Town of Cotton Valley - app.lla.state.la.us€¦ · aggregate remaining fund information of Hie Tovm of Cotton Valley, Louisiana, as of December 31, 2012, and the respective changes

Town of Cotton Valley Cotton VaKey, Louisiana

Financial Statement with Auditors' Report

For the Year Ended December 31, 2012

Town of Cotton Valley Cotton Valley, Louisiana

Table of Contents

Independent Auditors' Report

Basic Financial Statements:

Government-wide Financial Statements:

Statement of Net Position

Statement of Activities

Fund Financial Statements:

Balance Sheet-Governmental Funds

Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position

Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds

Reconciliation of (he Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities

Statement of Net Position - Proprietary Fund

Statement of Revenues, Expenses, and Changes in Fund Net Position -Proprietary Fund

Statement of Cash Flows - Proprietary Fund

Notes to the Financial Statements

Required Supplementary Information:

Budgetary Comparison Schedules:

General Fund For the Year Ended December 31, 2012

Safes Tax Fund For the Year Ended December 31, 2012

Notes to Required Supplementary Information For the Year Ended December 31.2012

Page

1 -3

4

5

9

10

11

12

13-27

28

29

30

(Continued)


Table of Contents (Continued)

Page Other Supplementary Information:

Schedule of Compensation Paid to Board Members For the Year Ended December 31, 2012 31

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 32 - 33

Summary Schedule of Prior Year Audit Findings 34-35

Schedule of Current Year Audit Findings 36

COOK & MOREHART

Certified Public Accountants I l l s H A W N A V E M I E • S H R E V E P O R T , LOUISIANA 71107 • P .O. B O X 78240 • S H R E V E P O B T . LOUISIANA 7II37-B240

TRAVIS H MOREHART. CPA T E L E P H O N E (318) 222-S41S FAX (318) 222-S441 A. EOWARDBALL.CPA VICKIE D CASE.CP/1

MEMBER AMERICAN [NSTltUTE

STUART L REEKS, CPA CERTIFIED PUBLIC ACCOUNTANTS

SOCIETY OF LOUISIANA CERTIFIED PUBLIC ACCOUNTANTS



Report on the Fmancial Statements

We have audited the aixompanying financial statements of the governmental activities, the tjusiness-type activities, each major fund, and the aggregate remaining fund infomnation of the Town of Cotton Valley, Louisiana, as of and for the year ended December 31, 2012, and the related notes to the financial statements, which collec^vely comprise the Town's basic financial statements as listed in the table of contents.

Management's Responsibility for the Financial Statements

Management is responsibility for the preparaWon and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

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 from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Opinions

In our opinion, the financial statements referred to above present feirly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of Hie Tovm of Cotton Valley, Louisiana, as of December 31, 2012, and the respective changes in financial position, and where applicable, cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America,

Other Mattel^

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the budgetary comparison information on pages 28 - 30 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Govemmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquires of management about the methods of preparing the information and comparing the information for consistency with managements responses to our inquires, 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 infomiation because the limited procedures do not provide us with sufficient evidence to express an opinion or provide an assurance.

Management has omitted management's discussion and analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial statements, is required by the Governmental Accounting Standands Board, who considers it to be an essential part of the financial reporting for placing the basic financial statements In an appropriate operational, economic, or historical context. Our opinion on the financial statements is not affected by this missing information.

Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town of Cotton Valley's basic financial statements. The other supplementary information listed in the table of contents and shown on page 31 Is presented for purposes of additional analysis and is not a required part of the basic financial statements. The other supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statemente. Such infonnafion has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such informaôn directly to Uie underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America, In our opinion, the infonnafion is fairiy stated In all material respects in relation to the basic financial statements as a whole.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated July 12, 2013, on our consideration of the Town of Cotton Valley, Louisiana's internal control over financial reporting and on our tests of its ccMTipliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report Is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control aver financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Town of Cotton Valley's internal control over financial reporting and compliance.

Cook & Morehart Certified Public Accountants July 12, 2013


Statement of Net Position December 31, 2012

Assets Cash and cash equivalents Receivables Internal balances Restricted assets:

Cash and cash equivalents Capital assets, net

Total assets

Governmental Activities

$ 31,066 29,721

(37,450)

49,094 72,431

Business-type Activities

$ 15,352 24,569 37,450

77,568 3,096,080 3,251,019

Total

$ 46,418 54,290

77,568 3,145,174 3,323,450

Liabilities Accounts payable Accrued liabilities Payable from restricted assets:

Revenue bonds - due within one year Accrued interest Customer deposits

Non-current liabilities: Due within one year Due in more than one year

Total liabilities

Net Position (Deficit) Invested in capital assets, net of

related debt Restricted for:

Debt Service Public works

Unrestricted Total net position (deficit)

20.693 22,959

4,000 31,000 78,652

12,638 1,962

28,649 3,859

41,630

601,278 690,016

33,331 24,921

28.649 3,859

41,630

4,000 632.278 768,668

14,094

40,049 17,134

(77.498) $ (6.221) !

2,466,153

49,003

45,847 E 2,561,003

2.480,247

89,052 17,134

(31.651) $ 2,554,782

See accompanying notes to the basic financial statements.

4

in

O

c: CQ <U 3 C Il>

LU

a .

a> <

5 c 0)

E E > o

O

i n 01

" • ^

> <

s s OJ ' I -t o CM"

eo o> CD

i n f ^

C i t o

^

^ ^ S eo ( N • *

t o r j r- m

iA-

,_ ^ ^ CO O o> o CD tn *"' c

,^ N CO • ^

^ r -

^ ^ T —

to M i r i

o> Ik-J

,.,_ tM in to <D' to d

t o r^ 1 - T- <D l o CD • * CO t eo CM m Q • * i n o_ I-- r^ w ^ ' a> h-" CM ("-' tM CD T- IN

<o

,. * ^

i n a

.. t o CO i n a>

1 ^ t o

eo t-- T- »- to eo ro 5 CO r - CO tM » - Q

l o o r - CM S ^ " o i tvT (N t - " (\J ( 0 ^ CM

tn t -"

CO

r-t M ' i n to (M

CM i n 2 -

0)

to" 1/5 CO

s K

CM

r-. i n

»

w

Ol

O

(0

=1 c:

Q:

E 2 , i a.

