Bannon Lakes Community Development District

ANNUAL FINANCIAL REPORT

September 30, 2017

Bannon Lakes Community Development District ANNUAL FINANCIAL REPORT
Fiscal Year Ended September 30, 2017 TABLE OF CONTENTS
Page Number

REPORT OF INDEPENDENT AUDITORS	1-2
MANAGEMENT’S DISCUSSION AND ANALYSIS	3-8
BASIC FINANCIAL STATEMENTS:
Government-wide Financial Statements:
Statement of Net Position	9
Statement of Activities	10
Fund Financial Statements:
Balance Sheet – Governmental Funds	11
Reconciliation of Total Governmental Fund Balances
to Net Position of Governmental Activities	12
Statement of Revenues, Expenditures and Changes in Fund
Balances – Governmental Funds	13
Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds
to the Statement of Activities	14
Statement of Revenues, Expenditures and Changes in Fund
Balances – Budget and Actual – General Fund	15
Notes to Financial Statements	16-28
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	29-30
MANAGEMENT LETTER	31-32
INDEPENDENT ACCOUNTANT’S REPORT/COMPLIANCE WITH
SECTION 218.415, FLORIDA STATUTES	33

tt Berger, Toombs, Elam,
,OJ Gaines & Frank
Certified Public Accountants	PL

600 Citrus Avenue
Suite 200
Fort Pierce,  Florida 34950
7721461-6120  II 461-1155
FAX: 7721468-9278
REPORT OF INDEPENDENT AUDITORS

To the Board of Supervisors
Bannon Lakes Community Development District St. Johns County, Florida

Report on the Financial Statements

We have audited the - accompanying financial statements of Bannon Lakes Community Development District as of and for the year ended September 30, 2017, and the related notes to financial statements, which collectively comprise the District's basic financial statements as listed in the table of contents.

Management's Responsibility for the Financial Statements

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

Auditor's Responsibility

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

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

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

Member AICPA

Fort Pierce I Stuart
- 1 -
Member AICPA Division For CPA Firms
Private Companies Practice Section

Member FICPA

fti Berger, Toombs, Elam,
,OJ Gaines & Frank
Certified Publk;A.ea>\Jnl;lf\11 Pl

To the Board of Supervisors
Bannon Lakes Community Development District

Opinion

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 Bannon Lakes Community Development District, as of September 30, 2017, and the respective changes in financial position and the budgetary comparison for the General Fund for the year then ended in conformity with accounting principles generally accepted in the United States of America.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the Management Discussion and Analysis be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, 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

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In accordance with Government Auditing Standards, we have also issued a report dated June 25, 2018 on our consideration of the District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations and contracts.  The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Bannon Lakes Community
velopment District's internal control over financial reporting and compliance.
)(J00)1 /oa-l Jr1/!(t}i;u?X)JJ
Berge, Toombs, Elam, Gaines & Frank Certified Public Accountants PL
Fort Pierce, Florida June 25, 2018

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

OVERVIEW OF THE FINANCIAL STATEMENTS

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

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

The statement of net position presents information on all assets and liabilities of the District, with the difference between assets and liabilities reported as net position. Assets, liabilities, and net position are reported for all Governmental activities.

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

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

OVERVIEW OF THE FINANCIAL STATEMENTS (CONTINUED)

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

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

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

Financial Highlights

The following are the highlights of financial activity for the year ended September 30, 2017.

The District’s total liabilities exceeded total assets by $(852,508) (net position).

Governmental activities revenues totaled $752,903 while governmental activities expenses totaled $810,621.

OVERVIEW OF THE FINANCIAL STATEMENTS (CONTINUED)

Financial Analysis of the District

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

Net Position

Governmental Activities

 	2017		2016

Current assets	$	463,829	$	36,628	
Restricted assets	1,263,438	8,021,411	
Capital assets	 	9,649,986 	 	3,923,381 	
Total Assets	 	11,377,253 	 	11,981,420 	
Current liabilities	482,490	1,032,354	
Non-current liabilities	 	11,747,271 	 	11,743,856 	
Total Liabilities	 	12,229,761 	 	12,776,210 	

Net position - unrestricted

  $	(852,508)

  $	(794,790)

 	

The increase in current assets is due to an increase in cash and due from developer in the current year.

