Loading...
HomeMy WebLinkAbout2018-19 SSFCC Annual Financial Statement C&ALLP FinalChavan & Associates, LLP Certified Public Accounts 1475 Saratoga Ave, Suite 180 San Jose, CA 95129 CITY OF SOUTH SAN FRANCISCO CONFERENCE CENTER AUTHORITY FINANCIAL REPORT JUNE 30, 2019 * * * CITY OF SOUTH SAN FRANCISCO CONFERENCE CENTER AUTHORITY ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2019 TABLE OF CONTENTS PAGE NO. INDEPENDENT AUDITOR’S REPORT..............................................................................................1 -3 MANAGEMENT’S DISCUSSION AND ANALYSIS .........................................................................4 -9 BASIC FINANCIAL STATEMENTS: Statement of Net Position -June 30, 2019 with Comparative Totals for June 30, 2018.....................10 Statement of Revenues, Expenses and Changes in Net Position for the Fiscal Year Ended June 30, 2019 with Comparative Totals for the Fiscal Year Ended June 30, 2018 .............................................................................................11 Statement of Cash Flows for the Fiscal Year Ended June 30, 2019 with Comparative Totals for the Fiscal Year Ended June 30, 2018 .........................................12 NOTES TO BASIC FINANCIAL STATEMENTS ...............................................................................13 -25 SUPPLEMENTAL INFORMATION: Schedule of Revenues, Expenditures and Changes in Net Position (Budget Basis) for Each of the Last Five Fiscal Years .............................................................26 Reconciliation of Changes in Revenues over Expenditures (Budget Basis) to Net Position (GAAP Basis) for Each of the Last Five Fiscal Years .....................................27 Schedule of Revenues, Expenditures and Changes in Net Position – Budget and Actual (Budget Basis) for the Fiscal Year Ended June 30, 2019...........................28 INDEPENDENT AUDITOR’S 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........................................................................................29 -30 CHAVAN &ASSOCIATES,LLP CERTIFIED PUBLIC ACCOUNTANTS Page | 1 1475 Saratoga Ave, Suite 180, San Jose, CA 95129 Tel:408-217-8749 • E-Fax: 408-872-4159 [email protected] •www.cnallp.com INDEPENDENT AUDITOR’S REPORT Members of the City of South San Francisco Conference Center Authority Board and Executive Director South San Francisco, California Report on the Financial Statements We have audited the accompanying financial statements of the business-type activities of the City of South San Francisco Conference Center Authority (the “Authority”), a component unit of the City of South San Francisco, California, as of and for the year ended June 30, 2019 and June 30, 2018, which collectively comprise the Authority’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements The Authority’s management is responsible for the preparation and fair presentation 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 from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit 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 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 Authority’s preparation and fair presentation of the 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 Authority’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. CHAVAN &ASSOCIATES,LLP CERTIFIED PUBLIC ACCOUNTANTS Page | 2 1475 Saratoga Ave, Suite 180, San Jose, CA 95129 Tel:408-217-8749 • E-Fax: 408-872-4159 [email protected] •www.cnallp.com We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion,the financial statements referred to above present fairly, in all material respects, the respective financial position of the of the business-type activities of the Authority,as of June 30, 2019 and June 30, 2018, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, as listed in the table of contents,be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic,or historical context.We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America,which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Supplemental Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Authority’s basic financial statements. The schedule of revenues, expenditures and changes in net position (budget basis) for each of the last five fiscal years, the reconciliation of changes in revenues over expenditures (budget basis) to net position (GAAP basis) for each of the last five fiscal years, and the schedule of revenues, expenditures and changes in net position -budget and actual (budget basis) for the fiscal year ended June 30, 2019 are presented for purposes of additional analysis and are not a required part of the basic financial statements. The schedule of revenues, expenditures and changes in net position (budget basis) for each of the last five fiscal years, the reconciliation of changes in revenues over expenditures (budget CHAVAN &ASSOCIATES,LLP CERTIFIED PUBLIC ACCOUNTANTS Page | 3 1475 Saratoga Ave, Suite 180, San Jose, CA 95129 Tel:408-217-8749 • E-Fax: 408-872-4159 [email protected] •www.cnallp.com basis) to net position (GAAP basis) for each of the last five fiscal years, and the schedule of revenues, expenditures and changes in net position -budget and actual (budget basis) for the fiscal year ended June 30, 2019 are the responsibility of management and were derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion the schedule of revenues, expenditures and changes in net position (budget basis) for each of the last five fiscal years, the reconciliation of changes in revenues over expenditures (budget basis) to net position (GAAP basis) for each of the last five fiscal years, and the schedule of revenues, expenditures and changes in net position -budget and actual (budget basis) for the fiscal year ended June 30, 2019 are fairly stated,in all material respects,in relation to the basic financial statements as a whole. The budgetary information included in the schedule of revenues, expenditures and changes in net position budget and actual (budget basis) 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. The supplemental schedules as listed in the supplemental section refer to financial information years ended prior to June 30, 2017, this information was audited by another auditor who expressed an unmodified opinion on those statements. