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Volusia Flagler Advanced Technology Center, Inc.

Financial Statements and Required Supplemental Information

Years ended June 30, 2011 and 2010

TABLE OF CONTENTS

Page

INDEPENDENT AUDITORS' REPORT 1

MANAGEMENT'S DISCUSSION AND ANALYSIS 3

BASIC FINANCIAL STATEMENTS

Government-Wide Financial Statements

Statements of Net Assets 9

Statements of Revenues, Expenses and Changes in Net Assets 10

Statements of Cash Flows 11

Notes to Financial Statements 12

REQUIRED SUPPLEMENTARY INFORMATION

Estimated Schedule of Funding Progress for the Retiree Health Plan 26

REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATIERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS 27

MANAGEMENTLETIER 28

Keith Altizer and Company, PA. Certified Public Accountants 431 East Horatio Avenue, Suite 300

Maitland, Florida 32751

407-539-1188

Fax 407-539-1116

www.ka-co.com

INDEPENDENT AUDITORS' REPORT

To the Board of Directors, Volusia Flagler Advanced Technology Center, Inc. Daytona Beach, Florida

We have audited the accompanying financial statements of the business-type activities for VolusiaFlagler Advanced Technology Center, Inc. (the "ATC") as of and for the year ended June 30, 2011, which collectively comprise the A TC's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the A TC's management. Our responsibility is to express an opinion on these financial statements based on our audit. The fmancial statements of the ATC as ofJune 30, 2010, were audited by other auditors whose report dated December 15,2010, expressed an unqualified opinion on those statements.

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 of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the business-type activities of the A TC, as ofJune 30, 2011, and the respective changes in fmancial position and cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.

In accordance with Government Auditing Standards, we have also issued our report dated December 16,20 lion our consideration of the ATC's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.

I

MEMBERS AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS FLORIDA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS

Accounting principles generally accepted in the United States of America require that the management's discussion and analysis and the estimated schedule of funding progress for the retiree health plan, 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.

December 16, 2011 Maitland, Florida

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MANAGEMENT'S DISCUSSION AND ANALYSIS

Years Ended June 30, 2011 and 2010

The discussion and analysis of Volusia Flagler Advanced Technology Center's (the "ATC") financial statements provides an overview of their financial activities for the years ended June 30, 2011, 2010 and 2009. Management has prepared the financial statements and the related footnote disclosures along with the discussion and analysis. Responsibility for the completeness and fairness of this information rests with management.

The ATC is a jOint venture between Volusia County School Board (VCSB), Flagler County School Board (FCSB). and Daytona State College (the "College"). The ATC is a 163,000 square foot facility that is located on a stand-alone campus in Daytona Beach. The eqUipment is considered assets of Daytona State College with the exception of those items purchased with partner share revenue. Pertinent financial information pertaining to the ATC over the past three fiscal years is presented.

ATC FINANCIAL HIGHLIGHTS

The following chart provides a graphical breakdown of revenues by category for three fiscal years:

5,500,000

4,500,000

Cl 3,500,000 r::: -g 2,500.000 :::s u. 1,500,000

500,000

(500,000)

FY 2011

Total Revenue By Source

FY 2010 FY 2009

.Sponsor Contributions

mOperating Grants, Contributions and other revenues

The ATC's total revenues for fiscal year 2011, 2010 and 2009 were $4,414,087, $4,952,893 and $5,812,671, respectively. This is a 10.9% decrease from fiscal year 2010 and a 24.1 % decrease from fiscal year 2009. Revenue from the Sponsors was $4,411,139, $4,948,678, and $5,262,495, representing 99.9%, 99.9%, and 90.5% of the total revenue for fiscal year 2011, 2010, and 2009, respectively. Revenue from Sponsors for fiscal year 2011 consisted only ofa Daytona State College contribution of $4,411,139 that included $654,681 of Operating Cost of New Facilities (OCNF). Due to fiscal constraints, both Volusia and Flagler County School Systems were unable to make Sponsor contributions in 2011. Other fiscal year 2011 revenue for the ATC includes charges for services of $2,948.

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USING THIS ANNUAL REPORT

This report consists of three basic financial statements: 1. Statements of Net Assets 2. Statements of Revenues, Expenses and Changes in Net Assets 3. Statements of Cash Flows

These statements provide information on the ATC as a whole and its associated programs which inciude the following activities: instruction, academic support, student support, institutional support, and plant operation and maintenance.

REPORTING ON THE ATC AS A WHOLE

The Statements of Net Assets and the Statements of Revenues, Expenses, and Changes in Net Assets

The Statements of Net Assets and the Statements of Revenues, Expenses, and Changes in Net Assets report information on the ATC as a whole and on its activities. When revenues and other sources of support exceed expenses, the result is an increase in net assets. When the reverse occurs, the result is a decrease in net assets. The relationship between revenues and expenses may be thought of as ATC operating results.

The Advanced Technology Center's net assets, the difference between assets and liabilities, are one way to measure the financial health, or financial position. Over time, increases or decreases in the net assets are one indicator of whether its financial health is improving or deteriorating. One will need to consider many other non-financial factors, such as certain trends, student retention, and condition of the buildings and the safety of the campus, to assess the overall health of the ATC.

Current assets for ATC totaled $372,249 at the fiscal year end 2011, a 7.6% increase from fiscal year 2010 current assets of $346,057. This increase is largely due to an increase in cash and cash equivalents, which was a direct result of the increase in salaries and compensated absences payable. Fiscal year 2010 represented a 25.2% decrease from 2009 current assets of $462,334.

Current liabilities are $372,249. This is an increase of $26,192 over the previous year. Accounts payable and accrued salaries are the major components of this increase. Noncurrent liabilities increased by $74,475 to $819,034. This increase is directly related to the increase of management's estimate of the balance of other postemployment benefits and compensated absences due beyond one year. Compensated absences consist of vacation and sick leave earned by employees, but not yet taken or paid and a limited amount of sick leave earned by ATC ernployees. Based upon experience, management has determined that approximately 30% of the total amount will be paid to employees in the coming fiscal year and is considered a current liability. The balance of the liability will be paid in future years and therefore is considered a non-current liability.

