enterprise florida, inc. · 10/30/2013 · equity fund management corporation, florida opportunity...

800 North Magnolia Avenue, Suite 1100 Orlando, Florida 32803

407.956.5600

eflorida.com

Enterprise Florida, Inc.Joint Meeting of the Audit and

Finance and Compensation Committees

October 30, 2013

10:00 am – 11:30 am EST

ENTERPRISE FLORIDA, INC. AUDIT AND FINANCE & COMPENSATION COMMITTEE MEMBERS

Marshall Criser III, Chair State President-Florida 150 W. Flagler Street Suite 1901 Miami, FL 33130 Phone: (305) 347-5300 E-mail: [email protected]

Ernie Diaz Regional President TD Bank 255 Alhambra Circle, Second Floor Coral Gables, FL 33134 Phone: (786) 437-2409 E-mail: [email protected]

Gordon Gillette President TECO Energy 702 N. Franklin Street Tampa, FL 33602 Phone: (813)228-4492 E-mail: [email protected]

Deb Millen Regional Manager, Florida 6923 Pine Valley Street Bradenton, FL 34202 Phone: (941) 343-7009 E-mail: [email protected]

Elizabeth Walker (ex-officio) Public-Private Partnership Liaison Department of Economic Opportunities Division of Strategic Business Development 107 East Madison Street MSC Center 80 Caldwell Building Tallahassee, Florida 32399-0001 Phone: (850) 414-1732 E-mail: [email protected]

Alan Becker, Chair Founding Shareholder Becker & Poliakoff, P.A. 3111 Stirling Road Fort Lauderdale, FL 33312 Phone: (954)987-7550 E-mail: [email protected]

Howard Halle Executive Vice President, Florida Wells Fargo Bank 1 Independent Drive 25th Floor, Suite 2500 Jacksonville, FL 32202 Phone: (904)351-7271 E-mail: [email protected]

Bob McAdam Senior Vice President, Government Relations Darden Restaurants 1000 Darden Center Drive Orlando, FL 32837 Phone: (407)245-5366 E-mail: [email protected]

Gene Schaefer President-Miami Bank of America, N.A. 701 Brickell Avenue, 8th Floor Miami, FL 33131 Phone: (305)347-2990 E-mail: [email protected]

Staff Contacts

Louis Laubscher SVP Administration Phone: (407) 956-5631 E-mail: [email protected]

Pamela Murphy Vice President, Finance and Accounting Phone: (407) 956-5644 E-mail: [email protected]

mailto:[email protected]:Walker,%20Elizabeth%20[[email protected]]mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]

800 North Magnolia Avenue, Suite 1100 ▪ Orlando, Florida 32803 ▪ T 407.956.5600

Enterprise Florida Board of Directors Joint Meeting of the Audit and Finance and Compensation Committees

October 30, 2013 10:00 am – 11:30 am EST

A meeting at: The Biltmore Hotel DEERING Meeting Room 1200 Anastasia Avenue Coral Gables, FL 33134 Presiding Officer: Marshall Criser, Chair, Audit Committee Audit Committee members:

Marshall Criser Ernie Diaz Gordon Gillette Elizabeth Walker

Finance and Compensation members: Alan Becker, Chair Howard Halle Bob McAdam Gene Schaefer Hal Melton (Expanded) Brett Couch (Expanded)

Others present: Ron Conrad, Partner Cherry Bekaert, LLP Debbie Brannon, Partner Geller, Ragans, James, Oppenheimer & Creel Kristin Bivona, Partner Geller, Ragans, James, Oppenheimer & Creel Kathy Thomas-Beck, Partner McGladrey Jill Reyes, Manager McGladrey

The purpose of the meeting is to approve the audited financial statements for Enterprise Florida, Inc. and hold Executive Session with the external audit firms.

Roll Call and Sunshine Notice Pamela Murphy (I)

Minutes for November 8, 2012 Audit Committee meeting Tab 1 Marshall Criser (I/D/A)

Review auditor’s letter to the committee from Cherry Bekaert, LLP Tab 2 Ron Conrad (I/D)

Presentation of Financial Statement Audit Results for the Year Ending June 30, 2013

Tab 3

Tab 4

Ron Conrad (I/D)

Review auditor’s letter to the committee from Geller, Ragans, James, Oppenheimer & Creel

Tab 5 Debbie Brannon, Kristin Bivona (I/D)

Presentation of 2012 Retirement Savings Plan Audit Tab 6

Debbie Brannon, Kristin Bivona (I/D)

Call in number: 1-800-501-8979 Access code: 9565644#

800 North Magnolia Avenue, Suite 1100 ▪ Orlando, Florida 32803 ▪ T 407.956.5600

Enterprise Florida Board of Directors Joint Meeting of the Audit and Finance and Compensation Committees

October 30, 2013 10:00 am – 11:30 am EST

Presentation of Records Retention and Management Report Tab 7 Kathy Thomas-Beck, Jill Reyes (I/D)

Presentation of Form 990 Return of Organization Exempt from Income Tax – DRAFT

Tab 8 Ron Conrad (I/D)

PUBLIC COMMENT Marshall Criser (I/D)

ACTION ITEMS: Marshall Criser (I/D/A)

o Approve audited financial statements for the fiscal year ending June 30, 2013

Tab 4

o Approve audited financial statements for the retirement savings plan for calendar year 2012

Tab 6

o Approve Records Retention and Management Report Tab 7

o Approve Form 990 Return of Organization Exempt from Income Tax – DRAFT

Tab 8

Executive Session Marshall Criser (I/D)

Other Business Marshall Criser

Adjourn

Minutes

Auditor’s Letter to Committee Cherry Bekaert, LLP

Financial Statement Audit Results

EFI Audited Financial Statements

Auditor’s Letter to Committee Geller, Ragans, James, Oppenheimer & Creel

401K Audited Financial Statements

Records Retention Internal Audit Report & Policy

EFI Form 990 Return of Organization Exempt from Income Tax - DRAFT

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DRAFT Minutes of a Joint Meeting of the Audit and Finance and Compensation Committees A joint meeting of the Enterprise Florida, Inc. (EFI) Audit and Finance and Compensation Committees was held on November 8, 2012, at the Rosen Shingle Creek Hotel in Orlando, Florida.

Agenda I. Minutes for April 12, 2012 Audit Committee meeting II. Review and approve interim unaudited statements for the quarter ending

September 30, 2012 III. Review and approve the financial statements audit results for the fiscal year ending

June 30, 2012 and auditor’s letter to the committee IV. Review and approve the audited financial statements for the retirement savings plan for

calendar year 2011, management letter, and auditor’s letter to the committee V. Review the Florida Sports Foundation Risk Assessment internal audit VI. Review and approve updates to the Salary and Bonus Guidelines VII. Review quarterly match report VIII. Review FY 2012/13 contract with the Department of Economic Opportunity IX. Executive Session

A quorum being present, Alan Becker called the meeting to order at 2:07 p.m.

Audit Committee Members Present

Marshall Criser, Chair Kevin Gillen Gordon Gillette Elizabeth Walker Finance and Compensation Committee Members Present

Alan Becker, Chair Howard Halle Bob McAdam Gene Schaefer Hal Melton Staff

Sharon Blake Charlotte Cowen Al Latimer Louis Laubscher Michele Miller Pamela Murphy Griff Salmon Gray Swoope John Webb Others Attendees

Ron Conrad Cherry, Bekaert & Holland, LLP Dan Gougherty Cherry, Bekaert & Holland, LLP Frank Kubicki Cherry, Bekaert & Holland, LLP Debbie Brannon Geller, Ragans, James, Oppenheimer & Creel Kristin Bivona Geller, Ragans, James, Oppenheimer & Creel Kathy Thomas-Beck McGladrey Jill Reyes McGladrey

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Approve minutes of April 12, 2012 meeting Motion: Approve the minutes of the April 12, 2012 Audit Committee.

