lusher audited financial report: f.y. 2015

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Financial Report

Advocatesfor Arts Based

Education Corporationd/b/a Lusher Charter School

June 30 2015

Bourgeois Bennett^^CERJIFIED PUBLIC A C C O U N TA N T S C O N S U LTA N T S



Financial Report

Advocatesfor Arts Based

Education Corporationd/b/a Lusher Charter School

June 30 2015



TABLE OF CONTENTS

Advocates for Arts-Based Education Corporationd/b/a Lusher Charter School

New Orleans, Louisiana

June 30. 2015 and 2014

PageNumber

Financial Section

Independent Auditor s R eport

Exhibits

A - Statement of Financial Position

B - Statement of Activities

C - Statement of Cash Flows

D - Notes to Financial Statements

1 3

4

5

6

7 19

Supplementary Information

1 - Schedule of Compensation, Benefits, and Other Paymentsto Agency Head or Chief Executive Officer

Special Reports of Certified Public Accountants

Independent Auditor's Report on Internal Control OverFinancial Reporting and on Compliance and OtherMatters Based on an Audit of Financial StatementsPerformed in Accordance with Government Auditing Standards

Schedule of Findings and Responses

Reports by Management

Schedule of Prior Year Findings and Responses

Management's Corrective Action Plan

20

21 22

23 24

25

26



TABLE OF CONTENTS (Continued)



June 30. 2015 and 2014

PageNumber

Schedules Required by State Law (R.S. 24:524 - Performance andStatistical Data) (Unaudited)

Independent Accountant s Report o Applying Agreed Upon Procedures 27 - 30

Schedules

1 - General Fund Instructional and Support Expenditures and CertainLocal Revenue Sources 31 - 32

2 - Education Levels of Public School Staff 33

3 - Number and Type of Public Schools 34

4 - Experience of Public School Principals, Assistant Principals, andFull Time Classroom Teachers 35

5 - Public School Staff Data: Average Salaries 36

6 - Class Size Characteristics 37

7 - Louisiana Educational Assessment Program (LEAP) 38 - 39

8 - Graduation Exit Examination (GEE) 40

9 - /Leap Tests 41 44



FINANCIAL SECTION



Bourgeois Bennett CERTIFIED PUBLIC CCOUNT NTSI CONSULT NTS

A LIHITED LIABILITY CONMNY

INDEPENDENT AUDITOR S REPORT

To the Board of Trustees,Advocates for Arts-Based Education Corporation

d/b/a Lusher Charter School,New Orleans. Louisiana.

Report on the Financial Statements

We have audited the accompanying financial statements of Advocates for Arts-BasedEducation Corporation d/b/a Lusher Charter School (a non-profit organization) which comprise thestatement of financial position as of June 30, 2015, and the related statements of activities and cashflows for the year then ended, and the 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 accepted in the United States ofAmerica; this includes the design, implementation, and maintenance of internal control relevant to thepreparation 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. Weconducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Govemment Auditing Standardsissued by the Comptroller General of the United States of America. Those standards require that weplan and perform the audit to obtain reasonable assurance about whether the financial statements arefree of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures 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 dueto fraud or error. In making those risks assessments, the auditor considers internal control relevant toLusher Charter School's preparation and fair presentation ofthe financial statements in order to designaudit procedures that are appropriate in the circumstances, but not for the purpose of expressing an

P O Box 60600 EW ORLEANS, LA 70160-0600 504.831.4949 BOURGEOISBENNETT.COM



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 thereasonableness of significant accounting estimates made by management, as well as evaluation of theoverall presentation of the financial statements.

We believe that audit evidence we have obtained is sufficient and appropriate to provide a basis

for our opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects,the financial position of Advocates for Arts-Based Education Corporation d^/a Lusher Charter Schoolas of June 30, 2015, and the changes in its net assets and its cash flows for the year then ended inconformity with accounting principles generally accepted in the United States of America.

Other Matter

Our audit was conducted for the purpose of forming an opinion on the financial statements as awhole. The supplemental schedule (Schedule 1) is presented for purposes of additional analysis, isrequired by Louisiana Revised Statute 24:513(a)(3), and is not a required part of the financialstatements. Such information is the responsibility of management and was derived from and relatesdirectly to the underlying accounting and other records used to prepare the financial statements. Theinformation has been subjected to the auditing procedures applied in the audit of the financialstatements and certain additional procedures, including comparing and reconciling such informationdirectly to the underlying accounting and other records used to prepare the financial statements or tothe financial statements themselves, and other additional procedures in accordance with auditingstandards generally accepted in the United States of America. In our opinion, the information is fairlystated in all material respects in relation to the financial statements as a whole.

Report on Summarized Comparative Information

We have previously audited the Advocates for Arts-Based Education Corporation d^/a LusherCharter School's financial statements, and our report dated September 26, 2014, expressed anunmodified opinion on those audited financial statements. In our opinion, the summarizedcomparative information presented herein as of and for the year ended June 30,2014, is consistent, inall material respects, with the audited financial statements from which it has been derived.



Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report, datedSeptember 29, 2015 on our consideration of Advocates for Arts-Based Education Corporation d/b/aLusher Charter School's internal control over financial reporting and on our test of its compliance withcertain provisions of laws, regulations, contracts and grant agreement, and other matters. The purpose

of that report is to describe the scope of our testing of internal control over financial reporting andcompliance and the results of that testing, and not to provide an opinion on the internal control overfinancial reporting or on compliance. That report is an integral part of an audit performed inaccordance with Government Auditing Standards in considering the Advocates for Arts-BasedEducation Corporation d/b/a Lusher Charter School's internal control over financial reporting andcompliance.

Certified Public Accountants.

New Orleans, Louisiana,September 29, 2015.



Exhibit A

STATEMENT OF FINANCIAL PQSITIQN



June 30, 2015(with comparative totals for 2014)

See notes to financial statements.

