Sugar Bowl, Inc. - app1.lla.la.govapp1.lla.la.gov/PublicReports.nsf/CF6D0A12CA68A06B86257290004… · Sugar Bowl Independent Auditor's Report We have audited the accompanying statements

SUGAR BOWL

Auditsof Financial Statements

30, 2006 and 2005

Under provisions of state law, this report is a pufc'icdocument. A copy of the report has been submitted tothe entity and other appropriate public officials. Thereport is available for public inspection at the BatonRouge office cf the Legislative Auditor and, whereappropriate, at the office of the parish clerk of court.

Release Date

SUGAR BOWLContents

Independent Auditor's Report 1

Statements of Financial Position 2

Statements of Activities 3

Statements of Cash Flows 4

Notes to Financial Statements 5-10

Schedule I - Unrestricted Revenue, Gains and Other Support 11

Schedule II - Program Expenses 12

Schedule 111 - Support Expenses 13

Independent Auditor's Report on Internal Control Over FinancialReporting and on Compliance and Other Matters Based on anAudit of Financial Statements Performed in Accordance withGovernment Auditing Standards 14-15

SEHRTROMIGHAND

CERTIFIED PUBLIC ACCOUNTANTS

Executive CommitteeSugar Bowl

Independent Auditor's Report

We have audited the accompanying statements of financial position of the Sugar Bowl (anonprofit organization) as of June 30, 2006 and 2005, and the related statements of activities andcash flows for the years then ended. These financial statements are the responsibility of theOrganization's management. Our responsibility is to express an opinion on these financialstatements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the UnitedStates of America and the standards applicable to financial audits contained in GovernmentAuditing Standards, issued by the Comptroller General of the United States. Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An audit includes examining, on a testbasis, evidence supporting the amounts and disclosures in the financial statements. An audit alsoincludes assessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation. We believe thatour audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects,the financial position of the Sugar Bowl as of June 30, 2006 and 2005, and the changes in its netassets and its cash flows for the years then ended in conformity with accounting principlesgenerally accepted in the United States of America.

Our audits were conducted for the purpose of forming an opinion on the basic financial statementstaken as a whole. The schedules on pages 11 — 13 are presented for purposes of additionalanalysis and are not a required part of the basic financial statements, Such information has beensubjected to the auditing procedures applied in the audits of the basic financial statements and, inour opinion, is fairly stated in all material respects in relation to the basic financial statementstaken as a whole.

In accordance with Government Auditing Standards, we have also issued our report datedAugust 18, 2006, on our consideration of the Sugar Bowl's internal control over financial reportingand our tests of its compliance with certain provisions of laws, regulations, contracts and grantagreements, and other matters. The purpose of that report is to describe the scope of our testingof internal control over financial reporting and compliance and the results of that testing, and notto provide an opinion on the internal control over financial reporting or on compliance. That reportis an integral part of an audit performed in accordance with Government Auditing Standards andshould be considered in assessing the results of our audits.

A Professional Accounting CorporationAugust 18, 2006

110 VETERANS MEMORIAL BOULEVARD, SUITE 200, METAIRIE, LA 70005-4958 - 504.835.5522 - FAX 504.835.55355100 VILLAGE WALK, SUITE 202, COVINGTON, LA 70433-4012 - 985,892.5850 - FAX 985.892.5956

WWW.LAPORTE.COM

RSM McGladrey NetworkAn Independently Owned Member

SUGAR BOWLStatements of Financial Position

June 30, 2006 and 2005

2006 2005Assets:

Cash and cash equivalentsAccounts receivableInterest receivablePrepaid expensesInvestmentsProperty and equipment, net

Liabilities and unrestricted net assets:Liabilities:

Accounts payable and accrued expensesFunds designated for hurricane donationsDue to superdome economic development fundDeferred ticket revenue

Total

Unrestricted net assets:UndesignatedBoard designated for basketball classic

Total

$ 644,24371,125

222,912•

23,245,39355,703

$ 24,239,376

$ 28,173182,033

-92,438

302,644

23,736,732200,000

23,936,732

$ 24,239,376

$ 401,056440,524133,36485,859

22,459,57585,259

$ 23,605,637

$ 47,660-

200,000455,500

703,160

22,702,477200,000

22,902,477

$ 23,605,637

The accompanying notes are an integral part of these financial statements.