Motion: Mr. Kevin Gillen

Second: Mr. Howard Halle The motion passed unanimously. Review and approve interim unaudited statements for the quarter ending September 30, 2012 Pamela Murphy reported that overall the financial statements looked good through the end of the first quarter. She reported that the largest decrease to cash and escrow payable were for funds returned to the state and the increase to accounts receivable was related to the loans receivable under the State Small Business Credit Initiative (“SSBCI”) program. Ms. Murphy reported that corporate contributions appeared to be behind budget but that was related to the timing of the renewals for the corporate investors which were heavy in the third and fourth quarters of the year. She reported that expenses were largely under budget with the largest variance in the trade show line. She also explained the schedule of administered grants and pass-throughs. Motion: Approve the interim unaudited financial statements for the quarter ending September 30, 2012

Motion: Mr. Bob McAdam

Second: Mr. Kevin Gillen

Review and approve the financial statements audit results for the fiscal year ending June 30, 2012 and the auditor’s letter to the committee Ron Conrad presented the audited financial statements for the year ending June 30, 2012. He reported that there were significant disclosures related to the SSBCI program, the mergers of the Florida Sports Foundation and Florida Black Business Investment Board, and the federal and state single audits. He reported that there was an unqualified opinion and no internal or compliance matters, other than the match deficiency. Gray Swoope explained that a 100% match from private sector is unrealistic without an in-kind component. Hal Melton notes that EFI had done well in all areas that they could control. Louis Laubscher explained that the Executive Committee had asked for a legislative fix but with the changes in legislation, it was not the right time to propose such a change. Ron Conrad explained that the financial statements were consolidated and included the Cypress Equity Fund Management Corporation, Florida Opportunity Fund, and Florida Sports Foundation. He also highlighted several of the note disclosures in the financial statements, including the use of estimates in valuing the Florida Opportunity Fund investments, Escrow Payables, and mergers. Motion: Approve the audited financial statements for the fiscal year ending June 30, 2012

Motion: Mr. Kevin Gillen

Second: Mr. Bob McAdam

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Review and approve the audited financial statements for the retirement savings plan for calendar year 2011, management’s letter, and the auditor’s letter to the committee Debbie Brannon reported that they performed a limited scope audit of the retirement savings plan meaning that the Department of Labor did not require them to audit the investments. She reported that the majority of the testing involved general planning, internal control, and participant eligibility and that there were no internal control deficiencies and no findings or disagreements with management. She explained that the market was not as kind to the plan but that the contributions were constant and that there were several large distributions which explained the decrease in the plan assets. Louis Laubscher stated that EFI had hired Fiduciary First to review the assets, fund watch lists, and required communications. They also performed a fund by fund analysis on at least a quarterly basis. He also stated that management had completed a blind RFP to ensure that fees were low and that the Principal Financial Group was meeting standards. Motion: Approve the audited financial statements for the retirement savings plan for calendar year 2011

Motion: Mr. Gordon Gillette

Second: Mr. Kevin Gillen Review the Florida Sports Foundation Risk Assessment Kathy Thomas-Beck stated that the audit was a high level risk assessment, not a detailed audit, to see what the risks were and to evaluate any exposure for EFI from the Florida Sports Foundation. Jill Reyes stated that they worked with management to evaluate any exposure and conducted walk-throughs of the processes to obtain an understanding of the entity. Ms. Reyes stated that their recommendations included segregation of duties, which as of the date of the audit had not been migrated to EFI’s system. She stated that these risks were inherent to any size organization, and not just for Florida Sports Foundation. In response to Kevin Gillen’s questions about integrating the accounting system, Pamela Murphy replied that the migration would be complete by January 1st. Jill Reyes stated that this would close the control gap once they moved to EFI’s system. Kevin Gillen asked about the Florida Sport Foundation’s revenue source, if EFI had looked at these other organizations that were part of EFI for match purposes, and if any staff had been eliminated. Louis Laubscher replied that their primary revenue source was state license tag fees, that they had been included in the match reporting, and that no staff had been eliminated. Review and approve the updates to the Salary and Bonus Guidelines Louis Laubscher stated that management had worked to simply the process, addresses grading inconsistencies, and changes the grading system from a 5-point system to a 4-point system with a 3 as the standard. The system would be available to all employees who had been employed for at least six months. He stated that a separate pool of funds would be available for the top performers which would be approved by Griff Salmon and Gray Swoope. These individuals would receive an additional 6% of compensation. Griff Salmon explained that the revised form would be used as an effective management tool to set goals and not penalize staff for not meeting stretch goals. He stated that there is still a 30% of corporate contributions limitation if EFI raises less than one million per year which would be adequate to cover the incentive compensation pool without a reduction to staff.

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Motion: Approve the updates to the Salary and Bonus Guidelines as a pilot program for fiscal year 2012/13.

Motion: Mr. Alan Becker

Second: Mr. Bob McAdam Review quarterly match report Pamela Murphy reported that the match report for the quarter ending September 30, 2012 had been provided as an information item. Review FY 2012/13 contract with the Department of Economic Opportunity Louis Laubscher reported that the FY 2012/13 contract with the Department of Economic Opportunity had been provided as an information item. Executive session with audit firms The Committees held an executive session with the auditors for the purpose of discussing any internal control or audit related issues. EFI staff excused themselves from the room during this time. Marshall Criser suggested that it would be helpful to have a workshop to discuss the overall audit plan and scope of resources, internal and external. He suggested an updated risk assessment to encompass the Florida Sports Foundation and an overview of the Florida Opportunity Fund. There being no additional business, the meeting was adjourned at 5:00 p.m.

September 24, 2013 To the Audit Committee of the Board of Directors of Enterprise Florida, Inc. Orlando, Florida Dear Members: We have audited the consolidated financial statements of Enterprise Florida, Inc. and consolidated entities (the “Organization”), for the year ended June 30, 2013, and have issued our report thereon dated September 24, 2013. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards, Government Auditing Standards, OMB Circular A-133, and Chapter 10.650 Rules of the Auditor General, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our letter to you dated January 8, 2013. Professional standards also require that we communicate to you the following information related to our audit.

Significant Audit Findings

Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the Organization are described in Note 1 to the financial statements. The application of existing policies was not changed during 2013; however, the Organization implemented the Accounting Standards Update 2011-04, Fair Value Measurement. The impact of this standard was to provide additional disclosures. We noted no transactions entered into by the Organization during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period.

Accounting estimates are an integral part of the financial statements prepared by management and are based on management’s knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the Organization’s financial statements were:

Management’s estimate of the value of fund of fund investments, which are based on net assets fair value information provided by investment advisors. Management’s estimate of the value of direct investments, which are based on information provided by the investment manager of the direct investments. Management’s estimate of the useful life of fixed assets, which are based on management’s analysis of the asset’s life expectancy.

We evaluated the key factors and assumptions used to develop these estimates to determine that they seem reasonable in relation to the financial statements taken as a whole. While the procedures used by management and the amount of these estimates seem reasonable at this time, there will usually be differences between the estimates and actual results and these differences may be material.

The financial statement disclosures are neutral, consistent, and clear.

Difficulties Encountered in Performing the Audit

We encountered no significant difficulties in dealing with management in performing and completing our audit.

Corrected and Uncorrected Misstatements Professional standards require us to accumulate all misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. We are pleased to report that no unrecorded misstatements were identified during the course of our audit.

