City of Cocoa Beach, Florida. Comprehensive Annual Financial Report Fiscal Year Ended September 30, 2012

Transcription

1 Comprehensive Annual Financial Report Fiscal Year Ended September 30, 2012

2 COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended September 30, 2012 Prepared by: Finance Department February, 2013

3 INTRODUCTORY SECTION Table of Contents Letter of Transmittal City Officials & Management Staff City Organization Chart Certificate of Achievement i

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5 Comprehensive Annual Financial Report Table of Contents For the Year Ended September 30, 2012 Page INTRODUCTORY SECTION Table of Contents Letter of Transmittal City Officials & Management Staff City Organization Chart Certificate of Achievement iii vii xiv xv xvi FINANCIAL SECTION Independent Auditor s Report 3 Management s Discussion and Analysis 5 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Assets 19 Statement of Activities 20 Fund Financial Statements: Balance Sheet - Governmental Funds 22 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds 23 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 24 Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - General Fund 26 Statement of Net Assets - Proprietary Funds 28 Statement of Revenues, Expenses, and Changes in Fund Net Assets - Proprietary Funds 31 Statement of Cash Flows - Proprietary Funds 32 Statement of Fiduciary Net Assets - Fiduciary Funds 34 Statement of Changes in Fiduciary Net Assets - Fiduciary Funds 35 Notes to Financial Statements 37 Required Supplementary Information (RSI): Schedule of Funding Progress (Pension Plans) 80 Schedule of Employer Contributions (Pension Plans) 81 Narrative Summary (Pension Plans) 82 Narrative Summary (OPEB Obligation) 83 Schedule of Funding Progress (OPEB Obligation) 83 Schedule of Employer Contributions (OPEB Obligation) 84 iii

6 Comprehensive Annual Financial Report Table of Contents For the Year Ended September 30, 2012 Page Other Supplemental Information: Combining Balance Sheet - Non-major Governmental Funds 86 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Non-major Governmental Funds 87 Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Metered Parking Special Revenue Fund 88 Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Confiscated Property Special Revenue Fund 89 STATISTICAL SECTION (Unaudited) Table of Contents & Additional Notes 91 Financial Trends: Net Assets by Component 93 Changes in Net Assets 94 Fund Balances - Governmental Funds 96 Changes in Fund Balances - Governmental Funds 97 Revenue Capacity: Value of Taxable Property 98 Direct and Overlapping Property Tax Rates 99 Principal Property Taxpayers 100 Property Tax Levies and Collections 101 Debt Capacity: Ratios of Outstanding Debt by Type 102 Direct and Overlapping Governmental Activities Debt 103 Pledged Revenue Coverage 105 Demographic and Economic Information Financial Trends Demographic and Economic Statistics 106 Principal Employers 107 Operating Information Full-time Equivalent City Government Employees by Function/Program 108 Operating Indicators by Function/Program 109 Capital Asset Statistics by Function/Program 110 iv

7 Comprehensive Annual Financial Report Table of Contents For the Year Ended September 30, 2012 Page COMPLIANCE SECTION Independent Auditor s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 113 Independent Auditor s Report on Compliance with Requirements Applicable to Each Major State Project and on internal Control Over Compliance in Accordance with Chapter , Rules of the Auditor General 115 Schedule of State Financial Assistance 117 Schedule of Findings and Questioned Costs 118 Independent Auditor s Management Letter 121 Response to Independent Auditor s Management Letter 123 v

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21 INDEPENDENT AUDITOR S REPORT The Honorable Mayor and Members of the City Commission We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Cocoa Beach, Florida (the City ), as of and for the year ended September 30, 2012, which collectively comprise the City s basic financial statements, as listed in the table of contents. These financial statements are the responsibility of the City 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 opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, business-type activities, each major fund, and the aggregate remaining fund information of the City as of September 30, 2012, and the respective changes in financial position, and, where applicable, cash flows, thereof and the budgetary comparison for the general fund 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 February 26, 2013, on our consideration of the City 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 conjunction with this report in considering the results of our audit. 3

22 The Honorable Mayor and Members of the City Commission INDEPENDENT AUDITOR S REPORT (Concluded) Accounting principles generally accepted in the United States of America require that the management s discussion and analysis and the required supplementary information, as listed in the table of contents, 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. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City s basic financial statements. The introductory section, the other supplemental information section, and the statistical section, listed in the table of contents, are presented for additional analysis and are not a required part of the financial statements. The other supplemental information section is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The other supplemental information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole. The introductory section and statistical section have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. MOORE STEPHENS LOVELACE, P.A. Certified Public Accountants Orlando, Florida February 26,

23 Management s Discussion and Analysis Management s discussion and analysis is designed to (a) assist the reader in focusing on significant financial issues, (b) provide an overview of the City s financial activity, (c) identify changes in the City s financial position, (d) identify any material deviations from the financial plan, and (e) identify individual fund issues or concerns. Readers are encouraged to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal in the Introductory Section of the report. FINANCIAL HIGHLIGHTS The assets of the City of Cocoa Beach exceeded its liabilities as of September 30, 2012 by $ 61,737,432 (net assets). Of this amount, $ 11,076,430 (unrestricted net assets) may be used to meet the City s ongoing obligations to citizens and creditors. The City s total net assets were increased by $ 360,938 over the FY 2011 ending balance of $ 61,376,494. A slight decrease in net assets for governmental activities ($ 206,585) was offset by an increase in business-type activities of $ 567,523. At September 30, 2012, the City of Cocoa Beach s governmental fund balance sheet reported a combined ending fund balances of $ 11,626,500, an increase of $ 496,920 from the FY 2011 ending fund balance of $ 11,129,580. Of this amount, $ 6,116,168 remains in the General Fund of the City as unassigned fund balance. The General Fund reported a total fund balance of $ 10,331,054 at year end, an increase from last fiscal year of $ 438,910. The ending fund balance in FY 2011 was $ 9,892,144. Total external debt increased by $ 9,702,618 in fiscal year MAJOR INITIATIVES Recommendations to make streetscape improvements in the downtown area are under consideration. The voters authorized the establishment of a Community Redevelopment Agency (CRA) for downtown on January 29, Formal budgets were approved in FY 2012 and FY Tax increment financing should be in the FY 2014 budget. A multi-year dredging project for the 200 Channel with a projected cost in excess of one million ($ 1,000,000) dollars was approved by the Florida Inland Navigation District (FIND) in late FY The initial phase, spoil site permitting and preparation, is complete. In FY 2014 we expect to begin spoil site construction. The actual dredging is scheduled for the FY 2015 FY 2017 period. Virtually all project costs are eligible for grant funding by FIND and those grants are expected to reimburse fifty (50%) percent of the project costs. 5

24 Improvements are underway to enhance a five (5) acre property acquired in 2001 for conservation purposes. The design includes a one (1) acre alum-enhanced pond and will also include a nature trail and passive recreation features. The pond is complete and the site plan review for the other features is also complete. The project is now scheduled for completion in FY 2014, pending notice of receipt of grant funding. This facility will assist in handling stormwater runoff in the area and from State Road A1A. Funding includes reimbursable grants from the Florida Department of Environmental Protection (FDEP), St. Johns River Water Management District (SJRWMD) and the Florida Department of Transportation (FDOT). The wastewater facility plan is a multi-year project with an estimated cost of about eighteen million ($ 18,000,000) dollars. Currently, one processing plant has been completed and upgrades to the second plant are underway and on schedule. We expect to finish this portion of the project by September The Aquifer Supply Well (ASR) portion of the project is also on schedule. The test well is on schedule, with positive test results to date. See Note H to the financial statements for additional details. Overview of the financial statements. This discussion and analysis is intended to serve as an introduction to the City of Cocoa Beach s basic financial statements. The basic financial statements are comprised of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the City s finances in a manner similar to a private-sector business. The statement of net assets presents information on all of the City s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The statement of activities presents information showing how the government s net assets changed during the most recent fiscal year. All changes in net assets are 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 result in cash flows in future fiscal periods (e.g. uncollected taxes and earned but unused vacation leave). Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges to external users (business-type activities). The governmental activities of the City include general government, planning and zoning, public safety, transportation, sanitation, street and park maintenance, public improvements and recreation. The business-type activities of the City include a golf course, wastewater treatment/reuse and stormwater management. The government-wide financial statements include only the City of Cocoa Beach itself (the primary government). The Cocoa Beach Public Library is funded through the Brevard County Free Public Library District, a separate taxing authority and is not included under the reporting entity definition in the City s financial statements. 6

25 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 City of Cocoa Beach, 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 City of Cocoa Beach can be divided into three categories: governmental funds, proprietary funds, and fiduciary 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. 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 government-wide 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 the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. During FY 2012, the City of Cocoa Beach maintained three (3) individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the General Fund which is a major fund. Since the Metered Parking Fund and Confiscated Property Fund are not considered to be major funds, data from those funds are combined into a single, aggregated presentation. The City of Cocoa Beach adopts an annual appropriated budget for its governmental funds. A budgetary comparison statement has been provided for the General Fund to demonstrate compliance with this budget. Proprietary funds. This category of funds includes both enterprise and internal service funds. However, the City does not use internal service funds. The City does maintain three (3) funds which are considered enterprise funds. The City uses enterprise funds to account for its golf course, waste collection/disposal/reuse water system, and stormwater management system. Proprietary funds provide the same type of information as the government-wide financial statements. The proprietary fund financial statements provide separate information for the Golf Course Fund, Utilities System Fund, and Stormwater Management Fund, each of which are considered to be major funds of the City. 7

26 Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statement because the resources of those funds are not available to support the City s programs. The City has three (3) pension trust funds (General Employees, Police, & Firefighters), and an OPEB trust fund. Financial information for these funds is provided in the notes to the financial statements. 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. GOVERNMENT-WIDE FINANCIAL ANALYSIS The government-wide financial report represents the approach mandated by the Governmental Accounting Standards Board (GASB). GASB sets the uniform standards for presenting government financial reports. As noted earlier, net assets may serve over time as a useful indicator of a government s financial position. In the case of the City of Cocoa Beach, net assets were $ 61,737,432 at the close of the most recent fiscal year. This is a $ 360,938 increase in net assets over the $ 61,376,494 reported in FY MILLIONS OF DOLLARS Total Business-type Governmental FY 2012 FY

27 The City s net assets totaled $ 61,737,432 at the end of FY The largest portion of the City s net assets reflects the investment in capital assets (e.g. land, buildings, machinery, and equipment). Although the City s investment in its capital assets ($ 50,358,112) (82% of total net assets) is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Governmental Activities Schedule of Net Assets Business-type Activities Current and other assets $ 12,691,125 $ 12,007,096 $ 3,797,309 $ 3,499,863 $ 16,488,434 $ 15,506,959 Capital assets 18,446,764 19,068,421 45,494,817 34,686,664 63,941,581 53,755,085 Total assets 31,137,889 31,075,517 49,292,126 38,186,527 80,430,015 69,262,044 Long-term liabilities outstanding 1,831,446 1,842,132 13,676,584 3,800,887 15,508,030 5,643,019 Other liabilities 1,855,532 1,575,889 1,329, ,642 3,184,553 2,242,531 Total liabilities 3,686,978 3,418,021 15,005,605 4,467,529 18,692,583 7,885,550 Total Invested in capital assets, net of related debt 18,261,764 18,708,421 32,096,348 31,165,812 50,358,112 49,874,233 Restricted 204, ,435 98, , , ,061 Unrestricted 8,984,450 8,743,640 2,091,980 2,447,560 11,076,430 11,191,200 Total net assets $ 27,450,911 $ 27,657,496 $ 34,286,521 $ 33,718,998 $ 61,737,432 $ 61,376,494 An additional portion of the City of Cocoa Beach s net assets, $ 302,890 (less than one percent) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets ($ 11,076,430) (18%) may be used to meet the government s ongoing obligations to citizens and creditors within the respective governmental and business-type activities. At the end of the current fiscal year, the City of Cocoa Beach is able to report positive balances in all three (3) categories of net assets as a whole and individually within the governmental and business type activities. The principal reason(s) for the changes in net asset balances are the completion of several capital projects and the continuing sewer plant upgrade project. This was offset by a corresponding increase in external debt required to fund the sewer plant project and associated capital asset retirements resulting in a small overall increase. The following display of Changes in Net Assets shows the governmental and business-type activities during the fiscal year. 9

28 Revenues: Programs revenues: Charges for services $ 5,649,537 $ 6,166,035 $ 8,952,024 $ 8,220,515 $ 14,601,561 $ 14,386,550 Grants and contributions 547,108 1,026,314 73, , ,499 1,661,335 General revenues: Property taxes 6,348,123 6,327, ,348,123 6,327,375 Other taxes 3,708,871 3,651, ,708,871 3,651,328 Intergovernmental 645, , , ,612 Investment earnings 96, ,315 66,561 79, , ,629 Other 112, , , ,322 Total revenues 17,108,824 18,129,301 9,091,976 8,934,850 26,200,800 27,064,151 Expenses: Schedule of Changes in Net Assets Governmental Activities Business-type Activities General government 2,788,002 3,357, ,788,002 3,357,724 Public safety 8,906,595 8,895, ,906,595 8,895,179 Physical environment 1,448,782 1,463, ,448,782 1,463,330 Transportation/public works 3,450,828 3,135, ,450,828 3,135,193 Recreation 1,202,669 1,008, ,202,669 1,008,353 Interest on long-term debt 9,587 15, ,587 15,697 Utilities System - - 4,846,321 4,682,920 4,846,321 4,682,920 Golf Course - - 2,704,671 2,821,748 2,704,671 2,821,748 Stormwater Management , , , ,821 Total expenses 17,806,463 17,875,476 8,033,399 8,015,489 25,839,862 25,890,965 Change in net assets before transfers (697,639) 253,825 1,058, , ,938 1,173,186 Transfers 491, ,054 (491,054) (491,054) - - Increase in net assets (206,585) 744, , , ,938 1,173,186 Net assets, beginning 27,657,496 26,912,617 33,718,998 33,290,691 61,376,494 60,203,308 Total Net assets, ending $ 27,450,911 $ 27,657,496 $ 34,286,521 $ 33,718,998 $ 61,737,432 $ 61,376,494 10

29 FINANCIAL ANALYSIS OF COCOA BEACH S FUNDS As noted earlier, the City of Cocoa Beach uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds. The City uses two governmental fund types (General & Special Revenue). The purpose of governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government s net resources available for spending at the end of the fiscal year. As of September 30, 2012, the City of Cocoa Beach s governmental funds reported a combined fund balance of $ 11,626,500, which is an increase of $ 496,920 from the prior year balance of $ 11,129, % General Fund Fund Balance as Percent of Expenditures The General Fund is the chief operating fund of the City. As of September 30, 2012, total fund balance in the General Fund was $ 10,331,054 of which $ 6,116,168 was unassigned. As a measure of liquidity, a comparison of total and unassigned fund balances to total expenditures for FY 2012 ($ 16,766,583) & FY 2011 ($ 18,235,599) shows percentages of 36.5% and 31.2%, respectively for unassigned fund balance % 60.00% 40.00% 20.00% 0.00% Total Fund Balance Total Fund Balance Unassigned Fund Balance Unassigned Fund Balance % 54.2% 36.5% 31.2% The increase in fund balance referenced above is due primarily to the completion of the Ocean Beach Blvd. project and receipt of all grant funds associated with this project. General Fund Budgetary Highlights. A budget to actual statement is provided for the General Fund. A budget column for both the original budget adopted for fiscal year 2012 as well as the final budget is presented. A comparison of the original budget to the final budget for current expenditures shows a final difference of $ 2,261,568. The major portion of the difference is attributed to the carry over and re-appropriation of incomplete FY 2011 capital projects ($ 1,083,606) to FY

30 Special Revenue Funds. Special Revenue Funds account for specific revenues and expenditures. The entire fund balance of the Metered Parking Fund is considered committed fund balance and it increased $ 74,948 from the prior year. The primary reason for the increase is the deferral of certain equipment replacements, partly offset by an increase in transferred funds. Committed fund balances are budgeted to replace and upgrade the parking meters, replace dune crossovers, replace police vehicles and the Maritime Hammock Preserve loan payment. See Note F to the financial statements for a detailed discussion of these transfers. The entire fund balance of the Confiscated Property Fund is considered restricted fund balance because it can only be used for special purchases for law enforcement purposes. It decreased by $ 16,938 to $ 188,497 for FY A Segway vehicle and associated equipment was purchased. Proprietary funds. The City currently uses one of the two (Enterprise & Internal Service) types of proprietary funds, and provides the same type of information found in the governmentwide financial statements, but in more detail. Enterprise Funds. At September 30, 2012, total net assets amounted to $ 34,286,521 for enterprise funds as compared to $33,718,998 at September 30, Net asset changes are a result of operations, investment earnings, capital contributions and transfers in the Golf Course, Utilities System and Stormwater Management Funds. The net operating income (loss) for all of the enterprise funds for fiscal years 2012 and 2011 is as follows: Enterprise Funds Net Operating Income (Loss) FY 2012 FY 2011 Utilities System $ 1,437,498 $ 971,040 Golf Course (416,256) (643,481) Stormwater Management 232, ,348 Total $ 1,253,423 $ 439,907 The operating income in the Utilities System was $466,458 greater than FY 2011 primarily due to a midyear rate increase. A reduction in electrical costs accounted for the remainder of the increase. These cost reductions are attributed to a continuing decline (i.e. lower fuel adjustment charges) in rates and the installation of some energy efficient technology in the plant. The operating loss of the Golf Course decreased $ 227,225 in FY The re-greening project is complete. Play has still not returned to historical levels, but the number of rounds played is rising slowly as the economic recovery continues. However, the Golf Course rate structure must be addressed to provide adequate revenues. The current system of tying rates to CPI increases is not adequate to cover increasing operating costs. The staff will be bringing forward some specific measures to address the situation. The Stormwater Management operating income increase of $ 119,833 results from a reduction in operating expenditures due to the concentration on the Total Maximum Daily Load (TMDL) project as well as increased analysis work, specifically the identification of unbilled and underbilled accounts. 12

31 CAPITAL ASSET ADMINISTRATION Capital assets. The City of Cocoa Beach s investment in capital assets as of September 30, 2012 is $ 63,941,581 (net of accumulated depreciation). This investment in capital assets includes land, buildings, improvements, equipment, infrastructure and work in progress. Governmental activities net investment in capital assets decreased by $ 621,657 and businesstype activities increased by $ 10,808,153. Major capital assets transactions during the current fiscal year included the following: Schedule of Capital Assets (Net) Governmental Activities Business-type Activities Total Land $ 6,697,356 $ 6,697,356 $ 2,944,894 $ 2,944,894 $ 9,642,250 $ 9,642,250 Buildings 3,467,291 3,552,536 3,905,529 4,013,370 7,372,820 7,565,906 Improvements 5,837,995 4,189,143 4,871,895 1,674,091 10,709,890 5,863,234 Equipment 1,372,000 2,001, , ,430 1,825,147 2,506,083 Infrastructure 729, ,735 24,081,987 23,546,166 24,811,360 24,292,901 Work in progress 342,749 1,880,998 9,237,365 2,003,713 9,580,114 3,884,711 Total $ 18,446,764 $ 19,068,421 $ 45,494,817 $ 34,686,664 $ 63,941,581 $ 53,755,085 Major changes in governmental activities included the completion of the Ocean Beach Blvd., 400 Channel, and the Orlando Avenue projects to account for the reduction in work in progress. The retirement of some governmental assets resulted from a comprehensive review of our asset records associated with the plant upgrade project. The major acquisitions for the business-type activities in both the improvements and work in progress categories are the plant upgrade project. A detailed discussion of this project is in Note H to the financial statements. The City annually updates a five (5) year Capital Improvements Program (CIP) and forecasts the funding requirements for necessary equipment and facilities. These requirements, as well as projected costs of operations and maintenance, are compared and adjusted based on forecasted sources of funding over that timeframe. Additional information on the City s capital assets can be found in Note G to the financial statements. DEBT ADMINISTRATION Long-term Debt. At the end of the current fiscal year, the City of Cocoa Beach had total longterm debt of $ 13,583,470. The City is participating in the State of Florida Revolving Loan Program with two (2) twenty (20) year loans. The initial loan (in FY 2004) was for the construction of the utilities lab and administration facilities located in the Public Works Complex and has an outstanding balance of $ 3,273,103. A second loan for the current utilities facility upgrades has an outstanding balance of $ 10,125,367 to date. See Note H to the financial statements for additional information. During the 2003 fiscal year, the City obtained a ten (10) year bank note secured by a covenant to budget and appropriate non-ad valorem funds for the purpose of purchasing property for preservation. The principal outstanding on the bank note at the end of the current fiscal year was $ 185,000. This note retires in FY

