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HomeMy WebLinkAboutFinancial Stmnts for PDRF Corp - FY Ending 6/30/07:EP CITY OF PALM DESERT FINANCE DEPARTMENT Staff Report REQUEST: RECEIVE AND FILE THE PALM DESERT RECREATIONAL FACILITIES CORPORATION AUDITED FINANCIAL REPORTS FOR THE FISCAL YEAR ENDED JUNE 30, 2007 DATE: JANUARY 24, 2008 CONTENTS: PALM DESERT RECREATIONAL FACILITIES CORPORATION AUDITED FINANCIAL REPORT FOR FISCAL YEAR ENDED JUNE 30, 2007 Recommendation: By Minute Motion, that the City Council receive and file the audited financial statements of the Palm Desert Recreational Facilities Corporation for the fiscal year ending June 30, 2007. Background: The Palm Desert Recreational Facilities Corporation (PDRFC) is a corporation that provides food and beverage services exclusively to the Desert Willow Golf Resort. Lance, Soil & Lunghard, LLP, performed and completed the annual independent audit for the fiscal year ended June 30, 2007, for the PDRFC in November 2007, in accordance with generally accepted auditing standards. In the auditor's opinion, the basic financial statements present fairly, in all material respects, the financial position of the PDRFC as of June 30, 2007, and the results of its operations of the year then ended are in conformity with accounting principles generally accepted in the United States of America. In conducting the audit, the auditors are also required to test the PDRFC's internal controls. For the year ended June 30, 2007, the auditors did not issue a management letter, indicating that its current internal controls are adequate. The Audit, Investment and Finance Committee received the audited financial statements for the PDRFC at their January 22, 2008 meeting, and it was recommended that the statements for the fiscal year ended June 30, 2007 be received and filed by the City Council. Paul S. Gibson, Director of Finance/City Treasurer Carlos L. Ortega, City Manager CITY COUNCIL ACTION APPROVED , DENIED RECEIVED t F; (e_ OTHER MEETING DATE j -4-f� AYES: Cc linei'i-f Elec!ei) 3tiMoii NOES: Nc ABSENT: Ke.ilyy ABSTAIN: iJ t ktr VERIFIED BY: (?,DrC(Cc Original on File withCity Clerk's Off G:\Finance\Niamh Ortega\Staff Reports\Audit staff reports 2007\audit 2007 PDRFC statements.rtf PALM DESERT RECREATIONAL FACILITIES CORPORATION PALM DESERT, CALIFORNIA FINANCIAL STATEMENTS JUNE 30, 2007 PALM DESERT RECREATIONAL FACILITIES CORPORATION PALM DESERT, CALIFORNIA FINANCIAL STATEMENTS JUNE 30, 2007 PALM DESERT RECREATIONAL FACILITIES CORPORATION TABLE OF CONTENTS JUNE 30, 2007 Page Number Independent Auditors' Report 1 Management's Discussion and Analysis 3 Basic Financial Statements: Exhibit A — Statement of Net Assets 8 Exhibit B — Statement of Revenues, Expenses and Changes in Net Assets 9 Exhibit C — Statement of Cash Flows 10 Notes to Basic Financial Statements 11 Lance Brandun W.Burrows Donald L.Parker SO" � Michael K.Chu David E.Hale Lu n g h a rd .�Proje.s.siono/Lbrporariun Donald G.Slater LLP Richard K.Kikuchi Cc�rtified I'ri/ilic .�rc���untcr�rt.s Retired Robert C. Lance 1914-1994 Richard C.Soll Fred J.Lunghard,Jr. 192N-1994 INDEPENDENT AUDITORS'REPORT Board of Directors Palm Desert Recreational Facilities Corporation City of Palm Desert, California We have audited the component unit financial statements of the Palm Desert Recreational Facilities Corporation, a component unit of the City of Palm Desert, Califomia, as of and for the year ended June 30, 2007, as listed in the accompanying table of contents. These component unit financial statemenis are the responsibility of the Palm Desert Recreational Facilities Corporation's management. Our responsibility is to express an opinion on these component unit 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 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 component unit financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the component unit 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. We believe that our audit provides a reasonable basis for our opinion. The component unit financial statements referred to above include only the financial activities of the Palm Desert Recreational Facilities Corporation. Financial activities of other component units that form the reporting entity are not included. The management's discussion and analysis is not a required part of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of ineasurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. In our opinion, the component unit financial statements referred to above present fairly, in all material respects, the financial position of the Palm Desert Recreational Facilities Corporation as of June 30, 2007, and