Disagreements with Management For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor’s report. We are pleased to report that no such disagreements arose during the course of our audit.

Management Representations We have requested certain representations from management that are included in the management representation letter dated September 24, 2013.

Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a “second opinion” on certain situations. If a consultation involves application of an accounting principle to the Organization’s financial statements or a determination of the type of auditor’s opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants.

Other Audit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the Organization’s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention.

Other Matters With respect to the supplementary information accompanying the financial statements, the consolidating financial statements, schedule of activities by consolidating entity, and the schedule of expenditures of federal awards and state financial assistance (the “Schedule”), we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with U.S. generally accepted accounting principles, OMB Circular A-133 and Chapter 10.650, Rules of the Florida Auditor General, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the consolidating financial statements and the Schedule to the underlying accounting records used to prepare the financial statements or to the financial statements themselves.

This information is intended solely for the use of the Audit Committee of the Board of Directors and management of the Organization and is not intended to be, and should not be, used by anyone other than these specified parties.

Very truly yours,

Financial Statement Audit Results For the Year Ended June 30, 2013 Audit Committee Meeting October 30, 2013

AGENDA Scope of Services

Auditors’ Required Communications

Areas of Financial Statement Audit Emphasis

Testing of Internal Controls and Compliance

Summary of Audit Results

Financial Highlights – Consolidated Enterprise Florida, Inc. Financial Position

Financial Highlights – Consolidated Enterprise Florida, Inc. Changes in Unrestricted Net Assets

Financial Highlights – Enterprise Florida, Inc.

Financial Position

Financial Highlights – Enterprise Florida, Inc.

Changes in Unrestricted Net Assets

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Scope of Services

AUDIT OF FINANCIAL STATEMENTS We at Cherry Bekaert LLP very much appreciate the opportunity to serve as independent auditors for Enterprise Florida, Inc. and Consolidated Entities. The services we were engaged to provide were designed to: Express an opinion on the Organization’s financial statements, including:

Enterprise Florida, Inc. Cypress Equity Fund Management Corporation Florida Opportunity Fund, Inc. (including FOF PA II, Inc.) Florida Sports Foundation, Inc.

Provide audit services in accordance with auditing standards generally accepted in the United States of America

and generally accepted auditing standards as set forth in Government Auditing Standards.

Issue reports on internal control over financial reporting and compliance with certain provisions of laws, regulations, contracts, and grants and with other matters.

Issue a report on compliance for each major program and on internal control over compliance required by OMB Circular A-133 and Chapter 10.650, Rules of the Florida Auditor General.

Prepare a schedule of findings and questioned costs pursuant to OMB Circular A-133 and Chapter 10.650.

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Auditor’s Required Communications

COMMUNICATION WITH THOSE CHARGED WITH GOVERNANCE

Certain communications related to audit results are provided in a separate letter to the Audit Committee. This letter provides the following:

An overview of our responsibility under applicable standards.

Planned scope and timing of the audit and notification that certain representations were received from management.

There were no significant difficulties in dealing with management, there were no disagreements with management, and there were no management consultations with other accountants with respect to auditing and accounting matters.

Accounting Standards Update 2011-04 was adopted to provide additional disclosures regarding fair value estimates. In addition, audit clarity standards were adopted and auditor’s reports were revised accordingly.

There are certain financial statement amounts subject to management judgment and estimates, most notably valuation of investments without quoted market prices for which key factors and assumptions provided by investment advisors were evaluated.

There were no audit adjustments that were material to the financial statements.

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Areas of Financial Statement Audit Emphasis

AREAS OF FOCUS

Our audits considered the primary risks associated with each entity in the affiliated group. Based on our analysis, the following areas were given special attention during our audit procedures:

Financial statement presentation and disclosures

Federal and State Single Audit and related compliance matters, including match requirements

State Small Business Credit Initiative loans, guarantees and direct investments

Clean Energy Program loans and direct investments

Fund of funds investments

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Testing of Internal Controls and Compliance INTERNAL CONTROLS

Internal controls were considered as a basis for designing our audit procedures for expressing an opinion on the financial statements.

Internal control analysis included risk assessment at the entity-wide and activity levels and systems walk-throughs in accordance with risk assessment standards.

Internal control analysis included identifying, assessing and responding to risks of fraud. Procedures

included numerous interviews, test of journal entries, brainstorming among engagement team members, analytical review, detailed testing of accounts and awareness of audit team members as to risks of fraud or abuse.

Internal control analysis included a review of information systems by firm-designated information technology specialists, as well as analysis and testing of various transaction cycles.

COMPLIANCE Tests of compliance with laws, regulations, contract and grant agreements as part of obtaining reasonable

assurance that the financial statements are free of material misstatement and to opine on major grant programs as to compliance with state and federal requirements.

Grant compliance testing included federal and state financial assistance programs and incorporated the regulatory requirements prescribed by the Florida Department of Economic Opportunity, the U.S. Department of Agriculture and the Small Business Administration.

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Summary of Audit Results

Unmodified (“clean”) opinions were issued on the financial statements.

No Internal control or compliance matters identified that would be required to be reported.

The schedule of findings and questioned costs summarizes our Single Audit results.

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Financial Highlights – Consolidated Enterprise Florida, Inc.

STATEMENTS OF FINANCIAL POSITION (in thousands)

(A) Includes $17,055 under the SSBCI program and $6,654 for various contracts administered by the DEO in 2013. Includes $8,342 under the

SSBCI program and $4,591 for various contracts administered by the DEO in 2012.

(B) Includes $8,164 of small business loans in 2013 under the SSBCI program compared to $586 in 2012, and $2,000 under the Florida Venture Capital Program for one new FOF loan outstanding in 2013.

(C) Increased due to additional investments of $11,736 in FOF’s Florida Venture Capital Program, $4,400 in additional direct investments, $2,000 in one additional loan under FOF’s Clean Energy Program, $3,597 in additional investments and gains on the Fund of Fund’s Program investments.

(D) Increased $2,164 due to contract funds administered for improvements to the Sarasota County Rowing Center and for securing the Major League Soccer combine and spring training commitment to Central Florida under the Central FL Sports Commission project.

(E) Decreased $12,041 as a result of the return of escrow funds back to either the State or to the companies depending on whether certain contract requirements were met by the companies.

(F) Decreased $1,902 due to EFI making payments to subrecipients on older defense and military grants in which the money had already been appropriated by the State and deferred in previous years.

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2013 2012

Cash and cash equivalents-operating 5,931$ 4,435$ Cash and cash equivalents-limited as to use 71,050 86,586 Due from State of Florida (A) 23,709 12,933 Loans receivable under the State Small Business Credit Initiative (B) 10,164 586 Florida Opportunity Fund loans and investments (C) 44,476 22,841 Property, net 531 482 Other assets 1,336 1,448

Total assets 157,197 129,311

Accounts and grants payable and accrued liabilities (D) 4,752 2,696 Escrow payable (E) 19,097 31,138 Deferred revenue (F) 2,402 4,304

Total liabilities 26,251 38,138

Net assets 130,946$ 97,173$

Financial Highlights – Consolidated Enterprise Florida, Inc.

STATEMENTS IN NET ASSETS (in thousands)

(A) Increased $24,814 from funding received from the State relating to the SSBCI program to enter into various loan programs and direct investments through

FOF’s Florida Venture Capital Program.

(B) Decreased $8,674 due to the last quarter funding received in 2012 and only reimbursable administrative expenses were recorded in 2013.

(C) Increased due to 13 distributions in 2013 compared to 1 distribution in 2012, resulting in an increase of realized gains of $1,040.

(D) Increased in 2013 due to an increase in payments to grantees under the Defense Infrastructure Grant program.

