RECEIVED. LE~!SLAiW E /,UOITOR. % J~li~26 ~i~9:01 LO UISIA NA HO RSEM EN'S BENEVO LENT A N D PRO TECTIV E A SSO CIATIO N 1993,IN C.

Transcription

1 RECEIVED LE~!SLAiW E /,UOITOR % J~li~26 ~i~9:01 LO UISIA NA HO RSEM EN'S BENEVO LENT A N D PRO TECTIV E A SSO CIATIO N 1993,IN C. Reporton A uditof FinancialStatem ents Decem ber31,1995 u naerprovisions ofstate law,~h~s report is a publi.~ docum ent. A copy ofthe reporth~,:~t~,:,'-,r~~l~bl,-n,itted to the r~:.~c'.ib:.'!, :.,r r~'view <:d, entity and olhp.~,!,.ppr:-p,:ia~(:~p.c{'.}~c officials. 1-i~,~%:,ol:,i~":~,;aii~Jie ior public in:~#~c lon ~.,t the Baton Rouge office oi~ho Legislative Auditor and,w h{;re appropriate,at the office of the parish clerk of court. ReleaseDate :7-/7~

2 LO UISIA N A H O RSEM EN 'S BEN EV O LENT A N D PRO TECTIV E A SSO CIA TIO N 1993,IN C C O N T E N T S N D EPEN D ENT A U D ITO R'S REPO RT O N T H E FINA NC IA L STA T EM ENTS Page 1 N D EPEN D ENT A U D ITO R'S REPO RT O N CO M PLIA N C E 2 N D EPEN D ENT A U D ITO R'S REPO RT O N TH E INTERNA L C O NTRO L STRU CTU RE 3 SC H ED U LE O F PRIO R Y EA R REPO RTA BLE C O N D ITIO N S 5 SC H ED U LE O F REPO RTA BLE C O N D IT IO NS -C U RRENT Y EA R 7 FINA NCIA L STATEM ENTS Statem ent ofa ssets,liabilities and Net A ssets -Cash Basis 10 Statem entof Revenues,Expenses and O therchanges in Net A ssets -Cash Basis 11 N otes to FinancialStatem ents 12 N D EPEN D ENT A U D ITO R'S REPO RT O N A D D IT IO NA L IN FO RM AT IO N 16 A DDITIO NA L IN FO RM ATIO N Statem ent of FunctionalExpenses H orsem en's BookkeeperSystem A ctivity Purse H old A ccount

3 CERTIFIED PUBLIC ACCOUNTANT 5017 CRAIG AVENUE,KENNER,LOUISIANA (504) FAX (504) M EM BER A r~ricar~institute ofcpa's Louisiana Society ofcpa's Tax Planning & Preparation Accounting & Bookkeepi~ Auditing The Board of D irectors Louisiana H orsem en's Benevolentand Protective A ssociation 1993,lnc N ew O rleans,louisiana 1have audited the accom panying statem entof assets,liabilities and netassets-cash basisof the Louisiana Horsemen'sBenevolentand Protective Association 1993,Inc.(anon-profitorganization)asof D ecember 31,1995,and the related statem ents of revenues,expenses and other changes in netassets -cash basisfor th e yearthen ended. Th ese financialstatem entsare the responsibility of the Com pany's m anagem ent. M y responsibility is to express an opinion on these financialstatem ents based on m y audit. Ico nducted nay auditin accordance w ith generally accepted auditing standards and G overnm entauditin~ Standards,issued by the Com ptroller G eneralof the U nited States and the Louisiana Governm entalaudit G uide. Those standards require that1 plan and perform the auditto obtain reasonable assurance about wheth erth e financialstatem entsare free of m aterialm isstatem ent. A n auditincludes exam ining,on a test basis,evidence supporting th e am ounts and disclosures in the financialstatem ents. A n auditalso includes assessing the accounting prineiples used and significant estim ates m ade by m anagem ent, as w ell as evaluating th e overallfinancialstatem entpresentation. Ibelieve thatm y auditprovides a reasonable basis form y opinion. Asdes cribed in note 1,the organization prepares its financialstatem ents on the basisof cash receipts and disbursem ents exceptthatthe statem ents include a provision fordepreciation of buildings and equipm ent. Th isbasis is a com prehensive basis of accounting otherthan generally accepted accountprinciples. In m y opinion,the financialstatem ents referred to above presentfairly,in allm aterialrespects,the assets, liabilitiesand netassets of the Louisiana H orsem en's Benevolentand Protective A ssociation 1993,Inc.as of D ecem ber 31, 1995,and the results of its revenues,expenses and the changes in its netassets forthe yearthen ended on the basisof accounting described in note 1. A s discussed in note 1 to the financialstatem ents,in 1995 the Louisiana H orsem en's Benevolentand Protective A ssociation 1993,Inc.adopted the provisions of the FinancialA ccounting Standards Board's Statem ent of Financial A ccounting Standards N o. 116, "A ccounting for Contributions Received and Contributions M ade," and N o.117,"financialstatem ents of N ot-for-profito rganizations." In accordance w ith G overnm entauditing Standards Ihave also issued a reportdated M ay 29, 1996,on m y co nsideration of th e Louisiana H orsem en's Benevolentand Protective A ssociation 1993,lnc.'s internal controlstructure and a reportdated M ay 29, 1996,on its com pliance w ith law s and regulations. Richard P.Reiser,Jr. Certified Public A ccountant M ay 29,1996

