IMMOKALEE WATER & SEWER DISTRICT

BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION

TOGETHER WITH REPORTS OF INDEPENDENT AUDITOR

YEARS ENDED SEPTEMBER 30, 2012 AND 2011


TABLE OF CONTENTS


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

Page(s)

1-3

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

I-X

BASIC FINANCIAL STATEMENTS

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

4

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

5

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

6

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

7-32


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, 2012................................................................................ 33-38

Schedule of Expenditures of Federal Awards - Year Ended September 30, 2012.................. 39

Notes to the Schedule of Expenditures of Federal Awards…..…...………………………… 40

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………………………………………

41-42

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……..…………………………


43-45

Schedule of Findings and Questioned Costs - Federal Awards - September 30, 2012..….…

46-47

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

48-50

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

Exhibit



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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, 2012 and 2011, 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, 2012 and 2011, 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 January 15, 2013, 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


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

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


compliance. That 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.


Accounting principles generally accepted in the United States of America require that the management's discussion and analysis (MD&A) on pages i-xx be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.


Our audits were conducted for the purpose of forming an opinion on the basic financial statements that collectively comprise Immokalee Water & Sewer District's financial statements. The required supplementary information other than MD&A - budgetary comparison information - 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, 2012, is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audits of the basic financial statement and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the required supplementary information other than MD&A - budgetary comparison information - 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, 2012, is fairly stated in all material respects in relation to the financial statements as a whole.


Our audits were conducted for the purpose of forming an opinion on the financial statements that collectively comprise the Immokalee Water & Sewer District's financial statements taken as a whole. The Schedule of Expenditures of Federal Awards, as required by U.S. Office of



Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations (Circular A-133) - year ended September 30, 2012 is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Schedule of Expenditures of Federal Awards - year ended September 30, 2012, is fairly stated in all material respects in relation to the financial statements as a whole.


The Exhibit - Management's Response to Independent Auditor's Report to Management, is not

a required part of the financial statements but is required by Government Auditing Standards and State of Florida Chapter 10.550 "Rules of the Auditor General". Such information has not

been subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we do not express an opinion or provide any assurance on it.

-4' c!..p"<l If ,A.

TUSCAN & COMPANY, P.A.

Fort Myers, Florida January 15, 2013


MANAGEMENT'S DISCUSSION AND ANALYSIS

(MD&A)



September 30, 2012


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, 2012.


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, and 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



September 30, 2012


September 30,

September 30, 2012


September 30,

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Condensed Financial Statement


Condensed financial information from the statements of net assets and revenues, expenses and changes in net assets for the years ended September 30, 2012 and 2011 are as follows:

image

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2012 2011

image image


Current and other assets

$ 11,328,715

$ 9,702,415

Capital assets, net

29,418,901

28,111,209

Total assets

$ 40,747,616

$ 37,813,624



Current liabilities

$ 1,977,868

$ 1,626,083

Long-term liabilities

15,857,160

14,491,289

Total liabilities

17,835,028

16,117,372


Net assets:

Invested in capital assets. net of related debt


13,198,776


13,169,600

Restricted

932,343

1,194,869

Unrestricted

8,781,469

7,331,783

Total net assets

22,912,588

21,696,252


Total liabilities and net assets


$ 40,747,616


$ 37,813,624



Operating revenue:

Water service


$ 2,425,186


$ 2,387,714

Wastewater service

4,027,021

3,954,977

Meter service charges

493,946

487,944

Late fees

79,620

82,325

Reconnection /transfer fee

109,825

116,145

Miscellaneous revenue

78,805

89,193

Cross connection control fees

278,590

208,604

Total operating revenues

7,492,993

7,326,902


Operating expenses:

Water treatment and distribution expense


1,313,018


1,250,778

Wastewater treatment expense

1,351,447

1,367,998

Wastewater collection expense

394,407

398,142

Customer service and administrative expense

973,489

1,066,866

Maintenance

260,169

244,220

Total operating expenses, excluding depreciation

4,292,530

4,328,004

Depreciation and amortization

1,388,852

1,500,000

Total operating expenses, including depreciation

5,681,382

5,828,004

Operating profit (loss)

1,811,611

1,498,898

Net nonoperating revenue/expense

(646,767)

(1,561,330)

Profit (loss) before capital grants

1,164,844

(62,432)

Capital grants and contributions

51,492

407,315

Increase (Decrease) in net assets

1,216,336

344,883

Beginning of year net assets

21,696,252

21,351,369

End of year net assets

$ 22,912,588

$ 21,696,252


(Continued)


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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, 2012.


Financial Highlights



The following charts show the major sources of operating revenues for the years ended September 30, 2012 and September 30, 2011:


image

Operating revenue for the year ended

September 30, 2012

1% 1%


Operating revenue for the year ended September 30, 2011


1%

1%

1% 4%

7%


54%


32%

7% 1%

3%


54%


33%


As in previous years, the wastewater service revenues make up more than half of the revenues, accounting for with 54% in 2012 and 2011. Water revenue accounted for slightly less in 2012 at 32% from 33% in 2011. Meter service charges, late fee charges, reconnection fees and miscellaneous revenues remained constant between the two years. Cross connection control fees, which were added in 2010, increased to 4% of total revenues in 2012 from 3% in 2011.


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.


MDA IV


Expenses


The following charges show the major sources of operating expenses for the years ended September 30, 2012 and September 30, 2011.


