WATER WORKS BOARD OF THE CITY OF MONROEVILLE, ALABAMA FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2014

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1 FINANCIAL STATEMENTS FOR THE YEAR ENDED

2 CONTENTS PAGE Independent Auditors' Report Statement of Net Position Statement of Revenues, Expenses and Changes in Net Position Statement of Cash Flows Notes to the Financial Statements REQUIRED SUPPLEMENTARY INFORMATION Analysis of Funding Progress - Employee Retirement System 16 COMPLIANCE SECTION 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 17-18

3 Xavier A. Hartmann, III, CPA Rucker T. Taylor, III, CPA J. Earl Blackmon, Jr., CPA B.Vance Kilgore, CPA Sally S. Wagner, CPA Dennis E. Sherrin, CPA Certified Public Accountants & Consultants Hartmann, Blackmon & Kilgore, P.C Sowell Street P.O. Box 1379 Brewton, Alabama Phone: Fax: Water Works Board of the City of Monroeville, Alabama Monroeville, Alabama INDEPENDENT AUDITORS' REPORT Report on the Financial Statements We have audited the accompanying financial statements of the Water Works Board of the City of Monroeville, Alabama, a component unit of the City of Monroeville, Alabama, as of and for the year ended September 30, 2014, and the related notes to the financial statements, which collectively comprise the Water Works Board of the City of Monroeville, Alabama's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements The Water Works Board of the City of Monroeville, Alabama' s management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express an op1mon 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 from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity' s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Fairhope I Brewton I Spanish Fort I Foley hbkcpas.com

4 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Water Works Board of the City of Monroeville, Alabama as of September 30, 2014, and the changes in its financial position and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Analysis of Funding Progress - Employee Retirement System on page 15 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Management has omitted management's discussion and analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. Our opinion on the basic financial statements is not affected by this missing information. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated January 12, 2015 on our consideration of the Water Works Board of the City of Monroeville, Alabama'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 internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Water Works Board of the City of Monroeville, Alabama' s internal cont{ol over financial reporting and compliance. January 12, 2015 Brewton, Alabama Certified Public Accountants

5 -3- STATEMENT OF NET POSITION ASSETS Current Assets Cash Temporary cash investments Accounts receivable, net of allowance for doubtful accounts of$46,780 Inventories Total Current Assets Other Assets Restricted funds Capital Assets Water system Machinery and equipment Furniture and fixtures Less accumulated depreciation Land Net Capital Assets TOT AL ASSETS DEFERRED OUTFLOWS OF RESOURCES Defeasance of debt TOTAL DEFERRED OUTFLOWS OF RESOURCES LIABILITIES Current Liabilities Accounts payable Accrued interest payable Accured liabilities Current maturities oflong-term debt: Bond payable Due to City of Monroeville Customer deposits Total Current Liabilities Long-term Liabilities Long-term debt less current maturities: Bond payable Compensated absences Total Long-term Liabilities TOT AL LIABILITIES NET POSITION Net investment in capital assets Restricted Unrestricted TOT AL NET POSITION $ 465, , , ,755 1,769, ,882 11,634, ,998 71,094 12,370,760 6,772, ,384 5,832,332 7,970, , , ,350 60,963 21, ,951 3, , ,238 3,923,214 19,516 3,942,730 4,442,968 1,784, ,882 1,499,788 $ 3,652,837 See independent auditors' report and notes to the financial statements.

6 -4- W ATER WORKS BOARD OF THE STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION FOR THE YEAR ENDED Operating Revenues Charges for services Other operating revenues Total Operating Revenues Operating Expenses Salaries Director fees Vehicle expense Insurance Repairs and maintenance Office expense Professional fees Material and supplies Provision for allowance for doubtful accounts Francise fees Taxes and licenses Postage Utilities Depreciation and amortization Other Total Operating Expenses Operating Income Non-Operating Revenues/(Expenses) Interest income Interest expense Total Non-Operating Revenue/(Expense) Change in Net Position Net Position at Beginning of Year as Previously Stated Prior Period Adjustment - Adoption of GASB 65 Net Position at Beginning of Year as Restated Net Position at End of Year $ 1,619, ,241 1,761, ,091 18,600 23,092 92, ,767 23,629 31,627 91,156 4,198 37,249 32,797 20, , ,534 42,069 1,598, ,938 1,223 (221,619) (220,396) (57,458) 3,752,501 (42,206) 3,710,295 $ 3,652,837 See independent auditors' report and notes to the financial statements.

