DORCAS FIRE DISTRICT, INC. CRESTVIEW, FLORIDA … rpts/2012 dorcas... · AND SUPPLEMENTARY...

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DORCAS FIRE DISTRICT, INC.

CRESTVIEW, FLORIDA

AUDITED FINANCIAL STATEMENTS

AND SUPPLEMENTARY INFORMATION

YEAR ENDED SEPTEMBER 30, 2012

Auditor: Joseph A. Jones, CPA

Crestview, Florida

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FIRE CHIEF

JOHN POLINSKI

BOARD MEMBERS

TOM CANNON (CHAIRMAN)

EDDIE ALFORD (TREASURER)

JOHNA ESTERBERG

(TWO SEATS ARE VACANT)

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TABLE OF CONTENTS

Pages

INDEPENDENT AUDITOR'S REPORT 4 - 5

REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL 6 - 7

REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED

IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

MANAGEMENT'S DISCUSSION AND ANALYSIS 8 - 11

MANAGEMENT CONFIRMATION LETTER 12 - 14

BASIC FINANCIAL STATEMENTS

GOVERNMENT-WIDE STATEMENTS

Statement of Net Assets 16

Statement of Activities 17

FUND FINANCIAL STATEMENTS

Statement of Assets, Liabilities and Fund Balance Arising From Cash Transactions 19

Reconciliation of the Statement of Assets, Liabilities and Fund Balance Arising From 20

Cash Transactions to the Statement of Net Assets

Statement of Revenues, Expenditures and Changes in Fund Balance 21

Reconciliation of the Statement of Revenues, Expenditures 22

and Changes in Fund Balances to the Statement of Activities

NOTES TO FINANCIAL STATEMENTS

NOTE A, Summary of Significant Accounting Policies 24 - 26

NOTE B, Deposits and Investments 27

NOTE C, Contingency 27

NOTE D, Capital Assets 27 - 28

NOTE E, Long Term Debt 29 - 30

NOTE F, Contingent Liabilities & NOTE G, Grants and Awards 30

SUPPLEMENTARY INFORMATION

Schedule of Expenditures Paid 32

Budget Comparison Schedule 33

Management letter 34 - 36

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JOSEPH A JONES CERTIFIED PUBLIC ACCOUNTANT 6075 Bud Moulton Road Crestview, Fl. 32536 Phone (850) 682-8950 Cell phone (850) 826-0630 Email: [email protected] Fax: (866) 521-9736 INDEPENDENT AUDITORS’ REPORT

Board of Directors Dorcas Fire District, Inc. Crestview, Florida I have audited the accompanying financial statements for the governmental activities of Dorcas Fire District, Inc., as of and for the year ended September 30, 2012, and which comprise Dorcas Fire District, Inc.’s basic financial statements as listed in the table of contents. These financial statements are the responsibility of Dorcas Fire District, Inc.’s management. My responsibility is to express an opinion on these financial statements based on my audit.

I have conducted my 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 I 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. I believe that my audit provides a reasonable basis for my opinion. Approximately $13,519 was posted to a discrepancies account, and many of these amounts appear to be misappropriation of funds. There may be additional instances of misappropriation of funds. In addition, documentation for many expenditures is missing and has not been found. On May 17, 2012 the former bookkeeper was arrested and charged with grand theft of $5,000 or more. On September 12, 2012, the former bookkeeper was sentenced to 3 years suspended prison sentence, with 5 years of probation, and was ordered to pay restitution of $13,364.82 at $300.00 per month.

In my opinion, except for the amount of misappropriation of funds and the amounts pertaining to missing documentation, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities of Dorcas Fire District, Inc., as of September 30, 2012, and changes in financial position, thereof for the year ended in conformity with Generally Accepted Accounting Principles as described in Note A.

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In accordance with Governmental Auditing Standards, I have also issued a report dated May 24, 2013, on my consideration of Dorcas Fire District, Inc.’s internal control over financial reporting and on my 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 my 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 on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of my audit.

The Management’s Discussion and Analysis on pages 5 through 8, is not a required part of the basic financial statements but is supplementary information required by accounting principles generally accepted in the United States of America. I have applied certain limited procedures, which consisted principally of inquiries of management regarding methods of measurement and presentation of the required supplementary information. However, I did not audit the information and express no opinion on it.

My audit was made for the purpose of forming an opinion on the financial statements that comprise Dorcas Fire District, Inc. basic financial statements. The accompanying financial information listed as supplementary information in the table of contents is presented for purposes of additional analysis and is not a required part of the financial statements of Dorcas Fire District, Inc. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and, in my opinion, except for the amount of misappropriation of funds and the amounts pertaining to missing documentation, this financial information listed as supplementary information is fairly presented in all material respects in relation to the financial statements taken as a whole.

