RIGHT-OF-WAY ACQUISITION AND BRIDGE CONSTRUCTION BONDS 7/01/ TM UT WJ5 7/01/ TN UU WK2

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1 RIGHT-OF-WAY ACQUISITION AND BRIDGE CONSTRUCTION BONDS Maturity Date Series 2005A Refunding Dated 3/01/2005 Series 2005B Refunding Dated 6/15/2005 Series 2006A Refunding Dated 9/01/2006 7/01/ TM UT WJ5 7/01/ TN UU WK2 7/01/ TP UV WL0 7/01/ TQ UW WM8 7/01/ TR UX WN6 7/01/ TS UY WP1 7/01/ TT UZ WQ9 7/01/ TU VA5-7/01/ TV VB3-7/01/ TW VC1-7/01/ TX VD9-7/01/ TY VE7-7/01/ VF4 - Legshare/SEC/2014CDA/ROW_114.wpd

2 RIGHT-OF-WAY ACQUISITION AND BRIDGE CONSTRUCTION BONDS (CONT.) CUSIP Numbers Maturity Date Series 2008A Dated 2/01/2008 Series 2009A Dated /2009 Series 2009B Dated 11/24/2009 Series 2011A Refunding Dated 05/12/2011 7/01/ XJ YN ZU B41 7/01/ XK YP ZV B58 7/01/ XL YQ ZW B66 7/01/ XM YR ZX B74 7/01/ XN YS ZY B82 7/01/ XP YT ZZ B90 7/01/ XQ YU A C24 7/01/ XR YV A C32 7/01/ XS YW A42-7/01/ XT YX A59-7/01/ XU YY A67-7/01/ XV YZ A75-7/01/ XW ZA A83-7/01/ XX ZB A91-7/01/ ZC /01/ ZD /01/ /01/ /01/ /01/ ZH /01/ /01/ /01/ YG /01/ /01/ ZN3 - - Legshare/SEC/2014CDA/ROW_114.wpd

3 RIGHT-OF-WAY ACQUISITION AND BRIDGE CONSTRUCTION BONDS (CONT.) CUSIP Numbers Maturity Date Series 2011B New & Refunding Dated 02/02/2012 Series 2012A Refunding Dated 05/17/2012 Series 2012B Refunding Dated 05/17/2012 7/01/ F L P38 7/01/ F L P46 7/01/ F L P53 7/01/ F L P61 7/01/ F M P79 7/01/ F M P87 7/01/ F M P95 7/01/ G M Q29 7/01/ G M Q37 7/01/ G M Q45 7/01/ G M Q52 7/01/ G M Q60 7/01/ G N Q78 7/01/ G N Q86 7/01/ G N Q94 7/01/ H N R28 7/01/ H N R36 7/01/ H R44 7/01/ H N R51 7/01/ H R69 7/01/ H /01/ H /01/ H /01/ /01/ /01/ /01/ J Legshare/SEC/2014CDA/ROW_114.wpd

4 ANNUAL FINANCIAL INFORMATION AND OPERATING DATA SUBMITTED PURSUANT TO RULE 15c2-12 OF THE SECURITIES AND EXCHANGE COMMISSION FOR THE STATE OF FLORIDA FULL FAITH AND CREDIT DEPARTMENT OF TRANSPORTATION RIGHT-OF-WAY ACQUISITION AND BRIDGE CONSTRUCTION BONDS Series 2005A (Refunding) Series 2005B (Refunding) Series 2006A (Refunding) Series 2008A Series 2009A Series 2009B (Refunding) Series 2011A (Refunding) Series 2011B (New & Refunding) Series 2012A (Refunding) Series 2012B (Refunding) for Fiscal Year ending June 30, 2014 Legshare/SEC/2014CDA/ROW_114.wpd

5 TABLE OF CONTENTS I. Historical Motor Fuel and Diesel Fuel Tax Collections II. Debt Service Coverage Investment of Funds Attached Statement of Assets and Liabilities Attached History of Legislative Appropriations (Operating and Fixed Capital Outlay Budget by Program Area) Attached Schedule of Outstanding Bonds (Debt Outstanding by Type and Program and Total State Debt Outstanding) Attached Sources and Amounts of State Funds (Five Year History of Trust Fund and General Revenues) Attached Florida Comprehensive Annual Financial Report for Fiscal Year Ended June 30, Attached Page Legshare/SEC/2014CDA/ROW_114.wpd

