Highland Meadows West Community Development District

FINANCIAL STATEMENTS

September 30, 2020

REPORT

Table of Contents

Page

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 ........................................................................................	9
Statement of Activities .............................................................................................	10
Fund Financial Statements
Balance Sheet – Governmental Funds......................................................................	11
Reconciliation of the Balance Sheet of Governmental Funds to the Statement
of Net Position ..........................................................................................................	12
Statement of Revenues, Expenditures and Changes in Fund Balances –
Governmental Funds ................................................................................................	13
Reconciliation of the Statement of Revenues, Expenditures and Change in
Fund Balances of Governmental Funds to the Statement of Activities ...................	14
Notes to Financial Statements ........................................................................................	15
Required Supplemental Information (other than MD&A)
Budget to Actual Comparison Schedule ‐ General Fund .............................................	27
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..................................	28
Management Letter ........................................................................................................	30
Independent Accountants’ Report on Compliance with Section 218.415,
Florida Statutes ...............................................................................................................	32

INDEPENDENT AUDITORS’ REPORT

To the Board of Supervisors
Highland Meadows West Community Development District Polk County, Florida

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities and each major fund of Highland Meadows West Community Development District (hereinafter referred to as “District”), as of and for the year ended September 30, 2020, 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, 2020, 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 21, 2021, 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 effectiveness of the District’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District’s internal control over financial reporting and compliance.

CARR, RIGGS & INGRAM, LLC

Miramar Beach, Florida June 21, 2021

Management’s Discussion and Analysis

Our discussion and analysis of the Highland Meadows West Community Development District’s financial performance provides an overview of the District’s financial activities for the fiscal year ended September 30, 2020. Please read it in conjunction with the District’s financial statements, which begin on page 9.

FINANCIAL HIGHLIGHTS

At September 30, 2020, the assets of the District exceed its liabilities by $78,713.

During the year ended September 30, 2020, the District issued Special Assessment Bonds, Series 2020 totaling $3,725,000 and incurred bond issuance costs totaling $258,318.

During the year ended September 30, 2020, the District made principal and interest payments totaling $1,385,000 and $348,318, respectively, and incurred approximately $4.9 million of capital outlay 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 9 – 10 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 11. 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.

Reporting the District’s Most Significant Funds

Our analysis of the District’s major funds begins on page 6. The fund financial statements begin on page 11 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.

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.

THE DISTRICT AS A WHOLE

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

September 30,	2020	2019	Change	
Assets
Current and other assets	
$	974,346	
$	2,917,405	
$	(1,943,059)	
Capital assets, net	8,304,490	3,360,694	4,943,796	
Total assets	9,278,836	6,278,099	3,000,737

Liabilities

Current liabilities	$	604,794	$	1,059,592	$	(454,798)	
Other liabilities	8,595,329	6,385,000	2,210,329	
Total liabilities	9,200,123	7,444,592	1,755,531	
Net position				
Net investment in capital assets
Restricted for: Debt service	60,170

70,842	‐	60,170

70,842	
Capital projects	‐	30,756	(30,756)	
Unrestricted	(52,299)	(1,197,249)	1,144,950	
Total net position (deficit)	78,713	(1,166,493)	1,245,206	
Total liabilities and net position	$	9,278,836	$	6,278,099	$	3,000,737	

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

During the fiscal year ended September 30, 2020, total assets and liabilities increased by approximately $3 million and $1.8 million, respectively. The increase in assets and liabilities is due to the commencement of infrastructure construction and the issuance of Special Assessment Bonds, Series 2020, less prepayments of the Series 2019 Bonds.

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

For the year ended September 30,	2020	2019	Change	
Revenues:
Program revenues: Charges for services	

$	1,750,503	

$	95,939	

$	1,654,564	
Grants and contributions	355,274	34,617	320,657	

Total revenues	
2,105,777	
130,556	
1,975,221	
Expenses:				
General government	218,457	93,496	124,961	
Bond issue costs	258,318	305,075	(46,757)	
Conveyance of capital assets	‐	614,684	(614,684)	
Interest	383,796	131,306	252,490	

Total expenses	
860,571	
1,144,561	
(283,990)	

Change in net position	
1,245,206	
(1,014,005)	
2,259,211	
Net position (deficit), beginning of year	(1,166,493)	(152,488)	(1,014,005)	

Net position (deficit), end of year	
$	78,713	
$	(1,166,493)	
$	1,245,206	

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

Revenues increased over the prior year by $1,975,221. The increase in revenues is primarily due to additional developer contributions and prepaid assessments in the current year. The expenses decreased by $283,990. The decrease in expenses is primarily due to the decrease in the conveyance of capital assets. The overall result was an increase of $1,245,206 in net position for fiscal year 2020.

