INDIGO
COMMUNITY DEVELOPMENT DISTRICT VOLUSIA COUNTY, FLORIDA FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2018

INDIGO COMMUNITY DEVELOPMENT DISTRICT VOLUSIA COUNTY, FLORIDA

TABLE OF CONTENTS

	    Page		
INDEPENDENT AUDITOR’S REPORT	1-2	
MANAGEMENT’S DISCUSSION AND ANALYSIS	3-6	
BASIC FINANCIAL STATEMENTS		
Government-Wide Financial Statements:		
Statement of Net Position	7	
Statement of Activities	8	
Fund Financial Statements:		
Balance Sheet – Governmental Funds	9	
Reconciliation of the Balance Sheet – Governmental Funds
to the Statement of Net Position	
10	
Statement of Revenues, Expenditures and Changes in Fund Balances –
Governmental Funds	
11	
Reconciliation of the Statement of Revenues, Expenditures and Changes in
Fund Balances of Governmental Funds to the Statement of Activities	
12	
Notes to the Financial Statements	13-22	
REQUIRED SUPPLEMENTARY INFORMATION		
Schedule of Revenues, Expenditures and Changes in Fund Balance –
Budget and Actual – General Fund	
23	
Notes to Required Supplementary Information	24	
INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS	

25-26	
INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE WITH THE REQUIREMENTS OF SECTION 218.415, FLORIDA STATUTES, REQUIRED BY RULE 10.556(10)
OF THE AUDITOR GENERAL OF THE STATE OF FLORIDA	

27	
MANAGEMENT LETTER REQUIRED BY CHAPTER 10.550 OF THE RULES OF THE AUDITOR GENERAL OF THE STATE OF FLORIDA	
28-30	

INDEPENDENT AUDITOR’S REPORT

To the Board of Supervisors
Indigo Community Development District Volusia County, Florida

951 Yamato Road ▪ Suite 280 Boca Raton, Florida  33431 (561) 994-9299 ▪ (800) 299-4728
Fax (561) 994-5823
www.graucpa.com

Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities and each major fund of Indigo Community Development District, Volusia County, Florida (“District”) as of and for the fiscal year ended September 30, 2018, and the related notes to the financial statements, which collectively comprise the District’s basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation 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.

The District was unable to provide sufficient competent evidential matter for certain expenditures incurred by the Debt Service fund. The financial information of the Debt Service fund is part of the governmental activities and is considered a major fund.

Opinions

In addition, in our opinion, except for the effects of such adjustments, if any, as might have been determined to be necessary had the District been able to provide sufficient competent evidential matter for the selected expenditures paid for by the Trustee from the debt service fund, the financial statements referred to above present fairly, in all material respects, the financial position of the governmental activities and each major fund of the District, as of September 30, 2018, and the respective changes in financial position thereof for the fiscal year then ended in conformity with accounting principles generally accepted in the United States of America

Emphasis of Matter

As discussed in Notes 6 and other notes to the basic financial statements, the debt service fund had a deficit fund balance of ($1,431,390) at September 30, 2018. Major landowners within the District failed to pay their share of the current and prior fiscal year assessments. As a result, the District did not have sufficient funds to make certain scheduled debt service payments and, as a result, the payments were not made. The District’s failures to make its scheduled debt service payments when they are due are considered events of default. The District is economically dependent on its major Landowners. Our opinion is not modified with respect to this matter.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis and budgetary comparison information be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, 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 inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated May 23, 2019, on our consideration of the District’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, 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 effectiveness of the District’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District’s internal control over financial reporting and compliance.

Report on Other Legal and Regulatory Requirements

We have also issued our report dated May 23, 2019, on our consideration of the District’s compliance with the requirements of Section 218.415, Florida Statutes, as required by Rule 10.556(10) of the Auditor General of the State of Florida. The purpose of that report is to provide an opinion based on our examination conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants.
May 23, 2019

MANAGEMENT’S DISCUSSION AND ANALYSIS

Our discussion and analysis of Indigo Community Development District, Volusia County, Florida (“District”) provides a narrative overview of the District’s financial activities for the fiscal year ended September 30, 2018. Please read it in conjunction with the District’s Independent Auditor’s Report, basic financial statements, accompanying notes and supplementary information to the basic financial statements.

FINANCIAL HIGHLIGHTS

The liabilities of the District exceeded its assets at the close of the fiscal year ended September 30, 2018 resulting in a (deficit) net position balance of ($6,729,484).

The change in the District’s total net position in comparison with the prior fiscal year was $2,461,030, an increase. The key components of the District’s net position and change in net position are reflected in the table in the government-wide financial analysis section.

At September 30, 2018, the District’s governmental funds reported combined ending fund balances of
$1,756,666, an increase of $2,036,655 in comparison with the prior fiscal year. The total fund balance is non-spendable for prepaid items, restricted for capital projects, unassigned, deficit debt service fund balance, assigned for subsequent year’s expenditures and the remainder is unassigned fund balance which is available for spending at the District’s discretion.

OVERVIEW OF FINANCIAL STATEMENTS

This discussion and analysis are intended to serve as the introduction to the District’s basic financial statements. The District’s basic financial statements are comprised of three components: 1) government- wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves.

Government-Wide Financial Statements

The government-wide financial statements are designed to provide readers with a broad overview of the District’s finances, in a manner similar to a private-sector business.

The statement of net position presents information on all the District’s assets, deferred outflows of resources, liabilities, and deferred inflows of resources with the residual amount being reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the District is improving or deteriorating.

The statement of activities presents information showing how the government’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods.

The government-wide financial statements include all governmental activities that are principally supported by special assessment revenues. The District does not have any business-type activities. The governmental activities of the District include the general government (management) and maintenance functions.

Fund Financial Statements

A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The District, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements The District has one fund category: governmental funds.

OVERVIEW OF FINANCIAL STATEMENTS (Continued)

Governmental Funds

Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a District’s near-term financing requirements.

Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the District’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.

The District maintains three governmental funds for external reporting. Information is presented separately in the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances for the general fund, debt service fund and capital projects fund, all of which are considered major funds.

The District adopts an annual appropriated budget for its general fund. A budgetary comparison schedule has been provided for the general fund to demonstrate compliance with the budget.

