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Magnolia Public Schools tell LAUSD it is financially in order

Magnolia Public Schools tell LAUSD it is financially in order

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Magnolia Public Schools responds to LAUSD's letter to tell the district that it has its financial house in order and will be able to meet standards for student achievement at Magnolia Science Academies 6 and 7.
Magnolia Public Schools responds to LAUSD's letter to tell the district that it has its financial house in order and will be able to meet standards for student achievement at Magnolia Science Academies 6 and 7.

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Published by: Los Angeles Daily News on Jul 22, 2014
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07/22/2014

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Magnolia Public Schools
"#$%& '()*+, -./0 1&&2 3/4*5(,4*/67 8- $19:# ;< =>"?@ :$1A%&99 B< =>"?@ :$1A%&11
July 3, 2014 Charter Schools Division Los Angeles Unified School District 333 South Beaudry Avenue, 20
th
 Floor Los Angeles, CA 90017
RE: MAGNOLIA SCIENCE ACADEMY #6 (CDS #19647330117648) & MAGNOLIA SCIENCE ACADEMY
#7
(CDS
#19647330117655)
Dear Mr. Cole-Gutierrez, We have received and thoroughly reviewed the Charter School Division (CSD) report/ correspondence dated Friday, June 27, 2014 regarding Magnolia Science Academy #6 (CDS #19647330117648) and Magnolia Science Academy #7 (CDS #19647330117655). Based on our review of the CSD June 27, 2014 correspondence we respectfully disagree with the findings and analysis of the CSD staff in their interpretation of the “forensic review” performed by the accounting firm of Vicenti, Lloyd and Stutzman (VLS). We have demonstrated over the past three to six months that our organization is fiscally viable and is in no danger of being disrupted by financial difficulties. Furthermore, we presented to VLS substantial documentation and analysis which supported our compliance with Generally Accepted Accounting Principles (GAAP) and demonstrated our significant financial strength. Our auditors, Hill, Morgan and Associates, LLP, a very reputable Certified Public Accounting firm who audits numerous California charter schools have issued “clean” (unqualified) opinions every year of our operations and have never issued any comments regarding potential insolvency of any of our operations.
 
 
Magnolia Public Schools
"#$%& '()*+, -./0 1&&2 3/4*5(,4*/67 8- $19:# ;< =>"?@ :$1A%&99 B< =>"?@ :$1A%&11
In direct conflict with the CSD June 27, 2014 correspondence, Hill, Morgan and Associates, LLP unambiguously explained to VLS there were no “going concern” issues with any of our operations, including Magnolia Science Academy (MSA) #6 & MSA #7
1
. As the CSD June 27, 2014 correspondence identified in pages six and seven at MSA 6 and MSA 7, our organization has succeeded in attaining our educational goals and our student academic achievement and test scores are superior. In order to fully address the CSD June 27, 2014 correspondence concerns, continue our excellent and cooperative partnership with the CSD, and further demonstrate that the VLS findings are incomplete, we anticipated that the VLS report would have been presented as an attachment to the CSD June 27, 2014 correspondence; however, the VLS report was not available as an integral component of the CSD June 27, 2014 correspondence. The omission of the VLS report as a material component of the CSD June 27, 2014 correspondence presents substantial questions as to the actual VLS report contents and how the VLS report may have been interpreted by the CSD staff in preparing the CSD June 27, 2014 correspondence. We were not supplied a draft report of findings by VLS prior to its issuance as is customary in such “investigations”. Furthermore, based on the errors we have identified in the analysis by the Charter School Division staff, there is a strong likelihood that VLS drew erroneous and uninformed conclusions from their work. These misstatements and errors most likely would have been avoided if Magnolia staff had been consulted by VLS prior to issuance of the reports by VLS and the CSD. As explained in your July 27, 2014 correspondence at page 2, “Education Code Section 47607(a)(3)(A) also provides that the authority that granted the charter shall consider increases in  pupil academic achievement for all groups of pupils served the charter school as the most important factor in determining whether to grant a charter renewal.”(sic)
 
Please note that Magnolia Schools have been wholly successful in fulfilling this requirement!
1
 Exhibit A, Letter from Hill Morgan and Associates dated July 3
rd
, 2014,
 
 
Magnolia Public Schools
"#$%& '()*+, -./0 1&&2 3/4*5(,4*/67 8- $19:# ;< =>"?@ :$1A%&99 B< =>"?@ :$1A%&11
As further explained at page two in your July 27, 2014 correspondence, “State regulations further  provide: When considering a petition for renewal, the district governing board shall consider the  past performance of the school's academics, finances, and operation in evaluating the likelihood of future success, along with future plans for improvement if any. (Title 5, California Code of Regulations, section 11966.4, subdivision (b)(1).)” Although page two of the CSD July 27, 2014 correspondence identifies that “…future plans…”are a component of considering a petition for renewal, we are disappointed that after the many years of our successful partnership with the CSD that no evaluation of our future plans were considered in the CSD’s unilateral denial of our MSA #6 and MSA #7 charter school renewals.
 
We are confident that our responses below to the CSD June 27, 2014 correspondence will demonstrate that our good partnership and relationship with the CSD should continue and that MSA 6 and MSA 7 are demonstrably likely to successfully implement the program as set forth in the renewal petitions and met all the criteria for renewal. The following is our response to the findings: (Note, the CSD June 27, 2014 correspondence findings are restated in each section below and our response is written in
bold, italicized indented text 
)
1.
 
Financial Solvency of the CMO and MSA 6 and MSA 7, or Lack Thereof
MERF: Magnolia Science Academies are operated by the nonprofit corporation/charter management organization (CMO) Magnolia Educational and Research Foundation (MERF). MERF operates 11 MSA charter schools, 8 of which are authorized by LAUSD. VLS performed some analysis of the financial information of MERF and reviewed transactions that involved loans and/or transfer of funds to MERF or to any of the MSA schools.

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