dorcas fire district, inc. crestview, florida … rpts/2012 dorcas... · and supplementary...
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DORCAS FIRE DISTRICT, INC.
CRESTVIEW, FLORIDA
AUDITED FINANCIAL STATEMENTS
AND SUPPLEMENTARY INFORMATION
YEAR ENDED SEPTEMBER 30, 2012
Auditor: Joseph A. Jones, CPA
Crestview, Florida
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DORCAS FIRE DISTRICT, INC.
FIRE CHIEF
JOHN POLINSKI
BOARD MEMBERS
TOM CANNON (CHAIRMAN)
EDDIE ALFORD (TREASURER)
JOHNA ESTERBERG
(TWO SEATS ARE VACANT)
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TABLE OF CONTENTS
Pages
INDEPENDENT AUDITOR'S REPORT 4 - 5
REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL 6 - 7
REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED
IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
MANAGEMENT'S DISCUSSION AND ANALYSIS 8 - 11
MANAGEMENT CONFIRMATION LETTER 12 - 14
BASIC FINANCIAL STATEMENTS
GOVERNMENT-WIDE STATEMENTS
Statement of Net Assets 16
Statement of Activities 17
FUND FINANCIAL STATEMENTS
Statement of Assets, Liabilities and Fund Balance Arising From Cash Transactions 19
Reconciliation of the Statement of Assets, Liabilities and Fund Balance Arising From 20
Cash Transactions to the Statement of Net Assets
Statement of Revenues, Expenditures and Changes in Fund Balance 21
Reconciliation of the Statement of Revenues, Expenditures 22
and Changes in Fund Balances to the Statement of Activities
NOTES TO FINANCIAL STATEMENTS
NOTE A, Summary of Significant Accounting Policies 24 - 26
NOTE B, Deposits and Investments 27
NOTE C, Contingency 27
NOTE D, Capital Assets 27 - 28
NOTE E, Long Term Debt 29 - 30
NOTE F, Contingent Liabilities & NOTE G, Grants and Awards 30
SUPPLEMENTARY INFORMATION
Schedule of Expenditures Paid 32
Budget Comparison Schedule 33
Management letter 34 - 36
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JOSEPH A JONES CERTIFIED PUBLIC ACCOUNTANT 6075 Bud Moulton Road Crestview, Fl. 32536 Phone (850) 682-8950 Cell phone (850) 826-0630 Email: [email protected] Fax: (866) 521-9736 INDEPENDENT AUDITORS’ REPORT
Board of Directors Dorcas Fire District, Inc. Crestview, Florida I have audited the accompanying financial statements for the governmental activities of Dorcas Fire District, Inc., as of and for the year ended September 30, 2012, and which comprise Dorcas Fire District, Inc.’s basic financial statements as listed in the table of contents. These financial statements are the responsibility of Dorcas Fire District, Inc.’s management. My responsibility is to express an opinion on these financial statements based on my audit.
I have conducted my audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in “Government Auditing Standards,” issued by the Comptroller General of the United States. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. Approximately $13,519 was posted to a discrepancies account, and many of these amounts appear to be misappropriation of funds. There may be additional instances of misappropriation of funds. In addition, documentation for many expenditures is missing and has not been found. On May 17, 2012 the former bookkeeper was arrested and charged with grand theft of $5,000 or more. On September 12, 2012, the former bookkeeper was sentenced to 3 years suspended prison sentence, with 5 years of probation, and was ordered to pay restitution of $13,364.82 at $300.00 per month.
In my opinion, except for the amount of misappropriation of funds and the amounts pertaining to missing documentation, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities of Dorcas Fire District, Inc., as of September 30, 2012, and changes in financial position, thereof for the year ended in conformity with Generally Accepted Accounting Principles as described in Note A.
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In accordance with Governmental Auditing Standards, I have also issued a report dated May 24, 2013, on my consideration of Dorcas Fire District, Inc.’s internal control over financial reporting and on my tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of my testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of my audit.
The Management’s Discussion and Analysis on pages 5 through 8, is not a required part of the basic financial statements but is supplementary information required by accounting principles generally accepted in the United States of America. I have applied certain limited procedures, which consisted principally of inquiries of management regarding methods of measurement and presentation of the required supplementary information. However, I did not audit the information and express no opinion on it.
My audit was made for the purpose of forming an opinion on the financial statements that comprise Dorcas Fire District, Inc. basic financial statements. The accompanying financial information listed as supplementary information in the table of contents is presented for purposes of additional analysis and is not a required part of the financial statements of Dorcas Fire District, Inc. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and, in my opinion, except for the amount of misappropriation of funds and the amounts pertaining to missing documentation, this financial information listed as supplementary information is fairly presented in all material respects in relation to the financial statements taken as a whole.
