town of south palm beach, floridadpanther.fiu.edu/sobek/content/fi/go/00/00/17/00001/2011 south...

TOWN OF SOUTH PALM BEACH, FLORIDA

COMPREHENSIVE ANNUAL FINANCIAL REPORT

FISCAL YEAR ENDED SEPTEMBER 30, 2011


COMPREHENSIVE ANNUAL FINANCIAL REPORT


PREPARED BY FINANCE DEPARTMENT


TABLE OF CONTENTS

Introductory Section Letter of Transmittal ................................................................................................................. i-iv List of Principal Officials ..............................................................................................................v Organizational Chart ................................................................................................................... vi Certificate of Achievement for Excellence in Financial Reporting ........................................... vii Financial Section Independent Auditors’ Report ............................................................................................... 1-2 Management’s Discussion and Analysis (Required Supplementary Information) ........ 3-12 Basic Financial Statements Government-wide Financial Statements Statement of Net Assets ........................................................................................................13 Statement of Activities ..........................................................................................................14 Fund Financial Statements Governmental Fund Financial Statements Balance Sheet .....................................................................................................................15 Statement of Revenues, Expenditures and Changes in Fund Balance ...............................16 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance of the Governmental Fund to the Statement of Activities ................................17 Proprietary Fund Financial Statements Statement of Net Assets ......................................................................................................18 Statement of Revenues, Expenses and Changes in Net Assets ...........................................19 Statement of Cash Flows ....................................................................................................20 Notes to Basic Financial Statements .................................................................................. 21-35 Required Supplementary Information (Other than MD&A) Budgetary Comparison Schedule – General Fund ...................................................................36 Note to Budgetary Comparison Schedule ................................................................................37


TABLE OF CONTENTS

Statistical Section Net Assets by Component ...........................................................................................................38 Changes in Net Assets ................................................................................................................39 Fund Balances of Governmental Funds ......................................................................................40 Changes in Fund Balances of Governmental Funds ...................................................................41 General Governmental Tax Revenues by Source .......................................................................42 Net Assessed Value and Estimated Actual Value of Taxable Property ......................................43 Property Tax Rates – Direct and Overlapping Governments .....................................................44 Principal Property Taxpayers ......................................................................................................45 Property Tax Levies and Collections ..........................................................................................46 Ratios of Outstanding Debt by Type ..........................................................................................47 Ratios of General Bonded Debt Outstanding ..............................................................................48 Direct and Overlapping Governmental Activities Debt ..............................................................49 Pledged Revenue Coverage ........................................................................................................50 Demographic and Economic Statistics .......................................................................................51 Principal Employers ....................................................................................................................52 Full-Time Equivalent Town Government Employees by Function ............................................53 Operating Indicators by Function/Program ................................................................................54 Capital Asset Statistics by Function/Program .............................................................................55 Compliance Section Independent Auditors’ Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ................... 56-57 Management Letter in Accordance with the Rules of the Auditor General of the State of Florida ................................................................................................................... 58-59

INTRODUCTORY SECTION

Page Intentionally Left Blank

TowN OF SOUTH PEI-V BrNCH3577 South Ocean Boulevard, South Palm Beach, Florida 33480

(561) 588-8889 . Fax (561) 588-6632

March 29,2012

To the Honorable Mayor, Members of the TownCouncil and Citizens of the Town of South Palm Beach:

The Government Finance Officers Association (GFOA) recommends that all units of localgovernment publish, within six months of the close of each fiscal year, a complete set offinancial statements presented in conformity with Generally Accepted Accounting Principles(GAAP) and audited in accordance with auditing standards generally accepted in the UnitedStates and in accordance with Govemment Auditing Standards by a firm of licensed certifiedpublic accountants. Pursuant to that recommendation, we hereby issue the comprehensiveannual financial report of the Town of South Palm Beach for the fiscal year ended September 30,2011.

This report consists of management's representation concerning the finances of the Town ofSouth Palm Beach. Consequently, management assumes full responsibility for the completenessand reliability of all of the information presented in this report. To provide a reasonable basis formaking these representations, management of the Town of South Palm Beach has established acomprehensive intemal framework that is designed both to protect the Town's assets from loss,theft, or misuse and to compile sufficient reliable information for the preparation of the Town ofSouth Palm Beach's financial statements in conformity with GAAP. Because the cost of internalcontrols should not outweigh their benefits, the Town of South Palm Beach's comprehensiveframework of internal controls has been designed to provide reasonable, rather than absolute,assurance that the financial statements will be free from material misstatement. As management,we assert that, to the best of our knowledge and belief, this financial report is complete andreliable in all material respects.

The firm of Marcum LLP, licensed certified public accountants has audited the Town of SouthPalm Beach's financial statements. The goal of the independent audit was to provide reasonableassurance that the basic financial statements of the Town of South Palm Beach for the fiscal yearended September 30,2011, are free of material misstatement. The independent audit involvedexamining, on a test basis, evidence supporting the amount and disclosures in the financialstatements; assessing the accounting principles used and significant estimates made bymanagement; and evaluating the overall financial statement presentation. The independentauditor concluded, based upon the audit, that there was a reasonable basis for rendering an

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unqualified opinion that the Town of South Palm Beach's financial'statements for the fiscal yearended September 30,2011, are fairly presented in conformity with GAAP. The independentauditor's report is presented as the first component of the financial section of this report.

GAAP requires that management provide a narrative introduction, overvierv, and analysis toaccompany the basic financial statements in the form of Management's Discussion and Analysis(MD&A). This letter of transmittal is designed to complement the MD&A and should be read inconjunction with it. The Town of South Palm Beach's MD&A can be found immediatelyfollowing the report of the independent certified public accountants in the financial section andprovides a narrative introduction, overview and analysis of the basic financial statements.

Profile of the Government

The Town of South Palm Beach, incorporated in 1955, is a small community on one of SouthFlorida's barrier islands five eighths of a mile in length located on US highway A1A. The Townis comprised of 1,853 housing units, of which only 4 are single family homes, the balance arecondominium apartments. Because of the Town's unique location and beauty, its own policeforce and a dedicated and well-trained professional staff, property values in the Town are aboveaverage for Palm Beach County. Local access to the Town is by two nearby bridges across theintra coastal waterway; Ocean Avenue to the south, and Lake Worth Road to the north.

The Town of South Palm Beach began operating with a Town administrator in 1982 and changed

the form of government to a Town Manager in 2000. Policymaking and legislative authority are

vested in a governing council consisting of the mayor and four other council members. The

Council is responsible among other things, for passing ordinances and resolutions, adopting the

annual budget and appointing the Town Manager. The Town Manager is responsible for

carrying out the policies and ordinances of the Council, and overseeing the daily operations of

the government.

The Town of South Palm Beach offers a range of services, including police protection, building,

zoning and planning, code enforcement and cultural activities. County wide services include fire

rescue, corrections rehabilitation, judicial administration, Palm Tran, public health, air quality

resources, human and social services, the airport, and the Sheriff s office. Palm Beach County is

the regional government for all county residents.

The annual budget serves as a foundation for the Town of South Palm Beach's financial planning

and control. Departments of the Town are required to submit requests for appropriations to the

Town Manager and these requests are the initiation of developing the proposed budget. The

Town Manager then presents a proposed budget to the Council for review. The Council is

required to hold public hearings on the proposed budget and to adopt a final budget no later than

September 30, the close of the Town's fiscal year. The appropriated budget is prepared by fund

and department. The Town Council approves supplemental appropriations. Budget to actual

comparisons are provided in this report for the general fund for which an appropriated annual

budget has been adopted. The general fund, budget to actual report, is presented in the required

supplemental information section of this report.

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Factors Affecting Financial Condition

The information presented in the financial statements is best'understood when it is consideredfrom the broader perspective of the specific environment with which the Town of South PalmBeach operates.

Local Economy

The Town of South Palm Beach has suffered the same economic downturn that has affected allof Florida. The Town has also experienced a decline in assessed taxable value of property.However, this exclusive community is comprised of well-educated and involved citizens whotake a genuine interest in the goveming aspects of their Town. The Town is comprised ofexclusive residential housing stock. There are no industrial or commercial uses in thecommunity with the exception of a nonconforming 58 unit motel on the ocean.

Long-Term Financial Planning

The Town utilizes a comprehensive living projection three years into the future to assess revenuetrends and expenditure needs to assure a balanced stable financial program while addressing thevarious goals and objectives of the community.

Risk Management

The Town is exposed to various risks of loss related to torts, theft or damage to and destructionof assets; effors and omissions; injuries to employees; and natural disasters. The Townparticipates in the Florida League of Cities Municipal Insurance Trust for workers'compensation, liability and property insurance with deductibles of up to $500 per claim.

Pension and Other Post-Employment Benefits.

The Town joined the Florida Retirement System (FRS) on January I, 2005 to provide postemployment retirement benefits to its employees. The Town's required contribution ranges from9.63 % to 22.11 o/o of covered payroll, based on employee risk groups. In addition, the Townsponsors a 457 deferred compensation plan in which any employee may contribute on avoluntary basis.

Awards and Acknowledgements

The Government Finance Officers Association (GFOA) awarded a Certificate of Achievementfor Excellence in Financial Reporting to the Town of South Palm Beach for its ComprehensiveAnnual Financial Report (CAFR) for the fiscal year ended September 30, 2010. This was thefifth year that the Town received this prestigious award. In order to be awarded a Certificate ofAchievement, the government published an easily readable and efficiently organized CAFR.This report satisfied both GAAP and applicable legal requirements.

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A Certificate of Achievement is valid for a period of one year only. I believe the current CAFRcontinues to meet the Certificate of Achievement Program's requirements and am submitting itto the GFOA to determine its eligibility for another certihcate.

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The preparation of this report would not have been possible without the efficient and dedicatedservices of the entire staff of the Town of South Palm Beach. I would like to express myappreciation to all members of the Town staff who assisted and contributed to the preparation ofthis report. Appreciation is also extended to the Mayor and the Town Council for their unfailingsupport for maintaining the highest standards of professionalism in the management of the Townof South Palm Beach's finances.

