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HomeMy WebLinkAbout2003TOWN OF SOUTHOLD SINGLE AUDIT REPORTS December 31,2003 AV Albrecht, Viggiano, Zureck & Company, P.C. CErtifiEd Pul~lic Accou~/r,~zrs TOWN OF SOUTHOLD SINGLE AUDIT REPORTS December 31,2003 FINANCIAL SECTION FINANCIAL SECTION Independent Auditors' Report .................................................................................................................... 1-2 REQUIRED SUPPLEMENTARY INFORMATION Management's Discussion end Analysis ................................................................................... 3-11 IBASIC FINANCIAL STATEMENTS I Govemment-Wide Financial Statements Statement of Net Assets ......................................................................................................................... 12 Statement of ActiviUes ............................................................................................................................. 13 Fund Financial Statements Governmental Fund Financial Statements Balance Sheet and Reconciliation of the Governmental Funds Balence Sheet to The Statement of Net Assets .......................................................................................... 14-15 Statement of Revenues, F_xl~nditures, and Changes in Fund Balances and Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, And Changes in Fund Balances to the Statement of Activities ................................................ 16-17 Fiduciary Fund Financial Statements Statement of Fiduciary Net Assets ............................................................................................ 18 Notes to Financial Statements ................................................................................................................... 19-34 I REQUIRED SUPPLEMENTARY INFORMATION OTHER THAN MD&A I Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual General Fund .............................................................................................................. Highway Fund ................................................................................................ .'...: ......... 35 36 OTHER SUPPLEMENTARY INFORMATION COMBINING FUND STATEMENTS: Nenmajor Governmental Funds Combining Balance Sheet ............................................................................................. Combining Statement of Revenues, Expenditures, and Changes in Fund Balances .................... 37 38 DISCRETLY PRESENTED COMPONENT UNITS Discretely Presented Component Units: Combining Statement of Net Assets ....................................................................................................... Combining Statement of Activities .......................................................................................................... 39 4O OTHER REPORTS Schedule of Expenditures of Federal Awards ........................................................................................ 41 Note to Schedule of Expenditures of Federal Awards ............................................................................ 42 Report on Compliance and on Intemal Control Over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards .......................................................................... 43 Report on Compliance with Requirements Applicable to each Major Program and on Internal Control Over Compliance in Accordance with OMB Circular A-133 ................................................................................................. 44-45 Schedule of Findings and Questioned Costa ......................................................................................... 46-47 ALBRECHT, VIGGIANO, ZURECK & COMPANY, P.C. INDEPENDENT AUDITORS' REPORT Honorable Supervisor and Town Board Town of Southold Southold, New York CERTIFIED PUBUC ACCOUNTANTS 25 SUFFOLK COURT HAUPPAUGE, NY 11788 (631)4349500 We have audited the accompanying financial statements of the governmental activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the Town of Southoid, New York, as of December 31, 2003, and for the year then ended, which collectively comprise the Town's basic financial statements as listed in the table of contents. These financial statements ara the responsibility of the Town's management. Our responsibility is to express an opinion on these financial statements based on our audit. Except as discussed in the following paragraph, we conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. The financial statements of the component units presented discretely in these financial statements were not audited in accordance with Government Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The financial statements supporting the financial activities of the Town of Southold's discretely presented component units with the exception of one, the Fishers Island Ferry District, were not audited as of the report date, nor were we able to satisf~ ourselves as to those financial activities by other auditing procedures. Those financial activities represent approximately 48% of the net assets of the discretely presented component units. The financial statements of the Fishers Island Ferry District were audited by other auditors whose report thereon have been furnished to us and in our opinion, insofar as it relates to the amounts included for that one component unit, is based solely on the reports of the other auditors. In our opinion, except for the effects of such adjustments if any as might have been determined to be necessary had the unaudited component units financial statements been audited and biased on our audit and the reports of other auditors, the financial statements referred to above present fairly, in ail material respects, the financial position of the Town of Southoid, New York, as of December 31, 2003, and the results of its operations for the year then ended in conformity with accounting principles generally accepted in the United States of America. As described in Note A, the Town has implemented a new financial reporting model, as required by the provisions of GASB Statement No. 34, Basic Financial Statements~and Management's Discussion and Analysis--for State and Local Governments. In accordance with Government Auditing Standards, we have also issued our report dated June 8, 2004, on our consideration of the Town's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. The Management's Discussion and Analysis and the budgetary information are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the supplementary information. However, we did not audit the information and express no opinion on it. -1- Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town of Southold, New York's basic financial statements. The combining and individual fund financial statements are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund financial statements and the schedule of expenditures of federal awards has been subjected to the auditing procedures applied in the audit of the basic financial statements of the Town of Southold, New York, and, in our opinion, is faidy presented in all material respects in relation to the basic financial statements taken as a whole. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by the U.S. Office of Management and Budget Circular A-133, Audits of States and Local Governments, and non-profit organizations, and is also not a required part of the basic financial statements of the Town of Southold, New York. Hauppauge, New York June 8, 2004 -2- REQUIRED SUPPLEMENTARY INFORMATION Management's Discussion and Analysis TOWN OF SOUTHOLD MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2003 The following is a discussion end analysis of the Town of Southold's financial performance, providing an overview of the Town's financial activities for the year ended December 31, 2003. Use this section in conjunction with the Town's basic financial statements. GASB Statement No. 34 Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments, establishes new reporting requirements for state and local governments. The new reporting requirements implemented for these statements include new information and restructure the presentation of previous years. Consequently, for this 2003 implementation year, the presentation of comparative data is not available or required. Comparative data will be available and presented for the 2004 report. USING THIS ANNUAL REPORT This annual report consists of a sedes of financial statements. The Statement of Net Assets and the Statement of Activities (on pages 12-13) provide information about the activities of the Town as a whole and present a Ionger-tarm view of the Town's finances. Fund financial statements start on page 14. For governmental activities, these statements tell how these services were financed in the short term as well as what remains for future spending. Fund financial statements also report the Town's operations in more detail than the government-wide statements by providing information about the Town's most significant funds. The remaining statements provide financial information about activities for which the Town acts solely as a trustee or agent for the benefit of those outside of the government. Reporting the Town as a Whole The Statement of Net Assets and the Statement of Activities One of the most important questions asked about the Town's finances is, Uls the Town as a whole better off or worse off as a result of the year's activities.? The Statement of Net Assets and the Statement of Activities report information about the Town as a whole and about its activities in a way that helps answer this question. These statements include all assets and liabilities using the accrual basis of accounting, which is similar to the accounting used by most pdvata-sector companies. The Statement of Activities is significanfiy different than a typical Statement of Revenues, Expenses, and Changes in Fund Balance. You will notice that expenses are listed in the first column with revenues from that particular program reported to the right. The result is a net (expense)/revenue. The reason for this kind of format is to highlight the relative financial burden of each of the functions on the Town's taxpayers. It also identifies how much each function draws from the general revenues or if it is self-financing through fees and grants. All of the current year's revenues and expenses are taken into account regardless of when cash is received or paid. These two statements report the Town's net assets and their respective changes. You can think of the Town's net assets--the difference between assets and liabilities~as one way to measure the Town's financial health, or financial position. Over time, increases or decreases in the Town's net assets are one indicator of whether its financial health is improving or deteriorating. You will need to consider other non-financial factors, however, such as changes in' the Town's property tax base and the condition of the Town's buildings, roads, drainage and other assets to assess the overall health of the Town. In the Statement of Net Assets and the Statement of Activities, we divide the Town into two kinds of activities: Governmental activities - The Town's basic services are reported here, including: general government support; public safety;, public health; transportation; economic assistance and opportunity; cultural and recreation and home and community services. Property taxes, sales taxes, franchise fees, fines, and state and federal grants finance these activities. The Town also charges fees to customers to help it cover the cost of certain services it provides. Component units - The Town includes 7 separate legal entities in its report (one ferry district, one sanitation district, one mosquito distdct and four park districts). Although legally separate, these "component units" are important because the Town is financially accountable for them. Complete financial statements of the individual component units can be obtained from their respective administrative offices (Note A). -3- TOWN OF SOUTHOLD MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2003 ReportinR the Town's Most Significant Funds Fund Financial Statements The fund financial statements begin on page 14 and provide detaitad information about the most significant funds--not the Town as a whole. Some funds are required to be established by State law and by bond covenants. However, the Town establishes many other funds to help it control and manage sources of funding and spending related to specific activfties. The Town's basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end that are available for spending. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The govemmental fund statements provide a detailed short-term view of the Town's general government operations and the basic services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the Town's programs. We desc~be the relationship (or differences) between governmental activities (reported in the Statement of Net Assets and ~e Statement of Activities) and governmental funds in a reconciliation that follows these fund financial statements. The Town as Trustee ReportinR the Town's Fiduciary Responsibilities All of the Town's fiduciary activities are reported in a separate Statement of Fiduciary Net Assets on page 18. We exclude these activities from the Town's other financial statements because the Town cannot use these assets to finance its operations. The Town is responsible for ensudng that the assets reported in these funds are used for their intended purposes. THE TOWN AS A WHOLE Our analysis below focuses on the net assets and changes in net assets of the Town's governmental activities. Condensed Statement of Net Assets Governmental Activities as of December 31, 2003 Assets Capital assets $ 76,948,071 Current and other assets 23,970,315 Total assets 100,918,386 Liabilities Long-term liabilities 14,461,033 Other liabilities 17,769,928 Total liabilities 32,230,961 Net assets Invested in capital assets, net of related debt 69,872,715 U nrestdcted (1,185,290) Total net assets $ 68,687,425 TOWN OF SOUTHOLD MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2003 THE TOWN AS A WHOLE (continued) The Town's combined net assets changed from the prior year, increasing by $6.2 million from $62.5 million to $68.7 million. The Town's net assets include $69.9 million invested in capital assets and $1.2 million in unrestricted deficit. The deficit balance of unrestricted net assets does not necessarily indicate stress. The deficit balance of unrestricted net assets arose primarily because of certain factom. The Town, in an effort to maintain present tax rates, used up cash reserves and borrowed funds as needed. In addition, long-term liabilities which include compensated absences, early retirement incentives, claims and judgments, the landfill closure'and post closure monitoring will be funded through future budgetary appropriations when they become payable in future periods. Changes in Net Assets Governmental Activities for the year ended December 31,2003 Program Revenues Charges for services Operating grants and contributions Capital grants and contributions General Revenues Real property taxes Other real property tax items Non-property tax items Interest earnings State aid - unrestricted Other Total Revenues Program Expenses General govemment support Public safety Public health Transportation Economic assistance end opportunity Culture and recreation Home and community services Interest on debt Total Expenses Increase in Net Assets $ 7,827,147 760,118 2,406,727 10,993,992 18,958,999 58,613 518,484 205,719 2,138,006 317,347 22,197,168 33,191,160 5,218,482 9,652,286 41,639 6,777,032 1,124,806 227,789 3,470,584 508,605 27,021,223 $ 6,169,937 -5- TOWN OF SOUTHOLD MANAGEMENT'S DISCUSSION AND ANALYSIS THE TOWN AS A WHOLE (continued) Net Cost of Services Governmental Activities for the year ended December 31, 2003 December 31, 2003 General government support Public safety Public health Transportation Economic assistance and opportunity Culture and recreation Home and community services Interest on debt Total Cost Net Cost of Services of Services 5,218,482 $ 4,924,406 9,652,286 8,947,863 41,639 32,829 6,777,032 6,226,842 1,124,806 762,537 227,789 50,799 3,470,584 (5,426,650) 508,605 508,605 $ 27,021,223 $ 16,027,231 The cost of all governmental activities this year was $27.0 million. The net cost of these services, however, after subsidized by program revenues including charges for services and program grants, was $16.0 million. The Town's change in net assets after general revenues of $22.2 million was $6.2 million. Since this is the first year to report all activities on the accrual basis of accounting, a comparison to the prior year is not possible (with the exception of the above comparison). However, in futura years, this section will explain the differences between the current and prior year assets, liabilities, and changes in net assets. Net Cost of Services Governmental Activities for the year ended December 31, 2003 Total Cost Program of Services Revenues General government support $ 5,218,482 Public safety 9,652,286 Public health 41,639 Transportation 6,777,032 Economic assistance and opportunity 1,124,806 Culture and recreation 227,789 Home and community services 3,470,584 Interest on debt 508,605 · $ 294,076 704,423 8,810 550,190 362,269 176,990 8,897,234 27,021,223 $ 10,993,992 -6- TOWN OF SOUTHOLD MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2003 THE TOWN AS A WHOLE {continued) $12.O00,OOO : $10,OOO,OOO · Program Revenues 24% ~ Revenue by Source Governmental Activities For the year ended December 31,2003 Real property taxes $ 18,958,999 State aid - unresticted 2,138,006 Charges for services 7,827,147 Other general revenues 1,100,163 Operating grants and contributions 760,118 Capital grants and contributions 2,406,727 $ 33,191,160 -7- TOWN OF SOUTHOLD MANAGEMENT'S DISCUSSION AND ANALYSIS December 31,2003 THE TOWN AS A WHOLE (continued) THE TOWN'S FUNDS The general fund balance has increased by $1.5 million due primarily to actual revenues in excess of those amounts budgeted. Mortgage tax received this year was up from the prior by $551 thousand. The refuse and garbage fund balance increased by $121 thousand to a fund balance of $224 thousand. The following schedule presents a summary of the govemmental fund - (general, special revenue, and capital projects) revenues and expenditures for the year ended December 31, 2003, and the amount of change and percentage of total in relation to the prior year. Increase % 2003 2002 (Decrease) Change I~I-VENUE,~ Real property taxes Other real property tax items Non-property tax items Departmental income Intargovemmental charges Use of money and property Licenses and permits Fines and forfeitures Sale of property and compensation for loss Miscellaneous local sources Interfund revenues State aid Federal aid Total Govemmental Fund Revenues EXPENDITURES General government support Public safety Public health Transportation Economic assistance and opportunity Culture and recreation Home and community services Employee benefits Capital Debt service principal and interest Total Govemmental Fund Expenditures $ 18,958,999 $ 17,131,570 $ 1,827,429 6.3% 58,613 98,624 (40,011) -0.1% 518,484 514,358 4,126 0.0% 2,654,516 3,363,639 (709,123) -2.4% 4,823,458 4,077,171 746,287 2.6% 320,963 472,358 (151,395) -0.5% 336,331 360,509 (24,178) -0.1% 156,084 102,032 54,052 0.2% 121,376 165,117 (43,741) -0.2% 211,240 159,982 51,258 0.2% 4,852 (4,852) 0.0% 4,226,230 2,275,101 1,951,129 6.7% 872,572 251,907 620,665 2.1% $ 33,258,866 $ 28,977,220 $ 4,281,646 14.8% $ 3,886,438$ 3,603,925$ 282,5130.9% 6,783,111 6,682,130 100,981 0.3% 39,396 39,449 (53) 0.0% 3,131,876 2,892,447 - . 239,429 0.7% 833,501 730,553 102,948 0.3% 3,547,970 3,289,527 258,443 0.8% 228,578 350,121 (121,543) -0.4% 4,468,238 4,183,297 284,941 0.9% 5,801,986 9,059,320 (3,258,254) -9.8% 1,171,737 2,263,306 (1,091,569) -3.3% $ 29,891,911 $ 33,094,075 $ (3,202,164)-9.6% GENERAL FUND BUDGETARY HIGHLIGHTS Over the course of the year the Town Board revises the budget as needed so that expenditures do not exceed appropriations. In all Town funds, various transfers between appropriations were approved for this purpose. -8- TOWN OF SOUTHOLD MANAGEMENT'S DISCUSSION AND ANALYSIS December 31,2003 CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets As of December 31, 2003 the Town had $76.9 million in net capital assets including land, buildings, improvements, machinery and equipment, and infrastructure. The Town's component units had $9.7 million in net capital assets including lend, buildings, improvements, machinery and equipment, and sewer mains. Capital Assets at December 31, Primary government Land Construction in progress Buildings Improvements other than buildings Machinery and equipment Infrastructure Total capital assets Less accumulated depreciation Pdmary government - Total net capital assets Component units Land Buildings Improvements other than buildings Machinery and equipment Infrastructure Total capital assets Less accumulated depreciation Component units - Total net capital assets 2003 2002 31,253,329 $ 27,778,470 3,066,170 4,352,714 4,102,824 10,585,564 9,080,465 8,118,119 7,650,557 68,977,685 67,938,222 126,353,581 116,550,538 49,405,510 45,905,974 $ 76,948,071 $ 70,644,564 2,213,759 $ 2,213,759 3,361,906 3,341,126 3,916,748 3,521,031 2,959,367 2,922,606 2,121,386 2,121,386 14,573,166 14,119,908 4,837,344 4,453,467 $ 9,735,822 $ 9,666,441 -9- TOWN OF SOUTHOLD MANAGEMENT'S DISCUSSION AND ANALYSIS December 31,2003 CAPITAL ASSET AND DEBT ADMINISTRATION (continued) Capital Assets (continued) The capital program is a long range financing guide and not a definitive plan. Each appropriation must be authorized by Town Board resolution before being undertaken. Each may be financed by issuance of general obligation bends, which, at times, are preceded by issuance of bond anticipation notes for various periods of time depending on the probabta usefulness of the p~.rpose of expenditure. The following sets forth a summary of the Town's capital program, as originally adopted for 2004. (Dollam in thousands): Equipment 2004 2005 General Fund $ 617 $ 16 Highway Fund 400 310 Special Districts 575 Total Equipment $1 ~592 $ 326 Improvements General Fund $1,077 Special Districts 2~110 Total Improvements $3~187 Total Program $4,77~ $ 32,,,~,,==~6 Additional information on the Town's capital assets can be found in Note C.3 to the financial statements. Debt Administration The Town of Southold's A2. credit rating from Moody's investment rating has remained unchanged. Debt Limit - The Town has the power to contract indebtedness for any Town purpose so long as the principal amount thereof, subject to certain limited exceptions, shall not exceed seven percent of the average full valuation of taxable real estate of the Town, and subject to certain enumerated exclusions and deductions such as water and certain sewer facilities and cash or appropriations for current debt service. The constitutional method for determining full valuation is calculated by taking the assessed valuation of taxable real estate as shown upon the latest completed assessment roll and dividing the same by the equalization rate as determined by the State Board of Equalization and Assessment. The State Legislature is required to prescribe the manner by which such ratio shall be determined. Average full valuation is determined by taking the sum of the full valuation of the last completed assessment roll and the four preceding assessment rolls and dividing such sum by five. Percentage of debt contracting power exhausted at December 31, 2003 was 2.05%. At December 31, 2003, the Town had approximately $6.9 million in long term general obligation bonds outstanding, of which $6.9 million was for general Town purposes. Also outstanding at year-end were bond anticipation notes in the amount of $14.8 million of which $10.6 million was for general Town purposes. Additional information on the Town's debt activity can be found in Note C.4 to