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2022-07-25 - Agendas - FinalFayetteville Advertising and Promotion Commission July 25, 2022 Location: Fayetteville Town Center, 15 W. Mountain Street Commissioners: Todd Martin, Chair, Tourism & Hospitality Representative Katherine Kinney, Tourism & Hospitality Representative Chrissy Sanderson, Tourism & Hospitality Representative Elvis Moya, Tourism & Hospitality Representative Andrew Prysby, Commissioner at -large Sarah Bunch, City Council Representative Mark Kinion, City Council Representative Staff: Molly Rawn, CEO Agenda I. Call to order at 2:00 p.m. II. Old Business A. Review and approval of June 2022 minutes. III. New Business A. CEO Report, Molly Rawn. An executive overview of the previous month's activity, issues and opportunities facing the organization. B. Financial Report, Jennifer Walker, Vice President of Finance C. Marketing Report: i. Hazel Hernandez, Vice President of Marketing and Communications ii. Mike Sells, Sells Agency D. Presentation of the 2021 Audit, Cynthia Burns, Director of Public Sector, Forvis F. Additions to the agenda may be added upon request from a majority of the commissioners IV. Adjourn Fayetteville Advertising and Promotion Commission Minutes June 27, 2022 Fayetteville Town Center Commissioners Todd Martin, Chair, Tourism & Hospitality Representative Present: Elvis Moya, Tourism & Hospitality Representative Chrissy Sanderson, Tourism & Hospitality Representative Andrew Prysby, Commissioner at -large * Online Sarah Bunch, City Council Representative * Online Commissioners Katherine Kinney, Mark Kinion Absent: Staff: Molly Rawn, CEO; Jennifer Walker, Vice President of Finance; Hazel Hernandez, Vice President of Marketing and Communications Chair Martin called the meeting to order at 2:00 pm. Old Business A. Chair Martin asked commissioners to review the May minutes and asked if there were any additions or revisions, hearing none, he stated that the minutes stood approved as presented. III. New Business A. CEO Report. An executive overview of the previous month's activity, issues and opportunities facing the organization. Complete memo attached. Before she began the CEO Report, Rawn stated that the commissioners were receiving an updated budget revision that would supersede the version provided earlier in regard to the budget revision agenda item. She stated that the two commissioners attending virtually were receiving an email with the updated version and the commissioners in person were handed a new printed copy. Additionally, she said we would ensure the city clerk's office received an updated version. Rawn gave an update of upcoming activities for the commission, including the audit presentation in July by BKD. She also stated that BKD was rebranding and is now called Forvis. In August, we will be issuing a couple of Request for Proposals, one for our IT provider and one for our Advertising Agency of Record and in this next quarter we will also be hearing an update from Theatre Squared. Rawn highlighted a few items from her report, beginning with the quarterly consumer leisure newsletter developed by Jerrika Longueville on our Experience Fayetteville team. Please let her now if you don't receive this quarter's newsletter this week. Rawn mentioned Buxton, the new research software we are using, and that we did some testing with it during NWA Pride events and will be reviewing the data we received. The Experience Fayetteville sales team has been busy, starting out the month with the Walmart Shareholders/Associates week with more than 24 countries represented and 3,500 hotel nights in Fayetteville with over 40,000 meals. The sales team also assisted Fayetteville's first Lego League event with over 3,000 participants with the goal of helping and ensuring that events like this stay and grow in Fayetteville. With Cycling, Rawn stated that we wrapped up a month of doing the Dinner Rolls bike valet program programming and learned a lot and would like to partner with other organizations to potentially bring some regularity to this helpful program. Additionally, in June, both the USA Gravel and Mountain Bike national championship and the Highlands Gravel Classic occurred and were quite successful. Chair Martin commented that his business completed the Bicycle Bootcamp program, commending Brannon Pack for doing a great job with it and stating that his team is wanting to do several things to make his establishments bike friendly. The Visitors Center update included a 28% increase in May visitation when compared to April and a 19% increase in sales compared to May. Rawn stated she is very pleased with all of Eden Moore's work. June's First Thursday event "In Bloom" had approximately 2,700 in attendance with food trucks reporting $8,000 in sales and our art vendors reporting over $6,500 in sales and our cash bar reporting almost $2,000 in sales. Also, Chloe Bell has been nominated to Fayetteville's Arts Council and received, for a personal project, a grant from the Creative Exchange Fund and the Tyson Family Foundation. The Fayetteville Town Center continues to reassess its sales strategy in this slower time and is gearing up for a busier 3rd and 41" quarter. Rawn also noted that the town center was simultaneously seeing more competition from a landscape that included more rental venues than before and slower business and corporate bookings as companies continued to be slower coming back to in person events. While these factors are creating slower business bookings, she is confident in the team at the town center. Rawn mentioned that the Clinton House Museum board of directors continues the work of separating financially from the A&P, including creating their own account with Square, allowing them to sell their own inventory. We'll hear more about the museum later in the meeting. She discussed both HMR and lodging numbers, stating that we had 74% occupancy at our hotels in May, a 15% increase over May 2021 and 60% occupancy, year-to-date, which is an 8% increase over 2021. The most significant data is that year to date, we've had a 21 % increase in HMR collections compared to last year, and the largest collection amount on record. We have more than made up for the small dips in revenue in restaurant collections for the prior two months. Commissioner Moya asked about the status of the Director of Downtown Initiatives job posting and Rawn stated that she expected it would be posted by the July meeting. B. Financial Report. Jennifer Walker, Vice President of Finance May financial statements are included in the commission packet and they show that revenue projections are 42% and we are very close with 41 % in actual revenue and expense projections are also at 42% and we are currently at 33% actual expenses; net revenue as of the end of May is $438,000. The balance sheet shows cash and investments at approximately $4.5 million and unearned revenue is $124,000, reflecting upcoming events at the town center. Walker stated that tax revenue for the end of May is 6% ahead of budget, after adjusting for seasonality. CEO Rawn asked if Walker could speak about the one time overhead reimbursement we are receiving for Cyclo-cross expenses. Walker stated that in June financials we will see a one time reimbursement of approximately $160,000 for overhead or indirect expenses including our staff time, marketing expenses and more. C. Marketing Report. Hazel Hernandez, Vice President of Marketing and Communications Hernandez stated it was a busy May for the marketing team including Vanny's first appearance at First Thursday and also serving as a sponsor for Her Set/Her Sound, a DJ music festival. She also gave an overview of our social media reach which showed really positive numbers for both Facebook and Instagram. Hernandez stated that some of our numbers were close to reaching the same numbers as our state tourism department. She noted that the Pride events in June really drove up some of these impressions. Hernandez mentioned that our new pocket guide will be delivered very soon and that we are working with a new influencer company and launched our first campaign with the company during Pride. Marketing also been working with Tina Archer Cope, our VP of Sales, and Arkansas Tourism to do a motorcycling shoot with a shift to include a focus on adventure or gravel riding. Hernandez ended her remarks and Mike Sells elaborated, beginning with the recently conducted influencer campaign and we'll take lessons learned from Pride for the upcoming campaigns which will focus on the food scene, night life, motorcycling and craft beer. Sells also talked about the large amount of cycling assets we've collected and that the Sells Agency will be giving recommendations to the marketing team on different ways to use these assets. Sells mentioned that last week was a big week as our new campaign launched with the majority of the elements ready and the video being filmed. He looks forward to showing it to the commission. He mentioned that the website continues to be refreshed with the "Eat" page being the most recently refreshed. He stated that almost 25% of this page's visitors downloaded the restaurant guide which is a very promising percentage. He also highlighted the latest Longwoods International travel report which showed that travel spending was for the first time higher than 2019 and more than a quarter of travelers planned to spend more than their 2019 travel budget. He also stated that the report showed that meetings and conventions were still trending behind leisure travel and most meeting planners didn't expect this segment to be back to pre -pandemic levels until 2023. D. Vote. Budget Revision. CEO Rawn stated that budget revisions are not uncommon and we may come to expect them to be a normal practice. We are bringing a budget revision forward which includes a one sheet that is a summary consolidated budget and then detail for both Experience Fayetteville and Fayetteville Town Center. Overall, we are calling for more revenue than budgeted for Experience Fayetteville and less revenue than was budgeted for Fayetteville Town Center. Walker added that revenue was revised upward on the Experience Fayetteville side to include that one time grant reimbursement for Cyclo-Cross and that some revenue for the Art Court has been shifted into future years simply because the Art Court will be starting operations later than we predicted. We are not making changes to the HMR revenue budgeted numbers. On the Fayetteville Town Center, you'll see revenue decreases projected due to decreased bookings. Commissioner Moya asking about the decrease in the Experience Fayetteville promotions budget from $280,000 to $204,000. CEO Rawn said that the decreases were not in video or other projects we are doing, but in activations or projects that were possibilities for this year that due to timing or capacity we would not be doing, i.e. we are not cutting anything we had planned to do. Likewise, Rawn stated, you'll see