South Vernon Parish Waterworks District No....

^ ' / ^ i 6

SOUTH VERNON PARISH WATERWORKS DISTRICT #1

ANNUAL FINANCIAL REPORT

FOR THE YEAR ENDED DECEMBER 31,2010

Under provisions of Slate law, this report is a public document. A copy ofthe report has been submitted to the entity and otherappropriate public officials. The report is available for public inspection at the Baton Rouge office ofthe LegislativeAuditor and, where appropriate, at the off ice of the parish clerk of court.

Release Date

TABLE OF CONTENTS

Independent Auditors'Report 1-2

Required Supplemental Information Management's Discussion and Analysis 3-5

Govemmental Funds Balance Sheet 6 Statement of Revenues, Expenditures, and Changes m Fund Balance 7 Statement of Cash Flows 8

Notes to Financial Statements 9-15

Independent Auditors* Report on Intemal Control over Financial Reporting and Other Matters Based on An Audit of Financial Statements Performed

in Accordance mih Government Auditing Standards 16-17

Schedule of Findings and Questioned Costs 18

Management's Corrective Action Plan 19

Summary of Prior Year Fmdings and Questioned Costs 20

RoziER, HARRINGTON & MCKAY CERTIFIED PUBLIC ACCOUNTANTS 1407PETERMANDRJVE • A L E X A N D R U , LOUISIANA 71301

MMUNG ADDRESS JOHNS. ROZIER, IV, CPA POSTOFRCBBOX 12178

MARKS. KCKAY, CPA ALBCANDfitA, LOUISIANA 71315-217B LEEW. WILLIS, CPA TEt£PHONE (318) 442-1B08

RHONDA L. RACHAL. CPA TELECOPIER (31B) 487-2027 STEVEN E. KtBKBALL, CPA

GEORGETTE VERCHER, CPA M. DALE HARRINGTON, CPA

RETIRED-2005

May 30,2011

INDEPENDENT AUDITORS' REPORT

Board of Commissioners South Vernon Parish Waterworks District #1

We have audited the accompanying financial statements of the business-type activities of Soutli Vernon Parish Waterworks District #1, as of and for the year ended December 31, 2010, which collectively comprise the District's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the District's management. Our responsibility is to express an opinion on these fmancial 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 reqmre that we plan and perform the audit to obtain reasonable assurance about whether the basic financial statements are fi:ee of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosttres in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opmion.

In our opmion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the business-type activities of South Vemon Parish Waterworks District #1, as of December 31, 2010, and tlie 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,

The management's discussion and analysis listed m the accompanying table of contents is not a required part of the financial statements but is supplementary information required by accounting principles generally accepted in ±e United States of America. We have applied certam limited procedures, which consisted principally of inquires of management regarding the metiiods of measurement and presentation of the requhed supplemental information. However, we did not audit the information and express no opinion on it.

-Members-Amoricpn Institute of Cartiflcd Public Accountants • Society of Lotiislana, CPAs

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South Vemon Parish Watenvorks District #i May 30, 2011 Page 2

In accordance with Government Auditing Standards, we have also issued a report dated May 30, 2011, onourconsiderationoftheSouth Vemon Waterworks District's intemal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction witii this report in considering the results of our audit. ^7^/rS^

ROZIER, HARRINGTON, & Mc Certified Pubhc Accountants

South Vemon Parish Waterworks Distr ict # 1

MANAGEMENTS DISCUSSION AND ANALYSIS December 31 ,2010

This section of the annual financial report presents our discussion and analysis of the District's financial performance during the fiscal year ended December 31,2010.

OVERVIEW OF FINANCIAL STATF.MF.NTS The basic financial statements report information about the District as a whole using accounting methods similar to those used by private-sector companies. These financial statements report all revenues and expenses regardless of when cash is received or paid. Furthermore, the basic financial statements include all of tbe District's assets and all ofthe District's liabilities (includmg long-term debt).

FINANCIAL ANAT.VSTS OF TfflT. DTSTRTCT This portion of management's discussion and analysis provides a comparative financial analysis.