4 CERTIFIED PUBLIC ACCOUNTANT 5017 CRAIG AVENUE,KENNER,LOUISIANA (504) FAX (504) M EM BER American Institute ofcpa's Louisiana Society ofcpa's Tax Planning & Preparation Accounting & Bookkeeping Auditing The Board of D irectors Louisiana H orsem en's Benevolentand Protective A ssociation 1993,Inc N ew Orleans,Louisiana Ihave audited the financialstatem ents of the Louisiana H orsem en'sbenevolentand Protective Association 1993,Inc.as of and forthe yearended D ecem ber 31,1995,and the horsem en's bookkeepersystem and the purse hold accountand have issued m y reportthereon dated M ay 29, Iconducted m y auditin accordance w ith generally accepted auditing standardsand Governm entauditing Standards,issued by the Com ptroller G eneralof the U nited States and the Louisiana G overnm entalaudit G uide. Those standards require thatiplan and perform the auditto obtain reasonable assurance about whetherthe financialstatem ents are free of m aterialm isstatem ent. Com pliance w ith law s, regulations, contracts, and grants applicable to the Louisiana H orsem en's Benevolent and Protective A ssociation 1993, Inc. is the responsibility of the Louisiana H orsem en's Benevolent and Protective A ssociation 1993, Inc.'s m anagem ent. A s a part of obtaining reasonable assurance aboutwheth erthe financialstatem ents are free of m aterialm isstatem ent,iperform ed tests of th e Louisiana H orsem en's Benevolent and Protective A ssociation 1993, Ine.'s com pliance w ith certain provisionsoflaws,regulations,contractsand grants. However,my objective wasnotto provide an opinion on overallcom pliance w ith such provisions. A ccordingly,ido notexpress such an opinion. The results of m y tests disclosed no instances of non-com pliance thatare required to be reported under governm entauditing standards. Th isreport isintended forth e inform ation of the auditcom m itee,m anagem ent,and The State of Louisiana Legislative A uditor. This restriction is notintended to lim itthe distribution of this report,which is a m atterof public record. f') / ~ / Richard P.Reiser,Jr Cert ified Public A ccountant M ay 29, 1996