•a E

c .9

I I

CO 0) J I « O

o m <J> t» CM

m Of

c

UJ

204

,1

83

698

tQ- CN i n f - . CM T~

w

(»l

CO

— • *

co" r--(M

CO T -•M-

co' h-CM

CM CO

to

5

l a

CI>

I - -

eo' %

tn

r-. eo' CO CO

s r--^' CO to

I A

10 in 0)

c

ra re

O

t o 0)

t o

10

CO

a i

re

u

1 ^

1.5

ses

and

pe

ov

ernm

ent

e O l

Licei

Inte

r

i n

'E 0)

E 13 0)

>

17

O

c _co

"53

5

t o <B 3 c i 2 •u c

o H

.g

' 3 o a .

11)

c CO

O

C3) C

c c O) a>

. Q

u=

2 ,

o

n

z

o> c ^ c

I

3, c o

i n o

z

<o 01

""SJ

in

g|

1 (0 o •? 3

is < S c ID

E £ S > o O

c V

E

D

c 01

o

IA

"53

Jblic

saf

ety

ighw

ay a

nd s

ire

a. X

tf> <a

« 1 E ja

6 > i

tere

st o

n Io

n

Tota

l gov

ern

c

*-* > •5 < 0) Q . £^ U) (0

e 3

m

^

• a

CD

1

<o 0)

ID

<1>

£• III

ll>

' io

1 f -

4-<

E ti>

s 1 1 -

Town of Cotton Valley Cotton Vatiey. Louisiana

Balance Sheet Govemmental Funds December31,2012

Assets Cash and cash equivalents Receivables Due from other fund

Total assets

Liabilities and Fund Balances (Deficit) Liabilities:

Accounts payable Accrued liabilities Due to other fund

Total liabilities

Fund balances (deficit): Restricted:

Debt service Public works

Unassigned Total fund balances (deficit)

Total liabilities and fund balances (deficit)

$

$

$

$

Major

General

3,476 13, / / /

17.253

20,693 22,959 51,099 94,751

(77,498) (77,498)

17,253

Funds

$

$

$

Sales Tax

8,711 8,423

17,134

17,134

17,134

17,134

$

$

$

$

Non Major Fund Debt

Service

18,879 7,521

13.649 40,049

40.049

40.049

40,049

G(

$

s

$

$

Total avernmental

Funds

31.066 29,721 13,649 74.436

20,693 22,959 51,099 94,751

40,049 17,134

(77,498) (20,315)

74,436



Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position

December 31,2012

Fund balances (deficit) - total govemmental funds $ (20,315)

Amounts reported for govemmental activities in the statement of net position are different because:

Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds. 49,094

Long-term liabilities, including bonds and notes payable, are not due and payable in the current period and therefore are not reported in the funds. (35,000)

Net position (deficit) of governmental activities $ (6,221)


7


Staiemenl of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds

For The Year Ended December 31, 2012

Revenues: Ad valorem taxes $ Franchise taxes Intergovernmental Sales tax Licenses and permits Fines and forfeitures Investment eamings iviiscellaneous

Total revenues

Expenditures: Cun-ent:

General government Public safety Highway and streets

Capital outlay Debt sen/ice:

Principal payments Interest and other charges

Total expenditures

Excess (deficiency) of revenues over expenditures

Other financing sources (uses): Transfers in Transfers out

Total other financing sources (uses)

Excess (deficiency) of revenues and other sources over (under) expenditures and other uses

Fund balances (defict) at beginning of year

Fund balances (deficit) at end of year $

Major Funds

General 14,990 17,071 30,176

22,781 144,714

7,603 237,335

171,068 117,250

13,500

301,818

(64,483)

51,000

51,000

(13,483)

(64,015)

(77,498)

$

$

Sales Tax

S

69,537

10

69,547

12,780

12,780

56,787

(51,000) (51.000)

5,767

11,367

17,134 $

Non Major Fund Debt

Service 6,453

8

6,461

3,000 1.900 4,900

1,561

1,561

38,468

40,049

Total Govemmental

Funds $ 21,443

17,071 30,176 69,537 22,781

144,714 18

7,603 313,343

171,068 117,250 12,780 13,500

3,000 1,900

319,498

(6.155)

51,000 (51,000)

(6.155)

(14,160)

$ (20.315)

See accompanying notes fo the basic financial statements.


Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Govemmental Funds to the Statement of Activities

For the Year Ended December 31,2012

Net change in fund balances - total governmental funds $ (6,155)

Amounts reported for govemmental activities in the statement of activities are different because:

Governmental funds report capital outlays as expenditures. However. In the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays ($13,500) exceeded depreciation by ($12,987) in the current period, 513

The repayment of principal of long-term debt consumes current financial resources of governmental funds, 3,000

Change in net position of govemmental activities $ (2,642)



Statement of Net Position Proprietary Fund

December 31, 2012

Assets Current assets:

Cash and cash equivalents Receivables Due from other fund

Total current assets

Noncurrent assets: Restricted cash and cash equivalents Capital assets:

Land Plant and equipment Less: accumulated depreciation

Total noncurrent assets Total assets

Liabilities Current liabilities:

Accounts payable Accrued liabilities Payable from restricted assets:

Revenue bonds Accrued interest Customer deposits

Total current liabilities

Noncurrent liabilities: Revenue bonds

Jotai noncurrent liabilities Total liabilities

Net position invested in capital assets, net

of related debt Restricted for debt service Unrestricted

Total net position

Business-Type Activities

Enterprise Fund_

15,352 24,569 37,450 77,371

77,568

16,000 4,561,106

(1,481,026) 3,173,648 3,251,019

12,638 1,962

28,649 3,859

41.630 88,738

601,278 601,278 690.016

2,466,153 49.003 45,847

2,561,003


10


Statement of Revenues, Expenses, and Changes in Fund Net Position Proprietary Fund

For the Year Ended December 31, 2012

Business-Type Activities Enterprise Fund

Operating revenues: Charges for service -

Water and sewer sales Other charges and fees

Total operating revenues

Operating expenses: Salaries Insurance Truck expense Maintenance and repairs Miscellaneous expenses Office expense Materials and supplies Utilities Travel Depreciation

Total operating expenses

Operating income (loss)

Non-operating revenues (expenses); Interest income Interest expense

Total non-operating revenues (expenses)

Change in net position

Net position - beginning of year

Net position - end of year

S 273,383

36

273,418

73,714 11,569 11,562 43,386 23,362 13,903 14,052 19,746

690 128,949

340,933

(67,515)

37 (27,816)

(27,779)

