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SECOND SUPPLEMENT DATED NOVEMBER 19, 2013
to
PRELIMINARY OFFICIAL STATEMENT DATED OCTOBER 18, 2013, AS PREVIOUSLY SUPPLEMENTED NOVEMBER 13, 2013
relating to
NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY
$23,000,000 Charter School Revenue Bonds (Series 2013 Project for the TEAM Academy Charter School)
The purpose of this Second Supplement is to amend and supplement certain information contained in the Preliminary Official Statement dated October 18, 2013, as previously supplemented on November 13, 2013 (the “Preliminary Official Statement”), relating to the above-referenced bonds. This Supplement should be read in conjunction with the Preliminary Official Statement. Terms used in this Supplement have the same meaning as in the Preliminary Official Statement, unless specifically otherwise defined herein.
A change is being be made to the Support Agreement, the form of which is included in Appendix H to the Preliminary Official Statement, as described herein.
M&T Securities, Inc.
Preliminary, subject to change.
Revision to Support Agreement
The Form of Support Agreement, which is included as Appendix H to the Preliminary Official Statement, is amended by adding thereto a new Section 2.08 which shall read as follows:
Section 2.08. Days Cash-on-Hand Covenant. FOTA covenants that as of the last day of each fiscal year commencing with the fiscal year ending June 30, 2014, the Days Cash-on-Hand shall be at least 60 days. For purposes of this Section 2.08, “Days Cash-on-Hand” means the quotient obtained by dividing (a) the unrestricted or temporarily restricted cash balance of FOTA, the School, the Borrower and any other facility-owning single purpose entities affiliated with FOTA or the School (collectively, the “Covenant Group”), on a consolidated basis, by (b) the annual average daily expenses of the Covenant Group, on a consolidated basis. Annual average daily expenses shall exclude an amount equal to any Federal bond subsidy payments actually received by FOTA or the School during the preceding twelve (12) months, and any amount which represents an intercompany transaction between any entities in the Covenant Group or which is non-cash in nature, including amortization and depreciation. Notwithstanding the foregoing, the covenant contained in this Section 2.08 shall remain in effect only for so long as FOTA has agreed to a similar covenant in any other agreement related to indebtedness of FOTA or lease obligations of the School, including without limitation the Senior Loan Agreement dated as of October 7, 2013 between FOTA and Manufacturers and Traders Trust Company.
SUPPLEMENT DATED NOVEMBER 13, 2013
to
PRELIMINARY OFFICIAL STATEMENT DATED OCTOBER 18, 2013
relating to
NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY
$23,000,000* Charter School Revenue Bonds (Series 2013 Project for the TEAM Academy Charter School)
The purpose of this Supplement is to amend and supplement certain information contained in the Preliminary Official Statement dated October 18, 2013 (the “Preliminary Official Statement”) relating to the above-referenced bonds. This Supplement should be read in conjunction with the Preliminary Official Statement. Terms used in this Supplement have the same meaning as in the Preliminary Official Statement, unless specifically otherwise defined herein.
Certain changes are being made to the Loan Agreement, the form of which is included in Appendix C to the Preliminary Official Statement, the Indenture, the form of which is included in Appendix D to the Preliminary Official Statement, and the Continuing Disclosure Agreement, the form of which is included in Appendix G to the Preliminary Official Statement.
Appendix A to the Preliminary Official Statement is amended and supplemented by revising certain sections and providing certain additional information, as set forth herein.
Appendix B-1 is supplemented by the addition of the Financial Statements of the School for the Fiscal Year Ended June 30, 2013.
Appendix B-2 is supplemented by the addition of the Financial Statements of FOTA for the Fiscal Year Ended June 30, 2013.
The Form of the Support Agreement is included in the Preliminary Official Statement as a new Appendix H.
Certain additional information is available through the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access system (“EMMA”), as set forth herein.
M&T Securities, Inc.
* Preliminary, subject to change.
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Revision to Loan Agreement
Section 6.21(d) of the Loan Agreement (relating to the Coverage Ratio covenant), which is included on page 44 of the form of the Loan Agreement in Appendix C to the Preliminary Official Statement, is revised to read as follows:
“The Borrower shall be deemed to be in compliance with this Section 6.21 so long as there has been compliance with the requirements of paragraphs (b) and (c) above and the recommendations, if any, of the Consultant are being followed; provided that the failure to achieve a Coverage Ratio of at least 1.00 for any Fiscal Year shall constitute an Event of Default.”
Revision to Indenture
The last paragraph of Section 5.03 of the Indenture (relating to the Revenue Fund and the application thereof), which is included on page 25 of the form of the Indenture in Appendix D to the Preliminary Official Statement, is revised to read as follows:
“Provided that (i) no Event of Default has occurred and is continuing hereunder, (ii) the balance in the Debt Service Reserve Fund is equal to the Reserve Fund Requirement for the Bonds, and (iii) the Trustee has received a Certificate from the Borrower stating that the Project is in good repair except with respect to any necessary repairs or replacements the cost of which are included in the current capital budget of the Borrower or the School, the Trustee shall return to the Borrower any Revenues remaining in the Revenue Fund on October 1 of each year after application of the Revenues for the purposes provided above.”
Supplements and Amendments to Appendix A
Appendix A to the Preliminary Official Statement is amended and supplemented as follows:
A. The paragraph under Table 3 on page A-5, which is the third paragraph under the heading “TEAM Growth Plan,” is revised in its entirety to read as follows:
“In 2012, TEAM’s management team and support staff assisted Cooper Lanning Square Renaissance School, Inc. (the “Camden School”), a New Jersey nonprofit corporation, in preparing and submitting a successful application to the Camden Board of Education to operate a public school as a Renaissance School under the Urban Hope Act (N.J.S.A. 18A:36C). The Camden School is a planned network of public schools to be located in Camden, New Jersey, the first school campus of which is expected to open in August 2014. It is currently anticipated that TEAM’s administrative and support staff, including the management team, will become employees of KIPP New Jersey A NJ Nonprofit Corporation (“KIPP NJ”), which is expected to function as a charter management company, by the end
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of the current fiscal year and that KIPP NJ will subsequently provide contracted management, administrative, and support services, in accordance with applicable law, to both TEAM and once operating, the Camden School. It is not currently anticipated that any TEAM school-site specific staff, such as principals, will become employees of KIPP NJ. TEAM is not affiliated with KIPP NJ or the Camden School. Neither KIPP NJ nor the Camden School is obligated to make payments with respect to the Series 2013 Bonds and no revenues of TEAM shall be used in connection with the development or financing of the Camden School.”
B. Number 2 In the table captioned “Operating Leases” on page A-10 is revised to read as follows:
“2. 230 Halsey Street 520-student elementary school in first year of 20-year lease with two five-year renewals at TEAM’s option. Leased by FOTA from private developer and subleased by FOTA to TEAM.”
C. The following sentence is added at the end of the “Operating Leases” section on page A-10:
“There is no outstanding debt of FOTA or any affiliated SPEs relating to the 333 Clinton Place or 230 Halsey Street facilities described above.”
D. The following sentence is added at the end of the “Series 2013 Bond Financed Facilities” section on page A-10:
“Upon the issuance of the Series 2013 Bonds, there will be no outstanding debt of any affiliated SPEs related to the 85 Custer Street and 21 Ashland Street facilities other than the Series 2013 Bonds.”
E. The following paragraph is added at the end of the “QZAB/QSCB Financed Facilities” section on page A-11:
“There is $60,617,000 of outstanding debt of FOTA related to the 18 Norfolk Street, 229 18th Avenue and 129 Littleton Avenue facilities described above, $9,167,000 of which will be repaid at the time the Series 2013 Bonds are issued. In addition, it is anticipated that FOTA will incur up to $34,632,924 of additional debt in connection with the reimbursement of approximately $4,050,000 of expenditures for the acquisition of the 229 18th Avenue property and the planned development of the 129 Littleton Avenue project consisting of a combination of taxable, non-public indebtedness and tax credit funding. Such debt is expected to be secured by a mortgage on the Littleton Avenue facilities and an assignment of the lease rentals to be paid by the School for such facilities. The tax credit funding may also be secured by a mortgage on the 229 18th Avenue facilities and an assignment of the lease rentals to be paid by the School for such facilities.”
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F. The paragraph under the heading “Lease Flow of Funds Regarding Campuses Financed with Series 2013 Bonds” on page A-12 is revised in its entirety to read as follows:
“The proceeds of the Series 2013 Bonds will be used to (i) acquire the TEAM facilities at 85 Custer Avenue at an approximate cost of $7,082,000, and at 21 Ashland Street at an approximate cost of $6,576,000, (ii) construct a gymnasium at 85 Custer Avenue at an approximate cost of $2,000,000 and finance up to approximately $1,000,000 of miscellaneous capital projects at 85 Custer Avenue and 21 Ashland Street, (iii) reimburse TEAM for minor renovations at 85 Custer Avenue in the approximate amount of $600,000, and (iv) acquire land (with a purchase price of approximately $1,350,000) adjacent to 21 Ashland Street to be used as athletic fields and a parking lot, as well as fund a debt service reserve fund and pay costs of issuance of the Series 2013 Bonds. TEAM will lease these facilities from the Borrower. The rent payments under the leases for the 21 Ashland Street and 85 Custer Avenue properties will in total equal 120% of the annual debt service on the Series 2013 Bonds. Because TEAM receives its public revenues bi-monthly, TEAM will be required to make bi-monthly lease payments equal to 120% of 1/24 of annual debt service associated with the Series 2013 Bonds. TEAM does not make bi-monthly lease payments on any of its existing leases. The Borrower will retain any excess lease income paid by TEAM and, at its sole discretion, may elect to donate excess lease income from any year to FOTA, TEAM, or other entities, provided that any required repairs at the facilities have been funded.”
G. The table captioned “Projected Revenue and Expense” on page A-39 is revised in its entirety to read as follows:
5
TEAM Academy Charter School, Inc. Friends of TEAM Academy Charter School, Inc. Projected Revenue and Expense
2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
Enrollment 1,809 2,233 2,571 3,003 3,538 3,955
TEAM Revenues
State/local $32,069,261 $38,098,843 $44,339,191 $52,330,970 $62,539,265 $71,172,007
Federal $4,304,686 $5,623,140 $6,687,150 $8,067,086 $9,714,767 $11,040,153
Fundraising/FOTA Support1 $3,179,534 $2,648,572 $1,970,216 $323,886 $0 $0
Other $338,532 $296,326 $534,603 $785,952 $789,712 $793,320
TEAM Subtotal $39,892,013 $46,666,881 $53,531,159 $61,507,893 $73,043,744 $83,005,480
FOTA Revenues
Fundraising1 $3,806,882 $4,151,428 $4,529,784 $4,407,982 $1,000,000 $1,000,000
Lease/Interest/Other (excl. QZAB/QSCB)2 $3,929,735 $4,008,330 $4,088,496 $4,580,266 $4,675,972 $4,773,714
QZAB/QSCB Subsidy $3,219,669 $5,177,595 $6,048,429 $6,048,429 $6,048,429 $6,048,429
QZAB/QSCB Subsidy Sequestration3 ($244,695) ($393,497) ($459,681) ($459,681) ($459,681) ($459,681)
FOTA Subtotal $10,711,591 $12,943,856 $14,207,029 $14,576,996 $11,264,720 $11,362,462
COMBINED TOTAL $50,603,604 $59,610,738 $67,738,188 $76,084,890 $84,308,464 $94,367,942
TEAM Expenses
Instruction $14,626,533 $17,791,870 $20,233,130 $23,342,792 $27,203,477 $30,317,220
General Administration $12,993,747 $15,805,732 $17,974,470 $20,736,994 $24,166,705 $26,932,855
Support Services (excluding leases) $6,424,294 $7,814,579 $8,886,834 $10,252,665 $11,948,363 $13,315,987
Capital Outlay $844,120 $1,026,797 $1,167,685 $1,347,149 $1,569,955 $1,749,654
Lease Payments4 $2,320,340 $3,227,905 $4,269,041 $4,828,293 $4,975,049 $5,114,857
TEAM Subtotal $37,209,034 $45,666,881 $52,531,159 $60,507,893 $69,863,548 $77,430,574
FOTA Expenses
Grants to TEAM $1,259,575 $1,500,000 $1,500,000 $1,000,000 $0 $0
Interest $2,162,724 $3,520,894 $4,536,810 $4,456,556 $4,358,313 $4,241,829
Lease Payments5 $1,398,774 $1,667,759 $2,004,409 $2,153,661 $2,182,714 $2,201,289
Other $1,795,063 $3,443,109 $3,451,717 $3,902,826 $3,879,467 $3,980,981
FOTA Subtotal $6,616,136 $10,131,763 $11,492,935 $11,513,043 $10,420,494 $10,424,098
COMBINED TOTAL $43,825,170 $55,798,644 $64,024,094 $72,020,936 $80,284,042 $87,854,672
TEAM Net Income $2,682,979 $1,000,000 $1,000,000 $1,000,000 $3,180,196 $5,574,906
FOTA Net Income $4,095,455 $2,812,093 $2,714,094 $3,063,954 $844,226 $938,364
Combined Net Income $6,778,434 $3,812,093 $3,714,094 $4,063,954 $4,024,422 $6,513,270
Combined EBIDA6 $9,422,542 $9,187,921 $10,757,222 $11,777,869 $11,657,294 $14,047,203
Combined EBIDA Plus Lease Expense7 $12,264,862 $15,255,299 $16,835,199 $16,830,787 $19,328,994
Projected Gross Debt / Lease Payments $6,781,964 $8,435,554 $10,448,951 $10,654,533 $10,755,097
Annual Debt Service Coverage 181% 181% 161% 158% 180%
Adjusted MADs8 $11,830,571 $11,830,571 $11,830,571 $11,830,571 $11,830,571
Adjusted MADs Coverage 104% 129% 142% 142% 163%
6
1. "Fundraising/FOTA Support" and "Fundraising" of TEAM and FOTA represents fundraising from corporations, foundations, individuals, or other entities that is paid directly to TEAM or FOTA. Some fundraising is paid to FOTA and then granted by FOTA to TEAM. TEAM is projected to outgrow the need for fundraising support after 2015-16 at which time TEAM has been structured to be sustainable on public funding. After 2015-16 FOTA and TEAM expect to continue to fundraise for various purposes including supporting programs that are not funded from public revenues.
2. "Lease/Interest/Other (excl. QZAB/QSCB)" is interest income, lease income, and other income, excluding income from interest on QZABs and QSCBs held by FOTA.
3. "QZAB/QSCB Subsidy Sequestration" is estimated at a reduction of 7.6% per year. An October 1, 2013 alert from National Association of Bond Lawyers estimated that sequestration will be 7.2% per year in FY 2014 and gradually taper down over time before being eliminated completely after FY2021.
4. Lease Payments by TEAM include payments for one school leased from Newark Public Schools (333 Clinton Place), one school (230 Halsey Street) and administrative space subleased from FOTA, lease of three schools (21 Ashland Street, 85 Custer Avenue and 18 Norfolk Street) from FOTA and SPEs. Projected lease payments also include additional leases in the future of 229 18th Avenue and 129 Littleton Avenue from SPEs.
5. Lease Payments by FOTA include leases of one school subleased to TEAM and actively used by TEAM (230 Halsey Street) plus lease of a former TEAM School currently subleased to an unrelated charter school and lease of central office space currently subleased to TEAM.
6. EBIDA is net income before interest, depreciation and amortization & lease expenses.
7. Lease Expense is added back to EBIDA in a manner similar to the method to calculate EBIDA from Net Income, thereby making the resulting "EBIDA Plus Lease Expense" a figure that can be compared to combined annual debt/lease payment obligations.
8. Adjusted MADs is the year with highest combined gross debt service plus lease payments (before QZAB/QSCB Subsidy).
Source: TEAM and FOTA
H. The following sentence is added after the table of “Projected Revenue and Expense” included on page A-39:
“TEAM Break-even Statement: Full enrollment at the existing six TEAM school campuses is approximately equal to 3,003 students. Assuming enrollment of 3,003 students, TEAM projects that through fiscal year 2023-24, maximum annual debt service and lease payments related to the FOTA, TEAM and affiliated SPEs (including the Borrower) is estimated to be $10,520,111. Combined TEAM, FOTA and SPE EBIDA (net income before interest, depreciation and amortization & lease expenses) during the same period is projected to be a minimum of $10,907,911 (FY 2014) and average $12,765,723. Actual enrollment is projected to increase to nearly 5,000 students by fiscal year 2023-24.”
I. The following charts containing information regarding projected indebtedness will be added to Appendix A:
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10
Supplement to Appendix B-1
Appendix B-1 to the Preliminary Official Statement is supplemented by adding the audited financial statements of the School for the Fiscal Year ended June 30, 2013, which are attached to this Supplement as Attachment I.
Supplement to Appendix B-2
Appendix B-2 to the Preliminary Official Statement is supplemented by adding the audited financial statements of FOTA for the Fiscal Year ended June 30, 2013, which are attached to this Supplement as Attachment II.
Revised Form of Continuing Disclosure Agreement
The form of the Continuing Disclosure Agreement, which is included in Appendix G to the Preliminary Official Statement, is replaced with the form of Continuing Disclosure Agreement attached to this Supplement as Attachment III.
Form of Support Agreement
The form of the Support Agreement is attached to the Preliminary Official Statement as a new Appendix H, in the form attached to this Supplement as Attachment IV.
Additional Information
The following information is available through the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access system (“EMMA”) at http://emma.msrb.org/IssueView/IssueDetails.aspx?id=7B8E26E2053D694D6E8E5C761B7F4AD6 :
1. Audited financial statements of the School for the Fiscal Years ended June 30, 2010 and June 30, 2011.
2. Audited financial statements of FOTA for the Fiscal Years ended June 30, 2010 and June 30, 2011.
3. Appraisal for property located at 21 Ashland Street, Newark, New Jersey.
4. Appraisal for property located at 85 Custer Avenue, Newark, New Jersey.
ATTACHMENT I
AUDITED FINANCIAL STATEMENTS OF THE SCHOOL FOR THE FISCAL YEAR ENDED JUNE 30, 2013
[ THIS PAGE INTENTIONALLY LEFT BLANK ]
COMPREHENSIVE ANNUAL
FINANCIAL REPORT
OF THE
TEAM ACADEMY CHARTER SCHOOL
FOR THE FISCAL YEAR ENDED JUNE 30, 2013
TEAM ACADEMY CHARTER SCHOOL
JUNE 30, 2013
TABLE OF CONTENTS
INTRODUCTORY SECTION
Letter of Transmittal .............................................................................................................................1 Roster of Trustees and Officers ............................................................................................................5
Consultants and Advisors .....................................................................................................................6
FINANCIAL SECTION
Independent Auditor's Report on General Purpose Financial Statements and Supplementary Schedule of Expenditures of Federal Awards and State Financial Assistance .....................................................................................................7
Required Supplementary Information - Part I
Management's Discussion and Analysis ....................................................................................10
Basic Financial Statements:
A. School-wide Financial Statements
A-1 Statement of Net Position ..........................................................................................................21
A-2 Statement of Activities ..............................................................................................................22
B. Fund Financial Statements:
Governmental Funds: B-1 Balance Sheet .............................................................................................................................23 B-2 Statement of Revenues, Expenditures and Changes in Fund Balances .....................................24
B-3 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities .................................25
Proprietary Funds: B-4 Statement of Net Position ..........................................................................................................26
B-5 Statement of Revenues, Expenses, and Changes in Fund Net Position .....................................27 B-6 Statement of Cash Flows ...........................................................................................................28
Fiduciary Funds: B-7 Statement of Fiduciary Net Position ..........................................................................................29 B-8 Statement of Changes in Fiduciary Net Position .......................................................................30
Notes to Financial Statements ..........................................................................................................31
TEAM ACADEMY CHARTER SCHOOL
JUNE 30, 2013
TABLE OF CONTENTS
Required Supplementary Information - Part II
C. Budgetary Comparison Schedules:
C-1 Budgetary Comparison Schedule General Fund ........................................................................51 C-2 Budgetary Comparison Schedule Special Revenue Fund ..........................................................54
Notes to Required Supplementary Information:
C-3 Budget to GAAP Reconciliation ................................................................................................56
E. Special Revenue Fund:
E-1 Combining Schedule of Program Revenues and Expenditures,
Special Revenue Fund - Budgetary Basis ..................................................................................57
G. Proprietary Funds:
Enterprise Fund: G-1 Combining Statement of Net Position .......................................................................................61
G-2 Combining Statement of Revenues, Expenses and Changes in Fund Net Position ..................................................................................................................62
G-3 Combining Statement of Cash Flows ........................................................................................63
Fiduciary Funds: H-1 Combining Statement of Fiduciary Net Position .......................................................................64
H-2 Combining Statement of Changes in Fiduciary Net Position ....................................................65 H-3 Student Activity Agency Fund Schedule of Receipts
and Disbursements .....................................................................................................................66
H-4 Payroll Agency Fund Schedule of Receipts
and Disbursements .....................................................................................................................67 H-5 Unemployment Compensation Insurance Trust Fund ...............................................................68
J. Financial Trends:
J-1 Net Assets by Component ..........................................................................................................69 J-2 Changes in Net Assets ................................................................................................................70 J-2A Combined Balance Sheet - Governmental Funds ......................................................................72 J-2B Combined Statement of Revenues, Expenditures and Changes
in Fund Balances - Governmental Funds ...................................................................................73
J-2C Statement of Cash Flow - Governmental Funds ........................................................................74
J-3 Fund Balances – Governmental Funds ......................................................................................75 J-4 Changes in Fund Balances – Governmental funds ....................................................................76
TEAM ACADEMY CHARTER SCHOOL
JUNE 30, 2013
TABLE OF CONTENTS
J. Revenue Capacity:
J-5 General Fund - Other Local Revenue by Source .......................................................................77
J-6 Assessed Value and Actual Value of Taxable Property ............................................................78 J-7 Direct and Overlapping Properties .............................................................................................79 J-8 Principal Property Taxpayers .....................................................................................................80
J. Debt Capacity:
J-9 Property Tax Levies and Collections .........................................................................................81 J-10 Ratios of Outstanding Debt by Type ........................................................................................82
J-11 Ratios of Net General Bonded Debt Outstanding ....................................................................83 J-12 Direct and Overlapping Governmental Activities Debt ...........................................................84
J. Demographic and Economic Information:
J-13 Legal Debt Margin Information ...............................................................................................85 J-14 Demographic and Economic Statistics ....................................................................................86
J. Operating Information:
J-15 Principal Employers .................................................................................................................87
J-16 Full Time Equivalent Charter School Employees by Function/Program ................................88 J-17 Operating Statistics ..................................................................................................................89
J-18 School Building Information ...................................................................................................90 J-19 General Fund - Schedule of Required Maintenance by School Facility ..................................91 J-20 Insurance Schedule ..................................................................................................................92
SINGLE AUDIT SECTION K.
K-1 Report on Compliance and on Internal Control over Financial
Reporting Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ...................................................................................................................................93
K-2 Report on Compliance with Requirements Applicable to Each
Major Program and Internal Control Over Compliance in Accordance with OMB Circular A-133 and New Jersey OMB Circular letter 04-04 .........................................................................................................95
K-3 Schedule of Expenditures of Federal Awards, Schedule A .......................................................98 K-4 Schedule of Expenditures of State Financial Assistance, Schedule B .......................................99
K-5 Notes to the Schedule of Awards and Financial Assistance ....................................................100 K-6 Schedule of Findings of Noncompliance .................................................................................102
K-7 Summary Schedule of Prior Audit Findings ............................................................................106
1
September 20, 2013
Commissioner
New Jersey Department of Education
100 Riverview Executive Plaza
CN 500
Trenton, NJ 08625
Dear Commissioner:
The Comprehensive Annual Financial Report of the TEAM Academy Charter School for the fiscal
year ended June 30, 2013, is hereby submitted.
Responsibility for both the accuracy of the data and completeness and fairness of the presentation,
including all disclosures, rests with the management of the school. To the best of our knowledge
and belief, the data presented in this report are accurate in all material respects and are reported in a
manner designed to present fairly the financial position and results of operations of the various
funds and account groups of the school. All disclosures necessary to enable the reader to gain an
understanding of the school’s financial activities have been included.
Governmental Accounting Standards Board (GASB) requires that management provide a narrative
introduction overview and analysis to accompany the basic financial statements in the form of
Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to
complement the MD&A and should be read in conjunction with it. The Charter School’s MD&A
can be found immediately following the Independent Auditor’s Report.
The Comprehensive Annual Financial Report is presented in four sections: introductory, financial,
statistical and single audit. The introductory section includes this transmittal letter, the Charter
School’s organizational chart and a list of principal officials. The financial section includes the
independent auditor’s report, management’s discussion and analysis (MD&S) and the basic
financial statements including the Charter School-wide financial statements presented in conformity
with Governmental Accounting Standards Board Statement No. 34. The basic financial statements
also include individual fund financial statements and required supplemental information (RSI). The
statistical section includes selected financial and demographic information, generally presented on a
multi-year basis.
1) REPORTING ENTITY AND ITS SERVICES: TEAM Academy Charter School is an
independent reporting entity within the criteria adopted by the Governmental Accounting
Standards Board (GASB) as established by GASB No. 34. All funds and account groups of the
TEAM Academy Charter School are included in this report
2
TEAM Academy Charter School is a free open-enrollment public school. TEAM completed the
2012 - 2013 fiscal year with 1,767 students across 5 campuses in grades K-3 and 5 - 12. The
mission of TEAM Academy is to instill in their students the desire and ability to succeed in
college, in order to change the world. TEAM’s vision is that one day, our nation will know
Newark, New Jersey, as a city of world-class public education.
Average Daily Enrollment
Fiscal Year Student Enrollment Percent Change Over Prior Year
2013 1767 20%
2012 1476 17%
2011 1262 22%
2010 1033 34%
2009 771 25%
2008 615 37%
2) MAJOR ACCOMPLISHMENTS – It marked TEAM Academy’s eleventh year of operation.
Student attendance exceeded 95% and staff attendance was 99%. The school served 1,306
students. Student attendance exceeded 95% and staff attendance exceeded 99%. The students
made impressive academic progress as they continued on the path to college and improved the
world around them through their volunteer activities and civic engagement.
3) INTERNAL ACCOUNTING CONTROLS: Management of the Charter School is
responsible for establishing and maintaining an internal control structure designed to ensure that
the assets of the Charter School are protected from loss, theft, or misuse and to ensure that
adequate accounting data are compiled to allow for the preparation of financial statements in
conformity with Generally Accepted Accounting Principals (GAAP). The internal control
structure is designed to provide reasonable, but not absolute, assurance that these objectives are
met. The concept of reasonable assurance recognizes that: (1) the cost of a control should not
exceed the benefits likely to be derived; and (2) the variation of costs and benefits requires
estimates and judgments by Management. As a recipient of Federal and State financial
assistance, the Charter School is also responsible for ensuring that an adequate internal control
structure is in place to ensure compliance with applicable laws and regulation related to those
programs. This internal control structure is also subject to periodic evaluation by the Charter
School Management.
4) BUDGETARY CONTROLS: In addition to internal accounting controls, TEAM Academy
Charter School maintains budgetary controls. The objective of these budgetary controls is to
ensure that compliance with legal provisions embodied in the annual budgets is adopted for the
General Fund and the Special Revenue Fund. The final budget amount as amended for the fiscal
year is reflected in the financial section.
5) ACCOUNTING SYSTEM AND REPORTS: TEAM Academy Charter School’s accounting
records reflect Generally Accepted Accounting Principles, as promulgated by the Governmental
Accounting Standards Board (GASB). The accounting system of the Charter School is
organized on the basis of funds and account groups. These funds and account groups are
explained in “Notes to the Basic Financial Statements,” Note 1.
3
6) FINANCIAL INFORMATION AT FISCAL YEAR–END: As demonstrated by the various
statements and schedules included in the financial section of this report, the Charter School
continues to meet its responsibility for sound financial management. The following schedule
presents a summary of the General Fund and Special Revenue Fund, for the fiscal year ended
June 30, 2013.
Revenue Amount Percent of Total
Local Revenue 3,788,611 9%
State Share 23,916,723 59%
State Aid 4,363,928 10%
E-rate Funding 1,427,459 4%
Private Funding -General FD 55,635 1%
Miscellaneous Reveue - General FD 338,303 1%
Federal Aid - Special Revenue 2,349,180 5%
Private Grants - Special Revenue 2,410,041 6%
Food Service - Federal Aid 982,830 2%
Food Service - State Aid 12,497 1%
Food Service - Other Income 81,181 1%
Food Service - Private Grant 165,398 1%
$39,891,786 100%
The following schedule presents a summary of the general fund, special revenue fund and
debt service fund expenditures for the fiscal year ended June 30, 2013.
Expenditures Amount Percent of Total
Current - General Fund 30,513,559 82%
Capital Outlay 844,121 2%
Special Revenue 4,609,447 13%
Food Service 1,241,906 3%
Total $37,209,033 100%
7) CASH MANAGEMENT: The investment policy of the Charter School is guided in large part
by state statute as detailed in “Notes to the Basic Financial Statements” Note 2. The TEAM
Academy Charter School has adopted a cash management plan, which requires it to deposit
public funds in public depositories protected from loss under the provisions of the Governmental
Unit Deposit Protection Act (“GUDPA”). GUDPA was enacted in 1970 to protect
Governmental Units from a loss of funds on deposit with a failed banking institution in New
Jersey. The law requires governmental units to deposit public funds only in public depositories
located in New Jersey, where the funds are secured in accordance with the Act
8) RISK MANAGEMENT: The board carries various forms of insurance, including but not
limited to general liability, automobile liability, and comprehensive/collision, hazard, and theft
insurance on property and contents, and fidelity bonds
4
9) OTHER INFORMATION:
Independent Audit – State statutes require an annual audit by an independent Certified Public
Accountant or Registered Municipal Accountant. The Accounting firm of Scott J. Loeffler,
CPA was selected by the Charter School.
In addition to meeting the requirements set forth in state statutes, the audit also was designed to
meet the requirements of the Single Audit Act Amendments of 1996 and the related OMB
Circular A-133, Audits of States, Local Governments, and Nonprofit Organizations, and New
Jersey OMB Circular NJOMB 04-04, Single Audit Policy for Recipients of Federal Grants,
State Grants and State Aid. The auditor’s report on the basic financial statements and specific
required supplementary information is included in the financial section of this report. The
auditors’ reports related specifically to the single audit are included in the single audit section of
this report.
Respectfully submitted,
Ryan Hill
Lead Person
5
TEAM ACADEMY
CHARTER SCHOOL ROSTER OF TRUSTEES AND OFFICERS
JUNE 30, 2013
BOARD OF DIRECTORS TERM EXPIRES
Dan Adan, Trustee, Voting 6/2014
Sheila Boyd, Trustee, Voting 2/2014
Thomas Dunn, Trustee, Voting 11/2015
Amy Rosen, Trustee, Voting 11/2015
Patricia Ross, Trustee, Parent Representative, Voting 2/2014
Linda Sterling, Trustee, Voting 11/2015
Brendan Maher, Trustee, Voting 11/2015
Heidi Moore, Teacher, Non-voting
Ryan Hill, Lead Person, Non-voting
6
CONSULTANTS AND ADVISORS
AUDIT FIRM
Scott J. Loeffler, CPA
7 Cleveland Street
Caldwell, New Jersey 07006
ATTORNEYS
Thomas O. Johnston, Esq.
Porzio, Bromberg & Newman, P.C.
100 Southgate Parkway
P.O. Box 1997
Morristown, NJ 07962-1997
OFFICIAL DEPOSITORY
M&T Bank
Buffalo, NY 14203
FINANCIAL SECTION
7
SCOTT J. LOEFFLER CERTIFIED PUBLIC ACCOUNTANT
P. O. BOX 553 EAST HANOVER, NEW JERSEY 07936
TELEPHONE FAX
973-585-4989 973-240-7318
UNMODIFIED OPINION ON BASIC FINANCIAL
STATEMENTS ACCOMPANIED BY REQUIRED SUPPLEMENTARY INFORMATION
AND SUPPLEMENTARY SCHEDULE OF
FEDERAL AND STATE AWARDS AND OTHER SUPPLEMENTARY INFORMATION -
GOVERNMENT ENTITY
Independent Auditor’s Report
The Honorable Chairperson and
Members of the Board of Trustees
TEAM Academy Charter School
County of Essex
Newark, New Jersey
Report on the Financial Statements
I have audited the accompanying financial statements of the governmental activities, the business-type
activities, each major fund and the aggregate remaining fund information of the Board of Trustees of the
TEAM Academy Charter School, County of Essex, State of New Jersey, as of and for the fiscal year ended
June 30, 2013, and the related notes to the financial statements, which collectively comprise the TEAM
Academy Charter School’s basic financial statements as listed in the table of contents.
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
My responsibility is to express an opinion on these financial statements based on my audit. I conducted my
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 and audit requirements as prescribed by the Office of School
Finance, Department of Education, State of New Jersey. Those standards require that I plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of
8
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, I 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. I believe that the audit evidence I
have obtained is sufficient and appropriate to provide a basis for my audit opinions.
Opinion
In my opinion, the financial statements referred to above present fairly, in all material respects, the
respective financial position of the governmental activities, the business-type activities, each major fund,
and the aggregate remaining fund information of the TEAM Academy Charter School as of June 30, 2013,
and the respective changes in financial position and, where applicable, cash flows, thereof for the year then
ended in conformity with accounting principles generally accepted in the United States of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management’s
Discussion and Analysis and Budgetary Comparison Information as listed in the table of contents be
presented to supplement the basic financial statements. Such information, although not a part of the basic
financial statements, is required by the Governmental Accounting Standards Board who considers it to be an
essential part of the financial reporting for placing the basic financial statements in an appropriate
operational, economic, or historical context. I have applied certain limited procedures to the required
supplementary information in accordance with auditing standards generally accepted in the United States of
America, which consisted of inquiries of management about the methods of preparing the information and
comparing the information for consistency with management’s responses to my inquiries, the basic financial
statements, and other knowledge I obtained during my audit of the basic financial statements. I do not
express an opinion or provide any assurance on the information because the limited procedures do not
provide me with sufficient evidence to express an opinion or provide any assurance.
Other Information
My audit was conducted for the purpose of forming opinions on the financial statements that collectively
comprise the TEAM Academy Charter School’s basic financial statements. The accompanying
supplementary information, which consists of the introductory section, combining and individual fund
financial statements and statistical tables are presented for purposes of additional analysis and are not are
required part of the basic financial statements. The accompanying schedules of expenditures of federal
awards and state financial assistance are presented for purposes of additional analysis as required by U.S.
Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit
Organizations, and New Jersey OMB’s Circular 04-04, Single Audit Policy for Recipients of Federal
Grants, State Grants and State Aid respectively, and are not a required part of the basic financial statements.
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 basic financial statements. Such information
has been subjected to the auditing procedures applied in the audit of the basic financial statements and
certain additional procedures, including comparing and reconciling such information directly to the
9
underlying accounting and other records used to prepare the basic financial statements or to the basic
financial statements themselves, and other additional procedures in accordance with auditing standards
generally accepted in the United States of America. In my opinion, the information is fairly presented, in all
material respects, in relation to the basis financial statements as a whole.
The information has not been subjected to the auditing procedures applied in the audit of the basic financial
statements, and accordingly, I do not express an opinion or provide any assurance on it.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, I have also issued my report dated September 20, 2013
on my consideration of the TEAM Academy Charter School’s internal control over financial reporting and
on my 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 my testing of internal control over
financial reporting and compliance and the results of that testing, and not to provide an opinion on the
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 the TEAM Academy Charter
School’s internal control over financial reporting and compliance.
Licensed Public School Accountant No. 870
Scott J. Loeffler CPA
September 20, 2013
REQUIRED SUPPLEMENTARY INFORMATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
10
TEAM ACADEMY CHARTER SCHOOL
Management’s Discussion and Analysis
Year Ended June 30, 2013
(Unaudited)
This section of TEAM Academy Charter School annual financial report presents its discussion and
analysis of the Board’s financial performance during the fiscal year that ended on June 30, 2013.
Please read it in conjunction with the transmittal letter at the front of this report and the Board’s
financial statements, which immediately follows this section.
FINANCIAL HIGHLIGHTS
Key financial highlights for the 2012-13 fiscal year include the following:
Net assets were $9,159,659.
Net Assets increased by $3,364,662 from July 1, 2012 to June 30, 2013.
The General Fund balance at June 30, 2013 is $6,931,537 an increase of $2,682,753 when
compared with the beginning balance at July 1, 2012.
OVERVIEW OF THE FINANCIAL STATEMENTS
The financial section of the annual report consists of four parts – Independent Auditor’s Report,
required supplementary information that includes the management’s discussion and analysis (this
section), the basic financial statements, and supplemental information. The basic financial
statements include two kinds of statements that present different views of the TEAM Academy
Charter School.
11
TEAM ACADEMY CHARTER SCHOOL
Management’s Discussion and Analysis
Year Ended June 30, 2013
(Unaudited)
Figure A-1. Required Components of the Board's Annual Financial Report
The first two statements are school-wide financial statements that provide both short-
term and long-term information about the TEAM Academy Charter School’s overall
financial status.
The remaining statements are fund financial statements that focus on individual parts
of the TEAM Academy Charter School, reporting the TEAM Academy Charter
School’s operation in more detail than the school-wide statements.
The governmental funds statements tell how basic services such as regular and
special education were financed in short term as well as what remains for future
spending.
Proprietary funds statements offer short- and long-term financial information about
the Food Service activities the TEAM Academy Charter School operates like
businesses.
12
TEAM ACADEMY CHARTER SCHOOL
Management’s Discussion and Analysis
Year Ended June 30, 2013
(Unaudited)
The financial statements also include notes that explain some of the information in the statements
and provide data that are more detailed. Figure A-1 summarizes the major features of the TEAM
Academy Charter School’s financial statements, including the portion of the TEAM Academy
Charter School’s activities they cover and the types of information they contain. The remainder of
this overview section of management’s discussion and analysis highlights the structure and contents
of each of the statements.
Figure A-2 - Major Features of the School-wide and Financial Statements
School-wide
Statements
Fund Financial Statements
Governmental Funds Proprietary Funds Scope Entire school. (except
fiduciary funds)
The activities of the TEAM Academy
Charter School that are for the school
operations and not proprietary or
fiduciary, such as teachers' salaries,
special education and building
maintenance, food service, and
community education
Activities the TEAM
Academy Charter School
operates similar to private
businesses: Internal service
fund
Required financial
statements
Statement of net assets
Statement of activities
Balance sheet
Statement of revenue expenditures
and changes in fund balances
Statement of net assets
Statement of revenue,
expenses, and changes in
fund net assets
Statement of cash flows
Accounting Basis
and measurement
focus
Accrual accounting and
economic resources
focus
Modified accrual accounting and
current financial focus
Accrual accounting and
economic resources focus
Type of
asset/liability
information
All assets and liabilities,
both financial and
capital, short-term and
long-term
Generally assets expected to be used
up and liabilities that come due
during the year or soon there after; no
capital assets or long-term liabilities
included
All assets and liabilities,
both financial and capital,
and short-term and long-
term
Type of inflow/out
flow information
All revenues and
expenses during year,
regardless of when cash
is received or paid
Revenues for which cash is received
during or soon after the end of the
year; expenditures when goods or
services have been received and the
related liability is due and payable
All revenues and expenses
during the year, regardless
of when cash is received or
paid
13
TEAM ACADEMY CHARTER SCHOOL
Management’s Discussion and Analysis
Year Ended June 30, 2013
(Unaudited)
School-wide Statements
The school-wide statements report information about the TEAM Academy Charter School as a
whole using accounting methods similar to those used by private-sector companies. The statement
of net assets includes all of the TEAM Academy Charter School’s assets and liabilities. All of the
current year’s revenue and expenses are accounted for in the statement of activities regardless of
when cash is received or paid.
The two school-wide statements report the TEAM Academy Charter School’s net assets and how
they have changed. Net assets – the difference between the TEAM Academy Charter School’s
assets and liabilities – are one way to measure the TEAM Academy Charter School’s financial
health or position.
In the school-wide financial statements, the TEAM Academy Charter School’s activities are shown
in two categories:
Governmental activities- Most of the TEAM Academy Charter School’s basic services are
included here, such as regular and special education, transportation, administration, food
services, and community education. State aids finance most of these activities.
Business-type activities- The TEAM Academy Charter School's Food Service Fund is
included here.
Fund Financial Statements
The fund financial statements provide more detailed information about the TEAM Academy Charter
School’s funds – focusing on its most significant or “major” funds – not the TEAM Academy
Charter School as a whole.
Funds are accounting devices the TEAM Academy Charter School uses to keep track of specific
sources of funding and spending on particular programs:
Some funds are required by State law and by bond covenants.
14
TEAM ACADEMY CHARTER SCHOOL
Management’s Discussion and Analysis
Year Ended June 30, 2013
(Unaudited)
The TEAM Academy Charter School use other funds, established in accordance with the State of
New Jersey Uniform Chart, to control and manage money for particular purposes (e.g., repaying its
long-term debts) or to show that it is property using certain revenues (e.g., federal funds).
The TEAM Academy Charter School has three kinds of funds:
Governmental funds- Most of the TEAM Academy Charter School’s basic services are
included in governmental funds, which generally focus on (1) how cash and other financial
assets that can readily be converted to cash flow in and out and (2) the balances left at year-
end that are available for spending. Consequently, the governmental funds statements
provide a detailed short-term view that helps to determine whether there are more or fewer
financial resources that can be spent in the near future to finance the TEAM Academy
Charter School’s programs. Because this information does not encompass the additional
long-term focus of the school-wide statements, we provide additional information at the
bottom of the governmental funds statements that explain the relationship (or differences)
between them.
Proprietary funds- Services for which the TEAM Academy Charter School charges a fee
are generally reported in proprietary funds. Proprietary funds are reported in the same way as the school-wide statements.
Fiduciary funds- The TEAM Academy Charter School is the trustee, or fiduciary, for assets
that belong to others such as scholarship fund, payroll and payroll agency funds, and student activity funds. The TEAM Academy Charter School is responsible for ensuring that the assets reported in these funds are used for their intended purposes. All of the TEAM Academy Charter School’s fiduciary activities are reported in a separate statement of fiduciary net assets and a statement of changes in fiduciary net assets. I exclude these activities from the TEAM Academy Charter School’s government-wide financial statements because the TEAM Academy Charter School cannot use these assets to finance its operations.
FINANCIAL ANALYSIS OF THE TEAM ACADEMY PUBLIC SCHOOLS AS A WHOLE
Net assets. The TEAM Academy Charter School’s net assets are $9,159,659 on June 30, 2013. (See Table A-1).
Governmental $9,159,659
The Statement of Net Assets of $2,228,122 reflects total capital assets at net of assumed
depreciation since inception.
15
TEAM ACADEMY CHARTER SCHOOL
Management’s Discussion and Analysis
Year Ended June 30, 2013
(Unaudited)
The TEAM Academy Charter School’s financial position is the product of these factors:
Program Special Revenue for Governmental Activities were $4,759,221.
Program Expenditure for Governmental Activities were $4,759,221
General Fund revenues during the 2013-12 school year were $33,890,659.
General Fund expenditures were $31,207,906.
Total
Current and Other Assets 11,970,340
Capital Assets (Including Business Activities) 2,228,122
Total Assets $14,198,462
Long-Term Liabilities -
Other Liabilities 5,038,803
Total Liabilities $5,038,803
Net Assets:
Invested In Capital Assets, Net of Related Debt 2,228,122
Restricted
Unrestricted 6,931,537
Credit for Total Compensated Absences
Total Net Assets $9,159,659
As of June 30, 2013
Table A-1
TEAM ACADEMY CHARTER SCHOOL
Statement of Net Assets
Total Governmental and Business Activities revenues & beginning assets are adjusted by net
adjusted expenditures resulting in a calculation of net assets of $9,159,659 on June 30, 2013.
16
TEAM ACADEMY CHARTER SCHOOL
Management’s Discussion and Analysis
Year Ended June 30, 2013
(Unaudited)
Total Percentage
Charges for services 81,181 1%
Private Grants 165,398 1%
General revenues
Local Share 3,788,611 9%
State Aid-Unrestricted 23,916,723 59%
State Aid 4,363,928 10%
Miscellaneous Revenue- General Fd 338,303 1%
Private Funding- General Fd 55,635 1%
E-Rate Funding-General Fd 1,427,459 4%
Special Revenue Federal Aid 2,349,180 5%
Special Revenue- Private Funding 2,410,041 6%
Food Service State Aid 12,497 1%
Food Service Federal Aid 982,830 2%
Total Revenues 39,891,786 100%
Expenses
Regular Instruction 14,937,401 40%
General Administrative 11,213,148 31%
School Administrative 6,758,013 18%
On-behalf TPAF Social Security and Pension 2,214,444 6%
Capital Outlay 844,121 2%
Food Service 1,241,906 3%
Total expenses 37,209,033$ 100%
Increase in Fund Balance 2,682,753
Increase in Net Capital Outlay 681,909
Net Increase in Net Assets 3,364,662
Net Assets, Beginning July 1 5,794,997
Net Assets, End of Year June 30 9,159,659$
Revenues
Program revenues
Table A-2
TEAM ACADEMY CHARTER SCHOOL
Changes in Net Assets - School Wide
For the Fiscal Year Ended June 30, 2013
17
TEAM ACADEMY CHARTER SCHOOL
Management’s Discussion and Analysis
Year Ended June 30, 2013
(Unaudited)
Total net assets were increased by $3,364,662 during the 2012-13 school year.
Source
Total Cost of
Services
Net Cost of
Services
Governmental Activities
Instruction
Regular B-2 14,937,401 14,937,401
Support Services
General Administrative Services B-2 11,362,922 11,362,922
School Administrative Services B-2 6,758,013 6,758,013
On-behalf TPAF Social Security B-2 2,214,444 2,214,444
Capital Outlay B-2 694,347 694,347
Food Service G-2 1,241,906 1,241,906
Total Governmental Activities 37,209,033$ 37,209,033$
Functions/Programs
Table A-3 (See Exhibit A-2)
TEAM ACADEMY CHARTER SCHOOL
Changes in Net Assets - School Wide
For the Fiscal Year Ended June 30, 2013
FINANCIAL ANALYSIS OF THE TEAM ACADEMY CHARTER SCHOOL OF
NEWARK’S FUNDS
The financial performance of the TEAM Academy Charter School as a whole is reflected in its
governmental activities Exhibit A-2. As the TEAM Academy Charter School completed the year,
its general funds reported a combined fund balance of $6,931,537 of which $-0- is being reserved as
capital reserve.
Revenues for the TEAM Academy Charter School’s governmental funds and business activities
were $39,891,786 while total expenses were $37,209,033. (Table A-2) (Exhibit A-2)
GENERAL FUND
The General Fund includes the primary operations of the TEAM Academy Charter School in
providing educational services to students in K-3 and Grades 5-12.
18
TEAM ACADEMY CHARTER SCHOOL
Management’s Discussion and Analysis
Year Ended June 30, 2013
(Unaudited)
The following schedule presents a summary of Government Revenues. The summary reflects the
dollar increase (decrease) from the prior year.
General Fund Revenues
Year Ended
06/30/2013
Year Ended
06/30/2012
Amount of
Increase
(Decrease)
Local Sources:
Local Share 3,788,611 3,010,932 777,679
Other Local Revenue 23,916,723 20,931,755 2,984,968
Total Local Sources 27,705,334$ 23,942,687$ 3,762,647$
Intergovernmental
State Sources 4,363,928 1,714,855 2,649,073
Other Sources 4,231,438 2,803,425 1,428,013
Federal Sources 2,349,180 1,866,555 482,625
Enterprise Fund 1,241,906 1,055,713 186,193
Total Intergovernmental Sources 12,186,452$ 7,440,548$ 4,745,904$
Total Revenue 39,891,786$ 31,383,235$ 8,508,551$
For the Years Ended June 30, 2013 and 2012
Changes in Net Assets - School Wide
Table A-4 (See Exhibit B-2)
TEAM ACADEMY CHARTER SCHOOL
The following schedule presents a summary of Governmental expenditures. The summary reflects
the dollar increase (decrease) from the prior year.
General Fund Expenditures
Year Ended
06/30/2013
Year Ended
06/30/2012
Amount of
Increase
(Decrease)
Current:
Regular Instruction 14,937,401 12,636,140 2,301,261
General Administrative Services 11,362,922 8,491,199 2,871,723
School Administration 6,758,013 5,192,475 1,565,538
On-behalf TPAF Social Security and Pension 2,214,444 1,346,536 867,908
Capital outlay 694,347 767,942 (73,595)
Food Service 1,241,906 1,055,713 186,193
Total Expenditures 37,209,033$ 29,490,005$ 7,719,028$
Table A-5 (See Exhibit B-2)
TEAM ACADEMY CHARTER SCHOOL
Changes in Net Assets - School Wide
For the Years Ended June 30, 2013 and 2012
19
TEAM ACADEMY CHARTER SCHOOL Management’s Discussion and Analysis
Year Ended June 30, 2013
(Unaudited)
Total School-Wide expenditures increased by $7,719,028 and total School-Wide revenue increased
by $8,508,551 during the 2012-2013 year.
UNRESERVED-UNDESIGNATED FUND BALANCE AS A PERCENTAGE OF EXPENDITURES
The following table shows the General Fund unreserved-undesignated fund balance.
General Fund 2013 2012 2011 2010 2009 2008
Unreserved-Undesignated 6,931,537 4,248,784 2,355,554 $1,534,898 $1,733,406 $647,280
Fund Balance
Expenditures 37,209,033 29,490,005 24,967,251 $19,452,926 $12,483,474 $8,099,667
For the Fiscal Year Ended June 30, 2013
Changes in Net Assets - School Wide
TEAM ACADEMY CHARTER SCHOOL
Table A-6
The TEAM Academy Charter School values its fund balances as a vehicle for addressing
unbudgeted and emergent needs that occur during school year. The amount of fund balance
designed to support the subsequent years budgets $6,931,537 for the 2013-14 school year.
CAPITAL ASSET AND DEBT ADMINISTRATION
Capital Assets
By the end of 2013, in the General Fund, the TEAM Academy Charter School had invested
$2,777,509 in a broad range of capital assets, including computer and audio-visual equipment, and
administrative offices, etc. (More detailed information about capital assets can be found in Note 4 to
the financial statements.) Total General Fund depreciation expense for the year was $152,892.
Facilities Improvement $1,578,510
Equipment 1,198,999
Total - General Fund $2,777,509
Less: Accumulated Depreciation (549,387)
Total - Net Capital Assets General Fund $2,228,122
Table A-7
TEAM ACADEMY CHARTER SCHOOL
Changes in Net Assets - School Wide
For the Fiscal Year Ended June 30, 2013
20
TEAM ACADEMY CHARTER SCHOOL
Management’s Discussion and Analysis
Year Ended June 30, 2013
(Unaudited)
CONTACTING THE TEAM ACADEMY CHARTER SCHOOL'S FINANCIAL
MANAGEMENT
This financial report is designed to provide our citizens, taxpayers, customers, and investors and
creditors with a general overview of the TEAM Academy Charter School’s finances and to
demonstrate the TEAM Academy Charter School’s accountability for the money it receives. If you
have questions about this report or need additional financial information, contact the Business
Office, TEAM Academy Charter School, 60 Park Place, Suite 802, Newark, NJ 07102.
BASIC FINANCIAL STATEMENTS
The basic financial statements provide a financial overview of the TEAM Academy
Charter School’s operations. These financial statements present the financial position and
operating results of all funds as of June 30, 2013.
SCHOOL-WIDE FINANCIAL STATEMENTS
21
Exhibit A-1
Governmental Business-type
Activities Activities Total
ASSETS
Cash and cash equivalents 6,971,205$ (124,010)$ 6,847,195$
Investments
Receivables, net 4,927,778 183,249 5,111,027
Security Deposit 12,118 12,118
Capital assets, net (Note 2): 2,228,122 - 2,228,122
Total Assets 14,139,223 59,239 14,198,462
LIABILITIES
Cash Overdraft -
Accounts payable 2,794,665 59,239 2,853,904
Due to Newark Board of Ed. 1,845,668 1,845,668
Deposits payable
Payable to federal government - -
Payable to state government
Deferred revenue 339,231 339,231
Noncurrent liabilities:
Due within one year
Due beyond one year
Total liabilities 4,979,564 59,239 5,038,803
NET ASSETS
Invested in capital assets, net of related debt 2,228,122 - 2,228,122
Restricted for:
Debt service -
Capital Reserves -
Permanent endowment - nonexpendable
Other purposes
Unrestricted 6,931,537 - 6,931,537 Total net assets 9,159,659$ - 9,159,659$
The accompanying Notes to the Basic Financial Statements are an integral part of this statement.
TEAM ACADEMY CHARTER SCHOOL
Statement of Net Position
June 30, 2013
22
Exhibit A-2
Program Revenues Changes in Net Assets
Operating Capital
Charges for Grants and Grants and Governmental Business-type
Functions/Programs Expenses Services Contributions Contributions Activities Activities Total
Governmental activities:
Instruction:
Regular (14,787,627)$ (2,364,273)$ (12,423,354)$ (12,423,354)$
Support services:
General administatrion (11,512,696) (2,394,948) (9,117,748) (9,117,748)
School administrative services/ operations plant serv. (6,758,013) (6,758,013) (6,758,013)
On - behalf TPAF Social Security (2,214,444) (2,214,444) (2,214,444)
Capital Outlay (694,348) (694,347) (694,347) Total governmental activities (35,967,128) (4,759,221) (31,207,906) (31,207,906)
Business-type activities:
Food Service 1,241,906 (1,241,906) (1,241,906)
Total business-type activities (1,241,906) (1,241,906) Total primary government (35,967,128) 1,241,906$ (4,759,221)$ (31,207,906)$ (1,241,906)$ (1,241,906)$
General revenues:
Local Share 3,788,611 3,788,611
State Share 23,916,723 - 23,916,723
State Aid 4,363,928 12,497 4,376,425
Miscellaneous IncomeFederal Aid - 982,830 982,830
E-Rate funding 1,427,459 1,427,459
Private Funding 55,635 165,398 221,033
Misccellanous Income 338,303 81,181 419,484
Total Revenue 33,890,659 1,241,906 33,890,659
Net Increase in Fund balance 2,682,753 - 2,682,753
Increase in net Capital Outlay 681,909 -- 681,909
Change in Net Assets 3,364,662 3,364,662
Net Assets—beginning 5,794,997 5,794,997Net Assets—ending 9,159,659$ - 9,159,659$
The accompanying Notes to Financial Statements are an integral part of this document
TEAM ACADEMY CHARTER SCHOOL
Statement of Activities
For the Year Ended June 30, 2013
FUND FINANCIAL STATEMENTS
GOVERNMENTAL FUNDS
23
Exhibit B-1
Special Capital Debt TotalGeneral Revenue Projects Service Governmental
Fund Fund Fund Fund Funds
ASSETS Cash and cash equivalents 8,315,981$ (1,344,776)$ 6,971,205 Investments Receivables, net 2,485,311 2,442,467 4,927,778 Security Deposit 12,118 12,118 Restricted cash and cash equivalents Total assets 10,813,410$ 1,097,691$ -$ 11,911,101$
LIABILITIES AND FUND BALANCES Liabilities: Cash Overdraft - Accrued expense - 0 Accounts payable 2,036,205 758,460 2,794,665 Due to School Districts 1,845,668 1,845,668 Payable to federal government - 0 Payable to state government - Deferred revenue - 339,231 339,231 Total liabilities 3,881,873 1,097,691 - - 4,979,564 Fund Balances: Reserved for: Encumbrances Legally restricted -- unexpended additional spending proposal Legally restricted -- designated for subsequent year's expenditures Capital reserve account Excess surplus Excess surplus -- designated for Subsequent year's expenditures Other purposes Unreserved, reported in: General fund 6,931,537 6,931,537 Capital projects fund - - Permanent fund Total Fund balances 6,931,537 6,931,537Total liabilities and fund balances 10,813,410$ 1,097,691$ -$
Amounts reported for governmental activities in the statement of net assets (A-1) are different because:
Capital assets used in governmental activities are not financial rescources andtherefore are not reported in the funds. The cost of the assets is $2,777,509
2,228,122
Long-term liabilities, including bonds payable, are not due and payable in thecurrent period and therefore are not reported as liabilities in the funds(see Note 2)
Net assets of governmental activities 9,159,659$
The accompanying Notes to the Basic Financial Statements are an integral part of this statement
TEAM ACADEMY CHARTER SCHOOLBalance Sheet
Governmental FundsJune 30, 2013
and the accumulated depreciation is ($ 549,387)
24
Exhibit B-2
Special Capital Debt Total
General Revenue Projects Service Governmental
Fund Fund Fund Fund Funds
REVENUES
Local sources:
Local share 3,788,611$ 3,788,611$
State Share 23,916,723 23,916,723
Other Restricted Miscellaneous Revenues
Miscellaneous 1,821,397 2,158,236 3,979,633
Total - Local Sources 29,526,731 - 29,526,731
State sources 4,363,928 - 4,363,928
Federal sources 2,600,985 2,600,985
Total revenues 33,890,659 4,759,221 38,649,880
EXPENDITURES
Current:
Regular instruction 12,423,354$ 2,364,273$ 14,787,627$
Support services- General Administrative 9,117,748 2,394,948 11,512,696
Support Services- School Admin/ operations plant serv 6,758,013 6,758,013
On-behalf TPAF Social Security and Pension 2,214,444 2,214,444
Capital outlay 694,347 694,347
Total expenditures 31,207,906 4,759,221 35,967,127
Excess (Deficiency) of revenues
over expenditures 2,682,753 - 2,682,753
OTHER FINANCING SOURCES (USES)
Transfers in -
Transfers out -
Total other financing sources and uses ---
SPECIAL ITEM
Net change in fund balances
Fund balance—July 1 4,248,784 4,248,784 Fund balance—June 30 6,931,537$ 6,931,537$
The accompanying Notes to Financial Statements are an integral part of this statement.
TEAM ACADEMY CHARTER SCHOOL
Statement of Revenues, Expenditures, And Changes in Fund Balances
Governmental Funds
For the Year Ended June 30, 2013
25
Exhibit B-3
Total net change in fund balances - governmental funds (from B-2) 2,682,753$
Amounts reported for governmental activities in the statement
of activities (A-2) are different because:
Capital outlays are reported in governmental funds as expenditures.
However, in the statement of activities, the cost of those assets is
allocated over their estimated useful lives as depreciation expense. This is
the amount by which capital outlays exceeded depreciation in the period.
Depreciation expense (152,892)$
Capital outlays 834,801
Repayment of bond principal is an expenditure in the governmental funds, 681,909
but the repayment reduces long-term liabilities in the statement of net assets
and is not reported in the statement of activities.
Change in net assets of governmental activities 3,364,662$
The accompanying Notes to the Basic Financial Statements are an integral part of this statement.
For the Year Ended June 30, 2013
TEAM ACADEMY CHARTER SCHOOL
Reconciliation of the Statement of Revenues, Expenditures,
and Changes in Fund Balances of Governmental Funds
to the Statement of Activities
PROPRIETARY FUNDS
26
Exhibit B-4
Business-type
Activities
Enterprise funds
Food Service
ASSETS
Current assets:
Cash and cash equivalents
Investments
Accounts receivable 181,348
Other receivables 1,901
Total current assets 183,249
Total assets 183,249
LIABILITIES
Current liabilities:
Cash overdraft 124,010
Accounts Payable 59,239
Compensated absences
Total current liabilities
Total liabilities 183,249
NET ASSETS
Invested in capital assets net of
related debt
Restricted for:
Capital projects
Unrestricted -
Total net assets $0
The accompanying Notes to the Basic Financial Statements are an integral part of this statement.
TEAM ACADEMY CHARTER SCHOOL
Statement of Net Position
June 30, 2013
Proprietary Funds
27
Exhibit B-5
Business-type
Activities
Enterprise Fund
Food
Service
Operating revenues:
Charges for services:
Daily sales - Reimbursable programs and Special Lunch Program 81,181$
Special functions
Total operating revenues 81,181
Operating expenses:
Cost of sales (1,167,639)
Salaries and Benefits (74,267)
Total Operating Expenses (1,241,906)
Operating income (loss) (1,241,906)
Nonoperating revenues (expenses):
State sources:
State school lunch program 12,497
Federal sources:
National school breakfast program 201,146
National school lunch program 608,423
After School Snack 173,261
Private Grants 165,398
Total nonoperating revenues (expenses) 1,160,725
Income (loss) before contributions & transfers -
Capital contributions
Transfers in (out)
Change in net assets
Total net assets—beginning 0Total net assets—ending -$
The accompanying Notes to the Basic Financial Statements are an integral part of this statement.
TEAM ACADEMY CHARTER SCHOOL
Statement of Revenues, Expenses, and Changes in Fund Net Position
Proprietary Funds
For the Year Ended June 30, 2013
28
Exhibit B-6
Business-type
Activities
Enterprise Funds
Food
Service
CASH FLOWS FROM OPERATING ACTIVITIES
Private contributions 165,398.00
Receipts from customers 83,756$
Payments to employees and benefits
Payments to suppliers (1,243,869)
Net cash provided by (used for) operating activities (994,715)
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
State and Federal Sources 1,009,953
Operating subsidies and transfers to other funds --
Net cash provided by (used for) non-capital financing activities 1,009,953
CASH FLOWS FROM INVESTING ACTIVITIES
Increase In Fixed Assets
Proceeds from sale/maturities of investments
Net cash provided by (used for) investing activities
Net increase (decrease) in cash and cash equivalents 15,238
Cash Balances—beginning of year (139,248)
Cash Balances—end of year (124,010)$
Reconciliation of operating income (loss) to net cash provided
(used) by operating activities:
Operating income (loss) -$
Adjustments to reconcile operating income (loss) to net cash provided by
(used for) operating activities
Depreciation and net amortization
(Increase) decrease in accounts receivable, net 17,201
(Increase) decrease in inventories
(Increase) decrease in USDA Commonities
Increase (decrease) in accounts payable (1,963)
Increase (decrease) in accrued compensated absences
Total adjustments 15,238
Net cash provided by (used for) operating activities 15,238$
The accompanying Notes to the Basic Financial Statements are an integral part of this statement.
Proprietary Funds
TEAM ACADEMY CHARTER SCHOOL
Statement of Cash Flows
For the Year Ended June 30, 2013
FIDUCIARY FUNDS
29
Exhibit B-7
Payroll Payroll Flex
Agency Account Spending TOTAL
ASSETS
Cash $137,496 $0 $39,617 $177,113
Total Assets $137,496 $0 $39,617 $177,113
LIABILITIES AND FUND BALANCES
Liabilities
Intergovernmental Payable - State
Payroll Deductions and Withholdings 137,496 0 39,617 177,113
Accrued Salaries and Wages
Due to Student Groups
Total Liabilities 137,496 0 39,617 177,113
Fund Balances
Reserve For Unemployed Trust Fund
Total Fund Balances
Total Liabilities and Fund Balances $0 $0 $0 $0
TEAM ACADEMY CHARTER SCHOOL
Statement of Fiduciary Net Position
Fiduciary Funds
June 30, 2013
30
Exhibit B-8
TEAM ACADEMY CHARTER SCHOOL
Statement of Changes in Fiduciary Net Position
Fiduciary Funds
For the Year Ended June 30, 2013
NOT APPLICABLE
NOTES TO THE BASIC FINANCIAL STATEMENTS
TEAM ACADEMY CHARTER SCHOOL
Notes to the Basic Financial Statements
Year Ended June 30, 2013
31
1. DESCRIPTION OF THE CHARTER SCHOOL DISTRICT AND REPORTING
ENTITY
TEAM Academy Charter School (the “Charter School”) was incorporated in the State of New Jersey in
2002 as a non-for-profit corporation for the purpose of operating and maintaining a public school under
a charter granted by the State of New Jersey, which promotes comprehensive educational reform by
infusing innovation into the public education system. It is an instrumentality of the State of New
Jersey, established to function as an education institution. The Charter School’s Board of Trustees (the
Board) is responsible for the fiscal control of the Charter School. A Chief Executive Officer (CEO) is
appointed by Board and is responsible for the administrative control of the Charter School. Under the
existing the statutes, the Charter School’s duties and powers include, but not limited to the
development and adoption of a school program; the establishment, organization and operation of
schools; and the acquisition, maintenance and disposition of school property.
A reporting entity is comprised of the primary government, component units and other organizations
that are included to ensure that the financial statements of the Charter School are not misleading. The
primary government consists of all funds, departments, boards and agencies that are not legally
separate from the Charter School. For the Charter School, this includes general operations, food service
and student related activities of the Charter School.
The primary criterion for including activities within the Charter School’s reporting entity, as set forth
in Section 2100 of the GASB Codification of Governmental Accounting and Financial Reporting
Standards, is the degree of oversight responsibility maintained by the Charter School. Oversight
responsibility includes financial interdependency, selection of governing authority, designation of
management, and ability to significantly influence operations and accountability for fiscal matters. The
combined financial statements include all funds of the Charter School over which the Board exercises
operating control. Based on the aforementioned criteria, the Charter School has no component units to
be included in the reporting entity. Further, the Charter School is not includable in any other reporting
entity on the basis of such criteria.
The TEAM Academy Charter School Board of Trustees also has broad financial responsibilities,
including the approval of the annual budget and the establishment of a system of accounting and
budgetary controls.
Its mission is to establish a charter school to serve as a neighborhood resource and as a model for other
similar schools. The TEAM Academy Charter School is committed to achieving the New Jersey Core
Curriculum Content Standards and producing high academic achievement by all students. The Charter
School will integrate a holistic curriculum, utilize learner center techniques, family and care giver
centered approaches, comprehensive community involvement, cutting edge technology and an intimate
nurturing environment that will enhance positive self-images.
TEAM ACADEMY CHARTER SCHOOL
Notes to the Basic Financial Statements
Year Ended June 30, 2013
32
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of TEAM Academy Charter School is presented to
assist in understanding the Charter School’s financial statements and notes are a representation of the
Charter School’s management, who is responsible for their integrity and objectivity. These accounting
policies conform to generally accepted accounting principles in the United States as applied to
governmental units and have been consistently applied in the preparation of these financial statements.
The financial statements of the TEAM Academy Charter School (the “Charter School”) have been
prepared in conformity with generally accepted accounting principles (GAAP) as applied to
governmental units. GASB is the accepted standard-setting body for establishing governmental
accounting and financial reporting principles.
The Charter School also applies Financial Accounting Standards Board (FASB) pronouncements
issued on or before November 30, 1989, to its governmental and business-type activities and to its
enterprise fund unless they conflict with or contradict GASB pronouncements. The most significant of
the Charter School’s accounting policies are described below:
A. Basis of Presentation
The Charter School’s basic financial statements consist of government-wide statements,
including a statement of net assets and a statement of activities, and fund financial statements
that provide a more detailed level of financial information.
Charter School Government-wide Financial Statements
The statement of net assets and the statement of activities display information about the Charter
School as a whole. These statements include the financial activities of the Charter School,
except for fiduciary funds.
The statement of net assets presents the financial condition of the governmental and business-
type activities of the Charter School at year-end. The statement of activities presents a
comparison between direct expenses and program revenues for each program or function of the
Charter School’s governmental and business-type activities. Direct expenses are those that are
specifically associated with a service, program or department and are therefore clearly
identifiable to a particular function. Program revenues include charges paid by the recipient of
the goods or services offered by the program and grants and contributions that are restricted to
meeting the operational or capital requirements of a particular program. Revenues that are not
classified as program revenues are presented as general revenues of the Charter School, with
certain limited exceptions. The comparison of direct expenses with program revenues identifies
the extent to which each governmental function is self-financing or draws from the general
revenues of the Charter School.
TEAM ACADEMY CHARTER SCHOOL
Notes to the Basic Financial Statements
Year Ended June 30, 2013
33
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) The governmental activities generally are financed through federal and state awards, taxes and other non-exchange revenues. Business-type activities are financed in whole or in part by fees charged to external parties for goods or services.
Fund Financial Statements
Fund financial statements of the Charter School are organized into funds, each of which is
considered to be separate accounting entities. Each fund is accounted for by providing a
separate set of self-balancing accounts that constitute its assets, liabilities, fund equity,
revenues, and expenditure/expenses. Funds are organized into three major categories:
governmental, proprietary, and fiduciary. An emphasis is placed on major funds within the
governmental and proprietary categories. A fund is considered major if it is the primary
operating fund of the Charter School. The New Jersey Department of Education (NJDOE)
requires that all funds be reported as major, as it is considered important for public interest and
to promote consistency among Charter Schools financial reporting in the State of New Jersey.
B Fund Accounting
The Charter School segregates transactions related to certain Charter School functions or
activities in separate funds in order to aid financial management and to demonstrate legal
compliance. Fund financial statements are designed to present financial information of the
Charter School at a more detailed level.
Governmental Funds
Governmental funds are those funds through which most governmental functions typically are
financed. Governmental fund reporting focuses on the sources, uses and balances of current
financial resources. Expendable assets are assigned to the various governmental funds
according to the purposes for which they will be paid. The difference between governmental
fund assets and liabilities is reported as fund balance. The following are the Charter Schools’
major governmental funds:
General Fund - The General Fund is the primary operating fund of the Charter School. It is
used to account for all financial resources except those that are legally or administratively
required to be accounted for in another fund. Included are certain expenditures for vehicles and
movable instructional or non-instructional equipment which are classified in the Capital Outlay
sub-fund.
As required by the New Jersey Department of Education, the Charter School included budgeted
capital outlay in this fund. Generally accepted accounting principles as they pertain to
governmental entities state that General Fund resources may be used to directly finance capital
TEAM ACADEMY CHARTER SCHOOL
Notes to the Basic Financial Statements
Year Ended June 30, 2013
34
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
outlays for long-lived improvements as long as the resources in such cases are derived
exclusively from unrestricted revenues.
Resources for budgeted capital outlay purposes are normally derived from State of New Jersey
aid and appropriated fund balance. Expenditures are those that result in the acquisition of or
additions to fixed assets for land, existing buildings, improvements of ground, construction of
buildings, additions to or remodeling of buildings and the purchase of built-in equipment. These
resources can be transferred from and to current expense by board resolution.
Special Revenue Fund - The Special Revenue Fund is used to account for the proceeds of
specific revenue from State and Federal Government, (other than major Capital Projects, Debt
Service or the Enterprise Funds) and local appropriations that legally restricted to expenditures
for specified purposes.
Capital Projects Fund - The Capital Projects Fund is used to account for all financial resources
to be used for the acquisition or construction of major capital facilities (other than those
financed by proprietary funds). The financial resources are derived from temporary notes or
serial bonds that are specifically authorized by the voters as a separate question on the ballot
either during the annual election or at a special election. As of June 30, 2013 there was no
Capital Projects Fund.
Proprietary Funds
The focus of Proprietary Funds’ measurement is upon determination of net income, changes in
net assets, financial position and cash flows. The generally accepted accounting principles
applicable are those to similar to business in the private sector. The following is a description of
the Proprietary Funds of the Charter School:
Enterprise Funds - The Enterprise Fund is utilized to account for operations that are financed
and operated in a manner similar to private business enterprises where the intent of the Charter
School is that the cost (i.e. expenses including depreciation and indirect costs) of providing
goods and services to the students on a continuing basis be financed or recovered primarily
through user charges; or where the Charter School has decided that periodic determination of
revenues earned, expenses incurred, and/or net income is appropriated for capital maintenance,
public policy, management control, accountability or other purposes.
TEAM ACADEMY CHARTER SCHOOL
Notes to the Basic Financial Statements
Year Ended June 30, 2013
35
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
All proprietary funds are accounted for on a cost of services or “capital maintenance”
measurement focus. This means that all assets and all liabilities, whether current or non-current,
associated with their activity are included on their balance sheets. Their reported fund equity
(net total assets) is segregated into contributed capital and unreserved retained earnings, if
applicable. Proprietary fund type operating statements present increases (revenue) and
decreases (expenses) in net total assets.
Fiduciary Funds
Fiduciary or trust and Agency Funds are used to account for assets held by the Charter School
in a trustee capacity or as an agent for individuals, private organizations, other governments
and/or other funds. This fund category includes:
Trust Funds - Expendable Trust Funds (unemployment compensation) are accounted for in
essentially the same manner as the governmental funds. The unemployment compensation trust
fund is used to account for contributions from employees and the employer (the Charter School)
and interest earned on the balance as well as payments to the State for reimbursements of
unemployment claims.
Agency Funds – Agency funds (Payroll, Health Benefits and Student Activity Fund) are used to
account for the assets that the Charter School holds on behalf of others as their agent. Agency
funds are custodial in nature and do not involved measurement of results of operations.
C Measurement Focus and Basis of Accounting
Measurement focus is a term used to describe “which” transactions are recorded within the
various financial statements. Basis of accounting refers to “when” transactions are recorded
regardless of the measurement focus applied.
Measurement Focus
On the government-wide statements of net assets and the statement of activities, both
governmental and business-like activities are presented using the economic resources
measurement focus. The accounting and financial reporting treatment applied to a fund is
determined by its measurement focus. All governmental funds and expendable trust funds are
accounted for using a current financial resources measurement focus. With this measurement
focus, only current assets and current liabilities generally are included on the balance sheet.
Operating statement of these funds present increases (i.e., revenues and other financing
sources), and decreases (i.e. Expenditures and other finances uses) during a given period.
These funds use fund balance as their measure of available spendable financial resources at the
end of the period.
TEAM ACADEMY CHARTER SCHOOL
Notes to the Basic Financial Statements
Year Ended June 30, 2013
36
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
All proprietary funds are accounted for on a flow economic resources measurement focus. With
this measurement focus, the accounting adjectives are the determination of operating income,
changes in net assets (or cost recovery), financial position, and cash flow. All assets and all
liabilities, whether current or non-current, associated with their activities are included on the
balance sheet. Fund equity (i.e., net total assets) is classified as net assets.
Basis of Accounting
In the government wide statement of net assets and statements of activities, both governmental
and business like activities are presented using the accrual basis of accounting. Under the
accrual basis of accounting revenues are recognized when earned and expenses are recognized
when the liability, resulting from exchange and exchange like transactions, is incurred (i. e the
exchange takes place).
In the fund financial statements, governmental fund and agency funds are presented on the
modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues
are recognized when they become both measurable and available. “Measurable” means the
amount of the transaction can be determine and “available” means collectible with the current
period or soon enough thereafter to be used to pay liabilities of the current period. State
equalization monies are recognized as revenue during the period in which they are appropriated.
A one-year availability period is used for revenue recognition for all other governmental funds
revenues.
D Budgets/Budgetary Control
Annual appropriated budgets are prepared in the spring of each year for the general and special
revenue fund. The budgets are submitted to the County Office and the Education
Commissioner for approval. Budgets except for the special revenue fund which is prepared
using a non-GAAP budgetary basis, are prepared using the modified accrual basis of
accounting. The legal level of budgetary control is established at line item accounts within each
fund. Line item accounts are defined as the lowest (most specific) level of detail as established
pursuant to the minimum chart of accounts referenced in N.J.A.C. 6:20-2A.2(m)1. Transfers of
appropriations may be made by Charter School Board resolution at any time during the fiscal
year subject to the limitation of P.L. 2004 c73 (S1701). The Board of Trustees did not make any
material supplemental budgetary appropriations during the fiscal year.
Formal budgetary integration into the accounting system is employed as a management control
device during the year. For governmental funds, there are no substantial differences between
the budgetary basis of accounting and generally accepted accounting principles, with the
exception of the Special Revenue Fund as noted below.
TEAM ACADEMY CHARTER SCHOOL
Notes to the Basic Financial Statements
Year Ended June 30, 2013
37
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Encumbrance accounting is also employed as an extension of formal budgetary integration in
the governmental funds types. Unencumbered appropriations lapse at fiscal year end.
The accounting records of the special revenue fund are maintained on the grant accounting
budgetary basis. The grant accounting budgetary basis differs from GAAP in that the grant
accounting budgetary basis recognized encumbrances as expenditures and also recognized the
related revenues, whereas the GAAP basis does not. Sufficient supplemental records are
maintained to allow of the presentation of GAAP basis financial reports.
E Cash, Cash Equivalent and Investments
Cash and cash equivalents include petty cash, change funds, cash in banks and all highly liquid
investment with a maturity of three months or less at the time of purchases and are stated at cost
plus accrued interest. US Treasury and agency obligations and certificates of deposit with
maturities of one year or less when purchases are stated at cost. All other investments are stated
at fair value.
New Jersey Charter Schools are limited as to the types of the investments and types of financial
institution they may invest in. New Jersey statute 18A:20-37 provides a list of permissible
investment that may be purchased by New Jersey Charter Schools.
Additionally, the Charter School has adopted a cash management plan that requires it to deposit
public fund in public depositories protected from loss under the provisions of the Governmental
Unit Deposit Protection Act (“GUDPA”). GUDPA was enacted in 1970 to protect
Governmental Units from loss funds on deposit with a failed banking institution in New Jersey.
N.J.S.A. 17:9-41 et. seq. established the requirements for the security of deposits of
governmental units. The statute requires that no governmental unit shall deposit public funds in
a public depository unless such funds are secured in accordance with the Act. Public
depositories include Savings and Loan Institutions, bank (both state and national banks) and
saving bank the deposits of which are federally insured. All public depositories must pledge
collateral, having a market value at least equal to five percent of the average daily balance of
collected public funds, to secure the deposit of Governmental Units. If a public depository fails,
the collateral it has pledged, plus the collateral of all other public depositories, is available to
pay the full amount of their deposits to the Governmental Units.
F Short-Term Interfund Receivables/Payables
On the fund financial statement, receivable and payables resulting from short-term (due within
one year) interfund loans are classified as interfund Receivable/Payable. interfund balances
within governmental activities and within business-type activities are eliminated on the
Government Wide Statements of Net Assets.
TEAM ACADEMY CHARTER SCHOOL
Notes to the Basic Financial Statements
Year Ended June 30, 2013
38
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
G Inventories and Prepaid Expenses
Inventories and prepaid expenses, which benefit future periods, other than those recorded in the
enterprise fund are recorded as expenditure during the year of purchase. Inventories in the
proprietary funds are valued at cost, which approximates market, using the first-in-first-out
(FIFO) method.
H Capital Assets
Capital assets, which include leasehold improvements, equipment, furniture & fixtures and
vehicles are reported in the applicable governmental or business-type activities columns of the
Government-wide financial statements. Capital assets are defined by the Charter School as
assets with initial, individual cost of more than $2,000 and an estimated useful life in excess of
two years. Such assets are recorded at historical cost or through estimation procedures
performed by an independent appraisal company.
The cost of normal repairs and maintenance that do not add to the value of the asset or
materially extend the assets lives are not capitalized. Donated capital assets are capitalized at
estimated fair market value on the date donated. Depreciation of capital assets is computed and
recorded by the straight-line method. The following estimated useful lives are used to compute
depreciation:
Description of Capital Cost Estimated Lives (Years)
Leasehold improvements 25
Equipment 10
I Compensated Absences
Compensated absences are those absences for which employees will be paid, such as vacation,
sick leave, and sabbatical leave. A liability for compensated absences that are attributable to
services already rendered, and that are not contingent on specific event that is outside the
control of the Charter School and its employees, is accrued as the employees earn the rights to
the benefits. Compensated absences that relate to future services, or that are contingent on
specific event that is outside the control of the Charter School and its employees, are accounted
for in the period in winch such services are rendered or in which such events take place.
For governmental fund financial statements, the current portion of unpaid compensated
absences is in the amount expected to be paid using expendable available resources. These
amounts are recorded in the account “compensated absences payable” in the fund from which
the employees who have accumulated unpaid leave are paid. The noncurrent portion of the
liability is not reported.
TEAM ACADEMY CHARTER SCHOOL
Notes to the Basic Financial Statements
Year Ended June 30, 2013
39
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The entire sick leave and vacation leave liabilities are reported on the school-wide financial
statements.
The Charter School had no compensated absences as of June 30, 2013.
J Accrued Liabilities and Long-Term Obligations
All payables, accrued liabilities, and long-term obligations are reported on the government-wide
financial statements.
In general, governmental fund payables and accrued liabilities that, once incurred, are paid in a
timely manner and in full from current financial resources are reported as obligations of the
funds. However, the non-current portion of compensated absences and mortgage payable (if
any) that will be paid from governmental funds are reported as liabilities on the fund financial
statements only to the extent that they are normally expected to be paid with expendable,
available financial resources.
K Deferred Revenue
Deferred Revenue represents funds which have been received but not yet earned.
There is no deferred revenue in the general fund.
Special Revenue – deferred revenue to be utilized in 2013-2014.
Newark Trust for Education $4,995
Peter Jennings Award 6,075
Kushan RH Scholarship 5,000
Morgridge Family Foundation Grant 3,892
Judy and Josh Weston Fund 100,000
Turrell Fund 100,000
City Bridge Foundation 1,500
The Gates Foundation Grant 56,622
The NJ-SIM Foundation 128
The Walton Family Foundation 7,325
The Louis Calder Foundation 15,525
NJ SIM Grant 9,552
Friends of Team Academy Charter School 11,950
Robinson Foundation Grant 16,667
Total: $339,231
TEAM ACADEMY CHARTER SCHOOL
Notes to the Basic Financial Statements
Year Ended June 30, 2013
40
L Fund Balance and Equity
In February 2009, the GASB issued GASB Statement No. 54, Fund Balance Reporting and
Governmental Fund Type Definitions (“GASB 54”). GASB 54 is effective for periods
beginning after June 15, 2010 and establishes fund balance classifications that comprise a
hierarchy based primarily on the extent to which government is bound to observe constraints
imposed upon the use of resources reported in governmental funds. Under GASB 54, fund
balances in the governmental funds financial statements are reported under the modified accrual
basis of accounting and classified into the following five categories, as defined below:
1. Nonspendable – includes amounts that cannot be spent because they either (a) not in
spendable form or (b) legally or contractually required to be maintained intact. Assets
included in this fund balance category include prepaid assets, inventories, long-term
receivables, and corpus of any permanent funds.