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Operating expenses for the year ended September 30, 2012

Operating expenses for the year ended September 30, 2011


24%


5%

17%

23%


7% 24%

26%


4%

18%

21%


24%

7%


Due to the significant investments the District has in capital assets, depreciation continues to be one the largest operating expenses at 24% of total operating expenses, a decrease of two percent, from 2011. Unlike the other expenses listed, depreciation is not a cash expense. The highest expense, at 24% of total expenses is for wastewater treatment, which remained the same between 2012 and 2011. 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 $417,000 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 23% for 2012. 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 the end of 2012, there were over 6,000 meters installed with the automated meters. There are over 6,300 total meters installed, so 95% of the meters are now automated. We should be able to complete the replacement project within the year.


The third largest department is the administration department, which consists of nine full time employees. The related expenses decreased to 17% of total expenses in 2012 from


MDA V


18% in 2011. The largest expense in this department, other than salaries and benefits is engineering fees. The District changed engineering firms during the 2011 fiscal year, and realized a significant cost savings on this line item during 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 2012 and 2011.


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 increased by one percent to 5% of total expenses in 2012, from 4% 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 on which they are working.


Expenses by category are depicted in the charts below for 2012 and 2011.



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Operating Expenses by Category for year ending September 30, 2012


Operating Expenses by Category for year ending September 30, 2011



7%

24%


43%


9%

26%


39%


26%

26%


Wages & Benefits

Material and Supplies

Wages & Benefits

Material and Supplies

Wages & Benefits

Material and Supplies

Wages & Benefits

Material and Supplies


Depreciation Other Operating Expense

Depreciation Other Operating Expense

Depreciation Other Operating Expense

Depreciation Other Operating Expense


Wages and benefits increased by four percent to 43% of the expenses in 2012, making it highest expense category. Materials and supplies stayed consistent at 26%. Depreciation expense decreased by two percent to 24%, and other operating expenses decreased by two percent to 7%.


The District continues to pursue ways to reduce costs without affecting service. During the 2012 fiscal year, the District did not give the employees a cost of living or merit increase. 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 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) increase operating revenue, increase non-operating revenue, reduce operating expenses, increase capital expenditures, increase debt service and adjust designated funds, and b) to increase operating revenue, increase non-operating revenue, decrease operating expenses, increase capital expenditures, increase debt service, and adjust designated funds.


Original to Final Budget Variance


Total final budgeted operating revenues were increased by approximately $529,000 (or 8%) more than originally budgeted, and total budgeted operating expenses, excluding depreciation expense, was decreased by over $408,000 (or 9%).


Budgeted interest income was increased by more than $8,000. Budgeted contributed capital – customers was decreased by $5,982. Contributed capital – developers, was decreased by $49,982 and other non-operating revenue were decreased by over $3,800.


Final Budget to Actual Variance


Total operating revenue was approximately $44,000 more than budgeted.


Over the five departments, approximately $301,000 in budgeted operating expenses were not expended, as well as $61,000 in depreciation expense. Approximately $38,000 in budgeted interest expenses were not expended.


MDA VII


Capital Assets


The District's capital assets as of September 30, 2012 and 2011, amounted to $29,418,901 and $28,111,209 (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:



2012

2011

Construction in progress

$1,874,139

$909,636

Buildings and improvements

-

11,553

Water and wastewater plants and systems

529,054

-514,285

Machinery and equipment

293,351

136,136

$2,696,544

$543,040


Construction in progress for 2012 was mainly related to the USDA Wastewater Treatment Expansion and forcemain expansion (ARRA) stimulus project.


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 2012 and 2011 we used our own personnel to continue the meter replacement program.


Debt


As of September 30, 2012, the District had $13,705,969 of revenue bonds outstanding. The total amount outstanding for these categories of debt decreased by $382,000. This reflects payments made by the District to decrease the debt.


Unrestricted Net Assets


As of September 30, 2012, the District had designated $4,726,913 in unrestricted net assets, as recommended by the auditor. The District designated $560,000 for emergencies,

$2,501,146 for operations, $267,025 for vehicle replacement, $215,865 for capital



MDA VIII

IMMOKALEE WATER & SEWER DISTRICT

Required Supplementary Information Management's Discussion and Analysis September 30, 2012

equipment, and $1,182,877 for maintenance reserve. The District still had $4,054,556 in undesignated net assets at the end of 2012.


Upcoming Significant Changes or Impacts


Rate Increase: The District last implemented an additional 5% rate increase for water and wastewater user fees on January 1, 2009. The District hired a rate consultant, PRMG, to determine what rate increase was needed. PRMG recommended a change in the way multi- family housing is charged, and an increase on all users. That was implemented on October 1, 2012.


Residential - There are several residential developments that are expected to continue to impact the future 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, 2012

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 fell through 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 operating 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 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 was nearly completed in 2012.


Our Wastewater Expansion Project began construction during 2012. It includes an expansion from 2.5 mgd to 3.25 mgd at the existing wastewater facility. It also includes 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, 2012 and 2011

2012

2011

ASSETS

CURRENT ASSETS

Cash


$ 7,564,324


$ 5,837,072

Investment

525,394

513,941

Accounts receivable, net

474,086

433,638

Other receivables

3,111

11,252

Inventory

324,447

262,934

Prepaid expenses

9,705

63,757

TOTAL CURRENT ASSETS

8,901,067

7,122,594


RESTRICTED ASSETS

Cash

2,427,648

2,579,821

Grant and other receivables

-

-


TOTAL RESTRICTED ASSETS 2,427,648 2,579,821


CAPITAL ASSETS

Capital assets not being depreciated:


Land

2,645,941

2,645,941

Construction in progress

6,305,475

4,431,336

Capital assets being depreciated: Buildings and improvements


1,511,233


1,511,233

Water and wastewater plants and systems

42,326,162

41,797,108

Machinery and equipment

2,106,131

1,812,780

Less:

Accumulated depreciation (25,476,041) (24,087,189)

29,418,901 28,111,209


TOTAL ASSETS

$ 40,747,616

$ 37,813,624

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The accompanying notes are an integral part of this statement.


