Candler Hills East Community Development District

ANNUAL FINANCIAL REPORT

September 30, 2018

Candler Hills East Community Development District ANNUAL FINANCIAL REPORT
Fiscal Year Ended September 30, 2018

TABLE OF CONTENTS

Page Number
REPORT OF INDEPENDENT AUDITORS	1-2
MANAGEMENT’S DISCUSSION AND ANALYSIS	3-8
BASIC FINANCIAL STATEMENTS:
Government-wide Financial Statements:
Statement of Net Position	9
Statement of Activities	10
Fund Financial Statements:
Balance Sheet – Governmental Funds	11
Reconciliation of Total Governmental Fund Balances to Net
Position of Governmental Activities	12
Statement of Revenues, Expenditures and Changes in Fund
Balances – Governmental Funds	13
Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the
Statement of Activities	14
Statement of Revenues, Expenditures and Changes in Fund
Balances – Budget and Actual – General Fund	15
Notes to Financial Statements	16-30
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	31-32
MANAGEMENT LETTER	33-34
INDEPENDENT ACCOUNTANT’S REPORT/COMPLIANCE
WITH SECTION 218.415, FLORIDA STATUTES	35

REPORT OF INDEPENDENT AUDITORS

To the Board of Supervisors
Candler Hills East Community Development District Marion County, Florida

Report on the Financial Statements

We have audited the accompanying basic financial statements of Candler Hills East Community Development District as of and for the year ended September 30, 2018, 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 an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 opinion.
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To the Board of Supervisors
Candler Hills East Community Development District

Opinion

In our opinion, the basic financial statements referred to above present fairly, in all material respects, the financial position of the governmental activities, and each major fund of Candler Hills East Community Development District as of September 30, 2018, and the respective changes in financial position and the budgetary comparison for the General Fund for the year then ended in conformity with accounting principles generally accepted in the United States of America.

Other Matters

Management’s Discussion and Analysis

Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis 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, economical or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted principally of inquiries of management 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 the 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 a report dated February 25, 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 and contracts.

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 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 Candler Hills

East Community Development District’s

internal control over financial reporting and compliance.

Berger, Toombs, Elam, Gaines & Frank Certified Public Accountants PL
Fort Pierce, Florida

February 25, 2019
- 2 -

Management’s discussion and analysis of Candler Hills East Community Development District (the “District”) financial performance provides an objective and easily readable analysis of the District’s financial activities. The analysis provides summary financial information for the District and should be read in conjunction with the District’s financial statements.

OVERVIEW OF THE FINANCIAL STATEMENTS

The District’s basic financial statements comprise three components; 1) Government-wide financial statements, 2) Fund financial statements, and 3) Notes to financial statements. The Government-wide financial statements present an overall picture of the District’s financial position and results of operations. The Fund financial statements present financial information for the District’s major funds. The Notes to financial statements provide additional information concerning the District’s finances.

The Government-wide financial statements are the statement of net position and the statement of activities. These statements use accounting methods similar to those used by private-sector companies. Emphasis is placed on the net position of governmental activities  and the change in net position. Governmental activities are primarily supported by special assessments.

The statement of net position presents information on all assets and liabilities of the District, with the difference between assets and liabilities reported as net position. Net position is reported in three categories; 1) net investment in capital assets, 2) restricted, and 3) unrestricted. Assets, liabilities, and net position are reported for all Governmental activities.

The statement of activities presents information on all revenues and expenses of the District and the change in net position. Expenses are reported by major function and program revenues relating to those functions are reported, providing the net cost of all functions provided by the District. To assist in understanding the District’s operations, expenses have been reported as governmental activities. Governmental activities financed by the District include general government, physical environment and debt service.

Fund financial statements present financial information for governmental funds. These statements provide financial information for the major funds of the District. Governmental fund financial statements provide information on the current assets and liabilities of the funds, changes in current financial resources (revenues and expenditures), and current available resources.

Fund financial statements include a balance sheet and a statement of revenues, expenditures and changes in fund balances for all governmental funds. A statement of revenues, expenditures, and changes in fund balances – budget and actual is provided for the District’s General Fund. Fund financial statements provide more detailed information about the District’s activities. Individual funds are established by the District to track revenues that are restricted to certain uses or to comply with legal requirements.

The government-wide financial statements and the fund financial statements provide different pictures of the District. The government-wide financial statements provide an overall picture of the District’s financial standing. These statements are comparable to private-sector companies and give a good understanding of the District’s overall financial health and how the District paid for the various activities, or functions, provided by the District. All assets of  the District, including land, buildings and improvements, and infrastructure are reported in the statement of net position. All liabilities, including principal outstanding on bonds are included. The statement of activities includes depreciation on all long-lived assets of the District, but transactions between the different functions of the District have been eliminated in order to avoid “doubling up” the revenues and expenses. The fund financial statements provide  a picture of the major funds of the District. In the case of governmental activities, outlays for long lived assets are reported as expenditures and long-term liabilities, such as general obligation bonds, are not included in the fund financial statements. To provide a link from the fund  financial statements to the government-wide financial statements, a reconciliation is provided from the fund financial statements to the government-wide financial statements.