Respectfully submitted,

R.@4Rex TaylorTown Manager

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LIST OF PRINCIPAL OFFICIALS

SEPTEMBER 30, 2011

TOWN COMMISSION

Dr. Donald Clayman Mayor

Dr. Joseph Flagello Vice-Mayor

Stella Jordan Councilmember

Bonnie Fischer Councilmember

Robert Gottlieb Councilmember

TOWN OFFICIALS

Rex Taylor Town Manager

Janet K. Whipple Town Clerk

Corbett and White Town Attorney

Beatrice Gateano, P.A. Finance Director

TOWN AUDITORS

Marcum LLP

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ORGANIZATION CHART

SEPTEMBER 30, 2011

FINANCIAL SECTION

INDEPENDENT AUDITORS’ REPORT

Marcum LLP n 525 Okeechobee Boulevard n Suite 750 n West Palm Beach, Florida 33401 n Phone 561.653.7300 n Fax 561.653.7301 n marcumllp.com

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INDEPENDENT AUDITORS’ REPORT

Honorable Mayor and Members of the Town Council Town of South Palm Beach, Florida We have audited the accompanying financial statements of the governmental activities, the business-type activities and each major fund of the Town of South Palm Beach, Florida (the Town) as of and for the year ended September 30, 2011, which collectively comprise the Town’s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Town'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 consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Town’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the governmental activities, the business-type activities and each major fund of the Town, as of September 30, 2011 and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended, in conformity with accounting principles generally accepted in the United States of America. As more fully described in Note 1 to the financial statements, the Town implemented the requirements of Governmental Accounting Standards Board Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, which significantly changed the classifications of fund balance of governmental funds. In accordance with Government Auditing Standards, we have also issued our report dated March 29, 2012, on our consideration of the Town’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing on 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.

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Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis, and budgetary comparison schedule, pages 3 to 12 and pages 36 and 37, respectively, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, which considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures, to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted principally of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town’s basic financial statements. The introductory section and the statistical tables are presented for purposes of additional analysis and are not a required part of the basic financial statements. The information included in the introductory and statistical sections has not been subjected to auditing procedures applied by us in the audit of the basic financial statements and, accordingly, we do not express an opinion on them. West Palm Beach, FL March 29, 2012

MANAGEMENT’S DISCUSSION AND ANALYSIS

(MD&A)

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MANAGEMENT’S DISCUSSION AND ANALYSIS As management of the Town of South Palm Beach, we offer readers of the Town of South Palm Beach’s (the Town) financial statements this narrative overview and analysis of the financial activities of the Town of South Palm Beach for the fiscal year ended September 30, 2011. FINANCIAL HIGHLIGHTS

• The assets of the Town of South Palm Beach exceeded its liabilities at the close of the most

recent fiscal year by $4,219,085 (net assets). • The Town’s total net assets increased by $176,944. This increase is attributable to excess

revenues over expenses for 2011. • As of the close of the current fiscal year, the Town of South Palm Beach’s governmental

fund reported an ending fund balance of $2,233,422. • The Town did not incur any debt during the current fiscal year.

OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the Town of South Palm Beach’s basic financial statements. The Town of South Palm Beach’s basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the Town of South Palm Beach’s finances, in a manner similar to a private sector business. The statement of net assets presents information on all of the Town of South Palm Beach’s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the Town of South Palm Beach is improving or deteriorating. The statement of activities presents information showing how the government’s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future periods (e.g., uncollected taxes and earned but unused vacation leave). Both of the government-wide financial statements distinguish functions of the Town of South Palm Beach that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business type activities). The governmental activities of the Town of South Palm Beach include general government, public safety and code enforcement.

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The government-wide financial statements include only the Town of South Palm Beach itself (known as the primary government). The government-wide financial statements can be found on pages 13 and 14 of this report. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The Town of South Palm Beach, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. The Town of South Palm Beach has two fund categories: the governmental fund and the enterprise fund. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statement focus on near-term inflows and outflows of spendable resources as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The Town of South Palm Beach maintains one governmental fund, the general fund. The Town of South Palm Beach adopts an annual appropriated budget for this fund. A Budgetary Comparison Schedule has been provided for this fund to demonstrate compliance with the budget. The basic governmental fund financial statements can be found on pages 15 to 17 of this report. Proprietary Funds. The Town maintains one type of proprietary fund. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The Town uses enterprise funds to account for its Sewer Utility operations. Notes to the basic financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 21 to 35 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 this case, the Town’s assets exceeded liabilities by $4,219,085 at the close of the most recent fiscal year. A portion of the Town’s net assets, $1,401,522 reflects its investment in capital assets (e.g., land and equipment). The Town of South Palm Beach uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Further details on the Town’s capital assets are disclosed in Note 7 to the financial statements found on pages 32 to 33 of this report.

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Our analysis of the financial statements of the Town begins on the next page. The Summary of Net Assets and the Summary of Changes in Net Assets, report information about the Town’s activities that will help answer questions about the position of the Town. A comparative analysis is provided with prior year information. NET ASSETS Below in Table A-1 is a Summary of the Town’s Net Assets. Also below in Table A-2, is a Summary of Changes in Net Assets. There are six basic transactions that affect the comparability of the Statement of Net Assets summary presentation as reflected below:

1. Net results of activities will impact (increase or decrease) current assets and unrestricted and/or restricted assets.

2. Borrowing for capital will increase current assets and long-term debt. 3. Spending borrowed proceeds on new capital will reduce current assets and increase capital

assets. There is a second impact, an increase in investment in capital assets and an increase in related debt, which will not change the investment in capital assets, net of debt.

4. Spending of non-borrowed current assets on new capital will reduce current assets and

increase capital assets and will also reduce unrestricted net assets and increase investment in capital assets, net of debt.

5. Principal payment on debt will reduce current assets, reduce long-term debt, also reduce

unrestricted net assets, and increase investments in capital assets, net of debt. 6. Reduction of capital assets through depreciation will reduce capital assets and investment

in capital assets, net of debt.

2011 2010 2011 2010 2011 2010

Current assets 2,297,278$ 2,119,061$ 888,746$ 809,852$ 3,186,024$ 2,928,913$ Capital assets, net 859,889 911,059 541,633 568,155 1,401,522 1,479,214

Total assets 3,157,167 3,030,120 1,430,379 1,378,007 4,587,546 4,408,127

Current liabilities 63,857 76,317 162,222 139,546 226,079 215,863 Non-current liabilities 142,382 150,124 - - 142,382 150,124

Total liabilities 206,239 226,441 162,222 139,546 368,461 365,987

Net assets:Invested in capital assets,

net of related debt 859,889 911,059 541,633 568,155 1,401,522 1,479,214 Unrestricted 2,091,039 1,892,620 726,524 670,306 2,817,563 2,562,926

Total net assets 2,950,928$ 2,803,679$ 1,268,157$ 1,238,461$ 4,219,085$ 4,042,140$

Table A-1Town of South Palm Beach

Net Assets

Business-typeGovernment Activities Activities Total

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As illustrated in Table A-1, at the close of the most recent fiscal year, assets of the Town of South Palm Beach exceeded its liabilities by $4,219,085. The largest portion of the Town of South Palm Beach’s assets, $2,817,563 or 67%, are unrestricted assets, which represent the resources that are available to provide services and/or additional capital assets to the citizens of the Town and also meet the Town’s obligations to its creditors. The balance of net assets in the amount of $1,401,522 or 33% are composed of investments in capital assets (land, buildings, etc.). The Town uses these capital assets to provide services to its citizens and consequently these assets are not available for future spending. At the end of its most recent fiscal year, the Town of South Palm Beach is able to report positive balances in the two categories of net assets, both for the government as a whole, as well as for its separate governmental and business-type activities. The same situation held true for the prior fiscal year. The Town’s total net assets increased by $176,944 in comparison to the prior year. Generally, the following impacts can significantly affect annual revenues and by extension change net assets:

1. Economic conditions can reflect a growing, stable or declining overall economic environment and those conditions can have a significant impact on property, non-ad valorem assessments, sales and use taxes, fees and other revenues derived from the community as well as received from other governments,

2. Changes in tax, assessment, and fee rates by elected officials directly affect the revenue

streams and have the most direct and immediate impact of all changes. 3. Changing patterns in intergovernmental and grant revenues cause measurable deviations

and make annual comparisons less than always meaningful. 4. Market impact on investment income might cause investment revenues to fluctuate widely

from year to year. Some other basic impacts are responsible for changes in annual expenditures:

1. Introduction of new programs can have substantial impact on department/program expenditures by requiring new personnel, capital, and operating funds.

2. Changes in service levels impacts expenditures by changing the levels of already

appropriated expenditures. 3. Salary/contract pricing increases can be a factor contributing to the increase in

appropriations. Most contracts entered into by the Town of South Palm Beach have provisions for increases, either automatic or negotiated each year.

4. While inflation generally appears to be at low levels, it still always affects the prices the

Town pays for commodities, supplies, fuels, parts and miscellaneous services it requires through the year. It is common that such goods may increase in price affecting expenditures.

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As illustrated by Table A-2, Changes in Net Assets, the Town’s revenues during Fiscal Year 2011 reached $2,125,884 and exceeded expenditures after transfers by $176,944.

Governmental Activities: Governmental activities increased the Town’s net assets by $147,248, thereby accounting for 17% of the total growth in the net assets of the Town. Key elements of this increase are as follows: • Effective October 1, 2010 the Town terminated the interlocal agreement with Palm Beach

County for fire protection and emergency medical services. These services are now billed by the County along with the property taxes. As a result, Public Safety expenses have decreased significantly, about 118% or $1,160,000.

• Property Tax Revenue decreased by 91% due mainly to fire and emergency medical

services being billed directly by the County as mentioned above.

2011 2010 2011 2010 2011 2010Revenues:

Program revenues:Charges for services 165,073$ 198,120$ 287,512$ 284,625$ 452,585$ 482,745$ Operating grants 1,000 2,000 - - 1,000 2,000 Capital grants - - - - - -

General revenues:Property taxes 1,178,180 2,244,521 - - 1,178,180 2,244,521 Other taxes 222,136 201,117 - - 222,136 201,117 Franchise taxes 111,384 108,402 - - 111,384 108,402 Intergovernmental 137,044 136,686 - - 137,044 136,686 Investment income 3,858 25,068 3,753 15,810 7,611 40,878 Miscellaneous 15,944 8,716 - - 15,944 8,716

Total revenues 1,834,619 2,924,630 291,265 300,435 2,125,884 3,225,065

Expenses:General government 563,367 603,412 - - 563,367 603,412 Public safety 981,720 2,140,999 - - 981,720 2,140,999 Public works 113,078 137,923 - - 113,078 137,923 Culture and recreation 29,206 31,867 - - 29,206 31,867 Utilities - - 261,569 233,471 261,569 233,471

Total expenses 1,687,371 2,914,201 261,569 233,471 1,948,940 3,147,672

Increase in net assets 147,248 10,429 29,696 66,964 176,944 77,393 Net assets, beginning 2,803,679 2,793,250 1,238,461 1,171,497 4,042,140 3,964,747 Net assets, ending 2,950,927$ 2,803,679$ 1,268,157$ 1,238,461$ 4,219,084$ 4,042,140$

Table A-2Town of South Palm Beach

Changes in Net Assets

Business-typeGovernment Activities Activities Total

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PROGRAM REVENUES AND EXPENSES – GOVERNMENTAL ACTIVITIES

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REVENUES BY SOURCE – GOVERNMENTAL ACTIVITIES

BUSINESS-TYPE ACTIVITIES Business-type activities increased the Town’s net assets by $29,696 accounting for 17% of the total increase in the Town’s assets.

