VffiGIN ISLANDS CASINO CONTROL COMMISSION FINANCIAL STATEMENTS SEPTEMBER 30, 2022 (Together With I11depe11de11t Auditor's Report Thereon) i 11 l §,§Hg aRTIFIED PU6UC ACCOUNTANTS & MANAGEMENT CONSULTANTS VIRGIN ISLANDS CASINO CONTROL COMMISSION FINANCIAL STATEMENTS SEPTEMBER 30, 2022 TABLE OF CONTENTS Independent Auditor’s Report .................................................................................................................... 1-3 Management’s Discussion and Analysis .................................................................................................... 4-8 Financial Statements Statement of Net Position ................................................................................................................ 9 Statement of Revenues, Expenses, and Changes in Net Position .................................................. 10 Statement of Cash Flows ............................................................................................................... 11 Notes to the Financial Statements ............................................................................................. 12-17 Reports Required by Government Auditing Standards Report on Internal Control over Financial Reporting and Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards .......................................................................................... 18-19 Schedule of Findings and Responses ............................................................................................. 20 Supplementary Information Combined Schedule of Net Position .............................................................................................. 21 Combined Schedule of Revenues, Expenses, and Changes in Net Position .................................. 22 lf'lffl!l'l'llf:11, ,\If• 't•· lf".111' '\.\'l:,1,HHII!' f1t)\!ljJ,\fll·• l 090 Vermont Avenue, NW Swte 250 Washmgton, DC 20005 PO. Box 2478 Kmgshdl, VI 00851 200 E Pr a tl Street Su,te 4100 Baltunore, MD 21202 T:202393.5600 TF: 1855.479.0548 F: 202393.5608 bertsmithco.com I ,,m1th,o•berts1111thc0(• m INDEPENDENT AUDITOR'S REPORT Board of Commissioners Virgin Islands Casino Control Commission St. Croix, U.S. Virgin Islands Report on the Audit of the Financial Statements Opinion We have audited the accompanying financial statements of the Virgin Islands Casino Control Commission (the "Commission"), a component unit of the Government of the United States Virgin Islands, which comprise the statement of net position as of and for the year ended September 30, 2022, and the related statement of revenues, expenses and changes in net position, and cash flows for the year then ended and the related notes to the financial statements, which collectively comprise the Commission's basic financial statements. The Virgin Islands Casino Control Commission is repo1ted as an enterprise fund in the Comprehensive Annual Financial Repo1t of the Government of the U.S. Virgin Islands. In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the respective financial position of the Commission, as of September 30, 2022, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Basis/or Opi11io11 We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General oft he United States (Government Auditing Standards). Our responsibilities under those standards are futther described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our repo1t. We are required to be independent of the Commjssion and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Responsibilities of Ma11ageme11t for tl,e Fi11a11cial Stateme11ts Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error. In preparing the fmancial 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 twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt sho1tly thereafter. A.N r,-.;01,vo1t1fMt HWll(ROr IBDO ALLIANCE USA - 2 - Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. 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. • 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. Emphasis of Matter As discussed in Note 1 to the financial statements, the financial statements present only the Virgin Islands Casino Control Commission’s financial position and the changes in financial position and cash flows and do not purport to, and do not, present fairly the financial position of the Government of the U.S. Virgin Islands as of September 30, 2022, and changes in the financial position of the Government of the U.S. Virgin Islands for the year then ended, in conformity with accounting principles generally accepted in the United States of America. Restatement As discussed in Note 4 of the financial statements, the Commission has restated its 2021 financial statements to reflect transactions which were not included in the prior year financial statements. Our opinion is not modified with respect