2012 2011

Bond anticipation note payable, current portion

$ -

$ -

Notes payable, current portion

-

92,496

Accounts and contracts payable

446,092

113,206

Other accrued expenses

36,471

35,429

Deferred revenue

-

-

Bond anticipation note payable, current portion

$ -

$ -

Notes payable, current portion

-

92,496

Accounts and contracts payable

446,092

113,206

Other accrued expenses

36,471

35,429

Deferred revenue

-

-

LIABILITIES AND NET ASSETS CURRENT LIABILITIES


TOTAL CURRENT LIABILITIES 482,563 241,131


CURRENT LIABILITIES (Payable from Restricted Assets)


Revenue bonds payable, current portion

400,000

382,000

Loans payable - SRF, current portion

30,020

39,145

Accrued revenue bond interest

51,973

53,540

Contracts payable

-

68,731

Retainage payable

119,656

-

Customer deposits

893,656

841,536

TOTAL CURRENT LIABILITIES

(Payable from Restricted Assets) 1,495,305 1,384,952


LONG-TERM LIABILITIES


Revenue bonds payable, net of current portion

13,305,969

13,705,969

Loans payable - DEP. SRF, net of current portion

695,820

716,040

Bond anticipation note payable, net of current portion

1,788,316

-

Notes payable, net of current portion

-

5,959

Accrued compensated absences

67,055

63,321

TOTAL LONG-TERM LIABILITIES

15,857,160

14,491,289

TOTAL LIABILITIES

17,835,028

16,117,372


NET ASSETS


Invested in capital assets, net of related debt

13,198,776

13,169,600

Restricted

932,343

1,194,869

Unrestricted

8,781,469

7,331,783

TOTAL NET ASSETS

22,912,588

21,696,252

TOTAL LIABILITIES AND NET ASSETS

$ 40,747,616

$ 37,813,624


STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

Years ended September 30, 2012 and 2011


2012 2011


OPERATING REVENUES

Cross connection control fee

$ 278,590

$ 208,604

Water service

2,425,186

2,387,714

Wastewater service

4,027,021

3,954,977

Meter service charge

493,946

487,944

Late fees

79,620

82,325

Reconnect and transfer fees

109,825

116,145

Miscellaneous charges, fees and other income

78,805

89,193

TOTAL OPERATING REVENUES 7,492,993 7,326,902


OPERATING EXPENSES

Water treatment and distribution

1,313,018

1,250,778

Wastewater treatment

1,351,447

1,367,998

Wastewater collection

394,407

398,142

Customer service and administrative

973,489

1,066,866

Maintenance

260,169

244,220

TOTAL OPERATING EXPENSES

PRIOR TO DEPRECIAITON

4,292,530

4,328,004

Depreciation

1,388,852

1,500,000

TOTAL OPERATING EXPENSES

5,681,382

5,828,004

OPERATING PROFIT (LOSS)

1,811,611

1,498,898


NON-OPERATING REVENUES (EXPENSES)

Interest income

66,282

66,268

Loss on disposal of fixed assets

-

(914,778)

Interest expense

(695,420

) (700,178)

Bad debt expense adjustment

(18,905

) (14,730)

Other income

1,276

2,088

NET NON-OPERATING EXPENSES

(646,767

) (1,561,330)

PROFIT (LOSS) BEFORE CAPITAL

CONTRIBUTIONS

1,164,844

(62,432)

CAPITAL CONTRIBUTIONS

Rural Development

-

9,742

FDEP

-

256,627

Customers

23,658

23,770

Developers

27,834

117,176

TOTAL CAPITAL CONTRIBUTIONS

51,492

407,315

INCREASE (DECREASE) IN NET ASSETS

1,216,336

344,883

NET ASSETS - Beginning of the year

21,696,252

21,351,369

NET ASSETS - End of the year

$ 22,912,588

$ 21,696,252


The accompanying notes are an integral part of this statement.


STATEMENTS OF CASH FLOWS

Years ended September 30, 2012 and 2011

2012

2011

CASH FLOWS FROM OPERATING ACTIVITIES:

Cash received from customers

$ 7,493,901

$ 7,322,576

Cash payments to suppliers and employees

(4,284,246)

(4,606,090)

NET CASH PROVIDED BY OPERATING ACTIVITIES

3,209,655

2,716,486


CASH FLOWS FROM NONCAPITAL FINANCING:

Other income received

1,276

2,088

NET CASH PROVIDED BY NON CAPITAL FINANCING

1,276

2,088


CASH FLOWS FROM CAPITAL AND

RELATED FINANCING ACTIVITIES:

Acquisition and construction of capital assets


(2,295,871)


(2,256,092)

Proceeds from sale of capital assets

-

12,490

Principal paid on revenue bonds

(382,000)

(366,000)

Principal paid on notes

(98,455)

(107,493)

Principal paid on loans - SRF

(29,342)