2015 2014

ASSETSCashGrants receivablePrepaid expensesInvestmentsOtherProperty and equipment, net

Total assets

LIABILITIESAccounts payable

Accrued expenses

3 , 0 3 6 , 4 8 42 0 3 , 9 6 73 1 2 , 8 3 4

1 3 , 2 7 2 , 7 8 7

1 9 0 , 1 7 32 , 3 1 3 , 6 5 8

$ 19,329,903

88,156

823.455

1 0 , 7 7 1 , 1 0 9

2 3 9 , 7 0 91 1 8 , 0 3 8

4 , 0 5 8 , 8 0 42 2 9 , 8 2 9

2 , 4 5 2 , 8 0 0

$ 17,870,289

85,781

795.687

Total liabilities 911.611 881.468

NET ASSETSUnrestrictedTemporarily restricted

18,104,667313.625

16,640,360348.461

Total net assets 18.418.292 16.988.821

Total liabilities and net assets $ 19,329,903 $ 17,870,289

4



Exhibit C

STATEMENT OF CASH FLOWS



For the year ended June 30, 2015(with comparative totals for 2014)

Cash Flows From Operating ActivitiesIncrease in net assetsAdjustments to reconcile increase in net assets

to cash provided by operating activities:DepreciationInterest on investment in certificate of deposit

(rolled over)Donation of fixed assets(Increase) decrease in assets:

Grants receivablePrepaid expensesOther

Increase (decrease) in liabilities:Accounts payable and accrued expenses

Net cash provided by operating activities

Cash Flows From Investing ActivitiesProperty and equipment purchasesProceeds from maturities of investmentsPurchases of investments

Net cash used in investing activities

Net Increase (Decrease) in Cash

CashBeginning of year

End of year

See notes to financial statements.

2015 2014

1 , 4 2 9 , 4 7 1 1 , 6 2 0 , 5 3 9

1 5 6 , 3 0 3 1 6 5 , 8 8 3

2 1 3 , 9 8 3 ) 1 6 , 7 3 8 )1 7 , 1 6 1 )

3 5 , 7 4 2 6 4 , 1 3 0 )1 9 4 , 7 9 6 ) 1 6 , 4 5 0 )

3 9 , 6 5 6 6 9 , 4 9 9 )

3 0 , 1 4 3 1 4 8 , 2 4 3 )

1 , 2 6 5 , 3 7 5 1 , 4 7 1 , 3 6 2

9 9 5 , 6 3 5 )4 , 0 8 8 , 6 3 9

9 , 0 0 0 , 0 0 0 ) 4 , 0 0 0 , 0 0 0 )

9 , 0 0 0 , 0 0 0 ) 9 0 6 , 9 9 6 )

7 , 7 3 4 , 6 2 5 ) 5 6 4 , 3 6 6

1 0 , 7 7 1 , 1 0 9 1 0 , 2 0 6 , 7 4 3

3 , 0 3 6 , 4 8 4 1 0 , 7 7 1 , 1 0 9



Exhibit DNOTES TO FINANCIAL STATEMENTS



June 30. 2015 and 2014

Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Organization

Advocates for Arts-Based Education Corporation d/b/a Lusher Charter School (the

School ), incorporated on August 24,2005, is an educational institution organizedto improve student learning, to increase learning opportunities for all students, toencourage the use of innovative teaching methods, to be more thoroughlyaccountable for education results, and to create new professional opportunities forteachers and other school employees.

The Orleans Parish School Board (OPSB) approved the granting of a charter to theSchool effective January 1, 2006 for a period ending on December 31, 2011, tooperate a Type 3 Charter School, as defined in LA R.S.17:3973(3)(b). On January18, 2011, the OPSB voted to renew the charter for a period of ten years.

b. Basis of Accounting

The financial statements of the School have been prepared in conformity withaccounting principles generally accepted in the United States of America on theaccrual basis of accounting. The Financial Accounting Standards Board (FASB) isthe accepted standard setting body for establishing not-for-profit accounting andfinancial reporting principles.

c. Estimates

The preparation of financial statements in conformity with accounting principlesgenerally accepted in the United States of America requires management to makeestimates and assumptions that affect certain reported amounts of assets andliabilities and disclosures of contingent assets and liabilities at the date of thefinancial statements and reported amounts of revenues and expenses during thereporting period. Accordingly, actual results could differ from those estimates.



Exhibit D(Continued)

Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

d. Cash and Cash Equivalents

Cash, which is held in interest bearing accounts, consists of both unrestricted andrestricted balances. Unrestricted cash balances represent cash available for generaloperating purposes. Restricted cash balances consist of amounts credited to theSchool's bank accounts from donations received from individuals or entities whospecified specific use of the contribution.

The School classifies as cash and cash equivalents all highly liquid debt instrumentswith an initial maturity of three months or less.

e. Grants Receivable

Grants receivable are stated at the amount management expects to collect fromoutstanding balances. The financial statements do not include an estimate forallowance for doubtful accounts. Management believes that all receivables arecollectible.

f. Promises to Give

Contributions are recognized when the donor makes a promise to give to the Schoolthat is, in substance, unconditional. Conditional promises to give are recognized

when the conditions on which they depend are substantially met. For the yearsended June 30, 2015 and 2014, the School did not have outstanding unconditionalpromises to give.

g. Investments

Investments consist of certificates of deposit stated at cost which approximates fairmarket value.

h. Property, Equipment, and Depreciation

Additions to physical plant and facilities are capitalized in accordance with theLouisiana Accounting and Uniform Governmental Handbook, which requires theSchool to capitalize equipment purchases with a cost greater than $5,000.Depreciation is provided utilizing the straight-line method over estimated usefullives of the assets.





i. Compensated Absences

All employees accrue ten days of leave each year, of which a maximum often daysmay be carried forward to the following fiscal year. The employee may use theleave days carried forward from the prior year, but will receive no additionalcompensation. Upon termination, the employee will receive payment for amaximum of twenty days at a per diem rate of $75. Unused leave over ten days atthe end of the fiscal year are paid at the per diem rate. The School accrues leave andrelated payroll liabilities for all employees who have ten or less leave days at the perdiem rate.

j. Contributions and Revenue Recognition

Contributions received are recorded as unrestricted, temporarily restricted, orpermanently restricted support, depending on the existence and/or nature of anydonor restrictions.

