Gravity Drainage District No. 3 Cameron, Louisiana

Transcription

1 f^f Gravity Drainage District No. 3 Basic Financial Statements With Independent Auditors' Report As of and for the Year Ended December 31,2004 With Supplemental Information Under provisions of state law, this report is public document. Acopy of the report has been submitted to the entity and other appropriate public officials. The report is available for public inspection at the Baton Rouge office of the Legislative Auditor and, where appropriate, at the office of the parish clerk of court. Release Date f-jto- o5"

2 GRAVITY DRAINAGE DISTRICT No. 3 CAMERON, LOUISIANA BASIC FINANCIAL STATEMENTS WITH INDEPENDENT AUDITORS' REPORT AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2004 TABLE OF CONTENTS Statement Page Independent Auditors' Report 1 Required Supplemental Information (Part I): Management's Discussion and Analysis Basic Financial Statements: Governmental Funds Balance Sheet/ Statement of Net Assets Statement of Governmental Funds Revenues, Expenditures and Changes in Fund Balances/ Statement of Activities Notes to the Financial Statements Required Supplemental Information (Part II): Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual - General Fund Independent Auditors' Report Required by Government Auditing Standards: B Schedule Paqe 20 Independent Auditors' Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Schedule of Findings and Questioned Costs Summary Schedule of Prior Audit Findings Other Supplemental Information Schedule of Per Diem Paid to Board Members

3 LITTLE & ASSOCIATES LLC CERTIFIED PUBLIC ACCOUNTANTS Wm. TODD LITTLE. CPA CHARLES R. MARCHBANKS, JR., CPA Independent Auditors* Report GRAVITY DRAINAGE DISTRICT No. 3 OF CAMERON PARISH December 31,2004 We have audited the accompanying financial statements of the governmental activities, and each major fund, of the Gravity Drainage District No. 3 of Cameron Parish, a component unit of the Cameron Parish Police Jury, as of December 31, 2004, and for the year then ended, which collectively comprise the basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Gravity Drainage District No. 3 of Cameron Parish's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to in the first paragraph present fairly, in all material respects, the respective financial position of the governmental activities, and each major fund, of the Gravity Drainage District No. 3 of Cameron Parish as of December 31, 2004, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. PHONE (318) FAX (318) NORTH 31" STREET MONROE, LA MAIUNG ADDRESS: P. O. BOX 4058 MONROE, LA

4 Gravity Drainage District No. 3 of Cameron Parish December 31,2004 As described in Note 1 to the basic financial statements, the Gravity Drainage District No. 3 of Cameron Parish adopted the provisions of Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements-and Management's Discussion and Analysis for State and Local Governments and Statement No. 37, Basic Financial Statements-end Management's Discussion and Analysis for State and Local Governments: Omnibus, as of October 1, This results in a change in the form and content of the basic financial statements. In accordance with Government Auditing Standards, we have also issued a report dated June 24, 2005, on our consideration of the Gravity Drainage District No. 3 of Cameron Parish's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. The Management's Discussion and Analysis and budgetary comparison on pages 2 through 3 and 22, respectively are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The other supplemental information schedules listed in the table of contents are presented for the purpose of additional analysis and are not a required part of the basic financial statements of Gravity Drainage District No. 3 of Cameron Parish. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly presented in all material respects in relation to the basic financial statements taken as a whole. Monroe, Louisiana June 24, 2005

