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HomeMy Public PortalAbout2012 AFRn 6 � : r F. r) 1 Y F V iS �l MP � a TOWN OF GULF STREAM, FLORIDA SEPTEMBER 30, 2012 TABLE OF CONTENTS Pages Independent Auditor's Report 1-2 Management's Discussion and Analysis (required supplementary information) 3-10 Basic Financial Statements Government -wide Financial Statements Statement of Net Assets 11 Statement of Activities 12-13 Fund Financial Statements Balance Sheet — Governmental 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 21-43 Required Supplemental Information Other Than MD&A Schedule of Revenues, Expenditures, and Changes in Fund Balance — Budget and Actual — General Fund 44 Notes to the Budgetary Required Supplemental Information 45 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 46-47 Management Letter in Accordance with the Rules of the Auditor General of the State of Florida 48-51 EM NOWLEN, HOLT & MINER, P.A. Cr:RTIFIM PUBLIC ACCOUNTANTS Nt1T RAL41 BEAL31 Ulik'E i:OR31UR DRU C.5L 515 N. EUGLLR XR WfE lila PU KT 11, BBMDu> N1Nf 1`.6LM ULMI I, ELURIUA 33M3014i T©tS'IIGVE [%jllP+-:9611 LV[ sol) n3sn,y 4'NN',NII?1CMCOM INDEPENDENT AUDITOR'S REPORT The Honorable Mayor and Members of the Town Commission Town of Gulf Stream, Florida EYERE>r3, IRIMLENIMVA LCIM W "B.MNMC MCR w. NENCRI%. F., CK JANTR. RMME CFA URM E1PR .F, CA k RCN.MP EEN ,tlM AI.E3UP VMi]q CFE. CR1 EPP4 OK NPLT F, CA6 xnw a ancsclA cPr, cr. NATIIFEN A. MNER. L i YCN6ELBTEVENA CPA RIAUU.VE7=R .CFE,CIM MMN.1 RI4SM. PJM RU K.IN, CIM NYANN.SH Lm RFLI Fri ADF ]FFICF = 5.0 LN STRCCT RP+ PRICE NO%341 CCLLC GLAm rLonoAU]AJU03W TELE'MONE('_dil 8365312 4A%(SRij Rif R"aR 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, 2012, 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 auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and 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 accounting principles generally accepted in the United States of America 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, 2012, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS - FLORIDA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS• CPAMERICAINTERNATIONAL 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, 2012, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in conformity with accepted accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated April 9, 2013, 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 44 and 45 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 April 9, 2013 2 IIA f MI 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. I al 1U.110109011r_l ➢ The assets of the Town of Gulf Stream exceeded its liabilities at the close of the most recent fiscal year by $10,584,444 (net assets). Of this amount, $1,052,958 (unrestricted net assets) may be used to meet the government's ongoing obligations to citizens and creditors. ➢ The government activities revenues were $2,719,292 at the close of fiscal year 2012. ➢ The business -type activities revenues were $874,573 at the close of fiscal year 2012. ➢ The total cost of all Town programs was $3,960,428 during the fiscal year 2012. At the end of the 2012 fiscal year, unassigned fund balance for the general fund was $951,144 or 33% of total general fund expenditures. USING THIS REPORT Management's Discussion & Analysis introduces the Town's basic financial statements which are described in the following graphic. MD&A Management's Discussion & Analysis (Required supplemental information) Government -wide financial Fund financial statements BASIC statements (pages 11-13) (Pages 14-20) FINANCIAL STATEMENTS Notes to the financial statements (Pages 21-43) REQUIRED SUPPLEMENTAL INFORMATION Required supplementary information (Other than MD&A) (Pages 44-45) 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 8. The fund financial statements provide detailed information about the most significant hinds — 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. 13 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 2012 are reported at $10,584,444. Net assets of the Town's governmental activities for the fiscal year ending 2012 are $8,391,903. The net assets of our business -type activities are reported at $2,192,541 for the fiscal year ending 2012. 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. Current and Other Assets Capital Assets TOTAL ASSETS Current and Other Liabilities Long-term Liabilities TOTAL LIABILITIES Net Assets: Invested in Capital Assets Restricted — Dredging Projects Restricted — Underground Utilities Restricted — Repairs, replacements, and improvements Unrestricted TOTAL NET ASSETS Town of Gulf Stream Statement of Net Assets As of September 30, 2012 Governmental Busineus type Activities Activities TOTAL 2011 2012 2011 2012 2011 2012 56,740,409 58,854,512 2,187.195 2,149.857 8.927.604 11.004.369 169,809 402,430 16.924 2,210,436 186.733 1.612.466 2,187,195 2,149,857 17,820 17,820 5,169,145 5-198,496 1.346,711 925.730 5 S 236,549 S 314,502 2.076.178 2.009.243 2.312.727 2.323.745 102,591 131-104 102.891 131-20 2,076,178 2,009,243 56,070 133.958 117,118 S6,976,958 S9,169,014 4.263.373 4.159.100 II 140.331 13.328.114 272,400 533,634 16.924 2,210.036 289.32472. 43.670 4,263,373 4,159,100 17,820 17,820 5,169,145 5,298,496 56,070 1.500.669 1.052.958 Management's Discussion and Analysis Changes in Net Assets The statement of activities presents information showing how the government's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in the future fiscal periods (i.e., uncollected taxes and earned but unused vacation leave). ➢ The decrease in net assets for governmental activities totaled $348,968. The decrease in net assets was primarily due to the balance of the paid premium of the special assessments. ➢ The decrease in business -type net assets was $17,595. The decrease in net assets was due in part to depreciation. 