Donor-restricted support is reported as an increase in temporarily or permanentlyrestricted net assets, depending on the nature of the restriction. When a restrictionexpires (that is, when a stipulated time restriction ends or purpose restriction isaccomplished), temporarily restricted net assets are reclassified to unrestricted netassets and reported in the Statement of Activities as net assets released from

restrictions.

Revenues from federal and state grants are recorded when the School has a right toreimbursement under the related grant, generally corresponding to the incurring ofgrant related costs by the School, or when earned under the terms of the grants.

k. In-kind Support

The School records the in-kind value of goods and services contributed to supportvarious activities as support and related expenses. In-kind support for the year

ended June 30, 2015 consisted of $18,362 in capitalized assets and revenues. In-kind support for the year ended June 30, 2014 was deemed insignificant.





I. Financial Statement Presentation

Net assets, revenues, and expenses are classified based on the existence or absenceof donor-imposed restrictions. Accordingly, net assets and changes therein areclassified and reported as follows:

Unrestricted Net Assets - Support, revenues, and expenses for the generaloperation of the School.

Temporarily Restricted Net Assets - Contributions specifically authorized bythe grantor or donor to be used for a certain purpose or to benefit a specificaccounting period.

Permanently Restricted Net Assets - Contributions subject to donor-imposedrestrictions and that are to be held in perpetuity by the School. Generally, thedonors of these assets permit the School to use all or part of the income derivedfrom the investment of these contributions. As of June 30, 2015 and 2014, theSchool did not have any permanently restricted net assets.

m. T ax Matters

The School has received a tax-exempt ruling under section 501(c)(3) from the

Internal Revenue Service and, accordingly, is not subject to Federal income taxunless the School has unrelated trade or business income.

Accounting standards provide detailed guidance for financial statement recognition,measurement, and disclosure of uncertain tax positions recognized in an entity'sfinancial statements. These standards require an entity to recognize the financialstatement impact of a tax position when it is more likely than not that the positionwill not be sustained upon examination. As of June 30, 2015, the School believesthat it has no uncertain tax positions that qualify for either recognition or disclosurein the financial statements. Tax years June 30, 2012 and later remain subject to

examination by the taxing authorities.

10




Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

n. Subsequent Events

Management evaluates events occurring subsequent to the date of the financialstatements in determining the accounting for and disclosure of transactions andevents that affect the financial statements. Subsequent events have been evaluatedthrough September 29, 2015, which is the date the financial statements wereavailable to be issued.

Note 2 - RESTRICTIONS ON ASSETS

Temporarily restricted net assets are restricted by donors for specific programs, purposes, or

to assist specific departments of the School. These restrictions are considered to expirewhen payments for restricted purposes are made. None of the temporarily restricted netassets are time-restricted by donors.

Temporarily restricted net assets as of June 30, 2015 and 2014 are available for thefollowing purposes:

2015 2014

Instructional and other $ 313,625 $ 348,461

Note 3 - PROPERTY AND EQUIPMENT

Property and equipment as of June 30, 2015 and 2014 consists of the following:

2015 2014

Site improvementsBuilding improvements

Equipment

Less accumulated depreciation

Total

$ 881,9371,537,069

1,561,5173,980,523

(1,666,865)

$ 2,313,658

$ 881,9371,537,069

1,544,3573,963,363

(1,510,563)

$ 2,452,800

Depreciation expense for the years ended June 30, 2015 and 2014 totaled $156,303 and$165,883, respectively.

11




Note 4 LEASES

On August 10, 2010, the School entered into a facility use agreement with JewishCommunity Center (JCC), a Louisiana not-for-profit corporation, whereby JCC granted the

School the exclusive use of certain rooms at its facility. The terms of the agreement are forthe period from August 6, 2010 through May 24, 2014. The lease was terminated in May24,2014.

On May 28,2014, the School entered into a lease agreement for six modular buildings to beused as classrooms on the Willow Street Campus. The lease term is for 36 monthsbeginning at delivery with rental payments due each month of $4,850. The original deliverydate was scheduled for July 15, 2014; however, the vendor did not deliver the modularbuildings until September 2014. The lease term was shortened to reflect the late delivery.

Rent expense for the years ended June 30, 2015 and 2014 totaled $101,390 and $175,602,respectively. Future minimum lease payments relating to the modular building lease are asfollows:

Year EndingJune 30.

2016 $ 58,2002017 55.775

Total $ 113,975

On January 8,2015, the School entered into a cancellable lease agreement for various copymachines to be used on both campuses. The lease term is for 36 months beginning atdelivery with rental payments each month of $2,271. The School may cancel the agreementat any time, but the rental payments are fixed for the duration of the contract. Rent expenserelated to the copiers for the year ended June 30, 2015 totaled $8,539.

Notes RETIREMENT PLAN

Substantially all employees of the School participate in the Teachers' Retirement System ofLouisiana (TRSL). This system is a cost sharing, multiple-employer governmental definedbenefit plan qualified under Section 401(a) of the Internal Revenue Code. The planprovides retirement benefits as well as disability and survivor benefits to eligibleparticipants. The TRSL issues publicly available financial reports that include financialstatements and required supplementary information of the TRSL. That report may beobtained by writing the Teachers' Retirement System of Louisiana, P.O. Box 94123, BatonRouge, LA 70804-9123.

12




Note 5 - RETIREMENT PLAN (Continued)

Participants vest immediately in employee contributions to the plan. Retirement benefitsvest after five years of service if the employee reaches age sixty; otherwise, benefits vest

after twenty years of service. Benefits are established and amended by state statue. Uponretirement, participants may select from eight retirement payment options.

Participants are required to contribute to the plan 8% of their annual covered payroll; theSchool was required to contribute 28.0% and 27.2% respectively, of the annual coveredpayroll of each participating employee for the years ended June 30, 2015 and 2014. Thesecontribution levels are established by law and set by the Public Retirement SystemsActuarial Committee. For the years ended June 30,2015 and 2014, School contributions tothis plan totaled $2,623,870 and $2,458,562 respectively.