the results of its operations and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. �i }"F_;�RS s�;/� I 929����ZQ04 �� FX4'P.p�J[CE 203 N.Brea Bivd.,Suitc 203 • Brca,CA 92821-4056�(714)672-0022 • Fax(714)672-0331 •www.lslcpas.com Lance Soll s Lunghard LLP GERIfF/EO<f/BLIC�CCOUNrAHfS Board of Directors Palm Desert Recreational Facilities Corporation In accordance with Government Auditing Standards, we have also issued our report dated November 20, 2007, on our consideration of the City of Palm Desert's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. � �� �-� ��� . ���, November 20, 2007 2 MANAGEMENT'S DISCUSSION AND ANALYSIS Our discussion and analysis of the financial performance of the Palm Desert Recreational Facilities Corporation (the Corporation), a component unit of the City of Palm Desert, provides an overview of the City's financial activities for the fiscal year ended June 30, 2007. Please read it in conjunction with the Palm Desert Recreation Facilities Corporation's financial statements. FINANCIAL HIGHLIGHTS • Palm Desert Recreational Facilities Corporation's net assets deficit increased by 48,528 from $403,981 to$452,509. • Palm Desert Recreational Facilities Corporation's gross income of$2,465,619 was an increase of $255,819(12°/a)over last year. • Palm Desert Recreational Facilities Corporation's gross profit increased by $156,222 (10%) from last year. The gross profit margin' dropped 1% to the industry average of 68% • Palm Desert Recreational Facilities overhead (Maintenance & Operations and General & Administrative)increased by$208,469 (14%). • Palm Desert Recreational Facilities Corporation's cost of goods sold increased by$99,597, which represents a 14 percent increase from the previous year. • Palm Desert Recreational Facilities Corporation's Se!ling and Administrafive Expense Percenfage2 increased 1% to 70%. USING THIS ANNUAL REPORT This annual report consists of a series of financial statements. The Statement of Net Assets and Statement of Revenues, Expenses and Changes in Net Assets (on pages 8 and 9) provide information about the activities of the Palm Desert Recreational Facilities Corporation as a whole, and present a long-term view of the Corporation's operations. REPORTING THE COMPONENT UNIT AS A WHOLE The Statement of Net Assets and the Statement of Revenues, Expenses and Changes in Net Assets: Our analysis of the Palm Desert Facilities Corporation as a whole begins on page 8. The Corporation plays a vital role in completing the overall project known as Desert Willow Golf Resort (a municipal golf course owned by the City of Palm Desert). The Corporation's main function is providing the Food and Beverage operations at the Desert Willow Clubhouse. The restaurant operation within the environment of the golf industry is a necessary complement to a round of golf. The main focus of our analysis of the Palm Desert Recreational Facilities Corporation's operations is the profitability of the food and beverage activities and tailoring the restaurant to meet the expectation of al! golf enthusiasts alike. 'The gross profit margin is calculated by dividing gross profit by gross sales.The gross profit margin indicates how well sales are performing when compared to expectations and the industry. The corporation expected an industry gross profit margin of approximately 68%. Z The selling and administrative expense percentage is calculated by dividing the sum of the Maintenance & Operations and the General &Administrative costs by the gross sales.This percentage indicates how well the corporation's overhead is maintained in relation to sales.The goal is to derive at overhead cost of approximately 64%or lower. 3 What is the outcome for the food & beverage operations for this fiscal year? The Statement of Net Assets and the Statement of Revenues, and the Expenses and Changes in Net Assets report information about the Component Unit as a whole and about its activities. This report along with the financial highlights, noted above, illustrates the operations and the profitability of the food and beverage activities. These statements include all assets and liabilities of the Corporation using the accrua/basis of accounting. With the accrual basis of accounting, all of the current year's revenues are recognized when earned instead of received, and all expenses are recorded when incurred instead of when paid. These two statements report the Palm Desert Recreational Facilities Corporation's net assets and changes in net assets. Net assets are the difference between assets and liabilities, which is one way to measure the Corporation's financial health, or financial position. Over time, increases