6 I. Motor and Diesel Fuel Tax Collections. Historical Motor Fuel and Diesel Fuel Sales Tax Collections and Distributions Accrual Basis 1 Motor & Diesel Fuel Sales Tax Collections Deductions 2 Total Transferred to the STTF Percentage Change Fiscal Year $1,178,458,421 $74,190,746 $1,104,267, % $1,176,565,161 $68,992,198 $1,107,572, % $1,188,859,111 $65,860,564 $1,122,998, % $1,234,094,070 $64,898,234 $1,169,195, % $1,291,968,739 $72,395,050 $1,219,573, % Source: State of Florida Department of Revenue. 1 This table shows the motor fuel taxes collected pursuant to Section (1)(g), and the diesel fuel taxes collected pursuant to Section (1)(e), Florida Statutes, deposited into the Fuel Tax Collection Trust Fund and subsequently transferred to the State Transportation Trust Fund. These figures represent actual distributions after all adjusting entries have been made at the end of each fiscal year. 2 Deductions include administrative costs of up to 2% of collections, refunds and distributions to other state trust funds. II. Debt Service Coverage. Fiscal Year State of Florida Historical Debt Service Coverage Right-of-Way Acquisition and Bridge Construction Bonds Motor Fuel and Diesel Fuel Sales Tax Transferred to STTF 1 Actual Debt Service 2 Debt Service Coverage $1,104,267,676 $134,261, x $1,107,572,964 $142,306, x $1,122,998,547 $143,290, x $1,169,195,836 $142,607, x $1,219,573,690 $141,872, x 1 These amounts indicate the distribution made to the State Transportation Trust Fund, as provided by the State of Florida Department of Revenue. 2 Source: State Board of Administration of Florida Annual Reports for Fiscal Years 2010 through Includes $8,360, of accrued debt service on the previously refunded 1999A Bonds. 4 Includes $2,047, of accrued debt service on the previously refunded 2002 and 2002A Bonds. 5 Includes $5,892, of accrued debt service on the previously refunded 2002, 2002A, 2002C and 2003A Bonds. 6 Includes $4,076, of accrued debt service on the previously refunded 2004A Bonds. Legshare/SEC/2014CDA/ROW_114.wpd 1

7 Investment of Funds Investment by the Chief Financial Officer - Funds held in the State Treasury are invested by internal and external investment managers. As of June 30, 2014, the ratio was approximately 46% internally managed funds, 43% externally managed funds, 3% Certificates of Deposit and 8% in an externally managed Security Lending program. The total portfolio market value on June 30, 2014, was $23,533,107, Under State law, the Treasury is charged with investing funds of each State agency and the judicial branch. As of June 30, 2014, $ billion of the investments in the Treasury consisted of accounts held by State agencies that are required by law to maintain their investments in the Treasury; additionally, $5.856 billion as of this date consisted of moneys held by certain boards, associations, or entities created by the State Constitution or by State law that are not required to maintain their investments with the Treasury and are permitted to withdraw these funds from the Treasury. As provided by State law, the Treasury must be able to timely meet all disbursement needs of the State. Accordingly, the Treasury allocates its investments to provide for estimated disbursements plus a cushion for liquidity in instances of greater-than-expected disbursement demand. To this end, a portion of Treasury s investments are managed for short-term liquidity and preservation of principal. The remainder is managed to obtain maximum yield, given the safety parameters of State law and Treasury s Comprehensive Investment Policy. Investments managed for short-term liquidity and preservation of principal are managed "internally" by Treasury personnel. The majority of investments managed for a maximum return are managed by "external" investment managers not employed by the State. The Externally Managed Investment Program provides long-term value while limiting risk appropriately and provides a backup source of liquidity. External investment strategy focuses on medium-term and long-term fixed income securities, rather than money market instruments, in order to take advantage of higher returns historically achieved by such securities. Portfolio managers are hired to actively manage funds. These funds may be invested in U.S. Treasury government agency obligations, investment grade corporate debt, municipal debt, mortgage backed securities, asset backed securities, negotiable certificates of deposit, and U.S. dollar denominated investment-grade foreign bonds that are registered with the Securities and Exchange Commission. The managers may also use leveraging techniques such as forward purchase commitments, covered options, and interest rate futures. Investment by the Board of Administration - The Board of Administration manages investment of assets on behalf of the members of the Florida Retirement System (the FRS ) Defined Benefit Plan. It also acts as sinking fund trustee for most State bond issues and oversees the management of a short-term investment pool for local governments and smaller trust accounts on behalf of third party beneficiaries. The Board of Administration adopts specific investment policy guidelines for the management of its funds which reflect the long-term risk, yield, and diversification requirements necessary to meet its fiduciary obligations. As of June 30, 2014, the Board of Administration directed the investment/administration of 37 funds in 475 portfolios. As of June 30, 2014 the total market value of the FRS (Defined Benefit) Trust Fund was $149,097,956, The Board of Administration pursues an investment strategy which allocates assets to different investment types. The long-term objective is to meet liability needs as determined by actuarial assumptions. Asset allocation levels are determined by the liquidity and cash flow requirements of the FRS, absolute and relative valuations of the asset class investments, and opportunities within those asset classes. Funds are invested internally and externally under a Defined Benefit Plan Investment Policy Statement.

