USVI Public Records

Document text

VIRGIN ISLANDS PUBLIC BROADCASTING SYSTEM (A Component Unit o f the Government of the United States Virgin Islands) INDEPENDENT AUDITORS' REPORT AND AUDITED FINANCIAL STATEMENTS SEPTEMBER 30, 2022 and 2021 CERTIFIED PUBLIC ACCOUNTANTS & MANAGEMENT CONSULTANTS VIRGIN ISLANDS PUBLIC BROADCASTING SYSTEM (A Component Unit of the Government of the United States Virgin Islands) INDEPENDENT AUDITORS’ REPORT AND AUDITED FINANCIAL STATEMENTS SEPTEMBER 30, 2022 and 2021 TABLE OF CONTENTS Independent Auditors’ Report……………………………………………………………………………..1 Management’s Discussion and Analysis………………………………………………………………….4 Financial Statements: Statements of Net Position……………………………………………………………………………..10 Statements of Revenues, Expenses and Changes in Net Position……………………………………....11 Statements of Cash Flows…………………………………………………...……………………….....12 Notes to the Financial Statements……………………………………………………………………...14 Required Supplementary Information: Schedule of the System’s Proportionate Share of Net Pension Liability………………………………..25 Schedule of the System’s Contributions………………………………………………………………..26 Notes to the Required Supplementary Information…………………………………………………….27 Supplementary Information: Statement of Revenues and Expenses per Division……………………………………………………28 Government Auditing Standards: Independent Auditors’ Report on Internal Control Over Financial Reporting and On Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards…………………………………30 (filssc BERT SMITH & CO. 1 ll'llllllll'\JIUf( ,\(I fll/lJIJ\111\ ,, I l!\IJ,\(",11'11111 If IIJ\lll 11\l!I\ INDEPENDENT AUDITORS' REPORT I 090 Vermont Avenue, NW Stute 250 Washmgton, DC 20005 PO. Box 2478 Kmgsh1II, VI 00851 200 E Prall Street Suite 4100 Baltunore, MD 21202 T:202393.5600 TF: 1 855.479 0548 F: 202393 5608 bertsmithco.com I ,m!tl p,I n -$\m,th: ,._, ,,n To the Board of Directors Virgin Islands Public Broadcasting System Report on the Audit of the Financial Statements Opillio11s We have audited the accompanying financial statements of the Virgin Islands Public Broadcasting System ("the System"), a component unit of the Government or the United States Virgin Islands, which comprise the statement of net position as or and for the years ended September 30, 2022 and September 30, 2021, and the related statements revenues, expenses and changes in net position, and cash flows for the years then ended and the related notes to the financial statements, which collectively comprise the System's basic financial statements. In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the respective financial position of the Systc111, as of September 30, 2022 and September 30, 2021, and the respective changes in financial posit ion. and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States or A111erica. Basis for Opi11io11s We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptrol lcr General of the United States (Government Auditing Standards). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit or the Financial State111cnts section or our report. We arc required to be independent of the System and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Re:,,po11sibilitics of Ma11age111e11t.for the Fi11a11cial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation or financial statements that arc free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the System's ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. AN INC)lt(ND(NT Mil◄IU 01 IBDO ALLIANCE USA - 2 - Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with GAAS and Government Auditing Standards, we • exercise professional judgment and maintain professional skepticism throughout the audit. • identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • obtain an understanding of internal control relevant to the audit 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 System’s internal control. Accordingly, no such opinion is expressed. • evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. • conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the System’s ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control—related matters that we identified during the audit. Emphasis of Matter As discussed in Note 11, as of July 1, 2021 compensation for all System employees is paid by the Primary Government. The System did not record any pension liabilities, related pension expense, and deferred outflows/inflows for the year ended September 30, 2022. The System’s outstanding liability will be adjusted as the overall pension liability changes and incremental changes will be reported by the primary government. Our opinion is not modified with respect to this matter. As discussed in Note 2 to the financial statements, the System adopted the provisions of GASB Statement No.87 Leases. Our opinion is not modified with respect to this matter. Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 4 through 9, Schedule of the System’s proportionate share of the net pension liability on page 25 and the System’s schedule of contributions on page 26 and the notes to the supplementary information on page 27 be presented to supplement the basic financial statements. Such - 3 - information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with GAAS, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Supplementary Information Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the System’s basic financial statements. The statement of revenues and expenses per division on pages 28 and 29 is presented for purposes of additional analysis and is not a required part of the basic financial statements. The statement of revenues and expenses per division is the responsibility of management of the System and is derived from, and relates directly to, the underlying accounting records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the basic financial statements in accordance with auditing standards generally accepted in the United States of America. In our opinion, the statement of revenues and expenses per division is fairly stated in all material respects, in relation to the basic 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 April 5, 2023 on our consideration of the System’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 solely 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 effectiveness of the System’s 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 System’s internal control over financial reporting and compliance. Bert Smith & Co. Washington, D.C. April 5, 2023 - 4 - VIRGIN ISLANDS PUBLIC BROADCASTING SYSTEM (A Component Unit of the Government of the United States Virgin Islands) MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) YEARS ENDED SEPTEMBER 30, 2022 and 2021 The purpose of the following management’s discussion and analysis of the financial performance and activity of the Virgin Islands Public Broadcasting System (the “System”) is to help the readers understand the basic financial statements of the System for the years ended September 30, 2022 and 2021. This discussion has been prepared by management and should be read in conjunction with the basic financial statements, supplementary information and the notes thereto which follow this section. Financial Highlights The assets and deferred outflows of the System exceeded liabilities and deferred inflows by $13.1 million and $11.4 million as of September 30, 2022 and 2021, respectively. The net position increased by $1.7 million during the year ended September 30, 2022 and $1.4 million during the year ended September 30, 2021. Reporting Entity The System is a public corporation and an autonomous governmental instrumentality of the Government of the U.S. Virgin Islands (“GVI”). It owns and operates the public television station of the U.S. Virgin Islands with the call letters WTJX, created by Act No. 2364 on November 15, 1968, to provide educational television services in the U.S. Virgin Islands, and to advance the general welfare, cultural development, and awareness of public affairs of the general population. The System is a member of the Public Broadcasting Service (“PBS”), a media foundation that provides grants and services to public and non-commercial stations. The System is also a member of the National Public Radio (“NPR”), a nonprofit media foundation broadcasting over the radio. Overview of the Financial Statements The System’s financial report includes three financial statements: The Statement of Net Position, the Statement of Revenues, Expenses and Changes in Net Position, and the Statement of Cash Flows. In addition to the three financial statements, the System has presented the Statement of Revenues and Expenses per Division, Schedule of the Share of the Net Pension Liability and Schedule of Contributions as supplementary information. The financial statements, and supplementary information, are prepared in accordance with accounting principles generally accepted in the United States of America. The Statement of Net Position reports all assets, deferred outflows of resources, liabilities, deferred