Balance Sheet A condensed version ofthe District's Balance Sheet is presented as follows;

Assets: Current and Other Assets Capital Assets Total Assets

Liabilities: Current and Other Liabilities Long-term Liabilities Total Liabilities

Net Assets: Invested in Capital Assets (Net) Restricted Unrestricted Total Net Assets

December 3U 2010

$

'

S

488,310 2,535,240 3,023,550

260,043 2,446.278 2,706,321

(147,539) 197,194 267,574 317,229

December 31, 2009

£

S

449.146 2,457,497 2,906,643

112,803 2,619.419 2.732,222

(251,650) 154,829 271,242 174,421

As the presentation appearing above demonstrates, the largest portion of the net assets are unrestricted and may be used to meet the District's ongoing obligations to citizens and creditors.

The District's net assets invested in capital assets is currently negative. These net assets will remain negative until the District either pays down existing debt or acquires additional fixed assets such as infrastructure.

The remaining portion ofthe District's net assets is subject to restrictions that are unposed by debt covenants.

South Vernon Parish Waterworics Distr ict #1

MANAGEMENT'S DISCUSSION AND ANAL YSIS December 31,2010

Changes in Net Assets

A condensed version of the Statement of Revenues, Expenses, and Changes in Net Assets is presented as follows:

For the Year Ended December 31,

2010 December 31,

2009

Revenues: Operating Revenues Operating Expenses

520,457 357,389

481,036 372.977

Operating Income (Loss) 163,068 108.059

Nonoperating Revenues fExnenscs) Interest Revenue Ad Valorem Taxes Revenue Sharing Interest Expense

3.130 59,038 9,222

(130.622)

4,754 98.447 8.848

(133^3) Total Nonoperating Revenues (Expenses)

Contributions: Developer Contributions Capital Grants Total Contributions

Change in Net Assets Net Assets - Beginning Net Assets - Ending

(59,232)

28.972 10.000 38,972

142.808 174,421

$ 317.229 $

(21.174)

—

86,885 87,536

174.421

The District experienced an increase in net assets of $142,808. This increase is not only due to an increase m water rates, increase in customers, and various contributions but also prudent expenditure of tiie District's resources,

CAPITAL ASSET AnMTNTSTRATTQN

Capital asset activity for the year ended December 31, 2010, is siunmarized as follows:

Additions: Improvements to the Utility System Infrastructure Dedicated by Developers Improvements to the Districts Building Equipment

$ 111,110 28,972 18,110 10,500

Total Additions Depreciation Net Increase / Decrease Beginning Capital Asset (Net)

Ending Capital Asset (Net)

168,692 (93,818) 74,874

2,460,366

S 2,535,240


MANAGEMENT'S DISCUSSION AND ANAL YSIS December 31,2010

Highlights ofthe District's capital asset administration are provided as follows:

• Improvements to the water system include; o An $83,908 bore under railroad tracks m order to provide water to a development.

This improvement was in process at year end. o A $27,202 extension of water lines to improve service to existing ctistomers.

• During the current year developers dedicated several new system extensions as part of subdivision developments.

• The equipment is for a 50hp variable frequency drive for the water pumps.

DEBT ADMINISTRATION No new debt was issued. Activity was Imiited to paying installments due on existmg obligations.

FACTORS EXPECTED TO EFFECT FITTITRE OPERATIONS Factors expected to affect fiiture operations are limited to the expectation of continued benefits fi-om the expansion ofthe District's water system that will allow it to accommodate additional residential customers firom new subdivisions that are being developed in the District.

SOUTH VERNON WATERWORKS DISTRICT#1

Balance Shee t December 3 1 , 2 0 1 0

Business-Type Activities Enterprise Fund

ASSETS Current Assets:

Cash and cash equivalents $ 158,764 Receivables (net) 111 ,944 Prepaid expenses 20,408 Assets restricted by bond indenture:

Cash" and cash equivalents 197,194

Total current assets 48 8,310

Non Current Assets: Land 15,000 Constmction in Process 83,908 Depreciable capital assets, net 2,436,332

Total assets 3,023.550

LIABILITIES Current Liabilities:

Accounts and other payables 72,186 Deposits due others 11,512 Liabilities payable from restricted assets

Accrued interest payable 2,926 Current portion of long term debt 173,419

Total Current Liabilities 260,043

Long-term debt due in more than one year 2,446,278

Total liabiHties 2,706,321

NET ASSETS Invested in Capital Assets (Net) (147,539) Restricted for debt service 197,194 Unrestricted 267,574

Total net assets (deficit) 317,229

Total Liabilities and Net Assets $ 3,023,550

The nccompanylng notes arc an fntcgrni part of the linanclnl stntcmcnts.

