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HomeMy WebLinkAbout2023 I II � i ypuTHp�O RF D157R�G SOUTHOLD FIRE DISTRICT P.O. BOX 908. SOUTHOLD, N.Y. 11971 (631) 765-4305 FAX (631) 765-5076 July 10, 2024 RECEIVED Town of Southold JUL 1 1 2024 Southold Town Hall Main Road, P.O. Box 1179 Southold,New York 11971 Southold Town Clerk 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, 2023 and ending on December 31, 2023. If you have should have any questions or problems, please do not hesitate to contact me at 765-4305, x 27. Sincerely, et�x� Carol A. Miller Fire District Secretary i it I i I i I � i I I Southold fire District Financial Statements (Regulatory Basis) with Independent Auditor's Report December 31, 2023 111 II I � I SOUTHOLD FIRE DISTRICT Table'of Contents December 31,2023 - Paee 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 I - Notes to Financial Statements 6 Supplementary Information Schedule of Revenues,Expenditures,and Changes in Fund Balance -Budget and Actual-General Fund-Operating 26 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 27 , I II i i i I I CULLEN ; & DANOWSKI, LLP CERTIFIED.UCLACCOUNTANTS INDEPENDENT AUDITOR'S REPORT To the Board of Fire Commissioners Southold Fire District Southold,New York a � Report on the Audit of the Financial Statements I ' Opinions We have audited the accompanying financial statements (regulatory basis) of the Southold Fire District (District), as of and for the year ended December 31, 2023, and the related notes to the financial statements, which collectively comprise the District's basic financial statements as listed in the table of contents. I 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, 2023,and the 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. 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" section of our report,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, 2023, and the respective changes in financial position for the year then ended. Basis for Opinions We conducted our audit in accordance with auditing standards generally accepted in the United States of -- America.Our responsibilities under those standards are further described in the"Auditor's Responsibilities for the Audit of the Financial Statements"section of our report.We are required to be independent of the District and to meet our other ethical responsibilities,in accordance with the relevant ethical requirements relating to our audit.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. i — - 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, "Summary of Significant Accounting Policies" 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 and pervasive. Responsibilities of Management 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. In preparing the financial statements, management;is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the District's ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly:thereafter. Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,whether due to fraud or error,and to issue an auditor's report that includes our opinions.Reasonable assurance is a high level of assurance but is not absolute assurance and,therefore,is not a guarantee that an audit conducted in accordance with-generally accepted auditing standards will always detect a material misstatement when it exists.The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error,as fraud may involve collusion,forgery,intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with generally'accepted auditing standards,we: • Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements,whether due to fraud 1 or error,and design and perform audit procedures responsive to those risks.Such procedures include examining,on a test basis,evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit 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,no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management,as well as evaluate the overall presentation of the financial statements. -Z- it I I Conclude whether, in our judgment, there are conditions or events, considered in the aggregate,that - raise substantial doubt about the District's ability to continue as a going concern for a reasonable period of time. - We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit,significant audit findings, and certain internal control-related matters a that we identified during the audit. a Supplementary 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 accompanying schedule of revenues, expenditures,and changes in fund balance-budget and actual-general fund-operating on page 26 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such 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.The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including { I' 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 schedule of revenues,expenditures,andichanges in fund balance-budget and actual-general fund -operating is fairly stated,in all material respects,ins relation to the basic financial statements as a whole on the basis of accounting described in Note 1. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards,we have also issued our report dated June 24,2024,on our j 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 I internal control over financial reporting and compliance. June 24,2024 II li -3- t ', I I SOUTHOLD FIRE DISTRICT Balance Sheet-Governmental Funds and Account Groups _ December 31,2023 -, Governmental Funds Account Groups I Non-Current Non-Current General Capital Governmental Governmental Fund Projects Assets Liabilities Total ASSETS Cash and cash equivalents Unrestricted $ 876,150 $ 3,642 $ $ $ 879,792 Restricted 2,263,494 56,131 2,319,625 Accounts receivable 14,214 14,214 Due from other funds 3,642 3,642 Lease receivable 209,890 209,890 Prepaids �90,043 90,043 Length of service award program 5,045,851 5,045,851 Land 722,972 722,972 Buildings and improvements 5,491,901 5,491,901 -- Equipment 4,654,594 4,654,594 Amount to be provided for retirement of long-term liabilities 6,420,561 6,420,561 Total Assets $ 8,503,284 $ 59,773 $ 10,869,467 $ 6,420,561 $ 25,853,085 - LIABILITIES Accounts payable $ 89,690 $ $ $ $ 89,690 _ Accrued liabilities 14,756 14,756 Due to other funds 3,642 3,642 Bonds payable 1,100,000 1,100,000 Compensated absences payable 16,035 16,035 Net pension liability-proportionate share 111,212 111,212 Length of service award program 5,193,314 5,193,314 Total Liabilities 104,446 3,642 6,420,561 6,528,649 DEFERRED INFLOWS OF RESOURCES Deferred leases 209,890 209,890 FUND BALANCE !