Loading...
CRA Independent Audit Report ,~ Boynton Beach City Manager's Office Memorandum FROM: Honorable Mayor & City Commission Joyce Costello'V Administrative AJssistant TO: DATE: April 3, 2007 SUBJECT: CRA Independent Audit Report Pursuant to a City Commissioner request, attached please find copies of the CRA Independent Auditor's Report, Basic Financial Statements and Required Supplementary Information for the following years: ~ Year ending September 30,2004 ~ Year ending September 30,2005 ~ Year ending September 30, 2006 Jc Attachments C: Kurt Bressner, City Manager Wilfred Hawkins, Assistant City Manager Carisse Lejeune, Assistant to the City Manager Jim Cheraf, City Attorney , I BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY TABLE OF CONTENTS FOR THE YEAR ENDED SEPTEMBER 30, 2004 [ 1 [1 [ 1 [ 1 INDEPENDENT AUDITOR'S REPORT REQUIRED SUPPLEMENTARY INFORMATION: Management's Discussion and Analysis (MD&A) BASIC FINANCIAL STATEMENTS: [I Government-wide Financial Statements: Statement of Net Assets Statement of Activities Governmental Fund Financial Statements: Balance Sheet Reconciliation of the Balance Sheet to the Statement of Net Assets Statement of Revenues, Expenditures and Change in Fund Balance Reconciliation of the Statement of Revenues, Expenditures and Change in Fund Balance to the Statement of Activities Notes to Financial Statements , I : I : I I I I I I I 1 I I I REQUIRED SUPPLEMENTARY INFORMATION: Budgetary Comparison Schedule ADDITIONAL ELEMENTS REQUIRED BY THE RULES OF THE AUDITOR GENERAL: Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Management Letter PAGE 1 3 9 10 11 12 13 14 15 23 26 28 ) -I 1 1 I I I ] I I I I I I I I I I DUFRESNE ~ ASSOCIATES, CPA, PA CERTIFIED PUBLIC ACCOUNTANTS MAILING ADDRESS: Po.n OPFICE Box 1179 ORANGE PARK. FLORIDA .32061-1179 www.dufresnecpas.com SATELLITE OFFICE 237 N1NTH AVENUE NORTH JACDlONVlLLI! BMCH. FLOlUDA 32250 TELEPHONE: 904 270-8820 FACSIMILE: 904 270-8821 MAIN OFFICE 357 STILES AVENUE ORANGE PARI:. FLORIDA 3207.3 TELEPHONE: 904 278-8980 FACSIMILE: 904 278-4665 December 24, 2004 INDEPENDENT AUDITOR'S REPORT To the Board of Directors Boynton Beach Community Redevelopment Agency We have audited the accompanying fmancial statements of the governmental activities of the Boynton Beach Community Redevelopment Agency (the "CRAil), a component unit of the City of Boynton Beach, Florida, as of and for the year ended September 30, 2004, which collectively comprise the CRA's basic financial statements as listed in the table of contents. These fmancial statements are the responsibility of the CRA'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 fmancial 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 am.ounts and disclosures in the fmancial 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 basic financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities of the CRA as of September 30,2004, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued a report dated December 24, 2004 on our consideration of the CRA's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreement and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. 1 [ ] f1 [ I [ 1 r 1 MANAGEMENT'S DISCUSSION AND ANALYSIS (Unaudited) The Boynton Beach Community Redevelopment Agency's (CRA) management discussion and analysis (MD&A) is designed to provide an objective and easy to read analysis of the financial activities based on currently know facts, decisions, and conditions. The MD&A provides a broad overview and short-term and long-term analysis of the CRA's activities based on information presented in the financial statements. Specifically, this information is designed to assist the reader in focusing on significant [mandal issues, provide an overview of the CRA's financial activity, and identify changes in the CRA's financial position and its ability to address the next year's challenges. Finally, the MD&A will identify any material deviations from the approved budget. r I : ] , I ; I J I I ! I I I I I The CRA is an independent agency for the City of Boynton Beach. The CRA has presented its financial statements in accordance with the reporting model required by Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments (Statement 34). [ I The information contained in this MD&A is only a component of the entire financial statement report. Readers should take time to read and evaluate all sections of the report, including the footnotes and other supplementary information provided. FINANCIAL HIGHLIGHTS . The CRA began the fiscal year with a net assets balance of $3,295,802. The CRA's total revenues were $2,589,280, while total expenses were $3,268,867. . The CRA has decreased net assets by $679,587. . The CRA's total investment in capital asset projects was $1,330,578. These investments included the purchase of the Relax Inn property. OVERVIEW OF THE FINANCIAL STATEMENTS The CRA's basic financial statements are comprised of the 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 financials statements themselves. Govemment-Wide Financial Statements The Government-Wide Financial Statements provide readers with a broad overview of the CRA's finances, in a manner similar to a private-sector business. In addition, the govemment-wide statements are prepared using the accrual- basis of accounting. The statement of net assets (Balance Sheet) presents information on the CRA's assets and liabilities, with the difference between the two reported as Net Assets. 3 I u1 1 I 1 ) I I I I I I ] I j ) I ! The management's discussion and analysis and the budgetary comparison information on pages 3 through 8 and page 23 through 24 are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. ~ 4 ~ (fJl+/JlJ Dufresne & Associates, CPA, PA 2 r I [} The statement of activities (Income Statement) presents information showing how the CRA's net revenues changed during the most recent fiscal year. All changes in net revenues are reported as soon as underlying events giving rise to the change occur regardless of the timing of related cash flows, The expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. [-I [ 1 [ 1 The Government-Wide Financial Statements present functions of the eRA that are principally supported by tax increment financing (governmental activities). The governmental activities of the CRA include general government activities and redevelopment projects. Thus, the CRA has no business-type activities. The Government-Wide fmancial statements are found on pages 9-10 of this report. Fund Financial Statements [ I The Fund Financial Statements provide readers with an overview of each fund and its related function in a traditional format. A fund is a grouping of related accounts that maintain control over resources that are segregated for specific activities or objectives. The CRA, like other state and local governments, uses fund accounting to ensure and demonstrate legal compliance with finance-related legal requirements. The CRA utilized only one fund, the General Fund, which is a governmental fund, and accounts for all financial resources of the CRA. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financials statements. However, unlike the government-wide [mandal statements, the 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 fmancing requirements. The focus of governmental funds is narrower than government-wide financial statements, and it is therefore useful to compare the information presented for governmental funds with similar information presented for governmental activities in the Government-Wide Financial Statements. By comparing and contrasting, readers may better understand the long-term impact of the CRA's near term financing decisions. The Balance Sheet and the Governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between the governmental fund and governmental activities. The CRA adopts an annual appropriated budget for its General Fund. A budgetary comparison schedule provided for the General Fund demonstrates compliance with this budget. The basic governmental fund financial statements can be found on pages 11 and 13 of this report is the reconciliation between the governmental funds and governmental activities found on pages 12 and 14. 4 1 1 I -I 1 1 I I I I J I I I I I I I 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 the Fund Financial Statements. These notes to the financial statements are located beginning on page 15 of this report. In addition to the basic fmancial statements and accompanying notes, this report also presents certain required supplementary information concerning the CRA's budget to actual results for the General Fund for the current year. The required supplementary information can be found on page 23 of this report. GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net assets may serve over time as a useful indicator of a government's financial position. In the case of the CRA, assets exceeded liabilities by $2,616,215 at the close of the most recent fiscal year. However, the largest portion of the CRA's total assets, 72%, is reflected in its cash and investment accounts. The eRA will use this cash asset for econDmic redevelopment; consequently, this asset is available for future spending on redevelopment and repayment of the related debt. CRA Net Assets at September 30, 2004 2004 Assets Current assets Capital assets Total assets $ 4,195,488 1,330,578 5,526,066 Liabilities Long term liabilities Other liabilities Total Uabllitles 2,630,845 279,006 2,909,851 Net assets Invested in capital assets Unrestricted Total net assets 1,330,578 1,285,637 $ 2,616,215 2003 $ 5,212,257 880,809 6,093,066 2,759,607 37,658 2,797,265 880,809 2,414,993 $ 3,295,802 eRA assets are unrestricted indicating the CRA will have assets available for future projects. 5 [ I fl [1 r 1 [ 1 [ 1 I I , ] 1 , I J I I , I I I I I Governmental Activities Governmental activities decreased the CRA's net assets by $679,587. Key elements of this decrease are as follows. eRA Changes in Net Assets for the Year Ended September 30, 2004 2004 2003 Revenues General Revenues Tax increment revenues $ 2,517,635 $ 1,330,409 Other revenues Total Revenues 71,645 2,589,280 79,667 1,410,076 Expenses General government Redevelopment projects Interest on Long-Term Debt Total Expenses 684,318 2,403,496 181,053 3,268,867 389,888 462,299 194,503 1,046,690 Increase (decrease) in net assets (679,587) 363,386 Net assets beginning of year Net assets end of year 3,295,802 $ 2,616,215 $ 2,932,416 3,295,802 Tax increment revenues increased by $1,187,226 during fiscal year 2004. Tax increment revenue increases are a product of increases in property values in the CRA's redevelopment area. In addition, increases in general government expense is directly due to the creation of an independent eRA with offices, staff, equipment, and supplies. 6 ) 1 I 1 ] J J I I I I I I I j ] I I General Budgetary Highlights During the year, staff made five requests for budget transfers within categories. However, actual revenues exceeded budgetary estimates by $17,550. The CRA originally budgeted $100,000 for the Fa~ade Grant Program, which was an existing program assumed from the City of Boynton Beach. The CRA approved the following recipients to receive the Fa~ade Grant: . Delray-Boynton Academy $15,000 . Weiss Memorial Chapel 1,139 . St. Mark Church 15,000 . Colonial Center Condo Association 30,000 . Scully Burgers 10,498 . Welch Plastering 1,800 . Provident Missionary Baptist Church 11,000 . Salefish Realty 9.227 $ 93.664 In addition, the CRA assumed the Development Regions Core Grant Program in 2003 from the City of Boynton Beach. The CRA Board approved the Development Regions Core Grant for Delray-Boynton Academy. The CRA staff brought forth to the CRA Board a CRA Pilot Police program for the Central Business District and the Heart of Boynton areas. These special police are over and above the regular police assigned within these areas. The program has been successful in placing a constant police presence, which has resulted in lowering the crime rate in these areas within the first month. The CRA has also moved forward with several projects: Riverwalk/ Promenade/ Boynton Beach Boulevard Extension project, a Way-Finding Sign program, and Boynton Beach Boulevard District Redevelopment Plan Phase II Update and the CRA Master Plan development. The eRA Board approved the acquisition of 31 properties in the Heart of Boynton area that will be developed into mixed use projects, which will include elements of retail, office condo and residential. The CRA contracted with The Urban Group for acquisition and is complying with all HUD guideline for these purchases. Two of these properties were purchased during the year ended September 30, 2004. The CRA contracted with Jack of Arts for Phase I of its web site development and implementation, which has been a great success. Today, current projects, new development, grant and incentive programs, festivals and events, as well as guidelines for development within the CRA area, can be viewed and printed from the website. In addition to the web site development, the CRA produced its first annual report, which can be viewed and printed from the website. Finally, expenditures were $9,215 less than budgetary estimates. 7 ( I r 1 Capital Assets and Debt Administration Capital Assets II [ I The CRA purchased the Relax Inn property as part of the Riverwalkj Promenade j Boynton Beach Boulevard Extension project in 2002. During 2004, the CRA purchased two of the 31 properties approved for acquisition in the Heart of Boynton area that will be developed into mixed use projects, which will include elements of retail, office condo and residential. Long Term Debt f1 [ I [ I : I , I : I I I , I , I I I I 1 The CRA has a Note Payable with Bank of America initiated on September 20, 2001 for $3,000,000, together with interest on the principal balance outstanding at the rate per annum of 6,56% per annum based upon a year of 360 days for the actual number of days elapsed. The principal and interest on this Note are payable in thirty (30) equal installments of $158,649.14 each, due March 20 and September 20, commencing March 20, 2002. This loan is scheduled to be paid in full September 20,2016. Economic Factors and Next Year's Budget and Rates The CRA Board approved the 2004-2005 budgets, which included projections through 2009. Tax Increment Revenues projections were based upon actual tax appraiser's office 2003 values and the projections of projects coming on line between the years of 2004 and 2009. In addition, the CRA Tax Increment income was derived from two factors: first the "New Construction" within the district, which was generated from new projects. Secondly, the eRA captured the difference between the 2003 base evaluation and the new appraised value for these new construction projects. The second area of tax revenue generation is from appreciation within the CRA district, which was substantial at 15%. The CRA Board approved the issuance of $19.575 million in Tax Increment Bonds secured by CRA Tax Increment Revenues with a City back-up pledge, which would allow the CRA's debt to be issued with bond insurance and rated "AM", the highest tax-exempt bond rating. The CRA has appropriated approximately $1.9 million for general operations, $1.67 million for programs, $8.7 million for projects, and an ending fund balance of $12.4 million carry forward for additional future projects for the fiscal year 2004-2005. Requests for Information This fmancial report is designed to provide a general overview of the CRA's finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the Executive Director at 639 E. Ocean Ave. Suite 103, Boynton Beach, Fl 33435. 8 I -I 1 1 -I I I I I I I I I I I I I I BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY STATEMENT OF NET ASSETS SEPTEMBER 30, 2004 GOVERNMENTAL ACTIVITIES ASSETS Cash and cash equivalents Accounts receivable Prepaids Capital assets: Land Depreciable capital assets, net $ 3,972,574 221,887 1,027 1,309,378 21,200 TOTAL ASSETS 5,526,066 LIABILITIES Accounts payable Accrued salaries and benefits Accrued interest payable Long-tenn liabilities: Due within one year Due in more than one year 267,296 6,917 4,793 145,708 2,485,137 TOTAL LIABILITIES 2,909,851 NET ASSETS Invested in capital assets Unrestricted 1,330,578 1,285,637 TOTAL NET ASSETS $ 2,616,215 See notes to financial statements. 9 [ 1 BOYll'TON BEACH CO_UNITY REDEVBLOPMBRT AGENCY STATEIIERT OF ACTIVJTIES FOR THE YEAR ENDED SEPTEMBER 30, 2004 rl PROGRAM REVENUES OPERATING GRANTS AND CONTRI- BUTIONS [I EXPENSES CHARGES FOR SERVICES [1 FUNCfIONS/PROGRAMS GOVERNMENTAL ACfIVITIES: General government $ 684,318 $ Redevelopment projects 2,403,496 Interest on long-term debt 181,053 TOTAL $ 3,268.867 $ [1 GENERAL REVENUES Tax increment revenue Interest and other income TOTAL GENERAL REVENUES :1 CHANGE IN NET ASSETS NET ASSETS - October 1, 2003 NET ASSETS - September 30, 2004 See notes to fmancial statements. 10 $ $ CAPITAL GRANTS AND CONTRI- BUTIONS $ $ NET $ (684,318) (2,403,496) (181,053) (3,268,867) 2,517,635 71,645 2,589,280 (679,587) 3,295,802 $ 2,616,215 BOYNTOR BEACH COMMUNITY REDEVELOPMENT AGENCY BALARCE SHEET - GOVERRllIERTAL FUND SEPTEMBER 30, 2004 '} -1 -, -1 ASSETS Cash and cash equivalents Accounts receivable Prepaids GENERAL FUND $ 3,972,574 221,887 1,027 $ 4,195,488 TOTAL ASSETS LIABILITIES AND FUND BALANCE LIABILITIES Accounts payable Accrued salaries and benefits $ 267,296 6,917 274,213 3,920,248 1,027 3,921,275 $ 4,195,488 TOTAL LIABILITIES FUND BALANCE Unreserved Reserved for Prepaids TOTAL FUND BALANCE I J I TOTAL LIABILITIES AND FUND BALANCE See notes to financial statements. 11 i1 BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET ASSETS GOVERIIIDtlITAL FUND SEPTBlIIBER 30, 2004 FUND BALANCE - TOTAL GOVERNMENTAL FUND [ 1 Amounts reported for governmental activities in the statement of net assets are different because: [U] Capital assets used in governmental activities are not reported in the govemmental fund. Capital assets - net [ 1 Long~term liabilities are not reported in the governmental fund. Compensated Absences Accrued interest Note Payable I I NET ASSETS OF GOVERNMENTAL ACTIVITIES See notes to financial statements. , I , I 12 $ 3,921,275 1,330,578 (14,468) (4,793) (2,616,377) $ 2,616,215 -1 BORTON BEACH COM!rlUJfITY REDEVELOPMENT AGENCY STATEJIE1IIT OF REVENUES, EXPBImITURES AND CHANGE Of FUND BALAl'ICE . GOVERNMENTAL FUND FOR THE YEAR ENDED SEPTEMBER 30, 2004 -) U) REVENUES Tax increment revenue Interest and other income TOTAL REVENUES EXPENDITURES General government Current Fixed Capital Outlay Total General Government $ Redevelopment projects ___.Debt Service: ~cipal Retirement Interest TOTAL EXPENDITURES EXCESS OF EXPENDITURES OVER REVENUES j J j J FUND BALANCE, Beginning of Year FUND BALANCE, End of Year See notes to fmancial statements. 