32 Schedule of Outstanding Debt Governmental Activities Business-type Activities State Revolving Loans ( # 1) $ - $ - $ 3,273,103 $ 3,520,852 $ 3,273,103 $ 3,520,852 State Revolving Loans ( # 2) ,125,367-10,125,367 - Revenue Note (Bank Loan) 185, , , ,000 Total $ 185,000 $ 360,000 $ 13,398,470 $ 3,520,852 $ 13,583,470 $ 3,880,852 Total Total external debt increased by $ 9,702,618 during the 2012 fiscal year. Additional information on the City s long-term debt can be found in Note H to the financial statements. ECONOMIC FACTORS AND NEXT YEAR S BUDGETS AND RATES The City s elected and appointed officials considered many factors when setting the fiscal year 2013 budget, tax rates, and fees to be charged for the business-type activities. In the past few years, the City has obligated significant dollars on street resurfacing, new public works facilities and property purchases. The City has also managed to accumulate an acceptable level of unassigned reserves. Bordering the ocean, the City wishes to hold reserve balances sufficient for those immediate expenditures associated with hurricanes, as well as expenditures required to maintain normal operations. Although a substantial portion of hurricane expenditures are typically reimbursed, this practice is considered necessary to avoid disruptions in operations. Since the City is effectively built-out, new construction is not expected to produce large annual increases in property tax receipts. It is important to the City s future that property tax revenues be maintained or increase from year-to-year because it the largest component of the General Fund s annual revenues. In addition, other revenues are not likely to increase significantly and since some of those sources (e. g. state shared revenues, grants) are beyond the City s control, property taxes were the most promising source of future funding. The Great Recession has reversed this trend. Developing new revenue sources and increasing existing ones are of increasing importance. Although the City is challenged by increased costs for employee benefits (primarily health insurance, workers compensation and pension contributions), it does not face demands to add personnel in order to extend current levels of service into new areas. Staffing levels are now at the levels of a decade ago and we have reached the point at which budget problems cannot be solved by further staff attrition. The five (5) year Capital Improvements Program (CIP) always presumes that operations and capital replacements are expected to be sufficiently funded without having to increase the ad valorem tax rate. We will have a real opportunity to test this presumption in the coming years. The City s Golf Course enterprise fund continues to be challenged to sustain its operations and cover necessary equipment replacements. The high salt content in the area is extremely damaging to the equipment used for maintenance and funding the maintenance expense and replacement costs is an ongoing burden. The City has constructed a garage for equipment storage to aid in mitigating the salt issue and selectively purchases used equipment to lower capital costs. The course has been re-greened with a salt-resistant grass and hopefully play will recover as the economy improves. 14

33 The twenty seven (27) hole golf course is already actively used, particularly in the busy winter season, so strategies to increase play are marginally helpful, not a solution. The improvements and purchasing practices mentioned in the preceding paragraph are also helpful, but do not produce immediate, dramatic results. The City Commission acted during 2005 to increase the rates and build in an automatic increase each year based on the consumer price index (CPI). However, the costs above are not linked to the CPI, so a rate increase above the CPI will be required in the very near (i.e. FY 2013 FY 2014) future. We are also exploring alternate approaches (e.g. corporate sponsorships, structural rate changes) to expand the revenue stream. The Utilities System enterprise fund is in a similar situation. Environmental standards for discharges into the Indian River Lagoon have become stricter. We commissioned a comprehensive study in FY 2008 to address specific capital replacements and upgrades required to meet the new discharge requirements schedule. We enacted a rate increase of twenty-five (25%) over three (3) years (i.e. 6.7% per year) to secure the necessary debt service for capital items, as well as cover increased costs of operations and the new regulatory requirements. See Note H to the financial statements for additional information. Forecasts for the Stormwater Management enterprise fund show that large capital improvements will have to be funded using grants or loans. Revenues are not sufficient to fund both operations and capital projects of any size. In addition to the budgetary challenges facing the Stormwater Fund, federal Clean Water Act legislation concerning the TMDL and National Pollutant Discharge Elimination System (NPDES) programs are unfunded mandates upon local government and require extensive staff resource time and effort. Operating costs continue to rise, so a rate increase will be required in the near future. We estimate a rate increase in FY 2014 or FY Staffing was provided by the Stormwater Fund to operate a canal dredging program, which helped the water quality and improved boat navigation in the City s canal system. A portion of the dredging expense considered to be transportation related was billed to the Metered Parking Fund. We have taken advantage of our expiring permit to suspend the dredging program, pending a comprehensive evaluation of the direction we wish to take in future years (i.e. contract dredge, in-house dredge, or some combination of the two). All of these factors were considered in preparing the City s budget for the 2013 fiscal year. The FY 2013 millage rate is , the rollback rate. This produces the same ad valorem tax revenue as the previous year and therefore is not a tax increase. See the economic outlook section of the letter of transmittal for additional details regarding economic conditions. REQUESTS FOR INFORMATION This financial report is designed to provide a general overview of the City of Cocoa Beach s finances for all those with an interest in the City s finances. Questions concerning any of the information provided in this report or requests for additional information should be addressed to Charles H. Holland Jr., CGFO, Finance Director, 2 South Orlando Avenue, Cocoa Beach, Florida, or cholland@cityofcocoabeach.com. The financial statements are included in the City s Comprehensive Annual Financial Report (CAFR) posted on the City s web site at 15

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35 BASIC FINANCIAL STATEMENTS 17

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37 Statement of Net Assets September 30, 2012 Governmental Activities Business-type Activities Total ASSETS Cash and cash equivalents $ 3,849,310 $ 3,696,883 $ 7,546,193 Investments 4,272,834 2,255,349 6,528,183 Accounts receivable, net of allowance for uncollectible accounts 514,180 1,054,099 1,568,279 Due from other governments 258, ,496 Internal balances 3,469,982 (3,469,982) - Inventory - 119, ,044 Prepaid expenses 137,816 43, ,539 Restricted assets: Cash and cash equivalents 188,507 98, ,700 Capital assets not being depreciated: Land 6,697,356 2,944,894 9,642,250 Work-in-progress 342,749 9,237,365 9,580,114 Capital assets net of accumulated depreciation: Buildings 3,467,291 3,905,529 7,372,820 Infrastructure 729,373 24,081,987 24,811,360 Improvements other than buildings 5,837,995 4,871,895 10,709,890 Machinery and equipment 1,372, ,147 1,825,147 Total assets 31,137,889 49,292,126 80,430,015 LIABILITIES Accounts payable and accrued liabilities 950, ,994 1,799,341 Accrued interest payable - 20,727 20,727 Unearned revenue 114,278 35, ,366 Non-current liabilities: Due within one year 790, ,212 1,215,119 Due in more than one year 1,831,446 13,676,584 15,508,030 Total liabilities 3,686,978 15,005,605 18,692,583 NET ASSETS Invested in capital assets, net of related debt 18,261,764 32,096,348 50,358,112 Restricted for: Debt service 16,200 98, ,393 Law enforcement 188, ,497 Unrestricted 8,984,450 2,091,980 11,076,430 Total net assets $ 27,450,911 $ 34,286,521 $ 61,737,432 The accompanying notes to the financial statements are an integral part of this statement. 19

38 Statement of Activities For the Fiscal Year Ended September 30, 2012 Program Revenues Function/Program Expenses Charges for Services Operating Grants and Contributions Capital Grants and Contributions Governmental activities: General government $ 2,788,002 $ 2,047,310 $ - $ - Public safety 8,906, , ,108 Physical environment 1,448,782 1,605, Transportation/public works 3,450,828 1,109, Recreation 1,202, , Interest on long-term debt 9, Total governmental activities 17,806,463 5,649, ,108 Business-type activities: Utility system 4,846,321 6,058,715-73,391 Golf 2,704,671 2,225, Stormwater 482, , Total business-type activities 8,033,399 8,952,024-73,391 Total government $ 25,839,862 $ 14,601,561 $ - $ 620,499 General Revenues: Property taxes Local option gax tax Franchise taxes Excise taxes Unrestricted Intergovernmental Unrestricted investment earnings Miscellaneous revenues Transfers Total general revenues and transfers Change in net assets Net assets - beginning Net assets - ending 20

39 Net (Expense) Revenue and Changes in Net Assets Governmental Activities Business-type Activities Total $ (740,692) $ - $ (740,692) (7,717,455) - (7,717,455) 156, ,876 (2,340,831) - (2,340,831) (958,129) - (958,129) (9,587) - (9,587) (11,609,818) - (11,609,818) - 1,285,785 1,285,785 - (479,274) (479,274) - 185, , , ,016 (11,609,818) 992,016 (10,617,802) 6,348,123-6,348, , ,735 1,358,787-1,358,787 1,891,349-1,891, , ,626 96,921 66, , , , ,054 (491,054) - 11,403,233 (424,493) 10,978,740 (206,585) 567, ,938 27,657,496 33,718,998 61,376,494 $ 27,450,911 $ 34,286,521 $ 61,737,432 The accompanying notes to the financial statements are an integral part of this statement. 21

40 Balance Sheet Governmental Funds September 30, 2012 Other Governmental Funds Total Governmental Funds General Fund ASSETS Cash and cash equivalents $ 2,997,263 $ 1,040,554 $ 4,037,817 Investments 3,999, ,043 4,272,834 Accounts receivable 513, ,180 Due from other governments 258, ,496 Due from other funds 77,682-77,682 Prepayments 137, ,816 Advances to other funds 3,392,300-3,392,300 Total assets $ 11,377,028 $ 1,314,097 $ 12,691,125 LIABILITIES AND FUND BALANCES Liabilities: Accounts and contracts payable $ 527,931 $ 18,651 $ 546,582 Accrued liabilities 403, ,765 Deferred revenue 114, ,278 Total liabilities 1,045,974 18,651 1,064,625 Fund balances: Non-spendable 3,530,116-3,530,116 Restricted 16, , ,697 Committed 668,570 1,106,949 1,775,519 Unassigned 6,116,168-6,116,168 Total fund balances 10,331,054 1,295,446 11,626,500 Total liabilities and fund balances $ 11,377,028 $ 1,314,097 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds (Note G, Paragraph 1) 18,446,764 Long-term liabilities, including OPEB obligation payable (Note B, Paragraph 1) (2,622,353) Net assets of governmental activities $ 27,450,911 The accompanying notes to the financial statements are an integral part of this statement. 22

41 Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Fiscal Year Ended September 30, 2012 REVENUES General Fund Other Governmental Funds Total Governmental Funds Taxes $ 10,056,994 $ - $ 10,056,994 Licenses and permits 416, ,435 Intergovernmental revenues 1,192,734-1,192,734 Charges for services 3,855, ,401 4,349,042 Fines and forfeitures 667, , ,892 Investment earnings 94,510 2,411 96,921 Gain on sale of assets Miscellaneous revenues 95, ,673 Total revenues 16,379, ,057 17,108,822 EXPENDITURES Current: General government 2,923, ,373 3,260,223 Public safety 8,379,998-8,379,998 Physical environment 1,448,782-1,448,782 Transportation/public works 2,785,826-2,785,826 Recreation 1,043,540-1,043,540 Debt service: Principal 175, ,000 Interest 9,587-9,587 Total expenditures 16,766, ,373 17,102,956 Excess (deficiency) of revenues over (under) expenditures before transfers (386,818) 392,684 5,866 OTHER FINANCING SOURCES (USES) Transfers in 962, ,700 1,090,074 Transfers out (136,646) (462,374) (599,020) Total other financing sources (uses) 825,728 (334,674) 491,054 Net change in fund balances 438,910 58, ,920 Fund balances, beginning of year 9,892,144 1,237,436 11,129,580 Fund balances, end of year $ 10,331,054 $ 1,295,446 $ 11,626,500 The accompanying notes to the financial statements are an integral part of this statement. 23

42 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities For the Fiscal Year Ended September 30, 2012 Amounts reported for governmental activities in the statement of activities are different because: Net change in fund balances - total governmental funds $ 496,920 Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period (Note B Paragraph 2). (621,657) The issuance of long-term debt (e.g., bonds) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, discounts and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. This amount is the net effect of these differences in the treatment of long-term debt and related items (Note B Paragraph 2). 175,000 Some expenses reported in the statement of activities did not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. (Note B Paragraph 2) (256,848) Change in net assets of governmental activities $ (206,585) The accompanying notes to the financial statements are an integral part of this statement. 24

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44 Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual General Fund For the Fiscal Year Ended September 30, 2012 Budget Amounts Original Final Actual Amounts Variance with Final Budget - Positive (Negative) REVENUES Taxes $ 9,790,800 $ 9,790,800 $ 10,056,994 $ 266,194 Licenses and permits 341, , ,435 75,435 Intergovernmental revenues 1,106,800 1,255,485 1,192,734 (62,751) Charges for services 3,873,918 3,873,918 3,855,641 (18,277) Fines and forfeitures 868, , ,878 (200,322) Investment earnings 131, ,801 94,510 (37,291) Miscellaneous revenues 72,550 72,550 95,573 23,023 Total revenues 16,185,069 16,333,754 16,379,765 46,011 EXPENDITURES Current: General government: Mayor and City Commission 75,180 75,180 71,461 3,719 City Attorney - legal services 213, , ,244 3,756 City Manager 281, , ,629 (24,161) Personnel 291, , ,633 36,195 City Clerk 205, , ,581 22,782 Finance 646, , ,320 40,041 Information technology 570, , ,371 11,551 Other general government 858, , , ,577 3,142,810 3,144,310 2,923, ,460 Public safety: Police department 4,505,868 4,566,332 4,182, ,948 Communications 652, , ,109 59,671 Fire department 3,036,143 3,189,124 2,922, ,322 Building department: Planning, zoning and development 345, , ,147 8,773 Inspections and permits 314, , ,556 9,473 8,854,740 9,108,185 8,379, ,187 Transportation/public works: Field operations 1,037,229 1,525,229 1,061, ,456 Building maintenance 489, , , ,783 Grounds maintenance 450, , , Fleet management 742, , ,452 55,344 Capital improvements 107, , , ,364 Physical environment 1,629,121 1,629,121 1,448, ,339 4,456,924 5,350,924 4,234,608 1,116,316 Continued on next page 26

45 Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual General Fund (continued) For the Fiscal Year Ended September 30, 2012 Budget Amounts Original Final Actual Amounts Variance with Final Budget - Positive (Negative) EXPENDITURES (continued) Recreation: Administration and community service center $ 345,454 $ 375,454 $ 375,842 $ (388) Parks 248, , ,291 28,946 Swimming pool 350, , ,292 72,091 Beach rangers - 138,265 85,381 52,884 Tennis courts 24,708 24,708 24,734 (26) 969,196 1,197,047 1,043, ,507 Debt service: Principal 175, , ,000 - Interest 9,674 9,674 9, , , , Total expenditures 17,608,344 18,985,140 16,766,583 2,218,557 Excess (deficiency) of revenues under expenditures (1,423,275) (2,651,386) (386,818) 2,264,568 OTHER FINANCING SOURCES AND (USES) Transfer from: Utilities System Fund 500, , ,000 - Metered Parking Fund 337, , , ,700 Transfer to: Metered Parking Fund - - (127,700) (127,700) Golf Course (8,946) (8,946) (8,946) - Total other financing sources 828, , ,728 (3,000) Net change in fund balances (594,547) (1,822,658) 438,910 2,261,568 Fund balances, beginning of year 9,892,144 9,892,144 9,892,144 - Fund balances, end of year $ 9,297,597 $ 8,069,486 $ 10,331,054 $ 2,261,568 The accompanying notes to the financial statements are an integral part of this statement. 27

46 Statement of Net Assets Proprietary Funds September 30, 2012 Enterprise Funds Utility Golf Stormwater System Course Management Total ASSETS Current assets: Cash and cash equivalents $ 2,161,927 $ 67,535 $ 1,467,421 $ 3,696,883 Investments 1,763, , ,203 2,255,349 Accounts receivable, net of allowance for uncollectible accounts 948, ,008 1,054,099 Due from other funds 79, ,324 Inventory - 119, ,044 Prepaid expenses 21,981 19,961 1,781 43,723 Total current assets 4,975, ,958 1,772,413 7,248,422 Noncurrent assets: Restricted assets Cash and cash equivalents 98, ,193 Advances to other funds 839, ,464 Capital assets: Land 1,691,599 1,253,295-2,944,894 Buildings 3,487,972 2,398, ,920 6,377,348 Infrastructure 35,902,564-2,474,883 38,377,447 Improvements other than buildings 5,365,247 2,036, ,197 7,653,989 Machinery and equipment 3,244,682 1,343,751 46,413 4,634,846 Construction in progress 9,206,103-31,262 9,237,365 Less accumulated depreciation (19,341,998) (3,936,031) (453,043) (23,731,072) Total non-current assets 40,493,826 3,096,016 2,842,632 46,432,474 Total assets $ 45,468,877 $ 3,596,974 $ 4,615,045 $ 53,680,896 Continued on the next page 28

47 Statement of Net Assets Proprietary Funds (continued) September 30, 2012 LIABILITIES Current Liabilities: Accounts payable and accrued liabilities 744,476 Enterprise Funds Utility Golf Stormwater System Course Management Total $ $ 76,187 $ 28,331 $ 848,994 Due to other funds - 77,682 79, ,006 Accrued compensated absences 92,045 60,205 16, ,972 Deferred revenue - 35,088-35,088 Note Payable 255, ,240 Accrued interest payable 20, ,727 Total current liabilities 1,112, , ,377 1,486,027 Noncurrent liabilities: Advances from other funds - 3,392, ,464 4,231,764 Accrued compensated absences 141,382 57,032 17, ,153 Accrued OPEB liability 161, ,230 26, ,201 Note payable 13,143, ,143,230 Total noncurrent liabilities 13,446,587 3,577, ,199 17,908,348 Total liabilities 14,559,075 3,826,724 1,008,576 19,394,375 NET ASSETS Invested in capital assets, net of related debt 26,157,700 3,096,016 2,842,632 32,096,348 Restricted for debt service 98, ,193 Unrestricted (deficit) 4,653,909 (3,325,766) 763,837 2,091,980 Total net assets 30,909,802 (229,750) 3,606,469 34,286,521 Total liabilities and net assets $ 45,468,877 $ 3,596,974 $ 4,615,045 $ 53,680,896 The accompanying notes to the financial statements are an integral part of this statement. 29

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49 Statement of Revenues, Expenses, and Changes in Fund Net Assets Proprietary Funds For the Fiscal Year Ended September 30, 2012 OPERATING REVENUES Enterprise Funds Utility Golf Stormwater System Course Management Totals Service charges $ 5,732,177 $ - $ 667,912 $ 6,400,089 Golf course fees - 1,863,079-1,863,079 Other operating revenue 326, , ,856 Total operating revenues 6,058,715 2,225, ,912 8,952,024 OPERATING EXPENSES Salaries, wages and employee benefits 1,574,736 1,230, ,087 3,031,937 Contractual services, materials and supplies 1,739,292 1,141, ,417 3,034,688 Insurance 60,263 79,299 6, ,625 Depreciation 1,246, ,261 49,164 1,486,351 Total operating expenses 4,621,217 2,641, ,731 7,698,601 Operating income (loss) 1,437,498 (416,256) 232,181 1,253,423 NON-OPERATING REVENUES (EXPENSES) Investment earnings 14,790 2,102 2,277 19,169 Interest on advance to other fund 47,392 (63,018) (46,676) (62,302) Interest expense (225,104) - - (225,104) Grant revenue Total non-operating revenues (expenses) (162,922) (60,916) (44,399) (268,237) Income (loss) before contributions and transfers 1,274,576 (477,172) 187, ,186 Capital contributions - connection fees 73, ,391 Transfers in 135,000 17, ,946 Transfers out (644,000) - - (644,000) Change in net assets 838,967 (459,226) 187, ,523 Total net assets, beginning of year 30,070, ,476 3,418,687 33,718,998 Total net assets, end of year $ 30,909,802 $ (229,750) $ 3,606,469 $ 34,286,521 The accompanying notes to the financial statements are an integral part of this statement. 31

