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1999-06-30 and 1998-01-13 Financial Statements I I I I I I I I I I I I I I I I I I I STMA ARENA FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 1999 AND, FOR THE PERIOD FROM INCEPTION (JANUARY 13, 1998) TO JUNE 30, 1998 JAMES AND GRUBER CERTIFIED PUBLIC ACCOUNTANTS Memo: To: STMA Joint Powers Board From: STMA Arena Manager Re: Description of arena manager's authority on different subjects as discussed and approved by board at last meeting. Scheduling of Events- * Authority to schedule all ice time. Inform board of any unique events. Will communicate with insurance agent regarding any insurance questions that may arise. * Will schedule all community related events. (Local dances, school events, local group use, weddings, etc.) * Will seek approval from board on any event from outside community not needing our community support. (Outside community group dances or other events not aimed at providing for out area.) * Will ask insurance agent, for every event, if any documentation or special precautions should be needed. * Upon successful completion of an event, arena manager will not seek board approval for same event in future. Purchases- * Will freely purchase all concession supplies, not including major appliances. * Will purchase everyday supplies when needed. (Arena Manager will get any major supply purchases over $100 approved by board, if not necessary for arena operation. Miscellaneous- * Will get any work done for arena approved by board. (Unless volunteered) * Will freely call for service work needed immediately. * Will use good judgement on any purchases, but will inform board of these, regardless of deemed importance. Lee J. Ryan 1405 2nd St. NE Buffalo, MN 55313 (763) 682-7069 July 10,2000 STMA Arena Joint Powers Board PO Box 193 Albertville, MN 55301 Dear Board Members: I want to thank you for all you have done for me here at the STMA Arena. It's been an honor working with you and representing the STMA Arena. Unfortunately, I regret to inform you that I wish to give 2 weeks' notice of my resignation from the arena. My official last day of work will be July 21st, 2000. I have accepted a recreation coordinator position with the City of Buffalo. This decision has nothing to do with the exceptional opportunity you have provided me here. The Joint Powers Board, along with the people in the community, have been more than fair with me, and I genuinely appreciate all your support. I wish the STMA Arena the best in the future, and I want to thank you for letting me be a part of it' s growth. Please count on me for helping with a smooth transition and any assistance needed in the future. Sincerely, rftlr Lee J. Ryan Register 7/10/2000 100 . Security State Bank Register through 07/10/20,00: Date No.lRef. Name Account Memo Amount C Balance 05/31/2000 6497 Lee J Ryan -split- -829.24 X 41,298.80 05/31/2000 6498 Ashley A Branstad -split - -23.55 X 41,275.25 05/31/2000 6499 Benjamin J Deh... -split- -220.09 X 41,055.16 05/31/2000 6500 Carla D Miedema -split- -23.55 X 41,031.61 05/31/2000 6501 Andrew M Valeri... -split- -27.70 X 41,003.91 05/31/2000 6494 PERA 536 . RETIREMENT -124.13 X 40,879.78 05/31/2000 6495 Security State Ba... 700, TAXES -437.53 X 40,442.25 05/31/2000 6496 MINNESOTA D... 700' TAXES -80.30 X 40,361.95 05/31/2000 DEPOSIT 770 . Interest Income 48.09 X 40,410.04 06/05/2000 DEPOSIT 400 . Concession Income GOES W/19... 90.00 X 40,500.04 06/05/2000 DEPOSIT 431 . - INSURANCE GOES W/19... 1,700.00 X 42,200.04 06/05/2000 DEPOSIT 414. CIRCUS - Bus ti... GOES W/19... 177. 00 X 42,377.04 06/07/2000 6502 MINNEGASCO 7300 . Utilities:730 . G... -61.43 X 42,315.61 06/07/2000 6503 SPRINT 710. Telephone -178.90 X 42,136.71 06/07/2000 6504 WH SECURiTY 500 . ARENA MONIT... -23.38 X 42,113.33 06/07/2000 6505 SYSCO MINNE... 516. Cost of Food -107.58 X 42,005.75 06/07/2000 6506 RANDY'S SANl... 530 . GARBAGE -33.93 X 41,971.82 06/07/2000 6507 DJ'S HOME CA... 510 . BUILDING MAl... -44.49 X 41,927.33 06/07/2000 6508 TWIN CITY DJ'S 528 . MUSIC - DEPOS... -200.00 X 41,727.33 06/07/2000 6509 THE WATSON... 516. Cost of Food -123.43 X 41,603.90 06/07/2000 6510 JUBILEE FOODS 516. Cost of Food -12.70 X 41,591.20 06/07/2000 6511 PRESS & NEWS... 505 . - ADVERTISIN... -225.00 X 41,366.20 06/07/2000 6512 STMA BLUE Ll... 6600' Repairs:660' B... -26.57 41,339.63 06/09/2000 6513 NSP 7300 . Utilities:730 . G... -904.74 X 40,434.89 06/09/2000 6514 CHOUINARD 0... 