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FINANCIAL ANALYSIS OF THE GOVERNMENT’S FUNDS As noted earlier, the Town of South Palm Beach uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The focus of the Town of South Palm Beach’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the Town’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. At the end of the fiscal year the current fund balance in the general fund was $2,233,422. Fund balance is considered non-spendable and is reserved for prepaid items in the amount of $23,502 and $1,432,506 is assigned to the beach project. The remaining amount of $777,414 is currently unassigned and available for appropriations. The general fund is the chief operating fund of the Town of South Palm Beach. As a measure of the general fund’s liquidity, it may be useful to compare unassigned fund balance and total fund balance to total fund expenditures. Total fund balance represents 132% of total general fund expenditures.

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A summary of the general fund’s condensed balance sheet and statement of revenues, expenditures and changes in fund balance is presented in Table B-1 and B-2 for September 30, 2011 and 2010 is shown below:

2011 2010

Total assets 2,297,278$ 2,119,061$

Total liabilities 63,856$ 76,317$ Total fund balance 2,233,422 2,042,744 Total liabilities and fund balance 2,297,278$ 2,119,061$

2011 2010

Total revenues 1,834,619$ 2,949,202$ Total expenditures 1,643,943 2,883,523 Excess of revenues over expenditures 190,676$ 65,679$

Table B-1

Fiscal Year

Table B-2

Fiscal Year

The fund balance of the Town’s general fund increased by $190,676. A key factor of this increase was the termination of the interlocal agreement with Palm Beach County for fire protection and emergency medical services. Overall, expenses were decreased and closely monitored by management in keeping with declining property values. FUND BUDGETARY HIGHLIGHTS The original budget was not amended. There were no supplemental appropriations for the fiscal year ended September 30, 2011. The most significant variance between the adopted budget and the actual results of operations, approximately $120,000, relates to the delayed beach restoration project which is included in capital outlay.

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CAPITAL ASSETS AND DEBT ADMINISTRATION As of September 30, 2011, the Town’s net investment in capital assets amounted to $1,401,522. Additional information on the Town’s capital assets is found in Note 7 beginning on page 32 of this report.

2011 2010 2011 2010 2011 2010 Land 108,396$ 108,396$ -$ -$ 108,396$ 108,396$ Buildings and improvements 564,368 581,864 - - 564,368 581,864 Improvements other than buildings 123,640 131,467 - - 123,640 131,467 Sewer system - - 541,633 568,155 541,633 568,155 Furniture, equipment and vehicles 63,485 89,332 - - 63,485 89,332 Total 859,889$ 911,059$ 541,633$ 568,155$ 1,401,522$ 1,479,214$

Government Activities Business Activities Total

Capital Assets, Net of Accumulated Depreciation

As of September 30, 2011, the Town’s debt only consisted of compensated absences. Additional information on the Town’s compensated absences is found in Note 8 on page 33. ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES • The unemployment rate for Palm Beach County is currently 9.7 percent, which is a decrease

from a rate of 12.4 percent a year ago. This compares favorably to the state’s average unemployment rate of 9.6 percent as well as to the national average rate of 8.9 percent.

• The government does not have a central business district. It is 100% residential.

• Inflationary trends in the region compare favorably to national indices. All of these factors were considered in preparation of the Town of South Palm Beach’s budget for the 2012 fiscal year. REQUESTS FOR INFORMATION This financial report is designed to provide a general overview of the Town of South Palm Beach’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 financial information should be addressed to the Office of the Town Manager, 3577 South Ocean Boulevard, South Palm Beach, Florida 33480.

BASIC FINANCIAL STATEMENTS


STATEMENT OF NET ASSETS

SEPTEMBER 30, 2011

Business-Governmental type

Activities Activities TotalsAssets

Cash and cash equivalents 2,160,082$ 626,342$ 2,786,424$ Investments 25,422 261,596 287,018 Accounts receivable 88,272 -- 88,272 Prepaid items 23,502 808 24,310 Capital assets not being depreciated 108,396 -- 108,396 Capital assets being depreciated, net 751,493 541,633 1,293,126

Total Assets 3,157,167 1,430,379 4,587,546

LiabilitiesAccounts payable and accrued liabilities 56,001 169,797 225,798 Internal balances 7,575 (7,575) -- Deferred revenue 280 -- 280 Noncurrent liabilities: Due within one year 14,238 -- 14,238 Due in more than one year 128,144 -- 128,144

Total Liabilities 206,239 162,222 368,461

Net AssetsInvested in capital assets 859,889 541,633 1,401,522 Unrestricted 2,091,039 726,524 2,817,563

Total Net Asset 2,950,928$ 1,268,157$ 4,219,085$

The accompanying notes are an integral part of these basic financial statements.

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Charges Operating Capital Business-for Grants and Grants and Governmental type

Functions/Programs Expenses Services Contributions Contributions Activities Activities Total

Governmental Activities General government 563,367$ 148,023$ --$ --$ (415,344)$ --$ (415,344)$ Public safety 981,720 17,050 1,000 -- (963,670) -- (963,670) Physical environment 113,078 -- -- -- (113,078) -- (113,078) Culture and recreation 29,206 -- -- -- (29,206) -- (29,206) Total governmental activities 1,687,371 165,073 1,000 -- (1,521,298) -- (1,521,298)

Business-Type Activities Sewer 261,569 287,512 -- -- -- 25,943 25,943

Total Business-Type Activities 261,569 287,512 -- -- -- 25,943 25,943

Total 1,948,940$ 452,585$ 1,000$ --$ (1,521,298) 25,943 (1,495,355)

General revenues: Property taxes 1,178,180 -- 1,178,180 Utility taxes 222,136 -- 222,136 Franchise fees based on gross receipts 111,384 -- 111,384 Sales and use tax 104,116 -- 104,116 State revenue sharing - unrestricted 32,928 -- 32,928 Investment income 3,858 3,753 7,611 Miscellaneous 15,944 -- 15,944 Total general revenues 1,668,546 3,753 1,672,299 Change in net assets 147,248 29,696 176,944 Net assets, beginning 2,803,680 1,238,461 4,042,141 Net assets, ending 2,950,928$ 1,268,157$ 4,219,085$

Program Revenues Changes in Net Assets


STATEMENT OF ACTIVITIES

FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2011

Net (Expense) Revenue and


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GeneralFund

AssetsCash and cash equivalents 2,160,082$ Investments 25,422 Accounts receivable 88,272 Prepaid items 23,502

Total Assets 2,297,278$

Liabilities and Fund Balance

Liabilities Accounts payable 56,001$ Due to other funds 7,575 Deferred revenue 280

Total Liabilities 63,856

Fund BalanceNonspendable for prepaid items 23,502 Assigned for beach project 1,432,506Unassigned 777,414

Total Fund Balance 2,233,422

Amounts reported for governmental activities in the statement of net assets are different because:

Capital assets used in governmental activities and are not financial resources and, therefore, are not reported in the funds 859,889

Long-term liabilities are not due and payable in the current period and therefore not reported in the fund (142,382)

Net Assets of Governmental Activities 2,950,928$


BALANCE SHEETGOVERNMENTAL FUND

SEPTEMBER 30, 2011


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STATEMENT OF REVENUES, EXPENDITURES ANDCHANGES IN FUND BALANCE

GOVERNMENTAL FUND


GeneralFund

Revenues Property taxes 1,178,180$ Utility taxes 222,136 Intergovernmental 138,044 Franchise fees 111,384 Licenses and permits 94,153 Charges for services 53,870 Interest and other 19,802 Fines and forfeitures 17,050

Total Revenues 1,834,619

Expenditures Current General government 537,026 Public safety 955,681 Physical environment 52,349 Culture and recreation 29,206 Capital outlay 69,681

Total Expenditures 1,643,943

Net Change in Fund Balance 190,676

Fund Balance - Beginning 2,042,746

Fund Balance - Ending 2,233,422$


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Amounts reported for governmental activities in the statement of activities (Page 14) are different because:

Net change in fund balance (Page 16) 190,676$

Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which depreciation exceeded capital outlays for the current The details of the difference are as follows:

Capital outlay 8,952$ Depreciation (60,122)

Net adjustment (51,170)

Some expenses reported in the statement of activities do notrequire current financial resources and, therefore, are not reportedas expenditures in the government fund.