50 Statement of Cash Flows Proprietary Funds For the Fiscal Year Ended September 30, 2012 CASH FLOWS FROM OPERATING ACTIVITIES Utilities System Golf Course Stormwater Management Totals Receipts from customers and users $ 5,702,111 $ 1,867,845 $ 673,949 $ 8,243,905 Payments to suppliers (1,139,847) (889,722) (221,521) (2,251,090) Employee payments and benefits (1,543,842) (1,240,446) (221,985) (3,006,273) Payments for interfund services used - (287,081) - (287,081) Other operating receipts 326, , ,856 Net cash (used in) provided by non-capital financing activities 3,344,960 (187,086) 230,443 3,388,317 CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES Proceeds from repayments of advances 114, ,221 Proceeds from advances from other funds - 371, ,529 Interest received from advances to other funds 47, ,392 Payments on advances from other funds - - (75,464) (75,464) Interest paid on advances from other funds - (63,018) (46,676) (109,694) Transfer to other funds (644,000) - - (644,000) Transfer from other fund 135,000 17, ,946 Net cash (used in) provided by non-capital financing activities (347,387) 326,457 (122,140) (143,070) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from capital debt 10,024, ,024,833 Capital contributions - connection fees 73, ,391 Purchase and construction of capital assets (12,128,276) (142,887) (23,341) (12,294,504) Principal payments on capital debt (147,215) - - (147,215) Interest payments on capital debt (226,673) - - (226,673) Net cash used in capital and related financing activities (2,403,940) (142,887) (23,341) (2,570,168) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of investments (22,563) (12,807) (61,046) (96,416) Investment earnings 14,790 2,102 2,277 19,169 Net cash provided by (used in) investing activities (7,773) (10,705) (58,769) (77,247) Net increase (decrease) in cash and cash equivalents 585,860 (14,221) 26, ,832 Cash and cash equivalents, beginning 1,674,260 81,756 1,441,228 3,197,244 Cash and cash equivalents, ending $ 2,260,120 $ 67,535 $ 1,467,421 $ 3,795,076 Continued on next page Enterprise Funds 32

51 Statement of Cash Flows Proprietary Funds (continued) For the Fiscal Year Ended September 30, 2012 Reconciliation of operating income to net cash provided by operating activities: Utilities System Golf Course Enterprise Funds Stormwater Management Totals Operating income (loss) $ 1,437,498 $ (416,256) $ 232,181 $ 1,253,423 Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation and amortization 1,246, ,261 49,164 1,486,351 (Increase) decrease in assets: Accounts receivable (30,066) (495) 6,037 (24,524) Inventory - 13,288-13,288 Prepaid expenses (598) (1,629) (21) (2,248) Increase (decrease) in liabilities: Accounts payable and accrued liabilities 660,306 32,816 (62,020) 631,102 Deferred revenue - 5,261-5,261 Accrued compensated absences 30,894 (10,332) 5,102 25,664 Total adjustments 1,907, ,170 (1,738) 2,134,894 Net cash provided (used) by operating activities $ 3,344,960 $ (187,086) $ 230,443 $ 3,388,317 Cash and cash equivalents reconciliation: Cash and cash equivalents $ 2,161,927 $ 67,535 $ 1,467,421 $ 3,696,883 Restricted assets: Cash and cash equivalents (included in restricted cash, cash equivalents, and investments) 98, ,193 Cash and cash equivalents at September 30, 2012 $ 2,260,120 $ 67,535 $ 1,467,421 $ 3,795,076 The accompanying notes to the financial statements are an integral part of this statement. 33

52 Statement of Fiduciary Net Assets Fiduciary Funds September 30, 2012 OPEB Trust Fund Pension Trust Funds ASSETS Accrued income $ - $ 13,034 Investments, at fair value: Cash and money market - 825,894 Mutual funds 482,754 25,759,673 Common stocks - 7,934,604 Total investments 482,754 34,520, ,754 34,533,205 LIABILITIES Prepaid contribution - 233,833 Benefits payable - 1, ,554 NET ASSETS Held in trust for pension benefits - 34,297,651 Held in trust for OPEB benefits 482,754 - Total net assets $ 482,754 $ 34,297,651 The accompanying notes to the financial statements are an integral part of this statement. 34

53 Statement of Changes in Fiduciary Net Assets Fiduciary Funds For the Fiscal Year Ended September 30, 2012 OPEB Trust Fund ADDITIONS Contributions: Employer 228,524 Pension Trust Funds $ $ 2,234,239 Plan members 62, ,626 Total contributions 291,280 2,626,865 Investment earnings: Net increase (decrease) in fair value of investments 69,287 4,669,181 Interest and dividends - 1,227,927 Total investment earnings 69,287 5,897,108 Less investment expenses - 157,322 Net investment earnings 69,287 5,739,786 Miscellaneous - 214,998 Total additions 360,567 8,581,649 DEDUCTIONS Benefits 191,280 2,064,257 Refunded contributions - 12,929 Administrative expenses ,032 Total deductions 192,160 2,139,218 Change in net assets 168,407 6,442,431 Net assets, beginning of year 314,347 27,855,220 Net assets, end of year $ 482,754 $ 34,297,651 The accompanying notes to the financial statements are an integral part of this statement. 35

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55 Notes to Financial Statements September 30, 2012 NOTES TO THE FINANCIAL STATEMENTS Table of Contents NOTE PAGE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 38 B. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS 46 C. BUDGETS 48 D. CASH AND INVESTMENTS 49 E. UNEARNED REVENUE 52 F. INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS 53 G. CAPITAL ASSETS 55 H. LONG-TERM DEBT 58 I. COMPENSATED ABSENCES 62 J. RESTRICTED NET ASSETS 63 K. RISK MANAGEMENT 63 L. EMPLOYER RETIREMENT PLANS 64 M. OTHER POST-EMPLOYMENT BENEFITS (OPEB) 72 N. INFORMATION ITEMS 77 37

56 Notes to Financial Statements September 30, 2012 A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1. Reporting entity The (the City) is a political subdivision of the State of Florida and is located in Brevard County. The City was incorporated in 1925 and has a Commission/City Manager form of government. The City Commission consists of a Mayor and four (4) Commissioners responsible for establishing policies and enacting ordinances and resolutions. They are elected at large. The City Commission appoints the City Manager who is responsible for the daily administration of the City s operations. The Cocoa Beach Public Library is funded through the Brevard County Free Public Library District, a separate taxing authority. The City Commissioners appoint an advisory Library Board that has authority to propose budget recommendations to the County and provide input in the selection of a library director. The Library s actual budget is approved and funded by Brevard County and all its personnel are governed by the policies and procedures of Brevard County. The Cocoa Beach Public Library is therefore not a component unit of the City. The accounting policies of the City conform to accounting principles generally accepted in the United States of America (GAAP) as applicable to governments. The following is a summary of the more significant policies of the City. 2. Government-wide and fund financial statements The government-wide financial statements consist of a Statement of Net Assets and a Statement of Activities. These statements report information on all of the nonfiduciary activities of the primary government as a whole. As part of the consolidation process, all interfund activities are eliminated from these statements, except for the residual amounts between governmental and business-type activities reported as internal balances. Net assets, the difference between assets and liabilities, as presented in the Statement of Net Assets, are categorized as follows: a. Invested in capital assets, net of related debt - the portion of net assets which are associated with capital assets, less outstanding capital assets related debt, net of unspent bond and loan proceeds. b. Restricted net assets - have third party (statutory, bond covenant or granting agency) limitations on their use, or enabling legislation. c. Unrestricted net assets - have no third party limitations on their use. The Statement of Activities presents a comparison between the direct and indirect expenses of a given function or segment and its program revenues, and displays the extent to which each function or segment contributes to the change in net assets for the fiscal year. Direct expenses are those that are clearly identifiable to a specific function or segment. Indirect expenses are costs the City has allocated to functions through various allocation methods. Program revenues consist of charges for services, operating grants and contributions, and capital grants and contributions. 38

57 Notes to Financial Statements September 30, 2012 A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2. Government-wide and fund financial statements (continued) Charges for services refer to amounts received from those who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment. Grants and contributions consist of revenues that are restricted to meeting the operational or capital requirements of a particular function or segment. Revenues not classified as program revenues are reported as general revenues. Separate fund financial statements report detailed information about the City's governmental, proprietary and fiduciary funds. The focus of governmental and proprietary fund financial statements is on major funds. Therefore, major funds are reported as separate columns in the fund financial statements and non-major funds are aggregated and presented as a single column on each statement. The results of governmental fund accounting are converted to the governmentwide presentation by reconciliation. Generally, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this are payments-in-lieu of taxes and other charges between the City s utilities and stormwater management systems and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. 3. Measurement focus, basis of accounting, and financial statement presentation The government-wide financial statements, as well as the proprietary and fiduciary fund financial statements, are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recognized in the period earned and expenses are recognized when a liability is incurred. Property tax revenues are recognized in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. All governmental fund financial statements are reported using a current financial resources measurement focus on a modified accrual basis of accounting. Under this basis, revenues are recognized in the accounting period in which they become both measurable and available to finance expenditures of the current period. Available is defined as collectible within the current period, or soon enough thereafter to be used to pay liabilities of the current period, usually considered sixty (60) days. The primary revenue sources for governmental funds are property taxes, public utility taxes, franchise fees, and sales and fuel taxes. Primary revenue sources associated with the current fiscal period are considered to be susceptible to accrual and have been recognized as revenues of the current fiscal period. All other revenues, such as licenses and permits, charges for services, and miscellaneous revenues, are considered to be measurable and available only when payment is received. 39

58 Notes to Financial Statements September 30, 2012 A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3. Measurement focus, basis of accounting, and financial statement presentation (continued) Expenditures of governmental funds are generally recorded when a liability is incurred, as under accrual accounting. However, accumulated sick and vacation pay, prepaid insurance and similar items, and principal and interest on long-term debt are recorded only when payment is due. Proprietary funds distinguish between operating and non-operating revenues and expenses. Operating revenues generally result from producing and delivering goods or providing services, such as water, sewer and garbage services, to the public. Operating expenses for these operations include the costs of sales and services, administrative expenses, and depreciation. All revenues and expenses not meeting the definition of operating are reported as non-operating revenues and expenses. Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and the proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board (GASB). Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The City has elected not to follow subsequent private-sector guidance. Major funds are those whose assets, revenues, expenditures and liabilities are at least ten (10%) percent of corresponding totals for all governmental or enterprise funds and at least five (5%) percent of the aggregate amount for all governmental and enterprise funds for the same item. The following are major governmental funds: General Fund - The General Fund is the City s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in other funds. The following are major enterprise funds: Utilities System Fund - The Utilities System Fund accounts for the provision of sewer and water reuse services to City residents and some county areas. Golf Course Fund - The Golf Course Fund accounts for the activities of the municipal golf course. Stormwater Management Fund - The Stormwater Management Fund accounts for the provision of stormwater drainage services to the residents of the City. 40

59 Notes to Financial Statements September 30, 2012 A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3. Measurement focus, basis of accounting, and financial statement presentation (continued) Fiduciary Funds report assets held in a trustee or agency capacity for others and therefore cannot be used to support the government s own programs. The following are trust or agency funds: Trust Funds - The three (3) pension trust funds account for the accumulation of resources to be used for pension payments to retiring general employees, police officers, and firefighters of the City. The OPEB trust fund accounts for the accumulation of resources that are used for payments of retirement benefits other than pensions. Agency Fund - The City has no agency funds. 4. Cash and cash equivalents The City s cash and cash equivalents are considered to be cash on hand, demand deposits, and highly liquid short-term investments with original maturities of three months or less from the date of acquisition. The City maintains centralized checking accounts for all funds (except fiduciary funds). Cash equivalents, including those classified as restricted assets include pooled investments with the Florida State Board of Administration s (SBA) Local Government Surplus Trust Fund, which, at September 30, 2012, were earning interest at approximately thirty (0.30%) basis points. The SBA is under the regulatory oversight of the State of Florida and has adopted and met the criteria for a 2a-7 like pool as defined in GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. This pool consists primarily of U.S. government and government guaranteed instruments, U.S. Agency obligations, U.S. Corporate obligations, certificates of deposit, certain repurchase agreements, bankers acceptances, commercial paper, asset backed securities and variable rate securities. The pool s investments are reported at amortized cost, which approximates fair value. 5. Investments The City s investment activities are governed by Chapter , Florida Statutes. In accordance with this statute, the City may invest any surplus funds in (a) The Local Government Surplus Funds Trust Fund (SBA); (b) Securities and Exchange Commission registered money market funds with the highest credit quality rating from a nationally recognized rating agency; (c) interest-bearing time deposits or savings accounts in qualified public depositories; (d) direct obligations of the U.S. Treasury and (e) federal agencies and instrumentalities. Securities listed in (c) and (d) must be invested to provide sufficient liquidity to pay obligations as they come due. The City has adopted a formal investment policy in compliance with Florida Statutes. Investments are stated at fair value. Changes in the fair value during the year are included in investment income or loss. 41

60 Notes to Financial Statements September 30, 2012 A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 6. Receivables and payables Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either due to/from other funds (the current portion of interfund loans) or advances to/from other funds (the non-current portion of interfund loans). All other outstanding balances between funds are reported as due to/from other funds. Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as internal balances. Advances between funds, as reported in the fund financial statements, are offset by a nonspendable fund balance account in the applicable governmental funds to indicate that they are not available for appropriation and are not expendable available resources. Trade receivables consist of account balances less than thirty (30) days overdue. Account balances exceeding thirty (30) days overdue are written off and sent to a collection agency. Therefore, all trade receivables reported are deemed collectible. 7. Inventory Inventory is stated at cost, which approximates fair value, using the first-in, first-out (FIFO) inventory costing method. Inventory in governmental funds is recorded as an expenditure when purchased. 8. Prepayments and deposits Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. These amounts are offset by a nonspendable fund balance account, which indicates that they do not constitute available resources. 9. Restricted assets Certain assets of the City s enterprise funds are classified as restricted assets on the statement of net assets because their use is limited by applicable legal restrictions. The restrictions are for the following: SRF Loan Repayment Reserve (Clean Water State Revolving Loan) (see Note J for additional information) Confiscated Property (see Note J for additional information) 42

61 Notes to Financial Statements September 30, 2012 A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 10. Property and equipment Capital assets, which include land, buildings, infrastructure, improvements, and equipment, are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the City as assets with an initial, individual cost of more than one thousand ($1,000) dollars and an estimated useful life exceeding one year. The cost of improvements and replacements, which extend the useful lives of assets or increase their capacity, are capitalized. Repairs and maintenance costs, which do not improve or extend the useful life of the respective assets, are charged to expense. Property and equipment purchased by the City is stated at cost or, if contributed, estimated fair market value at the date of contribution. Capital assets use straight-line depreciation over the following estimated service lives: Classification Infrastructure Buildings and building improvements Improvements other than buildings Machinery, furniture and equipment Service Life Ranges years 40 years years 3-5 years Major outlays for capital assets and improvements are capitalized, as projects are commissioned. For individual proprietary funds, interest incurred during the construction phase of capital assets is included as part of the capitalized value of the assets constructed. The amount of interest to be capitalized is calculated using the weighted average of construction expenditures multiplied by the interest rate on the debt. 11. Compensated absences The City permits employees to accumulate earned but unused paid-time-off (PTO) rather than sick and vacation leave, as was formerly used. All previously accrued sick leave and vacation time was eliminated in FY PTO is accrued when incurred in the government-wide and proprietary fund financial statements. In governmental funds, a liability for these amounts is reported only if the PTO has matured, for example, as a result of employee resignations and retirements. Upon termination, PTO is paid in full but limited to four hundred eighty (480) hours. This amount is charged to the fund in which the employee was budgeted. See Note I for a comprehensive recap by fund of the liability associated with compensated absences. 43

62 Notes to Financial Statements September 30, 2012 A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 12. Long-term liabilities Long-term debt and other long-term obligations are reported as liabilities in the government-wide financial statements for both governmental and business type activities and in the individual proprietary fund statements. Bond premiums and discounts, as well as issuance costs, are deferred and systematically amortized over the term of the bonds. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental funds recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as an other financing source. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs are reported as debt service expenditures. Losses incurred on refunding debt in Proprietary Funds is deferred and amortized over the shorter of the life of the new issue or the remaining life of the refunded issue. Only material amounts of accrued interest are recorded in the financial statements. 13. Fund equity GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions established accounting and financial reporting standards for governmental funds. It establishes criteria for classifying fund balances into specifically defined classification and clarifies definitions for governmental fund types. Fund balances for governmental funds are reported in classifications that comprise a hierarchy based primarily on the extent to which the government is bound to honor constraints on the specific purposes for which amounts in those funds can be spent. The City reported the following governmental fund balances: FUND BALANCE - GOVERNMENTAL FUNDS GENERAL CONFISCATED PROPERTY METERED PARKING TOTALS Fund balances: Non-spendable: Advances $ 3,392,300 $ 3,392,300 Prepaid expenses 137, ,816 Restricted: Public safety $ 188, ,497 Other 16,200 16,200 Committed: Capital projects 668,570 $ 135, ,450 Other 971, ,069 Assigned: None - Unassigned: General government 6,116,168 6,116,168 Total fund balance $ 10,331,054 $ 188,497 $ 1,106,949 $ 11,626,500 44

63 Notes to Financial Statements September 30, 2012 A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 13. Fund equity (continued) Non-Spendable Fund Balance Represents components not in spendable form and legally or contractually required to be maintained intact. Examples are inventories, prepaid expenditures, long term portion of notes receivable, property acquired for resale and unrealized gains. The City Commission is the highest authority for these items. Restricted Fund Balance These amounts represent spending constraints externally imposed by law through constitutional provisions or enabling legislation or by agreements with creditors, grantors, or other governments. See Note J for additional detail. These are no bond or other external restrictions on the governmental funds at this time. The Confiscated Property Fund is governed by Chapter 932, Florida Statutes, meaning that monies from the fund must be spent for the purposes and items enumerated in the statute. These expenditures are requested by the Police Chief and approved by the City Commission. Committed Fund Balance These amounts can only be used for specific purposes pursuant to constraints imposed by the City Commission. The constraints cannot be removed unless the Commission removes it in the same manner it was implemented. Resolution passed December 6, 2012 amended the FY 2013 budget to appropriate funds for capital projects not completed in the prior fiscal year. The Commission may cancel or defer any of the projects funded by the Resolution. The amount shown in the Metered Parking Fund must be used for specific purposes pursuant to constraints imposed by the Commission in creating the Fund. The City Manager has budget authority within the constraints mentioned above. Assigned Fund Balance These amounts are constrained by the government s intent they be used for specific purposes. Decisions with regard to these purposes and amounts will be as determined by the City Commission by Resolution. Unassigned Fund Balance Represents amounts that have not been assigned to other funds and that have not been restricted, committed, or assigned to a specific purpose within the general fund. This includes residual positive fund balance within the General Fund which has not been classified within the other above mentioned categories. Unassigned fund balance may also include negative balances for any governmental fund if expenditures exceed amounts restricted, committed, or assigned for those specific purposes. Currently, this condition does not exist. 45

64 Notes to Financial Statements September 30, 2012 A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 13. Fund equity (continued) When both restricted and unrestricted amounts are available for use, it is the City s practice to use restricted resources first. Additionally, the City would first use committed, then assigned, and lastly unassigned amounts of unrestricted fund balance. 14. Revenues, contributions, expenditures, and expenses The City s accounting treatment and recognition policies for certain revenues, expenditures, and expenses having unique accounting requirements are as follows: Property taxes Property taxes are billed November 1 st (discounts are available for early payment) for the calendar year beginning January 1 st. Taxes are due March 1 st and become delinquent on April 1 st and tax certificates on all property on which taxes are delinquent are sold at the end of May of each year. Property taxes are considered fully collected (i.e. 96% of the levy) during and prior to the end of the fiscal year. Therefore, no material amounts of property taxes are receivable. Administrative service charges Administrative services are provided to certain enterprise fund and special revenue fund activities by various departments within the general fund. These charges are recorded as revenues in the general fund and as operating expenses in the fund being charged. Grants Operating and capital grants for both governmental and proprietary funds are recorded as receivables and revenues at the time that eligible (reimbursable) project costs are incurred. Grant revenues received in advance of meeting all eligibility criteria are deferred. B - RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS 1. Explanation of certain differences between the governmental funds balance sheet and the government-wide statement of net assets The governmental funds balance sheet includes reconciliation between fund balance-total governmental funds and net assets-governmental activities as reported in the government-wide statement of net assets. An element of that reconciliation explains that long-term liabilities, including OPEB obligation payable, are not due and payable in the current period and, therefore, are not reported in the funds. The details of this difference are as follows: Capital Improvement Revenue Note, Series 2003 $ 185,000 OPEB Liability 1,160,817 Accrued compensated absences 1,276,536 Net adjustment to reduce fund balance - total governmental funds to arrive at net assets - governmental activities $ 2,622,353 46

65 Notes to Financial Statements September 30, 2012 B - RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (continued) 2. Explanation of certain differences between the governmental funds statement of revenues, expenditures, and changes in fund balances and government-wide statement of activities The governmental fund statement of revenues, expenditures, and changes in fund balances includes reconciliation between net changes in fund balances - total governmental funds and changes in net assets of governmental activities as reported in the government-wide statement of activities. One element of that reconciliation explains that governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. The details of this difference are as follows: Capital outlays and transfers (net - see Note G, paragraph 3) $ 993,926 Depreciation expense (1,615,583) Net adjustment to increase net changes in fund balances - total governmental funds to arrive at changes in net assets - governmental activities The net adjustment increases net changes in fund balances-total governmental funds to arrive at changes in net assets-governmental activities $ (621,657) Another element of that reconciliation explains that the issuance of long-term debt (e.g., bonds) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. The detail of this difference is as follows: Principal payments on long-term debt: Capital Improvement Revenue Note, Series 2003 $ 175,000 Net adjustment to increase net changes in fund balances - total governmental funds to arrive at changes in net assets - governmental activities $ 175,000 The net adjustment increases net changes in fund balances-total governmental funds to arrive at changes in net assets-governmental activities 47

