NETWORK OF INTERNATIONAL CHRISTIAN SCHOOLS/ OASIS ... · 6/30/2014 · opinion. Opinion In our opinion, the combined financial statements referred to above present fairly, in all

NETWORK OF INTERNATIONALCHRISTIAN SCHOOLS/

OASIS INTERNATIONAL SCHOOLS, INC.AND RELATED ENTITY

COMBINED FINANCIAL STATEMENTS

June 30, 2014

NETWORK OF INTERNATIONAL CHRISTIAN SCHOOLS/OASIS INTERNATIONAL SCHOOLS, INC. AND RELATED ENTITY

CONTENTS

INDEPENDENT AUDITOR'S REPORT 1/2

COMBINED STATEMENT OF FINANCIAL POSITION 3

COMBINED STATEMENT OF ACTIVITIES 4

COMBINED STATEMENT OF FUNCTIONAL EXPENSES 5

COMBINED STATEMENT OF CASH FLOWS 6/7

NOTES TO COMBINED FINANCIAL STATEMENTS 8/14

SUPPLEMENTARY INFORMATION

Schedule of Expenditures of Federal Awards 16

INTERNAL CONTROL AND COMPLIANCE

Independent Auditor's Report on Internal Control Over Financial Reportingand on Compliance and Other Matters Based on an Audit of Financial StatementsPerformed in Accordance with Government Auditing Standards 18/19

Independent Auditor's Report on Compliance For Each Major Program and on Internal Control Over Compliance Required by OMB Circular A-133 20/21

Schedule of Findings and Questioned Costs 22/24

DECOSIMOCERTIFIED PUBLIC ACCOUNTANTS

Joseph Decosimo and Company, PLLC

1000 Ridgeway Loop Road, Suite 402

Memphis, Tennessee 38120

www.decosimo.com

INDEPENDENT AUDITOR'S REPORT

Board of DirectorsNetwork of International Christian Schools/

Oasis International Schools, Inc.Southaven, Mississippi

Report on the Financial StatementsWe have audited the accompanying combined financial statements of Network of International ChristianSchools/Oasis International Schools, Inc. (NICS) and NICS Care Foundation (NCF), which comprise thecombined statement of financial position as of June 30, 2014, and the related combined statements of activities,functional expenses and cash flows for the year then ended, and the related notes to the financial statements.

Management's Responsibility for the Financial StatementsManagement is responsible for the preparation and fair presentation of these combined financial statements inaccordance with accounting principles generally accepted in the United States of America; this includes thedesign, implementation, and maintenance of internal control relevant to the preparation and fair presentation ofcombined 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 combined financial statements based on our audit. Weconducted our audit in accordance with auditing standards generally accepted in the United States of America andthe standards applicable to financial audits contained in Government Auditing Standards, issued by theComptroller General of the United States. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the combined financial statements are free from material misstatement. Thefinancial statements of NCF were not audited in accordance with Government Auditing Standards.

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

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

OpinionIn our opinion, the combined financial statements referred to above present fairly, in all material respects, thecombined financial position of Network of International Christian Schools/Oasis International Schools, Inc. andNCF as of June 30, 2014, and the changes in their net assets and their cash flows for the year then ended, inaccordance with accounting principles generally accepted in the United States of America.

1

Other Matters - Other InformationOur audit was conducted for the purpose of forming an opinion on the combined financial statements as a whole.The accompanying schedule of expenditures of federal awards, as required by Office of Management and BudgetCircular A-133, Audits of States, Local Governments, and Non-Profit Organizations, is presented for purposes ofadditional analysis and is not a required part of the combined financial statements. Such information is theresponsibility of management and was derived from and relates directly to the underlying accounting and otherrecords used to prepare the combined financial statements. The information has been subjected to the auditingprocedures applied in the audit of the combined financial statements and certain additional procedures, includingcomparing and reconciling such information directly to the underlying accounting and other records used toprepare the combined financial statements or to the combined financial statements themselves, and otheradditional 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 combined financialstatements as a whole.

