Audited Financial Statements and Independent Auditors ...

JACKSON MUNICIPAL AIRPORT AUTHORITY

Audited Financial Statements and

Independent Auditors' Reports on Internal Accounting Controls and Compliance

September 30, 2011


September 30, 2011

TABLE OF CONTENTS

Pages

Independent Auditors' Report 1 - 2

Management's Discussion and Analysis 3i -- 3viii

Financial Statements:

Statements of Net Assets 4

Statements of Revenues, Expenses and Changes in Net Assets 5

Statements of Cash Flows 6

Notes to Financial Statements 7 - 17

Supplementary Information:

Schedule of Expenditures of Federal Awards 18

Notes to Schedule of Expenditures of Federal Awards 19

Schedule of Passenger Facility Charges -- Cash Basis 20

Historical Schedule of Selected Financial Data 21

Schedule of Budgeted vs. Actual Revenues and Expenses 22

Summary Schedule of Prior Audit Findings 23

Report on Compliance and 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 24 - 25

JACKSON MUNICIPAL AIRPORT AUTHORITY September 30, 2011

TABLE OF CONTENTS (Continued)

Pages

Report on Compliance with Requirements That Could Have a Direct and

Each Major Program and the Passenger Facility Charge Program and on Internal Control Over Compliance in Accordance with OMB Circular

A-133 and the Passenger Facility Charge Audit Guide for Public Agencies 26 — 28

Schedule of Findings and Questioned Costs 29 — 30

Corrective Action Plan 31

BREAZEALE, SAUNDERS & O'NEIL, LTD. CERTIFIED PUBLIC ACCOUNTANTS

INDEPENDEN1' AUDITORS' REPORT

To the Board of Commissioners

Jackson Municipal Airport Autlu•ity:

We have audited the accompanyin g financial statements of the Jackson Municipal Airport

Authority ("the Authority") as of and for the years ended September 30, 2011 and 2.010, as listed

in the table of contents. These financial statements are the responsibility of the Authority's

management. Ou • responsibility is to express an opinion on these financial statcments 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 GOVCIIMIelli

Auditing Standards, issued by the Comptroller General of the United States. Those standards

require that we plan and perform the audits 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 si gnificant estimates made by

management, as well as evaluatin the overall financial statement presentation. We believe that

our audits provide a reasonable basis l'or our opinion.

g,

In our opinion, the ifnancial statements referred to above present fairly, in all material respects,

the ifnancial position of the Authorit n, , as of September 30, 2011 and 2010, and the results of its

operations and its cash flows for the years then ended in conformity with accounting principles

generally accepted in the United States of America.

In accordance with Government Auditing Standards, we have also issued our report dated

January 27, 2012, on our consideration of thc Authority's internal control over financial reporting

and on ou • tests of its compliance with certain provisions of laws, re gulations, contracts, and

grants. That report is an inte gral part of an audit performed in accordance with Government

Auditing Standards and should be read in conjunction with this report in considerin g, the results

of' our audits.

120 NORTH CONGRTF1FET I SUITE 300 P. O. BOX 80 JACKSON, MISSISSIPPI, 39205-0080 ESS S TELEPHONE: 601-969-7440 / TELECOPIER. 601-355-9003 / www.bSolid_com

Jackson Municipal Airport Authority

Page two

Management's Discussion and Analysis on pages 3i through 3viii is not a required part of the

basic financial statements, but is supplementary information required by accounting principles

generally accepted in the United States of America. We have applied certain limited procedures,

which consisted principally of inquiries of management regarding the methods of measurement

and presentation of the supplementary information. However, we did not audit the information

and express no opinion on it.

We have also previously audited the financial statements of the Authority as of and for the years

ended September 30, 2002 through 2009 (none of which are presented herein), and we expressed

unqualiifed opinions on those financial statements. Our audits were performed for the purpose of

fonning an opinion on the ifnancial statements taken as a whole. The historical schedule of

selected ifnancial data and budgetary comparison listed in the table of contents is presented for

purposes of additional analysis and is not a required part of the financial statements of the

Authority. The accompanying schedule of expenditures of federal awards is presented for

purposes of additional analysis as required by U.S. Ofifce of Management and Budget Circular

A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is also not a

required part of the financial statements of the Authority. The accompanying schedule of

expenditures of passenger facility charges is presented for purposes of additional analysis as

specified in the Passenger Facility Charge Audit Guide for Public Agencies, issued by the

Federal Aviation Administration, and is not a required part of the financial statements of the

Authority. Such information has been subjected to the auditing procedures applied in the audits

of the financial statements and, in our opinion, is fairly stated, in all material respects, in relation

to the financial statements taken as a whole.

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g.452

Jackson, Mississippi

January 27, 2012


Management's Discussion and Analysis September 30, 2011

JACKSON MUNICIPAL AIRPORT AUTHORITY Management's Discussion and Analysis

September 30, 2011

The following discussion and analysis of the financial performance and activity of the Jackson-

Evers International Airport and Hawkins Field is to provide an introduction and understanding of the basic financial statements of the Jackson Municipal Airport Authority ("the Authority") for the year ended September 30, 2011. This discussion has been prepared by management and should be read in conjunction with the audited financial statements and the notes thereto, which follow this section.

HIGHLIGHTS OF THE FISCAL YEAR 2011 BUDGET

On September 24, 2010, the Authority Board approved the fiscal year 2011 Budget. The actual operating results compared to budgeted amounts are as follows:

Fiscal Year 2011 Budget Actual

Operating revenues $ 16,126,446 16,287,920

Operating expenses 14,460,915 12,809,179

Operating income before depreciation 1,665,531 3,478,741

Depreciation expense 8,685,943 8 729 989

Operating loss (7,020,412) (5,251,248)

Other income (expense) 3,192,564 3 037 589

Loss before contributions and transfers $ (3,827,848) 2,213,659)

Operating revenues are $161 thousand greater than budget primarily due to Rental Car concession fees, non-terminal building rentals and parking income offsetting weakness in landing fees.

3i


September 30, 2011

Operating expenses are $1.7 million less than budget. Of this amount $.7 million of cost savings

to budget occurred in consulting expense due primarily to less spending for the airport Master

Plan, Back Haul Study and Diversity Study in fiscal year 2011 which are now planned to be

completed in fiscal year 2012. Of the remaining $1.0 million favorable to budget spending $655

thousand is due to reduced spending on general consulting, $148 thousand is due to energy

savings for electricity and natural gas and $218 thousand is due to favorable spending for general

services.

Other income is $.2 million lower than budget due primarily to reduced operating grant income

partially offset by favorable customer facility charge revenue over budgeted level.