THE DISTRICT’S FUNDS

As the District completed the year, its governmental funds (as presented in the balance sheet on page
reported a combined fund balance of $721,638, which is a decrease from last year’s fund balance that totaled approximately $2.0 million. Significant transactions are discussed below.

During the year ended September 30, 2020, the District issued Special Assessment Bonds, Series 2020 totaling $3,725,000 and incurred bond issuance costs totaling $258,318.

During the year ended September 30, 2020, the District made principal and interest payments of $1,385,000 and $258,318, respectively, and incurred approximately $4.9 million of capital outlay expenditures.

The overall decrease in fund balance for the year ended September 30, 2020 totaled approximately
$1.3 million.

CAPITAL ASSET AND DEBT ADMINISTRATION

Capital Assets

At September 30, 2020, the District had approximately $8.4 million invested in capital assets. This amount represents an increase of approximately $5 million from the fiscal year 2019 total.

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

September 30,	2020	2019	Change	

Capital assets not being depreciated	
$	8,228,570	
$	3,360,694	
$	4,867,876	
Capital assets being depreciated	78,016	‐	78,016	

Total, prior to depreciation	
8,306,586	
3,360,694	
4,945,892	
Accumulated depreciation	(2,096)	‐	(2,096)	

Net capital assets	
$	8,304,490	
$	3,360,694	
$	4,943,796	

More information about the District's capital assets is presented in Note 4 to the financial statements.

Debt

At September 30, 2020, the District had approximately $8.7 million of outstanding debt. This amount represents an increase of approximately $2.3 from the fiscal year 2019 total.

A listing of debt amounts outstanding for the current and prior year is as follows:
September 30,	2020	2019	Change

Special Assessment Bonds: Series 2019

$	5,000,000	$

6,385,000	$

(1,385,000)

Series 2020A2	2,770,000	‐	2,770,000
Series 2020A3	955,000	‐	955,000

Total

$	8,725,000	$

6,385,000	$

2,340,000

More information about the District's long term debt is presented in Note 5 to the financial statements.

GOVERNMENTAL FUNDS BUDGETARY HIGHLIGHTS

An Operating budget was established in the current year 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 27.

The District experienced a favorable variance in revenues as compared to the budget in the amount of $94,043. In addition, the district experienced a favorable variance in expenditures as compared to the budget in the amount of $24,306. The variance in expenditures occurred primarily due to anticipated operating expenditures that were not incurred during the year. Revenues varied in a similar manner because the Developer currently funds the operations of the District generally to the extent it makes expenditures. In addition, the District levied the special operations and maintenance assessments totaling $73,698 in the fiscal year 2020.

FUTURE FINANCIAL FACTORS

Highland Meadows West 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. Assessment rates for fiscal year 2021 were established to provide for the operations of the District as well as the necessary debt service requirements.

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 Highland Meadows West Community Development District’s management company at 9145 Narcoossee Road, Suite A206, Orlando, Florida 32827.

Basic Financial Statements

Highland Meadows West Community Development District
Statement of Net Position

September 30,	2020	
	Governmental	
	Activities	
Assets
Cash and cash equivalents	
$	931	
Investments	883,053	
Assessment receivables	42,553	
Due from developer	40,000	
Prepaid expenses	7,809	
Capital assets:
Not being depreciated	
8,228,570	
Depreciable, net	75,920	

Total assets	
9,278,836	

Liabilities		
Accounts payable	15,465	
Contracts payable	35,123	
Retainage payable	20,534	
Due to developer	181,586	
Accrued interest payable	155,081	
Non‐current liabilities:
Due within one year	
197,005	
Due in more than one year	8,595,329	

Total liabilities	
9,200,123	

Net position		
Net investment in capital assets	60,170	
Restricted for:
Debt service	
70,842	
Unrestricted	(52,299)	