5 Gravity Drainage District No.3 Management's Discussion and Analysis For the Year Ended December 31, 2004 As Management of the Gravity Drainage District No. 3, we offer readers of the Gravity Drainage District No. 3 financial statements this narrative overview and analysis of the financial activities of the Gravity Drainage District No. 3 as of and for the year ended December 31, We encourage readers to consider the information presented here in conjunction with the Gravity Drainage District No. 3 basic financial statements and supplementary information provided in this report in assessing the efficiency and effectiveness of our stewardship of public resources. The Management's Discussion and Analysis (MD&A) is an element of the new reporting model adopted by the Governmental Accounting Standards Board (GASB) in Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments ("GASB No. 34") issued June Certain comparative information between the current year and the prior year is required to be presented in the MD&A. However, because the year ended December 31, 2004, was the first year of implementing the new reporting model, certain necessary comparative information for the year ended December 31, 2003, was not prepared. Considering the financial resources necessary to prepare the information for the prior year, and that GASB No. 34 permits the omission of the comparative information in the first year of adoption of the new reporting model, the Gravity Drainage District No. 3 has elected to exclude the information in this report. FINANCIAL HIGHLIGHTS The assets of the Gravity Drainage District No. 3 exceeded its liabilities at December 31, 2004, by $1,215,388 (net assets). The Gravity Drainage District No. 3 net assets increased by $84,726 as a result of this year's operations. Total net assets are comprised of the following: (1) Unrestricted net assets of $1,215,388 represent the portion available to maintain the Gravity Drainage District No. 3 continuing obligations to citizens and creditors. At December 31, 2004, the Gravity Drainage District No. 3 governmental funds consist solely of the Gravity Drainage District No. 3 general fund. The Gravity Drainage District No. 3 governmental funds reported a total ending fund balance of $1,215,388, an increase of $84,726 including expenditures for capital assets. The entire fund balance is unreserved and available for spending at the Gravity Drainage District No. 3 discretion.

6 Gravity Drainage District No.3 Management's Discussion and Analysis For the Year Ended December 31, 2004 OVERVIEW OF THE FINANCIAL STATEMENTS Management's Discussion and Analysis is intended to serve as an introduction to the basic financial statements. In accordance with GASB No. 34, the Gravity Drainage District No. 3 basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the basic financial statements. This report also contains other supplementary information in addition to the basic financial statements. Government-wide Financial Statements. The government-wide financial statements of the Gravity Drainage District No. 3 report information about the Gravity Drainage District No. 3 using accounting methods similar to those used by private sector companies. They present the financial picture of the Gravity Drainage District No. 3 from an economic resources measurement focus using the accrual basis of accounting. These statements include all assets of the Gravity Drainage District No. 3 (including capital assets) as well as all liabilities (including long-term obligations). The Statement of Net Assets presents information on all of the Gravity Drainage District No. 3 assets and liabilities, with the difference between the two reported as net assets. Over time, increases and decreases in net assets may serve as a useful indicator of whether the financial position of the Gravity Drainage District No. 3 is improving or deteriorating. The Statement of Activities presents the current year's revenues and expenses and other information showing how the Gravity Drainage District No. 3 net assets changed during the year. The change in net assets is reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. The government-wide financial statements are presented on pages of this report. Fund Financial Statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The Gravity Drainage District No. 3, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the Gravity Drainage District No. 3 are categorized as governmental funds. Governmental Funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as, on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near-term financing requirements.

7 Gravity Drainage District No.3 Management's Discussion and Analysis For the Year Ended December 31, 2004 Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the governmentwide financial statements. By doing so, readers may better understand the long-term impact of the government's near-term financing decisions. Both the governmental fund balance sheet and governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The Gravity Drainage District No. 3 maintains one individual governmental fund - the general fund. The Gravity Drainage District No. 3 adopts an annual appropriated budget for the general fund, and a budgetary comparison schedule is provided for the general fund to demonstrate compliance with this budget. The governmental fund financial statements are presented on pages of this report. Notes to the Financial Statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. Required Supplemental Information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the Gravity Drainage District No. 3 budget presentation. The general fund's budgetary comparison schedule is included as "required supplementary information." Required supplementary information is information that the accounting rules strongly suggest be presented within the Gravity Drainage District No. 3 financial report. This schedule demonstrates compliance with the Gravity Drainage District No. 3 adopted and final revised budget. GOVERNMENT-WIDE FINANCIAL ANALYSIS The Gravity Drainage District No. 3 implemented the new financial reporting model used in this report beginning with the current calendar year ended December 31, Over time, as we accumulate year-to-year financial information on a consistent basis, changes in net assets may be observed and used to discuss the changing financial position of the Gravity Drainage District No. 3 as a whole.