2. Restricted – includes amounts that can be spent only for the specific purposes stipulated by
constitution, external resource providers, or through enabling legislation.
3. Committed – includes amounts that can be used only for the specific purposes determined
by a formal action of the government’s highest level of decision-making authority.
4. Assigned – amounts intended to be used by the government for specific purposes but do not
meet the criteria to be classified as restricted or committed.
5. Unassigned – includes all spendable amounts not contained in the other classifications.
When both restricted and unrestricted resources are available for use, it is the Charter School’s
policy to use restricted resources first, then unrestricted resources as they are needed. For the
unrestricted fund balance, the Charter School first spends committed funds, then assigned
funds, and finally, unassigned funds.
M Net Assets
Net Assets represent the difference between assets and liabilities in the Government-wide
financial statements. Net assets invested in capital assets, net of related debt consists of capital
assets, net of accumulated depreciation, reduced by the outstanding balance of any long-term
debt used to build or acquire the capital assets. Net assets are reported as restricted in the
Government-wide financial statements when there are limitations imposed on their use through
external restrictions imposed by creditors, grantors, or laws or regulations of other
governments.
N Management Estimates
The preparation of financial statements in conformity with generally accepted accounting
principles requires management to make estimates that affect the recorded amount of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenditures during the reporting period.
Actual results could differ from those estimates.
TEAM ACADEMY CHARTER SCHOOL
Notes to the Basic Financial Statements
Year Ended June 30, 2013
41
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
O On-Behalf Payments
Revenues and expenditures of the General Fund include payment made by the state of New
Jersey for Pension and social security contributions for certified teacher members of the New
Jersey Teachers Pension and Annuity Fund. The amounts are not required to be included in the
Charter School’s annual budget.
3 DEPOSITS AND INVESTMENTS
New Jersey statutes require that Charter Schools deposit public funds in public depositories
located in New Jersey that are insured by the Federal Deposit Insurance Corporation, the
Federal Savings and Loan Insurance Corporation, or by any other agency of the United States
that insures deposits made in public depositories. Charter schools are also permitted to deposit
public funds in the State of New Jersey Cash Management Fund (NJCMF), the New Jersey
Arbitrage Rebate Management Fund (NJARM) and the M.B.I.A Class.
New Jersey statutes require public depositories to maintain collateral for deposits of public
funds that exceed depository insurance limits as follows: The market value of the collateral
must equal at least 5% of the average daily balance of collected funds on deposit.
In addition to the above collateral requirement, if the public funds deposited exceed 75% of the
capital funds of the depository, the depository must provide collateral having a market value at
least equal to 100% of the amount exceeding 75%. All collateral must be deposited with the
Federal Reserve Bank of New York, the Federal Reserve Bank of Philadelphia, the Federal
Home Loan Bank of New York, or a banking institution that is a member of the Federal
Reserve System and has capital funds of not less than $25,000,000.
The Charter School’s cash and cash equivalents are classified below to inform financial
statement users about the extent to which the Charter School’s deposits and investments are
exposed to custodial credit risk. As of June 30, 2013, the Charter School’s carrying amount of
deposits and investments are as follows:
General
Fund
Special
Revenue
Enterprise
Funds
Agency
Funds
Total
Operating A/C $8,315,981 ($1,344,776) ($124,010) $177,112 $7,024,307
Operating cash accounts are held in the Charter School’s name by one banking institution. At
June 30, 2013, the Charter School’s bank balance was $7,024,307.
TEAM ACADEMY CHARTER SCHOOL
Notes to the Basic Financial Statements
Year Ended June 30, 2013
42
3 DEPOSITS AND INVESTMENTS (continued)
Of the bank balance, $250,000 of the Charter School’s cash deposits on June 30, 2013 were
secured by federal deposit insurance and $7,024,307 was covered by a collateral pool
maintained by the bank as required by New Jersey statutes in accordance with the New Jersey
Governmental Unit Deposit protection Act (“GUDPA”).
GASB Statement No. 40 requires that the Charter School disclose whether its deposits are
exposed to custodial risk (risk that in the event of failure of the counterparty, the Charter School
would not be able to recover the value of its deposit or investment). In general deposits are
considered to be exposed to custodial risk by three categories described below:
Category 1
Insured or collateralized with securities held by the Charter School or by its agent in the Charter
School’s name.
Category 2
Collateralized with securities held by the pledging public depository’s trust department or agent
in the Charter School’s name.
Category 3
Uncollateralized, including any deposits that are collateralized with securities held by the
pledging public depository, or by its trust department or agent, but not in the Charter School’s
name.
The Charter School does not have a policy for the management of the custodial risk, other than
depositing all of its funds in banks covered by GUDPA.
Investments
New Jersey statutes permit the Charter School to purchase the following types of securities:
1. Bonds or other obligations of the United States or obligations guaranteed by the United
States.
2. Bonds of any Federal Intermediate Credit Bank, Federal Home Loan Bank, Federal national
Mortgage Agency or of any United States Bank for Cooperatives which have a maturity
date not greater than twelve months from the date of purchase.
3. Bonds or other obligations of the Charter School.
TEAM ACADEMY CHARTER SCHOOL
Notes to the Basic Financial Statements
Year Ended June 30, 2013
43
3 DEPOSITS AND INVESTMENTS (continued)
4. New Jersey Cash Management Fund, New Jersey Arbitrage Rebate Management Fund and
MBIA CLASS.
As of June 30, 2013, the Charter School did not hold any investments.
4 CAPITAL ASSETS
The following schedule is a summarization of the governmental activities changes in capital
assets for the year ended June 30, 2013:
Beginning
Balance
Net Additions
(Deletions)
Ending
Balance
Governmental Activities
Capital assets, being depreciated:
Leasehold improvements $ 893,483 $685,027 $1,578,510
Equipment 1,049,225 149,774 1,198,999
Total capital assets being depreciated $1,942,708 $834,801 $2,777,509
Less accumulated depreciation for:
Leasehold improvements $53,757 $ 49,442 $103,199
Equipment 342,738 103,450 446,188
Total accumulated depreciation $396,495 $152,892 $549,387
Total capital assets net $1,546,213 $681,909 $2,228,122
5. LONG-TERM LEASES
The school leases its premises under the terms of a non-cancelable lease. Rent expense for the
year ended June 30, 2013 amounted to $2,320,340. Future obligations over the primary terms of
the long-term lease are as follows:
2014 2,451,381
2015 2,613,381
2016 2,762,522
2017 2,781,705
2018 2,801,272
TEAM ACADEMY CHARTER SCHOOL
Notes to the Basic Financial Statements
Year Ended June 30, 2013
44
6 PENSION PLANS
Description of Plans
Substantially all of the employees of the Charter School are covered by either the Public
Employee’s Retirement System or the Teacher’s Pension and Annuity Fund (both of which are
contributory defined benefits plans).
Both were established by state statute and are administered by the New Jersey Division of
Pension and Benefit (Division). According to the State of New Jersey Administrative Code, all
obligations of both Systems will be assumed by the State of New Jersey should the Systems
terminate. The Division issues a publicly available financial report that includes the financial
statements and required supplementary information for the Public Employees Retirements
System and the Teacher’s Pension and Annuity Fund. These reports may be obtained by
writing to the Division of Pensions and Benefits, PO Box 295, Trenton, New Jersey, 08625.
Teachers Pension and Annuity Fund (TPAF)
The Teachers’ Pension and Annuity Fund was established as of January 1,1955, under the
provisions of N.J.S.A. 18A:66 to provide coverage including post-retirements health care to
substantially all full time certified teachers or professional staff of the public school systems in
the State. The Teacher’s Pension and Annuity Fund is considered a cost-sharing multiple-
employer plan with a special funding situation, as under current statute, all employer
contributions are made by the State of New Jersey on behalf of the Charter School and the
systems other related non-contributing employers. Membership is mandatory for substantially
all teachers or members of the professional staff certified by the State Board of Examiners, and
employees of the Department of Education who have titles that are unclassified, professional
and certified.
Public Employees’ Retirement System (PERS)
The public Employees’ Retirement Systems (PERS) was established as of January 1, 1955
under the provisions of N.J.S.A. 43:15A to provide coverage including post-retirement health
care to substantially all full time employees of the State or any county municipality, Charter
School, or public agency provided the employee is not a member of another state-administered
retirement system. The public Employees’ Retirement System is a cost-sharing multiple-
employer plan. Membership is mandatory for substantially all full time employees of the State
of New Jersey or any county, municipality, Charter School, or public agency, provided the
employee is not required to be a member of another state administered retirement system or
other state or local jurisdiction.
TEAM ACADEMY CHARTER SCHOOL
Notes to the Basic Financial Statements
Year Ended June 30, 2013
45
6 PENSION PLANS (continued)
Vesting and Benefit Provisions
The vesting and benefit provisions for PERS are set by N.J.S.A 43:15a and 4303B and N.J.S.A.
18A: for TPAF. All benefits vest after eight to ten years of service, except for medical benefits
that vest after 25 years of service. Retirements benefits for age and service are available at age
55 and are generally determine to be 1/55 of the final average salary for each year of service
credit as defined.
Final average salary equals the average salary for the final three years of service prior to
retirement (or highest three years’ compensation if other than the final three years). Members
may seek early retirement after achieving 25 years of service credit or they may elect deferred
retirement after achieving eight to ten years of service in which case benefits would begin the
first day of the month after the member attains normal retirement age. The TPAF and PERS
provides for specified medical benefits for member who retire after achieving 25 years of
qualified service, as defined, or under the disability provisions of the System.
Members are always fully vested for their own contributions and, after three years of service
credit, become vested for 2% of related interest earned on the contributions. In the case of
death before retirement, members’ beneficiaries are entitled to full interest credited to the
member’s accounts.
Significant Legislation
P.L. 2010, c. 1, effective May 21, 2010, made a number of changes to the State-administered
retirement systems concerning eligibility, the retirement allowance formula, the definition of
compensation, the positions eligible for service credit, the non-forfeitable right to a pension, the
prosecutor's part of the PERS, and employer contributions to the retirement system.
This new legislation changed the membership eligibility criteria for new members of TPAF and
PERS from the amount of annual compensation to the number of hours worked weekly. Also, it
returned the benefit multiplier for new members of TPAF and PERS to 1/60 from 1/55, and it
provided that new members of TPAF and PERS have the retirement allowance calculated using
the average annual compensation for the last five years of service instead of the last three years
of service. New members of TPAF and PERS will no longer receive pension service credit from
more than one employer. Pension service credit will be earned for the highest paid position
only. This law also closed the prosecutor's part of the PERS to new members and repealed the
law for new members that provided a non-forfeitable right to receive a pension based on the
laws of the retirement system in place at the time five years of pension service credit is attained.
The law also requires the State to make its full pension contribution, defined as l/71th of the
required amount, beginning in Fiscal Year 2013.
TEAM ACADEMY CHARTER SCHOOL
Notes to the Basic Financial Statements
Year Ended June 30, 2013
46
6 PENSION PLANS (continued)
P.L. 2010, c.3, effective May 21, 2010, replaced the accidental and ordinary disability
retirement for new members of the TPAF and PERS with disability insurance coverage similar
to that provided by the State to individuals enrolled in the State's Defined Contribution
Retirement Program.
Funding Status and Funding Progress
As of June 30, 2009, the most recent actuarial valuation date, the aggregate funded ratio for all
the State administered retirement systems including TPAF and PERS, is 66.0 percent with an
unfunded actuarial accrued liability of $45.8 billion. The aggregate funded ratio and unfunded
accrued liability for the State-funded systems is 62.0 percent and $30.7 billion, and the
aggregate funded ratio and unfunded accrued liability for local PERS and Police and Firemen's
Retirement System ("PFRS”) is 72.1 percent and $15.1 billion.
The funded status and funding progress of the retirement systems is based on actuarial
valuations which involve estimates of the value of reported amounts and assumptions about the
probability of events far into the future.
These amounts are subject to continual revision as actual results are compared to past
expectations and new estimates are made about the probability of future events.
Actuarial calculations reflect a long-term perspective and are based on the benefits provided
under the terms of the retirement systems in effect at the time of each valuation and also
consider the pattern of the sharing of costs between the employer and members at that point in
time. The projection of benefits for financing reporting purposes does not explicitly incorporate
the potential effects of legal or contractual limitations on the pattern of cost sharing between the
employer and members in the future.
Actuarial Methods and Assumptions
In the June 30, 2009 actuarial valuation, the projected unit credit was used as the actuarial cost
method, and the five year average of market value was used as the asset valuation method for
the retirement systems. The actuarial assumptions included (l) 8.25 percent for investment rate
of return for the retirement systems and (2) 5.45 percent for projected salary increases for the
PERS and 5.74 percent for TPAF.
Employer and Employee Pension Contributions
The contribution policy is set by laws of the State of New Jersey and contributions are required
by active members and participating employers.
TEAM ACADEMY CHARTER SCHOOL
Notes to the Basic Financial Statements
Year Ended June 30, 2013
47
6 PENSION PLANS (continued)
Plan member and employer contributions may be amended by State of New Jersey legislation
with the amount of contributions by the State of New Jersey contingent upon the Annual
Appropriations Act. As defined, the retirement systems require employee contributions based
on 6.64% for PERS, 6.64% for TPAF and 6.64% for DCRP of the employee's annual
compensation.
Annual Pension Costs (APC)
Per the requirements of GASB Statement No. 27 for the year ended June 30, 2011 for TPAF,
which is a cost sharing plan with special funding situations, annual pension cost differs from the
annual required contribution. For PERS, which is a cost sharing multi-employer defined benefit
pension plan, the annual pension cost equals contributions made. TPAF employer contributions
are made annually by the State of New Jersey to the pension system on behalf of the school.
PERS employer contributions are made annually by the school to the pension system in
accordance with Chapter 114, P.L. 1997. In the DCRP, which is a defined contribution plan,
member contributions are matched by a 3% employer contribution.
In accordance with N.J.S.A 18A:66-66 the State of New Jersey reimbursed the Charter School
$892,582 during the year ended June 30, 2013 for the employer’s share of social security
contributions for TPAF members, as calculated on their base salaries. This amount has been
included in the school wide financial statements and the fund financial statements as a revenue
and expenditure in accordance with GASB No. 24.
7 POST RETIREMENT BENEFITS
P.L. 1987, c. 384 and P.L. 1990, c.6 required Teachers’ Pensions and Annuity Fund (TPAF)
and the Public Employees’ Retirement System (PERS), respectively, to fund post-retirement
medical benefits for those state employees who retire after accumulating 25 years of credited
service or on a disability retirement. P.L. 2007, c 103 amended the law to eliminate the funding
of post-retirement medical benefits through the TPAF and PERS. It created separate funds
outside of the pension plans for the funding and payment of post-retirement medical benefits for
retired state employees and retired educational employees.
As of June 30, 2013, there were 97,661 retirees receiving post-retirement medical benefits. The
cost of these benefits is funded through contribution by the State in accordance with P.L. 1994,
c.62. Funding of post-retirement medical premiums changed from a prefunding basis to a pay-
as-you-go basis beginning in fiscal year 1994.
TEAM ACADEMY CHARTER SCHOOL
Notes to the Basic Financial Statements
Year Ended June 30, 2013
48
7 POST RETIREMENT BENEFITS (continued)
The State is also responsible for the cost attributable to P.L. 1992, c.126 which provides free
health benefits to members of PERS, and the Alternate Benefit Program who retired from a
board of education or county college with 25 years of service. The state paid $146.6 million
toward Chapter 126 benefits for 16,618 eligible retired members in fiscal year 2012.
8 COMPENSATED ABSENCES
The Charter School accounts for compensated absences (e.g., unused vacation, sick leave) as
directed by Governmental Accounting Standards Board Statement No. 16 (GASB 16),
“Accounting for Compensated Absences”. A liability for compensated absences attributable to
services already rendered and not contingent on a specific event that is outside the control of the
employer and employee is accrued as employees earn the rights to the benefits.
Charter School employees are granted varying amounts of vacation and sick leave in
accordance with the Charter School’s personnel policy. The Charter School’s policy permits
employees to accumulate unused sick and personal days and carry forward the full amount to
subsequent years.
Upon termination or upon retirement, employees are currently not paid for accrued vacation or
unused sick and personal days. The Board of the Charter School is currently reviewing the
exiting compensated absences policies with the intent of addressing the issues of accumulation
and payments upon termination.
As of June 30, 2013, Charter School-wide compensated absences amounted to $-0-.
9 DEFERRED COMPENSATION
The Charter School offers its employees a deferred compensation plan created in accordance
with the IRS code 403(b). The plan which is administered by Nationwide permits participants
to defer a portion of their salaries until future years.
10 ECONOMIC DEPENDENCY
The Charter School receives a substantial amount of its support from federal and state
governments. A significant reduction in the level of support, if it were to occur, could have an
effect on the Charter School’s programs and activities.
11 CONTINGENT LIABILITIES
The Charter School participates in a number of federal and state programs that are fully or
partially funded by grants received from other governmental units. Expenditures financed by
grants are subject to audit by the appropriate grantor government.
TEAM ACADEMY CHARTER SCHOOL
Notes to the Basic Financial Statements
Year Ended June 30, 2013
49
11 CONTINGENT LIABILITIES (continued)
If expenditures are disallowed due to noncompliance with grant program regulations, the
Charter School may be required to reimburse the grantor government. As of June 30, 2013,
significant amounts of grant expenditures have not been audited by the various grantor agencies
but the Charter School believes that disallowed expenditures, if any, based on subsequent audits
will not have a material effect on any of the individual governmental funds or the overall
financial position of the Charter School.
The Charter School’s attorney’s letter advises that there is no litigation, pending litigation
claims, contingent liabilities, unasserted claims for assessments or statutory violations which
involved the Charter School and which might materially affect the Charter School’s financial
position.
12 RISK MANAGEMENT
The Charter School is exposed to various risks of loss related to torts; theft of, damage to, and
destruction of assets; errors and omissions; injuries to employees; and natural disasters.
Property and Liability Insurance - The Charter School maintains commercial insurance
coverage for property, liability and surety bonds. A complete schedule of insurance coverage
can be found in the Statistical Section (UNAUDITED) of this Comprehensive Annual Financial
Report.
13 RECEIVABLES
Receivables as of June 30, 2013 consisted of accounts, intergovernmental, grants and
miscellaneous. All receivables are considered collectible in full. A summary of the principal
items of intergovernmental receivables are as follows:
General
Special
Revenue
Food
Service
Total
Receivables:
Accounts $2,485,311 $2,442,467 $183,249 $5,111,027
Gross Receivables $2,485,311 $2,442,467 $183,249 $5,111,027
14. SUBSEQUENT EVENTS
The school has evaluated subsequent events occurring after the balance sheet through the date
of September 20, 2013, which is the date the financial statements were available to be issued.
Based on this evaluation, the school has determined no subsequent events require disclosure in
the financial statements.
TEAM ACADEMY CHARTER SCHOOL
Notes to the Basic Financial Statements
Year Ended June 30, 2013
50
15. RELATED PARTY
Friends of TEAM Academy Charter School (FOT), a non-profit entity which was formed to
support TEAM Academy Charter School, is the landlord of 5 facilities leased by TEAM
Academy Charter School. In the opinion of the management, the rental payments under the
leases approximate market rent.
REQUIRED SUPPLEMENTARY INFORMATION
PART II
BUDGETARY COMPARISON SCHEDULES
51
Exhibit C-1
Original Budget Final Variance
Budget Transfers Budget Actual Final to Actual
REVENUES:
Local Sources:
Local Share 7,195,947$ (2,048,942)$ 5,147,005$ 3,788,611$ 1,358,394
State Share 22,653,201 34,799 22,688,000$ 23,916,723 (1,228,723)
Other Restricted Miscellaneous Revenues - - -$ -
Miscellaneous 1,687,229 (296,128) 1,391,101 1,821,397 (430,296)
Total - Local Sources 31,536,377 (2,310,271) 29,226,106 29,526,731 (300,625)
Categorical Aid
Extraordinary Aid 133,863 - 133,863 133,839 24
Special Education Aid - 939,465 939,465 939,465 -
Security Aid - 836,836 836,836 836,836
Demonstrably Effective - - - - -
Non-Public Aid - 239,344 239,344 239,344 -
TPAF Pension (On-Behalf - Non-Budgeted) - - 892,582 (892,582)
TPAF Social Security (Reimbursed - Non-Budgeted) - - 1,321,862 (1,321,862)
Total State Sources 133,863 2,015,645 2,149,508 4,363,928 (2,214,420)
Federal Sources:
Impact Aid
Medical Assistance Program
Total - Federal Sources
Total Revenues 31,670,240 (294,626) 31,375,614 33,890,659 (2,515,045)
EXPENDITURES:
Current Expense:
Regular Programs - Instruction
Teachers Salary 10,494,432$ (564,684) 9,929,748 9,843,765 85,983
Other Salaries 1,211,368 (379,673) 831,695 821,693 10,002
Prof/Tech Services 65,000 (38,338) 26,662 12,054 14,608
General Supplies 1,793,904 (502,205) 1,291,699 1,108,330 183,369
Textbooks 319,500 (24,635) 294,865 222,253 72,612
Other Objects 1,033,071 (451,242) 581,829 415,259 166,570
TOTAL REGULAR PROGRAMS - INSTRUCTION 14,917,275 (1,960,777) 12,956,498 12,423,354 533,144
TEAM ACADEMY CHARTER SCHOOL
Budgetary Comparison Schedule
General Fund
For The Year Ended June 30, 2013
52
Exhibit C-1
Page 2
Original Budget Final Variance
Budget Transfers Budget Actual Final to Actual
Support Services - General Administrative
Salaries of Administative Salaries 5,016,455 (517,089) 4,499,366 4,416,830 82,536
Salaries of Secretarial and Clerical Assistants 391,286 48,155 439,441 438,958 483
Cost of Benefits 3,602,926 (382,523) 3,220,403 2,908,542 311,861
Other Purchased Services - - - -
Purchased Professional and Technical Services 306,258 21,046 327,304 326,839 465
Communications/Telephone 358,466 57,097 415,563 399,135 16,428
Supplies and Materials 336,249 (2,129) 334,120 293,078 41,042
Other Objects 183,877 807,644 991,521 334,366 657,155
10,195,517 32,201 10,227,718 9,117,748 1,109,970
Support Services - School Admin/Operation Plant Services
Salaries 2,911,111 (328,535) 2,582,576 2,581,633 943
Purchased Professional and Technical Services 507,659 279,842 787,501 766,842 20,659
Other Purchased Services 557,700 (125,445) 432,255 414,249 18,006
Rental of Land and Building- other than Lease Purchase Agreements 2,929,790 (381,221) 2,548,569 2,320,340 228,229
Insurance 96,833 11,333 108,166 107,102 1,064
General Supplies 130,034 27,531 157,565 137,407 20,158
Transportation 40,000 132,004 172,004 57,165 114,839
Energy (Energy and Electricity) 322,000 11,122 333,122 290,539 42,583
Other Objects 88,500 11,772 100,272 82,736 17,536
Total Undist. Expend. - Other Oper. & Maint. Of Plant 7,583,627 (361,597) 7,222,030 6,758,013 464,017
Food Service
Board Subsudy - - -
Other Purchsed Services - -
Total Food Services - - -
On-behalf TPAF pension Contributions (non-budgeted) 892,582 (892,582)
Reimbursed TPAF Social Security Contributions (non-budgeted) 1,321,862 (1,321,862)
TOTAL ON-BEHALF CONTRIBUTIONS - - 2,214,444 (2,214,444)
TOTAL UNDISTRIBUTED EXPENDITURES
17,779,144 (329,396) 17,449,748 18,090,205 (640,457)
TOTAL GENERAL CURRENT EXPENSE 32,696,419 (2,290,173) 30,406,246 30,513,559 (107,313)
For The Year Ended June 30, 2013
TEAM ACADEMY CHARTER SCHOOL
Budgetary Comparison Schedule
General Fund
53
Exhibit C-1
Page 3
Original Budget Final Variance
Budget Transfers Budget Actual Final to Actual
CAPITAL OUTLAY
Equipment
Regular Programs - Instruction:
Instructional Equipment 762,339 (407,416) 354,923 9,320 345,603
Non-Instructional Equipment - - - - -
Miscellaneous 821,622 (207,177) 614,445 685,027 (70,582)
Total Equipment 1,583,961 (614,593) 969,368 694,347 275,021
TOTAL EXPENDITURES- GENERAL FUND 34,280,380 (2,904,766) 31,375,614 31,207,906 167,708
Excess (Deficiency) of Revenues
Over (Under) Expenditures (2,610,140) 2,610,140 - 2,682,753 (2,682,753)
-
Other Financing Sources:
Operating Transfer In: 2,610,140 (2,610,140) - - -
Total Other Financing Sources: 2,610,140 (2,610,140) - - -
Excess (Deficiency) of Revenues and Other Financing Sources
Over (Under) Expenditures and Other Financing Sources (Uses) - - - 2,682,753 (2,682,753)
Fund Balance, July 1 - - 4,248,784 4,248,784
Fund Balance, June 30 -$ -$ 4,248,784$ 6,931,537$ (2,682,753)$
General Fund
For The Year Ended June 30, 2013
TEAM ACADEMY CHARTER SCHOOL
Budgetary Comparison Schedule
54
Exhibit C-2
Page 1
Original Budget Final Variance
Budget Transfers Budget Actual Final to Actual
REVENUES:
Local Sources 2,600,985$ 2,600,985$ 2,600,985$
State Sources - -
Federal Sources 2,158,236 2,158,236 2,158,236
Total Revenues 4,759,221 4,759,221 4,759,221
EXPENDITURES:
Instruction
Salaries of Teachers 968,378 968,378 968,378
Other Salaries for Instruction 40,583 40,583 40,583
Purchased Professional Services - -
Purchased Professional and Technical Services - -
Travel - -
Transportstion - -
General Supplies 530,969 530,969 530,969
Personal Services- Employee Benefits 128,620 128,620 128,620
Textbooks 174,664 174,664 174,664
Miscellaneous expnse 521,059 521,059 521,059
Total Instruction 2,364,273 2,364,273 2,364,273
Support Services
Salaries of Supervisor of Instruction 937,828 937,828 937,828
Salaries of Social Worker 15,667 15,667 15,667
Salaries of Clerical 30,000 30,000 30,000
Salaries of Secretaries & Clerical Assistants - - -
Purchased Prof and Tech Service 250,195 250,195 250,195
Personal Services - Employee Benefits - -
Professional Development - -
Supplies and Materials 56,279 56,279 56,279
Professional Development 154,518 154,518 154,518
School Transportation 522,849 522,849 522,849
School Transportation - - -
Personal services-Benefits 55,374 55,374 55,374
Travel - -
Miscellaneous Expenses 222,464 222,464 222,464
Capital Outlay 149,774 - -
Total Support Services 2,394,948 2,394,948 2,394,948
(Unaudited)
For the Fiscal Year Ended June 30, 2013
TEAM ACADEMY CHARTER SCHOOL
Budgetary Comparison Schedule
Special Revenue Fund
55
Exhibit C-2
Page 2
Original Budget Final Variance
Budget Transfers Budget Actual Final to Actual
Buildings Improvements
Instructional Equipment
Noninstructional Equipment
Total Facilities Acquisition and Construction Services
Transfer to Charter School
Total Expenditures 4,759,221 4,759,221 4,759,221
Other Financing Sources (Uses)
Transfer in from General Fund
Transfer Out to Whole School Reform (General Fund)
Total Other Financing Sources (Uses)
Total Outflows
Excess (Deficiency) of Revenues Over (Under)
Expenditures and Other Financing Sources (Uses)
(Unaudited)
Special Revenue Fund
For the Fiscal Year Ended June 30, 2013
TEAM ACADEMY CHARTER SCHOOL
Budgetary Comparison Schedule
NOTES TO REQUIRED SUPPLEMENTARY
INFORMATION
56
Exhibit C-3
GASB G-3
Note A - Explanation of Differences between Budgetary Inflows and Outflows and
GAAP Revenues and Expenditures
The general fund budget and the special revenue budget basis are GAAP, therefore no reconciliation is required
For the Fiscal Year Ended June 30, 2013
TEAM ACADEMY CHARTER SCHOOL
Required Supplementary Information
Budgetary Comparison Schedule
Note to RSI
(Unaudited)
SPECIAL REVENUE FUND
Special Revenue Funds are used to account for the proceeds of special revenue resources
(other than expendable trusts or major capital projects) that are legally restricted to
expenditures for specific purposes.
57
Exhibit E-1
TITLE TITLE CSP JUDY & JOSH FRIENDS RACE TO TOTAL
TITLE TITLE IIA VI CSP GRANT DISSEMINATION WESTON OF THE Exhibit
TOTAL I c/o IDEA SEEK THRIVE GRANT FUND TEAM TOP E-1, Pg. 2
REVENUES
Intergovernmental
State
Federal 2,600,985 1,168,038 272,445 2,299 357,938 116,619 277,211 126,685 27,945 251,805
Other Sources
Miscellaneous 2,158,236 250,000 227,783 1,680,453
Total Revenues 4,759,221 1,168,038 272,445 2,299 357,938 116,619 277,211 126,685 250,000 227,783 27,945 1,932,258
EXPENDITURES
Instruction
Salaries 968,378 508,683 188,024 80,949 32,449 51,578 27,945 78,750
Other Salaries 40,583 15,583 25,000
Personal Services 0
Purchased Prof. and Tech. Services 0 0
General Supplies 530,969 366,073 1,715 58,713 104,468
Textbooks 128,620 56,011 41,942 30,667
Personal Services - Employee Benefits 174,664 97,327 47,146 30,191 0
Miscellaneous Expense 521,059 0 284 250,000 13,135 257,640
Total Instruction 2,364,273 972,083 235,170 0 112,855 88,460 168,100 0 250,000 13,135 27,945 496,525
Support Services
Salaries of Supervisors of Instruction 937,828 120,401 20,725 64,902 18,438 18,302 42,000 653,060
Salaries of Social Worker 15,667 15,667
Salaries Clerical 30,000 30,000
Other Purchased Services 0 0
Professional Development 0 0
Family Programming 0
Supplies and Materials 56,279 23,920 2,299 146 17,255 9,362 3,297
Professional development 154,518 51,634 16,550 9,721 14,318 62,295
Purchased Prof. and Tech. Services 250,195 180,035 8,850 40,637 20,673
School Transportation 522,849 522,849
Furniture and Fixtures 0 0
Personal Services - Employee Benefits 55,374 4,178 14,653 36,543
Miscellanoeus Expenses 222,464 159,358 63,106
Capital Outlay 149,774 13,569 136,205
Total Support Services 2,394,948 195,955 37,275 2,299 245,083 28,159 109,111 126,685 0 214,648 0 1,435,733
TOTAL EXPENDITURES 4,759,221 1,168,038 272,445 2,299 357,938 116,619 277,211 126,685 250,000 227,783 27,945 1,932,258
Exhibit E-1
NCLB 2013
TEAM ACADEMY CHARTER SCHOOL
For the Year Ended June 30, 2013
Combining Schedule of Revenues and Expenditures- Budgetary Basis
Special Revenue Fund
58
FIDELITY LOUIS PJ JOHN MCI MORGRIDGE CUMMINGS TOTAL
BROKERAGE CALDER AWARD DARLENE VICTORIA AMELIOR FAMILY MEMORIAL Exhibit
TOTAL SERVICES FOUNDATION GRANT REID-DODICK FOUNDATON FOUNDATION FOUNDATION FUND E-1, Pg. 3
REVENUES
Intergovernmental
State
Federal 251,805 251,805
Other Sources
Miscellaneous 1,680,453 10,000 153,865 4,000 20,000 40,000 75,000 9,684 50,000 1,317,904
Total Revenues 1,932,258 10,000 153,865 4,000 20,000 40,000 75,000 9,684 50,000 1,569,709
EXPENDITURES
Instruction
Salaries 78,750 28,750 50,000 0
Other Salaries 25,000 25,000
Transportation 0
Personal Services 0
Purchased Prof. and Tech. Services 0
General Supplies 104,468 20,000 9,684 74,784
Textbooks 30,667 29,058 1,609
Personal Services - Employee Benefits 0 0
Miscellaneous Expenses 257,640 0 257,640
Total Instruction 496,525 0 57,808 0 20,000 0 0 9,684 50,000 359,033
Support Services
Salaries of Supervisors of Instruction 653,060 71,750 581,310
Salaries of Social Worker 0
Salaries of Clerical 0
Other Purchased Services 0 0
Professional Development 0 0
Family programming 0
Supplies and Materials 3,297 3,297
Scholarships 0
Purchased Prof. and Tech. Services 20,673 11,000 9,673
School Transportation 522,849 522,849
Furniture and Fixtures 0 0
Personal Services - Employee Benefits 36,543 36,543
Miscellaneous Expenses 63,106 10,000 13,307 4,000 35,799
Capital Outlay 136,205 40,000 75,000 21,205
Total Support Services 1,435,733 10,000 96,057 4,000 0 40,000 75,000 0 0 1,210,676
TOTAL EXPENDITURES 1,932,258 10,000 153,865 4,000 20,000 40,000 75,000 9,684 50,000 1,569,709
TEAM ACADEMY CHARTER SCHOOL
Special Revenue Fund
Combining Schedule of Revenues and Expenditures- Budgetary Basis
For the Year Ended June 30, 2013
Exhibit E-1 - Pg. 2
59
CHARLES CHARLES CAUSEVOX DUNNS WALTON INVESTING ITT TOTAL
HAYDEN HAYDEN CAMPAIGN CITYBRIDEGE FAMILY GOLDMAN FAMILY INVESTING EDUCAITONAL Exhibit
TOTAL FOUNDATION (2) FOUNDATION PROJECTS FOUNDATION FOUNDATION SACHS FOUNDATION INNOVATION SERVICES E-1, Pg. 4
REVENUES
Intergovernmental
State
Federal 251,805 251,805
Other Sources
Miscellaneous 1,317,904 289,960 25,230 1,609 3,500 250,000 25,000 141,272 232,889 348,444
Total Revenues 1,569,709 289,960 25,230 1,609 3,500 250,000 25,000 141,272 251,805 232,889 348,444
EXPENDITURES
Instruction
Salaries 0
Other Salaries 25,000 25,000
Transportation 0
Personal Services 0
Purchased Prof. and Tech. Services 0
General Supplies 74,784 22,347 52,437
Textbooks 1,609 1,609
Personal Services - Employee Benefits 0
Miscellaneous Expenses 257,640 250,000 7,640
Total Instruction 359,033 0 0 1,609 0 250,000 25,000 22,347 0 0 60,077
Support Services
Salaries of Supervisors of Instruction 581,310 22,950 90,700 251,805 215,855
Salaries of Social Worker
Salaries Clerical 0
Other Purchased Services 0 0
Professional Development 0
Rent
Supplies and Materials 3,297 3,297 0
Scholarships 0
Purchased Prof. and Tech. Services 9,673 9,673
School Transportation 522,849 289,960 232,889
Furniture and Fixtures 0 0
Personal Services - Employee Benefits 36,543 2,280 34,263
Miscellaneous Expenses 35,799 3,500 24,928 7,371
Capital Outlay 21,205 21,205
Total Support Services 1,210,676 289,960 25,230 0 3,500 0 0 118,925 251,805 232,889 288,367
TOTAL EXPENDITURES 1,569,709 289,960 25,230 1,609 3,500 250,000 25,000 141,272 251,805 232,889 348,444
TEAM ACADEMY CHARTER SCHOOL
Special Revenue Fund
Combining Schedule of Revenues and Expenditures- Budgetary Basis
For the Year Ended June 30, 2013
Exhibit E-1 - Page 3
60
HYDE AND NJ KIPP GATES BTC PETER NEWMANS DULLY
WATSON SCHOOL COOPER FOUNDATION TECHNOLGY JENNINGS OWN AND
TOTAL FOUNDATION BOARDS NORCROSS GRANT GRANT FOUNDATION FOUNDATION BOROWIEC
REVENUES
Intergovernmental
State
Federal
Other Sources
Miscellaneous 348,444 15,000 6,205 254,243 43,378 9,059 9,673 7,640 3,246
Total Revenues 348,444 15,000 6,205 254,243 43,378 9,059 9,673 7,640 3,246
EXPENDITURES
Instruction
Salaries 0
Other Salaries 0
Transportation 0
Personal Services 0
Purchased Prof. and Tech. Services 0
General Supplies 52,437 43,378 9,059
Textbooks 0
Personal Services - Employee Benefits 0
Miscellaneous Expenses 7,640 7,640
Total Instruction 60,077 0 0 0 43,378 9,059 0 7,640 0
Support Services
Salaries of Supervisors of Instruction 215,855 215,855
Salaries of Social Worker 0
Salaries of Clerical 0
Other Purchased Services 0
Professional Development 0
Rent 0
Supplies and Materials 0
Scholarships 0
Purchased Prof. and Tech. Services 9,673 9,673
School Transportation 0
Furniture and Fixtures 0
Personal Services - Employee Benefits 34,263 34,263
Miscellaneous Expenses 7,371 4,125 3,246
Capital Outlay 21,205 15,000 6,205
Total Support Services 288,367 15,000 6,205 254,243 0 0 9,673 0 3,246
TOTAL EXPENDITURES 348,444 15,000 6,205 254,243 43,378 9,059 9,673 7,640 3,246
For the Year Ended June 30, 2013
Combining Schedule of Revenues and Expenditures- Budgetary Basis
Special Revenue Fund
TEAM ACADEMY CHARTER SCHOOL
Exhibit E-1 - Page 4
PROPRIETARY FUNDS
ENTERPRISE FUND
Enterprise Funds are used to account for operations that are financed and operated in a
manner similar to private business enterprises where the intent is that the cost of
providing goods and services be financed through user charges or where the board has
decided that periodical determination of revenues earned, expenses incurred, and/or net
income is appropriate for capital maintenance, public policy, management control,
accountability or other purposes.
Food Service Fund - The fund provides for the operation of food services in all schools.
61
Exhibit G-1
Business- Type Activities
Enterprise Fund
ASSETS Food Services
Current Assets
Cash
Intergovernmental Receivable
Federal
State 181,348
Accounts Receivable 1,901
Inventory
Total Current Assets 183,249
Equipment
Accumulated Depreciation
Fixed Assets (Net of Accumulated Depreciation)
Total Assets 183,249
LIABILITIES
Current Liabilities
Cash Overdraft $124,215
Accounts Payable 59,034
Total Current Liabilities 183,249
Net Assets
Unrestricted 0
Invested in capital assets net of related debt
Total Net Assets $0
TEAM ACADEMY CHARTER SCHOOL
Statement of Net Position
For the Fiscal Year Ended June 30, 2013
62
Exhibit G-2
Business-Type Activities
Enterprise Fund
OPERATING REVENUES Food Services
Local Sources
Daily Sales - Reimbursable Programs
Special Lunch and Breakfast Program $81,181
Special Functions
Total Operating Revenues 81,181
OPERATING EXPENSES
Salaries, wages and employee benefits 74,267
Supplies, Materials & Other 1,167,639
Professional Fee
Depreciation
Cost of Sales
Total Operating Expenses 1,241,906
Income (Loss) From Operations 1,160,725
Nonoperating Revenues
State Sources
State Sources 12,497
Federal Sources
School Breakfast Program 201,146
National School Lunch Program 608,423
U.S. D.A. CommoditiesAfter School Snack 173,261
Private Grants 165,398
Total Nonoperating Revenues 1,160,725
Net Income (Loss) 0
Total Net Assets- Beginning of Year 0
Total Net Assets- End of Year $0
TEAM ACADEMY CHARTER SCHOOL
Statement of Revenues, Expenses, and Changes in Fund Net Position
Proprietary Fund
For the Fiscal Year Ended June 30, 2013
63
Exhibit G-3
2013
Cash flows from operating activities
Private Contributions $165,398
Cash Received from Customers 83,756
Cash Payments to Suppliers for Goods and Services (1,243,869)
Net Cash (Used) by Operating Activities (994,715)
Cash Flows from Noncapital Financing Activities
Cash Received from General Fund Transfer (Contribution)
Cash Received from State and Federal Subsidy Reimbursements 1,009,953
Net Cash Provided by Noncapital Financing Activities 1,009,953
Cash Flows from Investing Activities
Net Cash Provided by Investing Activities
Net Increase in Cash and Cash Equivalents 15,238
Cash and Cash Equivalents, Beginning of Year (139,248)
Cash and Cash Equivalents, End of Year ($124,010)
Reconcilliation of Operating (Loss) to Net Cash
Used by Operating Activities
Operating (Loss) $0
Adjustments to Reconcile Operating (Loss) to
Net Cash Used by Operating Activities
Depreciation
Increase in Accounts Receivable 17,201
USDA Commodities
Change in Assets and Liabilities
Increase/(Decrease) in Accounts Payable (1,963)
Increase/(Decrease) in Deferred Revenue
Increase/(Decrease) in Compensated Absences
Increase/(Decrease) in Inventory
Total Adjustment 15,238
Net Cash Used by Operating Activities $15,238
TEAM ACADEMY CHARTER SCHOOL
Statements of Cash Flows
For the Fiscal Years Ended June 30, 2013
FIDUCIARY FUNDS
64
Exhibit H-1
TEAM ACADEMY CHARTER SCHOOL
Combining Statement of Agency Fund Net Position
Fiduciary Funds
As of June 30, 2013
Payroll Payroll Flex
Agency Account Spending TOTAL
ASSETS
Cash $137,496 $0 $39,617 $177,113
Total Assets $137,496 $0 $39,617 $177,113
LIABILITIES AND FUND BALANCES
Liabilities
Intergovernmental Payble - State
Payroll Deductions and Withholdings 137,496 0 39,617 177,113
Accrued Salaries and Wages
Due to Student Groups
Total Liabilities 137,496 0 39,617 177,113
Fund Balances
Reserve For Unemploy. Trust Fund
Total Fund Balances
Total Liabilities and Fund Balances $0 $0 $0 $0
65
Exhibit H-2
TEAM ACADEMY CHARTER SCHOOL
Nonexpendable Trust Fund
Combining Statement of Agency Fund Net Position
Fiduciary Funds
As of June 30, 2013
NOT APPLICABLE
66
Exhibit H-3
NOT APPLICABLE
TEAM ACADEMY CHARTER SCHOOL
Fiduciary Funds
For the Year Ended June 30, 2013
Student Activity Agency Fund
Schedule of Receipts and Disbursements
67
Exhibit H-4
TEAM ACADEMY CHARTER SCHOOL
Payroll Agency Fund
Schedule of Receipts and Disbursements
Fiduciary Funds
For the Year Ended June 30, 2013
Balance Balance
July 1, 2012 Additions Deletions June 30, 2013
ASSETS
Cash and Cash Equivalents $22,863,588 $22,863,588
Total Assets 22,863,588 22,863,588
LIABILITIES
Payroll Deductions and Withholdings 9,214,937 9,214,937
Accrued Salaries and Wages 13,648,651 13,648,651
Total Liabilities $22,863,588 $22,863,588
68
Exhibit H-5
TEAM ACADEMY CHARTER SCHOOL
Unemployment Compensation Insurance Trust Fund
Statement of Receipts and Disbursements
Fiduciary Funds
For the Year Ended June 30, 2013
NOT APPLICABLE
FINANCIAL TRENDS
69
Exhibit J-1
2013 2012 2011 2010 2009 2008
Governmental activities
Invested in capital assets, net of related debt 2,228,122$ 1,546,213$ 870,255$ 426,734$ 436,902$ 395,409$
Restricted
Unrestricted 6,931,537 4,248,784 2,355,554 1,534,898 1,733,406 647,280
Total governmental activities net assets 9,159,659$ 5,794,997$ 3,225,809$ 1,961,632$ 2,170,308$ 1,042,689$
Business-type activities
Invested in capital assets, net of related debt
Restricted
Unrestricted
Total business-type activities net assets
School-wide
Invested in capital assets, net of related debt 2,228,122$ 1,546,213$ 870,255$ 426,734$ 436,902$ 395,409$
Restricted
Unrestricted 6,931,537 4,248,784 2,355,554 1,534,898 1,733,406 647,280
Total school net assets 9,159,659$ 5,794,997$ 3,225,809$ 1,961,632$ 2,170,308$ 1,042,689$
FOR THE FISCAL YEARS ENDED JUNE 30, 2013
NET ASSETS BY COMPONENT
TEAM ACADEMY CHARTER SCHOOL
(Unaudited)
70
Exhibit J-2
2013 2012 2011 2010 2009 2008
Expenses
Governmental activities
Instruction
Regular $14,787,627 $12,636,140 $10,809,131 $8,682,919 $5,268,078 $4,010,599
Support Services:
General administration 11,512,696 8,491,199 7,406,276 5,865,142 3,984,681 1,834,507
School Administrative Services 6,758,013 5,192,475 4,646,565 3,582,598 2,269,747 1,965,653
On-behalf TPAF Social Securituy 2,214,444 1,346,536 681,572 496,064 331,137 205,010
Capital outlay 694,347 767,942 409,340 44,274 88,828 83,898
Unallocated depreciation 152,892 91,984 70,280 54,442 47,335 34,583
Total governmental activities expenses 36,120,019 28,526,276 24,023,164 18,725,439 11,989,806 8,134,250
Business-type activities:
Food service 1,241,906 1,055,713 927,554 781,029 541,003 388,724
Child Care - - - - - -
Total business-type activities expense 1,241,906 1,055,713 927,554 781,029 541,003 388,724
Total school expenses $37,361,925 $29,581,989 $24,950,718 $19,506,468 $12,530,809 $8,522,974
Program Revenues
Governmental activities:
Charges for services:
Instruction (tuition) $0 $0 $0 $0 $0 $0
Pupil transportation - - - - - -
Central and other support services - - - - - -
Operating grants and contributions 4,759,221 3,875,353 3,817,944 2,113,290 1,451,715 1,597,631
Capital grants and contributions - - - - - -
Total governmental activities program revenues 4,759,221 3,875,353 3,817,944 2,113,290 1,451,715 1,597,631
Business-type activities:
Charges for services
Food service 1,241,906 1,055,713 927,554 781,029 541,003 388,724
Child care - - - - - -
Operating grants and contributions - - - - - -
Capital grants and contributions - - - - - -
Total business type activities program revenues 1,241,906 1,055,713 927,554 781,029 541,003 388,724
Total school program revenues $6,001,127 $4,931,066 $4,745,498 $2,894,319 $1,992,718 $1,986,355
Net (Expense)/Revenue
Governmental activities ($31,360,798) ($24,650,923) ($20,205,220) ($16,612,149) ($10,538,091) ($6,536,619)
Business-type activities - - - - - -
Total school-wide net expense ($31,360,798) ($24,650,923) ($20,205,220) ($16,612,149) ($10,538,091) ($6,536,619)
TEAM ACADEMY CHARTER SCHOOL
FOR THE FISCAL YEARS ENDED JUNE 30, 2013
CHANGES IN NET ASSETS
(Unaudited)
71
Exhibit J-2
Page 2
2013 2012 2011 2010 2009 2008
Governmental activities:
Local share $3,788,611 $3,010,932 $2,536,038 $1,978,975 $1,404,703 $1,559,685
State Share 23,916,723 20,931,755 15,485,572 12,682,970 8,638,026 3,804,599
State aid 4,363,928 1,714,855 2,102,735 1,289,871 1,211,373 1,311,556
Miscellaneous income 1,821,397 794,627 831,251 407,383 322,780 331,023
Increase in Net Capital Outlay 834,801 767,942 513,801 44,274 88,828 206,369
Investment earnings -
Miscellaneous income -
Transfers -
Total governmental activities 34,725,460 27,220,111 21,469,397 16,403,473 11,665,710 7,213,232
Business-type activities:
Investment earnings -
Transfers -
Total business-type activities -
Total school-wide $34,725,460 $27,220,111 $21,469,397 $16,403,473 $11,665,710 $7,213,232
Change in Net Assets
Governmental activities $3,364,662 $2,569,188 $1,264,177 ($208,676) $1,127,619 $676,613
Business-type activities -
Total school $3,364,662 $2,569,188 $1,264,177 ($208,676) $1,127,619 $676,613
General Revenues and Other Changes in Net Assets
TEAM ACADEMY CHARTER SCHOOL
CHANGES IN NET ASSETS
FOR THE FISCAL YEARS ENDED JUNE 30, 2013
(Unaudited)
72
Exhibit J-2A
Payroll
Special Enterprise and Payroll Total
General Revenue Food Service Agency Governmental
Fund Fund Fund Fund Funds
ASSETS
Cash and cash equivalents 8,315,981$ (1,344,776)$ (124,010)$ 177,112$ 7,024,307$
Investments
Receivables, net 2,485,311 2,442,467 183,249 5,111,027
Security Deposit 12,118 12,118
Restricted cash and cash equivalents
Total assets 10,813,410$ 1,097,691$ 59,239$ 177,112$ 12,147,452$
LIABILITIES AND FUND BALANCES
Liabilities:
Cash Overdraft -
Accrued expense - - 0
Accounts payable 2,036,205 758,460 59,239 2,853,904
Due to Newark Board of Ed. 1,845,668 1,845,668
Payroll and pension withholdings payable 177,112 177,112
Payable to federal government - 0
Payable to state government -
Deferred revenue - 339,231 339,231
Total liabilities 3,881,873 1,097,691 59,239 177,112 5,215,915
Fund Balances:
Reserved for:
Encumbrances
Legally restricted -- unexpended
additional spending proposal
Legally restricted -- designated for
subsequent year's expenditures
Capital reserve account
Excess surplus
Excess surplus -- designated for
Subsequent year's expenditures
Other purposes
Unreserved, reported in:
General fund 6,931,537 6,931,537
Capital projects fund - -
Permanent fund
Total Fund balances 6,931,537 6,931,537
Total liabilities and fund balances 10,813,410$ 1,097,691$ 59,239$
TEAM ACADEMY CHARTER SCHOOL Combined Balance Sheet
Governmental FundsJune 30, 2013(Unaudited)
73
Exhibit J-2B
Special Enterprise Total
General Revenue Fund Governmental
Fund Fund Food Service Funds
REVENUES
Local sources:
Local share 3,788,611$ 3,788,611$
State Share 23,916,723 12,497 23,929,220$
Private Funding 165,398 165,398$
Miscellaneous 1,821,397 2,158,236 81,181 4,060,814$
Total - Local Sources 29,526,731 2,158,236 259,076 31,944,043
State sources 4,363,928 - 4,363,928
Federal sources 2,600,985 982,830 3,583,815$
Total revenues 33,890,659 4,759,221 1,241,906 39,891,786
EXPENDITURES
Current:
Regular instruction 12,423,354$ 2,364,273$ 14,787,627$
Support services- General Administrative 9,117,748 2,394,948 11,512,696
Support Services- School Admin/ operations plant serv 6,758,013 1,241,906 7,999,919
On-behalf TPAF Social Security and Pension 2,214,444 2,214,444
Capital outlay 694,347 694,347
Other Disbursements -
Total expenditures 31,207,906 4,759,221 1,241,906 37,209,033
Excess (Deficiency) of revenues
over expenditures 2,682,753 - - 2,682,753
OTHER FINANCING SOURCES (USES)
Transfers in -
Transfers out -
Total other financing sources and uses ---
SPECIAL ITEM
Net change in fund balances
Fund balance—July 1 4,248,784 4,248,784 Fund balance—June 30 6,931,537$ 6,931,537$
TEAM ACADEMY CHARTER SCHOOL
Combined Statement of Revenues, Expenditures, And Changes in Fund Balances
Governmental Funds
For the Year Ended June 30, 2013
Unaudited
74
Exhibit J- 2C
Special Enterprise Payroll and Total
General Revenue Fund Payroll Governmental
CASH FLOWS FROM OPERATING ACTIVITIES Fund Fund Food Service Agency Funds
Increase in Fund Balance 2,682,753$ -- -$ -$ 2,682,753$
net cash provided by operating activities
Depreciation --- --- --- --- ---
Accounts Receivable (1,711,060) (1,649,327) 17,201 - (3,343,186)
Increase (Decrease) in Current Liabilities -
Accounts Payble 493,951 571,515 (1,963) 33,162 1,096,665
Deferred Revenue - - - - -
Due to the Newark Board Education 1,586,469 173,938 - - 1,760,407
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,052,113$ (903,874)$ 15,238$ 33,162$ 2,196,639$
CASH FLOWS FROM INVESTING ACTIVITIES
NET CASH USED BY INVESTING ACTIVITIES -- -- -- -- --
CASH FLOWS FROM FINANCING ACTIVITIES
NET CASH FROM FINANCING ACTIVITIES -- -- -- -- --
TOTAL INCREASE IN CASH
AND CASH EQUIVALENTS 3,052,113$ (903,874)$ 15,238$ 33,162$ 2,196,639$
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 5,263,868 (440,902) (139,248) 143,950 4,827,668
CASH AND CASH EQUIVALENTS - ENDING OF YEAR 8,315,981$ (1,344,776)$ (124,010)$ 177,112$ 7,024,307$
(Increase) Decrease in Current Assets
Adjustments to reconcile increase in unrestricted net assets to
TEAM ACADEMY CHARTER SCHOOL
STATEMENT OF CASH FLOW
GOVERNMENTAL FUNDS
FOR THE YEAR ENDED JUNE 30, 2013
(Unaudited)
75
EXHIBIT J-3
2013 2012 2011 2010 2009 2008
General Fund
Reserved
Unreserved $6,931,537 $4,248,784 $2,355,554 $1,534,898 $1,733,406 $647,280
Total general fund $6,931,537 $4,248,784 $2,355,554 $1,534,898 $1,733,406 $647,280
All Other Governmental Funds
Reserved
Unreserved, reported in:
Special revenue fund
Capital projects fund
Debt service fund
Permanent fund
Total all other governmental funds -- -- -- -- -- --
FOR THE FISCAL YEARS ENDED JUNE 30
FUND BALANCES - GOVERNMENTAL FUNDS
TEAM ACADEMY CHARTER SCHOOL
(Unaudited)
76
Exhibit J-4
2013 2012 2011 2010 2009 2008
Revenues
Local tax Levy 3,788,611$ 3,010,932$ 2,536,038$ 1,978,975$ 1,404,703$ 1,559,685$
Other local revenue 4,231,938 2,803,425 2,862,853 1,314,771 926,780 1,472,323
State sources 28,280,651 22,646,610 17,588,307 13,972,841 9,849,399 5,116,155
Federal sources 2,349,180 1,866,545 1,786,342 1,205,902 847,715 456,331
Total revenue 38,650,380 30,327,512 24,773,540 18,472,489 13,028,597 8,604,494
Expenditures
Instruction
Regular Instruction 12,423,354 10,197,999 8,596,106 7,236,190 4,475,236 2,944,997
Support Services:
General administration 9,117,748 7,053,987 5,801,357 5,198,581 3,325,808 1,302,478
School administrative services/Plant 6,758,013 5,192,475 4,646,565 3,582,598 2,269,747 1,965,653
TPAF Social Security 2,214,444 1,346,536 681,572 496,064 331,137 205,010
Food Service
Capital outlay 694,347 767,942 409,340 44,274 88,828 83,898
Debt service:
Principal - - - - - -
Interest and other charges - - - - - -
Special Revenue 4,759,721 3,875,343 3,817,944 2,113,290 1,451,715 1,597,631
Total expenditures 35,967,627 28,434,282 23,952,884 18,670,997 11,942,471 8,099,667
Excess (Deficiency) of revenues
over (under) expenditures 2,682,753 1,893,230 820,656 (198,508) 1,086,126 504,827
Other Financing sources (uses)
Proceeds from borrowing - - - - - -
Capital leases (non-budgeted) - - - - - -
Proceeds from refunding - - - - - -
Payments to escrow agent - - - - - -
Transfers in - - 788,333
Transfers out - - (788,333)
Total other financing sources (uses) - - - - - -
Net change in fund balances 2,682,753$ 1,893,230$ 820,656$ (198,508)$ 1,086,126$ 504,827$
Debt service as a percentage of
noncapital expenditures 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Source: School records
FOR THE FISCAL YEARS ENDED JUNE 30
CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS
TEAM ACADEMY CHARTER SCHOOL
(Unaudited)
REVENUE CAPACITY
77
Exhibit J-5
Private Grant E-Rate Other Local Annual Totals
Fiscal Year
Ending June 30,
2008 331,023 331,023
2009 452,714 452,714
2010 407,383 407,383
2011 831,251 831,251
2012 794,627 794,627
2013 55635 1,427,459 338,531 1,821,625
Source: School records
TEAM ACADEMY CHARTER SCHOOL
General Fund - Other Local Revenue By Source
For the Year Ended June 30, 2013
(Unaudited)
78
Exhibit J-6
NOT APPLICABLE
TEAM ACADEMY CHARTER SCHOOL
For the Year Ended June 30, 2013
Assessed Value and Actual Value of Taxable Property
(Unaudited)
79
Exhibit J-7
(Unaudited)
NOT APPLICABLE
TEAM ACADEMY CHARTER SCHOOL
For the Year Ended June 30, 2013
Direct and Overlapping Property Tax Rates
80
Exhibit J-8
NOT APPLICABLE
TEAM ACADEMY CHARTER SCHOOL
For the Year Ended June 30, 2013
Principal Property Taxpayers
(Unaudited)
DEBT CAPACITY
81
Exhibit J-9
NOT APPLICABLE
TEAM ACADEMY CHARTER SCHOOL
For the Year Ended June 30, 2013
Property Tax Levies and Collections
(Unaudited)
82
Exhibit J-10
(Unaudited)
TEAM ACADEMY CHARTER SCHOOL
For the Year Ended June 30, 2013
Ratios of Outstanding Debt by Type
NOT APPLICABLE
83
Exhibit J-11
NOT APPLICABLE
TEAM ACADEMY CHARTER SCHOOL
For the Year Ended June 30, 2013
Ratios of Net General Bonded Debt Outstanding
(Unaudited)
84
Exhibit J-12
NOT APPLICABLE
TEAM ACADEMY CHARTER SCHOOL
For the Year Ended June 30, 2013
Direct and Overlapping Governmental Activities Debt
(Unaudited)
DEMOGRAPHIC AND ECONOMIC INFORMATION
85
Exhibit J-13
NOT APPLICABLE
TEAM ACADEMY CHARTER SCHOOL
For the Year Ended June 30, 2013
Legal Debt Margin Information
(Unaudited)
86
Exhibit J-14
County Per
Capita
Personal Personal Unemployment
Year Populationa
Incomeb
Incomec
Rated
2009 272,434 3,544,093,906 13,009 14.10%
2010 277,140 3,605,314,260 13,009 15.00%
2011 277,140 3,605,314,260 13,009 15.00%
2012 277,140 3,605,314,260 13,009 15.00%
Source: a Population information provided by the NJ Dept of Labor and Workforce Development
d Unemployment data provided by the NJ Dept of Labor and Workforce Development
b Personal income has been estimated based upon the municipal population and per
c Personal capital income by municipality estimated based upon the 2000 Cesus
TEAM ACADEMY CHARTER SCHOOL
Demographic and Economic Statistics
For the Year Ended June 30, 2013
(Unaudited)
OPERATING INFORMATION
(UNAUDITED)
87
Exhibit J-15
NOT APPLICABLE
TEAM ACADEMY CHARTER SCHOOL
For the Year Ended June 30, 2013
Principal Employers
(Unaudited)
88
Exhibit J-16
2013 2012 2011 2010 2009 2008
Function/Program
Instruction
Regular 181 126 116 101 53 33
Special education 24 16 15 17 8 5
Other special education
Vocational
Other instruction
Nonpublic school programs
Adult/continuing education programs
Support Services:
Student & instruction related services 40 27 24 14 7 4
General administration 9
School administrative services 78 76 54 56 8 7
Other administrative services - -
Central services 23 18
Administrative Information Technology
Plant operations and maintenance
Pupil transportation -
Other support services -
Special Schools -
Food Service
Child Care
Total 323 245 209 197 99 67
Source: School Personnel Records
For the Years Ended June 30
Full-time Equivalent School Employees by Function/Program
TEAM ACADEMY CHARTER SCHOOL
89
Exhibit J-17
Fiscal
Year Enroll
Operating
Expenditures
Cost Per
Pupil
Percent
Change
Teaching
Staff Element.
Middle
School
Senior
High
School
Average
Daily
Enrollment
(ADE)
Average
Daily
Attendance
(ADA)
% Change in
Average
Daily
Enrollment
Student
Attendance
Percentage
2008 615 8,099,667 13,170 10.76% 38 0 32 6 615 583 34.36% 96.00%
2009 771 11,942,471 15,940 17.61% 61 0 14 10 771 740 34.36% 96.00%
2010 1,033 18,670,997 18,075 16.19% 113 10 81 22 1,033 998 33.98% 96.00%
2011 1,262 23,952,884 18,980 5.01% 121 20 65 37 1,262 1,204 22.17% 95.00%
2012 1,476 28,434,292 19,264 1.50% 142 30 73 39 1,482 1,423 17.43% 96.00%
2013 1,767 35,967,127 20,355 5.70% 205 75 73 57 1,783 1,681 20.31% 94.28%
Sources: School records
TEAM ACADEMY CHARTER SCHOOL
Operating Statistics
For the Years Ended June 30
Pupil/Teacher Staff Ratio
(Unaudited)
90
Exhibit J-18
2013 2012 2011 2010 2009 2008
School Building
School
Square Feet 260,348 227,386 116,848 121,000 83,880 83,880
Capacity (students) 2,390 2,280 1,515 1,415 850 850
Enrollment 1,767 1,476 1,262 1,033 771 615
Source: School Central Office, Facilities and Enrollment Department
TEAM ACADEMY CHARTER SCHOOL
School Building Information
For the Years Ended June 30
91
Exhibit J-19
NOT APPLICABLE
TEAM ACADEMY CHARTER SCHOOL
General Fund - Schedule of Required Maintenance By School Facility
For the Year Ended June 30, 2013
(Unaudited)
92
Exhibit J-20
Coverage Deductible
School Package Policy
Commercial Propertyneed 11,845,000$ 5,000$
Boiler and Machinery 100,000,000 5,000
General Automobile Liability 1,000,000 -
School Board Legal Liability 6,000,000 5,000
Umbrella 20,000,000 -
Workers' Compensation 2,000,000 -
Surety Bonds
School Board Legal Liability 1,000,000 N/A
Public Official Bond 50,000 N/A
Source: Charter School Records
TEAM ACADEMY CHARTER SCHOOL
Insurance Schedule
For the Year Ended June 30, 2013
(Unaudited)
SINGLE AUDIT SECTION K
93
SCOTT J. LOEFFLER CERTIFIED PUBLIC ACCOUNTANT
P. O. BOX 553 EAST HANOVER, NEW JERSEY 07936
TELEPHONE FAX
973-585-4989 973-240-7318
EXHIBIT K-1
INDEPENDENT AUDITORS’ 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
The Honorable President and
Members of the Board of Trustees
TEAM Academy Charter School
County of Essex
Newark, New Jersey
I have audited, 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 and audit requirements as prescribed by the Office of School
Finance, Department of Education, State of New Jersey, the financial statements of the governmental
activities, the business-type activities, each major fund, and the aggregate remaining fund information of
the TEAM Academy Charter School (“the Charter School”), in the County of Essex, State of New Jersey,
as of and for the year ended June 30, 2013, and the related notes to the financial statements, which
collectively comprise the Charter School’s basic financial statements, and have issued my report thereon,
dated September 20, 2013.
Internal Control Over Financial Reporting
In planning and performing my audit of the financial statements, I considered the Charter School’s internal
control over financial reporting (internal control) to determine the audit procedures that are appropriate in
the circumstances for the purpose of expressing my opinions on the financial statements, but not for the
purpose of expressing an opinion on the effectiveness of the Charter School’s internal control. Accordingly,
I do not express an opinion on the effectiveness of the Charter School’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, 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 internal control, such that there is a reasonable possibility that a material misstatement of
the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A
significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe
than a material weakness, yet important enough to merit attention by those charged with governance.
My consideration of internal control was for the limited purpose described in the first paragraph of this
section and was not designed to identify all deficiencies in internal control that might be material
weaknesses or significant deficiencies. Given these limitations, during my audit I did not identify any
94
deficiencies in internal control that I 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 Charter School’s financial statements are free
of material misstatement, I 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 the
determination of financial statement amounts. However, providing an opinion on compliance with those
provisions was not an objective of my audit, and accordingly, I do not express such an opinion. The results
of my tests disclosed no instances of noncompliance or other matters that are required to be reported under
Government Auditing Standards and audit requirements as prescribed by the Office of School Finance,
Department of Education, State of New Jersey.
Purpose of this Report
The purpose of this report is solely to describe the scope of my testing of internal control and compliance
and the results of that testing, and not to provide an opinion on the effectiveness of the Charter School’s
internal control or on compliance. This report is an integral part of an audit performed in accordance with
Government Auditing Standards and audit requirements as prescribed by the Office of School Finance,
Department of Education, State of New Jersey in considering the Charter School’s internal control and
compliance. Accordingly, this communication is not suitable for any other purpose.
Licensed Public School Accountant No. 870
Scott J Loeffler, CPA
September 20, 2013
95
SCOTT J. LOEFFLER CERTIFIED PUBLIC ACCOUNTANT
P. O. BOX 553 EAST HANOVER, NEW JERSEY 07936
TELEPHONE FAX
973-585-4989 973-240-7318
EXHIBIT K-2
INDEPENDENT AUDITORS’ REPORT ON COMPLIANCE WITH REQUIREMENTS
THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR
PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE
WITH OMB CIRCULAR A-133 AND NEW JERSEY OMB CIRCULAR NJOMB 04-04
The Honorable President and
Members of the Board of Trustees
TEAM Academy Charter School
County of Essex
Newark, New Jersey
Compliance
I have audited the TEAM Academy Charter School, in the County of Essex, State of New Jersey’s (“the
Charter School”) with the types of compliance requirements described in the OMB Circular A-133
Compliance Supplement and the New Jersey State Aid/Grant Compliance Supplement that could have a
direct and material effect on each of the Charter School’s major federal and state programs for the year
ended June 30, 2013. The Charter School’s major federal and state programs are identified in the summary
of auditor’s results section of the accompanying schedule of findings and questioned costs.
Management’s Responsibility
Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants
applicable to its state programs.
Auditors’ Responsibility
My responsibility is to express an opinion on compliance for each of the Charter School’s major federal and
state programs based on my audit of the types of compliance requirements referred to above. I conducted
my audit of compliance in accordance with auditing standards generally accepted in the United States of
America; the standards applicable to financial audits contained in Government Auditing Standards, issued
by the Comptroller General of the United States; audit requirements as prescribed by the Office of School
Finance, Department of Education, State of New Jersey; OMB Circular A-133, Audits of States, Local
Governments, and Non-profit Organizations; and State of New Jersey Department of Treasury Circular 04-
04-OMB, Single Audit Policy for Recipients of Federal Grants, State Grants and State Aid.
96
Those standards, OMB Circular A-133 and State of New Jersey Department of Treasury Circular 04-04-
OMB require that I plan and perform the audit to obtain reasonable assurance about whether
noncompliance with the types of compliance requirements referred to above that could have a direct and
material effect on a major federal or state program occurred. An audit includes examining, on a test basis,
evidence about the Charter School’s compliance with those requirements and performing such other
procedures as I considered necessary in the circumstances.
I believe that my audit provides a reasonable basis for my opinion on compliance for each major federal
and state program. However, my audit does not provide a legal determination of the Charter School’s
compliance.
Opinion on Each Major Federal and State Program
In my opinion, the Charter School complied, in all material respects, with the types of compliance
requirements referred to above that could have a direct and material effect on each of its major federal and
state program for the year ended June 30, 2013.
Report on Internal Control over Compliance
Management of the Charter School is responsible for establishing and maintaining effective internal control
over compliance with the types of compliance requirements referred to above. In planning and performing
my audit of compliance, I considered the Charter School’s internal control over compliance with the types
of requirements that could have a direct and material effect on each major federal and state program to
determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an
opinion on compliance for each major federal and state program and to test and report on internal control
over compliance in accordance with OMB Circular A-133 and State of New Jersey Department of Treasury
Circular 04-04-OMB, but not for the purpose of expressing an opinion on the effectiveness of internal
control over compliance. Accordingly, I do not express an opinion on the effectiveness of the Charter
School’s internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control over
compliance does not allow management or employees, in the normal course of performing their assigned
functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a
federal or state program on a timely basis. A material weakness in internal control over compliance is a
deficiency, or combination of deficiencies, in internal control over compliance, such that there is a
reasonable possibility that material noncompliance with a type of compliance requirement of a federal or
state program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in
internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over
compliance with a type of compliance requirement of a federal or state program that is less severe than a
material weakness in internal control over compliance, yet important enough to merit attention by those
charged with governance.
My consideration of internal control over compliance was for the limited purpose described in the first
paragraph of this section and was not designed to identify all deficiencies in internal control over
compliance that might be material weaknesses or significant deficiencies. I did not identify any deficiencies
in internal control over compliance that I consider to be material weaknesses. However, material
weaknesses may exist that have not been identified.
97
The purpose of this report on internal control over compliance is solely to describe the scope of my testing
of internal control over compliance and the results of that testing based on the requirements of OMB
Circular A-133 and State of New Jersey Department of Treasury Circular 04-04-OMB. Accordingly, this
report is not suitable for any other purpose.
Licensed Public School Accountant No. 870
Scott J. Loeffler, CPA
September 20, 2013
98
EXHIBIT A
TEAM ACADEMY CHARTER SCHOOL
Schedule of Federal Financial Assistance
For the Fiscal Year Ended June 30, 2013
Deferred
Refund Revenue/ Due to
CFDA/ of (Accounts Grantor
GRANT Balance Prior Prior Receivable) at
Federal/Grantor Project Grant Award July 1, Carry- Cash Budgetary Years' June 30, June 30,
Program Title Number Period Amount 2012 over Received Expenditures Balances Adjust 2013 2013
Food Subsidy
Federal School Lunch 10.555 07/01/12-06/30/13 $608,423 ($114,028) $613,061 $608,423 (109,390)
Federal After School 10.558 07/01/12-06/30/13 $173,261 ($40,179) 173,261 173,261 (40,179)
Federal Breakfast 10.553 07/01/12-06/30/13 $201,146 ($41,253) 202,656 201,146 (39,743)
Special Revenue
NCLB
Title I PART A 84.010A 09/01/12-08/31/13 $1,532,803 0 527,403 1,168,038 (640,635)
Title IIA 84.367A 09/01/12-08/31/13 $2,299 0 0 2,299 (2,299)
Title I PART A C/O 84.010A 09/01/12-08/31/13 $272,445 (8,586) 281,031 272,445
Charter School Program 84.282 09/01/12-08/31/13 $116,159 (80,815) 152,694 116,619 (44,740)
Charter School Program 84.282 09/01/12-08/31/13 $277,211 (120,123) 229,738 277,211 (167,596)
Investing in Innovation 84.411A 09/01/12-08/31/13 $251,805 0 207,065 251,805 (44,740)
IDEA BASIC 84.027 09/01/12-08/31/13 $357,938 (85,287) 310,219 357,938 (133,006)
Race to the Top 84.395 09/01/12-08/31/13 $27,945 27,945 27,945
Dissemination Grant 84.303 09/01/12-08/31/13 $126,685 (45,101) 171,786 126,685
Total Special Revenue (339,912) 1,907,881 2,600,985 (1,033,016) ---
($535,372) $0 $2,896,859 $3,583,815 $0 ($1,222,328) $0
See accompanying notes to schedules of expenditures of Federal and State Awards
99
EXHIBIT - B
Deferred
Refund Revenue/ Due to
of (Accounts Grantor
Balance Prior Receivable) at
State Grantor Grant or State Grant Award July 1, Cash Budgetary Years' June 30, June 30,
Program Title Project Number Period Amount 2012 Received Expenditures Balances Adjust 2013 2013
GENERAL FUND
TPAF Social Security 13-495-034-5095-002 7/1/12-06/30/13 $892,582 $892,582 $892,582
On-Behalf TPAF Pension 13-495-034-5095-006 7/1/12-06/30/13 701,487 701,487 701,487
On-Behalf Post Ret. Medical 13-495-034-5095-001 7/1/12-06/30/13 620,375 620,375 620,375
Equalization Aid - Local 13-495-034-5120-078 7/1/12-06/30/13 3,788,611 3,788,611 $3,788,611
Equalization Aid - State 13-495-034-5120-078 7/1/12-06/30/13 23,916,723 23,916,723 $23,916,723
Extraordinary Aid 13-100-034-5120-068 7/1/12-06/30/13 133,839 133,839 $133,839
Security aid 13-100-034-5120-084 7/1/12-06/30/13 939,465 939,465 $939,465
Special Education 13-100-034-5120-089 7/1/12-06/30/13 836,836 836,836 $836,836
Non Public Aid 13-100-034-5120-078 7/1/12-06/30/13 239,344 239,344 $239,344
Total General Fund -- 32,069,262 32,069,262 --
ENTERPRISE FUND
National School Lunch-State 13-100-010-3350-23 7/1/12-06/30/13 12,497 (2,416) 13,012 12,497 ($1,901) $
GRAND TOTAL (2,416) $32,082,274 $32,081,759 ($1,901) $ -
See accompanying notes to schedules of expenditures of Federal and State Awards
TEAM ACADEMY CHARTER SCHOOL
Schedule of State Financial Assistance
For the Fiscal Year Ended June 30, 2013
100
EXHIBIT K-5 Page 1
TEAM ACADEMY CHARTER SCHOOL NOTES TO THE SCHEDULES OF EXPENDITURES OF FEDERAL
AND STATE AWARDS
FOR THE YEAR ENDED JUNE 30, 2013
1. General
The accompanying schedules of expenditures of federal awards and state financial assistance
present the activity of all expenditures of federal awards and state financial assistance of the Charter
School. All federal and state awards received directly from federal and state agencies, as well as
federal awards and state financial assistance passed through other government agencies is included
on the schedule of expenditures of federal awards and state financial assistance.
2. Basis of Accounting
The accompanying schedules of expenditures of federal awards and state financial assistance are
presented on the budgetary basis of accounting with the exception of programs recorded in the
enterprise fund, which are presented using the accrual basis of accounting. These bases of
accounting are described in Note 1 to the Charter School’s basic financial statements. The
information in these schedules is presented in accordance with the requirements of OMB Circular
A-133, Audits of States, Local Governments, and Non-Profit Organizations. Therefore, some
amounts presented in the schedules may differ from amounts presented in, or used in the preparation
of, the basic financial statements.
3. Relationship to Basic Financial Statements
Amounts reported in the accompanying schedules agree with amounts reported in the Charter
School’s basic financial statements. The basic financial statements present the general fund and
special revenue fund on a GAAP basis. Budgetary comparison statements and schedules (RSI) are
presented for the general fund and special revenue fund to demonstrate finance-related legal
compliance in which certain revenue is permitted by law or grant agreement to be recognized in the
fiscal year, whereas for GAAP reporting, revenue is not recognized until the subsequent year or
expenditures have been made.
The general fund is presented in the accompanying schedules on the modified accrual basis. The
special revenue fund is presented in the accompanying schedules on the grant accounting budgetary
basis, which recognizes encumbrances as expenditures and also recognizes the related revenues,
whereas the GAAP basis does not.
The net adjustment to reconcile from the budgetary basis to GAAP basis is $-0- for the general fund
and $-0- for the special revenue fund. See Note 1 (the Notes to Required Supplementary
Information) for a reconciliation of the budgetary basis to the modified accrual basis of accounting
for the general and special revenue funds (C-3).
101
EXHIBIT K-5 Page 2
TEAM ACADEMY CHARTER SCHOOL NOTES TO THE SCHEDULES OF EXPENDITURES OF FEDERAL
AND STATE AWARDS
FOR THE YEAR ENDED JUNE 30, 2013
3. Relationship to Basic Financial Statements (continued)
Federal awards and state financial assistance revenues are reported in the Charter School’s basic
financial statements on a GAAP basis as follows:
Federal State Total
General Fund $ $32,069,262 $32,069,262
Special Revenue Fund 2,600,985 2,600,985
Food Service Fund 982,830 12,497 995,327
Total Awards and Financial Assistance
$3,583,815
$32,081,759
$35,665,574
4. Relationship To Federal And State Financial Reports
Amounts reported in the accompanying schedules agree with the amounts reported in the related
federal and state financial reports.
5. Other
The TPAF Social Security Contributions of $892,582 represents the amount reimbursed by the state
for the employer’s share of social security contributions for TPAF members for the year ended June
30, 2013.
102
EXHIBIT K-6 Page 1
TEAM ACADEMY CHARTER SCHOOL COUNTY OF ESSEX, NEW JERSEY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2013
PART 1 – SUMMARY OF AUDITOR’S RESULTS
Financial Statement Section
Type of auditor’s report issued: Unqualified
YES NO
Internal control over financial reporting:
Material weakness(es) identified: X
Significant deficiencies identified not considered to be material
weakness(es)?
X
Noncompliance material to financial statements noted? X
Federal Awards
Internal control over compliance:
Material weakness(es) identified? X
Significant deficiencies identified not considered to be material
weakness(es)?
X
Type of auditor’s report on compliance for major programs: Unqualified
Any audit findings disclosed that are required to be Reported in accordance with
Circular A-133 (section .510a)?
X
Identification of major programs:
CDFA Number(s) Name of Federal Program
84.010A
84.027
84.282
10.555
Title I Part A
IDEA - Basic
Charter School Program
Federal Lunch Program
Dollar threshold used to distinguish between type A and type B programs (.520) $300,000
Auditee qualified as low risk auditee: X
103
EXHIBIT K-6 Page 2
TEAM ACADEMY CHARTER SCHOOL COUNTY OF ESSEX, NEW JERSEY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2013
PART 1 – SUMMARY OF AUDITOR’S RESULTS (Continued)
State Awards YES NO
Dollar threshold used to distinguish between type A and type B programs (.520) $300,000
Auditee qualified as low risk auditee: X
Type of auditor’s report issued: Unqualified
Internal control over major programs:
Material weakness(es) identified: X
Significant deficiencies identified not considered to be material
weakness(es)?
X
Type of auditor’s report on compliance for major programs: Unqualified
Any audit findings disclosed that are required to be Reported in accordance with
NJOMB Circular Letter 04-04?
X
Identification of major programs:
GMIS Number(s) Name of State Program
13-495-034-5120-078 Equalization Aid Local and State
13-495-034-5095-089 Special Education Aid - Cluster
13-495-034-5095-084 Security Aid - Cluster
104
EXHIBIT K-6 Page 3
TEAM ACADEMY CHARTER SCHOOL COUNTY OF ESSEX, NEW JERSEY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR YEAR ENDED JUNE 30, 2013
PART II – SCHEDULE OF FINANCIAL STATEMENT FINDINGS
No financial statement findings noted that are required to be reported under Government Auditing
Standards.
105
EXHIBIT K-6 Page 4
TEAM ACADEMY CHARTER SCHOOL COUNTY OF ESSEX, NEW JERSEY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR YEAR ENDED JUNE 30, 2013
PART III – SCHEDULE OF FEDERAL AND STATE AWARD FINDINGS AND
QUESTIONED COSTS
No federal and state award findings and questioned costs noted that are required to be reported in
accordance of OMB Circular A-133 or with NJOMB Circular 04-04.
106
EXHIBIT K-7 Page 1
TEAM ACADEMY CHARTER SCHOOL SUMMARY OF SCHEDULE OF PRIOR-YEAR AUDIT FINDINGS
AND QUESTIONED COSTS AS PREPARED BY MANAGEMENT
FOR THE FISCAL YEAR ENDED JUNE 30, 2013
Status of Prior Year Findings
In accordance with government auditing standards, my procedures included a review of all prior
year recommendations. There were no prior year findings.
ATTACHMENT II
AUDITED FINANCIAL STATEMENTS OF FOTA FOR THE FISCAL YEAR ENDED JUNE 30, 2013
[ THIS PAGE INTENTIONALLY LEFT BLANK ]
THE FRIENDS OF TEAM ACADEMY, INC.
(A NON PROFIT ORGANIZATION)
FINANCIAL STATEMENTS AND INDEPENDENT
AUDITORS REPORT
JUNE 30, 20l3
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC.
TABLE OF CONTENTS
JUNE 30, 2013
Independent Auditor’s Report ............................................................................................. 1
Financial Statements
Statement of Financial Position ...................................................................................... 3 Statement of Activities .................................................................................................... 4 Statement of Cash Flows ................................................................................................ 5
Notes to Financial Statements ............................................................................................. 6
1
SCOTT J. LOEFFLER CERTIFIED PUBLIC ACCOUNTANT
P. O. BOX 553 EAST HANOVER, NEW JERSEY 07936
TELEPHONE FAX
973-585-4989 973-240-7318
INDEPENDENT AUDITOR’S REPORT
Board of Directors
The Friends of TEAM Academy Charter School, Inc.
60 Park Place
Newark, NJ 07112
I have audited the accompanying statements of The Friends of TEAM Academy Charter School, Inc. (a
nonprofit organization) which comprise the statements of financial position as of June 30, 2013, and the
related statements of activities and cash flows for the years then ended and the related notes to the financial
statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these 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
My responsibility is to express an opinion on these financial statements based on my audit. I conducted my
audit in accordance with auditing standards generally accepted in the United States of America. Those
standards require that I 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, I express no such opinion. An audit also includes evaluating the appropriateness of
accounting policies used and to reasonableness of significant accounting estimates made by management, as
well as evaluating the overall presentation of the financial statements.
I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit
opinion.
2
Opinion
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial
position of The Friends of TEAM Academy Charter School, Inc. as of June 30, 2013 and the changes in its
net assets and its cash flows for the years then ended in accordance with accounting principles generally
accepted in the United States of America.