The School sponsors deferred compensation plans pursuant to Sections 403(b) and 457(b)and (f) of the Internal Revenue Code for the benefit of its employees. The School'scontributions to the 457(b) plan totaled $18,476 and $17,590 for the years ended June 30,2015 and 2014, respectively. These funds are transferred to separate trusts outside thecontrol of the School with the employees as the beneficiary. No contributions were madeby the School to the 403(b) plan for either year.

Note 6 GRANTS

The United States Department of Education passed through a grant to OPSB, which wasawarded to the School as a subrecipient, to increase academic achievement throughstrategies such as improving teacher and principal quality and increase the number of highlyqualified teachers, principals, and assistant principals. The grant funds must be used toassist schools in effectively recruiting and retaining highly qualified teachers, to makeavailable professional development activities that address subject matter knowledge, andother activities. For the years ended June 30, 2015 and 2014, the School recognizedrevenue under this grant of $74,643 and $99,879, respectively.

The United States Department of Education passed through a grant to OPSB, which was

awarded to the School as a subrecipient, to assist meeting the costs of providing specialeducation and related services to children with disabilities. The grant funds must be used toprovide special education and related services to eligible children. For the years ended June30, 2015 and 2014, the School recognized revenue under this grant of $132,267 and$135,530, respectively.

13




Note 6 GRANTS (Continued)

The Louisiana Department of Education passed through a grant to OPSB, which wasawarded to the School as a subrecipient, to assist meeting the costs of providing special

education and related services to children with disabilities. The grant funds must be used toprovide special education and related services to eligible children. For the year ended June30, 2015, the School recognized revenue under this grant of $7,867. No revenue wasrecognized during the year ended June 30, 2014.

The Louisiana Department of Education passed through a grant to OPSB, which wasawarded to the School as a subrecipient, to improve student performance by creating a yearlong teaching residency to inexperienced educators. For the year ended June 30,2015 , theSchool recognized revenue under this grant of $3,000. No revenue was recognized duringthe year ended June 30, 2014.

OPSB provides funding for the general use of the School which is determined on an annualbasis based on the number of pupils enrolled in the School as of October L . Revenuesreceived by OPSB from sales tax revenues, ad valorem taxes, and other sources areallocated to each school based on its enrollment. For the years ended June 30, 2015 and2014, the School recognized revenue under this grant of $8,512,466 and $8,722,815,respectively.

The State of Louisiana provides funding for the general use of the School which isdetermined on an annual basis based on the number of pupils enrolled in the School as of

October L . This state-funded per pupil allocation is based on the most recently approvedminimum foundation program formula resolution. For the years ended June 30, 2015 and2014, the School recognized revenue under this grant of $7,832,158 and $7,699,352,respectively.

The State of Louisiana provides funding to OPSB, which was awarded to the School as asubrecipient, to provide instructional enhancements for students. For the years ended June30,2015 and 2014, the School recognized revenue under this grant of $32,514 and $38,721,respectively. These amounts are reported in Grants - Other on the Statement of Activities.

14




Note 7 - FAIR VALUE MEASUREMENTS

The framework for measuring fair value provides a fair value hierarchy which prioritizesthe inputs to valuation techniques used to measure fair value. The hierarchy gives the

highest priority to unadjusted quoted prices in active markets for identical assets orliabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The threelevels of the fair value hierarchy under the Financial Accounting Standards BoardAccounting Standards Codification (ASC) Topic 820, Fair Value Measurements aredescribed as follows:

Level 1 - Inputs to the valuation methodology are unadjusted quoted prices foridentical assets or liabilities in active markets that the School has the abilityto access.

Level 2 - Inputs to the valuation methodology include:

• quoted prices for similar assets or liabilities in active markets;• quoted prices for identical or similar assets or liabilities in inactive

markets;• inputs other than quoted prices that are observable for the asset or

liability;• inputs that are derived principally from or corroborated by observable

market data by correlation or other means.

If the asset or liability has a specified (contractual) term, the Level 2 input must beobservable for substantially the full term of the asset or liability.

Level 3 - Inputs to the valuation methodology are unobservable and significant to thefair value measurement.

The asset's fair value measurement level within the fair value hierarchy is based on thelowest level of any input that is significant to the fair value measurement. Valuationtechniques used need to maximize the use of observable inputs and minimize the use ofunobservable inputs.

• Certificates of Deposit: Valued at cost which approximates the market price.These are included in Level I of the fair value hierarchy.

The methodologies described above may produce a fair value calculation that may not beindicative of net realizable value or reflective of future fair values. Furthermore, while theSchool believes its valuation method is appropriate and consistent with other marketparticipants, the use of different methodologies or assumptions to determine the fair value

15




Note 7 - FAIR VALUE MEASUREMENTS (Continued)

of certain financial instruments could result in a different fair value measurement at thereporting date.

As of June 30, 2015 and 2014, assets measured at fair value on a recurring basis arecomprised of and determined as follows:

Based on

Description

Certificates ofdeposit

Fair ValueAs of

June 30.2015

Quoted PricesIn ActiveMarkets(Level 1)

OtherObservable Unobservable

Inputs Inputs(Level 2) (Level 3)

$ 13,272,787 $ 13,272,787

Description

Certificates ofdeposit

Fair ValueAs of

June 30.2014

Based onQuoted Prices

In ActiveMarkets(Level I)

OtherObservable Unobservable

Inputs Inputs(Level 2) (Level 3)

$ 4,058,804 $ 4,058,804 $

As of June 30, 2015 and 2014, there were no assets measured at fair value on a nonrecurring basis.

Note 8 - SCHOOL OPERATIONS/LEASEHOLD INTEREST

Effective January 1,2006, the School entered into an agreement with OPSB, which allowsthe School to use the facilities and its contents located at 7315 Willow Street, 5624 FreretStreet, 719 S. Carrollton Avenue (no longer utilized by the School), or any other locationsas may be approved by the School and OPSB. The agreement was scheduled to expire onDecember 31,2011. In June 2011, this agreement was renewed by OPSB for an additionalten years expiring on June 30, 2021.

