B~:9WARD COUNTY FLORIDA Exhibit 1 Office of the County Auditor 115 S. Andrews Avenue, Room 520 Fort Lauderdale, Florida 33301 954-357-7590 FAX 954-357-7592 April 2, 2015 TO: FROM: The Mayor and Members, Board of County Commissioners Evan A. Lukic, Coun~ SUBJECT: Slot Machine Revenues - Follow-Up Review, Report 09-02 This memorandum presents the results of our review of management's progress in addressing the recommendations from our report, Review of Slot Machine Revenues, dated February 25, 2009, Appendix A, (Report 09-02). In our 2009 report, we recommended that; 1) procedures be implemented to ensure slot machine revenues received are reconciled with the pari-mutuel revenue reports generated by the Florida Department of Business and Professional Regulation, Division of Pari-Mutuel Wagering (DBPR) and, 2) annual audited financial statements from all pari-mutuel facilities be obtained in accordance with Article 9, Section 9.1 of the respective agreements. Our current review disclosed that the Accounting Division was reconciling slot machines revenues received to pari-mutuel revenue reports generated by the Florida DBPR. We reviewed the reconciliations for the period October to December 2014, and found no exceptions. Based on the reconciliation process, obtaining annual audited financial statements (our second recommendation) was deemed unnecessary. Background In 2005 Broward County voters authorized operation of slot machines at the following pari-mutuel facilities: Mardi Gras Racetrack and Gaming Center Gulfstream Park Racing Association Dania Jai Alai Pompano Park Racing Three 1 pari-mutuel facilities began slot operations in fiscal year 2007. Pursuant to agreements with the County each pari-mutuel facility pays the County 1.5% of gross slot revenues to support County provided services including Mass Transit, law enforcement, human services and tourism promotion. As of September 30, 2014 the County has received approximately $25.8 million in revenues from the pari-mutuel facilities since inception of slot machine operations. 1 Dania Jai Ali started slot operations on February 20, 2014 Broward County Board of County Commissioners Mark D. Bogen Beam Furr Dale V.C. Holness Martin David Kiar Chip LaMarca Stacy Ritter Tim Ryan Barbara Sharie! Lois Wexler Broward.org
Slot Machine Revenues - Follow-Up Review, Report 09-02 April 2, 2015 Page 2 For the year ended September 30, 2014, gross slot machine revenues for the four parimutuels totaled $237.7 million and the County received payments totaling $3,565,268. The number of slot machines in each facility, gross slot machine revenues reported and payments to the County during fiscal year 2014 are shown in Table 1 below: Table 1: Summary of Pari-Mutuel Slot Machines, Gross Revenues and Payments received by the County Pompano Mardi Gras Gulfstream Dania Jai Ali Total Number of slot machines Pari-Mutuel's Slot Machine Gross Revenues Payments received by the County 1,455 $133,358,159 $ 2,000,373 972 $49,601,808 $744,027 888 $47,370,416 $710,556 516 $ 7,354, 149 $110,312 3,831 $237,684,532 $3,565,268 Source: Summary of Slot Revenue Reports submitted to the Accounting Division by pari- mutuels and DBPR website. EAL/ff /besa
APPENDIX A Our Previous Report 09-02, Review of Slot Machine Revenues Dated February 25, 2009 BR'OWARD ' COUNTY FL 0 RI DA Review of Slot Machine Revenues February 25, 2009 Report No. 09-02 Office of the County Auditor Evan A. Lukic, CPA County Auditor
Table of Contents Topic Page Executive Summary... 3 Purpose, Scope and Methodology... 3 Background... 3 Finding and Recommendations... 5 2
Executive Summary This report presents the results of our evaluation of management's controls over slot machine revenues received from Mardi Gras Gaming, Pompano Park Racing and Gulfstream Park (collectively referred to as pari-mutuel facilities). We concluded, the County accepts slot machine revenues from pari-mutuel facilities without verification. We recommend the Board direct the County Administrator to implement procedures to ensure slot machine revenues received are reconciled with the pari-mutuel revenue reports generated by the Florida Department of Business and Professional Regulation (DBPR), Division of Pari-Mutuel Wagering. Purpose, Scope and Methodology Our objectives were to determine whether controls exist to ensure slot machine revenues are remitted in accordance with the agreements and are properly recorded and expended. To accomplish our objectives, we: reviewed the agreements between Broward County and the Pari-mutuel facilities, interviewed