Board Executive Committee Meeting

Transcription

1 E N T E R P R I S E F L O R I D A S Board Executive Committee Meeting T U E S D A Y, N O V E M B E R 2 9,

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3 Enterprise Florida Executive Committee Meeting Agenda Outlook Hilton Sandestin Beach Golf Resort & Spa Miramar Beach, Florida Coral Ballroom A-B November 29, :00 p.m. 5:15 p.m. (CST) KEY: (I) = Information (D) = Discussion (A) = Action CALL-IN NUMBER: (800) ACCESS CODE: # 1. Welcome & Opening Statement Alan Becker, Vice Chairman (I) Statement of Public Notice Mike Grissom 2. Approval of Minutes dated September 28, 2016 Alan Becker (A) 3. CEO Succession Stan Connally (D,A) 4. Proposed Consent Agenda Items Alan Becker (D,A) Finance and Compensation Committee Report Audit Committee Report Reinvestment Strategy Update Board Investor Renewals New Board Investor New Board Investor Representative 5. Public Comment Alan Becker (I) 6. New Business Alan Becker (D) CFO Consultant Contract Rodney Ownby 7. Reminders Alan Becker (I) 2017 In-Person Meeting Date: Tuesday, January 17, 2017, Tallahassee 8. Adjourn Alan Becker (A) Enterprise Florida Board Executive Committee Meeting November 29, 2016

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5 Enterprise Florida Board Meeting Executive Committee Minutes September 28, 2016 Minutes of a Regular Meeting of the Executive Committee of Enterprise Florida A regular meeting of the Enterprise Florida, Inc. Executive Committee was held on September 28, 2016 at the Hyatt Regency Orlando International Airport in Orlando, Florida. Members Present Alan Becker Jesse Biter Stan Connally Brett Couch Brian Curtin Ken Detzner Danny Gaekwad Belinda Keiser Brian Lamb Kevin Reilly Eric Silagy Nathan Sparks Bob Ward Andy Wike Staff Present Sharon Blake Mike Grissom Joe Hice Paul Marttila Rodney Ownby Crystal Sircy Guests Julius Davis Dean Izzo Mark Morton Agenda I. Welcome & Opening Statement Statement of Public Notice II. Approval of Minutes III. CEO Succession IV. Proposed Consent Agenda Items Implementation of recommendations EFI Budget FY 2016/2017 Team Florida Marketing Budget FY 2016/2017 Staff Performance Results FY 2015/2016 and FY 2016/2017 Goals Investor Membership Renewals New Board Investors New Company Representative VISIT FLORIDA Board Member Approval V. Public Comment VI. New Business VII. Reminders VIII. Adjourn Enterprise Florida Board Executive Committee Meeting Minutes September 28, 2016

6 Enterprise Florida Board Meeting Executive Committee Minutes September 28, 2016 Welcome and Call to Order A quorum being present, Vice Chairman Alan Becker called the meeting to order at 4:15 p.m. Statement of Public Notice Mike Grissom read the statement of public notice, announcing that the meeting was being held in compliance with Florida s public record laws and was open to all who wished to attend. Approval of Minutes Vice Chairman Alan Becker called for a motion to approve the minutes from the June 30, 2016 meeting. Brian Curtin entered the motion and Jesse Biter seconded. The motion passed unanimously. CEO Succession Vice Chair Becker introduced Stan Connally who headed up the search committee. Jesse Biter recused himself from the discussion as his father is one of the finalists. Stan identified the committee members Alan Becker, Brett Couch, Carol Craig, Belinda Keiser and Eric Silagy. He thanked Sharon Blake, EFI Vice President of Human Resources, for all her hard work. There were 101 resumes received. After review by all, the list was narrowed to the top five candidates. Each committee member spoke individually to each of the five by phone. The list was further narrowed to the top two. The focus was on finding an individual with the ability to lead in the economic development field and represent the state with an emphasis on fiscal responsibility, good governance, legislative and partner experience with change management skills. The two finalists were brought to Orlando and participated in group interviews earlier in the day. The governor was not able to meet with them due to the incoming hurricane. There were no comments. The matter will be taken under advisement for now. Proposed Consent Agenda Items Implementation of recommendations David Wilkins made several recommendations for changes and improvements to EFI most of which were implemented within 30 days. Some have taken more time. Vice Chair Becker reported that regarding office space, Miami sublet its excess space. Orlando also sublet some space due to the downsizing which will save $75,000. Tallahassee is still researching options. Audit Committee Chairman Brian Lamb reported on the external and internal audits. Cherry Bekaert did not review internal audit controls as part of their annual external audit. RSM is being used for the function. They looked at the recommendations from David Wilkins, DEO and the E&Y study and came up with a scope of work covering items that were possibly high risk. This internal audit will be completed by the end of October and will then be presented to the Executive Committee and full board. There were no questions or comments. Another implementation item was to clarify the working relationship with DEO surrounding SSBCI venture capital and loan programs that help small businesses and high tech emerging companies with loans and loan guarantee programs to help them grow their businesses. The Florida Opportunity Fund was created by the legislature and given to EFI for purposes of appointing a board and providing back office support. The fund engages financial advisors, approve investments and redeploys profits. There is a clean energy investment program for $36M which runs through the Florida Opportunity Fund and works with the Department of Agriculture. EFI has indirect involvement. The venture capital program has direct investments in companies with $42M appropriated for that function. The Florida Opportunity Fund, EFI and DEO all have responsibilities which makes it complicated. Enterprise Florida Board Executive Committee Meeting Minutes September 28, 2016

7 Enterprise Florida Board Meeting Executive Committee Minutes September 28, 2016 EFI is under contract with DEO to administer these programs. David Wilkins recommended that perhaps it should go to DEO. Vice Chair Becker commented that EFI has been handling it very well so it might not be in the best solution for small business. It is still under review. There are ongoing discussions between Crystal Sircy and her team and DEO. Currently, all customers are being serviced. Duties have been redistributed due to loss of staff. Both organizations have a role. This item will be brought back to the November meeting with a resolution. Eric Silagy cautioned that changes shouldn t be made for the sake of change. The programs are showing healthy returns 19% for one program. Stan Connally encouraged simplification and clarification. Danny Gaekwad remarked that the staff does a wonderful job, but the message is not getting out. There were no questions. With regard to the South Africa international office, the entire budget comes out of EFI with the exception of a $259,000 allocation from the legislature to expand outreach. Losing that office completely would mean losing momentum. The budget item will be removed from EFI, but the separate appropriation will stay. The Finance and Compensation Committee is evaluating alternative approaches to bonuses for the coming year. They are looking at five models and will come back to the next meeting with a recommendation. Business flow Crystal Sircy is working with DEO on the identified issues and areas for improvement involving the Business Development deals and projects. The David Wilkins recommendation for the restructuring of that department will have an impact on the business flow solution, so work will continue. A cohesive plan will be brought back to this committee. The recommended $6M in savings has been accomplished, but now the money has to be redeployed. Crystal Sircy and the EFI SVPs have a proposal for reinvestment. Vice Chair Becker has reviewed the options but has concerns about recurring investments, so he asked for a task force of Executive Committee volunteers to take a look at the reinvestment recommendations and get back to Crystal Sircy and Vice Chair Becker with their thoughts. The task force will consist of Brian Curtin, Nathan Sparks, Danny Gaekwad and Joe York. There were no questions. Lastly, Brett Couch led a group to review the proposed options for the Business Development reorganization recommended by David Wilkins. They focused on sticking to the core mission with recommendations that included focus by sector, by region in Florida and on competitive intelligence and research. The model would allow the team to follow a top prospect and/or existing customer through the process instead of having multiple handoffs during different stages of the project. The group started with four models which they narrowed to two and then combined the best of the two for a best practice hybrid. Paul Marttila, SVP of Business Development thanked the members of the group Jesse Biter, Cathy Chambers, Larry Williams, Paul Plofchan and Nathan Sparks. This model preserves the best elements of what exists now and creates more active lead generation and an intelligence function. As David Wilkins recommended reinvestment in lead generators and competitive intelligence and research resources, Paul advised that the Business Development unit is up one staff member since January. It may be necessary to invest in a few more people. Stan Connally asked if the redesigned unit would be flexible enough to handle small business inquiries. Paul affirmed this. Brett Couch asked that a separate bullet point be added to the proposed structure being presented at the full board meeting. Enterprise Florida Board Executive Committee Meeting Minutes September 28, 2016

8 Enterprise Florida Board Meeting Executive Committee Minutes September 28, 2016 EFI Budget Fiscal Year 2016/2017 The Finance and Compensation Committee met and reviewed the budget for next year. The mandate to cut $6M was followed personnel were cut from 80 to 57 as well as sponsorships and programs for the international offices. Some cuts are based on contracts that did not expire within the fiscal year. Savings are not all realized in the first year. The Japan contract was modified from $50,000 to $33,000. China will expire and not be renewed. Therefore, the savings is not quite $6M. Crystal Sircy explained that the budget for the current year was approved in the last meeting recognizing that it would be amended due to the cuts. There were no comments. Team Florida Marketing Budget Fiscal Year 2016/2017 Vice Chair Becker introduced Eric Silagy who led the Team Florida marketing meeting earlier in the day where the budget was reviewed in more detail and approved with no changes. Going forward they may look at using television. Eric encouraged everyone to get a copy of the Team Florida annual report. They are reaching a broad domestic and international audience. No questions or comments. Staff Performance Results Fiscal Year 2015/2016 and Fiscal Year 2016/2017 Goals Vice Chair Becker explained that the EFI staff has always been paid bonuses based on individual and departmental performance. Going forward, the Finance and Compensation Committee is reviewing the plan and will have recommendations at the November board meeting. David Wilkins also advised that bonuses should better reflect a bell curve. All bonuses are paid from private sector funds. No state funds are used. The pool allocated for bonuses last year was $646,856. With fewer employees due to resignations, this year the pool is $449,103. The committee authorized a cap of $395,000 instead a cut of 44% from the prior year. Eric Silagy commented that it is good to hear that the bonus structure is being reviewed on an annual basis and the committee is being fiscally sensitive, but he advised caution. EFI needs to attract and retain the best employees. People won t stay if the bonus they have counted on won t be there. It is part of their total compensation. There is political pressure to treat EFI as a public entity, but it is not. Brett Couch asked about the reduction percentage. There has been a 27% reduction in staff and the cap would bring a 44% reduction in the bonus pool. Vice Chair Becker advised that the Finance and Compensation Committee is considering five different bonus structure models. With help from Alex Glenn and his HR department, they will come up with a recommendation in the upcoming meeting. The goals are standards that EFI imposes on itself. The chart compares standards and results from the prior and current years. Eric Silagy explained that EFI and DEO set up contractual goals and then EFI sets its own internal goals which are more aggressive. At the Finance and Compensation Committee meeting the staff satisfaction goal was reduced to 90% from 95%. The committee was impressed with the outstanding job the staff did given all the turmoil and wanted a more realistic target. Investor Membership Renewals/New Board Investors/New Company Representative Mike Grissom called the committee s attention to the list of investor membership renewals in the meeting documents as well as the biographies of the new members. o Yolanda Nader, Dosal Tobacco, is a new board investor. o Bob Ward is the new company representative for the Florida Council of 100. o Sonya Deen Hartley, JM Family Enterprises and John Rood, The Vestcor Companies are the new board appointees. Enterprise Florida Board Executive Committee Meeting Minutes September 28, 2016

9 Enterprise Florida Board Meeting Executive Committee Minutes September 28, 2016 VISIT FLORIDA Board Member Approval Vice Chair Becker explained that pursuant to legislation, EFI appoints the VISIT FLORIDA board and approves the annual budget but has no oversight on how that budget is spent. He advised that EFI has no need to have responsibility without oversight. VISIT FLORIDA should report directly to DEO. He asked the legislative committee to work on that language. Danny Gaekwad reported that he sits on both boards and believes the candidate Carlos Gazitua is a good choice. VISIT FLORIDA uses a rigorous process to vet their candidates. Public Comment and Vote on Proposed Consent Agenda Items Prior to the vote being taken Vice Chairman Becker invited public comment on the proposed consent agenda items. There was none. Jesse Biter offered a motion to approve the proposed consent agenda and forward it to the board for a vote by the full membership. Belinda Keiser seconded and the motion carried. New Business All items were discussed above. Further discussion can continue at a later date. Adjournment Having concluded committee matters Brian Lamb moved to adjourn the meeting. Stan Connally offered the second and the motion carried. The meeting was adjourned at 5:26 p.m. Enterprise Florida Board Executive Committee Meeting Minutes September 28, 2016