Notes to financial statements provide additional detail concerning the financial activities and financial balances of the District. Additional information about the accounting practices of the District, investments of the District, capital assets and long-term debt are some of the items included in the notes to financial statements.

Financial Highlights

The following are the highlights of financial activity for the year ended September 30, 2018.

The District’s total assets exceeded total liabilities by $1,396,944 (net position). Unrestricted net position for Governmental Activities was $47,748. Net Investment in Capital Assets was $1,020,298. Restricted net position was $328,898.

Governmental activities revenues totaled $376,978 while governmental activities expenses totaled $388,755.

Financial Analysis of the District

The following schedule provides a summary of the assets, liabilities and net position of the District and is presented by category for comparison purposes.

Net Position	
	Governmental Activities

 	2018		 	2017		
Current assets	$	47,874	$	45,777	
Restricted assets		491,608	522,085	
Capital assets	 	3,957,537 	 	4,135,508 	
Total Assets	 	4,497,019 	 	4,703,370 	
Deferred Outflows of Resources	 	24,379 	 	25,691 	
Current liabilities		149,730	230,631	
Non-current liabilities	 	2,974,724 	 	3,089,709 	
Total Liabilities	 	3,124,454 	 	3,320,340 	
Net investment in capital assets		1,020,298	1,009,597	
Restricted debt service		165,362	197,180	
Restricted capital projects		163,536	160,459	
Net position - unrestricted		 	47,748 	 	41,485 	
Total Net Position	$	1,396,944	$ 1,408,721	

The decrease in capital assets is mainly due to current year depreciation.

The reduction in restricted assets and the reduction in restricted debt service net position is related to prepayments on the bonds in the current year.

The decrease in total liabilities is primarily related to principal payments in the current year.

Financial Analysis of the District (Continued)

The following schedule provides a summary of the changes in net position of the District and is presented by category for comparison purposes.

Change In Net Position	
	Governmen 2018	tal Activities
2017	

Program Revenues			
Charges for services	$	373,051	$	509,260	
General Revenues			
Investment earnings	 	3,927 	 	2,330 	
Total Revenues	 	376,978 	 	511,590 	
Expenses			
General government	41,665	50,615	
Physical environment	235,583	230,372	
Interest on long-term debt Total Expenses

Change in Net Position	 	111,507 
 	388,755 	 	246,011 
 	526,998 	
	(11,777)	(15,408)	
Net Position - Beginning of Year	 	1,408,721 	 	1,424,129 	
Net Position - End of Year	  $	1,396,944 	  $	1,408,721 	

The decrease in charges for services is related reduced debt service requirements related to the bond refunding in the prior year.

The reduction in interest expense is related to the reduction in the outstanding bonds in the prior year.

Capital Assets Activity

The following schedule provides a summary of the District’s capital assets as of September 30, 2018 and 2017.

	Governmental Activities	
 	Description		
 	2018		 	2017		
Land	$	1,373,401	$	1,373,401	
Improvements		3,986,633		3,986,633	
Infrastructure		555,184		555,184	
Accumulated depreciation		 	(1,957,681)		 	(1,779,710)	
Total Capital Assets (Net)	  $		3,957,537 	  $		4,135,508 	

The activity for the year consisted of $177,971 in depreciation.

General Fund Budgetary Highlights

Actual governmental expenditures were less than final budgeted amounts primarily due to lower operating costs and contingency expenditures than were anticipated in the approved budget.

There were no amendments to the 2018 budget.

Debt Management

Governmental Activities debt includes the following:

In November 2016, Bay Laurel Community Development District issued conduit debt of
$3,380,000 Series 2016 Special Assessment Revenue Refunding Bonds for Candler Hills East Community Development District. These bonds were issued to refund the Series 2006 Special Assessment Bonds. The Bonds are special limited obligations of Bay Laurel, payable solely from and secured by pledge revenues to be collected by Candler Hills East Community Development District. The balance outstanding at September 30, 2017 was $3,080,000.

Economic Factors and Next Year’s Budget

The District is not aware of any circumstances that would have a significant effect on the financial position or results of operations of the District in fiscal year 2019.

Request for Information

The financial report is designed to provide a general overview of Candler Hills East Community Development District finances for all those with an interest. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the Candler Hills East Community Development District, Governmental Management Services, 9145 Narcoossee Road, Suite A206, Orlando, FL 32827.