a slight increase in the sales expenses as there are needs the team does have and things they will need for the remainder of the year. Chair Martin asked if there were any further discussion or questions and there being none, he called for a vote on approving the budget revision. With a roll call vote, Commissioners Prysby, Moya, Sanderson and Martin approved the revision with Martin noting that Commissioner Bunch had needed to leave the meeting. E. Vote. Clinton House Museum budget allocation transfer. CEO Rawn stated that it is important, as the Clinton House Museum further separates itself financially from the A&P, that they be able to pay their own expenses and set up processes for doing so. With a board willing and able to this, it is time to consider transferring the amount of funds in the A&P budget allocated to pay for Clinton House Museum expenses to the Clinton House Museum board. This will also allow them to take advantage of any opportunities to save funds as a small not -for -profit. Rawn's recommendation is to pay out the remaining budgeted amount to the Clinton House Museum and to also donate the remaining inventory that is specific to the Clinton House Museum and not items we would sell at Experience Fayetteville. With that recommendation, she invited Clinton House Museum board chair Steve Smith to speak. President Smith thanked the commission for the ongoing support the A&P has extended and also thanked the Clinton House Museum board of directors. President Smith stated the board has made good strides including getting the University of Arkansas to waive rent on the house through 2023 with CEO Rawn being very involved in that project. They've also had multiple conversations with Arkansas Tourism's Secretary Hurst to learn of grant opportunities for the foundation and have made application for one of them. The museum is now open Thursday through Saturday, 10 am to 4 pm. President Smith also mentioned multiple media coverage the museum has had. The museum has had a soft launch of its membership drive and can now sell gift shop items. They've also established that the Special Collections department at the University of Arkansas library will store the museum's records. President Smith also talked about other grants the museum has applied for, including a grant that would help create an augmented reality feature that will be added to the museum so that a visitor could hear and see interviews from the Clintons about the house. President Smith also stated that the board is looking for a bookkeeper. They are also organizing the Golden Anniversary Campaign that will start now and go through October 2025 which will be the Clinton's Golden Wedding Anniversary. He would like to come back to the commission later this year and make a proposal for continued support and said he would like to work on a Memo of Understanding between the Clinton House Museum and the A&P which Rawn stated she would like to work on with President Smith before sending it to the commission for review. Chair Martin stated that he was pleased to see the work the Clinton House Museum's board of directors has taken. He asked for a motion to authorize CEO Molly Rawn to pay out the remaining 2022 budgeted support in a single payment to Clinton House Museum and donate the Clinton House Museum inventory to the Clinton House Museum. The motion was made by Commissioner Sanderson and seconded by Commissioner Moya and was approved unanimously by a roll call vote of Chair Martin, Commissioner Moya, Commissioner Sanderson and Commissioner Prysby. F. Vote. Agreement with Art Court, LLC for a three-year lease of Dickson Street Art Court for $1.00. CEO Rawn presented the lease and there were no questions. Chair Martin asked for a motion to authorize CEO Molly Rawn to sign an agreement for a three-year lease for $1.00. Commissioner Sanderson made the motion and both Commissioners Prysby and Moya seconded with it being approved unanimously by a roll call vote of Chair Martin, Commissioner Moya, Commissioner Sanderson and Commissioner Prysby. With no further agenda items, Chair Martin called for a motion to adjourn the meeting. Commissioner Sanderson made the motion with Commissioner Moya seconding it and the meeting was adjourned at 2:57 pm. Minutes submitted by Amy Stockton, Director of Operations, Experience Fayetteville I Vrd I rill I I I Monthly A&P Tax Collections 2022** 0 6 I 71 • 6MIA 1-1 0 0 4.90% 3.71% -19.55% 26.09% %change over previous year 19.43% jan S I S apr may jun jul I aug I sep Oct I nov I dec S3969004 S4099478 0 0 0 0 0 0 0 O O O O 0 0 O 0 0 0 0 0 0 0 0 0 0 0 0 0 0 O 0 0 0 0 0 0 O O O O O O 0 O 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 o o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 C� o C� LO Co 00 M O N M I�t Ln Q0 r- 00 M O N Co � LSD C9 I- 00 M 0 CN l � N N N N N N N N N N Co C'M C'7 Co Co Co C'M C'7 Co Co �t This represents one half of the total HMR collections. The other half supports the Parks and Recreation department. 34.04% -0.15% 35.69% 7.91% 24.93 % 13.80% change from 2021 28.38% -17.18% 42.55% 14.90% 31.20% 25.00% change from 2019 Memo P l[AY� To: Molly Rawn, CEO, Experience Fayetteville Fayetteville Advertising & Promotion Commissioners From: Jennifer Walker, VP Finance, Experience Fayetteville Date: July 10, 2022 Re: Financial Statements — June 2022 This packet contains Experience Fayetteville Financial Statements for the month ended June 30, 2022. The following reports are included in the packet: • Summary P&L Financials for month ended June 30, 2022 • Balance Sheet for month ended June 30, 2022 Target Budget June — 50% • Revenue target 50% of budget or higher by the end of June 2022. Expenditures target 50% or lower at June 2022. Total Revenue YTD: $2,592,046 or 54%; We are 4% ahead of target. Tax Receipts - $2,191,465 (over budget by 3% ytd) Town Center - $166,923 (note $147k+ unearned revenue on Balance Sheet) Other - $233,657 Total Operating Expenditure YTD: $2,046,063 or 42%; this is 8% under budget. EF Main - $1,677,672 Town Center - $368,391 HMR tax — YTD June Collections (May activity) were above seasonally adjusted budget expectations by 7%. Operating Net Income is $545,983 year to date. Modified Accrual Fayetteville A and P Commission Statement of Budget, Revenue and Expense Year -to -Date @ June 30, 2022 CONSOLIDATED Year -to -Date Actual Budget Over/(Under) Budget %of Budget Revenue Hotel, Motel, Restaurant Taxes Revenue 2,191,465 4,154,500 (1,963,035) 52.7% Rental Revenue 153,510 346,000 (192,490) 44.4% Event Revenue 18,872 40,700 (21,829) 46.4% Visitor Center Store Revenue 39,751 51,200 (11,449) 77.6% Parking Revenue 11,534 33,000 (21,466) 35.0% Advertising Revenue 1,050 3,000 (1,950) 35.0% Grant/Other Revenue 171,725 182,255 (10,530) 94.2% Interest and Investment Revenue 4,138 8,250 (4,112) 50.2% Total Revenue 2,592,046 4,818,905 (2,226,859) 53.8% Expenses Operating Expenses Rental Expenses 22,905 88,500 (65,595) 25.9% Event Expenses 26,203 79,450 (53,247) 33.0% Visitor Center & Museum Store 33,528 48,200 (14,672) 69.6% Downtown Initiative 1,065 100,000 (98,935) 1.1% Personnel 717,067 1,616,044 (898,977) 44.4% Sales & Marketing 461,605 1,134,553 (672,948) 40.7% Office and Administrative 323,076 707,773 (384,698) 45.6% Bond Payments 350,790 707,000 (356,210) 49.6% Contribution to Capital Reserves - 100,000 (100,000) 0.0% Other grants 109,824 39,815 70,009 275.8% TheatreSquared Contribution - 200,000 (200,000) 0.0% Total Operating Expenses 2,046,063 4,821,335 (2,775,272) 42.4% Net Operating Income/(Loss) 545,983 (2,430) 548,413 0.0% Other Income Unrealized Gain/(Loss) on Investments 10,446 0.0% Other Expenses HE & Improvements 286,884 595,000 (308,116) 48.2% Depreciation Expense 66,737 0.0% Cost of Goods Sold (5,779) 0.0% Net Income/(Loss) (without cx Grants) 208,588 (597,430)1 795,572 1 -34.9% Modified Accrual Fayetteville A and P Commission Statement of Budget, Revenue and Expense Year -to -Date @ June 30, 2022 Experience Fayetteville Year -to -Date Actual Budget OverAUnder) Budget %of Budget Revenue Hotel, Motel, Restaurant Taxes Revenue 2,191,465 4,154,500 (1,963,035) 52.7% Rental and Event Revenue 17,073 37,700 (20,627) 45.3% Visitor Center Store Revenue 39,751 51,200 (11,449) 77.6% Advertising Revenue 1,050 3,000 (1,950) 35.0% Grant & Other Revenue 171,725 182,255 (10,530) 94.2% Interest and Investment Revenue 4,058 8,000 (3,942) 50.7% Total Revenue 2,425,122 4,436,655 (2,011,533) 54.7% Expenses Operating Expenses Event Expenses 18,586 76,450 (57,864) 24.3% Visitor Center & Museum Store 33,528 48,200 (14,672) 69.6% Downtown Initiative 1,065 100,000 (98,935) 1.1% Personnel 512,859 1,134,973 (622,114) 45.2% Sales & Marketing 457,481 1,118,553 (661,072) 40.9% Office and Administrative 193,539 402,523 (208,984) 48.1% Bond Payments 350,790 707,000 (356,210) 49.6% Contribution to Capital Reserve - 100,000 (100,000) 0.0% Other Grants 109,824 39,815 70,009 275.8% TheatreSquared Contribution - 200,000 (200,000) 0.0% Total Operating Expenses 1,677,671 3,927,514 (2,249,843) 42.7% Net Income/(Loss) Before Other Revenue and Expenses 747,451 509,141 238,310 146.8% Other Income Unrealized Gain/(Loss) on Investments 10,446 - 10,446 0.0% Other Expenses FFE & Improvements 128,352 90,000 38,352 142.6% Depreciation Expense 37,666 Cost of Goods Sold (5,779) Net Income/(Loss) 597,658 419,141 168,071 142.E Modified Accrual Fayetteville A and P Commission Statement of Budget, Revenue and Expense Year -to -Date @ June 30, 2022 Town Center Year -to -Date Actual Budget Over/(Under)% Budget of Budget Revenue Rental Revenue 153,510 346,000 (192,490) 44.4% Event Revenue 1,798 3,000 (1,202) 0.0% Parking Revenue 11,534 33,000 (21,466) 35.0% Interest and Investment Revenue 80 250 (170) 32.2% Total Revenue 166,923 382,250 (215,327) 43.7% Expenses Operating Expenses Rental Expenses 22,905 88,500 (65,595) 25.9% Event Expenses 7,617 3,000 4,617 253.9% Personnel 204,208 481,071 (276,863) 42.4% Sales & Marketing 4,125 16,000 (11,875) 25.8% Office and Administrative 129,537 305,250 (175,713) 42.4% Total Operating Expenses 368,391 893,821 (525,430) 41.2% Net Income/(Loss) Before Other Revenue and Expenses (201,468) (511,571) 310,103 39.4% Other Expenses HE & Improvements 158,532 505,000 (346,468) 68.6% Depreciation Expense 29,070 Net Income/(Loss) (389,070) (1,016,571) 627,501 38.3% Fayetteville A&P Commission Balance Sheet As of June 30, 2022 ASSETS Current Assets Cash 3,398,927 Investments 1,216,103 Accounts Receivable 447,520 Prepaid Expenses 22,947 Deposits 30,617 Visitors Guide Trade 3,052 Inventory Asset 23,089 Total Current Assets 5,142,256 Other Assets Capital Assets Furniture & Fixtures 96,641 Equipment 641,976 EF/CVB Building 940,410 EF/CVB Land 198,621 Building Additions 971,952 Walker -Stone House 1,167,218 Construction in Progress 27,109 Accumulated Depreciation (1,433,170) Total Other Assets 2,610,756 TOTAL ASSETS 7,753,012 LIABILITIES AND EQUITY Current Liabilities Accounts Payable 165,149 Unearned Revenue 147,357 Total Liabilities 312,506 Equity Unreserved Fund Balance 4,236,564 Operating Reserve 1,000,000 Capital Reserve 2,100,000 Temporarily Restricted Funds 439,895 Net Revenue Gain/(Loss) on Investments 10,446 Net Revenue without Cyclocross 298,141 Net Revenue for Cyclocross (644,540) (335,953) Total Equity 7,440,506 TOTAL LIABILITIES AND EQUITY 7,753,012 ULY 2022 MARKETING REPORT L • Araric n v iaec on Str .1 9. �"1• 1 . • . fi:lto i 1 U . # Li �h�1 1AITO - NYxf f� ,5 ■ y ��rYYr F •I u ��` i 5 _ _ 4w. r a" AUTHENTIC FAYETTEVILLE Digital & social ads Campaigned launced July 1 Media includes streaming + YouTube EXPERIENCEFAYETTEVILLE.COM Art Immersed in Beauty Learn More For an Authentic Experience, You Gotta Experience Fayetteville. 