5 5017 CRAIG AVENUE,KENNER,LOUISIANA (504) FAX (504) M EM BER American Institute ofcpa's Louisiana Society ofcpa's lax Planning & Preparation AccoUnting & Bookkeeping Auditing The Board of D irectors Louisiana H orsem en's Benevolentand Protective Association 1993,lnc N ew Orleans,Louisiana Ihave audited the financialstatem ents of the Louisiana H orsem en's Benevolentand Protective A ssociation 1993,Inc.as of an d forth e yearended D ecem ber 31,1995 and have issued m y reportthereon dated M ay 29, conducted m y auditin accordance w ith generally accepted auditing standards and Governm entauditing Standard~,issued by the Com ptroller G eneralof the U nited States and the Louisiana G overnm entalaudit G uide. Those standards require thatiplan and perform the auditto obtain reasonable assurance about w hetherthe financialstatem ents are free of m aterialm isstatem ent. The m anagem ent of the Louisiana Horsem en's Benevolent and Protective Association 1993, Inc. is responsible forestablishing and m aintaining an internalcontrolstructure. In fulfilling this responsibility, es tim ates and judgementsby m anagementare required to assessthe expected benefitsand related costsof internalcontrolstru cture policiesand proced ures. The objectivesofan internalcontrolstructure are to provide m anagem entw ith reasonable,butnotabsolute,assurance thatassets are safeguarded againstloss from unauth orized use ordisposition,and thattransactions are executed in accordance w ith m anagem ent's authorization and recorded properly to perm itthe preparation of financialstatem ents in accordance w ith generally accepted accounting principles. Because of inherentlim itations in any internalcontrolstructure, errorsoriregularitiesmay neverthelessoccurand notbedetected. Also,projection ofany evaluation of the structure to futureperiodsissubjectto therisk thatproced uresmay become inadequatebecauseof changes in conditions orthatthe effectiveness of the design and operation of policies and proced ures m ay deteriorate. In planning and perform ing m y auditof the financialstatem ents of the Louisiana H orsem en's Benevolent and Protective Association 1993,Inc.forthe yearended D ecember31,1995,1obtained an understanding of the internal control structure. W ith respect to the internal control structure, I obtained and understanding of the design of relevantpolicies and proced ures and whether they have been placed in operation, and 1 assessed controlrisk in order to determ ine m y auditing proced ures for the purpose of expressing m y opinion on the financialstatem ents and notto provide an opinion on the internalcontrol structure. A ccordingly,ido notexpress such an opinion. I noted certain m atters involving the internalcontrolstructure and its operation thati consider to be reportable conditionsunderstandar dsestablished by th e A m erican Institute of Certified Public A ccountants, Reportable conditions involve m atters com ing to m y attention relating to significantdeficiencies in the design oroperation ofthe internalcontrolstructurethat,in my judgment,could adversely affectthe 1

6 organization'sability to record,process,sum m arize,and reportfinancialdata in a m annerthatis consistent w ith the assertionsof m anagem entin the financialstatem ents. The reportable conditions noted are asfollow s Purse hold activity islacking in docum entation The check reconciliation worksheetused by the head horsem en's bookkeeper ispoorly designed and nottotally understood by the head horsem en's bookkeeper. Horsemenbookkeeperbankreconciliationadjustmentsarenotpostedandreconciled timely M oney from closed H orsem en's Bookkeeperm eets and deposited into the purse hold accountare notbeing properly m onitored Bank charges form the horsem en's bookkeepersystem are being netted againstinterestincom e The 1994 DeltaDownsunderpaymentto jockeysthatwasto bedistributed from thepursehold accountlastyearhas stillnotbeen distributed. N o budgeting orlong range forecasting isbeing done by m auagem en't A m aterial w eakness is a reportable condition in which the design or operation of the specific internal controlstructure elem ents doesnotred uce to a relatively low levelthe risk thaterrorsorirregularities in am ounts thatwould be m aterialin relation to the financialstatem ents being audited m ay occurand notbe detected w ith in a tim ely period by em ployees in the norm alcourse of perform ing theirassigned functions. M y co nsideration of the internalcontrolstructure w ould notnecessarily disclose allm atters in the internal controlstructure thatm ightbe reportable conditions and accordingly,would notnecessarily disclose all reportable conditions thatare also considered to be m aterialw eaknesses as defined above. H ow ever,i believe none of th e reportable conditionsdescribed in the accom panying sched ule of reportable conditions are m aterialw eaknesses. In connection w ith the audit,i review ed the prior year's reportable conditions on the internal control structure, including applicable internal adm inistrative controls to determ ine w hether m anagem ent had im plem ented appropriate corrective action to correctthe conditions giving rise to those findings. The results of m y review indicate thatm anagem enthastaken appropriate corrective action w ith respectto the 9ri~ryeas f~ndings ~ described in the Sched ule of PriorReportable Conditions,acceptforthe purse hold jockey guild red istribution. Th isreportis intended forthe inform ation of the board of directors,m anagem ent,the State of Louisiana Legislative Auditor. Th is restriction is notintended to lim itthe distribution of this report,which is a m atter of public record. / ~~,-/~ ~,~. ~ ~, R ichard P.Reiser,Ji:. Certified Public Accountant M ay 29, 1996