Candler Hills East Community Development District	
STATEMENT OF NET POSITION			
September 30, 2018			
Governmental	
		Activities	
ASSETS			
Current Assets			
Cash	$	36,832	
Prepaid items	 	11,042 	
Total Current Assets	 	47,874 	
Non-current Assets		
Restricted assets			
Investments		491,608	
Capital assets, not being depreciated			
Land		1,373,401	
Capital assets, being depreciated			
Infrastructure		555,184	
Improvements		3,986,633	
Less: accumulated depreciation	 	(1,957,681)	
Total Non-current Assets	 	4,449,145 	
Total Assets	 	4,497,019 	
Deferred Outflows of Resources			
Deferred amount on refunding, net	 	24,379 	
Total Assets and Deferred Outflows of Resources	 	4,521,398 	

LIABILITIES			
Current Liabilities			
Accounts payable and accrued expenses		126	
Accrued interest		44,604	
Bonds payable - current portion	 	105,000 	
Total Current Liabilities	 	149,730 	
Non-current Liabilities		
Bonds payable	 	2,974,724 	
Total Liabilities	 	3,124,454 	
NET POSITION			
Net investment in capital assets		1,020,298	
Restricted debt service		165,362	
Restricted capital projects		163,536	
Unrestricted	 	47,748 	
Total Net Position	  $		1,396,944 	

STATEMENT OF ACTIVITIES
For the Year Ended September 30, 2018

			Net (Expense)	
			Revenues and	
	Program		Changes in	
	Revenues		Net Position	
	Charges for		Governmental	
Functions/Programs
Governmental Activities	 	Expenses		Services		Activities	
General government	$	(41,665)	$	15,826		$	(25,839)	
Physical environment	(235,583)	89,681		(145,902)	
Interest on long-term debt
Total Governmental Activities	 	(111,507)	 	267,544 
  $	(388,755)	 $	373,051 		 	156,037 
(15,704)	

General revenues:			
	Investment earnings

Change in Net Position		 	3,927 

(11,777)	
	Net Position - October 1, 2017
Net Position - September 30, 2018		 	1,408,721 
  $	1,396,944 	

BALANCE SHEET - GOVERNMENTAL FUNDS
September 30, 2018

								Total	
				Debt		Capital		Governmental	
ASSETS

Cash	General

$   36,832		

$	Service

-		Projects

$	-		Funds

$	36,832	
Prepaid items	11,042			-		-		11,042	
Restricted assets									
Investments, at fair value	-			328,072		163,536		491,608

$	539,482	
Total Assets	$ 47,874		$	328,072		$ 163,536			

LIABILITIES AND FUND BALANCES									
LIABILITIES									
Accounts payable and accrued expenses

FUND BALANCES	$	126		$	-		$	-		$	126	
Nonspendable									
Prepaid items	11,042			-		-		11,042	
Restricted									
Debt service	-			328,072		-		328,072	
Capital projects	-			-		163,536		163,536	
Unassigned

Total Fund Balances

Total Liabilities and Fund Balances	36,706

47,748

  $   47,874 		

  $		- 328,072
328,072 		- 163,536
   $  163,536 		36,706

539,356

  $	539,482 	

RECONCILIATION OF TOTAL GOVERNMENTAL FUND BALANCES TO NET POSITION OF GOVERNMENTAL ACTIVITIES
September 30, 2018

Total Governmental Fund Balances	$	539,356	
Amounts reported for governmental activities in the Statement of Net Position			
are different because:			
Capital assets consisting of land, $1,373,401, improvements, $3,986,633, and			
infrastructure, $555,184, net of accumulated depreciation, $(1,957,681),			
used in governmental activities are not current financial resources			
and, therefore, are not reported at the fund level.		3,957,537	
Long-term liabilities, $(3,080,000) net of bond discount, net, $276, are not due and			
payable in the current period and, therefore, are not reported at the fund level.		(3,079,724)	
Deferred amounts on refunding are recognized as other debt service costs			
in the funds, however, at the government-wide level these costs are amortized			
over the life of the loan. This is the net deferred amount on refunding.		24,379	
Accrued interest expense for long-term debt is not a current financial use			
and, therefore, is not reported at the fund level.		(44,604)	

Net Position of Governmental Activities	
  $		
1,396,944 	

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS
For the Year Ended September 30, 2018

							Totals	
			Debt		Capital		Governmental	
	General		Service		Projects		Funds	
Revenues								
Special assessments	$ 105,507		$ 267,544		$	-		$	373,051	
Investment earnings	33		817		3,077		3,927	
Total Revenues	
105,540		
268,361		
3,077		
376,978	

Expenditures								
Current								
General government	41,665		-		-		41,665	
Physical environment	57,612		-		-		57,612	
Debt service								
Principal	-		190,000		-		190,000	
Interest	-		110,775		-		110,775	
Other debt service	-		1,140		-		1,140

401,192	
Total Expenditures	99,277		301,915		-			
Net change in fund balances	6,263		(33,554)		3,077		(24,214)	
Fund Balances - October 1, 2017	41,485		361,626		160,459		563,570	
Fund Balances - September 30, 2018	$	47,748		$ 328,072		$ 163,536		$	539,356	

RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE
STATEMENT OF ACTIVITIES
For the Year Ended September 30, 2018

Net Change in Fund Balances - Total Governmental Funds	$	(24,214)	
Amounts reported for governmental activities in the Statement of Activities are different because:			
Governmental funds report capital outlays as expenditures. However,
in the Statement of Activities, the cost of those assets is allocated over their estimated useful lives as depreciation. This is the amount of depreciation in the current period.		

(177,971)	
Bond discount and the deferred amount on refunding are amortized over the
life of the loan at the government-wide level. This is the amount of current-year amortization.		

