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HomeMy WebLinkAboutMINUTES - 10052004 - C49 TO: BOARD OF SUPERVISORS '` Contra Costa FROM: JOHN SWEETEN, � �� County Administrator County DATE: October 5, 2004 iIla SUBJECT. Report on the Dissolution of the Contra Costa Convention and Visitors Bureau SPECIFIC REQUEST(S)OR RECOMMENDATION(S)&BACKGROUND AND JUSTIFICATION RECOMMENDATION RECEIVE report on the dissolution of the Contra Costa Convention and Visitors Bureau. BACKGROUND: At the urging of Supervisor DeSaulnier, the CAM's office, in consultation with County Counsel staff, has prepared this report that addresses the legal and financial issues pertaining to the dissolution of the Contra Costa Convention and Visitors Bureau. The Contra Costa Convention and Visitors Bureau is a nonprofit mutual benefit corporation organized on January 1, 1984. The Bureau is currently undergoing a process of dissolution. The Bureau's main function was to promote Contra Costa County, its hotels, and City of Concord hotels as desirable destinations for tourists, conventions, conferences and seminars. For this purpose, it received funds from the City of Concord and Contra Costa County, which derived transient occupancy tax and sales revenue from the hotels represented by the Bureau, and whose combined contributions represented the Bureau's major source of income. Private sector businesses provided a small amount of revenue through membership dues. On July 29, 2004, the Board of Directors of the Contra Costa Convention and Visitors Bureau was informed that the City of Concord would no longer provide financial support to the Bureau. Prior to this meeting, on August 2, the CAO had informed the Bureau that it would recommend to the Board of Supervisors a reduction of its financial support for FY 2004-05 from $205,298 to $105,398. Under these financial conditions, the Board of Directors determined that the Bureau could not continue to operate. The Board of Directors, therefore, took action at its July 29 meeting to cease operations effective August 31, 2004, retain legal counsel for the dissolution process, and offer a severance package to its two remaining employees. CONTINUED ON ATTACHMENT: X YES SIGNATURE: 71 RECOMMENDATION OF COUNTY ADMINISTRATOR RE MENDATION OF BOARD COMMITTEE APPROVE OTHER SIGNATURE S): ACTION OF BOARD ON %# /;y ( art , � {�! APPROVED AS RECOMMENDED OTHER VOTE OF SUPERVISORS I HEREBY CERTIFY THAT THIS IS A TRUE AND CORRECT 1 r_ COPY OF AN ACTION TAKEN AND ENTERED ON MINUTES OF A UNANIMOUS(ABSENT THE BOARD OF SUPERVISORS ON THE DATE SHOWN. f �'s �'�„�,;, r,- } AYES: NOES: — ASSENT: ABSTAIN: Contact: — — r- S s 'A Cc: County Counsel ATTESTED `. h .t Concord City Manager JOHN SWEETEN,CLERK OFE BOARD O SUPERVISORS r tAI y 7 �A BY: � iv ' _ DEPUTY The Bureau is organized as a Nonprofit Mutual Benefit Corporation. Section 5.1.1 of the Bylaws makes the Bureau's operations subject to the laws governing these, which is Corporations Code 7110 et seq. The Bureau's original decisions on July 29 to initiate dissolution and grant severance packages to its two employees were taken in an irregular manner, however, the Bureau's Board of directors has since taken steps to correct these deficiencies. The action to ratify the decisions made at the July 29 meeting regarding the award of severance packages and the retention of legal counsel was passed at the August 16, 2004 meeting. The formal initiation of the dissolution process, which requires Bureau membership concurrence, was also passed at the August 16 meeting. The decisions whether to award severance packages and determine the amounts of these appear to be within the discretion of the Bureau's board of directors. To the extent that discretion is abused, the directors could be held personally liable for inappropriately dissipating Bureau funds. In addition, the District Attorney, in response to the City of Concord's request for review, found that a a private nonprofit corporation, the funds it receives from public agencies are no longer under the control of a public agency. However, according to the Bureau's bylaws, any remaining funds after dissolution