HomeMy WebLinkAboutLEPFA Lansing Entertainment and Public facilities Authority Audit 2014 Lansing
Entertainment L FRow
J :111...FAk
-and Public � -
Lansing Entertainment &x
Facilities Public Facilities Authority
Authority
Year Ended Financial
June 30, 2014 Ip Statements
0
kb
RBhmann
wsr'-ess wisdoms delivered.
This page intentionally left blank.
LANSING ENTERTAINMENT AND PUBLIC FACILITIES AUTHORITY
Table of Contents
Page
Independent Auditors' Report 1
Management's Discussion and Analysis 4
Basic Financial Statements
Statement of Net Position 8
Statement of Revenues, Expenses and Changes in Net Position 9
Statement of Cash Flows 10
Notes to Financial Statements 12
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 17
Schedule of Findings 19
MENEM
This page intentionally left blank.
Re h m a n n
' Rebmann Robson
675 Robinson Rd.
Jackson,MI 49203
Ph: 517.787.6503
Fx: 517.788.8111
rehmann.com
INDEPENDENT AUDITORS' REPORT
December 17, 2014
The Honorable Mayor,
Members of the City Council, and
Members of the Board of Commissioners of the
Lansing Entertainment and Public Facilities Authority
Lansing, Michigan
Report on the Financial Statements
We have audited the accompanying financial statements of the business-type activities and each major
fund of the Lansing Entertainment and Public Facilities Authority (the "Authority"), a discretely
presented component unit of the City of Lansing, Michigan, as of and for the year ended June 30, 2014,
and the related notes to the financial statements, as listed in the table of contents.
Management's Responsibility for the Financial &atements
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.
Independent Auditors'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 auditors' 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.
Rebmann is an independent member of Nexia International.
CPAs&Consultants Wealth Advisors Corporate Investigators
1 INTERNATIONAL
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of the business-type activities and each major fund of the Lansing Entertainment and
Public Facilities Authority as of June 30, 2014, and the respective changes in financial position and cash
flows 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 management's
discussion and analysis 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.
Other Reporting Required by Government Auditing&andards
In accordance with Government Auditing Standards, we have also issued our report dated December 17,
2014 on our consideration of the Lansing Entertainment and Public Facilities 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 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 and compliance.
L LC
2
MANAGEMENT'S DISCUSSION AND ANALYSIS
3
LANSING ENTERTAINMENT AND PUBLIC FACILITIES AUTHORITY
Management's Discussion and Analysis
As management of the Lansing Entertainment and Public Facilities Authority ("LEPFA' we offer readers of the
Authority's financial statements this narrative overview and analysis of the financial activities of the Authority for the
fiscal year ended June 30, 2014.
Financial Highlights
■ The assets of the Authority exceeded its liabilities at the close of the most recent fiscal by $693,786 (net
position). Of this amount, $679,388 (unrestricted net position) may be used to meet the Authority's ongoing
obligations to citizens and creditors.
■ The Authority's total net position increase by $162,705 for fiscal 2014.
Overview of the Financial Statements
This discussion and analysis is intended to serve as an introduction to the Authority's basic financial statements. The
basic financial statements are comprised of:
■ The statement of net position presents information on all of the Authority's assets and liabilities, with the
difference between the two reported as net position. Over time, increases or decreases in net position may serve
as a useful indicator of whether the financial position of the Authority is improving or deteriorating.
■ The statement of revenues, expenses and changes in net position presents information showing how the
Authority's net position changed during the two most recent fiscal years. All changes in net position are reported
as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows.
Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in
future fiscal periods.
■ The statement of cash flows presents the change in the Authority's cash and investments for the two most recent
fiscal years.
■ The notes to the financial statements provide additional information that is essential to a full understanding of
the data provided in the basic financial statements.
Financial Analysis
As noted earlier, net position may serve over time as a useful indicator of a government's financial position. In the
case of LEPFA, assets exceeded liabilities by$693,786 at the close of the most recent fiscal year.
By far the largest portion of the Authority's net position (97.9 percent) is its unrestricted net position which may be
used to meet the Authority's ongoing obligations to system users and creditors.
