rocketship education and its affiliates

62 Pages·2016·0.34 MB·English

ROCKETSHIP EDUCATION
AND ITS AFFILIATES

Consolidated Audited Financial Statements
for the Year Ended
June 30, 2016

Operating:

California
Rocketship Mateo Sheedy Elementary
Rocketship Si Se Puede Academy
Rocketship Los Suenos Academy
Rocketship Mosaic Elementary
Rocketship Discovery Prep
Rocketship Brilliant Minds
Rocketship Alma Academy
Rocketship Spark Academy
Rocketship Fuerza Community Prep
Rocketship Redwood City Prep
Rocketship Rising Stars
Rocketship Futuro Academy

Tennessee
Rocketship Nashville Northeast Elementary
Rocketship United Academy

Wisconsin
Rocketship Southside Community Prep

DC
Rocketship Rise Academy
ROCKETSHIP EDUCATION
AND ITS AFFILIATES

TABLE OF CONTENTS
June 30, 2016

Page

Independent Auditor's Report ......................................................................................... 1-2

Consolidated Statement of Financial Position ................................................................ 3

Consolidated Statement of Activities .............................................................................. 4

Consolidated Statement of Cash Flows .......................................................................... 5

Notes to the Consolidated Financial Statements ............................................................. 6-24

Local Education Agency Organization Structure ........................................................... 25-26

Consolidating Statement of Financial Position – Schools .............................................. 27-29

Consolidating Statement of Activities – Schools ............................................................ 30-32

Consolidating Statement of Cash Flows – Schools ........................................................ 33-35

Consolidating Statement of Financial Position – Obligated Group ................................ 36

Consolidating Statement of Activities – Obligated Group ............................................. 37

Consolidating Statement of Cash Flows – Obligated Group .......................................... 38

Schedule of Instructional Minutes – California .............................................................. 39-40

Schedule of Average Daily Attendance – California ...................................................... 41

Reconciliation of Annual Financial Report With Audited Financial Statements ........... 42

Schedule of Expenditures of Federal Awards ................................................................. 43-46

Notes to Supplementary Information .............................................................................. 47-48

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 ............................................... 49-50
ROCKETSHIP EDUCATION
AND ITS AFFILIATES

TABLE OF CONTENTS (continued)
June 30, 2016

Page

Independent Auditor's Report on Compliance For Each Major Federal Program; and
Report on Internal Control Over Compliance Required by the Uniform Guidance .. 51-53

Independent Auditor’s Report on State Compliance - California ................................... 54-55

Schedule of Findings and Questioned Costs ................................................................... 56-57

Status of Prior Year Findings and Questioned Costs ...................................................... 58
INDEPENDENT AUDITOR'S REPORT

Board of Directors
Rocketship Education and its Affiliates
Redwood City, California

Report on the Financial Statements

We have audited the accompanying consolidated financial statements of Rocketship Education and its
Affiliates (RSEA), a non-profit California public benefit corporation, 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.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes the
design, implementation, and maintenance of internal control relevant to the preparation and fair presentation
of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted
our audit in accordance with auditing standards generally accepted in the United States of America and the
standards applicable to financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement.

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

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

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Board of Directors
Rocketship Education and its Affiliates

Opinion

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

Other Matters

Supplementary Information

Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The
accompanying supplementary schedules are presented for purposes of additional analysis and are not a
required part of the basic financial statements. The accompanying schedule of expenditures of federal
awards is presented for purposes of additional analysis 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. 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 financial
statements. The information has been subjected to the auditing procedures applied in the audit of the
financial statements and certain additional procedures, including comparing and reconciling such information
directly to the underlying accounting and other records used to prepare the financial statements or to the
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.

Report on Summarized Comparative Information

We have previously audited RSEA’s 2015 financial statements, and our report dated October 26, 2015,
expressed an unmodified opinion on those financial statements. In our opinion, the summarized comparative
information presented herein as of and for the year ended June 30, 2015, is consistent, in all 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 a report dated November 1, 2016
on our consideration of RSEA’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 RSEA’s internal control over financial reporting and
compliance.