(E) Decreased due to the merging of Florida Sports Foundation in 2012.

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2013 2012

Operating revenues:

State operating assistance 22,768$ 22,503$ State small business credit initiative (A) 36,066 11,252 Capital grant to FOF (B) 106 8,780 Private investment contributions 1,488 1,425 Trade show revenue 1,211 1,110 Management and administrative fees 174 205 Net gain on investments (C) 2,276 898 Other 2,053 2,012

Total operating revenues 66,142 48,185 Operating expenses:

General and administrative 8,467 8,156 Payroll 8,000 7,493 Professional fees 5,024 4,960 Grants to sub-recipients (D) 4,640 3,974 Depreciation and other 238 281

Total operating expenses 26,369 24,864 Excess of assets acquired over liabilities (E) - 2,478 Increase in net assets 39,773 25,799 Net Assets, Beginning of Year 91,173 65,374 Net Assets, End of year 130,946$ 91,173$

Financial Highlights –Enterprise Florida, Inc. (Parent Only) Financial Position

STATEMENTS OF FINANCIAL POSITION (in thousands)

(A) Includes $17,055 for SSBCI program and $6,064 in State operating grants, defense grants and pass-through funds in 2013 compared to $8,342 for SSBCI program and $4,213 in State operating grants, defense grants and pass-through funds in 2012.

(B) Includes $8,164 for small business loans funded under the SSBCI program compared to $586 in 2012.

(C) Increased $2,164 due to contract funds administered for improvements to the Sarasota County Rowing Center and for securing the Major League Soccer combine and spring training commitment to Central Florida under the Central FL Sports Commission project.

(D) Decreased $12,041 as a result of the return of escrow funds back to either the State or to the companies depending on whether certain contract requirements were met by the companies.

(E) Decreased $1,902 due to EFI making payments to subrecipients on older defense and military grants in which the money had already been appropriated by the State and deferred in previous years.

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2013 2012

Cash and cash equivalents-operating 5,832$ 4,347$ Cash and cash equivalents-limited as to use 35,468 43,206 Due from State of Florida (A) 23,119 12,555 Loans receivable under the State Small Business Credit Initiative (B) 8,163 586 Property, net 515 462 Other assets 1,024 1,254

Total assets 74,121 62,410

Accounts and grants payable and accrued liabilities (C) 4,418 1,897 Escrow payable (D) 19,097 31,138 Deferred revenue (E) 2,402 4,304

Total liabilities 25,917 37,339

Net assets 48,204$ 25,071$

Financial Highlights –Enterprise Florida, Inc. (Parent Only) Changes in Unrestricted Net Assets

CHANGES IN NET ASSETS (in thousands)

(A) Increased $24,814 from funding received from the State relating to the SSBCI program to enter into various loan programs and direct investments through FOF’s Florida Venture Capital Program.

(B) G&A expenses for EFI (Parent Only) differ significantly from the Consolidated EFI due to the elimination of $13,800 related to SSBCI transactions with FOF for the Venture Capital Program.

(C) Increased in 2013 due to an additional $13,399 in SSBCI program costs, $1,000 in additional Florida Defense Support Task Force program costs, and $739 in additional defense and military program costs.

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2013 2012

Operating revenues:

State operating assistance 20,122$ 20,339$ State small business credit initiative (A) 36,066 11,252 Private investment contributions 1,488 1,425 Trade show revenue 934 838 Federal grant assistance - STEP grant 712 634 Management and administrative fees 927 684 Other 515 500

Total operating revenues 60,764 35,672 Operating expenses: (B)General and administrative (C) 20,468 5,821 Payroll 7,840 7,690 Professional fees 4,450 3,660 Grants to sub-recipients 4,640 3,974 Depreciation and other 233 272

Total operating expenses 37,631 21,417 Excess of assets acquired over liabilities - 317

Increase in net assets 23,133$ 14,572$

Presented by: Ron Conrad Cherry Bekaert LLP 800 North Magnolia Avenue Orlando, FL 32803 407.423.7911 Email: [email protected]

CONTACT INFORMATION

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ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIES CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended June 30, 2013 And Report of Independent Auditor

ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIES TABLE OF CONTENTS

Page REPORT OF INDEPENDENT AUDITOR 1 – 2 CONSOLIDATED FINANCIAL STATEMENTS Consolidated Statement of Financial Position 3 Consolidated Statement of Activities 4 Consolidated Statement of Cash Flows 5 Notes to Consolidated Financial Statements 6 – 22 SUPPLEMENTARY INFORMATION AND OTHER REPORTS OF INDEPENDENT AUDITOR Consolidating Statement of Financial Position 23 Consolidating Statement of Activities 24

Schedule of Activities by Consolidated Entity 25 Report of Independent Auditor 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 26 - 27 Report of Independent Auditor on Compliance for Each Major Program and on Internal Control over Compliance Required by OMB Circular A-133 and Chapter 10.650, Rules of the Florida Auditor General 28 - 29 Schedule of Expenditures of Federal Awards and State Financial Assistance 30 Notes to Schedule of Expenditures of Federal Awards and State Financial Assistance 31 - 32 Schedule of Findings and Questioned Costs 33 – 35 Summary Schedule of Prior Audit Findings and Corrective Action Plan 36

Report of Independent Auditor To the Members of the Board of Directors Enterprise Florida, Inc. Orlando, Florida: Report on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of Enterprise Florida, Inc. and consolidated entities (the “Organization”), which comprise the consolidated statement of financial position as of June 30, 2013, and the related consolidated statements of activities and cash flows for the year then ended, and the related notes to the financial statements. Management’s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated 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 consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these consolidated 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 consolidated financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Organization’s preparation and fair presentation of the consolidated 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 Organization’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 consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Organization as of June 30, 2013, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles general accepted in the United States of America.

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Other Matters Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The consolidating financial statements and schedule of activities by consolidated entity listed in the foregoing table of contents are presented for purposes of additional analysis and are not a required part of the consolidated financial statements. The accompanying schedule of expenditures of federal awards and state financial assistance is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and Chapter 10.650, Rules of the Auditor General, and is not a required part of the consolidated financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the consolidated financial statements. The information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the consolidated financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated September 24, 2013 on our consideration of the Organization’s internal control over financial reporting and on our tests of its compliance with certain 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 the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Organization’s internal control over financial reporting and compliance. Emphasis‐of‐matter As discussed in Note 1 and Note 6, the financial statements include investments in venture capital partnerships and direct investments valued at $13,032,873 and $27,913,363, respectively, representing approximately 31% of net assets at June 30, 2013 whose values have been estimated by the Organization in the absence of readily determinable market values. The Organization’s estimates are based on information provided by the venture capital partnerships and the investment manager of the direct investments. Due to the inherent uncertainty of these estimates, these values may differ significantly from the values that would have been used had a ready market for these investments existed, and the differences could be material.