8 Gravity Drainage District No.3 Management's Discussion and Analysis For the Year Ended December 31, 2004 The Gravity Drainage District No. 3 net assets at December 31, 2004, are summarized as follows: Summary of Net Assets Governmental Activities Assets: Current and Other Assets $ 1, Total Assets 1,225,933 Liabilities: Current and Other Liabilities 10,545 Total Liabilities 10,545 Net Assets: Unrestricted Total Net Assets $ 1,215,388 The largest components of Gravity Drainage District No. 3's total assets are: (1) cash and investments of $1,225,933 or 100%. Of Gravity Drainage District No. 3's total liabilities, the only component is accounts payable of $10,545. As noted earlier, net assets (total assets less total liabilities) may serve over time as a useful indicator of a government's financial position. At the close of the most recent fiscal year, the Gravity Drainage District No. 3 net assets totaled $1,215,388. The unrestricted net assets of the Gravity Drainage District No. 3 are available for future use. The unrestricted net assets exceed 100% of the total operating expenses for the fiscal year ended December 31, This measure is an estimate of how long the Gravity Drainage District No. 3 might be expected to operate on its current resources.fiscal year 2004 is the first year the Gravity Drainage District No. 3 has implemented GASB No. 34; accordingly, a comparative analysis of current and prior year balances is not included. However, such an analysis will exist in subsequent years.

9 Gravity Drainage District No.3 Management's Discussion and Analysis For the Year Ended December 31, 2004 The Gravity Drainage District No. 3 change in net assets for the year ended December 31, 2004, is summarized as follows: Summary Statement of Changes in Net Assets Govememental Activities Revenues: Ad Valorem $ 215,292 Federal Grant 347 State Revenue Sharing 1,929 Use of Money and Property 7,312 Total Revenues 224,880 Expenses: Personal Services 29,880 Operating Services 100,679 Materials and Supplies 9,595 Total Expenses 140,154 Change in Net Assets $ 84,726 Governmental activities increased net assets by $84,726 for the year ended December 31,2004. Key elements of the analysis of government-wide revenues and expenses reflect the following: The Gravity Drainage District No. 3 is heavily dependent on Ad Valorem to support its operations. Ad Valorem provided 96% of the Gravity Drainage District No. 3 total revenues. Use of Money and Property totaled approximately 3% of the Gravity Drainage District No. 3 current year resources. Operating expense and materials and supplies expenses comprise 72% and 7%, respectively, of total expenses. Employee salaries and benefits make up approximately 21% of the total expenses.

10 Gravity Drainage District No.3 Management's Discussion and Analysis For the Year Ended December 31, 2004 FINANCIAL ANALYSIS OF GOVERNMENTAL FUNDS The Gravity Drainage District No. 3 uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. The financial statements of the Gravity Drainage District No. 3 present its General Fund. The General Fund is the Gravity Drainage District No. 3 operating fund and the source of day-to-day service delivery. As discussed, the General Fund is useful in assessing the resources available at the end of the year in comparison with upcoming requirements. At December 31, 2004, the Gravity Drainage District No. 3 General Fund balance (total assets less total liabilities) totaled $1,215,388, all of which was unreserved. The Gravity Drainage District No. 3 unreserved fund balance increased by $84,726 in Total operating revenues reflect a 20% ($47,147) decrease in 2004 as compared to 2003 due primarily to an decrease in ad valorem taxes. Total personal expenses increased by $34,278, or 32% from 2003 to The most significant increase in expenses occurred in operating and maintenance expense. The total increase in this expenses from 2003 to 2004 was $25,071. GENERAL BUDGETARY ANALYSIS The Gravity Drainage District No. 3 employs formal budgetary integration as a management control device during the year. Budgeted amounts included in the Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual include the original adopted budget amounts and the final amended budget amounts. Original budgets for each year are adopted on or before December 31 of the year preceding the budget year. The original budget is based on estimated revenues, estimated expenses, and other financial information known to the Gravity Drainage District No. 3 at the time of the adoption of the budget. Amendments to the original budget are made throughout the year as changes in operations, in expected funding levels, and in estimated expenditures occur. The final amended budget is prepared at the time the Gravity Drainage District No. 3 anticipates no additional significant increases or decreases in revenues and expenses for the year and no expected changes in operations. The Gravity Drainage District No. 3 was not required to amend the original budget during The budgeted revenues and expenses were amended during 2004; However, the differences in the original and amended budgets were insignificant. The difference between the budgeted revenues and actual revenues for the year ended December 31, 2004, totaled $14,420. The primary reason for the decrease was due to a reduction in the 2004 ad valorem taxes. The budgeted expenses exceeded the actual expenses for the year ended December 31, 2004, by $654, an insignificant variance.