(95,294)

2,656,297

$ 2,561,003


11

Town of Cotton Valley

Cotton Valley, Louisiana

Statement of Cash Flows

Proprietary Fund

For the Year Ended December 31,2012

Business-Type Activities

Enterprise Fund

Cash Flows From Operating Activities Receipts from customers Cash payments to suppliers for goods and services Cash payments to employees for services

Net Cash From Operating Activities

Cash Flows From Capital and Related Financing Activities Principal paid on capital debt Interest paid on capital debt

Net Cash (used in) Capital and Related Financing Activities

Cash Flow From Investing Activities Interest income

Net Cash From Investing Activities

Net increase (decrease) in cash and cash equivalents

Cash, Beginning of year

Cash, End of year

Reconciliation of Operating Income (Loss) to Net Cash Provided By/(Used In) Operating Activities Operating income (loss) $ (67,515) Adjustments to reconcile operating income (loss) to net cash

provided (used) by operating activities Depreciation expense 128,949 Accounts receivable 704 Accounts payable 6,147 Accrued expenses 378 Meter Deposits 3,147 Due from other funds (4,900)

Net Cash Flovre From Operating ActiviHes $ 66,910

2012

$ 274,710

(133,708) (74,092)

66,910

(26,341)

(28,639) (54,980)

37 37

11,967

80,953

$ 92,920


12


Notes to Financial Statements December 31,2012

INTRODUCTION

The Town of Cotton Valley is incorporated under the provisions of the Lawrason Act, The Town operates under a Mayor-Council form of government.

(1) Summary of Significant Accounting Policies

The Town of Cotton Valley's financial statements are prepared in conformity with generally accepted accounting principles (GAAP), The Govemmental Accounting Standards Board (GASB) is responsible for establishing GAAP for state and local governments through its pronouncements (Statements and Interpretations), The more significant accounting policies established in GAAP and used by the Town of Cotton Valley are discussed below.

A. Reporting Entity

As the nnunicipal governing authority, for reporting purposes, the Town of Cotton Valley is considered a separate financial reporting entity. The financial reporting entity consists of (a) the primary government (the Town of Cotton Valley), (b) organizations for which the primary government is financially accountable, and (c) other organizations for which nature and significance of their relationship with the Town of Cotton Valley are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete.

GASB Statement No. 14, as amended by GASB Statement No, 39, established criteria for determining which component units should be considered part of the Town of Cotton Valley for financial reporting purposes. The basic criterion for including a potential component unit within the reporting entity is financial accountability. The GASB has set forth criteria to be considered in determining financial accountebiltty. This criteria includes:

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

a. The ability of the Town to impose its will on that organization and/or

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

2. Organizations for which the Town does not appoint a voting majority but are fiscally dependent on the Town.

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

In addition, the GASB 39 states that a legally separate, tax-exempt oipanization should be reported as a component unit of a reporting enti^ if all of the following criteria are met:

1. The economic resources received or held by the separate organization are entirely or almost entirely for the direct benefit of the primary government, its component units, or its constituents.

(Continued)

13


Notes fo Financial Statements December 31,2012

(Continued)

2. The primary government is entitled to, or has tiie ability to otherwise access, a majority of tfie economic resources received or held fay the separate organization.

3. The economic resources received or held by an individual organization that ttie specific primary government, or its component unite, is entitled to, or has the ability to othenivise access, are significant to that primary government.

In addition, other organizations should be evaluated as potential component units if they are closely related to, or financially integrated with, the primary government.

Based on the criteria described above, there are no component unite to be included as part of the reporting entity.

B. Basic Financial Statements - Government-Wide Statemente

The Town of Cotton Valley's basic financial statements include both government-wide (reporting the funds maintained by the Town of Cotton Valley as a whole) and fund financial statements (reporting the Town of Cotton Valley's major funds). Both the govemment-vride and fund financial statements categorize primary activities as either governmental or business type. The Tovm's sales tax fund, debt service fund, and general fund are classified as govemmental activities. The Town's water and sewer services are classified as business-type activities.

In the government-wide Statement of Net Position, both the governmental activities and business-type activities columns are presented on a consolidated basis by column and are reported on a full accrual, economic resource basis, which recognizes all long-term assets and receivables, as well as long-temi debt and obligations. The Town of Cotton Valley's net position is reported in three parts - invested in capital assets, net of related debt; restricted net position; and unrestricted net position.

The government-wide Statement of Activities reports both the gross and net cost of each of the Town of Cotton Valley's fianctions. The functions are also supported by general govemment revenues (property, sales and use taxes, certain intergovernmental revenues, etc.). The Statement of Activities reduces gross expenses (including depreciation) by related program revenues, operating, and capital grants. F>Rigram revenues must be directly associated with the function. Operating grants include operating-specific and discretionary (either operating or capital) grants while the capital grante column reflects capital-specific grants. Amounts reported as program revenues include 1) charges to customers or applicante 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 aU taxes.

Proprietary funds distinguish operating revenues and expenses from non-operating items. C^rating revenues and expenses generally result from providing services and producing and delivering goods in connection with the proprietary fund's principal ongoing operations of providing water and sewer services.

The net costs (by function) are normally covered by general revenue (property, sales and use taxes, certain intergovernmental revenues, interest income, etc.).

(Continued)

14


Notes to Financial Statements December31,2012

(Continued)

This government-wide focus is more on the sustainability of the Town of Cotton Valley as an entity and the change in the Town of Cotton Valley's net position resulting from the current year's activities.

C, Basic Financial Statements - Fund Financial Statemente

The financial transactions of the Town of Cotton Valley are reconded in individual funds in the ftjnd financial statements. Each fund is accounted for by pnaviding a separate set of self-balancing accounte that comprises Ite assets, liabilities, reserves, fund equity, revenues and expenditures/expenses. The various fijnds are reported by generic classification within the financial steitemente.

The following fund types are used by the Town of Cotton Valley:

1. Govemmental Funds - tiie focus of ttie govemmental funds' measurement (in the ftjnd statements) is upon determination of financial position and changes in financial position (sources, uses, and balances of financial resources) rattier than upon net income. The following is a description of the govemmental funds of the Town of Cottan Valley;

a. General fund is the general operating fund of the Town of Cotton Valley. It is used to account for all financial resources not accounted for in another fund.

b. Special revenue funds are used to account for the proceeds of specific revenue sources that are restilcted or committed to expenditures for specified purposes other than debt service or capital pnajects.

c. Debt service funds are used to account for all financial resources tiiat are resti"icted. committed or assigned to expenditures for principal and interest.