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 Total Revenues Expenses Governmental Activities: General and Administrative Police Department Fire Protection Streets Sanitation Physical Environment Interest on long-term debt 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 2011 2012 2011 2012 2011 2012 $5,586,070 $ 272,564 $967,684 $ 874,573 $ 6,553,754 $ 1,147,137 14,136 92,528 14,136 92,528 1,838,039 1,850,192 1,838,039 1,850,192 63,219 60,207 63,219 60,207 29,424 30,845 29,424 30,845 139,486 154,653 139,486 154,653 118,374 124,499 118,374 124,499 6,252 3,606 6,252 3,606 73,948 96,298 73,948 96,298 29.900 33.900 29.900 33.900 7.898.848 1,719,191 967.684 874.573 8.866.532 3.593.865 690,434 813,714 690,434 813,714 1,366,538 1,436,588 1,366,538 1,436,588 300,563 315,580 300,563 315,580 208,455 226,519 208,455 226,519 114,887 129,801 114,887 129,801 169,502 144,166 169,502 144,166 1,892 1,892 918.751 891,168 918.751 892.168 2.850.379 3.068 160 918.751 891,168 3.769.130 3.960.428 5,048,469 (348,968) 48,933 (17,595) 5,097,402 (366,563) 3.692.402 8.740.871 1,161103 2.210.136 5.853.605 10.951.007 SH 1 Sfl i �� n o 51-0�5-1 Q 514 2 Management's Discussion and Analysis More than half the Town's revenue comes from Property Taxes. (Please see chart below.) Investment rare 1% Franchise Fee: 4% Charges for Services 11% Intergovernmen 4% Revenues — Governmental Revenues by Source Other erty Taxes 67% Management's Discussion and Analysis The Town's expenses cover a range of services, with 47% related to public safety. (Please see chart below.) Expenses — Governmental Expenses by Function General Fire Interest on Long-term Debt, 0% FINANCIAL ANALYSIS ON THE FUND BASIS Financial Analysis of the General Fund 47% As the Town of Gulf Stream completed the year, the general fund reported a fund balance of $981,176, a decrease of $480,836 from the previous fiscal year. The decrease was due primarily to a transfer to the Special Assessment Fund. The general fund ended the 2012 fiscal year with $12,212 in nonspendable fund balance, $17,820 in restricted fund balance, and $951,144 in unassigned fund balance. 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 2012 were $2,192,541. The net assets of the water fund have decreased 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 $353,869 less than the final budget amounts. Revenues were $65,536 more than the final budget amounts. CAPITAL ASSET AND DEBT ADNIINSTRATION Capital Assets At the end of fiscal year 2012, the Town had invested $4,159,100 in a broad range of capital assets including police equipment, buildings, infrastructure and water improvements. Additional information can be found in Note 4 of the notes to the financial statements. Town of Gulf Stream's Capital Assets (Net of Depreciation) As of September 30, 2012 Governmental Business -type Activities Activities 2011 2012 2011 2012 TOTAL 2011 2012 Land S 376,523 S 376,523 S s S 376,523 Construction in Pmcess 15,432 15,432 Buildings & Improvements 257,796 216,427 2,066,183 2,002,855 2,323,979 Equipment 91,492 81,861 9,995 6,388 101,487 Infrastructure 1.445.952 1.475.046 1.445.952 TOTALS 52 I 52 I S29ODU $4 i2�37 z S 376,523 2,219,282 88,249 14. 75.046 Sq" I S9.I00 Management's Discussion and Analysis Debt As of September 30, 2012 the Town had $2,513,353 in long term debt 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, 2012 Governmental Business -type Activities Activities TOTAL 2011 2012 2011 2012 2011 2012 Promissory Note $ $2,427,895 $ $ $ $2,427,895 Compensated Absences 77 481 85.458 77,481 85.458 TOTALS ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES For the 2013 fiscal year, general fund revenue projections are comparable to the previous year. ➢ There is not a change in user rate fees for fiscal year 2013. ➢ The millage rate was increased to 3.1000 mills, which is greater than the rolled -back rate by 7.12%. 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, 2012 Primary Government Governmental Business -type Activities Activities Total Assets Cash and cash equivalents $ 2,960,883 $ $ 2,960,883 Investments 1,422,538 Accrued liabilities 1,422,538 Accounts receivable 62,506 146,906 209,412 Assessments receivable 2,453,598 60,500 60,500 2,453,598 Inventories 12,212 Long-term debt 12,212 Internal balances (161,668) 161,668 303,317 Prepaid expenses 2,210,036 5,928 5,928 Debt issue cost 24,021 24,021 Restricted invewtments 2,080,422 2,080,422 Capital assets Non -depreciable 376,523 376,523 Depreciable (net of depreciation) 1,773,334 2,009,243 3,782,577 Total assets 11,004,369 2,323,745 13,328,114 Liabilities Liabilities 2,149,857 2,009,243 Accounts payable 42,112 70,704 112,816 Accrued liabilities 45,506 45,506 Accrued interest payable 1,892 1,892 Damage deposit bonds 60,500 60,500 Deferred revenue 9,603 9,603 Long-term debt 56,070 Unrestricted Payable within one year 303,317 303,317 Payable after one year 2,210,036 2,210,036 Total liabilities 2,612,466 131,204 2,743,670 Net assets Invested in capital assets 2,149,857 2,009,243 4,159,100 Restricted for dredging projects 17,820 17,820 Restricted for underground utilities 5,298,496 5,298,496 Restricted for repairs, replacements and improvements 56,070 56,070 Unrestricted 925,730 127,228 1,052,958 Total net assets $ 8,391,903 $ 2,192,541 $ 10,584,444 See notes to the financial statements. 11 TOWN OF GULF STREAM, FLORIDA Statement of Activities For the Year Ended September 30, 2012 Functions/Programs Primary Government Governmental activities General government Police department Fire protection Streets Sanitation Physical environment Interest on long -tern debt Total governmental activities Business -type activities Water Total primary government 12 Charges for Expenses Services $ 813,714 1,436,588 315,580 226,519 129,801 144,166 1,892 3,068,260 138,210 1,385 132,969 272,564 892,168 874,573 $ 3,960,428 $ 1,147,137 Revenues Net (Expense) Revenue and Chanaes in Net Assets Operating Capital Primary Government Grants and Grants and Governmental Business -type Contributions Contributions - activities activities Total $ 17,588 $ 74,940 $ (582,976) $ $ (582,976) (1,435,203) (1,435,203) (315,580) (315,580) (226,519) (226,519) 3,168 3,168 (144,166) (144,166) (1,892) (1,892) 17,588 74,940 (2,703,168) (2,703,168) (17,595) (17,595) $ 17,588 $ 74,940 (2,703,168) (17,595) (2,720,763) General revenues Property taxes 1,850,192 1,850,192 Communications services taxes 60,207 60,207 Gas taxes 30,845 30,845 Utility service tax 154,653 154,653 Franchise taxes 124,499 124,499 Intergovernmental shared revenues 96,298 96,298 Unrestricted investment earnings 3,606 3,606 Miscellaneous revenues 33,900 33,900 Total general revenues 2,354,200 2,354,200 Change in net assets (348,968) (17,595) (366,563) Netassets- beginning 8,740,871 2,210,136 10,951,007 Net assets - ending $ 8,391,903 $ 2,192,541 $ 10,584,444 See notes to the financial statements. 13 TOWN OF GULF STREAM, FLORIDA Balance Sheet - Governmental Funds September 30, 2012 See notes to the financial statements. 