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HomeMy Public PortalAbout2011 AFRTOWN OF GULF STREAM, FLORIDA FINANCIAL STATEMENTS WITH INDEPENDENT AUDITOR'S REPORT THEREON SEPTEMBER 30, 2011 TOWN OF GULF STREAM, FLORIDA SEPTEMBER 30, 2011 TABLE OF CONTENTS Pates 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 Funds 14 Reconciliation of the Balance Sheet — Governmental Funds to the Statement of Net Assets 15 Statement of Revenues, Expenditures, and Changes in Fund Balance - Governmental Funds 16 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance of the Governmental Funds 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 21-40 Required Supplemental Information Other Than MD&A Schedule of Revenues, Expenditures, and Changes in Fund Balance — Budget and Actual — General Fund 41 Notes to the Budgetary Required Supplemental Information 42 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 43-44 Management Letter in Accordance With the Rules of the Auditor General of the State of Florida 45-48 NH M NOWLEN, HOLT & MINER, P.A. 213 FIFM ATBPI7. MM 200 W OMM BOX 361 WEST @ALAI BEACH, nAMDA IM=347 Tffi]T NE(561)M,3 ENC(561)IDSL n W W WTiCd[PA.CTlM INDEPENDENT AUDITOR'S REPORT The Honorable Mayor and Members of the Town Commission Town of Gulf Stream, Florida CVF mnATAMLN ISGG6i Wq, CM OD/Pro T.H ,,CM W613AM a uhvn CM ACMCHf W.HSNOMR. CM JNHf0.6TWCtYIC1ACM ARH.Q6IA.AAMRGM TA LMORTOL .M MB DeElFET,,CM 116CMA{, 6TMM, CM AINIA WPA&CM ®l AB1 BBESa,C .M KWAM 'CIO16 KCM 101WBDT.ItlC;.A.CM BELLE GLADE OFFICE 97 B.E. 2110 STREET POSTOFF3CE BDX 976 W 19 GLADE. FLOGBIA 73UD MW TEIEPHCU: (513 1) M& 5612 FAIL (BSI) CGS?XB We have audited the accompanying financial statements of the governmental activities, the business -type activities, and each major fund of the Town of Gulf Stream, Florida as of and for the year ended September 30, 2011 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. Except as discussed in the following paragraph, 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, 2011, and the respective changes in financial position thereof for the year then ended in conformity with U. S. generally accepted accounting principles. AMEREM INBTITME OFCEFMFIrD PUBLICACCOUMANTS • FLORDA INSTITUTE OF CERTFED P1)8MACC0INTAMB • CPNMERICAINMRNATIONAL 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 and each major fund of the Town of Gulf Stream, Florida, as of September 30, 2011, 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 February 29, 2012, 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 41 and 42 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 Postemployment 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 February 29, 2012 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 $10,951,007(net assets). Of this amount, $1,500,669 (unrestricted net assets) may be used to meet the government's ongoing obligations to citizens and creditors. ➢ The government activities revenues were $7,898,848 at the close of fiscal year 2011. ➢ The business -type activities revenues were $967,684 at the close of fiseal year 2011. ➢ The total cost of all Town programs was $3,769,130 during the fiscal year 2011. At the end of the 2011 fiscal year, unassigned fund balance for the general fund was $1,432,019 or 56% 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 I1-13) (Refocused)(Pages 14-20) Notes to the financial statements (Expanded/ Restructured) (Pages 21-40) Required supplementary information (Other than MD&A) (Expanded) (Pages 4142) 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 fdnds — 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 governmental funds, which focus 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. rd 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 2011 are reported at $10,951,007. Net assets of the Town's governmental activities for the fiscal year ending 2011 are $8,740,871. The net assets of our business -type activities are reported at $2,210,136 for the fiscal year ending 2011. Overall the financial position of the total primary government is better than the prior year, with a slight increase in net assets for the governmental activities and for the business type activities. Town of Gulf Stream Statement of Net Assets As of September 30, 2011 k Governmental Business -type Activities Activities TOTAL 2010 2011 2010 2011 2010 2011 Current and Other Assets $ 1,552,077 $ 6,740,409 $ 174,190 $ 236,549 $ 1,726-167 $ 6,976,958 Capital Assets19_._ 1.718 2.187.195 2.080.774 2.076.178 4.372.492 4.263.373 TOTALASSETS 3,843795 8,927,604 2154,964 2.312.727 6.098.759 11,240.331 Current and Other Liabilities 131,71--5 169,809 93,761 102,591 225,486 272,400 Long-term Liabilities 19.668 16.924 19.668 16,924 TOTAL LIABILITIES 151.393 186.733 93.761 102,591 245.154 289.324 Net Assets: Invested in Capital Assets 2-191,718 2,187,195 2,080,774 2,076,178 4,372,492 4-163,373 Restricted—Dredging Projects 17,820 17,820 17,820 17,820 Restricted— Underground Utilities 5,169,145 5,169,145 Unmtricted 1.382.864 1.366.711 80.429 133.958 1.463,293 1.500.669 TOTAL NET ASSETS$fi ZP87 ' ' S 5 853 605 S 10 951 007 k 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 increase in net assets for governmental activities totaled $5,048,469. The increase in net assets was primarily due to special assessments levied to finance the cost of placing overhead electric, cable television and telephone utilities underground. ➢ The special assessments had an assessable cost of $5,518,144, and the Town received prepayments in the amount of $2,885,049. ➢ The increase in business -type net assets was $48,933. The increase in net assets was due in part to increased revenue and