the financial statements. -10- TOWN OF SOUTHOLD MANAGEMENT'S DISCUSSION AND ANALYSIS December 31,2003 ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES Property Tax The Town has adopted a budget for the 2003 fiscal year which factors in inflation and other adjustments to revenues and expenditures as well as prior year positive and negative fund balances. The 2003 budget includes an overall increase in real property tax revenues from the prior year of approximately 10.68% for the general Town governmental activities. State Aid and Local Assistance The Town receives financial assistance from New York State and from Suffolk County. During 2003, financial assistance included state aid - mortgage tax of $2.1 million; state aid - per capita $72.5 thousand and County local government assistance of $160.9 thousand. Additionally, if the State should not adopt its budget in a timely manner, municipalities and school districts in the State, including the Town, may be affected by a delay in the payment of state aid. The State is not constitutionally obligated to maintain or continue state aid to the Town. The Town's 2004 budget included similar amounts for this financial assistance. Retirement System The New York State Employees Retirement System, having suffered some adverse effects of the weak stock market conditions, was expected to require payments in excess of amounts the State had originally anticipated for the year ended 2003. When establishing the 2003 budget, the Town had anticipated these excess payments. However, due to a change in the billing cycle, the State was able to hold the contribution rates to those the State had originally anticipated. The Town subsequently re-appropriated that budgeted but unexpended excess payment in the 2004 budget The State's new billing cycle will require a minimum contribution rate of 4.5%. Employer contribution for subsequent years will be based on the Russell 3000 performance as of April 1 of the preceding two years. In 2003 the Town of Southold adopted the New York State Early Retirement Incentive Program as authorized by Chapter 69 of the Laws of 2002. The option to retire early ran through December 31, 2002. The eligibility vaded based on tier, age and years of service, but all options required that the employees be at least fifty (50) years of age and being vested in the New York State Retirement System. As part of its contractual agreements with the unions, the Town of Southold also offers fully paid health insurance benefits (but not welfare benefits) for the retiree and their present spouse until death of the retiree. CONTACTING THE TOWN'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, and creditors with a general overview of the Town's finances and to show the Town's accountability for the money it receives. If you have questions about this report or need additional financial information, contact the Town of Southold, Office of the Town Comptroller, Southold, New York. -11- BASIC FINANCIAL STATEMENTS TOWN OF SOUTHOLD GOVERNMENT-WIDE FINANCIAL STATEMENT STATEMENT OF NET ASSETS December 31, 2003 ASSETS Current Assets: Cash and investments Accounts receivable, net of allowances Due from fiduciary funds Due from other governments Due from primary govemment State and federal aid receivables Prepaid charges Inventory of material and supplies Other assets Total Current Assets Non-Current Assets: Non-depreciable capital assets Depreciable capital assets, net of depreciation Total Non-Current Assets Primary Governmental Component Activities Units $ 21,624,970 $ 3,245,231 129,301 4,254 498,377 725,051 753,091 228,229 1,296 10,000 464,236 481,075 16,691 23,970,315 4,211,487 34,319,499 2,213,759 42,628,572 7,522,063 76,948,071 9,735,822 100,918,386 13,947,309 Total Assets LIABILITIES Current Liabilities: Accounts payable and accrued liabilities Accrued interest payable Bond anticipation notes payable Due to other governments Due to f'~luciary funds Unearned revenue Non-current liabilities due within one year General obligation bonds payable Due to Employees Retirement System Compensated absences Total Current Liabilities Non-Current Liabilities: General obligation bonds payable Due to Employees Retirement System Compensated absences Claims and judgements payable Estimated liability for landfill closure and postclosure care costs Total Non-Current Liabilities 2,021,418 868,938 134,271 12,041 10,576,000 4,192,302 447 71,020 4,268,259 307,895 642,431 32,569 38,742 17,787 17,769,928 5,414,192 6,242,429 32,571 135,834 5,165,082 1,000,000 1,917,688 14,461,033 32,571 32,230,961 5,446,763 69,872,715 7,206,528 (1,185,290) 1,294,018 Total Liabilities NET ASSETS Investment in capital assets, net of related debt Unrestricted Total Net Assets $ 68,687,425 $ 8,500,546 See notes to the financial statements -12- TOWN OF SOUTHOLD GOVERNMENT-WIDE FINANCIAL STATEMENT STATEMENT OF ACTIVITIES Year ended December 31, 2003 Function/Program PRIMARY GOVERNMENT Govemment Activities: General government support Public safety Public health Transportation Economic assistance and opportunity Culture and recreation Home and community services Interest on debt Total Primary Government COMPONENT UNITS General government support Public health Transportation Culture and recreation Home and community services Interest on debt Total Component Units Expenses Procjram Revenues Operating Capital Charges for Grants and Grants and Services Contributions Contributions Net Expenses and Change in Net Assets Pdmary Component Government Units $ 5,218,482 $ 167,637 $ 110,439 $ 16,000$ 4,924,406 9,652,286 558,947 145,476 8,947,863 41,639 8,810 32,829 6,777,032 8,231 78,982 462,977 6,226,842 1,124,806 158,430 203,839 762,537 227,789 176,990 50,799 3,470,584 6,756,912 212,572 1,927,750 (5,426,650) 508,605 508,605 $ 27,021,223 $ 7,827,147 $ 760,118 $ 2,406,727 $ 16,027,231 105,446 66,961 3,486,299 808,987 365,392 24,587 $ 5,246 1,716,565 $ 20,597 5,650 $ 549,718 20,000 196,843 $ 4,857,672 $ 1,742,408 $ 25,650 $ 746,561 GENERAL REVENUES Real preporty taxes Other real property tax items Non-property tax items Interest earnings State aid Other Total General Revenues Change in Net Assets Net Assets at Beginning of Year Net Assets at End of Year $ 105,446 61,715 1,214,366 788,987 147,952 24,587 $ 18,958,999 $ 58,613 518,484 205,719 2,138,006 317,347 22,197,168 6,169,937 62,517,488 $ 68,687,425 $ $ 2,343,053 1,595,730 2OO 46,952 131,436 1,774,318 (568,735) 9,069,281 8,500,546 See notes to financial statements. -13- TOWN OF SOUTHOLD BALANCE SHEET GOVERNMENTAL FUNDS December 31, 2003 ASSETS Cash and Investments Accounts Receivable Due from ot~er Funds Due from Trust Funds State and Federal Aid Receivable Due from Other Governments Supply Inventory Prapaids Deposit Total Assets LIABIMTIES AND FUND BALANCES MABILITIES Accounts Payable Retained Percentages Bond Anticipation Notes Payable Due to Other Funds Due to Trust Funds Deferred Revenue Total Liabilities FUND BALANCE Fund Balances - Reserved: Supply Inventory Prapaids Insurance Claims Fund Balance (Deficit) - Unreserved: Designated - Ensuing Year's Budget Undesignated Total Fund Equity(Deficit) Total Uabllities and Fund Equity(Deficit) MAJOR GOVERNMENTAL FUNDS Non-Major Capital Governmental General Hi~lhwa¥ Projects Funds Totals 8.436,782 $ 1.569.090 $ 9,673.846 $ 1.945,252 $ 21.624,970 1,168 1.154 31.004 95,975 129,301 15,107 3,469 194,719 230.623 443,918 342,253 83.198 6,830 66,096 498.377 13.195 49,843 601,310 88,743 753,091 112.471 577,529 35,051 725,051 1,296 1.296 69,865 1,320 71,185 10,000 10,000 $ 9,002,137 $ 1,706,'754 $ 11,085,23~8 $ 2,463,060 $ 24,257,189 792.860 $ 185.976 $ 304.734 $ 342,848 $ 1,626,418 395.000 395,000 10,576.000 10,576,000 426,211 2,601 15.106 443,918 595 70,425 71,020 2,463,059 616,093 1,189,107 4,268,259 3,682,725 804,670 11,275,734 1,617,486 17.380,615 1,296 1,296 69,865 1.320 71,185 1.033,085 1.033,085 112,000 112,000 2,008.000 239,000 329,000 2,576.000 2,207,166 551,084 (190.496) 515,254 3,083,008 5,319,412 902,084 (190,496) 845,574 6,876,574 $ ,2,463,060 $ 24,257,18~9 $ 9.002,13~7 $ 1,706,754 $ 11,085,23~8 See notes to the financial statements. -14- TOWN OF SOUTHOLD RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS As of December 31, 2003 Total Fund Balances - Governmental Funds Amounts reported for govermental activities in the Statement of Net Assets are different because: Capital assets less accumulated depreciation are included in the Statement of Net Assets: Capital assets - non-depreciable Capital assets - depreciable Accumulated depreciation Long-term liabilities applicable to the Town's governmental activities are not due and payable in the current period and accordingly are not reported in the funds. However these liabilities are included in the Statement of Net Assets: General obligation bonds payable Due to Employees Retirement System Compensated absences Claims and judgements payable Estimated liability for landfill closure and postclosure care costs Prepaid items included in the Statement of Net Assets Interest payable applicable to the Town's governmental activities are not due and payabte in the current period and accordingly are not reported in the funds. However these liabilities are included in the Statement of Net Assets. Net Assets of Governmental Activities $34,319,499 92,034,082 (49,405,510) (6,884,860) (174,576) (5,182,869) (1,o0o,o00) (1,917,688) $ 6,876,574 76,948,071 (15,159,993) 157,044 (134,271) $ 68,687,425 See notes to financial statements. -15- TOWN OF SOUTHOLD STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS For the year ended December 31. 2003 MAJOR GOVERNMENTAL FUNDS Non-Major Total Revenues General Highway $3.513.902 6.428 REVENUES Real Property Taxes $13.247.572 Other Real Property Tax Items 51.311 Non-Property Tax Items 401.035 Departmental Income 315.289 Intargovemmental Charges 202.917 15.573 Use of Money and Property 201.702 18.520 Ucenses and Permits 188.480 8.231 Fines and Fodeitures 107.084 Sale of Property and Compensation for Loss 56.893 4.033 Miscellaneous Local Sources 133.346 State Nd 2.225.401 458.686 Federal Aid 146~574 67~699 17~277~604 4.093.072 EXPENDITURES Cuffeat General Govemment Support 3.751.469 Public Safety 6.033.207 Public Health 32.988 Transportation 398.358 2.733.518 Economic Assistance and Opportunity 833.501 Home and Community Services 317.769 Culture and Recreation 228.578 Employee Benefits 2.617.783 976.406 Capital Outlay Interest 1.007.318 15~128 Total E)q)enditures 15~220.971 3.725~052 Excess (Deficiency) of Revenues Over Expenditures 2,056,633 368,020 Other Financing Sources (Uses) Transfers in 1,392,850 Transfers Out (1,910,781) (60~000) Total Other Financing Sources (Uses) (517.931) (60,000) Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses Fund Balance at Beginning of Year Prior Pedod Adjustment Fund Balances(Deficit) at End of Year Capital Governmental ProJects Funds Totals $ 2.197.525 $18.958.999 874 58.613 117.449 518.484 2.339.227 2.654.516 $4.603.354 1.614 4.823.458 82.594 18.147 320.963 139.620 336.331 49.000 156.084 16.000 44.450 121.376 77.664 2'30 211.240 1.380.750 161.393 4.226.230 547.000 111 ~299 872.572 6r707.362 5~1801828 33t258~866 134.969 3.886.438 749.904 6.783.111 6.408 39.396 3.131.876 833.501 3.230.201 3.547.970 228.578 874.049 4.468.238 5.801.066 5.801.066 31.729 117.562 1.171~737 51832.795 5~113.093 29~891.911 874.567 67.735 3.366.955 1.061.431 ' * 2.454.281 (483,500) (2.454.281) 1.061.431 (483.500) -0- 1.538.702 308.020 1.935.998 (415.765) 3.366.955 3.780.710 594.064 (3.645.679) 1.261.339 1.990.434 1.519.185 1.519.185 $ 5.319.412 S 902.084 $ (190.496) S 845.574 $ 6.876.574 See notes to the financial statements. -16- TOWN OF SOUTHOLD RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES December 31,2003 Net Change in Fund Balance Governmental funds report capital outlays as expenditures. However, in the Statement of Activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. The amount by which capital outlay exceeds depreciation in the current pedod is: Capital outlay Depreciation expense Loss on dispositions $ 9,942,859 (3,571,646) (67,706) Some expenses reported in the Statement of Activities do not require the use of current financial resources and therefore, are not reported as expeditures in governmental funds: Prepaid charges The issuance of long-term debt and increase in obligations under capital leases provides current financial resoumes to governmental funds, while the repayment of the principal of long term debt and capital leases consumes the current financial resources of governmental funds. Neither transaction has any effect on net assets. Repayment of bond principal Due to Employees Retirement System Compensated absences Estimated liability for landfill closure and postclosure care costs Accrued interest payable $ 3,366,955 6,303,507 157,044 632,429 (174,576) (2,228,437) (1,917,688) 30,703 Change in Net Assets of Governmental Activities $ 6,169,937 See notes to financialstatemen~. -17- TOWN OF SOUTHOLD STATEMENT OF FIDUCIARY NET ASSETS December 31, 2003 ASSETS Cash and investments Other receivables Due from other funds LIABILITIES Due to other funds Due to school districts Due to component units Due to other governments Other liabilities Deposits held Total Assets Total Liabilities Fishem Island Town Ferry District Totals $ 10,433,163 $ 121,469 $10,564,632 55,160 55,160 71,020 71,020 $ 10,504,183 $ 176,629 $10,680,812 $ 498,377 $ 498,377 8,989,713 8,989,713 307,895 $ 156,341 464,236 1,634 1,634 5,642 5,042 700,922 20,288 721,210 $ 10,504,183 $ 176,629 $10,680,812 See notes to financial statements. -18- TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2003 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Town of Southotd (the "Town"), which was established in 1640, is governed by Town Law and other general laws of the State of New York and various local laws. The Town Board is the legislative body responsible for overall operations. The Town Board consists of the Supervisor who is elected for a term of two years and f'n/e council members who are elected for terms of four years. The Town Board appoints the Town Attorney, Comptroller and the Commissioner of Public Works whose terms are fixed by Town Low. The Town Clerk and Receiver of Taxes are elected and serve for four years, respectively. The Town provides a full range of municipal services, including public safety, transportation, home and community services, public works and read maintenance, recreation and parks, and general and administrative services. The financial statements of the Town of Southold have been prepared in conformity with accounting principles generally accepted in the Untied States of America (GAAP) as applied to gevemmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing govemmental accounting and financial reporting principles. In June 1999, the Governmental Accounting Standards Board (GASB) unanimously approved Statement No. 34, Basic Financial StatementHnd Management's Discussion and Analysis--for State and Local Governments. Significant changes in the Statement include the following: For the first time the financial statements include: ,, A Management Discussion and Analysis (MD&A) section providing an analysis of the Town's overall financial position and results of operations. · The financial statements are prepared using full accrual accounting for all of the Town's activities, including the recording of depreciation expense for all capital assets. · A change in the fund financial statements to focus on the major funds. These and other changes are reflected in the accompanying financial statements (including notes to financial statements). The Town has elected to implement the general previsions of the Statement in the current year. The more significant of the govemmant's accounting policies ara described below. 1. REPORTING ENTITY The financial reporting entity consists of: (a) the pdmary govemment, which is the Town of Southeld; (b) organizations for which the pdmary government is financially accountable; and (c) other organizations for which the nature and significance of their relationship with the primary govemment ara such that exclusion would cause the reporting enfity's financial statements to be misleading or incomplete as set forth in GASB Statement No. 14. The decision to include a potential component unit in the Town of Southeld reporting entity is based on several criteria set forth in GASB Statement No. 14 including legal standing, dependency and financial accountability. Based on the application of these criteria, the following is a summary of certain entities considered in determining the Town of Southold's reporting entity. Certain special districts of the Town of Southold provide sanitation, ferry, and park services to residents and businesses within the districts. These special districts are organized under New York State Town law and have separately elected boards. Special districts cannot issue bonded debt without the approval and the backing of the full faith and credit of the Town. Budgets and tax rates are approved by the Town. Tax levies of the special districts are collected by the Town Receiver of Taxes. As a result of this fiscal dependency, the Town is financially accountable for these special districts. Accordingly, these special districts have been determined to be component units of the Town and ara presented discretely in a separate column in the combined financial statements to emphasize that they are legally separate from the primary government. Condensed financial statements, along with the addresses of the administrative office for these component units, are presented in Note A. -19- TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2003 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2. BASIS OF PRESENTATION The Town's basic financial statements include both government-wide (reporting the Town as a whole) and fund financial statements (reporting the Town's major funds). Government-wide Financial Statements The government-wide financial statements reports information on the Town as a whole, except fiduciary activities, with separate columns for the primary governmental activities as welt as the discretely presented component units. In the govemment-wide Statement of Net Assets, the Town's govemmentsl activities are presented on a consolidated basis and are reported on a full accrual, economic resource basis, which recognizes all long-term assets and receivables as well as long-term debt and obligations. The Town's net assets are reported in three parts~nvestments in capital assets, net of related debt; restricted net assets; and unrestricted net assets. The government-wide Statement of Activities reports both the gross and net cost of each of the Town's functional categories (public safety, transportation, home and community services, etc.), which are otherwise supported by general government revenues (property, sales and use taxes, certain intergovernmental revenues, fines, permits and charges, etc.). The Statement of Activities reduces gross expenses (including depreciation), by related program revenues and operating end capital grants, to preduca the net cost of each program. Program revenues include (a) charges for services and (b) operating and capital grants and contributions that are directly associated with the function. Operating grants include operating-specific and discretionary (either operating or capital) grants while the capital grants column reflects capital- specific grants. The net costs (by function) are normally covered by general revenue (property, taxes, intergovernmental revenues, interest income, etc). As a general rule the effect of interfund activity has bean eliminated in general purpose financial statements. This government-wide focus is more on the sustainability of the Town as an entity and the change in the Town's net assets resulting from the current year's activities. Fund Financial Statements The fund finencial statements are similar to the financial statements presented in the previous model. The new emphasis is on the major funds in the fund financial statements. Non-major funds are summarized into a single column. The accounts of the Town are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund balances, revenues, and expenditures, which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions or limitations. The various funds are presented by type in the fund financial statements. Accordingly, the Town maintains the following fund types: 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 upon determination of financial position and changes in financial position. Governmental funds are further classified as major and nonmajor funds. TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2003 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) BASIS OF PRESENTATION (continued) Fund Financial Statements (continued) The Town reports the following major governmental funds: General Fund - is the principal operating fund of the Town. This fund is used to account for all financial resources except those required to be accounted for in other funds. Highway Funds - To maintain and operate highways. Caoital Prolects Fund - used to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by special assessment fonds and trust fonds). Additionally, the Town reports the following nonmajor funds: Special Revenue Funds - are used to account for the proceeds of specific revenue sources (other than major capital projects) that are legally restricted to expenditures for specif'~l purposes. Special Revenue Funds include the following: General Fund Part Town - To provide general services outside the Village of Greenport. Special Grant Fund - Segregate and account for projects funded by Community Development revenue, Special District Funds - To provide special services to areas that encompass less than the whole town. Fiduciary Funds - Fiduciary Funds are used to account for assets held by the Town in a trustee or custodial capacity. Agency Fund - is for money (and/or property) received and held in the capacity of trustee, custodian or agent. Discretely Presented Component Units Certain special districts that have separately elected boards provide transportation, park, mosquito control, and sanitation services to residents and businesses within these districts, and follow government fund accounting principles. These districts, which are accounted for as discretely presented component units, are as follows: These districts include the following: The Fishers Island Ferry District, established in 1947 Orient Mosquito District, established in 1916 Fishers Island Garbage and Refuse District, established in 1952 Cutchogue-New Suffolk Park District, established in 1953 Orient-East Marion Park District, established in 1969 Southold Park District, established in 1907 Mattituck Park District, established in 1941 -21- TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2003 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2. BASIS OF PRESENTATION (continued) Complete financial statements of these component units can be obtained from their respective administrative offices: Orient Mosquito District Main Road Orient, NY 11957 Fishers Island Garbage & Refuse District Fishers Island, NY 06390 Cutchogue-New Suffolk Park District P.O. Box 311 Cutchogue, NY 11935 Orient-East Marion Park District Route 25 Orient, NY 11957 Southold Park District P.O. Box 959 Southold, NY 11971 Mattituck Park District P.O. Box 1413 Mattituck, NY 11952 Fishers Island Ferry District Main Street Southold, NY 11971 3. BASIS OF ACCOUNTING/MEASUREMENT FOCUS Measurement focus refers to what is being measured whereas the basis of accounting refers to when revenues end expenditures are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurement mede, regardless of the measurement focus applied. In the government-wide statements, governmental activities are presented using the economic resources measurement focus and are presented using the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred or economic asset used. Revenues, expenses, gains, losses, assets, and liabilities resulting fi.om exchange