inflows of resources, and net position as of September 30, 2022 and 2021. The System’s net position is the difference between (a) assets and deferred outflows of resources, and (b) liabilities and deferred inflows of resources. Over time, the increase or decrease in net position may serve as a useful indicator of whether the financial position of the System is improving or deteriorating. The Statement of Revenues, Expenses and Changes in Net Position presents information showing how the System’s net position changed during the two most recent fiscal years, focusing on operating revenues and expenses, including support provided by grants from the Government of the Virgin Islands and the Corporation for Public Broadcasting (“CPB”). The Statement of Cash Flows presents information related to cash inflows and outflows, summarized by operating, financing and investing activities. This Statement indicates the financial viability of the System to meet financial obligations as they occur. VIRGIN ISLANDS PUBLIC BROADCASTING SYSTEM (A Component Unit of the Government of the United States Virgin Islands) MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (Continued) YEARS ENDED SEPTEMBER 30, 2022 and 2021 - 5 - Summary of Financial Results Statements of Net Position – Table 1 summarizes the System’s Statements of Net Position as of September 30, 2022, 2021 and 2020. Table 1: Summary of Statements of Net Position 2022 2021 2020 Unrestricted Current Assets $ 6,420,810 $ 6,134,838 $ 6,658,297 Restricted Current Assets 732,179 737,283 541,980 Noncurrent Assets 144,188 - - Capital Assets 9,309,410 7,956,942 5,617,504 Total Assets $ 16,606,587 $ 14,829,063 $ 12,817,781 Deferred Outflows of Resources $ 1,183,938 $ 1,183,938 $ 768,156 Current Liabilities $ 512,453 $ 636,626 $ 344,888 Noncurrent Liabilities 3,632,709 3,608,285 2,826,642 Total Liabilities $ 4,145,162 $ 4,244,911 $ 3,171,530 Deferred Inflows of Resources $ 523,432 $ 393,047 $ 455,723 Net Position Net Investment in Capital Assets $ 9,309,410 $ 7,956,942 $ 5,617,504 Restricted 732,179 737,283 541,980 Unrestricted 3,080,341 2,680,818 3,799,200 Total Net Position $ 13,121,930 $ 11,375,043 $ 9,958,684 For fiscal year 2022, the System’s assets amounted to $16.6 million, of which $5.3 million represented unrestricted cash and cash equivalents, $732 thousand represented cash and cash equivalents restricted in purpose, $246 thousand represented trade, and other receivables, $305 thousand was due from the Government of the Virgin Islands, $595 thousand represented prepaid expenses and $9.3 million represented capital assets net of accumulated depreciation. Total current assets increased in fiscal year 2022 by $353 thousand mainly due to increase in cash and cash equivalent of $99 thousand, $321 thousand in trade and other receivables and decreased by $67 thousand in prepaid expenses. Non-current assets increased by $1.4 million, due to purchase of Production & Broadcast equipment for the Repack project, St. Croix building improvement and hurricane replacement purchases. Total liabilities and deferred inflows of resources amounted to 4.7 million and increased by $31 thousand, mainly due to an increase in unearned revenue of $77 thousand and an increase of $130 thousand in deferred outflows related to leases offset by a decreases in accounts payable of $141 thousand and compensated absences of $35 thousand. For fiscal year 2021, the System’s assets amounted to $14.8 million, of which $5.2 million represented unrestricted cash and cash equivalents, $737 thousand represented cash and cash equivalents restricted in purpose, $90 thousand represented trade, and other receivables, $140 thousand was due from the Government of the Virgin Islands, $661 thousand represented prepaid expenses and $8.0 million represented capital assets net of accumulated depreciation. Total current assets decreased in fiscal year 2021 by $328 thousand mainly due to decrease in cash and cash equivalent of $573 thousand which was offset by an increase of $195 thousand in restricted cash. Non-current assets increased by $2.3 million, due to purchase of Production & Broadcast equipment for Repack project and St. Croix building improvement. Total liabilities and deferred inflows of resources amounted to 4.6 million and increased by $1.0 million mainly due to increase in Pension liability by $800 thousand and increase of accounts payable by $260 thousand. VIRGIN ISLANDS PUBLIC BROADCASTING SYSTEM (A Component Unit of the Government of the United States Virgin Islands) MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (Continued) YEARS ENDED SEPTEMBER 30, 2022 and 2021 - 6 - Statements of Revenues, Expenses and Changes in Net Position – Table 2 summarizes the activities of the System as of September 30, 2022 and 2021. Table 2: Summary of Statements of Revenues, Expenses and Changes in Net Position 2022 2021 2020 Operating Revenues $ 3,347,450 $ 3,062,308 $ 1,921,897 Operating Expenses (6,415,578) (5,969,156) (5,202,377) Loss from Operations (3,068,128) (2,906,848) (3,280,480) Non-Capital Appropriations from Government of the U.S. Virgin Islands 4,681,846 3,627,111 4,030,123 Capital Grant from Government of the U.S.Virgin Islands 110,000 - - Other non-operating revenue - 439,111 200,000 Insurance Proceeds 16,717 255,328 - Interest Income 6,452 1,657 1,646 Income (Loss) 1,746,887 1,416,359 951,289 Change in Net Position $ 1,746,887 $ 1,416,359 $ 951,289 Net Position – Beginning of Year 11,375,043 9,958,684 9,007,395 Net Position – End of Year $ 13,121,930 $ 11,375,043 $ 9,958,684 For fiscal year 2022, operating revenues of $3.3 million reflect contributions from the Corporation for Public Broadcasting of $1.1 million, funds from Federal Communications (FCC) of $1.6 million, tower space rental income of $60 thousand, underwriting revenue of $163 thousand, fundraising revenue of $123 thousand, advertising revenue of $4 thousand, membership subscriptions and other donations of $55 thousand, funds from Federal Emergency Management Agency of $192 thousand and other revenue of $77 thousand. Operating revenues increased by $285 thousand from the previous year mainly due to increase in revenue from FCC, FEMA and fundraising. For fiscal year 2022, operating expenses of $6.4 million reflect programming expenses of $3.7 million, general administration expenses of $1.9 million, fundraising expenses of $114 thousand and depreciation expense of $699 thousand. Operating expenses increased by $446 thousand, mainly due to increase in program services and depreciation. For fiscal year 2021, operating revenues of $3.1 million reflect contributions from the Corporation for Public Broadcasting of $1.1 million, funds from Federal Communications (FCC) of $1.5 million, tower space rental income of $82 thousand, underwriting revenue of $181 thousand, fundraising revenue of $51 thousand, advertising revenue of $3 thousand, membership subscriptions and other donations of $43 thousand, funds from Federal Emergency Management Agency of $115 thousand and other revenue of $41 thousand. Operating revenues increased by $1.1 million from the previous year mainly due to increase in revenue from FCC. For fiscal year 2021, operating expenses of $6.0 million reflect programming expenses of $3.5 million, general administration expenses of $2.0 million, fundraising expenses of $2 thousand and depreciation expense of $487 thousand. Operating expenses increased by $767 thousand, mainly due to increase in program services. VIRGIN ISLANDS PUBLIC BROADCASTING SYSTEM (A Component Unit of the Government of the United States Virgin Islands) MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (Continued) YEARS ENDED SEPTEMBER 30, 2022 and 2021 - 7 - Grant Revenues – Table 3 summarizes grant revenues received through allotments from the Government of the Virgin Islands, grants from the Corporation for Public Broadcasting, and other grant revenue. Table 3: Summary of Grant Revenues 2022 2021 2020 Non-Capital Appropriations from Government of the Virgin Islands $ 4,681,846 $ 3,627,111 $ 4,030,123 Grant Revenues – Corporation for Public Broadcasting 1,090,316 1,058,329 1,003,656 Grant Revenues – Capital Grant from the Government of the U.S. Virgin Islands 110,000 - - Grant Revenues – Community foundation - 10,000 - American Rescue Plan – CPB - 439,111 - CARES Act Funds – Corporation for Public Broadcasting - - 200,000 Grant Revenues – Federal Communications Commission 1,584,370 1,478,440 473,600 Emergency Funds – Federal Emergency Management Agency 191,628 115,140 55,466 Total Grant Revenues 7,658,160 6,728,131 5,762,845 Operating Revenues 481,136 400,399 389,175 Total Revenues $ 8,139,296 $ 7,128,530 $ 6,152,020 Grants as a Percentage of Total Revenue 94.1% 94.4% 93.6% Capital Assets The System’s capital assets include land, buildings, building improvements and equipment. Capital asset additions during the fiscal years ended September 30, 2022 and 2021 amounted to $2.0 million and $3.4 million, respectively. Summary of Capital Assets – Table 4 