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NNFCRD Financial Statements 09/30/2002 I ^, I NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT GENERAL PURPOSE FINANCIAL STATEMENTS TOGETHER WITH REPORTS OF INDEPENDENT AUDITOR YEAR ENDED SEPTEMBER 30,2002 TABLE OF CONTENTS Page(s) ,., Independent Auditor's Report 1-3 #0. General Purpose Financial Statements Combined Balance Sheet-All Fund Types and Account Groups 4 Combined Statement of Revenue,Expenditures and Changes in Fund Balance- Governmental Funds and Expendable Trust Fund 5 Combined Statement of Revenue,Expenditures and Changes in Fund Balance- ^ Budget and Actual-Governmental Funds and Expendable Trust Fund 6 Statement of Changes in Plan Net Assets-Pension Trust Funds 7 Statement of Changes in Assets and Liabilities-Agency Fund 8 Notes to the General Purpose Financial Statements 9-42 Supplementary Information Combining Detailed Statement of Revenue,Expenditures and Changes in Fund ^ Balance-Budget and Actual-Governmental Funds and Expendable Trust Fund 43-45 Combining Balance Sheet- Special Revenue Funds 46 Combining Statement of Revenue,Expenditures and Changes in Fund Balance- Special Revenue Funds 47 Combining Statement of Revenue,Expenditures and Changes in ^ Fund Balance-Budget and Actual- Special Revenue Funds 48-50 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 51-53 Independent Auditor's Report to Management 54-76 Management's Response to Independent Auditor's Report to Management Exhibit M arkham Member American Institute of Certified Public Accountants Norton Stroemer Private Companies Practice Section Management Consulting Services Division �„ 1 i2'22y P.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 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, 2002 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 61% of the assets of the District's Fiduciary Fund Types and 97% 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, insofar 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 perfoiiu 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 97% 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 under the circumstances to apply alternate auditing procedures to determine the fairness of the amounts reported. 896/Conference Drive•Fort Myers.FL 33919•(239)433-5554•Direct Audit Fax(239)433-0249•Toll Free(888)457-7360 3838 Tamiami Trail,North,Suite 302•Naples.FL 34103•(239)434-7556•Fax(239)434-6480 Web Site:www.nnscpa.cma Board of Commissioners North Naples Fire Control and Rescue District Page 2 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 and Rescue District as of September 30, 2002, 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 July 18, 2003, 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 recorded. 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 Auditor's 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 historical 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 resulting in a 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. For the year ended September 30, 2002, the District did monitor its expenditures and did not expend more than its General Fund approved budget. A five (5) year plan was adopted subsequent to September 30, 2002 and strides were made to implement and then adhere to more comprehensive accounting and budgetary policies. It is important for the District to continue to monitor its expenditures and manage its budget to improve its financial condition. Board of Commissioners North Naples Fire Control and Rescue District Page 3 Subsequent to the year ended September 30, 2002, the District determined a prior period adjustment was necessary due to a retroactive District Board of Commissioners' policy decision to disallow certain impact fee expenditures recorded for fiscal years 1996 through 2001. As such, certain capital outlay purchases made from the Impact Fee Fund for these years were disallowed and charged to the General Fund. As part of the same Board action, impact collection fees originally paid by the General Fund were charged to the Impact Fee Fund. The net effect of the Board's policy change resulted in a prior period adjustment which decreased the fund balance of the General Fund in the amount of$257,520 and increased the deferred revenue in the Impact Fee Fund in the same amount at September 30, 2002. Subsequent to September 30, 2002 effective February 1, 2003, the District resigned its duty as the designated administrative District for the Code Enforcement Expendable Trust Fund (Fire Code Official) and Inspection Fees Collection Fund - an Agency Fund. As such all assets, liabilities and fund balances as well as the affected employees were transferred to another independent fire district now designated as the Administrative District. Subsequent to September 30, 2002, the District also completed the Distribution of all assets held by the General Employee's Pension Fund. As such, each of these Funds will be eliminated by the District. Subsequent to September 30, 2002, the District became aware of various investigations by certain law enforcement agencies. The investigations are ongoing as of the date of this report. The District is not privy to the investigations' intent nor the status of these investigations and therefore the outcome cannot be determined. Management believes the result of the investigation will not result in a material claim against the District. Our audit was made for the purpose of foaming 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 43 through 50 is presented for purposes of additional analysis and is not a required part of the general purpose financial statements of _ 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. c.L MARKHAM NORTON STROEMER & COMPANY, P.A. Fort Myers, Florida July 18, 2003 NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT COMBINED BALANCE SHEET -ALL FUND TYPES AND ACCOUNT GROUPS .. September 30, 2002 Governmental Fund Types Special Debt General Revenue Service Fund Funds Fund ASSETS AND OTHER DEBITS Cash and cash equivalents $ 1,136,262 $ 1,391,264 $ - Investments Due from other governments 32,649 49,773 - Due from other funds 78,050 549,758 - Other assets 226,041 - - Property and equipment Amount available in debt service fund Amount to be provided for retirement of general long-term debt - - - TOTAL ASSETS AND OTHER DEBITS $ 1,473,002 $ 1,990,795 $ - LIABILITIES,FUND EQUITY AND OTHER CREDIT LIABILITIES Accounts payable and accrued expenses $ 482,847 $ - $ _ ^ Due to other governments - 746 - �r Due to other funds 501,074 6,380 - Contract deposits 6,000 Deferred revenue - 1,745,466 Lines of credit - _ Capital lease obligation - - - Accrued compensated absences TOTAL LIABILITIES 989,921 1,752,592 - FUND EQUITY AND OTHER CREDIT Investment in general fixed assets - - - Fund balance Unreserved,undesignated 460,840 - - • Unreserved,designated 22,241 238,203 - ,1 Reserved _ - - TOTAL FUND EQUITY AND OTHER CREDIT 483,081 238,203 - TOTAL LIABILITIES,FUND EQUITY AND OTHER CREDIT $ 1,473,002 $ 1,990,795 $ - The accompanying notes are an integral part of this statement. ^ Page 4 of 76 ^ Fiduciary Fund Types _ Account Groups Totals - Firefighters' General Code Inspection Fees General General ^ Pension Employees' Enforcement Collection Fixed Long-Term (Memorandum Fund Pension Fund Fund Fund Assets Debt Only) $ 273,798 $ 99,962 $ 861;818 $ 2,584 $ - $ - $ 3,765,688 .. 1,496,641 - - - - - 1,496,641 108,123 - 118,632 79,381 - - ^ 388,558 - - 48,591 - - - 676,399 14,543 - 1,183 - - - 241,767 - - - - 15,394,326 - 15,394,326 - - - - - 690,790 690,790 $ 1,893,105 $ 99,962 $ 1,030,224 $ 81,965 $ 15,394,326 $ 690,790 $ 22,654,169 ^ $ 1,825 $ 2,275 $ 10,701 $ - $ - $ - $ 497,648 _ 32,487 - - 33,233 - 97,687 21,780 49,478 - - 676,399 _ - - - _ - 6,000 '� - - - - - - 1,745,466 ~ - - - - - 239,472 239,472 - - - - 451,318 451,318 1,825 99,962 _ 32,481 81,965 - 690,790 3,649,536 '', - - - , - 15,394,326 - 15,394,326 ^ - - - - - 460,840 - - - 260,444 ~ 1,891,280 - 997,743 - - - 2,889,023 1,891,280 - 997,743 - 15,394,326 - 19,004,633 $ 1,893,105 $ 99,962 $ 1,030,224 $ 81,965 $ 15,394,326 $ 690,790 $ 22,654,169 NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 5 of 76 COMBINED STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCE - GOVERNMENTAL FUNDS AND EXPENDABLE TRUST FUND .. Year Ended September 30, 2002 Expendable ", Governmental Funds Trust Fund Totals • Special Debt Code General Revenue Service Enforcement (Memorandum REVENUE Fund Funds •Fund Fund Only) Ad Valorem taxes $ 12,011,060 $ - $ - $ - $ 12,011,060 Fees: Inspection fees - 842,726 - - 842,726 Impact fees - 841,290 - - 841,290 .... Hydrant fees - 39,576 - - 39,576 Plan review fees - - - 962,615 962,615 Miscellaneous: Interest 154,367 101,612 - 9,976 265,955 ".. Other 428,032 - - 11,977 440,009 ,.. TOTAL REVENUE 12,593,459 1,825,204 - 984,568 15,403,231 .. EXPENDITURES Current .. Public safety Personal services 10,016,625 623,503 - 550,386 11,190,514 ,.., Operating expenditures 2,014,135 134,203 - 73,316 2,221,654 Capital outlay 152,569 866,005 - 11,185 1,029,759 .. Debt service Principal reduction 40,325 - - - 40,325 .. Interest and fiscal charges 44,897 57,039 _ - 101,936 TOTAL EXPENDITURES 12,268,551 1,680,750 - 634,887 14,584,188 EXCESS OF REVENUE OVER EXPENDITURES 324,908 144,454 - 349,681 819,043 ,^ OTHER FINANCING SOURCES(USES) Transfers in - - 135,803 - 135,803 Transfers out (135,803) - _ - - (135,803) (135,803) - 135,803 - ..... EXCESS OF REVENUE&OTHER FINANCING SOURCES OVER EXPENDITURES&OTHER FINANCING USES 189,105 144,454 135,803 349,681 819,043 FUND BALANCE,October 1,2001 551,496 93,749 (135,803) 648,062 1,157,504 Prior Period Adjustment (257,520) - - (257,520) FUND BALANCE,September 30,2002 S 483,081 $ 238,203 $ - $ 997.743 $ 1,719,027 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, 2002 .., Governmental Funds General Fund • Special Revenue Funds Variance Variance Favorable Favorable ^ Budget Actual (Unfavorable) Budget Actual (Unfavorable) REVENUE Ad Valorem taxes $ 11,976,896 $ 12,011,060 $ 34,164 $ - $ - $ - - Fees: Inspection fees - - - 782,846 842,726 59,880 .-. Impact fees - - - 1,300,000 841,290 (458,710) Hydrant fees • - _ - 43,000 39,576 (3,424) Plan review fees - _ • - - - - Miscellaneous: Interest 125,000 154,367 29,367 100,000 101,612 1,612 ''� Other 425,136 428,032 2,896 - _ - TOTAL REVENUE 12,527,032 12,593,459 66,427 2,225,846 1,825,204 (400,642) EXPENDITURES .� Current Public safety Personal services 10,145,438 10,016,625 128,813 691,846 623,503 68,343 Operating expenditures 2,081,710 2,014,135 67,575 148,721 134,203 14,518 Capital outlay 85,500 152,569 (67,069) 1,492,000 866,005 625,995 Debt service Principal reduction - 40,325 (40,325) - - - 'ft, Interest and fiscal charges 35,000 44,897 (9,897) 65,000 57,039 7,961 TOTAL EXPENDITURES 12,347,648 12,268,551. 79,097 2,397,567 1,680,750 716,817 EXCESS OF REVENUE OVER (UNDER)EXPENDITURES 179,384 324,908 145,524 (171,721) 144,454 316,175 OTHER FINANCING USES Transfers out to debt service fund (134,902) (135,803) (901) - - - - EXCESS OF REVENUE OVER .� (UNDER)EXPENDITURES AND OTHER FINANCING USES 44,482 189,105 144,623 (171,721) 144,454 316,175 "� • FUND BALANCE,October 1,2001 400,000 551,496 151,496 1,004,363 93,749 (910,614) Prior Period Adjustment - (257,520) (257,520) - - - FUND BALANCE, September 30,2002 $ 444,482 $ 483,081 $ 38,599 $ 832,642 $ 238,203 $ (594,439) - The accompanying notes are an integral part of this statement. Page 6 of 76 Expendable Trust Fund .•. Code Enforcement Totals-Memorandum Only Variance Variance .. Favorable Favorable ", Budget Actual (Unfavorable) Budget Actual (Unfavorable) 1 �_ $ - $ - $ - $ 11,976,896 $ 12,011,060 $ 34,164 ^ - - 782,846 842,726 59,880 ^ - - - 1,300,000 841,290 (458,710) - - - 43,000 39,576 (3,424) 001 837,708 962,615 124,907 837,708 962,615 124,907 ^ 10,000 9,976 (24) 235,000 265,955 30,955 - 11,977 11,977 425,136 440,009 14,873 ^ 847,708 984,568 136,860 15,600,586 15,403,231 (197,355) ^ .^ 558,477 550,386 8,091 11,395,761 11,190,514 205,247 110,833 73,316 37,517 2,341,264 2,221,654 119,610 ^ 12,000 11,185 815 1,589,500 1,029,759 559,741 ^ - - - - 40,325 (40,325) - - - 100,000 101,936 (1,936) 681,310 634,887 46,423 15,426,525 14,584,188 842,337 ^ 166,398 349,681 183,283 174,061 819,043 644,982 "` - - - (134,902) (135,803) (901) `� 166,398 349,681 183,283 39,159 683,240 644,081 600,000 648,062 48,062 2,004,363 1,293,307 (711,056) - - - (257,520) (257,520) $ 766,398 $ 997,743 $ 231,345 $ 2,043,522 $ 1,719,027 $ (324,495) NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 7 of 76 STATEMENT OF CHANGES IN PLAN NET ASSETS - PENSION TRUST FUNDS Year Ended September 30, 2002 Fiduciary Fund Types General Firefighters' Employees' Pension Pension Fund Fund Totals ADDITIONS Contributions: Employer $ 451,284 $ 20,163 $ 471,447 Plan members,made by employer on behalf of employee 21,138 - 21,138 State of Florida, insurance premiums 303,169 - 303,169 Total contributions 775,591 20,163 795,754 Investment income: Net depreciation in fair value of investments (238,020) - (238,020) Interest and dividends 48,648 1,634 50,282 (189,372) 1,634 (187,738) Less: investment expenses (14,120) - (14,120) Net investment income (203,492) 1,634 (201,858) TOTAL ADDITIONS 572,099 21,797 593,896 DEDUCTIONS Refund of contributions - 11,978 11,978 Administrative expenses 35,831 9,819 45,650 TOTAL DEDUCTIONS 35,831 21,797 57,628 NET INCREASE IN PLAN ASSETS 536,268 - 536,268 NET PLAN ASSETS,October 1,2001 1,355,012 - 1,355,012 NET PLAN ASSETS,September 30,2002 $ 1,891,280 $ - $ 1,891,280 The accompanying notes are an integral part of this statement. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 8 of 76 STATEMENT OF CHANGES IN ASSETS AND LIABILITIES - AGENCY FUND Year Ended September 30, 2002 Balance Balance October 1, September 30, 2001 Additions Deletions 2002 Inspection Fees Collection Fund ASSETS Cash $ 9,485 $ 1,464,225 $ (1,471,126) $ 2,584 Due from other governments 46,600 79,381 (46,600) 79,381 TOTAL ASSETS $ 56,085 $ 1,543,606 $ (1,517,726) $ 81,965 LIABILITIES Due to other governments $ 20,125 $ 631,245 $ (618,883) $ 32,487 Due to other funds 35,960 49,478 (35,960) 49,478 TOTAL LIABILITIES $ 56,085 $ 680,723 $ (654,843) $ 81,965 The accompanying notes are an integral part of this statement. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 9 of 76 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2002 NOTE A- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization .-. 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 (5) member elected Board of Commissioners. Commissioners serve on a staggered four(4)year 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", as amended by GASB Statement Number 39, "Determining Whether Certain Organizations Are Component Units." These statements require the financial statements of the District (the primary government) to include its component units, if any. A component unit is a legally separate agency for which the primary government is financially accountable or organizations whose exclusion would cause the financial statements to be misleading because of the nature and significance of their relationship with the primary government. Financial accountability is determined by the primary government's ability to appoint the voting majority of the entity's Board, impose its will on the organization, the existence of a financial benefit/burden relationship or fiscal dependency. Based on this criteria, there are no component units required to be and there are no component units included in the District's financial statements. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 10 of 76 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2002 NOTE A- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED Fund accounting, continued 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: 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. Ifth 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 three special revenue funds: an Impact Fee Fund, an Inspection 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. The Inspection Fee Fund consists of building inspection fees distributed to the District from the Inspection Fee Collection Fund, an agency fund also administered by 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. During the year ended September 30, 2002, the Board resolved to close the Debt Service Fund. As such, the District transferred assets from the General Fund to fund the Debt Service Fund loss carryforward. Oftk NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 11 of 76 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2002 ^ NOTE A- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED Fund accounting, continued Governmental Fund Types, continued: 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 Collection Fund, 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. Account Groups: General Fixed Assets - This account group is used to account for all fixed assets of the District. General Long-Term Debt- This account group 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 Imak NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 12 of 76 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2002 ^ NOTE A- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED Measurement focus, continued 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. 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 NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 13 of 76 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2002 NOTE A- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED Basis of accounting, continued interest on general long-teiiii 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-tenni 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 adheres to 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. 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. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 14 of 76 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2002 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED Fixed assets, continued 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. Subsequent to September 30, 2002, the District changed its capitalization limit for the year ended September 30, 2003 to $750. 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 revenue over expenditures and other financing uses of$44,482. The District has adopted an annual budget for the Special Revenue Funds - Impact Fee, Inspection Fee and Hydrant Fund, which included budgeted expenditures over revenue of$179,000 in the Impact Fee Fund, budgeted revenue equal to budgeted expenditures in the Inspection Fee Fund, and $7,279 budgeted revenue over expenditures in the Hydrant Fund. The District has adopted an annual budget for the Expendable Trust Fund - Code Enforcement, which included budgeted revenue over expenditures of$166,398. The District follows these procedures in establishing budgetary data for the General Fund, the Impact Fee Fund, the Inspection Fee Fund, the Hydrant Fund and the Code Enforcement Fund: NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 15 of 76 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2002 NOTE A- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED Budgets and budgetary accounting, continued 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, 2002, which increased the budgeted revenue in the General Fund, the Inspection Fee Fund, and the Code Enforcement Fund by $474,804, $582,846, and $187,708 respectively. The amendments also increased the budgeted expenditures and other financing uses in the General Fund, the Impact Fee Fund, the Inspection Fee Fund, and the Code Enforcement Fund by $953,495, $324,000, $582,846, and $28,804 respectively. No budgets were adopted for the Debt Service Fund (which was eliminated by September 30, 2002), the Inspection Fee Collection Fund (an Agency 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. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 16 of 76 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2002 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, 2002 was recorded in the general purpose financial statements in the General Long-Term Debt Account Group, as these accounts would not nolinally 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 17 of 76 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2002 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 $3,765,688, of which the total cash balance of $2,629,426 was restricted. Total cash and cash equivalents included cash on hand of $500 at September 30, 2002. 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, 2002. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 18 of 76 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2002 ^ NOTE B - CASH AND CASH EQUIVALENTS, CONTINUED District deposits consist of the following at September 30, 2002: Carrying Bank Amount Balance Unrestricted General Fund Depository Accounts $ 1,135,762 $ 1,433,137 Restricted Special Revenue Funds Impact Fee Depository 1,312,697 1,335,079 Hydrant Money Market 78,567 80,052 Total Special Revenue Funds 1,391,264 1,415,131 Debt Service Fund _ 5 Pension Trust Funds Firefighters'Pension Depository 273,798 Not Available General Employees' Pension Depository 99,962 99,962 Total Pension Trust Funds 373,760 99,962 Expendable Trust Fund Code Enforcement Depository 861,818 872,197 Agency Fund Inspection Fees Collection Depository 2,584 163,651 Total Restricted Cash 2,629,426 2,550,946 TOTAL $ 3,765,188 $ 3,984,083 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 19 of 76 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2002 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 Pension Trust Funds account for resources held to fund the respective employee pension benefits. 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 Collection 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. NOTE C - INVESTMENTS Investments were $1,496,641 at September 30, 2002. 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. AN NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 20 of 76 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2002 NOTE C - INVESTMENTS, CONTINUED 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: 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 Firefighters'Pension Trust Fund U.S. Federal Securities (Bonds) $ 348,624 $ - $ 348,624 Corporate Bonds - 423,536 423,536 Corporate Security Equities - 724,481 724,481 Total Firefighters' Pension Trust Fund 348,624 1,148,017 1,496,641 TOTAL INVESTMENTS $ 348,624 $ 1,148,017 $ 1,496,641 ^ i NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 21 of 76 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2002 NOTE D - DUE TO/FROM OTHER FUNDS Interfund receivables and payables at September 30,2002 are as follows: Due from Due to Fund other funds other funds General Fund: Impact Fee $ - $ 383,742 Inspection Fee - 114,217 Hydrant 6,380 3,115 Code Enforcement 21,780 - Inspection Fees Collection 794 - ^ General Employees'Pension Fund 49,096 - Total General Fund 78,050 501,074 Special Revenue Funds: Impact Fee General 383,742 - Inspection Fee General 114,217 - Inspection Fees Collection 48,684 - .. Hydrant General 3,115 6,380 Total Special Revenue Funds 549,758 6,380 Fiduciary Funds: General Employees'Pension Fund: General - 49,096 ^ Code Enforcement - 48,591 Total General Employees'Pension Fund - 97,687 Code Enforcement Fund: General - 21,780 General Employees'Pension Fund 48,591 - '� Total Code Enforcement Fund 48,591 21,780 Inspection Fees Collection Fund: General - 794 Inspection Fees - 48,684 Total Inspection Fees Collection Fund - 49,478 Total $ 676,399 $ 676,399 NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 22 of 76 ^ NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2002 NOTE E - CHANGES IN GENERAL FIXED ASSETS The following is a summary of changes in general fixed assets for the year ended September 30, 2002: Balance Balance October 1, Deletions/ September 30, 2001 Additions Adjustments 2002 Land $ 1,703,400 $ 103,030 $ - $ 1,806,430 Construction in progress - 172,260 - 172,260 Buildings&improvements 6,476,954 50,996 - 6,527,950 Vehicles &equipment 3,845,731 518,097 26,315 4,390,143 Firefighter equipment 1,212,998 110,679 7,428 1,331,105 Furniture&fixtures 822,479 74,697 (49,234) 847,942 Fixed assets acquired under capital lease 318,496 - - 318,496 $ 14,380,058 $ 1,029,759 $ (15,491) $ 15,394,326 Adjustments were required to the fixed asset balances at September 30, 2002 as a result of the on-going fixed asset inventorying project for items located and/or donated/deleted in prior years. 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, 2002: Amount General long-term debt payable, at October 1, 2001 $ 790,933 Principal reduction- capital lease (40,325) Decrease in accrued compensated absences (59,818) General long-term debt payable, at September 30, 2002 $ 690,790 NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 23 of 76 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2002 NOTE F- CHANGES IN GENERAL LONG-TERM DEBT, CONTINUED The following is a summary of long-term payable obligations at September 30, 2002: 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. $ 239,472 Non-current portion of compensated absences. Employees of the District are entitled to paid leave based on length of service and job classification. 451,318 $ 690,790 The annual debt service requirements for general long-term debt at September 30, 2002 were as follows: Year Ending Capital Lease September 30 Payable Total 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 282,627 282,627 Less: Amount representing interest (43,155) (43,155) $ 239,472 239,472 Accrued compensated absences 451,318 Total Long-Term Debt $ 690,790 NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 24 of 76 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2002 NOTE G - LINES OF CREDIT The following is a summary of the lines of credit payable at September 30, 2002: 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 was 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, 2002, the District made draws on the line of credit totaling $1,039,000 and principal payments totaling $1,874,977. $ _ 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, 2002 with interest accruing at 3.75%payable monthly. The line of credit was 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. During the fiscal year ended September 30, 2002, the District made draws on the line of credit totaling $1,252,038 and principal payments totaling $2,237,038. $1,500,000 line of credit payable to a financial institution. Principal due on demand but no later than December 12, 2001, with interest accruing at 6.5%payable monthly. The uncollateralized line of credit was obtained to pay overruns associated with fire station construction projects. During the year ended September 30, 2002, the District made draws on the line of credit totaling $1,213,000 and principal payments totaling $1,213,000. $ NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 25 of 76 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2002 NOTE H -RETIREMENT PLANS The following seven 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 (1) Plan 4 - Governmental Money Purchase Plan- Chief(2) Plan 5 - Governmental Money Purchase Plan- Executive Assistant (4) Plan 6 - Governmental Money Purchase Plan- Code Officers (3) Plan 7 - Governmental Money Purchase Plan - General Employees (5) (1) Plan was terminated as of December 31, 2000. (2) Plan was terminated on November 14, 2002 effective October 1, 2002. (3) Plan was terminated on February 13, 2003 effective February 1, 2003. (4) Plan was terminated as of July 24, 2003 effective July 24, 2003. (5) Plan was terminated on June 12, 2003 effective June 1,2003. 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, 2002, 2001 and 2000. The District's covered payroll for the years ended September 30, 2002, 2001 and 2000 was $3,950,152, $3,965,771, and $3,660,791 respectively. The District's contributions to the Plan were $657,502, $739,684, and$715,346 for the years ended September 30, 2002, 2001 and 2000, respectively, which represents 17%, 19%, and 19%, respectively, of covered payroll. Pension costs for the District ranged between 6%to 18% for the year ended September 30, 2002. There were no employee contributions to the Plan. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 26 of 76 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2002 NOTE H -RETIREMENT PLANS, CONTINUED Plan 1 - Plan description and provisions - Florida Retirement System, continued 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 creditable service. Vested employees may retire anytime after vesting and incur a 5%benefit reduction for each year prior to normal retirement age. 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, 2002 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. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 27 of 76 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2002 NOTE H -RETIREMENT PLANS, CONTINUED 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. There were no employee contributions to the Plan during the year ended September 30, 2002. 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, 2002. The State contributions under Chapter NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 28 of 76 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2002 NOTE H -RETIREMENT PLANS, CONTINUED Plan 2 - Plan description and provisions - Firefighters' Pension Trust Fund, continued 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 of$112,818. 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, 2001, the District's fiscal year 2002 contribution requirement was $451,284, which approximated 22% of covered payroll. Actual District contributions to the Plan for the year ended September 30, 2002 were $472,422 including $21,138 contributed by the District on behalf of the participating firefighters (1%pick-up). The State contributions for the year ended September 30, 2002 were $303,169. At September 30, 2002, $387,350 of the Plan's total net assets are restricted for future benefits increases. Pension benefits - Effective July 1, 2001, employees with 6 or more years of service are entitled to monthly 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 number of years of 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. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 29 of 76 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30,2002 NOTE H -RETIREMENT PLANS, CONTINUED Plan 2 - Plan description and provisions - Firefighters' Pension Trust Fund, continued ANN 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 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, 2002 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, 2001 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. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 30 of 76 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2002 NOTE H -RETIREMENT PLANS, CONTINUED Plan 2 - Plan description and provisions - Firefighters' Pension Trust Fund, continued A copy of the Plan and Plan audit for September 30, 2002 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)were 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, 2002. The District's contributions of$1,466 from the General Fund, of which$932 was expended in the prior year, and$18,697 from the Code Enforcement Fund were payments based upon prior year contribution requirements. These contributions were made during the process of terminating the Plan and were ultimately refunded to the respective contributing funds. The Plan was terminated on December 17, 2000 by Board action effective December 31, 2000. Benefit amounts were determined by participant at the present value of the future benefit. As of December 31, 2002, all assets of the Plan due to the participants had been paid. Assets of the Plan due to other funds (refunds) were reflected as payables to other funds. These amounts were disbursed in March 2003. Therefore, as of September 30, 2002, no anticipated employee benefits were due to any participant from this Plan. Ink NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 31 of 76 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2002 NOTE H -RETIREMENT PLANS, CONTINUED The following is a summary of the Single Employer-Defined Benefits Plan, including funding policies, contribution methods, benefit provisions and trend information: Firefighters'Pension Trust Fund-Plan 2 Year established and District Resolution 96- governing authority 004(July 11, 1996) Governing authority Board of Trustees of Plan Determination of contribution requirements: Actuarially determined Employer(District) 23%to 33% of covered payroll,based upon age of employees. Contributions are required after the State Revenue under Chapter 175 (premium tax refunds) are received. Plan members 1% of Covered payroll- - Note: The District adopted Resolution 96-005 to fund the contribution for the employees. (Pick-up) Funding of administrative costs Employer Period required to vest 6 years Post retirement benefit increase Cost of living increase of of 3%each year. Eligibility for distribution (Normal retirement) Earlier of 55 with 6 years of credited service or 25 years credited service regardless of age Provisions for: �• Disability benefits Yes Death benefits Yes NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 32 of 76 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2002 NOTE H -RETIREMENT PLANS, CONTINUED Memberships of the Plan consisted of the following at September 30, 2002: Firefighters'Pension Trust Fund-Plan 2 •� Retirees and beneficiaries receiving benefits 0 Terminated Plan members entitled to but not yet receiving benefits 0 ,. Non-vested active members 56 Total 56 Number of participating employers 1 Number of participating state agencies 1 Annual Pension Cost,Net Pension Obligation and Reserves Current year annual pension costs for the Firefighters' Pension Trust Fund are shown in the trend information provided. The Firefighters' Pension Trust Fund had a net unfunded actuarial accrued liability at September 30, 2002 of$719,089. The Plan assets are legally reserved for the payment of the respective plan member benefits within the Plan. There are no assets legally restricted for plan benefits other than these assets within the Plan. The Firefighters'Pension Trust Fund held certain investments at year end. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 33 of 76 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2002 NOTE H -RETIREMENT PLANS, CONTINUED Trend Information Firefighters'Pension Trust Fund(2) Required Net Annual (1) Pension Fiscal Pension Actual Percentage Obligation Year Contribution Contribution Contributed (NPO) 2002 $ 564,102 $ 754,453 100% - 2001 $ 393,649 $ 517,823 100% - '� 2000 $ 266,823 $ 409,439 100% - 1999 $ 159,203 $ 132,624 83% - ^ 1998 $ 79,718 $ 202,800 100% - .. (1) Excludes employee 1%pick-up but includes employer and State contributions. (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. Pension Trusts Required Supplementary Information, September 30, 2002 •► Schedule of Funding Progress Firefighters'Pension Plan: UAAL as a Annual 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 10/01/02 $1,501,493 $ 2,220,582 $ 719,089 67.6% $2,318,319 31.0% 10/01/01 $1,355,012 $ 1,574,854 $ 219,842 86.0% $2,074,284 10.6% 10/01/00 $ 869,923 $ 681,940 $(187,983) 127.6% $1,399,961 13.4% 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. As of December 31,2000,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 34 of 76 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2002 NOTE H -RETIREMENT PLANS, CONTINUED Pension Trust Required Supplementary Information, September 30, 2002, continued Firefighters' Pension Trust Fund Valuation date 10/01/01 • Actuarial cost method Entry Age Amortization method Level dollar, closed Remaining amortization period 30 years .. Actuarial asset valuation method Market .. Actuarial assumptions: Investment rate 8% Projected salary 5% to 9.5% depending on age Post retirement 3% Cost of living adjustment 3% Inflation 4% 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 (now former)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, 2002 and 2001 by the District were $20,000 and $24,000,respectively. The District contributed 100% of its required contributions for the year ended September 30, 2002, and no employee contributions were permitted or paid. The District, as per the Chiefs contract, also directly paid the Chief, via payroll, an additional $11,612 and$8,430 to invest for his retirement for the years ended September 30, 2002 and 2001, respectively. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 35 of 76 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2002 NOTE H -RETIREMENT PLANS, CONTINUED Plan 4 - Governmental Money Purchase Plan, continued Subsequent to September 30, 2002 on November 14, 2002, the District via Resolution 02-010 terminated this Plan, because, effective October 1, 2002, the Chief was no longer an employee of the District, and, therefore, not eligible to participate. Upon Plan termination, the Chief immediately vested in all Plan assets. 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, 2002 and 2001 by the District were $2,698 and $4,955,respectively. The District contributed 100% of its required contributions for the years ended September 30, 2002 and 2001, and no employee contributions were permitted or paid. Subsequent to September 30, 2002, on July 24, 2003, via Resolution 03-040, the District terminated this Plan, effective July 24, 2003. Plan's participants vested immediately 100% in the Plan's assets. Plan 6 - Governmental Money Plurchase 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). NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 36 of 76 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2002 NOTE H -RETIREMENT PLANS, CONTINUED Plan 6 - Governmental Money Purchase Plan, continued The Plan requires the District to make contributions equal to 20% of qualified employee compensation. Total contributions to the Plan for the ended September 30, 2002 and 2001 by the District were $62,535 and $53,234, respectively. The District contributed 100% of its required contributions for the years ended September 30, 2002 and 2001, and no employee contributions were permitted or paid. Subsequent to September 30, 2002, effective February 1, 2003 via Resolution 03-008, the District terminated the Plan simultaneously with its resignation as the designated administrative District for the Code Enforcement Fund- Fire Code Official. The affected Plan participants vested immediately in the Plan assets. 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, 2002 and 2001 by the District were $44,570 and $22,261, respectively. The District contributed 100% of its required contributions for the years ended September 30, 2002 and 2001, and no employee contributions were permitted or paid. Subsequent to September 30, 2003, Resolution 03-034, the District terminated this Plan. The Plan's participants, upon this Plan's termination, on June 1, 2003 immediately became participants in the FRS (Plan 1). The participants immediately vested 100% in the Plan's assets. Iwk NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 37 of 76 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2002 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, 2002, there were eight (8)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 $33,917 during the year ended September 30, 2002. 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$1,582,141 in health insurance claims during the fiscal year ending September 30, 2002. No accrual has been made as of September 30, 2002 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, 2002. 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. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 38 of 76 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2002 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 County Tax Collector. No accrual for the property tax levy becoming due in November 2002 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, 2002, $32,649 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 NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 39 of 76 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2002 NOTE K- PROPERTY TAXES, CONTINUED For the year ended September 30, 2002, 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 2001 net taxable value of real property located within the District. NOTE L - DESIGNATED AND/OR RESERVED FUND BALANCE Fund balance was designated and/or reserved for the following purposes at September 30, 2002: Designated fund balance Amount General Fund-Emergency $ 22,241 Special Revenue Fund-Inspection Fee Fund-building inspection fees 162,901 Special Revenue Fund-Hydrant Fund-fire hydrant maintenance 75,302 238,203 — Total Designated Fund Balance $ 260,444 Reserved fund balance Amount Firefighters'Pension Fund-firefighters'retirement benefits $ 1,891,280 Expendable Trust Fund-code enforcement future operations 997,743 Total Reserved Fund Balance $ 2,889,023 NOTE M - IMPACT FEE FUND ACTIVITY During the year ended September 30, 2002, the Impact Fee Fund had the following activity: Amount Deferred revenue, October 1, 2001 $ 1,112,606 Impact fee receipts (1) 1,216,630 Interest income 100,003 Operating fees (18,249) Capital outlay (866,005) Interest and fiscal charges (57,039) Prior period adjustment 257,520 Deferred revenue, September 30, 2002 $ 1,745,466 — (1) Impact fee receipts include a receivable of$49,773. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 40 of 76 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2002 NOTE N- 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. The District is a defendant in a claim for a waiver of or reimbursement of impact fees. The outcome of such allegation could affect impact fee collection or require impact fee reimbursement for a specified area within the District. The District does not foresee any potential for loss and plans to vigorously defend the matter. No .. outcome can be predicted at this time. The District has agreed to build and share a facility (Station 47) with Collier County EMS and East Naples Fire Control and Rescue District. As of the date of this report, the District had paid $803,030 to Collier County for its prorata share of the ^ facility. Subsequent to September 30, 2002, the District became aware of various investigations by certain law enforcement agencies. The investigations are ongoing as of the date of this report. The District is not privy to the investigation's intent nor the status of these investigations and therefore the outcome cannot be determined. Management believes the result of the investigations will not result in a material claim against the District. Subsequent to September 30, 2002,the District became aware that a local industry group has expressed its intent to explore legal action against the District for the improper expenditure of impact fees. The District has extensively reviewed, including seeking the opinion of legal counsel, its impact fee expenditures from October 1, 1996 through September 30, 2002 and recorded a prior period entry as a result of the review. Should the claim be asserted, the District intends to vigorously defend its position. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 41 of 76 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2002 NOTE O - PRIOR PERIOD ADJUSTMENT Subsequent to the year ended September 30, 2002, the District determined a prior period adjustment was necessary due to a retroactive District Board of Commissioners' policy decision to disallow certain impact fee expenditures recorded for fiscal years 1996 through 2001. As such, certain capital outlay purchases made from the Impact Fee Fund for these years were disallowed and charged to the General Fund. As part of the same Board action, impact collection fees originally paid by the General Fund were charged to the Impact Fee Fund. The net effect of the Board's policy change resulted in a prior period adjustment which decreased the fund balance of the General Fund in the amount of$257,520 and increased the deferred revenue in the Impact Fee Fund in the same amount at September 30, 2002. NOTE P - EXPENDITURES IN EXCESS OF BUDGETED EXPENDITURES Special Revenue Hydrant Fee - During the year ended September 30, 2002, expenditures in the Hydrant Fund exceeded appropriations by $23,911. The District's Board approved the expenditures but did not formally amend the budget. NOTE Q - SUBSEQUENT EVENTS Subsequent to September 30, 2002, a state legislator contacted the Joint Legislative Audit Committee of the State of Florida asking them to instruct the Auditor General to perform an audit of the District. The Auditor General examined the facts surrounding the inquiry and, after reviewing the September 30, 2001 independent audit, recommended to the Joint Legislative Committee that an audit by the Office of the Auditor General was not warranted at the time. However, the Auditor General should monitor the completion of the September 30, 2002 independent audit. The recommendation was based on the extensive findings noted within the September 30, 2001 audit report. The Auditor General was then directed to determine a schedule and monitor the implementation of the recommendations contained in the September 30, 2001 audit report. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 42 of 76 NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS September 30, 2002 NOTE Q - SUBSEQUENT EVENTS, CONTINUED At the August 29, 2002 District Board of Commissioners meeting the Chief of the District agreed to relinquish his position in exchange for a final contract settlement in the amount of$300,000. The settlement was to be paid in the following manner: $150,000 payable on or before October 1, 2002 and $150,000 payable on or before �• October 1, 2003. Prior to the execution of the terms of the written agreement, a citizen filed for and was granted a temporary order to prevent the payment of the settlement. As of the date of this report, the former Chief was paid four months severance per his original employment contract based upon a Judge's order. On August 21, 2003, the District agreed to pay the former Chief an additional $215,000 immediately and to pay $15,000 to the citizen that filed for and was granted the temporary order. This settlement is intended to fully settle this issue. The District had originally budgeted a$150,000 payment in fiscal year 2003. Subsequent to September 30, 2002 effective February 1, 2003, the District resigned its duty as the designated administrative District for the Code Enforcement Expendable Trust Fund (Fire Code Official) and Inspection Fees Collection Fund- an Agency Fund. As such all assets, liabilities and fund balances as well as the affected employees were transferred to another independent fire district now designated as the Administrative District. Subsequent to September 30, 2002 on July 1, 2003, the District settled with a former employee for approximately $58,000 in exchange for a full release for any possible past or future claims against the District. SUPPLEMENTARY INFORMATION COMBINING DETAILED STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL - GOVERNMENTAL ,., FUNDS AND EXPENDABLE TRUST FUND Year Ended September 30, 2002 Governmental Funds General Fund Special Revenue .� Variance Favorable Budget Actual (Unfavorable) Budget Actual REVENUE Ad Valorem taxes $ 11,976,896 $ 12,011,060 $ 34,164 $ - $ - .....s Fees: Inspection fees - - 782,846 . 842,726 Impact fees - - - 1,300,000 841,290 .1 Hydrant fees - - - 43,000 39,576 Plan review fees - - - - - Miscellaneous: Interest 125,000 154,367 29,367 100,000 101,612 Other 425,136 428,032 2,896 - TOTAL REVENUE 12,527,032 12,593,459 66,427 2,225,846 1,825,204 EXPENDITURES Current -'� Public safety Personal services: Salaries Firefighters&Admin. 5,149,602 5,161,946 (12,344) 360,000 357,577 Commissioners 30,000 29,500 500 - - Overtime 397,611 380,688 16,923 15,000 12,884 Incentives and holiday pay 509,690 484,896 24,794 14,846 6,840 Payroll taxes Social Security 482,000 478,941 3,059 28,000 29,624 Benefits Retirement 1,147,095 1,134,062 13,033 69,000 63,129 Health insurance 1,498,440 1,383,421 115,019 150,000 108,720 '1 Disability insurance 75,000 77,474 (2,474) 3,000 2,607 Vacation 44,000 43,871 129 - - Sick leave 185,000 217,058 (32,058) 15,000 9,940 -ti Unemployment compensation 14,000 13,750 250 - - Workers compensation 613,000 611,018 1,982 37,000 32,182 Subtotal-Personal services 10,145,438 10,016,625 128,813 691,846 623,503 The accompanying notes are an integral part of this statement. .., 1 Page 43 of 76 ON Expendable Trust Fund .. Funds Code Enforcement Fund Totals-Memorandum Only Variance Variance Variance Favorable Favorable Favorable ^ (Unfavorable) Budget Actual (Unfavorable) Budget Actual (Unfavorable) $ - $ - $ - $ - $ 11,976,896 $ 12,011,060 $ 34,164 59,880 - - 782,846 842,726 59,880 (458,710) - - - 1,300,000 841,290 (458,710) (3,424) - - - 43,000 39,576 (3,424) - 837,708 962,615 124,907 837,708 962,615 124,907 1,612 10,000 9,976 (24) 235,000 265,955 30,955 - - 11,977 11,977 425,136 440,009 14,873.. (400,642) 847,708 984,568 136,860 15,600,586 15,403,231 (197,355) oik .. 