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REPORTING ON THE ATC AS A WHOLE (continued)

These statements include all assets and liabilities using the accrual basis of accounting, which is similar to the accounting used by most private sector institutions. All of the current year's revenues and expenses are taken into account regardless of when cash is received or paid.

Current assets

Non-current assets

Total assets

Current liabilities

Non-current liabilities

Total liabilities

Net assets Restricted

Total net asset

Total liabilities and net assets

REVENUES

Table 1 Net Assets

FY 2011

$ 372,249

$ 819,034

$ 1,191,283

$ 372,249

819,034

1,191,283

$ 1,191,283

FY2010 FY2009

$ 346,057 $ 462,334

$ 744,559 $ 437,432

$ 1,090,616 $ 899,766

$ 346,057 $ 462,334

744,559 437,432

1,090,616 899,766

$ 1,090,616 $ 899,766

As previously mentioned, ATC's total revenues for fiscal year 2011, 2010 and 2009 were $4,414,087, $4,952,893, and $5,812,671, respectively. This is a 10.9% decrease from fiscal year 2010 and a 24.1 % decrease from fiscal year 2009. Due to fiscal constraints, both Volusia and Flagler County School Systems were unable to make Sponsor contributions in 2011; sponsorship contributions were attributable only to Daytona State College, which included $654,681 of Operating Cost of New Facilities Funding from the State of Florida.

For fiscal year 2010, revenue from Sponsors consisted of that of Daytona State College as follows: $4,948,678 (100%) which includes $668,180 of OCNF. For fiscal year 2009 the revenue distributions from the Sponsors were $3,701,366 (Daytona State College), $1,235,816 (VCSB), and $325,313 (FCSB). There were operating grants and contributions for fiscal year 2011,2010 and 2009 of $0, $0 and $528,391, respectively. The ATC received no capital contributions in fiscal year 2011,2010 and 2009.

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Years Ended June 30,2011 and 2010

REVENUES (continued)

Table 2 Statements of Revenues, Expenses, and Changes in Net Assets

FY2011 FY2010 FY2009

Revenues: Operating revenues:

Charges for services $ 2,948 $ 4,215 $ 21,785 Operating grants and contributions 528,391 Sponsor contributions 4,411,139 4,948,678 5,262,495

Total revenues 4,414,087 4,952,893 5,812,671

Expenses: Salaries 2,991,983 2,964,788 3,688,584 Benefits 812,653 960,920 924,093 Utilities 342,423 356,656 382,199 Contractual services 64,458 127,978 239,207 Other services and expenses 53,799 49,013 75,511 Materials and supplies 148,771 272,393 243,476 Administrative fee 221,145 260,460

Total expenses 4,414,087 4,952,893 5,813,530

Increase/(decrease) in net assets $ $ $ (859)

EXPENSES

Total expenses for the 2011 fiscal year were $4,414,087 as compared to $4,952,893, and $5,813,530 for fiscal year 2010 and 2009, resulting in a 10.9% decrease and 24.1% decrease, respectively over the prior years.

A view of expenses by category follows:

FY 2011 FY 2010 FY 2009 Amount % of Total Amount % of Total Amount % of Total

Salaries $ 2,991,983 67.7% $ 2,964,788 59.9% $ 3,688,584 63.4% 8enefits 812,653 18.4% 960,920 19.4% 924,093 15.9% Utilities 342,423 7.8% 356,656 7.2% 382,199 6.6% Contractual se",;ces 64,458 1.5% 127,978 2.5% 239,207 4.1% Other se",;ces and

expenses 53,799 1.2% 49,013 1.0% 75,511 1.3% Materials and supplies 148,771 3.4% 272,393 5.5% 243,476 4.2% Administrative fee 0.0% 221,145 4.5% 260,460 4.5%

Total $ 4,414,087 $ 4,952,893 $ 5,813,530

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Vol usia Flagler Advanced Technology Center, Inc.



EXPENSES (continued)

Employee benefits were higher in 2010 as a result of the initial recording of other postemployment benefits pursuant to GASB 45, whereas 2011 reflects just the current year change in expense. Contractual Services showed a continued decrease over the previous year mainly due to the reduction of temporary employees associated with academic and other student supports services that were relocated to the College's main campus. Materials and supplies in 2010 included minor equipment and renovations that did not reoccur in 2011, thus the reduction in the current year expense. Due to the funding reductions over the last several years, it is doubtful that further significant reductions can be obtained without a detrimental effect upon operations.

Program expenses by functional area are as follows:

FY 2011 FY 2010 FY 2009 Amount % of Total Amount 0/0 of Total Amount % of Total

Instructional $ 3,396,685 77.0% $ 3,444,874 69.5% $ 3,932.523 67.7% Academic support 303,683 6.9% 396,431 8.0% 359,657 6.2% Student support 45.908 1.0% 146,517 3.0% 466,210 8.0% Institutional support 13,130 0.3% 232,766 4.7% 322.490 5.5% Plant operations

and maintenance 654,681 14.8% 732,305 14.8% 732,650 12.6%

$ 4,414,087 $ 4,952.893 $ 5,813,530

The largest decreases in functional expenses were in academic and student support areas, as well as institutional support. Academic support services were relocated to the Daytona campus primarily. Student support services were eliminated from the ATC location; students can now receive these services from faculty or attend the Daytona campus, if necessary. The decrease in institutional support is directly related to the College no longer charging the ATC an administrative fee since the College is now the only contributing Sponsor.

