IMMOKALEE WATER & SEWER DISTRICT

BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION

TOGETHER WITH REPORTS OF INDEPENDENT AUDITOR

YEARS ENDED SEPTEMBER 30, 2011 AND 2010


TABLE OF CONTENTS


INDEPENDENT AUDITOR'S REPORT..............................................................................

Page(s)

1-2

MANAGEMENT'S DISCUSSION AND ANALYSIS..........................................................

I-X

BASIC FINANCIAL STATEMENTS

Statements of Net Assets..........................................................................................................

3

Statements of Revenues, Expenses, and Changes in Net Assets..............................................

4

Statements of Cash Flows........................................................................................................

5

Notes to the Financial Statements............................................................................................

6-29


REQUIRED SUPPLEMENTARY INFORMATION OTHER THAN MD&A

Schedule of Revenues, Expenses, and Changes in Net Assets - Budget (Non-GAAP Budgetary Basis) and Actual with Reconciliation to GAAP

Basis - Year Ended September 30, 2011................................................................................ 30-35

Schedule of Expenditures of Federal Awards - Year Ended September 30, 2011.................. 36

Notes to the Schedule of Expenditures of Federal Awards…..…...………………………… 37

ADDITIONAL REPORTS OF INDEPENDENT AUDITOR


Independent Auditor's Report on Internal Control Over

Financial Reporting and on Compliance and Other Matters Based on an Audit of Basic Financial Statements Performed

in Accordance with Government Auditing Standards………………………………………

38-39

Independent Auditor's report on Compliance with Requirements That Could

Have a Direct and Material Effect on Each Major Program and on Internal Control

Over Compliance in Accordance with OMB Circular A-133……..…………………………


40-42

Schedule of Findings and Questioned Costs - Federal Awards - September 30, 2011..….…

43-44

Independent Auditor's Report to Management………………………………………………

45-48

Management's Response to the Independent Auditor's Report to Management……………

Exhibit



image

Affiliations

Florida Institute of Certified Public Accountants American Institute of Certified Public Accountants

Private Companies Practice Section

Tax Division


INDEPENDENT AUDITOR’S REPORT


Board of Commissioners Immokalee Water & Sewer District 1020 Sanitation Road

Immokalee, Florida 34142


We have audited the accompanying basic financial statements of Immokalee Water & Sewer District (an independent special district) as of September 30, 2011 and 2010, and for the years then ended. These basic financial statements are the responsibility of the Immokalee Water & Sewer District's management. Our responsibility is to express an opinion on these basic financial statements based on our audits.


We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, and the provisions of the Office of Management and Budget (OMB) Circular A-133. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the basic financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the basic financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall basic financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.


In our opinion, the basic financial statements referred to above present fairly, in all material respects, the financial position of Immokalee Water & Sewer District as of September 30, 2011 and 2010, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.


In accordance with Government Auditing Standards, we have also issued a report dated December 22, 2011, on our consideration of Immokalee Water & Sewer District's internal control over financial reporting and 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


INTEGRITY ......... SERVICE ......... EXPERIENCE

12621 World Plaza Lane, Building 55 • Fort Myers, FL 33907 • Phone: (239) 333-2090 • Fax: (239) 333-2097

Board of Commissioners Immokalee Water & Sewer District Page2


report is an integral part of an audit performed in accordance with Government Auditing Standards, and should be considered in assessing the results of our audits.


The Management's Discussion and Analysis on pages I-X is not a required part of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the Management's Discussion and Analysis. However, we did not audit the information and express no opinion on it.


Our audit was conducted for the purpose of forming an opinion on the basic financial statements of Immokalee Water & Sewer District taken as a whole. The accompanying Schedule of Revenues, Expenses and Changes in Net Assets - Budget (Non-GAAP Budgetary Basis) and Actual with Reconciliation to GAAP Basis - year ended September 30, 2011, is presented for purposes of additional analysis and is not a required part of the basic financial statements but is information required by the Governmental Accounting Standards Board. Such additional information has been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, is fairly presented in all material respects when considered in relation to the basic financial statements taken as a whole.


Our audits were conducted for the purpose of forming an opinion on the basic financial statements oflmmokalee Water & Sewer District taken as a whole. The accompanying Schedule of Expenditures of Federal Awards - year ended September 30, 2011, is presented for purposes of additional analysis, as required by U.S. Office of Management and Budget Circular A-133, "Audits of States, Local Governments, and Non-Profit Organizations" and State of Florida Rules of the Auditor General 10.550, as applicable, and is not a required part of the basic financial statements. This information has been subjected to the auditing procedures applied in the audit of the basic financial statements and provisions of 0MB Circular A-133 and State of Florida, Rules of the Auditor General 10.550, and in our opinion, is fairly stated in all material respects in relation to the basic financial statements take as a whole.

i=f i.A.

Fort Myers, Florida December 22, 2011


MANAGEMENT'S DISCUSSION AND ANALYSIS

(MD&A)



The management of the Immokalee Water & Sewer District offers readers of our financial statements the following narrative overview and analysis of our financial activities for the year ended September 30, 2011.


Basic Financial Statements


Our basic financial statements are prepared using proprietary fund (enterprise fund) accounting that uses the same basis of accounting as private-sector business enterprises. The District is operated under one enterprise fund. Under this method of accounting, an economic resources measurement focus and an accrual basis of accounting is used.


Revenue is recorded when earned and expenses are recorded when incurred. The basic financial statements include a statement of net assets, a statement of revenues, expenses and changes in net assets, a statement of cash flows including a reconciliation of operating profit (loss) to net cash provided by operating activities. These financial statements are followed by notes to the financial statements. In addition to the basic financial statements, this report also contains required supplementary information pertaining to budgetary reconciliations, and a schedule of expenditures of federal awards received by the District.


The statement of net assets presents information on the District's assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the District is improving or deteriorating.


The statement of revenues, expenses, and changes in net assets reports the operating revenues and expenses and nonoperating revenues and expenses of the District for the fiscal year. The difference, the net income or loss, is combined with any capital grants to determine the net change in assets for the fiscal year. The net change, combined with the net assets at the end of the previous year, total to the net assets at the end of the current fiscal year.


The statement of cash flows reports cash and cash equivalent activities for the fiscal year resulting from operating activities, capital and related financing activities, noncapital and related financing activities and investing activities. The net result of these activities added to the beginning of the year cash balance, total to the cash and cash equivalent balance at the end of the current fiscal year.


MDA I


Condensed Financial Statement


image

Condensed financial information from the statements of net assets and revenues, expenses and changes in net assets for the years ended September 30, 2011 and 2010 are as follows:


MDA II


The information contained in the condensed financial information table is used as the basis for the discussion presented on the following pages, surrounding the District's activities for the fiscal year ended September 30, 2011.


Financial Highlights



The following charts show the major sources of operating revenues for the years ended September 30, 2011 and September 30, 2010:



image

Operating revenue for the year ended

September 30, 2011

1% 1%


Operating revenue for the year ended September 30, 2010


2% 2%

1%

7%


54%

3%


33%

7% 1%


55%


0%


33%


As in previous years, the wastewater service revenues make up more than half of the revenues, accounting for slightly less in 2011 with 54% compared to 55% in 2010. Water revenue accounted for 33% of total revenues for both 2011 and 2010. Meter service charges and late fee charges, remained constant between the two years. Reconnection fees and miscellaneous revenues both fell to 1% in 2011, from 2% in 2010. Cross connection control fees, which were added in 2010, increased to 3% of total revenues in 2011 from 0% in 2010.


The District was successful in receiving an increase in the District boundaries by the Florida Legislature, during the Spring 2005 session. This change in the boundaries is expected to result in increased opportunities for new users, in future years. We will be working on a capital improvement plan, in conjunction with the Immokalee Master Plan, to identify the needs within the next fiscal year. In addition, the District received donations from large landowners to pay for the cost of a Master Plan for the District. That Master Plan was completed during 2009, however the landowners have had to delay implementation of new housing plans, due to a downturn in the area economy.


MDA IV


Expenses


The following charges show the major sources of operating expenses for the years ended September 30, 2011 and September 30, 2010.



image

Operating expenses for the year ended September 30, 2011


Operating expenses for the year ended September 30, 2010


26%


4%

18%

21%


7% 23%

25%


4%

17%

7%

23%


23%


Due to the significant investment the District has in capital assets, depreciation continues to be one the largest operating expenses at 27% of total operating expenses, an increase of one percent, from 2010. Unlike the other expenses listed, depreciation is not a cash expense. The largest expense, at 23% of total expenses is for wastewater treatment, which remained the same between 2011 and 2010. This department is one the largest, with six full time employees and one part time employee. The largest expense in this department is Residuals Management, which accounted for over $435,000 in expenses.


The second largest department, by expenses, is the water distribution department with eleven full time employees. The related expenses decreased by two percent to 21% for 2011. We are replacing meters that are under registering, with new Neptune® auto-read meters. In addition, all new residential services are required to use the Neptune® auto-read meters. This will reduce the need for additional meter readers in the water department and will improve the efficiency and accuracy of the meter reading process. As of this date, there are over 5,600 meters installed with the automated meters. There are over 6,300 total meters installed, so 88% of the meters are now automated. We should be able to complete the replacement project within the next two years.


The third largest department is the administration department, which consists of nine full time employees. The related expenses increased to 18% of total expenses in 2011 from 17% in 2010. The largest expense in this department, other than salaries is engineering


MDA V


fees. The District changed engineering firms during the 2011 fiscal year, and we should see a cost savings on this line item in the 2012 fiscal year.


The next largest department is the wastewater collection department, which consists of four full time employees. The related expenses remained constant at 7% for 2011 and 2010.


The smallest department is the maintenance department, which was created in fiscal year 2004 to reduce maintenance-related expenses from third-party vendors. A new position was created in 2008, for this department, and it now consists of four full time employees. It remained constant at 4% of total expenses in 2011. Labor costs in this department, except for those relating to the supervisor, are charged to the appropriate departments, based on the maintenance projects they are working on.