14 Special Total Genera Assessment Governmental Fund Fund Funds Assets Cash and cash equivalents S 63,080 S 2,897,803 S 2,960,883 Investments 1,422,538 1,422,538 Accounts receivable 62,506 62,506 Assessments receivable 2,453,598 2,453,598 Due from other funds 2,403,663 2,403,663 Inventories 12,212 12,212 Restricted investments 2,080,422 2,080,422 Total assets S 3,640,758 S 7,755,064 S 11,395,822 Liabilities and fund equity Liabilities Accounts payable $ 39,142 S 2,970 $ 42,112 Accred liabilities 45,506 45,506 Due to other funds 2,565,331 2,565,331 Deferred revenue 9,603 2,453,598 2,463.201 Total liabilities 2,659,582 2,456.568 5.116,150 Fund equity Nonspendable Inventories 12,212 12,212 Restricted for Dredging projects 17,820 17,820 Underground utilities 5,298,496 5,298,496 Unassigned 951,144 951,144 Total fund equity 981,176 5,298,496 6,279,672 Total liabilities and fund equity S 3,640.758 S 7,755,064 S 11.395,822 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, 2012 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 Revenue is recognized when earned in the govemmentiwde statements regardless of when it is collected. Governmental funds recognize revenue when it is both measurable and available. $ 6,279,672 $ 4,189,745 (2,039,888) 2,149,857 Deferred revenue 2,453,598 Debt issue cost are reported as expenditures in governmental funds when debt is issued. These items are deferred and amortized over the life of the related debt in the government -wide statements. Unamortized debt issue cost 24,021 Long-term liabilities, including accrued interest payable, are not due and payable in the current period and therefore, are not reported in governmental funds. Note payable (2,427,895) Accrued interest payable (1,892) Compensated absences (85,458) Net assets of governmental activities S 8,391,903 See notes to the financial statements. 15 TOWN OF GULF STREAM, FLORIDA Statement of Revenues, Expenditures and Changes in Fund Balance Governmental Funds For the Year Ended September 30, 2012 See notes to the financial statements. 16 Special Total General Assessment Governmental Fund Fund Funds Revenues Taxes $ 2,114,604 $ $ 2,114,604 Intergovernmental revenue 130,198 130,198 Licenses and permits 224,141 224,141 Charges for services 139,346 139,346 Fines and forfeits 1,385 1,385 Investment earnings 3,606 3,606 Miscellaneous 106,012 106,012 Total revenues 2,719,292 2,719,292 Expenditures Current General and administrative 756,450 756,450 Police department 1,373,321 1,373,321 Fire protection 315,580 315,580 Streets 147,754 147,754 Sanitation 129,801 129,801 Physical environment 143,955 143,955 Capital outlay 153,981 153,981 Debt service Debt issue cost 24,232 24,232 Total expenditures 2,876,887 168,187 3,045,074 Excess (deficiency) of revenues over (under) expenditures (157,595) (168,187) (325,782) Other financing sources (uses): Debt proceeds 2,427,895 2,427,895 Transfers in 323,241 323,241 Transfers out (323,241) (323,241) Total other financing sources (uses) (323,241) ---2,751,136 2,427,895 Net change in fund balance (480,836) 2,582,949 2,102,113 Fund balance - beginning of the year 1,462,012 2,715,547 4,177,559 Fund balance - end of the year $ 981,176 $ 5,298,496 $ 6,279,672 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, 2012 Net change in fund balance of governmental funds S 2,102,113 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 S 125,468 (154,761) (29,293) 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 (8,045) The issuance of long -tern debt provides current financial resources to governmental funds, while the repayment of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has an effect on net assets of governmental activities. Debt proceeds Debt issue cost (2,427,895) 24,232 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. Amortization of bond issue costs Change in accrued interest payable Change in long -teen compensated absences Change in net assets of governmental activities (211) (1,892) (7,977) $ (348,968) See notes to the financial statements. 17 TOWN OF GULF STREAM, FLORIDA Statement of Net Assets Proprietary Fund September 30, 2012 Assets Current assets Accounts receivable, net Due from other funds Prepaid expenses Total current assets Noncurrent assets Depreciable capital assets Less acumulated depreciation Total noncurrent assets Total assets Liabilities Current liabilities Accounts payable Deposits payable Total current liabilities Total liabilities Net assets Invested in capital assets Restricted for repairs, replacements and improvements Unrestricted Total net assets See notes to the financial statements. 18 Enterprise Fund $ 146,906 161,668 5,928 314,502 2,720,800 (711,557) 2,009,243 2,323,745 70,704 60,500 131,204 131,204 2,009,243 56,070 127,228 $ 2,192,541 TOWN OF GULF STREAM, FLORIDA Statement of Revenues, Expenses and Changes in Net Assets Proprietary Fund For the Year Ended September 30, 2012 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 Capital contributions Reserve fees Total capital contributions Change in net assets Net assets - beginning of the year Net assets - end of the year Enterprise Fund $ 818,503 818,503 476,619 150,969 65,000 66,935 39,900 90,095 2,650 892,168 (73,665) 56,070 56,070 (17,595) 2,210,136 $ 2,192,541 See notes to the financial statements. 19 TOWN OF GULF STREAM, FLORIDA Statement of Cash Flows - Proprietary Fund For the Year Ended September 30, 2012 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 non -capital financing activities Internal activity - payments to other funds Net cash provided by non -capital financing activities Cash flows from capital financing activities: Reserve fees received 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 $ 839,387 (730,250) (65,000) 44,137 (88,162) (88,162) 44,025 44,025 $ (73,665) 66,935 26,113 2,500 24,974 (2,720) 117,802 $ 44,137 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2012 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the Town of Gulf Stream, Florida (the "Town") have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The Town's significant accounting policies are described below. Reporting Entity The Town of Gulf Stream, Florida is a municipal corporation organized pursuant to Chapter 31276, 1955 Laws of Florida. The Town operates under the Commission/Mayor form of government. The Town's major operations include general government, public safety, streets, sanitation, physical environment, 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, 2012 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Government -wide and Fond 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 ofAccountinr, 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 fast, then unrestricted resources as they are needed. 