Holly Hill Road East Community

Development District

FINANCIAL STATEMENTS

September 30, 2017

	Holly Hill Road East Community Development District	
		Table of Contents	
		September 30, 2017	
REPORT		
Independent Auditors’ Report	1	
			
FINANCIAL STATEMENTS		
Management’s Discussion And Analysis (required supplemental information)	3	
			
Basic Financial Statements		
Government Wide Financial Statements		
			
	Statement of Net Position	7	
			
	Statement of Activities	8	
			
Fund Financial Statements		
			
	Balance Sheet – Governmental Funds	9	
			
	Reconciliation of the Balance Sheet of Governmental Funds to the Statement

of Net Position	10	
		
	Statement of Revenues, Expenditures and Changes in Fund Balances –

Governmental Funds	11	
		
	Reconciliation of the Statement of Revenues, Expenditures and Changes in

Fund Balances of Governmental Funds to the Statement of Activities	12	
		
Notes to Financial Statements	13	
		
Required Supplemental Information (other than MD&A)		
		
Budget to Actual Comparison Schedule  General Fund	20	
		
Independent Auditors’ 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	21	
		
Management Letter	23	
		
Attestation Report on Compliance with Section 218.415 Florida Statutes	25	

CRI ~l:G::INGRAM	500 Grand Boulevard	
	Carr, Riggs & Ingram, LLC	
	Certified Public Accountants	
CPAs and Advisors	Suite 210	
	Miramar Beach, Florida 32550	
	(850)	837-3141	
	(850)	654-4619 (fax)	
	CRlcpa .com	
INDEPENDENT AUDITORS’ REPORT

To the Board of Supervisors Holly Hill Road East Community Development District Davenport, Florida

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities and each major fund of Holly Hill Road East Community Development District (hereinafter referred to as “District”), as of and for the year ended September 30, 2017, and the related notes to the financial statements, which collectively comprise the District’s basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements

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

Auditors’ Responsibility

Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

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

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

Opinions

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of the District as of September 30, 2017, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis and budgetary comparison information, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated June 22, 2018, 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 and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control 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.

CARR, RIGGS & INGRAM, LLC

Miramar Beach, Florida June 22, 2018

2

Management’s Discussion And Analysis

Holly Hill Road East Community Development District

Management’s Discussion and Analysis

Our discussion and analysis of the Holly Hill Road East Community Development District’s financial performance provides an overview of the District’s financial activities for the fiscal year ended September 30, 2017. Please read it in conjunction with the District’s financial statements, which begin on page 7.

FINANCIAL HIGHLIGHTS

x	At September 30, 2017, the liabilities of the District exceed its assets by approximately $13,000 (deficit).

x	During the fiscal year ended September 30, 2017, the District incurred approximately $421,000 of capital expenditures.

USING THE ANNUAL REPORT

This annual report consists of a series of financial statements. The Statement of Net Position and the Statement of Activities on pages 7 – 8 provide information about the activities of the District as a whole and present a longer term view of the District’s finances. Fund financial statements start on page 9. For governmental activities, these statements tell how these services were financed in the short term as well as what remains for future spending. Fund financial statements also report the District’s operations in more detail than the government wide statements by providing information about the District’s most significant funds.

Reporting the District as a Whole

Our analysis of the District as a whole begins on page 4. One of the most important questions asked about the District’s finances is, “Is the District as a whole better off or worse off as a result of the year’s activities?” The Statement of Net Position and the Statement of Activities report information about the District as a whole and about its activities in a way that helps answer this question. These statements include all assets and liabilities using the accrual basis of accounting, which is similar to the accounting used by most private sector companies. All of the current year’s revenues and expenses are taken into account regardless of when cash is received or paid.

These two statements report the District’s net position and related changes during the current year. You can think of the District’s net position – the difference between assets and liabilities – as one way to measure the District’s financial health, or financial position. Over time, increases or decreases in the District’s net position is one indicator of whether its financial health is improving or deteriorating. You will need to consider other nonfinancial factors; however, such as changes in the District’s assessment base and the condition of the District’s infrastructure, to assess the overall health of the District.