7 LO UISIA NA HORSEM EN'S BENEVO LENT A ND PROTECTIVE A SSOCIATIO N 1993,INC SCHEDULE O F PRIO R REPO RTA BLE CO NDITIO NS Forthe Yearended Decem ber31,1995 The priorauditreportdated October16,1995,contained reportable conditions. The fo low ing is a status ofthose findings: DITIO N -HO RSEM EN'S BO O KKEEP W hile testing the Horsem en's BookkeeperSystem Ifound the transferrequests w ere notas carefu ly filled outatdelta Dow ns as they w ere w ith the otherbookkeepers, The accountnum bers and reference num bers w ere notalw ays entered as is proper. This m akes the transaction harderto trace through the system,especially ifthe nam e is hard to read, CU RRENT STATUS M anagem ent addressed this issue and Iobserved im provem ent A lthough there has been som e im provem ent in the w eekly horsem en's bookkeeperbank reconciliations, there are stil w eeks w hen there are sm a l unreconciled differences or reconciliations that are not com pleted oreven dated. This has been a problem fora num berofyears now. O bviously there is still a lack ofunderstanding as to w hy the system isn'treconciling and itappears thatrealeffortis notbeing m ade to correctthis situation. There has been progress w ith the bank reconciliations butthere is stiltneed forim provem ent Ten m onths afteryearend the Decem ber31,1994 purse hold checking account w as stillnot reconciled. A s a resultthe 1995 m onthly bank reconciliations w ere also notreconciled, This is a very lengthy tim e to a low accounting controls to lapse. CURRENT STATUS M anagem enthas corrected this problem and the bank statem entis being reconciled each m onth The Delta Dow ns purse underpaym entto horsem en w as notfully redistributed by The Louisiana H BPA 1993,Inc. Itappears rem aining paym ents ow ed to the Jockey G uild w ere forgotten. Ten m onths after distribution had been m ade to the horsem en,the Jockey G uild paym ent had stillnotbeen fo low ed up. CURRENT STATUS A s ofthe date ofthis reportthis situation has stillnotbeen corrected D R

8 LO UISIA NA HO RSEM EN'S BENEVO LENT A ND PROTECTIVE A SSOCIATIO N 1993,INC SCHEDULE O F PRIO R REPO RTA BLE CO NDITIO NS Forthe Yearended Decem ber31,1995 There w asn'ta currentcopy ofthe purse hold First Bank & Trust C.D.in the office YourM FS investm ents are listed incorrectly undera previous organization nam e CU RRENT STATUS Both ofthese situations have been corrected PRIOR YEAR REPORTABLE CONDITIO N -AUDIT REPORT NOT ISSUED W ITHIN SIX M O NTHS O F YEAR EN D N ot issuing the audit report to the Legislative A uditor w ithin six m onths ofthe close ofthe fiscalyear as required by Louisiana Revised Statute 24:513. This is the firstyearthis law changed. Com plicating m aters further,m anagem entofthe organization contacted the Legislative A uditor's office and inquired w hich organizations w ere required by the Legislative A uditors to be audited. The Legislative A uditor's office took som e tim e to research this m atter. The organization's m anagem entand board then took additionaltim e to decide w hatthey w anted audited in addition to w hatw as required. Afterresolving these issues,the Legislative Auditordid notapprove the auditengagem entuntiljune 22,1995. The engagem entletterw as originally delivered to the clienton February 22, N M anagem ent has addressed this by starting the 1995 auditearlier,and is aw are ofthe six m onth rule

9 LO UISIA NA HO RSEM EN'S BENEVO LENT A ND PROTECTIVE A SSO CIATIO N 1993,INC SCHEDULE O F REPO RTA BLE CO NDITIO NS Forthe Yearended Decem ber31,1995 Finding The check reconciliation w orksheetused by the head horsem en's bookkeeperto reconcile the horsem en bookkeeperm eets each w eek is poorly designed and has contributed to a lack ofunderstanding ofhow the system w orks. Recom m endation The check reconciliation w orksheet should be replaced w ith a true bank reconciliation to im prove understanding and perform ance in orderforthe head horsem en's bookkeeperto do this very im portant internalcontrolfunction properly. Findinq In review ing the horsem en's bookkeeper's check reconciliation w ork,itw as apparentthatreconciling adjustments w ere often carried overto the succeeding bank reconciliationsbecause the adjustm entsw ere not being posted prom ptly. Ṛecom m endation Bank reconciling item s such as interest incom e, bank charges,etc.,should be posted to the bookkeeper system so thatthe books w illbe up to date and accurate and bank reconciliations w illnot be m uddled w ith various reconciling item s. Finding W hile auditing the horsem en's bookkeeper system it w as discovered that the head horsem en's bookkeeperw as netting bank charges againstinterestincom e thus show ing no bank charge expense and less interestincom e. W hile notm aterial,itis notproperaccounting and also reveals a policy notdecided upon by m anagem ent. Rec0m m ~ndation Interestand bank charges should be reported in fu l. This w ilalso keep possible bank charge problem s from being hidden and itw illalso revealthe banking costs ofeach horsem en's bookkeeperm eet. These type of decisions should not be m ade below m anagem ent leveland hints at a greaterneed forupper m anagem ent supervision ofthe head horsem en's bookkeeperposition.

