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2018
R CUTCHOGUE FIRE DISTRICT 260 New Suffolk Road, Cutchogue, NY 11935 Telephone (631) 734-6907 - Fax (631) 734-7079 Over 90 E-mail: cutfd@optonline.net Years of www.cutchoguefiredept.org Service RECEIVED June 21, 2019 JUN 1 2019 BY HAND Southold Town Clerk • Elizabeth A. Neville, Town Clerk • Town of Southold 53095 Route 25 Southold, New York 11971 Dear Ms. Neville: Enclosed for your file is a copy of the Annual Financial Report Update Document for the Cutchogue Fire District for the fiscal year ended December 31,2018. Very ly your , Peter J. Zwerlem Treasurer PJZ:p • enc. • 2018 and trsmtl towri cierk.docx i Cutchogue Fire District ANNUAL FINANCIAL REPORT December 31,2018 i I JUN 17 2099 CUTCHOGUE FIRE DISTRICT &COMPANY TABLE OF CONTENTS PAGE INDEPENDENT AUDITOR'S REPORT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A ANNUAL FINANCIAL REPORT UPDATE DOCUMENT FINANCIAL SECTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I SUPPLEMENTAL SECTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT . . . . . . . . 29 INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF ANNUAL FINANCIAL REPORT UPDATE DOCUMENT PERFORMED IN ACCORDANCE WITH GOVERNMENT A UDITING STANDARDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 COMPANY 165 Orinoco Drive,Brightwaters. NY 11718 LI M 631 665 7040 - Fax 631 665 7014 LM COMPANY South Bayles Avenue,Port Washington, NY 11050 51 516 883 5510 •Fax 516 767 7438 A PROFESSIONAL CORPORATION OF CERTIFIED PUBLIC ACCOUNTANTS www sheehancpa coin i INDEPENDENT AUDITOR'S REPORT ' To the Board of Fire Commissioners r Cutchogue Fire District Cutchogue,New York Report on the Annual Financial Report Update Document (Financial Section) We have audited the accompanying Annual Financial Report Update Document (Financial Section) of Cutchogue Fire District, as of and for the year ended December 31, 2018 and the '- related notes to the Annual Financial Report Update Document, as listed in the table of contents. Management's Responsibility for the Annual Financial Report Update Document Management is responsible for the preparation and fair presentation of the Annual Financial Report Update Document in accordance with accounting practices prescribed or permitted by the New York State Office of the State Comptroller (regulatory basis), as described in Note 1. Management is also responsible for the design, implementation and maintenance of internal control relevant to-the preparation and fair presentation of the Annual Financial Report Update Document that is free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on the Annual Financial Report Update Document based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Annual Financial Report Update Document is free from material e misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Annual Financial Report Update Document. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the Annual Financial Report Update Document, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Cutchogue Fire District's preparation and fair presentation of the Annual Financial Report Update Document 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 Cutchogue Fire District'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 Annual Financial Report Update Document. -A- An Independent Member of the BDO Alliance USA r To the Board of Fire Commissioners Cutchogue Fire District We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles As described more fully in Note 1, the Annual Financial Report Update Document is prepared by Cutchogue Fire District on the basis of the financial reporting provisions of the New York State Office of the State Comptroller, which is a basis of accounting other than accounting principles generally accepted in the United States of America, to meet the requirements of the New York State Office of the State Comptroller. The effects on the Annual Financial Report Update Document of the variances between the regulatory basis of accounting described in Note 1 and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material. Adverse Opinion on U.S. Generally Accepted Accounting Principles In our opinion, because of the significance of the matter discussed in the 'Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles" paragraph, the Annual Financial Report Update Document referred to above does not present fairly, in accordance with accounting principles generally accepted in the United States of America, the financial position of the Cutchogue Fire District, as of December 31, 2018, or changes in financial position for the year then ended. Unmodified Opinion on Regulatory Basis of Accounting In our opinion, the Annual Financial Report Update Document (Financial Section) referred to above presents fairly, in all material respects, the assets, liabilities and fund balances of Cutchogue Fire District, as of December 31, 2018 and the revenues it received and expenditures it paid for the year then ended in accordance with the basis of accounting described in Note 1. Other Matters jOur audit was conducted for the purpose of forming an opinion on the Annual Financial Report Update Document (Financial Section) taken as a whole. The Supplemental Section listed on page 2 of the Annual Financial Report Update Document is presented for purposes of additional analysis and is not a required part of the Annual Financial Report Update Document. - The information, except for the Fire District Questionnaire, has not been subjected to the jauditing procedures applied in the audit of the Annual Financial Report Update Document and, accordingly,we express no opinion on it. &COMPANY To the Board of Fire Commissioners Cutchogue Fire District Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated June 5, 2019, on our consideration of Cutchogue Fire District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opinion on the effectiveness of 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 Cutchogue Fire District's internal control over financial reporting and compliance. CPA yam.C . Brightwaters,New York June 5, 2019 - t &COMPANY All Numbers in This Report Have Been Rounded To The Nearest Dollar ANNUAL FINANCIAL REPORT UPDATE DOCUMENT For The FIRE DISTRICT of Cutchogue County of Suffolk For the Fiscal Year Ended 12/31/2018 i AUTHORIZATION i ARTICLE 3, SECTION 30 of the GENERAL MUNICPAL LAW. 1. ***Every Municipal Corporation ***shall annually make a report of its financial condition to the Comptroller. Such report shall be made by the Chief Fiscal Officer of such Municipal Corporation *** 5. All reports shall be certified by the officer making the same and shall be filed with the Comptroller*** It shall be the duty of the incumbent officer at the time such reports are required to be filed with the Comptroller to file such report*** State of NEW YORK Office of The State Comptroller Division of Local Government and School Accountability Albany, New York 12236 Page 1 FIRE DISTRICT OF Cutchogue *** FINANCIAL SECTION *** Financial Information for the following funds and account groups are included in the Annual Financial Report filed by your government for the fiscal year ended 2017 and has been used by the OSC as the basis for preparing this update document for the fiscal year ended 2018. (A)GENERAL (H)CAPITAL PROJECTS (K) GENERAL FIXED ASSETS (TA)AGENCY (W)GENERAL LONG-TERM DEBT All amounts included in this update document for 2017 represent data filed by your government with OSC as reviewed and adjusted where necessary. ***SUPPLEMENTAL SECTION *** The Supplemental Section includes the following sections. 