Loading...
1959 Liquor Dispensary BROEKER g HENDRICKSON Certified Public Accountants PILLSBURY BUILDING. MINNEAPOLIS 2, MINNESOTA TELEPHONE FEDERAL 9-0674 1 . , ~ -- s I . .- ? s ;t'~-L", VILLAGE OF NEW HOPE .' . ~R_ DISPEl~~Y .. FUND DETERl'1INATION OF :N""ET RE,\TEl'flJE ~_<=""""""~~",~~.",,~~=o=..""""'~.=~'='~~__=---- FOR THE PERIOD FROM DECEMBER 13~ - 1958 TO DECEr-ffiER 31~ .l:.92~ AS DEFINED IN SECTION 2.2 OF THE RESOLUTION AUTHORIZING ISSUANCE OF REVENUE BONDS -~-..-.-,-....._-=---=-=----~"""'~~,===~-,,-=~----~ Net loss for the period ended December 31, 1958 (as adjusted) $ ~4~699.05 Net loss for the year ended December 31, 1959 ~~2.J525 .01, $ (8~304.06 Add back- Expenses incurred and accrued which are not deductions from gross revenue in determination of net revenue: Depreciation expense for the year ended December 31, 1959 (depreciation for the 19 days in 1958 was not recorded) $ 2,618.40 Interest expense for the period from August 1,-1958 (date of-bond issue) 7,421.92 to December 31, 1959 Net income from operations, before deduction of interest and depreciation, for the period from December 13, 1958 to December 31, 1959 $ 1,736.26 Deduct- Net revenue reserves: Allowance for a reasonable stock of inventory (reflected by inventory balances-at December 31, 1959) $12,164.49 Allowance for a reasonable reserve for operation and maintenance emergencies (reflected as approximately one monthis operating expenses) ...~-' 400 .00 14, 564..~~. Net revenue (as defined~ for the period from December 13, 195 to December 31, 1959 (deficit) $(12,828.23 BROEKER & HENDRICKSON Certz/ied Public Accountants PILLSBURY BUILDING' MINNEAPOLI S 2, MINNESOTA February 19, 1960 To the Village Council Village of New Hope Hennepin County, lViinnesota We have examined the balance sheet of the VILLAGE OF NEW HOPE, LIQUOR DISPENSARY FUND as of December 31, 1959, and the related statement of income and surplus for the year then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessaFJ in the circumstances. In our opinion, the accompanying balance sheet and statement of income and surplus present fairly the financial position of the Village of New Hope, Liquor Dispensary Fund at December 31, 1959, and the results of its operations for the year then ended, in conformity with generally accepted accounting principles. The following pages of this report set forth certain comments relative to the liquor dispensary fund's organization, financial position and operations and to the scope of our examination. For simplicity the amounts included in the text of the report are expressed in even hundreds of dollars. We are submitting under separate cover a letter setting forth our recommendations in regard to certain matters noted in connection with . "-' our examlna~lon. -2- COf.~lliNTS ON ORGANIZATION The Village of New Hope by Ordinance No. 58-11, adopted June 24, 1958, operates a municipal on and off-sale liquor dispensary at 7180 Forty- Second Avenue North. The operations of the liquor store commenced on December 13, 1958. Construction of the building and purchase of equipment and fixtures were financed by the proceeds of Municipal Building Revenue Bonds in an aggregate principal amount of $90,000 authorized by a resolution of the Village Council dated July 16, 1958. At December 31, 1959 the Village carried the following insurance coverage relating to the Liquor Dispensary Fund: Fire and extended coverage- Building $40,000 180% co-insura~e) Contents 6,400 80% cO-insurance~ stock 8,000 80% co-insurance Public liability 100,000/300,000/5,000 Public employees' honesty blanket bond 20,000 In addition, the Village carried robbery and safe burglary coverage, and workmen's compensation insurance. CO~~lliNTS ON FINANCIAL POSITION -_.- ...--~-",. A statement of the sources and uses of funds from the date the liquor dispensary came into existence to December 31, 1959 follows: Funds were received from- Proceeds of revenue bonds $ 90~000 Advances from general fund (net) 15,70Q. $105,700 Funds were used to- Purchase merchandise inventory $ 12,200 Purchase land, building, and furniture and fixtures 87,600 Finance operating loss from date of commencing operations to December 31, 1959, before provision for depreciation of $2,600 5,700 Provide working cash, net of current accounts payable and accrued liabilities 200 $105,700 -3- As reflected in the above summary, funds were provided from the proceeds of the revenue bond issue and advances from the general fund and were used principally to