2,423 305,700 305,919 (219) 5,815,302 5,825,442 (10,140) '^� - - - - 30,000 29,500 500 2,116 10,000 6,759 3,241 422,611 400,331 22,280 IN 8,006 - - - 524,536 491,736 32,800 (1,624) 24,200 24,629 (429) 534,200 533,194 1,006 5,871 79,083 81,767 (2,684) 1,295,178 1,278,958 16,220 0-4, 41,280 90,000 90,000 - 1,738,440 1,582,141 156,299 393 3,914 3,897 17 81,914 83,978 (2,064) 44,000 43,871 129 5,060 17,080 9,274 7,806 217,080 236,272 (19,192) - 14,000 13,750 250 • 4,818 28,500 28,141 359 678,500 671,341 7,159 68,343 558,477 550,386 8,091 11,395,761 11,190,514 205,247 .. /r -. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT COMBINING DETAILED STATEMENT OF REVENUE,EXPENDITURES AND "1 CHANGES IN FUND BALANCE -BUDGET AND ACTUAL - GOVERNMENTAL ,,,-, FUNDS AND EXPENDABLE TRUST FUND- (CONTINUED) Year Ended September 30, 2002 Governmental Funds General Fund Special Revenue Variance Favorable Operating expenditures: Budget Actual (Unfavorable) Budget Actual ..., Insurance 95,000 95,421 (421) 7,000 6,480 Uniforms 44,000 35,356 8,644 1,000 923 Communications21,000 20,472 528 - - - Rent - - Telephone 91,000 86,737 4,263 8,000 6,267 Utilities 100,000 96,334 3,666 5,000 3,817 Maintenance Vehicle 258,000 256,407 1,593 7,000 5,400 Equipment 15,000 13,198 1,802 5,000 - Computer 42,500 42,035 465 2,000 1,000 Medical Equipment , 25,000 21,949 3,051 - - Contractlabor - - - 1,664 17,702 .. Hydrant - - - 34,057 41,930 Building 113,000 105,274 7,726 7,000 6,733 Supplies Office 35,000 28,352 6,648 10,000 9,450 Protective gear 55,000 18,108 36,892 - .� Station 28,000 25,151 2,849 - - Equipment Office 23,000 20,253 2,747 - - .-� Portable - - - - - Fire 1,000 35,339 (34,339) - - Professional and other fees Legal and professional 210,000 235,248 (25,248) - - Property appraiser fees 173,526 172,061 1,465 - - Tax collector fees 245,000 241,538 3,462 - - Special maintenance fee 3,684 3,684 - - - .-..„ Accounting 85,000 96,057 (11,057) - - Miscellaneous Travel 30,000 26,499 3,501 5,000 3,833 Public information officer 25,000 23,715 1,285 - - Fuel and oil 100,000 96,638 3,362 5,000 2,400 .. Employee physicals 67,000 66,334 666 3,000 2,000 Impact fee collection - - - 22,000 18,249 Training 75,000 55,886 19,114 - - �. Miscellaneous 20,000 15,891 4,109 5,000 - Dues and subscriptions 16,000 17,551 (1,551) - - .. Special teams - 728 (728) - - Cert team 25,000 23,960 1,040 - - Dive team 3,000 4,211 (1,211) - - Fire prevention 1,000 933 67 10,000 8,019 Hazardous materials 10,000 8,879 1,121 - - .� Technical rescue 10,000 7,759 2,241 - - Boat team 6,000 1,175 4,825 - - PERC contract 20,000 15,002 4,998 - - .-. Operational Reserves Contingency 10,000 - 10,000 11,000 - - Subtotal-Operating expenditures 2,081,710 2,014,135 67,575 148,721 134,203 The accompanying notes are an integral part of this statement. -.. Page 44 of 76 Expendable Trust Fund .. Funds Code Enforcement Fund Totals-Memorandum Only ^ Variance Variance Variance Favorable Favorable Favorable .-. (Unfavorable) Budget Actual (Unfavorable) Budget Actual (Unfavorable) 520 3,700 3,694 6 105,700 105,595 105 ... 77 3,000 2,973 27 48,000 39,252 8,748 - - - - 21,000 20,472 528 - 17,000 16,880 120 17,000 16,880 120 ... 1,733 9,600 9,874 (274) 108,600 102,878 5,722 1,183 . 960 978 (18) 105,960 101,129 4,831 1,600 2,500 900 1,600 267,500 262,707 4,793 5,000 - - - 20,000 13,198 6,802 ". 1,000 - - - 44,500 43,035 1,465 - - - - 25,000 21,949 3,051 (16,038) - - - 1,664 17,702 (16,038) (7,873) - - - 34,057 41,930 (7,873) 267 200 182 18 120,200 112,189 8,011A.*. 550 3,720 1,241 2,479 48,720 39,043 9,677 A. - - - - 55,000 18,108 36,892 - - - - 28,000 25,151 2,849 ". - 3,000 2,228 772 26,000 22,481 3,519 .4•.., _ - - - 1,000 35,339 (34,339) - 9,500 9,302 198 219,500 244,550 (25,050) ....•• 173,5226 172,061 1,465 - - - - 245,000 241,538 3,462 ..'. - - - - 3,684 3,684 - - 10,000 3,000 7,000 95,000 99,057 (4,057) '� 1,167 7,500 5,492 2,008 42,500 35,824 - 6,676 - - - - 25,000 23,715 1,285 2,600 14,400 6,775 7,625 119,400 105,813 13,587 1,000 2,400 180 2,220 72,400 68,514 3,886 3,751 - - - 22,000 18,249 3,751 p 4,500 3,629 871 79,500 59,515 19,985 5,000 2,000 1,084 916 27,000 16,975 10,025. ,••• - 7,100 3,963 3,137 23,100 21,514 1,586 - - - - - 728 (728) - - - - 25,000 23,960 1,040 .. - - - - 3,000 4,211 (1,211) 1,981 - - - 11,000 8,952 2,048 10,000 8,879 1,121 - - - - 10,000 7,759 2,241 - - - 6,000 1,175 4,825 ........ - - - - 20,000 15,002 4,998 11,000 - 9,753 941 8,812 30,753 941 29,812 14,518 110,833 73,316 37,517 2,341,264 2,221,654 119,610 .. -1 -r 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, 2002 Governmental Funds General Fund Special Revenue Variance Favorable Capital outlay: Budget Actual (Unfavorable) Budget Actual Station 47 land - - - 245,000 103,030 "'� Station 48 land - - - 20,000 39,818 Station 42 enlargement - - - 355,000 32,442 Trucks - - - 400,000 337,246 Vehicles - - - 70,000 30,863 Fire&rescue equipment 32,000 61,270 (29,270) 75,000 65,031 Protective gear - - - 50,000 10,036 Truck emitters - - - 14,000 22,831 ^ Office equipment 2,000 39,835 (37,835) 10,000 - Hazardous materials equip. - - - 60,000 26,279 Station 47 architect fees - - - - 100,000 Station 43 improvements - - - 28,000 40,229 Station 40 improvements - - - 7,000 10,767 - Technical rescue - 20,000 - Special teams - - - 50,000 35,847 Radios 24,000 23,936 64 - - ^� Accounting system - - - 46,000 - Pre plan - - - 12,500 - ^ Computers 23,500 23,116 384 - - Thermal imaging cameras - - - 12,000 11,586 Fire prevention 4,000 4,412 (412) - - Public information - - - 10,000 - Miscellaneous - - - 7,500 - ,1 Subtotal-Capital outlay 85,500 152,569 (67,069) 1,492,000 866,005 DEBT SERVICE Principal reduction - 40,325 (40,325) - - Interest and fiscal charges 35,000 44,897 (9,897) 65,000 57,039 ....... TOTAL EXPENDITURES 12,347,648 12,268,551 79,097 2,397,567 1,680,750 ,.� EXCESS OF REVENUE .-. OVER EXPENDITURES 179,384 324,908 145,524 (171,721) 144,454 - OTHER FINANCING USES Transfer to debt service fund (134,902) (135,803) (901) - - EXCESS OF REVENUE OVER EXPENDITURES AND OTHER FINANCING USES 44,482 189,105 144,623 (171,721) 144,454 �. FUND BALANCE,October 1,2001 400,000 551,496 151,496 1,004,363 93,749 Prior Period Adjustment - (257,520) (257,520) - FUND BALANCE, September 30,2002 $ 444,482 $ 483,081 $ 38,599 8 832,642 $ 238,203 _ The accompanying notes are an integral part of this statement. Page 45 of 76 Alak Expendable Trust Fund i. Funds Code Enforcement Fund Totals-Memorandum Only Variance Variance Variance Favorable Favorable Favorable (Unfavorable) Budget Actual (Unfavorable) Budget _ Actual _ (Unfavorable) 141,970 . - - - 245,000 103,030 141,970 (19,818) - - - 20,000 39,818 (19,818) 322,558 - - - 355,000 32,442 322,558 62,754 - - - 400,000 337,246 62,754 39,137 - - - 70,000 30,863 39,137 .� 9,969 - - - 107,000 126,301 (19,301) 39,964 - - - 50,000 10,036 39,964 (8,831) - - - 14,000 22,831 (8,831) 10,000 - - - 12,000 39,835 (27,835) 33,721 - - - 60,000 26,279 33,721 (100,000) - - - - 100,000 (100,000) (12,229) - - - 28,000 40,229 (12,229) ^ (3,767) - - - 7,000 10,767 (3,767) 20,000 - - - 20,000 - 20,000 14,153 - - - 50,000 35,847 14,153 .-. - - - - 24,000 23,936 64 46,000 - - - 46,000 - 46,000 12,500 - - - 12,500 - 12,500 - - - - 23,500 23,116 384 414 - - - 12,000 11,586 414 - - - - 4,000 4,412 (412) 10,000 - - - 10,000 - 10,000 7,500 12,000 11,185 815 19,500 11,185 8,315 625,995 12,000 11,185 815 1,589,500 1,029,759 559,741 - - - - - 40,325 (40,325) 7,961 - - - 100,000 101,936 (1,936) ^ 716,817 681,310 634,887 46,423 15,426,525 14,584,188 842,337 316,175 166,398 349,681 183,283 174,061 819,043 644,982 .. - (134,902) (135,803) (901) A 316,175 166,398 349,681 183,283 39,159 683,240 644,081 .. (910,614) 410,000 648,062 238,062 1,814,363 1,293,307 (521,056) - - - - - (257,520) (257,520) s. $ (594,439) $ 576,398 $ 997,743 $ 421,345 $ 1,853,522 $ 1,719,027 $ (134,495) NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 46 of 76 COMBINING BALANCE SHEET - SPECIAL REVENUE FUNDS September 30, 2002 Impact Fee Inspection Fee Hydrant Fund Fund Fund Totals ASSETS Cash and cash equivalents $1,312,697 $ - $ 78,567 $ 1,391,264 Due from other governments 49,773 - - 49,773 Due from other funds 383,742 162,901 3,115 549,758 TOTAL ASSETS $1,746,212 $ 162,901 $ 81,682 $ 1,990,795 LIABILITIES AND FUND EQUITY LIABILITIES Due to other governments $ 746 $ - $ - $ 746 Due to other funds - - 6,380 6,380 Deferred revenue 1,745,466 - - 1,745,466 TOTAL LIABILITIES 1,746,212 - 6,380 1,752,592 FUND EQUITY Fund balance Unreserved, designated - 162,901 75,302 238,203 TOTAL FUND EQUITY - 162,901 75,302 238,203 TOTAL LIABILITIES AND FUND EQUITY $1,746,212 $ 162,901 $ 81,682 $ 1,990,795 o-. The accompanying notes are an integral part of this statement. NORTH NAPLES FIRE CONTROL AND RESCUE DISTRICT Page 47 of 76 COMBINING STATEMENT OF REVENUE,EXPENDITURES AND CHANGES IN FUND BALANCE - SPECIAL REVENUE FUNDS Year Ended September 30, 2002 Impact Fee Inspection Fee Hydrant Fund Fund Fund Totals REVENUE Fees: Inspection fees $ - $ 842,726 $ - $ 842,726 Impact fees 841,290 - - 841,290 Hydrant fees - - 39,576 39,576 Miscellaneous: Interest 100,003 - 1,609 101,612 TOTAL REVENUE 941,293 842,726 41,185 1,825,204 EXPENDITURES Current Public safety Personal services - 623,503 - 623,503 Operating expenditures 18,249 56,322 59,632 134,203 Capital outlay 866,005 - - 866,005 Debt service Principal reduction - - - - Interest and fiscal charges 57,039 - - 57,039 TOTAL EXPENDITURES 941,293 679,825 59,632 1,680,750 EXCESS OF REVENUE OVER(UNDER)EXPENDITURES - 162,901 (18,447) 144,454 FUND BALANCE, October 1, 2001 - - 93,749 93,749 FUND BALANCE, September 30,2002 $ - $ 162,901 $ 75,302 $ 238,203 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, CONTINUED ,, Year Ended September 30, 2002 Impact Fee Fund Inspection Fee Fund .� Variance Variance Favorable Favorable Budget Actual (Unfavorable) Budget Actual (Unfavorable) REVENUE Amik Fees: Inspection fees $ - $ - $ - $ 782,846 $ 842,726 $ 59,880 Impact fees 1,300,000 841,290 (458,710) - - - Hydrant fees - - - - - - .., Miscellaneous: Interest 100,000 100,003 3 - - - "� TOTAL REVENUE 1,400,000 941,293 (458,707) 782,846 842,726 59,880 EXPENDITURES Current Public safety ..N Personal services: Salaries ''.N Regular - - - 360,000 357,577 2,423 Overtime - - - 15,000 12,884 2,116 Incentives and holiday pay - - - 14,846 6,840 8,006 ., Payroll taxes Social Security - - - 28,000 29,624 (1,624) ...N Benefits Retirement - - - 69,000 63,129 5,871 Health insurance - - - 150,000 108,720 41,280 Disability insurance - - - 3,000 2,607 393 Sick leave - - - 15,000 9,940 5,060 Aftk Workers compensation - - - 37,000 32,182 4,818 AmeN Subtotal-Personal services - - - 691,846 623,503 68,343 "1 The accompanying notes are an integral part of this statement. ,'N a ... • ... Page 48 of 76 ... .... Hydrant Fund Totals-Memorandum Only Variance Variance .. Favorable Favorable Budget Actual (Unfavorable) Budget Actual (Unfavorable) $ - $ - $ - $ 782,846 $ 842,726 $ 59,880 a 1,300,000 841,290 (458,710) a 43,000 39,576 (3,424) 43,000 39,576 (3,424) - 1,609 1,609 100,000 101,612 1,612 43,000 41,185 (1,815) 2,225,846 1,825,204 (400,642) As. .-. ... - - - 360,000 357,577 2,423 a - - - 15,000 12,884 2,116 ... - - - 14,846 6,840 8,006 - - - 28,000 29,624 (1,624) - - 69,000 63,129 5,871 - - 150,000 108,720 41,280 ... - 3,000 2,607 393 .a. - - - 15,000 9,940 5,060 - - - 37,000 32,182 4,818 ... - - - 691,846 623,503 68,343 .\ a .. .0. a .. .a. 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, 2002 Impact Fee Fund Inspection Fee Fund .-� Variance Variance Favorable Favorable Operating expenditures: Budget Actual (Unfavorable) Budget Actual (Unfavorable) Insurance - - - 7,000 6,480 520 Uniforms - - - 1,000 923 77 ., • Telephone - - - 8,000 6,267 1,733 Utilities - - - 5,000 3,817 1,183 Maintenance Vehicle - - - 7,000 5,400 1,600 Equipment - - - 5,000 - 5,000 .y Computer - - - 2,000 1,000 1,000 • Contract labor - - - - - - Hydrant - - - - - _ IN Building - - - 7,000 6,733 267 Supplies Office - - - 10,000 9,450 550 Miscellaneous Travel - - - 5,000 3,833 1,167 '..„ Fuel and oil - - - 5,000 2,400 2,600 Employee physicals - - - 3,000 2,000 1,000 ..\ Impact fee collection 22,000 18,249 3,751 - - - Miscellaneous - - - 5,000 - 5,000 Fire prevention - - - 10,000 8,019 1,981 Operational Reserves Contingency - - - 11,000 - 11,000 '.\ Subtotal-Operating expenditures 22,000 18,249 3,751 91,000 56,322 34,678 Capital outlay: Station 47 land 245,000 103,030 141,970 - - - Station 48 land 20,000 39,818 (19,818) - - - Station 42 enlargement 355,000 32,442 322,558 - - - Trucks 400,000 337,246 62,754 - - - Vehicles 70,000 30,863 39,137 - - - Fire&rescue equipment 75,000 65,031 9,969 - - - Protective gear 50,000 10,036 39,964 - Truck emitters 14,000 22,831 (8,831) - - - Office equipment 10,000 - 10,000 - .. - "� Hazardous materials equip. 60,000 26,279 33,721 - - - Station 47 architect fees - 100,000 (100,000) - - - Station 43 improvements 28,000 40,229 (12,229) - Station 40 improvements 7,000 10,767 (3,767) - - - Technical rescue 20,000 - 20,000 - - - Special teams 50,000 35,847 14,153 - - i Radios - - _ - _ _ Accounting system 46,000 - 46,000 - - - Pre plan 12,500 - 12,500 - - - Thermal imaging cameras 12,000 11,586 414 - - - Public information 10,000 - 10,000 - - - Miscellaneous 7,500 - 7,500 - - - Subtotal-Capital outlay 1,492,000 866,005 625,995 - - - j I 1 The accompanying notes are an integral part of this statement. .. A.. Page 49 of 76 Ifts ... Hydrant Fund. Totals-Memorandum Only Variance Variance Favorable Favorable .-. Budget Actual (Unfavorable) Budget Actual (Unfavorable) - - - 7,000 6,480 520 - - - 1,000 923 77 - - - 8,000 6,267 1,733 - - - 5,000 3,817 1,183 - - - 7,000 5,400 1,600 - - - 5,000 - 5,000 - - - 2,000 1,000 - 1,000 1,664 17,702 (16,038) 1,664 17,702 (16,038) .-. 34,057 41,930 (7,873) 34,057 41,930 (7,873) _ - 7,000 6,733 267 - - - 10,000 9,450 550 ^ - - - 5,000 3,833 1,167 - - 5,000 2,400 2,600 ^ - - - 3,000 2,000 1,000 - - - 22,000 18,249 3,751 - - - 5,000 - 5,000 ... - -- 10,000 8,019 1,981 ^ _ _ - 11,000 - 11,000 35,721 59,632 (23,911) 148,721 134,203 14,518 - - 245,000 103,030 141,970 ^ - - - 20,000 39,818 (19,818) - 355,000 32,442 322,558 ,� - - - 400,000 337,246 62,754 - - 70,000 30,863 39,137 - - 75,000 65,031 9,969 - - 50,000 10,036 39,964 - - 14,000 22,831 (8,831) .-. - - - 10,000 10,000 - - - 60,000 26,279 33,721 - - - - 100,000 (100,000) - - - 28,000 40,229 (12,229) - - - 7,000 10,767 (3,767) - _ - 20,000 - 20,000 - - - 50,000 35,847 14,153 - - - 46,000 - 46,000 - - - 12,500 - 12,500 - - - 12,000 11,586 414 _ _ 10,000 - 10,000 - - - 7,500 - 7,500 oft, - - 1,492,000 866,005 625,995 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, 2002 Impact Fee Fund Inspection Fee Fund Variance Variance Favorable Favorable Budget Actual (Unfavorable) Budget Actual (Unfavorable) DEBT SERVICE Principal reduction - - - - - Interest and fiscal charges 65,000 57,039 7,961 TOTAL EXPENDITURES 1,579,000 941,293 637,707 782,846 679,825 103,021 EXCESS OF REVENUE OVER(UNDER)EXPENDITURES (179,000) - 179,000 - 162,901 162,901 FUND BALANCE,October 1,2001 1,000,000 - (1,000,000) - - - FUND BALANCE, September 30,2002 $ 821,000 $ - $ (821,000) $ - $ 162,901 $ 162,901 oftk � I The accompanying notes are an integral part of this statement. ,1 Page 50 of 76 ^ Hydrant Fund Totals-Memorandum Only Variance Variance Favorable Favorable Budget Actual (Unfavorable) Budget Actual (Unfavorable) ^ 65,000 57,039 7,961 35,721 59,632 (23,911) 2,397,567 1,680,750 716,817 7,279 (18,447) (25,726) (171,721) 144,454 316,175 4,363 93,749 89,386 1,004,363 93,749 (910,614) $ 11,642 $ 75,302 $ 63,660 $ 832,642 $ 238,203 $ (594,439) a a ADDITIONAL REPORTS OF INDEPENDENT AUDITOR Markham Member American Institute of Certified PublicAeeountants Tax Division Norton StroeinerPrivate Companies Practice Section Management Consulting Services Division CompanyPA.. Florida Institute of Certified Public Accountants Business Consultants / Certified Public Accountants Government Finance Officers Association Florida Association of Special Districts Financial Consulting Group Page 51 of 76 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, 2002, and have issued our report thereon dated July 18, 2003. 