2

SUGAR BOWLStatements of Activities

Years Ended June 30, 2006 and 2005

2006 2005Unrestricted revenue, gains and other support

Expenses:Program expensesSupport expenses

Total

Changes in unrestricted net assets

Net assets, beginning of year

Net assets, end of year

$ 10,321,373 $ 11.057,335

7,146,7402,140,378

9,287,118

1,034,255

22,902,477

6,967,1801,824.122

8,791.302

2,266,033

20,636,444

$ 23.936,732 $ 22,902,477

The accompanying notes are an integral part of these financial statements.

3

SUGAR BOWLStatements of Cash Flows

Years Ended June 30, 2006 and 2005

2006 2005Cash flows from operating activities:

Change in unrestricted net assetsAdjustments to reconcile change in unrestricted net assets

to net cash provided by operating activitiesDepreciation and amortizationUnrealized gain on investmentsDecrease (increase) in accounts receivableDecrease (increase) in prepaid itemsIncrease in interest receivableDecrease in accounts payable and accrued expenses(Decrease) increase in deferred revenue

Net cash provided by operating activities

Cash flows from investing activities:Purchases of property and equipmentLoss on destruction of property and equipmentPurchases of investmentsProceeds from the sale of investments

Net cash used in investing activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of year

Cash and cash equivalents, end of year

$ 1,034,255 $ 2,266,033

13,371(343,195)369,39985,859

(89,548)(37,454)

(363,062)

669,625

(15,891)32,077

(18,219,653)17,777,029

(426,438)

243,187

401,056

$ 644,243

19,567(495,213)

(54,063)(55,284)(48,829)(40,923)292,290

1,883,578

(26,738)

(22,135,835)20,122,769

(2,039,804)

(156,226)

557,282

$ 401,056

The accompanying notes are an integral part of these financial statements,

4

SUGAR BOWLYears Ended June 30, 2006 and 2005

Notes to Financial Statements

Note 1. Nature of Activities

The Sugar Bowl (the Organization) is a not-for-profit organization established to conductthe annual Sugar Bowl Classic.

Note 2. Summary of Significant Accounting Policies

Basis of AccountingThe financial statements of the Organization have been prepared on the accrual basis ofaccounting.

Basis of PresentationFinancial statement presentation follows the recommendations of the Financial AccountingStandards Board in its Statement of Financial Accounting Standards (SFAS) No. 117,Financial Statements of Not-for-Proftt Organizations. Under SFAS No. 117, theOrganization is required to report information regarding its financial position and activitiesaccording to three classes of net assets: unrestricted net assets, temporarily restricted netassets, and permanently restricted net assets.

Use of EstimatesThe preparation of financial statements in conformity with accounting principles generallyaccepted in the United States of America includes the use of estimates that affect thefinancial statements. Accordingly, actual results could differ from those estimates.

ContributionsThe Organization accounts for contributions in accordance with the recommendations ofthe Financial Accounting Standards Board in SFAS No. 116, Accounting for ContributionsReceived and Contributions Made. In accordance with SFAS No. 116, contributionsreceived are recorded as increases in unrestricted, temporarily restricted, or permanentlyrestricted net assets, depending on the existence or nature of any donor restrictions.

All donor-restricted contributions are reported as increases in temporarily or permanentlyrestricted net assets depending on the nature of the restriction. When a restriction expires(that is, when a stipulated time restriction ends or purpose restriction is accomplished),temporarily restricted net assets are reclassified to unrestricted net assets and reported inthe statement of activities as net assets released from restrictions.

AdvertisingAdvertising costs are expensed as incurred and included as a program expense insponsorship package expense. Advertising expense amounted to $137,686 and $79,147for the years ended June 30, 2006 and 2005, respectively.



Note 2. Summary of Significant Accounting Policies (Continued)

Accounts ReceivableTrade receivables are carried at original invoice amount, and are considered to be fullycollectible. Accordingly, no allowance for doubtful accounts is required. Tradereceivables are written off when deemed uncollectible. The use of this method does notresult in a material difference. Recoveries of trade receivables previously written off arerecorded when received.

Property and EquipmentDepreciation of property and equipment is provided over the estimated useful lives of therespective assets using the straight-line method.

Acquisitions of property and equipment in excess of $500 are capitalized. Donatedequipment is recorded at fair market value at the date of the donation. Purchasedequipment is recorded at cost.

