WILLIAM A. LAWSON INSTITUTE FOR PEACE AND ......William A. Lawson Institute for Peace and Prosperity...

WILLIAM A. LAWSON INSTITUTE FOR PEACE AND PROSPERITY AND SUBSIDIARY

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE

YEARS ENDED AUGUST 31, 2019 AND 2018

AND INDEPENDENT AUDITOR’S REPORT


TABLE OF CONTENTS Page Certificate of Board 1

Independent Auditor’s Report 2

Consolidated Financial Statements

Consolidated Statements of Financial Position 4

Consolidated Statements of Activities 5

Consolidated Statements of Functional Expenses 6

Consolidated Statements of Cash Flows 8

Notes to the Consolidated Financial Statements 10

Supplemental Information to the Consolidated Financial Statements

Schedule of Consolidating Statement of Financial Position Information 23

Schedule of Consolidating Statement of Activities Information 25

Schedule of Consolidating Statement of Cash Flows Information 27

Supplemental Information for The Lawson Academy

Statements of Financial Position 29

Statements of Activities 30

Statements of Cash Flows 32

Schedules of Expenses 34

Schedules of Capital Assets 35

Budgetary Comparison Schedule 36

Compliance and Internal Controls

Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 38

Schedule of Findings and Questioned Costs 40

2019 2018

Current Assets:Cash 725,661$ 613,362$

Restricted cash 691,627 823,741

Contributions receivable 128,408 177,384

Total current assets 1,545,696 1,614,487

Noncurrent Assets:

Contributions receivable 12,500 62,500 Capital assets, net 14,037,848 14,146,185

Note receivable 7,253,300 7,253,300

21,303,648 21,461,985

22,849,344$ 23,076,472$

Current Liabilities:Accounts payable and accrued expenses 56,077$ 88,609$

Current maturities of notes payable 87,856 82,834

Total current liabilities 143,933 171,443

Notes Payable, net of current maturities 13,094,772 13,184,438

Net Assets:Without donor restrictions 4,164,408 4,238,831

With donor restrictions 5,446,231 5,481,760

9,610,639 9,720,591

22,849,344$ 23,076,472$

ASSETS

LIABILITIES AND NET ASSETS

WILLIAM A. LAWSON INSTITUTE FOR PEACE AND PROSPERITY

CONSOLIDATED STATEMENTS OF FINANCIAL POSITIONAugust 31, 2019 and 2018

AND SUBSIDIARY

(See Notes to Consolidated Financial Statements)

4

Without Donor With Donor Without Donor With DonorRestrictions Restrictions Total Restrictions Restrictions Total

Support and Revenue:Federal grants -$ 500,951$ 500,951$ -$ 360,696$ 360,696$

State grants - 2,119,158 2,119,158 - 2,252,403 2,252,403

Contributions 50,330 - 50,330 913,090 112,500 1,025,590

Property rental income 481,110 - 481,110 478,966 - 478,966

Interest 73,030 - 73,030 70,317 - 70,317

Other 77,105 - 77,105 73,724 - 73,724

681,575 2,620,109 3,301,684 1,536,097 2,725,599 4,261,696

Net assets released from restrictions 2,655,638 (2,655,638) - 2,636,974 (2,636,974) -

Total support and revenue 3,337,213 (35,529) 3,301,684 4,173,071 88,625 4,261,696

Expenses:Program services:

Senior housing operations 296,091 - 296,091 323,797 - 323,797

Charter school operations 2,349,488 - 2,349,488 2,384,947 - 2,384,947

Total program services 2,645,579 - 2,645,579 2,708,744 - 2,708,744

Supporting services:

Management and general 753,395 - 753,395 787,885 - 787,885

Fundraising 12,662 - 12,662 36,395 - 36,395

Total supporting services 766,057 - 766,057 824,280 - 824,280

Total expenses 3,411,636 - 3,411,636 3,533,024 - 3,533,024

Loss on retirement of capital assets - - - 56,000 - 56,000

Change in net assets (74,423) (35,529) (109,952) 584,047 88,625 672,672

Net assets, beginning of year 4,238,831 5,481,760 9,720,591 3,654,784 5,393,135 9,047,919

Net assets, end of year 4,164,408$ 5,446,231$ 9,610,639$ 4,238,831$ 5,481,760$ 9,720,591$

For the Years Ended August 31, 2019 and 2018CONSOLIDATED STATEMENTS OF ACTIVITIES


20182019


5

Senior CharterHousing School Management Total

Operations Operations Total and General Fundraising Total Expenses

Salaries and Related Expenses:Salaries -$ 1,307,484$ 1,307,484$ 153,308$ -$ 153,308$ 1,460,792$ Employee fringe benefits - 100,812 100,812 443 - 443 101,255 Payroll taxes - 41,057 41,057 16,826 - 16,826 57,883

Total salaries and related expenses - 1,449,353 1,449,353 170,577 - 170,577 1,619,930

Operating Expenses:

Contract services:

Legal and professional fees - 229,124 229,124 33,588 - 33,588 262,712 Food service - 135,110 135,110 - - - 135,110 Transportation - 190,723 190,723 - - - 190,723 Custodial services 3,726 - 3,726 - - - 3,726 Other contracted services 16,013 26,710 42,723 2,841 4,864 7,705 50,428 Property and equipment rent 265 35,705 35,970 - - - 35,970 Materials and supplies - 72,526 72,526 7,457 4,373 11,830 84,356 Maintenance and repairs 61,777 29,607 91,384 3,585 - 3,585 94,969 Utilities 60,078 66,579 126,657 - - - 126,657

Insurance - 29,120 29,120 47,311 - 47,311 76,431 Interest 42,251 - 42,251 236,762 - 236,762 279,013 Other 7,138 53,207 60,345 32,164 3,425 35,589 95,934

Total operating expenses before

depreciation 191,248 868,411 1,059,659 363,708 12,662 376,370 1,436,029

Depreciation 104,843 31,724 136,567 219,110 - 219,110 355,677

Total Functional Expenses 296,091$ 2,349,488$ 2,645,579$ 753,395$ 12,662$ 766,057$ 3,411,636$

WILLIAM A. LAWSON INSTITUTE FOR PEACE AND PROSPERITY AND SUBSIDIARYCONSOLIDATED STATEMENTS OF FUNCTIONAL EXPENSES

For the Year Ended August 31, 2019

Program Services Supporting Services


6

Senior CharterHousing School Management Total

Operations Operations Total and General Fundraising Total Expenses

Salaries and Related Expenses:Salaries -$ 1,285,272$ 1,285,272$ 149,345$ -$ 149,345$ 1,434,617$ Employee fringe benefits - 105,750 105,750 75 - 75 105,825Payroll taxes - 44,166 44,166 14,976 - 14,976 59,142