1) Statement of Indebtedness 2) Schedule of Time Deposits and Investments 3) Bank Reconciliation 4) Local Government Questionnaire 5) Schedule of Employee and Retiree Benefits 6) Schedule of Energy Costs and Consumption All numbers in this report will be rounded to the nearest dollar. i i , Page 2 Cutchogue FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2018 (A)GENERAL Balance Sheet EEL- 10 YE] L -T Assets Cash 572,555 A200 805,918 �672jW 805 918 § ffPA�- T Cash Special Reserves 1,307,032 A230 1,400,679 ,Rdstricte4 032 S [!OTALAss ts and�lEli6ferrW-06 rC % 587 4" 2,206,597 Page 3 OSC Municipality Code 471179002500 Cutchogue FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2018 (A)GENERAL Balance Sheet 2 IT Accounts Payable 55,212 A600 26,737 NYT—AL -;EuiktfC�4—yaO1 Accrued Liabilities 16,951 A601 18,038 0.1wc .cr 71 0o 72 Deferred Inflows of Resources Deferred Inflow of Resources A691 7�- !Tq6fA-�:Tde—fejje`djn#6-;Ws of—Re�our�e—s ;--"T —7-77�7,72-7- of Resources, 0 Fund Balance Capital Reserve 1,296,982 A878 1,400,679 TOT L �yq ajar 7 Assigned Appropriated Fund Balance A914 Assigned Unappropriated Fund Balance 100,000 A915 317,464 ,77- 7 900 000 Unassigned Fund Balance 410,442 A917 443,679 ffqT�L��n_ds6!gpeoLFuf,=ig TOTAL Fund Balance -807 424':,"'-�, 2— Page 4 OSC Municipality Code 471179002500 i Cutchogue FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2018 (A)GENERAL Results of Operation life. �$ibit" __." �_�w _w �.n ',' .tip.. _ = ';= �;': :_._`�_...__ i�• t11:7`.. ...,: isC94, �t19$ ; Revenues Real Property Taxes 1,494,655 A1001 1,599,100 'TOTAL4Reai Property;laxes 1,494;855' 1,599,1(10! Interest And Earnings 2,995 A2401 2,780 Rental of Real Property 1,300 A2410 1,451 TOTAL Use of IWbney.{Lind-Propierty 4,295 4;231• Sales of Equipment 1,100 A2665 Insurance Recoveries 2,442 A2680 3,179 OTa4L Sale o Prdperty And�Comsensatlol_'F ar•Loss 3,542 Refunds of Prior Year's Expenditures A2701 500 Unclassified(specify) 45 A2770 125 Additional Description tower lease&FOIL TOTAL Miscellaneous Local Sources __. . „ 45. St Aid Emergency Disaster Assistance 80,000 A3960 1,000 TOTAL State Aid 80,000 m '[,000'' Fed Aid,Emergency Disaster Assistance A4960 'TOTAL t*ederai Aid _. 0 _- 0, T©TALFevenues _. ;- 1,582;537 !,608,135' ,,�E1TAL,Dewll-Revenues And.Other.•,Sau!ces_ _m 4,582,537 _1,608,135' Page 5 OSC Municipality Code 471179002500 / Cutchogue Annual Update Document For the Fiscal Year Ending 2O18 ' (A)GENERAL ' Results of Operation Expenditures Fire, Pars aom 186.488 A341 01 184.888 Fire, Equip aCap Outlay 327.4e5 A34102 72.038 F/na.Cunt,Expend 47s.o71 x34104 469.324 ~_ - '726,260,,, State Retirement System 7.10e A90108 8775 Local Pension Fund, smp|on#e 359.344 A80258 380000 Social Security, Employer Cont 14.266 xnnuno 14.145 Worker's Compensation, smnionuo 44.722 x90408 52.297 Life Insurance,Emn|onfto 4.684 A80458 4.886 Unemployment Insurance, smp|anfts 337 A90508 750 Disability Insurance,smp|sn*n 446 AooasO 537 Hospital uMedical(uantaVIns, smp|snft 20.707 xe0000 15.221 452,212 Install Pur Debt,Principal ` 70.292 A87858 58.801 ���� ' -bt ' ' ' '. ' --' ' $ ' ' ' u�� . ~ ' . . ^ . ' ' ^ ' '' ' Install Pur Debt, Interest . 1,652 *97857 11,975 1 . ' ` 9x�7u'&�mn�t��� ' . ' . '. , ' v�ms�«� ' , ' '� — ~ ' ` ` ' ` ' --` ^ �qm^�� � � � axpon&,urmii�d Oxmem�mws �.==*'°=. ' � ' Page OSCMunicipality Code 47117SOD25O0 Cutchogue FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2018 (A)GENERAL Analysis of Changes in Fund Balance Analysis of Changes in Fund Balance Fund Balance-Beginning of Year 1,739,897 A8021 1,807,424 Restated Fund Balance-Beg of Year 1,739,897 A8022 1,807,424 ADD-REVENUES AND OTHER SOURCES 1,582,537 1,608,135 DEDUCT-EXPENDITURES AND OTHER USES 1,515,010 1,253,737 Fund Balance-End of Year 1,807,424 A8029 2,161,822 Page 7 OSC Municipality Code 471179002500 CutchogueF|RED|GTR|CT . Annual Update Document For the Fiscal Year Ending 2O18 (A)GENERAL Budget Summary � Estimated Revenues ' Est Rev'Real Property Taxes 1.599.0e5 A1049w 1.5e7.350 sstRo,-U000fMoneyAndpmpeny 1.000 A249em 1.000 TOTAL Es0 a~ d"O=Vonpcir ' Appropriated Fund Balance o A599w u ''— - `.' -. ' . ' '` ~' ' 8 � .- `� . ^ `^�..` . ` ' . - ' . ^ ' ` . ` �67AL'Estimated Pexemmem.Am#Othi( . ` `^� - ' '' _ 1,6�8,350 . / ` � / ` � Page OGC Municipality Code 47117SOO25OO maFIRE DISTRICT � Annual Update Document For the Fiscal Year Ending 3O18 ' | G VV swERAL Budget Summary Appropriations App'Public Safety 1.032.600 A3998N 888.750 App-Emp|oyomBonohts *67.*95 A3189w 528.500 App'Debt Service A8899w 71,100 App'|ntedbndTransfer 10O.UO0 A3889w 1oo.UOU Oth-- A .� . . - - — � 00,000 '..~^ - ' . ` . � .^ . . - _ ` ~ ^ V�. - ' U�� �n�o*�w8�� . . . . '' . _ _ ��n��� ,*_ ������ - � ' ' / _ _ Page OSC Municipality Code 471170UO25OO ueFIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2O18 ! ' � { . Balance Sheet ` ' \ - ` ` ' | ' _ ' Paoe1O Cutchogue FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2018 Balance Sheet ��: C�'1;;1f p�^ 6„"a�,' �p ��i+.�r. "a�"' `" �" s^"�' •a;a` , :'a•;W "•�;°�...�{�'�� `"'.,`',"�' �j"�t���fldE�S S ,;�'3,��1�«. „;N-.. t I~ Page 11 umFIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2O18 (H)CAPITAL PROJECTS Results nrOperation othe,8ourcmo Installment Purchase Debt 500,000 *5785 ��� -Km��mm' ` ' ~ ` . '� `----' ^' ` ^$�u� �''' ' ^' ' |� .�_ ~-. _- m� ^ ^. . ' . ` ^ . . ^ _6TAL'0' ther � ` Sources ' . . ` . ' _ .. _ ' .' _ ' _. _ �o���� . . . = � gC - - ' -- ��� ��� ' ' `�' ' ' $� .~= . , ^ � - � ' . � � ( � - ! ' � Page 12 OSCMunicipality Code 471170OO25OO Cutchogue FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2018 (H)CAPITAL PROJECTS Results of Operation C( xs.. d: CQ (tA4 r Expenditures Fire, Equip&Cap Outlay 500,000 H34102 TOTAL Fire,~. . .. -- - 50!3;000 < TQTi4L Public Safety`. 800,00!!:„ 0' TOTAC'-Eicpehditures_ - - 500,000... ' 0 ?OTA!.Detail Expenditures;And,9thjer Uses 500,000 �' „ Q' 1 Page 13 OSC Municipality Code 471179002500 Cutchogue FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2018 (H)CAPITAL PROJECTS Analysis of Changes in Fund Balance A Analysis of Changes in Fund Balance Fund Balance-Beginning of Year H8021 Restated Fund Balance-Beg of Year H8022 ADD-REVENUES AND OTHER SOURCES 500,000 DEDUCT-EXPENDITURES AND OTHER USES 500,000 Fund Balance-End of Year H8029 r Page 14 OSC Municipality Code 471179002500 Cutchogue FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2018 (K)GENERAL FIXED ASSETS Balance Sheet Ce<l�sct'if?tion ... „ ... - .�J .::: ,: . ; .•a ' ��.. _� ,Zit17��. ,. EdpG«�le=,-----,2£11;i':',•_ ":' Assets Net Pension Asset-Proportionate Share K108 f7&l L,Fixed Assets'(net) 0 "TOTAiL Assets.and-.t3efeiied Outflows of Resources -- 0 Q; Page 15 OSC Municipality Code 471179002500 � \ � CutchooueFIRE DISTRICT — Annual Update Document For the Fiscal Year Ending 2U1O (VGENERAL FIXED ASSETS Balance Sheet Liabilities,Deferred Inflows And Fund Balance � Total Non-Current Govt Assets ' K1 59 gov:CUmM�t ' - At�g*`. . .� ` . , � ' � [TOTAL,^^ / i' - � - ' _ ) ' Page 16 O8C Municipality Code 471179002500 Cutchogue FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2018 (TA)AGENCY Balance Sheet tea.+J•-i __...,:=.,. i l .e._a.u. r. � _ .^.^ :. w .w Assets Service Award Program Assets 2,127,669 TA461 2,390,586 �'OTAL tnves'tmenfs M, . ,. •2,127,&69� 2y39q,5$6< s*exs'SOO'Deferred Outftows of Resources. 2,127,668 . 2,$90;Fa86 i n s Page 17 OSC Municipality Code 471179002500 ' CutchogueFIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2O18 _ (TA)AGENCY / Balance Sheet Service Awards 2,127,669 ' � ~ Uabillitles .