CAPITAL ASSETS AND DEBT ADMINISTRATION

As of June 30, 2011, the ATC has no debt and no capital assets. Facility and equipment items are contributed to the ATC for the use of training students. The equipment is not the property of the ATC and is replaced occaSionally by Sponsors. The building and equipment were funded by the Sponsors and state appropriations, which was in accordance with the Consortium Agreement.

The College has no debt, however, Generally Accepted Accounting Principles (GAAP) in the United States requires employers to accrue a liability for employees' rights to receive compensation for future absences when certain conditions are met. The amount of compensated absence leave is based upon "vested" leave as prescribed by The Office of the Comptroller, Department of Banking and Finance, Bureau of Accounting.

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CAPITAL ASSETS AND DEBT ADMINISTRATION (continued)

Therefore, as reported in Note F to the financial statements, for fiscal years 2011 and 2010, the ATC had compensated absences amounting to $725,835 and $714,480, respectively. These figures are reflected in the Statements of Net Assets.

ECONOMIC FACTORS THAT WILL AFFECT THE FUTURE

The economic position of the Advanced Technology Center continues to be closely tied to that of the sponsors in 2011. Due to their fiscal constraints both the Vol usia County School District and the Flagler County School Board will not be providing support for the Advanced Technology Center in Fiscal Year 2012, as was the case in 2011. Accordingly, all high school level courses have been dropped by the ATC, although dual enrollment in college level courses continues. In order to maintain necessary funds for operation, one sponsor, Daytona State College, is funding the ATC at this time.

REQUEST FOR INFORMATION

This financial report is designed to provide a general overview of the finances of Volusia Flagler Advanced Technology Center. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to Dennis Micare, Senior Vice President and CFO, Daytona State College, 1200 W. International Speedway Blvd., P.O. Box2811 Daytona Beach, Florida 32120-2811.

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STATEMENTS OF NET ASSETS

June 30,

2011 2010

ASSETS

Current assets Cash and cash equivalents $ 152,641 $ 129,652 Due from sponsors - (Note C) 217,978 214,638 Due from other agencies Prepaid items 1,630 1,767

Total current assets 372,249 346,057

Noncurrent assets Due from sponsors - (Note C) 819,034 744,559

Total assets $ 1,191,283 $ 1,090,616

LIABILITIES AND NET ASSETS

Current liabilities Accounts payable $ 29,201 $ 18,060 Salaries payable 125,070 113,359 Compensated absences 217,978 214,638

Total current liabilities 372,249 346,057

Noncurrent liabilities Compensated absences 507,857 499,842 Other postemployment benefits ("OPES") payable 311,177 244,717

Total noncurrent liabilities 819,034 744,559

Total liabilities 1,191,283 1,090,616

Net assets Restricted

Total liabilities and net assets $ 1,191,283 $ 1,090,616

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

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STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS

Years ended June 30,

2011 2010 Revenues

Operating revenues: Charges for services $ 2,948 $ 4,215 Operating grants and contributions Sponsor contributions 4,411,139 4,948,678

Total operating revenues 4,414,087 4,952,893

Expenses Operating expenses:

Salaries 2,991,983 2,964,788 Benefits 812,653 960,920 Utilities 342,423 356,656 Contractual services 64,458 127,978 Other services and expenses 53,799 49,013 Materials and supplies 148,771 272,393 Administrative fee 221,145

Total operating expenses 4,414,087 4,952,893

Operating Income (Deficit)

Net assets, beginning of year

Net assets, end of year $ $


10

ATM2308

Typewritten Text


STATEMENTS OF CASH FLOWS

Years ended June 30,

2011 2010 Cash flows from operating activities

Sources of funds Receipts from sponsor contributions $ 4,333,324 $ 4,666,004 Receipts from state contributions Receipts from federal contributions 3,049 Receipts from charges for services 2,948 4,215

Uses of funds Payments to suppliers (192,168) (321,587) Payments to utilities and communications (340,152) (354,210) Payments to employees (2,980,273) (3,059,314) Payments for employee benefits (734,836) (678,246) Payments for contractual services (65,854) (129,008) Payments for administrative fee (221,145)

Net cash provided by (used in) operating activities 22,989 (90,242)

Net increase (decrease) in cash and cash equivalents 22,989 (90,242)

Cash and cash equivalents, beginning of year 129,652 219,894

Cash and cash equivalents, end of year $ 152,641 $ 129,652

Reconciliation of deficit from Operations to Net Cash Provided by (used in) Operating Activities:

Operating income (deficit) $ $ Adjustments to reconcile deficit from operations to net cash provided by (used in) operating activities:

Decrease (increase) in certain assets Due from sponsors - current (3,340) 24,453 Due from sponsors - noncurrent (74,475) (307,127) Due from other agencies 3,049 Prepaid items 137 (1,467)

Increase (decrease) in certain liabilities Accounts payable 11,141 2,701 Salaries payable 11,711 (94,525) Compensated absences - current 3,340 (24,453) Compensated absences - noncurrent 8,015 62,410 OPES 66,460 244,717

Net cash provided by (used in) operating activities $ 22,989 $ (90,242)


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NOTES TO FINANCIAL STATEMENTS


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies of Volusia Flagler Advanced Technology Center, Inc. ("ATC") conform to generally accepted accounting principles as applicable to governments. The following is a summary of the more significant policies.

1. Reporting entity

ATC is a not-for-profit corporation organized pursuant to Chapter 617, Florida Statutes, the Florida Not For Profit Corporation Act, and Section 228.505, Florida Statutes. The governing body of ATC is the not-for-profit corporation's Board of Directors.

The general operating authority of ATC is contained in Florida Statute 1002.34, Florida Statutes. ATC operates under a charter of the sponsors, Daytona State College (the "College"), Flagler County School Board (the "FCSB"), and Volusia County School Board (the "VCSB"), hereafter referred to as the "Sponsors." The current charter is effective until June 30, 2013 and may be renewed every five school years by mutual written agreement between ATC and the Sponsors. At the end of the term of the charter, the Sponsors may choose not to renew the charter. The profits will revert to the Sponsors based on their proportionate equity in the ATC as defined by the Consortium Agreement.