or decreases in the Corporation's net assets are an indication of whether its �nancial health is improving or deteriorating. To determine the profitability of the Corporation, consideration should also be given to other non-financial factors such as the changes in consumer spending as a direct result of the overalt economic indicators, as well as changes in the significant industry factors such as price per golf round and level of tourism. THE COMPONENT UNIT AS A WHOLE The Palm Desert Recreational Facilities Corporation's combined net assets deficit increased by $48,528 from $403,981 to $452,509. For the first three years of operations (1997-2000), ihe Corporation operated out of a temporary facility; beginning in April 2000 the Corporation moved into and began operating from its permanent restaurant located within the Desert Willow Golf Course Clubhouse. Although the Corporation has continued to recognize a deficit net asset, our analysis indicates an upturn in operations and predicts an eventual turnaround within a few years. Our analysis below focuses on the net assets (Table 1)and changes in net assets (Table 2) of the Corporation. 4 TABLE 1 NET ASSETS (IN THOUSANDS) As of June 30,2007 and 2006 Component Unit Activities 2007 2006 Current and restricted assets $ 252,333 $ 192,534 TOTAL ASSETS 252,333 192,534 Other liabilities 704,842 596,515 TOTAL LIABILITIES 704,842 596,515 Net assets(deficit): Unrestricted (452,509) (403,981) TOTAL NET ASSETS(DEFICIT) $ (452,509) $ (403,981) The fiscal year end loss of $48,528 increased the deficit in net assets by 12%. The major factor in contributing to the fiscal year loss was the increase in the California Minimum Hourly Wage Rate, which increased from �6.75 to $7.50. Although the Corporation continues to experience a deficit in net assets, we expect the Corporation will began to recognize net profit and eventually eliminate the deficit; resulting in a positive net assets. Nonetheless, the Restaurant is a necessary ingredient in the overall golf resort experience and will continue to operate. 5 TABLE 2 CHANGES IN NET ASSETS As of June 30,2007 and 2006 Component Activities 2007 2006 REVENUES: Program Revenues: Food&Beverage $ 2,465,619 $ 2,209,800 TOTAL REVENUES 2,465,619 2,209,800 EXPENSES: Cost of Goods Sold 785,821 686,224 Maintenance&Operations 1,479,889 1,268,619 General&Administrative 248,437 251,238 TOTAL EXPENSES 2,514,147 2,206,081 INCREASE(DECREASE) IN NET ASSETS S (48,528) $ 3,719 Component Activities Total revenue increased from $2,209,800 to $2,465,619, a 12% increase. The main factor involved with this increase is the fact that Palm Desert Recreation Facilities has continually become more efficient with operations. This fiscal year was the seventh full year of operations at the Desert Willow Clubhouse. During this fiscal year the Corporation was able to market their banquets and outings based on the previous years' history. Factors that contributed to the increase are as follows: • Efficiency in marketing and attracting new and repeat business. • Continued patronage of customers and corporate groups. • Increased Banquet and outing operations. • Consistency in golf rounds played. • Aggressive marketing to golfers on the golf course. As Table 2 above indicates, total expenses increased from $2,206,081 to $2,514,147, a 14% increase. The major factor in the increase in expenditures was the increase in labor costs. During the fiscal year the California Minimum Wage Rate increased from $6.75 to $7.50 per hour, an 11% increase. The remaining increase was a normal response to the additional business activities recognized during the fiscal year. The Gross Profit Margin and the Selling and Administrative Expense Percentage were consistent with previous years, indicating that the increase in overall expenses correlates with the increase in business. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets/Debt Administration The Palm Desert Recreational Facilities Corporation does not own or lease any capital assets; subsequently, there is no debt related to capital assets presented on their financial statement. More detail is presented in the notes to the Financial Statements. 