to this matter. Other Matters We have previously audited the Commission’s September 30, 2021, financial statements, and our dated December 15, 2023, expressed an unqualified opinion thereon. In our opinion, the summarized comparative information presented herein as of and for the year ended September 30, 2021, is consistent, in all material respects, with the audited financial statements from which it has been derived. - 3 - Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 4 through 8, be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with GAAS, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Supplementary Information Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the Commission’s basic financial statements. The combining schedule of net position and the combining schedule of changes in revenues, expenses and changes in net position on pages 21 and 22 are presented for the purpose of additional analysis and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with GAAS. In our opinion, the combining schedule of net position and the combining schedule of revenue, expense and changes in net position is fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated January 23, 2025 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 Commission’s internal control over financial reporting and compliance. Bert Smith & Co. Washington, D.C. January 23, 2025 - 4 - VIRGIN ISLANDS CASINO CONTROL COMMISSION (A Component Unit of the Virgin Islands Government) MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) FOR THE YEAR ENDED SEPTEMBER 30, 2022 INTRODUCTION The Virgin Islands Casino Control Commission (the “Commission”) was established by Title 32 Virgin Islands Code Chapter 21, as amended, in November 1995 (Act No. 6069). The Commission is responsible for the regulation of casinos pursuant to the Act and subsequently by Act No. 6419, Internet Gaming and Gambling Act; Racinos, pursuant to the Virgin Islands Racing Industry Assistance Acts of 2011 and 2016 (Act No. 7318 and 7952) and the Casino IV Establishments (Act No.7702). The Commission is an independent agency of the executive branch of the Government of the United States Virgin Islands and as such, its financial statements are included in the Government of the United States Virgin Islands financial statements. The Commission is funded through four (4) different sources: 1. Appropriations from the Government of the Virgin Islands General Fund. These appropriations fund the Commission’s personnel costs. 2. Fees and fines imposed by law or through regulation by the Commission. These amounts are imposed pursuant to 32 VIC §514, which was amended by Act 7643. 3. Casino Revenue funds. The Commission receives 10% of the 12% tax on gross casino revenue pursuant to 32 VIC §517. This rate was changed to 25% in April 2022. 4. The Horse Racetrack Casino Revenue. These funds are funded pursuant to 32 VIC §901 (The Virgin Islands Horse Racing Industry Assistance Act of 2011 (Bill 29-0127; Act 7318). The Commission operates under one Governing Board (the “Board”) in order to achieve maximum efficiency of operation to avoid duplication of services, personnel and operational expenses, and responsibilities. The Commission is funded primarily by allotments for salaries and fringe costs through the Office of Management and Budget on behalf of the Department of Finance based on an approved budget authorized by the Legislature of the Virgin Islands. As management of the Commission, we offer the readers of the Commission’s financial statements this narrative overview and analysis of the financial activities of the Commission for the year ended September 30, 2022. We encourage readers to consider the information presented here in conjunction with the Commission’s financial statements. This overview and analysis are required by accounting principles generally accepted in the United States of America (“GAAP”), and the Governmental Accounting Standards Board (“GASB”) Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Government. - 5 - VIRGIN ISLANDS CASINO CONTROL COMMISSION (A Component Unit of the Virgin Islands Government) MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) FOR THE YEAR ENDED SEPTEMBER 30, 2022 OVERVIEW OF THE FINANCIAL STATEMENTS The financial statements consist of four parts: management’s discussion and analysis, the financial statements, notes to the financial statements, and supplementary schedules. The Commission is an independent agency of the executive branch of the Government of the U.S. Virgin Islands and follows enterprise fund reporting. The financial statements, therefore, are presented in a manner similar to that of a private business, using the economic resources measurement focus and the accrual basis of accounting.  