Total salaries and related expenses - 1,435,188 1,435,188 164,396 - 164,396 1,599,584

Operating Expenses:

Contract services:

Legal and professional fees - 123,953 123,953 26,835 - 26,835 150,788 Food service - 197,442 197,442 - - - 197,442 Transportation - 180,573 180,573 - - - 180,573 Custodial services 12,482 - 12,482 - - - 12,482Other contracted services 20,432 29,046 49,478 11,946 27,019 38,965 88,443Property and equipment rent - 31,213 31,213 - - - 31,213Materials and supplies - 128,163 128,163 44,905 2,590 47,495 175,658Maintenance and repairs 54,223 43,217 97,440 11,115 - 11,115 108,555Utilities 78,628 90,238 168,866 - - - 168,866

Insurance - 47,348 47,348 33,934 - 33,934 81,282Interest 46,670 - 46,670 241,638 - 241,638 288,308Other 6,519 55,096 61,615 60,418 6,786 67,204 128,819

Total operating expenses before

depreciation 218,954 926,289 1,145,243 430,791 36,395 467,186 1,612,429

Depreciation 104,843 23,470 128,313 192,698 - 192,698 321,011

Total Functional Expenses 323,797$ 2,384,947$ 2,708,744$ 787,885$ 36,395$ 824,280$ 3,533,024$

Program Services Supporting Services

WILLIAM A. LAWSON INSTITUTE FOR PEACE AND PROSPERITY AND SUBSIDIARYCONSOLIDATED STATEMENTS OF FUNCTIONAL EXPENSES (CONTINUED)



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2019 2018

Cash Flows from Operating Activities:State grant receipts 2,103,643$ 2,250,731$

Federal grant receipts 520,509 348,331

Property rental receipts 481,110 478,966

Contribution receipts 150,330 863,090

Interest received 73,030 70,317

Receipts from miscellaneous sources 72,038 81,070

Payments to vendors for goods and services rendered (1,159,548) (1,374,242)

Payments to or on behalf of employees for services rendered (1,619,930) (1,580,030)

Interest paid (279,013) (281,677)

Net cash provided by operating activities 342,169 856,556

Cash Flows from Investing Activities:Restricted cash 132,114 1,809,257

Purchase of capital assets (277,340) (2,139,828)

Net cash used in investing activities (145,226) (330,571)

Cash Flows from Financing Activities:Payments on notes payable (84,644) (55,690)

Net cash used in financing activities (84,644) (55,690)

Net increase in cash 112,299 470,295

Cash, beginning of year 613,362 143,067

Cash, end of year 725,661$ 613,362$


CONSOLIDATED STATEMENTS OF CASH FLOWSFor the Years Ended August 31, 2019 and 2018

AND SUBSIDIARY


8

2019 2018

Reconciliation of Change in Net Assets to Net Cash Provided

by Operating Activities:Change in net assets (109,952)$ 672,672$

Adjustments to reconcile change in net assets to net

cash provided by operating activities:

Depreciation 355,677 321,011

Loss on retirement of capital assets - 56,000

Changes in operating assets and liabilities:

Contributions receivable 98,976 (71,558)

Other current assets - 2,367

Accounts payable and accrued expenses (2,532) (23,936)

Deferred revenue - (100,000)

Net cash provided by operating activities 342,169$ 856,556$

Noncash Investing and Financing Activities:Capital assets included in accounts payable and

accrued expenses -$ 30,000$

For the Years Ended August 31, 2019 and 2018


CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)AND SUBSIDIARY


9


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS August 31, 2019 and 2018

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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Organization

William A. Lawson Institute for Peace and Prosperity (“WALIPP”) is a nonprofit organization incorporated in the state of Texas in March 1996. WALIPP is governed by a Board of Directors (“WALIPP Board”) comprised of not fewer than three members. The WALIPP Board is elected pursuant to the bylaws of WALIPP and has the authority to make decisions, appoint the chief executive officer of WALIPP, and significantly influence operations. The WALIPP Board has primary accountability for the fiscal affairs of WALIPP.

WALIPP operates The Lawson Academy (the “Academy”) for boys and girls and a senior housing facility (the “Residence”), both located in Houston, Texas. WALIPP is supported through funds received from federal, state, and local governmental agencies, as well as from private donors including foundations, corporations, and other nonprofit organizations.

The Lawson Academy Real Estate Co. (“Real Estate Co.”) was formed as a supporting organization and for the exclusive benefit of WALIPP in May 2017. WALIPP is the sole member of Real Estate Co. Real Estate Co. is governed by a separate Board of Directors comprised of five members, of which three are also members of the WALIPP Board. Upon the dissolution of Real Estate Co., its assets and liabilities will be distributed to WALIPP.

In June 2019, the WALIPP Board approved a fiscal year change for WALIPP. Accordingly, WALIPP has filed the applicable forms and notified the Texas Education Agency (TEA) of the fiscal year change to start with the fiscal year beginning July 1, 2020.

Corporate Operations

The Academy was organized in 2001 to provide educational services to students in the 6th through 8th grades. In 2011, the Texas State Board of Education granted the Academy an open-enrollment charter pursuant to Chapter 12 of the Texas Education Code. Subsequently, the Academy was operated in accordance with the program described in the charter application approved by the State Board of Education and the terms of the applicable Contract for Charter. The Academy’s programs, services, activities, and functions are governed by the WALIPP Board. The Academy is part of the public school system of the State of Texas and is, therefore, entitled to distributions from the State’s available school fund. The Academy does not have the authority to impose ad valorem taxes on its district or to charge tuition.

The Residence was constructed in 2003 and is a four-story structure with 42 two-bedroom apartments and eight one-bedroom apartments designed for independent living by adults 55 and older, of which 26 of the apartments are designated for low-income and very low-income adults.

In July 2017, Real Estate Co. acquired real and personal property from the Residence for the development and construction of Academy’s new school facility (the “school”) located in Houston, Texas. In September 2017, Real Estate Co. entered into an operating lease agreement with the Academy for the use of the school’s land and facilities.



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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Principles of Consolidation

The consolidated financial statements include the accounts of WALIPP and Real Estate Co. (together, the “Organization”). All intercompany accounts and transactions have been eliminated in consolidation.

