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Home My WebLink AboutItem 06.qDate December 16, 2013 Item No. Lakeville Convention and Visitors Bureau Financial Statements for the years ending December 31, 2012 Proposed Action Staff recommends adoption of the following motion: Move to acknowledge receipt of the Lakeville Convention and Visitors Bureau Annual Financial Statements and Independent Auditors Report for the years ended of December 31, 2012. Overview The Lakeville Convention and Visitors Bureau Agreement requires the Lakeville Chamber of Commerce to provide an annual financial audit of the Bureau performed by an independent certified public accounting firm. The auditing firm of Kern, Dewenter, Viere, Ltd. has prepared and submitted the attached audit for fiscal years ended December 31, 2012 Primary Issues to Consider « Financial performance (budget compared actual) • Financial position net assets - as of December 31, 2012 Supporting Information • Lakeville Convention and Visitors Bureau Annual Financial Statements and Independent Auditors Report for the years ended of December 31, 2012 Financial Impact: $ _NJA budgeted: N/A Source: N/A Related Documents (CIP, ERP, etc.): Notes: Page 2 Primary Issues to Consider • Financial performance (budget compared actual) 2012 Original Revised Budeet Bu_ dget Actual Variance Support and Revenues Lodging tax Grant income Other income Total Support and Revenue Expenses Advertising Personnel Management fee Rent - reimbursement Operations Total expenses Change in net assets Net Assets, January 1 Net Assets, December 31 $ 145,100 5,000 600 $ 150,700 59,100 57,886 7,255 9,000 41,815 $ 175,056 $ (24,356) $ 145,100 5,000 600 $ 150,700 63,450 56,339 7,255 9,000 37,465 $ 173,509 $ (22,809) $ 160,564 $ 15,464 5,643 643 825 225 0 Financial position net assets -as of December 31, 2012 $ 167,032 $ 16,332 56,783 57,671 7,885 9,000 31,557 $ 162,896 4,136 128,419 $ 132,555 6,667 (1,332) (630) Q nno w ., $ 28,492 As of December 31, 2012, the Lakeville Convention and Visitors Bureau had $132,555 of net assets. The net assets are approximately 83% of the Lodging tax revenues. Page 3 • Status of most significant revenue source - lodging tax - compared to prior years. Year 2014 Estimate 2013 Estimate 2012 Actual 2011 Actual 2010 Actual 2009 Actual 2008 Actual 2007 Actual 2006 Actual 2005 Actual 2004 Actual 2003 Actual 2002 Actual 2001 Actual 2000 Actual 1999 Actual 1998 Actual 1997 Actual Lodging Tax S 162,515 160,929 160,564 151,411 132,052 120,634 150,256 131,001 85,453 94,745 95,012 95,331 109,959 115,301 122,658 130,348 124,584 116,289 Increase/ decrease) 1,586 365 9,153 19,359 11,418 (29,622) 19,255 45,549 (9,293) (267) (318) (14,628) (5,342) (7,357) (7,690) 5,764 8,295 • City representation. City representation on the CVB Board include • Council Member LaBeau • Parks and Recreation Director Altergott LAKEVILLE CONVENTION AND VISITORS BUREAU AUDITED FINANCIAL STATEMENTS Year Ended December 31, 2012 LAKEVILLE CONVENTION AND VISITORS BUREAU TABLE OF CONTENTS INDEPENDENT AUDITOR'S REPORT ...................................................... ............................... 1 AUDITED FINANCIAL STATEMENTS Statement of Financial Position .................................................................... ............................... 4 Statementof Activities ................................................................................. ............................... 5 Statementof Cash Flows .............................................................................. ............................... 6 Notes to the Financial Statements ................................................................ ............................... 7 SUPPLEMENTARY SCHEDULES Statement of Functional Expenses ................................................................ ............................... 11 Actual to Budget Comparison ............................... .,,, .:....................... ............................... 