13 674,283 12,424 GENERAL FUND $ 2,517,635 71,645 2,589,280 686,707 2,843,665 135,968 176,259 3,842,599 (1,253,319) 5,174,595 $ 3,921,276 BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCE TO THE STATEMENT OF ACTMTIES - GOVERNMENTAL FUND FOR THE YEAR ENDED SEPTEMBER 30, 2004 NET CHANGE IN FUND BALANCE - TOTAL GOVERNMENTAL FUND $ (1,253,319) Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlay expenditures. However, in the statement of activities, the cost of those assets is depreciated over their estimated useful lives. Expenditures for capital assets Less current year depreciation expense 452,592 (2,829) Repayment of principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net assets. Principal payments 135,968 Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Change in Long-term Compensated Absences (7,206) Interest on long-term debt in the statement of activities differs from the amount reported in the governmental funds because interest is recognized as an expenditure in the funds when it is due, and thus requires use of current financial resources. In the statement of activities, however, expense is recognized as the interest accrues, regardless of when it is due. (4,793) CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES $ (679,5871 14 "I 1 1 "I I I I I I I I I I I I I I I BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2004 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies of the Boynton Beach Community Redevelopment Agency {the "CRA; conform to generally accepted accounting principles as applicable to governments. The following is a summary of the more significant policies. A. Reporting Entity The CRA is a dependent special district established by the City of Boynton Beach, Florida under the authority granted by Florida Statutes 163, Section III. The purpose of the CRA is to promote and guide physical and economic redevelopment in the City of Boynton Beach. The CRA is a legally separate entity established by Ordinance number 83-41 of the City of Boynton Beach on December 20, 1983. TheCRA has adopted Governmental Accounting Standards Board Statement No. 14 (GASa 14), the Financial Reporting Entity, for the purpose of evaluating its component unit fmancial statements. Based on the criteria in GASB 14, the CRA has determined that there are no units that meet criteria for inclusion in the Agency's financial statements. B. Reporting Model The CRA's basic financial statements consist of government-wide statements, including a statement of net assets and a statement of activities, and fund fmancWl statements which provide a more detailed level of fmancial information. Govemment-Wide Financial Statements The statement of net assets and the statement of activities report information on all of the activities of the CRA. Governmental activities are reported separately from business-type activities, which rely on fees charged to external parties as their primary revenues. The ~RA has no business-type activities. The statement of net assets reports the CRA's financial position as of the end of the fiscal year. In this statement, the CRA's net assets are reported in three categories: invested in capital assets, net of related debt; restricted net assets; and unrestricted net assets. The statement of activities presents a comparison between direct expenses and program revenues for each function of the CRA. Direct expenses are those that are clearly identifiable with a specific function. Program revenues include charges for seIVices that are directly related to a given function and grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Tax increment revenue and other items not meeting the definition of program revenue are reported instead as general revenue. 15 BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2004 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES tcontinued) B. Reporting Model tcontinued~ Fund Financial Statements The CRA utilized only one fund, the General Fund, which is classified as a governmental fund and accounts for all financial resources of the CRA. The governmental fund statement includes reconciliations with brief explanations to better identify the relationship between the government-wide statements and the statement for the governmental fund. C. Measurement Focus and Basis of Accounting The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. The governmental fund fmancial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the CRA considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when the related fund liability is incurred. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. D. Cash and Cash Equivalents Cash and cash equivalents consist of petty cash and deposits with financial institutions qualified as public depositories under Florida law. All deposits are insured by federal depository insurance and/ or collateralized with securities held in Florida's multiple financial institution collateral pool as required by Chapter 280, Florida Statutes. E. Capital Assets and Depreciation Capital assets are defmed by the CRA as assets with an initial, individual cost of $1,000 or more and an estimated useful life of more than one year. These assets are recorded at historical cost. Donated capital assets are recorded at estimated fair value at the date of donation. Capital assets are depreciated using the straight-line method over the assets' estimated useful lives of all reported capital assets, except land and land improvements. The estimated useful life of furniture, fixtures and equipment is five to seven years. 16 I '1 1 I -, I I I I I I I I I I I I I BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2004 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) F. Revenue Sources Tax increment revenues are the primary source of revenue for the eRA. Tax increment revenue is collected from two governmental entities that levy property taxes within the legally defined redevelopment area of the CRA, which are the City of Boynton Beach and Palm Beach County. G. Compensated Absences It is the CRA's policy to permit employees to accumulate earned but unused vacation and sick pay benefits. Employees may, depending on their level of service, be paid for various amounts of their total accrued leave upon termination or retirement. The CRA accrues a liability for leave hours that meet the criteria for payment at the eligible employees' current rates of pay. H. Long-term LiabUltles All long-term debt and other long-term obligations are reported in the government- wide financial statements. In the fund fmancial statements, long-term liabilities are not reported because govemmental funds use the current financial resources measurement focus. I. Net Assets Net assets represent the difference between assets and liabilities and are reported in three categories as hereafter described. Net assets invested in capital assets, net of related debt, represent capital assets, net of accumulated depreciation and any outstanding debt related to those assets. Net assets are reported as restricted when there are legal limitations imposed on their use by legislation, or external restrictions imposed by other governments, creditors, or grantors. Unrestricted net assets are net assets that do not meet the definitions of the classifications previously described. When both restricted and unrestricted resources are available for use, it is the eRA's policy to use restricted resources first, and then unrestricted resources as they are needed. 17 [1 [1 l~ rl :1 BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS SEPTEllIIBER 30, 2004 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) J. Budgets aDd Budgetary Accounting II An annual budget is adopted on the modified accrual basis of accounting, consistent with generally accepted accounting principles, with the exception of compensated absences and festivals/events/seminars expenditures. Compensated absences are budgeted only to the extent expected to be paid, rather than on the modified accrual basis. Festivals/events/seminars expenditures are netted against revenue generated from these expenditures, rather than reporting revenues and expenditures individually. Amendments to the budget can only be made with the approval of the Board of Directors. The fund is the legal level of control. K. Use of Estimates r J I I I I ! I I I I I \ The preparation of financial statements in conformity with generally accepted accounting principles requires management to make various estimates. Actual results could differ from those estimates. 2. CASH AND CASH EQUIVALENTS At September 30, 2004 the CRA's cash and cash equivalents included deposits with fmancial institutions with a bank balance of $3,990,712 and $500 of petty cash. 3. ACCOUNTS RECEIVABLE At September 30, 2004 the CRA's accounts receivable included due from other governments and due from employees with balances of $219,117 and $2,769, respectively. 18 BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2004 4. CAPITAL ASSETS Capital asset activity for the year ended September 30,2004 was as follows: Balance at Beginning of Year Balance at End of Additions Deletions Year Capital assets not being depreciated: Land $869,210 $440,168 $ $1,309,378 Depreciable capital assets Furniture, fixtures and equipment Total depreciable capital assets 13,720 12,430 26,150 13,720 12,430 26,150 2,121 2,829 4,950 11,599 9,601 21,200 $880,809 $449,769 $ $1,330,578 Less accumulated depreciation Depreciable capital assets, net of accumulated depreciation Total capital assets 5. LONG-TERM LIABILITIES A summary of changes for the current fiscal year follows: Balance at Balance at Beginning of End of Year Additions Deletions Year Compensated Absences $ 7,262 $ 7,206 $ $ 14,468 Note Payable 2,752,345 135,968 2,616,377 Total $ 2,759,607 $ 7,206 $ 135,968 $2,630,845 19 BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2004 5. LONG-TERM LIABILITIES (continued) The CRA is a party to a promissory note to Bank of America, N .A. at 6.56% interest, payable in thirty semi-annual installments. Debt service requirements to maturity are as follows: Fiscal Year End September 30, Principal Interest Total 2005 145,708 171,590 317,298 2006 155,560 161,738 317,298 2007 166,079 151,219 317,298 2008 176,904 140,395 317,299 2009 189,270 128,028 317,298 2010-2014 1,156,235 430,257 1,586,492 2015-2016 626,596 55,214 681,810 Total $ 2,616,352 $1,238,441 $3,854,793 6. RISK MANAGEMENT The eRA is exposed to various risks of loss related to torts, theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The eRA purchases commercial insurance for the risks of loss to which it is exposed. Policy limits and deductibles are reviewed by management and established at amounts to provide reasonable protection from significant financial loss. Settlements did not exceed insurance coverage for the current fiscal year. 7. COMMITMENTS AND CONTINGENT LIABILITIES A. Lease Commitments The CRA leases buildings and equipment under noncancelable operating leases. Future minimum rental payments as of September 30, 2004 required by these leases are as follows: 2005 $ 35,156 2006 2007 2008 2009 Thereafter $ 35.156 Rental costs for the year ended September 30, 2004 approximated $19,000. 20 BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2004 7. COMMITMENTS AND CONTINGENT LIABILITIES (continuedt B. Facade Grant Program The CRA established a Facade grant program in an effort to promote the redevelopment of the facades of existing businesses located in the City of Boynton Beach. The program offers businesses a $15,000 matching grant to improve the facades of their businesses. During the year ended September 30, 2004, the CRA had committed $93,664 for facade grants. For the year ended September 30,2004 the CRA closed and disbursed $28,882 for facade grants. C. Grants Amounts received by the CRA from grantor agencies are subject to audit and adjustment by those agencies. Any disallowed claims, including amounts already received, might constitute a liability of the CRA for retum of those funds. During September 30, 2004 the CRA had committed $66,000 in matching grant funds from a Palm Beach County grant to create at least nineteen full-time jobs in Palm Beach County. 8. RELATED PARTY TRANSACTIONS The CRA is a component unit of the City of Boynton Beach, Florida. For the year ended September 30, 2003 the eRA's tax increment revenues include $1,573,522 received from the City. The CRA reimbursed the City for certain costs such as recording and information technology services, festival expenses and police services during the year. Total payments to the City for the year ended September 30,2004 were approximately $51,066. 9. SUBSEQUENT EVENT On December 22, 2004 the CRA dated and delivered $18,970,000 Tax Increment Revenue Bonds, Series 2004 (the "Series 2004 Bonds). The Series 2004 Bonds are being issued for the purpose of providing funds to (1) pay the cost of various capital improvements described in the community redevelopment plan of the CRA, (2) fund the 2004 Subaccount of the Reserve Fund in an amount equal to the Reserve Fund Requirement for the Series 2004 Bonds, and (3) pay costs and expenses related to the issuance of the Series 2004 Bonds. The Series 2004 Bonds were sold at a premium, and the subsequent repayment of this debt will come from the Tax Increment Revenues that have been designated as Pledged Funds. 21 REQUIRED SUPPLEJ/IB!ITARY IlO'ORMATlON 22 UU1U'"J"UIIIlIIiACIIl;U..UIU"."Y KIliIJIliV&5I.UrallISl'llT AUJWlo.;l BUPGBTARY COMPARISON SCIII!:DULB J'OR THE YUR DDED SEPTEMBER. 3D, 2004 Actual Budget to Amounts GAAP Actual Budgeted Amounts Budgetary Difference Amounts Original Final Basis Over (Under) GMP Basis REVENUES Tax increment revenue $ 2,361,158 $ 2,517,635 $ 2,517,635 $ $ 2,517,635 Interest and other income 75,000 48,725 66.275 (II 5,370 71,645 1 Total revenues 2,436,158 2,566,360 2.583,910 5,370 2,589,280 EXPENDITURES General government Salaries and benefitll 251.602 241,890 237,774 12) 7,206 244,980 Professionalllervices 243,660 344,131 344,130 344,130 Occupancy 23,787 23,076 23.066 23,066 1 Equipment leases 4,356 4,356 4,358 4,358 Insurance 5,688 4,661 4,400 4,400 Travel 19,719 25,199 25,195 25,195 Licenses, books, &; publications 5,066 4,676 4,691 4,691 Advertising 4,000 1,842 1,842 1,842 Career development 4,000 1,782 1,782 1,782 Printing 22,000 5,158 5,156 5,156 MiliCeUaneouB 500 183 183 183 Office supplies and equipment 11,500 14,461 14,421 14,421 Office leasehold improvements 1,500 942 942 942 Web Site Update/Expansion 10,000 15,622 15,621 15,621 Marketing and Promotions 1,529 1,529 1,529 Police 350,000 42,361 42,361 42,361 Total general government 957,378 731,869 727,451 7,206 734,657 Redevelopment projects Festivalsl eventsl seminars 50,000 30,223 30,223 (3) 5,370 35,593 Fa~de grants 100,000 28,882 28,882 28,882 Economic Development Grants 50 ,000 16,783 16,783 16,783 Transportation/Trolley 150,000 Marina Parking Garage 1,050,000 157,500 157,500 157,500 Riverwallc/ Promenade project 2,150,000 1,992,469 1,992,468 1,992,468 CDC Parking Site 1,750,000 Way-Finding Signage 50,000 51,986 51,986 51,986 Miscellaneous Projects 50,000 10,710 10,710 10,710 Savage Creatures Complex 75,000 50,162 50,162 50,162 HOBI Commercial/ Improvements 600,000 451,632 451,631 451,631 Total redevelopment projects 6,075,000 2,790,347 2,790,345 5,370 2,795.715 Debt service Principal payments 134,925 133,315 135,968 135,968 Interest expense 182,373 183.707 176,259 176,259 Debt Issue 1 200,000 Sinldng Fund 20,000 Issuance Cost 60,000 Total debt service 597,298 317,022 312,227 312,227 Total expenditures 7,629,676 3,839,238 3,830,023 12,576 3,842,599 Net change in fund balance (5,193,518) [1,272,878) (1.246.113) (7,2061 (1,253,319) Fund Balance, Beginning of Year 4,751,917 5,207,162 5,207,162 (4) (32.567) 5,174,595 Fund Balance, End of Year $ (441,601) $ 3,934,284 $ 3,961,049 $ (39,773) $ 3,921,276 23 ,I i1 i1 BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY BUDGETARY COMPARISON SCHEDULE lcontinued) FOR THE YEAR ENDED SEPTEMBER 30, 2004 Explanation of differences: i1 (l) The Agency does not budget for festival and event income" The income generated is netted against the expenditures incurred, rather than reporting the revenues and expenditures individually. $ 5,370 [1 (2) The Agency budgets for compensated absences only to the extent expected to be paid, rather than on the modified accrual basis. (7,206) [ I 11 (3) The Agency budgets for festival and event expenditures by netting the income generated against the expenditures incurred, rather than reporting the revenues and expenses individually. (5,370) $ (7,206) , I I I (4) The amount reported as "fund balance" on the budgetary basis of accounting derives from the basis of accounting used in preparing the Agency's budget. (See Note IJ for a description of the Agency's budgetary accounting method.) This amount differs from the fund balance reported in the statement of revenues, expenditures, and changes in fund balance because of the cumulative effect of transactions such as those described above. 24 ADDITIONAL ELRMR~ REQUIRED BY THE RULES 01' THE AUDITOR GENERAL 25 UUl".l<..h~NE (D 1\~~UClJ\.lt~, Lr 1\., CERTIFIED PUBLIC AcCOUNTANTS MAILING ADDRESS: POST OFPICE Box 1179 ORANGE PARK. FLORIDA 32067-1179 www.dufresnecpas.com r1\. SATELLITE OFFICE 237 NINTH AVENUE NOR.TH JACKSONVILLE BEACH. FLOR.IDA 32250 TELEPHONE: 904270-8820 FACSIMILE: 904 270-8821 MAIN OFFICE 357 STILES AVENUE ORANGE PARK. FLORIDA 32073 TELEPHONE: 904278-8980 FACSIMILE: 904278-4665 December 24, 2004 INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Board of Directors Boynton Beach Community Redevelopment Agency We have audited the accompanying combined fmancial statements of the governmental activities of the Boynton Beach Community Redevelopment Agency (the "CRA"), a component unit of the City of Boynton Beach; Florida as of and for the year ended September 30, 2004 which collectively comprise the CRA's basic fmancial statements, and have issued our report thereon dated December 24, 2004. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. COMPLIANCE As part of obtaining reasonable assurance about whether the CRA'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. The results of our tests disclosed no instances of noncompliance that are required to be reported herein under Government Auditing Standards. INTERNAL CONTROL OVER FINANCIAL REPORTING In planning and performing our audit, we considered the eRA's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide an opinion on the internal control over financial reporting. Our consideration of the internal control would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the 26 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 to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we considered to be material weaknesses. However, we noted other matters involving the internal control over financial reporting that we have reported to management of the CRA in a separate letter dated December 24,2004. This report is intended for the information of the CRA. This restriction is not intended to limit the distribution of this report, which is a matter of public record. ~~~ ~. a.44~<:rCf.fl% (tJ /+1,,4 A Dufresne & Associates, CPA, PA 27 DUFRESNE to ASSOCIATES. C t'1\, r 1\ CERTIFIED PUBLIC ACCOUNTANTS MAILING ADDR.ESS: Pml OFFICE Box 1179 ORANGE PARK. FLOR.IDA 32067-1179 www.dufresnecpas.com SATELLITE OFFICE 207 NINTH AVENUE NORTH JACKSONVILLE BEACH. FLORIDA 32250 TELEPHONE: 904 270-8820 FACSIMILE: 904 270-8821 MAIN OFFICE 357 STILE5 AVENUE ORANGE PARK. FLORIDA 32073 TELEPHONE: 904278-8980 FACSIMILE: 904 278-4665 December 24, 2004 MANAGEMENT LETTER To the Board of Directors Boynton Beach Conununity Redevelopment Agency We have audited the basic financial statements of the CRA, a component unit of the City of Boynton Beach, as of and for the fiscal year ended September 30, 2004, and have issued our report thereon dated December 24,2004. ~ We conducted our audit in accordance with U.S. generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. We have issued our Independent Auditor's Report on Compliance and Internal Control Over Financial Reporting based on an audit of financial statements performed in accordance with Government Auditing Standards. Disclosures in that reported, dated December 24, 2004, should be considered in conjunction with this management letter. Additionally, our audit was conducted in accordance with the provisions of Chapter 10.850, Rules of the Auditor General, which require that we address certain compliance and other matters in the management letter, if not already addressed in the auditor's report on compliance and intemal control. In planning and performing our audit of the financial statements of the CRA for the year ended September 30, 2004, we considered the eRA's internal controls in order to determine the scope of our audit procedures for the purpose of expressing an opinion on the financial statements and not to provide assurance on internal control. While our purpose was not to provide assurance on internal control, certain matters came to our attention that we want to report to you. PRIOR YEAR FINDINGS AND RECOMMENDATIONS The Rules of the Auditor General require that we address in the management letter, if not already addressed in the auditor's reports on compliance and internal control, whether or not inaccuracies, shortages, defalcations, fraud and/or violations of laws, rules, regulations and contractual provisions reported in the preceding annual financial report have been corrected. Additionally, the Rules of the Auditor General require that we address in the management letter, if not already addressed in the auditor's reports on compliance and internal control, whether or not recommendations made in the preceding management letter have been followed and otherwise apply. 28 There were no pnor year findings or recommendations that needed to have been corrected. CURRENT YEAR RECOMMENDATIONS PETTY CASH Condition: We noted that when the petty cash account was reimbursed, the reimbursement check was made out to "petty cash." This is an undesirable practice because checks made out to cash may be cashed by unauthorized persons, and the bank cannot be held liable for cashing them. Recommendation: We recommend that checks written to reimburse the petty cash account be made payable to the person authorized to cash such checks. Additionally, we also recommend that the petty cash fund be periodically reconciled by someone other than the petty cash custodian. This reconciliation should be indicated by the reconciler signing the reconciliation. Response: The CRA has hired a bookkeeper to assist in the accounting of the eRA. The CRA will write the petty cash check to the controller, who will immediately go to SunTrust Bank, cash the check, and return the cash to the bookkeeper to count and place in the locked cabinet. The petty cash will be verified independently by the bookkeeper and controller each Friday. CHECK SIGNING POLICY Condition: Once the checks are signed, they are retumed to the preparer for mailing. Recommendation: In order to reduce the risk that checks could be altered after being signed, we recommend that once checks have been signed, they are immediately mailed by someone with no access to the accounting records and not returned to the preparer. Response: The CRA checks will be input by the bookkeeper, printed by the controller, and returned to the secretary for preparation for mailing. BANK STATEMENT REVIEW AND RECONCILIATION Condition: At present, the controller completes the bank reconciliation. Recommendation: We recommend that the director open the bank statements and review them for any unusual checks or other transactions before giving them to the controller to perform the reconciliation. Management's review of the bank statement will ensure that unusual items are investigated on a timely basis. In addition, the bank statement reconciliation should be reviewed by someone other than the controller, since the controller keeps the general ledger and reconciles the bank statement. The reviewer should indicate their review by initialing the reconciliation. 29 Response: The CRA Director or designee will open the bank statements and review the checks for unusual amounts. The CRA Director or designee will give the bank statement and checks to the bookkeeper, who will reconcile the checks, print the reconciliation and give to the controller for review and initial the bank reconciliation. ANNUAL VACATIONS Condition: We noted that employees with accounting responsibility are not required to take vacations and that while they are on vacation another employee does not perform their duties. Recommendation We believe that the CRA should require employees with accounting responsibility to regularly take vacations. In addition to improving employee morale and preventing burnout, vacations help the CRA ensure that job tasks are being performed according to CRA policy. This helps maintain internal controls and reduces the risk of fraudulent activities being undetected. The occasional temporary disassociation of persons in trust from their regular duties to permit other persons to perform their duties for a period of several days while the regular employee is on vacation is a desirable element of a system of internal check and contro1. Internal control is strengthened when employees do not maintain continuous control over their particular area of responsibility. Response: All employees are encouraged to take their vacations. The new bookkeeper will be fully trained in all aspects of the accounting program, policies and procedures. The bookkeeper will be able to perform all functions while the controller is on vacation. OTHER REQUIRED INFORMATION Based on the criteria specified in 218.503(1) Florida Statutes, nothing came to our attention to cause us to believe that the eRA is, or during the fiscal year ended September 30, 2004 was, in a state of fmancial emergency as defined in the Statutes. We applied our own financial condition assessment procedures. The results of our procedures disclosed no matters that are required to be reported. The eRA is in compliance with Section 218.415, Florida Statutes, regarding the investment of public funds. The CRA has been classified as a dependent special district for the purpose of filing the annual financial report with the Department of Banking and Finance pursuant to Section 218.32, Florida Statutes. Accordingly, the CRA does not file a separate annual financial report with the state. Instead, the CRA's annual fmancial information will be included in the annual financial report of the City of Boynton Beach for the year ended September 30,2004. This management letter is intended solely for the information and use of the Board of Directors and management of the eRA, the City of Boynton Beach, and regulatory agencies and is not intended to be and should not be used by anyone other than these specified parties. 30 Thank you and your staff for the cooperation and courtesies extended to us during the course of the audit. Please let us know if you have any questions or conunents concerning this letter, our accompanying reports, or other matters. /ldlJ____A (1 '- ~,U/. (.-~ 1'(~Ih:Jft Dufresne & Associates, CPA, PA 31 BOYNTON BEACH COM1IrIUNITY REDEVELOPMENT AGENCY INDEPENDElft AUDITOR'S REPORTS, BASIC FINANCIAL STATEMENTS .AIm REQUIRED SUPPLBMBln'ARY INFOlU'lATION For the Year Ended September 30, 2005 DUFRESNE II ASSOCIATES, CPA, PA 367 STILES AWKtJB POST OFFICE BOX 1179 ORAl'lGJt PARK, FLORIDA 32073 (904t 278-8980 PHONE (904) 278-4665 FAX BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY TABLE OF CONTENTS . FOR THE YEAR ENDED SEPTEMBER 30, 2005 PAGE INDEPENDENT AUDITOR'S REPORT REQUIRED SUPPLEMENTARY INFORMATION: Management's Discussion and Analysis (MD&A) BASIC FINANCIAL STATEMENTS: Government-wide Financial Statements: Statement of Net Assets Statement of Activities Governmental Fund Financial Statements: Balance Sheet 11 Reconciliation of the Balance Sheet to the Statement of Net Assets 12 Statement of Revenues, Expenditures and Change in Fund Balance 13 Reconciliation of the Statement of Revenues, Expenditures and Change in Fund Balance to the Statement of Activities 14 Notes to Financial Statements 15 1 3 9 10 REQUIRED SUPPLEMENTARY INFORMATION: Budgetary Comparison Schedule 26 ADDITIONAL ELEMENTS REQUIRED BY THE RULES OF THE AUDITOR GENERAL: Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 28 Management Letter 30 i. I [ ] [-1 n [ I r 1 [I , I , I I I I ] I I , J I I I DUFRESNE fa AsSOCIATES. CPA. PA CERTIFIED PU8LIC ACCOUNTANTS MAILING ADDR&S: POST OPPICE Box 1179 ORANGE PARK. FLoRIDA 32067-1179 www.dufresnecpas.com SATELLITE OFFICE 237 NINTH AVENUE NORTH JACDONVILLE BUCH. FLoRIDA 32250 TELEPHONE: 904 270-8820 MAIN OFFICE 351 STILES AVENUE ORANGB PARK, FLOR.IDA 32073 TELEPHONE: 904 278-8980 FACSIMILE: 904 278-4665 December 14, 2005 IlmBPDDBN'T AlJDrrOR'S REPORT To the Board of Directors Boynton Beach Community Redevelopment Agency We have audited the accompanying [mancial statements of the governmental activities of the Boynton Beach Community Redevelopment Agency (the "CRAn), a component unit of the City of Boynton Beach, Florida, as of and for the year ended September 30, 2005, which collectively comprise the CRA's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the CRA's management. Our responsibility is to express opinions on these fmandal 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 basic financial statements referred to above present fairly, in all material respects, the financial position of the governmental activities of the CRA as of September 30, 2005, and the changes in fmancial position thereof 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 a report dated December 14, 2005 on our consideration of the CRA's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulatiQns, contracts and grant agreement and other matters. The purpose of that report is to describe the scope of our testing of internal control over fmancial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. 1 The management's discussion and analysis and the budgetary comparison information on pages 3 through 8 and page 26 are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. ~l<VW' l' ~~hv/ {.J J4;?A- Dufresne & Associates, CPA, PA 2 MANAGEMENT'S DISCUSSION AND ANALYSIS (Unaudited) The management discussion and analysis (MO&A) of the Boynton Beach Community Redevelopment Agency (the "CRAn) is designed to provide an objective and easy to read analysis of the fmancial activities based on currently known facts, decisions, and conditions. The MO&A provides a broad overview and short-term and long-term analysis of the CRA's activities based on information presented in the financial statements. Specifically, this information is designed to assist the reader in focusing on significant fmancial issues, provide an overview of the CRA's fmanciaI activity, and identify changes in the CRA's fmancial position and its ability to address the next year's challenges. Finally, the MD&A will identify any material deviations from the approved budget. The CRA is an independent agency (component unit) of the City of Boynton Beach (the "City"). The CRA has presented its [mancial statements in accordance with the reporting model required by Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments (Statement 34). The information contained in this MO&A is only a component of the entire fmancial statement report. Readers should take time to read and evaluate all sections of the report, including the footnotes and required supplementary information provided. FINANCIAL HIGHLIGHTS . The CRA began the fiscal year with a net assets balance of $2,616,215. The CRA's total revenues for the year ended September 30, 2005 were $4,448,433, while total expenses were $7,646,497. . The CRA's net assets decreased by $3,198,064. . The CRA's total investment in capital asset projects increased by $1,450,238. These capital assets included the purchase of several properties in the Heart of Boynton Project Area. OVERVIEW OF THE FINANCIAL STATEMENTS The CRA's basic financial statements are comprised of the 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains required supplementary information in addition to the basic fmancials statements themselves. Government-Wide Financial Statements The government-wide fmanciaI statements provide readers with a broad overview of the CRA's fmances, in a manner similar to a private-sector business. In addition, the government-wide statements are prepared using the accrual basis of accounting. The statement of net assets (balance sheet) presents information on the CRA's assets and liabilities, with the difference between the two reported as net assets. 3 II [-I r 0' The statement of activities (income statement) presents information showing how the CRA's net assets changed during the most recent fiscal year. All changes in revenues are reported as soon as underlying events giving rise to the change occur regardless of the timing of related cash flows. The expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. [1 The government-wide financial statements present functions of the eRA that are principally supported by tax increment fmancing (governmental activities). The governmental activities of the CRA include general government activities, public safety and redevelopment projects. Thus, the CRA has no business-type activities. 11 r -I r 1 I I I I I I J I I I j I The government-wide fmancial statements are found on pages 9-10 of this report. Fund I'iDaD.cial Statements The fund financial statements provide readers with an overview of each fund and its related function in a traditional format. A fund is a grouping of related accounts that maintain control over resources that are segregated for specific activities or objectives. The CRA, like other state and local governments, uses fund accounting to ensure and demonstrate legal compliance with finance-related legal requirements. The eRA utilized only one fund, the General Fund, which is a governmental fund, and accounts for all financial resources of the CRA. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide fmancials statements. However, unlike the government-wide fmancial statements, the governmental fund fmancial 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. The focus of govemmental funds is narrower than government-wide fmancial statements, and it is therefore useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By comparing and contrasting, readers o may better understand the long-term impact of the CRA's near term fmancing decisions. The Balance Sheet - Governmental Fund and Statement of Revenues, Expenditures, and Change in Fund Balance - Governmental Fund are reconciled as shown on the Reconciliation of the Balance Sheet - Governmental Fund to the Statement of Net Assets and the Reconciliation of the Statement of Revenues, Expenditures and Change in Fund Balance - Governmental Fund to the Statement of Activities to facilitate this comparison between the governmental fund and governmental activities. The eRA adopts an annual appropriated budget for its General Fund. A budgetary comparison schedule provided for the General Fund demonstrates compliance with this budget. 4 The basic governmental fund financial statements can be found on pages 11 and 13 of this report. The reconciliations between the governmental funds and govemmental activities are found on pages 12 and 14. 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 the fund financial statements. These notes to the financial statements begin on page 15 of this report. In addition to the basic fmancial statements and accompanying notes, this report also presents certain required supplementary information conceming the CRA's budget to actual results for the General Fund for the current year. The required supplementary information can be found on page 26 of this report. GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net assets may serve over time as a useful indicator of a government's financial position. In the case of the CRA, liabilities exceeded assets by $581,849 at the close of the most recent fiscal year . The largest portion of the CRA's total liabilities, 90%, represents bonds outstanding that were issued for the purpose of fmancing redevelopment activities. The largest portion of the CRA's total assets, 87%, is reflected in its cash and investment accounts. The CRA will use this cash asset for economic redevelopment; consequently, this asset is available for future spending on redevelopment and repayment of the related debt. eRA Net Assets at September 30, 2005 . 