The decrease in restricted assets is primarily the result of the interest payments and capital additions in the current year.

The decrease in current liabilities is primarily due to a decrease in contracts and retainage payable in the current year.

OVERVIEW OF THE FINANCIAL STATEMENTS (CONTINUED)

Financial Analysis of the District (Continued)

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

Change In Net Position

Governmental Activities

 	2017		 	2016	
Program Revenues
Charges for sevices	$	439,208	$	-	
Operating grants and contributions	 	313,695 	 	98,777 	

General government	100,118	88,253	
Physical environment	95,487	-	
Culture/recreation	26,476	-	
Interest on long-term debt	 	588,540 	 	804,004 	
Total Expenses	 	810,621 	 	892,257 	
Change in Net Position	(57,718)	(793,480)	
Net Position - Beginning of Year	 	(794,790)	 	(1,310)	
Net Position - End of Year	  $	(852,508)	$	(794,790)	

Total Revenues	 	752,903	 	98,777 Expenses

The increase in special assessments is related to the initial year assessments were levied.

The decrease in interest on long-term debt is primarily attributable to the cost of issuance of long-term debt in the prior year.

OVERVIEW OF THE FINANCIAL STATEMENTS (CONTINUED)

Capital Assets Activity

The following schedule provides a summary of the District’s capital assets as of September 30, 2017 and 2016.

Governmental Activities

2017	2016

Construction in progress

  $	9,649,986 

  $	3,923,381 

 	

Current year activity consisted of additions to construction in progress of $5,726,605.

General Fund Budgetary Highlights

Budgeted expenditures exceeded actual expenditures primarily due to less attorney, supervisor fees, landscape maintenance, facility management and utilities expenditures than were anticipated.

There were no amendments to the September 30, 2017 budget.

Debt Management

Governmental Activities debt includes the following:

In January 2016 the District issued $11,850,000 Special Assessment Bonds, Series 2016. The Bonds were issued to provide funds to finance the cost of acquisition, construction, installation and equipping the 2016 Project, pay certain costs associated with issuing the bonds, fund the 2016 Reserve account and fund capitalized interest through November 1, 2018. The balance outstanding at September 30, 2017 was
$11,850,000.

OVERVIEW OF THE FINANCIAL STATEMENTS (CONTINUED)

Economic Factors and Next Year’s Budget

Bannon Lakes Community Development District is in the process of finishing construction within the District. The District does not expect any other economic factors to have a significant effect on the financial position or results of operations of the District in fiscal year 2018.

Request for Information

The financial report is designed to provide a general overview of Bannon Lakes Community Development District’s finances for all those with an interest. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the Bannon Lakes Community Development District, Governmental Management Services, 475 West Town Place, Suite 114, St. Augustine, FL 32092.

	Governmental
Activities	
ASSETS		
Current Assets		
Cash	$	228,164	
Due from developer	216,882	
Deposits	50	
Prepaid expenses	 	18,733 	
Total Current Assets	 	463,829 	
Non-Current Assets		
Restricted Assets		
Investments	1,263,438	
Capital Assets, Not Being Depreciated		
Construction in progress	 	9,649,986 	
Total Non-Current Assets	 	10,913,424 	
Total Assets	 	11,377,253 	
LIABILITIES		
Current Liabilities		
Accounts payable	20,606	
Contracts and retainage payable	218,082	
Accrued interest	 	243,802 	
Total Current Liabilities	 	482,490 	
Non-Current Liabilities		
Bonds payable, net	 	11,747,271 	
Total Liabilities	 	12,229,761 	
NET POSITION		
Unrestricted	  $	(852,508)	

See accompanying notes to financial statements.