The Statement of Net Position: This statement includes all of the Commission’s assets and liabilities. It provides information about the nature and amounts of investments in resources (assets) and the obligations to creditors (liabilities). The assets and liabilities are presented in order of liquidity. The resulting net position presented in these statements is displayed as restricted or unrestricted.  The Statement of Revenues, Expenses, and Changes in Net Position: All of the current year’s revenues and expenses are accounted for in the Statement of Revenues, Expenses, and Changes in Net Position. This statement measures the activities of the Commission’s operations over the past year and can be used to determine whether the Commission has successfully recovered all of its costs through appropriations and the services it provided.  The Statement of Cash Flows: The primary purpose of this statement is to provide information about the Commission’s net cash used in operating activities, capital and related financing activities, and provide information regarding the sources and uses of cash and the changes in the cash balance during the reporting period.  Notes to the Financial Statements: The notes to the financial statements provide additional information that is essential to the full understanding of the data provided in the financial statements.  Supplementary Information: The supplementary information represents the combining financial activities of the major fund groups. - 6 - VIRGIN ISLANDS CASINO CONTROL COMMISSION (A Component Unit of the Virgin Islands Government) MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) FOR THE YEAR ENDED SEPTEMBER 30, 2022 2022 FINANCIAL HIGHLIGHTS • The Commission’s net position increased by $7,535. The Commission reported an increase of $586,190 in fiscal year 2021. • The Commission’s total assets increased by $105,907 or 8%. Total liabilities increased by $98,372 or 102% compared to fiscal year 2021. • The Commission’s operating revenues decreased by $118,836 or 6%, and operating expenses increased by $455,844, a 29% increase compared to fiscal year 2021. • Government appropriations increased by $152,748 or 14% compared to fiscal year 2021. Condensed Statements of Net Position as of September 30, 2022 and 2021 2022 As Restated 2021 Variance % Variance Assets Current Assets $ 1,345,187 $ 1,280,305 $ 64,882 5% Capital Assets, net 41,025 - 41,025 100% Total Assets $ 1,386,212 $ 1,280,305 $ 105,907 8% Liabilities Current Liabilities $ 194,451 $ 96,079 $ 98,372 102% Total Liabilities $ 194,451 $ 96,079 $ 98,372 102% Net Position Net Investment in Capital Assets $ 41,025 $ $ 41,025 100% Unrestricted 1,150,736 1,184,226 (33,490) -3% Total Net Position $ 1,191,761 $ 1,184,226 $ 7,535 1% CURRENT ASSETS Current assets support the Commission’s operations and include cash and cash equivalents, net receivables (primarily receivables from the Government of the Virgin Islands casino revenue fund and restitution), and prepaid expenses. Compared to the previous fiscal year, current assets increased by $64,822 or 5%. The increase is primarily due to the net effect of an increase in accounts receivable and a decrease in cash. Accounts receivables increased by $113,831 or 91% due to the 4th quarter allotment receivable in the amount of $184,487 from the Casino Revenue Fund payable by the Department of Finance. Cash decreased by $51,163 or -4%. Cash in the prior year was higher due to the funding received from the Casino Revenue Fund for the execution of the Virgin Islands Alliance on Responsible Gaming (VIARG) program. The program was created by a law passed in 1995 and mandates that 1% of the casino fund is directed to gambling and addiction programs. - 7 - VIRGIN ISLANDS CASINO CONTROL COMMISSION (A Component Unit of the Virgin Islands Government) MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) FOR THE YEAR ENDED SEPTEMBER 30, 2022 CURRENT LIABILITIES In fiscal year 2022, current liabilities increased by $98,372 or 102% from the previous fiscal year. This was primarily driven by a $57,223 or 501% increase in accounts payable and credit card payable. Additionally, investigative fees payable increased by $61,049 or 809% due to these funds now categorized as refundable escrow deposits. NET POSITION Net position represents the residual interest in the Commission’s assets after all liabilities are deducted for reporting purposes and are divided into two major components: • Net Investment in Capital Assets • Unrestricted Net Position The Commission’s 2022 change in net position was $7,535 compared to $586,190 in 2021. This was largely attributed to an increase in expenses paid to fund the V.I. Department of Labor’s Jobs for America's Graduates in the Virgin Islands (JAG-VI) Program. Condensed Statements of Revenues, Expenses, and Changes in Net Position for the Years Ended September 30, 2022, and 2021 2022 As Restated 2021 