12 KDV Expert advice. When you need it. INDEPENDENT AUDITOR'S REPORT Board of Directors Lakeville Convention and Visitors Bureau Lakeville, Minnesota Report on the Financial Statements We have audited the accompanying financial statements of the Lakeville Convention and Visitors Bureau, which comprise the Statement of Financial Position as of December 31, 2012 and 2011, and the related Statement of Activities and Cash Flows for the year then ended and related Notes to the Financial Statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation t.: fair prctation of these 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 financial statements that are free f rn material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion these financial statements based on our audit. We conducted our audit in accordance with and_ting standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Organization's preparation and fair presentation of the financial statements in order to design audit prod�dures OW are appropriate in the circumstances, but not for the purpose of expressing an opinion on the of trveness of the Organization'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 financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion. Y\D*V Basis for Qualified Opinion As discussed in Note 3 to the financial statements, the Organization is an operating division of the Lakeville Chamber of Commerce ( "the Chamber"). In our opinion, accounting principles generally accepted in the United States of America require that the division be accounted for with the activity of the Chamber. If the financial statements of the Chamber had included the activity of the Organization, total assets would be increased by $ 329,469 and total liabilities would be increased by $ 193,072 as of December 31, 2012, and revenues would be increased by $ 365,168 and expenses would be increased by $ 347,381 for the year then ended. Qualified Opinion In our opinion, except for the effects of not including the activity of the Chambm as discussed in the Basis for Qualified Opinion paragraph, the financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of the Organization as of December 31, 2012 and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matter Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The Statement of Functional Expenses and Actual to Budges Comparison on pages I 1 and 12 are presented for purposes of additional analysis and. are not a required part of the basic financial statements. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on it. KERN, DEWENTER, VIERE, LTD. Bloomington, Minnesota November 13, 2013 2 AUDITED FINANCIAL STATEMENTS LAKEVILLE CONVENTION AND VISITORS BUREAU STATEMENT OF FINANCIAL POSITION December 31, 2012 ASSETS Current Assets Cash and Cash Equivalents $ 79,287 Certificates of Deposit 29,269 Lodging Tax Receivable 23,526 Total Current Assets 132,082 Equipment, Net 1,597 e Total Assets $ 133,679 LIABILITIES AND NET ASSETS Current Liabilities Accounts Payable $ 1,124 Net Assets Unrestricted 132,555 Total Liabilities and Net Assets, $ 133,679 The Notes to the Financial Statements are an integral part of these statements. 4 LAKEVILLE CONVENTION AND VISITORS BUREAU STATEMENT OF ACTIVITIES Year Ended December 31, 2012 REVENUES Lodging Tax Revenue Grant Revenue Other Revenue Total Revenues EXPENSES Program Services General and Administrative Total Expenses Change in Net Assets NET ASSETS Beginning of Year End of Year $ 160,564 5,643 825 167,032 85,969 76,927 162,896 4,136 128,419 $ 132 ; 555 The Notes to the Financial Statements are an integral part of these statements. LAKEVILLE CONVENTION AND VISITORS BUREAU STATEMENT OF CASH FLOWS Year Ended December 31, 2012 CASH FLOWS - OPERATING ACTIVITIES Change in Net Assets Adjustments to Reconcile Change in Net Assets to Net Cash Flows - Operating Activities: Depreciation Change in Assets and Liabilities: Lodging Tax Receivable Deposits Prepaid Expenses Accounts Payable Total Adjustments Net Cash Flows - Operating Activities CASH FLOWS - INVESTING ACTIVITIES Net Purchases of Certificates of Deposit Purchases of Equipment Net Cash Flow - Investing Activities Net Change in Cash and Cash Equivts CASH AND CASH EQUIVALENTS Beginning of Year End of Year $ 4,136. 