7 -S- W ATER WORKS OF THE STATEMENT OF CASH FLOWS FOR THE YEAR ENDED Cash Flows from Operating Activities: Receipts from customers $ 1,739,203 Payments to suppliers (668,396) Payments to employees (488,091) Net Cash Provided (Used) by Operating Activities 582,716 Cash Flows from Capital and Related Financing Activities: Principal paid on capital debt (119,212) Interest paid on capital debt (200,398) Purchase of capital assets (56,455) Net Cash Provided (Used) by Capital and Related Financing Activities (376,065) Cash Flows from Investing Activities: Interest received 1,223 Net Cash Provided (Used) by Investing Activities 1,223 Net Increase (Decrease) in Cash 207,874 Cash at Beginning of Year 1,521,277 Cash at End of Year $ 1,729,151 Reconciliation of Operating Income to Net Cash Provided (Used) by Operating Activities: Operating Income $ 162,938 Adjustments to Reconcile Operating Income to Net Cash Provided (Used) by Operating Activities: Depreciation and amortization 372,534 Change in accounts receivable (23,394) Change in inventories (7,672) Change in prepaid expenses 82,460 Change in customer deposits 1,256 Change in due to City of Monroeville 71 Change in accounts payable and accrued liabilities (5,477) Net Cash Provided (Used) by Operating Activities $ 582,716 See independent auditors' report and notes to the financial statements.

8 - 6 - NOTES TO THE FINANCIAL STATEMENTS NOTEl SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations Water Works Board of the City of Monroeville, Alabama (the Board) provides water to residents of Monroeville, Alabama. Basis of Accounting On October 1, 2012, the Board adopted the prov1s10ns of Governmental Accounting Standards Board (GASB) Statement 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. GASB Statement 62 incorporates into the GASB's authoritative literature certain accounting and financial reporting guidance that is included in the following pronouncements issued on or before November 30, 1989, which does not conflict with or contradict GASB pronouncements: Financial Accounting Standards Board (F ASB) Statements and Interpretations, Accounting Principles Board Opinions and Accounting Research Bulletins of the American Institute of Certified Public Accountants (AICP A) Committee on Accounting Procedure. The adoption of GASB Statement 62 did not have any impact on the Board's financial statements. On October 1, 2012, the Board implemented GASB Statement 63, Financial Reporting of Deferred Out.flows of Resources, Deferred Inflows of Resources, and Net Position. GASB Statement 63 provides financial reporting guidance for deferred outflows of resources and deferred inflows of resources. The statement of net assets is renamed the Statement of Net Position and includes four components: assets deferred outflows of resources, liabilities and deferred inflows of resources. Additionally, GASB Statement 63 supersedes certain prov1s1ons of GASB Statement 34, Basic Financial Statements-and Management's Discussion and Analysis- for State and Local Governments. GASB Statement 63 requires the classification of net position (formerly net assets in GASB Statement 34) into three components: net investment in capital assets; restricted; and unrestricted. These classifications are defined as follows: Net investment in capital assets - This component of net position consists of capital assets, including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. Deferred outflows of resources and deferred inflows of resources that are

9 - 7 - NOTES TO THE FINANCIAL STATEMENTS NOTEl SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) attributable to the acquisition, construction, or improvement of those assets or related debt also should be included in this component of net position. If there are significant unspent related debt proceeds or deferred inflows of resources at year-end, the portion of the debt or deferred inflows of resources attributable to the unspent proceeds are not included in the calculation of invested in capital assets, net of related debt. Rather, that portion of the debt is included in the same net assets component as the unspent proceeds. Restricted - This component of net position consists of restricted assets reduced by liabilities and deferred inflows of resources related to those assets. Unrestricted - This component of net position consists of the net amounts of the assets, deferred outflows of resources, liabilities, and deferred inflows of resources that are not included in the determination of net investment in capital assets or the restricted component of net position. The Board is governed by its own Board of Directors and prepares and adopts an annual operating budget, which is not influenced by the City of Monroeville. The Board has the authority to issue debt securities which are not obligations of the City of Monroeville and most are not secured by City of Monroeville revenues. The Board has responsibility for operating deficits which may occur and must fund such deficits with prior year surplus or other financing sources. For the year ended September 30, 2014, the Board, for financial reporting purposes, is considered a component unit of the City of Monroeville, Alabama, (the City) due to the City appointing members of the governing body of the Board. In March 2012, the GASB issued Statement 65, Items Previously Reported as Assets and Liabilities. GASB Statement 65 requires certain items that are currently reported as assets and liabilities to be reclassified as deferred outflows ofresources, deferred inflows of resources or current-period outflows (expenses) and inflows (revenues). These determinations are based on the definitions of those elements in Concepts Statement No. 4, Elements of Financial Statements. This statement is effective for periods beginning after December 15, 2012, although the Board elected to early implement Statement 65 in fiscal year 2013.