increased asset acquisitions. Revenues Program Revenues: Charges for Services Operating & Capital Grants General Revenues: Property Taxes Communications Taxes Gas Taxes Utility Service Taxes Franchise Fees Unrestricted Investment Earnings Intergovernmental Revenues Other Transfers Total Revenues Expenses Governmental Activities: General and Administrative Police Department Fire Protection Streets Sanitation Physical Environment Business -type Activities: Water Total Expenses Change in Net Assets Net Assets - Beginning Net Assets - Ending Town of Gulf Stream's Changes in Net Assets Governmental Business -type Activities Activities TOTAL 2010 2011 2010 2011 2010 2011 8 189,973 $ 5,586,070 $961,402 $967,684 S 1,151,375 S6,553,754 22,054 14,136 22,054 14,136 1,972,342 1,838,039 1,972,342 1,838,039 64,143 63,219 64,143 63,219 28,678 29,424 28,678 29,424 66,807 139,486 66,807 139,486 118,277 118,374 118,277 118,374 31,113 6,252 31,113 6,252 73,082 73,948 73,082 73,948 32,026 29,900 32,026 29,900 2.598.495 7.898.848 96102 967.684 3.559.897 8.866.532 691,214 690,434 691,214 690,434 1,341,437 1,366,538 1,341,437 1,366,538 286,250 300,563 286,250 300,563 224,477 208,455 224,477 208,455 111,953 114,887 111,953 114,887 169,502 169,502 o06,551 918.751 906.551 918.751 '-2.655.331 2.850.379 906,551 918,751 3,561,883 3.769J.30 (56,836) 5,048,469 54,850 48,933 (1,986) 5,097,402 73. 49.238 3.692.402 2.106.353 2.161,103 5.855.591 5.853.605 S2MAL, HIM. &ll &2jbLzu, , S5.853.6u 814 Management's Discussion and Analysis More than half the Town's revenue comes from Charges for Services. (Please see chart below.) Charges for 71% Revenues — Governmental Revenues by Source Other axes Intergovernmental 4% Management's Discussion and Analysis The Town's expenses cover a range of services, with 48% related to public safety. (Please see chart below.) Expenses — Governmental Expenses by Function Gener. Fire P Financial Analysis of the Governmental Fund on the Fund Basis 48% As the Town of Gulf Stream completed the year, the general fund reported a fund balance of $1,462,012, a decrease of $2,199 from the previous fiscal year. The decrease was due primarily to an increase in Police Department expenditures. The general fund ended the 2011 fiscal year with $12,173 in nonspendable fund balance, $17,820 in restricted fund balance, and $1,432,019 in unassigned fund balance. H 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 2011 were $2,210,136. 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 $1,285 more than the final budget amounts. Revenues were $14,086 more than the final budget amounts. CAPITAL ASSET AND DEBT ADNIINSTRATION Capital Assets At the end of fiscal year 2011, the Town had invested $4,263,373 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. Town of Gulf Stream's Capital Assets (Net of depreciation) as of September 30, 2011 Governmental Business -type Activities Activities TOTAL 2010 2011 2010 2011 2010 2011 Land $ 376,523 $ 376,523 $ $ $ 376,523 $ 376,523 Construction in Process 15,432 15,432 Buildings& Improvements 282,749 257,796 2,069,193 2,066,183 2,351,942 2,323,979 Equipment 110,318 91,492 11,581 9,995 121,899 101,487 Infrastmcture 1.522.128 1.445.952 1.522.128 1.445.952 TOTALS $ $2.080.774 $2.07fi.17R S4 7 49 Management's Discussion and Analysis Debt As of September 30, 2011 the Town had no debt, but had $77,481 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 Long -Term Liabilities As of September 30, 2011 Governmental Business -type Activities Activities TOTAL 2010 2011 2010 2011 2010 2011 Compensated Absences 63,527 S 77 481 $ $ 63,527 77,481 TOTALS ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES For the 2012 fiscal year, general fund revenue projections are comparable to the previous year. ➢ The budget is balanced by using reserves from the 2011 fiscal year. ➢ There is not a change in user rate fees for fiscal year 2012. ➢ The millage rate was increased to 2.9265 mills, which is the rolled -back rate. ➢ As of September 30, 2011, the Town had not borrowed anything towards the Undergrounding Project but does plan on acquiring aloan for approximately $2,626,612 during the fiscal year 2012. 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, 2011 Assets Cash and cash equivalents Investments Accounts receivable Assessments receivable Inventories Internal balances Prepaid expenses Capital assets Non -depreciable Depreciable (net of depreciation) Total assets Liabilities Liabilities Accounts payable Accrued liabilities Refund payable Damage deposit bonds Deferred revenue Compensated absences payable Payable within one year Payable after one year Total liabilities Net assets Primary Government 109,264 Governmental Business -type 5,555 Activities Activities Total 11,803 11,803 60,557 $ 641,284 $ $ 641,284 1,343,217 289,324 1,343,217 63,102 159,835 222,937 4,754,139 4,754,139 12,173 12,173 (73,506) 73,506 3,208 3,208 391,955 391,955 1,795,240 2,076,178 3,871,418 8,927,604 2,312,727 11,240,331 64,673 44,591 109,264 27,221 27,221 5,555 5,555 58,000 58,000 11,803 11,803 60,557 60,557 16,924 16,924 186,733 102,591 289,324 Invested in capital assets 2,187,195 2,076,178 4,263,373 Restricted for dredging projects 17,820 17,820 Restricted for underground utilities 5,169,145 5,169,145 Unrestricted 1,366,711 133,958 1,500,669 Total net assets $ 8,740,871 $ 2,210,136 $ 10,951,007 See notes to the financial statements. 