Joseph A. Jones Certified Public Accountant

Crestview, Florida May 24, 2013

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JOSEPH A JONES CERTIFIED PUBLIC ACCOUNTANT 6075 Bud Moulton Road Crestview, Fl. 32536 Phone (850) 682-8950 Email: [email protected] Fax: (866) 521-9736

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

Board of Directors Dorcas Fire District, Inc. Crestview, Florida I have audited the financial statements of the governmental activities of Dorcas Fire District, Inc., as of and for the year ended September 30, 2012, and which comprise Dorcas Fire District, Inc.’s basic financial statements and have issued my report thereon dated May 24, 2013. I conducted my 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

In planning and performing my audit, I considered Dorcas Fire District, Inc.’s internal control over financial reporting in order to determine my auditing procedures for the purpose of expressing my opinion on the financial statements and not to provide an opinion on the internal control over financial reporting. My consideration of the internal control would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. I did find a lack in separation of duties pertaining to separation of financial bookkeeping and reporting versus financial custodian duties such as money receipts/deposits and disbursement of funds. The bookkeeper has been

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performing both the tasks of financial reporting and the tasks of custodian of funds receipts and disbursements. Most small organizations either cannot afford to hire additional personnal sufficient to accomplish separation of reporting duties from funds custodian duties. I believe that financial internal controls could be strengthened, and I recommend requiring the bookkeeper to perform monthly bank reconciliations and I recommend a board member perform a review, on a monthly basis, of the monthly financial statements, the monthly receipts and bank deposits, the monthly disbursements and supporting documentation, the monthly bank reconciliations, the monthly bank statements and unpaid bills. I recommend documentation of the board member’s review be maintained in the business office. I recommend any discrepancies found by this review be promptly reported to the board, and I recommend that appropriate action be promptly taken by the board to deal with any discrepancies found. Other than the lack of separation of duties, I noted no matters involving the internal control over financial reporting and its operation that I consider to be material weakness.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether Dorcas Fire District, Inc.’s financial statements are free of material misstatement, I 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 test of my audit, and accordingly, I do not express such an opinion. The results of my tests did disclose the misappropriation of funds mentioned previously, and did disclose the lack of separation of duties as mentioned above. Otherwise, the results of my tests disclosed 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 management and the board of directors and is not intended to be and should not be used by anyone other than those specified parties.

Joseph A. Jones Certified Public Accountant Crestview, Florida May 24, 2013

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Management Discussion and Analysis My discussion and analysis of the District’s financial performance provide an overview of the District’s financial activities for the fiscal year ended September 30, 2013. This discussion and analysis should be read in conjunction with the District’s financial statements. Overview of the Financial Statements The District’s financial statements comprise the following elements: Government-wide Financial Statements Government-wide financial statements provide both long-term and short-term information about the District’s overall financial condition. Changes in the District’s financial position may be measured over time by increases and decreases in the Statement of Net Assets. Information on the how District’s net assets changed during the fiscal year is presented in the Statement of Activities. Fund Financial Statements Fund financial statements focus on the individual parts of the District, reporting the District’s operations in more detail than government-wide and fund financial statements. Fund financial statements include the statements for governmental funds. Notes to Financial Statements Notes to the financial statements provide additional information that is essential to the full understanding of the data provided in the government-wide and fund financial statements. Refer to Note A to the financial statements for more detailed information on the elements of the financial statements. Financial Analysis of the District as a Whole One of the most important questions asked about the District’s finances is “Is the District, as a whole, better off or worse off as a result of the year’s activities?” The Statement of Net Assets and the Statement of Revenues, Expenses, and Net Assets report information about the District’s activities in a way that will help answer this question. These two statements report the net assets of the District and the changes in them. You can think of the district’s net assets-the difference between assets and liabilities-as one way to measure financial health or financial position. Over time, increases or decreases in the District’s net assets are one indicator of whether its financial health is improving or deteriorating. However, you will need also to consider other non-financial factors such as changes in economic conditions, population growth, and new or changed legislation.

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The Districts's total net assets were $104,012 at the end of the fiscal year. The analysis below

focuses on the District's net assets (Table 1) and changes in net assets (Table 2) during the year.

Table 1

2012 2011

Assets:

Current Assets

$ 39,043

$ 47,132

Capital Assets

599,981

653,411

Total Assets

639,024

700,543

Liabilities

Current Liabilities

30,592

34,019

Long Term Debt

504,419

535,750

Total Liabilities

535,011

569,769

Net Assets

Invested in Capital Assets

Net of Related Debt

72,408

95,475

Unrestricted

18,700

28,789

Restricted

12,903

6,510

Total Net Assets

$ 104,012

$ 130,774

Changes in District's net assets can be determined by reviewing the following condensed

Statement of Activities in Table 2.

Table 2

2012 2011

Property Taxes

$ 186,636

$ 182,264

Impact Fees

4,906

3,892

Interest Income

0

71

Gain on Sale of Fire Trucks

0

19,187

Restitution for Snap on Tools

706

-

Miscellaneous Income

-

110

Insurance Reimbursement for Bay door

4,167

-

Donations

1,031

-

Total Revenues

197,445

205,523

Operating Expenses

224,207

278,767

Total Primary Government Expenses

224,207

278,767

Change in Net Assets

(26,762)

(73,244)

Net Assets at Beginning of Year

130,774

204,018

Net Assets at End of Year

$ 104,012

$ 130,774

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The District's Funds

The District has one fund from which all activities are carried out. This is the General Fund.

The General Fund is used to report the cost of services provided to the residents of the District.

The District anticipates applying for various grants to assist it in acquiring additional fire fighting

equipment to assist in their providing services to the residents of their district.

Capital Assets and Debt Administration

Capital Assets

At the end of 2012, the District had $599,981 invested in capital assets net of accumulated

depreciation.