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 Hydrant Fund, a Special Revenue Fund, over expended its legally adopted budget by Aft $23,911. We also noted certain other instances of noncompliance that we have reported to .ft the management of North Naples Fire Control and Rescue District in our Report to Management dated July 18, 2003. 8961 Conference Drive•Fort Myers,FL 33919•(239)433-5554•Direct Audit Fax(239)433-0249•Toll Free(888)457-7360 3838 Tamiami Trail North,Suite 302•Naples,FL 34103•(239)434-7556•Fax(239)434-6480 Aft Web Site:www.mnscpa.com Page 52 of 76 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 District. 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 July 18, 2003. As a result of the reportable conditions that we considered to be material weaknesses, we extended procedures. Through the performance of the extended procedures a qualified opinion Page 53 of 76 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. 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. MN oti L MARKHAM NORTON STROEMER & COMPANY, P.A. Fort Myers, Florida July 18, 2003 Markham Member American Institute of Certified Public Accountants Tax Division Norton Stroem8r Private Companies Practice Section Management Consulting Services Division "'Company Pl 1. Florida Institute of Certified PublicAccountants Business Consultants / Certified Public Accountants Government Finance Officers Association Florida Association of Special Districts Financial Consulting Group Page 54 of 76 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, 2002 and have issued our report thereon dated July 18, 2003. 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, 2002) 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. Certain prior year comments, however, have been revised and expanded to address the current year facts and circumstances. Each comment has a current year addendum to indicate the current year status of the comment. 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. 8961 Conference Drive•Fort Myers,FL 33919•(239)433-5554•Direct Audit Fax(239)433-0249• Toll Free(888)457-7360 3838 Tamiand Trail North,Suite 302•Naples,FL 34103•(239)434-7556•Fax(239)434-6480 11 eh Site:wwrv.nutscpa.coal • Page 55 of 76 1. Numerous Adjusting Entries Required During Audit, Continued Current Year Addendum: It was noted that starting in May 2002, the new controller,who is now the Director of Finance,began reconciling all balance sheet accounts and reviewing the revenue and expenditure accounts on a monthly basis. The District also added an additional financial department staff person. This significantly reduced the number of adjusting journal entries required during the current audit period. 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. We recommend the District raise its capitalization limit to $750 to coincide with the threshold for recorded accountability of tangible personal property as established by Chapter 274 F.S. We also 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. Fixed asset records should be reconciled to impact fee disbursements and contain documentation of funding source. Page 56 of 76 2. Fixed Asset Policy Should be Formally Expanded,Designed and Adopted, and Control Accounts Should be Reconciled, Continued Current Year Addendum: We continue to recommend this corrective action. This issue resulted in the auditor's opinion being qualified. We did, subsequent to September 30, 2002, note that the District adopted a fixed asset policy which increased the capitalization limit to $750. The District also created the position of logistics officer responsible for the inventorying, tagging and management of the District's fixed assets. The logistics officer position was filled in June 2002 and progress is being made toward inventorying the District's fixed assets. We did note, however, at September 30, 2002 the inventory list was not complete and was not reconciled to the general ledger. We selected thirty (30) fixed assets for testing. Twenty(20) assets from the District's listing were selected and we attempted to physically locate them. Ten(10) assets were observed at the District's facilities, and we attempted to locate them on the District's listing. One (1) asset could not be located and one (1) asset was identified but not included on the list. Sixteen (16) of the thirty assets selected were not tagged. 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 noted that the District adopted a five year capital plan subsequent to September 30, 2002. 4. Travel Policy Should be Developed During the audit, we noted that certain travel vouchers did not contain the state approved foul's or copies of detailed receipts/invoices and/or the traveler's signature as required by Florida Statute 112.061, 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: We did note the District adopted a new policy October 11, 2001. We selected ten travel disbursements for testing. Three forms did not include the hour of departure and return; therefore, the allowability of meals could not be determined. One Page 57 of 76 4. Travel Policy Should be Developed, Continued travel reimbursement form had airline departure and arrival times that did not support the meals claimed. One travel disbursement packet of expenditures for nine travelers only included 8 travel forms, none of which were signed. One travel expenditure was not supported by a form. Finally, one travel voucher reimbursed by petty cash for a boat charter did not contain a detailed description to determine a business purpose. We continue to recommend adherence to the Florida Statutes and the policies approved by the Board. 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, including a five year plan, to the County Clerk as required. Current Year Addendum: We did note that, subsequent to September 30, 2002, the District had adopted a five year capital plan and submitted it to the County Clerk 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. 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. Page 58 of 76 6. Review of Trial Balance Required, Continued Current Year Addendum: We noted that during the fiscal year ended September 30, 2002 the new controller, effective May 2002,began reviewing the trial balance on a monthly basis. This procedure significantly reduced the number of adjusting entries required at year end as compared to the prior year. 7. Operating Policies Should be Formally Adopted We recommend the Board folivally 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 noted that the District has begun to develop and implement comprehensive operating and personnel policies. We continue to recommend the District develop the needed policies. We also recommend periodic review of existing policies and procedures to ensure that effective controls are in place to safeguard the District's assets. 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 noted that, subsequent to the year ended September 30, 2002, the District changed accounting software and now adheres to the State Uniform Chart of Accounts. 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. Page 59 of 76 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 the District's fixed asset policy requirements and that it was Board approved. The Board minutes should specifically document each approval by the Board of impact fees use as to purpose and amount. Items purchased as components of an approved use should be so noted. Current Year Addendum: We noted that the District now obtains an opinion from their attorney regarding the allowability of impact fee expenditures. Subsequent to the year ended September 30, 2002, the Board of Commissioners reviewed all impact fee expenditures from the year 1996 through 2001. Items totaling $363,460 were disallowed as impact fee expenditures. From the same period, expenditures in the amount of$105,940, which were originally paid from the General Fund were deemed to be allowable impact fee expenditures. These changes in policy resulted in a prior period adjustment in the amount of$257,520. We recommend obtaining a legal opinion prior to the expenditure of any impact fees to eliminate future adjustments to prior years and/or the current year. 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 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. Page 60 of 76 11. The District's Finance Department Should be Reorganized, Continued 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, is 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 Controller on September 4, 2001 which was just prior to the beginning of the year being audited. The District also made the accounting assistant a full-time position. In addition, the District promoted the Controller to the position of Director of Finance on September 5, 2002 and gave her full responsibility for fiscal matters. The District also hired a payroll bookkeeper whose main responsibilities are payroll and human resource duties. We continue to recommend assessing the need for additional financial personnel as the District continues to grow. We also noted the District did increase the "dishonesty" insurance policy limit to range between $40,000-$100,000. 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 ending September 30, 2000, 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. 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: During the year ended September 30, 2002, we noted certain expenditures that appear unallowable (approximately $3,000). The reason the expenditures appear unallowable for the year being audited is isolated to a lack of policy for certain types of expenditures such as, in-town meals. We noted that the District has now adopted, on Page 61 of 76 12. Credit Card and In-Town Meal/Other Costs Reimbursement Policy Should be Designed And Approved (As Revised for The Current Year), Continued May 8, 2003, an in-town meals and other costs reimbursement policy to address the allowability of these types of expenditures. All disbursements selected for testing included documentation. We recommend the District monitor and adhere to its newly adopted policy. 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 IRS reports. 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 the District changed its accounting software on October 1, 2002, hired an in-house Chief Accountant/Controller on September 4, 2001 and has begun in-house payroll processing as of May 31, 2002. We, however, noted that the personnel files did not contain documentation supporting current pay rates and positions. We recommend that each personnel file contain updated information with regard to the respective employees' position and pay rates. 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 Page 62 of 76 Aft •� 14. Controls Over Inspection Fees Fund Should be Enhanced, Continued respective participating districts within five (5) days of receipt of the proceeds by the North Naples Fire Control and Rescue District from Collier County. We 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: During the year ended September 30, 2002, it appears that all of the distributions to participating Districts were made in a timely manner. In January 2003, the Collier County Board of Commissioners signed an interlocal agreement assigning a District other than North Naples Fire Control and Rescue District the administrative duties for the inspection fees collection and the Collier County Fire Code Official. As of the date of this report, effective February 01, 2003, North Naples Fire Control and Rescue District no longer administers either of these funds. 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: Subsequent to the year ended September 30, 2002, the District obtained a legal opinion regarding the allocation of interest generated by the Inspection Fees Collection Fund and the interest was distributed to the participating districts in accordance with the legal opinion. 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. Page 63 of 76 16. Retirement Plans Should be Analyzed (as revised), Continued 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. Current Year Addendum: We did, however, note that General Employee's Retirement Plan (Plan 3) was terminated and that the District was in the process of distributing the Plan's assets. We, also, noted the District terminated four of its other retirement plans (Plans 4-7) in an effort to consolidate and better manage its benefit plans. We continue to recommend the District consider moving its remaining F.S. 175 retirement plan 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. We recommend the petty cash account be routinely reconciled by someone other than the custodian for internal control purposes. Current Year Addendum: We noted that shortly before the end of the year ended September 30, 2002 the Controller turned the custody of the petty cash over to the bookkeeper. The petty cash is also reconciled by another accounting staff person. 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 Director of Finance 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 Page 64 of 76 19. Payroll and Disbursement System Controls Should be Enhanced, Continued 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. 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 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 Page 65 of 76 19. Payroll and Disbursement System Controls Should be Enhanced, Continued 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. Current Year Addendum: Relative to payroll system, we noted numerous manual checks were written to correct errors or adjust for changes. Ninety-six (96) of these manual checks duplicated check numbers that were used during the previous two fiscal years. No log of blank manual checks was maintained and no controls were in place for ordering blank checks from the payroll processing company to ensure unique check sequences. All manual checks issued were duplicate check numbers. These checks with duplicate check numbers should _ have been destroyed when first discovered. Manual checks with unique check numbers should have been ordered. _ We noted that beginning with the pay period ended May 31, 2002, the District discontinued the use of the third-party payroll company and began processing payroll in- - house. The District now orders sequentially prenumbered check stock so that no numbers can be used more than once. All unused manual payroll checks were defaced and logged. No evidence of manual check usage was noted after May 31, 2002. We recommend the District carefully monitor the controls over the payroll system and reconcile the check sequence monthly. 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 Page 66 of 76 20. Code Enforcement Fund Controls Should be Strengthened, Continued 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 noted that subsequent to the year ended September 30, 2002, the administration of the Fire Code Official, an Expendable Trust Fund, as well as the Inspection Fee Collection Fund , an Agency Fund, was assigned to another independent fire district. As of the date of this report, the North Naples Fire Control and Rescue District no longer administers these funds. 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. Current Year Addendum: We noted that during the year ended September 30, 2002, the District's Board of Commissioners approved the elimination of the Debt Service Fund. Operating transfers were made to fund the loss carry forward from the General Fund and the fund was eliminated. 