66 Notes to Financial Statements September 30, 2012 B - RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (continued) 2. Explanation of certain differences between the governmental funds statement of revenues, expenditures, and changes in fund balances and government-wide statement of activities (continued) Another element of that reconciliation states, some expenses reported in the statement of activities did not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. The details of this difference are as follows: Change in accrued compensated absences $ (27,530) Change in OPEB Obligation 284,378 Net adjustment to decrease net changes in fund balances - total governmental funds to arrive at changes in net assets - governmental activities $ 256,848 The net adjustment decreases net changes in fund balances-total governmental funds to arrive at changes in net assets-governmental activities C - BUDGETS Budget policy Annual budgets are prepared for all funds except the following: The Confiscated Property Special Revenue Fund is not budgeted because its sole purpose is to account for property confiscated by law enforcement in accordance with State and Federal Law. The use of these funds is governed by Chapter 932, Florida statutes. Accordingly, these funds are held in a separate interest bearing account. The pension and OPEB trust funds are not budgeted because the funds held in these accounts are in trust for others; however, the City contributions to those funds are budgeted within the respective departments. See Notes L and M for additional information. Annual operating budgets are prepared on a basis consistent with accounting principles generally accepted in the United States of America. Annual budget appropriations lapse at the end of each fiscal year. Open purchase orders and other commitments are recognized as expenditures in the period in which the actual goods or services are received and a liability is incurred. Encumbrances outstanding at year-end for unfulfilled obligations are canceled and appropriated in the succeeding year s budget. Such amounts, if material, are disclosed in the notes to financial statements under Commitments. 48

67 Notes to Financial Statements September 30, 2012 C - BUDGETS (continued) Budget policy (continued) The City Commission pursuant to Article V of the City Charter and state statutes, using the following procedures, adopts annual operating budgets: Each department, office or agency of the City submits a work program and budget request to the Finance Director during March of each year. The City Manager reviews the departmental requests, conducts workshop sessions and presents the proposed budget to the City Commission in July of each year. The City Commission holds a series of budget workshops and public hearings on the proposed budget and adopts the official annual budget of the City by resolution. The budgets, as adopted, may be amended through formal approval by the City Commission. Budgetary integration is established in the accounting records for control purposes at the object of expenditure level; however, the City Charter establishes the level at which expenditures may not legally exceed budgeted amounts at the department level. The City s general governmental appropriations are budgeted within the general fund as if it were a separate department. Items making up this legal level of budgetary control include current other general government expenditures, debt service expenditures and other financing uses. Resolution adopted September 21, 2011 contains budgets for the General Fund and Metered Parking Fund (governmental funds) as well as the Utilities System Fund, Golf Course Fund, and the Stormwater Management Fund (enterprise funds). The City Manager may transfer budgeted amounts within a department, office, or agency of the City without formal approval by the City Commission. The final budget amounts shown in the financial statements include all amendments as approved during the year by the City Commission. D - CASH AND INVESTMENTS The City s cash and cash equivalents are considered to be cash on hand, demand deposits and certificates of deposit. The City maintains a centralized interest bearing checking account for all operating funds. At September 30, 2012, cash and cash equivalents consisted of the following: 1. Cash and cash equivalents Petty cash funds $ 6,630 State Board of Administration (see Note N paragraph 2 for complete details) 147,214 Bank balance (all accounts) 7,681,078 Total cash and cash equivalents 7,834,922 Less: cash and equivalents classified as restricted assets Restricted Assets (see Note J for complete details) (302,890) State Board of Administration Fund B (see Note N paragraph 2 for complete details) (18,743) Available cash balance $ 7,513,289 49

68 Notes to Financial Statements September 30, 2012 D - CASH AND INVESTMENTS (continued) 1. Cash and cash equivalents (continued) While the total carrying amount of our cash deposits is $ 7,834,922, the available cash balance is $ 7,513,289. The City has complied with the requirements of the Florida Security for Public Deposits Act (the Act) by maintaining its accounts at a qualified public depository as provided by Chapter 280 of the Florida Statutes. Under the Act, qualified public depositories must deposit with the State Treasurer eligible collateral in such amounts as required by the Act. Therefore, all cash deposits and certificates of deposit held by banks are classified as fully insured. 2. City investment policy and portfolio Resolution adopted February 20, 2003, established the City's investment policy. It allows the City to invest surplus money as provided by Florida Statute The investment must be one of the following authorized types: The Local Government Surplus Funds Trust Fund or any intergovernmental investment pool authorized pursuant to the Florida Interlocal Cooperation Act as provided in s , Florida Statutes. Securities and Exchange Commission registered money market funds with the highest credit quality ratings (AAA/AA) from a nationally recognized rating agency. Interest-bearing time deposits or savings accounts in qualified public depositories as defined in s , Florida Statutes. Direct Obligations of the United States Treasury. Federal agencies and instrumentalities. Derivative products and margin purchases are expressly prohibited. The City s investments at September 30, 2012, consisted of the following: Less than One Year 1-5 Years Over Five Years Fair Value* Direct Obligations of the U.S. Treasury (at market value) $ 659,281 $ 483,369 $ - $ 1,142,650 Federal Agencies & Instrumentalities 354,341 4,528, ,016 5,386,717 Total investments $ 6,529,367 *Includes temporarily restricted assets and accrued interest Maturity Dates The investment policy addresses and mitigates the risk types below as shown: (1) Interest Rate Risk The policy requires the portfolio be structured with securities that maintain the greatest degree of liquidity and flexibility. The portfolio will maintain a structure with maturities staged to meet the City s obligations as they come due. 50

69 Notes to Financial Statements September 30, 2012 D - CASH AND INVESTMENTS (continued) 2. City investment policy and portfolio (continued) (2) Credit Risk The City primarily invests in direct obligations of the U.S. Treasury, Federal agencies, and the State of Florida Local Government Surplus Trust Fund Pool. (3) Custodial Risk All cash and securities are held in accounts bearing the name of the City. Securities in such accounts, held in the street name, are considered held in the name of the City. (4) Concentration of Credit Risk No more than fifty (50%) percent of the City s funds will be invested with the same issuer, except direct obligations of the United States Treasury. No more than fifty (50%) percent of the City s funds will be invested through the same investment institution or dealer. No more than twenty (20%) percent of the City s funds will be invested beyond five (5) years in any security with the same maturity date. 3. Pension fund investment policies A specific City ordinance created each pension fund. The Board of Trustees for each respective fund determines investment policies for each of the three (3) pension trust funds. For each fund, no more than five (5%) percent of fund assets may be invested in the securities (of whatever type) of any one issuing company (this excludes the U. S. Government and its agencies). No investment may exceed five (5%) percent of the outstanding capital stock of any one company. The aggregate investments in common and capital stock and convertible securities (at cost) may not exceed sixty-five (65%) percent of the assets of the Police and Fire funds, or sixty (60%) percent of the assets of the General Employees fund. Each fund maintains a list of prohibited investment security types. are prohibited: The following investment types Futures General obligations issued by a foreign government Hedge funds Bonds issued by a state or municipality Limited partnerships Private equities Options Private mortgages Margin accounts Insurance annuities Securities lending Internally managed assets The investment policies address and mitigate the risk types below as shown: (1) Interest Rate Risk The funds investment policy requires that the portfolio be structured with sufficient liquidity to meet the funds obligations as they come due. (2) Credit Risk The three (3) pension trust funds each hold cash in their respective fund accounts. To mitigate credit risk, the time, savings and money market deposits of each fund in an institution may not exceed the Federal Deposit Insurance Corporation (FDIC) insurance coverage held by that institution for those amounts. 51

70 Notes to Financial Statements September 30, 2012 D - CASH AND INVESTMENTS (continued) 3. Pension fund investment policies (continued) (3) Custodial Risk All cash and securities are held in accounts bearing the name of the respective fund. Securities in such accounts, even though held in the street name are considered held in the name of the fund. Fund managers are required to carry errors and omissions insurance coverage. (4) Concentration of Credit Risk Each of the investment policies require that investments be diversified by security type. Each fund allocates the fund assets to a diversified portfolio of equities, fixed income & cash equivalent securities directed by a professional investment manager. Each fund has an independent investment consultant to evaluate and report on the performance of the investment managers. 4. Pension fund portfolio structure General Employees Pension Trust Fund Fair Value Investments not subject to categorization: Mutual Funds $ 13,330,135 Common stocks $ 3,905,644 Money market funds $ 334,157 Total Investments $ 17,569,936 Police Officers Retirement Trust Fund Investments not subject to categorization: Mutual Funds $ 6,090,390 Common stocks $ 2,052,845 Money market funds $ 262,820 Total Investments $ 8,406,055 Firefighters Retirement Trust Fund Investments not subject to categorization: Mutual Funds $ 6,339,148 Common stocks $ 1,976,115 Money market funds $ 228,917 Total Investments $ 8,544,180 Additional information about the City s pension funds is shown in Note L and in the Required Supplementary Information (RSI) section. Maturities are considered less than one year for the above scheduled investments. E - UNEARNED REVENUE Governmental funds report unearned revenue in connection with receivables for revenues that are not considered available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet earned. At September 30, 2012, the various components of unavailable revenue and unearned revenue reported in the governmental funds were as follows: 52

71 Notes to Financial Statements September 30, 2012 E - UNEARNED REVENUE (continued) Unavailable Unearned Business tax receipts received in FY 2012 for FY 2013 $ - $ 114,278 F - INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS 6. Long-term advances to/from other funds There are five (5) long-term advances outstanding as of September 30, a. In 2007, the General Fund made a long-term advance to the Golf Course Enterprise Fund in the amount of $ 682,126 for the legal defeasance of the Public Improvement Bonds Series This advance is being repaid over a fifteen (15) year period in annual installments including interest at 4.54% and will mature in FY b. In 2007, the Utilities System Enterprise Fund made a long-term advance to the Stormwater Enterprise Fund in the amount of $1,280,000 to fund the Ocean Beach Blvd. project construction phase. This advance is being repaid over a fifteen (15) year period in annual installments including interest at 5.00% and will mature in FY c. In 2009, the problem of salt infiltration of the greens forced a closing of the Golf Course, which drastically reduced operating revenues. The closure necessitated the advance of replacement funds by the General Fund to the Golf Course Fund during the year. The loan with a principal amount of $2,053,374 is being repaid over a forty (40) year period in annual installments including interest at 2.00% and will mature in FY d. In 2011 the General Fund made an additional loan to the Golf Course Fund during the year. This loan has enabled the Golf Course to continue operations. The loan with a principal amount of $ 504,826 is being repaid over a forty (40) year period in annual installments including interest at 2.00% and will mature in FY Outstanding Advance Balance at 9/30/12 Principal Due in FY 2013 ( a ) $ 482,813 $ 41,768 ( b ) 918,789 79,324 ( c ) 2,004,922 28,289 ( d ) 504,826 7,625 $ 3,911,350 $ 157,006 53

72 Notes to Financial Statements September 30, 2012 F - INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS (continued) 2. Interfund transfers Amounts are transferred from one fund to support expenditures of another fund in accordance with legally established budgets. Transfers between funds during the year ended September 30, 2012 were as follows: The General Fund transfer to the Golf Course Enterprise Fund of eight thousand nine hundred forty-six ($ 8,946) dollars is for a pro-rata share of the Golf Course improvements, which benefit the General Fund. The General Fund transfer to the Metered Parking Fund in the amount of one hundred twenty seven thousand seven hundred dollars ($ 127,700) accounts for the difference in amounts for parking fees charged to residents in accordance with Resolution The Metered Parking Fund transfer to the General Fund has four (4) components. A component of one hundred eighty four thousand six hundred seventy four ($ 184,674) dollars offsets a portion of the revenue note used to purchase the Maritime Hammock Preserve property; and a one hundred thousand ($ 100,000) dollar component provides a contribution for public safety and beach vehicles; a fifty thousand ($ 50,000) dollar component offsets the cost of a maintenance worker used to maintain beaches and landscaping; a one hundred twenty seven thousand seven hundred dollar ($ 127,700) component accounts for the difference in charges for parking permits in accordance with Resolution The Utility System Enterprise Fund transfer of five hundred thousand ($ 500,000) dollars to the General Fund has two (2) components. Four hundred fifty thousand ($ 450,000) is a payment in lieu of property taxes equivalent to the value of services received from the government as a property owner in its own right. Fifty thousand ($ 50,000) is to offset the cost of a General Fund maintenance worker used on projects which benefit the utility. The Utility Fund transfer to the Golf Course Enterprise Fund of nine thousand ($ 9,000) dollars is a payment for use of retention ponds. The amounts shown above specifically exclude the amounts the General Fund charges the enterprise funds each year for administrative support and services (e.g. payroll, accounts payable disbursements, etc.). These amounts are identified in the proprietary fund financial statements. Transfers in: General Golf Course Transfers out: Fund Enterprise Fund General Fund $ - $ 8,946 Metered Parking Special Revenue Fund 462, ,700 Utilities System Enterprise Fund 500,000 9,000 Total transfers $ 962,374 $ 145,646 54

73 Notes to Financial Statements September 30, 2012 G - CAPITAL ASSETS 1. Governmental capital asset activity for the year ended September 30, 2012, was as follows: Governmental activities: Beginning Balance Increases Decreases Ending Balance Capital assets, not being depreciated: Land $ 6,697,356 $ - $ - $ 6,697,356 Construction in progress 1,880, ,165 (1,768,414) 342,749 Total capital assets, not being depreciated 8,578, ,165 (1,768,414) 7,040,105 Capital assets, being depreciated: Buildings 5,325,047 33,829-5,358,876 Infrastructure 875, ,830 Improvements other than buildings 14,291,989 2,042,794-16,334,783 Machinery and equipment 10,633, ,552 (211,129) 10,877,981 Total capital assets, being depreciated 31,126,424 2,532,175 (211,129) 33,447,470 Less accumulated depreciation for: Buildings (1,772,511) (119,074) - (1,891,585) Infrastructure (129,095) (17,362) - (146,457) Improvements other than buildings (10,102,846) (393,942) - (10,496,788) Machinery and equipment (8,631,905) (1,085,205) 211,129 (9,505,981) Total accumulated depreciation (20,636,357) (1,615,583) 211,129 (22,040,811) Total capital assets, being depreciated, net 10,490, ,592-11,406,659 Governmental activities capital assets, net $ 19,068,421 $ 1,146,757 $ (1,768,414) $ 18,446,764 55

74 Notes to Financial Statements September 30, 2012 G - CAPITAL ASSETS (continued) 2. Business type capital asset activity for the year ended September 30, 2012, was as follows: Business-type activities: Beginning Balance Increases Decreases Ending Balance Capital assets, not being depreciated: Land $ 2,944,894 $ - $ - $ 2,944,894 Construction in progress 2,003,713 9,208,490 (1,974,838) 9,237,365 Total capital assets, not being depreciated 4,948,607 9,208,490 (1,974,838) 12,182,259 Capital assets, being depreciated: Buildings 6,338,357 38,991-6,377,348 Infrastructure 37,108,709 1,268,738-38,377,447 Improvements other than buildings 4,215,790 3,438,199-7,653,989 Machinery and equipment 4,566, ,921 (246,320) 4,634,846 Total capital assets, being depreciated 52,229,101 5,060,849 (246,320) 57,043,630 Less accumulated depreciation for: Buildings (2,324,987) (146,832) - (2,471,819) Infrastructure (13,562,543) (732,917) - (14,295,460) Improvements other than buildings (2,541,699) (240,395) - (2,782,094) Machinery and equipment (4,061,815) (366,207) 246,320 (4,181,702) Total accumulated depreciation (22,491,044) (1,486,351) 246,320 (23,731,072) Total capital assets, being depreciated, net 29,738,057 3,574,498-33,312,558 Business-type activities capital assets, net $ 34,686,664 $ 12,782,988 $ (1,974,838) $ 45,494,817 56

75 Notes to Financial Statements September 30, 2012 G - CAPITAL ASSETS (continued) 3. Depreciation expense charged to functions/programs of the City is as follows: Governmental activities: General government $ 264,855 Public safety 526,597 Transportation/public works 665,002 Recreation 159,129 Total depreciation expense -governmental activities $ 1,615,583 Business-type activities: Utility $ 1,246,926 Golf course 190,261 Stormwater 49,164 Total depreciation expense - business-type activities $ 1,486,351 Governmental activities: Assets being depreciated $ 2,532,175 Construction in progress - increase 230,165 Construction in progress - decrease (1,768,414) Capital outlays and transfers (net) $ 993, Construction (estimated) commitments are as follows: The scope of work for most projects is preliminary. The commitments shown are order of magnitude (i.e. plus/minus thirty (+30%) percent) estimates for most projects. Replacements of existing equipment units are omitted. Remaining Commitment Beyond Project Description Spent-to-date FY 2013 FY 2013 Wastewater Facility Upgrades $ 10,125,000 $ 2,500,000 $ 1,500,000 ASR Well - 2,000, ,000 Public Safety/Admin. Facilities 1,093,000 3,737,000 16,000,000 Other projects (20) 1,200,000-3,000,000 Total $ 12,418,000 $ 8,237,000 $ 21,000,000 57

76 Notes to Financial Statements September 30, 2012 G - CAPITAL ASSETS (continued) 5. Invested in capital assets, net of related debt: Enterprise Funds Govenmental Funds Utility Fund Golf Fund Stormwater Fund Capital Assets $ 40,487,575 $ 58,898,167 $ 7,032,047 $ 3,295,675 Less: Accumulated Depreciation (22,040,811) (19,341,998) (3,936,031) (453,043) Less: Outstanding Principal of Capital-related Debt (185,000) (13,398,470) - - Net Assets invested in Capital Assets,Net of Related Debt $ 18,261,764 $ 26,157,700 $ 3,096,016 $ 2,842,632 H - LONG-TERM DEBT 1. Revenue bonds and other debt instruments Outstanding Principal $ 1,540,000 Capital Improvement Revenue Note, Series 2003 issued by a local bank, payable in annual installments of $130,000 to $185,000 beginning November 2003 through January 2013; interest at 3.55%; issued to finance the purchase of a 5.4 acre parcel of undeveloped land in the City; secured by and payable from pledged funds including the proceeds from this note and moneys budgeted pursuant to the loan agreement. The ad valorum taxing power of the City will never be necessary or authorized to pay the amounts due. $ 185,000 Clean Water State Revolving Loan, # (final amount not determined) payable in semi-annual installments beginning March 2014 through September 2034; interest from 2.89% plus service charges. (Final payment amounts not yet determined). Issued to finance sewer treatment and rehabilitation projects; secured by and payable from the net revenues derived from the operation of the City's sewer system. This amount represents cash advances received as of September 30, ,125,367 $ 5,193,174 Clean Water State Revolving Loan # 68506P, payable in semi-annual installments of $ 175,796 beginning January 15, 2004 through July 15, 2023; interest from 1.45% to 1.635% plus service charges. Issued to finance sewer treatment and rehabilitation projects; secured by and payable from the net revenues derived from the operation of the City's sewer system. 3,273,103 Total $ 13,583,470 58

77 Notes to Financial Statements September 30, 2012 H - LONG-TERM DEBT (continued) 2. Changes in long-term liabilities Long-term liability activity for the year ended September 30, 2012 (excluding long-term advances between funds) was as follows: Governmental activities: Note payable: Beginning Balance Additions Reductions Ending Balance Due Within One Year Capital Improvement Revenue Note, Series 2003 $ 360,000 $ - $ (175,000) $ 185,000 $ 185,000 OPEB Liability 876, ,378-1,160,817 - Compensated absences 1,304, ,444 (618,974) 1,276, ,907 Governmental activity long-term liabilities $ 2,540,505 $ 875,822 $ (793,974) $ 2,622,353 $ 790,907 Business-type activities: Notes payable: State Revolving Loan # 68506P $ 3,520,852 $ - $ (247,749) $ 3,273,103 $ 255,240 State Revolving Loan # ,125,367-10,125,367 - OPEB Liability 279,089 38, ,201 - Compensated absences 397, ,985 (175,432) 385, ,972 Business-type activity long-term liabilities $ 4,197,514 $ 10,326,464 $ (423,181) $ 14,100,797 $ 424,212 A detailed discussion of the OPEB liability including the allocation by fund is discussed in Note M, paragraph 5. A detailed discussion of the compensated absence policy and its liability including the allocation by fund is discussed in Note A, paragraph 11 and Note I. 59