Expenses by category are depicted in the charts below for 2011 and 2010.


image

Operating Expenses by Category for year ending September 30, 2011

Operating Expenses by Category for year ending September 30, 2010


9%

26%


39%

9%

25%


37%


26% 30%


Wages & Benefits Material and Supplies Wages & Benefits Material and Supplies


Depreciation Other Operating Expense Depreciation Other Operating Expense


Wages and benefits increased by two percent to 39% of the expenses in 2011, making it largest expense category. Materials and supplies decreased by four percent to 26%. Depreciation expense increased by two percent to 26%, while other operating expenses remained constant at 9%.


The District continues to pursue ways to reduce costs without affecting service. The District bids out contracts for major expenses, such as health insurance, property insurance, residuals management and chemicals. The District has an arrangement with Collier County Fleet Management allowing the District use of their fuel tanks, located in Immokalee, to take advantage of bulk-usage savings. The District utilizes SUNCOM, through the Florida Department of Management Services for long distance services.


MDA VI



General Fund Budgetary Highlights


Over the course of the year, the Board of Commissioners amended the District budget two times. These budget amendments were done primarily to a) reduce operating revenue, reduce non-operating revenue, reduce operating expenses, increase capital expenditures, reduce interest expense, and adjust designated funds, and b) to increase operating revenue, reduce non-operating revenue, decrease operating expenses, decrease capital expenditures, reduce interest expense, adjust designated funds, and increase other uses of funds.


Original to Final Budget Variance


Total operating revenues were increased by approximately $6,800 (or .09%) more than originally budgeted, and total operating expenses, excluding depreciation expense, was decreased by over $505,000 (or 10%). Budgeted depreciation expense increased by over

$73,000 (or over 5%), to reflect the new capitalized infrastructure.


Contributed Capital – USDA and Debt Proceeds – USDA were reduced by more than

$7,905,000 due to not proceeding with the WWTP Expansion and forcemain project from USDA. Interest income was increased by more than $7,100. Contributed capital – customers was decreased by $36,191, Contributed capital – developers, and other non- operating revenue were both increased by over $47,000.


Final Budget to Actual Variance


Total operating revenue was approximately $50,000 more than budgeted.


Over the five departments, approximately $162,000 in budgeted operating expenses were not expended. $1,400 in budgeted interest expenses were not expended. Contributed capital – grant FDEP $256,627 and USDA $9,742, were received but not in the final budget.



MDA VII



Capital Assets


The District's capital assets as of September 30, 2011 and 2010 amounted to $28,111,209 and $28,669,627 (net of accumulated depreciation) respectively. This investment in capital assets includes land, construction in progress, buildings and improvements, water and wastewater plants and systems, and machinery and equipment.


Net capital asset additions included the following for the years ended September 30:


2011

2010


Construction in progress


$909,636


$3,061,536

Buildings and improvements

11,553

0

Water and wastewater plants and systems

-514,285

595,442

Machinery and equipment

136,136

40,335

$543,040

$3,697,313


Construction in progress for 2011 was mainly related to the FDEP (EPA) stimulus project, and the permitting and engineering for the USDA WWTP Expansion and forcemain expansion.


The District primarily acquires its assets with the proceeds from federal capital grants and revenue bonds, supplemented by user fees. USDA Rural Development is the primary source of proceeds, because they offer low interest loans for capital improvements. We also received contributed capital in the form of new water and sewer infrastructure from developers. New equipment purchases and a system expansion are part of the District's capital improvement program. Capital purchases are acquired using bids, or Florida State Contract prices. For our ongoing meter replacement program we utilize the bid prices for Neptune® meters from the City of Cape Coral. In Fiscal Year 2011 and 2010, we used our own personnel to continue the meter replacement program.


Debt


As of September 30, 2011, the District had $14,087,969 of revenue bonds outstanding. The total amount outstanding for these categories of debt decreased by $366,000. This reflects payments made by the District to decrease the debt.


Unrestricted Net Assets


As of September 30, 2011, the District had designated $4,342,012 in unrestricted net assets, as recommended by their auditor. The District designated $460,000 for emergencies,

$2,497,721 for operations, $217,025 for vehicle replacement, $224,444 for capital


MDA VIII


equipment, and $942,822 for maintenance reserve. The District still had $2,515,086 in undesignated net assets at the end of 2011.


Upcoming Significant Changes or Impacts


Rate Increase: The District implemented an additional 5% rate increase for water and wastewater user fees on January 1, 2009. The District has hired a rate consultant, PRMG, to determine what rate increase is currently needed. A plan should be in place during the 2012 fiscal year.


Residential - There are several new residential developments that are expected to impact the revenues of the District during the next fiscal year.


Arrowhead PUD, which will consist of over 1,200 residential units at completion, has completed the first phase of their water and wastewater infrastructure. The Crestview Apartments Phase I & II (304 units) were completed and connected. The first and second phase of approximately 125 single-family units were also completed. Building on these homes has been delayed due to the impact of the nationwide housing market.


Eden Gardens completed the 92 units of housing, just north of the Carson Road Water Plant.


Habitat for Humanity continues to build homes in Immokalee. In December 2006, they completed the infrastructure in the Independence Subdivision Phases II, with 167 homes. Liberty PUD, with 162 single family homes has also been connected, to our system. They have completed the preliminary work for the Faith PUD, which will include an additional 175 homes; and the Kaicasa PUD, which will consist of 400 homes.


United Church Homes - Immokalee Senior Housing PUD, completed and connected their 119 multi-family unit on North Eleventh Street. That unit was found to have problems with Chinese drywall, and other structural issues, and during 2009 the residents were relocated to the Arrowhead apartments. During 2010, residents returned to the complex.


The Empowerment Alliance has completed the site work on Esperanza Place - Phase 1 consisting of 62 homes, and Hatchers Preserve consisting of 18 single family homes.


Florida Non Profit Services is spearheading Esperanza Place - Phase 2 which consists of 176 multi-family homes. Those units have also been completed.


MDA IX


Other Residential:

IMMOKALEE WATER & SEWER DISTRICT

Required Supplementary Information Management's Discussion and Analysis September 30, 2011

The nearby Ave Maria University campus is expected to eventually impact Immokalee with increased demand for low cost residential homes for workers. Discussions were held in previous years with Lennar Homes regarding the possibility of 5,000 to 6,000 homes in the Serenoa subdivision, however, that did not materialize following the nationwide slump in housing prices. Barron Collier has since acquired that property, and they have not yet indicated what they plan to use the property for. Collier Enterprises has withdrawn their plans to build 400 homes near the Florida Tradeport.


Commercial

The EDC continues to market the Florida Tradeport, but has been unable to secure a key industry for that location. The National Guard took over the Immokalee Training and Manufacturing building, and they have plans to build a large facility on the Airport site. Plans were previously approved for the CCAA USDA Manufacturing Building at the airport, and that building is complete. Plans were also approved for First Stop Grocery on South 1st Street. That building replaces a building that was condemned years ago. Collier County Public Schools is nearing construction on the new Bethune Education Center.


Our own Community System Improvement (CSI) project was essentially completed during the 2009 fiscal year. This project included the increase in capacity of the Carson Road Water Plant, and the addition of new potable water wells, water lines, fire hydrants, a sewer force main, and improvements to several lift stations. The only remaining work that was completed in 2010 was work related to a lift station upgrade.


During 2010, we began construction using the $3,000,000 in funding from FDEP to complete several water line projects, chemical upgrades to our three water plants, and cross connection control projects throughout our community. That project was completed in 2011.


Also completed in 2011 was an upgrade to Lift Station R, using District funds. We began an upgrade and forcemain extension for Lift Station X2, and it should be completed in 2012.


Our Wastewater Expansion Project will begin construction during 2012. It includes an expansion from 2.5 mgd to 3.25 mgd at the existing wastewater facility. It will also include a sewer force main from Arrowhead PUD to the wastewater plant.


Request For Information


This financial report is intended to provide an overview of the finances of the District for those with an interest in this organization. Questions concerning any information within this report, may be directed to the Executive Director of the District, 1020 Sanitation Road, Immokalee, Florida 34142.


MDA X

IMMOKALEE WATER & SEWER DISTRICT

STATEMENTS OF NET ASSETS

September 30, 2011 and 2010

2011

2010

ASSETS

CURRENT ASSETS

Cash


$ 5,837,072


$ 5,312,506

Investment

513,941

500,000

Accounts receivable, net

433,638

411,207

Other receivables

11,252

11,707

Inventory

262,934

241,598

Prepaid expenses

63,757

59,842

TOTAL CURRENT ASSETS

7,122,594

6,536,860


RESTRICTED ASSETS

Cash

2,579,821

2,527,554

Grant and other receivables

-

544,348


TOTAL RESTRICTED ASSETS 2,579,821 3,071,902


CAPITAL ASSETS

Capital assets not being depreciated:


Land

2,645,941

2,645,941

Construction in progress

4,431,336

3,521,700

Capital assets being depreciated: Buildings and improvements


1,511,233


1,499,680

Water and wastewater plants and systems

41,797,108

42,311,393

Machinery and equipment

1,812,780

1,676,644

Less:

Accumulated depreciation (24,087,189) (22,985,731)

28,111,209 28,669,627


TOTAL ASSETS

$ 37,813,624

$ 38,278,389

image image


The accompanying notes are an integral part of this statement.


