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NNFCRD Financial Statements 09/30/2001
NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT GENERAL PURPOSE FINANCIAL STATEMENTS TOGETHER WITH REPORTS OF INDEPENDENT AUDITOR YEAR ENDED SEPTEMBER 30, 2001 TABLE OF CONTENTS Page(s) Independent Auditor's Report 1-2 General Purpose Financial Statements Combined Balance Sheet -All Fund Types and Account Groups 3 Combined Statement of Revenue, Expenditures and Changes in Fund Balance- Governmental Funds and Expendable Trust Fund 4 Combined Statement of Revenue, Expenditures and Changes in Fund Balance - - Budget and Actual - Governmental Funds and Expendable Trust Fund 5 Statement of Changes in Plan Net Assets - - Pension Trust Funds 6 Statement of Changes in Assets and Liabilities - - Agency Fund 7 Notes to the General Purpose Financial Statements 8-38 Supplementary Information Combining Detailed Statement of Revenue, Expenditures and Changes in Fund Balance - Budget and Actual - Governmental Funds and Expendable Trust Fund 39-41 Combining Balance Sheet - Special Revenue Funds 42 Combining Statement of Revenue, Expenditures and Changes in Fund Balance - Special Revenue Funds 43 Combining Statement of Revenue, Expenditures and Changes in Fund Balance - Budget and Actual - Special Revenue Funds 44-45 TABLE OF CONTENTS (continued) Page(s) Additional Reports of Independent Auditor Independent Auditor's Report on Compliance and on Internal Control over Financial Reporting Based on an Audit of General Purpose Financial Statements Performed in Accordance with Government Auditing Standards 46-48 Independent Auditor's Report to Management 49-64 Management's Response to Independent Auditor's Report to Management Exhibit Marham Member American Institute of Certified Public Accountants Tax Division - NortonStro8r/18r(� �(� Management Consulting Services Division Com,any P.A.. Florida Institute of Certified Public Accountants — Business Consultants / Certified Public Accountants Government Finance Officers Association Florida Association of Special Districts Financial Consulting Group INDEPENDENT AUDITOR'S REPORT Board of Commissioners North Naples Fire Control and Rescue District 1885 Veterans Park Drive Naples, Florida 34110 We have audited the accompanying general purpose financial statements of North Naples Fire Control and Rescue District (the "District") as of September 30, 2001 and for the year then ended. These general purpose financial statements are the responsibility of the District's management. Our responsibility is to express an opinion on these general purpose financial statements based on our audit. We did not audit the financial statements of North Naples Fire Control and Rescue District Firefighters' Pension Fund, which represent 58% of the assets of the District's Fiduciary Fund Types and 94%of the revenue of the Pension Trust Funds. Those financial statements were audited by other auditors whose report has been furnished to us, and our opinion, in so far as it relates to the amounts included for North Naples Fire Control and Rescue District Firefighters' Pension Fund is based on the report of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the general purpose financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall general purpose financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The values of land, buildings & improvements, vehicles & equipment, firefighter equipment and furniture & fixtures reported in the General Fixed Assets Account Group represent 98% of the District's investment in general fixed assets. The respective subsidiary accounts or other documentation showing the actual or estimated historical cost of these individual assets were not adequate to support the total reported value of these assets. It was not practical in the circumstances to apply alternate auditing procedures to determine the fairness of the amounts reported. In our opinion, except for the amounts reported as land, buildings & improvements,vehicles & equipment, firefighter equipment and furniture & fixtures in the General Fixed Assets Account Group, based on our audit and the report of other auditors, the general purpose financial statements referred to above present fairly, in all material respects,the financial position of North Naples Fire Control 8961 Conference Drive•Fort Myers,FL 33919•(239)433-5554•Fax(239)433-2824•Toll Free(888)457-7360 3838 Tamiami Trail North,Suite 302•Naples,FL 34103•(239)434-7556•Fax(239)434-6480 Web Site:www.mnscpa.com Board of Commissioners North Naples Fire Control and Rescue District Page 2 and Rescue District as of September 30, 2001, and the results of its operations for the year 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 our report dated May 20, 2002, on our consideration of the District's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations and contracts. That report is an integral part of an audit performed in accordance with Government Auditing Standards, and should be read in conjunction with this report in considering the results of our audit. As more fully described in the "Independent Auditor's Report on Compliance and on Internal Control over Financial Reporting Based on an Audit of General Purpose Financial Statements Performed in Accordance with Government Auditing Standards," we noted the District had reportable conditions related to the disbursement, recording, and reporting of transactions. Additionally, the District's supervisory controls did not detect the reportable conditions in a timely manner. We also noted an inordinate amount of adjusting journal entries and multiple and duplicate check sequences. Procedures were extended and corrections to known misclassifications were posted. It was not practical under the circumstances to further apply alternative auditing procedures to determine the further existence of posting misclassifications. As more fully described in our "Independent Auditors Report to Management" we tested the District's financial condition and noted certain factors indicating a potential deteriorating financial condition. These factors result, in part, from the District's rapid growth, the practice of annually expending more than annual revenue and not establishing reserves or a five (5) year plan. These factors are mitigated by an increasing tax base, continued construction within the District, continuation of impact fee receipts and a renewed commitment from the Board and management to implement corrective action. The District has sustained a level millage rate assessment. It is important for the District to monitor its expenditures and manage its budget to improve its financial condition. Our audit was made for the purpose of forming an opinion on the general purpose financial statements of North Naples Fire Control and Rescue District taken as a whole. The supplementary information included on pages 39 through 45 is presented for purposes of additional analysis and is not a required part of the general purpose financial statements of the North Naples Fire Control and Rescue District. Such information has not been subjected to the auditing procedures applied in the audit of the general purpose financial statements; and, accordingly, we express no opinion on it. M 04114,04.) da044VV Cr..&1411Pelt^ 11‘41 4- • MARKHAM NORTON STROEMER & COMPANY, P.A. Fort Myers, Florida May 20, 2002 Page 3 of 64 r. Fiduciary Fund Types Account Groups Totals a Firefighters' General Code Inspection General General Pension Employees' Enforcement Fees Fixed Long-Term (Memorandum a Fund Pension Fund Fund Fund Assets Debt Only) ^ $ 162,241 $ 85,212 $ 718,506 $ 9,485 $ - $ - $ 1,264,841 1,034,925 - - - - - 4,063,200 - - 73,102 - 79,209 46,600 436,094 - 29,073 67,963 - - - 646,104 89,726 - 4,125 - - - 133,671 - 14,380,058 - 14,380,058 a "' - - _ - 790,933 790,933 $ 1,359,994 $ 114,285 $ 869,803 $ 56,085 $ 14,380,058. $ 790,933 $ 21,714,901 $ 4,982 $ - $ 17,101 $ - $ - $ - $ 398,472 - - 388 - 20,125 - - 20,513 _ - 87,175 204,640 35,960 - - 646,104 - 26,722 - - - - 26,722 - - -- - 6,000 - - - - 1,112,606 - - - - 1,820,977 ^ -- - - 279,797 279,797 - - - - - 511,136 511,136 a. 4,982 114,285 221,741 56,085 - 790,933 4,822,327 a a - - - - 14,380,058 - 14,380,058 a - - - - _ - 551,496 - - - - - - (42,054) a 1,355,012 - 648,062 - - - 2,003,074 a 1,355,012 - 648,062 - 14,380,058 - 16,892,574 a $ 1,359,994 $ 114,285 $ 869,803 $ 56,085 $ 14,380,058 $ 790,933 $ 21,714,901. .. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 4 of 64 COMBINED STATEMENT OF REVENUE,EXPENDITURES AND CHANGES IN FUND BALANCE - GOVERNMENTAL FUNDS AND EXPENDABLE TRUST FUND Year Ended September 30,2001 Expendable Governmental Funds Trust Fund Totals Special Debt Code General Revenue Service Enforcement(Memorandum .. REVENUE Fund Funds Fund Fund Only) Ad Valorem taxes $ 10,119,221 $ - $ - $ - $ 10,119,221 Fees: Inspection fees 289,034 - - 289,034 Impact fees - 935,945 - - 935,945 Hydrant fees - 29,500 - - 29,500 Plan review fees - - - 818,200 818,200 Miscellaneous: Interest 244,213 3,650 2,163 14,329 264,355 Other 422,433 - - 37,281 459,714 TOTAL REVENUE 11,074,901 969,095 2,163 869,810 12,915,969 .-. EXPENDITURES Current , Public safety Personal services 9,382,384 - 199,883 491,496 10,073,763 Operating expenditures 1,596,196 64,797 - 95,244 1,756,237 Capital outlay 58,911 773,488 - 74,040 906,439 Debt service Principal reduction - 38,699 - - 38,699 Interest and fiscal charges 42,228 100,041 - - 142,269 TOTAL EXPENDITURES 11,079,719 977,025 199,883 660,780 12,917,407 EXCESS OF REVENUE . . OVER(UNDER)EXPENDITURES (4,818) (7,930) (197,720) 209,030 (1,438) FUND BALANCE,October 1,2000 556,314 101,679 61,917 439,032 1,158,942 FUND BALANCE,September 30,2001 $ 551,496 $ 93,749 $ (135,803) $ 648,062 $ 1,157,504 1 , I The accompanying notes are an integral part of this statement. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT COMBINED STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL - GOVERNMENTAL FUNDS AND EXPENDABLE TRUST FUND Year Ended September 30, 2001 Governmental Funds General Fund Special Revenue Funds Variance Variance Favorable Favorable ^ Budget Actual (Unfavorable) Budget Actual (Unfavorable) REVENUE Ad Valorem taxes $ 10,200,000 $ 10,119,221 $ (80,779) $ - $ - $ - - Fees: Inspection fees 285,000 289,034 4,034 - - - Impact fees - - - 1,400,000 935,945 (464,055) Hydrant fees - - - 53,400 29,500 (23,900) Plan review fees - - - - - - Miscellaneous: Interest 261,000 244,213 (16,787) 140,000 3,650 (136,350) Other 310,000 422,433 112,433 - - - TOTAL REVENUE 11,056,000 11,074,901 18,901 1,593,400 969,095 (624,305) EXPENDITURES - Current Public safety Personal services 9,528,290 9,382,384 145,906 - - - Operating expenditures 1,580,727 1,596,196 (15,469) 66,747 64,797 1,950 Capital outlay 59,300 58,911 389 1,214,500 773,488 441,012 Debt service Principal reduction - - - - 38,699 (38,699) ', Interest and fiscal charges 46,000 42,228 3,772 95,000 100,041 (5,041) ANN TOTAL EXPENDITURES 11,214,317 11,079,719 134,598 1,376,247 977,025 399,222 EXCESS OF REVENUE OVER(UNDER)EXPENDITURES (158,317) (4,818) 153,499 217,153 (7,930) (225,083) FUND BALANCE,October 1,2000 556,000 556,314 314 95,360 101,679 6,319 FUND BALANCE, September 30,2001 $ 397,683 $ 551,496 $ 153,813 $ 312,513 $ 93,749 $ (218,764) - The accompanying notes are an integral part of this statement. Page 5 of 64 Expendable Trust Fund Code Enforcement Totals-Memorandum Only Variance Variance Favorable Favorable Budget Actual (Unfavorable) Budget Actual (Unfavorable) $ - $ - $ - $ 10,200,000 $ 10,119,221 $ (80,779) 285,000 289,034 4,034 - 1,400,000 935,945 (464,055) 53,400 29,500 (23,900) 656,137 818,200 162,063 656,137 818,200 162,063 - 14,329 14,329 401,000 262,192 (138,808) - 37,281 37,281 310,000 459,714 149,714 656,137 869,810 213,673 13,305,537 12,913,806 (391,731) 506,335 491,496 14,839 10,034,625 9,873,880 160,745 98,032 95,244 2,788 1,745,506 1,756,237 (10,731) 75,000 74,040 960 1,348,800 906,439 442,361 38,699 (38,699) 141,000 142,269 (1,269) 679,367 660,780 18,587 13,269,931 12,717,524 552,407 (23,230) 209,030 232,260 35,606 196,282 160,676 400,000 439,032 39,032 1,051,360 1,097,025 45,665 $ 376,770 $ 648,062 $ 271,292 S 1,086,966 $ 1,293,307 $ 206,341 NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 6 of 64 STATEMENT OF CHANGES IN PLAN NET ASSETS - PENSION TRUST FUNDS Year Ended September 30, 2001 Fiduciary Fund Types General Firefighters' Employees' Pension Pension Fund Fund Totals ADDITIONS Contributions: Employer $ 305,603 $ 29,073 $ 334,676 Plan members, made by employer on behalf of employee 18,053 - 18,053 State of Florida, insurance premiums 212,220 - 212,220 Total contributions 535,876 29,073 564,949 Investment income: Net depreciation in fair value of investments (56,282) - (56,282) Interest and dividends 40,256 2,915 43,171 (16,026) 2,915 (13,111) Less: investment expenses (9,714) - (9,714) Net investment income (25,740) 2,915 (22,825) TOTAL ADDITIONS 510,136 31,988 542,124 DEDUCTIONS Benefits paid 27,110 27,110 Refund of contributions - 87,175 87,175 Administrative expenses 23,280 2,098 25,378 Other 1,767 - 1,767 TOTAL DEDUCTIONS 25,047 116,383 141,430 NET INCREASE (DECREASE)IN PLAN ASSETS 485,089 (84,395) 400,694 NET PLAN ASSETS, October 1, 2000 869,923 84,395 954,318 NET PLAN ASSETS, September 30,2001 $ 1,355,012 $ - $ 1,355,012 The accompanying notes are an integral part of this statement. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 7 of 64 STATEMENT OF CHANGES IN ASSETS AND LIABILITIES - AGENCY FUND Year Ended September 30, 2001 Balance - Balance- October 1, September 30, 2000 Additions Deletions 2001 Inspection Fees Fund ASSETS Cash $ 40,672 $ 464,483 $ (495,670) $ 9,485 Due from other governments 32,489 46,600 (32,489) 46,600 TOTAL ASSETS $ 73,161 $ 511,083 $ (528,159) $ 56,085 LIABILITIES Due to other governments $ 11,868 $ 186,599 $ (178,342) $ 20,125 Due to other funds 61,293 35,960 (61,293) 35,960 TOTAL LIABILITIES $ 73,161 $ 222,559 $ (239,635) $ 56,085 The accompanying notes are an integral part of this statement. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 8 of 64 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2001 NOTE A- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization The North Naples Fire Control and Rescue District(the "District") is an independent special taxing district located in northern Collier County, Florida. The District was originally established by Laws of Florida, Chapter 61-2032 and Florida Statute 633.15, then reestablished by Laws of Florida Chapter 84-416, as amended. The District's governing legislation was recreated, reenacted and codified by Laws of Florida, Chapter 99-450 on July 13, 1999. The District is governed by a five-member(5) elected Board of Commissioners. Commissioners serve on a staggered four-year (4) term basis. The District provides fire control and protection services, fire safety inspections, code enforcement, fire hydrant maintenance, firefighter training, and crash and fire rescue services as well as advanced life support services. In providing these services, the District operates and maintains six (6) stations and the related equipment and employs approximately 120 full-time professional firefighters and administrative staff. Reporting entity The District has adopted Governmental Accounting Standards Board (GASB) Statement Number 14, "Financial Reporting Entity." This statement requires the financial statements of the District (the primary government) to include its component units, if any. A component unit is a legally separate organization for which the elected officials of the primary government are financially accountable. Based on the criteria established in GASB 14, there are no component units included in the District's financial statements. Fund accounting The accounts of the District are organized on the basis of funds and account groups, each of which is considered a separate accounting entity. The operations of the funds are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, and revenue and expenditures, as appropriate. Government resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. The various funds are grouped in the general purpose financial statements into generic fund types, as follows: NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 9 of 64 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2001 NOTE A- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED Fund accounting, continued Governmental Fund Types: General Fund - The General Fund is the general operating fund of the District. It is used to account for all District financial resources, except those required to be accounted for in another fund. Special Revenue Funds - Special Revenue Funds are used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes. The District has two special revenue funds: an Impact Fee Fund and a Hydrant Fund. The Impact Fee Fund consists of fees collected by Collier County based on new construction within the District. The fees are restricted and can only be used for certain capital expenditures associated with growth within the District. Hydrant fees are one-time fees collected from new construction for fire hydrant maintenance. Debt Service Fund- The Debt Service Fund is used to account for resources to be used for the payment of compensated absences accounted for in the General Long-Term Debt Account Group. Fiduciary Funds - Fiduciary Funds account for assets held by the government in a trustee capacity or as an agent on behalf of others. Trust funds account for assets held by the government under the terms of a formal trust agreement. The District has four fiduciary funds: a Firefighters' Pension Fund and General Employees' _ Pension Fund used to account for all the assets of the respective pension plans; an Expendable Trust Fund- Code Enforcement, used to account for the financial -- activity of the code enforcement function of Collier County, which is monitored by a committee representing each fire district in the County; the Code Enforcement Fund retains a fifteen (15%) percent administrative fee to fund its operations, with excess revenues being retained until two (2) times the fund's annual budget is held in reserve; and an Agency Fund- Inspection Fees, used to collect building inspection fees from Collier County and distribute them to the fire districts within the County, of which North Naples Fire Control and Rescue District retains a one (1%) percent administrative fee. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 10 of 64 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2001 NOTE A- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED Fund accounting, continued Account Groups: General Fixed Assets -This account group is used to account for all fixed assets of the District. General Long-Team Debt- This account is used to account for long-term obligations of the District, including accrued compensated absences and a capital lease. Measurement focus Governmental Fund Types - The General Fund, Special Revenue Funds and Debt Service Fund are accounted for on a "spending" or "financial flow" measurement focus. This means that only current assets and current liabilities are generally included on the balance sheet. Accordingly, the reported unreserved fund balance (net current assets) is considered a measure of available, spendable or appropriable resources. Governmental Fund Type operating statements present increases (revenue and other financing sources, if any) and decreases (expenditures and other financing uses, if any) in net current assets. Fiduciary Fund Types - Pension Trust Funds are accounted for on an "economic resources" measurement focus. Accordingly, all assets and liabilities are included on their balance sheets, and the reported fund equities (total reported assets less total reported liabilities) provide an indication of the economic net worth of the funds. Operating statements for Pension Trust Funds report increases (additions) (revenues) and decreases (deductions) (expenses) in total economic net worth. The Expendable Trust Fund is accounted for in essentially the same manner as governmental funds. The Agency fund is custodial in nature (assets equal liabilities) and does not involve measurement of the results of operations. Account Groups - The General Fixed Assets Account Group and the General Long-Term Debt Account Group are concerned only with the measurement of financial position. They are not involved with the measurement of results of operations. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 11 of 64 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2001 NOTE A- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED Basis of accounting Basis of accounting refers to when revenue and expenditures are recognized in the accounts and reported in the general purpose financial statements. Basis of accounting relates to the timing of the measurement made, regardless of the measurement focus applied. The Governmental Funds, Expendable Trust Fund and Agency Fund are accounted for using the modified accrual basis of accounting, whereby revenue is recognized when it becomes measurable and available as net current assets. Taxpayer assessed income and gross receipts are considered"measurable" when in the hands of intermediary collecting governments and are recognized as revenue at that time. Anticipated refunds of such taxes are recorded as liabilities and reductions of revenue when they become measurable and their validity seems certain. Expenditures are generally recognized under the modified accrual basis of accounting when the related fund liability is incurred. Exceptions to this general rule include: (1) principal and interest on general long-term debt, if any, which is recognized when due; and (2) expenditures are generally not divided between years by the recording of prepaid expenditures. Because of their spending measurement focus, expenditure recognition for Governmental Fund Types excludes amounts represented by noncurrent liabilities. Since they do not affect current assets, such long-term amounts are recognized as liabilities in the General Long-Term Debt Account Group. The Pension Trust Funds are accounted for using the accrual basis of accounting. Under this method, revenues are recognized when they are earned; expenses are recognized when they are incurred. Pursuant to Governmental Accounting Standards Board (GASB) Statement Number 20, "Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting," the District has _ elected not to apply accounting standards issued after November 30, 1989, by the Financial Accounting Standards Board. Investments The District has adopted Statement No. 31 of the Governmental Accounting Standards Board (GASB), "Accounting and Financial Reporting for Certain Investments and for External Investment Pools," in which all investments are reported at fair value. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 12 of 64 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2001 NOTE A- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED Investments, continued Investments, including restricted investments, consist of certificates of deposit, U.S. Government securities, corporate debt securities, and securities of government agencies unconditionally guaranteed by the U.S. Government. — Fixed assets Fixed assets used in Governmental Fund Type operations (general fixed assets) are accounted for in the General Fixed Assets Account Group, rather than in the governmental funds. No depreciation has been provided on general fixed assets. The District follows a capitalization policy, which calls for capitalization of all fixed assets that have a cost or donated value of$500 or more and have a useful life in excess of one year. All fixed assets are valued at historical cost, or estimated historical cost if actual historical cost is not available. Donated fixed assets are valued at their estimated fair market value on the date donated. Public domain(infrastructure) general fixed assets consisting of certain improvements other than buildings, including curbs, gutters and drainage systems, are not capitalized, as the District generally does not acquire such assets. No debt-related interest expense is capitalized as part of general fixed assets. Budgets and budgetary accounting The District has adopted an annual budget for the General Fund, which included budgeted expenditures over revenue of$158,317 which was intended to be funded through prior year unreserved undesignated fund balance. The District has adopted an annual budget for the Special Revenue Funds - Impact Fee and Hydrant Fund, which included budgeted revenue over expenditures of $210,500 in the Impact Fee Fund and $6,653 budgeted revenue over expenditures for the Hydrant Fund. The District has adopted an annual budget for the Expendable Trust Fund -Code Enforcement, which included budgeted expenditures over revenue of$23,230 to be funded through the use of reserved fund balance. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 13 of 64 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2001 NOTE A- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED Budgets and budgetary accounting, continued The District follows these procedures in establishing budgetary data for the General Fund, the Impact Fee Fund, the Hydrant Fund and the Code Enforcement Fund: 1. During the summer of each year, the District Fire Chief submits to the Board of Commissioners a proposed operating budget for the fiscal year commencing on the upcoming October 1. The operating budget includes proposed expenditures and the means of financing them. 2. Public hearings are conducted to obtain taxpayer comments. 3. The budget is adopted by approval of the Board of Commissioners. 4. Budget amounts, as shown in these general purpose 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. 6. The level of control for appropriations is exercised at the fund level. 7. Appropriations lapse at year-end. Several budget amendments were approved by the Board of Commissioners during the fiscal year ended September 30, 2001, which increased the budgeted revenue in the General Fund, the Impact Fee Fund, and the Code Enforcement Fund by $702,524, $215,000, and $236,137 respectively. The amendments also increased the budgeted expenditures in the General Fund, the Impact Fee Fund, and the Code Enforcement Fund by $860,841, $670,500, and $261,320 respectively. No budgets were adopted for the Debt Service Fund, the Inspection Fee Fund, or the Pension Trust Funds. Impact fees/deferred revenue The District levies an impact fee on new construction within the District. The intent of the fee is for growth within the District to pay for capital improvements needed due to the growth. The fee is collected by Collier County and remitted to the District. The fee is refundable if not expended by the District within six (6) years from the date of collection. The District, therefore, records this fee as restricted cash and as deferred revenue until the date of expenditure, at which time it is recognized as revenue and charged to capital outlay. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 14 of 64 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2001 NOTE A- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED Due to/from other funds Interfund receivables and payables arise from interfund transactions and are recorded by funds affected in the period in which transactions are executed. Due from other governments No allowance for losses on uncollectible accounts has been recorded since the District considers all amounts to be fully collectible. Compensated absences The District's employees accumulate annual leave, based on the number of years of continuous service. Upon termination of employment, employees can receive payment of accumulated annual leave, if certain criteria are met. Accumulated annual leave at September 30, 2001 was recorded in the general purpose financial statements in the General Long-Term Debt Account Group, as these accounts would not normally be liquidated with expendable available financial resources. 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 necessary in order to assure effective budgetary control or to facilitate effective cash planning and control. Management estimates _ The preparation of 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 expenditures during the reporting period. Actual results could differ from those estimates. Fund equity Reservations of fund balance indicate amounts that are limited for a specific purpose, not appropriable for expenditure, or are legally segregated for a specific future use. Designations of fund balance represent tentative management plans. Unreserved, undesignated fund balance indicates funds that are available for current expenditure. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 15 of 64 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2001 NOTE A- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED Total columns on combined financial statements The total columns on the combined financial statements are captioned "Memorandum Only" to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position or results of operations in conformity with accounting principles generally accepted in the United States of America. Neither is such data comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data. Interfund transactions The District considers interfund receivables (due from other funds) and interfund liabilities (due to other funds) to be loan transactions to and from other funds to cover temporary (three months or less) cash needs. Transactions that constitute reimbursements to a fund for expenditures/expenses initially made from it that are properly applicable to another fund are recorded as expenditures/expenses in the reimbursing funds and as reduction of expenditures/expenses in the fund that is reimbursed. Reclassifications Certain amounts in the fiscal year 2001 financial statements have been reclassified to conform to current year presentation. NOTE B - CASH AND CASH EQUIVALENTS Cash and cash equivalents were $1,264,841, of which the total cash balance of $1,174,173 was restricted. Total cash and cash equivalents included cash on hand of $500 at September 30, 2001. Deposits The District's deposit policy allows deposits to be held in demand deposit and money market accounts. All District depositories are institutions designated as qualified depositories by the State Treasurer at September 30, 2001. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 16 of 64 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2001 NOTE B - CASH AND CASH EQUIVALENTS, CONTINUED District deposits consist of the following at September 30, 2001: Carrying Bank Amount Balance Unrestricted General Fund Depository Accounts $ 90,168 $ 565,695 Restricted Special Revenue Funds Impact Fee Depository 17,250 46,822 Hydrant Money Market 118,023 118,023 Total Special Revenue Funds 135,273 164,845 Debt Service Fund 63,456 63,456 Pension Trust Funds Firefighters' Pension Depository 162,241 Not Available General Employees' Pension Depository 85,212 85,212 Total Pension Trust Funds 247,453 85,212 Expendable Trust Fund Code Enforcement Depository 718,506 738,308 Agency Fund Inspection Fees Depository 9,485 29,090 Total Restricted Cash 1,174,173 1,080,911 TOTAL $ 1,264,341 $ 1,646,606 These deposits were entirely covered by federal depository insurance or by collateral pursuant to the Public Depository Security Act(Florida Statute 280) of the State of Florida. Bank balances approximate market value. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 17 of 64 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2001 NOTE B - CASH AND CASH EQUIVALENTS, CONTINUED Restricted cash and equivalents The following is a brief description of the restrictions on cash and cash equivalents: The Impact Fee account is used to account for the deposit of impact fees received and is restricted for certain capital asset acquisition associated with growth within the District. Impact fees are collected by Collier County for the District pursuant to County ordinance and District resolution. The Hydrant account is used to account for fees collected from new construction to fund future fire hydrant maintenance costs. The Code Enforcement account is used to account for fees charged by Collier County for building plan review performed by the District on behalf of the fire districts in the County. The Inspection Fees Fund strictly acts as agent for the fire districts in Collier County by receiving fees from Collier County and distributing the fees to the respective fire districts. The Pension Trust Funds account for resources held to fund the respective employee pension benefits. NOTE C - INVESTMENTS Investments were $4,063,200 at September 30, 2001. The District's investment policy allows investments in certificates of deposit for its Governmental Funds, Expendable Trust Fund and Agency Fund. Investments held in the Firefighters' Pension Plan are controlled by Firefighters' Pension Board policy. This policy provides for investments in treasury notes, federal agency guaranteed securities, corporate bonds, notes and/or equities and real estate. Certificates of deposit whose value exceeds the amount of federal depository insurance are collateralized pursuant to the Public Depository Securities Act (Florida Statute 280) of the State of Florida. In accordance with GASB Statement No. 3, "Deposits with Financial Institutions, Investments (including Repurchase Agreements), and Reserve Purchase Agreements," the District's investments are categorized as follows to give an indication of the level of risk assumed by the District: NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 18 of 64 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2001 NOTE C - INVESTMENTS, CONTINUED Category 1 Includes investments that are insured or registered, or securities held by the District or its agents in the District's name, or held by the District's agents in a Depository Trust Company custodial account. Category 2 Includes uninsured and unregistered investments held by a counterparty's trust department or agent in the District's name. Category 3 Includes uninsured and unregistered investments for which securities are held by a counterparty, its trust department or agent, but not in the District's name. There were no losses during the period due to default by counterparties to investment transactions, and the District had no other types of investments, during the year, other than those listed below. Bank Balance Carrying/ Category 1 Category 3 Fair Value General Fund Certificate of Deposit(1) $1,000,000 $ - $1,000,000 Special Revenue Funds Impact Fees Certificate of Deposit (2) 2,000,000 - 2,000,000 Certificate of Deposit (3) 28,275 - 28,275 Total Special Revenue Funds 2,028,275 - 2,028,275 Firefighters' Pension Trust Fund U.S. Federal Securities (Bonds) 153,085 - 153,085 Corporate Bonds - 339,939 339,939 Corporate Security Equities - 541,901 541,901 Total Firefighters' Pension Trust Fund 153,085 881,840 1,034,925 TOTAL INVESTMENTS $3,181,360 $ 881,840 $4,063,200 (1) The certificate of deposit is collateralized by the $835,977 line of credit held in the General Fund. (2) The certificate of deposit is collateralized by the $985,000 line of credit held by the Impact Fee - Special Revenue Fund. (3) The certificate of deposit is pledged by the District to Collier County as part of an agreement related to the construction of a fire station. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 19 of 64 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2001 NOTE D - DUE TO/FROM OTHER FUNDS Interfund receivables and payables at September 30,2001 are as follows: Due from Due to Fund other funds other funds General Fund: Impact Fee $ 44,417 $ 4,341 Hydrant 27,815 3,542 Debt Service 199,259 - Code Enforcement 183,172 31,350 Inspection Fees 35,960 - _ General Employees'Pension Fund 50,562 7,605 Total General Fund 541,185 46,838 Special Revenue Funds: Impact Fee General 4,341 44,417 Hydrant _ General 3,542 27,815 Total Special Revenue Funds 7,883 72,232 Debt Service Fund: General - 199,259 Total Debt Service Fund - 199,259 _ General Employees'Pension Fund: General 7,605 50,562 Code Enforcement 21,468 36,613 Total General Employees'Pension Fund 29,073 87,175 Code Enforcement Fund: General 31,350 183,172 General Employees'Pension Fund 36,613 21,468 Total Code Enforcement Fund 67,963 204,640 Inspection Fees Fund: General - 35,960 Total Inspection Fees Fund - 35,960 Total $ 646,104 $ 646,104 NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 20 of 64 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2001 NOTE E - CHANGES IN GENERAL FIXED ASSETS The following is a summary of changes in general fixed assets for the year ended September 30, 2001: Balance Balance October 1, September 30, 2000 Additions Deletions 2001 Land $ 1,330,102 $ 373,298 $ - $ 1,703,400 Buildings &improvements 6,465,503 11,451 - 6,476,954 Vehicles & equipment 3,623,309 222,422 - 3,845,731 Firefighter equipment 988,892 224,106 - 1,212,998 Furniture & fixtures 747,317 75,162 - 822,479 Fixed assets acquired under capital lease 318,496 - - 318,496 $ 13,473,619 $ 906,439 $ - $ 14,380,058 NOTE F- CHANGES IN GENERAL LONG-TERM DEBT The following is a summary of changes in general long-term debt for the year ended September 30, 2001: Amount — General long-term debt payable, at October 1, 2000 $ 870,987 Principal reduction- capital lease (38,699) Decrease in accrued compensated absences (41,355) General long-term debt payable, September 30, 2001 $ 790,933 NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 21 of 64 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2001 NOTE F - CHANGES IN GENERAL LONG-TERM DEBT, CONTINUED The following is a summary of long-term payable obligations at September 30, 2001: Amount $318,496 capital lease payable annually to financial institution in the amount of$56,525 including interest at 5.79%, collateralized by the respective vehicle. Final payment due January 1, 2007. $ 279,797 Non-current portion of compensated absences. Employees of the District are entitled to paid leave based on length of service and job classification. 