Variance % Variance Operating Revenues $ 2,013,882 $ 2,132,718 $ (118,836) -6% Operating Expenses (2,002,372) (1,546,528) 455,844 29% Operating Revenue Before Depreciation 11,510 586,190 (574,680) -98% Depreciation (3,975) - (3,975) 100% Operating Revenue After Depreciation 7,535 586,190 (578,655) -99% Change in Net Position 7,535 586,190 (578,655) -99% Net Position, Beginning of Year 1,184,226 598,036 586,190 98% Net Position, End of Year $ 1,191,761 $ 1,184,226 $ 7,535 1% OPERATING REVENUES Operating revenues decreased by $118,836 or 6% compared to the prior fiscal year. This was primarily due to a $275,349 or 56% reduction in license and slot fees generated by casino revenues. Work permit income also decreased by $72,770 or 78% compared to prior fiscal year. OPERATING EXPENSES Operating expenses in the aggregate increased by $455,844 or 29% compared to the previous fiscal year. This amount includes an increase of $335,975 or 100% to fund the V.I. Department of Labor’s Jobs for America's Graduates in the Virgin Islands (JAG-VI) Program for on-the-job training. Additionally, there was an increase of $30,320 or 711% in travel during the fiscal year due to various conferences and investigations. - 8 - VIRGIN ISLANDS CASINO CONTROL COMMISSION (A Component Unit of the Virgin Islands Government) MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) FOR THE YEAR ENDED SEPTEMBER 30, 2022 CAPITAL ASSETS As of September 30, 2022, the Commission had $41,025 invested in capital assets. Total asset acquisition during the fiscal year was $45,000 compared to $-0- in 2021, an increase of $45,000 or 100%. The net effect of these additions in the capital asset account and this year’s total depreciation expense of $3,975 resulted in an overall increase in net capital assets of $41,025 or 100% compared to last year. Capital Assets at Year-end Net of Accumulated Depreciation 2022 Vehicles $ 45,000 Total Costs 45,000 Less: Accumulated Depreciation (3,975) Net Capital Assets $ 41,025 - 9 - VIRGIN ISLANDS CASINO CONTROL COMMISSION STATEMENT OF NET POSITION AS OF SEPTEMBER 30, 2022 (With Comparative Totals for 2021) 2022 As Restated 2021 ASSETS Current Assets Cash and Cash Equivalents $1,103,500 $1,154,663 Other Receivables, net 239,473 125,642 Prepaid Expenses 2,214 - Total Current Assets 1,345,187 1,280,305 Non-Current Assets Capital Assets, net 41,025 - Total Non-Current Assets 41,025 - Total Assets $1,386,212 $1,280,305 LIABILITIES Current Liabilities Accounts Payable $ 68,428 $ 72,685 Other Current Liabilities and Accrued Expenses 126,023 23,394 Total Current Liabilities 194,451 96,079 Total Liabilities $ 194,451 $ 96,079 NET POSITION Net Position Net Investment in Capital Assets $ 41,025 $ - Unrestricted Net Position 1,150,736 1,184,226 Total Net Position $1,191,761 $1,184,226 The accompanying notes are an integral part of these financial statements. - 10 - VIRGIN ISLANDS CASINO CONTROL COMMISSION STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION FOR THE YEAR ENDED SEPTEMBER 30, 2022 (With Comparative Totals for 2021) 2022 As Restated 2021 Operating Revenues Non-Capital Appropriations $ 1,218,746 $ 1,065,998 Casino Revenue Fund 535,982 434,532 License and Slot Fees 218,418 493,767 Work Permit Income 20,175 92,945 Other Income 20,561 45,476 Total Operating Revenues 2,013,882 2,132,718 Operating Expenses Personnel Costs 1,220,025 1,066,498 V.I. Department of Labor Program 335,975 - Administrative 144,814 140,751 Professional 152,354 131,547 Rent 86,711 86,666 Investigative Fees - 58,827 License Fees - 23,051 Advertising and Promotion 17,105 8,199 Travel 34,583 4,263 Training, Conferences and Dues 10,805 26,726 Depreciation 3,975 - Total Operating Expenses 2,006,347 1,546,528 Operating Profit 7,535 586,190 Change in Net Position 7,535 586,190 Net Position, Beginning of Year 1,184,226 598,036 Net Position, End of Year $ 1,191,761 $ 1,184,226 The accompanying notes are an integral part of these financial statements. - 11 - VIRGIN ISLANDS CASINO CONTROL COMMISSION STATEMENT OF CASH FLOWS FOR THE YEAR ENDED SEPTEMBER 30, 2022 Cash Flow from Operating Activities Change in Net Position $ 7,535 Provided by Operating Activities: Depreciation 3,975 Adjustment to Reconcile Changes in Net Assets to Net Cash (Increase)/Decrease in Assets Receivables (113,831) Other Assets (2,214) Increase/(Decrease) in Liabilities Accounts Payable (4,257) Other Liabilities 102,629 Net Cash (Used In) Operating Activities (6,163) Cash Flow from Investing Activities Acquisition of Property and Equipment, Net (45,000) Net Cash Used In Investing Activities (45,000) Net Decrease in Cash and Cash Equivalents (51,163) Cash, Beginning of Year – As Restated 1,154,663 Cash, End of Year $ 1,103,500 The accompanying notes are an integral part of these financial statements. - 12 - VIRGIN ISLANDS CASINO CONTROL COMMISSION NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2022 NOTE 1 REPORTING ENTITY • Organization: The Virgin Islands Casino Control Commission (the “Commission”) was established by Title 32 Virgin Islands Code Chapter 21, as amended, in November 1995 (Act No. 6069). The Commission is responsible for the regulation of casinos pursuant to the Act and subsequently by Act No. 6419, Internet Gaming and Gambling Act; Racinos, pursuant to the Virgin Islands Racing Industry Assistance Acts of 2011 and 2016 (Act No. 7318 and 7952) and the Casino IV Establishments (Act No.7702). The Commission is an independent agency of the executive branch of the Government of the United States Virgin Islands and as such, its financial statements are included in the Government of the United States Virgin Islands financial statements. The Commission is funded through four (4) different sources: 1. Appropriations from the Government of the Virgin Islands General Fund. These appropriations fund the Commission’s personnel costs. 2. Fees and fines imposed by law or through regulation by the Commission. These amounts are imposed pursuant to 32 VIC §514, which was amended by Act 7643. 3. Casino Revenue funds. The Commission receives 10% of the 12% tax on gross casino revenue pursuant to 32 VIC §517. This rate was changed to 25% in April 2022. 4. The Horse Racetrack Casino Revenue. These funds are funded pursuant to 32 VIC §901 (The Virgin Islands Horse Racing Industry Assistance Act of 2011 (Bill 29-0127; Act 7318). NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES • Basis of Presentation: The Commission’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) as prescribed by the Governmental Accounting Standards Board. The Commission uses the economic resources measurement focus and follows the accrual basis of accounting whereby revenue is recorded when earned and expenses are recorded when incurred. • Basic Financial Statements: Standards for external financial reporting require that resources be classified for accounting and reporting purposes into net position categories. Net position is the residual of all other elements presented in the statement of net position. It is the difference between (a) assets and (b) liabilities and consists of the following categories: … Net Investment in Capital Assets – This category of net position consists of capital assets, net of accumulated depreciation, reduced by any outstanding balances of mortgages or notes attributable to the acquisition, construction or improvement of those assets. … Restricted Net Position – This category consists of restricted assets reduced by liabilities related to those assets. Note 2 – Summary of Significant Accounting Policies (Continued) - 13 - … Unrestricted Net Position – This category consists of the net amount of the assets and liabilities that are not included in the determination of net investment in capital assets, or the restricted component of net position. The Commission does not have any restricted net positions. • Separate Funds: The accounts of the Commission are organized on the basis of funds, each of which is considered to be a separate accounting entity. All transactions are recorded in a separate set of self- balancing accounts, which include assets, liabilities, net position, revenues and expenses. During fiscal year ended September 30, 2022, the Commission maintained four (4) accounting divisions which constitute major transactions of the Commission: 1. Virgin Islands Casino Commission – The Commission is responsible for the governance, operational, and regulatory functions of casinos, internet gaming and gambling racinos, pursuant to the Virgin Islands Horse Racing Industry Assistance Act, and the Casino IV establishments within the enterprise zones of Christiansted and Frederiksted St. Croix. 2. Division of Gaming Enforcement (DGE) – Working in unison with the Casino Control Commission, the Department of Justice, Division of Gaming Enforcement (DGE) provides an investigative arm in matters for investigation, prosecution, and the search for evidence of violations of the Virgin Islands Casino and Resort Laws. Twenty percent of the funds collected in the Commission’s Revolving Account are allocated to DGE for operating expenses. 3. Youth Programs – Ten percent of taxes collected from licensed gaming entities by the Government of the Virgin Islands is earmarked to youth related programs. The following training programs are subsidized by the Commission, in accordance with Virgin Islands Code, Title 32, Section 518: — Financial assistance to help casino employees obtain their General Education Development Test (GED) and further their education, to include but not limited to college education. — Financial assistance for casino employees to obtain certification in the field of Hotel/Hospitality Management. — Fifty percent (50%) of the budgetary needs of the Jobs for America’s Graduates Virgin Islands program. — Make available to the casino licensee half the cost of each employee participating in the GED or Hotel/Hospitality programs. 