Joseph A. Jones Certified Public Accountant
Crestview, Florida May 24, 2013
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JOSEPH A JONES CERTIFIED PUBLIC ACCOUNTANT 6075 Bud Moulton Road Crestview, Fl. 32536 Phone (850) 682-8950 Email: [email protected] Fax: (866) 521-9736
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Board of Directors Dorcas Fire District, Inc. Crestview, Florida I have audited the financial statements of the governmental activities of Dorcas Fire District, Inc., as of and for the year ended September 30, 2012, and which comprise Dorcas Fire District, Inc.’s basic financial statements and have issued my report thereon dated May 24, 2013. I conducted my audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in “Government Auditing Standards,” issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting
In planning and performing my audit, I considered Dorcas Fire District, Inc.’s internal control over financial reporting in order to determine my auditing procedures for the purpose of expressing my opinion on the financial statements and not to provide an opinion on the internal control over financial reporting. My consideration of the internal control would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. I did find a lack in separation of duties pertaining to separation of financial bookkeeping and reporting versus financial custodian duties such as money receipts/deposits and disbursement of funds. The bookkeeper has been
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performing both the tasks of financial reporting and the tasks of custodian of funds receipts and disbursements. Most small organizations either cannot afford to hire additional personnal sufficient to accomplish separation of reporting duties from funds custodian duties. I believe that financial internal controls could be strengthened, and I recommend requiring the bookkeeper to perform monthly bank reconciliations and I recommend a board member perform a review, on a monthly basis, of the monthly financial statements, the monthly receipts and bank deposits, the monthly disbursements and supporting documentation, the monthly bank reconciliations, the monthly bank statements and unpaid bills. I recommend documentation of the board member’s review be maintained in the business office. I recommend any discrepancies found by this review be promptly reported to the board, and I recommend that appropriate action be promptly taken by the board to deal with any discrepancies found. Other than the lack of separation of duties, I noted no matters involving the internal control over financial reporting and its operation that I consider to be material weakness.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Dorcas Fire District, Inc.’s financial statements are free of material misstatement, I performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective test of my audit, and accordingly, I do not express such an opinion. The results of my tests did disclose the misappropriation of funds mentioned previously, and did disclose the lack of separation of duties as mentioned above. Otherwise, the results of my tests disclosed no other instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
This report is intended solely for the information and use of management and the board of directors and is not intended to be and should not be used by anyone other than those specified parties.
Joseph A. Jones Certified Public Accountant Crestview, Florida May 24, 2013
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Management Discussion and Analysis My discussion and analysis of the District’s financial performance provide an overview of the District’s financial activities for the fiscal year ended September 30, 2013. This discussion and analysis should be read in conjunction with the District’s financial statements. Overview of the Financial Statements The District’s financial statements comprise the following elements: Government-wide Financial Statements Government-wide financial statements provide both long-term and short-term information about the District’s overall financial condition. Changes in the District’s financial position may be measured over time by increases and decreases in the Statement of Net Assets. Information on the how District’s net assets changed during the fiscal year is presented in the Statement of Activities. Fund Financial Statements Fund financial statements focus on the individual parts of the District, reporting the District’s operations in more detail than government-wide and fund financial statements. Fund financial statements include the statements for governmental funds. Notes to Financial Statements Notes to the financial statements provide additional information that is essential to the full understanding of the data provided in the government-wide and fund financial statements. Refer to Note A to the financial statements for more detailed information on the elements of the financial statements. Financial Analysis of the District as a Whole One of the most important questions asked about the District’s finances is “Is the District, as a whole, better off or worse off as a result of the year’s activities?” The Statement of Net Assets and the Statement of Revenues, Expenses, and Net Assets report information about the District’s activities in a way that will help answer this question. These two statements report the net assets of the District and the changes in them. You can think of the district’s net assets-the difference between assets and liabilities-as one way to measure financial health or financial position. Over time, increases or decreases in the District’s net assets are one indicator of whether its financial health is improving or deteriorating. However, you will need also to consider other non-financial factors such as changes in economic conditions, population growth, and new or changed legislation.
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The Districts's total net assets were $104,012 at the end of the fiscal year. The analysis below
focuses on the District's net assets (Table 1) and changes in net assets (Table 2) during the year.
Table 1
2012 2011
Assets:
Current Assets
$ 39,043
$ 47,132
Capital Assets
599,981
653,411
Total Assets
639,024
700,543
Liabilities
Current Liabilities
30,592
34,019
Long Term Debt
504,419
535,750
Total Liabilities
535,011
569,769
Net Assets
Invested in Capital Assets
Net of Related Debt
72,408
95,475
Unrestricted
18,700
28,789
Restricted
12,903
6,510
Total Net Assets
$ 104,012
$ 130,774
Changes in District's net assets can be determined by reviewing the following condensed
Statement of Activities in Table 2.
Table 2
2012 2011
Property Taxes
$ 186,636
$ 182,264
Impact Fees
4,906
3,892
Interest Income
0
71
Gain on Sale of Fire Trucks
0
19,187
Restitution for Snap on Tools
706
-
Miscellaneous Income
-
110
Insurance Reimbursement for Bay door
4,167
-
Donations
1,031
-
Total Revenues
197,445
205,523
Operating Expenses
224,207
278,767
Total Primary Government Expenses
224,207
278,767
Change in Net Assets
(26,762)
(73,244)
Net Assets at Beginning of Year
130,774
204,018
Net Assets at End of Year
$ 104,012
$ 130,774
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The District's Funds
The District has one fund from which all activities are carried out. This is the General Fund.
The General Fund is used to report the cost of services provided to the residents of the District.
The District anticipates applying for various grants to assist it in acquiring additional fire fighting
equipment to assist in their providing services to the residents of their district.
Capital Assets and Debt Administration
Capital Assets
At the end of 2012, the District had $599,981 invested in capital assets net of accumulated
depreciation.
Table 3 summarizes the District's capital assets, net of accumulated depreciation, for the years ended as follows:
Table 3
2012
2011
Land
$ 9,082
$ 9,082
Buildings - Completed
370,121
381,465
Fire & Rescue Equipment 18,079
21,511
Fire Trucks
202,698
241,354
Total Capital Assets
$ 599,981
$ 653,411
Table 4 summarizes the changes in capital assets. These changes are presented in
more detail in Note D to the financial statements.