6 ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS In preparing the budget for 2008, management looked at the following economic factors: • Energy and fuel cost: Uncertainty lingers regarding the energy crisis in California and the repercussions of increased energy and fuel costs remain. The Palm Desert Recreational Facilities Corporation has taken measures to reduce energy usage in the high peak period without impacting the quantity or quality of service. • Prices: The prices for goods and services in the golf industry have remained constant for the last four years. Many public golf facilities have maintained their marketing strategies and held prices constant in response to consumer choices. At this point, it appears that the pricing for golf and amenities has met the current demand; hence, prices are held constant. Nonetheless, the Palm Desert Recreational Facilities Corporation continues to aggressively market and advertise to secure their market share in the local and regional golf industry. • National Economy: The golf and hospitality industries refy heavily on a strong national and local economy. With a strang national economy, the market demand for leisure activities such as golf and dining is increased; however, in an economic downturn or a slowing of the economy, the typical trend is for the consumer to reduce their consumption of leisure activities. The current increases in fuel costs will increase the cost of food and beverage inventory, causing upward pressure on the prices at the restaurant, resulting in a reduction in sales. The Palm Desert Recreational Facilities Corporation does not know the extent of the impact that the erratic fuel costs would have on tourism to the Coachella Valley, but since the golf industry relies heavily on the local tourism industry for their revenue, a downturn in tourism would affect the Corporation's revenue. • Housing Market: There appears to be an upward trend in the number of housing foreclosures in the Coachella Vaifey as well as in Southern California, Because, the golf industry relies heavily on a strong economy, the fiscal impact of the current housing market on the overall economy may reduce play and reduction of the usage of the restaurant causing a downward trend on revenues. At this point the economic impact pf the housing market is unknown. A mid-year analysis will be performed and budget adjustment will be made accordingly. • During the 2006-2007 fiscal year the State of California raised the minimum wage rate from $6.?5 to �7.50 (11%) per hour. On January 1, 2008, the state anticipates to raise the minimum wage rate to$8.00 an hour, an additional 7% increase. Management will continue to analyie the impact of the increased minimum wage rate and determine how to best maximize profits without over pricing the food and beverage products. A mid-year analysis will be performed and budget adjustments will be made accordingly. A copy of the Corporation's 2007-2008 financial plan can be obtained by contacting the Palm Desert Recreational Facilities Corporation (see below). CONTACTING 7HE CORPORATION'S FINANCIAL MANAGEMENT This financia! report is designed to provide the users with a general overview of the Palm Desert Recreational Facilities Corporation, a component unit of the City of Palm Desert. If you have questions about this report or need additional financial information, contact the Controller at Palm Desert Recreational Facilities Corporation at 38-995 Desert Willow Drive, Paim Desert, California 92260. 7 PALM DESERT RECREATIONAL FACILITIES CORPORATION Exhibit A STATEMENT OF NET ASSETS JUNE 30,2007 Assets: Cash and cash equivalenfs $ 166,014 Accounts receivable 48,700 Inventory 31,639 Prepaid expenses 5,980 Total Assets $ 252,333 Liabilities: Current: Accounts payable $ 38,788 Accrued liabilities 22,292 Advance from related party 601,762 Unearned revenue 42,000 Total Liabilities 704,842 Net Assets(Deficit): Unrestricted (Deficit) (452,509) Totat Net Assets(Deficit) $ (452,509) See independent auditors' report and notes to financial statements. 8 PALM DESERT RECREATIONAL FACILITIES CORPORATION Exhibit B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS FOR THE YEAR ENDED JUNE 30,2007 Operating Revenues: Food and beverage sales S 2,465,619 Operating Expenses: Cost of goods sold 785,821 Maintenance and operations �,479.889 General and administrative 248,437 Total Operating Expenses 2,514,147 Operating income (Loss) (48,528) Change in Net Assets (48,528) Net Assets (Deficit)-Beginning of the year (403,981) Net Assets(Deficit) -End of the year $ (452,509) See independent auditors' report and notes to financial statements. 