11 TOWN OF GULF STREAM, FLORIDA Statement of Activities For the Year Ended September 30, 2011 Functions/Programs Primary Government Governmental activities General government Police department Fire protection Streets Sanitation Physical environment Total governmental activities Business -type activities Water Total primary government 12 918,751 967,684 $ 3,769,130 $ 6,553,754 Charges for Expenses Services $ 690,434 $ 127,064 1,366,538 2,108 300,563 208,455 114,887 118,251 169,502 5,338,647 2,850,379 5,586,070 918,751 967,684 $ 3,769,130 $ 6,553,754 General revenues Property taxes Communications services taxes Gas taxes Utility service tax Franchise taxes Intergovernmental shared revenues Unrestricted investment earnings Miscellaneous revenues Total general revenues Change in net assets Net assets - beginning Net assets - ending 1,838,039 Net (Expense) Revenue and 63,219 'rogram Revenues Changes in Net Assets 29,424 Operating Capital Primary Government 118,374 Grants and Grants and Governmental Business -type 73,948 Contributions Contributions activities activities Total 29,900 $ 14,136 $ $ (549,234) $ $ (549,234) 5,097,402 (1,364,430) (1,364,430) $ 8,740,871 $ 2,210,136 (300,563) (300,563) (208,455) (208,455) 3,364 3,364 5,169,145 5,169,145 14,136 2,749,827 2,749,827 48,933 48,933 $ 14,136 $ 2,749,827 48,933 2,798,760 General revenues Property taxes Communications services taxes Gas taxes Utility service tax Franchise taxes Intergovernmental shared revenues Unrestricted investment earnings Miscellaneous revenues Total general revenues Change in net assets Net assets - beginning Net assets - ending 1,838,039 1,838,039 63,219 63,219 29,424 29,424 139,486 139,486 118,374 118,374 73,948 73,948 6,252 6,252 29,900 29,900 2,298,642 2,298,642 5,048,469 49,933 5,097,402 3,692,402 2,161203 5,953,605 $ 8,740,871 $ 2,210,136 $ 10.951,007 See notes to the financial statements. 13 TOWN OF GULF STREAM, FLORIDA Balance Sheet- Governmental Funds September 30, 2011 See notes to the financial statements. 14 Special Total General Assessment Govemmenlal Fund Fund Funds Assets Cash and cash equivalents S 51,221 S 590,063 S 641,284 Investments 1,343,217 1,343,217 Accounts receivable 63,102 63,102 Assessments receivable 4,754,139 4,754,139 Due from other funds 130,914 130,914 Inventories 12,173 12,173 Total assets S 1,600,627 S 5,344 202 S 6,944,829 Liabilities and fund equity Liabilities Accounts payable $ 26,085 S 38,588 $ 64,673 Accrued liabilities 27,221 27,221 Refund payable 5,555 5,555 Due to other funds 73,506 130,914 204,420 Deferred revenue 11,803 2,453,598 2.465,401 Tocol liabilities 138,615 2,628,655 2,767,270 Fund equity Nonspendable Inventories 12,173 12,173 Restricted for Dredging projects 17,820 17,820 Underground utilities 2,715,547 2,715,547 Unassigned 1,432,019 1,432,019 Total fund equity 1,462,012 2,715,547 4,177,559 Total liabilities and fund equity $ 1,600,627 S 5,344,202 S 6,944,829 See notes to the financial statements. 14 TOWN OF GULF STREAM, FLORIDA Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets September 30, 2011 Fund balance of governmental funds 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 Less accumulated depreciation 5 4,177,559 5 4,090,021 (1,902,826) 2,187,195 Revenue is recognized when earned in the governmentiwde statements regardless of when it is collected. Governmental funds recognize revenue when it is both measurable and available. Deferred revenue Long-term liabilities are not due and payable in the current period and therefore, are not reported in governmental funds. Compensated absences Net assets of governmental activities See notes to the financial statements. 15 2,453,598 (77,481) 5 8,740,871 TOWN OF GULF STREAM, FLORIDA Statement of Revenues, Expenditures and Changes in Fund Balance Governmental Funds For the Year Ended September 30, 2011 Revenues Taxes Intergovernmental revenue Licenses and permits Charges for services Fines and forfeits Investment earnings Special assessments Miscellaneous Total revenues Expenditures Current General and administrative Police department Fire protection Streets Sanitation Physical environment Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures Net change in fund balance Fund balance - beginning of the year Fund balance - end of the year $ 1,462,012 $ 2,715,547 $ 4,177,559 See notes to the financial statements. 16 Special Total General Assessment Governmental Fund Fund Funds $ 2,088,120 $ $ 2,088,120 103,848 103,848 214,336 214,336 121,057 121,057 2,108 2,108 6,252 6,252 2,885,049 2,885,049 24,480 24,480 2,560,201 2,885,049 5,445,250 625,245 625,245 1,306,622 1,306,622 300,563 300,563 144,333 144,333 114,887 114,887 169,502 169,502 70,750 70,750 2,562,400 169,502 2,731,902 (2,199) 2,715,547 2,713,348 (2,199) 2,715,547 2,713,348 1,464,211 1,464,211 $ 1,462,012 $ 2,715,547 $ 4,177,559 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 Funds to the Statement of Activities For the Year Ended September 30, 2011 Net change in fund balance ofgovernmental funds $ 2,713,348 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 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 Governmental funds include revenues collected within 60 days of year end as deferred revenue. Government -wide reporting recognizes revenues when they are earned, regardless of when they are collected. Special assessments 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. Increase in long-term compensated absences Change in net assets of governmental activities See notes to the financial statements. 17 $ 70,750 (161,865) (91,115) (13,408) 2,453,598 (13,954) $ 5,048,469 TOWN OF GULF STREAM, FLORIDA Statement of Net Assets Proprietary Fund September 30, 2011 Assets Current assets Enterprise Fund Accounts receivable $ 159,835 Due from other funds 73,506 Prepaid expenses 3,208 Total current assets 236,549 Noncurrent assets Depreciable capital assets 2,720,800 Less acumulated depreciation (644,622) Total noncurrent assets 2,076,178 Total assets 2,312,727 Liabilities Current liabilities Accounts payable 44,591 Deposits payable 58,000 Total current liabilities 102,591 Total liabilities 102,591 Net assets Invested in capital assets 2,076,178 Unrestricted 133,958 Total net assets $ 2,210,136 See notes to the financial statements. 