Scott J. Loeffler
Certified Public Accountant
October 21, 2013
3
Current Assets
Cash and Cash Equivalents 6,858,173$
Accrued Interest Receivable 1,089,573
Contributions Receivable 627,665
Prepaid Expenses 41,092
Other Receivables 1,555,365
Prepaid Rent 14,998
Total Current Assets 10,186,866
Fixed Assets
Land - Custer Avenue 450,000
Building - Custer Avenue 1,259,000
Building Improvements - Other 945,586
Building Improvements - Custer Avenue 3,554,156
Building Improvements - Ashland Street 1,771,229
Furniture 38,508
Total 8,018,479
Less: Accumulated Depreciation (1,241,532)
Total Fixed Assets 6,776,947
Other Assets
Investment in Qualified School Construction Bonds 2012 9,625,084
Investment in Qualified Zone Academy Bonds 2012 11,486,307
Investment in Qualified Zone Academy Bonds 2011 17,950,132
Investment in Qualified School Construction Bonds 2011 23,249,078
Loan Receivable 527,949
Security Deposit 151,639
Total 62,990,189
Total Assets 79,954,002$
Current Liabilities
Accounts Payable 2,192,279
Accrued Interest Payable 567,751
Deferred Revenue 1,300,724
Loan Payable - Manufacturers and Traders Trust Company - Current 15,053,014
Loan Payable - Manufacturers and Traders Trust Company -Current 24,200,000
QZAB Contract Payable - KIPP Foundation - Current 750,000
QSCB Contract Payable - KIPP Foundation - Current 275,488
Mortgage Payable - Prudential Insurance Company of America - Current 2,948,491
Loan Payable - Prudential Asset Resources- Current 64,444
Loan Payable -LISC 91,899
Total Current Liabilities 47,444,090$
Loan Payable - Manufacturers and Traders Trust Company 8,400,000
Loan Payable - Prudential Asset Resources 2,935,556
QSCB Contract Payable - KIPP Foundation 1,421,241
QZAB Contract Payable - KIPP Foundation 500,000
Loan Payable Charter School Growth, Inc 1,650,000
Total Noncurrent Liabilities 14,906,797
Total Liabilities 62,350,887
NET ASSETS
Temporarily Restricted -
Unrestricted 17,603,115
TOTAL NET ASSETS 17,603,115
Total Liabilities and Net Assets 79,954,002$
See independent auditor's report and notes to financial statements.
Noncurrent Liabilities
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC.
(A NONPROFIT ORGANIZATION)
STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED JUNE 30, 2013
ASSETS
LIABILITIES AND NET ASSETS
4
INCOME
CONTRIBUTIONS
Temporarily Restricted Contributions 651,502$
Unrestricted Contributions 3,176,369
In-Kind Contribution 17,325
Total Contributions 3,845,196
Rental 2,070,706
Total Income 5,915,902
EXPENSES
Administrative Expense - Miscellaneous 22,062
Fundraising - Event 156,018
Printing and Reproduction 9,202
Alumni Direct Support 221,371
Emergency Relief 33,137
Professional Fees 18,300
Rental Expense 1,398,774
NCA Scholarships 16,750
Real Estate Taxes 110,058
Recruitment Expense 65,649
Community Engagement 24,368
Insurance 59,943
Consulting 108,080
Contributions 10,800
In-Kind - Legal Fees 17,325
Grants to TEAM Academy Charter School 1,005,332
TEAM in Africa 35,772
Network Events 111,606
Other 188,928
Predevelopment 31,954
School Wide Support 361,747
Depreciation 212,651
TOTAL EXPENSES BEFORE OTHER INCOME (EXPENSE) 4,219,827
TOTAL OPERATING INCOME 1,696,075
OTHER INCOME and (EXPENSE)
Amortization Bond Discount 1,143,352
Interest Income- Bonds 3,647,385
Interest Income - Other 22,276
Interest Expense (2,162,724)
Total Other Income (Expense) 2,650,289
INCREASE IN NET ASSETS 4,346,364
13,256,751
17,603,115$
See independent auditor's report and notes to financial statements.
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC.
(A NONPROFIT ORGANIZATION)
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2013
NET UNRESTRICTED AND TEMPORARILY RESTRICTED ASSETS -
BEGINNING OF YEAR
NET UNRESTRICTED AND TEMPORARILY RESTRICTED NET ASSETS -
END OF YEAR
5
CASH FLOWS FROM OPERATING ACTIVITIES
Increase in Net Assets 4,346,364$
net cash provided by operating activities
Depreciation 212,651
Amortization of Bond Discount (1,143,352)
Accrued Interest Receivable (370,251)
Contribution Receivable 538,280
Prepaid expenses (41,092)
Other Receivable (1,346,155)
Prepaid Rent 25,869
Increase (Decrease) in Current Liabilities
Accounts Payable 1,768,955
Accrued Expenses 147,507
Deferred Revenue 800,724
NET CASH PROVIDED BY OPERATING ACTIVITIES 4,939,500$
CASH FLOWS FROM AND (USED IN) INVESTING ACTIVITIES
Increase In Investment in Qualified School Construction Bonds ($9,513,752)
Increase In Investment in Qualified Zone Academy Bonds ($11,353,447)
Increase In Loan Receivable ($527,949)
Increase in Building and Improvements (210,873)
Increase in Security Deposit (51,639)
NET CASH USED BY INVESTING ACTIVITIES ($21,657,660)
CASH FLOWS FROM AND (USED IN) FINANCING ACTIVITIES
Increase in Bond Closing Cost 245,368$
Net Increase(Decrease) in Loans and Mortgages - Current 29,176,217$
Net Increase(Decrease) in Loans and Mortgages - Noncurrent (9,491,379)
NET CASH FROM FINANCING ACTIVITIES 19,930,206
TOTAL INCREASE IN CASH
AND CASH EQUIVALENTS 3,212,046$
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 3,646,127$
CASH AND CASH EQUIVALENTS - END OF YEAR 6,858,173$
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash Paid For Interest 2,015,217$
See independent auditor's report and notes to financial statements.
(Increase) Decrease in Current Assets
Adjustments to reconcile increase in net assets to
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC.
(A NONPROFIT ORGANIZATION)
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2013
6
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC.
(A NONPROFIT ORGANIZATION)
NOTES TO THE FINANCIAL STATEMENT
JUNE 30, 2013
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES
NATURE OF ACTIVITIES
The Friends of TEAM Academy Charter School, Inc., (the “Organization”) was organized exclusively to
provide support and services to TEAM Academy Charter School, which is a charter school located in
Newark, New Jersey (the “School”). The support services include obtaining financial support, providing
property or services directly to the School or to its staff and/or students to facilitate the purposes and
programs of the School. The affiliation with the subsidiary FOTA, Finance I, LLC ceased in December
2012 and the Organization assumed all assets and liabilities.
A. Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Significant
estimates included in the Organization financial statements are the fair value of investments and
contributions. Actual results could differ from those estimates.
B. Concentration of Credit Risk
The Organization’s financial instruments are potentially exposed to concentrations of credit risk which
consist primarily of cash. The Organization places its cash with quality financial institutions. The
Organization believe no significant concentrations of credit risk exist with respect to its cash.
C. Cash and Equivalents
The Organization defines cash equivalents as high quality and highly liquid investments, such as negotiable
Certificate of Deposits and commercial paper, with maturity of 90 days or less.
Analysis of Cash and Cash Equivalents is as follows:
Manufacturers and Traders Trust Company $6,649,107
Bank of America 209,066
Total $6,858,173
7
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC.
(A NONPROFIT ORGANIZATION)
NOTES TO THE FINANCIAL STATEMENT
JUNE 30, 2013
D. Contributions and Grants Receivable
Contributions and grants receivable represent amounts unconditionally committed by donors and agencies
that have not been received by the Organization.
The receivables are recorded at the current pledged value. The Organization does not anticipate any
uncollectible receivables.
E. Tax Exempt Status
The Organization is exempt from Federal and State Income Taxes under Section 501(c) 3 of the Internal
Revenue Code. Pursuant to accounting standards codification (ASC) topic 740, Income Taxes, management
has determined that it does not have any uncertain tax positions or tax liabilities.
F. Other Receivables - Current
Other receivables - current are as follows:
Due from Kingston Educational Holdings, Inc. $1,293,297
Due from KIPP NJ 8,530
Due from TEAM Academy Charter School 48,025
Due from NCA Facility, Inc. 175,640
Due from Ashland Development Co. 9,434
Rent receivable - Merit Charter School 17,812
Other 2,627
Total $1,555,365
All of the above are non interest bearing and collectible in 2013.
G. Donated Services
Although members of the Board of Directors and other volunteers have donated significant amounts of their
time to the Organization’s activities, these services are not reflected in the financial statements for donated
services as no objective basis is available to measure their value. However, $17,325 of In-Kind donated
legal fees are reflected as part of the Statement of Activities for In-Kind revenue and expenditures.
H. Building and Improvements
The Organization has made substantial investments purchasing and improving the facilities that house the
schools it leases or subleases to the School.
In September 2005, the Organization purchased a building located at 85 Custer Avenue from the Roman
Catholic Diocese of Newark for a total purchase price of $1,709,000, of which $450,000 was associated
with the cost of the land. During fiscal years 2005-2013 the Organization made substantial improvements
totaling $3,554,156.
8
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC.
(A NONPROFIT ORGANIZATION)
NOTES TO THE FINANCIAL STATEMENT
JUNE 30, 2013
“ASDC” owns the building on 21 Ashland Street which it leases to the Organization who then subleases to
the school to house its second school, Rise Academy. To date, the Organization has made leasehold
improvements totaling $1,771,229 to the building.
Other Leasehold Improvements totaling $984,094 have been made to other sites that the Organization has
leased from third party landlords and subleased to the School. These sites include sites such as 909 Broad
Street, which formerly housed TEAM’s high school (Newark Collegiate Academy) and currently houses
TEAM’s second elementary school (THRIVE Academy), and 540 Orange Street, which formerly housed
TEAM’s first elementary school (SPARK Academy).
Land - Custer Avenue $ 450,000
Building - Custer Avenue 1,259,000
Building Improvements - Custer Avenue 3,554,156
Building Improvements - Ashland Street 1,771,229
Building Improvements - Other 945,586
Furniture 38,508
Total $8,018,479
Depreciation expense for the fiscal year is $212,651, based upon the useful lives of 39.5 years for buildings
and improvements and 7 years for furniture.
I. Accounts Payable
The accounts payable are regular vendor expenditures payable within 90 days.
J. Deferred Revenue
Deferred revenue is donated monies that has been received and is temporarily restricted for use in future
years.
QZAB Matching $ 865,262
Other Contributions - Temporarily Restricted 435,462
$1,300,724
K. Loan Receivable - Noncurrent
Loan receivable - Kingston Educational Holding I, Inc. Interest Rate 8.5%.
To cover closing costs in 2011 and 2012 on Bond Issues. Due 2014
$502,875
Other 25,074
Total $527,949
9
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC.
(A NONPROFIT ORGANIZATION)
NOTES TO THE FINANCIAL STATEMENT
JUNE 30, 2013
NOTE 2: INVESTMENTS IN QUALIFIED SCHOOL CONSTRUCTION BOND
HELD TO MATURITY
During the year ended June 30, 2011, the Organization, a New Jersey nonprofit corporation, desired to
construct a building containing approximately 63,000 square feet of rentable space and a parking lot (the
“Project”), to be leased entirely to the School to be operated as a public charter school facility, and to be
constructed upon that certain real property (the “Property”), bounded by Norfolk Street to the west, Newark
Street to the east, Orange Street to the north, and Sussex Avenue to the south, with an address, of 18-36
Norfolk Street, Newark, New Jersey and 19 Newark Street, Newark, New Jersey.
Pursuant to the Internal Revenue Code of 1986, as amended, 26 U.S.C. Sections 54A, 54F and Treasury
Regulations promulgated thereunder, the Project, as a public school facility, was financed in part with the
proceeds of issuance of obligations known as “Qualified School Construction Bonds (Direct Payment)”
(“QSCBs”), and NCA will receive a direct subsidy from the Internal Revenue Service (each a “Direct
Payment”) reimbursing NCA for a portion of the interest payable on such QSCBs on each Interest Payment
Date.
On February 1, 2011 NCA issued $21,278,000 (par value) aggregate principal amount of QSCBs designated
"Qualified School Construction Bonds (Direct Payment) (Newark Collegiate Academy Project) Series 2011
A" (the “NCA QSCBs”) and $1,525,000 aggregate principal amount of taxable bonds designated "Project
Revenue Bonds (Newark Collegiate Academy Project)" (Federally Taxable), Series 2011 B" (the “Taxable
Bonds” and together with the NCA QSCBs, the “NCA Bonds”) pursuant to that certain Trust Indenture
dated as of February 1, 2011 (the “NCA Indenture”) among NCA, the Organization, as purchaser of the
Bonds, and Manufacturers and Traders Trust Company, as trustee (the “Trustee”), to finance, together with
other available monies, costs of the Project.
The New Jersey Economic Development Authority (“NJEDA”) issued on April 26, 2011 (the “NJEDA
Bond Issuance Closing Date”) $6,675,017 (par value) aggregate principal amount of QSCBs (the "NJEDA
Bonds"; the NJEDA Bonds and the NCA bonds are the "Bonds") pursuant to a bond agreement or trust
indenture among NJEDA, the Organization, as purchaser of the NJEDA Bonds, and the Trustee (the
“NJEDA Indenture”; the NJEDA Indenture and the NCA Indenture are the "Indentures"); and the proceeds
of the Bonds, together with other available monies, will be applied to finance the costs of the Project.
Pursuant to an Assumption Agreement by and between the New Jersey Redevelopment Authority (the
“Authority”) and NCA, the Authority is responsible for the performance of certain obligations necessary to
effect the payment of debt service and the ownership of the property under the Bond Documents including
the payment of principal and interest on Qualified School Construction Bonds, and other obligations issued
or entered into by NCA.
Pursuant to this agreement, the New Jersey Redevelopment Authority has the option to satisfy the above
mentioned Project Related Debt by conveyance of fee simple interest in the property as payment in full of
all liabilities on the maturity date of the QSCB’s.
10
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC.
(A NONPROFIT ORGANIZATION)
NOTES TO THE FINANCIAL STATEMENT
JUNE 30, 2013
The Organization’s investments in the bonds are as follows at June 30, 2013:
Issuer
Par Value
Bond
Discount
Net of
Amortization
Bond
Value
Net
NCA Facility Inc. Qualified School
Construction Bonds (Direct Pay) Newark
Collegiate Academy Project Series 2011A 17
years, 5%. Issuance date 2/1/11 Collateralized
by NCA building facility.
$21,278,000
$4,740,112
$16,537,888
New Jersey Economic Development Authority
Qualified School Construction Bonds Newark
Collegiate Academy project Series 2011 16
year, 5%. Issuance date 4/26/11. Collateralized
by NCA building facility.
6,675,017
1,488,827
5,186,190
NCA Facility Inc. Federally Taxable Newark
Collegiate Academy Project Series 2011B. 12
years, 8%. Issuance date 2/1/11. Collateralized
by NCA building facility.
1,525,000
-0-
1,525,000
$29,478,017 $6,228,939 $23,249,078
NOTE 3: BOND DISCOUNT - QSCB BONDS
The original bond discount was $7,335,017. The current amortization is calculated using the straight line
method over the term of the Bonds as follows:
Original
Bond
Discount
Accumulated
Bond
Discount
Amortization
Net
Discount
NCA Facility, Inc. QSCB Bonds. Par Value
$21,278,000
$5,583,458 $843,346 $4,740,112
NJEDA QSCB Bonds. Par Value $6,675,017 1,751,559 262,732 1,488,827
$7,335,017 $1,106,078 $6,228,939
The amortization of Bond Discount of $465,740 is recognized as income at June 30, 2013.
11
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC.
(A NONPROFIT ORGANIZATION)
NOTES TO THE FINANCIAL STATEMENT
JUNE 30, 2013
NOTE 4: INVESTMENT IN QUALIFIED ZONE ACADEMY BONDS HELD TO MATURITY
(TEAM ACADEMY CHARTER SCHOOL PROJECT SERIES 2011)
On December 29, 2011 The Kingston Educational Holdings I, Inc., a New Jersey Non Profit corporation,
obtained from the New Jersey Economic Development Authority (the “Authority”) financial assistance for
the purpose of rehabilitating and repairing various public school buildings (Project Facilities) in which the
Organization will be occupying and providing equipment for the benefit of the School (collectively the
“Project” or “Projects”), all to be leased entirely to the School. The eligible Project Facilities mean the
land and buildings located at 85 Custer Avenue, 909 Broad Street, 21 Ashland Street, 333 Clinton Place
and/or 18 Norfolk Street in the City of Newark, New Jersey and/or such other public school facility sites as
may be approved by the Department of Education in the State where such land and buildings are to be
improved with proceeds of the Bonds (as hereinafter defined).
On December 29, 2011, the Authority issued $25,535,000 Qualified Zone Academy Bonds (“QZAB”). The
Organization purchased the QZAB bonds par value $25,535,000 for $17,300,000 from Kingston
Educational Holdings I, Inc., with financing provided from Goldman Sachs and KIPP Foundation (the
“Bonds”).
Pursuant to the code section 54E of the Internal Revenue Code of 1986, as amended, promulgated there
under, the Bonds are obligations known as “Qualified Zone Academy Bonds” (“QZABs”).
The investments in the Bonds are as follows at June 30, 2013:
Par
Value
Bond
Discount
Net of
Amortization
Bond
Value
Net
TEAM Academy Project Qualified Zone
Academy Bonds - TEAM Academy Project
Series 2011 4.94% - 19 years*
$25,535,000
$(7,584,868)
$17,950,132
$25,535,000 $(7,584,868) $17,950,132
*Currently during the project construction, the Bonds will be collateralized with the following:
1. Mortgages or leasehold interests.
2. Assignment of leases.
12
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC.
(A NONPROFIT ORGANIZATION)
NOTES TO THE FINANCIAL STATEMENT
JUNE 30, 2013
Bond Discount
The original Bond discount was $8,235,000. The current amortization is calculated using the straight line
method as follows:
Original
Bond
Discount
Initial Year
Bond Discount
Amortization
Net
Discount
QZAB TEAM Academy Project Bonds Par Value
$25,535,000
$8,235,000
$(650,132)
$7,584,868
$8,235,000 $(650,132) $7,584,868
The amortization Bond Discount of $433,421 is recognized as income at June 30, 2013.
NOTE 5: INVESTMENT IN QUALIFIED ZONE ACADEMY BONDS AND QUALIFIED
SCHOOL CONSTRUCTION BONDS (TEAM ACADEMY CHARTER SCHOOL,
INC.) HELD TO MATURITY
On December 27, 2012, the Kingston Education Holdings I, Inc., a New Jersey Non Profit Corporation
obtained funding from the New Jersey Economic Development Authority for the purpose of purchase,
constructing, rehabilitation and repairing various public school buildings in which the School is or will be
established in the City of Newark, County of Essex in the State of New Jersey and in addition, providing
equipment for the benefit of the School (collectively the 2012 project or projects), all to be leased entirely to
the School.
On December 27 2012, the New Jersey Economic Development Authority issued $17,465,000 QZAB
Bonds (TEAM Academy Charter School, Inc., Series 2012). The Organization purchased the QZAB par
value $17,465,000 for $11,353,447. In addition, the Authority issued $14,635,000 QSCB Bonds (TEAM
Academy Charter School, Inc., Series 2012) for $9,513,953. Both the QZAB Bonds and the QSCB Bonds
were purchased from Kingston Educational Holdings I, Inc. with financing provided by M & T Bank.
The investment in the Series 2012 Bonds are as follows at June 30, 2013:
Par Value
Bond Discount
Net Of
Amortization
Bond
Value
Net
TEAM Academy Project QZAB (TEAM
Academy Project Series 2012) - 4.34% 23 years
maturity collateralized by 18th
Ave. school
building
$17,465,000
$5,978,693
$11,486,307
TEAM Academy Project QSCB (TEAM
Academy Project Series 2012) 4.34% 23 years
maturity collateralized by 18th
Ave. school
building
$14,635,000
$5,009,916
$9,625,084
13
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC.
(A NONPROFIT ORGANIZATION)
NOTES TO THE FINANCIAL STATEMENT
JUNE 30, 2013
Bond Discount - The original Bond discounts were $6,111,553 for the QZAB Bond and $5,121,247 for the
QSCB Bond.
Original
Bond
Discount
Accumulation
Bond Discount
Amortization
Net
Discount
TEAM Academy Project QZAB Series 2012 Par
Value $17,465,000
$6,111,553
$132,860
$5,978,693
TEAM Academy Project QSCB Series 2012 Par
Value $14,635,000
$5,121,247
$111,331
$5,009,916
The Amortization of Bond discount of $132,860 and $111,331 for the QZAB and QSCB Bonds respectfully,
calculated using the straight line method over term of the Bonds.
Summary of Amortization of Bond discount:
NCA Facility Inc., QSCB $ 348,970
NJEDA QSCB Bond Project 116,770
TEAM Academy QZAB - 2011 Project 433,421
TEAM Academy QZAB - 2012 132,860
TEAM Academy Project QSCB 111,331
Total Amortization of Bond Discount $1,143,352
NOTE 6: THE RECURRING FAIR VALUE MEASUREMENTS
The Financial Accounting Standards Board established a framework for measuring fair value. That
framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure
fair value. The hierarchy gives highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3
measurements). The three levels of the fair value hierarchy are described below:
The following table sets forth, within the fair value hierarchy, assets at fair value as of June 30, 2013:
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities
in active markets that the Organization has the ability to access. Such inputs include quoted prices in active
markets for identical assets or liabilities.
Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities;
or other inputs that are observable or can be corroborated by observable market data for substantially the
full term of the assets or liabilities.
Level 3 - Unobservable inputs that are supported by little or no market activity and that are financial
instruments whose values are determined using pricing models, discounted cash flow methodologies, or
similar techniques, as well as instruments for which the determination of fair value requires significant
judgment or estimation.
14
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC.
(A NONPROFIT ORGANIZATION)
NOTES TO THE FINANCIAL STATEMENT
JUNE 30, 2013
The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest
level of any input that is significant to the fair value measurement. Valuation techniques used need to
maximize the use of observable inputs and minimize the use of unobservable inputs.
The following methods and assumptions were used by the Organization in estimating the fair value of its
financial instruments:
Investment in Bonds
The carrying amounts reported in the statement of financial position for investment in Bonds approximates
fair value.
Contribution and Other Receivables
The carrying amount reported in the statement of financial position for contribution and other receivable
approximates fair value.
Debt Obligations
The carrying amount of the Organization debt approximates fair value.
Current Assets
Total Level 1 Level 2 Level 3
Current Assets
Cash and Cash Equivalents $6,858,173 $6,858,173
Contributions Receivable 627,685 627,685
Other Receivables 2,083,314 2,083,314
$9,569,172 $9,569,172
Other Assets
Investment in Qualified Zone
Academy Bonds (Net of Discount) $29,436,439 $29,436,439
Investment in Qualified School
Construction Bonds (Net of
Discount) 32,874,162 --- --- 32,874,162
Total $62,310,601 $62,310,601
Total Assets $71,879,773 $9,569,172 --- $62,310,601
Liabilities
Debt Obligations (58,290,133) --- (58,290,133)$13,589,640 $9,569,172 $4,020,468
30-Jun-13
The following is a summary of activity for the year ended June 30, 2013. Assets (liabilities) measured at fair
value for level 3 based on unobservable measure criteria.
15
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC.
(A NONPROFIT ORGANIZATION)
NOTES TO THE FINANCIAL STATEMENT
JUNE 30, 2013
Balance beginning of year
$1,694,754
Purchase of QZAB and QSCB Bonds
20,867,200
Amortization of Bond Discount
1,143,352
Total
23,705,306
Net Increase in Debt Obligations
(19,684,838)
Balance end of year
$4,020,468
NOTE 7: ACCRUED INTEREST RECEIVABLE
The accrued interest receivable represents interest earned on QSCB and QZAB Bond investments that was
collected in July 2013.
Note Receivable - Kingston Education $ 21,966
QSCB - 2012 Bond Investment 158,790
QZAB - 2012 Bond Investment 189,495
QSCB NCA 2011 Bond Investment 403,965
QZAB NJEDA 2011 Bond Investment 315,357
$1,089,573
NOTE 8: ACCRUED INTEREST PAYABLE
Accrued interest payable of $567,751 represents interest on loans and mortgages that were paid in July
2013.
NOTE 9: LONG TERM DEBT
The following is a summary of long term debt incurred by the Organization in conjunction with the 2011
QSCB and QZAB transactions:
The Organization has utilized all of the proceeds of the loan in the original principal amount of $15,750,000
(the “Senior Loan”) from Manufacturers and Traders Trust Company, (“M&T”), to finance the purchase of
the QSCBs, which as Senior Loan shall be secured by the NCA Bonds and the security therefore will be
repaid on a senior secured basis.
The Organization has utilized all of the proceeds of a cash deposit in the original principal amount of
$2,000,000 (the “KIPP Funding”) from KIPP Foundation, a California nonprofit, public benefit corporation
(“KIPP”) to finance the purchase of the QSCBs, which KIPP Funding is secured by the NCA Bonds and
the security therefore will be repaid on a subordinated basis in relation to the Senior Debt and the Junior
Debt (as defined below).
The Organization as additional funding for its acquisition of the NCA Bonds and to fund the acquisition of
the NJEDA Bonds on the NJEDA Bond Issuance on February 1, 2011, borrowed from Prudential Asset
Resources a loan (Junior Debt) in an original amount of $3,000,000, which Prudential Asset Resources has
been secured by the NCA Bonds and the security therefore, will be repaid on a subordinated basis in relation
to the Senior Loan.
16
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC.
(A NONPROFIT ORGANIZATION)
NOTES TO THE FINANCIAL STATEMENT
JUNE 30, 2013
Pursuant to the NCA Indenture, NCA has pledged and assigned a trustee, for the benefit of the holder or
holders of the NCA Bonds, all revenues of NCA derived from lease payments and other payments payable
to NCA by the School under the Lease (as hereinafter defined), all Direct Payments in respect of interest
paid on the NCA Bonds, all of NCA's interest in and rights to the Lease and the Collateral (as such terms are
defined in the NCA Indenture), and all monies on deposit in the funds and accounts established under the
NCA Indenture (except the Rebate Fund (as defined in the NCA Indenture)).
Pursuant to the NJEDA Indenture, the Authority pledged and assigned a trustee, for the benefit of the holder
or holders of the NJEDA Bonds, (a) all revenues of NJEDA, including without limitation all Direct
Payments in respect of interest paid on the NJEDA Bonds, (b) all of NJEDA's interest in and rights to (i)
any loan payments from NCA to NJEDA in respect of the loan, the proceeds of the NJEDA Bonds to NCA
and the document or documents evidencing such loan and (ii) the Collateral (as such term is defined in the
NJEDA Indenture), and (c) all monies on deposit in the funds and accounts established under the NJEDA
Indenture (except the Rebate Fund (as defined in the NJEDA Indenture).
The Organization has utilized the proceeds of the original principal of $12,600,000 borrowed from Goldman
Sachs in addition to using its own equity to purchase the Bonds (the Organization Project Series 2011,
issued December 29, 2011) which as Senior Loan is secured by all assets of the Organization. In December
2012, the $12,600,000 was refinanced by Manufacturers and Traders Trust Company.
The Organization ensures that at least 98% of the net proceeds of the Bonds will be used exclusively to
finance Capital Expenditures as stipulated by QZAB rules applicable under section 54E of the Internal
Revenue Service Code.
The Organization has utilized the financing of the original principal amount of $2,000,000 from KIPP to
purchase the QZAB Bonds which is secured by the Bonds and the security therefore will be repaid on a
subordinated basis in relation to the Senior debt above.
The Organization obtained $20,000,000 in financing from the Manufacturers and Trust Company to acquire
the QZAB and QSCB (TEAM Academy Charter School Series 2012) Bonds.
The following outlines the current and non-current debt:
QSCB Loan Payable - Manufacturers and Trust Company (Senior Debt)
Original principal $15,750,000 Dated 2/1/11, 25 year interest at 5.3%.
Balance $15,053,014
QSCB Loan Payable - Manufacturers and Trust Company (Senior Debt)
Original principal $32,600,000 Dated 12/27/12 Interest only at Libor interest rate plus
2.5%. Maturity 10/7/13.
Balance $32,600,000
On October 7, 2013 of the above two loans $30,000,000 was repaid and refinanced by Manufacturers and
Trust Company and the $17,567,000 difference was extended with the same loan terms above. The terms of
the refinanced loan $30,000,000 is as follows:
17
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC.
(A NONPROFIT ORGANIZATION)
NOTES TO THE FINANCIAL STATEMENT
JUNE 30, 2013
Senior Note 1: $12,000,000 amortizing over 10 years, floating rate with interest rate swap.
Senior Note 2: $18,000,000 interest only ballooning in 10 years. Floating rate with interest rate swap.
The extended loan $17,567,000 - the terms are as follows:
Interim Note: The extended loan $17,567,000 interest only. Interest rate - Libor interest rate plus 2.5%.
Maturity - November 2013 $9,167,000 and October 1, 2014 $8,400,000.
Collateral of the above loans - Grant of Security Interest As collateral security for the Senior Loan Secured
Obligations, Borrower hereby agrees to grant, convey and assign to Senior Lender a security interest, on a
first, prior and senior basis, in and to all assets of the Borrower, whether now owned or hereafter acquired,
created or arising, and wherever located.
QSCB Loan Payable - Prudential Asset Resources (Junior Debt)
Original principal $3,000,000 at 6.00%. Maturity 2/1/18. Collateral - 18-36 Norfolk
Street, Newark, NJ
Balance 3,000,000
QSCB Investment Contract Payable - KIPP Foundation
Original principal $2,000,000 - Maturity date 1/26/17
Variable rate based upon 6 month treasury rate. Updated annually. Quarterly
payments of interest with varied principal payments once a year. Collateral - 18-36
Norfolk Street, Newark, NJ
Balance 1,696,729
QZAB Investment Contract Payable - KIPP Foundation
Original Principal $2,000,000 at a variable rate based upon 6 month treasury.
Updated annually. $500,000 Principal Payments Due 12/13 and matures 12/15.
Collateral - 18-36 Norfolk Street, Newark, NJ
Balance 1,250,000
Mortgage Payable - Prudential Insurance Company of America
DATED: September 28, 2006
Principal and interest commencing 11/1/2007 to 10/7/13 in the amount of $25,205
per month. Proceeds were used primarily for the purchase and renovation of the
TEAM Academy Charter School located at 85 Custer Ave, Newark, NJ. Collateral
is the same building.
Balance 2,948,491
On October 7, 2013 the mortgage was repaid in full including the accrued interest of $42,566. The new
balance of the Prudential permanent loan is $2,978,122. The new loan will amortize based on existing
payment schedules.
18
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC.
(A NONPROFIT ORGANIZATION)
NOTES TO THE FINANCIAL STATEMENT
JUNE 30, 2013
Loan Payable - The Charter School Growth Fund
Initial Loan 12/10/10. No Interest or principal payments until 2016. Interest accrued at
3.25% to date. Collateral - 85 Custer Ave., Newark, NJ
Balance 1,650,000
Loan Payable - LISC
Non-interest bearing - due December 2013 - No collateral
Balance 91,899
Total current and non - current debt $58,290,133
Total interest expense for year end 6/30/13 $2,162,724
Minimum future principal payments for each of the next five years and thereafter on total long-term debt
outstanding at June 30, 2013 are as follows:
2014 $10,432,669
2015 9,017,008
2016 2,203,374
2017 1,965,007
2018 2,085,772
Thereafter 32,586,303
Total Current and Noncurrent debt $58,290,133
Analysis of minimum future payment 2014:
Current portion per financials $43,383,336
Manufacturer and Trader Trust refinancing 10/7/13, Loan Payable (30,000,000)
Prudential Mortgage Payable refinanced 10/7/13 (2,935,556)
Total 10,447,780
Net Additional Principal Increase on Refinancing (15,111)
Total $10,432,669
See Subsequent Event footnote #15.
NOTE 10: NET ASSETS
Net assets are categorized as unrestricted, temporarily restricted, and permanently restricted. The
unrestricted category contains, in addition to expendable funds, amounts dedicated to special programs,
investment in plant and equipment, and designated for other related purposes.
Temporarily restricted net assets are those that may be spent after the occurrence of an event or time certain,
and permanently restricted net assets cannot be spent. The net assets are deemed to be as follows:
Unrestricted $17,603,115
Temporarily Restricted ---
Total $17,603,115
19
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC.
(A NONPROFIT ORGANIZATION)
NOTES TO THE FINANCIAL STATEMENT
JUNE 30, 2013
Analysis of Net Assets - Temporarily Restricted:
Net assets temporarily restricted - beginning of year $501,623
Addition to temporarily restriction for year ended June 30, 2013 651,502
Net assets released from temporarily restricted for year ended June 30, 2013 (1,153,125)
Net assets temporarily restricted - end of year $0
NOTE 11: RENTAL INCOME
The Friends of TEAM Academy School holds a position of Landlord or Sublandlord to the Tenant or
Subtenant TEAM Academy Charter School for the following properties:
Position
Teachers Village, Newark, NJ Landlord
TEAM Academy Charter School, Newark, NJ Landlord
Rise Academy Charter School, Newark, NJ Sub-Landlord
THRIVE Academy School, 909 Broad Street Sub-Landlord
Sublet from Merit Charter School, 909 Broad St., Newark, NJ Sub-Landlord
Total Rental Income for year ended June 30, 2013 $2,070,706
NOTE 12: RENTAL EXPENSE
The Friends of TEAM Academy Charter School, Inc. holds a position of Tenant for the following Properties
with the TEAM Academy School being the Subtenant:
Rise Academy Charter School, Newark, NJ
Teachers Village, Newark, NJ
THRIVE Academy School, 909 Broad Street, Newark, NJ
Room 9 School Support Office, 60 Park Avenue, Newark, NJ
Total Rental Expense for year ended June 30, 2013 $1,398,774
The future lease values as noted above:
Rental
Income
Rental
Expense
2014 $1,191,696 $1,525,759
2015 $1,629,230 $1,761,574
2016 $2,039,231 $1,929,120
2017 $2,058,414 $1,959,132
2018 $2,077,981 $1,978,667
20
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC.
(A NONPROFIT ORGANIZATION)
NOTES TO THE FINANCIAL STATEMENT
JUNE 30, 2013
NOTE 13: RELATED PARTY
The Ashland Street Development Corporation (“ASDC”) is a wholly owned subsidiary of the Organization
and leases a building located at 21 Ashland Street from ASDC. There are no operations and assets or
liabilities included in these financial statements. Rent expense for year to ASDC is $450,000.
NOTE 14: CONTINGENCIES
The Organization is subject to ongoing litigation in the ordinary course of its operations. In the opinion of
its outside counsel, there were no actions pending that will have a material impact on its financial position.
NOTE 15: SUBSEQUENT EVENTS
In November 2013, the Custer Avenue building will be sold to Ashland School, Inc. (whose corporate
purpose is to support the organization) for 7 million. In addition, ASDC is required to use funds from their
sale of 21 Ashland Street to reimburse the Organization for the cost of tenant improvements on the 21
Ashland Street building in the amount of $1,771,229. These costs have been incurred by the Organization
over the years.
The proceeds from the above transactions will be used with other available cash to pay down the $9,167,000
portion of the Manufacturers and Trust Company principal in November 2013.
ATTACHMENT III
FORM OF CONTINUING DISCLOSURE AGREEMENT
[ THIS PAGE INTENTIONALLY LEFT BLANK ]
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CONTINUING DISCLOSURE AGREEMENT
This Continuing Disclosure Agreement (this “Agreement”), dated as of November 1, 2013 among TEAM Academy Charter School, Inc. (the “School”), Ashland School, Inc. (“Ashland”), The Friends of TEAM Academy Charter School, A New Jersey Non-Profit Organization (“FOTA” and, together with the School and Ashland, the “Disclosure Parties”) and Manufacturers & Traders Trust Company, as dissemination agent (the “Dissemination Agent”), is executed and delivered in connection with the issuance by the New Jersey Economic Development Authority (the “Authority”) of $[23,000,000] aggregate principal amount of its Charter School Revenue Bonds (Series 2013 Project for the TEAM Academy Charter School), (the “2013 Bonds”).
The 2013 Bonds are being issued pursuant to a Trust Indenture dated as of November 1, 2013 (the “Indenture”) between the Authority and Manufacturers & Traders Trust Company, as trustee. The proceeds of the 2013 Bonds are being loaned to Ashland, as the borrower, pursuant to a Loan Agreement dated as of November 1, 2013 (the “Loan Agreement”). Ashland will lease the facilities financed from the proceeds of the 2013 Bonds (the “Project Facilities”) to the School pursuant to certain Lease Agreements each dated November 1, 2013 (the “Lease Agreements”), and payments required under the Lease Agreements will be calculated to be sufficient, in total, to pay the principal of, premium, if any, and interest on the 2013 Bonds. The Indenture, the Loan Agreement and the Lease Agreements are referred to herein as the “Bond Documents.” The Disclosure Parties covenant and agree as follows for the benefit of the Bondholders (as defined below):
Section 1. Purpose of Agreement. This Agreement is being executed and delivered by the Disclosure Parties for the benefit of the Bondholders and in accordance with the requirements of the Rule. The Disclosure Parties acknowledge that the Authority and the Dissemination Agent have undertaken no responsibility with respect to any reports, notices or disclosures provided or required under this Agreement (except for the Dissemination Agent’s obligation to file with the MSRB reports provided by the Disclosure Parties pursuant to this Agreement), including their accuracy and completeness, and have no liability to any Person, including any Bondholder and the Underwriter, with respect to any such reports, notices or disclosures. The Disclosure Parties represent that they are the only “obligated persons” with respect to the Bonds.
Section 2. Definitions. In addition to the definitions set forth in the Bond Documents, which apply to any capitalized term used in this Agreement unless otherwise defined in the first paragraph of this Agreement or in this Section, the following capitalized terms shall have the meanings indicated below.
“Annual Report” shall mean any Annual Report provided by the Disclosure Parties pursuant to Section 4(a) of this Agreement.
“Annual Response to Investors” shall mean any Annual Response to Investors provided by the Disclosure Parties pursuant to Section 4(c) of this Agreement.
“Bondholder” or “Holder” of a 2013 Bond shall mean any registered owner of any of the 2013 Bonds or any Person which (i) has the power, directly or indirectly, to vote or
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consent with respect to, or to dispose of ownership of, any of the 2013 Bonds (including Persons holding through any nominee, securities depository or other intermediary, including any beneficial owner, or (ii) is treated as the holder of any of the 2013 Bonds for federal income tax purposes.
“EMMA” means the Electronic Municipal Market Access system of the MSRB as provided at http://www.emma.msrb.org, or any similar system that is acceptable to or as may be prescribed by the MSRB for purposes of the Rule and approved by the SEC from time to time. A current list of such systems may be obtained from the SEC at http://www.sec.gov/info/municipal/nrmsir.htm.
“Fiscal Year” means the fiscal year of the Disclosure Parties ending on June 30 of each calendar year.
“Listed Events” shall mean any of the events listed in Section 4(b) of this Agreement.
“MSRB” means the Municipal Securities Rulemaking Board established pursuant to Section 15(B)(b)(1) of the Securities Exchange Act of 1934, as amended, or any successor organization.
“Official Statement” shall mean the Official Statement dated [_________], 2013 used in connection with the sale of the 2013 Bonds.
“Quarterly Report” shall mean any Quarterly Report provided by the Disclosure Parties pursuant to Section 4(b) of this Agreement.
“Rule” shall mean Rule 15c2-12(b)(5) adopted by the SEC under the Securities Exchange Act of 1934, as the same may be amended from time to time.
“SEC” shall mean the United States Securities and Exchange Commission.
“Underwriter” shall mean M&T Securities, Inc.
Section 3. Content of Annual Reports, Quarterly Reports and Annual Response to Investors.
(a) Each Annual Report shall contain:
(i) a copy of the annual financial statements with respect to each of the Disclosure Parties, prepared in accordance with generally accepted accounting principles and audited by a certified public accountant;
(ii) an update of the information of the type set forth in Appendix A to the Official Statement as set forth on Schedule I attached hereto;
(iii) an Officer’s Certificate from Ashland certifying as to compliance with the financial covenants set forth in Section 6.21 of the Loan Agreement; and
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(iv) an Officer’s Certificate from the School certifying as to compliance with the financial covenants set forth in Article 14 of the Lease Agreements.
(b) Each Quarterly Report shall contain, for each fiscal quarter:
(i) an unaudited balance sheet and a statement of operations of the School as of the end of such quarter, in a format which is similar to that which has been reported to the Board of Trustees of the School, including a comparison of actual results to budget;
(ii) any updated enrollment data; and
(iii) A statement of the unrestricted cash and investments held by the School, FOTA and all special purpose entities which lease facilities to the School.
(c) Each Annual Response to Investors shall contain the Disclosure Parties’ response to the Bondholder inquiries received as described in Section 4(c) below.
Section 4. Provision of Annual Reports, Quarterly Reports, Annual Responses to Investors and Notices of Listed Events.
(a) Within 180 days after the end of each Fiscal Year, commencing with the Fiscal Year ending June 30, 2014, the Disclosure Parties shall provide to the Dissemination Agent copies of the Annual Report and written direction to file such Annual Report with the MSRB. In each case, the Annual Report may be submitted by the Disclosure Parties as a single document or as separate documents comprising a package, and may cross-reference other information to the extent permitted by the Rule. Notwithstanding the foregoing, the audited financial statements of the Disclosure Parties may be submitted separately from the balance of the Annual Report when such audited financial statements are available.
(b) Within 45 days after the end of each fiscal quarter commencing with the fiscal quarter ending December 31, 2013, the Disclosure Parties shall provide to the Dissemination Agent copies of the Quarterly Report and written direction to file such Quarterly Report with the MSRB.
(c) For 10 days following the publication and posting to EMMA of the Annual Report of the Disclosure Parties, Bondholders may e-mail related questions to the School. Within 20 days after such 10-day period or by the 30th day following the publication and posting to EMMA, the Disclosure Parties shall provide to the Dissemination Agent the Annual Response to Investors and written direction to file such Annual Response to Investors with the MSRB.
(d) In a timely manner not in excess of ten Business Days after the occurrence of the event, the Disclosure Parties shall deliver to the Dissemination Agent for filing with the MSRB notice of any of the following events with respect to the 2013 Bonds:
(i) Principal and interest payment delinquencies;
(ii) Non-payment related defaults, if material;
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(iii) Unscheduled draws on debt service reserves reflecting financial difficulties;
(iv) Unscheduled draws on credit enhancements reflecting financial difficulties;
(v) Substitution of credit or liquidity providers, or their failure to perform;
(vi) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701–TEB) or other material notices or determinations with respect to the tax status of the 2013 Bonds, or other material events affecting the tax status of the 2013 Bonds;
(vii) Modifications to rights of the Holders of the 2013 Bonds, if material;
(viii) Bond calls (other than mandatory sinking fund redemptions), if material, and tender offers;
(ix) Defeasances;
(x) Release, substitution, or sale of property, if any, securing repayment of the 2013 Bonds, if material;
(xi) Rating changes;
(xii) Bankruptcy, insolvency, receivership or similar event of the Disclosure Parties;
(xiii) The consummation of a merger, consolidation, or acquisition involving the Disclosure Parties or the sale of all or substantially all of the assets of the Disclosure Parties, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and
(xiv) Appointment of a successor or additional trustee or the change of name of a trustee, if material.
(e) The Disclosure Parties shall give, or shall cause the Dissemination Agent to give, notice in a timely manner to the MSRB of any failure by the Disclosure Parties to provide any information required pursuant to Section 4(a), (b), (c) or (d) above within the time limit specified therein.
(f) In lieu of providing any information specified in Section 4(a) , (b), (c) or (d) to the Dissemination Agent, the Disclosure Parties may file such information directly with the MSRB.
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Section 5. Report by Dissemination Agent. Concurrently with the delivery to the MSRB of any information required pursuant to Sections 4(a), 4(b), 4(c) or 4(d) above, the Dissemination Agent shall confirm to the Disclosure Parties that it has filed such information with the MSRB.
Section 6. Termination of Agreement. The obligations of the Disclosure Parties under this Agreement shall terminate upon the defeasance, prior redemption or payment in full of all of the 2013 Bonds. The Disclosure Parties shall provide the Dissemination Agent with written notice that the obligations of the Disclosure Parties under this Agreement have terminated and a written request that the Dissemination Agent file a copy of such notice with the MSRB. If the obligations of the Disclosure Parties under the Lease Agreements are assumed in full by another obligated person (as defined in the Rule), such Person shall be responsible for compliance with this Agreement in the same manner as if it were the Disclosure Parties, and the Disclosure Parties shall have no further responsibility hereunder.
Section 7. Amendment. The obligations of the Disclosure Parties under this Agreement may be amended, without notice to or consent of the Holders of the 2013 Bonds, to the extent required or permitted as a result of a change in the legal requirements, or in connection with a change in the identity, nature, corporate organization, or status of the Disclosure Parties, or the type of business conducted by the Disclosure Parties, or in connection with a corporate reorganization of the Disclosure Parties; provided that any such modification of the obligations of the Disclosure Parties under this Agreement shall be done in a manner consistent with the Rule and either (i) does not materially impair the interests of Bondholders, in the determination of the Dissemination Agent (which may be based on an opinion of counsel); or (ii) is approved by the Holders of a majority in aggregate principal amount of the 2013 Bonds. No amendment to this Agreement shall change or modify the rights or obligations of the Trustee or any Dissemination Agent without its written assent thereto, or with regard to any provision affecting the Authority, without the Authority’s written assent thereto.
Section 8. Additional Information. Nothing in this Agreement shall be deemed to prevent the Disclosure Parties from disseminating any other information, using the means of dissemination set forth in this Agreement or any other means of communication, or including any other information in any Annual Report, Quarterly Report, Annual Response to Investors or notice of occurrence of a Listed Event, in addition to that which is required by this Agreement. If the Disclosure Parties choose to include any information in any Annual Report, Quarterly Report, Annual Response to Investors or notice of occurrence of a Listed Event, in addition to that which is specifically required by this Agreement, the Disclosure Parties shall have no obligation under this Agreement to update such information or include it in any future Annual Report, Quarterly Report, Annual Response to Investors or notice of occurrence of a Listed Event.
Section 9. Transmission of Information and Notices. Unless otherwise required by law, all documents provided by the Disclosure Parties directly to the MSRB, or to the Dissemination Agent for filing with the MSRB, in compliance with Section 4 shall be provided to the MSRB or the Dissemination Agent, as applicable, in an electronic word-searchable PDF format (which requirement extends to all documents to be filed, including financial statements and other externally prepared reports), and shall be accompanied by identifying information, in each case as prescribed by the MSRB. As of the date of this Agreement, the MSRB has established
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EMMA as its continuing disclosure service for purposes of the Rule, and unless and until otherwise prescribed by the MSRB, all documents provided to the MSRB in compliance with Section 4 shall be submitted through EMMA in the format prescribed by the MSRB.
Section 10. Default. Any Bondholder may enforce the obligations of the Disclosure Parties under this Agreement; provided however that (i) any breach of such obligations shall not constitute or give rise to a default or an Event of Default under the Bond Documents, the 2013 Bonds or any other document or agreement relating to the 2013 Bonds, and (ii) the sole remedy for any such breach shall be to compel specific performance of the obligations of the Disclosure Parties under this Agreement.
Section 11. Beneficiaries. This Agreement shall inure solely to the benefit of the Authority, the Dissemination Agent, the Underwriter, the Disclosure Parties and Bondholders, and shall create no rights in any other Person.
Section 12. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey and the Rule.
Section 13. Severability. In case any one or more of the provisions of this Agreement shall for any reason be held to be illegal or invalid, such illegality or invalidity shall not affect any other provision of this Agreement, but this Agreement shall be construed and enforced as if such illegal or invalid provision had not been contained herein.
Section 14. Dissemination Agent’s Rights and Duties. The Dissemination Agent shall have only such duties as are specifically set forth herein and no implied covenants or obligations shall be read into this Agreement against the Dissemination Agent. The Dissemination Agent (i) shall not be liable for any error in judgment or for any act done or step taken or omitted by it in good faith, or for any mistake of fact or law, or for anything which it may do or refrain from doing in connection therewith, except for its own gross negligence or willful misconduct, (ii) shall not be obligated to take any legal action or other action hereunder, which might in its judgment involve any expense or liability unless it has been furnished with indemnification satisfactory to it, and (iii) shall be entitled to consult with counsel satisfactory to it, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the opinion of such counsel. The duties and responsibilities of the Dissemination Agent hereunder shall be determined solely by the express provisions of this Agreement, and no further duties or responsibilities shall be implied. The Dissemination Agent shall not have any liability under, or duty to inquire into the terms and provisions of any agreement or instructions, other than as outlined in this Agreement. The Dissemination Agent may rely and shall be protected in acting or refraining from acting upon any written notice, instruction or request furnished to it hereunder and believed by it to be genuine and to have been signed or presented by the proper party or parties. The Dissemination Agent shall be under no duty to inquire into or investigate the validity, accuracy or content of any such document. Any information mentioned in this Agreement, including any Annual Report or any information with respect to any event specified in Section 4(b) of this Agreement, shall be sufficiently authenticated for purposes of dissemination under this Agreement if it is accompanied by a written instrument signed by an authorized officer or employee of the Disclosure Parties. The Dissemination Agent shall not
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incur any liability for following the instructions herein contained or expressly provided for, or written instructions given by the other parties hereto. In the administration of this Agreement, the Dissemination Agent may execute any of its powers and perform its duties hereunder directly or through agents or attorneys and may consult with counsel, accountants and other skilled persons to be selected and retained by it. The Dissemination Agent shall not be liable for anything done, suffered or omitted in good faith by it in accordance with the advice or opinion of any such counsel, accountants or other skilled persons. The Dissemination Agent may resign and be discharged of its duties and obligations hereunder by giving notice in writing of such resignation specifying a date when such resignation shall take effect. Any corporation or association into which the Dissemination Agent in its individual capacity may be merged or converted or with which it may be consolidated, or any corporation or association resulting from any merger, conversion or consolidation to which the Dissemination Agent in its individual capacity shall be a party, or any corporation or association to which all or substantially all the corporate trust business of the Dissemination Agent in its individual capacity may be sold or otherwise transferred, shall be the Dissemination Agent under this Agreement without further act. The Disclosure Parties covenant and agree, jointly and severally, to defend, indemnify and hold the Dissemination Agent and its directors, officers, agents and employees (collectively, the “Indemnitees”) harmless from and against any and all liabilities, losses, damages, fines, suits, actions, demands, penalties, costs and expenses, including out-of-pocket, incidental expenses, reasonable legal fees and expenses and the costs and expenses of defending or preparing to defend against any claim (“Losses”) that may be imposed on, incurred by, or asserted against, the Indemnitees or any of them for following any instruction or other direction upon which the Dissemination Agent is authorized to rely pursuant to the terms of this Agreement. In addition to and not in limitation of the immediately preceding sentence, the Disclosure Parties also covenant and agree, jointly and severally, to indemnify and hold the Indemnitees and each of them harmless from and against any and all Losses that may be imposed on, incurred by, or asserted against the Indemnitees or any of them in connection with or arising out of or in the Dissemination Agent’s exercise or performance under this Agreement provided the Dissemination Agent has not acted with gross negligence or engaged in willful misconduct. Anything in this Agreement to the contrary notwithstanding, in no event shall the Dissemination Agent be liable for special, indirect, punitive or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Dissemination Agent has been advised of such loss or damage and regardless of the form of action. The Disclosure Parties hereby agree, jointly and severally, to pay reasonable compensation to the Dissemination Agent for, and all costs and expenses (including attorneys’ fees) of the Dissemination Agent incurred in, performing the services required of the Dissemination Agent under this Agreement. No provision of this Agreement shall require the Dissemination Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties under this Agreement or in the exercise of any of its rights or powers. This Section 14 shall survive termination of this Agreement, the resignation or removal of the Dissemination Agent for any reason, and the payment of the Bonds.
Section 15. No Recourse to Authority; Indemnified Parties. No recourse shall be had for the performance of any obligation, agreement or covenant of the Disclosure Parties, the Trustee or the Dissemination Agent under this Agreement against the Authority or against any member, official, employee, counsel, consultant and agent of the Authority or any person executing the Bonds. The Disclosure Parties agree to indemnify and hold harmless the Authority, any
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member, officer, official, employee, counsel, consultant and agent of the Authority, and the Trustee (collectively called the “Indemnified Parties”), against any and all losses, claims, damages, liabilities or expenses whatsoever caused by the Disclosure Parties’ or the Dissemination Agent’s failure to perform or observe any of its obligations, agreements or covenants under the terms of this Agreement but only if and insofar as such losses, claims, damages, liabilities or expenses are caused by any such failure of the Disclosure Parties or the Dissemination Agent to perform. In case any action shall be brought against the Indemnified Parties based upon this Agreement in respect of which indemnity may be sought against the Disclosure Parties, the Indemnified Parties shall promptly notify the Disclosure Parties in writing. Upon receipt of such notification, the Disclosure Parties shall promptly assume the defense of such action, including the retention of counsel, the payment of all expenses in connection with such action and the right to negotiate and settle any such action on behalf of such party. Any Indemnified Party shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless the employment of such counsel has been specifically authorized by the Disclosure Parties, or unless by reason of conflict of interest determined by the written opinion of counsel shall be borne by the Disclosure Parties. The Disclosure Parties shall not be liable for any settlement of any such action effected without its written consent, but if settled with the written consent of the Disclosure Parties or if there be a final judgment for the plaintiff in any such action with or without written consent, the Disclosure Parties agree to indemnify and hold harmless the Indemnified Parties from and against any loss or liability by reason of such settlement or judgment. Nothing in this Agreement shall require the Disclosure Parties to indemnify and hold harmless the Indemnified Parties from or against any loss, claim, damage, liability or expense caused by any gross negligence, recklessness or intentional misconduct of the Indemnified Parties in connection with the Disclosure Parties’ or the Dissemination Agent’s performance of their obligations, agreements and covenants under this Agreement. The indemnification rights under this Section 15 do not limit, and are in addition to, any other indemnification rights of the Indemnified Parties.
Section 16. Execution. This Agreement may be executed in any number of counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
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Section 17. Notices. Unless otherwise provided herein, all notices, certificates, requests or other communications hereunder shall be given by telecopier or electronic transmission and promptly confirmed in writing and shall be deemed given when given by telecopier or electronic transmission or addressed as follows:
School: TEAM Academy Charter School 60 Park Place, Suite 802 Newark, NJ 07112 Attn: Steve Small Telephone: (973) 622-0905 x1115 Email: [email protected]
Ashland: Ashland School, Inc. 60 Park Place, Suite 802 Newark, NJ 07112 Attn: Hannah Richman Telephone: (973) 705-8326 Email: [email protected]
FOTA: The Friends of TEAM Academy Charter School, Inc. 60 Park Place, Suite 802 Newark, NJ 07112 Attn: Hannah Richman Telephone: (973) 705-8326 Email: [email protected]
Dissemination Agent: Manufacturers & Traders Trust Company 166 Mercer Street New York, NY 10012 Attn: Marco Medina Telephone: (212) 941-4418 Telecopier: (212) 343-1079 Email: [email protected]
Each of the above parties may, by written notice given hereunder to the others, designate any further or different addresses to which subsequent notices, certificates, requests, or other communications shall be sent. In addition, the parties hereto may agree to any other means by which subsequent notices, certificates, requests or other communications may be sent.
[Signature page follows]
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IN WITNESS WHEREOF, the parties hereto have each caused this Continuing Disclosure Agreement to be executed in its name and in its behalf, all as of the date and year first above written.
TEAM ACADEMY CHARTER SCHOOL, INC.
By: Name: Title:
ASHLAND SCHOOL, INC.
By: Name: Title:
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC.
By: Name: Title:
MANUFACTURERS & TRADERS TRUST COMPANY, as Dissemination Agent
By: Authorized Officer
[Signature Page to Continuing Disclosure Agreement]
Schedule I-1
SCHEDULE I
INFORMATION SET FORTH IN APPENDIX A TO BE UPDATED IN EACH ANNUAL REPORT
Pursuant to Section 3(a)(ii) of this Agreement, each Annual Report shall include an update of the information of the type set forth in Appendix A to the Official Statement as follows:
1. Table 2 – Existing TEAM Charter Schools;
2. Table 3 – Planned TEAM Charter Schools;
3. Table 4 – Historical Average State/Local Per Pupil Tuition Funding;
4. Table 10 – New Jersey State Test Scores (to the extent such information is available from the New Jersey Department of Education):
5. Table 14 – Enrollment Chart;
6. Table 15 – Wait List; and
7. Table 16 – Re-Enrollment Data
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ATTACHMENT IV
FORM OF SUPPORT AGREEMENT
[ THIS PAGE INTENTIONALLY LEFT BLANK ]
SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT is dated as of [November_____], 2013 (this “Agreement”) by and between THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, A NEW JERSEY NON-PROFIT ORGANIZATION, a New Jersey not-for-profit corporation and charitable organization (“FOTA”), and ASHLAND SCHOOL, INC., a New Jersey not-for-profit corporation(the “Borrower”), in favor of MANUFACTURERS & TRADERS TRUST COMPANY, a New York banking corporation, as Trustee under the Indenture defined below (the “Trustee”).
W I T N E S S E T H:
A. FOTA owns the land and buildings located at 85 Custer Avenue, Newark, New Jersey (the “Custer Facility”). Ashland Street Development Corporation, a New Jersey corporation, owns the land and buildings located at 11-37 Ashland Street, Newark, New Jersey (the “Ashland Facility” and together with the Custer Facility, the “Project Facilities”). The Borrower wishes to purchase and improve the Project Facilities.
C. At the request and on behalf of the Borrower, the New Jersey Economic Development Authority (the “Issuer”) is issuing its Charter School Revenue Bonds (Series 2013 Project for the TEAM Academy Charter School) in the aggregate principal amount of $[23,000,000] (the “Bonds”). The Bonds are being issued under and are secured by a Trust Indenture dated as of November 1, 2013 (the “Indenture”) between the Issuer and the Trustee.
C. The Issuer is lending the proceeds of the Bonds to the Borrower pursuant to a Loan Agreement dated as of November 1, 2013 (the “Loan Agreement”) for the purpose of providing funds, together with other available funds, for the purpose of financing a project (the “Project”) consisting of (i) the acquisition of the Project Facilities; (ii) construction and renovation of buildings on such property; (iii) acquisition of land adjacent to 11-37 Ashland Street, (iv) completion of site work, (v) funding of a debt service reserve fund; and (vi) funding the costs of issuing the Bonds. Pursuant to the Loan Agreement, the Borrower is agreeing to make payments corresponding to the principal of and interest on the Bonds. The Loan is being evidenced by the Borrower’s Promissory Note dated [November_______], 2013, in the principal amount of the Loan, payable to the order of the Issuer (the “Note”). As security for the payment of the Bonds, the Issuer is assigning to the Trustee, for the benefit of the holders of the Bonds, all of the Issuer’s right, title and interest under the Loan Agreement (except for certain rights of the Issuer to receive fees and indemnity against claims) and the Note.
D. The Project Facilities will be leased by the Borrower to TEAM Academy Charter School, Inc., a New Jersey not-for-profit corporation and a public New Jersey charter school (the “School”), pursuant to Lease Agreements (collectively, the “Lease”) dated [November_____], 2013. Under the Lease, the School will make lease payments to the Borrower, which lease payments shall be at least sufficient to pay, inter alia, the principal of, premium, if any, and interest on the Bonds when due (“Lease Payments”).
E. The Borrower’s obligations under the Loan Agreement and the Note will be secured by a mortgage and security agreement in favor of the Trustee (the “Mortgage”) dated [November______], 2013 granting a first mortgage lien in and to the Project Facilities to the Trustee and an Absolute Assignment of Leases and Rents by the Borrower to the Authority (the “Absolute Assignment of Leases”) dated [November_____], 2013. The Indenture, the Loan Agreement, the Note, the Mortgage, the Lease and the Absolute Assignment of Leases are referred to collectively herein as the “Financing Documents.”
F. In order to provide additional security for the Bonds, FOTA has agreed to provide financial support for the benefit of the Bondholders as and to the extent provided herein.
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NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt of which is hereby acknowledged, and intending to be legally bound, FOTA and the Borrower hereby agree in favor of the Trustee as follows:
ARTICLE I
DEFINED TERMS
Section 1.01. Defined Terms. In this Agreement, terms defined above shall have the meanings set forth above, and capitalized terms used but not defined herein shall have the meanings ascribed to them in the Indenture.
ARTICLE II
FUNDING OBLIGATION
Section 2.01. FOTA Funding Obligation. (a) If on any date established under the Lease for the School to make Lease Payments, such Lease Payment is not received by the Trustee or is less than the required Lease Payment, the Trustee shall immediately notify the School and FOTA of such missed Lease Payment or of the remaining amount required to be paid.
(b) If on the date twenty days prior to any payment date on the Series 2013 Bonds, there are insufficient funds in the Debt Service Fund established under the Indenture to pay the full amount of principal and/or interest on the Series 2013 Bonds on the next succeeding payment date, the Trustee shall provide FOTA with notice of such deficiency. FOTA shall, no later than ten (10) days prior to such payment date, provide immediately available funds to the Trustee to be deposited into the Debt Service Fund such that the total amount of funds on deposit in the Debt Service Fund shall on each payment date be sufficient to pay the principal of or interest on the Series 2013 Bonds due on such payment date. The Lease Payments have been structured so that the Trustee should have sufficient funds on deposit in the Debt Service Fund to pay the full amount of principal and/or interest on the Series 2013 Bonds on the next succeeding payment date thirty (30) days prior to such payment date.
(c) Failure by the Trustee to send any notice provided for in sections 2.01(a) and (b) hereof, shall under no circumstances relieve FOTA of its responsibilities hereunder nor constitute waiver by the Trustee of any of right or remedy available to it hereunder or at law nor by FOTA and the Borrower of any of their obligations and responsibilities hereunder or any other Loan Documents as applicable.
Section 2.02. Funding Obligations Unconditional. The obligations of FOTA hereunder
are continuing, absolute and unconditional, irrespective of any circumstance whatsoever which might otherwise constitute a legal or equitable discharge or defense of FOTA. Without limiting the generality of the foregoing, the obligations of FOTA hereunder shall remain in full force and effect without regard to, and shall not be released, discharged or in any way affected by:
(a) any amendment, modification or supplement to the Indenture, the Loan Agreement, the Lease, any other Financing Document or any other document;
(b) any action, inaction, exercise or non-exercise of or delay in exercising any right, remedy, power or privilege under or in respect of this Agreement, the Indenture, the Loan Agreement, the Lease, any other Financing Document or any other document (even if any such right, remedy, power or privilege shall be lost thereby), or any waiver, consent or indulgence with respect to the Indenture, the Loan Agreement, the Lease or any other Financing Document;
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(c) any bankruptcy, insolvency, arrangement, composition, assignment for the benefit of creditors or similar proceeding commenced by or against the Borrower, the School, FOTA or any other Person;
(d) any failure to perfect or continue perfection of, or any release or waiver of, any rights given to the Trustee in any property as security for the performance of any of the Borrower’s or the School’s obligations under the Indenture, the Loan Agreement, the Lease, any other Financing Document or any other document;
(e) the genuineness, validity or enforceability of the Indenture, the Loan Agreement, the Lease, any other Financing Document or any other document;
(f) any limitation of liability of the Borrower or the School contained in the Indenture, the Loan Agreement, the Lease, any other Financing Document or any other document;
(g) any defense that may arise by reason of the failure of the Trustee to file or enforce a claim against the Borrower, the School, FOTA, any other Person or its or their estate(s) in any bankruptcy or other proceeding;
(h) any voluntary or involuntary liquidation, dissolution, sale of all or substantially all of the property of the Borrower, the School, FOTA or any other Person, or any marshalling of assets and liabilities of, or other similar proceeding affecting, the Borrower, the School, FOTA or any of its or their assets;
(i) the release of the Borrower or the School from performance or observance of any of the agreements, covenants, terms or conditions contained in the Indenture, the Loan Agreement, the Lease, any other Financing Document or any other document by operation of law;
(j) the failure of the Trustee to keep FOTA advised of the Borrower’s, the School’s or any other Person’s financial condition;
(k) any damage or destruction to or condemnation of the Project Facilities;
(l) any sale or other transfer of the Project Facilities or any part thereof or any judicial or non-judicial foreclosure by the Trustee on the Project Facilities or any part thereof; or
(m) any other circumstances which might otherwise constitute a legal or equitable discharge of FOTA.
No set-off, claim, reduction or diminution of any obligation, or any defense of any kind or nature which the Borrower, the School or FOTA now has or hereafter may have against the Trustee shall be available hereunder to FOTA against the Trustee.
Section 2.03. No Notice or Duty to Exhaust Remedies. FOTA hereby waives diligence, presentment, demand, protest and all notices of any kind, and waives any requirement that the Trustee exhaust any right or remedy, or proceed first or at any time, against the Borrower, the School or any other Person. The Trustee may pursue its respective rights and remedies under this Agreement and under the Indenture, the Loan Agreement, the Lease, any other Financing Document or any other document in whatever order, or collectively, and shall be entitled to payment and performance hereunder notwithstanding such other documents and notwithstanding any action taken by the Trustee or inaction by the Trustee to enforce any of its rights or remedies against FOTA or any other Person or property
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whatsoever, it being the purpose and intent of FOTA that the obligations hereunder shall be absolute, continuing, independent and unconditional under any and all circumstances.
Section 2.04. Payments by Borrower or School; Subordination. The Borrower or the School may agree to repay or otherwise indemnify FOTA for any advances or payments made by FOTA under Section 2.01 of this Agreement, provided that any such agreement to repay or indemnify shall be (i) fully subordinate in payment to the obligations of the Borrower or the School, as applicable, concurrently due from time to time under the Indenture, the Loan Agreement, the Lease or any other Financing Document, and (ii) unsecured.
Section 2.05. Additional Waivers.
(a) FOTA shall continue to be liable under this Agreement and the provisions hereof shall remain in full force and effect for the benefit of the Trustee notwithstanding (i) the election of remedies by the Trustee, including, without limitation, any election to proceed by judicial or nonjudicial foreclosure of any security, whether real property or personal property security, or by deed in lieu thereof, and whether or not every aspect of any foreclosure sale is commercially reasonable, or any election of remedies, including, but not limited to, remedies relating to real property or personal property security, which impairs or eliminates any rights of FOTA to proceed against the Borrower, the School or any other Person for reimbursement, or both, and (ii) any right FOTA might have under applicable law to revoke this Agreement. Without limiting the generality of the foregoing, FOTA agrees that FOTA’s liability shall continue even if any obligations of the Borrower or the School under any Financing Document or any other document are altered in any respect or the Trustee’s or FOTA’s remedies or rights against the Borrower, the School or any other Person are in any way impaired or suspended without FOTA’s consent, and FOTA hereby waives any and all rights, benefits and defenses it may have under applicable law with respect thereto.
(b) FOTA’s liability hereunder shall not be limited or affected in any way by any impairment or any diminution or loss of value of any security, guaranty or collateral for any Financing Document whether caused by hazardous substances or otherwise, the Trustee’s failure to perfect a security interest in such security or collateral or any disability or other defense of the Borrower, the School, FOTA or any other Person.
(c) FOTA agrees that the Trustee may enforce this Agreement before and after the occurrence of a Default or Event of Default under any Financing Document, notwithstanding (i) the existence of any dispute between the Borrower, the School and the Trustee with respect to the existence of such default or performance of the Borrower’s or the School’s obligations under any Financing Document, or any counterclaim, setoff or other claim which the Borrower or the School may allege against the Trustee with respect thereto, or (ii) the existence of any dispute between FOTA and the Borrower or the School, or any counterclaim, setoff or other claim which FOTA may allege against the Borrower or the School with respect thereto. Moreover, FOTA agrees that the Borrower’s and the School’s obligations shall not be affected by any circumstances which would constitute a legal or equitable discharge of FOTA.
(d) FOTA hereby waives any and all rights and benefits it may have under applicable law to require the Trustee to proceed against any other Person, to foreclose any lien on any real or personal property, to exercise any right or remedy under any Financing Document or any other document or to pursue any other remedy or to enforce any other right.
Section 2.06. Financial Statements. FOTA shall keep proper books, records and accounts containing complete and accurate entries of all financial and business transactions relating to its business, operations, property, assets, condition (financial or otherwise) or prospects in conformity with
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generally accepted accounting principles and all other legal requirements. FOTA shall maintain its books or records at its primary place of business unless thirty (30) days prior written notice of the new location where its books and records will be maintained has been delivered to the Trustee. As soon as practical, but in any case within 120 days after the end of the applicable Fiscal Year, FOTA shall deliver a copy of its audited financial statements to the Trustee.
Section 2.07. Assignment. FOTA’s obligations under this Agreement may be assigned to another entity, with the prior written consent of the Borrower and Trustee, which consent in the case of the Trustee shall not be unreasonably withheld, provided that (i) the assignee must be an organization described under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, created for the purpose, inter alia, of providing support to the School, and (ii) prior to any such assignment, the Borrower shall make a determination, in consultation with an investment banker or other qualified consultant, that such assignment is not reasonably expected to result in a lowering of any rating then assigned to the Bonds.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 3.01. Representations and Warranties. FOTA hereby represents, warrants and covenants to and with the Trustee that:
(a) FOTA is a New Jersey not-for-corporation and charitable organization created for the purpose of providing support to the School. FOTA has all requisite power and authority necessary to execute, deliver and perform its obligations under this Agreement.
(b) The execution, delivery and performance by FOTA of this Agreement (i) are within FOTA’s powers (ii) have been duly authorized by all requisite action of the governing body of FOTA in accordance with its organizational documents, and (iii) do not conflict with, violate or constitute a default under any law, rule, regulation, decree or judgment applicable to FOTA or any indenture, mortgage, deed of trust, agreement, instrument, contract or other restriction binding on or affecting FOTA.
(c) This Agreement is a legal, valid and binding obligation of FOTA enforceable against FOTA in accordance with its terms, subject to the application by a court of general principles of equity and to the extent of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors’ rights generally.
ARTICLE IV
DEFAULTS AND REMEDIES
Section 4.01. Defaults. Each of the following shall constitute an event of default hereunder (“Event of Default”):
(a) Failure by FOTA to make to the Trustee any advance or payment when due under Section 2.01 of this Agreement;
(b) Any material provision of this Agreement shall at any time for any reason cease to be valid and binding on FOTA or the School or shall be declared to be null and void, or the validity or enforceability thereof shall be contested by FOTA, the Borrower or the School or any governmental authority, or FOTA shall deny that it has any or further liability or obligation under
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this Agreement (provided that, if FOTA funds and continues to fund its obligations as required herein, any contest by FOTA of any particular liability or obligation of FOTA under this Agreement shall not, in and of itself, constitute an Event of Default); or
(c) FOTA shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian or the like of FOTA or of any substantial part of the property of FOTA or (ii) not, or be unable to, or admit in writing the inability of FOTA to, pay its debts generally as they become due, or (iii) make a general assignment for the benefit of creditors, or (iv) be adjudicated a bankrupt or insolvent, or (v) commence a voluntary case under the United States Bankruptcy Code or file a voluntary petition or answer seeking reorganization, an arrangement with creditors or an order for relief or seeking to take advantage of any insolvency law or file an answer admitting the material allegations of a petition filed against FOTA in any bankruptcy, reorganization or insolvency proceeding, or take corporate action for the purpose of effecting any of the foregoing, or (vi) have instituted against it a proceeding in any court of competent jurisdiction, under any law relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking in respect of FOTA an order for relief or an adjudication in bankruptcy, reorganization, dissolution, winding up or liquidation, a composition or arrangement with creditors, a readjustment of debts, the appointment of a trustee, receiver, liquidator or custodian or the like of FOTA or of all or any substantial part of the assets of FOTA or other like relief in respect thereof under any bankruptcy or insolvency law, and if such proceeding is being contested in good faith by FOTA, the same shall (A) result in the entry of an order for relief or any such adjudication or appointment or (B) remain undismissed and undischarged for a period of 60 days, or (vii) FOTA shall take any action in furtherance of, or indicating its consent to, approval of or acquiescence in, any of the acts described in clauses (i) through (vi) above.
Section 4.02. Remedies. Upon or after the occurrence of any Event of Default, the Trustee may, at its sole option and without prior notice, exercise, or cause to be exercised, any and all such remedies as it may have under this Agreement, any other Financing Document or any other document or at law or in equity.
Section 4.03. Waivers; Consents. No waiver of, or consent with respect to, any provision of this Agreement shall in any event be effective unless the same shall be in writing and signed by the Trustee, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given.
ARTICLE V
MISCELLANEOUS
Section 5.01. Further Assurances. From time to time upon the request of the Trustee, FOTA and the Borrower shall promptly and duly execute, acknowledge and deliver any and all such further instruments and documents as the Trustee may deem necessary or desirable to confirm this Agreement, to carry out the purpose and intent hereof or to enable the Trustee to enforce any of their rights hereunder.
Section 5.02. Amendments, Waivers, Etc. This Agreement may not be amended, modified, waived, changed, discharged or terminated, except by an instrument in writing signed by the party against whom enforcement of such amendment, modification, waiver, change, discharge or termination is sought and acknowledged by the Trustee.
Section 5.03. No Implied Waiver; Cumulative Remedies. No course of dealing and no delay or failure of the Trustee in exercising any right, power or privilege under this Agreement, the
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Indenture, the Loan Agreement, the Lease, any other Financing Document or any other document shall affect any other or future exercise thereof or exercise of any other right, power or privilege; nor shall any single or partial exercise of any such right, power or privilege or any abandonment or discontinuance of steps to enforce such a right, power or privilege preclude any further exercise thereof or of any other right, power or privilege. The rights and remedies of the Trustee under this Agreement are cumulative and not exclusive of any rights or remedies which the Trustee would otherwise have under the Indenture, the Loan Agreement, the Lease, any other Financing Document or any other document, at law or in equity.
Section 5.04. Notices. All notices, requests, demands, directions and other communications (collectively “notices”) under the provisions of this Agreement shall be in writing unless otherwise expressly permitted hereunder and shall be sent by United States certified or registered mail, return receipt requested, or by telecopier or reputable overnight courier or delivery service, in all cases with charges prepaid, and any such properly given notice shall be effective, when mailed as aforesaid, on the date shown on the return receipt, and when sent by any such other means, when received. All notices shall be sent to the applicable party addressed as set forth in Schedule I hereto. The Trustee may rely on any notice (including telephoned communication) purportedly made by or on behalf of FOTA, and shall have no duty to verify the identity or authority of the Person giving such notice.
Section 5.05. Expenses. FOTA agrees to pay or cause to be paid and to save the Trustee harmless against liability for the payment of all reasonable out-of-pocket expenses, including fees and expenses of counsel, incurred by the Trustee from time to time arising in connection with the Trustee’s enforcement or preservation of rights under this Agreement with respect to FOTA, including but not limited to such expenses as may be incurred by the Trustee in connection with any default by FOTA of any of its obligations hereunder. All obligations of FOTA to make payments under this Section 5.05 shall survive the payment in full of the Funding Obligations.
Section 5.06. Jurisdiction; Etc. Each of FOTA and the Borrower irrevocably (a) agrees that the Trustee may bring suit, action or other legal proceedings arising out of this Agreement in any federal or state court located in Newark, New Jersey; (b) consents to the jurisdiction of each such court in any such suit, action or proceeding; (c) waives, to the fullest extent permitted by applicable law, any objection which FOTA or the Borrower may have to the laying of the venue of any such suit, action or proceeding in any of such courts; and (d) to the fullest extent permitted by applicable law, waives any right FOTA or the Borrower may have to a jury trial in connection with any such suit, action or proceeding. FOTA hereby irrevocably consents to the service of any and all process in any such suit, action or proceeding by mailing of a copy of such process at the address provided in Schedule I hereto. FOTA agrees a final judgment in any such action or proceeding shall be conclusive, and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. All mailings under this Section shall be certified or registered mail, return receipt requested. Nothing in this Section shall affect the right of the Trustee to serve legal process in any other manner permitted by law or affect the right of the Trustee to bring any suit, action or proceeding against FOTA or its property in any other jurisdiction. The Borrower shall not commence any enforcement action against FOTA under this Agreement without the prior written consent of the Trustee.
Section 5.07. Reinstatement. This Agreement shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Funding Obligations is rescinded or must otherwise be restored or returned by the Trustee upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Borrower or FOTA or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for the Borrower or FOTA or any substantial part of its or their property, or otherwise, all as though such payments had not been made.
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Section 5.08. Severability. If any term or provision of this Agreement or the application thereof to any Person or circumstance shall to any extent be invalid or unenforceable, the remainder of this Agreement, or the application of such term or provision to Persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each term and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.
Section 5.09. Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument.
Section 5.10. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New Jersey.
Section 5.11. Successors and Assigns. This Agreement shall bind FOTA and the Borrower and their successors and assigns, and shall inure to the benefit of the Trustee and its respective successors and assigns.
Section 5.12. Immunity of Individuals. No recourse shall be had for the payment of the Funding Obligations under this Agreement or for any claim based thereon or on any covenant or agreement of FOTA in this Agreement against any past, present or future officer, director, member, employee or individual agent of FOTA, and all such liability of any such individual as such is hereby waived and released.
Section 5.13. Concerning the Trustee. In acting or refraining from acting under or pursuant to this Agreement, the Trustee shall be entitled to all of the rights, protections and immunities afforded to it under the Indenture and the Loan Agreement. Nothing herein shall require the Trustee to risk its own funds or otherwise incur any financial liability in acting or refraining from acting hereunder, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk is not reasonably assured to it.
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IN WITNESS WHEREOF, FOTA and the Borrower have duly executed and delivered this Agreement in favor of the Trustee as of the date first above written.
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, A NEW JERSEY NON-PROFIT ORGANIZATION
By __________________________________
Name: Title:
ASHLAND SCHOOL, INC.
By __________________________________ Name: Title:
RECEIPT OF THIS AGREEMENT ACKNOWLEDGED BY: MANUFACTURERS & TRADERS TRUST COMPANY, as Trustee By __________________________________ Name: Title:
SCHEDULE I ADDRESSES
If to FOTA:
The Friends of TEAM Academy Charter School, A New Jersey Non-Profit Organization 60 Park Place, Suite 802 Newark, NJ 07112 Attention: Hannah Richman Director
Telephone:
If to the Borrower:
Ashland School, Inc. 60 Park Place, Suite 802 Newark, NJ 07112 Attention: Hannah Richman Secretary
Telephone:
If to the Trustee:
Manufacturers & Traders Trust Company 166 Mercer Street, Suite 2R New York, NY 10012 Attention: Corporate Trust Department
Telephone: 212-941-4418 Fax: 212-343-1079
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PRELIMINARY OFFICIAL STATEMENT DATED OCTOBER 18, 2013
NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY$23,000,000*
CHARTER SCHOOL REVENUE BONDS(SERIES 2013 PROJECT FOR THE TEAM ACADEMY CHARTER SCHOOL)
NEW ISSUE
Dated: Date of Issuance
RATING: Standard & Poor’s: BBB Outlook: Stable See “RATING” herein.
Due: October 1, as shown on inside cover
In the opinion of Wolff & Samson PC, West Orange, New Jersey, Bond Counsel, assuming continuing compliance by the Authority, the Borrower and the School with certain tax covenants described herein, under existing law, interest on the Bonds (i) is not includable in gross income for Federal income tax purposes under current law, (ii) is not an item of tax preference under Section 57 of the Code for purposes of computing the alternative minimum tax; however, for Bonds held by corporate taxpayers interest on the Bonds is included in “adjusted current earnings”, which is used as an adjustment in determining the Federal alternative minimum tax for certain corporations. No opinion is expressed regarding other federal tax consequences arising with respect to the Bonds Interest on the Bonds and any gain from the sale thereof are not includable in the gross income of owners thereof under the New Jersey Gross Income Tax Act.. For a more complete discussion see “TAX MATTERS” herein.
The Bonds described above (the “Bonds”) are special, limited obligations of the New Jersey Economic Development Authority (the “Authority”) and will be issued under and will be payable solely from and secured by (i) a pledge of certain funds held under the Trust Indenture, dated as of November 1, 2013 (the “Indenture”), between the Authority and Manufacturers and Traders Trust Company, as trustee (the “Trustee”) and certain payments to be made by Ashland School, Inc., a New Jersey not-for-profit corporation (the “Borrower”), under a Loan Agreement dated as of November 1, 2013 (the “Loan Agreement”). The Borrower will lease the facilities financed from the proceeds of the Bonds (the “Project Facilities”) to TEAM Academy Charter School, Inc., a public charter school authorized by the State of New Jersey (the “School”) for lease payments sufficient to pay the principal of, premium, if any, and interest on the Bonds. See “SECURITY FOR THE BONDS – The Lease Agreements” herein.
THE BORROWER, ASHLAND SCHOOL, INC., IS A SINGLE PURPOSE ENTITY, IS NOT A SCHOOL AND WILL HAVE NO OPERATIONS AND NO ASSETS EXCEPT FOR THE PROJECT FACILITIES.
The Bonds will mature on the dates and in the amounts, and bear interest at the rates, set forth on the inside front cover hereof. Interest on the Bonds is payable semiannually on each April 1 and October 1, commencing on April 1, 2014. The Bonds will be issued as fully registered bonds, and, when issued, will be registered in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York (“DTC” or the “Securities Depository”), an automated depository for securities and a clearinghouse for securities transactions. Purchases of beneficial interests in the Bonds will be made in book-entry form (without certificates). The Bonds will be issued in minimum denominations of $25,000 or any integral multiple of $5,000 in excess thereof. So long as DTC, or its nominee, Cede & Co., is the registered owner of the Bonds, payments of the principal of, premium, if any, and interest on the Bonds will be made directly by the Trustee to Cede & Co., which will remit such payments to the beneficial owners of the Bonds. See “THE BONDS -- Book-Entry System” herein.
THE BONDS ARE SUBJECT TO REDEMPTION PRIOR TO MATURITY, AS DESCRIBED HEREIN.
Proceeds of the Bonds will be used by the Borrower to finance a project consisting of (i) acquisition of land and buildings located at 21 Ashland Street, Newark, New Jersey and 85 Custer Avenue, Newark, New Jersey; (ii) acquisition of land adjacent to 21 Ashland Street, Newark, New Jersey; (iii) completion of site work, (iv) construction and renovation of buildings on the property described in clause (i) above; (v) funding of a debt service reserve fund, and (vi) funding certain costs of issuing the Bonds.
