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, 2003 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. I was not provided with sufficient appropriate audit evidence to support inventory, accrued vacation pay, various operating expense accounts including salaries, wages and employee benefits in these financial statements. Due to the lack of sufficient appropriate audit evidence, assets, liabilities, expenses, net income and retained earnings are not susceptible to satisfactory audit verification. As a result, I was unable to determine whether adjustments were required in respect to recorded or unrecorded assets, recorded or unrecorded liabilities and the components making up the statements of operations. In addition, in respect of the year ended March 31, 2002,1 qualified my opinion with respect to the lack of audit evidence supporting capital assets and revenues. As a result, I am unable to satisfy myself over the accuracy of the opening account balances at April 1, 2002. In view of the possible material effects on the financial statements of the matters described in the preceding paragraphs, I am unable to express an opinion whether these financial statements are presented fairly in accordance with accounting principles generally accepted in Bermuda and Canada. Hamilton, Bermuda June 4, 2007 Larry T. Dennis, C.A. Auditor General }20 BOARD OF TRUSTEES OF THE GOLF COURSES BALANCE SHEET MARCH 31, 2003 2003 2002 $ ASSETS CURRENT ASSETS Cash Accounts receivable Inventories Due from the Government of Bermuda (note 3) 4,600 87,814 398,853 236,713 1,238,515 Capital assets (note 4) 787,789 43,916 406,810 727,980 224,612 1,463,127 727,980 388,229 427,040 116,497 286,228 296,835 144,917 931,766 727,980 LIABILITIES CURRENT LIABILITIES Accounts payable and accrued liabilities Deferred revenues Accrued vacation pay Deferred capital contributions (note 5) 224,612 1,156,378 RETAINED EARNINGS (note 1) 727,980 306,749 1,463,127 727,980 The accompanying notes and schedules are an integral part of these financial statements. 321 BOARD OF TRUSTEES OF THE GOLF COURSES STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 2003 2003 2002 $ $ REVENUES Green fees and memberships Golf cart hire Government grant Rent Amortization of deferred capital contributions (note 5) Miscellaneous 4,218,727 1,757,394 257,560 163,380 17,828 171,663 4,086,383 1,684,813 6,586,552 5,949,474 3,733,977 686,879 654,339 413,922 371,470 277,836 57,180 39,373 26,999 17,828 3,418,328 807,589 345,585 223,046 221,494 266,897 81,818 23,948 6,279,803 5,388,705 306,749 560,769 153,466 24,812 EXPENSES Salaries, wages and employee benefits Operational materials and supplies Repairs and maintenance Professional services (note 6 and 8) General and administrative (note 7) Electricity and fuel Credit card charges Rentals Bad debts Amortization of capital assets (note 4) Net income from operations Distribution of net income to Government of Bermuda (note 1) Net income (560,769) 306,749 - The accompanying notes and schedules are an integral part of these financial statements. 322 BOARD OF TRUSTEES OF THE GOLF COURSES NOTES TO THE FINANCIAL STATEMENTS MARCH 31, 2003 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. Prior to 2002, all sums received by the Board as a result of fees or other charges were paid into the Consolidated Fund of the Government of Bermuda. Likewise, all disbursements approved by the Board were paid out of the Consolidated Fund of the Government of Bermuda. On November 1, 2002, the Board of Trustees of the Golf Courses was set up as a quasiautonomous non-Governmental organization (QUANGO). At that time, all management responsibilities were moved from the Government of Bermuda to the Board of Trustees and the Board set up its own bank accounts and accounting records at that time. In addition, the net income from operations from the Golf Courses is now retained by the Board to cover future operations and capital development. 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 When the Board was set up as a QUANGO as described in note 1 above, the land, buildings and equipment of the Golf Courses remained vested with the Government of Bermuda. Since the Government of Bermuda retains the rights and risks of legal ownership, these capital assets are recorded on the financial statements of the Consolidated Fund of the Government of Bermuda; and therefore, they are not recognized in the financial statements of the Board of Trustees of the Golf Courses. 323 BOARD OF TRUSTEES OF THE GOLF COURSES NOTES TO THE FINANCIAL STATEMENTS MARCH 31, 2003 2. SIGNIFICANT ACCOUNTING POLICIES (continued) (b) Capital assets (continued) Since November 1, 2002, the Board of Trustees of the Golf Courses have acquired their own capital assets using a combination of capital contributions from the Government of Bermuda and other operating revenues. These capital assets are recorded at cost. Costs incurred by the Trustees for improvements to buildings and infrastructure, purchase of equipment, furniture, fixtures, site preparation and demolition are capitalized. Interest costs associated with development are capitalized. Proceeds from sale of excavated topsoil are credited against development costs. Amortization is calculated using the straight-line basis over the estimated useful lives of the assets as follows: Equipment Furniture and fixtures Leasehold improvements (c) 20% 2.5% - 20% 5% - 10% Revenue recognition Green fees and memberships, golf cart hire and rental revenue are recognized when received. Capital contributions received from the Government for the purpose of capital development are deferred and amortized to revenue on the same basis as amortization of the related capital assets. Operating grants are taken into income in the current period. (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. 