78 Notes to Financial Statements September 30, 2012 H - LONG-TERM DEBT (continued) 3. Bond & note debt service requirements to maturity for governmental activities Governmental Activities Capital Improvement Revenue Note, Series 2003 Year Ending September 30, Principal Interest 2013 $ 185,000 $ 3, Total $ 185,000 $ 3, Bond & note debt service requirements to maturity for business-type activities Business-type Activities Clean Water State Revolving Fund Loan # 68506P Year Ending September 30, Principal Interest 2013 $ 255,239 $ 96, ,957 88, ,908 80, ,100 72, ,540 64, ,236 55, ,195 46, ,426 37, ,936 27, ,736 17, ,830 7,762 Total $ 3,273,103 $ 594,409 60

79 Notes to Financial Statements September 30, 2012 H - LONG-TERM DEBT (continued) 5. Clean Water State Revolving Fund Loan Agreement # The wastewater treatment plant operated by the City does not meet the Total Maximum Daily Load (TMDL) standards finalized by the EPA in The City commissioned a study to determine what upgrades, with an appropriate timeline for construction, were required to meet the new TMDL standards. A series of public meetings were held on the subject and Resolution adopted August 20, 2009, accepted the final report. Concurrent with the report, a study of financing options concluded that the most favorable option was the state revolving loan agreement. Resolution adopted June 2, 2011 authorized the acceptance of the state revolving loan. The primary components of the project are the plant upgrades at a cost of $ 15,142,000 and the ASR well contract at $ 2,385,000. The Owner Direct Purchase Plan (ODP) and the competitive bidding environment has reduced our project costs approximately $ 712,000. The corresponding reduction in loan payments makes the total cost reduction to date $ 922,720. The allowed authorization through Amendment # 2 is shown below: Category Cost Allowance cost $ 1,451,054 Construction & demolition 17,427,000 Contingencies 871,350 Technical services after bid opening 1,296,000 SUBTOTAL (disbursable amount) 21,045,404 Capitalized interest 630,800 TOTAL (loan principal amount) 21,676,204 Loan service fee 420,908 TOTAL AMOUNT $ 22,097,112 Forty (40) loan payments of $ 726,672 each are scheduled to begin with the initial payment due March 15, 2014 and continue semiannually each September 15 and March 15 thereafter until paid. The financing rate is 2.89% per annum. There are reserve requirements and revenue pledges associated with the loan. The initial payment date is based on a project completion date of September The data above assumes the full amount would be borrowed. As the project progresses, contract amendments to reflect actual circumstances are common, so the final loan amount and payment schedule will be determined in FY 2013 after project completion and final inspection. Cash draws of $ 4,637,765 were received between the financial statement date and the date of the auditor s opinion. This amount represents payments for work completed and will be shown as a liability in FY

80 Notes to Financial Statements September 30, 2012 H - LONG-TERM DEBT (continued) 6. Comprehensive summary of debt service requirements to maturity Summary Year Ending September 30, Principal Interest 2013 $ 440,239 $ 99, ,957 88, ,908 80, ,100 72, ,540 64, ,236 55, ,195 46, ,426 37, ,936 27, ,736 17, ,830 7,762 Total $ 3,458,103 $ 597,693 I - COMPENSATED ABSENCES An explanation of the compensated absences policy is given in Note A, paragraph 11. A comprehensive recap of the liability by fund is as follows: Beginning Balance Additions Reductions Ending Balance Due Within One Year General Fund $ 1,304,066 $ 591,444 $ (618,974) $ 1,276,536 $ 605,907 Enterprise Funds: Utilities System $ 232,308 $ 92,723 $ (91,604) $ 233,427 $ 92,045 Golf Course 128,495 54,728 (65,986) 117,237 60,205 Stormwater Management 36,770 15,534 (17,842) 34,461 16,722 Total Enterprise Funds $ 397,573 $ 162,985 $ (175,432) $ 385,126 $ 168,972 62

81 Notes to Financial Statements September 30, 2012 J - RESTRICTED NET ASSETS The restricted net asset account balances in the government-wide business-type activities are: SRF Loan # 68506P Repayment Reserve $ 98,193 The restricted net asset account balances in the government-wide governmental activities are: Performance bonds (Refundable cash deposits) $ 16,200 Confiscated Property Fund 188,497 Total $ 204,697 The Confiscated Property Fund is maintained in a separate interest bearing bank account. For cash purposes, both of the above categories are considered restricted (see Note D - Cash and Investments). K - RISK MANAGEMENT 1. Property and liability insurance programs The City is exposed to various risks of loss related to torts; injuries to employees, theft of, damage to and/or destruction of assets, errors and omissions, general liabilities and natural disasters. In order to limit its exposure to these risks, the City participates in the Florida League of Cities (FLOC) (a not-for-profit corporation) insurance program for workers compensation, general and auto liability, and property insurance. The FLOC purchases both excess and specific coverages from third party insurance carriers. Program participants purchase excess and specific coverages and are not assessed for unanticipated losses incurred by the program. The City has insurance programs with other carriers for floods, liability insurance for public officials and other specialized coverages. Premiums paid by the City during FY 2012 totaled six hundred fifty thousand one hundred seventy three ($650,173) dollars. This is an increase from $ 609,842 paid in FY The cost increase is attributed to an increased rate for workers compensation as well as an increase in other insurance costs. Settled claims have not exceeded commercial excess coverages in any of the past five (5) years. 2. Hurricane & other event costs, damages and reimbursements Tropical Storm Fay impacted the City in August A shoreline stabilization and repair project with a construction value of about three hundred fifty thousand ($ 350,000) dollars is moving through the approval process required by the various federal and state agencies. All other eligible costs for Tropical Storm Fay have been paid. All eligible costs for all previous events have been paid. There were no events with eligible costs in the period FY FY

82 Notes to Financial Statements September 30, 2012 L - EMPLOYER RETIREMENT PLANS The City maintains three (3) contributory single-employer defined benefit pension plans (Plans) as described below. These Plans are: City of Cocoa Beach General Employees Pension Trust Fund (General Employees) City of Cocoa Beach Police Officers Retirement Trust Fund (Police Employees) City of Cocoa Beach Firefighters Retirement Trust Fund (Fire Employees) 1. Summary of significant accounting policies (all Plans) Basis of Accounting. The Plans financial statements are prepared using the accrual basis of accounting. Plan member contributions are recognized in the period in which the contributions are due. Employer contributions to each plan are recognized when due and the employer has made a formal commitment to provide the contributions. Benefits, refunds and administrative costs are recognized when due and payable in accordance with the terms of each plan. Onbehalf payments, made by the state totaling $ 91,774 and $ 133,717 for the Police Officers and Firefighters plans respectively, were recognized as revenues and expenditures in the General Fund during the year ended September 30, Method Used to Value Investments. Investments are reported at fair value. Short-term investments are reported at cost, which approximates fair value. Securities traded on a national or international exchange are valued at the last reported sales price at current exchange rates. Investments that do not have an established market are reported at estimated fair value. Presentation of Financial Statements. The Plans do not issue stand-alone financial reports and are not included in the reports of any other entity. Funding Requirements. At the request of the Division of Retirement, the City is required to fund the reported percentage of payroll for fiscal years beginning October 1, 2009 instead of a disclosed dollar requirement. 2. Participant data Participants as of October 1, 2012 General Police Fire Participant Category Employees Employees Employees Actively employed participants Service retirees Beneficiaries Terminated vested* Disability retirees DROP** retirees N/A - 1 Totals

83 Notes to Financial Statements September 30, 2012 L - EMPLOYER RETIREMENT PLANS (continued) 3. Description of plan benefits (all Plans) Plan provisions are established by City ordinance and may be amended by the City Commission. Each plan provides retirement, death and disability benefits to participating employees. Retirement benefits vest with the participants based on years of credited service. Employees qualifying for normal retirements are entitled to a monthly annuity based on a percentage of average compensation multiplied by the number of years of credited service. Early retirement benefits are available using reduced benefit formulas. Disability benefits available to employees with ten (10) years of plan participation provide monthly income (as defined by the respective plan) payable to normal retirement, death or recovery. In the event of death, the plan provides for a single sum death benefit equal to the participant s contribution account on date of death. Optional forms of benefits are available and may be elected by the employee as provided in the respective plans. The information presented in the supplementary schedules below was determined as part of the actuarial valuation at the dates indicated. Compensation Percentages General Employees Police Employees Fire Employees 100% vested at: Age 52 Age 55 Age 55 and Five years service Ten years service Ten years service Before 11/18/99 3% N/A N/A After 11/18/ % N/A N/A Before 11/18/98 N/A 4% 4% After 11/18/98 N/A 3% 3% Normal Retirement Age 62 Age 55 Age 55 and Five years service Ten years service Ten years service Early Retirement Age 52 Age 50 Age 45 and Five years service Ten years service Ten years service Actuarial valuation date 10/1/ /1/ /1/2012 Remaining amortization period* Actuarial cost method Frozen entry age Entry age normal Entry age normal Amortization method Asset valuation method (all funds) Level dollar amount Level percentage of pay, closed 4-year smooth Level percentage of pay, closed Actuarial assumptions: Investment rate of return 8.0% 8.0% 8.0% Projected salary increases** 6.0% 6.0% 6.5% Post Retirement COLA None None None * From longest lived benefit and/or assumption change **Includes inflation at 3% 65

84 Notes to Financial Statements September 30, 2012 L - EMPLOYER RETIREMENT PLANS (continued) 4. City of Cocoa Beach General Employees Pension Trust Fund Plan description The General Employees Pension Trust Fund (the Plan) covers full-time regular employees of the City and is administered by a Board composed of the City s Finance Director (chairman), a City Commissioner, two (2) general employees (elected by the general employees) and a resident of the City (selected by the City Commission). The Board s administrative authority includes, but is not limited to, eligibility determination for participation in the plan, early and late retirement, disability, contribution schedules, withdrawals and such investment determination as may be necessary. Current eligibility requirements provide that regular full-time general employees (not police officers or firefighters) may participate in the plan. Funding policy The City Commission establishes and may amend the contribution requirements of the Plan members and the City. Employees are required to contribute five (5%) percent of their gross pay to fund the Plan and the City is required to contribute funds at an actuarially determined rate, as a percentage of annual covered payroll. For the fiscal year ended September 30, 2012, the City s contribution rate was 16.03%, which amounted to a required contribution of $ 764,809. Annual pension costs The annual required contribution for the current year was determined as a part of the October 1, 2012 actuarial valuation using the frozen entry age actuarial cost method with the initial unfunded actuarial accrued liability determined by the entry age actuarial cost method and amortization of unfunded past service liability over a twenty- five (25) year period. The actuarial assumptions included an eight (8%) percent investment rate of return (net of investment-related expenses) and projected salary increases of six (6%) percent per year (including inflation at three (3%) percent). The assumptions did not include post-retirement benefit increases. Three-year Trend Information - General Employees Year Annual Percentage Net Ended Pension of APC* Pension September 30 Cost (APC) Contributed Obligation 2012 $ 764, % $ $ 773, % $ $ 627, % $ - * Annual Pension Cost from City sources Changes in benefit provisions/actuarial assumptions since the prior valuation There have been no changes in benefits since the prior valuation. Mortality rates for valuations dates after October 1, 2012 are based on the RP 2000 Combined Healthy Table projected to the valuation date using Schedule AA. 66

85 Notes to Financial Statements September 30, 2012 L - EMPLOYER RETIREMENT PLANS (continued) 5. City of Cocoa Beach Police Officers Retirement Trust Fund Plan description The City s Police Officers Retirement Trust Fund (the Plan) covers full-time police officers employed by the City s Police Department. A five (5) member Board of Trustees administers the Plan. Two (2) Board members are appointed by the City Commission and two (2) are police officer representatives elected by the employees. The initial four (4) trustees appoint the fifth member. Funding policy The City Commission establishes and may amend the contribution requirements of plan members and the City. Employees are required to contribute five percent (5%) of their gross pay to fund the Plan and the City is required to contribute funds at an actuarially determined rate, as a percentage of the annual covered payroll. For fiscal year ended September 30, 2012, the City s contribution rate was 45.85%, which amounted to an actual contribution of $ 814,745, which, when combined with the change in the Net Pension Obligation (NPO), equaled the required contribution. Annual pension costs The annual required contribution for the current year was determined as part of the October 1, 2012 actuarial valuation using the frozen entry age actuarial cost method with the initial unfunded actuarial accrued liability determined by the entry age normal actuarial cost method and amortization of unfunded past service liability over a thirty (30) year period. The actuarial assumptions included an eight (8%) percent investment rate of return (net of administrative expenses) and projected salary increases of six (6%) percent per year (including three (3%) percent inflation). The assumptions do not include post-retirement benefit increases. Three-year Trend Information - Police Employees Fiscal Actuarially Percentage Net Year Determined of APC* Pension Ended Contribution Contributed Obligation 9/30/2012 $ 815, % $ (7,624) 9/30/2011 $ 793, % $ (7,963) 9/30/2010 $ 668, % $ (8,446) *Annual Pension Cost from City sources; excludes state on behalf payments Changes in benefit provisions/actuarial assumptions since the prior valuation There have been no changes in benefits since the prior valuation. There have been no changes in methods or assumptions since the prior valuation. 67

86 Notes to Financial Statements September 30, 2012 L - EMPLOYER RETIREMENT PLANS (continued) 6. City of Cocoa Beach Firefighters Retirement Trust Fund Plan description The City s Firefighters Retirement Trust Fund (the Plan) covers full-time firefighters. A five (5) member Board of Trustees administers the plan. The City Commission appoints two (2) members. The employees elect two (2) Firefighter representatives. The initial four (4) trustees appoint the fifth member. Funding policy The City Commission establishes and may amend the contribution requirements of plan members and the City. Employees are required to contribute five percent (5%) of their gross pay to fund the plan and the City is required to contribute funds at an actuarially determined rate, calculated as a percentage of the annual covered payroll. For fiscal year ended September 30, 2012, the City s contribution rate was 46.44%, which amounted to a required contribution of $ 605,775. Annual pension costs The annual required contribution for the current year was determined as part of the October 1, 2012 actuarial valuation using the frozen entry age actuarial cost method with the initial unfunded actuarial accrued liability determined by the entry age normal actuarial cost method and amortization of unfunded past service liability over a thirty (30) year period. The actuarial assumptions included an eight (8%) percent investment rate of return (net of administrative expenses) and projected salary increases of six and one-half (6.5%) percent per year (including three (3%) percent inflation). The assumptions do not include post-retirement benefit increases. Three-year Trend Information - Fire Employees Fiscal Actuarially Percentage Net Year Determined of APC* Pension Ended Contribution Contributed Obligation 9/30/2012 $ 605, % $ - 9/30/2011 $ 521, % $ - 9/30/2010 $ 492, % $ - *Annual Pension Cost from City sources; excludes state on behalf payments Changes in benefit provisions/actuarial assumptions since the prior valuation Since the prior valuation, an ordinance was adopted, limiting the amount of overtime to be included in pensionable pay at 300 hours per year. There have been no changes in assumptions or methods since the prior valuation. 68

87 Notes to Financial Statements September 30, 2012 L - EMPLOYER RETIREMENT PLANS (continued) 7. Pension plan financial statements a. Statement of Plan Net Assets General Employees' Pension Trust Fund Police Officers' Retirement Trust Fund Firefighters' Retirement Trust Fund ASSETS Accrued income $ - $ 6,476 $ 6,558 Investments, at fair value: Cash and money market 334, , ,917 Mutual funds 13,330,135 6,090,390 6,339,148 Common stocks 3,905,644 2,052,845 1,976,115 Total investments 17,569,936 8,406,055 8,544,180 Total assets 17,569,936 8,412,531 8,550,738 LIABILITIES Pre-paid contributions 28,558 69, ,730 NET ASSETS Held in trust for pension benefits 17,541,378 8,343,265 8,413,008 Total net assets $ 17,541,378 $ 8,343,265 $ 8,413,008 69

88 Notes to Financial Statements September 30, 2012 L - EMPLOYER RETIREMENT PLANS (continued) 7. Pension plan financial statements (continued) b. Statement of Changes in Plan Net Assets ADDITIONS Contributions: General Employees' Pension Trust Fund Police Officers' Retirement Trust Fund Firefighters' Retirement Trust Fund Employer $ 764,809 $ 722,971 $ 520,968 Plan members 238,556 88,848 65,221 State (on behalf payments) - 91, ,716 Citizen Total contributions 1,003, , ,905 Investment earnings: Net increase (decrease) in fair value of investments 1,984,385 1,590,552 1,585,782 Interest and dividends 636, , ,054 Total investment earnings 2,621,343 1,747,927 1,742,836 Less investment expenses 65,247 34,431 34,600 Net investment earnings 2,556,096 1,713,496 1,708,236 Total additions 3,559,461 2,617,089 2,428,141 DEDUCTIONS Benefits 714, , ,934 Other expenses 33,998 28,033 23,044 Total deductions 748, , ,978 Change in net assets 2,811,228 1,813,040 1,818,163 Net assets, beginning of year 14,730,150 6,530,225 6,594,845 Net assets, end of year $ 17,541,378 $ 8,343,265 $ 8,413,008 70

89 Notes to Financial Statements September 30, 2012 L - EMPLOYER RETIREMENT PLANS (continued) 8. Funded Status and Funding Progress City of Cocoa Beach General Employees Pension Trust Fund As of September 30, 2012, the actuarial accrued liability (AAL) for benefits was $ 17,303,559 and the actuarial value of assets was $ 17,195,782, resulting in an unfunded actuarial accrued liability (UAAL) of $ 107,777. The covered payroll was $4,886,906 and the ratio of the UAAL to the covered payroll was 2.21%. City of Cocoa Beach Police Officers Retirement Trust Fund As of September 30, 2012, the actuarial accrued liability (AAL) for benefits was $ 14,499,039 and the actuarial value of assets was $ 7,820,220, resulting in an unfunded actuarial accrued liability (UAAL) of $ 6,678,819. The covered payroll was $ 1,798,182 and the ratio of the UAAL to the covered payroll was %. City of Cocoa Beach Firefighters Retirement Trust Fund As of September 30, 2012, the actuarial accrued liability (AAL) for benefits was $ 13,002,091 and the actuarial value of assets was $ 7,816,982, resulting in an unfunded actuarial accrued liability (UAAL) of $ 5,185,109. The covered payroll was $ 1,439,422 and the ratio of the UAAL to the covered payroll was %. The schedule of funding progress immediately following the notes to the financial statements presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. The schedule of employer contributions immediately following the notes to the financial statements presents multi-year information designed to show the extent to which the City has actually funded the actuarially determined annual required contribution (ARC) over time. 71

90 Notes to Financial Statements September 30, 2012 M - OTHER POST-EMPLOYMENT BENEFITS (OPEB) Effective for the 2009 fiscal year, the City implemented GASB No. 45, Accounting and Financial Reporting by Employers for Post-Employment Benefits Other Than Pensions, for certain postemployment benefits provided by the City. The statement generally requires that state and local governmental employers account for and report the annual cost of OPEB and the outstanding obligations and commitments related to OPEB in essentially the same manner as they currently do for pensions. 1. Description of Healthcare Benefits The post-employment health care benefits are administered by the City pursuant to the provisions of section , Florida Statutes. Former employees and eligible dependents who retire from the City may continue to participate in the City s fully insured health and hospitalization plan for medical coverage. However, the City subsidizes the premium rates paid by retirees by allowing them to participate in the plans at reduced or blended group premium rates for both active and retired employees. These rates provide an implicit subsidy for retirees because, on an actuarial basis, their current and future claims are expected to result in higher costs to the plan on average than those of active employees. In addition, the City contributes a portion of the premium cost (explicit subsidy) with the retirees responsible for the remainder of the payment. Significant changes were made to the OPEB benefit plan effective January 1, These changes reduce benefits for current employees retiring after January 1, 2014 and for new employees hired after January 1, The cumulative effect is expected to be a significant reduction in OPEB liability. Pre-Medicare retirees who retired prior to January 1, 2009 and participate in the group insurance plan offered by the City are required to contribute fifty (50%) percent of the active premium. Once these retirees are Medicare eligible, the City converts the health insurance to a Medicare supplement policy and pays one hundred (100%) percent of the premium. Retirees who retire after January 1, 2009, but were hired prior to January 1, 2009, must meet certain age and service requirements in order to be eligible for any City-paid premiums. For retirees hired after January 1, 2009, at least twenty-five (25) years of service is required before the City will contribute 33% of Pre-Medicare premiums. In addition, General employees must be at least age sixty-two (62) and Police Officers and Firefighters must be at least age fifty-five (55). Retirees are eligible for coverage in the Medicare supplement policy but pay 100% of the premium. In future years, contributions are assumed to increase at the same rate as premiums. Dental and Vision coverage is currently not available to retirees. As of September 30, 2012, the City provided healthcare benefits for fifty-two (52) eligible retired employees and beneficiaries. 72