Total net position	$	78,713

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

Highland Meadows West Community Development District
Statement of Activities

For the year ended September 30,			2020		

Program Revenues		Net (Expense)
Revenue and Changes in Net Position	
		
Charges for	Operating Grants and	Capital Grants and	
Governmental	
Functions/Programs	Expenses	Services	Contributions	Contributions	Activities	
Primary government:
Governmental activities: General government	

(218,457)	

$	1,750,503	

$	190,345	

$	151,733	

$	1,874,124	
Bonds issue costs	(258,318)				(258,318)	
Interest	(383,796)	‐	3,759	9,437	(370,600)	

Total governmental activities	
$	(860,571)	
$	1,750,503	
$	194,104	
$	161,170	
1,245,206	

Net deficit ‐ beginning of year	(1,166,493)

Net position ‐ end of year	$	78,713

The accompanying notes are an integral part of these financial statements.
− 10 ‐

Balance Sheet – Governmental Funds

September 30,

2020

General	Debt Service

Capital Projects

Total Governmental Funds

Assets
Cash and cash equivalents	
$	931	
$	‐	
$	‐	
$	931	
Investments	‐	660,326	222,727	883,053	
Assessments receivable	‐	42,553	‐	42,553	
Due from developer	40,000	‐	‐	40,000	
Prepaid expenditures	7,809	‐	‐	7,809	
Total assets	$	48,740	$	702,879	$	222,727	$	974,346	

Liabilities and Fund Balances
Liabilities
Accounts payable	

$	15,465	

$	‐	

$	‐	

$	15,465	
Contracts payable	‐	‐	35,123	35,123	
Retainage payable	‐	‐	20,534	20,534	
Due to developer	‐	‐	181,586	181,586	
Total liabilities	15,465	‐	237,243	252,708	

Fund balances					
Nonspendable	7,809	‐	‐	7,809	
Restricted for debt service	‐	702,879	‐	702,879	
Unassigned	25,466	‐	(14,516)	10,950	
Total fund balance (deficit)	33,275	702,879	(14,516)	721,638	

Total liabilities and fund balance	
$	48,740	
$	702,879	
$	222,727	
$	974,346	

Reconciliation of the Balance Sheet to the Statement of Net Position

September 30,	2020	

Total fund balances, governmental funds	
$	721,638	
Capital assets used in governmental activities are not financial resources and therefore are not reported in the fund financial statements.	
8,304,490	
Liabilities not due and payable from current resources, including accrued		
interest, are not reported in the fund financial statements.	(8,947,415)	

Total net position (deficit) ‐ governmental activities	
$	78,713	

Statement of Revenues, Expenditures and Changes in Fund Balances –
Governmental Funds

For the year ended September 30,			2020		
				Total	
		Debt	Capital	Governmental	
	General	Service	Projects	Funds	
Revenues
Assessments	
$	73,698	
$  377,899	$	‐	
$	451,597	
Prepaid assessments	‐	1,298,906	‐	1,298,906	
Developer contributions	190,345	−	151,733	342,078	
Interest	‐	3,759	9,437	13,196	
Total revenues	264,043	1,680,564	161,170	2,105,777	

Expenditures
Current:
General government
Debt service:	216,361	‐	‐	216,361	
Principal	6,958	1,385,000	‐	1,391,958	
Bond issue costs	‐	‐	258,318	258,318	
Interest	11,575	348,318	‐	359,893	
Capital outlay	78,016	‐	4,867,876	4,945,892	
Total expenditures	312,910	1,733,318	5,126,194	7,172,422	

Excess (deficit) of revenues over

expenditures	(48,867)	(52,754)	(4,965,024)	(5,066,645)	

Other Financing Sources (Uses)
Bond issuance proceeds	

‐	

309,460	

3,415,540	

3,725,000	
Discount on issuance of debt	‐	(320)	(3,532)	(3,852)	
Issuance of notes payable	78,016	‐	‐	78,016	
Transfers in	‐	‐	126,904	126,904	
Transfers out	‐	(126,904)	‐	(126,904)	
Total other financing sources (uses)	78,016	182,236	3,538,912	3,799,164	

Net change in fund balances	
29,149	
129,482	
(1,426,112)	
(1,267,481)	
Fund balance, beginning of year	4,126	573,397	1,411,596	1,989,119	