Table 3 summarizes the District's capital assets, net of accumulated depreciation, for the years ended as follows:

Table 3

2012

2011

Land

$ 9,082

$ 9,082

Buildings - Completed

370,121

381,465

Fire & Rescue Equipment 18,079

21,511

Fire Trucks

202,698

241,354

Total Capital Assets

$ 599,981

$ 653,411

Table 4 summarizes the changes in capital assets. These changes are presented in

more detail in Note D to the financial statements.

Table 4

2012

2011

Balance at Beginning of Year $ 653,411

$ 632,238

Fire & Rescue Equipment purchased 13,948

-

Fire Trucks Purchased

189,856

Less Cost of Fire Trucks Traded (Net)

(65,913)

Less current year Depreciation (67,379)

(102,769)


$ 599,981

$ 653,411

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Debt: At September 30, 2012, the District had a total of $535,011 of outstanding debt which represents

a decrease of $34,758 from the prior year.

Table 5 summarizes the outstanding debt:

Table 5

2012

2011

Accrued Interest

$ 1,416

$ 1,820

Payroll Liabilities

3,439

7,833

Pumper Truck (Marquette Bank)

23,847

34,702

2010 International (Community Bank)

156,345

169,856

First National Bank (New Fire Station)

345,965

351,558

Volunteer Account

4,000

4,000

Total Debt

$535,011

$ 569,769

Economic Factors and Next Year's Budget

The District expects its revenue to increase during the next fiscal year. As additional residents

move into the District's service area, additional equipment and manpower will be needed to service all of these residents. The District has an impact fee in place to help offset these costs, plus the District is applying for various grants to help offset these additional costs.

Contacting the District's Financial Management

This financial report is designed to provide the residents of the District, customer and creditors with a general overview of the District's finances and to demonstrate the District's accountability

for the money it receives. If you have questions about this report or need additional financial information, contact the Dorcas Fire District, at 4418 Poverty Creek Rd, Crestview, Fl. 32539.

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Dorcas Fire District, Inc. 4418 Poverty Creek Road

Crestview, Fl. 32539

December 6, 2012 To: Joseph A. Jones, C.P.A. 6075 Bud Moulton Road Crestview, Fl. 32536 Subject: Management Confirmation Letter for FY 2012 We are providing this letter in connection with your audit of the financial statements of Dorcas Fire District as of September 30, 2012, and for the year then ended, for the purpose of expressing an opinion as to whether the financial statements present fairly, in all material respects, the financial position of the government activities of the Dorcas Fire District, and the respective changes in financial position and cash flows, where applicable, in conformity with U.S. generally accepted accounting principles. We are also responsible for adopting sound accounting policies, establishing and maintaining effective internal control, and preventing and detecting fraud. We confirm, to the best of our knowledge and belief, the following representations made to you during your audit:

1. The financial statements referred to above are fairly presented in conformity with U.S. generally accepted accounting principles and include all properly classified fund and other financial information of the primary government and all component units required by generally accepted accounting principles to be included in the financial reporting entity.

2. We are making available to you all District records that you request, including, but not limited to, the following: a. Financial records and related supporting data. b. Minutes of meetings of Dorcas Fire District.

3. There have been no communications from regulatory agencies concerning noncompliance with, or deficiencies in, financial reporting practices.

4. There are no material transactions that have not been properly recorded in the accounting records underlying the financial statements.

5. We acknowledge our responsibility for the design and implementation of programs and controls to prevent and detect fraud.

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6. We have told you that the former bookkeeper has been convicted of theft and sentenced to pay $13,365 in restitution.

7. We have no knowledge of any allegations of fraud or suspected fraud affecting the entity received in communications from employees, former employees, analysts, regulators, or others, other than the fraud or theft as mentioned above in the previous paragraph.

8. The Dorcas Fire District has no plans or intentions that may materially affect the carrying value or classifications of assets, liabilities, or equity.

9. The following, if any, have been properly recorded or disclosed in the financial statements: a. Related party transactions, including revenues, expenditures/expenses, loans, transfers, leasing arrangements and guarantees. b. Guarantees, whether written or oral, under which the Liberty Fire District is contingently liable. c. All accounting estimates that could be material to the financial statements, including key factors and significant assumptions underlying those estimates and measurements. We believe the estimates and measurements are reasonable in the circumstances, consistently applied, and adequately disclosed.

10. We are responsible for compliance with the laws, regulations and provisions of contracts and grant agreements applicable to us, including tax or debt limits and debt contracts; and we have identified and disclosed to you all laws, regulations and provisions of contracts and grant agreements that we believe have a direct and material effect on the determination of financial statement amounts, including legal and contractual provisions for reporting specific activities in separate funds.

11. There are no: a. Violations or possible violations of budget ordinances, laws and regulations, provisions of contracts and agreements, tax or debt limits, and any related debt covenants whose effects should be considered for disclosure in the financial statements or as a basis for recording a loss contingency. b. We are not aware of any pending or threatened litigation, claims, or assessments or unasserted claims or assessments that are required to be accrued or disclosed in the financial statements in accordance with Financial Accounting Standards Board (FASB) Statement No. 5, “Accounting of Contingencies,” and we have not consulted a lawyer concerning litigation, claims, or assessments. c. Other liabilities or gain or loss contingencies that are required to be accrued or disclosed by FASB Statement No. 5. d. Reservations or designation of fund equity that was not properly authorized and approved.