2011 2010

Revenue bonds payable, current portion

$ 382,000

$ 366,000

Loans payable - SRF, current portion

39,145

-

Notes payable, current portion

92,496

106,259

Accounts payable

113,206

376,086

Accrued revenue bond interest

53,540

55,028

Other accrued expenses

35,429

29,047

Deferred revenue

-

-

Revenue bonds payable, current portion

$ 382,000

$ 366,000

Loans payable - SRF, current portion

39,145

-

Notes payable, current portion

92,496

106,259

Accounts payable

113,206

376,086

Accrued revenue bond interest

53,540

55,028

Other accrued expenses

35,429

29,047

Deferred revenue

-

-

LIABILITIES AND NET ASSETS CURRENT LIABILITIES


TOTAL CURRENT LIABILITIES 715,816 932,420


CURRENT LIABILITIES (Payable from Restricted Assets)


Contracts payable

68,731

434,715

Retainage payable

-

138,434

Customer deposits

841,536

809,156

TOTAL CURRENT LIABILITIES

(Payable from Restricted Assets) 910,267 1,382,305


LONG-TERM LIABILITIES


Revenue bonds payable, net of current portion

13,705,969

14,087,969

Loans payable - DEP. SRF

716,040

364,979

Notes payable, net of current portion

5,959

99,689

Accrued compensated absences

63,321

59,658

TOTAL LONG-TERM LIABILITIES

14,491,289

14,612,295

TOTAL LIABILITIES

16,117,372

16,927,020


NET ASSETS


Invested in capital assets, net of related debt

13,169,600

13,644,731

Restricted

1,669,554

1,689,597

Unrestricted

6,857,098

6,017,041

TOTAL NET ASSETS

21,696,252

21,351,369

TOTAL LIABILITIES AND NET ASSETS

$ 37,813,624

$ 38,278,389


STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

Years ended September 30, 2011 and 2010


2011 2010


OPERATING REVENUES

Cross connection control fee

$ 208,604

$ 21,392

Water service

2,387,714

2,380,941

Wastewater service

3,954,977

3,974,151

Meter service charge

487,944

499,395

Late fees

82,325

80,425

Reconnect and transfer fees

116,145

126,844

Miscellaneous charges, fees and other income

89,193

102,979

TOTAL OPERATING REVENUES 7,326,902 7,186,127


OPERATING EXPENSES

Water treatment and distribution

1,250,778

1,355,451

Wastewater treatment

1,367,998

1,356,029

Wastewater collection

398,142

411,182

Customer service and administrative

1,066,866

1,007,141

Maintenance

244,220

216,665

TOTAL OPERATING EXPENSES

PRIOR TO DEPRECIAITON

4,328,004

4,346,468

Depreciation

1,500,000

1,443,217

TOTAL OPERATING EXPENSES

5,828,004

5,789,685

OPERATING PROFIT (LOSS)

1,498,898

1,396,442


NON-OPERATING REVENUES (EXPENSES)

Interest income

66,268

127,207

Loss on disposal of fixed assets

(914,778)

(10,854)

Interest expense

(700,178)

(723,056)

Bad debt expense adjustment

(14,730)

(8,429)

Other income

2,088

-

NET NON-OPERATING EXPENSES

(1,561,330)

(615,132)

PROFIT (LOSS) BEFORE CAPITAL

CONTRIBUTIONS

(62,432)

781,310

CAPITAL CONTRIBUTIONS

Rural Development

9,742

260,166

FDEP

256,627

2,068,218

Customers

23,770

30,875

Developers

117,176

187,480

TOTAL CAPITAL CONTRIBUTIONS

407,315

2,546,739

INCREASE (DECREASE) IN NET ASSETS

344,883

3,328,049

NET ASSETS - Beginning of the year

21,351,369

18,023,320

NET ASSETS - End of the year

$ 21,696,252

$ 21,351,369


The accompanying notes are an integral part of this statement.


STATEMENTS OF CASH FLOWS

Years ended September 30, 2011 and 2010

2011

2010

CASH FLOWS FROM OPERATING ACTIVITIES:

Cash received from customers

$ 7,322,576

$ 7,196,995

Cash payments to suppliers and employees

(4,606,090)

(4,552,860)

NET CASH PROVIDED BY OPERATING ACTIVITIES

2,716,486

2,644,135


CASH FLOWS FROM NONCAPITAL FINANCING:

Other income received

2,088

-

NET CASH PROVIDED BY NON CAPITAL FINANCING

2,088

-


CASH FLOWS FROM CAPITAL AND

RELATED FINANCING ACTIVITIES:

Acquisition and construction of capital assets


(2,256,092)


(2,977,146)

Proceeds from sale of capital assets

12,490

-

Principal paid on serial bonds

(366,000)

(347,200)

Principal paid on vehicle notes

(107,493)

(100,583)

Interest paid on bonds and other obligations

(701,666)

(724,407)

Proceeds from debt issuance - FDEP

461,204

293,981

Capital contributions - Rural Development

80,767

198,198

Capital contributions - FDEP

658,952

1,665,893

Membership/customer connection fees

23,770

30,875


NET CASH PROVIDED BY (USED IN) CAPITAL

AND RELATED FINANCING ACTIVITIES (2,194,068) (1,960,389)


CASH FLOWS FROM (USED IN)


INVESTING ACTIVITIES:

Interest earned on investments

52,327

127,207

Purchase of certificate of deposit

-

(500,000)


CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

52,327

(372,793)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS


576,833


310,953

CASH AND CASH EQUIVALENTS-

BEGINNING OF YEAR


7,840,060


7,529,107

CASH AND CASH EQUIVALENTS-

END OF YEAR


$ 8,416,893


$ 7,840,060


The accompanying notes are an integral part of this statement.

Page 5 of 48




RECONCILIATION OF OPERATING PROFIT TO

NET CASH PROVIDED BY OPERATING ACTIVITIES:

2011

2010

OPERATING PROFIT (LOSS)

$ 1,498,898

$ 1,396,442

Adjustments to reconcile operating profit to

net cash provided by operating activities:

Depreciation (non cash)

1,500,000

1,443,217

(Increase) decrease in accounts receivable

(37,161)

(19,673)

(Increase) decrease in other receivable

455

(5,310)

(Increase) decrease in inventory

(21,336)

(8,509)

(Increase) decrease in prepaid expenses

(3,915)

(59,842)

Increase (decrease) in accounts payable

(262,880)

(145,051)

Increase (decrease) in other accrued expenses

6,382

6,767

Increase (decrease) in customer deposits

32,380

35,851

Increase (decrease) in accrued compensated absences


3,663


243

TOTAL ADJUSTMENTS

1,217,588

1,247,693

NET CASH PROVIDED BY

OPERATING ACTIVITIES

$ 2,716,486

$ 2,644,135


SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES


During the years ended September 30, 2011 and 2010, the District accepted system improvements donated, after construction, by developers in the amount of $117,176 and $187,480, respectively.



Organization

Immokalee Water & Sewer District (the "District") was created by Laws of Florida, Chapter 78-494 on July 15, 1978, under the provisions of Florida Statute, Chapter

153.53 for the purpose of providing water and sewer services to Immokalee, an unincorporated area of eastern Collier County, Florida. The District's enabling legislation was repealed, updated, reenacted, and codified by Laws of Florida, Chapter 98-495 on May 28, 1998. On July 1, 2005, Laws of Florida, Chapter 2005-298 amended Laws of Florida, Chapter 98-495 by expanding the District's

boundaries. The District owns, operates, maintains and regulates its water and sewer plants and systems as an independent special district of the State of Florida. The District is governed by a seven (7) member Board of Commissioners appointed by the Governor of the State of Florida. The Board of Commissioners (the "Board") administer the District, independent from any other local governing body and serve staggered four (4) year terms.


Reporting Entity

Immokalee Water & Sewer District is financially independent of all other units of government. It is responsible for financing its own activities and the payment of its own debt. The Board of Commissioners ("Board") has the responsibility to employ management that is responsible for the day-to-day operations of the District. The Board has absolute authority over all funds included in the entity. Immokalee Water & Sewer District is not a component unit of any other governmental unit.


The District adheres to Statement of Governmental Accounting Standards Board (GASB) Statement Number 14, "Financial Reporting Entity", as amended by GASB Statement Number 39, "Determining Whether Certain Organizations Are Component Units." These Statements require the financial statements of the District (the primary government) to include its component units, if any. A component unit is a legally separate agency for which the primary government is financially accountable or organizations whose exclusion would cause the financial statements to be misleading because of the nature and significance of their relationship with the primary government. Financial accountability is determined by the primary government's ability to appoint the voting majority of the entity's board, impose its will on the organization, the existence of a financial benefit/burden relationship or fiscal


dependency. Based on this criteria, there are no component units required to be included and there are no component units included in the District's financial statements.


The Immokalee Water & Sewer District adheres to the requirements of Governmental Accounting Standards Statement Number 33 "Accounting and Financial Reporting for Non-Exchange Transactions." As such, grant revenue is recorded as non-operating revenue and is reflected on the Statements of Revenues, Expenses and Changes in Net Assets.


The following is a summary of the significant accounting polices used in the preparation of these financial statements:


The District adheres to the requirements of Governmental Accounting Standards Board Statement Number 34, "Basic Financial Statement and Management's Discussion and Analysis for State and Local Governments" (GASB 34) for the years ended September 30, 2011 and 2010. The government-wide financial statements along with the notes to the financial statements and the RSI, as noted below comprise the basic financial statements.


The basic financial statements of the District are comprised of the following:


Government-Wide Financial Statements

The government-wide financial statements (i.e., the Statement of Net Assets and the Statement of Revenues, Expenses and Changes in Net Assets) report information on all of the activities of the District and do not emphasize fund types. These

business-type activities comprise the primary government. Business-type activities rely on user fees and charges to support its activities rather than taxes and intergovernmental revenues. The purpose of the government-wide financial statements is to allow the user to be able to determine if the District is in a better or worse financial position than the prior year. The District uses only one fund.


Government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis of accounting, revenues, expenses, gains, losses, assets, and liabilities resulting from exchange and exchange-like transactions are recognized when the exchange takes place. Revenues, expenses, gains, losses, assets, and liabilities resulting from nonexchange transactions are recognized in accordance with the requirements of GASB Statement 33-"Accounting and Financial Reporting for Nonexchange Transactions."


Amounts paid to acquire capital assets are capitalized as assets in the government-wide financial statements, rather than reported as expenditures.

Proceeds of long-term debt are recorded as liabilities in the government-wide financial statements, rather than as other financing sources. Amounts paid to reduce long-term indebtedness of the reporting government are reported as a reduction of the related liability in the government-wide financial statements, rather than as expenditures.


The Statement of Revenues, Expenditures and Changes in Net Assets 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 or segment. Program revenues include: 1) charges to customers or applicants who purchase, use or directly benefit for goods, services, or privileges provided by a given function and 2) grants and contributions that are restricted to meeting the operational or capital improvements of a particular function.


Operating revenues are considered to be revenues generated by services performed and/or by fees charged such as water and sewer usage, connection, inspection fees and flow testing.


Budgetary Information

As required, the District uses only one fund to account for its activities and, therefore, it is considered a major fund. The District has elected to report budgetary

comparison of its major fund as required supplementary information (RSI).


The District's financial practices are based upon fund accounting concepts. A fund is defined as a fiscal and accounting entity with a self-balancing set of accounts, recording cash and other financial resources, together with all related liabilities and net assets (fund equity balances) and changes therein.