The remaining portion of the net position (2.1 percent) is its investment in capital assets (e.g., machinery and
equipment); less any related debt used to acquire those assets that is still outstanding. The Authority uses these
capital assets to provide services; consequently, these assets are not available for future spending.
At the end of the current fiscal year, the Authority is able to report positive balances in both categories of net
position. The same situation held true for the prior fiscal year.
4
LANSING ENTERTAINMENT AND PUBLIC FACILITIES AUTHORITY
Management's Discussion and Analysis
Net Position
2014 2013
Current and other assets $ 1,633,570 $ 1,498,579
Capital assets 14,398 30,695
Total assets 1,647,968 1,529,274
Long-term liabilities - 2,733
Other liabilities 954,182 995,460
Total liabilities 954,182 998,193
Net position:
Net investment in capital assets 14,398 27,962
Unrestricted 679,388 503,119
Total net position $ 693,786 $ 531,081
Change in Net Position
2014 2013
Operating revenues $ 5,599,274 $ 5,086,099
Operating expenses 6,901,187 6,479,192
Operating loss (1,301,913) (1,393,093)
Nonoperating revenues 1,464,618 1,339,205
Change in net position 162,705 (53,888)
Net position - beginning 531,081 584,969
Net position - end of year $ 693,786 $ 531,081
The Authority's net position increased by$162,705 for fiscal 2014. Key elements of the 2014 increase include:
■ An increase in revenues in the Lansing Center for rent and food services. A portion of those increases were offset
by an increase in certain expenditures with the largest increase being in personnel services and food and
beverages.
5
LANSING ENTERTAINMENT AND PUBLIC FACILITIES AUTHORITY
Management's Discussion and Analysis
Capital Asset and Debt Administration
Capital assets. LEPFA's investment in capital assets as of June 30, 2014 amounted to $14,398 (net of accumulated
depreciation). This investment in capital assets is comprised of equipment. Total net capital assets decreased by
$16,297. The majority of the decrease is due to depreciation expense.
Capital Assets
2014 2013
Equipment $ 1,380,734 $ 1,509,962
Less accumulated depreciation (1,366,336) (1,479,267)
$ 14,398 $ 30,695
Additional information on the Authority's capital assets can be found in Note 5 of this report.
Long-term debt. At year-end, the Authority had no outstanding long-term installment purchase agreements.
Long-term Debt
2014 2013
Installment purchase agreements $ - $ 2,733
Additional information on the Authority's long-term debt can be found in Note 8 of this report.
Economic Factors Affecting Next Year's Operations
The Authority is concerned with several types of economic factors that will significantly affect business in fiscal year
2014-15. The most significant among them are changes in consumer/customer behavior in response to local and
regional economic conditions, the effects of inflation on the local labor market, health care costs, and the rates
charged by the Authority's utility supplier.
The Authority's plan reflects a belief that local economic conditions will remain flat from those during fiscal year
2014-15. Inflation in the local labor markets will remain moderate, whereas inflation in utility and health care costs
will be expected to rise.
Requests for Information
This financial report is designed to provide a general overview of LEPFA's finances for all those with an interest in the
Authority's finances. Questions concerning any of the information provided in this report or requests for additional
financial information should be addressed to Lansing Entertainment and Public Facilities Authority, 333 E. Michigan
Avenue, Lansing, Michigan 48933.
6
BASIC FINANCIAL STATEMENTS
7
LANSING ENTERTAINMENT AND PUBLIC FACILITIES AUTHORITY
Statement of Net Position
June 30, 2014
Lansing Cooley City
Center Stadium Market Total
Assets
Cash and cash equivalents $ 35,208 $ 78,294 $ 78,610 $ 192,112
Restricted cash and cash equivalents 751,696 80,000 - 831,696
Accounts receivable, net 386,378 35,701 6,556 428,635
Due from other funds 44,769 6,677 - 51,446
Prepaid expenses 42,847 5,143 97 48,087
Inventories 79,837 - 1,757 81,594
Capital assets, net - 5,015 9,383 14,398
Total assets 1,340,735 210,830 96,403 1,647,968
Liabilities
Accounts payable 159,484 92,644 7,896 260,024
Accrued liabilities 148,057 405 462 148,924
Due to other funds 6,677 22,195 22,574 51,446
Unearned revenue 473,382 - 20,406 493,788
Total liabilities 787,600 115,244 51,338 954,182
Net position
Net investment in capital assets - 5,015 9,383 14,398
Unrestricted 553,135 90,571 35,682 679,388
Total net position $ 553,135 $ 95,586 $ 45,065 $ 693,786
The accompanying notes are an integral part of these financial statements.