Criteria for determining if other entities are potential component units of A TC, which should be reported with A TC's basic financial statements, are identified and described in the Governmental Accounting Standards Board's (GAS B) Codification of Governmental Accounting and Financial Reporting Standards, Section 2100 and 2600. The application of these criteria provide for identification of any entities for which ATC is financially accountable and other organizations for which the nature and significance of their relationship with ATC are such that exclusion would cause ATC's basic financial statements to be misleading or incomplete. Based on these criteria, no component units are included within the reporting entity of ATC. Additionally, A TC does not meet the criteria of a component unit of any of the Sponsors and is reported as an investment in a joint venture.

2. Basis of accounting

The government-wide financial statements report information about the reporting government as a whole excluding fiduciary activities. The statements distinguish between governmental and business-type activities. Governmental activities generally are financed through taxes, intergovernmental revenues and other non-exchange revenues. Businesstype activities rely, to a significant extent, on fees and charges for support.

Funds are organized into three major categories: governmental, proprietary and fiduciary. The ATC is accounted for by providing a separate set of self-balancing accounts that constitute its assets, liabilities, net assets, revenues and expenditures/expenses.

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NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2. Basis of accounting (continued)

For financial reporting purposes, the ATC reports all of its operations as business activity in a single enterprise fund. Therefore, the government-wide and the fund financial statements are the same.

Enterprise funds are proprietary funds. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating activity generally arises from providing services in connection with a proprietary fund's principal activity. The operating revenues of the ATC consist primarily of sponsor contributions, operating grants and contributions, and charges for services.

Operating expenses for the ATC include the cost of salaries, benefits, utilities, contractual services, other services and expenses, material and supplies, and administrative fees. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses.

3. Measurement focus, basis of accounting and basis of presentation

Measurement focus is a term used to describe which transactions are recorded within the various financial statements. Basis of accounting refers to when transactions are recorded regardless of the measurement focus applied.

The proprietary fund utilizes an economic resources measurement focus. The accounting objectives of this measurement focus are the determination of operating income, changes in net assets (or cost recovery), financial position and cash flows. All assets and liabilities (whether current or non-current) associated with their activities are reported. Proprietary fund equity is classified as net assets. The basis of accounting used is similar to businesses in the private sector, thus, this fund is maintained on the accrual basis of accounting. Revenues are recognized when earned and expenses are recorded in the period incurred.

For financial reporting purposes, the A TC considers its Sponsor contributions associated with operations as operating revenue because these funds more closely represent revenues generated from operating activities rather than non-operating activities. As permitted by Governmental Accounting Standards Board (GASB) Statement of Governmental Accounting Standard (SGAS) No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities that use Proprietary Fund Accounting, the A TC has elected to not apply Financial Accounting Standards Board statements and interpretations issued after November 30,1989.

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4. Cash and cash equivalents

The amount reported as cash and cash equivalents consists of ATC's equity in Daytona State College's pooled cash account. Daytona State College (ATC's fiscal agent) considers all deposits with original maturities of three months or less to be cash equivalents. Under this definition, Daytona State College considers amounts invested in the State Board of Administration (SBA) and State Treasury Special Purpose Investment Account (SPIA) investment pool to be cash equivalents.

5. Facility and equipment usage

Facility and equipment items are contributed equipment to the ATC for the purpose of students' training. The equipment is not the property of the A TC and is replaced periodically by Sponsors.

In accordance with the Consortium Agreement, the building and equipment were funded by the Sponsors and state appropriations. The title to the land and building remains with VCSB and the equipment remains with the College. The Sponsors have entered into a lease agreement for the ATC's use of the land and building. The terms of the lease call for Daytona State College to pay VCSB $1 per year for 40 years. Equipment purchased with state appropriations are recorded on the financial statements of the College. The College has obtained grants and other state funding to purchase additional assets for use at the ATC; such eqUipment remains on the College's financial statements. In accordance with Government Auditing Standards, the recording of contributed facilities is not required and since the amount cannot be reasonably estimated, the accompanying financial statements do not reflect any contributed revenues for the land, facilities and equipment usage.

6. Revenue sources

Revenues for current operations are primarily from the Sponsors pursuant to the funding provisions as described in the Bridge Document dated April 9, 2004, which is an addendum to the original charter. If the full time equivalent (FTE) allocation rate exceeds base funding, the Sponsors will fund at that year's full FTE allocation rate after their approval. The College is also responsible for funding the operating costs of new facilities (OCNF), the site and facility. The FY 2011 and 2010 base funding for operations is $4,411,139 and $4,948,678 from Daytona State College, and $0 funding from VCSB and FCSB for both years.

Severe funding reductions have been experienced by the school board Sponsors due to budget cuts and, therefore, these Sponsors no longer have the fiscal capacities to provide sufficient support to the educational programs as set out in the original charter agreement. Each party desires to continue to jointly provide services to students. For FY 2010 and future years, the College has agreed to fulfill the funding requirements of the program changes.

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Daytona State College, as fiscal agent of ATC, receives state awards for the enhancement of various educational programs. This assistance is generally received based on proposals submitted to and approved by various granting agencies. The College collects this assistance and remits it to ATC through its annual funding discussed above.

7. Income taxes

The ATC is a not-for-profit corporation organized pursuant to Chapter 617, Florida Statutes, the Florida Not For Profit Corporation Act, and Section 228.505, Florida Statutes. Accordingly, the ATC is exempt from Federal income taxes.

8. Compensated absences

Daytona State College's personnel policies allow limited vesting of employee unused vacation and unused sick leave time. Compensated absences consist of vacation earned by employees but not yet taken or paid, and a limited amount of sick leave earned by the ATC employees. Personnel working at the ATC are employees of the College, and as such, some leave was earned prior to the inception of the ATC's charter. ATC has recorded a liability that represents total leave accrued from the hire date.