and exchenge-like transactions are mcngnized when the exchange takes place. In the funds statements, governmental funds use a current financial resources measurement focus and are accounted for using the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual (measurable and available to finance current operations). "Measurable" means the amount of the transaction can be determined and 'available' means collect~le within the current period or soon enough thereafter to pay liabilities of the current period. The Town considers all revenues available if they are collected within 60 days after the year end. Revenues susceptible to accrual include Suffolk County local assistance at year end on behalf of the Town, franchise fees, and charges for services, intergovernmental revenues and operating transfers. Permits, fees, and other similar revenues are not susceptible to accrual because generally they are not measurable until they are received in cash. In those instances where expenditures are the prime factor in determining eligibility for state and federal grants, revenues are recognized when the expenditure is incun'ed. In the Capital Projects Fund, long-term debt is recognized as revenue upon receipt of the proceeds. Expenditures ara recorded on the accrual basis except that (a) expenditures for prepaid expenses are recognized when incurred; (b) principal and interest on indebtedness are recognized as expenditures when due; (c) compensated absences, such as vacation and sick leave, which vest or accumulate, are charged as expenditures when paid. -22- 3. TOWN OF SOUTNOLD NOTES TO FINANCIAL STATEMENTS December 31, 2003 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) BASIS OF ACCOUNTING/MEASUREMENT FOCUS (continued) Encumbrance accounting, under which purchase orders, contracts and other commitments are recorded for budgetary control purposes in order to reserve that portion of the applicable appropriation, is employed in the governmental funds. Appropriations for all govammental funds except the capital projects fund lapse at year-end. However, encumbrances reserved against fund balances are re-appropriated in the ensuing year. Encumbrances are reported as reservations of fund balances since they do not constitute expenditures or liabilities. Expenditures for such commitments ere recorded in the pednd in which the liability is incurred. 4. ASSETS, UABILITIES AND FUND EQUITY RECEIVABLES Receivables include amounts due ffem Federal, State, and other governments or entities for services provided by the Town. Receivables am recorded and revenues recognized as earned or as specific program expenditures are incurred. INVENTORY - MATERIALS AND SUPPLIES Inventory in the general and special revenue funds is valued at cost. Inventory in these funds is accounted for under the consumption method. CAPITAL ASSETS Capital assets purchased or ac, quimd with an original cost of $5,000 or more are reported at historical cost or estimated historical cost. Contributed assets are reported at fair market value as of the date received. Additions, improvements and other capital outlays that significantly extend the useful life of an asset are capitalized. Other costs incurred for repairs and maintenance are expensed as incurred. Depreciation on all assets is provided on the straight- line basis over the following estimated useful lives: Buildings Improvements and other Machinery and equipment Infrastructure 10-40 years 20 years 5-10 years 20- 30 years Infrastructure assets, consisting of certain improvements other than buildings including roads, curbs, sidewalks, bridges, street lighting are capitalized along with other capital assets. In the fund financial statements, capital assets are recorded as capital outlay expenditures in the governmental fund upon acquisition. DEFERRED REVENUE/UNEARNED REVENUE Deferred revenues/unearned revenue are these where asset recognition criteria have been met, but which revenue recognition criteria have not been met. Such amounts include collections in advance, unearned income and amounts have been deemed to be "measurable" but not "available" to finance current expenses pursuant to generally accepted accounting principals. PREPAIDS Prepaids record payments to venders that benefit futura recording periods and ara reported on the consumption basis. Prapaids in the General and Special Revenue Funds represent insurance premiums paid for coverage that will benefit the subsequent period and for retirement benefits that will benefit a futura period. -23- TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2003 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) LONG-TERM OBLIGATIONS The liabilities for long-term obligations consisting of general obligation bond, compensated absences, due to employee retirement system, judgments, ctaims and liability for landfill closure and post closure costs are recognized in the government-wide financial statements. In the fund statements, long-term obligations are not reported as liabilities. The debt proceeds are reported as other financing sources and payment of principal and interest reported as expenditures. 5. REVENUES AND EXPENDITURES REAL PROPERTY TAX ASSESSMENT AND COLLECTION PROCEDURES In Suffolk County, the assessment and lien of real property for taxation is done by the County Department of Assessment. Real property taxes become a lien on December I for both school and general taxes. The Town's assessment rolls are used for the levy of real property taxes by the Town and the School Districts, as well as by the County and by Special Districts of the County and the Town. The Town of Southold Receiver of Taxes collects all real property taxes for the Town, Suffolk County, Town Special Districts end School Districts. These taxes are levied on December 1, and are due in two installments, 50% on December 1 and 50% on May 10, payable without penalty to January 10 and May 3'1, respectivaly. Penalties ars imposed thereafter at the rate of one-twelfth of the rate of interest determined by the State Commissioner of Taxation and Finance, after which taxes are payable to the County Treasurer. The Town rstains the total amount of Town, Highway and Town Special Districts levies fi-om the amount collected, and forwards the balance collected to the County which assumes collection responsibility. The Town and Town's Special Districts therefore realize annually the 100% collection of real property taxes. School District property taxes ars also levied on December 1, and ars also payable in two installments. School property taxes are due in two installments, 50% on December 1 and 50% on May 10 payable without penalty to January 10 and May 31, respectively~ The County is also responsible for uncollected schoot taxes. INTERFUND TRANSACTIONS Interfund transactions have been eliminated from the government-wide financial statements. In the funds statements interfund transactions include: a) Inte~und Revenues Intarfund revenues, quasi-external transactions, in the general fund rspresent amounts charged for services or facilities provided by the general fund. The amounts paid by the fund receiving the benefit of the service or facilities are reflected es an expenditurs of that fund. b) Transfers Transfers rspresent payments to the debt service and capital projects funds from the other funds for their appropriate share of the debt service or capital project costs. TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2003 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) COMPENSATED ABSENCES The liability for vested or accumulated vacation or sick leave (compensated absences) is recorded as current and noncurrent obligations in the government-wide statements. The current portion of this debt is estimated based on historical trends. In the fund financial statements only the compensated absence liability payable from expendable available financial resources is incurred. The amount that is expected to be liquidated with expendable available financial resources is reported as expenditures and a liability in the funds statement in the respective fund Ihat will pay it. 6. EQUITY CLASSIFICATIONS In the Government-wide Statements, equity is classified as net assets and displayed in three components: a) Invested in capital assets, net of related debt--Consists of capital assets including restricted capital assets, net of accumulated depreciation end reduced by the outstanding balances of any bonds, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. b) Restricted net assets~Consists of net assets with constraints placed on the use either by (1) extemal groups such as creditors, grantors, contributors, or laws or regulations of other governments; or (2) law through constitutional provisions or enabling legislation. c) Unrestricted net assets~AII other net assets that do not meet the definition of "restricted" or "invested in capital assets, net of related debt." In the Fund Statements, governmental fund equity is classified as fund balance. Fund balance is further classified as reserved and unreserved, with unreserved further split between designated and undesignated. Portions of fund equity are segregated for future use and therefore not available for future appropriation or expenditure. Amounts reserved for encumbrances, inventory, insurance claims and debt service represent portions of fund equity, which are required to be segregated in accordance with state law or GAAP. Designations of fund balances in governmental f~nds indicate the utilization of these resources in the subsequent year's budget or tentative plans for future use. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY 1. BUDGETARY DATA Budgets ara adopted annually on a basis consistent with generally accepted accounting principles. Appropriations authorized for the current year are increased by the amount of encumbrances carried forward from the prior year. Budgetary controls for special revenue funds are established in accordance with the applicable grant agraement, which may cover a period other than the Town's fiscal year. Appropriate budgetary adjustments have been made to reflect these grant agreements during the Town's fiscal year. TOWN OF SOUTNOLD NOTES TO FINANCIAL STATEMENTS December 31, 2003 STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY (continued) BUDGETARY DATA (continued) The Town follows the procedures enumerated below in establishing the budgetary data reflected in the financial statements: a. No later than October 1, the Supervisor submits a tentative budget to the Town Board for the fiscal year commencing the following fiscal year. The tentative budget includes the proposed means of financing for all funds. b. After public headngs are conducted to obtain taxpayer comments, no later than November 20, the Town Board adopts the budget. c. The Town Board must approve all modifications of the budget. However, the Supervisor is authorized to transfer certain budgeted amounts within departments. In order to show the full legal level of budgetary compliance for the general and certain special revenue funds, detailed individual statements of revenues, expenditures and changes in fund balances - budget and actual, are presented in a separate budget report 2. FUND BALANCES DESIGNATION OF FUND BALANCE Portions of the unreserved balances at December 31, 2003 were designated for the subsequent year's operating budgets as follows: Fund Fund Balance Unreserved and Designated Fund Balance Total for Subsequent (Deficit) Fund Balance Year's Unreserved Unreserved Budget Undesignated Non-Major Funds: Town Outside Village Special Grant East West Fire Protection District Southold Wastewater Distdct Fishers Island Sewer Distdct Solid Waste Management District $ 555,356 $ 329,000 $ 225,036 7,532 7,532 22,265 22,265 36,066 36,066 224,355 224,355 Total $ 845,574 $ 329,000 $ 515,254 FUND DEFICITS The capital projects fund had a deficit fund balance at December 31, 2003. The capital projects fund deficit will be eliminated as short-term debt is redeemed or converted to permanent