Table 4
2012
2011
Balance at Beginning of Year $ 653,411
$ 632,238
Fire & Rescue Equipment purchased 13,948
-
Fire Trucks Purchased
189,856
Less Cost of Fire Trucks Traded (Net)
(65,913)
Less current year Depreciation (67,379)
(102,769)
Total Capital Assets
$ 599,981
$ 653,411
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Debt: At September 30, 2012, the District had a total of $535,011 of outstanding debt which represents
a decrease of $34,758 from the prior year.
Table 5 summarizes the outstanding debt:
Table 5
2012
2011
Accrued Interest
$ 1,416
$ 1,820
Payroll Liabilities
3,439
7,833
Pumper Truck (Marquette Bank)
23,847
34,702
2010 International (Community Bank)
156,345
169,856
First National Bank (New Fire Station)
345,965
351,558
Volunteer Account
4,000
4,000
Total Debt
$535,011
$ 569,769
Economic Factors and Next Year's Budget
The District expects its revenue to increase during the next fiscal year. As additional residents
move into the District's service area, additional equipment and manpower will be needed to service all of these residents. The District has an impact fee in place to help offset these costs, plus the District is applying for various grants to help offset these additional costs.
Contacting the District's Financial Management
This financial report is designed to provide the residents of the District, customer and creditors with a general overview of the District's finances and to demonstrate the District's accountability
for the money it receives. If you have questions about this report or need additional financial information, contact the Dorcas Fire District, at 4418 Poverty Creek Rd, Crestview, Fl. 32539.
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Dorcas Fire District, Inc. 4418 Poverty Creek Road
Crestview, Fl. 32539
December 6, 2012 To: Joseph A. Jones, C.P.A. 6075 Bud Moulton Road Crestview, Fl. 32536 Subject: Management Confirmation Letter for FY 2012 We are providing this letter in connection with your audit of the financial statements of Dorcas Fire District as of September 30, 2012, and for the year then ended, for the purpose of expressing an opinion as to whether the financial statements present fairly, in all material respects, the financial position of the government activities of the Dorcas Fire District, and the respective changes in financial position and cash flows, where applicable, in conformity with U.S. generally accepted accounting principles. We are also responsible for adopting sound accounting policies, establishing and maintaining effective internal control, and preventing and detecting fraud. We confirm, to the best of our knowledge and belief, the following representations made to you during your audit:
1. The financial statements referred to above are fairly presented in conformity with U.S. generally accepted accounting principles and include all properly classified fund and other financial information of the primary government and all component units required by generally accepted accounting principles to be included in the financial reporting entity.
2. We are making available to you all District records that you request, including, but not limited to, the following: a. Financial records and related supporting data. b. Minutes of meetings of Dorcas Fire District.
3. There have been no communications from regulatory agencies concerning noncompliance with, or deficiencies in, financial reporting practices.
4. There are no material transactions that have not been properly recorded in the accounting records underlying the financial statements.
5. We acknowledge our responsibility for the design and implementation of programs and controls to prevent and detect fraud.
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6. We have told you that the former bookkeeper has been convicted of theft and sentenced to pay $13,365 in restitution.
7. We have no knowledge of any allegations of fraud or suspected fraud affecting the entity received in communications from employees, former employees, analysts, regulators, or others, other than the fraud or theft as mentioned above in the previous paragraph.
8. The Dorcas Fire District has no plans or intentions that may materially affect the carrying value or classifications of assets, liabilities, or equity.
9. The following, if any, have been properly recorded or disclosed in the financial statements: a. Related party transactions, including revenues, expenditures/expenses, loans, transfers, leasing arrangements and guarantees. b. Guarantees, whether written or oral, under which the Liberty Fire District is contingently liable. c. All accounting estimates that could be material to the financial statements, including key factors and significant assumptions underlying those estimates and measurements. We believe the estimates and measurements are reasonable in the circumstances, consistently applied, and adequately disclosed.
10. We are responsible for compliance with the laws, regulations and provisions of contracts and grant agreements applicable to us, including tax or debt limits and debt contracts; and we have identified and disclosed to you all laws, regulations and provisions of contracts and grant agreements that we believe have a direct and material effect on the determination of financial statement amounts, including legal and contractual provisions for reporting specific activities in separate funds.
11. There are no: a. Violations or possible violations of budget ordinances, laws and regulations, provisions of contracts and agreements, tax or debt limits, and any related debt covenants whose effects should be considered for disclosure in the financial statements or as a basis for recording a loss contingency. b. We are not aware of any pending or threatened litigation, claims, or assessments or unasserted claims or assessments that are required to be accrued or disclosed in the financial statements in accordance with Financial Accounting Standards Board (FASB) Statement No. 5, “Accounting of Contingencies,” and we have not consulted a lawyer concerning litigation, claims, or assessments. c. Other liabilities or gain or loss contingencies that are required to be accrued or disclosed by FASB Statement No. 5. d. Reservations or designation of fund equity that was not properly authorized and approved.
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12. The Dorcas Fire District has satisfactory title to all owned assets, and there are no liens or encumbrances on such assets nor has any assets been pledged as collateral, except for the following: (a) First National Bank of Crestview loan for Station 41 construction, (b) Marquette Bank loan for pumper truck, and (3) Community Bank loan for rescue truck.
13. The Dorcas Fire District has complied with all aspects of contractual agreements that would have a material effect on the financial statements in the event of noncompliance.
