DISCOVER PALM BEACH COUNTY, INC. STATEMENT OF FUNCTIONAL EXPENSES

For the Year Ended September 30, 2021

See accompanying notes to financial statements.

For the Years Ended September 30, 2022 and 2021

1. Summary of Significant Accounting Policies Nature of Organization

Discover Palm Beach County, Inc. d/b/a Discover The Palm Beaches (the “Organization”) serves as Palm Beach County’s travel planning resource for domestic and international travelers. As the official destination marketing organization charged with promoting Palm Beach County (the “County”) as a leisure travel and meetings destination, Discover The Palm Beaches plans and executes initiatives in a broad range of areas including sales, marketing, research, visitor services, and industry relations.

Formed in 1983, Discover Palm Beach County, Inc. is a private, not-for-profit corporation funded primarily by the collection of the Palm Beach County tourist development tax, or “bed tax”, paid by lodging guests for short-term stays in Palm Beach County The Organization’s mission is to increase visitation and contribute to the overall economic development in Palm Beach County.

Basis of Accounting

The financial statements of the Organization are prepared using the accrual basis of accounting whereas revenues are recognized when earned and expenses are recognized when incurred. This basis of accounting conforms to accounting principles generally accepted in the United States of America.

Financial Statement Presentation

The Organization’s financial statements are presented in accordance with FASB Accounting Standards Codification (FASB ASC) 958-205 Not-for-Profit Entities Presentation of Financial Statements. This standard requires the classification of the Organization’s Statements of Financial Position and Statements of Activities according to two classes of net assets: net assets without donor restrictions and net assets with donor restrictions:

Net assets without donor restrictions – this classification includes those net assets whose use is not restricted by donors, even though their use may be limited in other respects, such as by contract or by Board designation. Changes in net assets arising from exchange transactions (except income and gains on assets that are restricted by donors or by law) are included in net assets without donor restrictions.

Net assets with donor restrictions – this classification includes those net assets whose use by the Organization has been limited by donors to either a later period of time, or after a specified date, or for a specified purpose. This classification also includes net assets that must be maintained by the Organization in perpetuity. Net assets with donor restrictions in perpetuity increase when the Organization receives contributions for which donor-imposed restrictions limiting the Organization’s use of an asset or its economic benefits neither expire with the passage of time nor can be removed by the Organization meeting certain requirements. As of the years ended September 30, 2022and 2021, the Organization had no net assets with donor restrictions.

For the Years Ended September 30, 2022 and 2021

1. Summary of Significant Accounting Policies, continued Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Fair Value of Financial Instruments

FASB ASC Topic 820-10, Fair Value Measurements, establishes a framework for measuring fair value. This framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).

The three levels of the fair value hierarchy under FASB ASC Topic 820-10 are described below:

Level 1 –

Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Organization has the ability to access.

Level 2 – Inputs to the valuation methodology include:

 Quoted prices for similar assets or liabilities in active markets;

 Quoted prices for identical or similar assets or liabilities in inactive markets;

 Inputs other than quoted prices that are observable for the asset or liability;

 Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

 If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.

Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

For the Years Ended September 30, 2022 and 2021

1. Summary of Significant Accounting Policies, continued Fair Value of Financial Instruments, continued

The following methods and assumptions were used by the Organization in estimating the fair value of financial instruments that were not disclosed under FASB ASC Topic 820

 Cash and cash equivalents, reimbursement, receivables, accounts payable and accrued liabilities – The carrying amount reported approximates their fair values due to their short-term nature.

The following methods and assumptions were used by the Organization in estimating the fair value of financial instruments that are measured at fair value on a recurring basis under FASB ASC Topic 820.

 Investments in and obligations under deferred compensation plan – consists of balanced mutual funds measured at net asset value (NAV) quoted by the custodian as of the close of business. These investments are all measured according to Level 1

Cash and Cash Equivalents

The Organization considers cash held in checking and short-term investments with original maturities of three months or less to be cash equivalents.

Reimbursement due from Palm Beach County

The Organization records contract reimbursements due from Palm Beach County as allowable expenses are incurred, approved, and billed. All amounts are deemed fully collectible and no allowance is considered necessary.

Membership and Other Receivables

Membership and other receivables consist of amounts charged to local hotels and other local businesses for participation in the Organization’s advertising programs and employee travel advances, all of which are carried at net realizable value. The Organization provides an allowance for uncollectible accounts that is based upon a review of outstanding receivables, historical collection information, and existing economic conditions. As of September 30, 2022 and 2021, there was no allowance for uncollectible accounts.

Inventory

Inventory consists of promotional items (not for sale), and is stated at the lower of cost (first-in, first-out method) or market.

