42nd DISTRICT AGRICULTURAL ASSOCIATION GLENN COUNTY FAIR. ORLAND, CALIFORNIA FINANCIAL STATEMENTS. December 31, 2014

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1 42nd DISTRICT AGRICULTURAL ASSOCIATION GLENN COUNTY FAIR. ORLAND, CALIFORNIA FINANCIAL STATEMENTS December 31, 2014

2 GLENN COUNTY FAIR FINANCIAL STATEMENTS DECEMBER 31, 2014 TABLE OF CONTENTS INDEPENDENT ACCOUNTANTS' REVIEW REPORT... 1 BASIC FINANCIAL STATEMENTS Statement of Net Position... 3 Statement of Revenues, Expenses, and Changes in Net Position... 4 Statement of Cash Flows... 5 Notes to the Financial Statements INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS SCHEDULE OF FINDINGS AND RESPONSES... 15

3 Certified Public Accountants Aiello, Goodri~h (55 Teus~her An Accountancy Corporation INDEPENDENT AUDITORS' REPORT Management Consultants To the Board of Directors 42nd DAA, Glenn County Fair 221 E. Yolo Street Orland, CA Report on the Financial Statements We have audited the accompanying financial statements of the business-type activities, of the 42nd District Agricultural Association (42nd DAA), Glenn County Fair, Orland, California, as of and for the year ended December 31, 2014, and the related notes to the financial statements, which collectively comprise the 42nd DAA'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. Auditors' 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 and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. 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 opinions. P~O. Box N. Mt. Shasta Blvd., Suite 300 Mt. Shasta, California (530) Fax (530)

4 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the business-type activities, of the 42nd District Agricultural Association, Glenn County Fair, Orland, California, as of December 31, 2014, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Management has omitted Management's Discussion & Analysis that accounting principles in the United States of America require to be presented to supplement the basic financial statements. Such missing 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 and for placing the basic financial statements in an appropriate operational, economic, or historical context. Our opinion on the basic financial statements is not affected by this missing information. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated August 12, 2015, on our consideration of the 42nd District Agricultural Association, Glenn County Fair, Orland, California's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the 42nd District Agricultural Association, Glenn County Fair, Orland, California's internal control over financial reporting and compliance. A~llt>, ~~Ru_k ~~c.lu-. Aiello, Goodrich & Teuscher An Accountancy Corporation Mt. Shasta, California June 10,

5 BASIC FINANCIAL STATEMENTS

6 42nd DISTRICT AGRICULTURAL ASSOCIATION GLENN COUNTY FAIR - ORLAND, CALIFORNIA STATEMENT OF NET POSITION DECEMBER 31, 2014 ASSETS Current Assets Cash and cash equivalents Accounts receivable Total current assets Capital Assets Total assets $ 159,377 31, , , ,383 LIABILITIES AND NET ASSETS Current Liabilities Accounts payable Unearned revenues Accrued expenses Compensated absences Total current liabilities Total liabilities Net Position Net investment in capital assets Unrestricted Total net position 588 2,375 21,706 5,403 30,072 30, , , 138 $ 929,311 The accompanying notes are an integral part these financial statements. 3

7 42nd DISTRICT AGRICULTURAL ASSOCIATION GLENN COUNTY FAIR - ORLAND, CALIFORNIA STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION FOR THE YEAR ENDED DECEMBER 31, 2014 REVENUE Admissions $ 78,657 Commercial space Carnival Concessions Entry fees Attractions-fair time Miscellaneous fair revenue Non-fair revenue Junior Livestock Auction Interest Other operating revenue Donations and fundraising 16,005 44,496 40,682 11,273 17,263 7, , , , Total revenue 1,120,244 EXPENSES Administration Maintenance and operations Publicity Junior Livestock Auction Miscellaneous fair Exhibits Fair entertainment Cash over/short Depreciation Total expenses Change in net position NET POSITION Beginning of the year 126, ,537 8, ,097 71,588 11,920 37, ,184 1,189,577 (69,333) 998,644 Ending of the year $ 929,311 The accompanying notes are an integral part these financial statements. 4

