MARIN TELECOMMUNICATIONS AGENCY 555 Northgate Drive, Suite 230, San Rafael, CA

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1 MARIN TELECOMMUNICATIONS AGENCY 555 Northgate Drive, Suite 230, San Rafael, CA SPECIAL BOARD MEETING NOTICE DATE: Wednesday, May 10, 2017 TIME: PLACE: 7:00 PM Corte Madera Council Chambers, 300 Tamalpais Dr., Corte Madera, CA A. Call to order. AGENDA B. Director Comments. C. Executive Officer s Report (Oral Report). D. Consent Calendar: 1) Approve MTA March 8, 2017 Board Meeting Minutes. 2) Receive MTA FY17 Budget Status Report Through April 27, ) Authorize Executive Officer to Sign Audit Services Agreement with Maher Accountancy for Audit for period ending June 30, E. Public Open time for items not on the agenda. This portion of the meeting is reserved for persons who want to address the Agency on any matter not listed on the agenda. The Ralph M. Brown Act prohibits discussion of items that are not duly placed on the agenda. Speakers are limited to three minutes. Please Note: The Chair will allow time for public comment on each agenda item. F. MTA Annual Audit and Financial Statements for Period ending June 30, G. CMCM Annual Plan and Budget for July 1, 2017 June 30, 2018, And CMCM Financial Statements and Audit for Periods ending June 30, 2015 and June 30, H. Comcast Franchise and PEG Revenue Review for July 1, 2010 June 30, I. Authorize Executive Officer to Approve Services Agreement with Ashpaugh & Sculco, CPAs, PLC, for a Review of the Franchise and PEG fees Paid by Comcast and AT&T to MTA for the period of July 1, 2014 through June 30, J. Receive Proposed MTA FY18 Budget and Set Public Hearing for June 14, K. Adjourn. NEXT MTA REGULAR BOARD MEETING: Regular Board Meeting June 14, 2017, 7:00 PM, Corte Madera Town Council Chambers, 300 Tamalpais Drive, Corte Madera. See MTA s website at for MTA meeting updates. Agenda-Notice_ MTA Special Board Mtg_final.docx

2 A COMPLETE AGENDA PACKAGE IS AVAILABLE FOR VIEWING AT 555 Northgate Drive, Suite 230, San Rafael, CA or at the agency s website Copies of past MTA minutes are available for viewing at the same locations. Agenda-Notice_ MTA Special Board Mtg_final.docx

3 MARIN TELECOMMUNICATIONS AGENCY MINUTES OF SPECIAL BOARD MEETING OF MARCH 8, 2017 Corte Madera Council Chambers, 300 Tamalpais Ave., Corte Madera CA Present: Barbara Coler, Vice Chair, Town of Fairfax Joe Burns, City of Sausalito Kay Coleman, Town of San Anselmo Carla Condon, Alt., Town of Corte Madera Jim Fraser, Town of Tiburon Andrew McCullough, City of San Rafael Sashi McEntee, City of Mill Valley Elizabeth Robbins, Town of Ross Absent: Kate Sears, County of Marin Marty Winter, City of Belvedere Staff: Barbara Thornton, Executive Officer Suki Sennett, Clerk A. Call to order: The meeting was called to order by Vice Chair Coler at 5:39PM. B. Director Comments: There were none. C. Executive Officer s Report: No report. D. Consent Calendar: 1) Approve MTA February 8, 2017 Board Meeting Minutes M/S/P McCullough/McEntee, approve MTA February 8, 2017 Board Meeting Minutes. AYES: ALL NOES: NONE ABSTAIN: Condon Motion carried. E. Public Open Time for Items not on the Agenda: There were none. F. Adoption of Urgency Ordinance U Reauthorizing MTA PEG Access Fee. Executive Officer Thornton provided a brief background of DIVCA, the Digital Video and Competition Act of 2006, Section 5870 (n) that provided for local government to collect fees from state franchised video service providers in order to support public, educational and governmental (PEG) access channels. On February 2007, the MTA adopted Ordinance establishing a 1% PEG access fee to be paid to the MTA by state franchised video service providers in Marin County. DIVCA also provided that the ordinance shall expire and may be reauthorized upon expiration of the state franchise. AT&T s current California State video services franchise expires March 30, Therefore, MTA must reauthorize MTA s PEG fee ordinance. The first Reading of Ordinance , Ordinance of the Marin Telecommunications Agency Reauthorizing the Public, Educational and Governmental Access Fee was done at the regular meeting of the MTA Board on February 8, D1_Agenda Item_ MTA Bd Mtg_Appr MTA Mar Special Bd Mtg Minutes_Final.docx Page 1

4 The Second Reading of Ordinance was scheduled for February 27, 2017 Adjourned Regular Board Meeting; however, the meeting was cancelled due to lack of a quorum. Therefore, in order to avoid a lapse in the MTA s authority to collect PEG fees MTA s Counsel recommended the MTA adopt Urgency Ordinance U Reauthorizing MTA s PEG access fee pursuant to DIVCA Section 5870 (n). Upon Board adoption at this meeting, Urgency Ordinance U would be declared in full force and effect as of March 8, Executive Officer Thornton said the recommended Board actions were: 1) Move to read the ordinance by title only and waive further reading of the Urgency Ordinance U entitled Urgency Ordinance of the Marin Telecommunications Agency Reauthorizing the Public, Educational and Governmental access fee. Vice Chair Coler entertained a motion. M/S/P Coleman/McCullough, move to read the ordinance by title only and waive further reading of the Urgency Ordinance U entitled Urgency Ordinance of the Marin Telecommunications Agency Reauthorizing the public, Educational and Governmental access fee. AYES: ALL NOES: NONE Motion carried 2) Executive Officer Thornton read the title of Urgency Ordinance U entitled Urgency Ordinance of the Marin Telecommunications Agency Reauthorizing the Public, Educational and Governmental Access Fee. 3) The Board move to adopt MTA Urgency Ordinance U entitled Urgency Ordinance of the Marin Telecommunications Agency Reauthorizing the Public, Educational and Governmental Access Fee effective immediately and subject to the urgency findings in the ordinance. Vice Chair Coler entertained a motion. M/S/P McCullough/Burns, to adopt the MTA Urgency Ordinance U entitled Urgency Ordinance of the Marin Telecommunications Agency Reauthorizing the Public, Educational and Governmental Access fee effective immediately and subject to the urgency findings in the ordinance. AYES: ALL NOES: NONE Motion carried. G. Adjourn. M/S/P McEntee/McCullough, to adjourn. AYES: ALL NOES: NONE Motion carried. Meeting adjourned at 6PM. Respectfully Submitted, Barbara Thornton, Executive Officer May 10, 2017 D1_Agenda Item_ MTA Bd Mtg_Appr MTA Mar Special Bd Mtg Minutes_Final.docx Page 2

5 AGENDA ITEM D-2 MARIN TELECOMMUNICATIONS AGENCY 555 Northgate Drive, Suite 230, San Rafael CA DATE: May 10, 2017 TO: MTA Board of Directors FROM: Barbara Thornton, Executive Officer SUBJECT: AGENDA ITEM D-2: BUDGET STATUS FY17 YTD APRIL 27, 2017 Recommended Action: Receive FY17 Budget Status Report for Operating Fund 8017 and PEG Fund 8018 YTD through April 27, Discussion: Attached is the FY17 year-to-date budget status report for MTA Operating Fund 8017 and PEG Fund It reflects the FY17 annual budget approved June 8, 2016, FY17 Revised Budget approved August 10, 2016, and actual revenues and expenses yearto-date. 1. Operating Fund 8017 presents the data for the agency expense budget and the franchise fee revenues and payments to the members. MTA s FY17 year-to-date revenues are $2,891,425 which is 69% of the approved budget. Operating expenses to date are $154,059 which is 59% of the annual budget for the agency s annual operating expenses. 2. PEG Fund 8018 reflects the year-to-date PEG (Public, Education, and Government) revenue and expenses. PEG fee revenues are $321,817 which is 49% of the annual PEG revenue projections. Payments to the CMCM are $321,779 which is 50% of FY17 projections. First Quarter 2017 Franchise and PEG revenues will be received and paid to MTA members and CMCM in May Attachment: - FY17 YTD Budget Status Operating Fund (8017) and PEG Fund (8018) YTD April 27, 2017 D2-Agendaitem_ MTA Bd Mtg _FY17 Budget Status YTD _Final.Docx