�', . ^ ��3��� ' -_- - � ^^ -- - . ' '2,3ie,686' - | > - ' ` | Page 18 OSCMunicipality Code 471178OO250U Cutchogue FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2018 (W)GENERAL LONG-TERM DEBT Balance Sheet Assets Total Non-Current Govt Liabilities 487,870 W129 422,741 TOTAL,Provislohlb de WFuture', 447,970, TO 487,870', -422,741' TA Assets Deferred Outflows Page 19 OSC Municipality Code 471179002500 Cutchogue FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2018 (W)GENERAL LONG-TERM DEBT Balance Sheet Net Pension Liability-Proportionate Share 14,574 W638 8,347 Installment Purchase Debt 473,296 W685 414,394 j;870 4?8y7417 TOTAL Liabilities 487)870 422,7411 tirbfAL L 487,870• 422jW,, Page 20 OSC Municipality Code 471179002500 U1 u G�.t _ _ HVI l utl a vi 1131 vu21/26ia Statement of Indebtedness For the Fiscal Year Ending 2018 County of:Suffolk Municipal Code:471179002500 First Debt Cops Comp Date of Date of Int. Amt.Orig. O/S Beg. Paid Redeemed Prior Yr. Accreted O/S End Year Code Description Flag Flag Issue Maturity Rate Var? Issued of Year Dur.Year Bond Proc. Adjust. Interest •of Year 2014 IPC E EMS equipment 11/18/2014 12/18/2019 1.90% $71,341 $29,324 $14,528 $0 $0 $14,796 2017 IPC E Spartan ERV Fire Truck 11/21/2017 11/21/2026 2.594% $500,000 $443,972 $44,374 $0 $0 $399,598 'otal for Type/Exempt Status-Sums Issued Amts only made in AFR Year $0 $473,296 $58,902 $0 $0 $0 $414,394 AFR Year Total for All Debt Types-Sums Issued Amts only made in AFR Year $0 $473,296 $58,902 $0 $0 $0 $414,394 Page 21 Cutchogue FIRE DISTRICT Schedule of Time Deposits and Investments For the Fiscal Year Ending 2018 Page 22 Cutchogue FIRE DISTRICT Bank Reconciliation -- For the Fiscal Year Ending 2018 Include All Checking, Savings and C.D.Accounts Bank Add Less Adjusted Account Bank Deposit Outstanding Bank Number Balance In Transit Checks Balance *****-2534 $245,601 $0 $14,866 $230,735 *****-2609 $562,148 $0 $0 $562,148 *****-2617 $566,475 $0 $0 $566,475 *****-2591 $464,204 $0 $0 $464,204 *****-6570 $370,000 $0 $0 $370,000 *****-1113 $13,035 $0 $0 $13,035 Total Adjusted Bank Balance $2,206,597 Petty Cash $.00 Adjustments $.00 Total Cash 9ZCASH * $2,206,597 Total Cash Balance All Funds 9ZCASHB * $2,206,597 * Must be equal Page 23 OSC Municipality Code 471179002500 Cutchogue FIRE DISTRICT Fire District Questionnaire For the Fiscal Year Ending 2018 Response 1) Has your district adopted a written procurement prolicy and is it complied with? Y- 2) Has your district contracted to have an independent audit of its financial statements? Y If not, has the Board of Fire Commissioners performed an internal audit of the Treasurer's records and reports? - - --- -- 3) Does your district have a written travel policy and is it complied with? Y 4) Are monthly bank reconciliations performed? Y 5) What is your district's statutory spending limitation margin (amount) for the next fiscal $1,282,749 g) Does your district have a Length of Service Award Program (LOSAP)for volunteer firefighters? If so, how are the LOSAP funds invested? Marketable Securities N Annuities Y Life Insurance N Other(describe) 7) Has your Fire District adopted an investment policy as required by General Municipal Y Law, Section 39? Page 24 Cutchogue FIRE DISTRICT Employee and Retiree Benefits For the Fiscal Year Ending 2018 Total Full Time Employees: 2 Total Part Time Employees: 22 Account Description Total #of Full #of Part #of Retirees Code Expenditures Time Time (All Funds) Employees Employees 90108 State Retirement System $6,7750 2 1 9015 Police and Fire Retirement 90258 Local Pension Fund $360,00000 90308 Social Security $14,14500 2 2 90408 Worker's Compensation $52,29700 2 2 Insurance 9045 Life Insurance $4,8860 J_ 9050 Unemployment Insurance $7500 2 22 90558 Disability Insurance $53700 2 22 90608 Hospital and Medical $15,221 00 2 (Dental)Insurance 90708 Union Welfare Benefits L- 70'5 Supplemental Benefit Payment to Disabled Fire Fighters 9189 Other Employee Benefits – — ---------------------------------------- -- ---- - - — Total $456,611.0 Computed Total From Financial $456,611.0 Section(comparative purposes only) Page 25 OSC Municipality 471179002500 Cutchogue FIRE DISTRICT Energy Costs and Consumption For the Fiscal Year Ending 2018 Energy Type Total Total Volume Units Of Alternative Expenditures Measure Units Of Measure Gasohne $9,55 4,041 gallons Diesel Fuel $4,162 1,5911 gallons lfF— � Fuel Oil --��--- - —I_ -- -- - — - ----gallons- Natural Gas --gallonsNaturalGas $9,97 7,136 cubic feet=Fherrmns Electricity $21,33 116,87 kilowatt-hours Coal tons Propane $3,161 1,70 gallons 1 i Page 26 OSC Municipality 471179002500 FIRE DISTRICT DEMOGRAPHICS i Postal or Mailing Address: 260 New Suffolk Road Cutchogue�� NY 11935 'i 1 Street Address or PO Box City State Zip (631)734-6907 (631)734-7079 Fire District Telephone Number Fire District Fax Number cutfdtreas@optonline net Fhttp,//www cutchoguefiredept org/ � Official Email Address Website Physical Address (If Different From Postal Address) Street Address City State Zip r BOARD DEMOGRAPHICS i CHIEF FISCAL OFFICER Peter J Zwerlein Treasurer Name Title ± 260 New Suffolk Road Cutchogue NY '11935 Street Address or PO Box City State Zip (631)734-6907 (631)734-7079 Telephone Number Fax Number cutfdtreas@optonline net 12/31/2019 + Email Address Term End Date I CHAIRMAN OF THE BOARD Sanford H Fnemann Commissioner Name Title 260 New Suffolk Road JCutchogue =NY '119 Street Address or PO Box City State Zip (631)7346907 (631)734-7079 Telephone Number Fax Number sfrieman@optonline.net 12/31/2022 Email Address Term End Date I, Peter J Zwerlem hereby certify that I am the Chief Fiscal Officer of the Cutchogue Fire District and that the information provided in the annual financial report of the Cutchogue Fire District for the fiscal year ended 12/31/2018 , is true and correct to the best of my knowledge and belief. By entering the personal Identification number assigned by the Office of the State Comptroller to me as the Chief Fiscal Officer of the Cutchogue Fire District ,and adopted by me as my signature for use in conjunction with the filing of the Cutchogue Fire District 's annual financial report, I am evidencing my express Intent to authenticate my certification of the s Cutchogue Fire District 's annual financial report report for the fiscal year ended fl2/31/2018_ and filed by means of electronic data transmission Sheehan&Company,CPA, PC "*"*`*' 00/00/0000 Name of Report Preparer Personal Identification Number Date if different than Chief Fiscal Officer of Chief Fiscal Officer I l ; i_ Page 27 Cutchogue FIRE DISTRICT Financial Comments For the Fiscal Year Ending 2018 Page 28 Cutchogue Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT 1. Summary of significant accounting policies: The Annual Financial Report Update Document (AUD) of the Cutchogue Fire District (the District), as of and for the year ended December 31, 2018 has been prepared in conformity with accounting practices prescribed or permitted by the New York State Office of the State Comptroller (regulatory basis), which is a special purpose framework of accounting other than U.S. generally accepted accounting principles. Financial reporting entity: The District is a governmental entity that provides fire protection to the local community. The District receives most of its funding from property taxes. The District is governed by laws of the State of New York. The Board of Fire Commissioners is the legislative body responsible for the overall operation of the District. All activities and functions performed for the District are its direct responsibility. The Treasurer serves as Chief Fiscal Officer of the District. Basis of presentation: The AUD provides information about the District's funds, including Fiduciary Fund. The accounts of the District are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions or limitations. The following fund types are used: Governmental: r General Fund i ' The General Fund is the principal operating fund of the District and is used to account for all financial resources except those required to be accounted for in another fund. Debt service is also accounted for in the General Fund. Equipment Reserve Fund The Equipment Reserve Fund is used to account for and report financial resources to be used for the acquisition of equipment needed by the District. Building Reserve Fund The Building Reserve Fund is used to account for and report financial resources to be used for the acquisition, construction or renovation of major capital facilities. -29- c COMPANY , i Cutchogue Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT 1. Summary of significant accounting policies (continued): Governmental(continued): For AUD purposes, these funds are all