Department of Business, Economic Development and Tourism State of Hawaii MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) Fiscal Year Ended June 30, 2009 Changes in Net Assets Fiscal Years Ended June 30, 2009 and 2008 (Amounts in thousands) 2008 2009 Revenues Program revenues: Charges for services Operating grants and contributions General revenues: State-allotted appropriations Other $ 11,431 13,724 $ 7,344 13,831 18,461 1,519 45,135 Expenses Natural Energy Laboratory of Hawaii Authority High Technology Development Corporation Office of Planning General Support for Economic Development Strategic Industries Strategic Marketing and Support Economic Planning and Research for Economic Development Hawaii Strategic Development Corporation Foreign-Trade Zone Creative Industries Land Use Commission Aloha Tower Development Corporation Capital Outlays 42,519 12,707 6,189 3,359 2,758 5,299 2,333 Total revenues 19,510 1,834 11,975 5,823 4,101 3,835 4,252 2,562 3,150 9,504 1,809 2,170 490 3,122 581 3,194 944 2,093 (226) 623 1,021 447 Total expenses 53,471 40,644 Changes in net assets before transfers (8,336) 1,875 (1,843) 5,019 (10,179) 6,894 Transfers Changes in net assets 84,281 91,175 Beginning net assets $ Ending net assets This is trial version www.adultpdf.com 13 80,996 $ 91,175 Department of Business, Economic Development and Tourism State of Hawaii MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) Fiscal Year Ended June 30, 2009 Analysis of Changes in Net Assets The DBEDT's net assets decreased by $10.2 million or 11.2% during the fiscal year ended June 30, 2009 primarily due to the current fiscal year's total expenses exceeding the current fiscal year's total revenues Total revenues for the DBEDT were $45.1 million for the fiscal year ended June 30, 2009 Revenues generated by program charges for services were $11.4 million or 25.3% of the total, the State-allotted appropriations made up $18.5 million or 40.9% of the total, and federal grants and other sources provided the balance in total revenues Revenues generated by program charges for services increased by $4.1 million or 55.7% from the prior fiscal year primarily due to an increase in revenues for the Natural Energy Laboratory of Hawaii Authority, the High Technology Development Corporation and the Hawaii Strategic Development Corporation Total expenses for the DBEDT were $53.5 million for the fiscal year ended June 30, 2009 The expenses were for the following programs administered by the DBEDT: Natural Energy Laboratory of Hawaii Authority (NELHA), Office of Planning, High Technology Development Corporation, Hawaii Strategic Development Corporation, Strategic Industries, Strategic Marketing and Support, Creative Industries, Economic Planning and Research for Economic Development, General Support for Economic Development, Aloha Tower Development Corporation, Land Use Commission, and the Foreign-Trade Zone The largest expenses were for NELHA of $12.7 million or 23.8% of the total expended, which increased $0.7 million or 6.1 % from the prior fiscal year FINANCIAL ANALYSIS OF DBEDT'S INDIVIDUAL FUNDS As noted earlier, the DBEDT uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements Governmental Funds The focus of the DBEDT's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources Such information is useful in assessing the DBEDT's financing requirements In particular, the unreserved fund balance may serve as a useful measure of a government's net resources available for spending at the end ofthe fiscal year As of the end of the current fiscal year, the DBEDT's governmental funds reported combined ending fund balances of $34.6 million, a decrease of $5.5 million or 13.8% from the prior fiscal year Approximately $5.8 million or 16.8% of this total amount constitutes the unreserved fund balance, which is available for spending at the DBEDT's discretion in the coming fiscal year The general fund is the DBEDT's primary operating fund At the end of the current fiscal year, the fund balance of the DBEDT's general fund was $3.1 million, which reflects a decrease of 71 % over the prior fiscal year This is trial version www.adultpdf.com 14 Department of Business, Economic Development and Tourism State of Hawaii MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) Fiscal Year Ended June 30, 2009 The economic development special revenue fund accounts for all programs related to the development and promotion of industry and international commerce, energy development and management, economic research and analysis, and the