OVERVIEW OF THE FINANCIAL STATEMENTS

The financial reporting package consists of four parts — the independent auditors' report,

management's discussion and analysis (this section), the basic financial statements and

supplementary information. The repotr is guided by accounting and reporting principles

established by the Govenrmental Accounting Standards Board (GASB). The basic financial

statements are prepared on an accrual basis, whereby revenues are recognized when eanred and

expenses are recognized when incurred, regardless of when cash is received or paid. The basic

financial statements consist of: statements of net assets that include the Airport's assets,

liabilities, and net assets; statements of revenues, expenses, and changes in net assets; and

statements of cash flows. The financial statements also include notes that explain some of the

information in the ifnancial statements and provide more detailed data. Following the financial

statements is a section of supplementary information, which further explains and supports the

information in the financial statements. Of special significance to readers of the financial

statements is that, with certain limited exceptions, Airport Authority monies are restricted by

bond ordinances and Federal Aviation Administration regulations for use at the Airport. Airport

net revenues (essentially operating revenues less operating expenses other than depreciation) are

largely determined by permits with airlines and agreements with concessionaires and other

tenants.

3ii


September 30, 2011

FINANCIAL HIGHLIGHTS

Operating Revenues

Revenue Classification FY 2011 FY 2010 FY2009

Aviation $ 6,299,808 6,388,916 6,216,492 Non-Aviation 7,156,174 6,980,471 7,112,582 Concessions 2 831 938 2,726,292 2,665,060

Total operating revenues $ 16,287,920 16,095,679 15,994,134

The table above presents the major operating revenue classifications for fiscal year 2011 compared to fiscal year 2010 and fiscal year 2009.

The $89 thousand decrease in aviation revenue from fiscal year 2010 to 2011 is primarily from a

landing fee rate decrease of 12% substantially offset by increased terminal and fixed base operator rental rates. The $172 thousand increase in aviation revenue from ifscal year 2009 to ifscal year 2010 is primarily the result of a terminal rent rate increase partially offset by reduced landing fees.

The $176 thousand increase in non-aviation revenue from fiscal year 2010 to fiscal year 2011 is due almost entirely to increased parking revenue. The $132 thousand decrease in non-aviation revenue in fiscal year 2010 is primarily due to reduced parking revenue as a result of

enplanements in fiscal year 2010 falling 3% from prior year levels. Offsetting this shortfall to some extent was an increase in terminal rents.

The $106 thousand increase in concession revenue from fiscal year 2010 to fiscal year 2011 is primarily due to increased rental car activity. The $61 thousand increase in concession revenue in fiscal year 2010 is the result of a favorable audit result of our rental car concession resulting in the collection of previously unreported fees.

3iii


September 30, 2011

Operating Expenses

Expense Classification FY 2011 FY 2010 FY 2009

Board expenses $ 87,435 86,524 80,252 Building expenses 1,314,479 1,619,446 1,479,272 Employee expenses 6,472,111 6,350,261 6,206,199 Equipment expenses 373,723 401,193 381,477 Miscellaneous expenses 38,512 43,836 65,504 Services 4,004,217 4,071,730 3,306,705

Supplies 518,702 529,372 452,109

Total operating expenses $ 12,809,179 13 102,362 11,971,518

The table above presents the major expense classifications for fiscal year 2011 compared to

ifscal year 2010 and fiscal year 2009. The total operating expenses for ifscal year 2011 decreased

2% from the piror fiscal year while the total operating expenses for fiscal year 2010 increased

9% from the 2009 fiscal year.

Building expenses decreased 19% in fiscal year 2011 from fiscal year 2010 primarily due to

reduced utility costs and building maintenance which was contractually required in fiscal 2010

and not in fiscal year 2011. Building expenses increased 9% in fiscal year 2010 over fiscal year

2009 primarily the result of contractual building repairs done for a tenant's premises.

Employee expenses increased 2% in fiscal year 2011 over fiscal year 2010 primarily as a result

of wage and benefit economics year to year. Employee expenses increased 2% in fiscal year

2010 over fiscal year 2009 primarily due to the same reason as the fiscal year 2011 increase.

Equipment expenses decreased 7% in ifscal year 2011 from fiscal year 2010 as computer

purchases were reduced from fiscal year 2010 levels. Equipment expenses increased 5% in fiscal

year 2010 over ifscal year 2009 as a result of computer purchases to replace machines at the end

of their life cycle.

The 2% reduction in services expenses in fiscal year 2011 from fiscal year 2010 is the result of

reduced spending for consulting and other services more than offsetting an increase in

engineering costs. The 23% increase in services for fiscal year 2010 over fiscal year 2009 is due

primarily to consulting services for Master Plans covering our two airports which were

reimbursed.

3iv


September 30, 2011

The 2% decrease in expenses for supplies in fiscal year 2011 from fiscal year 2010 is a result of reduced software purchases. The 17% increase in supplies in fiscal year 2010 over fiscal year 2009 is due to the purchase of computer software and software support services.

Other income decreased $1.7 million to $3.0 million in fiscal year 2011 from fiscal year 2010 as a gain on sale of assets in fiscal year 2010 was not repeated in fiscal year 2011. Other income increased $2.4 million to $4.7 million in fiscal year 2010 over fiscal year 2009 primarily due to the gain on the sale of assets of $1.8 million and an increase in operating grant revenue of $.4 million.

NET ASSETS

The statement of Net Assets presents the financial position of the Authority at the end of the ifscal year and includes all of its assets and liabilities. Net assets represent the difference between total assets and total liabilities. A summarized comparison of the Authority's assets, liabilities and net assets follows:

FY 2011 FY 2010 FY 2009

Assets Current assets $ 20,383,720 20,081,952 16,651,322 Noncurrent assets

Facilities, net 112,145,420 105,401,041 112,085,401 Other noncurrent 29,842,220 29,848,581 24,467,372

Total assets 162,371,360 155,331,574 153,204,095

Liabilities Current liabilities 4,916,430 4,764,401 4,165,289 Noncurrent liabilities Long-term debt, net 41,556,431 42,861,901 44,095,424 Total liabilities 46,472,861 47,626,302 48,260,713

Net Assets Invested in capital assets,

Net of related debt 69,249,390 62,065,024 67,959,473 Restricted 32,567,033 32,453,765 26,948,320 Unrestricted 14 082 076 13,186,483 10,035,589 Net assets $ 115.898.499 107,705,272 104,943,382

3v


September 30, 2011

The Authority's financial strength improved in fiscal year 2011 as net assets increased $8.2 million. Additionally, the debt to equity ratio dropped from .44 in fiscal year 2010 to .40 in fiscal year 2011 as a result of capital grants and operating cash generated for capital spending. The

Authority's financial strength improved in fiscal year 2010 as unrestricted cash increased $3.4 million to $14.9 million and total assets increased $2.1 million.