8 The Board of Administration uses a variety of derivative products as part of its overall investment strategy. These products are used to manage risk or to execute strategies more efficiently or more cost effectively than could be done in the cash markets. They are not used to speculate in the expectation of earning extremely high returns. Any of the products used must be within investment policy guidelines designed to control the overall risk of the portfolio. The Board of Administration invests assets in 36 designated funds other than the FRS (Defined Benefit) Trust Fund. As of June 30, 2014, the total market value of these funds equaled $31,876,401, Each fund is independently managed by the Board of Administration in accordance with the applicable documents, legal requirements and investment plan. Liquidity and preservation of capital are preeminent investment objectives for most of these funds, so investments for these are restricted to high quality money market instruments (e.g., cash, short-term treasury securities, certificates of deposit, banker s acceptances, and commercial paper). The term of these investments is generally short, but may vary depending upon the requirements of each trust and its investment plan. Investment of bond sinking funds is controlled by the resolution authorizing issuance of a particular series of bonds. The Board of Administration s investment policy with respect to sinking funds is that only U.S. Treasury securities, and repurchase agreements backed thereby, be used.

9 STATEMENT OF ASSETS AND LIABILITIES Administered by State Chief Financial Officer ASSETS JUNE 30, 2014 JUNE 30, 2013 Currency and Coins $0.00 $0.00 Unemployment Compensation Investments Due From U.S Treasury -Unemployment TF (1) 1,658,309, ,942, Deferred Compensation Assets (2) 3,389,158, ,004,208, Bank Accounts (3) (58,768,562.76) (42,432,168.88) Consolidated Revolving Account (4) 252, , Total Cash, Receivables, and Other Assets $4,988,951, $3,630,127, Certificates of Deposit $549,500, $800,900, Securities (5) 20,912,648, ,563,334, Total Investments 21,462,148, ,364,234, Total Assets of the Division of Treasury $26,451,100, $23,994,362, LIABILITIES JUNE 30, 2014 JUNE 30, 2013 General Revenue Fund $3,616,661, $4,014,706, Trust Fund (6) 12,639,677, ,341,187, Budget Stabilization Fund 924,727, ,791, Total Three Funds $17,181,066, $15,064,685, Interest Payable & Securities Liability Due to Special Purpose Investment Accounts Due to Deferred Compensation Participants and/or Program (7) (8) (2) $9,853, $3,671, ,870,770, ,921,388, ,389,158, ,004,208, Due to Consolidated Revolving Account Agency Participants (4) 252, , Total Liabilities of the Division of Treasury $26,451,100, $23,994,362, Source: Annual Report of the State Chief Financial Officer for the Fiscal Year Ended June 30, Unemployment Trust Fund represents U.C. Benefit Funds invested by the Federal Government and due from U.S. Treasury. Plan assets held in the Deferred Compensation Trust Fund for the exclusive benefit of participants and their beneficiaries. Represents the "Per Reconciled Cash Balance" of $43,294, as of June 30, 2014 with receipted items in transit of $64,931, and disbursed items in transit of ($674,452.90) which nets to $64,257, These items have cleared the bank but have not been posted to the State ledger. The Total Bank Accounts figure does not include $12,569, held in clearing and\or revolving accounts outside the Treasury. The amount due to agency participants in the Consolidated Revolving Account as of June 30, 2014 is $7,827, Of this, $252, is in a financial institution account and $7,575, is invested in Special Purpose Investment Accounts. Represents Chief Financial Officer s Special Purpose Investment Accounts held in the Treasury Investment Pool and interest due to those accounts. The Chief Financial Officer s Special Purpose Investment Accounts are investments on behalf of state agencies with funds outside the Chief Financial Officer s Cash Concentration System and other statutorily created entities. Includes Purchased Interest in the amount of $360, Included in the Trust Fund Balance is $7,282,563, earning interest for the benefit of Trust Funds, Unemployment Trust Fund balance of $1,658,309,665.50, and the remaining balance of $3,698,804, earning interest for General Revenue. Represents $4,858, interest not yet receipted to State Accounts and Securities Liability Cost of $4,994, which settles July Note: June 30, 2014 June 30, 2013 Total Market Value of all Securities held by the Treasury. $21,624,201, $20,300,045,260.88

10 Source: Annual Conference Committee Report on General Appropriations Bills as passed by the Legislature, before veto messages; does not reflect appropriations made in other legislation or budget amendments.

11 Source: State of Florida, 2014 Debt Affordability Report. Per Capita Tax Supported Debt For Fiscal Years Ended June 30 Year Population 1 (thousands) Total Principal Outstanding 2 (millions) Per Capita ,588 $15, ,969 16, ,401 16, ,816 17, ,240 17, ,602 18, ,783 20, , ,767 22, , ,761 23, , ,880 22, , ,020 21, , ,214 20, ,059 1 Population estimate by the Office of Economic and Demographic Research, Florida Legislature (August, 2013). 2 State of Florida 2013 Debt Affordability Report; excludes refunded debt.