The accompanying financial statements reflect Business - Type Activities and are classified as a Single Proprietary Fund Type - Enterprise fund. This fund accounts for the cost of services provided by the District as well as the revenues earned by the District.


Business - Type Activities - Proprietary Fund Type

Enterprise Fund - An enterprise fund is used to account for operations (1) 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 (2) where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or

net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes.


Measurement Focus

Proprietary funds are accounted for on a flow of economic resources measurement focus. With this measurement focus, assets and liabilities associated with the operation of these funds are included on the balance sheet. Proprietary fund-type operating statements present increases (i.e. revenues) and decreases (i.e. expenses) in total net assets. Operating revenues and expenses result from providing water distribution as well as wastewater collection and treatment to members within the District's boundaries. Generally, other revenues and expenses are treated as

non-operating revenues and expenses.


When both restricted and unrestricted resources are available for use, it is the District's policy to use restricted resources first, then unrestricted resources as they are needed.


The proprietary fund type is presented on the accrual basis of accounting. Under the accrual basis of accounting, revenues are recorded in the period earned and expenses are recorded in the period the liability is incurred.


Budgetary Process

The District operates under a fixed budget for control purposes. The budget and amendments, if any, are approved by the Board of Commissioners. The budget is prepared on a Non-GAAP accrual basis, whereby items such as capital expenditures and debt principal payments are budgeted as expenses.


The annual budget serves as the legal authorization for expenditures. Expenditures cannot legally exceed the total amount budgeted. All budget amendments, which change the legally adopted total appropriation, are approved by the Board.


The District follows these procedures in establishing budgetary data.


  1. During the summer of each year, management submits to the Board of Commissioners a proposed operating budget for the fiscal year commencing on October 1. The operating budget includes proposed expenditures and the means of financing them.

  2. Public hearings are conducted to obtain citizen comments.

  3. The budget is adopted by approval of the Board of Commissioners.

  4. Budget amounts, as shown in these financial statements, are as originally adopted or as amended by the Board of Commissioners.

  5. The budget is adopted on a basis consistent with accounting principles generally accepted in the United States of America, except as reflected in the supplementary information and as noted above.

  6. The level of control for appropriations is exercised at the fund level.

  7. Appropriations lapse at year-end.


The Board of Commissioners did amend the budget during the fiscal year ended September 30, 2011 to increase total budgeted net operating revenue by $6,835 and net expenses (including net non-operating revenue and expense) by $499,240. This change resulted in a budgeted net loss increase of $492,405.


For the purpose of the Statement of Cash Flows, the District considers all highly liquid investments, including both unrestricted and restricted, with a maturity of three months or less, when purchased, to be a cash equivalent, in accordance with District policy.


Accounts Receivable/Allowance for Doubtful Accounts

Receivables include user fees for water and wastewater services provided as part of the operations by the District. The accounts receivable are recorded net of the estimated allowance for doubtful accounts. The District operates using an allowance and collection policy that ultimately provides for discontinuance of water service due to nonpayment by the user. The policy also provides for application of the respective user's security deposit upon certain criteria. Additionally, the policy requires a user landlord to satisfy any outstanding user fees (tenant) prior to allowing services to a future tenant for that landlord.


Inventory

Inventory consists of utility system parts and hardware supplies at year end. The inventories are valued at cost, which approximates market. The method used to determine the value of the inventory is the FIFO (first in-first out) method.


Capital Assets and Depreciation

Capital assets acquired by proprietary funds are reported in those funds at historical cost or estimated historical cost if actual historical cost is not available.


Donated assets are reported at estimated fair market value at the time received. Certain infrastructure-type fixed assets consisting of certain improvements such as roads, curbs, gutters and lighting systems have not been capitalized, as the District does not generally incur such expenditures. However, the systems' distribution and collection lines and pumps are capitalized and depreciated as part of the overall system. Assets acquired with a cost or fair value of $1,000 or more and a useful life of 1 year or more are capitalized. Maintenance, repairs and minor renovations are not capitalized. The acquisition of land and construction projects utilizing resources received from Federal and State agencies are capitalized when the related expenditure is incurred.


The capital assets are depreciated using the straight-line method of depreciation over the following estimated useful lives:


Asset

Years

Buildings/Plant and Plant Equipment

10-40

Capital Improvements, Distribution Lines

5-40

Furniture, Fixtures and Equipment

3-20

Vehicles

3-7


Restricted Assets

These monies are restricted by the applicable debt covenants and grant agreement or as customer deposits.


Vacation Leave and Other Compensated Absences

Accumulated unpaid vacation pay is accrued when incurred in the proprietary fund. The method of accrual is in accordance with Statement of Governmental Accounting Standards Board Number 16, "Accounting for Compensated Absences" (GASB

16). This standard provides for the measurement of accrued vacation leave and other compensated absences using the pay or salary rates in effect at the balance sheet date. It also requires additional amounts to be accrued for certain salary related payments associated with the payment of compensated absences such as

FICA and retirement benefits. Sick leave and personal time accrued is forfeited if not used prior to termination.


Encumbrances

Encumbrance accounting, under which purchase orders, contracts and other commitments for the expenditure of monies are recorded in order to reserve that portion of the applicable appropriation, is not employed by the District because at present it is not considered necessary to assure budgetary control or to facilitate effective cash planning and control.


Water (connection) service installation fees are dedicated for the system expansion and are treated as contributed capital but recognized as revenue when received (due to the District) by the District.


Income Taxes

The District, as a governmental unit, is exempt from income taxes under current provisions of the Internal Revenue Code and Florida State Law.


Fund Equity

Grants, entitlements or shared revenues which are externally restricted for capital acquisition or construction are treated as contributed capital but recorded as revenue when due the District. Contributed or donated fixed assets are also treated as contributed capital but recorded as revenue when due the District. Reserved retained earnings represent those portions of fund equity legally restricted by debt covenants for current and future debt service.


Use of Estimates

The preparation of basic financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.


Reclassifications

Certain amounts in the financial statements have been reclassified to conform with the current year presentation. These reclassifications had no effect on the results of operations or net assets.


Subsequent Events

Subsequent events have been evaluated through December 22, 2011, which is the date the basic financial statements were available to be issued.


In accordance with Governmental Accounting Standards Board (GASB) Statement 20, "Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting", the District has elected not to apply those FASB Statements and Interpretations issued after November 30, 1989, that do not conflict GASB pronouncements. Only GASB pronouncements issued after this date will be adopted by the District.


NOTE B - CASH AND INVESTMENTS


At September 30, 2011 and 2010, cash and cash equivalents (including both restricted and unrestricted cash and cash equivalents) were $8,417,073 and

$7,840,060, respectively, including unrestricted cash on hand of $900 and $900, respectively.


Deposits

The District's deposit policy allows deposits to be held in demand deposits, savings accounts, certificates of deposit, direct obligations of the U.S. Treasury, Local Government Surplus Trust Funds, direct obligations of Federal agencies and instrumentalities and money market accounts. All cash deposits are held in qualified public depositories pursuant to Florida Statutes Chapter 280, "Florida Security for Public Deposits Act."



September 30, 2011 Unrestricted

Insured/ Bank Carrying

Collateralized Balance Amount


Depository accounts

$ 184,746

$ 184,746

$ 154,592

Money market 5,681,580

5,681,580

5,681,580

5,866,326

5,866,326

5,836,172

Restricted

Depository accounts

859,673

859,673

859,673

Money market

1,720,148

1,720,148

1,720,148

2,579,821

2,579,821

2,579,821

$ 8,446,147

$ 8,446,147

$ 8,415,993



September 30, 2010 Unrestricted

Insured/ Bank Carrying

Collateralized Balance Amount


Depository accounts

$ 244,753

$ 244,753

$ 150,844

Money market 5,160,762

5,160,762

5,160,762

5,405,515

5,405,515

5,311,606

Restricted

Depository accounts

909,242

909,242

822,058

Money market

1,705,496

1,705,496

1,705,496

2,614,738

2,614,738

2,527,554

$ 8,020,253

$ 8,020,253

$ 7,839,160


Unrestricted and Restricted Deposits

The District's deposits are categorized to give an indication of the level of risk assumed by the District at year-end. All deposits, were fully insured by Federal Depository Insurance or collateral pursuant to the Public Depository Act (Florida Statute 280). As such, the District resolved to abide by Florida Statute 218.415(17).


Restricted Deposits

Restricted deposits are required by the District's outstanding debt agreements as well as grant and other agreements. Restricted deposits also include customer deposits.


Restricted deposits (carrying amounts) consist of the following at September 30:


2011 2010


Construction account

$ 23,947

$ 5,965

Bond sinking fund reserve

1,472,260

1,477,961

Department of Environmental Protection-

Deep Well Injection Reserve

226,441

224,876

Customer deposits

836,925

818,752

Loan debt service

20,248

818,752

$ 2,579,821

$ 3,346,306


Florida Statutes and the District's investment policy authorize investments in certificates of deposit (CD). Certificates of deposit whose values exceed the amount of the federal depository insurance are collateralized pursuant to the Public Depository Security Act of the State of Florida. The District had $513,941 and

$500,000 (bank and book balance) invested in certificates of deposit at September 30, 2011 and 2010, respectively. The CD carried an interest rate of 2.20 % and matures December 4, 2012.