9. Prepaid items

Certain payments to vendors reflect costs applicable to future periods and are recorded as prepaid items in the financial statements.

10. Net assets

Net assets represent the difference between assets and liabilities and are reported in three categories as hereafter described. Net assets invested in capital assets, represent capital assets net of accumulated depreciation. Net assets are reported as restricted when their use is restricted by (1) external groups such as grantors, creditors or laws and regulations of other governments; or (2) law through constitutional provisions or enabling legislation. Unrestricted net assets are net assets that do not meet the definitions of the classifications previously described. The ATC's policy is to first apply restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net assets are available. All net assets of the ATC are restricted by enabling legislation. In accordance with the charter, any deficits will be funded by the Sponsors, and therefore, no net assets existed as of the fiscal years ended June 30, 2011 and 2010.

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11. Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make various estimates. Actual results could differ from those estimates.

NOTE B-CASH

Custodial Credit Risk - The ATC maintains its cash balances in a pooled account with Daytona State College's financial institution (the "Bank"). The Bank participates in the Federal Deposit Insurance Corporation (FDIC) Transaction Account Guarantee Program. Under this program, through December 31,2012, all non-interest bearing transaction accounts (demand deposit accounts) are fully guaranteed by the FDIC for the entire amount in the account. Coverage under this program is in addition to and separate from the coverage available under the FDIC's basic deposit insurance rules. Balances in other account types, including interest bearing accounts, are insured up to $250,000. As of June 30, 2011 and 2010, none of the ATC's bank balances of $152,641 and $129,652, respectively, was exposed to custodial credit risk, as all were either insured or collateralized.

NOTE C - AMOUNTS DUE FROM SPONSORS

The amount reported as due from Sponsors represents expenditures in excess of monies provided by Sponsors (see Note D).

Due from Sponsors is as follows at June 30:

2011 2010 Due from sponsors - current

Compensated absences $ 217,978 $ 214,638 Due from sponsors - noncurrent Compensated absences 507,857 499,842 OPEB 311,177 244,717

$ 1,037,012 $ 959,197

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NOTE D - RELATED PARTIES

The ATC primarily receives its funding from the Sponsors. During the year ended June 30, 2011, Daytona State College contributed approximately $4,411,139. The VCSB and FCSB did not make contributions to the ATC, as discussed at Note A-6. Daytona State College contributed approximately $654,681 in OCNF. During the year ended June 30, 2010, Daytona State College contributed approximately $4,948,678; VCSB and FCSB did not contribute. Daytona State College contributed approximately $668,180 in OCNF.

In addition to being one of the three sponsors, Daytona State College is also the fiscal agent for the ATC. In the past, Daytona State College received an administrative fee from the ATC for acting as ATC's fiscal agent. During 2011 it was no longer deemed necessary to charge this fee, as Daytona State College was the only contributing Sponsor. During the year ended June 30, 2011 and 2010, respectively, Daytona State College received approximately $0 and $221,145 in administrative fees from the ATC for acting as ATC's fiscal agent.

As of June 30, 2011 and 2010, a receivable of $1 ,037,012 and $959,197 is recorded as Due from Sponsors, respectively. Due to the changes in Sponsor contributions effective FY 2010, and discussed at Note A-6, the total balance as of June 30, 2011 and 2010 is due from Daytona State College.

A lease has been entered into by the Sponsors as outlined in Note A-5.

NOTE E - CONCENTRATIONS

For the year ended June 30, 2011, approximately 99% of revenues and 100% of receivables reflected in the basic financial statements are from Daytona State College. For the year ended June 30, 2010, approximately 99% of revenues and 100% of receivables reflected in the basic financial statements are from Sponsors.

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NOTE F - NONCURRENT LIABILITIES

A summary of changes in noncurrent liabilities are as follows:

Balance Balance Due within Jul~1,2010 Additions Deletions June 30, 2011 one year

Compensated absences $ 714,480 $ 267,258 $ 255,903 $ 725,835 $ 217,978

OPES $ 244,717 $ 66,460 $ 311,177 $

Total $ 959,197 $ 333,718 $ 255,903 $ 1,037,012 $ 217,978

Balance Balance Due within Jul~ 1,2009 Additions Deletions June 30, 2010 one year

Compensated absences $ 676,523 $ 260,665 $ 222,708 $ 714,480 $ 214,638

OPES $ $ 259,762 $ 15,045 $ 244,717 $

Total $ 676,523 $ 520,427 $ 237,753 $ 959,197 $ 214,638

NOTE G - STATE RETIREMENT PROGRAMS

Florida Retirement System. Essentially all regular employees of Daytona State College are

eligible to enroll as members of the State administered Florida Retirement System (FRS).

Provisions relating to FRS are established by Chapters 121 and 122, Florida Statutes; Chapter 112, Part IV, Florida Statutes; Chapter 238, Florida Statutes; and Florida Retirement

System Rules, Chapter 60S, Florida Administrative Code; wherein eligibility, contributions,

and benefits are defined and described in detail. FRS is a single retirement system

administered by the Department of Management Services, Division of Retirement, and

consists of two cost sharing, multiple-employer retirement plans and other nonintegrated

programs. These include a defined-benefit pension plan (Plan), a Deferred Retirement Option

Program (DROP), and a defined contribution plan, referred to as the Public Employee Optional Retirement Program (PEORP).

Employees in the Plan vest at six years of service. All vested members are eligible for normal

retirement benefits at age 62 or at any age after 30 years of service, which may include up to

4 years of credit for military service. The Plan also includes an early retirement provision;

however, there is a benefit reduction for each year a member retires before his or her normal

retirement date. The Plan provides retirement, disability, death benefits, and annual cost of living adjustments.