2. Proprietary Funds - the focus of proprietary fund measurement is upon determination of operating income, changes in net position, financial position, and cash flows. The generally accepted accounting principles applicable are those similar to businesses in the private sector. The following is a description of the proprietary funds of the Town:

a. Enterprise funds are required to be used to account for operations for which a fee is charged to external users for goods or services and the activity (a) is financed with debt that is solely secured by a pledge of the net revenues, (b) has third party requirements that the cost of providing services, including capital costs, be recovered with fees and charges, or (c) establishes fees and charges based on a pricing policy designed to recover similar coste.

The emphasis in fund financial statements is on the major funds in either the govemmental or business-type activities categories. Non-major ftjnds by category are summarized into a single column. GASB Statement No. 34 sete forth minimum criteria (percentage of the assets, liabilities, revenues, or expenditures/expenses of fund category) for the determination of major ftjnds.

(Continued)

15


Notes to Financial Statements December 31, 2012

(Continued)

The following major funds are presented in the ftjnd financial statemente:

General Fund - accounts for all financial resources not accounted for in another fund.

Sales Tax Fund - accounte for the proceeds of sales taxes levied for operations of the police department and maintenance of streete, and operations of street lights.

Water and Sewer Fund - accounte for the provision of water and sewer services of the Town,

D. Basis of Accounting

Basis of accounting refers to the point at which revenues or expenditures are recognized in the accounte and reported in tiie financial statemente. It relates to the timing of the measurements made regardless of the measurement focus applied.

1. Accrual:

Both governmental and business-type activities in the government-wide financial statemente and the pnaprietary ftjnd financial statemente are presented an the accrual basis of accounting. Revenues are recognized viên earned and expenses are recognized when incurred,

2. Modified Accrual:

The governmental funds financial statemente are presented on the modified accrual basis of accounting. Under modified accrual basis of accounting, revenues are recorded when susceptible to accrual i.e.. both measurable and available. "Available" means collectible within the cun-ent period or within 60 days after year end. Expenditures are generally recognized under the modified accnjal basis of accounting when the related liability is incurred. The exception to Uiis general njle is that principal and interest on general obligation long-tenn debt. If any. is recognized when due.

E, Budgets

The Town uses the following budget practices:

1. The Mayor and Town Council prepare a proposed budget.

2. After completion of all action necessary to finalize and implement the budget, the budget is adopted in an open meeting.

3. Budgetary amendments involving the transfer of funds fi-om one department, program or function to another, or involving increases in expenditures resulting from revenues exceeding amounte estimated, require the approval of tiie Council.

4. All budgetary appropriations lapse at the end of each fiscal year.

(Continued)

16

Town of Cotton Va l l ^ Cotton Valley, Louisiana

Notes to Financial Statemente December 31, 2012

(Continued)

5. Budgets for the General Fund, Sales Tax Fund and Debt Service Fund are adopted on the cash basis. Budgeted amounts in the accompanying required supplementary Information schedules are as originally adopted, or as amended by tiie Council. There was one amendment to the budgete for the year ended December 31, 2012.

6. The Town's fiscal year is December 31.

F, Cash, Cash Equivalente, and Investmente

Cash Includes amounte in petty cash, demand deposite, interest bearing demand deposite, and time deposite. Cash equivalente include amounts in time deposite and ttiose investmente with original maturities of 90 days or less. Under state law, the Town may deposit funds in demand deposits, interest bearing demand deposite, money marttet accounte, or time deposite wiUi state banks organized under Louisiana law or any other state of the United States, or under the laws ofthe United States.

Investmente are limited by R,S. 33:2955 and the Town's investment policy. If the original maturities of Investments exceed 90 days, they are classified as investmente; however, if the original maturities are 90 days or less, they are classified as cash equivalente.

G. CapitelAssete

Capital assete purchased or acquired with an original cost of $1,000 or more are reported at historical cost or estimated historical cost. Contributed assete are reported at fair market value as of the date received. Additions, improvemente, and other capital outiays that significantly extend the useful life of an asset are capitalized, OUier coste incurred for repairs and maintenance are expensed as incurred. Depreciation on all assets is provided on the straight-line basis over the following estimated useful lives:

Buildings 20-50 years Other equipment 10 years Vehicles 5 years Water and sewer systems 5-40 years

GASBS No. 34 requires the Town to report and depreciate new inft^struchjre assete effective with the beginning of Uie current year. Infrashucture assete include roads, bridges, traffic signals, etc. These infrastructure assete are likely to be the largest asset class of the Town. Neither their historical cost nor related depreciation has historically been reported in the financial statemente. The retroactive reporting of infrastructure is not required.

(Continued)

17


Notes to Financial Statements December31,2012

(Continued)

H, Revenues

Ad valorem taxes attach as an enforceable lien on property as of January 1 of each year. Taxes are levied t ^ the Town in September or October and are actually billed to the taxpayers in November. Billed taxes become delinquent on January 1 of the following year. Revenues from ad valorem taxes are budgeted in flie year collected. The Town bills and collecte ite own property taxes, using the assessed values detemiined by the fax assessor of Webster F>arish. Sales tax revenues are recorded in tiie period in which the underlying exchange has occurred. Fines, forfeitures, licenses, and pemiite are recognized in the period tiiey are collected. Interest income on demand and time deposits is recorded when earned. Federal and state grante are reconded when the Town is entitied to the ftjnds,

I. Net Position

Net position represents the difference between assets and liabilities. Net position invested in capital assete, net of related debt, consist of capital assete, net of accumulated depreciation, reduced by the outetanding balance of any borrowing used for the acquisition, construction, or improvement of those assete. Net position is reported as restricted when there are limitations imposed on their use either through constitutional prctvisions or enabling legislation adopted by the Town or through external restrictions imposed by creditors, grantors, or laws or regulations of other governmente. The Town's policy is to first apply restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net position is available,

J, Sales Taxes

The proceeds of the 1% sales and use tax passed by the voters of the Town of Cotton Valley may be used only for Hie operations of the police department and for the maintenance of sti eete and operations of street lighte. The Webster Parish School Boand collecte the fax for the Town, remitting to the town on a weekly basis, for a fee of 1 % of collections.

K, Compensated Absences

The Town allows up to two weeks vacation based upon years of service. No canyover or accrued vacation leave is allowed. Unused vacation time will be applied upon termination. In addition, unused accumulated sick pay will not be paid upon separation of service.