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 30, 2019 on our consideration of the Authority’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 Authority’s internal control over financial reporting and compliance. October 30, 2019 San Jose, California CITY OF SOUTH SAN FRANCISCO CONFERENCE CENTER AUTHORITY MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 Page | 4 The City of South San Francisco Conference Center Authority’s (the Authority) management’s discussion and analysis is designed to (a) assist the reader in focusing on significant financial issues, (b) provide an overview of the Authority’s financial activity, (c) identify changes in the Authority’s financial position (its ability to address the next and subsequent year challenges), and (d) identify individual fund issues or concerns. Since the Management’s Discussion and Analysis (MD&A) is designed to focus on the current years activities, resulting changes and currently known facts, please read it in conjunction with the Authority’s financial statements (beginning on page 10). USING THIS ANNUAL REPORT The following graphic outlining the format of this report is provided for your review: MD&A ~ Management’s Discussion and Analysis (Required Supplementary Information)~ Basic Financial Statements ~ Fund Financial Statement ~ ~ Notes to Financial Statements ~ Other Supplementary Information ~ Supplementary Information ~ FINANCIAL HIGHLIGHTS The Authority’s net position increased by $465,118 (or 7%) during 2019 compared with $634,465 (or 10%) during 2018. Of this amount, $163,327 was an increase in the Authority’s net investment in capital assets. CITY OF SOUTH SAN FRANCISCO CONFERENCE CENTER AUTHORITY MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 Page | 5 The Authority’s revenue increased by $337,765 (or 8%) from $4,325,375 in 2018 to $4,663,140 in 2019. This increase was primarily due to an increase in charges for services, mostly related to rental income. The total expenses of all Authority’s programs increased by $507,112 (14%) from $3,690,910 in 2018 to $4,198,022 in 2019 primarily due to an increase in contractual services related to human resources litigation services. FUND FINANCIAL STATEMENTS The Authority consists of exclusively one Enterprise Fund. Enterprise funds utilize the full accrual basis of accounting. The Enterprise method of accounting is similar to accounting utilized by the private sector accounting. Statement of Net Position:The focus of the Statement of Net Position (the “Unrestricted Net Position”) is designed to represent the available liquid (non-capital) assets, net of liabilities, for the entire Authority. Net Position is reported in three broad categories: Invested in Capital Assets, Net of Related Debt: This component of Net Position consists of all Capital Assets, reduced by the outstanding balances of any bonds, mortgages, notes or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. Restricted Net Position: This component of Net Position consists of restricted assets; when constraints are placed on the asset by creditors (such as debt covenants), grantors, contributors, laws, regulations, etc. Unrestricted Net Position: Consists of Net Position that do not meet the definition of “Invested in Capital Assets, Net of Related Debt”, or “Restricted Net Position”. Statement of Revenues, Expenses and Changes in Net Position:(similar to an Income Statement) This Statement includes Operating Revenues (rental income, event services and food services), Operating Expenses (administrative,utilities, maintenance and depreciation), and Non-Operating Revenues and Expenses (occupancy tax, investment income and interest expense). The focus of the Statement of Revenues, Expenses and Changes in Net Position is the “Change in Net Position,"which is similar to Net Income or Loss. Statement of Cash Flows: This statement discloses net cash provided by, or used for, operating activities, non-capital financing activities,capital and related financing activities, and investing activities. CITY OF SOUTH SAN FRANCISCO CONFERENCE CENTER AUTHORITY MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 Page | 6 STATEMENT OF NET POSITION Table 1 reflects the condensed Statement of Net Position compared to prior year. The Authority is engaged only in Business-Type Activities. TABLE 1 STATEMENT OF NET POSITION June 30, 2017 June 30, 2018 June 30, 2019 Increas e (Dec reas e) Perc ent Inc reas e (Decreas e) As sets Current and Other As sets 4,088,325$ 4,649,954$ 4,749,290$ 99,336$ 2.1% Capital Assets 3,619,573 3,578,177 3,281,504 (296,673) -8.3% Total Assets 7,707,898$ 8,228,131$ 8,030,794$ (197,337)$ -2.4% Deferred Outflo ws 24,304$ -$ -$ -$ 0.0% Liabilitie s Lo ng-T erm Liabilit ie s 460,000$ -$ -$ -$ 0.0% Other Liab ilit ies 1,067,182 1,388,646 726,191 (662,455) -47.7% Total Lia bilit ie s 1,527,182$ 1,388,646$ 726,191$ (662,455)$ -47.7% Net Position Net Inves tment in Capital Assets 2,714,573$ 3,118,177$ 3,281,504$ 163,327$ 5.2% Restricted 480,922 482,596 - (482,596) -100.0% Unres tricted 3,009,525 3,238,712 4,023,099 784,387 24.2% Total Net Position 6,205,020$ 6,839,485$ 7,304,603$ 465,118$ 6.8% For more detailed information, see page 10 for the Statement of Net Position. Major Factors Affecting the Statement of Net Position Current and other assets increased by $99,336 (or 2%)due to the revenues exceeding expenses for the year 2019. Capital assets decreased by $296,673 (or 8.3%) due to current year depreciation expense and disposals, net of additions. CITY OF SOUTH SAN FRANCISCO CONFERENCE CENTER AUTHORITY MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 Page | 7 STATEMENT OF CHANGES IN NET POSITION Table 2 compares the revenues and expenses for the current and previous fiscal year. The Authority is engaged only in Business-Type Activities. TABLE 2 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION June 30, 2017 June 30, 2018 June 30, 2019 Inc reas e (d ecreas e) Perc ent Increas e (d ec rease) Revenue s Operating revenues Charges for services 1,852,250$ 2,146,762$ 2,331,740$ 184,978$ 8.6% No n-o perating revenues : Conferenc e center tax 2,146,545 2,150,818 2,243,066 92,248 4.3% Other income - - 11,575 11,575 100.0% Interes t income 19,152 27,795 76,759 48,964 176.2% Total Revenues 4,017,947 4,325,375 4,663,140 337,765 7.8% Expe ns es Operating exp ens es Pers onnel services 968,338 1,252,899 1,250,296 (2,603) -0.2% Ad ministrative costs 175,069 191,529 246,956 55,427 28.9% Other supplie s and expens es 141,713 161,713 150,097 (11,616) -7.2% Repair and maintenanc e 473,078 497,469 604,152 106,683 21.4% Contractual services 110,925 133,607 362,289 228,682 171.2% Rent 477,504 484,080 468,300 (15,780) -3.3% Ins uranc e claims and exp ens es 28,523 33,989 37,079 3,090 9.1% Marketing servic es 285,903 340,563 334,550 (6,013) -1.8% Amo rtization 28,176 25,826 - (25,826) -100.0% Dep rec ia tion 474,542 538,790 692,375 153,585 28.5% Mis cella neo us 22,333 14,304 18,998 4,694 32.8% Property taxes - - 22,070 22,070 100.0% No n-o perating expens es : Interes t exp ens e and fiscal charges 39,300 16,141 10,860 (5,281) -32.7% Total Exp ens es 3,225,404 3,690,910 4,198,022 507,112 13.7% Change Net Position 792,543$ 634,465$ 465,118$ (169,347)$-26.7% CITY OF SOUTH SAN FRANCISCO CONFERENCE CENTER AUTHORITY MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 Page | 8 Major Factors Affecting the Statement of Revenues,Expenses and Changes in Net Position: Charges for services increased by 8.6% because room rentals and other event charges performed better than expected in 2018-19. Interest income increased by 176% mostly due to an increase in interest income from the LAIF investment. Contractual services increased