18 TOWN OF GULF STREAM, FLORIDA Statement of Revenues, Expenses and Changes in Net Assets Proprietary Fund For the Year Ended September 30, 2011 Operating revenues Charges for services Total operating revenues Operating expenses Water purchases Repairs and maintenance Management fees Depreciation expense Payment in lieu of taxes Other expenses Field visit service Total operating expenses Operating income Non-operating revenues Connection fees Total non-operating revenues Change in net assets Net assets - beginning of the year Net assets - end of the year Enterprise Fund S 964,504 964,504 559,614 182,203 65,000 67,017 29,900 9,425 5,592 918,751 45,753 3,180 3,180 48,933 2,161,203 S 2,210,136 See notes to the financial statements. 19 TOWN OF GULF STREAM, FLORIDA Statement of Cash Flows - Proprietary Fund For the Year Ended September 30, 2011 Cash flows from operating activities: Receipts from customers Payments to suppliers Internal activity - payments to other funds Net cash provided by operating activities Cash flows from capital financing activities: Connection fee receipts Acquisition and construction of fixed assets Internal activity - payments to other funds Net cash used by capital financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents - beginning of the year Cash and cash equivalents - end of the year Cash flows from operating activities: Operating income Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation Changes in assets and liabilities: Increase (decrease) in: Accounts payable Deposits Decrease (increase) in: Accounts receivable Prepaid expenditures Total adjustments Net cash provided by operating activities See notes to the financial statements. 20 Enterprise Fund $ 1,007,595 (790,086) (65,000) 152,509 3,180 (62,421) (93,268) (152,509) $ 45,753 67,017 (3,670) 12,500 30,591 318 106,756 $ 152,509 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2011 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. Reportine 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. 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, 2011 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 ofAccounthiz 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. �17 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2011 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Measurement Focus. Basis ofAccounting, 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 funds: The General Fund is the general operating fund of the Town, and it is used to account for all financial resources except those required to be accounted for in another fund. The Special Assessment Special Revenue Fund is used to account for financial resources relating to the underground utility project. 23 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2011 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Proorietary 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, 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 fund: The Municipal Water Fund was established 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 lJ TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2011 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Investments (Continued) funds. Thus, this pool operates essentially as a money market fund. Investments in certificates of deposits are carred 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. Accounts Receivable Trade and other receivable are shown net of an allowance for estimated uncollectible amounts. Charges for solid waste collection and water usage are billed on a bi-monthly cycle. The Town recognizes revenue and the related receivables for the estimated unbilled usage at year end. 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 carred 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 nonspendable fund balance which indicates that it does not constitute "available spendable resources" even though it is a component of net current assets. 25 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2011 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 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 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. incurs a cost, charges the appropriate benefiting fund interfund transactions are presented as transfers. 26 Reimbursements occur when one fund and reduces its related cost. All other TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2011 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 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. Fund Balance In the fund financial statements, governmental funds report fund balance classifications that comprise a hierarchy based primarily on the extent to which the Town is bound to honor constraints on the specific purposes for which amounts in those funds can be spent. Fund balance is reported under the following categories: 1. Nonspendable fund balances — Includes amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact. The "not in spendable form" criterion includes items that are not expected to be converted to cash, for example, inventories and prepaid amounts. It also includes the long-term amount of loans and notes receivable, as well as property acquired for resale. However, if the use of the proceeds from the collection of those receivables or from the sale of those properties is restricted, committed, or assigned, then they should be included in the appropriate fund balance classification (restricted, committed, or assigned), rather than the nonspendable fund balance. The corpus (or principal) of a permanent fund is an example of an amount that is legally or contractually required to be maintained intact. 