Notes to the Financial Statements

The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements.

GOVERNMENT-WIDE FINANCIAL ANALYSIS

As noted earlier, net position may serve over time as a useful indicator of an entity’s financial position. In the case of the District, liabilities exceeded assets at the close of the most recent fiscal year.

Key components of the District’s net position are reflected in the following table:

NET POSITION
SEPTEMBER 30,		
2018	2017	
Current and other assets	$ 6,786,579	$ 5,076,710	
Capital assets, net of depreciation	 	4,144,239	4,417,843 	
Total assets	 	10,930,818	9,494,553 	
Current liabilities	5,366,439	5,650,987	
Long-term liabilities	 	12,293,863	13,034,080 	
Total liabilities	 	17,660,302	18,685,067 	
Net position			
Net investment in capital assets	(8,149,624)	(8,616,237)	
Restricted	147,677	147,339	
Unrestricted	 	1,272,463	(721,616) 	
Total net position	  $ (6,729,484) $ (9,190,514) 	

The District’s net position reflects its investment in capital assets (e.g. land, land improvements, and infrastructure) less any related debt used to acquire those assets that is still outstanding. These assets are used to provide services to residents; consequently, these assets are not available for future spending. Although the District’s investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.

GOVERNMENT-WIDE FINANCIAL ANALYSIS (Continued)

The restricted portion of the District’s net position represents resources that are subject to external restrictions on how they may be used.

The District’s net position increased during the most recent fiscal year. The increase was due to the settlement agreement with a major landowner.

Key elements of the change in net position are reflected in the following table:

CHANGES IN NET POSITION
FOR THE FISCAL YEAR ENDED SEPTEMBER 30,
2018	2017

Revenues:

Program revenues Charges for services

$ 4,738,769

$ 2,225,998

Operating grants and contributions	19,709	13,569
Capital grants and contributions	338	226
General revenues
Unrestricted investment earnings	 	6,022	3,177 

Total revenues	 	4,764,838	2,242,970 Expenses:
General government	235,614	202,209
Maintenance and operations	1,193,396	1,153,224
Interest on long-term debt	 	874,798	915,905 

Total expenses	 	2,303,808	2,271,338 

Change in net position	 	2,461,030	(28,368) 

Net position - beginning	 	(9,190,514)	(9,162,146) 

Net position - ending	 $  (6,729,484)   $  (9,190,514) 

As noted above and in the statement of activities, the cost of all governmental activities during the fiscal year ended September 30, 2018 was $2,303,808. The costs of the District’s activities were primarily funded by program revenues. Program revenues, comprised primarily of assessments, increased from the prior fiscal year primarily as a result of collecting a large portion of delinquent assessments during the current fiscal year. Expenditures increased as a result of increased maintenance costs incurred in the current fiscal year.

GENERAL BUDGETING HIGHLIGHTS

An operating budget was adopted and maintained by the governing board for the District pursuant to the requirements of Florida Statutes. The budget is adopted using the same basis of accounting that is used in preparation of the fund financial statements. The legal level of budgetary control, the level at which expenditures may not exceed budget, is in the aggregate. Any budget amendments that increase the aggregate budgeted appropriations must be approved by the Board of Supervisors. Actual general fund expenditures did not exceed appropriations for the fiscal year ended September 30, 2018.

CAPITAL ASSETS AND DEBT ADMINISTRATION

Capital Assets
At September 30, 2018, the District had $7,622,700 invested in capital assets for its governmental activities. In the government-wide financial statements depreciation of $3,478,461 has been taken, which resulted in a net book value of $4,144,239. More detailed information about the District’s capital assets is presented in the notes of the financial statements.

Capital Debt
At September 30, 2018, the District had $13,295,000 in Bonds outstanding. More detailed information about the District’s capital debt is presented in the notes of the financial statements.

ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND OTHER EVENTS

As discussed in the notes to the basic financial statements, the debt service fund had a deficit fund balance of ($1,431,390) at September 30, 2018. Major landowners within the District failed to pay their share of the current and prior fiscal year assessments. As a result, the District did not have sufficient funds to make certain scheduled debt service payments and, as a result, the payments were not made. The District’s failures to make its scheduled debt service payments when they are due are considered events of default. The District continues to work with the Trustee, the Bondholders, and the delinquent property owners for the collection of debt service assessments. Due to the cost and other issues surrounding the foreclosure of the delinquent properties, the District continues to take direction from the Trustee and Bondholders. The foreclosure process has been placed on hold.

CONTACTING THE DISTRICT’S FINANCIAL MANAGEMENT

This financial report is designed to provide our citizens, land owners, customers, investors and creditors with a general overview of the District’s finances and to demonstrate the District’s accountability for the financial resources it manages and the stewardship of the facilities it maintains. If you have questions about this report or need additional financial information, contact the Indigo Community Development District’s Finance Department at 9145 Narcoossee Road, Suite A206, Orlando, Florida 32827.

INDIGO COMMUNITY DEVELOPMENT DISTRICT VOLUSIA COUNTY, FLORIDA
STATEMENT OF NET POSITION SEPTEMBER 30, 2018

	Governmental
 	Activities		
ASSETS		
Cash and cash equivalents	$	330,187	
Investments	2,756,944	
Due from other		
Accounts receivable		
Assessments receivable	8,375	
Prepaid items	18,887	
Restricted assets:		
Investments	3,672,186	
Capital assets:		
Nondepreciable	2,507,717	
Depreciable, net	 	1,636,522 	
Total assets	 	10,930,818 	
LIABILITIES		
Accounts payable	74,014	
Accrued interest payable	336,526	
Due to Bondholders:		
Interest	4,030,899	
Principal	925,000	
Non-current liabilities:		
Due within one year*	495,000	
Due in more than one year	 	11,798,863 	
Total liabilities	 	17,660,302 	
NET POSITION		
Net investment in capital assets	(8,149,624)	
Restricted for capital projects	147,677	
Unrestricted	 	1,272,463 	
Total net position	  $	(6,729,484)	

* The missed debt service payments due for the Series 1999C and 2005 Bonds are reflected in the due to Bondholders account.

