NOBLE NETWORK OF CHARTER SCHOOLS, SUBSIDIARIES AND AFFILIATE CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION YEARS ENDED JUNE 30, 2018 AND 2017 NOBLE NETWORK OF CHARTER SCHOOLS, SUBSIDIARIES AND AFFILIATE YEARS ENDED JUNE 30, 2018 AND 2017 CONTENTS Page Independent auditors’ report 1-2 Consolidated financial statements: Statements of financial position 3-4 Statements of activities 5-6 Statements of functional expenses 7 Statements of cash flows 8-10 Notes to financial statements 11-36 Supplemental financial schedules: Consolidating schedules of financial position 37-40 Consolidating schedules of activities 41-44 Consolidating schedules of functional expenses 45-46 Schedules of functional expenses: Noble Network Support Team (NNST) 47 Noble Street College Prep 48 Rauner College Prep 49 Pritzker College Prep 50 Rowe Clark College Prep 51 Golder College Prep 52 Gary Comer College Prep 53 UIC College Prep 54 Muchin College Prep 55 Chicago Bulls College Prep 56 Johnson College Prep 57 Hansberry College Prep 58 DRW College Prep 59 Baker College Prep 60 Butler College Prep 61 ITW David Speer Academy 62 The Noble Academy 63 NOBLE NETWORK OF CHARTER SCHOOLS, SUBSIDIARIES AND AFFILIATE YEARS ENDED JUNE 30, 2018 AND 2017 CONTENTS (CONTINUED) Page Supplemental financial schedules: (continued) Schedules of functional expenses: (continued) Mansueto High School 64 Noble Day Care 65 Noble Network Education Foundation 66 Schedules of Activities – Summer of a Lifetime, A Noble Network Program 67 Schedule of PCTC tuition 68 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 69-70 Independent Auditors’ Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by the Uniform Guidance 71-73 Single Audit schedules: Schedule of expenditures of federal awards 74 Notes to schedule of expenditures of federal awards 75 Schedule of findings and questioned costs 76-77 Schedule of prior year findings and questioned costs 78 Independent Accountants’ Report on Compliance with Requirements of Applicable Laws and Regulations Prescribed by Administering Agency 79-80 Schedule of current year findings and prior year findings 81 Independent Auditors’ Report Board of Directors Noble Network of Charter Schools Report on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of Noble Network of Charter Schools, Subsidiaries and Affiliate (collectively referred to as the School), which comprise the consolidated statements of financial position as of June 30, 2018 and 2017, and the related consolidated statements of activities, functional expenses, and cash flows for the years then ended, and the related notes to the consolidated financial statements. Management’s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated 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 consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated 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 consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 1 NBC Tower, Suite 1500 | 455 N. Cityfront Plaza Drive | Chicago, IL 60611-5313 | O 312.670.7444 | F 312.670.8301 | ORBA.COM Independent Member of BKR International Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Noble Network of Charter Schools, Subsidiaries and Affiliate as of June 30, 2018 and 2017, and the changes in their net assets and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Other Information Our audits were conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The consolidating information on pages 37 through 66 is presented for additional analysis of the consolidated financial statements rather than to present the financial position, changes in net assets, and cash flows of the individual companies, and it is not a required part of the consolidated financial statements. The supplemental financial schedules on pages 67 and 68 are presented for the purpose of additional analysis and are also not a required part of the consolidated financial statements. The accompanying schedule of expenditures of federal awards, as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is presented for purposes of additional analysis and is also not a required part of the consolidated financial statements. Such information is the responsibility of management and except for the portion marked “unaudited”, was derived from and relates directly to the underlying accounting and other records used to prepare the consolidated financial statements. The information has been subjected to the auditing procedures applied in the audits of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the consolidated financial statements as a whole. The information marked “unaudited” on page 68 has not been subjected to the audit procedures applied in the audit of the consolidated financial statements and, accordingly, we do not express an opinion or provide any assurance on it. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 9, 2018, on our consideration of the School’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the School’s internal control over financial reporting and compliance. October 9, 2018 2 NOBLE NETWORK OF CHARTER SCHOOLS, SUBSIDIARIES AND AFFILIATE CONSOLIDATED STATEMENTS OF FINANCIAL POSITION June 30, 2018 2017 ASSETS Current assets: Cash $ 47,091,376 $ 51,647,306 Investments 29,850,000 Accounts receivable 4,184,284 9,289,351 Contributions receivable 781,857 7,613,673 Prepaid expenses 2,660,725 1,996,940 Cash - restricted by NMTC 2,504,804 10,399,174 Cash and investments - restricted by bond indenture 1,157,770 12,403,186 Investments - restricted for lease security deposit 361,332 Leverage loan notes receivable - NMTC 9,187,788 Total current assets 88,230,816 102,898,750 Property and equipment, net 108,200,133 108,491,523 Other assets: Contributions receivable, net of current portion 150,000 1,010,000 Investments - restricted for student scholarships 2,576,864 2,589,641 Leverage loan notes receivable - NMTC, net of current portion 24,918,422 24,878,829 Deposits 775,076 800,076 Total other assets 28,420,362 29,278,546