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Sarasota Manatee Airport Authority

Contents Report of Independent Certified Public Accountants .......................................................................................................1 Management’s Discussion and Analysis .........................................................................................................................3 Basic Financial Statements Enterprise Fund Statements of Net Assets ........................................................................................................................................ 17 Statements of Revenues, Expenses and Changes in Net Assets ............................................................................. 19 Statements of Cash Flows ...................................................................................................................................... 20 Pension Trust Fund Statements of Plan Net Assets ................................................................................................................................ 21 Statements of Changes in Plan Net Assets ............................................................................................................. 22 Notes to Financial Statements ..................................................................................................................................... 23 Required Supplementary Information Pension Plan Schedule of Funding Progress .......................................................................................................... 41 Pension Plan Schedule of Employer Contributions ................................................................................................ 41 Supplemental Schedules Schedule of Operating Expenses ............................................................................................................................ 43 Schedule of Receipts and Disbursements – Bond Proceeds Account – 2003 Revenue Bonds ............................... 44 Schedule of Receipts and Disbursements – Cash – Unrestricted Operating and Investment Accounts.................. 45 Schedule of Debt Service Coverage ....................................................................................................................... 46 Government Auditing Standards and Single Audit Report of Independent Certified Public Accountants 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 ................................................................... 47 Report of Independent Certified Public Accountants on Compliance with Requirements that could have a Material Effect on Each Major Federal Program and State Project and on Internal Control over Compliance in Accordance with OMB Circular A-133 and Chapter 10.550 Rules of the Auditor General .......................................................................................................................... 49 Schedule of Expenditures of Federal Awards ........................................................................................................ 51 Schedule of Expenditures of State Financial Assistance Projects .......................................................................... 52 Notes to Schedule of Expenditures of Federal Awards and State Financial Assistance Projects .......................... 53 Scheduled of Findings and Questioned Costs ........................................................................................................ 54 Passenger Facility Charge Program Report of Independent Certified Public Accountants on Compliance with Requirements that could have a Direct and Material Effect on the Passenger Facility Charge Program and Internal Control over Compliance in Accordance with the Passenger Facility Program Audit Guide ............................................. 55 Schedule of Passenger Facility Charges Collected and Expended ......................................................................... 57 Notes to Schedule of Passenger Facility Charges .................................................................................................. 58 Schedule of Findings and Questioned Costs Passenger Facility Charge Program ................................................. 59 Independent Certified Public Accountants’ Management Letter ............................................................................ 60

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Report of Independent Certified Public Accountants Members of the Board Sarasota Manatee Airport Authority Sarasota, Florida We have audited the accompanying statements of net assets of the enterprise fund and the statements of plan net assets of the pension trust fund of the Sarasota Manatee Airport Authority (the “Authority”), as September 30, 2010 and 2009, and the related statements of revenue, expenses and changes in net assets and cash flows and the statements of changes in plan net assets for the years then ended. These financial statements are the responsibility of the Authority’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinions.

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the enterprise fund and the pension trust fund as of September 30, 2010 and 2009, and the respective changes in financial position, and, where applicable, cash flows thereof for the years then ended in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 (Impact of Recently Issued Accounting Principles), the September 30, 2009 Governmental Activities assets, liabilities and net assets have been restated to reflect the effects of adopting GASB No. 51: Accounting and Financial Reporting for Intangible Assets and GASB No. 53: Accounting and Financial Reporting for Derivative Instruments. We audited the adjustments necessary to restate the September 30, 2009, net balances provided in Note 1. In our opinion, such adjustments are appropriate and have been properly applied.

In accordance with Government Auditing Standards, we have also issued our report dated January 18, 2011 on our consideration of the Authority'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 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 internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and important for assessing the results of our audit.

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The management’s discussion and analysis and the pension plan schedules of funding progress and employer contributions on pages 3 through 16 and 41, respectively, are not a required part of the basic financial statements, but are supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures which consisted primarily of inquiries of management regarding the methods of measurement and presentation of the required supplemental information. However, we did not audit the information and express no opinion on it.

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Authority's basic financial statements. The supplemental schedules as listed in the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements. In addition, the accompanying schedule of expenditures of federal awards and state financial assistance and the schedule of passenger facility charges collected and expended for the year ended September 30, 2010 are presented for the purposes of additional analysis as required by the U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, Chapter 10.550, Rules of the Auditor General–Local Governmental Entity Audits and Passenger Facility Charge Audit Guide for Public Agencies, issued by the Federal Aviation Administration, and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.

Tampa, Florida January 18, 2011

Sarasota Manatee Airport Authority Management’s Discussion and Analysis September 30, 2010 and 2009

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The following Management Discussion and Analysis (MD&A) of the Sarasota Manatee Airport Authority’s (the “Authority”) activities and financial performance provides an introduction to the basic financial statements of the Authority for the year ended September 30, 2010 with comparative information for the year ended September 30, 2009. The information contained in this MD&A should be considered in conjunctions with the information contained in the financial statements and the notes thereto, which are essential to a full understanding of the financial statement data. Authority Background and History The Authority is an independent special district pursuant to the constitution and laws of Florida, particularly Chapter 91-358, Laws of Florida, as amended (the “Act”), revising and consolidating Chapter 31263, Special Laws of Florida, 1955, which, by the Act authorized the Authority to own and operate the Sarasota Bradenton International Airport (the “Airport”). The Authority has jurisdiction, control, supervision and management of the Airport. The Authority's Board consists of six members who are appointed on a non-partisan basis to four-year staggered terms. The Act requires that three members of the Authority be residents of, and be appointed within, each of Sarasota and Manatee Counties. The Act further requires that the Chairperson elected by the members thereof, alternate county representation annually. The Airport is situated on approximately 1,100 acres located in Sarasota and Manatee Counties and the City of Sarasota. It is classified as a small hub airport by the Federal Aviation Administration (FAA). The airport has two crossing asphalt-surfaced runways, 4/22 (NE/SW) and 14/32 (SE/NW). Both runways were built in the early 1940’s. Runway 4/22, at 5,004 feet long is used almost exclusively by general aviation aircraft. Runway 14/32 was extended in 1969 to 7,003 feet and again in 2001 to its present length of 9,500 feet. As the main carrier runway, it is used by commercial jets as well as general aviation aircraft. The current terminal building opened to travelers on October 29, 1989. It is located southwest of the intersection of runways 4/22 and 14/32 and has approximately 240,000 square feet of interior space. The Authority is self supporting, using aircraft landing fees, fees from terminal and other rentals, and revenues from concessions to fund operating expenses. Operating expenses of the Authority are not taxpayer funded. Construction programs are funded by federal and state grants, Passenger Facility Charges (PFCs), and Authority revenues.


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Airport activities during 2010 as compared to 2009 are as follows:

% IncreaseFY 2010 FY 2009 (Decrease)

Enplanements 662,374 672,273 -1.5%Aircraft Operations 102,190 107,676 -5.1%Landed Weight 720,958,210 738,143,210 -2.3%

Aviation is a highly cyclical industry that has been repositioning itself in fiscal year 2010. Changes have been focused on building a new foundation for profitability which has primarily been centered upon adjustment in capacity and stimulation of improved yield for the airlines within the entire industry. The capacity adjustments at SRQ (SRQ is the Airport Identifier Code for the Sarasota Bradenton International Airport) have been in step with reductions across the nation. These changes are the foundation blocks for industry profitability and future growth at SRQ. With the desire of the Authority to increase air service to the Airport, the Authority passed several resolutions waiving fees such as landing fees and terminal rent fees in an effort to attract new air service. The following is a summary of the financial results for the years ended September 30, 2010 and 2009: Fiscal year 2010 operating revenue increased by 1.4% over 2009 and fiscal year 2009 operating revenues decreased by 2.2% from 2008. A large percentage of operating revenues at the Authority is directly related to passenger volumes and aircraft operations. In fiscal year 2010, operating expenses before depreciation and amortization increased 1.2% over 2009. The primary increase was in salaries and employee benefits due to the reacquisition of the fire department. In fiscal year 2009, operating expenses before depreciation and amortization decreased 2.8% from 2008. The primary decrease was a result of a decrease in administration and general expenses. Non-operating revenues and expenses in fiscal year 2010 decreased 17.4% from 2009 due to the defeasance of the 2003 bonds. Non-operating revenues and expenses in fiscal year 2009 decreased 68.4% from 2008 due to the sale of the museum building in fiscal year 2008 and a decrease in PFC’s. Capital contributions decreased 39.3% in 2010. Capital contributions in fiscal year 2009 decreased by 2.7% from 2008. These fluctuations are influenced by factors such as grant availability and project timing. During 2010, the Authority recorded a special item due to the termination of a lease and the purchase of the leasehold interest.


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Summary of Operations and Changes in Net Assets FY 2009 FY 2008

FY 2010 (As Restated) (As Restated)

Operating revenues 17,845,494$ 17,603,319$ 18,007,988$

Operating expenses (21,580,718) (21,575,383) (21,692,687)

Loss before non-operating revenues and expenses (3,735,224) (3,972,064) (3,684,699) Non-operating revenues and expenses, net 1,765,990 2,137,390 6,766,971

Gain (Loss) before capital contributions and special item (1,969,234) (1,834,674) 3,082,272 Capital contributions 3,768,005 6,210,304 6,381,962 Special item (345,000) - -

Increase in Net Assets 1,453,771$ 4,375,630$ 9,464,234$

Summary of Net Assets Over time, net assets may serve as a useful indicator of the Authority’s financial position. The Authority’s net assets exceeded liabilities by approximately $139.5 million at September 30, 2010, a $1.5 million increase from September 30, 2009 and the authority’s net assets exceeded liabilities by approximately $138 million at September 30, 2009, a $4.4 million increase from September 30, 2008.

FY 2009 FY 2008FY 2010 (As Restated) (As Restated)

Assets:Current and other assets 32,495,855$ 37,581,236$ 36,581,573$ Capital assets, net 122,413,599 124,689,077 124,450,553

Total assets 154,909,454$ 162,270,313$ 161,032,126$

Liabilities:Revenue bonds payable, less current portion 8,324,120$ 15,931,426$ 19,585,357$ Deffered revenue bonds payable 811,749 1,002,540 - Other liabilities 6,278,231 7,294,764 7,780,816

Total liabilities 15,414,100$ 24,228,730$ 27,366,173$

Net assets:Invested in capital assets, net of related debt 111,374,225$ 105,010,325$ 101,272,435$ Restricted 8,422,194 13,040,261 8,486,492 Unrestricted 19,698,935 19,990,997 23,907,026

Total net assets: 139,495,354$ 138,041,583$ 133,665,953$


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The largest portion of the Authority’s net assets each year represents its investment in capital assets (e.g., land, buildings, improvements and equipment), less the related indebtedness outstanding used to acquire and construct those capital assets. The Authority uses these capital assets to provide services to its passengers and visitors to the Airport; consequently, these assets are not available for future spending. Although the Authority’s investment in its capital assets is reported net of related debt, the resources required to repay this debt must be provided annually from operations, since it is unlikely the capital assets themselves will be liquidated to pay liabilities. An additional portion of the Authority’s net assets represents bond reserve funds that are subject to external restrictions on how they can be used under bond resolutions and PFC’s that are restricted by Federal regulations and a bond resolution until they can be used to pay future indebtedness. The remaining unrestricted net assets may be used to meet any of the Authority’s ongoing obligations. Airport Use Agreements The Authority has entered into Airport Use Agreements with the principal commercial air carriers that serve the airport. For 2010 and 2009, the signatory airlines are AirTran Airways, Continental, Delta Air Lines, JetBlue Airways, and US Airways. The signatory airlines are granted the non-exclusive use of the Airport for the purpose of operating an air transportation system for the carriage of persons, property, cargo and mail, according to the rules and regulations of the Authority. The current agreement for Continental expires in 2013 and the other signatory airline agreements expire in 2014. Rates and Charges Each of the signatory airlines leases space in the terminal for its exclusive use with the right to make certain leasehold improvements. Each of the signatory airlines pays monthly: (1) rentals for terminal building space, (2) landing fees, and (3) preferential apron space rental. Rentals and landing fees may be adjusted by the Authority, usually on an annual basis, to maintain a balanced budget. Rates and charges for recent years are as follows:

FY FY FY

2010 2009 2008

Landing fee (per 1,000 lbs MGLW)

Signatory 0.84 0.88 0.88

Non-signatory 0.92 0.97 0.97Average terminal rate (per square foot)

Signatory 59.78 58.70 56.17

Non-signatory 65.76 64.57 61.79

Apron fee rental (per linear foot) 263.60 227.41 223.59

Air cargo facility (per square foot) 11.22 11.22 11.22

Landing Fees All costs of the airfield runway area, as well as the cost of unleased terminal space, are combined in a monthly landing fee based upon the signatory airline’s aircraft arrivals during the month. The landing fee is computed by multiplying the maximum gross certified landing weight of the aircraft by a landing fee rate expressed in terms of thousand pound units of landed weight.