NOTE C - ACCOUNTS RECEIVABLE


Accounts receivable consist of the following at September 30:

2011 2010


Customer receivables (water/sewer)

$ 502,521

$ 483,815

Less allowance for doubtful accounts

(68,883)

(72,608)

Net receivables

$ 433,638

$ 411,207


The following is a summary of changes in capital asset activity for the year ended September 30, 2011:


Balance Balance

October 1 Adjustments/ September 30

2010 Additions Retirements Reclassifications 2011


Capital Assets Not Being Depreciated:

Land

$ 2,645,941 $

- $ - $

- $ 2,645,941


Construction in Progress

Total Capital Assets Not

3,521,700

909,636

-

-

4,431,336

Being Depreciated

6,167,641

909,636

-

-

7,077,277


Capital Assets

Being Depreciated:


1,499,680

12,680

(1,127)

-

1,511,233


42,311,393


603,844


(1,118,129)


-


41,797,108

1,676,644

342,690

(206,554)

-

1,812,780


45,487,717


959,214


(1,325,810)


-


45,121,121

1,499,680

12,680

(1,127)

-

1,511,233


42,311,393


603,844


(1,118,129)


-


41,797,108

1,676,644

342,690

(206,554)

-

1,812,780


45,487,717


959,214


(1,325,810)


-


45,121,121

Buildings & Improvements Water and Wastewater

Plant and Systems Machinery & Equipment

Total Capital Assets Being Depreciated

Less Accumulated Depreciation:

Buildings & Improvements

(549,597)

(37,886)

1,127

-

(586,356)

Plant and Systems

(21,097,807)

(1,192,324)

170,378

-

(22,119,753)

Machinery & Equipment

(1,338,327)

(269,790)

227,037

-

(1,381,080)

Total Accumulated Depreciation

(22,985,731)

(1,500,000)

398,542

-

(24,087,189)


Capital Assets, Net

$ 28,669,627 $

368,850

$ (927,268) $

- 28,111,209

image image image image

Related debt (14,941,609)


Net assets invested in capital assets, net of related debt


image

$ 13,169,600


The depreciation expense for the years ended September 30, 2011 and 2010 was

$1,500,000 and $1,443,217, respectively. During the year ended September 30, 2011, the District continued construction on its system-wide improvements. The District capitalized interest on the project in the amount of $16,760 for the year ended September 30, 2011, and $0 for the year ended September 30, 2010.


At September 30, 2011, construction in progress consisted of two (2) projects, which began during the year ended September 30, 2010. The remaining portion of the line and pump project, which began in during the year ended September 30, 2002, was completed and transferred to water and wastewater plant and systems during the year ended September 30, 2009.


NOTE E - RETIREMENT PLAN


Plan Description and Provisions

The District historically offered all its employees the opportunity to participate in an individual government employer-sponsored defined contribution 414(h) Money Purchase Pick-Up Retirement Plan and Trust (the "Plan"). Effective January 1, 2009, the District restated its retirement plan. As such, the restated plan qualifies as a 401(a) Money Purchase defined contribution plan. The Plan is administered by a

third party administrator. The employer funds substantially all the administrative costs of the Plan.


The Plan allows all employees to participate after three (3) months creditable employment. Employees who elect to participate must contribute a minimum of three (3%) percent of their gross wages excluding overtime compensation. Employees can increase their deferral up to 100% of wages limited to $16,500 for 2011. The employer is required to contribute six (6%) percent of the respective participating employee's gross wages excluding overtime compensation. Employer contributions are only required for those participating employees who contribute a minimum of three (3%) of their gross wages, as defined. During the years ended September 30, 2011, 2010, and 2009, the District contributed 100% of its required contributions.


The District's gross contributions (employer portion) to the plan for the years ended September 30, 2011, 2010 and 2009 were $88,611, $83,059, and $79,489, respectively. Employee contributions to the plan were $79,759, $67,697, and

$56,411 for the years ended September 30, 2011, 2010, and 2009, respectively.


Plan Description and Provisions, continued

Benefits available are limited to the value of the respective employee's individual account. Individuals direct the investment of their individual account. Benefits vest at a rate of twenty (20%) percent per year of creditable service and vest in full after five years of creditable service. A creditable year of service is defined as a year in which an eligible participant completes 1000 hours of service. Employees immediately vest in their contributions. Normal retirement shall be considered to be attainment of age 55 and completion of five (5) creditable years of service. Employees who fail to complete five (5) years creditable service vest in their respective accounts at twenty (20%) percent per completed year of creditable service. The Plan requires

retirement at April 1 following the date the participant reaches age 70 1/2. The Plan provides that forfeitures of employer contributions by non-vested terminated employees are to be used to offset future employer contributions. Therefore, employer contributions made to employee accounts who fail to complete the respective year revert back to the employer. Because of the restatement of the Plan during the fiscal year September 30, 2010, the District received a reimbursement for the balance in forfeitures in the amount of $0. The District has no liability for losses, if any, incurred by the plan. Loans to participants are permitted from the participant's specific account. Participants should refer to the complete plan document for specific detail of the Plan.


NOTE F - BONDS PAYABLE


The following is a summary of the District's bonds payable for the years ended September 30:

Amount


Balances - September 30, 2009

$14,801,169

Principal retired

(347,200)

Bonds issued

-

Balances - September 30, 2010

14,453,969

Principal retired

(366,000)

Bonds issued

-

Balances - September 30, 2011

$14,087,969


Bonds payable is comprised of the following at September 30:



$5,300,000 Series A, Water and Sewer Revenue Bonds, issued July 1981, through

USDA Rural Development. Principal is payable annually beginning September 1, 1983 through September 1, 2020; interest payable annually at the rate of 5%; collateralized by the gross operating revenues of the system and assessments levied on the lands benefited by the

2011 2010

system.

$ 900,000

$ 980,000


$722,715 Series B, Water and Sewer Revenue Bonds, issued July 1981, through USDA Rural Development. Principal is payable annually beginning September 1, 1983 through September 1, 2020; interest payable annually at the rate of 5%; collateralized by the gross operating revenues of the system and assessments levied on the lands benefited by the

system. 314,000 339,000


$635,000 Series 1985, Water and Sewer Revenue Bonds, issued May 1987, through USDA Rural Development. Principal is payable annually beginning September 1, 1989 through September 1, 2026; interest payable annually at the rate of 5%; collateralized by the gross operating revenues of the system and assessments levied on the lands benefited by the

system. 364,969 382,969


$3,750,000 Series 1989, Water and Sewer

Revenue Bonds, issued October 1991, through USDA Rural Development. Principal is payable annually beginning September 1, 1994 through September 1, 2031; interest payable annually at the rate of 5%; collateralized by the gross operating revenues of the system and assessments levied on the lands benefited by the system.


2,770,000


2,850,000

$250,000 Series 1990, Water and Sewer Revenue Bonds, issued October 1991, through USDA Rural Development. Principal is payable annually beginning September 1, 1994 through September 1, 2031; interest payable annually at the rate of 5%; collateralized by the gross

operating revenues of the system and assessments levied on the lands benefited by the system.


185,000


190,000

$4,313,200 Series 1996, Water and Sewer Revenue Bonds, issued August 1996, through USDA Rural Development. Principal is payable annually beginning September 1, 1998 through September 1, 2035; interest payable annually at the rate of 5.125%; collateralized by the gross operating revenues of the system and assessments levied on the lands benefited by the system.


3,543,000


3,618,000

$802,000 Series 1998, Water and Sewer Revenue Bonds, issued October 1998, through USDA Rural Development. Principal is payable annually beginning September 1, 2001 through September 1, 2038; interest payable annually at the rate of 4.5%; collateralized by the gross

operating revenues of the system and assessments levied on the lands benefited by the system.


687,000


700,000



$2,252,000 Series 2001, Water and Sewer

Refunding Bonds, issued December 2001,

through USDA Rural Development. Principal is

payable annually beginning September 1, 2004

through September 1, 2041; interest payable

annually at the rate of 4.5%; collateralized by the

gross operating revenues of the system and

assessments levied on the lands benefited by the

system.

2,032,000

2,064,000

$3,366,200 Series 2008, Water and Sewer

Revenue Bonds, issued March 28, 2008 through

USDA Rural Development. Principal is payable

annually beginning September 1, 2008 through

September 1, 2047; interest payable annually at

the rate of 4.375%; collateralized by the gross

operating revenues of the system and

assessments levied on the lands benefited by the

system.

3,292,000

3,330,000

Total

Less: current portion

14,087,969

14,453,969

(due in one year)

(382,000)

(366,000)

Long-term portion

$13,705,969

$14,087,969


Bond Resolutions

The bond resolutions established certain accounts and determined the order in which certain revenues are to be deposited into those accounts. In addition, there are various other covenants established by the official statements and District resolutions, including such items as debt service coverage, reporting requirements, and maintenance of facilities. Management believes that it has complied, in all material respects, with these covenants. All required balances at September 30, 2011 and 2010, were maintained and are reflected as restricted deposits within these financial statements.


Year Ending

September 30


Principal


Interest


Total

2012

$ 382,000

$ 674,657

$ 1,056,657

2013

400,000

655,938

1,055,938

2014

420,000

636,337

1,056,337

2015

440,000

615,752

1,055,752

2016

464,000

594,185

1,058,185

2017-2021

2,508,000

2,606,859

5,114,859

2022-2026

2,383,969

2,019,489

4,403,458

2027-2031

2,849,000

1,398,790

4,247,790

2032-2036

2,039,000

759,811

2,798,811

2037-2041

1,254,000

373,131

1,627,131

2042-2046

773,000

142,581

915,581

2047

175,000

7,656

182,656

$ 14,087,969

$ 10,485,186

$ 24,573,155


Bonded debt interest expense was $691,101 and $708,245 for the years ended September 30, 2011 and 2010, respectively. No bonded debt interest expense was capitalized in either year.


NOTE G - LOANS PAYABLE - SRF


image

The following is a summary of the District's loans payable activity for the year ended September 30, 2011:


DEP.SRF

DW110120

DEP.SRF

DW110121 Total

Balance-September 30, 2009 Proceeds

Principal retired

$ -

364,979

-

- $ -

- 364,979

- -

Balance-September 30, 2010

364,979

- 364,979

Proceeds

54,702

335,504 390,206

Balance-September 30, 2011

$ 419,681

$ 335,504 $ 755,185


2011 2010

$419,681 loan payable representing 15% of a grant/loan payable to Florida Department of Environmental Protection. The maximum amount of the loan is $2,735,112, in which the FDEP has forgiven

$2,324,845 of the note. The loan also requires the District to capitalize interest of $9,414 during the year ended September 30, 2011. Interest accrues at 2.71%. Principal and interest in payable in forty (40) semi-annual payments of $13,660 in May and

November beginning November 15, 2011. The loan is collateralized by the gross operating revenues of the system and assessments

levied on the lands benefited by the system. $

$335,504 loan payable to Florida Department of Environmental Protection. The loan requires forty (40) semi-annual payments of

$10,637 in November and May beginning November 15, 2011.

419,681

$364,979

The loan required the District to capitalize interest of $7,346 during the year ended September 30, 2011. Interest accrues at 2.43%.

The loan is collateralized by the gross operating revenues of the system and assessments levied on the lands benefited by the

system.