combined and shown as the General Fund. Fiduciary Fund Fiduciary funds are used to account for assets held by the District in a trustee or custodial capacity. The District utilizes the following fund: Agency Fund The Agency Fund is used to account for and report assets held by the District in the capacity of trustee, custodian or agent for individuals. Agency funds are custodial in nature and do not involve measurement of results of operations. Basis of accounting: The accompanying AUD has been prepared on the regulatory basis of accounting using the current financial resources measurement focus. Revenues are recognized when measurable and available. "Available" means collectible within the current period or within 60 days after year-end. Expenditures are generally recognized under the modified accrual basis of accounting when the related liability is incurred. The exception to this general rule is that principal and interest on general obligation long-term debt, if any, is recognized when due. Cash and cash equivalents: Cash and cash equivalents include demand deposits and temporary investments with original maturities of three months or less from the date of acquisition. Investments: An investment is a security or other asset (a) that a government hold's primarily for the purpose,of income or profit and (b) with present service capacity that is based solely on its ability to generate cash or to be sold to generate cash. Investments are generally reported at fair value, except certificates of deposit, which are reported at cost. Interfund transfers: The operations of the District give rise to certain transactions between funds, including transfers of expenditures and revenues to provide services and construct assets. This is either by budget, Board resolution, permissive referendum or - mandatory referendum. -30- &COMPANY � 4 ' Cutchogue Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT 1. Summary of significant accounting policies (continued): Encumbrances: Encumbrance accounting is used for budget control and monitoring purposes and is reported as part of the governmental funds. Under this method, purchase orders, contracts and other commitments for the expenditures of monies are recorded to reserve applicable appropriations. Outstanding encumbrances as of year-end are presented as assigned unappropriated fund balance and do not represent expenditures or liabilities. These commitments will be honored in the subsequent period. Related expenditures are recognized at that time, as the liability is incurred, or the commitment is paid. Fund balance: In accordance with Governmental Accounting Standards Board (GASB) Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, (GASB Statement 54), fund balance is broken down into five different classifications: non-spendable, restricted, committed, assigned and unassigned. Non-spendable consists of assets that are inherently non-spendable in the current period either because of their form or because they must be maintained intact, including prepaid items, inventories, long-term portions of loan receivable, financial assets held for resale and principal of endowments. Restricted consists of amounts that are subject to externally enforceable legal purpose restrictions imposed by creditors, grantors, contributors or laws and regulations of other governments or through constitutional provisions or enabling legislation. Committed consists of amounts that are subject to a purpose constraint imposed by a formal action of the government's highest level of decision-making authority before the end of the fiscal year and that require the same level of formal action to remove the constraint. The Board of Fire Commissioners is the decision-making authority that can, by Board resolution,prior to the end of the fiscal year, commit fund balance. Assigned consists of amounts that are subject to a purpose constraint that represents an i intended use established by the government's highest level of decision-making authority or by their designated body or official. The purpose of the assignment must be narrower than the purpose of the General Fund and in funds other than the General Fund, assigned ` fund balance represents the residual amount of fund balance. The Board of Fire Commissioners, by Board resolution, can authorize the Treasurer to assign fund balance. -31- COMPANY Cutchogue Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT 1. Summary of significant accounting policies (continued): Fund balance (continued): Unassigned represents the residual classification for the government's General Fund and could report a surplus or deficit. In funds other than the General Fund, the unassigned classification should be used only to report a deficit balance resulting from overspending for specific purposes for which amounts had been restricted, committed or assigned. When resources are available from multiple classifications, the District spends funds in the following order: • Restricted amounts are deemed to have been spent when an expenditure is incurred for purposes for which both restricted and unrestricted (committed, assigned or unassigned) amounts are available. • Within unrestricted fund balance, expenditures are deemed to be spent first from committed amounts, followed by assigned amounts and then unassigned amounts when expenditures are incurred for purposes for which amounts in any of those unrestricted fund balance classifications could be used. Real property taxes: All real property assessments are made by the Town of Southold. Real property tax payments are due in two equal installments; the first half payable on December 1 (lien and levy date) preceding the year for which the same is levied and the second half payable May 10, with the first half payable without penalty to January 10 and the second half payable without penalty to May 31. After May 31, all taxes must be paid to Suffolk County Treasurer with a 5% penalty charge and interest at the rate of 1% per j month from February 1. The Town of Southold Receiver of Taxes collects all real estate taxes for the District. The Town of Southold Receiver of Taxes distributes the tax collections to the District. All payments made to the District are made in the year for which the tax has been levied. The Town of Southold Receiver of Taxes turns over uncollected items to the Suffolk County Treasurer who continues the collection of these items. Responsibility for the collection of unpaid taxes rests with Suffolk County. Budgetary data: The District prepares an operating budget for the General Fund each year. The budget is adopted by the Board of Fire Commissioners as its final budget for the coming year as it relates to total spending. The District can adjust the budget as needed by transferring certain budgeted amounts between accounts. The budget is not subject to referendum. All budget appropriations lapse at the end of each year. -32- E?COMPANY 32-E?COMPANY I , Cutchogue Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT 1. Summary of significant accounting policies (continued): Use of estimates: The preparation of the AUD in conformity with the regulatory basis of accounting requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. 2. Deposits with financial institutions and investments: The District's investment policies are governed by state statutes and District policy. Resources must be deposited in Federal Deposit Insurance Corporation (FDIC) insured commercial banks or trust companies located within the state. Permissible investments include special time deposit accounts, certificates of deposit, obligations of the United States of America, obligations guaranteed by agencies of the United States of America and obligations of the State of New York. Collateral is required for demand and time deposits and certificates of deposit not covered by FDIC insurance. Custodial credit risk is the risk that in the event of a bank failure, the District's deposits may not be returned to it. The District's risk exposure can be categorized as follows: 1. Insured by FDIC insurance. 