(1,327)	
In the Statement of Activities, interest is accrued on outstanding bonds; whereas in governmental funds, interest expenditures are reported when due. This is the net amount between the prior year and the current year accruals.		

1,735	
Repayment of bond principal is an expenditure in the governmental funds,
but the repayment reduces long-term liabilities in the Statement of Net Position.	
 	190,000 	
Change in Net Position of Governmental Activities	  $		(11,777)	

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL - GENERAL FUND
For the Year Ended September 30, 2018

							Variance	
	Original		Final				Favorable	
	Budget		Budget		Actual		(Unfavorable)	
Revenues								
Special assessments	$ 105,046		$ 105,046		$105,507		$	461	
Investment earnings
Total Revenues	50

105,096		50

105,096		33

105,540		(17)

444	

Expenditures								
Current								
General government	45,101		45,101		41,665		3,436	
Physical environment Total Expenditures
Net change in fund balances Fund Balances - October 1, 2017	59,995

105,096

-

-		59,995

105,096

-

-		57,612

99,277

6,263

41,485		

  $		2,383
5,819

6,263

41,485

47,748 	

Fund Balances - September 30, 2018	
   $		
- 		
  $		
- 		
  $ 47,748 				

See accompanying notes.

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial statements of Candler Hills East Community Development District (the “District”) have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The District's more significant accounting policies are described below.

Reporting Entity

The District was established on November 19, 2002 by an ordinance of Marion County, Florida, under the Uniform Community Development District Act of 1980, Chapter 190, Florida Statutes, as amended (the "Act"), as a Community Development District.  The District was established for the purposes of financing and managing the acquisition, construction, maintenance and operation of the infrastructure necessary for community development within its jurisdiction. The District is governed by a five-member Board of Supervisors, who are elected for terms of four years. The District operates within the criteria established by Chapter 190. The Board has the responsibility for 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, and financing improvements.

The reporting entity for the District includes all functions of government in which the District’s Board exercises oversight responsibility. Oversight responsibility includes, but is not limited to, financial interdependency, designation of management, significant ability to influence operations and accountability for fiscal matters. As required by GAAP, these financial statements present the Candler Hills East Community Development District (the primary government) as a stand-alone government.

Based upon the application of the above-mentioned criteria as set forth by the Governmental Accounting Standards Board, the District has identified no component units.

Measurement Focus and Basis of Accounting

The basic financial statements of the District are composed of the following:
Government-wide financial statements
Fund financial statements
Notes to financial statements

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Measurement Focus and Basis of Accounting (Continued)

Government-wide Financial Statements

Government-wide financial statements report all non-fiduciary information about the reporting government as a whole. These statements include the governmental activities of the primary government. The effect of interfund activity has been removed from these statements.

Governmental activities are supported by special assessments, miscellaneous revenues and interest. Program revenues include charges for services, and payments made by parties outside of the reporting government’s citizenry if that money is restricted to a particular program. Program revenues are netted with program expenses in the statement of activities to present the net cost of each program.

Amounts paid to acquire capital assets are capitalized as assets, rather than reported as an expenditure. Proceeds of long-term debt are recorded as liabilities in the government-wide financial statements, rather than as an other financing source.

Amounts paid to reduce long-term indebtedness of the reporting government are reported as a reduction of the related liability, rather than as an expenditure.

Fund Financial Statements

The underlying accounting system of the District is organized and operated on the basis of separate funds, each of which is considered to be a separate accounting 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 expenditures or expenses, as appropriate. Governmental 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.

Fund financial statements for the primary government’s governmental funds are presented after the government-wide financial statements. These statements display information about major funds individually.

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2. Measurement Focus and Basis of Accounting (Continued)

b. Fund Financial Statements (Continued) Governmental Funds
The District has implemented the Governmental Accounting Standards Board Statement 54 – Fund Balance Reporting and Governmental Fund Type Definitions. The Statement requires the fund balance for governmental funds to be reported in classifications that comprise a hierarchy based primarily on the extent to which the government is bound to honor constraints on the specific purposes for which amounts in those funds can be spent.

The District has various policies governing the fund balance classifications.

Nonspendable Fund Balance – This classification consists of amounts that cannot be spent because they are either not in spendable form or are legally or contractually required to be maintained intact.

Restricted Fund Balance – This classification includes amounts that can be spent only for specific purposes stipulated by the state constitution, external resource providers, or through enabling legislation.

Assigned Fund Balance – This classification consists of the Board of Supervisors’ intent to be used for specific purposes, but are neither restricted nor committed. The assigned fund balances can also be assigned by the District’s management company.

Unassigned Fund Balance – This classification is the residual classification for the government’s general fund and includes all spendable amounts not contained in the other classifications. Unassigned fund balance is considered to be utilized first when expenditure is incurred for purposes for which amounts in any of those unrestricted fund balance classifications could be used.

Fund Balance Spending Hierarchy – For all governmental funds except special revenue funds, when restricted, committed, assigned, and unassigned fund balances are combined in a fund, qualified expenditures are paid first from restricted or committed fund balance, as appropriate, then assigned and finally unassigned fund balances.