2. Restricted fund balance — Includes amounts that are restricted to specific purposes when constraints placed on the use of resources are either (a) externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments, or (b) imposed by law through constitutional provisions or enabling legislation. 27 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2011 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Fund Balance (Continued) 3. Committed fund balance — Includes amounts that can be used only for specific purposes pursuant to constraints imposed by an ordinance, the Town's highest level of decision making authority. Those committed amounts cannot be used for any other purpose unless the Town removes or changes the specified use by taking the same type of action (an ordinance) it employed to previously commit those amounts. 4. Assigned fund balance — Includes amounts intended to be used by the Town for specific purposes, but are neither restricted or committed. Intent should be expressed by the Town Commission or the Town Manager to which the Town Commission has delegated authority to assign amounts to be used for specific purposes. The authority form making an assignment is not required to be the Town's highest level of decision making authority. Constraints imposed on the use of assigned amounts are more easily removed or modified than those imposed on amounts classified as committed. 5. Unassigned fund balance — Includes the residual classification for the general fund. This classification represents fund balance that has not been assigned to other funds and that has not been restricted, committed, or assigned to specific purposes within the general fund. The general fund should be the only fund that reports a positive unassigned fund balance amount. In other governmental funds, it may be necessary to report a negative unassigned fund balance if expenditures incurred for specific purposes exceeded the amounts restricted, committed, or assigned to those purposes. When an expenditure is incurred for purposes for which both restricted and unrestricted (committed, assigned, or unassigned) amounts are available, it is the Town's policy to reduce restricted amounts fust. When an expenditure is incurred for purposes for which amounts in any of the unrestricted fund balance classifications could be used, it is the Town's policy to reduce committed amounts first, followed by assigned amounts, and then unassigned amounts. 28 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2011 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Net Assets Equity in the government -wide and enterprise fund statements are classified as net assets and displayed in following three components: Invested in capital assets, net of related debt — Consists of capital assets including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, notes or other bon•owings that are attributable to the acquisition, construction or improvement of those assets. 2. Restricted net assets — Consists of net assets with constraints placed on the use either by: 1) external groups such as creditors, grantors, contributors, or laws or regulations of other governments; or 2) law through constitutional provisions of enabling legislation. 3. Unrestricted net assets — All other net assets that do not meet the definition of "restricted" or "invested in capital assets, net of related debt." Budgetary Data Formal budgetary integration is employed as a management control device during the year for the General Fund and the Municipal Water Fund. Appropriations are legally controlled at the department level. All budgets are legally enacted and are adopted on a basis consistent with generally accepted accounting principles. Budgeted amounts are as originally adopted, or as emended by appropriate action. The Special Assessment Special Revenue Fund is not budgeted because it is not legally required to be budgeted. 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. 29 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2011 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Property Taxes (Continued) All property is reassessed according to its fair market value January I 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 I% 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. 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. 30 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2011 NOTE 2 — DEPOSITS AND INVESTMENTS Deposits As of September 30, 2011, the carrying amount of the Town's deposits was $1,981,676 and the bank balances totaled $2,028,271. The Town also had cash on hand of $200. Town's 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 $783,341. The certificates of deposit and money market accounts are reported as investments in the balance sheet. As of September 30, 2011, the Town held the following certificates of deposit: Days to Maturity Fair Value 296 $255,420 297 261,509 328 40.322 $557.251 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. 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 31 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2011 NOTE 2 — DEPOSITS AND INVESTMENTS (Continued) Investments (Continued) 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, 2011, 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 20 -like fund and is not rated by any nationally recognized rating agency. The weighted average days to maturity (WAM) of Florida PRUVIE at September 30, 2011, was 38 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. The weighted average life (WAL) of Fund B at September 30, 2011, was 4.82 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, 2011. Additional information regarding the Local Government Surplus Funds Trust Fund may be obtained from the State Board of Administration. 