by 171%mostly from legal services related to human resources litigation. CAPITAL ASSETS As of June 30, 2019, the Authority had $3,281,504 invested in capital assets as reflected in the following schedule, which represents a $296,673 net decrease during the year. TABLE 3 CAPITAL ASSETS (NET OF DEPRECIATION) June 30, 2017 June 30, 2018 June 30, 2019 Increas e (dec reas e) Percent Increas e (dec reas e) Construc tion in progres s -$ 43,289$ 17,500$ (25,789)$ -59.6% Build ing improvements 10,822,457 11,148,265 10,824,976 (323,289) -2.9% Furniture and fixtures 781,465 880,168 925,599 45,431 5.2% Machinery and equip ment 173,645 203,239 260,394 57,155 28.1% Kitc hen table ware 63,912 63,912 63,912 - 0.0% Total Capital Assets 11,841,479 12,338,873 12,092,381 (246,492) -2.0% Les s ac cumulated dep rec ia tion (8,221,906) (8,760,696) (8,810,877) (50,181) 0.6% Capital assets , net 3,619,573$ 3,578,177$ 3,281,504$ (296,673)$ -8.3% CITY OF SOUTH SAN FRANCISCO CONFERENCE CENTER AUTHORITY MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 Page | 9 DEBT ADMINISTRATION As of June 30, 2019, the Authority paid off the debt (bonds) which had a remaining balance as of June 30, 2018 as noted in table 4 below: TABLE 4 OUTSTANDING DEBT June 30, 2017 June 30, 2018 June 30, 2019 Increase (decrease) Percent Increase (decrease) Revenue Bonds 905,000$ 460,000$ -$ (460,000)$ -100.0% Less: Current Portion (445,000) (460,000) - 460,000 100.0% Long-T erm Debt 460,000$ -$ -$ -$ 0.0% ECONOMIC FACTORS The Authority continued to see a positive interest in available dates and space in the Conference Center. With a new direction in sales and marketing programs, the Conference Center has placed an emphasizes on placing groups/events that will best utilize the space and dates for their meetings and avoiding one day programs in the middle of the week. FINANCIAL CONTACT The individual to be contacted regarding this report is Katie Leung,CFO,of the South San Francisco Conference Center, at (650) 877-3994. Specific requests may be submitted to Dean Grubl, Executive Director of the South San Francisco Conference Center, 255 South Airport Blvd., South San Francisco, CA 94080. CITY OF SOUTH SAN FRANCISCO CONFERENCE CENTER AUTHORITY STATEMENT OF NET POSTION JUNE 30, 2019 WITH COMPARATIVE TOTALS FOR JUNE 30, 2018 The notes to the basic financial statements are an integral part of this statement. Page | 10 2019 2018 As sets Cash and inves tments 4,399,644$ 3,844,563$ Restricted cash and inves tments - 482,596 Receiv ab le s, net 335,440 315,398 Dep osits 14,206 7,397 Capital assets , net 3,281,504 3,578,177 Total Assets 8,030,794$ 8,228,131$ Lia bilitie s Current Liab ilit ie s: Ac counts payab le and accrued exp ens es 352,231$ 432,698$ Ac crued pers onnel exp ens es 61,896 72,949 Dep osits 312,064 422,999 Lo ng term debt - current portion - 460,000 Total Lia bilit ie s 726,191$ 1,388,646$ Net Positio n Net inves tment in capital assets 3,281,504$ 3,118,177$ Restricted for debt service - 482,596 Unres tricted 4,023,099 3,238,712 Total Net Position 7,304,603$ 6,839,485$ CITY OF SOUTH SAN FRANCISCO CONFERENCE CENTER AUTHORITY STATEMENT OF REVENUES,EXPENSES AND CHANGES IN NET POSITION FOR THE FISCAL YEAR ENDED JUNE 30,2019 WITH COMPARATIVE TOTALS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 The notes to the basic financial statements are an integral part of this statement. Page | 11 2019 2018 Operating revenues : Charges for services - rent 1,297,270$ 1,148,296$ Charges for services - food & beverage 642,857 711,086 Charges for services - events 391,613 287,380 Total operating revenues 2,331,740 2,146,762 Operating exp ens es : Pers onnel services 1,250,296 1,252,899 Ad ministrative costs 246,956 191,529 Other supplie s and exp ens es 150,097 161,713 Repair and maintenanc e 604,152 497,469 Contrac tual services 362,289 133,607 Rent 468,300 484,080 Ins uranc e claims and exp ens es 37,079 33,989 Marketing services 334,550 340,563 Amo rtization - 25,826 Dep rec ia tion 692,375 538,790 Mis cella neo us 18,998 14,304 Property taxes 22,070 - Total operating exp ens es 4,187,162 3,674,769 Operating lo ss (1,855,422) (1,528,007) No n-o perating revenues (exp ens es ): Conferenc e center tax 2,243,066 2,150,818 Interes t in come 76,759 27,795 Interes t exp ens e and fis cal charges (10,860) (16,141) Other income 11,575 - Total non-o perating revenues (exp ens es )2,320,540 2,162,472 Change in Net Position 465,118 634,465 Total Net Position - Beginning 6,839,485 6,205,020 Total Net Position - End in g 7,304,603$ 6,839,485$ CITY OF SOUTH SAN FRANCISCO CONFERENCE CENTER AUTHORITY STATEMENT OF CASH FLOWS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 WITH COMPARATIVE TOTALS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 The notes to the basic financial statements are an integral part of this statement. Page | 12 2019 2018 Cash flo ws fro m operating ac tivities : Cash rec eived fro m customers 2,200,763$ 2,326,853$ Cash paid for goods and services (1,863,467) (1,213,917) Cash paid for emp lo yee services (1,261,349) (1,230,953) Cash paid for rent (468,300) (484,080) Net cash provid ed (us ed ) by operating ac tivities (1,392,353) (602,097) Cash flo ws fro m no n capital fin anc ing ac tivities : Cash rec eived fro m occupanc y taxes 2,243,066 2,150,818 Cash rec eived fro m other income 11,575 - Net cash provid ed (us ed ) by non capital fin anc ing ac tivities 2,254,641 2,150,818 Cash flo ws fro m capital and related financ in g ac tivities : Prin cipal paid on capital debt (460,000) (445,000) Interes t paid on capital debt (10,860) (28,022) Net cash provid ed (us ed ) by capital and related financ in g ac tivities (470,860) (473,022) Cash flo ws fro m in ves ting ac tivities : Interes t rec eived 76,759 26,121 Proceed s fro m maturity of cash held by trus tee 482,596 - Ac quis it io n of capital assets (395,702) (497,394) Net cash provid ed (us ed ) by inves ting ac tivities 163,653 (471,273) Net increas e (d ec reas e) in cash and cash equivalents :555,081 604,426 Beginning cash and cash equivalents 3,844,563 3,240,137 End in g cash and equivalents 4,399,644$ 3,844,563$ Reconcilia tion of operating in come (loss) to net operating cash: Operating in come (loss)(1,855,422)$ (1,528,007)$ Ad justments : Amo rtization - 25,826 Dep rec ia tion 692,375 538,790 Changes in: Receivab le s (20,042) 9,836 Dep osits paid (6,809) 33,113 Ac counts payab le and accrued exp ens es (80,467) 126,144 Ac crued pers onnel exp ens es (11,053) 21,946 Dep osits rec eived (110,935) 170,255 Net cash provid ed (us ed ) by operating ac tivities (1,392,353)$ (602,097)$ CITY OF SOUTH SAN FRANCISCO CONFERENCE CENTER AUTHORITY NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30,2019 Page | 13 1.REPORTING ENTITY The financial statements of the City of South San Francisco Conference Center Authority have been prepared in conformity with Generally Accepted Accounting Principles (GAAP) as applied to governmental units. The Government Auditing Standards Board (GASB) is