9 PALM DESERT RECREATIONAL FACILITIES CORPORATION Exhibit C STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30,2007 Cash Flows From Operating Activities: Receipts from customers $ 2,463,988 Payments to suppliers (2,416,570} Net Cash Provided (Used) by Operating Activities 47,418 Net Increase in Cash and Cash Equivalents 47,418 Cash and Cash Equivalents-Beginning of the Year 118,596 Cash and Cash Equivalents -End of the Year 5 166,014 Reconciliation of Operating Income(Loss)to Net Cash Provided (Used) by Operating Activities: Operating income (loss) $ (48,528} Adjustments to reconcile operating income (loss)to net cash provided (used) by operating activities: Change in assets and liabilities: Receivables (9,381} Prepaid (1,904) Inventories (1,096) Accounts and ather payables (11,513) Accounts payable related parties 112,090 Unearned revenue 7,750 Net Cash Provided (Used) by Operating Activities $ 47,418 See independent auditors' report and notes to financial statements. i0 PALM DESERT RECREATIONAL FACILITIES CORPORA710N NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30,2007 Note 1: Summary of Significant Accounting Policies a. General The Palm Desert Recreational Facilities Corporation (the Corporation) is a Corporation that provides food and beverage services exclusively to the Desert Willow Golf Resort (the Golf Resort). The Corporation is a discrete component unit of the City of Palm Desert (the City) and is reported as an Enterprise Fund in the City's basic financial statements. The Corporation was incorporated on February 25, 1997. The Board of Directors of the Corporation consists of two members of the City Council and two members of the public at large. 7he annual Board of Director's meetings is held the second Monday of June at 11:00 a.m. at the principal office of the Corporation. b. Basis of Accounting On July 1, 2000, the Corporation adopted the provisions of GASB Statement No. 34 ("Statement 34") of the Governmental Accounting Standards Board, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments. Statement 34 established standards for external financial reporting for all state and local government entities,which includes a statement of net assets, a statement of revenues, expenses and changes in net assets and a statement of cash flows. It requires the classification of net assets into three components - invested in capital assets, net of related debt; restricted; and unrestricted. These classifications are defined as follows: • Invested in capital assets, net of related debt - This component of net assets consists of capital assets, including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. If there are significant unspent related debt proceeds at year-end, the portion of the debt attributable to the unspent proceeds are not included in the calculation of invested in capital assets, net of related debt. Rather, that portion of the debt is included in the same net assets component as the unspent proceeds. • Restricted - This component of net assets consists of constraints placed on net asset used through external constraints imposed by creditors (such as through debt covenants), grantors, contributors or laws or regulations of other governments or constraints imposed by law through constitutional provisions or enabling legislation. • Unrestricted net assets -This component of net assets consists of net assets that do not meet the definition of "restricted" or "invested in capital assets, net of related debt." The adoption of Statement No. 34 had no effect on the basic financial statements except for the classification of net assets in accordance with the statement and the reflection of capital contributions as a change in net assets. See Independent Auditors' Report 11 Palm Desert Recreational Facilities Corporation Notes to Financial Statements(Continuedj Note 1: Summary of Significant Accounting Policies The Corporation reports its activities as an enterprise fund, which is used to account for operations that are financed and operated in a manner similar to a private business enterprise, where the intent of the Corporation is that the costs (including depreciation)of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges. Revenues and expenses are recognized on the accrual basis. Revenues are recognized in the accounting period in which they are earned and expenses are recognized in the period incurred, regardless of when the related cash flow takes place. Operating revenues, such as food and beverage sales, result from exchange transactions associated with the principal activity of the Corporation. Exchange transactions are those in which each party receives and gives up essentially equal values. The Corporation has elected under GASB Statement No. 20, Accounting and F�nancial Reporting for Proprietary Funds and Other Governmental Activities that Use Proprietary Fund Accounting, to apply all GASB pronouncements as well as any applicable pronouncements of the Financial Accounting Standards Board (FASB), the Accounting Principals Board (APB), or any Accounting Research Bulletins (ARB) issued on or before November 30, 1989, unless they contradict or conflict with GASB