See notes to the financial statements

INDIGO COMMUNITY DEVELOPMENT DISTRICT VOLUSIA COUNTY, FLORIDA STATEMENT OF ACTIVITIES
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2018

Program Revenues
Charges	Operating	Capital

Net (Expense) Revenue and Changes in Net Position

for		Grants and	Grants and	Governmental Functions/Programs	 Expenses	Services	Contributions   Contributions		Activities	 Primary government:
Governmental activities:

General government

$	235,614	$

235,614	$	-	$	-	$	-

Maintenance and operations	1,193,396	1,195,776	2,025	338	4,743
Interest  on long-term debt	 	874,798	3,307,379	17,684	-	2,450,265 
Total governmental activities	 	2,303,808	4,738,769	19,709	338	2,455,008 

General revenues:
Unrestricted investment earnings	 	6,022 
Total general revenues	 	6,022 
Change in net position	 	2,461,030 	
Net position - beginning	 	(9,190,514)	
Net position - ending	  $	(6,729,484)	

See notes to the financial statements

BALANCE SHEET GOVERNMENTAL FUNDS SEPTEMBER 30, 2018

 	Major Funds	
Debt	Capital
General	Service	Projects

Total Governmental Funds

ASSETS		
Cash and cash equivalents	$	330,187	$	-	$	-	$	330,187	
Investments	2,756,944	3,524,509	147,677	6,429,130	
Assessments receivable	8,375	-	-	8,375	
Prepaid items	 	18,887	-	-	18,887 
Total assets	 $	3,114,393	$	3,524,509	$	147,677	$	6,786,579 

LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable	$	74,014	$	-	$	-	$	74,014	
Due to Bondholders	 	-	4,955,899	-	4,955,899 	
Total liabilities	 	74,014	4,955,899	-	5,029,913 	

Fund balances:
Nonspendable:
Prepaid items	18,887	-	-	18,887 Restricted for:
Capital projects	-	-	147,677	147,677 Assigned for:
Subsequent year's expenditures	300,000	-	-	300,000	
Unassigned	 	2,721,492	(1,431,390)	-	1,290,102 	
Total fund balances	 	3,040,379	(1,431,390)	147,677	1,756,666 	

Total liabilities and fund balances	 $	3,114,393	$	3,524,509	$	147,677	$	6,786,579 

See notes to the financial statements

RECONCILIATION OF THE BALANCE SHEET - GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION
SEPTEMBER 30, 2018

Total fund balance - governmental funds	$	1,756,666 Amounts reported for governmental activities in the statement of
net position are different because:
Capital assets used in governmental activities are  not financial resources, therefore, are not reported as assets  in the governmental funds. The statement of net position includes those capital assets, net of any accumulated depreciation, in the net position of the government  as  a whole.
Cost of capital assets	7,622,700
Accumulated depreciation	 (3,478,461)	4,144,239
Liabilities not due and payable from current available resources are not reported as liabilities in the governmental fund financial statements. All liabilities, both current and long
term,	are	reported	in statements.
Accrued interest payable	the	government-wide	financial	

(336,526)	
Bonds payable *				  (12,293,863)	(12,630,389) 	
Net position of governmental activities	$	(6,729,484)

* The missed debt service payments due for the Series 1999C and 2005 Bonds are reflected in the due to Bondholders account.

See notes to the financial statements

STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2018

 	Major Funds		Total

Debt	Capital
General	Service	Projects

Governmental Funds

REVENUES		
Assessments	$	1,515,618	$	3,307,379	$	-	$	4,822,997	
Miscellaneous income	2,025	-	-	2,025	
Interest	 	6,022	17,684	338	24,044 
Total revenues	 	1,523,665	3,325,063	338	4,849,066 

EXPENDITURES
Current:
General government	164,295	71,319	-	235,614
Maintenance	919,792	-	-	919,792 Debt service:
Principal	-	745,000	-	745,000
Interest	 	-	912,005	-	912,005 
Total expenditures	 	1,084,087	1,728,324	-	2,812,411 

Excess (deficiency) of revenues
over (under) expenditures	439,578	1,596,739	338	2,036,655

Fund balances - beginning	 	2,600,801	(3,028,129)	147,339	(279,989)

Fund balances - ending	 $	3,040,379	$   (1,431,390)   $	147,677	$	1,756,666 

See notes to the financial statements

RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2018

Net change in fund balances - total governmental funds	$	2,036,655 Amounts reported for governmental activities in the statement of activities
are different because:
Depreciation of capital assets is not recognized in the governmental fund financial statements, but is reported as an expense in the
statement of activities.	(273,604)
Certain revenues were unavailable for the governmental fund financial statements in the prior fiscal year. In the current fiscal year, these
revenues  were recorded in the governmental fund financial statements.	(84,228)
Expenditures related to debt service payments must be recognized in governmental funds in the period in which they become due, therefore amounts not paid were recorded as a liability in the fund financial statements. The liability has already been recorded on the statement
of net position.	745,000
The change in accrued interest on long-term liabilities between the current and prior fiscal year is recorded in the statement of activities,
but not in the governmental fund financial statements.	41,990
Amortization of Bond discounts/premiums is not recognized in the governmental fund financial statements, but is reported as an expense
in the statement of activities.	 	(4,783) 
Change in net position of governmental activities	$	2,461,030

See notes to the financial statements

NOTES TO FINANCIAL STATEMENTS

NOTE 1 – NATURE OF ORGANIZATION AND REPORTING ENTITY

Indigo Community Development District ("District") was created January 3, 1995 by Rule 42U-1.001 - 1.003, Florida Administrative Code of the Florida Land and Water Adjudicatory Commission, pursuant to the Uniform Community Development District Act of 1980, otherwise known as Chapter 190, Florida Statutes. The Act provides among other things, the power to manage basic services for community development, power to borrow money and issue Bonds, and to levy and assess non-ad valorem assessments for the financing and delivery of capital infrastructure.

The District was established for the purposes of financing and managing the acquisition, construction, maintenance and operation of a portion of the infrastructure necessary for community development within the District.

The District is governed by the Board of Supervisors ("Board"), which is composed of five members. The Supervisors were elected by residents registered to vote within the District through the general election process. The Board of Supervisors of the District exercise all powers granted to the District pursuant to Chapter 190, Florida Statutes.