L. Interfund Activity

Intertund activity is reported as loans, reimbursements, or transfers. Loans are reported as interfund receivables and payables as appropriate and are subject to elimination upon consolidation. Any residual balances outetanding between the governmental activities and business-type activities are reported in the government-wide financial statemente as "internal balances," Reimbursemente are when one hand incurs a cost, charges the appropriate benefiting fund and reduces its related cost as a reimbursement. Transfers between governmental funds are netted as part of the reconciliation to the government-wide financial statements.

(Continued)

18


Notes to Financial Statemente December31.2012

(Continued)

M, Use of Estimates

Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assete and liabilities, the disclosure of confingent assete and liabilities, and reported revenues and expenses. Actual results could differ from those estimates,

N. 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 activities in the statement of net assete. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance coste are reported as deferred charges and amortized over the term of related debt.

In the fund financial statemente, govemmental funds recognize bond premiums and discounts, as well as bond issuance coste, during the current period. The fece amount of the debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance coste, whether or not withheld from the actual debt proceeds received, are repori:ed as debt service expenditures.

O. BadDebte

The Town uses Uie direct charge-off method of accounting for uncollectible ad valorem taxes and water system receivables. Although this method is not in accordance with generally accepted accounting principles, the overall effect on the financial statemente is immaterial.

P. Capitalized Interest

The Town capitalizes net interest costs and interest earned as part of the cost of constnjcting various water and sewer projects when material.

Q, Statement of Cash Flows

For the purposes of the Statement of Cash Flows, the Water and Sewer Funds consider all highly liquid investments (including resti-icted assete) with a maturity of three months or less when purchased to Ije cash equivalente.

R, Postretirement Benefite

The Town provides no posti"etirement benefite to ite employees.

(Continued)

19



(Continued)

S, Fund Balance

GASB has issued Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, which defines the different types of fund balances that a governmental entity must use for financial reporting purposes. GASB 54 requires the fund balance amounts to be properly reported within one of the fund balance categories list below.

1. Nonspendable fund balances are amounts that cannot he spent because they are either (a) not in spendable form, such as inventory or prepaid expenses, or (b) legally or contractually required to be maintained intact, such as a trust that must be retained in perpetuity,

2. Restricted fund balances are restricted when constraints placed on the use of resources are either (a) externally imposed by creditors, grantors, contributors, or laws or regulations of other governments, or (b) imposed by law through constitutional provisions or enabling legislation,

3. Committed fund balances include amounte that can be used only for the specific purposes as a result of constiînts imposed by the Council (the Town's highest level of decision making authority). Committed amounte cannot be used for any other purpose unless tfie Council removes those constrainte by taking the same type of action (i.e. legislation, resolution, or ordinance),

4. Assigned fund balances are amounte that are constrained by the Town's intent to be used for specific purposes, but are neither restricted nor committed.

5. Unassigned fund balances are the residual classification for the Town's general fund and include all spendable amounts not contained in the other classifications.

When both restricted and unresti"icted fund balances are available for use, it is the Town's policy fo use restricted fund balance first, then unrestricted fund balance. Furthermore, committed fund balances are reduced first, followed by assigned amounte, and then unassigned amounts when expenditures are incurred for purposes for which amounts in any of those unrestricted fund balance classifications can be used.

(2) New Accounting Standards

Effective January 1, 2012, the Town implemented GASB Statement No, 63, "Financiel Reporting of Deferred Outflows of Resources. Deferred Inflows of Resources, and Net Position." This Statement establishes standan:Js for reporting deferred outflows of resources, deferred inflovre of resources, and net position.

(Continued)

20


Notes to Financial Statemente December31,2012

(Continued)

(3) Ad Valorem Taxes

The distribution of the Tovm's levy (tax rate per $1.000 assessed value) for 2012

Tax Roll 2012

General Fund 7,23 Debt Service 3.95

111R

Authorized Levied Millaae Millaae 7.23 7.23 3,95 3,95

is as follows:

Expiration Date

Statutory 2017

(4) Cash and Cash Equivalente

A, Cash and Cash Equivalente

At December 31, 2012, the Town has cash and cash equivalente (book balances) totaling $123,986. ofwhich $77,568 is shown as a restricted asset These deposite are stated at cost, which approximates martlet. Under state law, Uiese deposite (or the resulting bank balances) must be secured by federal deposit insurance or the pledge of securities owned by the fiscal agent tiank. The market value of the pledged securities plus the federal deposit insurance must at all times equal the amount on deposit with Uie fiscal agent.

B. Credit Risk

Custodial credit risk is the risk that in the event of a bank failure, the government's deposite may not be returned to it. The Town does not have a policy for custodial credit risk. As of December 31, 2012, the Town's bank balance was secured from custodial credit risk due to deposite (collected bank balances) of $126,717 being secured by federal deposit insurance.

(5) Receivables

The following is a summary of receivables at December 31.2012:

Class of Receivable

Governmental activities -Sales taxes Ad valorem taxes

8,423 21.298 29,721

Business-type activities -Accounts receivable - v/ater and sewer charges 24.569

Total

(Continued)

21

(6)

(7)


Notes to Financial Statemente December 31, 2012

(Continued)

Restricted Assete - Proprietary Fund Type

Restricted assete were applicable to the following at December 31, 2012:

Sewer Fund

Customer deposite Bond and interest sinking fund Bond reserve fund Contingency fund

28,565 17,679 13,370 17,954

S 77,568

Capital Assets

Capital asset activity for the year ended December 31, 2012, was as follows:

Governmental Activities: Capital assete, not being depreciated:

Land

Capital assete, being depreciated: Buildings Other equipment Vehicles

Total capital assets, being depreciated, at historical cost

Less accumulated depreciation: Buildings OUier equipment Vehicles

Total accumulated depreciation

Total capital assets, being depreciated, net

Governmentel activities capital assets, net

Balance at January 1,

2012

$

( ( ( (

S

20,000

94,000 25,022 41.038

160.060

84,930) 13,938) 32.611)

131.479)

28.581

__48.581

Additions

( ( ( (

S_

13.500

13.500

2,135) 3,702) 7,150)

12.9871

513

513

Deletions

I 19.838)

f 19.838)

19.838 10.838

$

Balance at December 31,

2012

$

( ( (

(

20.000

94,000 25,022 34.700

153.722

87,065) 17,640) 19.923)

124.6281

29.094

S 49 094

(Continued)

22

Tovm of Cotton Valley Cotton Valley, Louisiana


(Continued)

Business-Tvpe Activities: Capital assets, not being depreciated:

Land

Capital assets, being depreciated: Water and sewer system:

Vehicles Distribution system Other equipment

Total capital assete, being depreciated, at historical cost

Less accumulated depreciation: Water and sewer system:

Vehicles Distribution system Other equipment

Total accumulated depreciation

Total capital assete, being depreciated, net

Business-type activities capital assete, net

Balance at January 1.