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12. The Dorcas Fire District has satisfactory title to all owned assets, and there are no liens or encumbrances on such assets nor has any assets been pledged as collateral, except for the following: (a) First National Bank of Crestview loan for Station 41 construction, (b) Marquette Bank loan for pumper truck, and (3) Community Bank loan for rescue truck.

13. The Dorcas Fire District has complied with all aspects of contractual agreements that would have a material effect on the financial statements in the event of noncompliance.

14. The financial statements include all component units as well as joint ventures with an equity interest, and properly disclose all other joint ventures and other related organizations.

15. All funds that meet the quantitative criteria in GASB Statement No. 34 for presentation as major are identified and presented as such. All other funds that are presented as major are particularly important to financial statement users.

16. Net asset components and fund balance reserves and designations are properly classified and, if applicable, approved.

To the best of our knowledge and belief, no events, including instances of noncompliance, have occurred subsequent to the balance sheet date and through the date of this letter that would require adjustment to or disclosure in the aforementioned financial statements.

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GOVERNMENT-WIDE FINANCIAL STATEMENTS

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STATEMENT OF NET ASSETS AT SEPTEMBER 30:

2012

ASSETS

CURRENT ASSETS

Cash, General Fund (Unrestricted)

$ 21,986

Cash, Impact Fund (Restricted)

12,903

Due from Deep South Fire Trucks

-

Prepaid Insurance

4,154

Total Current Assets

39,043

CAPITAL ASSETS

Depreciable Assets (Building, Trucks, Equipment, etc) 1,291,733

Less Accumulated Depreciation

(700,834)

Depreciable Assets, net of Depreciation

590,899

Non-depreciable Assets (Land)

9,082


599,981

TOTAL ASSETS

$ 639,024

LIABILITIES

CURRENT LIABILITIES

Accrued Interest

$ 1,416

Leases Payable

25,737

Payroll Liabilities

3,439

Total Current Liabilities

30,592

LONG-TERM LIABILITIES

Loan from Dorcas Volunteer Account

4,000

Long-term Leases Payable

154,455

Construction Loan, First National Bank

345,965

Total Long-term Liabilities

504,419

TOTAL LIABILITIES

535,011

NET ASSETS

Investments in Capital Assets, Net of Debt

72,408

Unrestricted

18,700

Restricted

12,903

Total Net Assets

$ 104,012

TOTAL LIABILITIES AND NET ASSETS

$ 639,024

The accompanying notes to the financial statements are an integral part of this statement.

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STATEMENT OF ACTIVITIES Year Ended September 30, 2012

NET (EXPENSE)

REVENUE AND

CHANGES IN

PROGRAM REVENUES NET ASSETS

CHARGES OPERATING CAPITAL PRIMARY

FOR GRANTS AND GRANTS AND GOVERNMENTAL

FUNCTION/PROGRAMS EXPENSES

SERVICES CONTRIBUTIONS CONTRIBUTIONS ACTIVITIES

PRIMARY GOVERNMENT Governmental Activities General Government $ 224,207

$ - $ - $ - $ (224,207)

Total Primary Government $ 224,207 $ - $ - $ - $ (224,207)

GENERAL REVENUES

Property Taxes

186,636

Impact Fees

4,906

Restitution for Snap on Tools

706

Insurance Reimbursement - Bay doors 4,167

Donations

1,031

Total General Revenues and Special Items 197,445

Change in Net Assets

(26,762)

NET ASSETS - BEGINNING OF YEAR 130,775

NET ASSETS - END OF YEAR

$ 104,012


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FUND FINANCIAL STATEMENTS

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DORCAS FIRE DISTRICT, INC. STATEMENT OF ASSETS, LIABILITIES AND FUND BALANCE

ARISING FROM CASH TRANSACTIONS

AT SEPTEMBER 30:

2012

ASSETS

CURRENT ASSETS

Cash, General Fund (Unrestricted)

$ 21,986

Cash, Impact Fund (Restricted)

12,903

Prepaid Insurance

4,154

Total Current Assets

39,043

TOTAL ASSETS

39,043

LIABILITIES AND FUND BALANCES

LIABILITIES

CURRENT LIABILITIES

Accrued Interest

1,416

Leases Payable

25,737

Payroll Liabilities

3,439

Total Current Liabilities

30,592

FUND BALANCES

Unrestricted

(4,453)

Restricted

12,903

Total Fund Balance, Unreserved

8,451

TOTAL OF LIABILITIES AND FUND BALANCES $ 39,043


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RECONCILIATION OF THE STATEMENT OF ASSETS, LIABILITIES AND FUND BALANCE

ARISING FROM CASH TRANSACTIONS TO THE STATEMENT OF NET ASSETS

AT SEPTEMBER 30:

2012

Fund Balances - Total Governmental Funds

$ 8,451

Amounts reported for governmental activities in Statement of Net Assets are different because:

Add: Capital Assets used in governmental activities are not financial resources

and therefore are not reported in the governmental funds

Governmental Capital Assets

1,300,815

Less: Accumulated Depreciation

(700,834)