Prepaid expenses

Prepaid expenses consist of expenses (generally deposits) for operations, sales, and marketing activities scheduled to occur subsequent to the year-end.

Accrued Expenses

Accrued expenses consist of accrued payroll, related payroll taxes, and employee benefits

For the Years Ended September 30, 2022 and 2021

1. Summary of Significant Accounting Policies, continued Deferred Revenue

Deferred revenue consists of contract income received for expenses paid for operations, sales, and marketing activities scheduled to occur subsequent to year-end This category also includes three months of membership revenue collected and deferred in connection the membership period which runs on a calendar year

Deferred Compensation Plan

The Organization provides a deferred compensation plan as more fully described in Note 4. In accordance with the terms of such arrangements, the fair value of plan assets is reported as both an asset subject to the claims of creditors and as a liability to the plan beneficiary.

County Contract Advance

In connection with the Organization’s administrative services and agency contract (further described in Note 3), Palm Beach County advanced the Organization $5,000,000 for use in facilitating vendor payments and other working capital needs, pendingreimbursement of requested expenses.

Revenues and Support

 Contract income – is received from the County on a cost-reimbursement basis. Revenues from the contract are deemed earned and recognized in the Statements of Activities when expenses are incurred and approved for the purposes specified.

 Membership income – Partner membership benefits include listings on the Organization’s website, listings in the Organization’s official publications, access to partner events, and opportunities to participate in trade shows and events. Membership income is recognized as revenue when earned over the membership period.

 Special promotional activity income – is revenue received from other organizations and individuals in order to participate in promotional events with the Organization. Special promotional activity income is recognized as revenue when the trade show or other promotional event occurs.

Donated Services and In-Kind Contributions

In accordance with FASB ASC 958-605, Revenue Recognition, the Organization records the value of those donated services and in-kind contributions that require specialized skills and that would typically need to be purchased if not provided by donation. Donated services and in-kind contributions include those that create or enhance the Organization’s efforts to provide certain tourism, marketing, and sales-related programs to promote Palm Beach County, Florida as a tourist destination. These services are reflected in the financial statements at their estimated fair market value at the date of receipt.

For the Years Ended September 30, 2022 and 2021

1. Summary of Significant Accounting Policies, continued Donated Services and In-Kind Contributions, continued

During the years ended September 30, 2022and 2021, the Organization received donated services and in-kind contributions, such as receptions and room accommodations for clients and groups and other noncash contributions, which are recorded as donated services and in-kind contributions at their estimated fair value at the date of donation. During the years ended September 30, 2022and 2021, the total amount of in-kind contributions received amounted to approximately $2,716,000 and $1,540,000, respectively See Note 5 for more details.

Expenses

The costs of providing the various programs and other activities have been detailed in the Statements of Functional Expenses and summarized on a functional basis in the Statements of Activities. Expenses associated with a specific program are charged directly to that program. Expenses which benefit more than one program are allocated based on the relative benefit provided.

Advertising

The Organization expenses the cost of advertising as incurred. During the years ended September 30, 2022 and 2021, the Organization incurred approximately $13,097,000 and $11,972,000, respectively, in advertising costs, which are reported as marketing - advertising in the Statements of Functional Expenses and includes donated services of approximately $2,467,000 and $1,352,000, respectively.

Compensated Absences

The Organization has a policy to accumulate unused vacation up to a maximum of 160 hours on accrual earning levels. All accumulated vacation leave must be used in the following year with no carryover. Sick leave may be accumulated up to a maximum of 60 days (480 hours) and carried indefinitely, but is not paid out for other than sick time under any circumstances. Accumulated unpaid vacation benefits are accrued as a liability and charged to expense.

Reclassifications

Certain accounts in the prior year financial statements may have been reclassified in order to conform with the current year financial statement presentation.

Income Taxes

The Organization is exempt from federal and state income taxes under Section 501(c)(6) of the Internal Revenue Code of 1986 and Chapter 220.13 of Florida Statutes. However, income from certain activities not directly related to the Organization's tax-exempt purpose is subject to taxation as unrelated business income. Management does not believe that the Organization engaged in any unrelated business activities during the years ended September 30, 2022and 2021, and accordingly there is no provision for income taxes reflected in the accompanying financial statements.

For the Years Ended September 30, 2022 and 2021

1. Summary of Significant Accounting Policies, continued Income Taxes, continued

The Organization follows FASB ASC 740-10, Accounting for Uncertainty in Income Taxes This pronouncement seeks to reduce the diversity in practice associated with certain aspects of measurement and recognition in accounting for income taxes. It prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position that an entity takes or expects to take in a tax return. An entity may only recognize or continue to recognize tax positions that meet a “more likely than not” threshold. The Organization assesses its income tax positions based on management’s evaluation of the facts, circumstances and information available at the reporting date.