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11 Enterprise Florida Board Meeting CEO Succession November 29, 2016 Below is an item being considered for placement on the Agenda for the upcoming board meeting. Subsequent to your action today, it will be on the Agenda and voted on by the full Enterprise Florida membership. PROPOSED Action Item 1. Action Item: CEO Succession The Executive Committee is asked to send the CEO Search Committee s recommendation to the Board for approval. Enterprise Florida Board Executive Committee Meeting November 29, 2016

12 Richard M. Biter Assistant Secretary, Intermodal Systems Development Department of Transportation (Ret.) Residence: Sarasota, Florida Education: Trine University (formally known as Tri-State University), Angola, Indiana, B.S. Transportation and Economics. Richard Biter most recently served as the Assistant Secretary of Intermodal Systems Development for the Florida Department of Transportation ( ). He also served as Vice-Chair of AASHTO's (American Association of State Highway and Transportation Officials) Special Committee on Intermodal Transportation and Economic Expansion. In this role, Mr. Biter worked to institutionalize intermodal freight planning at FDOT. He oversaw the creation of a new Freight, Logistics and Passenger Operations Office, oversaw the development of Florida's first multimodal Freight Mobility and Trade Plan, and led implementation efforts including new full-time District Freight Coordinator positions. As Chairman of the Steering Committee for the Florida Transportation Plan and the Strategic Information System Plan, he played an instrumental role in advancing innovation in Florida's transportation visioning and planning efforts. He also oversaw implementation of Florida's progressive Future Corridor planning process and the prioritization of projects in FDOT's $10 billion annual work program. Mr. Biter has truly made an impact by promoting direct engagement with key industry stakeholders, identifying and fostering strategic partnerships, and strengthening our global competitiveness through innovative and efficient use of resources. He has emerged as a visionary in the FDOT's efforts to become a national leader in the field of automated vehicles. His bold vision has thrust Florida into a leadership role among states in the implementation of this technology. Secretary Biter's understanding of how automated vehicle technology will benefit the residents and visitors to the Sunshine State will help transform transportation services and infrastructure for the new millennium. Mr. Biter formally served as a Principal of a Florida-based transportation consulting firm and was also a former Acting Associate Deputy Secretary and Director of the Office of lntermodalism at the U.S. Department of Transportation. He brings with him over 40 years of transportation program and policy making experience in the private and federal government transportation sectors. Mr. Biter has a significant track record in creating Federal and State intermodal transportation solutions for economic development in moving people and goods efficiently, boosting productivity and job growth, and strengthening our nation's competitiveness in the global economy through the more efficient use of our transportation resources.

13 Chris Hart IV President and CEO, CareerSource Florida workforce. Chris Hart IV is president and CEO of CareerSource Florida, the nonprofit, public-private workforce policy and investment board led by business and charged with developing strategies and policies for Florida's workforce system. In this role, Hart is at the center of efforts to ensure the state has the talent needed to strengthen the global competitiveness of Florida businesses while helping Floridians enhance their skills to enter, remain and advance in the With a vision of helping Florida become the global leader for talent, the CareerSource Florida network consists of the state board; 24 local workforce development boards overseeing 100 career centers statewide; and the Department of Economic Opportunity, the state agency charged with the administration of federally funded workforce programs. Workforce professionals help employers recruit, hire and train the best and brightest employees while working with job seekers to provide employment, training and career advancement opportunities. Florida was among the top five states with the fastest job growth in 2016, according to Kiplinger magazine. In the fiscal year that ended June 30, 2016, the network served more than 80,700 businesses statewide and more than 392,900 Floridians who found jobs. Hart, a two-term member of the Florida House of Representatives, has a long history of service to the state in workforce and economic development roles. He has served as the Governor s lead economic development advisor in the role of Interim Director of the Governor s Office of Tourism, Trade and Economic Development. Appointed in June 2015 as Chairman of Florida s Workforce Innovation and Opportunity Act Task Force, Hart was charged with leading the state s efforts to implement the new federal law providing key guidance and updates to the national workforce system. He also was selected by the Florida Legislature in 2013 to serve as Chairman of the state s Employer-Sponsored Benefits Study Task Force. In June 2010, Hart was appointed by the Governor as Chairman of the Gulf Oil Spill Economic Recovery Task Force. Prior to becoming president of CareerSource Florida, Hart was the Senior Vice President of External Affairs and Investor Relations for Enterprise Florida Inc., the public-private partnership responsible for leading Florida s statewide economic development efforts. He also was a co-founder of Classified Technologies Group, a classified advertising sales and software company. Hart currently serves on the Florida Chamber Foundation Board, the Florida Small Business Development Centers Network State Advisory Board and the Florida Research Consortium. He earned his Master of Business Administration from the University of South Florida and holds a Bachelor of Science degree from Florida State University where he majored in Political Science. Hart and his wife, Amy, have two children and live in Tallahassee.

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15 Enterprise Florida Board Meeting Consent Agenda November 29, 2016 Below is a list of items that are being considered for placement on the Consent Agenda for the upcoming board meeting. Subsequent to your action today, all approved items will be transferred to the Consent Agenda and voted on by the full Enterprise Florida membership. Board members are not allowed to vote on their own re-appointment or any issues for which they have a conflict of interest. Directors with an announced conflict of interest will be considered recused from these votes. PROPOSED CONSENT AGENDA 1. Action Item: Finance and Compensation Committee The Committee is asked to approve the recommendations of Finance and Compensation Committee. 2. Action Item: Audit Committee The Committee is asked to approve the recommendations of the Audit Committee. 3. Action Item: Target Industry Update Florida Statute , Enterprise Florida, Inc., and the Department of Economic Opportunity must undertake a comprehensive study every three years in order to determine the eligibility of Targeted Industries within the State of Florida. The Committee is asked to approve the Targeted Industry list provided. 4. Action Item: Investors Membership Renewals Subsequent to board ratification, the following companies will continue as At-Large Members of the Enterprise Florida Board of Directors for a one-year term: Craig Technologies Kaplan, Inc. Florida Realtors Odebrecht 5. Action Item: New Board Investor An affirmative vote on this issue will add the following new company as an At-Large member to the Enterprise Florida Board of Directors for a one-year term: Lakewood Ranch Commercial Realty Kirk Boylston, President 6. Action Item: New Company Representative Subject to an affirming vote by the board, Holly Borgmann, of ADT, LLC Head of Government Affairs will become her company s representative on the Enterprise Florida Board. Enterprise Florida Board Executive Committee Meeting November 29, 2016

16 November 17, 2016 To the Audit Committee and the Board of Directors of Enterprise Florida, Inc. Orlando, Florida Dear Members: We have audited the consolidated financial statements of Enterprise Florida, Inc. and consolidated entities (the Organization ), for the year ended June 30, 2016, and have issued our report thereon dated November 17, Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards, Government Auditing Standards, the Uniform Guidance, and Chapter Rules of the Auditor General, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our letter to you dated February 22, Professional standards also require that we communicate to you the following information related to our audit. 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 the Organization 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 We noted no transactions entered into by the Organization during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. 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. The most sensitive estimates affecting the Organization s financial statements were: Management s estimate of the value of fund of fund investments, based on net asset fair value information provided by fund managers. Management s estimate of the value of direct investments, based on information provided by the fund manager of the direct investments. Management's estimate of the accrual for annual fund manager fees, for which all fees incurred have been accrued based on the likelihood that such amounts will ultimately be paid for both the Clean Energy Investment Fund and the Florida Capital Venture Fund. Management s estimate of the useful life of fixed assets, based on management s analysis of the assets life expectancy. Management s estimate of loan loss provisions and estimated losses related to loan guarantees. We evaluated the key factors and assumptions used to develop these estimates to determine that they seem reasonable in relation to the financial statements taken as a whole. While the procedures used by management and the amount of these estimates seem reasonable at this time, there will usually be differences between the estimates and actual results and these differences may be material. The financial statement disclosures are neutral, consistent, and clear. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit.

17 Corrected and Uncorrected Misstatements Professional standards require us to accumulate all misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. In consultation with accounting personnel and the Florida Department of Economic Opportunity ( DEO ), certain adjustments were made to eliminate receivables from the DEO. In addition, in consultation with accounting personnel and the Florida Opportunity Fund Fund Manager, certain adjustments were made to the fair value of investments. One uncorrected misstatement involving timing of revenue recognition between the current and prior fiscal year for the administration of the State Small Business Credit Initiative Program, amounting to $438,806, was determined by management to be immaterial to the financial statements taken as a whole. Disagreements with Management For purposes of this letter, a disagreement with management is 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 November 17, 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 Organization 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 Audit Findings or Issues 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 Organization s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. Other Matters With respect to the supplementary information accompanying the financial statements, the consolidating financial statements, schedule of activities by consolidating entity, and the schedule of expenditures of federal awards and state financial assistance (the Schedule ), we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with U.S. generally accepted accounting principles, the Uniform Guidance and Chapter , Rules of the Florida Auditor General, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the consolidating financial statements and the Schedule to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. This information is intended solely for the use of the Audit Committee, the Board of Directors and management of the Organization and is not intended to be, and should not be, used by anyone other than these specified parties. Very truly yours,

18 ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIES (A COMPONENT UNIT OF THE STATE OF FLORIDA) CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended June 30, 2016 And Report of Independent Auditor

19 ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIES TABLE OF CONTENTS Page REPORT OF INDEPENDENT AUDITOR 1 2 CONSOLIDATED FINANCIAL STATEMENTS Consolidated Statement of Financial Position 3 Consolidated Statement of Activities 4 Consolidated Statement of Cash Flows 5 Notes to Consolidated Financial Statements 6 23 SUPPLEMENTARY INFORMATION AND OTHER REPORTS OF INDEPENDENT AUDITOR Consolidating Statement of Financial Position 24 Consolidating Statement of Activities 25 Schedule of Activities by Consolidated Entity 26 Report of Independent Auditor 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 Report of Independent Auditor on Compliance for Each Major Program and on Internal Control over Compliance Required by the Uniform Guidance and Chapter , Rules of the Florida Auditor General Schedule of Expenditures of Federal Awards and State Financial Assistance 31 Notes to Schedule of Expenditures of Federal Awards and State Financial Assistance Schedule of Findings and Questioned Costs Summary Schedule of Prior Audit Findings and Corrective Action Plan 38

20 Report of Independent Auditor To the Members of the Board of Directors Enterprise Florida, Inc. Orlando, Florida: Report on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of Enterprise Florida, Inc. and consolidated entities (the Organization ), a component unit of the State of Florida, which comprise the consolidated statement of financial position as of June 30, 2016, and the related consolidated statements of activities and cash flows for the year then ended, and the related notes to the consolidated financial statements. Management s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated 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 consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these consolidated 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 consolidated financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Organization s preparation and fair presentation of the consolidated 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 Organization 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 consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Organization as of June 30, 2016, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles general accepted in the United States of America.