1,174 (2,872) _(484) (2,182) 1,954 (172) ( 2 , 662 ) (2,834) (880) 80,167 $ 79,287 The Notes to the Financial Statements are an integral part of this statement. LAKEVILLE CONVENTION AND VISITORS BUREAU NOTES TO THE FINANCIAL STATEMENTS December 31, 2012 NOTE 1— SUAE%IARY OF SIGNIFICANT ACCOUNTING POLICIIES Nature of Organization The Lakeville Convention and Visitors Bureau (the "CVB ") is organized as a division of the Lakeville Chamber of Commerce (the "Chamber ") to advance the economic impact of tourism in the Lakeville, Minnesota area by attracting visitors, conventions, meetings, events and trade shows. Basis of Accounting The financial statements of the CVB have been prepared on the accrual basis of accounting. The accounting policies of the CVB conform to accounting principles generally accepted in the United States of America applicable to nonprofit organizations. Financial: Statement Presentation The assets, liabilities, net assets, revenues and expenses of the CVB are reported based upon net asset restrictions and the purposes for which resources are to be spent and the means, by which spending activities are controlled. Net asset restrictions are categorized as follows: Unrestricted Accounts for all financial resources which are neither permanently restricted nor temporarily restricted by donor - imposed stipulations. Resources may be used at the discretion of the Board of Directors. Temporarily Restricted Accounts for (a) contributions and other fine of assets whose use by the Organization is limited by donor - imposed stipulatiow that either expire by passage of time or can be fulfilled and removed by actions of the Organization pursuant to those stipulations, (b) other asset enhancements and diminishments subject to the same kinds ofstipulations and (c) reclassifications to (or from) other classes of net assets as a consequence'of donor- imposed stipulations, their expiration by passage of time or their fulfillt and removal by actions of the Organization pursuant to those stipulations. As of December 31, 2012 there wore no temporarily restricted assets. Permanently Restricted Accounts for all financial resources which include a donor- imposed restriction that stipulates the resources be maintained permanently, but permits the Organization to use or expend part or all of the income derived from the donated assets. As of December 31, 2012 there were no permanently restricted assets. Use of Estimates The pration of financial statements in conformity with accounting principles generally accepted in the United Stwes of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Cash and Cash Equivalents The CVB considers all financial instruments purchased with a maturity of three months or less to be cash equivalents. Certificates of Deposit Certificates of deposit are recorded at cost plus accrued interest. Certificates of deposit are with banks that are insured by the Federal Deposit Insurance Corporation (FDIC). VA LAKEVILLE CONVENTION AND VISITORS BUREAU NOTES TO THE FINANCIAL STATEMENTS December 31, 2012 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Lodging Tax Receivable This represents lodging tax revenue received by the City of Lakeville, Minnesota (the "City ") but not yet remitted to the CVB. Equipment Equipment is stated on the accompanying financial statements at cost, less the associatrd accumulated depreciation. Depreciation of equipment is provided on a straight-line or accelerated basis, over the estimated useful lives of the assets. Estimated useful lives range from three to live years. Contributed property and equipment is recorded at fair value at the date of the donation. if donors stipulate how long the assets must be used, the contributions are recorded as restricted support. In the absence of such stipulations, contributions of property and equipment are recorded as unrestricted support. Lodging Tax Revenue The CVB receives a 3% tax on lodging in the City. The lodging tax is based on an established City ordinance. The City and the Chamber have entered into an agreement in which the Chamber is responsible for oversight and management of the