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Revenues A summary of revenues for the year ended September 30, 2010 and the amount and percentage of change in relation to prior year amounts is as follows:

Increase Percent2010 Percent (Decrease) Increase

Amount of Total from 2009 (Decrease)

Operating Revenues:Building rentals 6,957,267$ 33.3% 495,663$ 7.7%Car rental concessions 3,847,452 18.4% 165,060 4.5%Parking lot fees 2,105,387 10.1% 162,573 8.4%Landing fees 490,612 2.3% (518,961) -51.4%

Other airfield revenue 2,298,151 11.0% (25,259) -1.1%Concessions 822,063 3.9% (2,761) -0.3%Non-aviation system revenue 1,282,170 6.1% 92,204 7.7%Other revenue 42,392 0.2% (126,344) -74.9%

Total Operating Revenues 17,845,494 85.3% 242,175 1.4%

Non-Operating Revenues:Interest and other investment income 323,121 1.5% (265,584) -45.1%

Passenger facility charges 2,721,002 13.1% (37,216) -1.3%

Other miscellaneous 26,611 0.1% (4,450) -14.3%

Total Non-Operating Revenues 3,070,734 14.7% (307,250) -9.1%

Total Revenues 20,916,228$ 100.0% (65,075)$ -0.3%

The following chart shows the major sources and the percentage of revenues for the year ended September 30, 2010:

33%

18%

10%

1%11%

4%6%

1%

2%

13%

1%

Building rentals

Car rental concessions

Parking lot fees

Landing fees

Other airfield revenue

Concessions

Non-aviation system revenue

Other revenue

Interest and other investment income

Passenger Facility Charges

Other miscellaneous


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Expenses A summary of expenses for the year ended September 30, 2010 and the amount and percentage of change in relation to prior year amounts is as follows:

Increase Percent

2010 Percent (Decrease) IncreaseAmount of Total from 2009 (Decrease)

Operating Expenses:Depreciation and amortization 7,745,428$ 33.8% (152,078)$ -1.9%

Salaries and employee benefits 8,975,405 39.2% 1,289,679 16.8%

Administration and general 2,698,660 11.8% (1,101,527) -29.0%Maintenance 1,315,379 5.7% 174,803 15.3%

Utilities 845,846 3.7% (205,542) -19.5%

Total Operating Expenses 21,580,718 94.2% 5,335 0.0%Non-Operating Expenses:

Interest expense 955,825 4.2% (232,108) -19.5%

Amortization of bond issuance costs 126,988 0.6% 74,327 141.1%

Loss on Defeasance of 2003 Bonds 221,931 1.0% 221,931 100.0%

Total Non-Operating Expenses 1,304,744 5.8% 64,150 5.2%

Total Expenses 22,885,462$ 100.0% 69,485$ 0.3%

The following chart shows the major cost centers and the percentage of expenses for the year ended September 30, 2010:

33%

39%

12%

6%

4%4%

1%1%

Depreciation and amortization

Salaries and employee benefits

Administration and general

Maintenance

Utilities

Interest expense

Amortization of bond issuance costs

Loss on Defeasance of 2003 Bonds


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Summary of Cash Flow Activities The following shows a summary of the major sources and uses of cash and cash equivalents for the past two years. Cash equivalents are considered cash-on-hand, bank deposits and highly liquid investments with an original maturity of three months or less.

FY 2010 FY 2009 FY 2008

Cash flows from Operating Activities 4,026,514$ 3,146,833$ 5,949,078$ Cash flows from Financing Activities (7,925,719) (4,089,360) 1,332,507 Cash flows from Non-Capital Financing Activities (724,601) - - Cash flows from Investing Activities 3,140,024 (461,722) 2,008,293

Net increase (decrease) in Cash and Cash Equivalents (1,483,782) (1,404,249) 9,289,878

Cash and Cash Equivalents:Beginning of year 19,090,482 20,494,731 11,204,853

End of year 17,606,700$ 19,090,482$ 20,494,731$

The Authority’s available cash and cash equivalents decreased from approximately $19.1 million at the end of fiscal year 2009 to approximately $17.6 million at the end of fiscal year 2010 and decreased from approximately $20.5 million at the end of fiscal year 2008 to approximately $19.1 million at the end of fiscal year 2009. Airport Statistics The following operating and passenger data are provided to comply with the Authority’s covenant to holders of the Series 2006 bonds to provide continuing disclosure of such information.

Fiscal Year Total

Yearly Percent (Decrease) Increase

Airport as Percent of U.S. Total

2006 689,673 5.7% 0.092007 789,165 14.4% 0.102008 779,057 -1.3% 0.102009 672,273 -13.7% 0.092010 662,374 -1.5% 0.09

Fiscal Year Historical Passenger Enplanements


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Calendar Year Total

Yearly Percent (Decrease) Increase

Airport as Percent of U.S.

Total

2006 715,137 6.4% 0.092007 783,964 9.6% 0.102008 755,162 -3.7% 0.102009 677,419 -10.3% 0.10

Calendar Year Historical Passenger Enplanements

Fiscal YearTotal

DeparturesAverage Daily

Departures

Enplaned Passengers per

Departure

2006 9,623 26 722007 9,873 27 802008 9,677 27 812009 7,195 20 932010 6,815 19 97

Airline Aircraft Departures

As of September 2010, the Airport was served by five national airlines (AirTran, Continental, Delta, JetBlue and US Airways) and one commuter airline, Comair, (collectively, the “Participating Airlines”). In April of 2008, Delta and Northwest announced a merger agreement. The operating certificates for Delta and Northwest were merged on December 31, 2009 and the reservation systems were merged on January 31, 2010; officially retiring the Northwest Brand. In fiscal year 2010, the top four airlines accounted for 98% of total enplanements. Delta ranks first in number of enplaned passengers (41%), with AirTran ranking second (30%), US Airways third (16%) and JetBlue ranking fourth (10%). The tables on the following page set forth information on passenger enplanements and landed weight by airlines. The Airport remains actively engaged in on-going marketing activities to enhance service by incumbent carriers as well as recruit service from airlines not currently serving the Airport Service Area.


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2006 2007 2008 2009 2010

AirTran 191,115 227,797 218,114 216,163 195,595Continental 83,041 83,396 75,640 - -

Delta 274,509 268,652 263,025 267,030 272,613

JetBlue 1,133 57,006 65,179 77,128 68,454

Northwest 22,480 28,853 18,668 10,843 5,056

US Airways 92,462 108,206 94,601 85,935 108,126

Other Airlines 1

24,933 15,255 43,830 15,174 12,530

Totals 689,673 789,165 779,057 672,273 662,374

2006 2007 2008 2009 2010

AirTran 27.7% 28.9% 28.0% 32.1% 29.5%Continental 12.0% 10.6% 9.7% 0.0% 0.0%Delta 39.8% 34.0% 33.6% 39.7% 41.2%JetBlue 0.2% 7.2% 8.4% 11.5% 10.3%Northwest 3.3% 3.7% 2.4% 1.6% 0.8%US Airways 13.4% 13.7% 12.3% 12.8% 16.3%Other Airlines

13.6% 1.9% 5.6% 2.3% 1.9%

Totals 100.0% 100.0% 100.0% 100.0% 100.0%

1 Includes Air Canada, Allegiant, American Eagle, Canjet, Cape Air, Florida Coastal,

Gold, Ryan/Pace, Tans State, USA 3000, & Vision.

Fiscal Years ended September 30, 2006 - 2010

Airline Passenger EnplanementsFiscal Years ended September 30, 2006 - 2010

Airline Market SharesEnplaned Passengers


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2006 2007 2008 2009 2010

AirTran 234,144 282,668 243,904 231,756 214,256Continental 92,799 91,724 85,372 - -

Delta 334,537 304,042 301,404 292,902 290,972JetBlue 1,280 63,848 77,215 88,215 77,728Northwest 29,870 33,394 21,190 12,188 5,965US Airways 111,026 126,415 102,727 91,812 113,647Other Airlines

131,278 20,878 64,839 21,270 18,390

Totals 834,934 922,969 896,651 738,143 720,958

2006 2007 2008 2009 2010

AirTran 28.0% 30.6% 27.2% 31.4% 29.7%Continental 11.1% 9.9% 9.5% 0.0% 0.0%Delta 40.1% 33.0% 33.4% 39.7% 40.4%JetBlue 0.1% 6.9% 8.6% 12.0% 10.8%Northwest 3.6% 3.6% 2.4% 1.7% 0.8%US Airways 13.3% 13.7% 11.7% 12.4% 15.8%

Other Airlines 1

3.8% 2.3% 7.2% 2.8% 2.5%

Totals 100.0% 100.0% 100.0% 100.0% 100.0%

1 Includes Air Canada, Allegiant, American Eagle, Canjet, Cape Air, Florida Coastal,

Gold, Ryan/Pace, Tans State, USA 3000, & Vision.

Landed WeightsFiscal Years ended September 30, 2006 - 2010

Share of total landed weight

Airline Landed WeightsFiscal Years ended September 30, 2006 - 2010

(in thousand pounds)

Airline Market Shares


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Aircraft Operations The volume of aircraft operations at the Airport, as reported by the FAA air traffic control tower, is presented below. Aircraft operations consist of aircraft landings and departures and are reported by the FAA in four categories: air carrier, air taxi and commuter airline, general aviation, and military. Aircraft operations for fiscal year 2010 totaled 102,190.

Fiscal Year Air CarrierAir Taxi and Commuter

General Aviation Military Total

2006 15,468 11,641 133,792 2,733 163,6342007 17,290 8,999 114,995 2,046 143,3302008 16,335 10,686 108,367 2,177 137,5652009 13,550 7,803 84,251 2,072 107,6762010 13,769 6,896 79,578 1,947 102,190

Aircraft OperationsFiscal Years ended September 30, 2006 - 2010

Financial Statements The Authority’s financial statements are prepared on an accrual basis in accordance with generally accepted accounting principles promulgated by the Government Accounting Standards Board (“GASB”). The bulk of the operations of the Authority are recorded in a single enterprise fund with revenues recognized when earned, not when received. Expenses are recognized when incurred, not when they are paid. Capital assets are capitalized and, except for land, depreciated over their useful lives. Amounts are restricted for debt service and, where applicable, for construction activities. The accompanying financial statements include statements for the enterprise fund and the Authority’s employee pension plan. The enterprise fund statements are comprised of the Statements of Net Assets; the Statements of Revenues, Expenses and Changes in Net Assets; and the Statements of Cash Flows. Net assets are displayed in three components: invested in capital assets, net of related debt; restricted; and unrestricted. The component of net assets comprising invested in capital assets, net of related debt, is net of accumulated depreciation and reduced by the outstanding balances of any outstanding debt that is attributable to the acquisition, construction or improvements of those assets. The Statements of Cash Flows present information showing how the Authority’s cash and cash equivalents changed during the fiscal year. The Statements of Cash Flows classify cash receipts and cash payments as resulting from operating activities, capital and non-capital related financing activities, and investing activities. The pension fund statements include a Statements of Plan Net Assets and a Statements of Changes in Plan Net Assets. Capital Acquisitions and Construction Activities During fiscal year 2010, the Authority expended approximately $5.5 million on capital activities. $2.3 million was expended on runway, taxiway and airfield improvements including enhancements to the airfield service road, while $1.8 million included continuing projects for terminal building improvements,