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. Prior to the current fiscal year (as noted in note 1), all revenue was received and all expenses were paid by the Consolidated Fund on behalf of the Board. No interest is accrued on the outstanding amount. 324 BOARD OF TRUSTEES OF THE GOLF COURSES NOTES TO THE FINANCIAL STATEMENTS MARCH 31, 2003 CAPITAL ASSETS As explained in note 2(b), the Board began purchasing and recording its own capital assets during the current fiscal year. The net book values of these assets are presented in the table below. 2003 2002 Cost Accumulated Amortization Net Book Value Net Book Value $ $ $ $ 131,129 97,025 14,286 13,113 4,001 714 118,016 93,024 13,572 242,440 Equipment Leashold improvements Furniture and fixtures 17,828 224,612 - DEFERRED CAPITAL CONTRIBUTIONS Deferred capital contributions represent contributions made by the Government of Bermuda for the acquisition of capital assets. The contributions are amortized to revenue on the same basis as the amortization expense of the acquired capital assets. Changes in the deferred capital contributions balance are as follows: 2003 2002 $ $ Balance, beginning of year Add: capital contributions Less: amounts amortized to revenue Balance, end of year 6. 242,440 17,828 224,612 - 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. 325 BOARD OF TRUSTEES OF THE GOLF COURSES NOTES TO THE FINANCIAL STATEMENTS MARCH 31, 2003 7. GENERAL AND ADMINISTRATIVE 2003 Special occasions and youth development programs Telephone and postage Printing, stationery and advertising Travel and training Audit and accounting Cleaning Clothing and uniform Insurance Miscellaneous 2002 $ $ 68,327 69,360 4,175 25,000 2,284 26,692 25,656 371,470 8. 88,260 69,075 68,584 53,992 44,500 15,629 9,141 9,043 13,246 221,494 RELATED PARTY TRANSACTIONS The Government of Bermuda provides capital grants to the Board of Trustees of the Golf Courses. Government officials receive complimentary rounds of golf. These complimentary rounds have not been reflected in the financial statements. 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 $61,422 (2002 - $112,344). 326 BOARD OF TRUSTEES OF THE GOLF COURSES NOTES TO THE FINANCIAL STATEMENTS MARCH 31, 2003 10. STATEMENT OF CASH FLOWS A statement of cash flows has not been prepared as it would not provide any additional useful information. 11. COMPARATIVE FIGURES Certain comparative figures have been reclassified to conform to the current year's presentation. 327 BOARD OF TRUSTEES OF THE GOLF COURSES STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 2003 Schedule 1 2003 $ Ocean View Golf Course 2002 $ REVENUES Green fees and memberships Golf cart hire Rent Miscellaneous 720,711 376,872 36,460 62,309 659,225 309,497 31,362 5,176 1,196,352 1,005,260 906,117 147,637 97,728 95,088 73,449 55,921 26,803 8,115 785,376 250,145 53,530 164,197 64,559 65,631 1,410,858 1,394,616 214,506 389,356 EXPENSES Salaries, wages and employee benefits Operational materials and supplies Genera] and administrative (note 7) Repairs and maintenance Electricity and fuel Professional services (notes 6 and 8) Rentals Credit card charges LOSS 328 654 10,524 BOARD OF TRUSTEES OF THE GOLF COURSES STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 2003 Schedule 2 2003 $ $ 2,688,717 891,519 257,560 80,637 17,828 96,827 2,636,423 905,913 4,033,088 3,636,029 1,856,676 419,859 419,642 321,767 163,838 138,743 37,138 17,828 12,570 8,999 1,626,109 124,240 293,736 111,573 103,590 132,440 53,132 3,397,060 2,457,203 636,028 Port Royal Golf Course 2002 1,178,826 REVENUES Green fees and memberships Golf cart hire Government grant Rent Amortization of deferred capital contributions Miscellaneous 76,614 17,079 EXPENSES Salaries, wages and employee benefits Repairs and maintenance Operational materials and supplies Professional services (notes 6 and 8) General and administrative (note 7) Electricity and fuel Credit card charges Amortization of capital assets Rentals Bad debt NET INCOME 329 12,383 BOARD OF TRUSTEES OF THE GOLF COURSES STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 2003 Schedule 3 2003 $ St. George's Golf Course 2002 $ REVENUES Green fees and memberships Golf cart hire Rent Miscellaneous 809,299 489,003 46,283 12,527 790,735 469,403 45,490 2,557 1,357,112 1,308,185 971,184 139,392 119,600 109,904 65,644 36,235 18,000 11,926 1,006,843 57,148 263,708 64,374 69,898 45,842 1,471,885 1,536,886 114,773 228,701 EXPENSES Salaries, wages and employee benefits Repairs and maintenance Operational materials and supplies General and administrative (note 7) Electricity and fuel Professional services (notes 6 and 8) Bad debts Credit card charges Rentals LOSS 330 18,162 10,911