511,136 _ $ 790,933 The annual debt service requirements for general long-term debt at September 30, 2001 were as follows: Year Ending Capital Lease September 30 Payable Total 2002 $ 56,525 $ 56,525 2003 56,525 56,525 2004 56,525 56,525 2005 56,525 56,525 2006 56,525 56,525 2007 56,527 56,527 Total debt service 339,152 339,152 Less: Amount representing interest (59,355) (59,355) $ 279,797 279,797 Accrued compensated absences 511,136 Total Long-Term Debt $ 790,933 NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 22 of 64 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2001 NOTE G - LINES OF CREDIT The following is a summary of the lines of credit payable at September 30, 2001: General fund Amount $1,000,000 line of credit payable to a financial institution. Principal due on demand but no later than September 1, 2002, with interest accruing at 4%payable monthly. The line of credit is collateralized by a$1,000,000 certificate of deposit held by the respective financial institution which matures on the due date of the line of credit. During the fiscal year ended September 30, 2001 the district made draws on the line of credit totaling $2,768,925 and principal payments totaling $2,505,721. $ 835,977 Special revenue fund- Impact Fee Fund $2,000,000 line of credit payable to a financial institution. Principal due on demand but no later than October 1, 2001 with interest accruing at 5.5%payable monthly. The line of credit is collateralized by a$2,000,000 certificate of deposit held by the respective financial institution which matures on the due date of the line of credit. Subsequent to the year ended September 30, 2001, the line of credit was renewed for one year, with the principal due on demand but no later than October 1, 2002 with interest accruing at 3.75%payable monthly. During the fiscal year ended September 30, 2001 the district made draws on the line of credit totaling $380,000 and principal payments totaling $1,395,000. 985,000 $1,500,000 line of credit payable to a financial institution. Principal due on demand but no later than March 12, 2002, with interest accruing at 6.5%payable monthly. The uncollateralized line of credit was obtained to pay overruns associated with fire station construction projects. The line of credit had not been drawn upon as of September 30, 2001. $ 1,820,977 NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 23 of 64 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2001 NOTE H - RETIREMENT PLANS The following four retirement plans have been established by the District: Plan 1 - Florida Retirement System (FRS) Plan 2 - Firefighters' Pension Trust Fund (Florida Statute 175) Plan 3 - General Employees' Pension Trust Fund Plan 4 - Governmental Money Purchase Plan - Chief Plan 5 - Governmental Money Purchase Plan - Executive Assistant Plan 6 - Governmental Money Purchase Plan - Code Officers Plan 7 - Governmental Money Purchase Plan - General Employees Employee participation in a specific plan is based on the respective employee's original hire date. Plan 1 - Plan description and provisions - Florida Retirement System All District personnel employed prior to January 1, 1996 are participants in the statewide Florida Retirement System (FRS) under the Authority of Article X, Section 14 of the State Constitution and Florida Statutes, Chapters 112 and 121. The FRS is noncontributory and is totally administered by the State of Florida. The District contributed 100% of the required contributions for the years ended September 30, 2001, 2000 and 1999. The District's covered payroll for the years ended September 30, 2001 and 2000 was $3,965,771 and $3,660,791 respectively. The covered payroll for the year ended September 30, 1999 was not readily available. The District's contributions to the Plan were $739,684, $715,346, and $732,200, for the years ended September 30, 2001, 2000 and 1999, respectively, which represents 19%, 19%, and 17%, respectively, of covered payroll. Pension costs for the District ranged between 7% to 20% for the year ended September 30, 2001. There were no employee contributions to the Plan. Employees who retire at or after age 62 with 6 years of creditable service , 6 years of senior management service and age 62, 6 years of special risk service and age 55, or 30 years of service (25 for special risk) regardless of age, are entitled to a retirement benefit, payable for life, equal to 1.5% to 3.3%per year of creditable service, depending on the class of employee (regular, special risk, etc.)based on average final compensation of the five (5) highest fiscal years' compensation. Benefits vest after six years (six years for senior management) of credited service. Vested employees may retire anytime after vesting and incur a 5%benefit reduction for each year prior to normal retirement age. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 24 of 64 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2001 NOTE H - RETIREMENT PLANS, CONTINUED Plan 1 - Plan description and provisions - Florida Retirement System, continued Early retirement, disability, death and survivor benefits are also offered. Benefits are established by State Statute. The plan provides for a constant 3% cost-of-living adjustment for retirees. The plan also provides several other plan and/or investment options that may be elected by the employee. Each offers specific contribution and benefit options. The Plan documents should be referenced for complete detail. Description of funding policy - This is a cost sharing, multi-employer plan available to governmental units within the State. Actuarial information with respect to an individual participating entity is not available. Participating employers are required, by statute, to pay monthly contributions at actuarially determined rates that, expressed as percentages of annual covered payroll, are adequate to accumulate sufficient assets to pay benefits when due. Trend information - A copy of the FRS's June 30, 2001 annual report can be obtained by writing the Florida Division of Retirement, Cedars Executive Center, 2639-C North Monroe Street, Tallahassee, Florida 32399-1560, or by calling (850) 488-5706. Plan 2 - Plan description and provisions - Firefighters' Pension Trust Fund The following brief description of the North Naples Fire Control and Rescue District Firefighters' Pension Plan (the "Plan") is provided for general information purposes only. _ Participants should refer to the plan agreement for a more complete description of the Plan. On July 11, 1996, under the authority of Florida Statute 175 and Laws of Florida, Chapter 95-338, the District's Board of Commissioners passed Resolutions 96-004 and 96-005, providing for the establishment and funding of a single employer defined benefit retirement plan and trust for newly hired fire suppression personnel. The resolutions establish that certified firefighters employed on or after January 1, 1996 are to become participants in the District's Firefighters' Pension Trust Fund. The Plan is totally administered, including all investment management, by a third party administrator and the Plan's appointed Pension Board. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 25 of 64 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2001 NOTE H -RETIREMENT PLANS, CONTINUED Plan 2 - Plan description and provisions - Firefighters' Pension Trust Fund, continued There were no employee contributions to the Plan during the year ended September 30, 2001. The employer contributed 100% of its required contributions, as well as those required of the participating firefighters (1%pick-up). The Plan provides for full-time firefighting personnel to become eligible to participate in the Plan immediately upon hire. Under District resolution#96-005, the District elected to pay the required 1% employee contribution on behalf of the employee. Effective July 1, 2001 (per resolution 01-01), benefits under the Plan vest after six years of creditable service. Employees who elect normal retirement at or after age 55 with 6 years of creditable service, or 25 years of service regardless of age, are entitled to a retirement benefit. Employees may elect early retirement after 6 years of creditable service and attainment of age 50 with a reduction in benefit not to exceed 3% for each year before normal retirement. The Plan also includes certain disability and death benefits. Contributions - Contributions to the Plan are derived from three sources: employees ("1% pick-up" - 1% of compensation paid by the District on behalf of the employee pursuant to Resolution#96-005), State funds (insurance premium tax per Florida Statute Chapter 175) and employer(remaining amount necessary to meet actuarial requirement). For the period from January 1, 1996 through September 30, 1996, no employer contributions were required. Employer contributions were required from October 1, 1996 through September 30, 2001. The State contributions under Chapter 175 began in June 1997. This revenue is based on property fire insurance premiums within the District and is applied up to an approved "frozen" limit. The District (employer) is required to fund the difference each year between the total contributions from all other sources for the year and the total cost for the year pursuant to the most recent actuarial valuation of the Plan. The total cost for any year equals total normal cost plus the additional amounts sufficient to amortize the unfunded past service liability over a 30 year period commencing the first year of the Plan's inception. Pursuant to the actuarial study dated October 1, 2000, the District's fiscal year 2001 contribution requirement was $280,831, which approximated 20% of covered payroll. Actual District contributions to the Plan for the year ended September 30, 2001 were $287,055. The District contributed $18,053 on behalf of the participating firefighters (1% pick-up). NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 26 of 64 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2001 NOTE H-RETIREMENT PLANS, CONTINUED Plan 2 - Plan description and provisions - Firefighters' Pension Trust Fund, continued Pension benefits - Effective July 1, 2001, employees with 6 or more years of service are entitled to annual pension benefits, beginning at the earlier of age 55 with 6 years of credited service or 25 years credited service, equal to 3% of their average final compensation (AFC) over the 5 highest years within the last 10 years of service multiplied by credited service. Maximum benefit is 100% of AFC. The plan permits early retirement at age 50 with 6 years of credited service. Employees may elect to receive their pension benefits in the form of a 10-year certain and life annuity. If employees terminate before rendering 6 years of credited service, they forfeit the right to receive the portion of their accumulated plan benefits. Death and Disability benefits - Upon the death of any vested member, whether or not still in active employment, a survivor benefit is payable to the beneficiary starting when the member would have reached retirement age. The benefit is equal to the vested pension benefit and is payable for 10 years. Non-active employees who become totally disabled with at least 8 years of credited service receive the greater of the accrued pension benefit or 25% of AFC. Income recognition - Interest income is recorded on the accrual basis. Investments are reported at market value. Short-term investments are reported at cost, which approximates market value. Actuarial present value of accumulated plan benefits - Accumulated plan benefits are those future periodic payments, including lump-sum distributions, that are attributable under the Plan's provisions to the service employees have rendered. Accumulated plan benefits include benefits expected to be paid to (a) retired or terminated employees or their beneficiaries, (b) beneficiaries of employees who have died, and(c) present employees or _ their beneficiaries. Benefits under the Plan are based on employees' age at entry to the Plan and is based upon the current starting salary for firefighters' at entry level. Benefits payable under all circumstances; retirement, death, disability and termination of employment, are included, to the extent they are deemed attributable to employee service rendered to the valuation date. The actuarial present value of accumulated plan benefits is determined by an actuary and is the amount that results from applying actuarial assumptions to adjust the accumulated plan benefits to reflect the time value of money (through discounts for interest) and the NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 27 of 64 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2001 NOTE H -RETIREMENT PLANS, CONTINUED Plan 2 - Plan description and provisions - Firefighters' Pension Trust Fund, continued probability of payment (by means of decrements such as for death, disability, withdrawal, or retirement) between the valuation date and the expected date of payment. The significant actuarial assumptions used in the valuations as of September 30, 2001 were (a) life expectancy of participants (the 1983 Group Annuity Mortality Table was used) (b) retirement age assumptions (the assumed average retirement age was 55) and (c) investment return. The October 1, 2000 actuary valuation reflected assumed average rates of return of 8%. The foregoing actuarial assumptions are based on the presumption that the Plan will continue. If the Plan terminated, different actuarial assumptions and other factors might be applicable in determining the actuarial present value of accumulated plan benefits. Payment of benefits -Benefit payments to participants are recorded upon distribution. The District contributed 100% of the required contributions. A summary of certain Plan details and trend information is included below. A copy of the Plan and Plan audit for September 30, 2001 can be obtained by writing the District at 1885 Veterans Park Drive, Naples, Florida 34110, or by calling (239) 597-3222. Plan 3 - Plan description and provisions - General Employees' Pension Trust Fund On October 10, 1996, under the authority of the laws of Florida, Chapter 95-388, the Board of Commissioners of the District passed Resolution 96-008,providing for the establishment of a single employer-defined benefit retirement plan(the "Plan") and trust for newly hired general employees. District general employees hired on or after January 1,1996 through December 31, 2000 (the date of Plan termination) are participants in the General Employees'Pension Trust Fund. There were no employee contributions made or required to be made to the Plan during the year ended September 30, 2001. The District contributed 100% of its required — contributions. The Plan provides for full-time general employees to become eligible to participate in the Plan immediately upon hire. Benefits under the Plan vest after 10 years of creditable service. Employees who elect normal retirement at or after age 62 with 10 years of creditable service, or 30 years of service regardless of age, are entitled to a retirement benefit. Employees may elect early retirement after 10 years of creditable service. Applicable benefits are reduced by 5% for each year before normal retirement. The Plan NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 28 of 64 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2001 NOTE H -RETIREMENT PLANS, CONTINUED Plan 3 - Plan description and provisions - General Employees' Pension Trust Fund, continued also includes certain disability and death benefits. The Planis totally administered, including investment management, by a third-party administrator. Contributions - Contributions to the Plan are 100% funded by the District (employer) based on periodic actuarial valuations. Employee contributions are prohibited. The total cost for any year equals total normal cost plus the additional amounts sufficient to amortize the unfunded past service liability over a 30 year period commencing the first year of the Plan's inception date. The District's 2001 contribution requirement was approximately 19% of covered payroll based upon the age of the employee plus the amount of actual administrative expenses incurred by the Plan during the year. Actual District contributions to the Plan for the year ended September 30, 2001 were $29,073. Pension benefits - Employees with 10 or more years of credited service are entitled to annual pension benefits beginning at the earlier of age 62 with 10 years of credited service or 30 years credited service equal to 1.6% of their average final compensation (AFC) for each year of credited service, multiplied by credited service prior to retirement age, with increases per year after normal retirement age. Maximum benefit is 100% of AFC. The Plan permits early retirement, regardless of age, with 10 years of credited service. Employees may elect to receive their pension benefits in the form of a 10-year certain and life annuity. If employees terminate before rendering 10 years of credited service, they forfeit the right to receive the portion of their accumulated plan benefits. Death and disability benefits - Upon the death of any vested member, whether or not still in active employment, a survivor benefit is payable to the beneficiary starting when the member would have reached retirement age. The benefit is equal to the vested pension benefit and is payable for 10 years. Non-active employees who become totally disabled receive the greater of the accrued pension benefit or 25% of AFC. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 29 of 64 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2001 NOTE H -RETIREMENT PLANS, CONTINUED Plan 3 - Plan description and provisions - General Employees' Pension Trust Fund, continued Actuarial present value of accumulated plan benefits - Accumulated plan benefits are those future periodic payments, including lump-sum distributions, that are attributable under the Plan's provisions to the service employees have rendered. Accumulated plan benefits include benefits expected to be paid to (a) retired or terminated employees or their beneficiaries, (b)beneficiaries of employees who have died, and (c)present employees or their beneficiaries. Benefits under the Plan are based on employees' age at entry to the Plan and is based upon the current starting salary for general employees at entry level. Benefits payable under all circumstances; retirement, death, disability and termination of employment, are included, to the extent they are deemed attributable to employee service rendered to the valuation date. The actuarial present value of accumulated plan benefits is determined by an actuary and is the amount that results from applying actuarial assumptions to adjust the accumulated plan benefits to reflect the time value of money(through discounts for interest) and the probability of payment (by means of decrements such as for death, disability, withdrawal, or retirement) between the valuation date and the expected date of payment. The significant actuarial assumptions used in the valuations as of September 30, 2000 were (a) life expectancy of participants (the 1983 Group Annuity Mortality Table was used) (b) retirement age assumptions (the assumed average retirement age was 55) and (c) investment return. The October 1, 1999 actuary valuation reflected assumed average rates of return of 8%. The foregoing actuarial assumptions are based on the presumption that the Plan will continue. If the Plan terminated, different actuarial assumptions and other factors might be applicable in determining the actuarial present value of accumulated plan benefits. Payment of benefits - Benefit payments to participants are recorded upon distribution. A copy of the Plan for September 30, 2001 can be obtained by writing the District at 1885 Veterans Park Drive, Naples, Florida 34110 or by calling (239) 597-3222. Subsequent event - During the year ended September 30, 2001, as of December 31, 2000 the District resolved to terminate Plan 3 and to establish two new plans (Plan 6 and Plan 7). Participants became vested in Plan 3 immediately upon Plan termination. Participant benefits were actuarially determined at the present value of the future benefit amounts. Such amounts were disbursed in the year ended September 30, 2002, although such amounts were accrued and recorded in the financial statements at September 30, 2001. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 30 of 64 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2001 NOTE H -RETIREMENT PLANS, CONTINUED The following is a summary of the Single Employer-Defined Benefits Plans, including funding policies, contribution methods,benefit provisions and trend information: Firefighters'Pension General Employees' Trust Fund-Plan 2 Pension Trust Fund -Plan 3* Year established and District Resolution#96- District Resolution#96- - governing authority 004 (July 11, 1996) 008 (October 10, 1996) Governing authority Board of Trustees of Plan Board of Trustees of Plan Determination of contribution requirements: Actuarially determined Actuarially determined Employer(District) 23%to 33% of covered 7% to 16% of payroll,based upon age of covered payroll,based employees. Contributions upon age of employees. _ are required after the State Revenue under Chapter 175 (premium tax refunds) are received. Plan members 1% of Covered payroll- 0% Note: The District adopted Resolution#96-005 to fund the contribution for the employees. (Pick-up) Funding of administrative costs Employer Employer Period required to vest 6 years 10 years _ Post retirement benefit increase Cost of living increase of Cost of living increase of of 3% each year. of 3% each year. Eligibility for distribution (Normal retirement) Earlier of 55 with 6 years Age of 62 with 10 years of credited service or 25 of credited service or 30 years credited service years credited service regardless of age regardless of age Provisions for: Disability benefits Yes Yes Death benefits Yes Yes *Plan terminated as of December 31, 2000. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 31 of 64 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2001 NOTE H -RETIREMENT PLANS, CONTINUED Memberships of the Plans consisted of the following at September 30, 2001: Firefighters'Pension General Employees' Trust Fund -Plan 2 Pension Trust Fund-Plan 3* Retirees and beneficiaries receiving benefits 0 0 Terminated Plan members entitled to but not yet receiving benefits 0 0 Non-vested active members 49 0 Total 49 0 Number of participating employers 1 0 Number of participating state agencies 1 0 *Plan terminated as of December 31, 2000. Annual Pension Cost, Net Pension Obligation and Reserves Current year annual pension costs for the Firefighters' Pension Trust Fund and the General Employees' Pension Trust Fund are shown in the trend information provided. There were no net pension obligations for either Plan at September 30, 2001. The plan assets are legally reserved for the payment of the respective plan member benefits within each Plan. There are no assets legally restricted for plan benefits other than these assets within the respective Plans. The Firefighters' Pension Trust Fund held certain investments at year end. The General Employees' Pension Trust Fund held no investments at year end. There are no long-term contracts for contributions. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 32 of 64 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2001 NOTE H -RETIREMENT PLANS, CONTINUED Trend Information Firefighters'Pension Trust Fund(2) General Employees'Pension Trust Fund(3) Required Net Required Net Annual (I) Pension Annual Pension Fiscal Pension Actual Percentage Obligation Pension Actual Percentage Obligation Year Contribution Contribution Contributed (NPO) Contribution Contribution Contributed (NPO) 2001 $ 393,649 $ 517,823 100% - Not Available $ 29,073 100% - 2000 $ 266,823 $ 409,439 100% - Not Available $ 32,919 100% - 1999 $ 159,203 $ 132,624 83% - Not Available Not Available - - _ 1998 $ 79,718 $ 202,800 100% - $ 40,094 Not Available 100% - 1997 $ 40,148 $ 108,607 100% - $ 22,184 Not Available 100% - (1) Excludes employee 1%pick-up. (2) An actuarial valuation was not prepared for October 1, 1998 (for FY 1999),per actuary's letter dated February 15, 2000 addressed to the pension administrator.However,the actuary determined the required contribution for year ending September 30,1999 based on October 1, 1998 payroll of $627,482. In addition,actuarial valuation was prepared on October 1, 1999 for fiscal year 2000. Information regarding FY 1999 was extracted from such study. Valuations have been prepared thereafter. (3) Valuations were prepared for the FY 1999 as of October 1, 1998 and as of December 31,2000,the date of Plan termination. Pension Trusts Required Supplementary Information, September 30, 2001 Schedule of Funding Progress Firefighters' Pension Plan: UAAL as a Percentage of Actuarial Value of Liability AAL AAL Funded Covered Covered Study Assets -Entry Age (UAAL) Ratio Payroll Payroll Date (a) (b) (b-a) (a/b) (c) (b-a)/c 10/01/00 $ 869,923 S 681,940 $(187,983) 127.6% $1,399,961 13.4% 10/01/99 $ 439,347 $ 361,015 $ (78,332) 121.7% $ 924,109 8.5% 10/01/97 $ 116,967 $ 31,423 $ (85,544) 372.2% $ 316,079 27.1% Note: 1. No valuation for plan year October 1, 1998 was prepared. 2. An October 1, 1999 actuarial valuation report was prepared. Schedule of Funding Progress General Employees' Pension Plan: Preliminary UAAL as a Percentage of Actuarial Value of Liability AAL AAL Funded Covered Covered Study Assets -Entry Age (UAAL) Ratio Payroll Payroll Date (a) (b) (b-a) (a/b) (c) (b-a)/c 10/1/98 Note: Information is based on a preliminary actuarial study since the actuarial study for this year was not available. The District did not obtain the required valuation study for any subsequent year except at the date of termination December 31,2000. In early fiscal year 2001,the District terminated the General Employees'Pension Plan and instituted two employee-approved 401(a)Pension Plans under the administration of International City/County Management Association(ICMA)Retirement Corporation. No information is available to complete this schedule. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 33 of 64 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2001 NOTE H -RETIREMENT PLANS, CONTINUED Pension Trusts Required Supplementary Information, September 30, 2001, continued Firefighters' Pension General Employees' Trust Fund Pension Trust Fund Valuation date 10/01/00 12/31/00 (formal) Actuarial cost method Entry Age Entry Age (*) Amortization method Level dollar, closed None Indicated (*) Remaining amortization period 26 years 30 years (*) Actuarial asset valuation method Market Market (*) Actuarial assumptions: Investment rate 8% 8% (*) Projected salary 5%to 9.5% 6% (*) depending on age Post retirement 3% None Indicated(*) Cost of living adjustment 3% 3% (*) Inflation 4% None Indicated (*) (*) Plan termination as of 12/31/00 and benefit amounts were determined at the present value of the future benefit. Plan 4 - Governmental Money Purchase Plan The District maintains a Governmental Money Purchase Plan(401(a)), a defined contribution plan which is available only to the District's Fire Chief. The Plan is completely administered by the Plan custodian, ICMA Retirement Corporation. The Plan requires the District to make monthly contributions of$2,000. Total contributions to the Plan for the year ended September 30, 2001 and 2000 by the District were $24,000 and $24,000, respectively. The District contributed 100% of its required contributions for the year ended September 30, 2001, and no employee contributions were permitted or paid. The District also directly paid the Chief an additional $8,430 to invest for his retirement for the year ended September 30, 2001. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 34 of 64 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2001 NOTE H -RETIREMENT PLANS, CONTINUED Pension Trusts Required Supplementary Information, September 30, 2001, continued Plan 5 - Governmental Money Purchase Plan The District established a Governmental Money Purchase Plan (401(a)), a defined contribution plan, on January 1, 2001, for certain of the District's Executive Assistants. The Plan is completely administered by the Plan custodian, ICMA Retirement Corporation. Participants vest in the Plan 100% immediately upon Plan entry(hire date). The Plan requires the District to make contributions equal to 5% of qualified employee compensation. Total contributions to the Plan for the year ended September 30, 2001 by the District were $4,955. The District contributed 100% of its required contributions for the year ended September 30, 2001, and no employee contributions were permitted or paid. Plan 6 - Governmental Money Purchase Plan The District established a Governmental Money Purchase Plan (401(a)), a defined contribution plan, on October 1, 2000, for the District's Code Official personnel. These are employees who specifically work for the Code Official fund. The Plan is completely administered by the Plan custodian, ICMA Retirement Corporation. Participants vest in the Plan 100% immediately upon Plan entry (hire date). The Plan requires the District to make contributions equal to 20% of qualified employee compensation. Total contributions to the Plan for the year ended September 30, 2001 by the District were $53,234. The District contributed 100% of its required contributions for the year ended September 30, 2001, and no employee contributions were permitted or paid. Plan 7- Governmental Money Purchase Plan _ The District established a Governmental Money Purchase Plan (401(a)), a defined contribution plan, on January 1, 2001, for the District's general employees, who are not certified firefighters and are not participants in any other District retirement plan. Eligible _ participants must have a hire date after December 31, 1995. The Plan is completely administered by the Plan custodian, ICMA Retirement Corporation. Participants vest in the Plan 100% after completion of six (6) years of credited service. The Plan requires the District to make contributions equal to 15% of the qualified employee's compensation. Total contributions to the Plan for the year ended September 30, 2001 by the District were $22,261. The District contributed 100% of its required contributions for the year ended September 30, 2001, and no employee contributions were permitted or paid. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 35 of 64 — NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2001 NOTE I - POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS The District provides insurance(health, dental and vision) benefits to its retired employees. All retired full-time employees are eligible for benefits if actively employed by the District immediately before retirement. As of September 30, 2001, there were six (6) retirees receiving these benefits. The benefits are provided both with and without contractual or labor agreements. The benefits may require contribution from the retirees, depending on certain specified criteria and, in particular, length of creditable employment. The District pays up to 50% of retiree dependent coverage. The District finances the benefits on a pay-as-you-go basis and recognizes expenditures at the time premiums are due. The premiums for these benefits totaled $25,895 during the year ended September 30, 2001. NOTE J- SELF-INSURANCE The District adopted a self-insurance program for health insurance claims only, beginning October 1, 1992. The self-insurance program has stated annual individual and aggregate loss limits and retains third party excess coverage for claims in excess of the loss limits. The District incurred $1,339,887 in health insurance claims during the fiscal year ending _ September 30, 2001. No accrual has been made as of September 30, 2001 for estimates of amounts to be paid for actual and incurred but not reported(IBNR) claims. It is the policy of the District to purchase commercial insurance for other forms of potential risks to which it is exposed. The District's risk management activities are reported in the General Fund. No accrual has been recorded for claims and incidents not reported to the insurer. The District had no significant reductions in insurance coverage from the prior year. Reported claims have not exceeded the insurance coverage for the years ended September 30, 1998 through September 30, 2001. The District's total liability within any one year is limited to the annual loss limit, except for tail coverage estimated at approximately three (3) month's average claims in the year of Plan termination. The District has no plan to terminate coverage; therefore, no such accrual has been recorded in the financial statements. NOTE K-PROPERTY TAXES Property taxes are levied after formal adoption of the District's budget and become due and payable on November 1 of each year and are delinquent on April 1 of the following year. Discounts on property taxes are allowed for payments made prior to the April 1 delinquent date. Tax certificates are sold to the public for the full amount of any unpaid taxes and must be sold not later than June 1 of each year. The billing, collection, and related record keeping of all property taxes is performed for the District by the Collier NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 36 of 64 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2001 NOTE K-PROPERTY TAXES, CONTINUED County Tax Collector. No accrual for the property tax levy becoming due in November 2001 is included in the accompanying financial statements, since such taxes are collected to finance expenditures of the subsequent period. Procedures for collecting delinquent taxes, including applicable tax certificate sales and tax deed sales, are provided for by Florida Statutes. The enforceable lien date is approximately two years after taxes become delinquent and occurs only upon request of a holder of a delinquent tax certificate. As of September 30, 2001, $90,571 was due from the Collier County Tax Collector to the District for ad valorem taxes and excess fees. Important dates in the property tax cycle are as follows: _ Assessment roll certified July 1 Millage resolution approved No later than 93 days following certification of assessment roll Taxes due and payable (Levy date) November/with various discount provisions through March 31 Property taxes payable- maximum discount (4 percent) 30 days after levy date Beginning of fiscal year for which taxes have been levied October 1 Due date March 31 Taxes become delinquent (lien date) April 1 Tax certificates sold by the Collier County Tax Collector Prior to June 1 For the year ended September 30, 2001, the Board of Commissioners of the District levied ad valorem taxes at a millage rate of$1.00 per$1,000 (1.00 mil) of the 2000 net taxable value of real property located within the District. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 37 of 64 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2001 NOTE L - SUBSEQUENT EVENTS Subsequent to the year ended September 30, 2001, the District purchased a parcel of land through the use of impact fees for future expansion to the Grey Oaks Area(Station #47). The land was purchased as part of an agreement with the Collier County Board of County Commissioners and the East County Fire Control District. Each entity paid one third of the purchase price of approximately $306,000. North Naples'portion of the purchase was approximately $102,000. Subsequent to September 30, 2001, the Chief resigned his position with the District. The Board of Commissioners approved a severance package totaling approximately $300,000 — to be paid in two equal installments in fiscal years 2003 and 2004. Subsequent to September 30, 2001, the District began considering amending the General Employees' 401(a) Defined Contribution Retirement Plan- Plan 7 by changing the vesting period from 6 years of service to immediate vesting upon plan entry. NOTE M - DESIGNATED AND/OR RESERVED FUND BALANCE Fund balance was designated and/or reserved for the following purposes at September 30, 2001: Designated fund balance(Deficit) Amount Special Revenue Fund-Hydrant Fund-fire hydrant maintenance $ 93,749 Debt Service Fund-payment of accrued compensated absences (135,803) Total Designated Fund Balance $ (42,054) Reserved fund balance Amount Firefighters'Pension Fund-firefighters'retirement benefits $ 1,355,012 General Employees'Pension Fund-general employees'retirement benefits - Expendable Trust Fund-code enforcement future operations 648,062 Total Reserved Fund Balance $ 2,003,074 NOTE N - DEFICIT FUND BALANCE At September 30, 2001, the District's Debt Service Fund had a deficit fund balance of $135,803. It has been recommended that the District consider eliminating the fund and close its fund balance (deficit) to the General Fund. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 38 of 64 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2001 NOTE O - IMPACT FEE FUND ACTIVITY During the year ended September 30, 2001, the Impact Fee Fund had the following activity: Amount Deferred revenue, October 1, 2000 $ 323,168 Impact fee receipts (1) 1,581,162 Interest income 144,221 Operating fees (23,717) Capital outlay (773,488) Principal reduction (38,699) Interest and fiscal charges (100,041) Deferred revenue, September 30, 2001 $ 1,112,606 (1) Impact fee receipts include a receivable of$98,536. NOTE P - COMMITMENTS AND CONTINGENCIES The District is involved from time to time in certain routine litigation, the substance of which either as liabilities or recoveries, would not materially affect the financial position of the District. Although the final outcome of the lawsuits, assertions and claims or the exact amount of costs and/or potential recovery is not presently determinable, in the opinion of the District's legal counsel, the resolution of these matters will not have a materially adverse affect on the financial condition of the District. As a general policy, the District plans to vigorously contest any such matters. During August 2002, the District and its Fire Chief agreed to settle a dispute with the District firefighters' union regarding certain unfair labor practices. As such, the District agreed to pay $20,000 toward the union's legal fees and make certain changes in the District's labor practices. No accrual or other amounts were recorded as of September 30, 2001, as the amounts were not considered material. SUPPLEMENTARY INFORMATION NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT COMBINING DETAILED STATEMENT OF REVENUE, EXPENDITURES AND -� CHANGES IN FUND BALANCE - BUDGET AND ACTUAL - GOVERNMENTAL FUNDS AND EXPENDABLE TRUST FUND Year Ended September 30, 2001 .-, Governmental Funds IN General Fund Special Revenue Funds ION Variance Variance Favorable Favorable ".„, Budget Actual (Unfavorable) Budget Actual (Unfavorable) REVENUE Ad Valorem taxes $ 10,200,000 $ 10,119,221 $ (80,779)$ - $ - $ - "'\ Fees: Inspection fees 285,000 289,034 4,034 - - - Impact fees - - - 1,400,000 935,945 (464,055) Hydrant fees - - - 53,400 29,500 (23,900) Plan review fees - - - - - - "1 Miscellaneous: Interest 261,000 244,213 (16,787) 140,000 3,650 (136,350) "'N Other 310,000 422,433 112,433 - - - TOTAL REVENUE 11,056,000 11,074,901 18,901 1,593,400 969,095 (624,305) Ifts EXPENDITURES Current '" Public safety Personal services: Salaries Firefighters&Admin. 4,976,650 5,072,281 (95,631) - - - Commissioners 30,000 30,000 - - - - ,, Oyertime 520,000 424,902 95,098 - - - Incentives and holiday pay 490,640 547,867 (57,227) - - - "\ Payroll taxes Social Security 480,000 478,688 1,312 - - - "1 Benefits Retirement 1,041,000 1,112,043 (71,043) - - - Health insurance 1,260,000 1,261,220 (1,220) - - - ., Disability insurance 60,000 63,953 (3,953) - - - Vacation 8,000 - 8,000 - - - Sick leave 207,000 - 207,000 - - - Workers compensation 455,000 391,430 63,570 - - - Subtotal-Personal services 9,528,290 9,382,384 145,906 - - - The accompanying notes are an integral part of this statement. - Page 39 of 64 Expendable Trust Fund Code Enforcement Fund Totals-Memorandum Only Variance Variance Favorable Favorable Budget Actual (Unfavorable) Budget Actual (Unfavorable) $ - $ - $ - $ 10,200,000 $ 10,119,221 $ (80,779) 1 - - - 285,000 289,034 4,034 - - - 1,400,000 935,945 (464,055) - - - 53,400 29,500 (23,900) �` 656,137 818,200 162,063 656,137 818,200 162,063 14,329 14,329 401,000 262,192 (138,808) 37,281 37,281 310,000 459,714 149,714 656,137 869,810 213,673 13,305,537 12,913,806 (391,731) .