3

Holly Hill Road East Community Development District

Management’s Discussion and Analysis

Reporting the District’s Most Significant Funds

Our analysis of the District’s major funds begins on page 5. The fund financial statements begin on page 9 and provide detailed information about the most significant funds – not the District as a whole. Some funds are required to be established by State law and by bond covenants. All of the District’s funds are governmental fund types.

x	Governmental funds – All of the District’s basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year end that are available for spending. The governmental fund statements provide a detailed short term view of the District’s general government operations and the basic services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the District’s programs. We describe the relationship (or differences) between governmental activities and governmental funds in a reconciliation with the fund financial statements.

THE DISTRICT AS A WHOLE

The following table reflects the condensed Statement of Net Position and is compared to the prior year.

September 30,	2017	2016	Change	
Assets				
Current and other assets	$154,449	$$154,449	
Capital assets, net	420,781		420,781	
Total assets	$575,230	$	$575,230	
				
Liabilities				
Current liabilities	$191,027	$$191,027	
Other liabilities	396,989396,989	
Total liabilities	588,016		588,016	
Net position				
Unrestricted	(12,786)		(12,786)	
Total net position (deficit)	(12,786)		(12,786)	
Total liabilities and net position	$575,230	$	$575,230	

For more detailed information, see the accompanying Statement of Net Position.

During the fiscal year ended September 30, 2017, total assets and liabilities increased over the prior

year by approximately $575,000 and $588,000, respectively. The District has no comparative

information for prior year due to the District’s inception in the current year.

4

Holly Hill Road East Community Development District

Management’s Discussion and Analysis

The following schedule compares the Statement of Activities for the current and previous fiscal year.

Year ended September 30,	2017	2016	Change	
Revenues:				
Program revenues:				
Charges for services	$15,300	$	$15,300	
Total revenues	15,300		15,300	
Expenses:				
General government	28,086		28,086	
Total expenses	28,086		28,086	
Change in net position	(12,786)		(12,786)	
Net position, beginning				
Net position (deficit), ending	$(12,786)	$	$(12,786)	

For more detailed information, see the accompanying Statement of Activities.

During the fiscal year ended September 30, 2017, total revenues and expenses increased over the prior year by approximately $15,000 and $28,000, respectively. The District has no comparative information for prior year due to the District’s inception in the current year. The District is currently being funded by its Developer, East Tenth, LLC., and affiliates. The overall result was a $12,786 decrease in net position for fiscal year 2017.

THE DISTRICT’S FUNDS

As the District completed the year, its governmental funds (as presented in the balance sheet on page 9) reported a combined fund balance deficit of approximately $37,000. Significant transactions are discussed below.

x	During the fiscal year ended, the District received advances from the Developer totaling approximately $397,000 to fund expenditures related to construction projects.

x	During the fiscal year ended September 30, 2017, the District incurred approximately $421,000 of capital expenditures.
The overall decrease in fund balance for the year ended September 30, 2017 totaled approximately $37,000.

5

Holly Hill Road East Community Development District

Management’s Discussion and Analysis

CAPITAL ASSET

Capital Assets

At September 30, 2017, the District had approximately $421,000 invested in capital assets. This amount represents a net increase of approximately $421,000 from the fiscal year 2016 total.

A listing of capital assets by major category for the current and prior year follows:

September 30,	2017	2016	Change	
Capital assets not being depreciated	$420,781	$	$420,781	
Net capital assets	$420,781	$	$420,781	

More information about the District’s capital assets is presented in Note 3 to the financial statements

GOVERNMENTAL FUNDS BUDGETARY HIGHLIGHTS

An Operating budget was established by the governing board for the District pursuant to the requirements of Florida Statutes. The budget to actual comparison for the general fund, including the original budget and final adopted budget, is shown at page 20.

The District experienced unfavorable variances in revenues and a favorable variance in expenditures as compared to the budget in the amount of $164,700 and $151,914, respectively. The variances occurred primarily due to anticipated budgeted operating expenditures that were not incurred during the year and the related impact on Developer funding.

FUTURE FINANCIAL FACTORS

Holly Hill Road East Community Development District is an independent special district that operates under the provisions of Chapter 190, Florida Statutes. The District operates under an elected Board of Supervisors, which establishes policy and sets assessment rates. For fiscal year 2018 the Developer has agreed to fund the operations of the District.