-6-


Statement of Revenues, Expenses and Changes in Fund Net Assets Proprietary Funds Year Ended December 31, 2010

Business-Type Activities Enterprise Fund

Onerating Revenues: Charges for services pledged as seciuity $ 467,758 Meter connections and other charges 52,699

Total Operating Revenues 520,457

Onerating Expenses: Salaries 98,125 Utilities 24,574 Insurance 34,492 Office operations 26,443 Repairs and maintenance 35,239 Depreciation 93,818 Other Expenses 44,698

Total Operating Expenses 357,389

Operating Income (Loss) 163,068

Nonoperating Revenues (Expenses'):

Interest revenue 3,130 Ad Valorem taxes 59,038 Revenue sharing 9,222 Interest expense (130,622)

Change in Net Assets Before Contributions 103,836

Contributions

Developer Contributions 28,972 Capital Grants 10,000

Change in net assets 142,808

Total net assets - beginning 174,421

Total net assets - ending $ 317,229

The accompanying notes arc an Integral part or the nnandnl stntcmcnts.

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statement of Cash Flo tvs Proprleiary Funds Year Ended December 31, 2010

Cosh now from operating activities:

Cash received from customers Cash payments to suppliers of goods and services Cash payments to employees for services

Net cash provided (used) by operating activities

Cash flows from non-capitnl financing activities:

Ad Valorem taxes and revenue sharing received

Net cash provided (used) by non-capital financing activities

Cash flows from capital and relnted financing activities;

Acquisillon of capilal assets Capital grant proceeds Principal paid on debt instruments Interest paid on debt instruments

Net cash provided (used) by capital and related financing

activities

Cash flows from investing activities:

Interest and other income

Net cash provided (used) by investing activities

Net Increase (decrease) in cash Beginning cash balnnce Ending cash balance Restricted cash

Cash and cash equivalents

Reconciliation of oncratine income floss^ to net cash Operating income (loss) Adjustments to reconcile operating income lo net cash

provided by operating activities: Depreciation (Increase) decrease in accounts receivable (Increase) decrease in prepaid expenses (Decrease) increase in operating accounts payable (Decrease) increase in customer deposits Net cash provided (used) by operating activities

Business-Tvpe Acrivities Enterprise Fund

J 545^27 (171,119) (98,125)

275,983

6S.260

68.260

(82.433) 10,000

(85,758) (131,388)

(289.579)

3,130

3.130

57,794 298.164

355,958 197.194

158.764

163,068

93,818 18,630

(5,673) 6,140

275,983

Supplemental Disclosure of Cash Flow Information: During the year ended December 31,2010, various developers dedicated water system improvements to the District. The Improvements dedicated to the District were valued at $28,972. There were no further operating, financing, or investing activities during the year that did not result in cash receipts or payments.

The avciini|wit)'fng notes ore an tnlrsral |Mrl nrUie Rnaaclal ftnkmenli.

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Notes to Financial Statements December 31,2010

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Basis of Presentation

The South Vemon Parish Waterworks District #1 is a political subdivision of the Vemon Parish Police Jury. The District is govemed by a board of commissioners, composed of seven members who serve with compensation and are appointed for terms of various years by the Vemon Parish Police Jury.

The following is a summary ofthe more significant accounting policies.

Financial Reporting Entity

Govemmental Accotmting Standards Board (GASB) Statement No. 14 established criteria for detem:iining which component units should be considered part of a financial reporting entity. The basic criterion for includmg a potential component unit within the reporting entity is financial accountability. The GASB has set forth criteria to be considered m determining financial accovmtability. This criteria includes:

1. Appointing a voting majority of an organization's goveming body, and

a. The ability ofthe reporting entity to impose its will on that organization and/or

b. The potential for tiie organization to provide specific financial benefits to or impose specific financial burdens on the reporting entity.

2. Organizations for which the reporting entity does not appomt a voting majority but are fiscally dependent on the reporting entity.

3. Organizations for which tiie reporting entity financial statements would be misleading if data of the organization is not included because of the nature or significance of the relationship.

Based on the previous criteria, the District is a component imit of the Vemon Parish Police Jury. The accompanying component unit financial statements present information only on tiie fimd maintained by the District and do not present uiformation on the police jury, the general govemment service provided by that govemmental imit, or other govemmental units that comprise the financial reporting entity.