purchase fixed assets and merchandise inventory. The physical inventory of the liquor dispensary was taken as of December 31, 1959. A summary of inventory, at cost, as of December 31, 1959 follo\^Ts: Liquor $10,700 vline 700 Beer 700 Miscellaneous 100 $12,200 The rate of inventory turnover for the year ended December 31, 1959 was l.i 1 ",. computed on the ratio of cost of sales for the year to year ' . vlmes, end inventory. A summary of fixed assets, at cost, setting forth the major items carried on the records of the Liquor Dispensary Fund is presented in the following summary: Land and improvements- Land $ 6,500 Grading and graveling 2,300 Black topping 2,500 Other 700 $12,000 Building- ~- General construction $35,000 Heating and air conditioning 8,100 Electrical 3,200 Plumbing 3,700 .4rchi tect, legal and consultant fees 5,900 Other 800 56,700 Furniture and fixtures- Neon sign $ 2,100 Refrigeration equipment 2,200 Bar and lounge fixtures 6,100 Cash registers 4,000 Liquor dispensers 2,200 Other 2,400 19,000 $87,700 -4- The Municipal Building Revenue Bonds payable are secured by the net revenues of the liquor dispensary. The bonds mature serially and bear interest (payable semi-annually) as follows: Interest Rate Due Date !!:.incipal (See No!~_ August 1- $ 4,000 4.2% 1961 1962 4,000 4.2 1963 5,000 4.2 1964 5,000 4.2 1965 5,000 4.2 1966 5,000 4.9 1967 8,000 4.9 1968 8,000 4.9 1969 8,000 4.9 1970 8,000 4.9 1971 10,000 4.9 1972 10,000 4.9 1973 10,000 4.9 $90,000 Note: In addition to the interest rates listed above, all bonds, bear an additional interest rate of 1.1% for the period from August 1, 1958 to August 1, 1962. COf.~ffit~S ON OPERATIONS --~~~~ ~ A condensed summary of operations for the year ended December 31, 1959 follows: Sales $82,500 Cost of sales '" 49,222. Gross profit on sales $33,300 Per cent to sales ., 40 .4% Operating expenses- Selling $14,100 Overhead 8,400 Administration and general --2.~g90 Total operating expense $31,700 Per cent to sales 38.4% Operating income $ 1,600 Interest expense 5,200 Net loss for the year 3) 3~6oo . , -5- The foregoing summary for the first full year of operation of the liquor dispensary reflects sales of $82,500, a gross profit of $33,300 (40.4%), operating expenses of $31,700 (38.4%) and operating income of $1,600. An analysis of sales for the year is presented below: On Sale Off Sale Total Liquor $24,900 $24,500 $49,400 Beer 14,200 14,800 29,000 Wine - 1,600 1,600 Miscellaneous 1,600 900 2,500 $40.700 $41.800 $82.500 The division of sales as between on sale and off sale was approximately the same amount. Liquor represented 60% of total sales and beer represented 35% of total sales for the year ended December 31, 1959. The overall gross profit margin of 40.4% for the current year compares favorably with the average gross profit of 35.4% for on sale and off sale municipal liquor stores reflected in the Analysis of Municipal Liquor Store Operations for 1958 prepared by the Department of Public Examiner of the State of Minnesota. Operating expenses as a per cent to sales are set forth in the following summary: Per Cent Amount to Sales Selling $14,100 17.1% Overhead 8,400 10.2 Administration and general 9,200 11.1 131. 700 38.4% Current years operating expenses of 38.4% of sales \'Jere substantially higher than the average of 18.8% for on sale and off sale stores reflected in the Analysis of Minnesota Municipal Liquor Store Operations for 1958. A detailed listing of operating expenses is recorded in the accompanying statement of income. r -0- SCOPE OF AUDIT ..-- -====' Our examination included, but was not limited to, the fol1m'ling procedures. Cash on hand was counted by us at December 31, 1959. Cash in bank was reconciled to the balance confirmed to us by the depositary as of December 31, 1959. The physical inventories were taken by Village officials as of December 31, 1959. We observed the inventory taking, reviewed the Village's procedures and made test counts of quantities in confirmation of procedures followed. Our review indicated that satisfactory methods had been employed in the determination of quantities. We made test checks of the clerical accuracy and pricing of inventories which indicated they were clerically accurate and priced at cost. The amounts reflected as due to and due from the general fund were reconciled with the balances recorded in the records of the general fund. Fixed asset accounts were reviewed, additions were test checked to invoices, contracts and other supporting data, and