0 ! 1K 423 Comments 284 Shares p�) Like comment p-,> Share 0 T PWY LOCAL/REGIONAL MARKETING ACTIVITIES POCKET VISITORS GUIDE • Less expensive than full version Drives traffic to website ppCKET ow- GT A UIDE AR Full version available to FAYETTEVILL view/download 'A NUGO'S has been in business since 1977. Located in the basement at 251/2 N Block Ave off the Historic Fayetteville Square, they offer excellent burgers (Blue Moon Burger, anyone?) and an array of appetizers, entrees, and desserts including their well-known homemade French -fries, beer cheese soup, and grasshopper crepes. Q@HugosBasement I HugosFayetteville.com POCKET GUIDE -WHERE TO EAT 111 G WHAT TO DO If you are looking to get out and about, you'll find plenty of options, inside and outside. Here are just a few options, but scan the code for even more ways to explore Fayetteville. 112 DRIVE-IN € DOWNTOWN & DICKSON 0@112DrivelnTheatre STREET 112DrivelnTheatre.com Block, Mountain, East & Center BLOCK STREET FRECKLED HEN RECORDS GIFT & HOME Q@BlockStreetRecords Q@ShopFreckledHen ShopFreckledHen.com BOTANICAL GARDEN OF THE 02ARKS STARLIGHT SKATIUM Q@BGOzarks Q@StarlightSkatium BGOzarks.org StarlightSkatium.com 61POCKET GUIDE -WHATTODO WHAT I SAW 41 POCKETOUIDE-WHATISAW �d WHERETO EAT Fayetteville's creative spirit isn't limited to just visual and performance arts. The culinary scene here is vibrant and eclectic, showcasing a love of flavor and hospitality Below is just the tip of the iceberg of culinary fare you'll only find in Fayetteville. BRUNCH: LUNCH/DINNER: DOOMSDAY COFFEE ARSAGXS MILL DISTRICT & ROASTERIE Q@Arsagas Q@DoomsdayCoffee Arsagas.com DoomsdayCoffeeRoast.com KHANIA FARMER'S TABLE CAFE Q@KhanalndianGrill Q@FarmersTableCafe WantKhana.com The FarmersTableCafe.com TULA CAFE RUE ORLEANS Q@TulaRestaurantMx Q@CafeRueOrleans TulaMX.com CafeRueOrleans.com SHULERTOWN FOOD TRUCKS Q@ShulertownMarket 101 POCKET GUIDE -WHERE TO EAT WHAT 1 DID - POCKET GUIDE 19 PFy SOCIAL MEDIA KPIs FACEBOOK.0 • Page Reach: +607.3% • Page Visits: �-1;0.7% • New Followers: +57.9% • Total Followers: 37,100 INS IRAM: • Page Reach: • Page Visits: • New Followe 0 • Total Followers: a8,907 +10% t23.6% rs: •4.3% TOTAL IG + F13 FOLLOWERS WEBSREFERRA ITE LS FROM SOCIAL: Users: �,4.4% New Users: -1304.4% Sessions: T�62.2% Bentonville: '811,482 Little Rock: 60,252 Hot Springs: 67,600 Fayetteville: 96,007 PWY BUXTON DATA - PRIDE WEEKEND Heat Map for Fayetteville Pride Weekend ler-Q) 1 � K Gulley Park n Park JP n iversi Wyman of Arkan Ll fi Lake huh Pai W 15th Si Fayette A r ingt n Junction Red indicates high concentration which makes sense due to the event on Dickson Top Zip Codes in the Area: Fayetteville • Springdale Rogers Peak Times: 12 PM 5 PM b PM Household Characteristics: 75.6% of attendees were married 45.7% of attendees have children Top Three Age Range of Visitors: • 45-54 • 25-34 35-44 PWY PRELIMINARY ADVERTISING INSIGHTS 2022 2021 % Increase Website Sessions from Display Ads 2jF510 1L 530% Digital & Social Ads � Social Media Ads 21r326 471 394% Tota I 41r836 625 674% Average Daily Sessions 345 from Advertising Social Media Advertising Kansas City 26% Session Metros Tulsa 16% Little Rock 11% NWA 10% Display Advertising Kansas City 26% Session Metros Tulsa 16% Little Rock 11% Chicago 10% WEBSITE ANALYTICS - Year Over Year Change 2022 V. 2021 2022 V. 2019 Total Users +11.8% +17.8% /■! �11 C U I I I � EqT ST$FP FJIPEAIENCE ULENDAG GIIIF New Users +12.9% +25.5% Sessions +18.1% +23.4% Session Duration +9.6% +21.6% < XPso Visitor Guide Flipbook +26.4% +69.3%ELI- I Visitor Guide PDF +13.6% +40.6% �The Fay food scene features a dive'rse�menu of local, pleaseinternational, and fusion flavors that are sure to Traffic to "Eat" Section +23.8% +12.1% Traffic to "Sleep" Section +13.4% +54.9% Traffic to "Experience" Section +54.1% +26.2% 2022 2021 2019 2015 Mobile Devices 7150% 74m3O% 72m9O% .20% LONOWOODS TRAVEL SENTIMENT SURVEY Fielded July 6, 2022 Factors Greatly Impacting Travel Plans: July 2022 ,an 2022 duly 2021 Coronavirus 19% mo d.--ro 21% .............................................................................. Personal Financial Situation 31% 26% 22% .............................................................................:............................:................................:.............................. Rising Transportation Costs 34% 26% 21% ................................................................................. ................................................................ ............................... Rising Gas Prices 43% LONOWOODS TRAVEL SENTIMENT SURVEY Fielded July 6, 2022 Impact of Rising Gas Prices on Travel Plans: 44% ............................ 44% 38% 36% 28% ............................ 22% .. . . . . . . . . . . . . . . . . . . . . . . . . . . y 19% 7% ............................ 12% I'm reducing the number of trips I'm taking ....................................................................................................................................................................................................................... I'm choosing destinations closer to home ............................................................................................................................................................... I'm reducing the amount I spend on retail purchases ....................................................................................................................................................................................................................... I'm reducing the amount I spend on entertainment and recreation ....................................................................................................................................................................................................................... I'm reducing the amount I spend on food and beverage ....................................................................................................................................................................................................................... I'm reducing the amount I spend on lodging ....................................................................................................................................................................................................................... I'm choosing to drive instead of fly ....................................................................................................................................................................................................................... I am choosing not to travel at all ........................................................................................................................................................................................................................ I'm cancelling trips ....................................................................................................................................................................................................................... Rising gas prices are not impacting my travel plans Memo To: Molly Rawn, CEO, Experience Fayetteville Fayetteville Advertising & Promotion Commissioners From: Jennifer Walker, VP Finance, Experience Fayetteville Date: July 25, 2022 Re: Presentation of the 2021 Audit Report PAY The Fayetteville A&P Commission has engaged the audit firm BKD, LLP to perform an annual financial audit for the fiscal year ending December 31, 2021. This audit work was completed Spring 2022 and the final audit report and financial report is now available for review and publication. BKD Director Cynthia Burns will present the 2021 auditor's report. The completed 2021 Independent Auditor's Report, Financial Statements, and Management Letter are attached for reference. FORWS 809 S. 52nd Street, Suite A 1 Rogers, AR 72758 P 479.845.0270 1 F 479.845,0840 forvis.com Board of Commissioners and Management FAYETTEVILLE ADVERTISING AND PROMOTION COMMISSION Fayetteville, Arkansas As part of our audit of the financial statements of the FAYETTEVILLE ADVERTISING AND PROMOTION COMMISSION (the Commission) as of and for the year ended December 31, 2021, we wish to communicate the following to you. AUDIT SCOPE AND RESULTS Auditor's Responsibility Under 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 An audit performed in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States is designed to obtain reasonable, rather than absolute, assurance about the financial statements. In performing auditing procedures, we establish scopes of audit tests in relation to the financial statements taken as a whole. Our engagement does not include a detailed audit of every transaction. Our contract more specifically describes our responsibilities. These standards require communication of significant matters related to the financial statement audit that are relevant to the responsibilities of those charged with governance in overseeing the financial reporting process. Such matters are communicated in the remainder of this letter or have previously been communicated during other phases of the audit. The standards do not require the auditor to design procedures for the purpose of identifying other matters to be communicated with those charged with governance. An audit of the financial statements does not relieve management or those charged with governance of their responsibilities. Our contract more specifically describes your responsibilities. Qualitative Aspects of Significant Accounting Policies and Practices Significant Accounting Policies The Entity's significant accounting policies are described in Note 1 of the audited financial statements. The Entity's financial statements are presented in accordance with accounting practices permitted by Arkansas Code Section 10-4-202, which is a regulatory basis of accounting that differs from accounting principles generally accepted in the United States of America. R.WIS is a LTademark nt FC, RV I5. LL: IEgistra hnn -iI wNvi Is pentllhq With the II S. Ratant and Trademark OMc9 �� PRAXITV FAYETTEVILLE ADVERTISING AND PROMOTION COMMISSION June 30, 2022 Page 2 Alternative Accounting Treatments We had discussions with management regarding alternative accounting