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rehabilitation of the public address/paging system, terminal access roadway and parking enhancements. The remaining $1.4 million was expended for land and capital equipment purchases. During fiscal year 2010, many projects came to completion and were closed from construction-in-progress to their respective capital accounts. These projects totaled approximately $8.6 million and were as follows: Vehicle Purchases $ 104,712 Lift Station/Sanitary sewer upgrades 31,355 Parking Lot Toll Booths 49,671 Telephone System Upgrades 50,511 Chiller Replacement 434,792 USS Renovations 43,701 Access Road 243,091 Taxiways 981,663 Runways 2,318,527 ATCT site study 388,886 Vehicle storage building 23,548 Airfield Lighting 1,170,078 Term access/video surveillance 219,696 Public Address System 52,135 Service Road 1,993,389 Master Plan Upgrade 471,095 Capital projects are funded using a variety of financing techniques, including federal grants with matching state grants, PFCs and airport funds. Additional information on the Authority’s capital asset commitments can be found in Note 9 – Commitments and Contingencies, of the Notes to the Financial Statements. Long-term Debt Administration

The Authority had outstanding long-term debt of $12.1 million and $21.2 million as of September 30, 2010 and 2009, respectively. The following table reflects the debt activities that occurred during fiscal year 2010:

Total TotalOutstanding Bonds Principal Outstanding

10/1/2009 Issued Paid Defeased 9/30/2010

Revenue refunding bonds:

Series 2006 18,015,000$ -$ 5,855,000$ -$ 12,160,000$ Series 2003 3,210,000 - 600,000 2,610,000 -

21,225,000$ -$ 6,455,000$ 2,610,000$ 12,160,000

Less current maturities (2,850,000)

Long term portion 9,310,000

Less unamortized loss on refunding (985,880)

Total 8,324,120$


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Bond ratings The Series 2006 bonds are variable rate demand bonds payable from an irrevocable direct pay Letters of Credit issued by SunTrust Banks, Inc. SunTrust’s bank rating as of September 30, 2010 were A2 (Moody’s) and BBB+ (Standard and Poor’s). Passenger Facilities Charges (PFC) On June 29, 1992, the Authority received approval from the FAA of its first application to impose a $3.00 PFC at the Airport effective September 1, 1992. The authorization to impose the PFC is contingent on continued compliance with the terms of Federal Aviation Regulations. A second application to use the proceeds of the first application was filed with the FAA and approval was granted in its Record of Decision dated January 31, 1995. Applications three and four were combined “impose and use” PFC applications and were approved by the FAA in Records of Decision dated December 15, 1995 and October 3, 2000, respectively. On February 22, 2002 an amendment to the fourth application was administratively approved by the FAA that increased the charge level from $3.00 to $4.50 per enplaned passenger and increased the approved collection amount. On June 17, 2009, amendments to application numbers one, two and three were administratively approved by the FAA. The effect of these amendments was to decrease the allowed collection amounts in each application to the amounts already imposed and used for each project within those applications, effectively closing each one. At that time, PFC collections held in trust fund accounts totaled approximately $5 million. These funds were then immediately available to be used for application four. On July 23, 2009, an amendment to application four was approved by the FAA that increased the allowed impose and use amount by $22,194,844. Application four is now the only active application. The Authority estimated this action has extended the charge expiration date to February 2022. Since inception of the PFC’s program, the Authority has collected approximately $45.1 million, including interest earnings, and expended approximately $44.8 million of these locally generated funds. Special Item At the June 2010 board meeting, the Authority approved the early termination of the Asolo lease to allow the site to be developed for aviation use. The Authority paid Asolo $500,000 for the termination and extinguishment of the lease and the leasehold interest. Included in the leasehold interest was a hangar with an appraised value of $155,000 which is in Capital Assets. One of the Authority’s Fixed Base Operators is currently using this building and has agreed to purchase this hangar from the Authority in fiscal year 2011. Economic Factors and Next Year’s Budgets and Rates As a result of high fuel and operating costs, Continental Airlines chose to terminate service at SRQ on September 3, 2008. As a signatory carrier, Continental remains responsible for terminal fixed rents through September 2013, the end date of their existing agreement. The remaining signatory carriers have reduced capacity to align more closely with perceived decreases in demand brought on by the general economic slowdown. Airport management has assessed this issue in determining its demand forecast and operating requirements for the next fiscal year. The Authority reviews its airline rates and charges as part of the annual budget development and adoption process. Despite the cost pressures of health and welfare benefits, utilities, increases in TSA mandated


16

security costs and technology, the fiscal year 2011 budget rates and charges remain largely unchanged. In particular, the landing fee decreased 1.2% and terminal building rental rates increased only 0.5%. Request for Information This financial report is designed to provide a general overview of the Authority’s finances for all those interested. Questions concerning any of the information provided in this report, or request for additional information should be addressed in writing to the Senior Vice President, Chief Financial Officer, Sarasota Manatee Airport Authority, 6000 Airport Circle, Sarasota, FL 34243 or by email to [email protected].

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Sarasota Manatee Airport AuthorityStatements of Net AssetsSeptember 30, 2010 and 2009

2009Assets 2010 (As Restated)Current Assets

Unrestricted AssetsCash and cash equivalents $ 9,387,528 $ 6,838,190

Investments 11,076,550 13,075,950

Accounts receivable 731,061 719,670

Notes receivable 8,148 7,740

Grants receivable 455,230 1,280,922 Inventory of materials and supplies 219,695 211,505

Prepaid expenses and other current assets 647,880 536,988

Total unrestricted assets 22,526,092 22,670,965

Restricted Assets

Cash and cash equivalents 8,219,172 12,252,292

Investments - 636,397

Accounts receivable 346,401 336,016 Accrued interest receivable - 9,525

Total restricted assets 8,565,573 13,234,230

Total current assets 31,091,665 35,905,195

Non-Current AssetsNotes receivable 457,695 465,827

Capital assets, net 122,413,599 124,689,077

Deferred outflow of resources 811,749 1,002,540

Deferred bond issuance costs (net of accumulated amortizationof approximately $1,591,000 and $1,464,000, respectively) 134,746 207,674

Total non-current assets 123,817,789 126,365,118

Total Assets $154,909,454 $ 162,270,313

The accompanying notes are an integral part of these financial statements.

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Sarasota Manatee Airport AuthorityStatements of Net Assets (continued)September 30, 2010 and 2009

2009

Liabilities and Net Assets 2010 (As Restated)Current Liabilities

Payable from unrestricted assets

Accounts payable 966,038$ 1,947,297$ Accrued expenses and other liabilities 1,028,209 1,198,496 Deferred revenue 1,290,605 - Current portion of revenue bonds payable 2,850,000 3,955,000

Total unrestricted liabilities 6,134,852 7,100,793

Current liabilities payable from restricted assetsAccrued revenue bond interest payable 73,170 113,546 Security deposits 70,209 80,425

Total restricted liabilities 143,379 193,971

Total current liabilities 6,278,231 7,294,764

Non-Current LiabilitiesDerivative investments - hedging 811,749 1,002,540 Revenue bonds payable, less current portion 8,324,120 15,931,426

Total non-current liabilities 9,135,869 16,933,966

Total liabilities 15,414,100 24,228,730

Net AssetsInvested in capital assets, net of related debt 111,239,479 104,802,651

Restricted 8,422,194 13,040,261 Unrestricted 19,833,681 20,198,671

Total net assets 139,495,354$ 138,041,583$


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Sarasota Manatee Airport AuthorityStatements of Revenues, Expenses and Changes in Net AssetsFor the Years ended September 30, 2010 and 2009

20092010 (As Restated)

Operating Revenues

Building rentals $ 6,957,267 $ 6,461,604 Car rental concessions 3,847,452 3,682,392

Parking lot fees 2,105,387 1,942,814

Landing fees 490,612 1,009,573

Other airfield revenue 2,298,151 2,323,410

Concessions 822,063 824,824

Non-aviation system revenue 1,282,170 1,189,966

Other revenue 42,392 168,736

Total operating revenues 17,845,494 17,603,319

Operating Expenses

Depreciation and amortization 7,745,428 7,897,506 Salaries and employee benefits 8,975,405 7,685,726

Administration and general 2,698,660 3,800,187

Maintenance 1,315,379 1,140,576 Utilities 845,846 1,051,388

Total operating expenses 21,580,718 21,575,383

Operating Loss (3,735,224) (3,972,064)

Non-Operating Revenues (Expenses)

Interest expense (955,825) (1,187,933)Interest and other investment income 323,121 588,705 Amortization of bond issuance costs (126,988) (52,661)

Passenger facility charges 2,721,002 2,758,218 Gain on disposal of capital assets 12,700 31,061 Audit Settlement 13,911 - Loss on defeasance of bonds (221,931) -

Total non-operating revenues 1,765,990 2,137,390

Loss before Capital Contributions and Special Item (1,969,234) (1,834,674)

Capital Contributions

Federal and state grants 3,768,005 6,210,304

Total capital contributions 3,768,005 6,210,304

Income before Special Item 1,798,771 4,375,630

Special Item (345,000) -

Net Assets

Increase in net assets 1,453,771 4,375,630

Restatement, Implementation GASB 51 - 1,488,067

Total net assets, beginning of year 138,041,583 132,177,886

Total net assets, end of year $ 139,495,354 $ 138,041,583


20

Sarasota Manatee Airport AuthorityStatements of Cash FlowsFor the Years ended September 30, 2010 and 2009

20092010 (As Restated)

Cash Flows from Operating Activities:Cash received from customers 17,637,413$ 17,350,135$ Cash paid to employees (7,655,672) (7,638,533) Cash paid to suppliers for goods and services (5,955,227) (6,564,769)

Net cash provided by operating activities 4,026,514 3,146,833

Cash Flows from Capital and Related Financing Activities:Principal paid on revenue bonds maturity (9,065,000) (3,825,000) Interest paid (643,507) (906,445) Purchases of capital assets (5,505,395) (7,947,986) Defeasance costs (53,560) - Bond Issue costs (500) - Proceeds from sale of PP&E 51,465 31,061 Acquisition of intangibles (3,320) (185,914) Capital contributions and grants 7,304,314 8,787,496 Payment of capital lease obligations - (2,867) Increase in security deposits (10,216) (39,705)

Net cash used in capital and related financing activities (7,925,719) (4,089,360)

Cash Flows from Non-Capital Financing Activities:Prepayment of bonds (171,581) - Buyout of lease (345,000) - Loss on defeasance of bonds (221,931) - Audit Settlement 13,911 -

Net cash used in non-capital financing activities (724,601) -

Cash Flows from Investing Activities:Proceeds from sales and maturities of investments 15,628,112 15,364,375 Purchases of investments (13,000,000) (16,403,045) Interest on restricted investments (9,570) (44,963) Interest on unrestricted investments 521,482 621,911

Net cash provided by (used in) investing activities 3,140,024 (461,722)

Net decrease in Cash and Cash Equivalents (1,483,782) (1,404,249) Cash and Cash Equivalents, Beginning of Year 19,090,482 20,494,731 Cash and Cash Equivalents, End of Year 17,606,700$ 19,090,482$

Cash and Cash Equivalents:Unrestricted 9,387,528$ 6,838,190$ Restricted 8,219,172 12,252,292

17,606,700$ 19,090,482$

Reconciliation of Operating Loss to Net Cash Provided by Operating Activities:Operating loss (3,735,224)$ (3,972,064)$ Adjustments to reconcile operating loss to net cash provided by operations:

Depreciation 7,498,436 7,843,323 Amortization 246,992 54,183 (Increase) decrease in accounts receivable (3,667) (78,244) (Increase) decrease in inventory, prepaid expenses and other assets (119,082) (146,466) Increase (decrease) in accounts payable and accrued expenses 139,059 (553,899)

Net cash provided by operating activities 4,026,514$ 3,146,833$


21


Statements of Plan Net AssetsPension Trust Fund - Employee Retirement FundSeptember 30, 2010 and 2009

2010 2009Assets

Investments, at fair valueEquity investments $ 4,734,275 $ 3,955,795 Real estate 483,372 425,308 Bonds/Fixed income 6,382,646 5,691,089