21 Emphasis of matter As discussed in Note 1 and Note 6, the consolidated financial statements include investments in venture capital partnerships and direct investments valued at $21,156,371 and $52,865,051, respectively, representing 42% of net assets at June 30, 2016, whose values have been estimated by the Organization in the absence of readily determinable market values. The Organization s estimates are based on information provided by the venture capital partnerships and the fund manager of the direct investments. Due to the inherent uncertainty of these estimates, these values may differ significantly from the values that would have been used had a ready market for these investments existed, and the differences could be material. Other Matters Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The consolidating financial statements and schedule of activities by consolidated entity listed in the foregoing table of contents are presented for purposes of additional analysis and are not a required part of the consolidated financial statements. The accompanying schedule of expenditures of federal awards and state financial assistance is presented for purposes of additional analysis as required by the Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards and Chapter , Rules of the Florida Auditor General, and is not a required part of the consolidated financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the consolidated financial statements. The information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the consolidated financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 15, 2016 on our consideration of the Organization 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 the 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 Organization s internal control over financial reporting and compliance. Orlando, Florida November 17,

22 CONSOLIDATED FINANCIAL STATEMENTS

23 ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIES CONSOLIDATED STATEMENT OF FINANCIAL POSITION YEAR ENDED JUNE 30, 2016 ASSETS Cash and cash equivalents: Operating $ 5,569,036 Limited as to use 186,055,777 Due from State of Florida 7,285,752 Accounts and loans receivable, net 7,091,936 Loans receivable under the State Small Business Credit Initiative, net 22,495,971 Interest receivable and other assets 1,877,297 Leaseholds, furniture and equipment, net 600,255 Enterprise Florida investments under the Small Business Technology Growth Fund 900,000 Florida Opportunity Fund investments in venture capital partnerships 21,156,371 Florida Opportunity Fund direct investments: Clean Energy Investment Program 24,969,422 Florida Venture Capital Program 27,895,629 Total Assets $ 305,897,446 LIABILITIES AND NET ASSETS Liabilities: Accounts and grants payable $ 3,841,694 Accrued liabilities 1,036,102 Escrow payable 110,440,211 Accrued annual fund manager fees 6,697,433 Deferred revenue 6,589,250 Total Liabilities 128,604,690 Net Assets: Unrestricted 10,415,835 Temporarily restricted 166,876,921 Total Net Assets 177,292,756 Total Liabilities and Net Assets $ 305,897,446 See notes to consolidated financial statements 3

24 ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIES CONSOLIDATED STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2016 Temporarily Unrestricted Restricted Total Revenues: State operating assistance $ 16,725,173 $ 16,610,496 $ 33,335,669 Private investment contributions 1,662, ,970 2,508,470 Event revenue 980, ,596 1,231,083 Federal grant assistance - 72,708 72,708 In-kind contributions 243, ,340 Management and administration fees 11,361-11,361 Net appreciation in fair value of investments - 17,420,336 17,420,336 Other income 139, ,514 1,097,983 Net assets released from restrictions 18,147,933 (18,147,933) - Total Revenues 37,910,263 18,010,687 55,920,950 Expenses: Marketing and promotion 9,832,831-9,832,831 Grants to sub-recipients 8,318,333-8,318,333 Payroll and related costs 8,737,612-8,737,612 Professional fees 5,890,485-5,890,485 General and administrative 4,835,221-4,835,221 Depreciation 178, ,774 Total Expenses 37,793,256-37,793,256 Change in Net Assets Before Income Tax Expense 117,007 18,010,687 18,127,694 Income tax expense 116, ,560 Change in Net Assets ,010,687 18,011,134 Net Assets, Beginning of Year 10,415, ,866, ,281,622 Net Assets, End of Year $ 10,415,835 $ 166,876,921 $ 177,292,756 See notes to consolidated financial statements 4

25 ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIES CONSOLIDATED STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2016 Cash Flows From Operating Activities: Increase in net assets $ 18,011,134 Adjustments to reconcile increase in net assets to net cash provided by operating activities: Depreciation 178,744 Net appreciation in fair value of investments (17,420,336) Changes in: Due from State of Florida (340,983) Accounts and loans receivable (1,139,628) Interest receivable and other assets (410,701) Accounts and grants payable 534,638 Accrued liabilities (350,739) Escrow payable 24,980,258 Accrued annual fund manager fees (671,553) Deferred revenue (2,442,091) Net Cash Provided by Operating Activities 20,928,743 Cash Flows From Investing Activities: Proceeds from investment distributions 8,844,397 Purchases of equipment (19,693) Funding of loans receivable (3,536,391) Funding of fund of funds investments (2,268,089) Funding of direct investments (6,742,395) Net Cash Used in Investing Activities (3,722,171) Net Increase in Cash and Cash Equivalents 17,206,572 Cash and Cash Equivalents, Beginning of Year 174,418,241 Cash and Cash Equivalents, End of Year $ 191,624,813 Classified in Consolidated Statement of Financial Position: Cash and cash equivalents - operating $ 5,569,036 Cash and cash equivalents - limited as to use 186,055,777 Cash and Cash Equivalents, End of Year $ 191,624,813 Supplemental schedule of non cash investing activities: Conversion of loan to equity $ 2,312,765 See notes to consolidated financial statements 5

26 ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2016 Note 1 Summary of Significant Accounting Policies Organization Enterprise Florida, Inc. ("Enterprise Florida") is a not-for-profit corporation created by Chapter 288, Florida Statutes and incorporated on February 18, 1993 as a public-private partnership responsible for leading Florida's statewide economic development efforts. Its mission is to facilitate job growth for Florida s businesses and citizens leading to a vibrant statewide economy. Enterprise Florida is a discretely presented component unit of the State of Florida (the State ), included in state-wide financial statements, as it is legally separate but has a significant relationship with the State of Florida. All revenues in excess of expenditures remain committed to further the purpose of Enterprise Florida. The accompanying consolidated financial statements include the accounts of Enterprise Florida and organizations controlled by Enterprise Florida, including Florida Sports Foundation Inc. (the Foundation ), Team Florida Marketing Partnership, LLC ( Team Florida ) and Florida Opportunity Fund (comprised of Florida Opportunity Fund, Inc. ( FOF ) and its wholly-owned subsidiary, FOF PA II, Inc.) (collectively, the Organization ). All significant intercompany accounts and transactions have been eliminated. The Foundation promotes and develops sports related industries, amateur sports activities, and physical fitness programs. This non-profit corporation merged into the Organization on August 29, 2011 pursuant to legislation contained in Florida Statute , and now comprises the Sports Development unit of Enterprise Florida. Enterprise Florida is the Foundation s sole member. FOF was created on July 13, 2007 by Enterprise Florida pursuant to the Florida Capital Formation Act under Florida Statutes Enterprise Florida facilitated the creation of FOF, is its sole member and controls its majority voting interest through appointment of its Board of Directors. Enterprise Florida also provided FOF s initial capital through funds appropriated by the State of Florida. FOF is not a public corporation or instrumentality of the State. FOF s initial purpose was to provide seed capital and early stage venture equity capital for emerging companies in the State, including, without limitation, enterprises in life sciences, information technology, advanced manufacturing processes, aviation and aerospace, and homeland security and defense, as well as other strategic technologies. Subsequent to initial capital funding, FOF has also been empowered by the Statute to make direct investments, including loans, in individual businesses and infrastructure projects. FOF receives and invests capital for the Clean Energy Investment Program and the Florida Venture Capital Program under the State Small Business Credit Initiative. FOF PA II, Inc. was incorporated on August 23, 2012 as a for-profit corporation for which FOF is the sole shareholder. FOF PA II, Inc. was established to hold an investment in the Florida Venture Capital Program for which income is passed to the investor. Team Florida Marketing Partnership, LLC was established as a separate Limited Liability Company (LLC) on February 23, 2015, with a separate initial legislative funding grant of $10,000,000. Team Florida creates marketing programs to promote the State of Florida for trade and investment. Enterprise Florida is Team Florida s sole member. 6

27 ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2016 Note 1 Summary of Significant Accounting Policies (continued) Enterprise Florida is related through common purpose with Florida Development Finance Corporation, which is not included in these consolidated financial statements. Enterprise Florida provides management and accounting services to this related party (See Note 11). In accordance with 2011 legislation, Enterprise Florida also has operating relationships with Visit Florida, through contracting for tourism-related marketing services and governing board appointments, and with Space Florida, where governmentally appointed members of Enterprise Florida s Board of Directors also serve as Directors of Space Florida. Enterprise Florida operates through units, each headed by a senior officer who reports to the chief operating officer. These are: Administration provides all administrative services to the Organization such as the executive office, human resources, contracts and compliance, information technology and accounting. Business Development responsible for coordinating national and international business development by managing projects to increase capital investment and jobs in Florida. It facilitates the most effective use of business incentives and assists existing businesses in expanding both jobs and capital investment. International Trade and Development focuses on international trade programs to expand the number of Florida companies exporting Florida products and services. It also manages key international relationships to improve Florida s international business and global reputation in the following countries: Brazil, Canada, China, Czech Republic, Germany, Israel, Japan, Mexico, France, South Africa, Spain, Taiwan and the United Kingdom. Information, and Communications coordinates Team Florida events for marketing and promotion of Florida for trade and investment. The unit also manages all corporate communications. Marketing and Branding Team Florida Marketing Partnership, LLC operates as a subsidiary of Enterprise Florida, responsible for establishing and building a pro-business image for the state by identifying and marketing Florida to targeted industry decision makers and business leaders. It develops, coordinates, and implements a statewide strategic plan for Florida brand recognition. Minority and Small Business, Entrepreneurship and Capital is responsible for small and minority business programs. It also administers special capital programs such as those of FOF and the State Small Business Credit Initiative and supports the Florida Development Finance Corporation. Sports Development Florida Sports Foundation, Inc. operates as a subsidiary of Enterprise Florida, working to strengthen the economic impact of sports events through grants as well as identifying business expansion or development opportunities linked to sports related activities. It also develops, fosters and coordinates services and programs for amateur sports through the Sunshine State Games and the Florida Senior Games State Championships. 7

28 ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2016 Note 1 Summary of Significant Accounting Policies (continued) Strategic Partnerships maintains and enhances relationships with primary partners and stakeholders to strengthen support of economic development initiatives and increase job growth. It maintains and expands investor support and Board participation. It assists communities by increasing their competitiveness when vying for job creation projects. It retains and maximizes opportunities to enhance the Department of Defense investment in Florida through management of defense grant programs and the Florida Defense Support Task Force activities. Tourism Marketing works to promote travel and drive visitation to and within Florida. This role is contracted with Visit Florida, which serves as the sole statewide destination marketing organization representing the entire Florida tourism industry. Basis of Presentation The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. Net assets and revenues, expenses, gains and losses are classified based on the existence or absence of donor-imposed restrictions. Accordingly, net assets of the Organization and changes therein are classified and reported as temporarily restricted (see Note 8) or unrestricted net assets. In addition, net assets of consolidated subsidiaries which are more limited than the broad scope of the consolidated entity are presented as temporarily restricted net assets. Cash and Cash Equivalents Cash and cash equivalents include the operating accounts of Enterprise Florida and cash and cash equivalents limited as to use. The Organization considers all highly liquid financial investments purchased with an original maturity date of three months or less to be cash equivalents. The Organization places its cash and cash equivalents on deposit with financial institutions in the United States. The Federal Deposit Insurance Corporation ( FDIC ) covers $250,000 for substantially all depository accounts. The Organization from time to time may have had amounts on deposit in excess of the insured limits. As of June 30, 2016, the Organization had $190,374,813 which exceeded these insured amounts; $26,903,923 of which was FOF deposits. Bank deposits include $118,356,363 held for the State of Florida. Management believes the associated risk is minimized by placing such assets with quality financial institutions. The Organization has not experienced any losses on such accounts. Cash and Cash Equivalents Limited as to Use In order to ensure compliance with grant documents and/or performance contracts, Enterprise Florida has limitations on funds held in escrow and for grant funds received in advance of expenditure. Certain program guidelines require that funds be deposited into separate bank accounts, including the Microfinance Loan Guarantee Program, SSBCI Program, and escrow agreements with the State of Florida. In addition, cash and cash equivalents for FOF and the Foundation are limited for specific use by each entity in accordance with their designated purpose and contractual arrangements. Loans Receivable Management assesses the potential for loan loss reserves and contingencies based on quarterly reporting provided by the financial institution responsible for collecting payments, reporting interest, and handling defaults related to the loans and guarantees. The quarterly reporting provides information to management on the remaining loan and guarantees outstanding and any delinquent accounts, if applicable, at each quarter s end. 8

