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HomeMy WebLinkAbout2018 ypUTHD<p RF lSG DTR\ SOUTHOLD FIRE DISTRICT P.O. BOX 908. SOUTHOLD, N.Y. 11971 RECEIVED (631) 765-4305 FAX (631) 765-5076 JUN 2 8 2019 June 28, 2019 Southold Tom Clerk Town of Southold Southold Town Hall Main Road, P.O. Box 1179 Southold,New York 11971 Re: Southold Fire District Dear Sir/Madam: In connection with the above matter, enclosed herewith please find a copy of the Auditor's Report prepared by Cullen& Danowski, LLP for the fiscal period beginning on January 1, 2018 and ending on December 31, 2018. If you have should have any questions or problems,please do,not hesitate to contact me at 765-4305, x 27. i cerely, o A. Miller Fire District Secretary _ r VINCENT D CULLEN,CPA IL (1950-2013) oCULLENA&r DANQWSKI, LLPo CERTIFIED P'EJBtIC'ACCC)bNTANTS JAMESE DANOWSKI,CPA Y/ PETER F.RODRIGUEZ,CPA JILL S.SANDERS,CPA DONALD J.HOFFMANN,CPA CHRISTOPHER V.REINO,CPA ALAN YU,CPA May 31, 2019 The Board of Fire Commissioners Southold Fire District Southold,New York In planning and performing our audit of the financial statements of the Southold Fire District(District) as of and for the year ended December 31, 2018,in accordance with auditing standards generally accepted in the United States of America, we considered the District's internal control over financial reporting (internal control) as a basis for designing auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on the financial statements, 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. During our audit we an opportunity for strengthening internal controls.The memorandum that accompanies this letter summarizes our comment and suggestion concerning this matter.This letter does not affect our report dated May 31, 2019,on the financial statements of the Southold Fire District. We will review the status of these comments during our next audit engagement.We have already discussed many of these comments and suggestions with various District personnel, and we will be pleased to discuss them in further detail at your convenience,to perform any additional study of these matters,or to assist you in implementing the recommendations. This communication is intended solely for the information and use of the Board of Fire Commissioners, management, others you deem appropriate within the District, and any governmental authorities you need to share this information with. It is not intended to be, and should not be, used by anyone other than these specified parties. Very truly yours, Cullen&Danowski,LLP 1650 ROUTE 112,PORT JEFFERSON STATION,NEW YORK 11776-3060 0 PHONE:631-473-3400•FAX:631-473-4863 9 WWW.CDLLP.NET Southold Fire District For the Year Ended December 31, 2018 STATUS OF PRIOR YEAR COMMENTS There were no prior year comments to report. CURRENT YEAR COMMENTS District Credit Card The District has chosen to open credit cards to provide to various members of the Board of Fire Commissioner's and select employees. Charges made using authorized credit cards follow the same procedure as all other disbursements whereby all purchases are supported by itemized receipts. During our current year audit,we noted various instance where items purchased using the District's credit card were shipped to an employee's residence rather than the District office. We recommend that the District implement procedures to ensure that all goods purchased using a District credit card are shipped directly to the District office. Page 2 VINCENT D.CULLEN,CPA L�`~' (1950-2013) CULLEN1&'DANQWWSKI, LLP CERTIFIED PUB-LIC'ACCOUNTANTS JAMES E.DANOWSKI,CPA {` PETER F.RODRIGUEZ,CPA JILL S.SANDERS,CPA DONALD J.HOFFMANN,CPA CHRISTOPHER V REINO,CPA ALAN YU,CPA May 31,2019 To the Board of Fire Commissioners Southold Fire District Southold,New York We have audited the financial statements of the Southold Fire District(District)for the year ended December 31, 2018, and have issued our report thereon dated May 31, 2019. Professional standards require that we provide you with the following information related to our audit. Our Responsibilities under U.S. Generally Accepted Auditing Standards and Government Auditing Standards As stated in our engagement letter dated December 1,2018,our responsibility,as described by professional standards, is to express opinions about whether financial statements prepared by management with your oversight are fairly presented,in all material respects,in accordance with the financial reporting provisions of the New York State Office of the State Comptroller,which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America (GAAP) as applied to governmental units. Our audit of the financial statements does not relieve you or management of its responsibilities. In planning and performing our audit,we considered the District's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and not to provide assurance on the internal control over financial reporting. As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement,we performed tests of the District's compliance with certain provisions of laws, regulations, contracts and grants,noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit. While our audit provides a reasonable basis for our opinion,it does not provide a legal determination on the District's compliance with those requirements. Our responsibility for the supplementary information accompanying the financial statements,as described by professional standards,is to evaluate the presentation of the supplementary information in relation to the financial statements as a whole and to report on whether the supplementary information is fairly stated,in all material respects,in relation to the financial statements as a whole. We are responsible for communicating significant matters related to the audit that are, in our professional judgment, relevant to your responsibilities in overseeing the financial reporting process. However,we are not required to design procedures specifically to identify such matters. 1650 ROUTE 112,PORT JEFFERSON STATION,NEW YORK 11776-3060 PHONE:631-473-3400•FAX:631-473-4863•WWW.CDLLP.NET Southold Fire District For the Year Ended December 31, 2018 Our Responsibility for Other Information in Documents Containing Audited Financial Statements Our responsibility for other information in documents containing the District's audited financial statements does not extend beyond the financial information identified in our report and we have no professional obligation to perform procedures to corroborate such other information. In the event the financial statements are incorporated into a printed document, please forward a printer's proof for our approval before final production. Planned Scope and Timing of the Audit We performed the audit according to the planned scope and timing previously communicated to you in our engagement letter. Significant Audit Matters Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the District are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during the year ended December 31, 2018. We noted no transactions entered into by the District during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. Management feels that their estimates are reasonable in relation to the financial statements taken as a whole. The most sensitive estimate affecting the financial statements was: • Historical Cost Value of Certain Capital Assets-Management's estimate of the historical cost value of Land and Buildings is based on replacement cost converted to estimated historical cost using a conversion factor based on the year the item was placed into service. • Actuarial Assumptions and Methods Underlying Pension Reporting - Management's acceptance of various actuarial assumptions and methods underlying the calculation of the District's pension reporting is based on the actuarial valuations prepared by the actuary for the ERS. • Actuarial Assumptions and Methods Underlying LOSAP Reporting - Management's acceptance of various actuarial assumptions and methods underlying the calculation of the District's actuarial present value of benefits and liability is based on actuarial valuations prepared by the District's actuary for the LOSAP plan. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Page 2 Southold Fire District For the Year Ended December 31,2018 Corrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit,other than those that are trivial,and communicate them to the appropriate level of management. In our judgment, none of the adjustments correcting misstatements that we proposed, all of which were recorded by the District,were material,either individually or in the aggregate to each opinion unit's financial statements taken as a whole. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in the management representation letter dated May 31, 2019. Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters,similar to obtaining a"second opinion" on certain situations. If a consultation involves application of an accounting principle to the District's financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Other Audit Finding or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the District's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. Other Matters With respect to the supplementary information accompanying the financial statements, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with the financial reporting provisions of the New York State Office of the State Comptroller, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. Page 3 a Southold Fire District For the Year Ended December 31, 2018 Restriction of Use This information is intended solely for the use of the Board of Fire Commissioners and management of Southold Fire District and is not intended to be and should not be used by anyone other than these specified parties. Very truly yours, &Wv"J 7, LcJ' LLYO Cullen&Danowsld, LLP Page 4 s Southold Fire District Adjusting journal Entries December 31,2018 Account Description Debit Credit 1 To record opening balances at12/31/18. A0.1030.0391.002 Due from Other Fund-Capital Bond 100.00 A0.1050.0480.000 Prepaid Expenses 3,681.10 A0.2000.0600.000 Accounts Payable 1,466.72 A0.3310.0917.000 Unassigned:Fund Balance 2,314.38 2 To reverse prior year prepaid balance still in account and accounts payable at 12/31/18. A0.4045.2410.000 Rentals 3,973.71 A0.5100.3410.480 FP-Insurance Costs 23,839.58 A0.5130.9010.800 Emp.Benefits-State Retirement System Contribution 7,089.50 A0,5100.3410.445 FP-Building Costs/Maintenance 5,206.38 A0.2000.0600.000 Accounts Payable 1,466.72 A0.1050.0480.000 Prepaid Expenses 40,109.17 A0.5100.3410.445 FP-Building Costs/Maintenance 1,466.72 3 To record deferred expenditures at 12/31/18. A0.1050.0480.000 Prepaid Expenses 26,837.41 A0.3010.0806.000 Nonspendable:Prepaids 1,782.30 A0.4045.2410.000 Rentals 4,039.77 AO.5100.3410.480 FP-Insurance Costs 15,874.64 A0.5130.9010.800 Emp.Benefits-State Retirement System Contribution 6,923.00 A0.3310.0917.000 Unassigned:Fund Balance 1,782.30 4 To adjust to client encumbrance balance at 12/31/18. A0.3305.0915.001 Assigned:Unappropriated/Encumbrances 88,459.38 A0.3310.0917.000 Unassigned:Fund Balance 88,459.38 5 To record encumbrance for 2018 audit fee at 12/31/18. A0.3310.0917.000 Unassigned:Fund Balance 12,700.00 A0.3305.0915.001 Assigned:Unappropriated/Encumbrances 12,700.00 6 To record receivable found through subsequent receipt testing at 12/31/18. A0.1020.0390.000 Accounts Receivable 33,115.40 A0.4075.2701.000 Refunds of Prior Years'Expenditures 33,115.40 7 To record accrued payroll at 12/31/18. A0.5000.3430.109 Accrued Payroll 5,679.56 A0.5130.9030.800 Emp.Benefits-Social Security 434.49 A0.2010.0601.001 Accrued Liabilities-Accrued Payroll 6,114.05 8 To record capital projects fund accounts payable at 12/31/18. H2.5170.3140.000 Capital Outlay 56,888.09 H2.2000.0600.000 Accounts Payable 56,888.09 9 To record encumbrances in the capital projects fund at 12/31/18. H2.3020.0910.000 Restricted Fund Balance-Capital Projects Fund 204,296.65 H2.3020.0915.000 Restricted-Capital Projects/Encumbrances 204,296.65 30 To transfer interest earnings on debt to the general fund. H2.4040.2401.000 Interest&Earnings-Interest 1,904.28 H2.2090.0630.000 Due to Other Funds-General Fund 1,904.28 A0.1030.0391.002 Due from Other Fund-Capital Bond 1,904.28 A0.4040.2401.003 Interest&Earnings/Bond Fund 1,904.28 A0.3310.0917.000 Unassigned:Fund Balance 1,904.28 A0.3020.0878.000 Restricted-Debt Service 1,904.28 11 To establish opening balance in Capital Projects Fund at 12/31/18. H2.3020.0910.000 Restricted Fund Balance-Capital Projects Fund 100.00 H2.2090.0630.000 Due to Other Funds-General Fund 100.00 12 To move costs not associated with bond project back to the general fund at 12/31/18. H2.4200.5031.000 Operating Transfer In 7,237.10 H2.5170.3140.000 Capital Outlay 7,237.10 A0.5100.3410.445 FP-Building Costs/Maintenance 7,237.10 A0.5200.9950.900 Operating Transfers Out-Other Funds 7,237.10 M Southold Fire District Financial Statements (Regulatory Basis) with Independent Auditor's Report December 31, 2®18 �II � I SOUTHOLD FIRE DISTRICT Table of Contents December 31,2018 Page 1� Independent Auditor's Report 1 Basic Financial Statements(Regulatory Basis) Balance Sheet-Governmental Funds and Account Groups 3 Statement of Revenues,Expenditures and Changes in Fund Balance-Governmental Funds 4 Statement of Fiduciary Net Position-Fiduciary Fund 5 I Notes to Financial Statements 6 I , Other Supplementary Information Schedule of Revenues, Expenditures and Changes in Fund Balance -Budget and Actual-General Fund-Operating 22 Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 23 f t , I I F 1 _ VINCENT D CULLEN,CPA (1950-2013) - CULLEN;" �OWS KI, LLP CERTIFIED P BPETER F RODRIGU ,CPA .LIC�ACCO NTANTS JAMES E Z _ DRIGUEZ,CPA JILL S.SANDERS,CPA DONALD HOFFMANN,CPA CHRISTOPHER V REINO,CPA INDEPENDENT AUDITOR'S REPORT ALAN YU,CPA To the Board of Fire Commissioners Southold Fire District Southold,New York We have audited the accompanying financial statements (regulatory basis) of the Southold Fire District, as of and for the year ended December 31, 2018, and the related notes to the 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 the financial reporting provisions of the New York State Office of the State Comptroller, as described in Note 1,to meet the reporting requirements of New York State. Management is also responsible t for 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. r Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the _ standards applicable to financial audits contained in Govern men tAuditing Standards,issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment,including the assessment of i 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 i audit opinions. Basis