__I Investment in non-current governmental assets 10,869,467 10,869,467 Nonspendable:prepaids 90,043 90,043 Restricted: Debt 3,542 3,542 1__ Capital,equipment 2,224,735 2,224,735 Capital,building 35,217 35,217 Length of service award program 5,045,851 5,045,851 I' Unspent bond proceeds 56,131 56,131 Assigned:unappropriated 86,252 86,252 Unassigned 703,308 703,308 Total Fund Balance 8,188,948 56,131 10,869,467 - 19,114,546 Total Liabilities,Deferred Inflows of Resources,and Fund Balance $ 8,503,284 $ 59,773 $ 10,869,467 $ 6,420,561 $ 25,853,085 l- I' See Notes to Financial Statements -4- L� 1 r SOUTHOLD FIRE DISTRICT Statement of Revenues,Expenditures,and Changes in Fund Balance-Governmental Funds For the Year Ended December 31,2023 - General Fund Length of Total L ; Capital Service Award Capital Governmental Operating Reserves Program Total Projects Funds REVENUES Real property taxes $ 2,128,692 $ $ $ 2,128,692 $ $ 2,128,692 j Other tax items 20,899 20,899 20,899 Interest and investment gains 44,116 90,595 270,686 405,397 405,397 _ Rentals 28,042 28,042 28,042 Insurance recoveries 7,415 7,415 7,415 Refund of prior year expenditures 1,535 1,535 1,535 Miscellaneous 246 246 246 Contributions 415,000 415,000 415,000 Total Revenues 2,230,945 90,595 685,686 3,007,226 3,007,226 L_+ EXPENDITURES Personal services 320,363 320,363 320,363 Equipment and capital outlay 160,613 160,613 160,613 Fire protection 566,038 566,038 566,038 State retirement system 26,183 26,183 26,183 - Length of service award program 415,000 412,124 827,124 827,124 Social security 24,039 24,039 24,039 Workers'compensation 47,013 47,013 47,013 Life insurance 75,819 75,819 75,819 Medical and accident insurance 26,731 26,731 26,731 Debt service-principal 100,000 100,000 100,000 Debt service-interest 25,714 25,714 25,714 Total Expenditures 1,787,513 412,124 2,199,637 2,199,637 Excess of Revenues 1 Over Expenditures 443,432 90,595 273,562 807,589 807,589 OTHER FINANCING SOURCES(USES) Operating transfers in 6,618 550,000 556,618 556,618 Operating transfers out (550,000) (550,000) (6,618) (556,618) j Total Other Financing Sources(Uses) (543,382) 550,000 - 6,618 (6,618) - f I 7- Net Change in Fund Balance (99,950) 640,595 273,562 814,207 (6,618) 807,589 Fund Balance-Beginning of Year 983,095 1,619,357 4,772,289 7,374,741 62,749 7,437,490 Fund Balance-End of Year $ 883,145 $ 2,259,952 $ 5,045,851 $ 8,188,948 $ 56,131 $ 8,245,079 d, I � See Notes to Financial Statements -5- I SOUTHOLD FIRE DISTRICT 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, r 2023,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 Statement No. 34 financial statements require the presentation of government-wide financial statements,and management's discussion and analysis.The accounting practices used to prepare 7 these financial statements do not require compliance with GASB Statement No.34. The significant accounting policies of the District are described below: i' 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 fire 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 ti General Municipal Law(GML)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 that 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 �I influence operations,and accountability for fiscal matters. B. Basis of Presentation -, Fund Financial Statements The District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to assist management by segregating transactions related to certain government functions or activities. A fund is a separate accounting entity with aself-balancing set of accounts. -6- r I SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) t , The District records its transactions in the fund types described below: r- Governmental Funds I 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 the determination of financial position and changes in financial position. The District utilizes the following 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. r 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 i 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: i F7; 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. t Non-Current Governmental Liabilities Account Group - the non-current governmental liabilities account group is used to account for all long-term debt and other liabilities of the District,as well as the District's proportionate share of the New York State and Local Employees' Retirement System's (ERS)net pension liability. 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 L 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- i SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) r ' The governmental funds 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 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,compensated absences,and pension costs,which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. t_ Proceeds of general long-term debt and acquisitions are reported as other financing sources. D. Real Property Taxes Real property taxes are levied annually by the District no later than November 1st and become a lien on December 1s% 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. Payments in Lieu of Taxes(PILOT) .' The District reports PILOT revenues in the general fund as part of other tax items revenues.These PILOT revenues are often either the result of tax abatements granted by industrial development agencies of the Town and/or the County to help promote local economic development,or other payments in lieu of tax arrangements.Property owners make PILOT,payments to the government agencies,which in turn remit the collected payments to the District. i The District's PILOT revenues includes payments from the Long Island Power Authority(LIPA)remitted -- to the Town of Southold.The LIPA Reform Act(Public Authorities Law§1020-q) gave LIPA tax-exempt _ status, as a public authority, in respect to any property if acquired from LILCO (Long Island Lighting Company). Due to the potential fiscal impact of loss of local property tax revenues in response to the exemption,the LIPA Reform Act provides for LIPA's payment of PILOT to the municipalities affected by any acquisition of LILCO property.The District received$20,899 in PILOT revenue during the 2023 fiscal j year. L F. 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 other capital assets. —, A detailed disclosure by individual fund for interfund receivables and payables, transfers in, and transfers out is provided subsequently in these Notes to Financial Statements. G. Use of Estimates +' I The preparation of financial statements in conformity with a comprehensive basis of accounting other than GAAP requires management to make estimates and assumptions that affect the reported amount of assets,liabilities,deferred inflows of resources,and disclosure of contingencies at the date of the financial i— statements,and the reported revenues and expenditures during the reporting period.Accordingly,actual results could differ from those estimates. Estimates and assumptions are made in a variety of areas, including compensated absences and pension costs. 1 ` -8- -- SOUTHOLD FIRE DISTRICT j ! Notes to Financial Statements (Continued) H. Cash and Cash Equivalents Cash and cash equivalents 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 and debt agreements. I. 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. r-, 7 J. Lease Receivable _ The District leases space for cellular antenna equipment to a third party. A lease receivable is measured and recorded at the present value of lease payments expected to be received by the District during the L_ lease term using an implicit discount rate,net of any provision for estimated uncollectible amounts. As lease payments are received from the lessee;they are first allocated to the amortization of the discount on the lease receivable and recognized as interest revenue,and then to lease receivable. K. 