Total liabilities decreased $1.153 million as a result of the Authority being able to finance its capital programs through grants, restricted cash and internally generated funds as well as keeping net operating expenses relatively level. Planned capital expenditures for fiscal year 2012 of $13.9 million are budgeted to be funded in a similar manner and the Authority does not see the need to issue new debt for the foreseeable future. Total liabilities at September 30, 2010 are $.634 million lower than the prior year September 30 level. This again results primarily from the Authority being able to finance its capital program with grants, other restricted cash and internally generated funds as well as keeping net operating expenses relatively level.

Net assets, which represent the residual interest in the Authority's assets atfer liabilities are deducted, increased $8.2 million primarily due to the increase in the acquisition of capital assets. Net assets in ifscal year 2010 increased $2.8 million from September 30, 2009 primarily due to the gain on the sale of assets.

CAPITAL ASSETS

The Authority's capital assets as of September 30, 2011 and September 30, 2010 amounted to $112,145,420 and $105,401,041 (net of accumulated depreciation) respectively. This investment in capital assets includes land, facilities, facility improvements, equipment, funriture and fixtures

and construction in progress. The total increase in the Authority's investment in capital assets atfer accumulated depreciation for fiscal years 2011 is $6,744,379 and the decrease in 2010 is $6,684,360.

Capital asset acquisitions are capitalized at cost and depreciated using the straight-line method. The Authority funds capital assets with passenger facility charges, customer facility charges, federal and state grants, net revenues and various bond issues. Additional information on the

Authority's capital assets can be found in the accompanying notes to the financial statements.

3vi


September 30, 2011

DEBT ADMINISTRATION

As of September 30, 2011, the Authority had outstanding revenue bonds of $43,460,000, which are listed below:

Description Amount

Series 1998B $230,000 Series 2005A 17,200,000 Series 2005B 7,775,000

Series 2005C 5,580,000 Series 2007A 5,920,000 Series 2007B 6,755,000

Long-term debt in the financial statements is reported net of discounts of $278,901 and deferred charges of $512,647 and increased for premiums of $242,979.

OTHER ITEMS

Airline Rates and Charges

Tenriinal rents for fiscal year 2011 were increased to $70.50 per square foot from the fiscal year 2010 rate of $68.65 per square foot. Landing fees were reduced in fiscal year 2011 to $1.99 per 1,000 lbs. from the fiscal year 2010 rate of $2.25 per 1,000 lbs. Rates and charges are calculated on an annual basis. Included in the rates and charges calculations are specific rebates of debt service coverage.

Operating and Capital Grants and Reimbursements

In fiscal year 2011, the Authority recognized grant revenue of $10,289,461 from the Federal Aviation Administration, $264,555 from the Mississippi Department of Transportation, $60,000

from the U.S Department of Defense, $239,871 from the Transportation Security Administration, and $4,559 in non-governmental grants. Funds from the FAA and MDOT were to partially offset costs of capital projects. Funds from the TSA were to reimburse the Authority for providing law enforcement services on behalf of TSA at the passenger security checkpoints. Funds from the Department of Defense were to offset costs associated with an altenrative energy study.

3vii


September 30, 2011

REQUEST FOR INFORMATION

This financial report is designed to provide a general overview of the Authority's finances and to demonstrate the Authority's accountability for the funds it receives and expends. Questions concerning this repotr or requests for additional information should be addressed to Gary Cohen, Chief Financial Officer, Jackson Municipal Airport Authority, Post Office Box 98109, Jackson,

MS 39298-8109. Information of interest may also be obtained on the Authority's website at www.jmaa.com .

3viii


Financial Statements

September 30, 2011 and 2010


Statements of Net Assets


2011 2010

ASSETS

Current assets: Cash and cash equivalents $ 14,721,582 14,866,146 Restricted cash and cash equivalents 3,772,613 3,749,410 Accounts receivable 575,723 543,086 Federal and State grants receivable 779,114 664,396

Other 534,688 258,914

Total current assets 20,383,720 20,081,952

Restricted cash and cash equivalents Restricted passenger facility charges receivable Restricted customer facility charges receivable Capitalized bond issue cost, net

Property, plant and equipment, net

28,242,424 28,226,691 393,488 363,032 158,508 114,632

1,047,800 1,144,226

112,145,420 105,401,041

Total assets 162,371,360 155,331,574

LIABILITIES

Current liabilities: Current maturities of long-term debt 1,355,000 1,295,000 Accounts payable 1,411,707 1,531,252 Contract retainage payable 313,195 34,324

Accrued expenses 1,836,528 1,903,825

Total current liabilities 4,916,430 4,764,401

Long-term debt, net of current maturities 41,556,431 42,861,901

Total liabilities 46,472,861 47,626,302

NET ASSETS

Invested in capital assets, net of related debt 69,249,390 62,065,024

Restricted for: Special projects 5,437,904 5,377,854 Debt indentures 27,129,129 27,075,911

Unrestricted 14,082,076 13,186,483

Net assets $ 115,898,499 107,705,272

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

4


Statements of Revenues, Expenses and Changes in Net Assets

Years Ended September 30, 2011 and 2010

2011 2010

Operating revenues: Aviation $ 6,299,808 6,388,916 Non-aviation 7,156,174 6,980,471 Concessions 2,831,938 2,726,292

Total operating revenues 16,287,920 16,095,679

Operating expenses: Board expenses 87,435 86,524 Building expenses 1,314,479 1,619,446 Employee expenses 6,472,111 6,350,261 Equipment expenses 373,723 401,193 Miscellaneous expenses 38.512 43,836 Services 4,004,217 4,071,730 Supplies 518,702 529,372

Total operating expenses 12,809,179 13,102,362

Operating income before depreciation 3,478,741 2,993,317

Depreciation expense 8,729,989 8,398,046

Operating loss (5,251,248) (5,404,729)

Other income (expense): Passenger facility charges, restricted Customer facility charges, restricted

2,701,673 2,681,010 1,732,645 1,557,572

Interest expense (2,107,112) (2,171,391) Operating governmental grant revenue 451,560 644,586 Gain on sale of assets Interest income

25,374 1,773,538 243,475 151,906

Other (10,026) 65,862

Net other income (expense) 3,037,589 4,703,083

Loss before capital grant contributions (2,213,659) (701,646)