The Organization uses the prescribed more likely than not threshold when making its assessment. For the years ended September 30, 2022 and 2021, the Organization did not accrue any interest expense or penalties related to tax positions, and there are no open Federal or State tax years currently under audit.

Recently Adopted Accounting Pronouncements

As of October 1, 2021, the Organization adopted the provisions of FASB ASU 2020-07, Not-for-Profit Entities (Topic 958): Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets. The purpose of the standard is to clarify the presentation and disclosure of contributed nonfinancial assets with an intention to provide the reader of the financial statements a clearer understanding of what type of nonfinancial assets were received and how they are used and recognized by the not-for-profit.

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). ASU 2016-02 replaces existing leasing rules with a comprehensive lease measurement and recognition standard and expanded disclosure requirements. ASU 2016-02 will require lessees to recognize most leases on their statement of financial position as liabilities, with corresponding “right-of-use” assets. The standard is effective for annual reporting periods in fiscal years that begin after December 15, 2021. This standard will be effective for the Organization’s fiscal year-end September 30, 2023. Management is currently evaluating the magnitude and other potential impacts on the Organization’s financial statements

2. Liquidity and Availability of Resources

Financial assets available for general expenditure within one year, that is, without donor restrictions or other restrictions limiting their use comprise the following:

For the Years Ended September 30, 2022 and 2021

2. Liquidity and Availability of Resources, continued

The Organization receives significant revenue from a Palm Beach County contract, which typically covers over 90% of its operating expenditures on a direct reimbursement basis. The Organization regularly monitors liquidity required to meet its operating needs and other contractual commitments The related resources have been included in the quantitative information detailing the financial assets available to meet general expenditures within one year

3. Transactions with Palm Beach County and Economic Dependency

The Organization and the County entered into an agreement for administrative services commencing on October 1, 2017 and expiring on September 30, 2022 The contract provides that the Organization will perform or administer various functions such as advertising, public relations, tour package development, consumer and trade shows, destination reviews, foreign representation, and other projects and promotional services to assist the County in its tourism promotion effort. Expenses made by the Organization under the contract are subject to budgetary approval by the County and must be consistent with the County’s Tourist Development Plan. For the years ended September 30, 2022 and 2021, the contract budget was $13,535,896 and $13,230,294, which includes the County direct expenses totaling $248,896 and $330,294, respectively. The Organization has also received a County Contract for fiscal year 2023 in the amount of approximately $14,514,000 of which $297,000will be County direct expense.

On behalf of the Organization,the County provided office space and directly paid communication and certain advertising expenses, which totaled approximately $249,000 and $188,000 for the years ended September 30, 2022 and 2021, respectively. This amount is included in Contract Income, Palm Beach County in the Statements of Activities and is reported according to natural and functional classifications in the Statements of Activities and Statements of Functional Expenses. In addition, the County provides the Organization with all furniture, fixtures, and equipment necessary for its operations.

Management believes the Organization has sufficient planned revenues from the agreement with the County to operate and fulfill its mission The revenue provided under contracts with Palm Beach County amounted to approximately $20,900,000 and $14,092,000, which represents 87% and 74% of the Organization’s total revenue, respectively, for the years ended September 30, 2022 and 2021 The loss of this agreement could have a negative impact upon the Organization. In addition, for the years ended September 30, 2022 and 2021, the County owed the Organization approximately $4,985,000 and $4,439,000, respectively, for costs related to this contract.

In connection with the County contract, the Organization submits requests for reimbursement of allowable payments and expenditures and records the corresponding revenue as the request is approved and paid. Subsequent adjustments made in accordance with US GAAP to certain payments and expenditures may often create timing differences between the contract utilization according to the County and the amounts reported in these financial statements. The fiscal year-end amounts and related adjustments are summarized as follows:

*Reconciling items include accrual basis transactions.

For the Years Ended September 30, 2022 and 2021

4. Retirement Plans

The Organization has a defined contribution pension plan, which provides retirement benefits for substantially all employees meeting certain eligibility requirements. Employees are eligible after one year of service. There are no matching contributions from the Organization. The Organization may make contributions to the plan consisting of a 3% Safe Harbor contribution and a discretionary contribution not to exceed 8.47% of the employee’s actual salary. Employees are immediately vested in the Safe Harbor contribution and fully vested in any discretionary contributions after three years of service with the Organization. Contributions for the years ended September 30, 2022and 2021 totaled approximately $386,000 and $195,000, respectively.