11 Gravity Drainage District No.3 Management's Discussion and Analysis For the Year Ended December 31, 2004 CAPITAL ASSETS AND LONG-TERM OBLIGATIONS Capital Assets At the end of December 31, 2004, the Gravity Drainage District No. 3 had invested in equipment. The capital assets are summarized below: Depreciable Assets: Governmental Activities Equipment $ 12,188 Totals 12, Less Accumulated Depreciation (12,188) Book Value-Depreciable Assets $ - Long-Term Obligations The Gravity Drainage District No. 3 had no long-term obligations at December 31, ECONOMIC FACTORS AND FUTURE OUTLOOK The Gravity Drainage District No. 3 budgeted revenues and expenditures for 2005 are comparable to 2004's actual revenues and expenditures. Furthermore, the Gravity Drainage District No. 3 does not anticipate any changes in its day-to-day operations that will have a material effect on its 2005 budget or operations. CONTACTING THE GRAVITY DRAINAGE DISTRICT NO. 3 FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, and creditors with a general overview of the Gravity Drainage District No. 3 finances and to show its accountability for the money it receives. If you have questions about this report or need additional financial information, contact Paula Pool, at the Gravity Drainage District No. 3 Office, Post Office Box 1067, or call at (337)

12 Statement A Gravity Drainage District No. 3 Governmental Funds Balance Sheet/Statement of Net Assets December 31,2004 FUND BALANCE Fund balance: Unreserved, reported in: General Fund 1,215,388 (1,215,388) Total Fund Balance 1,215,388 (1,215,388) Total Liabilities and Fund Balance $ 1,225,933 General Adjustments Statement of Fund (Note 1) Net Assets ASSETS Cash and cash equivalents $1,010,848 $ - $ 1,010,848 Receivables 215, ,085 Capital assets, net of accumulated - depreciation - Total Assets $1,225,933 $ - $ 1,225,933 LIABILITIES Accounts payable $ 10,545 _$ -_ $ 10,545 Total Liabilities 10,545-10,545 NET ASSETS Invested in Capital Assets, Net of Related Debt Unrestricted 1,215,388 1,215,388 Total Net Assets $ 1,215,388 $ 1,215,388 The accompanying notes are an integral part of this statement. 10

13 Statement B Gravity Drainage District No. 3 Statement of Governmental Fund Revenues, Expenditures, and Changes in Fund Balances/ Statement of Activities For the Year Ended December 31,2004 General Fund Adjustments (Note I) Statement of Activities EXPENDITURES/EXPENSES Public Works Personnel Service Operating services Materials and Supplies Total Expenditures/Expenses PROGRAM REVENUES Net Program Expense GENERAL REVENUES Use of money and property Ad valorem taxes Intergovernmental revenue: Federal Grant State revenue sharing Total General Revenues $ 29,880 $ 100,679 9, ,154 7, , , ,880 $ 29, ,679 9, ,154 (140,154) 7, , , ,880 EXCESS (Deficiency) OF REVENUES OVER EXPENDITURES CHANGE IN NET ASSETS FUND BALANCE/NET ASSETS: Beginning of the Year End of the Year 84,726-1,130,662 $ 1,215,388 (84,726) 84,726 84,726 1,130,662 $ - $ 1,215,388 The accompanying notes are an integral part of this statement. 11