-. 296,146 265,848 30,298 5,272,796 5,338,129 (65,333) ,..y - - - 30,000 30,000 - 10,000 6,760 3,240 530,000 431,662 98,338 - - - 490,640 547,867 (57,227) .. 23,420 21,676 1,744 503,420 500,364 3,056 61,229 74,702 (13,473) 1,102,229 1,186,745 (84,516) .-., 60,840 78,667 (17,827) 1,320,840 1,339,887 (19,047) 3,700 2,980 720 63,700 66,933 (3,233) .01 - - - 8,000 - 8,000 15,062 10,735 4,327 222,062 10,735 211,327 35,938 30,128 5,810 490,938 421,558 69,380 506,335 491,496 14,839 10,034,625 9,873,880 160,745 NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT -. 1 COMBINING DETAILED STATEMENT OF REVENUE, EXPENDITURES AND -. CHANGES IN FUND BALANCE -BUDGET AND ACTUAL - GOVERNMENTAL FUNDS AND EXPENDABLE TRUST FUND- (CONTINUED) ....k Year Ended September 30, 2001 - Governmental Funds General Fund Special Revenue Funds ,� Variance Variance Favorable Favorable Operating expenditures: Budget Actual (Unfavorable) Budget Actual (Unfavorable) Insurance 88,000 87,367 633 - - - Uniforms 37,000 34,892 2,108 - - - ,NN Communications 25,000 22,672 2,328 - - - Rent - - - - - - Telephone 80,000 92,933 (12,933) - - - "., Utilities 104,000 104,058 (58) - - - Maintenance Vehicle 186,800 193,848 (7,048) - - - Equipment 8,000 10,291 (2,291) - - - Computer 22,300 22,665 (365) - - - Medical Equipment 17,000 20,155 (3,155) - - - Contract labor - - - 24,997 9,759 15,238 Hydrant - - - 21,750 31,321 (9,571) Building 73,200 73,064 136 - - - Supplies �'1 Office 22,000 20,503 1,497 - - - Protective gear 8,000 6,002 1,998 - - - Station 22,000 23,130 (1,130) - - - Equipment Office 14,600 14,560 40 - - - Portable 1,827 1,165 662 - - - Fire 25,500 18,768 6,732 - - - AWN Professional and other fees Legal and professional 90,000 113,589 (23,589) - - - Property appraiser fees 128,000 124,917 3,083 - - Arms - Tax collector fees 205,000 202,718 2,282 - - - Special maintenance fee 4,000 - 4,000 - - - Accounting 75,000 64,801 10,199 - - - Miscellaneous Travel 12,000 17,540 (5,540) - - - Public information officer 25,000 17,769 7,231 - - - Fuel and oil 91,000 97,902 (6,902) - - - Employee physicals 35,000 59,671 (24,671) - - - Impact fee collection - - - 20,000 23,717 (3,717) Training 129,300 101,459 27,841 - - - Miscellaneous 12,000 9,053 2,947 - - - Dues and subscriptions 10,000 12,164 (2,164) - - - Special teams 23,000 22,355 645 - - - Dive team 6,200 6,185 15 - - - Operational Reserves Contingency - - - - - - Subtotal-Operating expenditures 1,580,727 1,596,196 (15,469) 66,747 64,797 1,950 The accompanying notes are an integral part of this statement. ,� 1 Page 40 of 64 Expendable Trust Fund .-. Code Enforcement Fund Totals-Memorandum Only Variance Variance Favorable Favorable "--.. Budget Actual (Unfavorable) Budget Actual (Unfavorable) 2,142 2,408 (266) 90,142 89,775 367 3,000 2,849 151 40,000 37,741 2,259 - - - 25,000 22,672 2,328 25,460 23,121 2,339 25,460 23,121 2,339 8,892 8,973 (81) 88,892 101,906 (13,014) 960 597 363 104,960 104,655 305 3,750 1,566 2,184 190,550 195,414 (4,864) - - - 8,000 10,291 (2,291) - - - 22,300 22,665 (365) - - - 17,000 20,155 (3,155) A.. - - - 24,997 9,759 15,238 - - - 21,750 31,321 (9,571) 2,000 881 1,119 75,200 73,945 1,255 9,020 2,593 6,427 31,020 23,096 7,924 .. - - - 8,000 6,002 1,998 - - - 22,000 23,130 (1,130) - 6,567 (6,567) 14,600 21,127 (6,527) - - - 1,827 1,165 662 - - - 25,500 18,768 6,732 1,440 1,991 (551) 91,440 115,580 (24,140) - - - 128,000 124,917 3,083 - - - 205,000 202,718 2,282 .-. - - - 4,000 - 4,000 3,500 25,500 (22,000) 78,500 90,301 (11,801) •• - - - 12,000 17,540 (5,540) - - - 25,000 17,769 7,231 15,000 6,935 8,065 106,000 104,837 1,163 2,100 5,074 (2,974) 37,100 64,745 (27,645) - - - 20,000 23,717 (3,717) 12,000 3,463 8,537 141,300 104,922 36,378 2,000 597 1,403 14,000 9,650 4,350 ^ 4,200 2,129 2,071 14,200 14,293 (93) - - - 23,000 22,355 645 - - - 6,200 6,185 15 2,568 - 2,568 2,568 - 2,568 .. 98,032 95,244 2,788 1,745,506 1,756,237 (10,731) NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT COMBINING DETAILED STATEMENT OF REVENUE, EXPENDITURES AND -..., CHANGES IN FUND BALANCE -BUDGET AND ACTUAL - GOVERNMENTAL FUNDS AND EXPENDABLE TRUST FUND-(CONTINUED) Year Ended September 30, 2001 .-, Governmental Funds General Fund Special Revenue Funds Variance Variance Favorable Favorable Capital outlay: Budget Actual (Unfavorable) Budget Actual (Unfavorable) Station 47 land - - - 245,000 - 245,000 Station 48 land - - - 400,000 373,298 26,702 Station 42 enlargement - - - 50,000 6,006 43,994 Station improvements 5,800 5,717 83 - - - I1 Trucks - - - 155,000 89,142 65,858 Vehicles 18,000 17,991 9 100,000 86,842 13,158 ows Fire&rescue equipment 3,700 3,610 90 7,000 8,501 (1,501) Protective gear - - - 20,000 14,179 5,821 Communications equip. 11,000 10,975 25 - - - Office equipment 1,400 1,307 93 - - - Training equipment 7,400 7,391 9 - - - Lawn equipment - - - 4,000 3,515 485 Hazardous materials equip. - - - 50,000 42,933 7,067 Physical fitness equipment - - - 9,000 8,934 66 Air pack equipment - - - 40,000 36,052 3,948 Fire simulator - - - 21,000 20,500 500 Technical rescue - - - 32,000 30,279 1,721 Special teams - - - 10,000 3,202 6,798 Dive team 2,200 2,195 5 - - - h PETC equipment - - - 12,000 10,752 1,248 Pre plan - - - 20,000 7,383 12,617 Computers 8,700 8,660 40 - - - Thermal imaging cameras - - - 12,500 12,500 - Fire prevention education 1,100 1,065 35 - - - "ikk Scriptwriters - - - 25,000 19,470 5,530 Miscellaneous - - - 2,000 - 2,000 "� Subtotal-Capital outlay 59,300 58,911 389 1,214,500 773,488 441,012 DEBT SERVICE Principal reduction - - - - 38,699 (38,699) Interest and fiscal charges 46,000 42,228 3,772 95,000 100,041 (5,041) „\ TOTAL EXPENDITURES 11,214,317 11,079,719 134,598 1,376,247 977,025 399,222 .1 EXCESS OF REVENUE OVER(UNDER)EXPENDITURES (158,317) (4,818) 153,499 217,153 (7,930) (225,083) oeik FUND BALANCE,October 1,2000 556,000 556,314 314 95,360 101,679 6,319 FUND BALANCE, September 30,2001 $ 397,683 $ 551,496 $ 153,813 $ 312,513 $ 93,749 $ (218,764) 'N The accompanying notes are an integral part of this statement. _ Page 41 of 64 Expendable Trust Fund Code Enforcement Fund Totals-Memorandum Only Variance Variance .-. Favorable Favorable Budget Actual (Unfavorable) Budget Actual (Unfavorable) .. - - - 245,000 - 245,000 - - - 400,000 373,298 26,702 - - - 50,000 6,006 43,994 '� - - - 5,800 5,717 83 - - - 155,000 89,142 65,858 ---. 61,000 60,236 764 179,000 165,069 13,931 - - - 10,700 12,111 (1,411) - - - 20,000 14,179 5,821 - - - 11,000 10,975 25 - - - 1,400 1,307 93 ^ - - - 7,400 7,391 9 - - - 4,000 3,515 485 - - - 50,000 42,933 7,067 - - 9,000 8,934 66 - - - 40,000 36,052 3,948 .. - - - 21,000 20,500 500 - - - 32,000 30,279 1,721 - - - 10,000 3,202 6,798 - - - 2,200 2,195 5 - - - 12,000 10,752 1,248 - - - 20,000 7,383 12,617 14,000 13,804 196 22,700 22,464 236 - - - 12,500 12,500 - . - - - 1,100 1,065 35 - - - 25,000 19,470 5,530 ,-� - - - 2,000 - 2,000 75,000 74,040 960 1,348,800 906,439 442,361 - - - - 38,699 (38,699) ,.., - - - 141,000 142,269 (1,269) 679,367 660,780 18,587 13,269,931 12,717,524 552,407 (23,230) 209,030 232,260 35,606 196,282 160,676 400,000 439,032 39,032 1,051,360 1,097,025 45,665 $ 376,770 $ 648,062 $ 271,292 $ 1,086,966 $ 1,293,307 $ 206,341 NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 42 of 64 COMBINING BALANCE SHEET - SPECIAL REVENUE FUNDS September 30, 2001 Impact Fee Hydrant Fund Fund Totals ASSETS Cash and cash equivalents $ 17,251 $ 118,022 $ 135,273 Investments -restricted 2,028,275 - 2,028,275 Due from other governments 98,536 - 98,536 Due from other funds 4,341 3,542 7,883 TOTAL ASSETS $ 2,148,403 $ 121,564 $ 2,269,967 LIABILITIES AND FUND EQUITY LIABILITIES Accounts payable and accrued expenses $ 6,380 $ - $ 6,380 Due to other funds 44,417 27,815 72,232 Deferred revenue 1,112,606 - 1,112,606 Line of credit 985,000 - 985,000 TOTAL LIABILITIES 2,148,403 27,815 2,176,218 FUND EQUITY Fund balance Unreserved, designated - 93,749 93,749 TOTAL FUND EQUITY - 93,749 93,749 •� TOTAL LIABILITIES AND FUND EQUITY $ 2,148,403 $ 121,564 $ 2,269,967 The accompanying notes are an integral part of this statement. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 43 of 64 COMBINING STATEMENT OF REVENUE,EXPENDITURES AND CHANGES IN FUND BALANCE - SPECIAL REVENUE FUNDS Year Ended September 30, 2001 Impact Fee Hydrant Fund Fund Totals REVENUE Fees: Impact fees $ 935,945 $ - $ 935,945 Hydrant fees - 29,500 29,500 Miscellaneous: Interest - 3,650 3,650 TOTAL REVENUE 935,945 33,150 969,095 EXPENDITURES Current Public safety Operating expenditures 23,717 41,080 64,797 Capital outlay 773,488 - 773,488 Debt service Principal reduction 38,699 - 38,699 Interest and fiscal charges 100,041 - 100,041 TOTAL EXPENDITURES 935,945 41,080 977,025 EXCESS OF REVENUE OVER(UNDER) EXPENDITURES - (7,930) (7,930) FUND BALANCE, October 1, 2000 - 101,679 101,679 FUND BALANCE, September 30, 2001 $ - $ 93,749 $ 93,749 The accompanying notes are an integral part of this statement. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT COMBINING STATEMENT OF REVENUE,EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL - SPECIAL REVENUE FUNDS Year Ended September 30, 2001 Impact Fee Fund Hydrant Fund Variance Variance Favorable Favorable Budget Actual (Unfavorable) Budget Actual (Unfavorable) REVENUE " Fees: Impact fees $ 1,400,000 $ 935,945 $ (464,055) $ - $ - $ - Hydrant fees - - - 53,400 29,500 (23,900) Miscellaneous: Interest 140,000 - (140,000) - 3,650 3,650 "- TOTAL REVENUE 1,540,000 935,945 (604,055) 53,400 33,150 (20,250) EXPENDITURES Current Public safety Operating expenditures: Maintenance Contract labor - - - 24,997 9,759 15,238 Hydrant - - - 21,750 31,321 (9,571) „y Miscellaneous 20,000 23,717 (3,717) - - - Operational Reserves AN ContingencyANN - - - - - - Subtotal-Operating expenditures 20,000 23,717 (3,717) 46,747 41,080 5,667 The accompanying notes are an integral part of this statement. Page 44 of 64 Totals Variance Favorable Budget Actual (Unfavorable) $ 1,400,000 $ 935,945 $ (464,055) 53,400 29,500 (23,900) 140,000 3,650 (136,350) 1,593,400 969,095 (624,305) 24,997 9,759 15,238 21,750 31,321 (9,571) 20,000 23,717 (3,717) 66,747 64,797 1,950 NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT COMBINING STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL - SPECIAL REVENUE FUNDS - (CONTINUED) Year Ended September 30, 2001 Impact Fee Fund Hydrant Fund Variance Variance Favorable Favorable Capital outlay: Budget Actual (Unfavorable) Budget Actual (Unfavorable) Station 47 land 245,000 - 245,000 - - - Station 48 land 400,000 373,298 26,702 - - - Station 42 enlargement 50,000 6,006 43,994 - - - Trucks 155,000 89,142 65,858 - - - Vehicles 100,000 86,842 13,158 - - - Fire&rescue equipment 7,000 8,501 (1,501) - - - Protective gear 20,000 14,179 5,821 - - - Lawn equipment 4,000 3,515 485 - - - Hazardous materials equip. 50,000 42,933 7,067 - - - Physical fitness equipment 9,000 8,934 66 - - - Air pack equipment 40,000 36,052 3,948 - - - Fire simulator 21,000 20,500 500 - - - Technical rescue 32,000 30,279 1,721 - - - Special teams 10,000 3,202 6,798 - - - PETC equipment 12,000 10,752 1,248 - - - Pre plan 20,000 7,383 12,617 - - - Thermal imaging cameras 12,500 12,500 - - - - Scriptwriters 25,000 19,470 5,530 - - - Miscellaneous 2,000 - 2,000 - - - Subtotal-Capital outlay 1,214,500 773,488 441,012 - - - DEBT SERVICE Principal-Capital lease - 38,699 (38,699) - - - Interest-Capital lease - 17,826 (17,826) - - - Interest-Credit line 95,000 82,215 12,785 - - - Subtotal-Debt service 95,000 138,740 (43,740) - - TOTAL EXPENDITURES 1,329,500 935,945 393,555 46,747 41,080 5,667 EXCESS OF REVENUE OVER(UNDER)EXPENDITURES 210,500 - (210,500) 6,653 (7,930) (14,583) -.FUND BALANCE,October 1,2000 - - - 95,360 101,679 6,319 FUND BALANCE, September 30,2001 $ 210,500 $ - $ (210,500) $ 102,013 $ 93,749 $ (8,264) The accompanying notes are an integral part of this statement. - Page 45 of 64 Total Variance Favorable Budget Actual (Unfavorable) 245,000 - 245,000 400,000 373,298 26,702 ,-� 50,000 6,006 43,994 155,000 89,142 65,858 100,000 86,842 13,158 7,000 8,501 (1,501) 20,000 14,179 5,821 ^ 4,000 3,515 485 50,000 42,933 7,067 9,000 8,934 66 40,000 36,052 3,948 21,000 20,500 500 32,000 30,279 1,721 10,000 3,202 6,798 ,.� 12,000 10,752 1,248 20,000 7,383 - 12,617 12,500 12,500 - 25,000 19,470 5,530 2,000 - 2,000 1,214,500 773,488 441,012 38,699 (38,699) ^ 17,826 (17,826) 95,000 82,215 12,785 95,000 138,740 (43,740) 1,376,247 977,025 399,222 217,153 (7,930) (225,083) 95,360 101,679 6,319 $ 312,513 $ 93,749 $ (218,764) ADDITIONAL REPORTS OF INDEPENDENT AUDITOR 11/1 Mar] a Memn /��j,N/7 American Institute of Certified Public Accountantsts Tax Division - Norton Stro8r/18r��jManagement Consulting Services Division Com,any PA. Florida Institute of Certified Public Accountants Business Consultants / Certified Public Accountants Government Finance Officers Association Florida Association of Special Districts Financial Consulting Group Page 46 of 64 INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF GENERAL PURPOSE FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Board of Commissioners North Naples Fire Control and Rescue District 1885 Veterans Park Drive Naples, Florida 34110 We have audited the general purpose financial statements of North Naples Fire Control and Rescue District ("the District") as of and for the year ended September 30, 2001, and have issued our report thereon dated May 20, 2002. 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. Compliance As part of obtaining reasonable assurance about whether North Naples Fire Control and Rescue District's general purpose financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws,regulations and contracts, noncompliance with which could have a direct and material effect on the determination of general purpose 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 instances of noncompliance that are required to be reported under Government Auditing Standards, which are more fully described in the accompanying Report to Management and are noted as material noncompliance. Specifically, we noted the Debt Service Fund had a deficit fund balance. We also noted certain other instances of noncompliance that we have reported to the management of North Naples Fire Control and Rescue District in our Report to Management dated May 20, 2002. 8961 Conference Drive•Fort Myers,FL 33919•(239)433-5554•Fax(239)433-2824•Toll Free(888)457-7360 3838 Tamiami Trail North,Suite 302•Naples,FL 34103•(239)434-7556•Fax(239)434-6480 Web Site:www.mnscpa.com Page 47 of 64 Internal Control Over Financial Reporting In planning and performing our audit, we considered North Naples Fire Control and Rescue District's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the general purpose financial statements and not to provide assurance on the internal control over financial reporting. However, we noted certain matters involving the internal control over financial reporting and its operation that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control over financial reporting that, in our judgment, could adversely affect North Naples Fire Control and Rescue District's ability to record, process, summarize and report financial data consistent with the assertions of management in the financial statements. The reportable conditions are described below. As more fully described in our Report to Management, we noted that North Naples Fire Control and Rescue District's system of internal control over financial reporting appears to properly perform the receipt and deposit of cash function. The system, however, did not accurately and consistently disburse, record or report such activity in the accounting system of the organization. As such, we noted an inordinate number of adjusting journal entries and multiple and duplicate payroll check sequences. Additionally, the supervisory controls, including the authorization and approval process in place (i.e.: review by Board of Commissioners), did not timely detect the weaknesses due to the routine level of reporting submitted to them. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level of risk that misstatements in amounts that would be material in relation to the general purpose financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we do consider the reportable conditions, described above, to be material weaknesses. We also noted other matters involving the internal control over financial reporting that we have reported to management of North Naples Fire Control and Rescue District in our Report to Management dated May 20, 2002. As a result of the reportable conditions that we considered material weaknesses, we extended procedures. Through the performance of the extended procedures a qualified opinion on the general purpose financial statement was rendered. The reportable conditions that we considered to be material weaknesses in internal control are described above and in the Independent Auditor's Report to Management. Page 48 of 64 This report is intended solely for the information and use of the Board of Commissioners, management, the Auditor General of the State of Florida and other federal and state audit agencies. This report is not intended to be used, and should not be used, by anyone other than these specified _ parties. adviavt, /1)044., cr&e,m2A,t7 44441 17 MARKHAM NORTON STROEMER& COMPANY, P.A. Fort Myers, Florida May 20, 2002 1 Markham Member �L/ U///m American Institute of Certified Public Accountants Siro8IllerNorton�l/ �,� Management Consulting Services Division - l.L 1. Florida Institute of Certified Public Accountants _ Business Consultants / Certified Public Accountants Government Finance Officers Association Florida Association of Special Districts Financial Consulting Group Page 49 of 64 INDEPENDENT AUDITOR'S REPORT TO MANAGEMENT Board of Commissioners North Naples Fire Control and Rescue District 1885 Veterans Park Drive Naples, Florida 34110 We have audited the general purpose financial statements of the North Naples Fire Control and Rescue District (the "District"), as of and for the fiscal year ended September 30, 2001 and have issued our report thereon dated May 20, 2002. In connection with our audit, we are submitting the following comments and recommendations in accordance with Chapter 10.550 "Rules of the Auditor General - Local Governmental Entity Audits" (Revised September 30, 2001) Rule 10.557(3) and Section 218.39(4), of the Florida Statutes. PRIOR YEAR COMMENTS THAT CONTINUE TO APPLY: Note: The prior year comments continue to apply in the current year. Prior year comments, however, have been revised and expanded to address the current year facts and circumstances. 