10 - 8 - NOTES TO THE FINANCIAL STATEMENTS NOTEl SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) In June 2012, the GASB issued statement 67, Financial Reporting for Pension Plans- an amendment of GASE Statement No.25. Effective for fiscal year 2014, GASB Statement 67 will require Pension Plans to present information differently than they have previously. Upon implementation, the Board's note disclosures will be presented in accordance with the updated presentation required of Pension Plans. GASB Statement 67 is effective for periods beginning after June 15, Management is currently evaluating the impact of the adoption of this statement on the Board's 2014 financial statements. In June 2012, the GASB issued Statement 68, Accounting and financial Reporting for Pensions- an amendment of GASE Statement 27. GASB Statement 68 requires a net pension liability to be recognized, to the extent unfunded, on the Statement of Net Position. Previously, no such liability was recognized. GASB Statement 68 is effective for periods beginning after June 15, The Board estimates that upon implementation of GASB Statement 68, a liability will be shown on the Statement of Net Position as well as a reduction in unassigned net position equal to the unfunded accrued actuarial liability. At September 30, 2013, the unfunded accrued actuarial liability is $996, 185 as shown in Note 6 to the financial statements. Capital Assets Capital asset items are carried at cost. Depreciation is charged to income over the estimated lives of the assets using the straight-line method. Estimated depreciable lives are as follows: Water system Building and improvements Machinery and Equipment Vehicles 40 years years 5 years 5 years Cash Equivalents For purposes of the statement of cash flows, cash equivalents include certificates of deposit and all highly liquid debt instruments with original maturities of three months or less. Income Taxes As a governmental entity, the Board is exempt from Federal income taxes.

11 - 9 - NOTES TO THE FINANCIAL STATEMENTS NOTEl SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Inventory Inventory consists of water system materials and is valued at the lower of cost (average cost method) or market. Estimates The process of preparing financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues, and expenses. Such estimates relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from estimated amounts. Subsequent Events The Board has evaluated subsequent events through January 12, 2015, the date which the financial statements were available to be issued. There were no material subsequent events which require disclosure at September 30, NOTE2 DEPOSITS AND INVESTMENT RISK The Board has not adopted a written policy for deposits or investing surplus funds; therefore, the Board follows the deposit and investment policies as required by the Code of Alabama 1975, Section 41-14A-3 and Section However, the Board must comply with bond covenants that do not allow investments in commercial paper and corporate bonds and limit the use of repurchase agreements. As such, investments consist solely of certificates of deposit and are stated at cost, which approximates fair value. Investment Risk - The Board does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. Credit Risk - State statutes authorize the Board's investments. The Board is authorized to invest in U. S. Government obligations and its agencies or instrumentalities, direct obligations of the state, SEC registered mutual funds holding like securities. The Board has no investment policy that further limits investment choices. As of September 30, 2014, the Board's mutual fund investment were rated AAAm by Standard & Poor' s.

12 -10- NOTES TO THE FINANCIAL STATEMENTS NOTE2 DEPOSITS AND INVESTMENT RISK (Continued) Custodial Credit Risk - The Board is a participant in the Security for Alabama Funds Enhancement (SAFE) Program, multiple financial institution collateral pool, administered by the State of Alabama. The program, by law, provides administration of pledge collateral coverage for all governments and agencies in the state and requires qualified financial institutions to provide collateral to the administrator adequate to secure all deposits of public funds in that financial institution. The State guarantees deposits identified as "public funds" will be adequately secured by insurance or collateral. Any collateral shortages of one financial institution are assessed to other member financial institutions. NOTE3 CONCENTRATIONS The Board's primary source of income is water revenue from its customers. The Board grants credit, on an unsecured basis, to its customers for services rendered. Customers are located in the City of Monroeville and surrounding area. NOTE4 CAPITAL ASSETS Changes in capital assets during the fiscal year were as follows: Balance Balance 10/1/2013 Increases Decreases 9/30/2014 Capital assets not being depreciated Land $ 234,384 $ $ - $ 234,384 Total capital assets not being depreciated 234, ,384 Capital assets being depreciated Water system 11,585,245 49,423 11,634,668 Machinery and equipment 657,967 7, ,998 Furniture and fixtures 71,094 71,094 Total capital assets being depreciated 12,314,306 56,454 12,370,760 Less accumulated depreciation 6,400, ,534 6,772,812 Net capital assets being depreciated 5,914,028 (316,080) 5,597,948 Capital assets, net $ 6,148,412 $ (316,080) $ $ 5,832,332