Fund balance (deficit), end of year	
$	33,275	
$ 702,879	
$	(14,516)	
$	721,638	

Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities

For the year ended September 30,	2020
Net change in fund balances ‐ governmental fund	$	(1,267,481)

Capital outlay, reported as expenditures in the governmental funds, is shown as
capital assets on the Statement of Net Position.	4,945,892

Governmental funds report principal payments on bonds and notes payable when debt is paid, whereas these payments are eliminated in the Statement of Activities and recognized as a decrease in bonds and notes payable in the
Statement of Net Position.	1,391,958

Governmental funds report the effect of original issue discount when debt is first issued, whereas these amounts are deferred and amortized in the
Statement of Activities.	3,852

Depreciation on capital assets is not recognized in the fund financial statements
but is reported as an expense in the Statement of Activities.	(2,096)

Bond discount amortization is not recognized in the fund financial statements
but is reported as an expense in the Statement of Activities.	(129)

The change in accrued interest between the current and prior year is recorded
on the Statement of Activities but not on the fund financial statements.	(23,774)

Bond proceeds which are reported as other financing sources in the governmental funds are recognized as long‐term liabilities in the Statement of
Net Position.	(3,725,000)

Issuance of notes payable which are reported as other financing users in the governmental funds are recognized as long‐term liabilities in the Statement of
Net Position.	(78,016)

Change in net position of governmental activities	$	1,245,206

NOTE 1: NATURE OF ORGANIZATION

The Highland Meadows West Community Development District (the “District”) was established on July 10, 2018 pursuant to the Uniform Community Development District Act of 1980, otherwise known as Chapter 190, Florida Statutes, by Polk County Ordinance No. 18‐045. 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 current Supervisors have been elected by the landowners. At September 30, 2020, all of the Supervisors are affiliated with the developer of the community, HMD West, LLC. The Board of Supervisors of the District exercises all powers granted to the District pursuant to Chapter 190, Florida Statutes.

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

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, 2020, 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. However, debt service expenditures are recorded only when payment is due.

Assessments, including debt service assessments along with operation and maintenance assessments, are non‐ad valorem special assessments imposed on all lands located within the District and benefited by the District’s activities. Assessments are levied and certified for collection by the District prior to the start of the fiscal year which begins October 1st and ends on September 30th. Operation and maintenance special assessments are imposed upon all benefited lands located in the District. Debt service special assessments are imposed upon certain lots and lands as described in each resolution imposing the special assessment for each series of bonds issued by the District.

Assessments, developer contributions and interest associated with the current fiscal period are all considered to be 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.

Debt Service Fund – The Debt Service Fund is used to account for the accumulation of resources for the annual payment of principal and interest on long‐term debt.
Capital Projects Fund – 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, 2020, 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 negotiable direct or indirect obligations which are secured by the United States Government; 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.

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 are depreciated using the straight‐line method over the estimated useful lives. Estimated useful lives for financial reporting purposes are as follows: Equipment ‐ 20 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.

Deferred Outflows/Inflows of Resources

In addition to assets, the statement of financial 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, 2020.

In addition to liabilities, the statement of financial 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, 2020.

Long‐Term Obligations

In the government‐wide financial statements, long‐term debt and other long‐term obligations are reported as liabilities in the Statement of Net Position. Bond premiums and discounts are deferred and amortized over the life of the bonds using the straight‐line or effective interest method. Bonds payable are reported net of these premiums or discounts. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as current period expenses.

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

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 the District’s bond covenants.

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.

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.

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:

Each year the District Manager submits to the District Board a proposed operating budget for the fiscal year commencing the following October 1.
A public hearing is conducted to obtain comments.
Prior to October 1, the budget is legally adopted by the District Board.
All budget changes must be approved by the District Board, unless otherwise delegated by the District Board.
Budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America.

Subsequent events

Management has evaluated subsequent events through the date that the financial statements were available to be issued, June 21, 2021. See Note 13 for relevant disclosures. No subsequent events occurring after this date have been evaluated for inclusion in these financial statements.

NOTE 3: INVESTMENTS

The District’s investments consist of money market funds in which shares are owned in the fund rather than the underlying investments. In accordance with GASB 72, Fair Value Measurement and Application, these amounts are reported at amortized cost.

Concentration risk – The District’s investment policy requires diversification, but does not specify limits on types of investments.