THE STATE OF NEW JERSEY IS NOT OBLIGATED TO PAY, AND NEITHER THE FAITH AND CREDIT NOR TAXING POWER OF THE STATE OF NEW JERSEY IS PLEDGED TO THE PAYMENT OF, THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE BONDS. THE BONDS ARE A SPECIAL, LIMITED OBLIGATION OF THE AUTHORITY, PAYABLE SOLELY OUT OF THE REVENUES OR OTHER RECEIPTS, FUNDS OR MONEYS OF THE AUTHORITY PLEDGED THEREUNDER, AND FROM ANY AMOUNTS OTHERWISE AVAILABLE UNDER THE INDENTURE FOR THE PAYMENT OF THE BONDS. THE BONDS DO NOT NOW AND SHALL NEVER CONSTITUTE A CHARGE AGAINST THE GENERAL CREDIT OF THE AUTHORITY. THE AUTHORITY HAS NO TAXING POWER. InvestmentintheBondsinvolvesasignificantdegreeofriskandisspeculativeinnatureasdescribedunder“RISKFACTORS”hereinandunderothersectionsofthisOfficialStatement.
This cover page contains certain information for quick reference only. It is not a summary of the Official Statement. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision.
The Bonds are offered when, as and if issued by the Authority, subject to the approval of the legality of the Bonds by Wolff & Samson PC, West Orange, New Jersey, Bond Counsel, and certain other conditions. Certain legal matters will be passed upon for the Borrower by Hill Wallack LLP, Princeton, New Jersey and the School by Porzio, Bromberg, and Newman, P.C., Morristown, New Jersey; and for the Underwriter by Ballard Spahr LLP, Philadelphia, Pennsylvania. It is expected that the Bonds in definitive form will be available for delivery to The Depository Trust Company in New York, New York on or about November __, 2013.
Dated: _____________, 2013
* Preliminary, subject to change
$23,000,000* NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY
CHARTER SCHOOL REVENUE BONDS (SERIES 2013 PROJECT FOR THE TEAM ACADEMY CHARTER SCHOOL)
MATURITY SCHEDULE*
MATURITIES, AMOUNTS, INTEREST RATES, YIELDS, PRICES AND CUSIPS
Maturity
(October 1) Principal Amount
Interest Rate Yield Price CUSIP **
$___________ ______% Term Bond due _______________, Price ____% to Yield ___% CUSIP **________ $___________ ______% Term Bond due _______________, Price ____% to Yield ___% CUSIP **________ $___________ ______% Term Bond due _______________, Price ____% to Yield ___% CUSIP **________
* Preliminary, subject to change. ** Copyright 2013, American Bankers Association. CUSIP data herein are provided by Standard & Poor’s CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. The CUSIP numbers listed above are being provided solely for the convenience of Bondholders only at the time of issuance of the Bonds and the Authority does not make any representation with respect to such numbers or undertake any responsibility for their accuracy now or at any time in the future. The CUSIP number for a specific maturity is subject to being changed after the issuance of the Bonds as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certain maturities of the Bonds.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICES OF THE BONDS AT LEVELS ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE BONDS TO CERTAIN DEALERS AND OTHERS AT PRICES LOWER THAN THE PUBLIC OFFERING PRICES STATED ON THE INSIDE COVER PAGE OF THIS OFFICIAL STATEMENT, AND SUCH PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER.
This Official Statement does not constitute an offer to sell the Bonds in any jurisdiction to any person to whom it is unlawful to make such offer in such jurisdiction. No dealer, broker, salesman or other person has been authorized by the Authority, the Borrower, the School or the Underwriter to give any information or to make any representation other than that contained herein and, if given or made, such other information or representation must not be relied upon as having been authorized. Neither the delivery of this Official Statement nor the sale of any of the Bonds implies that the information herein is correct as of any time subsequent to the date hereof. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create the implication that there has been no change in the matters described herein since the date hereof.
This Official Statement is not to be construed as a contract with the purchasers of the Bonds. All summaries of statutes and documents are qualified in their entirety by reference to such statutes and documents, respectively, and do not purport to be complete statements of any or all of such provisions.
The information set forth herein has been provided by Authority, the Borrower, the School or the Underwriter and by other sources which such parties believe are reliable, but it is not guaranteed as to its accuracy or completeness, and it is not to be construed as a representation by the Underwriter.
This Official Statement is submitted in connection with the sale of the Bonds referred to herein and may not be reproduced or be used, as a whole or in part, for any other purpose.
The Bonds have not been registered under the Securities Act of 1933, as amended, in reliance upon an exemption contained therein.
THE ORDER AND PLACEMENT OF MATERIALS IN THIS OFFICIAL STATEMENT, INCLUDING THE APPENDICES HERETO AND INFORMATION INCORPORATED HEREIN BY REFERENCE, ARE NOT TO BE DEEMED TO BE A DETERMINATION OF RELEVANCE, MATERIALITY OR IMPORTANCE, AND THIS OFFICIAL STATEMENT, INCLUDING THE APPENDICES HERETO AND INFORMATION INCORPORATED HEREIN BY REFERENCE, MUST BE CONSIDERED IN ITS ENTIRETY. THE OFFERING OF THE BONDS IS MADE ONLY BY MEANS OF THIS ENTIRE OFFICIAL STATEMENT.
IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE BORROWER, THE SCHOOL AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THE BONDS HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with and as part of its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.
TABLE OF CONTENTS
Page
INTRODUCTORY STATEMENT ............................................................................................. 1
THE AUTHORITY ..................................................................................................................... 3
THE SCHOOL AND THE PROJECT ........................................................................................ 4
ESTIMATED SOURCES AND USES OF FUNDS ................................................................... 5
DEBT SERVICE SCHEDULE.................................................................................................... 5
THE BONDS ............................................................................................................................... 6
SECURITY FOR THE BONDS ................................................................................................ 11
RISK FACTORS ....................................................................................................................... 13
TAX MATTERS ........................................................................................................................ 18
CONTINUING DISCLOSURE ................................................................................................. 19
LITIGATION ............................................................................................................................. 19
LEGAL MATTERS ................................................................................................................... 19
FINANCIAL STATEMENTS ................................................................................................... 20
RATING .................................................................................................................................... 20
UNDERWRITING .................................................................................................................... 20
TRUSTEE; CERTAIN RELATIONSHIPS ............................................................................... 20
MISCELLANEOUS .................................................................................................................. 20
Appendix A: Ashland School, Inc. and TEAM Academy Charter School, Inc. Appendix B-1: Financial Statements of the School for the Fiscal Year Ended
June 30, 2012 Appendix B-2: Financial Statements of The Friends of TEAM Academy Charter School
for the Fiscal Year Ended June 30,2012 Appendix C: Form of Loan Agreement Appendix D: Form of Indenture Appendix E: Form of Lease Agreements Appendix F: Form of Legal Opinion of Bond Counsel Appendix G: Form of Continuing Disclosure Agreement
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OFFICIAL STATEMENT
NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY $23,000,000*
CHARTER SCHOOL REVENUE BONDS (SERIES 2013 PROJECT FOR THE TEAM ACADEMY CHARTER SCHOOL)
INTRODUCTORY STATEMENT
This Official Statement is furnished in connection with the offering of $23,000,000* aggregate principal amount of Charter School Revenue Bonds (Series 2013 Project for the TEAM Academy Charter School) (the “Bonds”) of the New Jersey Economic Development Authority (the “Authority”). The Bonds will be special, limited obligations of the Authority and will be issued under a Trust Indenture, dated as of November 1, 2013 (the “Indenture”), between the Authority and Manufacturers and Traders Trust Company, as trustee (the “Trustee”).
The Authority is a public body corporate and politic constituting an instrumentality of the State of New Jersey. The Authority is authorized by Chapter 80 of the Laws of 1974 of New Jersey, as amended, codified at N.J.S.A. 34:1B-l, et seq. (the “Act”) to borrow money by issuing its revenue bonds for the purposes provided in the Act to, including but not limited to, extend credit or make loans for the planning, designing, acquiring, constructing, reconstructing, and equipping of projects, which includes a project such as the Project as hereinafter described, which loans may be secured upon such terms and conditions as the Authority shall deem reasonable.
The proceeds of the Bonds will be loaned to Ashland School, Inc., a New Jersey not-for-profit corporation (the “Borrower”) pursuant to a Loan Agreement dated as of November 1, 2013 (the “Loan Agreement”) between the Authority and the Borrower for the purpose of financing a project (the “Project”) consisting of (i) the acquisition of land and buildings located at 21 Ashland Street, Newark, New Jersey and 85 Custer Avenue, Newark, New Jersey (collectively, the “Mortgaged Property”); (ii) the acquisition of land located adjacent to 21 Ashland Street, Newark, New Jersey (the “Field Property” and, together with the Mortgaged Property, the “Project Facilities”); (iii) completion of site work, (iv) construction and renovation of buildings on the Mortgaged Property; (v) funding of a debt service reserve fund; and (vi) funding certain costs of issuing the Bonds. The Borrower is a special purpose entity and is not a school. For more information on the Borrower, see APPENDIX A.
The Project Facilities will be leased by the Borrower to TEAM Academy Charter School, Inc., a KIPP-affiliated public New Jersey charter school (the “School”). The School received its charter from the State of New Jersey in 2002. A renewal and expansion of the School’s charter was approved in 2006, with a further expansion approval in 2009 and a second renewal and expansion approval in 2011 for a five-year term. The School currently operates six school campuses located in Newark, New Jersey, including the Mortgaged Property. The Project Facilities consist of TEAM Academy and Rise Academy, both of which enroll students in grades 5-8, and the Field Property, on which athletic fields for use by all schools under the School’s charter and parking will be constructed. Other school facilities operated by the School enroll students in grades K-4 and 9-12. For more information on the Borrower and the School, see APPENDIX A hereto.
The Borrower is required, pursuant to the provisions of the Loan Agreement and a Series 2013 Note from the Borrower to the Authority (the “Note”), to make payments sufficient to pay the principal of and premium, if any, and interest on the Bonds when due. The Borrower’s obligations under the Loan Agreement and the Note will be secured by a mortgage and security agreement in favor of the Trustee * Preliminary, subject to change
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(the “Mortgage”) granting a first mortgage lien in and to the Mortgaged Property to the Trustee and the Absolute Assignment of Leases (as defined herein).
The Mortgaged Property will be leased to the School pursuant to separate lease agreements between the Borrower as lessor and the School as lessee (together, the “Lease Agreements”), each dated as of November 1, 2013. Under the Lease Agreements, the School will agree to make lease payments to the Borrower in amounts which in total will be at least sufficient to pay the principal of, premium, if any, and interest on the Bonds when due. The obligations of the School under the Lease Agreements will be an unsecured general obligation of the School. See “SECURITY FOR THE BONDS – The Lease Agreements” herein. The Form of Lease Agreements is attached hereto as APPENDIX E.
The Field Property also will be leased to the School pursuant to a lease; however, the Field Property is not subject to the Mortgage.
The Borrower, the Trustee and The Friends of TEAM Academy Charter School, A New Jersey Non-Profit Organization (“FOTA”), a New Jersey not-for-profit corporation and charitable organization formed to conduct fundraising and provide support for the School, will enter into a Support Agreement (the “Support Agreement”) dated as of November 1, 2013 under which FOTA will agree to make up any deficiency if and to the extent the Trustee does not hold sufficient funds under the Indenture to pay the principal of and interest on the Bonds when due. See “SECURITY FOR THE BONDS – The Support Agreement” herein.
The Bonds will be secured by an assignment by the Authority to the Trustee of the Authority’s right, title and interest in the Loan Agreement (except for certain reserved rights, including but not limited to the right to enforce certain covenants to collect certain fees and expenses and indemnification of the Authority), the Note and the Mortgage and by an Absolute Assignment of Leases and Rents by the Borrower to the Authority (the “Absolute Assignment of Leases”). The Bonds are limited obligations of the Authority and will be payable solely from the payments made by the Borrower pursuant to the Loan Agreement and the Note (except to the extent payable, under certain circumstances, from proceeds of insurance, sale or condemnation awards) and by payments by the School pursuant to the Lease Agreements or by FOTA pursuant to the Support Agreement. See “SECURITY FOR THE BONDS” herein.
THE BORROWER IS A SINGLE PURPOSE ENTITY AND IS NOT EXPECTED TO HAVE ANY OPERATIONS OR ASSETS OTHER THAN THE PROJECT FACILITIES. EXCEPT TO THE EXTENT SET FORTH IN THE SUPPORT AGREEMENT, NEITHER FOTA NOR ANY OF ITS AFFILIATES IS OBLIGATED TO MAKE PAYMENTS WITH RESPECT TO THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE BONDS.
THE STATE OF NEW JERSEY IS NOT OBLIGATED TO PAY, AND NEITHER THE FAITH AND CREDIT NOR TAXING POWER OF THE STATE OF NEW JERSEY IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OR REDEMPTION PREMIUM, IF ANY, OF OR INTEREST ON THE BONDS. THE BONDS ARE SPECIAL, LIMITED OBLIGATIONS OF THE AUTHORITY, PAYABLE SOLELY OUT OF THE REVENUES OR OTHER RECEIPTS, FUNDS OR MONEYS OF THE AUTHORITY PLEDGED UNDER THE INDENTURE, AND FROM ANY AMOUNTS OTHERWISE AVAILABLE THEREUNDER FOR THE PAYMENT OF THE BONDS. THE BONDS DO NOT NOW AND SHALL NEVER CONSTITUTE A CHARGE AGAINST THE GENERAL CREDIT OF THE AUTHORITY. THE AUTHORITY HAS NO TAXING POWER.
If and when included in this Official Statement, the words “expects”, “forecasts”, “projects”, “intends”, “anticipates”, “estimates”, “assumes”, and analogous expressions are intended to identify forward-looking statements and such statements inherently are subject to a variety of risks and uncertainties that could cause actual results to differ materially from those that have been projected. Such
3
risks and uncertainties include, among others, changes in economic conditions and various other events, conditions and circumstances, many of which are beyond the control of the Borrower, the School or the Authority. Such forward-looking statements speak of events, conditions and circumstances only as of the date of this Official Statement. The Borrower, the School and the Authority disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any changes in their expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
This Official Statement contains descriptions, summaries or forms of, as may be appropriate, among other matters, the Authority, the Borrower, the School, the Bonds, the Project, the Indenture, the Loan Agreement, the Note, the Mortgage, the Lease Agreements, the Absolute Assignment of Leases and the Support Agreement. Such descriptions and information do not purport to be comprehensive or definitive. Definitions of certain words and terms used in this Official Statement have the meaning ascribed to such terms in the Loan Agreement or the Indenture. All references herein to the Indenture, the Loan Agreement, the Note, the Mortgage, the Lease Agreements, the Absolute Assignment of Leases and the Support Agreement are qualified in their entirety by reference to such documents, and references herein to the Bonds are qualified in their entirety by reference to the form thereof included in the Indenture. Copies of such documents will be available for inspection at the corporate trust office of the Trustee in New York, New York, after delivery of the Bonds. The forms of the Loan Agreement, the Indenture and the Lease Agreements are attached to this Official Statement as Appendices C, D and E, respectively.
THE AUTHORITY
The Authority was established in 1974 as a public body corporate and politic, constituting an instrumentality of the State of New Jersey, exercising public and essential governmental functions, empowered by the Constitution and laws of the State, including specifically, The New Jersey Economic Development Authority Act, P.L. 1974, Chapter 80, as amended and supplemented (“Act”).
The Act authorizes the Authority to assist in various ways in financing the cost of acquiring, constructing, improving and equipping projects, including machinery and equipment, for the manufacturing, processing and assembling of raw materials or manufactured products, for research, office, industrial or commercial facilities, or for the control, abatement or prevention of land, sewer, water, air, noise or general environmental pollution deriving from the operation of public utilities, industry, manufacturing, warehousing, commercial, office and research facilities. In order to discharge its responsibilities and fulfill the purposes mentioned above, the Authority is authorized to issue and sell bonds and notes for these purposes, including the Bonds herein described.
The Authority consists of thirteen members and three alternate members. Of the thirteen members, an officer of the Executive Branch of the State of New Jersey appointed by the Governor, the Commissioner of Labor and Workforce Development, the Commissioner of Banking and Insurance, the Commissioner of Department of Environmental Protection, and the State Treasurer are ex-officio members and the remaining eight are public members, appointed by the Governor, all for terms of three years. In addition, a public member of the State Economic Recovery Board established pursuant to section 36 of P.L.2002,c.43(C.52:27BBB-36) appointed by the board, shall serve as a non-voting, ex-officio member of the Authority. Alfred C. Koeppe is a public member and Chairman of the Authority. The Act, as amended on July 18, 2000, provides that the appointment of new public members shall be as follows: there shall be eight public members, two public members (who shall not be legislators) are appointed by the Governor upon recommendation of the Senate President, and two public members (who shall not be legislators) are appointed by the Governor upon recommendation of the Speaker of the General Assembly, and four public members shall be appointed by the Governor. The appointments of the eight public members shall be as follows: the two members appointed upon the recommendation of the Senate President and the two members appointed upon the recommendation of the Speaker of the General Assembly shall serve terms of three years;
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two members shall serve terms of two years and two members shall serve terms of one year. There shall be three alternate members. Of the three alternate members, one alternate member (who shall not be a legislator) is appointed by the Governor upon recommendation of the Senate President, one alternate member (who shall not be a legislator) is appointed by the Governor upon recommendation of the Speaker of the General Assembly, and one alternate member shall be appointed by the Governor. The appointments of the alternate members shall be as follows: the alternate member appointed upon the recommendation of the Senate President shall serve a term of three years; the alternate member appointed upon the recommendation of the Speaker of the General Assembly shall serve a term of two years and one alternate member shall serve a term of one year.
The executive staff of the Authority includes professionals in the fields of industrial and commercial development and management, finance and mortgage lending. Michele A. Brown is the Chief Executive Officer and Timothy J. Lizura is the President and Chief Operating Officer.
The Authority maintains offices at 36 West State Street, Trenton, New Jersey 08625-0990 (P.O. Box 990).
THE AUTHORITY HAS NOT REVIEWED OR APPROVED, AND DOES NOT REPRESENT OR WARRANT IN ANY WAY, THE ACCURACY OR COMPLETENESS OF ANY OF THE INFORMATION SET FORTH IN THIS OFFICIAL STATEMENT (OTHER THAN THE STATEMENTS AND INFORMATION SET FORTH UNDER THE CAPTION “THE AUTHORITY” AND UNDER THE CAPTION “LITIGATION” INSOFAR AS SUCH STATEMENTS AND INFORMATION RELATE TO THE AUTHORITY).
THE SCHOOL AND THE PROJECT
The School currently operates six school campuses, including the Mortgaged Property and four other school facilities, all located in Newark, New Jersey. The Project Facilities consist of (i) TEAM Academy, located at 85 Custer Avenue, and Rise Academy, located at 21 Ashland Street, both of which enroll students in grades 5-8, and (ii) the Field Property, located adjacent to 21 Ashland Street, which consists of land on which athletic fields for use by all of the School’s students and parking will be constructed. Proceeds of the Bonds will finance the acquisition of the existing TEAM Academy and Rise Academy campuses and construction and renovation of buildings located on such campuses, completion of site work, the acquisition of the Field Property, funding a debt service reserve fund for the Bonds and funding certain costs of issuing the Bonds. Construction of the athletic fields to be located on the Field Property is expected to be financed with proceeds of the Authority’s $14,635,000 Qualified School Construction Bond (TEAM Academy Charter School, Inc. Project), Series 2012. While the Field Property is part of the Project Facilities and will be leased by the Borrower to the School pursuant to a lease, it is not subject to the Mortgage or the Absolute Assignment of Leases.
The Mortgaged Property will be leased by the Borrower to the School pursuant to the Lease Agreements. The four other school facilities operated by the School, the Field Property, and future locations expected to be operated by the School, are not subject to the Lease Agreements. For more information on the School and the Project, see APPENDIX A hereto
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ESTIMATED SOURCES AND USES OF FUNDS
Set forth below are the estimated sources and uses of funds in connection with the Project:
SOURCES Par amount of Bonds Equity Contribution USES Costs of the Project Debt Service Reserve Fund
Costs of Issuance* _______________ *Includes Authority Application Fee, Bond Counsel fees, Underwriter’s Discount, Underwriter’s Counsel fees, Trustee and Trustee’s Counsel fees, Borrower’s and School’s Counsel fees, title insurance premium, printing costs and other miscellaneous costs associated with the issuance of the Bonds.
DEBT SERVICE SCHEDULE
The following table sets forth the amounts required to make debt service payments with respect to the Bonds, including principal due at maturity, and interest.
Period Ending
([________]) Principal Interest
Total
Debt Service
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THE BONDS
General Description
The Bonds will be dated the date of issuance of the Bonds and will bear interest from that date at the rates and mature on the dates set forth on the inside front cover page of this Official Statement.
The Bonds are issued pursuant to Resolutions adopted by the Authority on June 11, 2013, and August 13, 2013, as may be amended by the Authority prior to issuance of the Bonds, and the terms of the Indenture. The Bonds are payable (except to the extent payable from the proceeds of the Bonds and the investment earnings thereon and under certain circumstances, the net proceeds of insurance or condemnation awards) as to principal, premium, if any, and interest, solely from the payments to be made to the Authority under the Loan Agreement and the Note. Pursuant to the Loan Agreement, the proceeds from the sale of the Bonds will be loaned by the Authority to the Borrower for the purpose of providing funds for the financing of the Project. The Bonds are all issued under and are equally and ratably secured by, and entitled to the protection of, the Indenture. The obligations created under the Loan Agreement and the Note are limited obligations of the Borrower secured solely by the Mortgage and the Absolute Assignment of Leases. See “SECURITY FOR THE BONDS” herein.
The Bonds are issuable as book entry only bonds registered in the name of Cede & Co. in minimum denominations of $25,000 or any integral multiple of $5,000 in excess thereof. Interest will be payable semi-annually on the first day of each April and October (each an “Interest Payment Date”), beginning on April 1, 2014 until the final maturity of the Bonds. Interest on the Bonds will be computed on the basis of a 360-day year composed of twelve 30-day months.
Interest payments (other than the final payment of interest due at the maturity or redemption of the Bonds) will be mailed by the Trustee, as Paying Agent (the “Paying Agent”), on the payment date to each registered Holder of the Bonds as it appears on the registration books of the Authority maintained by the Trustee on the fifteenth (15th) day of the month next preceding any Interest Payment Date (the “Record Date”), at the address listed for such Holders on such registration books. Upon written request received not later than the applicable Record Date, any holder of Bonds aggregating $1,000,000 or more shall be entitled to receive interest payments from the Trustee by wire transfer. The final payment of principal or Redemption Premium, if any, will be payable at the corporate trust office of the Trustee or such other place as the Trustee and the registered Holder of the Bond may agree, upon surrender of the Bond for cancellation. The Trustee is the registrar and Paying Agent for the Bonds.
Payments of principal will be made at the corporate trust office of the Paying Agent in New York, New York, or at the office designated for such payment by the Paying Agent or any successor Paying Agent, upon proper presentation of the Bonds.
A change in the registered owner of the Bonds can only be effected by presenting the Bonds, in accordance with the provisions of the Indenture, to the Trustee at its office in New York, New York (or such other office of which the Trustee or any successor registrar shall notify the Holders), together with the name, address and tax identification number of the new registered Holder.
If any Bond is mutilated, lost, stolen or destroyed, the Trustee will deliver, subject to the provisions of the Indenture, a new bond of like series and aggregate principal amount. In the case of a lost, stolen or destroyed Bond, the Trustee will require satisfactory evidence of such loss, theft, or destruction and satisfactory indemnification. The Trustee may charge the Holders of the Bonds with its fees and expenses in connection with replacing mutilated, lost, stolen or destroyed Bonds.
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Sinking Fund Redemption
The Bonds maturing October 1, 20__, October 1, 20__ and October 1, 20__ are subject to mandatory sinking fund redemption prior to maturity, in part by lot, at a redemption price equal to 100% of the principal amount thereof plus accrued interest to the redemption date on October 1 in the following years and in the amounts set forth below:
Bonds Maturing on October 1, ____
Bonds Maturing on October 1, ____
Bonds Maturing on October 1, ____
Year Amount Year Amount Year Amount ______________ *Final Maturity
In lieu of the mandatory sinking fund redemption of the Bonds in any year, the Borrower may deliver to the Trustee for cancellation, or, under certain conditions set forth in the Indenture, request the Trustee to purchase, the Bonds of the applicable maturity in an amount up to but not exceeding the principal amount of such maturity scheduled for sinking fund redemption in such year. The Trustee shall reduce the principal amount of such Bonds subject to mandatory sinking fund redemption on the next succeeding redemption date by the principal amount of the Bonds so presented for cancellation or so purchased.
Optional Redemption
The Bonds maturing after October 1, 2023, are subject to redemption prior to maturity at the option of the Authority, at the direction of the Borrower, in whole or in part, at any time on or after October 1, 2023 at a redemption price equal to the principal amount thereof plus accrued interest to the redemption date.
Extraordinary Redemption
The Bonds are subject to redemption prior to maturity, in whole or in part, at any time from surplus money in the Project Fund which is transferred to the Redemption Fund, and from insurance proceeds, condemnation awards, proceeds of conveyances in lieu of condemnation or proceeds from the sale of the Project Facilities deposited in the Redemption Fund and available for such purpose, at a Redemption Price equal to 100% of the principal amount thereof, plus accrued interest to the redemption date.
Extraordinary Mandatory Redemption
The Bonds are subject to extraordinary mandatory redemption in whole at a Redemption Price equal to 100% of the principal amount thereof, plus accrued interest to the Redemption Date, when, at the option of the Authority, the Authority provides written notice to the Trustee that either of the following events has occurred:
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(1) the Borrower ceases to operate the Project Facilities, or ceases to cause the Project Facilities to be operated, as an authorized “project” under the Act for twelve (12) consecutive months, without first obtaining the prior written consent of the Authority; or
(2) any representation or warranty made by the Borrower in the Loan Agreement or in any report, certificate, financial statement or other instrument furnished by the Borrower in connection with the Loan Agreement shall prove to be false or misleading in any material respect when made.
Extraordinary Mandatory Redemption Upon Determination of Taxability
The Bonds are subject to extraordinary mandatory redemption in whole at a Redemption Price of 100% of the principal amount thereof, plus interest accrued to the Redemption Date, after receipt by the Trustee of a notice of the occurrence of a Determination of Taxability (as defined in the Indenture).
Notice of Redemption
The Trustee shall cause notice of any redemption of Bonds to be mailed by first class mail to the Holders of all Bonds to be redeemed at the registered addresses appearing in the registration books. Each such notice shall (i) be mailed not more than 45 nor less than 30 days prior to the redemption date, (ii) identify the Bonds to be redeemed (specifying the CUSIP numbers, if any, assigned to the Bonds) (iii) specify the redemption date, the Redemption Price and, if less than all of any particular Bond is to be redeemed, the principal amount so to be redeemed, (iv) state that on the Redemption Date the Bonds called for redemption will be payable at the corporate trust office of the Trustee, that from that date interest will cease to accrue, that no representation is made as to the accuracy or correctness of the CUSIP numbers (if any) printed therein or on the Bonds, and (v) provide any other descriptive information which may be necessary in order to identify the Bonds to be redeemed, including without limitation the original issuance date, maturity date and interest rate applicable to such Bonds. No defect affecting any Bond, whether in the notice of redemption or mailing thereof (including any failure to mail such notice), shall affect the validity of the redemption proceedings for any other Bonds.
If, at the time of mailing of notice of any optional redemption, or any redemption described under “Extraordinary Mandatory Redemption” above, the Borrower shall not have deposited with the Trustee moneys sufficient to redeem all the Bonds called for redemption, the redemption notice shall state that it is conditional on the deposit of the redemption moneys with the Trustee not later than the Redemption Date, and such notice shall be of no effect unless such moneys are so deposited.
If there shall be so called for redemption less than all of a Bond, the Authority shall execute and the Trustee shall authenticate and cause to be delivered, upon the surrender of such Bond, without charge to the owner thereof, for the unredeemed balance of the principal amount of the Bond so surrendered, Bonds of like series, designation, interest rates and maturities in any of the authorized denominations.
On or before the redemption date specified in the notice above provided for, there shall be deposited with the Trustee an amount of cash sufficient to effect the redemption of the Bonds specified in such notice, except that such amount may be reduced to the extent that moneys then held by the Trustee under any of the provisions of the Indenture are available for such redemption. All moneys deposited with the Trustee, or set apart by the Trustee under the provisions of the Indenture, for the redemption of Bonds shall be held in trust for the account of the respective registered owners of the Bonds to be redeemed and applied in accordance with the provisions of the Indenture.
On the redemption date designated in such notice, the principal amount of each Bond so to be redeemed, together with the accrued interest thereon to such date, and such premium, if any, as is due and payable on such Bond upon such redemption, shall become due and payable; and from and after such date (such notice having been given in accordance with the provisions of the Indenture and such deposit
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having been made or moneys set apart as aforesaid), then, notwithstanding that any Bonds so called for redemption shall not have been surrendered, no further interest shall accrue on any such Bond (or on the portion thereof so to be redeemed). From and after such date of redemption (such notice having been given in accordance with the provisions of the Indenture and such deposit having been made or moneys set apart as aforesaid), or from and after the date upon which such notice is mailed, if such notice shall state that moneys to effect such redemption have been deposited with or set apart by the Trustee, all such Bonds or such portions thereof, as the case may be, insofar as such deposit shall have been made or moneys set apart as aforesaid, shall be deemed to have been paid in full as between the Authority and the respective Bondholders and shall no longer be deemed to be Outstanding thereunder, and the Authority shall be under no further liability in respect thereof.
If notice of redemption has been duly mailed or duly waived by the Holders of all Bonds called for redemption and the redemption moneys have been duly deposited with the Trustee, then in either such case the Bonds called for redemption shall be payable on the redemption date at the applicable Redemption Price. Payment of the Redemption Price together with accrued interest shall be made by the Trustee, out of Revenues or other funds deposited for the purpose, to or upon the order of the Holders of the Bonds called for redemption upon surrender of such Bonds if redeemed in full.
Upon the payment of the Redemption Price of Bonds being redeemed, each check or other transfer of funds issued by the Trustee for such purpose shall bear a description of the issue and maturity of the Bonds being redeemed with the proceeds of such check or other transfer.
The DTC Book-Entry-Only System
The following information concerning DTC and DTC’s book-entry only system has been obtained from DTC. The Authority, the Borrower, the School and the Trustee make no representation as to the accuracy of such information.
DTC will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered certificate will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC.
So long as Cede & Co., as nominee of DTC, is the registered owner of the Bonds, the Beneficial Owners of the Bonds will not receive or have the right to receive physical delivery of the Bonds, and references herein to the Bondowners or registered Owners of the Bonds shall mean Cede & Co. and shall not mean the Beneficial Owners (as defined below) of the Bonds.
DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is a wholly owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which
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are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants” and, together with Direct Participants, the “Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org.
Purchase of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of a Bond (“Beneficial Owner”) is in turn to be recorded on the Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners, are however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.
To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants and by Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the Bonds are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in the Bonds to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Authority as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Principal, premium, if any, and interest payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Authority or the Trustee on the payable date in accordance with their respective holdings shown
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on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC (or its nominee), the Trustee, the Borrower or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, premium, if any, and interest on the Bonds to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority, the Borrower or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Participants.
DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the Authority or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered. The Authority may decide to discontinue use of the system of book-entry only transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered to DTC.
NONE OF THE AUTHORITY, THE BORROWER, THE SCHOOL OR THE TRUSTEE SHALL HAVE ANY RESPONSIBILITY OR OBLIGATION TO ANY DTC PARTICIPANT OR ANY BENEFICIAL OWNER OR ANY OTHER PERSON NOT SHOWN ON THE REGISTRATION BOOKS OF THE TRUSTEE AS BEING A BONDHOLDER WITH RESPECT TO EITHER: (1) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DTC PARTICIPANT; (2) THE PAYMENT BY DTC OR ANY DTC PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL OR REDEMPTION PRICE OF OR INTEREST ON THE BONDS; (3) THE DELIVERY OR THE TIMELINESS OF ANY NOTICE TO ANY BENEFICIAL OWNER WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE INDENTURE TO BE GIVEN TO THE OWNER OF THE BONDS; OR (4) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS BONDHOLDER.
THE INFORMATION IN THIS SECTION CONCERNING DTC AND DTC’S BOOK-ENTRY SYSTEM HAS BEEN OBTAINED FROM DTC. THE AUTHORITY, THE BORROWER, THE SCHOOL AND THE UNDERWRITER TAKE NO RESPONSIBILITY FOR THE ACCURACY OR COMPLETENESS THEREOF.
Transfer fees. For every transfer and exchange of Bonds, owners of such Bonds requesting such transfer or exchange may be charged a sum sufficient to cover any tax, governmental charge or transfer fees that may be imposed in relation thereto, which charge may include transfer fees imposed by the Trustee, DTC or the DTC Participant in connection with such transfers or exchanges.
SECURITY FOR THE BONDS
General
The Bonds are special, limited obligations of the Authority. There is no source of funds for payment of the Bonds except from revenues received under the Loan Agreement, the Lease Agreements, the Mortgage, the Absolute Assignment of Leases and the Support Agreement and certain funds held under the Indenture. The Borrower has no operations and no assets other than the Project Facilities. The Borrower’s sole source of revenue to pay obligations under the Loan Agreement will be payments from the School under the Lease Agreements.
The Lease Agreements
Pursuant to the Lease Agreements, the Borrower will lease the Mortgaged Property to the School and the School will make bi-monthly payments of base rent in amounts equal, collectively, to 120% of the
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debt service on the Bonds. The base rent payments will be made directly to the Trustee for the account of the Borrower and will be deposited to the Revenue Fund established under the Indenture. Provided that no event of default has occurred and is continuing under the Indenture or the Loan Agreement, the Trustee will return to the Borrower on October 1 of each year any surplus funds in the Revenue Fund not needed to pay debt service on the Bonds. The School’s primary source of revenue is from payments made to the School by Newark Public Schools equal to the applicable per pupil payment, as described in Appendix A hereto. See also “RISK FACTORS – State Funding of Charter Schools” herein. See Appendix E hereto for the Form of the Lease Agreements.
Pursuant to the Absolute Assignment of Leases, as security for the Borrower’s obligations under the Loan Agreement and the Note, the Borrower will irrevocably, absolutely and unconditionally assign to the Authority, as security for the Bonds, all of its rights, title, estates and interest in and to (i) the Lease Agreements; (ii) all proceeds from the cancellation, surrender, sale or other disposition of the Lease Agreements; (iii) the right to collect and receive rental payments paid by the School under the Lease Agreements; and (iv) the right to enforce and exercise all terms and conditions of the Lease Agreements.
The Mortgage
Pursuant to the Mortgage, the Borrower will grant to the Authority a first mortgage lien on the Mortgaged Property as security for the Borrower’s obligations to make payments under the Loan Agreement and the Note. The Mortgage will be assigned by the Authority to the Trustee to secure the Bonds. Simultaneously with the issuance and delivery of the Bonds, the Borrower will deliver a mortgagee title insurance policy covering all of the Mortgaged Property under the Mortgage and insuring title to the Mortgaged Property and the lien of the Mortgage in an amount not less than the principal amount of the Bonds.
The Support Agreement
Pursuant to the Support Agreement, FOTA, upon written notice from the Trustee that insufficient funds are available in the Debt Service Fund to pay the full amount of principal of and/or interest on the Bonds on any payment date, will pay to the Trustee for deposit into the Debt Service Fund not later than ten days prior to such payment date an amount such that the total amount of funds on deposit in the Debt Service Fund shall be sufficient to pay the principal of and/or interest on the Bonds due on such payment date.
Debt Service Reserve Fund
The Trustee shall establish under the Indenture a Debt Service Reserve Fund into which the Trustee shall initially deposit an amount equal to the initial “Reserve Fund Requirement” for the Bonds. Amounts on deposit in the Debt Service Reserve Fund shall be invested pursuant to the Indenture. If any withdrawal is made under the Indenture, the amount of the withdrawal shall be restored by the Borrower on or prior to the next Interest Payment Date following the Interest Payment Date on which the withdrawal is made. If the value of the assets in the Debt Service Reserve Fund, determined in accordance with the Indenture, is less than 95% of the Reserve Fund Requirement (except to the extent that such deficiency relates to any withdrawal), the difference between such Reserve Fund Requirement and the value of the Debt Service Reserve Fund shall be restored by deductions from the Revenue Fund in approximate equal monthly amounts so as to restore the Debt Service Reserve Fund to its proper value on or prior to the next succeeding Interest Payment Date following the date of such valuation.
Additional Bonds
Under the Loan Agreement and the Indenture, Additional Bonds may be issued by the Authority upon compliance with specified requirements and limitations, for the purpose of providing funds for the
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costs of undertaking or completing the Project or the cost of refunding or refinancing all or a portion of the Outstanding Bonds of any one or more series. Such Additional Bonds, if issued, will be equally and ratably secured with the Bonds (excluding, however, the Debt Service Reserve Fund) with respect to the Mortgage, without preference, priority or distinction of any bonds or indebtedness over any other thereof.
THE STATE OF NEW JERSEY IS NOT OBLIGATED TO PAY, AND NEITHER THE FAITH AND CREDIT NOR TAXING POWER OF THE STATE OF NEW JERSEY IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OR REDEMPTION PREMIUM, IF ANY, OF OR INTEREST ON THE BONDS. THE BONDS ARE SPECIAL, LIMITED OBLIGATIONS OF THE AUTHORITY, PAYABLE SOLELY OUT OF THE REVENUES OR OTHER RECEIPTS, FUNDS OR MONEYS OF THE AUTHORITY PLEDGED UNDER THE INDENTURE AND FROM ANY AMOUNTS OTHERWISE AVAILABLE THEREUNDER FOR THE PAYMENT OF THE BONDS. THE BONDS DO NOT NOW AND SHALL NEVER CONSTITUTE A CHARGE AGAINST THE GENERAL CREDIT OF THE AUTHORITY. THE AUTHORITY HAS NO TAXING POWER.
Pursuant to the Indenture and to secure the performance of its obligations thereunder, the Authority has pledged and assigned to the Trustee substantially all of its rights under the Loan Agreement, including the present and continuing right to make claim for, collect and receive the revenues and other amounts payable thereunder. The Authority has, however, retained certain of its rights under the Loan Agreement including, but not limited to, the right to enforce all public purpose covenants thereunder and to cause the Bonds to be redeemed for any breach of such public purpose covenants.
RISK FACTORS
The following discussion of some of the risk factors associated with the Bonds is not, and is not intended to be, exhaustive, and such risks are not necessarily presented in the order of their magnitude.
Sufficiency of School Revenues
The Bonds, together with any Additional Bonds, are secured by and payable solely from a pledge of certain funds held under the Indenture and certain payments to be made by the Borrower under the Loan Agreement. The Borrower is a single purpose entity and is entirely dependent on payments from the School under the Lease Agreements to make payments under the Loan Agreement. Based on present circumstances (i.e., its charter and operating history), the School believes it will generate sufficient revenues to meet its obligations under the Lease Agreements. However, the School’s Charter may be terminated or not renewed, or the basis of the assumptions utilized by the School to formulate this belief may otherwise change and no representation or assurance can be made that the School will continue to generate sufficient revenues to meet its obligations under the Lease Agreements.
Economic and Other Factors
Future economic and other factors may adversely affect the School’s revenues and expenses and, consequently, the School’s ability to make payments under the Lease Agreements. Factors that could have such adverse effects include, but are not limited to: decreases in the number of students seeking to attend the School at optimum levels for each grade level; the ability of the School to provide the education desired and accepted by the population served; demographic changes or economic developments in the affected service area, including inflation and interest rates; diminution of the School’s reputation; competition from other educational institutions, including other charter schools, private schools and public schools; lessened ability of the School to attract and retain qualified teachers and staff at forecasted salaries; increased costs associated with technological advances; changes in government regulation of the education industry or in the New Jersey charter school statutes; decrease in per-student funding amounts by the State; future claims and torts (for accidents or any other reason) at the
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School and the extent of insurance coverage for such claims; and the occurrence of natural disasters, such as floods.
Funding of Charter Schools
Funding for charter school students comes from the various school districts where the charter school students reside. School districts receive their funding from the State. If funds are not allocated by the State, or are reduced for any reason or delayed, either at the State or school district level, it could have a material adverse affect on the operations of the School. See APPENDIX A – “New Jersey Charter Schools – TEAM Revenues: ‘Per Pupil Funding’” for information regarding historic levels of funding.
The School is the beneficiary of federal subsidies from programs such as Qualified School Construction Bonds and Qualified Zone Academy Bonds, and also may benefit in the future from additional Qualified School Construction Bonds and Qualified Zone Academy Bonds and other federal subsidies such as New Markets Tax Credit financing. These programs may be impacted by sequestration and any shutdown of the federal government.
Revocation or Non-Renewal of Charter
Unless renewed, the School’s Charter will expire on June 30, 2016. The School’s Charter may be terminated at any time if the School is not in substantial compliance with the Charter or any relevant provision of New Jersey law. In the event that the School’s Charter is revoked or not renewed, the School would be forced to cease operations and the Lease Agreements would terminate.
Competition for Students
The School competes for students with other public schools, charter schools and private schools. There can be no assurance that the School will attract and retain the number of students that are needed to produce the revenues that are necessary to make sufficient Lease payments to pay the debt service on the Bonds. Several public and charter schools are located in close proximity to the School. See APPENDIX A – “Competition” for information regarding other schools in the School’s service area.
Reliance on Projections
The projections of revenues and expenses set forth in APPENDIX A were prepared by the School and have not been independently reviewed or verified by any other party. Such projections are derived from the actual operation of the School, to the extent possible, and from the School’s assumptions about the student enrollment, funding and expenses. There can be no assurance that the actual enrollment revenues, funding and expenses for the School will be consistent with the projections contained herein.
Factors Associated with Education
There are a number of factors affecting schools in general, including the School, which could have an adverse effect on the School’s financial position and ability to make the payments required under the Lease Agreements. These factors include, but are not limited to, increasing costs of compliance with Federal or state regulatory laws or regulations, including, without limitation, laws or regulations concerning environmental quality, work safety and accommodation of persons with disabilities; any unionization of the School’s workforce with consequent impact on wage scales and operating costs of the School; changes in existing statutes pertaining to the powers of the School; decline of the School’s reputation, the faculty or student body, either generally or with respect to certain academic or extracurricular areas; and the disruption of the School’s operations by real or perceived threats against the
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School, the employees or the students. The School cannot assess or predict the ultimate effect of these factors on its operations or its ability to make the required rental payments under the Lease Agreements.
Key Management
The creation of, and the philosophy of teaching in, charter schools generally initially may reflect the vision and commitment of a few key persons on the board of trustees and/or the upper management of the school (the “Key Trustees/Managers”). Loss of such Key Trustees/Managers, and the inability of the School to find comparable qualified replacements, could adversely affect any of the School’s operations or financial results, however the School operates its educational program as an affiliate of KIPP (Knowledge is Power Program) and adheres to KIPP management philosophies. School management personnel receive training through KIPP programs.
Value of Project Facilities May Fluctuate
The value of the Project Facilities at any given time will be directly affected by market and financial conditions which are not in the control of the parties involved in the transaction. Real property values can fluctuate substantially depending in large part on the state of the economy. There is nothing associated with the Project Facilities which would suggest that its value would remain stable or would increase if the general values of property in the community were to decline. Upon a default under the Mortgage, no assurances can be given that the Trustee would be able to lease the Mortgaged Property, or the rental amount that would be payable thereunder, or that the amount that the Trustee would otherwise receive in connection with a foreclosure of the Mortgaged Property would be sufficient to pay the principal of, premium, if any, or interest on the Bonds.
Inability to Liquidate or Delay in Liquidating the Mortgaged Property.
Upon the occurrence and continuance of an event of default, the Trustee shall be entitled to exercise certain rights, including the right to possession of, and the right to sell the Mortgaged Property pursuant to a foreclosure sale under the Mortgage. The Mortgaged Property is intended to be used solely for educational purposes of the School. Because of such use, a potential purchaser of the Bonds should not anticipate that a transfer of the Mortgaged Property could be accomplished rapidly, or at all. Any sale of the Mortgaged Property would require compliance with the laws of the State of New Jersey applicable thereto. Such compliance might be difficult, time-consuming and expensive. Any delays in the ability of the Trustee to foreclose on the Mortgage would likely result in delays in the payment of the Bonds.
The Mortgaged Property is designed for use as school facilities and may not be readily adaptable to other uses. As a result, in the event of a sale of the Mortgaged Property, the number of uses that could be made of the property, and the number of entities which would be interested in purchasing the Mortgaged Property, could be limited, and the sale price would thus be adversely affected. The location of the Mortgaged Property might also limit the number of potential purchasers. The ability of the Trustee to sell the Mortgaged Property to third parties, thereby liquidating the investment, would be limited as a result of the nature of the Mortgaged Property. For these reasons, no assurance can be made that the amount realized upon any sale of the Mortgaged Property would be fully sufficient to pay and discharge the Bonds. In particular, there can be no representation that the cost of the property included in the Mortgaged Property would constitute a realizable amount upon any forced sale thereof. In the event the Trustee took possession of the Mortgaged Property, the Mortgaged Property might be subject to real property taxation.
Risks of Real Estate Investment
General. Development, ownership and operation of real estate, such as the Project Facilities, involves certain risks, including the risk of adverse changes in general economic and local conditions,
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including population decreases; uninsured losses; operating deficits and mortgage foreclosure; lack of attractiveness of the property to students/parents; cyclical nature of the real estate market; adverse changes in neighborhood values; and adverse changes in zoning laws, other laws and regulations and real property tax rates (to the extent such taxes are applicable to the Project Facilities). Such losses also include the possibility of fire or other casualty or condemnation. If the Project Facilities, or any portion thereof, were not available during the period of restoration, such unavailability could adversely affect the School’s ability to make payments under the Lease Agreements. Changes in general or local economic conditions and changes in interest rates and the availability of mortgage or other funding may render the sale or refinancing of the Project Facilities difficult or unattractive.
Limitations of Appraisals. Appraisals are estimates of value and not an assurance of what any particular property would bring in sale. Appraisals also are subject to numerous other limitations set forth therein. Potential investors should not assume that the values represent reliable estimates of what the Project Facilities would bring in liquidation following an event of default.
Damage, Destruction or Condemnation. Although the Borrower will be required to obtain certain insurance against damage or destruction as set forth in the Loan Agreement and the Mortgage, as applicable, there can be no assurance that any portion of the Project Facilities will not suffer losses for which insurance cannot be or has not been obtained or that the amount of any such loss, or the period during which the Borrower or the School, as a result of damage or destruction to the Project Facilities, cannot generate revenues, will not exceed the coverage of such insurance policies.
If the Project Facilities, or any portion thereof, are damaged or destroyed, or are taken in a condemnation proceeding, the proceeds of insurance or any such condemnation award for the Project Facilities, or any portion thereof, must be applied as provided in the Loan Agreement to restore or rebuild the Project Facilities or to redeem the Bonds. There can be no assurance that the amount of revenues available to restore or rebuild the Project Facilities, or any portion thereof, or to redeem the Bonds will be sufficient for that purpose, or that any remaining portion of the Project Facilities will generate revenues sufficient to pay the expenses of the Borrower and the debt service on the Bonds remaining outstanding.
Potential Environmental Risks. Phase I Environmental Site Assessments with respect to the Mortgaged Property were performed in October 2013. The Assessment with respect to the Custer Avenue property indicated the presence of three underground storage tanks, which the Borrower has arranged to have removed for an estimated cost of $21,600. No other recognized environmental conditions were noted on the properties. The value of the Mortgaged Property as security for the Bonds could be reduced by environmental problems, including environmental problems discovered in the future. There are other potential risks relating to environmental liability associated with the ownership or operation of, or secured lending with respect to, any real property. If hazardous substances are found to be located on real property, owners or operators of, or secured lenders regarding, such property may be held liable for costs and other liabilities relating to such hazardous substances on a strict liability basis.
Potential Effects of Bankruptcy
If the Borrower were to file a petition for relief (or if a petition were filed against either such entity as debtor) under the United States Bankruptcy Code, 11 U.S.C. §§ 101 et. seq., as amended, or other similar laws that protect creditors, the filing could operate as an automatic stay of the commencement or continuation of any judicial or other proceeding against the property of the debtor. If the bankruptcy court so ordered, the Borrower’s property and revenues could be used for the benefit of the Borrower despite the claims of its creditors (including the owners of the Bonds).
In a bankruptcy proceeding, the Borrower could file a reorganization plan for the adjustment of its debts which modifies the rights of creditors generally or the rights of any class of creditors, secured or unsecured (including the owners of the Bonds). The plan, when confirmed by the court, binds all
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creditors who had notice or knowledge of the plan and discharges all claims against the Borrower, as the case may be, provided for in the plan. No plan may be confirmed unless, among other conditions, the plan is in the best interest of creditors, is feasible and has been accepted by each class of claims impaired thereunder. The Borrower is prohibited from creating secured creditors except as provided in the Loan Agreement. Each class of claims has accepted the plan if at least two-thirds in dollar amount and more than one-half the number of the allowed claims of the class that are voted with respect to the plan are cast in its favor. Even if the plan is not so accepted, it may be confirmed if the court finds that the plan is fair and equitable with respect to each class of non-accepting creditors impaired thereunder and does not discriminate unfairly.
Tax-Exempt Status
Under present Federal and State law, regulations and rulings, the income of 501(c)(3) organizations, such as the Borrower and the School, is exempt from Federal and New Jersey income tax, except for any unrelated business income. Failure of the Borrower or the School to maintain its status as a 501(c)(3) organization or changes in such current laws, or the regulations, rulings or interpretations thereof could adversely affect the Borrower or the School, as applicable. Such failure would adversely affect the exclusion of interest on the Bonds from income for federal income taxation purposes.
Moreover, the ongoing tax-exempt status of interest on the Bonds is conditioned, under relevant provisions of the Code, on compliance by the Borrower and the School with various requirements set forth, inter alia, in Sections 145 and 148 of the Code, requiring, among other things, that the Project Facilities be owned throughout the term of the Bonds by a governmental unit or an organization described in Section 501(c)(3) of the Code, that not more than five percent of the proceeds of the Bonds (inclusive of proceeds applied to defray issuance costs) be applied to any “private business use,” any use giving rise to “unrelated business income,” or other uses inconsistent with the charitable purposes of the Borrower or the School, as a 501(c)(3) organization, and that certain investment earnings in respect of the Bonds be subject to non-arbitrage requirements imposed under Section 148 of the Code, including requirements to perform certain “rebate” computations and to make certain “rebate” payments of “arbitrage” earnings all as further provided in applicable statues, regulations, rulings and decisions. Failure to comply with such requirements could result in the loss of the tax-exempt status of interest on the Bonds to the owners thereof, and such interest could become taxable to such owners retroactive to the date of issuance of the Bonds.
Other Changes in Federal and State Tax Law
From time to time, there are Presidential proposals, proposals of various federal committees, and legislative proposals in the Congress and in the states that, if enacted, could alter or amend the federal and state tax matters referred to herein or adversely affect the marketability or market value of the Bonds or otherwise prevent holders of the Bonds from realizing the full benefit of the tax exemption of interest on the Bonds. Further, such proposals may impact the marketability or market value of the Bonds simply by being proposed.
Lack of Secondary Market
Although the Underwriter intends to engage in secondary market trading of the Bonds (subject to applicable state securities laws), the Underwriter is not obligated to repurchase any of the Bonds at the request of the owners thereof and cannot assure that there will be a continuing secondary market in the Bonds. In the secondary market for securities similar to the Bonds, the difference between the bid and asked price may be greater than the bid and asked spread for more traditional types of municipal securities. It is not expected that an active trading market for the Bonds will ever develop.
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TAX MATTERS
In the opinion of Wolff & Samson PC, West Orange, New Jersey, Bond Counsel, assuming continuing compliance by the Authority, the Borrower and the School with certain tax covenants described herein, under existing law, interest on the Bonds (i) is not includable in gross income for Federal income tax purposes under current law, (ii) is not an item of tax preference under Section 57 of the Code for purposes of computing the alternative minimum tax; however, for Bonds held by corporate taxpayers interest on the Bonds is included in “adjusted current earnings”, which is used as an adjustment in determining the Federal alternative minimum tax for certain corporations. No opinion is expressed regarding other federal tax consequences arising with respect to the Bonds.
In addition, interest on the Bonds received or accrued in any taxable year by certain foreign corporations may be included in computing the “dividend equivalent amount” of such corporations subject to the branch profits tax imposed on such corporations under Section 884 of the Code. Further, interest on the Bonds may be subject to federal income taxation under Section 1375 of the Code for S corporations which have Subchapter C earnings and profits at the close of the taxable year if greater than 25% of the gross revenues of such S corporations is passive investment income.
Ownership of the Bonds may result in collateral federal income tax consequences to certain taxpayers including, without limitation, property and casualty insurance companies, individual recipients of Social Security or Railroad Retirement benefits, and taxpayers, including banks, thrift institutions and other financial institutions subject to Section 265 of the Code, who may be deemed to have incurred or continued indebtedness to purchase or to carry the Bonds. Bond Counsel expresses no opinion as to any such consequences and prospective purchasers of the Bonds who may be subject to such collateral consequences should consult their tax advisors.
In rendering its opinion, Bond Counsel has relied on the Authority’s, the School’s and the Borrower’s covenants, contained in the Indenture, the Loan Agreement, the Lease Agreements and in the arbitrage certificates, that they will comply with the applicable requirements of the Code, relating to, inter alia, the use and investment of proceeds of the Bonds and rebate to the United States Treasury of specified arbitrage earnings, if any. Failure of the Authority, the School or the Borrower to comply with such covenants could result in the interest on the Bonds being subject to federal income tax from the date of issue. Bond Counsel has not undertaken to monitor compliance with such covenants or to advise any party as to changes in the law after the date of issuance of the Bonds that may affect the tax-exempt status of the interest.
Ownership of the Bonds may result in collateral federal income tax consequences to certain taxpayers including, without limitation, life insurance companies, holders of an interest in a financial asset securitization investment trust, property and casualty insurance companies, individual recipients of Social Security or Railroad Retirement benefits and individuals who otherwise qualify for the earned income credit. The Code denies the earned income credit to an individual who is otherwise eligible if the aggregate amount of disqualified income of the taxpayer for the taxable year exceeds certain limits set forth in Sections 32(i) and (j) of the Code. Interest on the Bonds will constitute disqualified income for this purpose. The Code also provides that for years beginning after December 31, 2010 the earned income credit is phased out if the modified adjusted gross income of the taxpayer exceeds certain amounts. Interest on the Bonds will be included in determining the modified adjusted gross income of the taxpayer.
In addition, attention is called to the fact that Section 265(b)(1) of the Code eliminates the interest deduction otherwise allowable with respect to indebtedness deemed incurred by banks, thrift institutions and other financial institutions to purchase or to carry tax-exempt obligations acquired after August 7, 1986 other than “qualified tax-exempt obligations” as defined in Section 265(b)(3) of the Code. The Bonds do not constitute “qualified tax-exempt obligations”.
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Owners of the Bonds should consult their own tax advisors as to the applicability and effect on their federal income taxes of the alternative minimum tax, the branch profits tax and the tax on passive investment income of corporations, as well as the applicability and effect of any other collateral federal income tax consequences.
Bond Counsel is also of the opinion that interest on the Bonds and any gain from the sale thereof are not includable in the gross income of the owners thereof under the New Jersey Gross Income Tax Act, as presently enacted and construed.
NO ASSURANCE CAN BE GIVEN THAT PENDING OR FUTURE LEGISLATION OR AMENDMENTS TO THE CODE IF ENACTED INTO LAW, OR ANY PROPOSED LEGISLATION OR AMENDMENTS TO THE CODE, WILL NOT ADVERSELY AFFECT THE VALUE OF, OR THE TAX STATUS OF INTEREST ON, THE BONDS. ALL POTENTIAL PURCHASERS OF THE BONDS SHOULD CONSULT WITH THEIR TAX ADVISORS IN ORDER TO UNDERSTAND THE IMPLICATIONS OF THE CODE.
CONTINUING DISCLOSURE
In order to assist the Underwriter in complying with the requirements of Rule 15c2-12 (the “Rule”) promulgated by the Securities and Exchange Commission, the Borrower, the School and FOTA will enter into a Continuing Disclosure Agreement. The proposed form of the Continuing Disclosure Agreement is attached to this Official Statement as APPENDIX G.
A failure by the Borrower, the School or FOTA to provide any information required under the Continuing Disclosure Agreement thereunder shall not constitute an Event of Default under the Indenture, the Loan Agreement, the Lease Agreements or any other document related to the issuance of the Bonds. The sole and exclusive remedy for such failure shall be an action by or on behalf of the Holders of the Bonds to compel specific performance of the obligations under the Continuing Disclosure Agreement.
None of the Borrower, the School or FOTA have entered into any prior continuing disclosure undertakings.
LITIGATION
There is no action, suit or proceeding at law or in equity pending or, to the Authority’s knowledge, threatened against the Authority to restrain or enjoin the issuance or sale of the Bonds or in any way contesting the validity or affecting the power of the Authority with respect to the issuance and sale of the Bonds or the documents or instruments executed by the Authority in connection therewith or the existence of the Authority or the right of the Authority to finance the Project.
There is no litigation of any nature pending or threatened against the Borrower or the School to restrain or enjoin completion of the Project or which would materially adversely affect the Borrower’s or the School’s financial condition or ability to perform their respective obligations under the documents described herein to which they are a party.
LEGAL MATTERS
Legal matters incident to the authorization, issuance and sale by the Authority of the Bonds will be passed upon by Wolff & Samson PC, West Orange, New Jersey, Bond Counsel. Copies of Bond Counsel’s approving opinion, a form of which is attached hereto as APPENDIX F, will be available at the time of delivery of the Bonds. Certain legal matters will be passed upon for the Borrower by Hill Wallack LLP, Princeton, New Jersey and the School by Porzio, Bromberg and Newman, P.C., Morristown, New Jersey; and for the Underwriter by Ballard Spahr LLP, Philadelphia, Pennsylvania.
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FINANCIAL STATEMENTS
The financial statements of the School included in APPENDIX B-1 of this Official Statement and the financial statements of FOTA included in APPENDIX B-2 of this Official Statement have been audited by Scott J. Loeffler, an independent certified public accountant, in each case to the extent and for the periods indicated in the reports which appear in APPENDIX B.
RATING
Standard & Poor’s Ratings Services, a Division of The McGraw-Hill Companies, Inc. (“Standard & Poor’s”) has assigned the Bonds a rating of “BBB” with a stable outlook. Such rating reflects only the views of Standard & Poor’s and any explanation of the significance of the rating may only be obtained from Standard & Poor’s.
A rating is not a recommendation to buy, sell or hold securities. There is no assurance that any rating or outlook will continue for any given period of time or that it will not be revised downward or withdrawn entirely by Standard & Poor’s if in its judgment circumstances so warrant. None of the Underwriter, the Authority, the School or the Borrower has undertaken any responsibility either to bring to the attention of the owners of the Bonds any proposed change in or withdrawal of a rating of the Bonds or to oppose any such proposed change or withdrawal. A downward revision or withdrawal of such rating may have a substantial adverse effect on the market price of the Bonds. Actual changes in ratings on the Bonds will be disclosed by the Borrower as described in the proposed form of the Continuing Disclosure Agreement attached to this Official Statement as APPENDIX G.
UNDERWRITING
The Bonds will be purchased by the Underwriter at a purchase price of $______________, which represents the par amount of the Bonds, less an underwriter’s discount of $___________. The obligation of the Underwriter to accept delivery of the Bonds is subject to various conditions contained in the purchase contract. The purchase contract provides that the Underwriter will purchase all of the Bonds if any are purchased. The Bonds may be offered and sold to certain dealers, banks and others at prices lower that the initial offering prices, and such initial offering prices may be changed from time to time by the Underwriter.
TRUSTEE; CERTAIN RELATIONSHIPS
Manufacturers and Traders Trust Company, the Trustee for the Bonds, and M&T Securities, Inc., which is acting as Underwriter, are both wholly owned direct subsidiaries of M&T Bank Corporation. An employee of Manufacturers and Traders Trust Company (“M&T”) is a member of the Board of Trustees of FOTA and M&T currently has other credit relationships with FOTA. The Trustee, the Underwriter and their affiliates, in the ordinary course of their respective businesses, have engaged, currently are engaged, or may in the future engage in additional financial or other transactions with the Authority, the Borrower, the School or FOTA.
The Trustee assumes no responsibility for this Official Statement and has not reviewed or undertaken to verify any information contained herein.
MISCELLANEOUS
The references herein to the Bonds, the Indenture, the Loan Agreement, the Note, the Lease Agreements, the Mortgage, the Absolute Assignment of Leases and the Support Agreement are brief outlines of certain provisions thereof. Such outlines do not purport to be complete. For full and complete statements of such provisions, reference is made to the Bonds, the Indenture, the Loan Agreement, the
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Note, the Lease Agreements, the Mortgage, the Absolute Assignment of Leases and the Support Agreement, copies of which are available for inspection at the corporate trust office of the Trustee in New York, New York. The forms of the Loan Agreement, the Indenture and the Lease Agreements are attached to this Official Statement as Appendices C, D and E, respectively.
The agreement of the Authority with the owners of the Bonds is fully set forth in the Indenture, and neither advertisements of the Bonds nor this Official Statement are to be construed as constituting an agreement with the owners of the Bonds. Statements made in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended merely as such and not as representations of fact.
The attached appendices are integral parts of this Official Statement and must be read together with all of the preceding information.
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The delivery of this Official Statement has been duly approved by the Authority and the Borrower.
NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY By:______________________________ Name: Title:
Approved by: ASHLAND SCHOOL, INC. By:________________________________ Name: Title: TEAM ACADEMY CHARTER SCHOOL, INC. By:________________________________ Name: Title:
APPENDIX A
Ashland School, Inc. and TEAM Academy Charter School, Inc.
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APPENDIX A ASHLAND SCHOOL, INC. AND
TEAM ACADEMY CHARTER SCHOOL, INC.
Introduction
TEAM Academy Charter School, Inc. (“TEAM”) currently operates a network of six public charter schools located on six separate campuses in Newark, New Jersey, with over 2,230 students enrolled in grades K-12. TEAM is supported by The Friends of TEAM Academy Charter School, A New Jersey Non-Profit Organization (“FOTA”) related to activities such as fundraising and facilities development. The New Jersey Department of Education (“NJDOE”) precludes charter schools from participating in the traditional state school facility funding program (available to traditional New Jersey school districts) and, except in certain limited circumstances, prohibits a charter school from incurring long term debt. Therefore, FOTA was organized in 2004 to support TEAM by facilitating the acquisition and financing of school facilities and also to assist with fundraising to supplement public tuition revenues. Ashland School, Inc. (the “Borrower”) was organized in 2011 and is a supporting organization for FOTA to assist with facilities financing.
TEAM has no affiliates but a number of “single purpose entity” (“SPE”) organizations, such as the Borrower, support either TEAM or FOTA. SPE purposes may include fundraising, facility financing and the acquisition and development of facilities for use by TEAM. See “TEAM Supporting Entities” below.
The Borrower
The Borrower is a New Jersey not-for-profit 501(c)(3) corporation organized for charitable and educational purposes as a supporting organization for FOTA. The Borrower was created to purchase, hold title to, improve, develop, construct, renovate, operate, lease or otherwise manage educational facilities for lease by TEAM.
The Borrower is governed by a four-member Board of Trustees, three members of which are voting trustees (see Table 1).
Table 1 – Board of Directors (Ashland School, Inc.)
Name
Position
Occupation Beginning Year
of Service
Jordan Metzger President Attorney, Cole, Schotz, Meisel, Forman & Leonard, P.A.
2010
Daniel Adan Vice President Managing Director, Perry Capital 2013 Gideon Alpert Treasurer Tax/In-house Counsel, Ingersoll Rand 2010 Hannah Richman Secretary (non-voting) Director, Friends of TEAM Schools 2011
Source: Ashland School, Inc.
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Pursuant to the Borrower’s bylaws, of the three voting trustees, one shall simultaneously sit on the Board of FOTA, one shall simultaneously sit on the Board of TEAM, and one shall not simultaneously sit on the Board of, or be an employee of, FOTA, TEAM or any other affiliated entity.
The Borrower’s immediate mission is to enter into long-term, tax-exempt financing for the acquisition of two of TEAM’s existing school campuses located at 21 Ashland Street and 85 Custer Avenue and land adjacent to 21 Ashland Street to be used as athletic fields for the students of all of TEAM’s schools and as a parking lot.
New Jersey Charter Schools and TEAM’s Charter
Charter schools in New Jersey are governed by the State of New Jersey Charter School Program Act of 1995 (the “Act”), which became effective January 11, 1996.
A New Jersey charter school is a public school that operates as its own Local Education Agency under a charter granted by the Commissioner of Education of the State of New Jersey on behalf of the NJDOE, the State Education Agency and sole charter school authorizer in New Jersey. NJDOE is responsible for setting the standards for and holding current and future public charter schools accountable for providing New Jersey students with a high-quality public education. As of September 2012, there were 86 approved charter schools with over 30,000 students enrolled in public charter schools across the State of New Jersey.
In July 2012, the NJDOE Office of Charter Schools released the Performance Framework which outlines academic, organizational and fiscal standards by which all New Jersey public charter schools are evaluated for renewal. The Performance Framework focuses on outcome measures that align with the NJDOE’s major goal of providing a high quality education for all students regardless of zip code. Within the Performance Framework, the academic section carries the most weight related to decisions regarding replication, expansion, renewal and revocation. According to the NJDOE website, the decision to renew a charter for each subsequent five-year period is based upon a review guided by the following three questions:
1. Is the school’s academic program a success?
2. Is the school financially viable?
3. Is the school equitable and organizationally sound?
As stated on the NJDOE website, “academic program success” is the most important criteria for charter renewal. Academic performance of TEAM, including test scores and comparison to Newark Public Schools, is discussed below (See “Academic Performance”).
TEAM operates all of its schools under a single charter. In accordance with the Act, charters granted to New Jersey public charter schools are initially granted for four years with renewals in five year increments. TEAM’s current charter runs through June 30, 2016 and TEAM plans to submit its next Charter School Renewal Application in 2015.
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TEAM Academy Charter School, Inc.
TEAM is a New Jersey, not-for-profit 501(c)(3) corporation organized in 2002. TEAM is chartered by NJDOE to operate a public charter school in Newark, New Jersey and operates its educational program as an affiliate of the highly successful KIPP Schools, a national network of separately incorporated charter schools (see “KIPP (Knowledge is Power Program) National School Network” below). TEAM’s vision is that “one day, our nation will know Newark, New Jersey, as a city of world-class public education.”
TEAM operates tuition-free, open-enrollment, college-preparatory public charter schools on six different school campuses under a single charter, preparing students in underserved areas of Newark for success in college and in life. In 2002, TEAM received its initial charter from the State of New Jersey through NJDOE and opened its first campus, TEAM Academy middle school. From 2002 through 2006, TEAM Academy middle school (TEAM’s first campus) grew to serve 360 students in grades 5-8. Five additional school locations have since been added (referenced in Table 2 below). In the current 2013-2014 school year, TEAM has enrolled over 2,230 students in grades K-12 on six individual school campuses in Newark’s lowest income wards, known as South, Central, and West.
Table 2 – Existing TEAM Charter School Campuses
Charter School Address Year
Opened Grades
Offered (1)
10/15/12 Enrollment
(2)
10/15/13 Enrollment
(3)
Planned Capacity
% Low Income
(4)
TEAM Academy 85 Custer Ave. 2002 5,6,7,8 392 402 402 87.8%
Rise Academy 21 Ashland St. 2006 5,6,7,8 405 405 401 88.4%
Newark Collegiate Academy
18 Norfolk St. 2007 9,10,11,12 571 587 600 88.4%
SPARK Academy
230 Halsey St. 2009 K,1,2,3,4 417 520 520 89.9%
THRIVE Academy
333 Clinton Place 2012 K,1 101 216 540 92.1%
Seek Academy 333 Clinton Place 2013 K n/a 108 540 (5)
(1) Seek Academy and THRIVE Academy each opened with grade K and will add one grade level per year until
they reach their planned capacity in grades K-4. (2) Actual 10/15/12 enrollment. (3) Anticipated 10/15/13 enrollment. (4) Most recent available data for the percentage of students who qualify for free or reduced cost lunches. (5) Data not yet available for school opened in August 2013. Source: TEAM
Due to the academic success of its initial school campus, TEAM was granted a five year renewal of its charter in 2006, including authorization to expand its network. TEAM opened its second school campus, another middle school, Rise Academy, in 2006 followed by the opening of its first high school campus, Newark Collegiate Academy (NCA), in 2007. Due to TEAM’s performance and the high demand by students and parents for its schools (there are currently more than 8,700 students on its wait list), in 2007 TEAM developed an expansion plan to grow
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to ten school campuses. In 2009, TEAM was granted an amendment to its charter to include two additional elementary school campuses and opened its first elementary school campus, SPARK Academy, in 2009, followed by another elementary campus, THRIVE Academy in 2012. In 2013 TEAM opened its third elementary school campus, Seek Academy.
TEAM has consistently met all criteria for charter renewals and was granted renewal approvals in 2006 and 2011, as well as an expansion of its charter in 2009. The 2011 renewal specifically authorized TEAM to continue its planned expansion by allowing TEAM to serve up to 4,120 students through June 30, 2016, when its charter will be scheduled for renewal.
TEAM plans to operate 10 individual school campuses (including its six existing schools) under its single charter by purposefully adding schools and expanding schools one grade at a time through the 2023-24 peak enrollment level of almost 5,000 students (approximately 11% of public school students in Newark).
TEAM Growth Plan
KIPP and TEAM adhere to a “smart growth” model based on opening new individual school campuses with a single founding grade and adding an additional grade each year (e.g., a Grade K-4 elementary school is opened with Grade K then expands as those students grow by one grade and new K students are admitted each year). In 2012-13, TEAM operated five school campuses (its first “cluster” which spans grades K-12) comprised of two established, fully enrolled, 5th-8th grade middle schools (Rise Academy and TEAM Academy), one 9th-12th grade high school (Newark Collegiate Academy), and two K-4th grade elementary schools (SPARK Academy and THRIVE Academy). As TEAM’s first elementary school campus, SPARK Academy is serving kindergarten through fourth grade in the 2013-14 school year, THRIVE Academy welcomed its 105-student founding kindergarten class in August 2012 and enrolled 216 students in Grades K-1 as of August 2013. At the start of the 2013-14 school year, the TEAM network serves more than 2,230 students and is expected to serve over 2,460 students on these five school campuses when they are fully enrolled.
TEAM initiated its second cluster of five school campuses by opening Seek Academy in August 2013 and plans to open one school campus per year for the next three years with a second high school campus planned to open in August 2019. Recognizing the importance of elementary education and the success of SPARK Academy and THRIVE Academy, TEAM is seeding this cluster with two elementary school campuses. Seek Academy will be followed by Life Academy in August 2014. By 2024, the second cluster of five school campuses is expected to serve its planned capacity of over 2,480 students and TEAM plans to provide college preparatory education to nearly 5,000 students across ten total campuses, approximately 11% of Newark’s students.
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Table 3 – Planned TEAM Charter School Campuses
Charter School Address
Planned Opening
Year
Planned Grades Offered
Planned Capacity
Life Academy 229 18th Ave. 2014 K,1,2,3,4 540
MS #3 TBD 2015 5,6,7,8 401
MS #4 TBD 2016 5,6,7,8 401
HS #2 129 Littleton Ave. 2019 9,10,11,12 600
Source: TEAM
In 2012, TEAM’s management team and support staff assisted KIPP New Jersey A NJ Nonprofit Corporation (“KIPP NJ”), a New Jersey nonprofit corporation and Cooper Lanning Square Renaissance School, Inc. (the “Camden School”), a New Jersey nonprofit corporation, in preparing and submitting a successful application to the Camden Board of Education to operate a public school as a Renaissance School under the Urban Hope Act (N.J.S.A. 18A:36C). The Camden School is a planned network of public schools to be located in Camden, New Jersey, the first school campus of which is expected to open in August 2014. It is currently anticipated that TEAM’s administrative and support staff, including the management team, will become employees of KIPP NJ, which is expected to function as a charter management company, by the end of the current fiscal year and that KIPP NJ will subsequently provide contracted management, administrative, and support services, in accordance with applicable law, to both TEAM and once operating, the Camden School. It is anticipated that no TEAM school specific staff, such as principals, will become employees of KIPP NJ. TEAM is not affiliated with KIPP NJ or the Camden School. Neither KIPP NJ nor the Camden School is obligated to make payments with respect to the Series 2013 Bonds and no revenues of TEAM shall be used in connection with the development or financing of the Camden School.
TEAM’s expansion goals are subject to ongoing review by the TEAM Board, the NJDOE, and TEAM Management. TEAM will only execute plans if it determines that then-prevailing conditions continue to support the expansion.
KIPP (Knowledge is Power Program) National School Network
TEAM is part of the growing national network of 141 KIPP Schools. This is a network of independently incorporated public charter schools that offer free, college preparatory education to over 50,000 students from underserved communities in 20 states and the District of Columbia.
In 2000, the KIPP Foundation was created with the objective to develop and expand the KIPP network by recruiting and training outstanding school leaders to open and operate KIPP affiliated schools. The KIPP Foundation, through its KIPP School Leadership Programs (“KSLP”), has trained more than 250 KIPP school leaders, including six leaders of the TEAM schools, to open and/or operate locally governed KIPP affiliated schools. Over time, KSLP has evolved to offer additional leadership development programs for those transitioning into other
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leadership roles within their school or region, such as the positions of grade-level chair, dean, assistant principal, successor school leader, chief academic officer, and executive director.
In addition to offering professional development for leaders, the KIPP Foundation is responsible for defining and evaluating school and regional performance, assessing the readiness of KIPP regions to expand, and facilitating the exchange of data and effective practices across the KIPP network.
TEAM operates in accordance with a Trademark License Agreement with the KIPP Foundation. Under this agreement, TEAM is granted the exclusive right to use the KIPP name and various licensed marks in the Newark area, and in return, TEAM pays an annual licensing fee of no more than $30,000 per school. The agreement is renewed annually, unless either party exercises its termination rights. KIPP Foundation has the right to terminate immediately if TEAM operations come under control of a person other than the founder, or if TEAM or its personnel behave in a manner that may be irrevocably detrimental to KIPP Foundation’s reputation, to the licensed marks, or to the goodwill associated therewith. TEAM may terminate for any reason at any time. Day-to-day operations are self-managed by TEAM, reporting to its own Board. The KIPP Foundation does not provide general management, directorial or administrative services to TEAM.
TEAM Supporting Entities
As mentioned above, TEAM has no affiliates but a number of SPE organizations support either TEAM or FOTA. SPE purposes may include fundraising, facility financing and the acquisition and development of facilities for use by TEAM. The following is a list of active SPEs, none of which, including the Borrower, is a school:
The Borrower will own 21 Ashland Street, 85 Custer Avenue and land adjacent to 21 Ashland Street, the purchase of which is to be financed with the proceeds of the Series 2013 Bonds.
FOTA was organized to fundraise and support financing, acquisition and development of facilities for lease by TEAM.
NCA Facility, Inc. owns 18 Norfolk Street, funded primarily with Qualified School Construction Bonds.
Kingston Educational Holdings 1, Inc. has borrowed the proceeds of Qualified School Construction Bonds and Qualified Zone Academy Bonds for the funding of facilities to lease to TEAM,
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including 229 18th Avenue and athletic fields to be constructed adjacent to 21 Ashland Street, and is expected to purchase 129 Littleton Avenue.
PinkHulaHoop1, LLC owns 229 18th Avenue and is undertaking the renovation of such facility.
Except for the Borrower and, to the extent provided for in the Support Agreement between FOTA and the Borrower, FOTA, none of the SPE entities described above is obligated to make payments with respect to the Series 2013 Bonds.
TEAM Revenues: “Per Pupil” Funding
In accordance with the New Jersey School Funding Reform Act of 2008, operating funds for New Jersey charter schools are determined using a student-weighted formula. Schools receive a base amount of funding for each student plus additional amounts according to each student’s demographic characteristics, such as grade level and income status. Schools also receive additional funding for students with special needs and students for whom English is a second language. For most categories of state and local funding, charter schools receive 90% of the amount that the local school district would receive for the same student (i.e., the local district receives some categories of funding that are not available to charter schools).
Table 4 – TEAM Historical Average State/Local Per Pupil Tuition Funding
Source: TEAM Finance Office
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Friends of TEAM Academy
As stated above, NJDOE precludes charter schools from participating in the traditional state school facility funding program (available to traditional New Jersey school districts) and, except in certain limited circumstances, prohibits a charter school from incurring long term debt. Therefore, FOTA was organized in 2004 to support TEAM by facilitating the acquisition and/or financing of school facilities and also to assist with fundraising to supplement public tuition revenues when individual TEAM schools are in their growth phase, prior to becoming fully enrolled.
For a list of members on the FOTA Board of Trustees, see “TEAM Governance - Friends of TEAM (FOTA) Board of Trustees on page A-15.
In 2011 TEAM and FOTA launched a multi-year comprehensive $30 million growth campaign fundraising drive to fund capital and operating needs through the point at which TEAM’s core operations (academics and facility leasing) will be self-sufficient from public fund revenues. To date, this fundraising campaign has achieved $27 million of cash and pledges, including $11 million of written pledges through 2017. Sources of campaign proceeds are primarily philanthropic gifts from individuals, corporations, and foundations. These efforts are a significant focus of both the TEAM executive leadership team and its Board of Trustees and Board of Governors, supported by a full-time development team of four. The following table summarizes the combined total grants and donations received by FOTA and TEAM.
Table 5 – $30,000,000 Growth Campaign (As of June 2013)
Source: TEAM Development Office
TEAM plans to fund its core academic and facility operations (ten campuses) entirely with publicly-sourced revenue beginning in the 2016-17 school year. Unrelated to core program
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
$4,500,000 Anticipated
$11,389,705 Pledged
$15,717,165 Collected
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support, FOTA intends to continue to raise funds for TEAM through its annual “Be the Change” gala and fundraiser as well as other future fundraising efforts. These funds will be available to TEAM to support the “KIPP Through College” program, alumni support, field trips, and specific programs identified by TEAM leadership that cannot legally be funded from public revenues.
Facilities
TEAM currently conducts its academic program at five school campuses located in academically underserved areas of Newark; the two youngest elementary schools share one facility. Three additional permanent school campuses are currently being developed, two planned to open in August 2014 at 229 18th Avenue and one planned to open in August 2016 at 129 Littleton Avenue. An additional two permanent school campuses are anticipated to be developed for opening in August 2018 and August 2021.
TEAM School Campuses #1 - #10
Source: Director, Friends of TEAM Schools
All campuses are leased by TEAM. As previously described, there are restrictions that limit the authority of New Jersey charter schools to directly borrow funds to construct facilities. Two campuses are leased by TEAM from third parties that are not “supporting organizations” of TEAM. All other campuses are, or will be, in the case of planned campuses, leased by TEAM from an SPE. A summary of the first eight school campuses follows:
Legend:
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Operating Leases:
School Campus Lease Arrangement
1. 333 Clinton Place A portion of Newark Public Schools (“NPS”) building houses elementary students under a short-term lease (the “Carver Lease”) from NPS to TEAM. The Carver Lease was executed in 2011 with an initial term through July 31, 2013. In an amendment to the Carver Lease, NPS has agreed to extend the term of the Carver Lease through July 31, 2014, with options to extend to July 31, 2015 and July 31, 2016. In the event NPS declines to extend the Carver Lease, NPS has agreed to lease to TEAM another school building owned by NPS of a sufficient size to accommodate TEAM’s student population at this campus.
2. 230 Halsey Street 520-student elementary school in first year of 20-year lease with two five-year renewals at TEAM’s option. Leased from private developer.
Series 2013 Bond Financed Facilities:
TEAM’s first campus (85 Custer Avenue) was originally leased by TEAM beginning in 2002 and was acquired by FOTA in 2005. TEAM’s second campus (21 Ashland Street) was acquired by a FOTA affiliate in 2006. Both have been in continuous use by TEAM since 2002 and 2006, respectively. These facilities will be purchased by Borrower with proceeds of the Series 2013 Bonds and will continue to be leased by TEAM. In addition, proceeds of the Series 2013 Bonds will be used to purchase certain land adjacent to 21 Ashland Street which will also be leased by Borrower to TEAM. TEAM expects to construct playing fields on such land for use by students of all of TEAM’s schools, and a parking lot.
School Campus Lease Arrangement
3. 85 Custer Avenue 400-student middle school (TEAM Academy) originally purchased by FOTA in 2005 and occupied by TEAM since 2002.
4. 21 Ashland St. 400-student middle school (Rise Academy) originally purchased by an FOTA affiliate in 2006 and occupied by TEAM since 2006.
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QZAB/QSCB Financed Facilities:
FOTA purchased Qualified School Construction Bonds (“QSCBs”) and Qualified Zone Academy Bonds (“QZABs”) which were issued in 2011 and 2012. The proceeds of such QSCBs and QZABs are being used primarily to fund four campuses: the NCA High School campus which opened in 2012 and three individual school campuses currently under development (two of which are co-located in a single large building on one site) (the “QZAB/QSCB Financed Facilities”). All of these campuses are, or will be, leased by one of the SPEs to TEAM.
Location Lease Arrangement
5. 18 Norfolk St. 600-student high school (Newark Collegiate Academy) constructed by TEAM in 2011-12.
6&7. 229 18th Ave. Under development. 400-student middle school (MS #3) and 540-student elementary school (THRIVE Academy) to be co-located in a former Newark Public School building. Opening August 2014. Life Academy (Elementary School #4) will temporarily use this facility until MS #3 opens.