Basis of Accounting and Presentation

The consolidated financial statements of the Organization are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).

Net Asset Classification

Net assets, revenue, gains, and losses are classified based on the existence or absence of donor-imposed restrictions, as follows:

Net assets without donor restrictions are not subject to donor-imposed restrictions even though their use may be limited in other respects such as by contract or board designation.

Net assets with donor restrictions are subject to donor-imposed restrictions. Restrictions may be temporary in nature, such as those that will be met by the passage of time or use for a purpose specified by the donor, or may be perpetual in nature, where the donor stipulates that resources be maintained in perpetuity. Net assets are released from restrictions when the stipulated time has elapsed, or purpose has been fulfilled, or both. Contributions of long-lived assets and of assets restricted for acquisition of long-lived assets are released when those assets are placed in service.

Support and Revenue

Grants are recognized as revenue when eligible expenditures are incurred. Restricted grant revenues whose restrictions are met in the same year as received are shown as revenues without donor restrictions on the consolidated statements of activities.

Contributions are recognized as revenue when an unconditional promise to give is received and is recorded as net assets without donor restrictions or net assets with donor restrictions depending on the absence or existence of any restrictions. Contributions that are restricted by the donor are reported as increases in net assets without donor restrictions if the restrictions expire in the fiscal year in which the contributions are recognized. Donor-restricted contributions are reported as increases in net assets with donor restrictions. When a restriction expires, that is, when a stipulated time restriction ends or purpose of restriction is accomplished, net assets with donor restrictions are reclassified to net assets without donor restrictions and reported in net assets released from restrictions on the consolidated statements of activities.



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Property rental income is recognized on a straight-line basis of the total required rental payments over the lease term. Contributed Services and In-Kind Gifts Contributed services and in-kind gifts are recognized at fair value when an unconditional commitment is received from the donor. Contributions of services are recognized when services received (a) create or enhance nonfinancial assets or (b) require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation. A substantial number of volunteers have contributed significant amounts of time in connection with programs, administration, and fundraising for which no amount has been recorded in the financial statements because the services did not meet the criteria for recognition under US GAAP. Restricted Cash Restricted cash consists of funds received for state and federal grants, donor funds received for capital expenditures under a conditional contribution, and lender funds received for capital expenditures under a debt agreement (Note 7). Funds received are required to be maintained in separate bank accounts. Contributions Receivable Contributions receivable that are expected to be collected within one year are reported at net realizable value. Contributions receivable that are expected to be collected in future years are discounted to estimate the present value of future cash flows.

Allowance for Uncollectible Accounts

An allowance for contributions receivable is provided when it is believed balances may not be collected in full. It is WALIPP’s policy to write off receivables against the allowance when management determines the receivable will not be collected. The amount of bad debt expense or loss on contributions receivable recognized each period and the resulting adequacy of the allowance at the end of each period are determined using a combination of historical loss experience and individual account-by-account analysis of receivable balances. It is possible that management’s estimate regarding the collectability of the balances will change in the near term resulting in a change in the carrying value of these receivables. At August 31, 2019 and 2018, management determined no allowance for uncollectible accounts was considered necessary.



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Capital Assets

Capital assets are recorded at cost. The Organization has no donated capital assets to be valued. Improvements or betterments of a permanent nature are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. The cost of assets retired or otherwise disposed of and the related accumulated depreciation are eliminated from the accounts in the year of disposal. Gains or losses resulting from capital asset disposals are credited or charged to operations currently. Capital assets are depreciated using the straight-line method over the estimated useful lives of the respective classes of assets. Income Taxes

The Organization is a nonprofit organization that is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code (“IRC”). WALIPP currently has no taxable unrelated business income. Accordingly, no provision for income taxes has been recorded. Management has evaluated the Organization’s tax positions and concluded that the Organization has taken no uncertain tax positions that require adjustment to the consolidated financial statements. In 2019 and 2018, the Organization had no tax-related interest or penalties included in the consolidated statements of activities. With few exceptions, the Organization is no longer subject to U.S. federal or state income tax examinations by tax authorities for years before 2016. Functional Allocation of Expenses

Expenses are reported by their functional classification as program services or supporting activities. Program services are the direct conduct or supervision of activities that fulfill the purposes for which the Organization exists. Fundraising activities include the solicitation of contributions of money, securities, materials, facilities, other assets, and time. Management and general activities are not directly identifiable with specific program or fundraising activities. Expenses that are attributable to more than one activity are allocated among the activities benefitted. Salaries and related costs are allocated on the basis of estimated effort expended. Depreciation of building and improvements and interest expense are allocated based on square footage. Estimates

The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management believes that these estimates and assumptions provide a reasonable basis for the fair presentation of the consolidated financial statements.



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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606). The ASU supersedes the revenue recognition requirements or most exchange transactions not specifically covered by other guidance. It does not apply to contributions. The core principle of the new guidance is that an entity should recognize revenue in an amount that reflects the consideration to which it expects to be entitled in exchange for transferred goods or services and established a 5-step process to determine when revenue is recognized. WALIPP is required to apply the amendments in its financial statements for the year ended August 31, 2020. Management expects the impact to be primarily additional disclosures.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires the identification of arrangements that should be accounted for as leases by lessees. In general, for operating or financing lease arrangements exceeding a twelve-month term, a right-of-use asset and a lease obligation will be recognized on the statement of financial position of the lessee while the statement of activities will reflect lease expense for operating leases and amortization/interest expense for financing leases. ASU 2016-02, as further amended by ASU 2019-10, is effective for annual reporting periods beginning after December 15, 2020, with early adoption permitted. Management has not evaluated the impact ASU 2016-02 will have on the Organization’s consolidated financial statements. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash (Topic 230). ASU 2016-18 applies to all entities that have restricted cash or restricted cash equivalents and are required to present a statement of cash flows under Topic 230. The amendments require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. ASU 2016-18 is effective for annual reporting periods beginning after December 15, 2018. Management has not evaluated the impact ASU 2016-18 will have on the Organization’s consolidated financial statements. In June 2018, the FASB issued ASU 2018-08, Not-for-Profit Entities: Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made (Topic 958). The amendments in this ASU clarify and improve current guidance about whether a transfer of assets (or the reduction, settlement, or cancellation of liabilities) is a contribution or an exchange transaction and provides additional guidance on determining whether a contribution is conditional or unconditional. WLIPP is required to apply the amendments in its consolidated financial statements for the year ended August 31, 2020. The amendments should be applied on a modified prospective basis, but retrospective application also is permitted. Management anticipates that adoption may impact the classification of certain transactions and require additional disclosures.