18




NOTE G - STATE RETIREMENT PROGRAMS (continued)

DROP, subject to provisions of Section 121.091, Florida Statutes, permits employees eligible for normal retirement under the Plan to defer receipt of monthly benefit payments while continuing employment with an FRS employer. An employee may participate in DROP for a

period not to exceed 60 months after electing to participate. During the period of DROP

participation, deferred monthly benefits are held in the FRS Trust Fund and accrue interest.

As provided in Section 121.4501, Florida Statutes, eligible FRS members may elect to participate in the PEORP in lieu of the FRS defined-benefit plan. College employees already

participating in the State College System Optional Retirement Program or the DROP are not

eligible to participate in this program. Employer contributions are defined by law, but the ultimate benefit depends in part on the performance of investment funds. The PEORP is

funded by employer contributions that are based on salary and membership class (Regular

Class, Senior Management Service Class, etc.). Contributions are directed to individual

member accounts, and the individual members allocate contributions and account balances among various approved investment choices. Employees in PEORP vest at one year of

service.

State College System Optional Retirement Program. Section 1012.875, Florida Statutes,

provides for an Optional Retirement Program (Program) for eligible college instructors and administrators. The Program is designed to aid colleges in recruiting employees by offering

more portability to employees not expected to remain in the FRS for six or more years.

The Program is a defined-contribution plan, which provides full and immediate vesting of all

contributions submitted to the participating companies on behalf of the participant. Employees

in eligible pOSitions can make an irrevocable election to participate in the Program, rather than

the FRS, and purchase retirement and death benefits through contracts provided by certain

insurance carriers. The employing college contributes, on behalf of the participant, 10.43

percent of the participant's salary, less a small amount used to cover administrative costs. The remaining contribution is invested in the company or companies selected by the

participant to create a fund for the purchase of annuities at retirement. The participant may

contribute, by payroll deduction, an amount not to exceed the percentage contributed by the

college to the participant's annuity account.

19




NOTE G - STATE RETIREMENT PROGRAMS (continued)

The State of Florida establishes contribution rates for the College's participating employees.

The College's liability for participation is limited to the payment of the required contribution at

the rates and frequencies established by law on future payrolls of the College. The College's

contribution rates and contributions for the fiscal year ended June 30, 2011 are as follows:

Class or Plan FY 2010/11

Percent of Gross Salary

Employee Florida Retirement System, Regular and Renewed Florida Retirement System, Regular and Renewed Investment Florida Retirement System, Senior Management Service (SMSC) Optional Retirement Program (PEORP) Optional Local Annuity Program Deferred Retirement Option Program - (DROP)

Notes: (A) Employer rates include 1.11 percent of the post-employment health insurance supplement. Also, employer rates, other than for DROP participants, include 0.03 percent for administrative costs of the Public Employee Optional Retirement Program.

(B) Contribution rates are dependent upon retirement class or plan in which reemployed.

0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

(B)

Employer (A) 10.77% 10.77% 14.57% 10.43% 12.34% 12.25%

(B)

For the years ended June 30, 2011, 2010 and 2009, total contributions were $282,127, $257,506, and $326,978, respectively.

Financial statements and other supplementary information of the FRS are included in the State's Comprehensive Annual Financial Report, which is available from the Florida Department of Financial Services. An annual report on the FRS, which includes its financial statements, required supplementary information, actuarial report, and other relevant information, is available from the Florida Department of Management Services, Division of Retirement.

20




NOTE H - OTHER POSTEMPLOYMENT BENEFITS OTHER THAN PENSION

The College follows Governmental Accounting Standards Board Statement (GAS B) No. 45,

Accounting and Financial Reporting by Employers for Postemployment Benefits Other than

Pensions, for certain other postemployment benefits administered by the College.

Plan Description. The Postemployment Benefits Plan (Plan) is a single-employer defined

benefit plan administered by the College. Pursuant to the provisions of Section 112.0801,

Florida Statutes, former employees who retire from the College are eligible to participate in the

College's health plan for medical, dental, vision, and life insurance coverage. The College subsidizes the premium rates paid by retirees by allowing them to participate in the Plan at

reduced or blended group (implicitly subsidized) premium rates for both active and retired

employees. These rates provide an implicit subsidy for retirees because, on an actuarial

basis, their current and future claims are expected to result in higher costs to the Plan on average than those of active employees. The College does not offer any explicit subsidies for

retiree coverage. Retirees are required to enroll in the Federal Medicare program for their

primary coverage as soon as they are eligible. The College does not issue a stand-alone

report and the Plan is not included in the annual report of a public employee retirement system or another entity.

Funding Policy. The Board of Trustees has established and can amend Plan benefits and

contribution rates. The College has not advance-funded or established a funding

methodology for the annual other postemployment benefit (OPEB) costs or the net OPEB obligation, and the Plan is financed on a pay as you go basis. For the 2010-11 fiscal year, 96

retirees received some form of other postemployment benefits. The College provided

required contributions of $234,582 toward the annual OPEB cost, comprised of benefit

payments made on behalf of retirees for claims expenses (net of reinsurance), administrative expenses, and reinsurance premiums. Retiree contributions totaled $336,573.

Annual OPEB Cost and Net OPEB Obligation. The College's annual OPEB cost (expense) is

calculated based on the annual required contribution (ARC), an amount actuarially determined

in accordance with the parameters of GASB Statement No. 45. The ARC represents a level

of funding that if paid on an ongoing basis, is projected to cover normal cost each year and

amortize any unfunded actuarial liabilities over a period not to exceed 30 years.

