Horizon Science Academy Of Toledo Lucas County, Ohio

Management’s Discussion and Analysis for the Fiscal Year Ended June 30, 2018 (Unaudited)The discussion and analysis of Horizon Science Academy of Toledo (the Academy) financial performance providesan overall review of the financial activities for the fiscal year ended June 30, 2018. Readers should also review thefinancial statements and notes to enhance their understanding of the Academy’s financial performance.Financial HighlightsKey financial highlights for fiscal year 2018 are as follows: Total assets were 483,291.Total liabilities were 7,865,576.Total net position increased by 2,321,257.Using this Financial ReportThis report consists of three parts: the MD&A, the basic financial statements, and notes to those statements. Thebasic financial statements include a Statement of Net Position, a Statement of Revenues, Expenses and Change inNet Position, and a Statement of Cash Flows.Reporting the Academy as a WholeOne of the most important questions asked about the Academy is, “As a whole, what is the Academy’s financialcondition as a result of the year’s activities?” The Statement of Net Position and the Statement of Revenues,Expenses and Change in Net Position, which appear first in the Academy’s financial statements, report informationon the Academy as a whole and its activities in a way that helps you answer this question. We prepare thesestatements to include all assets and deferred outflows of resources, and liabilities and deferred inflows of resources,using the accrual basis of accounting, which is similar to the accounting used by most private- sector companies.All of the current year’s revenues and expenses are taken into account regardless of when the cash is received orpaid.These two statements report the Academy’s net position – the difference between assets and deferred outflows ofresources, and liabilities and deferred inflows of resources, as reported in the Statement of Net Position – as oneway to measure the Academy’s financial health or financial position. Over time, increases or decreases in theAcademy’s net position – as reported in the Statement of Revenues, Expenses and Change in Net Position – areindicators of whether its financial health is improving or deteriorating. The relationship between revenues andexpenses is the Academy’s operating results. However, the Academy’s goal is to provide services to our students,not to generate profits as commercial entities do. One must consider many other non-financial factors, such as thequality of the education provided and the safety of the Academy, to assess the overall health of the Academy.The Statement of Net Position and the Statement of Revenues, Expenses and Change in Net Position report theactivities of the Academy, which encompass all the Academy’s services, including instruction, supporting services,community services, and food services. Unrestricted state aid and state and federal grants finance most of theseactivities.Horizon Science Academy of Toledo – Lucas CountyPage 4

Management’s Discussion and Analysis for the Fiscal Year Ended June 30, 2018 (Unaudited)Table 1 provides a comparison of net position as of June 30, 2018 with net position as of June 30, 2017. The netposition at June 30,2017 has been restated as described in Note 3.Table 1Net Position2018Restated2017AssetsCurrent and Other AssetsCapital Assets, NetTotal Assets 157,333325,958483,291 387,099389,466776,565Deferred Outflows of Resources2,519,0242,074,727LiabilitiesCurrent LiabilitiesNon-Current LiabilitiesTotal 9210,371,190Deferred Inflows of Resources590,188254,808Net PositionNet Investment in Capital AssetsUnrestrictedTotal Net Position306,481(5,759,930)( 5,453,449)381,505(8,156,211)( 7,774,706)The net pension liability (NPL) is the largest liability reported by the Academy at June 30, 2018 and is reportedpursuant to GASB Statement 68, “Accounting and Financial Reporting for Pensions—an Amendment of GASBStatement 27.” For fiscal year 2018, the Academy adopted GASB Statement 75, “Accounting and FinancialReporting for Postemployment Benefits Other Than Pensions,” which significantly revises accounting for costs andliabilities related to other postemployment benefits (OPEB). For reasons discussed below, many end users of thisfinancial statement will gain a clearer understanding of the Academy’s actual financial condition by adding deferredinflows related to pension and OPEB, the net pension liability and the net OPEB liability to the reported net positionand subtracting deferred outflows related to pension and OPEB.Governmental Accounting Standards Board standards are national and apply to all government financial reportsprepared in accordance with generally accepted accounting principles. Prior accounting for pensions (GASB 27)and postemployment benefits (GASB 45) focused on a funding approach. This approach limited pension and OPEBcosts to contributions annually required by law, which may or may not be sufficient to fully fund each plan’s netpension liability or net OBEP liability. GASB 68 and GASB 75 take an earnings approach to pension and OPEBaccounting; however, the nature of Ohio’s statewide pension/OPEB plans and state law governing those systemsrequires additional explanation in order to properly understand the information presented in these statements.GASB 68 and GASB 75 require the net pension liability and the net OPEB liability to equal the Academy’sproportionate share of each plan’s collective:1. Present value of estimated future pension/OPEB benefits attributable to active and inactive employees’ pastservice.2. Minus plan assets available to pay these benefits.Horizon Science Academy of Toledo – Lucas CountyPage 5