10 LO UISIA NA HORSEM EN'S BENEVO LENT A ND PROTECTIVE A SSOCIATIO N 1993.INC SCHEDULE O F REPO RTA BLE CO NDITIO NS Forthe Yearended Decem ber31,1995 BU DG ET Finding The Louisiana HBPA 1993,inc.had no budgetfor 1995 nordoes ithave one for1996. A lso no long range forecasting has been done. Budgeting and long range foreeastings are very im portant planning tools in m anaging any organization. W ith gam bling having a negative im pact on horse racing, your budgeting and forecasting needs are greaterthan everto plan cash flow s during the yearoranticipate shortages before they occur. PURSE HO LD A CCO UNT Finding The purse hold check book attim es lacks detailorcleardescriptions ofthe transactions Recom m endation W hile there have been som e im provem ents, deposits and check descriptions need to be m ore clearly detailed. Deposits need betterdocum entation such as copying the finalclosed out banks statem entfrom a m eet and filing itw ith depositsupportas itis deposited into the purse hold account. A little m ore detailon the reason for check disbursem ents should be used w ith m ore concise language and paper support explaining the item. Finding Rem aining funds closed outfrom a horsem en's bookkeeperm eetare deposited in the purse hold account and com m ingled w ith other closed out m eets. These closed out m eets are not accounted for and m onitored as checks are w ritten from the purse hold accountto coverold outstanding checks from horsem en w ho finally cash e check from an old m eet. No one is m onitoring the checks being w ritten from the purse hold to see ifit's m ore than the old m eethad w hen itw as closed, Som eone in the office otherthan the head horsem en's bookkeepershould keep a spreadsheetorsom e form ofaccounting,m atching checks w ritten from the purse hold accountw ith the m oney leftoverfrom the m eet the check pertains to. T his w illallow the organization to m onitor horsem en's bookkeeper m oney after it is rem oved from the system and held in the purse hold account.

11 LO UISIA NA HORSEM EN'S BENEVO LENT A ND PROTECTIVE A SSOCIATIO N 1993,INC SCHEDULE O F REPO RTA BLE CO NDITIONS Forthe Yearended Decem ber31, 1995 Finding The 1994 Delta Dow ns underpaym ent,to be distributed from the purse hold accountform oney ow ed to the Jockey G uild,as recom m ended in the October16,1995 auditreport,stilhas notbeen done. This is a repeatfinding. Recom m endation The underpaym entneeds to be com pleted and fully paid out. Itappears this problem is being ignored instead of being acted upon.

12 LO UISIA NA HO RSEM EN'S BENEVOLENT A ND PROTECTIVE A SSO CIATIO N 1993,INC STATEM ENT O F A SSETS,LIABILITIES A ND NET A SSETS -CA SH BASIS Decem ber31,1995 A ssets Currentassets Cash and cash equivalents Due from related party TotalCurrentAssets Non-currentassets Investm ents Land,buitdings and equipm ent(net Totalassels Liabilities Currentliabilities Payrolltaxes payable Totalcurrentliabilities Due to purse hold account TotalLiabilities N eta ssets Unrestricted Tem porarily restricted $ 75,402 32, ,320 76, $ , , ,472 Perm anently restricted Totalnetassets Totalliabilities and net assets The accom panying notes to the financialstatem ents are an integral partof these financialstatem ents. 10

13 LO UISIA NA HORSEM EN'S BENEVO LENT A ND PROTECTIVE A SSO CIATION 1993,INC STATEM ENT O F REVENUES,EXPENSES A ND OTHER CHA NGES IN NET A SSETS -CA SH BASIS YearEnded Decem ber31,1995 U nrestricted N et A ssets Revenues Interest incom e Dividend incom e Rent M iscellaneous incom e Pony leads Jockey payro lfees N SF fees T otalunrestricted revenue and support $ 152,800 4,798 14,100 4, ,574 7,230 2, Expenses Program services Supporting services -m anagem ent & genera 233, , ,226 D ecrease in unrestricted net assets Increase in tem porarily restricted netassets Increase in perm anently restricted netassets D ecrease in net assets N ET A SSETS A T BEG IN N IN G O F YEA R D ecrease in allow ance forunrealized loss on m arketable equity securities N ET A SSETS A T EN D O F YEA R 171,427 6,667 $ 167,472 The accom pan ying notes to the financialstatem ents are an integral part of these financialstatem ents.