335,504

-

Total loans payable

755,185

364,979

Less current portion:

(39,145)

-

$ 716,040

$364,979

Year Ending

September 30 Principal Interest Total Balance

2012

$ 39,145 $

9,449 $

48,594

$ 716,040

2013 30,275 18,319 48,594 685,765

2014 31,062 17,532 48,594 654,703

2015 31,869 16,724 48,593 622,834

2016 32,699 9,595 42,294 590,135

2017-2021 176,705 66,265 242,970 413,430

2022-2026 200,926 42,044 242,970 212,504

2027-2031 212,504 14,417 226,921 -

$ 755,185

$ 194,345

$ 949,530 $ -



September 30, 2011 and 2010, respectively. However, interest loan costs of

$16,760 and $0 were capitalized for the years ended September 30, 2011 and 2010, respectively.


NOTE H - NOTES PAYABLE


The following is a summary of the District's activity related to notes payable for the years ended September 30:

Amount


Balances, September 30, 2009

$ 306,531

Proceeds from issuance

-

Principal retired

(100,583)

Baances, September 30, 2010

205,948

Proceeds from issuance

-

Principal retired

(107,493)

Balances, September 30, 2011

$ 98,455


Notes payable is comprised of the following at September 30:


2011

2010

$500,781 Notes payables, representing eleven

(11) individual notes, for vehicles, principal and interest payable monthly over 60 months dated between October 26, 2006 and December 20, 2007 and collateralized by the respective vehicles. Interest rates range between 5.5% and 5.75% per year.


$ 98,455


$ 205,948

Less: Current Portion

(92,496)

(106,259)

Long Term Portion

$ 5,959

$ 99,689



Year Ending

September 30


Principal


Interest


Total

2012

$ 92,496

$ 3,258

$ 95,754

2013

5,959

75

6,034

$ 98,455

$ 3,333

$ 101,788


The District incurred interest expense related to the notes payable for the years ended September 30, 2011 and 2010, in the amount of $9,077 and $14,811, respectively.


NOTE I - LINE OF CREDIT


During December 2010, the District entered an agreement with a financial institution to establish an uncollateralized $1 million revolving Line of Credit (LOC) to be used for emergency situations. The LOC is available, although the District had not borrowed any funds from the LOC. The LOC required interest paid quarterly and principal at maturity. Interest accrues at the variable Prime Rate. The LOC was due in full on December 17, 2011. The financial institution has agreed to extend the LOC maturity date until June 17, 2012. Interest rate at September 30, 2011 was 3.25%.


NOTE J - ACCRUED COMPENSATED ABSENCES


Employees of the District are entitled to paid vacation based on length of service and job classification. Accrued compensated absences had the following activity for the year ended September 30:


Accrued compensated absences, September 30, 2009

Amount


$ 59,415

Net Increase 243

Accrued compensated absences,

September 30, 2010 59,658

Net Increase 3,663

Accrued compensated absences,

September 30, 2011 $ 63,321

image


Litigation

The District, from time to time, is involved as a defendant and a plaintiff in certain litigation and claims arising in the ordinary course of operations. As such, the District maintains third party insurance coverages. In the opinion of legal counsel, the range

of potential recoveries or liabilities will not materially affect the financial position of the District. The District intends to vigorously defend all claims unless first settled.

Potential losses, if any, may be recoverable through insurance coverages.


Federal Grants

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


The operations of the District are dependent upon the condition of the District's facilities. These facilities are currently being rehabilitated and improved substantially through the receipt of federal funding. Loss or reduction of such funding would have a material effect on the operations of the District.


During the year ended September 30, 2009, the District completed the upgrade of a water treatment plant from 2.5 million gallons per day to 4.0 million gallons per day. As such, the project was transferred from construction in progress to capital assets. Grant funding exceeded the cost of the project; therefore, USDA approved subsequent projects to allow the District to draw the remaining funds. During the fiscal year ended September 30, 2011, the District expended $9,742 in grant funds on additional projects that were approved by USDA. At September 30, 2011, the District had fully expended the funds from the original $3,000,000 grant.


During the year ended September 30, 2009, the District was approved for a

$4,932,000 loan (bond) and $3,156,000 grant (CFDA #10.781) from USDA Rural Development for water and wastewater improvements. This funding is part of the Federal Stimulus Package. The loan will ultimately be funded by USDA as a refinancing bond issue once the District completes the renovation and expansion project. Therefore, the District must seek third party interim financing to initially fund


Federal Grants, continued

the renovation and expansion costs. USDA loan can only be used to refinance a completed project. The USDA loan once funded will be repaid by operating revenue and a special assessment in the amount of $1,060,900 which is set to begin in fiscal year ending September 30, 2012. The assessment is to be levied over a twenty (20) year period.


The grant proceeds can only be requested once the loan funds have been exhausted. During the year ended September 30, 2009, the District began the process of securing the third part financing. No third party financing agreement was entered at September 30, 2009. The scope of the project, however, has been approved by USDA. No bids have been let. The District, however, had incurred related preliminary engineering costs of $209,331.


During the year ended September 30, 2010, the District incurred an additional

$450,542 in preliminary engineering costs. At September 30, 2010 the District had not secured the third party financing but had received bids from financial institutions. The District has also received bids for the construction; however, no contract had been awarded as of September 30, 2010.


During the year ended September 30, 2011, the District incurred an additional

$179,727 in preliminary engineering and permitting costs. At September 30, 2011, the District had not secured the third party financing and construction contracts have not been let.


During the year ended September 30, 2009, the District was approved for a

$2,735,112 grant/loan from EPA (CFDA#66.458) for drinking water improvements including supply, treatment, and distribution. The grant was passed through the Florida Department of Environmental Protections (FDEP) and is part of the Drinking Water State Revolving Fund (SRF). The award is part of the American Recovery and Reinvestment Act (ARRA) and is structured as a loan with 85% principal forgiveness. The District had expended $2,763,421 in the project as of September 30, 2010 and was awarded an additional $328,158 from the SRF which are not ARRA funds for the project in the form of a loan. The project was completed during the fiscal year ended September 30, 2011. The District has recorded $2,324,845 as contributed capital (85%) and the balance of the awards ($738,425) plus accrued interest and fees of $16,760 as loans payable - SRF.


Unrestricted net assets consist of the following at September 30:

2011 2010


Designated for emergencies

$ 460,000

$ 360,000

Designated for operations

2,497,721

2,497,577

Designated for vehicle replacement

217,025

300,000

Designated for capital equipment

224,444

315,740

Designated for maintenance reserve

942,822

702,767

Total Designated

4,342,012

4,176,084

Undesignated

2,515,086

1,840,957


Total unrestricted net assets

$ 6,857,098 $

6,017,041

image image


NOTE M - RISK MANAGEMENT


The District 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.


Insurance programs for general/professional liability, automobile, and property are through commercial insurance. The District retains the risk of loss, on insured claims, up to a deductible amount (ranging from $1,000 to 5% of total insured value depending on the type of loss) with the risk of loss in excess of this amount transferred to the insurance carrier. Limits of general liability are $1,000,000 per occurrence and $2,000,000 in the aggregate. The District is third party insured for employee health as well as workers' compensation.


REQUIRED SUPPLEMENTARY INFORMATION

OTHER THAN MD&A


OPERATING REVENUES


Cross connection control fee

$ 252,000

$ 208,604

$ 208,604

$ -

Water service

2,351,460

2,387,714

2,387,714

-

Wastewater service

3,928,989

3,954,977

3,954,977

-

Meter service charge

493,670

487,944

487,944

-

Late fees

80,573

82,325

82,325

-

Reconnect and transfer fees

119,601

116,145

116,145

-

Miscellaneous charges, fees and other income

43,212

38,631

89,193

50,562

TOTAL OPERATING REVENUES

7,269,505

7,276,340

7,326,902

50,562


OPERATING EXPENSES

WATER PLANTS / DISTRIBUTION


Salaries and wages

522,115

462,241

462,241

-

Overtime

17,339

-

-

-

FICA

41,268

36,788

36,788

-

Unemployment taxes

4,480

2,898

2,898

-

Employer pension contribution

31,327

27,531

27,531

-

Health/life insurance

161,109

161,328

161,328

-

Workers' compensation

27,425

28,233

28,233

-

Travel and training

16,500

11,721

11,801

(80)

Telephone and fax

12,375

5,576

5,576

-

Electric

147,859

158,101

158,101

-

General liability insurance

12,783

10,913

10,913

-

Comprehensive auto insurance

9,666

8,721

8,721

-

Other insurance

65,761

58,284

58,284

-

Repairs and maintenance

124,280

81,605

81,605

-

Other contract services

41,922

26,926

26,926

-

Vehicle fuel

25,700

43,010

43,010

-

Vehicle maintenance

11,863

13,138

13,138

-

Licenses and permits

15,068

8,241

8,241

-

Chemicals

60,513

51,520

51,520

-

Other materials

86,814

102,127

17,284

84,843

Laboratory fees

22,303

33,327

33,327

-

Uniforms/clothing allowance

3,250

2,324

2,324

-

Memberships/periodicals/books

1,010

988

988

-

SUB-TOTAL WATER PLANTS/DISTRIBUTION

1,462,730

1,335,541

1,250,778

84,763


The accompanying notes are an integral part of this statement.


WASTEWATER PLANT


Salaries and wages

337,171

337,856

337,856

-

Overtime

16,363

5,328

5,328

-

FICA

27,045

26,004

26,004

-

Unemployment taxes

2,240

1,818

1,818

-

Employer pension contribution

20,230

17,101

17,101

-

Health/life insurance

94,735

77,461

77,461

-

Workers' compensation

12,840

12,459

12,459

-

Travel and training

9,000

4,713

2,213

2,500

Telephone and fax

3,332

2,848

2,848

-

Electric

204,883

177,494

177,494

-

Section 8 electric

16,687

11,701

11,701

-

General liability insurance

16,973

15,434

15,434

-

Comprehensive auto insurance

6,448

6,037

6,037

-

Other insurance

58,645

55,198

55,198

-

Section 8 field maintenance

26,529

25,030

30

25,000

Repairs and maintenance

96,229

83,739

83,776

(37)

Section 8 repairs

22,047

8,998

8,998

-

Other contract services

1,865

6,922

1,922

5,000

Vehicle fuel

14,561

16,006

16,006

-

Vehicle maintenance

21,577

7,461

7,461

-

Licenses and permits

6,232

794

794

-

Chemicals

20,592

18,183

18,183

-

Other materials

48,767

42,169

27,169

15,000

Laboratory fees

22,709

17,952

17,952

-

Residuals management

458,323

435,094

435,094

-

Uniforms/clothing allowance

1,750

1,243

1,243

-

Memberships/periodicals/books

504

418

418

-

SUB-TOTAL WASTEWATER PLANT

1,568,277

1,415,461

1,367,998

47,463


The accompanying notes are an integral part of this statement.