summarizes the System’s capital assets as of September 30, 2022 and 2021: Table 4: Summary of Capital Assets 2022 2021 Land $ 1,284,996 $ 1,284,996 Production and Broadcasting Equipment 10,432,348 9,046,708 Buildings and Improvements 3,465,725 3,408,260 Other 2,895,512 2,756,770 Construction in Progress 186,772 25,000 Total Capital Assets 18,265,353 16,521,734 Less: Accumulated Depreciation 8,955,943 8,564,792 Net Capital Assets $ 9,309,410 $ 7,956,942 Note 5 to the financial statements provide detailed information regarding the capital assets of the System as of September 30, 2022 and 2021. VIRGIN ISLANDS PUBLIC BROADCASTING SYSTEM (A Component Unit of the Government of the United States Virgin Islands) MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (Continued) YEARS ENDED SEPTEMBER 30, 2022 and 2021 - 8 - Budgetary Analysis The System prepares an annual executive budget subject to approval by the Governor and the Legislature of the Virgin Islands. Following is a summary of the budget and actual results for the fiscal years ended September 30, 2022 and 2021: 2022 Budget 2022 Actual Variance Total Revenue $ 5,670,561 $ 5,893,495 $ 222,934 Total Operating Expenses (5,670,561) (5,250,259) 420,302 Non-Budgeted Revenues - 2,268,970 2,268,970 Non-Budgeted Expenses - (1,165,318) (1,165,318) Income (Loss) $ - $ 1,746,889 $ 1,746,889 CPB grant revenue increased by $31 thousand, other revenues increased by $183 thousand. Non-budgeted revenues consist $366 thousand in a grant to repay 8% retroactive payments to personnel affected, re- packing funds from Federal Communications Commission (FCC) of $1.6 million, Federal Emergency Management Agency (FEMA) $192 thousand and Government capital grant of $110 thousand. The decrease in operating expenses of $420 thousand is mainly due to savings from vacant positions, these funds were repurposed and used for much needed non-budgeted capital improvements. Non-budgeted expenses consist of depreciation expense of $699 thousand, $366 thousand for the repayment of 8% retroactive payments to personnel affected and FEMA related expenses of $81 thousand. 2021 Budget 2021 Actual Variance Total Revenue $ 4,940,767 $ 5,097,495 $ 156,728 Total Operating Expenses (4,940,767) (5,080,201) (139,434) Non-Budgeted Revenues - 2,288,019 2,288,019 Non-Budgeted Expenditures - (888,954) (888,954) Income (Loss) $ - $ 1,416,359 $ 1,416,359 CPB grant revenue increased by $55 thousand, Underwriting increased by $69 thousand and other revenues increased by $33 thousand. Non-budgeted revenues consist of $439 thousands from the American Rescue Plan Act through CPB, re-packing funds from Federal Communications Commission (FCC) of $1.5 million, FEMA $115 thousand and Government insurance proceeds from the 2017 hurricanes of $255 thousand. The increase in operating expenses of $627 thousand is mainly due the use of prior year revenues to partly fund PBS dues of $744 thousand since the government funding had been reduced due to budget cuts. Non- budgeted expenses consist of depreciation expense of $487 thousand, pension expense of $330 thousand and other expenses of $72 thousand. Significant Currently Known Facts Budgetary Appropriations The ability of the System to continue as a going concern and providing public television services is dependent on grant allotments and other funds received from the Government of the Virgin Islands and the Corporation for Public Broadcasting. VIRGIN ISLANDS PUBLIC BROADCASTING SYSTEM (A Component Unit of the Government of the United States Virgin Islands) MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (Continued) YEARS ENDED SEPTEMBER 30, 2022 and 2021 - 9 - Hurricanes Irma and Maria In September 2017, the US Virgin Islands was hit directly by hurricanes Irma and Maria. The category 5 storms caused extensive damages to VIPBS properties and operations. Their headquarters in St. Thomas was destroyed and St. Croix received less extensive damages. The Mountain Top facility also endured considerable damages. The System was informed of their preliminary allocation of insurance for Federal Emergency Management Agency (FEMA) purposes of $792,461, and this amount will be deducted from FEMA proceeds. As at the date of this report VIPBS has 17 worksheets with FEMA Public Assistance. There are 13 on St. Thomas and 4 on St. Croix. We have collected $799,352 to date for 7 project worksheets. We have received insurance proceeds of $294,159 towards 3 project worksheets. FCC Repack Project The System was included in the Federal Communications Commission (“FCC”) Repack Project. The project consists of certain realignment on the broadcasting frequency by which WTJX would change its broadcasting from channel 44 to channel 36, pursuant to a Transition Plan and Budget approved by the FCC (the “Plan”). As part of the Plan, the FCC will provide all the funding, which is estimated at $4.7 million, for the building of new tower and the purchase of new transmitters and underlying equipment. As of September 30, 2021, total repacking funds received amounted to $3,819,261. As of the date of issuing these financial statements, the Repack project was completed. Both towers are now in service. The overall reimbursed expenditure totaled $3,877,991. Contacting the Corporation This financial report is designed to provide a general overview of the System’s finances. If you have any questions about this report, or need additional information, contact the System at: Virgin Islands Public Broadcasting System – WTJX, P.O. Box 7879, Charlotte Amalie, St. Thomas, U.S. Virgin Islands 00801. - 10 - VIRGIN ISLANDS PUBLIC BROADCASTING SYSTEM (A Component Unit of the Government of the United States Virgin Islands) STATEMENTS OF NET POSITION SEPTEMBER 30, 2022 and 2021 2022 2021 ASSETS Current Assets Cash and Cash Equivalents $ 5,347,894 $ 5,243,906 Cash and Cash Equivalents – Restricted 732,179 737,283 Accounts and Other Receivable 109,474 89,561 Lease Receivable – Short-Term 64,135 - Due from the Government of the U.S. Virgin Islands 304,791 140,008 Prepaid Expenses 594,516 661,363 Total Current Assets 7,152,989 6,872,121 Noncurrent Assets Lease Receivable 72,183 - Lease Asset, net of accumulated amortization 72,005 - Capital Assets, net of accumulated depreciation 9,309,410 7,956,942 Total Noncurrent Assets 9,453,598 7,956,942 Total Assets 16,606,587 14,829,063 Deferred Outflows of Resources Deferred Amounts Related to Pension 1,183,938 1,183,938 Total Assets and Deferred Outflows of Resources $ 17,790,525 $ 16,013,001 LIABILITIES Current Liabilities Accounts Payable $ 144,064 $ 375,231 Accrued Liabilities 156,687 140,821 Unearned Revenue 78,000 1,060 Lease Liability – Short Term 22,471 - Compensated Absences – Short-Term 111,231 119,514 Total Current Liabilities 512,453 636,626 Noncurrent Liabilities Compensated Absences 115,372 142,519 Lease Liability 51,571 - Net Pension Liability 3,465,766 3,465,766 Total Non-Current Liabilities 3,632,709 3,608,285 Total Liabilities 4,145,162 4,244,911 Deferred Inflows of Resources Deferred Amounts Related to Pension 393,047 393,047 Deferred Amounts Related to Leases 130,385 - Total Deferred Inflows of Resources 523,432 393,047 Total Liabilities and Deferred Inflows of Resources $ 4,668,594 $ 4,637,958 NET POSITION Net Position Net Investment in Capital Assets $ 9,309,410 $ 7,956,942 Restricted 732,179 737,283 Unrestricted 3,080,341 2,680,818 Total Net Position $ 13,121,930 $ 11,375,043 The accompanying notes are an integral part of these financial statements. - 11 - VIRGIN ISLANDS PUBLIC BROADCASTING SYSTEM (A Component Unit of the Government of the United States Virgin Islands) STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION FOR THE YEARS ENDED SEPTEMBER 30, 2022 and 2021 2022 2021 Operating Revenues Grants from Corporation for Public Broadcasting $ 1,090,316 $ 1,058,329 Grant Revenues from Community Foundation - 10,000 Funds from Federal Emergency Management Agency 191,628 115,140 Grant Revenues from Federal Communications Commission 1,584,370 1,478,440 Lease Revenue - Tower Space Rental 59,519 81,676 Underwriting 162,599 180,545 Fundraising 123,347 4,150 Advertising 4,060 50,367 Membership Subscriptions and Other Donations 54,871 42,827 Other Operating Revenue 76,740 40,834 Total Operating Revenues 3,347,450 3,062,308 Operating Expenses Program Services 3,717,666 3,462,809 Management and General 1,885,272 2,017,390 Fundraising 114,019 1,735 Depreciation 698,621 487,222 Total Operating Expenses 6,415,578 5,969,156 Loss from Operations (3,068,128) (2,906,848) Non-Operating Revenues and Expense Non-capital Appropriations from Government of the U.S. Virgin Islands 4,681,846 3,627,111 Capital Grant from the Government of the U.S. Virgin Islands 110,000 - Other Non-Operating Revenue - 439,111 Insurance Recoveries, including Hurricane Related Claims 16,717 255,328 Interest Income 6,452 1,657 Total Non-Operating Revenues and Expense 4,815,015 4,323,207 Change in Net Position 1,746,887 1,416,359 Net Position, at Beginning of Year 11,375,043 9,958,684 Net