4. V.I. Alliance on Responsible Gaming – This account is the depository for the one percent (1%) of the revenues from the Casino Revenue Fund, received by the Commission, for programs to treat and prevent gambling addiction, as mandated by Virgin Islands Code title 32, § 517(c). The Commissioners are the signatories on this account. • Economic Dependency: The Commission’s sustainability depends primarily on appropriations from the Government of the Virgin Islands. In addition, it earns income from casino fees and license fees. During fiscal year ended September 30, 2022, the Commission received appropriations totaling $1,218,746 from the Government of the Virgin Islands, which approximates 61% of its revenue. • Other Receivables: Other receivables are recorded at net realizable value. The Commission has deemed that an allowance is necessary at this time. See Note 5. Note 2 – Summary of Significant Accounting Policies (Continued) - 14 - • Cash and Cash Equivalents: Cash and cash equivalents are defined as cash on hand, demand deposits, certificate of deposits with financial institutions and all highly liquid investments available for current use with an initial maturity of three months or less • Use of Estimates: The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to estimates and assumptions include the provision for loan losses, valuation of investments, and potential grant disallowances. • Comparative Information: The financial statements include certain prior-year summarized comparative information. Such information does not include sufficient detail or reclassifications to constitute a presentation in conformity with accounting principles generally accepted in the United States of America. Accordingly, such information should be read in conjunction with the Commission’s financial statements for the year ended September 30, 2021 from which the summarized information was derived. • Accounting Pronouncements Adopted: GASB Statement No. 87, Leases In June 2017, GASB issued Statement No. 87, Leases. This Statement increases the usefulness of governments’ financial statements by requiring recognition of certain lease assets and liabilities for leases that previously were classified as operating leases and recognized as inflows of resources or outflows of resources based on the payment provisions of the contract. It establishes a single model or lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. Under this Statement, a lessee is required to recognize a lease liability and an intangible right-to-use the lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources, thereby enhancing the relevance and consistency of information about governments’ leasing activities. This Statement is effective for reporting periods beginning after June 15, 2021, as postponed by GASB Statement. The Commission does not have any leases greater than one year. NOTE 3 CASH AND CASH EQUIVALENTS Cash and cash equivalents consisted of the following at September 30, 2022: Unrestricted Total Cash and Cash Equivalents $ 1,103,500 $ 1,103,500 - 15 - NOTE 4 RESTATEMENT Subsequent to the year ended September 30, 2021, the Commission determined that certain transactions were not reflected in the financial statements. These transactions included the recognition of the VIARG division and certain accounts payable balances. Statement of Net Position as of September 30, 2021: Previously Reported Increase/ (Decrease) Restated Total Assets $ 1,116,813 $ 163,492 $ 1,280,305 Total Liabilities 85,521 10,558 96,079 Net Position $ 1,031,292 $ 152,934 $ 1,184,226 Statement of Revenue, Expenses and Changes in Net Position for the year ended September 30, 2021: Previously Reported Increase/ (Decrease) Restated Change in Net Position $ 586,190 $ - $ 586,190 Net Position, Beginning 445,102 152,934 598,036 Net Position Ending $ 1,031,292 $ 152,934 $ 1,184,226 NOTE 5 OTHER RECEIVABLES Other receivables represent casino revenue funds remaining from the department of finance in the amount of $184,487 for fiscal year 2022. Also included in other receivables are due from affiliates of $54,986 and restitution receivable from a judgement in a criminal case for theft from programs receiving government funds by a former employee as of September 30, 2022. The judgement was dated August 13, 2020, totaling $295,503. Restitution payments received totaled $950 with a remaining balance of $294,553 as of September 30, 2022. Management considers the collection of restitution receivables to be minimal and uncertain in the short term. Accordingly, an allowance for restitution receivable of $294,553 was created. Casino Revenue Funds Receivable $ 184,487 Due from Affiliates 54,986 Restitution Receivable 294,553 534,026 Allowance for Doubtful Accounts (294,553) Other Receivables, net $ 239,473 NOTE 6 CAPITAL ASSETS Capital assets consist of the following at September 30, 2022: Capital Assets Vehicles $ 45,000 Total Capital Assets 45,000 Less: Accumulated Depreciation (3,975) Capital Assets, net $ 41,025 - 16 - NOTE 7 CUSTODIAL CREDIT RISK The custodial credit risk for deposits is the risk that in the event of a bank failure, the Commission’s deposits may not be recovered. The Commission does not have a policy to address custodial credit risk. Cash consists of cash held by various depository institutions in the Commission’s name. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250,000. At September 30, 2022, the Commission had a cash balance of $600,339 that was uninsured and uncollateralized. NOTE 8 RISK MANAGEMENT The Commission faces various risks of loss related to torts; theft of, damages to, and destruction of assets; and natural disasters for which the Commission has commercial insurance coverage. Annual premium payments are made in proportion to the anticipated exposure to the liability losses assessed. NOTE 9 DISASTER RELIEF FUNDING On September 6 and 19, 2017, the United States Virgin Islands was struck by two category five hurricanes. The extent and severity of the storms was unprecedented and resulted in catastrophic damage to the Territory. The Commission received disaster relief funding from the Federal Emergency Management Agency (FEMA) in the amount of $123,326. Funding is on a reimbursement basis and will be used for building and equipment damage and mold remediation. Expenses reimbursed to date total $56,993. NOTE 10 NON-CAPITAL APPROPRIATIONS Non-Capital Appropriations represent the amounts funded by the Government of the United States Virgin Islands for the Commission’s personnel costs. NOTE 11 CONTINGENCIES The Commission is a party to a legal proceeding. The Commission believes the proceeding will result in a favorable outcome. The Commission asserts that there have been no material claims, suits, or complaints filed nor are any pending against the organization. In the opinion of management and legal counsel, this matter and all other matters which are asserted or unasserted are without merit and would not have a significant effect on the financial position or results of operations of the organization, if disposed of unfavorably. NOTE 12 COMMITMENTS The Commission signed a one-year rental space for its administrative office agreement. The future minimum rental payments are as follows: 2023 $84,006 Total $84,006 Rent expense for the fiscal year 2022 was $84,006. - 17 - NOTE 13 SUBSEQUENT EVENTS The Commission has evaluated all subsequent events through January 23, 2025, which is the date the financial statements were available to be issued. This review and evaluation revealed no additional material events that would have an effect on the accompanying financial statements. On March 11, 2020, the World Health Organization (WHO) declared COVID-19 a global pandemic. The pandemic spread globally and adversely affected economic conditions throughout the world. On May 5, 2023, WHO declared an end to the global pandemic. Management believes that any future financial impact is not significant. Management continues to monitor any changes related to this matter. ll'llrlt l11'1J!:11, .,, I"• 1ll'll'1!JI• '1·\'F• ,H\111! 1 •n'Pll·\111'> 1090 Vermont Avenue, NW Suite 250 W…sh111gton, DC 20005 P.O. Box 2478 K1ngsh1II, VI 0085 1 200 E Pratt Street SuHe 4100 Balt11nore, MD 21202 T:202.393.5600 TF: 1 855.479.0548 F: 202.3935608 bertsmithco.com I ,,m1tlvo,bPrtsn11thco.,, ,m INDEPENDENT AUDITOR'S 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 A VD/TING STANDARDS Board of Commissioners Virgin Islands Casino Control Commission St. Croix, U.S. Virgin Islands We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the financial statements of the Virgin Islands Casino Control Commission (the "Commission") as of and for the year ended September 30, 2022, and the related notes to the financial statements and have issued our report thereon dated January 23, 2025. Internal Control over Financial Reporting In planning and perfomung our audit of the consolidated financial statements, we considered the Commission's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the consolidated 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 combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the Commission's financial statements will not be prevented or detected and corrected on a timely basis. A significant deficiency is a deficiency or a combination of deficiencies, in internal control that is less severe than a material weakness yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. We identified a