Financial Report September 30, 2023 Valencia Water Control District Valencia Water Control District Table of Contents I. Financial Section: Page Independent Auditor's Report Management's Discussion and Analysis 1 3 Basic Financial Statements: Statement of Net Position Statement of Revenues, Expenses and Changes in Net Position Statement of Cash Flows 6 7 8 Notes to Financial Statements 9 II. Compliance Section: 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 Management Letter Independent Accountant's Report on Compliance with the Requirements of Section 218.415, Florida Statutes 14 15 17 934 North Magnolia Avenue, Suite 100 Orlando, Florida 32803 Tel. 407-843-5406 www.mcdirmitdavis.com INDEPENDENT AUDITOR'S REPORT To the Board of Supervisors Valencia Water Control District Report on the Audit of the Financial Statements Opinions We have audited the financial statements of the business-type activities of Valencia Water Control District (the “District”), as of and for the year ended September 30, 2023, and the related notes to the financial statements, which collectively comprise the District’s basic financial statements as listed in the table of contents. In our opinion, the accompanying financial statements present fairly, in all material respects, the respective financial position of the governmental activities of the District as of September 30, 2023, and the respective changes in financial position and cash flows thereof, for the year then ended in accordance with accounting principles generally accepted in the United States of America. Basis for Opinions We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the District and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements related to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Responsibilities of Management for the Financial Statements The District's 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; and for 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. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the District’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. Auditor’s Responsibility for the Audit of Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgement made by a reasonable user based on the financial statements. In performing an audit in accordance with GAAS, we: . Exercise professional judgment and maintain professional skepticism throughout the audit. . Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. . Obtain an understanding of internal control relevant to the audit 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 District’s internal control Accordingly, no such opinion is expressed. the trusted partner . Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. . Conclude whether, in our judgement, there are conditions or events, considered in the aggregate, that raise substantial doubt about the District’s ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit. Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis starting on page 3, be presented to supplement the basic financial statements. Such information is the responsibility of management and, 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 a report dated June 26, 2024, on our consideration of the District’s internal control over financial reporting and 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 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. Orlando, Florida June 26, 2024 Page | 2 Valencia Water Control District Management’s Discussion and Analysis Our discussion and analysis of Valencia Water Control District (the “District”) financial accomplishments provide an overview of the District’s financial activities for the year ended September 30, 2023. Please read it in conjunction with the District’s Independent Auditor’s Report, financial statements and accompanying notes. This information is being presented to provide additional information regarding the activities of the District and to meet the disclosure requirements of Government Accounting Standards Board Statement (GASB) No. 34, Basic Financial Statements - and Management’s Discussion and Analysis - for State and Local Governments issued June 1999. Financial Highlights . The assets of the District exceeded its liabilities at September 30, 2023 by $1,953,816, an increase in net position of $152,573 in comparison with the prior year. . At September 30, 2023, the District ended the year with cash and cash equivalents of $410,043. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to Valencia Water Control District’s financial statements. The District’s financial statements comprise two components: 1) basic financial statements and 2) notes to financial statements. Basic 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: Proprietary Fund. Proprietary Funds The District maintains one type of proprietary fund: enterprise. The District maintains one enterprise fund. An enterprise fund is used to report the same functions presented as business-type activities in the financial statements. The District uses an enterprise fund to account for the operations of the water control services within the District. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. Notes to Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the financial statements. Condensed Financial Analysis Statement of Net Position The District’s net position was $1,953,816 at September 30, 2023. The following analysis focuses on the net position of the District’s financial activities. Business-Type Activities September 30, September 30, 2023 2022 Assets: Current and other assets $ 1,260,349 $ 1,094,411 Capital assets, net 716,640 724,398 Total assets 1,976,989 1,818,809 Liabilities: Current liabilities 23,173 17,566 Total liabilities 23,173 17,566 Net Position: Investment in capital assets 716,640 724,398 Unrestricted 1,237,176 1,076,845 Total net position $ 1,953,816 $ 1,801,243 Page | 3 Valencia Water Control District Management’s Discussion and Analysis The following is a summary of the District’s financial activities for the fiscal years ended September 30, 2023 and 2022. Business-Type Activities 2023 2022 Revenues: Program revenues: Assessments for services $ 557,896 $ 556,343 General revenues: Investment earnings 42,158 6,966 Total revenues 600,054 563,309 Expenses: Business, type activities: Water control 447,481 342,856 Total expenses 447,481 342,856 Increase (Decrease) in Net Position 152,573 220,453 Net position, beginning 1,801,243 1,580,790 Net position, ending $ 1,953,816 $ 1,801,243 Business-Type Activities The cost of the business-type activities was $447,481, an 30.5% increase from the prior year. The costs of those activities were paid for by assessments for services, which accounted for 93.0% of total business-type revenues. Assessments for services increased $1,553 from the prior year. Financial Analysis of the Government’s Fund Proprietary Fund The District’s Water Control Fund reported an operating income of $110,415, which is a decrease of $103,072 from the previous year. Of the total net position in the amount of $1,953,816; $716,640 is invested in capital assets. Capital Asset Activity Capital Assets At September 30, 2023, the District had $716,640 invested in capital assets, net of accumulated depreciation. More detailed information about the District’s capital assets is presented in the notes to the financial statements. Business-Type Activities 2023 LandPonds and canals Water control structures Furniture and equipmentAccumulated depreciation $ 700,120 4,134,227 672,531 6,703 (4,796,941) $ 700,120 4,134,227 672,531 6,703 (4,789,183) Total $ 716,640 $ 724,398 Page | 4 Valencia Water Control District Management’s Discussion and Analysis Capital Debt Activity Capital Debt At September 30, 2023, the District has no long-term debt. Economic Factors and Next Year’s Budget It is difficult to predict what significant effect the current economic condition will have on the financial position or results of operations of the District in fiscal year 2024. Requests for Information If you have questions about this report or need additional financial information, contact Valencia Water Control District’s Finance Department at 219 E. Livingston Street, Orlando, Florida 32801. Page | 5 FINANCIAL STATEMENTS Valencia Water Control District Statement of Net Position September 30, 2023 Assets Current Assets: Cash and cash equivalents Investments Accounts receivable, net Prepaid expenses and deposits $ Enterprise Fund Water Control 410,043 832,721 3,971 13,614 Total current assets 1,260,349 Noncurrent Assets: Capital Assets: Land Infrastructure and equipment Less accumulated depreciation 700,120 4,813,461 (4,796,941) Total noncurrent assets 716,640 Total assets 1,976,989 Liabilities Current Liabilities: Accounts payable and accrued expenses 23,173 Total liabilities 23,173 Net Position Investment in capital assets Unrestricted 716,640 1,237,176 Total net position $ 1,953,816 The accompanying Notes to Financial Statements are an integral part of this statement. Page | 6 Valencia Water Control District Statement of Revenues, Expenses and Changes in Net Position Year Ended September 30, 2023 Revenues: Charges for services $ Enterprise Fund Water Control 557,896 Total operating revenues 557,896 Operating Expenses: Salaries and benefits Property maintenance Other supplies and expenses Depreciation 2,000 378,947 58,776 7,758 Total Operating Expenses 447,481 Operating income (loss) 110,415 Nonoperating Revenues (Expenses): Interest and investment revenue 42,158 Total nonoperating revenue (expenses) 42,158 Income (loss) 152,573 Total net position, beginning 1,801,243 Total net position, ending $ 1,953,816 The accompanying Notes to Financial Statements are an integral part of this statement. Page | 7 Valencia Water Control District Statement of Cash Flows Year Ended September 30, 2023 Enterprise Fund Water Control Cash Flows from Operating Activities: Receipts from customers and users $ 560,414 Payments to suppliers of goods and services (432,051) Net cash provided by (used in) operating activities 128,363 Cash Flows from Investing Activities: Interest earnings 42,158 Sale (purchase) of investments 31,381 Net cash provided by (used in) investing activities 73,539 Net increase in cash and cash equivalents 201,902 Cash and cash equivalents, beginning 208,141 Cash and cash equivalents, ending $ 410,043 Reconciliation of Operating Income to Net Cash Provided By (Used In) Operating Activities Operating income (loss) $ 110,415 Adjustments Not Affecting Cash: Depreciation and amortization 7,758 Change in Assets and Liabilities: (Increase) Decrease in accounts receivable 2,518 (Increase) Decrease in prepaids 2,065 Increase (Decrease) in accounts payable 5,607 Total adjustments 17,948 Net Cash Provided by (Used In) Operating Activities $ 128,363 The accompanying Notes to Financial Statements are an integral part of this statement. Page | 8 NOTES TO FINANCIAL STATEMENTS Valencia Water Control District Notes to Financial Statements September 30, 2023 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Reporting Entity Valencia Water Control District, (the “District”) was established in May 1970 by Orange County, Florida under the authority of Chapters 298 and 72-291, Florida Statutes. The District was established for the purpose of storm water run-off that will minimize water pollution and maintain groundwater tables for the benefit of the landowners. In order to achieve these goals, several miles of canals, bridges, control structures, and other appurtenances have been constructed. The District is governed by the Board of Supervisors (the “Board”), which is composed of five members. At present, the Supervisors are elected to a five-year term. Their length of service is staggered so that one supervisor is elected or re-elected by the landowners at the Annual landowners Meeting held in June each year. The Board of Supervisors of the District exercises all powers granted to the District pursuant to Chapter 298, Florida Statutes. The Board has the final responsibility for, among other things: 1. Allocating and levying assessments. 