pledges Receivable

Unconditional promises to give are recorded as a receivable and revenue when the promise ismade, and reduced by an allowance for uncollectible pledges as determined by management.

Long-term pledges are discounted using the net present value of future cash flows.

Property and Equipment

Property and equipment are recorded at cost. KIPP capitalizes all purchases of property and

equipment in excess of $500. Depreciation is computed using the straight-line method over the

estimated useful lives of the respective assets which range from 3 to 10 years.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generallyaccepted in the United States of America requires management to make estimates and

assumptions that affect the reported assets and liabilities and disclosures of contingent assets and

liabilities at the date of the financial statements and the reported amounts of revenue and

expenses during the reporting period. Actual results could differ from those estimates.

Income Taxes

KIPP is a not-for-profit organization under Section 501(c)(3) of the Internal Revenue Code and

is exempt from income taxes on related income under Section 501(a) of the Code. KIPP filesfederal informational retums. The statutes of limitation for informational returns filed for theyears ended June 30, 2011 through 2014 have not expired and therefore are subject toexamination.

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KIPP: ST. LOUIS

NOTES TO FINANCIAL STATEMENTS

NOTE 2 _ PROPERTY AND EQUIPMENT

Property and equipment consists of the following at June 30,2014 and June 30,2013:

2014 2013

Fumiture and fixturesLeasehold improvements

$ 711,3601,236,472

$ 537,010

1,087,343

7,947,932(936,870)

r,624,353Less accumulated depreciation (73 7,700)

$ 1,010,962 $ 886,653

Depreciation expense was $199,170 and5232j83 for the years ended June 30,2014 and June

30, 2013, respectively.

NOTE 3 - LEASE COMMITMENTS

Building

KIPP has entered into an operating lease agreement for the lease of educational facilities ownedby St. Francis de Sales Oratory located at 2647 Ohio Avenue, St. Louis, Missouri. The lease

expires in May 2019. The lease is automatically terminated in the case of cancellation orrevocation of KIPP's charter. KIPP incurred lease expenses for the building in the amount of$122,050 and$142,667 for the years ended June 30, 2014 and June 30, 2013, respectively.

Regional Office

KIPP has entered into an operating lease agreement for the lease of regional offices owned bySt. Francis de Sales Oratory located at 2647 Ohio Avenue, St. Louis, Missouri. The Lease

expired in May 2014 and has not been renewed. KIPP continues to pay its monthly rent based onthe expired lease until a new lease is signed. KIPP incurred lease expenses for the regionaloffices in the amount of $21,210 and $15,000 for the years ended June 30,2014 and June 30,

2013, respectively.

Equipment

KIPP is party to various agreements for the leasing of certain articles of school office equipment.The minimum payments vary from $397 to $3,025 per month over the lives of the leases, whichend June 2020. KIPP incurred lease expense for these articles in the amount of approximately$45,000 and $23,000 for the years ended June 30,2014 and June 30,2013, respectively.

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KTPP: ST. LOUIS

NOTES TO FINANCIAL STATEMENTS

Minimum Lease Commitments

Future facilities and equipment minimum lease commitments as of June 30, are as follows:

Year EndingJune 30, Total Facilities Equipment

201520r620t720r820t92020

$ $ $206,064206,064193,964

169,764

169,764

4,764

165,000

165,000

165,000

lo),uuu165,000

41,064

4r,06428,964

4,764

4,764

4,764

$ 950,384 $ 825,000 $ 125,384

NOTE4_LONG-TERMDEBT

Long-term debt consists of a note payable to IFF. The note is payable in monthly installments of$8,006, including interest at 5.0o/o per annum through December l, 2014 at which time interest

will be recalculated from this date through maturity of December 1,2019. The loan is secured

by a leasehold deed of trust in and to KIPP's real estate lease as well as its security agreement on

personal property of the school.

The following is a summary of principal maturities on the long-term debt:

Year EndingJune 30, Principal

201520t62017

2018

20192020

$ 74,707

78,53284,549

86,773

91,21245,054

Total

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KIPP: ST. LOUIS

NOTES TO FINANCIAL STATEMENTS

NOTE 5-RISKMANAGEMENT

KIPP is exposed to various risks of loss from torts, theft of, damage to, and destruction of assets;

injuries to employees; and natural disasters. KIPP maintains commercial insurance, withlimitation, to protect KIPP from such risks.

NOTE 6 _ CONTINGENCY

Amounts received or receivable from grants or contracts by outside agencies are subject to audit

and adjustment by grantor agencies, principally the Missouri Department of Elementary and

Secondary Education and the federal government. Any disailowed amounts, including amounts

already collected, may constitute a liability of KIPP. The amorurts, if any, which may be

disallowed by any grantors cannot be determined at this time. Management believes any such

amount would not have a material effect on the accompanying financial statements.