Orlando, Florida September 24, 2013

CONSOLIDATED FINANCIAL STATEMENTS

ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIESCONSOLIDATED STATEMENT OF FINANCIAL POSITION

JUNE 30, 2013

Cash and cash equivalents:Operating 5,931,371$ Limited as to use 71,049,969

Due from State of Florida 23,708,639 Accounts and loans receivable 4,082,326 Loan receivable under the State Small Business Credit Initiative 10,163,820 Prepaid and other assets 778,546 Leaseholds, furniture and equipment, net 531,382 Florida Opportunity Fund investments in venture capital partnerships 13,032,873 Florida Opportunity Fund direct investments:

Clean Energy Investment Program 15,774,741 Florida Venture Capital Program 12,138,622

Investment in limited partnership 4,586

Total Assets 157,196,875$

Liabilities:Accounts and grants payable 3,578,655$ Accrued liabilities 1,173,887 Escrow payable 19,096,553 Deferred revenue 2,401,580

Total Liabilities 26,250,675

Net Assets:Unrestricted 8,598,088 Temporarily restricted 122,348,112

Total Net Assets 130,946,200

Total Liabilities and Net Assets 157,196,875$

LIABILITIES AND NET ASSETS

ASSETS

See notes to consolidated financial statements. 3

ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIESCONSOLIDATED STATEMENT OF ACTIVITIES

YEAR ENDED JUNE 30, 2013

Temporarily Unrestricted Restricted Total

Revenues:State operating assistance 17,739,535$ 5,028,583$ 22,768,118$ State Small Business Credit Initiative - 36,066,341 36,066,341 Capital grant to Florida Opportunity Fund, Inc. - 105,849 105,849 Private investment contributions 1,487,500 - 1,487,500 Event revenue 933,523 277,372 1,210,895 Federal grant assistance - 711,500 711,500 In-kind contributions 224,880 2,618 227,498 Management and administration fees 174,005 - 174,005 Net realized gain on investments - 1,307,039 1,307,039 Net unrealized gain on investments - 969,003 969,003 Other income 211,726 902,136 1,113,862 Net assets released from restrictions 7,236,182 (7,236,182) -

Total Revenues 28,007,351 38,134,259 66,141,610

Expenses:General and administrative 8,466,643 - 8,466,643 Payroll and related costs 8,000,275 - 8,000,275 Professional fees 5,024,193 - 5,024,193 Grants to sub-recipients 4,639,535 - 4,639,535 Depreciation 229,538 - 229,538 Miscellaneous 8,588 - 8,588

Total Expenses 26,368,772 - 26,368,772

Change in Net Assets 1,638,579 38,134,259 39,772,838

Net Assets, Beginning of Year 6,959,509 84,213,853 91,173,362

Net Assets, End of Year 8,598,088$ 122,348,112$ 130,946,200$


ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIESCONSOLIDATED STATEMENT OF CASH FLOWS

YEAR ENDED JUNE 30, 2013

Cash Flows From Operating Activities:Increase in net assets 39,772,838$ Adjustments to reconcile increase in net assets to net cash provided by operating activities:

Depreciation 229,538 Loss on disposal of assets 7,135 Net unrealized gain from investments (969,003) Net realized gain from investments (1,307,039) Equity in earnings of affiliate 80 Changes in:

Due from State of Florida (10,775,575) Accounts and loans receivable (3,511,219) Due from Cypress Equity Fund, Ltd. 13,295 Prepaid and other assets 75,891 Investment in limited partnership 1,628 Accounts and grants payable 1,960,447 Accrued liabilities 96,757 Escrow payable (12,041,647) Deferred revenue (1,902,621)

Net Cash Provided by Operating Activities 11,650,505

Cash Flows From Investing Activities:Proceeds from investment distributions 1,679,515 Purchases of equipment (286,095) Funding of loans receivable (9,577,393) Repayment of loan receivable 1,530,000 Funding of venture capital partnerships investments (2,902,961) Funding of direct investments (16,135,550) Distributions from Cypress Equity Fund, Ltd. 1,547

Net Cash Used in Investing Activities (25,690,937)

Net Decrease in Cash and Cash Equivalents (14,040,432)

Cash and Cash Equivalents, Beginning of Year 91,021,772

Cash and Cash Equivalents, End of Year 76,981,340$

Classified in Consolidated Statement of Financial Position:Cash and cash equivalents - operating 5,931,371$ Cash and cash equivalents - limited as to use 71,049,969

Cash and Cash Equivalents, End of Year 76,981,340$


ENTERPRISE FLORIDA, INC. AND CONSOLIDATED ENTITIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2013

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Note 1 ‐ Summary of Significant Accounting Policies Organization Enterprise Florida, Inc. ("Enterprise Florida") is a not-for-profit corporation created by Chapter 288, Florida Statutes and incorporated on February 18, 1993 as a public-private partnership responsible for leading Florida's statewide economic development efforts. Its mission is to facilitate job growth for Florida’s businesses and citizens leading to a vibrant statewide economy. Enterprise Florida is a discretely presented component unit of the State of Florida (the “State”), included in state-wide financial statements, as it is legally separate but has a significant relationship with the State of Florida. All revenues in excess of expenditures remain committed to further the purpose of Enterprise Florida. The accompanying consolidated financial statements include the accounts of Enterprise Florida, and the following organizations controlled by Enterprise Florida: Cypress Equity Fund Management Corporation, Florida Sports Foundation Inc., and Florida Opportunity Fund (comprised of Florida Opportunity Fund, Inc. (“FOF”) and its wholly-owned subsidiary, FOF PA II, Inc.) (collectively, the “Organization”). All significant intercompany accounts and transactions have been eliminated. Cypress Equity Fund Management Corporation was incorporated on October 5, 1995 as a not-for-profit corporation for the purpose of acting as the general partner of Cypress Equity Fund Limited Partnership, a private partnership, and serving as administrator of a private group trust. Enterprise Florida is the sole member of Cypress Equity Fund Management Corporation and controls its majority voting interest through membership of its Board of Directors. The Florida Sports Foundation, Inc. (the “Foundation”) promotes and develops sports related industries, amateur sports activities, and physical fitness. This non-profit corporation merged into the Organization on August 29, 2011 pursuant to legislation contained in Florida Statute 288.901, and now comprises the Sports Development unit of Enterprise Florida. Enterprise Florida is the Foundation’s sole member. FOF was created on July 13, 2007 by Enterprise Florida pursuant to the Florida Capital Formation Act under Florida Statutes 288.9621-288.9625. Enterprise Florida facilitated the creation of FOF, is its sole member and controls its majority voting interest through appointment of its Board of Directors. Enterprise Florida also provided FOF’s initial capital through funds received from the State of Florida Department of Economic Opportunity (“DEO”). FOF is not a public corporation or instrumentality of the State. FOF’s initial purpose was to provide seed capital and early stage venture equity capital for emerging companies in the State, including, without limitation, enterprises in life sciences, information technology, advanced manufacturing processes, aviation and aerospace, and homeland security and defense, as well as other strategic technologies. Subsequent to initial capital funding, FOF has also been empowered by the Statute to make direct investments, including loans, in individual businesses and infrastructure projects. Pursuant to an agreement with the Florida Department of Agriculture and Consumer Services, Department of Energy (“FLDOE”), successor to the Florida Energy and Climate Commission, FOF began to receive and invest capital for the Clean Energy Investment Program. During fiscal 2012, FOF began its role of receiving and investing capital for the Florida Venture Capital Program under the State Small Business Credit Initiative. FOF PA II, Inc. was incorporated on August 23, 2012 as a for-profit corporation for which FOF is the sole shareholder. FOF PA II, Inc. was established to hold an investment in the Florida Venture Capital Program for which taxable income is passed through to the investor.


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Note 1 ‐ Summary of Significant Accounting Policies (continued) Enterprise Florida is related through common purpose, Florida Statute or management, with Florida Development Finance Corporation and Cypress Equity Fund, Ltd., entities which are not included in these consolidated financial statements. Enterprise Florida provides management and accounting services to these related parties, which may not always be conducted on an arm's-length basis (See Note 12). Due to the 2011 legislation, Enterprise Florida also has operating relationships with Visit Florida, through contracting for tourism-related marketing services and governing board appointments, and with Space Florida, where governmentally appointed Directors on Enterprise Florida’s Board of Directors also serve as Directors of Space Florida. Enterprise Florida operates through units, each headed by a senior officer who reports to the chief operating officer. These are:

Administration – provides all administrative services to the Organization such as the executive office, human resources, contracts and compliance, information technology and accounting.