-

Interest paid on bonds and other obligations

(696,987)

(701,666)

Proceeds from debt issuance - FDEP

-

461,204

Proceeds from bond anticipation note

1,788,316

-

Capital contributions - Rural Development

-

80,767

Capital contributions - FDEP

-

658,952

Membership/customer connection fees

23,658

23,770


NET CASH PROVIDED BY (USED IN) CAPITAL

AND RELATED FINANCING ACTIVITIES (1,690,681) (2,194,068)


CASH FLOWS FROM (USED IN)


INVESTING ACTIVITIES:

Interest earned on investments

54,829

52,327

Purchase of certificate of deposit

-

-


CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

54,829

52,327

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS


1,575,079


576,833

CASH AND CASH EQUIVALENTS-

BEGINNING OF YEAR


8,416,893


7,840,060

CASH AND CASH EQUIVALENTS-

END OF YEAR


$ 9,991,972


$ 8,416,893


The accompanying notes are an integral part of this statement.

Page 6 of 50




RECONCILIATION OF OPERATING PROFIT TO

NET CASH PROVIDED BY OPERATING ACTIVITIES:

2012

2011

OPERATING PROFIT (LOSS)

$ 1,811,611

$ 1,498,898

Adjustments to reconcile operating profit to

net cash provided by operating activities:

Depreciation (non cash)

1,388,852

1,500,000

(Increase) decrease in accounts receivable

(59,353)

(37,161)

(Increase) decrease in other receivable

8,141

455

(Increase) decrease in inventory

(61,513)

(21,336)

(Increase) decrease in prepaid expenses

54,052

(3,915)

Increase (decrease) in accounts payable

10,969

(262,880)

Increase (decrease) in other accrued expenses

1,042

6,382

Increase (decrease) in customer deposits

52,120

32,380

Increase (decrease) in accrued compensated absences


3,734


3,663

TOTAL ADJUSTMENTS

1,398,044

1,217,588

NET CASH PROVIDED BY

OPERATING ACTIVITIES

$ 3,209,655

$ 2,716,486


SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES


During the years ended September 30, 2012 and 2011, the District accepted system improvements donated, after construction, from developers in the amount of $27,834 and $117,176, 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). 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, 2012 to increase total budgeted net operating revenue by $529,314 and a decrease in net expenses (including net non-operating revenue and expense) by

$341,966. This change resulted in a budgeted net loss decrease of $871,280.


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 agreements 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 January 15, 2013, 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, 2012 and 2011, cash and cash equivalents (including both restricted and unrestricted cash and cash equivalents) were $9,991,972 and

$8,416,893, respectively, including unrestricted cash on hand of $2,635 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, 2012 Unrestricted

Insured/ Bank Carrying

Collateralized Balance Amount


Depository accounts

$ 72,621

$ 72,621

$ 26,216

Money market 7,535,473

7,535,473

7,535,473

7,608,094

7,608,094

7,561,689

Restricted

Depository accounts

960,246

960,246

960,246

Money market

1,467,402

1,467,402

1,467,402

2,427,648

2,427,648

2,427,648

$ 10,035,742

$ 10,035,742

$ 9,989,337



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


Unrestricted and Restricted Deposits

The District's deposits were 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:


2012 2011


Construction account

$ 48,573

$ 23,947

Bond sinking fund reserve

1,193,411

1,472,260

Department of Environmental Protection-

Deep Well Injection Reserve

227,918

226,441

Customer deposits

905,046

836,925

Loan debt service

52,700

20,248

$ 2,427,648

$ 2,579,821


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 $525,394 and

$513,941 (bank and book balance) invested in certificates of deposit at September 30, 2012 and 2011, respectively. The CD carried an interest rate of 2.20 % and matured December 4, 2012. The CD was rolled over for sixty (60) months maturing on December 04, 2017.


NOTE C - ACCOUNTS RECEIVABLE


Accounts receivable consist of the following at September 30:

2012 2011


Customer receivables (water/sewer)

$ 544,795

$ 502,521

Less allowance for doubtful accounts

(70,709)

(68,883)

Net receivables

$ 474,086

$ 433,638


The following is a summary of changes in capital asset activity for the year ended September 30, 2012:


Balance Balance

October 1 Adjustments/ September 30

2011 Additions Retirements Reclassifications 2012


Capital Assets Not Being Depreciated:

Land

$ 2,645,941 $

- $ - $

- $ 2,645,941


Construction in Progress

Total Capital Assets Not

4,431,336

1,874,139

-

-

6,305,475

Being Depreciated

7,077,277

1,874,139

-

-

8,951,416


Capital Assets

Being Depreciated:


1,511,233

-

-

-

1,511,233


41,797,108


702,302


-


(173,248)


42,326,162

1,812,780

120,103

-

173,248

2,106,131


45,121,121


822,405


-


-


45,943,526

1,511,233

-

-

-

1,511,233


41,797,108


702,302


-


(173,248)


42,326,162

1,812,780

120,103

-

173,248

2,106,131


45,121,121


822,405


-


-


45,943,526

Buildings & Improvements Water and Wastewater

Plant and Systems Machinery & Equipment

Total Capital Assets Being Depreciated

Less Accumulated Depreciation:

Buildings & Improvements

(586,356

) (37,989

) -

-

(624,345)

Plant and Systems

(22,119,753

) (1,052,770

) -

-

(23,172,523)

Machinery & Equipment

(1,381,080

) (298,093

) -

-

(1,679,173)

Total Accumulated Depreciation

(24,087,189

) (1,388,852

) -

-

(25,476,041)

Capital Assets, Net

$ 28,111,209

$ 1,307,692

$ - $ -

29,418,901

Related debt

(16,220,125)


image

Net assets invested in capital assets, net of related debt


image

$ 13,198,776


The depreciation expense for the years ended September 30, 2012 and 2011 was

$1,388,852 and $1,500,000, respectively. During the years ended September 30, 2012 and 2011, the District continued construction on its system-wide improvements. The District capitalized interest on the project in the amount of $0 and $16,760 for the years ended September 30, 2012 and 2011.