22 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2012 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, 2012 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. For the purposes of the statement of cash flows, the Town considers amounts on deposit in demand accounts 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 24 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2012 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Investments (Continued) Investment Company Act of 1940, which comprises the rules governing money market funds. Thus, this pool operates essentially as a money market fund. Investments in certificates of deposits are carried at amortized cost that approximates market, because these investments are considered to be nonparticipating interest earning investment contracts that are not affected by changes in interest rates. 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 property, plant, 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 and in the Water Enterprise Fund. Effective October 1, 2011, the Town increased the capitalization threshold from $1,000 for all classes of capital assets to the following amounts: Buildings $5,000 Equipment 5,000 Infrastructure 10,000 Water Infrastructure 10,000 The change was made prospectively, and all capital assets placed into service prior to October 1, 2011 will remain capitalized. 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 25 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2012 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Inventory Inventories consist of expendable supplies held for consumption which are carried at cost (fust -in, fust -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. 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 frnancialstatements. 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. Interfmd 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 - 26 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2012 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Interhrnd Transactions (Continued) wide financial statements as "internal balances". Services deemed to be reasonably equivalent in value, are treated as revenue and expenditures/expenses. Reimbursements occur when one fund incurs a cost, charges the appropriate benefiting fund and reduces its related cost. All other interfund transactions are presented as transfers. Deferred Revenues The government reports deferred revenue on its government wide statement of net assets, proprietary statement of net assets, and governmental funds balance sheet. Deferred revenues arise when a potential revenue does not meet both the "measurable" and "available" criteria for recognition in the current period. Deferred revenues also arise when the government receives resources before it has a legal claim to them, as when grant monies are received prior to incurring qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the government has a legal claim to the resources, the liability for deferred revenue is removed and revenue is recognized. 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 -terns 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. 27 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2012 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Fund Balance (Continued) 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. 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 nor 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 for 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, 2012 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: 1. 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 borrowings 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, 2012 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Property Taxes (Continued) All property is reassessed according to its fair market value January 1 of each year, which is also the lien date. Each assessment roll is submitted to the Executive Director of the State Department of Revenue for review to determine if the rolls meet all the appropriate requirements of state statutes. All taxes are due and payable on November 1 of each year or as soon thereafter as the assessment roll is certified and delivered to the Tax Collector. All unpaid taxes become delinquent on April 1 following the year in which they are assessed. Discounts are allowed for early payment at the rate of 4% in the month of November, 3% in the month of December, 2% in the month of January and 1% in the month of February. The taxes paid in March are without discount. Delinquent taxes on real property bear interest of 18% per year. On or prior, to June I 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, 2012 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Recently Issued Accountine Pronouncements A brief description of new accounting pronouncements that might have a significant impact on the Town's financial statements is presented below. In November 2010, the Governmental Accounting Standards Board (GASB) issued Statement No. 61, The Financial Reporting Entity: Omnibus an amendment of GASB Statements No. 14 and No. 34. GASB 61 provides additional criteria for classifying entities as component units to better assess the accountability of elected officials by ensuring that the financial reporting entity includes organizations for which the elected officials are financially accountable or that are determined by the government to be misleading to exclude. This statement is effective for the fiscal year ending September 30, 2013. Management is currently evaluating the impact of the adoption of this statement on the Town's financial statements. In December 2010, the Governmental Accounting Standards Board (GASB) issued Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre - November 30, 1989 FASB and AICPA Pronouncements. GASB 62 directly incorporates the applicable guidance from FASB and AICPA pronouncements into the state and local government accounting and financial reporting standards, with provisions modified, as appropriate, to recognize the effects of the governmental environment and the needs of governmental financial statement users without affecting the substance of the