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HomeMy Public PortalAbout2010 AFRTOWN OF GULF STREAM, FLORIDA FINANCIAL STATEMENTS WITH INDEPENDENT AUDITOR'S REPORT THEREON SEPTEMBER 30, 2010 TOWN OF GULF STREAM, FLORIDA SEPTEMBER 30, 2010 TABLE OF CONTENTS Pages Independent Auditor's Report 1-2 Management's Discussion and Analysis (required supplementary information) 3 - 10 Basic Financial Statements Government -wide Financial Statements Statement of Net Assets 11 Statement of Activities 12-13 Fund Financial Statements Balance Sheet — Governmental Fund 14 Reconciliation of the Balance Sheet — Governmental Fund to the Statement of Net Assets 15 Statement of Revenues, Expenditures, and Changes in Fund Balance - Governmental Fund 16 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance of the Governmental Fund to the Statement of Activities 17 Statement of Net Assets — Proprietary Fund 18 Statement of Revenues, Expenses, and Changes in Net Assets — Proprietary Fund 19 Statement of Cash Flows — Proprietary Fund 20 Notes to the Financial Statements 21-38 Required Supplemental Information Other Than MD&A Schedule of Revenues, Expenditures, and Changes in Fund Balance — Budget and Actual — General Fund 39 Notes to the Budgetary Required Supplemental Information 40 Other Reports Report on Internal Control Over Financial Reporting and On Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards 41-42 Management Letter in Accordance With the Rules of the Auditor General of the State of Florida 43-46 NH &M NOWLEN, HOLT & MINER, P.A. CERTH;IM PUBLIC ACCOUNTANTS EVERETT B. NOWLEN (1030-1964), CPA EDWARD T HOLT, CPA WILLIAM B. MINER, CPA ROBERT W. HENDRK JR.,CPA WEST PALM BEACH OFFICE JANET R. BARICEVICH, CPA 215 FIFTH STREET, SUITE 700 POST OFFICE BOX 347 WEST PALM BEACH, FLORIDA 33402-0347 '1 PHONE (561) 659-3060 FAX (561) 835-0626 KATHLEEN A MINER, CPA W W WNHMCPA.COM TERRY L MORTON, , CPA T N. RONALD BENNETT, CPA J. MICHAEL STEVENS, CPA ALEXIA G. VARGA, CPA BRIAN J. BRESCV6 CFP-, CPA KORA D. PETERSON, CPA EDWARD T. HOLT, JR., CPA BELLE GLADE OFFICE 333 S.E. 2nd STREET POST OFFICE BOX 338 INDEPENDENT AUDITOR'S REPORT BELLE GLADE, FLORIDA 33430-0338 TELEPHONE (581) 096-5812 FAX (561) 988248 The Honorable Mayor and Members of the Town Commission Town of Gulf Stream, Florida We have audited the accompanying financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the Town of Gulf Stream, Florida as of and for the year ended September 30, 2010 which collectively comprise the Town's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Town of Gulf Stream's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with U.S. generally accepted auditing standards 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 significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. The Town has not recognized the other postemployment benefits (OPEB) expense and obligation in the governmental activities financial statements as required in accordance with U.S. generally accepted accounting principles as provided in Governmental Accounting Standards Board Statement No. 45. The effects of that departure on the financial statements are not reasonably determinable. The Town also has not disclosed the descriptive information about other post employment benefits required by standards. In our opinion, except for the effects of the omission of the OPEB expense and obligation for the governmental activities as described in the preceding paragraph, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities of the Town of Gulf Stream, Florida, as of September 30, 2010, and the respective changes in financial position thereof for the year then ended in conformity with U. S. AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS • FLORIDA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS • CPAMERICA INTERNATIONAL generally accepted accounting principles. In addition, in our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the business -type activities, each major fund, and the aggregate remaining fund information of the Town of Gulf Stream, Florida, as of September 30, 2010, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with U.S. generally accepted accounting principles. In accordance with Government Auditing Standards, we have also issued our report dated April 7, 2011, on our consideration of the Town of Gulf Stream's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, 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 should be read in conjunction with this report in considering the results of our audit. Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis on pages 3 through 10 and the budgetary comparison information on pages 39 and 40 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express and opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance Management has omitted the Schedule of Funding Progress for Other Post Employment Benefits that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. Our opinion on the basic financial statements is not affected by this missing information. West Palm Beach, Florida April 7, 2011 2 %MdJ-,4X-; 42� 9' Pa - Management's Discussion and Analysis The Town of Gulf Stream's (the "Town") discussion and analysis is designed to: A. Assist the reader in focusing on significant financial issues B. Provide an overview of the Town's financial activity C. Identify changes in the Town's financial position D. Identify any material deviations from the financial plan (approved budget) E. Identify individual fund issues or concerns Since the Management's Discussion and Analysis (MD&A) is designed to focus on the current years activities, resulting changes and currently known facts, please read it in conjunction with the Town's financial statements, which follow this section. FINANCIAL HIGHLIGHTS ➢ The assets of the Town of Gulf Stream exceeded its liabilities at the close of the most recent fiscal year by $5,853,605(net assets). Of this amount, $1,463,293 (unrestricted net assets) may be used to meet the government's ongoing obligations to citizens and creditors. ➢ The government activities revenues were $2,598,495 at the close of fiscal year 2010. ➢ The business -type activities revenues were $961,402 at the close of fiscal year 2010. ➢ The total cost of all Town programs was $3,561,883 during the fiscal year 2010. ➢ At the end of the 2010 fiscal year, unreserved fund balance for the general fund was $1,425,867 or 57% of total general fund expenditures. USING THIS REPORT In light of the fact that this is a very different presentation from the pre -GASB 34 Statements, the following graphic is provided for your review. MD&A BASIC FINANCIAL STATEMENTS REQUIRED SUPPLEMENTAL INFORMATION Management's Discussion & Analysis (Required supplemental information) Government -wide financial Fund Financial Statements statements (new)(pages 11-13) (Refocused)(Pages 14-20) Notes to the financial statements (Expanded/ Restructured) (Pages 21-38) Required supplementary information (Other than MD&A) (Expanded) (Pages 39-40) Management's Discussion and Analysis The financial statement's focus is on both the Town as a whole (government -wide) and on the major individual funds. Both perspectives (government -wide and major fund) allow the user to address relevant questions, broaden a basis for comparison (year to year or government to government), and enhance the Town's accountability. Government -Wide Financial Statements The government -wide financial statements are designed to provide readers with a broad overview of the Town of Gulf Stream's finances, in a manner similar to a private -sector business. The Statement of Net Assets includes all of the government's assets and liabilities. All of the current year's revenues and expenses are accounted for in the statement of activities regardless of when cash is received or paid. The two government -wide statements report the Town's net assets and how they have changed. Net assets, the difference between the Town's assets and liabilities, is one way to measure the Town's financial health or financial position. Over time, increases or decreases in the Town's net assets are indicators of whether its financial health is improving or deteriorating. You will need to consider other non-financial factors, however, such as changes in the Town's property tax base and the condition of the Town's roads, to assess the overall health of the Town. In the Statement of Net Assets and the Statement of Activities, we divide the Town into two kinds of activities: ➢ Government activities — Most of the Town's basic services are reported here, including the police, public services and general administration. Property taxes, franchise fees and state shared revenue finance most of these activities. ➢ Business -type activities — The Town