32 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2011 NOTE 2 — DEPOSITS AND INVESTMENTS (Continued) Investments (Continued) As of September 30, 2011, the Town held the following investments: Weighted Average Fair Maturi Value State Board of Administration Investment Pool Florida PRIME 38 days $ 1,086 Fund B 4.82 years 1.539 MEW" 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, 2011, 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. 33 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2011 NOTE 3 RECEIVABLES As of September 30, 2011, the Town's receivables for the individual major funds, including applicable allowances for uncollectible accounts, are as follows: NOTE 4 - CAPITAL ASSETS Capital asset activity for the year ended September 30, 2011, was as follows: Governmental Activities: Capital assets not being depreciated: Land Construction in Process Capital assets being depreciated: Buildings Infrastructure Equipment Total at historical cost Less accumulated depreciation for: Buildings Infrastructure Equipment Total accumulated depreciation Governmental activities capital assets, net Beginning Special Ending Balance Additions General Assessment Water $ 376,523 $ Fund Fund Fund Total Taxes $ 27,720 $ $ $ 27,720 Accounts - unbilled 21,041 145,392 166,433 Accounts - billed 2,872 1,948) 14,443 17,315 Due from other governments 11,469 4,090,021 11,469 Special assessments 556,466 4,754,139 4,754,139 Subtotal 63,102 4,754,139 159,835 4,977,076 Allowance for uncollectibles (38,540) 355,412 1,779,501 161,8653( Net receivables $ 63,102 $ 4,754,139 $ 159,835 $ 4,977,076 NOTE 4 - CAPITAL ASSETS Capital asset activity for the year ended September 30, 2011, was as follows: Governmental Activities: Capital assets not being depreciated: Land Construction in Process Capital assets being depreciated: Buildings Infrastructure Equipment Total at historical cost Less accumulated depreciation for: Buildings Infrastructure Equipment Total accumulated depreciation Governmental activities capital assets, net Beginning Ending Balance Additions Deletions Balance $ 376,523 $ $ $ 376,523 15,432 15,432 839,215 17,780 856,995 2,394,167 2,394,167 461,314 37 5385( 1,948) 446,904 4,071,219 70,7505( 1,948) 4,090,021 556,466 42,733 599,199 872,039 76,176 948,215 350,996 42,956 (38,540) 355,412 1,779,501 161,8653( 8,540) 1,902,826 2 29 191.1151 $ (13,4081 2.187.195 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2011 NOTE 4 — CAPITAL ASSETS (Continued) Depreciation expense was charged to functions and programs of the primary government as follows: Governmental activities: General government $58,229 Police department 39,514 Streets 64,122 Total depreciation expense for governmental activities Business -type activities: Municipal Water $ 67.017 35 Beginning Additions Deletions Balance Business -Type Activities: Capital assets not being depreciated: $ Capital assets being depreciated: 61,878 Water system unprovements 2,598,231 Equipment 60,148 Total at historical cost 2,658379 Less accumulated depreciation for: 644,622 Water system improvements 529,038 Equipment 48,567 Total accumulated depreciation 577,605 Business -type activities capital assets, net 12XM=4 Depreciation expense was charged to functions and programs of the primary government as follows: Governmental activities: General government $58,229 Police department 39,514 Streets 64,122 Total depreciation expense for governmental activities Business -type activities: Municipal Water $ 67.017 35 Ending Additions Deletions Balance 60,691 2,658,922 1,730 61,878 62,421 2,720,800 63,701 592,739 3,316 51,883 67,017 644,622 Depreciation expense was charged to functions and programs of the primary government as follows: Governmental activities: General government $58,229 Police department 39,514 Streets 64,122 Total depreciation expense for governmental activities Business -type activities: Municipal Water $ 67.017 35 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2011 NOTE 5 — INTERFUND RECEIVABLES AND PAYABLES Individual interfund receivables and payables at September 30, 2011, are as follows: Receivable Fund Payable Fund Amount General Fund Special Revenue Fund $ 130,914 Water Fund General Fund 73,506 2 2 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 $ 16.527 $ (2.5731 $]Z 18 55 On June 30, 2011, the Town adopted Resolution No. 011-12 authorizing the borrowing of the principal amount not to exceed $5,497,742 to finance the cost of the project of undergrounding the electric, cable television, and telephone utility facilities serving the municipality. The obligation to be known as Promissory Note, Undergrounding Project. Such debt shall not be a general obligation of the Town but shall be payable only from special assessments levied by the Town pursuant to Resolution No. 011-11, available non ad valorem revenues, and certain other monies. As of September 30, 2011, the Town had not borrowed any funds pursuant to the Note. See Note 14 for details of the special assessments. 36 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2011 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. 