Deferred Ticket RevenueTicket sales made prior to the fiscal year to which they apply are not recognized asrevenues until the year earned.

Cash and Cash EquivalentsFor purposes of the statements of cash flows, cash equivalents include time deposits, andall highly liquid debt instruments with original maturities of three months or less.

InvestmentsUnder SPAS No. 124, Accounting for Certain Investments Held by Not-for-profitOrganizations, investments in marketable securities with readily determinate fair valueand all investments in debt securities are reported at their fair values in the statements offinancial position. Unrealized gains or losses are included in the change in net assets inthe accompanying statements of activities.

Donated Goods and ServicesUnder SFAS No. 116, organizations are required to recognize as revenue and relatedexpense services received if the Organization would typically need to purchase theservices if not received as donations. No amounts have been reflected in the financialstatements of the Organization for donated goods and services because there was eitherno objective basis available to measure their value or the value given was immaterial tothe financial statements taken as a whole.

Income Tax StatusThe Organization is qualified as a nonprofit organization and is exempt from federal andstate income taxes under Internal Revenue Code Section 501(c)(3).



Note 2. Summary of Significant Accounting Policies (Continued)

Net AssetsIn accordance with SFAS No. 117, the Organization reports information regarding itsfinancial position and activities according to three classes of net assets: unrestricted netassets, temporarily restricted net assets, and permanently restricted net assets.Revenues are classified as temporarily or permanently restricted when they are receivedas donations with a donor stipulated restriction.

As of June 30, 2006 and 2005, all net assets owned by the Organization are unrestricted.

Note 3. Property and Equipment

Major classifications of property and equipment at June 30th consist of the following:

2006 2005

Leasehold improvementsFurniture and fixturesComputer equipment

Less: accumulated depreciation andamortization

Property and equipment, net

$ 23,96336,96615,587

76,516

20,813

$ 55.703

$ 962,035223,72435,114

1,220,873

1,135,614

$ 85T259

Depreciation and amortization expense for the years ended June 30, 2006 and 2005totaled $13,371 and $19,567, respectively.

Note 4. Concentration of Credit Risk

The Organization's receivables are primarily related to its contracts for licensing andsponsorship. These contracts have been made with companies located within thecontinental United States.

Additionally, the Organization maintains cash deposits with a financial institution in excessof federally insured limits.



Note 5. Investments

The Organization's investments are comprised of the following as of June 30th:

2006 2005

U.S. government securities $15,575,276 $ 15,527,593Equity securities and mutual funds 7,588,769 6,907,166Cash held for investment 81,348 24.816

Total $23.245.393 $22,459,575

The following schedule summarizes the investment return in the Statement of Activitiesfor the years ended June 30th:

2006 2005

Interest income, net of investment expenses $ 521,374 $ 563,585Realized and unrealized gains 417,432 679.029

Total $ 938.806 $ 1T242,614

Note 6. Lease Commitments

In previous years, the Organization was committed to leasing the Louisiana Superdome(the Superdome) for its annual football game. The lease stipulated a minimum annualrental of $40,000, plus an additional 5% of the gross football ticket sales in excess of$700,000; however, the total rent would not exceed $200,000. This lease expiredJune 30, 2005, and management was in the process of renegotiating the lease whenHurricane Katrina damaged the Superdome, As a result of the damage inflicted byHurricane Katrina, the January 2, 2006 Sugar Bowl Classic could not and did not takeplace in the Superdome, As discussed in Note 11, the game was relocated to the GeorgiaDome for the January 2, 2006 Classic. The Organization expects to return to theSuperdome for its 2007 Classic. As such, the two parties have a verbal agreement tomodify and extend the lease through the 2015 football season.

For the years ended June 30, 2006 and 2005, the Organization's rental expense for itsannual football games totaled $102,000 and $200,000, respectively.



Note 6. Lease Commitments (Continued)

In February 2006, the Organization entered into a one year lease for office space inMetairie, Louisiana. The lease stipulated monthly rental payments of $6,007. Asdiscussed in Note 11, this is a temporary replacement for its leased office space in theSuperdome that is currently being repaired. The office space in the Superdome has alease term through 2014, although the provisions of this lease have been suspendedpending the completion of the repairs. Management has indicated that this office spacewill be available for occupancy in February 2007, at which time they intend to relocateback to the office space in the Superdome. For the years ended June 30, 2006 and 2005,the Organization's rental expense for its office space totaled $85,957 and $98,587,respectively.