Business Development – responsible for coordinating national and international business development by managing projects to increase capital investment and jobs in Florida. It facilitates the most effective use of business incentives and assists existing business expand jobs and capital investment.

International Trade and Development – focuses on international trade programs to expand the number of Florida companies exporting Florida products and services. It coordinates Team Florida events for marketing and promotion of Florida for trade and investment. It also manages key international relationships to improve Florida’s international business and global reputation in the following countries: Brazil, Canada, China, Czech Republic, Germany, Israel, Japan, Mexico, France, South Africa, Spain, Taiwan and the United Kingdom.

Marketing, Information, and Communications – responsible for establishing and building a pro-business image for the state by identifying and marketing Florida to targeted industry decision makers and business leaders. It develops, coordinates, and implements a statewide strategic plan for Florida brand recognition. The unit also manages all corporate communications.

Minority and Small Business, Entrepreneurship and Capital – is responsible for small and minority business programs. It also administers special capital programs such as those of FOF and State Small Business Credit Initiative, and supports the Florida Development Finance Corporation, Cypress Equity Fund Management Corporation, Cypress Equity Fund Limited, and Cypress Equity Fund Group Trust.

Sports Development – Florida Sports Foundation, Inc. operates as a subsidiary of Enterprise Florida, working to strengthen the economic impact of sports events through grants and identifying business expansion or development opportunities linked to sports development. It also develops, fosters and coordinates services and programs for amateur sports through the Sunshine State Games and the Florida Senior Games State Championships.

Strategic Partnerships – maintains and enhances relationships with primary partners and stakeholders to strengthen support of economic development initiatives and increase job growth. It maintains and expands investor support and Board participation. It assists communities to increase their competitiveness when vying for job creation projects. It retains and maximizes opportunities to enhance the Department of Defense investment in Florida through management of defense grant programs and the Florida Defense Support Task Force activities.


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Note 1 ‐ Summary of Significant Accounting Policies (continued)

Tourism Marketing – works to promote travel and drive visitation to and within Florida. This role is contracted with Visit Florida, which serves as the sole statewide destination marketing organization representing the entire Florida tourism industry.

Basis of Presentation The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. Net assets and revenues, expenses, gains and losses are classified based on the existence or absence of donor-imposed restrictions. Accordingly, net assets of the Organization and changes therein are classified and reported as temporarily restricted (see Note 9) or unrestricted net assets. Cash and Cash Equivalents Cash and cash equivalents include the operating accounts of Enterprise Florida and cash and cash equivalents limited as to use. The Organization considers all highly liquid financial investments purchased with an original maturity date of three months or less to be cash equivalents. The Organization places its cash and cash equivalents on deposit with financial institutions in the United States. The Federal Deposit Insurance Corporation (“FDIC”) covers $250,000 for substantially all depository accounts. The Organization from time to time may have had amounts on deposit in excess of the insured limits. As of June 30, 2013, the Organization had $75,877,899 which exceed these insured amounts; $32,120,764 of which were FOF deposits. Bank deposits include $27,815,697 held for the State of Florida. Management believes the associated risk is minimized by placing such assets with quality financial institutions. The Organization has not experienced any losses on such accounts. Cash and Cash Equivalents Limited as to Use In order to ensure compliance with grant documents and/or performance contracts, Enterprise Florida has limitations on funds held in escrow and for grant funds received in advance of expenditure. In addition, cash and cash equivalents for FOF and the Foundation are limited for specific use by each entity in accordance with their designated purpose and contractual arrangements. Leaseholds, Furniture and Equipment Leaseholds, furniture and equipment are stated at cost, if purchased, or estimated market value at date of receipt, if acquired by gift. Depreciation is provided using the straight-line method over the estimated economic useful lives of the related assets which are as follows:

Leasehold improvements 5-7 yearsOffice furniture 5-7 yearsOffice equipment 5 yearsComputers and software 3-5 years

Additions or improvements in excess of $500 for the Foundation and $1,000 for the other entities, with an estimated useful life exceeding a year, are capitalized. Repairs and maintenance costs are charged to expense as incurred.


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Note 1 ‐ Summary of Significant Accounting Policies (continued) Investments in Venture Capital Partnerships FOF has investments in six partnerships, which invest in venture capital limited partnerships. These investments are stated at estimated fair value based on net asset value information received from the limited partnerships. Direct Investments FOF’s direct investments relate to the Clean Energy Investment Program and Florida Venture Capital Program and are presented in the accompanying consolidated financial statements at estimated fair value, as determined by management based on information provided by the investment manager. The values assigned to direct investments are based on available information and do not necessarily represent amounts that might ultimately be realized. Such amounts depend on future circumstances and cannot reasonably be determined until the individual investments are actually liquidated. Direct investments are in five privately-held companies of the Clean Energy Investment Program and in eight privately-held companies of the Florida Venture Capital Program. The nature of these investments provides risk of loss due to most being in early stages of operations and in the portion of the energy industry not yet well established. Fair values of direct investments are initially based on the price paid for the direct investments by the Organization, adjusted as appropriate for indications of change in fair value, such as subsequent changes in prices paid for company stock, significant changes in company performance from that expected, and changes in industry comparable data, such as revenue multiples of similar companies and prices paid for similar companies associated with mergers and acquisitions. There have been no such indications of change in fair value for the Organization’s direct investments; accordingly, all direct investment estimated fair values are equivalent to original cost as of June 30, 2013. Investment in Limited Partnership Cypress Equity Fund Management Corporation’s ownership interest in Cypress Equity Fund, Ltd., (the “Limited Partnership”) is accounted for under the equity method, as more fully described in Note 7. Use of 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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported time period. Actual results could differ from those estimates. Compensated Absences Vacation pay is accrued as earned by employees. Unused accumulated vacation pay is paid upon an employee's separation from service up to a maximum of 120 hours. Deferred Revenue Enterprise Florida recognizes its pass-through grants to sub-recipients in the consolidated statement of activities as the amounts that have been requested for reimbursement by the sub-recipients. Enterprise Florida records deferred revenue for the difference in the amount received from the State of Florida and the amount requested for reimbursement by the sub-recipients as this amount is considered a conditional promise to give and, therefore, does not meet the criteria for revenue recognition.