for Adverse Opinion on U.S.Generally Accepted Accounting Principles As described in Note 1,the financial statements are prepared by the Southold 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. - 1- 1650 ROUTE 112,PORT JEFFERSON STATION,NEW YORK 11776-3060 PHONE:631-473-3400•FAX:631-473-4863.WWW.CDLLP.NET 1 1 The effects on the financial statements 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 t 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 financial statements referred to above do not present fairly,in accordance with accounting principles generally accepted in the United States of America,the financial position of the Southold Fire District,as of December 31,2018,and the respective changes in financial position for the year then ended. f Unmodified Opinion on Regulatory Basis of Accounting i ' In our opinion,the financial statements referred to above present fairly,in all material respects,the respective financial position of each fund and account group of the Southold Fire District, as of December 31, 2018, and their respective changes in financial position for the year then ended,in accordance with the financial reporting provisions of the New York State Office of the State Comptroller as described in Note 1. i ! Other Matters Other Information i Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Southold Fire District's basic financial statements. The other supplementary information on page 22 is presented for purposes of additional analysis and is not a required part of the basic financial statements. The other supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has 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. In our opinion,the other supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole on the basis of accounting described in Note 1. w Other Reporting Required by Government Auditing Standards ? In accordance with Govern men tAuditing Standards,we have also issued our report dated May 31,2019,on our consideration of the Southold Fire District's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is 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 - the Southold Fire District's internal control over financial reporting or on compliance.That report is an integral j I part of an audit performed in accordance with Government Auditing Standards in considering Southold Fire - District's internal control over financial reporting and compliance. 1 R' May 31,2019 -2 - r i SOUTHOLD FIRE DISTRICT Balance Sheet-Governmental Funds and Account Groups 1 December 31,2018 j 's Governmental Funds Account Groups i Non-Current Non-Current General Capital Governmental Governmental Fund Projects Assets Liabilities Total ASSETS Cash Unrestricted $ 754,454 $ 100 $ $ $ 754,554 Restricted 1,208,763 406,595 1,615,358 { Accounts receivable 33,116 33,116 Due from other funds 2,004 2,004 Prepaids 96,743 96,743 Land 670,752 670,752 Construction work in progress 1,373,797 1,373,797 Buildings and improvements 3,511,540 3,511,540 Equipment 4,277,485 4,277,485 ` Amount to be provided for retirement of long-term debt 1,613,936 1,613,936 Total Assets $ 2,095,080 $ 406,695 $ 9,833,574 $ 1,613,936 $ 13,949,285 � f LIABILITIES Accounts payable $ 55,880 $ 56,888 $ $ $ 112,768 Accrued liabilities 9,418 9,418 __ Due to other funds 2,004 2,004 Bonds payable 1,600,000 1,600,000 Net pension liability- proportionate share 13,936 13,936 _J Total Liabilities 65,298 58,892 - 1,613,936 1,738,126 -} FUND BALANCE Investment in non-current governmental assets 9,833,574 9,833,574 Nonspendable 96,743 96,743 Restricted: Debt service 1,904 1,904 Capital,equipment 1,174,642 1,174,642 Capital,building 32,217 32,217 Unspent bond proceeds 347,803 347,803 Assigned:Unappropriated 23,295 23,295 Unassigned 700,981 700,981 Total Fund Balance 2,029,782 347,803 9,833,574 - 12,211,159 - Total Liabilities and Fund Balance $ 2,095,080 $ 406,695 $ 9,833,574 $ 1,613,936 $ 13,949,285 See Notes to Financial Statements -3- i r SOUTHOLD FIRE DISTRICT Statement of Revenues,Expenditures and Changes in Fund Balance-Governmental Funds + For the Year Ended December 31,2018 General Fund Total Capital Capital Governmental Operating Reserves Total Projects Funds REVENUES Real property taxes $ 1,942,051 $ $ 1,942,051 $ $ 1,942,051 .6 Interest and earnings 11,413 14,071 25,484 25,484 Rentals 26,113 26,113 26,113 Sale of equipment 27,500 27,500 27,500 Refund of prior year expenditures 33,901 33,901 33,901 Miscellaneous 150 150 150 Total Revenues 2,041,128 14,071 2,055,199 - 2,055,199 EXPENDITURES _ Personal services 281,201 281,201 281,201 Equipment and capital outlay 117,923 117,923 117,923 Fire protection 574,591 574,591 574,591 State retirement system 28,140 28,140 28,140 Service award program 361,742 361,742 361,742 �jj Social security 21,508 21,508 21,508 Workers'compensation 62,028 62,028 62,028 Medical and accident insurance 40,518 40,518 40,518 Debt service-principal 100,000 100,000 100,000 Debt service-interest 36,894 36,894 36,894 Capital outlay - 1,005,874 1,005,874 Total Expenditures 1,624,545 - 1,624,545 1,005,874 2,630,419 Excess of Revenues Over Expenditures 416,583 14,071 430,654 (1,005,874) (575,220) - OTHER SOURCES AND USES Operating transfers in 200,000 200,000 200,000 Operating transfers out (200,000) (200,000) (200,000) I ! Total Other Sources and Uses (200,000) 200,000 - - - 4 Net Change in Fund Balance 216,583 214,071 430,654 (1,005,874) (575,220) Fund Balance-Beginning of Year 606,340 992,788 1,599,128 1,353,677 2,952,805 i Fund Balance-End of Year $ 822,923 $ 1,206,859 $ 2,029,782 $ 347,803 $ 2,377,585 r 7 See Notes to Financial Statements -4- J SOUTHOLD FIRE DISTRICT Statement of Fiduciary Net Position-Fiduciary Fund a December 31,2018 Agency ASSETS 1 . Service award program assets $ 4,070,301 J { Total Assets $ 4,070,301 LIABILITIES i Service awards $ 4,070,301 Total Liabilities $ 4,070,301 t r i ; f i I I I G I � 1 -I f See Notes to Financial Statements -5- r SOUTHOLD FIRE DISTRICT Notes to Financial Statements 1 � Y 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the Southold Fire District (District) as of and for the year ended December 31, 2018,have been prepared in accordance with the financial reporting provisions of the New York State Office of the State Comptroller (Regulatory Basis), which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America (GAAP) for governmental units. The Governmental Accounting Standards Board(GASB) is the standard setting body for establishing GAAP for governmental units. The financial statements of the District have been prepared using only the current financial resources measurement focus and the modified accrual basis of accounting. This method differs from GAAP,which requires the preparation of additional financial statements using the economic resources measurement focus and the accrual basis of accounting. GAAP basis financial statements require the capitalization and depreciation of property and equipment and the recording of long-term liabilities.Under the regulatory basis of accounting, property and equipment are recorded as an expenditure when purchased,the proceeds of long-term debt are reported as other financing sources and the payment of long- term debt and other long-term liabilities are recognized to the extent that the liabilities mature during the year. In addition,GAAP requires the financial statements to be prepared in accordance