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NOTE 2 - ADOPTION OF ACCOUNTING STANDARDS UPDATE 2016-14 The Organization adopted the amendments of ASU 2016-14, Presentation of Financial Statements of Not-for-Profit Entities, as of and for the year ended August 31, 2019. These amendments have been applied on a retrospective basis to the consolidated financial statements for the year ended August 31, 2018, except that information regarding liquidity and availability of resources has been omitted as permitted by the ASU. Adoption of this ASU resulted in reclassification of previously reported activities and net assets to conform to the 2019 presentation but had no impact on total net assets or total changes in net assets for 2018. NOTE 3 - LIQUIDITY AND AVAILABILITY OF RESOURCES Financial assets available for general expenditure, that is, without donor or other restrictions limiting their use, within one year of August 31, 2019 comprise the following: Cash and cash equivalents $725,661 Contributions receivable 128,408 Total financial assets available for general expenditure $854,069 For purposes of analyzing resources available to meet general expenditures over a 12-month period, the Organization considers all expenditures related to its ongoing program activities, as well as the conduct of services undertaken to support those activities, to be general expenditures. General expenditures do not include capital projects funded by capital campaigns.

In addition to the financial assets available to meet general expenditures, the Organization anticipates collecting sufficient revenue to cover general expenditures not covered by donor-restricted resources. As part of the liquidity management practices, the Organization structures its financial assets to be available as its general expenditures, liabilities, and other obligations become due by maintaining a significant portion of its assets in cash. NOTE 4 - CONTRIBUTIONS RECEIVABLE Contributions receivable at August 31, 2019 and 2018 consist of the following: 2019 2018

TEA $ 63,267 $ 67,310 Foundation 62,500 162,500 Other 15,141 10,074 $140,908 $239,884



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NOTE 4 - CONTRIBUTIONS RECEIVABLE (CONTINUED) 2019 2018

Contributions receivable, due in: Less than one year $128,408 $177,384 One to five years 12,500 62,500 $140,908 $239,884 NOTE 5 - CAPITAL ASSETS Capital assets consist of the following at August 31, 2019 and 2018: Useful Lives 2019 2018 Land $ 5,862,083 $ 5,862,083 Building and improvements 5 - 40 years 10,076,273 9,769,017 Furniture and equipment 3 - 5 years 333,422 305,207 Construction in progress - 123,844 16,271,778 16,060,151 Less: Accumulated depreciation 2,233,930 1,913,966 $14,037,848 $14,146,185 Construction in progress represents costs incurred on building and improvements that were not completed and placed in service as of August 31, 2018. The construction in progress was completed in 2019. NOTE 6 - NOTE RECEIVABLE The Organization has an agreement under the New Markets Tax Credit (“NMTC”) program that resulted in a note receivable agreement between the Organization and the Lawson Academy Investment Fund, LLC (“Investment Fund”), an unrelated third-party. Interest, only, is due quarterly at 1% through the first principal balloon payment of $3 million in July 2024. Prior to July 2024, no prepayments of principal are allowed. Beginning September 2024, principal and interest payments of $51,809 are due quarterly through the maturity date in July 2047. Payments to the Organization are made only from distribution funds received by the Investment Fund from TMF Sub-CDE 31, LLC (“TMF Sub-CDE”) and Wells Fargo Community Development Enterprise Round 12 Subsidiary 16, LLC (“WFCDE”), the direct and indirect lenders, respectively, of four notes payable between the lenders and Real Estate Co. The note receivable is collateralized by a first-priority assignment of and security interest in TMF Sub-CDE and WFCDE. At August 31, 2019 and 2018, the note receivable due from the Investment Fund is $7,253,300.



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NOTE 7 - NOTES PAYABLE

Notes payable consist of the following at August 31, 2019 and 2018:

2019 2018

Note; payable to a financial institution in monthly installments of $6,252, including interest at 4.99%, maturing June 2026, collateralized by an interest in the senior housing facility, net of unamortized debt issuance costs of $3,246 and $3,721 at August 31, 2019 and 2018, respectively.* $ 851,240 $ 884,162

Construction note; payable to a nonprofit corporation; only interest due monthly at 6% through January 2018; subsequently, principal and interest due in monthly installments of $14,329; maturing July 2024; collateralized by a first lien deed of trust on certain real property and substantially all assets of the Organization; net of unamortized debt issuance costs of $17,560 and $21,131 at August 31, 2019 and 2018, respectively.** 1,896,388 1,948,110

Four notes; payable to TMF Sub-CDE and Renaissance New Markets Fund, LLC (“Renaissance”), two separate community development entities; only interest due quarterly at 1.11683% through the first principal balloon payment of $3 million in July 2024; beginning September 2024, principal and interest due in quarterly installments of $91,932; maturing July 2047; collateralized by a leasehold deed of trust against the school and interest in the land and certain deposit accounts restricted for capital expenditures*** (Note 1). Principal prepayments are not allowed until July 2024. 10,435,000 10,435,000

Total, net of debt issuance costs of $20,806 and $24,852 at August 31, 2019 and 2018, respectively 13,182,628 13,267,272 Less: Current maturities 87,856 82,834

$13,094,772 $13,184,438

Future maturities of the notes payable, net of debt issuance costs, at August 31, 2019 are as follows:

For the Year Ending August 31: 2020 $ 87,856 2021 93,172 2022 98,798 2023 104,752 2024 4,693,269 Thereafter 8,104,781

$13,182,628



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NOTE 7 - NOTES PAYABLE (CONTINUED)