charges a fee to customers to help it cover all or most of the cost of certain services it provides. Fund Financial Statements Our analysis of the Town's major funds begins on page 5. The fund financial statements provide detailed information about the most significant funds — not the Town as a whole. Funds are accounting devices that the Town uses to keep track of specific sources of funding and spending for a particular purpose. ➢ Governmental Funds — Most of the Town's basic services are included in a governmental fund, which focuses on (1) how cash and other financial assets can be readily converted to cash flow and (2) the balances left at year-end that are available for spending. Consequently, the governmental fund statements provide a short-term view that helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the Town's programs. Management's Discussion and Analysis ➢ Proprietary Funds — Services for which the Town charges customers a fee are generally reported in proprietary funds. Proprietary funds, like the government -wide statements, provide both long and short-term financial information. ■ The Town's enterprise fund (one type of proprietary fund) is the same as its business type activities, but provides more detail and additional information, such as cash flows. FINANCIAL ANALYSIS OF THE TOWN AS A WHOLE Net Assets The Town's combined net assets for the fiscal year ending 2010 are reported at $5,853,605. Net assets of the Town's governmental activities for the fiscal year ending 2010 are $3,692,402. The net assets of our business -type activities are reported at $2,161,203 for the fiscal year ending 2010. Overall the financial position of the total primary government is better than the prior year, with a slight decrease in net assets for the governmental activities and a slight increase for the business type activities. Town of Gulf Stream Statement of Net Assets As of September 30, 2010 5 Governmental Business -Type Total Primary Activities Activities Government 2009 2010 2009 2010 2009 2010 Current and other Assets $ 1,446,993 $ 1,552,077 $ 116,005 $ 174,190 $ 1,562,998 $ 1,726,267 Capital Assets 2,429,660 2,291,718 2,081,048 2,080,774 4,510,708 4,372,492 TOTAL ASSETS 3.876,653 3,843,795 2,197,053 2,254,964 6,073,706 6,098,759 Current and Other Liabilities 108,755 131,725 90,700 93,761 199,455 225,486 Long term liabilities outstanding 18,660 19,668 18,660 19,668 TOTAL LIABILITIES 127,415 151,393 90,700 93,761 218,115 245,154 Net Assets: Invested in capital assets, net of Related debt 2,429,660 2,291,718 2,126,938 2,080,774 4,556,598 4,372,492 Restricted 17,820 17,820 17,820 17,820 Unrestricted 1,301,758 1,382,864(20,585)8_0 429 1,281,173 1,463,293 TOTAL NET ASSETS $ 3,749,238 2 4 2 2 10 2 1 1 $ 5 855501 $ 5 Management's Discussion and Analysis Changes in Net Assets The statement of activities presents information showing how the government's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in the future fiscal periods (i.e., uncollected taxes and earned but unused vacation leave). ➢ The decrease in net assets for governmental activities totaled $56,836. The decrease in net assets was primarily due to increased depreciation as opposed to minimal capital asset acquisitions. ➢ The increase in business -type net assets was $54,850. The increase in net assets was due in part to increased revenue and increased asset acquisitions. IN Town of Gulf Stream's Changes in Net Assets Governmental Business -Type Total Primary Activities Activities Government 2009 2010 2009 2010 2009 2010 Revenues: Program Revenues: Charges for services: $ 193,146 $ 189,973 $ 914,783 $ 961,402 $ 1,107,929 $ 1,151,375 Operating & Capital Grants 18,095 22,054 18,095 22,054 General Revenues: Property Taxes 2,042,370 1,972,342 2,042,370 1,972,342 Communication Taxes 73,507 64,143 73,507 64,143 Gas Taxes 29,598 28,678 29,598 28,678 Utility Service Tax 66,807 66,807 Franchise Fees 132,705 118,277 132,705 118,277 Unrestricted Investment Earnings 66,083 31,113 66,083 31,113 Intergovernmental Revenues 72,683 73,082 72,683 73,082 Other 22,139 32,026 22,139 32,026 Transfers (1,268,567) 1,268,567 _ Total Revenues $ 1,381,759 12,598,495 $2,183,350961 402 $ 3,565,109 $ 3,559,897 Governmental Business -Type Total Primary Activities Activities Government 2009 2010 2009 2010 2009 2010 Expenses: Governmental Type Activities: General Government $ 661,758 $ 691,214 $ $ $ 661,758 $ 691,214 Police department 1,317,232 1,341,437 1,317,232 1,341,437 Fire protection 161,958 286,250 161,958 286,250 Streets 218,314 224,477 218,314 224,477 Sanitation 122,836 111,953 122,836 111,953 Business -Type Activities: Water 910,395 906,552 910,395 906,552 Total Expenses 2,482,098 2,655,331 910,395 906,552 3,392,493 3,561,883 Change in Net Assets (1,100,339) (56,836) 1,272,955 54,850 172,616 (1,986) Net Assets - Beginning 4,849,577 3,749,238 833,398 2,106,353 5,682,975 5,855,591 Net Assets - Ending $ 3,749,238 $ 3,692,402 $2,106,353 $2,161,203 $ 5,855,591 $5,853,605 IN Management's Discussion and Analysis More than half the Town's revenue comes from property taxes. (Please see chart below.) Charge Intergovern 9% Revenues — Governmental Revenues by Source Other 7 Management's Discussion and Analysis The Town's expenses cover a range of services, with 62% related to public safety. (Please see chart below.) Expenses — Governmental Expenses by Function C Fire Financial Analysis of the Governmental Fund on the Fund Basis ,51% As the Town of Gulf Stream completed the year, the general fund reported a fund balance of $1,464,211, an increase of $82,795 from the previous fiscal year. The increase was due to constraints in all functional spending, especially capital improvements. The general fund ended the 2010 fiscal year with $38,344 in reserved fund balances and with $1,425,867 in unreserved fund balances. N. Management's Discussion and Analysis Financial Analysis of the Proprietary Fund Total net assets of the water fund at the end of the fiscal year 2010 were $2,161,203. The net assets of the water fund have increased slightly from last year. Water rates were not changed and there were not any major improvements. General Fund Budgetary Highlights Over the course of the year, The Town Commission revised the budget once. With these adjustments, actual expenditures were $136,272 less than the final budget amounts. Revenues were $66,525 more than the final budget amounts. CAPITAL ASSET AND DEBT ADMINSTRATION Capital Assets At the end of fiscal year 2010, the Town had invested $4,372,492 in a broad range of capital assets including police equipment, buildings, infrastructure and water improvements. Additional information can be found in Note 3 of the notes to the financial statements. Some changes shown below in the categories are a result of the reclassification of some assets. Land Buildings & Improvements Equipment Infrastructure TOTALS Town of Gulf Stream's Capital Assets (Net of depreciation) as of September 30, 2010 Governmental Business -Type Activities Activities 2009 2010 2009 2010 $ 376,523 $ 376,523 $ $ 320,586 282,749 2,072,262 2,069,193 132,305 110,318 8,786 11,581 1,600,246 1,522,128 TOTAL 2009 2010 $ 376,523 $ 376,523 2,392,848 2,351,942 141,091 121,899 1,600,246 1,522,128 2,429,660 $2,291,718 $ 2,081,048 $2,080,774 $4,510,708 X $4372,492 Management's Discussion and Analysis Debt As of September 30, 2010 the Town had $63,527 in long term compensated absences as shown in the following table: Additional information can be found in note 6 of the notes to the financial statements. Town of Gulf Stream's Outstanding Debt As of September 30, 2010 Governmental Business -Type Activities Activities Total 2009 2010 2009 2010 2009 2010 Compensated Absences 61,838 $63,527 $ 61,838 $63,527 TOTALS $ 61.838 $6.3,527 S $ $ 61,838 $63,527 ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES For the 2011 fiscal year, general fund revenue projections are comparable to the previous year. ➢ The budget is balanced by using reserves from the 2010 fiscal year. ➢ There is not a change in user rate fees for fiscal year 2011. ➢ The millage rate was reduced to 2.8655 mills, which is less than the rolled -back rate. CONTACTING THE TOWN'S FINANCIAL MANAGEMENT This financial report is designed to provide our residents and creditors with a general overview of the Town's finances and demonstrates the Town's accountability for the money it receives and disburses. If you have any questions about this report or need additional information, please contact the Town of Gulf Stream, 100 Sea Road, Gulf Stream, FL 33483. 