1. Numerous Adjusting Entries Required During Audit Numerous adjusting entries were posted during the audit. As such, operating results were significantly adjusted from the preliminary amounts reported to the Board. Additionally, the entries then caused adjustments to be made to the subsequent year balances. These entries were substantially due to lack of timely and routine account reconciliations. To assist the -. District, year-end reconciling entries were submitted to management. Management then approved and posted the entries. The year-end general ledger was adjusted to agree to the financial statements. The numerous year-end adjustments impacted the accuracy of monthly management reports and resulted in additional audit and client assistance time. Note: This issue was included as a reportable condition. Current Year Addendum: This item continued to be an issue in the current year. 8961 Conference Drive•Fort Myers,FL 33919•(239)433-5554•Fax(239)433-2824•Toll Free(888)457-7360 3838 Tamiami Trail North,Suite 302•Naples,FL 34103•(239)434-7556•Fax(239)434-6480 Web Site:www.mnscpa.com Page 50 of 64 2. Fixed Asset Policy Should be Formally Expanded, Designed and Adopted, and Control Accounts Should be Reconciled During the audit, we noted the District needed to expand and adopt a formal comprehensive fixed asset policy. The policy should address inventory procedures, deletions, recordkeeping and correlate to procurement policies. During the audit, we noted that the District did not have a detailed list of fixed assets that was routinely reconciled to the fixed asset control account. Additionally, the District had capitalized assets costing less than its capitalization limit of$500 and was not grouping component assets by major asset (i.e.: components necessary to outfit a truck grouped by truck number). We also noted assets were capitalized when specifically designated by policy as noncapital. We understand the Board has adopted the capitalization amount of$500 and annually approves purchases through the budget process, in accordance with the requirements of Florida Statute 274 and Auditor General Rule 10.400. It should be noted that current law allows for a $750 capitalization limit. We recommend the District expand, revise and adopt a comprehensive fixed asset policy in accordance with Florida Statute 274 and Auditor General Rule 10.400. Such policy should correlate to a procurement policy with bidding requirements stated. A complete physical inventory should be taken and input into appropriate software to meet the pending requirements of GASB #34. Assets should be tagged and/or marked and correlated to the annual physical inventory and reconciled to the general ledger control accounts. Smaller _ component assets which comprise a larger asset should be grouped together and accounted for as a single asset rather than individually. A detailed list of fixed asset additions and deletions should be maintained. Supporting Board approval should be attached. Individual asset records should be maintained in accordance with Auditor General Rule 10.400. Current Year Addendum: We continue to recommend this corrective action. This issue resulted in the auditor's opinion being qualified. 3. Five Year Capital Plan Should be Adopted Florida Statute 189.415 requires the District to design a five year plan that addresses facilities, equipment, personnel and revenue and future construction and expansion plans. Such plan and its subsequent amendments are to be sent annually to the Collier County Clerk and the Department of Community Affairs. We recommend the District implement the criteria noted in Florida Statute 189.415 and revise its Plan as required. Current Year Addendum: We continue to recommend this corrective action. Page 51 of 64 4. Travel Policy Should be Developed During the audit, we noted that certain travel vouchers did not contain the state required forms or copies of detail receipts/invoices and/or the traveler's signature as required by Florida Statute 112.061, LOF 99-450, as well as Article V, Section 4 of the Code Enforcement Interlocal Agreement. Due to the lack of detail it was not possible, in all cases, to ascertain the allowability of the expenditure and/or if state travel limits were complied with. Note: This issue was included as a reportable condition. Current Year Addendum: The District retroactively attempted to obtain signed travel forms from the respective traveler for previously reimbursed expenditures upon adopting the form's use. During our testing we noted 3 of 22 forms tested were not signed. We continue to recommend the District develop and implement a travel policy. We did note the District adopted a new policy October 11, 2001. 5. Certain Reports Were Not Timely Filed During the audit we noted certain reports required to be filed by Florida Statutes were not timely filed. Items noted were as follows: Florida Statute 189.415(2) Submit a current public facilities report to the County Clerk at least every five years with any changes submitted annually. The District should file a current public facilities report to the County Clerk as required. Florida Statute 189.418(2) Annually update - Department of _ Community Affairs with change in statutory authority authorizing documents. The District should file its approved codification with the Department. 6. Review of Trial Balance Required During the audit, we noted that most general ledger account balances were not timely and/or routinely reconciled to the supporting detail. In addition, we noted a large number of misclassifications and/or mispostings in the general ledger. The situation was further complicated by the fact that the District's transactions are growing in size, number and complexity. The Finance Department, along with the necessary internal control policies and procedures, have not sufficiently grown to meet the challenges of the District's growth. Page 52 of 64 _ 6. Review of Trial Balance Required, continued This situation caused inconsistent application of accounting practices, resulting in the trial balances requiring significant adjustment and reportable conditions that we considered to be material weaknesses in internal control. We recommend timely and routine review of the trial balance to ensure proper postings, as well as timely and routine account detail reconciliations. Note: This issue was included as a reportable condition. Current Year Addendum: We continue to strongly recommend this procedure. Also during the year ended September 30, 2001, we noted that it appears inconsistent posting of purchase orders caused a double posting and double payment of approximately $13,000. We recommend the Board and Chief review and approve the trial balance monthly. 7. Operating Policies Should be Formally Adopted We recommend the Board formally review and adopt comprehensive operating and personnel policies of the District. These policies should include, at a minimum, travel, investment, _ procurement including bidding requirements, check signing authority, personnel, and in-town meals and expenditures. Due to the size and nature of the District, such policies should be designed with the assistance of legal counsel. Note: This issue was included as a reportable condition. Current Year Addendum: We continue to strongly recommend these policies. 8. Chart of Accounts Review Required We recommend the District review its chart of accounts to ensure compliance with the State Uniform Chart of Accounts (UAS) Florida Statute 218.321. We further recommend the chart of accounts correlate with the annual budget. Specifically, we recommend budgeting by actual expenditure and revenue line item designated by the specific account number. Current Year Addendum: We continue to recommend this procedure. We understand the District has converted accounting software packages and amended its chart of accounts during the year ended September 30, 2002. Page 53 of 64 9. Budget Format Should be Revised The budget format should be expanded to reflect each individual trial balance line and be segregated by functional line items. Budgets for all funds should be detailed so that each expenditure line has a budgeted amount. No expenditures should be approved without an available budgeted amount. Expenditures should then be charged to the appropriate budget line item. Current Year Addendum: We continue to recommend this procedure. 10. Use of Impact Fees Should be More Closely Reviewed During our audit, we noted amounts charged to the impact fee account for items not sufficiently identified as meeting the criteria for impact fee use. We recommend development of a policy and procedure to document each impact fee use, as to purpose and amount. The fixed asset records then should note the item was purchased through impact fees, that it met District's fixed asset policy and that it was Board approved. The Board minutes should specifically document each approval by the Board of Impact Fee use as to purpose and amount. Items purchased as components of an approved use should be so noted. Current Year Addendum: We recommend the District ensure all items purchased with impact fees are clearly allowable within the agreement or a legal opinion is obtained prior to the use of impact fees. During our audit, we noted several items purchased with impact fees for which we requested the District to seek a legal opinion. A legal opinion was received and all impact fee expenditures were noted as allowable. 11. The District's Finance Department Should be Reorganized The District's Financial activity is growing in size, number and complexity. The current structure of the department is still not meeting the District's needs in a timely fashion. During the audit, we noted transactions were recorded without proper approval and/or governing policy. The lack of coordination caused a variety of transactions to be recorded improperly, which resulted in a reportable condition. As such, we recommend coordination of all facets of the administration to ensure all transactions are properly authorized, approved, recorded and timely reported. Further, we recommend the Board consider creating a Chief Accountant/Controller position. This position would report to the Chief Financial Officer and would be responsible for maintaining and adjusting the general ledger. The position should be a full-charge accountant and would supervise the accounting staff. Access to and adjustment of the general ledger would be limited to this person and/or controlled by this person. The Chief Financial Officer would review and approve reporting, review adherence to policy and review and analyze financial issues. The Page 54 of 64 _ 11. The District's Finance Department Should be Reorganized, continued Chief Financial Officer should not adjust the general ledger directly or post any transaction, but rather request that the Chief Accountant/Controller make such adjustments, to ensure adequate internal control. We recommend all accounting staff as well as management be adequately bonded. The current policy of$10,000 does not appear adequate. The need for this position is reinforced by the fact the Chief Financial Officer is currently assigned to and is performing a vast amount of duties outside the accounting function. As such, there is not adequate time to perform the accounting function. Additionally, the Chief Financial Officer is assigned the role of original data entry and,therefore, not in a position to review reporting for accuracy. The size and nature of the District mandates the need for an accounting review function. The situation is further complicated by the lack of a formal Board policy. Current Year Addendum: We noted that the District hired a Chief Accountant/Controller near the end of the fiscal year being audited. The District also made the accounting assistant a full time position as it was previously part time. We recommend the District consider increasing the number of accounting staff by at least one person due to the growth of the District. We also recommend the Chief Financial Officer not directly adjust the general ledger or post any transaction but rather request that the Chief Accountant/Controller make such adjustments, to ensure adequate internal control. 12. Credit Card and In-Town Meal/Other Costs Reimbursement Policy Should be Designed And Approved (As Revised for The Current Year) During the year, we noted expenditures charged to credit and debit cards. Certain expenditures totaling approximately $33,000 lack proper documentation as to business purpose, allowability and compliance to policy and/or Florida Statute. Current Year Addendum: During the year ended September 30, 2001, we noted certain expenditures that appear unallowable and/or lack proper documentation (approximately $13,000). We recommend the Board design and adopt policies for in-town meal/other cost reimbursement as well as travel and other operating policies recommended earlier. It appears that certain of these costs were approved for payment due to lack of policy, direction and/or previous practice and were potentially unallowable by Statute. Therefore, we emphasize the need for increased resources in the Finance Department. Note: This issue was included as a reportable condition and material noncompliance. Current Year Addendum: We continue to recommend these policies. We did note a credit card policy was adopted on October 11, 2001. Page 55 of 64 13. Payroll Process Should be Enhanced We noted the District's payroll system is complex due to union contracts and non-union pay methods, incentives, employee classifications and the number of employees. We also noted the payroll is processed by an outside vendor who does not routinely have its internal controls audited. The current system essentially requires the full-time efforts of an in-house accountant as well as the services of the outside vendor. We noted no formal reconciliation of the data submitted to the vendor to the resulting payroll reports or to the general ledger accounts was performed. In addition, we noted payroll related costs and adjustments were netted to salary and wage expenditures, which made year-end reconciliation an overly time consuming process which required excessive research and effort. We recommend the Board consider enhancing the process by analyzing the payroll system, simplifying all facets possible and requiring routine reconciliation from the time records to the general ledger posting, including reconciliation to the IRS reporting. All payroll entries should be posted "gross"; no reimbursements on costs should be netted to the payroll accounts. This will simplify the reconciliation process. The Board should consider taking payroll in-house or moving to a vendor that annually has its internal controls audited (SAS 70 Report "Reports on the Processing of Transactions by Service Organizations") in an effort to reduce liability to the Board and District. Note: This issue was included as a reportable condition. Current Year Addendum: We noted that subsequent to September 30, 2001 (approximately the payroll paid on May 15, 2002) the District changed its accounting software, hired an in-house Chief Accountant/Controller and has begun implementation of in-house payroll processing. We continue to recommend that no duplicative check numbers be issued. 14. Controls Over Inspection Fees Fund Should be Enhanced During the audit, we noted the District remitted inspection fees to the participating districts after the period of time allowed by the interlocal agreements. Payments are due the respective participating districts within five (5) days of receipt of the proceeds by the North Naples Fire Control and Rescue District from Collier County. MNS allowed five (5) days from the date of the check from the County to North Naples Fire Control and Rescue District to allow for receipt transit time. Current Year Addendum: It appears in at least seven(7) months of the fiscal year ended September 30, 2001 the District's payment distributions were late. In the absence of the 5 day transit allowance, all 12 payments would be considered late. During the current year, there was an allocation error between three of the participating districts in the amount of$120 at September 30, 2001. Although the total dollar error was small, Page 56 of 64 14. Controls Over Inspection Fees Fund Should be Enhanced, continued materiality is not relevant since all amounts are due other districts. The discrepancy was corrected in the following month (FY 2002). We recommend the District enhance its accounting function to provide for compliance with its contracted duties. Remittances to the participating districts should include a copy of the County's disbursement listing by district with a check and a calculation of the amount being remitted. 15. Inspection Fee Interest and Revenue Should be Disbursed Timely The District has followed a policy of retaining the interest income earned from the Inspection _ Fee Account in the fund's cash account. The interest earnings should either be disbursed to the General Fund of North Naples Fire Control and Rescue District or to the participating districts. We recommend that the District obtain a legal opinion concerning how to properly allocate and disburse the investment earnings. Current Year Addendum: We continue to recommend the District address this issue. 16. Retirement Plans Should be Analyzed(as revised) _ During the audit, we noted the General Employees'Plan should have had an actuarial valuation performed. We, however, noted the Plan was terminated in the fiscal year 2001 and new Plans were instituted therefore eliminating the need for such valuations. It should be noted since no timely valuation was performed contributions to the Plan were based on prior year amounts and not actuarially determined. We also noted that due to investment choices made by the Board of Trustees of the Firefighters'Pension Plan, the plan had a significant loss which caused the District to have to fund the difference. The adoption of the new Plans further complicates the District's payroll function. We recommend the District review its retirement plans to ensure its employee benefit goal is being met and that the cost of administration of the Plans is considered. Recent changes to the State FRS may make it an attractive alternative,that also saves administrative efforts. Current Year Addendum: We noted the District instituted three (3) new retirement plans (plans 5-7) and terminated Plan 3. We continue to recommend the District monitor its retirement plans and consider moving all its plans into the State FRS. 17. Petty Cash Reconciliation Should be Restructured We noted petty cash was reconciled by the Controller who is the custodian and has access to the general ledger. Page 57 of 64 17. Petty Cash Reconciliation Should be Restructured, continued We recommend the petty cash account be routinely reconciled by someone other than the custodian for internal control purposes. Current Year Addendum: We continue to recommend the District implement this procedure. 18. Interfund Receivables and Payables Should be Routinely Reconciled We noted that due to/from other fund accounts were not timely or routinely reconciled. We recommend all interfund transactions be approved by the Chief Financial Officer prior to recording and that all due to/from accounts be reconciled monthly. In addition, the balances should be cleared, and actually paid, periodically to reduce the chance of error due to lengthy reconciliations. Current Year Addendum: We continue to recommend the District implement this procedure. 