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. n A portion of fund balance has been classified as nonspendable to indicate that prepaids do not constitute L available spendable resources. L. Restricted Length of Service Award Program Investments The District sponsors the Southold Fire District Length of Service Award Program (LOSAP), a defined _ benefit pension plan,and has reported program assets.The underlying assets are reported at fair market value based on quoted market prices for cash. Fixed income annuities and life insurance contracts are valued using other observable inputs. - The LOSAP's assets are restricted for the purposes of providing benefits to the participants of the plan. M. Net Pension Asset/(Liability)Proportionate Share r The District participates in the New York State and Local Employees'Retirement System (ERS),which is - a cost-sharing multiple-employer, defined benefit, public employee pension plan. The ERS provides retirement,disability,withdrawal,and death benefits to plan members and beneficiaries related to years of service and final average salary.The District reports its proportionate share of the ERS' net pension asset or liability in either the non-current governmental assets group or the non-current governmental liabilities group.Net pension assets or liabilities of the ERS are determined based on an annual actuarial valuation at the measurement date. -9- r-, r SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) N. Capital Assets - Capital assets are reported in the non-current governmental assets account group at original cost,when 'C 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 policy,the r—. dollar value above which asset acquisitions are added to the capital assets accounts, is $2,500 for all assets. 0. Employee Benefits-Compensated Absences i �i Compensated absences consist of unpaid accumulated sick leave and vacation leave. Sick leave eligibility and accumulation is s ecified in District policy. Upon retirement, resignation, or g• tY Pi P Y• P g death,employees may contractually receive a credit towards their health insurance obligation if over the age of 55 and 20 years of service to the District up to$6,000 per year,anything above and beyond this amount will be the responsibility of the employee.. j Vacation leave eligibility and accumulation is specified in collective bargaining agreements and in individual employment contracts.Some earned benefits may be forfeited if not taken within varying time -, periods. Employees are compensated for unused accumulated vacation leave through paid time off or cash payment upon retirement,termination,or death. 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. P. Other Benefits I ! Eligible District employees participate in the ERS and eligible volunteer firefighters participate in the District sponsored LOSAP. District employees may choose to participate in the District's elective deferral compensation plan established under Internal Revenue Code§457. i The District provides individual or family health insurance coverage for active employees pursuant to District policy. In addition to providing these benefits, the District provides individual, family, or surviving spouse postemployment health insurance coverage for eligible retired employees. District policy determines if District employees are eligible for these benefits if they reach normal retirement age while working for j the District.Healthcare benefits are provided through an insurance company whose premiums are based on the benefits paid during the year.The cost of providing post-retirement benefits is shared between the District and the retired employee. The District recognizes the cost of providing health insurance by 1 recording its share of health insurance premiums as an expenditure in the general fund as the liabilities for premiums mature(come due for payment). - 10- r-, '7 SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) Q. Long-Term Debt The District borrows money in order to acquire land or equipment, construct buildings, or make improvements. This enables the cost of these capital assets to be borne by the present and future ! taxpayers receiving the benefit of the capital assets.These long-term liabilities are full faith and credit r debt of the local government.The repayment of principal and interest will be in the general fund. _ R. Deferred Inflows of Resources Deferred inflows of resources represents an acquisition of net assets that applies to a future period and J so will not be recognized as an inflow of resources(revenue/expense credit)until that time.The District has one item that qualifies for reporting in this category, which is related to the long-term lease receivable of space for cellular tower equipment. Revenues will be recognized systematically over the term of the lease agreement. S. Fund Balance �+ The governmental fund financial 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 i of prepaids,which are recorded in the general fund. 1 !--� 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 1 restricted fund balances: Restricted for Debt i Unexpended balances of proceeds of borrowings for capital projects; interest and earnings from r_ investing proceeds of obligations; and, premium and accrued interest are recorded and held until appropriated for debt payments.This reserve is accounted for in the general fund. i Capital Reserve F A Capital Reserve (GML §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. Expenditures from a "type"reserve require a resolution by the Board,subject to permissive referendum.These reserves are accounted for in the general fund. Restricted for Length of Service Award Program The District sponsors a defined benefit service award program for its volunteer firefighters 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 in paragraph 4 of GASB Statement No. 73,Accounting and Financial Reporting for Pensions and Related Assets That Are Not - 11- j SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68 because the assets are not protected from the District's creditors.The District reports the assets and restricted fund balance in the general fund. L 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. In May 2021,the Board approved a bond reduction plan in which the District will utilize$6,618 of unspent bond proceeds each year through 2032 towards the repayment of the oufstanding bonds.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. 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, positive amount of fund balance. Assigned fund balance includes encumbrances not classified as restricted at the end of the fiscal year. Unassigned-represents the residual classification for the District's general fund and could report a 1 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. — 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 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. r 4 The Board shall retain the authority to assign fund balance. i 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 r- fund balance to the extent appropriated by the Board,and then from the unassigned fund balance. 