with GASB Statement ;f No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local _ Governments. GASB 34 financial statements require the presentation of government-wide financial statements and management's discussion and analysis. The accounting practices used to prepare these financial statements do not require compliance with GASB 34. The significant accounting policies of the District are described below: � f i A. Financial Reporting Entity The District is a district corporation and political subdivision of the state of New York,distinct from the j I municipalities in which it is located. In general, the District is governed by an elected board of commissioners (Board) and is required to have a treasurer and a secretary. The District has the legal authority to levy taxes on real property and to borrow in its own name. The District is governed by i General Municipal Law and other laws of the state of New York and its subdivisions. The scope of activities included in the accompanying financial statements is the transactions which comprise the District's operations. i —� The primary function of the District is to provide fire-protection, rescue and emergency services to the community. Services such as firefighting, fire prevention and public education support the primary I function. _ The financial reporting entity includes all funds, functions and organizations over which the District's Board exercises oversight responsibility. Oversight responsibility is determined on the basis of financial interdependency, selection of governing authority, designation of management, ability to significantly influence operations and accountability for fiscal matters. B. Basis of Presentation + Fund Financial Statements The District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to assist management by segregating transactions related to certain government functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. L -6- i SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) The District records its transactions in the fund types described below: ' J Governmental Funds Governmental funds are those through which most governmental functions are financed. The acquisition, use and balances of expendable financial resources and the related liabilities are - accounted for through governmental funds. The measurement focus of the governmental funds is based upon determination of financial position and changes in financial position. The following are the District's governmental fund types: General Fund - the general fund is the principal operating fund of the District. It is used to account for all financial resources except those required to be accounted for in another fund. Capital Projects Fund - is primarily used to account for the financial resources used for the t acquisition,construction,renovation or major repair of capital facilities and other capital assets, such as equipment. _ Fiduciary Funds Fiduciary funds are used to account for assets held by the District in a trustee or custodial capacity. I I Agency Fund- the agency fund is used to account for money (and/or property) received and UFi held in the capacity of trustee,custodian,or agent. Account Groups Account groups are used to establish accounting control and accountability for the District's capital assets and general long-term obligations. The two account groups are not "funds". They are accounting entities, not fiscal entities and are concerned only with the measurement of financial position,and not with the results of operations. The District utilizes the following account groups: Non-Current Governmental Assets Account Group - the non-current governmental assets account group is used to account for land,buildings,improvements and equipment owned by the —` District. Non-Current Governmental Liabilities Account Group - the non-current governmental liabilities account group is used to account for all long-term debt and other obligations of the District. - C. Measurement Focus and Basis of Accounting The governmental fund statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized when measurable and available. The District considers all revenues reported in the governmental funds to be available if the revenues are collected within 60 days after the end of the fiscal year. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt and claims and judgments, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term debt and acquisitions under capital leases are reported as other financing sources. I t - 7- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) S D. Real Property Taxes Real property taxes are levied annually by the District no later than November 1St and become a lien on December 1St. The District's tax levy is collected by the Town of Southold and then remitted to the District from January to June. The County of Suffolk is responsible for all uncollected taxes. E. Interfund Transactions - The operations of the District include transactions between funds.These transactions maybe temporary in nature, such as with interfund borrowings.The District typically loans resources between funds for the purpose of providing cash flow.These interfund receivables and payables are expected to be repaid within one year. Permanent transfers of funds include transfers to provide financing for the acquisition, construction or renovation of major capital facilities or equipment. r � A detailed disclosure by individual fund for interfund receivables, payables, transfers in and transfers out is provided subsequently in these Notes to Financial Statements. F. Use of Estimates - The preparation of financial statements in conformity with a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America requires management to �� make estimates and assumptions that affect the reported amount of assets, liabilities, and disclosure of �- contingencies at the date of the financial statements and the reported revenues and expenditures during the reporting period. Accordingly, actual results could differ from those estimates. Estimates and assumptions are made in a variety of areas, including actuarial assumptions and methods underlying pension reporting. G. Cash j Cash consists of cash on hand, demand deposits and short-term investments with original maturities of ! three months or less from date of acquisition. Certain cash balances are restricted by various legal and contractual obligations,such as legal reserves. l H. Prepaid Items i' Prepaid items represent payments made by the District for which benefits extend beyond year end. These payments to vendors reflect costs applicable to future accounting periods and are recorded as assets on the Balance Sheet using the consumption method. Under the consumption method, a current asset for the prepaid item is recorded at the time of receipt and/or purchase and an expenditure is reported in the year the goods or services are consumed. A portion of fund balance has been classified as nonspendable to indicate that prepaids do not constitute available spendable resources. } I. Capital Assets Capital assets are reported in the non-current governmental assets account group at original cost,when the information is available, or estimated historical cost based on professional third-party information. Donated assets are reported at acquisition value at the date of donation.The capital threshold,the dollar value