The School is responsible for all necessary maintenance to ensure that the facilities complywith all state and local health and safety standards and other applicable laws, regulations,and rules. If capital improvements are made by the School with non-public funds to anysite which it operates and the charter contract is revoked or terminated, the School will bereimbursed for the fair market value of such capital improvements. Assets purchased with

16




Note 8 - SCHOOL OPERATIONS/LEASEHOLD INTEREST (Continued)

public funds or obtained from public sources will automatically revert to OPSB at the timethis agreement is terminated. The School must maintain records of any assets acquired with

private funds that will remain the property of the School.

Use of the property is not recorded as an in-kind contribution from OPSB and related rentexpense. The value of the use of the land and building is not readily determinable. Theagreement is classified as an exchange transaction because both parties receive significantvalue from this arrangement. Accordingly, the present value of the benefit to be received infuture years has not been recorded.

Note 9 - FUNCTIONAL ALLOCATION OF EXPENSES

Expenses have been reported on the Statement of Activities by natural classification. Topresent expenses by functional classifications, expenses are charged to program servicesand supporting services (management and general expense and fundraising expense) basedon management's estimate of periodic time and expense evaluations. Management andgeneral expenses include those expenses that are not directly identifiable with any otherspecific function, but provide for the overall support and direction of the School.

Total expenses for the years ended June 30, 2015 and 2014 are allocated as follows:

2015 2014

Program services $ 16,360,735 $ 16,226,665Supporting services:

Management and general 689,975 704,055Fundraising 146,351 92,089

Total expenses $ 17,197,061 $ 17,022,809

Note 10 - COMMITMENTS

The School has employment contracts as is standard in the field of education with most of

its teachers and which expire June 30, 2016. Additionally, the School had an employmentcontract with one member of management which expired on June 30, 2015. All contractsprovide for a minimum annual salary and other benefits.

17




Note 10 - COMMITMENTS (Continued)

On August 1, 2007, the School entered into a contract for athletic training and physicaltherapy services with hours not to exceed thirty hours per week. Payments under this

contract approximate $2,000 per month for ten consecutive months, commencing onSeptember of each applicable year. The agreement was scheduled to expire on July 31,2012. In March 2012, this agreement was extended for an additional five years expiring onJuly 31, 2017.

On May 28, 2014 the School entered into a contract for the site preparation, placement,installation, and removal at the end of the lease period, of leased modular buildings at theWillow Street Campus (see Note 4). Payments under this contract approximate $130,000for the site preparations, placement, and installation of the modular buildings in Julythrough September of 2014 with an additional $15,000 for the removal of the modular

buildings in 2017.

Note 11 - RISK MANAGEMENT

The School is exposed to various risks of loss from torts, theft and damage to assets,business interruption, errors and omissions, employee injuries and illnesses, naturaldisasters, and employee health and accident benefits. Commercial insurance coverage ispurchased for claims arising from such matters. There were no settled claims or unsettledclaims that exceeded this commercial coverage during the years ended June 30, 2015 and2014.

Note 12 - CONCENTRATIONS OF RISK

The School received a substantial amount of its revenue through grants awarded by thefederal, state, and local govemments for the years ended June 30, 2015 and 2014 whichtotaled $16,609,145 and $16,871,103, or 89% and 91% of total revenue for each fiscal year,respectively.

All of the students of the School live in the Greater New Orleans area.

Custodial credit risk is the risk that in the event of a bank failure, the School's deposits maynot be returned to it. The School has a written policy for custodial credit risk. As of June30,2015, the School's bank balances, including certificates of deposit, were approximately$ 16,506,000. Balances insured by the Federal Deposit Insurance Corporation, which coversup to $250,000 per financial institution, totaled $250,000 as of June 30, 2015. Theremaining deposits of $2,983,000 were uninsured and collateralized with an FHLB letter ofcredit of $8,000,000 held by the pledging financial institution's trust department or agent,but not in the School's name.

18




Note 12 - CONCENTRATIONS OF RISK (Continued)

As of June 30, 2015, cash and certificates of deposit were adequately collateralized bysecurities held by unaffiliated banks for the account of the School. FASB ASC 825

considers these securities subject to custodial credit risk. Even though the pledgedsecurities are considered subject to custodial credit risk, Louisiana Revised Statute 39:1229imposes a statutory requirement on the custodial bank to advertise and sell the pledgedsecurities within ten days of being notified by the depositor that the fiscal agent has failedto pay deposited funds upon demand.

19



SUPPLEMENTARY INFORMATION



Schedule 1

SCHEDULE OF COMPENSATION, BENEFITS, AND OTHERPAYMENTS TO AGENCY HEAD OR CHIEF EXECUTIVE OFFICER


New Orleans, Lo uisianaFor the year endedJune 30, 2015

Agency Head Name: Kathleen Riedlinger, Chief Executive Officer

PurposeSalary $ 235,922Benefits- insurance 4,983Benefits- retirement 0 *Benefits- other 17,500 **Car allowance 6,000Vehicle providedby government 0Per diem 0Reimbursements 0Travel 1,500Registrationfees 699Conference travel 0

Co ntinuing professionaleducationfees 0Housing 0Unvoucheredexpenses 0Specialmeals 0

$ 266,604

* With regard to retirement,Ms. Riedlinger is a TRSL retire-rehire. Since she has alreadyretired,she will personallysee no benefit from the employercontributions Lusher makes to

TRSLon her behalf.

** 457 Plan

20



SPECIAL REPORTS OF CERTIFIED PUBLIC ACCOUNTANTS



Bouiwois Bennett^ CERTIFIED PUBLIC CCOUNT NTS| CONSULT NTS

A LIMITED LIABILITV COMP NY

INDEPENDENT AUDITOR S REPORT ON INTERNALCONTROL OVER FINANCIAL REPORTING AND

ON COMPLIANCE AND OTHER MATTERS BASED ONAN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN

ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

To the Board ofTrustees,Advocates for Arts-BasedEducation Corporation

d/b/a Lusher C harterSchool,New Orleans, Louisiana.

We haveaudited,in accordancewith auditing standards generallyacceptedin the UnitedStatesof America and the standards applicableto financial audits contained in Govemment AuditingStandards, issued by the ComptrollerGeneral of the United States of America, the financialstatementsof Advocates for Arts-BasedEducation Corporationd/b/a Lusher Ch arterSchool(a nonprofitorganization) (the School ) as of and for the year endedJune30,2015, and the relatednotes tothe financial statements,which collectively com prisethe School's financial statements,and haveissuedour report thereon datedSeptember29, 2015.