12 1 Public/Private Partnership obligations of the Department of Transportation are included in net tax-supported debt. The Department of Transportation has assumed the full annual payment obligation; however, certain payments are expected from non-tax sources. For the purpose of showing net-tax supported payments, the payments from other sources have not been considered. Source: State of Florida 2014 Debt Affordability Report.

13 Five Year History of Trust Fund and General Revenues 1 (millions of dollars) General Revenue Receipts Sales and Use Tax 3 $16,014.7 $16,638.3 $17,422.0 $18,417.6 $19,707.7 Beverage Licenses and Taxes Corporation Income Tax 1, , , , ,042.5 Documentary Stamp Tax Corporate Filing Fees Tobacco Tax Insurance Premium Tax Indian Gaming Pari-mutuel Fees, Licenses and Taxes Slot Machine Licenses GR Intangible Personal Property Tax Interest Earnings Auto Title and Lien Fees Oil and Gas Severance Tax Solid Mineral Severance Tax Drivers Licenses and Fees Motor Vehicle and Mobile Home Licenses Article V Fees & Transfers Medical and Hospital Fees Motor Vehicle Fees and Charges Fines/Foreitures/Judgements GR Other GR Total GR Collections and Transfers 21, , , , ,110.6 Plus Service Charges to GR Less Refunds of GR (537.8) (326.1) (306.2) (290.3) (379.5) Net GR Collections and Transfers 21, , , , ,198.0 Trust Fund Revenues 2 Major Transportation Revenues: Auto Title and Lien Fees Motor Fuel Tax 1, , , , ,955.3 Motor Vehicle and Mobile Home Licenses Motor Vehicle Fees and Charges Subtotal 2, , , , ,393.1 Workers Insurance Tax: Workers' Compensation Tax Workers' Comp. Special Disability Unemployment Compensation Tax 1, , , , ,937.4 Subtotal 1, , , , ,066.4 Conservation and Recreational Lands: Documentary Stamp Tax , , ,147.3 Solid Mineral Severance Tax Oil and Gas Severance Tax Sales and Use Tax Subtotal , , ,188.3 Education - Tuition, Fees and Charges: Slot Machine Tax to Education Lottery to Education 1, , , , ,475.0 Unclaimed Property (State School Trust Fund) Subtotal 1, , , , ,790.4 Agencies Administrative Trust Funds: Beverage Licenses and Taxes Insurance Premium Tax General Inspection Fees and Licenses Citrus Inspection Fees and Licenses D.F.S. and Treas Fees, Licenses & Taxes Citrus Taxes Hunting and Fishing Licenses Pari-mutuel Fees, Licenses and Taxes Professional Fees and Licenses Drivers' Licenses and Fees HSMV, Misc Fees, Licenses & Fines Slot Machine Licenses and Fees Lottery to Administration Unclaimed Property to Administration Subtotal , , ,072.2

14 (Five Year History of Trust Fund and General Revenues - continued) Other Trust Fund Revenues for State Use: Tobacco Tax 1, , , , Lottery Prizes 2, , , , ,482.9 Unclaimed Property Refund to Owners Tobacco Fines/Forfeitures/Judgements Trust Other Fines/Forfeitures/Judgements Trust Article V Fees Interest Earnings Miscellaneous Revenues Other Trust 3, , , , ,564.0 Subtotal 8, , , , ,348.1 Total Trust Fund Revenue for State Use 15, , , , ,858.6 Revenues Shared With Local Governments and School Districts Sales and Use Tax 1, , , , ,396.3 Beverage Licenses and Taxes Documentary Stamp Tax Insurance Premium Tax Article V Fees Indian Gaming Motor Fuel Tax Oil and Gas Severance Tax Solid Mineral Severance Tax Gross Receipts Tax 3 1, , , , ,005.4 Mtr Vehicle and Mobile Home Licenses Tobacco Taxes Other Fees, Licenses and Taxes Total Local Government 3, , , , ,271.4 Federal and Local Assistance Counties and Cities U.S. Government 28, , , , ,256.2 Other Grants Total Federal and Local Assistance 28, , , , ,431.8 Summary of Trust Fund and General Revenue General Revenue $21,523.1 $22,551.6 $23,618.8 $25,314.6 $26,198.0 Trust Fund 15, , , , ,858.6 Revenues Shared with Local Governments 3, , , , ,271.4 Donations & Fed Assistance 28, , , , ,431.8 Total Direct Revenues $69,695.6 $72,341.6 $68,164.8 $70,642.1 $72,759.8 Source: Florida Office of Economic and Demographic Research, January Numbers may not add due to rounding. 2 The Trust Fund portion of each tax source may include an obligatory General Revenue service charge, thereby reducing the dollars available for appropriations out of the trust fund. 3 Includes portion of Communications Services Tax. 4 Includes an unknown amount of General Revenue appropriations. 5 Shown before transfers of General Revenue service charges and refunds. (Remainder of page intentionally left blank)