VICENTI, LLOYD & STUTZMAN LLP
Glendora, California
November 1, 2016
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ROCKETSHIP EDUCATION
AND ITS AFFILIATES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
June 30, 2016
with comparative totals for June 30, 2015
Rocketship
Education D.C
Rocketship Public Launchpad
Rocketship Education Charter Development
Education Wisconsin Inc. School, Inc. Company Eliminations 2016 Total 2015 Total
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (notes 1,2) $ 1 3,561,320 $ 386,046 $ 810,445 $ 9 ,815,821 $ - $ 24,573,632 $ 16,072,631
Restricted cash (note 1) - - - 7,624,930 - 7,624,930 5,136,357
Investments - - - - - - 249,350
Accounts receivable (note 3) 7,791,464 80,824 - 54,296 (37,069) 7,889,515 5,838,881
Deferred rent asset - - - 65,636 (65,636) - -
Grants receivable (note 4) 257,160 - 246,000 - - 503,160 588,050
Prepaid expenses and deposits 2 ,129,394 62,546 53,849 578,689 (326,964) 2,497,514 1,265,685
Total current assets 2 3,739,338 529,416 1,110,294 1 8,139,372 (429,669) 43,088,751 29,150,954
LONG-TERM ASSETS:
Grants receivable (note 4) 40,434 - 195,040 - - 235,474 163,714
Intracompany receivable 4,546,491 - 600,000 - (5,146,491) - -
Security deposits 4 00,000 - - - (400,000) - -
Note receivable - - - 560,000 - 560,000 560,000
Deferred rent asset - - - 3,080,643 (3,080,643) - -
Property, plant and equipment, net (note 5) 5 ,363,093 - - 83,880,130 - 89,243,223 63,644,651
Total long-term assets 1 0,350,018 - 795,040 8 7,520,773 (8,627,134) 90,038,697 64,368,365
Total assets $ 3 4,089,356 $ 529,416 $ 1,905,334 $ 105,660,145 $ (9,056,803) $ 133,127,448 $ 93,519,319
LIABILITIES AND NET ASSETS
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 5,497,500 $ 125,257 $ 49,417 $ 2 ,344,231 $ (37,069) $ 7,979,336 $ 4,971,627
Accrued interest - - - 516,835 - 516,835 417,127
Deferred rent liability 65,636 - - - (65,636) - -
Deferred revenues 1 ,341,972 - - 326,964 (326,964) 1,341,972 370,372
Current portion of loans payable (note 6) 312,508 - - 7,305,128 - 7,617,636 6,842,252
Total current liabilities 7,217,616 125,257 49,417 1 0,493,158 (429,669) 17,455,779 12,601,378
LONG-TERM LIABILITIES:
Security deposits - - - 400,000 (400,000) - -
Accrued interest 149,196 - - - - 149,196 108,256
Deferred rent liability 3,329,536 112,241 - 989,815 (3,080,643) 1,350,949 1,185,092
Intracompany payable 6 00,000 2,161,472 2,385,019 - (5,146,491) - -
Loans payable (note 6) 2 ,187,520 - - 95,052,540 - 97,240,060 69,061,846
Total long-term liabilities 6,266,252 2,273,713 2,385,019 96,442,355 (8,627,134) 98,740,205 70,355,194
NET ASSETS:
Unrestricted 2 0,311,191 ( 1,869,554) (724,142) (1,275,368) - 16,442,127 10,074,280
Temporarily restricted (note 7) 2 94,297 - 195,040 - - 489,337 488,467
Total net assets 2 0,605,488 (1,869,554) (529,102) (1,275,368) - 16,931,464 10,562,747
Total liabilities and net assets $ 3 4,089,356 $ 529,416 $ 1,905,334 $ 105,660,145 $ (9,056,803) $ 133,127,448 $ 93,519,319

The accompanying notes are an integral part of these financial statements.
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ROCKETSHIP EDUCATION
AND ITS AFFILIATES
CONSOLIDATED STATEMENT OF ACTIVITIES
For the Year Ended June 30, 2016
with comparative totals for the Year Ended June 30, 2015
Rocketship
Rocketship Education D.C Launchpad
Rocketship Education Public Charter Development
Education Wisconsin Inc. School, Inc. Company Eliminations 2016 Total 2015 Total
UNRESTRICTED NET ASSETS:
Revenues
LCFF State Aid $ 36,874,280 $ - $ - $ - $ - $ 36,874,280 $ 29,395,472
Apportionment revenue 8,105,215 3,199,284 - - - 11,304,499 7,039,060
Property taxes 9,388,704 - - - - 9,388,704 7,536,074
Other State revenue 11,742,143 76,361 - - - 11,818,504 9,200,216
Federal revenue 8,843,327 873,360 - 133,549 - 9,850,236 8,136,903
Other local revenue 2,630,736 12,696 160 10,325,970 (12,584,203) 385,359 498,053
Contributions 6,226,687 3,500 1,780,900 1 30,540 - 8,141,627 5,251,662
Amounts released from restriction 299,290 - - - 299,290 851,995
Total unrestricted revenues 84,110,382 4,165,201 1,781,060 10,590,059 (12,584,203) 88,062,499 67,909,435
Program Expenses
Educational programs 61,813,865 4,034,032 1,583,763 - (11,561,999) 55,869,661 46,219,562
Supporting Services
Site supports and program development 10,102,673 - 14,058 10,010,488 (50,620) 20,076,599 16,955,433
Administration and general 5,363,068 606,651 407,381 342,876 (971,584) 5,748,392 4,933,874
Total supporting services 15,465,741 606,651 421,439 10,353,364 (1,022,204) 25,824,991 21,889,307
Total expenses 77,279,606 4,640,683 2,005,202 10,353,364 (12,584,203) 81,694,652 68,108,869
Increase (decrease) in unrestricted net assets 6,830,776 (475,482) (224,142) 236,695 - 6,367,847 (199,434)
TEMPORARILY RESTRICTED NET ASSETS:
Amounts released from restriction (299,290) - - - - (299,290) (851,995)
Contributions 105,120 - 195,040 - - 300,160 73,366
Increase (decrease) in temporarily
restricted net assets (194,170) - 195,040 - - 870 (778,629)
Beginning net assets 13,968,882 (1,394,072) (500,000) (1,512,063) - 10,562,747 13,356,528
Adjustment for restatement - - - - - - (1,815,718)
Beginning net assets, restated 13,968,882 (1,394,072) (500,000) (1,512,063) - 10,562,747 11,540,810
Ending net assets $ 20,605,488 $ (1,869,554) $ (529,102) $ (1,275,368) $ - $ 16,931,464 $ 10,562,747