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 that during the year being ended September 30, 2002 the District implemented this policy. Page 67 of 76 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. Current Year Addendum: We noted during the year ended September 30, 2002 a cash transfer between cash accounts in the General Fund that did not clear in a timely manner. 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. _ Current Year Addendum: We continue to recommend dating checks only when they are issued and accruing expenditures in the proper period. We noted this procedure was implemented for September 30, 2002. 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. 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. Current Year Addendum: We continue to recommend defacing and retaining all voided checks for review. We noted a procedure was implemented in April 2003 for documenting voided checks. 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. Page 68 of 76 26. District Cell Phone Usage Policy Should Be Developed, Continued 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. Current Year Addendum: We noted that, subsequent to the year ended September 30, 2002, the District adopted a cellular phone usage policy. We continue to recommend the monitoring of cellular phones for unauthorized uses. 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. Current Year Addendum: We noted that the District has created a position, a Logistics Officer, responsible for the inventory, tagging, and management of the District's fixed assets. We continue to recommend all fixed assets, whether purchased or donated, be accounted for on the District's fixed asset listing. The method of acquisition should be noted and the fixed asset listing should be reconciled to the funding sources and to the General Ledger. 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. Page 69 of 76 28. Expenditures Should Be Consistently Recorded, Continued Current Year Addendum: We noted, during a review of certain general ledger detail for the year ended September 30, 2002, that several reclassifications had been made to various accounts throughout the year. We continue to recommend consistent coding of expenditures. 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 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. Current Year Addendum: We noted that, subsequent to September 30, 2002, the District distributed the remaining funds in the General Employees' Pension Fund. 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. 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. Current Year Addendum: We noted that on November 14, 2002 the District's Board of Fire Commissioners adopted Resolution 02-013 to abide by the no written investment policy provision contained in Section 218.415(17) of the Florida Statutes. 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. Page 70 of 76 31. Firefighter Pension Plan Investment Policy Should be Reviewed, Continued 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. Current Year Addendum: We continue to recommend these corrective actions as the Plan's performance was again well below expectations. In regards to the Firefighters' Retirement Plan (Plan 2), we noted that the Plan's actuary continues to project an investment return of eight (8) percent. Actual results (loss of $189,372) have historically been significantly less than the projected amount; therefore, the District continues to be required to fund the shortfall between projected and actual returns. This funding of the shortfall is in addition to the annual District contributions determined by the actuary. 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. Although we do not believe the District to be in a state of financial emergency, the District did exhibit certain indications 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 Page 71 of 76 32. Potential Deteriorating Financial Condition-Declining Fund Balance Should be Monitored, Continued 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 con-elated 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. 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. Page 72 of 76 32. Potential Deteriorating Financial Condition-Declining Fund Balance Should be Monitored, Continued Current Year Addendum: The District continued to exhibit certain indications of a deteriorating financial condition as noted below. While we still do not believe the District to be in a state of financial emergency, the financial condition of the District must be monitored closely. The financial indicators established by the State continue to show the District performing unfavorably when compared to five of the eight applicable indicators. However, the unfavorable trends noticed over the past five years appear to either have leveled off or are beginning to turn in a positive direction. Fund balance of the District's governmental fund types increased $60,000 over the previous year, a change of 16%. This is due to the conscious effort of the Board regarding internal management, building of District reserves and the development and implementation of new policies and the five year capital plan. We noted, however, that the unreserved fund balance is very small for a District of this size and that no specific designations of fund balance have been made for specific issues such as equipment and buildings. The Board has now adopted a conservative budget approach. The District's management has been replaced and a conservative approach has been adopted. We continue to recommend that the management of the District and the Board of Fire Commissioners monitor the financial condition of the District closely and build reserves through careful budgeting and adherence to the newly implemented policies. It is imperative that the District correlate its five year plan with its budget and actual operating results. The coordinated use of impact fees and tax revenue will assist the District in strengthening its financial position. The five (5) unfavorable financial indicators noted were: 1. Ratio of unreserved fund balance to total expenditures 2. Ratio of cash and investments to current liabilities 3. Ratio of cash and investments to total expenditures divided by twelve (12) 4. Ratio of current liabilities to total revenue 5. Ratio of unreserved fund balance to total revenue 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. Current Year Addendum: During the year ended September 30, 2002, we noted that a separate line item account was established for each retirement plan. Page 73 of 76 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.) Current Year Addendum: During the year ended September 30, 2002, we noted that the Impact Fee Fund was reconciled to the cash account activity. 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. Current Year Addendum: During the September 30, 2002 audit, we noted that the State Joint Legislative Audit Committee had directed the State Auditor General to determine a schedule and monitor the implementation of the corrective actions contained in the independent audit for the fiscal year ending September 30, 2001. It was agreed that the District's financial status would be communicated to the State Auditor General's Office prior to release of this audit. No audit by the State Auditor General's Office is currently anticipated. _ 36. District and Fire Chief Admit Certain Unfair Labor Practices During August 2002, the District and its, now former, 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. Current Year Addendum: We noted that, during the year ended September 30, 2002, the District paid the full settlement amount of$20,000 for the Union's legal fees per the agreement related to the unfair labor practices. Page 74 of 76 36. District and Fire Chief Admit Certain Unfair Labor Practices, Continued As noted in footnote Q, a citizen was granted a temporary order blocking the payment of the contract settlement to the foinier chief. As of the date of this report, the former Chief was only paid four months severance per his original employment contract. On August 21, 2003, the District agreed to pay the former Chief an additional $215,000 immediately and pay $15,000 to the citizen that filed for and was granted the temporary order. The settlement is intended to fully settle this issue. CURRENT YEAR COMMENTS: 37. Late Payments Caused Unnecessary Finance Charges During the September 30, 2002 audit, we noted that the District was charged late fees three (3) times, totaling $7,562, during the year by a certain vendor for not paying invoices in a -- timely manner. We recommend paying all invoices according to their terms to avoid unnecessary finance charges. The District should also investigate the possibility of paying certain invoices early to take advantage of discounts offered by certain vendors. 38. Certain Agreements for Professional Services Should be Bid During the September 30, 2002 audit, we noted that the District engaged an accounting firm specializing in forensic accounting to examine certain areas of the District's finances. The District also contracted with a consultant to develop internal control policies. Neither of these two services were put out for bid. We recommend that the District solicit bids for all significant professional services especially because of the District's financial condition. In addition, the bid process affords the District the best method to evaluate the bidders qualifications. 39. Stale Dated Checks Should be Researched During the September 30, 2002 audit, we noted that the District's health insurance cash account reconciliation contained eight (8) outstanding checks that were issued more than one (1) year prior to the year ended September 30, 2002. Page 75 of 76 39. Stale Dated Checks Should be Researched, Continued We recommend the District research these checks and attempt to locate the original recipients. If they cannot be located, we recommend the District remit the money to the State of Florida as unclaimed property. 40. Expenditures in Excess of Budgeted Expenditures Special Revenue Hydrant Fund - During the year ended September 30, 2002, expenditures in the Hydrant Fund exceeded appropriations by $23,911. The District's Board approved the expenditures but did not formally amend the budget. 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)(g). 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 items 10.554(4)(a-c), we have disclosed possible violations of law being investigated by various law enforcement agencies, the outcome of which cannot be determined. We have also disclosed other possible expenditures not specifically determinable as legal or inadequately documented. 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). In regard to item 6(c)(1), we applied financial condition assessment procedures pursuant to Rule 10.556(8) and noted certain indications of deteriorating financial conditions, as defined by Statute. As such, we do not believe the District to be in a state of financial emergency as a consequence of conditions described in Section 218.503(1), of the Florida Statutes. Additionally, in regard to Item 6b, we represent that the financial report filed with the Department of Financial Services, pursuant to Florida Statute 218.32(1)(a), is in agreement with the annual financial audit report for the same period. Page 76 of 76 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. MARKHAM NORTON STROEMER& COMPANY, P.A. Fort Myers, Florida July 18, 2003 EXHIBIT � Nor& Naples Fire Control c ' Rescue Iisric i �^ 1885 Veterans Park Drive•Naples, Florida 34109 R rt. 239 597-3222•Fax(239) 597-7082 FLA September 3, 2003 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 the fiscal year 2001/2002: 1. NUMEROUS ADJUSTING ENTRIES REQUIRED DURING AUDIT. The District has now reorganized its financial department to include a Director of Finance, an Accounts Payable/Receivable Accountant and a Payroll Bookkeeper. All income and expense accounts are reviewed on a monthly basis, prior to presentation of the financial statement to the Board. Any adjusting journal entries required are made on a monthly basis. Account reconciliations and analyses are _ also performed on a monthly basis to maintain accuracy of general ledger accounts. 2. FIXED ASSET POLICY SHOULD BE FORMALLY EXPANDED, DESIGNED AND ADOPTED AND CONTROL ACCOUNTS SHOULD BE RECONCILED. At the November 2002 Board of Fire Commissioners' Meeting, an updated and expanded Fixed Asset Policy was adopted by Resolution 02-006. Changes from the former policy include the minimum threshold changed from $500 to $750 per state statute, provisions for depreciation of fixed assets, and the requirement for Board approval to delete and add fixed assets to the District's fixed asset list. Additionally, at the February 2003 Board of Fire Commissioners' Meeting, approval was received for a fixed asset numbering system, and inventory control forms. A detailed list of additions and deletions to the District's fixed assets has been created and maintained, with supporting board approval attached. 3. FIVE YEAR PLAN SHOULD BE ADOPTED. A Five Year Plan has been developed which meets all of the state requirements. While it is acknowledged by staff that this plan requires additional work to meet the criteria staff has developed, since it meets state requirements, the plan was filed with the Department of Community Affairs and Collier County Finance Department on January 24, 2003. The staff has received direction from the Board to present for review a more comprehensive Five Year Plan by January 2004. BJP/bp 9-03-03 4. TRAVEL POLICY SHOULD BE DEVELOPED. A Travel and Per Diem Policy was adopted by the Board of Fire Commissioners on October 11, 2001. A Revised Travel and Per Diem Policy was adopted by the Board by Resolution 03-002 at the February 13, 2003 Board of Fire Commissioners' Meeting. This revision addressed travel approval and reimbursement for the Fire Chief. A second revision to this policy was approved at the April 10, 2003 Board of Fire Commissioners Meeting by Resolution 03- 017, addressing travel approval and reimbursement for Fire Commissioners. A third revision to this policy will be proposed at the September 11, 2003 Board of Fire Commissioners' Meeting addressing the change in State Statute to the meal reimbursement rates and mileage reimbursement rates. State mandated travel reimbursements forms are used, and are now being reviewed on a monthly basis to ensure the forms are submitted completely and correctly, and no reimbursement is made without the appropriate receipts and signatures as required by Florida Statute. 5. CERTAIN REPORTS WERE NOT TIMELY FILED. The District did submit a current public facilities report to the County Clerk as required,but at the time of that filing had not filed a Five Year Plan. That Five Year Plan was filed with the County Clerk in January of 2003. Additionally, the District did receive confirmation that the District's Codification had been properly filed. 6. REVIEW OF TRIAL BALANCE REQUIRED. All trial balance accounts are reviewed by the Director of Finance on a monthly basis, prior to presentation to the Board of the monthly Financial Statement. Numerous account reconciliations are prepared and cross checked by staff on a monthly basis. Any necessary journal entries are done on a monthly basis to ensure accuracy of information presented to the Board. The aged accounts payable report is reconciled monthly with the general ledger account. The Board receives a trial balance generated by the financial computer program on a monthly basis with their Treasurer's Report. The Treasurer's Report, in its entirety, is then acknowledged and accepted by the Board and filed for audit at their monthly meetings. 