pronouncements. c. Capital Assets and Depreciation Capital assets are defined by the Corporation as assets with an initial cost of more than $500 and an estimated life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. Machinery and equipment are depreciated using the straight-line method over the following estimated useful lives: Assets Years Machinery and equipment 3—7 As of June 30, 2007, the Corporation did not have any capital assets or related depreciation expense. d. Budgets Kemper Sports Management, Inc., is required to submit to the City an operating budget containing estimates of all the Corporation expenses for the next operating year, including expenditures for: a) property operation and maintenance, b) repairs, replacements and alterations which do not consfitute capital improvements, c) furnishings and equipment and operating inventory, and d) advertising, sale and business promotion. The budget is required to be reviewed and approved by the City prior to July 1 of each year. See Independent Auditors' Report 12 Palm Desert Recreational Facilities Corporation Notes to Financial Statements(Continued) Note 1: Summary of Significant Accounting Policies e. Cash, Cash Equivalents and Credit Risk For purpose of the statement of cash flows, the Corporation considers all unrestricted highly liquid investments with an initial maturity of three months or less to be cash equivalents. The carrying value was $166,014 and the deposit value was$207,091. The City has implemented GASB Statement No. 40, Deposit and Investment Risk Disciosures. This pronouncement is an amendment to GASB Statement No. 3. GASB No. 40 establishes and modi�es disclosure requirements related to deposit and investment risks. The information required by GASB Statement No. 40 related to authorized investments, credit risk, etc., is available in the annual report of the City. f. Inventories Inventories are stated at the lower cost or market (no adjustments were made to reduce inventory below cost)with cost determined using the Weighted Average Cost Method. At June 30, 2007, inventory consisted of $31,639 in merchandise for sales of food and beverages. g. Leases Leases, which in substance transfer all of the benefits and risks equivalent to ownership of the property are classified as capital leases. The related assets and liabilities are recorded at amounts equal to the lesser of the present value of the minimum lease payments or the fair vaiue of the leased property at the beginning of the respective leased terms. Generally, such assets are amortized over their economic lives. Interest expense relating to the lease liabilities is recorded to effect constant rates of interest over the terms of the leases. All other leases are classified as operating leases and related rentals are charged to expense as incurred. Note 2: Related Party Transactions Advances From Related Party As of June 30, 2007,the Corporation owed the following amounts to related parties: Desert Willow Golf Course $ 136,762 City of Palm Desert 465,000 $ 601,762 The Corporation has an operating lease with the City of Pafm Desert for use of the facilities (see Note 3). See Independent Auditors' Report 13 Palm Desert Recreational Facilities Corporation Notes to Financial Statements(Continued} Note 3: Commitments and Contingencies Operating Leases Obligations under operating leases are as follows: The Corporation has an operating lease with the City of Palm Desert for use of the facilities.The terms of the lease are $8,000 per month beginning June 4, 1997. The lease is a month-to-month lease with no expiration date. On May 18, 2004, the Corporation approved an increase in the lease payment to begin on July 1, 2004. The new lease payment is $15,000 per month. Total rent expense incurred for the year ended June 30, 2007, under this lease was $180,000. Management Agreement The Corporation is managed by Kemper Sports Management, Inc., under an agreement to manage and operate Desert W illow Golf Course, a component unit of the City of Palm Desert. This agreement commenced on July 1,2007, and will expire on June 30, 2008. Note 4: Risk Management The Golf Resort is covered by insurance purchased by Kemper Sports Management Inc., general managers, which includes commercial liability, automobile, worker's compensation and overall umbrella excess liability insurance through Aon Risk Services, Inc. of Illinois. The corporation is named as additional insured. Note 5: Other Disclosures The Palm Desert Recreational Facilities Corporation has a net asset deficit of $452,509, which will be eliminated by increasing revenues through banquet reservations. See Independent Auditors' Report 14