The Board has the responsibility for, among other responsibilities:
Assessing and levying assessments.
Approving budgets.
Exercising control over facilities and properties.
Controlling the use of funds generated by the District.
Approving the hiring and firing of key personnel.
Financing improvements.

The financial statements were prepared in accordance with Governmental Accounting Standards Board (“GASB”) Statements. Under the provisions of those standards, the financial reporting entity consists of the primary government, organizations for which the District is considered to be financially accountable and other organizations for which the nature and significance of their relationship with the District are such that, if excluded, the financial statements of the District would be considered incomplete or misleading. There are no entities considered to be component units of the District; therefore, the financial statements include only the operations of the District.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Government-Wide and Fund Financial Statements
The basic financial statements include both government-wide and fund financial statements.

The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the non-fiduciary activities of the primary government. For the most part, the effect of interfund activity has been removed from these statements.

The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers who purchase, use or directly benefit from goods, services or privileges provided by a given function or segment. Operating-type special assessments for maintenance and debt service are treated as charges for services; and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Other items not included among program revenues are reported instead as general revenues.

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

Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures are recorded only when payment is due.

Assessments
Assessments are non-ad valorem assessments on benefited property within the District. Operating and maintenance assessments are based upon the adopted budget and levied annually at a public hearing of the District. Debt service assessments are levied when Bonds are issued and collected on an annual basis. The District may collect assessments directly or utilize the uniform method of collection under Florida Statutes. Direct collected assessments are due as determined by annual assessment resolution adopted by the Board of Supervisors. Assessments collected under the uniform method are mailed by the County Tax Collector on November 1 and due on or before March 31 of each year. Property owners may prepay a portion or all of the debt service assessments on their property subject to various provisions in the Bond documents.

Assessments and interest associated with the current fiscal period are considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. The portion of assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period.

The District reports the following major governmental funds:

General Fund
The general fund is the general operating fund of the District. It is used to account for all financial resources except those required to be accounted for in another fund.

Debt Service Fund
The debt service fund is used to account for the accumulation of resources for the annual payment of principal and interest on long-term debt.

Capital Projects Fund
This fund accounts for the financial resources to be used for the acquisition or construction of major infrastructure within the District.

As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements.

When both restricted and unrestricted resources are available for use, it is the government’s policy to use restricted resources first for qualifying expenditures, then unrestricted resources as they are needed.

Assets, Liabilities and Net Position or Equity

Restricted Assets
These assets represent cash and investments set aside pursuant to Bond covenants or other contractual restrictions.

Deposits and Investments
The District’s cash and cash equivalents are considered to be cash on hand and demand deposits (interest and non-interest bearing).

The District has elected to proceed under the Alternative Investment Guidelines as set forth in Section
218.415 (17) Florida Statutes. The District may invest any surplus public funds in the following:

The Local Government Surplus Trust Funds, or any intergovernmental investment pool authorized pursuant to the Florida Inter-local Cooperation Act;
Securities and Exchange Commission registered money market funds with the highest credit quality rating from a nationally recognized rating agency;
Interest bearing time deposits or savings accounts in qualified public depositories;
Direct obligations of the U.S. Treasury.

Securities listed in paragraph c and d shall be invested to provide sufficient liquidity to pay obligations as they come due.

The District records all interest revenue related to investment activities in the respective funds. Investments are measured at amortized cost or reported at fair value as required by generally accepted accounting principles.

Prepaid Items
Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements.

Capital Assets
Capital assets which include property, plant and equipment, and infrastructure assets (e.g., roads, sidewalks and similar items) are reported in the government activities columns in the government-wide financial statements. Capital assets are defined by the government as assets with an initial, individual cost of more than $5,000 (amount not rounded) and an estimated useful life in excess of two 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 costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed.

Property, plant and equipment of the District are depreciated using the straight-line method over the following estimated useful lives:

Assets	Years	
Entry feature and other improvements	10-20	
Infrastructure	10-30	
In the governmental fund financial statements, amounts incurred for the acquisition of capital assets are reported as fund expenditures. Depreciation expense is not reported in the governmental fund financial statements.

Unearned Revenue
Governmental funds report unearned revenue in connection with resources that have been received, but not yet earned.

Assets, Liabilities and Net Position or Equity (Continued)

Long-Term Obligations
In the government-wide financial statements long-term debt and other long-term obligations are reported as liabilities in the statement of net position. Bond premiums and discounts are deferred and amortized ratably over the life of the Bonds. Bonds payable are reported net of applicable premiums or discounts. Bond issuance costs are expensed when incurred.

In the fund financial statements, governmental fund types recognize premiums and discounts, as well as issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.

Deferred Outflows/Inflows of Resources
In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then.

In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time.

Fund Equity/Net Position
In the fund financial statements, governmental funds report non spendable and restricted fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Assignments of fund balance represent tentative management plans that are subject to change.

The District can establish limitations on the use of fund balance as follows:

Committed fund balance – Amounts that can be used only for the specific purposes determined by a formal action (resolution) of the Board of Supervisors. Commitments may be changed or lifted only by the Board of Supervisors taking the same formal action (resolution) that imposed the constraint originally. Resources accumulated pursuant to stabilization arrangements sometimes are reported in this category.

Assigned fund balance – Includes spendable fund balance amounts established by the Board of Supervisors that are intended to be used for specific purposes that are neither considered restricted nor committed. The Board may also assign fund balance as it does when appropriating fund balance to cover differences in estimated revenue and appropriations in the subsequent year’s appropriated budget. Assignments are generally temporary and normally the same formal action need not be taken to remove the assignment.

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

Net position is the difference between assets and deferred outflows of resources less liabilities and deferred inflows of resources. Net position in the government-wide financial statements are categorized as net investment in capital assets, restricted or unrestricted. Net investment in capital assets represents net position related to infrastructure and property, plant and equipment. Restricted net position represents the assets restricted by the District’s Bond covenants or other contractual restrictions. Unrestricted net position consists of the net position not meeting the definition of either of the other two components.

Other Disclosures

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

NOTE 3 – BUDGETARY INFORMATION

The District is required to establish a budgetary system and an approved Annual Budget. Annual Budgets are adopted on a basis consistent with generally accepted accounting principles for the general fund. All annual appropriations lapse at fiscal year end.