At September 30, 2012, construction in progress was $6,305,475 and consisted of 2 projects.


At September 30, 2011, construction in progress was $4,431,336 and consisted of two (2) projects, which began during the year ended September 30, 2010.


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 three (3%) percent of their gross wages excluding overtime compensation. 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 three (3%) of their gross wages, as defined.

During the years ended September 30, 2012, 2011, and 2010, the District contributed 100% of its required contributions.


The District's gross contributions (employer portion) to the plan for the years ended September 30, 2012, 2011 and 2010 were $90,463, $88,611, and $83,059, respectively. Employee contributions to the plan were $67,705, $79,759, and

$67,697 for the years ended September 30, 2012, 2011, and 2010, 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. 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 - REVENUE BONDS PAYABLE


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


Balances - September 30, 2010

Amount

$14,453,969

Principal retired (366,000)

Bonds issued -

Balances - September 30, 2011 14,087,969

Principal retired (382,000)

Bonds issued -

Balances - September 30, 2012 $13,705,969

image


Revenue 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

2012 2011

system.

$ 820,000

$ 900,000


$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. 284,000 314,000


$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. 346,969 364,969


$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.


2,686,000


2,770,000

$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.


179,000


185,000

$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.


3,465,000


3,543,000

$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.


673,000


687,000



$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.

1,999,000

2,032,000

$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.

3,253,000

3,292,000

Total

Less: current portion

13,705,969

14,087,969

(due in one year)

(400,000)

(382,000)

Long-term portion

$13,305,969

$13,705,969


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, 2012 and 2011, were maintained and are reflected as restricted deposits within these financial statements.


A summary of revenue bond debt service requirements to maturity is as follows September 30:


Year Ending

September 30


Principal


Interest


Total

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

487,000

571,438

1,058,438

2018-2022

2,458,000

2,484,019

4,942,019

2023-2027

2,464,969

1,903,440

4,368,409

2028-2032

2,749,000

1,260,215

4,009,215

2033-2037

1,876,000

662,961

2,538,961

2038-2042

1,141,000

317,481

1,458,481

2043-2047

806,000

108,763

914,763

$ 13,705,969

$ 9,810,529

$ 23,516,498


Revenue bond debt interest expense was $674,657 and $691,101 for the years ended September 30, 2012 and 2011, respectively. No revenue bond debt interest expense was capitalized in either year.


NOTE G - LOANS PAYABLE - SRF


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


DEP.SRF

DW110120

DEP.SRF

DW110121


Total

Balance-September 30, 2010

$ 364,979

-

$ 364,979

Proceeds Principal retired

54,702

-

335,504

-

390,206

-

Balance-September 30, 2011

419,681

335,504

755,185

Principal retired

(16,055)

(13,290)

(29,345)

Balance-September 30, 2012

$ 403,626

$ 322,214

$ 725,840


The loans payable - SRF activity for the year ended September 30 is as follows:

2012 2011

$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 required 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.

$ 403,626

$ 419,681

$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. 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.


322,214


335,504

Total loans payable

725,840

755,185

Less current portion:

(30,020)

(39,145)

$ 695,820

$ 716,040

Year Ending

September 30 Principal Interest Total


2013

$ 30,020

$ 18,575

$ 48,595

2014

30,800

17,795

48,595

2015

31,601

16,994

48,595

2016

32,423

16,172

48,595

2017

33,267

15,328

48,595

2018-2022

179,775

63,200

242,975

2023-2027

204,417

38,558

242,975

2028-2031

183,537

10,845

194,382

$ 725,840

$ 197,467

$ 923,307


Loans payable - SRF related interest expense was $17,320 and $0 for the years ended September 30, 2012 and 2011, respectively. However, loan interest costs of $0 and $16,760 were capitalized for the years ended September 30, 2012 and 2011, respectively.


NOTE H - BOND ANTICIPATION NOTE


The following is a summary of the District's Bond Anticipation Note payable for the year ended September 30:


Amount

Balances - September 30, 2011 $ -

Principal retired -

Bond proceeds 1,788,316


Balances - September 30, 2012 $ 1,788,316

image


Bond Anticipation Note payable is comprised of the following at September 30:


2012 2011

$4,932,000 Bond Anticipation Note (BAN) payable, issued June 4, 2012 through a financial institution. Principal is payable June 4, 2014; interest payable semi-annually on October 30 and April 30 beginning October 30, 2012 at the rate of 3%; collateralized by first party lien on the USDA Rural Development, Takeout Commitment. In addition, the BAN is collateralized by a subordinate lien on the District's system

revenues. 1,788,316 -

Total loans payable 1,788,316 - Less current portion: - -


$ 1,788,316 $ -

image image


Bond Anticipation Note Covenants

The bond anticipation note covenants established certain covenants including such items as debt service coverage and reporting requirements. Management believes that it has complied, in all material respects, with these covenants, at September 30, 2012.