21




NOTE H - OTHER POSTEMPLOYMENT BENEFITS OTHER THAN PENSION (continued)

The following table shows the College's annual OPES cost for the year, the amount actually

contributed to the Plan, and changes in the College's net OPES obligation:

Description Normal Cost (Service Cost for One Year) Amortization of Unfunded Actuarial

Accrued Liability Interest on Normal Cost and Amortization

Annual Required Contribution Interest on Net OPEB Obligation Adjustment to Annual Required Contribution

Annual OPES Cost (Expense) Contribution Toward the OPEB Cost

Increase in Net OPES Obligation Net OPEB Obligation. Beginning of Year

Net OPES Obligation, End of Year

Amount College

$ 1,314,333 $

572,722

1,887,055

147,939

(169,308)

1,865,686

(379,692)

1,485,994

4,931,288

$ 6,417,282 $

ATC 63,733

27,771

91,504

7,174

(8,210)

90,468

(24,008)

66,460

244,717

311,177

Funded Status and Funding Progress. As of July 1, 2009, the most recent valuation date, the

actuarial accrued liability for benefits was $16,681,182, and the actuarial value of assets was

$0, resulting in an unfunded actuarial accrued liability of $16,681,182 and a funded ratio of

o percent. Using a ratio of the ATC's 53 active participating employees compared to the

College's 1093, the ATC's unfunded actuarial accrued liability is $808,877 with a $0 actuarial

value of assets and a funded ratio of 0% on a $2,991,983 covered annual payroll of active

participating employees.

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts

and assumptions about the probability of occurrence of events far into the future. Examples

include assumptions about future employment and termination, mortality, and healthcare cost

trends.

22




NOTE H - OTHER POSTEMPLOYMENT BENEFITS OTHER THAN PENSION (continued)

Amounts determined regarding the funded status of the plan and the annual required

contributions of the employer are subject to continual revision as actual results are compared

with past expectations and new estimates are made about the future. The Schedule of Funding Progress, presented as required supplementary information following the notes to

financial statements, presents multiyear trend information that shows whether the actuarial

value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.

Actuarial Methods and Assumptions. Projections of benefits for financial reporting purposes

are based on the substantive Plan provisions, as understood by the employer and

participating members, and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and participating

members. The actuarial methods and assumptions used include techniques that are

designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the

actuarial value of assets, consistent with the long-term perspective of the calculations.

The College's OPEB actuarial valuation as of July 1, 2009, used the projected unit credit

actuarial method to estimate the unfunded actuarial liability as of June 30, 2010, and the

College's 2009-10 fiscal year ARC. This method was selected because it produced the lowest OPEB liability and annual cost. Because the OPEB liability is currently unfunded, the actuarial

assumptions included a 3 percent rate of return on invested assets, which is the College's

expectation of investment returns under its investment policy. The actuarial assumptions also

included a payroll growth rate of 3 percent per year, and an annual healthcare cost trend rate

of 7.8 percent for the 2009-10 fiscal year, reduced by decrements to an ultimate rate of 4.5 percent after 17 years. The unfunded actuarial accrued liability is being amortized as a level

percentage of projected payroll, amortized over 30 years. The remaining amortization period

at June 30, 2011, was 26 years.

NOTE I - COMMITMENTS AND CONTINGENT LIABILITIES

General- In the normal course of conducting its operations, ATC occasionally becomes party to various legal actions and proceedings. As of June 30, 2011, there are no pending lawsuits.

Grants - Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies, principally the state government. Any disallowed claims, including amounts already collected, may constitute a liability for the applicable funds. As of June 30, 2011, management is not aware of any such disallowed claims.

23




NOTE J - RISK MANAGEMENT

The ATC is exposed to various risk of loss related to torts; thefts of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters.

The ATC is part of the Daytona State College's self-insured insurance program and the Florida Colleges Risk Management Consortium Program.

The Florida Colleges Risk Management Consortium (Consortium) was created under the authority of Section 1001.64(27), Florida Statutes, by the boards of trustees of the Florida public colleges for the purpose of joining a cooperative effort to develop, implement, and participate in a coordinated Statewide College risk management program. The Consortium is self-sustaining through member assessments (premiums) and is reinsured through commercial companies for claims in excess of specified amounts. Insurance coverage obtained through the Consortium includes fire and extended property, general and automobile liability, workers' compensation, and other liability coverage. There were no significant reductions of insurance coverage from prior years and actual settlements did not exceed insurance coverage for each of the past three years.

NOTE K - SUBSEQUENT EVENTS

Management has evaluated subsequent events through December 16, 2011, the date which the financial statements were available to be issued.

24

REQUIRED SUPPLEMENTARY INFORMATION

25


ESTIMATED SCHEDULE OF FUNDING PROGRESS FOR THE RETIREE HEALTH PLAN

J une30, 2011

Actuarial UAALas a Actuarial Accrued Unfunded Estimated Percentage

Year Actuarial Value of Liability AAL Funded Covered of Covered Ended Valuation Assets (AAL) (UAAL) Ratio Payroll Payroll

June 30, Date (1) (a) (b) (b-a) (alb) (c) [(b-a)/c)

2010 711/2009 $ $ 827,811 $ 827,811 0% $ 2,488,963 33.3% 2011 7/1/2009 $ 808,877 $ 808,877 0% $ 2,991,983 27.0%

Notes: (1) The initial OPEB actuarial calculation was perfonned as of July 1, 2007 for the College as it implemented the provisions of GASB 45, and then again July 1, 2009. The next actuarial evaluation available will be June 30, 2012.

(2) The College's OPEB actuarial valuation used the projected unit credit actuarial method to estimate the unfunded actuarial liabilities.

26

Keith Altizer and Company, P.A. Certified Public Accountants 431 East Horatio Avenue, Suite 300


407-539-1188

Fax 407-539-1116

www.ka-co.com

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 Directors Vol usia Flagler Advanced Technology Center, Inc. Daytona Beach, Florida

We have audited the financial statements of the business-type activities of Volusia Flagler Advanced Technology Center, Inc. (the "ATC") as of and for the year ended June 30, 2011, which collectively comprise the ATC's basic financial statements and have issued our report thereon dated December 16, 2011. 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.