Basis of Presentation

The District uses an enterprise fimd for financial reporting purposes. Enterprise fimds are proprietary fimds used to accoimt for business-like activities. These activities are financed primarily by user charges and tiie measurement of financial activity focuses on net income measurement similar to tiie private sector. Due to these similarities, proprietary fimds are allowed to follow

South Vernon Parish Waterworks Distr ict # 1


certain pronoimcements that are developed by the Financial Accounting Standards Board (FASB) for business enterprises. However, tiie District only applies those FASB pronouncements that were issued on or before November 30,1989.

Measurement Focus and Basis of Accounting Measurement focus is a term used to describe which transactions are recorded within the various financial statements. Basis of accoimting relates to the timing ofthe measurements made, regardless ofthe measurement focus applied.

The District's enterprise fund utilizes an economic resources measurement focus. The accounting objectives of this measurement focus are the determination of operatmg income, changes in net assets, financial position, and cash flows. All assets and liabilities associated with their activities are reported. Proprietary fimd equity is classified as net assets.

In addition, the District's enterprise fimd utilizes the accmal basis of accoimting. Under the accrual basis of accounting and the economic resources measurement focus, revenues are recorded when eamed and expenses are recorded when a liability is incurred.

The District distinguishes operating revenues and expenses fi:om nonoperating items. Operating revenues and expenses generally result from providing services in connection witii the Distiict's principal ongomg operations.

Use of Estimates The preparation of financial statements m conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from tiiose estimates.

Cash and Cash Equivalents Amounts reported as cash and cash equivalents (restricted and unrestricted) include all cash on hand, cash in bank accounts, certificates of deposit, and highly liquid investments. Credit risk associated with bank deposits is limited by requiring fiscal agent banks to pledge securities as requked by State Law. Furthermore, mterest rate risk associated with certificates of deposit is typically mitigated by purchasing instruments that mature m one year or less.

Statement Of Cash Flows For the purpose of reporting cash flows, cash and cash equivalents includes all cash on hand, cash in banks, and certificates of deposit.

Restricted Assets Any amounts reported as restricted assets, represent resources that must be expended in a specific manner. Restrictions of this nature can be unposed by tax propositions and various contractual obligations including grant agreements and bond covenants. Whenever restricted assets can be used

10



to satisfy an obligation, the restricted assets are typically consumed before utilizing any tmrestricted resources.

Capital Assets Capital assets, which include property, equipment, and infrastructure, are reported as assets in the financial statements.

All capital assets are valued at historical cost or estimated historical cost if actual historical cost is not available. Donated assets are valued at tiieir fair market value when received by the District.

Capital assets are depreciated using the straight-line metiiod and estimated usefiil lives ranging from 4 to 50 years. Usefiil lives are selected depending on tiie expected durability ofthe particular asset.

Real estate developers periodically contribute water distribution lines and related costs to the District by mutual agreement. Distribution system assets contributed to the District by these installers are capitalized at the installers' cost, which approximate fair value at the time of the District's acquisition, and recorded as capital contributions when received.

NOTE 2-CASH ANTJ CASH EOTITVAr.FNTS

At December 31, 2010, cash and cash equivalents were $355,958, which includes restricted cash of $197,194.

Deposits are stated at cost, which approximates market value. Under state law, these deposits must be secured by federal deposit insurance or the pledge of securities owned by the fiscal agent bank. The market value of the pledged seciuities plus the federal deposit insurance must at all times equal the amount on deposit with the fiscal agent. These securities are held in the name of the pledging fiscal agent bank in a holdmg or custodial bank that is mutually acceptable to botii parties.

At December 31, 2010, the District has $362,792 in deposits (collected bank balance). These deposits are secured from risk by £250,000 of federal deposit insurance and $200,622 of pledged securities held by the custodial bank in the name of the fiscal agent bank. Even though the pledged securities are considered uncollateralized. State law imposes a statutory requirement on tiie custodial bank to advertise and sell tiie pledged securities withm 10 days of bemg notified that tiie fiscal agent has failed to pay deposited fimds upon demand.

NOTE 1 - AD VAT.OREM TAXF.S

Ad Valorem taxes attach as an enforceable lien on property as of January 1 of each year. Taxes are levied by the Vemon Parish Sheriffs OfBce and remitted to the District the month subsequent to collection.