8 42nd DISTRICT AGRICULTURAL ASSOCIATION GLENN COUNTY FAIR - ORLAND, CALIFORNIA STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2014 Cash Flows From Operating Activities Receipts from customers Payments to suppliers Payments to employees Net cash (used) by operating activities and net (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year $1,119,973 (989,500) (136,334) (5,861) 165,238 $ 159,377 Reconciliation Of Operating (Loss) To Net Cash (Used) By Operating Activities Net operating (loss) Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation Other (Increase) Decrease in: Accounts receivable Increase (Decrease) in: Accounts payable and accrued expenses Unearned revenues Net cash (used) by operating activities (69,333) 52, 184 (2,646) 11,559 2,375 $ (5,861) The accompanying notes are an integral part these financial statements. 5

9 GLENN COUNTY FAIR NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2014 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization The, 42nd District Agricultural Association (DAA) was formed for the purpose of sponsoring, managing, and conducting the Glenn County Fair each year in Orland, California. The State of California, Department of Food and Agriculture, through the Division of Fairs and Expositions provides oversight responsibilities to the 42nd DAA. The 42nd DAA is subject to the policies, procedures, and regulations set forth in the California Government Code, California Business and Professions Code, Public Contracts Code, Food and Agricultural Code, State Administrative Manual, and the Accounting Procedures Manual established by the Division of Fairs and Expositions. The State of California allocates funds annually to the DAA to support operations and acquire fixed assets. However, the level of State funding varies from year to year based on budgetary constraints, and going forward, the State does not anticipate it will be providing any funding. Basis of Accounting A. Basis of Presentation and Accounting The DAA's basic financial statements are presented on the full accrual basis of accounting and conform to accounting principles generally accepted in the United States of America. The DAA applies all applicable Government Accounting Standards Board (GASB) pronouncements as well as any applicable pronouncements of the Financial Accounting Standards Board, the Accounting Principles Board or any Accounting Research Bulletins issued on or before November 30, 1989, unless these pronouncements conflict with or contradict GASB pronouncements. The accounts of the DAA are organized on the basis of a proprietary fund type, specifically an enterprise fund. The activities of this fund are accounted for with a separate set of self-balancing accounts that comprise the DAA's assets, liabilities, net assets, revenues and expenses. Enterprise Funds account for activities (i) that are financed with debt that is secured solely by a pledge of the net revenues from fees and charges of the activity; or (ii) that are required by laws or regulations that the activity's costs of providing services, including capital costs (such as depreciation or debt service), be recovered with fees and charges, rather than with taxes or similar revenues; or (iii) that the pricing policies of the activity establish fees and charges designed to recover its costs, including capital costs (such as depreciation or debt service). The accounting and financial reporting treatment applied to the DAA is determined by its measurement focus. The transactions of the DAA are accounted for on a flow of economic resources measurement focus. With this measurement focus, all assets and all liabilities associated with the operations are included on the statement of net assets. 6

10 GLENN COUNTY FAIR NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2014 Net position (i.e. total assets net of total liabilities) are segregated into invested in capital assets, net of related debt; restricted for debt service; and unrestricted components. When both restricted and unrestricted net position are available, unrestricted resources are depleted first before the restricted assets are used. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Income Taxes The DAA is a state agency and, therefore, is exempt from paying taxes on its income. Cash Equivalents and Investments The DAA considers all highly liquid investments (including restricted cash and investments) with maturities of three months or less when purchased to be cash equivalents. Capital Assets Property, plant and equipment are accounted for as capital.assets. All capital assets are valued at historical cost or estimated historical cost if actual historical cost is not available, except donated assets are recorded at their estimated fair market value at the date of donation. All capital assets with a cost of $5,000 or more are capitalized. Depreciation of all exhaustible capital assets is recorded as an expense in the Statement of Revenues, Expenses and Changes in Net Assets, with accumulated depreciation reflected in the Statement of Net Assets. Depreciation is calculated using the straight-line method of depreciation over estimated useful lives ranging from 5 to 40 years. The cost of current repairs, maintenance, and minor replacements is charged to expense. The DAA periodically evaluates whether events or circumstances have occurred that may have resulted in an impairment of its capital assets. No such impairments occurred in the year ended December 31,