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 On November 28, 1990, the Town passed Resolution No. 90-8, 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, 2011, was $1,157,371, with covered payroll of $1,097,008. The Town's required and actual contribution for the year was $229,494 equaling 20.92% of covered payroll. The employees' contribution for the year was $87,761 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. 37 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2011 NOTE 9 — INTERLOCAL AGREEMENTS Interlocal EMS Service Agreement with the City of 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 $300,563 in the current fiscal year. The annual service fees for future years will be the current year fee of $300,563, 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 of 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 $51,192 for the fiscal year ended September 30, 2011. 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, 2011, 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 Member 30 2012 2013 Total Minimum Lease Payments $ 6,372 5.310 $11.682 38 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2011 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, 2011, the Town made payments of $114,887 pursuant to the agreement. NOTE 12 — OTHER POST EMPLOYMENT BENEFPTS (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, 2011. 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. 39 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2011 NOTE 14 — SPECIAL ASSESSMENT On June 30, 2011, the Town adopted Resolution 011-11 levying non -ad valorem special assessments on properties specially benefitted by a capital improvement project to place underground the overhead electric, cable television, and telephone utility facilities that serve a portion of the Town and its inhabitants. The special assessments were calculated using a methodology that fairly and reasonably apportions the cost of the project among the benefitted parcels in proportion to the benefits to such parcels. The calculation methodology used an equivalent benefit unit assigned for three categories: 1) improved safety 2) improved reliability and 3) improved aesthetics. Property owners were given the option to pay the entire amount of the assessment in advance of the Town obtaining financing for the project. The special assessments are subject to prepayment only on or before November 1, 2011. Assessments that are not prepaid shall be payable in not less than 10 nor more than 20 yearly installments. The special assessments shall bear interest not exceeding 10% per annum over the term of the financing obtained by the Town and will include annual costs related to administration and collection not to exceed 5%. The total assessable cost was $5,518,144, and the Town received prepayments in the amount of $2,885,049. See Note 6 for a discussion of the related financing for the project. NOTE 15 — ACCOUNTING CHANGE GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, enhances the usefulness of fund balance information by providing clearer fund balance classifications that can be more consistently applied and by clarifying the existing governmental fund type definitions. The Town implemented this standard during the fiscal year ended September 30, 2011. Changes to fund balance reporting of governmental funds are reflected in the financial statements and schedules. Related disclosures are included in Note 1. NOTE 16 — BUDGET TO ACTUAL COMPARISONS For the year ended September 30, 2011, General Fund expenditures exceeded appropriations by $1,285, and the following departments had an excess of expenditures over appropriations. General and administrative $ 8,860 Police $ 25,427 Ell 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, 2011 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) Taxes Ad valorem taxes $ 1,848,753 $ 1,848,753 S 1,838,039 $ (10,714) Local option fuel taxes 30,798 30,798 29,424 (1,374) Utility service taxes 142,000 142,000 139,486 (2,514) Communications services taxes 69,000 69,000 63,219 (5,781) Local business tax 15,000 15,000 17,952 2,952 Total taxes 2,105,551 2,105,551 2,088,120 (17,431) Licenses and permits Building permits 43,000 43,000 95,962 52,962 Franchise fees 135,700 135,700 118,374 (17,326) Total licenses and permits 178,700 178,700 214,336 35,636 Intergovernmental revenue State revenue sharing proceeds 62,461 62,461 63,503 1,042 Shared revenue from other local units 6,000 6,000 10,445 4,445 Payment in lieu of taxes 29,900 29,900 29,900 Total intergovernmental revenue 98,361 98,361 103,848 5,487 Charges for services Solid waste collection fees 114,887 114,887 118,251 3,364 Other 15,616 15,616 2,806 (12,810) Total charges for services 130,503 130,503 121,057 (9,446) Judgments, fines and forfeits Judgments and fines 4,000 4,000 1,808 (2,192) Violation of local ordinances 300 300 Total judgments, fines, and forfeits 4,000 4,000 2,108 (1,892) Investment earnings 29,000 29,000 6,252 (22,748) Miscellaneous revenues Contributions 14,136 14,136 Other 10,344 10,344 Total miscellaneous revneues 24,480 24,480 Total revenues 2,546,115 2,546,115 2,560,201 14,086 Expenditures General and administrative 616,385 616,385 625,245 (8,860) Police 1,321,513 1,336,513 1,361,940 (25,427) Fire 303,315 303,315 300,563 2,752 Streets 188,695 188,695 159,765 28,930 Sanitation 116,207 116,207 114,887 1,320 Total expenditures 2,546,115 2,561,115 2,562,400 (1,285) Excess (deficiency) of revenues over (under) expenditures $ $ (15,000) (2,199) S 12,801 Fund balance, beginning of year 1,464,211 Fund balance, end of year $1,462,012 41 TOWN OF GULF STREAM, FLORIDA Notes to the Budgetary Required Supplemental Information (RSI) General Fund September 30, 2011 NOTE 1 - BUDGETS AND BUDGETARY ACCOUNTING Budgets are adopted for the General Fund and the Water Fund. The Special Assessment Special Reveune Fund is not legally required to be budgeted and is not budgeted. A budgetary comparison schedule is presented for the General Fund as required by generally accepted accounting principles. The procedures for establishing budgetary data reflected in the budgetary comparison schedule are as follows: 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 ordinance. 