Management’s Discussion and Analysis for the Fiscal Year Ended June 30, 2018 (Unaudited)GASB notes that pension and OPEB obligations, whether funded or unfunded, are part of the “employmentexchange” – that is, the employee is trading his or her labor in exchange for wages, benefits, and the promise of afuture pension and other postemployment benefits. GASB noted that the unfunded portion of this promise is apresent obligation of the government, part of a bargained-for benefit to the employee, and should accordingly bereported by the government as a liability since they received the benefit of the exchange. However, the Academyis not responsible for certain key factors affecting the balance of these liabilities. In Ohio, the employee shares theobligation of funding pension benefits with the employer. Both employer and employee contribution rates arecapped by State statute. A change in these caps requires action of both Houses of the General Assembly andapproval of the Governor. Benefit provisions are also determined by State statute. The Ohio revised Code permits,but does not require the retirement systems to provide healthcare to eligible benefit recipients. The retirementsystems may allocate a portion of the employer contributions to provide for these OPEB benefits.The employee enters the employment exchange with the knowledge that the employer’s promise is limited not bycontract but by law. The employer enters the exchange also knowing that there is a specific, legal limit to itscontribution to the retirement system. In Ohio, there is no legal means to enforce the unfunded liability of thepension/OPEB plan as against the public employer. State law operates to mitigate/lessen the moral obligation ofthe public employer to the employee, because all parties enter the employment exchange with notice as to the law.The retirement system is responsible for the administration of the pension and OPEB plans.Most long-term liabilities have set repayment schedules or, in the case of compensated absences (i.e. sick andvacation leave), are satisfied through paid time-off or termination payments. There is no repayment schedule forthe net pension liability or the net OPEB liability. As explained above, changes in benefits, contribution rates, andreturn on investments affect the balance of these liabilities but are outside the control of the local government. Inthe event that contributions, investment returns, and other changes are insufficient to keep up with requiredpayments, State statute does not assign/identify the responsible party for the unfunded portion. Due to the uniquenature of how the net pension liability and the net OPEB liability are satisfied, these liabilities are separatelyidentified within the long-term liability section of the statement of net position.In accordance with GASB 68 and GASB 75, the Academy’s statements prepared on an accrual basis of accountinginclude an annual pension expense and an annual OPEB expense for their proportionate share of each plan’s changein net pension liability and net OPEB liability, respectively, not accounted for as deferred inflows/outflows.As a result of implementing GASB 75, the Academy is reporting a net OPEB liability and deferred inflows/outflowsof resources related to OPEB on the accrual basis of accounting. This implementation also had the effect of restatingnet position at June 30, 2017, from ( 6,301,683) to ( 7,774,706).Total current assets decreased by 229,766. This decrease is due to decreases in cash and cash equivalent of 292,365. Capital assets decreased by 63,508 due to current year depreciation. Total liabilities decreased 2,505,614, from the 2017 restated amount, primarily due to a decrease in the net pension liability of 2,199,930.Horizon Science Academy of Toledo – Lucas CountyPage 6