599,981

Subtract: Long-term liabilities are due and payable in the current year

and therefore are not reported in governmental funds

Loan from Dorcas Volunteer Account

4,000

Long Term Leases

154,455

First National Bank of Crestview construction loan

345,965

504,419

Net Assets of Governmental Activities

$ 104,012


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DORCAS FIRE DISTRICT, INC. STATEMENT OF REVENUES, EXPENDITURES, AND

CHANGES IN FUNDS BALANCES

FOR YEAR ENDED SEPTEMBER 30: 2012

REVENUES

Taxes

$ 186,636

Impact Fees

4,906

Insurance Reimbursement - Bay door 4,167

Restitution for Snap on Tools 706

Donations

1,031

Total Revenues 197,445

EXPENDITURES

General Government (excluding depreciation) 156,829

Capital Outlay

Plus Capital Assets Purchased 13,948

Long Term Debt Service

Plus Long Term Debt paid down 29,959

Plus Increase in Current Lease Debt

Total Expenditures 200,736

EXCESS OF REVENUES OVER (UNDER) (3,291)

EXPENDITURES - GENERAL GOVERNMENT

FUND BALANCE - BEGINNING 14,388

FUND BALANCE - ENDING

$ 11,097


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DORCAS FIRE DISTRICT, INC. RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES

FOR YEAR ENDED SEPTEMBER 30:

2012

Net Change in Fund Balances - total governmental funds

$ (3,291)

Amounts reported for governmental activities in Statement of Net Assets are different because:

Governmental funds report capital outlays as expenditures.

However, in the Statement of Activities, the cost of those

those assets is depreciated over their estimated useful lives:

Expenditures for capital assets

13,948

Less current year depreciation

(67,379)

Net Expenditure for capital assets

(53,431)

Repayment of principal on debt is an expenditure in the

governmental funds but the repayment reduces long-term

liabilities in the Statement of Net Assets

Normal debt reduction

29,959

Change in Net Assets of Governmental Funds

$ (26,762)


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NOTES TO FINANCIAL STATEMENTS

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NOTES TO FINANCIAL STATEMENTS September 30, 2012 NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Dorcas Fire District was created by section 2005-331, Laws of Florida. The district is an independent fire control district operating pursuant to the special act and the provisions of Chapter 191, Florida Statutes. The Dorcas Fire District, Inc. operates as a local government entity (special district), and was organized in Okaloosa County, Florida under County Ordinance 84.39. The Organization provides volunteer fire and rescue support to the local community. The financial statements of the Dorcas Fire District have been prepared in accordance with generally accepted accounting principles (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the standard-setting body for governmental accounting and financial reporting. The GASB periodically updates its codification of the existing Governmental Accounting and Financial Reporting Standards which, along with subsequent GASB pronouncements (Statements and Interpretations), constitutes GAAP for governmental units. The more significant of these accounting policies are described below. FINANCIAL REPORTING ENTITY As required by generally accepted accounting principles, these financial statements present the government and its component units. The Fire District does not have any component units. BASIC FINANCIAL STATEMENTS – GASB STATEMENT NO. 34 The governmental funds statements in the fund financial statements are presented on the modified accrual basis of accounting. The basic financial statements include both government-wide (based on the Fire District as a whole) and fund financial statements. Both the government-wide and fund financial statements (within the basic financial statements) categorize primary activities as either governmental or business type. The Fire District is accounted for as a single governmental fund. The government-wide Statement of Activities reflects both the gross and net cost per functional category which is otherwise being supported by general government revenues. The Statement of Activities reduces gross expenses (including depreciation) by related program revenues, operating and capital grants. The program revenues must be directly associated with the function or a business-type activity. The operating grants include operating-specific and discretionary (either operating or capital) grants while the capital grants column reflects capital-specific grants. The net costs are normally covered by general revenue. This government-wide focus is more on the sustainability of the Fire District as an entity and the change in aggregate financial position resulting from the activities of the fiscal period. As mentioned above the Fire District reports its government-wide activity as one fund.

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DORCAS FIRE DISTRICT, INC. NOTES TO FINANCIAL STATEMENTS September 30, 2012 NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) BASIS OF PRESENTATION The financial statements of the general fund are presented on the modified accrual basis in accordance with accounting principles applicable to general government funds. The new model (GASB Statement No. 34) sets forth minimum criteria for the determination of major funds. The non-major funds are combined in a column in the fund financial statements and detailed in the combining section. The accounts of the Fire District are organized on the basis of funds and account groups, each of which is considered a separate entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenses. Government resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. As mentioned above the Fire District reports its government-wide activity as one fund. Non-Current Governmental Assets GASB Statement No. 34 eliminates the presentation of account groups, but provides for these records to be maintained and incorporates the information into the Governmental column in the government-wide Statement of Net Assets. The capital assets are recorded at cost and estimated cost for certain items acquired prior to October 1, 1983. BASIS OF ACCOUNTING The Fire District’s governmental funds are accounted for using the modified accrual basis of accounting. Under the modified accrual method, revenues are recognized when they become measurable and available. Additionally, expenditures are generally recognized when a related fund liability is incurred.