Amortization of debt issuance costs is included in interest expense on the consolidated statements of activities. *The senior housing facility is included in building and improvements and was constructed with $1.3 million in federal funds passed through from the City of Houston, Texas (the “City”). Per the terms of the grant agreement with the City, the facility is subject to a minimum affordability period of 20 years, terminating in December 2024. During the affordability period, the Organization is required to designate 26 apartment units of the total 50 residential rental units on a continuous basis for low-income and very low-income adults age 55 and older. The facility may not be mortgaged or used as collateral, sold, or otherwise transferred to another party without the written permission of the City. Title to the facility vests with the Organization. **The proceeds of the note payable were provided from the Credit Enhancement of Charter School Facilities Program authorized by Title V, Part B, Subpart 2 of the No Child Left Behind Act. In accordance with the note agreement, the Academy must remain a charter school during the note term and comply with applicable federal, state, and local laws and regulations as they relate to the application, acceptance, and use of the proceeds. ***The deposit accounts restricted for capital expenditures are included in a Construction Monitoring and Disbursement Agreement (“Disbursement Agreement”). In accordance with the Disbursement Agreement, reserve funds of $315,000 from WALIPP and loan proceeds from TMF Sub-CDE and Renaissance were deposited into a deposit account (“Disbursement Account”). Two other separate deposit accounts were established for the benefit of TMF Sub-CDE and Renaissance (collectively, “Lenders”). These deposit accounts hold funds for compliance with NMTC covenants and use for future improvements and other costs, as determined by the Lenders. After final payment and satisfaction of all obligations under the note payable agreements, the remaining funds will be released to the Organization. The deposit accounts are held at Wells Fargo, the servicer of the Disbursement Agreement. NOTE 8 - NET ASSETS WITH DONOR RESTRICTIONS Substantially all of the net assets with donor restrictions are related to a $4,730,000 grant received from the City to acquire land for the current site of Academy’s new school. In accordance with the grant agreement, the Organization is subject to a five-year, restricted-use period of the land and campus terminating May 2023. During the restricted-use period, the Organization is required to have at least 51% of low-income families comprise the student population and will not sell, transfer, or assign its interest in the land and campus without the City’s written approval. The City holds a deed of trust on the land subordinate to the construction note (Note 7). Upon a violation of the grant’s restrictions, the Organization may be required to pay the grant funds plus accrued interest at 6% to the City. At the end of the restricted-use period, the deed of trust and the net assets with donor restrictions will be released.



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NOTE 8 - NET ASSETS WITH DONOR RESTRICTIONS (CONTINUED) Net assets with donor restrictions consist of the following at August 31, 2019 and 2018:

2019 2018

Subject to the passage of time: Land $4,730,000 $4,730,000 Subject to expenditure for a specific purpose: TEA federal and state grants 653,731 589,260 Promises to give 62,500 162,500

$5,446,231 $5,481,760 Net assets were released from restrictions during 2019 and 2018 by incurring expenses satisfying the restricted purpose, as follows:

2019 2018

Satisfaction of purpose restrictions: TEA federal and state grants $2,555,638 $2,586,974 Promises to give 100,000 50,000

$2,655,638 $2,636,974 NOTE 9 - CONDITIONAL CONTRIBUTION Through December 2017, the Organization had a lead challenge grant up to, but not exceeding, $1 million for a capital campaign to raise funds for the design, construction, and furnishing of the Academy’s new school. Matching contributions were paid to the Organization in increments of $50,000. In accordance with the challenge grant agreement, capital campaign funds were deposited in a separate bank account used only for payment of capital expenditures (Note 1). During the year ended August 31, 2018, the challenge grant was met and total matching contributions of $1 million had been received, including approximately $500,000 received in 2018. NOTE 10 - PENSION PLAN OBLIGATION The Academy’s full-time employees participate in the Teacher Retirement System of Texas (“TRS”), a public employee retirement system. TRS is a cost-sharing, multiple-employer, defined benefit pension plan and is qualified under Section 401(a) of the IRC. The TRS issues a publicly available financial report that includes financial statements and required supplementary information for the pension plan. That report may be obtained by writing the TRS Communications Department, 1000 Red River Street, Austin, Texas 78701, by calling the TRS Communications Department at 1-800-223-8778, or by downloading the report from the TRS website, www.trs.texas.gov.



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NOTE 10 - PENSION PLAN OBLIGATION (CONTINUED) For each year ended August 31, 2019 and 2018, plan members contributed 7.7% of their annual covered salary; the Academy and the State of Texas contributed 6.8%; and the Academy made a 1.5% non-OASDI surcharge payment for all TRS eligible employees. For 2019 and 2018, the Academy contributed $49,107 and $46,502, respectively, which does not represent more than 5% of the TRS plan’s total contributions for each year. The risks of participating in a multiemployer defined benefit plan are different from single-employer plans because (a) amounts contributed to a multiemployer plan by one employer may be used to provide benefits to employees of other participating employers and (b) if an employer stops contributing to TRS, unfunded obligations of TRS may be required to be borne by the remaining employers. There is no withdrawal penalty for leaving TRS. As of August 31, 2019 and 2018, total TRS plan assets were $181.8 billion and $176.9 billion, respectively; and accumulated benefit obligations were $210.0 billion and $209.6 billion, respectively. The plan was 76.40% and 76.90% funded at August 31, 2019 and 2018, respectively. NOTE 11 - POSTRETIREMENT HEALTH CARE BENEFIT Plan Description The Organization contributes to the Texas Public School Retired Employees Group Insurance Program (“TRS-Care”), a cost-sharing, multiple-employer, defined benefit Other Post-Employment Benefit plan administered by the Board of Trustees of TRS. The statutory authority for TRS-Care is the Texas Insurance Code, Chapter 1575. Under Section 1575.052, the Board of Trustees has the authority to establish basic and optional group insurance coverage for participants as well as amend benefit terms as needed. TRS-Care is funded on a pay-as-you-go basis and is subject to change based on available funding. The Texas Legislature determines the contribution rates for TRS-Care, and there is no continuing obligation to provide benefits beyond each fiscal year. Eligibility includes retirees from public schools, charter schools, regional service centers, and other educational districts who are members of the TRS pension system and have at least ten years of service credit in the TRS pension system. Retirees receive free basic health insurance coverage and may pay premiums for dependent coverage and participation in other insurance plans with more comprehensive benefits. Funding Policy Texas Insurance Code, Chapter 1575, Section 202 to 204 establishes state, active employee, and public school contribution rates. Funding for TRS-Care is provided by retiree premium contributions and contributions from the state, active employees, and participating employers based on active employee compensation. Public school contributions may not be less than 0.25% or greater than 0.75% of the



21

NOTE 11 - POSTRETIREMENT HEALTH CARE BENEFIT (CONTINUED) salary of each active employee. Contribution rates and amounts for fiscal year 2019 and 2018 are as follows: 2019 2018

Active Member: Rate 0.65% 0.65% Amount $7,755 $4,808 Academy: Rate 0.75% 0.75% Amount $8,999 $8,437 NOTE 12 - HEALTH CARE COVERAGE The 77th Texas Legislature enacted the Texas Active School Employees Uniform Group Benefits Act (H.B. 3343), establishing a statewide health coverage program for public school employees and their dependents. On September 1, 2002, TRS began administering this program, known as TRS-ActiveCare. For each year ended August 31, 2019 and 2018, the Organization contributed $225 per month per employee. The risk associated with this program is retained by the participants, and no risk is transferred to TRS, the Organization, or the State of Texas. NOTE 13 - COMMITMENTS AND CONTINGENCIES Operating Leases The Organization leases equipment under noncancelable operating leases that expire from May 2020 - January 2024. Future minimum lease payments of the operating leases are as follows: For the Year Ending August 31: 2020 $ 37,341 2021 28,080 2022 28,080 2023 28,080 2024 11,700 $133,281 For the years ended August 31, 2019 and 2018, rent expense was approximately $36,000 and $31,000, respectively.