Compensated absences 7,742

Change in Net Assets of Governmental Activities (Page 14) 147,248$


RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES


AND CHANGES IN FUND BALANCE OF THE GOVERNMENTAL FUND


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STATEMENT OF NET ASSETSPROPRIETARY FUND

SEPTEMBER 30, 2011

Business-typeActivities

Sewer FundAssets

Current AssetsCash and cash equivalents 626,342$ Investments 261,596 Due from other funds 7,575Prepaid items 808

Total Current Assets 896,321

Noncurrent AssetsCapital assets, net of accumulated depreciation 541,633

Total Assets 1,437,954

Liabilities

Current LiabilitiesAccounts payable 169,797

Total Liabilities 169,797

Net AssetsInvested in capital assets 541,633 Unrestricted 726,524

Total Net Assets 1,268,157$


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STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETSPROPRIETARY FUND



Sewer FundOperating Revenues Charges for services 287,512$

Operating Expenses Purchased services 149,965 Repairs and maintenance 43,441 General and administrative 27,800 Depreciation 40,363

Total Operating Expenses 261,569

Operating Income 25,943

Non-Operating Income Investment income 3,753

Change in Net Assets 29,696

Net Assets - Beginning 1,238,461

Net Assets - Ending 1,268,157$


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Sewer FundCash Flows From Operating Activities

Cash received from customers and users 287,512$ Cash paid to suppliers for goods and services (199,338)

Net Cash Provided by Operating Activities 88,174

Cash Flows Used in Capital and Related Financing ActivitiesAcquisition of capital assets (13,841)

Net Cash Used in Capital and Related Financing Activities (13,841)

Cash Flows From Investing Activities Proceeds from sale of investments 11,467 Interest received 5,069

Net Cash Provided By Investing Activities 16,536

Net Increase in Cash and Cash Equivalents 90,869

Cash and Cash Equivalents - Beginning 535,473

Cash and Cash Equivalents - Ending 626,342$

Reconciliation of Operating Income to Net Cash Provided by Operating Activities Operating income 25,943$ Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation 40,363 Changes in operating assets and liabilities:

Increase in prepaid expenses (808) Increase in due from other funds (7,575) Increase in accounts payable 30,251

Total Adjustments 62,231

Net Cash Provided by Operating Activities 88,174$

Noncash Investing ActivitiesUnrealized gain in fair value of investments 2,850$


STATEMENT OF CASH FLOWSPROPRIETARY FUND



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NOTES TO BASIC FINANCIAL STATEMENTS




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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Town of South Palm Beach, Florida (the Town) is a municipal corporation organized pursuant to Chapter 31276, Laws of Florida, 1955. The Town operates under the Council-Manager form of government. The Town’s major operations include general government, public safety, physical environment, culture and recreation and sewer services.

The basic financial statements of the Town have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The following is a summary of the Town’s more significant policies:

A. FINANCIAL REPORTING ENTITY

The financial statements were prepared in accordance with government accounting standards which establishes standards for defining and reporting on the financial reporting entity. The definition of the financial reporting entity is based upon the concept that elected officials are accountable to their constituents for their actions. One of the objectives of financial reporting is to provide users of financial statements with a basis for assessing the accountability of the elected officials. The financial reporting entity consists of the primary government, organizations for which the primary government is financially accountable and other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity’s financial statements to be misleading or incomplete. The Town is financially accountable for a component unit if it appoints a voting majority of the organization’s governing board and it is able to impose its will on that organization or there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on, the Town. Based upon the application of these criteria, there were no organizations that met the criteria described above.

B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS

The government-wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the activities of the Town. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support.




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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (CONTINUED)

The statement of activities demonstrates the degree to which the direct expenses of a given function are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for the governmental fund and proprietary fund.

C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT

PRESENTATION

The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.

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 Town considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures are recorded only when payment is due.

Property taxes, franchise fees and other taxes, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Revenues for expenditure driven grants are recognized when the qualifying expenditures are incurred. All other revenue items are considered to be measurable and available only when cash is received by the Town.




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C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION (CONTINUED)

The Town reports the following major governmental fund:

The general fund is the Town’s primary operating fund and its only governmental fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund.

The Town reports the following major proprietary fund in the basic financial statements:

The Town has established the Sewer Fund as its only proprietary fund to account for the billing and collection of fees for sewer services provided by the Town.

Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. The Town has the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The Town has elected not to follow subsequent private-sector guidance.

As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are payments-in-lieu of taxes and other charges between the Town’s various utility functions and various other functions of the Town. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned.

Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes.

The proprietary fund distinguishes operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the Town’s sewer fund are charges to customers for services. Revenue is recognized in the sewer fund when the services are performed. Operating expenses for proprietary funds include the costs of services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses.

When an expense is incurred for purposes for which both unrestricted and restricted net assets are available, it is the Town’s policy to first apply restricted resources.




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D. ASSETS, LIABILITIES AND NET ASSETS OR EQUITY

1. Cash, Cash Equivalents and Investments The Town’s deposits include cash and cash equivalents. Cash and cash equivalents include cash on hand and investments with the Florida PRIME administered by the State Board of Administration. Cash and cash equivalents, for purposes of the statement of cash flows, includes pooled cash and investments which are defined as short-term, highly liquid investments with original maturities of three months or less. Town administration is authorized to invest in those instruments authorized by the Florida Statutes. All investments, except the Florida PRIME and Fund B, are reported at fair value, which is based on quoted market prices. The Florida PRIME is recorded at the value of the pool shares (2a-7 like pool), which is fair value. Fund B is a fluctuating NAV pool and is reported based on the fair value factor. 2. Interfund Receivables and Payables

Activity between funds that is representative of lending/borrowing arrangements outstanding at the end of the fiscal year is referred to as either “due to/from other funds” (i.e., the current portion of interfund loans) or “advances to/from other funds” (i.e., the non-current portion of interfund loans). All other outstanding balances between funds (i.e., amounts owed for goods/services rendered to a particular fund by another fund in the reporting entity) are reported as “due to/from other funds” (current portion) or “interfund receivables/payables” (non-current portion). Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances.” 3. Receivables Receivables include amounts due from other governments and non ad valorem taxes. Receivables are recorded and revenues are recognized as earned or as specific program expenditures/expenses are incurred. Allowance for uncollectible receivables was determined to not be necessary at year end. Sewer operating revenue is generally recognized on the basis of cycle billings rendered bi-annually, in March and September.




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D. ASSETS, LIABILITIES AND NET ASSETS OR EQUITY (CONTINUED)

4. Prepaid Items

Payments made to vendors for services that will benefit future periods are reported as prepaid items using the consumption method by recording an asset for the prepaid amount and reflecting an expenditure in the year in which the services are consumed. At the governmental fund reporting level, an equal amount of fund balance is reported as nonspendable.

5. Capital Assets

Capital assets, which include property, plant and equipment, and certain infrastructure assets (e.g., utility plant, roads, bridges, sidewalks, and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets (including intangible assets) are defined by the Town as assets with an initial, individual cost of more than $750 and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair value at the date of donation.

The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Tangible capital assets of the Town are depreciated using the straight-line method over the following useful lives:

Buildings 10 - 50 yearsImprovement other than buildings 10 – 20 yearsFurniture, equipment and vehicles 5 – 20 yearsSewer system 20 – 50 years

6. Unearned Revenue Unearned revenue is recorded for governmental fund receivables that are not both measurable and available. In addition, inflows that do not yet meet the criteria for revenue recognition are recorded as unearned revenue in the government-wide and the fund statements.




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D. ASSETS, LIABILITIES AND NET ASSETS OR EQUITY (CONTINUED) 7. Compensated Absences Town employees are granted vacation and sick leave in varying amounts based on length of service. The Town’s sick leave and vacation policies permit employees to accumulate earned but unused sick pay and vacation benefits although limited to certain maximums based on length of service and personnel department. All vacation and sick leave pay is accrued when incurred in the government-wide financial statements. In the governmental fund, a liability is recorded only for unused vacation and sick leave payouts for employees who have separated, for example, as a result of employee resignations and retirements. 8. Long-Term Obligations In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activity, business-type activity, or proprietary fund type statement of net assets. In the fund financial statements, governmental fund types recognize the face amount of debt issued as another financing source. 9. Fund Equity The Town has implemented GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. This Statement establishes criteria for classifying governmental fund balances into specifically defined classifications. Classifications are hierarchical and are based primarily on the extent to which the Town is bound to honor constraints on the specific purposes for which amounts in the funds may be spent. Application of the Statement requires the Town to classify and report amounts in the appropriate fund balance classifications. The Town’s accounting and finance policies are used to interpret the nature and/or requirements of the funds and their corresponding assignment of restricted, committed, assigned or unassigned. The Town has established a policy for its use of unassigned fund balance amounts. The Town reports the following classifications:

Nonspendable fund balance. Nonspendable fund balances are amounts that are (a) not in spendable form or (b) legally or contractually required to be maintained intact.




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9. Fund Equity (continued) Restricted fund balance. Restricted fund balances are amounts that can be spent only for specific purposes stipulated by (a) external resource providers such as creditors (by debt covenants), grantors, contributors, or laws or regulations of other governments; or (b) imposed by law through constitutional provisions or enabling legislation.

Committed fund balance. These amounts can only be used for the specific purposes determined by a formal action (Ordinance or Resolution) of the Town Council, the Town’s highest level of decision making authority. Commitments may be changed or lifted only by the Town Council taking the same formal action (Ordinance or Resolution) that imposed the constraint originally. Resources accumulated pursuant to stabilization arrangements sometimes are reported in this category. Assigned fund balance. Assigned fund balances are amounts that are constrained by the Town’s intent to be used for specific purposes, but are neither restricted nor committed. Intent is established by management of the Town to which the Council has delegated the authority to assign, modify or rescind amounts to be used for specific purposes. This balance includes (a) all remaining amounts that are reported in governmental funds (other than the General Fund) that are not classified as nonspendable, restricted, or committed, and (b) amounts in the General Fund that are intended to be used for a specific purpose. Specific amounts that are not restricted or committed in a special revenue fund are assigned for the purposes in accordance with the nature of their fund type. Assignment within the General Fund conveys that the intended use of those amounts is for a specific purpose that is narrower than the general purposes of the Town itself.

Unassigned fund balance. This fund balance is the residual classification for the General Fund. It is also used to report negative fund balances in other governmental funds.

Additionally, the Town would first use committed fund balance, followed by assigned fund balance and then unassigned fund balance when expenditures are incurred for purposes for which amounts in any of the unrestricted fund balance classifications could be used.




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10. Net Assets Net assets of the government-wide and proprietary funds are categorized as invested in capital assets, net of related debt; restricted or unrestricted. Invested in capital assets, net of related debt, is that portion of net assets that relates to the Town’s capital assets reduced by accumulated depreciation and by any outstanding debt incurred to acquire, construct or improve those assets, excluding unexpended proceeds. Restricted net assets is that portion of net assets that has been restricted for general use by external parties (creditors, grantors, contributors, or laws or regulations of other governments) or imposed by law through constitutional provisions or enabling legislation. Unrestricted net assets consist of all net assets that do not meet the definition of either of the other two components. 11. Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenues and expenditures/expenses during the reporting period. Actual results could differ from estimates.

