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HomeMy WebLinkAboutBack-Up DocumentsMIAMI SPORTS AND EXHIBITION AUTHORITY (A Component Unit of the City of Miami, Florida) Basic Financial Statements September 30, 2016 (With Independent Auditor's Report Thereon) MIAMI SPORTS AND EXHIBITION AUTHORITY (A Component Unit of the City of Miami, Florida) For the Year Ended September 30, 2016 Table of Contents FINANCIAL SECTION: Page(s) Independent Auditor's Report 1-2 Basic Financial Statements: Government -wide Financial Statements: Statement of Net Position Statement of Activities 4 Fund Financial Statements: Balance Sheet — Governmental Fund 5 Statement of Revenues, Expenditures and Changes in Fund Balances — Governmental Fund 6 Statement of Net Position — Proprietary Funds 7 Statement of Revenues, Expenses, and Changes in Net Position — Proprietary Funds 8 Statement of Cash Flows — Proprietary Funds 9 Notes to the Basic Financial Statements 10-16 Required Supplementary Information (Unaudited): Budgetary Comparison Schedule 17 Notes to the Budgetary Comparison Schedule 18 COMPLIANCE SECTION: Independent Auditors' 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 19-20 Management Letter in Accordance with the Rules of the Auditor General of the State of Florida 21-22 FINANCIAL SECTION Independent Auditor's Report SK -J FV, I" CERTIFIED PUBLIC ACCOUNTANTS & CONSULTANTS Sanson, 1(lirieJaco o, Tandoe & Gamarra, LLP 5505 Flue Lagoon Drive I Suits 2201 Miami, FL 33126 Td: (305) 269-56331 Fax: (305) 265-06521 www.rkjtg-epa.com Independent Auditor's Report The Board Members Miami Sports and Exhibition Authority: Report on the Financial Statements We have audited the accompanying basic financial statements of the governmental activities, the business - type activities, and each major fund of the Miami Sports and Exhibition Authority (the Authority), a component unit of the City of Miami, Florida (the City), as of and for the year ended September 30, 2016, and the related notes to the financial statements, which collectively comprise the Authority's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements 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 entity'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 entity'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 audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business -type activities, and each major fund of the Authority as of September 30, 2016, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in conformity 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 budgetary comparison information on pages 17 and 18 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. Management has omitted the management's discussion and analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing 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. Our opinion on the basic financial statements is not affected by this missing information. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 15, 2016 on our consideration of the Authority's internal control over financial reporting and 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 the 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. .daw" 4;,u, ?Utxtna &,,t& 4 4t-4", 0 Miami, Florida December 15, 2016 2 Basic Financial Statements MIAMI SPORTS AND EXHIBITION AUTHORITY (A Component Unit of the City of Miami, Florida) Statement of Net Position September 30, 2016 (with summarized financial information for the fiscal year ended September 30, 2015) Assets Cash Other receivable Prepaids Total assets Liabilities Accounts payable Rent received in advance Deposits payable Total liabilities Net Position Restricted Unrestricted Total net position Business - Governmental type Activities Activities Totals 2016 2015 $ 9,137 $ 770,144 $ 779,281 $ 731,959 - 152 152 - - - - 9,825 9,137 770,296 779,433 741,784 768 - 768 202,271 - - - 3,800 250,000 250,000 - 768 250,000 250,768 206,071 - 183,087 183,087 37,270 8,369 337,209 345,578 498,443 $ 8,369 $ 520,296 $ 528,665 $ 535,713 The accompanying notes are an integral part of the basic financial statements. 3 MIAMI SPORTS AND EXHIBITION AUTHORITY (A Component Unit of the City of Miami, Florida) Statement of Activities Fiscal year ended September 30, 2016 The accompanying notes are an integral part of the basic financial statements. 4 Program Net (Expenses) Revenues Revenues and Changes in Net Position Business - Charges for Governmental type Functions Expenses Services Activities Activities Total Governmental Activities: - General government S 65,847 S - S (65,847) S - S (65,847) Culture and recreation 87,500 - (87,500) - (87,500) Total governmental activities 153,347 - (153,347) - (153,347) Business -type Activities: Watson Island 24 145,485 - 145,461 145,461 Total business -type activities 24 145,485 - 145,461 145,461 Total government S 153,371 S 145,485 S (153,347) S 145,461 S (7,886) General Revenues: Interest income S 8 S 830 S 838 Transfers 154,300 (154,300) - Total general revenues, speical items and transfers 154,308 (153,470) 838 Change in net position 961 (8,009) (7,048) Net position, beginning of year 7,408 528,305 535,713 Net position, end of year S 8,369 S 520,296 S 528,665 The accompanying notes are an integral part of the basic financial statements. 