above which asset acquisitions are added to the capital assets accounts,is$1,000 for all assets. i_� -8- - � SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) Other Benefits Eligible District employees participate in the New York State and Local Employees' Retirement System. i Eligible volunteer firefighters and ambulance volunteers participate in the District sponsored Length of Service Award Program. District employees may choose to participate in the District's elective deferral compensation plan established under Internal Revenue Code Section 457. J K. Fund Balance The governmental fund statements report fund balance classifications according to the relative strength 1 vli of spending constraints placed on the purpose for which resources can be used,as follows: Nonspendable - Consists of amounts that are inherently nonspendable in the current period either because of their form or because they must be maintained intact.Nonspendable fund balance consists of prepaids,which are recorded in the general fund. Restricted-Consists of amounts that are subject to externally enforceable legal purpose restrictions L-1 imposed by creditors, grantors, contributors, or laws and regulations of other governments; or through constitutional provisions or enabling legislation.The District has established the following restricted fund balances: Debt Service r ! Unexpended balances of proceeds of borrowings for capital projects; interest and earnings from investing proceeds of obligations, and premium and accrued interest are recorded in the debt service fund and held until appropriated for debt payments.These restricted amount are accounted for in the general fund. Capital Reserve A Capital Reserve (General Municipal Law Section 6-g) is used to finance all or part of the costs of construction, reconstruction, or acquisition of "specific" or "type" capital improvements or - equipment. The establishment of any capital reserve is subject to mandatory referendum (voter approval). Expenditures from a "specific" reserve require a resolution by the Board of Fire Commissioners. Expenditures from a "type" reserve require a resolution by the Board of Fire Commissioners,subject to permissive referendum. Unspent Bond Proceeds Unspent bond proceeds are recorded as restricted fund balance because they are subject to -' external constraints contained in the bond agreement. These restricted funds are accounted for in the capital projects fund. Assigned-Consists of amounts that are subject to a purpose constraint that represents an intended use established by the District's Board of Commissioners. 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. Assigned fund balance includes encumbrances not classified as restricted at the end of the fiscal year. -9 - J J SOUTHOLD FIRE DISTRICT _ Notes to Financial Statements (Continued) - Unassigned-represents the residual classification for the District's general fund and could report a surplus or deficit. In funds other than the general fund,the unassigned classification should be used V only to report a deficit fund balance resulting from overspending of available resources. �j Fund Balance Classification Any portion of fund balance may be applied or transferred for a specific purpose either by voter approval if required by law or by formal action of the Board of Fire Commissioners if voter approval is not required. Amendments or modification to the applied or transferred fund balance must also be approved by formal action of the Board of Fire Commissioners. The Board of Fire Commissioners shall retain the authority to assign fund balance. j ! In circumstances where an expenditure is incurred for a purpose for which amounts are available in multiple fund balance classifications (e.g., expenditures related to reserves) the expenditure is to be spent first from the restricted fund balance to the extent that an approved permissive referendum is in place or the reserve has been appropriated by the Board of Fire Commissioners, and then from the assigned fund balance to the extent that there is an assignment and then from the unassigned fund balance. �I 2. STEWARDSHIP.COMPLIANCE AND ACCOUNTABILITY t A. Budgets The District administration prepares a proposed budget for approval by the Board for the general fund, the only fund with a legally adopted budget.Budgets are adopted annually on the modified accrual basis of accounting. Appropriations are established by the adoption of the budget,are recorded at the program line item level, and constitute a limitation on expenditures (and encumbrances) that may be incurred.Appropriations — authorized for the year are increased by the amount of encumbrances carried forward from the prior year.Appropriations lapse at the end of the fiscal year unless expended or encumbered. Encumbrances l will lapse if not expended in the subsequent year. Appropriations authorized for the current year can be funded by the planned use of specific reserves, and can be increased by budget amendments approved by the Board of Fire Commissioners as a result of selected new revenue sources not included in the original budget (when permitted by law) and appropriation of fund balances. These supplemental appropriations may occur subject to legal restrictions,if the Board of Fire Commissioners approves them because of a need that exists which was not determined at the time the budget was adopted. A summary ' of the general fund budget is as follows: Budget approved by the Board of Fire Commissioners $ 1,967,676 1 Encumbrances from prior year 12,500 Final Budget $ 1,980,176 i - 10- - SOUTHOLD FIRE DISTRICT r- Notes to Financial Statements (Continued) B. Encumbrances Encumbrance accounting is used for budget control and monitoring purposes and is reported as a part of the governmental funds. Under this method, purchase orders, contracts and other commitments for the expenditure of monies are recorded to reserve applicable appropriations. Outstanding encumbrances as of year-end are presented as part of assigned fund balance, unless classified as - restricted, 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. 3. 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 obligations of the U.S.Treasury and U.S.Agencies, repurchase agreements and obligations of New York State or its localities.Collateral is required for demand and time deposits and certificates of deposit not covered by FDIC insurance.Obligations that may be pledged i__i as collateral are obligations of the United States and its Agencies and obligations of New York State and its municipalities.Investments are stated at fair value. �i Custodial credit risk is the risk that in the event of a bank failure, the District may be unable to recover deposits or collateral securities that are in possession of an outside agency. GASB directs that deposits be disclosed as exposed to custodial credit risk if they are not covered by depository insurance and the deposits are as follows: A. Uncollateralized, B. Collateralized by securities held by the pledging financial institution,or C. Collateralized by securities held by the pledging financial institution's trust department or agent but not in the District's name. The District's aggregate bank balances were covered by FDIC insurance or fully collateralized by securities pledged on the District's behalf at year end. ,r I 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 