applicable guidance. This statement is effective for the fiscal year ending September 30, 2013. Management is currently evaluating the impact of the adoption of this statement on the Town's financial statements. In June 2011, the Governmental Accounting Standards Board (GASB) issued Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position. GASB 63 will improve financial reporting by standardizing the presentation of deferred outflows of resources and deferred inflows of resources and their effects on a government's net position. It alleviates uncertainty about reporting those financial statement elements by providing guidance where none previously existed. This statement is effective for the fiscal year ending September 30, 2013. Management is currently evaluating the impact of the adoption of this statement on the Town's financial statements. In March 2012, the GASB issued Statement No. 65, Items Previously Reported as Assets and Liabilities. GASB 65 establishes accounting and financial reporting standards that reclassify, as deferred outflows of resources or deferred inflows of resources, certain items that were previously reported as assets and liabilities. This statement is effective for the fiscal year ending September 30, 2014. Management is currently evaluating the impact of the adoption of this statement on the Town's financial statements. 31 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2012 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Recently Issued Accounting Pronouncements (Continued) In March 2012, the GASB issued Statement No. 66, Technical Corrections — 2012 — an amendment of GASB Statements No. 10 and No. 62. GASB 66 improves accounting and financial reporting for a governmental reporting entity by resolving conflicting guidance that resulted from the issuance of two pronouncements, Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions and Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre -November 30, 1989 FASB and AICPA Pronouncements. This statement is effective for the fiscal year ending September 30, 2014. Management is currently evaluating the impact of the adoption of this statement on the Town's financial statements. In June 2012, the GASB issued Statement No. 67, Financial Reporting for Pension Plans — an amendment of GASB Statement 25. GASB 67 improves financial reporting by state and local governmental pension plans primarily through enhanced note disclosures and schedules of required supplementary information. This Statement is effective for the fiscal year ending September 30, 2014. Management is currently evaluating the impact of the adoption of this statement on the Town's financial statements. In June 2012, the GASB issued Statement No. 68, Accounting and Financial Reporting for Pensions — an amendment of GASB Statement 27. GASB 68 improves financial reporting by state and local governments for pensions. It also improves information provided by state and local governmental employers about financial support for pensions that is provided by other entities. This Statement results from a comprehensive review of the effectiveness of existing standards of accounting and financial reporting for pensions with regard to providing decision -useful information, supporting assessments of accountability and inter -period equity, and creating additional transparency. This Statement is effective for the fiscal year ending September 30, 2015. Management is currently evaluating the impact of the adoption of this statement on the Town's financial statements. 32 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2012 NOTE 2 — DEPOSITS AND INVESTMENTS Deposits As of September 30, 2012, the carrying amount of the Town's deposits was $6,461,014 and the bank balances totaled $6,503,157. 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 $2,941,374. The certificates of deposit and money market accounts are reported as investments in the balance sheet. As of September 30, 2012, the Town held the following certificates of deposit: Days to Maturity Fair Value 266 $255,654 297 262,798 233 40.505 $558.957 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 33 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2012 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. Pool A is now referred to as Florida PRIME and Pool B is referred to as Fund B. At September 30, 2012, Florida PRIME was assigned a "AAA(m)" principal stability fund rating by the Standard and Poor's Ratings. Florida PRIME is considered a SEC 20 -like fund, thus, the account balance should also be considered its fair value. Fund B is not considered a SEC 2a7 -like fund and is not rated by any nationally recognized rating agency. The weighted average days to maturity (WAM) of Florida PRIME at September 30, 2012, was 39 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, 2012, was 4.08 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, 2012. However, because Fund B consists of restructured or defaulted securities there is considerable uncertainty regarding the weighted average life. Additional information regarding the Local Government Surplus Funds Trust Fund may be obtained from the State Board of Administration. 34 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2012 NOTE 2 — DEPOSITS AND INVESTMENTS (Continued) Investments (Continued) As of September 30, 2012, the Town held the following investments: Weighted Average Fair Maturity Value State Board of Administration Investment Pool Florida PRIME 39 days $ 1,362 Fund B 4.08 years 1.267 7 79 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, 2012, 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. 