Attach 1 - 2019-7-2 Final Audit Report and financials.pdf

U.S. Coast Guard Base Honolulu

Honolulu, Hawaii Morale, Well-Being and

Recreation Program

Financial Statements and Supplementary Information

January 31, 2019

Morale, Well-Being and Recreation Program

Table of Contents

Page

Report of Independent Auditors

Statement of Financial Position 1

Statement of Activities 2

Statement of Cash Flows 3

Statement of Functional Revenues and Expenses 4

Notes to Financial Statements 5-7

Supplementary Information

Accounts Receivable and Accounts Payable Aging Schedules 8-9

Independent Auditors Report on Internal Control Over Financial Reporting and on Compliance and Other Matters 10-11

Schedule of Findings 12

Report of Independent Auditors

Morale, Well-Being and Recreation Regional Director Honolulu, Hawaii

We have audited the accompanying financial statements of the U.S. Coast Guard Base Honolulu Morale, Well-Being and Recreation Program (the “Organization” or the “MWR Program”), a non-appropriated fund instrumentality of the U.S. Coast Guard, which comprise the statement of financial position as of January 31, 2019, and the related statements of activities, cash flows, and functional revenues and expenses for the year then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with the modified accrual basis of accounting described in Note 2; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to the financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Assets

Current Assets Cash $ 219,351 Accounts receivable 5,534 Inventory 15,129 Other assets 1,436

Total assets $ 241,450

Liabilities and Net Assets

Current Liabilities Accounts payable $ 7,288 Unearned sponsorships 4,250 Accrued expenses 4,188

Total liabilities 15,726

Net Assets without donor restrictions 225,724

$ 241,450

See report of independent auditors and notes to financial statements.

Statement of Financial Position

U.S. Coast Guard Base Honolulu Honolulu, Hawaii

Morale, Well-Being and Recreation Program

January 31, 2019

Revenues $ 197,755

Cost of Goods Sold 79,651

Gross profit 118,104

Direct Expenses Salaries and payroll taxes 79,482 Equipment and supplies 11,468 Insurance 4,287 Credit card fees 3,594 Other 968

Total direct expenses 99,799

Other Revenue Coast Guard picnic 9,230 Oahu Base Unit contribution 2,005 Wailupe membership 2,216 Advertising income 1,500 Other income 1,935

Total other revenue 16,886

Other Expenses Coast Guard picnic 11,235

Increase in net assets 23,956

Net Assets, beginning of year 201,768

Net Assets, end of year $ 225,724

See report of independent auditors and notes to financial statements.

U.S. Coast Guard Base Honolulu Honolulu, Hawaii

Morale, Well-Being and Recreation Program Statement of Activities for the year ended January 31, 2019

Cash Flows from Operating Activities Increase in net assets $ 23,956 Adjustments to reconcile increase in net assets to net cash provided by operating activities:

(Increase) Decrease in:

Accounts receivable 1,122 Inventory (2,599) Other assets 22 Increase (Decrease) in:

Accounts payable 4,167 Unearned sponsorships (387) Accrued expenses 3,557

Net cash provided by operating activities 29,838

Cash, beginning of year 189,513

Cash, end of year $ 219,351

See report of independent auditors and notes to financial statements.

U.S. Coast Guard Base Honolulu Honolulu, Hawaii

Morale, Well-Being and Recreation Program Statement of Cash Flows

Club 14 Facility Rental Gear Rental Total

Revenues $ 170,912 $ 25,867 $ 976 $ 197,755

Cost of Goods Sold 79,651 0 0 79,651

Gross profit 91,261 25,867 976 118,104

Direct Expenses Salaries and payroll taxes 79,482 0 0 79,482 Equipment and supplies 10,374 1,094 0 11,468 Insurance 4,287 0 0 4,287 Credit card fees 3,594 0 0 3,594 Other 968 0 0 968

Total direct expenses 98,705 1,094 0 99,799

Excess (Deficiency) of functional revenues over expenses $ (7,444) $ 24,773 $ 976 $ 18,305

U.S. Coast Guard Base Honolulu Honolulu, Hawaii

Morale, Well-Being and Recreation Program Statement of Functional Revenues and Expenses

See report of independent auditors and notes to financial statements.

Notes to Financial Statements

1. Nature of Activities

Nature of Activities – The U.S. Coast Guard Base Honolulu Morale, Well-Being and Recreation Program (the “Organization” or the “MWR Program”) is a non-appropriated fund instrumentality of the U.S. government with the mission to uplift the spirits of the Coast Guard family and be an essential element of the Coast Guard mission readiness and retention through customer-owned and driven MWR programs and services.

MWR activities are divided into three categories: Category A, containing those activities that are considered most important for the health and well-being of the military member;

Category B, containing those activities that satisfy the basic physiological and psychological needs of Service members and families; and Category C, containing revenue-generating activities with the sale of goods and services that provide recreational activity, with the attendant morale benefit.

MWR activities derive their funding from both appropriated and non-appropriated sources, depending upon the category of the MWR activity. Non-appropriated funds are derived primarily from Coast Guard Exchange System profits in addition to the revenues earned from the sale of goods and services through the various MWR activities.