2. Collateralized by securities held by the pledging financial institution's trust department or agent, but not in the District's name. 3. Collateralized by securities held by the pledging financial institution, but not in the District's name. 4. Uncollateralized. The District's deposits held are categorized, based on the above criteria, as follows: Category Amount 1. $ 250,000 2. 1,971,463 3. - 4. - Total 2 221 463 The District did not have any investments at year-end or during the year. Consequently, the District was not exposed to any material interest rate risk. f -33- COMPANY I Cutchogue Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT 3. Long-term liabilities: Long-term liability activity for the year ended December 31, 2017 was as follows: Beginning Ending Balance Additions Reductions Balance U.S. Bank Equipment Finance $ 29,324 $ - $(14,528) $ 14,796 M&T Bank Equipment Finance 443,972 - (44,374) 399,598 Total 473 296 $ - 1114,394 In 2014, the District entered into a five-year lease purchase financing agreement with U.S. Bank Equipment Finance for the purchase of Emergency Medical Services (EMS) equipment. The value of the equipment at the inception of the lease was $71,341. Interest and principal payments are being provided for in the General Fund. Interest is at an annual rate of 1.90%. In 2017, the District entered into a ten-year lease purchase finance agreement with M&T Bank Equipment Finance for the purchase of a 2017 Spartan Fire Truck. The value of the equipment at the inception of the lease was $716,631. The District made a down payment of $216,631 and financed the remaining $500,000 balance. Interest and principal are being provided for in the General Fund. Interest is at an annual rate of 2.594%. s , i Maturities of long-term indebtedness, principal and interest, at December 31, 2017, are as follows: EMS installment lease: Due in Fiscal Year Ended Principal Interest Total i 2019 14 796 148 14 944 -34- COMPANY Cutchogue Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT 3. Lon$t-term liabilities (continued): Spartan Fire Truck(M&T) Installment lease: Due in Fiscal Year Ended Principal Interest Total 2019 $ 45,539 $10,490 $ 56,029 2020 46,734 9,294 56,028 2021 47,961 8,067 56,028 2022 49,220 6,808 56,028 2023 50,512 5,516 56,028 2024-2026 159,632 8,453 168,085 Total 399 598 48 628 $448--226 4. Pension Plan: Plan description: The District participates in the New York State and Local Employees' Retirement System (ERS) which is part of the New York State and Local Retirement System (the System). This is a cost-sharing, multiple-employer defined benefit retirement system. The net position of the System is held in the New York State Common Retirement Fund (the Fund), which was established to hold all net assets and record changes in fiduciary net position allocated to the System. The Comptroller of the State of New York serves as the trustee of the Fund and is the administrative head of the System. System benefits are established under the provisions of the New York State Retirement and Social Security Law (NYSRSSL). Once a public employer elects to participate in the System, the election is irrevocable. The New York State Constitution provides that pension membership is a contractual relationship and plan benefits cannot be diminished or impaired. Benefits can be changed for future members only by enactment of a State statute. The District also participates in the Public Employees' Group Life Insurance Plan (GLIP), which provides death benefits in the form of life insurance. The System is included in the State's financial report as a pension trust fund. That report may be found at www.osc.state.ny.us/retire/publications/index.php or obtained by writing to the New York State and Local Retirement System, 110 State Street, Albany,New York 12244. - Benefits provided: The System provides retirement benefits as well as death and disability benefits. ' -35- COMPANY f i Cutchogue Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT r ' 4. Pension Plan (continued): Benefits provided (continued): Tiers 1 and 2 Eligibility: Tier 1 members, with the exception of those retiring under special retirement plans, must be at least age 55 to be eligible to collect a retirement benefit. There is no minimum service requirement for Tier I members. Tier 2 members, with the exception of those retiring under special retirement plans, must have five years of service and be at least age 55 to be eligible to collect a retirement benefit. The age at which full benefits may be collected for Tier 1 is 55 and the full benefit age for Tier 2 is 62. Benefit calculation: Generally, the benefit is 1.67% of final average salary for each year of service if the member retires with less than 20 years. If the member retires with 20 or more years of service, the benefit is 2% of final average salary for each year of service. Tier 2 members with five or more years of service can retire as early as age 55 with reduced benefits. Tier 2 members age 55 or older with 30 or more years of service can retire with no reduction in benefits. As a result of Article 19 of the NYSRSSL, Tier 1 and Tier 2 members who worked continuously from April 1, 1999 through October 1, 2000 received an additional month of service credit for each year of credited service they have at retirement, up to a maximum of 24 additional months. Final average salary is the average of the wages earned in the three highest consecutive years. For Tier I members who joined on or after June 17, 1971, each year of final average salary is limited to no more than 20% of the previous year. For Tier 2 members, each year of final average salary is limited to no more than 20% of the average of the previous two years. i Tiers 3. 4 and 5 Eli ibili : Tier 3 and 4 members, with the exception of those retiring under special retirement plans, must have five years of service and be at least age 55 to be eligible to collect a retirement benefit. Tier 5 members, with the exception of those retiring under special retirement plans, must have 10 years of service and be at least age 55 to be eligible to collect a retirement benefit. The full benefit age for Tiers 3, 4 and 5 is 62. Benefit calculation: Generally, the benefit is 1.67% of final average salary for each year of service if the member retires with less than 20 years. If a member retires with between 20 and 30 years of service, the benefit is 2% of final average salary for each year of service. If a member retires with more than 30 years of service, an additional benefit of -36- _ d"TOMPANY I Cutchogue Fire District ' NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT 4. Pension Plan (continued): Benefits provided (continued): Tiers 3, 4 and S(continued) Benefit calculation (continued): 1.5% of final average salary is applied for each year of service over 30 years. Tier 3 and 4 members with five or more years of service and Tier 5 members with 10 or more years of service can retire as early as age 55 with reduced benefits. Tier 3 and 4 members age 55 or older with 30 or more years of service can retire with no reduction in benefits. Final average salary is the average of the wages earned in the three highest consecutive years. For Tier 3, 4 and 5 members, each year of final average salary is limited to no more than 10% of the average of the previous two years. Tier 6 .Eligibility: Tier 6 members, with the exception of those retiring under special retirement plans, must have ten years of service and be at least age 55 to be eligible to collect a retirement benefit. The full benefit age for Tier 6 is 63 for ERS members. Benefit calculation: Generally, the benefit is 1.67% of final average salary for each year of service if the member retires with less than 20 years. If a member retires with 20 years of service, the benefit is 1.75% of final average salary for each year of service. If a member