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HomeMy WebLinkAbout2020 lb 0v7H0RECEIVED AUG 021 DIST R�G Southold n Clerk SOUTHOLD FIRE DISTRICT P.O. BOX 908. SOUTHOLD, N.Y. 11971 (631) 765-4305 FAX (631) 765-5076 July 28, 2021 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, 2020 and ending on December 31, 2020. If you have should have any questions or problems,please do not hesitate to contact me at 765-4305, x 27. Si cerely, RECEIVED of A. Mil er Fire District Secretary AUG 3 2021 Southold Town Clerk Southold Fire District Financial Statements (Regulatory Basis) with Independent Auditor's Report December 31, 2020 SOUTHOLD FIRE DISTRICT Table of Contents December 31, 2020 Page Independent Auditor's Report 1 Financial Statements(Regulatory Basis) Balance Sheet-Governmental Funds and Account Groups 4 Statement of Revenues,Expenditures and Changes in Fund Balance-Governmental Funds 5 Notes to Financial Statements 6 Other Supplementary Information Schedule of Revenues,Expenditures and Changes in Fund Balance -Budget and Actual-General Fund-Operating 24 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 25 VINCENT D.CULLEN,CPA (1950-2013) CULLEN��&'D + -- O�VSKI, LLP JAMES E DANOWSKI,CPA CERTIFIED ftJ.BI IC ACCOUNTANTS PETER F.RODRIGUEZ,CPA JILL S.SANDERS,CPA DONALD J.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 Report on Financial Statements We have audited the accompanying financial statements (regulatory basis) of the Southold Fire District, as of and for the year ended December 31, 2020, 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 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. 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 GovernmentAuditing 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 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 District'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 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 financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 1 1650 ROUTE 112,PORT JEFFERSON STATION,NEW YORK 11776-3060 PHONE:631-473-3400•FAX:631-473-4863•WWW.CDLLP.NET i - 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. 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 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 31,2020,and the respective changes in financial position for the year then ended. Unmodified Opinion on Regulatory Basis of Accounting 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, 2020, 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. Changes in Accounting Principles As described in Note 2 to the financial statements,"Changes in Accounting Principles",the District eliminated the presentation of the Length of Service Award Program in the agency fund and presented the assets and restricted fund balance in the general fund.Accordingly,the District's beginning total fund balance was restated.In addition, the District recorded its total pension liability for the Length of Service Award Program in the non-current governmental liabilities account group. Other Matters Other Information 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 24 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. — -2- i - Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards,we have also issued our report dated June 29,2021,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 part of an audit performed in accordance with Government Auditing Standards in considering Southold Fire District's internal control over financial reporting and compliance. June 29,2021 i i—� -i I� L - 3- SOUTHOLD FIRE DISTRICT Balance Sheet-Governmental Funds and Account Groups December 31,2020 Governmental Funds Account Groups Non-Current Non-Current General Capital Governmental Governmental Fund Projects Assets Liabilities Total ASSETS Cash Unrestricted $ 908,823 $ 100 $ $ $ 908,923 Restricted 1,580,478 79,424 1,659,902 Accounts receivable 2,167 2,167 Due from other funds 3,539 3,539 Prepaids 53,515 53,515 Service award program 4,296,387 4,296,387 Land 715,686 715,686 Buildings and improvements 5,268,622 5,268,622 Equipment 4,630,903 4,630,903 Amount to be provided for retirement of long-term debt 6,792,902 6,792,902 Total Assets $ 6,844,909 $ 79,524 $ 10,615,211 $ 6,792,902 $ 24,332,546 LIABILITIES Accounts payable $ 68,614 $ $ $ $ 68,614 Accrued liabilities 11,720 11,720 Due to other funds 3,539 3,539 Bonds payable 1,400,000 1,400,000 Compensated absences payable 12,574 12,574 Net pension liability proportionate share 90,484 90,484 -- 5,289,844 5,289,844 Service award program Total Liabilities 80,334 3,539 - 6,792,902 6,876,775 FUND BALANCE Investment in non-current 10,615,211 10,615,211 governmental assets Nonspendable 53,515 53,515 Restricted: Debt service 3,439 3,439 1,543,982 Capital,equipment 1,543,982 Capital,building 33,057 33,057 Service award program 4,296,387 4,296,387 Unspent bond proceeds 75,985 75,985 Assigned:Unappropriated fund balance 190,905 190,905 Unassigned fund balance 643,290 643,290 Total Fund Balance 6,764,575 75,985 10,615,211 17,455,771 Total Liabilities and Fund Balance $ 6,844,909 $ 79,524 $ 10,615,211 $ 6,792,902 _L24,332,546 See Notes to Financial Statements -4 SOUTHOLD FIRE DISTRICT Statement of Revenues,Expenditures and Changes in Fund Balance-Governmental