Other Reporting Required by Government Auditing StandardsIn accordance with Government Auditing Standards, we have also issued our report dated November 7, 2014, onour consideration of NICS's internal control over financial reporting and on our tests of its compliance withcertain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of thatreport is to describe the scope of our testing of internal control over financial reporting and compliance and theresults 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 inconsidering NICS's internal control over financial reporting and compliance.

Memphis, TennesseeNovember 7, 2014

2


COMBINED STATEMENT OF FINANCIAL POSITION

June 30, 2014

ASSETS

Cash and cash equivalents $ 1,376,073Restricted cash and cash equivalents 280,175Investments, at fair value 2,910,067Restricted investments, at fair value 453,183Accounts receivable 21,173Prepaid expenses 2,699Due from schools 2,099,226School start-up receivables 28,500Beneficial interest in a trust 54,570Land held for sale 130,000Property and equipment, net 5,993,363

TOTAL ASSETS $ 13,349,029

LIABILITIES AND NET ASSETS

LIABILITIESDue to schools $ 1,309,666Accounts payable 74,988Custodial account 733,358Accrued expenses 61,854Capital lease obligations 18,975Note payable 3,586,557

Total liabilities 5,785,398

NET ASSETSUnrestricted -

Board designated 3,175,631Undesignated 4,333,430

7,509,061Temporarily restricted 54,570

Total net assets 7,563,631

TOTAL LIABILITIES AND NET ASSETS $ 13,349,029

The accompanying notes are an integral part of the combined financial statements.

3


COMBINED STATEMENT OF ACTIVITIES

Year Ended June 30, 2014

UnrestrictedTemporarily

Restricted Total

SUPPORT AND REVENUEContributions $ 2,906,325 $ - $ 2,906,325Administrative and service fees 3,353,836 - 3,353,836Grant income 2,029,713 - 2,029,713Investment return 248,644 - 248,644Orientation and other fees 145,456 - 145,456Change in fair value of beneficial interest in a trust - (12,038) (12,038)In-kind contributions 12,750 - 12,750

Total support and revenue 8,696,724 (12,038) 8,684,686

EXPENSESProgram service 6,876,509 - 6,876,509Management and general 899,134 - 899,134Fundraising expenses 93,971 - 93,971

Total expenses 7,869,614 - 7,869,614

CHANGE IN NET ASSETS 827,110 (12,038) 815,072

NET ASSETS - beginning of year 6,681,951 66,608 6,748,559

NET ASSETS - end of year $ 7,509,061 $ 54,570 $ 7,563,631


4


COMBINED STATEMENT OF FUNCTIONAL EXPENSES


ProgramService

Managementand General

FundraisingExpenses Total

Professional fees $ - $ 55,243 $ - $ 55,243Advertising and promotion 83,277 2,486 17,816 103,579Bad debt 114,203 - - 114,203Compensation - officers 268,196 113,722 - 381,918Conferences, conventions, meetings 7,933 10,645 - 18,578Depreciation 90,188 38,652 - 128,840USAID grant expenses 2,029,713 - - 2,029,713Information technology - 77,647 - 77,647Insurance - 36,907 - 36,907Interest expense 142,940 61,260 - 204,200Donation to school 200,000 - - 200,000Miscellaneous expenses 4,876 1,810 - 6,686Occupancy expense 104,647 44,848 - 149,495Office expenses 42,907 23,611 2,989 69,507Orientation expense 108,574 - - 108,574Employee benefits 65,735 41,008 6,093 112,836Other general expenses - 57,992 - 57,992Compensation - employees 688,365 288,803 57,968 1,035,136Payroll taxes 70,738 28,089 4,441 103,268Benefit plan contributions 70,512 9,548 4,664 84,724Recruiting expense 142,056 - - 142,056School educational program expenses 264,038 - - 264,038School project ministry expenses 28,930 58 - 28,988School support projects 1,631,940 - - 1,631,940Special school projects 553,432 - - 553,432Travel 163,309 6,805 - 170,114