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Measurement Focus and Basis of Accounting (Continued)

b. Fund Financial Statements (Continued) Governmental Funds (Continued)
Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are considered to be available when they are collected within the current period or soon thereafter to pay liabilities of the current period. For this purpose, the District considers revenues to be available if they are collected within 60 days of the end of the current fiscal period.

Expenditures generally are recorded when a liability is incurred, as under accrual accounting. Interest associated with the current fiscal period is considered to be an accrual item and so has been recognized as revenue of the current fiscal period.

Under the current financial resources measurement focus, only current assets and current liabilities are generally included on the balance sheet. The reported  fund balance is considered to be a measure of “available spendable resources”. Governmental fund operating statements present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Accordingly, they are said to present a summary of sources and uses of “available spendable resources” during a period.

Because of their spending measurement focus, expenditure recognition for governmental fund types excludes amounts represented by non-current liabilities. Since they do not affect net current assets, such long-term amounts are not recognized as governmental fund type expenditures or fund liabilities.

Amounts expended to acquire capital assets are recorded as expenditures in the year that resources were expended, rather than as fund assets. The proceeds of long-term debt are recorded as an other financing source rather than as a fund liability.

Debt service expenditures are recorded only when payment is due.

Basis of Presentation

Governmental Major Funds

General Fund – The General Fund is the District’s primary operating fund. It accounts  for all financial resources of the general government, except those required to be accounted for in another fund.

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Basis of Presentation (Continued)

Governmental Major Funds (Continued)

Debt Service Fund – Accounts for debt service requirements to retire certain capital improvement revenue bonds which were used to finance the construction of District infrastructure improvements and finance certain additional improvements. The bond series is secured by a pledge of debt service special assessment revenues in any fiscal year related to the improvements. A lien is placed on all benefited land in relationship to the debt outstanding.

Capital Projects Fund – The Capital Project Fund accounts for construction of infrastructure improvements within the boundaries of the district.

Non-current Governmental Assets/Liabilities

GASB Statement 34 requires that non-current governmental assets, such as land and buildings, and non-current governmental liabilities, such as special assessment bonds, be reported in the governmental activities column in the government-wide statement of net position.

Assets, Liabilities and Net Position or Equity

Cash and Investments

Florida Statutes require state and local governmental units to deposit monies with financial institutions classified as "Qualified Public Depositories," a multiple financial institution pool whereby groups of securities pledged by the various financial institutions provide common collateral from their deposits of public funds. This pool is provided as additional insurance to the federal depository insurance and allows for additional assessments against the member institutions, providing full insurance for public deposits.

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Assets, Liabilities and Net Position or Equity (Continued)

Cash and Investments (Continued)

The District is authorized to invest in those financial instruments as established by Section 218.415, Florida Statutes. The authorized investments consist of:

Direct obligations of the United States Treasury;

The Local Government Surplus Funds Trust or any intergovernmental investment pool authorized pursuant to the Florida Interlocal Cooperative Act of 1969;

Interest-bearing time deposits or savings accounts in authorized qualified public depositories;

Securities and Exchange Commission, registered money market funds with the highest credit quality rating from a nationally recognized rating agency.

Cash equivalents include time deposits and certificates of deposit with original maturities of three months or less and held in a qualified public depository as defined by Florida Statute 280.02.

Restricted Net Position

Certain net position of the District are classified as restricted on the statement of net position because their use is limited either by law through constitutional provisions or enabling legislation; or by restrictions imposed externally by creditors. In a fund with  both restricted and unrestricted net position, qualified expenses are considered to be paid first from restricted net position and then from unrestricted net position.

Capital Assets

Capital assets, which include land, infrastructure, and improvements, are reported in the applicable governmental activities column.

The District defines capital assets as assets with an initial, individual cost of $5,000 or more and an estimated useful life in excess of one year. The valuation basis for all assets is historical cost.

The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend its useful life are not capitalized.

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

4. Assets, Liabilities and Net Position or Equity (Continued)

Capital Assets (Continued)

Major outlays for capital assets and improvements are capitalized as projects are constructed.

Depreciation of capital assets is computed and recorded by utilizing the straight-line method. Estimated useful lives of the various classes of depreciable capital assets are as follows:

Improvements:	25 years
Infrastructure:	30 years

Budgets

Budgets are prepared and adopted after public hearings for the governmental funds, pursuant to Chapter 190, Florida Statutes. The District utilizes the same basis of accounting for budgets as it does for revenues and expenditures in its various funds. The legal level of budgetary control is at the fund level. All budgeted appropriations lapse at year end. Formal budgets are adopted for the general and debt service funds. As a result, deficits in the budget variance columns of the accompanying financial statements may occur.

NOTE	B	–		RECONCILIATION	OF	GOVERNMENT-WIDE	AND	FUND	FINANCIAL STATEMENTS

1. Explanation of Differences Between the Governmental Fund Balance Sheet and the Government-wide Statement of Net Position

“Total fund balances” of the District’s governmental funds ($539,356) differs from “net position” of governmental activities ($1,396,944) reported in the Statement of Net Position. This difference primarily results from the long-term economic focus of the statement of net position versus the current financial resources focus of the governmental fund balance sheet. The effect of the differences is illustrated below.