14. The financial statements include all component units as well as joint ventures with an equity interest, and properly disclose all other joint ventures and other related organizations.
15. All funds that meet the quantitative criteria in GASB Statement No. 34 for presentation as major are identified and presented as such. All other funds that are presented as major are particularly important to financial statement users.
16. Net asset components and fund balance reserves and designations are properly classified and, if applicable, approved.
To the best of our knowledge and belief, no events, including instances of noncompliance, have occurred subsequent to the balance sheet date and through the date of this letter that would require adjustment to or disclosure in the aforementioned financial statements.
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GOVERNMENT-WIDE FINANCIAL STATEMENTS
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DORCAS FIRE DISTRICT, INC.
STATEMENT OF NET ASSETS AT SEPTEMBER 30:
2012
ASSETS
CURRENT ASSETS
Cash, General Fund (Unrestricted)
$ 21,986
Cash, Impact Fund (Restricted)
12,903
Due from Deep South Fire Trucks
-
Prepaid Insurance
4,154
Total Current Assets
39,043
CAPITAL ASSETS
Depreciable Assets (Building, Trucks, Equipment, etc) 1,291,733
Less Accumulated Depreciation
(700,834)
Depreciable Assets, net of Depreciation
590,899
Non-depreciable Assets (Land)
9,082
Total Capital Assets
599,981
TOTAL ASSETS
$ 639,024
LIABILITIES
CURRENT LIABILITIES
Accrued Interest
$ 1,416
Leases Payable
25,737
Payroll Liabilities
3,439
Total Current Liabilities
30,592
LONG-TERM LIABILITIES
Loan from Dorcas Volunteer Account
4,000
Long-term Leases Payable
154,455
Construction Loan, First National Bank
345,965
Total Long-term Liabilities
504,419
TOTAL LIABILITIES
535,011
NET ASSETS
Investments in Capital Assets, Net of Debt
72,408
Unrestricted
18,700
Restricted
12,903
Total Net Assets
$ 104,012
TOTAL LIABILITIES AND NET ASSETS
$ 639,024
The accompanying notes to the financial statements are an integral part of this statement.
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DORCAS FIRE DISTRICT, INC.
STATEMENT OF ACTIVITIES Year Ended September 30, 2012
NET (EXPENSE)
REVENUE AND
CHANGES IN
PROGRAM REVENUES NET ASSETS
CHARGES OPERATING CAPITAL PRIMARY
FOR GRANTS AND GRANTS AND GOVERNMENTAL
FUNCTION/PROGRAMS EXPENSES
SERVICES CONTRIBUTIONS CONTRIBUTIONS ACTIVITIES
PRIMARY GOVERNMENT Governmental Activities General Government $ 224,207
$ - $ - $ - $ (224,207)
Total Primary Government $ 224,207 $ - $ - $ - $ (224,207)
GENERAL REVENUES
Property Taxes
186,636
Impact Fees
4,906
Restitution for Snap on Tools
706
Insurance Reimbursement - Bay doors 4,167
Donations
1,031
Total General Revenues and Special Items 197,445
Change in Net Assets
(26,762)
NET ASSETS - BEGINNING OF YEAR 130,775
NET ASSETS - END OF YEAR
$ 104,012
The accompanying notes to the financial statements are an integral part of this statement.
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FUND FINANCIAL STATEMENTS
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DORCAS FIRE DISTRICT, INC. STATEMENT OF ASSETS, LIABILITIES AND FUND BALANCE
ARISING FROM CASH TRANSACTIONS
AT SEPTEMBER 30:
2012
ASSETS
CURRENT ASSETS
Cash, General Fund (Unrestricted)
$ 21,986
Cash, Impact Fund (Restricted)
12,903
Prepaid Insurance
4,154
Total Current Assets
39,043
TOTAL ASSETS
39,043
LIABILITIES AND FUND BALANCES
LIABILITIES
CURRENT LIABILITIES
Accrued Interest
1,416
Leases Payable
25,737
Payroll Liabilities
3,439
Total Current Liabilities
30,592
FUND BALANCES
Unrestricted
(4,453)
Restricted
12,903
Total Fund Balance, Unreserved
8,451
TOTAL OF LIABILITIES AND FUND BALANCES $ 39,043
The accompanying notes to the financial statements are an integral part of this statement.
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DORCAS FIRE DISTRICT, INC.
RECONCILIATION OF THE STATEMENT OF ASSETS, LIABILITIES AND FUND BALANCE
ARISING FROM CASH TRANSACTIONS TO THE STATEMENT OF NET ASSETS
AT SEPTEMBER 30:
2012
Fund Balances - Total Governmental Funds
$ 8,451
Amounts reported for governmental activities in Statement of Net Assets are different because:
Add: Capital Assets used in governmental activities are not financial resources
and therefore are not reported in the governmental funds
Governmental Capital Assets
1,300,815
Less: Accumulated Depreciation
(700,834)
599,981
Subtract: Long-term liabilities are due and payable in the current year
and therefore are not reported in governmental funds
Loan from Dorcas Volunteer Account
4,000
Long Term Leases
154,455
First National Bank of Crestview construction loan
345,965
504,419
Net Assets of Governmental Activities
$ 104,012
The accompanying notes to the financial statements are an integral part of this statement.