Custodial credit risk – For an investment, custodial credit risk is the risk that the District will not be able to recover the value of the investments or collateral securities that are in the possession of an outside party. The District has no formal policy for custodial risk. At September 30, 2020, the money market funds are not exposed to custodial credit risk because their existence is not evidenced by securities that exist in physical or book entry form.

Interest Rate Risk – The district does not have a formal policy for addressing interest rate risk; however, investments are made with discretion to seek reasonable returns, preserve capital, and in general, avoid speculative investments. The District manages its exposure to declines in fair values from interest rate changes by reviewing the portfolio on an ongoing basis for changes in effective yield amounts.

The following is a summary of the District’s investments:

September 30,	2020	Credit Risk Maturities

Short‐term Money Market Funds

$	883,053

S&P AAAm	47 days

NOTE 4: CAPITAL ASSETS

The following is a summary of changes in the capital assets for the year ended September 30, 2020:

	Beginning
Balance	
Additions	Transfers and
Conveyances	Ending
Balance	
Governmental Activities:
Capital assets not being depreciated Infrastructure under construction	

$ 3,360,694	

$ 4,867,876	

$	‐	

$ 8,228,570	
Total capital assets, not being depreciated	3,360,694	4,867,876	‐	8,228,570	

Capital assets being depreciated Equipment	
‐	
78,016	
‐	
78,016	
Total capital assets, being depreciated	‐	78,016	‐	78,016	

Less accumulated depreciation Equipment		
(2,096)	
‐	
(2,096)	
Total accumulated depreciation	‐	(2,096)	‐	(2,096)	
Total capital assets, being depreciated, net	‐	75,920	‐	75,920	
Governmental activities capital assets, net	$ 3,360,694	$ 4,943,796	$	‐	$ 8,304,490	

The net proceeds from the Series 2019 Bonds have been used to fund a portion of the infrastructure associated with Phase 1 of the Development. Phase 1 is currently planned for 266 single‐family residential lots. The net proceeds from the Series 2020 Bonds have been used to fund a portion of the infrastructure associated with Assessment Area 2 and Assessment Area 3 of the Development. The Assessment Area 2 Project is currently planned for 130 single‐family units. The Assessment Area 3 Project is currently planned for 46 single‐family units. The infrastructure includes stormwater management systems, utilities, roadways, entry features and signage, amenities, parks and recreation facilities and off‐site improvements.

All three projects were substantially complete at September 30, 2020 and were certified to be complete in February 2021 (see Note 13). The total cost of the capital improvement projects was approximately $9.7 million including the Series 2019 project costs of approximately $6.5 million and the Series 2020 projects’ costs of approximately $3.2 million.

NOTE 5: BONDS PAYABLE

In April 2019, the District issued $6,385,000 of Special Assessment Bonds, Series 2019, consisting of
$575,000 Term Bonds, $695,000 Term Bonds, $1,960,000 Term Bonds, and $3,155,000 Term Bonds with interest rates of 4.000%, 4.125%, 4.875% and 5.000%. The Series 2019 bonds were issued to fund the planning, financing, acquisition, construction, equipping and installation of the Series 2019 Project. Interest is paid semiannually on each May 1 and November 1. Principal payments on the Series 2019 $575,000 Term Bonds are made serially commencing on November 1, 2020 through November 1, 2024. Principal payments on the Series 2019 $695,000 Term Bonds are made serially commencing on November 1, 2025 through November 1, 2029. Principal payments on the Series 2019
$1,960,000 Term Bonds are made serially commencing on November 1, 2030 through November 1, 2039. Principal payments on the Series 2019 $3,155,000 Term Bonds are made serially commencing on November 1, 2040 through November 1, 2049.

In February 2020, the District issued $3,725,000 of Series 2020A Bonds, consisting of $2,770,000 for the Assessment Area 2 Project and $955,000 for the Assessment Area 3 project with interest rates ranging from 2.875% to 4.000%. The Series 2020A bonds were issued to fund the planning, financing, acquisition, construction, and installation of the Assessment Area 2 and 3 projects. Interest is paid semiannually on each May 1 and November 1. Principal payments on the $2,770,000 Assessment Area 2 Project are made serially commencing on May 1, 2021 through May 1, 2050. Principal payments on the $955,000 Assessment Area 3 Project are made serially commencing on May 1, 2021 through May 1, 2050.