NOTE	B	–		RECONCILIATION	OF	GOVERNMENT-WIDE	AND	FUND	FINANCIAL STATEMENTS (CONTINUED)

Explanation of Differences Between the Governmental Fund Balance Sheet and the Government-wide Statement of Net Position (Continued)

Capital related items

When capital assets (property, plant and equipment that are to be used in governmental activities) are purchased or constructed, the cost of those assets is reported as expenditures
in governmental funds.	However, the Statement of Net Position assets among the assets of the District as a whole.	included those capital	
Land	$	1,373,401	
Improvements	3,986,633	
Infrastructure	555,184	
Accumulated depreciation	 	(1,957,681)	
Total	$	3,957,537	
Deferred outflows of resources		
Deferred amounts on refunding deferred outflows of resources that life of the loan.	are amortized over the	
Deferred amount on refunding, net	$	24,379	

Long-term debt transactions

Long-term liabilities and bond discount applicable to the District’s governmental activities are not due and payable in the current period and accordingly are not reported as fund liabilities. All liabilities (both current and long-term) are reported in the Statement of Net Position.

Bonds payable	$	(3,080,000)	
Bond discount, net	 	276 	
Bonds payable, net	$	(3,079,724)	

Accrued interest

Accrued liabilities in the Statement of Net Position differ from the amount reported in governmental funds due to accrued interest on bonds.

Accrued interest on bonds payable	$	(44,604)

NOTE	B	–		RECONCILIATION	OF	GOVERNMENT-WIDE	AND	FUND	FINANCIAL STATEMENTS (CONTINUED)

Explanation of Differences Between the Governmental Fund Operating Statements and the Statement of Activities

The “net change in fund balances” for government funds ($(24,214)) differs from the “change in net position” for governmental activities ($(11,777)) reported in the Statement of Activities. The differences arise primarily from the long-term economic focus of the Statement of Activities versus the current financial resources focus of the governmental funds. The effect of the differences is illustrated below.

Capital related items

When capital assets that are to be used in governmental activities are purchased or constructed, the resources expended for those assets are reported as expenditures in governmental funds. However, in the Statement of Activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation. As a result, fund balances decrease by the amount of financial resources expended, whereas net position decrease by the amount of depreciation charged for the year.

Depreciation	$	(177,971)

Long-term debt transactions

Repayments of bond principal are reported as an expenditure in the governmental funds and, thus, have the effect of reducing fund balance because current financial resources have been used.

Debt principal payments	$	190,000

NOTE	B	–	RECONCILIATION	OF	GOVERNMENT-WIDE	AND	FUND	FINANCIAL STATEMENTS (CONTINUED)

Explanation of Differences Between the Governmental Fund Operating Statements and the Statement of Activities (Continued)

Long-term debt transactions (Continued)

Some expenses reported in the Statement of Activities do not require the use of current financial resources, therefore, are not reported as expenditures in governmental funds.
Net change in accrued interest payable	$	1,735 Amortization of bond discount and deferred amount
on refunding	$	(1,327)

NOTE C – CASH AND INVESTMENTS

All deposits are held in qualified public depositories and are included on the accompanying balance sheet as cash and investments.

Custodial Credit Risk – Deposits

Custodial credit risk is the risk that in the event of a bank failure, the District's deposits may not be returned to it. The District does not have a formal deposit policy for custodial credit risk; however, they follow the provisions of Chapter 280, Florida Statutes regarding deposits and investments. As of September 30, 2018, the District's bank balance was $43,376 and the carrying value was $36,832. Exposure to custodial credit risk was as follows. The District maintains all deposits in a qualified public depository in accordance with the provisions of Chapter 280, Florida Statutes, which means that all deposits are fully insured by Federal Depositors Insurance or collateralized under Chapter 280, Florida Statutes.

As of September 30, 2018, the District had the following investments and maturities:

 	Investment			Maturities		Fair Value	
Local Government Surplus Trust Fund - FL Prime		33 days*		$	163,536	
Managed Money Market		N/A		 	328,072 	
Total	$	491,608

* Weighted Average Maturity

NOTE C – CASH AND INVESTMENTS (CONTINUED)

Custodial Credit Risk – Deposits (Continued)

The District categorizes its fair value measurement within the fair value hierarchy established by generally accepted accounting principles. The fair value is the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. The District uses a market approach in measuring fair value that uses prices and other relevant information generated by market transactions involving identical or similar assets, liabilities, or groups of assets and liabilities.

Assets or liabilities are classified into one of three levels. Level 1 is the most realizable and is based on quoted price for identical assets, or liabilities, in an active market. Level 2 uses significant other observable inputs when obtained quoted prices for identical or similar assets, or liabilities, in markets that are not active. Level 3 is the least reliable and uses significant unobservable inputs that uses the best information available under the circumstances which includes the District's own data in measuring unobservable inputs.