2005 Assets Current and other assets Capital assets Total assets $ 20,725,300 2,767,079 23,492,379 LiabiUties Current liabilities Long term liabilities Total Habllities 2,230,206 21,844,022 24,074,228 Net assets Invested in capital assets, net of related debt Restricted for: Capital projects Debt Service Unrestricted . Total net assets (16,588.012) 13,607,064 1,707,885 691,214 $ (581,849) 5 2004 $ 4,195,488 1,330,578 5,526,066 279,006 2,630,845 2,909,851 1,330,578 1,285,637 $ 2,616,215 II ( I The CRA has restricted assets which are restricted for various capital projects and the bond reserve fund requirement. [ -1 n Governmental Activities Governmental activities decreased the eRA's net assets by $3,198,064. Key elements of this decrease are as follows. eRA Changes in Net ADets for the Year Ended September 30, 2005 r J [ I [ I , I I I I I I I I , J I j 2005 2004 Revenues General Revenues Tax increment revenues $ 3,871,616 $ 2,517,635 Other revenues 576,817 71,645 Total Revenues 4,448,433 2,589,280 EKpenses General government 1,223,846 684,318 Public safety 343,523 Redevelopment projects 5,277,848 2,403,496 Interest on long-term debt 801,280 181,053 Total Expenses 7 ,646,497 3,268,867 Decrease in net assets (3,198,064) (679,587) Net assets beginning of year 2,616,215 3,295,802 Net assets end of year $ (581,849) $ 2,616,215 Tax increment revenues increased by $1,353,981 during fiscal year 2005. Tax increment revenue increases are a product of increases in property values in the CRA's redevelopment area. In addition, increases in general government expense is directly due to the creation of an independent CRA with offices, staff, equipment, and supplies. Expenses increased by $4,377,630 during fiscal year 2005. The increase is attributable to increased redevelopment activity due to the issuance of the Tax Increment Revenue Bonds, Series 2004. FINANCIAL ANALYSIS OF THE eRA'S FUNDS The focus of the CRA's governmental funds is to provide information on near-term inflows, outflows and balances of spendable resources. Such information is useful in assessing the eRA's financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. At the end of fiscal year 2005, the CRA's governmental fund reported an ending fund balance of $18,175,395, an increase of $14,254,119 in comparison with prior year. This increase is chiefly due to tax increment revenue bonds that were issued on December 22,2004 in the amount of $18,970,000. 6 GENERAL BUDGETARY HIGHLIGHTS Actual revenues exceeded budgetary estimates by $2,013.574. Actual bond proceeds received were more than budgetary estimates. Actual expenses were less than budgetary estimates by $4,201,855. Expenditures for redevelopment projects were less than estimated. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets The CRA continues to assemble properties throughout the redevelopment district with an eye on expanded development in the next twelve months. During the year ended September 30, 2005, the CRA purchased eight of the thirty-one properties approved for acquisition in the Heart of Boynton area that will be developed into mixed use projects, which will include elements of retail, office condo and residential. Long Term Debt At the end of fiscal year 2005, the CRA has total bonded debt and loans payable outstanding of $21,065,682. Of this amount, $18,595,000 represents bond secured solely by tax increment revenues. The loan payable of $2,470,682 represents a loan payable to Bank of America. The CRA's total debt increased by $18,970,000 during the current fiscal year. On December 22, 2004, the CRA issued $18,970,000 Tax Increment Revenue Bonds, Series 2004 (the "Bonds"). The Bonds were issued for the purpose of providing funds to pay the cost of various capital improvements described in the community redevelopment plan of the CRA, fund the 2004 Subaccount of the Reserve Fund in an amount equal to the Reserve Fund Requirement for the Bonds, and pay costs and expenses related to the issuance of the Bonds. ECONOMIC FACTORS AND NEXT YEAR'S BUDGET AND RATES The CRA Board approved the 2005-2006 budget, which included projections through 2009. Tax increment revenue projections were based upon actual 2004 values from the tax appraiser's office and projections of projects coming on line between the years of 2005 and 2009. In addition, the eRA tax increment income was derived from two factors. The first factor was the amount of "new construction" within the district, which was generated from new projects. Secondly, the eRA captured the difference between the 2004 base evaluation and the new appraised value for these new construction projects. The second area of tax revenue generation is from appreciation within the CRA district, which was substantial at 15%. It should be noted that the CRA expects its tax increment revenues.to reach over $6,000,000 in fiscal 2005-2006. The CRA Board approved the issuance of $11.275 million in Tax Increment Revenue Bonds (the "2005 Bonds") which were issued on December 12, 2005. The 2005 Bonds are secured by CRA tax increment revenues with a City back-up pledge, which would allow the CRA's debt to be issued with bond insurance and rated "MA", the highest tax-exempt bond rating. 7 II [] [ -I rl r 1 rUj REQUEST FOR Ilfll'ORMATION This financial report is designed to provide a general overview of the CRA's finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the Executive Director at 639 East Ocean Avenue, Suite 103, Boynton Beach, Florida 33435. : I I 1 I I : I I I I I I I j ] 8 BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY STATEMENT OF NET ASSETS SEPTEMBER 30, 2006 GOVERNMENTAL ACTMTIES $ 5,062,641 22,965 2,860 2,186 319,699 15,314,949 2,623,913 161,853 (18,687) 23,492,379 527,922 1,702,284 155,560 21,688,462 24,074,228 (16,588,012) 13,607,064 1,707,885 691,214 $ (581,849) ASSETS Cash and cash equivalents Investments Accounts receivable Prepaids Unamortized bond issue costs Restricted assets: Temporarily restricted: Investments Capital assets: Land Furniture and equipment Accumulated depreciation TOTAL ASSETS LIABILITIES Accounts payable and accrued expenses Due to City of Boynton Beach Long-tenn liabilities: Due within one year Due in more than one year TOTAL LIABILITIES NET ASSETS Invested in capital assets, net of related debt Restricted for: Capital projects De bt service Unrestricted TOTAL NET ASSETS See notes to fmancial statements 9 II f1 [ I 11 [ I r 1 : I I I I I I I I I I I J BOYJrrOR BEACH COIlllUlUTY REDEVELOPMENT AGENCY STATEllEIIT 01' ACTIVITIES FOR THE YEAR BBDBD 8BPTBIIBER 30, 2005 FUNCTIONS/PROGRAMS GOVERNMENTAL ACTIVITIES: General government Public safety Redevelopment projects Interest on long-term debt TOTAL See notes to fmancial statements. EXPENSES CHARGES FOR SERVICES $ 1,223,846 343,523 5,277,848 80 I ,280 $ $ 7,646,497 $ GENERAL REVENUES Tax increment revenue Interest and other income TOTAL GENERAL REVENUES CHANGE IN NET ASSETS NET ASSETS - Beginning of year NET ASSETS - End of year 10 PROGRAM REVENUES OPERATING GRANTS AND CONTRI- BUTIONS $ $ CAPITAL GRANTS AND CONTRI- BUTIONS $ $ NET $ (1,223,846) (343,523) (5,277,8481 (801,280) (7,646,497) 3,871,616 576,817 4,448,433 (3,198,064) 2,616,215 . $ (581,849) BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY BALANCE SHEET. GOVERNMENTAL FUND SEPI'EMBER 30, 2006 ASSETS Cash WId cash equivalen t8 Investments Accounts receivable Prepaids TOTAL ASSETS LIABILITIES AND FUND BALANCE LIABILITIES Accounts payable WId accrued expenses Due to City of Boynton Beach TOTAL LIABILITIES FUND BALANCE Unreserved Reserved for prepaids TOTAL FUND BALANCE TOTAL LIABILITIES AND FUND BALANCE See notes to finWlcial statements. 11 GENERAL FUND $ 5,062,641 15,337.914 2,860 2,186 $ 20,405,601 $ 527,922 1,702,284 2,230,206 18,173,209 2.186 18,175,395 $ 20,405,601 [ I [1 BOYlft'OJII BEACH COIDlUll1TY REDJCVELOPMENT AGENCY RBCOBClLIATlOB OF TIlE BALANCB SHEET ~ GOVERNMENTAL FUND TO TBB STATBIIENT OF NET ASSETS 8EP'I'JJIIBBR 30. 2005 r 1 n r I [ I r I I : I I I I I I I I I I ) FUND BALANCE - TOTAL GOVERNMENTAL FUND Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not reported in the governmental fund. Capital assets - net Long-term liabilities are not reported in the governmental fund. Compensated absences Note payable Bonds payable Unamortized bond issue costs NET ASSETS OF GOVERNMENTAL AC'l'MTIES See notes to financial statements. 12 $ 18,175,395 2,767,079 (18,249) (2,470,682) (19,355,091) 319,699 $ {581,8491 BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY STATEMENT OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCE - GOVERNMENTAL FUND FOR THE YEAR ENDED SEPTElI/IBER 30, 2006 GENERAL FUND REVENUES Tax increment revenue Interest and other income $ 3,871,616 576,817 TOTAL REVENUES 4,448,433 EXPENDITURES General government Public safety Redevelopment projects Debt Service: Principal retirement Interest Debt issuance costs Capital outlay 1,206,329 343,523 5,301,026 520,695 806,074 336,525 1,450,238 9,964,410 (5,515,977) 18,970,000 800,096 19,770,096 14,254,119 3,921,276 $ 18,175,395 TOTAL EXPENDITURES EXCESS OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES Bond proceeds Premium from issuance of bonds TOTAL OTHER FINANCING SOURCES NET CHANGE IN FUND BALANCE FUND BALANCE, Beginning of Year FUND BALANCE, End of Year See notes to financial statements. 13 BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCE ~ GOVERNMENTAL FUND TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2006 NET CHANGE IN FUND BALANCE - TOTAL GOVERNMENTAL FUND $ 14,254,119 Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlay expenditures. However, in the statement of activities, the cost of those assets is depreciated over their estimated useful lives. Expenditures for capital assets 1,450,238 Less current year depreciation expense (13,737) For governmental funds, the issuance of long-term debt provides current fmancial resources and the repayment of long-term debt consumes current financial resources. 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. (18,884,903) Some expenses reported in the statement of activities do not require the use of current fmandal resources and, therefore, are not reported as expenditures in governmental funds. Change in long-term compensated absences (3,781) CHANGE IN NET ASSETS OF GOVERNMENTAL ACTMTIES $ (3,198,064) 14 I I 1 -1 -\ '\ , 1 I : I I I I I .1 I I I , I .1 BOUTON BEACH COMMUlUTY REDEVELOPMENT AGENCY NOTES TO J'l!fAlfCIAL STATEMBlfTS S~.III1IRIt 30, 2005 1. SUMllARY OF mGIfIFICABT ACC01JNTJNG POLICIES The accounting policies of the Boynton Beach Community Redevelopment Agency (the "CRA; conform to generally accepted accounting principles as applicable to governments. The following is a summary of the more significant policies. A. Repoa1:iD.g Entity The CRA is a dependent special district established by the City of Boynton Beach, Florida under the authority granted by Florida Statutes 163, Section III. The purpose of the CRA is to promote and guide physical and economic redevelopment in the City of Boynton Beach. The CRA is a legally separate entity established by Ordinance number 83-41 of the City of Boynton Beach on December 20,1983. The CRA has adopted Governmental Accounting Standards Board Statement No. 14 (GASB 14), the Financial Reporting Entity, for the purpose of evaluating its component unit financial statements. Based on the criteria in GASB 14, the CRA has determined that there are no units that meet criteria for inclusion in the CRA's financial statements. B. Reporting llIodel The CRA's basic fmancial statements consist of government-wide statements. including a statement of net assets and a statement of activities, and fund fmancial statements which provide a more detailed level of fmancial information. Government-Wide Financial Statements The statement of net assets and the statement of activities report information on all of the activities of the CRA. Governmental activities are reported separately from business-type activities, which rely on fees charged to external parties as their primary revenues. The CRA has no business-type activities. The statement of net assets reports the CRA's fmancial position as of the end of the fiscal year. In this statement, the CRA's net assets are reported in three categories: invested in capital assets, net of related debt; restricted net assets; and unrestricted net assets. The statement of activities presents a comparison between direct expenses and program revenues for each function of the CRA. Direct expenses are those that are clearly identifiable with a specific function. Program revenues include charges for services that are directly related to a given function and grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Tax increment revenue and other items not meeting the definition ofprogra:m revenue are reported instead as general revenue. 15 I 1 1 -1 1 C I 1 I I I ] I I ! I ,\ I I I BO~.dTOIf BBACH COIDlUlUTY REDEVELOPMENT AGENCY NOTES TO J'IRAIfCIAL STATEMENTS SBPTBIIBBR SO, 2005 1. 81J'1tD1ARY 01' SIGNIFICANT ACCOUNTING POLICIES (contlnuedl B. ReportiD& Yodel (contlnuedl Fund Financial Statements The CRA utilized only one fund, the General Fund, which is classified as a governmental fund and accounts for all financial resources of the CRA. The governmental fund statement includes reconciliations with brief explanations to better identify the relationship between the govemment-wide statements and the statements for the governmental fund. c. IIcUlII'Oment Focus and Basls of Accounting The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. The governmental fund fmancial statements are reported using the current imancial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the CRA considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when the related fund liability is incurred. However, debt service expenditures, as well as expenditures related to compensated absences and claims andjudgments, are recorded only when payment is due. D. Cuh and Cash Equivalents Cash and cash equivalents are defined as short-term highly liquid investments that are both readily convertible to known amounts of cash and have an original maturity of three months or less. Cash and cash equivalents consist of petty cash and deposits with fmancial institutions qualified as public depositories under Florida law. All deposits are insured by federal depository insurance and/ or collateralized with securities held in Florida's multiple financial institution collateral pool as required by Chapter 280, Florida Statutes. B. Investment- All of the CRA's investments are reported at fair value, with the exception of investments in the 2a7-like pools (State Board of Administration Local Government Surplu~ Trust Fund Pool), which are stated at cost, or amortized cost, and are the sam.e as the fair value of pool shares. Any differences between the market value and cost of investments are reflected in investment income. 16 II ! 1- [1 rl f 1 r 1 BOYlITOB BEACH COIDlU1U'ty REDEVELOPMENT AGENCY BOTBS TO PDAlfCIAL STATEMENTS SBPTBIIBBR 30, 2005 1. 8U1D1ARY OF S1GBlFICAlfT ACCOUBTING POLICIES (continued) E. Investments (continued) The CRA is authorized to invest in direct obligations of the United States of America or any agency thereof, interest bearing time or demand deposits with any qualified depository institution~ commercial paper, bankers' acceptances~ state and I or local government taxable debt, mutual funds, repurchase agreements and. the State Treasurer's investment pool, a 2a-7 like pool, which has the characteristics of a money market fund. ! I The CRA has adopted GASB Statement No. 40, "Deposit and Investment Risk Disclosures," (GASB 40) in fiscal year 2005. The affect of this adoption is the inclusion of new disclosures for deposit and investment risks. : I ; I : I , I I I , I I I I I F. Capital Auets Capital assets are defined by the CRA as assets with an initial, individual cost of $1,000 or more and an estimated useful life of more than one year. These assets are recorded at historical cost. Donated capital assets are recorded at estimated fair value at the date of donation. Capital assets are depreciated using the straight-line method over the assets' estimated useful lives of all reported capital assets~ except land and land improvements. The estimated useful life of furniture, fixtures and equipment is five to ten years. G. Bond Premiums and Issuance Costs In the government-wide financial statements, bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight line method. 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 fund types recognize bond premiums and discounts, as well as bond issuance costs during the current period. Tbe face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other fmancing sources while discounts are reported as other fmancing uses. Issuance costs are reported as debt service expenditures. H. Revenue Sources Tax increment revenues are the primary source of revenue for the CRA. Tax increment revenue is collected from two governmental entities that levy property taxes within the legally defmed redevelopment area of the CRA, which are the City of Boynton Beach and Palm Beach County. , I 17 BOYNTON BEACH COMMUNITY RBDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2005 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) I. Compensated Absences It is the CRA's policy to permit employees to accumulate earned but unused vacation and sick pay benefits. Employees may, depending on their level of service, be paid for various amounts of their total accrued leave upon termination or retirement. The CRA accrues a liability for leave hours that meet the criteria for payment at the eligible employees' current rates of pay. J. Long-term LlabiUties All long-term debt and other long-term obligations are reported in the government- wide financial statements. In the fund financial statements, long-term liabilities are not reported because governmental funds use the current financial resources measurement focus. K. Net Assets Net assets represent the difference between assets and liabilities and are reported in three categories as hereafter described. Net assets invested in capital assets, net of related debt, represent capital assets, net of accumulated depreciation and any outstanding debt related to those assets. Net assets are reported as restricted when there are legal limitations imposed on their use by legislation, or extemal restrictions imposed by other governments, creditors, or grantors. Unrestricted net assets are net assets that do not meet the definitions of the classifications previously described. When both restricted and unrestricted resources are available for use, it is the CRA's policy to use restricted resources fIrst, and then unrestricted resources as they are needed. L. Budgets and Budgetary Accounting An annual budget is adopted on the modified accrual basis of accounting, consistent with generally accepted accounting principles, with the exception of compensated absences and festivals/events/seminars expenditures. Compensated absences are budgeted only to the extent expected to be paid, rather than on the modified accrual basis. Festivals/events/seminars expenditures are netted against revenue generated from these expenditures, rather than reporting revenues and expenditures individually. Amendments to the budget can only be made with the approval of the Board of Directors. The fund is the legal level of control. M. Use of Estimates The preparation of fmancial statements in conformity with generally accepted accounting principles requires management to make various estimates. Actual results could differ from those estimates. 