19. Payroll and Disbursement System Controls Should be Enhanced Relative to the payroll system, we noted numerous errors and changes in amounts submitted to the payroll service provider. This caused manual checks to be written internally by the District. We noted the District had multiple and duplicate payroll manual check sequences in use during the year. In some cases the check number was used 2 or 3 times in the same year. Twenty-eight (28) checks with the same number were issued more than once. No log of manual checks was maintained and no controls were in place for ordering blank checks from the payroll company. The District did establish a check signer policy requiring Board member signatures on all checks (two signatures for payables and one for payroll checks). Note: The combination of the lack of payroll reconciliations and multiple and duplicate check sequences indicates a material weakness in internal controls and material noncompliance. We recommend manual checks be logged and approved for use by specific check. Blank checks should be secured and the ordering of blank checks should be approved. Check numbers should not be duplicative and only a single check sequence should be used. Payroll should be timely reconciled. Proper and complete documentation for all disbursements should be required and properly filed. Current Year Addendum: Relative to the payroll system, we noted numerous errors and changes in amounts submitted to the payroll service provider. This caused manual checks to be written internally by the District. We noted the District had multiple and duplicate payroll manual check sequences in use during the year. In some cases, the same check number was used 2 or 3 times in the same year. One hundred fifty-six (156) checks with the same number were issued more than once. No log of all manual checks (complete sequence) was Page 58 of 64 19. Payroll and Disbursement System Controls Should be Enhanced, continued maintained and no controls were in place for ordering blank checks from the payroll company for a portion of the year being audited. When this matter was discovered during the performance of prior year auditing procedures, the District's Chief Financial Officer took possession of all blank payroll check stock used for writing manual payroll checks and prepared a log to account for the portion of manual checks issued. The remaining blank manual check stock was not logged. All manual checks issued were either duplicate or triplicate check numbers. These checks with duplicate and triplicate check numbers should have been destroyed when first discovered. Manual checks with unique check numbers should have been ordered. We recommend blank manual check stock be logged (population) and approved for use by specific check number. Blank checks should be logged, secured and the ordering of blank checks should be approved. Check numbers should not be duplicative and a unique check sequence should be used for manual checks. Payroll should be timely reconciled. Proper and complete documentation for all disbursements should be required and properly filed. The combination of lack of payroll reconciliations and multiple and duplicate check sequences indicates a material weakness and reportable condition in internal controls. Note: The combination of the lack of payroll reconciliations and multiple and duplicate check sequences indicates a material weakness in internal controls and material noncompliance. 20. Code Enforcement Fund Controls Should be Strengthened We noted no evidence of approval of the fund's budget by the participating districts (prior to June 1 each year) as required in the interlocal agreements nor any evidence of consistent financial reporting to these districts or the steering committee. We noted certain capital assets were purchased but no policy exists as to ownership of such assets. We recommend the District timely submit the Code Official (enforcement) budget to the participating districts and the steering committee as well as consistent and accurate financial reporting packages. These packages should include at a minimum a check register, receipts log, trial balance and budget vs. actual statement. We further recommend the steering committee establish written control policies for this fund, including invoice and check approvals, signers, fixed asset policies, and investment criteria (Florida Statute 218.415). Additionally, all monthly reports should be signed by a representative of the steering committee and minutes of the steering committee's meetings should be written and maintained. Any supporting documents should be maintained along with the official minutes. Current Year Addendum: We continue to recommend the District implement this procedure. Page 59 of 64 21. Purpose of Debt Service Fund Should be Analyzed (As Revised) We noted the Debt Service Fund was not budgeted and the purpose and use of the fund was not formally documented or made policy by the Board. We also noted that the fund had a negative (deficit) fund balance, at September 30, 2001. We recommend the Board formally establish policy as to the need and purpose of the Debt Service Fund. We recommend if no specific need for the fund is determined or if its current use is continued, the fund be eliminated and closed to the General Fund. 22. Check Registers Should be Reviewed and Initialed by the Chief Financial Officer Due to the nature and size of the District's administrative staff and the fact that the Board signs the checks, we recommend the Chief Financial Officer initial the check register, as evidence of review, prior to having the checks signed. Such signed check registers should be filed and maintained as evidence of controls. Additionally, we recommend that each Board member be given a copy of the monthly trial balance for review, as well as the monthly receipts listing, approved check registers, and a budget to actual summary. It is recommended the minutes document such Board review and approval as evidence of internal control. This documentation is important due to the size of the District. This recommendation would increase internal control for the Board. Current Year Addendum: We noted the District implemented this policy subsequent to the fiscal year end. CURRENT YEAR COMMENTS 23. Cash Transfers Should Be Initiated Timely _ We noted that a cash transfer between funds was recorded on June 30, 2001 was not paid until April 24, 2002. We recommend that all cash transfers are made at the time they are posted to the accounting records. 24. Checks Should Not Be Post/Back Dated We noted that certain checks near year-end were post dated while others were back dated. We recommend checks be dated only when they are issued and accruals made to record the expenditures in the proper period. 25. Voided Checks Should Be Defaced and Retained We noted that several voided checks could not be located for review during the audit. We recommend that all voided checks be defaced and retained for review. Accounting for all sequentially numbered documents is an essential internal control. Page 60 of 64 25. Voided Checks Should Be Defaced and Retained, continued We did note subsequent to year-end a new procedure was adopted. The current procedure regarding voided checks is to deface the check and retain it. If a check is reissued, the original voided check is kept with the documentation of the reissued check. 26. District Cell Phone Usage Policy Should Be Developed The District does not have a formal written policy on District owned cell phone usage with respect to personal calls. The District has noted some excessive personal usage on occasion and in certain instances employees are requested to reimburse the District for those calls. The lack of a formal policy precludes the District from uniformly applying any collection efforts. We recommend the District adopt a formal written cell phone usage policy which addresses items such as personnel to be issued cell phones, necessity for long distance service, approved usages, monitoring procedures to ensure adherence to the policy, collection efforts, and consequences of the abuse of the cell phone privilege. 27. All Fixed Assets Should Be Included In Inventory Listing We noted that the District did not include certain donated items of a capital nature in their master fixed asset inventory listing. Florida Statute 274 and Auditor General Rule 10.400 requires all tangible personal property of a non-consumable nature to be marked when practicable and inventoried at least annually. We recommend that all fixed assets whether purchased or donated be marked when practicable and accounted for on the District's inventory listing pursuant to Florida Statute 274 and Auditor General Rule 10.400. Also, assets purchased with impact fees should be recorded as funded from impact fees. 28. Expenditures Should Be Consistently Recorded We noted that certain rental expenditures were not consistently coded to the proper expenditure accounts. At times, items such as contracted clerical help and telephone expenditures were included in rent expense in the Code Enforcement Fund. Expenditure coding should be consistently applied throughout the fiscal period. Consistent application of expenditure coding aids in review of financial data including comparison analysis. We recommend the District consistently apply expenditure coding throughout the fiscal period especially on expenditures of a recurring nature. 29. General Employees' Pension Fund Should Be Invested Or Distributed We noted that the General Employee's Pension fund was terminated in December 2000. The Board of Trustees of the Plan have obtained the required actuarial valuation at the date of termination. However, this was not performed until August 2002. Further, the assets of the Plan Page 61 of 64 29. General Employees' Pension Fund Should Be Invested Or Distributed, continued have only consisted of cash in a demand deposit account with a financial institution which earned significantly less than the actuarial assumption (8%) from the previous valuation. We noted the District distributed the assets of the Plan as provided in the termination clause of the agreement during the year ended September 30, 2002. 30. Investment Policy Should be Developed and Implemented During the year ended September 30, 2001, we noted the District had no written investment policy per Florida Statute 218.415. This is in noncompliance with the statute. However, we noted the District had only invested in cash which complies with F.S. 218.415(17). Per Florida Statute 218.415, we recommend the District either elect to design and adopt a written investment policy or formally resolve to abide by F.S. 218.415(17). Such decision should be recorded in the minutes and a formal policy to abide by F.S. 218.415(17) should be adopted. 31. Firefighter Pension Plan Investment Policy Should be Reviewed Current (Plan-2) investment policy and actual selected investments performed below expectations and caused losses and under funding of the Plan. Such losses and under funding are actuarially recovered through increased required contributions by the District. We recommend the Plan's policy and investments be reviewed and adjusted to accommodate current economic times. Such review should minimize investment losses and reduce the _ requirement of the District to increase contributions to offset investment losses. 32. Potential Deteriorating Financial Condition-Declining Fund Balance Should be Monitored During the audit, we noted that the District again had adopted an annual budget having annual expenditures greater than annual revenue. This practice results in the planned use of prior year excess revenue (carryover). Specifically, the District budgeted the use of prior year excess revenue in the amounts of approximately $271,000 and $158,000, respectively, over the last two fiscal years. Actual use of prior year excess revenues was approximately $402,000 and $141,000, respectively, over the last two fiscal years. Therefore, actual use of prior year excess revenue was greater than the amounts budgeted due, in part, to a large number of required adjustments to the books and records at year-end. This practice has left the District with a small unreserved, undesignated fund balance relative to Districts of a similar size. No evidence was noted or submitted for our review of any Board approved target or planned fund balance amount, or planned use of any remaining fund balance. Page 62 of 64 32. Potential Deteriorating Financial Condition-Declining Fund Balance Should be Monitored, continued Although we do not believe the District to be in a state of financial emergency, the District did meet certain of the State indicators of a deteriorating financial condition, as defined by statute (F.S.218.503). Our financial condition assessment of the District included the use of many procedures, including the indicator testing criteria established by the Office of the Auditor General of the State of Florida(Rule 10.550). As noted earlier, the use of such criteria indicated factors contributing to the indicators related to a declining fund balance, annual budgetary increases, lack of timely and accurate financial reporting, general ledger and annual budget not being specifically correlated, lack of operational policies, no cash or budgetary reserve, annual operational costs in excess of revenue, and no five year plan which coordinates future operational and capital needs with projected tax, impact and other revenues. These factors and indicators resulted in part from the rapid growth of the District, and the lack of budget and expenditure monitoring. As such, we recommend the District establish a target and/or planned fund balance, address and/or correct the issues noted herein, and ensure timely and accurate financial reporting. Specifically, we recommend the Board review its unreserved undesignated fund balance (in the General and Special Revenue Funds) and establish a policy to determine a target and/or planned fund balance to be held for unanticipated and emergency purposes. Planned reserves should also include amounts for future capital investments and/or major repairs and correlate with future budgets with these items. We recommend the District quickly address and implement the corrective action to the comments submitted within this letter. In addition, the District must review its proposed FY2003 budget (and subsequent budgets) and attempt to reduce and/or limit expenditure increases so as to begin to build reserves for emergencies, operational contingencies, future major repairs and capital asset replacements. This effort should be correlated with the design of the five (5) year capital and operational plan, as well as projected tax, impact fee and other revenues. Future major capital repairs, replacement, and expansion should be incorporated into the plan. Methods, timing, and revenue sources to fund such items should be planned and reserves designed and funded over time. The five year plan must be established and monitored in accordance with current and future District assessment of asset condition and response, service and staffing standards. In summary, the District should continue to monitor its expenditures closely in the future. Operational efficiency and a capital asset condition assessment should be implemented. The results of such efforts will assist in preparing the five (5) year plan and guide the District's budgeting efforts. The District did have certain positive financial indicators such as no increase in millage rate, increasing taxable property values within the District, a projected FY2003 increase in ad valorem revenue of over$2 million, projected continued construction within the District boundaries, essentially no debt and continued receipt of impact fees. Page 63 of 64 32. Potential Deteriorating Financial Condition-Declining Fund Balance Should be Monitored, continued Other positive District financial indicators include acquisition of a new accounting software program, implementation of certain operating policies, reorganization of the finance department, improved reporting and the renewed managerial intent to more closely analyze future budgets, expenditure levels and future needs. 33. Retirement Costs Should be Recorded Separately by Plan We noted that certain retirement costs for multiple plans are recorded into the same general ledger account. This practice makes year end reconciliation difficult and does not provide routine, readily available information for the District. We recommend a separate line item account be established for each retirement plan. 34. Impact Fee Fund Should be Reconciled to Cash Account Activity During the audit, we noted the impact fee fund was reconciled to the year-end cash balance. We, however, noted many adjustments and items purchased partially with non-impact fee monies. We recommend to simplify the impact fee accounting that adjustments and the use of partial funding of asset purchases be minimized. We also recommend monthly actual cash account activity be segregated and reconciled to the impact fee fund general ledger accounts (i.e.: interest revenue, capital outlay, operating expenditures, etc.) 35. State of Florida Auditor General Has Been Requested to Perform an Audit During the audit, we became aware that the State Senator representing the area of Collier County covered by the District has requested the State Auditor General audit the District. No course of action has been determined by the State Joint Legislative Audit Committee. 36. District and Fire Chief Admit Certain Unfair Labor Practices During August 2002, the District and its Fire Chief agreed to settle a dispute with the District firefighters' union regarding twenty-two (22) unfair labor practices. As such, the District agreed to pay $20,000 toward the Union's legal fees and make certain changes in the District's labor practices. Subsequently, the Chief resigned his position with the District and accepted a severance package totaling approximately $300,000 to be paid over the next two fiscal years. Page 64 of 64 We have included in this letter all comments which came to our attention during the course of our audit regarding Items 1 through 6, as applicable, of the "Rules of the Auditor General-Local Governmental Entity Audits," Rule 10.554, Section(1)(f). In regard to Item 2, we represent that the North Naples Fire Control and Rescue District has complied with Florida Statute 218.415 regarding investment of public funds, except as noted above. In regard to Item 6a, nothing came to our attention to cause us to believe that at any time during the year the North Naples Fire Control and Rescue District met any of the criteria for being in a state of financial emergency as defined in Florida Statute 218.503(1), nor do we believe the District to be in a state of deteriorating financial conditions, as defined by statute. However, we did note certain factors indicating a potential deteriorating financial condition as noted within this report. As such, we do not believe the District to be in a state of financial emergency. Additionally, in regard to Item 6b, we represent that the financial report filed with the Department of Banking and Finance, pursuant to Florida Statute 218.32(1)(a), is in agreement with the annual financial audit report for the same period. This report is intended solely for the information and use of the Board of Commissioners, management, the Auditor General of the State of Florida and other federal and state audit agencies. This report is not intended to be, and should not be, used by anyone other than these specified parties. Ait4444j 4.44441114- 41447)*47) 14 . lel MARKHAM NORTON STROEMER& COMPANY, P.A. Fort Myers, Florida May 20, 2002 EXHIBIT Nori Naples Fire Control Zr Rescue District Ft . 1885 Veterans Park Drive•Naples, Florida 34109 a rt,` (239)597-3222•Fax(239)597-7082 FA. September 9, 2002 _ Auditor General's Office Local Government Audits/342 Claude Pepper Building, Room 401 111 West Madison Street Tallahassee, FL 32399-1450 The following is management's response to the audit report for fiscal year 2000/2001: 1. NUMEROUS ADJUSTING ENTRIES REQUIRED DURING AUDIT The District began to reorganize its financial department in September 2001. General ledger is now reviewed monthly. Routine account reconciliations are now performed. 