utilization of resources At the end of the current fiscal year, the fund balance of the economic development special revenue fund was $22.7 million, of which $4.8 million was unreserved and available for the DBEDT's expenses The capital projects fund accounts for financial resources used for the acquisition or construction of major capital facilities The fund balance of the capital projects fund at the end of the current fiscal year was $8.8 million Fiduciary Funds The DBEDT maintains an agency fund for the funds held in the bank account for security deposits for the Foreign-Trade Zone Division, NELHA, and the High Technology Development Corporation GENERAL FUND BUDGETARY HIGHLIGHTS The difference between the general fund original budget of $11.0 million and the final budget of $11.6 million was $0.6 million Actual expenditures were $9.8 million for the fiscal year ended June 30, 2009, resulting in a variance between the final budget and actual expenditures on a budgetary basis of $1.8 million CAPITAL ASSETS The DBEDT's investment in capital assets as of June 30, 2009, amounted to $50.2 million (net of accumulated depreciation of $39.3 million) This investment in capital assets includes land, buildings and improvements, machinery, and equipment Major capital improvement project expenses for the fiscal year ended June 30, 2009, were for improvements at NELHA ECONOMIC FACTORS AND NEXT YEAR'S BUDGET Hawaii is currently going through a period of economic slowdown due to national and global economic conditions In January 2010, the Council on Revenues, revised its estimates of the State's General Fund tax growth rate to a negative 2.5% in fiscal 2010, 7.6% in fiscal 2011, and 6.0% in fiscal 2012 Due to extraordinary financial circumstances concerning the State budget, the Governor has restricted authorized spending in FY 2010 and has implemented both layoffs and furloughs to reduce payroll costs The Governor has required that the reductions due to layoff and salary furlough adjustments be reflected in the General Fund supplementary budget request for FY 2011 Updated revenue projections will impact the Governor's budget policy and accordingly, DBEDT's future budget This is trial version www.adultpdf.com 15 Department of Business, Economic Development and Tourism State of Hawaii MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) Fiscal Year Ended June 30, 2009 REQUESTS FOR INFORMATION Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Director, Department of Business, Economic Development and Tourism, P.O Box 2359, Honolulu, Hawaii 96804 General information about the DBEDT can be found at the State's website, http://www.hawaiLgov/dbedt This is trial version www.adultpdf.com 16 Department of Business, Economic Development and Tourism State of Hawaii STATEMENT OF NET ASSETS June 30,2009 ASSETS Cash Cash in State Treasury Cash in bank Petty cash Total cash $ Receivables Accounts, net Loans, net Due from grantor 34,397,026 1,024,280 29,300 35,450,606 696,975 1,030,554 843,357 2,570,886 Total receivables, net 8,974,073 Investment in venture capital limited partnerships, at cost Capital assets 3,486,466 46,709,095 Non-depreciable Depreciable, net 50,195,561 $ 97,191,126 $ Total assets 1,404,035 602,922 7,683,566 29,300 2,636,584 1,550,000 LIABILITIES Liabilities Vouchers payable Accrued payroll Due to other state agencies Due to State General Fund Deferred revenues Accrued claims payable Accrued compensated absences Due within one year Due in more than one year 673,557 1,615,380 16,195,344 Total liabilities NET ASSETS 50,195,561 30,800,221 Invested in capital assets Unrestricted 80,995,782 Total net assets Total liabilities and net assets $ See accompanying notes to the basic financial statements This is trial version www.adultpdf.com 17 97,191,126 Department of Business, Economic Development and Tourism State of Hawaii STATEMENT OF ACTIVITIES Fiscal Year Ended June 30, 2009 ~ ex> Functions/Programs Governmental activities: Natural Energy Laboratory of Hawaii Authority High Technology Development Corporation Office of Planning General Support for Economic Development Strategic Industries Strategic Marketing and Support Economic Planning and Research for Economic Development Foreign-Trade Zone Hawaii Strategic Development Corporation Creative Industries Land Use Commission Aloha Tower Development Corporation Capital Outlays Total govemmental activities Program Revenues Operating Charges for Grants and Services Contributions Expenses 12,706,961 6,188,923 3,358,719 2,757,871 5,299,100 2,332,802 3,150,063 