Management’s Discussion and Analysis for the Fiscal Year Ended June 30, 2018 (Unaudited)Table 2 shows the changes in net position for the fiscal years 2018 and 2017. The net position at June 30, 2017 hasbeen restated as described in Note 3.Table 2Horizon Science Academy of ToledoStatement of Revenues, Expenses and Change in Net PositionFor the Fiscal Year Ended June 30, 2018June 30, 2018RestatedJune 30, 2017OPERATING REVENUES:Foundation paymentsExtracurricular activitiesOther revenueTotal operating revenues 4,436,20335,70517,9634,489,871 4,945,60635,84924,5735,006,028OPERATING EXPENSES:SalariesFringe benefitsPurchased servicesMaterials and suppliesDepreciationMiscellaneousTotal operating ,5091,674,6682,321,257(378,134)(7,774,706)N/A( 5,453,449)(7,774,706)Operating income/(loss)NON-OPERATING REVENUES(EXPENSES):Restricted grants in aid - federalState and other grantsInterest expenseDonated management feeTotal non-operatingrevenues (expenses)Change in net positionNet position, beginning of year - asrestatedNet position, end of yearHorizon Science Academy of Toledo – Lucas CountyPage 7

Management’s Discussion and Analysis for the Fiscal Year Ended June 30, 2018 (Unaudited)The information necessary to restate the 2017 beginning balances and the 2017 OPEB expense amounts for theeffects of the initial implementation of GASB 75 is not available. Therefore, 2017 functional expenses still includeOPEB expense of 6,613 computed under GASB 45. GASB 45 required recognizing OPEB expense equal to thecontractually required contributions to the plan. Under GASB 75, OPEB expense represents additional amountsearned, adjusted by deferred inflows/outflows. The contractually required contribution is no longer a componentof OPEB expense. Under GASB 75, the 2018 statements report negative OPEB expense of 224,940.Consequently, in order to compare 2018 total program expenses to 2017, the following adjustments are needed:Total 2018 program expenses under GASB 75 Negative OPEB expense under GASB 752018 contractually required contributions3,499,123224,9407,441Adjusted 2018 program expenses3,731,504Total 2017 program expenses under GASB 457,058,830Decrease in programexpenses not related to OPEB (3,327,326)Operating Expenses decreased 3,559,707 or 50.43%. This decrease is primarily the result of the State TeachersRetirement System (STRS) indefinitely suspending the Cost of Living Adjustment (“COLA”) and the SchoolEmployee Retirement System (SERS) lowering the COLA from 3.00% to 2.50%. On the accrual basis, the Academyreported ( 1,943,260) in pension expense and ( 224,940) in OPEB expense mainly due to these benefit changes.For fiscal year 2018, the Academy has reported a negative fringe benefits expense resulting from the negativepension and OPEB expenses which are components of that expense category.Foundation support decreased 509,403 primarily due to decrease in enrollment. Federal grants decreased in theamount of 57,926.Foundation support is the primary support of the Academy, comprising 99% of operating revenue and 76% of totalrevenues. The Academy also received a significant portion of federal grants, which represent 17% of total revenue.Net position increased 2,321,257 resulting from revenues in excess of expenses.Capital AssetsAt the end of fiscal year 2018 the Academy had 600,130 invested in improvements, equipment, office andinstructional and vehicles, ( 325,957 net of accumulated depreciation). Table 3 shows activity for fiscal year 2018:Table 3Capital AssetsBalanceJuly 1, 2017AdditionsDeletionsEndingJune 30, 2018 170,381366,32752,73932,312621,759(232,293) 032,2650032,265(95,774) 0(23,355)(30,539)0(53,894)53,894 170,381375,23722,20032,312600,130(274,173) 389,466(63,509) 0 325,957Capital Assets, Being Depreciated:ImprovementsEquipment InstructionalEquipment OfficeSchool VehicleTotal Capital AssetsLess: Accumulated DepreciationNet Capital AssetsFor more information on capital assets see Note 5 to the basic financial statements.Horizon Science Academy of Toledo – Lucas CountyPage 8

Management’s Discussion and Analysis for the Fiscal Year Ended June 30, 2018 (Unaudited)Contacting the Academy’s Financial ManagementThis financial report is designed to provide our citizens, taxpayers, and creditors with a general overview of theAcademy’s finances. Questions concerning any of the information in this report or requests for additionalinformation should be directed to Eldar Kafarov, Treasurer, Horizon Science Academy of Toledo, 2600 W. SylvaniaAve. Toledo, OH 43613.Horizon Science Academy of Toledo – Lucas CountyPage 9