$ 6,876,509 $ 899,134 $ 93,971 $ 7,869,614


5


COMBINED STATEMENT OF CASH FLOWS


OPERATING ACTIVITIESChange in net assets $ 815,072Adjustments to reconcile change in net assets to

net cash flows from operating activities -Bad debt on due from schools 114,203Depreciation 128,840Gain on disposal of asset (643)Investment income reinvested (97,904)Unrealized gain on investments (138,966)Realized gain on investments (11,774)Gain on custodial investments (17,155)Change in fair value of beneficial interest in a trust 12,038Changes in operating assets and liabilities -

Accounts receivable (21,173)Due to schools 578,083Accounts payable 33,443Custodial account 366,716Accrued expenses (9,036)

Net cash flows from operating activities 1,751,744

INVESTING ACTIVITIESPurchase of property and equipment (197,165)Purchase of investments (1,081,684)Proceeds from sale of investments 435,058Proceeds from certificate of deposit 28,658Due from schools (849,249)

Net cash flows from investing activities (1,664,382)

FINANCING ACTIVITIESPayments on capital lease obligations (5,985)Payments on note payable (236,397)

Net cash flows from financing activities (242,382)

NET CHANGE IN CASH AND CASH EQUIVALENTS (155,020)

CASH AND CASH EQUIVALENTS - beginning of year 1,811,268

CASH AND CASH EQUIVALENTS - end of year $ 1,656,248


6


COMBINED STATEMENT OF CASH FLOWS


RECONCILIATION OF CASH AND CASH EQUIVALENTSCash and cash equivalents $ 1,376,073Restricted cash and cash equivalents 280,175

$ 1,656,248

SUPPLEMENTAL DISCLOSURE OF CASH FLOWINFORMATIONCash paid for interest $ 205,816


7


NOTES TO COMBINED FINANCIAL STATEMENTS

June 30, 2014

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF COMBINATION - Network of International Christian Schools/Oasis International Schools,Inc. is a Tennessee non-profit corporation. NICS Care Foundation is a non-profit corporation organized in theState of Mississippi. NCF is a supporting organization to NICS and has common Board members andmanagement. NCF's Board members are members of NICS' management. Accordingly, the accounts of NCF havebeen combined with NICS to form one economic entity (the Entity). All significant intercompany transactionshave been eliminated in the combination.

NATURE OF ORGANIZATION - The Entity is a non-profit corporation organized to assist member schools ininternational cities. This assistance includes helping to start up new schools, teacher recruiting, purchasingtextbooks and other services to the schools. NCF is a non-profit corporation organized to support the developmentof international schools around the world and by managing property and assets in support of such purposes byadministering a fund that will provide compensation to qualifying foreign school staff members during theirretirement years.

BASIS OF ACCOUNTING - The combined financial statements have been prepared on the accrual basis ofaccounting in accordance with accounting principles generally accepted in the United States of America.

COMBINED FINANCIAL STATEMENT PRESENTATION - The accompanying combined financial statementsreflect the results of all programs operated by the Entity. The Entity is required to report information regarding itsfinancial position and activities according to three classes of net assets: unrestricted net assets, temporarilyrestricted net assets and permanently restricted net assets, based on the absence or existence and type of donor-imposed restrictions. Accordingly, net assets of the Entity and changes therein are classified and reported asfollows:

Unrestricted net assets - Net assets that are not subject to donor-imposed stipulations or the donor-imposedrestrictions have expired. All fees, gifts, contributions, grants and bequests are considered unrestricted unlessspecifically restricted by the donor.

Temporarily restricted net assets - Net assets that are subject to donor-imposed restrictions either for use during aspecified time period or for a particular purpose. Temporarily restricted net assets are restricted by the donors asto the specific year when funds can be utilized or received.

Permanently restricted net assets - Net assets that are subject to donor-imposed restrictions that they bemaintained permanently by the Entity. The donors of the assets allow the Entity to use all or part of thecontributions for unrestricted or restricted purpose. There are no permanently restricted net assets as of June 30,2014.