The accompanying notes are an integral part of these financial statements.
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ROCKETSHIP EDUCATION
AND ITS AFFILIATES
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Year Ended June 30, 2016
with comparative totals for the Year Ended June 30, 2015
Rocketship
Rocketship Education D.C Launchpad
Rocketship Education Public Charter Development
Education Wisconsin Inc. School, Inc. Company Eliminations 2016 Total 2015 Total
CASH FLOWS from OPERATING ACTIVITIES:
Change in Net Assets $ 6,636,606 $ ( 475,482) $ (29,102) $ 2 36,695 $ - $ 6,368,717 $ (978,063)
Adjustments to reconcile change in net assets to
net cash provided (used) by operating activities:
Depreciation and amortization 199,099 - - 2,066,044 - 2,265,143 2 ,080,534
Allowance for non-recoverable project costs - - - - 6,365
Debt forgiven through grant agreement - - - (105,540) - (105,540) (550,000)
Donated investments - - - - - - (249,350)
(Increase) or decrease in operating assets:
Accounts receivable 207,407 ( 703) - (31,132) - 175,572 7 ,077,426
Grants receivable 204,170 - (191,040) - 13,130 541,952
Prepaid expenses and other current assets (1,344,573) ( 45,028) (53,849) (115,343) - (1,558,793) 4 70,333
Deferred rent asset - - - (231,544) 231,544 - -
Increase or (decrease) in operating liabilities:
Accounts payable and accrued liabilities 1,421,393 ( 102,998) 49,417 8 8,841 - 1,456,653 6 97,873
Deferred revenues 971,600 - - 326,964 - 1,298,564 (252,513)
Deferred rent liability 26,176 33,755 - 3 37,470 (231,544) 165,857 515,839
Net cash provided (used) by operating activities 8,321,878 ( 590,456) (224,574) 2 ,572,455 - 10,079,303 9,360,396
CASH FLOWS from INVESTING ACTIVITIES:
Proceeds from sale of stock 249,350 - - - - 249,350 -
Proceeds from disposal of property, plant and equipment 3,611 - - - - 3,611 -
Purchases of property, plant and equipment (1,975,720) - - (24,189,927) - (26,165,647) (11,025,976)
Net cash used by investing activities (1,722,759) - - (24,189,927) - (25,912,686) (11,025,976)
CASH FLOWS from FINANCING ACTIVITIES:
Change in restricted cash - - - (2,488,573) - (2,488,573) 1 3,522
Intracompany loans (3,587,120) 307,310 1,035,019 - - (2,244,791) -
Proceeds from debt 3,250,000 - - 38,289,443 - 41,539,443 4 00,000
Repayment of debt (3,102,779) - - (9,368,916) - (12,471,695) (15,734,216)
Net cash provided (used) by financing activities (3,439,899) 307,310 1,035,019 2 6,431,954 - 24,334,384 (15,320,694)
Net increase (decrease) in cash and cash equivalents 3,159,220 ( 283,146) 810,445 4 ,814,482 - 8,501,001 (16,986,274)
Cash and cash equivalents at the beginning of the year 10,402,100 669,192 - 5 ,001,339 - 16,072,631 33,058,905
Cash and cash equivalents at the end of the year $ 13,561,320 $ 386,046 $ 810,445 $ 9,815,821 $ - $ 24,573,632 $ 16,072,631
CASH PAID FOR INTEREST (Net) $ 38,459 $ 49,098 $ - $ 5 ,374,480 $ (85,636) $ 5,376,401 $ 4,975,669
CAPITALIZED INTEREST $ - $ - $ - $ 1 67,421 $ (36,563) $ 130,858 $ 130,319

The accompanying notes are an integral part of these financial statements.
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ROCKETSHIP EDUCATION
AND ITS AFFILIATES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Year Ended June 30, 2016

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Nature of Activities – Rocketship Education and its Affiliates (RSEA) are organized to
manage, operate, guide, direct, and promote a network of public elementary charter
schools.