the accepted standard setting authority for establishing governmental accounting and financial reporting principles. The City of South San Francisco, California (the “City”) Conference Center Authority (the “Authority”)was established to renovate and operate a leased building as a conference center. The Center was opened in April 1993. The Authority’s operations are financed by a voter-approved surtax on hotel occupancies of $2.50 per room per day and charges for rental of the facilities. The Authority is governed by a Board of nine commissioners consisting of two Council members and seven representatives from various businesses and resident communities appointed by the City Council. As the City is financially accountable for the Authority,the Authority is a component unit of the City and is reported in the general-purpose financial statements of the City. The activities of the Authority are accounted for in a single enterprise fund because operations are financed and are operated in a manner similar to that of a private business enterprise where the intent is to provide service to the general public and partially recover such costs through user charges. 2.BASIS OF PRESENTATION Statement of Net Position -The statement of net position is designed to display the financial position of the Authority. The Authority’s fund equity is reported as net position, which is broken down into three categories defined as follows: Net investment in capital assets -This component of net position consists of capital assets including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. Restricted -This component of net position consists of constraints placed on net asset use through external constraints imposed by creditors (such as through debt covenants), grantors, contributors, or law or regulations of other governments. It also pertains to constraints imposed by law or constitutional provisions or enabling legislation. Unrestricted -This component of net position consists of net assets that do not meet the definition of “restricted” or “invested in capital assets, net of related debt.” CITY OF SOUTH SAN FRANCISCO CONFERENCE CENTER AUTHORITY NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30,2019 Page | 14 Statement of Revenues, Expenses and Changes in Net Position -The statement of revenues, expenses and changes in net position is the operating statement for proprietary funds. Revenues are reported by major source. This statement distinguishes between operating and non-operating revenues and expenses and presents a separate subtotal for operating revenues, operating expenses and operating income/loss. 3.BASIS OF ACCOUNTING AND SIGNIFICANT ACCOUNTING POLICIES Basis of accounting refers to when revenues and expenses are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of measurements made regardless of the measurement focus applied. The Authority uses the accrual basis of accounting. Revenues are recognized when they are earned and expenses are recognized when they are incurred. The Authority applies all applicable Governmental Accounting Standards Board (GASB) pronouncements in its accounting and reporting. Proprietary Funds The Authority accounts for their business-type activities in a Proprietary fund. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues for the Authority is charges to customers for sales and services.Operating expenses include personnel services, employee benefits, repairs and maintenance, professional services, transportation, materials and supplies, claims and judgments, rent, insurance, utilities, communications, general administration and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. Budgets and Budgetary Accounting The Authority operates under the general laws of the State of California (the State) and annually adopts a budget effective July 1 for the ensuing fiscal year ended. From the effective date of the budget, which is approved by the Authority and whereas, the South San Francisco Municipal Code 2.78.100 requires that the South San Francisco Conference Center budget be approved by the South San Francisco City Council, the amounts stated therein as proposed expenses become appropriations. The Authority may amend the budget by a resolution during the fiscal year. Transfers of funds exceeding $5,000 between budget categories require the approval of the Authority. Budgets are presented in component unit financial statements as amended. Budgets are generally prepared on a Generally Accepted Accounting Principles (GAAP) basis except for capital outlay, depreciation and interest expense,which are budgeted on a cash basis. A reconciliation of budget basis change in net position (net income)to the GAAP basis CITY OF SOUTH SAN FRANCISCO CONFERENCE CENTER AUTHORITY NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30,2019 Page | 15 change in net position as reported in the Statement of Revenues, Expenses and Changes in Net Position -Budget and Actual for the years ended June 30, 2019 and 2018 is as follows: June 30, 2019 June 30, 2018 Budgeted Change in Net Position 301,791$ 256,687$ Capital Improvements 395,702 497,394 Prin cipal Payments 460,000 445,000 Depreciation (692,375) (538,790) Am ortization - (25,826) Change in Net Position GAAP 465,118$ 634,465$ Cash Equivalents The Authority considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. This includes funds invested in the State Treasurer’s Investment Pool (Local Agency Investment Fund) which are available for use. For purpose of the statement of cash flows, restricted cash and investment held by the fiscal agent for debt service is not considered as cash equivalents. Investments The California Government Code authorizes an agency to invest in their own bonds, certain time deposits, obligations of the U.S. Treasury, agencies and instrumentalities, commercial paper, bankers’acceptances with maturities not to exceed 270 days, and medium-term notes issued by corporations operating within the U.S., commercial paper rated P-1 or higher by Moody’s or A-1 by Standard & Poor’s commercial paper record, repurchase agreements of obligations of the U.S. Government or its agencies for a term of one year or less and the Local Agency Investment Fund. Investments are recorded at fair value in accordance with GASB Statement No. 72, Fair Value Measurement and Application. Accordingly,the change in fair value of investments is recognized as an increase or decrease to investment assets and investment income. The following is a summary of the definition of fair value: Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction. In determining this amount, three valuation techniques are available: Market approach -This approach uses prices generated for identical or similar assets or liabilities. The most common example is an investment in a public security traded in an active exchange such as the NYSE. CITY OF SOUTH SAN FRANCISCO CONFERENCE CENTER AUTHORITY NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30,2019 Page | 16 Cost approach -This technique determines the amount required to replace the current asset. This approach may be ideal for valuing donations of capital assets or historical treasures. Income approach -This approach converts future amounts (such as cash flows) into a current discounted amount. Each of these valuation techniques requires inputs to calculate a fair value. Observable inputs have been maximized in fair value measures, and unobservable inputs have been minimized. Accounts Receivable Accounts receivable represents amounts due to the Authority for previously recognized net services. The Authority does not maintain an allowance for doubtful account. Capital Assets Capital assets are carried at historical costs, net of accumulated depreciation. Depreciation is computed on the straight-line basis over the shorter of the estimated useful lives of the assets or, for building improvements, the term of the lease. Estimated useful lives are as follows: Years Building(s)30 -40 Building improvements 5 -10 Improvement of site 5 -10 Furniture and fixtures 5 -10 Food service equipment 5 -15 Kitchen tableware 5 -10 Machinery and vehicles 5 -10 Office equipment 2 -5 Computers, tablets and mobile devices 2 -5 Telecommunications 2 -5 Maintenance equipment 2 -5 Deferred Outflows and Inflows of Resources In addition to assets, the Statement of Net Position includes a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources,represents a consumption of net position that applies to a future period(s), and as such will not be recognized as an outflow of resources (expense/expenditures)until then. CITY OF SOUTH SAN FRANCISCO CONFERENCE CENTER AUTHORITY NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30,2019 Page | 17 During fiscal year ending June 30, 2019, the Authority does not have any deferred outflows of resources. In addition to liabilities,the Statement of Net Position reports a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and as such, will not be recognized as an inflow of resources (revenue) until that time. During fiscal year ending June 30, 2019, the Authority does not have any deferred inflows of resources. Accrued Vacation Accrued vacation is accrued as earned and expensed as a current operating expense, salary and benefits. In the event of termination, employees are reimbursed for all unused accumulated vacation days up to two years at their current hourly rates. Accrued vacation is not budgeted by the Authority. Long-Term Liabilities Long-term debt and other long-term obligations are reported as liabilities in the proprietary fund statements. Bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable premiums and discounts. Issuance costs are expensed in the period incurred. Net Position Net position represents the difference between assets and liabilities. Net position invested in capital assets, net of related debt consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowings used for the acquisition, construction, or improvement of those assets. Net position is reported as restricted when there are limitations imposed on their use either through the enabling legislation adopted by the Authority or through external restrictions imposed by creditors, grantors, laws or regulations of other governments. The Authority applies restricted resources when an expense is incurred for purposes for which both restricted and unrestricted revenues are available. Use of Estimates The preparation of financial statements in conformity with Generally Accepted Accounting Principles requires management to make estimates and assumptions that affect the report amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. CITY OF SOUTH SAN FRANCISCO CONFERENCE CENTER AUTHORITY NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30,2019 Page | 18 Implemented New Accounting Pronouncements GASB Statement No. 83, Certain Asset Retirement Obligations -This Statement addresses accounting and financial reporting for certain asset retirement obligations (AROs). An ARO is a legally enforceable liability associated with the retirement of a tangible capital asset. A government that has legal obligations to perform future asset retirement activities related to its tangible capital assets should recognize a liability based on the guidance in this Statement. As of June 30, 2019,this Statement did not have an impact on the Authority’s financial statements. GASB Statement No. 88, Certain Disclosures Related to Debt, Including Direct Borrowings and Direct Placements -This Statement addresses additional information to be disclosed in the notes to the financial statements regarding debt, including unused lines of credit; assets pledged as collateral for the debt; and terms specified in debt agreements related to significant events of default with finance-related consequences, significant termination events with finance-related consequences, and significant subjective acceleration clauses. As of June 30, 2019, this Statement did not have an impact on the Authority’s financial statements. Upcoming Accounting and Reporting Changes GASB Statement No.84, Fiduciary Activities -The objective of this Statement is to improve guidance regarding the identification of fiduciary activities for accounting and financial reporting purposes and how those activities should be reported.This Statement establishes criteria for identifying fiduciary activities of all state and local governments. The focus of the criteria generally is on (1) whether a government is controlling the assets of the fiduciary activity and (2) the beneficiaries with whom a fiduciary relationship exists. Separate criteria are included to identify fiduciary component units and postemployment benefit arrangements that are fiduciary activities. The requirements of this Statement are effective for financial statements for periods beginning after December 15, 2018. Earlier application is encouraged. The Authority doesn’t believe this statement will have a significant impact on the Authority’s financial statements. GASB issued Statement No. 87,Leases -The objective of this statement is to better meet the information needs of financial statement users by improving accounting and financial reporting for leases by governments. This statement increases the usefulness of governments’ financial statements by requiring recognition of certain lease assets and liabilities for leases that previously were classified as operating leases and recognized as inflows of resources or outflows of resources based on the payment provisions of the contract.It establishes a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. Under this statement, a lessee is required to recognize a lease liability and an intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources, thereby enhancing the relevance and consistency of information about CITY OF SOUTH SAN FRANCISCO CONFERENCE CENTER AUTHORITY NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30,2019 Page | 19 governments’ leasing activities. The requirements of this