								Net (Expense)	
								Revenues and	
								Changes in	
				Program Revenues		Net Position	

Functions/Programs		

Expenses		
Charges for Services		Operating Grants and Contributions		
Governmental Activities	
Governmental Activities									
General government		$	(100,118)		$	198,003		$	-		$	97,885	
Physical environment		(95,487)		188,844		313,695		407,052	
Culture/recreation		(26,476)		52,361		-		25,885	
Interest on long-term debt		 	(588,540)		 	- 		 	- 		 	(588,540)	
Total Governmental Activities		  $	(810,621)		  $	439,208 		  $	313,695 		(57,718)	
	
Change in Net Position				
(57,718)	
	Net Position - October 1, 2016				 	(794,790)	
	Net Position - September 30, 2017				  $	(852,508)	

See accompanying notes to financial statements.

Bannon Lakes Community Development District BALANCE SHEET
GOVERNMENTAL FUNDS
September 30, 2017

			Series		Series		Total	
			2016		2016		Governmental	
	 	General			 Debt Service 		 Capital Projects		 	Funds		
ASSETS								
Cash	$	228,164		$	-		$	-		$	228,164	
Due from developer	-		-		216,882		216,882	
Prepaid expenses	18,733		-		-		18,733	
Deposits	50		-		-		50	
Restricted assets								
Cash and investments, at fair value	 	- 		 	1,263,438 		 	- 		 	1,263,438 	
Total Assets	$	246,947		$ 1,263,438		$	216,882		$	1,727,267	

LIABILITIES AND FUND BALANCES								
LIABILITIES								
Accounts payable	$	20,606		$	-		$	-		$	20,606	
Contracts and retainage payable	-		-		218,082		218,082	
Total Liabilities	20,606		-		218,082		238,688	

FUND BALANCES								
Nonspendable:								
Prepaid expenses/deposits	18,783		-		-		18,783	
Restricted:								
Debt service	-		1,263,438		-		1,263,438	
Unassigned	207,558		-		(1,200)		206,358	
Total Fund Balances	226,341		1,263,438		(1,200)		1,488,579	
Total Liabilities and Fund Balances	$	246,947		$ 1,263,438		$	216,882		$	1,727,267	

Bannon Lakes Community Development District RECONCILIATION OF TOTAL GOVERNMENTAL FUND BALANCES TO NET POSITION OF GOVERNMENTAL ACTIVITIES
September 30, 2017

Total Governmental Fund Balances	$	1,488,579	
Amounts reported for governmental activities in the Statement of Net Position		
are different because:		
Capital assets, not being depreciated, land and improvements, used in		
governmental activities are not current financial resources and therefore,	
are not reported at the governmental fund level.	9,649,986	
Long-term liabilities, including bonds payable, $(11,850,000), and bond		
discount, $102,729, are not due and payable in the current period		
and therefore, are not reported at the governmental fund level.	(11,747,271)	
Accrued interest expense for long-term debt is not a current financial use		
and therefore, is not reported at the governmental fund level.	(243,802)	

Net Position of Governmental Activities	
$	(852,508)	

Bannon Lakes Community Development District STATEMENT OF REVENUES, EXPENDITURES AND CHANGES
IN FUND BALANCES - GOVERNMENTAL FUNDS
For the Year Ended September 30, 2017

			Series		Series		Total	
			2016		2016		Governmental	
	General		Debt Service		Capital Projects		Funds	
Revenues								
Special assessments	$ 439,208		$	-		$	-		$	439,208	
Developer contributions	10,654		-		313,695		324,349	
Total Revenues	449,862		-		313,695		763,557	

Expenditures								
Current								
General government	100,118		-		-		100,118	
Physical environment	95,487		-		-		95,487	
Culture/recreation	26,476		-		-		26,476	
Capital outlay	-		-		5,726,605		5,726,605	
Debt service								
Interest	-		585,125		-		585,125	
Total Expenditures	222,081		585,125		5,726,605		6,533,811	

Net Change in Fund Balances	
227,781		
(585,125)		
(5,412,910)		
(5,770,254)	
Fund Balances - October 1, 2016	(1,440)		1,848,563		5,411,710		7,258,833	

Fund Balances - September 30, 2017	
$ 226,341		
$ 1,263,438		
$	(1,200)		
$	1,488,579	