Capital grant contributions 10,406,886 3,463,536

Change in net assets 8,193,227 2,761,890

Net assets - beginning of year 107,705,272 104,943,382

Net assets - end of year $ 115,898,499 107,705,272

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

5


Statements of Cash Flows

Years Ended September 30, 2011 and 2010

2011 2010

Cash lfows from operating activities: Cash received from customers $ 16,255,283 15,957,431 Cash paid for payroll expenses (5,973,661) (5,917,132)

Cash paid for other operating expenses

Net cash flows from operating activities

(7,668,413) (6,046,732)

2,613,209 3,993,567

Cash flows from non-capital financing activities: Operating grants received 422,381 644,586

Other (10,026) 65,862

Net cash flows from non-capital financing activities 412,355 710,448

Cash lfows from capital and related financing activities:

Capital grants received 10,321,347 3,504,577 Passenger facility charges collected Customer facility charges collected Payment of debt Payment of interest

2,671,217 2,694,168 1,688,769 1,574,452

(1,295,000) (1,235,000) (1,989,860) (2,044,900)

Capital asset expenditures (14,796,514) (5,545,628)

Proceeds from sale of capital assets 25,374 5,082,540

Net cash flows from capital and related

financing activities (3,374,667) 4,030,209

Cash lfows from investing activities -

Receipt of interest 243,475 151,906

Change in cash and cash equivalents (105,628) 8,886,130 Cash and cash equivalents - beginning of year

(including $31,976,101 in restricted accounts) 46,842,247 37,956,117

Cash and cash equivalents - end of year

(including $32,015,037 in restricted accounts) $ 46,736,619 46,842,247

Reconciliation of operating loss to net cash flows from operating activities:

Operating loss $ (5,251,248) (5,404,729) Depreciation expense 8,729,989 8,398,046 Net effect of changes in operating assets and liabilities:

Accounts receivable (32,637) (138,248) Other current assets (275,774) 50,276 Accounts payable (518,528) 981,148

Accrued expenses (38,593) 107,074

Net cash flows from operating activities $ 2,613,209 3,993,567

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

6

JACKSON MUNICIPAL AIRPORT AUTHORITY Notes to Financial Statements September 30, 2011 and 2010

( 1 ) Summary of Significant Accounting Policies

A summary of significant accounting policies for the Jackson Municipal Airport

Authority ("the Authority") follows:

(a) Organization and Nature of Operations

The Authority operates two airports in the Jackson, Mississippi, metropolitan

area, the Jackson-Evers International Airport ("JEIA") and the Hawkins Field

Airport. The Authority, created in 1960 as a component unit of the City of

Jackson, Mississippi, is govenred by five (5) commissioners appointed by the

Mayor of Jackson and confirmed by the Jackson City Council to serve staggered

terms of five (5) years each. The Commissioners are responsible for planning,

development, and operation of the Hawkins Field Airport and the Jackson-Evers

International Airport. Most of the Authority's business activity is with customers

in the transportation i ^dustry. A substantial portion of its customers' ability to

honor their contracts with the Authority is dependent upon the transportation

economic sector.

(b) Basis of Accounting

The Authority is accounted for as an enterprise fund. The financial statements are

prepared on the accrual basis of accounting in accordance with U.S. generally

accepted accounting principles. The Authority has elected to apply all applicable

Governmental Accounting Standards Board ("GASB") pronouncements as well as

Financial Accounting and Standards Board ("FASB") pronouncements and

Accounting Principles Board ("APB") opinions issued on or before November 30,

1989, unless those pronouncements conlfict with or contradict GASB

pronouncements. The Authority has further elected not to apply FASB

pronouncements issued after November 30, 1989, in accordance with GASB

Statement No. 20.

(c) Cash and Cash Equivalents

Mississippi law allows govenrmental entities to invest in collateralized bank

deposits, Federal securities, or securities issued by other Mississippi governmental

entities. For purposes of the statements of cash flows, the Authority considers restricted cash and all short-term debt securities purchased with maturities of three months or less to be cash equivalents.

7


Notes to Financial Statements


(1) Summary of Significant Accounting Policies (Continued)

(d) Accoun ts Receivable

No allowance for doubtful accounts has been provided, as management believes

all accounts to be collectible as of September 30, 2011 and 2010.

(e) Property, Plant and Equipment

Property, plant and equipment are recorded at acquisition cost. Interest expense,

net of income earned on construction bond proceeds, is capitalized during

construction on those capital projects paid for from the bond proceeds and is

amortized over the depreciable life of the related assets on a straight-line basis. No

interest was capitalized in 2011 or 2010.

Depreciation has been provided using the straight-line method over the estimated useful lives of the assets. Depreciation is not provided for construction-in-

progress until such time as the assets are placed into service.

(0 Income Taxes

The Authority is exempt from federal and state income taxes.

(g) Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles

generally accepted in the United States of America requires management to make

estimates and assumptions that affect the reported amount of assets and liabilities

and disclosure of contingent assets and liabilities at the date of the financial

statements and revenues and expenses during the reporting period. Actual results could differ from those estimates.

(h) Presentation of Sales Tax

The State of Mississippi imposes a sales tax of 7% on the Authority's parking

revenues. The Authority collects the sales tax from customers and remits the

entire amount to the State. The Authority's accounting policy is to exclude the tax

collected and remitted to the State from both revenues and expenses.

8




(1) Summary of Significant Accounting Policies (Continued)

(i) Date of Management's Review

Management has evaluated subsequent events through January 27, 2012, the date

on which the ifnancial statements were available to be issued.

(j) Rest•icted Assets

Assets required to be held and/or used as specified in bond indentures, bond

resolutions, and grantor specifications have been repotred as restricted assets.

When both restricted and unrestricted assets are available for use, the policy is to use restricted assets first.

(2) Deposits and Investments

The carrying amount of the Authority's total cash deposits with financial institutions (including restricted cash) at September 30, 2011, was $43,624,583 and the bank balance was $44,159,314. Collateral for public entities' deposits in financial institutions is held in the name of the Mississippi State Treasurer under a program established by the Mississippi State Legislature and is governed by Section 27-105-5, Miss. Code Ann. (1972). Under this program, the State Treasurer monitors collateralization of the entity's funds. Financial institutions holding deposits of public funds must pledge securities as collateral against those deposits. In the event of failure of a financial institution, securities pledged by that institution would be liquidated by the State Treasurer to replace the public deposits not covered by the Federal Depositary Insurance Corporation ("FDIC").

The carrying amount of the Authority's total cash equivalents (including restricted cash equivalents) at September 30, 2011, was $3,112,036. The Authority's cash equivalents, which are invested in U.S. Treasury securities, are not covered by FDIC insurance.