2012

$ 16,000

4.500 4,497,993

58,613

4,561,106

(1.500) (1,300,446)

(50.131) (1,352,077)

3,209,029

$ 3,225,029

Additions Deletions

$ $

(1,500) (125,329)

(2,120) (128,949)

(128,949)

$ (128,949) $

Balance at December 31,

Transfers 2012

$ $ 16,000

4,500 4,497,993

58,613

4,561,106

(3,000) (1,425,775)

(52,251) (1,481,026)

3,080,080

$ $ 3.096.080

Depreciation expense was charged to Govemmental and Business-type Activities as follows:

Public safety Highway and streets General government Water and sewer

Total


$ 4,933 2.917 5,137

^ 17,987

Business-type Activities

$

128.949 S 128.949

$

$

Total 4,933 2,917 5.137

128.949 141.936

(Continued)

23



(Continued)

(8) Interfund Balances

Interfund balances at December 31, 2012 consisted ofthe following:

Due From Due To Other Fund Other Fund Net

Govemmental Funds: General $ $ 51,099 $ (51,099) Debt service 13,649 13,649

Total Governmental Funds 13,649 51,099 (37,450)

Proprietary Fund 37,450 37,450

Total $ 51,099 $ 51,099 $

The interfund balances are Uie result of the time lag between the dates that (1) interi und goods and services are provided or reimbursable expenditures occur, (2) transactions are recorded in the accounting system, and (3) paymente between funds are made.

(9) Customers' Deposite

Deposite held for customers that are currentiy active on Uie vrater system total $41,630 at December 31,2012.

(10) Long-term liability activity for the year ended December 31,2012, was as follows:

Govemment Activities: General Obligation Bonds

Business-Type Activities: Sewer Revenue Bonds

Water Revenue Bonds

Water Revenue Bonds

Water and Sewer Bonds

Water and Sewer Bonds

Total Business-Type Activities

Beginning Balance

$ 38,000

$ 83,000

4.322

1,544

32.000

535.402

$ 656.268

(Contin

24

Additions

$

S

$

lued)

Reductions

$ (3.000)

$ (7,000)

(393)

(744)

(10,000)

(8,204)

$ (26,341)

Ending Balance

S 35,000

$ 76.000

3.929

800

22.000

527.198

$ 629,927

Amounte Due Within One Year

$ 4.000

$ 8,000

476

800

11,000

8,373

$ 28.649



(Continued)

Governmental Activities:

General obligation bonds -$90,000 Public Improvement Bonds dated 7/29/80; due in annual installments of $1,000 - $5,000 tiirough 7/29/20; interest at 5% -12%, The debt redemption Is paid ftom the Debt Sen -ice

Fund. S 35.000

Business-type Activities:

$190,000 Sewer Revenue Bonds (Series A #92-02) and $35,000 Sewer Revenue Bonds (Series #92-05) dated 7/29/60; due in annual paymente of $3,000 to $11.000, wth the first payment (July 1982) being for interest only, and, Uiereafter Uie paymente shall be equal in amount and consist of fully amortized insfallmente of principal and interest, interest at 5% $ 76,000 $8,905 Water Revenue Bonds dated June 15,1993; due in annual installments of $609, which includes principal and interest; interest rate at 5% 3,929

$10,226 Water Revenue Bonds dated June 15,1993; due in annual installments of $821. which includes principal and interest; interest rate at 5% 800

$180,000 Water and Sewer Revenue Bonds dated August 1,1974; due annual installmente of $1,000 through $11,000 which includes principal and interest; interest rate at 5% 22.000

$586,000 Water and Sewer Revenue Bonds dated August 12,2003; due in 480 monthly installmente beginning October, 2007 of $2,567 which includes principal and interest; interest rate at 4.25%; final payment in 2044 527,198

1 629.927

Payments on general obligation bonds are made from debt service funds.

The Water and Sewer Revenue Bonds constitute special obligations of the Town solely secured by a lien on and pledge of the net revenues of the water and sewer system, Paymente on Uie notes payable of the Enterprise Fund are made from the Water and Sewer Fund.

(Continued)

25


Notes to Financial Stetemente December31,2012

(Continued)

Debt service requiremente at December 31, 2012, were as follows;


Fiscal Year Principal Interest

2013 2014 2015 2016 2017

2018-2022

Business-Tvoe Activities

Fiscal Year

2013 2014 2015 2016 2017

2018-2022 2023-2027 2028-2032 2033-2037 2038-2042 2043-2047

$ 4,000 4.000 4,000 4.000 4.000

15.000 3i 35.000

Principal

$ 28,649 28,236 18,640 19,062 20,503 89,732 69,777 86,265

106,650 131,852 30.561

$ 1,750 1,550 1,350 1.150

950 1.500

S 8.250

Interest

$ 27,513 26.123 24,769 23,897 23,007

100.811 84,224 67,735 47,351 22,149

922 S 629.927 $ 448,501

(Continued)

26



(Continued)

(11) Risk Management

The Town purchases commercial insurance to provide workers compensation coverage and general liability and property insurance. There were no significant reductions in insurance coverage from the previous year.

(12) Leases

The Town leases equipment under operating leases. The rental cost on the equipment paid during the year ended December 31, 2012 was $2,959.

CommiUnents under lease agreement having initial or remaining non-cancelable terms, except for a non-appnapriation clause, in excess of one year are as follows:

Year Ending DecemberSI. Amount

2013 $ 3,097 2014 3,097 2015 3,097

(13) Subsequent Evente

Subsequent evente have been evaluated tiirough July 12, 2013, Uie date the financial statemente were available to be issued.

(14) General Fund (Deficit)

At December 31, 2012, the General Fund's fund balance (deficit) vras ($77,498). Management's plan to conect Uie deficit is as follows:

1) Transfers from Uie proprietary fund to Uie general fund will be made, as funds are available, to offset expenditures now being paid by the general fund for the benefit of the proprietary fund,

2) The Town will adopt appropriate budgete which will include reduction of expenditures for the general fund in the future.