14 GRAVITY DRAINAGE DISTRICT No. 3 OF CAMERON PARISH Notes to the Financial Statements (Continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Gravity Drainage District No. 3 of Cameron Parish was created on April 6, 1931, as a political subdivision of the State of Louisiana under the provisions of Louisiana Revised Statutes 38: , and was established for the purpose of opening and maintaining all natural drains in the district where drainage is accomplished using the natural force of gravity. The district is governed by a board of 5 commissioners who are appointed by the Cameron Parish Police Jury. A. BASIS OF PRESENTATION The accompanying basic financial statements of the District have been prepared in conformity with governmental accounting principles generally accepted in the United States of America. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The accompanying basic financial statements have been prepared in conformity with GASB Statement 34, Basic Financial Statements-and Management's Discussion and Analysis for State and Local Governments, issued in June Certain of the significant changes in the Statement include the following: A Management Discussion and Analysis (MD&A) section providing an analysis of the District's overall financial position and results of operations; Financial statements prepared using full accrual accounting for all of the District's activities; and A change in the fund financial statements to focus on the major funds. B. REPORTING ENTITY As the governing authority of the parish, for reporting purposes, the Cameron Parish Police Jury is the financial reporting entity for Cameron Parish. The financial reporting entity consists of (a) the primary government (police jury), (b) organizations for which the primary government is financially accountable, and (c) other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. 12

15 GRAVITY DRAINAGE DISTRICT No. 3 OF CAMERON PARISH Notes to the Financial Statements (Continued) Governmental Accounting Standards Board (GASB) Statement No. 14 established criteria for determining which component units should be considered part of the Cameron Parish Police Jury for financial reporting purposes. The basic criterion for including a potential component unit within the reporting entity is financial accountability. The GASB has set forth criteria to be considered in determining financial accountability. This criteria includes: 1. Appointing a voting majority of an organization's governing body, and: a. The ability of the police jury to impose its will on that organization and/or; b. The potential for the organization to provide specific financial benefits to or impose specific financial burdens on the police jury. 2. Organizations for which the police jury does not appoint a voting majority but are fiscally dependent on the police jury.3. Organizations for which the reporting entity financial statements would be misleading if data of the organization is not included because of the nature or significance of the relationship. Because the police jury appoints all board members of the district and can impose its will on the district, the district was determined to be a component unit of the Cameron Parish Police Jury, the financial reporting entity. The accompanying financial statements present information only on the funds maintained by the district and do not present information on the police jury, the general government services provided by that governmental unit, or the other governmental units that comprise the financial reporting entity. 13

16 GRAVITY DRAINAGE DISTRICT No. 3 OF CAMERON PARISH Notes to the Financial Statements (Continued) C. FUND ACCOUNTING The district uses funds and account groups to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts that comprises its assets, liabilities, fund equity, revenues, and expenditures. An account group, on the other hand, is a financial reporting device designed to provide accountability for certain assets and liabilities (general fixed assets and general long-term obligations) that are not recorded in the "funds" because they do not directly affect net expendable available financial resources. They are concerned only with the measurement of financial position, not with the measurement of results of operations. Funds are classified into three categories; governmental, proprietary, and fiduciary. Each category, in turn, is divided into separate "fund types." Governmental funds are used to account for a government's general activities, where the focus of attention is on the providing of services to the public as opposed to proprietary funds where the focus of attention is on recovering the cost of providing services to the public or other agencies through service charges or user fees. Fiduciary funds are used to account for assets held for others. The district's current operations require the use of only governmental fund types. The governmental fund types of the district are described as follows: General Fund The General Fund is the general operating fund of the district and is used to account for all financial activities not required to be accounted for in other funds. E. MEASUREMENT FOCUS/BASIS OF ACCOUNTING Fund Financial Statements (FFS) The amounts reflected in the General Fund of Statements A and B are accounted for using a current financial resources measurement focus. With this measurement focus, only current assets and current liabilities are generally included on the balance sheet. The statement of revenues, expenditures, and changes in fund balances reports on the 14