35 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2012 NOTE 3 RECEIVABLES As of September 30, 2012, the Town's receivables for the individual major funds, including applicable allowances for uncollectible accounts, are as follows: Taxes Accounts - unbilled Accounts - billed Due from other governments Special assessments Subtotal Allowance for uncollectibles Net receivables NOTE 4 - CAPITAL ASSETS Capital asset activity for the year ended September 30, 2012, 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 General Assessment Water Fund Fund Fund $ 23,531 $ $ 22,442 144,842 2,967 106,656 8,654 13,566 34,244 (25,744) 4,090,021 2,453,598 1,176) 62,506 2,453,598 153,496 (6,590) $ 62,506 $ 2,453,598 $ 146,906 Capital asset activity for the year ended September 30, 2012, 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 Balance Additions Deletions $ 376,523 $ $ 15,432 (15,432) 856,995 2,394,167 106,656 446,904 34,244 (25,744) 4,090,021 140,9004( 1,176) 599,199 948,215 355,412 1,902,826 41,369 77,562 35,8301( 7,699) 154,761 (17,699) mnnn�___iff 36 $(23.4771 Total $ 23,531 167,284 11,621 13,566 2,453,598 2,669,600 (6,590) $ 2,663,010 Ending Balance $ 376,523 856,995 2,500,823 455,404 4,189,745 640,568 1,025,777 373,543 2,039,888 2-149-857 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2012 NOTE 4 — CAPITAL ASSETS (Continued) Depreciation expense was charged to functions and programs of the primary government as follows: Governmental activities: General government $ 51,095 Police department 36,666 Streets 67,000 Total governmental activities $ 154,761 Business -type activities: Municipal water $ 66,935 37 Beginning Ending Balance Additions Deletions Balance Business -Type Activities: Capital assets being depreciated: Water system improvements $2,658,922 $ $ $2,658,922 Equipment 61,878 61,878 Total at historical cost 2,720,800 2,720,800 Less accumulated depreciation for. Water system improvements 592,739 63,328 656,067 Equipment 51,883 3,607 55,490 Total accumulated depreciation 644,622 66,935 711,557 Business -type activities capital assets, net $$ (6 $ 2.009.243 Depreciation expense was charged to functions and programs of the primary government as follows: Governmental activities: General government $ 51,095 Police department 36,666 Streets 67,000 Total governmental activities $ 154,761 Business -type activities: Municipal water $ 66,935 37 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2012 NOTE 5 — INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS Individual interfund receivables and payables at September 30, 2012, are as follows: Receivable Fund Special Assessment Water Fund Payable Fund General Fund General Fund Amount $ 2,403,663 161,668 $ 2,565,331 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. Interfund transfers for the year ended September 30, 2012, were as follows: General Fund Special Assessment Fund Transfers In Transfers Out $ 323,241 323,241 $ 323,241 $ 323,241 The transfer moved loan proceeds from the fund that originally received them to the fund where they will be expended. NOTE 6 — LONG-TERM LIABILITIES Governmental Activities On September 6, 2012, the Town issued its Promissory Note, Undergrounding Project in the principal amount of $2,427,895 to provide funds for the project of undergrounding the electric, cable television, and telephone utility facilities serving the municipality. Such debt shall not be a general obligation of the Town. The Town covenants that, so long as the Note shall remain unpaid or any other amounts are owed by the Town under the Note, it will appropriate in its annual budget, by amendment, if required, from pledged funds and available non ad valorem revenues, amounts sufficient to pay principal and interest on the Note as they become due. The covenant to budget and appropriate does not create a lien upon or pledge of the available non ad valorem revenues. Pledged 38 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2012 NOTE 6 — LONG-TERM LIABILITIES (Continued) Governmental Activities (Continued) funds consist of amounts on deposit in the note proceeds fund and the payment fund and special assessments. Principal and interest payments on the Note are due in annual installments commencing on April 1, 2013 and on each April 1 thereafter until final maturity on April 1, 2022. The Note bears interest at the rate of 2.09%. At September 30, 2012, principal and interest to maturity on April 1, 2022 to be paid from pledged funds totaled $2,691,569. No principal or interest was paid for the current fiscal year. Annual debt service requirements to maturity are as follows: Year Ended Balance Additions Deletions Governmental activities: September 30 Principal Interest Payment Underground project $ $2,427,895 $ 2013 $ 240,379 $ 28,778 $ 269,157 2014 223,438 45,719 269,157 2015 228,108 41,049 269,157 2016 232,875 36,282 269,157 2017 237,742 31,415 269,157 2018-2022 1,265,353 80,431 1,345,784 $ 2,427,895 $ 263,674 $ 2,691,569 Changes in Long -Term Liabilities Beginning Compensated absences are liquidated by the General Fund 39 Ending Balance $2,427,895 85,458 $2,513,353 Due Within One Year $ 240,379 62,938 $ 303,317 Balance Additions Deletions Governmental activities: Promissory Note, Underground project $ $2,427,895 $ Compensated absences 77,481 70,4136( 2,436) Total Governmental Activities $ 77,481 $2,498,308 $(62,436) Compensated absences are liquidated by the General Fund 39 Ending Balance $2,427,895 85,458 $2,513,353 Due Within One Year $ 240,379 62,938 $ 303,317 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2012 NOTE 6 — LONG-TERM LIABILITIES (Continued) Interest Expense The total interest cost incurred on all Town debt for the year ended September 30, 2012, was $1,892, and no interest was paid during the year. No interest was capitalized in the Enterprise Fund during the year. 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. 40 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2012 NOTE 8 — DEFINED CONTRIBUTION EMPLOYEE RETIREMENT PLAN (Continued) Because the Town does not hold or administer funds for the Plan, it does not meet the criteria for inclusion in the Town's financial statements as a fiduciary fund. The Plan does not issue a stand alone financial report. The Town's total payroll for the fiscal year ended September 30, 2012, was $1,203,474, with covered payroll of $1,130,134. The Town's required and actual contribution for the year was $236,424 equaling 20.92% of covered payroll. The employees' contribution for the year was $90,411 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. NOTE 9 — INTERLOCAL AGREEMENTS Interlocal EMS Service Agreement with the City ofDelrav 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 $315,580 in the current fiscal year. The annual service fees for future years will be the current year fee of $315,580, adjusted annually based on the "All Urban Customers — United States April Consumer Price Index" or an increase of five percent (5.00/6), whichever is greater. Interlocal Dispatch Service Agreement with the Citv ofDelrav Beach On October 1, 2007, the Town entered into an agreement with the City of Delray Beach for dispatch services. The agreement terminated on September 30, 2012. The annual service fee the Town paid under the agreement was $54,389 for the fiscal year ended September 30, 2012. On October 1, 2012, 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, 2017. The annual service fee under the agreement is $53,782 for the fiscal year ended September 30, 2013. 