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NOTE 13 - COMMITMENTS AND CONTINGENCIES (CONTINUED) Concentrations of Credit Risk Financial instruments, which potentially subject the Organization to concentrations of credit risk, consist principally of cash deposits in excess of federally insured limits. The Organization places its cash with financial institutions that are considered high quality financial institutions by the Organization’s management. At times, such cash investments may be in excess of federally insured limits. The Organization receives a large portion of its funding from the TEA. As of August 31, 2019 and 2018 and for each of the years then ended, TEA funding was approximately 45% and 28% of contributions receivable, respectively, and 79% and 59% of total support and revenue, respectively. An unforeseen loss of the charter agreement with TEA or changes in legislative funding could have a material effect on the ability of the Academy to continue to provide the current level of services to its students. The Organization receives funds through state and federal programs that are governed by various statutes and regulations. State program funding is based primarily on student attendance data submitted to the TEA and is subject to audit and adjustment. In addition, expenses charged to federal and state programs are subject to audit and adjustment by the grantor agencies. These funding sources may suspend payments, require reimbursement of expenses or return of funds, or both, as a result of noncompliance with the terms of their funding agreements. This could result in a liability or decrease of revenues for the Organization. Also, grants and contributions are funded annually and subject to annual funding renewals. In management’s opinion, the risk of these events occurring is minimal. NOTE 14 - SUBSEQUENT EVENTS Management has evaluated subsequent events through December 23, 2019, the date the consolidated financial statements were available to be issued. As a result of this evaluation, no events were identified that are required to be disclosed or would have a material impact on reported net assets or changes in net assets.

Real

WALIPP Estate Co. Debit Credit Total

Current Assets:Cash 661,922$ 63,739$ 1,274,593$ 1,274,593$ 725,661$

Restricted cash 410,364 281,263 - - 691,627

Contributions receivable 128,408 20,004 - 20,004 128,408

Total current assets 1,200,694 365,006 1,274,593 1,294,597 1,545,696

Noncurrent Assets:Contributions receivable 12,500 - - - 12,500

Capital assets, net 3,099,853 10,937,995 - - 14,037,848

Note receivable 7,253,300 - - - 7,253,300

10,365,653 10,937,995 - - 21,303,648

11,566,347$ 11,303,001$ 1,274,593$ 1,294,597$ 22,849,344$

WILLIAM A. LAWSON INSTITUTE FOR PEACE AND PROSPERITY AND SUBSIDIARYSCHEDULE OF CONSOLIDATING STATEMENT OF FINANCIAL POSITION INFORMATION

August 31, 2019

Eliminating Entries

ASSETS

23

Real


Current Liabilities:Accounts payable and accrued expenses 53,109$ 22,972$ 20,004$ -$ 56,077$

Current maturities of notes payable 87,856 - - - 87,856

Total current liabilities 140,965 22,972 20,004 - 143,933

Notes Payable, net of current maturities 2,659,772 10,435,000 - - 13,094,772

Net Assets:Without donor restrictions 3,319,379 845,029 - - 4,164,408

With donor restrictions 5,446,231 - - - 5,446,231

Total net assets 8,765,610 845,029 - - 9,610,639

11,566,347$ 11,303,001$ 20,004$ -$ 22,849,344$


Eliminating Entries

August 31, 2019

WILLIAM A. LAWSON INSTITUTE FOR PEACE AND PROSPERITY AND SUBSIDIARYSCHEDULE OF CONSOLIDATING STATEMENT OF FINANCIAL POSITION INFORMATION (CONTINUED)

24

Real


Changes in Net Assets Without Donor Restrictions:

Support and Revenue:Contributions 50,330$ 1,034,593$ 1,034,593$ -$ 50,330$

Property rental income 481,110 240,000 240,000 - 481,110

Interest 73,030 - - - 73,030

Other 76,220 885 - - 77,105

680,690 1,275,478 1,274,593 - 681,575

Net assets released from restrictions 2,655,638 - - - 2,655,638

Total support and revenue 3,336,328 1,275,478 1,274,593 - 3,337,213

Expenses:Program services:

Senior housing operations 296,091 - - - 296,091

Charter school operations 2,589,488 - - 240,000 2,349,488

Total program services 2,885,579 - - 240,000 2,645,579

Supporting services:

Management and general 1,438,327 349,661 - 1,034,593 753,395

Fundraising 12,662 - - - 12,662

Total supporting services 1,450,989 349,661 - 1,034,593 766,057

Total expenses 4,336,568 349,661 - 1,274,593 3,411,636

Change in net assets without donor restrictions (1,000,240) 925,817 1,274,593 (1,274,593) (74,423)

WILLIAM A. LAWSON INSTITUTE FOR PEACE AND PROSPERITY AND SUBSIDIARYSCHEDULE OF CONSOLIDATING STATEMENT OF ACTIVITIES INFORMATION


Eliminating Entries

25

Real


Changes in Net Assets with Donor Restrictions Support and Revenue:

Federal grants 500,951$ -$ -$ -$ 500,951$

State grants 2,119,158 - - - 2,119,158

2,620,109 - - - 2,620,109

Net assets released from restrictions (2,655,638) - - - (2,655,638)

Total support and revenue (35,529) - - - (35,529)

Change in net assets with donor restrictions (35,529) - - - (35,529)

Change in net assets (1,035,769) 925,817 1,274,593 (1,274,593) (109,952)

Net assets, beginning of year:Without donor restrictions 4,319,619 (80,788) - - 4,238,831


Total net assets, beginning of year 9,801,379 (80,788) - - 9,720,591

Net assets, end of year:Without donor restrictions 3,319,379 845,029 1,274,593 (1,274,593) 4,164,408