CASH AND CASH EQUIVALENTS - The Entity considers all highly liquid deposit instruments with originalmaturities of three months or less and cash accounts that are not subject to withdrawal restrictions or penalties tobe cash equivalents. The Entity maintains cash accounts which may exceed federally insured amounts at timesand which may at times significantly exceed combined statement of financial position amounts due to outstandingchecks. As of June 30, 2014, the Entity had approximately $875,000 of cash in excess of federal depositinsurance.

8



June 30, 2014

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

INVESTMENTS - The Entity's investments consist of available for sale securities and are reported at fair value.Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderlytransaction between market participants at the measurement date. Generally accepted accounting principlesestablish a fair value hierarchy which gives the highest priority to observable inputs such as quoted prices inactive markets for identical assets or liabilities (Level 1), the next highest priority to inputs from observable dataother than quoted prices (Level 2) and the lowest priority to unobservable inputs (Level 3). Inputs are broadlydefined as assumptions market participants would use in pricing an asset or liability.

The Entity's combined financial statements include investment securities traded on a national securities exchange,or reported on the NASDAQ national market, which are valued based on quoted market prices. These financialinstruments are classified as Level 1 in the fair value hierarchy.

Realized gains or losses upon disposition of investments are computed based upon the difference between theproceeds and the carrying value determined using the specific identification method. Unrealized gains or losses oninvestments are computed based upon the difference between fair value and the carrying value of investmentsheld during the year and are classified as a component of investment return. All other changes in the valuation ofinvestments are reported in investment return on the combined statement of activities.

SCHOOL START-UP RECEIVABLES - School start-up receivables are zero interest loans from NICS to start upschools around the world for start-up expenses. They have no definite repayment schedule, bear no interest, andare not supported by collateral. Due to the fact that the schools are located outside the United States of America,these funds may be subject to loss if the countries in which the schools are located become unstable or haveregulations enforced that make it difficult for NICS to sustain management. As of June 30, 2014, NICS has totalcredit risk of $28,500 for start up receivables. An allowance for doubtful accounts is recognized, if necessary,based upon management's estimate of uncollectible accounts determined by analysis of specific balances and ageneral reserve based upon aging of outstanding balances. Management has determined that school start-upreceivables are collectible and, accordingly, there was no allowance for uncollectible accounts as ofJune 30, 2014.

DUE FROM SCHOOLS - Due from schools represents amounts that NICS advances to schools for education andbuilding projects. Amounts due from schools have no definite repayment schedule, bear no interest, and are notsupported by collateral. Due to the fact that the schools are located outside the United States of America, thesefunds may be subject to loss if the countries in which the schools are located become unstable or have regulationsenforced that make it difficult for NICS to sustain management. As of June 30, 2014, NICS has total credit risk of$2,099,226 due from schools. An allowance for doubtful accounts is recognized, if necessary, based uponmanagement's estimate of uncollectible accounts determined by analysis of specific balances and a general reservebased upon aging of outstanding balances. Management has determined that the amounts due from schools iscollectible and, accordingly, there was no allowance for uncollectible accounts as of June 30, 2014.

9



June 30, 2014


BENEFICIAL INTEREST IN A TRUST - In June 1994, NICS was named the beneficiary of an irrevocablecharitable remainder trust held by a third party. The trust makes specified payments from earnings to the donorand, upon the donor's death, to the donor's spouse. NICS has unrestricted use of the proceeds of the trust upon thedeath of the donor and the donor's spouse. NICS recognizes the expected asset and revenue discounted for thetime value of money (net present value) at a discount rate of 6% over twenty-five years. The adjustment in the netpresent value of the asset is recognized as temporarily restricted support under the caption, “Change in fair valueof beneficial interest in a trust.”

LAND HELD FOR SALE - NICS holds land for sale that is reported at cost.