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". 41 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2012 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, 2012, the Town made payments of $6,372 pursuant to the lease. The following is a schedule of the Town's required future minimum lease payments under the agreement: Year Ended Minimum September 30 Lease Payments 2013 $ 5,310 NOTE 11— COMMITMENTS On August 18, 2008, the Town amended the solid waste and recycling collection franchise agreement with Waste Management Inc. of Florida (WNM. 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, 2012, the Town made payments of $129,801 pursuant to the agreement. NOTE 12 — OTHER POSTEMPLOYMENT BENEFITS (OPEB) The Town was required to implement Governmental Accounting Standards Board Statement 45 (GASB 45), Accounting and Financial Reporting by Employers for Postemployment Benefits Other than Pensions for fiscal year ending September 30, 2010. Retirees of the Town pay an amount equal to the actual premium for health insurance charged by the carrier, but there is an implied subsidy in the healthcare insurance premium charged for active employees, who are younger than retirees on average. This implied subsidy constitutes other post employment benefits under GASB 45. The Town elected not to apply GASB 45. The effects of that departure on the financial statements are not reasonably determinable. The Town also has not disclosed the descriptive information about other post employment benefits required by standards. 42 TOWN OF GULF STREAM, FLORIDA Notes to the Financial Statements September 30, 2012 NOTE 13 —RISK MANAGEMENT The Town is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; injuries to employees, and natural disasters for which the Town carries commercial insurance. 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. The Town has not significantly reduced insurance coverage from the prior year, and there were no settled claims which exceeded insurance coverage during the past three fiscal years. Florida Statues limit the Town's maximum loss for most liability claims to $200,000 per person and $300,000 per occurrence under the Doctrine of Sovereign Immunity. However, under certain circumstances, a plaintiff can seek to recover damages in excess of statutory limits by introducing a claims bill to the Florida Legislature. The limits addressed in Florida Statutes do not apply to claims filed in Federal courts. 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 and not 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. 43 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, 2012 Other financing sources (uses) Transfers out (323,241) (323,241) Total other financing sources (uses) (323,241) (323,241) Excess (deficiency) or revenues and other financing sources over (under) expenditures $ (450,000) S (577,000) (480,836) $ 96,164 Fund balance, beginning of year 1,462,012 Fund balance, end of year S 981,176 44 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) Taxes Ad valorem taxes $ 1,853,385 $ 1,853,385 $ 1,850,192 $ (3,193) Local option fuel taxes 29,836 29,836 30,845 1,009 Utility service taxes 152,000 152,000 154,653 2,653 Communications services taxes 69,000 69,000 60,207 (8,793) Local business tax 15,000 15,000 18,707 3,707 Total taxes 2,119,221 2,114 221 2,114,604 (4,617) Licenses and permits Building permits 50,000 50,000 99,642 49,642 Franchise fees 148,000 148,000 124,499 (23,501) Total licenses and permits 198,000 198,000 224,141 26,141 Intergovernmental revenue State revenue sharing proceeds 79,158 79,158 83,452 4,294 Shared revenue Item other local units 6,000 6,000 12,846 6,846 Payment in lieu of taxes 41,000 41,000 33,900 (7,100) Total intergovernmental revenue 126,158 126,158 130,198 4,040 Charges for services Solid waste collection Fees 130,000 130,000 132,969 2,969 Other 70,377 70,377 6,377 (64,000) Total charges for services 200,377 200,377 139,346 (61,031) Judgments, fines and forfeits Judgments and fines 3,000 3,000 1,050 (1,950) Violation of local ordinances 335 335 Total judgments, fines, and forfeits 3,000 3,000 1,385 (1,615) Investment eamings 7,000 7,000 3,606 (3,394) Miscellaneous revenues Contributions 92,528 92,528 Other 13.484 13,484 Total miscellaneous revneues 106,012 106,012 Total revenues 2,653,756 2,653,756 2,719,292 65,536 Expenditures General and administrative 1,084,600 1,092,600 766,791 325,809 Police 1,357,562 1,416,562 1,413,972 2,590 Fire 318,350 318,350 315,580 2,770 Streets 191,924 251,924 250,743 1,181 Sanitation 131,320 131,320 129,801 1,519 Contingency 20,000 20,000 20,000 Total expenditures 3,103,756 3,230,756 2,876,887 353,869 Excess (deficiency) of revenues over (under) expenditures (450,000) (577,000) (157,595) 419,405 Other financing sources (uses) Transfers out (323,241) (323,241) Total other financing sources (uses) (323,241) (323,241) Excess (deficiency) or revenues and other financing sources over (under) expenditures $ (450,000) S (577,000) (480,836) $ 96,164 Fund balance, beginning of year 1,462,012 Fund balance, end of year S 981,176 44 TOWN OF GULF STREAM, FLORIDA Notes to the Budgetary Required Supplemental Information (RSI) General Fund September 30, 2012 NOTE 1- BUDGETS AND BUDGETARY ACCOUNTING Budgetary comparison information is required to be presented for the General Fund and each major special revenue fund. The Special Assessment Special Revenue Fund is not legally required to be budgeted and is not budgeted. A budgetary comparison schedule is presented for the General Fund. The procedures for establishing budgetary data reflected in the budgetary comparison schedule are as follows: 1. Prior to August Ist, the Town Manager submits to the Town Commission a proposed operating budget for the fiscal year commencing the next October 1st. 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 st, 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 30th. 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, 2012, no departments had an excess of expenditures over appropriations. 45 NH &M NOWLEN, HOLT & MINER, P.A. CC•1;TB7m PUBLIC ACCOUNTANTS Whir 1•AN!RL OI ICU NORTNRRROODCCNTRF 515N. FLAOLOREARLSUITE lily T OFt3L8AONL7 NIST RA IEIWII. rLMINA3 1()01AT TEI}I KME 1561) 650. 