6 MTA FY17 Budget Revised 8/10/16 Operating Fund 8017 (Revised 8/10/16) and PEG Fund 8018 YTD Actuals 4/27/17 FY17 Revised Budget YTD 4/27/17 - Operating Fund 8017 FY17 Budget Approved 6/8/16 FY17 Revised Budget 8/10/16 FY17 YTD Actual 4/27/17 YTD % 4/27/17 Revenues: Franchises 4,200,000 4,200,000 2,890,344 69% Interest 1,000 1,000 1, % Other 0 0 Total Revenues 4,201,000 4,201,000 2,891,425 69% Operating Expenses: Professional Services 198, , ,222 64% Administration & Financial Services 23,000 23, % Insurance Premiums 10,500 10,500 8,818 84% Communications Services 2,900 2,900 1,942 67% Rent & Operating Leases 13,300 13,300 11,392 86% Memberships, Conference, Webinars 4,000 4,000 3,460 87% Travel 2,000 2,000 1,186 59% Office Supplies 2,500 8, % Total Operating Expenses 256, , ,059 59% Net Income 3,944,300 3,944,300 2,737,366 69% Available for Distrbution to Members: Net Income 3,944,300 3,944,300 2,737,366 69% Low Income/Youth Projects 0 CMCM Network Services (21,000) (21,000) (14,000) Franchise & PEG Fee Audit 0 Marin Broadband Task Force (10,000) (10,000) DAP - franchise Fee Funds to CMCM (165,000) (165,000) (165,000) 100% Increase (Decrease) to Reserves* 0 3,748,300 3,748,300 2,558,366 68% Net Distribution to Members 3,748,300 3,748,300 2,468,644 66% Cash: Inflows 4,201,000 4,201,000 2,891,425 69% Outflows** 4,201,000 4,207,000 2,801,702 67% Net Cash Increase (Decrease) 0 (6,000) 89,723 * $6,000 Deficit to be funded from FY16 estimated EOY Fund Balance of $165,000. ** Franchise fee payments to members + MTA operating expenses + Member funded expenses FY17 Revised Budget YTD 4/27/17 - PEG Fund 8018 FY17 Budget Approved 6/8/16 FY17 YTD Actual 4/27/17 YTD % 4/27/17 Revenues: Franchises (PEG Fees) 650, ,779 50% Interest % Total Revenues 650, ,817 49% Operating Expenses: Outgoing PEG Fees 650, ,779 50% Total Operating Expenses 650, ,779 50% Net Income* * $300 to be retained in PEG Fund Balance (8018) FY17 Revised Budget does not change the FY17 PEG Fund 8018 Budget Approved 6/8/16. C:\Documents and Settings\BThornton\Desktop\ Mtg \FINALS\ D2-Att_ MTA Bd Mtg_FY17 Budget Status YTD _Final.xlsm FY17 YTD Bdgt Status /8/2017 4:34 PM

7 AGENDA ITEM D-3 MARIN TELECOMMUNICATIONS AGENCY 555 Northgate Drive, Suite 230, San Rafael CA DATE: May 10, 2017 TO: MTA Board of Directors FROM: Barbara Thornton, Executive Officer SUBJECT: AGENDA ITEM D-3: AUTHORIZE EXECUTIVE OFFICER TO SIGN AN AUDIT SERVICES AGREEMENT WITH MAHER ACCOUNTANCY FOR MTA S AUDIT FOR THE PERIOD ENDING JUNE 30, 2017 Recommended Action: Authorize the Executive Officer to sign the Audit Services Agreement with Maher Accountancy for MTA s FY17 Financial Statements, Audit Services and State of California filings for the amount of $14,975. Background: The attached Audit Services agreement with Maher Accountancy provides for the services required to perform MTA s audit for the period ending June 30, 2017 and provide accounting advice for a cost of $14,125. It also includes the cost for Maher Accountancy to prepare and submit the Annual Report of Financial Transactions to the State of California along with the required payment of $850. The total fees for these services and costs are $14,975. MTA s FY17 proposed budget includes funding for the audit. Attachment: - Maher Accountancy Audit Services Agreement for MTA Audit for Period Ending June 30, D3-AgendaItem_ MTA Mtg_Auth EO sign Audit Svcs Agrmnt-FY17 Audit_final.docx 1

8 1101 FIFTH AVENUE SUITE 200 SAN RAFAEL, CA May 2, 2017 Board of Directors Marin Telecommunications Agency 555 Northgate Drive San Rafael, CA We are pleased to confirm our understanding of the services we will provide to Marin Telcommunications Agency. We will audit the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information, which collectively comprise the basic financial statements of Marin Telecommunications Agency as of and for the year ended June 30, Accounting standards generally accepted in the United States provide for certain required supplementary information (RSI), such as management s discussion and analysis (MD&A), to accompany your basic financial statements. As part of our engagement, we will apply certain limited procedures to your RSI. These limited procedures will consist principally of inquiries of management regarding the methods of measurement and presentation, which management is responsible for affirming to us in its representation letter. Unless we encounter problems with the presentation of the RSI or with procedures relating to it, we will disclaim an opinion on it. The following RSI is required by generally accepted accounting principles and will be subjected to certain limited procedures, but will not be audited: 1) Management s discussion and analysis. 2) Budgetary comparison schedules Audit Objective The objective of our audit is the expression of an opinion as to whether your financial statements are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles and to report on the fairness of the additional information referred to in the first paragraph when considered in relation to the financial statements taken as a whole. Our audit will be conducted in accordance with U.S. generally accepted auditing standards and will include tests of the accounting records and other procedures we consider necessary to enable us to express such an opinion. If our opinion on the financial statements is other than unqualified, we will fully discuss the reasons with you in advance. If, for any reason, we are unable to complete the audit or are unable to form, or have not formed an opinion, we may decline to express an opinion or to issue a report as a result of this engagement.

9 Board of Directors May 2, 2017 Page 2 Management Responsibilities Management is responsible for establishing and maintaining internal controls, including monitoring ongoing activities; for the selection and application of accounting principles; and for the fair presentation in the financial statements of the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information and the respective changes in financial position and where applicable, cash flows, in conformity with U.S. generally accepted accounting principles. Management is responsible for the basic financial statements and all accompanying information as well as all representations contained therein. You are also responsible for management decisions and functions; for designating an individual with suitable skill, knowledge, or experience to oversee our financial statement preparation services and any other nonattest services we provide; and for evaluating the adequacy and results of those services and accepting responsibility for them. Management is responsible for making all financial records and related information available to us and for the accuracy and completeness of that information. Management is responsible for adjusting the financial statements to correct material misstatements and for confirming to us in the representation letter that the effects of any uncorrected misstatements aggregated by us during the current engagement and pertaining to the latest period presented are immaterial, both individually and in the aggregate, to the financial statements taken as a whole. You are responsible for the design and implementation of programs and controls to prevent and detect fraud, and for informing us about all known or suspected fraud or illegal acts affecting the government involving (1) management, (2) employees who have significant roles in internal control, and (3) others where the fraud or illegal acts could have a material effect on the financial statements. Your responsibilities include informing us of any knowledge you have of any allegations of fraud or suspected fraud received in communications from employees, former employees, regulators, or others affecting the government. In addition, you are responsible for identifying and ensuring that the entity complies with applicable laws and regulations. Audit Procedures General An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; therefore, our audit will involve judgment about the number of transactions to be examined and the areas to be tested. We will plan and perform the audit to obtain reasonable rather than absolute assurance about whether the financial statements are free of material misstatement, whether from errors, fraudulent financial reporting, misappropriation of assets, or violations of laws or governmental regulations that are attributable to the entity or to acts by management or employees acting on behalf of the entity. Because an audit is designed to provide reasonable, but not absolute, assurance and because we will not perform a detailed examination of all transactions, there is a risk that material

10 Board of Directors May 2, 2017 Page 3 misstatements may exist and not be detected by us. In addition, an audit is not designed to detect immaterial misstatements, or violations of laws or governmental regulations that do not have a direct and material effect on the financial statements. However, we will inform you of any material errors that come to our attention, and we will inform you of any fraudulent financial reporting or misappropriation of assets that come to our attention. We will also inform you of any violations of laws or governmental regulations that come to our attention, unless clearly inconsequential. Our responsibility as auditors is limited to the period covered by our audit and does not extend to matters that might arise during any later periods for which we are not engaged as auditors. Our procedures will include tests of documentary evidence supporting the transactions recorded in the accounts, and may include tests of the physical existence of inventories, and direct confirmation of receivables and certain other assets and liabilities by correspondence with selected individuals, creditors, and financial institutions. We will request written representations from your attorneys as part of the engagement, and they may bill you for responding to this inquiry. At the conclusion of our audit, we will also require certain written representations from you about the financial statements and related matters. Audit Procedures Internal Control Our audit will include obtaining an understanding of the entity and its environment, including internal control, sufficient to assess the risks of material misstatement of the financial statements and to design the nature, timing, and extent of further audit procedures. An audit is not designed to provide assurance on internal control or to identify deficiencies in internal control. However, during the audit, we will communicate to management and those charged with governance internal control related matters that are required to be communicated under professional standards. Audit Procedures Compliance As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we may perform tests of the Organization s compliance with applicable laws and regulations and the provisions of contracts and agreements. However, the objective of our audit will not be to provide an opinion on overall compliance and we will not express such an opinion. Audit Administration, Fees and Other Our fees will be as follows: Audit services and accounting advice $14,125 Annual Report of Financial Transactions $850

11 Board of Directors May 2, 2017 Page 4 This fee commitment is made under the assumption that MTA s staff will prepare and locate documents as requested. Should MTA begin reporting property historically by Community Media Center of Marin, should we encounter unexpected circumstances, or should you require other services in addition to those described above, we will invoice you separately at our standard hourly rates. Our invoices for these fees will be rendered each month as work progresses and are payable on presentation. In accordance with our policies, work may be suspended if your account becomes 30 days or more overdue and will not be resumed until your account is paid in full. We appreciate the opportunity to be of service to you, and believe this letter accurately summarizes the significant terms of our engagement. If you have any questions, please let us know. If you agree with the terms of our engagement as described in this letter, please sign the enclosed copy and return it to us. The other copy is for your records. Very truly yours, John W. Maher, CPA RESPONSE: This letter correctly sets forth the understanding of Marin Telecommunications Agency. Executive Officer Date