Statement are effective for financial statements for periods beginning after December 15, 2019. Earlier application is encouraged. The Authority is in the process of determining the impact this Statement will have on the financial statements. GASB Statement No. 89, Accounting for Interest Cost Incurred Before the End of the Construction Period -This Statement addresses interest costs incurred before the end of a construction period be recognized as an expense in the period in which the cost is incurred for financial statements prepared using the economic resources measurement focus. As a result, interest cost incurred before the end of a construction period will not be included in the historical cost of a capital asset reported in a business-type activity or enterprise fund. The requirements of this Statement are effective for financial statements for periods beginning after December 15, 2019. Earlier application is encouraged. The Authority doesn’t believe this statement will have a significant impact on the Authority’s financial statements. GASB Statement No. 90, Majority Equity Interests -an Amendment of GASB Statements No. 14 and No. 61 -The objectives of this Statement are to improve the consistency and comparability of reporting a government’s majority equity interest in a legally separate organization and to improve the relevance of financial statement information for certain component units. This Statement also requires that a component unit in which a government has 100 percent equity interest account for its assets, deferred outflows of resources,liabilities, and deferred inflows of resources at acquisition value at the date the government acquired a 100 percent equity interest in the component unit.The requirements of this Statement are effective for financial statements for periods beginning after December 15, 2018. The requirements should be applied retroactively, except for the provisions related to (1) reporting a majority equity interest in a component unit and (2) reporting a component unit if the government acquires a 100 percent equity interest. Those provisions should be applied on a prospective basis. The Authority doesn’t believe this statement will have a significant impact on the Authority’s financial statements. GASB Statement No. 91, Conduit Debt Obligations -The objectives of this Statement are to provide a single method of reporting conduit debt obligations by issuers and eliminate diversity in practice associated with (1) commitments extended by issuers, (2) arrangements associated with conduit debt obligations, and (3) related note disclosures. This Statement also clarifies the existing definition of a conduit debt obligation; establishing that a conduit debt obligation is not a liability of the issuer; establishing standards for accounting and financial reporting of additional commitment and voluntary commitments extended by issuers and arrangements associated with the debt obligations; and improving required note disclosures. The requirements of this Statement are effective for financial statements for periods beginning after December 15, 2020. Earlier application is encouraged.The Authority doesn’t believe this statement will have a significant impact on the Authority’s financial statements. CITY OF SOUTH SAN FRANCISCO CONFERENCE CENTER AUTHORITY NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30,2019 Page | 20 4.CASH AND INVESTMENTS The following is a summary of the Authority’s cash and investments as of June 30, 2019: Av aila ble for Operations Restricted Total Investment Rating Weigh ted Av erage Maturity LAIF 4,093,496$-$ 4,093,496$Not Rated N/A Total Investments 4,093,496 - 4,093,496 Cash Deposits with Banks 306,148 - 306,148 Total Cash and Investments 4,399,644$-$ 4,399,644$ The following is a summary of the Authority’s cash and investments as of June 30,2018: Av aila ble for Operations Restricted Total Investment Rating Weigh ted Av erage Maturity US Debt Mutual Fund -$ 482,596$482,596$ AAAm /Aaa-mf 39 Days LAIF 3,167,864 - 3,167,864 Not Rated N/A Total Investments 3,167,864 482,596 3,650,460 Cash Deposits with Banks 676,699 - 676,699 Total Cash and Investments 3,844,563$482,596$4,327,159$ Investment Risks Investments are subject to certain types of risks, including interest rate risk,custodial credit risk, credit risk, and concentration of credit risk. The following describes those risks. Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment the greater the sensitivity of its fair value to changes in market interest rates. The Authority does not have a formal policy regarding interest rate risk. However, the Authority’s practice to manage its exposure to interest rate risk is by purchasing a combination of shorter term and longer-term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations. CITY OF SOUTH SAN FRANCISCO CONFERENCE CENTER AUTHORITY NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30,2019 Page | 21 Custodial Credit Risk The California Government Code requires California banks and savings and loan associations to secure an agency’s deposits by pledging government securities as collateral. The market value of pledged securities must equal at least 110% of an agency’s deposits. California law also allows financial institutions to secure an agency’s deposits by pledging first trust deed mortgage notes having a value of at least 150% of an agency’s total deposits. With respect to investments, custodial credit risk does not apply to a local government’s indirect investment in securities through the use of mutual funds or government investment pools such as LAIF. The Authority does not have a policy for custodian credit risk on deposits. The cash balances with banks were $552,463 as of June 30, 2019 and were insured up to $250,000 by the Federal Depository Insurance Corporation (FDIC). The remaining uninsured balance of $302,463 was secured by pledged government securities as collateral. The market value of pledged securities must equal at least 110%of the Authority’s deposit. Differences between the carrying amount and bank balances are due to reconciling items such as deposits in transit and outstanding checks. Credit Risk Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. The Authority does not have a formal policy regarding credit risk. LAIF does not receive a rating from a nationally recognized statistical rating organization. Concentration of Credit Risk The investment policy of the Authority contains no limitations on the amount that can be invested in any one issue beyond that stipulated by the California Government Code. The LAIF created by California statute is part of a pooled money investment account. The LAIF has oversight by the Local Investment Advisory Board, which consists of five members designated by statute.The Chairman is the State Treasurer, or his designated representative. Restricted Cash and Investments Provisions of the 2003 revenue bonds require that amounts equal to the maximum annual principal and interest payment be set aside and held by the trustee. As of June 30,2019 and 2018, restricted cash and investments for the 2003 revenue bonds totaled $-and $482,596, respectively.During fiscal year ending June 30, 2019, the 2003 revenue bonds were paid off, thus removing the requirement to maintain restricted cash with a trustee. CITY OF SOUTH SAN FRANCISCO CONFERENCE CENTER AUTHORITY NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30,2019 Page | 22 Fair Value Measurements GASB 72 established a hierarchy of inputs to the valuation techniques above. This hierarchy has three levels: Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are quoted market prices for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other than quoted prices that are not observable Level 3 inputs are unobservable inputs, such as a property valuation or an appraisal. The District has the following recurring fair value measurements as of June 30, 2019: California Local Agency Investment Fund (LAIF) of $3,167,864;valued using Level 1 and 2 inputs. 