l - Investment pool: The District participates in the Cooperative Liquid Assets Securities System - New York (NYCLASS), a _ multi-municipal cooperative investment pool agreement pursuant to New York State General Municipal Law Article 3-A and 5-G, whereby it holds a portion of the investments in cooperation with other participants.The investments are highly liquid and are considered to be cash equivalents.All NYCLASS investment and collateral policies are in accordance with General Municipal Law,Sections 10 and 11. Total investments of the cooperative at December 31, 2018 are $2,171,185,562, which consisted of $340,876,133 in repurchase agreements collateralized by a U.S. Government Agency Security, $1,597,558,337 in U.S. Treasury Securities and $232,751,092 in collateralized bank deposits, with ti various interest rates and due dates. I , -11- J SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) l—+ The following amounts are included as cash: Carrying Fund Amount General fund $ 341,456 General fund-Capital reserves 688,397 $ 1,029,853 The above amounts represent the cost of the investment pool shares,which approximates market value. -' The Lead Participant of NYCLASS is the Village of Potsdam.Additional information concerning NYCLASS, including the annual report,can be found on its website at www.newyorkclass.org. -- 4. CAPITAL ASSETS Capital assets balances and activity for the year ended December 31,2018,were as follows: Balance Balance December 31, December 31, ; 2017 Additions Deletions 2018 �- Land $ 670,752 $ - $ - $ 670,752 Construction work in progress 346,323 1,027,474 - 1,373,797 Buildings and improvements 3,501,501 10,039 - 3,511,540 j Equipment 4,240,590 112,776 (75,881) 4,277,485 ; I $ 8,759,166 $ 1,150,289 $ (75,881) $ 9,833,574 L;i 5. CAPITAL RESERVES —1 Activity for the capital reserves during the year under audit is as follows: i ' : Building Equipment - Reserve Reserve Total Reserve Balance-Beginning of Year $ 31,669 $ 961,119 $ 992,788 Additions to Reserve: Interest 548 13,523 14,071 — Planned budgeted increase 200,000 200,000 Reserve Balance-End of Year $ 32,217 $ 1,174,642 $ 1,206,859 -1 - 12 - SOUTHOLD FIRE DISTRICT Notes to Financial Statements ' (Continued) i 6. INTERFUND TRANSACTIONS `- Interfund balances at December 31, 2018,are as follows: r Interfund Receivables Payable !� General fund $ 2,004 $ Capital projects fund 2,004 $ 2,004 $ 2,004 The balance payable from the capital projects fund to the general fund represents $100 transferred to initially open a checldng account plus $1,904 of interest earned on bond proceeds that is now being accounted for in the debt service reserve. 7. LONG-TERM LIABILITIES Long-term liability balances and activity for the year are summarized below: Balance Balance Amounts JDecember 31, December 31, Due Within 2017 Additions Reductions 2018 One Year y } Long-term debt: Bonds payable $ 1,700,000 $ - $ 100,000 $ 1,600,000 $ 100,000 �! The general fund has typically been used to liquidate long-term liabilities. tJ A. Bonds Payable I '. Bonds payable are comprised of the following: Lt _ Outstanding at Issue Final Interest December 31, Description Date Maturity Rate 2018 --� Serial bond 12/1/2017 6/1/2032 2.236% $ 1,600,000 The following is a summary of debt service requirements for bonds payable: Fiscal Year Ending December 31, Principal Interest Total 2019 $ 100,000 $ 34,658 $ 134,658 2020 100,000 32,422 132,422 1 2021 100,000 30,186 130,186 2022 100,000 27,950 127,950 2023 100,000 25,714 125,714 2024-2028 600,000 90,558 690,558 2029-2032 500,000 22,360 522,360 Total $ 1,600,000 $ 263,848 $ 1,863,848 Interest on long-term debt for the year was$36,894. - 13 - i SOUTHOLD FIRE DISTRICT Notes to Financial Statements } (Continued) - . 8. PENSION PLANS A. New York State and Local Employees'Retirement System Plan Description The District participates in the New York State and Local Employees'Retirement System(ERS). This is a cost-sharing,multiple-employer defined benefit retirement system.The system provides retirement, disability,withdrawal and death benefits to plan members and beneficiaries related to years of service and final average salary. Provisions and Administration Obligation of employers and employees to contribute and benefits to employees are governed by the New York State Retirement and Social Security Law (NYSRSSL).The net position of ERS is held in the _ New York State Common Retirement Fund(the Fund),which was established to hold all net assets and record changes in plan net position allocated to the ERS.As set forth in the NYSRSSL,the Comptroller of the State of New York serves as the trustee of the Fund and is the administrative head of ERS.Once a public employer elects to participate in ERS, 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 ERS is included in the State's financial report as a pension trust fund. That report, including information with regard to benefits provided may be found at www.osc.state.ny.uslretire/publications/index.phl2 or may be obtained by writing to: New !—I York State and Local Employees' Retirement System,110 State Street,Albany,NY 12244. i Funding Policies Plan members who joined the system before July 27, 1976, are not required to make contributions. Those joining on or after July 27, 1976,and before January 1,2010,with less than ten years of credited services are required to contribute 3% of their salary. Those joining on or after January 1, 2010 and before April 1, 2012, are required to contribute 3% of their salary throughout active membership. Those joining on or after April 1, 2012, are required to contribute between 3% and 6% dependent on their salary throughout active membership. Employers are required to contribute at an actuarially determined rate based on covered salaries paid. For the ERS, the Comptroller annually certifies the - actuarially determined rates expressly used in computing the employers' contributions for the ERS' fiscal year ended March 31St, and employer contributions are either paid by December 15th less a 1% discount or by February 1St. The District paid 100% of the required contributions as billed by the ERS for the current year.The District's average contribution rate was 15.0%of covered payroll for the ERS' fiscal year ended March 31,2018. LJ The Comptroller annually certifies the actuarially determined rates expressly used in computing the employers' contributions based on salaries paid during the ERS' fiscal year ending March 31. The resulting contributions paid in the current year and two preceding years were equal to 100 percent of the contributions required,and were as follows: 2018 2017 2016 District contributions paid $ 28,140 $ 28,222 $ 27,814 �'. -14- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) B. Pension Liabilities At December 31, 2018,the District reported the following liability for its proportionate share of the net - pension liability for ERS in the non-current governmental liabilities account group. The net pension liability was measured as of March 31,2018.