29 ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2016 Note 1 Summary of Significant Accounting Policies (continued) Management has evaluated all loans for potential losses and all guarantees for the potential of recording an associated loss reserve based on the contingency of ultimate payment being more likely than not. Based on this analysis, management has determined that a loan loss reserve as detailed in the following table is appropriate at June 30, 2016: SSBCI Loan Participation Program $ 56,488 SSBCI Loan Guarantee Program 42,870 Small Business Technology Growth Fund 125,750 Total Loan Loss Reserve as of June 30, 2016 $ 225,108 Leaseholds, Furniture and Equipment Leaseholds, furniture and equipment are stated at cost, if purchased, or estimated market value at date of receipt, if acquired by gift. Depreciation is provided using the straight-line method over the estimated economic useful lives of the related assets as follows: Leasehold improvements Office furniture Office equipment Computers and software 5-7 years 5-7 years 5 years 3-5 years Additions or improvements in excess of $500 for the Foundation and $1,000 for the other consolidated entities, with an estimated useful life exceeding a year, are capitalized. Repairs and maintenance costs are charged to expense as incurred. Investments in Venture Capital Partnerships FOF has investments in seven venture capital funds, which in turn directly invest in business enterprises. These investments are stated at estimated fair value based on net asset value information received from the limited partnerships. Direct Investments Enterprise Florida s direct investments from the Small Business Technology Growth Fund and FOF s direct investments from the Clean Energy Investment Program and from the Florida Venture Capital Program are presented in the accompanying consolidated financial statements at estimated fair value, as determined by management based on information provided by the investment fund manager. The values assigned to direct investments are based on available information and do not necessarily represent amounts that might ultimately be realized. Such amounts depend on future circumstances and cannot reasonably be determined until the individual investments are actually liquidated. Direct investments are in two privately held companies and an investment group of the Small Business Technology Growth Fund, in seven privately-held companies of the Clean Energy Investment Program and in twelve privately-held companies of the Florida Venture Capital Program. The nature of these investments provides the potential for risk of loss due to most being in early stages of operations. Fair values of direct investments are initially based on the price paid for the direct investments by FOF, adjusted as appropriate for indications of change in fair value, such as subsequent changes in prices paid for company stock, significant changes in company performance from that expected, estimated liquidation values considering preferred liquidation preferences and changes in industry comparable data, such as revenue multiples of similar companies and prices paid for similar companies through mergers and acquisitions. 9

30 ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2016 Note 1 Summary of Significant Accounting Policies (continued) Compensated Absences Vacation pay is accrued as earned by employees. Unused accumulated vacation pay, for which $14,241 is included in accrued liabilities on the consolidated statement of financial position at June 30, 2016, is paid upon an employee's separation from service, up to a maximum of 120 hours. Deferred Revenue Enterprise Florida recognizes its pass-through grants to sub-recipients in the consolidated statement of activities as the amounts are eligible for reimbursement to the sub-recipients. Enterprise Florida records deferred revenue for the difference in the amount received from the State of Florida and the amount eligible for reimbursement to the sub-recipients, as this amount is considered a conditional promise to give and, therefore, does not meet the criteria for revenue recognition. Enterprise Florida also records deferred revenue for funds received in advance of payment under the Microfinance Loan Guarantee Program and for unamortized loan guarantee fees that, as a practical expedient for measurement, are realized as income over the life of the guarantees. State Operating Assistance Revenue State operating assistance revenue represents State appropriations for the Organization s operating funds, consisting of the following: unconditional promises to give that are available for unrestricted use; unconditional promises to give that are temporarily restricted for program use; and pass-through grants administered by Enterprise Florida that are recognized as revenue and expense when pass-through sub-recipients incur associated costs. State Small Business Credit Initiative Revenue During fiscal 2012, Enterprise Florida began to receive funding under an agreement with the Florida Department of Economic Opportunity ( DEO ) for the State Small Business Credit Initiative ( SSBCI ). The SSBCI facilitates institutional lending and venture capital investing benefiting small businesses, so long as the proposed activities are consistent with the purpose of the funding. The SSBCI is directly funded by the DEO in total appropriations of $97,662,349 from a contract awarded by DEO through Title III of the Small Business Jobs Act of Of this amount, $89,119,107 has been allocated to Enterprise Florida, including $45,436,207 to fund the Small Business Loan Program administered by Enterprise Florida, $41,907,900 to be passed through to FOF for the Florida Venture Capital Program and $1,775,000 in administrative funding. Of the $89,119,107 allocated, $76,703,108 has been received or is receivable from DEO at June 30, 2016, $44,770,105 of which was for the Small Business Loan Program, $24,669,298 of which has been passed through to FOF for the Florida Venture Capital Program, $1,775,000 of which was for administrative funding and the remaining $5,488,705 is available to be allocated to a specific program. SSBCI revenue represents restricted use funding received through the SSBCI funding agreement to support investing and loan activity and administrative costs. 10

31 ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2016 Note 1 Summary of Significant Accounting Policies (continued) Private Investment Contributions Private investment contributions provided to Enterprise Florida are recognized as revenues in the period received. Private investment contributions provided to Enterprise Florida are generally available for unrestricted use by Enterprise Florida. Private investment contributions that are restricted by the donor are reported as an increase in unrestricted net assets if the restriction expires in the reporting period in which the support is recognized. Other donor restricted contributions are reported as an increase in temporarily restricted net assets, depending on the nature of the restriction. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets. Conditional promises to give are not recognized until they become unconditional; that is, when the conditions on which they depend are substantially met. In-kind Contributions Donated goods and services are recorded at their fair market value at the date of receipt by the Organization. Contributions of donated services that create or enhance non-financial assets or that require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation, are recorded at fair value in the period received. Contributions of those services not meeting specified criteria are not recorded in the consolidated financial statements. In-kind contributions recognized in the consolidated statement of activities for the year ended June 30, 2016 consisted primarily of foreign office locations, advertising and publications used for promoting business and sports development in the State. Advertising Costs Advertising Costs are expensed when incurred and totaled $551,988 for the year ended June 30, 2016 and are included in general and administrative expenses in the consolidated statement of activities. Income Tax Status Enterprise Florida, Florida Sports Foundation, and FOF are recognized by the Internal Revenue Service (IRS) as exempt from federal income tax on related income under Internal Revenue Code (IRC) Section 501(a), consisting of organizations described in Section 501(c)(3). Team Florida Marketing Partnership, LLC, as a single member LLC, is a disregarded entity for tax purposes. These entities are also exempt from state income taxes on related income pursuant to Chapter of the Florida Statutes. Therefore, a provision for income taxes has not been included for these entities in the accompanying consolidated financial statements except for FOF, which includes a tax provision for FOF PA II as noted in the subsequent paragraph. FOF PA II, Inc. is a for-profit corporation subject to income tax related to investments in pass-through entities and, accordingly, is responsible for income tax on investee taxable income based on its ownership percentage. Income tax expense of $116,560 has been recognized in the consolidated statement of activities for the year ended June 30, 2016 for tax on pass-through income from the partnership interest. Income tax expense has not been recognized for appreciation on the value of this investment due to an option agreement that provides FOF the ability to purchase the partnership interest from FOF PA II at cost. 11

32 ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2016 Note 1 Summary of Significant Accounting Policies (continued) The Organization s policy is to record a liability for any tax position taken that is beneficial to the Organization, including any related interest and penalties, when it is more likely than not the position taken by management will be overturned by a taxing authority upon examination. Management believes there are no such positions as of June 30, 2016 and, accordingly, no liability has been accrued. 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 revenues and expenses during the reported time period. Actual results could differ from those estimates. Note 2 Cash and Cash Equivalents Limited as to Use The Organization s cash and cash equivalents limited as to use consist of the following as of June 30, 2016: Enterprise Florida Escrow $ 110,440,211 Programs administered by Enterprise Florida FL Defense Support Task Force 3,295,161 State Small Business Credit Support Initiative 28,903,169 Rural Strategic Marketing 1,350,776 Small Business Technology Growth Fund 22,938 Florida International Business Expansion Initiative 529,542 Military Base Protection 28,932 Minority Business Development 886,595 Florida Export Diversification and Expansion 790,771 Microfinance Loan Guarantee 4,833,375 Pass through grants administered by Enterprise Florida Funds restricted for grants programs 1,479,339 Total Enterprise Florida 152,560,809 Florida Opportunity Fund, Inc. 27,153,923 Florida Sports Foundation, Inc. 3,638,803 Team Florida Marketing Partnership, LLC 2,702,242 $ 186,055,777 Note 3 Due From State of Florida Amounts due from State of Florida consist of $7,383,252 at June 30, 2016 under various contracts administered by the DEO, including $144,136 receivable under the SSBCI. 12

33 ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2016 Note 4 Accounts and Loans Receivable Accounts and loans receivable, which are presented at cost, include trade show events, 3 Small Business Technology Growth Fund unsecured loans with 5% interest payable upon loan maturity in fiscal 2017, and loans receivable of $4,449,133 and $2,528,323 under the Clean Energy Investment Program and the Florida Venture Capital Program, respectively. The Organization also has loans receivable of $22,552,459, net $56,488 of reserves, under its SSBCI Program. These loan receivables generally have repayment terms ranging from 6 months to 3 years. Interest income is recorded on the accrual basis based on applicable interest rates and principal outstanding, and included in other income for the year ended June 30, There are no past due loans for which payment is delinquent or for which stated interest is not accrued. Loan Guarantee Program The Loan Guarantee Program is available to qualified businesses that demonstrate adequate historical and/or proposed cash flow coverage and other credit underwriting metrics. Enterprise Florida works with financial institutions to use this program as a credit enhancement to mitigate any perceived credit weaknesses on loans. Under each guarantee, should the borrower be delinquent for 120 days, the participating lending institution makes a demand for the guarantee which is funded by Enterprise Florida, which purchases a fifty percent participation in the loan and any recovery, to the extent of the guarantee. The typical loan guarantee is between 5% and 50% of the total required financing and ranges from $250,000 to $1,000,000, with a maximum loan term of 5 years. Interest rates and fees are negotiable. Enterprise Florida receives a loan guarantee fee upfront, which is recognized on a straight-line basis as revenue over the term of the guarantee, and an ongoing fee, recognized as revenue in the year to which it relates, until the loan is paid off or the guarantee expires. The financial institution is responsible for collecting payments, reporting interest, and handling defaults. The maximum potential future payments to be paid under guarantees were $10,717,610 as of June 30, All remaining guarantees are for 3 years or less. Note 5 Leaseholds, Furniture and Equipment Leaseholds, furniture and equipment consist of the following as of June 30, 2016: Leasehold improvements $ 227,468 Office furniture 541,975 Equipment and computer 1,213,373 1,982,816 Less: accumulated depreciation $ (1,382,561) 600,255 13

34 ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2016 Note 6 Investments in Venture Capital Partnerships and Direct Investments Investments in venture capital partnerships and direct investments are provided through three programs administered through FOF, including a Fund of Funds program and two direct investment programs. The Fund of Funds program represents the investments in venture capital partnerships, initially funded by $29,500,000 of State appropriations subject to Florida Statute (the Statute ). The Statute provides that FOF may invest this initial funding only in seed and early stage venture capital/angel funds focusing on opportunities in Florida; direct investments of Fund of Funds capital in individual businesses is prohibited. Investments in Venture Capital Partnerships FOF investments in venture capital partnerships consist of seven limited partnerships as presented in the accompanying financial statements at estimated fair value based on net asset value per share. Each of the investments made under the FOF s Fund-of-Funds Program are limited life limited partnerships (or other limited liability vehicles) that provide minimal redemption opportunities. Liquidity is achieved from the partnership through distributions in the form of cash and stock. The term of each limited partnership is stated in its limited partnership agreement, as amended, and ranges from approximately 10 to 12 years, including any provisions for extensions. As of June 30, 2016, the Fund-of- Funds investments range in age from approximately 14 months to 51 months and the estimated remaining life of such investments range from approximately 5 years to 9 years. Each Fund-of-Funds investment term and estimated remaining life has been calculated based on its limited partnership agreement, including any term extensions effective as of June 30, A Fund-of-Funds investment may liquidate before its stated termination date or may require additional term extensions to complete its liquidation in an orderly manner. Fund-of-Funds investment term extensions are implemented in accordance with the respective limited partnership agreement for each investment. As permitted, fair value for each Fund-of-Funds investment is determined by FOF based on its proportionate share of the underlying fair value of the net assets of the limited funds, derived from FOF s ownership percentage and audited financial statements provided by each investee. The audited financial statements provided by each investee are reviewed by the fund manager, and adjustments to net asset values provided by the fund manager are approved quarterly by management. Direct Investments The Clean Energy Investment Program FOF entered into an agreement (the Clean Energy Agreement ) with the Florida Department of Agriculture and Consumer Services, Office of Energy ( DACS-OOE ), successor to the Florida Energy and Climate Commission, for the Clean Energy Investment Program. The Clean Energy Investment Program was created during fiscal 2010 and targets qualified Florida businesses with direct investments in three primary areas of focus: 1) facility and equipment improvement with energy-efficient and renewable energy products, 2) acquisition or demonstration of renewable energy products and 3) process improvement of existing production, manufacturing, assembly or distribution of operations to increase energy efficiency or reduce consumption. The direct investments may consist of debt and other instruments. The Clean Energy Investment Program is funded through a grant by the State of Florida, as sub-recipient to the United States Department of Energy, in the amount of $36,089,000. As of June 30, 2016, FOF has cumulative capital contributions of $36,089,000 for this program, of which all has been received. 14