Internal Control Over Financial Reporting

In planning and performingour audit of the financialstatements,we consideredthe School'sinternal controlov er financialreporting( internalcontrol ) to determinethe audit procedures that arappropriatein the circumstances for the purpose of expressingouropinion onthe financial statementbut not for the purpose ofexpressingan opinionon the effectiveness of the School'sinternalcontrol.Accordingly,we do not express an opinionon the effectiveness of the School's internalcontrol.

A deficiencyin internalcontrols exists when the designoroperationof a controldoes not allow

managementor em ployees,in the normalcourse of performingtheir assigned fu nctions,to preventordetect and correct misstatementson a timely basis. A material weakness is a deficiency, oracombination ofdeficiencies,in internal control suchthat there is a reasonable possibilitythat amaterial misstatement ofthe School'sfinancial statementswill not be prevented,or detected andcorrectedon a timely basis.A significant deficiencyis a deficiency, ora combination of deficienciein internal controlthat is less severethan a materialweakness,yetimportantenoughto meritattentionby those chargedwith governance.

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P O Box 60600 EW ORLEANS, LA 70160-0600 504.831.4949 BOURGEOISBENNETT.COM



Our consideration of internal control was for the limited purpose described in the firstparagraph of this section and was not designed to identify all deficiencies in internal control that mightbe a material weakness or significant deficiencies. Given these limitations, during our audit we didnot 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 the School's financial statements arefree of 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 andmaterial effect on the determination of financial statement amounts. However, providing an opinionon compliance with those provisions was not an objective of our audit, and accordingly, we do notexpress such an opinion. The results of our tests disclosed no instances of noncompliance or othermatters 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 andcompliance and the results of that testing, and not to provide an opinion on the effectiveness of theSchool's internal control or on compliance. This report is an integral part of an audit performed inaccordance with Government Auditing Standards in considering the School's internal control andcompliance. Accordingly, this communication is not suitable for any other purpose.



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(Continued)

Section II - Internal Control Over Financial Reporting and Compliance and Other MattersMaterial to the Basic Financial Statements (Continued)


No compliance findings material to the financial statements were reported during the audit forthe year ended June 30, 2015.

Section III - Federal Award Findings and Questioned Costs

Internal Control / Compliance

The School did not expend more than $500,000 in federal awards during the year endedJune 30,2015, and therefore, is exempt from the audit requirements under the Single Audit

Act and OMB Circular A-133, Audits of States. Local Government, and Non-ProfitOrganizations.

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REPORTS BY MANAGEMENT



SCHEDULE OF PRIOR YEAR FINDINGS AND RESPONSES



For the year ended June 30, 2015

Section I - Internal Control Over Financial Reporting and Compliance and Other MattersMaterial to the Basic Financial Statements


There were no findings noted during the audit for the year ended June 30, 2014 related tointernal control over financial reporting material to the basic financial statements.


There were no findings material to the financial statements noted during the audit for the yearended June 30, 2014 related to compliance and other matters.

Section II - Internal Control and Compliance Material to Federal Awards

The School did not expend more than $500,000 in federal awards during the year ended June 30,2014, and therefore, was exempt from the audit requirements under the Single Audit Act and OMBCircular A-133, Audits of States. Local Government, and Non-Profit Organizations.

Section III - Management Letter

A management letter was not issued in connection with the audit of the financial statements for theyear ended June 30, 2014.

25



MANAGEMENT S CORRECTIVE ACTION PLAN



For the year ended June 30, 2015

Section I - Internal Control Over Financial Reporting and Compliance and Other MattersMaterial to the Basic Financial Statements


There were no findings noted during the audit for the year ended June 30, 2015 related tointernal control over financial reporting material to the basic financial statements.


There were no findings material to the financial statements noted during the audit for the yearended June 30, 2015 related to compliance and other matters.

Section II - Internal Control and Compliance Material to Federal Awards

The School did not expend more than $500,000 in federal awards during the year ended June 30,2015, and therefore, was exempt from the audit requirements under the Single Audit Act and OMBCircular A-133, Audits of States. Local Government, and Non-Profit Organizations.

Section III - Management Letter

A management letter was not issued in connection with the audit of the financial statements for theyear ended June 30, 2015.

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SCHEDULES REQUIRED BY STATE LAW(R.S. 24:524 - PERFORMANCE AND STATISTICAL DATA)

(UNAUDITED)



Bouiwois Bennett^ CERTIFIED PUBLIC CCOUNT NTS| CONSULT NTS

A LIMITED LIABILITV COMP NY

INDEPENDENT ACCOUNTANT S REPORTON APPLYING AGREED UPON PROCEDURES

To the Board of Trustees,Advocates for Arts-Based Education Corporation

d/b/a Lusher Charter School,New Orleans. Louisiana.

We have performed the procedures included in the Louisiana Governmental Audit Guide

and enumerated below, which were agreed to by the management of Advocates for Arts-BasedEducation Corporation d/b/a Lusher Charter School (the School ) and the Legislative Auditor,State of Louisiana, solely to assist users in evaluating management's assertions about theperformance and statistical data accompanying the annual financial statements of the School forthe year ended June 30, 2015 and to determine whether the specified schedules are free of obviouserrors and omissions as provided by the Board of Elementary and Secondary Education.Management of the School is responsible for its performance and statistical data. The agreed-upon procedures engagement was performed in accordance with attestation standards establishedby the American Institute of Certified Public Accounts and applicable standards of GovernmentAuditing Standards. The sufficiency of these procedures is solely the responsibility of the

specified users of the report. Consequently, we make no representation regarding the sufficiencyof the procedures described below either for the purpose for which this report has been requestedor for any other purpose.

Our procedures and findings relate to the accompanying schedules of supplementalinformation and are as follows:

General Lund Instructional and Support Expenditures and Certain Local Revenue Sources(Schedule I)

I) We selected a random sample of 25 transactions and reviewed supportingdocumentation to determine if the sampled expenses were classified correctly andwere reported in the proper amounts for each of the categories reported on ScheduleI.

