Office of the Auditor General Victoria Hall 11 Victoria Street Hamilton HM 11, Bermuda Tel: (441)296-3148 Fax: (441)295-3849 Email: auditbda@gov.bm Website: www.oagbermuda.gov.bm AUDITOR'S REPORT To the Minister of Tourism and Transport I have audited the balance sheet of the Board of Trustees of the Golf Courses as at March 31, 2002 and the statement 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 green fees and membership revenues, golf cart hire revenues, deferred revenues and due from the Government of Bermuda are fairly stated. Accordingly, my verification of these amounts was limited to the amounts recorded in the financial records of the Board and I was unable to determine whether any adjustments might be necessary to green fees and membership revenues, golf cart hire revenues, deferred revenues, due from the Government of Bermuda, net income from operations, and distribution of net income to the Government of Bermuda. Due to a lack of sufficient and appropriate audit evidence, I was unable to satisfy myself that capital assets disclosed in Note 8 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 8 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 a complete set of minutes of the Board of Trustees meetings during the year. These minutes could have included information pertaining to decisions that may have a material effect on the financial statements and therefore would have required adjustments to or disclosure in these financial statements. In respect of the year ended March 31, 2001, a qualified opinion was issued with respect to completeness and accuracy of capital assets and a review of all Board of Trustee minutes. As a 228 result, I was unable to satisfy myself over the accuracy of the opening balances of capital assets at April 1,2001. In my opinion, except for the effect of adjustments, if any, which I might have determined to be necessary had I beep able to satisfy myself concerning the accuracy and completeness of green fees and membership revenues, golf cart hire revenues, deferred revenues, due from the Government of Bermuda, and capital assets disclosed in Note 8 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, 2002 and the results of its operations for the year then ended in accordance with accounting principles generally accepted in Bermuda and Canada. 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, 2002 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 March 16, 2005 Larry T. Dennis, C.A. Auditor General 229 BOARD OF TRUSTEES OF THE GOLF COURSES BALANCE SHEET MARCH 31, 2002 2002 2001 $ $ 4,600 87,814 398,853 236,713 4,800 104,015 396,781 185,582 727,980 691,178 ASSETS CURRENT ASSETS Cash Accounts receivable Inventories Due from the Government of Bermuda (note 3) Apprentice Training Fund (note 4) 8,099 727,980 699,277 286,228 296,835 144,917 222,054 294,419 174,705 727,980 691,178 LIABILITIES CURRENT LIABILITIES Accounts payable and accrued liabilities Deferred revenues Accrued vacation pay Apprentice Training Fund (note 4) 8,099 727,980 699,277 The accompanying notes and schedules are an integral part of these financial statements. 230 BOARD OF TRUSTEES OF THE GOLF COURSES STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 2002 2002 2001 $ $ REVENUES Green fees and memberships Golf cart hire Rent Miscellaneous 4,086,383 1,684,813 153,466 24,812 4,477,777 1,615,515 149,940 44,990 5,949,474 6,288,222 3,418,328 807,589 345,585 266,897 223,046 221,494 81,818 23,948 3,111,820 632,397 301,459 234,735 229,580 213,576 91,110 17,463 28,654 5,388,705 4,860,794 560,769 1,427,428 (560,769) (1,427,428) EXPENSES Salaries, wages and employee benefits Operational materials and supplies Repairs and maintenance Electricity and fuel Professional services (notes 5 and 6) General and administrative (note 7) Credit card charges Rentals Bad debts Net income from operations Distribution of net income to Government of Bermuda Net income retained by the Board - - The accompanying notes and schedules are an integral part of these financial statements. 231 BOARD OF TRUSTEES OF THE GOLF COURSES NOTES TO THE FINANCIAL STATEMENTS MARCH 31, 2002 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. SIGNIFICANT ACCOUNTING POLICIES The financial statements have been prepared in accordance 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) 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. (c) Revenue recognition Green fees and memberships, golf cart hire and rental revenue are recognized when received. 232 BOARD OF TRUSTEES OF THE GOLF COURSES NOTES TO THE FINANCIAL STATEMENTS MARCH 31, 2002 2. SIGNIFICANT ACCOUNTING POLICIES (continues) (d) Use of estimates The preparation of financial statements in accordance with generally accepted 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 earned and expenses incurred during the year. Actual results could differ from these estimates. 