WASTEWATER COLLECTION


Salaries and wages

191,939

184,250

184,250

-

Overtime

4,563

1,438

1,438

-

FICA

15,032

14,005

14,005

-

Unemployment taxes

1,680

1,032

1,032

-

Employer pension contribution

11,516

10,282

10,282

-

Health/life insurance

55,521

61,881

61,881

-

Workers' compensation

7,194

7,275

7,275

-

Travel and training

7,500

1,465

1,465

-

Telephone and fax

1,836

1,521

1,521

-

Electric

39,859

29,638

29,638

-

General liability insurance

16,652

15,434

15,434

-

Comprehensive auto insurance

4,921

4,696

4,696

-

Other insurance

899

858

858

-

Repairs and maintenance

53,673

54,178

24,178

30,000

Other contract services

424

373

373

-

Vehicle fuel

10,442

14,023

14,023

-

Vehicle maintenance

8,303

10,006

10,006

-

Licenses and permits

154

417

417

-

Chemicals

1,560

518

518

-

Other materials

13,340

13,567

13,567

-

Uniforms/clothing allowance

1,250

783

783

-

Memberships/periodicals/books

333

502

502

-

SUB-TOTAL WASTEWATER COLLECTION

448,591

428,142

398,142

30,000


The accompanying notes are an integral part of this statement.



CUSTOMER SERVICE / ADMIN


Salaries and wages

429,411

400,712

400,712

-

Overtime

1,724

39

39

-

FICA

32,982

29,879

29,879

-

Unemployment taxes

3,640

2,787

2,787

-

Employer pension contribution

25,765

22,466

22,466

-

Health/life insurance

131,834

117,213

117,213

-

Workers' compensation

2,411

2,617

2,617

-

Legal services

37,000

30,742

30,742

-

Other professional services

1,500

6,100

-

6,100

Accounting/auditing

48,992

40,130

40,130

-

Engineering services

240,000

252,435

237,435

15,000

Engineering services/SRF

-

-

-

-

Travel and training

20,546

6,782

6,782

-

Telephone and fax

3,884

4,786

4,786

-

Postage and freight

38,863

31,786

31,786

-

General liability insurance

2,232

2,131

2,131

-

Comprehensive auto insurance

703

671

671

-

Other insurance

19,760

21,239

21,239

-

Other contract services

15,553

13,844

48,843

(34,999)

Repairs and maintenance

18,893

14,143

12,643

1,500

Vehicle fuel

285

444

444

-

Vehicle maintenance

411

909

909

-

Office supplies

37,044

25,316

25,316

-

Miscellaneous office expense

8,383

13,894

13,918

(24)

Miscellaneous bank fees

3,683

4,562

4,562

-

Miscellaneous expense

604

2,524

24

2,500

Advertising

2,982

2,487

2,487

-

Licenses and permits

262

175

175

-

Memberships/periodicals/books

15,000

6,130

6,130

-

SUB-TOTAL CUSTOMER SERVICE / ADMIN

1,144,347

1,056,943

1,066,866

(9,923)


The accompanying notes are an integral part of this statement.



MAINTENANCE


Salaries and wages

224,667

124,147

124,147

-

Overtime

10,346

-

-

-

FICA

17,978

9,470

9,470

-

Unemployment taxes

1,680

1,032

1,032

-

Employer pension contribution

13,480

11,231

11,231

-

Health/life insurance

44,196

44,924

44,924

-

Workers' compensation

8,542

7,900

7,900

-

Travel and training

6,000

1,491

1,491

-

Telephone and fax

1,882

1,859

1,859

-

Comprehensive auto insurance

2,811

2,683

2,683

-

Repairs and maintenance

3,242

2,612

2,612

-

Other contract services

959

1,315

1,315

-

Vehicle fuel

4,628

9,045

9,045

-

Vehicle maintenance

9,704

11,322

11,322

-

Licenses and permits

500

698

698

-

Other materials

19,002

23,238

13,238

10,000

Uniforms/clothing allowance

1,500

1,033

1,033

-

Memberships/periodicals/books

382

220

220

-

SUB-TOTAL MAINTENANCE

371,499

254,220

244,220

10,000

DEPRECIATION

Depreciation


1,426,311


1,500,000


1,500,000


-

SUB-TOTAL DEPRECIATION

1,426,311

1,500,000

1,500,000

-

TOTAL OPERATING EXPENSES

6,421,755

5,990,307

5,828,004

162,303

OPERATING PROFIT

$ 847,750

$ 1,286,033

$ 1,498,898

$ 212,865


The accompanying notes are an integral part of this statement.


Original

Budget

Final

Budget


Actual


Variance

OPERATING PROFIT,

BROUGHT FORWARD

$ 847,750

$ 1,286,033

$ 1,498,898

$ 212,865


NON-OPERATING REVENUES (EXPENSES)

Interest income

59,113

66,266

66,268

2

Contributed capital - grant - FDEP/EPA

366,350

-

256,627

256,627

Contributed capital - grant - USDA/FHA

3,156,000

-

9,742

9,742

Contributed capital - customers

59,961

23,770

23,770

-

Contributed capital - developers

70,000

117,178

117,176

(2)

Debt proceeds - USDA

4,932,000

182,257

-

(182,257)

Debt proceeds -Loans-SRF

64,650

452,276

390,206

(62,070)

Other non-operating revenue

4,748

52,648

2,088

(50,560)

Capital expenditures

(8,648,961)

(1,315,905)

(1,868,850)

(552,945)

Principal retirement - bonds

(366,000)

(366,000)

(366,000)

-

Principal retirement - vehicle notes

(106,259)

(107,133)

(107,493)

(360)

Maintenance reserve

(240,055)

-

-

-

Interest expense

(886,673)

(701,665)

(700,178)

1,487

Bad debt expense

(35,000)

(14,730)

(14,730)

-

Loss on sale of assets

(25,000)

(914,776)

(914,778)

(2)

NET NON-OPERATING

REVENUES (EXPENSES)

(1,595,126)

(2,525,814)

(3,106,152)

(580,338)

NET PROFIT (LOSS)

$ (747,376)

$ (1,239,781)

$ (1,607,254)

$ (367,473)


Reconciliation:


Net profit (loss) (Non-GAAP Budgetary Basis)

$ (1,607,254)

Loan proceeds

(390,206)

Capital outlay

1,868,850

Principal retirement - bonds

366,000

Principal retirement - vehicle notes

107,493

Increase in Net Assets (GAAP Basis)

344,883

Net assets - beginning of the year, as restated

21,351,369

Net assets - end of the year

$ 21,696,252


The accompanying notes are an integral part of this statement.



Grantor Agency/Program Title


Federal

image

CFDA Award Revenue/ Expenses/ Number Amount Receipts Disbursements


    1. Department of Agriculture - Rural Development

      Type B Program

      10.760

      $ 3,000,000

      $ 9,742

      $ 9,742


      10.781


      4,932,000


      -


      179,727


      10.781


      3,156,000


      -


      -

      10.760

      $ 3,000,000

      $ 9,742

      $ 9,742


      10.781


      4,932,000


      -


      179,727


      10.781


      3,156,000


      -


      -

      Water and Wastewater System Improvements- RUS Grant


      Type B Program

      ARRA-Water and Waste Water Disposal Loan (WWDL) (Stimulus/ARRA)*


      ARRA-Water and Waste Water Disposal Grant (WWDG) (Stimulus/ARRA)


      Environmental Protection Agency (EPA)

      Type A Program

      Passed through Florida Department of

      ARRA-Environmental Protection (2)

      Supply, Treatment and Distribution (ARRA)* 66.458 2,735,112 301,915 (3) - (5)


      Type A Program

      Passed through Florida Department of

      Environmental Protection

      (1)

      Supply, Treatment and Distribution*

      66.458

      328,158

      328,158

      (4)

      328,158


      $ 14,151,270

      $ 639,815 $

      517,627

      image image image



      * To be initially funded through private funding sources.

      1. Excludes capitalized interest of 7,346.

      2. Excludes capitalized interest of $9,414.

      3. Includes loan proceeds of $45,288 and grant proceeds (which is recorded as contributed capital)of $256,627.

      4. Recorded as loan proceeds.

      5. Expenditures recognized in a prior year.



The accompanying notes are an integral part of this statement.


Year ended September 30, 2011


NOTE A - BASIS OF PRESENTATION


The Schedule of Expenditures of Federal Awards has been prepared on an accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America and is in accordance with the provisions of Office of Management and Budget (OMB) Circular A-133, and the State of Florida, Rules of the Auditor General 10.550.


Expenditures reported on the Schedule of Expenditures of Federal Awards include cash disbursements, whether capitalized or expensed, during the fiscal year as well as grant related amounts recorded as payable at year end. Revenues reported on the Schedule of Expenditures of Federal Awards include cash receipts, whether recognized or deferred, as well as grant receivables recorded at year end.


NOTE B - INDIRECT COSTS


The District did not routinely allocate costs to Federal Awards. Costs charged to such programs were direct costs unless specifically incurred for the program and allowed and indicated as such.


ADDITIONAL REPORTS OF INDEPENDENT AUDITOR


image

Affiliations

Florida Institute of Certified Public Accountants American Institute of Certified Public Accountants

Private Companies Practice Section

Tax Division


Page 38 of 48


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



Board of Commissioners Immokalee Water & Sewer District 1020 Sanitation Road

Immokalee, Florida 34142


We have audited the financial statements of Immokalee Water and Sewer District as of and for the year ended September 30, 2011, and have issued our report thereon dated December 22, 2011.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States of America.