2. FUTURE ACCOUNTING STANDARDS The GASB Statements are issued to set generally accepted accounting principles (GAAP) for state and local governments.The following is not an all-inclusive list of GASB statements issued, but the statements that the District feels may have a future impact on these financial statements. The District will evaluate the impact of these pronouncements and implement them,as applicable,if material. Effective for the Year Ending Statement _ December 31,2024 GASB No.99-Omnibus 2022 December 31,2024 GASB No. 101-Compensated Absences December 31,2025 GASB No.102-Certain Risk Disclosures GASB Statement No.99 provides additional guidance to enhance comparability in accounting and financial reporting to improve consistency of previously issued literature. -12- I SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) r GASB Statement No. 101 was issued to better meet the information needs of financial statement users by updating the recognition and measurement guidance for compensated absences.That objective is achieved by aligning the recognition and measurement guidance under a unified model and amending previously 1- required disclosures. GASB Statement No. 102 provides users of government financial statements with essential information about risks related to a government's vulnerabilities due to certain concentrations or constraints. 3. STEWARDSHIP,COMPLIANCE,AND ACCOUNTABILITY A. Budgets The District's administration prepares a proposed budget for approval by the Board for the general fund, the only fund with a legally adopted budget.Budgets are adopted annually on the modified accrual basis 7 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 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 approves them because of a need that exists, which was not , J determined at the time the budget was adopted. A summary of the general fund budget is as follows: Budget approved by the Board $ 2,161,719 Board approved transfer to equipment reserve 300,000 Appropriations for fire protection 22,968 L Encumbrances from prior year 10,863 Final Budget $ 2,495,550 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 1 the expenditure of monies are recorded to reserve applicable appropriations. Outstanding encumbrances as of year end are presented as part of assigned fund balance, unless classified as restricted, and do not represent expenditures or liabilities.These commitments will be honored in the r subsequent period. Related expenditures are recognized at that time,as the liability is incurred,or the commitment is paid. C. Over Expenditure of Certain Appropriations 1i Certain general fund appropriations were over expended. These were in the following appropriation categories of the budget: personnel services, workers' compensation, and debt service principal. The general fund budget in total was not over expended. l -13- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) 4. 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 z 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.These 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 at year end. — The District did not have any investments at year end or during the year, except as discussed in the note below.Consequently,the District was not exposed to any material interest rate risk. Investment pool: The District participates in the New York Cooperative Liquid Assets Securities System (NYCLASS), a multi-municipal cooperative investment pool agreement pursuant to GML Articles 3-A and 5-G,whereby i l it holds a portion of the investments in cooperation with other participants. NYCLASS is rated by S&P Global Ratings.The current rating is'AAAm'.The investments are highly liquid and are considered to be cash equivalents.All NYCLASS investment and collateral policies are in accordance with GML §10 and -- §11. The District's investments in NYCLASS consisted of repurchase agreements,U.S.Treasury Securities,and collateralized bank deposits,with various interest rates and due dates.The dollar weighted average days +— to maturity(WAM)of NYCLASS at December 31,2023,was 41 days and the weighted average life(WAL) was 87 days.These investments are included in cash and cash equivalents as follows: Carrying Fund Amount General fund $ 755,280 General fund-Capital reserves 2,259,699 $ 3,014,979 Securities,other than repurchase agreements,are valued at the most recent market bid price as obtained from one or more market makers for such securities.Repurchase agreements are recorded at cost,which approximates fair value. The lead participant of NYCLASS is the Village of Potsdam. Additional -14- SOUTHOLD FIRE DISTRICT Notes to Financial Statements L J (Continued) I information concerning NYCLASS, including the annual report, can be found on its website at www.newyorkclass.org. S. ACCOUNTS RECEIVABLE Accounts receivable at December 31,2023,consisted of$14,214 for reimbursement to the District from a vendor($9,805)and rental fees ($4,409). 6. CAPITAL ASSETS A. Description { The December 31, 2022 capital assets balances were restated by $474,702 due to a change in the District's capitalization policy threshold. As Reported As Restated December 31, December 31, Increase u 2022 2022 (Decrease) Land $ 722,972 $ 722,972 $ - Buildings and improvements 5,453,165 5,459,031 5,866 Equipment 5,097,236 4,616,668 (480,568) $ 11,273,373 $ 10,798,671 $ (474,702) B. Changes Capital asset balances and activity for the year ended December 31,2023 are as follows: As Restated Balance Balance December 31, December 31, 2022 Additions Deletions 2023 r- Land $ 722,972 $ $ $ 722,972 Buildings and improvements 5,459,031 32,870 5,491,901 Equipment 4,616,668 66,519 (28,593) 4,654,594 r- $ 10,798,671 $ 99,389 $ (28,593) $ 10,869,467 i C. Impairment Losses The District evaluates prominent events or changes in circumstances affecting capital assets to determine whether impairment of a capital asset has occurred. The District's policy is to record an impairment loss in the period when the District determines that the carrying amount of the asset will not be recoverable.At December 31,2023,the District has not recorded any such impairment losses. i -15 - SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) 7. LEASE RECEIVABLE Site Lease Agreement The District entered into site lease agreements) in the prior year to utilize District property for cellular _ antenna equipment.Under the agreement,the District receives installments in each fiscal year covered by the agreement.The installments increase by 3016 in the next fiscal year until the agreement's expiration date of May 1,2030.During the year ended December 31,2023,the District recognized lease revenue and lease interest in the amounts of$28,042 and$2,230,respectively. 