17 GRAVITY DRAINAGE DISTRICT No. 3 OF CAMERON PARISH Notes to the Financial Statements (Continued) sources (i.e., revenues and other financing sources) and uses (i.e., expenditures and other financing uses) of current financial resources. This approach is then reconciled, through adjustment, to a governmentwide view of the District's operations. The amounts reflected in the General Fund of Statements A and B use the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual (i.e., when they become both measurable and available). Measurable means the amount of the transaction can be determined and available means collectible within the current period or soon enough thereafter to pay liabilities of the current period. The District considers all revenues available if they are collected within 60 days after the fiscal year end. Expenditures are recorded when the related fund liability is incurred, except for interest and principal payments on general long-term debt which is recognized when due, and certain compensated absences and claims and judgments which are recognized when the obligations are expected to be liquidated with expendable available financial resources. The governmental funds use the following practices in recording revenues and expenditures: Revenues Ad valorem taxes and the related state revenue sharing are recorded in the year the taxes are due and payable. Ad valorem taxes are assessed on a calendar year basis and attach as an enforceable lien and become due and payable on the date the tax rolls are filed with the recorder of mortgages. Louisiana Revised Statute 47:1993 requires that the tax roll be filed on or before November 15 of each year. Ad valorem taxes become delinquent if not paid by December 31. The taxes are normally collected in December of the current year and January through the tax sale of the ensuing year. Interest income on interest bearing demand deposits is recorded at the end of the month when credited by the bank. Interest income on time deposits is recorded when the time deposits have matured and the interest is available. Based on the above criteria, ad valorem taxes and state revenue sharing have been treated as susceptible to accrual. 15

18 GRAVITY DRAINAGE DISTRICT No. 3 OF CAMERON PARISH Notes to the Financial Statements (Continued) Expenditures Expenditures are generally recognized under the modified accrual basis of accounting when the related fund liability is incurred, except for compensated absences, which are recognized when paid. Government-Wide Financial Statements (GWFS) The column labeled Statement of Net Assets (Statement A) and the column labeled Statement of Activities (Statement B) display information about the District as a whole. These statements include all the financial activities of the District. Information contained in these columns reflects the economic resources measurement focus and the accrual basis of accounting. Revenues, expenses, gains, losses, assets and liabilities resulting from exchange or exchange-like transactions are recognized when the exchange occurs (regardless of when cash is received or disbursed). Revenues, expenses, gains, losses, assets and liabilities resulting from nonexchange transactions are recognized in accordance with the requirements of GASB Statement No. 33, Accounting and Financial Reporting for Nonexchange Transactions. F. CAPITAL ASSETS AND LONG-TERM DEBT Capital assets are capitalized at historical cost or estimated cost if historical cost is not available. Donated assets are recorded as capital assets at their estimated fair market value at the date of donation. All of fixed assets are based on actual historical costs. The district maintains a threshold level of $1,000 or more for capitalizing capital assets. Capital assets and related expenses are recorded in the Statement of Net Assets and Statement of Activities, respectively, but are not reported in the fund financial statements. Since surplus assets are sold for an immaterial amount when declared as no longer needed for public purposes, no salvage value is taken into consideration for depreciation purposes. All capital assets are depreciated using the straight-line method over the following useful lives: 16

19 GRAVITY DRAINAGE DISTRICT No. 3 OF CAMERON PARISH Notes to the Financial Statements (Continued) Capital assets consit of equipment totaling $12,188 which is fully depreciated as of December 31, Description Equipment Building Estimated Lives 5-10 years 40 years I. CASH AND CASH EQUIVALENTS Under state law, the district may deposit funds within a fiscal agent bank organized under the laws of the State of Louisiana, the laws of any other state in the union, or the laws of the United States. The district may invest in certificates and time deposits of state banks organized under Louisiana law and national banks having principal offices in Louisiana. At December 31, 2004, the district had cash and cash equivalents (book balances) totaling $1,010,848, of which $50,848 was in demand deposits and $960,000 was in time deposits. These deposits are stated at cost, which approximates market. Under state law, these deposits, or the resulting bank balances, must be secured by federal deposit insurance or the pledge of securities owned by the fiscal agent bank. Bank balances at December 31, 2004, are secured as follows: Bank Balances $1,014,677 Federal deposit insurance 154,678 Pledged securities (uncollateralized) 957,090 Total $1,111,768 Because the pledged securities are held by a custodial bank in the name of the fiscal agent bank rather than the name of the district, they are considered uncollateralized (Category 3) under the provisions of GASB Codification C20.106; however, Louisiana Revised Statute 39:1229 imposes a statutory requirement on the custodial bank to advertise and sell the pledged securities 17