11 Compensated Absences GLENN COUNTY FAIR NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2014 Compensated absences are absences for which permanent employees will be paid, such as vacation, personal leave, and compensatory time off. The compensated absences liability is calculated based on the pay rates in effect at the balance sheet date. Revenue Recognition Generally the DAA recognizes revenues upon completion of services provided primarily under authorized contractual agreements. Advance payments received are deferred in accrued liabilities and other in the combined balance sheets until performance is complete. Operating lease revenue is recognized, in part, based on the combined financial statements provided by the lessee. Net Position Net position comprises various net earnings from operating income, nonoperating revenues and expenses, and capital contributions. Net position is classified into the following three components. Invested in capital assets, net of related debt consists of capital assets, net of accumulated depreciation, and reduced by the outstanding balances of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction or improvement of those assets. Restricted net position consists of constraints imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments or constraints imposed by law through constitutional provisions or enabling legislation. Unrestricted net position consists of net assets that do not meet the definition of restricted net position or invested in capital assets, net of related debt. NOTE 2 - CASH AND CASH EQUIVALENTS The following list of cash and cash equivalents were held by the DAA as of December 31, 2014: Cash in bank California Local Agency Investment Fund (LAIF) Total cash and cash equivalents $ 108,173 51,204 $ 159,377 8

12 Investments Authorized: GLENN COUNTY FAIR NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2014 The DAA manages its pooled idle cash investments under the guidelines of the State of California Government Code Section 53601, which specifically authorizes investments in the following instruments: treasury bills, treasury notes, federal agency securities, bankers' acceptances, nonnegotiable certificates of deposit, commercial paper, negotiable certificates of deposit, and repurchase agreements. All investments activities are conducted with financial institutions approved by the Board of Directors. Disclosure Relating to Interest Rate Risk: Interest rate risk is the risk that changes in market rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to market interest rates. As of year-end, the weighted average maturity, as well as the estimated fair value of each investment is shown in the following table: Cost $ 51,204 Disclosure Relating to Credit Risk: Fair Value $ 51,204 Maturity 232 day avg. Generally, credit risk is the risk that an issuer if an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Cash on deposit with a financial institution and LAIF do not have such a rating. Concentration of Credit Risk: The investment policy of the DAA contains no limitation on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. There are no investments in any one issuer that represent 5 percent or more of total DAA's investments. Custodial Credit Risk: Custodial credit risk of deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The California Government Code and the DAA's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits, other than the following provisions for deposits: The California Government Code requires that a financial institution secure deposits made by state or local governmental 9

13 GLENN COUNTY FAIR NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2014 units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal 110 percent of the total amount deposited by the public agencies. California law also allows financial institutions to secure DAA deposits by pledging first trust deed mortgage notes having a value of 150 percent of the secured public deposits. The collateral for deposits in federal and state chartered banks is held in safekeeping by an authorized Agent of Depository recognized by the State of California Department of Banking. These securities are physically held in an undivided pool for all California public agency depositors. Under Government Code Section 53655, the placement of securities by a bank with an "Agent of Depository" has the effect of perfecting the security interest in the name of the local governmental agency. Accordingly, all collateral held by California Agents of Depository are considered to be held for, and in the name of, the local governmental agency. The DAA's balance in banks and book balance as of year-end is as follows: Bank Balance $ 66,452 Book Balance $ 108,173 All of the bank balance at year-end was covered by federal depository insurance or the collateral requirements described in the preceding paragraph. The bank balance differs from the book balance because of deposits in transit and outstanding checks. NOTE 3 ACCOUNTS RECEIVABLE The DAA is required to record an allowance for doubtful accounts based on estimates of collectability. The DAA expects its accounts to be fully collectible and therefore does not have any allowances for doubtful accounts at December 31, NOTE 4 - CAPITAL ASSETS Capital assets at December 31, 2014 consist of the following: 10