Position, at End of Year $ 13,121,930 $ 11,375,043 The accompanying notes are an integral part of these financial statements. - 12 - VIRGIN ISLANDS PUBLIC BROADCASTING SYSTEM (A Component Unit of the Government of the United States Virgin Islands) STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED SEPTEMBER 30, 2022 and 2021 2022 2021 Cash Flows Used in Operating Activities Receipts from Grants, Customers and Others $ 3,026,436 $ 3,043,045 Payments to Suppliers and Employees (5,618,563) (4,915,704) Net Cash Used in Operating Activities (2,592,127) (1,872,659) Cash Flows Provided by Non-Capital Financing Activities Non-Capital Appropriations from Primary Government 4,680,936 3,625,782 Insurance recoveries on non-hurricane related claims 16,717 255,328 Other Proceeds - 439,111 Net Cash Provided by Non-Capital Financing Activities 4,697,653 4,320,221 Cash Flows Provided by Investing Activities Interest Received on Cash and Cash Equivalents 6,452 1,657 Cash Flows Used in Capital and Related Financing Activities Purchase of Capital Assets (2,051,089) (2,826,660) Leased Asset (72,005) - Capital Grants from the Government of the U.S. Virgin Islands 110,000 - Net Cash Provided by Capital and related Financing Activities (2,013,094) (2,826,660) Net Increase in Cash and Cash Equivalents 98,884 (377,441) Cash and Cash Equivalents, at Beginning of Year 5,981,189 6,358,630 Cash and Cash Equivalents, at End of Year $ 6,080,073 $ 5,981,189 Cash and Cash Equivalents Unrestricted Cash and Cash Equivalents $ 5,347,894 $ 5,243,906 Restricted Cash and Cash Equivalents 732,179 737,283 Total Cash and Cash Equivalents $ 6,080,073 $ 5,981,189 Reconciliation to Net Cash Used in Operating Activities Loss from Operation $ (3,068,128) $ (2,906,848) Adjustments to Reconcile Operating Income to Net Cash Provided by Operating Activities: Depreciation 698,621 487,222 Bad debt expense 910 1,329 Change in Assets and Liabilities: Accounts and Other Receivable (19,913) (19,881) Lease Receivable (136,317) - Due from the Government of the U.S. Virgin Islands (164,783) 618 Prepaid Expenses 66,847 (30,022) Accounts Payable (231,167) 260,324 Accrued Liabilities 15,866 (650) Unearned Revenue 76,940 1,060 Compensated Absences (35,430) 4,205 Deferred Outflows of Resources - (415,782) Deferred Inflows of Resources - Pension - (62,676) Deferred Inflows of Resources - Leases 130,385 - Lease Liability 74,042 - Net Pension Liability - 808,442 Total Adjustments 476,001 1,034,189 Net Cash Used in Operating Activities $ (2,952,127) $ (1,872,659) - 13 - VIRGIN ISLANDS PUBLIC BROADCASTING SYSTEM (A Component Unit of the Government of the United States Virgin Islands) STATEMENTS OF CASH FLOWS (Continued) FOR THE YEARS ENDED SEPTEMBER 30, 2022 and 2021 2022 2021 Non-Cash Transactions Disclosures Supplementary Disclosures of Cash Flows Information Salaries Paid by the Government of Virgin Islands in the Form of a Grant $ 2,802,567 $ 2,482,927 Donated Services $ - $ 14,146 The accompanying notes are an integral part of these financial statements. - 14 - VIRGIN ISLANDS PUBLIC BROADCASTING SYSTEM (A Component Unit of the Government of the United States Virgin Islands) NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2022 and 2021 NOTE 1 REPORTING ENTITY The Virgin Islands Public Broadcasting System (the “System”) was created by Act No. 2364 on November 15, 1968, to provide education television services in the United States Virgin Islands, and to advance the general welfare, cultural development, and awareness of public affairs of the general population. In December 2014, the System expanded operations to include a public education radio station, WTJX-FM. The radio promotes educational, general welfare and cultural programming including National Public Radio programming. On July 30, 2015, but effective November 2015, the Legislature of the Virgin Islands through Act 7748 officially changed the name of the Virgin Islands Public Television System to the Virgin Islands Public Broadcasting System. The System was formed as a public corporation and is an autonomous component unit of the Government of the U.S. Virgin Islands (the “GVI”) and, therefore, the financial statements of the System are not intended to present fairly the financial position and results of operations of the GVI. Only the accounts of the System are included in the reporting entity. The System’s Board of Directors consists of the Commissioner of the Department of Education, the Vice- Chair of the Board of Education, the President of the University of the Virgin Islands, the Director of the Office of Management and Budget, three members appointed by the President of the Legislature, four other members appointed by the Governor. The call letters of the System are WTJX, and it is a member of the Public Broadcasting Service (“PBS”), a media foundation that provides programs and services to public and non-commercial television stations. Also, it is a member of the National Public Radio (“NPR”). NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The System prepares it financial statements in conformity with accounting principles generally accepted in the United States of America for governmental enterprise funds as prescribed by the Government Accounting Standards Board (“GASB”). The financial statements of the System have been prepared using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. Basic Financial Statements – Standards for external financial reporting require that resources be classified for accounting and reporting purposed into net positions, categories and to report the change in net position. Net position is the residual of all other elements presented in the statements of net position. It is the difference between (a) assets and deferred outflows of resources and (b) liabilities and deferred inflows of resources and consists of the following categories: • Net Investment in Capital Assets – This category of net position consists of capital assets, net accumulated depreciation, reduced by any outstanding balances of mortgages or notes attributable to the acquisition, construction or improvement of those assets. • Restricted Net Position – This category consists of restricted assets reduced by liabilities and deferred inflows of resources related to those assets. NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) - 15 - • Unrestricted Net Position – This category consists of the net amount of the assets, deferred outflows of resources, liabilities and deferred inflows of resources that are not included in the determination of net investment in capital assets, or the restricted component of net position. The System distinguishes operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from services provided in connection with the System’s community and education-based television system. The principal revenues of the System are grants, including grants from the Government of the U.S. Virgin Islands and grants from the Corporation for Public Broadcasting (“CPB”), underwriting, fundraising, tower space rental and advertising. Operating expenses mainly include programming services, management and general expenses, and depreciation. When both restricted and unrestricted resources are available for use, the System decides to use resources on a case by case basis. Cash and Cash Equivalents – All deposits of the System are made in board-designated official depositories. The System may designate, as an official depository, any bank or savings association whose principal office is located in the United States Virgin Islands. Also, the System may establish time deposit accounts such as certificates of deposits. The System’s cash and cash equivalents are considered to be cash on hand, demand deposits, and short- term investments with original maturities of three months or less from the date of acquisition. The System receives cash allotments from the CPB in two installments during the year which are held in a separate bank account and are reported as restricted cash and cash equivalents. Under Virgin Islands law, government public funds are required to be deposited into accounts that are collateralized by security bond collateral that is satisfactory to the Commissioner of Finance. As of September 30, 2022, cash and cash equivalents held at banks were fully collateralized. Accounts and Other Receivable – All trade and grant receivables are reported as assets of the System. These accounts receivable mainly consist of underwriting, grants and rent from tower space. Allowance for Doubtful Accounts – The allowance for doubtful accounts is an amount that management believes will be adequate to absorb possible losses on existing accounts receivable that may become uncollectible based on evaluations of collectability of accounts receivable and prior credit loss experience. Because of uncertainties inherent in the estimation process, management’s estimate of credit losses inherent in the existing accounts receivable and related allowance may change in the future. Balance of the allowance for