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DORCAS FIRE DISTRICT, INC. STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUNDS BALANCES
FOR YEAR ENDED SEPTEMBER 30: 2012
REVENUES
Taxes
$ 186,636
Impact Fees
4,906
Insurance Reimbursement - Bay door 4,167
Restitution for Snap on Tools 706
Donations
1,031
Total Revenues 197,445
EXPENDITURES
General Government (excluding depreciation) 156,829
Capital Outlay
Plus Capital Assets Purchased 13,948
Long Term Debt Service
Plus Long Term Debt paid down 29,959
Plus Increase in Current Lease Debt
Total Expenditures 200,736
EXCESS OF REVENUES OVER (UNDER) (3,291)
EXPENDITURES - GENERAL GOVERNMENT
FUND BALANCE - BEGINNING 14,388
FUND BALANCE - ENDING
$ 11,097
The accompanying notes to the financial statements are an integral part of this statement.
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DORCAS FIRE DISTRICT, INC. RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES
FOR YEAR ENDED SEPTEMBER 30:
2012
Net Change in Fund Balances - total governmental funds
$ (3,291)
Amounts reported for governmental activities in Statement of Net Assets are different because:
Governmental funds report capital outlays as expenditures.
However, in the Statement of Activities, the cost of those
those assets is depreciated over their estimated useful lives:
Expenditures for capital assets
13,948
Less current year depreciation
(67,379)
Net Expenditure for capital assets
(53,431)
Repayment of principal on debt is an expenditure in the
governmental funds but the repayment reduces long-term
liabilities in the Statement of Net Assets
Normal debt reduction
29,959
Change in Net Assets of Governmental Funds
$ (26,762)
The accompanying notes to the financial statements are an integral part of this statement.
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NOTES TO FINANCIAL STATEMENTS
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DORCAS FIRE DISTRICT, INC.
NOTES TO FINANCIAL STATEMENTS September 30, 2012 NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Dorcas Fire District was created by section 2005-331, Laws of Florida. The district is an independent fire control district operating pursuant to the special act and the provisions of Chapter 191, Florida Statutes. The Dorcas Fire District, Inc. operates as a local government entity (special district), and was organized in Okaloosa County, Florida under County Ordinance 84.39. The Organization provides volunteer fire and rescue support to the local community. The financial statements of the Dorcas Fire District have been prepared in accordance with generally accepted accounting principles (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the standard-setting body for governmental accounting and financial reporting. The GASB periodically updates its codification of the existing Governmental Accounting and Financial Reporting Standards which, along with subsequent GASB pronouncements (Statements and Interpretations), constitutes GAAP for governmental units. The more significant of these accounting policies are described below. FINANCIAL REPORTING ENTITY As required by generally accepted accounting principles, these financial statements present the government and its component units. The Fire District does not have any component units. BASIC FINANCIAL STATEMENTS – GASB STATEMENT NO. 34 The governmental funds statements in the fund financial statements are presented on the modified accrual basis of accounting. The basic financial statements include both government-wide (based on the Fire District as a whole) and fund financial statements. Both the government-wide and fund financial statements (within the basic financial statements) categorize primary activities as either governmental or business type. The Fire District is accounted for as a single governmental fund. The government-wide Statement of Activities reflects both the gross and net cost per functional category which is otherwise being supported by general government revenues. The Statement of Activities reduces gross expenses (including depreciation) by related program revenues, operating and capital grants. The program revenues must be directly associated with the function or a business-type activity. The operating grants include operating-specific and discretionary (either operating or capital) grants while the capital grants column reflects capital-specific grants. The net costs are normally covered by general revenue. This government-wide focus is more on the sustainability of the Fire District as an entity and the change in aggregate financial position resulting from the activities of the fiscal period. As mentioned above the Fire District reports its government-wide activity as one fund.
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DORCAS FIRE DISTRICT, INC. NOTES TO FINANCIAL STATEMENTS September 30, 2012 NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) BASIS OF PRESENTATION The financial statements of the general fund are presented on the modified accrual basis in accordance with accounting principles applicable to general government funds. The new model (GASB Statement No. 34) sets forth minimum criteria for the determination of major funds. The non-major funds are combined in a column in the fund financial statements and detailed in the combining section. The accounts of the Fire District are organized on the basis of funds and account groups, each of which is considered a separate entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenses. Government resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. As mentioned above the Fire District reports its government-wide activity as one fund. Non-Current Governmental Assets GASB Statement No. 34 eliminates the presentation of account groups, but provides for these records to be maintained and incorporates the information into the Governmental column in the government-wide Statement of Net Assets. The capital assets are recorded at cost and estimated cost for certain items acquired prior to October 1, 1983. BASIS OF ACCOUNTING The Fire District’s governmental funds are accounted for using the modified accrual basis of accounting. Under the modified accrual method, revenues are recognized when they become measurable and available. Additionally, expenditures are generally recognized when a related fund liability is incurred.
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DORCAS FIRE DISTRICT, INC. NOTES TO FINANCIAL STATEMENTS September 30, 2012 NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY Cash and cash equivalents – The Fire District considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Capital Assets – Capital assets, which include property, plant and equipment, are reported in the government-wide financial statements. Capital assets are defined as assets with an initial, individual, cost of more than $1,000 and an estimated useful life in excess of 5 years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The cost of normal maintenance and repairs that do not add to the value or materially extend assets’ lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Property, plant and equipment is depreciated using the straight-line method over the following estimated useful lives. Assets Years Buildings 40 Fire Trucks 10 Equipment 5 Office Equipment 5 Fund Balance – In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for a specific purpose. Amounts in fund balances represent tentative management plans that are subject to change. BUDGETS AND BUDGETARY ACCOUNTING Budgets are legally adopted for the general fund. Any revision to the budget must be approved by the Board of Commissioners. The budgets are compared to actual expenditures. In instances where budget appropriations and estimated revenues have been revised during the year, budget data presented in the financial statements represent final authorization amounts. ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that effect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
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DORCAS FIRE DISTRICT, INC. NOTES TO FINANCIAL STATEMENTS September 30, 2012
NOTE B - DEPOSITS AND INVESTMENTS
The District maintains deposits with "Qualified Public Depositories" as defined in Chapter 280, Florida Statutes.