18 I .'1 '-1 ~l '1 :-1 r I ! 1 : I I I ] I I I ] J [ BOYIn'OK BEACH COMIIUMTY REDEVELOPMENT AGENCY NOTES TO nBAJlCIAL STATEMBNTS ~30, 2005 2. CASH, CASH EQUIVALENTS ABD INVESTMENTS The CRA's investment policy is designed to ensure the prudent management of funds, and the availability of operating and capital funds when required, while earning a competitive return within the policy framework. The primary objectives, in order of priority, of investment activity shall be safety, interest rate risk, liquidity, and yield. Investments of the eRA include: deposits and guaranteed contracts with banks or other [mancial institutions which meet standards for deposits stipulated in investnient agreements. Memorandum Only - Combined Totals Investment Maturities (in Years) Total Fair Value Less Than 1 1-10 Cash and cash equivalents: Bank deposits Cash on hand Investments: Treasurer's investment pool Investment agreements $ 5,062,141 500 22,965 $ 15,314,949 20,400,555 (5,062,641) 15,337,914 $ nta n/a 22,965 $ 15,314,949 Total cash; cash equivalents and investments 22,965 15,314,949 Less cash and cash equivalents Total investments $ 22,965 $ 15,314,949 Interest Rate RJak Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The CRA's investment policy to minimize interest rate risk is to structure the investment portfolio so that the securities mature to meet cash requirements for current budgeted needs, thereby avoiding the need to sell securities on the open market prior to maturity. J'orelp Currenoy RI.k Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair value of an investment or a deposit. The CRA does not hold foreign or foreign currency investments and therefore is not subject to foreign currency risk. 19 BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2005 2. CASH, CASH EQ1nVALENTS AND INVESTMENTS (continuedt Credit Risk The CRA also mitigates credit risk, which is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. Custodial credit risk is the risk that, in the event of the failure of the counterparty to a transaction, the CRA will not be able to recover the value of investment or collateral securities that are held in the possession of an outside party. Authorized investments under the bond resolution include investment agreements, including GICs, acceptable to MBIA Insurance Corporation. As of September 30, 2005, the CRA had investment agreements with the following financial institutions: Investment Agreement Contract Providers' Moody's Ratings as of Se tember 30, 2005 Aa2 Inc. Aal Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The CRA diversifies its investment portfolio to minimize the impact of potential losses from one type of security or individual issuer, excluding U.S Treasuries, and Federally Guaranteed Obligation. The implementation, of GASB Statement No. 40 requires the disclosure of investments in anyone issuer that represents five percent or more of total investments. As of September 30, 2005, the CRA had investments in the percentages of the total investments shown below with the following issuers: Investment % of Total Investment Type Amount Investments Treasurer's Investment Pool $ 22,965 .15% MBIA, Inc. 1,707,885 11.14% Citigroup Financial Products, Inc. 13,607,064 88.71 % Total $ 15,337,914 100.00% 20 BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2005 3. CONSTRUCTION COl\lMlTMENTS The CRA has active construction projects at September 30, 2005. The projects include construction of the Boynton Beach Riverwalk Promenade. At September 30,2005 construction commitments are as follows: Project Promenade & Riverwalk Total Adjusted Contract Amounts $ 9,784,432 Remaining Commitment $ 4,729,275 4. CAPITAL ASSETS Capital asset activity for the year ended September 30,2005 was as follows: Balance Beginning of Year Additions Deletions Capital assets not being depreciated: Land $ 1,309,378 $1,314,535 $ Depreciable capital assets Furniture, fIXtures and equipment 26,150 135,703 Total depreciable capital assets 26,150 135,703 Less accumulated depreciation 4,950 13,737 Depreciable capital assets, net of accumulated depreciation 21 ,200 121,966 Total capital assets, net $ 1,330,578 $1,436,501 $ Balance . End of Year . $ 2,623,913 161,853 161,853 18,687 143,166 $ 2,767,079 Depreciation expense of $13,737 was charged to general government. 21 II [I n 11 [-1 [ -1 r -, BOYJfTOR BEACH COMMUNITY REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2005 5. LONG-TERM LIABILITIES At September 30, 2005, bonds and loans payable consisted of the following: BONDS: 2004 Tax Increment Revenue Bonds, dated December 14, 2004, due in annual principal installments of $375,000 to $6,045,000 through October I, 2024, bearing interest rates of 3.0% to 5.0% $ 18,595,000 LOANS: I I 1 I j I I ! , I j Promissory note to Bank of America, N .A. at 6.56% interest, payable in thirty semi-annual installments through September 20,2016 2,470.682 $ 21.065.682 Transactions for the year ended September 30,2005 are summarized as follows: Balance at End of Additions Deletions Year $18,970.000 $ (375,000) $18,595,000 800 ,096 (40,005) 760,091 19,770,096 (415,005) 19,355,091 (145,695) 2,470,682 3,781 18,249 $19,773,877 $ (560,700) $21,844,022 Due Within One Year Balance at Beginning of Year Bonds payable Plus deferred amounts: For issuance premium $ $ Total bond:s payable Note payable 2,616,377 155,560 Compensated absences 14,468 Total long-term liabilities $ 2,630,845 $ 155,560 22 . BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2005 5. LONG-TERM LIABILITIES (continued) The annual requirements to amortize the bonds and loans payable outstanding as of September 30, 2005 are as follows: Fiscal Year Tax Ending Increment September 30, Revenue Bonds Note Payable Totals Principal Interest Principal Interest Principal Interest 2006 $ $ 400,619 $ 155,560 $ 161,738 $ 155,560 $ 562,357 2007 585,000 793,925 166,079 151,219 751,079 945,144 2008 600,000 779,112 176,904 140,394 776,904 919,506 2009 615,000 763,156 189,270 128,028 804,270 891,184 2010 635,000 745,175 202,068 115,230 837,068 860,405 2011-2015 3,495,000 3,376,844 1,234,415 209,228 4,729,415 3,586,072 2016-2020 5,270,000 2,497,931 346,386 18,165 5,616,386 2,516,096 2021-2025 7 ,395,000 952,375 7 ,395,000 952,375 $ 18,595,000 $10,309,137 $ 2,470,682 $ 924,002 $21,065,682 $11,233,139 The 2004 Tax Increment Revenue Bonds (the "Bonds") were issued on December 22, 2004 in the amount of $18,970,000 to finance the cost of various capital improvements described in the community redevelopment plan of the CRA. The Bonds are payable solely from tax increment revenues. 6. RISK MANAGEMENT The CRA is exposed to various risks of loss related to torts, theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The CRA purchases commercial insurance for the risks of loss to which it is exposed. Policy limits and deductibles are reviewed by management and established at amounts to provide reasonable protection from significant fmandal loss. Settlements did not exceed insurance coverage for the current fiscal year. 7. COMMITMENTS AND CONTINGENT LIABILITIES Facade Grant Program The CRA established a Facade grant program in an effort to promote the redevelopment of the facades of existing businesses located in the City of Boynton Beach. The program offers businesses a $15,000 matching grant to improve the facades of their businesses. During the year ended September 30, 2005, the CRA had committed $38,429 for facade grants. For the year ended September 30, 2005 the CRA closed and disbursed $112,000 for facade grants, for which commitments had been made prior to September 30, 2005. 23 BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2005 8. RELATED PARTY TRANSACTIONS The eRA is a component unit of the City of Boynton Beach, Florida. For the year ended September 30, 2005 the CRA's tax increment revenues include $2A19,760 received from the City. The CRA reimbursed the City for certain costs such as recording and information technology services, festival expenses and police services during the year. Total payments to the City for the year ended September 30,2005 were approximately $543,028. As of September 30, 2005 the CRA owed the City $1,702,284 for police services, recording services and reimbursement for the purchase of property. 9. SUBSEQUENT EVENT On December 22, 2005 the CRA dated and delivered $11,275,000 Tax Increment Revenue Bonds, Series 2005 (the "Series 2005 Bonds). The Series 2005 Bonds are being issued for the purpose of providing funds to (1) pay the cost of various capital improvements described in the community redevelopment plan of the CRA, (2) fund Subaccounts of the Reserve Fund in an amount equal to the Reserve Fund Requirements for the Series 2005 Bonds, and (3) pay costs and' expenses related to the issuance of the Series 2005 Bonds. 24 REQUIRED SUPPJ.~ARY INJi'ORlVIATION 25 BOYR'I'OB BJlIACII COIlllUlOTY RBDEVELOPMENT AGENCY BUDOBTARI' COIIPARlBOW BCBl!:DULE FOR THE YEAR BNDBD BBP'I'BMBER 30, 2005 Variance with r I Budgeted Amounts Actual Final Budget Original Final Amounts Positive (Negative) REVENUES 1 Tax increment revenue $ 3,467,422 $ 3,871,616 $ 3,871,616 $ Bond proceeds, including premium 17,833,520 19,770,096 1,936,576 Grant funding 120,000 120,000 (120,000) Interest and other income 218,152 379,819 576,817 196,998 r I Total revenues 3,805,574 22,204,955 24,218,529 2,013,574 EXPENDITURES ~1 General government Salaries and benefits 280,086 366,626 332,132 34,494 Profesaional services 612,233 894,448 682,922 211,526 Occupancy 34,710 39,402 34,151 5,251 Equipment leases 4,500 4,500 3,104 1,396 Insurance 6,500 6,500 4,018 2,482 Travel 4,788 39,660 43,760 (4,100) Licenses, books, &. publications 6,234 6,234 12,202 (5,968) Advertising 1,500 10,000 18,548 (8,548) Career development 3,000 1,529 1,471 Printing 5,000 20,000 5,758 14,242 Mi8ccllaDeous 1,000 10,000 4,348 5,652 r I 0fIice supplies and equipment 11,000 34,427 36,963 (2,536) Office leasehold improvements 5,234 (5,234) Website update/expansion 5,000 19,378 7,194 12,184 Marketing and promotions 2,744 (2,744) Credit card expenes 15,522 (15,522) , I Total general govemment 972,551 1,454,175 1,210,129 244,046 Public safety Police 350,000 557 ,368 475,426 81,942 , I Total public safety 350,000 557,368 475,426 81,942 Redevelopment projects Festivals/ eventBl seminars 51,025 66,025 57,992 8,033 Facade grantB 181,118 181,118 130,171 50,947 Economic development grants 18,882 185,000 10,219 174,781 Transportation/ troUey 471,966 471,966 180,222 291,744 ASllc:JDb1y & redevelopment 90,000 10,668 79,332 Single family residental 100,000 100,000 Marina parking garage 750,000 750,000 472,500 277,500 Riverwalk/Promenade project 2,910,492 5,535,172 4,023,885 1,511,287 Way-Finding signage 58,465 2,865 55,600 Town Square project 50,000 50,000 Miscellaneous projects 55,000 7,535 47,465 Savage Creatures complex 75,000 8,505 66,495 HOB commercial improvements 684,457 2,915,000 1,710,999 1,204,001 Total redevelopment projects 5,067,940 10,532,746 6,615,561 3,917,185 Debt service Principal payments 134,925 134,925 145,695 (10,770) Interest expense 182,373 182,373 176,396 5,977 Bond principal and interest expense 1,004,678 1,004,678 Issuance costs 300,000 336,525 (36,525) Total debt service 317,298 1,621,976 1,663,294 (41,318) Total eJq)enditures 6,707,789 14,166,265 9,964,410 4,201,855 Net change in fund balance (2,902,215) 8,038,690 14,254,119 6,215,429 Fund balance, beginning of year 3,921,276 3,921,276 3,921,276 Fund bBlance, end of year $ 1,019,061 :II 11,959,966 $ 18,175,395 $ 6,215,429 26 ADDmONAL ELE1Ir'IENTS REQUIRED BY THE RULES OF THE AUDrroR GENERAL 27 I fl 1'1 11 r 1 fl II , I f I I : I -j I j I . j I I DUFRESNE ti$ AsSOCIATES. CPA. PA CERTIFIED PUBLIC ACCOUNTANTS MAILING ADDRESS: POST OFFICE Box 1179 ORANGE PAn. FLORIDA 32067-1179 www.dufresnecpas.com SATELLITE OFFICE 231 NINTH AVENUE NORTH 'ACUONVIUa BEACH. FLoRIDA 32250 TELEPHONE: 904 270-8820 MAIN OFFICE 357 STILES AVENUE ORANGE PARK. FLORIDA 32073 TELEPHONE: 904 278-8980 FACSIMILE: 904 278-4665 December 14,2005 IIIDBPBNDBKT AUDITOR'S REPORT ON COMPLIANCE AND ON INTERNAL COJlTROL OVER I'INANCIAL RBPORTJRG BASED ON AN AUDIT OF FINANCIAL STATBIIBIfTS PBRFORMED III ACCORDANCE WITH GOVE.RNMENT AUDITING STANDARDS To the Board of Directors. Boynton Beach Community Redevelopment Agency We have audited the accompanying combined financial statements of the governmental activities of the Boynton Beach Community Redevelopment Agency (the "eRA', a component unit of the City of Boynton Beach, Florida as of and for the year ended September 30, 2005 which collectively comprise the CRA's basic fInancial statements, and have issued our report thereon dated December 14. 2005. We conducted our audit in accordance with auditing standards generally accepted in the United. States of America and standards applicable to fmancial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. . COMPLIANCE As part of obtaining reasonable assurance about whether the CRA's fmancial 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. The results of our tests disclosed no instances of noncompliance that are required to be reported herein under Government Auditing Standards. INTERNAL CONTROL OVER FINANCIAL REPORTING In planning and performing our audit, we considered the CRA's intemal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the rmancial statements and not to provide an opinion on the internal control over financial reporting. Our consideration of the intemal control would not necessarily disclose all matters in the internal control over fInancial reporting that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the intemal control 28 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 to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the intemal control over financial reporting and its operation that we considered to be material weaknesses. However, we noted other matters involving the intemal control over fmancial reporting that we have reported to management of the CRA in a separate letter dated December 14.2005. This report is intended for the information of the CRA. This restriction is not intended to limit the distribution of this report, which is a matter of public record. ,. t~ ~ ~/( (JA7~4- Dufresne & Associates, CPA, PA 29 DUFRESNE {O AsSOCIATES. CPA, PA CERTIFIED PUBLIC ACCOUNTANTS MAILING ADDRES~: POST OFFICE Box 1179 ORANGB PARK. FLORIDA 32067-1179 www.dufresnecpas.com SATELLITE OFFICE 237 NINTH AVENUB NORTH JACKSONVILLE BEACH. FLORIDA 32250 TELEPHONE: 904 270-8820 MAIN OFFICE 357 STlLES AVBNUE ORANGE PAR.K, FLORIDA 32073 TELEPHONE: 904278-8980 FACSIMILE: 904 278-4665 December 14,2005 MANAGEMENT LETTER To the Board of Directors Boynton Beach Community Redevelopment Agency We have audited the basic fmancial statements of the CRA, a component unit of the City of Boynton Beach, as of and for the fiscal year ended September 30, 2005, and have issued our report thereon dated December 14,2005. We conducted our audit in accordance with U.S. generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. We have issued our Independent Auditor's Report on Compliance and Internal Control Over Financial Reporting based on an audit of fmancial statements performed in accordance with Government Auditing Standards. Disclosures in that reported, dated December 14, 2005, should be considered in conjunction with this management letter. Additionally, our audit was conducted in accordance with the provisions of Chapter 10.850, Rules of the Auditor General, which require that we address certain compliance and other matters in the management letter, if not already addressed in the auditor's report on compliance and internal control. In planning and performing our audit of the financial statements of the CRA for the year ended September 30, 2005, we considered the CRA's internal controls in order to determine the scope of our audit procedures for the purpose of expressing an opinion on the fmandal statements and not to provide assurance on internal control. While our purpose was not to provide assurance on internal control, certain matters carne to our attention that we want to report to you. PRIOR YEAR FINDINGS AND RECOMMENDATIONS The Rules of the Auditor General require that we address in the management letter, if not already addressed in the auditor's reports on compliance and internal control, whether or not inaccuracies, shortages, defalcations, fraud and/or violations of laws, rules, regulations and contractual provisions reported in the preceding annual financial report have been corrected. None of the aforementioned were disclosed in the preceding audit report. 30 Additionally, the Rules of the Auditor General require that we address in the management letter, if not already addressed in the auditor's reports on compliance and internal control, whether or not recommendations made in the preceding management letter have been followed and otherwise apply. The following is a summary of prior year recommendations: PETTY CASH Condition: We noted that when the petty cash account was reimbursed, the reimbursement check was made out to "petty cash." This is an undesirable practice because checks made out to cash may be cashed by unauthorized persons, and the bank cannot be held liable for cashing them. Recommendation: We recommend that checks written to reimburse the petty cash account be made payable to the person authorized to cash such checks. Additionally, we also recommend that the petty cash fund be periodically reconciled by someone other than the petty cash custodian. This reconciliation should be indicated by the reconciler signing the reconciliation. Management Response: All petty cash checks had formerly been made out to "PETTY CASH", a practice that made it easy for anyone to endorse them. As of July 18, 2005 all such checks are made payable to Robert Reardon-Petty cash. In addition, as Director of Finance Mr. Reardon cashes the petty cash check and the Assistant to the Finance Director does all of the petty cash reconciliations, produces a tape, signs and dates same. Status: Cleared. CHECK SIGNING POLICY Condition: Once the checks are signed, they are returned to the preparer for mailing. Recommendation: In order to reduce the risk that checks could be altered after being signed, we recommend that once checks have been signed, they are immediately mailed by someone with no access to the accounting records and not returned to the . preparer. Management Response: Vouchers are prepared by the Assistant to the Finance Director and they are then sent to the Director of Finance and the Executive Director for review and sign off. The Director of Finance then produces the actual checks, and applies his signature. The checks along with the vouchers and backup are then reviewed and counter signed by the Chair or Vice Chair of the Agency Board. The checks are then mailed out by the Agency receptionist. Status: Cleared. 