4 Cash Prepaids Total assets MIAMI SPORTS AND EXHIBITION AUTHORITY (A Component Unit of the City of Miami, Florida) Balance Sheet Governmental Fund September 30, Assets Liabilities and Fund Balances Liabilities: Accounts payable Fund Balances: Nonspendable Unassigned Total fund balances Total liabilities and fund balances General Fund 2016 2015 $ 9,137 $ - - 9,825 $ 9,137 $ 9,825 $ 768 $ 2,417 - 9,825 8,369 (2,417) 8,369 7,408 $ 9,137 $ 9,825 The accompanying notes are an integral part of the basic financial statements 5 MIAMI SPORTS AND EXHIBITION AUTHORITY (A Component Unit of the City of Miami, Florida) Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Fund Fiscal year ended September 30, Revenues: Interest income Total revenues Expenditures: General and administrative Professional services Culture and recreation Total expenditures Deficiency of revenues under expenditures Other fmancing sources: Transfers in Net change in fund balances Fund balances, beginning of year Fund balances, end of year General Fund 2016 2015 $ 8 $ - 8 - 46,847 19,000 87,500 153,347 (153,339) 34,177 16,188 95,000 145,365 (145,365) 154,300 139,631 961 (5,734) 7,408 13,142 $ 8,369 $ 7,408 The accompanying notes are an integral part of the basic financial statements. 6 MIAMI SPORTS AND EXHIBITION AUTHORITY (A Component Unit of the City of Miami, Florida) Statement of Net Position Proprietary Funds September 30, 2016 (with summarized financial information for the fiscal year ended September 30, 2015) Assets Current assets Cash Due from other fund Other receivable Total assets Liabilities and Net Position Current liabilities Accounts payable Rent received in advance Due to other fund Deposits payable Total liabilities Net position: Restricted Unrestricted Total net positon Total liabilities and net positon Business -type Activities - Enterprise Funds Non CDT Watson Totals Fund Island Fund 2016 2015 $ 259,931 $ 510,213 $ 770,144 $ 731,959 77,278 - 77,278 - $ 337,209 $ 510,365 $ 847,574 $ 731,959 $ - 0 $ - $ 199,854 - - - 3,800 - 77,278 77,278 - - 250,000 250,000 - - 327,278 327,278 203,654 - 183,087 183,087 37,270 337,209 - 337,209 491,035 337,209 183,087 520,296 528,305 $ 337,209 $ 510,365 $ 847,574 $ 731,959 The accompanying notes are an integral part of the basic financial statements. 7 MIAMI SPORTS AND EXHIBITION AUTHORITY (A Component Unit of the City of Miami, Florida) Statement of Revenues Expenses and Changes in Net Position Proprietary Funds Fiscal year ended September 30, 2016 (with summarized financial information for the fiscal year ended September 30, 2015) Operating revenues: Rent revenue Pilot fee revenue Litigation settlement Total operating revenues Operating expenses: General and administrative Total operating expenses Operating income Non-operating revenues (expenses): Interest income Total non-operating revenues Income before transfers Transfers out Special item - contribution to Heliport Project Change in net position Net position, beginning of year Net position, end of year Business -type Activities - Enterprise Funds Non CDT Watson Totals Fund Island Fund 2016 2015 $ $ 123,376 $ 123,376 $ 103,064 - 22,109 22,109 - - - - 226,070 - 145,485 145,485 329,134 - 24 24 - - 24 24 - - 145,461 145,461 329,134 474 356 830 18,717 474 356 830 18,717 474 145,817 146,291 347,851 (154,300) - (154,300) (139,631) - - - (199,854) (153,826) 145,817 (8,009) 8,366 491,035 37,270 528,305 519,939 $ 337,209 $ 183,087 $ 520,296 $ 528,305 The accompanying notes are an integral part of the basic financial statements. 8 MIAMI SPORTS AND EXHIBITION AUTHORITY (A Component Unit of the City of Miami, Florida) Statement of Cash Flows Fiscal year ended September 30, 2016 (with summarized financial information for the fiscal year ended September 30, 2015) Cash flows from operating activities Receipts from rent and deposits Recepits from pilot fee revenue Recepits from litigation settlement Net receipts (payments) from (to) other funds Payments to suppliers for services Net cash provided by (used in) operating activities Cash flows from noncapital financing activities Transfers to other funds Net cash used in noncapital financing activities Cash flows from investing activities Receipts from interest Net cash provided by investing activities Net increase (decrease) in cash Cash - beginning of year Cash - end of year Reconciliation of operating income to net cash provided by (used in) operating activities Operating income Adjustments to reconcile operating income to net cash provided by (used in) operating activities: (Increase) decrease in assets: Rent receivable Due from other fund Other receivable Increase (decrease) in liabilities: Accounts payable Rent received in advance Due to other fund Deposits payable Net cash provided by (used in) operating activities Business -type Activities - Enterprise Funds Non CDT Watson Totals Fund Island Fund 2016 2015 $ - $ 369,424 $ 369,424 $ 137,064 - 22,109 22,109 - - - - 226,070 (77,278) 77,278 - - - (199,878) (199,878) - (77,278) 268,933 191,655 363,134 (154,300) - (154,300) (139,631) (154,300) - (154,300) (139,631) 474 356 830 18,717 474 356 830 18,717 (231,104) 269,289 38,185 242,220 491,035 240,924 731,959 489,739 $ 259,931 $ 510,213 $ 770,144 $ 731,959 $ - $ 145,461 $ 145,461 $ 329,134 30,200 (77,278) - (77,278) - - (152) (152) - - (199,854) (199,854) - - (3,800) (3,800) 3,800 - 77,278 77,278 - - 250,000 250,000 - $ (77,278) $ 268,933 $ 191,655 $ 363,134 The accompanying notes are an integral part of the basic financial statements. 