14 LO UISIA NA HO RSEM EN'S BENEVO LENT A ND PROTECTIVE A SSO CIATIO N 1993,INC NOTES TO FINA NCIA L STATEM ENTS Decem ber31,1995 NOTE 1 -NATURE O F A CTIVITIES A ND SIGNIFICANT ACCO UNTING PO LICIES ORGA NIZATIO N A ND O PERATIO NS The Louisiana Horsem en's Benevolent and Protective A ssociation 1993, Inc. w as form ed as a protective association forlouisiana horsem en to,am ong otherthings,m ediate on behalfofindividual m em bers w hen problem s arise w ith track m anagem ents orstate racing com m issions,negotiate fair distributions at tracks and m onitor state and federal legislative developm ents in the interest of horsem en. Its principalrevenue sources are pony lead fees charged to assistrace horses onto the track and interest incom e derived from the horsem en's bookkeepersystem w hich earns intereston funds horsem en have in the system. The Com pany's policy is to prepare its financial statem ents on the cash basis of accounting; consequently,certain revenues are recognized w hen received ratherthan w hen earned,and certain expenses and purchases of assets are recognized w hen cash is disbursed rather than w hen the obligation is incurred. INCO M E TA X ES No provision for incom e taxes has been m ade, since the com pany is exem pt as a non-profit organization under ~ 50 1 (c)(6)ofthe InternalRevenue Code. T In 1995,the Organization adopted Statem entoffinancialaccounting Standards (SFA S)No.117, FinancialStatem ents of Not-For-Profit Organizations. Under SFA S No. 117,the Organization is required to report inform ation regarding its assets,liabilities,revenues and expenses according to three classes of net assets: unrestricted net assets, tem porarily restricted net assets, and perm anently restricted net assets. Underthese provisions,net assets,revenues,expenses,gains, and losses are classified based on the existence or absence of donor-im posed restrictions. A ccordingly,netassets ofthe organization and changes therein are classified and reported as fo low s: UNRESTRICTED NET ASSETS -Netassets thatare notsubjectto donor-im posed stipulations TEM PORARILY RESTRICTED NET ASSETS -Netassets subjectto donor-im posed stipulations that m ay orw illbe m et eitherby actions of the organization and/orthe passage oftim e. PERM A NENTLY RESTRICTED NET ASSETS -Netassets subjectto donor-im posed stipulations that neither expire by the passage oftim e norcan be fulfiled orotherw ise rem oved by actions ofthe organization. 12

15 LO UISIA NA HO RSEM EN'S BENEVO LENT A ND PROTECTIVE A SSOCIATIO N 1993,INC NOTES TO FINA NCIA L STATEM ENTS Decem ber31,1995 A S perm itted by this new statem ent,the organization has discontinued its use offund accounting and has, accordingly, reclassified its financialstatem ents to present the three classes of net assets required. This reclassification had no effecton the change in netassets. CONTRIBUTIONS The Organization in 1995 also adopted SFA S No 116,A ccounting for Contributions Received and Contributions M ade. In accordance w ith SFAS No. 116, contributions received are recorded as unrestricted,tem porarily restricted,orperm anently restricted supportdepending on the existence and/ornature ofany donorrestrictions. During 1995, the value of contributed services m eeting the requirem ents for recognition in the financialstatem ents w as notm aterialand has notbeen recorded. Forpurposes ofthe statem ents ofcash flow s,the organization considers a lhighly liquid investm ents w ith an initialm aturity of three m onths orless to be cash equivalents. Property,plant and equipm ent are carried at e cost. D epreciation is com puted using the straight-line or double declining balance m ethod overthe estim ated usefullives ofthe respective assets. W hen assets are retired orotherw ise disposed of,the costand related accum ulated depreciation are rem oved from the accounts and any resulting gain orloss is reflected in incom e forthe period. The costof m aintenance and repairs is charged to expense as incurred;significantrenew als and betterm entare capitalized. The folow ing isa sum m ary ofthe m ajorclasses ofproperty and equipmentand the related appreciation. COST A CCUM ULATED DEPRECIATIO N NET Land Building Furniture & fixtures Com puters Equipm ent Trailer Totals 601, ,774 45,597 6,589 13,610 $110, , ,587 1,