91 Notes to Financial Statements September 30, 2012 M - OTHER POST EMPLOYMENT BENEFITS (OPEB) (continued) 2. Description of Life Insurance Benefits Life Insurance in the amount of $ 5,000 may be provided to some current retirees up to age 70, and then coverage drops to $ 2,500. The retiree contributes 100% of the premium for this benefit. The City provides a pass-through billing service at no charge to the employee. This benefit provides an implicit subsidy because the retiree receives the same rate as an active City employee. However, Life Insurance is not offered to employees retiring after October 1, At September 30, 2012, there were twenty-four (24) retirees and eligible dependents remaining in this program. 3. Summary of Significant Accounting Policies Basis of Accounting. The financial statements are prepared using the accrual basis of accounting. Contributions are recognized in the period in which the contributions are due. Benefits, refunds and administrative costs are recognized when due and payable in accordance with the terms of the plan. Method Used to Value Investments. Investments are reported at fair value. The Florida Municipal Pension Trust Fund (FMPTF) provides monthly statements for this purpose. Presentation of Financial Statements. The OPEB trust does not issue stand-alone financial reports and is not included in the reports of any other entity. 4. Funding Policy The Plan was established by Resolution in terminated as circumstances require by Resolution. The Plan may be amended or The numbers shown below reflect a decision to partially fund the program. Therefore, the contributions made to the program are the benefits paid to retirees (both on an explicit and implicit basis) and administrative expenses. An initial $100,000 was contributed to the OPEB fund run by the FMPTF administered by the Florida League of Cities in October As of September 30, 2012, four (4) annual payments of $ 100,000 each had been made to the FMPTF. A payment of $ 100,000 for FY 2013 was made in December The program was amended as of January 1, 2009, as described above (i.e. benefit changes for employees hired after January 1, 2009) and those new provisions were used to determine the Net OPEB Obligation for FY 2009 and years following. Benefits may be changed from time to time by management as noted above. Under the current policy, if a retiree does not make his or her payments for the benefits as described above the benefit is forfeited and cannot be reinstated. 73

92 Notes to Financial Statements September 30, 2012 M - OTHER POST EMPLOYMENT BENEFITS (OPEB) (continued) 5. Annual OPEB Cost and Net OPEB Obligation Fiscal Year Ending September 30, 2012 Normal Cost $ 178,376 Interest on Normal Cost 10,454 Normal Cost Component 188,830 Amortization Amount 284,384 Amortization Interest 17,063 Amortization Component 301,447 Annual Required Contribution (ARC) 490,277 Interest on net OPEB Obligation 69,332 Adjustment to Annual Required Contribution (74,093) Annual OPEB Cost (Expense) 485,516 Estimated Net Contribution Made (163,026) Anticipated Increase (Decrease) in Net OPEB Obligation 322,490 Net OPEB Obligation - Beginning of Year 1,155,528 Estimated Net OPEB Obligation - End of Year $ 1,478,018 Allocation of the OPEB Obligation Fund Personnel Percent Amount General Fund % $ 1,160,817 Golf Course % 128,230 Utility System % 161,975 Stormwater % 26,996 Total % $ 1,478,018 74

93 Notes to Financial Statements September 30, 2012 M - OTHER POST EMPLOYMENT BENEFITS (OPEB) (continued) 6. Funded Status and Funding Progress As of September 30, 2012, the actuarial accrued liability (AAL) for benefits was $ 4,800,974, and the actuarial value of assets was $ 313,234 dollars, resulting in an unfunded actuarial accrued liability (UAAL) of $ 4,487,740. The covered payroll was $ 7,314,426 and the ratio of the UAAL to the covered payroll was 61.40%. As of October 1, 2012, there were forty-one (41) retirees and five (5) eligible dependents receiving postemployment health care benefits. In FY 2012 the City contribution of $ 163,026 consists of two (2) components: $ 63,026 for the current year as noted above and a $ 100,000 contribution to the FMPTF to continue funding Actuarial Valuation Date Actuarial Value of Assets (AVA) ( a ) Schedule of Funding Progress Actuarial Accrued Liability (AAL) ( b ) Unfunded AAL (UAAL) ( b-a ) Funded Ratio ( a/b ) Covered Payroll ( c ) Ratio of UAAL to Covered Payroll ( b-a/c ) 10/1/2011 $ 313,234 $ 4,800,974 $ 4,487, % $ 7,314, % 10/1/ ,284 4,797,993 4,580, % 7,854, % 10/1/ ,350 4,522,910 4,421, % 8,665, % 10/1/2008-4,592,459 4,592,459-7,719, % The Required Supplementary Information (RSI) immediately following the notes to the financial statements presents additional multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. 75

94 Notes to Financial Statements September 30, 2012 M - OTHER POST EMPLOYMENT BENEFITS (OPEB) (continued) 7. Actuarial Methods and Assumptions Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment and termination, mortality, and the healthcare cost trends. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. Projections of benefits for financial reporting purposes are based on the substantive plan provisions, as understood by the employer and participating members, and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and participating members. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. The OPEB liability is currently partially funded, with a combination of annual contributions to a professionally managed fund and City premium payments on a pay-as-you-go basis. The City s actuarial valuation as of October 1, 2011, was used to estimate the unfunded actuarial liability and to determine the annual required contribution for the fiscal year ended September 30, The actuarial assumptions included the following: Funding Method - Entry age normal actuarial cost method (level Percent of Pay) Retirement age for active employees - Based on historical average retirement ages for General, Fire & Police employee categories. Mortality - RP Combined Healthy Mortality Table Turnover - City s historical data by age in General, Fire & Police employee categories. Healthcare cost trend rate nine (9 %) percent in 2012; 8.55 in 2013; decreasing 1% each year to the ultimate rate of four and one half (4.5%) percent in Health insurance premiums - Actual 2012 premiums were used to calculate the values of benefits to be paid. Payroll growth rate - three (3.0%) percent per year (0% for General employees). Inflation rate - three (3.0%) percent per year. Interest rate - six (6.0%) percent per year, compounded annually, net of investment related expenses. The unfunded actuarial accrued liability is being amortized as a level percentage of (closed amortization over thirty (30) years) payroll. 76

95 Notes to Financial Statements September 30, 2012 N - INFORMATION ITEMS 1. Community Redevelopment Agency In 2008, the City s electorate approved the formation of a Community Redevelopment Agency (CRA). As of September 30, 2012 the CRA had been formed, and the plan was delivered to the taxing authorities in April, Tax increment funding (TIF) is not available for the FY 2013 budget. The FY 2013 budget was prepared without the TIF. The TIF funding is expected in FY State Board of Administration (SBA) Florida Prime (formerly Local Government Surplus Trust Funds Investment Pool Fund A) (LGIP-A) In December 2008, all Florida Prime balances became 100% liquid. In accordance with GASB 31, Florida Prime balances are considered an SEC 2a7 -like fund and the account balance is considered the fair value of the of the investment. Currently, LGIP Fund B participants are prohibited from withdrawing from that pool. Fund B cash holdings are being distributed as they become available from maturities, sales, investment interest and other income received from the assets in Fund B to the Florida Prime accounts of participants in proportion to their original adjusted Fund B balances. The investment objective of Fund B is to maximize the present value of distributions to participants. The Fund B balance as of September 30, 2012, is $ 18,742. The SBA has, in accordance with GASB 31, provided a fair value factor of to value the City s investment. Our adjusted balance is $ 17,786. The weighted average life (WAL) is estimated at 4.08 years. Additional information regarding these funds Administration. may be obtained from the State Board of 77

96 Intentionally Blank Page 78

97 REQUIRED SUPPLEMENTARY INFORMATION (RSI) 79

98 Required Supplementary Information September 30, 2012 Two schedules of actuarial trend information typically must be presented in connection with defined benefit pension plans. 1. Schedule of Funding Progress (Pension Plans) The schedule of funding progress is designed to show the extent to which a plan has over time set aside assets sufficient to cover its actuarial accrued liability. Actuarial Valuation Date Actuarial Value of Assets ( a ) Actuarial Accrued Liability * (AAL) ( b ) Unfunded AAL (UAAL) ( b-a ) Funded Ratio ( a/b ) Covered Payroll ( c ) UAAL as a Percentage of Covered Payroll ( b-a/c ) General Employees' Pension Trust Fund 10/1/2012 $ 17,195,782 $ 17,303,559 $ 107, % $ 4,886, % 10/1/2011 $ 16,055,038 $ 15,623,261 $ (431,777) % $ 4,879, % 10/1/2010 $ 15,944,467 $ 15,509,486 $ (434,981) % $ 4,871, % 10/1/2009 $ 15,340,869 $ 14,790,697 $ (550,173) % $ 4,915, % 10/1/2008 $ 14,594,805 $ 13,834,187 $ (760,618) % $ 4,952, % 10/1/2007 $ 12,857,634 $ 12,882,425 $ 24, % $ 4,944, % 10/1/2006 $ 10,962,987 $ 11,265,446 $ 302, % $ 4,612, % 10/1/2005 $ 9,390,224 $ 9,841,362 $ 451, % $ 4,542, % 10/1/2004 $ 7,856,525 $ 8,471,448 $ 614, % $ 4,150, % 10/1/2003 $ 6,877,248 $ 7,644,786 $ 767, % $ 4,140, % Police Officers' Retirement Trust Fund 10/1/2012 $ 7,820,220 $ 14,499,039 $ 6,678, % $ 1,798, % 10/1/2011 $ 7,066,831 $ 14,287,613 $ 7,220, % $ 1,852, % 10/1/2010 $ 7,206,808 $ 14,638,112 $ 7,431, % $ 1,841, % 10/1/2009 $ 7,027,836 $ 13,975,918 $ 6,948, % $ 1,778, % 10/1/2008 $ 7,098,373 $ 13,177,991 $ 6,079, % $ 1,710, % 10/1/2007 $ 7,342,820 $ 12,263,527 $ 4,920, % $ 1,618, % 10/1/2006 $ 6,951,162 $ 11,523,256 $ 4,572, % $ 1,458, % 10/1/2005 $ 6,606,725 $ 11,019,222 $ 4,412, % $ 1,486, % 10/1/2004 $ 6,496,318 $ 10,432,694 $ 3,936, % $ 1,497, % 10/1/2003 $ 6,701,023 $ 9,633,760 $ 2,932, % $ 1,413, % Firefighters' Retirement Trust Fund 10/1/2012 $ 7,816,982 $ 13,002,091 $ 5,185, % $ 1,439, % 10/1/2011 $ 6,963,778 $ 12,180,852 $ 5,217, % $ 1,362, % 10/1/2010 $ 7,045,162 $ 12,366,572 $ 5,321, % $ 1,365, % 10/1/2009 $ 6,991,841 $ 11,935,259 $ 4,943, % $ 1,376, % 10/1/2008 $ 6,687,635 $ 11,522,353 $ 4,834, % $ 1,478, % 10/1/2007 $ 6,086,462 $ 10,496,385 $ 4,409, % $ 1,337, % 10/1/2006 $ 5,519,891 $ 9,681,202 $ 4,161, % $ 1,391, % 10/1/2005 $ 4,964,802 $ 8,660,400 $ 3,695, % $ 1,318, % 10/1/2004 $ 4,705,949 $ 7,921,292 $ 3,215, % $ 1,151, % 10/1/2003 $ 4,828,035 $ 7,671,211 $ 2,843, % $ 1,220, % * General Employees Plan uses the Frozen Initial Liability (FIL) Actuarial Cost Method Police & Firefighter's Plans use the Individual Entry Age Normal Actuarial Cost Method 80

99 Required Supplementary Information September 30, Schedule of Employer Contributions (Pension Plans) The schedule of employer contributions is designed to show the extent to which employers have actually funded their actuarially determined annual required contribution over time. Schedule of Required Contributions From Employers and Other Contributing Entities General Employees' Pension Trust Fund Year Ended Sept. 30 Annual Required Contribution Percentage Contributed (Employer) State Contribution 2012 $ 764, % N/A 2011 $ 773, % N/A 2010 $ 627, % N/A 2009 $ 692, % N/A 2008 $ 786, % N/A 2007 $ 867, % N/A Police Officers' Retirement Trust Fund Year Ended Sept. 30 Annual Required Contribution City Contribution State (on behalf) Contribution* Percentage Contributed 2012 $ 814,744 $ 722,971 $ 91, % 2011 $ 792,672 $ 704,001 88, % 2010 $ 667,614 $ 573,850 93, % 2009 $ 488,842 $ 396,286 96, % 2008 $ 438,734 $ 344,948 98, % 2007 $ 455,328 $ 362,772 92, % Firefighters' Retirement Trust Fund Year Ended Sept. 30 Annual Required Contribution City Contribution State (on behalf) Contribution Percentage Contributed 2012 $ 605,775 $ 520,598 $ 84,807** % 2011 $ 521, ,864 84,807** % 2010 $ 492, ,287 84,807** % 2009 $ 485, ,489 84,807** % 2008 $ 446, ,750 84,807** % 2007 $ 407, ,659 84,807** % *Frozen per Chapter 185, F.S., as amended **Frozen per Chapter 175, F.S., as amended 81

100 Required Supplementary Information September 30, Narrative Summary (Pension Plans) General Employees' Pension Trust Fund During the past twelve (12) months, the experience was more favorable than expected relative to the Plan s actuarial assumptions. The principal component of favorable experience is attributable to average increases in pensionable compensation that were less than the assumption approximately four (4%) percent. This gain was partially offset by a 5.5% investment return (Actuarial Asset Basis) that was less than the 8% assumption. 1. Plan Changes Since Prior Valuation There have been no changes in benefits since the prior valuation. 2. Actuarial Assumptions & Method Changes Since Prior Valuation Mortality rates for valuation dates on and after October 1, 2012 are based on the RP 2000 Combined Healthy Table, projected to the valuation date using Schedule AA. Police Officers' Retirement Trust Fund During the past twelve (12) months, the experience has been more favorable than expected on the basis of the Plan s actuarial assumptions. The primary components of gain included average pensionable earnings that were less than the assumed rate by almost 5%, greater than expected turnover, and a 9.1% investment return (Actuarial Asset Basis) exceeding the 8% assumption. These gains were partly offset by one disability retirement. 1. Plan Changes Since Prior Valuation There have been no changes in benefits since the prior valuation. 2. Actuarial Assumptions & Method Changes Since Prior Valuation There have been no changes in methods or actuarial assumptions since the prior valuation. 82

101 Required Supplementary Information September 30, Narrative Summary (Pension Plans) (continued) Firefighters' Retirement Trust Fund During the past twelve (12) months, the experience was slightly less favorable than expected on the basis of the Plan s actuarial assumptions. The primary components of loss included lower than expected employee turnover and one Disability Retirement. These losses were partially offset by average increases in pensionable earnings that were less than the assumed rate by more than 4%, and an 8.8% investment return (Actuarial Asset Basis) exceeding the 8% assumption. 1. Plan Changes Since Prior Valuation There have been no changes in benefits since the prior valuation. A plan change limiting the amount of overtime included in pensionable pay at 300 hours per year was adopted by ordinance. 2. Actuarial Assumptions & Method Changes Since Prior Valuation There have been no changes in assumptions or methods since the prior valuation. 4. Narrative Summary (OPEB Obligation) The OPEB liability is currently partially funded, with a combination of annual contributions to a professionally managed fund and City premium payments on a pay-as-you-go basis. See note M, paragraph 4 for additional details. 5. Schedule of Funding Progress (OPEB Obligation) Actuarial Valuation Date Actuarial Value of Assets (AVA) ( a ) Schedule of Funding Progress Actuarial Accrued Liability (AAL) ( b ) Unfunded AAL (UAAL) ( b-a ) Funded Ratio ( a/b ) Covered Payroll ( c ) Ratio of UAAL to Covered Payroll ( b-a/c ) 10/1/2011 $ 313,234 $ 4,800,974 $ 4,487, % $ 7,314, % 10/1/2010 $ 217,284 $ 4,797,993 $ 4,580, % $ 7,854, % 10/1/2009 $ 101,350 $ 4,522,910 $ 4,421, % $ 8,665, % 10/1/2008 $ - $ 4,592,459 $ 4,592,459 - $ 7,719, % 83

102 Required Supplementary Information September 30, Schedule of Employer Contributions (OPEB Obligation) Contributions began in October 2008 (FY 2009) Fiscal Year Ended Schedule of Employer Contributions Annual OPEB Cost Percentage Contributed Net OPEB Obligation 9/30/2012 $ 485, % $ 1,478,018 9/30/2011 $ 537, % $ 1,155,528 9/30/2010 $ 529, % $ 736,955 9/30/2009 $ 503, % $ 356,273 84

103 OTHER SUPPLEMENTAL INFORMATION 85

104 Combining Balance Sheet Non-major Governmental Funds September 30, 2012 Metered Parking Fund Special Revenue Confiscated Property Fund Total Nonmajor Governmental Funds ASSETS Cash and cash equivalents $ 852,057 $ 188,497 $ 1,040,554 Investments 273, ,043 Accounts receivable Total assets $ 1,125,600 $ 188,497 $ 1,314,097 LIABILITIES AND FUND BALANCES Liabilities: Accrued liabilities $ 18,651 $ - $ 18,651 Fund balances: Restricted for law enforcement - 188, ,497 Committed 1,106,949-1,106,949 Total fund balances 1,106, ,497 1,295,446 Total liabilities and fund balances $ 1,125,600 $ 188,497 $ 1,314,097 86

105 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Non-major Governmental Funds For the Fiscal Year Ended September 30, 2012 Metered Parking Fund Special Revenue Confiscated Property Fund Total Nonmajor Governmental Funds REVENUES Parking meter fees $ 493,401 $ - $ 493,401 Fines and forfeitures 230,249 2, ,014 Investment earnings 2, ,411 Gain on sale of assets Miscellaneous revenues Total revenues 726,030 3, ,057 EXPENDITURES Current: General government 316,408 19, ,373 Total expenditures 316,408 19, ,373 Excess of revenues over (under) expenditures 409,622 (16,938) 392,684 OTHER FINANCING SOURCES (USES) Transfer in 127, ,700 Transfer out (462,374) - (462,374) Total other financing sources (334,674) - (334,674) Net change in fund balances 74,948 (16,938) 58,010 Fund balances, beginning of year 1,032, ,435 1,237,436 Fund balances, end of year $ 1,106,949 $ 188,497 $ 1,295,446 87

106 Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Metered Parking Special Revenue Fund For the Fiscal Year Ended September 30, 2012 Variance with Budget Amounts Final Budget - Original Final Actual Amounts Positive (Negative) REVENUES Parking meter fees $ 465,000 $ 465,000 $ 493,401 $ 28,401 Parking fines 195, , ,249 35,249 Investment earnings 7,762 7,762 2,280 (5,482) Gain on sale of assets Miscellaneous revenues 1,500 1, (1,400) Total revenues 669, , ,030 56,768 EXPENDITURES Current: General government 748, , , ,319 Total expenditures 748, , , ,319 Excess of revenues over (under) expenditures (79,585) (215,465) 409, ,087 OTHER FINANCING SOURCES (USES) Transfer in 127, , ,700 - Transfer out (462,374) (462,374) (462,374) - Net change in fund balances (414,259) (550,139) 74, ,087 Fund balances, beginning of year 1,032,001 1,032,001 1,032,001 - Fund balances, end of year $ 617,742 $ 481,862 $ 1,106,949 $ 625,087 88

107 Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Confiscated Property Special Revenue Fund For the Year Ended September 30, 2012 Variance with Budget Amounts Final Budget - Original Final Actual Amounts Positive (Negative) REVENUES Fines and forfeitures $ - $ - $ 2,765 $ 2,765 Investment earnings Gain on sale of assets Total revenues - - 3,027 3,027 EXPENDITURES Current: General government ,965 (19,965) Total expenditures ,965 (19,965) Excess of revenues over expenditures - - (16,938) (16,938) Fund balances, beginning of year 205, , ,435 - Fund balances, end of year $ 205,435 $ 205,435 $ 188,497 $ (16,938) 89

