sTeOLDSTEIN™ Contract Number: C000063743 Independent Auditors’ Report’ Financial Statements: As of June 30, 2017 and for the contract period July 1, 2016 through June 30, 2017 December 12, 2016“TABLE OF CONTENTS INDEPENDENT AUDITORS’ REPORT PINANCIAL STATEMENTS: Balance Sheet Statement of Contract Revenues, Expenditures and Bund Balance Notes to Financial Statements SUPPLEMENTARY INFORMATION: Independent Auditors’ Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Statement of Budget to Actual Expenditures Schedule of Findings and Questioned Costs 78 10¥ JTGOLDSTEIN ACCOUNTANTS & QUSINESS ADVISORS. INDEPENDENT AUDITORS’ REPORT “To the Boned of Directors of Philadelphia 2016 Host Committee Philadelphia, PA Report on the Financial Statements We have audited the accompanying financial statements of the Philadelphia 2016 Host Committee, Economic Development & Community Development Initiative Program, Grant Contract Number: {€000063743, which comprise the balance sheet as of June 30, 2017, and the related statement of. contract revenues, expenditures and fund balance, for the conteact period from July 1, 2016 to June 30, 2017, 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 accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or etror, 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 financial audits contained in Goremment Auditing Standards, issued by the Comptroller General of the United States. Those standards reqnite 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 disclosuces in the financial statements, ‘The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or ettor. In making those risk assessments, the auditor considets internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedutes that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal conttol. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies wsed 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. STMT Suto. |) Olney Guar etsn MPN eedOpinion In out opinion, the financial statements referred to above present faitly, in all material respects, the financial position of the Philadelphia 2016 Host Committee, Economic Development & Community Development Initiative Program, Grant Contract Number: C000063743 as of June 30, 2017, and the changes of its fund balance for the contract period from July 1, 2016 through June 30, 2017, in. accordance with accounting principles generally accepted in the United States of Ametica, Report on Supplementary Information (Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. ‘The accompanying supplementary information shown on page 9 is presented for purposes of additional analysis as requited by the Peunsyhania Department of Community & Econons Developnnent Audit Guideline, and is not a requiied part of the financial statements, ‘The supplemental information is the responsibility of management and was derived from and telates ditectly to the underlying accounting and other records used to prepare the financial statements, Such information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information ditectly to the ‘underlying accounting and other records used to prepare the financial statements of to the financial statements themselves, and other additional procedures in accordance with auditing standards generally aceepted in the United States of America. In our opinion, the accompanying supplementary information is faisly stated, in all material respects, in relation to the financial statements as a whole, Other Reporting Required by Government Auditing Standards In accordance with Government Anditing Standards, we have also issued our report dated December 12, 2016 on our consideration of the Philadelphia 2016 Host Committee, Economic Development & Community Development Initiative Program, Grant Contract Number: C000063743's internal control over financial reporting and on onr tests of its compliance with cettain provisions of laws, regulations, contracts, and grant agreements and other matters. ‘The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting ot ‘on compliance. That report is an integral part of an audit performed in accordance with Goverment Auditing Standards io. considering the Philadelphia 2016 Host Committee, Economic Development & Community Development Initiative Program, Grant Contract Numbet; C000063743's internal control over financial reporting and compliance, ]QRrAttees ue Philadelphia, PA December 12, 2016‘Assets Philadelphia 2016 Host Committee Economic Development & Community Development Initiative Program Grant Contract Number: €0000637432. BALANCE SHEET Jane 30, 2017 ‘Current assets Cash snd cash equivalents ‘Total assets Liat ies Current labl Accrued expenses ‘Total labiltes Fund Balance “Total fund balance “Total lables and fund balance s “The accompanying notes are an integral pat ofthe financial statements. 