Total assets $11,600,293 $ 10,072,192

Net Assets

Held in trust for pension benefits $11,600,293 $ 10,072,192


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Sarasota Manatee Airport Authority Statements of Changes in Plan Net AssetsPension Trust Fund - Employee Retirement FundFor the years ended September 30, 2010 and 2009

2010 2009Additions

ContributionsEmployer $ 924,367 $ 811,783

Investment incomeNet appreciation in fair value of investments 1,140,719 81,638

Total investment income 1,140,719 81,638

Total additions 2,065,086 893,421

DeductionsBenefits paid 506,503 222,774

Administrative expenses 30,482 26,491

Total deductions 536,985 249,265

Change in net assets 1,528,101 644,156

Net Assets

Held in trust for pension benefits

Beginning of year 10,072,192 9,428,036

End of year $ 11,600,293 $ 10,072,192


Sarasota Manatee Airport Authority Notes to the Financial Statements September 30, 2010 and 2009

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1. Significant Accounting Policies

Nature of Entity The Sarasota Manatee Airport Authority (the “Authority”) is an independent special district pursuant to the constitution and laws of Florida, particularly Chapter 91-358, Laws of Florida, as amended (the “Act”), revising and consolidating Chapter 31263, Special Laws of Florida, 1955, which, by the Act authorized the Authority to own and operate the Sarasota Bradenton International Airport (the “Airport”). The Authority has jurisdiction, control, supervision and management of the Airport. The Authority's Board consists of six members who are appointed on a non-partisan basis to four-year staggered terms. The Act requires that three members of the Authority be residents of, and be appointed within, each of Sarasota and Manatee Counties. It is mandated that the Chairperson elected by the members thereof, alternate county representation on an annual basis. The Airport is situated on approximately 1,100 acres located in Sarasota and Manatee Counties and the City of Sarasota. It is classified as a small hub airport by the Federal Aviation Administration (FAA). 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 and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Basis of Presentation The Authority's financial statements are presented in the form of a single enterprise fund which encompasses all financial activity relative to owning, operating, and improving the Airport facilities plus a pension trust fund for the employee defined benefit pension plan. Governmental proprietary operations (enterprise funds) and pension trust funds are accounted for using a flow of economic resources measurement focus on an accrual basis of accounting. Revenues are recognized in the period in which they are earned and expenses are recognized in the period incurred. Revenues from airlines, concessions, rental cars and parking are reported as operating revenues. Transactions which are capital, financing or investing related are reported as non-operating revenues. All expenses related to operating the Airport are reported as operating expenses. Interest expense, financing costs are reported as non-operating expenses. The accounting and reporting policies of the Authority conform to the accounting rules prescribed by the Governmental Accounting Standards Board (GASB). Private sector standards of financial accounting and reporting issued prior to December 1, 1989 generally are followed in enterprise fund financial statements, to the extent that those standards do not conflict with or contradict GASB pronouncements. Governments also have the option of following subsequent private sector guidance for their enterprise funds, subject to this same limitation. The Authority has elected not to follow subsequent private sector guidance.


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Net assets for enterprise funds on the accompanying Statements of Net Assets are required to be segregated into the following four categories:

Invested in capital assets, net of related debt: Capital assets, net of accumulated depreciation and

outstanding debt balances (net of deferred losses and unamortized issuance costs) attributable to the acquisition, construction or improvement of those assets.

Restricted:

Nonexpendable – Net assets subject to externally imposed stipulations requiring that the Authority maintain them permanently. The Authority has no nonexpendable net assets. Expendable – Net assets whose use by the Authority is subject to externally imposed stipulations that can be fulfilled by actions of the Authority pursuant to those stipulations, or that expire by the passage of time. Such assets included the Authority’s bond construction funds on hand.

Unrestricted: Net assets that are not subject to externally imposed stipulations and are not invested in

capital assets. Unrestricted net assets may be designated for specific purposes by action of management or the Commissioners or may otherwise be limited by contractual agreements with outside parties.

Reporting Entity The accompanying financial statements present the financial position, results of operations and cash flows of the Authority in accordance with GASB Statement No. 14, The Financial Reporting Entity, as amended by GASB Statement No. 39, Determining Whether Certain Organizations are Component Units. As a result of applying the reporting entity criteria in GASB Statement Nos. 14 and 39, no component units exist in which the Authority has any financial accountability, which would require inclusion in the Authority's financial statements. Cash and Cash Equivalents The Authority considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Investments The Authority's investments are managed by the Senior Vice President, Chief Financial Officer in conjunction with the Sarasota County Clerk's Office. Investments in commercial paper are recorded at cost, which approximates fair value. Investments in U.S. Treasury and government agency securities are recorded at fair value, as determined by quoted market prices. All investment income, including changes in the fair value of investments, is reported as interest and other investment income in the Statements of Revenues, Expenses and Changes in Net Assets. Pension investments are valued at fair value. The pension plan’s unallocated insurance contracts are valued at contract value. Contract value represents contributions made under the contract plus interest at the contract rate, less funds used to pay benefits or administrative expenses charged by the Principal Life Insurance Company. The pension plan’s unallocated separate accounts are valued at fair value.


25

Concentrations of Credit Risk The Authority maintains its cash and cash equivalents with a large financial institution. All accounts are guaranteed by the Federal Deposit Insurance Corporation up to $100,000 per bank, increasing to $250,000 in October 2008. Cash deposits that exceed the federally insured amount are covered under Florida Statutes Chapter 280 (see Note 2). Additionally, the Authority has unrestricted and restricted investments in federal government agencies that have a high credit standing. The Authority does not believe there is a significant risk of non-performance from these agencies. Receivables Accounts and grants receivable are reported at realizable value. All receivables are expected to be collected as such; no allowance for doubtful accounts has been reflected. Inventories of Materials, Supplies and Fuel Inventories of materials and supplies are valued at FIFO and fuel is valued at weighted average cost. Restricted Assets Certain assets are restricted in accordance with the provisions of the bond covenants and in accordance with FAA restrictions, or as required by law. Assets restricted under the bond covenant are designated primarily for payment of debt service. When both restricted and unrestricted resources are available for use, it is the Authority’s policy to use restricted resources first, then unrestricted resources as needed. Capital Assets Assets with a cost of $1,000 or more are capitalized and recorded at cost, or the fair value at receipt for contributions. They are depreciated under the straight-line method over the following estimated useful lives: Building and structures 10 – 40 years Runways, taxiways and ramps 20 – 30 years Land improvements 10 – 20 years Fencing 7 – 10 years Lights and signs 7 – 10 years Equipment, furniture and fixtures 5 – 10 years Computers and other intangibles 3 – 5 years Project costs are capitalized and included in construction in progress as the costs are incurred and maintenance and repair costs are expensed as incurred. The accumulated project costs are transferred to depreciable capital assets upon completion. The gain or loss recognized on assets retired or otherwise disposed of is reflected in operations and the associated cost and related accumulated depreciation are removed from the accounts. Construction in progress consists mainly of terminal modifications to enhance baggage screening security, taxiway and runway construction, and construction of a new facilities vehicle storage building.


26

The costs of various easement rights, including the expenses incurred in sound proofing residences, are reported as aviation easements. The Authority adopted GASB 51, Accounting and Financial Reporting for Intangible Assets. This new statement determined easements have indefinite lives and therefore are not amortized. Deferred Bond Issuance Costs Deferred bond issue costs are amortized using the straight line method for the 2006 bonds. Impact of Recently Issued Accounting Principles In July 2007, the GASB issued Statement 51, Accounting and Financial Reporting for Intangible Assets. This Statement provides guidance regarding how to identify, account for, and report intangible assets. The requirements of this Statement are effective for financial statements for periods beginning after June 15, 2009. The Authority adopted GASB Statement 51 in fiscal year 2010. This statement requires the cumulative effect of applying the Statement to be reported as a restatement of beginning net assets, impacts the beginning balances in Capital Assets (Note 4). The effects of the accounting change on net assets as previously reported for fiscal year 2009 and prior years are shown below.

September 30, 2008 September 30, 2009

Net assets, as previously stated 132,177,886$ 136,172,158$

Accumulative effect of restatement of prior period

amortization on indefinite life intangible assets 1,106,709 1,488,067

Add back current period amortization expense onindefenite life intangible assets 381,358 381,358

Net assets, as restated 133,665,953$ 138,041,583$

September 30, 2008 September 30, 2009

Increase in net assets, as previously stated 9,082,876$ 3,994,272$

Add back current period amortization expense onindefenite life intangible assets 381,358 381,358

Increase in net assets, as restated 9,464,234$ 4,375,630$

In June 2008, the GASB issued Statement 53, Accounting and Financial Reporting for Derivative Instruments. GASB 53 addresses the recognition, measurement and disclosure of information regarding derivative instruments entered into by state and local governments. The requirements of this Statement are effective for financial statements for periods beginning after June 15, 2009. The Authority adopted GASB Statement 53 in fiscal year 2010. This statement requires the cumulative effect of applying this Statement be reported as a restatement of beginning net assets. There was no effect on total net assets due to the adoption of GASB 53. However, non-current assets (Deferred outflow of resources) and non-current liabilities (Derivative investments - hedging) increased by $1,002,540 at September 30, 2009.


27

Capital Contributions Contributions and grants are funds donated by various governmental agencies and Airport tenants for specific improvement to the Airport facilities (Improvements). In the normal course of business, the Authority applies for and receives money from the FAA under Airport Improvement Program grant agreements. Costs incurred under these agreements are subject to review and approval by the FAA. Contributions and grants for improvements are reported in the Statements of Revenues, Expenses and Changes in Net Assets after non-operating revenues and expenses as capital contributions. Passenger Facility Charges On June 29, 1992, the Authority received approval from the FAA to impose a $3.00 Passenger Facility Charge (PFC) at the Airport effective September 1, 1992. The authorization to impose the PFC is contingent on continued compliance with the terms of the Federal Aviation Regulations. A use application was filed with the FAA and a decision of approval was granted on December 15, 1995. In addition, another impose and use PFC application was filed and approved by the FAA in its Record of Decision dated October 3, 2000. On February 22, 2002 an amendment to that application was administratively approved by the FAA that increased the charge level from $3.00 to $4.50 per enplaned passenger and increased the approved collection amount. PFCs are restricted to expenditures for specified capital assets, or debt service thereon, and are reported as non-operating expense to the accompanying Statements of Revenues, Expenses and Changes in Net Assets. On June 17, 2009, amendments to application numbers one, two and three were administratively approved by the FAA. The effect of these amendments was to decrease the allowed collection amounts in each application to the amounts already imposed and used for each project within those applications, effectively closing each one. On July 23, 2009, an amendment to application four was approved by the FAA that increased the allowed impose and use amount by $22,194,844. Application four is now the only active application. The Authority estimated this action has extended the charge expiration date to February 2022. Revenue Recognition Airfield Landing Fee Charges – Landing fees are principally generated from scheduled airlines and non-scheduled commercial aviation and are based on the landed weight of the aircraft. The estimated landing fee structure is determined annually pursuant to an agreement between the Authority and the signatory airlines based on the operating budget of the Authority and is adjusted at year end for the actual landed weight of all aircraft. Landing fees are recognized as revenue when the related facilities are utilized (see Note 8). Terminal Rents, Out parcel Rentals, Concessions and Ground Transportation – Rental and Concession fees are generated from airlines, parking lots, food and beverage, retail, rental cars, advertising and other commercial tenants. Leases are for terms from one to fifty years and generally require rentals based on the volume of business, with specific minimum annual rental payments required. Rental revenue is recognized over the life of the respective leases and concession revenue is recognized based on reported concessionaire revenue. Parking Lot – Per the management agreement with Republic Parking, Authority revenue is recognized as gross parking sales net of operating expenses, including the management fee. Other – All other types of revenues are recognized when earned.


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Reclassification For comparability purposes, certain reclassifications have been made to the 2009 financial statements to conform to the 2010 presentation.