1,808,861 9,504,328 2,169,773 490,430 3,121,950 581,185 53,470,966 $ $ $ 4,091,918 1,319,583 $ 153,029 43,624 7,297,528 3,394,944 1,431,843 Net (Expenses) Revenue and Changes in Net Assets $ 274,140 100,000 1,225,642 1,575,410 2,903,085 1,344,438 $ 11,431,087 $ 13,724,097 General revenues: State-allotted appropriations, net of reversions and lapses Nonimposed employee fringe benefits Net investment loss Lapsed appropriations related to previous fiscal years 18,461,274 2,886,010 (641,984) (725,300) 19,980,000 Total general revenues (1,843,162) Transfers Change in net assets Net assets at July 1, 2008 Net assets at June 30, 2009 This is trial version www.adultpdf.com See accompanying notes to the basic financial statements (1,317,515) (1,474,396) (1,926,876) (2,757,871) (4,871,931) (2,189,178) (1,924,421 ) (233,451) (6,601,243) (2,169,773) (490,430) (1,777,512) (581,185) (28,315,782) $ (10,178,944) 91.174,726 80,995,782 Department of Business, Economic Development and Tourism State of Hawaii BALANCE SHEET GOVERNMENTAL FUNDS June 30, 2009 Economic Development Special Revenue General Capital Projects Total ASSETS Cash in State Treasury Cash in bank Petty cash Receivables: Accounts, net Loans, net Due from grantor Investment in venture capital limited partnerships, at cost Total assets $ 2,843,066 $ 8,500 22,748,041 1,024,280 20,800 $ 8,805,919 $ 34,397,026 1,024,280 29,300 696,975 9,989 843,357 1,020,565 $ 3,872,131 $ $ 481,662 274,008 $ 696,975 1,030,554 843,357 8,974,073 34,317,515 8,974,073 46,995,565 $ 8,805,919 $ LIABILITIES AND FUND BALANCES LIABILITIES Vouchers payable Accrued payroll Due to other state agencies Due to State General Fund Deferred revenues Total liabilities 764,170 2,087,396 17,814,994 1,020,565 3,107,961 110,053 4,800,231 22.725,278 8,500 FUND BALANCES Reserved for encumbrances Reserved for capital projects Reserved for other purposes Unreserved Total fund balances Total liabilities and fund balances 922,373 328,914 7,683,566 20,800 2,636,584 11,592,237 $ 3,872,131 $ 34,317,515 $ $ 353,443 8,452,476 8,805,919 See accompanying notes to the basic financial statements This is trial version www.adultpdf.com 19 20,255,833 8,452,476 110,053 5,820,796 34,639,158 8,805,919 $ 1,404,035 602,922 7,683,566 29,300 2,636,584 12,356,407 $ 46,995,565 Department of Business, Economic Development and Tourism State of Hawaii RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS June 30, 2009 $ Total fund balances - governmental funds 34,639,158 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the governmental funds Governmental capital assets Less accumulated depreciation $ 89,456,611 (39,261,050) 50,195,561 Accrued compensated absences liability is not due in the current period and, therefore, is not reported in the governmental funds (2,288,937) Claims payable is not due in the current period and, (1,550,000) therefore, is not reported in the governmental funds Net assets of governmental activities See accompanying notes to the basic financial statements This is trial version 20 www.adultpdf.com $ 80,995,782 Department of Business, Economic Development and Tourism State of Hawaii STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS Fiscal Year Ended June 30, 2009 Economic Development Special Revenue General REVENUES Charges for current services Intergovernmental State-allotted appropriations, net of reversions and lapses Nonimposed employee fringe benefits Net investment loss $ $ Capital Projects Total $ 8,160,000 11,431,087 $ 13,724,097 11,431,087 13,724,097 17,735,974 2,886,010 (641,984) 8,160,000 45,135,184 9,575,974 2,886,010 59.844 12,521,828 10,498,430 1,449,050 4,292,220 1,999,069 10,856,099 3,345,533 5,423,123 5,247,212 3,051,207 1,665,302 1,449,018 3,114,320 1,920,310 4,650,000 Strategic Marketing and Support Hawaii Strategic Development Corporation Foreign-Trade Zone Creative Industries Land Use Commission Aloha Tower Development Corporation Capital outlays 24,453,356 357,669 1,896,483 1,130,903 3,248,143 3,051,207 EXPENDITURES Natural Energy Laboratory of Hawaii Authority Office of Planning High Technology Development Corporation Strategic Industries General Support for Economic Development Economic Planning and Research for Economic Development (701,828) 401,934 4,878,868 1,701,581 2,322,244 9,528,868- - 581,185 1,701,581 1,565,144 509,531 1,571,950 581,185 1,565,144 509,531 1,571,950 19,994,692 28,242,120 581,185 48,817,997 (7,472,864) (3,788,764) 7,578,815 (3,682,813) (215,000) (1,628,162) (1,843,162) (215,000) (1,628,162) (1,843,162) (7,687,864) (5,416,926) 