treatments within accounting principles generally accepted in the United States of America for policies and practices for material items, including recognition, measurement, and disclosure considerations related to the accounting for specific transactions as well as general accounting policies, as follows: • Utilization of the modified accrual basis of regulatory accounting Management Judgments and Accounting Estimates Accounting estimates are an integral part of financial statement preparation by management, based on its judgments. The following areas involve significant estimates for which we are prepared to discuss management's estimation process and our procedures for testing the reasonableness of those estimates: • Estimated useful lives of capital assets Significant Unusual Transactions Significant unusual transactions represent significant transactions that are outside the normal course of business for the entity or that otherwise appear to be unusual due to their timing, size, or nature. We did not identify any transactions that we consider to be significant and unusual. Financial Statement Disclosures The following areas involve particularly sensitive financial statement disclosures for which we are prepared to discuss the issues involved and related judgments made in formulating those disclosures: • Commitments • Related party transactions • Regulatory accounting • Basis of accounting and presentation Audit Adjustments No matters are reportable. Auditor's Judgments About the Quality of the Entity's Accounting Principles No matters are reportable. Disagreements with Management No matters are reportable. Significant Issues Discussed with Management No matters are reportable. Difficulties Encountered in Performing the Audit No matters are reportable. FAYETTEVILLE ADVERTISING AND PROMOTION COMMISSION June 30, 2022 Page 3 Other Material Communications Listed below are other material communications between management and us related to the audit: • Management representation letter (attached) • We orally communicated to management other deficiencies in internal control identified during our audit that are not considered material weaknesses or significant deficiencies This communication is intended solely for the information and use of management, and Board of Commissioners, and is not intended to be and should not be used by anyone other than these specified parties. FDV,V I5, U,P June 30, 2022 Enclosure DocuSign Envelope ID: 2B067021-2E55-49E8-96E6-E66DB707ED5C Representation of: FAYETTEVILLE ADVERTISING AND PROMOTION COMMISSION 21 South Block Avenue, Suite 100 Fayetteville, Arkansas 72701 Provided to: FORVIS, LLP Certified Public Accountants P.O. Box 1893 Rogers, Arkansas 72757 The undersigned ("We") are providing this letter in connection with FORVIS' audits of our financial statements as of and for the years ended December 31, 2021 and 2020. Our representations are current and effective as of the date of FORVIS' report: June 30, 2022. Our engagement with FORVIS is based on our contract for services dated: March 17, 2022. Our Responsibility and Consideration of Material Matters We confirm that we are responsible for the fair presentation of the financial statements subject to FORVIS' report in conformity with accounting practices permitted by Arkansas Code 10-4-412, which is a regulatory basis of accounting that differs from accounting principles generally accepted in the United States of America. We are also responsible for adopting sound accounting policies; establishing and maintaining effective internal control over financial reporting, operations, and compliance; and preventing and detecting fraud. We understand that you will not render an unmodified opinion on the financial statements due to lack of conformity with accounting principles generally accepted in the United States of America regarding our accounting for regulatory basis. Certain representations in this letter are described as being limited to matters that are material. Items are considered material, regardless of size, if they involve an omission or misstatement of accounting information that, in light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would be changed or influenced by the omission or misstatement. An omission or misstatement that is monetarily small in amount could be considered material as a result of qualitative factors. Confirmation of Matters Specific to the Subject Matter of FORVIS' Report We confirm, to the best of our knowledge and belief, the following: 1. We have fulfilled our responsibilities, asset out in the terms of our contract, for the preparation and fair presentation of the financial statements in accordance with accounting practices permitted by Arkansas Code 10-1-412, which is a regulatory basis of accounting that differs from accounting principles generally accepted in the United States of America. DocuSign Envelope ID: 2B067021-2E55-49E8-96E6-E66DB707ED5C FAYETTEVILLE ADVERTISING AND PROMOTION COMMISSION Page 2 2. We acknowledge our responsibility for the design, implementation, and maintenance of: a. Internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. b. Internal control to prevent and detect fraud. 3. We have reviewed and approved a draft of the financial statements and related notes referred to above, which you prepared in connection with your audit of our financial statements. We acknowledge that we are responsible for the fair presentation of the financial statements and related notes. 4. We have everything we need to keep our books and records. 5. We have provided you with: a. Access to all information of which we are aware that is relevant to the preparation and fair presentation of the financial statements, such as records, documentation, and other matters. b. Additional information that you have requested from us for the purpose of the audit. c. Unrestricted access to persons within the entity from whom you determined it necessary to obtain audit evidence. d. All minutes of meetings of the governing body held through the date of this letter or summaries of actions of recent meetings for which minutes have not yet been prepared. All unsigned copies of minutes provided to you are copies of our original minutes approved by the governing body, if applicable, and maintained as part of our records. e. All significant contracts and grants. 6. All transactions have been recorded in the accounting records and are reflected in the financial statements. 7. We have informed you of all current risks of a material amount that are not adequately prevented or detected by our procedures with respect to: a. Misappropriation of assets. b. Misrepresented or misstated assets, liabilities, or fund balance. 8. We understand the potential penalties for failure to disclose reportable tax transactions to the taxing authorities and have fully disclosed to FORVIS any and all known reportable tax transactions. 9. We have no knowledge of any known or suspected fraudulent financial reporting or misappropriation of assets involving: a. Management or employees who have significant roles in internal control, or b. Others, where activities of others could have a material effect on the financial statements. 10. We have no knowledge of any allegations of fraud or suspected fraud affecting the entity received in communications from employees, customers, regulators, suppliers, or others. DocuSign Envelope ID: 2B067021-2E55-49E8-96E6-E66DB707ED5C FAYETTEVILLE ADVERTISING AND PROMOTION COMMISSION Page 3 11. We have assessed the risk that the financial statements may be materially misstated as a result of fraud and disclosed to you any such risk identified. 12. We have disclosed to you the identity of all of the entity's related parties and all the related -party relationships of which we are aware. In addition, we have disclosed to you all related -party transactions of which we are aware, including any modifications during the year that were made to related -party transaction agreements which existed prior to the beginning of the year under audit, as well as new related -party transaction agreements that were executed during the year under audit. Related -party relationships and transactions have been appropriately accounted for and disclosed in accordance with accounting principles generally accepted in the United States of America. We understand that the term related party refers to an affiliate, management and members of their immediate families, component units, and any other party with which the entity may deal if the entity can significantly influence, or be influenced by, the management or operating policies of the other. The term affiliate refers to a party that directly or indirectly controls, or is controlled by, or is under common control with, the entity. 13. We are not aware of any side agreements or other arrangements (either written or oral) that are in place. 14. Except as reflected in the financial statements, there are no: a. Plans or intentions that may materially affect carrying values or classifications of assets and liabilities. b. Material transactions omitted or improperly recorded in the financial records. c. Material gain/loss contingencies requiring accrual or disclosure, including those arising from environmental remediation obligations. d. Events occurring subsequent to the statements of assets, liabilities and fund balance date through the date of this letter requiring adjustment or disclosure in the financial statements. e. Agreements to purchase assets previously sold. f. Restrictions on cash balances or compensating balance agreements. g. Guarantees, whether written or oral, under which the entity is contingently liable. 15. We have disclosed to you all known instances of noncompliance or suspected noncompliance with laws and regulations whose effects should be considered when preparing financial statements. 16. We have no reason to believe the entity owes any penalties or payments under the Employer Shared Responsibility Provisions of the Patient Protection and Affordable Care Act nor have we received any correspondence from the IRS or other agencies indicating such payments may be due. 17. We are not aware of any pending or threatened litigation or claims whose effects should be considered when preparing the financial statements. We have not sought or received attorney's services related to pending or threatened litigation or claims during or subsequent to the audit period. Also, we are not aware of any litigation or claims, pending or threatened, for which legal counsel should be sought. DocuSign Envelope ID: 2B067021-2E55-49E8-96E6-E66DB707ED5C FAYETTEVILLE ADVERTISING AND PROMOTION COMMISSION Page 4 18. Adequate provisions and allowances have been accrued for any material losses from: a. Uncollectible receivables. b. Reducing obsolete or excess inventories to estimated net realizable value. c. Purchase commitments in excess of normal requirements or above prevailing market prices. 