9




(3) Restricted Cash and Cash Equivalents

A summary of restricted cash and cash equivalents follows:

Description 2011 2010

Short-term: Debt interest and principal payments Passenger facility charges ("PFC") Customer facility charges ("CFC")

$ 2,370,075 2,338,291 219,012 219,012

1,183,526 1,192,107

Total short-term 3,772,613 3,749,410

Long-term: Passenger facility charges ("PFC") Customer facility charges ("CFC") Asset forfeiture seizure funds Unused proceeds of bond issues Restricted for capital projects

17,986,883 17,817,109 3,320,845 2,718,193

45,827 45,371 741,961 1,558,067

3,079,079 3,048,388 Cash reserve restricted by bond indenture 3,067,829 3,039,563

Total long-term 28,242,424 28,226,691

Total restricted cash and cash equivalents $ 32 015 037 31,976,101

(4) Property, Plant and Equipment, Net

A summary of property, plant and equipment, net follows:

Balance Balance

Description Sept. 30, 2010 Additions Deletions Adjustments Sept. 30, 2011

Land S 4,622,050 - 4,622,050

Land improvements 86,058,287 514,802 86,573,089

Buildings & improvements 103,863,687 4,722,835 108,586,522

Utility systems 2,219,549 2,219,549

Fumiture, fixtures & equip. Construction in progress

11,183,986 262,81 1 11,446,797 6,306.545 15,211,156 (5,237,637) 16,280,064

Total 214,254,104 15,473 967 - _- 229 , 728 , 071

Accumulated depreciation (108,853,063) (117,582,651)

Net capital assets $105,401,041 112,145,420

10

JACKSON MUNICIPAL AIRPORT AUTHORITY Notes to Financial Statements


(4) Property, Plant and Equipment, Net (Continued)

Substantially all buildings and improvements are leased to third parties through operating leases.

The Authority has committed approximately $10,000,000 to future construction projects

as of September 30, 2011. These projects are expected to be substantially completed within 2 years from September 30, 2011 and will primarily be financed with grant funds. In 2010, the Authority sold land realizing a gain of approximately $4,900,000. In 2010,

the Authority determined that three construction projects had been partially or completely abandoned and wrote off approximately $3,200,000 of construction-in-progress.

The Authority is generally dependent on continued Federal and State grants to fund a majority of its capital projects.

(5) Pension Plan

Plan Description - The Authority contributes to the Public Employees' Retirement

System of Mississippi ("PERS"), a cost-sharing multiple-employer defined benefit

pension plan. PERS provides retirement and disability benefits, annual cost-of-living

adjustments, and death benefits to plan members and beneficiaries. Benefit provisions are established by State law and may be amended only by the State of Mississippi Legislature. PERS issues a publicly available financial report that includes ifnancial statements and required supplementary information. That information may be obtained by

writing to Public Employee Retirement System, PERS Building, 429 Mississippi Street,

Jackson, Mississippi 39201-1005 or by calling 1-601-359-3589 or 1-800-444-PERS.

Funding Policy - PERS members are required to contribute 9% of their annual covered salary and the Authority is required to contribute at an actuarially determined rate. The current rate is 12% of annual covered payroll. The contribution requirements of PERS members are established and may be amended only by the State of Mississippi Legislature. The Authority's contributions to PERS for the years ended September 30, 2011 and 2010 were $551,321 and $535,518, respectively.

11



(5) Pension Plan (Continued)

Employees of the Authority may also elect to contribute to a Section 457 tax-deferred defined contribution retirement plan administered by PERS. The Authority's contributions to this plan for the years ended September 30, 2011 and 2010 were $75,285 and $71,548, respectively.

(6) Operating Lease Revenues

Primarily all buildings and improvements, except for the parking facility, of the Authority

are leased to third parties through operating leases. Many of these leases provide for the

payment of contingent amounts based on revenues. A summary of future minimum rental

revenue to be received based on operating leases in effect at September 30, 2011, follows:

Year Ending Future Minimum Rental Revenues September 30,

2012 $ 4,524,101

2013 2,231,590

2014 1,716,679

2015 1,289,266

2016 988,696

2017-2021 4,684,912

2022-2026 2,664,433

2027-2031 1,854,401

2032-2036 976,219

Total $ 20,930,297

12



(7) Long-term Debt

A summary of long-term debt follows:


2007 Series A Authority Revenue Bonds

maturing in October 2026; interest rates from 4.00% to 5.00% 8 5,920,000 6,170,000

2007 Series B Authority Revenue Bonds maturing in October 2028; interest rate of 3.75 to 4.25% 6,755,000 7,030,000

2005 Series A Authority Revenue Bonds

maturing in October 2031; interest rates from 3.75% to 5.00% 17,200,000 17,200,000

2005 Series B Authority Revenue Bonds

maturing in October 2035; interest

rate of 4.5% 7,775,000 7,775,000

2005 Series C Authority Revenue Bonds maturing in October 2027; interest rates from 4.25% to 5.15% 5,580,000 6,245,000

1998 Series B Authority Revenue Bonds

maturing in December 2012;

interest rates f •om 5.7% to 6.6% 230,000 335,000

Total long-term debt 43,460,000 44,755,000

13


(7) Long-term Debt (Continued)


Unamortized bond premiums $ 242,979 269,050

Unamortized bond discounts (278,901) (296,004)

Unamortized deferred charges (512,647) (571,145)

Long-term debt 42,911,431 44,156,901

Less current maturities (1,355,000) (1,295,000)

Long-term debt, net of current maturities $ 41 556 431 42,861,901

The 1998 and 2007 Revenue Bonds are collateralized by and will be payable solely from the net revenues of the Authority. The indentures do not constitute a mortgage on any of the physical properties of the Authority. The bonds do not constitute a debt of the

Authority within the meaning of the Mississippi Constitution. Payment of principal and

interest on these bonds is insured by a municipal bond insurance policy.

The 2005 Revenue Bonds are collateralized by and will be payable from the net revenues of the Authority. The 2005A and 2005B Bonds are also partially collateralized by and

payable from PFC revenues of the Authority and the 2005A and 2005C Bonds are also

partially collateralized by and payable from CFC revenues of the Authority. The

indentures do not constitute a mortgage on any of the physical properties of the Authority.

The bonds do not constitute a debt of the Authority within the meaning of the Mississippi

Constitution. Payment of principal and interest on these bonds is insured by a municipal

bond insurance policy.

No new debt was issued in 2011 or 2010. Principal repayments of debt were $1,295,000

and $1,235,000 in 2011 and 2010, respectively.