620 . Office Supplies -59.45 X 40,375.44 06/09/2000 6515 COCA COLA E... 520 . CONCESSIONS ... -482.72 X 39,892.72 06/09/2000 6516 MIKE VALERIUS 6600 . Repairs:660 . B... -1,400.00 38,492.72 06/13/2000 6517 JAMES AND G... 502' ACCOUNTANT... -543.00 X 37,949.72 06/13/2000 6521 Lee J Ryan -split - -829.23 X 37,120.49 06/13/2000 6522 Benjamin J Deh... -split- -46.86 X 37,073.63 06/13/2000 6518 PERA 536, RETIREMENT -124.13 X 36,949.50 06/13/2000 6519 Security State Ba... 700 . TAXES -371.31 X 36,578.19 06/13/2000 6520 MINNESOTA D... 700, TAXES -68.66 X 36,509.53 06/15/2000 DEPOSIT 400 . Concession Income GOES W/46... 169.85 X 36,679.38 06/15/2000 DEPOSIT 441 . - TEEN DANCE GOES W/46... 291.00 X 36,970.38 06/19/2000 6523 League ofMN Ci... 529. - MUNICIPALITY -4,484.00 X 32,486.38 06/28/2000 6527 Lee J Ryan -split- -829.24 31,657.14 06/28/2000 6524 PERA 536 . RETIREMENT -124.13 31,533.01 06/28/2000 6525 Security State Ba... 700, TAXES -357.33 31,175.68 06/28/2000 6526 MINNESOTA D... 700, TAXES -68.66 31,107.02 07/02/2000 DEPOSIT 770 . Interest Income INTEREST 44.37 X 31,151.39 07/10/2000 6528 SPRINT 710. Telephone -185.78 30,965.61 Page 1 / Register 100 . Security State Bank Register through 07/10/2000: Date No.lRef. Name Account 07/10/2000 6529 DJ'S HOME CA... 6600 . Repairs 07/10/2000 6530 WH SECURITY 500 . ARENA MONIT... 07/10/2000 6531 RANDY'S SAN!... 530 . GARBAGE 07/10/2000 6532 MINNEGASCO 7300 . Utilities:730 . G... 07/10/2000 6533 JUBILEE FOODS 520 . CONCESSIONS ... 07/10/2000 6534 HARDWARE H... 6600 . Repairs 07/10/2000 6535 NSP 7300 . Utilities:730 . G... 07/10/2000 6536 CHOUINARD 0... 620 . Office Supplies Page 2 Memo 7/10/2000 Amount C Balance -51. 77 30,913.84 -23.38 30,890.46 -47.68 30,842.78 -46.36 30,796.42 -20.72 30,775.70 -78.70 30,697.00 -598.35 30,098.65 -29.05 30,069.60 I I I I I I I I I I I I I I I I I I I STMA ARENA FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 1999 AND, FOR THE PERIOD FROM INCEPTION (JANUARY 13,1998) TO JUNE 30,1998 JAMES & GRUBER CERTIFIED PUBLIC ACCOUNTANTS I I I I I I I I I I I I I I I I I I I STMA ARENA FOR THE YEAR ENDED JUNE 30, 1999 AND, FOR THE PERIOD FROM INCEPTION (JANUARY 13, 1998) TO JUNE 30, 1998 T ABLE OF CONTENTS INDEPENDENT AUDITOR'S REPORT FINANCIAL STATEMENTS Balance Sheets Statements of Income Statements of Cash Flows Statements of Retained Earnings NOTES TO FINANCIAL STATEMENTS MANAGEMENT LETTER Page 1 2 3 4 5 6-8 9 - 10 I I JAMES AND GRUBER I I I I I I I I I I I I I I I I I CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITOR'S REPORT To the Board of Directors of STMA Arena Albertville, yfl\i 55301 We have audited the accompanying financial statements of STMA Arena of Albertville, Minnesota, as of and for the year ended June 30,1999 and for the period from inception (January 13, 1998) to June 30, 1998 as listed in the table of contents. These financial statements are the responsibility of STMA Arena management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall fmancial statement presentation. We believe that our audits provide a reasonable basis for our opmlOn. As discussed in Note 1, the financial statements present only the STMA Arena and are not intended to present fairly the financial position of Independent School District #885, the City of St. Michael, and the City of Albertville, and the results of their operations and cash flows of their funds in conformity with generally accepted accounting principles. In our opinion the fmancial statements referred to above present fairly the financial position of STMA Arena as of June 30, 1999 and 1998, and the results of its operation and its cash flows for the periods then ended in conformity with generally accepted accounting principles. ~~~G~ May 17,2000 25 Birch Avenue, Box 385. Maple Lake. MN 55358 919 West St. Germain, Suite 2020, St. Cloud, MN 5630 I 311 South Walnut Street, Box 755, Monticello, MN 55362 Phone 320-963-5414 Fax 320-963-6224 Phone 320-252-7188 Fax 320-252-8902 Phone 612-295-5070 Fax 612-295-2940 ------------------ I I STMA ARENA BALANCE SHEETS I JUNE 30, 1999 AND 1998 I ASSETS I JUNE 30, JUNE 30, 1999 1998 I CURRENT ASSETS Cash $ 104,097 $ 901 Total Current Assets 104,097 901 I PROPERTY AND EQUIPMENT Equipment 277,905 0 I Land and Building 624,800 0 Less: Accumulated Depreciation (14,478) 0 Net Property and Equipment 888,227 0 I OTHER CURRENT ASSETS Prepaid Insurance 936 0 I Total Other Current Assets 936 0 I TOT AL ASSETS $ 993,260 $ 901 I LIABILITIES AND RETAINED EARNINGS I CURRENT LIABILITIES