8. CAPITAL RESERVES Activity for the capital reserves during the year sunder audit is as follows: i Building Equipment Reserve Reserve Total Reserve Balance-Beginning of Year $ 33,549 $ 1,585,808 $ 1,619,357 Additions to Reserve: Interest 1,668 88,927 90,595 Budgeted transfer to reserve 250,000 250,000 Board approved transfer to reserve 300,000 300,000 I r, Reserve Balance-End of Year $ 35,217 $ 2,224,735 $ 2,259,952 9. INTERFUND TRANSACTIONS Interfund balances at December 31,2023,are as follows: Interfund Receivables Payable Transfers In Transfers Out General fund $ 3,642 $ $ 6,618 $ Capital projects fund 3,642 6,618 $ 3,642 $ 3,642 $ 6,618. $ 6,618 f The balance payable from the capital projects fund to the general fund represents$3,542 of interest earned on bond proceeds that is now being accounted for in the debt reserve and$100 that was provided to initially fund the bank account.The transfer to the general fund from the capital projects fund represents unspent bond proceeds that were used towards the repayment of the bonds. 10. LONG-TERM LIABILITIES A. Changes Long-term liability balances and activity for the year,excluding pensions,are summarized below: r- -16- I I ' ,I SOUTHOLD FIRE DISTRICT Notes to Financial Statements _ (Continued) Balance Balance Amounts December 31, December 31, Due Within 2022 Additions Reductions 2023 One Year Long-term debt Bonds payable $ 1,200,000 $ $ 100,000 $ 1,100,000 $ 100,000 Other long-term liabilities Compensated absences 9,713 6,322 16,035 $ 1,209,713 $ 6,322 $ 100,000 $ 1,116,035 $ 100,000 r. 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 is comprised of the following: Outstanding at Issue Final Interest December 31, Description Date Maturity Rate 2023 i Serial bond-improvements to Fire District facilities 12/1/2017 6/1/2032 2.236% $ 1,100,000 The following is a summary of debt service requirements for bonds payable: r- Year Ending December 31, Principal Interest Total 2024 $ 100,000 $ 23,478 $ 123,478 2025 125,000 20,962 145,962 2026 125,000 18,167 143,167 2027 125,000 15,373 140,373 r 2028 125,000 12,578 137,578 2029-2032 500,000 22,360 522,360 Total $ 1,100,000 $ 112,918 $ 1,212,918 C. Interest Expense —I Interest on long-term debt for the year was$25,714. `V -17- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) 11. PENSION PLAN-NEW YORK STATE 17 A. New York State and Local Employees'Retirement System Plan Description The District participates in the ERS.This is a cost-sharing, multiple-employer, defined benefit, public employee,pension plan.The ERS 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(Comptroller)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.php 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 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 31s,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 14.72%of covered payroll for the ERS' fiscal year ended March 31,2023. The Comptroller annually certifies the actuarially determined rates expressly used in computing the employer's 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: 2023 2022 2021 District contributions $ 26,183 $ 25,822 $ 31,648 17 �__ -18- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) i B. Pension Asset/(Liability) At December 31, 2023,the District reported the following asset/(liability)for its proportionate share of the net pension asset/(liability)for ERS in the non-current governmental asset/(liability)account group. The net pension asset/(liability)was measured as of March 31, 2023.The total pension liability used to calculate the net pension asset/(liability) was determined by an actuarial valuation as of that date.The District's proportion of the net pension asset/(liability)was based on a,projection of the District's long- term share of contributions to the system relative to the projected contributions of all participating members,actuarially determined.This information was provided by the ERS in reports provided to the District. Measurement date March 31,2023 District's proportionate share of the net pension liability $ (111,212) District's portion of the Plan's total net pension liability 0.0005186% Change in proportion since the prior measurement date 0.0001419 r- 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 31,2023 Actuarial valuation date April 1,2022 Inflation 2.9% Salary increases 4.4% Investment rate of return(net of investment expense,including inflation) 5.9% - Cost of living adjustments 1.5% Annuitant mortality rates are based on April 1, 2015 - March 31, 2020 system experience with adjustments for mortality improvements based on the Society of Actuaries' MP-2021. The previous actuarial valuation as of April 1, 2021 used the same assumptions for the measurement of total pension liability. The actuarial assumptions were based on the results of an actuarial experience study for the period April 1,2015-March 31,2020. 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: -19 - r� i l i ' I r SOU-1-HOLD FIRE DISTRICT Notes to Financial Statements (Continued) Long-term Target Expected Real Allocation Rate of Return r- Measurement date j March 31,2023 _ Asset class Domestic equity 32.6o % 4.30 % International equity 15.00 % 6.85 % Real estate equity 9.00 % 4.60 % Private equity 10.00 % 7.50 % Alternative investments 10.00 % 5.38-5.84 Fixed income 23.00 % 1.50 % Cash 1.00 % 0.00 % 100.00 % The real rates of return are net of a long-term inflation assumption of 2.5%. Discount Rate The discount rate used to calculate the total pension liability was 5.9%.The projection of cash flows used to determine the discount rate assumes that contributions from plan members will be made at the r current contribution rates and that contributions,from employers will be made at statutorily required rates,actuarially determined.Based upon the assumptions,the ERS'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 Asset/(Liability) to the Discount Rate Assumption The following presents the District's proportionate share of the net pension asset/(liability) calculated using the discount rate of 5.9%, 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 (4.9%)or 1 percentage point higher(6.9%)than the current rate: Current 1%Decrease Assumption 1%Increase 4.90% 5.90% 6.90% District's proportionate share of the net pension asset/(liability) $ (268,751) $ (111,212) $ 20,431 I Pension Plan Fiducia1y Net Position { The components of the current-year net pension asset/(liability) of the employers, rounded to the - nearest thousand,as of the measurement date were as follows: { -20- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) (Dollars in Thousands) -- Measurement date March 31,2023 Employers'total pension liability $ (232,627,259) Plan fiduciary netposition 211,183,223 Employers'net pension liability $ (21,444,036) Ratio of plan fiduciary net position to the employers'total pension liability 90.78% Prepayment to the Pension Plan Employer contributions are paid annually based on the ERS'fiscal year,which ends on March 31st.Annual payments are due February 1st.An employer can elect to prepay the amount due by December 15th to receive a 1%discount.The District paid the annual invoice in December,which resulted in a prepayment of$6,758 for the period January 1,2024 through March 31,2024.Employee contributions are remitted monthly. 12. LENGTH OF SERVICE AWARD PROGRAM(LOSAP) 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 GML. 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 LOSAP for the plan year ending on December 31,2023. 