14


(7) Long-term Debt (Continued)

A schedule of future maturities of long-term debt follows

Year Ending September 30, Principal Interest

2012 $ 1,355,000 1,930,810 2013 1,405,000 1,869,430 2014 1,345,000 1,807,782 2015 1,390,000 1,746,807 2016 1,545,000 1,684,313 2017-2021 8,760,000 7,370,673 2022-2026 10,825,000 5,237,299 2027-2031 8,600,000 2,794,714 2032-2036 8,235,000 959,990

Total $ 43.460.000 25 401 818

(8) Net Assets

A summary of restricted net assets follows:


Debt interest and principal payments Passenger facility charges ("PFC") Customer facility charges ("CFC") Asset forfeiture seizure funds Unused proceeds of bond issues

$ 2,370,075 2,338,291 18,599,383 18,399,153 4,662,879 4,024,932

45,827 45,371 741,961 1,558,067

Restricted for capital projects 3,079,079 3,048,388

Cash reserve restricted by bond indenture 3,067,829 3,039,563

Total restricted net assets $ 32,567,033 32,453,765

15




(9) Commitments and Contingencies

The Authority is exposed to risks of loss of property and general liability claims incidental to its operations. The Authority manages these risks by purchasing commercial insurance.

On December 15, 2011, the Authority terminated the contractor on a major capital project

at the Authority for non-compliance with contract specifications. The contractor has filed

for binding arbitration of the underlying dispute and seeks $2,500,000 for wrongful rejection of materials. The Authority has filed a counter claim in the arbitration proceeding, seeking $3,500,000 in damages. The Authority intends to vigorously defend the contractor's claim and aggressively assert its counterclaim. At this time, the outcome

is uncertain. No liability has been recorded in the financial statements for either the

arbitration claim or for any costs the Authority would incur if it is not successful in its counter-claim.

In 2011, the Authority terminated without cause an engineer on another contract at J EIA. The Authority and its replacement contractor are in the process of evaluating how much

of the work on the original contract will be salvageable. Current estimates are that potentially up to about $600,000 may not be salvageable and may be written off in the

future. However, since no reliable estimate of the amount that may be unsalvageable is

available at the current time, no write-off has been recorded in the 2011 financial

statements.

In November 2011, American Airlines filed for protection under Chapter 11 of the US Bankruptcy Code. American Airlines represents approximately 15% of the passenger

traffic at JEIA. It is unknown what effect, if any, this will have on the Authority's future

operations.

16




(10) Passenger Facility Charges

Under Part 158 of the Code of Federal Regulations, the Federal Aviation Administration

("FAA") granted public agencies controlling commercial service airports the authority to

impose passenger facility charges ("PFC"), ranging from $1.00 to $4.50 per enplaned

passenger, to be used towards the cost of predetermined capital and operating projects

and debt service. These projects and debt service have been approved by the FAA and the

participating airlines. The Authority is currently authorized to impose PFC charges of

$4.50 per enplaned passenger and is authorized to collect $51,742,140 in connection with specific PFC projects, of which $39,547,925 had been collected as of September 30,

2011.

(11) Customer Facility Charges

The Authority has reached agreements with its automobile rental concessionaires

whereby the Authority collects a customer facility charge ("CFC") of $4.00 for each

vehicle rental day. Use of the CFC revenues is restricted to expansion of the parking

garage at JEIA and other construction projects (including related debt service) for the benefit of the Authority's automobile rental concessionaires and to offset increases in

rental rates charged by the Authority to the concessionaires.

17


Supplementary Information

September 30, 2011


Schedule of Expenditures of Federal Awards

Year Ended September 30, 2011

Federal Federal Grantor / Pass-through

Grantor / Program or Cluster Title CFDA Federal

Number Expenditures

U.S. Department of Transportation: Direct programs:

Federal Aviation Administration - Airport Improvement Program:

3-28-0037-041-2008 20.106 $ 1,128,927 3-28-0037-042-2009 20.106 123,879 3-28-0038-012-2010 20.106 321,406 3-28-0037-043-2010 20.106 2,455,705 3-28-0037-044-2010 20.106 5,830,710 3-28-0038-013-2011 20.106 202,051 3-28-0037-045-2011 20.106 226,783

Total U.S. Department of Transportation 10,289,461

U.S. Department of Homeland Security - Direct program -

Transportation Security Administration - Law Enforcement Personnel Agreement -

DTSA20-03-P-01510 97.090 239,871

Total U.S. Department of Homeland Security 239,871

U.S. Department of Defense - Direct program -

National Guard Bureau - Military Construction, National Guard - ARRA

W9127Q-10-2-2101 12.400 60,000

Total U.S. Department of Defense 60,000

Total federal awards $ 10,589,332

The accompanying notes to schedule of expenditures of Federal awards are an integral

part of this schedule.

See accompanying independent auditors' report.

18

JACKSON MUNICIPAL AIRPORT AUTHORITY Notes to Schedule of Expenditures of Federal Awards

September 30, 2011

(1) Basis of Presentation

The accompanying schedule of expenditures of federal awards includes the federal grant

activity of Jackson Municipal Airpotr Authority and is presented on the accrual basis of

accounting. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit

Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements.

(2) Sub-recipients

The Authority provided no federal awards to sub-recipients.

(3) Reconciliation of Schedule of Expenditures of Federal Awards to Financial Statements

A reconciliation of the total Federal awards per the Schedule of Expenditures of Federal

Awards to the statement of revenues, expenses and changes in net assets is presented below:

Description Amount

Per Schedule of Expenditures of Federal Awards:

Total Federal awards $ 10,589,332

State of Mississippi grants 264,555

Other grants 4,559

Total governmental grants $ 10,858,446

Per Statement of Revenues, Expenses and

Changes In Net Assets:

Operating governmental grant revenue

Capital grant contributions

$ 451,560

10,406,886

Total governmental grants $ 10,858,446

19


Schedule of Passenger Facility Charges - Cash Basis


PFC PFC PFC

Application Application Application

99-03-C- 03-04-C- 07-05-C-

00-JAN 00-JAN 00-JAN Total

Balance at September 30, 2010 $ 18,036,121

Receipts:

Passenger facility charges collected

Interest income 2,484,236

186,982

Total income 2,671,218

Expenditures:

Terminal renovations - debt service $ 159,464 - - 159,464

Rehabilitate International Drive

- debt service - 59,548 - 59,548

Passenger Jet Bridges 390,785 390,785

Access Control Security Project 158,189 158,189

Rehabilitate Utility Services - 883,300 883,300

Rehabilitate Storm Water Infrastructure

Master Plan Update

Pavement Rehab

- 49,238 49,238

- 629,358 629,358

- 171,562 171,562

Total expenditures 159,464 59,548 2,282,432 2,501,444

Prior expenditures 4,826,634 1,890,447 1,560,882

Cumulative expenditu res $ 4,986,098 1,949,995 3,843,314

Balance at September 30, 2011 $ 18,205,895


20


Historical Schedule of Selected Financial Data

As of and For the Years Ended September 30,

( in thousands)