15 FLORIDA COMPREHENSIVE ANNUAL FINANCIAL REPORT F I SC A L Y E A R E N D E D J U N E 3 0, 2014 JEFF ATWATER CHIEF FINANCIAL OFFICER FLORIDA DEPARTMENT OF FINANCIAL SERVICES

16 ACKNOWLEDGEMENTS The Florida Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2014 was prepared by: DIVISION OF ACCOUNTING AND AUDITING Christina B. Smith, Director Rachael K. G. Lieblick, Assistant Director Rick Sweet, Assistant Director BUREAU OF FINANCIAL REPORTING Timothy W. Hsieh, CPA, Chief STATEWIDE FINANCIAL REPORTING SECTION Regina L. Ballard, CPA, Financial Administrator Pamela J. Barksdale Frank H. Bierling Brian J. Dampman Nicole D. Davis Blake D. Goodwin, CPA David E. James SPECIAL APPRECIATION Special appreciation is given to all fiscal and accounting personnel throughout the State of Florida who contributed financial information for their agencies and component units. The report cover was designed by the Publications Unit, Division of Administration, Department of Financial Services.

17 STATE OF FLORIDA COMPREHENSIVE ANNUAL FINANCIAL REPORT Fiscal Year Ended June 30, 2014 Rick Scott GOVERNOR Jeff Atwater CHIEF FINANCIAL OFFICER FLORIDA DEPARTMENT OF FINANCIAL SERVICES This document and related information is available via the Florida Department of Financial Services homepage at:

18 COMPREHENSIVE ANNUAL FINANCIAL REPORT FISCAL YEAR ENDED JUNE 30, 2014 TABLE OF CONTENTS INTRODUCTORY SECTION Letter of Transmittal... 6 Organizational Chart and Principal Officials... 8 FINANCIAL SECTION INDEPENDENT AUDITOR S REPORT MANAGEMENT S DISCUSSION AND ANALYSIS BASIC FINANCIAL STATEMENTS PAGE Government-wide Financial Statements Statement of Net Position Statement of Activities Governmental Fund Financial Statements Fund Descriptions Balance Sheet Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position Statement of Revenues, Expenditures, and Changes in Fund Balances Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities Proprietary Fund Financial Statements Fund Descriptions Statement of Net Position Statement of Revenues, Expenses, and Changes in Fund Net Position Statement of Cash Flows Fiduciary Fund Financial Statements Fund Descriptions Statement of Fiduciary Net Position Statement of Changes in Fiduciary Net Position Component Unit Financial Statements Component Unit Descriptions Statement of Net Position Statement of Activities Notes to the Financial Statements Table of Contents Note 1 - Summary of Significant Accounting Policies Note 2 - Deposits and Investments Note 3 - Receivables and Payables Note 4 - Taxes Note 5 - Capital Assets Note 6 - Pensions and Other Postemployment Benefits Note 7 - Commitments and Operating Leases Note 8 - Bonds Payable and Certificates of Participation Note 9 - Installment Purchases, Capital Leases, and Public-Private Partnership Note 10 - Changes in Long-term Liabilities Note 11 - Interfund Balances and Transfers

19 Note 12 - Risk Management Note 13 - Florida Prepaid College Program Note 14 Insurance Enterprises Note 15 - Contingencies Note 16 - Litigation Note 17 - Deficit Fund Equity Note 18 - Subsequent Events OTHER REQUIRED SUPPLEMENTARY INFORMATION Budgetary Comparison Schedules - General and Major Special Revenue Funds Budget to GAAP Reconciliation Budgetary Reporting Schedule of Funding Progress - Florida Retirement System Pension Schedules of Funding Progress - Retiree Health Insurance Subsidy Program Pension and Other Postemployment Benefits Information About Infrastructure Assets Reported Using the Modified Approach COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES - NONMAJOR FUNDS Governmental Funds Fund Descriptions Combining Balance Sheet Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Special Revenue Funds Fund Descriptions Combining Balance Sheet Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Budgetary Comparison Schedules Capital Projects Funds Fund Descriptions Combining Balance Sheet Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Proprietary Funds Enterprise Funds Fund Descriptions Combining Statement of Net Position Combining Statement of Revenues, Expenses, and Changes in Fund Net Position Combining Statement of Cash Flows Internal Service Funds Fund Descriptions Combining Statement of Net Position Combining Statement of Revenues, Expenses, and Changes in Fund Net Position Combining Statement of Cash Flows Fiduciary Funds Private-purpose Trust Funds Fund Descriptions Combining Statement of Fiduciary Net Position Combining Statement of Changes in Fiduciary Net Position Pension and Other Employee Benefits Trust Funds Fund Descriptions