For the Year Ended September 30, 2017

Net Change in Fund Balances - Total Governmental Funds	$	(5,770,254)	
Amounts reported for governmental activities in the Statement of Activities are		
different because:		
Governmental funds report capital outlays as expenditures. However, in the		
Statement of Activities, the cost of those assets is allocated over their		
estimated useful lives as depreciation. This is the amount of capital outlay		
in the current period.	5,726,605	
Revenues in the Statement of Activities that do not provide current financial		
resources are reported as deferred inflows of resources in the governmental		
funds. This is the change in deferred inflows of resources in the current period.	(10,654)	
Amortization of bond discount does not require the use of financial current		
resources and therefore, is not reported in the governmental funds. This is the		
amount of amortization in the current period.	(3,415)	

Change in Net Position of Governmental Activities	
$	(57,718)	

For the Year Ended September 30, 2017

							Variance with	
							Final Budget	
	Original		Final				Positive	
	Budget		Budget		Actual		(Negative)	
Revenues								
Special assessments	$ 552,204		$ 552,204		$ 439,208		$	(112,996)	
Developer contributions	 	- 		 	- 		 	10,654 		 	10,654 	
Total Revenues	552,204		552,204		449,862		(102,342)	

Expenditures								
Current								
General government	111,681		111,681		100,118		11,563	
Physical environment	267,600		267,600		95,487		172,113	
Culture/recreation	172,923		172,923		26,476		146,447	
Total Expenditures	 	552,204 		 	552,204 		 	222,081 		 	330,123 	
Net Change in Fund Balances	-		-		227,781		227,781	
Fund Balances - October 1, 2016	-		-		(1,440)		(1,440)	

Fund Balances - September 30, 2017	
   $	- 		
   $	- 		
  $ 226,341 		
   $	226,341 	

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Reporting Entity

The District was established on September 21, 2015, pursuant to the Uniform Community Development District Act of 1980, Chapter 190, Florida Statutes, as amended (the "Act"), by Ordinance #2015-60 of the Board of County Commissioners of St. Johns County, as a Community Development District. The District was established for the purposes of financing and managing the acquisition, construction, maintenance and operation of the infrastructure necessary for community development within its jurisdiction. The District is authorized to issue bonds for the purpose, among others, of financing, funding, planning, establishing, acquiring, constructing district roads, landscaping, and other basic infrastructure projects within or outside the boundaries of the Bannon Lakes Community Development District. The District is governed by a Board of Supervisors who are elected to four year and two year terms. The District operates within the criteria established by Chapter 190.

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

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

Measurement Focus and Basis of Accounting

The basic financial statements of the District are composed of the following:

Government-wide financial statements

Fund financial statements

Notes to financial statements

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Measurement Focus and Basis of Accounting (Continued)

Government-wide Financial Statements

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

Governmental activities are supported by developer contributions.  Program revenues are netted with program expenses in the statement of activities to present the net cost of each program.

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

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

Fund Financial Statements

The underlying accounting system of the District is organized and operated on the basis of separate funds, each of which is considered to be a separate accounting entity. The operations of each fund are accounted for with a separate set of self- balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures or expenses, as appropriate. Governmental resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled.

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

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2. Measurement Focus and Basis of Accounting (Continued)

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

The District has various policies governing the fund balance classifications.

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

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

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

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

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

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Measurement Focus and Basis of Accounting (Continued)

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

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

Under the current financial resources measurement focus, only current assets and current liabilities are generally included on the balance sheet. The reported fund balance is considered to be a measure of “available spendable resources”.

Governmental fund operating statements present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Accordingly, they are said to present a summary of sources  and uses of “available spendable resources” during a period.

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

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

Debt service expenditures are recorded only when payment is due.

Basis of Presentation

Governmental Major Funds

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

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Basis of Presentation (Continued)

Governmental Major Funds (Continued)

Series 2016 Debt Service Fund – The Series 2016 Debt Service Fund accounts for debt service requirements to retire the Series 2016 Special Assessment Bonds, which were used to finance the construction of certain improvements within the District.