19. Except as disclosed in the financial statements, the entity has: a. Satisfactory title to all recorded assets, and they are not subject to any liens, pledges, or other encumbrances. b. Complied with all aspects of contractual and grant agreements, for which noncompliance would materially affect the financial statements. 20. The financial statements disclose all significant estimates and material concentrations known to us. Significant estimates are estimates at the statement of net position date that could change materially within the next year. Concentrations refer to volumes of business, revenues, available sources of supply, or markets for which events could occur that would significantly disrupt normal finances within the next year. Significant assumptions used by us in making accounting estimates, including those measured at fair value, are reasonable. 21. The fair values of financial and nonfinancial assets and liabilities, if any, recognized in the financial statements or disclosed in the notes thereto are reasonable estimates based on the methods and assumptions used. The methods and significant assumptions used result in measurements of fair value appropriate for financial statement recognition and disclosure purposes and have been applied consistently from period to period, taking into account any changes in circumstances. The significant assumptions appropriately reflect market participant assumptions. 22. We have not been designated as a potentially responsible party (PRP or equivalent status) by the Environmental Protection Agency (EPA) or other cognizant regulatory agency with authority to enforce environmental laws and regulations. 23. With respect to any nonattest services you have provided us during the year, including drafting the financial statements and related notes, and preparation of the Form 990: a. We have designated a qualified management -level individual to be responsible and accountable for overseeing the nonattest services. b. We have established and monitored the performance of the nonattest services to ensure they meet our objectives. c. We have made any and all decisions involving management functions with respect to the nonattest services and accept full responsibility for such decisions. d. We have evaluated the adequacy of the services performed and any findings that resulted. e. We have received the deliverables from you and have stored these deliverables in information systems controlled by us. We have taken responsibility for maintaining internal control over these deliverables. DocuSign Envelope ID: 2B067021-2E55-49E8-96E6-E66DB707ED5C FAYETTEVILLE ADVERTISING AND PROMOTION COMMISSION Page 5 24. With regard to deposit and investment activities: a. All deposit and investment transactions have been made in accordance with legal and contractual requirements. b. Disclosures of deposit and investment balances and risks in the financial statements are consistent with our understanding of the applicable laws regarding enforceability of any pledges of collateral. c. Collateral pledged for the Commission deposits are held in the Commission's name. d. We understand that your audit does not represent an opinion regarding the enforceability of any collateral pledges. 25. As an entity subject to Government Auditing Standards: a. We acknowledge that we are responsible for compliance with applicable laws, regulations, and provisions of contracts and grant agreements. b. We have identified and disclosed to you all laws, regulations, and provisions of contracts and grant agreements that have a direct and material effect on the determination of amounts in our financial statements or other financial data significant to the audit objectives. c. We have identified and disclosed to you any violations or possible violations of laws, regulations, and provisions of contracts and grant agreements whose effects should be considered for recognition and/or disclosure in the financial statements or for your reporting on noncompliance. d. We have taken or will take timely and appropriate steps to remedy any fraud, abuse, illegal acts, or violations of provisions of contracts or grant agreements that you or other auditors report. e. We have a process to track the status of audit findings and recommendations. f. We have identified to you any previous financial audits, attestation engagements, performance audits, or other studies related to the objectives of your audit and the corrective actions taken to address any significant findings and recommendations made in such audits, attestation engagements, or other studies. 26. We acknowledge the current economic volatility presents difficult circumstances and challenges for our industry. Entities are potentially facing declines in the fair values of investments and other assets, declines in the volume of business and constraints on liquidity. We understand the values of the assets and liabilities recorded in the financial statements could change rapidly, resulting in material future adjustments to asset values, that could negatively impact the entity's ability to meet debt covenants or maintain sufficient liquidity. We acknowledge that you have no responsibility forfuture changes caused by the current economic environment and the resulting impact on the entity's financial statements. Further, management and governance are solely responsible for all aspects of managing the entity. 27. With regards to our loan obtained under the "first draw' Paycheck Protection Program (created under the CARES Act of 2020 and extended under the 2021 Consolidated Appropriations Act) (PPP-1 or First Draw), dated March 3, 2021, we represent the following: DocuSign Envelope ID: 2B067021-2E55-49E8-96E6-E66DB707ED5C FAYETTEVILLE ADVERTISING AND PROMOTION COMMISSION Page 6 a. At the time of the loan application, the current economic uncertainty that existed made this loan request necessary to support the entity's ongoing operations. In making this assessment, we considered the nature of our business activities at the time of the loan application and our ability to access other sources of liquidity that were sufficient to support ongoing operations. b. The entity, when considered together with all its affiliates (using the affiliate determinations required by the PPP-1), had fewer than 500 employees at the date of the loan application. i. In addition, we have determined the number of full-time equivalent employees on payroll at the time of the application in a manner that is consistent with the clarification guidance released by the Small Business Administration. c. We have not received more than one loan under the First Draw Paycheck Protection Program. In addition, we have confirmed with our affiliated entities (using the affiliate determinations required by the PPP-1) that the total of any PPP loans received by us and by those affiliates under the First Draw program does not exceed $20 million in the aggregate. d. We have not used the proceeds from the PPP-1 loan for expenditures that were covered by other funding sources, i.e., government grants or contracts. e. The funds received under this loan have only been used: i. To retain workers and maintain payroll; ii. To make utility payments; f. We have not spent more than 40 percent of the loan amount for nonpayroll costs. El DocuSigned by: 99B63C0860D745E... Molly Rawn, Chief Executive Officer mrawn@experiencefayetteville.com DocuSigned by: 3C9EA947E9024B0... Jennifer Walker, Vice President of Finance jwalker@experiencefayetteville.com Fayetteville Advertising & Promotion Commission A Component Unit of the City of Fayetteville, Arkansas Independent Auditor's Report and Financial Statements December 31, 2021 and 2020 Fayetteville Advertising & Promotion Commission A Component Unit of the City of Fayetteville, Arkansas December 31, 2021 and 2020 Contents Independent Auditor's Report ...............................................................................................1 Financial Statements Statements of Assets, Liabilities, and Fund Balance Modified Accrual Basis ................................ 4 Statements of Revenues, Expenditures, and Changes in Fund Balance — ModifiedAccrual Basis.................................................................................................................. 5 Statements of Revenues and Expenditures Regulatory Modified Accrual Basis Budgetto Actual............................................................................................................................. 7 Notes to Financial Statements............................................................................................................ 9 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 — Independent Auditor's Report ............................................................................................................... 20 FORWS 809 S. 52nd Street, Suite A 1 Rogers, AR 72758 P 479.845.0270 1 F 479.845,0840 forvis.com Independent Auditor's Report Board of Commissioners Fayetteville Advertising & Promotion Commission Fayetteville, Arkansas Report on the Audit of the Financial Statements Opinions We have audited the financial statements of the Fayetteville Advertising and Promotion Commission, a component unit of the City of Fayetteville, Arkansas, as of and for the years ended December 31, 2021 and 2020, and the related notes to the financial statements, which collectively comprise the Commission's basic financial statements as listed in the table of contents. Unmodified Opinion on Regulatory Basis of Accounting In our opinion, the financial statements referred to above present fairly, in all material respects, the assets, liabilities, and fund balance of the Commission as of December 31, 2021 and 2020, and its respective revenues, expenditures, and the changes in fund balance and budgetary results for the years then ended, in accordance with the basis of accounting practices prescribed or permitted by the State of Arkansas described in Note 1. Adverse Opinion on U.S. Generally Accepted Accounting Principles In our opinion, because of the significance of the matter discussed in the Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles section of our report, the accompanying financial statements referred to above do not present fairly, in accordance with accounting principles generally accepted in the United States of America, the financial position of the Commission as of December 31, 2021 and 2020, or changes in fund balance thereof for the years then ended. Basis of Opinions We conducted our audits 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 Comptroller General of the United States. Our responsibilities under those standards are further described in the "Auditor's Responsibilities for the Audit of the Financial Statements" section of our report. We are required to be independent of the Commission, and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. R]RVIS is a trademark nt FC,RV IS. LLP rEglstrahnri .1I which Is penaihq With the 113. Patonl and Trademark GMc9 �L}P R A X I T Y Board of Commissioners Fayetteville Advertising & Promotion Commission Page 2 Basis for Adverse Opinion on U. S. Generally Accepted Accounting Principles As described in Note 1 of the financial statements, the financial statements are prepared by the Commission on the basis of accounting practices prescribed or permitted by the State of Arkansas to demonstrate compliance with the State's regulatory basis of accounting and budget laws, which is a basis of accounting other than accounting principles generally accepted in the United States of America, to meet the requirements of the State of Arkansas. The effects on the financial statements of the variances between the regulatory modified accrual basis of accounting described in Note 1 and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material and pervasive. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the financial reporting provisions of A.C.A. § 10-4-412, as described in Note 1, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are 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 Commission's ability to continue as a going concern for 12 months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. 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 Commission's internal control. Accordingly, no such opinion is expressed. Board of Commissioners Fayetteville Advertising & Promotion Commission Page 3 • 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 Commission'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. Required Supplementary Information Management has omitted the management's discussion and analysis information that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing information, 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. Our opinion on the basic financial statements is not affected by this missing information. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we also have issued our report dated June 30, 2022, on our consideration of the Commission'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 Commission'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 the Commission's internal control over financial reporting and compliance. FOKV I5, LA-P Rogers, Arkansas June 30, 2022 Fayetteville Advertising & Promotion Commission A Component Unit of the City of Fayetteville, Arkansas Statements of Assets, Liabilities, and Fund Balance - Regulatory Modified Accrual Basis December 31, 2021 and 2020 Assets Cash and cash equivalents Investments Accounts receivable Deposits Inventory Prepaid expense Capital assets Buildings Furniture and fixtures Land Office equipment Construction in progress Less accumulated depreciation Total assets Liabilities Accounts payable Accrued expenses Unearned revenue Accrued payroll Total liabilities Fund Balance Unassigned Restricted Total fund balance Total liabilities and fund balance 2021 2020 $ 3,603,666 1,517,292 19,276 30,617 19,833 162,325 3,079,580 96,641 198,621 641,976 27,109 (1,366,434) $ 8,030,502 $ 153,053 4,104 72,554 23,969 253,680 5,940,003 1,836,819 7,776,822 $ 8,030,502 $ 1,830,811 1,037,786 183,001 30,617 12,066 29,468 3,079,580 96,641 198,621 498,597 (1,221,281) $ 5,775,907 $ 49,787 779 56,708 22,115 129,389 5,264,087 382,431 5,646,518 $ 5,775,907 See Notes to Financial Statements 4 Fayetteville Advertising & Promotion Commission A Component Unit of the City of Fayetteville, Arkansas Statements of Revenues, Expenditures and Changes in Fund Balances - Regulatory Modified Accrual Basis Years Ended December 31, 2021 and 2020 Revenues Hotel, motel and restaurant taxes Rental income Visitors center store Visitor guide advertising income Parking income Investment income (loss), net Grant income Miscellaneous event income Total revenues Expenditures Advertising Automobile expense Bank charges Bond payments Collection expense Contract labor Convention development Depreciation Dues and subscriptions Employee benefits Insurance Miscellaneous Office supplies and printing Payroll taxes Postage Professional services Rent Repairs and maintenance Salaries and wages Special projects and events Taxes and licenses Training and meetings Utilities Visitor center store expense Total expenditures 2021 $ 3,998,903 163,200 46,618 26,858 374,926 2,965,465 91,419 2020 $ 3,008,949 180,369 17,568 25,125 20,330 (43,142) 946,007 65,213 7,667,389 4,220,419 481,283 5,000 4,218 701,092 79,978 33,055 158,633 145,153 14,360 27,232 143,516 85,272 13,235 79,165 6,293 25,682 39,600 142,747 954,351 2,225,262 8,186 7,370 130,020 26,382 5,537,085 484,682 2,708 4,590 701,098 60,179 20,389 128,438 148,317 31,137 25,845 138,873 102,969 11,852 64,541 6,966 34,140 41,220 110,909 859,500 668,367 9,894 13,947 117,313 18,312 3,806,186 See Notes to Financial Statements 5 Fayetteville Advertising & Promotion Commission A Component Unit of the City of Fayetteville, Arkansas Statements of Revenues, Expenditures and Changes in Fund Balances — Regulatory Modified Accrual Basis (Continued) Years Ended December 31, 2021 and 2020 Change in Fund Balance Fund Balance Beginning of year End of year 2021 2020 $ 2,130,304 $ 414,233 5,646,518 5,232,285 $ 7,776,822 $ 5,646,518 See Notes to Financial Statements 6 Fayetteville Advertising & Promotion Commission A Component Unit of the City of Fayetteville, Arkansas Statement of Revenues and Expenditures - Regulatory Modified Accrual Basis - Budget to Actual Year Ended December 31, 2021 Variance Favorable Original Budget Final Budget Actual (Unfavorable) Revenues Hotel, motel and restaurant taxes $ 3,460,576 $ 3,460,576 $ 3,998,903 $ 538,327 Rental income 350,250 350,250 163,200 (187,050) Visitors center store 45,258 45,258 46,618 1,360 Parking income 21,500 21,500 26,858 5,358 Investment income, net 21,500 21,500 374,926 353,426 Grant Income 31,190 31,190 2,965,465 2,934,275 Miscellaneous event income 45,500 45,500 91,419 45,919 Total revenues 3,975,774 3,975,774 7,667,389 3,691,615 Expenditures Advertising 618,860 618,860 481,283 137,577 Automobile expense 5,000 5,000 5,000 - Bank charges 4,850 4,850 4,218 632 Bond payments 707,000 707,000 701,092 5,908 Collection expense 69,215 69,215 79,978 (10,763) Contract labor 61,983 61,983 33,055 28,928 Convention development 328,175 328,175 158,633 169,542 Depreciation - - 145,153 (145,153) Dues and subscriptions 31,175 31,175 14,360 16,815 Employee benefits 33,344 33,344 27,232 6,112 Insurance 155,582 155,582 143,516 12,066 Miscellaneous 87,750 87,750 85,272 2,478 Office supplies and printing 18,100 18,100 13,235 4,865 Payroll taxes 87,116 87,116 79,165 7,951 Postage 13,250 13,250 6,293 6,957 Professional services 29,000 29,000 25,682 3,318 Rent 39,760 39,760 39,600 160 Repairs and maintenance 396,150 396,150 142,747 253,403 Salaries and wages 1,053,223 1,053,223 954,351 98,872 Special projects and events 342,490 342,490 2,225,262 (1,882,772) Taxes and licenses 11,100 11,100 8,186 2,914 Training and meetings 29,950 29,950 7,370 22,580 Utilities 144,020 144,020 130,020 14,000 Visitor center store expense 31,560 31,560 26,382 5,178 Total expenditures 4,298,653 4,298,653 5,537,085 (1,238,432) Excess of Revenues Over Expenditures $ (322,879) $ (322,879) $ 2,130,304 $ 2,453,183 See Notes to Financial Statements 7 Fayetteville Advertising & Promotion Commission A Component Unit of the City of Fayetteville, Arkansas Statement of Revenues and Expenditures - Regulatory Modified Accrual Basis - Budget to Actual Year Ended December 31, 2020 Variance Favorable Original Budget Final Budget Actual (Unfavorable) Revenues Hotel, motel and restaurant taxes $ 2,399,024 $ 2,399,024 $ 3,008,949 $ 609,925 Rental income 279,000 279,000 180,369 (98,631) Visitors center store 15,700 15,700 17,568 1,868 Visitor guide advertising income 15,000 15,000 25,125 10,125 Parking income 23,800 23,800 20,330 (3,470) Investment income, net 17,800 17,800 (43,142) (60,942) Grant income 594,052 594,052 946,007 351,955 Miscellaneous event income 16,100 16,100 65,213 49,113 Total revenues 3,360,476 3,360,476 4,220,419 859,943 Expenditures Advertising 497,150 497,150 484,682 12,468 Automobile expense 1,041 1,041 2,708 (1,667) Bank charges 7,650 7,650 4,590 3,060 Bond payments 707,000 707,000 701,098 5,902 Collection expense 47,980 47,980 60,179 (12,199) Contract labor 40,375 40,375 20,389 19,986 Convention development 147,140 147,140 128,438 18,702 Depreciation - - 148,317 (148,317) Dues and subscriptions 24,000 24,000 31,137 (7,137) Employee benefits 34,023 34,023 25,845 8,178 Insurance 151,463 151,463 138,873 12,590 Miscellaneous 107,530 107,530 102,969 4,561 Office supplies and printing 19,600 19,600 11,852 7,748 Payroll taxes 71,800 71,800 64,541 7,259 Postage 7,400 7,400 6,966 434 Professional services 38,500 38,500 34,140 4,360 Rent 39,720 39,720 41,220 (1,500) Repairs and maintenance 254,000 254,000 110,909 143,091 Salaries and wages 838,759 838,759 859,500 (20,741) Special projects and events 874,336 874,336 668,367 205,969 Taxes and licenses 15,000 15,000 9,894 5,106 Training and meetings 24,600 24,600 13,947 10,653 Utilities 131,117 131,117 117,313 13,804 Visitor center store expense 14,650 14,650 18,312 (3,662) Total expenditures 4,094,834 4,094,834 3,806,186 288,648 Excess of Revenues Over Expenditures $ (734,358) $ (734,358) $ 414,233 $ 1,148,591 See Notes to Financial Statements 8 Fayetteville Advertising & Promotion Commission A Component Unit of the City of Fayetteville, Arkansas Notes to the Financial Statements December 31, 2021 and 2020 Note 1: Nature of Operations and Summary of Significant Accounting Policies As discussed further below, these financial statements are presented in accordance with the regulatory modified accrual basis of presentation as prescribed by Arkansas state law. The Fayetteville Advertising and Promotion Commission (the Commission) maintains its records on a regulatory modified accrual basis of accounting, as discussed below. The regulatory modified accrual basis of presentation and the modified accrual basis of accounting differ from accounting principles generally accepted in the United States of America. The significant accounting policies of the Commission are as follows: Regulatory Accounting The Arkansas Legislature enacted a law in 2005 that requires municipalities to present their financial statements in a prescribed format and also restricts the basis of accounting for this format to one of three methods. The entity's governing body, however, can adopt a resolution annually to adopt GASB Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments (GASB No. 34) as their reporting model in lieu of reporting on this regulatory modified accrual basis established by Arkansas Code 10-4412. The Board of Commissioners did not adopt such a resolution for 2021 or 2020. The regulatory presentation is on a fund basis with no distinction being made as to the type of funds (Proprietary, Governmental, etc.) being presented. The required financial statements consist of a balance sheet (or statement of assets, liabilities, and fund balance), statement