Office of the Auditor General Victoria Hall 11 Victoria Street Hamilton HM 11, Bermuda Tel: Fax: (441)296-3148 (441)295-3849 Email: auditbda@gov.bm Website: www.oagbenriuda.gov.bm AUDITOR'S REPORT To the Minister of Works and Engineering I have audited the balance sheet of the Board of Trustees of the Golf Courses as at March 31, 2001 and the statements of operations for the year then ended. These financial statements are the responsibility of the Board's management. My responsibility is to express an opinion on these financial statements based on my audit. Except as explained in the following paragraphs, I conducted my audit in accordance with auditing standards generally accepted in Bermuda and Canada. Those standards require that I plan and perform an audit to obtain reasonable assurance 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 financial statement presentation. Due to a lack of sufficient and appropriate audit evidence, I was unable to satisfy myself that capital assets disclosed in Note 9 of the financial statements are fairly stated. Accordingly, my verification of these amounts was limited to the amounts disclosed in the financial records of the Board and I was unable to determine whether any adjustments might be necessary to Note 9 regarding capital assets, repairs and maintenance expense, net income from operations and distribution of net income to the Government of Bermuda. In addition, I did not receive confirmation that all available Board minutes were provided to me and therefore, there may be matters that would have a material effect on the financial statements that have not been identified, appropriately recorded or disclosed in these financial statements. In respect of the year ended March 31, 2000, a qualified opinion was issued with respect to completeness and accuracy of membership revenues and accounts payable. As a result, I was unable to satisfy myself over the accuracy of the opening balances of accounts payable and due to the Government of Bermuda at April 1, 2000 and the accuracy of membership revenue for the year ended March 31, 2001. In my opinion, except for the effect of adjustments, if any, which I might have determined to be necessary had I been able to satisfy myself concerning the accuracy and completeness of capital assets disclosed in Note 9, repairs and maintenance expenses, due to/from the Government of Bermuda and membership revenues and as a result of further information not received as referred to in the preceding paragraph, these financial statements present fairly, in all material respects, the financial position of the Board of Trustees of the Golf Courses as at March 31, 2001 and the results of its operations for the year then ended in accordance with accounting principles generally accepted in Bermuda and Canada. 248 Schedules 1 to 3 are presented as supplementary information only. In this respect, they do not form part of the basic financial statements of the Board of Trustees of the Golf Courses for the year ended March 31, 2001 and therefore are excluded from my opinion on these financial statements. Schedules 1 to 3 were subject to audit procedures only to the extent necessary to express an opinion on the financial statements of the Board and, in my opinion, except for the effect of adjustments as explained above, if any, these supplementary schedules are fairly presented in relation to the basic financial statements. Hamilton, Bermuda April 4, 2002 Larry T. Dennis, C.A. Auditor General 249 BOARD OF TRUSTEES OF THE GOLF COURSES Balance Sheet March 31, 2001 (Expressed in Bermuda Dollars) 2000 2001 Assets Current assets Cash Accounts receivable Inventories Prepaid expenses Due from Government of Bermuda (Note 3) 4,800 104,015 396,781 185,582 Total current assets $ 4,650 130,990 435,697 24,866 — 691,178 8,099 Apprentice Training Fund (Note 4) Total assets 596,203 10,504 699,277 $ 606,707 $ 222,054 294,419 174,705 145,842 68,408 207,086 174.867 691,178 596,203 8,099 10,504 Liabilities Current liabilities Due to Government of Bermuda (Note 3) Accounts payable and accrued liabilities Deferred revenues Accrued vacation pay $ Total current liabilities Apprentice Training Fund (Note 4) $ Total liabilities See accompanying notes to financial statements 250 699,277 $ 606,707 BOARD OF TRUSTEES OF THE GOLF COURSES Statement of Operations