NOTE C - CONTINGENCY
The Fire District receives a most of its support from Fire District Taxes and Impact Fees. A reduction in
growth of new construction would have affect the Fire District's programs and activities.
NOTE D - CAPITAL ASSETS
Capital asset activity for the fiscal year was as follows:
Balance
Balance
Oct. 1,
Sep. 30,
GOVERNMENTAL ACTIVITIES: 2011
Additions
Sold
2012
Capital assets, not being depreciated:
Land
$ 9,082
$ 9,082
Total capital assets, not being depreciated 9,082
9,082
Capital assets, being depreciated:
Fire Station Building
453,758
453,758
Fire & Rescue Equipment 312,512
13,948
326,460
Fires Trucks
511,515
511,515
Total capital assets, being depreciated 1,277,785
13,948
1,291,733
Total Capital assets, before depreciation 1,286,867
13,948
1,300,815
Less accumulated depreciation for:
Fire Station Buildings
72,293
11,344
83,637
Fire & Rescue Equipment 291,002
17,379
308,381
Fires Trucks
270,161
38,655
308,817
Total capital assets, being depreciated 633,455
67,379
700,834
Total capital assets, being depreciated, net 644,330
(53,431)
590,899
Governmental activities capital assets, net $ 653,411
$ (53,431)
$ 599,981
The accompanying notes to the financial statements are an integral part of this statement.
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DORCAS FIRE DISTRICT, INC. NOTES TO FINANCIAL STATEMENTS
September 30, 2012
NOTE D - CAPITAL ASSETS (continued)
Land and Fire Station Building: Land (1.5 acres) was purchased on Poverty Creek Road for a site for the New Fire Station (#41).
A contract to construct the new station was awarded to Mike Josey Construction Co. Payments
were made in stages as construction was completed. The new fire station building on Poverty
Creek Road was completed for a total cost of $362,968, and was occupied in Oct/Nov 2006.
Fire and Rescue Equipment: The following Fire and Rescue Equipment was purchased during the fiscal year:
Date
Description Purchased Cost
Toshiba Computer 11/2/2011 $ 1,813
Radios 6/8/2012 3,835
Cascade System 9/26/2012 8,300
Total
$13,948
The accompanying notes to the financial statements are an integral part of this statement.
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DORCAS FIRE DISTRICT, INC.
NOTES TO FINANCIAL STATEMENTS September 30, 2012
NOTE E - LONG-TERM DEBT: Capitalized Leases and Notes Payable
The District has entered into long term lease agreements for purchase of Fire Trucks. These leases
qualify for capital lease treatment. A summary of the capital leases are as follows:
Principal Accrued
Description Bal. 10/01/11 Additions Reductions Bal. 9/30/12 Due in 2013 Interest 2012
Pumper Truck (99 Ferrara) 34,702
10,856 23,847 11,552 765
2010 IntL 4300 Rescue Truck 169,856 - 13,511 156,345 14,185 650
Totals 204,558 - 24,366 180,192 25,737 1,416
The following is a detailed schedule of current, and future, lease payments for the Pumper Truck. The
lease is with Marquette Bank. The amount financed was $122,367 on 2/1/1999 at 6.42% interest.
Date Due Payment Interest Principal Prin. Balance Accrued Interest
4/1/2011 13,083 2,883 10,200 34,702 1,114
4/1/2012 13,083 2,228 10,856 23,847 765
4/1/2013 13,083 1,531 11,552 12,294
4/1/2014 13,083 789 12,294
The following is a detailed schedule of current, and future, lease payments for the 2010 InternatL 4300 Rescue Truck.
The lease is with Community Bank. The amount financed is $169,856 on 9/1/2011 at 4.99% interest.
Date Due Payment Interest Principal Prin. Balance Accrued Interest
9/1/2011
169,856 706
9/1/2012 21,986 8,476 13,511 156,345 650
9/1/2013 21,986 7,802 14,185 142,161
9/1/2014 21,986 7,094 14,893 127,268
9/1/2015 21,986 6,351 15,636 111,632
9/1/2016 21,986 5,570 16,416 95,216
9/1/2017 21,986 4,751 17,235 77,981
9/1/2018 21,986 3,891 18,095 59,886
9/1/2019 21,986 2,988 18,998 40,888
9/1/2020 21,986 2,040 19,946 20,941
The accompanying notes to the financial statements are an integral part of this statement.
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DORCAS FIRE DISTRICT, INC. NOTES TO FINANCIAL STATEMENTS September 30, 2012
NOTE E - LONG-TERM DEBT: Capitalized Leases and Notes Payable (continued)
The District borrowed $385,000 ($360,000 in FY06 and $25,000 in FY07) from the First National
Bank of Crestview to finance construction of a new fire station on Poverty Creek Road. This new
fire station replaces the fire station destroyed by fire in FY04. The replacement fire station
building was constructed over FY05 and FY06, and was occupied in October/November 2006.