CONTACTING THE DISTRICT’S FINANCIAL MANAGEMENT

This financial report is designed to provide a general overview of the District’s finances. If you have questions about this report or need additional financial information, contact the Holly Hill Road East Community Development District’s management company, Fishkind & Associates, Inc., at 12051 Corporate Blvd., Orlando, Florida 32817.

6

Basic Financial Statements

	Holly Hill Road East Community Development District	
	Statement of Net Position	
September 30,	2017		
	Governmental	
	Activities	
Assets			
Cash and cash equivalents	$1,735		
Accounts receivable	147,714		
Prepaid expenses	5,000		
Capital assets:			
Not being depreciated	420,781		
Total assets	575,230		
Liabilities			
Accounts payable	172,927		
Retainage payable	18,100		
Non current liabilities:			
Due to developer	396,989		
Total liabilities	588,016		
Net position			
Unrestricted	(12,786)		
Total net position (deficit)	$(12,786)		

The accompanying notes are an integral part of these financial statements.

7

Holly Hill Road East Community Development District

Statement of Activities

Year ended September 30,			2017			
					Net (Expense)	
					Revenue and	
					Changes in	
		Program Revenues	Net Position	
			Operating	Capital		
		Charges for	Grants and	Grants and	Governmental	
Functions/Programs	Expenses	Services	Contributions Contributions	Activities	
Primary government:						
Governmental activities:						
General government	$  (28,086)	$  15,300	$	$	$    (12,786)	
Total governmental						
activities	$  (28,086)	$  15,300	$	$	(12,786)	

Change in net position	(12,786)	
Net position  beginning of year		
Net position (deficit)  end of year	$    (12,786)	

The accompanying notes are an integral part of these financial statements.

8

Holly Hill Road East Community Development District

Balance Sheet – Governmental Funds

September 30,		2017		
			Total	
			Governmental	
	General	Capital Projects	Funds	
Assets				
Cash and cash equivalents	$1,735	$	$1,735	
Accounts receivable		147,714	147,714	
Prepaid expenditures	5,000		5,000	
Total assets	$6,735	$147,714	$154,449	
				
Liabilities and Fund Balances				
Liabilities				
Accounts payable	$19,521	$153,406	$172,927	
Retainage payable		18,100	18,100	
Total liabilities	19,521	171,506	191,027	
Fund balances				
Nonspendable	5,000		5,000	
Unassigned	(17,786)	(23,792)	(41,578)	
Total fund balances (deficit)	(12,786)	(23,792)	(36,578)	
Total liabilities and fund balances	$6,735	$147,714	$154,449	

The accompanying notes are an integral part of these financial statements.

9

Holly Hill Road East Community Development District

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

Net Position

September 30,	2017	
Total fund balances, governmental funds	$(36,578)	
Capital assets used in governmental activities are not financial resources and		
therefore are not reported in the fund level statements.	420,781	
Liabilities not due and payable from current resources are not reported in the		
fund level statements.	(396,989)	
Total net position (deficit)  governmental activities	$(12,786)	

The accompanying notes are an integral part of these financial statements.

10

Holly Hill Road East Community Development District

Statement of Revenues, Expenditures and Changes in Fund Balances –

Governmental Funds

Year ended September 30,		2017		
			Total	
			Governmental	
	General	Capital Projects	Funds	
Revenues				
Developer contributions	$15,300	$	$15,300	
Total revenues	15,300		15,300	
Expenditures				
Current:				
General government	28,086		28,086	
Capital outlay		420,781	420,781	
Total expenditures	28,086	420,781	448,867	
Excess (deficit) of revenues over				
expenditures	(12,786)	(420,781)	(433,567)	
Other financing sources (uses)				
Developer advances		396,989	396,989	
Total other financing sources (uses)		396,989	396,989	
Net change in fund balances	(12,786)	(23,792)	(36,578)	
Fund balances, beginning of year				
Fund balances (deficit), end of year	$(12,786)	$(23,792)	$(36,578)	

The accompanying notes are an integral part of these financial statements.