Based on the criteria in the preceding paragraph, the investment in Managed Money Market is a Level 1 asset.
Investments
The District’s investment policy allows management to invest funds in investments permitted under Section 218.415, Florida Statutes. Among other investments, the policy allows  the District to invest in the State Board of Administration Local Government Surplus Trust Funds.
Cash placed with the State Board of Administration represents the District’s participation in the Local Government Surplus Trust Funds Investment Pool and is reported at fair value. As a pool participant the District invests in pools of investments in which shares are owned in the pool rather than the underlying investments.
Interest Rate Risk
The District does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates.
Credit Risk
The District's investments are limited by state statutory requirements and bond compliance.  The District has no investment policy that would further limit its investment choices. As of September 30, 2018, the District's investment in Local Government Surplus Trust Fund is rated AAAm by Standards & Poors.

NOTE C – CASH AND INVESTMENTS (CONTINUED)
Concentration of Credit Risk
The District places no limit on the amount it may invest in any one fund. The investments in Managed Money Market is 67% and the investments in the Local Government Surplus Fund is 33% of the District’s total investments.
The types of deposits and investments and their level of risk exposure as of September 30, 2018 were typical of these items during the fiscal year then ended. The District considers any decline in fair value for certain investments to be temporary.

NOTE D – SPECIAL ASSESSMENT REVENUES
Assessments are non-ad valorem assessments on benefitted property within the District. Operating and Maintenance Assessments are based upon adopted budget and levied annually. Debt Service Assessments are levied when bonds are issued and collected annually. The District may collect assessments directly or utilize the uniform method of collection (Chapter 197.3632, 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 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 all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period.

NOTE E – CAPITAL ASSETS

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

	Beginning					Ending	
	 	Balance		    Additions		   Deletions 	 	Balance		
Governmental Activities:							
Capital assets, not being depreciated:							
Land	  $ 1,373,401 	  $		- 	  $		- 	  $ 1,373,401 	
Capital assets, being depreciated:							
Improvements	3,986,633		-		-	3,986,633	
Infrastucture	 	555,184 	 	- 	 	- 	 	555,184 	
Total Capital Assets Depreciated	4,541,817	-	-	4,541,817	
Less accumulated depreciation	 	(1,779,710)	 	(177,971)	 	- 	 	(1,957,681)	
Total Capital Assets Depreciated, Net	 	2,762,107 	 	(177,971)	 	- 	 	2,584,136 	
Governmental Activities Capital Assets	  $ 4,135,508 	  $ 	(177,971)	  $		- 	  $ 3,957,537 	

Depreciation in the amount of $177,971 was charged to physical environment.

NOTE F – LONG-TERM DEBT

In November 2016, Bay Laurel Community Development District issued conduit debt of
$3,380,000 of Special Assessment Revenue Refunding Bonds, Series 2016 ("Series 2016 Bonds"). In connection with the issuance of the Series Bonds, an agreement was established whereby Bay Laurel Community Development District loaned the Series 2016 Bonds funds to the District. The Series 2016 Bonds were issued to refund the Series 2006 Bonds. The Series 2016 Bonds are special limited obligation of Bay Laurel Community Development District, payable solely from and secured by pledge revenues to be collected by the District.

The following is a summary of activity for long-term debt of the District for the year ended September 30, 2018:

Long-term debt at October 1, 2017	$	3,270,000	
Principal payments	 	(190,000)	
Long-term debt at September 30, 2018	3,080,000	
Bond discount, net	 	(276)	
Bonds Payable, Net	$	3,079,724 	

NOTE F – LONG-TERM DEBT (CONTINUED)		
Special Assessment Revenue Refunding Bonds		
Long-term debt is comprised of the following:		
$3,380,000 Series 2016 Special Assessment Revenue Refunding Bonds due in annual installments beginning May 2017 and maturing May 2037. Interest at various interest rates between 2% and 4% due in May and November and starting in May 2017. Current portion is $105,000.	

$	3,080,000	
Bond discount, net	 	(276)	
Bonds Payable, Net	$	3,079,724	

The annual requirements to amortize the principal and interest of bonded debt outstanding as of September 30, 2018 are as follows:

Year Ending					
    September 30,	

2019	

$	 	Principal	

105,000	 	Interest	

$	107,050	 	Total	

$	212,050	
2020		130,000	104,950	234,950	
2021		130,000	102,025	232,025	
2022		135,000	99,100	234,100	
2023		135,000	96,062	231,062	
2024-2028		695,000	422,875	1,117,875	
2029-2033		900,000	278,163	1,178,163	
2034-2037

Totals	

  $		 	850,000 

3,080,000 	 	86,600 

  $	1,296,825 	 	936,600 

  $	4,376,825 	

NOTE F – LONG-TERM DEBT (CONTINUED)

Summary of Significant Bonds Resolution Terms and Covenants

Special Assessment Revenue Refunding Bonds, Series 2016
The District levies special assessments pursuant to Section 190.022, Florida Statutes and the assessment rolls are approved by resolutions of the District Board. The collections are to be strictly accounted for and applied to the debt service of the bond series for which they were levied. The District covenants to levy special assessments in annual amounts adequate to provide for payment of principal and interest on the bonds. Payment of principal and interest is dependent on the money available in the debt service fund and the District’s ability to collect special assessments levied.