CVB. The City collects the tax receipts and then remits the proceeds (less an administrative charge of 5% of the gross tax collections) to the CVB. This agreement may be cancelled by either the City or the Chamber with six month's notice. The CVB recognizes lodging tax revenue in the pad it is earned *om the City. Advertising Costs The CVB's policy is to expense advertising torts when incurred. Advertising costs incurred totaled $ 56,783 for the year ended December 31, 2012. Tax Status The Organization is exempt from income taxes under Section 501(c)(6) of the Internal Revenue Code (IRC). The Organization is also exempt from Minnesota Franchise or income tax. The Organization is required to assess whether an uncertain tax position exists and if there should be recognition of a related benefit or liability in the financial statements. The Organization has determined there are no amounts to record as assets or liabilities related to uncertain tax positions. Generally, the Organization is no lortet subject to examination by tax authorities for years before 2009. Subu "t Eve The CVB has evaluated subsequent events through November 13, 2013, the date which the financial statements were available to be issued. LAKEVILLE CONVENTION AND VISITORS BUREAU NOTES TO THE FINANCIAL STATEMENTS December 31, 2012 NOTE 2 — EQUIPMENT December 31, 2012 Equipment $ 8,864 Less Accumulated Depreciation (7,267) Equipment, Net 1 7 Depreciation expense for the year ended December 31, 2012 totaled $ 1,174. NOTE 3 — AGREEMENT WITH THE CHAMBER The CVB was established as a division of the Chamber for the purpose of marketing and promoting the City as a tourist or convention center (see Note 1). The CVB and the Chamber share a common work area and, therefore, share expenses. The Chamber chars back certain expenses to the CVB based on estimated usage and $ 750 a month for office ov&head expenses. Total reimbursement expense for the year ended December 31, 2012 was $ 9,000. The Chamber also charges a 5% management fee (based on the CVB's lodging tax income) to cover costs of direct services used. Manama# fee expense for 2012 was $ 7,885. NOTE 4 — PENSION PLAN The Chamber maintains a SIMPLE IRA plan. The CVB matches employee deferrals dollar- for - dollar, up to 3% of employee compensation. The CVB's contributions to the plan for the year ended December 31, 2012 was $ 1,238. 9 m LAKEVILLE CONVENTION AND VISITORS BUREAU STATEMENT OF FUNCTIONAL EXPENSES For the Year Ended December 31, 2012 11 Program General and 2012 Services Administrative Total Salary $ 24,290 $ 24,290 $ 48,580 Payroll Taxes and Benefits 3,927 3,926 7,853 Pension 619 619 1,238 Chamber Management Fees - 7,885 7,885 Audit - 4,657 4,657 Accounting Fees - 3,601 3,601 Reimbursement Expense 9,000 9,000 Insurance - 980 980 Advertising 56.783 - 56,783 Production _ Printing 350 - 350 Office Supplies 2,647 2,647 Education and Seminars - 204 204 Computer Technology 1,498 1,498 Business Meetings 3,162 3,162 Postage - 2,303 2,303 Memberships - 1080 1080 Advisory Board Meetings _ 2,60 2,60 Telephone - 4,524 4,524 Travel - 2,720 2,720 Miscellaneous - 51 51 Total Expenses'before Depreciation 85,969 75,753 16I,722 Depreciation - 1,174 1 Total Expenses $ 85,969 $ 76.927 $ 162,896 11 LAKEVILLE CONVENTION AND VISITORS BUREAU ACTUAL TO BUDGET COMPARISON For the Year Ended December 31,2 012 12 Actual Ekidget REVENUE Lodging Tax Revenue $ 160,564 $ 145,100 Grant Revenue 5,643 5,000 Other Revenue 825 600 Total Revenue 167,032 150,700 EXPENSES Salary 4$,580 47,548 Payroll Taxes and Benefits 7,853 7,554 Pension 1,238 1,237 Chamber Management Fees 7,885 7,255 Audit 4,657 5,500 Accounting Fees 3,601 2,900 Reimbursement Expense 9,000 9,000 Insurance 980 975 Advertising 56,783 63,450 Production - 1,000 Printing 350 2,320 Office Supplies 2,647 3,000 Education and Seminars 204 3,140 Computer Technology 1,498 1,000 Business Meetings 3,162 2,100 Postage 2,303 2,750 Memberships 1,080 1,300 Advisory Board Meetings 2,606 1,600 Telephone 4,524 3,660 Travel 2,720 3,800 Miscellaneous 51 620 Depr-eciation 1,174 1 Total Expenses 162,896 173,509 Change in Net Assets $ 4,136 $ (22,8091 12