Series 2016 Capital Projects Fund – The Series 2016 Capital Projects Fund accounts for acquisition and construction of infrastructure improvements located within the boundaries of the District.

Non-current Governmental Assets/Liabilities

GASB Statement 34 requires that non-current governmental assets, such as construction in progress, and non-current governmental liabilities, such as general obligation bonds be reported in the governmental activities column in the government-wide Statement of Net Position.

Assets, Liabilities, and Net Position or Equity

Cash and Investments

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

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

Direct obligations of the United States Treasury;

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

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

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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

Cash and Investments (Continued)

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

Cash and investments include time deposits, certificates of deposit, money market funds, and all highly liquid debt instruments with original maturities of three months or less.

Restricted Assets

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

Capital Assets

Capital assets, which include construction in progress, are reported in the governmental activities column.

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

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

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

Unamortized Bond Discounts

Bond discounts associated with the issuance of revenue bonds are amortized according to the straight line method of accounting. For financial reporting, unamortized bond discounts are netted against the applicable long-term debt.

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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

Budgets

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

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

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

“Total fund balances” of the District’s governmental funds ($1,488,579) differs from “net position” of governmental activities ($(852,508)) reported in the Statement of Net Position. This difference primarily results from the long-term economic focus of the Statement of Net Position versus the current financial resources focus of the governmental fund balance sheet. The effect of the differences is illustrated below:

Capital related items

When capital assets (land, buildings and improvements, infrastructure and equipment that are to be used in governmental activities) are purchased or constructed, the cost of those assets is reported as expenditures in governmental funds. However, the Statement of Net Position included those capital assets among the assets of the District as a whole.

Construction in progress	$	9,649,986

Long-term debt transactions

Long-term liabilities applicable to the District’s governmental activities are not due and payable in the current period and accordingly are not reported as fund liabilities. All liabilities (both current and long-term) are reported in the Statement of Net Position. Balances at September 30, 2017 were:

Bonds payable	$ (11,850,000)	
Bond discount, net	 	102,729	
Bonds payable, net	$ (11,747,271)	

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

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

Accrued interest

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

Accrued interest	$	(243,802)

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

The “net change in fund balances” for government funds ($(5,770,254)) differs from the “change in net position” for governmental activities ($(57,718)) reported in the Statement of Activities. The differences arise primarily from the long-term economic focus of the Statement of Activities versus the current financial resources focus of the governmental funds. The effect of the differences is illustrated below:

Capital related items

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

Capital outlay	$	5,726,605

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

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

Long-term debt transactions

Amortization of the bond discount does not require the use of current financial resources and therefore, is not reported in governmental funds.

Amortization of bond discount	$	(3,415)

Deferred inflows of resources

Deferred inflows of resources reported in the governmental funds are recognized as revenues in the Statement of Activities.

Net change in deferred inflows of resources	$	(10,654)

NOTE C – CASH AND INVESTMENTS

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

Custodial Credit Risk – Deposits

Custodial credit risk is the risk that in the event of a bank failure, the District's deposits may not be returned to it. The District does not have a formal deposit policy for custodial credit risk, however, they follow the provisions of Chapter 280, Florida Statutes regarding deposits and investments. As of September 30, 2017, the District's bank balance was $237,705 and the carrying value was $228,164. Exposure to custodial credit risk was as follows. The District maintains all deposits in a qualified public depository in accordance with the provisions of Chapter 280, Florida Statutes, which means that all deposits are fully insured by Federal Depositors Insurance or collateralized under Chapter 280, Florida Statutes.

Investments

As of September 30, 2017, the District had the following investments and maturities:

 	Investment		 Maturity Date	 Fair Value 
Money Market Mutual Fund	N/A	 1,263,438 

NOTE C – CASH AND INVESTMENTS (CONTINUED)

Investments (Continued)

The District categorizes its fair value measurements within the fair value hierarchy recently 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 price 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.

Based on the criteria in the preceding paragraph, the investments in managed mutual funds are a Level 1 asset.