2. Approving budgets. 3. Exercising control over facilities and properties. 4. Controlling the use of funds generated by the District. 5. Approving the hiring and firing of key personnel. 6. Financing improvements. The financial statements were prepared in accordance with Governmental Accounting Standards Board (“GASB”) Statements 14, 39, and 61. Under the provisions of those standards, the financial reporting entity consists of the primary government, organizations for which the District Board of Supervisors 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. Basic Financial Statements Separate financial statements are provided for proprietary funds. The District’s enterprise fund is reported in the fund financial statements. Measurement Focus, Basis of Accounting and Financial Statement Presentation The enterprise fund 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 recognized as revenues as soon as all eligibility requirements imposed by the provider have been met. Assessments are non-ad valorem assessments imposed on all lands located within the District and benefited by the District’s activities. The assessments are levied by the District prior to the start of the fiscal year which begins October 1st and ends on September 30th. These assessments are imposed upon all benefited lands located in the District. 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. The District reports the following major proprietary fund: Water Control Fund This enterprise fund is used to account for the operations of the water control services within the District. The costs of providing services to the residents are recovered primarily through user assessments. Page | 9 Valencia Water Control District Notes to Financial Statements September 30, 2023 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) As a general rule, when both restricted and unrestricted resources are available for use, it is the District’s policy to use restricted resources first, then unrestricted resources as they are needed. Assets, Liabilities, Deferred Outflows/Inflows of Resources and Net Position Deposits and Investments The District’s cash and cash equivalents are considered to be cash on hand and demand deposits. Investments of the District are reported at fair value and are categorized within the fair value hierarchy established in accordance with GASB Statement No. 72, Fair Value Measurement and Application. The District’s investments consist of investments authorized in accordance with Section 218.415, Florida Statutes. Inventories Inventories are valued at cost which approximates market value using the first-in, first-out (FIFO) method. 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. Receivables Accounts receivable and assessments receivable are shown net of an allowance for uncollectible amounts. Capital Assets Capital assets, which include property, storm water improvements, equipment and infrastructure assets (e.g., drainage system, storm water system, and similar items), are reported in the applicable financial statements. Capital assets are defined by the government as assets with an initial, individual cost of more than $5,000 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 acquisition 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 Canals and ponds 25 Water control structures 15 - 25 Furniture and equipment 5 - 10 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. The District does not have any item that qualifies for reporting in this category for the year ended September 30, 2023. 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. The District does not have any item that qualifies for reporting in this category for the year ended September 30, 2023. Page | 10 Valencia Water Control District Notes to Financial Statements September 30, 2023 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Net Position Flow Assumption Sometimes the District will fund outlays for a particular purpose from both restricted and unrestricted resources. In order to calculate the amounts to report as restricted net position and unrestricted net position in the financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the District’s policy to consider restricted net position to have been depleted before unrestricted net position is applied. 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. New Accounting Standards In fiscal year 2023, the District has not implemented any new accounting standards with a material effect on the District’s financial statements. NOTE 2 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 categorizes its fair value measurements 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 reliable and is based on quoted prices for identical assets, or liabilities, in an active market. Level 2 uses significant other observable inputs when obtaining 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 use the best information available under the circumstances, which includes the District’s own data in measuring unobservable inputs. Investments held in the State Board of Administration Fund Florida Prime (SBA) consist of short-term federal agency obligations, treasury bills, repurchase agreements and commercial paper. The SBA is not a registrant with the Securities and Exchange Commission (SEC); however, the SBA has adopted operating procedures consistent with the