2011 2010 2008 2007 2006 2005 2004 2003 2002

ASSETS Current assets, unrestricted S 16.611 16,333 12,935 11,432 8.637 8.385 8.154 3.278 3,750 4,861 3,794 Restricted assets 32,567 32,454

26.948 24,692 23,569

112.086 117,454 123,631 22.229 32.038 7,748 5,539 5.656 5.128

Property, plant & equipment

Other non-current assets

112,145 105,401 126,193 109.851 97,107 95,131 94,327 88,943 1,048 1,144 1,235 1,341 1,452 1,536 1,651 583 543 587

Total assets 162,371 155,332 153,204 154,919 157,289 158,343 151,694 108,716 104,963 105,431 98,497

LIABILITIES Current liabilities 4.917 4,764 4.165 4.119 4,262 4.748 5.043 2.895 2.305 3.555 3.323 Long-term debt, net of current maturities 41,556 42,862 44,096 45,277 46,398 47,672 48,400 19,771 20,394 21,895 21,545

Total liabilities 46,473 47,626 48,261 49,396 50,660 52,420 53,443 22,666 22,699 25,450 24,868

NET ASSETS S 115,898 107,706 104,943 105,523 106,629 105,923 98,251 86,050 82,264 79,981 73,629

REVENUES AND EXPENSES Operating revenues $ 16,288 16,096 15.994 16.524 15.908 14.660 13,531 12.335 12.072 11.027 11,238 Operating expenses 12,809 13,103 11,971 13,248 11,777 10,701 8,822 8,891 8,461 7,448 8,106

Operating income before depreciation

Depreciation

3.479 2,993 4.023 3.276 4,131 3.959 4,709 3.444 3,611 3,579 3.132 8,730 8,398 8,560 8,491 8,318 6,756 6,504 6,214 5,185 4,824 4,617

Operating income (loss) Passenger facility charges (restricted) Customer facility charges (restricted)

Other income & expense

(5.251) (5.405) (4.537) (5.215) (4.187) (2.797) (1.795) (2.770) (1.574) (1.245) (1.485) 2.702 2.681 2.645 3.102 3,348 3,343 2,931 2,600 1.721 1,658 1,850 1.733 1,558 1,528 1,781 1.961 3.212 1,807 409 - -

(1,398) 464 (1,898) (945) (1,240) (1,116) (834) (894) (740) (994) (758)

Income (loss) before capital grant contributions S (2,214) (702) (2,262) (1,277) ( I I S) 2,642 2.109 (655) (593) (581) (393)

OTHER Property, plant & equipment additions $ 15,474 5.023 1.782 2,314 5,757 24,047 19,203 8,190 5,991 10,208 17,195 Federal and state capital grants ((0,407) (3,464) (1,683) (171) (824) (5,703) (10,092) (4,442) (2,712) (6,934) (11,143) Passenger facility charge reimbursements (2,501) (601) (50) (1,519) - (668) (1,020) (2,158) (973) (2,900)

Net construction costs incurred S 2,566 958 49 624 4,933 18,344 8,371 2,728 1,121 2,301 3,152


21


Schedule of Budgeted vs. Actual Revenues and Expenses


Budget Actual Variance

Operating revenues:

Aviation $ 6,276,506 6,299,808 23,302

Non-aviation 7,099,540 7,156,174 56,634 Concessions 2,750,400 2,831,938 81,538

Total operating revenues 16,126,446 16,287,920 161,474

Operating expenses:

Board expenses 99,600 87,435 12,165

Building expenses 1,572,327 1,314,479 257,848

Employee expenses 6,444,680 6,472,111 (27,431)

Equipment expenses 410,760 373,723 37,037

Miscellaneous expenses 35,050 38,512 (3,462)

Services 5,365,538 4,004,217 1,361,321

Supplies 532,960 518,702 14,258

Total operating expenses 14,460,915 12,809,179 1,651,736

Operating income before

depreciation 1,665,531 3,478,741 1,813,210

Depreciation expense

Operating loss

8,685,943 8,729,989 (44,046)

(7,020,412) (5,251,248) 1,769,164

Other income (expense):

Passenger facility charges, restricted

Customer facility charges, restricted

2,741,742 2,701,673 (40,069)

1,517,359 1,732,645 215,286

Interest expense (1,957,887) (2,107,112) (149,225)

Operating govenrmental grant revenue

Gain on sale of assets

Interest income

725,750 451,560 (274,190)

- 25,374 25,374

156,000 243,475 87,475

Other 9,600 (10,026) (19,626)

Net other income (expense) 3,192,564 3,037,589 (154,975)

Loss before contributions

and transfers $ (3,827,848) (2,213,659) 1,614,189


22


Summary Schedule of Prior Audit Findings

September 30, 2011


Summary Schedule of Prior Audit Findings

September 30, 2011

There were no prior audit findings reported.

23


REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND

OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH

GO VERNMENT A UDITING STANDARDS

September 30, 2011

BREAZEALE, SAUNDERS & O'NEIL, LTD. CERTIFIED PUBLIC ACCOUNTANTS

REPORT ON CONIPLIANCE AND ON INTERNAL CONTROL OVER

FINANCIAL REPORTING ANI) ON COMPLIANCE AND

OTHER MATTER.S BASED ON AN AUDIT OF FINANCIAL

STATEMENTS PERFORMED IN ACCORDANCE NNTITI

GO f TRIV,IIENT AUDITING STANDARDS


Jackson -Municipal Airport Authority:

We have audited the financial statements of the Jackson Municipal Airport Authority ("the

Authority") as of and for the year ended September 30, 201 l , and have issued our report thereon

dated January 27, 2012. 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 /twitting Standards, issued by the Comptroller General of thc United States.

Internal Control Over Financial Re )ortifig

In planning and performint4 our audit, wc considered the Authority's internal control over financial

reporting as a basis for desimling our auditinLt 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 nornial course o ['performing their assigned functions, to prevent or

detect and correct misstatements on a timely basis. A material weakness is a deficiency, or

combination of deifciencies, in internal control such that there is a reasonable possibility that a

material misstatement of the Authority's financial statements will not be prevented or detected and

corrected on a timel y basis.