31 BANK STATEMENT REVIEW AND RECONCILIATION Condition: At present, the controller completes the bank reconciliation. Recommendation: We recommend that the director open the bank statements and review them for any unusual checks or other transactions before giving them to the controller to perform the reconciliation. Management's review of the bank statement will ensure that unusual items are investigated on a timely basis. In addition, the bank statement reconciliation should be reviewed by someone other than the controller, since the controller keeps the general ledger and reconciles the bank statement. The reviewer should indicate their review by initialing the reconciliation. Management Response: The bank statement will be reviewed by the Executive Director, initialed, and returned to the Assistant to the Finance Director who will then perform the reconciliation. The new fmancial software has a bank reconciliation module that assists the staff in this process. All checks must be reconciled by the system in order to arrive at a book balance. Once the reconciliations are completed, they are given to the Director of Finance for inspection and review. He signs off on the completed work, or investigates any discrepancies. The Director ultimately signs off on the work. Status: Cleared. ANNUAL VACATIONS Condition: We noted that employees with accounting responsibility are not required to take vacations and that while they are on vacation another employee does not perform their duties. Recommendation: We believe that the CRA should require employees with accounting responsibility to regularly take vacations. In addition to improving employee morale and preventing burnout, vacations help the CRA ensure that job tasks are being performed according to CRA policy. This helps maintain internal controls and reduces the risk of fraudulent activities being undetected. The occasional temporary disassociation of persons in trust from their regular duties to permit other persons to perform their duties for a period of several days while the regular employee is on vacation is a desirable element of a system of internal check and control. Internal control is strengthened when employees do not maintain continuous control over their particular area of responsibility. Management Response: All Finance personnel must take at least one week of consecutive time off at least twice each year. Due to the limited number of Agency staff it-is unlikely that all Finance personnel will be out concurrently. Status: Cleared. 32 CURRENT YEAR FINDINGS AND RECOMMENDATIONS The Rules of the Auditor General (Section 10.554(1)(g)(3)) require disclosure in the management letter of any recommendations to. improve fmancial management, accounting procedures, and internal controls. The following is a summary of current year recommendations. ACCRUAL BASIS OF ACCOUNTING Condition: At present, the CRA keeps its general ledger on the basis of cash receipts and cash disbursements, whereby certain revenues and the related assets are recognized when received, and expenses are recognized when paid. Recommendation: We recommend that the accrual basis of accounting be considered. Under that basis, revenues and the related assets are recorded when earned and expenses are recorded when the obligation is incurred. The accrual basis is required by generally accepted accounting principles since it results in financial statements that reflect the complete effects of the CRA's fmancial transactions for a period. Management Response: As of November 2005 the CRA has employed a new financial software platform that will allow the Agency to conduct its financial accounting on an accrual basis. Henceforth, all expenses incurred in any fiscal year will be charged to the correct year for budgetary purposes. The Agency will also employ purchase orders to help accomplish the necessary fiscal tracking. In addition, all Agency revenues will be booked in the year in which they were earned. The Agency will no longer operate on a CASH basis. It should be noted that all expenses and revenues attributable to the prior year will considered up to 60 days after the close of the fiscal year. OTHER REQUIRED INFORMATION Based on the criteria specified in 218.503(1) Florida Statutes, nothing came to our attention to cause us to believe that the eRA is, or during the fiscal year ended September 30, 2005 was, in a state of financial emergency as defined in the Statutes. We applied our own financial condition assessment procedures. The results of our procedures disclosed no matters that are required to be reported. The CRA is in compliance with Section 218.415, Florida Statutes, regarding the investment of public funds. The eRA has been classified as a dependent special district for the purpose of filing the annqal financial report with the Department of Banking and Finance pursuant to Section 218.32, Florida Statutes. Accordingly, the CRA does not me a separate annual financial report with the state. Instead, the CRA's annual financial information will be included in the annual financial report of the City of Boynton Beach for the year ended September 30, 2005. 33 This management letter is intended solely for the information and use of the Board of Directors and management of the CRA, the City of Boynton Beach, and regulatory agencies and is not intended to be and should not be used by anyone other than these specified parties. Thank you and your staff for the cooperation and courtesies extended to us during the course of the audit. Please let us know if you have any questions or comments conceming this letter, our accompanying reports, or other matters. (},u.{;v~ ~ C~M-D-t-~~/ (PA,rtt- Dufresne & Associates, CPA, PA 34 BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY INDEPENDENT AUDITOR'S REPORTS, BASIC FINANCIAL STATEMENTS AND REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended September 30,2006 DUFRESNE & ASSOCIATES, CPA, PA 357 STILES AVENUE POST OFFICE BOX 1179 ORANGE PARK, FLORIDA 32073 (904) 278-8980 PHONE (904) 278-4665 FAX BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY TABLE OF CONTENTS FOR THE YEAR ENDED SEPTEMBER 30, 2006 PAGE INDEPENDENT AUDITOR'S REPORT MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) 3 BASIC FINANCIAL STATEMENTS: Government-wide Financial Statements: Statement of Net Assets 9 Statement of Activities 10 Governmental Fund Financial Statements: Balance Sheet - Governmental Funds 11 Reconciliation of the Balance Sheet - Governmental Funds to the Statement of Net Assets 12 Statement of Revenues, Expenditures and Changes in Fund Balances 13 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds to the Statement of Activities 14 Notes to Financial Statements ] 5 REQUIRED SUPPLEMENTARY INFORMATION: Budgetary Comparison Schedule Note to the Budgetary Comparison Schedule 24 25 ADDITIONAL ELEMENTS REQUIRED BY THE RULES OF THE AUDITOR GENERAL: Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 26 Management Letter 28 January 10, 2007 INDEPENDENT AUDITOR'S REPORT To the Board of Directors Boynton Beach Community Redevelopment Agency Boynton Beach, Florida We have audited the accompanying financial statements of the governmental activities of the Boynton Beach Community Redevelopment Agency (the "CRA") , a component unit of the City of Boynton Beach, Florida, (the "City") as of and for the year ended September 30, 2006, which collectively comprise the CRA's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the CRA'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 basic financial statements referred to above present fairly, in all material respects, the financial position of the governmental activities of the CRA as of September 30, 2006, and the changes in financial position thereof 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 a report dated January 10, 2007 on our consideration of the CRA's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreement and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. The management's discussion and analysis and the budgetary comparison information are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Dufresne & Associates, CPA, PA 2 MANAGEMENT'S DISCUSSION AND ANALYSIS (Unaudited) The Management Discussion and Analysis (MD&A) of the Boynton Beach Community Redevelopment Agency (the CRA) is designed to provide an objective and easy to read analysis of the financial activities based on currently known facts, decisions, and conditions. The MD&A provides a broad overview and short-term and long-term analysis of the CRA's activities based on information presented in the financial statements. Specifically, this information is designed to assist the reader in focusing on significant financial issues, provide an overview of the CRA's financial activity, and identify changes in the CRA's financial position and its ability to address the next year's challenges. Finally, the MD&A will identify any material deviations from the approved budget. The eRA is an independent agency or a component unit of the City of Boynton Beach, Florida (the "City"). The CRA has presented its financial statements in accordance with the reporting model required by Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments (Statement 34). The information contained in this MD&A is only a component of the entire financial statement report. Readers should take time to read and evaluate all sections of the report, including the footnotes and required supplementary information provided. FINANCIAL HIGHLIGHTS · The CRA began the fiscal year with a net assets balance of $(581,849). The CRA's total revenues for the year ended September 30, 2006, were $7,070,509, while total expenses were $8,766,692. · The CRA's net assets decreased by $1,696,183. · The CRA's total investment in capital asset projects increased by $12,881,077. These capital assets included the purchase of several properties in the Heart of Boynton Project Area. OVERVIEW OF THE FINANCIAL STATEMENTS The CRA's basic financial statements are comprised of the 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains required supplementary information in addition to the basic financials statements themselves. Government-Wid~ Financial Statements The government-wide financial statements provide readers with a broad overview of the CRA's finances, in a manner similar to a private-sector business. In addition, the government-wide statements are prepared using the accrual basis of accounting. 3 The statement of net assets (balance sheet) presents information on the CRA's assets and liabilities, with the difference between the two reported as net assets. The statement of activities (income statement) presents information showing how the CRA's net assets changed during the most recent fiscal year. All changes in revenues are reported as soon as underlying events giving rise to the change occur regardless of the timing of related cash flows. The expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. The government-wide financial statements present functions of the CRA that are principally supported by tax increment financing (governmental activities). The governmental activities of the CRA include general government activities, public safety and redevelopment projects. Thus, the CRA has no business-type activities. The government-wide financial statements are found beginning on page 9 of this report. Fund Financial Statements The governmental fund financial statements provide readers with an overview of each fund and its related function in a traditional format. A fund is a grouping of related accounts that maintain control over resources that are segregated for specific activities or objectives. The CRA, like other state and local governments, uses fund accounting to ensure and demonstrate legal compliance with finance-related legal requirements. The CRA now utilizes three funds for the fiscal year ending September 30, 2006, the General Fund, which is a governmental fund, the Debt Service Fund, used for servicing all debt payments and the Bond Projects Fund, from which all Bond proceeds are spent. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financials statements. However, unlike the government-wide financial statements, the 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 requiremen ts. The focus of governmental funds is narrower than government-wide financial statements, and it is therefore useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By comparing and contrasting, readers may better understand the long-term impact of the CRA's near term financing decisions. The Balance Sheet - Governmental Fund and Statement of Revenues, Expenditures, and Change in Fund Balance - Governmental Fund are reconciled as shown on the Reconciliation of the Balance Sheet - Governmental Fund to the Statement of Net Assets and the Reconciliation of the Statement of Revenues, Expenditures and Change in Fund Balance - Governmental Fund to the Statement of Activities to facilitate this comparison between the governmental fund and governmental activities. 4 The CRA adopts an annual appropriated budget for its General Fund. A budgetary comparison schedule provided for the General Fund demonstrates compliance with this budget. The basic governmental fund financial statements can be found beginning on page 11 of this report. The reconciliations between the governmental funds and governmental activities are found on pages 12 and 14. 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 the fund financial statements. These notes to the financial statements begin on page 15 of this report. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the CRA's budget to actual results for the General Fund for the current year. The required supplementary information can be found on page 24 of this report. GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net assets may serve over time as a useful indicator of a government's financial position. In the case of the CRA, assets exceeded liabilities by $2,278,032 at the close of the most recent fiscal year. However, the largest portion of the CRA's total assets, 93% is reflected in its capital assets. CRA Net Assets at September 30, 2006 2006 2005 Assets Current and other assets $ 698,417 $ 20,725,300 Capital assets 9,783,870 2,767,079 Total assets 10,482,287 23,492,379 Liabilities Current liabilities 2,263,632 2,230,206 Long term liabilities 32,292,712 21,844,022 Total liabilities 34,556,344 24,074,228 Net assets Invested in capital assets, net of related debt (20,183,422) (16,588,012) Restricted for: Capital projects 12,881,077 13,607,064 Debt Service 2,772,082 1,707,885 Unrestricted 2,252,231 691,214 Total net assets $ (2,278,032) $ (581,849) 5 The CRA has restricted assets which are restricted for various capital projects and the bond reserve fund requirement. Governmental Activities Governmental activities decreased the CRA's net assets by $1,520,531. Key elements of this decrease are as follows. CRA Changes in Net Assets for the Year Ended September 30, 2006 2006 2005 Revenues General Revenues Tax increment revenues Other revenues Total Revenues $ 6,076,347 994,162 7,070,509 $ 3,871,616 576,817 4,448,433 Expenses General government Public safety Redevelopment projects Interest on long-term debt Total Expenses Decrease in net assets Net assets beginning of year Net assets end of year 2,048,057 1,223,846 343,523 5,331,035 5,277,848 1,387,600 801,280 8,766,692 7,646,497 (1,696,183) (3,198,064) (581,849) 2,616,215 $ (2,278,032) $ (581,849) Tax increment revenues increased by $ 2,204,731 during fiscal year 2006. Tax increment revenue increases are a product of increases in property values in the CRA's redevelopment area. In addition, increases in general government expense is directly due to the creation of an independent CRA with offices, staff, equipment, and supplies. 6 Expenses increased by $2,797,728 during fiscal year 2006. The increase is attributable to increased redevelopment activity due to the issuance of the Tax Increment Revenue Bonds, Series 2005 (Series 2005 Bonds). FINANCIAL ANALYSIS OF THE eRA'S FUNDS The focus of the CRA's governmental funds is to provide information on near-term inflows, outflows and balances of spendable resources. Such information is useful in assessing the CRA's financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. At the end of fiscal year 2006, the CRA's governmental fund reported an ending fund balance of $19,825,260, an increase of $1,649,865 in comparison with prior year. The increase is attributable to increased redevelopment activity due to the issuance of the Tax Increment Revenue Bonds, Series 2005 (Series 2005 Bonds). GENERAL BUDGETARY HIGHLIGHTS Actual revenues exceeded budgetary estimates by $538,091. Actual bond proceeds received were more than budgetary estimates. Actual expenses were less than budgetary estimates by $2,882,560. Expenditures for re-development projects were less than estimated. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets The CRA continues to assemble properties throughout the redevelopment district with an eye on expanded development in the next twelve months. During the year ended September 30, 2006, the CRA purchased eight of the thirty-one properties approved for acquisition in the Heart of Boynton area that will be developed into mixed use projects, which will include elements of retail, office condo and residential. Long Term Debt At the end of fiscal year 2006, the CRA has total bonded debt and loans payable outstanding of $31,581,119. Of this amount, $18,010,000 represents the 2004 Tax Increment Revenue Bonds secured solely by tax increment revenues. The loan payable of $2,296,119 represents a loan payable to Bank of America, N.A. The CRA's total debt increased by $11,275,000 during the current fiscal year. On December 12, 2005, the CRA issued $11,275,000 Tax Increment Revenue Bonds, Series 2005A & 2005B (Series 2005 Bonds). The Series 2005 Bonds were issued for the purpose of providing funds to pay the cost of various capital improvements described in the community redevelopment plan of the CRA. The Series 2005 Bonds has a Reserve Fund in an amount equal to the Reserve Fund Requirement of $962,500. The Series 2005 Bonds are secured by CRA tax increment revenues with a City back-up pledge, which would allow the CRA's debt to be issued with bond insurance and rated "AAA", the highest tax-exempt bond rating. 