PROPERTY AND EQUIPMENT - Property and equipment are recognized at acquisition cost if purchased, or theestimated fair value on the date received if donated, less accumulated depreciation. Expenditures for additions,major renewals or betterments are capitalized and those for maintenance and repairs are charged to expense asincurred. Depreciation of property and equipment is provided over the estimated useful lives of the assets usingthe straight-line method. Upon the disposition of property and equipment, the cost and accumulated depreciationare removed from the related accounts and any gain or loss is reflected in operations.

Buildings, improvements and equipment are depreciated using the straight-line method over the followingestimated useful lives:

Years

Building 39Building improvements 5 - 15Furniture and equipment 5 - 7

NET ASSETS RELEASED FROM RESTRICTIONS - When a donor restriction expires, that is, when astipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets arereclassified to unrestricted net assets and reported in the combined statement of activities as net assets releasedfrom restrictions.

REVENUE RECOGNITION AND CONTRIBUTED SUPPORT - Contributions received are recognized asunrestricted, temporarily restricted or permanently restricted support depending on the existence and/or nature ofany donor restrictions. The Entity has elected to show restricted contributions whose restrictions are met in thesame reporting period as unrestricted support.

GRANT INCOME - In August 2011, NICS was awarded a USAID grant totaling $4,232,115 to fund the AfghanTuition Scholarship Program for students attending the International School of Kabul (ISK). The grant will coverthe period from July 1, 2011 through August 10, 2013. This grant was amended and the period was extendedthrough July 31, 2017. The committed amount for this grant was amended to $6,398,711. The funds are disburseddirectly to NICS from USAID, and NICS disburses to ISK as the subrecipient of the grant. ISK will have aprogram specific audit in accordance with Office of Management and Budget Circular A-133, Audits of States,Local Governments, and Non-Profit Organizations (Circular A-133). NICS recognized $2,029,713 of grant

10



June 30, 2014


income and grant expenses, which are included in program expenses, for the year ended June 30, 2014. Theremaining funding on the grant totaled $477,460 as of June 30, 2014.

ADMINISTRATIVE AND SERVICE FEES - NICS receives a percentage of school project contributions asadministrative and service fees. These amounts are reflected as unrestricted revenue on the combined statement ofactivities.

IN-KIND CONTRIBUTIONS - Contributions of donated noncash assets are capitalized at their fair values in theperiod received. Contributions of donated services that create or enhance nonfinancial assets, or that requirespecialized skills and are provided by individuals possessing those skills, and would typically need to bepurchased if not provided by donation, are recognized at their fair values in the period received as support andexpense.

Additionally, NICS receives a significant amount of contributed time from general volunteers, which does notmeet the two recognition criteria described above. Accordingly, the value of this contributed time has not beendetermined and is not reflected in the combined financial statements.

PROGRAM SERVICE - Program service consists of expenses on programs designed to support administratorsand teachers and school operations for schools supported by NICS in international cities.

INCOME TAXES - The Entity is classified by the Internal Revenue Service as a public charity exempt fromfederal income taxes on related business income under the provision of Section 501(c)(3) of the Internal RevenueCode and is similarly exempt from state taxes. Consequently, no federal or state income taxes have been providedin these combined financial statements. The Entity does not have any unrelated business income for the yearended June 30, 2014.

The Entity's federal and state exempt organization returns for the years ended June 30, 2013, 2012, and 2011, aresubject to examination by the Internal Revenue Service, generally for three years after they are filed.

FUNCTIONAL ALLOCATION OF EXPENSES - Expenses that are directly identifiable are charged to programservice, general and administrative, or fundraising as incurred. Expenses related to more than one function areallocated to program service, general and administrative, and fundraising on the basis of estimates made bymanagement. General and administrative expenses include those expenses that are not directly identifiable withany other specific function but provide for the overall support and direction of the Entity.

CONCENTRATION - During the year ended June 30, 2014, NICS received 23% of its funding for operationsfrom a federal grant to operate a school in Kabul, Afghanistan, and 14% from a school for administrative andservice fees. During the year ended June 30, 2014, NICS had 84% of its outstanding receivables owed by fourschools for administrative and service fees.

