Audit 305702

Title: Scope of Audit Pursuant to the Uniform Guidance Accounting Policies: The School’s grant funds are accounted for on the modified cash basis of accounting. Under the modified cash basis, grant revenues are recognized when received and expenditures are recorded when paid. These grant funds are included in the “Federal Assistance” line of the Consolidated Statement of Revenues, Expenditures, and Changes in Fund Balance – Regulatory Basis. The School is the recipient of federal and state grant awards. The grant programs are administered by various departments within the School. The activities of these departments are monitored by School staff to ensure compliance with the requirements of grants. De Minimis Rate Used: N Rate Explanation: The School has elected not to use the 10% de minimis indirect cost rate allowed under the Uniform Guidance. All federal and state financial award programs of Arkansas Arts Academy and Subsidiary (the School) are included in the scope of the Uniform Guidance audit. For purposes of this schedule, federal awards include those received from other agencies, the original source of which was a federal agency.

Title: Summary of Significant Accounting Policies Accounting Policies: The School’s grant funds are accounted for on the modified cash basis of accounting. Under the modified cash basis, grant revenues are recognized when received and expenditures are recorded when paid. These grant funds are included in the “Federal Assistance” line of the Consolidated Statement of Revenues, Expenditures, and Changes in Fund Balance – Regulatory Basis. The School is the recipient of federal and state grant awards. The grant programs are administered by various departments within the School. The activities of these departments are monitored by School staff to ensure compliance with the requirements of grants. De Minimis Rate Used: N Rate Explanation: The School has elected not to use the 10% de minimis indirect cost rate allowed under the Uniform Guidance. The School’s grant funds are accounted for on the modified cash basis of accounting. Under the modified cash basis, grant revenues are recognized when received and expenditures are recorded when paid. These grant funds are included in the “Federal Assistance” line of the Consolidated Statement of Revenues, Expenditures, and Changes in Fund Balance – Regulatory Basis. The School is the recipient of federal and state grant awards. The grant programs are administered by various departments within the School. The activities of these departments are monitored by School staff to ensure compliance with the requirements of grants.

Title: Relationship to Federal Financial Reports Accounting Policies: The School’s grant funds are accounted for on the modified cash basis of accounting. Under the modified cash basis, grant revenues are recognized when received and expenditures are recorded when paid. These grant funds are included in the “Federal Assistance” line of the Consolidated Statement of Revenues, Expenditures, and Changes in Fund Balance – Regulatory Basis. The School is the recipient of federal and state grant awards. The grant programs are administered by various departments within the School. The activities of these departments are monitored by School staff to ensure compliance with the requirements of grants. De Minimis Rate Used: N Rate Explanation: The School has elected not to use the 10% de minimis indirect cost rate allowed under the Uniform Guidance. Grant expenditures reports as of June 30, 2023, which have been submitted to grantor agencies will, in some cases, differ slightly from amounts disclosed herein. The reports prepared for grantor agencies are typically prepared at a later date and often reflect refined estimates of the year‐end accruals. The reports will agree at termination of the grant as the discrepancies noted are timing differences.

Title: 10% De Minimis Indirect Cost Rate Accounting Policies: The School’s grant funds are accounted for on the modified cash basis of accounting. Under the modified cash basis, grant revenues are recognized when received and expenditures are recorded when paid. These grant funds are included in the “Federal Assistance” line of the Consolidated Statement of Revenues, Expenditures, and Changes in Fund Balance – Regulatory Basis. The School is the recipient of federal and state grant awards. The grant programs are administered by various departments within the School. The activities of these departments are monitored by School staff to ensure compliance with the requirements of grants. De Minimis Rate Used: N Rate Explanation: The School has elected not to use the 10% de minimis indirect cost rate allowed under the Uniform Guidance. The School has elected not to use the 10% de minimis indirect cost rate allowed under the Uniform Guidance.

Title: Subrecipients Accounting Policies: The School’s grant funds are accounted for on the modified cash basis of accounting. Under the modified cash basis, grant revenues are recognized when received and expenditures are recorded when paid. These grant funds are included in the “Federal Assistance” line of the Consolidated Statement of Revenues, Expenditures, and Changes in Fund Balance – Regulatory Basis. The School is the recipient of federal and state grant awards. The grant programs are administered by various departments within the School. The activities of these departments are monitored by School staff to ensure compliance with the requirements of grants. De Minimis Rate Used: N Rate Explanation: The School has elected not to use the 10% de minimis indirect cost rate allowed under the Uniform Guidance. No awards were provided to subrecipients.

Title: Medicaid Reimbursements Accounting Policies: The School’s grant funds are accounted for on the modified cash basis of accounting. Under the modified cash basis, grant revenues are recognized when received and expenditures are recorded when paid. These grant funds are included in the “Federal Assistance” line of the Consolidated Statement of Revenues, Expenditures, and Changes in Fund Balance – Regulatory Basis. The School is the recipient of federal and state grant awards. The grant programs are administered by various departments within the School. The activities of these departments are monitored by School staff to ensure compliance with the requirements of grants. De Minimis Rate Used: N Rate Explanation: The School has elected not to use the 10% de minimis indirect cost rate allowed under the Uniform Guidance. Medicaid reimbursements are defined as contracts for services and not federal awards; therefore, they are not covered by the reporting requirements of the Uniform Guidance. Total Medicaid funding for the year ended June 30, 2023 was $185,170, of which $15,516 was from the Arkansas Department of Human Services.