35 ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2016 Note 6 Investments in Venture Capital Partnerships and Direct Investments (continued) Administrative costs and expenses include annual fund manager fees equivalent to $1,082,670 (3% of the program funding) which are accrued until program returns are available to pay accrued fees. FOF also incurs deal by deal fund manager success fees equal to 30% of the cumulative distributions that exceed invested capital for any investment. The annual fund manager fees of 3% were initiated on May 3, 2010, totaling $6,671,510 through June 30, 2016, of which $2,165,340 had been paid based on the allowable cap specified in the Clean Energy Agreement and $2,000,000 of which has been paid based on the closeout of an investment during the fiscal year ended June 30, 2015 that had cumulative distributions in excess of invested capital. This investment closeout also resulted in fund manager fees payable at June 30, 2016 of $703,506, which includes success fees of $211,052 and fund manager fees of $492,454. The remaining unpaid accrued manager fees of $2,013,716 at June 30, 2016 is payable when proceeds from dispositions and cumulative distributions of each program investment, net of fund manager success fees, exceeds the amount of capital invested. This amount is presented as accrued annual fund manager fees due to the probability of ultimate payment. Fund manager success fees for other investments have not been accrued on the financial statements since such fees are contingent on realized gains, which are not estimable and are dependent on future transactions. The contingent obligation for fund manager success fees, calculated as if all investments were sold at estimated fair value at June 30, 2016, is $1,785,529 for the Clean Energy Investment Program. The Clean Energy Agreement is set to terminate on March 31, 2025; however, DACS-OOE has the option to renew on the same terms and conditions for an additional five year term. Florida Venture Capital Program Enterprise Florida has an agreement (the DEO Agreement ) with the DEO for the SSBCI. The SSBCI was created by Congress, and funds were appropriated to the United States Department of the Treasury to be allocated and disbursed to States that have created capital programs for small businesses. The United States Department of the Treasury allocated funds to the State of Florida which then funded the Florida Venture Capital Program through the DEO as an agency of the State of Florida. The Florida Venture Capital Program utilizes SSBCI to provide direct investments in Florida businesses. The direct investments may consist of debt and other instruments. The expiration date of the DEO agreement is March 31, 2017, upon which all direct investment funding is to be completed, with no contractual stipulations regarding the return of the initial program funding of $41,907,900. Of the initial funding available, $38,507,608 has been committed for potential direct investments. Administrative costs include legal, accounting, insurance, other necessary expenses and annual fund manager fees of $1,257,236 (3% of program funding), of which $56,250 is payable quarterly and reimbursed through quarterly receipts from DEO through Enterprise Florida. FOF also incurs deal by deal fund manager success fees equal to 30% of the cumulative distributions that exceed invested capital for any investment. The annual fund manager fees were initiated on November 18, 2011, totaling $5,805,679 through June 30, 2016, of which $982,757 had been paid through quarterly installments. At June 30, 2016 fund manager fees payable of $174,758 consists of a quarterly installment of $56,250, success fees of $35,553 and additional fund manager fees of $82,955. The remaining unpaid portion of $4,683,717 at June 30, 2016 is payable to the extent reimbursable through $56,250 quarterly installments and through payments of the accrued fund manager fees to the extent of the profit less the fund manager fees. Fund manager success fees have not been accrued on the financial statements if contingent on future realized gains, which are not estimable and are dependent on future transactions. The contingent obligation for fund manager success fees, calculated as if all investments were sold at estimated fair value at June 30, 2016, is $4,302,241 for the Florida Venture Capital Program. 15

36 ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2016 Note 6 Investments in Venture Capital Partnerships and Direct Investments (continued) Fair Value Hierarchy The fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value, provides three levels of inputs used to measure fair value. Because of the inherent uncertainty of valuations, estimated fair values may differ significantly from the values that would have been used had a ready market for these investments existed, and differences could be material. FOF classifies its investments into a hierarchical disclosure framework as follows: Level I - Securities traded in an active market with available quoted prices for identical assets as of the reporting date. Level II - Securities not traded on an active market but for which observable market inputs are readily available or Level I securities where there is a contractual restriction as of the reporting date. Level III - Securities not traded in an active market and for which no significant observable market inputs are available as of the reporting date. The cost basis of the Organization s Fund of Funds investments, Clean Energy direct investments and Florida Venture Capital Fund direct investments was $17,772,818, $17,002,850 and $18,839,716, respectively, as of June 30, The following table summarizes the valuation of the Organization s investments, measured at fair value as of June 30, 2016, based on the level of input utilized to measure fair value: Fair Value Percent of Net Assets Level I $ 187,338 - Level II - - Level III 73,834,084 42% Total investments $ 74,021,422 42% The $187,338 Level I investment represents stock in a publicly traded company in the Clean Energy Investment Program. This, together with Level III investments of $24,782,084, is presented as direct investments of $24,969,422 under the Clean Energy Investment Program on the Consolidated Statement of Financial Position. Remaining Level III investments consist of $21,156,371 in FOF Fund-of-Fund investments, $27,895,629 in FLVCP direct investments and $900,000 in Enterprise Florida Small Business Technology Growth Fund ( SBTGF ) direct investments. 16

37 ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2016 Note 6 Investments in Venture Capital Partnerships and Direct Investments (continued) The following table presents a reconciliation of the beginning and ending balances of the fair value measurements using significant unobservable inputs (Level III): SBTGF Investments Fund of Funds Investments Clean Energy Direct Investments FLVCP Direct Investments Opening Balance at 7/1/15 $ 900,000 $ 20,362,563 $ 14,097,672 $ 18,015,481 Total gains or losses (realized and unrealized) included in changes in net assets - 944,936 6,510,948 9,818,475 Contributions - 2,268,089 2,000,000 2,206,582 Conversion of loan - - 2,173, ,362 Distributions - (2,419,217) - (2,507,271) Ending Balance at 6/30/16 $ 900,000 $ 21,156,371 $ 24,782,084 $ 27,895,629 The amount of total gains (losses) for the year included in changes in net assets attributable to assets still held at the reporting date $ - $ (1,096,147) $ 6,510,948 $ 9,133,634 FOF relies on the fund manager to oversee the valuation process of the Organization s Level III direct investments. Although management is responsible for overseeing the Organization s valuation processes and procedures, the fund manager is responsible for conducting periodic reviews of fair value for each direct investment and for presenting results of fair value assessments to management. The fund manager determines the valuations of the Fund s Level III direct investments on at least a semi-annual basis. Valuations determined by the Organization are required to be supported by market data, industry accepted third-party valuation models, prior company financing or other methods the fund manager deems appropriate, including the use of internal proprietary valuation models. 17

38 ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2016 Note 6 Investments in Venture Capital Partnerships and Direct Investments (continued) When quantitative unobservable inputs are used in the valuation of Level III investments, the valuation technique, the unobservable input, and the quantitative amount used in the valuation require disclosure. The Organization had one investment in the Clean Energy Investment Program and two investments in the Florida Venture Capital Program for which quantitative unobservable inputs were used in measuring the fair value at June 30, 2016, as follows: Valuation Unobserable Valuation Asset Fair Value Technique Input Multiple CEIP - Direct Market Investment $ 2,348,248 Approach Revenue 2.5x FLVCP - Direct Market Investment $ 10,259,948 Approach Revenue 3.6x FLVCP - Direct Market Investment $ 3,985,454 Approach Revenue 5.4x Note 7 Escrow Payable The State has awarded a total of $202,791,527 to seventy-seven companies under the State s incentive programs through June 30, These awards were intended to fund business projects to further job creation. DEO, along with the consent of these companies, appointed Enterprise Florida as the escrow agent to hold these funds for disbursement to the companies in accordance with the State s incentive programs. Through June 30, 2016, Enterprise Florida paid $46,879,203 to thirty companies that certified to DEO they had met their contract requirements under the program. Enterprise Florida has returned $45,472,087 to DEO for seventeen companies that were not able to complete their program requirements. Enterprise Florida recorded the remaining $110,440,211 as an escrow payable at June 30,

39 ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2016 Note 8 Temporarily Restricted Net Assets The Organization classifies Enterprise Florida net assets as temporarily restricted based on agreements with the State, wherein funding may not be utilized for the general purpose of Enterprise Florida, and classifies net assets of FOF, the Foundation, and Team Florida as temporarily restricted since their use is specifically limited for the purposes of those consolidating entities. Temporarily restricted net assets consist of the following as of June 30, 2016: Enterprise Florida: State Small Business Credit Initiative $ 50,689,437 Florida Defense Support Task Force 3,292,902 Rural Strategic Marketing 1,350,776 Small Business Technology Growth Fund 950,188 Florida International Business Expansion Initiative 514,452 Military Base Protection 29,704 Florida Export Diversification and Expansion 1,048,212 State Trade and Export Program 12,320 Total Enterprise Florida temporarily restricted net assets 57,887,991 Florida Opportunity Fund, Inc. 101,968,336 Florida Sports Foundation, Inc. 1,732,383 Team Florida Marketing Partnership, LLC 5,288,211 Total temporarily restricted net assets $ 166,876,921 19

40 ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2016 Note 9 State Operating Assistance Revenue Performance contracts and pass-through grants with the state of Florida for the year ended June 30, 2016 are as follows: Operating funds provided to Enterprise Florida, Inc. $ 14,000,000 Pass-through grants administered by Enterprise Florida, Inc: Visit Florida 75,075,438 Defense Infrastructure 2,017,044 Defense Reinvestment 705,730 Military Base Protection 2,399 Total Pass-through grants 77,800,611 Less: Pass-through grants not presented as activities (75,075,438) Total unrestricted state operating assistance 16,725,173 Other programs administered by Enterprise Florida, Inc.: Florida Export Diversification and Expansion Program 1,000,000 Florida Defense Support Task Force - Administration 187,500 Florida Defense Support Task Force - Programs 736,310 1,923,810 Florida Sports Foundation, Inc. - Programs 1,900,000 Florida Sports Foundation, Inc. - Tag Revenue 2,786,686 4,686,686 Team Florida Marketing - Operating 10,000,000 Total temporarily restricted revenue 16,610,496 Total State operating assistance revenue $ 33,335,669 Pass-through grants amounting to $75,075,438 have been excluded from recognition in the consolidated statement of activities because they represent agency transactions which have been line item appropriated in the State budget. Other pass-through grants amounting to $2,725,173 are reflected as both revenues and expenses in the consolidated statement of activities as they meet the criteria for recognition as activities. The contract with the state of Florida requires Enterprise Florida to return all interest income earned on state passthroughs and grant funds to the state of Florida. As these funds must be returned to the State, Enterprise Florida does not record the revenue associated with these earnings. Instead, a liability to the State is recorded as interest is earned. 20