The District follows these procedures in establishing the budgetary data reflected in the financial statements.

Each year the District Manager submits to the District Board a proposed operating budget for the fiscal year commencing the following October 1.
A public hearing is conducted to obtain public comments.
Prior to October 1, the budget is legally adopted by the District Board.
All budget changes must be approved by the District Board, subject to the District’s appropriation resolution.
The budgets are adopted on a basis consistent with generally accepted accounting principles.
Unused appropriation for annually budgeted funds lapse at the end of the year.

NOTE 4 – DEPOSITS AND INVESTMENTS

Deposits
The District’s cash balances were entirely covered by federal depository insurance or by a collateral pool pledged to the State Treasurer. Florida Statutes Chapter 280, "Florida Security for Public Deposits Act", requires all qualified depositories to deposit with the Treasurer or another banking institution eligible collateral equal to various percentages of the average daily balance for each month of all public deposits in excess of any applicable deposit insurance held. The percentage of eligible collateral (generally, U.S. Governmental and agency securities, state or local government debt, or corporate bonds) to public deposits is dependent upon the depository's financial history and its compliance with Chapter 280. In the event of a failure of a qualified public depository, the remaining public depositories would be responsible for covering any resulting losses.

Investments
The District’s investments were held as follows at September 30, 2018:
	Amortized	Credit Risk	Maturities	
Fidelity Government Portfolio Class III	$ 3,397,439	N/A	N/A	
US Bank Money Market Fund	 	3,031,691 	N/A	N/A	
	  $ 6,429,130 			

Credit risk – For investments, credit risk is generally the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Investment ratings by investment type are included in the preceding summary of investments.

Concentration risk – The District places no limit on the amount the District may invest in any one issuer.

Interest rate risk – The District does not have a formal policy that limits investment maturities as a means of managing exposure to fair value losses arising from increasing interest rates.

However, the Bond Indenture limits the type of investments held using unspent proceeds.

Investments (Continued)
Fair Value Measurement – When applicable, the District measures and records its investments using fair value measurement guidelines established in accordance with GASB Statements. The framework for measuring fair value provides a fair value hierarchy that prioritizes the inputs to valuation techniques.

These guidelines recognize a three-tiered fair value hierarchy, in order of highest priority, as follows:
Level 1: Investments whose values are based on unadjusted quoted prices for identical investments in active markets that the District has the ability to access;
Level 2: Investments whose inputs - other than quoted market prices - are observable either directly or indirectly; and,
Level 3: Investments whose inputs are unobservable.

The fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the entire fair value measurement. Valuation techniques used should maximize the use of observable inputs and minimize the use of unobservable inputs.

Money market investments that have a maturity at the time of purchase of one year or less and are held by governments other than external investment pools should be measured at amortized cost. Accordingly, the District’s investments have been reported at amortized cost above.

NOTE 5 – CAPITAL ASSETS

Capital asset activity for the fiscal year ended September 30, 2018 was as follows:

	Beginning	Ending
Balance	Additions	Reductions	Balance	
Governmental activities
Capital assets, not being depreciated Land and land improvements	

  $    2,507,717	$	-	$	-	$ 2,507,717 	
Total capital assets, not being depreciated	 	2,507,717	-	-	2,507,717 	

Capital assets, being depreciated Entrance and other improvements	

1,872,969	-	-	1,872,969	
Infrastructure	 	3,242,014	-	-	3,242,014 	
Total capital assets, being depreciated	 	5,114,983	-	-	5,114,983 	

Less accumulated depreciation for: Entrance and other improvements	

1,225,196	151,594	-	1,376,790	
Infrastructure	 	1,979,661	122,010	-	2,101,671 	
Total accumulated depreciation	 	3,204,857	273,604	-	3,478,461 	

Total capital assets, being depreciated, net	
 	1,910,126	(273,604)	-	1,636,522 	

Governmental activities capital assets, net	
   $   4,417,843	$	(273,604)   $	-	$ 4,144,239 	

The District is bifurcated into two distinct development areas known as the North Assessment Area and the South Assessment Area. The District’s Series 1999C funded all of the Community Wide Capital Improvements situated in the North Assessment Area and a portion of the Community Wide Capital Improvements situated in the South Assessment Area. The remaining costs of the Community Wide Capital Improvements for the South Assessment Areas have been estimated at $35 million. A portion of the costs was to be funded with the proceeds from the Series 2005 Bonds (the “2005 Project”) and the remaining costs were to be funded with proceeds from a future bond issuance and by the Developer.

The 2005 Project was originally estimated at $12 million and included roadway, utility, and landscape projects located in the South Assessment Area. However, due to economic reasons, the scope of the project was revised and improvements costing a total of $6,306,958 were declared completed (“2005 Completed Project”) in a prior fiscal year. Also in a prior fiscal year, the series 1999C Project was declared completed. The Series 1999C project was also revised and the total cost of the improvements completed under the Series 1999C Project (“1999C Completed Project”) was approximately $7,183,238. The Engineer certified that the Series 1999C and 2005 Completed Projects will be capable of performing the functions for which they were intended. Due to the default of the series 1999C and 2005 Special Assessments by the Developer and subsequent landowners, the overall timeline for the plan of development has changed and it has been determined that it is economically infeasible to continue expanding the public infrastructure at the present time.

Also in a prior fiscal year, subsequent to the declaration of completion of the 1999C and 2005 projects,
$6,800,000 of excess fund remaining in the Construction Accounts were used to pay down the outstanding principal on Series 2005 Bonds.

Depreciation expense was charged to the maintenance and operations function.

NOTE 6 – LONG-TERM LIABILITIES

At September 30, 2018, the District had Bond issues as follows:

Issue	Original Face	Interest
Series	Date	Amount	Rate	Maturity Capital Improvement Bonds:

Series 1999A	December 20, 1999	$

980,000

7.00%	May 1, 2031

Series 1999C	December 20, 1999	8,515,000	7.00%	May  1, 2030
Series 2005	February 1, 2005	14,710,000	5.75%	May  1, 2036

The Capital Improvement Bonds, Series 1999A, 1999C and 2005A were issued to finance the acquisition and construction of certain improvements for the benefit of the District.

Interest is to be paid semiannually for each Bond series on each May 1 and November 1. Principal is to be paid serially for each Bond series on each May 1.