12 AGENDA ITEM F MARIN TELECOMMUNICATIONS AGENCY 555 Northgate Drive, Suite 230, San Rafael CA DATE: May 10, 2017 TO: FROM: SUBJECT: MTA Board of Directors Barbara Thornton, Executive Officer AGENDA ITEM F: ACCEPT THE ANNUAL AUDIT REPORT AND FINANCIAL STATEMENTS PREPARED FOR MARIN TELECOMMUNICATIONS AGENCY BY MAHER ACCOUNTANCY FOR THE FISCAL YEAR ENDING JUNE 30, 2016 Recommended Action: Accept the Annual Financial Statements and Audit Report prepared by Maher Accountancy for MTA for the period ending June 30, 2016 which include: Auditors Communication with MTA Board Financial Statements and Auditors vreport Year ended June 30, 2016 Discussion: Maher Accountancy performed the Annual Audit for Marin Telecommunications Agency for the period ending June 30, The Maher Accountancy communication Letter to the MTA Board of Directors and the Financial Statements and Auditors Report are attached. In the Management Representation letter submitted by the Executive Officer to Maher Accountancy as a part of the audit, we included the following statement: As part of your audit, you prepared the draft financial statements and related notes. We have designated a competent employee to oversee your services and have made all management decisions and performed all management functions. We have reviewed, approved, and accepted responsibility for those financial statements and related notes. MTA has also established an Audit Committee comprised of Board members Jim Fraser and Andrew McCullough who communicated with the Auditor during the Audit and they reviewed the draft Financial Statements and Auditors Report. There were no exceptions or issues identified in the Audit Report for the period ending June 30, John Maher, CPA, CGMA, of Maher Accountancy will attend the board meeting to answer any questions the board has regarding the Financial Statements and the Audit. Attachments: Auditors Communication with MTA Board. MTA Financial Statements and Auditor s Report for the period ending June 30, F-AgendaItem_ MTA Bd Mtg_Audited Financial Stmnts thru June 30, 2016_final.docx

13 1101 FIFTH AVENUE SUITE 200 SAN RAFAEL, CA March 20, 2017 To the Board of Directors Marin Telecommunications Agency We have audited the financial statements of the Marin Telecommunications Agency for the year ended June 30, 2016, and have issued our report thereon March 20, Professional standards require that we provide you with the following information related to our audit. Our Responsibility under U.S. Generally Accepted Auditing Standards As stated in our engagement letter dated May 16, 2016, our responsibility, as described by professional standards, is to express opinions about whether the financial statements prepared by management with your oversight are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles. Our audit of the financial statements does not relieve you or management of your responsibilities. Significant Audit Findings Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by Marin Telecommunications Agency are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during year. We noted no transactions entered into by the governmental unit during the year for which there is a lack of authoritative guidance or consensus. There are no significant transactions that have been recognized in the financial statements in a different period than when the transaction occurred. Accounting estimates are an integral part of the financial statements prepared by management and are based on management s knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. There are no significant estimates used in preparing the financial statements. Difficulties Encountered in Performing the Audit We encountered no difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements. Routine adjustments were required in order to present MTA s financial statements on the full accrual basis of accounting in

14 Board of Directors March 20, 2017 Page 2 of 2 addition to the modified-accrual basis of accounting under which it maintains its books. Any other misstatements detected as a result of audit procedures and corrected by management were immaterial, either individually or in the aggregate, to the financial statements taken as a whole. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor s report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in the management representation letter dated March 20, 2017, Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a second opinion on certain situations. If a consultation involves application of an accounting principle to the governmental unit s financial statements or a determination of the type of auditor s opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Other matters We generally discuss a variety of matters, including the application of accounting principles and auditing standards with management each year prior to retention as the governmental unit s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. MTA s agreement with Community Media Center of Marin (CMCM) requires that CMCM be responsible for the proper maintenance, recordkeeping and safekeeping of all equipment and facilities under the agreement. We recommend that management evaluate the effectiveness of CMCM s procedures. This information is intended solely for the use of Board of Directors and management of Marin Telecommunications Agency and is not intended to be and should not be used by anyone other than these specified parties. Very truly yours, Maher Accountancy

15 FINANCIAL STATEMENTS AND AUDITORS REPORT YEAR ENDED JUNE 30, 2016

16 TABLE OF CONTENTS INDEPENDENT AUDITORS REPORT... 1 MANAGEMENT S DISCUSSION AND ANALYSIS... 3 BASIC FINANCIAL STATEMENTS STATEMENT OF NET POSITION...7 STATEMENT OF ACTIVITIES...8 BALANCE SHEET...9 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES...10 NOTES TO THE FINANCIAL STATEMENTS...11 REQUIRED SUPPLEMENTAL INFORMATION BUDGETARY COMPARISON SCHEDULES OPERATING FUND PEG FUND NOTES TO THE REQUIRED SUPPLEMENTAL INFORMATION OTHER SUPPLEMENTAL INFORMATION... 20

17 1101 FIFTH AVENUE SUITE 200 SAN RAFAEL, CA INDEPENDENT AUDITORS REPORT To the Board of Directors Marin Telecommunications Agency We have audited the accompanying financial statements of the governmental activities of the Marin Telecommunications Agency (Agency) as of and for the year ended June 30, 2016, which collectively comprise the Agency s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 1

18 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the Agency as of June 30, 2016, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis and budgetary comparison information, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Supplemental Information Our audit was conducted for the purpose of forming opinions on the Marin Telecommunication Agency s basic financial statements. The other supplemental information is presented for purposes of additional analysis and are not a required part of the basic financial statements. The other supplemental information has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Maher Accountancy March 20,

19 MARIN TELECOMMUNICATIONS AGENCY MANAGEMENT S DISCUSSION AND ANALYSIS The Management s Discussion and Analysis provides an overview of the Marin Telecommunications Agency (MTA) financial activities for the fiscal year ended June 30, Please read it along with MTA s financial statements, which begin on page 7. FINANCIAL HIGHLIGHTS MTA s net position is $178,282, an increase of $8,037 over the prior year. Total revenues decreased by $256,849 and total expenses decreased by $367,749. Budgetary comparison schedules are found starting on page 18. Those schedules indicate we had a positive variance of $57,985 in the Operating Fund, and a negative variance of $248 in the PEG Fund when comparing actual activity with budgeted. USING THIS ANNUAL REPORT This annual report consists of financial statements for Marin Telecommunications Agency as a whole. The statement of net position and the statement of activities provide information about the activities of MTA as a whole and present a long-term view of MTA s finances. The fund financial statements present a short-term view of MTA s activities (they include only current assets expected to be collected in the very near future and liabilities expected to be paid in the very near future). MTA AS A WHOLE One important question asked about MTA s finances is, Is MTA better or worse off as a result of the year s activities? The information in the government-wide financial statements helps answer this question. These statements include all assets and liabilities using the accrual basis of accounting, which is similar to the basis of accounting used by most private-sector companies. The change in net position (the difference between total assets and total liabilities) over time is one indicator of whether MTA s financial health is improving or deteriorating. However, one must consider other nonfinancial factors in making an assessment of the Agency s health, such as changes in the economy and changes in its jurisdiction, etc. 3

20 MARIN TELECOMMUNICATIONS AGENCY MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) Changes in MTA s net position were as follows: Increase (Decrease) Current assets $ 1,257,323 $ 1,381,104 $ (123,781) Current liabilities 1,079,041 1,210,859 (131,818) Net assets Restricted 8,252 8, Unrestricted 170, ,045 7,985 Total net position $ 178,282 $ 170,245 $ 8,037 MTA experienced decreases in both current assets and current liabilities during the year ended June 30, This was due to the departure of Larkspur at the start of the fiscal year. MTA no longer collects revenues on Larkspur s behalf or carries a liability to distribute funds to the City. Changes in MTA s revenues were as follows: Increase (Decrease) Franchise/PEG fees $ 4,212,130 $ 4,469,135 $ (257,005) Investment earnings Total revenue 4,212,997 4,469,846 (256,849) MTA franchise and PEG revenues are determined as a fixed percentage of its franchisee s qualifying revenue. As mentioned above, the departure of Larkspur resulted in an overall decrease of revenues to the agency. This decrease was offset in part by greater revenues for the remaining members of approximately $80,000. 4

21 MARIN TELECOMMUNICATIONS AGENCY MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) Changes in MTA s expenses and net position were as follows: Increase (Decrease) Expenses: Telecommunications $ 3,781,806 $ 4,120,327 $ (338,521) PEG 423, ,382 (29,228) Total expenses 4,204,960 4,572,709 (367,749) Less: program revenues 4,212,997 4,469,846 (256,849) Changes in net position $ 8,037 $ (102,863) $ 110,900 The decrease in telecommunications expense from the prior year is mostly the result of the Larkspur departure, as no expense was recognized for franchise fee distributions to the city in The franchisees erroneously included Larkspur s franchise and PEG fees in their normal payments to MTA for several quarters, and MTA did distribute these funds to Larkspur. These transactions are not recognized as a revenue or an expense of MTA. Included in 2015 was $40,000 of grant expense that did not occur in This was mostly offset by increased 2016 expenses in professional services and administration. During both 2015 and 2016, payments of $220,000 funded from franchise fees were made to CMCM as part of the 2014 DAP Agreement. These funds reduced amounts available for distributions made to the members. PEG expenses are related to PEG revenue MTA received from its various franchise arrangements. In 2015 and 2016, the expense equaled the PEG revenue received, which is in accordance with the recent DAP agreement. FUND FINANCIAL STATEMENTS The fund financial statements provide detailed information about the MTA s funds - the general (Telecommunications) fund and PEG Special Revenue funds. The fund financial statements provide a short-term view of MTA s operations. They are reported using an accounting basis called modified accrual which measures amounts using only cash and other short-term assets and liabilities (receivables and payables) that will soon be converted to cash or will soon be paid with cash. Total governmental fund balances increased by $8,037, as shown on page 10. 5