would be returned to the City and County based on a share of average contributions. At the end of the 2003-2004 fiscal year, the total fund balance for the Bureau was $252,011. (See Attachment A, Financial Statements, June 30, 2004.) On September 23, 2004, the cash remaining after the payment of the severance packages ($121,231.71), final salary expenses, equipment leases, and other monthly expenses was $53,173.55. Several outstanding expenses remain to be settled: the office lease, the copier lease, final auditing services, additional legal services, and records storage. The office lease buy-out may be the most costly item to resolve. In May 2004, the Bureau had re- signed a three-year lease agreement with the landlord at the rental rate of $2,843 per month, increasing 5% on an annual basis. A lease buy-out has been proposed by the landlord and is in the process of negotiation. The copier lease buy-out cost $1,100 plus $400 for shipping. The phone system cost $2,100 for the lease buy-out. The postage machine cost $900 for the lease buy-out. Any furniture that could not be sold would be donated to Hospice. With respect to record storage requirements, a cost estimate of $1,000 has been proposed for records storage with the Wine Train for a period of seven years. The chair of the beard has agreed to act as the legal custodian of the records; an agreement to this effect will be drafted by the law firm retained. In terms of distributing any remaining funds after the final expenses are paid, the Bylaws specifically provide a distribution upon dissolution of the corporation. The Bylaws stipulate that the assets shall be disposed of by a distribution to the governmental entities that contributed to the Bureau based on an average of the last three years of contributions received immediately preceding the dissolution. The calculation of contributions shall be based on an audited statement paid by the Bureau. Based on the contributions of both the City of Concord and the County over the last three years, the percent of any remaining funds would be approximately 44% to the County and 56% to the City. The outcome of the office lease buy-out negotiations will largely determine how much money the County will receive of any accumulated fund balance. However file storage costs, which are unknown at this time, final auditing expenses (estimated to be $3,800), and final legal expenses will also impact the reimbursement. Therefore, the final disbursement to the County is expected to be minimal. fl i Contra Costa Convention and Visitors Bureau Financial Statements June 30, 2004 Christopher W. Grow, CPA 101 Gregory Lane, Suite 37 Pleasant Hill, CA 94523 925.685-1987 CONTRA COSTA CONVENTION AND VISITORS BUREAU CONTENTS Financial statements : nage Independent Auditor' s Report I Balance Sheet 2 Statement of Revenues And Expenditures ? Statement of Changes in Fund Balances 4 Statement of Casa Flows 5 Statement of Expenditures (Schedule A) 6 Notes to Financial. Statements 7-8 GROW Certifies! Public Accountant Independent Auditor' s Report Board of Directors Contra Costa Convention and Visitors Bureau Concord, California I have audited the accompanying balance sheet of the CONTRA COSTA. CONVENTION AND VISITORS BUREAU (a nonprofit corporation) as of June 30, 2004, and the related statements of revenues and expenditures, fund balances, and cash flows for the year then ended. 'These financial statements are the responsibility of the Bureau' s management . My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with generally accepted auditing standards . Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement . An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements . An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Contra Costa Convention. and Visitors Bureau as of June 30, 2004, and the results of its operation and its cash flows for the year then ended in the conformity with generally accepted accounting principles . My report was made for the purpose of forming an opinion on the financial statements taken as a whole . The budget information on panes 3 and 6 is presented for the purpose of additional analysis and is not, a required part of the basic financial statements . Such information has not been subject to the auditing procedures applied in the audit of the basic financial statements, and, accordingly, I express no opinion ori it . Christopher W. Grow, CPA September 3 , 2004 101 Gregory lane, Suite 37 Pleasant}-fill, CA 94523-4915 (925)685-1987 FAX(925) 685-6409 CONTRA COSTA CONVENTION AND VISITORS BUREAU BALANCE SHEET June 30, 2004 General Equipment Fund Fund Total ASSETS Current Assets : Cash on hand $ 100 $ 100 Cash in bank 262 , 260 252 , 260 Accounts receivable 1, 064 1, 054 Prepaid expenses 4 , 582 4, 582 Total Current assets 258 , 005 258 , 005 Office furniture and equipment, less accumulated depreciation of $24, 666 (Note 3) $9, 963 9, 963 Security Deposit 1, 950 -- 11950 $269, 955 11,963 $279 , 919 LIABILITIES AN:'D. FUND BALANCES Current Liabilities : Accounts payable $ 12 , 408 $ 12 , 408 Trust Liability (Buy Concord) 15, 000 15, 000 Unearned membership dues 500 500 Total current liabilities 27 , 908 27 , 908 Commitments (Note 4) Fund Balances : Equipment Fund $9, 963 9, 953 General Fund 242 , 048 242, 048 Total fund balances 242, 048 9, 953 252 , 011 $269, 956 9 953 $279 . 91.9 See accompanying notes to financial statements . 2 CONTRA COSTA CONVENTION AND VISITORS BUREAU STATEMENTS OF REVENUES AND EXPENDITURES - COMBINED FUNIS Actual. and Budget For the year ended June 30, 2004 Actual Over (Under) Actual Budget Budget Revenues : Contract with City of Concord $282 , 949 $282 , 949 $ -0- Contract with Contra Costa County 228, 219 228, 219 -0-- Membership dues 27, 468 31, 000 (3 , 532) Interest income 3 , 353 5, 000 (1 , 647) other income 170 -0- 170 Total revenues 542 , 159 547, 168 (5 , 009) Expenditures : (See Schedule A) 523 , 568 547, 1.6.8 (23 , 600) Excess of revenues over expenditures $ 18 , 5.91 S -0- $ 18 , 591. See accompanying nates to financial statements . 3 CONTRA COS'T'A. CONVENTION AND 'VISITORS BUREAU STATEMENT OF CHANGES IN FUND BALANCES For the year ended Cune 30, 2004 General Equipment Fund Fund 'Ictal Fund balances, beginning of year $222 , 393 $11, 027 $233, 420 Excess of revenues over expenditures 21, 591 (3, 000) 18, .591 Fund transfer - equipment purchases/disposals - net (11`936) 1, 936 -0- Excess of revenues over expenditures - combined 19, 655 (1, 064) 18, 591 Fund balances, end of year $242, 048 12,963 x$252 , 011 See accompanying notes to financial statements . 4 CONTRA COSTA CONVENTION AND VISITORS BUREAU STATEMENT OF CASH FLOWS - COXBINEU FUNDS For the year ended dune 30, 2004 Increase (Decrease) in Cash and Cash Equivalents Cash Flows from Operating Activities : Excess of revenues over expenditures $ 18, 591 Adjustments to reconcile to net cash used by operating activities : Depreciation 3 , 000 Changes in asset and liabilities - net : Accounts receivable 5 , 1.33 Prepaid expenses 21.9 Accounts payable (2 , 058) Unearned membership dues (3, 591) Total adjustments 2 , 703 Net cash provided by operations 21, 294 Cash Flow from Ingesting Activities : Purchase of equipment Cash Flow from Financing Activities : Trust monies for Buy Concord 18, 000 Trust payment for Buy Concord 1%3 , 000) Total cash provided by financing 15 , 000 Net increase in cash and cash equivalents 34 , 358 Cash and cash equivalents at beginning of year 228 , 002 Cash and cash. equivalents at end of year62 , 360 See accompanying notes to financial statements . 5 CONTRA COSTA CONVENTION AND VISITORS BUREAU STATEMENT OF EXPENDITURES - COMBINED FUNDS For the year ended June 30 2004 SCHEDULE A - EXPENSES Actual Over (Under) Actual Budget y_ Budget Salaries $242, 397 $248, 302 $ (5 , 905) Accounting services 2 , 059 2 , 500 (441) Advertising 28 , 224 38, 000 (9 , 776) Audio visual --0- 1, 000 (1 , 000) Audit 2 , 300 2 , 400 (100) Duets and subscriptions 6, 132 6, 500 (368) Equipment maintenance 550 2 , 000 (1 , 450) Mileage 14, 240 12, 000 2 , 240 Office supplies 7, 501 6, 000 1 , 501 Postage 3 , 705 _ 6, 000 (2 , 295) Printing 3, 571 6, 500 (2 , 929) Promotional materials 15 ,.305 33 , 000 (17 , 695) Membership promotion 4, 132 4, 500 (368) Convention sales 55, 702 50, 