2. Cash, Cash Equivalents and Investments

Deposits All of the Authority’s public deposits are held in qualified public depositories pursuant to Florida Statutes, Chapter 280. Qualified public depositories are required to pledge collateral to the State Treasurer with a market value equal to 50% of the average daily balance of all public deposits in excess of any federal deposit insurance. In addition, to the extent that total public deposits exceed the total amount of the regulatory capital accounts of a bank or the regulatory net worth of a savings association, the required collateral shall have a market value equal to 125% of the deposits. In event of default by a qualified public depository, all claims for public deposits would be satisfied by the State Treasurer from the proceeds of federal deposit insurance, pledged collateral of the public depository in default and, if necessary, a pro rata assessment to the other qualified public depositories in the collateral pool. Therefore, the cash and time deposits are fully insured or collateralized.

The carrying value of the Authority’s deposits at September 30, 2010 and 2009 are approximately $17.6 million and $19.1 million respectively.

In addition to cash deposits, the Authority maintains cash on hand for the purpose of making change on transactions. The amount of cash on hand as of September 30, 2010 and 2009 was $900.

Investments As of September 30, 2010 and 2009, the Authority has the following investments and maturities:

FY 2010 Less than More than EffectiveFair Value 1 Year 1-3 Years 3 Years Duration

Unrestricted

Federal National Mortgage Assoc. 4,009,380$ -$ -$ 4,009,380$ 1.37

Federal Home Loan Bank 7,067,170 - - 7,067,170 0.52

Total Unrestricted 11,076,550 - - 11,076,550

Investment Type


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FY 2009 Less than More than EffectiveFair Value 1 Year 1-3 Years 3 Years Duration

Unrestricted

Federal National Mortgage Assoc. 2,014,380$ -$ 2,014,380$ 4.00

Federal Home Loan Bank 3,030,930 - - 3,030,930 3.28

Federal Home Loan Mortgage Corp 8,030,640 - - 8,030,640 2.56

Total Unrestricted 13,075,950 - - 13,075,950

Restricted

Federal Home Loan Mortgage Corp 636,397 - - 636,397 0.08

Total Restricted 636,397 - - 636,397

Total Investments 13,712,347$ -$ -$ 13,712,347$

Investment Type

Investments of the Authority conform to the provisions of Section 5(21) of Chapter 91-358, Laws of Florida (the “Sarasota-Manatee Airport Authority Act”), and an investment policy adopted pursuant to Florida Statutes, Section 218.415.

Interest Rate Risk. As a means of limiting its exposure to fair value losses arising from rising interest rates, the Authority’s investment policy limits its risk by maintaining an investment portfolio with limited volatility. Accordingly, no security shall have an estimated average return of principal exceeding five years. The weighted average duration of principal return for the portfolio shall generally be less than two years. However, securities in restricted accounts will have a maximum maturity consistent with the nature of the restricted accounts.

Credit Risk. The Authority is authorized under Florida Statutes, Section 218.415(16) and Section 5(21) of Chapter 91-358, Laws of Florida to invest in certain investments. All of the Authority’s investments carried a credit rating of AAA by Standard & Poor’s and Aaa by Moody’s as of September 30, 2010 and 2009.

Custodial Credit Risk. For an investment, custodial credit risk is the risk that in the event of the failure of the counterparty, the Authority will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The Authority’s investments are either held in the name of the Authority or held in trust under the Authority’s name by an independent third-party custodian.

Concentration of Credit Risk. The Authority’s investment policy establishes limitations on portfolio composition in order to control concentration of credit risk. The policy allows 100% of the portfolio to be invested in U.S. Treasury bills or notes, 75% to be invested in near cash accounts such as the State investment pool or money market and accounts, 65% to be invested in other U.S. Government agencies, 40% to be invested in certificates of deposit, 30% to be invested in commercial paper, and 25% to be invested in bankers acceptances. No more than 30% of the entire portfolio may be purchased or sold through one security dealer or bank. The Authority purchased 36% from RBS, 27.3% from FTN, 18.2% from Synovus, and 18.2% from Raymond James during the year ended September 30, 2010. The Authority places no limit on the amount they may invest in any one issuer.


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Deposits and Investments – Pension Trust Fund

Deposits At September 30, 2010 and 2009, the plan held no deposits. Investments The investment manager has been delegated with investment discretion for plan assets by the Authority. Investment balances in the plan are not allocated to individual participants, nor are investments subject to custodial credit risk or foreign currency risk. At September 30, 2010, the plan held investments as indicated below:

Fair Value Effective Fair Value Effective2010 Duration 2009 Duration

Fixed Income Investments

Core plus bond I Separate Account 2,448,771$ 4.55 2,147,897$ 4.51Bond and Mortgage Separate Account 2,234,054 4.80 2,155,230 4.39Inflation Protection Separate Account 1,010,733 7.54 848,315 7.43High Yield Separate Account 689,088 4.07 539,647 3.82

Total Fair Value of Fixed Income Investments 6,382,646 5,691,089

Marketable SecuritiesLarge U.S. Equity 3,134,142 2,619,159 Small/Mid U.S. Equity 746,653 584,364 International Equity 992,539 851,265 U.S. Property Separate Account 344,313 326,315

Total Marektable Securities 5,217,647 4,381,103

Total Investments 11,600,293$ 10,072,192$

Credit Risk. The fixed income investment accounts above are not rated for credit risk. Interest Rate Risk. The effective duration of Fixed Income Investments (excluding Money Market and Guaranteed Interest) is equal to 1.63 years. Concentration of Credit Risk. At September 30, 2010, the following are in any one organization, which represents five percent or more of net assets available for benefits: 2010 2009 Principal Financial Group (PFG) $11,600,293 $10,072,192 Custodial Credit Risk. All pension plan investments are held by PFG. There is no independent third-party custodian.


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3. Notes Receivable

In February 2005, the President, Chief Executive Officer’s (CEO), three-year employment contract included a provision that the Authority acquire a private residence, including furnishing to be used as the CEO’s personal residence. A provision in the renegotiated contract of July 2008, provided for the CEO to purchase the residence, including furnishings, at an independently determined market price of $316,500, with the Authority providing a private mortgage over thirty years at an interest rate of 4.37 percent. In addition, in April 2003, the Authority agreed to advance $170,000 of expenditures of DRI costs to one of their tenants, Innovation Green, for thirty years at an interest rate of 7 percent. The principal and interest are payable in the following amounts:

Fiscal Year EndingSeptember 30 Principal Interest Total

2011 8,148$ 24,375$ 32,523$ 2012 8,580 23,944 32,524 2013 9,035 23,489 32,524 2014 9,516 23,008 32,524 2015 10,023 22,500 32,523

2016 - 2020 58,802 103,816 162,618 2021 - 2025 76,619 85,999 162,618 2026 - 2030 100,235 62,383 162,618 2031 - 2035 131,670 30,948 162,618 2036 - 2038 53,215 3,640 56,855

Total 465,843$ 404,102$ 869,945$


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4. Capital Assets

A summary of changes in capital assets for the years ended September 30, 2010 and 2009 is as follows:

Balance atOctober 1, Transfers Balance at

2009 and September 30,(As Restated) Additions Deletions 2010

Land 18,990,919$ 1,060,312$ (120,173)$ 19,931,058$ Aviation easements 19,566,078 - 96,341 19,662,419 Intangibles 263,604 3,320 919,437 1,186,361 Site prep., utilities and drainage 13,887,064 - - 13,887,064 Buildings and structures 63,434,339 160,925 61,900 63,657,164 Runways, taxiways & ramps 75,445,940 - 3,167,863 78,613,803 Land improvements 12,297,414 - 2,267,835 14,565,249 Fencing 461,941 9,060 2,860 473,861 Lights and signs 2,392,946 - 1,145,425 3,538,371 Computers 810,935 55,159 (23,628) 842,466 Equipment, furniture and fixtures 17,073,904 126,425 (2,264,150) 14,936,179

224,625,084 1,415,201 5,253,710 231,293,995

Less accumulated depreciation (111,085,593) (7,745,428) 3,284,549 (115,546,472)

113,539,491 (6,330,227) 8,538,259 115,747,523

Construction in progress 11,149,586 4,093,514 (8,577,024) 6,666,076

124,689,077$ (2,236,713)$ (38,765)$ 122,413,599$

Balance atBalance at Transfers September 30,October 1, and 2009

2008 Additions Deletions (As Restated)

Land 18,990,919$ -$ -$ 18,990,919$

Avigation easements 19,566,078 - - 19,566,078 Intangibles 629,989 188,042 (554,427) 263,604 Site prep., utilities and drainage 13,887,064 - - 13,887,064 Buildings and structures 61,128,149 2,306,190 - 63,434,339 Runways, taxiways & ramps 75,310,633 135,307 - 75,445,940 Land improvements 10,787,350 1,510,064 - 12,297,414 Fencing 461,941 - - 461,941 Lights and signs 2,392,946 - - 2,392,946 Computers 817,986 59,903 (66,954) 810,935 Equipment, furniture and fixtures 16,041,042 1,144,858 (111,996) 17,073,904

220,014,097 5,344,364 (733,377) 224,625,084

Less accumulated depreciation (103,917,419) (7,897,506) 729,332 (111,085,593)

114,608,611 (2,553,142) (4,045) 113,539,491

Construction in progress 8,353,875 7,451,435 (4,655,724) 11,149,586

124,450,553$ 4,898,293$ (4,659,769)$ 124,689,077$


33

Depreciation expense for the years ended September 30, 2010 and 2009 on the above capital assets was $7,498,436 and $7,843,323, respectively.

5. Pension Plan

Plan Description The Sarasota Manatee Airport Authority Pension Plan (the “Plan”) is a single-employer defined benefit pension plan controlled by the provisions adopted pursuant to the Authority Agreement. The Plan is governed by the Authority, which is responsible for the management of plan assets. The Plan is administered by The Principal Financial Group. The Plan provides retirement, disability, and death benefits to Plan members and beneficiaries. The Principal Financial Group provides the Authority with a financial report that includes financial statements and required supplementary information for the Plan. The report is available to the public and can be obtained directly from the Authority. Active members of the Plan do not contribute to the Plan. Plan Membership As of October 1, 2010 and 2009, the pension plan’s membership consisted of:

2010 2009

Active employees 91 90Retirees and beneficiaries currently receiving benefits 30 27Terminated employees entitled to benefits, not yet receiving 18 22

Total 139 139 Funding Policy The contribution requirements of the Plan are established and may be amended by the Board Members of the Authority. The Authority is required to contribute an actuarially determined fixed amount annually. Annual Pension Cost For the year ended September 30, 2010 and 2009, the Authority's annual pension costs of $924,367 and $811,783 respectively were equal to the Authority's required and actual contributions. The required contributions for 2010 and 2009 were determined as part of the actuarial valuations dated October 1, 2009 and 2008, respectively, using the entry age actuarial cost method. This method does not identify and separately amortize unfunded actuarial liabilities. This increase resulted from a less than assumed return on plan investments. The following is three-year trend information for the plan:

Year ended Pension % of PC Net PensionSeptember 30, Cost (PC) Contributed Obligation

2008 745,001$ 100% -$ 2009 811,783 100% - 2010 924,367 100% -


34

Other The actuarial value of plan assets is determined using a four-year smoothing technique. Administrative and investment expenses are funded with contributions and investment income.