20 Combining Statement of Fiduciary Net Position Combining Statement of Changes in Fiduciary Net Position Investment Trust Funds Fund Descriptions Combining Statement of Fiduciary Net Position Combining Statement of Changes in Fiduciary Net Position Agency Funds Fund Descriptions Combining Statement of Fiduciary Net Position Combining Statement of Changes in Assets and Liabilities Component Units Component Unit Descriptions Combining Statement of Net Position Combining Statement of Activities STATISTICAL SECTION Table of Contents Schedule A-1 Net Position by Component Schedule A-2 Changes in Net Position Schedule A-3 Fund Balances - Governmental Funds Schedule A-4 Changes in Fund Balances - Governmental Funds Schedule B-1 Revenue Base/Rate Schedule B-2 Principal Sales Tax Payers by Industry Schedule C-1 Ratios of Outstanding Debt by Type Schedule C-2 Ratios of Net General Bonded Debt Outstanding Schedule C-3 Legal Debt Margin Schedule C-4 Pledged-Revenue Coverage Schedule D-1 Demographic and Economic Statistics Schedule D-2 Industry Sector Employment Schedule E-1 Full-Time Equivalent State Employees by Function Schedule E-2 Operating Indicators by Function Schedule E-3 Capital Assets by Function

21 INTRODUCTORY SECTION

22 February 27, 2015 Citizens of the State of Florida The Honorable Rick Scott, Governor The Honorable Andy Gardiner, President of the Senate The Honorable Steve Crisafulli, Speaker of the House of Representatives To the Citizens of Florida, Governor Scott, President Gardiner, and Speaker Crisafulli: I am pleased to submit the State of Florida s Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2014, in accordance with Section (3), Florida Statutes (F.S.). This report is prepared in accordance with generally accepted accounting principles as prescribed by the Governmental Accounting Standards Board. Management assumes full responsibility for the completeness and reliability of the information contained in this report based upon a comprehensive framework of internal control. The objective of internal control is to provide reasonable, rather than absolute, assurance that the financial statements are free of material misstatements. The concept of reasonable assurance ensures that the costs do not exceed the benefits derived. The Auditor General has issued an opinion on the state s financial statements for the fiscal year ended June 30, The independent auditor s report is located at the front of the financial section of this report. Management s Discussion and Analysis (MD&A) immediately follows the independent auditor s report and provides a narrative introduction, overview, and analysis of the basic financial statements. The MD&A complements this letter of transmittal and should be read in conjunction with it. PROFILE OF THE STATE Florida s Constitution divides the governmental structure of the state into three independent branches. The Legislative Branch has exclusive lawmaking power for the state. The Executive Branch, consisting of the Governor, Cabinet, and their agencies, administers the laws made by the Legislature. The Governor shares executive power and responsibility with the Cabinet, which is composed of the Attorney General, Chief Financial Officer, and Commissioner of Agriculture. The Judicial Branch interprets the law and applies the Constitution. The organizational chart following this letter provides an overview of the state s structure. Florida s government provides a range of services to its citizens including education, health and family services, transportation, law and corrections, natural resources and environmental protection. The financial reporting entity of the state includes the primary government as well as component units for which the state is either financially accountable or a relationship exists with the state such that exclusion would cause the financial statements to be misleading. Refer to Note 1 to the financial statements for a listing of Florida s component units and the Financial Section of the report to obtain an overview of their financial positions. Florida s budget is prepared using the processes set forth in Chapter 216, F.S. The major phases of the budget process are detailed in the Other Required Supplementary Information Section of this report. Florida law strictly prohibits overspending and requires budgetary control to be maintained at the individual appropriation account level. ECONOMIC CONDITION Florida marked the conclusion of its fifth year of positive growth in general fund collections in June This milestone followed three consecutive years of declines during the Great Recession and indicated that the state was beginning its return to more normal conditions. The state s Economic Estimating Conference confirmed in early December that Florida s economy is continuing to improve as expected with a decided boost from lower fuel prices. Barring any spillover effects from the weakening global economy, the Conference expects that the growth in Florida will continue allowing more normal economic and fiscal patterns to emerge sometime during the fiscal year. Meanwhile, Florida s population growth and other key indicators generally continue to improve. Florida s real Gross Domestic Product in 2013 showed that the state s economic growth remained in positive territory, matching the state s revised 2012 rate with a real growth gain of 2.2 percent. This rate of growth moved Florida above the national average (1.8 percent) for the first time since 2006 and enabled a state ranking of 18th in the nation. On the more real-time measure of personal income, the calendar year results were similar: Florida ended 2013 with 2.9 percent growth over 2012, putting the state above the national growth rate of 2.6 percent. However, the latest data may provide a DEPARTMENT OF FINANCIAL SERVICES THE CAPITOL, TALLAHASSEE, FLORIDA (850) FAX (850)