41 ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2016 Note 10 Retirement Plans Enterprise Florida sponsors a 401(K) defined contribution retirement plan (the Plan ) covering all its employees that are age 21 or older. It is subject to the provisions of the Employee Retirement Security Act of 1974 (ERISA). Participants may contribute up to 100% of compensation, as defined in the Plan, but may not exceed the maximum amount allowable by the Internal Revenue Code ( IRC ), which is currently $18,000. Enterprise Florida s contributions to the Plan beyond the 3% safe harbor are discretionary. Currently Enterprise Florida matches 25% of the first 4% of wages the employee contributes and makes an additional contribution equal to 10% of employee wages (3% of which is designated as safe harbor and is not discretionary). Investments of contribution are self-directed by participants within investments provided for by the Plan. Participants are immediately vested in their contributions and earnings thereon. Vesting in Enterprise Florida s contributions is based on years of service. A participant vests at 33.33% annually until fully vested upon completion of three years of credited service. Any participant employed at the date of total and permanent disability, death or the attainment of normal retirement age, as defined, is deemed to be 100% vested. Contributions made toward the safe harbor are immediately vested. Enterprise Florida contributed a total of $664,586 to the Plan and all expenses related to the Plan were paid from forfeitures during the year ended June 30, The Foundation has a defined contribution money purchase pension plan covering all of the full-time employees it had prior to the merger with Enterprise Florida. On the date of merger, all Foundation employees became employees of Enterprise Florida and members of the Enterprise Florida Plan. No further contributions have been made to the Foundation s defined contribution money purchase pension plan since the date of merger. Investments are self-directed by participants and accounts vest over a six year period. Note 11 Related Party Transactions The Organization has considerable activity with the State and Visit Florida, as presented on the consolidated financial statements and throughout the notes to the consolidated financial statements. Management fees charged by Enterprise Florida to Florida Development Finance Corporation were $50,000 during the year ended June 30, 2016 and are included in management and administration fees revenue on the consolidated statement of activities. Enterprise Florida recorded $1,675,000 of contributions from entities that had employees on the Board of Directors during the year ended June 30,

42 ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2016 Note 12 Commitments and Contingencies Operating Lease Commitments The Organization is obligated under noncancelable operating leases for office facilities and equipment. At June 30, 2016 future minimum lease payments under noncancelable operating leases are as follows for the years ending June 30: 2017 $ 1,152, ,013, , ,520 Thereafter $ 778,483 4,116,187 The Organization s rental expenses totaled $1,282,423 for the year ended June 30, 2016 and are included in general and administrative expenses on the consolidated statement of activities. Capital Investment Commitments FOF has committed $26,000,000 to seven limited partnerships in fund of funds investments, of which $6,185,631 remains subject to additional capital calls as of June 30, For the Clean Energy Investment Program, FOF has committed $32,036,727 to eight direct investments, of which $4,970,000 remains subject to investment in the respective companies and from which $5,354,308 in capital has been returned. For the Florida Venture Capital Program, FOF has committed $38,507,608 to fourteen direct investments, of which $13,838,310 remains subject to investment in the respective companies and from which $3,450,180 has been returned. Grants and Contracts Contingency Grants and contracts require the fulfillment of certain conditions set forth in the agreements, including certain match requirements which may be subject to audit and adjustment by grantor/contracting agencies. In the opinion of management, any such adjustments would not be material to the Organization s financial statements. Fund Manager Fees Contingency The Organization is committed for fund manager fees under its amended Investment Management Agreement, dated September 16, The agreement has an initial term of ten years and a five year extension provision subject to terms defined in the Investment Management Agreement. Quarterly fund manager fee commitments are $81,125, $270,668 and $314,309 for the Fund of Funds, Clean Energy Investment Program and the Florida Venture Capital Program, respectively, throughout the remaining term of the agreement. Additional provisions of the agreement commit the Organization to deal by deal fund manager success fees equal to 30% to the extent dispositions and cumulative distributions exceed invested capital for any investment, as more fully described in Note 6. The Organization s ability to pay fund manager fees is dependent on provisions in agreements with its funding sources, DACS-OOE and DEO, to allow such payments. 22

43 ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2016 Note 13 Functional Expenses The Organization s activities include numerous functions, summarized as follows: Enterprise Florida Enterprise Florida Program Services: International Trade and Development $ 7,164,137 Strategic Partnerships 3,602,130 Florida Defense Support Task Force 3,409,572 Business Development 2,209,898 Information and Communications 2,185,982 Minority Business Development 281,032 Enterprise Florida Supporting Services 6,457,072 Team Florida Marketing Program Services 5,557,758 Florida Sports Foundation Program Services 4,042,285 Florida Opportunity Fund Program Services 2,883,390 37,793,256 Florida Opportunity Fund Income Tax 116,560 Total Expenses, including Income Tax $ 37,909,816 Note 14 Concentrations For the year ended June 30, 2016, the Organization received approximately 60% of its revenue from the State of Florida for the Organization s operations and various programs which the Organization administers. Note 15 Subsequent Events Subsequent events have been evaluated through November 17, 2016, which is the date the consolidated financial statements were available to be issued. 23

44 SUPPLEMENTARY INFORMATION AND OTHER REPORTS OF INDEPENDENT AUDITOR

45 ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIES CONSOLIDATING STATEMENT OF FINANCIAL POSITION YEAR ENDED JUNE 30, 2016 Florida Enterprise Florida Sports Team Florida Opportunity Florida Foundation Partnership Fund Eliminations Total ASSETS Cash and cash equivalents Operating $ 5,569,036 $ - $ - $ - $ - $ 5,569,036 Limited as to use 152,560,809 3,638,803 2,702,242 27,153, ,055,777 Due from State of Florida 3,999, ,616 2,500, ,285,752 Accounts and loans receivable, net 36,750 23, ,183 7,102,897 (242,201) 7,091,936 Loans receivable under the State Small Business Credit Initiative, net 22,495, ,495,971 Interest receivable and other assets 458,006 41,000-1,378,291-1,877,297 Leaseholds, furniture and equipment, net 580,578 19, ,255 Enterprise Florida investments under the Small Business Technology Growth Fund 900, ,000 Florida Opportunity Fund investments in venture capital partnerships ,156,371-21,156,371 Florida Opportunity Fund direct investments: Clean Energy Investment Program ,969,422-24,969,422 Florida Venture Capital Program ,895,629-27,895,629 LIABILITIES AND NET ASSETS Total Assets $ 186,600,286 $ 4,509,403 $ 5,373,425 $ 109,656,533 $ (242,201) $ 305,897,446 Liabilities: Accounts and grants payable $ 230,897 $ 2,777,020 $ 85,214 $ 990,764 $ (242,201) $ 3,841,694 Accrued liabilities 1,036, ,036,102 Escrow payable 110,440, ,440,211 Accrued annual fund manager fees ,697,433-6,697,433 Deferred revenue 6,589, ,589,250 Total Liabilities 118,296,460 2,777,020 85,214 7,688,197 (242,201) 128,604,690 Net Assets: Unrestricted 10,415, ,415,835 Temporarily restricted 57,887,991 1,732,383 5,288, ,968, ,876,921 Total Net Assets 68,303,826 1,732,383 5,288, ,968, ,292,756 Total Liabilities and Net Assets $ 186,600,286 $ 4,509,403 $ 5,373,425 $ 109,656,533 $ (242,201) $ 305,897,446 24

46 ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIES CONSOLIDATING STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2016 Unrestricted Temporarily Restricted Florida Total All Total Enterprise Florida Sports Team Florida Opportunity Temporarily Entities Eliminations Unrestricted Florida Foundation Partnership Fund Eliminations Restricted Total Revenues: State operating assistance 16,725,173 $ - $ 16,725,173 11,923,810 $ 4,686,686 $ 10,000,000 $ - $ (10,000,000) $ 16,610,496 $ 33,335,669 State Small Business Credit Initiative ,735,204 (4,735,204) - - Private investment contributions 1,662,500-1,662, , ,970 2,508,470 Event revenue 980, , , ,596 1,231,083 Federal grant assistance , ,708 72,708 In-kind contributions 243, , ,340 Management and administration fees 802,662 (791,301) 11, ,361 Net appreciation in fair value of investments ,420,336-17,420,336 17,420,336 Other income 139, ,469 (82,567) 429, , ,514 1,097,983 Net assets released from restrictions 32,883,137 (14,735,204) 18,147,933 (19,491,842) (4,683,586) (5,557,759) (3,149,950) 14,735,204 (18,147,933) - Total Revenues 53,436,768 (15,526,505) 37,910,263 (7,577,891) 683,165 5,288,211 19,617,202-18,010,687 55,920,950 Expenses: Marketing and promotion 9,832,831-9,832,831 9,832,831 Grants to sub-recipients 23,053,537 (14,735,204) 8,318,333 8,318,333 Payroll and related costs 9,320,763 (583,151) 8,737,612 8,737,612 Professional fees 6,062,635 (172,150) 5,890,485 5,890,485 General and administrative 4,871,221 (36,000) 4,835,221 4,835,221 Depreciation 178, , ,774 Total Expenses 53,319,761 (15,526,505) 37,793, ,793,256 Change in Net Assets Before Income Tax Expense 117, ,007 (7,577,891) 683,165 5,288,211 19,617,202-18,010,687 18,127,694 Income tax expense 116, , ,560 Change in Net Assets (7,577,891) 683,165 5,288,211 19,617,202-18,010,687 18,011,134 Net Assets, Beginning of Year 10,415,388-10,415,388 65,465,882 1,049,218-82,351, ,866, ,281,622 Net Assets, End of Year $ 10,415,835 $ - $ 10,415,835 $ 57,887,991 $ 1,732,383 $ 5,288,211 $ 101,968,336 $ - $ 166,876,921 $ 177,292,756 25

47 ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIES SCHEDULE OF ACTIVITIES BY CONSOLIDATED ENTITY YEAR ENDED JUNE 30, 2016 Florida Enterprise Florida Sports Team Florida Opportunity Florida Foundation Partnership Fund Eliminations Total Revenues: State operating assistance $ 28,648,983 $ 4,686,686 $ 10,000,000 $ - $ (10,000,000) $ 33,335,669 State Small Business Credit Initiative ,735,204 (4,735,204) - Private investment contributions 1,662, , ,508,470 Event revenue 980, , ,231,083 Federal grant assistance 72, ,708 In-kind contributions 243, ,340 Management and administration fees 802, (791,301) 11,361 Net appreciation in fair value of investments ,420,336-17,420,336 Other income 56, , ,612-1,097,983 Total Revenues 32,467,582 5,366,751 10,845,970 22,767,152 (15,526,505) 55,920,950 Expenses: Marketing and promotion, including Foundation program costs 2,814,605 1,673,888 5,344, ,832,831 Grants to sub-recipients 20,879,937 2,173, (14,735,204) 8,318,333 Payroll and related costs 8,737, , (583,151) 8,737,612 Professional fees 3,063,755 22,150 6,145 2,970,585 (172,150) 5,890,485 General and administrative 4,376, , ,276 62,805 (36,000) 4,835,221 Depreciation 172,710 6, ,774 Total Expenses 40,045,026 4,683,586 5,557,759 3,033,390 (15,526,505) 37,793,256 Change in Net Assets Before Income Tax Expense (7,577,444) 683,165 5,288,211 19,733,762 18,127,694 Income tax expense , ,560 Change in Net Assets (7,577,444) 683,165 5,288,211 19,617,202 18,011,134 Net Assets, Beginning of Year 75,881,270 1,049,218-82,351, ,281,622 Net Assets, End of Year $ 68,303,826 $ 1,732,383 $ 5,288,211 $ 101,968,336 $ - $ 177,292,756 26