6. Long-Term Debt

A summary of changes in long-term indebtedness for the years ended September 30, 2010 and 2009 is as follows: Revenue Bonds: Amounts due

Sept. 30, 2009 Increases Reductions Sept. 30, 2010 within one year

2006 18,015,000$ -$ (5,855,000)$ 12,160,000$ 2,850,000$ 2003 3,210,000 - (3,210,000) - -

At Par 21,225,000 - (9,065,000) 12,160,000 2,850,000

Unamortized loss on refunding (1,338,574) - 352,694 (985,880) -

Total 19,886,426$ -$ (8,712,306)$ 11,174,120$ 2,850,000$

Revenue Bonds: Amounts due Sept. 30, 2008 Increases Reductions Sept. 30, 2009 within one year

2006 21,255,000$ -$ (3,240,000)$ 18,015,000$ 3,355,000$

2003 3,795,000 - (585,000) 3,210,000 600,000

At Par 25,050,000 - (3,825,000) 21,225,000 3,955,000

Unamortized loss on refunding (1,639,643) - 301,069 (1,338,574) -

Net 23,410,357 - (3,523,931) 19,886,426 3,955,000 Capital Lease 5,905 - (5,905) - -

Total 23,416,262$ -$ (3,529,836)$ 19,886,426$ 3,955,000$


35

Revenue Bonds On October 23, 2003, the Authority sold $6.34 million of revenue refunding bonds with an average coupon of 3.276% and a true-interest-cost of 3.364% to refinance and replace prior Series 1993 bonds. The refinancing resulted in an accounting loss of approximately $.6 million which was deferred in accordance with GASB Statement No. 23, and is being amortized over the life of the new bonds which is equivalent to the remaining life of the old bonds. In December 2009, the SMAA Board approved the use of approximately $2.5 million of PFC funds, and the existing associated escrow funds, to defease the 2003 Revenue Refunding Bonds. This was due to the amendment to PFC application four making the entire PFC trust fund balance of approximately $5 million available for debt service and debt retirement. Debt service savings in fiscal year 2010 as a result of this action was approximately $687,000, with a total debt service savings through the normal maturity date of 2014 of over $3.5 million. In September 2005 (see Note 7), the Authority executed a forward starting interest rate swap agreement with SunTrust Capital Markets. Variable rate demand bonds were sold by the Authority on June 28, 2006 to defease prior 1996 Revenue Refunding Bonds. The refunding was completed on the 96 Series first call date of August 1, 2006. The swap agreement locks in a fixed rate of 3.139% plus 0.42% letter of credit fee, and will terminate in August 2014, the same date as the 2006 Bonds. The 2006 bonds are limited obligations payable solely from the net revenues of the Authority. The Authority is required to maintain a debt coverage ratio of at least 125% as defined in the Bond Resolution. Certain major air carriers serving the airport have entered into Airline Use Agreements which, taken as a whole, provide that the air carriers will make payments sufficient to enable the Authority to meet its rate covenant obligations. At September 30, 2010 and 2009, the Authority met the minimum debt coverage ratio. Principal for the 2006 swap agreement is payable annually on each August 1, and interest is payable semi-annually on each February 1 and August 1. In August 2010, the Authority used $2.5 million of PFC funds to reduce the amount of variable rate bonds outstanding. The Authority chose to reduce the final four years of maturities by $625,000 each. A month to month fee of $171,580 was paid to the swap counter party SunTrust and the Letter of Credit was likewise amended to reflect the new maturity table, below. Interest differential payments are made on a monthly basis to the Trustee. Quarterly letter of credit fees and an annual remarketing fee are paid in arrears directly to SunTrust Capital Markets. The bonds and respective interest are payable in the following amounts and maturities:

2006 2006Maturity Non-taxable Interest Total

2011 $ 2,850,000 $ 418,182 $ 3,268,182 2012 2,965,000 320,171 3,285,171 2013 3,105,000 218,205 3,323,205 2014 3,240,000 111,424 3,351,424

12,160,000$ $ 1,067,982 $ 13,227,982


36

7. Interest Rate Swap In fiscal year 2005, the Authority entered into a forward-starting interest rate swap agreement with SunTrust Bank. An interest rate swap is a contractual agreement in which one party pays a fixed rate of interest on a notional dollar amount and the other party pays a variable rate of interest on an equal notional dollar amount. An interest rate swap agreement that is forward-starting is executed at a date in advance of the date that the interest begins to accrue. The Authority entered into its forward-starting interest rate in order to immediately establish a fixed interest rate liability on a notional amount intended to match the par amount of variable rate bonds to be issued in the following fiscal year. On September 8, 2005, the Authority entered into the swap, and specified June 29, 2006 as the date on which the interest liability would begin to accrue, which was the date on which it was then anticipated that variable rate bonds would be issued. The terms of the swap provide that the Authority pays semiannually a fixed rate of 3.139% per annum plus fees, and receives monthly a variable rate equal to 67% of the one-month London Interbank Offered Rate (LIBOR). The notional dollar amount referenced for the interest calculations is $27,330,000, which amortizes semiannually in order to match the amortization of the bonds. Following the bonds’ issuance and the swap’s effectiveness, the Authority is paying a fixed rate of interest under the swap and a variable rate of interest on the bonds, and receiving a variable rate of interest under the swap. The net of the three interest payments approximates the Authority paying a fixed interest rate. The swap is scheduled to terminate on August 1, 2014, the same date on which the bonds will be completely retired. Fair Value: Because interest rates have continued to decline since the Authority entered into the swap, the swap has a negative fair value as of September 30, 2010 of $811,749. The reported fair value was provided by SunTrust Capital Markets, Inc. using the marked-to-market method. Credit Risk: Because the swap has a negative fair value, the Authority is exposed to the credit risk of SunTrust Bank in the amount of the swap’s fair value. SunTrust Bank has ratings of Aa3 (long-term) and VMIG1 (short-term) by Moody’s Investors Services and AA- (long-term) and A-1+ (short-term) by Standard & Poor’s. Basis Risk: The Authority is exposed to basis risk because the variable rate payments payable to it are calculated on the basis of a 67% of LIBOR (a taxable rate index) and the Authority’s variable rate interest obligations on the bonds is determined in the tax-exempt market. Should the relationship between LIBOR and the tax-exempt market change and move to convergence, or should the bonds trade at levels worse (higher in rate) in relation to the tax-exempt market, the Authority’s all-in costs would increase.


37

Termination Risk: The swap does not contain any out-of-the-ordinary termination events that would expose the Authority to significant termination risk. In keeping with market standards, the Authority or the counterparty may terminate the swap if the other party fails to perform under the terms of the contract. If a termination were to occur, at the time of the termination, the Authority would be liable for payment equal to the swap’s fair value, if it had a negative fair value at that time. The counterparty would be liable for any payment equal to the swap’s fair value, if it had positive fair value at that time. In addition, a termination would mean that the Authority’s variable rate bonds would no longer be hedged, and the Authority would be exposed to interest rate risk, unless it entered into a new hedge following termination. Rollover Risk: Because the swap has a scheduled termination date and a notional amount that are tied to the maturity date and principal amounts of the amortizing bonds, there is no rollover risk associated with the swap, other than in the event of a termination. Swap Payments and Associated Debt: As rates vary, the bond’s interest payments and the swap’s interest payments will vary. As of September 30, 2010, debt service requirements of the variable rate bonds and net swap payments, assuming current interest rates remain the same for their term, were as follows:

Fiscal Year Ending September 30 Principal Interest

Interest Rate Swap,

Net Total2011 2,850,000$ 121,600$ 260,102$ 3,231,702$ 2012 2,965,000 93,100 199,141 3,257,241 2013 3,105,000 63,450 135,720 3,304,170 2014 3,240,000 32,400 69,304 3,341,704

12,160,000$ 310,550$ 664,267$ 13,134,817$

Variable Rate Bonds

8. Leases

Five-year airline leases were originally signed effective October 1, 1999. Five airlines signed scheduled airline operating agreements and two signed scheduled regional and commuter airline agreements. The agreements provide funding for the ongoing maintenance, operations, debt service with coverage, and capital improvements of the Airport through various rates and charges. The leases have been subsequently extended through September 2014. As of September 30, 2010, the five signatory airlines covered under the agreements were AirTran Airways, Continental, Delta Air Lines, JetBlue Airways and US Airways. The airline leases require an annual year-end adjustment to the actual amount of airline rates and charges, wherein charges calculated using budgeted data at the beginning of the fiscal year are reconciled to actual year-end costs, resulting in an under or over collection of revenues with the airlines signatory to the lease agreements. The fiscal year 2010 year-end adjustment to actual was an over collection of $196,776. This amount is due to the signatory airlines and is included in accounts payable at September 30, 2010. The fiscal year 2009 year-end adjustment to actual was an over collection of $88,770. A portion of the Authority's revenue is provided by non-airline lease and concession agreements. These agreements relate to a portion of the Authority's buildings, land, and the privilege to do business at the Airport and have terms ranging from one to ninety-nine years.


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Many of the non-airline agreements contain contingent rental provisions whereby additional amounts, in excess of stated minimums, are due based upon the lessees’ gross revenue. Minimum future lease payments to be received under these operating lease agreements are as follows:

Year Ending Car RentalSeptember 30, Restaurants Agencies Other Total

2011 216,173$ 607,823$ 1,748,471$ 2,572,467$ 2012 216,173 607,823 1,656,823 2,480,819 2013 216,173 607,823 1,647,610 2,471,606 2014 216,173 607,823 1,612,610 2,436,606 2015 216,173 607,823 1,607,405 2,431,401

2016-2020 1,080,864 - 7,946,410 9,027,274 2021-2025 414,331 - 4,920,250 5,334,581 2026-2030 - -- 3,926,868 3,926,868 2031-2035 - -- 3,266,636 3,266,636 2036-2040 -- -- 2,700,585 2,700,585 2041-2045 -- -- 767,976 767,976 2046-2050 -- -- 767,976 767,976 2051-2055 767,976 767,976 2056-2076 -- -- 1,373,510 1,373,510

Total 2,576,060$ 3,039,115$ 34,711,106$ 40,326,281$

Rents received from non-airline leases and concession agreements amounted to approximately $5,902,000 and $5,788,000 for the years ended September 30, 2010 and 2009, respectively. Amounts received under contingent rental clauses were approximately $207,328 and $278,000 for the years ended September 30, 2010 and 2009, respectively.

9. Commitments and Contingencies

Following September 11, 2001, the Florida Airport Managers Association (FAMA) Board of Directors met with the Governor in Tallahassee to discuss the impacts of the September 11 tragedy on state airports. As a result of this meeting, the governor of the State of Florida signed legislation on November 16, 2001 that authorized state airports to utilize Florida Department of Transportation (FDOT) grant money to pay for capital and operating costs for security and replacement of lost revenue resulting from the events of September 11. The Governor’s office has subsequently extended the funding to pay for additional security costs through fiscal year 2008. The Authority received $563,598 and $504,799 in state compensation for the years ended September 30, 2010 and 2009, respectively, for security capital expenditures. The Authority has entered into contracts to purchase property, plant and equipment aggregating approximately $28.9 as of September 30, 2010. Of that amount, approximately $22.1 has been expended, with the remaining amount anticipated to be expended over the next two years. The majority of these expenditures are expected to be reimbursed to the Authority through grant funding. The Authority is involved in certain legal actions and claims arising in the ordinary course of its business. It is the opinion of management (based on the advice of legal counsel) that such litigation and claims will be resolved without material adverse effect on the Authority's net assets, results of operations or cash flows.


39

Grant monies received and disbursed by the Authority are for specific purposes and are subject to review by the grantor agencies. Such audits may result in requests for reimbursement due to disallowance of expenditures. Based on prior experience, the Authority does not believe that such disallowances, if any, would have a material effect on the financial position of the Authority.

10. Major Airline User

The Authority derived a significant portion of its revenues from a major airline user for the years ended September 30, 2010 and 2009. During 2010, this major airline user handled approximately 41.1% of the total passenger traffic at the Airport as compared to 38.1% during 2009. Additionally, this major airline user has a number of separate agreements with the Authority covering various types of property and buildings. Several of those agreements allocate charges to the carrier based upon the airline's market share of passengers and flight activity. Revenues from this airline were approximately $2.8 million for each of the years ended September 30, 2010 and 2009, respectively. The majority of these revenues were derived from building rentals and landing fees.

11. Risk Management

The Authority is a member of the Public Risk Management of Florida (PRM), a liability risk pool. PRM administers insurance activities relating to workers' compensation, property, liability, and automobiles. PRM absorbs the risk of loss up to a specified amount annually and purchases excess and other specific coverage from third-party carriers. PRM assesses each member its’ pro rata share of the estimated amount required to meet current year losses and operating expenses. During the fiscal years ended September 30, 2010 and 2009, the Authority had no significant reductions in insurance coverage from the prior years. In addition, there have been no settlements which exceeded the Authority's insurance coverage in any of the past three fiscal years.

12. Subsequent Events

The Authority has evaluated subsequent events from October 1, 2010 to January 18, 2011, in connection with the preparation of these financial statements which is the date the financial statements were available to be issued. There are no subsequent events to disclose.