7. OPERATING POLICIES SHOULD BE FORMALLY ADOPTED. Since October 1, 2002, the Board has adopted the following procedures: BJP/bp 9-03-03 2 a. Fixed Assets Accounting and Control Policy adopted November 14, 2002 by Resolution 02-006. b. Revised Cellular Phone Policy adopted November 14, 2002 by Resolution 02-012. c. Revised Purchase Policy adopted December 5, 2002 by Resolution 02- 018, and revised April 10, 2003 by Resolution 03-016. d. Cash Management Policy adopted February 13, 2003 by Resolution 03- 004. This policy provides procedures for cash receipts, petty cash and bank account reconciliations. e. Revised Travel and Per Diem Reimbursement Policy adopted February 13, 2003 by Resolution 03-002; revised April 10, 2003 by Resolution 03-017; a proposed revision to be presented to the Board at their September 11, 2003 meeting. f. Education Reimbursement Policy adopted March 13, 2003 by Resolution 03-01 1; Revised Education Reimbursement Policy adopted April 10, 2003 by Resolution 03-018. g. In-Town Meals and Other Cost Reimbursement Policy adopted May 11, 2003 by Resolution 03-018. h. Computer Use Policy adopted May 8, 2003 by Resolution 03-030 . i. Revised Public Inspection, Examination and Duplication of Records Policy adopted July 24, 2003 by Resolution 03-038. j. Computer Use-Internet and E-Mail Use adopted August 21, 2003 by Resolution 03-039 . k. Resolution 02-013 adopted December 5, 2002- No Investment Policy. 1. Policy for Retirement of Helmet and Badge upon employee retirement adopted February 13, 2003 by Resolution 03-005. The following procedures were approved at the February 2003 Board meeting: a. Payroll: (i) Recording Daily Time Sheets (ii) Adjust Salary for Promotion or Step Raise (iii) Entering Information from Time Sheets into Great Plains (iv) Entering Time Used or to Adjust Time Available (v) Entering Vacation/Sick Time Balance on P/R Checks (vi) Preparing Non-Employee Payroll Disbursements b. Petty Cash c. Bank Reconciliation d. Cash Receipts e. Purchasing and Accounts Payable f. Check Signing and Electronic Transfer of Funds Extensive work has been done on a Bidding Policy for the District, including a special Workshop held on May 9, 2003. Discussion anddirection was given by the Board as to the procurement of professional services. This Bidding Policy is BJP/bp 9-03-03 3 scheduled to be presented for Board approval at the September 11, 2003 Board Meeting. 8. CHART OF ACCOUNTS REVIEW REQUIRED. The District purchased and implemented new financial software which incorporates a chart of accounts which complies with the state uniform chart of accounts (UAS) Florida Statute 218.321. This chart of accounts has been reviewed and approved by the District's auditor. 9. BUDGET FORMAT SHOULD BE REVISED. In September 2002, the budget format was revised to reflect each individual trial balance account. In July and August of 2003, the budget information presented to the Board and contained in the District's official budget has been revised to include more detailed information. An Appendix was created to provide the supporting data for budget line item calculation. This will facilitate tracking of expenditures, and provide sufficient detail to enable the financial department to verify that a requested expense has been budgeted. No unbudgeted expenses are approved by staff. All such expenses are submitted to the Board for approval. Additionally, staff reclassified some of the District's routine expenditures to more appropriate expense accounts. This reclassification of expenditures, combined with the increase of detailed information contained in the Budget for the 2003- 2004 fiscal year will ensure that the expenditures are charged to the appropriate budget line item. 10. USE OF IMPACT FEES SHOULD BE MORE CLOSELY REVIEWED. In early 2002, the Board requested staff to secure written legal opinions identifying any proposed Impact Fee expenditures as appropriate uses of Impact Fee Funds. Additionally, staff prepared a detailed analysis of all Impact Fee expenditures from October 1, 1996 through September 30, 2002. The Board of Fire Commissioners held a Special Meeting on July 1, 2003 to review all of these expenditures and identified those which lacked necessary documentation to verify the appropriateness of the use of Impact Fees, and those expenditures which, on reexamination, appeared to be questionable use of Impact Fees. These expenditures were then reclassified to the General Fund, and the transfer of funds from the General Fund to the Impact Fee Fund was made. This review process provided staff with a much greater understanding of what constitutes appropriate use of Impact Fees, and has resulted in careful monitoring of the Impact Fee Fund in the current fiscal year. BJP/bp 9-03-03 4 Staff plans to submit a formal policy containing a procedure for Impact Fee Fund Use to the Board at the November 2003 Board of Fire Commissioners' Meeting. 11. THE DISTRICT'S FINANCE DEPARTMENT SHOULD BE REORGANIZED. The District's financial department has been reorganized, and numerous policies and procedures have been adopted by the Board, as detailed in item number 7 above. The financial department currently consists of a Director of Finance, an Accounts Payable/Receivable Accountant, and a Payroll Bookkeeper, all full-time positions. The increase in the number of financial staff provides the ability to segregate duties and institute internal control procedures. The Accounts Payable/Receivable Accountant is responsible for the District's accounts payable, cash disbursements and cash receipts. All invoices are approved for payment by the Director of Finance, in accordance with the District's Purchase Policy. The AP/AR Accountant then prepares all disbursements, which are reviewed by the Director of Finance, then submitted to two Fire Commissioners for signature. The AP/AR Accountant prepares all bank deposits in accordance with the District's Cash Receipts procedure. The bank deposits are verified by the Director of Finance. The Payroll Bookkeeper prepares the Accounts Payable account bank reconciliation. The AP/AR Accountant is also responsible for reconciling the aged Accounts Payable Report to the Accounts Payable general ledger account. This reconciliation is then reviewed by the Director of Finance. Additionally, the AP/AR Accountant prepares the monthly bank reconciliations for all other District accounts, and reconciles the Petty Cash fund, which is maintained by the Payroll Bookkeeper. The Payroll Bookkeeper is responsible for accruing, recording and tracking all employees' sick, vacation, personal and loose time, and for preparing and processing the semi-monthly payroll using the District's financial program. Additionally, the P/R Bookkeeper is responsible for preparing the semi-monthly payroll tax deposit and identifying the cash requirements for each payroll. A spreadsheet is provided to the Director of Finance for review with each payroll which compares the current salary schedule to actual payroll and accounts for any discrepancies. This schedule, as well as payroll check registers and paychecks, are then submitted to the Commissioner for signature and approval. The AP/AR Accountant then prepares the Payroll bank account reconciliation. The Director of Finance is responsible for reviewing and adjusting general ledger postings, as well as preparing the financial statement which is provided to the Board of Fire Commissioners at their monthly meeting. Additionally, the BJP/bp 9-03-03 5 Director of Finance monitors expenditures, ensures that timely reconciliations are Oft prepared and ensures the accuracy of financial information reported to the Board. The increase in the financial department staff has allowed the District to institute internal controls and segregate duties so the same staff member does not enter data and review the accompanying account. 12. CREDIT CARD AND IN-TOWN MEAL/OTHER COSTS REIMBURSEMENT POLICY SHOULD BE DESIGNED AND APPROVED (AS REVISED FOR THE CURRENT YEAR. On October 11, 2001, the Board adopted a Credit Card Policy. At the May 2003 Board of Fire Commissioners' Meeting, an In-Town Meal and Other Cost Reimbursement Policy was adopted by Resolution 03-030. 13. PAYROLL PROCESS SHOULD BE ENHANCED. In September 2001, the District hired a Controller, whose first priority was to reorganize and improve the payroll system, and to identify and correct prior payroll errors. In May of 2002, payroll preparation was transferred from an outside payroll service to the District's in house financial program, providing greater accuracy and improved monitoring and control. Only one check numbering sequence is used to eliminate the possibility of duplicate check numbers. In February 2003, the District hired a Payroll Bookkeeper who is a Certified Payroll Specialist to assume the responsibilities of all payroll preparation and benefit time accrual and monitoring. The Director of Finance reviews all payroll related general ledger accounts on a semi-monthly basis. All payroll entries are done in accordance with generally accepting accounting procedures. As a result of these improvements to and enhancements of the District's payroll process, payroll errors and inaccuracies have dramatically decreased, and a procedures to ensure internal control has been created. 14. CONTROLS OVER INSPECTION FEES FUND SHOULD BE ENHANCED. Beginning October 2001, all inspection fees have been disbursed within ten days of receipt by the District. Beginning September 2002, all inspection fee receipts and disbursements have been reviewed by the Director of Finance. On January 28, 2003, the Collier County Board of Commissioners signed a new Interlocal Agreement, assigning East Naples Fire Control &Rescue District as the administering district for both the Inspection Fees and the Collier County Fire BJP/bp 9-03-03 6 Code Officials. Effective February 1, 2003, North Naples Fire Control & Rescue District no longer administers either of these funds. 15. INSPECTION FEE INTEREST AND REVENUE SHOULD BE DISBURSED TIMELY. In September 2002, the Collier County Attorney's office was contacted regarding the disbursement of the interest earned by the Inspection Fee Fund. No response was received. A legal opinion was then obtained from the District's legal counsel regarding the allocation of interest to be disbursed, and all interest was disbursed to the participating fire districts in November of 2002. 16. RETIREMENT PLANS SHOULD BE ANALYZED. Since October 1, 2002, the following actions have been taken regarding the District's pension plans: a. In October 2002, the Board approved the final distribution of funds from the General Pension Plan. Final distributions were approved by the Board of Trustees of the General Pension Plan on November 8, 2002, and subsequently made on November of 2002. The General Pension Plan bank account was closed in May of 2003. b. ICMA Plan No.109725 —(Chief Tobin). Since the only participant in this plan was the former Fire Chief who is no longer employed by the District, the Board adopted Resolution 02-010 on November 14, 2002, tecniinating this 401(a) plan. c. ICMA Plan No.107725 (Fire Code Officials). On February 13, 2003, the Board of Fire Commissioners adopted Resolution 03-008, terminating the Fire Code Official's 401(a) plan, since the District no longer administers the Collier County Fire Code Officials. d. ICMA Plan No. 107818 —(Administrative Employees and Elected Officials) On June 12, 2003 the Board of Fire Commissioners adopted Resolution 03-034, terminating ICMA Plan No. 107818 in order to enter these employees into the Florida Retirement System. e. On May 8, 2003, the Board of Fire Commissioners adopted Resolution 03-028 entering the general employees and elected officials into the Florida Retirement System, effective June 1, 2003. f. ICMA Plan No. 107788 —(Executive Assistant) On July 24, 2003 the Board of Fire Commissioners adopted Resolution 03-040, terminating ICMA Plan No. BJP/bp 9-03-03 7 107788 , since the Executive Assistant was the only participant, and is no longer employed by the District. As of this date, the District's employees participate in one of two pension plans— .• the Florida Retirement System, or the Chapter 175 Firefighters Pension. The staff continues to recommend analysis of the Chapter 175 Plan, and recommends investigation into returning all employees to the Florida Retirement System. 17. PETTY CASH RECONCILIATIONS SHOULD BE RESTRUCTURED. Beginning August 2002,the AP/AR Accountant became the custodian of the petty cash, disbursing funds for reimbursement, and the Director of Finance reconciled on a monthly basis. Following the hiring of the Payroll Bookkeeper in February of 2003, the Payroll Bookkeeper became the custodian of the petty cash,disbursing funds per the approved procedure. The AP/AR Accountant reconciles the petty cash on a monthly basis. The Director of Finance reviews the general ledger postings on a monthly basis. 18. INTERFUND RECEIVABLES AND PAYABLES SHOULD BE ROUTINELY RECONCILED. Beginning March 2002, the Controller analyzed all interfund receivable and payable general ledger accounts and reconciled them. Authorization to transfer funds as appropriate was then submitted to the Chief Financial Officer for approval. Following the reorganization of the District's finance department and beginning September 2002, the Director of Finance reviews and reconciles all interfund receivables and payables on a monthly basis. Resulting transfer of funds are then prepared for a Commissioner's authorization, and the funds are transferred on a timely basis. 19. PAYROLL AND DISBURSEMENT SYSTEM CONTROLS SHOULD BE ENHANCED. In May of 2002, the payroll service provider was eliminated. Beginning with the May 31, 2002 payroll, payroll is now processed in-house using the District's financial software. Only one pre-numbered check sequence is used. There is no need for manual checks. In February 2003, the District hired a Certified Payroll Specialist, whose primary responsibility is the preparation of payroll and all related reports, and to accrue BJP/bp 9-03-03 8 and track employees' benefit time per the District's Union Contract and Employment Conditions for Non-Union Employees. The Payroll Bookkeeper prepares the payroll following the Board approved procedures adopted in February 2003. The Director of Finance reviews all disbursements prior to submission to a Commissioner for signature. The Director of Finance reviews the payroll related general ledger accounts on a semi-monthly basis. Detailed payroll reports are submitted to the authorizing Commissioner, along with any checks to be signed. These reports are reviewed and initialed by the Director of Finance and the authorizing Commissioner. As a result of the establishment of procedures and the increase in staff, payroll .. errors occur infrequently. • 20. CODE ENFORCEMENT FUND CONTROLS SHOULD BE STRENGTHENED. Beginning January 2002, the Fire Code Official's budget, current financial statement, check registers, trial balances, bank reconciliations and receipt logs were submitted to the Steering Committee on a monthly basis. On September 24, 2002, the Steering Committee was provided with a copy of the audit for the year ended September 30, 2001, and Comment 20 was read into their record. At that meeting the Steering Committee voted to begin the process to change the administering district to East Naples Fire Control and Rescue District. On January 28, 2003, the Collier County Board of Commissioners signed an Interlocal Agreement assigning the administrative duties for the Collier County Fire Code Officials to East Naples Fire Control & Rescue District. This transfer was effective February 1, 2003. Following a detailed analysis of the Fire Code Official's capital assets, verification was received to clarify ownership of the Fire Code Official's capital assets, indicating those assets that were owned by the Collier County Fire Code Official were not owned by North Naples Fire Control and Rescue District. At the February 13, 2003 Board of Fire Commissioners' Meeting, Resolution 03- 009 was adopted, transferring the Collier County Fire Code Official's fixed assets to East Naples Fire Control &Rescue District. 21. PURPOSE OF DEBT SERVICE FUND SHOULD BE ANALYZED. On August 29, 2002, the Board of Fire Commissioners approved the elimination of the Debt Service Fund. The appropriate journal entries were made, and the fund was eliminated. BJP/bp 9-03-03 9 22. CHECK REGISTERS SHOULD BE REVIEWED AND INITIALED BY CHIEF FINANCIAL OFFICER. Beginning September 2002, all check registers for all funds are reviewed and initialed by the Director of Finance prior to submission of checks to the Commissioners for signature. The signing Commissioners also initial the check registers, and they are submitted to the Board as part of the Treasurer's report on a monthly basis. 