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DORCAS FIRE DISTRICT, INC. NOTES TO FINANCIAL STATEMENTS September 30, 2012 NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY Cash and cash equivalents – The Fire District considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Capital Assets – Capital assets, which include property, plant and equipment, are reported in the government-wide financial statements. Capital assets are defined as assets with an initial, individual, cost of more than $1,000 and an estimated useful life in excess of 5 years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The cost of normal maintenance and repairs that do not add to the value or materially extend assets’ lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Property, plant and equipment is depreciated using the straight-line method over the following estimated useful lives. Assets Years Buildings 40 Fire Trucks 10 Equipment 5 Office Equipment 5 Fund Balance – In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for a specific purpose. Amounts in fund balances represent tentative management plans that are subject to change. BUDGETS AND BUDGETARY ACCOUNTING Budgets are legally adopted for the general fund. Any revision to the budget must be approved by the Board of Commissioners. The budgets are compared to actual expenditures. In instances where budget appropriations and estimated revenues have been revised during the year, budget data presented in the financial statements represent final authorization amounts. ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that effect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

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DORCAS FIRE DISTRICT, INC. NOTES TO FINANCIAL STATEMENTS September 30, 2012

NOTE B - DEPOSITS AND INVESTMENTS

The District maintains deposits with "Qualified Public Depositories" as defined in Chapter 280, Florida Statutes.

NOTE C - CONTINGENCY

The Fire District receives a most of its support from Fire District Taxes and Impact Fees. A reduction in

growth of new construction would have affect the Fire District's programs and activities.

NOTE D - CAPITAL ASSETS

Capital asset activity for the fiscal year was as follows:

Balance

Balance

Oct. 1,

Sep. 30,

GOVERNMENTAL ACTIVITIES: 2011

Additions

Sold

2012

Capital assets, not being depreciated:

Land

$ 9,082

$ 9,082

Total capital assets, not being depreciated 9,082

9,082

Capital assets, being depreciated:

Fire Station Building

453,758

453,758


13,948

326,460

Fires Trucks

511,515

511,515

Total capital assets, being depreciated 1,277,785

13,948

1,291,733

Total Capital assets, before depreciation 1,286,867

13,948

1,300,815

Less accumulated depreciation for:

Fire Station Buildings

72,293

11,344

83,637


17,379

308,381

Fires Trucks

270,161

38,655

308,817

Total capital assets, being depreciated 633,455

67,379

700,834

Total capital assets, being depreciated, net 644,330

(53,431)

590,899

Governmental activities capital assets, net $ 653,411

$ (53,431)

$ 599,981


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DORCAS FIRE DISTRICT, INC. NOTES TO FINANCIAL STATEMENTS

September 30, 2012

NOTE D - CAPITAL ASSETS (continued)

Land and Fire Station Building: Land (1.5 acres) was purchased on Poverty Creek Road for a site for the New Fire Station (#41).

A contract to construct the new station was awarded to Mike Josey Construction Co. Payments

were made in stages as construction was completed. The new fire station building on Poverty

Creek Road was completed for a total cost of $362,968, and was occupied in Oct/Nov 2006.

Fire and Rescue Equipment: The following Fire and Rescue Equipment was purchased during the fiscal year:

Date

Description Purchased Cost

Toshiba Computer 11/2/2011 $ 1,813

Radios 6/8/2012 3,835

Cascade System 9/26/2012 8,300

Total

$13,948


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NOTES TO FINANCIAL STATEMENTS September 30, 2012

NOTE E - LONG-TERM DEBT: Capitalized Leases and Notes Payable

The District has entered into long term lease agreements for purchase of Fire Trucks. These leases

qualify for capital lease treatment. A summary of the capital leases are as follows:

Principal Accrued

Description Bal. 10/01/11 Additions Reductions Bal. 9/30/12 Due in 2013 Interest 2012

Pumper Truck (99 Ferrara) 34,702

10,856 23,847 11,552 765

2010 IntL 4300 Rescue Truck 169,856 - 13,511 156,345 14,185 650

Totals 204,558 - 24,366 180,192 25,737 1,416

The following is a detailed schedule of current, and future, lease payments for the Pumper Truck. The

lease is with Marquette Bank. The amount financed was $122,367 on 2/1/1999 at 6.42% interest.

Date Due Payment Interest Principal Prin. Balance Accrued Interest

4/1/2011 13,083 2,883 10,200 34,702 1,114

4/1/2012 13,083 2,228 10,856 23,847 765

4/1/2013 13,083 1,531 11,552 12,294

4/1/2014 13,083 789 12,294

The following is a detailed schedule of current, and future, lease payments for the 2010 InternatL 4300 Rescue Truck.

The lease is with Community Bank. The amount financed is $169,856 on 9/1/2011 at 4.99% interest.

Date Due Payment Interest Principal Prin. Balance Accrued Interest

9/1/2011

169,856 706

9/1/2012 21,986 8,476 13,511 156,345 650

9/1/2013 21,986 7,802 14,185 142,161

9/1/2014 21,986 7,094 14,893 127,268

9/1/2015 21,986 6,351 15,636 111,632

9/1/2016 21,986 5,570 16,416 95,216

9/1/2017 21,986 4,751 17,235 77,981

9/1/2018 21,986 3,891 18,095 59,886

9/1/2019 21,986 2,988 18,998 40,888

9/1/2020 21,986 2,040 19,946 20,941


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DORCAS FIRE DISTRICT, INC. NOTES TO FINANCIAL STATEMENTS September 30, 2012

NOTE E - LONG-TERM DEBT: Capitalized Leases and Notes Payable (continued)

The District borrowed $385,000 ($360,000 in FY06 and $25,000 in FY07) from the First National

Bank of Crestview to finance construction of a new fire station on Poverty Creek Road. This new

fire station replaces the fire station destroyed by fire in FY04. The replacement fire station

building was constructed over FY05 and FY06, and was occupied in October/November 2006.