retires with more than 20 years of service, an additional benefit of 2% of final average salary is applied for each year of service over 20 years. Tier 6 members with ten or more years of service can retire as early as age 55 with reduced benefits. Final average salary is the average of the wages earned in the five highest consecutive years. For Tier 6 members, each year of final average-salary is limited to no more than 10% of the average of the previous four years. Ordinary Disability Benefits Generally, ordinary disability benefits, usually one-third of salary, are provided to eligible members after ten years of service; in some cases, they are provided after five years of service. I -37- &COMPANY Cutchogue Fire District 1 NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT 4. Pension Plan (continued): Benefits provided (continued): Accidental Disability Benefits For all eligible Tier 1 and Tier 2 ERS members, the accidental disability benefit is a pension of 75% of final average salary, with an offset for any Workers' Compensation benefits received. The benefit for eligible Tier 3, 4, 5 and 6 members is the ordinary disability benefit with the years-of-service eligibility requirement dropped. Ordinary Death Benefits Death benefits are payable upon the death, before retirement, of a member who meets eligibility requirements as set forth by law. The first $50,000 of an ordinary death benefit is paid in the form of group term life insurance. The benefit is generally three times the member's annual salary. For most members, there is also a reduced post-retirement ordinary death benefit available. Post-Retirement Benefit Increases A cost-of-living adjustment is provided annually to: (i) all pensioners who have attained age 62 and have been retired for five years, (ii) all pensioners who have attained age 55 and have been retired for ten years, (iii) all disability pensioners, regardless of age, who have been retired for five years, (iv) ERS recipients of an accidental death benefit, regardless of age, who have been receiving such benefit for five years and (v) the spouse of a deceased retiree receiving a lifetime benefit under an option elected by the retiree at retirement. An eligible spouse is entitled to one-half the cost-of-living adjustment amount that would have been paid to the retiree when the retiree would have met the eligibility criteria. This cost-of-living adjustment is a percentage of the annual retirement benefit of the eligible member as computed on a base benefit amount not to exceed $18,000 of the annual retirement benefit. The cost-of-living percentage shall be 50% of the annual E Consumer Price Index as published by the U.S. Bureau of Labor, but cannot be less than I% or exceed 3%. Contributions: The System is non-contributory except for employees who joined the ERS after July 27, 1976, who contribute 3% of their salary for the first ten years of membership, and employees who joined on or after January 1, 2010 who generally contribute 3% of their salary for their entire length of service. For Tier 6 members, the contribution rate varies from 3% to 6% depending on salary. Generally, Tier 5 and 6 members are required to contribute for all years of service. Under the authority of the -3 8- COMPANY Cutchogue Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT 4. Pension Plan (continued): Contributions (continued): NYSRSSL, the Comptroller annually certifies the actuarially determined rates expressly used in computing the employers' contributions based on salaries paid during the Systems' fiscal year ending March 31. Contributions for the current year and two preceding years were equal to 100% of the contributions required and were as follows: Year Ending December 31, Amount 2018 $8,775 2017 7,106 2016 5,888 Chapter 57 of the Laws of 2013 of the State of New York was enacted that allows local employers to amortize a portion of their retirement bill for up to 12 years in accordance with the following stipulations: The maximum amount an employer can amortize is the difference between the normal annual contribution (total bill, excluding payments for deficiency, group life, previous amortizations, incentive costs and prior year adjustments) and the graded contribution. For subsequent State fiscal years (SFYs), the graded rate will increase or decrease by / up to one-half of 1% depending on the gap between the increase or decrease in the System's average rate and the previous graded rate. The interest rate will be set annually and will be comparable to a 12-year U.S. Treasury Bond plus 1%. For subsequent SFYs in which the System's average rates are lower than the graded rates, the employer will be required to pay the graded rate. Any additional contributions made will first be used to pay off existing amortizations and then any excess will be deposited into a reserve account and will be used to offset future increases in contribution rates. This law requires participating employers to make payments on a current basis, while amortizing existing unpaid amounts relating to the System's fiscal years when the local employer opts to participate in the program. The District's total pension liability was paid as of December 31, 2018. -39- &COMPANY Cutchogue Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT 4. Pension Plan (continued): Pension liabilities, pension expense and deferred outflows of resources and deferred inflows of resources related to pensions: At December 31, 2018, the District reported a liability of$8,347 for its proportionate share of the net pension liability. The net pension liability was measured as of March 31, 2018 and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The District's proportion of the net pension liability was based on a projection of the District's long-term share of contributions to the pension plan relative to the projected contributions of all participating members, actuarially determined. At March 31, 2018, the District's proportion was 0.0002586%. For the year ended December 31, 2018, the District recognized pension expenditures of $8,775. At December 31, 2018, the District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources Differences between expected and actual experience $ ,2,977 $ 2,460 Changes of assumptions 5,534 - i ' Net difference between projected and actual earnings on pension plan investments 12,123 23,929 Changes in proportion and differences between District contributions and proportionate share of contributions 7,189 6,786 District contributions subsequent to the measurement date 8,775 - Total 36 598 33 175 $8,775 reported as deferred outflows of resources related to pensions resulting from District contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended March 31, 2019. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: -40- &COMPANY Cutchogue Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT 4. Pension Plan (continued): Pension liabilities, pension expense and deferred outflows of resources and deferred inflows of resources related to pensions (continued): Year Ended March 31: Amount 2019 $ 2,973 2020 581 2021 (6,616) 2022 (2,292) Actuarial assumptions: The total pension liability at March 31, 2018 was determined by using an actuarial valuation as of April 1, 2017, with update procedures used to roll forward the total pension liability to March 31, 2018. The actuarial valuation used the following actuarial assumptions: Inflation 2.5% Salary increases 3.8% Investment rate of return(net of investment expense, including inflation) 7.0% Annuitant mortality rates are based on April 1, 2010 through March 31, 2015 System experience with adjustments for mortality improvements based on the Society of Actuaries' Scale MP-2014. The actuarial assumptions used in the April 1, 2017 valuation are based on the results of an actuarial experience study for the period April 1, 2010 through March 31, 2015. Best estimates of arithmetic real rates of return for each major asset class