8. 129 Littleton Ave. Under development. 600-student high school (HS #2) to be newly constructed. Site acquisition October 2013. Construction start March 2014. Opening August 2016. Life Academy (ES #4), MS #3, and/or MS #4 will temporarily use this facility until HS #2 opens.
Facility Enhancements
TEAM is also in the process of enhancing some of its existing campuses. Such improvements will not add classroom space or capacity. Planned enhancements include:
Acquisition of property adjacent to 21 Ashland Street using proceeds of Series 2013 Bonds
Construction of athletic fields on the property adjacent to 21 Ashland Street, using QSCB proceeds
18 Norfolk Street (Newark Collegiate Academy)
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Construction of a gymnasium and minor cosmetic renovations at 85 Custer Avenue, using proceeds of the Series 2013 Bonds
Acquisition of miscellaneous furniture and equipment as needed, using QZAB proceeds
Lease Flow of Funds Regarding Campuses Financed with Series 2013 Bonds
The proceeds of the Series 2013 Bonds will be used to (i) acquire the TEAM facilities at 85 Custer Avenue and 21 Ashland Street, (ii) construct a gymnasium at 85 Custer Avenue, (iii) reimburse TEAM for minor renovations at 85 Custer Avenue, and (iv) acquire land adjacent to 21 Ashland Street to be used as athletic fields and a parking lot. TEAM will lease these facilities from the Borrower. The rent payments under the leases for the 21 Ashland Street and 85 Custer Avenue properties will in total equal 120% of the annual debt service on the Series 2013 Bonds. Because TEAM receives its public revenues bi-monthly, TEAM will be required to make bi-monthly lease payments equal to 120% of 1/24 of annual debt service associated with the Series 2013 Bonds. The Borrower will retain any excess lease income paid by TEAM and, at its sole discretion, may elect to donate excess lease income from any year to FOTA, TEAM, or other entities 60 days following the release of the Borrower’s annual audit.
QZAB/QSCB Financed Facilities
FOTA recently finalized a long-term permanent refinancing/financing related to bridge funding it used to acquire the QSCBs and QZABs, the proceeds of which are funding the QZAB/QSCB Financed Facilities other than 129 Littleton Avenue. Under this taxable financing FOTA has $48,950,000 of debt from the purchase of QZABs and QSCBs in 2011 and 2012 and plans to incur an additional $24,000,000 of debt in December 2013 for the purchase of additional planned QSCBs to finance the 129 Littleton Avenue project. The TEAM lease payments are extremely low for these state-of-the-art facilities because the $5,580,000 QZAB/QSCB direct subsidy cash income funds a substantial portion of the $6,275,000 of debt service that would otherwise be paid by TEAM as lease payments. The estimated lease payment burden is $695,000 per year ($325 per student per year for 2,140 students of capacity).
Future Facilities: 9th and 10th Campuses
TEAM’s expansion goals require development of two more facilities (#9 and #10) for occupancy in 2018 and 2021. It is anticipated that TEAM could lease existing facilities from private parties or enter into leases which provide for the construction of facilities. In either case, TEAM will fund the cost through lease payments. TEAM’s internal operating projections conservatively plan for a cost of $2,000 per student per year for these facilities, compared to an average of about $635 per student per year (net of QZAB/QSCB subsidy) for the eight facilities described above.
TEAM’s expansion goals, future facility needs, and future lease payment obligations are subject to change in conjunction with continuous review by TEAM management and the TEAM Board. Additionally, pursuant to the Lease Agreements between TEAM and the Borrower (the form of which is included in Appendix E to this Official Statement), TEAM will covenant not to
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incur financial obligations, including lease rental payments, which would be expected to result in a rating downgrade of the Series 2013 Bonds to a rating below the lower of “investment grade” or the then-current rating of the Series 2013 Bonds.
TEAM Governance
In order to ensure strong governance and oversight, TEAM developed strong boards with diverse backgrounds. As a result, TEAM benefits from three outstanding boards: (i) TEAM Board of Trustees, (ii) Friends of TEAM Board of Trustees, and (iii) TEAM Board of Governors, which is an advisory board. This structure gives TEAM the benefit of focused governance and advisory input from financial and real estate professionals as well as seasoned community leaders.
TEAM Board of Directors
TEAM’s Board of Directors functions as the official school board whose responsibilities include financial and operational oversight, regulatory compliance, and fiduciary responsibility for the operation of the schools. The Board holds monthly meetings and consists of seven voting members listed in the chart below. TEAM bylaws provide for up to nine Board members, who serve three-year terms and hold office until their successors are elected and qualified, or until their resignation or removal. The Board has an active Finance Committee consisting of members who may or may not be members of the Board, which reviews the technical details of TEAM’s operating performance, financing matters and provides information and recommendations to the Board.
Table 6 – TEAM Board of Directors
Name Position Occupation Beginning Year
of Service
Brendan Maher Chairman Portfolio Manager, Calamos Arista Partners
2009
Dan Adan Member Managing Director, Perry Capital 2008 Sheila Boyd Member Manager, Microsoft North America 2003 Thomas Dunn Member Managing Principal, New Holland
Capital 2006
Ryan Hill Member (non-voting) Founder and CEO, TEAM Schools 2002 Heidi Fisher Teacher
Representative (non-voting)
Teacher, TEAM Academy 2002
Amy Rosen Member President/CEO, Network for Teaching Entrepreneurship
2006
Patricia Ross Parent Representative Bank of America 2006 Linda Sterling Member Volunteer 2006 Source: TEAM
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TEAM Board of Governors
The 12-member Board of Governors is a group of donors and advisors that meets three to four times per year along with members of the other TEAM-related boards to provide strategic advice to the management team in conjunction with the Board of Directors. This advisory board was formed in 2011.
Table 7 – TEAM Board of Governors Name
Position
Occupation
Beginning Year of Service
Lisa Amato Member Volunteer 2011 Judy Bedol Member Volunteer 2011 Richard Braddock Member Former CEO, Mozido.com, Priceline,
Fresh Direct, and former President, CITICORP
2011
Fatimah Burnam-Watkins Member Executive Director, Teach For America 2011 Derek Capanna Member Managing Director – Equity Sales,
Deutsche Bank 2011
Gary DeBode Member CEO, Edison Properties 2012 Alan P. Fournier Member Managing Member and Founder,
Pennant Capital Management 2011
Joseph C. Kusnan Member Chief Investment Officer, JAWS Estate Capital
2012
Coleen Mullens Member Senior Vice President, Asurion 2011 John Reid-Dodick Member Former Chief People Officer, AOL 2011 Josh Weston Member Honorary Chairman, Automatic Data
Processing 2011
John Willian Member Managing Director, Goldman Sachs 2011 Source: TEAM
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Friends of TEAM (FOTA) Board of Trustees
The FOTA Board is comprised of real estate and finance professionals who donate their time in areas such as real estate law, finance, project management, and architecture.
Table 8 – FOTA Board of Trustees
Name
Position
Occupation Beginning Year
of Service
Timothy Carden President Managing Director, PFM Group 2007 Reena Bhatia Member Vice President, Local Initiatives Support
Corporation (LISC) 2010
Lea Ciavarra Member Principal, lubrano ciavarra architects, pllc 2010 Thomas Comiskey Treasurer Vice President and Group Manager, M&T
Bank 2011
Carmen Maldonado Member Regional Director, Canyon-Agassi Charter School Facility Fund
2006
Connie Max Member Vice President, Chief Credit Officer and Director, Portfolio Management, Nonprofit Finance Fund
2013
Jordan Metzger Vice President
Cole, Schotz, Meisel, Forman & Leonard, P.A.
2009
Hannah Richman Secretary (non-voting)
Director, Friends of TEAM Schools 2004
Thad Sheely Member Senior Vice President, Operations, Related Hudson Yards
2009
Source: FOTA
TEAM Management
TEAM’s leadership group consists of a Chief Executive Officer, Chief Academic Officer, Chief Operating Officer, Chief Financial Officer, Chief External Officer, Managing Director of KIPP Through College and Strategy, and Network Leadership Coach. Biographies are set forth below for the individuals currently in these roles as well as for the Director of FOTA. As mentioned above under “TEAM Growth Plan,” it is currently anticipated that TEAM’s administrative and support staff, including the management team, will become employees of KIPP NJ by the end of the current fiscal year and that KIPP NJ will subsequently provide contracted management, administrative, and support services to both TEAM and once operating, the Camden School.
Ryan Hill, Chief Executive Officer
In 2002, Ryan Hill founded TEAM Academy, the first KIPP school in New Jersey, after completing the KIPP School Leadership Program’s prestigious Fisher Fellowship. Now in his eleventh year with TEAM Schools, Mr. Hill’s strategic leadership as Chief Executive Officer has grown TEAM from one to six schools, which serve over 2,230 students in grades K-12 for the 2013-14 school year. Prior to founding TEAM Academy, Mr. Hill was a Teach For America corps member in Washington Heights, New York. Mr. Hill also completed the Broad Fellowship for Education Leadership.
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Mr. Hill serves on the board of the New Jersey Charter School Association and on the advisory board of the New Jersey branch of Democrats for Education Reform. Mr. Hill was awarded the Bank of America Local Heroes Award and he was named one of eleven New Jerseyans to watch by the Newark Star-Ledger. He received a B.A. in Philosophy from the University of Wisconsin and an M.A. in Educational Administration from National Louis University.
Steven Small, Chief Financial Officer
Steve Small has served as Chief Financial Officer (CFO) since 2007 and also served as TEAM’s Chief Operating Officer (COO) from 2007 through 2010. Mr. Small oversees the accounting and treasury functions, finance, human resources, fundraising, marketing, compliance reporting, and audit functions. He manages the annual operating budget, long term financial projections, and the debt portfolio. As CFO Mr. Small has overseen the TEAM operating budget as it has grown from $5 million to over $40 million annually and has utilized real estate financing structures that have saved more than $19 million versus traditional financing approaches. Mr. Small is a graduate of the Broad Residency in Urban Public Education and in 2011 was a finalist for the NJ Biz CFO of the Year in the Best Growth Manager category.
Prior to his work in education, Mr. Small worked for six years at JP Morgan in New York City, primarily in the Private Banking division. He received a B.S. in Finance and Philosophy from the University of Scranton and earned his Masters in Business Administration and Masters of Education Policy and Administration degrees from the University of Michigan.
Gabriella DiFilippo, Chief Operating Officer
Gabriella DiFilippo joined TEAM Schools as Chief Operating Officer in February 2012 and oversees the day-to-day operations of the schools, including procurement, facilities management, information technology, nutrition, real estate, student recruitment and enrollment and other areas of operational management. From 2009 to 2012, Ms. DiFilippo was an independent real estate consultant to nonprofits, including FOTA. From 1998 to 2009, Ms. DiFilippo was Vice President of Real Estate Services at Chicago-based Illinois Facility Fund (IFF) where she developed IFF’s consulting program into a $2 million business with twelve staff. Ms. DiFilippo provided executive oversight on more than 250 real estate consulting and development projects for more than 200 nonprofit clients, including more than twenty charter school clients. She participated in an IFF report on the need for charter schools in Chicago neighborhoods, worked closely with Chicago Public Schools (CPS) on its charter school facilities strategy and a disposition strategy for under-utilized school facilities, and participated in CPS’s selection process for new charter school operators. Ms. DiFilippo earned an M.A. in Public Policy from the Harris School of Public Policy at the University of Chicago and a B.A. in English Literature from the University of Pennsylvania.
Vincent Marigna, Chief Academic Officer
Vincent Marigna joined TEAM Schools in 2007 as the Director of Strategic Human Assets. In this role, Mr. Marigna was responsible for the development and implementation of recruitment and selection strategies for TEAM’s schools as well as supporting the executive staff
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on a network-wide leadership development initiative. In June 2011, Mr. Marigna moved to the CAO role, overseeing the academic program across all schools, curriculum and instruction, data and analytics, leadership development, talent recruitment, and the development, coaching and management of the school leaders.
Mr. Marigna started his career in education in 2003 as a Teach For America corps member in Newark. He taught High School English, Journalism, and Creative Writing for two years at Weequahic High School. After this commitment, Mr. Marigna joined TFA staff as program director for TFA Newark, where he supported 1st and 2nd year corps members in their development as well as worked on district strategy and cultivation. In addition to working for Teach For America’s program staff, Mr. Marigna served three summers at Teach For America’s Philadelphia Institute as a corps member advisor and school director. He received his B.A. in English from Evangel University and an M.A. in Educational Leadership from National Louis University.
Benjamin Cope, Chief External Officer
Benjamin Cope joined TEAM Schools as the Director of Development in 2005. In 2012, he was promoted to Chief External Officer, where he oversees development and community relations. He has led TEAM’s fundraising efforts to raise $30 million in order to support TEAM’s growth to ten schools in Newark and achieve financial sustainability on public funding. The campaign has raised approximately $27 million in cash and pledges since 2011. Mr. Cope has also led the community outreach program in Newark.
Mr. Cope began his career in education as an elementary school teacher in the Bronx as a Teach For America corps member from 1998-2000. He went to work for Senator Edward Kennedy in the Senator’s education policy office while No Child Left Behind legislation was written and passed. He then served as the Chief of Staff to State Delegate Peter Franchot of Maryland and worked as a campaign manager for a number of Maryland candidates. Mr. Cope began his work with KIPP as a volunteer, consultant and intern with a number of KIPP schools and the KIPP Foundation. Mr. Cope received a B.A. in Political Science from Colorado College and an M.B.A. from the University of Maryland.
Eric Fisher, Managing Director of KIPP Through College and Strategy
Eric Fisher is the Managing Director of KIPP Through College and Strategy for TEAM Schools. As such he is responsible for the development and implementation of TEAM’s Strategic Plan, including directly managing key departments and identifying new opportunities that will help TEAM achieve its ambitious goal of doubling Newark’s college graduation rate. After joining TEAM in 2007, Mr. Fisher worked in Development and was later responsible for building the network’s Academic Support and Operations teams. This included development of TEAM’s Instructional Vision and curriculum, as well as day-to-day management of Data and Analytics, Knowledge Management, Enrollment, Special Education, and Alumni Support. Currently, Mr. Fisher directly manages TEAM’s KIPP Through College program and is responsible for coordinating and providing a cohesive K-16 program that prepares all students for success in top colleges across the country and post-graduate careers. Mr. Fisher graduated
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with a B.A. from Furman University and from Clemson University with a M.Ed. in Higher Education Administration.
Shawadeim Reagans, Network Leadership Coach and Consultant
Sha Reagans is in his eleventh year with TEAM Schools and was a founding teacher at TEAM Academy when the school opened with its first fifth grade class in 2002. Mr. Reagans is currently responsible for coaching principals and school leaders at all schools within the TEAM network while serving as Assistant School Leader at NCA. Mr. Reagans joined the founding team after teaching in Harlem as a Teach for America corps member. As a TEAM teacher, Mr. Reagans won the U.S. Department of Education’s American Star of Teaching Award for the State of New Jersey in 2005. Mr. Reagans moved from the school leader role at TEAM Academy, where he served for six years, to become the school leader of NCA in the summer of 2011. Mr. Reagans is in his eleventh year of teaching in Harlem and Newark. He received his B.A. at Syracuse University and completed his Masters in Early Childhood Education at Bank Street College of Education.
Hannah Richman, Director, FOTA
Hannah Richman is the Founder and Director of FOTA, which supports TEAM Charter Schools in its facilities planning, construction and renovation projects. Ms. Richman is responsible for board development, as well as leasing, acquiring, financing, renovating, and constructing facilities. She served as CFO and Development Director for TEAM Schools from 2002-2005. Before joining TEAM, she served as the Director for Charter School Development in the Massachusetts Department of Education’s Charter Schools Office, where she authored a revised charter school application, managed the charter application process, and worked to assist the startup of successful charter schools throughout Massachusetts.
Ms. Richman received her Master’s Degree in Public Administration from New York University’s Wagner School of Public Service, where she worked as a Research Assistant for Professors and education experts, Diane Ravitch and Joseph P. Viteritti. Hannah received her B.A. from Oberlin College, and served as a member of their Board of Trustees from 1995-1998. She currently serves on the Oberlin College President’s Advisory Council. She also serves on the Bloomfield College Board of Trustees, for which she Co-Chairs the Committee on Development and Trusteeship.
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Employees
The following table provides information regarding TEAM’s instructional staff, support staff, and central services staff.
Table 9 – TEAM Staffing
2013 2012 2011 2010 2009 2008
Instructional Staff
Regular 181 126 116 101 53 33
Special Education 24 16 15 17 8 5
Student and Instructional Related Services
40 27 24 14 7 4
School Administrative Services 78 76 54 65 31 25
Total 323 245 209 197 99 67
Student/Teacher Ratio 9:1 10:1 10:1 9:1 12:1 16:1
Source: TEAM
For the academic years ending 2013, 2012, and 2011, teacher retention rates were 86%,
82%, and 84%, respectively (Source: TEAM).
None of TEAM’s employees are represented by a union.
Educational Philosophy
TEAM schools are free, open enrollment, college-preparatory public charter schools with a goal for their students to develop the knowledge, skills and character traits necessary to succeed in and graduate from high school in order to succeed in and persist through college and in the competitive world beyond. TEAM achieves this goal by its unwavering commitment to KIPP’s five pillars:
High expectations – all students will learn and achieve.
Choice and commitment – attending TEAM is a choice with each stakeholder committed to themselves and to each other to put in the time and effort to succeed.
More time – TEAM students have a longer day, week and year, using added classroom time to build the academic knowledge and skills necessary to succeed.
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Power to lead – Passionate, committed teachers and staff are given the freedom over budgetary and hiring decisions and thus the power to lead effective schools.
Focus on results – KIPP schools focus relentlessly on high student performance on standardized tests and other objective measures, as they expect students to achieve a level of academic performance that will enable them to succeed at the nation's best high schools and colleges.
Given its focus on academic achievement with the goal of college readiness and success, TEAM is committed to the alignment with and implementation of the Common Core State Standards (“CCSS”). In 2009 the State of New Jersey signed onto the CCSS Initiative, a state-led effort to establish a single set of clear educational standards for K-12th grades in English language arts and mathematics. In addition, New Jersey will change its state proficiency tests to those developed by the Partnership for Assessment of Readiness for College and Careers (PARCC). It is expected that these tests will replace the New Jersey Assessment of Skills and Knowledge (“NJ ASK”) tests beginning in the 2014-15 school year.
Elementary School Campuses: SPARK Academy, THRIVE Academy and Seek Academy
Beginning in 2009 with the opening of its first elementary school, TEAM extended its mission of educating underserved students in Newark by reaching these students at the beginning of their educational career. Opening elementary schools gives these young students the chance to avoid falling behind grade level and avoid the remediation that is typically needed for middle school students who transfer from Newark Public Schools to TEAM.
At the elementary school level a strong emphasis on reading and writing begins in kindergarten and gives students the foundation to excel in middle school and beyond. Independent reading goals include minutes spent on independent daily reading and progress versus goals is monitored by students, teachers, and families using the daily homework log. Trimester assessments are teacher-created using the Common Core standards and used across the network in all elementary schools. Every summer teachers review and revise assessments to create age-appropriate and challenging trimester benchmarks and milestones.
Middle School Campuses: TEAM Academy and Rise Academy
TEAM middle school campuses continue strong emphasis on reading and writing, as many of its students enter 5th grade two or more grade levels behind the national average, not having had the benefit of attending a TEAM elementary school. Students are exposed to a well-rounded curriculum including math, science and social studies which is complemented by service learning opportunities, extracurricular activities, field trips, including highly anticipated end of year trips. TEAM middle school students attend classes for over eight hours a day and then participate in a broad range of activities that develop their talents and interests.
TEAM middle schools have been early adaptors of personalized learning tools that have driven student academic success, especially in the 5th and 6th grades. Students are challenged to accelerate their math growth through Khan Academy, for example, building their level of mastery. In reading, they respond to the TEAM academic game “millionaire challenge,” in
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which students are recognized and celebrated among their peers for reading more than one million words in a school year.
High School Campus: Newark Collegiate Academy
TEAM’s high school offers rigorous college-preparatory classes, designed to prepare students for success at both regional and national colleges and universities, some of which are recognized as the nation’s best institutions of higher education. Students are required to study literature, math, science and history, and have a choice of art, drama or dance, as well as a foreign language (Spanish or French). Students also have opportunities for leadership development through clubs, athletics and student government.
NCA high school students are also exposed to Life Skills seminars and test preparation as they prepare for the transition to college. NCA students take the PSAT, SAT and ACT tests in 11th and 12th grades. College visits and college fairs are part of the college preparation process. Each student has a college counselor and sets goals for college readiness.
Tracking Academic Progress
Success at TEAM is defined by its students’ progress towards achieving their goals. In addition to academic goals, TEAM values character education as well as a commitment to continuous improvement. These goals are measured through a variety of internally and externally designed assessments that measure student mastery and growth.
To facilitate its students’ academic growth, TEAM trains its school leaders and teachers to collect data through frequent assessments, analyze this data, and use it to identify gaps and opportunities. For example, at the elementary school level, internal bi-weekly assessments are administered to determine student mastery of the material taught in the previous two week period. The results of these assessments impact teachers’ instructional methods, pacing the re-introduction of material. Trimester assessments testing all standards and objectives are also administered.
In addition, external assessments are used to determine students’ progress against national standards. The primary testing tools include the Strategic Teaching and Evaluation of Progress Literacy Assessment (“STEP”) in the elementary schools, the state mandated New Jersey Assessment of Skills and Knowledge (“NJ ASK”) for grades 3-8, and the Northwest Evaluation Association’s Measures of Academic Progress (“NWEA MAP”) assessment for grades K-8. Students in 11th grade take the state mandated High School Proficiency Assessment (“HSPA”), which is used in New Jersey to determine student achievement in reading, writing, and mathematics as specified in the New Jersey Core Curriculum Content Standards. In addition, TEAM piloted MAP testing at the 9th and 10th grade levels in the 2012-13 school year. The NWEA MAP measures each student’s learning growth over time in reading and mathematics, and is widely considered the gold standard in national norm referencing.
Technology
TEAM invests in the critical technology initiatives that bring access to cutting-edge tools to TEAM’s students, teachers and schools. These initiatives include developing technology-
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literate students in preparation for college and life, supporting effective teaching through the deployment of instructional technology, and using effective technological tools to create personalized learning platforms and feedback systems for students, teachers and parents.
KIPP Through College
TEAM’s KIPP Through College (“KTC”) program supports TEAM’s students on their journey to college and its alumni on their journey through college. Its work with alumni is funded by grants and private donations. The director of KTC is joined by a team of five counselors who advise on college placement and support the college application process through a mix of personal counseling, programs, and services. The KTC team focuses its counseling work on the junior and senior classes, and works with students in earlier grades as they develop the character traits, self-advocacy and decision making skills necessary to persist through and graduate from college.
TEAM’s first class of college-bound seniors graduated from high school in June 2010. TEAM alumni from the classes of 2010, 2011, and 2012 are now attending both two and four year colleges around the country, with a majority in the eastern United States. In a nation where only 11% of low-income students finish college1, 47% of the class of 2010 who were TEAM students in 8th grade are still in four-year colleges. An additional 16% are in two-year colleges. Having committed so much to its students in their K-12 years, TEAM is also committed to the college success of TEAM graduates. TEAM’s KTC office is dedicated to supporting alumni, and continues to support all students after high school in critical ways, including financial assistance, academic advising, crisis navigation, internship assistance, and personal visits to their colleges.
Academic Results
TEAM is responsible to its stakeholders for delivering on its promise of providing a rigorous, college preparatory education to its students. These stakeholders include students, their families, educators, staff, and TEAM’s authorizing body, the NJDOE. NJDOE’s website indicates that “academic program success” carries the most weight in consideration for charter renewal. As demonstrated by the test scores of its students and its history of successful charter renewals, TEAM has met and believes that it will continue to meet the academic success requirements of NJDOE.
In addition to the test scores and other growth measurements, TEAM gauges success by measuring the degree to which students are staying in school with TEAM. TEAM’s most recent student attrition rate was 7.4%, with half of the students who left having done so because of family relocation out of the Newark area. TEAM also celebrates a high school graduation rate of 90% (Source: NJ DOE Graduate Data Report), and 81% of TEAM alumni have gone to college.
A comparison of TEAM test scores to Newark Public Schools (“NPS”, the sending district) along with graduation rates, exemplifies the success students attending TEAM have been able to achieve compared to that of their peers at traditional Newark Public Schools. In five
1 (Source: Haskins, R. (2008). Education and economic mobility. In J. B. Isaacs, I. V. Sawhill & R. Haskins (Eds.), Getting
ahead or losing ground: Economic mobility in America (pp. 99-104). Washington, DC: The Brookings Institution)
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out of eleven tests, the proficiency levels of TEAM students are 20 or more percentage points higher than NPS scores and they are 15 to 19 points higher on an additional five of the eleven tests in the chart below.
Table 10 – New Jersey State Test Scores
TEAM vs. Newark Public Schools Comparison of 2011-12
(% Proficient)
TEAM Newark
NJ ASK Math 5 80 56
NJ ASK Math 6 84 55
NJ ASK Math 7 56 40
NJ ASK Math 8 61 45
NJ ASK Reading 5 46 30
NJ ASK Reading 6 47 40
NJ ASK Reading 7 51 34
NJ ASK Reading 8 77 57
NJ ASK Science 81 56
HSPA Reading (2011-12) 91 68
HSPA Math (2011-12) 67 51
Source: New Jersey State Department of Education
For the past four years, at each grade level, TEAM students have scored above NPS on
all standardized tests and TEAM students have scored above the State average 11 of 44 times.
TEAM’s success is also reflected in its high school graduation rate relative to Newark Public Schools and the State of New Jersey: 90% TEAM high school graduation rate compared to 69% for Newark Public Schools and 86% New Jersey state average (Source: NJ DOE Graduate Data Report).
Standardized Testing
TEAM students are administered the following New Jersey standardized tests:
NJ Assessment of Skills and Knowledge (NJ ASK)
High School Proficiency Assessment (HSPA)
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TEAM students also take the Northwest Evaluation Association (NWEA) Measures of Academic Progress (MAP) to compare their progress relative to students nationwide.
NJ Assessment of Skills and Knowledge (NJ ASK)
The NJ ASK, administered annually in April, is a series of tests that assess student proficiency in reading and math in grades 3 – 8 and science in grade 8. Four levels of proficiency are assessed based upon the New Jersey Core Curriculum Content Standards, giving the state and TEAM a snapshot of a student’s proficiency at a given point in time.
Comparative results for the school years 2009-2010, 2010-2011, and 2011-2012 are set forth in the charts below. Highlights include the following:
TEAM students have outperformed their peers in Newark Public Schools in all subjects and across all grades.
In the spring of 2012-13 SPARK Academy (TEAM’s first elementary school) third graders took the NJ-PASS, the elementary school form of the NJ-ASK for the first time. While comparative data for Newark Public Schools is not yet available, TEAM 3rd graders outperformed the State of New Jersey in both Math (TEAM 85% vs. New Jersey 78%) and English Language Arts (“ELA”) (TEAM 81% vs. New Jersey 66%).
TEAM’s goal is for its students to outperform the state in terminal grades (4, 8 and 11), a high bar for students who enter middle school two to three years below grade level. Yet TEAM students have outperformed students around the state in 6th grade math for two of the past four years and eighth grade ELA and science for two of the past four years.
TEAM’s year-to-year proficiency levels in 5th and 6th grade math and 5th grade ELA improved more than year-to-year proficiency levels of the state.
Table 11 – NJ ASK Scores for TEAM’s Middle Schools
Source: New Jersey Department of Education
Math NPS Math NPS Math NPS
% Proficient % Proficient %Proficient % Proficient % Proficient %Proficient % Proficient % Proficient %Proficient
5 83% 80% 56% 5 81% 77% 56% 5 77% 75% 59%
6 79% 84% 55% 6 77% 74% 49% 6 71% 75% 42%
7 63% 56% 40% 7 66% 61% 34% 7 66% 65% 39%
8 72% 61% 45% 8 72% 73% 41% 8 72% 70% 42%
Reading NPS Reading NPS Reading NPS
% Proficient % Proficient %Proficient % Proficient % Proficient %Proficient % Proficient % Proficient %Proficient
5 62% 46% 30% 5 61% 45% 38% 5 66% 46% 39%
6 65% 47% 40% 6 67% 57% 34% 6 70% 56% 47%
7 61% 51% 34% 7 63% 53% 41% 7 72% 74% 44%
8 82% 77% 57% 8 82% 82% 58% 8 82% 88% 56%
Science NPS Science NPS Science NPS
% Proficient % Proficient %Proficient % Proficient % Proficient %Proficient % Proficient % Proficient %Proficient
8 82% 81% 56% 8 81% 86% 61% 8 84% 94% na
State TEAM State TEAM State
TEAM
TEAM
State TEAM State TEAM State
State TEAM State TEAM State TEAM
2011‐12 NJ ASK 2009‐2010 NJ ASK2010‐11 NJ ASK
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High School Proficiency Assessment (HSPA)
HSPA tests provide a snapshot of student achievement in reading, writing and mathematics as specified in the New Jersey Core Curriculum Content Standards. Students take this test in March of their junior year. Comparative results for the school years 2009-2010, 2010-2011, and 2011-2012 are set forth in the charts below. Highlights include the following:
TEAM students have matched or outperformed the New Jersey state-wide average in reading in three of the last four years and in math two of the past four years.
Newark Public Schools’ comparative data on the 2012-13 school year are not yet available but TEAM students scored 82% proficient in math and 94% proficient in reading, outperforming their New Jersey peers by 2% points on both exams.
Table 12 – HSPA Scores
*n/a = data not available at this time Source: New Jersey State Department of Education
Northwest Evaluation Association (NWEA) Measures of Academic Progress (MAP)
Beginning in the 2008-2009 school year, TEAM began to administer the MAP test, which measures each student’s learning growth over time in reading and mathematics and is widely considered the gold standard in national norm referencing. This test is particularly important to TEAM, as students typically enter 5th grade two-to-three grade levels behind in reading and math, which makes proficiency on the 5th and 6th grade NJ-ASK exams difficult to attain. Longitudinal analysis of the MAP results provides TEAM Schools with valuable information about student growth in learning. The MAP test is administered at the beginning and end of each school year. Results are set forth in Table 13 below. These charts are organized by class cohort, following the academic progress of each class from its entry into TEAM through the present. Thus it includes 4 years of data for 8th graders, 3 for 7th, 2 for 6th, and 1 for 5th. For
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the elementary school, it depicts 3 years of testing for the 2nd graders, 2 for the 1st graders and 1 for kindergarten students. The results are compared to the national average.
Highlights include the following:
TEAM elementary students enter kindergarten behind grade level but on average surpass the national averages in reading and math after one year.
TEAM middle school students, who to date have entered 5th grade from outside the TEAM network, typically enter TEAM considerably below grade level and behind their national peers, but usually enjoy substantial gains in reading growth over time.
On average, TEAM middle school students are able to close their educational achievement gaps, relative to national peers in math by the 8th grade.
It is anticipated that students matriculating from TEAM elementary school campuses to TEAM middle school campuses will be at a level consistent with national peers and on par with New Jersey state averages, so TEAM can focus on moving students forward rather than catching them up to necessary academic levels.
Table 13 - NWEA MAP Assessment
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Source: Northwest Evaluation Association test results.
Admissions and Wait List
TEAM school campuses are tuition free, open enrollment public schools for City of Newark children. TEAM does not discriminate in admissions for any reason, including race, religion, national origin, language spoken, intellectual or athletic ability, measures of achievement or aptitude, or status as a student with special needs.
Open enrollment for the following school year begins each November, and the first recruitment cycle ends in January. If the number of enrollment applications exceeds the number of spaces available, which has been the case for all but the very earliest years of TEAM’s history, a lottery is held to determine the order in which students are offered enrollment. Pursuant to the New Jersey Charter School Law, siblings of current students receive preference should they apply during the open enrollment period.
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The following table shows TEAM’s historical and projected enrollment at its schools and total wait list numbers.
Table 14 - Enrollment Chart
Historical Budgeted Projected*
Fiscal Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 TEAM Academy 356 389 372 376 383 402 402 402 402 Rise Academy 277 372 377 377 391 405 401 401 401 NCA 135 219 349 439 507 587 600 600 600 SPARK Academy 104 208 314 419 520 520 520 520 THRIVE Academy 105 216 324 432 540 Seek Academy 108 216 324 432 Life Academy 104 216 324 Middle School #3 108 211 Middle School #4 108 TOTAL TEAM Schools
768 1,084 1,306 1,506 1,805 2,238 2,571 3,003 3,538
WAITING LIST 3,000 4,000 6,000 8,000 8,705 Source: TEAM Enrollment Office _____________ * Projected enrollment after June 30, 2016 is subject to charter renewal.
After each lottery TEAM reviews its applicant list and prepares a wait list for the
following school year. For the past two school years, the wait list is set forth below.
Table 15 – Wait List
Grade 2011-12* 2012-13*
K 596 488 1 452 787 2 590 718 3 492 826 4 299 742 5 469 498 6 317 628 7 516 577 8 532 710 9 516 919 10 481 702 11 433 614 12 267 496
TOTAL 5,960 8,705 *Tabulated as of January of each school year. Source: TEAM Schools, Annual Reports to NJDOE, 2011-2012 and 2012-2013
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Retention
The rates of retention at each of the TEAM schools for the school years 2011 and 2012 are shown in the table below. In both years, approximately 50% of the students who left TEAM (approximately 4% of students) did so due to a move out of Newark or out of the State of New Jersey. No students left due to expulsion as TEAM has a no expulsion policy.
Table 16 - Re-Enrollment Data
School 2010-2011* 2011-2012*
TEAM Academy 92% 89% Rise Academy 90% 93% Newark Collegiate Academy 94% 92% SPARK Academy 92% 95% OVERALL 92% 92%
*Tabulated as of October 15 of each school year.
Source: TEAM
Demographics
TEAM is committed to (i) serving students who require the most academic support and (ii) serving a student population that closely resembles the demographics of the most underserved students in Newark Public Schools. To do so, TEAM takes great care to ensure that Newark parents are aware of its application process through outreach in the community, targeted mailings, and its website. TEAM’s application is straightforward, requiring only a name, address and child’s birthdate. TEAM’s enrollment department also proactively reaches out to families in the South, Central and West wards of Newark in order to reach all parents and potential students in these areas.
TEAM’s student demographics are as follows:
94% are African-American and 5% are Latino
86% are from low income homes (as reflected by the number of students receiving free and reduced price meals)
13% have special needs.
NCLB Accountability
Under the accountability provisions of Title I of the Elementary and Secondary Education Act, as reauthorized by the No Child Left Behind Act of 2001 (“NCLB”), all schools are evaluated for Adequate Yearly Progress (“AYP”). On February 9, 2012, the U.S. Department of Education provided to the State of New Jersey a waiver from certain of the NCLB requirements,
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including the AYP targets. The waiver provides that it was granted “in exchange for rigorous and comprehensive plans designed to improve educational outcomes for all students, close achievement gaps, increase equity, and improve the quality of instruction.” To date, New Jersey and 31 states, plus the District of Columbia, have been provided waivers. The waiver became effective for the 2011-2012 school year and is valid through the end of the 2013-2014 school year, after which the State of New Jersey may request an extension of the waiver. TEAM is considered one school under one charter for NCLB purposes and is a Title I school, as determined by its high proportion of low-income students.
Market Share
Based on a national study completed in November 2012 by the National Alliance for Public Charter Schools entitled “A Growing Movement: American’s Largest Charter School Communities,” charter school students make up over 17% of total Newark Public School students. For the year 2011-12, the timeframe of this study, TEAM’s market share of charter students was 20.6%, which equated to 3.6% of total district students. TEAM’s share of total charter school and district school enrollment in Newark has increased almost two fold from approximately 1.7% of all public school students in 2008-09 to approximately 3.6% of the public school enrollment in 2011-12. In addition, TEAM increased its market share even as new charters were opening and Newark public school enrollment increased. TEAM students comprised approximately 20.6% of all public charter school enrollments in the year 2011-12, up from 16.9% in 2008-09. TEAM is the second largest public charter school network in Newark.
Table 17 – Public Schools Students, Newark, New Jersey
School Year
TEAM Students
Charter Enrollment
Non-Charter
Enrollment
Total District
Enrollment
TEAM Students as % of Charter Students
TEAM Students as a % of District Students
2011-2012 1,506 7,310 35,415 42,275 20.6% 3.6%
2010-2011 1,306 6,281 33,253 39,534 20.8% 3.3%
2009-2010 1,084 5,391 39,442 44,833 20.1% 2.4%
2008-2009 768 4,544 39,992 44,536 16.9% 1.7%
Source: National Alliance for Public Charter Schools
Competition
In general TEAM’s competition for students from Newark Public Schools occurs in the South, Central and West wards. While all Newark public school students are eligible to participate in the lottery, TEAM’s Enrollment Department estimates that the overwhelming majority of students who enter the lottery are from these wards. Families sending their students to district schools are currently required to send their children to the closest neighborhood school
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for elementary and middle school. At the high school level, Newark also has six “magnet” (selective enrollment) schools to which students can apply.
TEAM also competes with all Newark charter schools regardless of the location of those schools. Charter school applications can be made any time before each charter school’s deadlines by any student who is a Newark resident. Charter school applications are available on a school-by-school basis.
Since its beginning, TEAM has demonstrated the ability to retain its existing students while managing periods of high growth. Since 2008-09, TEAM has increased its enrollment from 768 students to over 1,800 students as TEAM grew from three to five schools and from 10 to 15 grades. During this period demand for seats in TEAM schools remained strong as evidenced by the January 2013 lottery at which only 550 students could be admitted from the wait list of approximately 8,700 students.
Currently the charter landscape in Newark is comprised primarily of stand-alone charter schools; however, it also includes another large charter management organization, Uncommon Schools, which, like TEAM, is expected to expand. TEAM works closely with other like-minded high performing charter schools to share best practices and engages in various educational opportunities.
In addition, TEAM works closely with the Newark Public Schools Office of the Superintendent and with George Washington Carver Elementary School in particular as TEAM elementary schools currently share space at the 333 Clinton Place Campus.
Pension and Benefits
As New Jersey state employees, all eligible full-time employees of TEAM are required to participate in one of two state operated retirement systems: Public Employees Retirement System (PERS) or the Teachers’ Pension and Annuity Fund (TPAF). Eligibility is based upon a tiered system which defines the plan benefits.
TEAM employees who do not meet the criteria of the PERS or TPAF pension plans, but who earn more than $5,000 per year, are enrolled in the New Jersey Defined Contribution Retirement Program (DCRP) which is administered for the Division of Pensions and Benefits by Prudential Retirement Insurance and Annuity Company.
Insurance
TEAM maintains insurance coverage related to property, casual and liability claims that is comparable to insurance coverage maintained by other New Jersey public schools.
Accounting Matters: TEAM, FOTA and the Borrower
Because TEAM is a party to the Lease Agreements between TEAM and the Borrower and due to FOTA’s role associated with the Support Agreement, potential purchasers of the Bonds should read TEAM’s and FOTA’s financial statements as of and for the year ended June 30, 2012 in their entirety for more complete information regarding the their financial positions
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and the results of their operations (see Appendix B-1 and B-2 to this Official Statement). The financial statements of TEAM and FOTA as of and for the year ended June 30, 2012 included in this official statement have been audited by Scott J. Loeffler, New Jersey Certified Public Accountant. In the opinion of both TEAM and FOTA, there have been no material adverse changes in the financial condition of either TEAM or FOTA since June 30, 2012, the most recent date for which audited financial statements are available. Beginning with the year end of June 30, 2014, audited financial statements will be published concerning the Borrower, TEAM, and FOTA, as required by the Continuing Disclosure Agreement.
Litigation
TEAM is not aware of any litigation pending or threatened with respect to itself, Borrower, or FOTA, wherein any unfavorable decision would have a materially adverse effect on the financial condition, property, or operation of TEAM, taking into consideration available insurance coverage.
Related Parties
From time to time credit is provided to FOTA by M&T Bank, a New York banking corporation, including a credit facility that funds a portion of the QZAB/QSCB Funded Facilities described above. M&T Securities, Inc., the underwriter associated with the Series 2013 Bonds and Manufacturers and Traders Trust Company, the Trustee associated with the Series 2013 Bonds are both wholly owned direct subsidiaries of M&T Bank Corporation. A credit facility from The Prudential Insurance Company of America also funds a portion of the QZAB/QSCB Funded Facilities and The Prudential Insurance Company of America may purchase some of the 2013 Bonds.
Financial Statements
Although the Borrower was established in 2010, it has not previously had any significant financial activity, incurred any liabilities, or held any assets and therefore it has not prepared any financial statements. Financial information for TEAM and FOTA are provided below.
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TEAM Academy Charter School, Inc. Statement of Financial Position For the Years Ended June 30, 2009 through 2013
(unaudited)
2009 2010 2011 2012 2013 ASSETS
CURRENT ASSETS
Cash in Bank $2,095,338 $2,189,663 $3,231,990 $4,827,642 $7,023,807
Cash Equivalents 0 0 26 26 500
Intergovernmental A/R - State 83,731 35,859 413,637 259,788 559,396
Intergovernmental A/R - Federal 0 0 0 138,974 777,198
Intergovernmental A/R - Other 0 0 82,434 1,332,298 3,578,367
Other Accounts Receivable 168,933 538,269 37,641 37,009 48,283
Total CURRENT ASSETS 2,348,002 2,763,791 3,765,728 6,595,737 11,987,552
OTHER ASSETS
Other Assets 0 0 12,118 12,118 12,953
Prepaid Expenses 0 0 0 433,782 147,783
Total OTHER ASSETS 0 0 12,118 445,900 160,736
Total ASSETS 2,348,002 2,763,791 3,777,846 7,041,637 12,148,288
LIABILITIES & FUND BALANCE
CURRENT LIABILITIES
Account Payable 203,973 709,176 839,199 2,010,758 2,772,451
Due to School Districts 81,548 158,030 211,099 259,199 1,845,668
Accrued Payroll Liabilities 0 0 106,648 143,950 177,947
Deferred Revenues 329,075 361,687 265,346 165,293 339,231
Total CURRENT LIABILITIES 614,596 1,228,893 1,422,292 2,579,201 5,135,297
LONG-TERM LIABILITIES
Copiers Lease Buyout 0 0 0 213,652 81,227
Total LONG-TERM LIABILITIES 0 0 0 213,652 81,227
FUND BALANCE
Current Year Fund Balance 1,086,126 (198,508) 820,656 1,893,230 2,682,980
Prior Year Fund Balance 647,280 1,733,406 1,534,898 2,355,554 4,248,784
Total FUND BALANCE 1,733,406 1,534,898 2,355,554 4,248,784 6,931,764
Total LIABILITIES & FUND BALANCE Source: TEAM
$2,348,002 $2,763,791 $3,777,846 $7,041,637 $12,148,288
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TEAM Academy Charter School, Inc. Statement of Revenues and Expenditures For the Years Ended June 30, 2009 through 2013
(unaudited)
2009 2010 2011 2012 2013 Revenue
State/Local Funding $11,266,569 $15,970,150 $20,235,889 $25,657,542 $32,069,261 Federal Funding 1,145,090 1,669,865 $2,563,287 $2,939,078 $4,304,686 Grants (fundraising) 787,434 1,145,180 3,238,586 2,615,437 3,179,534 Other 370,507 469,223 93,248 171,178 338,532
Total Revenue 13,569,600 19,254,418 26,131,010 31,383,235 39,892,013
Expenditures
Instruction Salaries of Teachers 3,883,461 6,493,647 8,294,366 8,845,577 11,641,971 Supplies and Materials 634,170 1,408,283 1,289,644 1,876,506 2,036,190 Miscellaneous Expenses 650,907 780,989 1,008,348 1,010,636 948,372
Total Instruction 5,168,538 8,682,919 10,592,358 11,732,718 14,626,533
General Administration Administrative Salaries 2,148,055 2,764,221 3,668,848 4,096,863 5,823,780 Total Benefit Costs 1,255,268 1,649,258 3,019,629 4,009,150 5,358,363 Other Expenses 857,908 1,354,978 1,511,636 1,704,345 1,811,604 Total General Administration 4,261,231 5,768,457 8,200,113 9,810,358 12,993,747
Support Services Salaries 349,371 881,674 1,598,195 2,190,579 2,666,066 Purchased Professional/Technical Services 101,847 159,121 330,913 495,107 1,029,168 Other Purchased Services 873,661 1,129,211 1,120,430 1,220,875 1,503,204 Rent of Land and Buildings 999,280 1,677,580 2,135,823 2,319,947 2,320,340 Energy Costs 145,553 221,801 285,635 226,230 290,539 Transportation 372,787 429,982 441,316 438,067 580,014 Other 122,378 457,907 91,770 217,452 355,302
Total Support Services 2,964,877 4,957,276 6,004,081 7,108,256 8,744,634
Equipment and Capital Outlay Purchased Professional/Technical Services 0 20,674 262,715 329,252 113,699 Supplies and Materials 88,828 23,600 251,086 509,420 730,420
Total Capital Outlay 88,828 44,274 513,801 838,672 844,120
Total Expenditures 12,483,474 19,452,926 25,310,354 29,490,005 37,209,034
Operating Surplus / (Deficit) $1,086,126 ($198,508) $ 820,656 $1,893,230 $2,682,980
Source: TEAM
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Friends of TEAM Academy Charter School, Inc.
Consolidated Statement of Financial Position
For the Years Ended June 30, 2009 through 2013 (Unaudited)
2009 2010 2011 2012 2013
CURRENT ASSETS
Cash and cash equivalents $1,727,186 $1,920,545 $2,686,668 $3,646,127 $6,858,173
Accrued interest receivable 0 0 380,691 719,322 1,089,573
Loan receivables 5,106 5,106 0 0 0
Contributions receivable 0 0 0 1,165,945 627,665
Accounts receivable/other receivable 0 0 222,509 204,104 1,528,119
Deferred expenses 27,378 192,131 0 0 0
Rent receivable/Other 45,000 159,666 65,106 45,973 88,442
Total Current Assets 1,804,670 2,277,448 3,354,974 5,781,471 10,191,973
FIXED ASSETS
Land 450,000 450,000 450,000 450,000 450,000
Buildings 6,504,397 6,687,449 7,235,256 7,319,098 7,529,971
Furniture/equipment 34,762 38,508 38,508 38,508 38,508
Total 6,989,159 7,175,957 7,723,764 7,807,606 8,018,479
Less: accumulated depreciation (488,704) (658,688) (840,489) (1,028,881) (1,241,532)
Total Fixed Assets 6,500,455 6,517,269 6,883,275 6,778,725 6,776,947
OTHER ASSETS Investment in QZABs, QSCBs and Taxable Bonds
0 0 22,317,595 40,300,050 62,310,602
Unamortized bond closing cost 0 0 0 245,368 0
Note Receivable – Kingston Education 0 0 0 0 502,875
Other 50,000 50,000 58,333 100,000 171,606
Total Other Assets 50,000 50,000 22,375,928 40,645,418 62,985,082
TOTAL ASSETS 8,355,125 8,844,717 32,614,177 53,205,614 79,954,002
CURRENT LIABILITIES
Loan payable - Current 214,356 202,024 492,669 14,207,119 34,177,391
Deferred revenue 0 0 0 500,000 1,300,724
Accounts payable 0 0 0 423,324 2,443,202
Other 100,036 0 275,299 420,244 662,970
Total Current Liabilities 314,392 202,024 767,968 15,550,687 38,584,287
NONCURRENT LIABILITIES
Loans Payable 3,398,571 3,199,047 24,133,290 24,398,176 24,020,844
Total Noncurrent Liabilities 3,398,571 3,199,047 24,133,290 24,398,176 24,020,844
TOTAL LIABILITIES 3,712,963 3,401,071 24,901,258 39,948,863 62,605,130
NET ASSETS
Temporarily restricted 0 600,000 0 501,623 0
Unrestricted 4,642,162 4,843,646 7,712,919 12,755,128 17,348,871
TOTAL NET ASSETS $4,642,162 $5,443,646 $7,712,919 $13,256,751 $17,348,871
Source: FOTA
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Friends of TEAM Academy Charter School, Inc.
Consolidated Statements of Activities
For Years Ended 2009-2013 (Unaudited) 2009 2010 2011 2012 2013
INCOME
Contributions
Restricted contributions $1,046,400 $ 615,000 $ 98,104 $ 635,616 $ 651,502
Unrestricted contributions 1,148,719 1,583,453 2,468,321 5,121,377 3,155,380
In-kind contribution 53,021 74,375
Total contributions 2,195,119 2,198,453 2,619,446 5,831,368 3,806,882
Other income
Rental income 990,915 1,677,580 2,080,818 2,174,310 1,874,766
Gain on sale of property 1,096,618
Amortization bond discount 174,595 682,455 1,143,352
Interest income - bonds 2,302,637 3,669,351
Interest income - other 5,493 25,466 589,027 282 310
Sublease Income/Other 216,929
Total other income 996,408 1,703,046 3,941,058 5,159,684 6,904,709
TOTAL INCOME 3,191,527 3,901,499 6,560,504 10,991,052 10,711,591
EXPENSES
Administrative expense 11,273 7,384 23,697 19,009 22,062
Fundraising 194,868 164,524 104,439 148,168 165,220
Interest expense 209,697 198,556 641,206 1,607,667 2,162,724
Alumni Support 132,528 206,183 62,217 196,046 221,371
Professional fees 64,358 113,146 76,220 167,856 18,300
Rent expense 403,333 893,315 1,527,354 1,551,978 1,398,774
Occupancy Expenses 269,041 415,457 193,296 226,130 369,671
In-kind - legal fees 53,021 74,375
Grants to TEAM 750,000 500,000 1,163,546 958,095 1,259,575
Emergency Financial Assistance 33,137
School Wide Support 361,747
Amortization of bond closing costs 6,632
Other Expenses 256,017 431,467 264,434 302,871 390,905
Depreciation 164,392 169,983 181,801 188,393 212,651
Total Expenses 2,455,507 3,100,015 4,291,231 5,447,220 6,616,136
INCREASE IN NET ASSETS BEFORE REALIZED GAIN (LOSS)
736,020 801,484 2,269,273 5,543,832 4,095,455
Realized Loss (3,335)
NET ASSETS - BEGINNING 3,906,142 4,642,162 5,443,646 7,712,919 13,256,751 NET ASSETS - ENDING $4,642,162 $5,443,646 $7,712,919 $13,256,751 $17,348,871 Source: FOTA
A-38
Financial Projections
This Appendix A and other portions of the Official Statement contain certain “forward-looking” statements, as described in the Official Statement under the heading “INTRODUCTORY STATEMENT.” Although TEAM believes that the assumptions upon which the forward-looking statements contained in this Appendix A and other portions of the Official Statement are reasonable, any of the assumptions could prove to be inaccurate and, as a result, the forward-looking statements based on those assumptions could also be incorrect. All phases of TEAM’s operations involve risks and uncertainties, many of which are outside of TEAM’s control and any one of which, or a combination of which, could materially affect TEAM’s results with respect to its operations. Certain factors that could cause actual results to differ from those expected are described in the section of the Official Statement entitled “RISK FACTORS”. TEAM is providing the following Projected Income and Expenses table for illustrative purposes only.
[Remainder of page intentionally left blank]
A-39
Projected Income and Expense TEAM Academy Charter School, Inc.
Friends of TEAM Academy Charter School, Inc.
2012-13 2013-14 2014-15 2015-16 2016-17
Enrollment 1,809 2,233 2,571 3,003 3,538
TEAM Revenues
State/local $32,069,261 $38,098,843 $44,339,191 $52,330,970 $62,539,265
Federal 4,304,686 5,623,140 6,687,150 8,067,086 9,714,767
Fundraising/FOTA Support 3,179,534 3,101,046 2,192,920 416,905 0
Other 338,532 296,326 534,603 785,952 789,712
TEAM Subtotal 39,892,013 47,119,356 53,753,863 61,600,912 73,043,744
FOTA Revenues
Fundraising 3,806,882 3,698,954 4,307,080 4,314,963 1,000,000 Lease/Interest/Other (excl. QZAB/QSCB) 3,929,735 4,008,330 4,088,496 4,170,266 4,253,672
QZAB/QSCB Subsidy 3,219,669 5,177,595 6,048,429 6,048,429 6,048,429
QZAB/QSCB Subsidy Sequestration (244,695) (393,497) (459,681) (459,681) (459,681)
FOTA Subtotal 10,711,591 12,491,382 13,984,324 14,073,978 10,842,420
COMBINED TOTAL 50,603,604 59,610,738 67,738,188 75,674,890 83,886,164
TEAM Expenses
Instruction 14,626,533 17,791,870 20,233,130 23,342,792 27,203,477
General Administration 12,993,747 15,805,732 17,974,470 20,736,994 24,166,705
Support Services (excluding leases) 6,424,294 7,814,579 8,886,834 10,252,666 11,948,364
Capital Outlay 844,120 1,026,797 1,167,685 1,347,149 1,569,955
Lease Payments 2,320,340 3,680,378 4,491,744 4,921,311 5,068,950
TEAM Subtotal 37,209,034 46,119,356 52,753,863 60,600,912 69,957,451
FOTA Expenses
Grants to TEAM 1,259,575 1,500,000 1,500,000 1,000,000 0
Interest 2,162,724 3,520,894 4,536,810 4,456,556 4,358,313
Lease Payments 1,398,774 2,120,234 2,227,113 2,246,680 2,266,637
Other 1,795,063 2,990,635 3,229,012 3,399,807 3,363,265
FOTA Subtotal 6,616,136 10,131,763 11,492,934 11,103,043 9,988,214
COMBINED TOTAL $43,825,170 $56,251,119 $64,246,798 $71,703,954 $79,945,665
TEAM Net Income 2,682,979 1,000,000 1,000,000 1,000,000 3,086,293
FOTA Net Income 4,095,455 2,359,619 2,491,390 2,970,935 854,206
Combined Net Income $6,778,434 $3,359,619 $3,491,390 $3,970,935 $3,940,499
Combined EBITDA $9,422,542 $8,735,447 $10,534,518 $11,684,851 $11,573,372
Source: TEAM and FOTA
A-40
TEAM Management Statement
Since opening in 2002, TEAM has created a network of schools in Newark that instill in their students the desire and ability to succeed in college, in order to change the world. Currently enrolling over 2,230 students, TEAM is on a growth trajectory to serve nearly 5,000 students (11% of students in Newark) by 2024. TEAM is one of the top performing KIPP Schools in the nation and as a leading school in Newark has an outstanding working relationship with the NJDOE, its charter authorizer. Based on TEAM’s history of renewal and expansion approvals and its high level of academic performance demonstrated over the past 11 years, TEAM’s management and Board are confident that TEAM will be granted its fourth charter renewal in 2016 with full authorization to continue implementing its planned expansion.
Recent accomplishments
Over 90% of TEAM students graduate from high school and 81% of all TEAM alumni have gone to college. The KIPP Through College program works with TEAM alumni to support them to and through college.
94% of TEAM juniors passed the state high school proficiency exam in English in 2012-2013.
82% of TEAM fifth graders are behind grade level by 1-4 years entering TEAM middle schools. By the end of their first year, 56% are reading at grade level or above.
On average, incoming TEAM kindergarten school students outperform the national average in reading and in math after their first year.
TEAM’s most recent attrition rate was 7.4%, with half of departing students leaving TEAM because their family moves away from Newark.
A consortium of KIPP Schools, including TEAM, has received more than $34.2 million from the Department of Education’s Charter School Program (2010, 2011 and 2012 awardees) to support the replication and expansion of high-quality charter schools. TEAM has received over $650,000 in funding through CSP since 2011.
In 2010, KIPP Foundation was awarded a five-year, $50 million Investing in Innovation (i3) grant from the U.S. Department of Education to support innovative practices in school leadership development and KIPP’s expansion over five years. TEAM has received over $400,000 in funding through i3.
Over the past three years, two TEAM middle school teachers have been honored with the Harriett Ball Excellence in Teaching Award out of more than 2,000 teachers who work for KIPP nationwide.
APPENDIX B - 1
Financial Statements of the School for the Fiscal Year Ended June 30, 2012
[ THIS PAGE INTENTIONALLY LEFT BLANK ]
COMPREHENSIVE ANNUAL
FINANCIAL REPORT
OF THE
TEAM ACADEMY CHARTER SCHOOL
FOR THE FISCAL YEAR ENDED JUNE 30, 2012
TEAM ACADEMY CHARTER SCHOOL
JUNE 30, 2012
TABLE OF CONTENTS
INTRODUCTORY SECTION
Letter of Transmittal .............................................................................................................................1
Roster of Trustees and Officers ............................................................................................................5 Consultants and Advisors .....................................................................................................................6
FINANCIAL SECTION
Independent Auditor's Report on General Purpose Financial Statements and Supplementary Schedule of Expenditures of Federal Awards
and State Financial Assistance .....................................................................................................7
Required Supplementary Information - Part I Management's Discussion and Analysis ......................................................................................9
Basic Financial Statements:
A. School-wide Financial Statements
A-1 Statement of Net Assets .............................................................................................................20 A-2 Statement of Activities ..............................................................................................................21
B. Fund Financial Statements:
Governmental Funds: B-1 Balance Sheet .............................................................................................................................22
B-2 Statement of Revenues, Expenditures and Changes in Fund Balances .....................................23 B-3 Reconciliation of the Statement of Revenues, Expenditures, and Changes
in Fund Balances of Governmental Funds to the Statement of Activities .................................24
Proprietary Funds: B-4 Statement of Net Assets .............................................................................................................25 B-5 Statement of Revenues, Expenses, and Changes in Fund Net Assets .......................................26 B-6 Statement of Cash Flows ...........................................................................................................27
Fiduciary Funds: B-7 Statement of Fiduciary Net Assets .............................................................................................28
B-8 Statement of Changes in Fiduciary Net Assets ..........................................................................29
Notes to Financial Statements ..........................................................................................................30
TEAM ACADEMY CHARTER SCHOOL
JUNE 30, 2012
TABLE OF CONTENTS
Required Supplementary Information - Part II
C. Budgetary Comparison Schedules:
C-1 Budgetary Comparison Schedule General Fund ........................................................................47 C-2 Budgetary Comparison Schedule Special Revenue Fund ..........................................................50
Notes to Required Supplementary Information:
C-3 Budget to GAAP Reconciliation ................................................................................................52
E. Special Revenue Fund:
E-1 Combining Schedule of Program Revenues and Expenditures, Special Revenue Fund - Budgetary Basis ..................................................................................53
G. Proprietary Funds:
Enterprise Fund: G-1 Combining Statement of Net Assets ..........................................................................................55 G-2 Combining Statement of Revenues, Expenses and Changes
in Fund Net Assets .....................................................................................................................56
G-3 Combining Statement of Cash Flows ........................................................................................57
Fiduciary Funds: H-1 Combining Statement of Fiduciary Net Assets .........................................................................58 H-2 Combining Statement of Changes in Fiduciary Net Assets .......................................................59 H-3 Student Activity Agency Fund Schedule of Receipts
and Disbursements .....................................................................................................................60
H-4 Payroll Agency Fund Schedule of Receipts and Disbursements .....................................................................................................................61
H-5 Unemployment Compensation Insurance Trust Fund ...............................................................62
J. Financial Trends:
J-1 Net Assets by Component ..........................................................................................................63 J-2 Changes in Net Assets ................................................................................................................64 J-2A Combined Balance Sheet - Governmental Funds ......................................................................66 J-2B Combined Statement of Revenues, Expenditures and Changes
in Fund Balances - Governmental Funds ...................................................................................67
J-2C Statement of Cash Flow - Governmental Funds ........................................................................68 J-3 Fund Balances – Governmental Funds ......................................................................................69 J-4 Changes in Fund Balances – Governmental funds ....................................................................70
TEAM ACADEMY CHARTER SCHOOL
JUNE 30, 2012
TABLE OF CONTENTS
J. Revenue Capacity:
J-5 Revenue Capacity .....................................................................................................................71 J-6 Assessed Value and Actual Value of Taxable Property ...........................................................72 J-7 Direct and Overlapping Properties ...........................................................................................73 J-8 Principal Property Taxpayers ...................................................................................................74
J. Debt Capacity:
J-9 Property Tax Levies and Collections.........................................................................................75
J-10 Ratios of Outstanding Debt by Type .........................................................................................76 J-11 Ratios of Net General Bonded Debt Outstanding .....................................................................77
J-12 Direct and Overlapping Governmental Activities Debt ............................................................78
J. Demographic and Economic Information:
J-13 Demographic and Economic Statistics .....................................................................................79
J-14 Principal Employers ..................................................................................................................80
J. Operating Information:
J-15 Full Time Equivalent Charter School Employees by Function/Program .................................81 J-16 Operating Expenses ...................................................................................................................82
J-17 School Building Information ....................................................................................................83 J-18 Insurance Schedules ..................................................................................................................84 J-19 General Fund-Other Local Revenue by Source ........................................................................85
J-20 Schedule of Allowable Maintenance Expenditures by School Facility ....................................86
SINGLE AUDIT SECTION K.
K-1 Report on Compliance and on Internal Control over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ...................................................................................................................................87
K-2 Report on Compliance with Requirements Applicable to Each Major Program and Internal Control Over Compliance in Accordance with OMB Circular A-133 and New Jersey OMB Circular letter 04-04 .........................................................................................................89
K-3 Schedule of Expenditures of Federal Awards, Schedule A .......................................................91
K-4 Schedule of Expenditures of State Financial Assistance, Schedule B .......................................92 K-5 Notes to the Schedule of Awards and Financial Assistance ......................................................93
K-6 Schedule of Findings of Noncompliance ...................................................................................95 K-7 Summary Schedule of Prior Audit Findings ..............................................................................99
1
September 12, 2012
Commissioner
New Jersey Department of Education
100 Riverview Executive Plaza
CN 500
Trenton, NJ 08625
Dear Commissioner:
The Comprehensive Annual Financial Report of the TEAM Academy Charter School for
the fiscal year ended June 30, 2012, is hereby submitted. Responsibility for both the
accuracy of the data and completeness and fairness of the presentation, including all
disclosures, rests with the management of the school. To the best of our knowledge and
belief, the data presented in this report are accurate in all material respects and are
reported in a manner designed to present fairly the financial position and results of
operations of the various funds and account groups of the school. All disclosures
necessary to enable the reader to gain an understanding of the school’s financial
activities have been included.
The Comprehensive Annual Financial Report is presented in four sections: introductory,
financial, statistical and single audit. The introductory section includes this transmittal
letter and list of principal officials. The financial section includes the general-purpose
financial statements and schedules, as well as the auditor’s report. The statistical section
includes audited data from the school’s first six fiscal years. The school is required to
undergo an annual single audit in conformity with the provisions of the Single Audit Act
of 1996 and the U. S. Office of Management and Budget Circular A-133, “Audits of
State and Local Governments and Non-Profit Organizations,” and the State Treasury
Circular Letter 04-04 OMB, “Single Audit Policy for Recipients of Federal Grants, State
Grants and State Aid Payments.” Information related to this single audit, including the
auditors’ reports on internal control and compliance with applicable laws and regulations
and findings and recommendations is included in the single audit section of this report.
1) REPORTING ENTITY AND ITS SERVICES: TEAM Academy Charter School
is an independent reporting entity within the criteria adopted by the Governmental
Accounting Standards Board (GASB) as established by GASB No. 34. All funds and
account groups of the TEAM Academy Charter School are included in this report
2
TEAM Academy Charter School is a free open-enrollment public school. TEAM completed
the 2009-2010 fiscal year with 1,025 students in grades K, and 5 – 10. The mission of
TEAM Academy is to prepare all students with the knowledge, skills, and character traits
necessary to succeed in the finest high schools and colleges, and become exemplary citizens
of their community, country, and world.
Average Daily Enrollment
Fiscal Year Student Enrollment Percent Change Over Prior Year
2012 1476 17%
2011 1262 22%
2010 1033 34%
2009 771 25%
2008 615 37%
2007 450 41%
2) MAJOR ACCOMPLISHMENTS – The school served 1,476 students during the 2011-2012
school year in grades K-2nd
and 5th
–12th
. It marked TEAM Academy’s tenth year of operation.
Student attendance exceeded 95% and staff attendance was 99%. The 2010-2011 school year
was TEAM Academy’s ninth year of operation. The school served 1,306 students. Student
attendance exceeded 95% and staff attendance exceeded 99%. The students made impressive
academic progress as they continued on the path to college and improved the world around them
through their volunteer activities and civic engagement.
3) INTERNAL ACCOUNTING CONTROLS: Management of the Charter School is
responsible for establishing and maintaining an internal control structure designed to ensure that
the assets of the Charter School are protected from loss, theft, or misuse and to ensure that
adequate accounting data are compiled to allow for the preparation of financial statements in
conformity with Generally Accepted Accounting Principals (GAAP). The internal control
structure is designed to provide reasonable, but not absolute, assurance that these objectives are
met. The concept of reasonable assurance recognizes that: (1) the cost of a control should not
exceed the benefits likely to be derived; and (2) the variation of costs and benefits requires
estimates and judgments by Management. As a recipient of Federal and State financial
assistance, the Charter School is also responsible for ensuring that an adequate internal control
structure is in place to ensure compliance with applicable laws and regulation related to those
programs. This internal control structure is also subject to periodic evaluation by the Charter
School Management.
4) BUDGETARY CONTROLS: In addition to internal accounting controls, TEAM Academy
Charter School maintains budgetary controls. The objective of these budgetary controls is to
ensure that compliance with legal provisions embodied in the annual budgets is adopted for the
General Fund and the Special Revenue Fund. The final budget amount as amended for the fiscal
year is reflected in the financial section.
5) ACCOUNTING SYSTEM AND REPORTS: TEAM Academy Charter School’s accounting
records reflect Generally Accepted Accounting Principles, as promulgated by the Governmental
Accounting Standards Board (GASB). The accounting system of the Charter School is
organized on the basis of funds and account groups. These funds and account groups are
explained in “Notes to the Basic Financial Statements,” Note 1.
3
6) FINANCIAL INFORMATION AT FISCAL YEAR–END: As demonstrated by the various
statements and schedules included in the financial section of this report, the Charter School
continues to meet its responsibility for sound financial management. The following schedule
presents a summary of the General Fund and Special Revenue Fund, for the fiscal year ended
June 30, 2012.
Revenue Amount Percent of Total
Local 3,010,932 10%
State 22,646,610 73%
Federal 1,866,555 6%
Other Sources 2,803,425 8%
Food Service 1,055,713 3%
Total $ 31,383,235 100%
The following schedule presents a summary of the general fund, special revenue fund and
debt service fund expenditures for the fiscal year ended June 30, 2012.
Expenditures Amount Percent of Total
Current - General Fund 23,790,997 80%
Capital Outlay 767,942 3%
Special Revenue 3,875,353 13%
Food Service 1,055,713 4%
Total $29,490,005 100%
7) CASH MANAGEMENT: The investment policy of the Charter School is guided in large part
by state statute as detailed in “Notes to the Basic Financial Statements” Note 2. The TEAM
Academy Charter School has adopted a cash management plan, which requires it to deposit
public funds in public depositories protected from loss under the provisions of the Governmental
Unit Deposit Protection Act (“GUDPA”). GUDPA was enacted in 1970 to protect
Governmental Units from a loss of funds on deposit with a failed banking institution in New
Jersey. The law requires governmental units to deposit public funds only in public depositories
located in New Jersey, where the funds are secured in accordance with the Act
8) RISK MANAGEMENT: The board carries various forms of insurance, including but not
limited to general liability, automobile liability, and comprehensive/collision, hazard, and theft
insurance on property and contents, and fidelity bonds
9) OTHER INFORMATION:
Independent Audit – State statutes require an annual audit by an independent Certified
Public Accountant or Registered Municipal Accountant. The Accounting firm of Scott J.
Loeffler, CPA was selected by the Charter School.
4
In addition to meeting the requirements set forth in state statutes, the audit also was designed
to meet the requirements of the Single Audit Act Amendments of 1996 and the related OMB
Circular A-133, Audits of States, Local Governments, and Nonprofit Organizations, and
New Jersey OMB Circular NJOMB 04-04, Single Audit Policy for Recipients of Federal
Grants, State Grants and State Aid. The auditor’s report on the basic financial statements
and specific required supplementary information is included in the financial section of this
report. The auditors’ reports related specifically to the single audit are included in the single
audit section of this report.
Respectfully submitted,
Ryan Hill
Lead Person
5
TEAM ACADEMY
CHARTER SCHOOL ROSTER OF TRUSTEES AND OFFICERS
JUNE 30, 2012
BOARD OF DIRECTORS TERM EXPIRES
Dan Adan, Trustee, Voting 6/2014
Sheila Boyd, Trustee, Voting
2/2014
Tom Dunn, Trustee, Voting 11/2012
Amy Rosen, Trustee, Voting 9/2012
Patricia Ross, Trustee, Voting 2/2014
Linda Sterling, Trustee, Voting 9/2012
Brendan Maher, Trustee, Voting 10/2012
Heidi Moore, Teacher, Non-voting
Ryan Hill, Lead Person, Non-voting
6
CONSULTANTS AND ADVISORS
AUDIT FIRM
Scott J. Loeffler, CPA
7 Cleveland Street
Caldwell, New Jersey 07006
ATTORNEYS
Thomas O. Johnston, Esq.
Porzio, Bromberg & Newman, P.C.
100 Southgate Parkway
P.O. Box 1997
Morristown, NJ 07962-1997
OFFICIAL DEPOSITORY
M&T Bank
Buffalo, NY 14203
FINANCIAL SECTION
7
SCOTT J. LOEFFLER CERTIFIED PUBLIC ACCOUNTANT
P. O. BOX 553 EAST HANOVER, NEW JERSEY 07936
TELEPHONE FAX
973-585-4989 973-240-7318
UNQUALIFIED OPINION ON BASIC FINANCIAL
STATEMENTS ACCOMPANIED BY REQUIRED SUPPLEMENTARY INFORMATION
AND SUPPLEMENTARY SCHEDULE OF
FEDERAL AND STATE AWARDS AND OTHER SUPPLEMENTARY INFORMATION -
GOVERNMENT ENTITY
Independent Auditor’s Report
The Honorable Chairperson and
Members of the Board of Trustees
TEAM Academy Charter School
County of Essex
Newark, New Jersey
I have audited the accompanying financial statements of the governmental activities, the business-type
activities and each major fund and the aggregate remaining fund information of the Board of Trustees of the
TEAM Academy Charter School, County of Essex, State of New Jersey, as of and for the fiscal year ended
June 30, 2012, which collectively comprise the charter schools’ basic financial statements, as listed in the
table of contents. These financial statements are the responsibility of the Board of Trustee's management.
My responsibility is to express opinions on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards; the standards applicable to
financial audits contained in Government Auditing Standards, issued by the Comptroller General of the
United States; and audit requirements as prescribed by the Division of Administration and Finance,
Department of Education, State of New Jersey. Those standards require that I plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation. I believe that my audit
provides reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the
respective financial position of the governmental activities, business-type activities, each major fund, and
the aggregate remaining fund information of the TEAM Academy Charter School, Board of Trustees, in the
County of Essex, State of New Jersey, as of June 30, 2012, and the respective changes in financial position
and cash flows, where applicable thereof, for the fiscal year then ended in conformity with accounting
principles generally accepted in the United States of America.
In accordance with Government Auditing Standards, I have also issued my report dated September 12, 2012
on my consideration of the TEAM Academy Charter School, in the County of Essex, State of New Jersey,
Board of Trustee's internal control over financial reporting and my tests of its compliance with certain
8
provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report
is to describe the scope of my testing of internal control over financial reporting and compliance and the
results of that testing, and not to provide an opinion on the internal control over financial reporting or on
compliance. This report is an integral part of an audit performed in accordance with Government Auditing
Standards and should be considered in assessing the results of my audit.
Accounting principles generally accepted in the United States of America require that the Management’s
Discussion and Analysis and Budgetary Comparison Information in Exhibits C-1 through C-3 be presented
to supplement the basic financial statements. Such information, although not a part of the basic financial
statements is required by the Governmental Accounting Standards Board who considers it to be an essential
part of financial reporting for placing the basic financial statements in an appropriate operational, economic,
or historical context. I have applied certain limited procedures to the required supplementary information in
accordance with auditing standards generally accepted in the United States of America, which consisted of
inquiries of management about the methods of preparing the information and comparing the information for
consistency with management’s responses to my inquiries, the basic financial statements, and other
knowledge I obtained during my audit of the basic financial statements. I do not express an opinion or
provide any assurance on the information because the limited procedures do not provide me with sufficient
evidence to express an opinion or provide any assurance.
My audit was conducted for the purpose of forming opinions on the financial statements that collectively
comprise the TEAM Academy Charter School’s Board of Trustees’ basic financial statements. The
accompanying supplementary information schedules such as the combining and individual fund financial
statements and the Schedules of Expenditures of Federal and State Awards, as required by U.S. Office of
Management and Budget Circular A-133, Audits of States, Local Governments, and Nonprofit
Organizations, and New Jersey OMB Circular NJOMB 04-04, Single Audit Policy for Recipients of Federal
Grants, State Grants and State Aid, are presented for purposes of additional analysis and are not a required
part of the financial statements. 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 statements themselves, and other additional procedures in accordance with auditing standards
generally accepted in the United States of America.
In my opinion, the accompanying schedules of expenditures of federal and state awards are fairly stated in
all material respects in relation to the financial statements as a whole. The accompanying other information,
such as the introductory and statistical sections, is presented for the purposes of additional analysis and is
not a required part of the basic financial statements. Such information has not been subjected to the auditing
procedures applied in the audit of the basic financial statements, and accordingly, I do not express an
opinion or provide any assurance on it.
Licensed Public School Accountant No. 870
Scott J. Loeffler CPA
September 12, 2012
REQUIRED SUPPLEMENTARY INFORMATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
9
TEAM ACADEMY CHARTER SCHOOL
Management’s Discussion and Analysis
Year Ended June 30, 2012
(Unaudited)
This section of TEAM Academy Charter School annual financial report presents its discussion and
analysis of the Board’s financial performance during the fiscal year that ended on June 30, 2012.
Please read it in conjunction with the transmittal letter at the front of this report and the Board’s
financial statements, which immediately follows this section.
FINANCIAL HIGHLIGHTS
Key financial highlights for the 2011-12 fiscal year include the following:
Net assets were $5,794,997.
Net Assets increased by $2,569,188 from July 1, 2011 to June 30, 2012.
The General Fund balance at June 30, 2012 is $4,248,784 an increase of $1,893,230 when
compared with the beginning balance at July 1, 2011.
OVERVIEW OF THE FINANCIAL STATEMENTS
The financial section of the annual report consists of four parts – Independent Auditor’s Report,
required supplementary information that includes the management’s discussion and analysis (this
section), the basic financial statements, and supplemental information. The basic financial
statements include two kinds of statements that present different views of the TEAM Academy
Charter School.
10
TEAM ACADEMY CHARTER SCHOOL
Management’s Discussion and Analysis
Year Ended June 30, 2012
(Unaudited)
Figure A-1. Required Components of the Board's Annual Financial Report
The first two statements are school-wide financial statements that provide both short-
term and long-term information about the TEAM Academy Charter School’s overall
financial status.
The remaining statements are fund financial statements that focus on individual parts
of the TEAM Academy Charter School, reporting the TEAM Academy Charter
School’s operation in more detail than the school-wide statements.
The governmental funds statements tell how basic services such as regular and
special education were financed in short term as well as what remains for future
spending.
Proprietary funds statements offer short- and long-term financial information about
the Food Service activities the TEAM Academy Charter School operates like
businesses.
11
TEAM ACADEMY CHARTER SCHOOL
Management’s Discussion and Analysis
Year Ended June 30, 2012
(Unaudited)
The financial statements also include notes that explain some of the information in the statements
and provide data that are more detailed. Figure A-1 summarizes the major features of the TEAM
Academy Charter School’s financial statements, including the portion of the TEAM Academy
Charter School’s activities they cover and the types of information they contain. The remainder of
this overview section of management’s discussion and analysis highlights the structure and contents
of each of the statements.
Figure A-2 - Major Features of the School-wide and Financial Statements
School-wide
Statements
Fund Financial Statements
Governmental Funds Proprietary Funds Scope Entire school. (except
fiduciary funds)
The activities of the TEAM Academy
Charter School that are for the school
operations and not proprietary or
fiduciary, such as teachers' salaries,
special education and building
maintenance, food service, and
community education
Activities the TEAM
Academy Charter School
operates similar to private
businesses: Internal service
fund
Required financial
statements
Statement of net assets
Statement of activities
Balance sheet
Statement of revenue expenditures
and changes in fund balances
Statement of net assets
Statement of revenue,
expenses, and changes in
fund net assets
Statement of cash flows
Accounting Basis
and measurement
focus
Accrual accounting and
economic resources
focus
Modified accrual accounting and
current financial focus
Accrual accounting and
economic resources focus
Type of
asset/liability
information
All assets and liabilities,
both financial and
capital, short-term and
long-term
Generally assets expected to be used
up and liabilities that come due
during the year or soon there after; no
capital assets or long-term liabilities
included
All assets and liabilities,
both financial and capital,
and short-term and long-
term
Type of inflow/out
flow information
All revenues and
expenses during year,
regardless of when cash
is received or paid
Revenues for which cash is received
during or soon after the end of the
year; expenditures when goods or
services have been received and the
related liability is due and payable
All revenues and expenses
during the year, regardless
of when cash is received or
paid
12
TEAM ACADEMY CHARTER SCHOOL
Management’s Discussion and Analysis
Year Ended June 30, 2012
(Unaudited)
School-wide Statements
The school-wide statements report information about the TEAM Academy Charter School as a
whole using accounting methods similar to those used by private-sector companies. The statement
of net assets includes all of the TEAM Academy Charter School’s assets and liabilities. All of the
current year’s revenue and expenses are accounted for in the statement of activities regardless of
when cash is received or paid.
The two school-wide statements report the TEAM Academy Charter School’s net assets and how
they have changed. Net assets – the difference between the TEAM Academy Charter School’s
assets and liabilities – are one way to measure the TEAM Academy Charter School’s financial
health or position.
In the school-wide financial statements, the TEAM Academy Charter School’s activities are shown
in two categories:
Governmental activities- Most of the TEAM Academy Charter School’s basic services are
included here, such as regular and special education, transportation, administration, food
services, and community education. State aids finance most of these activities.
Business-type activities- The TEAM Academy Charter School's Food Service Fund is
included here.
Fund Financial Statements
The fund financial statements provide more detailed information about the TEAM Academy Charter
School’s funds – focusing on its most significant or “major” funds – not the TEAM Academy
Charter School as a whole.
Funds are accounting devices the TEAM Academy Charter School uses to keep track of specific
sources of funding and spending on particular programs:
Some funds are required by State law and by bond covenants.
13
TEAM ACADEMY CHARTER SCHOOL
Management’s Discussion and Analysis
Year Ended June 30, 2012
(Unaudited)
The TEAM Academy Charter School use other funds, established in accordance with the State of
New Jersey Uniform Chart, to control and manage money for particular purposes (e.g., repaying its
long-term debts) or to show that it is property using certain revenues (e.g., federal funds).
The TEAM Academy Charter School has three kinds of funds:
Governmental funds- Most of the TEAM Academy Charter School’s basic services are
included in governmental funds, which generally focus on (1) how cash and other financial
assets that can readily be converted to cash flow in and out and (2) the balances left at year-
end that are available for spending. Consequently, the governmental funds statements
provide a detailed short-term view that helps to determine whether there are more or fewer
financial resources that can be spent in the near future to finance the TEAM Academy
Charter School’s programs. Because this information does not encompass the additional
long-term focus of the school-wide statements, we provide additional information at the
bottom of the governmental funds statements that explain the relationship (or differences)
between them.
Proprietary funds- Services for which the TEAM Academy Charter School charges a fee
are generally reported in proprietary funds. Proprietary funds are reported in the same way as the school-wide statements.
Fiduciary funds- The TEAM Academy Charter School is the trustee, or fiduciary, for assets
that belong to others such as scholarship fund, payroll and payroll agency funds, and student activity funds. The TEAM Academy Charter School is responsible for ensuring that the assets reported in these funds are used for their intended purposes. All of the TEAM Academy Charter School’s fiduciary activities are reported in a separate statement of fiduciary net assets and a statement of changes in fiduciary net assets. I exclude these activities from the TEAM Academy Charter School’s government-wide financial statements because the TEAM Academy Charter School cannot use these assets to finance its operations.
FINANCIAL ANALYSIS OF THE TEAM ACADEMY PUBLIC SCHOOLS AS A WHOLE
Net assets. The TEAM Academy Charter School’s net assets are $5,794,997 on June 30, 2012. (See Table A-1).
Governmental $5,794,997
The Statement of Net Assets of $1,546,213 reflects total capital assets at net of assumed
depreciation since inception.
14
TEAM ACADEMY CHARTER SCHOOL
Management’s Discussion and Analysis
Year Ended June 30, 2012
(Unaudited)
The TEAM Academy Charter School’s financial position is the product of these factors:
Program Special Revenue for Governmental Activities were $1,866,555.
Program Expenditure for Governmental Activities were $1,866,555
General fund revenues during the 2011-12 school year were $26,452,169.
General Fund expenditures were $24,558,939.
Total
Current and Other Assets 6,461,102
Capital Assets (Including Business Activities) 1,546,213
Total Assets $8,007,315
Long-Term Liabilities -
Other Liabilities 2,212,318
Total Liabilities $2,212,318
Net Assets:
Invested In Capital Assets, Net of Related Debt 1,546,213
Restricted
Unrestricted 4,248,784
Credit for Total Compensated Absences
Total Net Assets $5,794,997
As of June 30, 2012
Table A-1
TEAM ACADEMY CHARTER SCHOOL
Statement of Net Assets
Total Governmental and Business Activities revenues & beginning assets are adjusted by net
adjusted expenditures resulting in a calculation of net assets of $5,794,997 on June 30, 2012.