First National Bank construction loan balance at 9/30/2011

$ 351,558

No loans were made during FY2012

-

Principal paid down in FY2012

(5,593)

First National Bank construction loan balance at 9/30/2012

345,965

(Loan #392760004)

Interest and late fees paid to First National Bank in FY2012

28,768

Monthly payments during FY2012

$ 2,863

The interest rate of 7.75% was lowered to 5.50% on 12/10/2012.

NOTE F - CONTINGENT LIABILITY: Payroll Taxes The Internal Revenue Service (IRS) has billed the Fire District for unpaid Payroll Taxes of $9,636

for calendar year 2010. Telephone conversations with both the IRS and the Social Security

Administration (SSA) have revealed that the calendar year 2010 gross wages of $21,965 were were input into government computers, three times, rather than one time. Therefore the

IRS believes the Fire District should pay payroll taxes on $64,395, rather than on actual wages of

$21,965. The IRS tax bill of $9,636 is based on taxing the Fire District for additional wages of

$42,930. It is likely that the IRS will correct their records and delete the $9,636 tax bill.

NOTE G - GRANTS AND AWARDS

The fire district received no grant revenues during the fiscal year.


31

SUPPLEMENTARY INFORMATION

32

DORCAS FIRE DISTRICT, INC. SCHEDULE OF EXPENDITURES PAID

GOVERNMENTAL FUNDS Year Ended September 30, 2012

EXPENDITURES Discrepancies

$ 13,519

Administration

2,030

Attorney fee

1,500

Building Repairs

2,322

Dues and Subscriptions

475

Equipment Maintenance

6,002

Equipment Supplies

4,448

Expendable Equipment

9,111

Fuel

9,589

Insurance

17,841

Interest Expense

36,869

Office Supplies & Software

2,011

Payroll Expenses

20,158

Payroll Taxes

2,091

Pest Control

244

Phone/TV/Internet Service

4,557

Postage and Delivery

148

Professional Audit Fees (2 years)

8,200

Station Supplies

705

Tag and title

132

Tax Roll Prep

2,501

Towing expense

740

Training

1,239

Truck Maintenance

4,230

Utilities:Gas, Electric, Water, Garbage

6,167

Total General Government Expenditures

156,829

Plus Capital Outlay Expenditures

13,948

Plus Debt Service Expenditures

29,959

Total Expenditures

$ 200,736

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DORCAS FIRE DISTRICT Budgetary Comparison Schedule GOVERNMENTAL FUNDS Year Ended September 30, 2012

EXPENDITURES

Actual

Budgeted

Over (Under)

General Government (excluding depreciation)

Expenditures

Expenditures

Budget

EXPENDITURES

Discrepancies

$ 13,519

$ 13,519

Administration

2,030

$ 1,200

830

Attorney fee

1,500

3600

(2,100)

Building Repairs

2,322

2,322

Dues and Subscriptions

475

600

(125)

Equipment Maintenance

6,002

300

5,702

Equipment Supplies

4,448

4,448

Expendable Equipment

9,111

5000

4,111

Fuel

9,589

10000

(411)

Insurance

17,841

21869

(4,028)

Interest Expense

36,869

13084

23,785

Office Supplies & Software

2,011

2500

(489)

Payroll Expenses

20,158

19600

558

Payroll Taxes

2,091

3634

(1,543)

Pest Control

244

244

Phone/TV/Internet Service

4,557

3434

1,123

Postage and Delivery

148

148

Professional Audit Fees (2 years)

8,200

8000

200

Station Supplies

705

705

Tag and title

132

132

Tax Roll Prep

2,501

2370

131

Towing expense

740

740

Training

1,239

1,239

Truck Maintenance

4,230

4,230

Utilities:Gas, Electric, Water, Garbage

6,167

6724

(557)

Total General Government Expenditures

156,829

101,915

$ 54,914

Plus Capital Outlay Expenditures

13,948

25000

(11,052)

Plus Debt Service Expenditures

29,959

34361

(4,402)

Total Expenditures

$ 200,736

$ 161,276

$ 39,460

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JOSEPH A JONES CERTIFIED PUBLIC ACCOUNTANT 6075 Bud Moulton Road Crestview, Fl. 32536 Phone (850) 682-8950 Cell Phone (850) 826-0630 Email: [email protected] Fax: (866) 521-9736

MANAGEMENT LETTER To the Board of Directors Dorcas Fire District, Inc. Crestview, Florida

I have audited the financial statements of the Dorcas Fire District, Inc., as of and for the year ended September 30, 2012, and have issued my report dated May 24, 2013.

I conducted my 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. I have issued my 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.” Disclosure in that report, which is dated May 24, 2013, should be considered in conjunction with this management letter.

Additionally, my audit was conducted in accordance with Chapter 10.550, Rules of Auditor General, which govern the conduct of local governmental entity audits performed in the State of Florida and require that certain items be addressed in this letter.