3. DUE FROM THE GOVERNMENT OF BERMUDA The amount due from the Government of Bermuda represents the net asset position of the Board receivable from 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. 4. APPRENTICE TRAINING FUND The apprentice training fund was established to receive contributions from various donors to assist persons studying turf management. During the year the balance of the fund ($8,099) was reimbursed to the creator of the Fund. 5. 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. 6. RELATED PARTY TRANSACTIONS 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 (2001 - $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. 233 BOARD OF TRUSTEES OF THE GOLF COURSES NOTES TO THE FINANCIAL STATEMENTS MARCH 31,2002 7. GENERAL AND ADMINISTRATIVE 2002 Printing, stationery and advertising Telephone and postage Clothing and uniform Insurance Audit and accounting Travel Cleaning Miscellaneous 2001 $ $ 50,642 70,833 11,930 32,366 22,000 10,575 5,128 10,102 221,494 8. 69,360 68,327 26,692 25,656 25,000 4,175 2,284 213,576 CAPITAL ASSETS As explained in Note 2(b), 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. Cost Net Book Value 2001 Net Book Value $ Land Buildings Land development Equipment Fixtures and fittings Land improvements 2002 Accumulated Amortization $ $ $ 11,063,633 6,838,191 4,611,995 2,674,965 1,079,119 1,489,946 2,434,765 2,526,446 2,185,588 761,673 1,177,898 11,063,633 4,403,426 2,085,549 489,377 317,446 312,048 11,063,633 4,539,830 2,200,848 496,706 318,685 357,067 27,757,849 9,086,370 18,671,479 18,976,769 234 BOARD OF TRUSTEES OF THE GOLF COURSES NOTES TO THE FINANCIAL STATEMENTS MARCH 31, 2002 8. CAPITAL ASSETS (continued) 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 Land development Equipment Fixtures and fittings Land improvements 2.5% 2.5% 25% 10% 10% Total amortization for the year is calculated as $798,000 (2001 - $751,299). 9. PENSION PLAN All employees of the Board are covered by the Public Service Superannuation Fund ("the Fund") a defined benefit plan administered by the Government of Bermuda. Employee contributions to the Fund are 5% of gross salary and they are matched by the Board. The Board is not required under present legislation to make contributions with respect to actuarial deficiencies of the Fund. As a result, the current year contributions to the Fund represent the total liability of the Board. The Board's contributions to the Fund during the year were $112,344 (2001 -$115,613). 10. STATEMENT OF CASH FLOWS A statement of cash flows has not been prepared as it would not provide any additional useful information. 11. SUB SEQUENT EVENT Effective October 1, 2002 the responsibility of the Golf Courses' receipts and payments was transferred from the Accountant General to the Board. The Golf Courses now have their own bank accounts. 235 BOARD OF TRUSTEES OF THE GOLF COURSES STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 2002 Schedule 1 2002 $ Ocean View Golf Course 2001 $ REVENUES Green fees and memberships Golf cart hire Rent Miscellaneous 659,225 309,497 31,362 5,176 672,885 304,037 31,050 1,147 1,005,260 1,009,119 785,376 250,145 164,197 65,631 64,559 53,530 10,524 774,565 221,028 85,874 57,024 58,475 56,286 11,530 EXPENSES Salaries, wages and employee benefits Operational materials and supplies Repairs and maintenance Professional services (notes 5 & 6) Electricity and fuel General and administrative (note 7) Credit card charges Rentals 654 1,394,616 (389,356) NET LOSS 236 1,264,782 (255,663; BOARD OF TRUSTEES OF THE GOLF COURSES STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 2002 Schedule 2 2002 $ $ 2,636,423 905,913 76,614 17,079 3,035,182 882,838 61,340 22,118 3,636,029 4,001,478 1,626,109 293,736 132,440 124,240 111,573 103,590 53,132 12,383 1,495,636 289,825 124,369 121,160 136,715 96,926 61,825 7,869 2,457,203 2,334,325 1,178,826 Port Royal Golf Course 2001 1,667,153 REVENUES Green fees and memberships Golf cart hire Rent Miscellaneous EXPENSES Salaries, wages and employee benefits Operational materials and supplies Electricity and fuel Repairs and maintenance Professional services (notes 5 & 6) General and administrative (note 7) Credit card charges Rentals NET INCOME 237 BOARD OF TRUSTEES OF THE GOLF COURSES STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 2002 Schedule 3 2002 $ St. George's Golf Course 2001 $ REVENUES Green fees and memberships Golf cart hire Rent Miscellaneous 790,735 469,403 45,490 2,557 769,710 428,640 57,550 21,725 1,308,185 1,277,625 1,006,843 263,708 69,898 64,374 57,148 45,842 18,162 10,910 841,619 121,544 51,891 60,364 94,425 35,841 17,755 9,594 28,654 1,536,885 1,261,687 EXPENSES Salaries, wages and employee benefits Operational materials and supplies Electricity and fuel General and administrative (note 7) Repairs and maintenance Professional services (notes 5 & 6) Credit card charges Rentals Bad debts (LOSS) NET INCOME (228,700) 238 15,938