Year Ended March 31, 2001 (Expressed in Bermuda Dollars) 2001 Revenues Green fees and memberships Golf cart hire Rent Miscellaneous 4,477,777 1,615,515 149,940 44,990 2000 $ 4,212,461 1,516,407 133,394 37,920 6,288,222 3,111,820 632,397 301,459 234,735 229,580 213,576 91,110 28,654 17,463 Distribution of net income to Government of Bermuda Net income retained by Board See accompanying notes to financial statements 251 4,814,909 1,427,428 Net income from operations 3,022,057 594,453 476,578 251,331 178,031 219,658 58,700 2,508 11,593 4,860,794 Expenses Salaries and wages Operational materials and supplies Repairs and maintenance Electricity and fuel Professional services (Notes 6 and 7) General and administrative (Note 5) Credit card charges Bad debts Rentals 5,900,182 1,085,273 (1.427,428) (1,085,273) BOARD OF TRUSTEES OF THE GOLF COURSES Notes to Financial Statements March 31, 2001 1. General The Board of Trustees of the Golf Courses ("the Board") was established on April 3, 1998 under The Golf Courses (Consolidation) Act 1998, ("the Act"), which took effect that same day. Under section 5 of the Act, the functions of the Board are to have general control, management and administration over the Port Royal, Ocean View, and St. George's Golf Courses ("the Golf Courses"); and to maintain the Golf Courses in good and proper condition. Since March 31, 1999, the financial statements of the Golf Courses under the Board's administration have been consolidated accordingly to reflect the spirit of the Act. In accordance with section 8 of the Act, the Board shall administer the Golf Courses and shall levy such fees and other charges as required to meet the expenses of the trustees including depreciation and amortization charges; and to ensure that the earned surplus of the Board will not fall into a deficit position. All sums received by the Board as a result of fees or other charges are paid into the Consolidated Fund of the Government of Bermuda. Likewise, all disbursements approved by the Board are paid out of the same fund. 2. Accounting policies The financial statements have been prepared in conformity with accounting principles generally accepted in Bermuda and Canada and include the following significant accounting policies: a) Inventories Inventories are valued at the lower of cost and net realizable value. b) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. c) Capital Assets The Act vests the land, buildings and equipment of the Golf Courses with the Government of Bermuda. Since the Government of Bermuda retains legal ownership as well as all cash proceeds (net of cash disbursements) of the Golf Courses, capital assets are not recorded in the financial statements of the Board. Capital assets are considered economic resources whereby all future benefits are ultimately owned and controlled by the Government of Bermuda. All capital assets are expensed as capital acquisitions or capital development expenditures in the Consolidated Fund of the Government of Bermuda. Government intends to begin capitalization and amortization of land improvements, land development and buildings in 2001. 252 BOARD OF TRUSTEES OF THE GOLF COURSES Notes to Financial Statements March 31, 2001 Due to/from the Government of Bermuda The amount due to/from Government of Bermuda represents the net asset position of the Board, payable to the Consolidated Fund since all revenue is received and all expenses are paid by the Consolidated Fund on behalf of the Board. No interest is accrued on the outstanding amount. Apprentice training fund The apprentice training fund was established to receive contributions from various donors to assist persons studying turf management. The movement during the year was as follows: 2001 Balance, beginning of year 10,504 Donations Scholarships Interest 2000 95 (2,500) Balance, end of year 8,099 $ 11,889 (2,217) 832 $ 10,504 General and administrative 2000 2001 Telephone and postage Printing, stationery and advertising Insurance Audit and accounting Clothing and uniform Travel Miscellaneous Cleaning 70,833 50,642 32,366 22,000 11,930 10,575 10,102 5,128 $ 6. $ 213,576 $ 63,567 63,661 25,908 31,100 13,157 13,148 2,643 6,474 $ 219,658 Professional services Professional services represents commissions paid on golf cart hire, the Golf range, tee time reservations systems and fees paid to the Ministry of Works and Engineering for management services. Related party transaction The Government of Bermuda provides accounting and administrative services to the Board. This includes processing and payment of general and payroll expenditure, revenue processing, maintenance of accounting records and the production of management accounts. A management fee of $24,900 (2000 - $24,900) has been included as part of professional services expense. Government officials receive complimentary rounds of golf. These complimentary rounds have not been reflected in the financial statements. 