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109 STATISTICAL SECTION (Unaudited) This part of the City of Cocoa Beach s Comprehensive Annual Financial Report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the city s overall financial health. Table of Contents & Additional Notes A. Financial Trends These schedules contain trend information to help the reader understand how the city s financial performance and well-being have changed over time. Page Table A - 1 Net Assets by Component 93 Table A - 2 Changes in Net Assets 94 Table A - 3 Fund Balances - Governmental Funds 96 Table A - 4 Changes in Fund Balances - Governmental Funds 97 B. Revenue Capacity These schedules contain information to help the reader assess the city s most significant local revenue source, the property tax. Page Table B - 1 Value of Taxable Property 98 Table B - 2 Direct and Overlapping Property Tax Rates 99 Table B - 3 Principal Property Taxpayers 100 Table B - 4 Property Tax Levies and Collections 101 C. Debt Capacity These schedules present information to help the reader assess the affordability of the city s current levels of outstanding debt and the city s ability to issue additional debt in the future. Page Table C - 1 Ratios of Outstanding Debt by Type 102 Table C - 2 Ratios of General Bonded Debt Outstanding (See Notes) - Table C - 3 Direct and Overlapping Governmental Activities Debt 103 Table C - 4 Legal Debt Margin Information (See Notes) - Table C - 5 Pledged Revenue Coverage 105 D. Demographic and Economic Information Financial Trends These schedules offer demographic and economic indicators to help the reader understand the environment within which the city s financial activities take place. Page Table D - 1 Demographic and Economic Statistics 106 Table D - 2 Principal Employers 107 (Continued) 91

110 STATISTICAL SECTION (Unaudited) (Continued) E. Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the city s financial report relates to the services the city provides and the activities it performs. Page Table E - 1 Full-time Equivalent City Government Employees by Function/Program 108 Table E - 2 Operating Indicators by Function/Program 109 Table E - 3 Capital Asset Statistics by Function/Program 110 Additional Notes Unless otherwise noted, the information in these schedules is derived from the City s Comprehensive Annual Financial Report (CAFR) for the relevant year. In 2004 the Governmental Accounting Standards Board (GASB) issued Statement 44, which governs the preparation of the statistical section with an effective date for periods beginning after June 15, Financial statements present the financial position of a government as of a particular date. The intention of Statement 44 is to present detailed information, in ten-year trends, to assist users in evaluating the economic condition of a government over time. This gives a much broader view than the financial statements themselves. Most schedules require data presentation retroactively only to the implementation date of GASB Statement 34. The City implemented GASB Statement 34 in Fiscal Year The tenth presentation year was reached in FY Actual titles of some schedules will vary from the general titles shown above. Neither the City of Cocoa Beach Charter or Code, nor the Florida Statutes limit the amount of debt the City of Cocoa Beach can issue; therefore tables showing the City s legal debt limit and debt margins are not applicable. The City has not issued any General Bonded Debt in the last ten (10) years. The following statistical tables which are normally included in a government s Comprehensive Annual Financial Report are not applicable and, accordingly, are not included in this report. Table C - 2 Table C - 4 Ratios of General Bonded Debt Outstanding Legal Debt Margin Information 92

111 Table A-1 Net Assets by Component Last Ten Fiscal Years Governmental activities Invested in capital assets, net of related debt $ 11,307,449 $ 17,216,916 $ 17,410,323 $ 17,427,319 $ 17,780,910 $ 18,708,421 $ 18,261,764 Restricted 100, , , , , , ,697 Unrestricted 9,815,606 6,413,259 7,504,212 8,814,972 8,930,157 8,743,640 8,984,450 Total governmental activities net assets $ 21,223,617 $ 24,014,681 $ 25,160,452 $ 26,467,518 $ 26,912,617 $ 27,657,496 $ 27,450,911 Business-type activities Invested in capital assets, net of related debt $ 17,129,299 $ 23,286,859 $ 25,798,570 $ 27,284,398 $ 31,284,569 $ 31,165,812 $ 32,096,348 Restricted 2,709,115 1,927,068 2,041,853 2,025, , ,626 98,193 Unrestricted 8,938,629 8,451,326 6,480,832 3,987,231 1,893,282 2,447,560 2,091,980 Total business-type activities net assets $ 28,777,043 $ 33,665,253 $ 34,321,255 $ 33,297,222 $ 33,290,691 $ 33,718,998 $ 34,286,521 Primary government Invested in capital assets, net of related debt 28,436,748 40,503,775 43,208,893 44,711,717 49,065,479 49,874,233 50,358,112 Restricted 2,809,677 2,311,574 2,287,770 2,250, , , ,890 Unrestricted 18,754,235 14,864,585 13,985,044 12,802,203 10,823,439 11,191,200 11,076,430 Total primary government net assets $ 50,000,660 $ 57,679,934 $ 59,481,707 $ 59,764,740 $ 60,203,308 $ 61,376,494 $ 61,737,432 Notes: 1. Accrual basis of accounting. 2. Accounting standards require that net assets be reported in three (3) components in the financial statements: invested in capital assets, net of related debt; restricted; and unrestricted. 3. Net assets are considered restricted only when an external party, such as the state or federal government, places a restriction on how the resources may be used, or through enabling legislation enacted by the City. 93

112 Table A-2, Part 1 Changes in Net Assets Last Ten Fiscal Years Program Expenses Governmental activities: General Government $ 2,243,760 $ 2,707,193 $ 3,312,362 $ 3,582,822 $ 4,041,326 $ 3,558,863 $ 3,802,676 $ 3,249,190 $ 3,357,724 $ 2,788,002 Public Safety 5,634,022 6,202,393 5,960,791 6,644,722 7,280,825 7,628,097 7,382,335 8,146,626 8,895,179 8,906,595 Physical Environment 1,167,381 1,205,702 1,254,638 1,322,685 1,419,442 1,472,568 1,529,693 1,474,627 1,463,330 1,448,782 Transportation/Public Works 3,062,277 3,731,067 3,337,931 3,658,984 3,695,886 3,043,125 3,037,158 3,291,140 3,135,193 3,450,828 Recreation 834, , , , , , , ,958 1,008,353 1,202,669 Interest on long-term debt 72,834 92,597 98,331 80,381 68,190 32,660 27,292 21,608 15,697 9,587 Total governmental activities program expenses 13,014,690 14,800,937 14,863,733 16,007,967 17,448,120 16,692,620 16,678,179 17,151,149 17,875,476 17,806,463 Business-type activities: Utilities System 4,224,605 4,377,204 4,875,069 4,957,482 4,880,873 4,895,213 5,242,467 4,894,135 4,682,920 4,846,321 Golf 2,298,850 2,365,398 2,341,842 2,495,109 3,156,264 2,577,661 2,693,504 2,691,019 2,821,748 2,704,671 Stormwater 456, , , , , , , , , ,407 Total business-type activities program expenses 6,980,047 7,220,208 7,711,663 8,036,153 8,643,729 8,055,313 8,541,980 8,171,329 8,015,489 8,033,399 Total primary government program expenses $ 19,994,737 $ 22,021,145 $ 22,575,396 $ 24,044,120 $ 26,091,849 $ 24,747,933 $ 25,220,159 $ 25,322,478 $ 25,890,965 $ 25,839,862 Program Revenues Governmental activities: General government $ 979,539 $ 1,178,295 $ 1,749,595 $ 1,569,992 $ 1,771,039 $ 1,501,714 $ 2,139,597 $ 2,112,700 $ 2,747,622 $ 2,047,310 Public Safety 323, , , , , , , , , ,032 Physical Environment 1,479,497 1,475,062 1,476,766 1,525,285 1,537,120 1,586,746 1,575,950 1,544,614 1,588,430 1,605,658 Transportation/Public Works 312, , , ,516 1,128, ,093 1,068,118 1,026,787 1,159,062 1,109,997 Recreation 193, , , , , , , , , ,540 Operating grants and contributions 31,809 1,220, , , , , , Capital grants and contributions ,697 1,026, ,108 Total governmental activities program revenues 3,319,963 4,858,240 5,393,290 5,084,562 5,462,739 5,229,605 6,059,255 5,982,185 7,192,349 6,196,645 Business-type activities: Charges for services: Utilities System 5,212,772 5,194,029 5,092,130 5,038,354 4,941,702 5,042,600 5,009,239 5,169,109 5,544,368 6,058,715 Golf 2,200,922 2,242,289 2,353,821 2,466,258 2,429,321 2,364,654 1,749,352 1,977,061 2,103,128 2,225,397 Stormwater 528, , , , , , , , , ,912 Operating grants and contributions 105,600 25, , Capital grants and contributions 36, ,540-1,176, , , , ,021 73,391 Total business-type activities program revenues 8,084,290 8,032,102 8,183,958 8,511,981 9,196,628 8,736,307 7,601,810 8,495,305 8,855,536 9,025,415 Total primary government program revenues $ 11,404,253 $ 12,890,342 $ 13,577,248 $ 13,596,543 $ 14,659,367 $ 13,965,912 $ 13,661,065 $ 14,477,490 $ 16,047,885 $ 15,222,060 94

113 Table A-2, Part 2 General Revenues and Other Changes in Net Assets Last Ten Fiscal Years Net (Expense) Revenue Governmental activities: $ 5,246,406 $ (9,942,697) $ (9,470,443) $ (10,923,405) $ (11,985,381) $ (11,463,015) $ (10,618,924) $ (11,168,964) $ (10,683,127) $ (11,609,818) Business-type activities - 905, , , , ,994 (940,170) 323, , , Total primary government net expense $ 5,246,406 $ (9,037,057) $ (8,998,148) $ (10,447,577) $ (11,432,482) $ (10,782,021) $ (11,559,094) $ (10,844,988) $ (9,843,080) $ (10,617,802) General Revenues and Other Changes in Net Assets Governmental activities: General Revenues Property taxes $ 5,246,406 $ 5,760,621 $ 6,144,630 $ 6,632,845 $ 7,341,257 $ 7,005,132 $ 6,982,452 $ 6,536,885 $ 6,327,375 $ 6,348,123 Local Option Gas Tax 380, , , , , , , , , ,735 Franchise taxes 1,074,565 1,163,260 1,188,000 1,454,603 1,545,098 1,460,119 1,550,539 1,424,131 1,357,980 1,358,787 Excise Taxes 1,891,561 1,836,706 1,865,377 1,878,965 1,833,416 1,811,006 1,915,443 1,977,281 1,926,808 1,891,349 Intergovernmental 1,071,509 1,125,972 1,168,907 1,230,616 1,107, , , , , ,626 Unrestricted investment earnings 153,547 99, , , , , , , ,315 96,921 Miscellaneous revenues ,447 33,943 79, , ,638 Gain on sale of capital assets 8,344 16, Transfers 246, ,544 91,054 91,054 (1,561,325) 341, , , , ,054 Total governmental activities 10,073,424 10,600,611 11,089,373 12,276,578 11,146,428 12,608,786 11,925,990 11,614,063 11,428,006 11,403,233 Business-type activities: Unrestricted investment earnings 138, , , , , , , ,547 79,314 66,561 Gain on sale of capital assets (2,503) Transfers (246,568) (210,544) (91,054) (91,054) 1,561,325 (341,054) (221,054) (441,054) (491,054) (491,054) Total business-type activities (110,767) (100,973) 130, ,562 2,075,724 (24,993) (83,863) (330,507) (411,740) (424,493) Total primary government $ 9,962,657 $ 10,499,638 $ 11,219,608 $ 12,653,140 $ 13,222,152 $ 12,583,793 $ 11,842,127 $ 11,283,556 $ 11,016,266 $ 10,978,740 Changes in Net Assets Governmental activities $ 378,697 $ 657,914 $ 1,618,930 $ 1,353,173 $ (838,953) $ 1,145,771 $ 1,307,066 $ 445,099 $ 744,879 $ (206,585) Business-type activities 993, , , ,390 2,628, ,001 (1,024,033) (6,531) 428, ,523 Total primary government $ 1,372,173 $ 1,462,581 $ 2,221,460 $ 2,205,563 $ 1,789,670 $ 1,801,772 $ 283,033 $ 438,568 $ 1,173,186 $ 360,938 Note: Modified Accrual Basis of Accounting 95

114 Table A-3 Fund Balances, Governmental Funds Last Ten Fiscal Years General Fund Reserved Unreserved $ 159,999 $ 141,392 $ 279,013 $ 740,067 $ 1,263,382 $ 800,507 $ 686,318 $ 2,665,004 $ - $ - 9,552,635 8,498,184 10,001,075 10,416,471 5,288,000 6,737,924 8,667,363 7,247, Nonspendable ,117,227 3,530,116 Restricted ,200 Committed ,083, ,570 Assigned Unassigned ,691,311 6,116,168 Total general fund Fiscal Year $ 9,712,634 $ 8,639,576 $ 10,280,088 $ 11,156,538 $ 6,551,382 $ 7,538,431 $ 9,353,681 $ 9,912,214 $ 9,892,144 $ 10,331,054 All Other Governmental Funds Reserved, reported in: Confiscated Property Fund $ 100,562 $ 97,940 $ 108,191 $ 124,576 $ 192,470 $ 245,917 $ 225,227 $ 201,550 $ - $ - Unreserved, reported in: Metered Parking Fund 853,880 1,244,392 1,322,727 1,190,326 1,105,283 1,127, , , Nonspendable Restricted , ,497 Committed ,032,001 1,106,949 Assigned Unassigned Total all other governmental funds $ 954,442 $ 1,342,332 $ 1,430,918 $ 1,314,902 $ 1,297,753 $ 1,373,844 $ 1,213,284 $ 1,123,929 $ 1,237,436 $ 1,295,446 Note: Modified Accrual Basis of Accounting The city implemented GASB # 54 for the fiscal year ending September 30, 2011 See Note N to the financial statements for details 96

115 Table A-4 Changes in Fund Balances, Governmental Funds Last Ten Fiscal Years ` Fiscal Year Revenues Taxes $ 7,710,702 $ 8,201,776 $ 9,606,551 $ 10,389,563 $ 11,148,582 $ 10,689,566 $ 10,845,054 $ 10,298,362 $ 9,978,703 $ 10,056,994 Licenses and permits 405, , , , , , , , , ,435 Intergovernmental Revenues 1,093,433 1,922,339 2,320,440 1,504,355 1,303,800 1,127,111 1,318,166 1,321,858 1,719,712 1,192,734 Charges for services 4,167,991 4,576,624 3,717,123 3,961,940 4,172,475 4,072,471 4,718,683 4,552,958 4,576,197 4,349,042 Fines & Forfeitures 260, , , , , , , ,872 1,193, ,892 Investment earnings 153,547 99, , , , , , , ,315 96,921 Miscellaneous Revenues 43, , ,203 23,078 96, ,447 33,943 79, ,768 95,804 Total Revenues 13,834,891 15,628,663 16,801,609 17,270,086 18,170,492 17,497,337 17,764,191 17,155,194 18,129,301 17,108,822 Expenditures General government 2,569,600 3,160,116 3,310,610 3,531,853 3,982,911 3,409,279 3,300,052 3,205,018 3,118,375 3,260,223 Public Safety 5,407,203 5,905,643 5,826,948 6,508,885 7,900,145 7,543,517 7,382,335 7,869,464 8,678,916 8,379,998 Physical Environment 1,167,381 1,205,702 1,254,638 1,322,685-1,472,568 1,529,693 1,474,627 1,463,330 1,448,782 Transportation/Public Works 2,000,273 2,631,099 3,726,237 4,107,006 6,243,149 3,222,585 3,037,158 3,509,852 4,153,674 2,785,826 Recreation 671, , , ,544 1,109, , , , ,926 1,043,540 Debt Service Principal - 164, , , , , , , , ,000 Interest 69,584 92,938 86,045 80,381 68,190 32,660 27,292 21,608 15,697 9,587 Capital Outlay 3,596,670 2,681, Total Expenditures 15,481,937 16,538,928 15,145,144 16,600,706 20,269,235 16,775,251 16,330,555 17,127,070 18,526,918 17,102,956 Excess of Revenues Over (under) Expenditures (1,647,046) (910,265) 1,656, ,380 (2,098,743) 722,086 1,433,636 28,124 (397,617) 5,866 Other Financing Sources (Uses) Land Purchases (962,237) Transfers in 1,421,799 1,422, , , , , , , ,798 1,090,074 Transfers out (1,175,231) (1,212,382) (308,946) (361,946) (2,121,256) (267,819) (561,192) (340,601) (344,744) (599,020) Total other financing sources 246, ,544 91,054 91,054 (2,523,562) 341, , , , ,054 Net change in fund balances $ (1,400,478) $ (699,721) $ 1,747,519 $ 760,434 $ (4,622,305) $ 1,063,140 $ 1,654,690 $ 469,178 $ 93,437 $ 496,920 Debt service as a percentage of non-capital expenditures 0.59% 1.85% 1.67% 1.56% 5.10% 1.18% 1.13% 1.07% 1.01% 1.09% Notes: Negative net change in Fund Balance for FY2004 is the result of unbudgeted hurricane expenditures. See Note J, Paragraph 2 of the FY 2005 financial statement notes for details. Due to change in presentation, capital outlays are no longer segregated after FY Rise of debt service percentage in FY 2007 is attributed to legal defeasance of a bond issue. Modified accrual basis of accounting. 97

116 Table B-1 Value of Taxable Property Last Ten Fiscal Years Fiscal Year Taxable Value Personal New Real Property Property for Gross Construction Adjusted Final for Operating Operating Taxable Taxable Taxable Taxable Millage Purposes Purposes Value Value Value Value* Rate ** $ 1,065,850,840 $ 49,440,074 $ 1,115,290,914 $ 20,573,681 $ 1,094,717,233 $ 1,110,250, $ 1,197,114,330 $ 49,118,695 $ 1,246,233,025 $ 18,093,909 $ 1,228,139,116 $ 1,246,422, $ 1,363,553,950 $ 48,819,916 $ 1,412,373,866 $ 8,840,412 $ 1,403,533,454 $ 1,412,942, $ 1,621,506,020 $ 50,841,054 $ 1,672,347,074 $ 31,630,124 $ 1,640,716,950 $ 1,674,992, $ 2,063,281,760 $ 58,788,193 $ 2,122,069,953 $ 15,507,817 $ 2,106,562,136 $ 2,115,735, $ 2,036,579,260 $ 57,643,659 $ 2,094,222,919 $ 17,133,370 $ 2,077,089,549 $ 2,087,281, $ 1,639,162,920 $ 53,665,754 $ 1,692,828,674 $ 5,605,130 $ 1,687,223,544 $ 1,938,070, $ 1,417,116,320 $ 43,261,675 $ 1,460,377,995 $ 2,756,180 $ 1,457,621,815 $ 1,457,361, $ 1,273,147,270 $ 34,617,909 $ 1,307,765,179 $ 2,615,190 $ 1,305,149,989 $ 1,457,119, $ 1,282,995,490 $ 36,505,989 $ 1,319,501,479 $ 1,955,124 $ 1,317,546,355 $ 1,317,771, Source: Notes: Brevard County Property Appraiser (Forms DR-422 and DR-420) *Final Taxable Value determined after Valuation Board rulings **The rate used in the calculation for property taxes. One mil equals $1 per $1,000 of taxable value. A millage of ,which is the current (FY 2012) rate in effect for the City of Cocoa Beach is equal to $5.024 for each $1,000 of taxable value on real property. Property is assessed at actual value and therefore a separate table for assessed and actual data is not presented. 98

117 Table B-2 Direct and Overlapping Property Tax Rates Last Ten Fiscal Years City Direct Rates Overlapping Rates Fiscal Basic Brevard Brevard County Schools Total Year Rate * County Operating Capital Outlay Other ** Millage Sources: Notes: Brevard County Property Appraiser website Brevard County Property Tax Collector website * The rate used in the calculation for property taxes. One mil equals $1 per $1,000 of taxable value. The tax rate on real property is based on $1 per $1,000 of assessed property value. ** "Other" includes Florida Inland Navigation District and St. John's River Water Management District Overlapping rates are those of local and county governments that apply to property owners within the City of Cocoa Beach. The total millage column applies to all property owners within the City limits. 99

118 Table B-3 Principal Property Taxpayers Current Year and Nine Years Ago Taxpayer * Percentage Percentage of Total City of Total City Taxable Taxable Taxable Taxable Assessed Assessed Assessed Assessed Value Rank Value Value Rank Value Cocoa Beach Development, Inc.(Cocoa Beach Resort) $ 20,177, % $ 32,576, % Discovery Resort, Inc. 10,636, % % Cocoa Beach Hotels, Ltd (Hilton) 8,500, % 11,900, % International Palms (LSREF ORANGE (COCOA) LLC) 7,800, % 12,600, % Inland Western Cocoa Beach 5,800, % North Corp. (Days Inn/Best Western) 5,000, % 10,070, % Northport, Inc.(Ocean Landings) 4,678, % 15,853, % Pandey Hotel Cocoa Beach LLC (Doubletree) 4,500, % 7,900, % Ron Jon Surf Shop of Florida, Inc. 4,161, % 8,080, % Cocoa Beach Surf Company 4,000, % Las Olas Beach Club % 5,092, % Ocean Partners Assoc., Ltd (Hampton/Marriot) % 11,600, % Crossway Inn, Inc % 5,262,900 9 TOTALS $ 75,254, % $ 120,935, % Total City Final Taxable Value $ 1,317,771,181 $ 1,246,422,512 Source: Brevard County Property Appraiser Multiple properties may be included in some Taxable Assessed Value Totals *Data for the year 2004 is the earliest available data 100