10 TOWN OF GULF STREAM, FLORIDA Statement of Net Assets September 30, 2010 Assets Cash and cash equivalents Investments Accounts receivable Inventories Internal balances Prepaid expenses Capital assets Non -depreciable Depreciable (net of depreciation) Total assets Liabilities Liabilities Accounts payable Accrued liabilities Damage deposit bonds Deferred revenue Compensated absences payable Payable within one year Payable after one year Total liabilities Net assets Investment in capital assets, net of related debt Restricted for dredging projects Unrestricted Total net assets Total liabilities and net assets Primary Government Governmental Business -type $ 80,711 $ $ 80,711 1,362,489 1,362,489 68,591 190,426 259,017 5,199 19,668 5,199 19,762 (19,762) 93,761 245,154 15,325 3,526 18,851 376,523 376,523 1,915,195 2,080,774 3,995,969 $ 3,843,795 $ 2,254,964 $ 6,098,759 $ 53,869 $ 48,261 $ 102,130 23,195 23,195 45,500 45,500 10,802 10,802 43,859 43,859 19,668 19,668 $ 3,843,795 151,393 93,761 245,154 2,291,718 2,080,774 4,372,492 17,820 17,820 1,382,864 80,429 1,463,293 3,692,402 2,161,203 5,853,605 $ 3,843,795 $ 2,254,964 $ 6,098,759 See notes to the financial statements. TOWN OF GULF STREAM, FLORIDA Statement of Activities For the Year Ended September 30, 2010 Functions/Programs Primary Government Governmental activities General government Police department Fire protection Streets Sanitation Total governmental activities Business -type activities Water Total primary government 12 Charges for Expenses Services $ 691,214 $ 75,836 1,341,437 1,506 286,250 224,477 111,953 112,631 2,655,331 189,973 906,552 961,402 $ 3,561,883 $ 1,151,375 Net (Expense) Revenue and Program Revenues Changes in Net Assets Operating Capital Primary Government Grants and Grants and Governmental Business -type Contributions Contributions activities activities Total $ 22,054 $ $ (593,324) $ $ (593,324) (1,339,931) (1,339,931) (286,250) (286,250) (224,477) (224,477) 678 678 22,054 (2,443,304) (2,443,304) 54,850 54,850 $ 22,054 $ (2,443,304) 54,850 (2,388,454) General revenues Property taxes Communications services taxes Gas taxes Utility service ta)i Franchise fees Intergovernmental shared revenues Unrestricted investment earnings Miscellaneous revenues Total general revenues Change in net assets Net assets - beginning Net assets - ending 1,972,342 1,972,342 64,143 64,143 28,678 28,678 66,807 66,807 118,277 118,277 73,082 73,082 31,113 31,113 32,026 32,026 2,386,468 2,386,468 (56,836) 54,850 (1,986) 3,749,238 2,106,353 5,855,591 $ 3,692,402 $ 2,161,203 $ 5,853,605 See notes to the financial statements. 13 TOWN OF GULF STREAM, FLORIDA Balance Sheet - Governmental Fund September 30, 2010 Assets General Fund Cash and cash equivalents $ 80,711 Investments 1,362,489 Accounts receivable 68,591 Due from other funds 19,762 Inventories 5,199 Prepaid expenditures 15,325 Total assets $ 1,552,077 Liabilities and fund equity Liabilities Accounts payable $ 53,869 Accrued Liabilities 23,195 Deferred revenue 10,802 Total liabilities 87,866 Fund equity Reserved for: Inventories 5,199 Prepaid expenditures 15,325 Dredging projects 17,820 Unreserved - undesignated 1,425,867 Total fund equity 1,464,211 Total liabilities and fund equity $ 1,552,077 See notes to the financial statements. 14 TOWN OF GULF STREAM, FLORIDA Reconciliation of the Balance Sheet of Governmental Fund to the Statement of Net Assets September 30, 2010 Fund balance - governmental fund $ 1,464,211 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and therefore, are not reported in the governmental fund. Governmental capital assets $ 4,071,219 Less accumulated depreciation (1,779,501) 2,291,718 Long-term liabilities are not due and payable in the current period and therefore, are not reported in the governmental fund. Compensated absences (63,527) Net assets of governmental activities $ 3,692,402 See notes to the financial statements. 15 TOWN OF GULF STREAM, FLORIDA Statement of Revenues, Expenditures and Changes in Fund Balance Governmental Fund For the Year Ended September 30, 2010 General Fund Revenues Taxes $ 2,055,551 Intergovernmental revenue; 195,803 Licenses and permits 167,668 Charges for services 112,631 Fines and forfeits 1,506 Investment earnings 31,113 Miscellaneous 34,223 Total revenues 2,598,495 Expenditures Current General and administrative 629,148 Police department 1,272,508 Fire protection 286,250 Streets 156,730 Sanitation 111,953 Capital outlay 59,111 Total expenditures 2,515,700 Excess (deficiency) of revenue; over (under expenditures; 82,795 Net change in fund balance 82,795 Fund balance - beginning of the year 1,381,416 Fund balance - end of the yea: $ 1,464,211 See notes to the financial statements. 16 TOWN OF GULF STREAM, FLORIDA Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance of the Governmental Fund to the Statement of Activities For the Year Ended September 30, 2010 Net change in fund balance - governmental fund $ 82,795 Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is depreciated over their estimated useful life. Expenditures for capital assets Less current year depreciation $ 59,111 (171,016) (111,905) Gains and losses on the disposal of fixed assets are not reported in the governmental funds but are reported in the statement of activities Net book value of fixed asset disposals (26,037) Some expenses reported in the statement of activities do not require the use of current financial resources and therefore, are not reported as expenditures of governmental funds. Change in long-term compensated absences Change in net assets of statement of activities (1,689) $ (56,836) See notes to the financial statements. 17 TOWN OF GULF STREAM, FLORIDA Statement of Net Assets Proprietary Fund September 30, 2010 Assets Current assets Accounts receivable Prepaid expenses Total current assets Noncurrent assets Depreciable capital assets Less acumulated depreciation Total noncurrent asset,, Total assets Liabilities Current liabilitie: Accounts payable Due to other funds Damage deposit bonds Total current liabilitie Total liabilitie; Net assets Investment in capital assets, net of related deb Unrestricted Total net assets See notes to the financial statements. 18 Enterprise Fund $ 190,426 3,526 193,952 2,658,379 (577,605) 2,080,774 2,274,726 48,261 19,762 45,500 113,523 113,523 2,080,774 80,429 $ 2,161,203 TOWN OF GULF STREAM, FLORIDA Statement of Revenues, Expenses and Changes in Net Assets Proprietary Fund For the Year Ended September 30, 2010 Operating revenues Charges for services Total operating revenue, Operating expenses Water purchases Repairs and maintenance Management fees Depreciation expense Payment in lieu of taxes Other expenses Field visit service Total operating expense; Operating income Change in net assets Net assets - beginning of the yea: Net assets - end of the yeaj See notes to the financial statements 19 Enterprise Fund $ 961,402 961,402 552,355 182,058 65,000 62,516 29,900 8,035 6,688 906,552 54,850 54,850 2,106,353 $ 2,161,203 TOWN OF GULF STREAM, FLORIDA Statement of Cash Flows - Proprietary Fund For the Year Ended September 30, 2010 Cash flows from operating activities Receipts from customer Damage deposit bonds receive( Payments to suppliers Internal activity - payments to other fund Net cash provided by operating activities Cash flows from capital financing activities Acquisition and construction of fixed asset! Internal activity - payments to other fund. Net cash used by capital financing activities Net increase (decrease) in cash and cash equivalent Cash and cash equivalents - beginning of the yea Cash and cash equivalents - end of the yea Cash flows from operating activities Operating income Adjustments to reconcile operating income b net cash provided by operating activities Depreciation Changes in assets and liabilities Increase (decrease)in Accounts payable Deposits Decrease (increase) in Accounts receivablf Prepaid expenditureE Total adjustments Net cash provided by operating activities See notes to the financial statements. 