The charter schools are funded principally through public education monies. The
charters may be revoked by their sponsor for material violations of the charter, failure to
meet generally accepted standards of fiscal management, or violation of any provision of
the law.

Principles of Consolidation – The accompanying financial statements include the
accounts of Rocketship Education (RSED) and its schools. All significant intercompany
accounts and transactions within RSED and its schools have been eliminated in the
consolidating financial statements. Additionally, the accompanying financial statements
include the accounts of Rocketship Education Wisconsin Inc., Rocketship Education D.C.
Public Charter School Inc., and Launchpad Development Company (LDC) and its
wholly-owned LLCs. All significant intercompany accounts and transactions within LDC
have been eliminated in the consolidating financial statements. Finally, all significant
intercompany accounts and transactions between RSED and Launchpad have been
eliminated in consolidation.

Rocketship Education (RSED)

Rocketship Education (RSED) is a California nonprofit public benefit corporation that
was incorporated in 2006 and is organized to manage, operate, guide, direct, and promote
a network of public elementary charter schools. Divisions of RSED include:

 Rocketship Support Network (RSN) – Centralized resources providing
management, back office support and organizational strategy.
 Rocketship Mateo Sheedy Elementary (RMS) – California charter school
 Rocketship Si Se Puede Academy (RSSP) – California charter school
 Rocketship Los Suenos Academy (RLS) – California charter school
 Rocketship Mosaic Elementary School (ROMO) – California charter school
 Rocketship Discovery Prep (RDP) – California charter school
 Rocketship Brilliant Minds (RBM) – California charter school
 Rocketship Alma Academy (RSA) – California charter school
 Rocketship Spark Academy (RSK) – California charter school
 Rocketship Fuerza Community Prep (RFZ) – California charter school
 Rocketship Redwood City Prep (RRWC) – California charter school
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ROCKETSHIP EDUCATION
AND ITS AFFILIATES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Year Ended June 30, 2016

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued)

Rocketship Education (RSED) (continued)

 Rocketship Rising Stars (RRS) – California charter school (opening in 16/17)
 Rocketship Futuro Academy (RFA) – California charter school (opening in
16/17)
 Rocketship Nashville Northeast Elementary (RNNE) – Tennessee charter school
 Rocketship United Academy (RUA) – Tennessee charter school

Rocketship Education Wisconsin Inc.
& Rocketship Southside Community Prep (RSCP)

RSED incorporated Rocketship Education Wisconsin Inc., as a nonprofit public benefit
corporation in October 2012 to hold the charter for its first elementary school in
Wisconsin, Rocketship Southside Community Prep (RSCP). The City of Milwaukee
Common Council approved a separate charter for RSCP in November 2011.

Rocketship Education D.C., Public Charter School, Inc. (RSDC) & Rocketship Rise
Academy (RISE)

Rocketship Education D.C., Public Charter School, Inc. (RSDC) incorporated as a
nonprofit public benefit corporation during 2014 for the purpose of operating charter
schools in Washington, D.C. The District of Columbia Public Charter School Board
(PCSB) approved RSDC to establish up to eight charter schools beginning in July 2016.
Rocketship Education and RSDC entered into a Network Services Agreement to provide
services for the DC region.

Launchpad Development Company

Launchpad Development Company (LDC) was incorporated as a 509(a)(3) nonprofit
public benefit corporation in November 2009. LDC is a supporting organization of
RSED. LDC provides facilities and development services provided that such services are
consistent with RSED’s exempt purpose. Divisions of LDC include:

 Launchpad (LP) – investment and asset management and administrative services
 Launchpad Development One LLC (LLC1) – RMS facilities
 Launchpad Development Two LLC (LLC2) – RSSP facilities
 Launchpad Development Three, LLC (LLC3) – RLS facilities
 Launchpad Development Four LLC (LLC4) – ROMO facilities
 Launchpad Development Five LLC (LLC5) – RDP facilities
 Launchpad Development Eight LLC (LLC8) – RSA facilities
 Launchpad Development Ten LLC (LLC10) – Facilities development
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