14 GLENN COUNTY FAIR NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2014 Non-depreciable; land Depreciable: Buildings and improvements Equipment Less accumulated depreciation Net depreciable capital assets Net capital assets Depreciation expense $ 16,264 2,683,914 67,419 2,751,333 (1,999,424) 751,909 $ 768,173 $ 52,184 There were no additions or deletions of capital assets for the year. NOTE 5 - RETIREMENT PLANS Employees of the DAA are considered to be employees of the State, and as such, participate in the State's retirement plans, as described below. Since the employees are State employees, information particular to DAA's pension liabilities is not separately calculated. Permanent employees of the DAA are members of the Public Employees' Retirement System (PERS), which is a defined benefit contributory retirement plan. The retirement contributions made by the DAA and its employees are actuarially determined. Contributions plus earnings of the Retirement System will provide the necessary funds to pay retirement costs when accrued. The DAA's share of retirement contributions is included in the cost of administration. For further information, please refer to the annual single audit of the State of California. Retirement benefits fully vest after five years of credited service for Tier I employees. Retirement benefits fully vest after ten years of credited service for Tier II employees. Upon separation from State employment, members' accumulated contributions are refundable with interest credited through the date of separation. The DAA, however, does not accrue the liability associated with vested benefits. The DAA and employees contributed approximately the following amounts for the year ended December 31, 2014: DAA contributions $ 15,000 Employee contributions $6,600 The Alternate Retirement Program (ARP) is a retirement savings program that certain employees hired on or after August 11, 2004 are automatically enrolled in for their first 11

15 GLENN COUNTY FAIR NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2014 two years of employment with the State of California. ARP is administered by the Savings Plus Program with the Department of Personnel Administration and invests funds in a fixed-income fund. ARP provides two years of retirement savings (five percent of paycheck amount each month) in lieu of two years of service credit. At the end of the two-year period, the deductions are placed in Ca1 PERS and the retirement service credit begins. Temporary, 119-day, employees of the DAA participate in the Part-Time, Seasonal, Temporary (PST) Retirement Plan. The PST Retirement Plan is a mandatory deferred compensation plan under which 7.5% of the employee's gross salary is deducted before taxes are calculated. These pre-tax dollars are placed in a guaranteed savings program. The employee has the option of leaving these funds on deposit upon separation, or requesting a refund. 12

16 Certified Public Accountants Aiello,. Teus~her Management Consultants An Accountancy Corporation INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Board of Directors 42nct DAA, Glenn County Fair 221 E. Yolo Street Orland, CA We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audhs contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the business-type activities of the 42nct District Agricultural Association ( 42nct DAA), Glenn County Fair, Orland, California, as of and for the year ended December 31, 2014, and the related notes to the financial statements, which collectively comprise the 42nct DAA's basic financial statements, and have issued our report thereon dated August 12, Internal Control over Financial Reporting In planning and performing o ur audit of the financial statements, we considered the 42nd DAA's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the 42nct DAA's internal control. Accordingly, we do not express an opinion on the effectiveness of the 42nct DAA's internal control. Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as described in the accompanying schedule of findings and responses, we identified certain deficiencies in internal control that we consider to be a material weakness. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider the deficiency described in the accompanying schedule of findings and responses (Item ) to be a material weakness. 13 P.O. Box N. Mt. Shasta Blvd., Suite 300 Mt. Shasta, California (530) Fax (530)

17 Compliance and Other Matters As part of obtaining reasonable assurance about whether the 42nd DAA's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, non compliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. AlQ_llO, G~Rtc_~ ~-lawl_~ Aiello, Goodrich & Teuscher An Accountancy Corporation Mt. Shasta, California August 12,

18 42No DISTRICT AGRICULTURAL ASSOCIATION GLENN COUNTY FAIR ORLAND, CALIFORNIA SCHEDULE OF FINDINGS AND RESPONSES FOR THE YEAR ENDED DECEMBER 31, BALANCE SHEET ACCOUNTS RECONCILLIATIONS Condition: The Fair does not have consistent procedures in place to reconcile various balance sheet accounts on a periodic basis. Criteria: Good internal control design requires that accounts be periodically reconciled to supporting information, in order to present accurate financial statements. Cause: Lack of a policy detailing when and how reconciliations are to be performed, and no oversight of the function by the Board of Directors. Effect: Errors or misstatements may occur and not be found in a timely fashion. Questioned costs: None Recommendation: The Fair should develop policies and procedures detailing when and how all balance sheet accounts are to be reconciled. Response: We will develop and implement policies and procedures to reconcile cash monthly, and all other balance sheet accounts quarterly. 15