5. Budgets are adopted on a basis consistent with generally accepted accounting principles. 6. Appropriations along with encumbrances lapse at September 30. NOTE 2 - BUDGET AND ACTUAL COMPARISONS Formal budgetary integration is employed within the accounting system as a management control device. Appropriations are legally controlled at the department level and expenditures may not legally exceed appropriations at that level. For the year ended September 30, 2011, General Fund expenditures exceeded appropriations by $1,285, and the following departments had an excess of expenditures over appropriations. General and administrative $ 8,860 Police $ 25,427 NH &M NOWLEN, HOLT & MINER, P.A. CERTUM) FORLIC ACCOUNTA2)TS c m u n'omiHnex:m.y CM J.W.VO T HW. CM W ..UM & wxnk CM P1IGCHTW.icL AMJR,CM WB FALM BE.MI) OEPICb BAAIC K CM 71 S EIPLH ST X=. 3ITrM 10C NTST OFFICE a11( M WEST PALM BEA(.'H,FII JDA INCL M7 THvErL1ON8 (561) 659 AI(0 FA C561)[154Hn "TIWCLN4M M[ CM WWW \'IQP(15l.COM TEXiY L YpgTCML JR, CM R GB ICM O J. M Gw: VCM BT%RACIA 9TAprn mGPA I wA T. H0IIWAGM EOH4IABT.IGL; R,GM REPORT ON INTERNAL CONTROL OVER FINANCIAL MLLE Gane OFFICE REPORTING AND ON COMPLIANCE AND OTHER m eeIC1ET r = EECE BTrBOX10111 MATTERS BASED ON AN AUDIT OF FINANCIAL E GLADE. FLORIDA 73MMU TELEPMCNe (BBI)88&5512 STATEMENTS PERFORMED IN ACCORDANCE WITH FAX M1T WeM GOVERNMENTAUDITING STANDARDS The Honorable Mayor and Members of the Town Commission Town of Gulf Stream, Florida We have audited the financial statements of the governmental activities, the business -type activities, and each major fund of the Town of Gulf Stream, Florida, as of and for the year ended September 30, 2011, which collectively comprise the Town of Gulf Stream's basic financial statements and have issued our report thereon dated February 29, 2012. 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 the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered the 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. 43 A111811CM INSTninr= OFCEITTRM PUBLICACCOUNTiINTB•FLOADAINSTnI EOr CEMV&D PLIMMACCOLMMM• CPAMMICAINTERNATIONAL 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 February 29, 2012. 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. West Palm Beach, Florida February 29, 2012 44 NH &M NOWLEN, HOLT & MINER, P.A. DIED PUBLICACCOUN APr)S MAEPfa IGMEn lIY]6iuMAcM EOVOVIO T. HO[>; CM ,M77,M a 61Ac—p, CM IIDbE11T W.18:'C]ML.03, EM W16TAV74BEAf1I CPP1C8 JNEIR B.w,C[vCµ CM 715 VJFM M%=.3UrM 200 POWOFF.C911=34I WM MUI 86ACH. FUMIDA 771074344 7T4.flR VE(561)M9 PA][ 061) c15OR8 NllTll¢nA. W,Tn, CM Y!W W.l"[AICIA.Cm/ T6�fY LYORTOt� Al. EPA R NPNlO CM VrmA 11K'1N66aWPA%m AIE NACM BWANl ML-. Mrcrt acgcM MM0.PGTEflBW(cM eDwwov�a4Lzm.EM MANAGEMENT LETTER IN ACCORDANCE WITH THE RULES OF THE AUDITOR GENERAL -- ---- OF THE STATE OF FLORIDA BEUE GLADE OFROr =6-a STTM PoErr 0"CE Box 1 B£II.E DLADE, FWn[DA 33Wa 'IB TELEPWCNE (58 1) 9W 5512 FA%(681)8 &eM The Honorable Mayor and Members of the Town Commission Town of Gulf Stream, Florida We have audited the financial statements of the Town of Gulf Stream, Florida, as of and for the year ended September 30, 2011, and have issued our report thereon dated February 29, 2012. 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 auditing standards generally accepted in the United States of America, and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. 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 February 29, 2012 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. 45 AMEREM INff7Mrr OFCEFMFIM PUBLICACCMNTAMB • FLORDA INSTMIM OF CEFMFED PUKMAOCO MAMB • CPAMERICAIMERNATIONNL 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 Provisions of Contracts or Grant Agreements. or Abuse Rules of the Auditor General require that we address violations of provisions of contracts or grant agreements, or abuse, that have occurred, or are likely to have occurred, that have an effect on the financial 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. 46 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 ofFinancial Emergency Criteria Rules of the Auditor General, require 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, 2011, 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, 2011. 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 ofExDendituures OverAnnromiations Findin¢ 2011-1 Condition: As indicated in Note I to the Budgetary Required Supplementary Information for the year ended September 30, 2011, certain departments had expenditures in excess of appropriations. Criteria: Florida Statutes prohibit expenditures in excess of appropriations. Effect: Noncompliance with budgetary requirements. 47 Recommendation: We recommend that management periodically review budget to actual comparisons and amend the budget as necessary to eliminate expenditures in excess of appropriations. Management Response: The Town will make interim budget adjustments as necessary. 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, 2011. Consequently, the Town was not required to have a federal single audit or a state single audit. Response to Mannpement Letter We did not audit management's response to the Management Letter and express no opinion on it. 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 February 29, 2012 i?aw 2 ►�; �.2�. 4 �Y�1Nneti DA. 48