20 Enterprise Fund $ 929,599 4,500 (780,730) (65,000) 88,369 (62,242) (26,127) (88,369) $ 54,850 62,516 (1,439) 4,500 (31,803) (255) 33,519 $ 88,369 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2010 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the Town of Gulf Stream, Florida (the "Town") have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The Town's significant accounting policies are described below. Reporting Entity The Town of Gulf Stream, Florida is a municipal corporation organized pursuant to Chapter 31276, 1955 Laws of Florida. The Town operates under the Commission/Mayor form of government. The Town's major operations include general government, public safety, streets, sanitation, and water services. In accordance with Statement 14 of the Government Accounting Standards Board, the underlying concept of the governmental financial reporting entity is that governmental organizations are responsible to elected governing officials; therefore, financial reporting should report the elected officials' accountability for those organizations. Furthermore, the financial statements of the reporting entity should allow users to distinguish between the primary governments and its component units if any, by communicating information about the component units and their relationships with the primary government. A component unit is a legally separate organization for which the elected officials of the primary government are financially accountable. Determining factors of financial accountability include appointment of a voting majority, imposition of will, financial benefit or burden on a primary government, or fiscal dependency. In addition, component units can be other organizations for which the nature and significance of their relationship with a primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. Based upon application of these criteria, the Town of Gulf Stream has determined that there are no additional governmental departments, agencies, institutions, commissions, public authorities or other governmental organizations operating within the jurisdiction of the Town that would be required to be included in the Town's financial statements. 21 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2010 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Government -wide and Fund Financial Statements The basic financial statements include both government -wide and fund financial statements. The government -wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the non -fiduciary activities of the primary government. For the most part, the effect of inter -fund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business -type activities, which rely on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Taxes and other items not included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental and enterprise funds are reported as separate columns in the fund financial statements. Measurement Focus, Basis ofAccountinZ and Financial Statement Presentation The government -wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses recorded when a liability is incurred, regardless of the timing of related cash flows. The Town does not accrue property tax revenues since the collection of these taxes coincides with the fiscal year in which levied, and since the Town consistently has no material uncollected property taxes at year end. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. When both restricted and unrestricted resources are available for use, it is the Town's policy to use restricted resources first, then unrestricted resources as they are needed. 22 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2010 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued) As a general rule the effect of inter -fund activity has been eliminated from the government -wide financial statements. Exceptions to this general rule are payments -in -lieu of taxes and other charges between the Town's water and sewer function and various other functions of the Town. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Governmental Funds Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough afterwards to pay liabilities of the current period. The Town considers revenues collected within 60 days of the year end to be available to pay liabilities of the current period. Expenditures are generally recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures relating to compensated absences and claims and judgments are recorded only when payment is due. Fines and permit revenues are not susceptible to accrual because generally, they are not measurable until received in cash. Property taxes, franchise taxes, licenses, interest revenue, intergovernmental revenues, and charges for services associated with the current fiscal period are all considered to be susceptible to accrual and have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the Town. The Town reports the following major governmental fund: The General Fund is the general operating fund of the Town. It is used to account for all financial resources except those required to be accounted for in another fund. Proprietary Funds Proprietary Funds are used to account for operations (a) that are financed and operated in a manner similar to private business enterprises - where the intent of the governing body is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges or (b) where the governing body has decided that periodic determination of revenues earned, expenses incurred, 23 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2010 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Proprietary Funds (Continued) and net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. Operating expenses report on the costs to maintain the proprietary systems, the cost of sales and services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. The Town reports the following major proprietary funds: The Town has established the Municipal Water Fund to account for the provision of water services to Town residents. Government Accounting Standards Board (GASB) Statement #20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Funds, provides proprietary activities with a choice of authoritative guidance issued after November 30, 1989. The Town of Gulf Stream, Florida has elected to follow GASB pronouncements exclusively after that date. Cash and Cash Equivalents Cash and cash equivalents include amounts on deposit in demand accounts and money market accounts. For the purposes of the statement of cash flows, the Town considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Investments Investments in the Local Government Surplus Funds Trust Fund, a 2a -7 -like pool, are carried at fair value. A 2a -7 -like pool is not registered with the SEC as an investment company, but nevertheless, has a policy that it will, and does, operate in a manner consistent with the SEC's rule 2a-7 of the Investment Company Act of 1940, which comprises the rules governing money market funds. Thus, this pool operates essentially as a money market fund. Investments in certificates of deposits are carried at amortized cost that approximates market, because these investments are considered to be nonparticipating interest earning investment contracts that are not affected by changes in interest rates. 24 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2010 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Accounts Receivable Accounts receivable of the General Fund and the Municipal Water Fund consists of billed and unbilled receivables. Capital Assets Capital assets, which include plant, property, equipment, and infrastructure assets (e.g. roads, bridges, and sidewalks) are reported in the applicable governmental or business -type activities columns in the governmental -wide financial statements. Capital assets are defined by the government as assets with an estimated life in excess of one year and an initial cost of more than $1,000. Such assets are recorded at cost or the fair market value of the assets at the time of purchase or contribution. The Town is a Phase 3 government under GASB 34 and has elected not to report major general infrastructure assets retroactively. Depreciation has been provided over the useful lives using the straight line method. The estimated useful lives are as follows: Buildings 10-30 years Equipment 3-15 years Infrastructure 25-50 years Water Infrastructure 40-50 years Inventory Inventories consist of expendable supplies held for consumption which are carried at cost (first -in, first -out). The Town accounts for inventories using the consumption method, under which expenditures are recognized only when inventory items are used. Reported inventory is equally offset by a fund balance reserve which indicates that it does not constitute "available spendable resources" even though it is a component of net current assets. Compensated Absences Compensated absences are absences for which employees will be paid, such as vacation, sick leave, and sabbatical leave. A liability for compensated absences that is attributable to services already rendered and that is not contingent on a specific event that is outside the control of the government and its employees is accrued as employees earn the rights to the benefits. Compensated absences that relate to future services or that are contingent on a specific event that is outside the control of the government and its employees are accounted for in the period in which such services are rendered or such events take place. All vacation, sick leave, and sabbatical leave is accrued when incurred in the government -wide and proprietary fund financial 25 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2010 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Compensated