In addition, the Organization has a deferred compensation retirement plan, which provides retirement benefits for certain of its key employees. Under the plan, employees are allowed to defer amounts of compensation up to the maximum allowable IRS limits. There are no matching contributions from the Organization. The Organization may make discretionary contributions to the plan. During the years ended September 30, 2022 and 2021, the Organization made no discretionary contributions to this plan. Funds of the plan are invested in mutual funds as directed by the employees. These funds had a fair value of approximately $200,300 and $215,100 at September 30, 2022 and 2021, respectively.

For the years ended September 30, 2022 and 2021, the Organization did not incur administrative costs for either plan.

5. In-Kind Contributions

Contributed goods and services are reflected as donated services and in-kind contributions support and expenses in the accompanying financial statements. The products and professional services are recorded at their estimated fair value. On behalf of the Organization, the County directly paid approximately $145,700 of administrative expenses, $21,500 of inspector general expenses, $19,200 of technology support, and $62,500 of other contractual service expenses for the year ended September 30, 2022.

The Organization recognized approximately $2,467,000 of advertising, promotion, and consulting as donated services, which are reflected in the Statement of Activities as donated services. These amounts primarily include co-op advertising with sports fundraisers and international airlines, and are recognized as support, under the caption of donated services in the Statements of Activities, and as marketing – advertising in the Statement of Functional Expenses. Advertising and promotion are valued based on prices of advertising time and/or space. Consulting services are value based on the price of the services provided.

6. Concentration of Credit Risk

The Organization maintains its cash and cash equivalents in one qualified public depository pursuant to Florida State Statute, Chapter 280, Florida Security for Public Deposits Act, and are covered by either federal depository insurance or collateral held by the Chief Financial Officer of Florida.

Any losses to public depositors are covered by applicable deposit insurance, sale of securities pledged as collateral, and, if necessary, assessments against other qualified public depositories of the same type as the depository in default. Management believes the Organization is not exposed to any significant credit risk on its deposits.

For the Years Ended September 30, 2022 and 2021

7. Risks and Uncertainties

On March 11, 2020, the World Health Organization characterized Coronavirus (COVID-19) as a pandemic, and on March 13, 2020, the President of the United States declared a national emergency relating to the disease. This unprecedented situation resulted in the temporary contraction of activities and operating hours for many individuals and organizations, including Discover Palm Beach County, Inc. and those that interact with and support Discover Palm Beach County, Inc. The COVID-19 pandemic and resulting global disruptions also caused economic uncertainty and volatility in financial markets. As a result, Discover Palm Beach County, Inc.’s 2021-22 and forward operations and financial results may be adversely affected by Governmental restrictions on in-person meetings, decline in governmental funding, and the potential inability to conduct certain production activities. Management believes Discover Palm Beach County, Inc. is taking appropriate actions to mitigate these negative effects; however, the full impact of COVID-19 continues to evolve as of the date of this report and cannot be reasonably estimated as these events are still developing

8. Payroll Protection Program - Loan Forgiveness

The Organization applied for and received a Paycheck Protection Program (PPP) loan on April 5, 2021 in the amount of $752,690 to fund payroll and related expenses. The Paycheck Protection Program is part of the Coronavirus, Aid, Recovery and Economic Security Act (the “CARES Act”). In accordance with the provisions of this program, the loan was forgiven on September 30, 2021.

9. CARES Act - Employee Retention Credit

The Coronavirus, Aid, Recovery and Economic Security Act (the “CARES Act”) provides an employee retention credit (“CARES Employee Retention credit”), which is a refundable tax credit against certain employment taxes of up to $5,000 per employee for eligible employers. The tax credit was equal to 50% of qualified wages paid to employees during a quarter, capped at $10,000 of qualified wages per employee through December 31, 2020. Additional relief provisions were passed by the United States government, which extend and slightly expand the qualified wage caps on these credits through September 30, 2021. Based on these additional provisions, the tax credit is now equal to 70% ($7,000) of qualified wages paid to employees during a quarter, and the limit on qualified wages per employee has been increased to $10,000 of qualified wages per quarter. The Organization qualified for the tax credit under the CARES Act. During the fiscal year ended September 30, 2021, the Organization recorded $695,670 in income related to the CARES Employee Retention Tax Credit on the Organization’s Statements of Activities

As of September 30, 2022 and 2021, the Organization has $252,888 and $308,722, respectively in receivables related to the CARES Employee Retention Credit, which is recorded as “CARES Act –Employee Retention Credit receivables” on the Organization’s Statements of Financial Position

10. Subsequent Events

Management has evaluated subsequent events through April 7, 2023, the date on which these financial statements were available to be issued, and determined that they were no further disclosures required in these financial statements.