No exceptions were noted.

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P O Box 60600 NEW ORLEANS, LA 70160-0600 504.831.4949 BOURGEOISBENNETT.COM



Education Levels of Public School Staff (Schedule 2)

2) We reconciled the total number of full-time classroom teachers per the scheduleExperience of Public School Principals, Assistant Principals, and Full-time

Classroom Teachers (Schedule 4) to the combined total number of full-timeclassroom teachers per this schedule and to the School's supporting payroll records

as of October 1, 2014.


3) We reconciled the combined total of principals and assistant principals per theschedule Experience of Public School Principals, Assistant Principals, and Fulltime Classroom Teachers (Schedule 4) to the combined total number of principalsand assistant principals per this schedule.


4) We obtained a list of full-time teachers, principals, and assistant principals byclassification as of October 1, 2014, and as reported on this schedule. We traced arandom sample of 25 teachers to the individual's personnel file and determined theindividual's education level was properly classified on this schedule.


Number and Type of Public Schools (Schedule 3)

5) We obtained a list of schools by type as reported on Schedule 3. We compared thelist to the schools and grade levels as reported on the Title I Grants to LocalEducational Agencies (CFDA #84.010) application.


Experience of Public School Principals. Assistant Principals, and Full-time ClassroomTeachers (Schedule 4)

6) We obtained a list of full-time teachers, principals, and assistant principals byclassification as of October 1, 2014, and as reported on this schedule. We traced the

same sample used in procedure 4 to the individual's personnel file and determined ifthe individual's experience is properly classified on this schedule.


28



Public School Staff Data: Average Salaries (Schedule 5)

7) We obtained a list of all classroom teachers including their base salaries, extracompensation, and ROTC or rehired retiree status as well as full-time equivalentwhich was used to compute average salaries on the schedule. We traced a randomsample of 25 teachers' salaries to the individual's personnel file to determine if the

individual's salary, extra compensation, and full-time equivalents are properlyincluded on the list.

No exceptions where noted.

8) We recalculated the average salaries and full-time equivalents reported in thisschedule.


Class Size Characteristics (Schedule 6)

9) We obtained a list of classes by school, school type, and class size as reported onthis schedule and reconciled school type classifications to Schedule 3 data, asobtained in procedure 5. We traced a random sample of 10 classes to the October 1,2014 roll books for those classes and determined if the class is properly classified onthis schedule.


Louisiana Educational Assessment Program (LEAP) (Schedule 7)

10) We obtained test scores as provided by the testing authority and reconciled scores asreported by the testing authority to scores reported in this schedule by the School.


Graduation Exit Exam (GEE) (Schedule 8)

11) Not Applicable. Graduation Exit Exam (GEE) is no longer administered.

/Leap Tests (Schedule 9)

12) We obtained test scores as provided by the testing authority and reconciled scores asreported by the testing authority to scores reported in this schedule by the School.


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We are not engaged to, and did not perform an examination, the objective of which wouldbe the expression of an opinion on management's assertions. Accordingly, we do not express suchan opinion. Had we performed additional procedures, other matters might have come to ourattention that would have been reported to you.

This report is intended solely for the use of the School, the Louisiana Department of

Education, the Louisiana Legislature, and the Legislative Auditor, State of Louisiana, and shouldnot be used by those who have not agreed to the procedures and taken responsibility for thesufficiency of the procedures for their purposes. Under Louisiana Revised Statue 24:513, thisreport is distributed by the Legislative Auditor as a public document.



30



Schedule 1

GENERAL FUND INSTRUCTIONAL AND SUPPORTEXPENDITLfRES AND CERTAIN LOCAL REVENUE SOLfRCES



For the year ended June 30, 2015(Unaudited)

General Fund Instructional and Equipment ExpendituresInstructional Expenditures:Teacher and Student Interaction Activities:

Classroom Teacher Salaries $ 6,308,665Other Instructional Staff Salaries 320,974Instructional Staff Employee Benefits 2,392,051Purchased Professional and Technical Services 110,310Instructional Materials and Supplies 512,251Instructional Equipment -

Total Teacher and Student Interaction Activities $ 9,644,251

Other Instructional Activities 412,920

Pupil Support Services 816,264Less: Equipment for Pupil Support Services -

Net Pupil Support Services 816,264

Instructional Staff Services 825,421Less: Equipment for Instructional Staff Services -

Net Instructional Staff Services 825,421

School Administration 1,702,586Less: Equipment for School Administration (156,583)

Net School Administration 1.546.003

Total General Fund Instructional Expenditures $ 13,244,859

Total General Fund Equipment Expenditures $ 156,583

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Schedule 1(Continued)

Certain Local Revenue SourcesLocal Taxation Revenue:Constitutional Ad Valorem TaxesRenewable Ad Valorem TaxDebt Service Ad Valorem TaxUp to 1% of Collections by the Sheriff on Taxes

Other than School TaxesSales and Use Taxes

Total Local Taxation Revenue

Local Earnings on Investment in Real Property:Earnings from 16th Section PropertyEarnings from Other Real Property

Total Local Earnings on Investment in Real Property

State Revenue in Lieu of Taxes:Revenue Sharing - Constitutional TaxRevenue Sharing - Other TaxesRevenue Sharing - Excess Portion

Other Revenue in Lieu of Taxes

Total State Revenue in Lieu of Taxes

Nonpublic Textbook Revenue

Nonpublic Transportation Revenue

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Schedule

EDUCATION LEVELS OF PUBLIC SCHOOL STAFF




Full-time Classroom TeachersCertificated Uncertificated

Principals and Assistant PrincipalsCertificated Uncertificated

Number Percent Number Percent Number Percent Number Percent

Less than a Bachelor's DegreeBachelor's DegreeMaster's DegreeMaster's Degree + 30Specialist in EducationPh. D. or Ed. D.