The Series 1999A, 1999C, and 2005 Bonds are subject to redemption at the option of the District prior to maturity. Each Bond Series is subject to extraordinary mandatory redemption prior to maturity in the manner determined by the Bond Registrar if certain events occurred as outlined in the Bond Indenture.

The Bond Indentures established debt service reserve requirements as well as other restrictions and requirements relating principally to the use of proceeds to pay for the infrastructure improvements and the procedures to be followed by the District on assessments to property owners. The District agreed at the time of issuance to levy special assessments in annual amounts adequate to provide payment of debt service and to meet the reserve requirements and has agreed to collect the same. The Series 1999A debt service reserve requirements were met at September 30, 2018. However, the Series 1999C and 2005 debt service reserve requirements were not met at September 30, 2018.

During the prior and current fiscal years, there were significant delinquent assessments, and, as a result, certain scheduled debt service payments due on the Series 1999C and 2005 during prior fiscal years were made, in part, by draws on the respective debt service reserve account. Also, default related expenses were paid from funds in the debt service reserve accounts. As a result of these payments, there are deficits of approximately $644,000 and $356,000 in the Series 1999C and Series 2005 debt service reserve accounts, respectively. Furthermore, certain scheduled debt service payments due on the Series 1999C and 2005 were not made, resulting in events of default. The amounts due have been reported in the financial statements as Due to Bondholders and reflects unpaid principals of $925,000 for the Series 1999C and unpaid interests of
$1,219,260 and $2,811,639 for the Series 1999C and 2005, respectively.

During the prior fiscal year, the District made principal and interest payments of $65,000 and $490,769, respectively for past due amounts on the Series 1999C Bonds. During the current fiscal year the District made interest payments of $647,221 and $333,181 for the Series 1999C and 2005, respectively. In addition, the District made a principal payment of $875,000 during the current fiscal year for the Series 2005 Bonds.

Long-term Debt Activity
Changes in long-term liability activity for the fiscal year ended September 30, 2018 were as follows:
	Beginning
Balance	
Additions	
Reductions	Ending
Balance	Due Within
One Year	
Governmental activities						
Bonds payable:						
Series 1999 A	$	695,000	$	-	$	30,000	$	665,000	$	35,000	
Series 1999 C	6,660,000	-	-	6,660,000	1,215,000 *	
Series 2005	6,845,000	-	875,000	5,970,000	170,000 *	
Original issue discount	80,920	-	4,783	76,137	-	
Total	$ 14,119,080	$	-	$	900,217	$ 13,218,863	$ 1,420,000	
* Includes the missed debt service payments due for the Series 1999C and 2005 Bonds w hich w ere not paid.

At September 30, 2018, the scheduled debt service requirements on the long-term debt were as follows:

Year ending September 30:

 		Governmental Activities		 Principal		Interest	Total

2019	$	1,420,000	*	$	5,082,058	*	$	6,502,058	
2020	525,000	2,659,644	3,184,644	
2021	565,000	697,588	1,262,588	
2022	600,000	662,163	1,262,163	
2023	645,000	624,413	1,269,413	
2024-2028	3,920,000	2,457,100	6,377,100	
2029-2033	3,585,000	1,155,788	4,740,788	
2034-2036	 	2,035,000	329,188	2,364,188 

Total	 $ 13,295,000	$ 13,667,942	$ 26,962,942 

* Includes the missed debt service payments due for the Series 1999C and 2005 Bonds w hich w ere not paid.

NOTE 7 – ASSESSMENTS

Agreement between the District and GC Land LLC
During a prior fiscal year, the District entered into an agreement with GC Land LLC (“GC Land”), a landowner, regarding the payment of past due O&M on parcels identified as NW-21 and SW-28 that were previously direct-billed in fiscal years 2010 and 2011. According to the Agreement, past due O&M assessments on NW- 21 and SW-28 were $117,680 and $46,931, respectively. The amount due on NW-21 is net of a $35,000 payment that was made prior to the execution of the agreement. Pursuant to the Agreement, GC Land agreed to make monthly payments of $3,000 toward NW-21 beginning July 31, 2015 until the earlier of the payment of
$25,000 or the sale of the NW-21. If the $25,000 is paid before the closing of NW-21, the remaining $92,680 balance (the “Deferred Amount”) will be deferred until the closing and sale of SW-28. If SW-28 is not sold by April 30, 2016, GC Land will recommence paying the monthly installment payments to reduce the Deferred Amount. GC Land also agreed to pay any remaining balance of the Deferred Amount plus any current and future unpaid O&M related to SW-28 upon the closing of SW-28. The District has utilized the uniform method to collect O&M assessments for NW-21 and SW-28 since 2012. Also pursuant to the agreement, the District, with the consent of the Bondholders, agreed to waive all late fees, penalties, and interest related to the past due O&M and debt service assessments on the parcels.

In accordance with the agreement and in addition to the $35,000 payment mentioned above, GC Land paid to the District a total of $66,000 during prior fiscal years. During the current fiscal year, SW-28 was sold via tax deed sale and is no longer owned by GC Land.

Settlement Agreement with Cardinal Servicing Company, LLC
During the current fiscal year, the District entered into a settlement agreement with a new Landowner, Cardinal Servicing Company, LLC (“Cardinal”) whereby Cardinal would pay the District for a portion of the past due assessments on the lots owned and make the delinquent assessments on such lots current. Pursuant to the agreement, the District collected delinquent assessments for the general and 1999C and 2005 debt service funds in the amounts of $411,175, $1,560,963, and $1,268,988, respectively.

NOTE 8 – CONCENTRATION

A significant portion of the District’s activity is dependent upon the continued involvement of the major landowners. As such, the nonpayment of assessments by some of the major landowners in the prior, current, and subsequent fiscal years has resulted in the deterioration of the District’s financial conditions.

NOTE 9 – MANAGEMENT AGREEMENTS

The District has contracted with management companies to perform management advisory services, which include financial and accounting services, and field management services. Certain employees of one of the management companies also serve as officers of the District. Under the agreements, the District compensates one of the management companies for management, accounting, financial reporting, computer and other administrative costs and the other management company for field operations management services.