23. CASH TRANSFERS SHOULD BE INITIATED TIMELY. Beginning March 2002, cash transactions were reviewed by the Controller, submitted to the Chief Financial Officer for approval, and submitted to a Commissioner for authorization. Beginning September 2002, the Director of Finance reviews all cash transactions required, approves as appropriate, and submits to a Commissioner for authorization. In February 2003, the Board adopted a procedure for transfer of funds, which is strictly adhered to. 24. CHECKS SHOULD NOT BE POST/BACK DATED. In September 2002, the Director of Finance directed the accounting staff by memo not to post or back date any checks. All year end expenses received after September 30 are recorded as accounts payable or accrued expenses, as appropriate, rather than back dating the disbursement. 25. VOID CHECKS SHOULD BE DEFACED AND RETAINED. Beginning April 2002, all void checks have been defaced and retained for review. In April of 2003, the Director of Finance issued a memo to the financial department staff indicating the procedure for voiding and retaining District checks. 26. DISTRICT CELL PHONE USAGE POLICY SHOULD BE DEVELOPED. A revised Cellular Phone Policy was adopted by the Board of Fire Commissioners at their November 14, 2002 Board Meeting by Resolution 02-012. This policy addresses approved usages, monitoring procedures to ensure adherence to the policy, collection efforts and consequences of the abuse of the cell phone privilege. Additionally, the Deputy Chief of Operations reviews the cell phone bill on a monthly basis, and maintains accountability of personnel who have a District cell phone in their possession. BJP/bp 9-03-03 10 27. ALL FIXED ASSETS SHOULD BE INCLUDED IN INVENTORY LISTING. In June 2002, the District assigned a full time employee to inventory all fixed assets for reconciliation to the general ledger and fixed asset list. Extensive work has been done to complete the inventory of Fixed Assets. Procedures were approved by the Board of Fire Commissioners for adding and deleting assets to the Fixed Asset Inventory at their February 2003 Board Meeting. The physical inventory has been completed, and the numbering of assets per the Board approved numbering system is in progress; lists of additions and deletions to the District's Fixed Asset List have been brought to the Board for approval at their February 2003, April 2003, and August 2003 meetings, and additional adjustments are proposed for the September 11, 2003 Board Meeting. A numbering system was approved by the Board at the February 13, 2003 meeting. Additional work has been done to complete the District's Fixed Asset List and to ensure the list is in compliance with audit requirements, including locating the source of funds used for the purchase of assets, the date and number of the check used to purchase the asset, and the physical location of each asset. Because of the magnitude of this job, it has taken a good deal of time. The Fire Chief made the completion of this task a top priority for staff in September 2002. 28. EXPENDITURES SHOULD BE CONSISTENTLY RECORDED. Beginning May 2002, the Controller reviewed the posting of expenditures to ensure consistent recording. Beginning September 2002, the Director of Finance, upon review of invoices during the approval process, indicates the general ledger account to which the expense should be recorded. In August and September of 2003, a more detailed budget format was developed to assist staff in assigning consistent, accurate expense codes to the District's "*. expenditures. 29. GENERAL EMPLOYEES' PENSION FUND SHOULD BE INVESTED OR DISTRIBUTED. In September 2002, the distributions to plan participants took place, following an extensive analysis of contributions and contribution requirements to ensure the plan was properly funded. The balance of funds in the plan was distributed, following Board approval, to the District and the Collier County Fire Code Officials following the General Pension Board's final meeting in November 2002. All subsequent disbursements required for payment of legal and accounting fees were made, and the General Pension Bank account was closed in May of 2003. BJP/bp 9-03-03 1 1 30. INVESTMENT POLICY SHOULD BE DEVELOPED AND IMPLEMENTED. On December 5, 2002, the Board of Fire Commissioners adopted Resolution 02- 013, opting not to have an investment policy, but to operate in accordance with Section 218.415(17) of the Florida Statutes. 31. FIREFIGHTER PENSION PLAN INVESTMENT POLICY SHOULD BE REVIEWED. The Board of Trustees of the Chapter 175 Firefighters' Pension Plan continues to monitor the investments of the fund. Because of the significant losses suffered by the Plan, both the Board of Trustees of the Pension Plan, and the Board of Fire Commissioners sioners continue to discuss the feasibility of transferring the participants of the Chapter 175 Pension Plan to the Florida Retirement System. 32. POTENTIAL DETERIORATING FINANCIAL CONDITION-DECLINING FUND BALANCE SHOULD BE MONITORED. In August and September 2002, management and Board members met with the District's auditor and were advised of the serious nature of this comment. Management is committed to fiduciary responsibility and the necessity of closely monitoring expenditures, as well as providing accurate and timely financial information to the Board. In an effort to improve the financial condition of the District, the Board of Fire Commissioners adopted a budget for the fiscal year 2002/2003 that does not have expenditures greater than annual revenue and provided for designated reserves as follows: Reserve-Emergency $69,748 Reserve-Vehicles $75,000 Reserve-Bldg.Improvements $75,000 Reserve-St. #40 $162,350 Reserve-St. #46 $20,900 Initial projections for September 30, 2003 indicate that the District has effectively managed to control expenditures and build designated reserves. Projected reserves at September 30, 2003 appear to be approximately 1.5 million dollars. The tentative budget for the year ended September 30, 2004 also contains proposed provisions for designated reserves. BJP/bp 9-03-03 12 The budget for the year ended September 30, 2004 provides for no increase in millage rate, and indicates an increase in Ad Valorem revenue of over 2 million dollars. As of this date, the District's cash flow continues to be carefully monitored. The District currently has approximately$2,000,000 in a General Fund Money Market account, and $1,000,000 in a Certificate of Deposit which will mature on September 12, 2003. As a result of tightly controlling expenditures, staff anticipates that there will be no need to obtain a bridge loan to support operational expenses from October 1, 2003 through November 30, 2003, the approximate time period for which we will receive no Ad Valorem revenue. The financial department of the District has been reorganized and staff has been increased to provide for the segregation of duties necessary to implement internal controls. Policies and procedures have been adopted by Board resolution and adhered to. The District prepared and filed a Five Year Plan and understands the need to correlate the Five Year Plan, capital purchases and Impact Fee Fund purchases. Complete and accurate financial information is submitted to the Board on a monthly basis as part of the Treasurer's Report. Management has continued to maintain its commitment to closely analyzing current and future budgets and expenditure levels. 33. RETIREMENT COSTS SHOULD BE RECORDED SEPARATELY. In September 2002, the general ledger was adjusted to reflect a separate expense account for each retirement plan. 34. IMPACT FEE FUND SHOULD BE RECONCILED TO CASH ACCOUNT ACTIVITY. Beginning September 2002, the Impact Fee Fund has been reconciled to cash account activity. Schedules prepared for the audit for the fiscal year ended September 30, 2002 included cash flow activity for the Impact Fee Fund, as well as all other District funds. Beginning October 1, 2002, the District has not partially funded any assets between the Impact Fee Fund and any other fund. 35. STATE OF FLORIDA AUDITOR GENERAL HAS BEEN REQUESTED TO PERFORM AN AUDIT. At the October 10, 2002 Board of Fire Commissioners' Meeting, the Board directed Fire Chief Webb to contact the District's auditor, Jeff Tuscan, and direct him to contact the Auditor General's office, report on the current status of the District, and request that, based on the change in administration, they not perform an audit. BJP/bp 9-03-03 13 On March 25, 2003, the District's auditors, Fire Chief James Webb, and Director of Finance Becky Pogan met with Jim Dwyer of the Auditor General's Office. During this meeting, the change in the District's administration, the policies and procedures that have been implemented and the financially conservative position the administration and Commissioners have taken were discussed. The outcome of this meeting was the preliminary decision that the Auditor General's office will continue to monitor the District's progress and review the audit for the fiscal year ended September 30, 2002 before deciding whether or not to request the Joint Legislative Committee to institute an audit of the District. As of this date, a meeting is scheduled for September 8, 2003 with Jim Dwyer, Jeff Tuscan, Chief Webb and Becky Pogan. 36. DISTRICT AND FIRE CHIEF ADMIT CERTAIN UNFAIR LABOR PRACTICES. On August 6, 2002, the Public Employees' Relations Commissioner held a hearing at North Naples Fire Control & Rescue District's administrative offices. In attendance were their representatives, the Fire District's attorney and the Union's attorney. The former Fire Chief admitted committing 22 unfair labor practices. There were 8 remaining unfair labor practices which were not filed by the August 6, 2002 hearing. On September 4, 2002, the District paid in full the settlement amount of$20,000, $15,002.00 which was disbursed to Attorneys Sugarman and Susskind(the attorneys for the Union), and $4,998.00 of which was disbursed to union employees. On September 23, 2002 we received a $2.00 refund from Sugarman and Susskind. On August 29, 2002,by action of the Board of Fire Commissioners, the former Fire Chief was relieved of all duties, and his last paid date as an employee of the District was September 30, 2002. In September of 2002, the Union sent a letter to Fire Chief Webb informing him that they would not be filing the remaining 8 outstanding unfair labor practices against the District in an effort to show good faith and demonstrate support of the healing process between administration and the Union. 37. LATE PAYMENTS CAUSED UNNECESSARY FINANCE CHARGES. Prior to September 5, 2002, invoices were submitted to the Chief Financial Officer for review. Because the prior Chief Financial Officer had other operational duties which often required him to be absent from the administrative offices, there was frequently a lengthy period of time between receipt of invoices and approval for payment. Beginning September 5, 2002, all invoices are BJP/bp 9-03-03 14 reviewed upon receipt and immediately forwarded to the Accounts Payable/Receivable Accountant for payment. Additionally,beginning September 2003, accounts payable disbursements are processed every week, rather than semi-monthly, to ensure timely payment of invoices due. 38. CERTAIN AGREEMENTS FOR PROFESSIONAL SERVICES SHOULD BE BID. Extensive work has been done on a Bidding Policy for the District, including a special Workshop held on May 9, 2003. Discussion and direction was given by the Board as to the procurement of professional services. This Bidding Policy is scheduled to be presented for Board approval at the September 11, 2003 Board Meeting. 39. STALE DATED CHECKS SHOULD BE RESEARCHED. The stale dated checks referenced in the Auditor's letter to management were processed by the District's health insurance third party administrator. Numerous inquiries have been made,both verbally and in writing,requesting the third party administrator research these checks. As of this date, the outstanding checks have been resolved and voided. 40. EXPENDITURES IN EXCESS OF BUDGETED EXPENDITURES-SPECIAL REVENUE. In the course of the reorganization of the District's management staff, which occurred in late August and early September,the Hydrant Fund budgeted amendment was overlooked. For the year ended September 30, 2003, the Hydrant Fund has been amended as needed. Additionally, staff will propose to the Board of Fire Commissioners at their September 11, 2003 that the Hydrant Fund be eliminated and the fund balance '� transferred to the General Fund. The expenses associated with maintaining the hydrants have been provided for in the General Fund budget. Sincerely, NORTH ► • ' - - ' CONTROL & RESCUE DISTRICT 05/3 �! r:r.. LOMABARDO EDWARD M �e'• "� Chairman, Board of Fire Commissioners Vice Chairman, Board of Fire Commissioners BJP/bp 9-03-03 15 il JOYCE A J. RAUTIta STEVE ILLIGAN Treasur- , Bo.rd of Fire Co 'missio :rs Fire Commissioner a,(4( 0)17(/ H i L, JR / J . WEBB Fire Coml. io Fir: =i REBECAH POGAN Director of Finance BJPibp 9-03-03 16 ,ijD'P`n'. pr, North Naples Fire Control c ' Rescue District rict �0i -) : � 1885 Veterans Park Drive•Naples, Florida 34109 `►* (239)597-3222•Fax(239)597-7082 FLA September 25, 2003 Clerk of Courts—ATTN: Minutes Department P. O. Box 413044 Naples, FL 34101-3044 Re: Audit for Fiscal Year Ending 9-30-02 To Whom It May Concern, Enclosed please find one copy of the annual Audit for the fiscal year ended September 30,2002, and one copy of the Annual Local Government Financial Report for the fiscal year 2001-2002 for the North Naples Fire Control & Rescue District. Please contact me at the above number if you require any additional information. Very truly yours, BECKY POGAN Director of Finance BJP/bp Enclosures • -11 A X >< o O o cc 1 -F5. N C!) C7 ?1 T _C w m ]..9 b m t !j 0 (73 c_, -- G-' 3 ens ui 'o x - Q CD O- D w w C N. 1 w c ? • ro X y = CD cn a O O n o CD CD X" Fp'; 1 t 4 t-• C7 c co 0 0 N. co (0Ci •• �v n C Z hi _I Z a O co I I C C a m _ •3 F. .d a- ? N 3 Ni Ni Ni _ VD ni W O 1 1f1�'j = I I —1 a z _i _x c 1 p aE c m n I W :L b7 I o " c �..�. ^ 1l-h CD Cr d O �C 1� N n 1(' w m 5 ty w Z (D co 1= �, a —. 'til '1 pt a a o O� . H Q CO Io3 CD •D Co `..1' g E 5 4 (D m G 0. it', - R. m a Er a j ;-- o o. 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N/A If you will be using reporting forms generated by your own computer system, rather than filing electronically, check to see that they mirror our forms. (Please note, there have been changes to the names of various funds.) YES Report in whole dollars. YES Are revenues and expenditures/expenses reported by fund group, i.e., General Fund, Special Revenue Fund, Debt Service Fund, Capital Project Fund, Permanent Fund, Enterprise Fund, Internal Service Fund, Pension Fund and Trust 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 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 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 (11-29), 30 (31-59), 60 (61- 67), 70 (71-73), 80 (81-83), 90(91-99) levels. Manual reporting forms which present sub-object detail will be returned as unacceptable. (Refer to the enclosed list, or 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, 2003 if an audit is not required in accordance with Section 218.39 F.S., 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 E. Gaines Street Tallahassee, FL 32399-0350 * Effective 1-7-03: Department of Financial Services Bureau of Accounting 200 E. Gaines Street Tallahassee, FL 32399-0354 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 Burton Marshall (850)410-9365 Suncom 210-9365 Hal Foy (850)410-9345 Suncom 210-9345 FAX (850)410-9993 Suncom 210-9993 AUDITOR GENERAL LOCAL GOVERNMENTAL ENTITY AUDIT REPORT SUBMITTAL CHECKLIST (SECTION 218.39, FLORIDA STATUTES) (To be submitted with the 2001-2002 fiscal year audit report) Local Governmental Entity Name North Naples Fire Control and Rescue District Contact Person Name and Title Becky Pogan, Chief Financial Off icer Contact Person Phone Number (239) 597-3222 Contact Person Email Address Fiscal Year Audited September 30, 2002 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 the county 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)? YES 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(cr�.aud.state.fl.us Web site Address: www.state.fl.us/audgen Page 2 of 2