7 ECONOMIC FACTORS AND NEXT YEAR'S BUDGET AND RATES The CRA Board approved the 2006-2007 budget, which included projections through 2009. Tax increment revenue projections were based upon actual 2005 values from the tax appraiser's office and projections of projects coming on line between the years of 2005 and 2009. In addition, the CRA tax increment income was derived from two factors. The first factor was the amount of "new construction" within the district, which was generated from new projects. Secondly, the CRA captured the difference between the 2005 base evaluation and the new appraised value for these new construction projects. The second area of tax revenue generation is from appreciation within the CRA district, which was substantial at 15%. It should be noted that the CRA expects its tax increment revenues to reach over $9,000,000 in fiscal 2006-2007. The CRA Board approved the purchase of additional marina property that includes 70 parking spaces for public use in the Marina Village parking structure for a coast of $3,570,000. The 2006-2007 budget calls for a cash down payment of $1,570,000 in Project Fund and General Fund operating revenue. The seller has agreed to carry the balance of $2,000,000 over a four year period at the rate of 5%. The CRA expects the Tax Increment Financing rates (TIF) to increase in the coming years. Despite the downturn in the market the CRA is confident that the TIF will continue to grow. The CRA feels poised to capture significant tax dollars from several projects that are in the development pipeline when the market rebounds. REQUEST FOR INFORMATION This financial report is designed to provide a general overview of the CRA's finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the Executive Director at 639 East Ocean Avenue, Suite 103, Boynton Beach, Florida 33435. 8 BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY STATEMENT OF NET ASSETS SEPTEMBER 30, 2006 GOVERNMENTAL ACTIVITIES ASSETS Cash and cash equivalents $ 4,001,362 Investments Accounts receivable 2,462,929 Mortgage receivable 100,000 Prepaids 14,974 Unamortized bond issue costs 405,550 Restricted assets: Temporarily restricted: Investments 15,509,624 Capital assets: Land 9,689,557 Furniture and equipment 91,619 Renovations 8,440 Leasehold improvements 21,099 Accumulated depreciation (26,845) TOTAL ASSETS $ 32,278,309 LIABILITIES Accounts payable and accrued expenses $ 2,222,432 Deposits payable 5,308 Due to City of Boynton Beach 35,893 Long-term liabilities: Due within one year 410,823 Due in more than one year 31,881,889 TOTAL LIABILITIES 34,556,345 NET ASSETS Invested in capital assets, net of related debt (20,183,422) Restricted for: Capital projects 12,881,077 Debt service 2,772,082 Unrestricted 2,252,231 TOTAL NET ASSETS $ (2,278,032) 9 See notes to financial statements. BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY STATEMENT OF ACTMTIES FOR THE YEAR ENDED SEPTEMBER 30, 2006 PROGRAM REVENUES OPERATING CAPITAL GRANTS CHARGES FOR GRANTS AND AND EXPENSES SERVICES CONTRIBUTIONS CONTRIBUTIONS NET FUNCTIONS/PROGRAMS GOVERNMENTAL ACTIVITIES: General government $ 2,048,057 $ $ $ $ (2,048,057) Redevelopment projects 7,464,094 2,133,059 (5,331,035) Interest on long-tenn debt 1,387,600 (1,387,600) TOTAL $ 10,899,751 $ $ $ 2,133,059 $ (8,766,692) GENERAL REVENUES Tax increment revenue $ 6,076,347 Interest and other income 994,162 TOTAL GENERAL REVENUES 7,070,509 CHANGE IN NET ASSETS (1,696,183) NET ASSETS - Beginning of year (581,8491 NET ASSETS - End of year $ (2,278,032) See notes to financial statements. 10 BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY BALANCE SHEET. GOVERNMENTAL FUNDS SEPTEMBER 30, 2006 BOND TOTAL GENERAL PROJECTS DEBT SERVICE GOVERNMENTAL FUND FUND FUND FUNDS ASSETS Cash and cash equivalents $ 3,857,827 $ 44,496 $ 99,039 $ 4,001,362 Investments 12,836,581 2,673,043 15,509,624 Accounts receivable 2,001,800 460,285 844 2,462,929 Mortgage receivable 100,000 100,000 Prepaids 14,974 14,974 Due from other funds 562,407 27,237,893 27,800,300 TOTAL ASSETS $ 6,537,008 $ 13,341,362 $ 30,010,819 $ 49,889,189 LIABILITIES AND FUND BALANCE LIABILITIES Accounts payable and accrued expenses $ 2,107,489 $ 114,939 $ $ 2,222,428 Deposits payable 5,308 5,308 Due to City of Boynton Beach 35,893 35,893 Due to other funds 27,237,893 562,407 27,800,300 TOTAL LIABILITIES 2,148,690 27,352,832 562,407 30,063,929 FUND BALANCE Unreserved 4,373,344 (14,011,470) 29,448,412 19,810,286 Reserved for prepaids 14,974 14,974 TOTAL FUND BALANCE 4,388,318 (14,011,470) 29,448,412 19,825,260 TOTAL LIABILITIES AND FUND BALANCE $ 6,537,008 $ 13,341,362 $ 30,010,819 $ 49,889,189 See notes to financial statements. 11 BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY RECONCILIATION OF THE BALANCE SHEET - GOVERNMENTAL FUNDS TO THE STATEMENT OF NET ASSETS SEPTEMBER 30, 2006 FUND BALANCE - TOTAL GOVERNMENTAL FUND Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not reported in the governmental fund. Capital assets - net Unamortized bond issue costs are not reported in the governmental fund. Long-term liabilities are not reported in the governmental fund. Compensated absences Note payable Bonds payable NET ASSETS OF GOVERNMENTAL ACTIVITIES See notes to financial statements. 12 $ 19,825,260 9,783,870 405,550 (29,299) (2,296,119) (29,967,294) $ (2,278,032) BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY STATEMENT OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCE. GOVERNMENTAL FUND FOR THE YEAR ENDED SEPTEMBER 3D, 2006 TOTAL BOND PROJECTS DEBT SERVICE GOVERNMENTAL GENERAL FUND FUND FUND FUNDS REVENUES Tax increment revenue $ 6,076,347 $ $ $ 6,076,347 County grant revenue 2,125,314 2,125,314 Contributions and donations 1,000 1,000 Interest and other income 298,153 600,196 102,562 1,000,911 TOTAL REVENUES 8,500,814 600,196 102,562 9,203,572 EXPENDITURES General government 1,936,659 1,498 25 1,938,182 Redevelopment projects 2,828,376 4,635,720 7,464,096 Debt Service: Principal retirement 174,563 585,000 759,563 Interest 140,565 1,257,186 1,397,751 Debt issuance costs 113,716 113,716 Capital outlay 7,024,950 7,024,950 Transfer to Police Department 90,668 90,668 TOTAL EXPENDITURES 12,195,781 4,750,934 1,842,211 18,788,926 EXCESS OF REVENUES OVER EXPENDITURES (3,694,967) (4,150,7381 (1,739,649) (9,585,354) OTHER FINANCING SOURCES Bond proceeds 11,235,219 11,235,219 Transfers in 5,532,630 1,507,884 597,751 7,638,265 Transfers out (2,067,352) (5,570,913) (7,638,2651 TOTAL OTHER FINANCING SOURCES 3,465,278 (4,063,029) 11,832,970 11,235,219 NET CHANGE IN FUND BALANCE (229,689) (8,213,767) 10,093,321 1,649,865 FUND BALANCE, Beginning of Year 4,618,007 (5,797,703) 19,355,091 18,175,395 FUND BALANCE, End of Year $ 4,388,318 $ (14,011,470) $ 29,448,412 $ 19,825,260 See notes to financial statements. 13 BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCE. GOVERNMENTAL FUND TO THE STATEMENT OF ACTMTIES FOR THE YEAR ENDED SEPTEMBER 30, 2006 NET CHANGE IN FUND BALANCE - TOTAL GOVERNMENTAL FUND Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlay expenditures. However, in the statement of activities, the cost of those assets is depreciated over their estimated useful lives. Expenditures for capital assets Less current year depreciation expense For governmental funds, the issuance of long-term debt provides current financial resources and the repayment of long-term debt consumes current financial resources. 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. Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Change in long-term compensated absences CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVlTlES See notes to financial statements. 14 $ 1,649,865 7,024,949 (8,158) (10,351,789) (11,050) $ (1,696,183) BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2006 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies of the Boynton Beach Community Redevelopment Agency (the CRA) conform to Generally Accepted Accounting Principles (GAAP) as applicable to governments. The following is a summary of the more significant policies. A. Reporting Entity The CRA is a dependent component unit established by the City of Boynton Beach, Florida (the "City") under the authority granted by Florida Statutes 163, Section III. The purpose of the CRA is to promote and guide physical and economic redevelopment in the City of Boynton Beach and part of Palm Beach County, Florida (the "District"). The CRA is a legally separate entity established by Ordinance number 83-41 of the City of Boynton Beach on December 20, 1983. The CRA has adopted Governmental Accounting Standards Board Statement No. 14 (GASB Statement No. 14), the Financial Reporting Entity, for the purpose of evaluating its component unit financial statements. Based on the criteria in GASB 14, the CRA has determined that there are no units that meet criteria for inclusion in the CRA's financial statements. B. Reporting Model The CRA's basic financial statements consist of government-wide statements, including a statement of net assets and a statement of activities, and fund financial statements which provide a more detailed level of financial information. Government-Wide Financial Statements The statement of net assets and the statement of activities report information on all of the activities of the CRA. Governmental activities are reported separately from business-type activities, which rely on fees charged to external parties as their primary revenues. The CRA has no business-type activities. The statement of net assets reports the CRA's financial position as of the end of the fiscal year. In this statement, the CRA's net assets are reported in three categories: invested in capital assets, net of related debt; restricted net assets; and unrestricted net assets. The statement of activities presents a comparison between direct expenses and program revenues for each function of the CRA. Direct expenses are those that are clearly identifiable with a specific function. Program revenues include charges for services that are directly related to a given function and grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Tax increment revenue and other items not meeting the definition of program revenue are reported instead as general revenue. 15 BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2006 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) B. Reporting Model (continued) Fund Financial Statements For the fiscal year ending September 30, 2006, the CRA utilized three funds, the General Fund, the Debt Service Fund and the Bond Programs Fund. The general fund is classified as a governmental fund and accounts for all financial resources controlled by the CRA. The debt service fund is used to account for the accumulation of resources for the annual payment of principal and interest on long-term obligation debt and the bond programs fund accounts for all single- family bond programs. The governmental fund statement includes reconciliations with brief explanations to better identify the relationship between the government- wide statements and the statements for the governmental fund. C. Measurement Focus and Basis of Accounting The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. The governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the CRA considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when the related fund liability is incurred. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. D. Cash and Cash Equivalents Cash and cash equivalents are defined as short-term highly liquid investments that are both readily convertible to known amounts of cash and have an original maturity of three months or less. Cash and cash equivalents consist of petty cash and deposits with financial institutions qualified as public depositories under Florida law. All deposits are insured by federal depository insurance and! or collateralized with securities held in Florida's multiple financial institution collateral pool as required by Chapter 280, Florida Statutes. E. Investments All of the CRA's investments consist of amounts placed with the State Board of Administration ("SBA") for participation in the Local Government Surplus Funds 16 BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2006 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) E. Investments (continued) Trust Fund investment pool ("SBA Investment Pool") created by Section 281.405, Florida Statutes, and those made locally. The SBA Investment Pool operates under investment guidelines established by Section 215.47, Florida Statutes. The District's investments in the SBA Investment Pool, which is a Securities and Exchange Commission Rule 2a7-like external investment pool, are reported at amortized cost. Investments made locally consist of amounts placed in obligations of United States Government Agencies and Instrumentalities and are reported at fair value. Investments for the Agency Funds consist of monies placed in certificates of deposit. The CRA is authorized to invest in direct obligations of the United States of America or any agency thereof, interest bearing time or demand deposits with any qualified depository institution, commercial paper, bankers' acceptances, state and/ or local government taxable debt, mutual funds, repurchase agreements and the State Treasurer's investment pool, which has the characteristics of a money market fund. The CRA has adopted GASB Statement No. 40, Deposit and Investment Risk Disclosures, (GASB Statement No. 40) in fiscal year 2005. The affect of this adoption is the inclusion of new disclosures for deposit and investment risks. F. Capital Assets Capital assets are defined by the CRA as assets with an initial, individual cost of $1,000 or more and an estimated useful life of more than one year. These assets are recorded at historical cost. Donated capital assets are recorded at estimated fair value at the date of donation. Capital assets are depreciated using the straight-line method over the assets' estimated useful lives of all reported capital assets, except land and land improvements. The estimated useful life of furniture, fixtures and equipment is five to ten years. G. Bond Premiums and Issuance Costs In the government-wide financial statements, bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight line method. 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 fund types recognize bond premiums and discounts, as well as bond issuance costs during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts are reported as other financing uses. Issuance costs are reported as debt service expenditures. 17 BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2006 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) H. Revenue Sources Tax increment revenues are the primary source of revenue for the CRA. Tax increment revenue is collected from two governmental entities that levy property taxes within the legally defined redevelopment area of the CRA, which is the City of Boynton Beach, Florida. I. Compensated Absences It is the CRA's policy to permit employees to accumulate earned but unused vacation and sick pay benefits. Employees may, depending on their level of service, be paid for various amounts of their total accrued leave upon termination or retirement. The CRA accrues a liability for leave hours that meet the criteria for payment at the eligible employees' current rates of pay. J. Long-term Liabilities All long-term debt and other long-term obligations are reported in the government- wide financial statements. In the fund financial statements, long-term liabilities are not reported because governmental funds use the current financial resources measurement focus. K. Net Assets Net assets represent the difference between assets and liabilities and are reported in three categories as hereafter described. Net assets invested in capital assets, net of related debt, represent capital assets, net of accumulated depreciation and any outstanding debt related to those assets. Net assets are reported as restricted when there are legal limitations imposed on their use by legislation, or external restrictions imposed by other governments, creditors, or grantors. Unrestricted net assets are net assets that do not meet the definitions of the classifications previously described. When both restricted and unrestricted resources are available for use, it is the CRA's policy to use restricted resources first, and then unrestricted resources as they are needed. L. Budgets and Budgetary Accounting An annual budget is adopted on the modified accrual basis of accounting, consistent with generally accepted accounting principles, with the exception of compensated absences and festivals/events/seminars expenditures. Compensated absences are budgeted only to the extent expected to be paid, rather than on the modified accrual basis. Festivals/events/seminars expenditures are netted against revenue generated from these expenditures, rather than reporting revenues and expenditures individually. Amendments to the budget can only be made with the approval of the Board of Directors (the "Board") fund is the legal level of control. 18 BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2006 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) M. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make various estimates. Actual results could differ from those estimates. 