NOTE 2 – CASH, CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS

All of the Town’s deposits are held in qualified public depositories pursuant to State of Florida Statutes, Chapter 280, Florida Security for Public Deposits Act. Under the Act, every qualified public depository shall deposit with the Treasurer eligible collateral of the depository to be held subject to his or her order. The Treasurer, by rule, shall establish minimum required collateral pledging levels. The pledging level may range from 25% to 125% of the average monthly balance of public deposits depending upon the depository’s financial condition and establishment period. All collateral must be deposited with an approved financial institution. Any potential losses to public depositors are covered by applicable deposit insurance, sale of securities pledged as collateral and, if necessary, assessments against other qualified public depositories of the same type as the depository in default. Accordingly, the Town’s deposits are deemed insured or collateralized by the entity or its agent in the entity’s name.




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NOTE 3 – INVESTMENTS

INVESTMENTS

The Town has adopted an investment policy in accordance with Florida Statutes to establish guidelines for the efficient management of its cash reserves. The Town is authorized to invest in obligations of the U.S. Treasury, its agencies and instrumentalities, certificates of deposit, the State Board of Administration investment pool, any intergovernmental investment pools authorized pursuant to Chapter 163 of the Florida Statutes, SEC registered money market funds with the highest credit quality rating from a nationally recognized rating agency, and securities of any interest in any open-end or closed-end management type investment company or investment trust registered under the Investment Company Act of 1940, provided that the portfolio is limited to obligations of the U.S. government, its agencies and instrumentalities and to repurchase agreements fully collateralized by such U.S. government obligations and provided that such investment company or investment trust takes delivery of such collateral either directly or through an authorized custodian. The State Board of Administration (SBA) administers the Florida PRIME and the Fund B Surplus Funds Trust Fund. (Fund B), both of which are governed by Chapter 19-7 of the Florida Administrative Code and Chapters 218 and 215 of the Florida Statutes. These rules provide guidance and establish the policies and general operating procedures for the administration of the Florida PRIME and Fund B. The Florida PRIME is not a registrant with the Securities and Exchange Commission (SEC); however, the Board has adopted operating procedures consistent with the requirements for a 2a-7 fund, which permits money market funds to use amortized cost to maintain a constant net asset value (NAV) of $1 per share. The fair value of the position in the Florida PRIME is equal to the value of the pool shares. The Fund B does not meet the requirements of an SEC 2a-7 like fund and therefore is accounted for as a fluctuating NAV pool. As of September 30, 2011, the fair value factor for Fund B was $.75684 per share. The Fund B is not subject to participant withdrawal requests. Distributions from Fund B, as determined by the SBA, are effected by transferring eligible cash or securities to the Florida PRIME, consistent with the pro rata allocation of pool shareholders of record at the creation of Fund B. One hundred percent of such distributions from Fund B are available as liquid balance within the Florida PRIME. The investments in the Florida PRIME and Fund B are not insured by FDIC or any other governmental agency.




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NOTE 3 – INVESTMENTS (CONTINUED)

INVESTMENTS (CONTINUED)

As of September 30, 2011, the Town had the following investments:

FairValue Maturities

Florida PRIME 1,568$ 38 daysFund B 40,450 4.82 yearsCertificate of Deposit 245,000 3/3/2013

Total Investments 287,018$

INTEREST RATE RISK

The Town does not have a formal investment policy that limits investment maturities as a means of managing its exposure to market value losses arising from increasing interest rates. To mitigate risk, the Town primarily invests in investments with maturities of 12 to 24 months. CREDIT RISK

The Town does not have an investment policy that limits investments to the highest ratings by two of the nationally recognized statistical rating organization (NRSRO) (Standard and Poor’s and Moody’s Investment Services). Excess funds are sent to the SBA for their investment. The Florida PRIME is rated AAAm by Standard and Poor’s. The Fund B is not rated by an NRSO. CONCENTRATION OF CREDIT RISK The Town’s diversifies its portfolio in such a way to control the risk of loss resulting from concentration of assets to a specific maturity, instrument, issue, dealer, or bank through which these securities are bought and sold. As of September 30, 2011, as applicable, the value of each position held in the Town’s portfolio is less than 5% in any one issuer.




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NOTE 4 – PROPERTY TAXES

Property taxes are billed and collected within the same fiscal period. Ad valorem taxes on property values are assessed as of January 1 and are levied the following October. Taxes are payable on November 1, with discounts allowed of 1% to 4% if paid prior to March 1 of the following calendar year. All unpaid taxes on real and personal property become delinquent and subject to lien on April 1. Real and personal property taxes are collected by Palm Beach County (the County) and remitted to the Town. Revenue is recognized at the time when monies are received by the Town. State law permits Florida cities to levy a maximum of $10 per $1,000 (10 mills) of assessed taxable value for general government services. The Town levied taxes at a rate of approximately 4.3174 mills.

NOTE 5 – RECEIVABLES

Receivables for the Town’s individual major funds, including the applicable allowance for uncollectible accounts, are as follows:

General Fund

Franchise fees 19,682$ Utility taxes 17,069 Intergovernmental 51,521

88,272 Less allowance for uncollectibles --

Net Total Receivables 88,272$

NOTE 6 - INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS The composition of interfund balances as of September 30, 2011 is as follows: DUE FROM/TO OTHER FUNDS

Receivable Fund Payable Fund Amount

Sewer Fund General Fund 7,575$




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NOTE 7 –CAPITAL ASSETS

The following summarizes capital asset activity for the fiscal year ended September 30, 2011:

Beginning EndingBalance Increases Decreases Balance

Governmental ActivitiesCapital assets, not being depreciated: Land 108,396$ --$ --$ 108,396$

Total Capital Assets, Not Being Depreciated 108,396 -- -- 108,396

Capital Assets, Being Depreciated Buildings and improvements 773,565 3,651 -- 777,216 Improvements other than buildings 154,391 -- -- 154,391 Furniture, equipment and vehicles 523,100 5,301 -- 528,401 Total Capital Assets, Being Depreciated 1,451,056 8,952 -- 1,460,008

Less accumulated depreciation for: Buildings and improvements (191,701) (21,147) -- (212,848) Improvements other than buildings (22,924) (7,827) (30,751) Furniture, equipment and vehicles (433,768) (31,148) -- (464,916) Total Accumulated Depreciation (648,393) (60,122) -- (708,515) Total Capital Assets, Being Depreciated, Net 802,663 (51,170) -- 751,493

Governmental Activities, Capital Assets, Net 911,059$ (51,170)$ --$ 859,889$

Beginning EndingBalance Increases Decreases Balance

Business-Type ActivitiesCapital assets, being depreciated: Sewer system 1,085,121$ 5,841$ --$ 1,090,962$ Machinery and equipment 40,025 8,000 -- 48,025 Total Capital Assets, Being Depreciated 1,125,146 13,841 -- 1,138,987

Less accumulated depreciation for: Sewer system (516,966) (39,963) -- (556,929) Machinery and equipment (40,025) (400) -- (40,425) Total Accumulated Depreciation (556,991) (40,363) -- (597,354) Total Capital Assets, Being Depreciated, Net 568,155 (26,522) -- 541,633

Business-Type Activities, Capital Assets, Net 568,155$ (26,522)$ --$ 541,633$




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NOTE 7 –CAPITAL ASSETS (CONTINUED) Depreciation expense for the fiscal year ended September 30, 2011 was charged to functions/programs of the Town as follows: Governmental Activities General government 28,973$ Public safety 31,149 Total Depreciation Expenses - Governmental Activities 60,122$

Business-Type Activities Sewer 40,363$

NOTE 8 – LONG-TERM DEBT

Changes in long-term debt are as follows:

Beginning Ending Due Within Balance Additions Retirements Balance One Year

Governmental Activities Compensated absences 150,124$ 87,890$ 95,632$ 142,382$ 14,238$

For governmental activities, compensated absences are liquidated by the General Fund.

NOTE 9 – FLORIDA RETIREMENT SYSTEM

PLAN DESCRIPTION

The Town has elected to extend the Florida Retirement System Plan to all Town employees, including police officers. The Florida Retirement System (FRS) is a cost-sharing multiple-employer Public Employment Retirement System (PERS) which covers substantially all permanent full and part time Town employees. The FRS is noncontributory and is totally administered by the State of Florida. Benefit provisions are established under Chapter 121, Florida Statutes, which may be amended by the Florida Legislature. A description of FRS benefits under the defined benefit plan (FRS Pension Plan) can be found at www.myfrs.com. Beginning in 2002, a defined contribution plan alternative to the existing defined benefit plan known as the Public Employee Optional Retirement Program or the FRS investment became available to FRS members.




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NOTE 9 – FLORIDA RETIREMENT SYSTEM (CONTINUED)

PLAN DESCRIPTION (CONTINUED)

FRS issues an annual financial report. A copy can be obtained by sending a written request to: Division of Retirement, P.O. Box 9000, Tallahassee, FL 32315-9000. FUNDING POLICY

The FRS funding policy provides for monthly employer contributions at actuarially determined rates that, expressed as percentages of annual covered payroll, are adequate to accumulate sufficient assets to pay benefits when due. Level percentage of payroll employer contribution rates, established by state law, are determined using the entry-age actuarial cost method. If an unfunded actuarial liability reemerges as a result of future plan benefits changes, assumption changes, or methodology changes, it is assumed any unfunded actuarial liability would be amortized over 30 years, using level dollar amounts. Except for gains reserved for rate stabilization, it is anticipated future actuarial gains and losses are amortized on a rolling 10% basis, as a level dollar amount. The Town’s required contribution rate ranges from 9.63% to 22.11% of covered payroll, based on employee risk groups. The Town’s contributions to FRS for the years ended September 30, 2011, 2010 and 2009 were approximately $135,000, $130,000 and $149,000, respectively, equal to the required contributions for each year.

NOTE 10 – DEFINED CONTRIBUTION EMPLOYEE RETIREMENT PLAN

PLAN DESCRIPTION

The Town provides retirement benefits through the Town of South Palm Beach 401(k) Retirement Plan (the Plan) for one employee in the Public Works Department since January 1, 2005. In July 2011, this employee joined the FRS plan.

FUNDING POLICY

The Town contributes 15% of the participant’s covered compensation to the Plan. The employee is permitted to make elective contributions up to a maximum of 17.5% of his covered compensation. Vesting commences after two years of certified service with 20% vesting in year two and 20% each year thereafter until fully vested after six years.

The Plan held no securities of the Town or related parties during the year or as of the close of the fiscal year. The Town’s contribution for the year was approximately $3,300.




35

NOTE 11 –COMMITMENTS AND CONTINGENCIES

INTERLOCAL AGREEMENTS

City of Lake Worth The Town has entered into an agreement with the City of Lake Worth, Florida, providing for the disposal of sewage generated by the Town’s collection system by utilizing the East Central Regional Wastewater Reclamation Facility (ECRWRF) treatment facilities.