Internal Control Over Financial Reporting

In planning and performing our audit, we considered the ATC's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the ATC's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the ATC'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 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.

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 over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify.any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the ATC'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.

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

Maitland, Florida December 16, 2011

AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS

27

MEMBERS FLORIDA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS

Keith Altizer and Company, P.A. Certified Public Accountants 431 East Horatio Avenue, Suite 300


407·539·1188

Fax 407·539·1116

www.ka-co.com

MANAGEMENT LETTER

To the Board of Directors Volusia Flagler Advanced Technology Center, Inc. Daytona Beach, Florida

We have audited the financial statements of Vol usia Flagler Advanced Technology Center, Inc. (the "ATC"), as of and for the fiscal year ended June 30, 20 II, and have issued our report thereon dated December 16,20 II.

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. We have issued our Independent Auditors' Report on Internal Control over Financial Reporting and Compliance and Other Matters. Disclosures in that report, which is dated December 16, 2011, should be considered in conjunction with this management letter.

Additionally, our audit was conducted in accordance with Chapter 10.850, Rules of the Auditor General, which governs the conduct of the charter school and similar entity audits performed in the State of Florida. This letter includes the following information, which is not included in the aforementioned auditors' reports.

•

•

•

•

•

Section 1 0.854(1)(e)l, 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. There were no recommendations in the preceding audit report.

Section 10.854(l)(e)2, Rules of the Auditor General, requires a statement be included as to whether or not the school has met one or more of the conditions described in Section 218.503(1), Florida Statutes, and identification of the specific condition(s) met. In connection with our audit, we determined that the ATC did not meet any of the conditions described in Section 218.503(1), Florida Statutes.

Section 10.854(1)(e)3, Rules of the Auditor General, requires that we address in the management letter any recommendations to improve financial management. In connection with our audit, we did not have any such recommendations.

Section IO.854(1)(e)4, Rules of the Auditor General, requires that we address violations of 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 more than inconsequential. In connection with our audit, we did not have any such findings.

Section IO.854(1)(e)5, Rules of the Auditor General, provides that the auditor may, based on professional judgment, report the following matters that have an inconsequential affect on the financial statements, considering both quantitative and qualitative factors: (1) violations of provisions of contracts or grant agreements, fraud, illegal acts, or abuse and (2) deficiencies in internal control that are not significant deficiencies. In connection with our audit, we did not have any such findings.

28


• Section 1O.854(1)(e)6, Rules of the Auditor General, requires the name or official title of the school. The official title of the School is Volusia Flagler Advanced Technology Center, Inc., which is a not-for-profit corporation organized pursuant to Chapter 617, Florida Statutes, the Florida Not-For-Profit Corporation Act, and Section 1002.33, Florida Statutes.

• Pursuant to Sections 1O.854(1)(e)7a., Rules of the Auditor General, we applied financial condition assessment procedures pursuant to Rule 10.855(10). It is management's responsibility to monitor the ATe'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 management.

Pursuant to Chapter 119, Florida Statutes, this management letter is a public record and its distribution is not limited. Auditing standards generally accepted in the United States of America require us to indicate that this letter is intended solely for the information and use of Volusia Flagler Advanced Technology Center, Inc.'s management and Board of Directors, others within the entity, and the State of Florida Auditor General and other regulatory agencies and is not intended to be and should not be used any anyone other than those specified parties.

~ M OJvd ~ fill December 16, 2011 Maitland, Florida

29

Keith Altizer and Company, PA. Certified Public Accountants

To the Board of Directors Daytona State College Daytona Beach, Florida

December 16, 2011

431 East Horatio Avenue, Suite 300


407-539-1188

Fax407-539-1116

www.ka-co.com

We have audited the financial statements of the business-type activities of Vol usia Flagler Advanced Technology Center, Inc. (the "ATC") for the year ended June 30, 2011. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards and Government Auditing Standards, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our letter to you dated October 4, 2011. Professional standards also require that we communicate to you the following information related to our audit.

Significant Audit Findings

Qualitative Aspects of Accounting Practices

Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the ATC are described in Note A to the fmancial statements_ No new accounting policies were adopted and the application of existing policies was not changed during 2011. We noted no transactions entered into by the governmental unit during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period.

Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected_ The most sensitive estimates affecting the ATC's financial statements were:

Management's estimates of the short-term portion of compensated absences and the OPEB liability are based on management's past experience and an actuarial valuation as of July 1, 2009. We evaluated the key factors and assumptions used to develop these estimates in determining that they are reasonable in relation to the financial statements taken as a whole.

Certain financial statement disclosures are particularly sensitive because of their significance to financial statement users. The most sensitive disclosures affecting the financial statements were:

The disclosure of Related Parties in Note D to the financial statements, the disclosure of Other Postemployment Benefits Other than Pension in Note H to the financial statements, the disclosure of Commitments and Contingent Liabilities in Note I to the financial statements, and the disclosure of Risk Management in Note J to the financial statements.

Difficulties Encountered in Performing the Audit

We encountered no significant difficulties in dealing with management in performing and completing our audit.


Board of Directors December 16, 2011 Page 2

Corrected and Uncorrected Misstatements

Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements. In addition, none of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to each opinion unit's financial statements taken as a whole.

Disagreements with Management

For purposes of this letter, professional standards define a disagreement with management as a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit.

Management Representations

We have requested certain representations from management that are included in the management representation letter dated December 16, 20 II.

Management Consultations with Other Independent Accountants

In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the goverrnnental unit's [mancial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants.

Other Audit Findings or Issues

We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the goverrnnental unit's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention.

Other Information in Documents Containing Audited Financial Statements

With respect to the supplementary information accompanying the financial statements, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves.

This information is intended solely for the use of Board of Directors and management of the ATC and is not intended to be and should not be used by anyone other than these specified parties.

Very truly yours,

Keith Altizer and Company, P.A.