The Bond Indentures require that the District maintain adequate funds in reserve accounts to meet the debt service reserve requirements as defined in the Indentures. The requirements have been met for the fiscal year ended September 30, 2020.

The Bond Indentures have certain restrictions and requirements relating principally to the use of proceeds to pay for the infrastructure improvements and the procedure to be followed by the District on assessments to property owners. The District agreed to levy special assessments in annual amounts adequate to provide payment of debt service and to meet the reserve requirements. The District is in compliance with the requirements of the Bond Indentures.

At September 30, 2020, the scheduled debt service requirements on bonds payable were as follows:

Year Ending September 30,	Principal	Interest	Service	
2021	$	180,000	$	370,853	$	550,853	
2022	185,000	364,397	549,397	
2023	195,000	356,981	551,981	
2024	200,000	349,981	549,981	
2025	205,000	342,781	547,781	
2026‐2030	1,145,000	1,592,434	2,737,434	
2031‐2035	1,390,000	1,337,294	2,727,294	
2036‐2040	1,740,000	995,669	2,735,669	
2041‐2045	2,545,000	513,800	3,058,800	
2046‐2050	940,000	115,400	1,055,400	
	$	8,725,000	$	6,339,591	$	15,064,591	

NOTE 6: NOTES PAYABLE

In October 2019, the District obtained a note payable totaling $28,750 for the purchase of playground equipment. The note is payable in 48 monthly payments of $771 each, bears interest at 13.005% and matures in November 2023.

In June 2020, the District obtained a note payable totaling $49,265 for the purchase of playground equipment. The note is payable in 48 monthly payments of $1,298 each, bears interest at 12.01% and matures in July 2024.

At September 30, 2020, the future annual principal payments on the notes payable were as follows:

2021	$	17,005	
2022	19,237	
2023	21,763	
2024	 	13,052 	
	  $	71,057 	

Long‐term liability activity for the year ended September 30, 2020 was as follows:

	Beginning
Balance	
Additions	
Reductions	
Ending Balance	Due Within
One Year	
Governmental Activities
Bonds payable: Series 2019	

$	6,385,000	

$	‐	

$ (1,385,000)	

$	5,000,000	

$	105,000	
Series 2020A2	‐	2,770,000	‐	2,770,000	55,000	
Series 2020A3	‐	955,000	‐	955,000	20,000	
Bond discount	‐	(3,852)	129	(3,723)		
Total bonds payable	6,385,000	3,721,148	(1,384,871)	8,721,277	180,000	
Notes Payable:
Playground equipment	‐	78,015	(6,958)	71,057	17,005

 	$	6,385,000	$   3,799,163	$   (1,391,829)  $	8,792,334	$	197,005 

NOTE 8: 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. As of the date of this report, the District has not filed any claims against this commercial coverage.

NOTE 9: 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 10: INTERFUND TRANSFERS

During the fiscal year ended September 30, 2020, the interfund transfers totaling $126,904 were between the Debt Service Fund and the Capital Project Fund to make payments for debt service and fund capital improvement projects timely.

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

The developer has agreed to fund the operations of the District. For the year ended September 30, 2020, the developer contributed $190,345 to the General Fund and $151,733 to the Capital Project Funds , of which $40,000 was outstanding at year end and is recorded as Due from developer on the accompanying Statement of Net Position and Balance Sheet – Governmental Funds. In addition, for the year ended September 30, 2020, the Developer was assessed directly for the Series 2019 debt services in amount of $42,553, which was outstanding at year end and is recorded as Assessments receivable on the accompanying Statement of Net Position and Balance Sheet – Governmental Funds.

At September 30, 2020, the District owed the developer $181,586 for a reimbursement of the Series 2019 capital improvement project costs, which is recorded as Due to developer on the accompanying Statement of Net Position and Balance Sheet – Governmental Funds.

In 2020, the District and the Developer entered into two agreements for the collateral assignment and assumption of development rights relating to the assessment area 2 project and assessment area 3 project. In accordance with these agreements, the Developer collaterally assigned to the District, to the extent assignable, all Developer’s development rights, permits, entitlements and work product relating to the development of the Assessment Area 2 Project and Assessment Area 3 Project (see Note 4), and Developer’s rights as declarant of any property owner or homeowner association with respect to both projects, as security for the Developer’s payment and performance of its obligations arising under the Bond Documents.