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Note 1 ‐ Summary of Significant Accounting Policies (continued) State Operating Assistance Revenue State operating assistance revenue represents State appropriations for the Organization’s operating funds, consisting of the following: unconditional promises to give that are available for unrestricted use; unconditional promises to give that are temporarily restricted for program use; and pass-through grants administered by Enterprise Florida that are recognized as revenue and expense when pass-through sub-recipients incur associated costs. State Small Business Credit Initiative Revenue During fiscal 2012, Enterprise Florida began to receive funding under an agreement with the DEO for the State Small Business Credit Initiative (“SSBCI”). The SSBCI facilitates institutional lending and vendor capital investing benefiting small businesses, so long as the proposed activities are consistent with the purpose of the funding. The SSBCI is directly funded by the DEO in total appropriations of $97,662,349 from a contract awarded by DEO through Title III of the Small Business Jobs Act of 2010. Of this amount, $85,723,033 has been allocated to Enterprise Florida, including $42,040,133 to fund the Small Business Loan Program administered by Enterprise Florida, $41,907,900 to be passed through to FOF for the Florida Venture Capital Program and $1,775,000 in administrative funding. Of the $85,723,033 allocated, $46,758,817 has been received or is receivable from DEO at June 30, 2013, $17,507,856 of which was for the Small Business Loan Program, $14,235,559 of which has been passed through to FOF for the Florida Venture Capital Program, $560,023 of which was for administrative funding and the remaining $14,455,379 is available to be allocated to a specific program. State Small Business Credit Initiative revenue represents restricted use funding received through the SSBCI funding agreement to support investing and loan activity and administrative costs. Private Investment Contributions Private investment contributions provided to Enterprise Florida are recognized as revenues in the period received. Private investment contributions provided to Enterprise Florida are available for unrestricted use by Enterprise Florida whereas capital contributions provided to Enterprise Florida by DEO are for restricted use within the SSBCI. Private investment contributions that are restricted by the donor are reported as an increase in unrestricted net assets if the restriction expires in the reporting period in which the support is recognized. Other donor restricted contributions are reported as an increase in temporarily restricted net assets, depending on the nature of the restriction. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets. Conditional promises to give are not recognized until they become unconditional; that is, when the conditions on which they depend are substantially met. In-kind Contributions Donated goods and services are recorded at their fair market value at the date of receipt by the Organization. Contributions of donated services that create or enhance non-financial assets or that require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation, are recorded at fair value in the period received. Contributions of those services not meeting those specified criteria are not recorded in the consolidated financial statements. In-kind contributions recognized in the statement of activities for the year ended June 30, 2013 consisted primarily of foreign office locations, advertising and publications used for promoting business and sports development in the State.


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Note 1 ‐ Summary of Significant Accounting Policies (continued) Advertising Costs Advertising Costs are expensed when incurred and totaled $720,110 for the year ended June 30, 2013. Income Tax Status Enterprise Florida, Cypress Equity Fund Management Corporation, Florida Sports Foundation and FOF are recognized by the Internal Revenue Service (IRS) as exempt from federal income tax on related income under Internal Revenue Code (IRC) Section 501(a), consisting of organizations described in Section 501(c)(3). These entities are also exempt from state income taxes on related income pursuant to Chapter 220.13 of the Florida Statutes. Therefore, a provision for income taxes has not been included for these entities in the accompanying consolidated financial statements. FOF PA II, Inc. is a for-profit corporation subject to income tax related to investments in pass-through entities and, accordingly, is responsible for income tax on investee taxable income based on its ownership percentage. To the extent FOF PA II, Inc. has paid or is obligated for income tax on its share of investee tax basis income, before such income is recognized for financial statement purposes, a deferred tax asset is recognized at applicable tax rates. As of June 30, 2013, FOF PA II, Inc. has no deferred tax assets or taxes payable. The Organization’s policy is to record a liability for any tax position taken that is beneficial to the Organization, including any related interest and penalties, when it is more likely than not the position taken by management will be overturned by a taxing authority upon examination. Management believes there are no such positions as of June 30, 2013 and, accordingly, no liability has been accrued. The Organization is no longer subject to tax examinations for years prior to 2010. Note 2 ‐ Cash and Cash Equivalents Limited as to Use The Organization’s cash and cash equivalents limited as to use consist of the following as of June 30, 2013:

Enterprise Florida Escrow 19,096,553$ Programs administered by Enterprise Florida

FL Defense Support Task Force 3,365,472 State Small Business Credit Support Initiative 7,632,041 Rural Strategic Marketing 1,350,776 Small Business Technology Growth Fund 922,938 Florida International Business Expansion Initiative 628,856 Military Base Protection 95,235 Minority Business Development 182,211 Technology related programs 39,108

Pass through grants administered by Enterprise FloridaFunds restricted for grant programs 2,154,605

Total Enterprise Florida 35,467,795

Florida Opportunity Fund, Inc. 32,336,920 Florida Sports Foundation, Inc. 3,245,254

71,049,969$


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Note 3 ‐ Due From State of Florida Amounts due from State of Florida consist of $23,708,639 at June 30, 2013 under various contracts administered by the DEO, including $17,055,458 receivable under the State Small Business Credit Initiative. Note 4 ‐ Accounts and Loans Receivable Accounts and loans receivable, which are presented at cost, includes private investment contributions, trade show events, unsecured loans to three borrowers with 5% interest payable upon loan maturity, in fiscal 2016, and $3,530,000 of loans receivable under the Clean Energy Investment Program. The Organization also has loans receivable under its State Small Business Credit Initiative Program, generally with repayment terms ranging from 6 months to 3 years. Management assesses the potential for loan loss reserves based on payment history and existing conditions of companies to which loans have been made. Based on this analysis, management has determined that an allowance for doubtful amounts is not necessary. Interest income is recorded on the accrual basis based on applicable interest rates and principal outstanding, included in other income for the year ended June 30, 2013. There are no past due loans for which payment is delinquent or for which stated interest is not accrued. Loan Guarantee Program The Loan Guarantee Program is available to qualified businesses that demonstrate adequate historical and/or proposed cash flow coverage and other credit underwriting metrics. Enterprise Florida works with financial institutions to use this program as a credit enhancement to mitigate any perceived credit weaknesses on loans.Under each guarantee, Enterprise Florida is obligation, should the borrower be delinquent for 120 days, to make the monthly loan payments of the borrower, to the extent of the guarantee. The typical loan guarantee is between 5-50% of the total required financing and ranges from $250,000 - $5,000,000 with a maximum loan term of 5 years. Interest rates and fees are negotiable. Enterprise Florida receives a loan guarantee fee upfront, which is recognized on a straight-line basis as revenue over the term of the guarantee, and an ongoing fee, recognized as revenue in the year to which it relates, until the loan is paid off or the guarantee expires. The financial institution is responsible for collecting payments, reporting interest, and handling defaults. Management has evaluated all loan guarantees for the potential of recording an associated liability based on the contingency of ultimate payment being more likely than not. Based on this analysis, management believes a liability for loss contingency is not warranted at June 30, 2013. The maximum potential future payments to be paid under guarantees were $3,845,785 as of June 30, 2013. One guarantee of $260,053 has a 5 year term and all other guarantees are for 3 year terms.


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Note 5 ‐ Leaseholds, Furniture and Equipment Leaseholds, furniture and equipment consist of the following as of June 30, 2013:

Leasehold improvements 234,387$ Office furniture 432,951 Office equipment 314,563 Computers and software 730,474

1,712,375 Less accumulated depreciation (1,180,993)

531,382$

Note 6 ‐ Investments in Venture Capital Partnerships and Direct Investments Investments in venture capital partnerships and direct investments are provided through three programs administered through FOF, including a Fund of Funds program and two direct investment programs. The Fund of Funds program represents the investments in venture capital partnerships, initially funded by $29,500,000 of State appropriations subject to Florida Statute 288.9624 (the “Statute”). The Statute provides that FOF may invest this initial funding only in seed and early stage venture capital/angel funds that have experienced managers or management teams with demonstrated experience, expertise, and a successful history in the investment of venture capital funds, focusing on opportunities in Florida. FOF may not directly invest initial Fund of Funds capital in individual businesses. While not precluded from investing in venture capital funds that have investments outside of Florida, FOF must require a venture capital fund to show a record of successful investment in Florida, to be based in Florida, or to have an office in Florida staffed with a full-time, professional venture investment executive in order to be eligible for investment. Investments in Venture Capital Partnerships FOF investments in venture capital partnerships consist of six partnerships that invest in energy-related and life sciences limited partnerships, presented in the accompanying financial statements at estimated fair value based on net asset value per share. Each of the investments made under the Organization’s Fund-of-Funds Program are limited life limited partnerships (or other limited liability vehicles) that provide minimal redemption opportunities. Liquidity is achieved from the partnership through distributions in the form of cash and stock.