24

120 NORTH CONGRESS STREET / SUITE 300 I P. O. BOX BO / JACKSON, MISSISSIPPI. 39205-0080

TELEPHONE 601-969-7440 / TELECOPIER: 601-355-9003 1 wv.P.v.bsoltd_corn


Page two

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 intenral

control over financial reporting that might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deifciencies in internal control over financial reporting that

we consider to be material weaknesses, as deifned above.

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 Governnzent Auditing Standards.

We noted certain matters that we reported to management of the Authority in a separate letter dated January 27, 2012.

This report is intended solely for the information and use of management, the Board of

Commissioners, others within the entity, and Federal awarding agencies and is not intended to be and should not be used by anyone other than these specified parties.


January 27, 2012

25

JACKSON MUNICIPAL, AIRPORT AUTHORITY

REPORT ON COMPLIANCE WITH REQUIREMENTS THAT COULD HAVE A DIRECT

AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND THE PASSENGER

FACILITY CHARGE PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE

IN ACCORDANCE WITH OMB CIRCULAR A-133 AND THE PASSENGER FACILITY

CHARGE AUDIT GUIDE FOR PUBLIC AGENCIES

September 30, 2011

BREAZEALE, SAUNDERS & Li'D. CERTJFIED PUBLIC ACCOUNTANTS

REPORT ON COMPLIANCE, WITH REQUIREMENTS THAT COULI) HAVE A

DIRECT AND MATEIZIAL EFFECT ON EACH MAJOR PROGRAM AND THE

PASSENGER FACILITY CHAR.GE PROGRAM AND ON INTERNAL CONTROI.

OVER COMPLIANCE IN ACCORDAN('• WITH OMB CIRCULAR A-133 AND THE

PASSENGER FACILITY CHARGE AUDIT GUIDE EOR. PUBLIC AGENCIES


Jackson NIunicipaI Airport Authority:

Coin )liance

We have audited the compliance of.fackson Municipal Airport Authority ("the Authority") with the

types olcompliance requirements described in the U. S. Ofifce of Management and Budget ("OMB")

Circular A-133 Compliance Supplc-unent that could have a direct and material effect on each of its

major federal programs and the compliance requirements described in the Passenger Facilitv Charge

Audit GuidelOr Public Agencies, ("the Guide") issued by the Federal Aviation Administration, for

its passenger facility charge program for the year ended September 30, 2011 . The Authority's major

federal pro grams are identified in the summar y of auditors' results section of the accompanying

schedule of findin gs and questioned costs. Compliance with the requirements of laws, regulations.

contracts, and grants applicable to each of its major federal prog-rams and its passenger facility

charg program is the responsibility of the Authority's management. Our responsibility is to express e

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 C'omptroller General ofthe United States; OMB Circular A-1 33,

Audits of States, Local Governments, and Non-Profit Organizations; and the Pas,s'enger Facilitv

Charge Audit Guidefor Public Agencies. Those standards, OMB Circular A-I 33, and the Guide

require that we plan and perform the audit to obtain reasonable assurance about whether

noncompliance with the types of compi i ancc requirements referred to above that could have a direct

and material effect on a major federal pro gram or thc passenger facility char ge program occurred. Ari

audit includes examining on a test basis evidence about thc Authority's compliance with those

requirements and perfonning 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 of the Authority's compliance with those requirements.

)6

120 NORTH CONGRESS STREET / SUITE 300 / P. O. BOX 50 /JACKSON, MISSISSIPPI, 39205-0080 TELEPHONE: 601-969-7440 / TELECOPIER, 601-355-9003 i www.bsoltd.com


Page two

In our opinion, the Authority complied, in all material respects, with the requirements referred to above that could have a direct and material effect on each of its major federal programs and its passenger facility charge program for the year ended September 30, 2011.

Intenral Control Over Compliance

The management of the Authority is responsible for establishing and maintaining effective intenral

control over compliance with the requirements of laws, regulations, contracts, and grants applicable

to federal programs and the passenger facility charge program. In planning and performing our audit,

we considered the Authority's intenral control over compliance with requirements that could have a direct and material effect on a major federal program or the passenger facility charge program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133,

but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Authority's intenral control over compliance.

A deifciency 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 on a tiniely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in intenral control over compliance such that there is a

reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented or detected and corrected on a timely basis.

Our consideration of the intenral 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

that might be deficiencies, signiifcant deficiencies or material weaknesses. We did not identify any

deifciencies in intenral control over compliance that we consider to be material weaknesses, as deifned above.

27

Jackson Municipal Airport Authority Page three

This report is intended solely for the information and use of management, the Board of

Commissioners, others within the entity, federal awarding agencies, and the Federal Aviation

Administration and is not intended to be and should not be used by anyone other than these specified

parties.

/-%'7410 .


January 27, 2012

28


Schedule of Findings and Questioned Costs

September 30, 2011

JACKSON MUNICIPAL AIRPORT AUTHORITY Schedule of Findings and Questioned Costs

September 30, 2011

Section I — Summary of Auditors' Results

1. The independent auditors' report expresses an unqualified opinion on the financial statements of Jackson Municipal Airport Authority.

2. No signiifcant deficiencies in internal control over financial reporting were disclosed during the audit of the financial statements.

3. No instances of noncompliance material to the financial statements of Jackson Municipal Airport Authority that would be required to be reported in accordance with Govern/new Auditing Standa •ds were disclosed during the audit.

4. No significant deficiencies in intenral control over compliance with requirements of major federal award programs or the passenger facility charge program are reported in Section 3 of this Schedule.

5. The independent auditors' report on compliance with requirements applicable to each major program and the passenger facility charge program expresses an unqualified opinion on Jackson Municipal Airport Authority's compliance with compliance requirements applicable to its major federal programs and its passenger facility charge program.

6. No audit findings that are required to be reported in accordance with Section 510(a) of OMB Circular A-133 are reported in Section 3 of this Schedule.

7. The programs tested as major programs were:

20.106 Airport Improvement Program

8. The threshold for distinguishing Types A and B programs is $300,000.

9. Jackson Municipal Airport Authority was determined to be a low-risk auditee.

29

JACKSON MUNICIPAL AIRPORT AUTHORITY Schedule of Findings and Questioned Costs

September 30, 2011

Section II — Financial Statement Findings

No significant deficiencies, material weaknesses, or instances of material noncompliance related to the financial statements were reported.

Section III — Federal Award Findings and Questioned Costs

No audit ifndings required to be reported by Section 510(a) of Circular A-133 were reported.

30


Corrective Action Plan

September 30, 2011

JACKSON MUNICIPAL AIRPORT AUTHORITY Corrective Action Plan

September 30, 2011

No audit findings have been reported. Therefore, no corrective action plan is necessary.

31

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