22 MARIN TELECOMMUNICATIONS AGENCY MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) FUTURE OF THE AGENCY In November 2016 MTA approved its revised Strategic Plan which outlines the updated Mission of the Agency and Four Strategic Directions. The work of the Agency will closely align with the refined Strategic Directions going forward. MTA is in discussions with the City of Larkspur regarding establishing terms for an agreement for their continued use of MTA s PEG channels since Larkspur is no longer a MTA member. MTA continues to closely monitor franchise and PEG fee revenues. A franchise revenue review of Comcast revenues is currently in progress. REQUESTS FOR INFORMATION This financial report is designed to provide our residents, taxpayers and creditors with a general overview of the MTA s finances and to demonstrate its accountability for the funds under its stewardship. Please address any questions about this report or requests for additional financial information to Marin Telecommunications Agency, 555 Northgate Dr. #230, San Rafael, CA Respectively submitted, Barbara Thornton Executive Officer 6

23 MARIN TELECOMMUNICATIONS AGENCY BASIC FINANCIAL STATEMENTS STATEMENT OF NET POSITION AS OF JUNE 30, 2016 ASSETS Current assets: Cash in County treasury $ 216,300 Receivables: Franchise fees 1,041,023 Total current assets 1,257,323 LIABILITIES Current liabilities: Accounts payable and accrued expenses 38,018 Payable to CMCM 103,726 Franchise fees payable to agency members 937,297 Total current liabilities 1,079,041 NET POSITION Restricted for PEG project 8,252 Unrestricted 170,030 Total net position $ 178,282 The accompanying notes are an integral part of these financial statements. 7

24 MARIN TELECOMMUNICATIONS AGENCY STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2016 Telecommunications PEG Total EXPENSES Professional services $ 206,089 $ 206,089 Administration and financial 41,981 41,981 Insurance 9,106 9,106 Memberships, conference, webinars 3,350 3,350 Office expenses, rent and supplies 13,405 13,405 Franchise fee distributions 3,287,875 3,287,875 Grants for PEG System 220,000 $ 423, ,154 Total expenses 3,781, ,154 4,204,960 PROGRAM REVENUES Franchise/PEG fees 3,788, ,154 4,212,130 Interest income Total program revenues 3,789, ,206 4,212,997 Net program revenue (expense) $ 7,985 $ 52 $ 8,037 NET POSITION - BEGINNING OF THE YEAR 170,245 NET POSITION - END OF THE YEAR $ 178,282 The accompanying notes are an integral part of these financial statements. 8

25 MARIN TELECOMMUNICATIONS AGENCY BALANCE SHEET YEAR ENDED JUNE 30, 2016 ASSETS Special Revenue Total General Fund PEG Governmental Fund Fund Funds Cash in County treasury $ 208,048 $ 8,252 $ 216,300 Receivables: Franchise/ PEG fees 937, ,726 1,041,023 Total assets $ 1,145,345 $ 111,978 $ 1,257,323 LIABILITIES Accounts payable and accrued expenditures $ 38,018 $ 38,018 Payable to CMCM $ 103, ,726 Franchise fees payable to agency members 937, ,297 Total liabilities 975, ,726 1,079,041 FUND BALANCE Restricted 8,252 8,252 Unassigned 170, ,030 Total fund balance 170,030 8, ,282 Total liabilities and fund balance $ 1,145,345 $ 111,978 $ 1,257,323 The accompanying notes are an integral part of these financial statements. 9

26 MARIN TELECOMMUNICATIONS AGENCY STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES YEAR ENDED JUNE 30, 2016 Special Revenue Total General Fund PEG Governmental Fund Fund Funds REVENUES Franchise fees $ 3,788,976 $ 423,154 $ 4,212,130 Interest income Total revenues 3,789, ,206 4,212,997 EXPENDITURES Services, supplies and grants: Professional services 206, ,089 Administration and financial 41,981 41,981 Insurance 9,106 9,106 Memberships, conference, webinars 3,350 3,350 Office expenses, rent and supplies 13,405 13,405 Grants for PEG system 423, ,154 Total services, supplies and grants 273, , ,085 Franchise fee distributions 3,507,875 3,507,875 Total expenditures 3,781, ,154 4,204,960 Excess (deficiency) of revenues over expenditures 7, ,037 FUND BALANCES - BEGINNING 162,045 8, ,245 FUND BALANCES - ENDING $ 170,030 $ 8,252 $ 178,282 The accompanying notes are an integral part of these financial statements. 10

27 MARIN TELECOMMUNICATIONS AGENCY NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REPORTING ENTITY The Marin Telecommunications Agency (MTA) was formed under a joint powers agreement between the County of Marin and ten municipalities within Marin County. MTA manages the video services franchises for the member agencies and video services customers, and advises participants on the exercise of their license authority. MTA receives franchise fees from Comcast, AT&T and Horizon Cable and remits them to each member agency. MTA further supports availability, accessibility, affordability and public inclusion in the advancement and enhancement of telecommunications infrastructure and services in Marin on behalf of MTA s members and the community. The governing board of MTA consists of one appointed official from each of the governing bodies of the participants. The powers and responsibilities of MTA are contained in the Joint Powers Agreement. INTRODUCTION Marin Telecommunications Agency s financial statements are prepared in accordance with generally accepted accounting principles (GAAP). The Governmental Accounting Standards Board (GASB) is responsible for establishing GAAP for state and local governments through its pronouncements (Statements and Interpretations.). BASIC FINANCIAL STATEMENTS GOVERNMENT-WIDE STATEMENTS The Organization s basic financial statements include both government-wide (reporting MTA as a whole) and fund financial statements (reporting MTA s major funds). In the government-wide Statement of Net Position, the MTA s activities are reported on a full accrual, economic resource basis, which recognizes all long-term assets and receivables as well as long-term debt and obligations. MTA s net position is reported in two parts: (1) restricted net position and (2) unrestricted net position. The government-wide Statement of Activities reports both the gross and net cost of MTA s functions. The function is supported by general government revenues and franchise and related fees from the local video service providers. The Statement of Activities reduces gross expenses by related program revenues. The net costs (by function) are normally covered by general revenues. The government-wide focus is more on the sustainability of the MTA as an entity and the change in its net position resulting from the current year s activities. 11

28 MARIN TELECOMMUNICATIONS AGENCY NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) FUND FINANCIAL STATEMENTS The financial transactions of MTA are reported in individual funds in the fund balancing accounts that comprise its assets, liabilities, restrictions, fund balance, revenues and expenditures. MTA uses the following fund type: Governmental funds: The focus of the governmental funds measurement (in the fund statements) is upon determination of financial position and changes in financial positions (sources, uses, and balances of financial resources) rather than upon net income. The following is a description of the governmental funds of Marin Telecommunications Agency: General fund accounts for the Organization s general operations. It is used to account for all financial resources except those required to be accounted for in another fund. Special revenue funds are used to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes. MTA s PEG Fund is used to account for fees paid from cable television franchisees that are restricted for the development and operation of public, educational and governmental (PEG) access channels and the media center. MTA makes grants to Community Media Center of Marin (CMCM) to operate the PEG activities. BASIS OF ACCOUNTING Basis of accounting refers to the point at which revenues or expenditures/expenses are recognized in the accounts and reported in the financial statements. It relates to the timing of the measurement made regardless of the measurement focus applied. ACCRUAL: The governmental activities in the governmental-wide financial statements are presented on the accrual basis of accounting. Revenues are recognized when earned and expenses are recognized when incurred. 12

29 MARIN TELECOMMUNICATIONS AGENCY NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) MODIFIED ACCRUAL: The government fund financial statements are presented on the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recorded when susceptible to accrual; i.e., both measurable and available. Available means collectible within the current period or within 60 days after year-end. Expenditures are generally recognized when the related liability is incurred. The exception to this general rule is that principal and interest on general obligation long-term debt, if any, is recognized when due. FINANCIAL STATEMENT AMOUNTS CASH AND CASH EQUIVALENTS: Management has defined cash and cash equivalents to include cash on hand, demand deposits, and short-term investments with fiscal agent (County of Marin). Capital Assets Capital assets purchased or acquired with an original cost of $1,000 or more are reported at historical cost or estimated historical cost. Contributed assets are reported at fair market value as of the date received. Additions, improvements and other capital outlays that significantly extend the useful life of an asset are capitalized. Costs incurred for repairs and maintenance is expensed as incurred. MTA has an agreement with Community Media Center of Marin (CMCM) for the construction and operation of a media center. Accordingly, certain funds provided to CMCM have been used to purchase equipment and other capital assets. The equipment and other capital assets are included in CMCM s financial statements. In the event the agreement with CMCM is terminated or not renewed, the equipment and capital assets will be transferred to MTA. 13