23 Page Two February 27, 2015 note of caution to the most recently adopted forecast. Florida finished the third quarter of the 2014 calendar year with just 0.9% growth over the preceding quarter, falling slightly below the national growth rate of 1.0% and ranking 21 st among all states. The forecast for assumes Florida s personal income will reach $870.6 billion, with 4.9 percent growth over the prior year. Underpinning the projected growth in personal income is continued population growth; these projections were slightly strengthened in November. In addition, new vehicle registrations and tourist visits continue to contribute strongly to Florida s economic recovery. In response to all of this, the state s revenue collections are expected to grow over the prior year. The level of employment in Florida continues to improve from the low levels of the Great Recession. For the third quarter of the 2014 calendar year, total non-farm employment stood at 7.81 million jobs. The forecast indicates that non-farm employment will add approximately thousand jobs during the course of the fiscal year, representing a 2.4 percent increase over the prior fiscal year. According to the preliminary data for November 2014 relative to November 2013, the fiscal year estimate will likely be exceeded. Similar to the job creation numbers, Florida s unemployment rate has also shown improvement over the last year and equaled the national rate of 5.8 percent in November. Most importantly, there are significant indications that the improvements will be sustainable. As expected by the Florida Legislature s Office of Economic and Demographic Research (EDR), Florida s labor force participation rate has been increasing (over the month) since December 2013 and reached 60.8 percent in May Among all unemployed, the share of those reentering the labor force increased from 24.8 percent in November 2013 to 27.4 percent in November The share of new entrants (largely, Florida s younger population) of all unemployed increased as well to 11.7 percent in November 2014 from 9.2 percent in November New entrants begin their job search by passing through a period of unemployment. Typical economic recoveries are led by increases in lending and housing construction. Since the housing and credit markets are still sluggish compared to the years leading up to the Housing Boom, Florida s employment recovery has largely been coming from sectors other than the construction-related areas. While it is building from very low levels, the construction sector is performing better than expected. Building permit activity, an indicator of new construction, is back in positive territory, showing strong (33.4 percent) growth for the second year in The first ten months of the 2014 calendar year indicate some slowing; year-to-date activity through October is running below last year for the same period. However, the new forecast calls for continuing improvement in starts, reaching annual rates of 81.7 thousand units in state fiscal year and 99.3 thousand units in state fiscal year To put these numbers in perspective, the peak year for starts was at nearly 272 thousand units. EDR feels the long-lasting housing market correction, discounted home prices, bubble of foreclosures still working through the courts, and rising interest rates will remain the predominant drags on Florida s economy in the near-term. While the outlook for foreclosures has improved (the incoming pipeline has narrowed over the past year), meaningful improvement in the housing market will lag behind the rest of Florida s economic recovery. Even so, the recovery in Florida is well underway. The subsequent turnaround in Florida housing is being led by: low home prices that are attracting new buyers and clearing the inventory; the release of pent-up demand caused by past population growth and stalled household formation; and, Florida s unique demographics and the aging of the baby-boom generation which will fuel future population growth. As updated by EDR for recent conferences, the constitutionally required Long-Range Financial Outlook indicates that a budget gap is unlikely in the upcoming budget year, meaning that projected revenues are sufficient to address anticipated expenditures. The Long-Range Financial Outlook also identifies potential obligations of the Florida Hurricane Catastrophe Fund and Citizens Property Insurance Corporation as significant risks to the forecast. Refer to Note 14 to the financial statements for additional information related to the state s insurance enterprises. ACKNOWLEDGEMENTS Preparation of the CAFR requires a significant investment of time and resources of fiscal and accounting personnel throughout the state. We appreciate all the contributions made to this effort. Sincerely, Jeff Atwater Chief Financial Officer JA:pjb

24 ORGANIZATION AT JUNE 30, 2014 THE ELECTORATE OF FLORIDA 2014 STATE OF FLORIDA CAFR Legislative Branch Executive Branch Judicial Branch Senate Supreme Court House of Representatives District Courts of Appeal - 5 Districts Circuit Courts - 20 Circuits Public Service Commission County Courts - 67 Counties Auditor General Office of Public Counsel Office of Program Policy Analysis and Justice Administrative Commission Government Accountability Capital Collateral Regional Counsel Legislative Support Services: Criminal Conflict and Civil Regional Counsel Office of Legislative Services Guardian ad Litem Program Office of Legislative Information State Attorneys (elected officials) Technology Services Public Defenders (elected officials) Office of Economic and Demographic Research Judicial Qualifications Commission Commission on Ethics Governor Cabinet Agencies and Commissions of Lieutenant Governor Attorney General the Governor and Cabinet Executive Office of the Governor Department of Legal Affairs Department of Highway Safety and Agencies and Commissions of the Governor Chief Financial Officer Motor Vehicles Agency for Health Care Administration Department of Financial Services Department of Law Enforcement Agency for Persons with Disabilities Commissioner of Agriculture Department of Revenue Department of Business and Department of Agriculture and Department of Veterans' Affairs Professional Regulation Consumer Services Financial Services Commission Department of Children and Families Office of Insurance Regulation Department of Citrus Office of Financial Regulation Department of Corrections Florida Commission on Offender Review (1) Department of Economic Opportunity Department of Elder Affairs Department of Environmental Protection Department of Health Department of Juvenile Justice Other Agencies, Boards, and Commissions Board of Governors of the State University System Department of the Lottery State Board of Education - Department of Education Department of Management Services Fish and Wildlife Conservation Commission Department of Military Affairs State Board of Administration Department of State Department of Transportation Division of Administrative Hearings PRINCIPAL OFFICIALS AT JUNE 30, 2014 Legislative Branch Senate Executive Branch Rick Scott, Governor Judicial Branch Jorge Labarga, Chief Justice Don Gaetz, President Carlos Lopez-Cantera, Lieutenant Governor House of Representatives Cabinet Will Weatherford, Speaker Pam Bondi, Attorney General Jeff Atwater, Chief Financial Officer Adam Putnam, Commissioner of Agriculture (1) Chapter , Laws of Florida, renamed the Parole Commission to the Florida Commission on Offender Review effective June 20,