A summary of the bond anticipation note debt service requirements to maturity is as follows September 30:


Year Ending

September 30


Principal Interest Total

2013

$ - $ 53,649 $ 53,649

2014

1,788,316 53,649 1,841,965

$ 1,788,316 $ 107,298 $ 1,895,614


image

image

Interest expense on the BAN was $0 and $0 for the years ended September 30, 2012 and 2011, respectively. No BAN debt interest expense was capitalized in either year.


NOTE I - 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, 2010 $ 205,948

Proceeds from issuance -

Principal retired (107,493)

Balances, September 30, 2011 98,455 Proceeds from issuance -

Principal retired (98,455)

Balances, September 30, 2012 $ -


Notes payable is comprised of the following at September 30:



2012

2011

$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 ranged between 5.5% and 5.75% per year.


$ -


$ 98,455

Less: Current Portion

-

(92,496)

Long Term Portion

$ -

$ 5,959


The District incurred interest expense related to the notes payable for the years ended September 30, 2012 and 2011, in the amount of $3,443 and $9,077, respectively.


NOTE J - 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 Prime Rate. The LOC was due in full on December 17, 2011. The LOC maturity date was extended until April 30, 2013.

Interest rate at September 30, 2012 was 3.25%.


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, 2010

Amount


$ 59,658

Net Increase 3,663

Accrued compensated absences,

September 30, 2011 63,321

Net Increase 3,734

Accrued compensated absences,

September 30, 2012 $ 67,055

image


NOTE L - COMMITMENTS AND CONTINGENCIES


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 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, 2014. 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 $217,331.


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, 2012, the District did enter into a Bond Anticipation Note (BAN) Payable with a financial institution in the amount of

$4,932,000 to fund the initial costs of the project. The loan term are disclosed in detail in Note H.


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.


Contracts

During September, 2012, the District approved a contract for the acquisition of a sludge processing facility which will cost approximately $2,000,000. The purchase of the facility is intended to reduce operating costs. The District is currently comparing financing options.


Unrestricted net assets consist of the following at September 30:

2012 2011


Designated for emergencies

$ 560,000

$ 460,000

Designated for operations

2,501,146

2,497,721

Designated for vehicle replacement

267,025

217,025

Designated for capital equipment

215,865

224,444

Designated for maintenance reserve

1,182,877

942,822

Total Designated

4,726,913

4,342,012

Undesignated

4,054,556

2,989,771


Total unrestricted net assets

$ 8,781,469 $

7,331,783

image image


NOTE N - 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.


NOTE O - SUBSEQUENT EVENT


Effective November 1, 2012, the District implemented as IRS Code Section 457 Deferred Compensation Plan. Any District employee at least eighteen (18) years old and after completion of three (3) months continuous employment is eligible for Plan participation. Employer and employee contributions are permissible under the Plan.


REQUIRED SUPPLEMENTARY INFORMATION

OTHER THAN MD&A


Budget Budget Actual Variance

OPERATING REVENUES


Cross connection control fee

$ 252,000

$ 278,590

$ 278,590

$ -

Water service

2,244,634

2,425,186

2,425,186

-

Wastewater service

3,733,132

4,027,022

4,027,021

(1)

Meter service charge

464,161

493,946

493,946

-

Late fees

76,544

79,620

79,620

-

Reconnect and transfer fees

107,965

109,825

109,825

-

Miscellaneous charges, fees and other income

41,051

34,612

78,805

44,193

TOTAL OPERATING REVENUES

6,919,487

7,448,801

7,492,993

44,192


OPERATING EXPENSES

WATER PLANTS / DISTRIBUTION


Salaries and wages

493,970

475,504

475,502

2

Overtime

12,534

-

-

-

FICA

38,747

37,419

37,419

-

Unemployment taxes

4,480

5,080

5,080

-

Employer pension contribution

29,638

27,426

27,426

-

Health/life insurance

176,929

180,078

180,078

-

Workers' compensation

25,815

26,922

15,909

11,013

Travel and training

16,500

9,419

9,419

-

Telephone and fax

8,662

5,509

5,509

-

Electric

180,694

160,789

160,789

-

General liability insurance

14,439

14,649

14,649

-

Comprehensive auto insurance

7,835

7,835

7,835

-

Other insurance

64,975

64,975

64,975

-

Repairs and maintenance

137,867

88,113

63,114

24,999

Other contract services

41,986

52,044

27,044

25,000

Vehicle fuel

47,023

39,437

39,437

-

Vehicle maintenance

18,721

11,282

9,363

1,919

Licenses and permits

5,881

234

234

-

Chemicals

64,896

75,545

75,545

-

Other materials

75,983

99,893

54,899

44,994

Laboratory fees

28,950

35,049

35,049

-

Uniforms/clothing allowance

3,000

2,729

2,729

-

Memberships/periodicals/books

1,050

1,014

1,014

-

SUB-TOTAL WATER PLANTS/DISTRIBUTION

1,500,575

1,420,945

1,313,018

107,927


The accompanying notes are an integral part of this statement.