7,578,815 (5,525,975) 10,795,825 28,142,204 1,227,104 40,165,133 22,725,278 $ 8,805,919 $ 34,639,158 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers out NET CHANGE IN FUND BALANCES FUND BALANCES AT JULY 1, 2008 FUND BALANCES AT JUNE 30, 2009 $ 3,107,961 $ See accompanying notes to the basic financial statements This is trial version www.adultpdf.com 21 Department of Business, Economic Development and Tourism State of Hawaii RECONCILIATION OF THE CHANGE IN FUND BALANCE OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES Fiscal Year Ended June 30, 2009 Net change in fund balances - total governmental funds $ (5,525,975) Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures, however, in the statement of activities, the cost of those assets are depreciated over their estimated useful lives as depreciation expense This is the amount by which capital outlays exceeded depreciation in the current period (3,071,907) Change in long-term compensated absences reported in the statement of activities not require the use of current financial resources and therefore are not reported as (31,062) expenditures in governmental funds Claims payable reported in the statement of activities not require the use of current financial resources and therefore (1,550,000) are not reported as expenditures in the governmental funds Change in net assets of governmental activities See accompanying notes to the basic financial statements This is trial version 22 www.adultpdf.com $ (10,178,944) Department of Business, Economic Development and Tourism State of Hawaii STATEMENT OF REVENUES AND EXPENDITURES - BUDGET AND ACTUAL GENERAL AND ECONOMIC DEVELOPMENT SPECIAL REVENUE FUNDS Fiscal Year Ended June 30, 2009 General Fund Actual on Final budgetary budget basis Original budget REVENUES State-allotted appropriations, net of reversions and lapses Other $ 10,991,697 $ 11,621,434 $ Economic Development Special Revenue Fund Actual on Variance Original Final budgetary favorable budget budget basis (unfavorable) Variance favorable (unfavorable) 9,794,225 $ (1,827,209) $ $ - $ $ 52,515,460 83,156,719 22,308,445 (60,848,274) 10,991,697 EXPENDITURES Natural Energy Laboratory of Hawaii Authorit) High Technology Development Corporation Office of Planning Aloha Tower Development Corporation Strategic Industries General Support for Economic Development Economic Planning and Research for Economic Development Foreign-Trade Zone Strategic Marketing and Support Land Use Commission Hawaii Strategic Development Corporation Creative Industries EXCESS OF REVENUES OVER (UNDER) EXPENDITURES $ 11,621,434 9,794,225 (1,827,209) 52,515,460 83,156,719 22,308,445 (60,848,274) 365,000 1,068,465 1,681,322 365,000 1,047,539 1,704,754 357,669 964,800 1,275,615 7,331 82,739 429,139 1,273,579 1,648,994 1,269,174 2,384,525 1,065,102 2,163,699 204,072 220,826 12,277,635 8,876,482 5,336,671 3,030,554 4,363,397 25,229,965 11,318,250 6,847,228 3,876,497 13,393,459 13,630,026 3,475,328 1,086,156 1,628,477 4,370,547 11,599,939 7,842,922 5,761,072 2,248,020 9,022,912 1,341,287 1,382,312 1,091,982 290,330 1,828,212 491,668 1,724,729 509,731 1,464,950 398,891 259,779 110,840 1,575,737 2,010,341 2,071,915 2,876,357 2,417,717 2,239,362 966,543 1,725,949 210,946 1,909,814 691,768 2,028,416 12,972,728 14,957,884 8,827,740 6,130,144 1,293,170 1,233,670 1,011,517 222,153 10,991,697 l'V w 11,621,434 9,794,225 1,827,209 52,515,460 83,156,719 35,921,712 47,235,007 $ $ $ $ This is trial version www.adultpdf.com - See accompanying notes to the basic financial statements $ - $ (13,613,267) $ (13,613,267) Department of Business, Economic Development and Tourism State of Hawaii STATEMENT OF ASSETS AND LIABILITIES AGENCY FUNDS June 30, 2009 ASSETS $ 250,250 Cash and other assets held in trust $ 250,250 Total assets LIABILITIES $ 250,250 Deposits payable Total liabilities See accompanying notes to the basic financial statements This is trial version 24 www.adultpdf.com $ 250,250 .. .Department of Business, Economic Development and Tourism State of Hawaii MANAGEMENT''S DISCUSSION AND ANALYSIS (Continued) Fiscal Year Ended June 30, 2009 Analysis of Changes in Net Assets The. .. trial version www.adultpdf.com 17 97,191,126 Department of Business, Economic Development and Tourism State of Hawaii STATEMENT OF ACTIVITIES Fiscal Year Ended June 30, 2009 ~ ex> Functions/Programs... version www.adultpdf.com 15 Department of Business, Economic Development and Tourism State of Hawaii MANAGEMENT''S DISCUSSION AND ANALYSIS (Continued) Fiscal Year Ended June 30, 2009 REQUESTS FOR