350 5 , 352 Seminars 5 , 841 7, 500 (1 , 659) Taxes & Fees 110 -0- 1.10 Payroll taxes 16, 411 19, 016 (2 , 605) Retirement 21, 357 21, 357 -0- Health insurance 15 , 824 15, 000 824 Liability insurance 4 , 549 2 , 000 2 , 549 Workers compensation. insurance 5, 473 5, 423 50 Office lease 34 , 633 35, 820 (1 , 187) Telephone 15, 293 11, 000 4 , 293 Utilities 3 , 118 41000 (882) Bank fees 5 -0- 5 Equipment rental 4 , 981 6, 000 (1 , 019) Furniture acquisition --0- 1, 000 (11000) Depreciation 3 , 000 -0- 3 , 000 Professional fees 7 , 155 -0- 7 , 155 Total expenses $523 , 568 $547 , 168 $ (23 , 600) See accompanying notes to financial statements . 6 CONTRA COSTA CONVENTION AND VISITORS BUREAU NOTES TO FINANCIAL STAT"'EMEN'T"S For the year ended June 30, 200.4 NOTE I ORGANIZATION AND DISCONTINANCE OF OPERATIONS The Contra Costs. Convention and Visitors Bureau is a nonprofit corporation organized January 1, 1984 . The Bureau' s main function is to promote the local area as a desirable destination for tourists, conventions, conferences and seminars . For this purpose, it receives funds from the City of Concord and Centra Costa County which combined represents its primary source of income. Due to funding cutbacks, the Bureau will discontinue operations as of August 31, 2004 . NOTE 2 - SUMYARY OF SIGNIFICANT ACCOUNTING ?POLICIES a) Accounting basis The financial statements of the Bureau are prepared on the accrual basis whereby revenues, other than contributions, are recognized when earned and expenditures are recognized when incurred. b) Fund Accounting To ensure observance of limitations and restrictions placed on the use of the resources available to the organiza�ion, the accounts of the organization are maintained in accordance with the principles of .fund accounting . This is the procedure by which resources for various purposes are classified for accounting and reporting purposes into funds established according to their nature and purpose . Separate accounts are maintained for each fund; however, in the accompanying financial statements, funds that have similar characteristics have been combined into fund groups . Accordingly, all financial transactions have been recorded and reported by fund group. c) Description and purpose of funds The Bureau maintains two funds : The General Fund and the Equipment Fund. The general fund represents an expendable fund that is available for support of the Bureau ' s operations. The equipment fund is stated at cost . Maintenance and repairs are expensed. When assets are sold or retired, the related cost and accumulated depreciation is removed from the accounts and any gain or loss is recognized in the current year. Depreciation is provided on the straight-line method over the estimated useful life of 7 CONTRA COSTA CONVENTION AND VISITORS BUREAU NOTES TO FINANCIAL STATEMENTS For the year ended June 30, 2004 NOTE 2 - STJMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) the equipment of five years . General funds used for equipment acquisitions are treated as transfers from the general fund to the equipment fund. d} Income taxes The organization has been granted nonprofit status by bath the federal government and the State of California. Therefore, no provisions for income taxes have been made . NOTE 3 - FURNITURE AND EQUIPMENT A summary of furniture and equipment is as follows : Acquisition Accumulated Book Cost Depreciation Value Furniture and equipment $34 , 629 $24, 056 $9 , 963 Current year acquisitions are $1, 936 . Current year depreciation is $3 , 000 . NOTE 4 - LEASE COMMITMENTS On April 20 , 1999 the Bureau entered into a 36-month lease arrangement for approximately 1445 square feet of general office space . The original lease was amended three times . The third amendment extended the lease for three year on the following schedule: Number of months remaining Monthly rent 12 mos . from June 1, 2004 to May 31, 2005 $2, 843 12 mos . from June 1, 2005 to May 31, 2006 $2, 985 12 mos . from June 1, 2006 to May 31, 2007 $3, 135 The total remaining commitments are as follows : Year Amount 2004 - 2005 $34, 258 2005 - 2005 $35, 970 2006 - 2007 $34, 485 8