Absences (Continued) statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements. Town employees may accumulate up to 5 days of vacation leave and 120 days of sick leave. Accumulated vacation is payable to employees upon termination or retirement at the rate of pay on that date. Sick leave can only be used for paid time off and is not paid to any employee upon termination. Interest Cost Interest costs in governmental funds are charged to expenditures as incurred. Construction period interest incurred in governmental funds is not capitalized. Construction period interest incurred in proprietary funds is capitalized and included in the cost of the assets in accordance with generally accepted accounting principles. Interfund Transactions Transactions between funds consist of loans, services provided, reimbursements, or transfers. The current portion of interfund loans are reported in the fund financial statements as "due from other funds" and "due to other funds" while the non-current portion of interfund loans are reported as "advances to other funds" and "advances from other funds". Any residual balances outstanding between the governmental activities and business -type activities are reported in the government - wide financial statements as "internal balances". Services deemed to be reasonably equivalent in value, are treated as revenue and expenditures/expenses. Reimbursements occur when one fund incurs a cost, charges the appropriate benefiting fund and reduces its related cost. All other interfund transactions are presented as transfers. Deferred Revenues The government reports deferred revenue on its government wide statement of net assets, proprietary statement of net assets, and governmental funds balance sheet. Deferred revenues arise when a potential revenue does not meet both the "measurable" and "available" criteria for recognition in the current period. Deferred revenues also arise when the government receives resources before it has a legal claim to them, as when grant monies are received prior to incurring qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the government has a legal claim to the resources, the liability for deferred revenue is removed and revenue is recognized. 26 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2010 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Fund Balances The Town has established certain reservations and designations of governmental fund balances. Reserves represent those portions of fund balances not considered as available for future appropriation or legally segregated for a specific future use. Designated fund balances represent tentative plans for future use of financial resources. The following is a list of all reserves used by the Town and a description of each: Reserved for inventories — An account used to segregate a portion of fund balance to indicate that inventories do not represent available, expendable resources even though it is a component of assets. Reserved for prepaids — An account used to segregate a portion of fund balance to indicate that prepaids do not represent available, expendable resources even though it is a component of assets. Reserved for dredging projects — An account used to indicate that a portion of the General Fund's fund balance is legally restricted for the payment of dredging projects. Budgetaly Data Formal budgetary integration is employed as a management control device during the year for the General Fund and the Municipal Water Fund. All budgets are legally enacted. Budgets are adopted on a basis consistent with generally accepted accounting principles. Budgeted amounts are as originally adopted, or as amended by appropriate action. One amendment was made during the year. 27 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2010 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Property Taxes Under Florida law, the assessment of all properties and the collection of all county, municipal, and school board property taxes are consolidated in the offices of the County Property Appraiser and County Tax Collector. The laws of the State regulating tax assessment are also designed to assure a consistent property valuation method statewide. The tax levy of the Town is established by the Town Commission prior to October 1 of each year, and the Palm Beach County Property Appraiser incorporates the Town's millages into the total tax levy, which includes Palm Beach County and Palm Beach County School Board tax requirements. All property is reassessed according to its fair market value January 1 of each year, which is also the lien date. Each assessment roll is submitted to the Executive Director of the State Department of Revenue for review to determine if the rolls meet all the appropriate requirements of state statutes. All taxes are due and payable on November 1 of each year or as soon thereafter as the assessment roll is certified and delivered to the Tax Collector. All unpaid taxes become delinquent on April 1 following the year in which they are assessed. Discounts are allowed for early payment at the rate of 4% in the month of November, 3% in the month of December, 2% in the month of January and 1% in the month of February. The taxes paid in March are without discount. Delinquent taxes on real property bear interest of 18% per year. On or prior, to June 1 following the tax year, certificates are sold for all delinquent taxes on real property. After the sale, tax certificates bear interest of 18% per year or any lower rate bid by the buyer. Application for a tax deed on any unredeemed tax certificates may be made by the certificate holder after a period of two years. Delinquent taxes on personal property bear interest of 18% per year until the tax is satisfied either by seizure and sale of the property or by the five year statute of limitations. W. TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2010 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Use of Estimates The financial statements and related disclosures are prepared in conformity with accounting principles generally accepted in the United States. Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and revenue and expenses during the period reported. These estimates include assessing the collectibility of accounts receivable, the use and recoverability of inventory, and useful lives and impairment of tangible and intangible assets, among others. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the financial statements in the period they are determined to be necessary. Actual results could differ from the estimates. NOTE 2 - DEPOSITS AND INVESTMENTS Deposits As of September 30, 2010, the carrying amount of the Town's deposits was $1,440,377 and the bank balances totaled $1,507,440. The Town also had cash on hand of $200. Town deposits include checking accounts, money market accounts, and certificates of deposit. The Town had two money market accounts with a total bank balance and carrying amount of $805,115. The certificates of deposit and money market accounts are reported as investments in the balance sheet. As of September 30, 2010, the Town held the following certificates of deposit: Days to Maturity Fair Value 294 $259,558 323 255,165 325 40,027 554 750 In addition to insurance provided by the Federal Depository Insurance Corporation, deposits are held in banking institutions approved by the State Treasurer of the State of Florida to hold public funds. Under Florida Statutes Chapter 280, Florida Security for Public Deposits Act, the State Treasure requires all Florida qualified public depositories to deposit with the Treasure or another banking institution eligible collateral. In the event of failure of a qualified public depository, the remaining public depositories would be responsible for covering any resulting losses. The Town's deposits are considered insured for custodial credit risk purposes. 