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 r pension liability was based on a projection of the District's long-term share of contributions to the system relative to the projected contributions of all participating members, actuarially determined. This information was provided by the ERS in reports provided to the District. Measurement date March 31,2018 District's proportionate share of the net pension asset/(liability) $ (13,936) District's portion of the Plan's total net pension asset/(liability) 0.0004318% Change in proportion since the prior measurement date (0.0000313) Actuarial Assumptions _ The total pension liability as of the measurement date was determined by using an actuarial valuation as _ noted in the table below,with update procedures used to roll forward the total pension liability to the measurement date.The actuarial valuations used the following actuarial assumptions: Measurement date March 31,2018 Actuarial valuation date April 1,2017 Inflation 2.5% Salary increases 3.8% r 1, Investment rate of return(net of investment expense,including inflation) 7.0% Cost of living adjustments 1.3% Annuitant mortality rates are based on April 1, 2010— March 31, 2015 system experience with adjustments for mortality improvements based on the Society of Actuaries'Scale MP-2014. The actuarial assumptions were based on the results of an actuarial experience study for the period April 1,2010—March 31,2015. 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 of 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 weighing the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. �f ' � - 15 - r-- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) The target allocation and best estimates of the arithmetic real rates of return for each major asset class are summarized as follows: Long-term Target Expected Rate Allocation of Return Measurement date March 31,2018 Asset type J Domestic equity 36.00 % 4.55 % t International equity 14.00 % 6.35 % Real estate 10.00 % 5.55 % Private equities 10.00 % 7.50 % Alternative investments 8.00 % 3.75-5.68% Bonds and mortgages 17.00 % 1.31 % r Cash 1.00 % (0.25)% Inflation indexed bonds 4.00 % 1.25 % 100.00 % Real rates of return are net of long-term inflation assumption of 2.5%. -, 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 determined. 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% for ERS, as well as what the District's proportionate share of the net pension asset/liability would be if it were calculated using a discount rate that is 1 percentage point lower(6.0%) or 1 percentage point higher(8.0%)than the current rate: J� Current 1% Decrease Assumption 1%Increase (6.00)% (7.00)% (8.00)% District's proportionate share of the net pension asset(liability) $ (105,441) $ (13,936) $ 63,474 L., r- -16- i -- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) - Pension Plan Fiduciary Net Position The components of the current-year net pension liability of the employers, rounded to the nearest thousand,as of the measurement date were as follows: ` - (Dollars in Thousands) Measurement date March 31,2018 Employers'total pension liability $ (183,400,590) Plan fiduciary net position 180,173,145 -- Employers'net pension liability $ (3,227,445) `J Ratio of plan fiduciary net position to the employers'total pension liability 98.24% Prepayment to the Pension Plan j Employer contributions are paid annually based on the System's fiscal year,which ends on March 31St. Annual payments are due February 1St.An employer can elect to prepay the amount due by December _ 15th to receive a 1% discount. The District paid the annual invoice in December, which resulted in a prepayment of$6,923 for the period January 1, 2019 through March 31, 2019. Employee contributions are remitted monthly. C. Length of Service Award Program(LOSAP) The District established a defined benefit LOSAP for the active volunteer firefighters of the Southold Fire Department. The program took effect on January 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.The information contained in this note is based on information for the Length of rService Award Program for the plan year ending on December 31, 2018. Program Description Participation, Vesting and Service Credit Active volunteer firefighters who have reached the age of 18 and who have completed 1 year of firefighting service are eligible to participate in the program.Participants acquire a non-forfeitable right to a service award after being credited with 5 years of firefighting services or upon attaining the j program's entitlement age.The program's entitlement age is age 62 and completion of 1 year of service. In general,an active firefighter is credited with a year of firefighting service for each calendar year after the establishment of the program which he or she accumulates fifty 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 5 years of firefighting service rendered prior to the establishment of the program. i -17- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) Benefits A participant's benefit under the program is life annuity with 10 years certain 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 40,and 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 Hometown/RSA Consultants to assist in the administration of the program. The designated program administrator's primary responsibility is to administer the plan for the exclusive benefit of the participants and their beneficiaries.Such duties include,but are not limited to,determining eligibility of firefighters to participate in the plan,compute participant entitlement, authorize disbursements to participants, compute necessary contribution amounts, maintain all necessary records and consult with the sponsor and the trustee on long-term investment plans. Disbursements of program assets for the payment of benefits or administrative expenses must be reviewed by the trustee,the Board of Fire Commissioners,and signed by at least two board members prior to being disbursed by the administrator. Program assets are required to be held in trust by LOSAP legislation, for the exclusive purpose of --; providing benefits to participants and their beneficiaries or for the purpose of defraying the reasonable expenses of the operation and administration of the program.The trust agreement is dated February 8, 2005,and the trustee is the Board of Fire Commissioners. Authority to invest program assets is vested in the administrator, with the Board of Fire Commissioners' prior written approval. Subject to restrictions in the program document, program _. assets are invested in accordance with a statutory"prudent person"rule.The program document calls for all investment decisions to be chosen and approved by the trustee, prior to being invested by the -� administrator. The sponsor is required to retain an actuary to determine the amount of the sponsor's contributions to the plan. The actuary retained by the sponsor for this purpose is BPAS Actuarial & Pension Services, LLC. Portions of the following information are derived from a report prepared by the actuary dated March 2019 for the plan year ended December 31,2018. - 18- -' SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) Program Financial Condition Assets and Liabilities Actuarial Present Value of Benefits at December 31,2018 $ 5,233,361 r} Less: i Assets Available for Benefits % of total Trust 1.85% $ 75,260 Annuities 80.28% 3,267,633 Insurance contracts 17.87% 727,408 Total Net Assets Available for Benefits 4,070,301 Total Unfunded Benefits 1,163,060 Less:Unfunded Liability for Prior Service (1,163,060) Unfunded Normal Benefits $ - Prior Service Costs - Prior service costs are being amortized over a range of 8 to 10 years at a discount