8
LANSING ENTERTAINMENT AND PUBLIC FACILITIES AUTHORITY
Statement of Revenues, Expenses and Changes in Net Position
For the Year Ended June 30, 2014
Lansing Cooley City
Center Stadium Market Total
Operating revenues
Building rental $ 1,006,025 $ 8,000 $ 90,051 $ 1,104,076
Security 79,387 1,080 - 80,467
Food services 3,254,894 5,770 3,260,664
Equipment rental 606,934 585 607,519
Box office 32,328 459 32,787
Labor/service 239,708 4,971 244,679
Trade show utilities 160,923 - - 160,923
Other 75,591 7,168 25,400 108,159
Total operating revenues 5,455,790 28,033 115,451 5,599,274
Operating expenses
Personnel services 2,414,420 81,067 81,356 2,576,843
Food and beverage 1,897,598 - - 1,897,598
Communications 21,153 2,415 1,195 24,763
Rents and leases 6,711 - - 6,711
Professional services 340,237 - 2,714 342,951
Utilities 847,382 132,430 64,710 1,044,522
Marketing 51,664 1,277 19,852 72,793
Repairs and maintenance 112,737 52,093 6,239 171,069
Supplies and materials 140,612 1,662 7,683 149,957
Insurance 57,300 19,321 1,576 78,197
Events 165,281 - 2 165,283
Security 71,881 1,024 - 72,905
Depreciation 5,224 1,662 9,411 16,297
Bad debt expense 126,348 - 106 126,454
Other 124,700 29,650 494 154,844
Total operating expenses 6,383,248 322,601 195,338 6,901,187
Operating loss (927,458) (294,568) (79,887) (1,301,913)
Nonoperating revenues(expense)
Annual operating subsidy- City of Lansing 852,399 307,082 49,299 1,208,780
Pass-through of hotel/motel tax collections from
Greater Lansing Convention and Visitors Bureau 269,770 - - 269,770
Interest income 57 57
Interest expense (67) (67)
Capital development fund expense - (13,922) - (13,922)
Total nonoperating revenues 1,122,159 293,160 49,299 1,464,618
Change in net position 194,701 (1,408) (30,588) 162,705
Net position, beginning of year 358,434 96,994 75,653 531,081
Net position, end of year $ 553,135 $ 95,586 $ 45,065 $ 693,786
The accompanying notes are an integral part of these financial statements.
9
LANSING ENTERTAINMENT AND PUBLIC FACILITIES AUTHORITY
Statement of Cash Flows
For the Year Ended June 30, 2014
Lansing Cooley City
Center Stadium Market Total
Cash flows from operating activities
Cash received from customers $ 5,673,333 $ 28,033 $ 130,856 $ 5,832,222
Cash received from interfund services 38,451 13,114 279 51,844
Cash payments for goods and services (4,025,651) (294,415) (104,239) (4,424,305)
Cash payments to employees (2,385,774) (80,811) (81,275) (2,547,860)
Cash payments for interfund services (6,677) (45,167) (51,844)
Net cash used in operating activities (699,641) (340,756) (99,546) (1,139,943)
Cash flows from noncapital financing activities
Cash transfers from City and Common Ground 852,399 307,082 49,299 1,208,780
Cash transfers from Convention and Visitors Bureau 269,770 - - 269,770
Net cash provided by noncapital financing activities 1,122,169 307,082 49,299 1,478,550
Cash flows from capital and related financing activities
Payments on installment purchase agreements (2,733) - - (2,733)
Interest on installment purchase agreements (67) (67)
Net cash used in capital and
related financing activities (2,800) (2,800)
Cash flows from investing activities
Interest on cash and cash equivalents 57 57
Net change in cash and cash equivalents 419,785 (33,674) (50,247) 335,864
Cash and cash equivalents, beginning of year 367,119 191,968 128,857 687,944
Cash and cash equivalents, end of year $ 786,904 $ 158,294 $ 78,610 $ 1,023,808
Reconciliation of operating loss to net
cash used in operating activities
Operating loss $ (927,458) $ (294,568) $ (79,887) $ (1,301,913)
Adjustments to reconcile operating loss to
net cash used in operating activities:
Depreciation expense 5,224 1,662 9,411 16,297
Accounts receivable 114,369 92,610 6,261 213,240
Due from other funds 31,998 (6,677) 279 25,600
Prepaid expenses (19,085) (854) 34 (19,905)
Inventories (18,665) - 603 (18,062)
Accounts payable (24,297) (146,299) (305) (170,901)
Accrued liabilities 28,646 256 81 28,983
Due to other funds 6,453 13,114 (45,167) (25,600)
Unearned revenue 103,174 - 9,144 112,318
Net cash used in operating activities $ (699,641) $ (340,756) $ (99,546) $ (1,139,943)
The accompanying notes are an integral part of these financial statements.