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. In general,an,active firefighter is credited with a year of firefighting service for each calendar year after the establishment of the program for 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. -- -21- I; SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) Benefits A participant's benefit under the program is life annuity with 10 years equal to $20 multiplied by the person's total number of years of firefighting service.The number of years of firefighting service used to j 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, 2023 measurement date, the following participants were covered by the benefit terms: Inactive participants: Currently receiving benefits 93 Entitled to but not yet receiving benefits 30 Active participants 77 200 i Contributions GML §219-d (1) requires the Board to contribute an actuarially determined contribution on an annual basis.The actuarially determined contribution shall be appropriated annually by the 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. The underlying assets are reported at Level 1,which is fair value based on quoted market prices. Level 2, is based on comparable market prices for similar contracts, market interest rates,or other observable inputs relating to life insurance or annuity contracts. Level 1 - Cash $ 146,414 Level 2 Fixed Income Annuities 3,831,505 Life insurance contracts 1,067,932 I' $ 5,045,851 C. Fiduciary Investment and Control -- Service credit is determined by the governing board of the sponsor,based on information certified to the governing board by each fire company having members who participate in the program. Each fire company must maintain all required records on forms prescribed by the governing board. The governing board of the sponsor has retained and designated Hometown/Firefighters Services to assist in the administration of the program. The designated program administrator's primary -22 - 1_� I I - SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) 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, and the Board,and be signed by at least two board members prior to being disbursed by the administrator. Program assets are required to be held in trust by GML,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. Authority to invest program assets is vested in the administrator, with the Board's 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 and Pension Services, LLC.Portions of the following information are derived from a report prepared by the actuary dated May 2023 for the plan year ended December 31,2023. i D. Program Financial Condition Assets and Liabilities Actuarial Present Value of Benefits at December 31,2023 $ 5,193,314 Less: Assets Available for Benefits %/o of total Cash 2.90% $ 146,414 Fixed Income Annuities 75.93% 3,831,505 --I Insurance contracts 21.16% 1,067,932 i Total Net Assets Available for Benefits 5,045,851 Total Unfunded Benefits 147,463 Less:Unfunded Liability for Prior Service (147,463) Unfunded Normal Benefits $ - Prior Service Costs Prior service costs are being amortized over a range of 3 to 10 years at a discount rate of 5.00%. jl -23- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) Receipts and Disbursements Plan Net Assets,Beginning of Year $ 4,772,289 Changes during the year +Plan contributions $ 415,000 _ +Investment income earned 270,686 Plan benefit withdrawals (412,124) -- 273,562 Plan Net Assets,End of Year $ 5,045,851 Contributions Maximum amount of sponsor's contribution recommended by actuary: $ 270,369 Minimum amount of sponsor's actual contribution: 207,752 _ Amount of sponsor's actual contribution: 415,000 Sponsor's contribution recommended by actuary for the 2024 plan year Maximum amount $ 221,351 Minimum amount 187,968 Administration Fees Fees paid to designated program administrator $ 6,200 �i 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% I' Mortality tables used for Withdrawal None Disability None Retirement RP-2000 Combined-Unisex Death(actives) None 'I— Death(inactives) None Other None 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 31,2023 and -24- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) 2022, 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, 2023 and 2022, -- respectively. 13. 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 31,2023 totaled$13,863. 14. COMMITMENTS AND CONTINGENCIES i A. Encumbrances All encumbrances are classified as either restricted or assigned fund balance. At December 31,2023,the District encumbered the following amounts: Assigned:Unappropriated General Fund Fire protection $ 86,252 I. B. 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. C. Litigation The District is not aware of any material,pending,or threatened litigation claims against the District.The District is also unaware of any unasserted claims or assessments that would require financial statement disclosure. 15. SPENDING LIMITATION The District did not exceed the statutory spending limitation imposed by New York State Law for the year ended December 31,2023,and the budget for the year ending December 31,2024. 16. 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. I i -25 - t SOUTHOLD FIRE DISTRICT Schedule of Revenues,Expenditures,and Changes in Fund Balance- Budget and Actual-General Fund-Operating For the Year Ended December 31,2023 Board- Final Budget Approved Final Variance with Budget Budget Actual Actual REVENUES Real property taxes $ 2,128,676 $ 2,128,676 $ 2,128,692 $ 16 Other tax items 20,899 20,899 Interest and earnings 3,290 3,290 44,116 40,826 Rentals 29,753 29,753 28,042 (1,711) Insurance recoveries 7,415 7,415 Refund of prior year expenditures 1,535 1,535 Miscellaneous 246 246 i Total Revenues 2,161,719 2;161,719 2,230,945 69,226 i - OTHER FINANCING SOURCES Operating transfers in 6,618 6,618 Total Revenues and Other Sources 2,161,719 2;161,719 2,237,563 $ 75,844 APPROPRIATED FUND BALANCE - Appropriated for fire protection/surplus 322,968 Prior year's encumbrances ' 10,863 I, Total Appropriated Fund Balance '333,831 Total Revenues,Other Sources,and Appropriated Fund Balance $ 2,161,719 $ 2;495,550 Final Budget Variance with Year End Actual and Encumbrances Encumbrances EXPENDITURES - Personal services $ 330,000 $ 316,565 320,363 $ $ (3,798) Equipment and capital outlay 155,000 198,443 160,613 37,830 Fire protection 692,623 .676,719 566,038 86,252 24,429 State retirement system 25,000 27,034 26,183 851 Length of service award program 490,000 432,649 415,000 17,649 Social security 24,039 24,039 - Workers'compensation 60,000 46,654 47,013 (359) - Life insurance 20,000 77,351 75,819 1,532 Medical and accident insurance 20,000 27,000 26,731 269 Debtservice-principal 93,382 93,382 100,000 (6,618) I i Debt service-interest 25,714 25,714 25,714 Total Expenditures 1,911,719 1,945,550 1,787,513 86,252 71,785 OTHER FINANCING USES Operating transfers out 250,000 550,000 550,000 - Total Expenditures and Other Financing Uses $ 2,161,719 $ 2,495,550 2,337,513 $ 86,252 $ 71,785 - Net Change in Fund Balance (99,950) Fund Balance-Beginning of Year 983,095 Fund Balance-End of Year $ 883,145 Note to Supplementary Information Budget Basis of Accounting Budgets are adopted on the modified accrual basis of accounting. See Paragraph on Supplementary Information Included in Auditor's Report -26- CULLEN ;& DANOWSK1 LLP CERTIFIED PU-B.LC A@COrUNTANTS 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, 2023, and the related notes to financial statements, which collectively comprise the District's basic financial statements,and have issued our report thereon dated June 24, 2024.