9 Notes to the Basic Financial Statements MIAMI SPORTS AND EXHIBITION AUTHORITY (A Component Unit of the City of Miami, Florida) Notes to the Basic Financial Statements September 30, 2016 L SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This summary of the Miami Sports and Exhibition Authority (the Authority) significant accounting policies is presented to assist the reader in interpreting the basic financial statements. The policies are considered essential and should be read in conjunction with the basic financial statements. The accounting policies of the Authority conform to U.S. generally accepted accounting principles applicable to governmental units. This report, the accounting systems and classification of accounts conform to standards of the Governmental Accounting Standards Board (GASB), which is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The following is a summary of the more significant policies. A. Organization and reporting entity The Authority is an independent and autonomous agency and instrumentality of the City of Miami, Florida (the City). The Authority was established by Ordinance No. 9662 adopted by the City Commission on July 28, 1983 (as amended by City Ordinance No. 11155), pursuant to Section 212.0305, Florida Statute, for the purpose of promoting the development of sports, convention and exhibition facilities within the City and attracting professional sports franchises and exhibitions to utilize the City's and/or the Authority's facilities. For financial statement purposes, the Authority is a discretely presented component unit of the City and is included in the City's Comprehensive Annual Financial Report. The Authority's financial statements are not intended to present fairly the financial position and results of operations of the City in conformity with U.S. generally accepted accounting principles. B. Government -wide and fund financial statements The government -wide financial statements (i.e., the statement of position and the statement of activities) report information on all the nonfiduciary activities of the Authority. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from businesstypeactivities, which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for the Authority's governmental funds and proprietary funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. C. Measurement focus, basis of accounting and financial statement presentation The government -wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. 10 MIAMI SPORTS AND EXHIBITION AUTHORITY (A Component Unit of the City of Miami, Florida) Notes to the Basic Financial Statements September 30, 2016 L SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) C. Measurement focus, basis of accounting and financial statement presentation (continued) The governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the Authority considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when the related fund liability is incurred. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. The proprietary fund financial statements are reported using the accrual basis of accounting in order to recognize the flow of economic resources. Under this basis, revenues are recognized in the period in which they are earned, expenses are recognized in the period in which they are incurred, depreciation of capital assets is recognized, and all assets and liabilities associated with the operation of the Authority are included in the statement of net position. Proprietary funds distinguish operating revenues and expenses from non- operating 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 of the Authority enterprise funds are charges to customers for sales and services. Operating expenses for enterprise funds include the cost of sales and services and administrative expenses. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. The Authority reports the following major governmental funds: ■ The General Fund is the Authority's primary operating fund. It accounts for all financial resources used to fund the operations of the Authority, except those required to be accounted for in another fund. The Authority reports the following major proprietary funds: ■ The Non -CDT Fund (the Project Development Fund) accounts for the activities of joint projects undertaken by the Authority with other entities (private and/or nonprofit entities) that share the Authority's cultural and recreational objectives; ■ The Watson Island Fund accounts for the activities related to the inter -local agreement dated November 2, 2001 with the City for the management of revenue and expenses derived from Watson Island. D. Assets, liabilities, and net position/fund balance (1) Cash and investments The Authority's cash at September 30, 2016 consists of cash on hand and demand deposits. The Authority is authorized to invest in obligations of the U.S. Treasury, its agencies, instrumentalities and the State Board of Administration Investment Pool. GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, requires disclosure of investments at fair value and recognition of unrealized gains or losses, if material, for investments with remaining maturities of more than one year at the time of purchase. Investments with remaining maturities of one year or less at the time of purchased are recorded at amortized cost. At September 30, 2016, the Authority had no investments. (2) Prepaid expenses Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid expenses in both the government -wide and fund financial statements. 11 MIAMI SPORTS AND EXHIBITION AUTHORITY (A Component Unit of the City of Miami, Florida) Notes to the Basic Financial Statements September 30, 2016 L SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) D. Assets, liabilities, and net position/fund balance (continued) (3) Interfund receivables and payables Activity between funds that is representative of lending/borrowing arrangements outstanding at the end of the fiscal year is referred to as "due to/from other funds". (4) Fund equity / net position Fund equity GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, establishes criteria for classifying fund balances into specifically defined classifications and clarifies definitions for governmental fund types. Fund balances for governmental funds are reported in classifications that comprise a hierarchy based primarily on the extent to which the government is bound to honor constraints on the specific purposes for which amounts in those funds can be spent, as follows: ■ Nonspendable fund balance - amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact. ■ Restricted fund balance - amounts that are restricted to specific purposes when constraints placed on the use of resources are either by (a) externally imposed by creditors (such as debt covenants), grantors, contributors, or laws or regulations of other governments; or (b) imposed by law through constitutional provisions or enabling legislations. ■ Committed fund balance - amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the government's highest level of decision making authority. ■ Assigned fund balance - amounts that are constrained by the government's intent to be used for specific purposes, but are neither restricted nor committed. ■ Unassigned fund balance - amounts that have not been assigned to other funds and that have not been restricted, committed, or assigned to specific purpose within the general fund. When both restricted and unrestricted amounts are available for use, it is the Authority's practice to use restricted resources first. Additionally, the Authority would first use committed, then assigned, and lastly unassigned amounts of unrestricted fund balance. Net position The government -wide and proprietary funds financial statements utilize a net position presentation. Net position can be categorized as net investment in capital assets, restricted, or unrestricted. The first category represents capital assets, less accumulated depreciation and net of any outstanding debt associated with the acquisition of capital assets. Restricted net position represent amounts that are restricted by requirement of debt indenture or enabling legislation. Unrestricted net position represents the net position of the Authority which are not restricted for any project or purpose. When both restricted and unrestricted resources are available for use, it is the Authority's policy to use unrestricted resources first, and then restricted resources as they are needed. (5) Prior year total columns Total columns for the prior year in the accompanying financial statements are presented only to facilitate financial analysis. Data in these columns do not present the financial position, or results of operations, in conformity with U.S. generally accepted accounting principles. 12 MIAMI SPORTS AND EXHIBITION AUTHORITY (A Component Unit of the City of Miami, Florida) Notes to the Basic Financial Statements September 30, 2016 L SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) D. Assets, liabilities, and net position/fund balance (continued) (6) Use of estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although these estimates are based on management's knowledge of current events and actions it may undertake in the future, they may ultimately differ from actual results. II. DETAILED NOTES TO OPERATIONS A. Deposits At September 30, 2016, the carrying amounts and bank balances of the Authority's deposits totaled $779,281 and $820,456, respectively. Custodial Credit Risk is the risk that in the event of a bank failure, the Authority's deposits may not be returned to it. In addition to insurance