48 Report of Independent Auditor 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 Members of the Board of Directors Enterprise Florida, Inc. Orlando, Florida: We have audited, 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, the consolidated financial statements of Enterprise Florida, Inc. and consolidated entities (the "Organization") which comprise the consolidated statement of financial position as of June 30, 2016, and the related consolidated statements of activities and cash flows for the year then ended, and the related notes to the consolidated financial statements, and have issued our report thereon dated November 17, Internal Control over Financial Reporting In planning and performing our audit, we considered the Organization 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 consolidated financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Organization s internal control. Accordingly, we do not express an opinion on the effectiveness of the Organization s internal control. 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 consolidated 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. Our consideration of internal control was for the limited purpose described in the first paragraph of this section 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. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. We did identify certain deficiencies in internal control, described in the accompanying schedule of findings and questioned costs as item , that we would consider to be significant deficiencies. 27

49 Compliance and Other Matters As part of obtaining reasonable assurance about whether the Organization s consolidated financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of consolidated 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 Organization 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 Organization s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Orlando, Florida November 17,

50 Report of Independent Auditor on Compliance for the Major Program and on Internal Control Over Compliance Required by the Uniform Guidance and Chapter , Rules of the Florida Auditor General To the Members of the Board of Directors Enterprise Florida, Inc. Orlando, Florida: Report on Compliance for Each Major Federal Program and State Financial Assistance Project We have audited Enterprise Florida, Inc. and consolidated entities (the "Organization") compliance with the types of compliance requirements described in the OMB Compliance Supplement, and the requirements described in the Florida Department of Financial Services State Projects Compliance Supplement, that could have a direct and material effect on each of the Organization s major federal and state programs for the year ended June 30, The Organization s major federal programs are identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs and state financial assistance projects. Auditor s Responsibility Our responsibility is to express an opinion on compliance for each of the Organization s major federal programs and state financial assistance projects based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) and Chapter , Rules of the Florida Auditor General. Those standards, the Uniform Guidance and Chapter Rules of the Florida Auditor General, require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program or state financial assistance project occurred. An audit includes examining, on a test basis, evidence about the Organization s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program and state financial assistance project. However, our audit does not provide a legal determination of the Organization s compliance. Opinion on Each Major Federal Program and State Financial Assistance Project In our opinion, the Organization complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal awards programs and state financial assistance projects for the year ended June 30,

51 Other Matters The results of our auditing procedures disclosed an instance of noncompliance, which is required to be reported in accordance with the Uniform Guidance and which is described in the accompanying Schedule of Findings and Questioned Costs as item Our opinion on each major federal program is not modified with respect to this matter. The Organization s response to the noncompliance finding identified in our audit is described in the accompanying Schedule of Findings and Questioned Costs. The Organization s response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response. Report on Internal Control over Compliance Management of the Organization is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the Organization s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program or state financial assistance project to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and state financial assistance project and to test and report on internal control over compliance in accordance with the Uniform Guidance and Chapter , Rules of the Auditor General, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Organization s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program or state financial assistance project on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program or a state financial assistance project will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of the internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Orlando, Florida November 17,

52 ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIES SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AND STATE FINANCIAL ASSISTANCE YEAR ENDED JUNE 30, 2016 Agency and Purpose Originating CFDA CSFA Grant/Contract Pass Through to Grant Period Number Number Number Expenditures Subrecipients Federal Agency Name: Small Business Administration State Trade and Export Promotion Pilot Grant Program 10/01/15-9/30/ SBAHQ-11-IT ,958 59,110 $ 68,958 $ 59,110 U.S. Department of Energy Passed through the State of Florida, Executive Office of the Governor, Department of Agriculture and Consumer Services, Department of Energy State Energy Program 7/1/12-6/30/ DE-EE /ARS003 36,089,000 - Total expenditures of federal awards $ 36,157,958 $ 59,110 State Agency Name: Direct projects: State of Florida, Department of Economic Opportunity Enterprise Florida, Inc. - Operating Support 7/01/15-6/30/ SB ,400,000 - Enterprise Florida, Inc. - International Programs 7/01/15-6/30/ SB ,550,000 - Enterprise Florida, Inc. - Florida Export & Diversification Program 7/01/15-6/30/ SB ,000,000 - Enterprise Florida, Inc. - Foreign Offices 7/01/15-6/30/ SB ,050,000-15,000,000 - Team Florida Marketing, LLC. 7/01/15-6/30/ SB ,000,000 - Florida Sports Foundation - Seniors/Sunshine State Games 7/01/15-6/30/ S ,000 - Florida Sports Foundation - Major/Regional Grants 7/01/15-6/30/ S0018 1,000,000 1,000,000 Florida Sports Foundation - Professional Sports Teams License Plate Project 7/01/15-6/30/ S0018 2,700,783 1,708,600 Florida Sports Foundation - U.S. Olympic License Plates 7/01/15-6/30/ S ,783 - Florida Sports Foundation - Nascar License Plates 7/01/15-6/30/ S ,875 13,453 Florida Sports Foundation - Florida Tennis License Plates 7/01/15-6/30/ S0018 4,245-4,686,686 2,722,053 Florida Defense Support Task Force 7/1/15-6/30/ SB ,135 - Florida Defense Support Task Force 7/1/15-6/30/ SB , ,085 - Total CSFA ,347,771 2,722,053 Defense Infrastructure Grants 7/1/13-6/30/ SB , ,539 Defense Infrastructure Grants 7/1/12-6/30/ SB , ,707 Defense Infrastructure Grants 7/1/11-6/30/ SB , ,609 Defense Infrastructure Grants 7/1/10-6/30/ OT , ,000 Defense Infrastructure Grants 7/1/09-6/30/ OT ,980 19,980 Total CSFA / ,803,834 1,803,834 Defense Reinvestment Grants 7/1/14-6/30/ SB , ,209 Defense Infrastructure Grants 7/1/14-6/30/ SB , ,209 Defense Reinvestment Grants 7/1/13-6/30/ SB , , , ,939 Florida Defense Support Task Force 7/1/14-6/30/ SB ,091,070 1,091,070 Florida Defense Support Task Force 7/1/13-6/30/ SB , ,427 Florida Defense Support Task Force 7/1/12-6/30/ SB ,007 11,007 Florida Defense Support Task Force 7/1/11-6/30/ SB , ,982 2,748,486 2,748,486 Military Base Protection 7/1/06-6/30/ OT ,573 - Total CSFA / ,670,998 3,667,425 Advocating International Relationships 7/1/13-6/30/ SB ,664 59,664 Total expenditures of state financial assistance $ 35,882,267 $ 8,252,976 See notes to schedule of expenditures of federal awards and state financial assistance 31

53 ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIES NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AND STATE FINANCIAL ASSISTANCE YEAR ENDED JUNE 30, 2016 Note 1 Presentation This Schedule of Expenditures of Federal Awards and State Financial Assistance is presented on the accrual basis of accounting and includes federal and state expenditures of Enterprise Florida, Inc. and consolidating entities. The information in this Schedule is presented in accordance of the Uniform Guidance, and, therefore, certain amounts in this Schedule may differ from amounts presented in the consolidated financial statements. Primarily the amounts differ due to the State Energy Program including cumulative grant proceeds since inception. Note 2 Match Requirement Enterprise Florida, Inc. receives funding for operations from the Department of Economic Opportunity ("DEO"), which is subject to Florida Statute Section (2) match requirements. The match requirements are designed to require Enterprise Florida, Inc. to secure statutory basis match of at least 100 percent of the State's operating investment in Enterprise Florida, Inc., which was $29,913,821 for year ended June 30, Statutory Basis (1) Direct cash (2) $ 2,480,000 Cash donations from assisted organizations (3) 1,086,477 Jointly raised cash (4) - Fees charged for products or services (5) 1,723,009 Copayments, stock, warrants, royalties or other private resources (6) 33,464,607 Quick-Response Training Program in-kind contributions (7) 13,916,310 Total matching funds 52,670,403 Total match required (8) 29,913,821 Excess $ 22,756, Florida Statutory basis amounts are reported as defined in Section (2), Florida Statutes. In-kind contributions under this basis of accounting include amounts that do not meet the GAAP basis requirements for revenue recognition. 32

54 ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIES NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AND STATE FINANCIAL ASSISTANCE YEAR ENDED JUNE 30, Defined in Section (2)(b)(1) as cash given directly to Enterprise Florida, Inc., for its operations, including contributions from at-large members of the board of directors. 3. Defined in Section (2)(b)(2) as cash donations from organizations assisted by the divisions. 4. Defined in Section (2)(b)(3) as cash jointly raised by Enterprise Florida, Inc., and a private local economic development organization, a group of such organizations, or a statewide private business organization that supports collaborative projects. 5. Defined in Section (2)(b)(4) as cash generated by fees charged for products or services of Enterprise Florida, Inc., and its divisions by sponsorship of events, missions, programs, and publications. 6. Defined in Section (2)(b)(5) as copayments, stock, warrants, royalties, or other private resources dedicated to Enterprise Florida, Inc., or its divisions. The amount provided is derived exclusively from Visit Florida. Visit Florida is a direct support organization dedicated solely to the Enterprise Florida, Inc. division of Tourism Marketing so private resources of Visit Florida that are not required for Visit Florida's match are available for Enterprise Florida, Inc.'s match requirements. Visit Florida's financial information is not presented as part of GAAP basis financial reporting for Enterprise Florida, Inc. 7. Defined in Section (9) as eligible in-kind contributions received under the Quick-Response Training Program, administered by CareerSource Florida, which may be counted toward the matching requirements of Section (2). Contributions presented consist of reimbursed wages from contracts entered into during fiscal 2016 to employers with trainees in the Quick-Response Training Program. 8. The total match required consists of $15,000,000 of Enterprise Florida, Inc. operating support, $10,000,000 of Team Florida Marketing Partnership, LLC operating support, $4,686,686 of Florida Sports Foundation and $227,135 of Florida Defense Support Task Force administration. Note 3 Indirect Cost Rate The Organization did not elect to utilize the 10% de minimis indirect cost rate. Note 4 Loan Program Outstanding Balance The Organization has loans outstanding from the U.S. Department of Energy totaling $36,089,000 as of June 30,

55 ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIES SCHEDULE OF FINDINGS AND QUESTIONED COSTS FEDERAL AWARDS PROGRAMS AND STATE FINANCIAL ASSISTANCE PROJECTS YEAR ENDED JUNE 30, 2016 Part I Summary of Auditor Results Financial Statement Section Type of auditor report issued: Unmodified Internal control over financial reporting: Material weakness(es) identified? yes x no Significant deficiency(ies) identified? x yes none reported Non-compliance material to financial statements noted? yes x no Federal Awards and State Projects Section Internal control over major programs: Material weakness(es) identified? yes x no Significant deficiency(ies) identified? yes x none reported Type of auditor report on compliance for major federal programs and state projects: Unmodified Any audit findings disclosed that are required to be reported in accordance with 2 CFR (a) x yes no Any audit findings disclosed that are required to be reported in accordance with Chapter , Rules of the Florida Auditor General yes x no 34

56 ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIES SCHEDULE OF FINDINGS AND QUESTIONED COSTS FEDERAL AWARDS PROGRAMS AND STATE FINANCIAL ASSISTANCE PROJECTS YEAR ENDED JUNE 30, 2016 Part I Summary of Auditor Results (continued) Federal Awards and State Projects Section (continued) Identification of major federal programs and state projects: Federal Programs: U.S. Department of Energy ARRA - State Energy Program Name of Program or Cluster CFDA Number State Projects: Name of Project CSFA Number Florida Department of Economic Opportunity Enterprise Florida, Inc Dollar threshold used to determine Type A programs: Federal State $ $ 750,000 1,076,468 Auditee qualified as low-risk auditee for federal purposes? x yes no Part II Financial Statement Findings This section identifies the significant deficiencies, material weaknesses, fraud, illegal acts, violations of provisions of contracts and grant agreements, and abuse related to the consolidated financial statements that are required to be reported in accordance with Government Auditing Standards. Finding Significant Deficiency Understanding and Accounting for Complex Transactions, Review, and Financial Closing Criteria: An effective system of internal control contemplates a personal structure to achieve designated tasks, appropriate segregation of duties and oversight, and a well-defined process for identifying routine and nonroutine events and transactions. The Finance Department should possess a sufficient understanding of the details and complexities over compliance and accounting requirements to allow for proper financial reporting. 35