Note 7. Due to Superdome Economic Development Fund

During the year ended June 30, 2006, the Organization received forgiveness of its$200,000 liability to the Economic Development Fund Grant. These funds were initiallygranted as Initial Seed Money for funding the Sugar Bowl Basketball Classic. As a result,this amount has been recognized as basketball revenue for the year ended June 30, 2006.

Note 8. Commitments and Contingencies

The Organization has employment agreements with its Executive Director and AssociateExecutive Director which extend through June 30, 2010. The aggregate commitmentunder these agreements is $550,000 for the 2007 year end, with annual increases of 4%through 2010.

Associated with the employment contracts is an obligation to contribute 15% of the above-mentioned salaries to the Simplified Employee Pension Plan.

Under the contract as a participant in the Bowl Championship Series (BCS), theOrganization is committed to paying $6,000,000 per game as follows; one game inJanuary 2007, two games in January 2008, one game in January 2009, and one game inJanuary 2010.

Note 9. Simplified Employee Pensions

The Organization is committed to a simplified employee pension plan for all full-time, non-contractual employees of the Organization with a minimum of one year of service. Theannual contribution shall be equal to 15% of each eligible employee's annual wages. Thecontributions for the years ended June 30, 2006 and 2005, were $31,575 and $29,813,respectively.



Note 10. Related Party Transactions

Members of the Organization are involved with companies supplying goods and servicesto the Organization. In such instances where "related parties" conduct business with theOrganization, due care is taken to assure that the services and/or goods are purchased atnormal competitive rates. The total dollar amounts of the transactions are immaterial tothe financial statements taken as a whole.

Note 11. Hurricane Katrina

On August 29, 2005, Hurricane Katrina hit the Gulf Coast and caused widespreaddestruction. One impact on the Organization was the change of venue for theJanuary 2, 2006 Sugar Bowi Classic from the Louisiana Superdome to the Georgia Domelocated in Atlanta, Georgia. As a result, the Organization set up temporary offices inAtlanta from October 2005 to February 2006. In February 2006, the Organization returnedto Louisiana and entered into a one year lease agreement for office space in Metairie,Louisiana. As displayed in Note 3, the Organization's property and equipment decreasedsubstantially, primarily as a result of the destruction of leasehold improvements andfurniture and fixtures. The amount charged to losses on the destruction of fixed assetstotaled $32,077, as most of these assets had already been fully depreciated.

10

Schedule ISUGAR BOWL

Unrestricted Revenue, Gains and Other SupportYears Ended June 30, 2006 and 2005

2006 2005

Ticket sales - footballInvestment returnSecondary sponsorshipsCommercial air timeLicensingBasketballProgram revenueHotel/Motel commissionMiscellaneousRoad raceVideo sales, net of expenseState of Louisiana - cooperative endeavorHeritage festivalRegatta revenue

$ 7,216,575938,806762,492634,740474,385200,00069,57021,0003,067

70038

•--

$ 6,294,1751,242,614

806,794663,200445,911225,500

86,071200,000

7464,529

601,011,950

75,005780

Total unrestricted revenue, gains andother support $ 10,321,373 $ 11.057,335

See independent auditor's report.

11

Schedule IISUGAR BOWL

Program ExpensesYears Ended June 30, 2006 and 2005

2006 2005

BCS payoutGeorgia state saies taxesBasketballEntertainmentStadium expenseFootball committee expenseAwards and trophiesMedia relationsSponsorship packagesSponsor tradesInsurance expenseDecorationsSatellite sponsorship - LHSAA prep football classicFootball team packagesProgramNokia liaisonCity relationsSatellite sponsorship - volleyballTicket committeePageantSatellite sponsorship - LHSAA soccerSatellite sponsorship - LHSAA baseballSatellite sponsorship - LHSAA track and fieldGoods for resaleAutomobile expenseSatellite sponsorship - LHSAA swimmingRegattaTelevision/Radio expenseManning quarterback awardMarathonCity Park improvementNFF/Coliege hall of fameSatellite sponsorship • LSA soccerTriathlonSpecial events

Total

$ 4,400,000544,107

-494,177321,773202,286187,305173,673148,67897,03896,88385,27785,00060,73548,57537,45729,93923,98521,14715,72715,08813,82213,71013,0965,6735,0782,9472,3731,191