11



June 30, 2014


ESTIMATES AND UNCERTAINTIES - The preparation of combined financial statements in conformity withaccounting principles generally accepted in the United States of America requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets andliabilities at the date of the combined financial statements and the reported amounts of revenues and expensesduring the reporting period. Actual results could differ from those estimates.

SUBSEQUENT EVENTS - The Entity has evaluated subsequent events for potential recognition and disclosurethrough November 7, 2014, the date the combined financial statements were available to be issued.

NOTE 2 - INVESTMENTS

Investments reported at fair value consist of the following:

Fair ValueCost Level 1 Level 2 Level 3 Total

Fixed income $ 2,169,702 $ 2,176,289 $ - $ - $ 2,176,289Equities 1,019,366 1,186,961 - - 1,186,961Total $ 3,189,068 $ 3,363,250 $ - $ - $ 3,363,250

Net investment return consists of the following:

Interest and dividend income reinvested $ 97,904Realized gain on investments 7,244Unrealized gain on investments 143,496

$ 248,644

NOTE 3 - PROPERTY AND EQUIPMENT

Property and equipment consist of the following major classifications:

Land $ 3,516,686Building 2,532,013Furniture and fixtures 139,799Computer equipment 597,600

6,786,098Accumulated depreciation (792,735)

$ 5,993,363

12



June 30, 2014

NOTE 4 - CAPITAL LEASE OBLIGATIONS

NICS has capital lease obligations for a copier and postage machine. For financial reporting purposes, the presentvalue of future minimum lease payments related to the equipment has been capitalized. The leased assets arereported at a cost of $28,716 less accumulated depreciation of $9,814 as of June 30, 2014. Amortization of theseassets is included in depreciation expense. Future minimum lease payments under these noncancelable capitalleases as of June 30, 2014, are as follows:

Year endingJune 30, 2015 $ 7,739June 30, 2016 7,739June 30, 2017 5,389June 30, 2018 433

Total minimum lease payments 21,300Amounts representing interest at 8% (2,325)Present value of future minimum lease payments $ 18,975

NOTE 5 - NOTE PAYABLE

NICS has a promissory note with a bank, due in monthly installments of $21,444, including principal and interestat 4.75%, with a final balloon payment for the remaining outstanding balance on November 15, 2018. During theyear ended June 30, 2014, NICS recognized interest totaling $202,445. This loan is collateralized by the buildingand land.

Future maturities of the note payable subsequent to June 30, 2014, are as follows:

Year endingJune 30, 2015 $ 89,176June 30, 2016 93,054June 30, 2017 98,023June 30, 2018 102,782June 30, 2019 3,203,522

$ 3,586,557

NOTE 6 - RESTRICTED ASSETS AND CUSTODIAL ACCOUNT

NICS holds restricted cash and cash equivalents totaling $280,175 and investments totaling $453,183 which aredesignated for NICS' supported schools' portions of the crisis fund and are reported as a custodial account liabilityon the combined statement of financial position.

13



June 30, 2014

NOTE 7 - NET ASSETS

Net assets with donor and time restrictions are classified as temporarily restricted net assets as follows:

Beneficial interest in a trust $ 54,570

Unrestricted, board designated net assets of $3,175,631 as of June 30, 2014, are designated for crisis,contingency, financial software and NCF.

NOTE 8 - IN-KIND CONTRIBUTIONS

In-kind contributions recognized as revenue in the accompanying combined financial statements are offset by alike amount included in management and general expenses. NICS received in-kind contributions as follows:

Professional accounting services $ 12,750

NOTE 9 - EMPLOYEE BENEFIT PLAN

NICS sponsors a 403(b) defined contribution tax shelter annuity employee benefit plan covering substantially allemployees. Under the plan, NICS matches dollar for dollar up to 8% of a participant's qualifying compensation.Plan matching contributions incurred by NICS during the year ended June 30, 2014, totaled $84,724.