doubtful accounts at September 30, 2022 and 2021 amounted to $-0-. Prepaid Expenses – Certain cash outlays to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in the statement of net position and are expensed as the items are used or the expense is realized. These prepaid expenses mainly consist of unamortized PBS dues, memberships and insurance. Capital Assets – Capital assets, which include property, plant, and equipment assets, are reported in the financial statements at the time of acquisition or donation. Acquired capital assets are reported at cost at the date of purchase or construction, and donated assets are reported at acquisition value at the date of donation. Only assets with an initial, individual cost, or fair market value, of more than $5,000 are capitalized. The costs of normal maintenance and repairs that do not add to the value of the assets, or materially extend the life of assets are not capitalized. Interest incurred during the construction phase of capital assets is included as part of the capitalized value of the assets constructed. NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) - 16 - Capital assets are depreciated using the straight-line method by groups or classes over the following expected service lives: Years Buildings 40-60 Buildings and Improvements 15-30 Production & Broadcast Equipment 3-15 Others 7 When capital assets are retired, the cost and related accumulated depreciation is removed from the accounts and any gain or loss is recognized as non-operating revenue or expense. Compensated Absences – Employees are eligible under personnel policies established by the Government of the Virgin Islands to accrue annual leave (up to 480 hours) if not used during the Calendar year. Unpaid annual leave is accrued as a liability of the System, as well as the System’s share of related payroll taxes, if the compensated absence is attributable to past service and it is probable that the System will compensate the employee for the benefits. The number of compensated absences is computed using salary rates in effect at September 30th. As of September 30, 2022 and 2021, the System reported accrued compensated absences amounting to $226,603 and $262,033, respectively. Pension Plan – The Employees’ Retirement System of the government (the “GERS”) is the administrator of a cost-sharing multiple-employer, defined benefit pension plan (the “plan”) established as of October 1, 1959 by the Government to provide retirement, death, and disability benefits to its employees, and includes employees of Judicial, Executive and Legislative Branches of government and outside agencies. The plan covers all employees of the Government except employees compensated on a contract fee basis, casual, per diem or provisional and part-time employees who work less than 20 hours per week. Persons over the age of 55 may opt out of the plan by providing formal notification to the plan. Vesting of benefits occurs after 10 years of service. Benefits may be extended to beneficiaries of plan members. Deferred Outflows of Resources – In addition to assets, the statement of net position reports a separate section of deferred outflows of resources. Deferred outflows of resources represent a consumption of net position that applies to a future period and will not be recognized as an outflow of resources (expense) until that time. The deferred amounts related to pension consists of the unamortized portion of the net difference between projected and actual earnings on pension plan investments, changes in assumptions and other differences between expected and actual experience. Deferred Inflows of Resources – In addition to liabilities and net position, the statement of net position reports a separate section of deferred inflows of resources. Deferred inflows of resources represent an acquisition of net position that applies to a future period(s) and will not be recognized as an inflow of resources (revenue) until that time. The deferred amounts related to pension consists of the unamortized portion of the net difference between projected and actual earnings on pension plan investments, changes in assumptions and other differences between expected and actual experience. Revenue Recognition – The System distinguishes operating revenues and expenses from non-operating items. Revenues associated with the Contributions from Corporation for Public Broadcasting are recorded as operating revenues when cash is received. Expenses related to the program services, and management and general expenses are recorded as operating expenses. Non-operating revenues consist principally of non-capital appropriations from government of the U.S. Virgin Islands. These funds are given to the system for its operations. The allotment amount is approved by the government which is split into monthly allotment set by OMB. A memo is sent monthly informing the System that the funds are available. NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) - 17 - Operating Revenues and Expenses – Operating revenues and expenses generally result from providing services in connection with the System’s principal ongoing operations, mainly the production of educational and cultural programs. The System also recognizes grants received as operating revenue. Operating expenses for the System include cost of services, administrative expenses, and depreciation on capital assets. Use of Estimates in the Preparation of Financial Statements – 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 reported amounts of assets, deferred inflows, liabilities, deferred outflows and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. New Accounting Pronouncements – Accounting Pronouncements Adopted Leases – The System implemented Governmental Accounting Standards Board (GASB) Statement No. 87, Leases, in fiscal year 2022. The Statement defines a lease as a legally binding contract that conveys control of the right to use another entity’s nonfinancial asset as specified in the contract. As a lessor the System recognizes a lease receivable and deferred inflows of resources in the financial statements. The lease receivable is measured as the present value of payments expected to be received during the lease at commencement date. Subsequently, the lease receivable is reduced by the principal portion of lease payments received. The deferred inflow of resources is initially measured as the initial amount of the lease receivable, adjusted for lease payments received at or before the lease commencement date. Subsequently, the deferred inflow of resources is recognized as revenue over the life of the lease term. Key estimates and judgements include how the System determines (1) the discount rate it uses to discount the expected lease receipts to present value, (2) lease term and (3) lease receipts. The System uses the prime rate as the discount for the leases. The lease term includes the non-cancellable period of the lease and the lease receipts included in the measurement of the lease receivable is composed of fixed payments from the lessee. The System monitors changes in circumstances that would require a remeasurement of its lease and will remeasure the lease receivable and deferred inflows of resources if certain changes occur that are expected to significantly affect the amount of the lease receivable. As a lessee, the System leases ground space for equipment and recognizes a lease liability and an intangible right-to-use asset. The System measures the lease liability at the present value of the payments expected to be made during the lease term. The lease liability is reduced by the principal portion of the lease payments made. The leased asset is initially measured as the initial amount of the lease liability and amortized on a straight-line basis over the lease term. The System did not restate the fiscal year 2021 amounts. The cumulative effect of the changes did not result in a change to net position. New Accounting Pronouncements – Accounting Pronouncements Issued but Not Yet Adopted GASB Statement No. 100 – Accounting Changes and Error Corrections, an amendment of GASB Statement No. 62 – This Statement establishes accounting and financial reporting requirements for (a) accounting changes and (b) the correction of an error in previously issued financial statements (error correction) of an error in previously issued financial statements (error correction). This Statement defines accounting changes as changes in accounting principles, changes in accounting estimates and changes in to or within the financial reporting entity and describes the transactions or other events that constitute those NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) - 18 - changes. As part of those descriptions, for (1) certain changes in accounting principles and (2) certain changes in accounting estimates that result from a change in measurement methodology, a new principle or methodology should be justified on the basis that it is preferable to the principle or methodology used before