30 MARIN TELECOMMUNICATIONS AGENCY NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Fund Balance In the fund financial statements, fund balance for governmental funds is reported in classifications that comprise a hierarchy based primarily on the extent to which MTA is bound to honor constraints on the specific purpose for which amounts in the funds can be spent. Fund balance is reported in five components nonspendable, restricted, committed, assigned and unassigned. Following is a description of the components applicable to MTA: 2. CASH Restricted This component consists of amounts that have constraints placed on them either externally by third-parties (creditors, grantors, contributors, or laws or regulations of other governments) or by law through constitutional provisions or enabling legislations. Unassigned This classification represents amounts that have not been restricted, committed or assigned to specific purposes within the general fund. MTA maintains all of its cash in the County of Marin pooled investment fund for the purpose of increasing interest earnings through pooled investment activities. Interest earned on the investment pool is allocated quarterly to the participating funds using the daily cash balance of each fund. This pool, which is available for use by all funds, is displayed in the financial statements as Cash. The County Pool includes both voluntary and involuntary participation from external entities. The State of California statutes require certain special districts and other governmental entities to maintain their cash surplus with the County Treasurer. The County s investment pool is not registered with the Securities and Exchange Commission as an investment company. Investments made by the Treasurer are regulated by the California Government Code and by the County s investment policy. The objectives of the policy are in order of priority, safety, liquidity, yield, and public trust. The County has established a treasury oversight committee to monitor and review the management of public funds maintained in the investment pool in accordance with Article 6 Section of the California Government Code. The oversight committee and the Board of Supervisors review and approve the investment policy annually. The County Treasurer prepares and submits a comprehensive investment report to the members of the oversight committee and the investment pool participants every month. The report covers the types of investments in the pool, maturity dates, par value, actual costs and fair value. 14

31 2. CASH (continued) MARIN TELECOMMUNICATIONS AGENCY NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2016 INTEREST RATE RISK In accordance with its investment policy, the County manages its exposure to declines in fair values by limiting the weighted average maturity of its investment pool to 540 days, or 1.5 years. At June 30, 2016, the County s investment pool had a weighted average maturity of 204 days. For purposes of computing weighted average maturity, the maturity date of variable rate notes is the length of time until the next reset date rather than the stated maturity date. CREDIT RISK State law and the County s Investment Policy limits investments in commercial paper, corporate bonds, and medium term notes to the rating of A or higher as provided by Moody s Investors Service or Standard & Poor s Corporation. The County s Investment Policy limits investments purchased by Financial Institution Investment Accounts, a type of mutual fund, to United States Treasury and Agency obligations with a credit quality rating of AAA. CONCENTRATION OF CREDIT RISK The following is a summary of the concentration of credit risk by investment type as a percentage of each pool s fair value at June 30, Percent Investments in investment pool of portfolio Federal agency - discount 78% Federal agency - coupon 20% Money market funds 2% 100% CUSTODIAL CREDIT RISK For investments and deposits held with safekeeping agents, custodial credit risk is the risk that, in the event of the failure of the counterparty, the County will not be able to recover the value of its investments or deposits that are in the possession of an outside party. At year end, the County s investment pool had no securities exposed to custodial credit risk. 15

32 2. CASH (continued) MARIN TELECOMMUNICATIONS AGENCY NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2016 LOCAL AGENCY INVESTMENT FUND The County Treasurer s Pool maintains an investment in the State of California Local Agency Investment Fund (LAIF), managed by the State Treasurer. This fund is not registered with the Securities and Exchange Commission as an investment company, but is required to invest according to California State Code. Participants in the pool include voluntary and involuntary participants, such as special districts and school districts for which there are legal provisions regarding their investments. The Local Investment Advisor Board (Board) has oversight responsibility for LAIF. The Board consists of five members as designated by State statue. 3. FRANCHISE FEES MTA receives revenue from multiple franchisees and distinguishes these revenues as franchise fees and PEG fees. These fees are based on a percentage of the franchisees sales. The franchisee remits the franchise fees to MTA, who then distributes the fees to member agencies shortly after received. MTA retains a portion of the franchise fee revenue for administrative purposes. The largest franchisee is responsible for approximately 91% of all such fees collected. PEG fees are also collected from the same franchisees. The franchisee remits the PEG fees to MTA, and based on current Board policy and contractual agreements, MTA then distributes the money to CMCM. The majority of the PEG fees are distributed to CMCM shortly after received. 5. RISK MANAGEMENT MTA is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; and errors and omissions. During the year, the MTA purchased liability insurance with limits of $5,000,

33 6. COMMITMENTS MARIN TELECOMMUNICATIONS AGENCY NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2016 The Agency entered into professional service agreements that extend beyond the fiscal year ended June 30, These commitments were approximately $144,000. The Agency shares office space with Marin General Services Agency (MGSA). In March 2016, MTA and MGSA entered into a four-year lease to rent office space. Rent expense for the year was approximately $12,000. The current lease will continue through February 28, 2020, with required future minimum lease payments remaining of approximately $48,000. Required future minimum lease payments are as follows: Year ended June 30, 2017 $12, , , ,004 $ 47,590 17

34 MARIN TELECOMMUNICATIONS AGENCY BUDGETARY COMPARISON SCHEDULE OPERATING FUND YEAR ENDED JUNE 30, 2016 Variance Original Final Positive Budget Budget Actual (Negative) REVENUES Franchises $ 3,900,000 $ 4,300,000 $ 3,954,397 $ (345,603) Interest on pooled investments 1,000 1, (185) Total revenues 3,901,000 4,301,000 3,955,212 (345,788) EXPENDITURES Operating expenditures Professional services 209, , ,070 30,930 Administration and financial 15,500 15,500 14, Insurance premiums 10,500 10,500 9,106 1,394 Communication services 3,000 3,000 2, Rent and operating leases 14,100 14,100 12,041 2,059 Memberships, conference, webinars 4,000 4,000 2,460 1,540 Travel 3,000 3, ,110 Office supplies 3,500 8,000 1,364 6,636 Total operating expenditures 262, , ,500 46,600 Excess (deficiency) of revenues over operating expenditures 3,638,400 4,028,900 3,729,712 (392,388) Other expenditures Grant for low income/youth projects 20, CMCM network services 21,000 21,000 21,000 - Franchise & PEG fee audit 16,000 28,000 27, Grant for Marin Broadband Task Force 20, DAP - franchise fees to CMCM 220, , ,000 - Franchise fee distributions to members 3,341,400 3,809,900 3,453, ,604 Total other expenditures 3,638,400 4,078,900 3,721, ,173 Excess (deficiency) of revenues over expenditures $ - $ (50,000) $ 7,985 $ 57,985 See notes to the required supplemental information 18

35 MARIN TELECOMMUNICATIONS AGENCY BUDGETARY COMPARISON SCHEDULE PEG FUND YEAR ENDED JUNE 30, 2016 Variance Original Final Positive Budget Budget Actual (Negative) REVENUES PEG fees $ 443,000 $ 488,000 $ 442,068 $ (45,932) Interest on pooled investments (248) Total revenues 443, , ,120 (46,180) EXPENDITURES PEG fee payments to CMCM 443, , ,068 45,932 Total expenditures 443, , ,068 45,932 Excess (deficiency) of revenues over expenditures $ 300 $ 300 $ 52 $ (248) See notes to the required supplemental information 19

36 MARIN TELECOMMUNICATIONS AGENCY NOTES TO THE REQUIRED SUPPLEMENTAL INFORMATION YEAR ENDED JUNE 30, 2016 BUDGETARY BASIS OF PRESENTATION The budget included in these financial statements represents the original budget and amendments approved by the Board of Directors. Budgets expire at the end of each year. The budgetary basis is the modified accrual basis of accounting. Various reclassifications have been made to the actual amounts to conform to classifications included in the approved budget. MTA budgeted for the receipt and distribution of franchise and PEG fees collected on behalf of Larkspur as a revenue and expense. For comparison purposes, the budget schedules above included these transactions in the Actual column as intended by the budget. The government-wide financial statements that precede the budget schedules are prepared on a full accrual basis and exclude these Larkspur transactions from revenue and expense. OTHER SUPPLEMENTAL INFORMATION CAPITAL ASSETS HELD BY CMCM MTA has an agreement with Community Media Center of Marin (CMCM) for the construction and operation of a media center. Accordingly, certain funds provided to CMCM have been used to purchase equipment and other capital assets. The equipment and other capital assets are included in CMCM s financial statements. In the event the agreement with CMCM is terminated or not renewed, the equipment and capital assets will be transferred to MTA. The following unaudited information has been provided by CMCM: Balances as of June 30, 2016 Furniture & equipment $ 776,256 Facilities 924,518 Total capital assets 1,700,774 Accumulated depreciation (1,323,072) Total capital assets, net $ 377,702 20

37 MARIN TELECOMMUNICATIONS AGENCY 555 Northgate Drive, Suite 230, San Rafael CA AGENDA ITEM G DATE: May 10, 2017 TO: FROM: SUBJECT: MTA Board of Directors Barbara Thornton, Executive Officer AGENDA ITEM G: RECEIVE CMCM S ANNUAL PLAN AND BUDGET FOR JULY 2017 THROUGH JUNE 2018, AND CMCM S FINANCIAL STATEMENTS AND AUDIT FOR PERIODS ENDING JUNE 30, 2015 AND JUNE 30, 2016 Recommended Action 1. Receive and consider CMCM s Annual Plan and Budget for July 2017 through June 2018, and as appropriate provide recommendations to the CMCM for consideration in finalizing its Plan and Budget for 2017/ Receive CMCM s Financial Statements and Audit for the periods ending June 30, 2015 and June 30, Background The MTA and CMCM entered into a new agreement in May 2014 whereby the MTA designated the CMCM as the Dedicated Access Provider (DAP) to operate and manage the PEG access facilities, equipment, channels and media center. This agreement requires the CMCM to provide the MTA annual reports including the Annual Plan and Budget due April 1, 2017 which is a prospective view for the upcoming fiscal year beginning July 1, The Annual Plan and Budget describes the activities and programs planned for with funds and other resources provided by the MTA and others to the CMCM. Key elements of the Annual Plan include: A statement of the anticipated number of hours of PEG access programming to be cablecast divided among the public, education and government channels. Training classes to be offered. Promotional activities planned by CMCM. Other activities planned by CMCM. The operating and capital equipment and facilities budgets which show the projected revenues and expenditures for , planned capital improvements and planned equipment purchases of new or replacement equipment. Michael Eisenmenger, Executive Director of the CMCM will present the Annual Plan and Budget which will provide a basis for the MTA to understand CMCM s operations and financial requirements for 2017/18. The Annual Plan, Budget including capital plan information is attached (Attachment G-1). As per the DAP Agreement, the MTA shall review the Annual Plan and Budget and may request additional information to ensure that CMCM is complying with and implementing the G-AgendaItem_ MTA Mtg_CMCM Annual Plan & Budget_FY & FY15 & FY16 Audit_final.docx