29 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2010 NOTE 2 - DEPOSITS AND INVESTMENTS (Continued) Investments Florida statutes authorize the Town to invest in the Local Government Surplus Funds Trust Fund administered by the State Treasurer, negotiable direct obligations of or obligations unconditionally guaranteed by the U.S. Government, interest-bearing time deposits in financial institutions located in Florida and organized under Federal or Florida laws, obligations of the Federal Farm Credit Banks, the Federal Home Loan Mortgage Corporation, the Federal Home Loan Bank or its district banks, or obligations guaranteed by the Government National Mortgage Association, and obligations of the Federal National Mortgage Association. The State Board of Administration is part of the Local Governments Surplus Funds Trust Fund and is governed by Chapter 19-7 of the Florida Administrative Code. These rules provide guidance and establish the general operating procedures for the administration of the Local Governments Surplus Funds Trust Fund. Additionally, the Office of the Auditor General performs the operational audit of the activities and investments of the State Board of Administration. The Local Government Surplus Funds Trust Fund is not a registrant with the Securities and Exchange Commission (SEC); however, the board has adopted operating procedures consistent with the requirements for a 2a-7 fund. On December 4, 2007, based on recommendations from an outside financial advisor, the State Board of Administration restructured the Pool into two separate pools. Pool A, (Local Government Surplus Funds Trust Fund Investment Pool) consisted of all money market appropriate assets. Pool B, (Surplus Funds Trust Fund) consisted of assets that either defaulted on a payment, paid more slowly than expected, and/or had any significant credit and liquidity risk. At the time of the restructuring, all current pool participants had their existing balances proportionately allocated into Pool A and Pool B. On August 3, 2009 the SBA announced "Florida PRIME" as the highly enhanced version of the SBA's prior Local Government Investment Pool. At September 30, 2010, Florida PRIME was assigned a "AAA(m)" principal stability fund rating by the Standard and Poor's Ratings. Florida PRIME is considered a SEC 20 -like fund, thus, the account balance should also be considered its fair value. Fund B is not considered a SEC 2a7 - like fund and is not rated by any nationally recognized rating agency. The weighted average days to maturity (WAM) of Florida PRIME at September 30, 2010 was 52 days. A portfolio's WAM reflects the average maturity in days based on final maturity or reset date, in the case of floating rate instruments. WAM measures the sensitivity of Florida PRIME to interest rate changes. 30 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2010 NOTE 2 - DEPOSITS AND INVESTMENTS (Continued) Investments (Continued) The weighted average life (WAL) of Fund B at September 30, 2010 was 7.49 years. A portfolio's WAL is the dollar weighted average length of time until securities held reach maturity. WAL is based on legal final maturity dates for Fund B as of September 30, 2010. Additional information regarding the Local Government Surplus Funds Trust Fund may be obtained from the State Board of Administration. As of September 30, 2010, the Town held the following investments: Weighted Average Fair Maturi Value State Board of Administration Investment Pool Florida PRIME 52 days $ 685 Fund B 7.49 years 1,938 2 623 The investments in the State Board of Administration Pool are reported as investments in the balance sheet. Credit Risk Credit risk is the risk that an issuer or other counter party to an investment will not fulfill their obligations. The Town's investment policies limit its investments to high quality investments to control credit risk. At September 30, 2010, Florida PRIME was rated "AAA(m) by Standard and Poor's Ratings Services. Fund B is not rated by any nationally recognized rating agency. Interest Rate Risk Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The Town does not have a formal investment policy that limits investment maturities as a means of managing exposure to fair value losses arising from increasing interest rates. 31 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2010 NOTE 3 - CAPITAL ASSETS Capital asset activity for the year ended September 30, 2010, was as follows: 32 Beginning Ending Balance Additions Deletions Balance Governmental Activities: Capital assets not being depreciated: Land $ 376,523 $ $ $ 376,523 Capital assets being depreciated: Buildings 835,145 4,070 839,215 Infrastructure 2,394,167 2,394,167 Equipment 458,346 55,041 (52,073) 461,314 Total at historical cost $ 4,064,181 $ 59,111 $(52,073) $4,071,219 Less accumulated depreciation for: Buildings $ 514,559 $ 41,907 $ $ 556,466 Infrastructure 793,921 78,118 872,039 Equipment 326,041 50,9912( 6,036) 350,996 Total accumulated depreciation $ 1,634,521 $ 171,016 $(26,030 $1,779,501 Governmental activities capital assets, net 2,429.660 111905) S2,291,718 32 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2010 NOTE 3 - CAPITAL ASSETS (Continued) Beginning Balance Business -Type Activities: Capital assets not being depreciated: $ Capital assets being depreciated: Water system improvements 2,540,406 Equipment 55,731 Total at historical cost $2,596,137 Additions Deletions 57,825 4,417 $ 62,242 Less accumulated depreciation for: Water system improvements $ 468,144 $ 60,894 Equipment 46,945 1,622 Total accumulated depreciation $ 515,089 $ 62,516 Business -type activities capital assets, net 2 081 048 274 Ending Balance M 2,598,231 60,148 $2,658,379 $ 529,038 48,567 $ 577,605 2 080 774 Depreciation expense was charged to functions and programs of the primary government as follows: Governmental activities: General government $ 61,521 Police department 419748 Streets 67,747 Total depreciation expense for governmental activities 111L,016 Business -type activities: Municipal Water 62 516 At September 30, 2010 there were $354,496 of fully depreciated governmental capital assets and $108,021 of fully depreciated business -type capital assets. 33 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2010 NOTE 4 - PROPRIETARY FUND ACCOUNTS RECEIVABLE The Water Enterprise Fund had $190,426 in water billings receivable as of September 30, 2010. The Town has not established a reserve for doubtful accounts relating to this accounts receivable because the Town's long-term water billing collection rate is approximately 100%. The amount of unbilled revenue at year end was insignificant. NOTE 5 - INTERFUND RECEIVABLES AND PAYABLES Individual interfund receivables and payables at September 30, 2010, were as follows: Receivable Fund Payable Fund Amount General Fund Water Fund 19 762 The outstanding balance between funds results from the time lag between the dates that interfund goods and services are provided or reimbursable expenditures occur and payments between funds are made. NOTE 6 - LONG-TERM LIABILITIES The Town's long-term liabilities consist solely of compensated absences. The change in long-term liabilities is as follows: Beginning Ending Due Within Balance Additions Reductions Balance One Year Governmental activities: Compensated absences 61 838 13 377 (11.6881 63 527 43 859 NOTE 7 - DEFERRED COMPENSATION PLAN The Town offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan, available to all Town employees, permits them to defer a portion of their salary until future years. The deferred compensation is not available to employees until termination, retirement, death, or unforeseeable emergency. 34 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2010 NOTE 7 - DEFERRED COMPENSATION PLAN (Continued) Assets of the plan are invested in either mutual funds or insurance contracts. In 1998, the Plan was amended to conform to changes in the Internal Revenue Code brought about by the Small Business Job Protection Act of 1996 (the "Act"). The Act requires that eligible deferred compensation plans established and maintained by governmental employers be amended to provide that all assets of the plan be held in trust, or under one or more appropriate annuity contracts or custodial accounts, for the exclusive benefit of plan participants and their beneficiaries. As a result of this change, plan assets are no longer subject to the claims of the Town's general creditors. Because the Town has little administrative involvement and does not perform the investing function for funds in the Plan, the Town's activities do not meet the criteria for inclusion in the fiduciary funds of a government. Consequently, the Plan was removed from the Town's financial statements. NOTE 8 - DEFINED CONTRIBUTION EMPLOYEE RETIREMENT PLAN The Town passed Resolution 90-8 on November 28, 1990, authorizing the establishment of a 401(a) plan (the "Plan"). All full-time employees are eligible to participate in the Plan upon completion of six months of service and attaining age 18. This defined contribution pension plan is administered by the International City Management Association Retirement Corporation. In a defined contribution plan, benefits depend solely on amounts contributed to the Plan plus investment earnings. The plan requires that the Town and the employees contribute an amount equal to 20.92% and 8.0%, respectively, of the employee's base salary each month. The Town's contribution for each employee and investment earnings allocated to the employee's account vest at a rate of 20% per year of service completed. Employees are eligible for normal retirement upon attainment of the age of 59-1/2. Town contributions and interest forfeited by employees who leave employment before satisfying the vesting requirement are used to reduce the Town's current -period contribution requirement. Plan assets are not considered the Town's assets; therefore, they are not included in the Town's basic financial statements. The Plan does not issue a stand alone financial report. The Town's total payroll for the fiscal year ended September 30, 2010, was $1,140,197, with covered payroll of $1,042,498. The Town's required and actual contribution for the year was $218,090 equaling 20.92% of covered payroll. The employees' contribution for the year was $83,401 equaling 8.0% of covered payroll. The investments are held in various mutual funds and employees can direct employer and employee contributions made on their behalf. 