13 NOTES TO THE FINANCIAL STATEMENTS NOTES LONG-TERM DEBT The following is a summary of changes in long-term debt for the year ended September 30, 2014: Beginning Balance Additions Reductions Ending Balance Due Within One Year 2008 Revenue Bonds 2012 Subordinate Revenue Bond Total Long-term Debt $ 3,940,000 $ 342,086 $ 4,282,086 $ ==== $ 90,000 $ 3,850,000 $ 90,000 33, ,224 34,95 1 $ 123,862 $ 4,158,224 $ 124,951 Long-term debt consists of the following: 2008 water revenue bonds payable in annual installments of $75,000 to $260,000 with interest at 3.5% to 5% payable June 1 and December subordinate water revenue bond due in Monthly installments of $3,594, including interest at 2.8% Face amount of bonds Less unamortized discount Total debt Less current portion Total Long-Term Debt $3,850, ,224 4,158, ,059 4,048, ,951 $

14 -12- NOTES TO THE FINANCIAL STATEMENTS NOTES LONG TERM DEBT (Continued) Maturities oflong term debt for each of the next five years are as follows : Year Ending September 30, Principal Interest Total 2015 $ 124,951 $ 190,977 $ 315, , , , , , , , , , , , , , ,404 1,510, , ,841 1,376, , ,000 1,370, , ,750 1,099,750 $ 4,158,224 $ 2,789,736 $ 6,947,960 The bond agreement relating to the Water Revenue Bonds, Series 2008 contains covenants pertaining to a bond and interest fund. The Board is required to deposit monthly in the bond fund one-sixth of the next succeeding interest payment and one-twelfth of the next succeeding principal payment. The Board is in compliance with all such significant financial limitations and restrictions relating to the Series 2008 bonds. NOTE6 RETIREMENT PLAN Plan Description The Board's defined benefit pension plan provides retirement and disability benefits, cost-of-living adjustments, and death benefits to plan members and beneficiaries. The plan is affiliated with the Employees Retirement System of Alabama (RSA), a cost sharing multiple-employer pension plan. The State of Alabama has the authority to establish and amend the benefit provisions of the plans that participate. RSA issues a publicly available financial report that includes financial statements and required supplementary information of the plan. The report may be obtained by contacting the Retirement Systems of Alabama, P.O. Box , Montgomery, Alabama

15 -13 - NOTES TO THE FINANCIAL STATEMENTS NOTE6 RETIREMENT PLAN (Continued) Funding Policy During 2012, two "Tiers" of covered employees were created. Employees hired prior to January 1, 2013 (Tier 1 employees) must contribute 5% of their covered salary. Employees hired on after that date (Tier 2 employees) must contribute 6% of their covered salary. The Town is required to contribute at an actuarially determined rate. At September 30, 2014, the rate is 18.71% for Tier 1 and % for Tier 2 employees. A Tier 1 employee may retire after 25 years of credited service and receive pension benefits equal to % of the employee's average final salary multiplied times years of credited service. A Tier 2 employee may retire after age 62 and ten years of service years and with benefits equal to 1.65% of the employee's average final salary multiplied times years of credited service. Average final salary for both Tier 1 and Tier 2 employees is defined as the average of the three highest year' s salary out of the last ten years of service. The pension plan also provides death benefits and disability benefits as determined by state statutes. Annual Pension Cost For the year ended September 30, 2014, the Board' s annual pension cost of $76,668 was equal to the Board' s required and actual contributions. The required contribution was determined as part of the September 30, 2013, actuarial valuation using the entry age actuarial cost method. The actuarial assumptions included: (a) 8% investment rate of return (net of administrative expenses), (b) projected salary increases ranging from 3.75% to 7.25% per year. Both (a) and (b) included an inflation component of 3.00%. The actuarial value of plan assets was determined using techniques that smooth the effects of short-term volatility in the market value of investments over a five-year period. The plan's unfunded actuarial accrued liability is being amortized as a level percentage of projected payroll on a closed basis. The remaining amortization period at September 30, 2014, was 30 years.