The Bonds are subject to redemption at the option of the District and are also subject to extraordinary mandatory redemption prior to maturity as outlined in the Trust Indenture.

Depository Funds – The bond resolution establishes certain funds and determines the order in which revenues are to be deposited into these funds. A description of the significant funds, including their purposes, is as follows:
Reserve Fund – The Series 2016 Reserve Account is funded from the proceeds of the Bonds in an amount equal to fifty percent of the Maximum Annual Debt Service Requirement for all Outstanding Series 2016 Bonds. Monies held in the reserve accounts will be used only for the purposes established in the Trust Indenture.

Reserve	Reserve
 	Balance		 Requirement 
Series 2016	 $   118,106	 $	118,756 

The government is exposed to various risks of loss related to torts, theft of, damage to and destruction of assets; errors and omissions; and natural disasters for which the government carries commercial insurance.

NOTE H – SUBSEQUENT EVENT
On November 1, 2018 the district prepaid $25,000 of the Series 2016 Special Assessment Revenue Refunding Bonds.

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
Candler Hills East Community Development District Marion 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 Candler Hills East Community Development District, as of and for the year ended September 30, 2018, and the related notes to the financial statements, and have issued our report thereon dated February 25, 2019.

Internal Control Over Financial Reporting

In planning and performing our audit, we considered Candler Hills East Community Development District's internal control over financial reporting 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 Candler Hills East Community Development District’s internal control. Accordingly, we do not express an opinion on the effectiveness of Candler Hills East Community Development District's internal control over financial reporting.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the 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 over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control 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.

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Board of Supervisors
Candler Hills East Community Development District

Compliance and Other Matters

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

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.

Berger, Toombs, Elam, Gaines & Frank Certified Public Accountants
Fort Pierce, Florida February 25, 2019

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MANAGEMENT LETTER

To the Board of Supervisors
Candler Hills East Community Development District Marion County, FL
Report on the Financial Statements

We have audited the financial statements of the Candler Hills East Community Development District as of and for the year ended September 30, 2018, and have issued our report thereon dated February 25, 2019.
Auditor’s Responsibility

We conducted our audit in accordance with auditing standards generally accepted in the United States; 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 Financial Statements Performed in Accordance with Government Auditing Standards and our Independent Auditor’s Report on an examination conducted in accordance with AICPA Professionals Standards, AT-C Section 315 regarding compliance requirements in accordance with Chapter 10.550, Rules of the Auditor General. Disclosures in that report, which is dated February 25, 2019, should be considered in conjunction with this management letter.
Prior Audit Findings

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

Section 10.554(1)(i)5.a. and 10.556(7), Rules of the Auditor General, requires us to apply appropriate procedures and communicate the results of our determination as to whether or not Candler Hills East Community Development District has met one or more of the conditions described in Section 218.503(1), Florida Statutes, and to identify the specific conditions met. In connection with our audit, we determined that the Candler Hills East Community Development District did not meet any of the conditions described in Section 218.503(1), Florida Statutes.

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To the Board of Supervisors
Candler Hills East Community Development District

Pursuant to Sections 10.554(1)(i)5.c. and 10.556(8), Rules of the Auditor General, we applied financial conditions assessment procedures as of September 30, 2018 for the Candler Hills East Community Development District. It is management’s responsibility to monitor the Candler Hills East Community Development District’s financial condition; our financial condition assessment was based in part on the representations made by management and the review of the financial information provided by the same.

Section 10.554(1)(i)2., Rules of the Auditor General, requires that we communicate any recommendations to improve financial management. In connection with our audit, we did not have any such recommendations.

Additional Matters

Section 10.554(1)(i)3., Rules of the Auditor General, requires us to communicate 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. In connection with our audit, we did not note any such findings.

Purpose of this Letter

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, the Board of Supervisors, and applicable management, and is not intended to be and should not be used by anyone other than these specified parties.

Berger, Toombs, Elam, Gaines & Frank Certified Public Accountants PL
Fort Pierce, Florida February 25, 2019

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INDEPENDENT ACCOUNTANT’S REPORT/COMPLIANCE WITH SECTION 218.415, FLORIDA STATUTES

To the Board of Supervisors
Candler Hills East Community Development District Marion County, Florida

We have examined Candler Hills East Community Development District's compliance with Section 218.415, Florida Statutes during the year ended September 30, 2018. Management is responsible for Candler Hills East Community Development District’s compliance with those requirements. Our responsibility is to express an opinion on Candler Hills East Community Development 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 and, accordingly, included examining, on a test basis, evidence about Candler Hills East Community Development District’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our examination provides a reasonable basis for our opinion. Our examination does not provide a legal determination on Candler Hills East Community Development District’s compliance with the specified requirements.

In our opinion, Candler Hills East Community Development District complied, in all material respects, with the aforementioned requirements during the year ended September 30, 2018.

Berger, Toombs, Elam, Gaines & Frank Certified Public Accountants PL
Fort Pierce, Florida February 25, 2019

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