2. FIXED ASSET POLICY SHOULD BE FORMALLY EXPANDED, DESIGNED AND ADOPTED AND CONTROL ACCOUNTS SHOULD BE RECONCILED. Our new fixed asset policy has been prepared and approved by legal counsel and submitted to the Board of Fire Commissioners for approval. Our new fixed asset policy will soon be adopted by the Board of Fire Commissioners. This policy will address inventory procedures, deletions, recordkeeping, and be correlated to procurement policies. The District will maintain a list of fixed assets that will be reconciled to the fixed asset control account. Items, part of a larger fixed asset or group and under the capitalization limit, will be grouped together as a major asset. Assets that policy designates as non capital will not be capitalized. The current capitalization amount of$500.00 will be changed to the $750.00 capitalization limit. A procurement policy will be expanded with bidding requirements stated. A complete physical inventory is currently being performed. The District has created a permanent staff position performing physical inventory. This position will report directly to Chief of Administration. Assets will be tagged and or marked and correlated with the annual physical inventory and reconciled to the general ledger control accounts. A detailed list of fixed assets additions and deletions will be maintained with supporting board approval attached. 3. FIVE YEAR CAPITAL PLAN SHOULD BE ADOPTED The District will design a five year plan that addresses facilities, equipment, personnel, revenue, and future construction and expansion plans. Such plan and its subsequent amendments will be _ sent annually to the Collier County Clerk and the Department of Community Affairs. The District will implement the criteria noted in Florida Statutes and the Auditor General's office. The five year plan will be correlated with planned use of impact fees, revenue reserves and the use of debt, if necessary. 4. TRAVEL POLICY SHOULD BE DEVELOPED The travel policy was adopted by the District's Board of Fire Commissioners on October 11, 2001. State mandated travel reimbursement forms are used. All travel vouchers will contain the state required forms and appropriate receipts as required by Florida Statute. 5. CERTAIN REPORTS WERE NOT TIMELY FILED The District submitted a current public facilities report to the county clerk, but did not include the five year plan. Current management has made that a top priority to create a five year plan, and as soon as it is accomplished, it will be submitted. 6. REVIEW OF TRIAL BALANCE REQUIRED All trial balances are reviewed on a monthly basis to ensure proper posting as well as timely routine account detail reconciliation. 7. OPERATING POLICIES SHOULD BE FORMALLY ADOPTED Operating policies, shall include but not be limited to investment, procurement, including bidding requirements, check signing authority, in town meals and expenditures. Financial policies and procedures are currently being developed, as well, and will be formalized and adopted in the coming year. 8. CHART OF ACCOUNTS REVIEW REQUIRED The District has purchased financial software and has created a new chart of accounts which complies with the state uniform chart of accounts (UAS) Florida Statute 218.321. 9. BUDGET FORMAT SHOULD BE REVISED Our budget format will be revised to reflect each individual trial balance account and will be segregated by functional line items. No expenditures will be approved without an available budgeted amount. Expenditures will be charged to the appropriate budget line item. 10. USE OF IMPACT FEES SHOULD BE MORE CLOSELY REVIEWED _ All impact fee expenditures will be reviewed, approved and signed off by the District's attorney, and approved by the Board of Fire Commissioners before any monies are expended from Impact fees. 11. THE DISTRICT'S FINANCE DEPARTMENT SHOULD BE REORGANIZED The District's financial department has been reorganized. The finance director is assigned only to duties relating to the accounting function. Upon Board approval another accounting staff member will be hired. The finance director will review and maintain the general ledger and provide the accounting staff with necessary journal entries to process. All accounting staff and management are bonded. The bonding amount will be analyzed. 12. CREDIT CARD AND IN-TOWN MEAL/OTHER COSTS REIMBURSEMENT POLICY SHOULD BE DESIGNED AND APPROVED (As Revised for the Current Year) The District will develop a policy for in-town meals and reimbursements, as per Florida Statute. 13. PAYROLL PROCESS SHOULD BE ENHANCED The District purchased accounting software and now processes payroll in-house. There is only one sequence of payroll check numbers, therefore they can not be duplicated. All unused manual payroll checks have been destroyed. 14. CONTROLS OVER INSPECTION FEES FUND SHOULD BE ENHANCED Payments will be made to the participating districts within five days of receipt of proceeds. The inspection fee fund is reviewed and reconciled monthly. 15. INSPECTION FEE INTEREST AND REVENUE SHOULD BE DISBURSED TIMELY We will obtain a legal opinion from the District's attorney regarding how to properly allocate interest earned by the inspection fee fund. 16. RETIREMENT PLANS SHOULD BE ANALYZED Management continues to recommend that they return to the FRS system for all employees. 17. PETTY CASH RECONCILIATIONS SHOULD BE RESTRUCTURED The bookkeeper is now the custodian of the petty cash and the financial officer will reconcile it. 18. INTERFUND RECEIVABLES AND PAYABLES SHOULD BE ROUTINELY RECONCILED The due to/from other fund accounts are reconciled monthly, the balances are cleared and paid on a routine and timely basis. 19. PAYROLL AND DISBURSEMENT SYSTEM CONTROLS SHOULD BE ENHANCED The payroll service provider has been eliminated. Payroll is now processed in-house using only one check sequence. There is no need to use manual checks. All payroll reports are reconciled monthly. Pending Board approval the District will hire an accounting staff member, whose sole responsibility will be payroll and all related matters. 20. CODE ENFORCEMENT FUND CONTROLS SHOULD BE STRENGTHENED Currently, the code official budget, as well as check registers, trial balances, bank reconciliations, and receipt logs are being submitted to the Steering Committee. A policy will be developed clarifying ownership of Capital Assets purchased by Code Enforcement. A specific set of policies will be developed for this fund. Budgets will be submitted timely. 21. PURPOSE OF DEBT SERVICE FUND SHOULD BE ANALYZED On August 29, 2002 the Board approved the dissolution of the Debt Service Fund. The fund will be closed prior to September 30, 2002. 22. CHECK REGISTERS SHOULD BE REVIEWED AND INITIALED BY THE FINANCE DIRECTOR Check registers are reviewed and initialed by the finance director and the Board of Fire Commissioners providing signatures for the disbursements. Additionally, all Board members receive check registers as part of their monthly financial packets and will accept such reports via the Board minutes. 23. CASH TRANSFERS SHOULD BE INITIATED TIMELY All cash transfers are made as soon as the Board member signatures are obtained. 24. CHECKS SHOULD NOT BE POST/BACKDATED No checks will be post dated or back dated. Checks will be dated only when issued and accruals will be made to record the expenditures in the proper period. 25. VOIDED CHECKS SHOULD BE DEFACED AND RETAINED Currently, the chief financial officer voids, defaces and retains all voided checks. If a check is reissued the original voided check will be kept with the documentation of the reissued check. 26. DISTRICT CELL PHONE USE POLICY SHOULD BE DEVELOPED The District has developed a cell phone usage policy, which will be updated to include personnel to be issued cell phones, necessity for long distance service, approved usages, monitoring procedures to ensure adherence to the policy, collection efforts, and consequences of abuse. This policy will submitted to the Board of Fire Commissioners for approval. The chief financial officer will review the cell phone bills on a monthly basis. 27. ALL FIXED ASSETS SHOULD BE INCLUDED IN INVENTORY LISTING All fixed assets, whether purchased or donated, will be included in the inventory listing. Assets purchased with Impact Fees are assets recorded as funded from Impact Fees. 28. EXPENDITURES SHOULD BE CONSISTENTLY RECORDED The District will consistently apply expenditure coding throughout the fiscal period. The chief financial officer will review the expense accounts on a monthly basis to ensure the consistent application of expense coding. 29. GENERAL EMPLOYEES PENSION PLAN SHOULD BE INVESTED OR DISTRIBUTED As of September 2002, distribution to participants has been made. The remaining monies in the fund will be distributed by November 2002. _ 30. INVESTMENT POLICY SHOULD BE DEVELOPED AND IMPLEMENTED The District will design a written investment policy and submit it for board approval. 31. FIRE FIGHTER PENSION PLAN INVESTMENT POLICY SHOULD BE REVIEWED The District will review the policy and adjust to accommodate current economic time. 32. DECLINING FUND BALANCE SHOULD BE MONITORED _ The District's management is aware of the gravity of the situation. We do not believe the District to be in a state of financial emergency. In an effort to improve the financial condition of the District, the Board of Fire Commissioners has tentatively adopted a budget for the fiscal year 2002/2003 that does not have expenditures greater than annual revenue and provides for designated and undesignated reserves. The financial department has been reorganized to _ increase the accuracy of financial reporting and general ledger review. The general ledger and the annual budget are being modified so that they correlate. Operational policies are being prepared for submittal to the Board. The department has hired an independent consultant to assist in the establishment of internal controls and policies and procedures. The District has made it one of its highest priorities to establish a five year plan. The Board will review its undesignated fund balance in general and special revenue funds and establish a policy to determine a target or planned fund balance to be held for unanticipated and emergency purposes. The 2002/2003 budget includes reserves for emergencies, operational contingencies, future major repairs, and capital asset replacement. The District will continue to monitor its expenditures closely and operational efficiency and capital asset condition assessment will be implemented. The District has not increased its millage rate and projects an increase in ad valorem revenues of more than 2 million dollars in the year ending 2003. Management is committed to more closely analyzing future budgets, expenditure levels, and future needs. 33. RETIREMENT COSTS SHOULD BE RECORDED SEPARATELY BY PLAN The District retroactively separated the retirement costs by plan in September 2002. 34. IMPACT FEE FUND SHOULD BE RECONCILED TO CASH ACCOUNT ACTIVITY The District will minimize partial funding of assets between impact fee fund and other funds. The District will segregate and reconcile monthly actual cash account activity to the impact fee fund general ledger accounts. 35. STATE OF FLORIDA AUDITOR GENERAL HAS BEEN REQUESTED TO PERFORM AN AUDIT The District's management has reorganized the financial department. 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YES Are revenues and expenditures/expenses reported by fund group, i.e., General Fund, Special Revenue Fund, Debt Service Fund, Capital Project Fund, Enterprise Fund, Internal Service Fund and Trust and Agency Fund? Use account codes only once; across fund columns where applicable. YES Are all like funds rolled up and reported as one fund group? YES Are all account codes consistent with those listed in the 2000 Edition of the Uniform Accounting System Manual? ONLY ACCOUNT CODES THAT APPEAR ON THE ENCLOSED LIST CAN BE USED. PLEASE CALL IF ADDITIONAL ACCOUNT NUMBERS ARE NEEDED. YES Check to see that Revenue codes contain 6 digits, none of which is an X. For example, 313.XXX should be reported as 313.100, 313.200, 313.300, etc. Codes with X's cannot be entered electronically or entered manually into our database and forms containing these codes will be returned as unacceptable. (Refer to the enclosed list, or the 2000 Edition of the Uniform Accounting System Manual for valid codes.) YES Check to see that Expenditure/Expense codes contain 5 digits, 2 of which represent object codes (10, 30, 60, 70, 80, 90) such as 513.10, 513.30, 513.60, etc. Do not list sub-objects such as 513.11, 513.21, 513.23, etc. when filing manually; electronic filing will not accept incorrect account codes. All expenditures/expenses are to be rolled up to the 10, 30, 60, 70,80, 90 levels. Manual reporting forms which present sub-object detail will be returned as unacceptable. (Refer to the enclosed list, or the 2000 Edition of the Uniform Accounting System manual for valid codes.) N/A If you are reporting a discretely presented component unit, record the revenues and expenditures under the COMPONENT UNIT column as you would for any other fund group. N/A If you are reporting a dependent district, make sure to complete Component Unit Reporting— Part 1 and Component Unit Reporting— Part 2 forms manually. They should be submitted along with the certification page, if filing electronically, or with the annual report if filing manually. Add any units you may have that are not listed. Also, please list any independent special district which is reported as a component unit by your agency. N/A If filing electronically, has the certification page been completed and signed by the Chairman of the Board and the Chief Financial Officer and mailed? YES If filing manually, have all applicable parts of the form been completed and has the certification page been completed and signed by the Chairman of the Board and the Chief Financial Officer and mailed? YES Submit one (1) copy of the audit report, (management letter version), with the completed certification page, and any component unit reports, if filing electronically, or with all completed forms if filing manually. YES Annual Financial Report must be filed electronically, or postmarked by April 30, 2002 if an audit is not required in accordance with Section 11.45(3)(a)4., or within 45 days after the completion of the audit report, but no later than 12 months after the end of the fiscal year. There are no provisions in the statutes for any extensions for filing the Annual Financial Report. Nonfilers are subject to having state revenue sharing funds withheld until reporting deficiencies are remedied. Note mailing address for the annual report: Department of Banking and Finance Bureau of Accounting Room 414, Fletcher Building 101 East Gaines Street Tallahassee, Florida 32399-0350 Do not hesitate to contact this office if assistance or clarification is needed regarding reporting requirements. Our telephone and fax numbers are as follows: Otis Smith (850)410-9347 Suncom 210-9347 Jeanne Dowdrick (850)410-9344 Suncom 210-9344 Mark Hammett (850)410-9377 Suncom 210-9377 Hal Foy (850)410-9345 Suncom 210-9345 FAX (850)410-9993 Suncom 210-9993 C:%word\AFR checklist for FY 2000-01ysd AUDITOR GENERAL LOCAL GOVERNMENT AUDIT REPORT SUBMITTAL CHECKLIST (SECTION 218.39,FLORIDA STATUTES) (To be submitted with the 2000-2001 fiscal year audit report) Local Governmental Entity Name North Naples Fire Control and Rescue District Contact Person Name and Title Bill Hansell, Deputy Chief of Administration Contact Person Phone Number (941 ) 597-37?? Contact Person Email Address Fiscal Year Audited September 30, 2001 Date Auditor Delivered Audit Report to Local Government Does the audit report include the following items required Auditor General Rule 10.557(3): Required for municipalities special districts, the county as a whole, and county agencies** YES The financial statements described in Auditor General Rules 10.556(3) through (5), as applicable, together with related notes to financial statements? N/A Required supplementary information (RSI) such as the Management's Discussion and Analysis (not required for county agencies), or the Budgetary Comparison Schedule (required as RSI if not presented as part of the financial statements), for entities that have implemented GASB 34? YES The auditor's report on the financial statements? YES The auditor's report on compliance and internal control? YES The management letter defined in Auditor General Rule 10.554(1)(g)? YES The written statement of explanation or rebuttal required by Auditor General Rule 10.558(1)? ** Pursuant to Section 218.39(2), Florida Statutes, an audit of the board of county commissioners is not required. However, if the county report includes an audit of the board of county commissioners, it should include the items by Auditor General Rule 10.557(3). Required for municipalities,special,districts,and thecounty as a whole N/A Any auditor's reports and related financial information required pursuant to the Federal Single Audit Act Amendments of 1996, OMB Circular A-133, or other applicable Federal law? N/A Any auditor's reports and related financial information required pursuant to the Florida Single Audit Act(see Auditor General Rule 10.557(3)(d))? Page 1 of 2 In addition to the above,have the following requirements been complied with: YES Are all of the above elements of the audit report included in a single bound document as required by Auditor General Rule 10.557(3)? )tES Are two copies of the audit report being submitted as required by Auditor General Rule 10.558(2)? YES Was the audit report submitted within 45 days after the completion of the audit, but no later than 12 months after the end of the fiscal year? NOTE: There are no provisions in the statutes for any extensions for filing the audit report. Nonfilers are subject to having state revenue sharing funds withheld, or may be subjected to other penalties, for failure to file an audit report. N/A If the audit report is for a county or municipality, and a dependent special district was audited as part of the county or municipality audit, did the notes to financial statements clearly indicate that the special district had been included as part of the county's or municipality's reporting entity? NOTE: Pursuant to Section 218.39(3), Florida Statutes, an independent special district may not be audited as part of a county or municipality audit. When a dependent special district is audited as part of the county or municipality audit, the county or municipality notes to financial statements should clearly disclose that the special district is a component unit included within the county's or municipality's reporting entity. This checklist should accompany the audit report. It is suggested that you retain a copy of the checklist for your files. Do not hesitate to contact this office if assistance or clarification is needed regarding reporting requirements. Our telephone and fax numbers, and electronic addresses, are as follows: New Address— Auditor General's Office Local Government Audits/342 Claude Pepper Building,Room 401 111 West Madison Street Tallahassee, FL 32399-1450 Telephone: (850) 487-9031 Suncom 277-9031 Fax (850) 487-4403 Fax-Suncom 277-4403 Email Address: flaudgen localgovt(aaud.state.fl.us Web site Address: www.state.fl.us/audgen Page2of2