4 5

5

6

13

4 3

4 7

6

13

67

33 75

2 5

T o t a l 1 0 5 1 0 0 1 4 1 0 0

33



Schedule 3

NUMBER AND TYPE OF PUBLIC SCHOOLS




Type Number

ElementaryMiddle/Jr.HighSecondaryCombination

Total

34



Schedule 4

EXPERIENCE OF PUBLIC SCHOOL PRINCIPALS, ASSISTANTPRINCIPALS, AND FULL TIME CLASSROOM TEACHERS




4-10 11-14 15-19 20-24 25+0-1 Yr. 2-3 Yrs. Yrs. Yrs. Yrs. Yrs. Yrs. Total

Assistant Principals 1 1

Principals 3 3Classroom

Teachers 7 42 1 11 11 108

Total 7 6 42 19 11 12 15 112

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Schedule 5

PUBLIC SCHOOL STAFF DATA: AVERAGE SALARIES




All Classroom Teachers

Classroom TeachersExcluding ROTC, Rehired

Retirees, and FlaggedSalary Reductions

Average Classroom TeachersSalary Including ExtraCompensation

Average Classroom TeachersSalary Excluding ExtraCompensation

Number of Teacher Full-TimeEquivalents (FTEs) used in

Computation of AverageSalaries

$ 53,676

$ 49,521

$ 53,308

$ 49,210

116 113

36



Elementary

ElementaryActmty Classes

Middle/Jr. High

Middle/Jr. HighActMty Classes

High

Hi ActivityClasses

Schedule 6

CT.ASS ST7F. CHARACTERISTICS



A s of October 1, 2014(Unaudited)

Class Size Range1-20 21-26 27-33 34

School Type Number Percent Number Percent Number Percent Number Percent

Combination 228 78 211 35 92

CombinationActMty Classes 66 2 2 2 8 1 2 1

T o t a l s 2 9 4 1 2 3 9 1 3 8 1 1

7



Schedule 7

LOUISIANA EDUCATIONAL ASSESSMENT PROGRAM (LEAP)




School A chievementLevelResults

Students

Grade 4AdvancedMasteryBasicApproaching BasicUnsatisfactory

Total

EnglishLanguageArts Mathematics2015 2014 2013 2015 2014 2013

Percent Percent

513910

Percent

374617

Percent

100 100

Percent

434015

2

100

Percent

355312

100

Please note that beginningin 2015, the EnglishLanguageArts and Mathematics portionsof the

LEAP test are no longer administered.

School A chievementLevelResults

Students

Science SocialStudies2015 2014

Percent Percent2013

Percent2015

Percent2014

Percent2013

Percent

Grade 4Advanced

MasteryBasicApproaching BasicUnsatisfactory

T o t a l

2 4

4 43 2

1 0 0

36

42 4

1

3 2

4 12 6

1

1

1 8

532 7

2

1 0 0

1 2

5 43 4

1 0 0

2

4 931

1 0 0

3 8




School AchievementLevel Results

Students

Grade 8AdvancedMasteryBasicApproaching BasicUnsatisfactory

Total

English Language Arts Mathematics2015 2014 2013 2015 2014

Percent Percent

345610

100

Percent

423819

1

100

Percent Percent

552421

100

2013

Percent

422532

1

100

Please note that beginning in 2015, the English Language Arts and Mathematics portions of theLEAP test are no longer administered.

School AchievementLevel Results

Students

Science Social Studies2015 2014 2013

Percent Percent Percent2015 2014 2013

Percent Percent Percent

Grade 8

AdvancedMasteryBasicApproaching BasicUnsatisfactory

T o t a l

1 855

2 5

2

1 0 0

1 959

2 1

1

1

2 851

1 92

1

2 255

2 2

1

1 0 0

2 262

1 6

1 0 0

3 44 6

1 9

1

1 0 0

39



Schedule 8

GRADUATION EXIT EXAMINATION (GEE)




Not Applicable:The Graduate Exit Exam (GEE) is no longeradministered

40



Schedule 9

/LEAP TESTS




SchoolAchievementLevelResults EnglishLanguageArts Mathematics

2015 2014 2013 2015 2014 2013Students Percent Percent Percent Percent Percent Percent

Grade 3Advanced - 32 45 - 50 51Mastery - 49 38 - 28 32Basic - 18 17 - 22 17Approaching Basic - 1 - - - -

Unsatisfactory - - - - - -

Total 100 100 100 100

Please note that beginning in 2015, the English Language Arts and Mathematics portions of theiLEAP test are no longer administered.

School AchievementLevel Results Science Social Studies


Grade 3Advanced 34 31 29 23 19 30Mastery 39 42 52 47 53 53Basic 26 24 19 28 27 17

Approaching Basic 1 3 - 2 1 -Unsatisfactory - - - - - -

Total 100 100 100 100 100 100

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School AchievementLevel Results English Language Arts Mathematics


Grade 5Advanced - 36 45 - 36 38Mastery - 47 41 - 33 40Basic - 17 14 - 31 22Approaching Basic - - - - -


Total 100 100 100 100




Grade 5Advanced 26 38 25 32 40 37Mastery 50 44 61 35 39 34

Basic 23 18 14 30 20 29Approaching Basic - - - 2 1 -

Unsatisfactory 1 - - 1 - -

Total 100 100 100 100 100 100

42






Grade 6

Advanced - 34 36 - 69 51Mastery - 51 44 - 20 31Basic - 15 19 - 11 18Approaching Basic - - 1 - - -


Total 100 100 100 100




Grade 6Advanced 35 27 25 62 53 77Mastery 39 55 50 29 31 17

Basic 24 18 23 8 16 6Approaching Basic 1 - 2 - - -

Unsatisfactory 1 - - 1 - -

Total 100 100 100 100 100 100

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Grade 7Advanced -

57 49-

6945

Mastery - 32 38 - 19 42Basic - 11 13 - 12 13Approaching Basic - - - - - -


Total 100 100 100 100




Grade 7Advanced 33 39 24 55 63 26Mastery 53 50 51 33 24 55Basic 13 10 24 11 13 18Approaching Basic - 1 1 1 - 1

Unsatisfactory 1 - - - - -

Total 100 100 100 100 100 100

Please note that the grade 9 iLEAP has been dropped by the Department of Education,everything at that level was moved to end of course testing.

lusher audited financial report: f.y. 2015

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