the change. That preferability should be based on the qualitative characteristics of financial reporting. The requirements of this Statement are effective for accounting changes and error corrections made in fiscal years beginning after June 15, 2023. GASB Statement No. 101 – Compensated Absences – This Statement establishes standards of accounting and financial reporting for (a) compensated absences and (b) associated salary-related payments, including certain defined contribution pensions and defined contribution other postemployment benefits (OPEB). This Statement defines a compensated absence as leave for which employees may receive one or more (a) cash payments when the leave is used for time off; (b) other cash payments, such as payment for unused leave upon termination of employment; or (c) noncash settlements, such as conversion to defined benefit postemployment benefits. The Statement further defines salary-related payments as obligations that a government incurs related to providing leave in exchange for services rendered and requires note disclosures regarding long-term liabilities for compensated absences. The requirements of this Statement are effective for fiscal years beginning after December 15, 2023. GASB Statement No. 99 – Omnibus 2022 – This Statement addresses practice issues that have been identified during the implementation and application of certain GASB Statements. This Statement addresses a variety of topics and includes specific provisions about the following: (1) requirements related to leases; (2) PPPs; and (3) SBITAs. The requirements of these provisions of the Statement are effective for reporting periods beginning after June 15, 2022. Further, this Statement addresses specific provisions about the following: (1) requirements related to financial guarantees; and (2) the classification and reporting of derivative instruments within the scope of Statement No. 53. The requirements of these provisions are effective beginning after June 15, 2023. - 19 - NOTE 3 CASH AND CASH EQUIVALENTS The System maintains unrestricted cash and cash equivalents including: (i) allotments from the Government of the Virgin Islands, (ii) Special Productions including underwriting, donations, and other fundraising activities, (iii) Emergency Maintenance funded from rental income of an up-link television broadcasting tower located in St. Thomas, (iv) Certificate of Deposit held as a reserve and (v) a petty cash account. Restricted cash consist of CPB funding. These funds will be used for the operation of the System, in compliance with the purposes and restrictions set forth in the CPB General Provisions and Eligibility criteria guidelines. As of September 30, 2022 and 2021, cash and cash equivalents consisted of the following deposits in banks and certificate of deposit: 2022 2021 Restricted: Corporation for Public Broadcasting $ 732,179 $ 737,283 Unrestricted: Government of the U.S. Virgin Islands 3,443,218 3,174,820 Special Productions 693,288 593,524 FCC Repacking - 128,120 Emergency Maintenance 681,431 819,574 FEMA Funds Account 195,316 194,342 Petty Cash 2,200 1,500 Certificate of Deposit 332,441 332,026 Unrestricted Cash and Cash Equivalents 5,347,894 5,243,906 Total Cash and Cash Equivalents $ 6,080,073 $ 5,981,189 • Concentration of Credit Risk – The System utilizes one financial institution located in the United States Virgin Islands. • Credit Risk – Depository balances are fully collateralized with collateral satisfactory to the USVI Commissioner of Finance. NOTE 4 ACCOUNTS AND OTHER RECEIVABLES Accounts and other receivables at September 30, 2022 and 2021, consisted of the following: 2022 2021 Underwriting $ 61,460 $ 46,764 Rent 1,633 1,583 Fundraising 14,000 - Advertisement 1,750 - FEMA - 22,114 Other 30,631 19,100 $ 109,474 $ 89,561 As of September 30, 2022 and 2021, the System had an outstanding receivable due from the Government, amounting to $304,791 and $140,008, respectively, to cover accrued payroll expenses. - 20 - NOTE 5 CAPITAL ASSETS Capital assets at September 30, 2022 and 2021 are comprised of the following: Balance at September 30, 2021 Additions Disposals Balance at September 30, 2022 Non-depreciable assets: Land $ 1,284,996 $ - $ - $ 1,284,996 Construction in Progress 25,000 161,772 - 186,772 Non-depreciable assets: 1,309,996 161,772 1,471,768 Depreciable assets: Production and broadcasting equipment 9,046,708 1,648,456 (262,816) 10,432,348 Buildings and improvements 3,408,260 57,465 - 3,465,725 Other 2,756,770 183,396 (44,654) 2,895,512 Total depreciable assets 15,211,738 1,889,317 (307,470) 16,793,585 Less: accumulated depreciation (8,564,792) (698,621) 307,470 (8,955,943) Total depreciable assets, net 6,646,946 1,190,696 - 7,837,642 Total capital assets, net $ 7,956,942 $1,352,468 $ - $ 9,309,410 Balance at September 30, 2020 Additions Disposals Balance at September 30, 2021 Non-depreciable assets: Land $ 1,284,996 $ - $ - $ 1,284,996 Construction in Progress 586,112 25,000 (586,112) 25,000 Non-depreciable assets: 1,871,108 25,000 (586,112) 1,309,996 Depreciable assets: Production and broadcasting equipment 7,142,573 2,238,727 (334,592) 9,046,708 Buildings and improvements 3,134,242 274,018 - 3,408,260 Other 1,881,743 875,027 - 2,756,770 Total depreciable assets 12,158,558 3,387,772 (334,592) 15,211,738 Less: accumulated depreciation (8,412,162) (487,222) 334,592 (8,564,792) Total depreciable assets, net 3,746,396 2,900,550 $ - 6,646,946 Total capital assets, net $ 5,617,504 $2,925,550 $ (586,112) $ 7,956,942 Depreciation expense for the years ended September 30, 2022 and 2021 amount to $698,621 and $487,222, respectively. NOTE 6 PROGRAMMING DUES The System is a member station of the Public Broadcasting Services of the U.S. (“PBS”). PBS offers programming designed to expand the minds of children, documentaries, noncommercial news programs, and programs designed to expose listeners to music, theatre, dance and art. Dues for the member year of July 1, 2022 through June 30, 2023 amounted to $630,776, was paid as of September 30, 2022. Unamortized portion amounting to $473,082 in FY 2022 is included as part of prepaid expenses in the accompanying statement of net position. Dues for the member year of July 1, 2021 through June 30, 2022 amounted to $723,121, was paid as of September 30, 2021. Unamortized portion amounting to $542,341 in FY 2021 is included as part of prepaid expenses in the accompanying statement of net position. - 21 - NOTE 7 NON-CAPITAL APPROPRIATIONS AND GRANTS REVENUE The System receives two main sources of revenues: (i) noncapital appropriations from the Government of the U.S. Virgin Islands to pay salaries and related expenses and operating expenditures, and (ii) grants from the Corporation for Public Broadcasting (“CPB”) to provide funding for the System’s member dues to the Public Broadcasting Service, salaries and related benefits and operating expenses. For the fiscal years ended September 30, 2022 and 2021, the System received the following grant revenue from these organizations: 2022 2021 Government of the Virgin Islands $ 4,681,846 $ 3,627,111 Corporation for Public Broadcasting 1,090,316 1,497,440 Capital Grant from the Government of the U.S. Virgin Islands 110,000 - Community Foundation - 10,000 Re-Packing Fund-FCC 1,584,370 1,478,440 FEMA Grants 191,628 115,140 $ 7,658,160 $ 6,728,131 During the years ended September 30, 2022 and 2021, the GVI supported $2,802,567 and $2,358,179 in salary and related costs through its appropriations to the System. NOTE 8 LEASES Lease Receivables The System implemented Governmental Accounting Standards Board (GASB) Statement 87, Leases in fiscal year 2022. The System has entered into contractual arrangements as a lessor for certain tower facilities. The leases require monthly payments for a term of 5 years. Leases include the option to extend and those deemed reasonably certain to be exercised have been factored into the determination of lease receivable. The System recognized $59,519 and $6,452 in lease revenue and interest income, respectively, during the fiscal year ended September 30, 2022. As of September 2022, lease receivables totaled $136,317 and deferred inflows of resources totaled $130,385. Lease Liability The System entered into a contractual arrangement as a lessee for ground space for equipment installation. As of September 30, 2022, the lease liability totaled $74,042. The value of the leased asset (right-to-use) was $95,358 with an accumulated amortization of $23,353. NOTE 9 COMMITMENTS AND CONTINGENCIES The System derives most of its operating revenue from appropriations provided by the local Government and the Corporation for Public Broadcasting. The continuing operation of the System is dependent on a continuation of grants for sustainable operations. The Government of the Virgin Islands Department of Property and Procurement provides casualty insurance on System assets under a blanket insurance policy covering both the primary Government and certain autonomous agencies. In FY 2022, the