Total net assets, end of year 8,765,610$ 845,029$ 1,274,593$ (1,274,593)$ 9,610,639$

SCHEDULE OF CONSOLIDATING STATEMENT OF ACTIVITIES INFORMATION (CONTINUED)For the Year Ended August 31, 2019

Eliminating Entries


26

Real


Cash Flows from Operating Activities:State grant receipts 2,103,643$ -$ -$ -$ 2,103,643$

Federal grant receipts 520,509 - - - 520,509

Property rental receipts 481,110 240,000 - 240,000 481,110

Contribution receipts 150,330 1,034,593 - 1,034,593 150,330

Interest received 73,030 - - - 73,030

Receipts from miscellaneous sources 71,153 885 - - 72,038

Payments to vendors for goods and services rendered (1,385,534) (14,014) 240,000 - (1,159,548)

Payments to or on behalf of employees for services rendered (1,619,930) - - - (1,619,930)

Interest paid (162,472) (116,541) - - (279,013)

Contributions paid (1,034,593) - 1,034,593 - -

Net cash provided by (used in) operating activities (802,754) 1,144,923 1,274,593 1,274,593 342,169

Cash Flows from Investing Activities:Restricted cash 42,780 89,334 - - 132,114

Purchase of capital assets (277,340) - - - (277,340)

Net cash provided by (used in) investing activities (234,560) 89,334 - - (145,226)

Cash Flows from Financing Activities:Proceeds from (payments on) intercompany account 1,186,827 (1,186,827) - - -

Payments on notes payable (29,351) (55,293) - - (84,644)

Net cash provided by (used in) financing activities 1,157,476 (1,242,120) - - (84,644)

Net increase (decrease) in cash 120,162 (7,863) 1,274,593 1,274,593 112,299

Cash, beginning of year 541,760 71,602 - - 613,362

Cash, end of year 661,922$ 63,739$ 1,274,593$ 1,274,593$ 725,661$

WILLIAM A. LAWSON INSTITUTE FOR PEACE AND PROSPERITY AND SUBSIDIARYSCHEDULE OF CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION


Eliminating Entries

27

Real



by Operating Activities:Change in net assets (1,035,769)$ 925,817$ 1,274,593$ 1,274,593$ (109,952)$


cash provided by (used in) operating activities:

Depreciation 136,567 219,110 - - 355,677


Contributions receivable 98,976 - - - 98,976

Accounts payable and accrued expenses (2,528) (4) - - (2,532)

Net cash provided by (used in) operating activities (802,754)$ 1,144,923$ 1,274,593$ 1,274,593$ 342,169$

WILLIAM A. LAWSON INSTITUTE FOR PEACE AND PROSPERITY AND SUBSIDIARYSCHEDULE OF CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION (CONTINUED)


Eliminating Entries

28

2019 2018

Current Assets:Cash 743,967$ 676,205$

Due from Texas Education Agency 63,267 67,310

Total current assets 807,234 743,515

Capital Assets, net 40,801 28,575

848,035$ 772,090$

Current Liabilities:Accounts payable and accrued expenses 21,626$ 38,383$

Total current liabilities 21,626 38,383

Net Assets:Without donor restrictions 172,678 144,447

With donor restrictions 653,731 589,260

826,409 733,707

848,035$ 772,090$

THE LAWSON ACADEMYSTATEMENTS OF FINANCIAL POSITION

August 31, 2019 and 2018

ASSETS


29

Without Donor With Donor Without Donor With DonorRestrictions Restrictions Total Restrictions Restrictions Total

Revenues:Local support:

5744 Gifts and bequests 6,629$ -$ 6,629$ 10,100$ -$ 10,100$ 5749 Other revenues from local sources 55,452 - 55,452 32,067 - 32,067

62,081 - 62,081 42,167 - 42,167

State program revenues:5811 Per capital apportionment - 104,290 104,290 - 46,467 46,467 5812 Foundation School Program

Act entitlements - 2,006,186 2,006,186 - 2,174,325 2,174,325

5829 State program revenues distributed by

the Texas Education Agency - 8,682 8,682 - 31,611 31,611

- 2,119,158 2,119,158 - 2,252,403 2,252,403

Federal program revenues:5921 School breakfast program - 26,741 26,741 - 28,361 28,361 5922 National school lunch program - 87,224 87,224 - 83,818 83,818 5929 Federal revenues distributed by the

Texas Education Agency - 386,986 386,986 - 137,302 137,302 5949 Federal revenues distributed by State

of Texas government agencies - - - - 111,215 111,215

- 500,951 500,951 - 360,696 360,696

Net assets released from restrictions:Restrictions satisfied by payments 2,555,638 (2,555,638) - 2,586,974 (2,586,974) -

Total revenues 2,617,719 64,471 2,682,190 2,629,141 26,125 2,655,266

THE LAWSON ACADEMYSTATEMENTS OF ACTIVITIES


2019 2018

30

Without Donor With Donor Without Donor With Donor

Restrictions Restrictions Total Restrictions Restrictions Total

Expenses:11 Instruction 1,239,418$ -$ 1,239,418$ 1,325,808$ -$ 1,325,808$ 13 Curriculum development and

instructional staff development 82,129 - 82,129 1,205 - 1,205 23 School leadership 157,930 - 157,930 188,410 - 188,410 34 Student (pupil) transportation 190,723 - 190,723 180,573 - 180,573 35 Food services 157,243 - 157,243 200,069 - 200,069 36 Cocurricular/extracurricular activities 20,042 - 20,042 23,753 - 23,753 41 General administration 208,560 - 208,560 238,221 - 238,221 51 Plant maintenance and operations 460,223 - 460,223 429,823 - 429,823 52 Security and monitoring services 36,980 - 36,980 - - - 53 Data processing services 36,240 - 36,240 37,085 - 37,085

Total expenses 2,589,488 - 2,589,488 2,624,947 - 2,624,947

Loss on retirement of capital assets - - - 56,000 - 56,000

Change in net assets 28,231 64,471 92,702 (51,806) 26,125 (25,681)

Net assets, beginning of year 144,447 589,260 733,707 196,253 563,135 759,388

Net assets, end of year 172,678$ 653,731$ 826,409$ 144,447$ 589,260$ 733,707$

THE LAWSON ACADEMYSTATEMENTS OF ACTIVITIES (CONTINUED)