11

Holly Hill Road East Community Development District

Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund

Balances of Governmental Funds to the Statement of Activities

Year ended September 30,		2017	
Net change in fund balances  governmental funds	$(36,578)	
Capital outlay, reported as expenditures in the governmental funds, is shown		
as capital assets on the Statement of Net Position.	420,781	
Developer advances are recorded as other financing sources on the fund level		
financial statements but are treated as a liability on the Statement of Net		
Position.		(396,989)	
		
Change in net position of governmental activities	$(12,786)	

The accompanying notes are an integral part of these financial statements.

12

Holly Hill Road East Community Development District

Notes to Financial Statements

NOTE 1: NATURE OF ORGANIZATION

The Holly Hill Road East Community Development District (the “District”) was established on July 10, 2017 pursuant to the Uniform Community Development District Act of 1980, otherwise known as Chapter 190, Florida Statutes, by the City Commission of the City of Davenport Ordinance 2017 814. The Act provides among other things, the power to manage basic services for community development, power to borrow money and issue bonds, and to levy and assess non ad valorem assessments for the financing and delivery of capital infrastructure.

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

The District is governed by a Board of Supervisors (“Board”), which is comprised of five members. The Supervisors are elected on an at large basis by the owners of the property within the District. The Board of Supervisors of the District exercises all powers granted to the District pursuant to Chapter 190, Florida Statutes. At September 30, 2017, certain Board members were affiliated with East Tenth, LLC (“the Developer”).

The Board has the final responsibility for:

1.	Assessing 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.

In evaluating how to define the government, for financial reporting purposes, management has considered all potential component units. The decision to include or exclude a potential component unit in the reporting entity was made by applying the criteria set forth by Generally Accepted Accounting Principles (GAAP) as defined by the Governmental Accounting Standards Board (GASB). Based on the foregoing criteria, no potential component units were found.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies of the District conform to GAAP as applicable to governments in accordance with those promulgated by GASB. The following is a summary of the more significant policies:

Government wide and Fund Financial Statements

The basic financial statements include both government wide and fund financial statements.

13

Holly Hill Road East Community Development District

Notes to Financial Statements

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The government wide financial statements (i.e., the Statement of Net Position and the Statement of Activities) report information on all the non fiduciary activities of the primary government. Governmental activities, which normally are supported by assessments, are reported separately from business type activities, which rely to a significant extent on fees and charges for support. The business type activities are reported separately in government wide financial statements; however, at September 30, 2017, the District did not have any significant business type activities. Therefore, no business type activities are reported. Assessments and other items not properly included as program revenues (i.e., charges to customers or applicants who purchase, use, or directly benefit from goods or services) are reported as general revenues.

Separate financial statements are provided for governmental funds. Major individual governmental funds are reported as separate columns in the fund financial statements.

Measurement Focus, Basis of Accounting and Basis of Presentation

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

Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the 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.

Developer contributions and interest associated with the current fiscal period are all considered to susceptible to accrual and have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the District.

The District reports the following major governmental funds:

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

14

Holly Hill Road East Community Development District

Notes to Financial Statements

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

For the year ended September 30, 2017, the District does not report any proprietary funds.

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

When both restricted and unrestricted resources are available for use, it is the District’s policy to use restricted resources first, then unrestricted resources as they are needed. When committed, assigned, or unassigned resources are available for use in the governmental fund financial statements, it is the government’s policy to use committed resources first, followed by assigned resources, then unassigned resources as needed.

Cash, Deposits and Investments

The District maintains deposits with "Qualified Public Depositories" as defined in Chapter 280, Florida Statutes. All Qualified Public Depositories must place with the Treasurer of the State of Florida securities in accordance with collateral requirements determined by the State’s Chief Financial Officer. In the event of default by a Qualified Public Depository, the State Treasurer will pay public depositors all losses. Losses in excess of insurance and collateral will be paid through assessments between all Qualified Public Depositories.

Under this method, all the District's deposits are fully insured or collateralized at the highest level of security as defined by GASB, Statement Number 40, Deposits and Investment Disclosures (An

Amendment of GASB, Statement Number 3).

The District is authorized to invest in financial instruments as established by Section 218.415, Florida Statutes. The authorized investments include among others direct obligations of the United States Treasury; the Local Government Surplus Trust Funds as created by Section 218.405, Florida Statutes; SEC registered money market funds with the highest credit quality rating from a nationally recognized rating agency; and interest bearing time deposits or savings accounts in authorized financial institutions.