16 TE 3 - LO UISIA NA HO RSEM EN'S BENEVO LENT A ND PROTECTIV E A SSO CIATIO N 1993,INC NOTES TO FINA NCIA L STATEM ENTS Decem ber31,1995 The currentportfolio ofm arketable equity securities are carried attheirlow erofcostorm arketatthe batanee sheetdate. M arketable equity securities had a costof $108,758 at Decem ber31,1995. To reduce the carrying am ountofthe currentm arketable equity securities portfolio to m arketw hich w as low erthan costatdecem ber31,1995,a valuation allow ance w as established w ith a charge to equity atthatdate. At Decem ber31,1995,gross unrealized losses pertaining to the m arketable equity securities in the portfolio w ere $32,386. A lthough a lofthe funds are liquid and can be used atanytim e,itis m anagem ent's intention to investthese funds forthe long term and forthis reason the valuation allow ance w illbe carried as a reduction ofequity and notas an incom e orloss event. NO TE 4 -HO RSEM EN'S BO O KKEEPER SYSTEM The horsem en's bookkeepersystem is a com puterized accounting system that is used to adm inister the business of horse racing forow ners and trainers of race horses in m uch the sam e fashion as a bank. Itis run by personnelca led horsem en's bookkeepers em ployed by the Louisiana HBPA 1993, Inc.(93 Inc.)to assisthorsem en in the horse racing industry. The horsem en's bookkeepersystem is entirely independentofand has nothing to do w ith the operations ofthe actualrace tracks. Itis used forhorsem en w ho use the system to conduct business transactions related to horse racing at race tracks around Louisiana. The 93 Inc.provides this system to horsem en,buta lfunds belong to the horsem en and notthe 93 Inc. The system is designed as a cash flow system -cash in and cash out. It runs for a defined length of tim e -from the start ofthat race m eetto the end ofthat m eet. N o tw o m eets start and finish at the sam e tim e. A com plete operating cycle for all race track locations to be reported on is from A pril1 to M arch 3 1,and so it is forthis reporting period. The horsem en's bookkeepersystem starts w ith zero dolars. Since the system starts w ith zero do lars and ends w ith zero dollars,there is no balance sheet,only a cash in and cash outstatem entreflecting activity forthat period. These funds are not partofthe Louisiana H BPA 1993,Inc.'s Statem entof assets,liabilities and netassets orthe statem entofrevenues,expenses and netassets because they are horsem en's funds and are reported here forinform ation purposes only. The Louisiana HBPA 1993,Inc.earns intereston these funds w hile they adm inisterthem. 14

17 LO UISIA NA HO RSEM EN'S BENEVO LENT A ND PROTECTIVE A SSOCIATIO N 1993,INC NOTES TO FINA NCIA L STATEM ENTS Decem ber3 1, 1995 The purse hold account is m oney being held in a bank account or C.D.'s by the Louisiana H BPA, 1993,Inc. Itconsists offunds leftoverfrom closed horsem en's bookkeeperm eets forchecks that have notyetbeen cashed by horsem en,purse m onies underpaid by the race tracks thathave to be recalculated and distributed to horsem en,funds held forbad testresults on a horse,w aiting to be distributed to the ow ners once the race results have been corrected by the state racing com m ission. These funds belong to the horsem en and are being held forthem as the horsem en's representatives by the 93 Inc.untilsuch tim e as m atters can be resotved oruntilthe ow ners ofthese funds cash their checks. The 93 Inc.keeps interestearned on these funds. The Louisiana H BPA 1993,Inc.is also borrow ing m oney from this accountto covercash shortages. The purse hold account is notshow n in the body ofthe 93 Inc.financialstatem ents because itis horsem en's m onies and is being reported forinform ation purposes only. The Louisiana Horsem en's Benevolentand Protective A ssociation 1993,Inc.{93 Inc.)shares certain overhead costs w ith the Louisiana Horsem en's M edicalbenefittrustand the Louisiana Horsem en's Pension Trust. G enera ly the 93 Inc.pays the overhead expenses and then is reim bursed by the other organizations. In 1995 the Louisiana Horsem en's M edicalbenefit Trust reim bursed the 93 Inc. $117,939 forits share ofoverhead expenses,such as telephone,office supplies,occupancy expense, insurance,etc. The Louisiana Horsem en's Pension Trustreim bursed the 93 Inc.$34,870 forits share of overhead expenses. At Decem ber 31, 1995 the M edicaltrust and Pension Trust stilow ed $20,539 and $12,379 respectively,totaling to $32,918. The M edicaltrustand Pension Trustalso paid $11,700 and $2,400 respectively in rentforcom m on office space shared. The Louisiana HBPA 1993,Inc.also reim bursed $6,903 to the Louisiana Horsem en's M edicalbenefit Trustforoverhead expenses paid by the M edicaltrust. 15