NOTET_RETIREMENTPLAN

KIPP contributes to the Public School Retirement System of the City of St. Louis, a cost-sharing,

multi-employer defined benefit pension plan. Participation is mandatory under Missouri Revised

Statues, Chapter I05 &,169.

The Retirement System members are required to contribute 5.00% of their annual covered salary

for the year 2014. KIPP was required to contribute 15.07olo of covered school compensation for

July 1 , 2013 to December 3l , 2013 and 16 .5%o for the period January I , 2014 through June 3 0,

20i4. The employer contribution rates are determined annually as part of the Annual Valuation

Report made by the Plan's actuary and the employee contribution rate is determined by the

statute.

The total employer contributions for the years ended June 30, 2014 and June 30, 2013 were

$73 8,87 1 and 5234,228, respectively.

NOTE 8 . RECLASSIFICATIONS

Certain accounts in the prior-year financial statements have been reclassified for comparative

pufposes to conform with the presentation in the current-year financial statements.

NOTE 9 _ SUBSEQUENT EVENTS

In preparing the financial statements, KIPP has evaluated events and transactions for potential

recõgtrition or disclosure through December 9, 2014, the date the financial statements were

available to be issued.

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SUPPLEMENTARY INFORMATION

KIPP: ST. LOUIS

SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES.

MODIFIED CASH BASIS - GOVERNMENTAL FUNDS - UNAUDITED

Year ended June 2014

General

SpecialRevenue

Capital

Projects

TotalFunds

Revenues

LocalState

Federal

Expenditures

CurrentInstructionHealthy, psych, speech and audio

Improvement of instruction

Executive administration

Building level administration

Business services

Operation of plant

Pupil transportationFood services

Central officeDebt service

PrincipalInterest

Total expenditures

Excess ofrevenues over (under)

expenditures

Other financing sources (uses)

Transfers

Fund balances at July 1,2013

Fund balances at June 30,2014

$ 2,190,388

3,085,763686,633

$ 60,000 $ 378,000 $ 2,628,388

3,085,763

686,633

60,000 378,000 6,400,7845,962,784

636,503

28,553

17,280

699,272

220,392

177,672

245,401

285,322

288,303

59,382

1,799,186 70,512

48

579,823

7,300

159,433

224,843

2,488

I,l0l

2,506,20128,55317,280

706,620800,215

177,672

404,834

285,322

290,791

285,326

71,07324.995

71,07324,995

2,6 58,080 2,603,900 336,902 5,598,882

3,304,704 (2,543,900) 41,098 801,902

(2,543,900) 2,543,900

1,0 10.304 1,010,304

$ 1,771,108 $ $ 41,098 $1, 812,206

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KIPP: ST. LOUIS

SCHEDULE OF REVENUES COLLECTED BY SOURCE -MODIFIED CASH BASIS - GOVERNMENTAL FUNDS - UNAUDITEDYear ended June 30, 2014

General

Special

Revenue

CapitalProjects

TotalFunds

LOCALProp C

Earnings on investments

Food service program

Student activities

Other

Total local

STATE

Basic formula

Transportation

Food service

Total state

FEDERAL

Medicaid

IDEA Entitlement Funds, Part B IDEA

Food service

Title I - ESEA

Title II, Part A, ESEA

Other

Total federal

Total revenues

$ 339,363

s29

1,667

29,8gg

l,g l g,g30

2,190,388

$

60,000

60,000

$ 339,363

529

1,667

29,899

378,000

378,000 2,628,388

$

3,03 1,3 l052,805

1,648

3,031,310

52,805

1,648

3,095,763 3,085,763

37,759

42,963

219,420

247,259

33,551

105,681

37,759

42,963

219,420

247,259

33,551

105,681

686,633 686,633

s 5,962,784 $ 60,000 $ 378,000 $ 6,400 ,784

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KIPP: St. Louis

SCHEDULE OF EXPENDITURES PAID BY OBJECT. MODIFIED CASH BASIS -

GOVERNMENTAL FUNDS . UNAUDITEDYear ended June 30,201.4

General

SpecialRevenue

CapitalProjects

TotalFunds

Salaries

Employee benefits

Purchased services

Supplies and materials

Capital outlay

Principal

Interest

$ 471,400 81,920,402 $

229,981 683,498

r,671,5r0

s 2,397,802

9t3,479

1,671,510

279,189 279,t89

240,834 240,834

71,073 71,073

24,995 24,995

$ 2,658,080 $ 2,603,900 s 336,902 $ 5,598,882

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