Capital Assets

Capital assets, which include primarily infrastructure assets (e.g., roads, sidewalks, water management systems and similar items), are reported in the governmental activities column in the government wide financial statements. Capital assets are defined by the District 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 and estimated historical cost if purchased or constructed. Donated assets are recorded at estimated fair market value at the date of donation.

15

Holly Hill Road East Community Development District

Notes to Financial Statements

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed.

Property, plant and equipment of the primary government will be depreciated using the straight line method over the estimated useful lives when the assets are completed and placed into service. Estimated useful lives for financial reporting purposes are anticipated as follows: infrastructure and other improvements: 30 years.

In the governmental fund financial statements, amounts incurred for the acquisition of capital assets are reported as fund expenditures. Depreciation expense is not reported in the governmental fund financial statements.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Deferred Outflows/Inflows of Resources

In addition to assets, the Statement of Net Position and Balance Sheet – Governmental Funds 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 of this type of item at September 30, 2017.

In addition to liabilities, the Statement of Net Position and Balance Sheet – Governmental Funds 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 of this type of item at September 30, 2017.

Fund Equity

Net position in the government wide financial statements represents the difference between assets and deferred outflows of resources and liabilities and deferred inflows of resources and is categorized as net investment in capital assets, restricted or unrestricted. Net investment in capital assets represents assets related to infrastructure and property, plant and equipment, net of any related debt. Restricted net position represents the assets restricted by creditors or laws and regulations of other governments.

16

Holly Hill Road East Community Development District

Notes to Financial Statements

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Governmental fund equity is classified as fund balance. Fund balance is further classified as nonspendable, restricted, committed, assigned, or unassigned. Nonspendable fund balance cannot be spent because of its form. Restricted fund balance has limitations imposed by creditors, grantors, or contributors or by enabling legislation or constitutional provisions. Committed fund balance is a limitation imposed by the District board through approval of resolutions. Assigned fund balance is a limitation imposed by a designee of the District board. Unassigned fund balance in the General Fund is the net resources in excess of what can be properly classified in one of the above four categories. Negative unassigned fund balance in other governmental funds represents excess expenditures incurred over the amounts restricted, committed, or assigned to those purposes.

Budgets

The District is required to establish a budgetary system and an approved annual budget. Annual budgets are legally adopted on a basis consistent with GAAP for the General Fund. Any revision to the budget must be approved by the District Board. The budgets are compared to actual expenditures. In instances where budget appropriations and estimated revenues have been revised during the year, budget data presented in the financial statements represent final authorization amounts.

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

A. Each year the District Manager submits to the District Board a proposed operating budget for the fiscal year commencing the following October 1.

	B.  A public hearing is conducted to obtain comments.

	C.  Prior to October 1, the budget is legally adopted by the District Board.

	D. All budget changes must be approved by the District Board, unless otherwise delegated by the District Board.

	E.  Budgets are adopted on a basis consistent with accounting principles generally accepted in

the United States of America.

NOTE 3: CAPITAL ASSETS

The following is a summary of changes in the capital assets for the year ended September 30, 2017:

	Beginning			Ending	
	Balance	Additions	Disposals	Balance	
Governmental Activities:					
Capital assets not being depreciated					
Construction in progress	$	$   420,781	$	$   420,781	
Total capital assets, not being depreciated		420,781		420,781	
Governmental activities capital assets, net	$	$   420,781	$	$   420,781	

17

Holly Hill Road East Community Development District

Notes to Financial Statements

NOTE 3: CAPITAL ASSETS (Continued)

The total projected cost of the infrastructure has been estimated at $10.5 million. Phase 1 of the infrastructure is estimated to cost $5.2 million, of which approximately $3.68 million is expected to be financed with the proceeds from the issuance of Bonds with the remainder to be funded by the Developer. The District expects to issue additional bonds to fund all or a portion of the remaining infrastructure, with the remainder to be funded by the Developer.

NOTE 4: RISK MANAGEMENT

The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters. The District maintains commercial insurance coverage to mitigate the risk of loss. Coverage may not extend to all situations. Management believes such coverage is sufficient to preclude any significant uninsured losses to the District. Settled claims have not exceeded this commercial coverage since the District’s inception.