119 Table B-4 Property Tax Levies and Collections Last Ten Fiscal Years Collected Within the Current Year Gross Fiscal Year of the Levy Collections Total Collections Fiscal Tax Percentage for Prior Percentage Year Levy (1) Amount of Levy Years Amount of Levy 2003 $ 5,541,546 $ 5,228, % $ 11,132 $ 5,239, % 2004 $ 5,956,994 $ 5,743, % $ 11,420 $ 5,755, % 2005 $ 6,355,683 $ 6,042, % $ 101,031 $ 6,143, % 2006 $ 6,856,623 $ 6,621, % $ 11,590 $ 6,632, % 2007 $ 7,582,302 $ 7,283, % $ 57,656 $ 7,341, % 2008 $ 7,230,762 $ 6,969, % $ 35,645 $ 7,005, % 2009 $ 7,210,039 $ 6,949, % $ 33,091 $ 6,982, % 2010 $ 6,558,125 $ 6,502, % $ 45,134 $ 6,547, % 2011 $ 6,563,416 $ 6,302, % $ 25,030 $ 6,327, % 2012 $ 6,562,237 $ 6,327, % $ 20,696 $ 6,348, % Source: Form 422 Final Taxable Value multiplied by millage rate, less allowance for adjustments and discounts Notes: Reference the financial statements, Note A, Paragraph

120 Table C-1 Ratios of Outstanding Debt by Type Last Nine Fiscal Years Governmental Activities Business Type Activities Utility Clean Debt as Public Capital System Public Water Total Percentage Improvement Improvement Improvement Improvement State Debt of of Debt Fiscal Revenue Revenue Revenue Revenue Revolving Primary Personal Per Year Bonds Note Bonds Bonds Loan Government Income Capita 2003 $ 930,029 $ 1,540,000 $ 13,145,000 $ 3,434,971 $ 3,604,499 $ 22,654, % $ 895,938 $ 1,410,000 $ 11,660,000 $ 3,309,062 $ 5,064,955 $ 22,339, % $ 858,652 $ 1,280,000 $ 10,115,000 $ 3,171,348 $ 4,861,926 $ 20,286, % $ 820,300 $ 1,140,000 $ 8,535,000 $ 3,029,700 $ 4,654,718 $ 18,179, % $ - $ 995,000 $ 6,910,000 $ - $ 4,441,247 $ 12,346, % $ - $ 845,000 $ 5,260,000 $ - $ 4,221,323 $ 10,326, % $ - $ 690,000 $ 3,565,000 $ - $ 3,994,751 $ 8,249, % $ - $ 530,000 $ - $ - $ 3,761,330 $ 4,291, % $ - $ 360,000 $ - $ - $ 3,520,852 $ 3,880, % $ - $ 185,000 $ - $ - $ 13,398,470 $ 13,583, % 1209 Notes: The Public Improvement Revenue Refunding Bonds, Series 2002 were apportioned between the General Fund and the Golf Course Enterprise Fund. The bonds were legally defeased in Percentage of personal income and per capita amounts calculated from information in Table D-1 The Utility System Bonds Series 2002 were legally defeased March 3, See Note H, paragraphs # 1 & # 5 for a detailed discussion of the Clean Water State Revolving Loans Details regarding the City's outstanding debt can be found in the notes to the financial statements. 102

121 Table C-3 Direct and Overlapping Governmental Activities Debt As of September 30, 2012 Governmental Unit Estimated Estimated Share of Debt Percentage Overlapping Outstanding Applicable Debt City Direct Debt (governmental activities) $ 185, % $ 185,000 Overlapping Debt Brevard County: Governmental Activities Debt (a) 287,182, % 15,059,757 Total Direct and Overlapping Debt $ 287,367,397 $ 15,244,757 Source: (a) Brevard County Finance Department - Comprehensive Annual Financial Report 2011, Table 11 Note: Percentage based on the Brevard County Property Appraiser website 2011 taxable assessed valuation 103

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123 Table C-5 Pledged Revenue Coverage Last Ten Fiscal Years Utilities System Improvement Utilities System Improvement Revenue Refunding Bonds, Series 2002 (1) Utility (2) Gross Less: Net (3)(8) Fiscal Pledged Operating Pledged Debt Service Year Revenue Expenses Revenue Principal Interest Coverage 2003 $ 5,379,480 $ 3,112,730 $ 2,266,750 $ 1,010,000 $ 623, $ 5,410,513 $ 2,880,146 $ 2,530,367 $ 1,485,000 $ 311, $ 5,253,670 $ 3,137,640 $ 2,116,030 $ 1,545,000 $ 280, $ 5,469,626 $ 3,104,397 $ 2,365,229 $ 1,580,000 $ 249, $ 5,467,882 $ 3,371,389 $ 2,096,493 $ 1,625,000 $ 216, $ 5,371,208 $ 3,420,178 $ 1,951,030 $ 1,650,000 $ 179, $ 5,181,664 $ 3,785,669 $ 1,395,995 $ 1,695,000 $ 135, $ - $ - $ - $ - $ $ - $ - $ - $ - $ $ - $ - $ - $ - $ - - General Fund & Golf Course Public Improvement Revenue Refunding Bonds, Series 2002 (4) (2) Gross Less Net (5)(6)(7) Fiscal Pledged Operating Pledged Debt Service Year Revenue Expenses Revenue Principal Interest Coverage 2003 $ 3,278,118 $ 2,059,399 $ 1,218,719 $ - $ 198, $ 3,360,662 $ 1,897,317 $ 1,463,345 $ 160,000 $ 180, $ 3,512,373 $ 1,945,770 $ 1,566,603 $ 175,000 $ 175, $ 3,820,258 $ 2,137,219 $ 1,683,039 $ 180,000 $ 170, $ - $ - $ - $ - $ $ - $ - $ - $ - $ $ - $ - $ - $ - $ $ - $ - $ - $ - $ $ - $ - $ - $ - $ $ - $ - $ - $ - $ - - Notes: (1) Gross pledged revenues include sewer system connection fees accounted for as contributed capital in the financial statements but available for debt service in accordance with the bond resolution. (2) Direct operating expenses exclude depreciation and amortization. (3) The Utility bonds were advance refunded in November The debt service requirement for FY 2003 includes the November principal & interest requirements for the Series 1993 Bonds and the May interest requirement for the Series 2002 Bonds. (4) Gross pledged revenues include golf course operating revenue, electric franchise fees and occupational licenses. (5) The Public Improvement Revenue Refunding Bonds, Series 2002 payments are split between the General Fund and the Golf Course Fund. Refer to Footnote H of the Financial Statements for a detailed explanation. (6) The Public Improvement Bonds were advance refunded in August The debt service requirement for FY 2003 was on the Series 1993 Public Improvement Revenue Bonds, which had principal & interest payments of $135,000 & $233,760 respectively prior to their retirement. (7) The Public Improvement Bonds were legally defeased as of April (8) The Utilities System Improvement Bonds were legally defeased as of March 3,

124 Table D-1 Demographic and Economic Statistics Last Ten Fiscal Years Year (3) (1) (2) Per Capita (4) (5) (6) Personal Personal Median Unemployment School Population Income Income Age Rate Enrollment 12,509 $ 357,369,621 $ 28, % 1,988 12,761 $ 384,642,062 $ 30, % 2,449 12,850 $ 408,630,000 $ 31, % 2,416 12,880 $ 458,927,280 $ 35, % 2,485 12,785 $ 460,260,000 $ 36, % 2,369 12,805 $ 456,254,955 $ 35, % 2,402 12,800 $ 445,977,600 $ 34, % 2,226 12,631 $ 492,583,738 $ 38, % 2,175 11,231 $ 468,939,174 $ 41, % 2,226 11,233 $ 453,970,462 $ 40, % 2,063 Sources: (1) Local Government Financial Information Handbook (2) Estimate (col. #1 x col. #3) (3) State of Florida Bureau of Labor Market Information - rate is for Brevard County (4 & 5) Economic Development Commission of Florida's Space Coast (6) Brevard County Public Schools - Includes all three (3) schools within City limits 106

125 Table D-2 Principal Employers Current Year and Ten Years Ago Percentage of Percentage of Total County Total County Employer Employees Rank Employment Employees Rank Employment Health First, Inc. 9, % 6, % Brevard County Schools 9, % 9, % Harris Corporation 5, % 6, % Brevard County Government 2, % 3, % 45th Space Wing DOD 2, % * * * Kennedy Space Ctr. 2, % 2, % United Space Alliance 1, % 6, % Brevard Community College 1, % * * * Rockwell Collins Inc. 1, % * * * Northrup Grummond 1, % 2, % Space Gateway Support , % Wuesthoff Health Systems , % Boeing Company , % TOTALS 27, % 42, % Source: Economic Development Commission of Florida's Space Coast Employers exclude retail operations Note: Figures for 2006 are most representative Employment figures are for Brevard County. No City figures are available * Figures unavailable 107

126 Table E-1 Full-time Equivalent City Government Employees by Function/Program Last Nine Fiscal Years Full-time Equivalent Employees as of September 30 Function/Program General Government Police Fire Public Works Parks and Recreation Utilities Stormwater Golf Course Metered Parking Totals Source: City Finance and Personnel Departments Notes: Refers to the number of personnel authorized for an accounting period, including part-time personnel converted to the decimal equivalent of a full-time position based on 2,080 hours per year. For example, a part-time recreation aide working twenty (20) hours per week for fifty-two (52) weeks a year equals one half (.5) of a full-time position. Elected officials are carried as General Government employees for payroll purposes, but are excluded from the figures above. 108

127 Table E-2 Operating Indicators by Function/Program Last Ten Years Function/Program Police Physical arrests 1, Parking violations 7,059 5,405 5, Traffic violations 5,469 4,863 3, Fire Emergency responses 2,184 2,149 2,513 2,150 Fires extinguished Inspections Public Works Street resurfacing (miles) Pothole Repair/Patching (square yards) 1, Asphalt Rejuvenation (square yards) - 530, Parks and Recreation Attendees at Gym 2,621 2,158 2,542 1,717 Pool Attendees 19,624 19,003 22,627 21,180 Water Total Metered Connections* 4,526 4,507 4,518 4,502 Average daily consumption 2,136 1,902 1,913 1,891 (thousands of gallons) Wastewater Average daily sewage treatment ** 3,208 3,368 3,600 3,696 (thousands of gallons) Notes: Sources: Refuse collection - Contracted out Library - County provided Transit - County provided * Excludes Patrick AFB ** Includes Patrick AFB *** One month of Fire report data for 2012 was unavailable at time of publication Data provided by City of Cocoa Water Sewer Distribution Report Water data provided by City of Cocoa Wastewater data provided by City of Cocoa Beach 109

128 Table E-3 Capital Asset Statistics by Function/Program Last Ten Fiscal Years Function/Program Schools* Elementary Junior/Senior High Police Stations Police Officers** Fire Stations Firefighters Other Public Works Streets (linear miles) Streetlights 1,265 1,265 1,265 1,265 1,265 1,265 1,265 1, Parks and Recreation Parks & Playgrounds*** Golf Course (27 holes) Tennis courts (2 clay) Swimming pools (1 adult ;1 children) Maritime Hammock Preserve**** Skateboard park Utilities Wastewater Sanitary sewers (miles) Storm sewers (miles) Electricity Meter Connections ***** ***** ***** 10,341 10,390 10,230 10,122 10,120 10,121 10,137 Notes: * Schools owned & operated by Brevard County School Board ** Sworn officers *** City and County parks in City limits **** Purchased 5.4 acres unimproved land in November 2003 ***** Figures unavailable 110

129 COMPLIANCE SECTION Independent Auditor s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditor s Report on Compliance with Requirements that Could Have a Direct and Material effect on Each Major State Project and on Internal Control Over Compliance in Accordance with Chapter , Rules of the Auditor General Schedule of State Financial Assistance Schedule of Findings and Questioned Costs Independent Auditor s Management Letter Response to Independent Auditor s Management Letter 111

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131 INDEPENDENT AUDITOR S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS The Honorable Mayor and Members of the City Commission We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Cocoa Beach, Florida (the City ), as of and for the year ended September 30, 2012, and have issued our report thereon dated February 26, 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. Internal Control over Financial Reporting Management of the City is responsible for establishing and maintaining effective internal control over financial reporting. In planning and performing our audit, we considered the City s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the City s internal control over financial reporting. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. 113

132 The Honorable Mayor and Members of the City Commission Compliance and Other Matters As part of obtaining reasonable assurance about whether the City s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. In connection with our audit, we noted no other 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 Mayor, City Commission, management, the State of Florida Auditor General, and federal and state awarding agencies and is not intended to be, and should not be, used by anyone other than these specified parties. MOORE STEPHENS LOVELACE, P.A. Certified Public Accountants Orlando, Florida February 26,

133 INDEPENDENT AUDITOR S REPORT ON COMPLIANCE WITH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR STATE PROJECT AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH CHAPTER , RULES OF THE AUDITOR GENERAL The Honorable Mayor and Members of the City Commission Compliance We have audited the compliance of the (the City ), with the types of compliance requirements described in the Department of Financial Services State Projects Compliance Supplement that could have a direct and material effect on each of its major state projects for the year ended September 30, The City s major state project is identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements referred to above is the responsibility of the City s management. Our responsibility is to express an opinion on the City s compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; Chapter 69I-5, Schedule of Expenditures of State Financial Assistance, Rules of the Department of Financial Services; and Chapter , Rules of the Auditor General. Those standards, Chapter 69I-5, and Chapter , require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major state project identified in the accompanying schedule of findings and questioned costs occurred. An audit includes examining, on a test basis, evidence about the City s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination of the City s compliance with those requirements. In our opinion, the City complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on its major state project identified in the accompanying schedule of findings and questioned costs for the year ended September 30,

134 The Honorable Mayor and Members of the City Commission Internal Control over Compliance Management of the City is responsible for establishing and maintaining effective internal control over compliance with the compliance requirements of laws, regulations, contracts, and grants applicable to state projects. In planning and performing our audit, we considered the City s internal control over compliance with requirements that could have a direct and material effect on a major state project to determine auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with Chapter 69I-5, Schedule of Expenditures of State Financial Assistance, Rules of the Department of Financial Services; and Chapter , Rules of the Auditor General, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct, noncompliance with a type of compliance requirement of a state project on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a state project will not be prevented, or detected and corrected on a timely basis. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be deficiencies, significant deficiencies, or material weaknesses in internal control over compliance. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. Schedule of State Financial Assistance We have audited the financial statements of the City as of and for the year ended September 30, 2012, and have issued our report thereon dated February 26, Our audit was performed for the purpose of forming an opinion on the financial statements of the City. The accompanying schedule of expenditures of state financial assistance is presented for the purpose of additional analysis, as required by Chapter 69I-5, Schedule of Expenditures of State Financial Assistance, Rules of the Department of Financial Services, and Chapter , Rules of the Auditor General, and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements taken as a whole. This report is intended solely for the information and use of the Mayor, City Commission, management, the State of Florida Auditor General, and federal and state awarding agencies and is not intended to be, and should not be, used by anyone other than these specified parties. MOORE STEPHENS LOVELACE, P.A. Certified Public Accountants Orlando, Florida February 26,

135 CITY OF COCOA BEACH SCHEDULE OF STATE FINANCIAL ASSISTANCE For the year ended September 30, 2012 CFDA/ CSFA Contract/Grant Agency/Federal Program or State Project Title Number Number Expenditures State of Florida Department of Environmental Protection WW ,659,570 Total state financial assistance $ 11,659,570 NOTE 1 - BASIS OF PRESENTATION The accompanying schedule of state financial assistance is presented on the accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133, "Audits of States, Local Governments, and Non-Profit Organizations," and the Rules of the Auditor General of the State of Florida. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements. 117

136 CITY OF COCOA BEACH, FLORIDA SCHEDULE OF FINDINGS AND QUESTIONED COSTS For the Year Ended September 30, 2012 SECTION I - SUMMARY OF INDEPENDENT AUDITOR S RESULTS Financial Statements Type of Auditor s Report Issued: Unqualified Opinion Internal control over financial reporting: Material weakness(es) identified? Yes X No Significant deficiency(ies) identified? Yes X None reported Noncompliance material to financial statements noted? Yes X No State Projects Internal control over major projects: Material weakness(es) identified? Yes X No Significant deficiency(ies) identified? Yes X None reported Type of report issued on compliance for major state projects: Unqualified Opinion Any audit findings disclosed that are required to be reported in accordance with Chapter , Rules of the Auditor General? Yes X No Identification of Major State Project: CSFA Number Name of State Project State of Florida Department of Environmental Protection Dollar threshold used to distinguish between Type A and Type B projects: $349,

137 CITY OF COCOA BEACH, FLORIDA SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) For the Year Ended September 30, 2012 SECTION II - FINANCIAL STATEMENT FINDINGS None Reported. SECTION III STATE FINANCIAL ASSISTANCE FINDINGS AND QUESTIONED COSTS SECTION None Reported. SECTION IV - PRIOR-YEAR AUDIT FINDINGS None Reported. 119

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139 The Honorable Mayor and Members of the City Commission INDEPENDENT AUDITOR S MANAGEMENT LETTER We have audited the financial statements of the (the City ), as of and for the fiscal year ended September 30, 2012, and have issued our report thereon dated February 26, We conducted our audit in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. We have also issued our Independent Auditor s Report on Internal Control over Financial Reporting and on Compliance and Other Matters, Independent Auditor s Report on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major State Project and on Internal Control over Compliance in Accordance With Chapter , Rules of the Auditor General, and Schedule of Findings and Questioned Costs. Disclosures in those reports and schedule, which are dated February 26, 2013, should be considered in conjunction with this management letter. Additionally, our audit was conducted in accordance with the provisions of Chapter , Rules of the Auditor General, which govern the conduct of local governmental entity audits performed in the State of Florida. This letter includes the following information, which is not included in the aforementioned auditor s reports or schedule: Section (1)(i)1., Rules of the Auditor General, requires that we determine whether or not corrective actions have been taken to address findings and recommendations made in the preceding annual financial audit report. In connection with our audit, we determined that the City implemented the recommendations. Section (1)(i)2., Rules of the Auditor General, requires our audit to include a review of the provisions of Section , Florida Statutes, regarding the investment of public funds. In connection with our audit, we determined that the City complied with Section , Florida Statutes. Section (1)(i)3., Rules of the Auditor General, requires that we address in the management letter any recommendations to improve financial management. In connection with our audit, we did not have any such findings. Section (1)(i)4., Rules of the Auditor General, requires that we address violations of provisions of contracts and grant agreements or abuse that have an effect on the financial statements that is less than material but more than inconsequential. In connection with our audit, we did not have any such findings. 121

140 The Honorable Mayor and Members of the City Commission Section (1)(i)5., Rules of the Auditor General, provides that the auditor may, based on professional judgment, report the following matters that have an inconsequential effect on financial statements, considering both quantitative and qualitative factors: (1) violations of provisions of contracts or grant agreements, fraud, illegal acts, or abuse, and (2) control deficiencies that are not significant deficiencies. In connection with our audit, we did not have any such findings. Section (1)(i)6., Rules of the Auditor General, requires that the name or official title and legal authority for the primary government and each component unit of the reporting entity be disclosed in this management letter, unless disclosed in the notes to the financial statements. The legal authority is disclosed in the notes to the financial statements. Section (1)(i)7.a., Rules of the Auditor General, requires a statement be included as to whether or not the local governmental entity has met one or more of the conditions described in Section (1), Florida Statutes, and identification of the specific condition(s) met. In connection with our audit, we determined that the City did not meet any of the conditions described in Section (1), Florida Statutes. Section (1)(i)7.b., Rules of the Auditor General, requires that we determine whether the annual financial report for the City for the fiscal year ended September 30, 2012, filed with the Florida Department of Financial Services pursuant to Section (1)(a), Florida Statutes, is in agreement with the annual financial audit report for the fiscal year ended September 30, In connection with our audit, we determined that these two reports were in agreement. Pursuant to Sections (l)(i)7.c. and (7), Rules of the Auditor General, we applied financial condition assessment procedures. It is management s responsibility to monitor the City s financial condition, and our financial condition assessment was based, in part, on representations made by management and the review of financial information provided by same. Our management letter is intended solely for the information and use of the Legislative Auditing Committee, members of the Florida Senate and the Florida House of Representatives, the Florida Auditor General, federal and other granting agencies, and applicable management and is not intended to be and should not be used by anyone other than these specified parties. MOORE STEPHENS LOVELACE, P.A. Certified Public Accountants Orlando, Florida February 26,

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143 Excellent Recreation and Quality Living