15
TEAM ACADEMY CHARTER SCHOOL
Management’s Discussion and Analysis
Year Ended June 30, 2012
(Unaudited)
Total
Charges for services 62,074
Private Grants 211,308
General revenues
Local Share 3,010,932
Federal and State Aid-Unrestricted 22,646,610
Federal and State Aid-Restricted 1,866,555
Food Service Aid 782,331
Other 2,803,425
Increase in Net Capital Outlay 675,958
Total revenues 32,059,193$
Expenses
Regular Instruction 12,636,140
General Administrative 8,491,199
School Administrative 5,192,475
On-behalf TPAF Social Security and Pension 1,346,536
Capital Outlay 767,942
Food Service 1,055,713
Total expenses 29,490,005$
(Decrease) in net assets 2,569,188
Net Assets, Beginning July 1 3,225,809
Net Assets, End of Year June 30 5,794,997$
Revenues
Program revenues
For the Fiscal Year Ended June 30, 2012
Table A-2
TEAM ACADEMY CHARTER SCHOOL
Changes in Net Assets - School Wide
Changes in Net Assets. The TEAM Academy Charter School’s total revenues were $31,383,235.
Local shares of $3,010,932 represented 10% of revenues. The state aid of $22,646,610 represented
72% of revenues and federal aid $1,866,555 represented 5% of revenues.
The “Other Revenue” for 2012 is $2,803,425 which represents 9% of revenues and food service
revenue of $1,055,713 which represents 4% of revenues.
The TEAM Academy Charter School’s expenses of $29,490,005 are predominantly related to
instruction and support services. Instruction expenditures totaled $12,636,140; Administrative and
Support services, $15,030,210, Capital Outlay $767,942 and food service $1,055,713.
16
TEAM ACADEMY CHARTER SCHOOL
Management’s Discussion and Analysis
Year Ended June 30, 2012
(Unaudited)
Total net assets were increased by $2,853,186 during the 2011-12 school year.
Source
Total Cost of
Services
Net Cost of
Services
Governmental Activities
Instruction
Regular B-2 12,636,140 12,636,140
Support Services
General Administrative Services B-2 8,491,199 8,491,199
School Administrative Services B-2 5,192,475 5,192,475
On-behalf TPAF Social Security B-2 1,346,536 1,346,536
Capital Outlay B-2 767,942 767,942
Food Service G-2 1,055,713 1,055,713
Total Governmental Activities 29,490,005$ 29,490,005$
Functions/Programs
Table A-3 (See Exhibit A-2)
TEAM ACADEMY CHARTER SCHOOL
Changes in Net Assets - School Wide
For the Fiscal Year Ended June 30, 2012
FINANCIAL ANALYSIS OF THE TEAM ACADEMY CHARTER SCHOOL OF
NEWARK’S FUNDS
The financial performance of the TEAM Academy Charter School as a whole is reflected in its
governmental activities Exhibit A-2. As the TEAM Academy Charter School completed the year,
its general funds reported a combined fund balance of $4,248,784 of which $-0- is being reserved as
capital reserve.
Revenues for the TEAM Academy Charter School’s governmental funds and business activities
were $31,383,235 while total expenses were $29,490,005. (Table A-2) (Exhibit A-2)
GENERAL FUND
The General Fund includes the primary operations of the TEAM Academy Charter School in
providing educational services to students in Kindergarten and from grade 5 through grade 12.
17
TEAM ACADEMY CHARTER SCHOOL
Management’s Discussion and Analysis
Year Ended June 30, 2012
(Unaudited)
The following schedule presents a summary of Government Revenues. The summary reflects the
dollar and percent increase (decrease) from the prior year.
General Fund Revenues
Year Ended
06/30/2012
Year Ended
06/30/2011
Amount of
Increase
(Decrease)
Local Sources:
Local Share 3,010,932 2,536,038 474,894
Other Local Revenue 20,931,755 831,251 20,100,504
Total Local Sources 23,942,687$ 3,367,289$ 20,575,398$
Intergovernmental
State Sources 1,714,855 17,931,410 (16,216,555)
Other Sources 2,803,425 2,031,602 771,823
Federal Sources 1,866,555 1,786,342 80,213
Enterprise Fund 1,055,713 1,014,367 41,346
Total Intergovernmental Sources 7,440,548$ 22,763,721$ (15,323,173)$
Total Revenue 31,383,235$ 26,131,010$ 5,252,225$
For the Years Ended June 30, 2012 and 2011
Changes in Net Assets - School Wide
Table A-4 (See Exhibit B-2)
TEAM ACADEMY CHARTER SCHOOL
The following schedule presents a summary of Governmental expenditures. The summary reflects
the dollar and percent increases (decreases) from the prior year.
General Fund Expenditures
Year Ended
06/30/2012
Year Ended
06/30/2011
Amount of
Increase
(Decrease)
Current:
Regular Instruction 12,636,140 10,809,131 1,827,009
General Administrative Services 8,491,199 7,406,276 1,084,923
School Administration 5,192,475 4,646,565 545,910
On-behalf TPAF Social Security and Pension 1,346,536 1,024,675 321,861
Capital outlay 767,942 409,340 358,602
Food Service 1,055,713 1,014,367 41,346
Total Expenditures 29,490,005$ 25,310,354$ 4,179,651$
Table A-5 (See Exhibit B-2)
TEAM ACADEMY CHARTER SCHOOL
Changes in Net Assets - School Wide
For the Years Ended June 30, 2012 and 2011
18
TEAM ACADEMY CHARTER SCHOOL Management’s Discussion and Analysis
Year Ended June 30, 2012
(Unaudited)
Total School-Wide expenditures increased by $4,179,651 during the 2011-2012 year.
UNRESERVED-UNDESIGNATED FUND BALANCE AS A PERCENTAGE OF EXPENDITURES
The following table shows the General Fund unreserved-undesignated fund balance.
General Fund 2012 2011 2010 2009 2008 2007
Unreserved-Undesignated 4,248,784 2,355,554 $1,534,898 $1,733,406 $647,280 $142,453
Fund Balance
Expenditures 29,490,005 24,967,251 $19,452,926 $12,483,474 $8,099,667 $4,749,119
For the Fiscal Year Ended June 30, 2012
Changes in Net Assets - School Wide
TEAM ACADEMY CHARTER SCHOOL
Table A-6
The TEAM Academy Charter School values its fund balances as a vehicle for addressing
unbudgeted and emergent needs that occur during school year. The amount of fund balance
designed to support the subsequent years budgets $4,248,784 for the 2011-12 school year.
CAPITAL ASSET AND DEBT ADMINISTRATION
Capital Assets
By the end of 2012, in the General Fund, the TEAM Academy Charter School had invested
$1,174,766 in a broad range of capital assets, including computer and audio-visual equipment, and
administrative offices, etc. (More detailed information about capital assets can be found in Note 4 to
the financial statements.) Total General Fund depreciation expense for the year was $91,984.
Facilities Improvement $1,046,103
Equipment 896,605
Total - General Fund $1,942,708
Less: Accumulated Depreciation (396,495)
Total - Net Capital Assets General Fund $1,546,213
Table A-7
TEAM ACADEMY CHARTER SCHOOL
Changes in Net Assets - School Wide
For the Fiscal Year Ended June 30, 2012
19
TEAM ACADEMY CHARTER SCHOOL
Management’s Discussion and Analysis
Year Ended June 30, 2012
(Unaudited)
FACTORS BEARING ON THE SCHOOL’S FUTURE
At the time these financial statements were prepared and audited, the TEAM Academy Charter
School was aware of these existing circumstances that could significantly affect its financial health
in the future:
The State of New Jersey passed legislation which imposes a 2% cap on the underlying
school District’s tax levy.
Future State Aid may be reduced due to the State’s new criteria utilized in calculating
allocations of State Aid.
CONTACTING THE TEAM ACADEMY CHARTER SCHOOL'S FINANCIAL
MANAGEMENT
This financial report is designed to provide our citizens, taxpayers, customers, and investors and
creditors with a general overview of the TEAM Academy Charter School’s finances and to
demonstrate the TEAM Academy Charter School’s accountability for the money it receives. If you
have questions about this report or need additional financial information, contact the Business
Office, TEAM Academy Charter School, 60 Park Place, Suite 802, Newark, NJ 07102.
BASIC FINANCIAL STATEMENTS
The basic financial statements provide a financial overview of the TEAM Academy
Charter School’s operations. These financial statements present the financial position and
operating results of all funds as of June 30, 2012.
SCHOOL-WIDE FINANCIAL STATEMENTS
20
Exhibit A-1
Governmental Business-type
Activities Activities Total
ASSETS
Cash and cash equivalents 4,822,966$ (139,248)$ 4,683,718$
Investments
Receivables, net 1,567,391 197,875 1,765,266
Security Deposit 12,118 12,118
Capital assets, net (Note 2): 1,546,213 - 1,546,213
Total Assets 7,948,688 58,627 8,007,315
LIABILITIES
Cash Overdraft -
Accounts payable 1,542,254 58,627 1,729,199
Due to Newark Board of Ed. 259,199 259,199
Deposits payable
Payable to federal government - -
Payable to state government
Deferred revenue 165,293 165,293
Noncurrent liabilities:
Due within one year
Due beyond one year
Total liabilities 1,966,746 58,627 2,025,373
NET ASSETS
Invested in capital assets, net of related debt 1,546,213 - 1,546,213
Restricted for:
Debt service -
Capital Reserves -
Permanent endowment - nonexpendable
Other purposes
Unrestricted 4,248,784 - 4,248,784 Total net assets 5,794,997$ - 5,794,997$
The accompanying Notes to the Basic Financial Statements are an integral part of this statement.
TEAM ACADEMY CHARTER SCHOOL
Statement of Net Assets
June 30, 2012
21
Exhibit A-2
Program Revenues Changes in Net Assets
Operating Capital
Charges for Grants and Grants and Governmental Business-type
Functions/Programs Expenses Services Contributions Contributions Activities Activities Total
Governmental activities:
Instruction:
Regular (12,636,140)$ (2,438,141)$ (10,197,999)$ (10,197,999)$
Support services:
General administatrion (8,491,199) (1,437,212) (7,053,987) (7,053,987)
School administrative services/ operations plant serv. (5,192,475) (5,192,475) (5,192,475)
On - behalf TPAF Social Security (1,346,536) (1,346,536) (1,346,536)
Capital Outlay (767,942) (767,942) (767,942) Total governmental activities (28,434,292) (3,875,353) (24,558,939) (24,558,939)
Business-type activities:
Food Service 1,055,713 (1,053,138) (1,053,138)
Total business-type activities (1,053,138) (1,053,138) Total primary government (28,434,292) 1,055,713$ (3,875,353)$ (24,558,939)$ (1,053,138)$ (1,053,138)$
General revenues:
Local Share 3,010,932 3,010,932
State Share 20,931,755 - 20,931,755
Miscellaneous Income State and Federal Aid 1,714,855 782,331 2,497,186
Private Grants 211,308
Misccellanous Income 794,627 62,074 856,701
Increase in net Capital Outlay 675,958 675,958
27,128,127 1,055,713 28,183,840
Change in Net Assets 2,569,188 - 2,569,188
Net Assets—beginning 3,225,809 - 3,225,809Net Assets—ending 5,794,997$ - 5,794,997$
The accompanying Notes to Financial Statements are an integral part of this document
TEAM ACADEMY CHARTER SCHOOL
Total general revenues, special items, extraordinary
Statement of Activities
For the Year Ended June 30, 2012
FUND FINANCIAL STATEMENTS
GOVERNMENTAL FUNDS
22
Exhibit B-1
Special Capital Debt TotalGeneral Revenue Projects Service Governmental
Fund Fund Fund Fund Funds
ASSETS Cash and cash equivalents 5,263,868$ (440,902)$ 4,822,966 Investments Receivables, net 774,251 793,140 1,567,391 Security Deposit 12,118 12,118 Restricted cash and cash equivalents Total assets 6,050,237$ 352,238$ -$ 6,402,475$
LIABILITIES AND FUND BALANCES Liabilities: Cash Overdraft - Accrued expense - - 0 Accounts payable 1,542,254 186,945 1,729,199 Due to Newark Board of Ed. 259,199 259,199 Payable to federal government - 0 Payable to state government - Deferred revenue - 165,293 165,293 Total liabilities 1,801,453 352,238 - 2,153,691 Fund Balances: Reserved for: Encumbrances Legally restricted -- unexpended additional spending proposal Legally restricted -- designated for subsequent year's expenditures Capital reserve account Excess surplus Excess surplus -- designated for Subsequent year's expenditures Other purposes Unreserved, reported in: General fund 4,248,784 4,248,784 Capital projects fund - - Permanent fund Total Fund balances 4,248,784 4,248,784Total liabilities and fund balances 6,050,237$ 352,238$ -$
Amounts reported for governmental activities in the statement of net assets (A-1) are different because:
Capital assets used in governmental activities are not financial rescources andtherefore are not reported in the funds. The cost of the assets is $1,942,708
1,546,213
Long-term liabilities, including bonds payable, are not due and payable in thecurrent period and therefore are not reported as liabilities in the funds(see Note 3)
Net assets of governmental activities 5,794,997$
The accompanying Notes to the Basic Financial Statements are an integral part of this statement
TEAM ACADEMY CHARTER SCHOOLBalance Sheet
Governmental FundsJune 30, 2012
and the accumulated depreciation is ($ 396,495)
23
Exhibit B-2
Special Capital Debt Total
General Revenue Projects Service Governmental
Fund Fund Fund Fund Funds
REVENUES
Local sources:
Local share 3,010,932$ 3,010,932$
State Share 20,931,755 20,931,755
Other Restricted Miscellaneous Revenues
Miscellaneous 794,627 2,008,798 2,803,425
Total - Local Sources 24,737,314 - 24,737,314
State sources 1,714,855 - 1,714,855
Federal sources 1,866,555 1,866,555
Total revenues 26,452,169 3,875,353 30,327,522
EXPENDITURES
Current:
Regular instruction 10,197,999$ 2,438,141$ 12,636,140$
Support services- General Administrative 7,053,987 1,437,212 8,491,199
Support Services- School Admin/ operations plant serv 5,192,475 5,192,475
On-behalf TPAF Social Security and Pension 1,346,536 1,346,536
Capital outlay 767,942 767,942
Total expenditures 24,558,939 3,875,353 28,434,292
Excess (Deficiency) of revenues
over expenditures 1,893,230 - 1,893,230
OTHER FINANCING SOURCES (USES)
Transfers in -
Transfers out -
Total other financing sources and uses ---
SPECIAL ITEM
Net change in fund balances
Fund balance—July 1 2,355,554 2,355,554 Fund balance—June 30 4,248,784$ 4,248,784$
The accompanying Notes to Financial Statements are an integral part of this statement.
TEAM ACADEMY CHARTER SCHOOL
Statement of Revenues, Expenditures, And Changes in Fund Balances
Governmental Funds
For the Year Ended June 30, 2012
24
Exhibit B-3
Total net change in fund balances - governmental funds (from B-2) 1,893,230$
Amounts reported for governmental activities in the statement
of activities (A-2) are different because:
Capital outlays are reported in governmental funds as expenditures.
However, in the statement of activities, the cost of those assets is
allocated over their estimated useful lives as depreciation expense. This is
the amount by which capital outlays exceeded depreciation in the period.
Depreciation expense (91,984)$
Capital outlays 767,942
Repayment of bond principal is an expenditure in the governmental funds, 675,958
but the repayment reduces long-term liabilities in the statement of net assets
and is not reported in the statement of activities.
Change in net assets of governmental activities 2,569,188$
The accompanying Notes to the Basic Financial Statements are an integral part of this statement.
For the Year Ended June 30, 2012
TEAM ACADEMY CHARTER SCHOOL
Reconciliation of the Statement of Revenues, Expenditures,
and Changes in Fund Balances of Governmental Funds
to the Statement of Activities
PROPRIETARY FUNDS
25
Exhibit B-4
Business-type
Activities
Enterprise funds
Food Service
ASSETS
Current assets:
Cash and cash equivalents
Investments
Accounts receivable 197,875
Other receivables 2,575
Total current assets 200,450
Total assets 200,450
LIABILITIES
Current liabilities:
Cash overdraft 139,248
Accounts Payable 61,202
Compensated absences
Total current liabilities
Total liabilities 200,450
NET ASSETS
Invested in capital assets net of
related debt
Restricted for:
Capital projects
Unrestricted -
Total net assets $0
The accompanying Notes to the Basic Financial Statements are an integral part of this statement.
TEAM ACADEMY CHARTER SCHOOL
Statement of Net Assets
June 30, 2012
Proprietary Funds
26
Exhibit B-5
Business-type
Activities
Enterprise Fund
Food
Service
Operating revenues:
Charges for services:
Daily sales - Reimbursable programs and Special Lunch Program 62,074$
Special functions
Total operating revenues 62,074
Operating expenses:
Cost of sales (958,194)
Salaries and Benefits (97,519)
Total Operating Expenses (1,055,713)
Operating income (loss) (1,055,713)
Nonoperating revenues (expenses):
State sources:
State school lunch program 9,967
Federal sources:
National school breakfast program 150,640
National school lunch program 467,779
After School Snack 153,945
Private Grants 211,308
Total nonoperating revenues (expenses) 993,639
Income (loss) before contributions & transfers -
Capital contributions
Transfers in (out)
Change in net assets
Total net assets—beginning 0Total net assets—ending -$
The accompanying Notes to the Basic Financial Statements are an integral part of this statement.
TEAM ACADEMY CHARTER SCHOOL
Statement of Revenues, Expenses, and Changes in Fund Net Assets
Proprietary Funds
For the Year Ended June 30, 2012
27
Exhibit B-6
Business-type
Activities
Enterprise Funds
Food
Service
CASH FLOWS FROM OPERATING ACTIVITIES
Private contributions 211,308.00
Receipts from customers 60,000$
Payments to employees and benefits
Payments to suppliers (1,046,904)
Net cash provided by (used for) operating activities (775,596)
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
State and Federal Sources 707,205
Operating subsidies and transfers to other funds --
Net cash provided by (used for) non-capital financing activities 707,205
CASH FLOWS FROM INVESTING ACTIVITIES
Increase In Fixed Assets
Proceeds from sale/maturities of investments
Net cash provided by (used for) investing activities
Net increase (decrease) in cash and cash equivalents (68,391)
Cash Balances—beginning of year (70,857)
Cash Balances—end of year (139,248)$
Reconciliation of operating income (loss) to net cash provided
(used) by operating activities:
Operating income (loss) -$
Adjustments to reconcile operating income (loss) to net cash provided by
(used for) operating activities
Depreciation and net amortization
(Increase) decrease in accounts receivable, net (77,200)
(Increase) decrease in inventories
(Increase) decrease in USDA Commonities
Increase (decrease) in accounts payable 8,809
Increase (decrease) in accrued compensated absences
Total adjustments (68,391)
Net cash provided by (used for) operating activities (68,391)$
Proprietary Funds
TEAM ACADEMY CHARTER SCHOOL
Statement of Cash Flows
For the Year Ended June 30, 2012
FIDUCIARY FUNDS
28
Exhibit B-7
TEAM ACADEMY CHARTER SCHOOL
Statement of Fiduciary Net Assets
June 30, 2012
Fiduciary Funds
NOT APPLICABLE
29
Exhibit B-8
TEAM ACADEMY CHARTER SCHOOL
Statement of Changes in Fiduciary Net Assets
Fiduciary Funds
For the Year Ended June 30, 2012
NOT APPLICABLE
NOTES TO THE BASIC FINANCIAL STATEMENTS
30
TEAM ACADEMY CHARTER SCHOOL
Notes to the Basic Financial Statements
Year Ended June 30, 2012
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the TEAM Academy Charter School been prepared in conformity with
accounting principles generally accepted in the United States of America (GAAP) as applied to
governmental units. The Governmental Accounting Standards Board (GASB) is the accepted
standard-setting body for establishing governmental accounting and financial reporting principles.
The more significant of the TEAM Academy Charter School’s accounting policies are described
below.
Formal budgetary integration into the accounting system is employed as a management control
device during the year. For governmental funds there are no substantial differences between the
budgetary basis of accounting and generally accepted accounting principles. Encumbrance
accounting is employed as an extension of formal budgetary integration in the governmental fund
types. Unencumbered appropriations lapse at fiscal year end.
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Reporting Entity:
The TEAM Academy Charter School is an instrumentality of the State of New
Jersey, established to function as an education institution. The TEAM Academy
Charter School Board of Trustees is responsible for the fiscal control of the TEAM
Academy Charter School. An Executive Director is appointed by the TEAM
Academy Charter School and is responsible for the administrative control of the
TEAM Academy Charter School. Under existing statutes, the TEAM Academy
Charter School's duties and powers include, but are not limited to the development
and adoption of a school program; the establishment, organization and operation of
schools; and the acquisition, maintenance and disposition of school property.
The TEAM Academy Charter School Board of Trustees also has broad financial
responsibilities, including the approval of the annual budget and the establishment of
a system of accounting and budgetary controls.
The accompanying financial statements present the government and its component
units, entities for which the school is considered to be financially accountable. The
TEAM Academy Charter School has no blended or discretely presented component
units. Furthermore, the TEAM Academy Charter School is not includable in any
other reporting entity as a component unit.
31
TEAM ACADEMY CHARTER SCHOOL
Notes to the Basic Financial Statements
Year Ended June 30, 2012
B. Government-wide and Fund Financial Statements:
The government-wide financial statements (i.e., the statement of net assets and the
statement of changes in net assets) report information on all of the nonfiduciary
activities of the TEAM Academy Charter School and its component units. For the
most part, the effect of interfund activity has been removed from these statements.
Governmental activities, which normally are supported by taxes and
intergovernmental revenues, are reported separately from business-type activities,
which rely to a significant extent on fees and charges for support.
The statement of activities demonstrates the degree to which the direct expenses of a
given function or segment are offset by program revenues. Direct expenses are those
that are clearly identifiable with a specific function or segment. Program revenues
include 1) charges to customers or other governmental entities, including other
school districts, who purchase, use, or directly benefit from goods or services
provided by a given function or segment and 2) grants and contributions that are
restricted to meeting the operational or capital requirements of a particular function
or segment. Other items not properly included among program revenues are reported
instead as miscellaneous revenues.
Separate financial statements are provided for governmental funds, proprietary funds,
and fiduciary funds, even though the latter are excluded from the government-wide
financial statements. Major individual governmental funds and individual enterprise
funds are reported as separate columns in the fund financial statements.
C. Measurement Focus, Basis of Accounting and Financial Statement Presentation:
The government-wide financial statements are reported using the economic resources
measurement focus and the accrual basis of accounting, as are the proprietary fund
and fiduciary fund financial statements. All assets and all liabilities associated with
these operations (with the exception of the fiduciary funds) are included on the
Statement of Net Assets. Revenues are recorded when earned and expenses are
recorded at the time liabilities are incurred, regardless of the timing of related cash
flows. Grants and similar items are recognized as revenue as soon as all eligibility
requirements imposed by the provider have been met.
32
TEAM ACADEMY CHARTER SCHOOL
Notes to the Basic Financial Statements
Year Ended June 30, 2012
C. Measurement Focus, Basis of Accounting and Financial Statement Presentation:
(continued)
Governmental fund financial statements are reported using the current financial
resources measurement focus and the modified accrual basis of accounting. Under
this measurement focus and basis of accounting, revenues are recognized when
susceptible to accrual (i.e. when they are both measurable and available).
Revenues are considered to be available when they are collectible within the current
period or soon enough thereafter to pay liabilities of the current period. For this
purpose, the TEAM Academy Charter School considers revenues to be available if
they are collected within 90 days after year-end. Expenditures are recorded when a
liability is incurred, as under accrual basis of accounting, with the exception of debt
service expenditures, which are recorded when payment is due and compensated
absences and claims and judgments which are recorded only to the extent that there
are expendable financial resources available.
Other items associated with the current fiscal period are all considered to susceptible
to accrual and so have been recognized as revenues of the current fiscal period. All
other revenue items are considered to be measurable and available only when cash is
received by the TEAM Academy Charter School.
The TEAM Academy Charter School reports the following major governmental
funds:
The general fund is the TEAM Academy Charter School's primary operating fund. It
accounts for all financial resources of the TEAM Academy Charter School, except
those required to be accounted for in another fund.
The TEAM Academy Charter School reports the following major proprietary fund
which are organized to be self-supporting through user charges:
The food service fund accounts for the activities of the school cafeteria, which
provides food service to students.
33
TEAM ACADEMY CHARTER SCHOOL
Notes to the Basic Financial Statements
Year Ended June 30, 2012
C. Measurement Focus, Basis of Accounting and Financial Statement Presentation:
(continued)
Additionally, the government reports the following fund types:
The fiduciary trust fund is used to account for resources legally held in trust for
private donations for scholarships. All resources of the fund, including any earnings
on invested resources, may be used to support the intended purposes. There is no
requirement that any portion of these resources be preserved as capital.
Private-sector standards of accounting and financial reporting issued by the Financial
Accounting Standards Board (FASB) prior to December 1, 1989, generally are
followed in both the government-wide and proprietary fund financial statements to
the extent that those standards do not conflict with or contradict guidance of the
Governmental Accounting Standards Board (GASB). Governments also have the
option of following subsequent private-sector guidance for their business-type
activities and enterprise funds, subject to this same limitation. The TEAM Academy
Charter School has elected not to follow FASB guidance issued subsequent to
December 1, 1989.
As a general rule the effect of interfund activity has been eliminated from the
government-wide financial statements.
Amounts reported as program revenues in the TEAM Academy Charter School -
wide statement of activities include 1) charges to customers or applicants for goods
or services, provided, 2) operating grants and contributions, and 3) capital grants and
contributions. Internally dedicated resources are reported as general revenues rather
than as program revenues.
Proprietary funds distinguish operating revenues and expenses from nonoperating
items. Operating revenues and expenses generally result from providing services and
producing and delivering goods in connection with a proprietary fund's principal
ongoing operations. The principal operating revenues of the food service enterprise
fund are charges to customers for sales and services. Operating expenses for the
enterprise fund includes the cost of sales and services. All revenues and expenses not
meeting this definition are reported as nonoperating revenues and expenses. Federal
and State subsidies for the food service operation are considered nonoperating
revenues.
34
TEAM ACADEMY CHARTER SCHOOL
Notes to the Basic Financial Statements
Year Ended June 30, 2012
D. Assets, Liabilities and Net Assets or Equity:
1. Deposits and Investments
Cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term
investments with original maturities of three months or less from the date of acquisition.
Investments are reported at fair value and are limited by N.J.S.A. 18A:20-37.
2. Receivables and Payables
Activity between funds that are representative of lending/borrowing arrangements outstanding at the end
of the fiscal year are referred to as either "due to/from other funds" (i.e., the current portion of interfund
loans) or "advances to/from other funds" (i.e., the non-current portion of interfund loans). All other
outstanding balances between funds are reported as "due to/from other funds". Any residual balances
outstanding between the governmental activities and business-type activities are reported in the
government-wide financial statements as "internal balances".
All receivables are reported at their gross value, and where appropriate, are reduced by the estimated
portion that is expected to be uncollectible.
3. Inventories and Prepaid Items
The cost of inventories of the governmental fund types are recorded as expenditures at the time individual
inventory items are purchased.
Food Service Fund inventories, exclusive of the federal commodities, are valued at cost, using the first-in
first-out (FIFO) method. The United States Department of Agriculture (USDA) commodity portion of the
Food Service Fund inventory consists of food donated by the USDA. It is valued at estimated market
prices by the USDA. The amount of unused commodities at year-end is reported as deferred revenue.
Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as
prepaid items in both government-wide and fund financial statements.
Accrued Liabilities and Payables
All payables and accrued liabilities, are reported on the school-wide financial statements. In general,
governmental fund payables and accrued liabilities that, once, incurred, are paid in a timely manner and in
full from current financial resources are reported as obligations of the funds.
Net Assets
Net assets represent the difference between assets and liabilities. Net assets invested in capital assets, net
of related debt consists of capital assets, net of accumulated depreciation, reduced by the outstanding
balance of any borrowing used for the acquisition, construction, or improvement of those assets. Net
assets are reported as restricted when there are limitations imposed on their use either through the
enabling legislation adopted by the school or through external restrictions imposed by creditors, grantors,
or laws or regulations of other governments. The school’s policy is to first apply restricted resources
when an expense is incurred for purposes for which both restricted and unrestricted net assets are
available.
35
TEAM ACADEMY CHARTER SCHOOL
Notes to the Basic Financial Statements
Year Ended June 30, 2012
D. Assets, Liabilities and Net Assets or Equity: (continued)
4. Capital Assets
Capital assets, which include property, plant and equipment, are reported in the
applicable governmental or business type activities columns in the government-wide
financial statements. Capital assets are defined by the TEAM Academy Charter
School as assets with an initial, individual cost of $2,000 and an estimated useful life
in excess of two years. Such assets are recorded at historical cost or estimated
historical cost if purchase or constructed. Donated capital assets are recorded at
estimated fair market value at the date of donation.
The costs of normal maintenance and repairs that do not add to the value of the asset
or materially extend assets lives are not capitalized.
Major outlays for capital assets and improvements are capitalized as projects are
constructed. Interest incurred during the construction phase of capital assets of
business-type activities is included as part of the capitalized value of the assets
constructed.
Property, plant, and equipment of the primary government, as well as the component
units, is depreciated using the straight line method.
5. Fund Reserve Restrictions, Commitments and Assignments
The Charter School implemented GASB Statement No. 54, Fund Balance Reporting
and Governmental Fund Type Definitions, during the current fiscal year. The
objective of this standard is to enhance the usefulness of fund balance information by
providing clearer fund balance classification that can be more consistently applied by
clarifying the existing governmental fund type definitions. This Statement establishes
fund balance classifications that comprise a hierarchy based primarily on the extent
to which a government is bound to observe constraints imposed upon the use of the
resources reported in governmental funds.
The restricted fund balance category includes amounts that can be spent only for the
specific purposes stipulated by constitution, external resource providers, or through
enabling legislation. The committed fund balance classification includes amounts
that can be used only for the specific purposes determined for a formal action of the
Charter School's highest level of decision-making authority.
36
TEAM ACADEMY CHARTER SCHOOL
Notes to the Basic Financial Statements
Year Ended June 30, 2012
D. Assets, Liabilities and Net Assets or Equity: (continued)
Fund Reserves Restrictions, Commitments and Assignments (continued)
Amounts in the assigned fund balance classification are intended to be used by the
government for specific purposes but do not meet the criteria to be classified as
restricted or committed. The Charter School has no funds restricted at June 30, 2012.
Unassigned fund balance is the residual classification for the Charter School's
General Fund and includes all spendable amounts not contained in the other
classifications. In other funds, the unassigned classifications should be used only to
report a deficit balance resulting from overspending for specific purposes for which
amounts has been restricted, committed or assigned.
The Board of Trustees has the responsibility to formally commit resources for
specific purposes through a motion or a resolution passed by a majority of the
members of the Board of Trustees at a public meeting of that governing body. The
Board of Trustees must also utilize a formal motion or a resolution passed by a
majority of the members of the Board of Trustees at a public meeting of that
governing body in order to remove or change the commitment of resources. The
Charter School has no committed resources at June 30, 2012
The assignment of resources is generally made by the Board of Trustees through a
motion or a resolution passed by a majority of the members of the Board of Trustees.
These resources are intended to be used for a specific purpose. The process is not as
restrictive as the commitment of resources and the Board of Trustees may allow an
official of the Charter School to assign resources through policies adopted by the
Board of Trustees. The Charter School has no assigned resources at June 30, 2012.
Reserve for Encumbrances - This reserve is created to represent encumbrances
outstanding at the end of the year based on purchase orders and contracts awarded
for which the goods or services have not yet been received at June 30. There were no
reserve for encumbrance at June 30, 2012.
Reserve for Capital Reserve Account - This reserve is created by budget
appropriation to fund future capital expenditures.
Reserve for Legally Restricted - Designated for Subsequent Year's Expenditures - This reserve is created to represent the portion of fund balance at June 30, 2012
restricted and utilized in the adopted subsequent year's budget. At June 30, 2012
there were no reserves.
37
TEAM ACADEMY CHARTER SCHOOL
Notes to the Basic Financial Statements
Year Ended June 30, 2012
NOTE 2. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL
STATEMENTS
A. Explanation of certain differences between the governmental fund balance sheet
and the government-wide statement of net assets
No difference noted.
NOTE 3. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY
A. Budgetary Information:
In accordance with the requirements of the New Jersey Department of Education, the
TEAM Academy Charter School annually prepares its operating budget for the
forthcoming year. The budget, except for the special revenue fund, which is more
fully explained below, is prepared in accordance with accounting principles generally
accepted in the United States of America and serves as a formal plan for
expenditures and the proposed means for financing them.
The annual budget is adopted in the spring of the preceding year for the general,
special revenue and debt service funds. The budget is submitted to the county
superintendent and is voted upon by the Board of Trustees. Budget adoptions and
amendments are recorded in the TEAM Academy Charter School minutes.
The budget is properly amended by the TEAM Academy Charter School trustees as
needed throughout the year. The budget for revenues, other resources, other uses, and
fund balances is prepared by fund source and amount.
The budget for expenditures is prepared by fund, program, function, object and
amount. The legal level of budgetary control is established at the line item account
within each fund. Line item accounts are defined as the lowest (most specific) level
of detail as established pursuant to the minimum chart of accounts referenced in
N.J.A.C. 6:20-2A.2(m)1. The school approved several budget transfers during
2011/2012.
38
TEAM ACADEMY CHARTER SCHOOL
Notes to the Basic Financial Statements
Year Ended June 30, 2012
NOTE 3. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY (continued)
A. Budgetary Information: (continued)
Formal budgetary integration into the accounting system is employed as a
management control device during the year. For governmental funds there are no
substantial differences between the budgetary basis of accounting and accounting
principles generally accepted in the United States of America, with the exception of
the special revenue fund as noted below. Encumbrance accounting is also employed
as an extension of formal budgetary integration in the governmental fund types.
Unencumbered appropriations lapse at fiscal year end.
The accounting records of the special revenue fund are maintained on the grant
accounting budgetary basis. The grant accounting budgetary basis differs from
GAAP in that the grant accounting budgetary basis recognizes encumbrances as
expenditures and also recognizes the related revenues, whereas the GAAP basis does
not. Sufficient supplemental records are maintained to allow for the presentation of
GAAP basis financial reports.
The following presents a reconciliation of the special revenue fund from the
budgetary basis of accounting as presented in the Budgetary Comparison Schedule -
Special Revenue Fund to the GAAP basis of accounting as presented in the
Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental
Funds.
Revenues
Expenditures
Operating
In
Transfers
Out
Budgetary Basis $3,875,343 $3,875,343 - -
Adjustments: - - - -
Add encumbrances at June 30, 2011 - - - -
Less encumbrances at June 30, 2012 - - - -
GAAP Basis
$3,875,343 $3,875,343 - -
Encumbrance accounting is employed in the governmental funds. Under
encumbrance accounting, purchase orders, contracts and other commitments for the
expenditure of resources are recorded to reserve a portion of the applicable
appropriation.
39
TEAM ACADEMY CHARTER SCHOOL
Notes to the Basic Financial Statements
Year Ended June 30, 2012
NOTE 3. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY (continued)
A. Budgetary Information: (continued)
Open encumbrances in governmental funds other than the special revenue fund are reported as
reservations of fund balances at fiscal year end as they do not constitute expenditures or
liabilities but rather commitments related to unperformed contracts for goods and services.
B. Capital Reserve Account:
Funds placed in the capital reserve account are restricted to capital projects in the TEAM
Academy Charter School's approved Long Range Facilities Plan (LRFP) and updated annually in
the Quality Assurance Annual Report (QAAR).
NOTE 4. DETAILED NOTES ON ALL FUNDS
A. Deposits and Investments
Deposits
New Jersey statutes permit the deposit of public funds in public depositories which are located in
New Jersey and which meet the requirements of the Governmental Unit Deposit Protection Act
(GUDPA). GUDPA requires a bank that accepts public funds to be a public depository. A public
depository is defined as a state bank, a national bank, or a savings bank, which is located in the
State of New Jersey, the deposits of which are insured by the Federal Deposit Insurance
Corporation. The statutes also require public depositories to maintain collateral for deposits of
public funds that exceed certain insurance limits. All collateral must be deposited with the
Federal Reserve Bank or a banking Institution that is a member of the Federal Reserve System,
and has capital funds of not less than $25,000,000.00. Under (GUDPA), if a public depository
fails, the collateral it has pledged, plus the collateral of all other public depositories, is available
to pay the full amount of the deposits to the governmental unit.
As of June 30, 2012, TEAM Academy Charter School cash and cash equivalents consisted of the
following:
General
Fund
Special
Revenue
Enterprise
Fund
Total
Operating Account $5,263,868 ($440,902) ($139,248) $4,683,718
Category 1 - Insured or collateralized with securities held by the Board or its agent in the
Board's name.
Category 2 - Collateralized with securities held by the pledging financial institutions trust
department or agent in the Board's name.
40
TEAM ACADEMY CHARTER SCHOOL
Notes to the Basic Financial Statements
Year Ended June 30, 2012
NOTE 4. DETAILED NOTES ON ALL FUNDS
B. Deposits and Investments (continued)
Deposits (continued)
Category 3 - Uncollateralized or collateralized with securities held by the pledging
financial institution, or by its trust department or agent, but not in the TEAM Academy
Charter School's name.
Category Bank
1 2 3 Balance
Deposits $4,683,718 $ 0 $ 0 $4,683,718
The TEAM Academy Charter School’s cash deposits as June 30, 2012 were entirely
covered by the Federal Deposit Insurance Corporation (F.D.I.C.) or by the pledged
collateral pool maintained by the banks as required by New Jersey statutes.
Investments
New Jersey statutes permit the TEAM Academy Charter School to purchase the
following types of securities:
a. Bonds or other obligations of the United States or obligations guaranteed by the
United States of America.
b. Government Money Market Mutual Funds.
c. Any obligations that a federal agency or a federal instrumentality has issued, which
security has a maturity date not greater than 397 days from the date of purchase,
provided that such obligation bears a fixed rate of interest.
d. Bonds or other obligations of the TEAM Academy Charter School or bonds or other
obligations of the local unit or units which the school district is located.
e. Bonds or other obligations, having a maturity date of not more than 397 days from
the date of purchase, that are approved by the New Jersey Department of Treasury,
Division of Investments.
f. Local Government investment pools.
g. Agreements or the repurchase of fully collateralized securities, if transacted in
accordance with N.J.S.A. 18A:20-37.
The TEAM Academy Charter School had no outstanding investments at June 30, 2012.
41
TEAM ACADEMY CHARTER SCHOOL
Notes to the Basic Financial Statements
Year Ended June 30, 2012
C. Receivables
Receivables as of year-end for the government's individual major funds and fiduciary
funds in the aggregate, including the applicable allowances for uncollectible accounts,
are as follows:
General
Special
Revenue
Food
Service
Total
Receivables:
Accounts $774,251 $793,140 $200,450 $1,767,841
Gross Receivables $774,251 $793,140 $200,450 $1,767,841
D. Deferred Revenue
Deferred Revenue represents funds which have been received but not yet earned.
There is no deferred revenue in the general fund.
Special Revenue – deferred revenue to be utilized in 2012-2013.
Peter Jennings Award $10,075
Charles Hayden Foundation 25,230
MCJ Amelior Foundation Grant 75,000
Calder Foundation Grant to Fiscal Year 2013 19,745
Robinson Harris Foundation (MFF Match) 16,667
Kushan RH Scholarship 5,000
Morgridge Family Foundation Grant 13,576
Total: $165,293
42
TEAM ACADEMY CHARTER SCHOOL
Notes to the Basic Financial Statements
Year Ended June 30, 2012
NOTE 4. DETAILED NOTES ON ALL FUNDS (continued)
E. Capital Assets
Capital assets as at the year ended June 30, 2012 was as follows:
Primary Government:
Balance at
June 30, 2012
Governmental activities:
Capital assets, not being depreciated: $ -
Land -
Total capital assets, not being depreciated $ -
Capital assets, being depreciated:
Leasehold Improvements 1,046,103
School equipment 896,605
Total capital assets being depreciated $1,942,708
Less accumulated depreciation for:
Total accumulated depreciation ($396,495)
Total capital assets, being depreciated, net all funds $1,546,213
Depreciation expense was charged to functions/programs of the primary government as
follows:
Governmental activities: Total depreciation expense - governmental activities $91,984
Capital assets are depreciated in the financial statements using the straight-line method
over the estimated useful life of the asset.
43
TEAM ACADEMY CHARTER SCHOOL
Notes to the Basic Financial Statements
Year Ended June 30, 2012
NOTE 4. DETAILED NOTES ON ALL FUNDS (continued)
F. Interfund Receivables, Payables, and Transfers:
As of June 30, 2012, there were no interfund transactions reflected.
G. Management Estimates:
The preparation of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported
amounts of revenues and expenditures/expenses during the reporting period. Actual results
could differ from those estimates.
NOTE 5. OTHER INFORMATION
A. Contingent Liabilities
The TEAM Academy Charter School participates in a number of federal and state programs that
are fully or partially funded by grants received from other governmental units. Expenditures
financed by grants are subject to audit by the appropriate grantor government. If expenditures
are disallowed due to noncompliance with grant program regulations, the TEAM Academy
Charter School may be required to reimburse the grantor government. As of June 30, 2012,
significant amounts of grant expenditures have not been audited by the various grantor agencies
but the TEAM Academy Charter School believes that disallowed expenditures, if any, based on
subsequent audits will not have a material effect on any of the individual governmental funds or
the overall financial position of the TEAM Academy Charter School.
The TEAM Academy Charter School’s attorney’s letter advises that there is no litigation,
pending litigation claims, contingent liabilities, unasserted claims for assessments or statutory
violations which involved the TEAM Academy Charter School and which might materially
affect the TEAM Academy Charter School’s financial position.
B. Pension Plans
Substantially all of the TEAM Academy Charter School's employees participate in one of the
two contributory defined benefit public employee retirement systems: the Teachers' Pension and
Annuity Fund (TPAF) or the Public Employees' Retirement System (PERS) of New Jersey. The
TPAF and PERS are sponsored and administered by the State of New Jersey. The TPAF is
considered a cost-sharing, multiple-employer plan with a special funding situation, as under
current statute, all employer contributions are made by the State of New Jersey on behalf of the
TEAM Academy Charter School and the system’s other non-contribution employers. The PERS
is also considered a cost-sharing, multiple-employer plan. As a general rule, all full-time
employees are eligible to join the TPAF or the PERS.
44
TEAM ACADEMY CHARTER SCHOOL
Notes to the Basic Financial Statements
Year Ended June 30, 2012
NOTE 5. OTHER INFORMATION (continued)
B. Pension Plans (continued)
Employees who are members of TPAF or PERS and retire at a specified age according
to the relevant tier category for that employee are entitled to a retirement benefit based
upon a formula which takes “final average salary” during years of creditable service.
Vesting occurs after 8 to 10 years of service.
The State of New Jersey, Department of the Treasury, Division of Pensions and
Benefits, issues publicly available financial reports that include the financial statements
and required supplementary information of each of the above systems. The financial
reports may be obtained by writing to the State of New Jersey, Department of the
Treasury, Division of Pensions and Benefits, P.O. Box 295, Trenton, New Jersey,
08625-0295.
The contribution policy is set by New Jersey State Statutes and, in most retirement
systems, contributions are required by active members and contributing employers. Plan
member and employer contributions may be amended by State of New Jersey
regulation. Effective with the first payroll to be paid on or after October 1, 2011 the
employee contributions for PERS went from 5.5% to 6.5% of employees’ annual
compensation as defined. Employers are required to contribute at an actuarially
determined rate in the PERS and TPAF.
The actuarially determined employer contribution includes funding for cost-of-living
adjustments and noncontributory death benefits, and post-retirement medical premiums.
Under current statute, the TEAM Academy Charter School is a noncontributing
employer of the TPAF.
During the fiscal year ended June 30, 2012, the State of New Jersey contributed
$223,530 to the TPAF for pension benefits on-behalf of the TEAM Academy Charter
School.
Post-Retirement Benefits
Chapter 384 of Public Laws 1987 and Chapter 6 of Public Laws 1990 required TPAF
and PERS, respectively, to fund post-retirement medical benefits for those State
employees who retire after accumulating 25 years of credited service or on a disability
retirement. Chapter 103 of Public Law amended the law to eliminate the funding of
post-retirement medical benefits through TPAF and PERS. It created separate funds
outside of the pension plans for the funding and payment of post-retirement medical
benefits for retired State employees and retired educational employees.
45
TEAM ACADEMY CHARTER SCHOOL
Notes to the Basic Financial Statements
Year Ended June 30, 2012
NOTE 5. OTHER INFORMATION (continued)
B. Pension Plans (continued)
Post-Retirement Benefits (continued)
As of June 30, 2011, there were 93,323 retirees eligible for post-retirement medical
benefits. The cost of these benefits is funded through contributions by the State in
accordance with Chapter 62, P.L. 1994. Funding of post-retirement medical premiums
changed from a prefunding basis to a pay-as-you-go basis beginning in fiscal year 1994.
The State is also responsible for the cost attributable to Chapter 126, P.L. 1992 c. 126,
which provides free health benefits to members of PERS and the Alternate Benefit
Program who retired from a board of education or county college with 25 years of
service. The State paid $144 million toward Chapter 126 benefits for 15,709 eligible
retired members in Fiscal Year 2011.
The State’s on behalf Post Retirement Medical Contributions to TPAF for the TEAM
Academy Charter School were $449,352.
NOTE 6. RISK MANAGEMENT
The TEAM Academy Charter School is exposed to various risks of loss related to torts;
theft of, damage to, and destruction of assets; errors and omissions; injuries to
employees; and natural disasters. The school maintains commercial insurance coverage
for property, liability, student accident and surety bonds. A complete schedule of
insurance coverage can be found in the Statistical Section of this Comprehensive
Annual Financial Report.
NOTE 7. LONG-TERM LEASES
The school leases its premises under the terms of a non-cancelable lease. Rent expense
for the year ended June 30, 2012 amounted to $2,314,917. Future obligations over the
primary terms of the long-term lease is as follows:
2013 2,176,000
2014 2,176,000
2015 2,176,000
46
TEAM ACADEMY CHARTER SCHOOL
Notes to the Basic Financial Statements
Year Ended June 30, 2012
NOTE 8. SUBSEQUENT EVENTS
The school has evaluated subsequent events occurring after the balance sheet through
the date of September 12, 2012, which is the date the financial statements were available
to be issued. Based on this evaluation, the school has determined no subsequent events
require disclosure in the financial statements.
REQUIRED SUPPLEMENTARY INFORMATION
PART II
BUDGETARY COMPARISON SCHEDULES
47
Exhibit C-1
Original Budget Final Variance
Budget Transfers Budget Actual Final to Actual
REVENUES:
Local Sources:
Local Share 3,098,710$ 240,116$ 3,338,826$ 3,010,932$ 327,894
State Share 19,034,930 1,467,564 20,502,494$ 20,931,755 (429,261)
Other Restricted Miscellaneous Revenues - - -$ -
Miscellaneous 1,784,763 (374,403) 1,410,360 794,627 615,733
Total - Local Sources 23,918,403 1,333,277 25,251,680 24,737,314 514,366
Categorical Aid
Extraordinary Aid 97,018 - 97,018 98,507 (1,489)
Special Education Aid - - - - -
T& E Gap - - - -
Demonstrably Effective - - - - -
Non-Public Aid - 473,358 473,358 269,812 203,546
TPAF Pension (On-Behalf - Non-Budgeted) - - 672,882 (672,882)
TPAF Social Security (Reimbursed - Non-Budgeted) - - 673,654 (673,654)
Total State Sources 97,018 473,358 570,376 1,714,855 (1,144,479)
Federal Sources:
Impact Aid
Medical Assistance Program
Total - Federal Sources
Total Revenues 24,015,421 1,806,635 25,822,056 26,452,169 (630,113)
EXPENDITURES:
Current Expense:
Regular Programs - Instruction
Teachers Salary 8,696,070$ (1,007,154) 7,688,916 7,613,937 74,979
Other Salaries 456,100 (5,735) 450,365 428,420 21,945
Prof/Tech Services 9,476 24,600 34,076 33,113 963
General Supplies 1,396,158 807,746 2,203,904 1,543,136 660,768
Textbooks 257,500 (41,532) 215,968 160,293 55,675
Other Objects 963,043 (433,088) 529,955 419,100 110,855
TOTAL REGULAR PROGRAMS - INSTRUCTION 11,778,347 (655,163) 11,123,184 10,197,999 925,185
TEAM ACADEMY CHARTER SCHOOL
Budgetary Comparison Schedule
General Fund
For The Year Ended June 30, 2012
48
Exhibit C-1
Page 2
Original Budget Final Variance
Budget Transfers Budget Actual Final to Actual
Support Services - General Administrative
Salaries of Administative Salaries 3,548,731 (448,455) 3,100,276 3,098,571 1,705
Salaries of Secretarial and Clerical Assistants 311,991 6,945 318,936 318,936 0
Cost of Benefits 2,514,159 818,157 3,332,316 2,329,056 1,003,260
Other Purchased Services - - - -
Purchased Professional and Technical Services 296,528 (24,500) 272,028 238,488 33,540
Communications/Telephone 481,892 (94,645) 387,247 351,302 35,945
Supplies and Materials 275,102 24,781 299,883 256,962 42,921
Other Objects 544,992 47,870 592,862 460,672 132,190
7,973,395 330,153 8,303,548 7,053,987 1,249,561
Support Services - School Admin/Operation Plant Services
Salaries 2,145,374 (255,344) 1,890,030 1,791,385 98,645
Purchased Professional and Technical Services 432,700 (53,641) 379,059 333,470 45,589
Other Purchased Services 474,200 (18,172) 456,028 281,096 174,932
Rental of Land and Building- other than Lease Purchase Agreements 2,492,748 (165,021) 2,327,727 2,314,917 12,810
Insurance 79,302 9,258 88,560 86,342 2,218
General Supplies 82,600 13,977 96,577 87,274 9,303
Transportation 50,000 38,771 88,771 48,678 40,093
Energy (Energy and Electricity) 259,000 2,322 261,322 226,230 35,092
Other Objects 63,500 (37,833) 25,667 23,083 2,584
Total Undist. Expend. - Other Oper. & Maint. Of Plant 6,079,424 (465,683) 5,613,741 5,192,475 421,266
Food Service
Board Subsudy - - -
Other Purchsed Services - -
Total Food Services - - -
On-behalf TPAF pension Contributions (non-budgeted) 672,882 (343,103)
Reimbursed TPAF Social Security Contributions (non-budgeted) 673,654 (673,654)
TOTAL ON-BEHALF CONTRIBUTIONS - - 1,346,536 (1,016,757)
TOTAL UNDISTRIBUTED EXPENDITURES
14,052,819 (135,530) 13,917,289 13,592,998 324,291
TOTAL GENERAL CURRENT EXPENSE 25,831,166 (790,693) 25,040,473 23,790,997 1,249,476
TEAM ACADEMY CHARTER SCHOOL
Budgetary Comparison Schedule
General Fund
For The Year Ended June 30, 2012
49
Exhibit C-1
Page 3
Original Budget Final Variance
Budget Transfers Budget Actual Final to Actual
CAPITAL OUTLAY
Equipment
Regular Programs - Instruction:
Instructional Equipment 766,732 (429,178) 337,554 322,804 14,750
Non-Instructional Equipment - - - - -
Miscellaneous 213,935 230,094 444,029 445,138 (1,109)
Total Equipment 980,667 (199,084) 781,583 767,942 13,641
TOTAL EXPENDITURES- GENERAL FUND 26,811,833 (989,777) 25,822,056 24,558,939 1,263,117
Excess (Deficiency) of Revenues
Over (Under) Expenditures (2,796,412) 2,796,412 - 1,893,230 (1,893,230)
-
Other Financing Sources:
Operating Transfer In: 2,796,412 (2,796,412) - - -
Total Other Financing Sources: 2,796,412 (2,796,412) - - -
Excess (Deficiency) of Revenues and Other Financing Sources
Over (Under) Expenditures and Other Financing Sources (Uses) - - - 1,893,230 (1,893,230)
Fund Balance, July 1 - - 2,355,554 2,355,554
Fund Balance, June 30 -$ -$ 2,355,554$ 4,248,784$ (1,893,230)$
General Fund
For The Year Ended June 30, 2012
TEAM ACADEMY CHARTER SCHOOL
Budgetary Comparison Schedule
50
Exhibit C-2
Page 1
Original Budget Final Variance
Budget Transfers Budget Actual Final to Actual
REVENUES:
Local Sources 2,008,798$ 2,008,798$ 2,008,798$
State Sources - - -
Federal Sources 1,866,555 1,866,555 1,866,555
Total Revenues 3,875,353 3,875,353 3,875,353
EXPENDITURES:
Instruction
Salaries of Teachers 849,111 849,111 849,111
Other Salaries for Instruction 54,503 54,503 54,503
Purchased Professional Services - -
Purchased Professional and Technical Services 275,448 275,448 275,448
Travel - -
Transportstion - -
General Supplies 67,791 67,791 67,791
Personal Services- Employee Benefits 282,567 282,567 282,567
Trip Expense - - -
Textbooks 97,511 97,511 97,511
Miscellaneous expnse 811,210 811,210 811,210
Total Instruction 2,438,141 2,438,141 2,438,141
Support Services
Salaries of Supervisor of Instruction 870,661 870,661 870,661
Salaries of Social Worker 9,977 9,977 9,977
Salaries of Clerical - -
Salaries of Secretaries & Clerical Assistants - - -
Other purchased Services (400-500 series) 338 338 338
Personal Services - Employee Benefits 42,040 42,040 42,040
Professional Development 41,303 41,303 41,303
Supplies and Materials - - -
Scholarships - - -
School Transportation 389,388 389,388 389,388
Transportation and Travel Expenses - - -
Rent 83,505 83,505 83,505
Travel - -
Summer Opportunities - - -
Capital Outlay - - -
Total Support Services 1,437,212 1,437,212 1,437,212
For the Fiscal Year Ended June 30, 2012
TEAM ACADEMY CHARTER SCHOOL
Budgetary Comparison Schedule
Special Revenue Fund
51
Exhibit C-2
Page 2
Original Budget Final Variance
Budget Transfers Budget Actual Final to Actual
Buildings Improvements
Instructional Equipment
Noninstructional Equipment
Total Facilities Acquisition and Construction Services
Transfer to Charter School
Total Expenditures 3,875,353 3,875,353 3,875,353
Other Financing Sources (Uses)
Transfer in from General Fund
Transfer Out to Whole School Reform (General Fund)
Total Other Financing Sources (Uses)
Total Outflows
Excess (Deficiency) of Revenues Over (Under)
Expenditures and Other Financing Sources (Uses)
Special Revenue Fund
For the Fiscal Year Ended June 30, 2012
TEAM ACADEMY CHARTER SCHOOL
Budgetary Comparison Schedule
NOTES TO REQUIRED SUPPLEMENTARY
INFORMATION
52
Exhibit C-3
GASB G-3
Note A - Explanation of Differences between Budgetary Inflows and Outflows and
GAAP Revenues and Expenditures
The general fund budget and the special revenue budget basis are GAAP, therefore no reconciliation is required
For the Fiscal Year Ended June 30, 2012
TEAM ACADEMY CHARTER SCHOOL
Required Supplementary Information
Budgetary Comparison Schedule
Note to RSI
SPECIAL REVENUE FUND
Special Revenue Funds are used to account for the proceeds of special revenue resources
(other than expendable trusts or major capital projects) that are legally restricted to
expenditures for specific purposes.
53
FRIENDS OF
TITLE TITLE CSP Calder Friends Friends TEAM/ Robinson Total
TITLE TITLE VI IDEA VI CSP Grant Dissemination Foundation Of Of DUNNS Harris Weston Schedule
TOTAL I IIA PRESCHOOL IDEA Grant Thrive Grant Grant TEAM TEAM Foundation Fund Fund E-2
REVENUES
Intergovernmental
State
Federal 1,866,555 1,131,146 12,589 3,856 323,632 128,052 120,123 147,157
Other Sources 0
Miscellaneous 2,008,798 130,255 223,754 389,388 250,000 28,027 250,000 737,374
Total Revenues 3,875,353 1,131,146 12,589 3,856 323,632 128,052 120,123 147,157 130,255 223,754 389,388 250,000 28,027 250,000 737,374
EXPENDITURES
Instruction
Salaries 849,111 598,127 11,694 56,500 45,715 48,375 88,700
Other Salaries 54,503 45,360 9,143
Transportation 0
Personal Services 0
Purchased Prof. and Tech. Services 275,448 160,000 115,448
General Supplies 67,791 3,856 15,281 1,971 3,377 9,210 0 1,794 32,302
Textbooks 97,511 60,742 36,769
Personal Services - Employee Benefits 282,567 180,068 895 24,725 0 65,809 11,070
Miscellaneous Expense 811,210 0 16,120 15,545 157,607 250,000 26,233 250,000 95,705
Total Instruction 2,438,141 823,555 12,589 3,856 256,506 54,858 62,713 19,497 73,130 223,416 0 250,000 28,027 250,000 379,994
Support Services
Salaries of Supervisors of Instruction 870,661 307,591 67,126 35,052 8,462 86,260 51,125 315,045
Salaries of Social Worker 9,977 9,142 835
Salaries Clerical 0
Other Purchased Services 338 0 338
Professional Development 0
Rent 0
Supplies and Materials 83,505 29,000 48,948 5,557
Scholarships 0
Purchased Prof. and Tech. Services 41,303 17,220 6,000 18,083
School Transportation 389,388 389,388 0
Furniture and Fixtures 0
Summer Opportunities 0 0
Benefits 42,040 0 18,623 23,417
Total Support Services 1,437,212 307,591 0 0 67,126 73,194 57,410 127,660 57,125 338 389,388 0 0 357,380
TOTAL EXPENDITURES 3,875,353 1,131,146 12,589 3,856 323,632 128,052 120,123 147,157 130,255 223,754 389,388 250,000 28,027 250,000 737,374
Exhibit E-1
NCLB 2012
TEAM ACADEMY CHARTER SCHOOL
For the Year Ended June 30, 2012
Combining Schedule of Revenues and Expenditures- Budgetary Basis
Special Revenue Fund
54
NJ New
Hyde School Leaders Causevox Morgridge Fourier Education Peter
Charles and Watson Charles Kipp Board For Goldman Campaign Family Turrell Family Pioneers Jennings
TOTAL Hayden Foundation Hayden Foundation Grant New Schools Sachs Projects Grant Fund Foundation Grant Grant
REVENUES
Intergovernmental
State
Federal
Other Sources
Miscellaneous 737,374 174,770 17,000 77,500 213,399 6,448 898 3,409 5,264 36,424 125,000 43,262 14,000 20,000
Total Revenues 737,374 174,770 17,000 77,500 213,399 6,448 898 3,409 5,264 36,424 125,000 43,262 14,000 20,000
EXPENDITURES
Instruction
Salaries 88,700 88,700
Fellow Salaries 0
Transportation 0
Personal Services 0
Purchased Prof. and Tech. Services 95,448 75,000 6,448 14,000 20,000
General Supplies 32,302 17,000 6,533 5,264 3,505
Textbooks 36,769 345 36,424
Personal Services - Employee Benefits 11,070 11,070
Miscellaneous Expenses 95,705 52,539 3,409 39,757
Total Instruction 359,994 174,770 17,000 59,417 0 6,448 0 3,409 5,264 36,424 0 43,262 14,000 20,000
Support Services
Salaries of Supervisors of Instruction 315,045 213,399 101,646
Salaries of Clerical/Secretarial 835 835
Other Purchased Services 0
Professional Development 0
Supplies and Materials 0
Scholarships 0
Purchased Prof. and Tech. Services 18,083 18,083
School Transportation 0
Furniture and Fixtures 0 0
Summer Opportunities 0
Benefits 23,417 63 23,354
Capital Outlay 0 0 0 0
Total Support Services 357,380 0 0 18,083 213,399 0 898 0 0 0 125,000 0 0 0
TOTAL EXPENDITURES 737,374 174,770 17,000 77,500 213,399 6,448 898 3,409 5,264 36,424 125,000 43,262 14,000 20,000
For the Year Ended June 30, 2012
Combining Schedule of Revenues and Expenditures- Budgetary Basis
Special Revenue Fund
TEAM ACADEMY CHARTER SCHOOL
Exhibit E-1 - Page 2
PROPRIETARY FUNDS
ENTERPRISE FUND
Enterprise Funds are used to account for operations that are financed and operated in a
manner similar to private business enterprises where the intent is that the cost of
providing goods and services be financed through user charges or where the board has
decided that periodical determination of revenues earned, expenses incurred, and/or net
income is appropriate for capital maintenance, public policy, management control,
accountability or other purposes.
Food Service Fund - The fund provides for the operation of food services in all schools.
55
Exhibit G-1
Business- Type Activities
Enterprise Fund
ASSETS Food Services
Current Assets
Cash
Intergovernmental Receivable
Federal $195,460
State 2,415
Accounts Receivable 2,575
Inventory
Total Current Assets 200,450
Equipment
Accumulated Depreciation
Fixed Assets (Net of Accumulated Depreciation)
Total Assets 200,450
LIABILITIES
Current Liabilities
Cash Overdraft $139,248
Accounts Payable 61,202
Total Current Liabilities 200,450
Net Assets
Unrestricted 0
Invested in capital assets net of related debt
Total Net Assets $0
TEAM ACADEMY CHARTER SCHOOL
Statement of Net Assets
For the Fiscal Year Ended June 30, 2012
56
Exhibit G-2
Business-Type Activities
Enterprise Fund
OPERATING REVENUES Food Services
Local Sources
Daily Sales - Reimbursable Programs
Special Lunch and Breakfast Program $62,074
Special Functions
Total Operating Revenues 62,074
OPERATING EXPENSES
Salaries, wages and employee benefits 97,519
Supplies, Materials & Other 958,194
Professional Fee
Depreciation
Cost of Sales
Total Operating Expenses 1,055,713
Income (Loss) From Operations 993,639
Nonoperating Revenues
State Sources
State Sources 9,967
Federal Sources
School Breakfast Program 150,640
National School Lunch Program 467,779
U.S. D.A. CommoditiesAfter School Snack 153,945
Private Grants 211,308
Total Nonoperating Revenues 993,639
Net Income (Loss) 0
Total Net Assets- Beginning of Year 0
Total Net Assets- End of Year $0
TEAM ACADEMY CHARTER SCHOOL
Statement of Revenues, Expenses, and Changes in Fund Net Assets
Proprietary Fund
For the Fiscal Year Ended June 30, 2012
57
Exhibit G-3
2012
Cash flows from operating activities
Private Contributions $211,308
Cash Received from Customers 60,000
Cash Payments to Suppliers for Goods and Services (1,046,904)
Net Cash (Used) by Operating Activities (775,596)
Cash Flows from Noncapital Financing Activities
Cash Received from General Fund Transfer (Contribution)
Cash Received from State and Federal Subsidy Reimbursements 707,205
Net Cash Provided by Noncapital Financing Activities 707,205
Cash Flows from Investing Activities
Net Cash Provided by Investing Activities
Net Increase in Cash and Cash Equivalents (68,391)
Cash and Cash Equivalents, Beginning of Year (70,857)
Cash and Cash Equivalents, End of Year ($139,248)
Reconcilliation of Operating (Loss) to Net Cash
Used by Operating Activities
Operating (Loss) $0
Adjustments to Reconcile Operating (Loss) to
Net Cash Used by Operating Activities
Depreciation
Increase in Accounts Receivable (77,200)
USDA Commodities
Change in Assets and Liabilities
Increase/(Decrease) in Accounts Payable 8,809
Increase/(Decrease) in Deferred Revenue
Increase/(Decrease) in Compensated Absences
Increase/(Decrease) in Inventory
Total Adjustment (68,391)
Net Cash Used by Operating Activities ($68,391)
TEAM ACADEMY CHARTER SCHOOL
Statements of Cash Flows
For the Fiscal Years Ended June 30, 2012
FIDUCIARY FUNDS
58
Exhibit H-1
TEAM ACADEMY CHARTER SCHOOL
Combining Statement of Agency Fund Net Assets
Fiduciary Funds
As of June 30, 2012
Payroll Payroll Flex
Agency Account Spending TOTAL
ASSETS
Cash $120,118 $0 $23,832 $143,950
Total Assets $120,118 $0 $23,832 $143,950
LIABILITIES AND FUND BALANCES
Liabilities
Intergovernmental Payble - State
Payroll Deductions and Withholdings 120,118 0 23,832 143,950
Accrued Salaries and Wages
Due to Student Groups
Total Liabilities 120,118 0 23,832 143,950
Fund Balances
Reserve For Unemploy. Trust Fund
Total Fund Balances
Total Liabilities and Fund Balances $0 $0 $0 $0
59
Exhibit H-2
TEAM ACADEMY CHARTER SCHOOL
Nonexpendable Trust Fund
Combining Statement of Agency Fund Net Assets
Fiduciary Funds
As of June 30, 2012
NOT APPLICABLE
60
Exhibit H-3
NOT APPLICABLE
TEAM ACADEMY CHARTER SCHOOL
Fiduciary Funds
For the Year Ended June 30, 2012
Student Activity Agency Fund
Schedule of Receipts and Disbursements
61
Exhibit H-4
TEAM ACADEMY CHARTER SCHOOL
Payroll Agency Fund
Schedule of Receipts and Disbursements
Fiduciary Funds
For the Year Ended June 30, 2012
Balance Balance
July 1, 2011 Additions Deletions June 30, 2012
ASSETS
Cash and Cash Equivalents $16,743,839 $16,743,839
Total Assets 16,743,839 16,743,839
LIABILITIES
Payroll Deductions and Withholdings 6,189,638 6,189,638
Accrued Salaries and Wages 10,554,201 10,554,201
Total Liabilities $16,743,839 $16,743,839
62
Exhibit H-5
TEAM ACADEMY CHARTER SCHOOL
Unemployment Compensation Insurance Trust Fund
Statement of Receipts and Disbursements
Fiduciary Funds
For the Year Ended June 30, 2012
NOT APPLICABLE
FINANCIAL TRENDS
63
Exhibit J-1
2012 2011 2010 2009 2008 2007
Governmental activities
Invested in capital assets, net of related debt 1,546,213$ 870,255$ 426,734$ 436,902$ 395,409$ 366,076$
Restricted -
Unrestricted 4,248,784 2,355,554 1,534,898 1,733,406 647,280 142,453
Total governmental activities net assets 5,794,997$ 3,225,809$ 1,961,632$ 2,170,308$ 1,042,689$ 508,529$
Business-type activities -$
Invested in capital assets, net of related debt -
Restricted -
Unrestricted -$
Total business-type activities net assets
School-wide 1,546,213$ 870,255$ 426,734$ 436,902$ 395,409$ 366,076$
Invested in capital assets, net of related debt -
Restricted 4,248,784 2,355,554 1,534,898 1,733,406 647,280 142,453
Unrestricted 5,794,997$ 3,225,809$ 1,961,632$ 2,170,308$ 1,042,689$ 508,529$
Total school net assets
FOR THE FISCAL YEARS ENDED JUNE 30, 2012
NET ASSETS BY COMPONENT
TEAM ACADEMY CHARTER SCHOOL
(Unaudited)
64
Exhibit J-2
2012 2011 2010 2009 2008 2007
Expenses
Governmental activities
Instruction
Regular $12,636,140 $10,809,131 $8,682,919 $5,268,078 $4,010,599 $2,348,359
Support Services:
General administration 8,491,199 7,406,276 5,865,142 3,984,681 1,834,507 983,853
School Administrative Services 5,192,475 4,646,565 3,582,598 2,269,747 1,965,653 1,862,462
On-behalf TPAF Social Securituy 1,346,536 681,572 496,064 331,137 205,010 124,814
Capital outlay 767,942 409,340 44,274 88,828 83,898 33,316
Unallocated depreciation 91,984 70,280 54,442 47,335 34,583 27,934
Total governmental activities expenses 28,526,276 24,023,164 18,725,439 11,989,806 8,134,250 5,380,738
Business-type activities:
Food service 1,055,713 927,554 781,029 541,003 388,724 253,174
Child Care - - - - - -
Total business-type activities expense 1,055,713 927,554 781,029 541,003 388,724 253,174
Total school expenses $29,581,989 $24,950,718 $19,506,468 $12,530,809 $8,522,974 $5,633,912
Program Revenues
Governmental activities:
Charges for services:
Instruction (tuition) $0 $0 $0 $0 $0 $0
Pupil transportation - - - - - -
Central and other support services - - - - - -
Operating grants and contributions 3,875,353 3,817,944 2,113,290 1,451,715 1,597,631 603,685
Capital grants and contributions - - - - - -
Total governmental activities program revenues 3,875,353 3,817,944 2,113,290 1,451,715 1,597,631 603,685
Business-type activities:
Charges for services
Food service 1,055,713 927,554 781,029 541,003 388,724 253,174
Child care - - - - - -
Operating grants and contributions - - - - - -
Capital grants and contributions - - - - - -
Total business type activities program revenues 1,055,713 927,554 781,029 541,003 388,724 253,174
Total school program revenues $4,931,066 $4,745,498 $2,894,319 $1,992,718 $1,986,355 $856,859
Net (Expense)/Revenue
Governmental activities ($24,650,923) ($20,205,220) ($16,612,149) ($10,538,091) ($6,536,619) ($4,777,053)
Business-type activities - - - - - -
Total school-wide net expense ($24,650,923) ($20,205,220) ($16,612,149) ($10,538,091) ($6,536,619) ($4,777,053)
TEAM ACADEMY CHARTER SCHOOL
FOR THE FISCAL YEARS ENDED JUNE 30, 2012
CHANGES IN NET ASSETS
(Unaudited)
65
Exhibit J-2
Page 2
2012 2011 2010 2009 2008 2007
Governmental activities:
Local share $3,010,932 $2,536,038 $1,978,975 $1,404,703 $1,559,685 $857,301
State Share 20,931,755 15,485,572 12,682,970 8,638,026 3,804,599 2,699,210
State aid 1,714,855 2,102,735 1,289,871 1,211,373 1,311,556 888,598
Miscellaneous income 794,627 831,251 407,383 322,780 331,023 277,948
Increase in Net Capital Outlay 767,942 513,801 44,274 88,828 206,369 33,316
Investment earnings - -
Miscellaneous income - -
Transfers - -
Total governmental activities 27,220,111 21,469,397 16,403,473 11,665,710 7,213,232 4,756,373
Business-type activities:
Investment earnings - -
Transfers - -
Total business-type activities - -
Total school-wide $27,220,111 $21,469,397 $16,403,473 $11,665,710 $7,213,232 $4,756,373
Change in Net Assets
Governmental activities $2,569,188 $1,264,177 ($208,676) $1,127,619 $676,613 ($20,680)
Business-type activities - -
Total school $2,569,188 $1,264,177 ($208,676) $1,127,619 $676,613 ($20,680)
General Revenues and Other Changes in Net Assets
TEAM ACADEMY CHARTER SCHOOL
CHANGES IN NET ASSETS
FOR THE FISCAL YEARS ENDED JUNE 30, 2012
(Unaudited)
66
Exhibit J-2A
Payroll
Special Enterprise and Payroll Total
General Revenue Food Service Agency Governmental
Fund Fund Fund Fund Funds
ASSETS
Cash and cash equivalents 5,263,868$ (440,902)$ (139,248)$ 143,950$ 4,827,668$
Investments
Receivables, net 774,251 793,140 200,450 1,767,841
Security Deposit 12,118 12,118
Restricted cash and cash equivalents
Total assets 6,050,237$ 352,238$ 61,202$ 143,950$ 6,607,627$
LIABILITIES AND FUND BALANCES
Liabilities:
Cash Overdraft -
Accrued expense - - 0
Accounts payable 1,542,254 186,945 61,202 1,790,401
Due to Newark Board of Ed. 259,199 259,199
Payroll and pension withholdings payable 143,950 143,950
Payable to federal government - 0
Payable to state government -
Deferred revenue - 165,293 165,293
Total liabilities 1,801,453 352,238 61,202 143,950 2,358,843
Fund Balances:
Reserved for:
Encumbrances
Legally restricted -- unexpended
additional spending proposal
Legally restricted -- designated for
subsequent year's expenditures
Capital reserve account
Excess surplus
Excess surplus -- designated for
Subsequent year's expenditures
Other purposes
Unreserved, reported in:
General fund 4,248,784 4,248,784
Capital projects fund - -
Permanent fund
Total Fund balances 4,248,784 4,248,784
Total liabilities and fund balances 6,050,237$ 352,238$ 61,202$
TEAM ACADEMY CHARTER SCHOOL Combined Balance Sheet
Governmental FundsJune 30, 2012(Unaudited)
67
Exhibit J-2B
Special Enterprise Total
General Revenue Fund Governmental
Fund Fund Food Service Funds
REVENUES
Local sources:
Local share 3,010,932$ 3,010,932$
State Share 20,931,755 9,967 20,941,722
Other Restricted Miscellaneous Revenues
Miscellaneous 794,627 2,008,798 62,074 2,865,499
Total - Local Sources 24,737,314 2,008,798 72,041 26,818,153
State sources 1,714,855 - 983,672 2,698,527
Federal sources 1,866,555 1,866,555
Total revenues 26,452,169 3,875,353 1,055,713 31,383,235
EXPENDITURES
Current:
Regular instruction 10,197,999$ 2,438,141$ 12,636,140$
Support services- General Administrative 7,053,987 1,437,212 8,491,199
Support Services- School Admin/ operations plant serv 5,192,475 1,055,713 6,248,188
On-behalf TPAF Social Security and Pension 1,346,536 1,346,536
Capital outlay 767,942 767,942
Other Disbursements -
Total expenditures 24,558,939 3,875,353 1,055,713 29,490,005
Excess (Deficiency) of revenues
over expenditures 1,893,230 - 1,893,230
OTHER FINANCING SOURCES (USES)
Transfers in -
Transfers out -
Total other financing sources and uses ---
SPECIAL ITEM
Net change in fund balances
Fund balance—July 1 2,355,554 2,355,554 Fund balance—June 30 4,248,784$ 4,248,784$
The accompanying Notes to Financial Statements are an integral part of this statement.
TEAM ACADEMY CHARTER SCHOOL
Combined Statement of Revenues, Expenditures, And Changes in Fund Balances
Governmental Funds
For the Year Ended June 30, 2012
Unaudited
68
Exhibit J- 2C
Special Enterprise Payroll and Total
General Revenue Fund Payroll Governmental
CASH FLOWS FROM OPERATING ACTIVITIES Fund Fund Food Service Agency Funds
Increase in Fund Balance 1,893,230$ -- -$ -$ 1,893,230$
net cash provided by operating activities
Depreciation --- --- --- --- ---
Accounts Receivable (671,629) (485,659) (74,625) - (1,231,913)
Increase (Decrease) in Current Liabilities -
Accounts Payble 702,323 34,158 6,234 32,474 775,189
Deferred Revenue - - - - -
Due to the Newark Board Education 259,199 (100,053) - - 159,146
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,183,123$ (551,554)$ (68,391)$ 32,474$ 1,595,652$
CASH FLOWS FROM INVESTING ACTIVITIES
NET CASH USED BY INVESTING ACTIVITIES -- -- -- -- --
CASH FLOWS FROM FINANCING ACTIVITIES
NET CASH FROM FINANCING ACTIVITIES -- -- -- -- --
TOTAL INCREASE IN CASH
AND CASH EQUIVALENTS 2,183,123$ (551,554)$ (68,391)$ 32,474$ 1,595,652$
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 3,080,745 110,652 (70,857) 111,476 3,232,016
CASH AND CASH EQUIVALENTS - ENDING OF YEAR 5,263,868$ (440,902)$ (139,248)$ 143,950$ 4,827,668$
See independent auditors' report and notes to financial statements.
(Increase) Decrease in Current Assets
Adjustments to reconcile increase in unrestricted net assets to
TEAM ACADEMY CHARTER SCHOOL
STATEMENT OF CASH FLOW
GOVERNMENTAL FUNDS
FOR THE YEAR ENDED JUNE 30, 2012
(Unaudited)
69
EXHIBIT J-3
2012 2011 2010 2009 2008 2007
General Fund
Reserved
Unreserved $4,248,784 $2,355,554 $1,534,898 $1,733,406 $647,280 $142,453
Total general fund $4,248,784 $2,355,554 $1,534,898 $1,733,406 $647,280 $142,453
All Other Governmental Funds
Reserved
Unreserved, reported in:
Special revenue fund
Capital projects fund
Debt service fund
Permanent fund
Total all other governmental funds -- -- -- -- -- --
FOR THE FISCAL YEARS ENDED JUNE 30, 2012
FUND BALANCES - GOVERNMENTAL FUNDS
TEAM ACADEMY CHARTER SCHOOL
(Unaudited)
70
Exhibit J-4
2012 2011 2010 2009 2008 2007
Revenues
Local tax Levy 3,010,932$ 2,536,038$ 1,978,975$ 1,404,703$ 1,559,685$ 857,301$
Other local revenue 2,803,425 2,862,853 1,314,771 926,780 1,472,323 470,698
State sources 22,646,610 17,588,307 13,972,841 9,849,399 5,116,155 3,587,808
Federal sources 1,866,545 1,786,342 1,205,902 847,715 456,331 410,935
Total revenue 30,327,512 24,773,540 18,472,489 13,028,597 8,604,494 5,326,742
Expenditures
Instruction
Regular Instruction 10,197,999 8,596,106 7,236,190 4,475,236 2,944,997 1,805,345
Support Services:
General administration 7,053,987 5,801,357 5,198,581 3,325,808 1,302,478 983,853
School administrative services/Plant 5,192,475 4,646,565 3,582,598 2,269,747 1,965,653 1,801,791
TPAF Social Security 1,346,536 681,572 496,064 331,137 205,010 124,814
Food Service
Capital outlay 767,942 409,340 44,274 88,828 83,898 33,316
Debt service:
Principal - - - - - -
Interest and other charges - - - - - -
Special Revenue 3,875,343 3,817,944 2,113,290 1,451,715 1,597,631 603,685
Total expenditures 28,434,282 23,952,884 18,670,997 11,942,471 8,099,667 5,352,804
Excess (Deficiency) of revenues
over (under) expenditures 1,893,230 820,656 (198,508) 1,086,126 504,827 (26,062)
Other Financing sources (uses)
Proceeds from borrowing - - - - - -
Capital leases (non-budgeted) - - - - - -
Proceeds from refunding - - - - - -
Payments to escrow agent - - - - - -
Transfers in - 788,333 89,480
Transfers out - (788,333) (89,480)
Total other financing sources (uses) - - - - - -
Net change in fund balances 1,893,230$ 820,656$ (198,508)$ 1,086,126$ 504,827$ (26,062)$
Debt service as a percentage of
noncapital expenditures 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Source: School records
FOR THE FISCAL YEAR ENDED JUNE 30, 2012
CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS
TEAM ACADEMY CHARTER SCHOOL
(Unaudited)
REVENUE CAPACITY
71
EXHIBIT J-5
TEAM ACADEMY CHARTER SCHOOL
REVENUE CAPACITY
FOR THE FISCAL YEAR ENDED JUNE 30, 2012
(Unaudited)
NOT APPLICABLE
72
Exhibit J-6
NOT APPLICABLE
TEAM ACADEMY CHARTER SCHOOL
For the Year Ended June 30, 2012
Assessed Value and Actual Value of Taxable Property
(Unaudited)
73
Exhibit J-7
(Unaudited)
NOT APPLICABLE
TEAM ACADEMY CHARTER SCHOOL
For the Year Ended June 30, 2012
Direct and Overlapping Property Tax Rates
74
Exhibit J-8
NOT APPLICABLE
TEAM ACADEMY CHARTER SCHOOL
For the Year Ended June 30, 2012
Principal Property Taxpayers
(Unaudited)
DEBT CAPACITY
75
Exhibit J-9
NOT APPLICABLE
TEAM ACADEMY CHARTER SCHOOL
For the Year Ended June 30, 2012
Property Tax Levies and Collections
(Unaudited)
76
Exhibit J-10
(Unaudited)
TEAM ACADEMY CHARTER SCHOOL
For the Year Ended June 30, 2012
Ratios of Outstanding Debt by Type
NOT APPLICABLE
77
Exhibit J-11
NOT APPLICABLE
TEAM ACADEMY CHARTER SCHOOL
For the Year Ended June 30, 2012
Ratios of Net General Bonded Debt Outstanding
(Unaudited)
78
Exhibit J-12
NOT APPLICABLE
TEAM ACADEMY CHARTER SCHOOL
For the Year Ended June 30, 2012
Direct and Overlapping Governmental Activities Debt
(Unaudited)
DEMOGRAPHIC AND ECONOMIC INFORMATION
79
Exhibit J-13
NOT APPLICABLE
TEAM ACADEMY CHARTER SCHOOL
For the Year Ended June 30, 2012
Demographic and Economic Statistics
(Unaudited)
80
Exhibit J-14
NOT APPLICABLE
TEAM ACADEMY CHARTER SCHOOL
For the Year Ended June 30, 2012
Principal Employers
(Unaudited)
OPERATING INFORMATION
(UNAUDITED)
81
Exhibit J-15
2012 2011 2010 2009 2008 2007
Function/Program
Instruction
Regular 126 116 101 53 33 19
Special education 16 15 17 8 5
Other special education
Vocational
Other instruction
Nonpublic school programs
Adult/continuing education programs
Support Services:
Student & instruction related services 27 24 14 7 4
General administration 9
School administrative services 76 54 56 8 7
Other administrative services - - -
Central services 23 18
Administrative Information Technology
Plant operations and maintenance
Pupil transportation - -
Other support services - -
Special Schools - -
Food Service
Child Care
Total 245 209 197 99 67 19
Source: School Personnel Records
For the Year Ended June 30, 2012
Full-time Equivalent School Employees by Function/Program
TEAM ACADEMY CHARTER SCHOOL
82
Exhibit J-16
Fiscal
Year Enroll
Operating
Expenditures
Cost Per
Pupil
Percent
Change
Teaching
Staff Element.
