HomeMy WebLinkAbout2020 RECEIVED
MAY 2 9 2021
Southold Town Clerk
Cutchogue Fire District
ANNUAL FINANCIAL REPORT
December 31,2020
&COMPANY
TABLE OF CONTENTS
PAGE
INDEPENDENT AUDITOR'S REPORT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A
ANNUAL FINANCIAL REPORT UPDATE DOCUMENT
FINANCIAL SECTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
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 AUDITING STANDARDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
165 Orinoco Drive, Brightwaters, NY 11718
631.665.7040 Fax: 631.665.7014
NY 11050
15 South Bayles Avenue, Port
Washington,
516.883.5510
Fax: 516.767.7438
A PROFESSIONAL CORPORATION OF CERTIFIED PUBLIC ACCOUNTANTS www.sheehancpa.com
INDEPENDENT AUDITOR'S REPORT
To the Board of Fire Commissioners
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, 2020 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
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
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, 2020, or changes in its 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, 2020, 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
Our 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
auditing procedures applied in the audit of the Annual Financial Report Update Document and,
accordingly, we express no opinion on it.
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 April
12, 2021, 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.
Brightwaters, New York
April 12, 2021
Cutchogue FIRE DISTRICT
Statement of Indebtedness
For the Fiscal Year Ending 2020
O/S End
FirstDebtCopsCompDate ofDate ofInt.Amt. Orig.O/S Beg.PaidRedeemedPrior Yr.Accreted
of Year
YearCodeFlagFlagIssueMaturityRateIssuedof YearDur. YearBond Proc.Adjust.Interest
DescriptionVar?
Spartan ERV Fire Truck
$500,000
2017IPCE11/21/20262.594%11/21/2017$354,059$46,734$0$0$307,325
Cutchogue Fire District
NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT
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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, 2020 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. 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:
General Fund
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.
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Cutchogue Fire District
NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT
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1. Summary of significant accounting policies (continued):
Basis of presentation (continued):
Governmental (continued):
Service Award Program Fund
The Service Award Program Fund is used to account for and report financial
resources related to the District's length of service award program (LOSAP).
For reporting purposes, these funds are all combined and shown within the General
Fund.
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 holds
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.
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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 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
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.
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.
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Cutchogue Fire District
NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT
____
1. Summary of significant accounting policies (continued):
Fund balance (continued):
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
month from February 1.
The Town of Southold Receiver of Taxes collects all real estate taxes and 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.
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.
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Cutchogue Fire District
NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT
____
1. Summary of significant accounting policies (continued):
Newly adopted accounting standards: The District has adopted all current standards of
the Governmental Accounting Standards Board that are applicable. During 2020, the
District adopted Governmental Accounting Standards Board Statement No. 84, Fiduciary
Activities (GASB 84), effective for the year ending December 31, 2020. This standard
provides guidance for identifying fiduciary activities, primarily based on whether the
government is controlling the assets and the beneficiaries with whom the fiduciary
relationship exists and on how different fiduciary activities should be reported. As a
result, some activities previously reported within the Fiduciary Fund are reported within
the General Fund.
Subsequent events: Management has evaluated subsequent events through the date of
the report, which is the date the financial statements were available to be issued.
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.
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Cutchogue Fire District
NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT
____
2. Deposits with financial institutions and investments (continued):
The District's deposits held are categorized, based on the above criteria, as follows:
Category Amount
1 $ 250,000
2 1,956,507
3 -
4 -
Total $2,206,507
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.
3. Long-term liabilities:
Long-term liability activity for the year ended December 31, 2020 was as follows:
Beginning Ending
Balance Additions Reductions Balance
M&T Bank Equipment
Finance $354,059 $ - $(46,734) $307,325
Total $354,059 $ - $(46,734) $307,325
In 2017, the District entered into a lease purchase finance agreement with M&T Bank
Equipment Finance for the purchase of a 2017 Spartan Fire Truck that ends on November
21, 2026. 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%.
Maturities of long-term indebtedness, principal and interest, at December 31, 2020, are as
follows:
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Cutchogue Fire District
NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT
____
3. Long-term liabilities (continued):
Spartan Fire Truck (M&T) Installment lease:
Due in Fiscal Year Ended Principal Interest Total
2021 $ 47,961 $ 8,067 $ 56,028
2022 49,220 6,808 56,028
2023 50,512 5,516 56,028
2024 51,838 4,190 56,028
2025 53,199 2,830 56,029
2026 54,595 1,433 56,028
Total $307,325 $28,844 $336,169
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.