rate of 5.00%. i Receipts and Disbursements Plan Net Assets,Beginning of Year $ 3,967,387 _ Changes during the year f - +Plan contributions $ 303,360 +Investment income earned 104,624 +Insurance receipts 52,942 +�-Changes in fair market value of investments (32,221) -Plan benefit withdrawals (325,791) 102,914 Plan Net Assets,End of Year $ 4,070,301 Contributions Maximum amount of sponsor's contribution recommended by actuary: $ 352,764 44; Minimum amount of sponsor's actual contribution: 341,231 Amount of sponsor's actual contribution: 303,360 -19- i SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) Normal Costs The actuarial valuation methodology used by the actuary to determine the sponsor's contribution is the unit credit cost method.The assumptions used by the actuary to determine the sponsor's contribution and the actuarial present value of benefits are: Assumed rate of return on investment 5.00% Mortality tables used for Withdrawal None Disability None Retirement RP-2000 Combined Table-Unisex Death(actives) None Death(inactives) None Other None D. Deferred Compensation Plan The District has established a deferred compensation plan in accordance with Internal Revenue Code §457 for all employees. The District makes no contributions in this Plan. The amount of$3,400 was deferred by eligible employees for the year ended December 31,2018. 9. COMMITMENTS AND CONTINGENCIES i A. Encumbrances i All encumbrances are classified as either restricted or assigned fund balance. At December 31,2018,the District encumbered the following amounts: . j Restricted: Capital Projects Fund Capital Outlay $ 204,297 Assigned:Fund Balance General Fund Fire protection 23,295 $ 227,592 i B. Risk Management !_ _I 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; and 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 for the past three years. -20- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) C. Litigation The District is not aware of any material,pending or threatened litigation claims against the District.The District is also unaware of any unasserted claims or assessments that would require financial statement disclosure. 10. SPENDING LIMITATION The District did not exceed the statutory spending limitation imposed by New York State Law for the year ended December 31,2018,and the budget for the year ending December 31,2019. i 11. SUBSEQUENT EVENT The District has evaluated subsequent events through the date of the auditor's report,which is the date the financial statements were available to be issued. No significant events were identified that would require adjustment of or disclosure in the financial statements. Z i I " j i -21- SOUTHOLD FIRE DISTRICT Schedule of Revenues,Expenditures and Changes in Fund Balance- Budget and Actual-General Fund-Operating For the Year Ended December 31,2018 i Board- Final Budget Approved Final Variance with Budget Budget Actual Actual REVENUES Real property taxes $ 1,942,020 $ 1,942,020 $ 1,942,051 $ 31 Interest and earnings 11,413 11,413 r_ Rentals 25,656 25,656 26,113 457 Sale of equipment 27,500 27,500 _I Refund of prior year expenditures 33,901 33,901 Miscellaneous 150 150 I J Total Revenues 1,967,676 1,967,676 2,041,128 $ 73,452 APPROPRIATED FUND BALANCE Prior year's encumbrances 12,500 Total Revenues and Appropriated Fund Balance $ 1,967,676 $ 1,980,176 Final Budget Variance with Year End Actual and Encumbrances Encumbrances EXPENDITURES Personal services $ 283,500 $ 305,000 281,201 $ $ 23,799 Equipment and capital outlay 140,000 130,000 117,923 12,077 Fire protection 646,426 667,430 574,591 23,295 69,544 State retirement system 38,000 29,500 28,140 11360 Service award program 360,000 362,492 361,742 750 Social security 21,500 22,000 21,508 492 Workers'compensation 70,000 67,504 62,028 5,476 - Medical and accident insurance 54,000 42,000 40,518 1,482 C Debt service-principal 100,000 100,000 100,000 - --- Debt service-interest 54,250 54,250 36,894 17,356 Total Expenditures 1,767,676 1,780,176 1,624,545 23,295 132,336 --t OTHER USES Operating transfers out 200,000 200,000 200,000 - Total Expenditures and Other Uses $ 1,967,676 $ 1,980,176 1,824,545 $ 23,295 $ 132,336 Net Change in Fund Balance 216,583 Fund Balance-Beginning of Year 606,340 Fund-Balance-End of Year $ 822,923 J i Note to Other Supplementary Information ii Budget Basis of Accounting Budgets are adopted on the modified accrual basis of accounting. See Paragraph on Other Supplementary Information Included in Auditor's Report -22- VINCENT D.CULLEN,CPA 1�_-i i�' (1950-2013) CULLEN &-DA�NQ�WSKI, LLP CERTIFIED PUB fICLACCO'UNTANTS ETES E.DAN IGUEZ,CPA PETER F RODRIGUEZ,CPA JILL S SANDERS,CPA DONALD J.HOFFMANN,CPA CHRISTOPHER V.REINO,CPA ALAN YU,CPA INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENTAVDITING STANDARDS To the Board of Fire Commissioners Southold Fire District Southold,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 financial statements of the Southold Fire District (District), as of and for the year ended December 31, 2018,and the related notes to financial statements,as listed in the table of contents,which collectively comprise the District's basic financial statements and have issued our report thereon dated May 31, 2019.As described more fully in Note 1,the Southold Fire District has prepared these financial statements i_n accordance with financial reporting provisions of the New York State Office of the State i Comptroller,which is a comprehensive basis of accounting other than accounting principles generally accepted -- in the United States of America. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the Southold Fire 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 opinions on the financial statements,but not for the purpose of expressing an opinion on the effectiveness of the Southold Fire District's internal control. Accordingly,we do not express an opinion on the effectiveness of the Southold Fire District's internal control. iJ 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 financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies,in internal control that is less severe than a material weakness,yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal I control that we consider to be material weaknesses.However,material weaknesses may exist that have not been identified. 1650 ROUTE 112,PORT JEFFERSON STATION,NEW YORK 11776-3060 - -23 - PHONE:631-473-3400•FAX:631-473-4863•WWW.CDLLP.NET i Compliance and Other Matters As part of obtaining reasonable assurance about whether the Southold Fire District's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements,noncompliance with which could have a direct and material effect on the determination of financial statement amounts.However,providing an opinion on compliance with those provisions was not an objective of our audit,and accordingly,we do not express such an opinion.The results of - our tests disclosed no instances of noncompliance or other matters that are required to be reported under { GovernmentAuditing Standards. Purpose of this Report .s The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing,and not to provide an opinion on the effectiveness of the District's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing - Standards in considering the District's internal control and compliance.Accordingly,this communication is not suitable for any other purpose. May 31, 2019 -24-