Accounting staff to obtain an understanding of procedures used to process slot machine revenues, obtained and reviewed the State's process for reconciling slot machine revenues reported by pari-mutuel facilities to DBPR, Division of Pari-Mutuel Wagering,(the agency responsible for regulating pari-mutuel facilities), and recalculated slot machine revenues due to the County for October through December 2008. Our review focused on slot machine revenues received for fiscal year 2008. Background In 2005 Broward County voters authorized operation of slot machines at the following pari-mutuel facilities located in Broward County: Mardi Gras Racetrack and Gaming Center Gulfstream Park Racing Association Dania Jai Alai (No slot machines at this time) Pompano Park Racing 3
Pari-mutuel facilities began slot operations in Broward County during fiscal year 2007. Three of the pari-mutuel facilities have contracts with Broward County which require monthly payments to the County of 1.5% of gross slot machine revenues. Since inception of slot machine operations at the pari-mutuel facilities, the County has received approximately $6.4 million in revenues ($2 million, 53.6 million and $800,000 in fiscal years 2007, 2008 and 1 51 quarter of 2009, respectively). The number of slot machines in each facility and the amount collected by the County during fiscal year 2008 is provided in Table 1 below: Table 1: Number of Slot Machines and County Revenues for fiscal year 2008 Number of Machines/Revenue Pompano Mardi Gras Gulfstream Total Number of slot machines 1,500 1,443 825 3,768 County Revenues from Slot Machines 51,811,784 S1,159,737 5591,791 53,563,312 Source: Slot Revenue Report submitted to Accoun ting Division Slot Machine Revenue Collection Process Monthly, each facility remits a check with a spreadsheet (daily revenue stream) to the County's Accounting Division for the County's portion of slot machine revenue for the month. Accounting staff prepares its own spreadsheet for each facility to document the cash receipt number, date the check was logged in, check number and amount, and recalculates the County's portion to determine the accuracy of the check, i.e., 1.5% of gross slot revenues generated. Slot revenues are booked in the County 's General Fund and are used to support generally funded services identified in the agreement such as Mass Transit, law enforcement, human services, and tourism promotion programs. The State Revenue Monitoring Process Staff of the DBPR stated that state tax auditors are assigned to each pari-mutuel facility. The auditors perform daily reconciliations to the facility's revenue monitoring system. In addition, financial examiner analysts in Tallahassee perform monthly reconciliations of pari-mutuel slot machine revenues. The State generates revenue reports which are posted on the State's website at www.myflorida.com. 4
Finding and Recommendations Finding The County accepts slot machine revenues from pari-mutuel facilities without verification. Sound business practice dictates that the County should have measures in place to verify the revenues reported by the pari-mutuel facilities. Each month, the County's Accounting Division receives and processes slot machine revenues from Mardi Gras Gaming, Pompano Park Racing, and Gulfstream Park. The Accounting staff reperform the calculation of the County's share of gross slot machine revenues based on the amounts reported by each pari-mutuel facility. The County does not compare the reported gross slot revenues with the State of Florida nor does the County receive annual audited financial statements for each of the pari-mutuel facilities as required by Article 9, section 9.1 of the Agreement. Reconciliation of reported revenues to audited financial statements or to the gross revenues on the State's website would effectively reduce the risk of under reported revenues. Recommendations We recommend the Board of County Commissioners direct the County Administrator to: 1. Implement procedures to ensure slot machine revenues received are reconciled with the pari-mutuel revenue reports generated by the Florida DBPR, Division of Pari-Mutuel Wagering. 2. Obtain annual audited financial statements from all pari-mutuel facilities in accordance with Article 9, Section 9.1 of the Agreements. 5
County Auditor Board Action Agenda Item 21 April 14, 2015 21. MOTION TO FILE Memorandum on the Slot Machine Revenues - Follow-Up Review, Report 09-02. ACTION: (T-10:26 AM) Approved. VOTE: 9-0. Attachments Exhibit 1 - Memorandum on the Slot Machine Revenues