Middle
School
Senior
High
School
Average
Daily
Enrollment
(ADE)
Average
Daily
Attendance
(ADA)
% Change in
Average
Daily
Enrollment
Student
Attendance
Percentage
2007 450 5,352,804 11,895 4.11% 26 0 17 0 462 444 46.67% 96.00%
2008 615 8,099,667 13,170 10.76% 38 0 32 6 615 583 34.36% 96.00%
2009 771 11,942,471 15,940 17.61% 61 0 14 10 771 740 34.36% 96.00%
2010 1,033 18,670,997 18,075 16.19% 113 10 81 22 1,033 998 33.98% 96.00%
2011 1,262 23,952,884 18,980 5.01% 121 20 65 37 1,262 1,204 22.17% 95.00%
2012 1,476 28,434,292 19,264 1.50% 142 30 73 39 1,482 1,423 17.43% 96.00%
Sources: School records
TEAM ACADEMY CHARTER SCHOOL
Operating Statistics
For the Year Ended June 30, 2012
Pupil/Teacher Staff Ratio
(Unaudited)
83
Exhibit J-17
2012 2011 2010 2009 2008 2007
School Building
School
Square Feet 227,386 116,848 121,000 83,880 83,880 63,880
Capacity (students) 2,280 1,515 1,415 850 850 700
Enrollment 1,476 1,262 1,033 771 615 450
Source: School Office
TEAM ACADEMY CHARTER SCHOOL
School Building Information
For the Year Ended June 30, 2012
84
Exhibit J-18
Coverage Deductible
School Package Policy
Commercial Propertyneed 11,845,000$ 5,000$
Boiler and Machinery 100,000,000 5,000
General Automobile Liability 1,000,000 -
School Board Legal Liability 6,000,000 5,000
Umbrella 20,000,000 -
Workers' Compensation 2,000,000 -
Surety Bonds
School Board Legal Liability 1,000,000 N/A
Public Official Bond 50,000 N/A
Source: Charter School Records
TEAM ACADEMY CHARTER SCHOOL
Insurance Schedule
For the Year Ended June 30, 2012
(Unaudited)
85
Exhibit J-19
Sale of Capital
Assets Donations Rentals
Prior Year
Refunds
Sale and
Leaseback of
Textbooks Other Local Annual Totals
Fiscal Year
Ending June 30,
2007 - - - 277,948 277,948
2008 - - - 331,023 331,023
2009 452,714 452,714
2010 407,383 407,383
2011 831,251 831,251
2012 794,627 794,627
Source: School records
TEAM ACADEMY CHARTER SCHOOL
For the Year Ended June 30, 2012
General Fund - Other Local Revenue By Source
(Unaudited)
86
Exhibit J-20
TEAM ACADEMY CHARTER SCHOOL
For the Year Ended June 30, 2012
NOT APPLICABLE
Schedule of Allowable Maintenance Expenditures by School Facility
(Unaudited)
SINGLE AUDIT SECTION K
87
SCOTT J. LOEFFLER CERTIFIED PUBLIC ACCOUNTANT
P. O. BOX 553 EAST HANOVER, NEW JERSEY 07936
TELEPHONE FAX
973-585-4989 973-240-7318
EXHIBIT K-1
INDEPENDENT AUDITORS’ 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
The Honorable President and
Members of the Board of Trustees
TEAM Academy Charter School
County of Essex
Newark, New Jersey
I have audited the financial statements of the governmental activities, the business-type activities, each
major fund, and the aggregate remaining fund information of the TEAM Academy Charter School as of and
for the fiscal year ended June 30, 2012, which collectively comprise the TEAM Academy Charter School’s
basic financial statements and have issued my report thereon dated September 12, 2012. I conducted my
audit in accordance with auditing standards generally accepted in the United States of America, audit
requirements as prescribed by the Division of Administration and Finance, Department of Education, State
of New Jersey, and the standards applicable to financial audits contained in Government Auditing
Standards, issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting
The management of the Board of Trustees of the TEAM Academy Charter School is responsible for
establishing and maintaining effective internal control over financial planning. In planning and performing
my audit, I considered the TEAM Academy Charter School Board of Trustees internal control over financial
reporting as a basis for designing my auditing procedures for the purpose of expressing my opinion on the
financial statements but not for the purpose of expressing an opinion on the effectiveness of the TEAM
Academy Charter School Board of Trustee’s internal control over financial reporting. Accordingly, I do not
express an opinion on effectiveness of the TEAM Academy Charter School Board of Trustee’s internal
control over financial reporting.
A deficiency in internal control exists when the design or operation of a control does not allow management
or employees, 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
internal control, such that there is a reasonable possibility that a material misstatement of the TEAM
Academy Charter School’s financial statements will not be prevented or detected and corrected on a timely
basis.
My consideration of internal control over financial reporting was for the limited purpose described in the
first paragraph of this section and would not necessarily identify all deficiencies in internal control that
88
might be significant deficiencies or material weaknesses. I did not identify any deficiencies in internal
control over financial reporting that I consider to be material weaknesses, as defined above.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the TEAM Academy Charter School Board of
Trustee’s financial statements are free of material misstatement, I 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 the determination of financial statement amounts. However, providing
an opinion on compliance with those provisions was not an objective of my audit, and accordingly, I do not
express such an opinion. The results of my tests disclosed no instances of noncompliance or other matters
that are required to be reported under Government Auditing Standards and audit requirements as prescribed
by the Division of Administration and Finance, Department of Education, State of New Jersey. However, I
noted certain matters that I have reported to the Board in a separate report, the Auditors’ Management report
on Administrative Findings - Financial, Compliance, and Performance, dated September 12, 2012.
This report is intended solely for the information and use of the management of the TEAM Academy
Charter School, Board of Trustees and the New Jersey State Department of Education and other state and
federal awarding agencies and pass-through entities and is not intended to be and should not be used by
anyone other than these specified parties.
Licensed Public School Accountant No. 870
Scott J Loeffler, CPA
September 12, 2012
89
SCOTT J. LOEFFLER CERTIFIED PUBLIC ACCOUNTANT
P. O. BOX 553 EAST HANOVER, NEW JERSEY 07936
TELEPHONE FAX
973-585-4989 973-240-7318
EXHIBIT K-2
INDEPENDENT AUDITORS’ REPORT ON COMPLIANCE WITH REQUIREMENTS
THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR
PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE
WITH OMB CIRCULAR A-133 AND NEW JERSEY OMB CIRCULAR NJOMB 04-04
The Honorable President and
Members of the Board of Trustees
TEAM Academy Charter School
County of Essex
Newark, New Jersey
Compliance
I have audited the compliance of the Board of Trustee’s of the TEAM Academy Charter School, in the
County of Essex, State of New Jersey, with the types of compliance requirements described in the U.S.
Office of Management and Budget (OMB) Circular A-133 Compliance Supplement and the New Jersey
State Aid/Grant Compliance Supplement that are applicable to each of its major federal and state programs
for the fiscal year ended June 30, 2012. The Board of Trustee’s of the TEAM Academy Charter School
major federal and state programs are identified in the summary of auditor’s results section of the
accompanying schedule of findings and questioned costs. Compliance with the requirements of laws,
regulations, contracts and grants applicable to each of its major federal and state programs is the
responsibility of the Board of Trustee’s TEAM Academy Charter School management. My responsibility
is to express an opinion on the Board of Trustee’s TEAM Academy Charter School compliance based on
my audit.
I conducted my audit of compliance in accordance with auditing standards generally accepted in the United
States of America; audit requirements as prescribed by the Division of Administration and Finance,
Department of Education, State of New Jersey (the “Department”); the standards applicable to financial
audits contained in Government Auditing Standards issued by the Comptroller General of the United States;
New Jersey’s OMB Circular 04-04, Single Audit Policy for Recipients of Federal Grants, State Grants and
State Aid; and Federal Office of Management and Budget Circular A-133 Audits of States, Local
Governments, and Non-Profit Organizations. Those standards, Federal OMB Circular A-133 and New
Jersey’s OMB Circular NJOMB 04-04, require that I plan and perform the audit to obtain reasonable
assurance about whether noncompliance with the types of compliance requirements referred to above that
could have a direct and material effect on a major federal or state program occurred. An audit includes
examining, on a test basis, evidence about the Board of Trustee’s TEAM Academy Charter School
compliance with those requirements and performing such other procedures, as I considered necessary in the
circumstances. I believe that my audit provides a reasonable basis for my opinion. My audit does not
provide a legal determination of the Board of Trustees of the TEAM Academy Charter School compliance
with those requirements.
90
In my opinion, the Board of Trustee’s of the TEAM Academy Charter School, in the County of Essex, State
of New Jersey, complied, in all material aspects, with the requirements referred to above that are applicable
to each of its major federal and state programs for the fiscal year ended June 30, 2012.
Internal Control Over Compliance
The management of the Board of Trustee’s of the TEAM Academy Charter School is responsible for
establishing and maintaining effective internal control over compliance with the requirements of laws,
regulations, contracts and grants applicable to federal and state programs. In planning and performing my
audit, I considered the Board of Trustee’s TEAM Academy Charter School internal control over
compliance with requirements that could have a direct and material effect on a major federal or state
program in order to determine my auditing procedures for the purpose of expressing my opinion on
compliance but not for the purpose of expressing an opinion on the effectiveness of internal control over
compliance. Accordingly I do not express an opinion on the effectiveness of the Board of Trustee’s TEAM
Academy Charter School internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control over
compliance does not allow management or employees in the normal course of performing their assigned
functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a
federal or state program on a timely basis. A material weakness in internal control over compliance is a
deficiency, or combination of deficiencies, in internal control over compliance, such that there is a
reasonable possibility that material noncompliance with a type of compliance requirement of a federal or
state program will not be prevented or detected and corrected, on a timely basis.
My consideration of internal control over financial reporting was for the limited purpose described in the
first paragraph of this section and would not necessarily identify all deficiencies in internal control that
might be significant deficiencies or material weaknesses. I did not identify any deficiencies in internal
control over compliance that I consider to be material weaknesses, as defined above.
This report is intended for the information and use of the audit committee, management, the Board of
Trustee’s TEAM Academy Charter School, the New Jersey State Department of Education, and other state
and federal awarding agencies and pass-through entities and is not intended to be and should not be used by
anyone other than these specified parties.
Licensed Public School Accountant No. 870
Scott J. Loeffler, CPA
September 12, 2012
91
EXHIBIT A
TEAM ACADEMY CHARTER SCHOOL
Schedule of Federal Financial Assistance
For the Fiscal Year Ended June 30, 2012
Deferred
Refund Revenue/ Due to
CFDA/ of (Accounts Grantor
GRANT Balance Prior Prior Receivable) at
Federal/Grantor Project Grant Award July 1, Carry- Cash Budgetary Years' June 30, June 30,
Program Title Number Period Amount 2011 over Received Expenditures Balances Adjust 2012 2012
Food Subsidy
Federal After School 10.555 07/01/11-06/30/12 $467,779 ($24,419) $452,019 $467,779 (40,179)
Federal School Lunch * 10.555 07/01/11-06/30/12 $601,397 ($68,177) 108,094 153,945 (114,028)
Federal Breakfast 10.553 07/01/11-06/30/12 $18,136 ($23,105) 132,492 150,640 (41,253)
Special Revenue Fund
Special Revenue
NCLB
Title I PART A 84.01A 09/01/11-08/31/12 $1,403,591 (183,913) 1,306,473 1,131,146 (8,586)
Title IIA 84.367A 09/01/11-08/31/12 $12,589 12,589 12,589
Title I ARRA 84.389A 09/01/11-08/31/12 $490,534 (40,877) 40,877 0
Charter School Program 84.282 09/01/11-08/31/12 $128,052 47,237 128,052 (80,815)
Charter School Program 84.282 09/01/11-08/31/12 $120,123 0 120,123 (120,123)
IDEA BASIC 84.027 09/01/11-08/31/12 $323,632 (43,985) 282,330 323,632 (85,287)
IDEA Preschool 84.027 09/01/11-08/31/12 $3,856 3,856 3,856
Dissemination Grant 84.303 09/01/11-08/31/12 $147,157 0 102,056 147,157 (45,101)
Total Special Revenue (268,775) 1,795,418 1,866,555 (339,912) ---
($384,476) $0 $2,488,023 $2,638,919 $0 ($535,372) $0
*Major Program
92
EXHIBIT - B
Deferred
Refund Revenue/ Due to
of (Accounts Grantor
Balance Prior Receivable) at
State Grantor Grant or State Grant Award July 1, Cash Budgetary Years' June 30, June 30,
Program Title Project Number Period Amount 2012 Received Expenditures Balances Adjust 2012 2012
GENERAL FUND
TPAF Social Security 12-495-034-5095-002 7/1/11-06/30/12 $673,654 $673,654 $673,654
On-Behalf TPAF Pension 12-495-034-5095-006 7/1/11-06/30/12 223,530 223,530 223,530
On-Behalf Post Ret. Medical 12-495-034-5095-001 7/1/11-06/30/12 449,352 449,352 449,352
Equalization Aid - Local 12-495-034-5120-078 7/1/11-06/30/12 3,010,932 3,010,932 $3,010,932
Equalization Aid - State 12-495-034-5120-078 7/1/11-06/30/12 20,931,755 20,931,755 $20,931,755
Non Public Aid 12-100-034-5120-066 7/1/11-06/30/12 269,812 269,812 $269,812
Extraordinary Aid 12-495-034-5120-089 7/1/11-06/30/12 98,507 98,507 $98,507
Total General Fund -- 25,657,542 25,657,542
ENTERPRISE FUND
National School Lunch 12-100-010-3350-23 7/1/11-06/30/12 9,967 (7,048) 14,599 9,967 ($2,416) $
GRAND TOTAL -- $25,672,141 $25,667,509 ($2,416) $ -
See accompanying notes to schedules of expenditures of Federal and State Awards
TEAM ACADEMY CHARTER SCHOOL
Schedule of State Financial Assistance
For the Fiscal Year Ended June 30, 2012
93
EXHIBIT K-5 Page 1
TEAM ACADEMY CHARTER SCHOOL NOTES TO THE SCHEDULES OF EXPENDITURES OF FEDERAL
AND STATE AWARDS
FOR THE YEAR ENDED JUNE 30, 2012
NOTE 1. GENERAL
The accompanying Schedules of Expenditures of awards and financial assistance present the activity
of all federal and state award programs of the Board of Trustees of the TEAM Academy Charter
School. The board of trustees is defined in the Notes to the school's general-purpose financial
statements. All federal and state awards received directly from federal and state agencies, as well as
federal awards and state financial assistance passed through other government agencies is included
on the schedule of expenditures of federal awards and state financial assistance.
NOTE 2. BASIS OF ACCOUNTING
The accompanying schedules of expenditures of awards and financial assistance are presented using
the budgetary basis of accounting with the exception of programs recorded in the food service fund,
which are presented using the accrual basis of accounting. These bases of accounting are described
in Note 1 to the school's basic financial statements. The information in this schedule is presented in
accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments,
and Non-Profit Organizations. Therefore, some amounts presented in this schedule may differ from
amounts presented in, or used in the preparation of, the basic financial statements.
NOTE 3. RELATIONSHIP TO GENERAL-PURPOSE FINANCIAL STATEMENTS
The basic financial statements present the general fund and special revenue fund on a GAAP basis.
Budgetary comparison statements or schedules (RSI) are presented for the general fund and special
revenue fund to demonstrate finance-related legal compliance in which certain revenue is permitted
by law or grant agreement to be recognized in the audit year, whereas for GAAP reporting revenue is
not recognized until the subsequent year or expenditures have been made.
The general fund is presented in the accompanying schedules on the modified accrual basis. The
special revenue fund is presented in the accompanying schedules on the grant account budgetary
basis, which recognizes encumbrances as expenditures and also recognizes the related revenues,
whereas the GAAP basis does not. The net adjustment to reconcile from the budgetary basis to
GAAP basis is $-0-. See Note 1 for a reconciliation of the budgetary basis to the GAAP basis of
accounting for the special revenue fund. Awards and financial assistance revenues are reported in the
school's general-purpose financial statements on a GAAP basis as follows:
94
EXHIBIT K-5 Page 2
TEAM ACADEMY CHARTER SCHOOL NOTES TO THE SCHEDULES OF EXPENDITURES OF FEDERAL
AND STATE AWARDS
FOR THE YEAR ENDED JUNE 30, 2012
NOTE 3. RELATIONSHIP TO GENERAL-PURPOSE FINANCIAL STATEMENTS
(continued)
GAAP basis is $-0-. See Note 1 for a reconciliation of the budgetary basis to the GAAP basis of
accounting for the special revenue fund. Awards and financial assistance revenues are reported in the
school's general-purpose financial statements on a GAAP basis as follows:
Federal State Total
General Fund $ $25,657,542 $25,657,542
Special Revenue Fund 1,866,555 1,866,555
Food Service Fund 772,364 9,967 782,331
Total Awards and Financial Assistance
$2,638,919
$25,667,509
$28,306,428
NOTE 4. RELATIONSHIP TO FEDERAL AND STATE FINANCIAL REPORTS
Amounts reported in the accompanying schedules agree with the amounts reported in the related
federal and state financial reports.
NOTE 5. OTHER
The amount reported as TPAF Pension Contributions represents the amount paid by the state on
behalf of the Charter School for the year ended June 30, 2012 was 672,882. TPAF Social Security
Contributions represents the amount of $672,882 reimbursed by the state for the employer's share of
social security contributions for TPAF members for the year ended June 30, 2012.
NOTE 6. ON-BEHALF PROGRAMS NOT SUBJECT TO STATE SINGLE AUDIT
On-behalf State Programs for TPAF Pension and Post-Retirement Medical Benefits Contributions
are not subject to a State single audit and, therefore, are excluded from major program
determination. The Schedule of State Financial Assistance provides a reconciliation of State
financial assistance reported in the schools basic financial statements and the amount subject to State
single audit and major program determination.
95
EXHIBIT K-6 Page 1
TEAM ACADEMY CHARTER SCHOOL COUNTY OF ESSEX, NEW JERSEY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2012
PART 1 – SUMMARY OF AUDITOR’S RESULTS
Financial Statement Section
Type of auditor’s report issued: Unqualified
YES NO
Internal control over financial reporting:
Material weakness(es) identified: X
Significant deficiencies identified not considered to be material
weakness(es)?
X
Noncompliance material to financial statements noted? X
Federal Awards
Internal control over compliance:
Material weakness(es) identified? X
Significant deficiencies identified not considered to be material
weakness(es)?
X
Type of auditor’s report on compliance for major programs: Unqualified
Any audit findings disclosed that are required to be Reported in accordance with
Circular A-133 (section .510a)?
X
Identification of major programs:
CDFA Number(s) Name of Federal Program
84.01A
84.027
10.555
No Child Left Behind – Title I Part A
IDEA - Part B Basic
National School Lunch
Dollar threshold used to distinguish between type A and type B programs
(.520)
$300,000
Auditee qualified as low risk auditee: X
96
EXHIBIT K-6 Page 2
TEAM ACADEMY CHARTER SCHOOL COUNTY OF ESSEX, NEW JERSEY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2012
PART 1 – SUMMARY OF AUDITOR’S RESULTS (Continued)
State Awards YES NO
Dollar threshold used to distinguish between type A and type B programs
(.520)
$300,000
Auditee qualified as low risk auditee: X
Type of auditor’s report issued: Unqualified
Internal control over major programs:
Material weakness(es) identified: X
Significant deficiencies identified not considered to be material
weakness(es)?
X
Type of auditor’s report on compliance for major programs: Unqualified
Any audit findings disclosed that are required to be Reported in accordance with
NJOMB Circular Letter 04-04?
X
Identification of major programs:
GMIS Number(s) Name of State Program
12-495-034-5120-078 Equalization Aid Local and State
12-495-034-5095-002 TPAF Social Security
97
EXHIBIT K-6 Page 3
TEAM ACADEMY CHARTER SCHOOL COUNTY OF ESSEX, NEW JERSEY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR YEAR ENDED JUNE 30, 2012
PART II – SCHEDULE OF FINANCIAL STATEMENT FINDINGS
No financial statement findings noted that are required to be reported under Government Auditing
Standards.
98
EXHIBIT K-6 Page 4
TEAM ACADEMY CHARTER SCHOOL COUNTY OF ESSEX, NEW JERSEY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR YEAR ENDED JUNE 30, 2012
PART III – SCHEDULE OF FEDERAL AND STATE AWARD FINDINGS AND
QUESTIONED COSTS
No federal and state award findings and questioned costs noted that are required to be reported in
accordance of OMB Circular A-133 or with NJOMB Circular 04-04.
99
EXHIBIT K-7 Page 1
TEAM ACADEMY CHARTER SCHOOL SUMMARY OF SCHEDULE OF PRIOR-YEAR AUDIT FINDINGS
AND QUESTIONED COSTS AS PREPARED BY MANAGEMENT
FOR THE FISCAL YEAR ENDED JUNE 30, 2012
Status of Prior Year Findings
In accordance with government auditing standards, my procedures included a review of all prior
year recommendations. There were no prior year findings.
[ THIS PAGE INTENTIONALLY LEFT BLANK ]
APPENDIX B - 2
Financial Statements of FOTA for the Fiscal Year Ended June 30, 2012
[ THIS PAGE INTENTIONALLY LEFT BLANK ]
THE FRIENDS OF TEAM ACADEMY
CHARTER SCHOOL, INC. AND AFFILIATE
(A NON PROFIT ORGANIZATION)
INDEPENDENT AUDITORS REPORT
CONSOLIDATED FINANCIAL STATEMENT
AND SUPPLEMENTAL INFORMATION
JUNE 30, 20l2
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC.
AND AFFILIATE
TABLE OF CONTENTS
JUNE 30, 2012
Independent Auditor’s Report ............................................................................................. 1
Financial Statements
Consolidated Statement of Financial Position ................................................................ 2 Consolidated Statement of Activities ............................................................................. 3
Consolidated Statement of Cash Flows .......................................................................... 4
Notes to Financial Statements ............................................................................................. 5
Supplemental Information
Consolidated Statements of Financial Position ............................................................ 17 Consolidated Statements of Activities .......................................................................... 18
1
SCOTT J. LOEFFLER CERTIFIED PUBLIC ACCOUNTANT
P. O. BOX 553 EAST HANOVER, NEW JERSEY 07936
TELEPHONE FAX
973-585-4989 973-240-7318
INDEPENDENT AUDITOR’S REPORT
Board of Directors
The Friends of TEAM Academy Charter School, Inc. and Affiliate
60 Park Place
Newark, NJ 07112
I have audited the accompanying consolidated statements of financial position of the Friends of TEAM
Academy Charter School, Inc. and its Affiliate as of June 30, 2012 and the related consolidated statement of
activities, and changes in net assets and cash flows for the year then ended. These financial statements are
the responsibility of the Friends of TEAM Academy Charter School, Inc. and its Affiliate’s management.
My responsibility is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with auditing standards generally accepted in the United States of
America. Those standards require that I plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the consolidated financial statements referred to above present fairly, in all material respects,
the financial position of the Friends of TEAM Academy Charter School, Inc. and its Affiliate as of June 30,
2012 and the changes in their net assets and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America.
My audit was made for the purpose of forming an opinion on the basic consolidated financial statements of
the Friends of TEAM Academy Charter School, Inc., and its Affiliate taken as a whole. The additional
information on pages 17 through 18 is presented for the purpose of additional analysis and is not a required
part of the basic consolidated financial statements. This additional information is the responsibility of the
management of the Friends of TEAM Academy Charter School, Inc. and its Affiliate. Such additional
information has been subjected to the auditing procedures applied in my audit of the basic consolidated
financial statements and, in my opinion, is fairly stated in all material respects when considered in relation
to the basic consolidated financial statements taken as a whole.
Scott J. Loeffler
Certified Public Accountant
September 19, 2012
2
Current Assets
Cash and Cash Equivalents 3,646,127$
Accrued Interest Receivable 719,322
Loan Receivable 5,106
Contributions Receivable 1,165,945
Other Receivable 204,104
Prepaid Rent 40,867
Total Current Assets 5,781,471
Fixed Assets
Land - Custer Avenue 450,000
Building - Custer Avenue 1,259,000
Building Improvements - Other 505,304
Building Improvements - Custer Avenue 3,548,190
Building Improvements - Ashland Street 2,006,604
Furniture 38,508
Total 7,807,606
Less: Accumulated Depreciation (1,028,881)
Total Fixed Assets 6,778,725
Other Assets
Investment in Qualified Zone Academy Bonds 17,516,711
Investment in Qualified School Construction Bonds 22,783,339
Unamortized Bond Closing Cost 245,368
Security Deposit 100,000
Total 40,645,418
Total Assets 53,205,614$
Current Liabilities
Loan Payable - Manufacturers and Traders Trust Company - Current 332,915$
QSCB Contract Payable - KIPP Foundation - Current 273,330
QZAB Contract Payable - KIPP Foundation - Current 1,000,000
Loan Payable - Goldman Sachs - Current 12,472,004
Mortgage Payable - Prudential Insurance Company of America - Current 128,870
Deferred Revenue 500,000
Accounts Payable 423,324
Accrued Interest Payable 420,244
Total Current Liabilities 15,550,687$
Loan Payable - Manufacturers and Traders Trust Company 15,053,015
Loan Payable - Prudential Asset Resources 3,000,000
QSCB Contract Payable - KIPP Foundation 1,696,670
QZAB Contract Payable - KIPP Foundation 1,000,000
Loan Payable Charter School Growth, Inc 700,000
Mortgage Payable - Prudential Insurance Company of America 2,948,491
Total NonCurrent Liabilities 24,398,176
Total Liabilities 39,948,863
NET ASSETS
Temporarily Restricted 501,623
Unrestricted 12,755,128
TOTAL NET ASSETS 13,256,751
Total Liabilities and Net Assets 53,205,614$
See independent auditor's report and notes to financial statements.
Noncurrent Liabilities
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC. AND AFFILIATE
(A NONPROFIT ORGANIZATION)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED JUNE 30, 2012
ASSETS
LIABILITIES AND NET ASSETS
3
INCOME
CONTRIBUTIONS
Temporarily Restricted Contributions 635,616$
Unrestricted Contributions 5,121,377
In-Kind Contribution 74,375
Total Contributions 5,831,368
Rental Income 2,174,310
Total Income 8,005,678
EXPENSES
Administrative Expense - Miscellaneous 19,009
Fundraising - Event 135,451
Printing and Reproduction 12,717
Interest Expense 1,607,667
Alumni Direct Support 196,046
Professional Fees 167,856
Rent Expense 1,551,978
Real Estate Taxes 72,486
Recruitment Expense 65,010
Insurance 49,888
Consulting 103,756
Contributions 10,949
In-Kind - Legal Fees 74,375
Grants to TEAM Academy Charter School 958,095
TEAM in Africa 48,215
Network Events 102,288
Travel 25,873
Field Trip - Instructional Lesson 50,536
Amortization of Bond Closing Costs 6,632
Depreciation 188,393
TOTAL EXPENSES 5,447,220
TOTAL OPERATING INCOME 2,558,458
OTHER INCOME
Amortization Bond Discount 682,455
Interest Income Bonds 2,302,637
Interest Income - Other 282
Total Other Income 2,985,374
INCREASE IN NET ASSETS 5,543,832
7,712,919
13,256,751$
See independent auditor's report and notes to financial statements.
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC. AND AFFILIATE
(A NONPROFIT ORGANIZATION)
CONSOLIDATED STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2012
NET UNRESTRICTED AND TEMPORARILY RESTRICTED ASSETS -
BEGINNING OF YEAR
NET UNRESTRICTED AND TEMPORARILY RESTRICTED NET ASSETS -
END OF YEAR
4
CASH FLOWS FROM OPERATING ACTIVITIES
Increase in Net Assets 5,543,832$
net cash provided by operating activities
Depreciation 188,393
Amortization of Bond Discount (682,455)
Amortization of Closing Costs 6,632
Accrued Interest Receivable (338,631)
Contribution Receivable (1,165,945)
Prepaid expenses (40,867)
Other Receivable 18,405
Rent Receivable 60,000
Increase (Decrease) in Current Liabilities
Accounts Payable 423,327
Accrued Expenses 144,945
Deferred Revenue 500,000
Loan Payables Current Portion 13,471,120
NET CASH PROVIDED BY OPERATING ACTIVITIES 18,128,756$
CASH FLOWS FROM AND (USED IN) INVESTING ACTIVITIES
Increase In Investment in Qualified Zone Academy Bonds ($17,300,000)
Increase in Building and Improvements (83,842)
Increase in Security Deposit (41,667)
NET CASH USED BY INVESTING ACTIVITIES ($17,425,509)
CASH FLOWS FROM AND (USED IN) FINANCING ACTIVITIES
Increase in Bond Closing Cost (252,000)$
Net Increase(Decrease) in Loans and Mortgages - Noncurrent 508,212
NET CASH FROM FINANCING ACTIVITIES 256,212
TOTAL INCREASE IN CASH
AND CASH EQUIVALENTS 959,459$
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 2,686,668$
CASH AND CASH EQUIVALENTS - END OF YEAR 3,646,127$
See independent auditor's report and notes to financial statements.
(Increase) Decrease in Current Assets
Adjustments to reconcile increase in net assets to
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC. AND AFFILIATE
(A NONPROFIT ORGANIZATION)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2012
5
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC. AND AFFILIATE
(A NONPROFIT ORGANIZATION)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT
JUNE 30, 2012
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES
NATURE OF ACTIVITIES
The Friends of TEAM Academy Charter School, Inc., (the “Organization”) and FOTA Finance I, LLC a
wholly owned subsidiary (the “Affiliate”) were organized exclusively to provide support and services to
TEAM Academy Charter School, which is a charter school located in Newark, New Jersey (the “School”).
The support services include obtaining financial support, providing property or services directly to the
School or to its staff and/or students to facilitate the purposes and programs of the School.
A. Principles of Consolidation
The consolidated financial statements include all accounts and operations of the Organization and its
Affiliate. Intercompany accounts and transactions have been eliminated in consolidation.
B. Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Significant
estimates included in the Organization and its Affiliate’s consolidated financial statements are the fair value
of investments and contributions. Actual results could differ from those estimates.
C. Concentration of Credit Risk
The Organization’s and Affiliate financial instruments are potentially exposed to concentrations of credit
risk which consist primarily of cash. The Organization places its cash with quality financial institutions. The
Organization and Affiliate believe no significant concentrations of credit risk exist with respect to its cash.
D. Cash and Equivalents
The Organization defines cash equivalents as high quality and highly liquid investments, such as negotiable
Certificate of Deposits and commercial paper, with maturity of 90 days or less.
6
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC. AND AFFILIATE
(A NONPROFIT ORGANIZATION)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT
JUNE 30, 2012
Analysis of consolidated Cash and Cash Equivalents is as follows:
The Friends
of TEAM
Academy
June 30, 2012
FOTA Finance
I, LLC
June 30, 2012
Total
Consolidated
Manufacturers and Traders Trust Company $2,631,977 $47,277 $2,679,254
Bank of America 966,873 --- 966,873
Total $3,598,850 $47,277 $3,646,127
E. Contributions and Grants Receivable
Contributions and grants receivable represent amounts unconditionally committed by donors and agencies
that have not been received by the Organization and its Affiliate.
Government grants are primarily cost reimbursement grants and are recognized when earned.
The receivables are recorded at the current pledged value. The Organization and its Affiliate do not
anticipate any uncollectible receivables.
F. Tax Exempt Status
The Organization and the Affiliate, as a disregarded entity, are exempt from Federal and State Income Taxes
under Section 501(c) 3 of the Internal Revenue Code. Pursuant to accounting standards codification (ASC)
topic 740, Income Taxes, management has determined that it does not have any uncertain tax positions.
G. Accounts Receivable
The accounts receivable are as follows:
Due from TEAM Academy $197,980
Refund Receivable 6,124
Total $204,104
H. Donated Services
Although members of the Board of Directors and other volunteers have donated significant amounts of their
time to the Organization’s activities, these services are not reflected in the financial statements for donated
services as no objective basis is available to measure their value. However, $74,375 of in-Kind donated
legal fees are reflected as part of the Statement of Activities for in-Kind revenue and expenditures.
7
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC. AND AFFILIATE
(A NONPROFIT ORGANIZATION)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT
JUNE 30, 2012
I. Building and Improvements
The Organization has made substantial investments into purchasing and improving the facilities that house
the schools it leases or subleases to the School.
In September 2005, the Organization purchased a building located at 85 Custer Avenue from the Roman
Catholic Diocese of Newark for a total purchase price of $1,709,000, of which $450,000 was associated
with the cost of the land. During fiscal years 2005-2012 the Organization made substantial improvements
totaling to date $3,545,190.
In 2006 Ashland Street Corporation (“ASDC”), a wholly owned subsidiary of the Organization, acquired a
building located on 21 Ashland Street, Newark New Jersey which it leases from ASDC, and in turn, sub-
leases to the School to house its second school Rise Academy. To date the Organization has made leasehold
improvements totaling $2,006,604 to the building.
Other Leasehold Improvements totaling $505,304 have been made to other sites that the Organization has
leased from third party landlords and subleased to the School. These sites include sites such as 909 Broad
Street, which formerly housed TEAM’s high school (Newark Collegiate Academy) and currently houses
TEAM’s second elementary school (THRIVE Academy), and 540 Orange Street, which formerly housed
TEAM’s first elementary school (SPARK Academy).
Land - Custer Avenue $ 450,000
Building - Custer Avenue 1,259,000
Building Improvements - Custer Avenue 3,548,190
Building Improvements - Ashland Street 2,006,604
Building Improvements - Other 505,304
Furniture 38,508
Total $7,807,606
Depreciation expense for the fiscal year 2012 is $188,393, based upon the useful lives of 40 years for
buildings and improvements and 7 years for furniture.
J. Accounts Payable
The accounts payable are expenditures payable within 90 days.
K. Deferred Revenue
Deferred revenue is donated monies restricted for use in future years.
8
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC. AND AFFILIATE
(A NONPROFIT ORGANIZATION)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT
JUNE 30, 2012
NOTE 2: INVESTMENTS IN QUALIFIED SCHOOL CONSTRUCTION BOND
HELD TO MATURITY
During the year ended June 30, 2011, NCA Facility, Inc. (“NCA”), a New Jersey nonprofit corporation,
desired to construct a building containing approximately 63,000 square feet of rentable space and a parking
lot (the “Project”), to be leased entirely to the School to be operated as a public charter school facility, and
to be constructed upon that certain real property (the “Property”), bounded by Norfolk Street to the west,
Newark Street to the east, Orange Street to the north, and Sussex Avenue to the south, with an address, of
18-36 Norfolk Street, Newark, New Jersey and 19 Newark Street, Newark, New Jersey.
Pursuant to the Internal Revenue Code of 1986, as amended, 26 U.S.C. Sections 54A, 54F and Treasury
Regulations promulgated thereunder, the Project, as a public school facility, was financed in part with the
proceeds of issuance of obligations known as “Qualified School Construction Bonds (Direct Payment)”
(“QSCBs”), and NCA will receive a direct subsidy from the Internal Revenue Service (each a “Direct
Payment”) reimbursing NCA for a portion of the interest payable on such QSCBs on each Interest Payment
Date.
On February 1, 2011 NCA issued $21,278,000 (par value) aggregate principal amount of QSCBs designated
"Qualified School Construction Bonds (Direct Payment) (Newark Collegiate Academy Project) Series 2011
A" (the “NCA QSCBs”) and $1,525,000 aggregate principal amount of taxable bonds designated "Project
Revenue Bonds (Newark Collegiate Academy Project)" (Federally Taxable), Series 2011 B" (the “Taxable
Bonds” and together with the NCA QSCBs, the “NCA Bonds”) pursuant to that certain Trust Indenture
dated as of February 1, 2011 (the “NCA Indenture”) among NCA, the Organization, as purchaser of the
Bonds, and Manufacturers and Traders Trust Company, as trustee (the “Trustee”), to finance, together with
other available monies, costs of the Project.
The New Jersey Economic Development Authority (“NJEDA”) issued on April 26, 2011 (the “NJEDA
Bond Issuance Closing Date”) $6,675,017 (par value) aggregate principal amount of QSCBs (the "NJEDA
Bonds"; the NJEDA Bonds and the NCA bonds are the "Bonds") pursuant to a bond agreement or trust
indenture among NJEDA, the Organization, as purchaser of the NJEDA Bonds, and the Trustee (the
“NJEDA Indenture”; the NJEDA Indenture and the NCA Indenture are the "Indentures"); and the proceeds
of the Bonds, together with other available monies, will be applied to finance the costs of the Project.
Pursuant to an Assumption Agreement by and between the New Jersey Redevelopment Authority (the
“Authority”) and NCA, the Authority is responsible for the performance of certain obligations necessary to
effect the payment of debt service and the ownership of the property under the Bond Documents including
the payment of principal and interest on Qualified School Construction Bonds, and other obligations issued
or entered into by NCA.
Pursuant to this agreement, the New Jersey Redevelopment Authority has the option to satisfy the above
mentioned Project Related Debt by conveyance of fee simple interest in the property as payment in full of
all liabilities on the maturity date of the QSCB’s.
9
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC. AND AFFILIATE
(A NONPROFIT ORGANIZATION)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT
JUNE 30, 2012
The Organization’s investments in the bonds are as follows at June 30, 2012:
Issuer
Par Value
Bond
Discount
Net of
Amortization
Bond
Value
Net
NCA Facility Inc. Qualified School
Construction Bonds (Direct Pay) Newark
Collegiate Academy Project Series 2011A 17
years, 5%. Issuance date 2/1/11 Collateralized
by NCA building facility.
$21,278,000
$5,089,084
$16,188,916
New Jersey Economic Development Authority
Qualified School Construction Bonds Newark
Collegiate Academy project Series 2011 16
year, 5%. Issuance date 4/26/11. Collateralized
by NCA building facility.
6,675,017
1,605,594
5,069,423
NCA Facility Inc. Federally Taxable Newark
Collegiate Academy Project Series 2011B.
Insurance date 2/1/11. Collateralized by NCA
building facility.
1,525,000
-0-
1,525,000
$29,478,017 $6,694,678 $22,783,339
NOTE 3: BOND DISCOUNT - QSCB BONDS
The original bond discount was $7,335,017. The current amortization is calculated using the straight line
method as follows:
Original
Bond
Discount
Accumulated
Bond
Discount
Amortization
Net
Discount
NCA Facility QSCB Bonds Par Value
$21,278,000
$5,583,458 $494,374 $5,089,084
NJEDA QSCB Bonds Par Value $6,675,017 1,751,559 145,965 1,605,594
$7,335,017 $640,339 $6,694,678
The amortization Bond Discount of $465,744 is recognized as income at June 30, 2012.
10
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC. AND AFFILIATE
(A NONPROFIT ORGANIZATION)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT
JUNE 30, 2012
NOTE 4: INVESTMENT IN QUALIFIED ZONE ACADEMY BONDS HELD TO MATURITY
(TEAM ACADEMY CHARTER SCHOOL PROJECT SERIES 2011)
On December 29, 2011 The Kingston Educational Holdings I, Inc., a New Jersey Non Profit corporation,
obtained from the New Jersey Economic Development Authority (the “Authority”) financial assistance for
the purpose of rehabilitating and repairing various public school buildings (Project Facilities) in which the
Organization will be occupying and providing equipment for the benefit of the School (collectively the
“Project” or “Projects”), all to be leased entirely to the School. The eligible Project Facilities mean the
land and buildings located at 85 Custer Avenue, 909 Broad Street, 21 Ashland Street, 333 Clinton Place
and/or 18 Norfolk Street in the City of Newark, New Jersey and/or such other public school facility sites as
may be approved by the Department of Education in the State where such land and buildings are to be
improved with proceeds of the Bonds (as hereinafter defined).
On December 29, 2011, the Authority issued $25,535,000 Qualified Zone Academy Bonds (“QZAB”). The
Affiliate purchased the QZAB bonds par value $25,535,000 for $17,300,000 from Kingston Educational
Holdings I, Inc., with financing provided from Goldman Sachs and KIPP Foundation (the “Bonds”).
Pursuant to the code section 54E of the Internal Revenue Code of 1986, as amended, promulgated there
under, the Bonds are obligations known as “Qualified Zone Academy Bonds” (“QZABs”).
The investments in the Bonds are as follows at June 30, 2012:
Par
Value
Bond
Discount
Net of
Amortization
Bond
Value
Net
TEAM Academy Project Qualified Zone
Academy Bonds - TEAM Academy Project
Series 2011 4.94% - 19 years*
25,535,000
(8,018,289)
17,516,711
$25,535,000 $(8,018,289) $17,516,711
*Currently and/or upon the commencement of the project construction, as applicable, the Bonds will be
collateralized with the following:
1. Mortgages or leasehold interests.
2. Assignment of leases.
3. The Organization will pledge its membership interests in the Affiliate.
4. The Affiliate will pledge all of its assets.
5. The Affiliate will pledge its rights as holder of the Bonds.
11
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC. AND AFFILIATE
(A NONPROFIT ORGANIZATION)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT
JUNE 30, 2012
Bond Discount
The original Bond discount was $8,235,000. The current amortization is calculated using the straight line
method as follows:
Original Bond
Discount
Initial Year
Bond Discount
Amortization
Net
Discount
QZAB TEAM Academy Project Bonds Par
Value $25,535,000
8,235,000
(216,711)
8,018,289
$8,235,000 $(216,711) $8,018,289
The amortization Bond Discount of $216,711 is recognized as income at June 30, 2012.
NOTE 5: THE RECURRING FAIR VALUE MEASUREMENTS
The Financial Accounting Standards Board established a framework for measuring fair value. That
framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure
fair value. The hierarchy gives highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3
measurements). The three levels of the fair value hierarchy are described below:
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities
in active markets that the Organization has the ability to access. Such inputs include quoted prices in active
markets for identical assets or liabilities.
The following table sets forth, within the fair value hierarchy, assets at fair value as of June 30, 2012:
Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities;
or other inputs that are observable or can be corroborated by observable market data for substantially the
full term of the assets or liabilities.
Level 3 - Unobservable inputs that are supported by little or no market activity and that are financial
instruments whose values are determined using pricing models, discounted cash flow methodologies, or
similar techniques, as well as instruments for which the determination of fair value requires significant
judgment or estimation.
The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest
level of any input that is significant to the fair value measurement. Valuation techniques used need to
maximize the use of observable inputs and minimize the use of unobservable inputs.
12
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC. AND AFFILIATE
(A NONPROFIT ORGANIZATION)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT
JUNE 30, 2012
Current Assets June 30, 2012
Total Level 1 Level 2 Level 3
Current Assets
Cash and Cash Equivalents $3,646,127 $3,646,127
Contributions Receivable 1,165,945 1,165,945
$4,812,072 $4,812,072
Other Assets
Investment in Qualified Zone Academy
Bonds (Net of Discount)
$17,516,711
$17,516,711
Investments in Qualified School
Construction Bonds (Net of Discount)
22,783,338
---
---
22,783,338
Total $40,300,049 $40,300,049
Total Assets $45,112,121 $4,812,072 --- $40,300,049
NOTE 6: ACCRUED INTEREST RECEIVABLE
The accrued interest receivable represents interest earned on QSCB and QZAB Bond investments that has
not yet been collected.
QSCB NCA 2011 Bond Investment $403,965
QZAB NJEDA 2011 Bond Investment 315,357
$719,322
NOTE 7: ACCRUED INTEREST PAYABLE
The accrued interest payable represents interest payable owed on loans and mortgages payable that has not
yet been paid.
NOTE 8: LONG TERM DEBT
The following is a summary of long term debt incurred by the Organization in conjunction with the 2011
QSCB and QZAB transactions:
The Organization has utilized all of the proceeds of the loan in the original principal amount of $15,750,000
(the “Senior Loan”) from Manufacturers and Traders Trust Company, a New York banking corporation
(“M&T”), to finance the purchase of the QSCBs, which as Senior Loan shall be secured by the NCA Bonds
and the security therefore will be repaid on a senior secured basis.
The Organization has utilized all of the proceeds of a cash deposit in the original principal amount of
$2,000,000 (the “KIPP Funding”) from KIPP Foundation, a California nonprofit, public benefit corporation
(“KIPP”) to finance the purchase of the QSCBs, which KIPP Funding is secured by the NCA Bonds and
the security therefore will be repaid on a subordinated basis in relation to the Senior Debt and the Junior
Debt (as defined below).
13
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC. AND AFFILIATE
(A NONPROFIT ORGANIZATION)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT
JUNE 30, 2012
The Organization as additional funding for its acquisition of the NCA Bonds and to fund the acquisition of
the NJEDA Bonds on the NJEDA Bond Issuance on February 1, 2011, borrowed from Prudential Asset
Resources a loan (Junior Debt) in an original amount of $3,000,000, which Prudential Asset Resources has
been secured by the NCA Bonds and the security therefore, will be repaid on a subordinated basis in relation
to the Senior Loan.
Pursuant to the NCA Indenture, NCA has pledged and assigned a trustee, for the benefit of the holder or
holders of the NCA Bonds, all revenues of NCA derived from lease payments and other payments payable
to NCA by the School under the Lease (as hereinafter defined), all Direct Payments in respect of interest
paid on the NCA Bonds, all of NCA's interest in and rights to the Lease and the Collateral (as such terms are
defined in the NCA Indenture), and all monies on deposit in the funds and accounts established under the
NCA Indenture (except the Rebate Fund (as defined in the NCA Indenture)).
Pursuant to the NJEDA Indenture, the Authority pledged and assigned a trustee, for the benefit of the holder
or holders of the NJEDA Bonds, (a) all revenues of NJEDA, including without limitation all Direct
Payments in respect of interest paid on the NJEDA Bonds, (b) all of NJEDA's interest in and rights to (i)
any loan payments from NCA to NJEDA in respect of the loan, the proceeds of the NJEDA Bonds to NCA
and the document or documents evidencing such loan and (ii) the Collateral (as such term is defined in the
NJEDA Indenture), and (c) all monies on deposit in the funds and accounts established under the NJEDA
Indenture (except the Rebate Fund (as defined in the NJEDA Indenture).
The Affiliate has utilized the proceeds of the original principal of $12,600,000 borrowed from Goldman
Sachs in addition to using its own equity to purchase the Bonds (the Organization Project Series 2011,
issued December 29, 2011) which as Senior Loan is secured by all assets of the affiliate. The Affiliate
ensures that at least 98% of the net proceeds of the Bonds will be used exclusively to finance Capital
Expenditures as stipulated with the QZAB rules applicable under section 54E of the Internal Revenue
Service Code. As of June 30, 2012, no monies have been released as yet for the Organization Project.
The Affiliate has utilized the financing of the original principal amount of $2,000,000 from KIPP to
purchase the QZAB Bonds which is secured by the Bonds and the security therefore will be repaid on a
subordinated basis in relation to the Senior debt above.
The following outlines the consolidated current and non-current debt:
QSCB Loan Payable - Manufacturers and Traders Trust Company (Senior
Debt)
Original principal $15,750,000 25 years at 5.30%. The loan interest rate is due to be
reset in 2016. The resetting of the rate may cause the loan to be refinanced. -
Maturity 1/1/36
Balance $15,385,930
14
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC. AND AFFILIATE
(A NONPROFIT ORGANIZATION)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT
JUNE 30, 2012
QSCB Loan Payable - Prudential Asset Resources (Junior Debt)
Original principal $3,000,000 at 6.00%. Maturity 2/1/18
Balance 3,000,000
QSCB Investment Contract Payable - KIPP Foundation
Original principal $2,000,000 - Maturity date 1/26/17
Variable rate based upon 6 month treasury rate. Quarterly payments of interest with
varied principal payments once a year.
Balance 1,970,000
QZAB Loan Payable - Goldman Sachs
Original Principal $12,600,000 at 6% on 12/29/11. Maturity 12/31/12
Balance 12,472,004
QZAB Investment Contract Payable - KIPP Foundation
Original Principal $2,000,000 at .04%. $500,000 Principal Payments Due 12/12,
6/13, 12/13 and 12/15.
Balance 2,000,000
Mortgage Payable - Prudential Insurance Company of America
DATED: September 28, 2006
Principal and interest commencing 11/1/2007 to 9/1/2015 in the amount of $25,205
per month. Proceeds were used primarily for the purchase and renovation of the
TEAM Academy Charter School located at 85 Custer Ave, Newark, NJ
Balance 3,077,361
Loan Payable - The Charter School Growth Fund
Initial Loan 12/10/10. No Interest or principal payments until 2016. Thereafter
interest accrues at 3.25%.
Balance 700,000
Total current and non - current debt $38,605,295
Total interest expense for year end 6/30/12 $1,607,667
15
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC. AND AFFILIATE
(A NONPROFIT ORGANIZATION)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT
JUNE 30, 2012
Principal payments for each of the next five years and thereafter on total consolidated long-term debt
outstanding at June 30, 2012 are as follows:
Friends of TEAM Academy Charter School, Inc. $24,133,291
FOTA Finance I, LLC 14,472,004
$38,605,295
Principal Payments are as follows:
2013 $14,207,119
2014 1,321,452
2015 920,909
2016 4,375,996
2017 1,142,297
Thereafter 16,637,522
Net Long-Term Debt $38,605,295
NOTE 9: CONSOLIDATED NET ASSETS
Net assets are categorized as unrestricted, temporarily restricted, and permanently restricted. The
unrestricted category contains, in addition to expendable funds, amounts dedicated to special programs,
investment in plant and equipments, and designated for other related purposes.
Temporarily restricted net assets are those that may be spent after the occurrence of an event or time certain,
and permanently restricted net assets cannot be spent. The net assets are deemed to be as follows:
Friends of TEAM Academy Charter School, Inc. - Unrestricted $12,755,128
FOTA Finance I, LLC - Temporarily Restricted 501,623
Total Consolidated $13,256,751
NOTE 10: RENTAL INCOME
The Friends of TEAM Academy School holds a position of Landlord or Sublandlord to the Tenant or
Subtenant TEAM Academy Charter School for the following properties:
Position
TEAM Academy Charter School, 85 Custer Avenue Landlord
RISE Academy School, 21 Ashland Street Sub-Landlord
THRIVE Academy School, 909 Broad Street Sub-Landlord
Room 9 School Support Office, 60 Park Avenue Sub-Landlord
Total Rental Income $2,174,310
16
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC. AND AFFILIATE
(A NONPROFIT ORGANIZATION)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT
JUNE 30, 2012
NOTE 11: RENTAL EXPENSE
The Friends of TEAM Academy Charter School, Inc. holds a position of Tenant for the following Properties
with the TEAM Academy School being the Subtenant:
RISE Academy, 21 Ashland Street, Newark, NJ
THRIVE Academy School, 909 Broad Street, Newark, NJ
Room 9 School Support Office, 60 Park Avenue, Newark, NJ
Total Rental Expense $1,551,978
The future lease values as noted above:
Rental
Income
Rental
Expense
2013 2,176,000 1,402,608
2014 2,176,000 1,402,608
2015 2,276,000 1,461,579
NOTE 12: RELATED PARTY
The Ashland Street Development Corporation is a subsidiary of the Organization and leases a building
located at 21 Ashland Street from ASDC.
NOTE 13: CONTINGENCIES
The Organization and its Affiliate are subject to ongoing litigation in the ordinary course of their operations.
In the opinion of their outside counsel, there were no actions pending that will have a material impact on
their financial position.
NOTE 14: SUBSEQUENT EVENTS
The Organization and its Affiliate’s management has evaluated subsequent events occurring after the
statement of financial position date through the date of September 19, 2012, which is the date the financial
statements were available to be issued. Based on this evaluation, the Organization and its Affiliate’s
management has determined that no subsequent events require disclosure in the financial statements.
17
The Friends
of TEAM
Academy FOTA
Charter Finance I,
School, Inc. LLC Debit Credit Total
ASSETS
Current Assets
Cash and Cash Equivalents 3,598,850$ 47,277$ 3,646,127$
Accrued Interest Receivable 403,965 315,357 719,322
Loan Receivable 5,106 5,106
Contributions Receivable 1,165,945 1,165,945
Other Receivable 204,104 204,104
Prepaid Rent 40,867 40,867
Total Current Assets 5,418,837 362,634 5,781,471
Fixed Assets
Land - Custer Avenue 450,000 450,000
Building - Custer Avenue 1,259,000 1,259,000
Building Improvements - Other 505,304 505,304
Building Improvements - Custer Avenue 3,548,190 3,548,190
Building Improvements - Ashland Street 2,006,604 2,006,604
Furniture 38,508 38,508
Total 7,807,606 7,807,606
Less: Accumulated Depreciation (1,028,881) (1,028,881)
Total Fixed Assets 6,778,725 6,778,725
Other Assets -
Investment in Qualified Zone Academy Bonds 17,516,711 17,516,711
Investment in Qualified School Construction Bonds 22,783,339 22,783,339
Investment in FOTA I Financing , LLC 3,000,000 (3,000,000) -
Unamortized Bond Closing Cost 245,368 245,368
Security Deposit 100,000 100,000
Total 25,883,339 17,762,079 (3,000,000) 40,645,418
Total Assets 38,080,901$ 18,124,713$ (3,000,000) 53,205,614$ -
ASSETS AND LIABILITIES - -
Current Liabilities -
Loan Payable - Manufacturers and Traders Trust Company 332,915$ 332,915$
QSCB Contract Payable - KIPP Foundation 273,330 273,330
QZAB Contract Payable - KIPP Foundation 1,000,000 1,000,000
Loan Payable - Goldman Sachs 12,472,004 12,472,004
Mortgage Payable - Prudential Insurance Company of America 128,870 128,870
Deferred Revenue 500,000 500,000
Accounts Payable 423,324 423,324
Accrued Interest Payable 269,158 151,086 420,244 -
Total Current Liabilities 1,927,597$ 13,623,090$ 15,550,687$ -
Non-Current Liabilities
Loan Payable - Manufacturers and Traders Trust Company 15,053,015 15,053,015
Loan Payable - Prudential Assets Resources 3,000,000 3,000,000
QSCB Contract Payable - KIPP Foundation 1,696,670 1,696,670
QZAB Contract Payable - KIPP Foundation 1,000,000 1,000,000
Loan Payable Charter School Growth Fund, Inc 700,000 700,000
Mortgage Payable - Prudential Insurance Company of America 2,948,491 2,948,491
Total NonCurrent Liabilities 23,398,176 1,000,000 24,398,176
Total Liabilities 25,325,773 14,623,090 39,948,863 -
NET ASSETS
Temporarily Restricted 501,623 501,623
Unrestricted 12,755,128 12,755,128
Friends Of Team Equity 3,000,000 3,000,000 -
TOTAL NET ASSETS 12,755,128 3,501,623 3,000,000 13,256,751
Total Liabilities and Net Assets 38,080,901$ 18,124,713$ 3,000,000 53,205,614$
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC. AND AFFILIATE
(A NONPROFIT ORGANIZATION)
SUPPLEMENTAL CONSOLIDATING STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED JUNE 30, 2012
18
The Friends
of TEAM
Academy FOTA
Charter Finance I,
School, Inc. LLC Debit Credit Total
INCOME
CONTRIBUTIONS
Temporarily Restricted Contributions 635,616$ 635,616$
Unrestricted Contributions 5,121,377 5,121,377
In-Kind Contribution 74,375 74,375
Total Contributions 5,831,368 5,831,368
Rental Income 2,174,310 2,174,310
Total Income 8,005,678 - 8,005,678
EXPENSES
Administrative Expense - Miscellaneous 19,009 19,009
Fund raising - Event 135,451 135,451
Printing and Reproduction 12,717 12,717
Interest Expense 1,213,156 394,511 1,607,667
Alumni Direct Support 196,046 196,046
Professional Fees 167,133 723 167,856
Rent Expense 1,551,978 1,551,978
Real Estate Taxes 72,486 72,486
Recruitment Expense 65,010 65,010
Insurance 49,888 49,888
Consulting 103,756 103,756
Contributions 10,949 10,949
In-Kind - Legal Fees 74,375 74,375
Grants to TEAM Academy Charter School 958,095 958,095
TEAM in Africa 48,215 48,215
Network Events 102,288 102,288
Travel 25,873 25,873
Field Trip- Instructional Lessons 50,536 50,536
Amortization of Bond Closing Costs - 6,632 6,632
Depreciation 188,393 188,393
TOTAL EXPENSES 5,045,354 401,866 5,447,220
TOTAL OPERATING INCOME (LOSS) 2,960,324 (401,866) 2,558,458
OTHER INCOME
Amortized Bond Discount 465,744 216,711 682,455
Interest Income - Bonds 1,615,859 686,778 2,302,637
Interest Income - Other 282 282
Total Other Income 2,081,885 903,489 2,985,374
INCREASE IN NET ASSETS 5,042,209 501,623 5,543,832
-
NET UNRESTRICTED AND TEMPORARILY
RESTRICTED ASSETS - BEGINNING OF YEAR 7,712,919 - 7,712,919
- NET UNRESTRICTED AND TEMPORARILY
RESTRICTED NET ASSETS - END OF YEAR $ 12,755,128 $ 501,623 - - 13,256,751$
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC. AND AFFILIATE
(A NONPROFIT ORGANIZATION)
SUPPLEMENTAL CONSOLIDATING STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2012
APPENDIX C
Form of Loan Agreement
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[ THIS PAGE INTENTIONALLY LEFT BLANK ]
APPENDIX D
Form of Indenture
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[ THIS PAGE INTENTIONALLY LEFT BLANK ]
[ THIS PAGE INTENTIONALLY LEFT BLANK ]
APPENDIX E
Form of the Lease Agreements
[ THIS PAGE INTENTIONALLY LEFT BLANK ]
1
FORM OF AMENDED AND RESTATED LEASE AGREEMENT
THIS AMENDED AND RESTATED LEASE AGREEMENT (this “Lease”), dated this 1st day of November, 2013 (the “Effective Date”) between Ashland School, Inc., a New Jersey non-profit corporation, having an office at 60 Park Place, Suite 802, Newark, New Jersey 07102 (“Landlord”) and The TEAM Academy Charter School, Inc. (“Tenant”), a New Jersey not-for-profit corporation, having an office at 60 Park Place, Suite 802, Newark, New Jersey 07112.
PRELIMINARY STATEMENT
__________________ (“______”), as landlord and Tenant, as tenant, entered into a certain Lease Agreement dated as of _______, as amended by a certain First Amendment to Lease Agreement made as of _______ and a certain Second Amendment to Lease Agreement, made as of ________ (collectively, the “Original Lease”) relating to premises located at _______________, Newark, New Jersey (the “Leased Premises”).
Prior to the date hereof, _____________ was the owner of the Leased Premises. On _________, 2013, ______ and Landlord entered into a Purchase and Sale Agreement (the “Purchase Agreement”) for the sale of the Leased Premises from _____to Landlord. _____ required as a condition to sale that the Original Lease be amended and restated in its entirety to provide, among other things, that upon the purchase of the Leased Premises by Landlord, Landlord would become landlord to Tenant with respect to the Leased Premises.
On the date hereof, Landlord is entering into a Loan Agreement (as defined herein) with the New Jersey Ecomomic Development Authority (the “NJEDA”) pursuant to which the NJEDA is loaning a portion of the proceeds of the Bonds (as defined herein) to Landlord to purchase the Leased Premises from ____, [retouch the façade of the Leased Premises, and construct a gymnasium addition on the Leased Premises For Custer Lease Only].
In satisfaction of the requirements under the Purchase Agreement, the parties hereto desire to amend and restate in its entirety, the Original Lease and to enter into this Lease with respect to the Leased Premises on the terms and conditions hereinafter set forth. From and after the date hereof the Original Lease will be deemed terminated, invalid and of no force and effect.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. As used in this Lease, the following terms have the following respective meanings:
“Additional Rent” has the meaning provided in Section 3.2.
2
“Applicable Laws” means all applicable laws, ordinances, orders, directives, rules and regulations of any governmental authority having jurisdiction, whether now or hereafter in effect.
“Approved Plans” has the meaning provided in Section 2.3.
[“Ashland Lease” means the Amended and Restated Lease Agreement dated as of the date hereof between Landlord and Tenant with respect to the property owned by Landlord and leased to Tenant located at 21 Ashland Street, Newark, New Jersey 07102.For Custer Lease Only]
“Base Rent” has the meaning provided in Section 3.1.
“Bonds” means, collectively, the $______________ New Jersey Economic Development Authority Charter School Revenue Bonds (Series 2013 Project for the TEAM Academy Charter School).
“Casualty” means a fire or natural disaster causing damage to the Leased Premises.
“Charter” means a charter granted to Tenant by the Commissioner to operate a public charter school in the State of New Jersey within the meaning of the New Jersey Charter School Program Act of 1995 (NJSA 18A:36A).
“Combined Annual Payment Obligation” shall mean, for the applicable Fiscal year, the combined total of (i) Lease Payments plus (ii) Debt Payments.
“Commissioner” means the Commissioner of Education of the State of New Jersey.
“Consultant” shall mean an independent consulting firm which is appointed by Tenant for the purpose of passing on questions relating to the financial affairs, management or operations of Tenant and has a favorable reputation for skill and experience in performing similar services in respect of entities of a comparable size and nature.
“Coverage Ratio” shall mean, for the applicable Fiscal Year, the ratio of Funds Available for Lease/Debt Payments to the Combined Annual Payment Obligation during the applicable Fiscal Year.
[“Custer Lease” means the Amended and Restated Lease Agreement dated as of the date hereof between Landlord and Tenant with respect to the property owned by Landlord and leased to Tenant located at 85 Custer Avenue, Newark, New Jersey 07102.For Ashland Lease Only]
“Debt Payments” means payments of interest and principal under any debt obligations of Tenant.
“Depository” has the meaning provided in Section 13.1.
3
“Education Department” means the Department of Education of the State of New Jersey or any successor agency.
“Effective Date” means the date specified in the first paragraph of this Lease.
“Environmental Laws” means all federal, state and local laws, ordinances, rules and regulations governing the use, handling and disposal of Hazardous Substances (as hereinafter defined) which are applicable to the Leased Premises and are now or hereafter in effect, including, without limitation, ISRA (as hereinafter defined), the Spill Compensation and Control Act, N.J.S.A. 58:10-23.11 et seq., Section 1004 of the Federal Reserve Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq. (42 U.S.C. Section 6903) and any additions, amendments or modifications thereto.
“Events of Default” has the meaning provided in Article 14.
“Exemption Loss Date” has the meaning provided in Section 2.2.
“FOTA” means The Friends of TEAM Academy Charter School, a New Jersey Non-Profit Organization.
“Funds Available for Lease/Debt Payments” shall mean, in any Fiscal Year, the sum of the following: (i) Net Income for such Fiscal Year, (ii) all interest expense with respect to any outstanding long term debt; (iii) all depreciation expense, and amortization of financing charges and (v) other non-cash expenses deducted from revenues in determining Net Income for such Fiscal Year, all as determined in accordance with GAAP.
“Hazardous Substances” means any hazardous substance, hazardous waste, toxic substance, pollutant or contaminant as such terms may be defined in any of the Environmental Laws.
“Indenture” shall mean the Trust Indenture dated October 1, 2013 between the New Jersey Economic Development Authority and Manufacturers and Traders Trust Company, as amended from time to time.
“Insurance Requirements” means all insurance required to be maintained by Tenant pursuant to Section 10.1.
“ISRA” means the New Jersey Industrial Site Recovery Act as the same may be supplemented, amended or replaced.
“Landlord Financing Expenses” shall include Landlord’s out-of-pocket costs for audits, tax returns, trustee fees, or any reporting required by the Loan Agreement.
“Lease Payments” means payments of Base Rent and Additional Rent payable by Tenant hereunder and any rent payable under any other lease for real property leased by Tenant.
“Leased Premises” has the meaning provided in the Preliminary Statement.
4
“Lien” means any mortgage, pledge, lien, charge, encumbrance or security interest of any kind, including any inchoate mechanic’s or materialman’s lien.
“Loan Agreement” means the Loan Agreement dated as of October 1, 2013 by and between the New Jersey Econmic Development Authority and Landlord with respect to the loan of the proceeds of the Bonds.
“Mortgage” means any deed of trust or mortgage that may now or hereafter encumber Landlord’s or Tenant’s interest in the Leased Premises and all renewals, modifications, consolidations, replacements and extensions thereof.
“Mortgagee” means the holder of any Mortgage.
“Net Award” means any insurance proceeds or condemnation award payable in connection with any Casualty or Taking, less any expenses incurred by Landlord in recovering the same.
“Net Income” means, for any Fiscal Year, the total of all revenues, gains and other support less all expenses and losses (calculated in accordance with GAAP). In calculating Net Income, there shall be excluded: all extraordinary gains and losses; any item classified as the cumulative effect of a change in accounting principles; gains and losses resulting from the sale of capital assets; proceeds of insurance policies (excluding business interruption), condemnation awards, gifts, donations, grants, pledges, devises, legacies, bequests and contributions to the extent that they may be restricted as to their use by their terms and such amounts are unavailable for the payment of Lease Payments or operating expenses; unrealized gains and losses from investments; asset impairment losses; pension settlement losses; changes in the funded status of defined benefit plans; and losses on the early extinguishment of debt.
“Operating Expenses” shall mean, for any Fiscal Year, all expenses incurred in connection with the operations of Tenant for such period
“Over Due Interest Rate” means the default interest rate under the Bonds, provided that in no event shall the Over Due Interest Rate exceed the maximum rate permitted by Applicable Laws.
“Rent Commencement Date” means ___________, 2013.
“Restoration” means the repair and/or replacement using standard working methods and procedures of improvements damaged by a Casualty to the same or better condition as they were in immediately before the Casualty.
“Support Agreement” means the agreement dated as of _________, 2013 among FOTA, Landlord and Manufacturers and Traders Trust Company, as Trustee under the Indenture.
“Taking” means the taking of the whole or any part of, or access to, the Leased Premises under the power of condemnation or eminent domain by any public, quasi-public or private authority or by act of or pursuant to public authority (with or without a formal taking) or
5
in lieu of taking, conveyed to the taking authority by agreement between Landlord and such public authority.
“Tenant’s Charter” means that certain charter issued to Tenant by the Commissioner permitting Tenant to operate a public charter school in the State of New Jersey during the period commencing on February 28, 2011 and terminating on June 30, 2016, unless sooner renewed, extended or terminated in accordance with applicable law.
“Tenant’s Notice” has the meaning provided in Section 12.2.
“Term” has the meaning provided in Section 2.2.
“Transferee” has the meaning provided in Section 17.2.
“Underlying Encumbrance” has the meaning provided in Section 17.1.
“Unrestricted Liquid Assets” shall mean the sum of: cash, marketable securities, investments, internally or board-designated funds (but excluding donor restricted gifts, grants, bequests, donations or contributions and any income therefrom) as determined in accordance with GAAP. All investments and securities shall be valued at fair market value for the purposes of this definition.
1.2 Undefined Terms. Any capitalized term used in this Lease, including any exhibit or schedule hereto, that is not defined in this Lease shall have the meaning assigned thereto in the Loan Agreement.
ARTICLE 2
DEMISE; TERM; CONDITION
2.1 Demise. Landlord, for and in consideration of the covenants hereinafter contained and made on the part of the Tenant, as of the Effective Date, hereby demises and leases to Tenant, and, as of the Effective Date, Tenant hereby leases from Landlord, the Leased Premises, subject to the terms and conditions of this Lease.
2.2 Term.
(a) The term of this Lease (the “Term”) shall be from the Effective Date through June 30, 2016, unless sooner terminated as provided for in this Lease, provided that this Lease shall automatically renew upon each renewal or extension of the Charter for a term of years equal to the term of each subsequent renewal or extension of the Charter up to an outside termination date of June 30, 20___, unless sooner terminated as provided for in this Lease. Tenant shall provide Landlord with written notice and satisfactory evidence of each extension or renewal of the Charter within fifteen (15) days after Tenant’s receipt of such evidence. The other terms of this Lease during each renewal term shall be the same as those contained in this Lease except that the Base Rent shall be adjusted as provided in Section 3.1 hereof.
6
(b) Notwithstanding paragraph (a) of this Section 2.2., Landlord shall have the option to terminate the Term effective on the date (the “Exemption Loss Date”) that the Bonds are no longer “qualified tax-exempt bonds” for purposes of Section 145 of the Code by giving written notice to Tenant within thirty (30) days after the Exemption Loss Date.
2.3 Condition. Tenant agrees to accept possession of the Leased Premises in their “as-is” condition on the Effective Date, subject to Landlord’s obligation to construct a gymnasium addition and retouch the façade in a good and workmanlike manner and in accordance with Applicable Law and those certain plans and specifications described in Exhibit A attached hereto and made a part hereof by this reference (the “Approved Plans”). Tenant agrees further that neither Landlord nor any agent or representative of Landlord has made any representations or warranties with respect to the physical condition of the Leased Premises, and Tenant acknowledges that it is not relying upon any such representation or warranty in entering into this Lease.
2.4 Delivery Date. Landlord agrees to complete the gym addition pursuant to a schedule mutually acceptable to Tenant and Landlord.
ARTICLE 3
BASE RENT; ADDITIONAL RENT; NO OFFSET
3.1 Base Rent. Commencing on the Rent Commencment Date, and continuing on the first and fifteenth day of each month thereafter, Tenant shall pay Base Rent to Landlord in the amounts and at the times and place specified on Schedule 3.1 attached hereto and made a part hereof. The obligation to pay Base Rent and Additional Rent shall terminate on the effective date of any denial, revocation, non-renewal or surrender of Tenant’s Charter. The Base Rent has been calculated such that the Base Rent listed on Schedule 3.1 together with the base rent actually paid under the [Ashland][Custer] Lease will be an amount equal to 120% of debt service to be paid by Landlord on the Bonds.
3.2 Additional Rent. Tenant shall also pay and discharge when due, without deduction, offset or counterclaim within the time periods set forth in this Lease, as additional rent (“Additional Rent”), (a) to the persons entitled to receive same, all other amounts, liabilities and obligations that Landlord is obligated to pay which Tenant herein agrees to pay or discharge, together with all interest, penalties and costs which may be added thereto, (b) to Landlord, interest at the Over Due Interest Rate on such of the foregoing as are payable to Landlord from the due date until payment, and (c) to Landlord, interest at the Overdue Interest Rate on all overdue Base Rent. Landlord shall have all the rights, powers and remedies provided for in this Lease or at law or in equity or otherwise for failure to pay Additional Rent as are available for nonpayment of Base Rent.
3.3 Late Charge. If any installment of Base Rent or any Additional Rent is not paid within fifteen (15) days of the date when due, Tenant shall pay to Landlord within thirty (30) days after demand, in addition to interest at the Over Due Interest Rate, as Additional Rent, a late charge equal to five percent (5%) of the amount unpaid.
7
3.4 No Offset. Except as otherwise expressly provided herein, Tenant hereby covenants and agrees to pay to Landlord, in all events and without notice or demand, during the Term, at Landlord’s address for notices hereunder, or such other place as Landlord may from time to time designate, without any offset, set-off, counterclaim, deduction, defense, abatement, suspension, deferment or diminution of any kind the Base Rent and Additional Rent and all other sums payable by Tenant hereunder.
ARTICLE 4
SERVICES
4.1 Services. Tenant hereby acknowledges and agrees that from and after the Rent Commencement Date this Lease is intended to be a “net-net-net lease” and Landlord is not obligated to provide any services to Tenant pursuant to this Lease (except for the afore-mentioned construction of a gymnasium addition and retouching of the façade). From and after the Rent Commencement Date or the date on which Landlord delivers possession of the Leased Premises to Tenant, whichever is earlier, Tenant shall arrange for the provision of and be directly responsible for payment, as Additional Rent, of all costs with respect to utility services, the operation and maintenance of, all taxes or other governmental charges (including, but not limited to, payments in lieu of taxes) levied against, all premiums for insurance required under Article 10 of this Lease to be carried for the benefit of or with respect to, and all other costs or expenses arising out of or in connection with Tenant’s use and occupancy of the Leased Premises. Tenant’s obligation to pay all such Additional Rent hereunder shall be self-operating without the requirement of notice from the Landlord pursuant to this Section and Tenant shall make all payments directly to the applicable payee at the place and time required by each payee.
ARTICLE 5
MAINTENANCE; ALTERATIONS; ADDITIONS; REMOVAL OF TRADE FIXTURES
5.1 Maintenance Obligations. Tenant shall, at its sole cost and expense, keep and maintain the Leased Premises in the same condition as on the Rent Commencement Date or the date on which Landlord gives possession of the Leased Premises to Tenant, whichever is earlier, ordinary wear and tear and unrepaired damage from a Casualty not caused by Tenant or from a Taking excepted. Landlord may, at Landlord’s sole option and at Tenant’s sole expense, elect to perform any Alterations which Tenant has requested and to which Landlord has consented.
Landlord shall submit to Tenant an invoice setting forth the cost of all work performed by Landlord pursuant to this Article 5.1 (collectively, the ‘Reimbursable Costs’) together with supporting documentation. The term ‘Reimbursable Costs’ means all hard construction costs, soft costs such as engineering, architectural, and project management fees, all financing costs including lender fees, attorney’s fees, and any other fees payable in connection with such work or the financing thereof. Tenant shall remit to Landlord payment of all such invoices within thirty (30) days after receipt thereof.
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5.2 Right to Assert Claims. Landlord hereby authorizes Tenant to assert all rights and claims, and to bring suits, actions and proceedings, in Landlord’s name or in either or both Landlord’s and Tenant’s name, in respect of any and all contracts, manufacturer’s or supplier’s warranties or undertakings, express or implied, relating to any portion of the Leased Premises; provided, however, that Landlord shall not be obligated to incur any cost in connection therewith. Landlord hereby assigns to Tenant all warranties and guaranties, if any, received from suppliers or subcontractors with respect to the Leased Premises and will execute such further assignments as Tenant shall require to effectuate the purposes of this Section 5.2.
5.3 Alterations. Tenant shall not make any changes, modifications or alterations (collectively, the “Alterations”) to the Leased Premises without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed. This consent shall not be required for any single Alteration with a cost of less than $100,000. Landlord may delegate an authorized officer to consent to such Alterations. Landlord may, at Landlord’s sole option and at Tenant’s sole expense, elect to perform any Alterations which Tenant has requested and to which Landlord has consented. Landlord shall submit to Tenant an invoice setting forth the Reimbursable Costs together with supporting documentation. Tenant shall remit to Landlord payment of all such invoices within thirty (30) days after receipt thereof.
(a) Unless otherwise agreed to by Landlord and Tenant, all Alterations to the Leased Premises shall, upon installation, become the property of Landlord and shall be deemed part of, and shall be surrendered with, the Leased Premises. Tenant shall remove any Alterations made by Tenant to the Leased Premises and promptly repair and restore any damage to the Leased Premises caused by such removal to their condition existing prior to the installation thereof, reasonable wear and tear and unrepaired damage from a Casualty not caused by Tenant or from a Taking excepted, provided that Landlord advises Tenant in writing, at or prior to the time that Tenant requests the right to make such Alteration, that Tenant will be required to remove the same at the expiration or earlier termination of this Lease.
(b) Tenant may install or place or reinstall or replace and remove from the Leased Premises any trade equipment, machinery and personal property belonging to Tenant, provided, that Tenant shall repair all damage to the Leased Premises caused by such removal. Such trade equipment, machinery and personal property shall not become the property of Landlord and shall remain the property of Tenant.
ARTICLE 6
USE OF LEASED PREMISES
6.1 Permitted Uses. Tenant shall not, except with the prior consent of Landlord, use or suffer or permit the use of the Leased Premises for any purpose other than as a charter school, including administrative space relating thereto. Tenant’s use and occupancy of the Leased Premises shall not violate any Applicable Laws. Tenant agrees to conduct its business in a professional manner and in accordance with appropriate standards for a charter school and shall, at all times when the Leased Premises are open for business to the public, keep the Leased Premises attended by adequate personnel.
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6.2 Limitations on Use. Tenant shall promptly comply with all governmental orders and directions for the correction, prevention and abatement of any violations in or on, or in connection with, the Leased Premises, all at Tenant’s sole expense.
ARTICLE 7
INDEMNIFICATION; LIABILITY OF LANDLORD
7.1 Indemnification. Tenant hereby indemnifies, and shall pay, protect and hold Landlord harmless from and against all liabilities, losses, claims, demands, costs, expenses (including reasonable attorneys’ fees and expenses) and judgments of any nature, arising, or alleged to arise, from or in connection with, (a) any injury to, or the death of, any person or loss or damage to property on or about the Leased Premises, except when arising from the negligence or the recklessness or willful misconduct of Landlord or its agents, servants, employees or contractors, (b) any violation of this Lease or of any Applicable Laws by Tenant, or (c) performance of any labor or services or the furnishing of any materials or other property in respect of the Leased Premises or any part thereof by or for Tenant. Tenant will resist and defend any action, suit or proceeding brought against Landlord by reason of any such occurrence by independent counsel selected by Tenant and reasonably acceptable to Landlord. The obligations of Tenant under this Section 7.1 shall begin as of the Rent Commencement Date or the date on which Landlord gives possession of the Leased Premises to Tenant, whichever is earlier, and shall survive the expiration or termination of this Lease.
7.2 No Claims against Landlord. Tenant agrees to make no claim against Landlord or for (i) any damage to, or loss (by theft or otherwise) of, or loss of use of, any property of Tenant or of any other person, regardless of the cause thereof (including, without limitation, any such injury or damage caused by the negligence, recklessness or willful misconduct of Landlord or Landlord’s agents, servants and employees) and (ii) any indirect, consequential (including, without limitation, losses arising out of any business interruption), or punitive damages regardless of the cause thereof (including, without limitation, any such damage caused by the negligence, recklessness or willful misconduct of Landlord or Landlord’s agents, servants and employees); it is hereby understood that Tenant assumes all risk in connection therewith.
ARTICLE 8
COMPLIANCE WITH REQUIREMENTS
8.1 Compliance. Tenant, upon taking possession of the Leased Premises and at all times thereafter during the Term, and at its sole cost and expense, shall (a) comply with all Applicable Laws and Insurance Requirements applicable to the Leased Premises, and (b) maintain and comply with all permits, licenses and other authorizations and approvals required by any governmental authority for its use of the Leased Premises and for the proper operation, maintenance and repair of the same. Landlord will join in the application for any permit or authorization required under Applicable Laws if such joinder is necessary and will cooperate with Tenant in connection therewith.
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8.2 Negative Covenants. Tenant shall not do, or permit to be done, anything in or to the Leased Premises, or bring thereto, or keep anything therein that will, in any way, invalidate or conflict with the fire insurance or public liability insurance policies covering the Leased Premises or any personal property kept therein, or obstruct or interfere with the rights of Landlord, or subject Landlord to any liability for injury to persons or damage to property, or violate any Applicable Laws. All substances used by Tenant in the ordinary course of its business operations (such as cleaning, art or science laboratory supplies) that would otherwise be deemed Hazardous Substances may be kept in the Leased Premises, provided that such substances are used, handled, transported, and stored in strict compliance with applicable Environmental Laws and requirements of the City of Newark and the Education Department.
8.3 Reporting. Tenant shall deliver promptly to Landlord a true and complete photocopy of any correspondence, notice, report, sampling, test, submission, order, complaint, citation or any other instrument, document, agreement and/or information submitted to, or received from, any governmental entity, department or agency in connection with any Applicable Laws relating to or affecting the Leased Premises.
8.4 No Hazardous Substances. Tenant shall not cause or permit any Hazardous Substance to be brought, kept or stored on or about the Leased Premises in violation of Environmental Laws other than substances used in the ordinary course of Tenant’s business operations (such as cleaning, art or science laboratory supplies) and used, handled, transported, and stored in strict compliance with applicable Environmental Laws and requirements of the City of Newark and the Education Department. Tenant shall not engage in, or permit any other person or entity to engage in, any activity, operation or business on or about the Leased Premises which involves the generation, manufacture, refining, transportation, treatment, storage, handling or disposal of Hazardous Substances.
8.5 Spills and Discharges. If a spill or discharge of a Hazardous Substance occurs on the Leased Premises during the Term, Tenant shall, promptly upon obtaining knowledge thereof, give Landlord immediate oral and written notice of such spill and/or discharge, setting forth in reasonable detail all relevant facts. Tenant shall pay all costs and expenses relating to compliance with all applicable Environmental Laws (including, without limitation, the costs and expenses of the site investigations and of the removal and remediation of such Hazardous Substance) arising out of or in connection with any such spill or discharge, except any spill or discharge caused by Landlord, which such spill or discharge shall be remediated by Landlord after giving notice thereof to Tenant.
8.6 Compliance.
(a) If Tenant’s operations at the Leased Premises now or hereafter are subject to the provisions of any Environmental Laws, then Tenant agrees to comply, at its sole cost and expense, with all requirements of such Environmental Laws to the satisfaction of the governmental entity, department or agency having jurisdiction over such matters (including, but not limited to, performing site investigations and performing any removal action and remediation required in connection therewith), in connection with (i) the expiration of the Term or Tenant’s earlier termination of activities in the Leased Premises, (ii) any closure, transfer or consolidation of Tenant’s operations at the Leased Premises, (iii) any change in the ownership or control of
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Tenant, (iv) any permitted assignment of this Lease or permitted sublease of all or part of the Leased Premises, or (v) any other action by Tenant which triggers the application of such Environmental Laws.
(b) Intentionally Omitted.
(c) If in connection with Tenant’s compliance with Environmental Laws Tenant requires any affidavits, certifications or other information within the control of Landlord, Landlord shall cooperate with Tenant and deliver to Tenant without charge all such documents within ten (10) days after receipt of a request by Tenant, provided Landlord shall not be required to sign any document which Landlord reasonably believes contains any information which is untrue or misleading, would subject Landlord to any liability or would subject Landlord to any civil or criminal penalty or fine.