20 GRAVITY DRAINAGE DISTRICT No. 3 OF CAMERON PARISH Notes to the Financial Statements (Continued) within 10 days of being notified by the district that the fiscal agent has failed to pay deposited funds upon demand. J. VACATION/SICK LEAVE POLICY AND PENSION PLAN The district has no employees; therefore, the district does not have a formal policy on vacation and sick leave and does not contribute to a pension plan. K. RISK MANAGEMENT The district is exposed to various risk of loss related to torts; thefts of, damage to, and destruction of assets and errors and omissions. To handle such risk of loss, the district maintains surety bond coverage, a general liability policy, and an errors and omissions policy, and automobile liability. No claims were paid on any of the policies during the past three years which exceeded the policies' coverage amount. 2. LEVIED TAXES The district has an authorized tax millage of 7.50 mills for general maintenance and operation of the district. The tax expires with the 2008 tax roll. For the year ended December 31, 2004, the district levied 5.00 mills. 3. PRINCIPAL TAXPAYERS The following are the principal taxpayers for the parish and their 2004 assessed valuation (amounts expressed in thousands): Percent 2004 of Assessd Total Valuation Assessed Valuation Omega Protein, Inc. $3, % Natural Gas Pipeline 2, % Cameron Telephone Co. 1, % Tenneco, Inc. 1, % Baroid Drilling Fluids, Inc. 1, % 18

21 GRAVITY DRAINAGE DISTRICT No. 3 OF CAMERON PARISH Notes to the Financial Statements (Continued) Abdon Callais Offshore, LLC Ambar Drilling Fluids LP LLLP Alpha Marine Services, LLC Aries Marine Corp Seabulk Offshore LTD Total 2004 Assessd Valuation 1,245 1,202 1,134 1,128 1,034 $16,099 Percent of Total Assessed Valuation 4.50% 4.35% 4.10% 4.08% 3.74% 58.25% RECEIVABLES The General Fund receivables of $215,085 at December 31, 2004, consisted of ad valorem tax receivable of $213,306 and state revenue sharing (net) of $1,270. LITIGATION AND CLAIMS The district is not involved in any litigation at December 31, 2004, nor is it aware of any unasserted claims. 19

22 Schedule 1 Gravity Drainage District No. 3 GOVERNMENTAL FUND - GENERAL FUND Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget (Non GAAP) and Actual General Fund For the Year Ended December 31,2004 Budgeted Amounts Original Final Actual Amounts (Non GAAP Basis) Variance With Final Budget Over(Under) REVENUES Ad valorem taxes Intergovernmental revenue: Federal Grant State revenue sharing (net) Use of money and property $ 225, ,900 8,000 $ 230,000 $ 400 1,900 7, ,959 3i 8, ,963 7,312 (53) Total revenues 235, , ,581 9,281 EXPENDITURES Current: Personnel services Operating services Materials and supplies 30, ,500 5,250 30, ,500 6,000 29, ,448 9,595 (120) (52) 3,595 Total expenditures 137, , ,923 3,423 EXCESS (Deficiency) OF REVENUES OVER EXPENDITURES 97,550 99, ,658 5,858 FUND BALANCE (Deficit) AT BEGINNING OF YEAR 1,130,662 1,130,662 1,130,662 1,130,662 FUND BALANCE (Deficit) AT END OF YEAR $ 1, $ 1, $ 1,236,320 $ 1,136,520 20

23 GRAVITY DRAINAGE DISTRICT No. 3 Notes to Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget Basis (Non GAAP) and Actual For the Year Ended December 31,2004 Sources/inflows of resources General Fund Actual amounts (budgetary basis) "Total Revenues" from the Schedule 1. $ 248,581 Differences - budget to GAAP: The District budgets for property tax revenue only to the extent expected to be received, rather than on the modified accrual (23,701) basis. Total revenues as reported on the statement of revenues, expenditures, and changes in fund balances-governmental funds. $ 224,880 Uses/outflows of resources Actual amounts (budgetary basis) "Total Expenditures" from the Schedule 1. $ 142,923 Differences - budget to GAAP: The District budgets for property tax revenue only to the extent expected to be paid, rather than on the modified accrual basis. (2,769) Total expenditures as reported on the statement of revenues, expenditures, and changes in fund balances-governmental funds. $ 140,154 21