10
NOTES TO FINANCIAL STATEMENTS
11
LANSING ENTERTAINMENT AND PUBLIC FACILITIES AUTHORITY
Notes to Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Reporting Entity
The Lansing Entertainment and Public Facilities Authority (the "Authority" or "LEPFA") was established
under the charter of the City of Lansing in February, 1996, replacing the former Greater Lansing
Convention/Exhibition Authority. LEPFA was established to oversee the management and operations of
the Lansing Center, the Cooley Stadium and the City Market under an agreement with the City of Lansing.
The Authority is chartered as a building authority under the provisions of Act 31, Public Acts of Michigan,
1948. In the event of dissolution or termination of the Authority, all assets and rights of the Authority
shall revert to the City of Lansing. The Authority's Board of Commissioners consists of nine members
appointed by the Mayor of the City of Lansing and approved by the City Council, and three ex-officio
members.
The Authority is a discretely presented component unit of the City of Lansing.
Measurement Focus, Basis of Accounting, and Financial Statement Presentation
The proprietary fund 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.
The Authority reports the Lansing Center, Cooley Stadium and City Market Enterprise Funds as major
funds in accordance with GASB Statement No. 34. Each fund accounts for the activities of its respective
facility.
Enterprise 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 an enterprise fund's principal ongoing operations. The principal operating revenues of
the enterprise funds are charges to customers for facility rentals, sales and services. Operating expenses
for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on
capital assets. All revenues and expenses not meeting this definition are reported as nonoperating
revenues and expenses.
Assets, Liabilities and Equity
Deposits and Investments
The Authority's cash and cash equivalents are considered to be cash on hand, demand deposits and short-
term investments with original maturities of three months or less from the date of acquisition.
State statutes authorize governments to deposit in the accounts of federally insured banks, credit unions,
and savings and loan associations, and to invest in obligations of the U.S. Treasury, certain commercial
paper, repurchase agreements, bankers' acceptances, and mutual funds composed of otherwise legal
investments.
Investments are reported at fair value.
12
LANSING ENTERTAINMENT AND PUBLIC FACILITIES AUTHORITY
Notes to Financial Statements
Receivables and Payables
Activity between funds that are representative of lending/borrowing arrangements outstanding at the end
of the fiscal year are referred to as either "due to/from other funds" (i.e., the current portion of
interfund loans) or "advances to/from other funds" (i.e., the non current portion of interfund loans). All
other outstanding balances between funds are reported as "due to/from other funds".
Inventories and Prepaid Items
Inventories are valued at cost using the first-in/first-out (FIFO) method.
Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as
prepaid items.
Restricted Assets
Under the terms of the Authority's operating agreement with the City of Lansing, the Authority is
required to restrict $50,000 annually for capital improvements and/or replacements. Any such monies
unexpended shall be carried forward to future years. For the year ended June 30, 2014, all such
restricted monies were expended on capital improvements, leaving a zero balance in restricted assets for
capital improvements at year end.
Under an amendment to the operating agreement with the City of Lansing, the Authority is also required
to maintain an Event Development cash reserve fund to provide a source of monies from which to finance
events at the Cooley Law School Stadium. The fund was established by an initial contribution from the
City and may be increased up to certain limits by the amount of any profits earned from such events.