Funds For the Year Ended December 31,2020 General Fund Length of Total Capital Service Award Capital Governmental Operating Reserves Program Total Projects Funds REVENUES ' Real property taxes $ 2,018,290 $ $ $ 2,018,290 $ $ 2,018,290 Interest and earnings 1 3,746 11,397 155,685 170,828 170,828 Rentals 1 31,828 31,828 31,828 Insurance recoveries 8,619 8,619 8,619 Sale of equipment 19,990 19,990 19,990 Refund of prior year expenditures 4,479 4,479 4,479 Miscellaneous 1,244 1,244 1,244 Contributions 312,000 312,000 312,000 Total Revenues 2,088,196 11,397 467,685 2,567,278 2,567,278 EXPENDITURES Personal services 278,183 278,183 278,183 Equipment and capital outlay 564,066 564,066 564,066 Fire protection 525,831 5,800 531,631 531,631 State retirement system '31,314 31,314 31,314 Service award program 312,000 382,894 694,894 694,894 Social security ;21,281 21,281 21,281 Workers'compensation 64,948 64,948 64,948 Life insurance '51,294 51,294 51,294 1 Medical and accident insurance 31,147 31,147 31,147 Debt service-principal 100,000 100,000 100,000 Debt service-interest 32,155 32,155 32,155 Total Expenditures 2,012,219 388,694 2,400,913 2,400,913 Excess(Deficiency)of Revenues Over Expenditures 75,977 11,397 78,991 166,365 - 166,365 OTHER FINANCING SOURCES(USES) Operating transfers in 100,000 100,000 100,000 Operating transfers out (100,000) (100,000) (100,000) Total Other Financing Sources(Uses) (100,000) 100,000 - - - - Net Change in Fund Balance (24,023) 111,397 78,991 166,365 - 166,365 Fund Balance-Beginning of Year,as Restated 915,172 1,465,642 4,217,396 6,598,210 75,985 6,674,195 Fund Balance-End of Year $ 891,149 $ 1,577,039 $ 4,296,387 $ 6,764,575 $ 75,985 $ 6,840,560 i J r� ,r- ; i See Notes to Financial Statements -5- SOUTHOLD FIRE DISTRICT v Notes to Financial Statements 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the Southold Fire District (District) as of and for the year ended December 31, 2020,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 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: A. Financial Reporting Entity The District is a district corporation and political subdivision of the state of New York, distinct from the 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 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. 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 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 T with a self-balancing set of accounts. -6- SOUTHOLD FIRE DISTRICT �J Notes to Financial Statements - (Continued) The District records its transactions in the fund types described below: 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 acquisition,construction,renovation or major repair of capital facilities and other capital assets. 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. J C. Measurement Focus and Basis of Accounting Measurement focus describes what type of information is reported,and is either the economic resources measurement focus or the current financial resources measurement focus. The economic resources measurement focus reports all assets,liabilities and deferred resources related to a given activity,as well as transactions of the period that affect net position.For example,all assets,whether financial (e.g.,cash and receivables) or capital (e.g., property and equipment) and liabilities (including long-term debt and --, obligations)are reported.The current financial resources measurement focus reports more narrowly on assets,liabilities and deferred resources that are relevant to near-term liquidity,along with net changes resulting from transactions of the period. Consequently, capital assets and the unmatured portion of long-term debt and certain other liabilities the District would not expect to liquidate currently with expendable available financial resources (e.g., compensated absences for employees still in active service)would not be reported. Basis of accounting describes when changes are recognized,and is either the accrual basis of accounting or the modified accrual basis of accounting. The accrual basis of accounting recognizes changes in net position when the underlying event occurs,regardless of the timing of related cash flows.The modified accrual basis of accounting recognizes changes only at the point they affect near-term liquidity. - 7- L_ SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) The governmental fund financial 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, claims and judgments, pension costs and compensated absences, 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. D. Real PropertyTaxes 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 may be 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. A detailed disclosure by individual fund for interfund receivables and payables 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 v assumptions are made in a variety of areas, including compensated absences, pension costs, other postemployment benefits. G. Cash 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 y and debt agreements. H. Receivables Receivables are shown net of an allowance for uncollectibles, if any. However, no allowance for uncollectibles has been provided since it is believed that such allowance would not be material. -8- r-� l SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) I. Prepaid Items 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. J. 