8.7 Sale or Disposition of Fee.
(a) In connection with (i) any sale or other disposition of all or part of Landlord’s interest in the Leased Premises or (ii) any change in the ownership or control of Landlord, or (iii) any other action by Landlord which triggers the applicability of any Environmental Laws, Landlord shall comply, at its sole cost and expense, with all requirements of such Environmental Laws; provided, however, if any site investigation is required as a result of Tenant’s use and occupancy of the Leased Premises or a spill or discharge of a Hazardous Substance caused by the act, negligence or omission of Tenant or its agents, employees, contractors, invitees, or other persons invited by Tenant into the Leased Premises, then Tenant shall pay all costs associated with said site investigation; in addition, if any removal and remediation is required as a result of a spill or discharge of a Hazardous Substance, which occurred during the Term and was not caused by Landlord or any of its employees, agents, representatives or contractors, then Tenant shall pay all costs associated with said removal and remediation. Notwithstanding anything to the contrary contained herein, in connection with any sale of the Leased Premises to Tenant, Tenant shall comply, at its sole cost and expense, with all requirements of any Environmental Laws which may be triggered by such sale.
(b) If, in connection with such compliance, Landlord requires any affidavits, certifications or other information from Tenant, Tenant agrees to cooperate with Landlord and to deliver to Landlord without charge all such documents within ten (10) business days after Tenant’s receipt of said request.
8.8 Testing.
(a) Landlord shall have the right, but not the obligation, upon notice to Tenant, to enter onto the Leased Premises from time to time during the Term for the purpose of conducting such tests and investigations as Landlord deems reasonably necessary to determine whether Tenant is complying with the provisions of this Article 8. If Landlord determines that Tenant is not in compliance with this Article 8, Landlord shall so notify Tenant, setting forth in such notice the basis for Landlord’s determination, and shall provide to Tenant copies of any reports, data and/or other information relating to Landlord’s determination. Within fifteen (15) Business Days after receipt of Landlord’s notice of noncompliance, Tenant shall notify Landlord
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whether it disputes Landlord’s determination. If Tenant so notifies Landlord within said fifteen (15) Business Day period, then Landlord and Tenant, and their respective consultants, shall meet to resolve the dispute. If Tenant fails to notify Landlord of any objection within said fifteen (15) Business Day period, then Tenant shall be deemed to have accepted Landlord’s determination and Tenant shall promptly remedy the noncompliance.
(b) If Tenant is not in compliance with the provisions of this Article 8, Tenant shall pay to Landlord, as Additional Rent, within thirty (30) days after demand, an amount equal to all reasonable costs and expenses incurred by Landlord in connection with the tests and investigations conducted by or on behalf of Landlord.
8.9 Environmental Indemnification. Tenant hereby agrees to defend, indemnify and hold Landlord harmless from and against any and all claims, losses, liability, damages and expenses (including, without limitation, site investigation costs, removal and remediation costs and reasonable attorneys’ fees and disbursements) arising out of or in connection with (i) Tenant’s use and occupancy of the Leased Premises, (ii) any spill or discharge of a Hazardous Substance on or after the Rent Commencement Date or the date on which Landlord gives possession of the Leased Premises to Tenant, whichever is earlier, unless such spill or discharge is caused by Landlord, its agents, servants, employees or contractors, and/or (iii) Tenant’s failure to comply with the provisions of this Article 8.
8.10 Notice to Mortgagees. If Landlord has given to Tenant the name and address of any holder of any Mortgage, Tenant agrees, upon request from Landlord or the holder of the Mortgage, to send to such holder a photocopy of those items given to Landlord pursuant to the provisions of Section 8.3.
8.11 Survival. The provisions of this Article 8 shall survive the expiration or earlier termination of this Lease.
ARTICLE 9
DISCHARGE OF LIENS; PERMITTED CONTESTS
9.1 Discharge of Liens. Tenant will discharge by bond or otherwise within thirty (30) days after receipt of notice thereof any Lien on the Leased Premises or the Base Rent, Additional Rent or any other sums payable under this Lease, caused by or arising out of Tenant’s acts or Tenant’s failure to perform any obligation hereunder.
9.2 Permitted Contests. Tenant may contest by appropriate proceedings, the amount, validity or application of any Applicable Laws with which Tenant is obligated to comply or any Lien which Tenant is obligated to discharge, provided that (a) such proceedings shall suspend or stay the collection thereof, (b) no part of the Leased Premises or of any Base Rent or Additional Rent or other sum payable hereunder would be subject to loss, sale or forfeiture during such proceedings, (c) Landlord would not be subject to any civil or criminal liability for failure to pay or perform, as the case may be, (d) Tenant shall have furnished such security as may be required in the proceedings, (e) such proceedings shall not affect the payment of Base Rent, Additional Rent or any other sum payable to Landlord hereunder or prevent Tenant from using the Leased
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Premises for its intended purposes, and (f) Tenant shall notify Landlord of any such proceedings not less than two (2) days prior to the commencement thereof, and shall describe such proceedings in reasonable detail. Tenant will conduct all such contests in good faith and with due diligence and will, promptly after the determination of such contest, pay and discharge all amounts which shall be finally determined to be payable pursuant thereto.
ARTICLE 10
INSURANCE
10.1 Tenant’s Insurance. Tenant, at its sole cost and expense, from and after the date Tenant is given possession of the Leased Premises, shall keep the Leased Premises insured against each risk to which the Leased Premises may from time to time be subject (including fire, lightning, storm, tempest, explosion, impact, aircraft, riot, civil commotion, bursting or overflowing of water tanks, apparatus or pipes, boiler and machinery coverage against loss or damage by explosion of steam boilers, pressure vessels and similar apparatus now or hereafter installed, flood, labor disturbances, malicious damage, or any other casualty or act of God, vandalism and other risks covered by all-risk insurance; and, if requested by any Mortgagee, earthquake; if the Leased Premises or any portion thereof are located in an area identified as an area having special flood hazards and in which flood insurance has been made available, flood; and loss of rents by reason of such risks) for the benefit of Landlord and any Mortgagee. Such insurance shall be provided in an amount at all times, to the extent available, equal to the greater of 100% of the full replacement value of the Leased Premises or the outstanding principal balance of the Mortgage, and shall be provided for such periods, in such form, with such special endorsements, on such terms and by such companies and against such risks as shall be satisfactory to Landlord and each Mortgagee. Notwithstanding the foregoing, if any Mortgagee determines at any time that any part of the Leased Premises is located in an area identified, on a Flood Hazard Boundary Map or Flood Insurance Rate Map issued by the Federal Emergency Management Agency, as having special flood hazards, Tenant will obtain and maintain a flood insurance policy meeting the requirements of the current guidelines of the Federal Insurance Administration, with a generally acceptable insurance carrier, in an amount satisfactory to such Mortgagee, but in no case less than the lesser of (y) the outstanding principal balance of the Mortgage, or (z) the maximum amount of insurance which is available under the National Flood Insurance Act of 1968, the Flood Disaster Protection Act of 1973 or the National Flood Insurance Reform Act of 1994, as amended. The policy shall also name Mortgagee under a standard noncontributory mortgagee clause. Said policy shall be in an amount to be determined by Mortgagee, which amount shall in no event be less than the outstanding principal balance of the Mortgage or exceed in the aggregate 100 percent (100%) of the completed insurable value of the Leased Premises and shall be sufficient to meet all applicable coinsurance requirements.
10.2 (b) Without limiting the generality of the foregoing, each policy pursuant to which such insurance is provided shall contain a mortgagee clause, in form and substance satisfactory to each Mortgagee, (a) naming Mortgagee as mortgagee and (b) providing that (i) all moneys payable pursuant to such insurance shall be payable to the Mortgagees, (ii) such insurance shall not be affected by any act or neglect of Landlord, Tenant or any Mortgagee, any occupancy, operation or use of the Leased Premises or any portion thereof for purposes more hazardous than permitted by the terms of such policy, any foreclosure or other proceeding or
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notice of sale relating to the Leased Premises or any portion thereof or any change in the title to or ownership of the Leased Premises or any portion thereof and (iii) such policy and such mortgagee clause may not be canceled or amended except upon thirty (30) days’ prior written notice to Landlord and each Mortgagee. Tenant hereby assigns and shall deliver each policy pursuant to which any such insurance is provided to Landlord and any Mortgagee, and Tenant shall further deliver renewals of the each insurance policy to Landlord and all Mortgagees no fewer than thirty (30) days’ prior to the expiration of each then-current policy. The acceptance by Landlord and/or Mortgagees of such policies from Tenant shall not be deemed or construed as an approval by Landlord or any Mortgagee of the form, sufficiency or amount of such insurance. Landlord does not in any way represent that such insurance, whether in scope or coverage or limits of coverage, is adequate or sufficient to protect the business or interest of Tenant. In the event of the foreclosure of any Mortgage by its Mortgagee, or a transfer of title to the Leased Premises in extinguishment of the indebtedness secured by such Mortgage, all right, title and interest of Landlord in and to any such policies then in force shall pass to the purchaser or grantee of the Leased Premises. Tenant agrees that Mortgagees may retain and apply the proceeds of any such insurance in satisfaction or reduction of the indebtedness secured by the Mortgages, whether or not then due and payable, or Mortgagees may pay the same, wholly or in part, to Landlord or Tenant for the repair or replacement of the Leased Premises or for any other purpose satisfactory to Mortgagees, without affecting the liens of the Mortgages or this Lease for the full amount of the indebtedness secured by the Mortgages before the making of such payment.
10.3 Policy Provisions. The policies of fire and insurance with respect to risks from time to time included under the standard extended coverage endorsement required to be maintained by Tenant pursuant to Section 10.1 shall name Landlord and all Mortgagees as the named insureds and loss payees (and, if Landlord or any Mortgagee requests, such Mortgagee shall be named as a mortgagee and loss payee). All other insurance policies required to be maintained by Tenant pursuant to Section 10.1 shall name Landlord, all Mortgagees, and any other party as Landlord or any Mortgagee shall request, as an additional insured and shall also include a contractual liability endorsement evidencing coverage of Tenant’s obligation to indemnify Landlord pursuant to Section 7.1. Any general liability policy shall also name the NJEDA as an additional insured. All insurance policies required to be maintained by Tenant shall be reasonably satisfactory to Landlord and such Mortgagees and shall provide that (a) thirty (30) days’ prior written notice of suspension, cancellation, termination, modification, non-renewal or lapse or material change of coverage shall be given to Landlord and (b) such insurance shall not be invalidated by any change in the title or ownership of the Leased Premises.
10.4 Evidence of Insurance. Prior to the Effective Date, Tenant shall deliver to Landlord original or duplicate policies or certificates of the insurers evidencing all the insurance which is required to be maintained hereunder by Tenant, and, at least ten (10) days prior to the expiration of any such insurance, other original or duplicate policies or certificates evidencing the renewal of such insurance. If Tenant delivers certificates, such certificates shall be in form reasonably satisfactory to Landlord and Mortgagee. Notwithstanding the foregoing, in the case of the fire and extended risks coverage required to be maintained pursuant to Section 10.1, Tenant shall deliver original policies (as opposed to duplicate policies or certificates).
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10.5 Waivers. Landlord hereby waives and releases Tenant, and Tenant hereby waives and releases Landlord, from any and all liabilities, claims and losses for which the released party is or may be held liable to the extent of any insurance proceeds received by said injured party. Each party agrees to have included in each casualty and liability insurance policy maintained in connection with the Leased Premises or any property belonging to it or others in the Leased Premises a waiver of the insurer’s right of subrogation against the other.
ARTICLE 11
ESTOPPEL CERTIFICATES
11.1 Estoppel Certificates. At any time and from time to time, upon not less than fifteen (15) days’ prior notice, each party shall execute, acknowledge and deliver to the other a statement, prepared by Landlord, certifying the following: (i) the Effective Date and the Rent Commencement Date, (ii) the expiration date of the Term, (iii) the date(s) of any amendment(s) and/or modification(s) to this Lease, (iv) that this Lease was properly executed and is in full force and effect without amendment or modification, or, alternatively, that this Lease and all amendments and/or modifications thereto have been properly executed and are in full force and effect, (v) the current annual Base Rent, the current monthly installments of Base Rent and the date on which Tenant’s obligation to pay Base Rent commenced, (vi) the date through which Base Rent and Additional Rent have been paid, (vii) that, to the best of such party’s knowledge, neither party to this Lease is in default in the keeping, observance or performance of any covenant, agreement, provision or condition contained in this Lease and no event has occurred which, with the giving of notice or the passage of time, or both, would result in a default by either party, except as specifically provided in this Lease or in the estoppel certificate, (viii) that, in the case of Tenant, Tenant has no existing defenses, offsets, liens, claims or credits against the Base Rent or Additional Rent or against enforcement of this Lease by Landlord, except as specifically provided in the estoppel certificate, (ix) that Tenant has not been granted any options or rights of first refusal to extend the Term or to terminate this Lease before the expiration date or to purchase the Leased Premises, except as specifically provided in the estoppel certificate, (x) that, in the case of Tenant, Tenant has not received any notice of violation of Applicable Laws or Insurance Requirements relating to the Leased Premises, except as specifically provided in the estoppel certificate, (xi) that, in the case of Tenant, Tenant has not assigned this Lease or sublet all or any portion of the Leased Premises, except as specifically provided in the estoppel certificate, (xii) that, in the case of Tenant, no Hazardous Substances have been generated, manufactured, refined, transported, treated, stored, handled, disposed or spilled on or about the Leased Premises, except as and to the extent specifically permitted pursuant to Article 8 hereof and as provided in the estoppel certificate, and (xiii) such other reasonable matters as the party requesting the certificate may request. Tenant hereby acknowledges and agrees that such statement may be relied upon by any Mortgagee, or any prospective purchaser, Mortgagee or assignee of any Mortgage, of the Leased Premises or any part thereof.
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ARTICLE 12
ASSIGNMENT AND SUBLETTING
12.1 Consent Required. Except as otherwise expressly provided in this Article 12, Tenant shall not sell, assign, transfer, hypothecate, mortgage or encumber this Lease, by operation of law or otherwise, without the prior written consent of Landlord, which consent may be withheld in Landlord’s sole discretion. Any consent granted by Landlord in any instance shall not be construed to constitute consent with respect to any other instance or request. If the Leased Premises or any part thereof should be sublet, used, or occupied by anyone other than Tenant, or if this Lease should be assigned by Tenant, Landlord shall have the right to collect rent from the assignee, subtenant, user or occupant, but no such assignment, subletting, use, occupancy or collection shall be deemed a waiver of any of Landlord’s rights under the provisions of this Section 12.1, a waiver of any of Tenant’s covenants contained in this Article 12, the acceptance of the assignee, subtenant, user or occupant as tenant, or a release of Tenant from further performance by Tenant of Tenant’s obligations under the Lease.
12.2 Tenant’s Notice. If Tenant shall desire to assign this Lease, it shall first submit to Landlord a written notice (“Tenant’s Notice”) setting forth in reasonable detail:
(a) the name and address of the proposed assignee;
(b) the terms and conditions of the proposed assignment (including the proposed effective date of the assignment, which shall be at least thirty (30) days after Tenant’s Notice is given);
(c) the nature and character of the business of the proposed assignee;
(d) banking, financial, and other credit information relating to the proposed assignee, in reasonably sufficient detail, to enable Landlord to determine the proposed assignee’s financial responsibility; and
(e) if required by Landlord or Mortgagee, an opinion from a nationally recognized bond counsel firm that such assignment shall not affect the tax-exempt status of the Bonds.
12.3 Landlord’s Response. Within thirty (30) days after Landlord’s receipt of Tenant’s Notice, Landlord agrees that it shall notify Tenant whether Landlord (i) consents to the proposed assignment, or (ii) does not consent to the proposed assignment. Landlord’s failure to respond within such thirty day period shall not constitute Landlord’s consent to the proposed assignment.
12.4 Defaults. No assignment or sublease shall be permitted if, at the effective date of such assignment or sublease, Tenant is in default under this Lease.
12.5 Additional Requirements for Subleases. In addition to the foregoing requirements, any sublease must contain the following provisions:
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(i) the sublease shall be subject and subordinate to all of the terms and conditions of this Lease;
(ii) at Landlord’s option, in the event of cancellation or termination of this Lease for any reason or the surrender of this Lease, whether voluntarily, involuntarily, or by operation of law, prior to the expiration of such sublease, including extensions and renewals of such sublease, the subtenant shall make full and complete attornment to Landlord for the balance of the term of the sublease. The attornment shall be evidenced by an agreement in form and substance satisfactory to Landlord which the subtenant shall execute and deliver at any time within five (5) days after request by Landlord or its successors and assigns;
(iii) the term of the sublease shall not extend beyond a date which is one day prior to the expiration date of the Term;
(iv) no subtenant shall be permitted to further sublet all or any portion of the subleased space or to assign its sublease without Landlord’s prior written consent; and
(v) the subtenant shall waive the provisions of any law now or subsequently in effect which may give the subtenant any right of election to terminate the sublease or to surrender possession of the space subleased in the event that any proceeding is brought by Landlord to terminate this Lease.
12.6 Deemed Assignments. Each of the following events shall be deemed to constitute an assignment of this Lease and each shall require the prior written consent of Landlord:
(i) any assignment or transfer of this Lease by operation of law; or
(ii) any hypothecation, pledge, or collateral assignment of this Lease;
(iii) any involuntary assignment or transfer of this Lease in connection with bankruptcy, insolvency, receivership, or similar proceeding; or
(iv) any assignment, transfer, disposition, sale or acquisition of a controlling interest in Tenant to or by any person, entity, or group of related persons or affiliated entities, whether in a single transaction or in a series of related or unrelated transactions.
12.7 Assumption Agreement. It is a further condition to the effectiveness of any assignment otherwise complying with this Article 12 that the assignee execute, acknowledge, and deliver to Landlord an agreement in form and substance satisfactory to Landlord whereby the assignee assumes all of the obligations of Tenant under this Lease and agrees that the provisions of this Article 12 shall continue to be binding upon it with respect to all future assignments and deemed assignments of this Lease.
12.8 No Release. No assignment of this Lease nor any sublease of all or any portion of the Leased Premises shall release or discharge Tenant from any liability, whether past, present, or future, under this Lease and Tenant shall continue to remain primarily liable under this Lease.
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12.9 Permits and Approvals; Costs. Tenant shall be responsible for obtaining all permits and approvals required by any governmental or quasi-governmental agency in connection with any assignment of this Lease or any subletting of the Leased Premises, and Tenant shall deliver copies of these documents to Landlord prior to the commencement of any work, if work is to be done.
12.10 Failure to Consummate. If Landlord consents to any proposed assignment and Tenant fails to consummate the assignment to which Landlord consented within ninety (90) days after the giving of such consent, Tenant shall be required again to comply with all of the provisions and conditions of this Article 12 before assigning this Lease. If Tenant consummates the assignment to which Landlord consented within said ninety (90) day period, Tenant agrees that it shall deliver to Landlord a fully executed, duplicate original counterpart of the assignment agreement within ten (10) days of the date of execution of such item.
12.11 Landlord’s Liability. Tenant agrees that under no circumstances shall Landlord be liable in damages or subject to liability by reason of Landlord’s failure or refusal to grant its consent to any proposed assignment of this Lease or subletting of the Leased Premises. Nothing contained herein shall prevent Tenant from seeking equitable relief if Tenant believes that Landlord has unreasonably withheld its consent to a proposed assignment or subletting.
12.12 Indemnification. If Landlord withholds its consent to any proposed assignment, Tenant shall defend, indemnify, and hold Landlord harmless from and reimburse Landlord for all liability, damages, costs, fees, expenses, penalties, and charges (including, but not limited to, reasonable attorneys’ fees and disbursements) arising out of any claims that may be made against Landlord by any brokers or other persons claiming a commission or similar compensation in connection with the proposed assignment.
12.13 Bankruptcy.
(a) Notwithstanding anything to the contrary contained in this Lease, in the event that this Lease is assigned to any person or entity pursuant to the provisions of the Bankruptcy Code, any and all monies or other consideration payable or otherwise to be delivered in connection with such assignment shall be paid or delivered to Landlord, shall be and remain the exclusive property of Landlord and shall not constitute property of Tenant or of the estate of Tenant within the meaning of the Bankruptcy Code. Any and all monies or other consideration constituting Landlord’s property under the preceding sentence not paid or delivered to Landlord shall be held in trust for the benefit of Landlord and be promptly paid to or turned over to Landlord.
(b) If Tenant proposes to assign this Lease pursuant to the provisions of the Bankruptcy Code to any person or entity who shall have made a bona fide offer to accept an assignment of this Lease on terms acceptable to Tenant, then notice of such proposed assignment setting forth (i) the name and address of such person or entity, (ii) all of the terms and conditions of such offer, and (iii) the adequate assurance to be provided by Tenant to assure such person’s or entity’s future performance under this Lease, including, without limitation, the assurance referred to in Section 365(b)(3) of the Bankruptcy Code, or any such successor or substitute legislation or rule thereto, shall be given to Landlord by Tenant no later than twenty (20) days after receipt by
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Tenant, but in any event no later than ten (10) days prior to the date that Tenant shall make application to a court of competent jurisdiction for authority and approval to enter into such assignment and assumption. Landlord shall thereupon have the prior right and option, to be exercised by notice to Tenant given at any time prior to the effective date of such proposed assignment, to accept an assignment of this Lease upon the same terms and conditions and for the same consideration, if any, as the bona fide offer made by such person for the assignment of this Lease. Any person or entity to which this Lease is assigned pursuant to the provisions of the Bankruptcy Code shall be deemed without further act or deed to have assumed all of the obligations arising under this Lease on or after the date of such assignment. Any such assignee shall, upon demand, execute and deliver to Landlord an instrument confirming such assumption.
ARTICLE 13
CASUALTY/CONDEMNATION
13.1 Awards. Tenant hereby assigns to Landlord any award or payment on account of any Taking that is payable to Tenant. Any such award or payment which is assigned to Landlord and any insurance proceeds received in connection with any damage to or destruction of the Leased Premises shall be deposited with Manufacturers and Traders Trust Company, as Trustee under the Indenture and applied in accordance with the terms of the Indenture. Landlord shall have the right to participate fully in any proceedings or negotiations in connection with any Taking, and Tenant will pay all costs, fees and expenses incurred in connection with any Taking. All amounts paid pursuant to an agreement with a condemning authority in connection with any Taking shall be deemed to constitute an award on account of such Taking. Landlord and Tenant agree that this Lease shall control the rights of Landlord and Tenant in any such award, and any contrary provision of any present or future law is hereby waived.
13.2 Termination Rights.
(a) In the event of a permanent Taking of the whole of the Leased Premises, then the Term of this Lease shall cease and terminate as of the date when possession is taken by the condemning authority and all Base Rent and Additional Rent shall be paid up to that date.
(b) In the event of a permanent Taking of fifty percent (50%) or more of the Leased premises, then Tenant may at any time either prior to or within a period of sixty (60) days after the date when possession of such premises shall be acquired by the condemning authority, elect to terminate this Lease and all Base Rent and Additional Rent shall be paid up to the date of such termination.
(c) Tenant shall have no right to terminate this Lease, and Tenant’s obligations hereunder (including, without limitation, its obligations to pay all Base Rent and Additional Rent without abatement) shall not be affected in any manner, in the event of any damage to or destruction of the Leased Premises. Except as expressly set forth in this Section 13.2, Tenant shall have no right to terminate this Lease, and Tenant’s obligations hereunder (including, without limitation, its obligation to pay all Base Rent and Additional Rent without abatement) shall not be affected in any manner, in the event of any Taking.
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13.3 Notice; Restoration. If any Casualty occurs to the Leased Premises or any proceedings or negotiations are instituted which do or may result in a Taking, Tenant shall promptly give notice thereof to Landlord, describing the nature and extent thereof. Except for Tenant’s right to terminate the Lease on account of a Taking pursuant to Section 13.2, this Lease shall remain in full force and effect after any such Casualty or Taking, and, except to the extent that Landlord is required to repair and restore the Leased Premises, Tenant shall promptly commence and complete Restoration of the Leased Premises, regardless of the availability or sufficiency of any Net Award. In the case of a Taking for temporary use, Tenant shall not be required to effect Restoration until such Taking shall have terminated.
13.4 Distribution of Net Award.
(a) If there is no continuing Event of Default, Landlord shall pay or make reimbursement for the cost and expense of Restoration from and to the extent of the Net Award received by Landlord. Any such payments or reimbursements shall be made to Tenant, or as Tenant may direct, in an amount not more than the excess of the total amounts actually incurred in connection with such Restoration over the amounts previously paid or reimbursed. Such payments or reimbursements shall be made from time to time but not more than once in any period of thirty (30) calendar days, upon receipt by Landlord of a request therefor, signed by the Chairperson or any Vice Chairperson of Tenant, certifying in reasonable detail as to the satisfaction of the conditions for such payment or reimbursement and specifying the persons to whom such amounts are to be paid. After completion of Restoration, any balance of the Net Award remaining after all such payments and reimbursements shall belong to Landlord. If the cost of Restoration exceeds the amount of the Net Award, the deficiency shall be paid by Tenant. If no Restoration is required hereunder, the entire Net Award shall be payable to Landlord, except as expressly set forth in Section 13.4(b). If this Lease is terminated pursuant to Section 13.2, the entire Net Award shall be payable to Landlord.
(b) If there is no continuing Event of Default any Net Award received by Landlord as compensation for a Taking of temporary use or occupancy during the Term of this Lease shall be paid over currently to Tenant, except that (i) any portion of such Net Award allocable to a period after the expiration or earlier termination of this Lease shall become the property of Landlord and shall be paid to Landlord, and (ii) any portion of such Net Award which is received as the result of a Casualty shall be applied as provided in Section 13.4(a).
ARTICLE 14
MAINTENANCE AND FINANCIAL COVENANTS
14.1 Maintenance Covenants. (a) Tenant covenants that it will conduct and maintain its operations and will (i) collect revenue from any sources such that in each Fiscal Year the Coverage Ratio is 100%, provided that compliance with the requirements of this clause (i) of subsection (a) may be subject to statutory, governmental, judicial and/or administrative limitations on the ability of Tenant to collect such revenue and (ii) maintain as of June 30 of each
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Fiscal Year Unrestricted Liquid Assets of at least 7% of total Operating Expenses for such Fiscal Year.
(b) If Tenant has not met the requirements of (a)(i) or (ii) above as of the end of any Fiscal Year, then Tenant shall promptly retain a Consultant. Such Consultant shall promptly (in no event more than sixty (60) days after such appointment) deliver to Tenant a report setting forth in detail the reasons for the Tenant’s noncompliance with the requirements of paragraph (a) above, and making recommendations with respect to the operation and management of Tenant which in such Consultant’s judgment will enable the Tenant to comply with such requirements at the earliest practicable time (unless such Consultant reasonably concludes that noncompliance with such requirements is principally due to factors wholly outside the control of Tenant).
(c) Tenant shall promptly implement such recommendations. Within thirty (30) days of receipt of such Consultant’s report, Tenant shall deliver to Landlord and Trustee:
1. a certified copy of a resolution adopted by Tenant accepting such report and agreeing to implement the recommendations, if any, of such Consultant; and
2. a report setting forth in reasonable detail the steps Tenant proposes to take in order to implement the recommendations of such Consultant and achieve compliance with the requirements of paragraph (a) above.
(d) The Tenant shall be deemed to be in compliance with paragraph (a) hereof, so long as there has been compliance with the requirements of paragraphs (b) and (c) above and the recommendations, if any, of the Consultant are being followed.
(e) Pursuant to the Support Agreement, the Trustee shall provide FOTA with notice if any Base Rent payments are not received by the Trustee when due. FOTA has covenanted to transfer to the Trustee for deposit to the Debt Service Fund (as defined in the Indenture) such sums as are sufficient to ensure that on each Bond payment date, the amount of funds on deposit in the Debt Service Fund is sufficient to pay the principal of, or interest on the Bonds due on such date.
14.2 Financial Covenants. Other than with respect to approximately $420,000 in annual obligations contemplated with respect to the lease of the facility located at 129 Littleton Avenue (net of anticipated subsidies), Tenant shall not enter into any additional payment obligations (“Additional Obligations”) except as set forth in this Section 14.2. Provided no Event of Default under this Lease shall have occurred and be continuing:
(a) Tenant may incur Additional Obligations, provided that prior to incurring such Additional Obligations, Tenant delivers to Landlord and to the Trustee a certificate stating (1) that Tenant has determined, in consultation with an investment banker or other qualified consultant or as a result of a review or evaluation by a Rating Agency (defined below), that the incurrence of such Additional Obligations is not reasonably expected to result in (A) any then-current rating on the Bonds being maintained by Standard & Poor’s Rating Agency (“S&P”), Moody’s Investors Service (“Moody’s”) or Fitch Ratings (“Fitch”) (each, a “Rating Agency”) or (B) the then-current rating being maintained by any Rating Agency on any outstanding bonds of Tenant, Landlord or FOTA, being downgraded to below the lower of (x) investment grade
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(“BBB-” by S&P or Fitch or “Baa3” by Moody’s), without regard to any “outlook” or similar qualifier or (y) the then-current rating on the Bonds or any outstanding bonds of Tenant, Landlord or FOTA (including any assigned "outlook") and (2) Landlord would not be in violation of, or otherwise unable to meet, the Coverage Ratio requirement set forth in Section 6.21 of the Loan Agreement as a result of Tenant entering into such Additional Obligations.
(b) Tenant may incur short-term indebtedness (indebtedness with a maximum maturity of 365 days) (the “Short-Term Indebtedness”) in a cumulative maximum amount not to exceed 20% of total unrestricted revenues for the prior Fiscal Year; provided that any such Short-Term Indebtedness must, for a period of 14 consecutive days during each Fiscal Year, be reduced to $0; provided further, that such “clean-down” requirement shall be waived upon presentation of a Certificate of Tenant to Landlord and to the Trustee that the Short-Term Indebtedness cannot be paid down a result of delays in the receipt of public funds.
ARTICLE 15
EVENTS OF DEFAULT
15.1 Events of Default. Any of the following occurrences, conditions or acts shall constitute an “Event of Default” under this Lease:
(a) If Tenant shall fail to make any payment when due of any Base Rent, Additional Rent or other amount payable by Tenant hereunder within five (5) days of the date such payment is due and such payment is not made by FOTA pursuant to the Support Agreement within ten (10) days of the date such payment is due hereunder; or
(b) if Tenant shall file a petition in bankruptcy pursuant to the Bankruptcy Code or under any similar federal or state law, or shall be adjudicated a bankrupt or become insolvent, or shall commit any act of bankruptcy as defined in any such law, or shall take any action in furtherance of any of the foregoing; or
(c) if a petition or answer shall be filed proposing the adjudication of Tenant as a bankrupt pursuant to the Bankruptcy Code or any similar federal or state law, and (i) Tenant shall consent to the filing thereof, or (ii) such petition or answer shall not be discharged or denied within thirty (30) days after the filing thereof; or
(d) if a receiver, trustee or liquidator (or other similar official) of Tenant or of all or substantially all of its business or assets or of the estate or interest of Tenant in the Leased Premises shall be appointed and shall not be discharged within thirty (30) days thereafter or if Tenant shall consent to or acquiesce in such appointment; or
(e) if the estate or interest of Tenant in the Leased Premises shall be levied upon or attached in any proceeding and such process shall not be vacated or discharged within thirty (30) days after such levy or attachment; or
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(f) if Tenant fails to maintain the insurance required pursuant to Article 10, or Tenant fails to deliver to Landlord the insurance certificates required by Article 10 within the time periods set forth in Section 10.3; or
(g) if Tenant fails to take all actions necessary to renew Tenant’s Charter, and such failure is not cured within thirty (30) days after Landlord shall have given notice to Tenant of such default;
(h) if Tenant’s Charter shall be revoked, denied renewal, or surrendered; or
(i) if Tenant shall default in the observance or performance of any other provision of this Lease and such default shall continue for thirty (30) days after Landlord shall have given notice to Tenant specifying such default and demanding that the same be cured (unless such default cannot be cured by the payment of money and cannot with due diligence be wholly cured within such period of thirty (30) days, in which case Tenant shall have such longer period as shall be necessary to cure the default, so long as Tenant promptly commences to cure the same within such thirty (30) day period, prosecutes the cure to completion with due diligence and promptly advises Landlord from time to time, on Landlord’s request, of the actions which Tenant is taking and the progress being made).
ARTICLE 16
CONDITIONAL LIMITATIONS; REMEDIES
16.1 Conditional Limitations. This Lease and the Term and estate hereby granted are subject to the limitation that whenever an Event of Default shall have occurred and be continuing, Landlord shall have the right, at its election, then or thereafter while any such Event of Default shall continue and notwithstanding the fact that Landlord may have some other remedy hereunder or at law or in equity, to give Tenant written notice of Landlord’s intention to terminate this Lease on a date specified in such notice, which date shall be not less than five (5) days after the giving of such notice, and upon the date so specified, this Lease and the estate hereby granted shall expire and terminate with the same force and effect as if the date specified in such notice were the date hereinbefore fixed for the expiration of this Lease, and all right of Tenant hereunder shall expire and terminate, and Tenant shall be liable as hereinafter provided in this Article 16. If any such notice is given, Landlord shall have, on such date so specified, the right of re-entry and possession of the Leased Premises and the right to remove all persons and property therefrom and to store such property in a warehouse or elsewhere at the risk and expense, and for the account, of Tenant. Should Landlord elect to re-enter as herein provided or should Landlord take possession pursuant to legal proceedings or pursuant to any notice provided for by law, Landlord may from time to time re-let the Leased Premises or any part thereof for such term or terms and at such rental or rentals and upon such terms and conditions as Landlord may deem advisable, with the right to make commercially reasonable alterations in and repairs to the Leased Premises.
16.2 Remedies. In the event of any termination of this Lease as provided in this Article 16 or as required or permitted by law, Tenant shall forthwith quit and surrender the Leased
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Premises to Landlord, and Landlord may, without further notice, enter upon, re-enter, possess and repossess the same by summary proceedings, ejectment or otherwise, and again have, repossess and enjoy the same as if this Lease had not been made, and in any such event neither Tenant nor any person claiming through or under Tenant by virtue of any law or an order of any court shall be entitled to possession or to remain in possession of the Leased Premises but shall forthwith quit and surrender the Leased Premises. Landlord, at its option, notwithstanding any other provision of this Lease, shall be entitled to recover from Tenant, as and for liquidated damages, the sum of:
(a) all Base Rent, Additional Rent and other amounts payable by Tenant hereunder then due or accrued and unpaid, and
(b) all other damages and expenses (including attorneys’ fees and expenses), if any, which Landlord shall have sustained by reason of the breach of any provision of this Lease.
16.3 No Limitation on Remedies in Bankruptcy. Nothing herein contained shall limit or prejudice the right of Landlord, in any bankruptcy or insolvency proceeding, to prove for and obtain as liquidated damages by reason of such termination an amount equal to the maximum allowed by any bankruptcy or insolvency proceedings, or to prove for and obtain as liquidated damages by reason of such termination, an amount equal to the maximum allowed by any statute or rule of law whether such amount shall be greater or less than the excess referred to above.
16.4 No Waiver of Indemnification. Nothing in this Article 16 shall be deemed to affect the right of Landlord to indemnification pursuant to this Lease.
16.5 Surrender. If Landlord terminates this Lease upon the occurrence of an Event of Default, Tenant will quit and surrender the Leased Premises to Landlord or its agents, and Landlord may without further notice enter upon, re-enter and repossess the Leased Premises by summary proceedings, ejectment or otherwise. The words “enter,” “re-enter,” and “reentry” are not restricted to their technical legal meanings.
16.6 Costs and Expenses. If either party shall be in default in the observance or performance of any provision of this Lease, and an action shall be brought for the enforcement thereof in which it shall be determined that such party was in default, the party in default shall pay to the other all fees, costs and other expenses which may become payable as a result thereof or in connection therewith, including reasonable attorneys’ fees and expenses.
16.7 Additional Rights. If Tenant shall default in the keeping, observance or performance of any covenant, agreement, term, provision or condition herein contained, Landlord, without thereby waiving such default, may perform the same for the account and at the expense of Tenant. Tenant shall pay to Landlord, within ten (10) days after demand and as Additional Rent, all reasonable costs and expenses incurred by Landlord in connection with any such performance by it for the account of Tenant and also all costs and expenses, including attorneys’ fees and disbursements incurred by Landlord in any action or proceeding (including any summary dispossess proceeding) brought by Landlord to enforce any obligation of Tenant under this Lease and/or right of Landlord in or to the Leased Premises.
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16.8 Non-Exclusive Remedies of Landlord. Except as otherwise provided in this Article 16, no right or remedy herein conferred upon or reserved to Landlord is intended to be exclusive of any other right or remedy, and every right and remedy shall be cumulative and in addition to any other legal or equitable right or remedy given hereunder, or now or hereafter existing. No waiver by Landlord of any provision of this Lease shall be deemed to have been made unless expressly so made in writing. Landlord shall be entitled, to the extent permitted by law, to seek injunctive relief in case of the violation, or attempted or threatened violation, of any provision of this Lease, or to seek a decree compelling observance or performance of any provision of this Lease, or to seek any other legal or equitable remedy.
ARTICLE 17
SUBORDINATION
17.1 Subordination. This Lease and the Term and estate hereby granted are and shall be subject and subordinate to the lien of each Mortgage which may now or at any time hereafter affect all or any portion of the Leased Premises or Landlord’s interest in the Leased Premises and to any underlying lease which may now or at any time hereafter affect all or any portion of the Leased Premises (any such Mortgage or underlying lease is hereafter referred to as an “Underlying Encumbrance”). The foregoing provisions for the subordination of this Lease and the Term and estate hereby granted to an Underlying Encumbrance shall be self-operative and no further instrument shall be required to effect any such subordination; provided, however, at any time and from time to time, upon not less than ten (10) days prior notice by Landlord, Tenant shall execute, acknowledge and deliver to Landlord any and all reasonable instruments that may be necessary or proper to effect such subordination or to confirm or evidence the same.
17.2 Effect of Transfers; Attornment.
(a) If all or any portion of Landlord’s estate in the Leased Premises shall be sold or conveyed to any person, firm or corporation (each a “Transferee”) upon the exercise of any remedy provided for in any Underlying Encumbrance or by law or equity, at the Transferee’s option, Tenant shall be bound to the Transferee under all the terms, covenants and conditions of this Lease, except as provided in subparagraph (b), for the balance of the term thereof remaining, with the same force and effect as if the Transferee were Landlord. Upon request of the Transferee, Tenant hereby agrees in such event to (i) recognize the Transferee and its successors and assigns as Landlord under this Lease and shall attorn to and accept the Transferee as its landlord under this Lease, (ii) affirm its obligations under this Lease, and (iii) make payments of all sums thereafter becoming due under this Lease to the Transferee. Said attornment, affirmation and agreement is to be effective and self-operative without the execution of any further instruments upon the Transferee succeeding to the interests of Landlord under this Lease.
(b) If all or any portion of Landlord’s estate in the Leased Premises shall be sold or conveyed to a Transferee, such Transferee (i) shall not be liable for any act or omission of Landlord under this Lease occurring prior to such sale or conveyance, (ii) shall not be subject to any offset, defense or counterclaim accruing prior to such sale or conveyance, except to the extent that any Transferee shall seek to enforce an obligation
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to pay rent which accrued prior to such sale or conveyance, (iii) shall not be bound by any payment prior to such sale or conveyance of Base Rent, Additional Rent or other payments for more than one month in advance (except prepayments in the nature of security for the performance by Tenant of its obligations hereunder), and (iv) shall be liable for the keeping, observance and performance of the other covenants, agreements, terms, provisions and conditions to be kept, observed and performed by Landlord under this Lease only during the period such person, firm or corporation shall hold such interest.
17.3 Rights of Holders of Underlying Encumbrance. In the event of an act or omission by Landlord which would give Tenant the right to terminate this Lease or to claim a partial or total eviction, Tenant will not exercise any such right until it has given written notice of such act or omission to the holder of any Underlying Encumbrance whose name and address shall previously have been furnished to Tenant in writing, by sending such notice of such act, omission or damage addressed to such holder at said address or if such holder hereafter furnishes another address to Tenant in writing at the last address of such holder so furnished to Tenant, and, unless otherwise provided herein, until a reasonable period for remedying such act, omission or damage shall have elapsed following such giving of such notice, provided any such holder, with reasonable diligence, shall, following the giving of such notice, have commenced and continued to remedy such act, omission or damage or to cause the same to be remedied.
17.4 Modifications. If, in connection with obtaining financing for the Leased Premises or refinancing any Mortgage encumbering the Leased Premises, the prospective lender, including any Bondholder, requests reasonable modifications to this Lease as a condition precedent to such financing or refinancing, then Tenant hereby covenants and agrees not to unreasonably withhold, delay or condition its consent to such modifications, provided such modifications do not increase the Base Rent or Additional Rent, do not reduce the length of the Term, do not materially and adversely affect the leasehold interest created by this Lease and do not materially and adversely affect the manner in which Tenant’s operations are conducted at the Leased Premises.
ARTICLE 18
REMOVAL OF PERSONAL PROPERTY
18.1 Removal. Upon the expiration or earlier termination of this Lease, Tenant shall surrender the Leased Premises to Landlord in the same condition as is required to be maintained under Article 5 of this Lease with the building situated on the Leased Premises being broom clean. Any personal property which shall remain in any part of the Leased Premises after the expiration or earlier termination of this Lease shall be deemed to have been abandoned, and either may be retained by Landlord as its property, or may be disposed of in such manner as Landlord may see fit, at Tenant’s expense; provided, however, that, notwithstanding the foregoing, Tenant will, upon request of Landlord made not later than ten (10) days after the expiration or earlier termination of this Lease, promptly remove from the Leased Premises any such personal property, at Tenant’s expense.
18.2 Holding Over. If Tenant holds over possession of the Leased Premises beyond the expiration or earlier termination of this Lease, such holding over shall not be deemed to
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extend the Term or renew this Lease but such holding over shall be deemed a month-to-month tenancy and shall continue upon the terms, covenants and conditions of this Lease except as to the duration of the Term, and except that that Tenant agrees that the charge for use and occupancy of the Leased Premises for each calendar month or portion thereof that Tenant holds over (even if such part shall be one day) shall be a liquidated sum equal to one-twelfth (1/12th) of (a) one hundred twenty-five percent (125%) of the Base Rent and (b) one hundred percent (100%) of the Additional Rent required to be paid by Tenant during the calendar year preceding the termination date. The parties recognize and agree that the damage to Landlord resulting from any failure by Tenant to timely surrender possession of the Leased Premises will be extremely substantial, will exceed the amount of the monthly Base Rent and Additional Rent payable hereunder and will be impossible to accurately measure. If the Leased Premises are not surrendered upon the expiration of this Lease, Tenant shall indemnify, defend and hold harmless Landlord against any and all losses and liabilities resulting therefrom, including, without limitation, any claims made by any succeeding tenant founded upon such delay. Nothing contained in this Lease shall be construed as a consent by Landlord to the occupancy or possession by Tenant of the Leased Premises beyond the termination date, and Landlord, upon said termination date, shall be entitled to the benefit of all legal remedies that now may be in force or may be hereafter enacted relating to the immediate repossession of the Leased Premises. The provisions of this Article 18 shall survive the expiration or sooner termination of this Lease.
ARTICLE 19
MISCELLANEOUS
19.1 Brokers. Each party represents to the other that it has not dealt with any real estate broker or sales representative in connection with this transaction. Each party agrees to indemnify and hold harmless the other from and against any threatened or asserted claims, liabilities, losses or judgments (including reasonable attorneys’ fees and disbursements) by any broker or sales representative claiming to have dealt with it in connection with this transaction. The provisions of this Section 19.1 shall survive the expiration or sooner termination of this Lease.
19.2 Notices. Any report, demand, notice or other communication required or permitted to be given hereunder shall be in writing, and shall be delivered personally, by recognized overnight national courier (such as Federal Express) for next business day delivery, or shall be sent by certified or registered mail, return receipt requested, first-class postage prepaid to the parties at the addresses set forth below (or to such other addresses as the parties may specify by due notice to the other):
To Landlord:
Ashland School, Inc. 60 Park Place, Suite 802 Newark, New Jersey 07112 Attn: Jordan Metzger, President
To Tenant:
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The TEAM Academy Charter School, Inc. 60 Park Place, Suite 802 Newark, New Jersey 07112 Attn: Board President
Any notice delivered to a party’s designated address by (a) personal delivery, (b) recognized overnight national courier service, or (c) registered or certified mail, return receipt requested, shall be deemed to have been received by such party at the time the notice is delivered to such party’s designated address. Confirmation by the courier delivering any notice given pursuant to this Section 19.2 shall be conclusive evidence of receipt of such notice. Each party hereby agrees that it will not refuse or reject delivery of any notice given hereunder, that it will acknowledge, in writing, receipt of the same upon request by any other party and that any notice rejected or refused by it shall be deemed for all purposes of this Lease to have been received by the rejecting party on the date so refused or rejected, as conclusively established by the records of the U.S. Postal Service or the courier service. Any notice given by an attorney or a party shall be effective for all purposes.
19.3 Nature of Landlord’s Obligations. Anything in the Lease to the contrary notwithstanding, no recourse or relief shall be had under any rule of law, statute or constitution or by any enforcement of any assessments or penalties, or otherwise or based on or in respect of this Lease (whether by breach of any obligation, monetary or non-monetary) against Landlord or any member, partner, joint venturer, shareholder or other person or entity having an ownership interest in Landlord, it being expressly understood that all obligations of Landlord under or relating to this Lease are solely obligations payable out of the Leased Premises and are compensable solely therefrom. It is expressly understood that all such liability is and is being expressly waived and released as a condition of and as a condition for the execution of this Lease, and Tenant expressly waives and releases all such liability as a condition of, and as a consideration for, the execution of this Lease by Landlord. Tenant shall look solely to Landlord’s equity in the Leased Premises to satisfy any liability of Landlord hereunder.
19.4 Right of Entry. Tenant shall permit Landlord, its agents, servants, employees and contractors, any prospective purchaser, and any present or prospective mortgagee and their representatives, upon twenty four (24) hours advance notice, to enter the Leased Premises from time to time upon reasonable advance notice to Tenant, and during the last eighteen (18) months of the Term shall permit Landlord to show the Leased Premises to prospective tenants, in each case, accompanied by a representative of Tenant.
19.5 Accord and Satisfaction. The receipt by Landlord of any installment of Base Rent or of any Additional Rent with knowledge of a default by Tenant under the terms and conditions of this Lease shall not be deemed a waiver of such default. No payment by Tenant or receipt by Landlord of a lesser amount than the rent herein stipulated shall be deemed to be other than on account of the earliest stipulated rent, nor shall any endorsement or statement on any check or any letter accompanying any check or payment of rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such rent or pursue any other remedy in this Lease provided.
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19.6 Modifications; Amendments; Waivers. This Lease may not be amended, modified or terminated, nor may any obligation hereunder be waived orally, and no such amendment, modification, termination or waiver shall be effective unless in writing and signed by the party against whom enforcement thereof is sought. No waiver by either party of any obligations hereunder shall be deemed to constitute a waiver of the future performance of such obligation.
19.7 Severability. If any provision of this Lease or any application thereof shall be invalid or unenforceable, the remainder of this Lease and any other application of such provision shall not be affected thereby.
19.8 Successors and Assigns. Subject to the terms of Article 12 hereof, this Lease shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto.
19.9 Quiet Enjoyment. Upon due performance of the covenants and agreements to be performed by Tenant under this Lease, Landlord covenants that Tenant shall and may at all times peaceably and quietly have, hold and enjoy the Leased Premises during the Term without molestation or hindrance by Landlord or any party claiming through Landlord.
19.10 Owner for Time Being. The term “Landlord”, as used in this Lease, shall mean only the owner of the title to the Leased Premises as of the date in question. Upon the sale, transfer or other conveyance by Landlord of the Leased Premises, Landlord shall be released from any and all liability under this Lease arising after the date of such sale, transfer or other conveyance.
19.11 Interpretation. The table of contents and the article and section headings are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
19.12 Counterparts. This Lease may be simultaneously executed in several counterparts, each of which when so executed and delivered, shall constitute an original, fully enforceable counterpart for all purposes.
19.13 Governing Law. This Lease shall be governed by and construed in accordance with the laws of the State of New Jersey.
19.14 No Acceptance of Surrender. No act or thing done by Landlord or Landlord’s agents during the Term shall be deemed an acceptance of a surrender of the Leased Premises. No agreement to accept such surrender shall be valid unless in writing and signed by Landlord. No employee of Landlord or Landlord’s agents shall have any authority to accept the keys to the Leased Premises prior to the termination date and the delivery of keys to any employee of Landlord or Landlord’s agents shall not operate as an acceptance of a termination of this Lease or an acceptance of a surrender of the Leased Premises.
19.15 No Offer. The submission of this Lease to Tenant for examination does not constitute an offer to lease the Leased Premises on the terms set forth herein, and this Lease shall become effective as a lease agreement only upon the execution and delivery of the Lease by Landlord and Tenant.
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19.16 Reporting Requirements. Tenant shall provide to Landlord:
(a) No later than 120 days after the end of Tenant’s Fiscal Year, audited financial statements, showing balance sheets as of the end of such Fiscal Year, audited income and expense statements and statements of cash flow for such year, in reasonable detail, certified by independent accouintants of recognized national standing and prepared in accordance with generally accepted accounting principals.
(b) Such other certifications or information as may be required to be delivered to the NJEDA under the Loan Agreement.
19.17. Compliance with Charter School Act. This Lease shall comply with and is hereby made consistent with the Charter School Program Act of 1995 (N.J.S.A. 18A:36-1 et. seq.) (the “Charter School Act”) and all regulations thereunder. If any provisions of this Lease conflicts with the Charter School Act, such provisions shall be deemed deleted and the remainder of the Lease shall be in full force and effect.
ARTICLE 20
CONDITIONS TO EXECUTION OF LEASE
20.1 Deliveries to Landlord. In connection with the execution of this Lease, Tenant shall deliver to Landlord, (i) a certificate of good standing or its equivalent for Tenant issued by the governmental authority with jurisdiction over the existence of Tenant within sixty (60) days prior to the Effective Date, and (ii) a certificate of the President or Secretary of Tenant as to its certificate of incorporation, incumbency of authorized signatories, shareholders’ agreement, and resolutions of its shareholders authorizing the execution and delivery of this Lease.
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IN WITNESS WHEREOF, the parties have executed this Lease as of the date first above written.
Landlord: Ashland School, Inc. By:_________________________________ Name: Jordan J. Metzger Title: President Tenant: The TEAM Academy Charter School, Inc. By..________________________________ Name: Title: Chairperson
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EXHIBIT A
[APPROVED PLANS AND SPECIFICATIONS FOR GYMANSIUM AND MASONRY FOR CUSTER LEASE ONLY]
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SCHEDULE 3.1
BASE RENT
The Base Rent shall be payable in bi-monthly installments on the first and fifteenth day of each month during the Term, commencing on the Rent Commencement Date as follows:
From the Rent Commencement Date through maturity of the Bonds:
[SCHEDULE WILL RESULT IN PAYMENTS TO ASHLAND OF ROUGHLY 1.2X DEBT SERVICE PAYMENTS TO BE MADE BY ASHLAND]
From the maturity of the Bonds through the end of the Term:
Rent shall be payable to Manufacturers & Traders Trust Company, as custodial agent of Landlord at [INSERT ACCOUNT INFO] or as otherwise directed in writing by Landlord.
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APPENDIX F
Form of Bond Counsel Opinion
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DAVID SAMSON ARTHUR S. GOLDSTEIN* ARMEN SHAHINIAN* THOMAS R. O’BRIEN* GAGE ANDRETTA* DANIEL A. SCHWARTZ* KAREN L. GILMAN KENNETH N. LAPTOOK* FREDRIC P. LAVINTHAL DAVID M. HYMAN* DAVID L. SCHLOSSBERG ROGER J. BREENE BERNARD S. DAVIS HOWARD J. SCHWARTZ* PAUL M. COLWELL ROBERT E. NIES MORRIS BIENENFELD* DENNIS M. TOFT JEFFREY M. GUSSOFF* LAURENCE M. SMITH WILLIAM E. GOYDAN* PETER E. NUSSBAUM LORI GRIFA* ADAM K. DERMAN JEFFREY M. WEINICK* A. ROSS PEARLSON* MICHAEL J. NAUGHTON* GEORGE A. SPADORO*
JOHN F. CASEY JAMES D. FERRUCCI JOHN A. MCKINNEY JR. DARRYL WEISSMAN* MICHELLE A. SCHAAP ADAM P. FRIEDMAN* MITCHELL S. BERKEY* CATHERINE P. WELLS JONATHAN BONDY* SEAN M. AYLWARD JOHN G. VALERI JR. ROBERT H. CRESPI* JAMES P. RHATICAN* JUNIE HAHN* JILL D. ROSENBERG* JOHN O. LUKANSKI* ROXANNA E. HAMMETT RONALD L. ISRAEL* MATTHEW E. BECK* RHONDA CARNIOL* ADAM B. CANTOR* MARGARET WOOD* DORIT F. KRESSEL* THOMAS J. TRAUTNER JR. ROBERT L. HORNBY* STEPHEN A. KISKER* TRICIA M. GASPARINE NICOLE F. DIMARIA KIRAN V. SOMASHEKARA*
COUNSEL
——————————-------------------------- AARON D. BASSAN JOSEPH ZAWILA HOWARD K. UNIMAN STEVEN S. KATZ* JUNE S. MELLER* ANDREW S. KENT* ERIC J. LEVINE* STEPHEN G. CORDARO* WARREN BARROWS* DONNA M. EREM JOHN P. MALONEY* MARC R. LEPELSTAT* BRUCE D. ETTMAN* TODD W. TERHUNE CARLOS G. MANALANSAN* DANIEL D. BARNES* DIANA L. BUONGIORNO CHRIS TOPHER R. PALDINO JOSHUA M. LEE DAVID M. DUGAN* ELISA M. PAGANO RACHEL C. SANTARLAS*
STEVEN M. DIPASQUO
OF COUNSEL ——————————-------------------------- CARL B. LEVY ASSOCIATES ——————————-------------------------- JONATHAN A. TYLER^ MYRNA BLUME WILLIAM R. FINIZIO ANDREW A. NOBLE^
MARK A. FORAND* DENISE J. PIPERSBURGH* DANIEL T. MCKILLOP FARAH N. ANSARI* XAVIER M. BAILLIARD* MARIE L. MATHEWS* MELISSA A. SALIMBENE* C. NICOLE SULLIVAN* DARREN GRZYB* BETH J. ROTENBERG* BRIAN KANTAR* JAMES M. VAN SPLINTER* CHRISTOPHER W. GEROLD* RAJESH V. FOTEDAR●
ELIZABETH C. YOO* PATRICIA D. CLEARY* MAURO G. TUCCI JR.* ARI S. DAVIS*
MICHAEL R. CARUSO* WILLIAM J. CANNICI JR.* LAUREN R. DEMAURO PATRICK O’REILLY* LINDSAY A. SMITH* JOSEPH G. FENSKE
MARISA A. RAUCHWAY* MICHAEL G. GORDON* CELINE L. BARAKAT* SCOTT C. HOLLANDER* SCOTT W. LICHTENSTEIN* KELLY E. BRAUNSTEIN* RAFAEL E. ROSARIO, JR.* MELISSA A. BROWN RYAN W. FEDERER* MINDY P. FOX* BRIAN P. O’NEILL* OLEG A. MESTECHKIN^
MELISSA I. FALK WERNICK* BRIGITTE M GLADIS BARRY S. SOBEL CASEY A. MILIANTA
PATENT AGENT ——————————-------------------------- BRYMER H. CHIN KINZA HECHT
One Boland Drive West Orange, NJ 07052
(973) 325-1500 Fax: (973) 325-1501
* MEMBER NJ AND NY BARS ^ MEMBER NY BAR ONLY ● MEMBER MA BAR ONLY REGISTERED PATENT ATTORNEY
WOLFF & SAMSON PC One Boland Drive, West Orange, NJ 07052 ▪ (973) 325-1500 ▪ Fax: (973) 325-1501 140 Broadway, 46th Floor, New York, NY 10005 ▪ (212) 973-0572 128 West State Street, Suite 3, Trenton, NJ 08608 ▪ (609) 396-6645
www.wolffsamson.com
November __, 2013
New Jersey Economic Development Authority 36 West State Street PO Box 990 Trenton, New Jersey 08625
Re: [$23,000,000] Charter School Revenue Bonds (Series 2013 Project for the TEAM Academy Charter School)
To Whom It May Concern:
We have examined a record of proceedings relating to the issuance by the New Jersey Economic Development Authority, a public body corporate and politic, constituting an instrumentality of the State of New Jersey (the "Authority") of its [$23,000,000] Charter School Revenue Bonds (Series 2013 Project for the TEAM Academy Charter School) (the "2013 Bonds”).
The 2013 Bonds are issued under and pursuant to Chapter 80 of the Pamphlet Laws of 1974 of New Jersey, as amended and supplemented, (the "Act") and a Bond Resolution of the Authority adopted June 11, 2013, as amended by a resolution of the Authority adopted August 13, 2013 (as so amended, the "Bond Resolution").
The 2013 Bonds are initially issued in the form of fully registered bonds numbered R-l and upward and in minimum denominations of $25,000 or any integral multiple of $5,000 in excess thereof. The 2013 Bonds are dated November __, 2013, mature, bear interest and are redeemable prior to maturity all as more particularly described therein.
The 2013 Bonds are issued for the purpose of financing a project for Ashland School,
Inc., a New Jersey not-for-profit corporation (the "Borrower"), which consists of (i) the acquisition by the Borrower of the land and buildings located at 21 Ashland Street, Newark, New
November __, 2013 Page 2
Jersey and 85 Custer Avenue, Newark, New Jersey, to be leased to and used by TEAM Academy Charter School, Inc. (the “Charter School”), (ii) the acquisition by the Borrower of the land adjacent to 21 Ashland Street to be leased to and used by the Charter School, (iii) the completion of site work on such properties, (iv) the renovation and construction of buildings on the property described in (i) above, (v) funding a debt service reserve fund and (vi) funding costs related to the issuance of the 2013 Bonds (hereinafter collectively referred to as the “Project”), all as set forth in the Bond Resolution and the Loan Agreement. The Project described in clause (i) above is to be leased by the Borrower to the Charter School pursuant to two Lease Agreements each dated as of November 1, 2013, under which the Charter School has agreed to pay rent, which is scheduled to be paid in order to provide for the timely payment of the principal of and interest on the 2013 Bonds. The Authority and the Borrower have entered into a Loan Agreement dated as of November 1, 2013 (the "Loan Agreement") providing, among other things, for the making of a loan (the "Loan") to the Borrower in order to finance the Project. The Authority and Manufacturers and Traders Trust Company (the "Trustee") have executed a Trust Indenture dated as of November 1, 2013 (the "Trust Indenture") pursuant to which the Authority has assigned to the Trustee, as security for the payment of the 2013 Bonds, certain of its rights and interests under the Loan Agreement. Capitalized terms used herein and not defined herein shall have the same meaning given to them as in the Loan Agreement. We are of the opinion that:
1. The Authority is duly created and validly existing under the Act, and it has good right and lawful authority (a) to enter into the Loan Agreement and make the Loan contemplated thereby and (b) to enter into the Trust Indenture and assign its rights and pledge its revenues to be derived therefrom pursuant to the Trust Indenture as security for the payment of the 2013 Bonds in accordance with its terms.
2. The Loan Agreement, the Trust Indenture, the Bond Purchase Agreement dated November __, 2013 (the "Purchase Agreement") by and among the Authority, the Borrower and M&T Securities Inc., as the Underwriter, have each been duly authorized, executed and delivered by the Authority, and assuming the due authorization, execution and delivery by the other parties thereto, are each in full force and effect and constitute, legal, valid and binding agreements by and among the parties thereto, enforceable in accordance with their respective terms. In the Trust Indenture, the Authority has duly and validly assigned to the Trustee certain of its rights and interests in the Loan Agreement as security for the payment of the 2013 Bonds. 3. The 2013 Bonds have been duly authorized, executed and issued by the Authority in accordance with law, and are valid, legal and binding special limited obligations of the Authority, the principal of, premium, if any, and interest on which are payable solely from the revenues and other moneys of the Authority derived from the Project and pledged therefor pursuant to the Loan Agreement and the Trust Indenture. The 2013 Bonds are enforceable in accordance with their terms and are entitled to the benefit of the Act. All conditions precedent to the delivery of the 2013 Bonds have been fulfilled.
4. (a) Interest on the 2013 Bonds is not includable in gross income for income tax purposes under the Internal Revenue Code of 1986, as amended (the "Code"), subject to the limitations set forth in paragraph 4(c) hereof.
(b) The Code establishes certain conditions which must be met in order that said interest on the 2013 Bonds remains not includable in gross income for income tax purposes under the provisions thereof. The Loan Agreement specifies those conditions which we deem are necessary in order that said interest on the 2013 Bonds be deemed and remain
November __, 2013 Page 3
not includable in gross income for tax purposes under Section 103 of the Code. Pursuant to the Loan Agreement, the Borrower has made certain representations and has covenanted not to take any action, or omit to take any action, which act or omission would adversely affect such tax-exempt status of interest on the 2013 Bonds under Section 103 of the Code. Misrepresentations or non-compliance with any of the foregoing covenants may cause interest on the 2013 Bonds to lose such tax-exempt status retroactively to the date of issuance. In rendering our opinion in paragraphs 4 and 5 hereof, we have assumed that such conditions in fact will be met.
(c) Our opinion is subject to the following tax consequences arising under the Code:
(i) Interest on the 2013 Bonds held by certain corporations may be included in the "adjusted net book income" calculation and the "adjusted current earnings" calculation for federal alternative minimum tax; and
(ii) Ownership of the 2013 Bonds may result in collateral Federal income tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty insurance companies, individual recipients of social security or railroad retirement benefits and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry the 2013 Bonds. No opinion is expressed with regard to the foregoing collateral Federal income tax consequences enumerated in this paragraph (ii).
5. The offering and sale of the 2013 Bonds are not required to be registered under
the Securities Act of 1933, as amended, and such registration is not required under the rules and regulations of the Securities and Exchange Commission promulgated under such Act as presently enforced. The Trust Indenture is not required to be qualified under the Trust Indenture Act of 1939, as amended.
6. Interest on the 2013 Bonds and the gain on the sale thereof are exempt from inclusion as gross income under the New Jersey Gross Income Tax Act (P.L. 1976, Chapter 47).
The foregoing opinions are also qualified to the extent that the enforceability of the 2013 Bonds, the Loan Agreement, the Trust Indenture and the Purchase Agreement may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or limiting creditors' rights generally and the application of general principles of equity.
In rendering this opinion, we have relied as to the power of the Borrower to enter into and the due authorization, execution and delivery of the Loan Agreement and the other Loan Documents, on the opinion of Hill Wallack, LLP, counsel to the Borrower.
We have examined the executed Bond No. R-l and, in our opinion, the form of such Bond and its execution are regular and proper.
Notwithstanding anything to the contrary herein, we acknowledge that this opinion is a government record subject to release under the Open Public Records Act (N.J.S.A. 47: 1A-1 et seq.).
Very truly yours,
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APPENDIX G
Form of Continuing Disclosure Agreement
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CONTINUING DISCLOSURE AGREEMENT
This Continuing Disclosure Agreement (this “Agreement”), dated as of November 1, 2013 among TEAM Academy Charter School, Inc. (the “School”), Ashland School, Inc. (“Ashland”), The Friends of TEAM Academy Charter School, A New Jersey Non-Profit Organization (“FOTA” and, together with the School and Ashland, the “Disclosure Parties”) and Manufacturers & Traders Trust Company, as dissemination agent (the “Dissemination Agent”), is executed and delivered in connection with the issuance by the New Jersey Economic Development Authority (the “Authority”) of $[23,000,000] aggregate principal amount of its Charter School Revenue Bonds (Series 2013 Project for the TEAM Academy Charter School), (the “2013 Bonds”).
The 2013 Bonds are being issued pursuant to a Trust Indenture dated as of November 1, 2013 (the “Indenture”) between the Authority and Manufacturers & Traders Trust Company, as trustee. The proceeds of the 2013 Bonds are being loaned to Ashland, as the borrower, pursuant to a Loan Agreement dated as of November 1, 2013 (the “Loan Agreement”). Ashland will lease the facilities financed from the proceeds of the 2013 Bonds (the “Project Facilities”) to the School pursuant to certain Lease Agreements each dated November 1, 2013 (the “Lease Agreements”), and payments required under the Lease Agreements will be calculated to be sufficient, in total, to pay the principal of, premium, if any, and interest on the 2013 Bonds. The Indenture, the Loan Agreement and the Lease Agreements are referred to herein as the “Bond Documents.” The Disclosure Parties covenant and agree as follows for the benefit of the Bondholders (as defined below):
Section 1. Purpose of Agreement. This Agreement is being executed and delivered by the Disclosure Parties for the benefit of the Bondholders and in accordance with the requirements of the Rule. The Disclosure Parties acknowledge that the Authority and the Dissemination Agent have undertaken no responsibility with respect to any reports, notices or disclosures provided or required under this Agreement (except for the Dissemination Agent’s obligation to file with the MSRB reports provided by the Disclosure Parties pursuant to this Agreement), including their accuracy and completeness, and have no liability to any Person, including any Bondholder and the Underwriter, with respect to any such reports, notices or disclosures. The Disclosure Parties represent that they are the only “obligated persons” with respect to the Bonds.
Section 2. Definitions. In addition to the definitions set forth in the Bond Documents, which apply to any capitalized term used in this Agreement unless otherwise defined in the first paragraph of this Agreement or in this Section, the following capitalized terms shall have the meanings indicated below.
“Annual Report” shall mean any Annual Report provided by the Disclosure Parties pursuant to Section 4(a) of this Agreement.
“Bondholder” or “Holder” of a 2013 Bond shall mean any registered owner of any of the 2013 Bonds or any Person which (i) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any of the 2013 Bonds (including Persons holding through any nominee, securities depository or other intermediary, including any
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beneficial owner, or (ii) is treated as the holder of any of the 2013 Bonds for federal income tax purposes.
“EMMA” means the Electronic Municipal Market Access system of the MSRB as provided at http://www.emma.msrb.org, or any similar system that is acceptable to or as may be prescribed by the MSRB for purposes of the Rule and approved by the SEC from time to time. A current list of such systems may be obtained from the SEC at http://www.sec.gov/info/municipal/nrmsir.htm.
“Fiscal Year” means the fiscal year of the Disclosure Parties ending on June 30 of each calendar year.
“Listed Events” shall mean any of the events listed in Section 4(b) of this Agreement.
“MSRB” means the Municipal Securities Rulemaking Board established pursuant to Section 15(B)(b)(1) of the Securities Exchange Act of 1934, as amended, or any successor organization.
“Official Statement” shall mean the Official Statement dated [_________], 2013 used in connection with the sale of the 2013 Bonds.
“Rule” shall mean Rule 15c2-12(b)(5) adopted by the SEC under the Securities Exchange Act of 1934, as the same may be amended from time to time.
“SEC” shall mean the United States Securities and Exchange Commission.
“Underwriter” shall mean M&T Securities, Inc.
Section 3. Content of Annual Reports.
(a) Each Annual Report shall contain:
(i) a copy of the annual financial statements with respect to each of the Disclosure Parties, prepared in accordance with generally accepted accounting principles and audited by a certified public accountant;
(ii) an update of the information of the type set forth in Appendix A to the Official Statement as set forth on Schedule I attached hereto;
(iii) an Officer’s Certificate from Ashland certifying as to compliance with the financial covenants set forth in Section 6.21 of the Loan Agreement; and
(iv) an Officer’s Certificate from the School certifying as to compliance with the financial covenants set forth in Article 14 of the Lease Agreements.
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Section 4. Provision of Annual Reports and Notices of Listed Events.
(a) Within 180 days after the end of each Fiscal Year, commencing with the Fiscal Year ending June 30, 2013, the Disclosure Parties shall provide to the Dissemination Agent copies of the Annual Report and written direction to file such Annual Report with the MSRB. In each case, the Annual Report may be submitted by the Disclosure Parties as a single document or as separate documents comprising a package, and may cross-reference other information to the extent permitted by the Rule. Notwithstanding the foregoing, the audited financial statements of the Disclosure Parties may be submitted separately from the balance of the Annual Report when such audited financial statements are available.
(b) In a timely manner not in excess of ten Business Days after the occurrence of the event, the Disclosure Parties shall deliver to the Dissemination Agent for filing with the MSRB notice of any of the following events with respect to the 2013 Bonds:
(i) Principal and interest payment delinquencies;
(ii) Non-payment related defaults, if material;
(iii) Unscheduled draws on debt service reserves reflecting financial difficulties;
(iv) Unscheduled draws on credit enhancements reflecting financial difficulties;
(v) Substitution of credit or liquidity providers, or their failure to perform;
(vi) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701–TEB) or other material notices or determinations with respect to the tax status of the 2013 Bonds, or other material events affecting the tax status of the 2013 Bonds;
(vii) Modifications to rights of the Holders of the 2013 Bonds, if material;
(viii) Bond calls (other than mandatory sinking fund redemptions), if material, and tender offers;
(ix) Defeasances;
(x) Release, substitution, or sale of property, if any, securing repayment of the 2013 Bonds, if material;
(xi) Rating changes;
(xii) Bankruptcy, insolvency, receivership or similar event of the Disclosure Parties;
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(xiii) The consummation of a merger, consolidation, or acquisition involving the Disclosure Parties or the sale of all or substantially all of the assets of the Disclosure Parties, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and
(xiv) Appointment of a successor or additional trustee or the change of name of a trustee, if material.
(c) The Disclosure Parties shall give, or shall cause the Dissemination Agent to give, notice in a timely manner to the MSRB of any failure by the Disclosure Parties to provide any information required pursuant to Section 4(a) or 4(b) above within the time limit specified therein.
Section 5. Report by Dissemination Agent. Concurrently with the delivery to the MSRB of any information required pursuant to Section 4(a) or 4(b) above, the Dissemination Agent shall confirm to the Disclosure Parties that it has filed such information with the MSRB.
Section 6. Termination of Agreement. The obligations of the Disclosure Parties under this Agreement shall terminate upon the defeasance, prior redemption or payment in full of all of the 2013 Bonds. The Disclosure Parties shall provide the Dissemination Agent with written notice that the obligations of the Disclosure Parties under this Agreement have terminated and a written request that the Dissemination Agent file a copy of such notice with the MSRB. If the obligations of the Disclosure Parties under the Lease Agreements are assumed in full by another obligated person (as defined in the Rule), such Person shall be responsible for compliance with this Agreement in the same manner as if it were the Disclosure Parties, and the Disclosure Parties shall have no further responsibility hereunder.
Section 7. Amendment. The obligations of the Disclosure Parties under this Agreement may be amended, without notice to or consent of the Holders of the 2013 Bonds, to the extent required or permitted as a result of a change in the legal requirements, or in connection with a change in the identity, nature, corporate organization, or status of the Disclosure Parties, or the type of business conducted by the Disclosure Parties, or in connection with a corporate reorganization of the Disclosure Parties; provided that any such modification of the obligations of the Disclosure Parties under this Agreement shall be done in a manner consistent with the Rule and either (i) does not materially impair the interests of Bondholders, in the determination of the Dissemination Agent (which may be based on an opinion of counsel); or (ii) is approved by the Holders of a majority in aggregate principal amount of the 2013 Bonds. No amendment to this Agreement shall change or modify the rights or obligations of the Trustee or any Dissemination Agent without its written assent thereto, or with regard to any provision affecting the Authority, without the Authority’s written assent thereto.
Section 8. Additional Information. Nothing in this Agreement shall be deemed to prevent the Disclosure Parties from disseminating any other information, using the means of dissemination set forth in this Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Agreement. If the Disclosure Parties choose to include
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any information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is specifically required by this Agreement, the Disclosure Parties shall have no obligation under this Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.
Section 9. Transmission of Information and Notices. Unless otherwise required by law, all documents provided by the Disclosure Parties directly to the MSRB, or to the Dissemination Agent for filing with the MSRB, in compliance with Section 4 shall be provided to the MSRB or the Dissemination Agent, as applicable, in an electronic word-searchable PDF format (which requirement extends to all documents to be filed, including financial statements and other externally prepared reports), and shall be accompanied by identifying information, in each case as prescribed by the MSRB. As of the date of this Agreement, the MSRB has established EMMA as its continuing disclosure service for purposes of the Rule, and unless and until otherwise prescribed by the MSRB, all documents provided to the MSRB in compliance with Section 4 shall be submitted through EMMA in the format prescribed by the MSRB.
Section 10. Default. Any Bondholder may enforce the obligations of the Disclosure Parties under this Agreement; provided however that (i) any breach of such obligations shall not constitute or give rise to a default or an Event of Default under the Bond Documents, the 2013 Bonds or any other document or agreement relating to the 2013 Bonds, and (ii) the sole remedy for any such breach shall be to compel specific performance of the obligations of the Disclosure Parties under this Agreement.
Section 11. Beneficiaries. This Agreement shall inure solely to the benefit of the Authority, the Dissemination Agent, the Underwriter, the Disclosure Parties and Bondholders, and shall create no rights in any other Person.
Section 12. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey and the Rule.
Section 13. Severability. In case any one or more of the provisions of this Agreement shall for any reason be held to be illegal or invalid, such illegality or invalidity shall not affect any other provision of this Agreement, but this Agreement shall be construed and enforced as if such illegal or invalid provision had not been contained herein.
Section 14. Dissemination Agent’s Rights and Duties. The Dissemination Agent shall have only such duties as are specifically set forth herein and no implied covenants or obligations shall be read into this Agreement against the Dissemination Agent. The Dissemination Agent (i) shall not be liable for any error in judgment or for any act done or step taken or omitted by it in good faith, or for any mistake of fact or law, or for anything which it may do or refrain from doing in connection therewith, except for its own gross negligence or willful misconduct, (ii) shall not be obligated to take any legal action or other action hereunder, which might in its judgment involve any expense or liability unless it has been furnished with indemnification satisfactory to it, and (iii) shall be entitled to consult with counsel satisfactory to it, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the opinion of such counsel. The duties and responsibilities of the Dissemination Agent hereunder shall be
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determined solely by the express provisions of this Agreement, and no further duties or responsibilities shall be implied. The Dissemination Agent shall not have any liability under, or duty to inquire into the terms and provisions of any agreement or instructions, other than as outlined in this Agreement. The Dissemination Agent may rely and shall be protected in acting or refraining from acting upon any written notice, instruction or request furnished to it hereunder and believed by it to be genuine and to have been signed or presented by the proper party or parties. The Dissemination Agent shall be under no duty to inquire into or investigate the validity, accuracy or content of any such document. Any information mentioned in this Agreement, including any Annual Report or any information with respect to any event specified in Section 4(b) of this Agreement, shall be sufficiently authenticated for purposes of dissemination under this Agreement if it is accompanied by a written instrument signed by an authorized officer or employee of the Disclosure Parties. The Dissemination Agent shall not incur any liability for following the instructions herein contained or expressly provided for, or written instructions given by the other parties hereto. In the administration of this Agreement, the Dissemination Agent may execute any of its powers and perform its duties hereunder directly or through agents or attorneys and may consult with counsel, accountants and other skilled persons to be selected and retained by it. The Dissemination Agent shall not be liable for anything done, suffered or omitted in good faith by it in accordance with the advice or opinion of any such counsel, accountants or other skilled persons. The Dissemination Agent may resign and be discharged of its duties and obligations hereunder by giving notice in writing of such resignation specifying a date when such resignation shall take effect. Any corporation or association into which the Dissemination Agent in its individual capacity may be merged or converted or with which it may be consolidated, or any corporation or association resulting from any merger, conversion or consolidation to which the Dissemination Agent in its individual capacity shall be a party, or any corporation or association to which all or substantially all the corporate trust business of the Dissemination Agent in its individual capacity may be sold or otherwise transferred, shall be the Dissemination Agent under this Agreement without further act. The Disclosure Parties covenant and agree, jointly and severally, to defend, indemnify and hold the Dissemination Agent and its directors, officers, agents and employees (collectively, the “Indemnitees”) harmless from and against any and all liabilities, losses, damages, fines, suits, actions, demands, penalties, costs and expenses, including out-of-pocket, incidental expenses, reasonable legal fees and expenses and the costs and expenses of defending or preparing to defend against any claim (“Losses”) that may be imposed on, incurred by, or asserted against, the Indemnitees or any of them for following any instruction or other direction upon which the Dissemination Agent is authorized to rely pursuant to the terms of this Agreement. In addition to and not in limitation of the immediately preceding sentence, the Disclosure Parties also covenant and agree, jointly and severally, to indemnify and hold the Indemnitees and each of them harmless from and against any and all Losses that may be imposed on, incurred by, or asserted against the Indemnitees or any of them in connection with or arising out of or in the Dissemination Agent’s exercise or performance under this Agreement provided the Dissemination Agent has not acted with gross negligence or engaged in willful misconduct. Anything in this Agreement to the contrary notwithstanding, in no event shall the Dissemination Agent be liable for special, indirect, punitive or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Dissemination Agent has been advised of such loss or damage and regardless of the form of action. The Disclosure Parties hereby agree, jointly and severally, to pay reasonable compensation to the Dissemination Agent
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for, and all costs and expenses (including attorneys’ fees) of the Dissemination Agent incurred in, performing the services required of the Dissemination Agent under this Agreement. No provision of this Agreement shall require the Dissemination Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties under this Agreement or in the exercise of any of its rights or powers. This Section 14 shall survive termination of this Agreement, the resignation or removal of the Dissemination Agent for any reason, and the payment of the Bonds.
Section 15. No Recourse to Authority; Indemnified Parties. No recourse shall be had for the performance of any obligation, agreement or covenant of the Disclosure Parties, the Trustee or the Dissemination Agent under this Agreement against the Authority or against any member, official, employee, counsel, consultant and agent of the Authority or any person executing the Bonds. The Disclosure Parties agree to indemnify and hold harmless the Authority, any member, officer, official, employee, counsel, consultant and agent of the Authority, and the Trustee (collectively called the “Indemnified Parties”), against any and all losses, claims, damages, liabilities or expenses whatsoever caused by the Disclosure Parties’ or the Dissemination Agent’s failure to perform or observe any of its obligations, agreements or covenants under the terms of this Agreement but only if and insofar as such losses, claims, damages, liabilities or expenses are caused by any such failure of the Disclosure Parties or the Dissemination Agent to perform. In case any action shall be brought against the Indemnified Parties based upon this Agreement in respect of which indemnity may be sought against the Disclosure Parties, the Indemnified Parties shall promptly notify the Disclosure Parties in writing. Upon receipt of such notification, the Disclosure Parties shall promptly assume the defense of such action, including the retention of counsel, the payment of all expenses in connection with such action and the right to negotiate and settle any such action on behalf of such party. Any Indemnified Party shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless the employment of such counsel has been specifically authorized by the Disclosure Parties, or unless by reason of conflict of interest determined by the written opinion of counsel shall be borne by the Disclosure Parties. The Disclosure Parties shall not be liable for any settlement of any such action effected without its written consent, but if settled with the written consent of the Disclosure Parties or if there be a final judgment for the plaintiff in any such action with or without written consent, the Disclosure Parties agree to indemnify and hold harmless the Indemnified Parties from and against any loss or liability by reason of such settlement or judgment. Nothing in this Agreement shall require the Disclosure Parties to indemnify and hold harmless the Indemnified Parties from or against any loss, claim, damage, liability or expense caused by any gross negligence, recklessness or intentional misconduct of the Indemnified Parties in connection with the Disclosure Parties’ or the Dissemination Agent’s performance of their obligations, agreements and covenants under this Agreement. The indemnification rights under this Section 15 do not limit, and are in addition to, any other indemnification rights of the Indemnified Parties.
Section 16. Execution. This Agreement may be executed in any number of counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
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Section 17. Notices. Unless otherwise provided herein, all notices, certificates, requests or other communications hereunder shall be given by telecopier or electronic transmission and promptly confirmed in writing and shall be deemed given when given by telecopier or electronic transmission or addressed as follows:
School: TEAM Academy Charter School 60 Park Place, Suite 802 Newark, NJ 07112 Attn: Steve Small Telephone: (973) 622-0905 x1115 Email: [email protected]
Ashland: Ashland School, Inc. 60 Park Place, Suite 802 Newark, NJ 07112 Attn: Hannah Richman Telephone: (973) 705-8326 Email: [email protected]
FOTA: The Friends of TEAM Academy Charter School, Inc. 60 Park Place, Suite 802 Newark, NJ 07112 Attn: Hannah Richman Telephone: (973) 705-8326 Email: [email protected]
Dissemination Agent: Manufacturers & Traders Trust Company 166 Mercer Street New York, NY 10012 Attn: Marco Medina Telephone: (212) 941-4418 Telecopier: (212) 343-1079 Email: [email protected]
Each of the above parties may, by written notice given hereunder to the others, designate any further or different addresses to which subsequent notices, certificates, requests, or other communications shall be sent. In addition, the parties hereto may agree to any other means by which subsequent notices, certificates, requests or other communications may be sent.
[Signature page follows]
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IN WITNESS WHEREOF, the parties hereto have each caused this Continuing Disclosure Agreement to be executed in its name and in its behalf, all as of the date and year first above written.
TEAM ACADEMY CHARTER SCHOOL, INC.
By: Name: Title:
ASHLAND SCHOOL, INC.
By: Name: Title:
THE FRIENDS OF TEAM ACADEMY CHARTER SCHOOL, INC.
By: Name: Title:
MANUFACTURERS & TRADERS TRUST COMPANY, as Dissemination Agent
By: Authorized Officer
[Signature Page to Continuing Disclosure Agreement]
Schedule I-1
SCHEDULE I
INFORMATION SET FORTH IN APPENDIX A TO BE UPDATED IN EACH ANNUAL REPORT
Pursuant to Section 3(a)(ii) of this Agreement, each Annual Report shall include an update of the information of the type set forth in Appendix A to the Official Statement as follows:
1. Table 2 – Existing TEAM Charter Schools;
2. Table 3 – Planned TEAM Charter Schools;
3. Table 4 – Historical Average State/Local Per Pupil Tuition Funding;
4. Table 14 – Enrollment Chart;
5. Table 15 – Wait List; and
6. Table 16 – Re-Enrollment Data