2. CASH, CASH EQUIVALENTS AND INVESTMENTS The CRA's investment policy is designed to ensure the prudent management of funds, and the availability of operating and capital funds when required, while earning a competitive return within the policy framework. The primary objectives, in order of priority, of investment activity shall be safety, interest rate risk, liquidity, and yield. Investments of the CRA include: deposits and guaranteed contracts with banks or other financial institutions which meet standards for deposits stipulated in investment agreements. Memorandum Only - Combined Totals Investment Maturities (in Years) Total Fair Value Less Than 1 1-10 Cash and cash equivalents: Bank deposits Cash on hand Investments: Investment agreements $ 4,000,862 500 15,509,624 15,509,624 Total cash, cash equivalents and investments 19,510,986 15,509,624 Less cash and cash equivalents (4,001,362) Total investments $ 15,509,624 $ - $ 15,509,624 A. Interest Rate Risk Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The CRA's investment policy to minimize interest rate risk is to structure the investment portfolio so that the securities mature to meet cash requirements for current budgeted needs, thereby avoiding the need to sell securities on the open market prior to maturity. 19 BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2006 2. CASH, CASH EQUIVALENTS AND INVESTMENTS (continued) B. Foreign Currency Risk Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair value of an investment or a deposit. The CRA does not hold foreign or foreign currency investments and therefore is not subject to foreign currency risk. C. Credit Risk The CRA also mitigates credit risk, which is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. Custodial credit risk is the risk that, in the event of the failure of the counterparty to a transaction, the CRA will not be able to recover the value of investment or collateral securities that are held in the possession of an outside party. Authorized investments under the bond resolution include investment agreements, including Guaranteed Investment Certificates (GIC's), acceptable to Municipal Bond Insurance Agency (MBIA). D. Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The CRA diversifies its investment portfolio to minimize the impact of potential losses from one type of security or individual issuer, excluding D.S Treasuries, and Federally Guaranteed Obligation. The implementation of GASB Statement No. 40 requires the disclosure of investments in anyone issuer that represents five percent or more of total investments. As of September 30, 2006, the CRA had investments in the percentages of the total investments shown below with the following issuers: Treasurers pool MBIA & Commerce (Bond Reserve) Citigroup (construction) $ 2,673,043 12,836,581 15,509,624 0,00% 17.23% 82.77% 100.00% $ 20 BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2006 3. CAPITAL ASSETS Capital asset activity for the year ended September 30, 2006, was as follows: BALANCE BEGINNING OF BALANCE END YEAR OF YEAR 10/1 / 2005 ADDITIONS DELETIONS 9/30/2006 Capital assets not being depreciated: Land 2,623,913 7,065,644 9,689,557 Depreciable capital assets Furniture, fIxtures and equipment 161,853 49,973 (90,668) 121.158 Total depreciable capital assets 161,853 49,973 (90,6681 121,158 Less accumulated depreciation 18,687 8,158 26,845 Depreciable capital assets, net of accumulated depreciation 143,166 41,815 (90,6681 94,313 TOTAL CAPITAL ASSETS, KET 2.767,079 7,107,459 (90,6681 $ 9.783,870 Depreciation expense of $8,158 was charged to general government. 21 BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2006 4. LONG-TERM LIABILITIES At September 30, 2006, bonds and loans payable consisted of the following: BONDS: 2004 Tax Increment Revenue Bonds, dated December 14, 2004, due in annual principal installments of $375,000 to $6,045,000 through October 1, 2024, bearing interest rates of 3.0% to 5.0% $ 18,010,000 2005 A & B Bonds dated December 12, 2005, due in annual principal installments of $69,075 to $2,840,000 through October 1, 2026, bearing interest rates of % to % 2005A 3,000,000 2005B 8,275,000 LOANS: Promissory note to Bank of America, N .A. at 6.56% interest, payable in thirty semi-annual installments through September 20, 2016 2,296.119 $ 31.581.119 22 BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2006 4. LONG-TERM LIABILITIES (continued) The annual requirements to amortize the bonds and loans payable outstanding as of September 30, 2006, are as follows: 2004 Tax 2005 A Increment Revenue Bonds Principal Interest Principal Interest (~ $ 793,925 $ $ 135,000 600,000 779,112 135,000 615,000 763,156 135,000 635,000 745,175 135,000 3,495,000 3,376,844 675,000 5,270,000 2,497,931 675,000 7,395,000 952,375 1,465,000 675,000 1,535,000 69,075 $ 18,010,000 $ 9,908,518 $ 3,000,000 $ 2,634,075 2005 B Note Payable Totals Principal Interest Principal Interest Principal Interest $ 235,000 $ 453,320 $ 175,823 $ 129,015 $ 410,823 $ 1,511,260 245,000 441,335 185,697 119,141 1,030,697 1,474,588 255,000 428,840 196,829 108,008 1,066,829 1,435,004 275,000 415,835 208,266 96,572 1,118,266 1,392,582 1,575,000 1,856,560 1,237,290 286,899 6,307,290 6,195,303 1,990,000 1,393,290 292,213 12,625 7,552,213 4,578,846 2,840,000 767,553 11,700,000 2,394,928 860,000 48,590 2,395,000 117,665 $ 8,275,000 $ 5,805,323 $ 2,296,118 $ 752,260 $ 31,581,118 $ 19,100,176 23 BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2006 Transactions for the year ended September 30, 2006 are summarized as follows: BALANCE AT BEGINNING OF BALANCE AT END DUE WITHII, YEAR 10/01/05 ADDITIONS DELETIONS OFYEAR 9/30/06 ONE YEAR Bonds payable $ 18,595,000 $ 11,275,000 S 1585,000) $ 29,285,000 $ 235,000 Plus deferred amounts For discount (39,7811 1,989 (37,7921 For issuance premium 760,091 (40,0051 720,086 Total bonds payable 19,355,091 11,235,219 (623,016) 29,967,294 235,000 Note payable 2,470,682 [ 174,563) 2,296,119 175,823 Compensated absences 18,249 11,050 29,299 Total long-term liabilities $ 21,844,022 S 11,246,269 $ (797,579) $ 32,292} 12 $ 410,823 On December 12, 2005, the CRA issued $11,275,000 Tax Increment Revenue Bonds, Series 2005A & 2005B (Series 2005 Bonds). The Series 2005 Bonds were issued for the purpose of providing funds to pay the cost of various capital improvements described in the community redevelopment plan of the CRA. 5. RISK MANAGEMENT The CRA is exposed to various risks of loss related to torts, theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The CRA purchases commercial insurance for the risks of loss to which it is exposed. Policy limits and deductibles are reviewed by management and established at amounts to provide reasonable protection from significant financial loss. Settlements did not exceed insurance coverage for the current fiscal year. 6. COMMITMENTS AND CONTINGENT LIABILITIES Facade Grant Program The CRA established a Facade grant program in an effort to promote the redevelopment of the facades of existing businesses located in the City of Boynton Beach. The program offers businesses a $15,000 matching grant to improve the facades of their businesses. During the year ended September 30, 2006, the CRA closed and disbursed $15,000 for facade grants. 24 BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2006 Lease Commitments The CRA leases buildings and equipment under non-cancelable operating leases. Future minimum rental payments as of September 30, 2006 required by these leases are as follows: 2007 2008 $ 48,000 28,000 $ 76.000 Rental costs for the year ended September 30, 2006, approximated $46,240. 7. RETIREMENT CONTRIBUTIONS The CRA participates in a defined contribution pension plan. The plan is qualified under Sections 401(1), 403(a) and 501 (a) of the Internal Revenue Code. The Plan is administered by independent trustees. All employees who meet the requirements are qualified to participate. Employees make voluntary contributions to the plan. The CRA's required contribution is 5% of the total salaries of qualified participants. Total salaries for the year were $606,530. Total salaries of qualified participants were $51,066. Each participant's non-forfeitable percentage of this employer's contribution account increases (vests) 20% for each year of service. Employer contributions for the period totaled $-------- and are included in personal service expenditures of the General Fund. The CRA also participates in a 457 Deferred Compensation Plan. The Plan is administered by independent trustees. All employees who met the requirements are qualified to contribute. As of September 30, 2006, at the amount held by the Trustee is $20,395.53. 8. RELATED PARTY TRANSACTIONS The CRA is a component unit of the City of Boynton Beach, Florida. For the year ended September 30, 2006 the CRA's tax increment revenues include $3,813,697 received from the City. The CRA reimbursed the City for certain costs such as recording and information technology services, festival expenses, fire and rescue, and police services during the year. Total payments to the City for the year ended September 30, 2006, were approximately $ 9. SUBSEQUENT EVENT As of July 11, 2006, the CRA is involved in a legal investigation pertaining to a property purchase/swap at 208 NE 10th Avenue with Greater St. Paul AME Church. As of September 30, 2006 there has been no definitive legal action or remedy taken by the CRA. 25 REQUIRED SUPPLEMENTARY INFORMATION BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY BUDGETARY COMPARISON SCHEDULE. GENERAL FUND FOR THE YEAR ENDED SEPTEMBER 30, 2006 BUDGETED AMOUNTS FINAL BUDGET ACTUAL POSITIVE ORIGINAL FINAL AMOUNTS (NEGATIVE) REVENUES Tax increment revenue 6,000,000 6,000,000 6,076,347 76,347 County grant revenue 1,155,000 1,155,000 2,125,314 970,314 Contributions and donations 1,000 1,000 Interest and other income 767,723 807,723 298,153 (509,570) TOTAL REVENUES 7,922,723 7,962,723 8,500,814 538,091 EXPENDITURES General government 1,114,623 1,768,549 1,936,659 (168,110) Public safety 365,000 110,463 110,463 Redevelopment projects 3,827,363 3,509,625 2,828,376 681,249 Debt Service: Principal retirement 749,463 749,273 174,563 574,710 Interest 1,587,238 1,587,429 140,565 1,446,864 Debt issuance costs 279,036 237,384 237,384 TOTAL EXPENDITURES 7,922,723 7,962,723 5,080,163 2,882,560 EXCESS OF REVENUES OVER EXPENDITURES 3,420,651 3,420,651 Capital outlay 7,024,950 (7,024,950) OTHER FINANCING SOURCES Transfers in 5,532,630 5,532,630 Transfers out (2,158,020) (2,158,020) TOTAL OTHER FINANCING SOURCES 3,374,610 3,374,610 NET CHANGE IN FUND BALANCE (229,689) (229,689) FUND BALANCE, Beginning of Year 4,618,007 4,618,007 4,618,007 FUND BALANCE, End of Year $ 4,618,007 $ 4,618,007 $ 4,388,318 $ (229,689) See notes to budgetary comparison schedule 24 BOYNTON BEACH COMMUNITY REDEVELOPMENT AGENCY NOTES TO BUDGETARY COMPARISON SCHEDULE FOR THE YEAR ENDED SEPTEMBER 30, 2006 The CRA is required to establish a budgetary system and an approved annual budget for the General Fund. The CRA's budgeting process is based on estimates of cash receipts and cash expenditures which are approved by the Board. The legal level of budgetary control, the level at which expenditures may not exceed budget, is in the aggregate. Any budget amendments that increase the aggregate budgeted appropriations must be approved by the Board. 25 ADDITIONAL ELEMENTS REQUIRED BY THE RULES OF THE AUDITOR GENERAL January 10, 2007 INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Board of Directors Boynton Beach Community Redevelopment Agency Boynton Beach, Florida We have audited the accompanying combined financial statements of the governmental activities of the Boynton Beach Community Redevelopment Agency (the "CRA"), a component unit of the City of Boynton Beach, Florida (the "City") as of and for the year ended September 30, 2006, which collectively comprise the CRA's basic financial statements, and have issued our report thereon dated January 10,2007. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. COMPLIANCE As part of obtaining reasonable assurance about whether the CRA'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. The results of our tests disclosed no instances of noncompliance that are required to be reported herein under Government Auditing Standards. INTERNAL CONTROL OVER FINANCIAL REPORTING In planning and performing our audit, we considered the CRA's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide an opinion on the internal control over financial reporting. Our consideration of the internal control would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses. A material weakness is a reportable 26 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 to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we considered to be material weaknesses. However, we noted other matters involving the internal control over financial reporting that we have reported to management of the CRA in a separate letter dated January 10, 2007. This report is intended for the information of the CRA. This restriction is not intended to limit the distribution of this report, which is a matter of public record. Dufresne & Associates, CPA, PA 27 January 10,2007 MANAGEMENT LETTER To the Board of Directors Boynton Beach Community Redevelopment Agency Boynton Beach, Florida We have audited the basic financial statements of the CRA, a component unit of the City of Boynton Beach, Florida (the "City") as of and for the fiscal year ended September 30, 2006, and have issued our report thereon dated January 10, 2007. We conducted our audit in accordance with U.S. generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. We have issued our Independent Auditor's Report on Compliance and Internal Control Over Financial Reporting based on an audit of financial statements performed in accordance with Government Auditing Standards. Disclosures in that reported, dated January 10, 2007, should be considered in conjunction with this management letter. Additionally, our audit was conducted in accordance with the provlslOns of Chapter 10.850, Rules of the Auditor General, which require that we address certain compliance and other matters in the management letter, if not already addressed in the auditor's report on compliance and internal control. In planning and performing our audit of the financial statements of the CRA for the year ended September 30, 2006, we considered the CRA's internal controls in order to determine the scope of our audit procedures for the purpose of expressing an opinion on the financial statements and not to provide assurance on internal control. While our purpose was not to provide assurance on internal control, certain matters came to our attention that we want to report to you. PRIOR YEAR FINDINGS AND RECOMMENDATIONS The Rules of the Auditor General require that we address in the management letter, if not already addressed in the auditor's reports on compliance and internal control, whether or not inaccuracies, shortages, defalcations, fraud and/ or violations of laws, rules, regulations and contractual provisions reported in the preceding annual financial report have been corrected. None of the aforementioned were disclosed in the preceding audit report. 28 Additionally, the Rules of the Auditor General require that we address in the management letter, if not already addressed in the auditor's reports on compliance and internal control, whether or not recommendations made in the preceding management letter have been followed and otherwise apply. The following is a summary of prior year recommendations: ACCRUAL BASIS OF ACCOUNTING Condition: At present, the CRA keeps its general ledger on the basis of cash receipts and cash disbursements, whereby certain revenues and the related assets are recognized when received, and expenses are recognized when paid. Recommendation: We recommend that the accrual basis of accounting be considered. Under that basis, revenues and the related assets are recorded when earned and expenses are recorded when the obligation is incurred. The accrual basis is required by generally accepted accounting principles since it results in financial statements that reflect the complete effects of the CRA's (GAAP) financial transactions for a period. Management Response: As of November 2005 the CRA has employed a new financial software platform that will allow the CRA to conduct its financial accounting on an accrual basis. Henceforth, all expenses incurred in any fiscal year will be charged to the correct year for budgetary purposes. The CRA will also employ purchase orders to help accomplish the necessary fiscal tracking. In addition, all CRA revenues will be booked in the year in which they were earned. The CRA will no longer operate on a CASH basis. It should be noted that all expenses and revenues attributable to the prior year will considered up to 60 days after the close of the fiscal year. Status: Cleared CURRENT YEAR FINDINGS AND RECOMMENDATIONS The Rules of the Auditor General (Section 10.554(1)(g)(3)) require disclosure in the management letter of any recommendations to improve financial management, accounting procedures, and internal controls. The following is a summary of current year recommendations. Condition: The CRA paid for artwork in their offices, which meet the definition of a public place. Florida Statutes does not allow the artwork to be paid for using TIF revenues. There was no evidence that revenues were officially allocated from sources other than TIF to pay for the artwork. Recommendation: We recommend that the governing body take official action regarding allocation of non-TIF revenues to cover the artwork expenditures. Management Response: 29 OTHER REQUIRED INFORMATION Based on the criteria specified in 218. 503( 1) Florida Statutes, nothing came to our attention to cause us to believe that the CRA is, or during the fiscal year ended September 30, 2006, was, in a state of financial emergency as defined in the Statutes. We applied our own financial condition assessment procedures. The results of our procedures disclosed no matters that are required to be reported. The CRA is in compliance with Section 218.415, Florida Statutes, regarding the investment of public funds. The CRA has been classified as a dependent component unit for the purpose of filing the annual financial report with the Department of Banking and Finance pursuant to Section 218.32, Florida Statutes. Accordingly, the CRA does not file a separate annual financial report with the state. Instead, the CRA's annual financial information will be included in the annual financial report of the City of Boynton Beach, Florida for the year ended September 30, 2006. This management letter is intended solely for the information and use of the Board of Directors and management of the CRA, the City of Boynton Beach, and regulatory agencies and is not intended to be and should not be used by anyone other than these specified parties. Thank you and your staff for the cooperation and courtesies extended to us during the course of the audit. Please let us know if you have any questions or comments concerning this letter, our accompanying reports, or other matters. Dufresne & Associates, CPA, PA 30