57 ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIES SCHEDULE OF FINDINGS AND QUESTIONED COSTS FEDERAL AWARDS PROGRAMS AND STATE FINANCIAL ASSISTANCE PROJECTS YEAR ENDED JUNE 30, 2016 Condition: During the course of our audit, we noted that significant personnel turnover at the Organization caused there to be insufficient experience and understanding relating to the reporting for the Organization and for specific programs. For part of the fiscal year, personnel turnover and insufficient oversight resulted in certain journal entries posted without evidence of review and difficulties and delays were experienced in the year-end close-out process for the Organization s books and records. The Organization has since taken appropriate action to reestablish its personnel structure and to gain necessary knowledge of complex areas of accounting. Effect: Considerable research and time were required to gain familiarity and to accurately record transactions. An additional risk resulted from the more limited review and oversight structure in existence throughout much of the year. Cause: The departure of the Vice President of Finance and Accounting on June 30, 2015 and subsequent departures of Finance Department personnel at end of the fiscal 2016 at times left the Finance Department with insufficient personnel structure, knowledge of accounting requirements and oversight. Recommendation: The Organization has been able to reestablish the Finance Department with appropriate personnel in order to close out the fiscal 2016 books and records and to address other immediate needs. Revisions of policies and procedures are inherent in this process, for which we recommend careful review and written documentation. Management s Views: The response from management is presented on the Summary Schedule of Prior Findings and Corrective Action Plan. Part III Federal Award Findings and Questioned Costs This section identifies the significant deficiencies, material weaknesses, and material instances of noncompliance, including questioned costs, as well as any material abuse findings, related to the audit of major federal programs, as required to be reported by 2 CFR section (a). U.S. Department of Energy State Energy Program Statement of Condition : Required quarterly reports were not filed timely with the Florida Department of Agriculture and Consumer Services, Office of Energy ("DACS-OOE"). This finding was noted in the 2015 report and was documented as Condition Criteria: Under the Florida Energy and Climate Commission Grant Agreement ( Agreement ), each quarter has certain deliverables required to be filed by the Organization. Under the Long Term Program Deliverables section of Attachment A-2 of the Agreement, the Organization is required to file quarterly reports within 3 days of quarter end and annual reports within 30 days of the Agreement's year end. These deadlines were established in section 6 and 7 of the Agreement. Effect of Condition: Quarterly reports not filed timely could result in actions taken by DACS-OOE as described in section 11 of the Agreement. Cause of Condition: The Organization was unable to file timely due to the complex nature of the reporting and the stringent deadlines in place for submission. All reports were filed; however, all were late according to the reporting requirements. 36

58 ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIES SCHEDULE OF FINDINGS AND QUESTIONED COSTS FEDERAL AWARDS PROGRAMS AND STATE FINANCIAL ASSISTANCE PROJECTS YEAR ENDED JUNE 30, 2016 Recommendation: DAS-OOE acknowledged that a contract revision is being considered to provide additional time for the Organization to submit the required reports. The Organization should continue to work with DACS- OOE to ensure the contract is amended to allow for more reasonable submission deadlines. Management s Views: The response from management is presented on the Summary Schedule of Prior Findings and Corrective Action Plan. Part IV State Project Findings and Questioned Costs This section identifies the significant deficiencies, material weaknesses, and material instances of noncompliance, including questioned costs, as well as any material abuse findings, related to the audit of major state projects, as required to be reported by Chapter , Rules of the Florida Auditor General. There are no items related to state financial assistance required to be reported. Accordingly, a management letter is not required. 37

59 ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIES SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS AND CORRECTIVE ACTION PLAN YEAR ENDED JUNE 30, 2016 Summary of Prior Year Findings Condition : Required quarterly reports were not filed timely with the Florida Department of Agriculture and Consumer Services, Office of Energy ("DACS-OOE"). Status: Management recognized that quarterly and annual reports were required and filed the reports. However, each of the reports was filed after the required deadlines. This finding was restated in 2016 as Condition Corrective Action Plan Statement of Condition : During the course of our audit, we noted that significant personnel turnover at the Organization caused there to be insufficient experience and understanding relating to the reporting for the Organization and for specific programs. For part of the fiscal year, personnel turnover and insufficient oversight resulted in certain journal entries posted without evidence of review and difficulties and delays were experienced in the year-end close-out process for the Organization s books and records. The Organization has since taken appropriate action to reestablish its personnel structure and to gain necessary knowledge of complex areas of accounting. Recommendation: The Organization has been able to reestablish the Finance Department with appropriate personnel in order to close out the fiscal 2016 books and records and to address other immediate needs. Revisions of policies and procedures are inherent in this process, for which we recommend careful review and written documentation. Management s Response: The Organization has now been at full staff for over 60 days, and cross training and succession planning have been initiated by current leadership. Updated internal control procedures in association with personnel changes, together with documentation of such changes, is in process. Statement of Condition : Although timeliness was enhanced considerably as compared to prior year submissions, required quarterly reports were not filed timely with the Florida Department of Agriculture and Consumer Services, Office of Energy ("DACS-OOE"). Recommendation: DAS-OOE acknowledged that a contract revision is being considered to provide additional time for the Organization to submit the required reports. The Organization should continue to work with DACS- OOE to ensure the contract is amended to allow for more reasonable submission deadlines. Management s Response: Management will continue to work with DACS-OOE to amend the contract to reflect quarterly and annual submission deadlines no later than 45 calendar days following the quarterly reporting period. This will enable management to file within the reporting deadlines. 38

60 The Target Industry Update 2017 EXECUTIVE SUMMARY As required by Florida Statute , Enterprise Florida, Inc. and the Department of Economic Opportunity must undertake a comprehensive study every three years in order to determine the eligibility of Targeted Industries within the State of Florida. Used by many of the State s incentive programs, the Targeted Industry List provides a fact-based determination of industries and sectors that historically generate large returns on investment for statewide recruitment and expansion efforts. In order to meet statutory requirements, a Targeted Industry must possess six characteristics: future growth, stability, high wage, market & resource independence, industrial base diversification, and positive economic impact. Currently, Florida targets all qualifying Corporate Headquarters, Research & Development, and Manufacturing projects. Global Logistics & Trade also connects with many of Florida s current Targeted Industries and is given special consideration according to Statute. In addition to these high-level sectors, the Targeted Industry List identifies Financial & Professional Services, Information Technology, Aviation & Aerospace, Defense & Homeland Security, Life Sciences, and Clean Technology as industries with the necessary distinctions to satisfy the above criteria. The study uses the North American Industry Classification System (NAICS) as a framework to define the sectors and industries listed above. In keeping with previous updates of the Target Industry List, the study analyzes the economic benefit of each of the Targeted Industries in Florida. Special attention is paid to payrolls relative to the national average and employment growth as indicators of industry health and performance. A considerable amount of the research is derived from government agencies such as the Bureau of Labor Statistics, while industry reports and other sources have been aggregated to highlight specific strengths within the State. Through careful evaluation of workforce, opportunities for growth, and competitive advantages, the study suggests that the current Target Industry List has been highly successful in Florida. Enterprise Florida Board Executive Committee Meeting November 29, 2016

61 The Target Industry Update 2017 Only businesses able to locate in other states and serving multi-state and/or international markets are targeted. Retail activities, utilities, mining and other extraction or processing businesses, and activities regulated by the Division of Hotels and Restaurants of the Department of Business and Professional Regulation, are statutorily excluded from consideration. All projects are evaluated on an individual basis and therefore operating in a target industry does not automatically indicate eligibility. MANUFACTURING (31-33) Food Manufacturing (311) Beverage Manufacturing (312) Textile Mills (313) Textile Product Mills (314) Apparel Manufacturing (315) Leather and Allied Product Manufacturing (316) Wood Product Manufacturing (321) Paper Manufacturing (322) Printing and Related Support Activities (323) Petroleum and Coal Products Manufacturing (324) Chemical Manufacturing (325) Plastics and Rubber Products Manufacturing (326) Nonmetallic Mineral Product Manufacturing (327) Primary Metal Manufacturing (331) Fabricated Metal Product Manufacturing (332) Machinery Manufacturing (333) Computer and Electronic Product Manufacturing (334) Electrical Equipment, Appliance, and Component Manufacturing (335) Transportation Equipment Manufacturing (336) Furniture and Related Product Manufacturing (337) Miscellaneous Manufacturing (339) GLOBAL LOGISTICS & TRADE Wholesale Trade (42) Merchant Wholesalers, Durable Goods (423) Merchant Wholesalers, Nondurable Goods (424) Wholesale Electronic Markets and Agents and Brokers (425) Transportation and Warehousing (48-49) FINANCE & INSURANCE Credit Intermediation and Related Activities (522) Securities, Commodity Contracts, and Other Financial Investments and Related Activities (523) Insurance Carriers and Related Activities (524) Funds, Trusts, and Other Financial Vehicles (525) INFORMATION TECHNOLOGY Publishing Industries (except Internet) (511) Motion Picture & Sound Recording Industries (512) Telecommunications (517) Data Processing, Hosting & Related Services (518) Other Information Services (519) PROFESSIONAL, SCIENTIFIC & TECHNICAL SERVICES (54) CORPORATE HEADQUARTERS Management of Companies and Enterprises (55) OTHER Educational Services (611) Medical & Diagnostic Laboratories (621) Space Research & Technology (927) ADMINISTRATIVE & SUPPORT SERVICES (561)* Enterprise Florida Board Executive Committee Meeting November 29, 2016 *Excludes 5611 and 5614 unless otherwise permitted in F.S.

62 Investor Membership Renewals Craig Technologies Carol Craig Founder & CEO Florida Realtors Maria Wells President-elect Kaplan, Inc. Andy Rosen Chairman Odebrecht Construction, Inc. Alessandro Dias Gomes President Enterprise Florida Board of Directors Meeting November 30, 2016

63 New Board Investor Kirk G. Boylston President Lakewood Ranch Commercial Realty Kirk G. Boylston joined the LWR Commercial Team in March 2014 as President. He has a broad background in commercial real estate, including mixed use, industrial, office and retail development. As a Siesta Key native and graduate of the University of Florida, he knows the area well and believes there is tremendous potential in showcasing and promoting Lakewood Ranch's commercial real estate, considering the many attributes within the Ranch and its surroundings that make the area uniquely attractive for companies to locate. Boylston moved from Las Vegas where he ended his tenure as regional director of EJM Development Co., responsible for the company's operations in Southern Nevada, which includes a portfolio of more than 5 million square feet of leased industrial, office and retail property. Prior to his work in Las Vegas, Boylston held several positions in development, sales, acquisitions, leasing representation and fiscal management at companies located in Southern California. Enterprise Florida Board Executive Committee Meeting November 29, 2016

64 New Board Investor Representative Holly Borgmann Director, Government Affairs ADT Relatively new to the security industry, Holly Borgmann sees the Internet of Things as a great opportunity for both customers and employers. Borgmann joined the industry in 2013, shortly after ADT split from Tyco. She worked in government affairs, but in different industries. The security industry [is] changing a lot. With the Internet of Things, and so many technological advances, you really need to keep pace with all of that, Borgmann said. So, it s been interesting to see regulation and legislation try to keep up with technology that s a big priority for us here. The IoT has potential to bring in more customers, she said, Because now people who maybe weren t interested in a traditional security offering are interested in home automation features and, as an add-on, they re looking at security for the first time. The Internet of Things also opens the industry up to a more diverse group of people, including younger applicants, with different skillsets than traditional installers, she said. Previously, you might have had to have been licensed as an electrician to do work on a security system. Whereas, now, you could come to the security industry with a great technological background, but not necessarily a traditional trade, and find a spot for you in this industry. From Borgmann s perspective, licensing and regulation can play a role in bringing younger generations into the installing side of the industry. She gave a specific example from Washington, [there,] you need to be licensed as an electrician, with over 4,000 hours of experience, before you can install a security system. If you come out of a tech trade program, you have 2,000 hours of experience, and are probably more than qualified to do the Internet of Things work and the high-tech work of today, she said. This can keep young applicants out if they want to start work in the industry sooner. Enterprise Florida Board Executive Committee Meeting November 29, 2016