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Note 6 ‐ Investments in Venture Capital Partnerships and Direct Investments (continued) The term of each limited partnership is stated in its limited partnership agreement, as amended, and ranges from approximately 10 to 12 years, including any provisions for extensions. As of June 30, 2013, the Fund-of-Funds investments range in age from approximately 14 months to 51 months and the estimated remaining life of such investments range from approximately 7 years to 11 years. Each Fund-of-Funds investment term and estimated remaining life has been calculated based on its limited partnership agreement, including any term extensions effective as of June 30, 2013. A Fund-of-Funds investment may liquidate before its stated termination date or may require additional term extensions to complete its liquidation in an orderly manner. Fund-of-Funds investment term extensions are implemented in accordance with the respective limited partnership agreement for each investment. As permitted, fair value for each Fund-of-Funds investment is determined by FOF based on its proportionate share of the underlying fair value of the net assets of the limited funds, derived from FOF’s ownership percentage and audited financial statements provided by each investee. The audited financial statements provided by each investee are reviewed by the investment advisor for fair value measurement compliance and net asset values provided by the investment advisor are approved quarterly by management. Direct Investments The Clean Energy Investment Program FOF has an agreement (the “Clean Energy Agreement”) with the FLDOE to administer the Clean Energy Investment Program. The Clean Energy Investment Program was created in 2010 and targets qualified Florida businesses with direct investments in three primary areas of focus: 1) facility and equipment improvement with energy-efficient and renewable energy products, 2) acquisition or demonstration of renewable energy products and 3) process improvement of existing production, manufacturing, assembly or distribution of operations to increase energy efficiency or reduce consumption. The direct investments may consist of debt and other instruments, so long as the proposed activities are consistent with the three areas of focus described above. The Clean Energy Investment Program is through a grant funded by State of Florida in the amount of $36,089,000 as a result of a grant awarded by the United States Department of Energy through the American Recovery and Reinvestment Act. As of June 30, 2013, FOF has cumulative capital contributions of $35,049,514 for this program, of which $34,825,152 has been received. Program funding under the Clean Energy Agreement is required to be segregated from existing monies provided by the State or other existing or future contributors, and initial funding was required to be deposited in an interest bearing account. Ninety percent of the initial proceeds from the FLDOE ($32,480,100) are to be invested in accordance with provisions of the preceding paragraph. The remaining ten percent ($3,608,900) of the initial proceeds are reimbursed as administrative costs are incurred. Administrative costs and expenses included an annual fund manager fee equivalent to 3% of the program funding and allowable grantee expenses, including legal, accounting, insurance, and other necessary expenses, up to 4% of program funding. To the extent cumulative distributions of a program asset exceeds the amount invested from the program capital with respect to such program asset, FOF is contingently liable for a deal by deal fund manager success fee of 30% and any deferred fund manager fees. The Clean Energy Agreement is set to terminate on March 31, 2025; however, the FLDOE has the option to renew on the same terms and conditions for an additional five year term.


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Note 6 ‐ Investments in Venture Capital Partnerships and Direct Investments (continued) Florida Venture Capital Program During fiscal 2011, Enterprise Florida entered into an agreement (the “DEO Agreement”) with the Florida Department of Economic Opportunity (the “DEO”) for the State Small Business Credit Initiative (“SSBCI”). The Florida Venture Capital Program was one of several programs created utilizing SSBCI funding. The Florida Venture Capital Program targets qualified Florida businesses by providing direct investments to increase the amount of capital available. The direct investments may consist of debt and other instruments. The expiration date of the DEO agreement is March 31, 2017, upon which all direct investment funding is to be completed, with no contractual stipulations with respect to return of the initial program funding. Program funding under the DEO Agreement is required to be segregated from existing monies provided by the State or other existing or future contributors, and initial funding is required to be deposited in an interest bearing account. Quarterly reimbursements of administrative costs up to $88,750 will be made by DEO upon proper submission of quarterly reports by the Organization from October 1, 2011 to September 30, 2016, for a total administration fee to not exceed $1,775,000 over the life of the program. Administrative costs and expenses include legal, accounting, insurance, other necessary expenses and a fund manager fee of up to .075% of program funding, of which $56,250 is payable quarterly and reimbursed through quarterly receipts from DEO through Enterprise Florida. To the extent cumulative distributions of a program asset exceeds the amount invested from the program capital with respect to such program asset, FOF is contingently obligated for a deal by deal fund manager success fee of 30% and additional fund manager fees equivalent to $258,058 per quarter. Fair Value Hierarchy The fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value, provides three levels of inputs used to measure fair value. Because of the inherent uncertainty of valuations, estimated fair values may differ significantly from the values that would have been used had a ready market for these investments existed, and differences could be material.


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Note 6 ‐ Investments in Venture Capital Partnerships and Direct Investments (continued) FOF classifies its investments into a hierarchical disclosure framework as follows:

Level I - Securities traded in an active market with available quoted prices for identical assets as of the reporting date.

Level II - Securities not traded on an active market but for which observable market inputs are readily available or Level I securities where there is a contractual restriction as of the reporting date. Level III - Securities not traded in an active market and for which no significant observable market inputs are available as of the reporting date.

The cost basis of the Organization’s Fund of Funds investments, Clean Energy direct investments and Florida Venture Capital Fund direct investments was $11,053,837, $15,774,741 and $12,138,622, respectively, as of June 30, 2013. The following table summarizes the valuation of the Organization’s investments, measured at fair value as of June 30, 2012, based on the level of input utilized to measure fair value:

Fair Value

Percent of Fund's Net Assets

Level I -$ - Level II - - Level III 40,946,236 52%Total investments 40,946,236$ 52%

The following table presents a reconciliation of the beginning and ending balances of the fair value measurements using significant unobservable inputs (Level III):

Fund‐of‐Funds Investments

Clean Energy Direct Investments

FLVCP Direct Investments

Opening Balance at 7/1/12 9,436,448$ 11,374,750$ 500,000$

Total gains or losses (realized and unrealized) included in changes in net assets 2,276,042 - -

Investments 2,902,961 4,399,991 11,735,559

Returns (1,582,578) - (96,937)

Transfers in and / or out of Level III - - -

Ending Balance at 6/30/13 13,032,873$ 15,774,741$ 12,138,622$

The amount of total gains or losses for the period included in changes in net assets attributable to the change in unrealized gains or losses relating to assets still held at the reporting date 969,003$ -$ -$


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Note 6 ‐ Investments in Venture Capital Partnerships and Direct Investments (continued) The Organization relies on the investment advisor to oversee the valuation process of the Organization’s Level III direct investments. Although management is responsible for overseeing the Organization’s valuation processes and procedures, the investment advisor is responsible for conducting periodic reviews of fair value for each direct investment and for presenting results of fair value assessments to management. The investment advisor determines the valuations of the Fund’s Level III direct investments on at least a quarterly basis. Valuations determined by the Organization are required to be supported by market data, industry accepted third-party valuation models, prior company financing or other methods the investment advisor deems appropriate, including the use of internal proprietary valuation models. Note 7 – Investment in Limited Partnership Cypress Management is the general partner of Cypress Equity Fund, Ltd. (the "Limited Partnership"). Condensed financial information for the limited partnership is as follows:

Assets 529,966$ Liabilities 16,057

Partners' capital 513,909$

Cypress Management's capital account balance 5,174$

Schedule of Financial Position InformationDecember 31, 2012

Cypress Management's capital account balance is included in other assets in the consolidated statement of financial position and includes activity occurring between the date of the Limited Partnership's financial statements and Cypress Management’s year ended June 30, 2013.

Revenues 56,934$

enterprise florida, inc. · 10/30/2013 · equity fund management corporation, florida opportunity...

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