1 A' VNIIMCMCOM REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GO VERNMENTA UDITING STANDARDS The Honorable Mayor and Members of the Town Commission Town of Gulf Stream, Florida EVEFETT 3, NOW LEN 'I IWLM M EMIMDTH T. CA WLLWAP.MNERGIL FMEFw W NFISWL , CIA 1ANETR. IMW VEN. LFA TERMt NOFRRI. R, CIA NXAD VAE .WE. CM AEEAND VFf✓D T. . CPL FRLY E T. I K c" CM lRInN 1 pICSCN CFH CIA NATIAEEN A. MNER, CM n. MCN.LEL RFEVEN& CPL NAnAO.FC.'ER ,CTE,C!A NMR A RYN19TM. rJ MR. W. CN PYMI N.ANORE CT RFLLF ri.AOF')FFIC.F 233 SE. 2nJ SMECT ROSOFFICE NRY VM CLLLC DLADC. RARIDA33676U= TELEFF NE S`E21) 9365312 FAX (MI) 03R6101 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, 2012, which collectively comprise the Town of Gulf Stream's basic financial statements and have issued our report thereon dated April 9, 2013. 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 Management of the Town of Gulf Stream, Florida is responsible for establishing and maintaining effective 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. AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS • FLORIDA INSTI TUTE OF CERTIFIED PUBLIC ACCOUNTANTS • CPANIERICA INTERNATIONAL Our consideration of internal control over financial reporting was for the limited purpose described in the fust paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. Compliance and Other Matters As part of obtaining reasonable assurance about whether the Town of Gulf Stream, Florida's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. We noted certain matters that we reported to management of the Town of Gulf Stream, Florida in the accompanying Management Letter in Accordance with the Rules of the Auditor General dated April 9, 2013. 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 April 9, 2013 ItQ,4,_h � 4 , � PQ. 47 EM NOWLEN, HOLT & MINER, P.A. CERTIFIED PUBLIC ACCOUNTANTS %I t P=LI RLAL14 01TWL NINInIRRIOGLCENTRE 515 N ILAGLLR DRM. SUIT[ lila F<1DVACII, NRIDA3 N'13l"I`ALAINCACILI 11611 AAMINNT TIiIPiiOVE 1%35 .taPNA1 LAX1]111 tk CO1 N'N'N";KIIAICMCO\I MANAGEMENT LETTER IN ACCORDANCE WITH THE RULES OF THE AUDITOR GENERAL OF THE STATE OF FLORIDA The Honorable Mayor and Members of the Town Commission Town of Gulf Stream, Florida EVEPETt a.N NI'M I RNI. CM EOWIIIIIl H T. CR WLLW.IN. MNM C, PfMEM IN FE x -F., CK ,,,, RAMCEVM CW TFfl"L N]IRCEI A. CPA k PCNu EEM ..CM ALM G VAFAA, CFE. CW EDWT1 LT h. CN CRIAN 1 I1R =K CFH CPA KATH A. YINEA. CH 1 MCNAELH.EVEK%CPA IURAo,P , RS .CPC.CPA 1/ARK.I RVIIASTEA. CM MKLAS, CM RTANKSMCRE CM Rm s mADF OFFIC; 203 S.C. BN SIRCCT NOKOFFICE MO% 7.,T m 1 r GLADC. nonim u1636u33u TELEPF3NE('_81) W7 Sa12 FAX (Er,1) D1"PO We have audited the financial statements of the Town of Gulf Stream, Florida, as of and for the year ended September 30, 2012, and have issued our report thereon dated April 9, 2013. The Town has not recognized the other postemployment benefits (OPEB) expense and obligation in the governmental activities financial statements as required in accordance with accounting principles generally accepted in the United States of America, 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 postemployment benefits required by accounting principles generally accepted in the United States of America. 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 April 9, 2013, 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. M. AMERICAN INSTITUTE OF CERTIFIED PUSLICACCOUNTANTS • FLORIDA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS • CPAMERICA INTERNATIONAL PRIOR YEAR COMMENTS Rules of the Auditor General require that we determine whether or not corrective actions have been taken to address findings and recommendations made in the preceding annual financial audit report. Corrective actions have been taken to address all findings and recommendations in the preceding annual financial audit report. CURRENT YEAR COMMENTS Investment ofPublic 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 such recommendations. Violations o(Provisions of Contracts or Grant Agreements, Fraud, Illegal Acts. or Abuse Rules of the Auditor General require that we address violations of provisions of contracts or grant agreements, fraud, illegal acts, or abuse, that have occurred, or are likely to have occurred, that have an effect on the financial statements that is less than material but more than inconsequential. In connection with our audit, we did not have any such findings. Matters Inconsequential to the Financial Statements Rules of the Auditor General provide that the auditor may, based on professional judgment, report the following matters that have an inconsequential effect on financial statements, considering both quantitative and qualitative factors: (1) violations of provisions of contracts or grant agreements, fraud, illegal acts, or abuse, and (2) deficiencies in internal control that are not significant deficiencies. In connection with our audit, we did not have any such findings. Oversight Unit and Component Units Rules of the Auditor General require that the name or official title and legal authority for the primary government and each component unit of the reporting entity be disclosed in this management letter, unless disclosed in the notes to the financial statements. This information is disclosed in Note 1 to the financial statements, but has been repeated here. The Town of Gulf Stream, Florida is a municipal corporation organized pursuant to 49 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 o(Financial Emereencv 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, 2012, 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, 2012. 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 as of the fiscal year end. 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. Sinele 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, 2012. Consequently, the Town was not required to have a federal single audit or a state single audit. Response to Management Letter There were no items that required a response of management. Our management letter is intended solely for information and use of the Legislative Auditing 50 Committee, members of the Florida Senate and Florida House of Representatives, the Florida Auditor General, management, the Town Commission, others within the entity, federal and state awarding agencies, and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. West Palm Beach, Florida April 9, 2013 /(Q 0F,h 9we,j, 4 j, � rQ. 51