System received $16,717 in insurance proceeds from the Government of the U.S. Virgin Islands. NOTE 9 – COMMITMENTS AND CONTINGENCIES (Continued) - 22 - During September 2017, Hurricanes Irma and Maria hit the U.S. Virgin Islands causing enormous losses and devastation. The System suffered damages to equipment and property. The System’s headquarters and its main broadcasting facility was severely damaged. Management and the Board continue to identify funding sources and estimated outlay of funds for the restoration of the facilities. The System is anticipating federal funding from FEMA to aid in the rebuild. The total funds to be expended is not yet determinable. The System is part of the FCC Re-Packing Project that will allow for significant equipment acquisition related to a global repositioning of the FCC’s broadcasting spectrum. Total estimated costs of the project amount to $4.7 million, of which $3,819,261 has been disbursed as of September 30, 2022. The Re-Packing Project has been completed as of the date of this report for total reimbursed expenditures of $3,877,991. The United States has been affected the Novel-Coronavirus (COVID-19), an aggressive and potent pandemic, which has spread globally and is expected to adversely affect economic conditions throughout the world. The System’s allotment from the Government of the Virgin Islands was increased just a little over pre-pandemic amounts. Management is no longer monitoring the impact of COVID-19 on its financial liquidity and operations as of the date of this report. NOTE 10 PENSION PLAN The System follows the provisions of GASB Statement No. 68 Accounting and Financial Reporting for Pensions – an amendment of GASB Statement No. 27. This Statement establishes financial reporting standards for state and local governments for pensions. Plan Description The System’s employees are members of the Employees’ Retirement System of the Government of the U.S. Virgin Islands (“GERS”), cost sharing multiple employer defined benefit, public employee retirement system as defined by GASB 68. The system was established by the Government to provide retirement, death and disability benefits to its employees. All of the System’s full-time regular employees are mandated to participate in the retirement plan administered by GERS. The System’s part-time employees who regularly work more than 50% of the normal work period, and full- time regular employees who at the time of employment are under age 55 years with one year of government service are eligible to participate in the system. Effective January 1, 2017, the System’s required contribution was 23.5% of the member’s annual salary. Prior to that date, the percentage was 17.5%. Effective January 1, 2017, member contributions were 11% and 11.5% for Tier I and Tier II employees. Plan descriptions, funding policies, and a schedule of employee required and paid contributions for the defined benefit plans are presented in the Virgin Islands Comprehensive Annual Financial Report (Report) for the fiscal year ended September 30, 2022. The Report also provides detailed historical trend information showing the progress in accumulating sufficient assets to pay benefits when due. In addition, GERS issues a publicly available report that includes financial statements and required supplementary information. The report may be obtained from the Employees’ Retirement System of the Government of the Virgin Islands, GERS Complex, 3438 Kronpindsens Gade, St. Thomas, and VI 00802. - 23 - NOTE 11 NET PENSION LIABILITY Net Pension Liability Effective July 1, 2014, the System implemented the provisions of GASB Statement No. 68, Accounting and Financial Reporting for Pensions - an amendment of GASB Statement No. 27, as amended by GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date - an amendment of GASB Statement No. 68. Following is a description of the pension plan and accounting for pension expense, liabilities, and deferred outflows/inflows of resources. Plan Description and Benefits Full time employees of the System are members of the Government Employees’ Retirement System of the Virgin Islands (GERS), a cost sharing multiple-employer, defined benefit pension plan (the plan) established as of October1,1959 in accordance with Title 3, Chapter 27 of the Virgin Islands Code to provide retirement, death, and disability benefits. Benefits may be extended to beneficiaries of plan members. The plan covers all employees of the Government, including the System, except employees compensated on a contract fee basis, casual, per diem or provisional and part time employees who work less than 20 hours per week. Persons over the age of 55 may opt out of the plan by providing formal notification to the plan. Vesting of benefits occurs after 10 years of service. Benefits may be extended to beneficiaries of plan members. There are two tiers within the plan: Tier I: Employees hired prior to September 30, 2005 Tier II: Employees hired on or after October 1, 2005 Regular Tier I employees are eligible for full-service retirement at age 60 with 10 years of credited service or any age with 30 years of credited service. Regular Tier II employees are eligible for full-service retirement at age 65 with 10 years of credited service. Tier 1 members who are considered “safety employees” as defined in the Code are eligible for full retirement benefits at age 55 with 10 years of credited service or any age with 20 years of credited service. Tier II safety employees are eligible for full retirement benefits at age 60 with 10 years of service or age 58 with 25 years of service. Regular and safety employees who have attained age 50 with at least 10 years of credited service may elect to retire early with a reduced benefit. The monthly annuity benefit payment is determined by applying a stipulated benefit ratio to the member’s average compensation. Average compensation for Tier I members is determined by averaging the five highest years of credited service within the last ten years of service, subject to the maximum salary limitations in effect during such service. Average compensation for Tier II members is determined by averaging the most recent five years of credited service within the last ten years of service, subject to the maximum salary limitations in effect during the service. The maximum annual salary that can be used in this computation is $65,000, except for senators and judges, whose annual maximum compensation is $85,000. Funding and Contribution Policy Contributions to GERS are established by the Board of Trustees of GERS. Contribution rates to the retirement plan for regular employees vary based on classification as Tier I or Tier II. The GVI’s employer contribution for Tier I and Tier II employees is 23.5% of the member’s annual salary, effective on January 1, 2020. Employee contribution rates effective on January 1, 2017 are as follows: NOTE 11 – PENSION LIABILITY (Continued) - 24 - Tier I Tier II Regular Employees 11% 11.5% Public Safety Employees 13% 13.625% Legislature 12% 14% Judges 15% 15% Both the Plan and the System have a September fiscal year end. GASB Statement No. 68 requires that the reported results must pertain to liability and asset information within certain defined time frames. For this report, the following time frames are used: Valuation Date: October 1, 2021 Measurement Date: September 30, 2021 Measurement Period: October 1, 2020 – September 30, 2021 The System’s proportionate share of employer contributions recognized by GERS was $53,570 for the Plan’s fiscal year ended September 30, 2021. Pension Liabilities and Expense and Deferred Outflows/Inflows of Resources As of July 1, 2021, the Primary Government processes compensation for all of the System’s employees. The System’s related pension liability, expense and deferred outflows/inflows will be accounted for by the Primary Government. Actuarial information related to the pension plan can be obtained from the GERS. NOTE 12 OTHER POSTEMPLOYMENT BENEFIT LIABILITY The Governmental Accounting Standards Board issued GASB Statement No. 75 – Accounting and Financial Reporting for Postemployment Benefits Other than Pensions. The Statement is effective for fiscal years beginning after June 15, 2017. The Government of the Virgin Islands adopted and implemented GASB 75 for the year-end September 30, 2018. The objective of the Statement is to improve Accounting and Financial Reporting for state and local governments (including component units) for Postemployment Benefits Other than Pensions (OPEB). The System is a component unit of the U.S. Virgin Islands Primary Government. For purposes of GASB 75, the plan is classified as a nontrusted multiple employer plan. In this Special Funding Situation, the Primary Government covers the plan expenses as they occur. The plan is considered a “pay as you go” plan. The Primary Government is the only entity responsible for the payment of OPEB for retirees of the System. As of July 1, 2021, all compensation of the System’s employees is paid by the