provided by the Federal Deposit Insurance Corporation (FDIC), deposits are held in banking institutions approved by the State of Florida, State Treasurer to hold public funds. Under Florida Statutes, Chapter 280, "Florida Security for Public Deposits Act", the State Treasurer requires all qualified public depositories to deposit with the Treasurer or another banking institution eligible collateral. In the event of a failure of a qualified public depository, the remaining public depositories would be responsible for covering any resulting losses. Accordingly, all cash held by banks are fully collateralized or insured. B. Fund balances At September 30, 2016, the Authority's General Fund reported unassigned fund balance of $8,369. As previously described, unassigned fund balance are amounts that have not been assigned to other funds and have not been restricted, committed, or assigned for a specific purpose. C. Interlocal agreement On August 14, 1997, and amended on October 19, 2013, the Authority entered into an Interlocal Agreement with the City to construct, operate, manage, and maintain the Air Transportation Facility on Watson Island, solely out of the revenues derived from such facility (see Note II D). The initial term of the Interlocal Agreement is for 30 years, with two additional renewal periods of 10 years each, at the City's option. In accordance with the Interlocal Agreement, rent is to be paid by the Authority to the City as follows: 1) for the airport area, rent shall be established in accordance with the requirements of the State Deed restrictions, funders, granters and any outstanding debt services, and Florida Department of Transportation ("FDOT"), and the Federal Aviation Administration regulations as they relate to the Air Transportation Facility; and 2) for the adjacent area, at such time as the Authority develops, or procures the development of the adjacent area, the Authority shall not convey any interest with respect to the adjacent area, unless i) the Authority receives fair market rent in connection with any use of the Air Transportation Facility and its adjacent area, and ii) the Authority negotiates a payment to the City which guarantees a fair market return to the City. As of September 30, 2016, no such rent has been paid to the City. 13 MIAMI SPORTS AND EXHIBITION AUTHORITY (A Component Unit of the City of Miami, Florida) Notes to the Basic Financial Statements September 30, 2016 II. DETAILED NOTES TO OPERATIONS (continued) D. Lease and sublease agreements (1) Miami Children's Art Museum On November 2, 2001, the Miami Children's Art Museum entered into a lease agreement with the Authority to lease space on Watson Island. The terms of the agreement is for 25 years at rent of $2.00 per year. (2) Linden Airport Services Corporation — Heliport Project On October 9, 2013, Linden Airport Services Corporation ("Linden"), d/b/a Watson Island Heliport Corporation, entered into a 30 -year Sublease Agreement (the "Linden Sublease Agreement") with the Authority to lease certain space on Watson Island to develop and operate a heliport for the use and benefit of the general public. Upon expiration of the original term, Linden has the option of to extend the agreement for two 10 -year periods. In conjunction with the Linden Sublease Agreement, Linden entered into a separate Development Agreement with the Authority and the City for the construction of the helipad, to be paid by a $350,000 contribution from Linden and the remaining construction costs to be paid by the City through grant funds. In accordance with the Linden Sublease Agreement, rent to be paid by Linden to the Authority shall be the greater of the minimum annual rent or percentage rent. Minimum annual rent is determined as follows: i) $2,200 per month for lease years 1 and 2; ii) $3,800 per month for lease year 3; iii) $5,500 per month for lease year 4; iv) $5,775 per month for lease years 5 through 9; v) $6,208 per month for lease years 10 through 19; vi) $6,705 per month for lease years 20 through 25; and vii) $7,375 per month for lease year 26 and every lease year thereafter. Percentage rent is determined as follows: i) 2.5% of gross revenues for lease years 1 and 2; ii) 5% of gross revenues for lease years 3 and 4; iii) 7.5% of gross revenues for lease years 5 through 9; iv) 8% of gross revenues for lease years 10 through 19; and v) 10% of gross revenues for lease years 20 through 30. Rent revenue recognized on the Linden Sublease Agreement during fiscal year 2016 totaled $26,400. The Linden Sublease Agreement and the Development Agreement were simultaneously amended twice during fiscal year 2015. In accordance with the second amendment to the Linden Sublease Agreement, dated September 16, 2015, the Authority agreed to contribute up to $200,000 towards the cost charged by Florida Power and Light to place all of the required electrical utility lines underground at the heliport site. (3) Chalks Airlines, Inc. On July 29, 2014, Chalks Airlines, Inc. ("Chalks") entered into an Amended and Restated Air Terminal Facility Sublease Agreement (the "Chalks Sublease