2. Summary of Significant Accounting Policies

Basis of Presentation – The accompanying financial statements have been prepared in accordance with standards and procedures established by the U.S. Coast Guard set forth in the NONAPPROPRIATED FUND INSTRUMENTALITIES (NAFI) MANUAL, COMDTINST M7010.5C and other directives.

The MWR Program utilizes the accrual basis of accounting, modified as follows:

Fixed Assets and Depreciation – The method of accounting for asset purchases conforms to the requirements of the NONAPPROPRIATED FUND INSTRUMENTALITIES (NAFI) MANUAL, COMDTINST M7010.5C. Fixed (non-consumable) assets are not reflected in the accounts of the MWR Program as capital items. Rather, they are deducted as a current operating expense in determining net income.

This procedure differs from accounting principles generally accepted in the United States of America which requires that the cost of fixed assets be recorded and carried in the accounts as assets. The cost of these assets is then charged against operating income ratably over their estimated useful lives.

Notes to Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Additionally, in accordance with U.S. Coast Guard regulations, the MWR Program is provided with land and buildings for their use and some of its equipment and utilities are provided for operations from general government (appropriated) sources. Repairs and maintenance of these assets are provided by appropriated funding. No cost for the use of government-owned assets is included in the financial statements.

Revenue and Expense Recognition – The Organization utilizes the accrual basis of accounting for recognizing revenue and expenses.

Appropriated Personnel – The MWR is currently served by individuals whose salaries are paid directly by an appropriation in the annual budget of the U.S. Coast Guard. The salaries for these individuals are not included in the financial statements.

Cash – Cash, as presented in the statement of financial position, consists of amounts on hand and in demand bank accounts without restricted access.

Accounts Receivable – Accounts receivable consists of amounts related to facility rental revenue and amounts to be fully reimbursed from the Hideaway Club at USCG Air Station Barbers Point for payroll expenses incurred.

Inventory – Inventory consists of food, liquor, and beverages and is stated at the lower of cost or net realizable value, with cost being determined by the first-in, first-out method.

Other Assets – Other assets consists of prepaid insurance that is amortized over the applicable term.

Accounts Payable – Accounts payable consists of amounts due to vendors in relation to inventory purchases and other operating expenses, of which $29 represents related party payables.

Unearned Sponsorships – Unearned sponsorships consists of amounts received in advance from sponsors to be used at special events to be held in the future.

Accrued Expenses – Accrued expenses consists of payroll, taxes, and benefits for the last pay period of the fiscal year, and earned and unused vacation leave.

Income Taxes – A morale fund is an instrumentality of the federal government. As such, it is exempt from taxing authorities. The MWR Program functions and profits are exempt from the provisions of the Internal Revenue Code. Additionally, the MWR Program is not subject to direct taxation by state or local taxing authorities.

Notes to Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Management 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, disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates.

Subsequent Events – Management of the Organization has evaluated subsequent events, for recognition or disclosure through July 2, 2019, the date the accompanying financial statements were available to be issued.

3. Inventory

Inventory consists of consumable food, liquor, and beverage items at the Club 14 restaurant.

Inventory is as follows as of January 31, 2019:

Food $ 12,162 Liquor 2,362 Beverages 605

$ 15,129

Supplementary Information

Accounts Payable Aging as of January 31, 2019

See report of independent auditors

Accounts receivable consisted of the following at January 31, 2019:

Jammer's Volleyball Club Facility Rental

December 2018 $ 2,115 January 2019 3,169

Total facility rentals 5,284

JN Chevrolet - November 2017 250

Total accounts receivable $ 5,534

Accounts Payable Aging as of January 31, 2019

See report of independent auditors

0 - 30 31 - 60 61 - 90 > 90 Total

Aloha Packaging & Supply $ 525 $ 0 $ 0 $ 0 $ 525 Coast Guard Exchange System 29 0 0 0 29 Chef Zone 76 0 0 0 76 The Yerga Mate Co., LLC 173 0 0 0 173 HFM Food Service 6,485 0 0 0 6,485

Total $ 7,288 $ 0 $ 0 $ 0 $ 7,288

Independent Auditors Report on Internal Control Over Financial Reporting and on

Compliance and Other Matters Based on an Audit Performed in Accordance with Government Auditing Standards

Morale, Well-Being and Recreation Regional Director

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 financial statements of the U.S. Coast Guard Base Honolulu Morale, Well-Being and Recreation Program (the “Organization” or the “MWR Program”), which comprise the statement of financial position as of January 31, 2019, and the related statements of activities and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated July 2, 2019.

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, 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 opinion on the 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 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 have not been identified. Given these limitations during our audit, we did not identify any deficiencies in internal control that we consider to be a material weakness or significant deficiencies.

Schedule of Findings

Section I. Summary of Auditor’s Results

Financial Statements

Type of auditor’s report issued: Unmodified

Internal control over financial reporting:

Material weakness(es) identified? No Significant deficiencies identified that are not considered to be material weakness(es)? No

Noncompliance material to the financial statements noted? No

Section II. Financial Statement Findings

None Noted