16 NOTES TO THE FINANCIAL STATEMENTS NOTE6 RETIREMENT PLAN (Continued) Trend Information Fiscal Annual Percentage Net Year Pension ofapc Pension Funding Cost (APC) Contributed Obligation 9/30/ , % 9/30/ , % 9/30/ , % NOTE7 COMPENSATED ABSENCES The liability for compensated absences consists of unpaid, accumulated annual and sick leave balances. The liability has been calculated using the vesting method, in which leave amounts for both employees who currently are eligible to receive termination payments and other employees who are expected to become eligible in the future to receive such payments upon termination are included. NOTES RESTATEMENT In accordance with GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, GASB concluded that most debt issuance costs do not meet the definition of an asset, because the costs incurred do not result in service capacity that the Board presently controls. GASB also concluded that debt issuance costs do not meet the definition of a deferred outflow of resources because the costs are not applicable to a future period. As a result, the GASB concluded that these costs should be recognized as an outflow of resources (expense) in the reporting period in which they are incurred. Debt issuance costs incurred in previous years have been restated to reflect current treatment of debt issuance costs. Accordingly, debt issuance costs incurred prior to 2014 has been restated through a priorperiod adjustment to adjust the beginning unrestricted net position to account for implementation of this accounting standard. The effect is shown in the table below. Beginning Unrestricted Net Position has been restated in the amount of $42,206 for debt issuance costs. The total restatement of beginning net position as shown below reflects the total of both changes.

17 NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30; 2014 NOTES RESTATEMENT (Continued) 2008 unamortized debt issue costs Unrestricted net position Net Position Previously Reported $ 42,206 3,752,501 Restatement I Adjustment Beginning Net Position Restated $ (42,206) $ (42,206) 3,710,295

18 REQUIRED SUPPLEMENTARY INFORMATION

19 16 REQUIRED SUPPLEMENTARY INFORMATION ANALYSIS OF FUNDJNG PROGRESS-EMPLOYEE RETIREMENT SYSTEM Actuarial Actuarial Accrued Unfunded Actuarial Value of Liability (AAL) AAL Funded Covered Valuation Assets* Entry Age (UAAL) Ratio Payroll Date (a) (b)i (b - a) (a I b) (c) 9/30/2008 1,173,442 1,514, , % 374, ,135,024 1,687, , % 330,157 9/30/ ,077,250 1,798, , % 344,074 9/30/ ,003,376 1,839, , % 340, ,633 1,835, , % 358,458 9/30/ ,981 1,977, , % 387, ' 6 983,98 1 1,980, , % 387,038 UAAL as a Percentage of Covered Payroll ((b - a) I c) 91.0% 167.3% 209.7% 245.8% 250.4% 256.7% 257.4% 'Reflects liability for cost of living benefit increases granted on or after October 1, Reflects the impact of Act , which closes the DROP program to new applicants after March 24, Reflects the impact of Act , which increases the contribution rate by 2.25% beginning. October I, and by an additional 0.25% beginning October 1, Reflects changes in actuarial assumptions. 5 Reflects changes in interest smoothing methodology. 6 Reflects implementation of Board Funging Policy. *The actuarial value of assets was set equal to the market value of assets as of September 30, Market Value of Assets as of September 30, 2013: $1,03 I, 720

20 COMPLIANCE SECTION

21 Xavier A. Hartmann, Ill, CPA Rucker T. Taylor, III, CPA J. Earl Blackmon, Jr., CPA B.Vance Kilgore, CPA Sally S. Wagner, CPA Dennis E. Sherrin, CPA Certified Public Accountants & Consultants Hartmann, Blackmon & Kilgore, P.C. 311 Sowell Street P.O. Box 1379 Brewton, Alabama Phone: Fax: 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 STANDAR.DS Water Works Board of the City of Monroeville, Alabama Monroeville, Alabama We have audited, 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, the financial statements of the Water Works Board of the City of Monroeville, Alabama as of and for the year ended September 30, 2014, and the related notes to the financial statements, which collectively comprise Water Works Board of the City of Monroeville, Alabama's financial statements, and have issued our report thereon dated January 12, Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered Water Works Board of the City of Monroeville, Alabama's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Water Works Board of the City of Monroeville, Alabama's internal control. Accordingly, we do not express an opinion on the effectiveness of Water Works Board of the City of Monroeville, Alabama's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be material weaknesses or significant deficiencies and therefore, material Fairhope I Brewton I Spanish Fort I Foley hbkcpas.com

22 weaknesses or significant deficiencies may exist that were not identified. Given these limitations, during our audit we did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. We did identify a certain deficiency in internal control over financial reporting that we consider to be a significant deficiency and communicated it in writing to management and those charged with governance on January 12, Compliance and Other Matters As part of obtaining reasonable assurance about whether Water Works Board of the City of Monroeville, Alabama's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. January 12, 2015 Brewton, Alabama