5.CAPITAL ASSETS The following is a summary of the Authority’s capital assets as of June 30, 2019: June 30, 2018 Ad ditions Deletions June 30, 2019 Construction in Progress 43,289$ 17,500$ (43,289)$ 17,500$ Build in g im provements 11,148,265 218,122 (541,411) 10,824,976 Furniture and fixt ures 880,168 88,332 (42,901) 925,599 Machinery and equipment 203,239 115,037 (57,882) 260,394 Kitchen tableware 63,912 - - 63,912 Total Capital Assets 12,338,873 438,991 (685,483) 12,092,381 Less accumulated depreciation (8,760,696) (692,375) 642,194 (8,810,877) Capital assets, net 3,578,177$ (253,384)$ (43,289)$ 3,281,504$ CITY OF SOUTH SAN FRANCISCO CONFERENCE CENTER AUTHORITY NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30,2019 Page | 23 The following is a summary of the Authority’s capital assets as of June 30, 2018: June 30, 2017 Ad ditions Deletions June 30, 2018 Construction in Progress -$ 43,289$ -$ 43,289$ Build in g im provements 10,822,457 325,808 - 11,148,265 Furniture and fixt ures 781,465 98,703 - 880,168 Machinery and equipment 173,645 29,594 - 203,239 Kitchen tableware 63,912 - - 63,912 Total Capital Assets 11,841,479 497,394 - 12,338,873 Less accumulated depreciation (8,221,906) (538,790) - (8,760,696) Capital assets, net 3,619,573$ (41,396)$ -$ 3,578,177$ 6.REVENUE BONDS PAYABLE On June 1, 2003, the City of South San Francisco Capital Improvement Financing Authority (the CIFA) issued $5,865,000 of 2003 revenue bonds. The CIFA was created through a joint exercise of powers agreement between the City and the CIFA for the purpose of obtaining financing for capital improvements. The 2003 revenue bonds are obligations of the CIFA although the Authority is required to make the bond principal and interest payments in return for the use and ownership of the improvements to the leased building that comprise the Conference Center’s facilities. The Authority has pledged the $2.50 tax imposed on the City’s hotel occupants on a per day per room basis as the sole source of repayment of these obligations. The 2003 revenue bonds are, in substance, obligations of the Authority and have therefore been recorded as such in these component unit financial statements.The Authority made the final payment for the 2003 revenue bonds during fiscal year ending June 30, 2019. The following is a summary of the revenue bonds as of June 30, 2019 and 2018: June 30, 2019 June 30, 2018 Begin ning Balance 460,000$ 905,000$ Ad ditions - - Payments (460,000) (445,000) Ending Balance - 460,000 Current Portion - (460,000) Noncurrent Portion -$ -$ The 2003 revenue bonds were issued for the purpose of refunding the 1993 revenue bonds. The refunding reduced required interest payments and did not extend the maturities on the bonds. The advance refunding reduced the Authority’s total debt service payments by $846,859 and resulted in an accounting loss of $401,345. This loss is being amortized over CITY OF SOUTH SAN FRANCISCO CONFERENCE CENTER AUTHORITY NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30,2019 Page | 24 the remaining life of the old debt and the remaining balance is reported as a deferred outflow of resources.As of June 30, 2018, this loss has been fully amortized. The 2003 revenue bonds bear interest rates ranging from 2.25% to 4.00% and matured on September 1, 2018. The Authority had a final payment of $460,000 with $10,860 in interest in fiscal year ending June 30, 2019. 7.FUTURE MINIMUM LEASE COMMITMENTS The Authority sublet land from the City of South San Francisco under an operating lease with a 30-year term commencing on January 1,1999 and ending January 31, 2029. The rent amount is subject to re-negotiation, at the option of either party, between January 1 and February 28, 2009 and 2019. Future minimum lease payments as of June 30, 2019 are as follows: Year End in g June 30 Min imum Leas e Payments 2020 420,000 2021 420,000 2022 420,000 2023 420,000 2024 420,000 2025-2029 1,830,000 Total Min imum Leas e Payments 3,930,000$ 8.DEFINED CONTRIBUTION PLANS 401K Qualified Plan: The Authority provides pension benefits for all employees through a defined contribution plan. In a defined contribution plan,benefits depend solely on amounts contributed to the plan plus investment earnings. The Authority contributes 8.5% of the employees’ compensation and employees contribute an additional 7.5%. Employees vest 100% after completing five years of service. The Authority contributions and interest forfeited by employees who leave employment before five years of service are used to reduce the Authority’s future contribution requirements. For the year ended June 30, 2019, the Authority’s total and covered payroll was $898,878, with employer contributions of $67,374 and employee contributions of $59,336. For the year ended June 30, 2018, the Authority’s total and covered payroll was $908,847, with employer contributions of $92,453 and employee contributions of $80,908. CITY OF SOUTH SAN FRANCISCO CONFERENCE CENTER AUTHORITY NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30,2019 Page | 25 457 Deferred Compensation Plan: The Authority has adopted a deferred compensation plan for the benefit of its employees. All eligible employees of the Authority may defer receipt of a portion of their salary and, therefore, defer taxation on that amount, until they are separated from service or face an unforeseeable emergency. The participants direct the plan administrator, ICMA Retirement Corporation, to invest the deferred amounts in investments of their choice.The Authority contributes for the employees who decline medical benefits based on the cost of these benefits. For the years ended June 30, 2019 and 2018, employees contributed $39,450 and 59,336, respectively, to the deferred compensation plan. 9.RISK MANAGEMENT The Authority is covered by the City’s insurance group called the Association of Bay Area Governments (ABAG) plan for general liability and property. There were no significant reductions in insurance coverage from