NOTE 5: MANAGEMENT COMPANY

The District has contracted with a management company to perform management advisory services, which include financial and accounting advisory services. Certain employees of the management company 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 6: DEVELOPER ACTIVITY

The Developer and affiliates have agreed to fund the general operations of the District. For the year ended September 30, 2017, the Developer and affiliates contributed $15,300. In addition, the Developer and affiliates advanced $396,989 to fund the construction of infrastructure, and this amount is recorded as Due to Developer on the accompanying Statement of Net Position.

A significant portion of the District’s activity is dependent upon the continued involvement of the Developer, East Tenth, LLC, the loss of which could have a material adverse effect on the District’s operations.

NOTE 7: RELATED PARTY TRANSACTIONS

During the year ended September 30, 2017, the District incurred $24,000 worth of construction management expenses with Heath Construction & Management, LLC, whose CEO is the District’s Board Chairman.

18

Holly Hill Road East Community Development District

Notes to Financial Statements

NOTE 8: COMMITMENT

At September 30, 2017, the District had an outstanding infrastructure construction contract totaling approximately $1.9 million, of which approximately $1.8 million remained unfinished at year end.

NOTE 9: SUBSEQUENT EVENT

Subsequent to year end, the District issued $4,160,000 of Special Assessment Bonds, Series 2017 consisting of $370,000 Term Bonds due May 1, 2023 with a fixed interest rate of 3.5%, $455,000 Term Bonds due May 1, 2028 with a fixed interest rate of 4.125%, $1,270,000 Term Bonds due May 1, 2038 with a fixed interest rate of 4.625%, and $2,065,000 Term Bonds due May 1, 2048 with a fixed interest rate of 5.0%. The Bonds were issued to provide funding to pay a portion of the costs of the planning, financing, acquisition, construction, equipping and installation of the Series 2017 project. Interest is to be paid semiannually on each May 1 and November 1, commencing on May 1, 2018.

Principal on the Bonds is to be paid serially commencing May 1, 2019 through May 1, 2048. The Series 2017 Bonds may, at the option of the District, be called for redemption prior to maturity as discussed in the Bond Indenture. The Bonds are subject to optional and extraordinary mandatory redemption prior to maturity in the manner determined by the Bond Registrar if certain events occur as outlined in the Bond Indenture.

In connection with the issuance, the District repaid the Developer for the funds advanced to the District for construction.

19

Required Supplemental Information (Other Than MD&A)

Holly Hill Road East Community Development District

Budget to Actual Comparison Schedule – General Fund

Year ended September 30,		2017		
	Original and	Actual	Variance with	
	Final Budget	Amounts	Final Budget	
Revenues				
Assessment revenue	$180,000	$15,300	$(164,700)	
Total revenues	180,000	15,300	(164,700)	
Expenditures				
General government	180,000	28,086	151,914	
Total expenditures	180,000	28,086	151,914	
Excess (deficit) of revenues over expenditures	$	$   (12,786)	$(12,786)	

20

CRI ~l:G::INGRAM	500 Grand Boulevard	
	Carr, Riggs & Ingram, LLC	
	Certified Public Accountants	
CPAs and Advisors	Suite 210	
	Miramar Beach, Florida 32550	

(850) 837-3141

(850) 654-4619 (fax)
CRlcpa.com

INDEPENDENT AUDITORS’ 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 Holly Hill Road East Community Development District Davenport, Florida

We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities and each major fund of Holly Hill Road East Community Development District (hereinafter referred to as the “District”), as of and for the year ended September 30, 2017, and the related notes to the financial statements, which collectively comprise the District’s basic financial statements, and have issued our report thereon dated June 22, 2018.

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered the District’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District’s internal control. Accordingly, we do not express an opinion on the effectiveness of the District’s internal control.

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

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies, and therefore, material weaknesses or significant deficiencies may exist that were not identified. We did identify a deficiency in internal control described below as item IC2017 001 that we consider to be a material weakness.