included in the target asset allocation as of March 31, 2018 are summarized below: The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected return, net investment expenses and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. -41- &COMPANY i Cutchogue Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT 4. Pension Plan (continued): Actuarial assumptions (continued): Long-term Expected Real Asset Class Rate of Return Domestic equity 4.55% International equity 6.35% Private equity 7.50% Real estate 5.55% Absolute return strategies (1) 3.75% Opportunistic portfolio 5.68% Real assets 5.29% Bonds and mortgages 1.31% Cash (0.25)% Inflation-indexed bonds 1.25% The real rate of return is net of the long-term inflation assumption of 2.5%. (1) Excludes equity-oriented and long-only funds. For investment management purposes, these funds are included in domestic equity and international equity. j Discount rate: The discount rate used to calculate the total pension liability was 7.0%. The projection of cash flows used to determine the discount rate assumes that contributions from plan members will be made at the current contribution rates and that contributions from employers will be made at statutorily required rates, actuarially. Based upon the assumptions, the System's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long- term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of the proportionate share of the net pension liability to the discount rate assumption: The following presents the District's proportionate share of the net pension liability calculated using the discount rate of 7.0%, as well as what the District's proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (6.0%) or I percentage point higher (8.0%) than the current rate: -42- &'COMPANY Cutchogue Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT 4. Pension Plan (continued): Sensitivity of the proportionate share of the net pension liability to the discount rate assumption (continued): 1% Current 1% Decrease Assumption Increase (6.0%) (7.0%) (8.0%) i District's proportionate share of ' the net pension liability (asset) $63,153 $8,347 $(38,017) Pension plan fiduciary net position: The components of the current-year net pension liability of the employers as of March 31, 2018 were as follows: (Dollars in Thousands) Employees' Retirement System Employers'total pension liability $ 183,400,590 Plan net position (180,173,145) Employers' net pension liability 3,227,445 Ratio of plan net position to the employers' total pension liability 98.24% 5. Length of Service Award Program (LOSAP): The District's AUD is for the year ended December 31, 2018. However, the information contained in this note is based on information for the LOSAP for the plan year ending on February 28, 2018, which is the most recent plan year for which complete information is available. The funding detail is for the period March 1, 2017 through February 28, 2018. The District established a defined benefit LOSAP for the active volunteer firefighters of the District. The Program took effect on March 1, 1993. The Program was established pursuant to Article 11-A of the General Municipal Law. The Program provides municipally funded, pension-like benefits to facilitate the recruitment and retention of active volunteer firefighters. The District is the sponsor of the Program. -43- &COMPANY Cutchogue Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT 5. Length of Service Award Program (LOSAP) (continued): Program description: Participation, vesting and service credit: Active volunteer firefighters who have reached the age of 17 and who have completed their probationary period are eligible to participate in the Program. Participants acquire a non-forfeitable right to a service award after being credited with five years of firefighting service or upon attaining the Program's entitlement age. The Program's entitlement age is age 65. In general, an active volunteer firefighter is credited with a year of firefighting service for each calendar year after the establishment of the Program in which he or she accumulates 50 points. Points are granted for the performance of certain activities in accordance with a system established by the sponsor on the basis of a statutory list of activities and point values. A participant may also receive credit for five years of firefighting service rendered prior to the establishment of the Program. Benefits: A participant's benefit under the Program is the actuarial equivalent of a monthly payment for life equal to $20 multiplied by the person's total number of years of firefighting service. The number of years of firefighting service used to compute the benefit cannot exceed 30. Benefits are not payable until the first day of the month coincident with or following the attainment of age 65 and completion of one year of plan participation. Except in the case of disability or death, benefits are payable when a participant reaches entitlement age. The Program provides statutorily mandated death and disability benefits. Fiduciary investment and control: Service credit is determined by the Governing Board of the sponsor, based on information certified to the Governing Board by each fire company having members who participate in the Program. Each fire company must maintain all required records on forms prescribed by the Governing Board. The Governing Board of the sponsor has retained and designated Volunteers Firemen's Insurance Services, Inc. (VFIS) to assist in the administration of the Program. The designated Program administrator's functions include providing basic annual administration services as follows: a) Providing participant enrollment forms; b) Providing an annual reminder letter with a review list for the current anniversary date; c) Preparation of Explanation of Plan Benefits; -. d) Calculation of Schedule of Benefits and costs annually; -44- COMPANY Cutchogue Fire District 'i NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT 5. Length of Service Award Program (LOSAP) (continued): Fiduciary investment and control (continued): e) Participants' benefit calculation at time of severance or retirement; 0 Auxiliary Fund valuation and suggested deposit; g) Summary of required annual contribution; h) Annual actuarial review and recommended benefit enhancements. Disbursements of Program assets for the payment of benefits or administrative expenses must be approved. The following is an explanation of the process for approving disbursements: Payment of benefits: 1. Entitlement benefits - VFIS prepares and submits to the plan sponsor a Verification of Benefits Statement and an Annuity Enrollment form for participants active at entitlement age and for vested participants upon termination from the plan. Following review for accuracy, the plan sponsor signs and returns the paperwork to VFIS authorizing VFIS to disburse entitlement benefits. 2. Death benefits - Upon notification from the plan sponsor of a participant's death, VFIS prepares a Verification of Benefits statement and a Lump-Sum Death Benefit form. Following review for accuracy, the plan sponsor signs and returns the paperwork accompanied by a death certificate to VFIS authorizing VFIS to disburse a death benefit. 