35 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2010 NOTE 9 - INTERLOCAL AGREEMENTS Interlocal EMS Service Agreement with the City o Delray Beach On July 14, 2009, the Town entered into an agreement with the City of Delray Beach whereby the City of Delray Beach will provide the Town with emergency medical services. The term of the agreement was for 10 years beginning on October 1, 2009, and extending through September 30, 2019. The annual service fee the Town paid under the agreement was $286,250 in the current fiscal year. The annual service fees for future years will be the current year fee of $286,250, adjusted annually based on the "All Urban Customers — United States April Consumer Price Index" or an increase of five percent (5.0%), whichever is greater. Interlocal Dispatch Service Agreement with the City o Delray Beach On October 1, 2007 the Town entered into a new agreement with the City of Delray Beach for dispatch services. The agreement shall automatically renew for five one year renewals unless either party notifies the other in writing of their intent not to renew at least 90 days prior to the start of the renewal term. The agreement shall terminate on September 30, 2012. The annual service fee the Town paid under the agreement was $50,090 for the fiscal year ended September 30, 2010. The service fees for subsequent years shall be adjusted from the previous year based on the "All Urban Consumers — United States April Consumer Price Index". NOTE 10 - OPERATING LEASE On July 24, 2008, the Town entered into an operating lease for a copier for use in the Town Hall. The lease is for 60 months and requires monthly payments of $531 that commenced in August 2008. For the year ended September 30, 2010, the Town made payments of $6,372 pursuant to the lease. The following is a schedule of the Town's required future minimum lease payments under the agreement: Year Ended Minimum September 30 Lease Payments 2011 $ 6,372 2012 6,372 2013 5,310 Total 18 054 36 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2010 NOTE 11— COMMITMENTS On August 18, 2008, the Town amended the solid waste and recycling collection franchise agreement with Waste Management Inc. of Florida (WMI). The agreement terminates on September 30, 2013. Under the terms of the agreement, the Town informs WMI of the total number of residential and multi -family units that have a Certificate of Occupancy each year on September 1. WMI bills all multi -family units that are serviced by a container. The monthly charges for the remainder of the units that are serviced by means other than by containers are paid by the Town. WMI bills the Town monthly for these services at the then current rate as adjusted from time to time by the terms and conditions of the agreement. For the year ended September 30, 2010, the Town made payments of $111,953 pursuant to the agreement. NOTE 12 — OTHER POST EMPLOYMENT BENEFITS (OPEB) The Town was required to implement Governmental Accounting Standards Board Statement 45 (GASB 45), Accounting and Financial Reporting by Employers for Post Employment Benefits Other than Pensions for fiscal year ending September 30, 2010. Retirees of the Town pay an amount equal to the actual premium for health insurance charged by the carrier, but there is an implied subsidy in the healthcare insurance premium charged for active employees, who are younger than retirees on average. This implied subsidy constitutes other post employment benefits under GASB 45. The Town elected not to apply GASB 45. The effects of that departure on the financial statements are not reasonably determinable. The Town also has not disclosed the descriptive information about other post employment benefits required by standards. NOTE 13 - RISK MANAGEMENT The Town is exposed to various risks of loss related to torts as well as theft of, damage to, and destruction of assets. The Town is also exposed to errors and omissions, injuries to employees, and natural disasters. The Town purchases commercial insurance to cover the various risks. Retention of risks is limited to those risks that are uninsurable and deductibles ranging from $250 to $2,500 per occurrence. Review of the past three years claims reveals settled claims have not exceeded insurance coverage. 37 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2010 NOTE 14 — NEW PRONOUNCEMENTS The Town is required to implement Governmental Accounting Standards Board Statement 54 (GASB 54), Fund Balance Reporting and Governmental Fund Type Definitions for the fiscal year ending September 30, 2011. The objective of this is to increase the usefulness, including understandability of governmental fund balance information. The impact of the implementation of GASB 54 has not been determined. W. TOWN OF GULF STREAM, FLORIDA Required Supplemental Information Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual General Fund For the Year Ended September 30, 2010 Variance with 39 Final Budget Budgeted Amount,, Actual Positive Original Final Amounts (Negative) Revenues Ad valorem taxes $ 1,951,470 $ 1,951,470 $ 1,972,342 $ 20,872 Local option fuel taxes 30,000 30,000 28,678 (1,322) Utility service taxes 66,807 66,807 Communications services taxes 69,000 69,000 64,143 (4,857) Local business tax 20,500 20,500 16,402 (4,098) Building permits 39,000 39,000 49,391 10,391 Franchise fees 135,700 135,700 118,277 (17,423) State revenue sharing proceed; 59,900 59,900 61,689 1,789 Shared revenue from other local unit 11,393 11,393 Payment in lieu of taxes 29,900 29,900 29,900 Charges for services 132,000 132,000 112,631 (19,369) Judgments and fines 4,000 4,000 1,506 (2,494) Investment earnings 39,000 39,000 31,113 (7,887) Miscellaneous revenue! 21,500 21,500 34,223 12,723 Total revenues 2,531,970 2,531,970 2,598,495 66,525 Expenditures General and administrative 636,613 676,113 648,284 27,829 Police 1,303,639 1,318,639 1,312,483 6,156 Fire 289,000 289,000 286,250 2,750 Streets 231,720 231,720 156,730 74,990 Sanitation 136,000 136,500 111,953 24,547 Contingency 36,788 Total expenditures 2,633,760 2,651,972 2,515,700 136,272 Excess (deficiency) of revenue over (under) expenditure; $ (101,790) $ (120,002) 82,795 $ 202,797 Fund balance, beginning of yea: 1,381,416 Fund balance, end of yea: $ 1,464,211 39 TOWN OF GULF STREAM, FLORIDA Notes to the Budgetary Required Supplemental Information (RSI) General Fund September 30, 2010 NOTE 1 - BUDGETS AND BUDGETARY ACCOUNTING As required by GASB Statement No. 34, a budgetary comparison schedule is presented for the General Fund. The procedures for establishing budgetary data reflected in the budgetary comparison schedule are as follows: 1. Prior to August 1, the Town Manager submits to the Town Commission a proposed operating budget for the fiscal year commencing the next October 1. The operating budget includes proposed expenditures and the means of financing them. 2. Public hearings are conducted to obtain taxpayer comments. 3. Prior to October 1, the budget is legally enacted through the passage of an ordinance. 4. The Town Manager is authorized to transfer budgeted amounts within any department. However, any revisions that alter the total expenditures of any department must be approved by the Town Commission by a legally enacted resolution. 5. Budgets are adopted on a basis consistent with generally accepted accounting principles. 