27


Required Supplementary Information Budgetary Comparison Schedule

General Fund For the Year Ended December 31. 2012

Revenues: Ad valorem taxes Franchise taxes Intergovernmental Licenses and permits Fines and forfeitures Miscellaneous

Total revenues

Expenditures: Current:

General govemment Public safety

Capital outiay

Total expenditures

Budget i Original

$ 18,000 33.000

143 23,000

110,000 7.857

192,000

53,873 82,127

136.000

'\mounts Final

$ 15.000 33,000

150 23,000

110,000 1,700

182,850

79,000 81,500

160,500

Actual Amounte (Budgetary Basis)

$ 10,498 17,071 30,176 22,781

144,714 7,603

232.843

159,599 119,934 13,500

293.033

Variance with Final Budget

Positive (Negative)

$ (4,502) (15.929) 30,026

(219) 34,714

5,903 49,993

(80,599) (38,434) (13,500)

(132,533)


Other financing sourses (uses): Transfer in

Excess (deficiency) of revenues and oUier sources over expenditures and other uses

Fund balance (deficit) at beginning of year

Fund balance (deficit) at end of year

56,000 22.350 (60,190)

51.000

(82,540)

51,000

!S

$

56,000

56.000 $

22,350

22,350 $

51,000

(9.190)

(39,001)

(48,191) $

51,000

(31,540)

(39,001)

(70,541)

See accompanying note to the required supplementary schedule.

28


Required Supplementary Information Budgetary Comparison Schedule

Sales Tax Fund For the Year Ended December31, 2012

Revenues: Sales tax Investment earnings

Total revenues

Expenditures; Current:

Highway and streets Total expenditures


Other financing sourses (uses): Transfers out

Budgeted Amounte Original and Final

$ 59,000

59,Q00"

31,200

Excess (deficiency) of revenues and other sources over expenditures and other uses

Fund balance at beginning of year

Fund balance (deficit) at end of year

Variance with Final Budget

Actual Amounts Positive (Budgetary Basis) (Negative) $ 66,610 $ 7,610

10 10

31.200

27.800

(15,000) (15.000)

12,800

12,800 $

66,620

12,830 12.830

53,790

(51,000) (51,000)

2,790

5,921

8,711 $

7,620

18,370 18,370

25,990

(36,000) (36,000)

(10,010)

5,921

(4,089)

See accompanying note to the required supplementary schedule,

29


Notes to Required Supplementary Information For the Year Ended December 31,2012

For the year ended December 31, 2012, the Town adopted budgets on a cash basis for the general fund, sales tax fund, and debt service fund. There was one amendment to the budgete. The follovnng schedule reconciles excess (deficiency) of revenues and other sources over expenditures and other uses on the statement of revenues, expenditures and changes in fund balances (budget basis) with the amounts shown on Uie statement of revenues, expenditures and changes in fijnd balances (GAAP basis):

General Fund

Sales Tax Fund

Excess (deficiency) of revenues and oUier sources over expenditures and other uses (budget basis)

Adjustmente: Revenue accruals - net

Expenditures accruals - net

Excess (deficiency) of revenues and other sources over expenditijres and other uses (GAAP basis)

S ( 9,190) $ 2,790

4,362 2,927

( 8.655) 50

Sf 13,4831 $ 5,767

30


Schedule of Compensation Paid to Board Members For the Year Ended December 31, 2012

Mayor - Comerdis Phillips $ 6.325

Alderman: Clarence Cox 2,442 Naomi Houston 2,664 Evelyn Parish 2,664 Curtis Walker 2,664 Chris Williams 2,664

$ ^9,423

31

COOK & MOREHART

Certified Public Accountants

IZISHAWNAVENVE'SHREVEPORT. LOUISIANA 71107• P.O. BOX 7S24l>'SMREVEPORT, LOUISIANA 71I37-S240

TJUVjsf) MOBEHMIT.CPA TELEPHONE (318) 22I-S41.^ FAX [318) 2:i-S441 A EDWARD BALL, CPA VICKIE D CASE. CPA

. MEMBER

STUART L REEKS, CPA CERTIFIED PUBLIC ACCOUNTANTS

SOCIETY OF LOUISIANA CEKTIFIEO PUBLIC ACCOUNTANTS

Report On Internal Control over Financial Reporting and on Compliance and Other Matiiers Based on an Audit of Financial Statemente Performed in

Accordance With Govemment Auditing Standants



We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to the financial audite contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, business-^pe activities, each major fund, and the aggregate remaining fund intomiation of Uie Town of Cotton Valley, Louisiana, as of and for the year ended December 31, 2012, and the related notes to the financial stetemente, which collectively comprise the Tovm of Cotton Valley's basic financial statemente, and have issued our report thereon dated July 12, 2013,

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered Uie Town of Cotton Valley's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial stetemente, but not tor the purpose of expressing an opinion on the effectiveness of the Town of Cotton Valley's intemal contiTDl. Accordingly, we do not express an opinion on the effectiveness of Uie Town of Cotton Valley's intemal confrol.

A deficiency in internal control exists when the design or operation of a conti"ol does not allow management or employees, in the normal course of peribrming their assigned functions, to prevent, or detect and correct misstatemente on a timely t>asis. A material weakness is a deficiency, or combination of deficiencies, in internal contiTsI, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and conected on a timely basis, A significant deficiency is a deficiency, or a combination of deficiencies, in infernal control that is less severe than a material weakness, yet important enough to merit attention by those charged vi/ith governance.

Our consideration of the intemal control was for Hie limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in intemal control that might be material weaknesses or significant deficiencies and tiierefore, material weaknesses or significant deficiencies may exist fliat were not identified. Given these limitations, during our audit we did not identify any deficiencies in internal conUol that we consider fo be material weaknesses. However, material weaknesses may exist that have not been identified. We did identily certain deficiencies in intemal conti"ol, described in the accompanying schedule of current year audit findings as items 2012-2 and 2012-3 that we consider to be significant deficiencies.

32

Compliance and Other Matters

As part of obtaining reasonable assurance about vrfieUier Town of Cotton Valley's financial statements are free from material misstatement, we performed teste of its compliance with certain pnavisions of laws, regulations, conti-acts, and grant agreemente, noncompliance vidth which could have a direct and material effect on the determination of financial statement amounte. 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 resulte of our teste disclosed one instance of noncompliance or other matters that is required to be reported under Govemment Auditing Standards and which is descritied in the accompanying schedule of cun-ent year audit findings as item 2012-1.