Under the terms of this agreement, the Town has agreed to pay each month to the City of Lake Worth a pro rata share of the City’s operating costs of the ECRWRF’s treatment facilities. The agreement also requires the Town to pay an amount equal to its pro rata share, based upon reserved capacity, of the non-federally funded capital expenditures required of the City for pumping, transmission and treatment disposal facilities constructed for the benefit of the Town system and its customers. The minimum rate which the Town has agreed to pay is it’s pro rata share of the debt service requirements of the Refunding Revenue Bonds, Series 1994 which have been repaid. The total amount paid under this agreement for the fiscal year ended September 30, 2011 was approximately $119,000. Town of Lantana – Dispatch Services The Town has entered into an agreement with the Town of Lantana, Florida for the provision of public safety communications and dispatch services for a period of five years beginning October 1, 2009. The total amount paid under this agreement for the fiscal year ended September 30, 2011 was $51,820.

RISK MANAGEMENT

The Town 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 Town purchases commercial insurance to cover the various risks. Retention of risk is limited, with deductibles of up to $500 per occurrence. There were no reductions in insurance coverages from coverages in the prior year. There were no settled claims that have exceeded insurance coverage for each of the past three years.

REQUIRED SUPPLEMENTARY INFORMATION


REQUIRED SUPPLEMENTARY INFORMATIONBUDGETARY COMPARISON SCHEDULE


Variancewith FinalBudget -

Original and Actual PositiveFinal Budget Amounts (Negative)

Revenues Property taxes 1,079,917$ 1,178,180$ 98,263$ Utility taxes 190,100 222,136 32,036 Intergovernmental 142,200 138,044 (4,156) Franchise fees 105,100 111,384 6,284 Licenses and permits 98,080 94,153 (3,927) Charges for services 63,000 53,870 (9,130) Fines and forfeitures 11,800 17,050 5,250 Interest and other 11,523 19,802 8,279

Total Revenues 1,701,720 1,834,619 132,899

Expenditures Current General government 549,030 537,026 12,004 Public safety 998,380 955,681 42,699 Physical environment 80,410 52,349 28,061 Culture and recreation 44,900 29,206 15,694 Capital outlay 204,000 69,681 134,319

Total Expenditures 1,876,720 1,643,943 232,777

Excess (Deficiency) of Revenues Over Expenditures (175,000) 190,676 15,676

Other financing sources:Appropriation of prior years' fund balance 175,000 -- (175,000)

Total Other Financing Sources 175,000 -- (175,000)

Net Change in Fund Balance --$ 190,676$ 190,676$

Fund Balance - Beginning 2,042,746

Fund Balance - Ending 2,233,422$

See note to budgetary comparison schedule.

36

37


NOTE TO BUDGETARY COMPARISON SCHEDULE

FISCAL YEAR ENDED SEPTEMBER 30, 2011 NOTE 1 – BUDGETS AND BUDGETARY ACCOUNTING

An annual appropriated budget is adopted for the general fund on a basis consistent with accounting principles generally accepted in the United States of America. The Town follows these procedures in establishing the budgetary data reflected in the basic financial statements.

a. Approximately July 1st, the Town Manager submits to the Town Council a proposed

operating budget for the fiscal year commencing the following October 1st. The operating budget includes proposed expenditures and the means of financing them.

b. Public hearings are conducted to obtain taxpayer comments. c. Prior to October 1st, the budget is legally enacted through passage of an ordinance. d. Appropriations are legally controlled at the fund level and expenditures may not legally

exceed budgeted appropriations at that level. e. The Town Council approves total budget appropriations only. The Town Manager is

authorized to transfer budget amounts between departments within any fund. However, any revisions that alter the total appropriations of any fund must be approved by the Town Council.

f. Formal budgetary integration is employed as a management control device during the

year for the one budgeted fund. g. Appropriations which are neither expended nor specifically designated to be carried

over lapse at the end of the fiscal year. h. There were no budget amendments made during the year. There were no supplemental

appropriations during the year.

STATISTICAL SECTION

Contents Page

Financial Trends

These schedules contain trend information to help the reader understand how the Town'sfinancial performance and well-being have changed over time. These schedules include: 38

Revenue CapacityThese schedules contain information to help the reader assess the Town's most significantlocal revenue source, the property tax. 43

Debt CapacityThese schedules present information to help the reader assess the affordability of the Town'scurrent levels of outstanding debt and the Town's ability to issue additional debt in thefuture. 47

Demographic and Economic InformationThese schedules offer demographic and economic indicators to help the reader understandthe environment within which the Town's financial activities take place. 51

Operating InformationThese schedules contain service and infrastructure data to help the reader understand howthe information in the Town's financial report relates to the services the Town provides andthe activities it performs. 54

Sources: Unless other wise noted, the information in these schedules is derived from thecomprehensive annual financial reports for the relevant year.

STATISTICAL SECTION

This part of the Town of South Palm Beach's comprehensive annual financial report presents detailedinformation as a context for understanding what the information in the financial statements, notedisclosures, and required supplementary information says about the Town's overall financial health.

2006 2007 2008 2009 2010 2011Governmental Activities

Invested in capital assets, net of related debt 993,222$ 1,018,199$ 1,003,209$ 951,567$ 911,059$ 859,889$ Restricted -- -- -- -- -- -- Unrestricted 1,154,451 1,552,710 1,781,303 1,841,683 1,892,620 2,091,039

Total Governmental Activities Net Assets 2,147,673 2,570,909 2,784,512 2,793,250 2,803,679 2,950,928

Business-Type ActivitiesInvested in capital assets, net of related debt 481,439 448,529 458,271 607,826 568,155 541,633 Restricted -- -- -- -- -- -- Unrestricted 461,078 584,184 687,248 563,671 670,306 726,524

Total Business-Type Activities Net Assets 942,517 1,032,713 1,145,519 1,171,497 1,238,461 1,268,157

Total GovernmentInvested in capital assets, net of related debt 1,474,661 1,466,728 1,461,480 1,559,393 1,479,214 1,401,522 Restricted -- -- -- -- -- -- Unrestricted 1,615,529 2,136,894 2,468,551 2,405,354 2,562,926 2,817,563

Total Government Net Assets 3,090,190$ 3,603,622$ 3,930,031$ 3,964,747$ 4,042,140$ 4,219,085$

Fiscal Year


NET ASSETS BY COMPONENT

LAST SIX FISCAL YEARS(ACCRUAL BASIS OF ACCOUNTING)

38

2006 2007 2008 2009 2010 2011Expenses

Governmental activities:General government 536,257$ 626,381$ 591,159$ 606,493$ 603,412$ 563,367$ Public safety 2,098,158 2,348,502 2,327,895 2,265,320 2,140,999 981,720 Physical Environment 61,119 73,792 109,131 106,685 137,923 113,078 Culture/recreation 48,858 49,736 51,279 40,792 31,866 29,206

Total Governmental Activities 2,744,392 3,098,411 3,079,464 3,019,290 2,914,200 1,687,371

Business-Type ActivitiesUtility system 195,457 209,417 177,070 252,329 233,471 261,569

Total Business-Type Activities 195,457 209,417 177,070 252,329 233,471 261,569

Total Government Expenses 2,939,849$ 3,307,828$ 3,256,534$ 3,271,619$ 3,147,671$ 1,948,940$

Program RevenuesGovernmental activities:

Charges for services:General government 197,842$ 188,413$ 192,536$ 153,715$ 180,194$ 148,023$ Public safety 21,339 17,286 50,169 27,502 17,926 17,050 Culture/recreation -- -- -- -- -- --

Operating grants and contributions:Capital grants and contributions -- 70,307 1,543 13,982 2,000 1,000

Total Governmental Activities Program Revenues 219,181 276,006 244,248 195,199 200,120 166,073

Business-type activities:Charges for services:

Utility system 234,599 267,073 273,441 287,457 284,625 287,512 Operating grants and contributions:Capital grants and contributions -- -- -- -- -- --

Total Business-Type Activities Program Revenues 234,599 267,073 273,441 287,457 284,625 287,512

Total Program Revenues 453,780$ 543,079$ 517,689$ 482,656$ 484,745$ 453,585$

Net (expense) revenue:Governmental activities (2,525,211)$ (2,822,405)$ (2,835,216)$ (2,824,091)$ (2,714,080)$ (1,521,298)$ Business-type activities 39,142 57,656 96,371 35,128 51,154 25,943

Total Net Expense (2,486,069)$ (2,764,749)$ (2,738,845)$ (2,788,963)$ (2,662,926)$ (1,495,355)$

General RevenuesGovernmental activities:

Taxes:Property taxes 2,093,756$ 2,608,927$ 2,458,131$ 2,365,847$ 2,244,521$ 1,178,180$ Utility taxes 228,327 233,914 258,689 204,849 201,117 222,136 Intergovernmental revenues 295,799 171,879 150,178 136,331 136,686 137,044 Franchise taxes 113,219 115,450 115,984 115,097 108,402 111,384

Investment earnings 58,104 102,506 53,869 (5,579) 25,068 3,858 Miscellaneous 8,088 12,965 11,968 16,284 8,716 15,944

Total Governmental Activities 2,797,293 3,245,641 3,048,819 2,832,829 2,724,510 1,668,546

Business-type activities: Investment earnings 29,593 32,540 16,435 (9,150) 15,810 3,753

Total Business-Type Activities 29,593 32,540 16,435 (9,150) 15,810 3,753

Total General Revenues 2,826,886$ 3,278,181$ 3,065,254$ 2,823,679$ 2,740,320$ 1,672,299$

Change in Net AssetsGovernmental activities 272,082$ 423,236$ 213,603$ 8,738$ 10,430$ 147,248$ Business-type activities 68,735 90,196 112,806 25,978 66,964 29,696

Total Change in Net Assets 340,817$ 513,432$ 326,409$ 34,716$ 77,394$ 176,944$


CHANGES IN NET ASSETS

LAST SIX FISCAL YEARS(ACCRUAL BASIS OF ACCOUNTING)

Fiscal Year

39

2006 2007 2008 2009 2010 2011 *General Fund

Reserved 46,318$ 23,304$ 18,984$ 28,124$ 1,357,732$ 23,502$ Unreserved 1,220,514 1,643,024 1,835,078 1,948,943 685,012 -- Non spendable -- -- -- -- -- -- Assigned -- -- -- -- -- 1,432,506 Unassigned -- -- -- -- -- 777,414