Interest Rate Risk

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

Credit Risk

The District has no investment policy that would further limit its investment choices. Concentration of Credit Risk
The District places no limit on the amount it may invest in any one fund.

The types of deposits and investments and their level of risk exposure as of September 30, 2017 were typical of these items during the fiscal year then ended.

NOTE D – CAPITAL ASSETS

Capital Asset activity for the year ended September 30, 2017 was as follows:

Governmental activities:
Capital assets, not being depreciated:

Balance	Balance
October 1,	September 30,
 	2016	 	Additions	 	Deletions	 	2017	

Construction in progress

  $	3,923,381 

  $	5,726,605 

  $	- 

  $	9,649,986 

   

NOTE E – LONG-TERM DEBT		
Long-term debt is comprised of the following:		
Special Assessment Bonds		
$11,850,000 Series 2016 Bonds are due in annual principal installments beginning November 2019, maturing November 2048. Interest is due semi-annually on May 1 and November 1, beginning May 1, 2016, at variable rates of 4.5% and 5%.	

$	11,850,000	
Less: bond discount, net	 	(102,729)	
Bonds Payable, Net	$	11,747,271	

NOTE E – LONG-TERM DEBT (Continued)

The annual requirements to amortize the principal and interest of bonded debt outstanding as of September 30, 2017 are as follows:

Year Ending
 	September 30, 	 	Principal		 	Interest		 	Total		
2018	$	-	$	585,125	$	585,125	
2019	-	585,125	585,125	
2020	185,000	580,963	765,963	
2021	190,000	572,525	762,525	
2022	200,000	563,750	763,750	
2023-2027	1,150,000	2,670,750	3,820,750	
2028-2032	1,455,000	2,356,375	3,811,375	
2033-2037	1,855,000	1,945,125	3,800,125	
2038-2042	2,365,000	1,419,375	3,784,375	
2043-2047	3,020,000	750,000	3,770,000	
2048-2049	 	1,430,000 	 	72,250 	 	1,502,250 	
Totals	  $	11,850,000 	  $	12,101,363 	  $	23,951,363 	

Significant Bond Provisions

The Series 2016 Bonds are subject to redemption at the option of the District prior to their maturity, in whole or in part, at any time after November 1, 2028 at a redemption price equal to the principal amount of the Series 2016 Bonds together with accrued interest to the date of redemption.

The Trust Indenture established certain amounts be maintained in a reserve account. In addition, the Trust Indenture has certain restrictions and requirements relating principally to the use of proceeds to pay for the infrastructure improvements and the procedures to be followed by the District on assessments to property owners. The District agrees to levy special assessments in annual amounts adequate to provide payment of debt service and to meet the reserve requirements.

NOTE E – LONG-TERM DEBT (CONTINUED)

Depository Funds

The bond resolution establishes certain funds and determines the order in which revenues are to be deposited into these funds. A description of the significant funds, including their purposes, is as follows:

1. Reserve Fund – The 2016 Reserve Account was funded from the proceeds of the Series 2016 Bonds in an amount equal to the maximum annual debt service requirement. Monies held in the reserve account will be used only for the purposes established in the Trust Indenture.

   Special Assessment Bonds	

Reserve
 	Balance	

Reserve Requirement

  $	385,750	 $	385,750 

NOTE F – ECONOMIC DEPENDENCY

The Developers own a significant portion of land within the District. The District’s activity is dependent upon the continued involvement of the Developers, the loss of which could have a material adverse effect on the District’s operations. At September 30, 2017, all board members are affiliated with the Developers.

NOTE G – 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 for which the government carries commercial insurance. There were no claims or settled claims from these risks have not exceeded commercial insurance coverage.

tt Berger, Toombs, Elam,
.....o,., Gaines & Frank
Certified Public Accountants	PL
600 Citrus Avenue
Suite 200
Fort Pierce, Florida 34950
7721461-6120 II 461-1155
FAX: 7721468-9278

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
Bannon Lakes Community Development District St. Johns County, Florida

We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of Bannon Lakes Community Development District, as of and for the year ended September 30, 2017, and the related notes to the financial statements, and have issued our report thereon dated June 25, 2018.