NCF is a supporting organization of NICS and was established to care for the community of school staff membersin their retirement years. NCF has established criteria for qualified school staff members to receive compensationduring their retirement years. School staff members will not be able to receive compensation until reaching 65years of age and completing twenty years of service at an NICS network school. The compensation provided byNCF varies based on funds available and the number of school staff members who qualify.

NCF investments consisted of $2,391,674 and cash and cash equivalents of $25,528 as of June 30, 2014, and areincluded in the combined statement of financial position. As of June 30, 2014, no school staff members werereceiving retirement benefits.

14

SUPPLEMENTARY INFORMATION

NETWORK OF INTERNATIONAL CHRISTIAN SCHOOLS/OASIS INTERNATIONAL SCHOOLS, INC.

SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS


Federal Grantor/Program Title/

Pass-through Grantor CFDA #ContractNumber

Beginning(Accrued)Deferred Receipts Expenditures

Ending(Accrued)Deferred

FEDERAL AWARDS

Direct Federal AwardsUSAID Foreign Assistance for Programs Overseas -

Afghanistan 98.001 $ - $ 2,029,713 $ 2,029,713 $ -

TOTAL FEDERAL AWARDS $ - $ 2,029,713 $ 2,029,713 $ -

NOTE 1 - BASIS OF PRESENTATION

The schedule of expenditures of federal awards includes grant activity of NICS and is presented on the accrual basis of accounting. The information in thisschedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations.

NOTE 2 - SUBRECIPIENTS

Of the expenditures of federal awards presented in the schedule, NICS provided awards to subrecipients as follows:

Program Title

FederalCFDA

Number

AmountProvided toSubrecipient

USAID Foreign Assistance for Programs Overseas -Afghanistan 98.001 $ 2,029,713

16

INTERNAL CONTROL AND COMPLIANCE





www.decosimo.com

INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND

OTHER MATTERS BASED ON AN AUDIT OF FINANCIALSTATEMENTS PERFORMED IN ACCORDANCE WITH

GOVERNMENT AUDITING STANDARDS



We have audited, in accordance with the auditing standards generally accepted in the United States of Americaand the standards applicable to financial audits contained in Government Auditing Standards issued by theComptroller General of the United States, the combined financial statements of NICS and NCF (collectively, theEntity), which comprise the combined statement of financial position as of June 30, 2014, and the relatedcombined statements of activities, functional expenses and cash flows for the year then ended, and the relatednotes to the financial statements, and have issued our report thereon dated November 7, 2014. The financialstatements of NCF were not audited in accordance with Government Auditing Standards and, accordingly, thisreport does not include reporting on internal control over financial reporting or instances of reportablenoncompliance associated with NCF.

Internal Control Over Financial Reporting In planning and performing our audit of the combined financial statements, we considered the Entity's internalcontrol over financial reporting (internal control) to determine the audit procedures that are appropriate in thecircumstances for the purpose of expressing our opinion on the combined financial statements, but not for thepurpose of expressing an opinion on the effectiveness of the Entity's internal control. Accordingly, we do notexpress an opinion on the effectiveness of the Entity's internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management oremployees, in the normal course of performing their assigned functions, to prevent, or detect and correct,misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internalcontrol, such that there is a reasonable possibility that a material misstatement of the entity's financial statementswill not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or acombination of deficiencies, in internal control that is less severe than a material weakness, yet important enoughto merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this sectionand was not designed to identify all deficiencies in internal control that might be material weaknesses orsignificant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internalcontrol that we consider to be material weaknesses. However, material weaknesses may exist that have not beenidentified.

18

Compliance and Other Matters As part of obtaining reasonable assurance about whether the Entity's combined financial statements are free frommaterial misstatement, we performed tests of its compliance with certain provisions of laws, regulations,contracts, and grant agreements, noncompliance with which could have a direct and material effect on thedetermination of financial statement amounts. However, providing an opinion on compliance with thoseprovisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results ofour tests disclosed no instances of noncompliance or other matters that are required to be reported underGovernment Auditing Standards.