38 AGENDA ITEM G requirements of the DAP Agreement. Further the Board may make recommendations to the CMCM regarding the Annual Plan and Budget and these recommendations shall be considered by the CMCM as its Board finalizes its Annual Plan & Budget for July 2017 through June CMCM Budget for Fiscal Year July 1, 2017 June 30, 2018 The CMCM FY 2017/18 budget reflects total revenue $1,115,532 which includes the 1% PEG fees MTA will be receiving from Comcast, AT&T and Horizon. CMCM projected PEG revenues increase from $458,000 in FY to $891,360 in FY , assuming the inclusion of Larkspur s PEG fees per a proposed MTA Larkspur agreement.. CMCM s FY2017/18 budget reflects a continued increase in Fee for Service revenues associated with many of the new video installations for MTA members as well as for video services contracts with other government agencies and community organizations. CMCM s total planned expenses in FY 2017/18 are $792,105 (versus $773,210 in FY ) resulting in operating surplus of $323,427 before capital equipment expenditures. Planned capital replacement expenditures are $125,000 and $50,000 for City Capital Equipment Installations/Replacements, resulting in a balance of $148,427 for the year for revenues, operating expenses and capital equipment replacements. A comparison of FY2017/18 budget to FY 2016/17 budget is attached (Attachment G-2). In addition, as reference the CMCM 5 Year Budget Plan from March 2014 that was used as the basis for DAP Bridge Funding (Attachment G-3), and CMCM s FY2016/17 Budget and year to date actual revenues and expenditures through January 31, 2017 (Attachment G-4) are attached. CMCM Financial Statements and Audit for the Periods Ending June 30, 2015 and June 30, The MTA CMCM Dedicated Access Provider Agreement (DAP) approved May 2014, requires that every two years the CMCM shall provide the MTA the CMCM s year-end financial statements audited and reviewed by a certified public accountant along with the management letter prepared by the accountant. The CMCM Financial Statements and Audit Letters for the periods ending June 30, 2015 and June 30, 2016 are attached. The Auditor s Letter to the CMCM Board of Directors indicates We did not identify any deficiencies in internal control that we consider to be materials weaknesses, as defined above (in the letter). Further the Auditor states In our opinion, the financial statements referred to above present fairly, in all material aspects, the financial position of Community Media Center of Marin as of June 30, 2016 and 2015, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Attachments: CMCM Proposed Annual Plan and Budget FY 2017/18 (G-1). CMCM Budget FY 2017/18 with Comparison to FY 2016/17 Budget (G-2). CMCM 5 Year Budget March 2014 Basis for DAP Bridge Funding in DAP (G-3). CMCM FY 2016/17 Budget-Actual Jan 2017 (G-4). CMCM Financial Statements and Audit for the Periods Ending June 30, 2015 and June 30, 2016 (G-5). G-AgendaItem_ MTA Mtg_CMCM Annual Plan & Budget_FY & FY15 & FY16 Audit_final.docx

39 MARIN TELECOMMUNICATIONS AGENCY 555 Northgate Drive, Suite 230 San Rafael, CA (415) Barbara Thornton Community Media Center of Marin Annual Plan and Budget 2017/18 To the MTA board, April, 2017 The following narrative elements outline our Board s ongoing plans as defined and required by the DAP agreement. Sincerely, Michael Eisenmenger Executive Director CMCM 819 A Street, Suite 21, San Rafael CA ph

40 Community Media Center of Marin Annual Plan and Budget The Community Media Center projects a budget for the fiscal year consistent with prior years and aligned with the four year budget projections presented as part of the DAP agreement. As in past years, the largest budget items are salaries, particularly as government and production work continues to increase. Capital equipment replacement from the capital reserve has again temporarily reduced normally budgeted annual replacement/repair costs but we expect this to rise as repair/replacements become necessary. CMCM continues to operate modestly under conservative budgets and as a result we have maintained a stable financial outlook. The coming year looks positive across all the sectors CMCM serves and we anticipate more good outcomes in the coming fiscal year. PEG Programming The previously submitted CMCM 2015/16 Annual Report outlined programming statistics across all channels for that fiscal year in more detail. Our current plans are to continue these efforts with a continued focus on further developing our education sector. The Community Channel No major changes anticipated to programming content as the community channel is largely dependent on programming that Marin residents produce, provide or request to be aired. The Community Channel continues to feature a number of well-produced local and national programs. The main change to the community channel (and others) in the coming fiscal year is the integration of HD content into our workflow that will result in better quality live web streaming. Our new playback system also enables better tracking and more extensive program archiving and we also are working on more programming specific promotions across the channels. The Governmental Channel More cities and agencies continue to come onboard the Government Channel. This continues to increase our locally produced municipal programming. This is by far our busiest channel, both in amount of content produced and in staff time devoted to it. The majority of MTA's member jurisdictions now air their meetings on the Government Channel. The channel currently carries meetings from San Rafael, San Anselmo, Mill Valley, Larkspur, Novato, Fairfax, Sausalito, Corte Madera, County of Marin, Marin Clean Energy, Ross Valley Sanitary District, Tam School Board, LAFCO and the Commission on Aging. Funding for previous city installations came from a designated fund of PEG fees previously not distributed to CMCM. Of the total amount setaside, approx $25K remains available for future installations. We estimate this to be enough for one more installation or HD upgrade in Community Media Center of Marin 2017/18 Annual Budget and Plan 2

41 the coming fiscal year. Our prior installations are already to start to age out with two reaching the six-year mark this fiscal period. We anticipate that upgrades to this equipment will need to begin as cities reach the seven-year mark. We estimate costs of 25-30K per city installation to replace and upgrade existing equipment to HD. We are still working to meet the DIVCA requirements to formally request and receive a second government channel from Cable providers. Programming levels must average 56 hours of unique programming per week over the course of an entire quarter (13 weeks). This is a threshold we exceed in some weeks but not in others. In the interim we have had to move some of the live meeting cablecasts over to our Educational Channel on weekday evenings to accommodate live schedules. We're hopeful that we will meet the required threshold in a single quarter soon. We already have the additional fourth channel capacity in place and ready to go when carriage is made available. The Educational Channel No major changes are anticipated to Educational programming content types. The Education Channel was launched in 2010 on Comcast Channel 30 and remains a channel of diverse educational content for youth and seniors. Of the county schools, Dominican University remains the most responsive, providing a regular lecture series, occasional special events and sports coverage made possible through support by CMCM. We also receive irregular local content from Tam High, Drake, Bel Aire Elementary, Redwood, Marin Academy and San Rafael High. Through our youth driven Marin Media Corps we also generate additional local content, which includes coverage of the Bioneers conference among many other local events. The Summer Sports Broadcast Camp will launch its fifth year of Live Pacifics Baseball coverage produced entirely by Marin youth. CMCM staff continue to seek out other quality educational programming from external sources, and still carries lectures and courses from Yale University, Stanford, UC Berkeley, Commonwealth Club, Ted Talks and others (all are free to air). In addition we seek out local, national and international conference videos on topics of relevance to Marin residents. CMCM also started carrying daily Spanish language programming from Mexico to complement other international and national news and information programming. CMCM Training: Courses and Frequency CMCM training courses began in July 2009 and we have continued the foundation regularly to date. The courses range from a single session class to four sessions spread over several weeks. We currently offer five basic foundation courses that are required for usage of most equipment. After initial high demand when the center opened, enrollments in the foundation courses have steadily leveled off. To address this, CMCM created many different advanced and specialty Community Media Center of Marin 2017/18 Annual Budget and Plan 3