Required Supplementary Information

41


Required Supplementary Information

(1) (2) (3) (4) (5) (6)Actuarial Unfunded UAAL as

Actuarial Actuarial Accrued AAL Funded Annual a % of Valuation Value of Liability (UAAL) Ratio Covered Payroll

Date Assets (AAL) (2)-(1) (1)/(2) Payroll [(2)-(1)]/(5)

10/1/2005 7,645,364 7,645,364 -$ 100% 4,023,418 0%10/1/2006 9,129,373 9,129,373 -$ 100% 3,712,255 0%10/1/2007 10,140,104 11,785,356 1,645,252$ 86% 3,820,704 43%10/1/2008 11,021,681 13,177,382 2,155,701$ 84% 3,793,580 57%10/1/2009 11,635,551 14,731,484 3,095,933$ 79% 3,463,441 89%10/1/2010 12,201,140 16,210,578 4,009,438$ 75% 3,580,709 112%

Pension Plan Schedule of Funding Progress

Beginning with plan year 2007, the entry age actuarial cost method is utilized for actuarial valuations. Prior to that time, the aggregate cost method was used.

AnnualPlan Year Required Actual PercentageEnd Date Contribution Contribution Contributed

9/30/2005 901,029 901,029 100%9/30/2006 850,279 850,279 100%9/30/2007 756,320 756,320 100%9/30/2008 745,001 745,001 100%9/30/2009 811,783 811,783 100%9/30/2010 924,367 924,367 100%

Pension Plan Schedule of Employer Contributions


Supplemental Schedules

For the Years Ended September 30, 2010 and 2009

43


2010 2009

Depreciation and amortization 7,745,428$ 7,897,506$ Salaries and wages 5,960,900 5,009,108 Health insurance 1,399,868 1,244,736 Operating supplies, maintenance and repairs 1,314,339 1,143,164 Pension 965,560 837,878

General insurance 754,426 730,394 Electricity 696,791 881,393 Social security 429,801 366,711 Marketing 381,932 480,528 Service contract 261,308 1,244,928

Professional services 253,515 253,502 Legal 162,648 241,641 Travel 140,360 90,202 Staffing - Contracted 139,391 109,747 Customs 137,822 140,809

Workers’ compensation insurance 128,838 165,837 Advertising and entertainment 80,742 78,129 Dues and subscriptions 68,446 65,247 Telephone 63,829 68,288 Data processing supplies 62,771 74,894

Uniforms and identification 62,429 54,404 Water and sewer 60,753 70,068 Unemployment insurance 48,768 25,736 Training 43,137 46,797 Disability 41,670 35,720

Accounting and audit fees 38,000 40,545 Office supplies, postage and publishing 36,364 55,584 Sanitation 24,473 31,639 Miscellaneous 21,220 27,525 Taxes 12,660 12,316

Equipment rental 10,676 1,653 Bond and banking fees 10,209 12,276 Public relations 6,392 16,752 Bad debt 5,382 7,835 Shuttle service 3,718 1,074

Interior plants 2,613 3,510 Car allowance 2,106 5,842 Employee service awards 1,433 1,465

Total Operating Expenses 21,580,718$ 21,575,383$

Year Ended September 30,

Schedule of Operating Expenses

44


Schedule of Receipts and Disbursements - Bond Proceeds Account - 2003 Revenue BondsFor the Year Ended September 30, 2010

Debt Service Sinking FundReserve Principal Interest Total

Proceeds at Beginning of YearOctober 1, 2009 636,426$ 100,000$ 20,206$ 756,632$

Receipts:Interest earnings 9,525 - - 9,525 Market value adjustment (1,714) - - (1,714) Operating revenue transfers in (out) (9,554) 150,000 28,259 168,705

(1,743) 150,000 28,259 176,516

Disbursements:Defeasement (634,683) (250,000) (48,465) (933,148)

(634,683) (250,000) (48,465) (933,148)

Proceeds at End of YearSeptember 30, 2010 -$ -$ -$ -$

45


Schedule of Receipts and DisbursementsCash - Unrestricted Operating and Investment Accounts

Operations & Renewal & CapitalRevenue Maintenance Replacement Improvements Authority PAR Airline Total

BalanceOctober 1, 2009 (As Restated) -$ 2,558,745$ 2,000,000$ 3,225,612$ 10,506,782$ 1,623,001$ 19,914,140$

Receipts:

Revenue and grants 19,698,658 - - 4,593,697 - - 24,292,355$ Gain on sale of investments - - - - (5,970) - (5,970)$ Transfer from restricted assets 9,554 - - - - - 9,554$

Transfers (net) (17,975,815) 16,692,564 - 1,112,935 548,637 (462,490) (84,169)$

Disbursements:Capital - - - (4,898,696) - - (4,898,696)$ Operating - (16,621,732) - - (409,007) - (17,030,739)$ Interest and Principal fund deposit (1,732,397) - - - - - (1,732,397)$

Balance

September 30, 2010 $ - $ 2,629,577 2,000,000$ 4,033,548$ 10,640,442$ 1,160,511$ 20,464,078$

General Purpose

For the Year Ended September 30, 2010

46

2010 2009Revenues (1)

Building rentals 6,957,267$ 6,461,604$ Car rental concessions 3,847,452 3,682,392 Interest and other investment income (2) 521,481 621,911 Parking lot fees 2,105,387 1,942,814 Landing fees 490,612 1,009,573 Other airfield revenues 2,298,151 2,323,410 Other concessions 822,063 824,824 Non-aviation system revenue 1,282,170 1,189,966 Other revenue 42,392 168,736

18,366,975$ 18,225,230$ Operating and maintenance expenses (4)

Salaries and employee benefits 8,975,405 7,685,726 Administration and general 2,698,660 3,800,187 Maintenance 1,315,379 1,140,576 Utilities 845,846 1,051,388

13,835,290$ 13,677,877$

Net revenues 4,531,685$ 4,547,353$

Plus transfers (5) 3,508,102 3,512,495

Monies available for payment of principal and interest requirements 8,039,787$ 8,059,848$

Principal and interest requirements and sinking fund requirements 4,778,810$ 4,791,184$

Demonstrated coverage (6) (7) 1.68 1.68

(1)(2)(3)(4)(5)(6)(7)


Schedule of Debt Service Coverage

Includes all operating and other revenues, less grant and PFC revenues.Includes investment income less investment income on the bond proceeds account.

The minimum, mandatory debt service coverage was 1.25 as of September 30, 2010

Includes compensation from FAA and FDOT for reimbursement of lost revenues and operating expenses as a result of the 9/11 Includes all operating and maintenance expenses. Excludes depreciation, amortization and any extraordinary items.Represents amount transferred from the Prepaid Airline Revenue sub-account of the General Purposes Account to the Revenue Adjusted net revenues divided by debt service requirement.

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Report of Independent Certified Public Accountants 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

Members of the Board Sarasota Manatee Airport Authority Sarasota, Florida We have audited the financial statements of the enterprise fund and the pension trust fund of the Sarasota Manatee Airport Authority (the “Authority”) as of and for the year ended September 30, 2010, and have issued our report thereon dated January 18, 2011. We conducted our audit 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.

Internal Control Over Financial Reporting In planning and performing our audit, we considered the Authority’s internal control over financial reporting as a basis for designing our auditing procedures 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 Authority’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Authority’s internal control over financial reporting.

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.

Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above.

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Compliance and Other Matters As part of obtaining reasonable assurance about whether the Authority’s 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 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 that are required to be reported under Government Auditing Standards.

We noted certain matters that we reported to management of the Authority, in a separate letter dated January 18, 2011.

This report is intended solely for the information of the Commissioners, management, the State of Florida Auditor General, and federal and state awarding agencies, and pass-through entities, and is not intended to be and should not be used by anyone other than these specified parties.


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Report of Independent Certified Public Accountants on Compliance with Requirements that could have a Direct and Material Effect on Each Major

Federal Program and State Project and on Internal Control Over Compliance in Accordance with OMB Circular A-133 and Chapter 10.550

Rules of the Auditor General Members of the Board Sarasota Manatee Airport Authority Sarasota, Florida Compliance We have audited the Sarasota Manatee Airport Authority (the “Authority”) compliance with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133, Compliance Supplement and the requirements described in the Florida Department of Financial Services, State Projects Compliance Supplement, that could have a direct and material effect on each of its major federal programs and state projects for the year ended September 30, 2010. The Authority's major federal programs and major state projects are identified in the summary of the auditors' results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major federal programs and major state projects is the responsibility of the Authority's management. Our responsibility is to express an opinion on the Authority's compliance based on our audit.

We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations; and Chapter 10.550, Rules of the Auditor General. Those standards, OMB Circular A-133, and Chapter 10.550, Rules of the Auditor General, require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program or state project occurred. An audit includes examining, on a test basis, evidence about the Authority's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on the Authority's compliance with those requirements.

In our opinion, the Authority complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major federal programs and major state projects for the year ended September 30, 2010.

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Internal Control Over Compliance The management of the Authority is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to federal programs and state projects. In planning and performing our audit, we considered the Authority's internal control over compliance with requirements that could have a direct and material effect on a major federal program or state project to determine the auditing procedures for the purpose of expressing our opinion on compliance, and to test and report on internal controls over compliance in accordance with OMB Circular A-133 and Chapter 10.550, but not for the purpose of expressing our opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Authority's internal control over compliance.

A deficiency in internal control over compliance 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, noncompliance with a type of compliance requirement of a federal program or state project on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program or state project will not be prevented, or detected and corrected, on a timely basis.

Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above.

This report is intended solely for the information and use of the Commissioners, management, the State of Florida Auditor General, and federal and state awarding agencies and pass-through entities, and is not intended to be and should not be used by anyone other than these specified parties.


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SARASOTA MANATEE AIRPORT AUTHORITY

Schedule of Expenditures of Federal Awards Year Ended September 30, 2010

Federal Federal Federal Grantor/Program Title/Grant Number CFDA # Expenditures

U.S. Department of Transportation, Federal Aviation Administration Airport Improvement Program 3-12-0071-41 20.106 $ 36,853 3-12-0071-42 20.106 76,695 3-12-0071-43 20.106 206,269 3-12-0071-44 20.106 22,666 3-12-0071-45 ARRA 20.106 1,219,061 3-12-0071-46 20.106 1,640,019 3-12-0071-47 20.106 57,077 Total Federal Expenditures $ 3,258,640 See accompanying Notes to the Schedule of Expenditures of Federal Awards and State Financial Assistance Projects.

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Schedule of Expenditures of State Financial Assistance Projects Year Ended September 30, 2010

State State

Federal Grantor/Program Title/Grant Number CSDA # Expenditures Florida Department of Transportation Aviation Administration Aviation Development Grants 412235-194-01 55.004 $ 12,670 414388-194-08 55.004 3,323 414388-194-10 55.004 9,741 417013-194-01 55.004 483,631 Total State Financial Assistance $ 509,365

See accompanying Notes to the Schedule of Expenditures of Federal Awards and State Financial Assistance Projects.


Notes to Schedule of Expenditures of Federal Awards and State Financial Assistance Projects

Year Ended September 30, 2010

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Note 1 – Summary of Significant Accounting Policies The accounting policies and presentation of the accompanying schedule of expenditures of federal awards and state financial assistance of the Sarasota Manatee Airport Authority (the Authority) have been designed to conform with generally accepted accounting principles applicable to governmental units. This includes the audit, reporting and compliance requirements of the Single Audit Act of 1984, the Single Audit Act Amendments of 1996, U.S. Office of Management and Budget (OMB) Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, the Florida Single Audit Act, Chapter 69I-5, Rules of the Florida Department of Financial Services, and Chapter 10.550, Rules of the Auditor General of the State of Florida. Reporting Entity

The Authority is an independent special district pursuant to the constitution and laws of Florida, particularly Chapter 91-358, Laws of Florida, as amended, revising and consolidating Chapter 31263, Special Laws of Florida, 1955, which, by the Act authorized the Authority to own and operate the Sarasota Bradenton International Airport (the Airport). The Authority has jurisdiction, control, supervision and management of the Airport. Basis of Accounting

The accompanying schedule of expenditures of federal awards and state financial assistance is presented using the accrual basis of accounting. Revenue is recognized (accrued) when the corresponding expense has been determined to be eligible for reimbursement under the terms of the grant. Expenses are recognized when incurred. Note 2 – Contingencies Grant monies received and disbursed by the Authority are for specific purposes and are subject to review by the grantor agencies. Such audits may result in requests for reimbursement due to disallowance of expenditures. Based upon prior experience, the Authority does not believe that such disallowances, if any, would have a material effect on the financial position of the Authority.