financing. -26- TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31,2003 DETAILED NOTES ON ALL FUNDS AND ACCOUNT GROUPS 1. CASH AND INVESTMENTS Cash consists of funds deposited in demand accounts, time deposit accounts and certificates of deposit with maturities of less than three months. The Town's investments ara governed by a formal investment policy. The Town's monies must be deposited in FDiC-insured commercial banks or trust companies located within the state. The Town is authorized to use demand accounts and certificates of deposit. Permissible investments include obligations of the U.S. Treasury, U.S. Agencies and investments made by the Cooperative Liquid Asset Secudty System (CLASS). CLASS is a cooperative investment plan consisting of U.S. Treasury Obligations and repurchase agreements relating to treasury obligations. Investments are stated at cost, which approximates market value. CLASS was established as a cooperative investment arrangement organized under the CLASS Municipal Cooperation Agreement made pursuant to New York General Municipal Law, Article 3A and 5-G. It is the Town's policy to require collateral held in the name of the Town for demand deposits, money market deposits and certificates of deposit for all deposits not covered by federal deposit insurance. Obligations that may be pledged as collateral are obligations of the United States and its agencies and obligations of the State and its municipalities and school districts. At December 31, 2003 the cash in banks was approximately $35,500,000 and collateral held against cash in banks was $42,100,000 consisting of FDIC insurance and/or securities held in the name of the Town of Southold. INTERFUND RECEIVABLES AND PAYABLES Intarfund receivables and payables for the primary government at December 31, 2003 were as follows: General Fund - Townwide Highway Fund Capital Projects Fund Part Town Special Grant Southold Wastewater Solid Waste Management District Amount Amount Receivable Paveble $ 15,107 $ 426,211 3,469 2,601 194,719 56,007 106 15,000 3,283 171,333 $ 443.918 $ 443.918 Interfund receivable and payable balances for the pdmary government at December 31, 2003 ara expected to be paid currently. -27- TOWN OF SOUTNOLD NOTES TO FINANCIAL STATEMENTS December 31, 2003 DETAILED NOTES ON ALL FUNDS (continued) 3. C~AL ~SETS Primary government Capital assets not being depreciated Land Construction in progress Total capital assets not being depreciated Depreciable capital assets Buildings Improvements other than buildings Machinery and equipment Infrastructure Total depreciable capital assets Less accumulated depreciation Buildings Impmvementa other than buildings Machinery and equipment Infrastructure Total accumulated depreciation Total net depreciable capital assets Total net capital assets Balance Balance 1/1/03 Additions Deletions 12/31/03 $ 27,778,470 $ 3,474,859 $ 31,253,329 3,066,170 3,066,170 27,778,470 6,541,029 34,319,499 4,102,824 249,890 4,352,714 9,080,465 1,505,099 10,585,564 7,658,557 607,378 $ 139,816 8,118,119 67,938,222 1,039,463 58,977,585 88,772,068 3,401,830 139,816 92,034,082 1,696,048 113,508 1,809,556 2,325,478 175,626 2,581,104 4,582,189 621,273 72,110 5,431,352 37,002,259 2,661,239 39,663,498 $ 45,905,974 $ 3,571,646 $ 72,110 49,405,510 42,628,572 $ 76,948,071 Depreciation expense was charged to governmental functions as follows: General govemment support Public safety Transportation Economic assistance and opportunity Culture and recreation Home and community services $ 224,659 149,075 2,643,757 34,511 7,365 312,279 $ 3,571,646 -28- TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2003 DETAILED NOTES ON ALL FUNDS (continued) 4. CAPITAL ASSETS (continued) Discretely presented component units Capital assets not being depreciated Land $ Depreciable capital assets Buildings Improvements other than buildings Machinery and equipment Infrastructure Total depreciabla capital assets Less accumulated depreciation Buildings Improvements other than buildings Machineq/and equipment Infrastructure Total accumulated depreciation $ Total net depreciabla capital assets Total net capital assets Balance Balance 1/1/03 Additions Deletions 12/31/03 2,213,759 $ 2,213,759 3,341,126 $ 20,780 3,361,906 3,521,031 395,717 3,916,748 2,922,606 36,761 2,959,367 2,121,386 2,121,386 11,906,149 453,258 12,359,407 981,356 100,954 1,082,310 799,977 85,596 885,573 1,774,186 103,651 1,877,837 897,948 93,676 991,624 4,453,467 $ 383,877 4,837,344 7,522,063 $ 9,735,822 4. INDEBTEDNESS SHORTTERM DEBT Bond Anticipation Notes (BANs) - Bond anticipation notes (BANs) are used as a temporary means of financing capital expenditures in the capital projects fund. State law requires that BANs issued for capital purposes be converted to long-term obligations within five years after the original issue date. The notes or renewal thereof may not extend more than two years beyond the original date of issue unless a portion is redeemed within two years and within each 12 month period thereafter. Liabilities for BANs are generally accounted for in the capital projects fund. BANs are expected to be paid from the proceeds of future bond issues after renewal of these notes. These BANa bear interest at various rates from 0.00% to 1.22% and are due at various dates through 2004. When BANs are not redeemed with the proceeds of bend issues, but instead paid from budgetary appropriations, the principal amount paid is recorded as an expenditure in the operating fund and a financing source is recorded in the capital projects fund. -29- TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2003 DETAILED NOTES ON ALL FUNDS (continued) 4. INDEBTEDNESS (continued) SHORT TERM DEBT (continued) These notes are summarized as follows: To Be Redeemed 2004 Interest Budget Description Amount Rate Aooroodations Various Purposes $ 2,096,000 1.140% $ 426,000 Various Purposes 3,800,000 1.216% 370,000 Landfill Closure 4,680,000 1.190% 310,000 New London Wharf 3,045,000 1.220% 70,000 Pickett Landfill Closure 1,147,302 0.000% Total ~ ~ Bonds $ 1,670,000 3,430,000 4,370,000 2,975,000 1,147,302 Of the $14,768,302 in bend anticipation notes, $10,576,000 relates to the pdmary government and the remaining $4,192,302 relates to the component units. LONG TERM DEBT Summary of changes in long-term debt transactions for the year ended December 31, 2003 is as follows: Non-current Balance Balance liabilities due Non-current t/1103 Increases Redustons 12/31/03 within one year liabilities Primary Govemment: Ge~eralobligabonbonds $ 7,517,289 $ 632,429 $ 6,884,860 $ 642,431 $ 6,242,429 Due to Employees Relimment System -0- $ 174,576 174,576 38,742 135,834 Compensated abcences 2,954,432 2,423,988 195,551 5,182,869 17,787 5,165,082 Claims and judgments 1,000,088 1,000,088 1,880,880 Estimated liabti['/for landfill closure and bost..dosure cam costs -0- 1,917,688 1,917,688 1,917,688 Component Units: General obiiga6on bonds 97,771 32,631 65,140 ' 32,569 32,571 General Obligation Bonds - The Town borrows money in order to acquire land or equipment or construct buildings and 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, which are backed by the full faith and credit of the Town, bear interest at various rotes from 4.7% to 9.1% and have matudty dates in 2004 through 2019. -30- TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2003 DETAILED NOTES ON ALL FUNDS (continued) 4. INDEBTEDNESS (continued) LONG TERM DEBT (continued) Future principal and interest payments to maturity for both the primary govemment and the component units are as follows: Year Endin.q Principal Interest 2004 $ 675,000 $ 351,053 2005 700,000 309,748 2006 500,000 273,545 2007 520,000 247,053 2008 530,000 220,060 2009-2013 2,515,000 681,178 2014-2018 1,390,000 187,011 2019 120,000 2,820 Totals $ 6.950.000 ~ Other long-term liabilities for claims and judgments, compensated absences, retirement system and the estimated liability for landfill closure and post closure costs are to be paid by the fund that gave rise to the liability. 5. RETIREMENT SYSTEM Plan Description The Town of Southold participates in the New York State and Local Employees' Retirement System (ERS). This is a cost-sharing multiple-employer retirement system. The System provides retirement benefits as well as death and disability benefits. Obligation of employers and employees to contribute and benefits to employees are govemed by the New York State Retirement and Social Security Law (NYSRSSL). As set forth in the NYSRSSL, the Comptroller of the State of New York (Comptroller) serves as sole trustee and administrative head of the System. The Comptroller shall adopt end may amend rules and regulations for the administration and transaction of the business of the System and for the custody and control of their funds. A publicly available annual report containing financial statements and required supplemental information for the Employees' Retirement System may be obtained by writing to the New York State Retirement System, Governor Smith State Building, Albany, NY 12244. Fundin.q Policy The System is noncontributory except for employees who joined the New York State and Local Employees' Retirement System after July 27, 1976 and who have less than ten years of membership and less than ten years of credited semice with a retirement system under the provisions of article fourteen or fifteen of the NYSRSSL, who contribute 3% of their salary. Pdor to October 1, 2000, all employees who joined the System after July 27, 1976 were required to contribute 3% of their salary. Under the authority of the NYSRSSL, the Comptroller shall ce~'y annually the rates expressed as proportions of payroll of members, which shall be used in computing the contributions required to be mede by employers to the pension accumulation fund. The Town is required to contribute at an actuarially determined rate. The actual contributions were equal to the actuadally required amounts and also include additional contributions to fund various eady retirement incentives made available to the Town employees. The credits and miscellaneous adjustments represent modification made by the ERS for pdor year's contributions. -31- TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2003 DETAILED NOTES ON ALL FUNDS (continued) 5. RETIREMENT SYS'rEM (continued) Funding Policy (continued) The required contributions, for the Primary government, for the current year and two preceding years were: ERS PFRS 2003 $ 443,861 $ 240,756 2002 $ 99,200 $ 65,087 2001 $ 61,327 $ 63,568 The Town's contribution to the system was 100% of the contributions required each year. 6. POST EMPLOYMENT BENEFITS In addition to providing pension benefits, the Town provides health insurance coverage and survivor benef'~ for retired employees and their survivors. Substantially all of the Town's employees may become aligible for these benefits if they reach normal retirement age while working for the Town. Health care benef'~ in accordance with New York State Health Insurance Rules and Regulations (administered by the New York State Department of Civil Service), are provided through the New York State Empire Plan (the 'Empire Plan") whose premiums ara based on the benefits paid throughout the State dudng the year. The Town recognizes the cost of providing benefits by recording its share of insurance premiums as an expenditure in the year paid. The Town's union contracts and ordinances require that it provide its eligible enrollees with Empire Plan benefit coverage, or if another provider is utilized, the equivalent coverage. Under the provisions of the Empire Plan, premiums ara adjusted on a prospective basis for any Iceses experienced by the Empire Plan. The Town has the option to terminate its participation in the Empire Plan at any time without liability for its respective share of any previously incurred loss. During the 2003 year, $2,396,302 wes paid on behalf of 83 retirees and 206 active employees and recorded as an expenditure in the vadous funds of the Primary govemment. 