Internal Control Over Financial Reporting

Management of Immokalee Water and Sewer District is responsible for establishing and maintaining effective internal control over financial reporting. In planning and performing our audit, we considered Immokalee Water and Sewer District's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Immokalee Water and Sewer District's internal control over financial reporting. Accordingly, we

do not express an opinion on the effectiveness of Immokalee Water and Sewer District'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 significant deficiency is a deficiency, or a combination of deficiencies, in internal control, that adversely affect the entity's ability to initiate, authorize, record, process, or report financial data reliably in accordance with accounting principles generally accepted in the United States of America, such that there is more than a remote likelihood that a misstatement of the financial

INTEGRITY ......... SERVICE ......... EXPERIENCE

12621 World Plaza Lane, Building 55 • Fort Myers, FL 33907 • Phone: (239) 333-2090 • Fax: (239) 333-2097

Page 39 of 48


statements that is more than inconsequential will not be prevented or detected and corrected on a timely basis.


A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis.


Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. We, however, noted one deficiency in internal control over financial reporting, comment 2010-1, that we have reported in our report to management dated December 22, 2011.


Compliance and Other Matters

As part of obtaining reasonable assurance about whether Immokalee Water and Sewer District's financial statements are free of material misstatement, we performed tests of its

compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards except for comment 2011-1 noted in our report to management dated December 22, 2011.


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


co :;P <l i. A.

Fort Myers, Florida December 22, 2011



image

Affiliations

Florida Institute of Certified Public Accountants American Institute of Certified Public Accountants

Private Companies Practice Section

Tax Division


Page 40 of 48

Independent Auditor's Report on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Program and on Internal Control Over Compliance in Accordance With OMB Circular A-133


Board of Commissioners Immokalee Water & Sewer District 1020 Sanitation Road

Immokalee, Florida 34142


Compliance

We have audited Immokalee Water & Sewer District's compliance with the types of compliance requirements described in the United States Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that could have a direct and material effect on each of Immokalee Water and Sewer District's major federal programs for the year ended September 30, 2011.

Immokalee Water and Sewer District's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs.

Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major federal programs is the responsibility of Immokalee Water and Sewer District's management. Our responsibility is to express an opinion on Immokalee Water and Sewer District's compliance based on our audit.


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


INTEGRITY ......... SERVICE ......... EXPERIENCE

12621 World Plaza Lane, Building 55 • Fort Myers, FL 33907 • Phone: (239) 333-2090 • Fax: (239) 333-2097


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


Internal Control Over Compliance

Management of Immokalee Water and Sewer District is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts and grants applicable to federal programs. In planning and performing our audit, we considered Immokalee Water and Sewer District's internal control over compliance with the requirements that could have a direct and material effect on a major federal program to determine the auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance.

Accordingly, we do not express an opinion on the effectiveness of Immokalee Water and Sewer District's internal control over compliance.


A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, in internal control, that adversely affects the entity's ability to administer a federal program such that there is a reasonable possibility that noncompliance with a type of compliance requirement of a federal program that is more than inconsequential will not be prevented, or detected and corrected by the entity's internal control. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis.


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



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


co ::P d'i. A,

Fort Myers, Florida December 22, 2011


Section I – Summary of Auditor’s Results

Financial Statements


Type of auditor's report issued Unqualified Internal control over financial reporting:

Control deficiency(es) identified? Yes x No

Significant deficiency(es) identified? Yes x No

Material weaknesses? Yes x None reported Noncompliance material to financial statements

noted? Yes x No


Federal Awards


Internal control over major programs: Internal control over financial reporting:

Control deficiency(es) identified? Yes x No

Significant deficiency(es) identified? Yes x No

Material weaknesses? Yes x None reported Type of auditors report issued on compliance for

major programs Unqualified

Any audit findings disclosed that are required to be reported in accordance with OMB Circular A-133,

Section 510(a)? Yes x No Identification of major programs:


CFDA

Number(s) Name of Federal Program or Cluster

66.458 Environmental Protection Agency


Dollar threshold used to distinguish between

Type A and Type B programs Threshold used was $300,000.


Auditee qualified as low-risk auditee? x Yes No Listing of Subrecipients and amounts passed-through: None - Not applicable


Section II- Financial Statement Findings

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


Section III- Federal Award Findings and Questioned Costs

There were no audit findings related to federal awards required to be reported by OMB Circular A-133, Section 510(a).


Section IV- Status of Federal Prior Year Findings

There were no prior year findings required to be reported by OMB Circular A-133.


Subgrantees


There were no subgrantees during the year ended September 30, 2011.



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Affiliations

Florida Institute of Certified Public Accountants American Institute of Certified Public Accountants

Private Companies Practice Section

Tax Division


Page 45 of 48


INDEPENDENT AUDITOR'S REPORT TO MANAGEMENT


Board of Commissioners Immokalee Water & Sewer District 1020 Sanitation Road

Immokalee, Florida 34142


We have audited the accompanying basic financial statements of Immokalee Water and Sewer District (the "District") as of and for the year ended September 30, 2011 and have issued our report thereon dated December 22, 2011.


We conducted our audit in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. We have issued our Report on Internal Control over Financial Reporting and Compliance and Other Matters. Disclosures in that report, which is dated December 22, 2011, should be considered in conjunction with this report to management.


Additionally, our audit was conducted in accordance with Chapter 10.550, Rules of the Auditor General, which governs the conduct of local governmental entity audits performed in the State of Florida. This letter included the following information, which is not included in the aforementioned auditor's report:



INTEGRITY ......... SERVICE ......... EXPERIENCE

12621 World Plaza Lane, Building 55 • Fort Myers, FL 33907 • Phone: (239) 333-2090 • Fax: (239) 333-2097



CURRENT YEAR COMMENTS:


2011-1. The District Should Timely Renew the Board Member Bonding

Based on our review and discussion with Management, we noted that the District bonds had expired for two of the currently attending Board Members. Bonding is required for each Commissioner per LOF 98-495, Section 5(1). Bonding Insurance typically covers the District's damages or defense costs as a result of a lawsuit for alleged wrongful acts by the directors or officers while acting in their capacity for the organization.


We recommend that the District renew or obtain a bonding insurance policy to cover those mentioned above. It should be noted that upon realization that two of the bonds had expired, without notification, the District decided to change insurance companies and is currently in the process of renewing all of the bonds with a different insurance company.


PRIOR YEAR COMMENTS THAT CONTINUE TO APPLY:


2010-1. Controls Over Inventory Should Be Monitored and Enhanced, as Revised

The District has made significant improvements in the inventory system over recent years. The inventory is well organized and secured. Purchase orders and work orders are prepared for items purchased and used. The District changed their policy in the previous year to require a physical count of inventory twice per year. Inventory is being counted in accordance with the policy.


Current Year Addendum

During the audit, we performed various tests relating to the District’s inventory on hand.


We selected eight (8) inventory items and performed a physical inventory count and compared it to the inventory listing provided to us. Four (4) of the items were traced from the list to the physical inventory and four (4) items were traced from the physical inventory to the list. Of the eight (8) selected, three (3) of the items on the test count were reconciled to the quantity indicated on the inventory list as of September 30, 2011. The remaining five (5) items could not be reconciled to the quantity indicated on the inventory list.


In addition, we traced the eight (8) items selected to pricing information to determine if they matched the prices listed on the inventory valuation. Of the eight (8), only three (3) could be agreed to a current invoice price. Some of the discrepancies were due to donated items or estimated prices which were assigned to older, infrequently used parts.



The District uses an Excel spreadsheet to account for inventory each month. The spreadsheet calculates the ending inventory quantity and multiplies it by the price entered to determine the value of ending inventory. So e problems were noted in this system, for example an item that was indicated on a later inventory sheet was not listed on the previous month's spreadsheet. It was unclear as to whether this was due to problems with the spreadsheet or if the item was added during the internal procedures performed.


We recommend that the District change their policy to require a physical inventory count on a quarterly basis until the inventory issues above are resolved. In addition, we recommend that the District continue their efforts to improve their inventory procedures, specifically, we recommend that the District continue their efforts to quantify the inventory for the maintenance department and implement the inventory tracking software to

facilitate the counting and pricing of inventory. It should be noted that the District previously purchased two (2) software programs in an effort to correct this situation. In both cases, the implementation was not successful for various reasons. The District also purchased a computer scanner and printer as part of the project. It should also be noted that subsequent to September 30, 2011, the District hired a consultant to train its employees how to use the inventory tracking software and are hopeful that they can successfully implement the software for the year ended September 30, 2012.


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


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TUSCAN & COMPANY, P.A.

Fort Myers, Florida December 22, 2011


EXHIBIT

Immokalee Water & Sewer District

I 020 Sanitation Road lmmokalee, Florida 34142



Immokalee Water & Sewer District

January 12, 2012 David W. Martin, CPA

Auditor General, State of Florida Claude Denson Pepper Building 111 West Madison Street Tallahassee, Florida 32399-1450


Dear Mr. Martin:

(239) 658-3630

FAX (239) 658-3634


This letter is in response to the Management Letter in the District's Year Ending September 30, 2011 audit, performed by Tuscan & Company, P.A.; which was presented to the Board on February 15, 2012 and accepted by the Board on February 15, 2012.


PRIOR YEAR COMMENTS:


2010-1. Controls over Inventory Should be Monitored and Enhanced


The District continues to fine tune the process in which electronically tracks inventory. The inventory tracking software database has been developed and is currently being customized to the District's needs in order to be used by all those involved. We are exploring all the different aspects of the software to take advantage of the benefits and to work around its limitations before going live.


We understand that inventory tracking is a tedious and detailed process that must be done correctly to reduce errors and fraud. Therefore, we continue to conduct the scheduled inventory count and are keeping track of it on the excel spreadsheet until it can be safely and accurately converted on to a compatible electronic tracking system.


CURRENT YEAR COMMENTS:


2011-1. The District Should Timely Renew the Board Member Bonding


Upon realization that two of the bonds had expired, we decided to change insurance companies and are in the process ofrenewing all of the bonds.


As usual, we have enjoyed working with Tuscan & Company P.A., during the course of our audit. The field personnel are always professional and knowledgeable. They understand the importance we place on accountability both to Rural Development and to the citizens of Immokalee, whom we serve.


Please contact our office if you have any questions. Sincerely,

r

Eva J. Deyo, Executive Director

CC: Angela Prioleau, USDA Rural Development