Budget Budget Actual Variance

WASTEWATER PLANT


Salaries and wages

321,094

337,742

337,742

-

Overtime

15,270

6,083

6,083

-

FICA

25,732

26,025

26,025

-

Unemployment taxes

2,240

3,264

3,264

-

Employer pension contribution

19,266

17,059

17,059

-

Health/life insurance

95,263

102,485

102,485

-

Workers' compensation

12,220

12,416

12,416

-

Travel and training

9,000

3,967

3,967

-

Telephone and fax

3,052

2,744

2,744

-

Electric

207,224

176,386

176,386

-

Section 8 electric

14,510

12,036

12,036

-

General liability insurance

15,518

14,649

14,649

-

Comprehensive auto insurance

3,561

3,561

3,561

-

Other insurance

61,154

61,154

61,154

-

Section 8 field maintenance

23,268

-

-

-

Repairs and maintenance

101,740

102,577

70,407

32,170

Section 8 repairs

21,085

2,532

2,532

-

Other contract services

1,939

17,255

17,255

-

Vehicle fuel

16,017

13,824

13,824

-

Vehicle maintenance

11,601

4,004

-

4,004

Licenses and permits

2,141

600

600

-

Chemicals

21,416

27,176

27,176

-

Other materials

44,680

39,731

1,468

38,263

Laboratory fees

22,273

19,219

19,219

-

Residuals management

439,039

417,576

417,576

-

Uniforms/clothing allowance

1,750

1,288

1,288

-

Memberships/periodicals/books

524

531

531

-

SUB-TOTAL WASTEWATER PLANT

1,512,577

1,425,884

1,351,447

74,437


The accompanying notes are an integral part of this statement.


WASTEWATER COLLECTION


Salaries and wages

188,003

188,377

188,378

(1)

Overtime

4,460

1,475

1,475

-

FICA

14,723

14,190

14,190

-

Unemployment taxes

1,680

1,991

1,991

-

Employer pension contribution

11,280

10,182

10,182

-

Health/life insurance

60,848

64,208

64,208

-

Workers' compensation

7,046

7,437

7,437

-

Travel and training

7,500

2,776

2,776

-

Telephone and fax

1,768

1,284

1,284

-

Electric

43,845

30,019

30,019

-

General liability insurance

15,518

14,649

14,649

-

Comprehensive auto insurance

3,561

4,273

4,273

-

Other insurance

956

956

956

-

Repairs and maintenance

71,876

56,167

21,262

34,905

Other contract services

441

925

925

-

Vehicle fuel

16,174

14,885

14,885

-

Vehicle maintenance

13,432

5,864

5,486

378

Licenses and permits

578

100

100

-

Chemicals

1,090

1,090

-

1,090

Other materials

17,237

17,237

9,014

8,223

Uniforms/clothing allowance

1,250

628

628

-

Memberships/periodicals/books

346

289

289

-

SUB-TOTAL WASTEWATER COLLECTION

483,612

439,002

394,407

44,595


The accompanying notes are an integral part of this statement.



CUSTOMER SERVICE / ADMIN


Salaries and wages

415,008

410,655

410,655

-

Overtime

1,597

3,273

3,273

-

FICA

31,870

30,566

30,566

-

Unemployment taxes

3,640

4,202

4,202

-

Employer pension contribution

24,900

23,854

23,854

-

Health/life insurance

129,738

127,579

121,579

6,000

Workers' compensation

2,330

2,311

2,311

-

Legal services

37,000

35,000

30,000

5,000

Other professional services

1,500

32,000

-

32,000

Accounting/auditing

50,952

50,030

48,030

2,000

Engineering services

240,000

115,508

95,508

20,000

Engineering services/SRF

-

-

-

-

Travel and training

15,000

11,168

9,968

1,200

Telephone and fax

4,625

5,173

5,173

-

Postage and freight

40,418

39,021

39,021

-

General liability insurance

2,656

2,725

2,725

-

Comprehensive auto insurance

712

712

712

-

Other insurance

18,772

16,997

16,997

-

Other contract services

19,649

39,866

40,527

(661)

Repairs and maintenance

19,456

33,651

33,651

-

Vehicle fuel

551

339

339

-

Vehicle maintenance

1,260

1,125

1,125

-

Office supplies

30,292

17,537

17,537

-

Miscellaneous office expense

14,343

20,117

19,572

545

Miscellaneous bank fees

4,646

5,598

5,598

-

Miscellaneous expense

628

416

332

84

Advertising

3,101

3,316

3,316

-

Licenses and permits

242

935

935

-

Memberships/periodicals/books

7,759

5,983

5,983

-

SUB-TOTAL CUSTOMER SERVICE / ADMIN

1,122,645

1,039,657

973,489

66,168


The accompanying notes are an integral part of this statement.



MAINTENANCE


Salaries and wages

217,717

130,083

130,081

2

Overtime

7,910

-

-

-

FICA

17,260

9,956

9,956

-

Unemployment taxes

1,680

892

892

-

Employer pension contribution

13,063

11,942

11,942

-

Health/life insurance

48,550

55,009

55,009

-

Workers' compensation

8,226

8,331

8,331

-

Travel and training

6,000

4,919

4,919

-

Telephone and fax

2,051

1,927

1,927

-

General liability insurance

2,157

2,157

2,157

-

Comprehensive auto insurance

5,698

5,698

5,698

-

Repairs and maintenance

4,123

3,419

3,419

-

Other contract services

2,557

1,141

1,141

-

Vehicle fuel

10,925

8,888

8,888

-

Vehicle maintenance

15,364

6,268

6,233

35

Licenses and permits

968

968

-

968

Other materials

16,738

16,197

8,454

7,743

Uniforms/clothing allowance

1,500

882

882

-

Memberships/periodicals/books

397

240

240

-

SUB-TOTAL MAINTENANCE

382,884

268,917

260,169

8,748

DEPRECIATION

Depreciation


1,450,000


1,450,000


1,388,852


61,148

SUB-TOTAL DEPRECIATION

1,450,000

1,450,000

1,388,852

61,148

TOTAL OPERATING EXPENSES

6,452,293

6,044,405

5,681,382

363,023

OPERATING PROFIT

$ 467,194

$ 1,404,396

$ 1,811,611

$ 407,215


The accompanying notes are an integral part of this statement.