deficiency in internal control described in the accompanying schedule of findings and responses as item 2022-001 that we consider to be a significant deficiency. - 18 - IBDO ALLIANCE USA - 19 - Compliance and Other Matters As part of obtaining reasonable assurance about whether the Commission’s consolidated financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of the consolidated financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Commission’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 Commission’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Bert Smith & Co. Washington, D.C. January 23, 2025 - 20 - VIRGIN ISLANDS CASINO CONTROL COMMISSION SCHEDULE OF FINDINGS AND RESPONSES AS OF SEPTEMBER 30, 2022 Finding: 2022–001 Internal Control Policies and Procedures (Significant Deficiency) The Commission does not currently have a formalized policy for review and approval of transactions. While we did not find any illegitimate transactions, we believe that formalized policies and procedures are key to the prevention and detection of errors and fraud. We understand that the Commission had staff changes and significant time was devoted to reconciling accounts and other internal matters. We noted that the Commission is working towards creating the appropriate policies and procedures that would govern review and approval of transactions, however this process is not complete. Recommendation: We recommend that the Commission continues to develop the policies and procedures that would govern all transactions recorded in the system. These written policies and procedures will ensure that transactions are recorded and approved with the appropriate segregation of duties on a consistent basis. Views of Responsible Officials and Planned Corrective Action: The Commission concurs with the auditor’s findings and recommendations. The Commission is working towards developing and fully implementing an accounting policies and procedures manual. SUPPLEMENTARY INFORMATION - 21 - VIRGIN ISLANDS CASINO CONTROL COMMISSION COMBINED SCHEDULE OF NET POSITION AS OF SEPTEMBER 30, 2022 (With Comparative Totals for 2021) VICCC DGE Youth Program VIARG Total 2022 As Restated Total 2021 ASSETS Current Assets Cash $ 307,842 $ 265,070 $ 345,112 $ 185,476 $ 1,103,500 $ 1,154,663 Receivables 184,487 15,108 39,878 - 239,473 125,642 Prepaid Expenses 2,214 - - - 2,214 - Total Current Assets 494,543 280,178 384,990 185,476 1,345,187 1,280,305 Non-Current Assets Property & Equipment, net 41,025 - - - 41,025 - Total Non-Current Assets 41,025 - - - 41,025 - Total Assets $ 535,568 $ 280,178 $ 384,990 $ 185,476 $ 1,386,212 $ 1,280,305 LIABILITIES Current Liabilities Accounts Payable $ 68,428 $ - $ - $ - $ 68,428 $ 72,685 Other Current Liabilities and Accrued Expenses 57,428 68,595 $ - $ - 126,023 23,394 Total Current Liabilities 125,856 68,595 $ - $ - 194,451 96,079 Total Liabilities $ 125,856 $ 68,595 $ - $ - $ 194,451 $ 96,079 NET POSITION Net Position Net Investment in Capital Assets $ 41,025 $ - $ - $ - $ 41,025 $ - Unrestricted Net Position 368,687 211,583 384,990 185,476 1,150,736 1,184,226 Total Net Position $ 409,712 $ 211,583 $ 384,990 $ 185,476 $ 1,191,761 $ 1,184,226 The accompanying notes are an integral part of these financial statements. - 22 - VIRGIN ISLANDS CASINO CONTROL COMMISSION COMBINED SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN NET POSITION FOR THE YEAR ENDED SEPTEMBER 30, 2022 (With Comparative Totals for 2021) VICCC DGE YOUTH PROGRAM VIARG 2022 As Restated 2021 Operating Revenues Non-Capital Appropriations $1,218,746 $ - $ - $ - $1,218,746 $ 1,065,998 Casino Revenue Fund 387,445 - 126,553 21,984 535,982 434,532 License and Slot Fees 163,028 55,390 - - 218,418 493,767 Work Permit Income 16,080 4,095 - - 20,175 92,945 Other Income 18,907 1,040 614 - 20,561 45,476 Total Revenues 1,804,206 60,525 127,167 21,984 2,013,882 2,132,718 Operating Expenses Personnel Costs 1,220,025 - - - 1,220,025 1,066,498 V.I. Department of Labor Program - - 335,975 - 335,975 - Administrative 136,449 8,365 - - 144,814 140,751 Professional 147,954 4,400 - - 152,354 131,547 Rent 84,006 2,705 - - 86,711 86,666 Investigative Fees - - - - - 58,827 License Fees - - - - - 23,051 Advertising and Promotion 17,105 - - - 17,105 8,199 Travel 25,828 8,755 - - 34,583 4,263 Training, Conferences and Dues 8,013 1,824 968 - 10,805 26,726 Depreciation 3,975 - - - 3,975 - Total Expenses 1,643,355 26,049 336,943 - 2,006,347 1,546,528 Operating Profit 160,851 34,476 (209,776) 21,984 7,535 586,190 Change in Net Position 160,851 34,476 (209,776) 21,984 7,535 586,190 Net Position, Beginning of Year As Restated 248,861 177,107 594,766 163,492 1,184,226 598,036 Net Position, End of Year $ 409,712 $ 211,583 $ 384,990 $ 185,476 $1,191,761 $ 1,184,226 The accompanying notes are an integral part of these financial statements.