Internal Control Over Financial Reporting

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

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

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

Member AICPA

Fort  P e2c9 /_Stuart
Meinber AICPA Division For CPA Firms Private Companies Practice Section

Member FICPA

f".: tt Berger, Toombs, Elam,

Co,, Gaines & Frank

To the Board of Supervisors
Bannon Lakes Community Development District

Compliance and Other Matters

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

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Berger, Toombs, Elam, Gaines & Frank Certified Public Accountants

Fort Pierce, Florida June 25, 2018

- 30 -

tt Berger, Toombs, Elam,
,OJ Gaines & Frank
Certified Public Accountants	PL

600 Citrus Avenue
Suite 200
Fort Pierce, Florida 34950
772/461-6120 // 461-1155
FAX: 772/468-9278

To the Board of Supervisors

MANAGEMENT LETTER

Bannon Lakes Community Development District St. Johns County, Florida

Report on the Financial Statements

We have audited the financial statements of the Bannon Lakes Community Development District as of and for the year ended September 30, 2017, and have issued our report thereon dated June 25, 2018.

Auditor's Responsibility

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

Other Reporting Requirements

We have issued our Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards and our Independent Auditor's Report on an examination conducted in accordance with A/CPA Professionals Standards, AT-C Section 315, regarding compliance requirements in accordance with Chapter 10.550, Rules of the Auditor General. Disclosures in those reports, which are dated June 25, 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 financial audit report. The findings or recommendations in the preceding audit were corrected in the preceding audit.

Financial Condition and Management

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 Bannon Lakes Community Development District has met one or more of the conditions described in Section 218.503(1), Florida Statutes, and to identify the specific conditions met. In connection with our audit, we determined that Bannon Lakes Community Development District did not meet any of the conditions described in Section 218.503(1) Florida Statutes.

Member AICPA

Fort Pierce / Stuart
- 31 -
Member AICPA Division For CPA Firms
Private Companies Practice Section

Member FICPA

f p Berger, Toombs, Elam,

-..t;J Gaines & Frank

To the Board of Supervisors
Bannon Lakes Community Development District

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 Bannon Lakes Community Development District. It is management's responsibility to monitor the Bannon Lakes Community Development District's financial condition; our financial condition assessment was based in part on the representations made by management and the review of the financial information provided by the same as of September 30, 2017.

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 Bannon Lakes Community Development 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.

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 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.
2JA4tl Jotmio<Y	rl
0>6ac 4	J1td/l)_/
Berger, Toombs, Elam, Gaines & Frank
Certified Public Accountants PL Fort Pierce, Florida

June 25, 2018

- 32 -

tt Berger, Toombs, Elam,
....o,,	Gaines & Frank
Certified Public Accountants	PL

600 Citrus Avenue
Suite 200
Fort Pierce, Florida 34950
772/461-6120 // 461-1155
FAX: 772/468-9278

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

To the Board of Supervisors
Bannon Lakes Community Development District St. Johns County, Florida

We have examined Bannon Lakes Community Development District's compliance with Section 218.415, Florida Statutes during the year ended September 30, 2017. Management is responsible for Bannon Lakes Community Development District's compliance with those requirements. Our responsibility is to express an opinion on Bannon Lakes Community Development District's compliance based on our examination.

Our examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants and, accordingly, included examining, on a test basis, evidence about Bannon Lakes Community Development District's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our examination provides a reasonable basis for our opinion. Our examination does not provide a legal determination on Bannon Lakes Community Development District's compliance with the specified requirements.

In our opinion, Bannon Lakes Community Development District complied, in all material respects, with the aforementioned requirements during the year ended September 30, 2017.
J)JA/}Jfi, Joonk»1 fi
otJ o> <i-  \tJLdAJ
Berger, Toombs, Elam, Gaines & Frank
Certified Public Accountants PL Fort Pierce, Florida

June 25, 2018

Member AICPA

Fort Pierce / Stuart
- 33 -
Mernber AICPA Division For CPA Firms
Private Companies Practice S ction

Member FICPA