requirements of a 2a-7 like pool for it’s fund and the fair value of the position in the pool is equal to the fair value of the statements. Investment income is recognized as earned and is allocated to the participating funds based on their equity participation. Page | 11 Valencia Water Control District Notes to Financial Statements September 30, 2023 NOTE 2 DEPOSITS AND INVESTMENTS (CONTINUED) Investments made by the District as of September 30, 2023 are summarized below. Investments are reported at fair value, except for the investment in the SBA, which is carried at amortized cost and approximates fair value. Weighted Average Investment Type Amortized Cost Credit Rating Maturity Florida Prime $ 832,721 AAAm 35 days The District’s investment policies are governed by State Statutes. The District investment policy allows investments in any financial institution that is a qualified public depository of the State of Florida as identified by the State Treasurer, in accordance with Chapter 280 of the Florida Statutes. Authorized District investments include, but are not limited to: 1. The Local Government Surplus Funds Trust Fund (SBA); 2. Securities and Exchange Commission Registered Money Market Funds with the highest credit quality rating from a nationally recognized rating agency; 3. Interest-bearing time deposits or savings accounts in qualified public depositories; 4. Direct obligations of the U.S. Treasury. Credit Risk: The District’s investment policy limits credit risk by restricting authorized investments to those described. Investments in U.S. Government securities and agencies must be backed by the full faith and credit of the United States Government. Short-term bond funds shall be rated by a nationally recognized ratings agency and shall maintain the highest credit quality rating. Custodial Credit Risk: In the case of deposits, this is the risk that in the event of a bank failure, the District’s deposits may not be returned to it. The District’s investment policy requires that bank deposits be secured as provided by Chapter 280, Florida Statutes. This law requires local governments to deposit funds only in financial institutions designated as qualified public depositories by the Chief Financial Officer of the State of Florida, and creates the Public Deposits Trust Fund, a multiple financial institution pool with the ability to assess its member financial institutions for collateral shortfalls if a default or insolvency has occurred. At September 30, 2023, all of the District’s bank deposits were in qualified public depositories. For an investment, this is the risk that, in the event of the failure of the counterparty, the government will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. At September 30, 2023, none of the investments listed are exposed to custodial credit risk because their existence is not evidenced by securities that exist in physical or book entry form. Concentration of Credit Risk: The District’s investment policy does not specify limits on the amount the District may invest in any one issuer. Interest Rate Risk: The District’s investment policy does not specifically address interest rate risk; however, the general investment policy is to apply the prudent-person rule: Investments are made as a prudent person would be expected to act, with discretion and intelligence, to seek reasonable income, preserve capital, and in general, avoid speculative investments. The District manages its exposure to declines in fair values by investing primarily in pooled investments that have a weighted average maturity of less than three months. Page | 12 Valencia Water Control District Notes to Financial Statements September 30, 2023 NOTE 3 CAPITAL ASSETS The following is a summary of changes in capital assets for the year ended September 30, 2023: Business-type Activities: Capital Assets, not being depreciated: Land Total capital assets, not being depreciated $ Beginning Balance 700,120 700,120 $ Additions - - Disposals Ending Balance -$ 700,120 $ -700,120 Capital Assets Being Depreciated: Canals Ponds Water control structures Furniture and equipment Total capital assets, being depreciated 2,888,690 1,245,537 672,531 6,703 4,813,461 - - - - - - - - - - 2,888,690 1,245,537 672,531 6,703 4,813,461 Less accumulated depreciation for: Canals Ponds Water control structures Furniture and equipment Total accumulated depreciation, net (2,888,690) (1,238,337) (655,453) (6,703) (4,789,183) - (3,600) (4,158) - (7,758) - - - - - (2,888,690) (1,241,937) (659,611) (6,703) (4,796,941) Total capital assets being depreciated, net Business-type activities capital assets, net $ 24,278 724,398 $ (7,758) (7,758) -16,520 -$ 716,640 $ NOTE 4 MANAGEMENT COMPANY District Operations The District has contracted with a management company (“GMS”) to perform management services, which include financial and accounting services. Certain employees of GMS also serve as officers (Board appointed non-voting positions) of the District. Under the agreement, the District compensates the management company for management, accounting, financial reporting and other administrative costs. NOTE 5 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. These risks are covered by commercial insurance from independent third parties. The District has not filed any claims under this commercial coverage during the last three years. Page | 13 COMPLIANCE SECTION 934 North Magnolia Avenue, Suite 100 Orlando, Florida 32803 Tel. 407-843-5406 www.mcdirmitdavis.