Restricted assets for event development amounted to $80,000 at June 30, 2014.
The Authority's Board of Commissioners has also established a cash reserve account to ensure reasonable
liquidity for Lansing Center operations. The balance of this cash reserve as of June 30, 2014 was $751,696
and is reported as restricted cash and cash equivalents in the statement of net position. Generally, the
reserve is intended to provide up to 60 days of operating cash (which would be approximately $850,000 if
fully funded). The account is adjusted annually for the prior year operating results and does not correlate
with the Authority's net position or fund equity. By contrast, the Authority's fund equity position as of
June 30, 2014, which represents accumulated net income, was $679,356 for the Lansing Center fund.
Capital Assets
Capital assets, which are limited to equipment, are stated at cost and depreciated using the straight line
method over the estimated useful lives of the assets ranging from three to ten years. Capital assets are
defined by the government as assets with an initial, individual cost of more than $500 and an estimated
useful life of three years. Facilities managed by the Authority are owned by the City of Lansing and, as
such, the carrying values of these properties are reflected in the City's financial statements.
The costs of normal maintenance and repairs that do not add to the value of the asset or materially
extend asset lives are not capitalized.
13
LANSING ENTERTAINMENT AND PUBLIC FACILITIES AUTHORITY
Notes to Financial Statements
2. DEPOSITS AND INVESTMENTS
A reconciliation of cash and investments as shown on the statement of net position follows:
Statement of net position
Cash and cash equivalents $ 192,112
Restricted cash and cash equivalents 831,696
Total $ 1,023,808
Deposits and investments
Bank deposits - checking and savings accounts $ 371,237
Investments - money market accounts 612,776
Cash on hand 39,795
Total $ 1,023,808
Interest Rate Risk. State law limits the allowable investments and the maturities of some of the
allowable investments as identified in the summary of significant accounting policies. The Authority's
investment policy does not have specific limits in excess of state law on investment maturities as a means
of managing its exposure to fair value losses arising from increasing interest rates. None of the
Authority's investments at year end have maturity dates.
Credit Risk. State law limits investments to specific government securities, certificates of deposits and
bank accounts with qualified financial institutions, commercial paper with specific maximum maturities
and ratings when purchased, bankers acceptances of specific financial institutions, qualified mutual funds
and qualified external investment pools as identified in the list of authorized investments in the summary
of significant accounting policies. The Authority's investment policy does not have specific limits in
excess of state law on investment credit risk. Credit risk ratings, where applicable, have been identified
above for the Authority's investments.
Custodial Credit Risk - Deposits. Custodial credit risk is the risk that in the event of a bank failure, the
Authority's deposits may not be returned. State law does not require and the Authority does not have a
policy for deposit custodial credit risk. As of year end, $229,640 of the Authority's bank balance of
$479,640 was exposed to custodial credit risk because it was uninsured and uncollateralized.
The Authority's investment policy does not specifically address this risk, although the Authority believes
that due to the dollar amounts of cash deposits and the limits of FDIC insurance, it is impractical to insure
all bank deposits. As a result, the Authority evaluates each financial institution with which it deposits
Authority funds and assesses the level of risk of each institution; only those institutions with an
acceptable estimated risk level are used as depositories.
Custodial Credit Risk - Investments. For an investment, custodial credit risk is the risk that, in the event
of the failure of the counterparty, the Authority will not be able to recover the value of its investments or
collateral securities that are in the possession of an outside party. State law does not require and the
Authority does not have a policy for investment custodial credit risk. On the investments listed above,
there is no custodial credit risk, as these investments are uncategorized as to credit risk.
14
LANSING ENTERTAINMENT AND PUBLIC FACILITIES AUTHORITY
Notes to Financial Statements
Concentration of Credit Risk. State law limits allowable investments but does not limit concentration of
credit risk as identified in the list of authorized investments in the summary of significant accounting
policies. The Authority's investment policy does not have specific limits in excess of state law on
concentration of credit risk. All investments held at year end are reported above.
3. TRANSACTIONS WITH THE CITY OF LANSING
For the year ended June 30, 2014, the City of Lansing provided annual operating subsidies to the
Authority in the amount of$1,208,780 for the Lansing Center, Cooley Stadium, and City Market.