of revenues, expenditures, and changes in fund balance, and statement of revenues and expenditures - budget to actual. The basis of accounting is limited to regulatory cash basis, regulatory modified cash basis or regulatory modified accrual basis. The Commission has elected to utilize the regulatory modified accrual basis of accounting. Nature of Operations The Commission is a component unit of the City of Fayetteville, Arkansas (the "City"), established by Ordinance Number 2310 of the City for the purpose of promoting and advertising the City and its environs. The Commission is presented in the City of Fayetteville's Comprehensive Annual Financial Report as a discretely presented component unit. A Commission consisting of seven members governs the Commission. Four members are owners or managers of hotels, motels or restaurants, and serve for staggered terms of four years. Two members must be members of the governing body of the City, are selected by the City Council and serve at the will of the City Council. One member is from the public at large and is nominated by the Commission and approved by the City Council. All members must reside in the City. Members are voted on by the existing Commissioners and approved by the City Council. The financial statements present only the Commission, and are not intended to present the financial position and results of operations of the City of Fayetteville, Arkansas, in conformity with accounting principles generally accepted in the United States of America. Operations of the Commission include the Fayetteville Convention and Visitors Bureau, the Fayetteville Town Center and the Clinton House Museum. Fayetteville Advertising & Promotion Commission A Component Unit of the City of Fayetteville, Arkansas Notes to the Financial Statements December 31, 2021 and 2020 Use of Estimates Management used estimates and assumptions in preparing these financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures during the reporting period. Actual results could differ from those estimates. Cash Equivalents The Commission considers all liquid investments with original maturities of three months or less to be cash equivalents. At December 31, 2021 and 2020, cash equivalents consisted of money market funds with brokers. Basis of Accounting and Presentation The financial statements are prepared on the modified accrual basis of accounting. As such, revenues are recognized when the underlying exchange takes place and in the accounting period in which the revenue is both measurable and available to finance expenditures of the fiscal period. The Commission considers all tax revenues measurable and available when collected and exchange revenue when the transaction occurs. Expenditures are recorded when the related liability is incurred. Budgets The Commission adheres to the following procedures in establishing the budgets reflected in the accompanying financial statements: Prior to December 1, the budget committee proposes an operating budget for the fiscal year commencing the following January 1. The operating budget includes proposed expenditures and the means of financing them. Prior to January 1, the Commission legally enacts the budget through approval of the Commissioners. Budgets are adopted on a basis consistent with accounting practices prescribed or permitted by the State of Arkansas, which practices differ from accounting principles generally accepted in the United States of America. Budgeted revenues and expenditures represent the formal operating budget adopted by the Commission. Budgetary control is maintained at the operations level. Budgeted amounts not spent by year end lapse. 10 Fayetteville Advertising & Promotion Commission A Component Unit of the City of Fayetteville, Arkansas Notes to the Financial Statements December 31, 2021 and 2020 Investments Investments of the Commission represent the portion of a combined investment pool managed by the City allocable to the Commission. Investments include money market mutual funds, U.S. Treasury obligations, corporate bonds and U.S. Government agency obligations. Money market mutual funds, governmental securities and corporate bonds are recorded at fair market value based on quoted market prices. Income related to investments is recorded when earned. Income earned in the pool is allocated to the various funds and component units weekly. At December 31, 2021 and 2020, the Commission's proportionate share of the investment pool was approximately 0.79% and 0.63%, respectively. The Commission's portion of investments held by the City amounted to $1,517,292 and $1,037,786 at December 31, 2021 and 2020, respectively, and is held at one financial institution in the name of the City. Approximately 91.05% and 90.89% of the pool is invested in direct obligations of the United States of America. The remainder is either insured or collateralized. Accounts Receivable Accounts receivable consist of amounts due from the Fayetteville Town Center customers and the City's Parking Department. For the years ended December 31, 2021 and 2020, accounts receivable were deemed fully collectible; therefore, no allowance for doubtful accounts was considered necessary. If accounts become uncollectible, they will be charged to operations when that determination is made. Determination of uncollectability is made by management based on knowledge of individual accounts and consideration of such factors as current economic conditions. Accounts are generally uncollateralized. Past -due status is based on contractual terms. Past -due accounts are not charged interest. Inventory Inventory is valued at the lower of cost (first -in, first -out method) or market. Inventory consists of items for sale in the Commission's gift shop. Capital Assets Capital assets are carried at historical cost or acquisition value at date of donation if the asset was contributed. The Commission's capitalization policy states that assets with an initial value or cost greater than or equal to $5,000 and an estimated useful life of greater than one year will be capitalized. Depreciation is provided on the straight-line method over the estimated useful lives of the respective assets, which range from 5 to 39 years. 11 Fayetteville Advertising & Promotion Commission A Component Unit of the City of Fayetteville, Arkansas Notes to the Financial Statements December 31, 2021 and 2020 Funding The Commission is funded by a 1% hotel, motel and restaurant tax on all revenue from the renting, leasing or otherwise furnishing of hotel or motel accommodations for profit in the City. The tax also applies to the gross receipts or gross proceeds received by restaurants and similar businesses as may be defined from time to time by ordinance from the sale of prepared foods and beverages for on or off premises consumption. The tax does not apply to such gross receipts or proceeds of organizations qualified under Section 501(c)(3) of the Federal Internal Revenue Code. The taxes are due the 20`h day of the month following the month in which the taxes were collected. If taxes become delinquent, the City Prosecutor seeks to collect the taxes. Delinquent taxes totaled $81,570 and $33,097 at December 31, 2021 and 2020, respectively. Revenues collected from the taxes are to be used for advertising and promotion in the City and its environs. Revenues are also to be used for the construction, reconstruction, equipment, improvement, maintenance, repair and operation of a convention center, for the operation of tourist promotion facilities in the City, and for personnel and agencies necessary to conduct the business of the Commission. Advertising The Commission expenses advertising, marketing and promotion costs as incurred. Income Taxes The Commission is a tax-exempt organization under Section 115 of Internal Revenue Code. Fund Balance — Governmental Funds The fund balances for the Commission's funds are displayed in three components: Nonspendable — Nonspendable fund balance represents amounts that are either not in a spendable form or are legally or contractually required to remain intact. Restricted — Restricted fund balances may be spent only for the specific purposes stipulated by external resource providers. Restrictions may be changed or lifted only with the consent of resource providers. Funds are externally restricted by contributors. Unassigned — Unassigned fund balance includes all amounts not restricted. The Commission considers restricted amounts to have been spent when an expenditure incurred for purposes for which both restricted and unassigned fund balance is available. The Commission applies restricted amounts first, and then unassigned amounts when an expenditure is incurred for purposes for which amounts in any of those unrestricted fund balance classifications could be used. 12 Fayetteville Advertising & Promotion Commission A Component Unit of the City of Fayetteville, Arkansas Notes to the Financial Statements December 31, 2021 and 2020 Note 2: Commitments During the year ended December 31, 2013, a resolution was proposed that recommended to the City the issuance and sale of (1) approximately $1,500,000 of hotel and restaurant gross receipts tax refunding bonds for the purpose of refunding the City's outstanding hotel and restaurant gross receipts tax refunding bonds, series 2003, (2) approximately $6,900,000 of hotel and restaurant gross receipts tax and tourism revenue capital improvement bonds for the purpose of financing certain capital improvements in connection with the proposed Walton Arts Center expansion and renovation, and (3) approximately $3,500,000 of hotel and restaurant gross receipts tax and tourism revenue capital improvement bonds for the purpose of financing certain capital improvements in connection with a proposed regional park. The resolution was approved by the Commission in May 2013 and approved by the voters in November 2013 in a special election. The bonds were issued in October 2014, will mature in 2039, and bear interest at coupon rates ranging from 2.0% to 5.0%. As a result of the issuance, the City retains $707,313 per year, plus fees, for payments on these bonds. The amount retained for the bond payment would otherwise be remitted to the Commission. Note 3: Deposits, Investments and Investment Income Deposits Custodial State law requires that municipal funds be deposited in federally insured banks located in the State of Arkansas. The municipal deposits may be in the form of checking accounts, savings accounts, and time deposits. Public funds may also be invested in direct obligations of the United States of America and obligations, the principal and interest of which, are fully guaranteed by the United States of America. The Commission maintains separate bank accounts in two banks. Deposits with banks at December 31, 2021 and 2020 amounted to $3,899,955 and $1,886,045, respectively, of which $295,000 and $297,887 was insured and the remaining amount was collateralized by securities held in the Commission's name. Investments The Commission may legally invest in direct obligations of the U.S. Government and agencies, collateralized certificates of deposit, prerefunded municipal bonds, corporate bonds, collateralized repurchase agreements, treasury money markets, local government trusts and savings accounts. 