NOTE 10 – RISK MANAGEMENT

The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters. The District has obtained commercial insurance from independent third parties to mitigate the costs of these risks; coverage may not extend to all situations. There were no settled claims during the past three years.

NOTE 11 – LITIGATION

In a prior fiscal year, the Board of Supervisors of the District authorized the foreclosure of certain parcels currently owned by GC Land, LLC, HW CGC Investment Land LLC, and other Landowners for nonpayment of Special assessments as it relates to the District Series 1999C and 2005 Bonds and operating and maintenance assessments for fiscal years 2009 – 2012. During the 2015 fiscal year, The Board of Supervisors entered into an agreement related to specific lands owned by GC Land, LLC in regards to delinquent O&M assessments (see Note 7). The parcels subject to the agreement are NW-21 and SW-28 and as such are secured by title to the lands being held in escrow. If certain payments are not made by GC Land, the title for the parcels will be provided to the District. The Trustee and the Bondholders have been informed of the agreement and at this time have not wanted the District to move forward with foreclosure on lands with delinquent debt service assessments. No adjustment has been made to the financial statements as the impact on the District cannot be determined at this time since it is unclear how events will unfold.

During the current fiscal year, the District was served with a Complaint to Quiet Title to Real Property. The plaintiff acquired the subject property (generally known as SW 28) via tax deed sale, and seeks to extinguish any interest the District may have in the property. The District’s alleged interest in the property relates to a mortgage it holds to secure the payment of certain delinquent operation and maintenance assessments under the Agreement Regarding Payment of District Operation and Maintenance Assessments Related to Parcels NW-21 and SW-28. During the current fiscal year, the District was dropped as a party to the lawsuit.

NOTE 12 – SUBSEQUENT EVENTS

Missed Debt Service Payments
Subsequent to fiscal year end, certain scheduled debt service payments were due on the Series 1999C and 2005 Bonds. However, shortfalls in the collection of special assessments caused there to be insufficient amounts available to fully fund these scheduled debt service payments. As a result, the Series 1999C and 2005 debt service payments due on November 1, 2018 and May 1, 2019 were not made. The failure by the District to pay its debt service is considered an event of default.

Settlement Agreement with SW-30 Investments, LLC
Subsequent to fiscal year end, the District entered a settlement agreement with SW-30 Investments, LLC (“American”) which recently took ownership of delinquent parcels 30 and 32. Pursuant to the agreement, the District received delinquent assessments on such parcels from American as follows: $33,890 for Series 1999C debt assessments, $69,094 of Series 2005 debt assessments, and $65,000 for O&M assessments. The District also received $9,500 for currently due O&M assessments. The remaining delinquent O&M assessments on the parcels were forgiven while the remaining delinquent debt assessments were assumed by American excluding all penalties and past due accrued and unpaid interest on such debt assessments which was waived. The District also agreed to forbear on the foreclosure of delinquent parcels as long American remains current on its obligations per the agreement.

Payment of Past Due Interest
Subsequent to fiscal year end, the District paid past due interest on the Series 1999C Bonds in the amount of
$1,447,285.

SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL – GENERAL FUND FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2018

	
Budgeted
 	Amounts	 Original & Final	

Actual Amounts	Variance with Final Budget - Positive
(Negative)	
REVENUES
Assessments	
$	989,768	
$	1,515,618	
$	525,850	
Miscellaneous revenue	8,100	2,025	(6,075)	
Interest	 	1,000	6,022	5,022 
Total revenues	 	998,868	1,523,665	524,797 

EXPENDITURES
Current:
General government	176,343	164,295	12,048
Maintenance	 	925,586	919,792	5,794 
Total expenditures	 	1,101,929	1,084,087	17,842 

Excess (deficiency) of revenues
over (under) expenditures	(103,061)	439,578	542,639

OTHER FINANCING SOURCES (USES)
Carryforward	 	103,061	-	(103,061) Total  other financing sources (uses)	 	103,061	-	(103,061)

Net change in fund balance	  $	-		439,578	$	439,578	

Fund balance - beginning		
 	2,600,801 		
Fund balance - ending		  $	3,040,379 		

See notes to required supplementary information

NOTES TO REQUIRED SUPPLEMENTARY INFORMATION

The District is required to establish a budgetary system and an approved Annual Budget for the general fund. The District’s budgeting process is based on estimates of cash receipts and cash expenditures which are approved by the Board. The budget approximates a basis consistent with accounting principles generally accepted in the United States of America (generally accepted accounting principles).

The legal level of budgetary control, the level at which expenditures may not exceed budget, is in the aggregate. Any budget amendments that increase the aggregate budgeted appropriations must be approved by the Board of Supervisors. Actual general fund expenditures did not exceed appropriations for the fiscal year ended September 30, 2018.

951 Yamato Road ▪ Suite 280 Boca Raton, Florida  33431 (561) 994-9299 ▪ (800) 299-4728
Fax (561) 994-5823
www.graucpa.com

INDEPENDENT AUDITOR’S 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

To the Board of Supervisors
Indigo Community Development District Volusia County, Florida

We have audited, in accordance with the 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, the financial statements of the governmental activities and each major fund of Indigo Community Development District, Volusia County, Florida (“District”) as of and for the fiscal year ended September 30, 2018, and the related notes to the financial statements, which collectively comprise the District’s basic financial statements, and have issued our opinion thereon dated May 23, 2019, which includes an explanatory paragraph regarding the modified opinion for the debt service fund due to the lack of sufficient competent evidential matter, and an emphasis of matter paragraph.

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered the District’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 statements, but not for the purpose of expressing an opinion on the effectiveness of the District’s internal control. Accordingly, we do not express an opinion on the effectiveness of the District’s internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the District’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

We noted certain matters that we reported to management of the District in a separate letter dated May 23, 2019.

The District's responses to the findings identified in our audit are described in the accompanying Management Letter. We did not audit the District's responses and, accordingly, we express no opinion on them.

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 results 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 with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

May 23, 2019

INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE WITH THE REQUIREMENTS OF SECTION 218.415, FLORIDA STATUTES, REQUIRED BY RULE 10.556(10) OF THE AUDITOR GENERAL OF THE STATE OF FLORIDA

To the Board of Supervisors
Indigo Community Development District Volusia County, Florida

We have examined Indigo Community Development District, Volusia County, Florida’s (“District”) compliance with the requirements of Section 218.415, Florida Statutes, in accordance with Rule 10.556(10) of the Auditor General of the State of Florida during the fiscal year ended September 30, 2018. Management is responsible for District’s compliance with those requirements. Our responsibility is to express an opinion on District’s compliance based on our examination.