First National Bank construction loan balance at 9/30/2011
$ 351,558
No loans were made during FY2012
-
Principal paid down in FY2012
(5,593)
First National Bank construction loan balance at 9/30/2012
345,965
(Loan #392760004)
Interest and late fees paid to First National Bank in FY2012
28,768
Monthly payments during FY2012
$ 2,863
The interest rate of 7.75% was lowered to 5.50% on 12/10/2012.
NOTE F - CONTINGENT LIABILITY: Payroll Taxes The Internal Revenue Service (IRS) has billed the Fire District for unpaid Payroll Taxes of $9,636
for calendar year 2010. Telephone conversations with both the IRS and the Social Security
Administration (SSA) have revealed that the calendar year 2010 gross wages of $21,965 were were input into government computers, three times, rather than one time. Therefore the
IRS believes the Fire District should pay payroll taxes on $64,395, rather than on actual wages of
$21,965. The IRS tax bill of $9,636 is based on taxing the Fire District for additional wages of
$42,930. It is likely that the IRS will correct their records and delete the $9,636 tax bill.
NOTE G - GRANTS AND AWARDS
The fire district received no grant revenues during the fiscal year.
The accompanying notes to the financial statements are an integral part of this statement.
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SUPPLEMENTARY INFORMATION
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DORCAS FIRE DISTRICT, INC. SCHEDULE OF EXPENDITURES PAID
GOVERNMENTAL FUNDS Year Ended September 30, 2012
EXPENDITURES Discrepancies
$ 13,519
Administration
2,030
Attorney fee
1,500
Building Repairs
2,322
Dues and Subscriptions
475
Equipment Maintenance
6,002
Equipment Supplies
4,448
Expendable Equipment
9,111
Fuel
9,589
Insurance
17,841
Interest Expense
36,869
Office Supplies & Software
2,011
Payroll Expenses
20,158
Payroll Taxes
2,091
Pest Control
244
Phone/TV/Internet Service
4,557
Postage and Delivery
148
Professional Audit Fees (2 years)
8,200
Station Supplies
705
Tag and title
132
Tax Roll Prep
2,501
Towing expense
740
Training
1,239
Truck Maintenance
4,230
Utilities:Gas, Electric, Water, Garbage
6,167
Total General Government Expenditures
156,829
Plus Capital Outlay Expenditures
13,948
Plus Debt Service Expenditures
29,959
Total Expenditures
$ 200,736
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DORCAS FIRE DISTRICT Budgetary Comparison Schedule GOVERNMENTAL FUNDS Year Ended September 30, 2012
EXPENDITURES
Actual
Budgeted
Over (Under)
General Government (excluding depreciation)
Expenditures
Expenditures
Budget
EXPENDITURES
Discrepancies
$ 13,519
$ 13,519
Administration
2,030
$ 1,200
830
Attorney fee
1,500
3600
(2,100)
Building Repairs
2,322
2,322
Dues and Subscriptions
475
600
(125)
Equipment Maintenance
6,002
300
5,702
Equipment Supplies
4,448
4,448
Expendable Equipment
9,111
5000
4,111
Fuel
9,589
10000
(411)
Insurance
17,841
21869
(4,028)
Interest Expense
36,869
13084
23,785
Office Supplies & Software
2,011
2500
(489)
Payroll Expenses
20,158
19600
558
Payroll Taxes
2,091
3634
(1,543)
Pest Control
244
244
Phone/TV/Internet Service
4,557
3434
1,123
Postage and Delivery
148
148
Professional Audit Fees (2 years)
8,200
8000
200
Station Supplies
705
705
Tag and title
132
132
Tax Roll Prep
2,501
2370
131
Towing expense
740
740
Training
1,239
1,239
Truck Maintenance
4,230
4,230
Utilities:Gas, Electric, Water, Garbage
6,167
6724
(557)
Total General Government Expenditures
156,829
101,915
$ 54,914
Plus Capital Outlay Expenditures
13,948
25000
(11,052)
Plus Debt Service Expenditures
29,959
34361
(4,402)
Total Expenditures
$ 200,736
$ 161,276
$ 39,460
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JOSEPH A JONES CERTIFIED PUBLIC ACCOUNTANT 6075 Bud Moulton Road Crestview, Fl. 32536 Phone (850) 682-8950 Cell Phone (850) 826-0630 Email: [email protected] Fax: (866) 521-9736
MANAGEMENT LETTER To the Board of Directors Dorcas Fire District, Inc. Crestview, Florida
I have audited the financial statements of the Dorcas Fire District, Inc., as of and for the year ended September 30, 2012, and have issued my report dated May 24, 2013.
I conducted my audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in “Government Auditing Standards,” issued by the Comptroller General of the United States. I have issued my report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with “Government Auditing Standards.” Disclosure in that report, which is dated May 24, 2013, should be considered in conjunction with this management letter.
Additionally, my audit was conducted in accordance with Chapter 10.550, Rules of Auditor General, which govern the conduct of local governmental entity audits performed in the State of Florida and require that certain items be addressed in this letter.