Original

Budget

Final

Budget


Actual


Variance

OPERATING PROFIT,

BROUGHT FORWARD

$ 467,194

$ 1,404,396

$ 1,811,611

$ 407,215


NON-OPERATING REVENUES (EXPENSES)

Interest income

Contributed capital - grant - FDEP/EPA Contributed capital - grant - USDA/FHA

58,000

- 3,156,000

66,282

- 3,156,000

66,282

-

-

-

- (3,156,000)

Contributed capital - customers

28,982

23,000

23,658

658

Contributed capital - developers

70,000

26,000

27,834

1,834

Debt proceeds - USDA

4,481,458

4,481,458

-

(4,481,458)

Debt proceeds -FCB

-

1,885,000

1,788,316

(96,684)

Other non-operating revenue

49,299

45,467

1,276

(44,191)

Capital expenditures

(7,736,440)

(7,911,781)

(2,696,547)

5,215,234

Principal retirement - bonds

(419,760)

(2,304,759)

(382,000)

1,922,759

Principal retirement - vehicle notes

(92,496)

(92,496)

(98,455)

(5,959)

Maintenance reserve

(240,055)

(240,055)

-

240,055

Interest expense

(873,701)

(733,751)

(695,420)

38,331

Bad debt expense

(35,000)

(20,000)

(18,905)

1,095

Loss on disposal of assets

(25,000)

(25,000)

-

25,000

NET NON-OPERATING

REVENUES (EXPENSES)

(1,578,713)

(1,644,635)

(1,983,961)

(339,326)

NET PROFIT (LOSS)

$ (1,111,519)

$ (240,239)

$ (172,350)

$ 67,889


Reconciliation:


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

$ (172,350)

Loan proceeds

(1,788,316)

Capital outlay

2,696,547

Principal retirement - bonds

382,000

Principal retirement - vehicle notes

98,455

Increase in Net Assets (GAAP Basis)

1,216,336

Net assets - beginning of the year

21,696,252

Net assets - end of the year

$ 22,912,588


The accompanying notes are an integral part of this statement.



Grantor Agency/Program Title


Federal

image

CFDA Award Revenue/ Expenses/ Number Amount Receipts Disbursements


U.S. Department of Agriculture - Rural Development

Type A Program

ARRA-Water and Waste Disposal Systems for Rural Communities - Loan

(WWDL) (Stimulus/ARRA)* 10.781


$ 4,932,000 $


- $ 1,874,139


ARRA-Water and Waste Disposal

10.781

3,156,000

-

-

8,088,000

-

1,874,139


10.760


269,300


-


-

$ 8,357,300

$ -

$ 1,874,139

10.781

3,156,000

-

-

8,088,000

-

1,874,139


10.760


269,300


-


-

$ 8,357,300

$ -

$ 1,874,139

Systems for Rural Communities - Grant (WWDG) (Stimulus/ARRA)


Water and Waste Disposal

Systems for Rural Communities - Grant (WWDG)


* To be initially funded through private funding sources, 2012 BAN payable.


The accompanying notes are an integral part of this statement.


Year ended September 30, 2012


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


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Affiliations

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

Private Companies Practice Section

Tax Division


Page 41 of 50


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, 2012, and have issued our report thereon dated January 15, 2013.

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 42 of 50


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.


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.


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.


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TUSCAN & COMPANY, P.A.

Fort Myers, Florida January 15, 2013



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Affiliations

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

Private Companies Practice Section

Tax Division


Page 43 of 50

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, 2012.

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, 2012.


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.

T!::::cOtPt;;l;J If) A.

Fort Myers, Florida January 15, 2013


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

10.781 U.S. Department of Agriculture - Water and Waste Disposal Systems for Rural Communities - ARRA


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, 2012.



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Affiliations

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

Private Companies Practice Section

Tax Division


Page 48 of 50


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, 2012 and have issued our report thereon dated January 15, 2013.


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 January 15, 2013, 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:


No financially significant comments noted.


PRIOR YEAR COMMENTS THAT CONTINUE TO APPLY:


Prior year comments appear to have been resolved.


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, Audit Committee, management, federal and state awarding agencies, pass through entities, 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 January 15, 2013


EXHIBIT

..

..

Immokalee Water & Sewer District

.

.

1020 Sanitation Road

.

.

. (239) 658-3630

. (239) 658-3630

.. Immokalee, Florida 34142

. FAX (239) 658-3634

Immokalee Water & Sewer District


February 14, 2013


David W. Martin, CPA

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


Dear Mr. Martin:


This letter is in response to the Management Letter in the District's Year Ending September 30, 2012 audit, performed by Tuscan & Company, P.A.; which was presented to the Board on February 20, 2013 and accepted by the Board on February 20, 2013.


We are pleased to note that the audit report reflected no current year or prior year comments which require management’s response.


Management and staff of the District have worked diligently to resolve past audit comments to insure the financial stability of the District.


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,

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Eva J. Deyo, Executive Director