Town of Cotton Valley's Response to Finding

Town of Cotton Valley's response to the finding identified in our audit is described in the accompanying Corrective Action Plan for Current Year Audit Findings, Town of Cotton Valley's response was not subjected to ttie auditing procedures applied in Uie audit of Uie financial statemente and, accordingly, we express no opinion on it.

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the resulte of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance wiUi Government Auditing Standards in considering Uie entity's internal conUol and compliance. Accordingly, this communication is not suitable for any other purpose.

Cook & Morehart Certified Public Accountante July 12, 2013

33


Summary Schedule of Prior Year Audit Findings December 31, 2012

2011-1: Budgetary Control

During the year ended December 31. 2011, the Town did not amend the budget resulting in expenditures and transfers for the sales tax fund exceeding total budgeted expenditures and transfers by five percent or more. The Town did not amend the budget for the general fund which caused the expenditures to exceed budgeted expenditures by five percent or more.

Recommendation: We recommend that the Town monitor and amend budgets in order to be in compliance with state law.

Current Status: See finding in current year audit.

2011-2: Significant Deficiency - Control of Ut i l l ^ Accounts and Customer Deposits

During our audit for the year ended December 31, 2011. we note the following concerning control of utility accounts receivable and utility customer deposits:

The Town does not reconcile an aged accounte receivable trial balance and the customer d^Josit detail listing to the general ledger on a monthly basis.

Recommendation: We recommend that the Town reconcile the aged accounts receivable trial balance and the customer deposit detail listing to the general ledger or to each report and listing on a monthly basis.

Current Status: See finding in current year audit

2011-3: Significant Deficiency - Controls Over Revenue Collections

Criteria: Internal controls should be in place to provide adequate segregation of duties over collections of the Town's various revenue sources.

Conditions: Collections of the various revenue sources, such as utility billing, ad valorem, fines-tickets, etc, are generally done by the Town Clerk or Assistant Town Clerk. Sometimes the same person collecting also makes the deposits and reconciles the bank statements.

Cause: Due to small size of the Town and available resources, there is a lack of segregation of duties.

Effect: Due to the lack of segregation of duties, errors or irregularities could occur and not be detected.

(Continued)

34


Summary Schedule of Prior Year Audit Findings For the Year Ended December 31, 2011

(Continued)

Recommendation: The Town should consider implementing controls whereby the duties concerning collection of the various revenues can be properly segregated.

Current Status: See finding in current year audit.

2011-4: Significant Deficiency - Financial Statement Preparation

Condition: Management is responsible for establishing and maintaining internal controls, including monitoring, and for the fair presentation in the financial statements of financial position, results of operations, and cash flows, including the notes to financial stetemente, in conformity wiUi U.S, generally accepted accounting principles. As part of the audit, management requested us to prepare a draft of your financial stetemente. including the related notes to financial statements. This condition is intentional by management based upon the agency's financial complexity, along with the cost effectiveness of acquiring the ability to prepare financial statemente in accordance with generally accepted accounting principles. Management reviewed, approved, and accepted responsibility for those financial statements prior to their issuance.

Recommendation: Whether or not it would be cost effective to cure a control deficiency is not a factor in applying Statement on Auditing Standards (SAS) 115's reporting requirements. Because prudent management requires that the potential benefit from an internal control must exceed its cost, it may not be practical to correct all the deficiencies an auditor reports under SAS 115. In this case we do not believe that curing the significant deficiency described above would be cost effective or practical and accordingly do not believe any corrective action is necessary.

Current Status: No finding in current year audit.

2011-5: Code of Ethics

During our audit for the year ended December 31. 2011, the Town purchased a trailer for $1,000 from one of its Alderman. It appears this violates R,S, 42:1112 in regards to participation in a Uansaction with the Town that is not allowed by the statute.

Recommendation: We recommend that the Town contact the Louisiana Ethics Administration to resolve this finding. We also recommend that the Town establish procedures to prevent violations of the above mentioned stetute.

Current Status: Finding resolved.

(Continued)

35

Town of Cotton Valley Cotton Valley. Louisiana

Schedule of Current Year Findings For the Year Ended December 31. 2012

2012-1: Budgetary Control

During the year ended December 31, 2012, the Town did not amend the budget resulting in expenditures and transfers for the sales tax fund exceeding total budgeted expenditures and transfers by five pen^nt or more. The Town did not amend the budget for the general fund which caused the expenditures to exceed budgeted expenditures by five pen;ent or more.

Recommendation: We recommend that the Town monitor and amend budgete in order to be in compliance with state law.

Management's Response: The Town will monitor and amend the budget as needed in the future.

2012-2: Significant Deficiency - Control of Utility Accounts and Customer Deposits

During our audit for the year ended December 31, 2012, we note the following concerning control of utility accounts receivable and utility customer deposite:

The Town does not reconcile an aged accounte receivable trial balance and the customer deposit detail listing to the general ledger on a monthly basis.

Recommendation: We recommend that the Town reconcile Uie aged accounte receivable trial balance and the customer deposit detail listing to the general ledger or to each report and listing on a monthly basis,

Management's Response: The Town Clerk began reconciling the Accounts Receivable ttial balance with the daily work during June, 2013.

2012-3: Significant Deficiency - Controls Over Revenue Collections

Criteria: Internal controls should be in place to provide adequate segregation of duties over collections of the Town's various revenue sources.

Conditions: Collections of the various revenue sources, such as utility billing, ad valorem, fines-tickete, etc., are generally done by the Town Clerk or Assistant Town Clerk, Sometimes the same person collecting also makes the deposite and reconciles the bank statements.

Cause: Due to small size of the Town and available resources, there is a lack of segregation of duties.

Effect: Due to the lack of segregation of duties, errors or irregularities could occur and not be detected.

Recommendation: The Town should consider implementing controls whereby the duties concerning collection of the various revenues can be properly segregated.

Management's Response: The Town will consider controls where they can, but due to the small size of the Town, personnel duties will not always be totally segregated.

(Continued)

36

Documents

Town of Cotton Valley - app.lla.state.la.us€¦ · aggregate remaining fund information of Hie Tovm of Cotton Valley, Louisiana, as of December 31, 2012, and the respective changes