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Cutchogue Fire District
NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT
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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 1 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 1 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.
Tiers 3, 4 and 5
Eligibility: 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.
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Cutchogue Fire District
NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT
____
4. Pension Plan (continued):
Benefits provided (continued):
Tiers 3, 4 and 5 (continued)
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
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.
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Cutchogue Fire District
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
Consumer Price Index as published by the U.S. Bureau of Labor, but cannot be less than
1% 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.
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Cutchogue Fire District
NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT
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4. Pension Plan (continued):
Contributions (continued):
Generally, Tier 5 and 6 members are required to contribute for all years of service.
Under the authority of the 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
2020 $7,293
2019 6,465
2018 8,775
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, 2020.
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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, 2020, the District reported a
liability of $45,524 for its proportionate share of the net pension liability. The net pension
liability was measured as of March 31, 2020 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, 2020, the District's proportion was 0.0001719%.
For the year ended December 31, 2020, the District recognized pension expenditures of
$7,293. At December 31, 2020, 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 $ 2,679 $ -
Changes of assumptions 917 791
Net difference between projected and actual
earnings on pension plan investments 23,338 -
Changes in proportion and differences between
District contributions and proportionate share of
contributions 2,277 6,860
District contributions subsequent to the measurement
date 7,293 -
Total $36,504 $ 7,651
The $7,293 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, 2021. Other amounts
reported as deferred outflows of resources and deferred inflows of resources related to
pensions will be recognized in pension expense as follows:
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Cutchogue Fire District
NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT
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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
2021 $ 2,623
2022 5,853
2023 7,203
2024 5,880
Actuarial assumptions: The total pension liability at March 31, 2020 was determined
by using an actuarial valuation as of April 1, 2019 with update procedures used to roll
forward the total pension liability to March 31, 2020. The actuarial valuation used the
following actuarial assumptions:
Inflation 2.5%
Salary increases 4.2%
Investment rate of return (net of
investment expense, including
inflation) 6.8%
Cost-of-living adjustments 1.3%
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-2018. The previous actuarial valuation as of April 1, 2018 used the
Society of Actuaries' scale MP-2014.
The actuarial assumptions used in the April 1, 2019 valuation are based on the results of
an actuarial experience study for the period April 1, 2010 through 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 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.
The target allocation and best estimates of arithmetic real rates of return for each major
asset class as of March 31, 2020 are summarized below:
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Cutchogue Fire District
NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT
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4. Pension Plan (continued):
Actuarial assumptions (continued):
Long-term
Expected Real
Asset Class Target Allocation Rate of Return
Domestic equity 36.00% 4.05%
International equity 14.00 6.15%
Private equity 10.00 6.75%
Real estate 10.00 4.95%
Absolute return strategies (1) 2.00 3.25%
Opportunistic portfolio 3.00 4.65%
Real assets 3.00 5.95%
Bonds and mortgages 17.00 0.75%
Cash 1.00 0.00%
Inflation-indexed bonds 4.00 0.50%
100.00%
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.
Discount rate: The discount rate used to calculate the total pension liability was 6.8%.
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 6.8%, 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 (5.8%) or 1 percentage point higher (7.8%)
than the current rate:
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Cutchogue Fire District
NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT
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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
(5.8%) (6.8%) (7.8%)
District's proportionate share of
the net pension liability $83,549 $45,524 $10,502
Pension plan fiduciary net position: The components of the collective net pension
liability of the participating employers as of March 31, 2020 were as follows:
(Dollars in Thousands)
Employees' Retirement
System
Employers' total pension liability $ 194,596,261
Plan net position (168,115,682)
Employers' net pension liability $ 26,480,579
Ratio of plan net position to the employers'
total pension liability 86.39%
5. Length of Service Award Program (LOSAP):
The District's AUD is for the year ended December 31, 2020. However, the information
contained in this note is based on information for the LOSAP for the plan year ending on
February 28, 2021, which is the most recent plan year for which complete information is
available. The funding detail is for the period March 1, 2019 through February 29, 2020.
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.
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Cutchogue Fire District
NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT
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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 based on 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 Glatfelter Specialty
Benefits, Volunteer Firemen's Insurance Services, Inc. (VFIS), a division of Glatfelter
Insurance Group, 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.
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Cutchogue Fire District
NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT
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5. Length of Service Award Program (LOSAP) (continued):
Fiduciary investment and control (continued):
e) Participants' benefit calculation at time of severance or retirement.
f) 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.