Billed taxes become delinquent on January 1 ofthe following year. Revenues from ad valorem taxes are budgeted in the year billed.

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South Vemon Parish Waterworks Distr ict # 1

Notes to Financial Statements December 3 1 , 201O

For the year ended December 31,2010, taxes of 12.60 mills totaling $59,038 were levied and collected on property. The 12.6 mills consists of 10,10 mills dedicated to general corporate purposes and 2.50 inills dedicated for the payment of general obligation bonds.

NnTE4-RECETVAm.ES

The receivables at December 31,2010, are as follows:

Accounts Receivable Utility Customers $

Due From Otiier Govemmental Units Ad Valorem Taxes Revenue Sharing Capital Grants Total due From Other Governments Total Receivables $

35,728

60,068 6,148

10,000 76,216

111,944

Management considers the amounts listed above to be fiilly collectible. Therefore, there is no allowance for doubtful accoimts.

NOTE 5 - CAPITAL ASSETS

Changes in business-type capital assets are presented as follows:

Beginning Ending Balance Additions Disposals Balance

Non Depreciable Capital Assets Land Construction in Process

Total

Depreciable Capital Assets Distribution System Buildings Vehicles Fumiture, Fixtures & Equipment Accumulated Depreciation

$ 15.000 $ —

15.000

3.410,470 79.275 32,631 27,142

(1.104,152)

- . $

83,908 83,908

56,174 18.110

—

10,500 (93,818)

-— $ 15,000 83.908 98.908

3,466.644 97.385 32,631 37.642

—- (1,197,970) Total Depreciable Capital Assets 2.445.366 (9,034) ---- 2,436.332

Total Capital Assets $ 2,460.366 $ 74,874 J ---- $ 2,535.240

Depreciation expense for tiie year ended December 31,2010 is $93,818.

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Notes to Financial Statements December 3 1 , 2010

At year end, the District is selling water to customers on a new water system extension. This extension is part of a grant bemg administered by the Vemon Parish Police Jury. At year end, the grant is not final and the extension has not been given to the District. However, due to the extension being connected to the District's distribution system, the District is requfred to sell water to the households connected to the new system. Therefore, the District will continue to sell water to the new customers and will record the new extension as a capital asset when the grant is finalized.

NOTE 6 - LONn-TERM LTARTI TTTES

Changes in the District's long-term debt for the year ended December 31, 2010, are presented as follows:

Revenue Bonds General Obligations Certificates of Indebtedness

Total Long-term Debts

Beginning Balance

$ 2,530,455 126.000 49,000

$ 2,705,455

Additions

s

$ —

Reductions

$ 49,386 21.000 15,372

$ 85,758

Ending Balance

$ 2,481,069 105,000 33,628

$ 2,619,697

Revenue Bonds The District has issued revenue bonds that are secured by and payable solely from a pledge of funds generated by a specific revenue source. Revenue bonds outstanding at December 31, 2010, are described as follows:

$2,712,000 Utility Revenue Bonds, dated February I, 1994, witit an effective rate of interest of 4.8750%. Principal is payable in 480 montlily installments of $13,870 beginning July 27, 1998. Final maturity is scheduled for June 27, 2036, unless the District elects to redeem the bonds prior to maturity. $ 2.406,476

$90,000 Utility Revenue Bonds. Series A dated February 1. 1994, bearing iTiterest of 4.875%. Principal is payable in 480 monthly installments of $435 beginning July 27, 1998. Final maturity is scheduled for June 27, 2036, unless tiie District elects to redeem the bonds prior to maturity. 74.593

Total Revenue Bonds 2,481,069 Portion due within one year 52,104

Portion due in more than one year $ 2,428,965

General Obligation Bonds

The District has issued general obligations bonds payable from property taxes levied in the manner provided by State Law. General obligations outstanding at December 31,2010 are described as follows:

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South Vernon Parish Waterworks Distr ict #1


$318,000 General Obligation Bonds, Series 1994 dated May I. 1994, witii interest rates ranging from 5.4% to 9.0%. Tlie bonds mature serially on March P of each year in amounts ranging from $1,000 to $28,500. Final maturity is scheduled for March 1,2024. unless the District elects to redeem the bonds prior to maturity. Bonds became subject to early redemption on March 1, 2005. The bonds are secured by the fiill faith and credit ofthe District and a special tax levied on property subject to taxation within the boundaries of tiie District. $ 105,000