42 courses now has over 20 different courses offered throughout the year to offer a wider array of learning opportunities to the community with many courses led by working professionals. CMCM is also doing specialized trainings for organizations and schools that come to us, including several youth groups engaged in programmatic projects involving media production. In addition to formal coursework, CMCM members continue to hold monthly Member Mixers, which strengthens the work of our community of users and the mixers also include presentations/workshops organized by members on a variety of subjects. CMCM Promotional activities We are continuing with the majority of the outreach plans as identified by CMCM board in past reports to the MTA. Outreach is performed by existing CMCM staff with input from the board: On-air and online promotions for CMCM membership and donor support, special events and courses. A bi-weekly Marin IJ advertising campaign made possible through our collaboration to produce programming. Non-profit workshops, center tours, presentations at schools and meetings to orientate and educate the non-profit community in using CMCM resources. Targeted outreach to the business community to seek underwriting support for the channels and youth projects. Continued social media use including our web site, Facebook, Twitter feeds and local online calendars. Coordinate increased visibility through attendance to more community events, the County Fair and other local programming opportunities that we present on the channels. We continue our popular exhibition series in our space at 819 A Street, which has grown to include artists from across the Bay Area. CMCM 2017/18 Budget CMCM's budget for 2017/18 tracks evenly from the previously years, showing modest growth in expenses in keeping with anticipated COL increases. This fiscal year we are anticipating a bump in PEG fees as Comcast begins passing through the full 1% required under DIVCA. While the significant contribution of the MTA bridge fund will cease before this fiscal year begins, the additional PEG fees will generate a surplus important to begin rebuilding the CMCM capital equipment reserve. Over the past three past fiscal years, CMCM began the necessary capital equipment replacement cycle, a cycle that will now be an ongoing occurrence as equipment fully depreciates and needs to be refreshed. Capital equipment expenditures are not indicated on the annual operating budget, as these expenditures will be itemized and charged against existing capital equipment reserves as Community Media Center of Marin 2017/18 Annual Budget and Plan 4

43 recorded in our annual reports. The capital plan under the current DAP agreement continued through 2018 and CMCM is in the final stages of making these final equipment upgrades and replacements. In the current fiscal year we made the largest upgrade, which is, our master control refresh estimated at over $250K. For the 2017/18 year we anticipate another 125K in remaining upgrades as according the DAP plan. CMCM has been able to maintain stability in operations and services by carefully maintained an adequate capital equipment reserve to accommodate this first cycle of upgrades. That effort combined with the MTA bridge support ensures that CMCM will have a long future to continue providing much needed service and support to our cities, schools and communities. The CMCM board is already planning for future capital equipment upgrades through 2024 including the necessary stewardship to rebuild and protect a capital reserve that will ensure the stability for PEG services over the coming decade. City Capital Equipment Fund and Upgrades CMCM has maintained a separate capital reserve for City equipment installations. This was funded through the initial 106K in AT&T PEG fees set aside by the MTA. This fund covered the cost for three city video installations and has a balance of approx 25K at present. Those funds are available to cities wishing to have video equipment installed for council meeting coverage. To date Ross, Tiburon and Belvedere lack such capability Any decision to move forward is entirely that of the respective city, CMCM remains available when needed. CMCM began providing these installations for the cities in 2011 with Mill Valley and San Rafael, in 2012 for Fairfax, in 2014 for San Anselmo, in 2015 for Larkspur and in 2016 for Corte Madera. We have also provided equipment and services to Sausalito and the County of Marin throughout this period. The systems installed by CMCM are nearly identical to better facilitate efficient and consistent staffing for our production services. However, this equipment is aging out and becoming increasingly difficult to repair/replace. We would advise allowing for remainder of the city equipment fund to also be used for upgrades as well as new installations. The Mill Valley and San Rafael installations will be 7 years old in the 2017/18 fiscal year and should be the first to be upgraded. Upgrades for other cities should follow as needed and when funds and resources are available. Upgraded installations would be identical to the more recent installation in Corte Madera. All that equipment is HD (High Definition) and the recording uses more stable and reliable SSD media. Individual upgrade costs will range from 25-30K with some equipment and wiring being retained for integration with the new system. Funding for upgrades and additional installations can be drawn from the CMCM capital equipment replacement reserve of designated PEG fees. Community Media Center of Marin 2017/18 Annual Budget and Plan 5

44 CMCM ANNUAL BUDGET (July 1, June 30, 2018) OPERATING REVENUE PEG Fees 827,688 Additional Interest Income / Dividends from reserve 5,000 Prod. Services Income & City Meetings 110,000 Other Income (grants, donations) 25,000 Course Fees 17,000 Membership Related Fees 11,000 inet/midas Reimbursement 21,000 Larkspur PEG Fees* 63,672 Retroactive Larkspur PEG fees* 35,172 Total Revenue 1,115,532 EXPENSES INET/Midas Cost 21,000 Facilities Lease/Utilities/Expenses 83,000 Equipment Purchase/Repair/Rental 12,000 Office/Business Expense 10,000 Advertising/Promotion 10,000 Professional Services (CPA, Legal, Etc) 24,000 Event Expenses 4,000 Insurance Expenses 9,500 Salaries 493,370 Benefits/Payroll Taxes 120,235 Travel, Meeting & Staff Development 5,000 Total Expenses 792,105 Operating Surplus/(Deficit) Before Cap Equip 323, /8 Capital Equipment Replacement** (125,000) City Capital Equipment Replacement (50,000) Total Balance 148,427 Notes *Estimate of past and anticipated Larkspur PEG Fees to be negotiated ** Captial Equipment Replacement estimate from DAP budget planning. The 106K PEG Fund for future City installationshas a balance of approx 25K and is not indicated in this annual budget. 2016/17 Depreciation, estimated at 175,000, not included on this budget overview. Community Media Center of Marin 2017/18 Annual Budget and Plan 6

45 ATTACHMENT G-2 CMCM ANNUAL BUDGET (July 1, June 30, 2018) OPERATING REVENUE PEG Fees 827, ,000 Additional Interest Income / Dividends from reserve 5,000 7,500 Prod. Services Income & City Meetings 110,000 92,000 Other Income (grants, donations) 25,000 20,000 Course Fees 17,000 21,810 Membership Related Fees 11,000 11,000 inet/midas Reimbursement 21,000 21,000 MTA Fiscal Support 165,000 Larkspur PEG Fees* 63,672 Retroactive Larkspur PEG fees* 35,172 TOTAL REVENUE 1,115, ,310 EXPENSES INET/Midas Cost 21,000 21,000 Facilities Lease/Utilities/Expenses 83,000 82,000 Equipment Purchase/Repair/Rental 12,000 10,000 Office/Business Expense 10,000 9,000 Advertising/Promotion 10,000 8,000 Professional Services (CPA, Legal, Etc) 24,000 24,000 Event Expenses 4,000 2,200 Insurance Expenses 9,500 9,000 Salaries 493, ,000 Benefits/Payroll Taxes 120, ,510 Travel, Meeting & Staff Development 5,000 4,500 Expenses Total 792, ,210 Operating Surplus/(Deficit) Before Cap Equip 323,427 23, /8 Capital Equipment Replacement** -125, ,000 City Capital Equipment Replacement -50,000 Total Balance 148, ,900 Notes For Budget *Estimate of past and anticipated Larkspur PEG Fees to be negotiated ** Captial Equipment Replacement estimate from DAP budget planning. The 106K PEG Fund for future City installationshas a balance of approx 25K and is not indicated in this annual budget. 2016/17 Depreciation, estimated at 175,000, not included on this budget overview. C:\Documents and Settings\BThornton\Desktop\ Mtg \FINALS\ G-Att 2_ MTA Bd Mtg_MTA-CMCM Budget_Compare FY _wip.xlsx 5/8/2017 4:35 PM

46 ATTACHMENT G Category Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year / / / / / / /18 15 INCOME 16 MTA Estimated Total PEG Fees $352,848 $375,079 $410,000 $422,300 $434,969 $628,018 $832, inet/midas Reimbursement 19 Contributions/Grants 20 Fee for Service 21 Course Fees/Membership 22 Investment Income CMCM Income (all other) 25 MTA Direct Support MTA Restricted Funding (City 26 Video) 27 Total Income EXPENSES 30 INET $83,960 $35,929 $28,349 $27,034 $528,120 $22,800 $7,264 $45,449 $27,131 $992 $478,715 $22,800 $21,600 $10,000 $32,000 $27,000 $10,100 $79,100 $0 $105,000 $615,700 $21,600 $21,000 $12,000 $55,000 $27,810 $8,000 $102,810 $220,000 $0 $766,110 $21,000 $21,000 $16,000 $55,000 $28,644 $4,800 $104,444 $220,000 $0 $780,413 $21,000 $21,000 $18,000 $55,000 $29,504 $5,400 $107,904 $165,000 $0 $921,922 $21,000 $21,000 $20,000 $55,000 $30,389 $6,000 $111,389 $0 $0 $964,647 $21, Facilities Lease/Utilities/Expenses Equipment $83,299 $69,300 $71,200 $74,020 $76,925 $79,916 $82, Purchase/Repair/Rental 33 Office/Business Expense $45,956 $12,828 $50,650 $9,218 $28,000 $9,550 $30,000 $9,807 $32,000 $10,071 $34,000 $10,343 $36,000 $10, Advertising/Promotion/Events Professional Services (CPA, Legal, $1,155 $2,789 $15,000 $15,450 $15,914 $16,391 $16, Etc) 36 Event Expenses 37 Insurance Expenses 38 Salaries $18,204 $2,141 $6,073 $344,557 $39,979 $1,321 $7,521 $358,750 $25,000 $2,050 $8,000 $421,707 $34,750 $2,112 $8,250 $449,358 $31,793 $2,175 $8,500 $462,389 $32,746 $2,240 $9,000 $475,811 $33,729 $2,307 $9,250 $489, Benefits/Payroll Taxes $68,980 $72,791 $82,000 $86,000 $90,000 $96,000 $102, Travel & Meeting $5,694 $1,908 $3,500 $3,605 $3,713 $3,825 $3, Equipment Replacement Total required funding (operating + $0 $0 -$94,000 -$169,800 -$227,000 -$109,000 -$60, replacements) Net combined operations + $846,607 $944,151 $981,479 $890,271 $868, Equipment & Income 51 Start of year Reserve Investment -$60,768 -$158,312 -$230,907 -$178,041 -$201,065 $31,650 $96, Portfolio 53 $963,000 $732,093 $554,052 $352,986 $384, B C D E F G H I J K L M N O P SCENARIO MTA Recommendation CMCM March 25 Revised Budget including: - $165,000 Franchsie Fees in 2016/17 - Assumes 1% PEG Jan $180,000 Comcast 1% PEG 2016/17 - CMCM 2016/17 EOY Reserve Level $385, Mar-14 v22 City video install one time fund $65,000 $40,000 Total Expenses $588,888 $637,027 $752,607 $774,351 $754,479 $781,271 $808,364 Operating Surplus/(Deficit) Before Equipment Replacement Community Media Center of Marin Budget and DAP Worksheet Actuals -$60,768 -$158,312 -$136,907 -$8,241 $25,935 $140,650 $156,283 End of CMCM Fiscal Year Reserve $96,300 $963,000 $732,093 $554,052 $352,986 $384,637 $480,920 Fiscal Year 2011/ / / / / / /18 Note: Income Increase Assumption 0.03 Expense Increase Assumption 0.03 Notes - End of Period Reserve Level using San Rafael Proposed Formula - SR min rsv level - excl $63K INET $374,517 - SR min rsv level - no exclusions $385,017 - SR min Rsv level - Aug 2013 budget $357,465 Projected Note: The 105K revenue for equipment is shown in this sheet in 13/14. Expense is in 13/14 & 14/15. Fund use restricted to City Video Installations. G-Att 3_ MTA Mtg_CMCM Mar Budget Scenarios for DAP.xlsx v22stdcase-sumlevel-scen1.5f&p 5/8/2017 4:35 PM