Agreement") with the Authority to sublease certain space on Watson Island to operate an air transportation facility for the use and benefit of the general public. Pursuant to a Settlement Agreement dated March 6, 2002 (the "Settlement Agreement") by and between the Authority and Flying Boat, Inc. (d/b/a Chalks Ocean Airways), the Authority and Flying Boat, Inc. (the "Original Tenant") entered into that certain Air Terminal Facility Sublease, dated March 6, 2002 (the "Original Sublease"), which Original Sublease has been assigned to Chalks. The Chalks Sublease Agreement amends and restates the Original Sublease. Chalks' initial plans for the leased property contemplate, at Chalks' own cost and expense, tenant improvements to include the refurbishment and/or new construction of the existing air transportation facility and the new construction of new facilities in one or more phases. 14 MIAMI SPORTS AND EXHIBITION AUTHORITY (A Component Unit of the City of Miami, Florida) Notes to the Basic Financial Statements September 30, 2016 II. DETAILED NOTES TO OPERATIONS (continued) D. Lease and sublease agreements (continued) (3) Chalks Airlines, Inc. (continued) New facilities will include food and alcohol service establishments, a historical center, a media room, commercial recreational indoor and/or open air retail businesses, other commercial, educational and civic uses, as well as learning centers, and parking facilities. All designs for any such tenant improvements are subject to review and approval by the Authority. The initial rent to be paid by Chalks (the "Initial Construction Stage Rent") is $6,000 per month, commencing on the effective date, and from that date through the earlier of (i) substantial completion of the tenant improvements; or (ii) the receipt of a temporary or final certificate of occupancy, whichever is obtained first (the "Rent Commencement Date"). If Chalks fails to open the tenant improvements, including the restaurants (the "Facility Opening"), as of the Rent Commencement Date, the Initial Construction Stage Rent will increase to $20,833 per month until such time as the Facility Opening occurs. Commencing with the date the Facility Opening occurs through the expiration date of the Chalks Sublease Agreement (i.e. October 18, 2043), Chalks shall pay the Authority as annual rent, the greater of $500,000 or a percentage rent equal to the sum of (i) 5% of the pertinent annual gross revenue attributable to Chalks' sale of fuel at the property, (ii) Chalks' or its subtenant's gross revenue from the sale of food, beverage and alcohol per establishment, other than the Air Transportation Facility, equal to 8% of the pertinent annual gross revenues from such sale of food, beverage and alcohol over $300,000 but less than $500,000 and 10% of annual gross revenues from such sale of food, beverage and alcohol of $500,000 or more, (iii) 10% of gross revenues from ticket or other sales for access at the historical center, media or learning center, and (iv) 1% of the pertinent annual gross revenues (after deducting out any other amounts of gross revenues paid pursuant to clauses (i) - (iii) above, plus $15.86 per square foot of the establishments used as retail portions of the Commercial Facilities). Rent revenue recognized on the Chalks Sublease Agreement during fiscal year 2016 totaled $72,000. Upon execution of the Chalks Sublease Agreement, Chalks paid a security deposit in the amount of $250,000, which wasn't actually paid until fiscal year 2016. The security deposit is reported on the statement of net position as deposits payable. E. Interfund receivables, payables and transfers At September 30, 2016, the Non CDT Fund reported a due to the Watson Island Fund, and the Watson Island Fund reported a due from the Non CDT Fund, in the amount of $$77,278. The outstanding balance is a result of the time lag between the dates that payments between funds are made. During fiscal year 2016, the Non -CDT Fund transferred a total of $154,300 to the General Fund to cover operating expenditures and grants. F. Risk management The Authority is exposed to various risks of losses related to torts; theft or damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The Authority purchases commercial insurance for the risks of loss to which it is exposed. Policy limits and deductibles are reviewed by management and established at amounts to provide reasonable protection from significant financial loss. There were no losses or claims incurred during the current fiscal year, and there were no settlements that exceeded insurance coverage during the past three fiscal years. 