Horizon Science Academy of ToledoStatement of Net PositionJune 30, 2018ASSETS:Current Assets:Accounts receivableIntergovernmental receivableOther prepaid itemsTotal current assetsNoncurrent Assets:Depreciable capital assets, netTotal Noncurrent AssetsTotal AssetsDEFERRED OUTFLOWS OF RESOURCES:PensionOPEBTotal Deferred Outflows of ResourcesLIABILITIES:Current Liabilities:Accounts payableAccrued wages and benefits payableNote payableOutstanding checks over bank balancesCapital leaseTotal current liabilitiesNoncurrent Liabilities:Net pension liabilityNet OPEB liabilityNote payableCapital leaseTotal noncurrent liabilitiesTotal LiabilitiesDEFERRED INFLOWS OF RESOURCES:PensionOPEBTotal Deferred Inflows of Resources 576441,712148,476590,188NET POSITION:Net investment in capital assetsUnrestricted306,481(5,759,930)Total Net Position( 5,453,449)See accompanying notes to the basic financial statements.Horizon Science Academy of Toledo – Lucas CountyPage 10

Horizon Science Academy of ToledoStatement of Revenues, Expenses and Change in Net PositionFor the Fiscal Year Ended June 30, 2018OPERATING REVENUES:Foundation paymentsExtracurricular activitiesOther revenueTotal operating revenues 4,436,20335,70517,9634,489,871OPERATING EXPENSES:SalariesFringe benefitsPurchased servicesMaterials and suppliesDepreciationMiscellaneousTotal operating 153,5003,499,123Operating incomeNON-OPERATING REVENUES:Restricted grants in aid - federalState and other grantsInterest expenseDonated management feeTotal non-operating revenuesChange in net positionNet position, beginning of year (restated)Net position, end of 1,257(7,774,706)( 5,453,449)See accompanying notes to the basic financial statements.Horizon Science Academy of Toledo – Lucas CountyPage 11

Horizon Science Academy of ToledoStatement of Cash FlowsFor the Fiscal Year Ended June 30, 2018CASH FLOWS FROM OPERATING ACTIVITIES:Cash received from State of OhioCash received from other operating revenuesCash payments to suppliers for goods and servicesCash payments to employees for services and benefitsOther cash paymentsNet cash used for operating activitiesCASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:Federal grants receivedState and other grants receivedNet cash provided by noncapital financing activitiesCASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES:Interest paid on notes payablePrincipal paid on notes/capital lease payablePayment for capital acquisitionsNet cash used for capital and related financing activitiesNet decrease in cash and cash equivalentsCash and cash equivalents at beginning of yearCash and cash equivalents at end of yearRECONCILIATION OF OPERATING LOSS TO NET CASHUSED FOR OPERATING ACTIVITIESOperating incomeADJUSTMENTS TO RECONCILE OPERATING INCOME TO NETCASH USED FOR OPERATING ACTIVITIES:DepreciationDonated management feeChanges in Assets, Liabilities, Deferred Outflows and Deferred Inflows:Decrease in other prepaid items(Increase) in accounts receivable(Decrease) in accounts payable(Increase) in intergovernmental receivable(Decrease) in accrued wages and benefits payableIncrease in outstanding checks over bank balancesIncrease in deferred inflows of resources(Increase) in deferred outflows of resources(Decrease) in net pension liability(Decrease) in net OPEB liabilityTotal adjustmentsNet cash used for operating activities (41,030)(292,365)292,365( 0) (2,330,095)( 1,339,347)See accompanying notes to the basic financial statements.Horizon Science Academy of Toledo – Lucas CountyPage 12

Notes to the Basic Financial Statements for the Fiscal Year Ended June 30, 20181. DESCRIPTION OF THE ACADEDMY AND REPORTING ENTITYHorizon Science Academy of Toledo, (the Academy), is a nonprofit corporation established pursuant to Ohio Rev.Code Chapters 3314 and 1702 to address the needs of students in grades K through twelve in Toledo. The Academy,which is par

HORIZON SCIENCE ACADEMY OF TOLEDO LUCAS COUNTY, OHIO (AUDITED) BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018. 88 East Broad Street, Columbus, Ohio 43215 Phone: 614-466-4514 or 800-282-0370 www.ohioauditor.gov Board of Directors Horizon Science Academy of Toledo