------

$ 7,146,740

$ 4,400,000-

428,089391,741406,559192,241143,393136,15997,33776,55792,826

116,17186,94757,34668,23832,06122,5742,000

12,73212,30011,34014,71613,620

9546,597

10,1269,8444,290

17,59840,10325,00012,65210,06910,0005,000

$ 6,967,180


12

Schedule 111SUGAR BOWL

Support ExpensesYears Ended June 30, 2006 and 2005

General and administrative expensesHurricane Katrina-related expenses, netSpecial appropriationsInsurance expenseLoss on destruction of property and equipmentDepreciation expense

2006

$ 1,657,721284,81780,00072,39232,07713,371

2005

$ 1,637,388-

94,60072,567

-19,567

Total $ 2,140,378 $ 1.824.122


13

LAPORTE$EHRTCERTIFIED PUBLIC ACCOUNTANTS

INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVERFINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS

BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITHGOVERNMENT AUDITING STANDARDS

Executive CommitteeSugar Bow!

We have audited the financial statements of the Sugar Bow! as of and for the years endedJune 30, 2006 and 2005, and have issued our report thereon dated August 18, 2006. Weconducted our audits in accordance with auditing standards generally accepted in the UnitedStates of America and the standards applicable to financial statements contained in GovernmentAuditing Standards, issued by the Comptroller General of the United States.

Internal Control Over Financial Reporting

In planning and performing our audits we considered the Sugar Bowl's internal control overfinancial reporting in order to determine our auditing procedures for the purpose of expressing ouropinion on the financial statements and not to provide assurance on the internal control overfinancial reporting. Our consideration of the internal control over financial reporting would notnecessarily disclose all matters in the internal control over financial reporting that might bematerial weaknesses. A material weakness is a reportable condition in which the design oroperation of one or more of the internal control components does not reduce to a relatively lowlevel the risk that misstatements caused by error or fraud in amounts that would be material inrelation to the financial statements being audited may occur and not be detected within a timelyperiod by employees in the normal course of performing their assigned functions. We noted nomatters involving the internal control over financial reporting and its operation that we consider tobe material weaknesses.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the Sugar Bowl's financial statementsare free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements, noncompliance with which could have a directand material effect on the determination of financial statement amounts. However, providing anopinion 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 one instance ofnoncompliance that is required to be reported under Government Auditing Standards which isdescribed in the accompanying schedule of audit findings as item 2006-1.

110 VETERANS MEMORIAL BOULEVARD, SUITE 200, METAIRIF, LA 70005-4958 • 504.835.5522 • FAX 504.835.55355100 VILLAGE WALK, SUITE 202, COVINGTOK, LA 70433-4012 - 985.892.5850 • FAX 985.892.5956

WWW, LA PORTE. COM

RSM McGladrey Networkftn Wependenfiv Owned Warber

This report is intended for the information of the audit committee, management, others within theOrganization and the State of Louisiana, Department of Economic Development and is notintended to be, and should not be, used by anyone other than these specified parties.

A Professional Accounting Corporation

Metairie, LouisianaAugust 18,2006

SUGAR BOWLSCHEDULE OF CURRENT AUDIT FINDINGS

For the Year Ended June 30, 2006

COMPLIANCE WITH LAWS AND REGULATIONS

Finding 2006-1

Condition: The Organization was unable to file its annual audit in accordance with LSA-RS 24;514T 33:463, and/or 39:92.

Recommendation: The primary cause of the untimely filing was the fact that theindependent auditor did not electronically submit the report prior to December 31, 2006,as understood by Sugar Bowl. The audit was presented by the independent auditorbefore the Sugar Bowl's Finance Committee and accepted by that Committee inSeptember 2006.

Current Status: The audit reports are being filed as requested by the LegislativeAuditor's office.

Management's Response: It is understood that it is the joint responsibility of the auditorand auditee to ensure the timely release of the report. The auditor and managementhave agreed that the e mail notification received by the auditor from the LegislativeAuditor upon successful transmission of the audit report will be forwarded to the auditeeto ensure timely filing.

Documents

Sugar Bowl, Inc. - app1.lla.la.govapp1.lla.la.gov/PublicReports.nsf/CF6D0A12CA68A06B86257290004… · Sugar Bowl Independent Auditor's Report We have audited the accompanying statements