18 CERTIFIED PUBLIC ACCOUNTANT 5017 CRAIG AVENUE,KENNER.LOUISIANA (504) FAX (504) M EM BER Am erican Institute ofcpa's Louisiana Society ofcpa's Tax Planning & Preparation Accounting & Bookkeeping Auditing R'S REPO RT O N N M y auditreporton the basic financialstatem ents ofthe Louisiana Horsem en's Benevolentand Protective A ssociation,1993,inc.,and the horsem en's bookkeepersystem and the purse hold accountappears on page 1. The audit w as m ade forthe purpose of form ing an opinion on the basic financialstatem ents taken as a w hole. The inform ation on pages 17 through 20 related to the above statem ents is presented for purposes of additionalanalysis and is not a required partofthe basic financialstatem ents. Such inform ation has been subjected to the auditing procedures applied in the exam ination ofthe basic financialstatem ents and,in m y opinion,is fairly stated in alm aterialrespects in relation to the basic financialstatem ents forthe yearended Decem ber31, 1995 and the horsem en's bookkeepersystem and the purse hold accounttaken as a w hole. Ric Certified Public A ccountant M ay 29,

19 LO UISIA NA HO RSEM EN'S BENEVO LENT A ND PROTECTIVE A SSO CIATION 1993,INC SCHEDULE O F FUNCTIO NA L EX PENSES FO R THE YEA R ENDED DECEM BER 31,1995 Supporting Services Program M anagem ent Services and G eneral Total Legal& accounting D epreciation Election expenses Insurance Nationaloffice assessm ents O ccupancy expense Professionalservices Taxes and license Postage and freight Repairs and m aintenance O ffice supplies and expense Telephone expense Traveland m eeting expense W ages A uto expenses D ues and subscriptions Printing M isce laneous expenses TotalProgram Expenses $ 10,981 $ 28,741 $ 39, , , , , ,907 24, ,13 1 9, ,583 13,583 14, ,674 14,0 11 7,721 21,732 4,945 2,008 6, ,133 4, ,325 15,325 36, ,960 8, , , ,486 4, ,344 2, ,196 5, , $ 233,805 $ 172,421 $406,226 See accountant's reporton additionalinform ation 17

20 LO UISIA NA HO RSEM EN'S BENEV O LENT A N D PRO TECTIVE A SSO CIATIO N 1993,INC H orsem en's BookkeeperSystem A ctivity Forthe Period A pril1,1995 to M arch 31,1996 Cash Deoosited Into Horsem en's BookkeeDerSystem Purses from Race Tracks H orse O w ners Interest Payee A ccounts (Various Vendors) H orse Trainers Jockeys $ 34,4 13,402 5,587, ,805 3,553 40,116 2,162 Tota $ 40,19 1,080 H orse O w ners Jockeys Payee A ccounts (V arious V endors) H orse Trainers $ 35,109,583 3,49 1,883 1,565,719 23,895 Tota See accountant's reporton additionalinform ation 18

21

22 LO UISIANA HO RSEM EN'S BENEVO LENT A ND PRO TECTIVE A SSO CIATIO N 1993,INC Purse Hold A ccount Decem ber31,1995 Beginning cash and certificates of deposit balance $ 13 1, D eposits O utstanding checks from closed m eets Delinquentjack m ounts U nresolved bad tests C ourt order purse m oney w ithheld M iscellaneous Funds received from a disqualified w inner 65, ,839 5, ,90 1 T otald eposits 85, Disbursem ents Bad test resolved paym ents Reissued checks foroutstanding checks from closed m eets M isce laneous 14,921 23, TotalDisbursem ents (39,581 Ending cash and certificate of deposit balance See accountant's reporton additionalinform ation 2O