7. COMPENSATED ABSENCES Town employees are granted vacation and sick leave and earn compensatory absences in varying amounts. In the event of termination or upon retirement, an employee is entitled to payment for accumulated vacation and sick leave and unused compensatory absences at various rates subject to certain maximum limitations. Estimated vacation, sick leave and compansatory absences accumulated by governmental fund type employees have been recorded in the statements of net assets. Payment of vacation time and sick leave is dependent upon many factors; therefore, timing of future payments is not readily determinable. However, management believes that sufficient resources will be made available for the payments of vacation, sick leave and compensatory absences when such payments become due. As of December 31, 2003, the value of the accumulated vacation time and sick leave wes $5,182,869 for the primary government. -32- TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31,2003 COMMITMENTS AND CONTINGENCIES Risk Management The State of New York has commenced a lawsuit against the Town for unlawful discharge of gasoline and petroleum products at the Town's Highway department on Peconic Lane. As of the date of this report, the likelihood of an unfavorable outcome is uncertain, but is at least reasonably possible that cleanup costs and interest could total up to $1,000,000. The Town is self-insured for medical insurance only. The amount of claims outstanding at December 31, 2003 is $112,929 and is reserved against fund balance in the General Fund. The Town is self-insured for workers' compensation insurance and disability insurance. Estimated benefits to be paid are appropriated in the various operating funds of the Town. The Town is also self- insured for unemployment benefits paid. Landfill Closure and Post-Closure Care Costs State and federal laws and regulations require the Town to place a final cover on its landfill sites and to perform certain maintenance and monitoring functions at the sites for thirty years after closure. The Town ceased accepting waste at its Cutchogue landfill as of October 8, 1993. The Town entered into a stipulation of settlement with the New York State Department of Environmental Conservation in October of 1994 in which all charges of operational violations at the Cutchogue landfill were dropped. Under the stipulation, the Town agreed to close and place a final cover over the landfill and to pay a civil penalty of $650,000 over seven years. Construction of the final cover commenced in the summer of 2001 and was completed in the fall of 2003. In addition to placoment of the final cover on the landfill, state and federal regulations presently require the Town to perform certain maintenance and monitoring functions at the site for up to thirty years. Accordingly, as of December 31, 2003 the Town has recorded a liability of $1,917,688 which represents the provision to be made in future budgets for post-closure landfill costs. Actual costs may vary due to inflation or deflation, changes in technology, or changes in regulations or applicable laws. Actual costs associated with the placement of the final cover totaled $7,681,719. Financing for closure activities 'was provided through a $2,000,000 grant from the New York State Department of Environmental Conservation with the balance provided with a state subsidized loan through the New York State Environmental Facilities Coq~oration. Costs associated with post cio.sure care will be covered by charges to future landfill users and future tax revenue. Lease Commitments And Leased Assets The Town leases property and equipment under operating leases. Total rental expenditures on such leases for the fiscal year ended December 31, 2003 were approximately $120,231. Future obligations over the primary terms of the Town's leases as of December 31,2003 are as follows: 2004 $ 153,192 2005 124,156 2006 108,405 2007 60,425 Total $ 446.178 -33- TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2003 CONDENSED FINANCIAL STATEMENTS FOR THE DISCRETELY PRESENTED COMPONENT UNITS The following represents condensed financial statements for the discretely presented component units as of and for the year ended December 31, 2003: Condensed Statement of Net Assets: Due from Capital Assets Other Current Pdmary NCt of Current Long-Term NCt Assets Go'~emment Deffeciation Liabilities Uabilitise Assets Fishers Island Fem/District $ 2.952.718 Fishets Island Refuse and GaFeage Dis 420.511 Cutchogue-N~v Suffolk Park District 98.713 Soufl-~old Park District 16.287 Orient-East Marion Park Distrk;t 8.864 Mattituck Park Distdct 232.976 Orient Mosquito District 17.182 $ 3.747.251 $ 224.595 $ 5.172.242 $ 3.933.911 $ 32.571$ 4.383.073 79.691 2.509,008 1.255.389 1.753.821 126.254 370 224,597 58.666 655.861 103.676 627.138 5.421 432.985 14.412 432,858 83.612 839.472 94.183 1.061.877 12.251 12.251 17.182 464,236 $ 9,735.822 $ 5,414,192 $ 32,571$ 8.500.546 Program Gene~l Revenue Ne( Assets F_~ Re~mflue Tax Ob~er Change 111~03 12/31/03 Fishers Island Fern/District $ 3.634.725 Rshe~ Island Reflse a~d Garbage 346.889 Cutd,~gue-New Suffolk Park Dislfic 112.200 Soufho~ Pad( Dis~ict 371.275 0fie~t-Eaxt Mmts~ Park Distdct 29.138 O~e~ Mosquito I~s~ct 66.881 $ 2,271,933 $ 1,88~,792 $ 880,000 S 14.354 $ 968,438 $ 5,881,511 $ 4,3~3,073 217,440 129,549 411,150 4.107 (285,708) 1,468,113 1,753,821 112.200 148.000 738 (36.5.38) 188.059 224.597 371,275 235,000 29,646 106.629 733,767 627,138 29,138 21,700 119 7,31~J 440,177 432,858 20.000 276.384 334.880 129.323 (187.819) 574.088 1.061,877 5,246 61,715 65.0~0 301 (3.586) 13.588 17.182 $ 4,857.672 $ 2.514.619 $ 2,343,053 $ 1,595,730 $ 178,588$ 568,735$ 9,(]69,281 $ 8,500,546 F. SUBSEQUENT EVENTS In July 2004, the Town issued State Clean Water and Ddnking Water Revolving Fund Revenue Bonds, sedes 2004D through New York Environmental Facilifies Corporation in the amount of $3,789,098 at interest rates ranging fi.om 1.201% to 4.586%. In addition, the Town issued public improvement sedal bonds on behalf of the Mattituck Park District in September 2004 in the amount of $240,000 with an interest rate of 3.14%. G. PRIOR PERIOD ADJUSTMENT As of January 1, 2003, all capital projects and related debt was transferred from the primary government to the discretely presented component units in accordance with generally accepted accounting principles. The net effect was an increase in fund balance in the capital projects fund of $1,519,185. -34- REQUIRED SUPPLEMENTARY INFORMATION OTHER THAN MD&A TOWN OF SOUTHOLD GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL Year ended December 31,2003 Original Final Budget Budget REVENUES Real Property Taxes $13,247,572 $13,247,572 Other Real Property Tax Items 60,000 60,000 Non-Property Tax Items 400,000 400,000 Departmental Income 336,400 410,121 Intergovernmental Charges 246,914 116,910 Use of Money and Property 243,964 243,964 Licenses and Permits 187,850 187,850 Fines and Forfeitures 96,500 96,500 Sale of Property and Compensation for Loss 240,400 249,939 Miscellaneous Local Sources 118,200 138,829 State Aid 1,302,000 1,339,616 Federal Aid 146,433 Total Revenues Variance with Final Budget Actual Over/(Under) $13,247,572 51,311 $ (8,689) 401,035 1,035 315,289 (94,832) 202,917 86,007 201,702 (42,262) 188,480 630 107,084 10,584 56,893 (193,046) 133,346 (5,483) 2,225,401 885,785 146,574 141 16,479,800 16,637,734 17,277,604 639,870 EXPENDITURES General Government Support 3,836,825 4,024,052 Public Safety 6,235,956 6,272,245 Public Health 33,300 33,300 Transportation 369,200 410,725 Economic Assistance and Opportunity 649,560 866,388 Culture and Recreation 350,555 350,555 Home and Community Services 223,011 244,016 Employee Benefits 5,475,016 5,356,462 Debt Service - Principal and Interest 1,483,600 1,433,600 Total Expenditures Deficiency of Revenues Over Expenditures Other Financing Sources (Uses) Transfers In Transfers Out Total Other Financing Sources (Uses) Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses Fund Balance at Beginning of Year Fund Balance at End of Year 3,751,469 272,583 6,033,207 239,038 32,988 312 398,358 12,367 833,501 32,887 317,769 32,786 228,578 15,438 3,795,373 1,561,089 1,007,318 426,282 18,857,023 18,991,343 16,398,561 2,592,782 (2,377,223) (2,353,609) 879,043 3,232,652 2,749,900 2,749,900 2,570,440 (179,460) (1,558,677) (1,582,291) (1,910,781 ) (328,490) 1,191,223 1,167,609 659,659 (507,950) $ (1,186,000) $ (1,186,000) 1,538,702 $ 2,724,702 3,780,710 $ 5,319,412 See notes to the financial statements. -35- TOWN OF SOUTHOLD HIGHWAY FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL Year ended December 31, 2003 REVENUES Real Property Taxes Other Real Property Tax Items Non-Property Tax Items Intergovernmental Charges Use of Money and Property Licenses and Permits Sale of Property and Compensation for Loss Interfund Revenues State Aid Federal Aid Total Revenues EXPENDITURES Transportation Employee Benefits Debt Service - Principal and Interest Total Expenditures Excess (Deficiency) of Revenues Over Expenditures Other Financing Uses Transfers Out Total Other Financing Uses Variance with Original Final Final Budget Budget Budget Actual Over/(Under) $ 3,513,902 $ 3,513,902 $ 3,513,902 7,000 7,000 4,574 $ (2,426) 1,854 1,854 15,573 15,573 32,000 32,000 18,520 (13,480) 21,000 21,000 8,231 (12,769) 4,000 4,000 4,033 33 3,500 3,500 (3,500) 223,700 458,686 458,686 67,699 67,699 3,805,102 4,107,787 4,093,072 (14,715) 2,737,400 3,085,735 2,733,518 352,217 566,577 1,183,427 976,406 207,021 78,925 78,925 15,128 63,797 3,382,902 4,348,087 3,725,052 623,035 422,200 (240,300) 368,020 608,320 (689,000) ~ (60,000) (689,000) ~ ~ Excess (Deficiency) of Revenues Over Expenditures and Other Uses Fund Balance at Beginning of Year Fund Balance at End of Year $ (266,800) $ (300,300) 308,020 $ 608,320 594,064 $ 902,084 See notes to the financial statements. -36- OTHER SUPPLEMENTARY INFORMATION Combining Fund Statements of Revenues, Expenditures and Changes in Fund Balance r~ TOWN OF SOUTHOLD COMBINING BALANCE SHEET NON-MAJOR GOVERNMENTAL FUNDS December 31,2003 ASSETS Cash and Investments Accounts Receivable, net of allowance - Due from Other Funds Due from Trust Funds Due from Other Govemments State and Federal Receivables Prepaid Expenditures Total Assets General Fund Part Town $ 661,685 56,007 34,072 1,320 $ 753,084 East-West Fire Southold Fishers Solid Waste Special Protection Wastewater Island Sewer Management Grant Distdct District District District $ 35,051 $ 835,710 $ 54,057 $ 48,651 3,283 2,121 $ 35,051 $ 835,710 $ 59,461 $ 48,651 $ 345,149 95,975 171,333 29,903 88,743 $ 731,103 Totals $1,945,252 95,975 230,623 66,096 35,051 88,743 1,320 $ 2,463,060 LIABILITIES AND FUND EQUITY LIABILITIES Accounts Payable Due to Other Funds Due to Trust Funds Deferred Revenue Total Liabilities FUND EQUITY Fund Balance - Reserved: Prepaid Expenses Fund Balance - Unreserved: Designated - Ensuing Year's Budget Undesignated Total Fund Equity Total Liabilities and Fund Equity $ 49,672 106 70,425 77,525 197,728 1,320 329,000 225,036 555,356 $ 753,084 $ 20,051 $ 12,441 15,000 35,051 $ 35,051_ 815,737 828,178 $ 13,972 $ 12,189 $ 234,523 23,224 37,196 7,532 22,265 7,532 22,265 $ 835,710 $ 59,461 396 12,585 36,066 36,066 $ 48,651 272,225 506,748 224,355 224,355 $ 731,103 $ 342,848 15,106 70,425 1,189,107 1,617,486 1,320 329,000 515,254 845,574 $ 2,463,060. -37- TOWN OF SOUTHOLD COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - NON-MAJOR GOVERNMENTAL FUNDS Year ended December 31, 2003 REVENUES Real Property Taxes Other Real Property Tax Items Non Property Tax Items Departmental Income Intergovernmental Charges Use of Money and Property Licenses and Permits Fines and Forfeitures Sale of Property and Compensation for Loss Miscellaneous Local Sources State Aid Federal Aid EXPENDITURES General Govemment Support Public Safety Public Health Home and Community Services Employee Benefits Debt Service - Principal and Interest Total Revenues Total Expenditures Excess (Deficiency) of Revenues Over Expenditures Other Financing Uses: Operating Transfers Out Total Other Financing Uses Excess (Deficiency) of Revenues Over Expenditures and Other Uses Fund Balance at Beginning of Year Fund Balances at End of Year East-West Fire Southold General Fund Special Protection Wastewater Part Town Grant District District $ 294,256 $ 338,261 $ 154,864 542 59 27 117,449 543,604 88,049 8,557 2,000 49,000 8,248 230 72,650 1,096,536 134,969 408,437 6,408 628,311 435,67O 6,009 $ 111,299 111,299 111,299 735 1,318 Fishers Island Sewer Distdct $ 17,606 464 Solid Waste Management District $ 1,410,144 246 1,689,968 1,614 7,073 137,620 36,202 88,743 Totals $ 2,197,525 874 117,449 2,339,227 1,614 18,147 139,620 49,000 44,450 230 161,393 111,299 339,055 244,258 18,070 3,371,610 5,180,828 35,363 211,308 24,201 2,950 341,467 2,243,920 414,178 108,603 2,766,701 604,909 (483,500) (483,500) 121,409 102,946 $ 224,355 1,619,804 111,299 341,467 238,459 (523,268) (2,412) 5,799 (523,268) (2,412) 5,799 1,078,624 9,944 16,466 $ 555,356 $ -0- $ 7,532 $ 22,265.. 