2019 2018

31

2019 2018

Cash Flows from Operating Activities:State grant receipts 2,103,643$ 2,250,731$

Federal grant receipts 520,509 348,331

Contribution receipts 6,629 10,100

Receipts from miscellaneous sources 55,452 49,896

Payments to vendors for goods and services rendered (1,125,168) (1,181,335)

Payments to or on behalf of employees for services rendered (1,449,353) (1,415,634)

Net cash provided by operating activities 111,712 62,089

Cash Flows from Investing Activities:Purchase of capital assets (43,950) (30,014)

Net cash used in investing activities (43,950) (30,014)

Net increase in cash 67,762 32,075

Cash, beginning of year 676,205 644,130

Cash, end of year 743,967$ 676,205$

THE LAWSON ACADEMYSTATEMENTS OF CASH FLOWS


32

2019 2018


by Operating Activities:Change in net assets 92,702$ (25,681)$


cash provided by operating activities:

Depreciation 31,724 23,470

Loss on retirement of capital assets - 56,000


Due from Texas Education Agency 4,043 (14,037)

Other receivables - 15,462

Other current assets - 2,367

Accounts payable and accrued expenses (16,757) 4,508

Net cash provided by operating activities 111,712$ 62,089$


THE LAWSON ACADEMYSTATEMENTS OF CASH FLOWS (CONTINUED)

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2019 2018

Expenses:6100 Payroll costs 1,449,353$ 1,435,188$

6200 Professional and contracted services 953,558 935,682

6300 Supplies and materials 72,526 128,163

6400 Other operating costs 114,051 125,914

Total expenses 2,589,488$ 2,624,947$

THE LAWSON ACADEMYSCHEDULES OF EXPENSES


34

Local State Federal

2019

1539 Furniture and equipment 34,654$ 78,856$ 129,853$

34,654 78,856 129,853

Less: accumulated depreciation

1573 Furniture and equipment 34,654 38,055 129,853

34,654 38,055 129,853

Total capital assets, net -$ 40,801$ -$

Local State Federal

2018

1539 Furniture and equipment 70,366$ 34,906$ 129,853$

70,366 34,906 129,853

Less: accumulated depreciation

1573 Furniture and equipment 59,028 17,669 129,853

59,028 17,669 129,853

Total capital assets, net 11,338$ 17,237$ -$

Ownership Interest

Ownership Interest

THE LAWSON ACADEMYSCHEDULES OF CAPITAL ASSETS

August 31, 2019 and 2018

35

Variance from

Original Final Actual Final Budget

Revenues:5700 Local and intermediate sources 65,000$ 24,000$ 62,081$ (38,081)$

5800 State program 2,219,760 2,043,760 2,119,158 (75,398)

5900 Federal program 257,197 515,403 500,951 14,452

Total revenues 2,541,957 2,583,163 2,682,190 (99,027)

Expenses:11 Instruction 1,153,401 1,257,398 1,239,418 17,980

13 Curriculum development and instructional staff development 74,350 70,715 82,129 (11,414)

23 School leadership 165,046 159,746 157,930 1,816

34 Student (pupil) transportation 199,800 190,722 190,723 (1)

35 Food services 128,300 157,405 157,243 162

36 Cocurricular/extracurricular activities 20,000 20,043 20,042 1

41 General administration 291,032 227,573 208,560 19,013

51 Plant maintenance and operations 408,830 464,330 460,223 4,107

52 Security and monitoring services 54,160 37,082 36,980 102

53 Data processing services 36,340 42,320 36,240 6,080

Total expenses 2,531,259 2,627,334 2,589,488 37,846

Change in net assets 10,698 (44,171) 92,702 (136,873)

Net assets, beginning of year 596,341 669,961 733,707 (63,746)

Net assets, end of year 607,039$ 625,790$ 826,409$ (200,619)$

THE LAWSON ACADEMYBUDGETARY COMPARISON SCHEDULE


Budgeted Amounts

36

THE LAWSON ACADEMY BUDGETARY COMPARISON SCHEDULE (CONTINUED)

For the Year Ended August 31, 2019 (UNAUDITED)

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MATERIAL BUDGET VARIANCE REVENUE

(1) The following is an explanation of the 10% variances from original budget to final budget of revenue reported on the Budgetary Comparison Schedule for the year ended August 31, 2019. Object 5700 – Donations for the construction of the school were not recorded to the Academy. Object 5900 – The Academy received the unbudgeted 2018–2019 School Transformation grant from the TEA in the amount of $250,000.

MATERIAL BUDGET VARIANCE EXPENDITURES

(1) The following is an explanation of the 10% variances from original budget to final budget of expenses reported on the Budgetary Comparison Schedule for the year ended August 31, 2019. Function 35 – An unexpected increase in food service cost from the Academy’s food service vendor. Function 41 – Depreciation, staff, and general supply costs were lower than expected. Function 51 – Additional work performed on the school building to meet compliance requirements with the Texas Department of Licensing and Regulation. Function 52 – Decrease in bus monitors during the 2018-2019 school year. Function 53 – Additional expenditures expected for computers, a telephone system, and camera system repairs.

MATERIAL BUDGET VARIANCE REVENUE

(1) The following is an explanation of the 10% variances from final budget to actual revenue reported on the Budgetary Comparison Schedule for the year ended August 31, 2019.

Object 5700 – Correcting the acquisition of laptops with funds received and improperly expensed in 2018.

MATERIAL BUDGET VARIANCE EXPENDITURES

(1) The following is an explanation of the 10% variances from final budget to actual expenses reported on the Budgetary Comparison Schedule for the year ended August 31, 2019.

Function 13 – Full time employee hired to prepare the Academy’s curriculum for assisting in the improvement of student test scores. Function 53 – Anticipated expenditures for computers, a telephone system, and camera system repairs did not occur.

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SCHEDULE OF FINDINGS AND QUESTIONED COSTS For the Year Ended August 31, 2019

Summary of Auditor’s Results

1. The auditor’s report expresses an unmodified opinion on the consolidated financial statements of William A. Lawson Institute for Peace and Prosperity and Subsidiary (the “Organization”).

2. There are no material weaknesses or significant deficiencies disclosed during the audit of the Organization’s consolidated financial statements.

3. No instances of noncompliance material to the consolidated financial statements of the Organization were disclosed during the audit.

Findings - Financial Statements Audit

None

WILLIAM A. LAWSON INSTITUTE FOR PEACE AND ......William A. Lawson Institute for Peace and Prosperity...

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