253 BOARD OF TRUSTEES OF THE GOLF COURSES Notes to Financial Statements March 31, 2001 8. Statement of cash flows A statement of cash flows has not been prepared as it would not provide any additional useful information. 9. Capital assets As explained in Note 2c, the Board does not record capital assets in the financial statements. The following capital asset information is provided as additional information for financial statement users. 2001 Cost Land Buildings Equipment Land development Land improvements Fixtures and fittings Accumulated amortization 2000 Net book value Net book value $ 11,063,633 6,803,915 3,445,895 4,611,995 1,442,363 1,051,254 $ 2,264,085 2,949,189 2,411,147 1,085,296 732,569 $11,063,633 4,539,830 496,706 2,200,848 357,067 318,685 $ 11,063,633 4,709,653 582,735 2,316,148 410,904 334,347 $ 28,419,055 $ 9,442,286 18,976,769 $ 19,417,420 Initial costs for land were based on market value. All subsequent capital asset purchases are presented based on cost. Capital assets are amortized on a straight-line basis at the following rates: Buildings Equipment Land development Land improvements Fixtures and fittings 2.5% 25% 2.5% 10% 10% Total amortization for the year is calculated as $751,299 (2000 - $885,580). 10. Pension plan Employees of the Board of Trustees of the Golf Courses are covered by the Public Service Superannuation Fund, which is a defined benefit plan administered by the Government of Bermuda. Contributions to the fund are required from both the employee and the Board. These contributions represent the total liability of the Board and are recognized in the accounts on a current basis. The Board is not required under present legislation to make contributions with respect to the actuarial deficiencies of the Public Service Supperannuation Fund. 254 BOARD OF TRUSTEES OF THE GOLF COURSES Schedule 1 Individual Course Statement of Operations March 31, 2001 2001 2000 672,885 304,037 31,050 1,147 603,100 265,572 32,000 12,469 1,009,119 913,141 774,565 221,028 85,874 58,475 57,024 56,286 11,530 — 718,323 147,739 148,926 72,527 55,435 66,711 2,119 2,508 1,264,782 1,214,713 Ocean View Golf Course Revenue Green fees and membership Golf cart hire Rent Miscellaneous Expenses Salaries and wages Operational materials and supplies Repairs and maintenance Electricity and fuel Professional services General and administrative Credit and charges Bad Debts Rentals Net loss $ 255 (255,663) 425 $ (301,572) Schedule 2 BOARD OF TRUSTEES OF THE GOLF COURSES Individual Course Statement of Operations March 31, 2001 2000 2001 Port Royal Golf Course Revenue Green fees and membership Golf cart hire Rent Miscellaneous $ 3,035,182 882,838 61,340 22,118 $ 2,753,690 782,686 61,819 22,384 4,001,478 1,495,636 289,825 136,715 124,369 121,160 96,926 61,825 7,869 1,465,252 244,812 89,175 111,192 288,663 89,476 48,671 — 2,334,325 Expenses Salaries and wages Operational materials and supplies Professional services Electricity and fuel Repairs and maintenance General and administrative Credit card charges Rentals 3,620,579 2,337,241 $ 1,667,153 Net income 256 $ 1,283,338 BOARD OF TRUSTEES OF THE GOLF COURSES Schedule 3 Individual Course Statement of Operations March 31, 2001 2000 2001 St. Georges Golf Course Revenue Green fees and membership Golf cart hire $ Rent Miscellaneous 769,710 428,640 57,550 21,725 $ 855,671 468,149 39,575 3,067 1,277,625 841,619 121,544 94,425 60,364 51,891 35,841 28,654 17,755 9,594 Net income $ 257 838,482 201,902 38,989 63,471 67,612 33,421 7,910 11,168 1,261,687 Expenses Salaries and wages Operational materials and supplies Repairs and maintenance General and administrative Electricity and fuel Professional services Bad debts Credit card charges Rentals 1,366,462 1,262,955 15,938 $ 103,507