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. K. Employee Benefits-Compensated Absences Compensated absences consist of unpaid accumulated sick leave. Sick leave eligibility and accumulation is specified in District policy. Upon retirement, resignation or death,employees may contractually receive a credit towards their health insurance obligation. The liability for compensated absences has been calculated using the vesting method and an accrual for --, that liability is included in the non-current governmental liabilities account group. The compensated absences liability is calculated based on the pay rates in effect at year-end. In the fund financial statements, a liability is reported only for payments due for unused compensated absences for those employees that have obligated themselves to separate from service with the District by December 31st. L. Other Benefits Eligible District employees participate in the New York State and Local Employees'Retirement System. 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. M. Fund Balance The governmental fund statements report fund balance classifications according to the relative strength 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. -9- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) 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. The District has established the following restricted fund balances: Restricted for Debt Service 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.These reserves are accounted for in the general fund. Reserve for Service Award Program The District sponsors a defined benefit service award program for its volunteer EMS/Ambulance workers and is legally responsible for annual contributions to the program. The program is administered through a trust. Payments made from the program are made from general assets, which are subject to the claims of the District's creditors. The Trust does not meet the criteria of GASB Statement No. 73, paragraph 4 because the assets are not protected from the District's creditors.The District reports the assets and restricted fund balance in the general fund. Restricted for 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. i 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 only to report a deficit fund balance resulting from overspending of available resources. - 10- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) 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. 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 to the extent appropriated by any Board approved budget revision, then from the assigned fund balance to the extent appropriated by the Board of Fire Commissioners, and then from the unassigned fund balance. 2. CHANGES IN ACCOUNTING PRINCIPLES For the fiscal year ended December 31,2020,the District eliminated the presentation of the Length of Service Award Program in the agency fund, presented the assets and restricted fund balance in the general fund, and reported the length of service award liability in the non-current governmental liabilities account group in accordance with the financial reporting provisions of the New York State Office of the State Comptroller, and provided by GASB Statement No.73,Accounting and Financial Reporting for Pensions and Related Assets _ thatAre Not within the Scope of GASB Statement 67 and 68 and GASB Statement No. 84,Fiduciary Activities. The New York State Office of the State Comptroller does not require the recognition of the related expense, - deferred outflows of resources and!deferred inflows of resources as provided by GASB Statement No. 73. j 3. STEWARDSHIP COMPLIANCE AND ACCOUNTABILITY A. Budgets The District administration prepares a proposed budget for approval by the Board of Fire Commissioners - 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 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 $ 2,050,487 Encumbrances from prior year 328,566 Final Budget $ 2,379,053 - - 11- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) : I 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 4 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 i commitment is paid. 4. DEPOSITS WITH FINANCIAL INSTITUTIONS AND INVESTMENTS CThe 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 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. 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 letters of credit on the District's behalf at year end. ! 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. 