24 GRAVITY DRAINAGE DISTRICT No. 3 OF CAMERON PARISH Notes to the Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget (Non-GAAP Basis) and Actual For the Year Ended December 31, 2004 A. BUDGET PRACTICES A preliminary budget for the ensuing year is prepared for the board of commissioners and made available to the public. The budget is then adopted during the regular December meeting. The purposed budget for the General Fund is prepared on the cash basis of accounting. The budget is established and controlled by the board of commissioners at the object level of expenditures. Appropriations lapse at year-end and must be appropriated for the following year to be expended. All changes in the budget must be approved by the board of commissioners normal budgetary integration is employed as a management control device during the year. Budgeted amounts included in the accompanying financial statements include the original adopted budget and all subsequent amendments. 22

25 Independent Auditor's Report Required by Government Auditing Standards The following independent auditor's report on compliance and internal control is presented in compliance with the requirements of Government Auditing Standards issued by the Comptroller General of the United States, and the Louisiana Governmental Audit Guide, issued by the Society of Louisiana Certified Public Accountants and the Louisiana Legislative Auditor. 23

26 LITTLE & ASSOCIATES LLC CERTIFIED PUBLIC ACCOUNTANTS Wm. TODD LITTLE, CPA CHARLES R. MARCHBANKS, JR., CPA Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards GRAVITY DRAINAGE DISTRICT No. 3 OF CAMERON PARISH We have audited the basic financial statements of the Gravity Drainage District No. 3 of Cameron Parish, a component unit of the Cameron Parish Police Jury, as of and for the year ended December 31, 2004, and have issued our report thereon dated June 24, We conducted our audit in accordance with auditing standards generally accepted in the United States and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered the Gravity Drainage District No. 3 of Cameron Parish's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide an opinion on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses. 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 the risk that misstatements in amounts that would be material in relation to the 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. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses. 74 PHONE {318) FAX ( NORTH 31" STREET MONROE, LA MAILING ADDRESS: P. O. BOX 4058 MONROE, LA

27 GRAVITY DRAINAGE DISTRICT NO. 3 OF CAMERON PARISH Independent Auditor's Report on Compliance And Internal Control Over Financial Reporting, etc. December 31, 2004 Compliance and Other Matters As part of obtaining reasonable assurance about whether the Gravity Drainage District No. 3 of Cameron Parish's 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 financial amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. This report is intended solely for the information and use of the Gravity Drainage District No. 3 of Cameron Parish, and the Louisiana Legislative Auditor and is not intended to be and should not be used by anyone other than these specified parties. Under Louisiana Revised Statute 24:513, this report is distributed by the Legislative Auditor as a public document. Monroe, Louisiana June 24,

28 GRAVITY DRAINAGE DISTRICT No. 3 OF CAMERON PARISH Schedule 2 Schedule of Findings and Questioned Costs For the Year Ended December 31, 2004 A. SUMMARY OF AUDIT RESULTS 1. The auditors' report expresses an unqualified opinion on the general purpose financial statements of Gravity Drainage District No. 3 of Cameron Parish. 2. No instances of noncompliance material to the financial statements Gravity Drainage District No. 3 of Cameron Parish were disclosed during the audit. 3. No reportable conditions relating to the audit of to the financial statements are reported in the Independent Auditor's Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards. B. FINDINGS - FINANCIAL STATEMENTS AUDIT None 26

29 Schedule 3 GRAVITY DRAINAGE DISTRICT No. 3 OF CAMERON PARISH Summary Schedule of Prior Audit Findings For the Year Ended December 31, 2004 FINDINGS - FINANCIAL STATEMENTS AUDIT There were no audit findings reported in the audit for the year ended December 31,

30 GRAVITY DRAINAGE DISTRICT No. 3 OF CAMERON PARISH Schedule 4 Schedule of Per Diem Paid To Board Members For the Year Ended December 31, 2004 Recipients Amount Scott Henry $540 E.J. Dronet 120 Joe Dupont 660 Edward Racca, Jr. 720 Coy Mudd 360 Mike Johnson 480 TOTAL 28