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. Report on 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) as a basis for designing 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 or significant deficiencies may exist that were not identified. C 1650 ROUTE 112,PORT JEFFERSON STATION,NEW YORK 11776-3060 O ^ PHONE:631-473-3400•FAX:631-473-4863•WWW.CDLLP.NET -27- i Report on 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 financial statements. 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. 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. i June 24,2024 -28- i 4 , CULLEN ; & DANOWSKI, LLP_ o- CERTIFIED PU-BtIC{AC-tdUNTANTS June 24,2024 The Board of Fire Commissioners Southold Fire District Southold,New York In planning and performing our audit of the financial!statements of the Southold Fire District(District)as of and for the year ended December 31,2023,in accordance with auditing standards generally accepted in the United States of America, we considered the District's internal control over financial reporting (internal control) as a basis for designing auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District's internals control.Accordingly,we do not express an opinion on the effectiveness of the District's internal control. In connection with our audit of the financial statements as of and for the year ended December 31,2023,we communicated an opportunity for strengthening internal controls and operating efficiencies. The memorandum that accompanies this letter summarizes this matter identified.This letter does not affect our report dated June 24,2024,on the financial statements of the Southold Fire District. This communication is intended solely for the information and use of the Board of Fire Commissioners, management,others you deem appropriate within the District,and any governmental authorities you need to share this information with. It is not intended to be,and should not be,used by anyone other than these specified parties. Very truly yours, Cullen&Danowski,LLP 1650 ROUTE 112,PORT JEFFERSON STATION,NEW YORK 11776-3060 PHONE:631-473-3400•FAX:631-473-4863•WWW.CDLLP.NET Y Y Southold Fire District For the Year Ended December 31,2023 STATUS OF PRIOR YEAR COMMENT Capital Assets The responsibility of tracking the District's investment in capital assets is important to sound fiscal management. This responsibility is discharged to management with oversight by the Board and is accomplished through adequate capital asset accounting and a board-approved capital asset policy. During our previous year audit,while reviewing the third-party appraisal valuation report for capital assets, we noted that capital assets recorded in the appraisal report were based on a capital asset threshold of$2,500, which was a threshold used by the third-party appraisal firm.However,upon further investigation,we noted that District's capital asset threshold at December 31, 2022 was still only$1,000.Additionally, management had not reviewed this report prior to sharing it with us. We recommended that management review the annual capital asset valuation report for accuracy to ensure that it reflects the most current board approved capital asset policy threshold, prior to providing it to the external auditors for financial statement purposes. In addition, although management and the Board are considering an increase in the capitalization threshold'policy to$2,500,we recommended that the capital asset policy be in effect prior to any changes in the accounting for'the capital asset additions being made. i Status.Corrected—The District updated it capital assets policy on June 27,2023 to increase the capitalization threshold to$2,500. -2- CULLEN & DANOWSKJ, LLP CERTIFIED PU-B.CIC-ACCOTJNTANTS June 24,2024 To the Board of Fire Commissioners Southold Fire District Southold,New York We have audited the financial statements of each fund and account group of the Southold Fire District (District) for the year ended December 31, 2023,and have issued our report thereon dated June 24, 2024. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards(and,if applicable,Government Auditing Standards),as well as certain information related to the planned scope and timing;in our audit.We have communicated such information in our previous letter to you dated February 15; 2024. Professional standards also require that we communicate to you the following information related to our audit. Significant Audit Matters Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the District are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during the year. We noted no transactions entered into by the District during the year for which there is a lack of authoritative guidance or consensus.All significant transactions have been recognized in the financial statements in the proper period. Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events.Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the financial statements were: • Historical Cost Value of Certain Capital Assets - Management's estimate of the historical cost value of Land and Buildings is based on replacement cost converted to estimated historical cost using a conversion factor based on the year the item was placed in service. • Compensated Absences Liability - Management's estimate of the liability for compensated absences is based on historical information regarding employees who have separated from the District and their terminal payout amounts, in order to determine the probability and amount of future payouts to employees for vested accumulated sick,vacation and/or leave terminal payouts. 1650 ROUTE 112,PORT JEFFERSON STATION,NEW YORK 11776-3060 o -1- PHONE:631-473-3400•FAX:631-473-4863•WWW.CDLLP.NET Southold Fire District For the Year Ended December 31,2023 • Actuarial Assumptions and Methods Underlying Pension Reporting - Management's acceptance of various actuarial assumptions and methods underlying the calculation of the District's pension reporting is based on the actuarial valuation prepared by the actuary for the ERS. • Actuarial Assumptions and Methods Underlying Length of Service Award Program (LOSAP) Reporting- Management's acceptance of various actuarial as and methods underlying the calculation of the District's actuarial present value of benefits and liability is based on actuarial valuations prepared by the District's actuary for the LOSAP Plan. • GASB No. 87. Lease recognition - Management's estimate for the present value of leased assets and liabilities associated with GASB No.87 is based on historical or projected implicit rates. We evaluated the key factors and assumptions used to develop these estimates in determining that they are reasonable in relation to the financial statements taken as a whole. The financial statement disclosures are neutral,consistent,and clear. Difficulties Encountered