3. Disability benefits - Upon notification from the plan sponsor of a participant's total and permanent disability, VFIS prepares a Verification of Benefits statement, a Physician Statement form and a Lump-Sum Disability Benefit form. Following review for accuracy, the plan sponsor signs and returns the paperwork authorizing VFIS to disburse a disability benefit. Payment of administrative expenses: 1. Per the executed Service Fee Agreement, the plan sponsor agrees to payment as contracted. i -45- c COMPANY Cutchogue Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT 5. Length of Service Award Program (LOSAP) (continued): Payment of administrative expenses (continued): Authority to invest Program assets is vested in Mass Mutual Financial Group. Subject to restrictions in the Program document, Program assets are invested in accordance with a statutory "prudent person" rule. The sponsor invested plan funds in a Group Annuity Contract with guarantees of both principal and interest. The sponsor is required to retain an actuary to determine the amount of sponsor's contributions to the plan. The actuary retained by the sponsor for this purpose is JF Actuarial Services, Inc. Portions of the following information were derived from a report prepared by the actuary dated June 1, 2017. Program financial condition: Assets and Liabilities % of Total Actuarial present value of accrued benefits at February 28, 2017: Vested $2,497,435 Non-vested 67,966 2,565,401 Present value of accrued post-entitlement benefits 418,887 Total present value of accrued benefits 2,984,288 Less assets available for benefits: General investments 100% $1,894,096 Total net assets available for benefits 1,894,096 Total unfunded normal benefits 1 090 192* * The unfunded liability was placed on a 10-year amortization effective March 1, 2013. The unfunded liability was based upon data as of March 1, 2013 and will be affected by plan experience over the 10-year period. Funded ratio: Plan assets $1,894,096 Total present value of accrued benefits $2,984,288 Percent funded 63.5% -46- &COMPANY Cutchogue Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT 5. Length of Service Award Program (LOSAP) (continued): Program financial condition (continued): Receipts and Disbursements Plan net assets, beginning of year $1,591,806 Changes during the year (increases/(decreases)): _ Plan contributions $ 353,283 Fixed investment gain 67,955 Cash value surrender policies 86,815 Plan benefit withdrawals (186,248) Death claim (13,590) Administrative and other fees/charges (3,495) Life insurance gain 10,000 Life insurance premium1( 2,430) 302,290 Plan net assets, end of year 1 894 096 Contributions Amount of sponsor's contribution recommended by actuary 330 944 Amount of sponsor's actual contribution 359 344 Contributions paid in excess of recommended amount are for administration fees and other adjustments. Administration Fees Fees paid to designated program administrator 3 495 Funding methodology and actuarial assumptions: Normal costs: The actuarial valuation methodology used by the actuary to determine the sponsor's contribution is Entry Age Normal Frozen Initial Liability. The assumptions used by the actuary to determine the sponsor's contribution and the actuarial present value of benefits are: -47- COMPANY ,I Cutchogue Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT 5. Length of Service Award Program (LOSAP) (continued): Funding methodology and actuarial assumptions (continued): Normal costs (continued): I Assumed rate of return on investment 4.75% Mortality tables used for: i Pre-retirement Male 1994 Group Annuity (GAR) 0 Female 1994 Group Annuity (GAR) 0 1 Post-retirement Male 1994 Group Annuity (GAR) 0 Female 1994 Group Annuity (GAR) 0 Effective August 1, 2016, the District converted its Universal Life Insurance policy to Group Term Life. This conversion removed the life insurance component from the District's LOSAP plan, which is reflected in the District's LOSAP report. 6. Commitments and contingencies: Encumbrances: In the current year, the District has reported encumbrances. This amount is included in the assigned unappropriated fund balance of$317,464 reported on the Annual Financial Report. This amount includes $195,000 for a Chief s car and truck purchase, $65,000 for new Chiefs Equipment, $36,863 for a Hurst Edraulic rescue tool and $20,601 for portable and mobile radios for a fire police vehicle and chief s vehicle. Assigned appropriated fund balance: The District, from time to time, will appropriate a portion of its unassigned unappropriated fund balance. During 2018, no such appropriation was made. General legal: The District is exposed to various risks of loss related to torts, theft of, damage to and destruction of assets, injuries to employees, errors and omissions, natural disasters, etc. These risks are covered by commercial insurance purchased from independent third-parties. Settled claims from these risks have not exceeded commercial insurance coverage. Grant: During 2018, the District did not enter into any significant grants. - -48- &COMPANY Cutchogue Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT 7. Economic dependency: For the year ended December 31, 2018, approximately 99% of the District's gross revenues were derived from real property taxes provided by the Town of Southold. 8. Subsequent events: Rental of real property: On December 13, 2016, the District entered into a lease agreement to lease ground space on its property to a company for the positioning of a communication tower, which has not yet been positioned on the property. The communication tower will not be District owned. This is a 30-year lease commencing on the date of commercial operation of the leased space. Upon notice of lessee, the lease will be renewed for three additional terms of five years each and one additional term of four years. The terms of the lease allow for the lessee to sublease the property and requires the lessee to pay the District 30% of all rents received from the first sub lessee, 35%for the second sub lessee and 40% from all subsequent sub lessees. There was no rental income related to this lease during the year ended December 31, 2018 and future rental income is not readily determinable. -49- &COMPANY 165 Orinoco Dnve,Bright-waters, NY 11718 631 665 7040 - Fax 631 665 7014 ' 15 South Bayles Avenue, Port Washington, NY 11050 C 0MPA N Y 516 883 5510 - Fax 516 767 7438 A PROFESSIONAL CORPORA PION OF CERTIFIED PUBLIC ACCOUNTANT S www sheehancpa coni i r INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF ANNUAL FINANCIAL REPORT UPDATE DOCUMENT PERFORMED IN ACCORDANCE WITH GO VERNMENTA UDITING STANDARDS To the Board of Fire Commissioners Cutchogue Fire District Cutchogue,New York We have audited, 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, the Annual Financial Report Update Document of Cutchogue Fire District (the District), as of and for the year ended December 31, 2018 and the related notes to the Annual Financial Report Update Document (Financial Section), which collectively comprise the District's basic financial statements and have issued our report thereon dated June 5, 2019. Internal Control Over Financial Reporting In planning and performing our audit of the Annual Financial Report Update Document, we considered the District's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the Annual Financial Report Update Document but not for the purpose of expressing an opinion on the effectiveness of the District's internal control. Accordingly, we do not express an opinion on the effectiveness of the District's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the District's Annual Financial Report Update Document will not be prevented or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. -50- An Independent Member of the BDO Alliance USA I ' To the Board of Fire Commissioners Cutchogue Fire District Compliance and Other Matters As part of obtaining reasonable assurance about whether the District's Annual Financial Report Update Document is free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, non-compliance with which could have a direct and material effect on the determination of Annual Financial Report Update Document 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 instance of non-compliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing and not to provide an opinion on the effectiveness of the District's internal control or on compliance. This report is an integral part of an audit I performed in accordance with Government Auditing Standards in considering the District's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. CPP, p,C . Brightwaters,New York June 5, 2019 _51- COMPANY