Accounts Payable - Trade $ 34,623 $ 0 Total Current Liabilities 34,623 0 I DUE TO JOINT POWERS 652,668 3,000 I RETAINED EARNINGS (DEFICIT) 305,969 (2,099) TOTAL LIABILITIES I AND RETAINED EARNINGS $ 993,260 $ (2,099) I See accompanying footnotes. I (2) I I I STMA ARENA STATEMENTS OF INCOME I FOR THE YEAR ENDED JUNE 30, 1999 AND, FOR THE PERIOD FROM INCEPTION (JANUARY 13, 1998) TO JUNE 30,1998 I JUNE 30, JUNE 30, INCOME 1999 1998 I Grant Income 250,000 0 Contributions 123,538 0 Ice Time Income 10,461 0 I Concession Income 5,000 0 Total Income $ 388,999 $ 0 I OPERATING EXPENSES I Wages 21,407 0 Depreciation Expense 14,478 0 Utilities 14,439 0 I Insurance - General 5,500 0 Legal and Professional 5,057 0 Concessions 4,697 0 I Ice Maintenance Expenses 4,980 0 Repairs and Maintenance 2,464 2,051 Insurance - Health 2,291 0 I Equipment Rental 2,120 0 Supplies 1,648 0 Taxes 1,638 0 I Telephone 1,036 0 Employee Pension 896 0 Reimbursement Expense 438 0 I Dental Expense 173 0 Office Supplies 171 0 Dues and Subscriptions 150 0 I Miscellaneous 132 67 Arena Monitoring 117 0 Total Operating Expenses 83,832 2,118 I Income (Loss) from Operations 305,167 (2,118) OTHER INCOME I Interest Income 2,901 19 Total Other Income 2,901 19 I NET INCOME (LOSS) $ 308,068 $ (2,099) I See accompanying footnotes. (3) I I I I I I I I I I I I I I I I I I I I STMA ARENA ST A TEMENTS OF CASH FLOWS FOR THE YEAR ENDED JUNE 30. 1999 AND, FOR THE PERIOD FROM INCEPTION (JANUARY 13, 1998) TO JUNE 30.1998 JUNE 30. JUNE 30, 1999 1998 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income (Loss) $ 308,068 $ (2,099) Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities Depreciation 14,478 0 (Increase) Decrease In: Prepaid Insurance (936) 0 Increase (Decrease) In: Accounts Payable 34,623 0 Net Cash Provided by Operating Activities 356,233 (2,099) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of Equipment (277,905) 0 Purchases of Land and Building (624,800) 0 Net Cash Provided by Investing Activities (902,705) 0 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from Joint Powers 649,668 3,000 Net Cash Provided by Financing Activities 649,668 3,000 NET INCREASE IN CASH 103,196 901 CASH AT BEGINNING OF YEAR 901 0 CASH AT END OF YEAR $ 104,097 $ 901 See accompanying footnotes. (4) I I I I I I I I I I I I I I I I I I I STMA ARENA STATEMENTS OF RETAINED EARNINGS JUNE 30,1999 AND 1998 RETAINED E~NINGS - BEGINNING EXCESS OF EXPENSE OVER REVENUE RETAINED EARt~INGS - June 30, 1998 EXCESS OF REVENUE OVER EXPENSE RETAINED EARNINGS - June 30, 1999 (5) $ o (2,099) (2,099) 308,068 $ 305,969 I I I I I I I I I I I I I I I I I I I STMA ARENA NOTES TO FINANCIAL STATEMENTS JUNE 30,1999 AND 1998 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Joint Powers AlITeement The STMA Arena (the Organization) is an enterprise fund owned one-third each by each of the City of St. Michael, the City of Albertville, and Independent School District No. 885 (the joint powers). The enterprise fund is used to account for operations that are financed and operated in a manner similar to privately owned enterprises. The STMA Arena owns and operates an Ice Arena in the city of Albertville, Minnesota. Each owner has contributed cash to the Organization and lends full faith to one-third annual operating deficit. Revenues are allocated first to existing debt repayment, then operation and maintenance of the Ice Arena, and any excess is invested in reserve funds for payments of joint powers advances. The Joint Powers Agreement shall terminate upon sale of the property. Basis of Accounting The accrual basis of accounting is utilized by the Joint Powers for enterprise fund reporting. Under this method, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred. Budgets The Joint Powers Board will meet in July of each year to estimate revenues and expenses and to determine any shortfalls in revenues. One-third of all shortfall amounts with be included in each parties budget for the year. Shortfall payments are to be made in April if necessary. Depreciation Depreciation is computed using the straight-line method. Depreciation expense was $14,478 for the year ended June 30, 1999 and $0 for June 30, 1998. Equipment is depreciated using a 7 year life. Building and building improvements are depreciated on a 40 year life. Income Taxes The STMA Arena is exempt by statute from federal and state income taxes. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. (6) I I I STMA ARENA NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 AND 1998 NOTE 2 DEFINED BENEFIT PENSION PLANS - STATEWIDE I Public Emplovees Retirement Association I A. Plan Description I All full-time and certain part-time employees of the STMA Arena are covered by defined benefit plans administered by the Public Employees Retirement Association of Minnesota (PERA). PERA administers the Public Employees Retirement Fund (PERF) which is a cost-sharing, multiple-employer retirement plan. This plan is established and administered in accordance with Minnesota Statutes, Chapters 353 and 356. I I PERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by Social Security and Basic Plan members are not. All new members must participate in the Coordinated Plan. I PERA provides retirement benefits as well as disability benefits to members, and benefits to survivors upon death of eligible members. Benefits are established by State Statute, and vest after three years of credited service. The defined retirement benefits are based on a member's highest average salary for any five successive years of allowable service, age, and years of credit at termination of service. I I Two methods are used to compute benefits for PERF's Coordinated and Basic Plan members. The retiring member receives the higher of a step-rate benefit accrual formula (Method 1) or a level accrual formula (Method 2). Under Method 1, the annuity accrual rate for a Basic Plan member who retired before July 1, 1997 is 2 percent of average salary for each of the first 10 years of service 2.5 percent for each remaining year. The annuity accrual rate for Basic members who retire on or after July 1, 1997 is 2.2 percent of average salary for each of the first 10 years of service and 2.7 percent for each remaining year. For a Coordinated Plan member who retired before July 1, 1997, the annuity accrual rate is 1 percent of average salary for each of the first 10 years and 1.5 percent for each remaining year. For Coordinated members who retire on or after July 1, 1997, the annuity accrual rates increase by 0.2 percent (to 1.2 percent of average salary for each of the first 10 years and 1.7 percent for each remaining year). Under Method 2, the annuity accrual rate is 2.5 percent of average salary for Basic Plan members and 1.5 percent for Coordinated Plan members who retired before July 1, 1997. Annuity accrual rates increase 0.2 percent for members who retire on or after July 1, 1997. PERF members whose annuity is calculated using Method 1, a full annuity is available when age plus years of service equal 90. A reduced retirement annuity is also available to eligible members seeking early retirement. I I I I I There are different types of annuities available to members upon retirement. A normal annuity is a lifetime annuity that ceases upon death of the retiree--no survivor annuity is payable. There are also various types of joint and survivor annuity options available which will reduce the monthly normal annuity amount, because the annuity is payable over joint lives. Members may also leave their contributions in the fund upon termination of public service in order to qualify for a deferred annuity at retirement age. Refunds of contributions are available at any time to members who leave public service, but before retirement benefits begin. I I (7) I I I I I I I I I I I I I I I I I I I I STMA ARENA NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 AND 1998 NOTE 2 DEFINED BENEFIT PENSION PLANS - STATEWIDE - continued The benefit provisions stated in the previous paragraphs of this section are current provisions and apply to active plan participates. Vested, terminated employees who are entitled to benefits but are not receiving them yet are bound by the provisions in effect at the time they last terminated their public service. PERA issues a publicly available financial report that includes financial statements and required supplementary information for PERF. That report may be obtained by writing to PERA, 514 St. Peter Street 200, St. Paul, Minnesota, 55102 or by calling (651) 296-7460 or 1-800-652-9026. B. Funding Policy Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. These statutes are established and amended by the state legislature. The STMA Arena makes annual contributions to the pension plans equal to the amount required by state statutes. PERF Basic Plan members and Coordinated Plan members are required to contribute 8.75% and 4.75%, respectively, of their annual covered salary. The