Portion due within one year $ 105,000

Certificates of Indebtedness The District has issued certificates which are secured by and payable from a pledge ofthe excess of annual revenues above statutory, necessary and usual charges incurred by the District. Certificates of indebtedness outstanding at December 31,2010 are described as follows:

$49,000 Certificates of Indebtedness, Series 2009 dated December 18, 2009, bearing an interest rate of 5.75%. Principal is payable in tiiirty-six (36) monthly instalhnents of $1,485 beginning January 18, 2010 with tiie final payment due December 18,2012. $

Portion due within one year Portion due in more than one year

33.628

16,315 17,313

Maturity of Long-term Debt A schedule of maturities of long-term debt is presented as i

Year Ended December 31" 2011 2012 2013 2014 2015 2016-2020 2021-2025 2026-2Q3Q 2031-2035 2036 Total Govemmental

Revenue Bonds

$ 52.104 54.701 57.429 60.291 63,297

367,086 468,179 597,118 757,676

3,188 $ 2.481.069

bllows:

Principal Installments General

Obligations $ 105,000

— — — — — — — —

S 105,000

Certificiites of Indebtedness $ 16,315

$

17.313 —

—

— — — — —-

33,628

Total $ 173.419

72,014 57,429 60,291 63,297

367,086 468,179 597,118 757.676

3.188 $2,619,697

Interest $ 131,477

126.795 121.875 117.177 112.789 510,998 413,141 289,548 132,915 15,181

$ 1.971.896

Interest expense for the current year totaled $130,622.

14


Notes to Financial Statements December 31 , 2010 ,

NOTE 7- RISK: M A N A G E M E N T

The District is exposed to various risk of loss related to torts; theft, damage or destruction of assets; errors and omissions; injuries to employees; and natural disasters. Settled clauns resulting from these risk have not exceeded insurance coverage in any ofthe past tiiree fiscal years.

NOTE 8- ROARn Off DTRECTOR'S PER DTEM For the year ended December 31,2010, the amounts of per diem paid to the Board of Directors were as follows:

Name Position Per Diem William Churchman Tom Dixon Barbara Bartlett Morris Weldon Elmer Moses Freddie Coins Stanley Hebert Elaine Fontenot Total

Board Member Board Member Board Member Board Member Board Member Board Member Board Member Board Member

NOTE 9- ACCOUNTS AND OTHER PAYABLES

Details related to amounts reported as accoimts and other paye

Payable to Vendors

Payable tmder contractual arrangements

—...

ibles

$

$ 840 900 900 420 600 240 240 240

$ 4.380

are provided i

12,030

60,156 $ 72,186

15

ROZIER, HARRINGTON & MCKAY CERTIFIED PUBLIC ACCOUNTANTS 1407 PETERMAN DRIVE • ALEXANDRU, LOUISUNA 71301

MAILING ADDRESS JOHN S. ROZIER, IV, CPA POST OFFICE BOX 1217S

MARKS. MCKAY, CPA ALEXANDRIA, LOUISIANA 71315-2173 LEEW. WILLIS, CPA TELEPHONE(118) 442-1608

RHONDA L. RACHAL, CPA STEVENS, KIMBALL, CPA TELECOPIER (318) 487-2027

OEORGErTE VERCHER, CPA AT. DALE HARRINGTON, CPA

RETIRED-ZOOS

May 30,2011

REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT

OF FINANCL^L STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STAIWABDS

Board of Commissioners Soutii Vemon Parish Waterworks District No. 1

We have audited the financial statements of the business-type activity of the South Vemon Parish Waterworks District No. 1 as of and for the year ended December 31, 2010, which collectively comprise the basic financial statements and have issued our report thereon dated May 30,2011. We conducted our audit in accordance with auditmg standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government AtidUing Standards, issued by tiie Comptroller General ofthe United States.

INTERNAL CONTROL OVER FINANCIAL REPORTTNO

In planning and performing our audit, we considered the Soutii Vemon Parish Waterworks District's intemal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing oiu* opinions on tiie financial statements but not for the purpose of expressing an opmion on the effectiveness of tiie South Veraon Parish Waterworks District's intemal control over financial reporting. Accordingly, we do not express an opmion on the effectiveness of the South Vemon Parish Waterworks District's internal control over financial reportmg.