Our examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. Those standards require that we plan and perform the examination to obtain reasonable assurance about whether the District complied, in all material respects, with the specified requirements referenced in Section 218.415, Florida Statutes. An examination involves performing procedures to obtain evidence about whether the District complied with the specified requirements. The nature, timing, and extent of the procedures selected depend on our judgment, including an assessment of the risks of material noncompliance, whether due to fraud or error. We believe that the evidence we obtained is sufficient and appropriate to provide a reasonable basis for our opinion. Our examination does not provide a legal determination on the District’s compliance with specified requirements.

In our opinion, the District complied, in all material respects, with the aforementioned requirements for the fiscal year ended September 30, 2018.

This report is intended solely for the information and use of the Legislative Auditing Committee, members of the Florida Senate and the Florida House of Representatives, the Florida Auditor General, management, and the Board of Supervisors of Indigo Community Development District, Volusia County, Florida and is not intended to be and should not be used by anyone other than these specified parties.

May 23, 2019

MANAGEMENT LETTER PURSUANT TO THE RULES OF THE AUDITOR GENERAL FOR THE STATE OF FLORIDA

To the Board of Supervisors
Indigo Community Development District Volusia County, Florida

Report on the Financial Statements

We have audited the accompanying basic financial statements of Indigo Community Development District ("District") as of and for the fiscal year ended September 30, 2018, and have issued our report thereon dated May 23, 2019, which includes an explanatory paragraph regarding the modified opinion for the debt service fund due to the lack of sufficient competent evidential matter, and an emphasis of matter paragraph.

Auditor’s Responsibility

We conducted our audit in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and Chapter 10.550, Rules of the Florida Auditor General.

Other Reporting Requirements

We have issued our Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards; and Independent Auditor’s Report on an examination conducted in accordance with AICPA Professional Standards, AT-C Section 315, regarding compliance requirements in accordance with Chapter 10.550, Rules of the Auditor General. Disclosures in those reports, which are dated May 23, 2019, should be considered in conjunction with this management letter.

Purpose of this Letter

The purpose of this letter is to comment on those matters required by Chapter 10.550 of the Rules of the Auditor General for the State of Florida. Accordingly, in connection with our audit of the financial statements of the District, as described in the first paragraph, we report the following:

Current year findings and recommendations.
Status of prior year findings and recommendations.
Compliance with the Provisions of the Auditor General of the State of Florida.

Our management letter is intended solely for the information and use of the Legislative Auditing Committee, members of the Florida Senate and the Florida House of Representatives, the Florida Auditor General, Federal and other granting agencies, as applicable, management, and the Board of Supervisors of the District and the Auditor General of the State of Florida and is not intended to be and should not be used by anyone other than these specified parties.

We wish to thank Indigo Community Development District, Volusia County, Florida and the personnel associated with it, for the opportunity to be of service to them in this endeavor as well as future engagements, and the courtesies extended to us.

May 23, 2019

REPORT TO MANAGEMENT

CURRENT YEAR FINDINGS AND RECOMMENDATIONS 2018-01: Financial Condition Assessment
Observation: The District’s financial conditions continue to deteriorate. The debt service fund had a deficit fund balance of ($1,431,390) at September 30, 2018. In the prior, current, and subsequent fiscal years, major landowners in the District failed to pay significant portions of their assessments. As a result, certain debt service payments were not made. In addition, the District has not met the debt service reserve requirement. The non-payment of interest and principal payments, when due, are considered events of default. The District is economically dependent on the major landowners of the District. Furthermore, the title work necessary to commence foreclosure proceedings has been completed, but a foreclosure complaint has not yet been filed by the District.

Recommendation: The District should take the necessary steps to alleviate the deteriorating financial condition.

Reference Numbers for Prior Year Findings: 2017-01, 2016-01, 2015-01, 2014-01, 2013-2, 2012-02,
2011-02

Management Response: The District continues to work with the Trustee, the Bondholders, and the land owners of delinquent properties for the collection of debt service assessments. Due to the cost and other issues surrounding the foreclosure of the delinquent assessment properties, the District continue to take direction from the Trustee and the Bondholders. At this time the foreclosure process is on hold.

PRIOR YEAR FINDINGS AND RECOMMENDATIONS 2017-01: Financial Condition Assessment
Current Status: See finding 2018-01 above.

COMPLIANCE WITH THE PROVISIONS OF THE AUDITOR GENERAL OF THE STATE OF FLORIDA

Unless otherwise required to be reported in the auditor’s report on compliance and internal controls, the management letter shall include, but not be limited to the following:

A statement as to whether or not corrective actions have been taken to address findings and recommendations made in the preceding annual financial audit report.

There were no significant findings and recommendations made in the preceding annual financial audit report for the fiscal year ended September 30, 2017, except as noted above.

Any recommendations to improve the local governmental entity's financial management.

There were no such matters discovered by, or that came to the attention of, the auditor, to be reported for the fiscal year ended September 30, 2018, except as noted above.

Noncompliance with 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 which warrants the attention of those charged with governance.

There were no such matters discovered by, or that came to the attention of, the auditor, to be reported, for the fiscal year ended September 30, 2018, except as noted above.

The name or official title and legal authority of the District are disclosed in the notes to the financial statements.

REPORT TO MANAGEMENT (Continued)

III. COMPLIANCE WITH THE PROVISIONS OF THE AUDITOR GENERAL OF THE STATE OF FLORIDA
(Continued)

In connection with our audit, we determined that the District has met one or more of the financial emergency conditions described in Section 218.503(1), Florida Statutes. The District failed to make certain scheduled debt service payments due on the Series 1999C and 2005 Bonds, as a result of a lack of funds. We applied financial condition assessment procedures pursuant to Rule 10.556(7) and determined that a deteriorating financial condition was noted. See Findings section above for additional information. It is management’s responsibility to monitor financial condition, and our financial condition assessment was based in part on representations made by management and the review of financial information provided by same.