4. RECEIVABLES
Receivables are composed entirely of amounts due from customers (net of an allowance for doubtful
accounts in the amount of $147,030) and the City of Lansing. Accounts receivable as of June 30, 2014
were as follows:
Accounts receivable, net $ 396,378
Accounts receivable - City of Lansing 32,257
Total accounts receivable $ 428,635
5. CAPITAL ASSETS
Capital assets activity for the year ended June 30, 2014 was as follows:
Beginning Ending
Balance Additions Disposals Balance
Machinery and equipment $ 1,509,962 $ - $ (129,228) $ 1,380,734
Less accumulated depreciation 1,479,267 16,297 (129,228) 1,366,336
Net capital assets $ 30,695 $ (16,297) $ - $ 14,398
6. PAYABLES
Accounts payable is composed entirely of amounts due to vendors, except for $54,279 payable to the City
of Lansing. Accrued liabilities include wages payable, payroll taxes payable. Insurance, and benefits
payable.
15
LANSING ENTERTAINMENT AND PUBLIC FACILITIES AUTHORITY
Notes to Financial Statements
7. INTERFUND RECEIVABLES AND PAYABLES
Amounts due from and to other funds at year-end are as follows:
Receivable Payable
Lansing Center $ 44,769 $ 6,677
Cooley Stadium 6,677 22,195
City Market - 22,574
$ 51,446 $ 51,446
The outstanding balances between funds result mainly from the time lag between the dates that (1)
interfund goods and services are provided or reimbursable expenditures occur, (2) transactions are
recorded in the accounting system, and (3) payments between funds are made.
8. LONG-TERM DEBT
The Authority has entered into various long-term installment purchase agreements. The original amount
of installment obligations issued in prior years for the items listed below was $142,947. Installment
purchase agreements outstanding at year-end are as follows:
Changes in installment purchase agreements payable for the year ended June 30, 2014, were as follows:
Beginning Ending Due Within
Balance Additions Deductions Balance One Year
Installment purchase
agreements $ 2,733 $ - $ 2,733 $ $
9. DEFINED CONTRIBUTION PENSION PLAN
The Authority has a defined contribution pension plan covering substantially all full-time employees who
have completed 120 days of employment. The Authority contributes 12% of participating employees'
annual compensation to the plan. Effective January 1, 2003, employees are required to contribute 7.5%of
covered wages as defined in the plan; prior to that date, no employee contributions to this plan were
required. Such current employee contributions are in lieu of federal social security participation. Plan
provisions and contribution requirements are established and may be amended by the Authority's Board
of Commissioners. Employee contributions for the year ended June 30, 2014 were $139,314. Employer
contributions for the year ended June 30, 2014 were $227,786.
■ ■ ■ ■ ■
16
Re h m a n n
' Rebmann Robson
675 Robinson Rd.
Jackson,MI 49203
Ph: 517.787.6503
Fx: 517.788.8111
rehmann.com
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
December 17, 2014
Honorable Mayor,
Members of the City Council, and
Members of the Board of Commissioners of
the Lansing Entertainment and Public Facilities Authority
Lansing, Michigan
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 business-type
activities and each major fund of the Lansing Entertainment and Public Facilities Authority (the
"Authority"), as of and for the year ended June 30, 2014, 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 17, 2014.
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.
Rebmann is an independent member of Nexia International.
CPAs&Consultants Wealth Advisors Corporate Investigators
17 INTERNATIONAL
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 and therefore, material weaknesses or significant deficiencies may
exist that were not identified. 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. We did identify certain deficiencies in internal control over financial
reporting, described in the accompanying schedule of findings as items 2014-FS-01 and 2014-FS-02 that we
consider to be significant deficiencies.
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 entity's internal control and compliance. Accordingly,
this communication is not suitable for any other 4L-u�4L4)1-
L LG
18
LANSING ENTERTAINMENT AND PUBLIC FACILITIES AUTHORITY
Schedule of Findings
For the Year Ended June 30, 2014
2014-FS-01 - Segregation of Duties (Repeat Comment)
Finding Type. Significant Deficiency in Internal Control over Financial Reporting.