A deficiency in internal conti-ol exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned fimctions. to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in intemal control such that there is a reasonable possibility that a material misstatement ofthe entity's financial statements will not be prevented, or detected and corrected on a tunely basis.

Our consideration ofthe mtemal control over financial reporting was for the Umited purpose described in the first paragraph of tius section and was not designed to identify all deficiencies in intemal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in intemal control over financial reporting tiiat we consider to be material weaknesses, as defined above. However, we identified certam deficiencies in intemal control

16

Sout/i Vemon Parish Waterwor/cs District #i May 30,2011 Page 2 _____

over financial reporting, described m ±e accompanying schedule of findings and questioned costs as item 2010-1 tiiat we consider to be significant deficiencies m intemal control over financial reporting. A significant deficiency is a deficiency, or combination of deficiencies, in intemal control that is less severe than a material weakness, yet unportant enough to merit attention by those charged with governance,

COMPLIANCE AND OTHff.R MATTERS

As part of obtaining reasonable assurance about whether the Soutii Vemon Parish Waterworks District's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grants, 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 requfred to be reported under Government Auditing Standards.

This report is intended for the information of management. However, this report is a matter of public record and its distribution is not limited.

ROZIER, HARRINGTON & Certified Public Accountants

17

South Vernon Parish Waterworks Distr ict # 1 Schedule of Findings and Questioned Costs For tiie Year Ended December 31,2010

PART I - SUMMARY OF AUDITORS' RESULTS:

• The Independent Auditor's Report on the financial statements for the South Vemon Parish Waterworks District #1 as of December 31, 2010, and for the year then ended expressed an unqualified opinion.

• The results of the audit disclosed no instance of noncompliance that is considered to be material to the financial statements ofthe South Veraon Waterworks District #1.

• The audit disclosed one instance (2010-1) is reqmred to be reported as a significant deficiency ui intemal control over financial reporting.

• The District was not required to have a Single Audit; therefore, none of the reporting requirements of Circular A-133 were required.

PART n - FINDINGS RELATING TO THE FINANCIAL STATEMENTS WHICH ARE REOUIRED TO BE REPORTED IN ACCORDANCE WITH GENERALLY ACCEPTED GOVERNMENTAL AUDITING STANDARDS:

• 2010-1- Cash Drawer Collections & Reconciliations Both ofthe District's clerks are using the same cash drawer to collect payments and the drawer is not being properiy reconciled to the established amount each day.

PART HI -FINDINGS AND OUESTIONED COSTS FOR FEDERAL AWARDS WHICH SHALL INCLUDE AUDIT FINDINGS AS DEFINED BY OMB CIRCULAR A-133:

• There are no matters to report.

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South Vernon Parish Waterworics Distr ict #1 lifianagements Corrective Act ion Plan For t i ie Year Ended December 31,2010

SECTION I - INTERNAL CONTROL AND COMPLIANCE MATERIAL TO THE FINANCIAL STATEMENTS

2010-1- Cash Drawer Collections & Reconciliations The District's clerks are using tiie same cash drawer to collect payments and the drawer is not being properly reconciled to the established amount each day.

2010-1 Manasement's Resbonse We are currentiy working on changing our policies and procedures in order to ensure proper controls over collections.

SECTION n - INTERNAL CONTROL AND COMPLIANCE MATERIAL TO FEDERAL AWARDS

There were no findings of this nature reported. Response-N/A.

SECTION m - MANAGEMENT LETTER

Tliere were no findings of this nature reported. Response-N/A

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South Vernon Parish Waterwor/cs Distr ict # 1 Schedule o f Prior Year Findings and Questioned Costs For the Year Ended December 3 1 , 2010

SECTION I - INTERNAL CONTROL AND COMPLUNCE MAlERLVL TO THE FINANCIAL STATEMENTS

There were no findings of this nature reported. Response - N/A.

SECTION n - INTERNAL CONTROL AND COMPLIANCE MATERIAL TO FEDERAL AWARDS

There were no findings of this nature reported. Response — N/A.

SECTION i n - MANAGEMENT LETTER

There were no findings of this nature reported. Response-N/A

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South Vernon Parish Waterworks District No....

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