21

IC2017 001: Developer advances

x	Condition: The District failed to report approximately $218,000 of developer advances on its financial statements as of September 30, 2017. The amounts were essentially expenditures

made by the Developer on the District’s behalf.

x	Criteria: Generally Accepted Accounting Principles for governmental entities require payments made on behalf of governments to be recorded as revenue and expenditures as appropriate.

x	Cause: The District overlooked recording the revenue and related expenditures because

they were non cash in nature and had no direct impact on the District’s financial records.

x	Effect: Revenues and expenditures on the fund level financial statements were understated by approximately $218,000.

x	Recommendation: We recommend the District record developer advances in the amount of

construction costs funded by the Developer.

x	Management Response: The District has already taken further steps to ensure that this oversight is avoided in the future.

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 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 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.

CARR, RIGGS & INGRAM, LLC

Miramar Beach, Florida June 22, 2018

22

CRI INGRAM~1tc::		500 Grand Boulevard		
		Carr, Riggs & Ingram, LLC		
		Certified Public Accountants		
CPAs and Advisors		Suite 210		
		Miramar Beach, Florida 32550		
					
	MANAGEMENT LETTER	(850)	837-3141		
		(850)	654-4619 (fax)		
					
	CRlcpa .com		
			
To the Board of Supervisors			
Holly Hill Road East Community Development District			
Davenport, Florida			
			
Report on the Financial Statements			
			
We have audited the financial statements of the Holly Hill Road East Community Development District (“District”) as of and for the fiscal year ended September 30, 2017, and have issued our report thereon dated June 22, 2018.

Auditors’ Responsibility

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

Other Reports and Schedule

We have issued our Independent Auditors’ Report on Internal Control over Financial Reporting and Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards; and Independent Accountant’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 22, 2018, 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 taken to address findings and recommendations made in the preceding annual financial audit report. This is the District’s first annual 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. The information required is disclosed in the notes to the financial statements.

23

Financial Condition

Section 10.554(1)(i)5.a. and 10.556(7), Rules of the Auditor General, require 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 identification of 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.c. 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.

Annual Financial Report

Section 10.554(1)(i)5.b. and 10.556(7), Rules of the Auditor General, require us to apply appropriate procedures and communicate the results of our determination as to whether the annual financial report for the District for the fiscal year ended September 30, 2017, filed with the Florida Department of Financial Services pursuant to Section 218.32(1)(a), Florida Statutes, is in agreement with the annual financial audit report for the fiscal year ended September 30, 2017. In connection with our audit, we determined that these two reports were in agreement.

Other Matters

Section 10.554(1)(i)3., Rules of the Auditor General, require 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 have 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.

CARR, RIGGS & INGRAM, LLC			

Miramar Beach, Florida			
June 22, 2018			

24

CRI INGRAM~1tc::	500 Grand Boulevard	
	Carr, Riggs & Ingram, LLC	
	Certified Public Accountants	
CPAs and Advisors	Suite 210	
	Miramar Beach, Florida 32550	
	(850)	837-3141	
	(850)	654-4619 (fax)	
	CRlcpa .com	
INDEPENDENT ACCOUNTANTS’ REPORT

To the Board of Supervisors Holly Hill Road East Community Development District Davenport, Florida

We have examined Holly Hill Road East Community Development District’s compliance with the requirements of Section 218.415, Florida Statutes, Local Government Investment Policies, during the year ended September 30, 2017. Management of the District is responsible for the District’s compliance with the specified requirements. Our responsibility is to express an opinion on the District’s compliance with the specified requirements based on our examination.

Our examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. Those standards require that we plan and perform the examination to obtain reasonable assurance about whether the District complied, in all material respects, with the specified requirements referenced above. An examination involves performing procedures to obtain evidence about whether the District complied with the specified requirements. The nature, timing, and extent of the procedures selected depend on our judgment, including an assessment of the risks of material noncompliance, whether due to fraud or error. We believe that the evidence we obtained is sufficient and appropriate to provide a reasonable basis for our opinion.

Our examination does not provide a legal determination on the District’s compliance with specified requirements.

In our opinion, the District complied, in all material respects, with the aforementioned requirements for the year ended September 30, 2017.

This report is intended solely for the information and use of management and the State of Florida Auditor General and is not intended to be and should not be used by anyone other than these specified parties.

CARR, RIGGS & INGRAM, LLC

Miramar Beach, Florida June 22, 2018

25