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, 2020 are $3,103,788,488, which consisted of $200,211,058 in repurchase agreements collateralized by a U.S. Government Agency Security, $240,172,031 in U.S. Treasury Notes, $1,661,660,665 in Treasury Bills, and $1,001,744,734 in collateralized bank deposits,with various interest rates and due dates. i - - 12 - I SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) The following amounts are included as cash: Carrying Fund Amount General fund $ 304,230 General fund-Capital reserves 1,576,785 $ 1,881,015 I 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. S. CAPITAL ASSETS Capital assets balances and activity for the year ended December 31, 2020,were as follows: Balance Balance December 31, December 31, 2019 Additions Deletions 2020 Land $ 715,686 $ $ $ 715,686 Buildings and improvements 5,264,488 4,134 5,268,622 Equipment 4,317,774 487,035 (173,906) 4,630,903 $ 10,297,948 $ 491,169 $ (173,906) $ 10,615,211 I - 6. CAPITAL RESERVES Activity for the capital reserves during the year under audit is as follows: Building Equipment Reserve Reserve Total Reserve Balance-Beginning of Year $ 32,888 $ 1,432,754 $ 1,465,642 Additions to Reserve: Interest 169 11,228 11,397 Budgeted transfer to reserve 100,000 100,000 Reserve Balance-End of Year $ 33,057 $ 1,541,982 $ 1,577,039 - 13- i SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) 7. INTERFUND TRANSACTIONS Interfund balances at December 31, 2020,are as follows: Interfund Receivables Payable General fund $ 3,539 $ ^� Capital projects fund 3,539 $ 3,539 $ 3,539 The balance payable from the capital projects fund to the general fund represents $100 transferred to initially open a checlang account plus $3,439 of interest earned on bond proceeds that is now being accounted for in the debt service reserve. 8. LONG-TERM LIABILITIES A. Changes Long-term liability balances and activity for the year are summarized below: Balance Balance Amounts December 31, December 31, Due Within 2019 Additions Reductions 2020 One Year Long-term debt: Bonds payable $ 1,500,000 $ $ 100,000 $ 1,400,000 $ 100,000 Other long-term liabilities Compensated absences 8,332 4,242 12,574 - $ 1,508,332 $ 4,242 $ 100,000 $ 1,412,574 $ 100,000 The general fund has typically been used to liquidate long-term liabilities. Additions and reductions to compensated absences are shown net since it is impractical to separately determine these amounts. The maturity of compensated absences is not determinable. B. Bonds Payable Bonds payable are comprised of the following: Outstanding at Issue Final Interest December 31, Description Date Maturity Rate 2020 Serial bond-improvements to Fire District facilities 12/1/2017 6/1/2032 2.236% $ 1,400,000 i - 14- '� i SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) The following is a summary of debt service requirements for bonds payable: Year Ending December 31, Principal Interest Total 2021 $ 100,000 $ 30,186 $ 130,186 2022 100,000 27,950 127,950 2023 100,000 25,714 125,714 2024 100,000 23,478 123,478 2025 125,000 20,962 145,962 2026-2030 625,000 62,888 687,888 2031-2032 250,000 5,590 255,590 Total $ 1,400,000 $ 196,768 $ 1,596,768 Interest on long-term debt for the year was$32,155. 9. PENSION PLAN-NEW YORK STATE 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.us/retire/publications/index.pbp or may be obtained by writing to: New York State and Local Employees'Retirement System, 110 State Street,Albany,NY 12244. 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 - 15- I � SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) 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 15.05%of covered payroll for the ERS' fiscal year ended March 31, 2020. 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: 2020 2019 2018 District contributions paid $ 31,314 $ 28,841 $ 28,140 B. Pension Liabilities At December 31, 2020,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 31,2020.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 liabilitywas 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, 2020 District's proportionate share of the net pension liability $ 90,484 District's portion of the Plan's total net pension liability 0.0003417% Change in proportion since the prior measurement date (0.0000118) 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 31,2020 Actuarial valuation date April 1,2019 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 - March 31, 2015 system experience with adjustments for mortality improvements based on the Society of Actuaries' MP-2018. The actuarial assumptions were based on the results of an actuarial experience study for the period April 1, 2010 - March 31, 2015. -16- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) 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 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 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, 2020 Asset type Domestic equity 36.00 % 4.05 % International equity 14.00 % 6.15 % Real estate 10.00 % 4.95 % Private equities 10.00 % 6.75 % Alternative investments 8.00 % 3.25-5.95% Bonds and mortgages 17.00 % 0.75 % Cash 1.00 % 0.00 % Inflation indexed bonds 4.00 % 0.50 % 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 6.8% (the discount rate used at the prior year's measurement date of March 31, 2019, 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. ij - 17- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) 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% 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 (5.8%) or 1 percentage point higher(7.8%)than the current rate: Current 1%Decrease Assumption 1% Increase 5.80% 6.80% 7.80% District's proportionate share of the net pension asset(liability) $ (166,064) $ (90,484) $ (20,875) 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, 2020 Employers'total pension liability $ (194,596,261) Plan fiduciary net position 168,115,682 Employers'net pension liability $ (26,480,579) Ratio of plan fiduciary net position to the employers'total pension liability 86.39% ! Prepayment to the Pension Plan 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$8,010 for the period January 1, 2021 through March 31, 2021. Employee contributions are remitted monthly. 