Section 10.554(1)(i)1., Rules of the Auditor General, require that I address whether or not recommendations made in the preceding annual financial report have been followed. The prior year audit report, dated September 19, 2012, included recommendations as mentioned again on the next page. Management has agreed to the recommendations made in the preceding year’s audit report dated September 19, 2012, and they are still in the process of implementing those recommendations. Turnover in bookkeepers has caused a delay in implementing those recommendations. Section 10.554(1)(i)2., Rules of the Auditor General require my audit to include a review of the provisions of Section 218.415., Florida Statutes, regarding investment of public funds. In connection with my audit, I determined that the Fire District complied with Section 218.415. Section 10.554(1)(i)3., Rules of the Auditor General, requires that I address in the management letter any recommendations to improve the entity’s financial management, accounting procedures, and internal controls. In connection with my audit of the Dorcas Fire District, Inc., I did find a lack in separation of duties pertaining to separation of financial reporting duties versus financial custodian duties. It appears that funds have been misappropriated. On May 17, 2012 the former bookkeeper was arrested and charged with grand theft of $5,000 or more. On September 12, 2012, the former bookkeeper was sentenced to 3 years suspended prison
35
sentence, with 5 years of probation, and was ordered to pay restitution of $13,364.82 at $300.00 per month. Recommendation: If the fire district had additional resources, I would recommend the district hire sufficient personnel to have separation of financial reporting duties from financial custodian duties. Since the district possibly cannot afford to hire additional personnel to have separation of duties, I recommend the district strengthen financial internal controls by requiring the bookkeeper to perform monthly bank reconciliations. I also recommend a board member perform a financial review, on a monthly basis, of the following: (a) monthly financial statements, (b) monthly receipts and bank deposits, (c) monthly disbursements and supporting documentation, (d) monthly bank reconciliations, and (e) monthly bank statements and unpaid bills. I recommend documentation of the board member’s review be maintained in the business office. I recommend the results of the board member’s review be promptly reported to the board on a monthly basis. I recommend that appropriate action be promptly taken by the board to deal with any discrepancies found. Management Response: Management concurs with the auditor’s recommendations. Management will require monthly bank reconciliations and will require monthly reviews by a board member of the financial reports and documents mentioned above. Management agrees to promptly report the results of the board member’s monthly financial review to the board on a monthly basis. Management agrees to take prompt, and appropriate, action to deal with any discrepancies found in the monthly financial reviews. Section 10.554(1)(i)4., Rules of the Auditor General, requires that I address violations of provisions of contracts or grant agreements, or abuse, that have occurred, or are likely to have occurred, that have an effect on the financial statements that is less than material but more than inconsequential. In connection with my audit, I did not have any such findings. Section 10.554(1)(i)5., Rules of the Auditor General, provides that the auditor may, based on professional judgment, report the following matters that have an inconsequential effect on financial statements, considering both quantitative and qualitative factors: (1) violations of provisions of contracts or grant agreements, fraud, illegal acts, or abuse, and (2) Deficiencies in internal control that are not significant deficiencies. In connection with my audit, I determined that there appears to be fraud or theft of approximately $13,519 in fiscal year 2012 and approximately $16,200 in fiscal year 2011. The former bookkeeper has been arrested and charged with grand theft of $5,000, and has been convicted. This fraud or theft of funds is material in amount in comparison to the city’s total revenues and expenditures. The fire district has agreed to implement the following steps to improve internal controls and to help prevent future fraud or thefts:
1. The bookkeeper will perform monthly bank reconciliations as soon as bank statements
are received.
2. A board member will perform a financial review, on a monthly basis, of the following: (a)
monthly financial statements, (b) monthly receipts and bank deposits, (c) monthly
disbursements and supporting documentation, (d) monthly bank reconciliations, and (e)
monthly bank statements and unpaid bills.
3. Documentation of the board member’s monthly financial review will be maintained in the
business office.
4. The results of the board member’s monthly financial review will be promptly reported to
the board on a monthly basis.
5. Appropriate action will be promptly taken by the board to deal with any discrepancies
found in the monthly reviews.
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Section 10.554(1)(i)6., Rules of the Auditor General, requires that the name or official title and legal authority for the primary government and each component unit of the reporting entity be disclosed in this management letter, unless disclosed in the notes to the financial statements. The Dorcas Fire District was created by section 2005-331, Laws of Florida. The district is an independent fire control district operating pursuant to the special act and the provisions of Chapter 191, Florida Statutes. There are no component units. Section 10.554(1)(i)7.a., Rules of the Auditor General, requires a statement be included as to whether or not the local governmental entity has met one or more of the conditions described in Section 218.503(1), Florida Statutes, and identification of the specific condition(s) met. In connection with my audit, I determined that the Dorcas Fire District did not meet any of the conditions described in Section 218.503(1), Florida Statutes. Section 10.554(1)(i)7.b., Rules of the Auditor General, requires that I determine whether the annual financial report for the Dorcas Fire District for the fiscal year ended September 30, 2012, filed with the Florida Department of Financial Services pursuant to Section 218.32(1)(a), Florida Statutes, is in agreement with the annual financial audit report for the fiscal year ended September 30, 2011. In connection with my audit, I determined that these two reports were in agreement. Pursuant to Sections 10.554(1)(i)7.c. and 10.556(7), Rules of the Auditor General, I applied financial condition assessment procedures. It is management’s responsibility to monitor the Dorcas Fire District’s financial condition, and my financial condition assessment was based in part on representations made by management and the review of financial information provided by same. I did not see any deteriorating financial conditions for the Fire District. Pursuant to Chapter 119, Florida Statutes, this management letter is a public record and its distribution is not limited. Auditing standards generally accepted in the United States of America require me to indicate that this letter is intended solely for the information and use of management, and the Florida Auditor General, and is not intended to be and should not be used by anyone other than these specified parties.
Joseph A. Jones Certified Public Accountant
Crestview, Florida May 24, 2013