Purpose of this ReportThe purpose of this report is solely to describe the scope of our testing of internal control and compliance and theresults of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or oncompliance. This report is an integral part of an audit performed in accordance with Government AuditingStandards in considering the entity's internal control and compliance. Accordingly, this communication is notsuitable for any other purpose.


19





www.decosimo.com

INDEPENDENT AUDITOR'S REPORT ON COMPLIANCEFOR EACH MAJOR PROGRAM AND ON INTERNAL

CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133



Report on Compliance for Each Major Federal Program We have audited NICS's compliance with the types of compliance requirements described in the OMB Circular A-133, Compliance Supplement, that could have a direct and material effect on each of NICS's major federalprograms for the year ended June 30, 2014. NICS's major federal program is identified in the summary ofauditor's results section of the accompanying schedule of findings and questioned costs.

Management's ResponsibilityManagement is responsible for compliance with the requirements of laws, regulations, contracts, and grantsapplicable to its federal programs.

Auditor's ResponsibilityOur responsibility is to express an opinion on compliance for each of NICS's major federal programs based on ouraudit of the types of compliance requirements referred to above. We conducted our audit of compliance inaccordance with auditing standards generally accepted in the United States of America; the standards applicableto financial audits contained in Government Auditing Standards, issued by the Comptroller General of the UnitedStates; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Thosestandards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assuranceabout whether noncompliance with the types of compliance requirements referred to above that could have adirect and material effect on a major federal program occurred. An audit includes examining, on a test basis,evidence about NICS's compliance with those requirements and performing such other procedures as weconsidered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion on compliance for each major federalprogram. However, our audit does not provide a legal determination of NICS's compliance.

Opinion on Each Major Federal ProgramIn our opinion, NICS complied, in all material respects, with the types of compliance requirements referred toabove that could have a direct and material effect on each of its major federal programs for the year endedJune 30, 2014.

20

Report on Internal Control Over Compliance Management of NICS is responsible for establishing and maintaining effective internal control over compliancewith the types of compliance requirements referred to above. In planning and performing our audit of compliance,we considered NICS's internal control over compliance with the types of requirements that could have a direct andmaterial effect on each major federal program to determine the auditing procedures that are appropriate in thecircumstances for the purpose of expressing an opinion on compliance for each major federal program and to testand report on internal control over compliance in accordance with OMB Circular A-133, but not for the purposeof expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not expressan opinion on the effectiveness of NICS's internal control over compliance.

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

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

The purpose of this report on internal control over compliance is solely to describe the scope of our testing ofinternal control over compliance and the results of that testing based on the requirements of OMB Circular A-133.Accordingly, this report is not suitable for any other purpose.


21


SCHEDULE OF FINDINGS AND QUESTIONED COSTS


Section I - Summary of Auditor's Results

FINANCIAL STATEMENTS

Type of auditors' report issued: modified

Internal control over financial reporting:

• Material Weakness(es) identified? yes X no

• Significant deficiency(ies) identified that are notconsidered to be material weakness(es)? yes X none reported

Noncompliance material to financial statements noted? yes X no

FEDERAL AWARDS

Internal control over major federal programs:

• Material Weakness(es) identified? yes X no

• Significant deficiency(ies) identified that are notconsidered to be material weakness(es)? yes X none reported

Type of auditors' report issued on compliance for major programs: unmodified

Any audit findings disclosed that are required to be reportedin accordance with section 510(a) of Circular A-133? yes X no

Identification of major federal programs:

CFDA Number

98.001

Name of Major Federal Program

USAID Foreign Assistance forPrograms Overseas - Afghanistan

Dollar threshold used to distinguish type A and type B programs: $300,000

Auditee qualified as low-risk auditee? X yes no

22




Section II - Financial Statement Findings

None noted.

23




Section III - Federal Award Findings and Questioned Costs

None noted.

24

Documents

NETWORK OF INTERNATIONAL CHRISTIAN SCHOOLS/ OASIS ... · 6/30/2014 · opinion. Opinion In our opinion, the combined financial statements referred to above present fairly, in all