Total General Fund 1,266,832 1,666,328 1,854,062 1,977,067 2,042,744 2,233,422

All Other Governmental FundsReserved -- -- -- -- -- --

Total All Other Governmental Funds -- -- -- -- -- --

Total Governmental Funds 1,266,832$ 1,666,328$ 1,854,062$ 1,977,067$ 2,042,744$ 2,233,422$

* The Town implemented GASB 54 for the fiscal year ended September 30, 2011


FUND BALANCES OF GOVERNMENTAL FUNDS

LAST SIX FISCAL YEARS(MODIFIED ACCRUAL BASIS OF ACCOUNTING)

Fiscal Year

40

2006 2007 2008 2009 2010 2011Revenues

Ad valorem taxes 2,093,756$ 2,608,927$ 2,458,131$ 2,365,847$ 2,244,521$ 1,178,180$ Franchise fees 113,219 115,450 115,987 115,097 108,402 111,384 Intergovernmental revenue 295,799 242,186 151,718 150,313 138,686 138,044 Utility taxes 228,327 233,914 194,155 244,811 225,690 222,136 Licenses and permits 154,782 150,917 149,377 115,291 145,343 94,153 Charges for services 43,060 37,496 43,159 38,424 34,851 53,870 Fines and forfeitures 21,339 17,286 50,169 27,503 17,926 17,050 Investment income 58,104 102,506 53,869 10,705 25,066 3,858 Miscellaneous 8,088 12,965 11,968 -- 8,716 15,944

Total Revenues 3,016,474 3,521,647 3,228,533 3,067,991 2,949,201 1,834,619

ExpendituresCurrent:

General government 514,576 601,081 549,798 565,341 577,338 537,026 Public safety 2,044,199 2,286,921 2,278,844 2,217,461 2,107,888 955,681 Physical environment 61,119 70,856 74,500 86,482 80,741 52,349 Culture and recreation 48,858 49,736 51,279 40,792 31,867 29,206 Capital outlay 189,906 113,557 86,378 34,909 85,690 69,681

Total Expenditures 2,858,658 3,122,151 3,040,799 2,944,985 2,883,524 1,643,943

Excess of Revenues Over Expenditures 157,816 399,496 187,734 123,006 65,677 190,676

Other Financing Sources (Uses)Transfers in -- -- -- -- -- -- Transfers out -- -- -- -- -- --

Total Other Financing Sources (Uses) -- -- -- -- -- --

Net Change in Fund Balances 157,816$ 399,496$ 187,734$ 123,006$ 65,677$ 190,676$

Debt Service as a Percentageof Non-Capital Expenditures 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%


CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS

LAST SIX FISCAL YEARS(MODIFIED ACCRUAL BASIS OF ACCOUNTING)

Fiscal Year

41

Fiscal Ad Valorem Franchise UtilityYear Taxes Taxes Taxes Total

2002 1,029,336$ 195,288$ 80,354$ 1,304,978$ 2003 1,171,726 86,844 204,100 1,462,670 2004 1,375,341 189,310 138,014 1,702,665 2005 1,626,435 198,241 137,796 1,962,472 2006 2,093,756 113,219 228,327 2,435,302 2007 2,608,927 115,450 233,914 2,958,291 2008 2,458,131 115,987 194,155 2,768,273 2009 2,365,847 115,097 244,811 2,725,755 2010 2,244,521 108,402 225,690 2,578,613 2011 1,178,180 111,384 222,136 1,511,700

Source: Town of South Palm Beach Finance Department


GENERAL GOVERNMENTAL TAX REVENUES BY SOURCE

LAST TEN FISCAL YEARS(MODIFIED ACCRUAL BASIS OF ACCOUNTING)

42

EstimatedTotal Actual Value

Fiscal Year Total Net Direct Estimated as a PercentageEnded Residential Commercial Personal Assessed Tax Actual of Net Assessed

September 30, Property Property Property Value Rate Value Value

2002 177,732,309$ --$ 2,385,881$ 180,118,190$ 6.2500 1,125,739$ 0.63%2003 215,037,336 -- 2,358,858 217,396,194 7.2500 1,576,122 0.73%2004 256,448,593 -- 2,416,358 258,864,951 6.5000 1,682,622 0.65%2005 332,014,781 -- 2,596,617 334,611,398 6.5000 2,174,974 0.65%2006 429,954,410 -- 2,586,439 432,540,849 6.2500 2,703,380 0.63%2007 424,164,261 -- 2,485,475 426,649,736 6.2500 2,666,561 0.63%2008 426,649,736 -- 2,543,131 429,192,867 5.9607 2,558,290 0.60%2009 370,315,688 -- 2,347,784 372,663,472 6.5695 2,448,213 0.66%2010 305,824,752 -- 2,424,388 308,249,140 7.6512 2,358,476 0.77%2011 260,873,683 -- 2,422,346 263,296,029 4.3174 1,136,754 0.43%

Source: Palm Beach County Property Appraiser's Office.

Note: Property in the Town is reassessed each year. Tax rates are per $1,000 of assessed value. The Town has nocommercial zoned property.

Real Property


NET ASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY

LAST TEN FISCAL YEARS

43

Palm Beach Palm Beach Palm BeachSouth Florida Florida Total County Palm County County Water Children's Inland Direct and

Fiscal Tax Roll General Debt Total School Beach Health Care Library Management Services NavigationOverlappingYear Year Operations Service Town Board County District System District Council District Rates

2002 2001 6.2500 - 6.2500 8.95 8.09 1.15 0.54 0.60 0.57 0.04 26.19 2003 2002 7.2500 - 7.2500 8.43 7.97 1.13 0.54 0.70 0.69 0.04 26.75 2004 2003 6.5000 - 6.5000 8.43 7.97 1.10 0.54 0.70 0.69 0.04 25.97 2005 2004 6.5000 - 6.5000 8.10 7.82 1.08 0.54 0.70 0.69 0.04 25.47 2006 2005 6.5000 - 6.5000 8.11 7.82 1.08 0.63 0.70 0.69 0.04 25.57 2007 2006 6.2500 - 6.2500 7.36 6.98 0.89 0.54 0.62 0.58 0.03 23.25 2008 2007 5.9607 - 5.9607 7.25 3.97 1.00 0.54 0.62 0.60 0.03 19.98 2009 2008 6.5695 - 6.5695 7.98 4.56 1.15 0.55 0.62 0.69 0.03 22.16 2010 2009 7.6512 - 7.6512 7.97 8.02 1.15 0.55 0.62 0.69 0.03 26.69 2011 2010 4.3174 - 4.3174 8.15 8.45 1.15 0.61 0.62 0.75 0.03 24.08

Note: All millage rates are based on $1 for every $1,000 of assessed value.

Sources: Town of South Palm Beach Finance Department and Palm Beach County Property Appraiser's Office.

(1) Overlapping rates are those of local and county governments that apply to property owners within the Town of South Palm Beach. Not alloverlapping rates apply to all Town of South Palm Beach property owners (i.e., the rates for special districts apply only to the proportion of thegovernment's property owners whose property is located within the geographic boundaries of the special district).

Town of South Palm Beach Overlapping Rates (1)

TOWN OF SOUTH PALM BEACH, FLORIDAPROPERTY TAX RATES - DIRECT AND OVERLAPPING GOVERNMENTS


44

Percent of Percent ofTotal Total

Net Town Net Net Town NetAssessed Assessed Assessed Assessed

Taxpayer Value Rank Value Taxpayer Value Rank Value

Kosova Realty Corp. 3,970,633$ 1 1.29% Kosova Realty Corp. 3,200,000$ 1 1.89%EFN Family LTD Ptrs 1,438,434 2 0.47% EFN Family LTD Ptrs 700,000 2 0.41%James & Eileen Roche 828,012 3 0.27% James & Eileen Roche 590,000 3 0.35%Eliot Gittelmacher 782,816 4 0.25% Eliot Gittelmacher 466,500 4 0.26%

** -- 5 0.00% ** -- 5 0.00%** -- 6 0.00% ** -- 6 0.00%** -- 7 0.00% ** -- 7 0.00%** -- 8 0.00% ** -- 8 0.00%** -- 9 0.00% ** -- 9 0.00%** -- 10 0.00% ** -- 10 0.00%

7,019,895$ 2.28% 4,956,500$ 2.90%

Source: Tax roll provided by Palm Beach County Property Appraisers Office.

Note: ** Remainder of taxpayers are condominium units all with similar immaterial differences in assessed values.

2011 2001


PRINCIPAL PROPERTY TAXPAYERS

CURRENT YEAR AND TEN YEARS AGO

45

Total TaxesFiscal Year Levied for Collections in

Ended Fiscal Percent Subsequent PercentSeptember 30, Year Amount of Levy Year's Amount of Levy

2002 1,060,913$ 1,029,336$ 97.02% 1,425 1,030,761$ 97.16%2003 1,215,797 1,170,301 96.26% - 1,170,301 96.26%2004 1,413,075 1,375,341 97.33% - 1,375,341 97.33%2005 1,683,622 1,626,435 96.60% - 1,626,435 96.60%2006 2,174,000 2,093,756 96.31% - 2,093,756 96.31%2007 2,697,998 2,608,927 96.70% - 2,608,927 96.70%2008 2,543,131 2,458,131 96.66% - 2,458,131 96.66%2009 2,347,784 2,365,847 100.77% - 2,365,847 100.77%2010 2,442,135 2,241,334 91.78% 3,187 2,244,521 91.91%2011 1,136,754 1,178,180 103.64% - 1,178,180 103.64%

Source: Town of South Palm Beach Finance Department and Palm Beach County Tax Collector's Office.

Collected within

TOWN OF SOUTH PALM BEACH, FLORIDAPROPERTY TAX LEVIES AND COLLECTIONS


the Fiscal Yearof the Levy to Date

Total Collections

46

Note: The Town does not have any outstanding debt.


RATIOS OF OUTSTANDING DEBT BY TYPE


47


RATIOS OF GENERAL BONDED DEBT OUTSTANDING


Note: The Town has not had any outstanding debt in the last ten years.