3] PagePhiladelphia 2016 He Economie Development & Community Development Ini Grant Contract Number: C0000637432 Statement of Contract Revenues, Expenditures and Fund Balance For the contract year July 1, 2016 - June 30, 2017 Tox Support and Revenue: DCED Grant 8 ‘Total Revenue 10,000,000 Expenses: Event expenses: Venue license 5,775,000 Construction management 2,465,195, Construction 1,759,805, “Total expeases 10,000,000 Excess of revenue over expenses 7 Fund Balance: Beginning of contract : End of contract, 5, é “The accompanying notes are an integral part ofthe financial statements 4[PagePhiladelphia 2016 Host Committee Economie Development & Community Development Initiative Progtam Grant Contract Number: C0000637432, NOTES TO FINANCIAL STATEMENTS For the contract petiod July 4, 2016 - June 30, 2017 1, DESCRIPTION OF THE ENTITY "The Philadelphia 2016 Host Committee (“Philly 2016 HC) was established on December 23, 2014, as a nonprofit corporation in the Commonwealth of Pennsylvania. ‘The Philly 2016 HC was incorporated for the purpose of serving as a host committee for the 2016 Democratic National Convention, lessen the financial burden of state and local government, and promote economic and community growth and development. ‘The 2016 Democratic National Convention was held on July 25-28%, 2016 in Philadelphia, Pennsylvania, ‘The Pennsylvania Department of Community and Reonomic Development (‘DCED”) has appropriated $10,000,000 in funding under the Economic Development and Community Development Initiative Program to carry out the Philly 2016 HC’s and DCED?s shared goals. Accordingly, Contract #C000063743 was entered into by these two parties on July 7, 2016 to provide funds for infrastructure improvements and convention arena rental facilities, ‘The contract was subject to the requirements of the Pennsylvania Department of ‘Community and Economic Development audit guidelines, dated June 9, 2016. ‘The Economic Development and Community Development Initiative Program is « program utilized by DCED to undertake ways and means of promoting and encouraging the prosperous development of Pennsylvania business, industry and commerce of expanding markets, promoting developing new markets for Pennsylvania products, and to encourage the location and development of new business, industry and commerce within the Commonwealth of Pennsylvania. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation ‘The accompanying statement of contract revenues, expenditures and fund balance has been prepared in a format set fosth in the general terms and conditions of the Economic Development and Community Development Initiative Program grant contract and represent only a scleeted portion of the operations of Philly 2016 FIC. It not intended to, and does // not present the financial position, changes in net assets, oF cash flows of Philly 2016 HC. Revenue and expenses ate recognized using the accrual method of accounting in which revenue is recognized when earned and expenses when they are incutred. Revenue represents grant proceeds received from the DCED, under the terms of the contract. Expenses reflect those costs cligible under this contract. SiPaxePhiladelphia 2016 Host Committee Eeonomic Development & Community Development Initiative Program Grant Contract Number: C0000637432 ‘NOTES TO FINANCIAL STATEMENTS For the conttact period July 1, 2016 - June 30, 2017 3. ‘TAX POSITIONS “The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires Philly 2016 HC to report information regarding its exposute to various tax positions taken by the Philly 2016 HC. ‘The Philly 2016 HC applied for exempt status from federal income taxation under Section 501(€)@) of the Internal Revenue Code (“IRC”). The Internal Revenue Service ("IRS") challenged and ultimately denied the tax-exempt status. Management believes and has taken the position that Philly 2016 HC is exempt from federal income taxation under IRC 501 ()(6) and will be self-declating this status on annual tax filings. ‘There was no taxable income as of June 30, 2017 reported in these financial statements; therefore, no provision for income taxes has been included in the event the self- declaration is further challenged by the IRS. 4, INPUTED INTEREST Funds wete not invested into an interest bearing account, In accordance with DCED Audit guidelines, 2016 Philly HC is sequired to calculate imputed interest. The 2016 Philly HC received $10,000,000 and fully expended these amounts within nine days. eae imputed interest approximates $563, 5. SUBSEQUENT EVENTS Philadelphia 2016 Host Committee has evaluated all subsequent events for the Beonomic Development & Community Development Initiative Progtam, Grant Contract Number: 000063743 through the report issue date of December 12, 2016. Events occurring after that date have not been evalated to determine whether a change in the financial statements ‘would be requited. G]PageSUPPLEMENTARY INFORMATIONJTGOLDSTEIN™ [ACCOUNTANTS 8 BUSINESS ADVISORS. INDENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL, REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Board of Directors of Philadelphia 2016 Host Committee Philadelphia, PA We have audited, in accordance with the auditing standards generally accepted in the United States, of America and the standards applicable to financial audits contained in Goverument Auditing Standards issued by the Comptroller Genetal of the United States, the financial statements of Philadelphia 2016 Host Committee, Economic Development & Community Development Tnitiative Program, Grant Contract Number: €000063743, which comprise the balance sheet as of June 30, 2017, and the related statement of contract revenues, expenditures and fand balance, for the contract period from July 1, 2016 through June 30, 2017, and the related notes to the financial statements, and have issued our report thereon dated December 12, 2016. Internal Control over Financial Reporting To planning and performing our audit, we considered the Philadelphia 2016 Host Committee, Economic Development & Community Development Initiative Program, Grant Contract Number: €000063743’s internal control over financial reporting (internal control) to determine the audit procedutes 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 Philadelphia 2016 Host Committee, Economie Development & Community Development Initiative Program, Grant Contract Number: C000063743's internal control, Accordingly, we do not express an opinion on the effectiveness of Philadelphia 2016 Host Committee, Economic Development & Community Development Initiative Program, and Grant Contract Number: C000063743's internal control. A. deficiency in interval control exists when the design or operation of a control docs not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on 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 deficeng 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 fist paragraph of this section and was not designed to identify all deficiencies in internal control that might be material ‘weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses, However, material ‘weaknesses may exist that have not been identified. ACM SUG (ie cenaCompliance and Other Matters As part of obtaining reasonable assurance about whether the Philadelphia 2016 Host Committee, Economic Development & Community Development Initiative Program, Grant Contract Number: (000063743's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agceements, noncompliance with which could have a ditect and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. ‘The results of our disclosed and instance of noncompliance that ate required to be reported under Goverment Auditing ‘Standards and which are described in the accompanying schedule of findings and questioned costs as. item 2017-001. Philadelphia 2016 Host Committee's Response to Finding Philadelphia 2016 Host Committee's response to the finding identified in out audit is described in the accompany schedule of findings and questioned costs. Philadelphia 2016 Host Committee's response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it Purpose of this Report “The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the/” ‘entity's internal control or on compliance. This report is an integral part of an adit performed in accordance with Goverment Andiing Standards is. considering the entity's internal contol and compliance, Accordingly, this communication is not suitable for any other purpose ]Qeaete we Philadelphia, PA December 12,2016Philadelphia 2016 Host Committee Economic Development & Community Development Initiative Progtam Grant Contract Number: 0000637432 STATEMENT OF BUDGET TO ACTUAL EXPENDITURES For the contract period July 1, 2016 - June 30, 2017 DCED —_DCED Funds Budget Line Item Funds Actual __Budget Variance Byents $10,000,000 _$ 10,000.00 _$ ‘Total $10,000,000, _§ 10,000,000 __- Sec auditors! report on supplemental information, PagPhiladelphia 2016 Host Committee Economic Development & Community Development Initiative Program Grant Contract Number: C0000637432 SCHEDULE OF FINDINGS For the contract period July 1, 2016 - June 30, 2017 SCHEDULE OF FINDINGS AND QUESTIONED COSTS Finding # 2017-001 Criteria In accordance with DCED's guidelines, funds paid to Philadelphia 2016 Host Committee shall be continuously invested and reinvested in accordance with applicable state laws, with a view toward ‘maximizing yield and minimizing the instances of uninvested funds. Condition For the contract period July 1, 2016 through June 30, 2017, Philadelphia 2016 Host Committee deposited $10,000,000 of funds received by DCED into 2 non interest bearing aecount and did not maximize yield, Questioned costs $563. This amount was determined by calculating interest on $10,000,000, as expended over the coutse of a nine day period, utilizing an annual percentage yield of .30% applied to the average monthly balance, as confitmed with Philadelphia 2016 Host Committee’s financial institution. Cause Philadelphia 2016 Host Committee deposited funds received in advance from DC interest bearing account. into a non Effect or Potential Effect DCED lost potential interest that could have been earned on funds provided to Philadelphia 2016 Host Committee. Recommendation Implement controls to ensure grant compliance is followed. This can be accomplished by developing procedures and creating a checklist to highlight significant provisions that responsible personnel must follow upon grant execution leading up to grant close out. ‘Views of Responsible Officials and Planned Corrective Action Philly 2016 Host Committee concurs with this finding and wilt adhere to the recommendation for any future DCED awards, Philly 2016 Host Committee will implement the above procedure immediately. 1O|Page