13 Fayetteville Advertising & Promotion Commission A Component Unit of the City of Fayetteville, Arkansas Notes to the Financial Statements December 31, 2021 and 2020 At December 31, 2021 and 2020, the Commission had the following investments and maturities: December 31, 2021 Maturities in Years Less More Type Fair Value than 1 1-5 6-10 than 10 Money market mutual funds $ 522,765 $ 522,765 $ U.S. agencies obligations 994,527 74,451 $ - S 920,076 - $1,517,292 $ 597,216 $ 920,076 $ December 31, 2020 Maturities in Years Less More Type Fair Value than 1 1-5 6-10 than 10 Money market mutual funds $ 271,607 $ 271,607 $ U.S. agencies obligations 766,179 126,343 $ - S 639,836 - $1,037,786 $ 397,950 $ 639,836 $ - $ - Interest Rate Risk - As a means of limiting its exposure to fair value losses arising from rising interest rates, the Commission's investment policy is to attempt to match investment maturities with cash flow requirements. The Commission's investments are money market mutual funds and U.S. Government agency obligations. Credit Risk — Credit risk is the risk that the issuer or other counterparty to an investment will not fulfill its obligations. It is the Commission's policy to invest no more than 20% in corporate debt or in securities of a management type investment company or investment trust. It is the Commission's policy to limit its investments in corporate bonds to issues that are rated investment grade by Standard & Poor's and Moody's Investors Service and shall maintain an A- average rating or better for Standard & Poor's and an A3 average rating or better for Moody's Investors Service. Investment in commercial paper will be rated A-1/P-1. At December 31, 2021 and 2020, the Commission's investments in U.S. agencies obligations were rated an average rate of AA by Standard & Poor rating and an average rate of Aal by Moody's Investors Service. 14 Fayetteville Advertising & Promotion Commission A Component Unit of the City of Fayetteville, Arkansas Notes to the Financial Statements December 31, 2021 and 2020 Custodial Credit Rick — Custodial credit risk is the risk that, in the event of the failure of the counterparty, the Commission will not be able to recover the value of its investment or collateral securities that are in the possession of an outside party. Concentration of Credit Risk — The Commission's policy states that investments shall be diversified by limiting investments to avoid concentration in securities from a specific issuer less than or equal to 5% of the cost basis of the Commission's portfolio at the time of purchase and limits concentration in any one business sector to 15% of the cost basis of the portfolio excluding U.S. Treasury securities and collateralized certificates of deposit. The Commission had no concentration risk as of December 31, 2021 and 2020. Foreign Currency Risk- This risk relates to adverse effects on the fair value of an investment from changes in exchange rates. The City's investment policy doesn't directly address foreign currency risk. The City's investment manager only buys U.S. dollar pay securities. The Commission had no investments that were denominated in foreign currency at December 31, 2021 and 2020. In compliance with GASB 72, the Commission categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. The Commission had the following recurring fair value measurements: • U.S. agencies obligations of $994,527 and $766,179 as of December 31, 2021 and 2020, respectively, are valued using the option -adjusted discounted cash now model (Level 2 inputs). • Money market mutual funds of $522,765 and $271,607 as of December 31, 2021 and 2020, respectively, are valued using quoted market prices (Level 1 inputs). 15 Fayetteville Advertising & Promotion Commission A Component Unit of the City of Fayetteville, Arkansas Notes to the Financial Statements December 31, 2021 and 2020 Summary of Carrying Values The carrying values of deposits and investments shown above are included in the statement of net position as follows: Carrying value Deposits Cash on hand Investments Included in the following statement of assets, liabilities, and fund balance captions Cash and cash equivalents Investments 2021 2020 $ 3,602,516 $ 1,829,561 1,150 1,250 1,517,292 1,037,786 $ 5,120,958 $ 2,868,597 $ 3,603,666 $ 1,830,811 1,517,292 1,037,786 $ 5,120,958 Investment Income Investment income (loss) for the year ended December 31, consisted of: 2021 Interest and dividend income Net increase (decrease) in fair value of investments $ 2,868,597 2020 $ 12,265 $ 22,009 362,661 (65,151) $ 374,926 $ (43,142) 16 Fayetteville Advertising & Promotion Commission A Component Unit of the City of Fayetteville, Arkansas Notes to the Financial Statements December 31, 2021 and 2020 Note 4: Employee Benefit Plan The Commission offers a SIMPLE IRA plan to all employees who meet the eligibility requirements. The Commission matches employee contributions up to 3% of compensation, while the employee may contribute up to 10% of his or her salary. The Board of Commissioners of the Commission has the authority to amend the plan and contribution rate. The Commission made contributions in the amount of $22,793 and $21,346 for the years ended December 31, 2021 and 2020, respectively. Note 5: Related Party Transactions As stated in Ordinance Number 95-1, the board of the Commission consists of seven members, four of which are owners or managers of businesses in the tourism industry which collect the hotel or restaurant taxes levied. Thus, four members of the board are employed by restaurants or hotels that pay the tax which is the primary funding for the Commission. During the years ended December 31, 2021 and 2020, the Commission paid approximately $5,000, for expenses related to operational services performed by the City for the lease of parking spaces. The Commission had accounts receivable from the City's Parking Department of $9,660 and $5,090 at December 31, 2021 and 2020, respectively. The Commission has an agreement to pay the City a collection fee of 2% of the taxes collected. During the years ended December 31, 2021 and 2020, the Commission paid collection expenses of $79,978 and $60,179, respectively, to the City in exchange for the City collecting tax revenue on behalf of the Commission. 17 Fayetteville Advertising & Promotion Commission A Component Unit of the City of Fayetteville, Arkansas Notes to the Financial Statements December 31, 2021 and 2020 Note 6: Capital Assets A summary of changes in capital assets is as follows: 2021 Beginning Additions/ Deletions/ Ending Balance Transfers Transfers Balance Building $ 3,079,580 $ - $ - $ 3,079,580 Furniture and fixtures 96,641 - - 96,641 Land 198,621 - - 198,621 Equipment 498,597 143,379 - 641,976 Construction in progress - 27,109 - 27,109 3,873,439 170,488 - 4,043,927 Less accumulated depreciation 1,221,281 145,153 - 1,366,434 $ 2,652,158 $ 25,335 $ - $ 2,677,493 2020 Beginning Additions/ Deletions/ Ending Balance Transfers Transfers Balance Building $ 3,014,963 $ 64,617 $ - $ 3,079,580 Furniture and fixtures 96,641 - - 96,641 Land 198,621 - - 198,621 Equipment 371,601 126,996 - 498,597 Construction in progress 77,693 - 77,693 - 3,759,519 191,613 77,693 3,873,439 Less accumulated depreciation 1,072,964 148,317 - 1,221,281 $ 2,686,555 $ 43,296 $ 77,693 $ 2,652,158 18 Fayetteville Advertising & Promotion Commission A Component Unit of the City of Fayetteville, Arkansas Notes to the Financial Statements December 31, 2021 and 2020 Note 7: Paycheck Protection Program (PPP) Loan The CARES Act and other subsequent legislation provides a Small Business Administration (SBA) loan designed to provide a direct incentive for small businesses to keep their workers on the payroll. Interest is accrued in accordance with the loan agreement. The Payroll Protection Program (PPP) loans and accrued interest will be forgiven if all employee retention criteria are met and the funds are used for eligible expenses. The Commission received a PPP loan of $245,900 in 2021. The loan has an interest rate of 1%. In 2021, Commission received legal notice that the PPP loan was forgiven in its entirety and recognized the gain from extinguishment as revenue included in Grant income on the accompanying statement of revenues, expenditures, and change in fund balance — regulatory modified accrual basis. PPP loans are subject to audit and acceptance by the U.S. Department of Treasury, Small Business Administration, or lender; as a result of such audit, adjustments could be required to any gain recognized. 19 FORWS 809 S. 52nd Street, Suite A 1 Rogers, AR 72758 P 479.845.0270 1 F 479.845,0840 forvis.com 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 Independent Auditor's Report Board of Commissioners Fayetteville Advertising & Promotion Commission Fayetteville, Arkansas We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the financial statements of Fayetteville Advertising and Promotion Commission (the Commission), a component unit of the City of Fayetteville, Arkansas, which comprise the statement of assets, liabilities, and fund balance — modified accrual basis as of December 31, 2021, and the related statements of revenues, expenditures, and changes in fund balance — modified accrual basis and revenues and expenditures — modified accrual basis — budget to actual for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated June 30, 2022, which expressed an adverse opinion on U.S. Generally Accepted Accounting Principles and an unmodified opinion on the Regulatory Basis of Accounting. Report on Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the Commission's internal control over financial reporting (internal control) as a basis for designing 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 Commission's internal control. Accordingly, we do not express an opinion on the effectiveness of the Commission'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 normal 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 a 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. R]RVIS is a trademark nt F(-,RV IS. LLP tegistrahnri .1I wt)lch Is penaihq With the 113. Patonl and Trademark GMc9 20 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 or significant deficiencies may exist that have not been identified. Report on Compliance and Other Matters As part of obtaining reasonable assurance about whether the Commission'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 financial statements. 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 entity'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 entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. FOI-V I5, LLP Rogers, Arkansas June 30, 2022 21