coverage in the prior year. The Authority has purchased commercially available workers’ compensation insurance. SUPPLEMENTAL INFORMATION The accompanying supplemental information is included to provide the user with (1) a five-year trend of the Authority’s operating statements prepared on the Authority’s Budget basis, (2) a reconciliation from the audited financial statements presented on a Generally Accepted Accounting Principles (GAAP) basis to the Authority’s Budget basis operating statement, and (3) a statement of revenues and expenses on budget basis. CITY OF SOUTH SAN FRANCISCO CONFERENCE CENTER AUTHORITY SCHEDULE OF REVENUES,EXPENDITURES AND CHANGES IN NET POSITION (BUDGET BASIS) FOR EACH OF THE LAST FIVE FISCAL YEARS See accompanying independent auditor’s report. Page | 26 2019 2018 2017 2016 2015 Revenues : Occupanc y tax 2,243,066$ 2,150,818$ 2,146,545$ 2,172,208$ 2,215,145$ Rent 1,297,270 1,148,296 805,776 764,257 755,948 Food and beverage 642,857 711,086 778,270 617,910 487,958 Event services 391,613 287,380 268,204 237,651 182,010 Interes t in come 76,759 27,795 19,152 9,204 9,416 Other in come 11,575 - - - - Total Revenues 4,663,140 4,325,375 4,017,947 3,801,230 3,650,477 Exp end it ures : Capital imp rovements 395,702 497,394 390,445 481,127 273,682 Deb t service: Interes t and fis cal charges 10,860 16,141 39,300 55,058 69,748 Prin cipal payments 460,000 445,000 425,000 410,000 395,000 Pers onnel 1,250,296 1,252,899 968,338 936,668 941,886 Repair s and maintenanc e 645,149 497,729 473,078 454,693 434,804 Supplie s 49,776 68,614 56,097 128,330 114,969 Ma rketing services 339,230 340,563 285,903 288,051 253,739 Profes sional services 463,426 226,879 196,541 212,185 140,608 Ins uranc e 37,079 33,989 28,523 28,523 28,523 Utilit ie s 209,654 191,529 175,069 180,740 176,421 Property taxes 22,070 - - - - Other 9,807 13,871 22,333 22,709 27,338 Subtotal 3,893,049 3,584,608 3,060,627 3,198,084 2,856,718 Rent 468,300 484,080 477,504 491,809 501,402 Total Exp end it ures 4,361,349 4,068,688 3,538,131 3,689,893 3,358,120 Changes in Net Position 301,791$ 256,687$ 479,816$ 111,337$ 292,357$ CITY OF SOUTH SAN FRANCISCO CONFERENCE CENTER AUTHORITY RECONCILIATION OF CHANGES IN REVENUES OVER EXPENDITURES (BUDGET BASIS) TO NET POSITION (GAAP BASIS) FOR EACH OF THE LAST FIVE FISCAL YEARS See accompanying independent auditor’s report. Page | 27 (5 )Net Position Net Position Change in (1 )(2 )(3 )(4 )Change in Prio r Beginning End Net Position Capital Principal Net Position Period of Year of Year Year (Bud get)Imp ro vements Payments Dep rec ia tion Amo rtization (G AAP )Ad justment (GAAP )(GAAP ) 2019 301,791$ 395,702$ 460,000$ (692,375)$ -$ 465,118$ -$ 6,839,485$ 7,304,603$ 2018 256,687 497,394 445,000 (538,790) (25,826) 634,465 - 6,205,020 6,839,485 2017 479,816 390,445 425,000 (474,542) (28,176) 792,543 - 5,412,477 6,205,020 2016 111,337 481,127 410,000 (455,271) (28,176) 519,017 - 4,893,460 5,412,477 2015 292,357 273,682 395,000 (430,419) (28,176) 502,444 - 4,391,016 4,893,460 No tes: (1) (2) (3) (4) (5)Ac count for a prio r period adjus tment by res tating the prio r period financ ia l statements . GAAP Bas is Reconcilin g Items Capital exp end it ures are rec orded as inc reas es to fixed assets und er GAAP and as exp end it ures und er the budget basis. Principal payments on le as e obligations are rec orded as decreas es to debt und er GAAP and as exp end it ures und er the budget basis. Deprec iation exp ens e rep res ents noncash usage of fix ed assets and is deducted for GAAP purp oses, not deducted for budget basis purp oses. Amo rtization rep resents noncash charges for deferred bond refund in g lo sses and issuanc e costs, and is exp ens ed for GAAP purposes. CITY OF SOUTH SAN FRANCISCO CONFERENCE CENTER AUTHORITY SCHEDULE OF REVENUES,EXPENDITURES AND CHANGES IN NET POSITION BUDGET AND ACTUAL (BUDGET BASIS) FOR THE FISCAL YEAR ENDED JUNE 30, 2019 See accompanying independent auditor’s report. Page | 28 Ac tual (Bud get Basis)Varianc e Operating Revenues : Rent 1,200,000$ 1,297,270$ 97,270$ Food and beverage 800,000 642,857 (157,143) Event services 275,000 391,613 116,613 Total Operating Revenues 2,275,000 2,331,740 56,740 Operating Expens es : Pers onnel 1,338,926 1,250,296 88,630 Repairs and maintenanc e 701,917 645,149 56,768 Supplies 70,700 49,776 20,924 Marketing services 334,390 339,230 (4,840) Profes sional services 185,934 463,426 (277,492) Ins uranc e 26,700 37,079 (10,379) Utilit ie s 217,100 209,654 7,446 Property taxes 27,100 22,070 5,030 Other 38,000 9,807 28,193 Subtotal 2,940,767 3,026,487 (85,720) Rent 468,300 468,300 - Operating Expens es before Capital Outlay 3,409,067 3,494,787 (85,720) Capital Outlay 440,500 395,702 44,798 Total Operating Exp ens es 3,849,567 3,890,489 (40,922) Operating Inc ome (Lo ss)(1,574,567) (1,558,749) 15,818 No n Operating Revenues (Exp ens es): Conferenc e center tax 2,279,518 2,243,066 (36,452) Interes t in come 35,000 76,759 41,759 Other in come - 11,575 11,575 Deb t service (470,200) (470,860) (660) Net No n Operating Revenues 1,844,318 1,860,540 16,222 Change in Net Position 269,751$ 301,791$ 32,040$ Bud get (Unaud it ed ) CHAVAN &ASSOCIATES,LLP CERTIFIED PUBLIC ACCOUNTANTS Page | 29 1475 Saratoga Ave, Suite 180, San Jose, CA 95129 Tel:408-217-8749 • E-Fax: 408-872-4159 [email protected] •www.cnallp.com INDEPENDENT AUDITOR'S 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 Members of the City of South San Francisco Conference Center Authority Board and Executive Director South San Francisco, California We have audited, 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, the financial statements of the business-type activities of the City of South San Francisco Conference Center Authority (the “Authority”), a component unit of the City of South San Francisco, California, as of and for the year ended June 30, 2019, and the related notes to the financial statements, which collectively comprise the Authority’s basic financial statements, and have issued our report thereon dated October 30, 2019. Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the Authority’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Authority’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Authority’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the Authority’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be material weaknesses or significant deficiencies.Given these limitations, during our audit we did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. CHAVAN &ASSOCIATES,LLP CERTIFIED PUBLIC ACCOUNTANTS Page | 30 1475 Saratoga Ave, Suite 180, San Jose, CA 95129 Tel:408-217-8749 • E-Fax: 408-872-4159 [email protected] •www.cnallp.com Compliance and Other Matters As part of obtaining reasonable assurance about whether the Authority’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Authority’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Authority’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. October 30, 2019 San Jose, California