35,363 (17,293) (17,293) 53,359 $ 36,066 134,969 749,904 6,408 3,230,201 874,049 117,562 5,113,093 67,735 (483,500) (483,500) (415,765) 1,261,339 $ 845,574 -38- DISCRETLY PRESENTED COMPONENT UNITS TOWN OF SOUTHOLD DISCRETELY PRESENTED COMPONENT UNITS COMBINING STATEMENT OF NET ASSETS December 31, 2003 ASSETS Current Assets: Cash and investments Accounts receivable, net of allowance Due from primary govemment State and federal receivables Prepaid charges Total Current Assets Non-Current Assets: Non-depreciable capital assets Depreciable capital assets, net of depreciation Total Assets LIABILITIES Current Liabilities: Accounts payable and accrued liabilities Accured interest payable Due to other govemments Deferred Revenue Bond anticipation notes payable Non-current liabilities due within one year General obligation bonds payable Total Current Liabilities Noncurrent Liabilities: General obligation bonds payable Total Liabilities NET ASSETS Investment in capital assets, net of related debt Unrestricted Total Net Assets Fishers Island Ferry District Fishers Island Cutchogue- Southold Orient-East Mattituck Orient Refuse and New Suffolk Park Marion Park Park Mosquito Garbage District Park District District District District District (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Totals 2,471,643 224,595 481,075 3,177,313 399,566 4,254 79,691 16,691 500,202 $ 98,713 $ 16,287 58,666 8,864 5,421 232,976 83,612 17,182 12,251 $ 3,245,231 4,254 464,236 481,075 16,691 98,713 74,953 14,285 316,588 29,433 4,211,487 41,717 517,266 101,198 588,847 5,130,525 1,991,742 25,056 67,014 432,985 531,746 307,726 2,213,759 7,522,063 8,349,555 3,009,210 224,967 730,814 447,270 1,156,060 29,433 13,947,309 821,057 12,031 68,254 3,000,000 32,569 28,396 79,691 1,147,302 37O 10 58,666 45,000 8,991 5,421 10,124 447 83,612 12,251 868,938 12,041 447 307,895 4,192,302 32,569 3,933,911 32,571 1,255,389 370 103,676 14,412 94,183 12,251 5,414,192 32,571 3,966,482 1,255,389 370 103,676 14,412 94,183 12,251 5,446,763 3,790,250 1,361,706 126,254 655,861 432,985 839,472 7,206,528 592,823 392,115 98,34~33 (28,723) (127) 222,405 17,182 1,294,018 $ 4,383,073 $ 1,753,821 $ 224,59.~._7 ~$ 627,138 $ 432,858 $ 1,061,877 $ 17,182 $ 8,500,546 TOWN OF SOUTHOLD DISCRETELY PRESENTED COMPONENT UNITS COMBINING STATEMENT OF ACTIVITIES Year ended December 31, 2003 REVENUES Program revenues Real property taxes Other real property tax items Interest and earnings Other Total Revenues EXPENDITURES General government support Public health Transportation Culture and recreation Home and community services Debt service - interest Total Expenditures Fishers Island Ferry District Fishers Island Cutchogue- Southold Orient-East Refuse and New Suffolk Park Marion Park Garbage District Park District District District (Unaudited) .. (Unaudited) (.Unaudited) (Unaudited) . $ 2,271,933 380,000 66 9,384 4,904 217,440 411,150 $ 148,000 $ 235,000 72 4,035 738 29,646 2,666,287 632,697 148,738 264,646.. $ 21,700 4 115 21,819 105,446 3,486,299 112,200 371,265 29,138 18,403 346,989 24,577 .... 10 3,634,725 346,989_ 112,200 371,275 29,138 Mattituck Park District (Unaudited) $ 20,000 334,880 58 2,733 126,532 Orient MosquEo District (UnaudEed) Totals 5,246 $ 2,514,619 65,000 1,595,730 20O 301 46,952 131,436 484,203 70,547 4 288 937 296,384 296,384 105,446 66,961 66,961 3,486,299 808,987 365,392 24,587 66,961 4,857,672 Changes in Net Assets Net Assets at Beginning of Year Net Assets at End of Year (968,438) 5,351,511 $ 4,383,O73 285,708 1,468,113 $ 1,753,821. 36,538 (106,629) (7,319) 188,059 733,767. 440,177 224 597 $ 627,138 $ 432,858 187,819 3,586 (568,735) 874,058 13,596 9,069,281 $ 1,061,877 $ 17,182 $ 8,500,546 OTHER REPORTS TOWN OF SOUTHOLD SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Year ended December 31, 2003 Federal Grantor/Pass-through Grantor/ Pro(imm or Cluster Title U.S. Department of Aqdculture Passed through Suffolk County Cash-In-Lieu of Food Awards Natural Resource Conservation Service Farm and Ranchland Protection Program U.S. Department of Health and Human Services Pass-through Suffolk County, New York Nutrition U. S. De~adment of Housina and Urban Development Pass-through from Suffolk County, New York Community Development Block Grant Program U. S. Department of Justice Bulletproof Vest Partnership Program Federal Eme~lency ManaRement A~qency Pass-through program from State of New York 2003 Presidents Day Snowstorm 3184 EM NY Total expenditures of federal awards Federal CFDA Number Federal Expenditures 10.550 $ 41,621 10.913 547,000 93.045 14.218 16.607 83.548 87,197 111,299 3,988 81,467 See accompanying note to schedule of expenditures of federal awards. -41- TOWN OF SOUTHOLD NOTE TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Year ended December 31,2003 Note A - Basis of Presentation The accompanying schedule of expenditures of federal awards includes the federal grant activity of the Town of Southold and is presented on the modified accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements. ALBRECHT, VIGGIANO, ZURECK & COMPANY, P.C. CERTIFIED PUBLIC ACCOUNTANTS 25 SUFFOLK COURT HAUPPAUGE, NY 11788 (631) 434-9500 REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Town Board Town of Southoid Southold, New York We have audited the financial statements of the governmental activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the Town of Southold, New York as of and for the year ended December 31, 2003, which collectively comprise the Town of Southold's basic financial statements, and have issued our report thereon dated June 8, 2004, which was qualified because the Town of Southold's discretely presented component units with the exception of one, the Fishers Island Ferry District, were not audited as of the report date. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Comoliance As part of obtaining reasonable assurance about whether the Town of Southold's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grants, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. Internal Control Over Financial Reporting In planning and performing our audit, we considered the Town of Southold, New York's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and not to provide assurance on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively Iow level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses. This report is intended solely for the information of the Town Board, management, others within the organization, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than those specified parties. Hauppauge, New York June 8, 2004 -43- ALBRECHT, VIGGIANO, ZURECK & COMPANY, P.C. CERTIFIED PUBLIC ACCOUNTANTS 25 SUFFOLK COURT HAUPPAUGE, NY 11788 (631) 434-9500 REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND O1'4 INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 Town Board Town of Southold Southold, New York Comoliance We have audited the compliance of the Town of Southold, New York with types of compliance requirements described in the U. S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that are applicable to each of its major federal programs for the year ended December 31, 2003. The Town of Southold's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major federal programs is the responsibility of the Town of Southold's management. Our responsibility is to express an opinion on the Town of Southold, New York's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Govemments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and matedal effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the Town of Southold, New York's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination of the Town of Southold's compliance with those requirements. In our opinion, the Town of Southold, New York complied, in all material respects,' with 'the requirements referred to above that are applicable to each of its major federal programs for the year ended December 31, 2003. Intemal Controls Over Compliance The management of the Town of Southold is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, ragulations, contracts, and grants applicable to federal programs. In planning and performing our audit, we considered the Town of Southold's internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on the internal control over compliance in accordance with OMB Circular A-133. Our consideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might be a material weakness. A matedal weakness is a condition in which the design er operation of one er more of the internal control components does not reduce to a relatively Iow level the dsk of noncompliance with applicable requirements of laws, regulations, contracts and grants that would be matedal in relation to a major federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing the assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses. This report is intended solely for the information of the Town Board, management, others within the organization, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than those specified parties. Hauppauge, New York June 8, 2004 TOWN OF SOUTHOLD SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year ended December 31, 2003 SUMMARY OF AUDITOR'S RESULTS The auditor's report expresses a qualified opinion on the financial statements of the Town of Southold due to the fact that six of the seven component units of the Town of Southold that were discretely presented were not audited. The remaining component unit, the Fishers Island Ferry District, was audited by other auditors. No reportable conditions disclosed during the audit of the financial statements are reported in the ~REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS". 3. No instances of noncompliance material to the financial statements of the Town of Southold were disclosed during the audit. No reportable conditions disclosed during the audit of the major federal award programs are reported in the "REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A- 133". No material weaknesses were noted. 5. The auditor's report on compliance for the Farm and Ranchland Protection Program expresses an unqualified opinion; the report on the remaining programs are unqualified. 6. No audit findings relative to the major federal award programs for the Town of Southold are reported in this schedule. 7. The Town of Southold had one "Type A" program for the year ended December 31, 2003. 8. The program tested as a major program includes: CFDA Number Name of Federal Prof:lram or Cluster 10.913 U.S. Department of Agriculture Farm and Ranchland Protection Prograrn 9. The threshold for distinguishing Types A and B programs was $300,000. 10. The Town of Southold was determined to be a Iow-risk auditee. TOWN OF SOUTHOLD SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year ended December 31,2003 FINDINGS-FINANCIAL STATEMENTS AUDIT REPORTABLE CONDITIONS There were no findings or reportable conditions noted. FINDINGS AND QUESTIONED COSTS- MAJOR FEDERAL AWARD PROGRAMS AUDIT U.S. Dept of Agriculture - CFDA # 10.913 Farm and Ranchland Protection Program Thero were no findings or reportable conditions noted. Questioned Cost $ -0-