Section 10.554(1)(i)1., Rules of the Auditor General, require that I address whether or not recommendations made in the preceding annual financial report have been followed. The prior year audit report, dated September 19, 2012, included recommendations as mentioned again on the next page. Management has agreed to the recommendations made in the preceding year’s audit report dated September 19, 2012, and they are still in the process of implementing those recommendations. Turnover in bookkeepers has caused a delay in implementing those recommendations. Section 10.554(1)(i)2., Rules of the Auditor General require my audit to include a review of the provisions of Section 218.415., Florida Statutes, regarding investment of public funds. In connection with my audit, I determined that the Fire District complied with Section 218.415. Section 10.554(1)(i)3., Rules of the Auditor General, requires that I address in the management letter any recommendations to improve the entity’s financial management, accounting procedures, and internal controls. In connection with my audit of the Dorcas Fire District, Inc., I did find a lack in separation of duties pertaining to separation of financial reporting duties versus financial custodian duties. It appears that funds have been misappropriated. On May 17, 2012 the former bookkeeper was arrested and charged with grand theft of $5,000 or more. On September 12, 2012, the former bookkeeper was sentenced to 3 years suspended prison

35

sentence, with 5 years of probation, and was ordered to pay restitution of $13,364.82 at $300.00 per month. Recommendation: If the fire district had additional resources, I would recommend the district hire sufficient personnel to have separation of financial reporting duties from financial custodian duties. Since the district possibly cannot afford to hire additional personnel to have separation of duties, I recommend the district strengthen financial internal controls by requiring the bookkeeper to perform monthly bank reconciliations. I also recommend a board member perform a financial review, on a monthly basis, of the following: (a) monthly financial statements, (b) monthly receipts and bank deposits, (c) monthly disbursements and supporting documentation, (d) monthly bank reconciliations, and (e) monthly bank statements and unpaid bills. I recommend documentation of the board member’s review be maintained in the business office. I recommend the results of the board member’s review be promptly reported to the board on a monthly basis. I recommend that appropriate action be promptly taken by the board to deal with any discrepancies found. Management Response: Management concurs with the auditor’s recommendations. Management will require monthly bank reconciliations and will require monthly reviews by a board member of the financial reports and documents mentioned above. Management agrees to promptly report the results of the board member’s monthly financial review to the board on a monthly basis. Management agrees to take prompt, and appropriate, action to deal with any discrepancies found in the monthly financial reviews. Section 10.554(1)(i)4., Rules of the Auditor General, requires that I address violations of provisions of contracts or grant agreements, or abuse, that have occurred, or are likely to have occurred, that have an effect on the financial statements that is less than material but more than inconsequential. In connection with my audit, I did not have any such findings. Section 10.554(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) Deficiencies in internal control that are not significant deficiencies. In connection with my audit, I determined that there appears to be fraud or theft of approximately $13,519 in fiscal year 2012 and approximately $16,200 in fiscal year 2011. The former bookkeeper has been arrested and charged with grand theft of $5,000, and has been convicted. This fraud or theft of funds is material in amount in comparison to the city’s total revenues and expenditures. The fire district has agreed to implement the following steps to improve internal controls and to help prevent future fraud or thefts:

1. The bookkeeper will perform monthly bank reconciliations as soon as bank statements

are received.

2. A board member will perform a financial review, on a monthly basis, of the following: (a)

monthly financial statements, (b) monthly receipts and bank deposits, (c) monthly

disbursements and supporting documentation, (d) monthly bank reconciliations, and (e)

monthly bank statements and unpaid bills.

3. Documentation of the board member’s monthly financial review will be maintained in the

business office.

4. The results of the board member’s monthly financial review will be promptly reported to

the board on a monthly basis.

5. Appropriate action will be promptly taken by the board to deal with any discrepancies

found in the monthly reviews.

36

Section 10.554(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 Dorcas Fire District was created by section 2005-331, Laws of Florida. The district is an independent fire control district operating pursuant to the special act and the provisions of Chapter 191, Florida Statutes. There are no component units. Section 10.554(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 218.503(1), Florida Statutes, and identification of the specific condition(s) met. In connection with my audit, I determined that the Dorcas Fire District did not meet any of the conditions described in Section 218.503(1), Florida Statutes. Section 10.554(1)(i)7.b., Rules of the Auditor General, requires that I determine whether the annual financial report for the Dorcas Fire District for the fiscal year ended September 30, 2012, filed with the Florida Department of Financial Services pursuant to Section 218.32(1)(a), Florida Statutes, is in agreement with the annual financial audit report for the fiscal year ended September 30, 2011. In connection with my audit, I determined that these two reports were in agreement. Pursuant to Sections 10.554(1)(i)7.c. and 10.556(7), Rules of the Auditor General, I applied financial condition assessment procedures. It is management’s responsibility to monitor the Dorcas Fire District’s financial condition, and my financial condition assessment was based in part on representations made by management and the review of financial information provided by same. I did not see any deteriorating financial conditions for the Fire District. Pursuant to Chapter 119, Florida Statutes, this management letter is a public record and its distribution is not limited. Auditing standards generally accepted in the United States of America require me to indicate that this letter is intended solely for the information and use of management, and the Florida Auditor General, and is not intended to be and should not be used by anyone other than these specified parties.

Joseph A. Jones Certified Public Accountant

Crestview, Florida May 24, 2013

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