Robert Arredondo of Clifton Larson Allen (CLA) presented the results of the fiscal year 2024–25 audit. He reported that the audit was successful and thanked Scholarship Prep staff, including Jason, Sarah, and the Charter Impact team, for their support and timely cooperation throughout the audit process.

Key audit results included:

• One immaterial audit adjustment related to an expense accrual; no material adjustments were required.
• No uncorrected misstatements were identified.
• The financial statement audit received an unmodified (clean) opinion.
• The state compliance audit also received an unmodified opinion.
• The federal single audit, including testing of the Child Nutrition Cluster, resulted in an unmodified opinion with no material weaknesses or deficiencies.

Financial highlights presented:

• Current ratio of 2.0 at the consolidated level, meeting standard benchmarks.
• Months of cash on hand within the healthy range of 3–6 months.
• Net increase in cash of approximately $1.5 million.
• Functional expense allocation fell within expected norms, with approximately 70–80% allocated to program services.

Additional notes:

• Riverside and Upland school sites were included in the audit due to startup-year activity.
• Investments are now presented as a separate line item due to securities held in school accounts.
• No governance issues or audit findings were noted in the required governance communication letter.

Mr. Arredondo also provided a brief overview of upcoming compliance considerations, including:

• Transitional Kindergarten (TK) staffing ratio changes.
• Attendance recovery options, including Saturday school and short-term independent study.
• Immunization testing requirements (Tdap).
• Comprehensive School Safety Plan audit requirements.
• Proposed audit guide changes, including LCAP adoption timing requirements.
• SB 414 was vetoed by the Governor and will not impact the current audit cycle.

Board chair, Charles Friedrichs, asked Robert before his presentation if there were any red flags, and Robert answered that there were no material audit adjustments, no uncorrected misstatements, and all audits resulted in unmodified (clean) opinions.

Charles also asked if the recommendations related to solar energy, cybersecurity, and similar services critical to the audit. Robert stated that they are optional, informational services offered by CLA and are not required components of the audit. While IT controls are reviewed during the audit, services such as penetration testing are not part of standard audit procedures.

David Olson from Charter Impact presented the financials through October 2025, reflecting the First Interim reports submitted to all authorizers. Overall, four of five campuses are trending positively with increased surpluses; Upland, a first-year campus, is projecting a deficit primarily due to enrollment, grant timing, and higher first-year operational costs. Oceanside, Orange County, and South Bay have strong cash positions. Riverside and Upland may require short-term borrowing during the year due to state payment timing; this is expected and manageable.

Charles asked if Riverside and Upland borrowing will need to meet a minimum standard or threshold. David and Jason Sitomer from Charter Impact stated that both schools maintain positive cash balances and any borrowing reflects state payment delays, not true cash shortfalls. Loans will be formally recorded once borrowing needs and repayment schedules are finalized.

It was also asked why are staffing costs at Upland not decreasing despite lower enrollment? David explained that Upland has a higher-than-anticipated special education population (18%), with significant student needs requiring additional support services, including six Registered Behavioral Technicians (RBTs), most of whom are contracted.

Charles asked if students with higher special education needs bring additional state funding, and Jason Sitomer answered that additional reimbursement is only available for “low-incidence” disabilities, which represent less than 1% of students statewide and are reimbursed through SELPA. Most students do not qualify.

Charles also asked if the former students from the prior school at the site enrolling at Upland. Jason Watts explained that the previous school served different grade levels and offered a different program. The enrollment growth is attributed to community outreach, word-of-mouth, and referrals from special education advocates.

Lastly, it was asked if additional support will be needed for special education services going forward. Jason Watts answered that leadership anticipates continued need for increased support and is actively exploring ways to provide additional resources across all campuses.

Executive Director Jason Watts provided the organization update. 

Funding and Enrollment Update

• The organization has historically secured grant funding to support operations, with the majority of this work led by Andrew, in coordination with Sarah.
• As student performance improves, leadership anticipates increased interest in Scholarship Prep schools, particularly in Inland Empire (IE) regions.
• Increased enrollment is expected to generate additional funding and expand support for students and families.
• Leadership continues to pursue supplemental funding opportunities alongside grant management efforts.

School and Community Engagement Highlights

• Leadership attended winter performances at multiple school sites. Oceanside site presented a Nutcracker-themed performance, noted for its professionalism and strong staff collaboration. Orange County (17th Street) performance was highlighted as the strongest to date, showcasing advanced choreography and execution.
• A Winter Wellness Event at the 17th Street campus drew over 700 attendees. The event was organized with extensive staff support and led by Kristen Crowe, along with Victor and Marissa. Numerous community partners participated, providing services, resources, food, and family activities. Attendance reached capacity, reflecting sustained growth and strong community engagement. A recap video will be shared at a future board meeting and is currently available on the organization’s LinkedIn page.

Foundation Support and Family Assistance

• The Scholarship Community Foundation continues to support students, families, and staff across the organization.
• Through coordinated outreach and needs identification, nearly 70 families received $100 gift cards to assist with essential needs during the break.
• Appreciation was expressed to foundation partners and staff for timely responses and effective coordination.

Charles asked Jason if parents becoming more aware of the Scholarship Community Foundation, how is the organization ensuring that support leads to long-term impact rather than short-term aid, and what process is in place to evaluate requests for assistance.

Jason answered that awareness is increasing, and the organization is also becoming more strategic in how assistance is provided. Leadership emphasized a “teach them how to fish” approach, focusing on sustainable support such as career training, resume building, and other skill-based opportunities to extend long-term impact. A formal application and vetting process was implemented over six months ago. Kristen and Victor review requests, with leadership consultation as needed. Support decisions may include approval, denial, or adjusted assistance based on individual circumstances.

The Board entered the closed session at 2:55 pm.

Board President, Charles Friedrichs, reported out of close session at 3:37 pm. There was nothing to report out of closed session.