Primary Government. Management has communicated that because the Primary Government is responsible for all employment cost of the System’s employees, no adjustments to its financial statements are recorded. NOTE 13 SUBSEQUENT EVENTS The Authority’s management has evaluated subsequent events through April 5, 2023, the date the financial statements were available to be issued. The accompanying financial statements recognize the effects of subsequent events that provided evidence about conditions that exist at the balance sheet date, including the estimates inherent in the process of preparing financial statements. The accompanying financial statements do not recognize the effect of subsequent events that did not exist at the balance sheet date, but disclosures of such events, if any, are included in the accompanying notes. REQUIRED SUPPLEMENTARY INFORMATION - 25 - VIRGIN ISLANDS PUBLIC BROADCASTING SYSTEM (A Component Unit of the Government of the United States Virgin Islands) SCHEDULE OF THE SYSTEM’S PROPORTIONATE SHARE OF NET PENSION LIABILITY LAST 10 FISCAL YEARS 2021 2020 2019 2018 2017 2016 System’s proportion of the net pension liability 0.0600% 0.0500% 0.0534% 0.0568% 0.0522% 0.0571% System’s proportionate share of the net pension liability $3,465,766 $2,657,324 $2,227,340 $2,487,214 $2,552,151 $2,322,908 System’s covered-employee payroll 239,632 202,388 317,367 223,583 203,205 203,050 System’s proportion share of the net pension liability as a percentage of its covered-employee payroll 1446% 1313% 701.82% 1,112.43% 1,256.00% 1,144.00% Plan fiduciary net position as percentage of the total pension liability 9.16% 11.32% 13.72% 16.18% 16.54% 19.58% *The schedule is intended to show a 10-year trend. Additional years will be reported as they become available. The amounts presented for each fiscal year are as of the measurement date (September 30 of the previous fiscal year). The data presented is as of the last period of pension liability allocation for the System – September 30, 2021. - 26 - VIRGIN ISLANDS PUBLIC BROADCASTING SYSTEM (A Component Unit of the Government of the United States Virgin Islands) SCHEDULE OF THE SYSTEM’S CONTRIBUTIONS LAST 10 FISCAL YEARS 2021 2020 2019 2018 2017 2016 2015 Actuarially required contributions $219,482 $138,762 $142,975 $142,276 $136,431 $114,251 $95,427 Contributions in relation to the actuarially required contributions 53,570 47,495 43,543 42,715 40,208 41,276 34,354 Contribution deficiency/(excess) 165,912 91,267 99,432 99,561 96,223 72,975 61,073 Covered-employee payroll 239,632 202,388 214,172 223,583 203,205 203,050 186,176 Contributions as a percentage of covered-employee payroll 22.36% 23.47% 20.33% 19.11% 19.79% 20.33% 18.45% *The schedule is intended to show a 10-year trend. Additional years will be reported as they become available. The amounts presented for each fiscal year are as of the measurement date (September 30 of the previous fiscal year). The data presented is as of the last period of pension liability allocation for the System – September 30, 2021. - 27 - VIRGIN ISLANDS PUBLIC BROADCASTING SYSTEM (A Component Unit of the Government of the United States Virgin Islands) NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION SEPTEMBER 30, 2021 Valuation Date: October 1, 2020 Measurement Date: September 30, 2020 Actuarially determined contribution rates are calculated as of September 30, 2020, one year prior to end of the fiscal year in which contributions are reported and applied to all periods included in the measurement. Methods and assumptions used to determine contribution rates: Actuarial cost method Entry Age Normal Cost Method Inflation 2.00% Salary increases 3.25% including inflation Discount rate 2.23%, net of pension plan investment expense, including inflation Mortality rates RP-2014 Blue Collar Employee Healthy Annuitant Employee Mortality Tables Municipal bond yield 2.21% *The data presented is as of the last period of pension liability allocation for the System – September 30, 2021. SUPPLEMENTARY INFORMATION - 28 - VIRGIN ISLANDS PUBLIC BROADCASTING SYSTEM (A Component Unit of the Government of the United States Virgin Islands) STATEMENTS OF REVENUES AND EXPENSES PER DIVISION FOR THE YEARS ENDED SEPTEMBER 30, 2022 and 2021 TOTAL WTJX-TV WTJX-FM 2022 2021 Operating Revenues Grants and Funds $ 2,866,313 $ - $ 2,866,313 $ 2,661,909 Lease Revenue - Tower Space Rental 59,519 - 59,519 81,676 Underwriting 68,600 93,999 162,599 180,545 Fundraising 114,565 8,782 123,347 51,258 Advertising 4,060 - 4,060 3,259 Membership Subscriptions and Other Donations 42,585 12,287 54,872 42,827 Other Operating Revenue 76,740 - 76,740 40,834 Total Operating Revenues 3,232,382 115,068 3,347,450 3,062,308 Non-Operating Revenues Contribution from the Government of the U.S. Virgin Islands 4,493,150 188,696 4,681,846 3,627,111 Capital Grant from the Government of the U.S. Virgin Islands 110,000 - 110,000 - Interest Income 6,452 - 6,452 1,657 Insurance Proceeds 16,717 - 16,717 255,328 Other non-operating revenue - - - $ 439,111 Total Non-Operating Revenues 4,626,319 188,696 4,815,015 4,323,207 Total Revenues $ 7,858,701 $ 303,764 $ 8,162,465 $ 7,385,515 Operating Expenses Program Services Salaries $ 1,851,056 $ 87,159 $ 1,938,215 $ 1,712,812 Program Acquisition 724,294 10,880 735,174 743,736 Annual Leave Accrual (35,430) - (35,430) 5,763 Employee Benefits 689,833 27,930 717,763 638,788 Equipment Rental and Maintenance 184,056 - 184,056 206,873 Utilities 14,284 5,194 19,478 71,035 Travel 26,616 922 27,538 17,709 Supplies and Other 29,456 - 29,456 52 Production 32,251 43,240 75,491 66,041 Lease Amortization Expense 23,353 - 23,353 - Lease Interest Expense 2,572 - 2,572 - Total Program Services 3,542,341 175,325 3,717,666 3,462,809 Management and General Salaries 26,929 - 26,929 285,088 Employee Benefits 370,506 5,000 375,506 411,261 Depreciation 698,621 - 698,621 487,222 Payroll Taxes and Contributions 141,732 6,668 148,400 151,868 Utilities 292,045 - 292,045 239,966 Professional Fees 173,710 - 173,710 189,234 Production 32,377 - 32,377 7,996 Printing and Publication 14,027 - 14,027 16,310 Repairs and Maintenance 133,506 579 134,085 105,341 Insurance 115,597 - 115,597 129,157 Subscriptions and Memberships 11,272 - 11,272 2,851 Professional Development/Training 29,117 4,291 33,408 11,175 Supplies and Other 150,018 2,359 152,377 142,951 Bad Debt Expense 910 - 910 - - 29 - VIRGIN ISLANDS PUBLIC BROADCASTING SYSTEM (A Component Unit of the Government of the United States Virgin Islands) STATEMENTS OF REVENUES AND EXPENSES PER DIVISION (Continued) FOR THE YEARS ENDED SEPTEMBER 30, 2022 and 2021 TOTAL WTJX-TV WTJX-FM 2022 2021 Program Acquisition - 22,632 22,632 22,161 Automobile 37,083 - 37,083 32,355 Equipment Rental and Maintenance 2,150 - 2,150 1,452 Small Equipment 46,611 12,656 59,267 96,667 Postage and Freight 19,114 920 20,034 19,584 Advertising 27,910 - 27,910 5,443 Computer Supplies 83,778 5,971 89,749 62,949 Security 15,363 - 15,363 11,830 FCC Repacking 81,742 - 81,742 21,252 FEMA 18,699 - 18,699 50,499 Total Management and General 2,522,817 61,076 2,583,893 2,504,612 Fundraising 113,039 980 114,019 1,735 Total Operating Expenses $ 6,178,197 $ 237,381 $ 6,415,578 $ 5,969,156 , H1llll!lll'llllll' f\(fl'\11111\111\ ,,1.1,\ll·\fil/':1!111 c 1)1-I\IIIIAl!I\ I 090 Vermont Avenue, NW Suite 250 Wash111gto11, DC 20005 PO. Box 2478 K111gsh1II, VI 00851 200 E Prall Street Slllte1100 Balt11nore, MD 21202 T:202.393 5600 TF: I 855.479.0548 F: 202.393.5608 bertsmithco.com ,1 ,,·! I ·•,m1tl _ 1 INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED lN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Board of Directors Virgin Islands Public Broadcasting System: We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the Virgin Islands Public Broadcasting System (the "System"), as of and for the year ended September 30, 2022 and the related notes to the financial statements, which collectively comprise the System's basic financial statements and have issued our repott thereon dated April 5, 2023. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the System's internal controls over financial reporting (internal control) to detennine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the System's internal control. Accordingly, we do not express an opinion on the effectiveness of the System's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the norn1al course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is reasonable possibility that a material misstatement of the entity's financial statements will not be prevented or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. AN INOlP(NOENT MlMtllt Of - 30 - IBDO ALLIANCE USA - 31 - Report on Compliance and Other Matters As part of obtaining reasonable assurance about whether the System’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the System’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the System’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Bert Smith & Co. Washington, D.C. April 5, 2023