STMA Arena is required to contribute the following percentages of annual covered payroll: 11.43% for Basic Plan PERF members, and 5.18% for Coordinated Plan PERF members. The STMA Arena's contributions the Public Employees Retirement fund for the years ending June 30, 1999, and 1998, were $896.54, and $0, respectively. The STMA Arena's contributions were equal to the contractually required contributions for each year as set by state statute. NOTE 3 CONCENTRATIONS OF CREDIT RISK The STMA Arena maintains its cash balances in one financial institution located in Albertville, Minnesota. The balances are insured by the Federal Deposit Insurance Corporation up to $100,000. At June 30, 1999, STMA Arena had uninsured cash balances total $9,865. NOTE 4 - DlJE TO JOINT POWERS The Joint Powers have advanced funds to the Organization to finance the Building purchase and operations of the Organization. The advances have at this time no formal repayment terms. The advances are as follows: 1999 1998 Due to City of Albertville $ 217,667 $ 1,000 Due to City of St. Michael 217,667 1,000 Due to Independent School District No. 885 217,334 1,000 $ 652,668 $ 3,000 (8) I I I I I I I I I I I I I I I I I I I JAMES AND GRUBER CERTIFIED PUBLIC ACCOUNTANTS To the Board of Directors ofSTMA Arena. Albertville, MN 55301 In planning and performing our audit of the financial statements of STMA Arena for the year ended June 30, 1999, we considered its internal control in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on internal control. However, we noted certain matters involving internal control and its operation that we consider to be reportable conditions under standards established by the American Institute of Certified Public Accountants. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of internal control that, in our judgment, could adversely affect the organization's ability to record, process, summarize, and report financial data consistent with the assertions of management in the financial statements. Due to the size of the Organization and limited number of personnel employed, it is not possible to establish the usual internal control procedures requiring separation of duties: Accounting Records During the setup stages the Organization relied on volunteers and members of the community to provide certain aspects of administrative duties. Some of the administrative duties are still performed by persons in the community. We recommend that the Board review the following areas to ensure that the functions are properly performed and are entered into the formal accounting records on a timely basis: Sales tax: The Manager is responsible for summary of daily revenue. The records must have sufficient detail to prepare accurate sales tax returns. The Management is responsible to determine which items are subject to sales tax. Ice Time Revenue: The individual responsible for scheduling and billing for ice time should provide records on a monthly basis to the accountant that maintains the Organization's General Ledger. Detailed records of revenue, amounts received as payment and amounts uncollected at month end are needed. (9) 25 Birch Avenue, Box 385, Maple Lake, MN 55358 919 West St. Germain, Suite 2020, St. Cloud. MN 56301 311 South Walnut Street. Box 755, Monticello, MN 55362 Phone 320-963-5414 Fax 320-963-6224 Phone 320-252-7188 Fax 320-252-8902 Phone 612-295-5070 Fax 612-295-2940 I I I I I I I I I I I I I I I I I I I Record Keeping: All disbursements should be supported by original invoices, these should be filed systematically so they are available for future reference. The Organization should consider adapting a system that records who approved invoices for payment, the amount paid and the date and the check number of the payment. Joint Powers Agreement We recommend a formal review of the joint powers agreement to determine what amendments should be made. We noted that no formal agreement appears to be in place regarding repayment of the advances from the three entities. The repayment terms, interest rate, payment amount and the calculation formula for the shortfall/surplus resulting from annual operations should be formalized and determined each year within a fixed period of time of the year end. This report is intended solely for the information and use of STMA Arena management, and others within the Organization and is not intended to be and should not be used by anyone other than these specified parties. ~~6,~ May 17, 2000 (10)