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Cutchogue Fire District
NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT
____
5. Length of Service Award Program (LOSAP) (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 Gail E.
Johnson. The actuary reviewed the actuarial valuation of the plan prepared by VFIS and
issued a report dated June 8, 2020. Portions of the following information were derived
from a report prepared by VFIS dated June 3, 2020.
Program financial condition:
Assets and Liabilities
% of Total
Actuarial present value of accrued benefits at
February 29, 2020:
Vested $3,095,308
Non-vested 35,191
3,130,499
Present value of accrued post-entitlement benefits 474,931
Total present value of accrued benefits $3,605,430
Less assets available for benefits:
General investments 100% $2,654,187
Total net assets available for benefits 2,654,187(A)
Total unfunded normal benefits $951,243*
* 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 $2,654,187
Total present value of accrued benefits $3,605,430
Percent funded 73.6%
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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, 3/1/2019 $2,372,693
Changes during the year (increases/(decreases)):
Plan contributions $415,000
Fixed investment gain 81,212
Plan benefit withdrawals (209,208)
Administrative and other fees/charges (5,510)
281,494
Plan net assets, end of year, 2/29/2020 $2,654,187(A)
(A) This amount represents the net assets available for the payment of benefits as of February
29, 2020. The value being reported on page 3 of the AUD represents the asset value of
the Plan as of December 31, 2020.
Contributions
Amount of sponsor's contribution recommended by actuary $ 376,554
Amount of sponsor's actual contribution $ 409,490
Administration Fees
Fees paid to designated program administrator $ 5,510
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:
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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):
Assumed rate of return on investment 4.50%
Mortality tables used for:
Pre-retirement
Male N/A
Female N/A
Post-retirement
Male RP2000M>2030 0
Female RP2000F>2030 0
6. Commitments and contingencies:
Encumbrances: In the current year, the District has nine reported encumbrances in the
amount of $168,523. This amount is included in the assigned unappropriated fund
balance of $320,793 reported in the AUD. This amount is mainly for the purchase of a
Chief's Vehicle, Turnout gear, SCBA bottles and Dispatch software.
Assigned appropriated fund balance: The District, from time to time, will appropriate
a portion of its unassigned unappropriated fund balance. During 2020, no such
appropriation was made.
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.
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Cutchogue Fire District
NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT
____
7. Economic dependency:
For the year ended December 31, 2020, approximately 94% of the District's gross
revenues were derived from real property taxes provided by the Town of Southold.
8. 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,
2020 and future rental income is not readily determinable.
9. Coronavirus pandemic:
In March 2020, an outbreak of a new strain of Coronavirus, COVID-19, emerged as a
pandemic in New York State and across the United States leading to widespread business
shutdowns and significant volatility in the financial markets. To help blunt the spread of
COVID-19 and reduce the density of exposure, many businesses and organizations
temporarily ceased operations or began operating on a very limited or remote basis. The
Coronavirus outbreak is still evolving. The ultimate extent of the pandemic's impact on
the District will depend on future developments which are highly uncertain. Currently,
management is unable to quantify the potential effects of the pandemic on operations and
financial performance of the District.
10. Prior period adjustment:
The following restatement was performed to fund balance at the beginning of 2020 due to
a change in accounting principle resulting from the adoption of GASB 84, as required by
the regulatory basis of accounting prescribed by the New York State Office of the State
Comptroller in the current year. The implementation of GASB 84 eliminated the
District's use of the Agency Fund, which prior to adjustment at January 1, 2020 reflected
assets and liabilities of $2,707,249 and required the District to report its length of service
award program activity within the General Fund:
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Cutchogue Fire District
NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT
____
10. Prior period adjustment (continued):
General Fund
Service Award
Program Fund
Fund balance at January 1, 2020,
as previously presented $ -
Service award program assets 2,707,249
Fund balance at January 1, 2020,
as restated $ 2,707,249
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165 Orinoco Drive, Brightwaters, NY 11718
631.665.7040 Fax: 631.665.7014
15 South Bayles Avenue, Port Washington, NY 11050
516.883.5510
Fax: 516.767.7438
A PROFESSIONAL CORPORATION OF CERTIFIED PUBLIC ACCOUNTANTS www.sheehancpa.com
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 AUDITING 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, 2020 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 April 12, 2021.
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.
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An Independent Member of the BDO Alliance USA
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
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.
Brightwaters, New York
April 12, 2021
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