10. LENGTH OF SERVICE AWARD PROGRAM (LOSAPI A. General Information The District established a single employer 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 Service Award Program for the plan year ending on December 31,2020. - 18- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) B. 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 program's entitlement age.The program's entitlement age is age 62 and completion of 1 year of service. J`! 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. A participant becomes 100% vested upon earning 5 years of service credit, attaining the entitlement age while an active member, becoming totally or permanently disabled, or upon death. Benefits are forfeited when a participant's membership is terminated and the participant has less than 5 years of credited service. 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. Participants At the December 31, 2020 measurement date, the following participants were covered by the benefit terms: Inactive participants: Currently receiving benefits 87 Entitled to but not yet receiving benefit payments 31 Active participants 80 - 198 Contributions New York State General Municipal Law §219-d (1) requires the Town Board to contribute to an actuarially determined contribution on an annual basis.The actuarially determined contribution shall be appropriated annually by the Town Board. Trust Assets Although assets have been accumulated in an irrevocable trust such that assets are dedicated to providing pensions to plan members in accordance with benefit terms, the trust assets are not legally protected from creditors of the District. As such,the trust assets do not meet the criteria in paragraph 4 - of GASB Statement No.73. C. Fiduciary Investment and Control Service credit is determined by the governing board of the sponsor,based on information certified to the - 19 - SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) 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/Firefighters Services 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 April 2021 for the plan year ended December 31,2020. D. Program Financial Condition i _ Assets and Liabilities i ' Actuarial Present Value of Benefits at December 31,2020 $ 5,289,844 Less: Assets Available for Benefits %of total Cash 1.07% $ 45,848 Annuities 77.35% 3,323,321 Insurance contracts 21.58% 927,218 Total Net Assets Available for Benefits 4,296,387 Total Unfunded Benefits 993,457 Less:Unfunded Liability for Prior Service (993,457) Unfunded Normal Benefits $ -20- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) Prior Service Costs Prior service costs are being amortized over a range of 6 to 10 years at a discount rate of 5.00%. - Receipts and Disbursements ' I !LJ Plan Net Assets,Beginning of Year $ 4,217,396 Changes during the year +Plan contributions $ 312,000 f +Investment income earned 155,685 -Plan benefit withdrawals (382,894) -Administrative fees (5,800) 78,991 Plan Net Assets,End of Year $ 4,296,387 Contributions Maximum amount of sponsor's contribution recommended by actuary: $ 387,375 Minimum amount of sponsor's actual contribution: 359,442 Amount of sponsor's actual contribution: 312,000 Sponsor's contribution recommended by actuary for the 2020 plan year Maximum amount $ 364,466 Minimum amount 321,676 Administration Fees Fees paid to designated program administrator $ 5,800 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-Unisex Death(actives) None Death(inactives) None Other None - 21 - SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) The actuarial valuation methodology used by the actuary to determine the sponsor's accrued benefits liability is the unit credit cost method. The assumptions used by the actuary to determine the sponsor's accrued benefits liability and the actuarial present value of benefits are: Interest rate: 6.00% compounded annually Retirement: 1994 GAR-Male The assumed rate of return on investment used in determining the sponsor's contributions was 5%and the mortality table used was the RP2000 Combined-Unisex for the years ended December 31, 2020 and 2019, respectively. The interest rate and the mortality tables used in determining the accrued benefit liability change was 6% and the 1994 GAR-Male, for the years ended December 31, 2020 and 2019, respectively. 11. 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 deferred by eligible employees for the year ended December 31,2020 totaled$4,365. 