Village officials represented to us that physical retirements were properly reflected in the accounts. Depreciation provisions were based on rates which appeared reasonable in relation to the estimated lives of the depreciable property. Insofar as we could ascertain from our examination, all direct and contingent liabilities at December 31, 1959 are reflected in the accompanying balance sheet and Village officials have represented that all such liabilities were disclosed to us. We made test checks of -7- the records of accounts payable and accrued liabilities and confirmed the amounts owing to major suppliers at December 31, 1959 by direct corres- pondence with the creditors. Municipal Building Revenue Bonds payable were traced to the authorizing resolution. We traced the proceeds from the bond issue to cash receipts of the liquor fund and reconciled the interest paid to the paying agent with the outstanding bonds. &-e-ItJ-1 VILLAGE OF ~~W HOPE LIQUOR prSPENSARJ FUND BALANCE SHEET - DECEMBER 31, 1959 A S S E T S ..."""""'" CURRENT ASSETS: Cash- Cash on hand $ 600.00 Cash in bank--operation and maintenance 4,241.92 $ 4,841.92 account Inventory, at cost 12,164.49 Due from general fund 49J . 61 Total current assets $ 17,504.02 FIXED ASSETS, at cost: $12,016.64 Land Building 56,681.53 Furniture and fixtures 18,954.10 $87,652.27 Less- Accumulated depreciation ~. 2,618.40 85,033.87 $102,537.89 L I A B I I E S CURRENT LIABILITIES: Accounts pa;>,-able $ 1,208.00 Due to General Fund 16,214.57 Accrued Public Employees' Retirement Association contributions 1,236.46 Accrued interest on Municipal Building Revenue Bonds payable 2,182.92 Total current liabilities $ 20,841.95 ~ill~ICIPAL BUILDING REV""E:NuE BONDS PAYABLE, (See Note) 90,000.00 SURPLUS ( it), per accompanying statement 8 $102,537.89 The accompanying note is an integral part of this balance sheet. NOTE TO FINANCIAL STATEMEr~S The provision underlying the Municipal Building Revenue Bonds payable provides, in part, the following: a. Annual bond maturities vary from $4,000 to $10,000 for each year beginning August 1, 1961 to 1973. Bonds maturing in the years 1961 through 1966 are payable on their respective maturity dates without option of prior payment. Bonds maturing in the years 1971 through 1973 are subject to redemption on or after August 1, 1963 and bonds maturing in the years 1967 through 1970 are subject to redemption on or after August 1, 1966. All prepayments are at the option of the Village and are payable at par plus accrued interest and a premium of $50 per $1,000 bond. b. The annual interest on the bonds varies from 4.2% to 6.0% dependent upon the year of interest payment and the date of the serial maturity. c. Bond interest and redemption shall be payable from the net revenue, as defined. As of December 31, 1959 the Liquor Dispensary Fund had no net revenue, as defined. VILLAGE OF NEW HOPE -- =-.-. - ------ - LIQUOR DISPENSARY FUND STATE~lliNT OF INCOtlli AND SURPLUS l>- .... FOR THE -;fEAR END~D DEC~l:IB~.J959 INCOME SALES: On sale $40,667.80 Off sale 41,804.67 Total sales $82,472.47 COST OF SALES 49,168.08, Gross profit on sales $33,304.39 Per cent to sales 40.4% .,......... OPERATING EXPENSES: Selling- Salaries $12,257.23 Laundry 191.07 Supplies 815.49 Licenses and taxes 74.52 Public Employee Retirement Association contribution 768.00 Cash short __30.11, $14,136.42 Overhead- Utilities $ 1,740.26 Maintenance of building and . '" 309.58 equlpmenv Cleaning and waste removal 1,371.35 Other contractual services 543.84 Supplies 41.90 Insurance 1,587.07 Property taxes 200.59 Depreciation 2,,618..42- 8,412.99 Administration and general- Salaries $ 8,496.34 Conferences and travel 75.00 Office supplies 63.06 Public Employee Retirement Association contribution 468.46 Miscellaneous 18..U, _9,1~ 31,670.40 Operating income $ 1,633.99 INTEREST EXPENSE 5,239.00 Net s for the year -2- SURPLUS BALANCE, DECEMBER 31, 1958, per Minnesota Public Examiner's report: Deficit ((' "f . Reserve for payment of bonds and interest 4,395.53 Reserve for construction ~.20" 82 ~) . DEDUCT: Insurance and salary expense capitalized at December 31, 1958 $ 2,161.56 Interest accrued on bonds prior to December 31, 1958, not recorded at that date _?,9J..7 . )2 _~! 198" 95 BALANCE, DECElViBER 31, 1958 ( it ), 2 . as adjusted DEDUCT: Net loss for the year ended December 31, 1959 3,695.01 ~ BALANCE, DECEMBER 31, 1959 (de ., ,- ) .1.. t.; The accompanying note is an integral part of this statement of income and surplus.