Schedule of Findings and Questioned Costs Year Ended September 30, 2010

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Part A – Summary of Audit Results

1. The Report of Independent Certified Public Accountants expresses unqualified opinions on the enterprise fund and the pension trust fund of the Sarasota Manatee Airport Authority (the “Authority”) as of and for the year ended September 30, 2010.

2. No material weaknesses or significant deficiencies in internal control over financial reporting

relating to the audit of the financial statements are reported in the Report of Independent Certified Public Accountants 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.

3. No instances of noncompliance material to the financial statements of the Authority were

disclosed during the audit.

4. No significant deficiencies or material weaknesses in internal control over compliance for major federal awards programs or major state financial assistance projects are reported in the Report of Independent Certified Public Accountants on Compliance with Requirements that could have a Direct and Material Effect on each Major Federal Program and State Project and on Internal Control Over Compliance in Accordance with OMB Circular A-133 and Chapter 10.550 Rules of the Auditor General.

5. The auditors' report on compliance for the major federal awards programs and the major state

financial assistance projects for the Authority expresses an unqualified opinion.

6. The programs/projects tested as major programs/projects included the following:

Major Federal Awards Program:

U.S. Department of Transportation, Federal Aviation Administration CFDA # 20.106 - Airport Improvement Program

Major State Financial Assistance Project:

Florida Department of Transportation CSFA # 55.004 – Aviation Development Grants

7. The threshold for distinguishing Type A and Type B programs/projects was $300,000 for major federal awards programs and major state financial assistance projects.

8. The Authority qualified as a low-risk auditee pursuant to OMB Circular A–133.

Part B – Findings - Financial Statement Audit

None reported Part C – Findings and Questioned Costs - Major Federal Awards Programs

None reported Part D – Findings and Questioned Costs - Major State Financial Assistance Projects

None reported

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Report of Independent Certified Public Accountants on Compliance with Requirements that could have a Direct and Material Effect on the Passenger

Facility Charge Program and Internal Control over Compliance in Accordance with the Passenger Facility Program Audit Guide

Members of the Board Sarasota Manatee Airport Authority Sarasota, Florida Compliance We have audited the Sarasota Manatee Airport Authority (the “Authority”) compliance with the types of compliance requirements described in the Passenger Facility Charge Audit Guide for Public Agencies, issued by the Federal Aviation Administration (the “Guide”), for its passenger facility charge program for the year ended September 30, 2010. Compliance with the requirements of laws, regulations, contracts and grants applicable to its passenger facility charge program is the responsibility of the Authority's management. Our responsibility is to express an opinion on the Authority's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the Guide. Those standards and the Guide require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on the passenger facility charge program occurred. An audit includes examining, on a test basis, evidence about the Authority's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on the Authority's compliance with those requirements. In our opinion, the Authority complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on its passenger facility charge program for the year ended September 30, 2010. Internal Control Over Compliance The management of the Authority is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to the passenger facility charge program. In planning and performing our audit, we considered the Authority's internal control over compliance with requirements that could have a direct and material effect on the passenger facility charge program to determine the auditing procedures for the purpose of expressing our opinion on compliance, but not for the purpose of expressing our opinion on the effectiveness of internal control over compliance in accordance with the Guide. Accordingly, we do not express an opinion on the effectiveness of the Authority’s internal control over compliance.

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A deficiency in internal control over compliance 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, noncompliance with a type of compliance requirement of the passenger facility charge program on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program or state project will not be prevented, or detected and corrected, on a timely basis.

Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above.

Schedule of Passenger Facility Charges We have audited the basic financial statements of the Authority for the years ended September 30, 2010 and 2009 and have issued our report thereon dated January 18, 2011. Our audit was performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying Schedule of Passenger Facility Charges Collected and Expended for the year ended September 30, 2010 is presented for purposes of additional analysis as required by the Federal Aviation Administration, and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. This report is intended solely for the information and use of the Commissioners, management, and the Federal Aviation Administration and is not intended to be and should not be used by anyone other than these specified parties.


Beginning Balance - Passenger Facility Charges 5,210,871$

Collections (1)

December 31, 2009 678,033

March 31, 2010 780,285

June 30, 2010 682,064

September 30, 2010 563,628

Total 2,704,010

Interest Earned

December 31, 2009 2,896

March 31, 2010 1,146

June 30, 2010 1,359

September 30, 2010 582

Total 5,983

Expenditures

Debt service (2) (7,531,880)

Total (7,531,880)

Ending Balance - Passenger Facility Charges 388,984$

(1) PFC collections were applied to eligible expenditures.

(2) Represents payments of principal and interest on the 2003 and 2006 Bonds.



Schedule of Passenger Facility Charges (PFC)

Collected and Expended (1)

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Notes to Schedule of Passenger Facility Charges For the Year Ended September 30, 2010

Note 1 – General

The accompanying schedule of passenger facility charges presents the activity of all passenger facility charges of the Sarasota Manatee Airport Authority for the year ended September 30, 2010. Note 2 – Basis of Accounting

The accompanying schedule of passenger facility charges is presented using the cash basis of accounting. End of year receivables totaled $346,401. Beginning of year receivables totaled $336,016.

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Schedule of Findings and Questioned Costs Passenger Facility Charge Program


Part A – Summary of Audit Results

1. The Report of Independent Certified Public Accountants expresses unqualified opinions on the enterprise fund and the pension trust fund of the Sarasota Manatee Airport Authority (the “Authority”) as of and for the year ended September 30, 2010.

2. No material weaknesses or significant deficiencies related to the internal control over financial

reporting were reported relating to the audit of the financial statements are reported in the Report of Independent Certified Public Accountants 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.

3. No instances of noncompliance material to the financial statements of the Authority were

disclosed during the audit.

Passenger Facility Charge Program

4. No significant deficiencies or material weaknesses were disclosed during the audit of internal control over the passenger facility charge program are reported in the Report of Independent Certified Public Accountants on Compliance with Requirements Applicable to the Passenger Facility Charge Program and Internal Control over Compliance in Accordance with the Passenger Facility Program Audit Guide.

5. The auditors' report on compliance for the passenger facility charge program for the Authority

expresses an unqualified opinion.

Part B – Financial Statement Findings

None reported Part C – Passenger Facility Charge Program – Finding and Questioned Costs

None reported Part D – Schedule of Current and Prior Year Findings and Questioned Costs

No summary schedule of prior audit findings is required because there were no prior audit findings related to the passenger facility charge program for the year ended September 30, 2009. No corrective action plan is required for the year ended September 30, 2010 because there were no current year findings requiring correction under the passenger facility charge program.

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Independent Certified Public Accountants’ Management Letter Members of the Board Sarasota Manatee Airport Authority Sarasota, Florida We have audited the financial statements of the enterprise fund and the pension trust fund of the Sarasota Manatee Airport Authority (the “Authority"), as of and for the year ended September 30, 2010, and have issued our report thereon dated January 18, 2011. We conducted our audit 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; and OMB Circular A-133, Audits of States, Local Governments and Non-Profit Organizations. We have issued our Report of Independent Certified Public Accountants 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, the Report of Independent Certified Public Accountants on Compliance with Requirements that could have a Direct and Material Effect on each Major Federal Program and State Project and on Internal Control Over Compliance in Accordance with OMB Circular A-133 and Chapter 10.550 Rules of the Auditor General and the Schedule of Findings and Questioned Costs. Disclosure in those reports and schedule, which are dated January 18, 2011, should be considered in conjunction with this management letter. Additionally, our audit was conducted in accordance with Chapter 10.550, Rules of the Auditor General, which governs the conduct of local governmental entity audits performed in the State of Florida. This letter includes the following information, which is not included in the aforementioned auditor’s report. Section 10.554(1)(i)1., Rules of the Auditor General, requires that we determine whether or not corrective actions have been taken to address findings and recommendations made in the preceding annual financial audit report. There were no such matters in the preceding annual financial audit report. Section 10.554(1)(i)2., Rules of the Auditor General, requires our audit to include a review of the provisions of Section 218.415, Florida Statutes, regarding the investment of public funds. In connection with our audit, nothing came to our attention that would cause us to believe that the Authority was in noncompliance with Section 218.415 regarding the investment of public funds. Section 10.554(1)(i)3., Rules of the Auditor General, requires that we address in the management letter any recommendations to improve financial management. See Appendix A for management letter comments with recommendations.

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Section 10.554(1)(i)4., Rules of the Auditor General, requires that we address violations of provisions of contracts or grant agreements, or abuse, that have occurred, or are likely to have occurred that have an effect on the financial statement amounts that is less than material but more than inconsequential. In connection with our audit, we did not have any such findings.

Section 10.554(1)(i)5., Rules of the Auditor General, provides that the auditor may, based on professional judgment, report the following matters that have an inconsequential effect on financial statements, considering both quantitative and qualitative factors: (1) violations of provisions of contracts or grant agreements, fraud, illegal acts, or abuse, and (2) control deficiencies that are not significant deficiencies. See Appendix A for management letter comments with recommendations in connection with internal controls.

Section 10.554(1)(i)6., Rules of the Auditor General, requires that the name or official title and legal authority for the primary government and each component unit of the reporting entity be disclosed in this management letter, unless disclosed in the notes to the financial statements. Such disclosure is included in the notes to the financial statements. There were no component units related to the entity.

Section 10.554(1)(i)7.a., Rules of the Auditor General, requires a statement to be included as to whether or not the Authority has met one or more of the financial emergency conditions described in Section 218.503(1), Florida Statutes and identification of specific conditions met. In connection with our audit, the results of our tests did not indicate that the Authority met any of the specified conditions of a financial emergency contained in Section 218.503(1). However, our audit does not provide a legal determination on the Authority’s compliance with this requirement.

Section 10.554(1)(i)7.b., Rules of the Auditor General, requires that we determine whether the annual financial report for the Authority for the fiscal year ended September 30, 2010 filed with the Florida Department of Financial Services pursuant to Section 218.32(1)(a), Florida Statutes, is in agreement with the annual financial audit report for the fiscal year ended September 30, 2010. In connection with our audit, we determined that these two reports were in agreement.

Pursuant to Sections 10.554(1)(i)7.c. and 10.556(7), Rules of the Auditor General, we applied financial condition assessment procedures. It is management’s responsibility to monitor the Authority’s financial condition, and our financial condition assessment was based in part on representations made by management and the review of financial information provided by management.

We wish to thank the Authority’s finance and internal audit personnel and other involved in the conduct of the audit for their courtesy and cooperation.

Pursuant to Chapter 119, Florida Statutes, this management letter is a public record and its distribution is not limited. Auditing standards generally accepted in the United States of America require us to indicate that this letter is intended solely for the information and use of management, and the Florida Auditor General, and is not intended to be and should not be used by anyone other than these specified parties.


Sarasota Manatee Airport Authority Appendix A – Management Letter Comments

September 30, 2010

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In planning and performing our audit of the financial statements of the enterprise fund and the pension trust fund of the Sarasota Manatee Airport Authority (the “Authority”), as of and for the year ended September 30, 2010, which collectively comprise the Authority’s basic financial statements, we considered its internal control in order to determine our auditing procedures for the purpose of expressing our opinions on the basic financial statements and not to provide assurance on internal control. During our audit we became aware of matters that present opportunities for strengthening internal control and operating efficiency. We will review the status of these comments during our next audit engagement. Current Year Observations and Recommendations:

2010-1

Observation: We noted that the Authority recorded the receipt of Federal Aviation Administration “Other Transaction Agreement” (the “Agreement”) funds incorrectly as grant revenue. These funds are restricted and only used for the specific purposes addressed in the agreement and are refundable to the Federal Aviation Administration should the Authority not spend the funds for the purposes described in the Agreement.

Recommendation: We recommend that the Authority implement a control to ensure that refundable advances are properly recorded.

Authority’s Response: As recommended, the Authority has established two general ledger numbers to track the receipt and disbursement of the Federal Aviation Administration Agreement funds, to ensure that they are properly recorded as a restricted asset and deferred revenue.

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