Criteria. Management is responsible for establishing and maintaining effective internal control over financial
reporting and the safeguarding of the Authority's assets. In establishing appropriate internal controls, careful
consideration must be given to the cost of a particular control and the related benefits to be received.
Accordingly, management must make the difficult decision of what degree of risk it is willing to accept, given
the Authority's unique circumstances.
Condition. During the course of the audit we noted that:
• Maintenance of the receivable subsidiary ledger is not independent of general ledger maintenance.
• Billing is not independent of cash handling and accounts receivable bookkeeping.
• Persons preparing payroll are not restricted from access to other payroll data or cash.
• Handling of cash is not independent of accounts receivable bookkeeping.
• Check signing is not independent of the initiator of the preparer of checks and accounts payable.
• Bank accounts are not reconciled by individuals independent of cash receipts and disbursements.
• Invoice processing and accounts payable are not segregated from the general ledger function.
• Account distributions are not recorded by the operating department.
Cause. As is the case with many organizations of similar size, the Authority lacks a sufficient number of
accounting personnel in order to ensure a complete segregation of duties within its accounting function.
Ideally, no single individual should ever be able to authorize a transaction, record the transaction in the
accounting records, and maintain custody of the assets resulting from the transaction. Essentially, proper
segregation of duties is intended to prevent an individual from committing an act of fraud or abuse and being
able to conceal it.
Effect. Events of recent years have given rise to a heightened awareness of the risks of fraud and abuse. The
purpose of internal controls is to provide reasonable, but not absolute, assurance that assets are safeguarded
against loss from unauthorized use or disposition, and that transactions are properly authorized and recorded.
Any limitations on the effectiveness of an Authority's internal controls carries with it a greater risk of fraud
and abuse.
Recommendation. While there are, of course, no easy answers to the challenge of balancing the costs and
benefits of internal controls and the segregation of duties, we would nevertheless encourage management to
actively seek ways to further strengthen its internal control structure by requiring as much independent
review, reconciliation, and approval of accounting functions by qualified members of management as
possible.
View of Responsible Official. The Authority agrees with the items noted above. Due to the size of the
entity, complete segregation of duties may not be feasible, however, procedures are being implemented to
mitigate the risks that exist and the Authority will continue to review procedures and make changes where
possible.
19
LANSING ENTERTAINMENT AND PUBLIC FACILITIES AUTHORITY
Schedule of Findings
For the Year Ended June 30, 2014
2014-FS-02 -Accounts Receivable
Finding Type. Significant Deficiency in Internal Control over Financial Reporting.
Criteria. Management is responsible for establishing and maintaining effective internal controls over the
financial reporting of accounts receivable and revenue recognition.
Condition. We noted that there are numerous customer accounts that are recorded as receivables that are
outstanding that date back as far as 2008.
Cause. During our testing of accounts receivable, we noted that there is no review of the outstanding
customer accounts or follow-up with the customers to determine if the account is collectible.
Effect. Accounts receivable may be overstated with the expectation that these accounts are collectible,
when in fact they may not be.
Recommendation. We recommend that there be a systematic review of the aged accounts receivable and
that the Authority implement procedures identify which accounts are not collectible and remove the
receivable form the accounting records by recording bad debt expense. We strongly recommend the
Authority make a concerted effort to collect the amounts before recording the bad debt expense.
View of Responsible Official. The Authority recognizes deficiencies in this process. The receivables that are
mentioned dating back to 2008 were set up in a bad debt account, hopeful to collect, but the additional step
of writing them off has not occurred to date. We will proceed forward with writing them off in FY 15.
As we move forward, there is a weekly meeting with the Accounting Manager to review the aging detail and
discuss attempts to collect on those balances upon reaching the 30 day window. This information will be
shared monthly with the President/CEO. Upon reaching 45 days, additional team members (VP of Sales,
Director of Sales, Event Coordinators) will be brought into the discussion to seek additional points of contact
to reach. Upon reaching 60 days, we will submit a letter requesting payment along with a statement of the
account. Collection efforts will also include pressure being brought by upper management and the City.
When efforts have been exhausted, including legal remedies, the VP of Finance will recommend to the
President/CEO to set up an allowance for Bad Debt. As the end of the fiscal year approaches, those
accounts deemed uncollectible will be written off.
■ ■ ■ ■ ■
20