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65 DATE: May 10, 2017 TO: FROM: MARIN TELECOMMUNICATIONS AGENCY 555 Northgate Drive, Suite 230, San Rafael CA MTA Board of Directors Barbara Thornton, Executive Officer AGENDA ITEM I SUBJECT: AGENDA ITEM I: FRANCHISE REVENUE AUDIT COMCAST & AT&T AUTHORIZE EXECUTIVE OFFICER TO APPROVE SERVICES AGREEMENT Recommended Action: Authorize the Executive Officer to enter into a services agreement with Ashpaugh & Sculco, CPAs, PLC, for Franchise and PEG fee revenue reviews/audits of AT&T and Comcast for the three year period July 1, 2014 through June 30, The combined cost for both audits is $34,000. Background DIVCA provides that a local entity may examine the business records of the holder of a state video franchise to the extent reasonably necessary to ensure compensation in accordance with DIVCA. If the examination discloses that the franchise holder has underpaid franchise fees by more that 5 percent during the examination period, the holder shall pay all of the reasonable and actual costs of the examination. If the examination discloses the holder has not underpaid franchise fees, the local entity shall pay all of the reasonable and actual costs of the examination. In every other instance, each party shall bear its own cost of the examination. Most likely MTA will bear the cost of the audit given that a 5 percent underpayment may be a high threshold. Recent MTA Revenue Reviews of AT&T and Comcast In 2015 Ashpaugh and Sculco completed a limited revenue review of AT&T s franchise and PEG fees for MTA for the period January 1, 2012 through December 31, 2013 and MTA recovered $34,956 from AT&T. The total AT&T franchise and PEG fees paid to MTA for the review period were approximately $500,000. The cost of the limited review was $8,500. Ashpaugh and Sculco is currently completing a revenue review of Comcast s franchise and PEG fees for MTA for the period July 1, 2010 through June 30, The total Comcast franchise and PEG fees paid to MTA during this period was approximately $13 million. The estimated underpayment for this four year review will exceed the $27,000 cost of the review. As a result of the AT&T review completed in 2015 MTA was able to recover franchise and PEG fees that were underpaid to MTA. MTA will also be able to recover underpaid franchise and PEG fees as a result of the currently in progress Comcast revenue review. Both of these reviews have or will provide MTA with revenues greater than the cost of the reviews. These reviews identify and recover franchise and PEG revenues that have been underpaid to MTA. I-AgendaItem_ MTA Mtg_Franchise & PEG Fee Audit_final.docx 1

66 AGENDA ITEM I Proposed AT&T and Comcast Revenue Review for period July 1, 2014 through June 30, 2017 Given MTA s revenue recovery and anticipated revenue recovery for 2010 through 2014, the opportunity for MTA to recover additional franchise and PEG fee revenues for the period July 1, 2104 through June 30, 2017 suggests MTA should initiate a new three year revenue review for the period July 1, 2014 through June 30, Staff recommends the firm Ashpaugh & Sculco, CPAs, PLC be engaged to do MTA s AT&T and Comcast revenue reviews based on their experience in performing AT&T and Comcast audits including under DIVCA; their attention to detail and the needs of the process; and their use of proprietary software developed for their use in the revenue analysis which has resulted in favorable recoveries for their clients. In the attached proposal from Ashpaugh & Sculco, CPAs, PLC, they propose to review the franchise and PEG fees paid by AT&T and Comcast to MTA for the proposed not-to-exceed budgets and review periods outlined in the Table below. Description Proposed Budgets Review of AT&T (July 1, 2014 June 30, 2017) $10,000 Review of Comcast (July 1, 2014 June 30, 2017) $28,000 Total Proposed Budgets $38,000 Discounted Budgets for Concurrent Reviews $34,000 It is recommended that since MTA should review both AT&T and Comcast for the new 3 year period both revenue reviews should be initiated at this time which will also facilitate MTA receiving the discounted budget for concurrent reviews. The cost for AT&T and Comcast reviews combined will be $34,000. The franchise and PEG fee revenues combined for AT&T and Comcast for the 3 year review period will be approximately $12 million. If MTA recovers 1% from underpayment of fees by the vendors, recovery would be $120,000 which is greater than the $34,000 cost of the reviews. Recommendation and Fiscal Impact Staff recommends that MTA engage Ashpaugh & Sculco to perform the AT&T and Comcast franchise and PEG audits for the period July 1, 2014 through June 30, 2017, and that the Executive Officer be authorized to enter into a services agreement for the work at a cost not-toexceed $34,000. It is expected that the cost of these audits will be more than offset by recovery of underpayment of video revenues by video providers as identified in the audits. The $34,000 cost of the audit for AT&T and Comcast will be included in the proposed FY 18 Budget. Attachments: May 3, 2017 Proposal from Ashpaugh & Sculco, CPAs, PLC for a Review of Franchise & PEG Fees Paid by AT&T and Comcast to MTA. I-AgendaItem_ MTA Mtg_Franchise & PEG Fee Audit_final.docx 2

67 Barbara Thornton, Executive Officer Marin Telecommunications Agency 555 Northgate Drive, #230 San Rafael, CA Subject: Dear Ms. Thornton: May 3, 2017 Proposal for a Review of the Franchise and PEG Fees Paid by AT&T and Comcast to the Marin Telecommunications Agency, California Ashpaugh & Sculco, CPAs, PLC ( A&S ) is pleased to provide this proposal to the Marin Telecommunications Agency, California ( MTA ) for a review of the franchise and PEG fees paid to the MTA by AT&T and Comcast. As you are aware, we recently completed a review of AT&T resulting in the MTA receiving a payment from AT&T. We are currently assisting the MTA with negotiations for an additional payment from Comcast. A&S has recent experience reviewing the franchise and PEG fees paid by AT&T and Comcast throughout the country. We have established an excellent working relationship with AT&T and Comcast, and they are familiar with the data that we require to perform a review. We have obtained significant recoveries from AT&T for over twenty cities and counties throughout the country. Several clients have engaged A&S to review AT&T and Comcast on an ongoing basis. Please see our client listing in the attached proposal. A&S is recognized nationally as one of the leading firms that can assist local governments with a review of franchise and PEG fees. Furthermore, A&S has been the leading firm in addressing the following innovative issues: the gross-up of revenues to include franchise and PEG fees in the fee base; treatment of subscriber revenues such as DVR revenues, late fees, franchise fees, wire maintenance, service protection plan fees, bad debt; and treatment of commissions paid on advertising revenues from affiliated companies. We continue to be on the cutting edge of identifying and quantifying issues related to gross revenues and associated franchise fees. We have listed reasons that differentiate us from our competition. Our strengths include: Experience with Companies We have significant experience reviewing the records of companies such as AT&T, Comcast, Time Warner Cable, Verizon, and Cox. We have executed non-disclosure agreements with various companies for over a decade. Successful Results We have unparalleled experience in meeting the needs of our clients in these areas that has resulted in retaining several major clients for well over a decade. Our combined experience has achieved recoveries exceeding $30 million. Personal Service We are dedicated to personal service and excellence. We are the individuals that will be in contact with the MTA to discuss issues, resolutions, and any 300 N. New York Avenue, #879 Winter Park, FL Fax gashpaugh@ascpas.com csculco@ascpas.com

68 Barbara Thornton, Executive Officer Marin Telecommunications Agency May 3, 2017 concerns. This intimate level of personal service is the trademark of our work. Unique Tools We have proprietary software and methods that accurately identify the revenue base and analyze the correct amount due to AT&T and Comcast. We have attached the following information to the cover letter: scope of work, budgets, labor rates, references and resumes. We take pride in our reputation and are equally proud of our cost-effective services. Thank you for the opportunity to provide you with this proposal. If you need any additional information, please call me. Sincerely, ASHPAUGH & SCULCO, CPAS, PLC Carolyn Sculco, CPA Vice-President & Member cc: Garth Ashpaugh, Ashpaugh & Sculco, CPAs, PLC