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 Valencia Water Control District We have audited, 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, the financial statements of the business-type activities of Valencia Water Control District (the “District”) as of and for the year ended September 30, 2023, which collectively comprise the District’s financial statements and have issued our report thereon dated June 26, 2024. Report on 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) as a basis for designing procedures that are appropriate in the circumstances for the purpose of expressing 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. Report on 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 grant agreements, noncompliance with which could have a direct and material effect on the financial statements. 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 District’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 District’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Orlando, Florida June 26, 2024 the trusted partner Page | 14 934 North Magnolia Avenue, Suite 100 Orlando, Florida 32803 Tel. 407-843-5406 www.mcdirmitdavis.com MANAGEMENT LETTER Board of Supervisors Valencia Water Control District We have audited the financial statements of Valencia Water Control District (the “District”), as of and for the fiscal year ended September 30, 2023, and have issued our report thereon dated June 26, 2024. 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 Auditor General. Other Reporting Requirements We have issued our 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 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 these reports, which are dated June 26, 2024, should be considered in conjunction with this management letter. Prior Audit Findings Section 10.554(1)(i.)1., Rules of the Auditor General, require that we determine whether or not corrective actions have been taken to address findings and recommendations made in the preceding annual financial audit report. There were no such findings in the preceding annual financial audit report. Official Title and Legal Authority Section 10.554(1)(i)4., Rules of the Auditor General, requires that the name or official title and legal authority for the primary government and each component unit of the reporting entity be disclosed in this management letter, unless disclosed in the notes to the financial statements. This information has been disclosed in the notes to the financial statements. 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 the District has met one or more of the conditions described in Section 218.503(1), Florida Statutes, and to identify the specific condition(s) met. In connection with our audit, we determined that the District did not meet any of the conditions described in Section 218.503(1), Florida Statutes. Pursuant to Sections 10.554(1)(i)5.b. and 10.556(8), Rules of the Auditor General, we applied financial condition assessment procedures for the District. It is management’s responsibility to monitor the District’s 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. 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. Specific Information (Unaudited) As required by Section 218.39(3)(c), Florida Statutes, and Section 10.554(1)(i)6, Rules of the Auditor General, the District reported: a. The total number of District employees compensated in the last pay period of the District’s fiscal year as zero. b. The total number of independent contractors to whom nonemployee compensation was paid in the last month of the District’s fiscal year as 8. c. All compensation earned by or awarded to employees, whether paid or accrued, regardless of contingency as zero. d. All compensation earned by or awarded to nonemployee independent contractors, whether paid or accrued, regardless of contingency as $430,987. the trusted partner Page | 15 e. Each construction project with a total cost of at least $65,000 approved by the District that is scheduled to begin on or after October 1 of the fiscal year being reported, together with the total expenditures for such project as: Not Applicable. f. A budget variance based on the budget adopted under Section 189.016(4), Florida Statutes, before the beginning of the fiscal year being reported if the District amends a final budget under Section 189.016(6), Florida Statutes, as $0. The District does not have a budget amendment. As required by Section 218.39(3)(c), Florida Statutes, and Section 10.554(1)(i)7, Rules of the Auditor General, the District reported: a. The rate or rates of non-ad valorem special assessments imposed by the District as operations and maintenance- $61.52. b. The total amount of special assessments collected by or on behalf of the District as $557,602. c. The total amount of outstanding bonds issued by the District and the terms of such bonds as not applicable. 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. Orlando, Florida June 26, 2024 Page | 16 934 North Magnolia Avenue, Suite 100 Orlando, Florida 32803 Tel. 407-843-5406 www.mcdirmitdavis.com INDEPENDENT ACCOUNTANT’S REPORT ON COMPLIANCE WITH THE REQUIREMENTS OF SECTION 218.415, FLORIDA STATUTES To the Board of Supervisors Valencia Water Control District We have examined the Valencia Water Control District’s (the “District”) compliance with the requirements of Section 218.415, Florida Statutes, during the year ended September 30, 2023. Management is responsible for the District’s compliance with those requirements. Our responsibility is to express an opinion on the 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 the standards applicable to attestation engagements contained in Government Auditing Standards issued by the Comptroller General of the United States, and, accordingly, included examining, on a test basis, evidence about the 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 the District’s compliance with specified requirements. In our opinion, the District complied, in all material respects, with the aforementioned requirements for the year ended September 30, 2023. Orlando, Florida June 26, 2024 the trusted partner Page | 17