15 MIAMI SPORTS AND EXHIBITION AUTHORITY (A Component Unit of the City of Miami, Florida) Notes to the Basic Financial Statements September 30, 2016 II. DETAILED NOTES TO OPERATIONS (continued) G. New pronouncements issued The following pronouncements have recently been issued by the GASB, but do not or will not have a material impact on the financial statements of the Trust upon implementation: ■ GASB Statement No. 72, Fair Value Measurement and Application, which is effective for the fiscal year ending September 30, 2016. ■ GASB Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68, which is effective for the fiscal year ending September 30, 2017. ■ GASB Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, which is effective for the fiscal year ending September 30, 2017. ■ GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, which is effective for the fiscal year ending September 30, 2018. ■ GASB Statement No. 77, Tax Abatement Disclosures, which is effective for the fiscal year ending September 30, 2017. ■ GASB Statement No. 78, Pensions Provided through Certain Multiple -Employer Defined Benefit Pension Plans, which is effective for the fiscal year ending September 30, 2017. ■ GASB Statement No. 79, Certain External Investment Pools and Pool Participants, which is effective for the fiscal year ending September 30, 2017. ■ GASB Statement No. 80, Blending Requirements for Certain Component Units an amendment of GASB Statement No. 14, which is effective for the fiscal year ending September 30, 2017. ■ GASB Statement No. 81, Irrevocable Split -Interest Agreements, which is effective for the fiscal year ending September 30, 2018. ■ GASB Statement No. 82, Pension Issues an amendment of GASB Statements No. 67, No. 68, and No. 73, which certain requirements are effective for the fiscal year ending September 30, 2017, and certain other requirements effective for fiscal year ending September 30, 2018. H. Subsequent events The Authority evaluated subsequent events through December 15, 2016, the date the financial statements were available to be issued. [LIM Required Supplementary Information MIAMI SPORTS AND EXHIBITION AUTHORITY (A Component Unit of the City of Miami, Florida) Budgetary Comparison Schedule General Fund (Required Supplementary Information - Unaudited) Fiscal year ended September 30, 2016 Revenues: Interest income Total revenues Expenditures: General and administration Professional services Total expenditures Deficiency of revenues under expenditures Other fmancing sources: Transfers in Carryover fund balance Total other financing sources Net change in fund balances Budgeted amounts Original Final Variance with Actual fmal budget - budgetary positive basis (negative) $ 8 $ 8 8 8 70,100 70,100 46,847 23,253 18,900 18,900 19,000 (100) 89,000 89,000 65,847 23,153 (89,000) (89,000) (65,839) (23,145) - - 154,300 154,300 89,000 89,000 - - 89,000 89,000 154,300 154,300 $ - $ - $ 88,461 $ 131,155 The notes to the supplementary information are an integral part of this schedule. 17 MIAMI SPORTS AND EXHIBITION AUTHORITY (A Component Unit of the City of Miami, Florida) Notes to the Budgetary Comparison Schedule September 30, 2016 1. BUDGETARY INFORMATION In accordance with generally accepted accounting principles, budgetary comparison information is disclosed only for the general fund. Section 52.6-10 of the City's Code requires the Authority to annually submit to the City Commission a general fund administrative budget request pertaining to operating expenditures for approval. The annual operating budget for the general fund is adopted on a basis consistent with generally accepted accounting principles. The annual budget may be revised during the fiscal year subject to approval by the board of directors of the Authority and the City Commission. The legal level of budgetary control, the level at which expenditures may not exceed budget, is in the aggregate. IL BUDGET/GAAP RECONCILIATION Adjustments necessary to convert the change in fund balance as of September 30, 2016 from the budgetary basis of accounting to U.S. generally accepted accounting principles (GAAP) basis of accounting is as follows: Change in fund balance — budgetary basis $ 88,461 Less grants to third -parties (87,500) Net change in fund balance — GAAP basis $ 961 Grants to third -parties are not budgeted. However, such grants are approved by the board of directors. COMPLIANCE SECTION CERTIFIED PUBLIC ACCOUNTANTS & CONSULTANTS Sanson, Minejaeomino, Tand®e & Gia, LLP 5805 Blu@ Lagoon Drive I Suit@ 2201 Miami, FL 33126 TAY: (305) 269-86331 Fax: (305) 265-06521 www.skjt8-epaxom. Independent Auditors' 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 The Board Members Miami Sports and Exhibition Authority: We have audited, in accordance with the 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 governmental activities, the business -type activities, and each major fund of the Miami Sports and Exhibition Authority (the Authority) as of and for the year ended September 30, 2016, and the related notes to the financial statements, which collectively comprise the Authority's basic financial statements, and have issued our report thereon dated December 15, 2016. 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 entity'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 was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 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. 19 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 entity'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 entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. .danaary+. 