in Performing the Audit I We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit,other than those that are trivial,and communicate them to the appropriate level of management. The attached audit adjustments correcting misstatements (which were accepted and recorded by the District) in our judgment, indicate matters that could have a significant effect on the District's financial reporting process. We assisted the District with nonattest services necessary,for the preparation of the financial statements, including drafting of the financial statements and recording cash to accrual entries. Those adjustments are not attached. Disagreements with Management For purposes of this letter,a disagreement with management is a financial accounting,reporting,or auditing matter,whether or not resolved to our satisfaction,that could be significant to the financial statements or the auditor's report.We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in the management representation letter dated June 24,2024. -2- Southold Fire District For the Year Ended December 31,2023 Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters,similar to obtaining a"second opinion"on certain situations.If a consultation involves application of an accounting principle to the District's financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Other Audit Finding or Issues We generally discuss a variety of matters, including;.the application of accounting principles and auditing standards, with management each year prior to retention as the District's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. Other Matters We were engaged to report on the schedule of revenues,expenditures,and changes in fund balance-budget and actual - general fund - operating, which accompanies the financial statements but is not required supplementary information (RSI). With respect to this supplementary information, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with the reporting provisions of the New York State Office of the State Comptroller,the method of preparing it has not changed from the prior period,and the information is appropriate and complete in relation to our audit of the financial statements.We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves: Restriction on Use This information is intended solely for the information and use of the Board of Fire Commissioners and management of Southold Fire District and is not intended to be and should not be used by anyone other than these specified parties. Very truly yours, &J—� 7- &,woura�, Cullen&Danowski,LLP -3- i Southold Fire District AUC-260 Audit Journal Entries December 31,2023 I Workpaper Account Description Reference Debit Credit Net Income Effect 1 To record budgeted transfer in the equipment reserve. HO.3310.0917.000 Unassigned:Fund Balance 250,000.00 0.00 HO.4200.5031.000 Operating Transfers In 0.00 250,000.00 AO.5200.9950.900 Operating Transfers Out-Other Funds 250,000.00 0.00 AO.3310.0917.000 Unassigned:Fund Balance 0.00 250,000.00 Total 500,000.00 500,000.00 0.00 2 To record 6/27/23 approved transfer from General Fund to Equipment Reserve HO.3310.0917.000 Unassigned:Fund Balance 300,000.00 0.00 HO.4200.5031.000 Operating Transfers In 0.00 300,000.00 AO.5200.9950.900 Operating Transfers Out-Other Funds 300,000.00 0.00 AO.3310.0917.000 Unassigned:Fund Balance 0.00 300,000.00 Total 600,000.00 600,000.00 0.00 3 To correct client recording of bond repayment plan at 12/31/23 A0.3310.0917.000 Unassigned:Fund Balance 6,618.00 0.00 A0.4200.5031 Operating Transfers In-Other Funds 0.00 6,618.00 Total 6,618.00 6,618.00 6,618.00 4 To reclass interest in bond account to the General Fund. H2.4040.2401.000 Interest&Earnings-Interest 31.00 0.00 H2.3020.0910.000 Restricted Fund Balance-Capital Projects Fund 0.00 31.00 AO.3310.0917.000 Unassigned:Fund Balance 31.00 0.00 AO.4040.2401.003 Interest&Earnings/Bond Fund 0.00 31.00 Total 62.00 62.00 0.00 5 i A0102D-la To record additional receivable for reimbursement from Aspludnh Construction AO.1020.0390.000 Accounts Receivable 9,805.00 0.00 AO.5100.3410.461 FP-Fire Equip.&Alarms/Equipment Maintenance' 0.00 1,305.00 AO.5100.3410.445 FP-Building Costs/Maintenance 0.00 8,500.00 Total 9,805.00 1805.00 9,805.00 6 A02000-01a To remove accounts payable for services related to subsequent year AO.2000.0600.000 Accounts Payable 2,200.00 0.00 AO.5100.3410.426 FP-Firefighting Expenses/Fire Training Seminar 0.00 2,200.00 Total 2,200.00 2,200.00 2,200.00 7 A03305-01 To record encumbrances at 12/31/23. AO.3310.0917.000 Unassigned:Fund Balance 86,251.99 0.00 AO.3305.0915.001 Assigned:Unappropriated/Encumbrances 0.00 86,251.99 AO.2000.0600.000 Accounts Payable 8,239.40 0.00 AO.5170.3430.202 FP-Equip.&Capital Outlay/Fire Dept. 0.00 8,239.40 Total 94,491.39 94,491.39 8,239.40 8 To adjust the restricted equipment reserve for current year activity. HO.3310.0917.000 Unassigned:Fund Balance 88,927.00 0.00 HO.3020.0910.000 Restricted for Capital 0.00 88,927.00 Total 98,927.00 88,927.00 0.00 9 To correct lease interest incorrectly recorded. AO.4040.2401.004 Interest&Earnings/Lease 2,132.00 0.00 AO.4045.2430.000 Rentals 0.00 2,132.00 Total 2,132.00 2,132.00 0.00 10 To reclassify lease payments received. A0.4040.2401.000 Interest&Earnings/General 0.00 2,229.59 AO.4045.2421.000 Lease Payment Revenues 0.00 28,042.19 AO.4045.2410.000 Rentals 30,271.78 0.00 Total 30,271.78 30,271.79 0.00 Southold Fire District AUC-260 Audit Journal Entries December 31,2023 Workpaper Account Description Reference Debit Credit Net Income Effect 11 To record the current year activity for the LOSAP asset. A1.1200.461 Service Award Program Assets 273,561.53 0.00 A1.5130.9025.8 Service Award Program Benefits 412,124.00 0.00 A1.4085.2770 Contributions 0.00 415,000.00 AlA040.2401 Interest&Earnings 0.00 270,685.53 Total 685,685.53 685,685.53 273,561.53 12 To record net change in restricted fund balance related to LOSAP. A1.3310.917 Unassigned FB 273,561.53 0.00 A1.3020.895 Restricted:Service Award Program 0.00 273,561.53 Total 273,561.53 273,561.53 0.00 13 To adjust the restricted building reserve for the c 1-11.3020.0910.000 Restricted for Capital 0.00 1,668.00 1-11.3310.0917.000 Unassigned:Fund Balance 1,668.00 0.00 Total 1,668.00 1,668.00 0.00 14 To record additional payables at 12/31/23. AO.2000.0600.000 Accounts Payable 0.00 22,968.00 AO.5170.3410.201 FP-Equip.&Capital Outlay/Fire Rescue 22,968.00 0.00 AO.2000.0600.000 Accounts Payable 0.00 4,761.42 AO.5100.3410.460 FP-Fire Equip.&Alarms/Apparatus Maintenance 4,761.42 0.00 Total 27,729.42 27,729.42 (27,729.42) 15 To reclass life insurance expenditures to the pro{ AO.5130.9025.800 Emp.Benefits-Service Award Program 0.00 57,351.37 AO.5130.9045.800 Emp.Benefits-Life Insurance j 57,351.37 0.00 Total 57,351.37 57,151.37 0.00 16 To reclass refunds of prior years expenditures to proper account code. AO.4070.2770.001 Miscellaneous/Other 1,535.00 0.00 AO.4075.2701.000 Refunds of Prior Years'Expenditures 0.00 1,535.00 Total 1,535.00 1,535.00 0.00 17 To reclass Insurance recoveries to proper account code. AO.4070.2770.001 Miscellaneous/Other 7,415.00 0.00 AO.4060.2680.000 Insurance Recoveries 0.00 7,415.00 Total 7,415.OD 7,415.00 0.00