48

Percentage Amount Applicable to Applicable to

the ResidentsNet the Town of the TownDebt of South of South

Government Unit Outstanding Palm Beach (1) Palm Beach

Debt repaid with property taxes: Palm Beach County 250,470,000$ 0.246% 647,708$ Palm Beach County School Board -- 0.00% --

Town of South Palm Beach Direct Debt --

Total Direct and Overlapping Debt 647,708$

(1) General Obligation Bonds

Note: Overlapping governments are those that coincide, at least in part, with thegeographic boundaries of the Town. This schedule estimates the portion of theoutstanding debt of those overlapping governments that is borne by the residents andbusinesses of the Town of South Palm Beach. This process recognizes that, whenconsidering the Town's issue and repay long-term debt, the entire debt burden borne bythe residents and businesses ability to should be taken into account. However, thisdoes not imply that every taxpayer is a resident, and therefore responsible for repayingthe debt of each overlapping government.


DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT

SEPTEMBER 30, 2011

2011

Sources: Palm Beach County Property Appraiser and Palm Beach CountyComprehensive Annual Financial Report, dated 09/30/10

49


PLEDGED REVENUE COVERAGE


Note: The Town does not have any outstanding debt and therefore, no revenues are pledged forany purpose.

50

Personal Income

(Amounts Per CapitaExpressed in Personal Unemployment

Year Population Thousands) Income Rate

2002 1,600 71,731$ 44,832$ 6.1%2003 1,586 70,958 44,740 5.7%2004 1,531 75,010 48,994 5.4%2005 1,531 79,143 51,694 4.2%2006 1,526 86,470 56,664 3.6%2007 1,526 91,206 59,768 4.2%2008 1,522 92,704 60,909 6.4%2009 1,509 86,708 57,461 10.4%2010 1,171 67,287 57,461 11.7%2011 1,171 67,287 57,461 9.7%

Sources: .


DEMOGRAPHIC AND ECONOMIC STATISTICS

Bureau of Economic Analysis

U.S. Census Bureau Bureau of Labor Statistics


51

Percentage of Percentage ofTotal Town Total Town

Employer Employees Rank Employment Employees Rank Employment

The Mayfair 21 1 18.10% 20 1 17.24%Town Hall 12 2 10.34% 12 2 10.34%Barclay 13 3 11.21% 11 4 9.48%Concordia East & West 12 4 10.34% 12 11 10.34%Southgate 11 5 9.48% 11 7 9.48%Dune Deck 11 6 9.48% 9 8 7.76%Tides Restaurant 10 7 8.62% 11 3 9.48%Tuscany 8 8 6.90% 9 5 7.76%Palm Beach Ocean Front Inn 6 9 5.17% 9 6 7.76%Palmsea 6 10 5.17% 7 10 6.03%Le Chateau 6 11 5.17% 5 9 4.31%

Total 116 100.00% 116 100.00%

Source: Town of South Palm Beach Finance Department

2011 2001

CURRENT YEAR AND TEN YEARS AGO


PRINCIPAL EMPLOYERS

52

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

General Government 2 2 2 2 3 3 3 3 3 3 Public Safety 10 9 9 9 9 9 9 9 8 8 Physical Environment 1 1 1 1 1 1 1 1 1 1

Total Number of Employees 13 12 12 12 13 13 13 13 12 12

Source: Town of South Palm Beach Finance Department.


FULL-TIME EQUIVALENT TOWN GOVERNMENT EMPLOYEES BY FUNCTION


53

Function/Program 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Public SafetyPolice:

Police personnel and officers 10 9 9 9 9 9 9 9 8 8 Police calls for service 1,597 1,449 1,511 1,279 1,212 1,418 1,555 1,944 1,055 967 Parking violations 53 81 62 53 96 70 51 48 41 29 Traffic violations 557 812 414 766 638 836 980 851 619 417

Fire:Fire personnel -- -- -- -- -- -- -- -- -- -- Fire alarms answered -- -- -- -- -- -- -- -- -- -- Fire inspections performed -- -- -- -- -- 28 28 28 25 20

Planning and DevelopmentBuilding permits issued 421 409 431 693 804 827 592 541 542 586 Occupational licenses issued -- -- -- -- -- 588 622 635 658 661

Sources: Various Town Departments

Note: Indicators are not available for the general government function. The Town does not have a fire department.


OPERATING INDICATORS BY FUNCTION/PROGRAM


54

Function/Program 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

General GovernmentNumber of general government buildings 1 1 1 1 1 1 1 1 1 1

Public Safety Police:

Police stations 1 1 1 1 1 1 1 1 1 1 Patrol units 3 3 3 3 3 3 4 4 4 4 Fire: Fire stations -- -- -- -- -- -- -- -- -- --

TransportationMiles of streets 5/8 5/8 5/8 5/8 5/8 5/8 5/8 5/8 5/8 5/8Number of street lights 9 9 9 9 9 20 20 20 20 20 Number of traffic signals -- -- -- -- -- -- -- -- -- --

Culture and RecreationParks -- -- -- -- -- -- -- -- -- -- Parks acreage -- -- -- -- -- -- -- -- -- -- Community center -- -- -- -- -- -- -- -- -- -- Swimming pools -- -- -- -- -- -- -- -- -- -- Tennis courts -- -- -- -- -- -- -- -- -- -- Baseball/softball fields -- -- -- -- -- -- -- -- -- --

Utility System Miles of mains 5/8 5/8 5/8 5/8 5/8 5/8 5/8 5/8 5/8 5/8 Fire hydrants - Town of South Palm Beach 10 10 10 10 10 10 10 10 10 10 Fire hydrants - Outside Town of South Palm Beach -- -- -- -- -- -- -- -- -- -- Maximum daily capacity (thousands of gallons, est.) 69,900 69,900 69,900 69,900 69,900 69,900 69,900 69,900 69,900 69,900

Sources: Various Town DepartmentsNote: Unless otherwise noted by an amount or number, the answer is zero.


CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM


55

COMPLIANCE SECTION


56

INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED

ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

Honorable Mayor and Members of the Town Council Town of South Palm Beach, Florida We have audited the financial statements of the governmental activities, the business-type activities, and each major fund of the Town of South Palm Beach, Florida (the Town) as of and for the year ended September 30, 2011, which collectively comprise the Town’s basic financial statements and have issued our report thereon dated March 29, 2012. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control over Financial Reporting In planning and performing our audit, we considered the Town’s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Town’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Town’s internal control over financial reporting.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the Town’s financial statements will not be prevented, or detected and corrected on a timely basis. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above.

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Compliance and Other Matters As part of obtaining reasonable assurance about whether the Town’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 or other matters that are required to be reported under Government Auditing Standards. This report is intended solely for the information of the Mayor, Town Council, management others within the entity, and regulatory bodies and is not intended to be and should not be used by anyone other than these specified parties. West Palm Beach, FL March 29, 2012


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MANAGEMENT LETTER IN ACCORDANCE WITH THE RULES OF THE AUDITOR GENERAL OF THE STATE OF FLORIDA

Honorable Mayor and Members of the Town Council Town of South Palm Beach, Florida We have audited the accompanying financial statements of the governmental activities, business-type activities, and each major fund of the Town of South Palm Beach, Florida (the Town), as of and for the fiscal year ended September 30, 2011, and have issued our report thereon dated March 29, 2012. 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. We have issued our Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters. Disclosures in that report, which is dated March 29, 2012, should be considered in conjunction with this management letter. Additionally, our audit was conducted in accordance with Chapter 10.550, Rules of the Auditor General, which governs the conduct of local governmental entity audits performed in the State of Florida. This letter includes the following information, which is not included in the aforementioned auditor's report:

Section 10.554(1)(i)1., Rules of the Auditor General, requires that we determine whether or not corrective actions have been taken to address findings and recommendations made in the preceding annual financial audit report. There were no findings or recommendations reported in the preceding annual financial audit report.

Section 10.554(l)(i)2., Rules of the Auditor General, requires our audit to include a review of

the provisions of Section 218.415, Florida Statutes, regarding the investment of public funds. In connection with our audit, we determined that the Town complied with Section 218.415, Florida Statutes.

Section 10.554(l)(i)3., Rules of the Auditor General, requires that we address in the

management letter any recommendations to improve financial management. In connection with our audit, we did not have any such recommendations.

Section 10.554(1)(i)4., Rules of the Auditor General, requires that we address violations of

provisions of contracts or grant agreements, or abuses that have occurred, or are likely to have occurred, that have an effect on the financial statements that is less than material but more than inconsequential. In connection with our audit, we did not have any such findings.

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Section 10.554(l)(i)5., Rules of the Auditor General, provides that the auditor may, based on professional judgment, report the following matters that have an inconsequential effect on financial statements, considering both quantitative and qualitative factors: (1) violations of provisions of contracts or grant agreements, fraud, illegal acts, or abuse, and (2) deficiencies in internal control that are not significant deficiencies. In connection with our audit, we did not have any such findings.

Section 10.554(l)(i)6., Rules of the Auditor General, requires that the name or official title and legal authority for the primary government and each component unit of the reporting entity be disclosed in this management letter, unless disclosed in the notes to the financial statements. The Town has made these disclosures in the notes to the financial statements.

Section 10.554(l)(i)7.a., Rules of the Auditor General, requires a statement be included as to

whether or not the local governmental entity has met one or more of the conditions described in Section 218.503(1), Florida Statutes, and identification of the specific condition(s) met. In connection with our audit, we determined that the Town did not meet any of the conditions described in Section 218.503(1), Florida Statutes.

Section 10.554(1)(i)7.b., Rules of the Auditor General, requires that we determine whether

the annual financial report for the Town for the fiscal year ended September 30, 2011, filed with the Florida Department of Financial Services pursuant to Section 218.32(1)(a), Florida Statutes, is in agreement with the annual financial audit report for the fiscal year ended September 30, 2011. In connection with our audit, we determined that these two reports were in agreement.

Pursuant to Sections 10.554(l)(i)7.c. and 10.556(7), Rules of the Auditor General, we applied

financial condition assessment procedures. It is management's responsibility to monitor the Town’s financial condition, and our financial condition assessment was based in part on representations made by management and the review of financial information provided by same.

Pursuant to Chapter 119, Florida Statutes, this management letter is a public record and its distribution is not limited. Auditing standards generally accepted in the United States of America require us to indicate that this letter is intended solely for the information and use of Mayor, Town Council, management, and the Florida Auditor General, and is not intended to be and should not be used by anyone other than these specified parties. West Palm Beach, FL March 29, 2012

town of south palm beach, floridadpanther.fiu.edu/sobek/content/fi/go/00/00/17/00001/2011 south...

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