4�' u, �aU� 1a�z'a41 � .ba a, J�iJ�iP Miami, Florida December 15, 2016 C CERTIFIED PUBLIC ACCOUNTANTS & CONSULTANTS Sanson, lGine jaee ®, Tand®e & Gia, LLP 5805 Blu@ Lagoon Drive I Suit@ 2201 Miami, FL 33126 Td: (305) 269-86331 Fax: (305) 265-06521 w.skjt8-epaxom Management Letter in Accordance with the Rules of the Auditor General of the State of Florida The Board Members Miami Sports and Exhibition Authority: We have audited the financial statements of the Miami Sports and Exhibition Authority (the Authority), a component unit of the City of Miami, Florida, as of and for the fiscal year ended September 30, 2016, and have issued our report thereon dated December 15, 2016. 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 and Chapter 10.550, Rules of the Florida Auditor General. We have issued our Independent Auditors' Reports on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards. Disclosures in those reports, which are dated December 15, 2016, should be considered in conjunction with this management letter. Additionally, our audit was conducted in accordance with the provisions of Chapter 10.550, Rules of the Auditor General, which governs the conduct of local governmental entity audits performed in the State of Florida. This letter includes the following information, which are not included in the aforementioned auditor's reports: ■ Section 10.554(1)(1)1., Rules of the Auditor General, requires that we determine whether or not corrective actions have been taken to address findings and recommendations made in the preceding annual financial audit report not otherwise addressed in the auditor's report pursuant to Section 10.557(3)(b)2., Rules of the Auditor General. Corrective action has been taken to address finding and recommendation made in the preceding annual financial audit report. ■ Section 10.554(1)(1)2., Rules of the Auditor General, requires our audit to include a review of the provisions of Section 218.415, Florida Statutes, regarding the investment of public funds. In connection with our current year audit, we determined that the Authority complied with Section 218.415, Florida Statutes. ■ Section 10.554(1)(1)3., Rules of the Auditor General, requires that we address in the management letter any recommendations to improve financial management. In connection with our current year audit, we did not have any such recommendations. ■ Section 10.554(1)(1)4., Rules of the Auditor General, requires that we address noncompliance with provisions of contracts or grant agreements, fraud, illegal acts, or abuse, that have occurred, or are likely to have occurred, that have an effect on the financial statements that is less than material but which warrants the attention of those charged with governance. In connection with our current year audit, we did not have any such findings. 21 ■ Section 10.554(1)(1)5., Rules of the Auditor General, requires that the name or official title and legal authority for the primary government and each component unit of the reporting entity be disclosed in this management letter, unless disclosed in the notes to the financial statements. Such disclosures are made in note I(A) to the Authority's financial statements. ■ Section 10.554(1)(1)6.a., Rules of the Auditor General, requires a statement be included as to whether or not the local governmental entity has met one or more of the conditions described in Section 218.503(1), Florida Statutes, and identification of the specific condition(s) met. In connection with our current year audit, we determined that the Authority did not meet any of the conditions described in Section 218.503(1), Florida Statutes. Section 10.554(1)(1)6.b., Rules of the Auditor General, requires that we determine whether the annual financial reports for the Authority for the fiscal year ended September 30, 2016, filed with the Florida Department of Financial Services pursuant to Section 218.32(1)(a), Florida Statutes, is in agreement with the annual financial audit report for the fiscal year ended September 30, 2016. The Authority does not file a separate report with the State of Florida Department of Financial Services. The financial operations of the Authority are included in the basic financial statements of the City of Miami, Florida for the year ended September 30, 2016. ■ Sections 10.554(1)(1)6.c. and 10.556(7), Rules of the Auditor General, require that we apply financial condition assessment procedures. In connection with our current year audit, we applied financial condition assessment procedures. It is management's responsibility to monitor the entity's financial condition, and our financial condition assessment was based in part on representations made by management and the review of financial information provided by same. This management letter is intended solely for the information and use of the board of directors, management of the Authority, and the State of Florida Office of the Auditor General, and is not intended to be and should not be used by anyone other than these specified parties. 1171-� 4�44 ?z4m-�4 1��- ) 4ro�") /V Miami, Florida December 15, 2016 22