12. RESTATEMENT OF FUND BALANCE For the fiscal year ended December 31,2020,the District eliminated the presentation of the Length of Service Award Program in the agency fund, presented the assets and restricted fund balance in the general fund, and reported the length of service award liability in the non-current governmental liabilities account group in accordance with the financial reporting provisions of the New York State Office of the State Comptroller, and provided by GASB Statement No.73,Accounting and Financial Reporting for Pensions and Related Assets that Are Not within the Scope of GASB Statement 67 and 68 and GASB Statement No. 84,Fiduciary Activities. The New York State Office of the State Comptroller does not require the recognition of the related expense, deferred outflows of resources and deferred inflows of resources as provided by GASB Statement No. 73. Accounting changes adopted to conform to the provisions of the statement are to be applied retroactively and reported as a restatement of beginning net position and fund balance.Accordingly,the beginning fund balance of the general fund was restated as follows: General Fund Agency Fund Balance Fund Balance Balance,beginning of year,as previously stated $ 2,380,814 $ 4,217,396 GASB Statement No.73 implementation Beginning service award asset 4,217,396 (4,217,396) Balance,beginning of year,as restated $ 6,598,210 $ - 13. COMMITMENTS AND CONTINGENCIES A. Encumbrances - All encumbrances are classified as either restricted or assigned fund balance. At December 31,2020,the District encumbered the following amounts: -22- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) Assigned:Fund Balance General Fund Equipment and capital outlay $ 147,355 Fire protection 43,550 i ` ` $ 190,905 B. Grants - The District has received grants, which are subject to audit by agencies of the state and federal governments.Such audits may result in disallowances and a request for a return of funds.Based on prior audits,the District's administration believes disallowances,if any,would be immaterial. C. Risk Management 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. There have been no significant reductions in insurance coverage as compared to the prior year,and settled claims from these risks have not exceeded commercial insurance coverage for the past three years. D. 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. 14. SPENDING LIMITATION The District did not exceed the statutory spending limitation imposed by New York State Law for the year ended December 31, 2020,and the budget for the year ending December 31,2021. 15. 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. -23 - SOUTHOLD FIRE DISTRICT - Schedule of Revenues,Expenditures and Changes in Fund Balance- Budget and Actual-General Fund-Operating For the Year Ended December 31,2020 Board- Final Budget Approved Final Variance with Budget Budget Actual Actual REVENUES Real property taxes $ 2,018,261 $ 2,018,261 $ 2,018,290 $ 29 Interest and earnings 5,000 5,000 3,746 (1,254) Rentals 27,226 27,226 31,828 4,602 Insurance recoveries 8,619 8,619 Sale of equipment 19,990 19,990 Refund of prior year expenditures 4,479 4,479 Miscellaneous 1,244 1,244 j Total Revenues 2,050,487 2,050,487 2,088,196 $ 37,709 I_ APPROPRIATED FUND BALANCE Prior year's encumbrances 328,566 Total Revenues and Appropriated Fund Balance $ 2,050,487 $ 2,379,053 Final Budget Variance with Year End Actual and Encumbrances Encumbrances EXPENDITURES Personal services $ 301,500 $ 278,185 278,183 $ $ 2 Equipment and capital outlay 425,000 744,295 564,066 147,355 32,874 Fire protection 552,500 583,150 525,831 43,550 13,769 State retirement system 30,000 32,042 31,314 728 Service award program 368,000 313,094 312,000 1,094 Social security 23,065 21,865 21,281 584 Workers'compensation 70,000 70,000 64,948 5,052 Life insurance 56,000 51,294 4,706 Medical and accident insurance 48,000 48,000 31,147 16,853 Debt service-principal 100,000 100,000 100,000 - Debt service-interest 32,422 32,422 32,155 267 Total Expenditures 1,950,487 2,279,053 2,012,219 190,905 75,929 OTHER FINANCING USES Operating transfers out 100,000 100,000 100,000 - { Total Expenditures and { Other Financing Uses $ 2,050,487 $ 2,379,053 2,112,219 $ 190,905 $ 75,929 Net Change in Fund Balance (24,023) I � Fund Balance-Beginning of Year 915,172 Fund Balance-End of Year $ 891,149 L� Note to Other Supplementary Information Budget Basis of Accountine Budgets are adopted on the modified accrual basis of accounting. See Paragraph on Other Supplementary Information Included in Auditor's Report -24- VINCENT D.CULLEN,CPA O (1950-2013) CULLEN jf&'U11. SKI, LLP ET CERTIFIED P -B.L�ICLACCO�UNTANTS ES E.DAN ,CPA PETER F RODRIGUEZGUEZ,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 GOVERNMENT AUDITING 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, 2020,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 June 29, 2021.As described more fully in Note 1, the Southold Fire District has prepared these financial statements in accordance with 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. 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. 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 control that we consider to be material weaknesses.However,material weaknesses may exist that have not been identified. 16SO ROUTE 112,PORT JEFFERSON STATION,NEW YORK 11776-3060 - 25 - PHONE: 25 - PHONE:631-473-3400•FAX:631-473-4863•WWW.CDLLP.NET 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 Government Auditing Standards. We noted certain matters that we have reported to the Board of Fire Commissioners and management of the Southold Fire District in a separate letter dated June 29,2021. Purpose of this Report r 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. June 29,2021 - 26-