6. Appropriations along with encumbrances lapse at September 30. M NH &M NOWLEN, HOLT & MINER, P.A. CERTIFIM PUBLIC ACCOUNTANTS WEST PALM BEACH OFFICE 215 FIFTH STREET, SLATE 700 POST OFFICE BOX 347 WEST PALM BEACH, FLORIDA 33402-0347 TELEPHONE (561) 659-3060 FAX (561) SM -M6 W W WNHMCPA.COM REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT A UDITING STANDARDS The Honorable Mayor and Members of the Town Commission Town of Gulf Stream, Florida EVERETT B. NOWLEN (1030-1964), CPA EDWARD T HOLT, CPA WILLIAM B. MINER, CPA ROBERT W. HENDRK JR.,CPA JANET R. BARICEVICH, CPA KATHLEENA. MINER, CPA TERRY L MORTON, JR., CPA N. RONALD BENNETT, CPA J. MICHAEL STEVENS, CPA ALEXIA G. VARGA, CPA BRIAN J. BRESCV6 CFP-, CPA KORA D. PETERSON, CPA EDWARD T. HOLT, JR., CPA BELLE GLADE OFFICE 333 S.E. 2nd STREET POST OFFICE BOX 338 BELLE GLADE, FLORIDA 33430-0338 TELEPHONE (561) 096-5612 FAX (561) 886-6248 We have audited the financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the Town of Gulf Stream, Florida, as of and for the year ended September 30, 2010, which collectively comprise the Town of Gulf Stream's basic financial statements and have issued our report thereon dated April 7, 2011. The report on the governmental activities was qualified because the Town has not recognized the other postemployment benefits (OPEB) expense and obligation which is required in accordance with U.S. generally accepted accounting principles as provided in Governmental Accounting Standards Board Statement No. 45. We conducted our audit in accordance with auditing standards generally accepted in applicable to financial audits contained Comptroller General of the United States. Internal Control Over Financial Reporting the United States of America and the standards in Government Auditing Standards, issued by the In planning and performing our audit, we considered the Town of Gulf Stream, Florida's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Town of Gulf Stream, Florida's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Town of Gulf Stream, Florida'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. 41 AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS • FLORIDA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS • CPAMERICA INTERNATIONAL 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. Compliance and Other Matters As part of obtaining reasonable assurance about whether the Town of Gulf Stream, Florida'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 or other matters that are required to be reported under Government Auditing Standards. We noted certain matters that we reported to management of the Town of Gulf Stream, Florida in the accompanying Management Letter in Accordance with the Rules of the Auditor General dated April 7, 2011. This report is intended solely for the information and use of management, the Town Commission, others within the entity, the Florida Auditor General, 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. *XVMX, PAL West Palm Beach, Florida April 7, 2011 42 NH &M NOWLEN, HOLT & MINER, P.A. CERTIFIM PUBLIC ACCOUNTANTS WEST PALM BEACH OFFICE 215 FIFTH STREET, SLATE 700 POST OFFICE BOX 347 WEST PALM BEACH, FLORIDA 33402-0347 TELEPHONE (561) 659-3060 FAX (561) SM -M6 W W WNHMCPA.COM MANAGEMENT LETTER IN ACCORDANCE WITH THE RULES OF THE AUDITOR GENERAL OF THE STATE OF FLORIDA The Honorable Mayor and Members of the Town Commission Town of Gulf Stream, Florida EVERETT B. NOWLEN (1030-1964), CPA EDWARD T HOLT, CPA WILLIAM B. MINER, CPA ROBERT W. HENDRK JR.,CPA JANET R. BARICEVICH, CPA KATHLEENA. MINER, CPA TERRY L MORTON, JR., CPA N. RONALD BENNETT, CPA J. MICHAEL STEVENS, CPA ALEXIA G. VARGA, CPA BRIAN J. BRESCV6 CFP-, CPA KORA D. PETERSON, CPA EDWARD T. HOLT, JR., CPA BELLE GLADE OFFICE 333 S.E. 2nd STREET POST OFFICE BOX 338 BELLE GLADE, FLORIDA 33430-0338 TELEPHONE (561) 096-5612 FAX (561) 886-6248 We have audited the financial statements of the Town of Gulf Stream, Florida, as of and for the year ended September 30, 2010, and have issued our report thereon dated April 7, 2011. The Town has not recognized the other post -employment benefits (OPEB) expense and obligation in the governmental activities financial statements as required in accordance with U.S. generally accepted accounting principles as provided in Government Accounting Standards Board Statement No. 45. The effects of that departure on the financial statements are not reasonably determinable. The Town also has not disclosed the descriptive information about other post employment benefits required by standards. We conducted our audit in accordance with United States generally accepted auditing standards, and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. We have issued our Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards. Disclosures in that report, which is dated April 7, 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 government entity audits performed in the State of Florida. This letter includes the following information, which is not included in the aforementioned auditor's reports. 43 AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS • FLORIDA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS • CPAMERICA INTERNATIONAL PRIOR YEAR COMMENTS Rules of the Auditor General require that we determine whether or not corrective actions have been taken to address significant findings and recommendations made in the preceding annual financial audit report. There were no items in the prior year that required a response by management. CURRENT YEAR COMMENTS Investment of Public Funds Rules of the Auditor General require our audit to include a review of the Town's compliance with Section 218.415, Florida Statutes, regarding the investment of public funds. In connection with our audit, the results of our procedures did not disclose any instances of noncompliance with Section 218.415, Florida Statutes. Current Year Recommendations Rules of the Auditor General require that we address in the Management Letter any recommendations to improve financial management. In connection with our audit, we did not have any recommendations that are required to be reported in this letter. Violations of Laws, Regulations, Contracts and Grant Provisions or Abuse Rules of the Auditor General require that we address violations of provisions of contract or grant agreements, or abuse, that have occurred, or are likely to have occurred, that have an effect on the financial statements that is less than material but more than inconsequential. In connection with our audit, we did not have any such findings. Matters Inconsequential to the Financial Statements Rules of the Auditor General provide 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) deficiencies in internal control that are not significant deficiencies. In connection with our audit, we did not have any such findings. Oversight Unit and Component Units Rules of the Auditor General require 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. This information is disclosed in Note 1 to the financial statements, but has been repeated here. The Town of Gulf Stream, Florida is a municipal corporation organized pursuant to Chapter 31276, Laws of Florida, 1955. Based upon the application of criteria defined in publications cited in Chapter 10.553, Rules of the Auditor General, the Town has determined that there are no component units related to the Town. Consideration of Financial Emergency Criteria Rules of the Auditor General, requires a statement be included as to whether or not the local government entity has met one or more of the conditions described in Section 218.503(1), Florida Statutes, and identification of the specific condition(s) met. In connection with our audit, we determined that the Town of Gulf Stream, Florida did not meet any of the conditions described in Section 218.503(1), Florida Statutes. Annual Financial Report Rules of the Auditor General require that we determine whether the annual financial report for the Town of Gulf Stream, Florida 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 noted that the two reports were in substantial agreement. Financial Condition Assessment Procedures Pursuant to Rules of the Auditor General, we applied financial condition assessment procedures. It is management's responsibility to monitor the Town of Gulf Stream, Florida's financial condition, and our financial condition assessment was based in part on representations made by management and the review of financial information provide by management. The results of our procedures did not disclose any matters that are required to be reported. Excess of Expenditures Over Appropriations As indicated in Note 1 to the Budgetary Required Supplementary Information for the year ended September 30, 2010 there were no departments that had expenditures in excess of appropriations. Single Audits The Town expended less than $500,000 of federal awards and less than $500,000 of state financial assistance for the year ended September 30, 2010. The Town was not required to have a federal single audit or a state single audit. 45 Response to Management Letter There were no items that required a response by management. 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, the Town Commission, others within the entity, the Florida Auditor General, 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. West Palm Beach, Florida April 7, 2011 46