In 2020, the District entered into two agreements with Orchid Terrace Development, LLC, an owner and developer of certain lands within the District, for the acquisition of work product, improvements and real property for the Assessment Area 2 Project and the Assessment Area 3 Project (see Note 4). In conjunction with these projects, the District and Orchid Terrace Development, LLC entered into a cost share agreement, whereby Orchid Terrace was responsible for the project costs including excavation or disposal of trash or any other unforeseen site conditions, any extended warranty, landscaping or irrigation, well abandonment, power relocation or removal, and fencing, which were not included in the District’s capital improvement projects plan,. These projects were completed in February 2021 (see Note 13).

In 2019, the District entered into an interlocal agreement with Davenport Road South Community Development District for its share of the amenity costs. The allocation is based on the number of assessable units developed and to be developed within each District. The District’s initial share of the amenity budget expenses is approximately 52%. During the year ended September 30, 2020, the District incurred expenses totaling $59,358 for its share of the operations and maintenance of the amenity center.

NOTE 13: SUBSEQUENT EVENT

Subsequent to year end, the District completed the Series 2019 and Series 2020 capital improvement projects. The District’s engineer certified the projects to be complete on February 18, 2021. Upon completion, certain additional assets were conveyed to other entities for ownership and/or maintenance.

Required Supplemental Information (Other than MD&A)

Highland Meadows West Community Development District Budget to Actual Comparison Schedule – General Fund

For the year ended September 30,		2020		
	
Original	
Final	Actual	
Variance with	
	Budget	Budget	Amounts	Final Budget	

Revenues
Assessments	

$	‐	

$	‐	$	73,698	

$	73,698	
Developer contributions	265,700	170,000	190,345	20,345	
Total revenues	265,700	170,000	264,043	94,043	

Expenditures
General government	

265,700	

259,200	216,361	

42,839	
Debt service:
Principal	
‐	
−	6,958	‐
(6,958)	
Interest	‐	−	11,575	(11,575)	
Total expenditures	265,700	259,200	234,894	24,306	
Excess (deficit) of revenues over				
expenditures	$	‐	$  (89,200)  $	29,149	$	118,349	

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
Highland Meadows West Community Development District Polk County, Florida

We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities and each major fund of Highland Meadows West Community Development District (hereinafter referred to as the “District”), as of and for the year ended September 30, 2020, 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 21, 2021.

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 as a basis for designing 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 the District’s internal control. Accordingly, we do not express an opinion on the effectiveness of the District’s internal control.

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

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

Compliance and Other Matters

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

Purpose of this Report

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

CARR, RIGGS & INGRAM, LLC

Miramar Beach, Florida June 21, 2021

MANAGEMENT LETTER

To the Board of Supervisors
Highland Meadows West Community Development District Polk County, Florida

Report on the Financial Statements

We have audited the financial statements of the Highland Meadows West Community Development District (“District”) as of and for the fiscal year ended September 30, 2020, and have issued our report thereon dated June 21, 2021.

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 Reporting Requirements

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 those reports, which are dated June 21, 2021, 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. There were no findings or recommendations made in the preceding 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.

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

Pursuant to Sections 10.554(1)(i)5.b. and 10.556(8), Rules of the Auditor General, we applied financial condition assessment procedures for the District. It is management’s responsibility to monitor the District’s financial condition, and our financial condition assessment was based in part on representations made by management and the review of financial information provided by same.

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

Additional Matters

Section 10.554(1)(i)3., Rules of the Auditor General, requires us to communicate noncompliance with provisions of contracts or grant agreements, or abuse, that have occurred, or are likely to have occurred, that have an effect on the financial statements that is less than material but which warrants the attention of those charged with governance. In connection with our audit, we did not note any such findings.

Purpose of this Letter

Our management letter is intended solely for the information and use of 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 21, 2021

INDEPENDENT ACCOUNTANTS’ REPORT

To the Board of Supervisors
Highland Meadows West Community Development District Polk County, Florida

We have examined Highland Meadows West Community Development District ’s compliance with the requirements of Section 218.415, Florida Statutes, Local Government Investment Policies, during the year ended September 30, 2020. 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 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 performed 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, 2020.

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 21, 2021