25 FINANCIAL SECTION

26 DAVID W. MARTIN, CPA AUDITOR GENERAL AUDITOR GENERAL STATE OF FLORIDA G74 Claude Pepper Building 111 West Madison Street Tallahassee, Florida PHONE: FAX: The President of the Senate, the Speaker of the House of Representatives, and the Legislative Auditing Committee Report on the Financial Statements INDEPENDENT AUDITOR S REPORT We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the State of Florida, as of and for the fiscal year ended June 30, 2014, and the related notes to the financial statements which collectively comprise the State s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of: The Prepaid College Program Fund, which is a major enterprise fund and represents 35 percent and 8 percent, respectively, of the assets and revenues of the business-type activities. The Florida Turnpike System, which represents 89 percent and 91 percent, respectively, of the assets and revenues of the Transportation major enterprise fund. The Hurricane Catastrophe Fund, which is a major enterprise fund and represents 31 percent and 11 percent, respectively, of the assets and revenues of the business-type activities. The College Savings Plan and the trust fund maintained by the State Board of Administration to account for the investments of the Public Employee Optional Retirement Program, which collectively represent 5 percent of the assets and 7 percent of the revenues/additions of the aggregate remaining fund information. The Florida Retirement System Trust Fund maintained by the State Board of Administration to account for the assets and investment income of the Florida Retirement System which represent 93 percent and 77 percent, respectively, of the assets and additions of the Pension and Other Employee Benefits Trust Funds.

27 The Florida Finance Housing Corporation, Citizens Property Insurance Corporation, component units related to the State s universities and community colleges, and certain other funds and entities that, in the aggregate, represent 68 percent and 41 percent, respectively, of the assets and revenues of the discretely presented component units. Financial statements for the above-listed funds and entities were audited by other auditors whose reports thereon have been furnished to us, and our opinions, insofar as they relate to the amounts included for these funds and entities, are based solely on the reports of the other auditors. 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 involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, based on our audit and the reports of the other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the State of Florida, as of June 30, 2014, and the respective changes in financial position and, where applicable, cash flows thereof for the fiscal year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Note 1. I. to the basic financial statements, the plan administrator for the defined benefit pension plans reported by the State as part of the Pension and Other Employee Benefits Trust Funds implemented a new accounting standard, Governmental Accounting Standards Board (GASB) Statement No. 67, Financial Reporting for Pension Plans, an amendment of GASB Statement No. 25, for the fiscal year. This matter had no effect on our opinion. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the accompanying management s discussion and analysis, on pages 14 through 20, and the budgetary information, the funding and contribution information for pension and other postemployment benefits, and information on infrastructure using the modified approach, on pages 148 through 159, be presented to supplement the basic financial statements. Such information, although not a required 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

28 financial statements in an appropriate operational, economic, or historical context. We and other auditors 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. Supplementary Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the State s basic financial statements. The Introductory Section, on pages 6 through 8, and the combining and individual fund statements and related budgetary comparison schedules and the Statistical Section, on pages 163 through 275, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund statements and related budgetary comparison schedules are the responsibility of management and were derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The combining and individual fund statements and related budgetary comparison schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America by us and the other auditors. In our opinion, based on our audit, the procedures performed as described above, and the reports of other auditors, the combining and individual fund statements and related budgetary comparison schedules are fairly stated in all material respects, in relation to the basic financial statements taken as a whole. The Introductory Section and the Statistical Section have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated February 27, 2015, on our consideration of the State s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, administrative rules, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the State s internal control over financial reporting and compliance. That report will be included as part of our separately issued report entitled State of Florida Compliance and Internal Controls Over Financial Reporting and Federal Awards. Respectfully submitted, David W. Martin, CPA Tallahassee, Florida February 27, 2015