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Home My WebLink About2001 . . . TOWN OF SOUTHOLD SINGLE AUDIT REPORTS . December 31,2001 . . . . . . . . TABLE OF CONTENTS Paoe . Independent Auditors' Report 1-2 GENERAL PURPOSE FINANCIAL STATEMENTS . Combined Balance Sheet All Fund Types, Account Groups and Discretely Presented Component Units.................................................................................. 3 Combined Statement of Revenues, Expenditures and Changes in Fund Balances All Governmental Fund Types and Discretely Presented Component Units............ 4 . Combined Statement of Revenues, Expenditures, and Changes in Fund Balances-Budget and Actual: General Fund................................................ ...... .............................................. 5 . Special Revenue Funds .................................................................................... 6 Notes to Financial Statements.................................................................................... 7-24 COMBINING INDIVIDUAL FUND STATEMENTS AND SCHEDULES . Special Revenue Funds: Combining Balance Sheet.......................... .................................................... 25 Combining Statement of Revenues, Expenditures and . Changes in Fund Balance ........................................................................... 26 Special Districts - Special Revenue Funds: Combining Balance Sheet.......................... .................................................... 27 . Combining Statement of Revenues, Expenditures and Changes in Fund Balance ........................................................................... 28 Fiduciary Funds: Combining Statement of Changes in Assets and Liabilities............................ 29 . Discretely Presented Component Units: Combining Balance Sheet .............................................................................. 30 Combining Statement of Revenues, Expenditures and . Changes in Fund Balance ........................................................................... 31 . . TABLE OF CONTENTS Paoe . OTHER REPORTS Schedule of Expenditures of Federal Awards............................................................. 32 Notes to Schedule of Expenditures of Federal Awards .............................................. 33 . Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards.... .............................. ............. ...................................................... 34-35 . Report on Compliance with Requirements Applicable To Each Major Program and Internal Control Over Compliance in Accordance with OMB Circular A-133................................................. 36-37 Schedule of Findings and Questioned Costs.............................................................. 38 . . . . . . . . -1- ALBRECHT, VIGGIANO, ZURECK & COMPANY, P.C. CERTIFIED PUBLIC ACCOUNTANTS . 25 SUFFOLK COURT HAUPPAUGE, NY 11788 (631) 434-9500 . INDEPENDENT AUDITORS' REPORT Town Board . Town of Southold Southold, New York We have audited the accompanying general-purpose financial statements of the Town of Southold, New York as of and for the year ended December 31, 2001 as listed in the table . of contents. These general purpose financial statements are the responsibility of the Town of Southold, New York management. Our responsibility is to express an opinion on these general purpose financial statements based on our audit. 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 satisfy ourselves as to those financial activities by other auditing procedures. Those financial activities are included in the component unit column and represent 24% and 34% of the assets and revenues, respectively, of the discretely presented component unit column. The financial statements of the Fishers Island Ferry District were audited by other auditors whose report thereon has 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. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. . Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general-purpose financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the general-purpose 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. 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 mentioned above, been . audited, or had we been able to satisfy ourselves as to those financial activities by other auditing procedures, the general purpose financial statements referred to above present fairly, in all material respects, the financial position of the Town of Southold, as of December 31, 2001, and the results of its operations for the year then ended in conformity with generally accepted accounting principles. . . -2- Our audit was conducted for the purposes of forming an opinion on the general-purpose financial statements taken as a whole. The combining individual fund statements and . schedules listed in the table of contents is presented for purposes of additional analysis and is not a required part of the general purpose financial statements of the Town of Southold, New York. Such information, except for the information pertaining to the Town of Southold's discretely presented component units on page 33 and 34 on which we express no opinion, has been subjected to the auditing procedures applied in the audit of the . general purpose financial statements and, in our opinion, is fairly stated in all material respects in relation to the general purpose financial statements taken as a whole. In accordance with Government Auditing Standards, we have also issued a report dated April 30, 2002 on our consideration of the Town of Southold, New York internal control over . financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants, Our audit was performed for the purpose of forming an opinion on the general-purpose financial statements, taken as a whole, The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office . Management and Budget Circular A-133, Audits of States, Local Governments, and Non- Profit Organizations, and is not a required part of the general purpose financial statements of the Town of Southold, New York. Such information has been subjected to the auditing procedures applied in the audit of the general purpose financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the general purpose financial . statements taken as a whole. -' Z-~ + G,.. r . 1r ,11. t . ~IV~I Hauppauge, New York April 30, 2002 . . . . . . . . GENERAL PURPOSE FINANCIAL STATEMENTS . . . . . . . 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IS: ~ CII CII It: CI t- ~ OW Q) C::JW"- _ ~~ Q) Q) ~Q)~8~-gQ)~roo~ E roE~~g 05 ~~ 0 r:n ~~ C:c:ro Q)~~C: c: ~ OQ)'~ -~ 0~ _ ol--Q) c..~~CIIQ) ~ c-EQ)cc.. en CIICC CII _ ~~~~Et-eo!:J1 ~1~:5~~8e:::Q)Q) :/Ig'i~~ :/I : Q)-Q)ccc~u..oge::: -e e:::0Q)--<( -er:no CJ-Q)I-I- CJ GI ~~I~~I~[j~~~-g~<(-~ ~~~lg~~~I~ ~~~!! ~ g ~~~tO~~ O-:J ~ -~oo~o ~oOO C~~~ ~ ~-~lro~OC~ ~t~Q) QQ)"_._~cQ):J-~ ~ ~~ ~ zroQ)~coo.Q)Q)Q)Q)Q)cQ)~Q)C6-e ZCQ)~~58E~Eo..a u..EQ)Q) m w - ~~.Q"_ro'-~~Q) w :J:J~ O:J Q) ~Q)~~ >e:::OZOE=>~~en:2Eenu.. ~C)c..c..I-WI()WO Glooo ~ W >< .s:l e::: w 0 II.. . . . . . . -5- TOWN OF SOUTH OLD COMBINED STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES . IN FUND BALANCE - BUDGET AND ACTUAL GENERAL FUND Year ended December 31, 2001 Variance Favorable . Budget Actual (Unfavorable) REVENUES Real Property Taxes $ 10,965,967 $ 10,965,967 Other Real Property Tax Items 44,000 55.069 $ 11,069 Non-Property Tax Items 570,000 508,130 (61,870) . Departmental Income 303,050 312,033 8,983 Intergovernmental Charges 330,856 261,646 (69,210) Use of Money and Property 499,738 448,483 (51.255) Licenses and Permits 163,950 198,949 34,999 Fines and Forfeitures 115.500 97,609 (17,891 ) Sale of Property and Compensation for Loss 40,215 76,471 36.256 . Miscellaneous Local Sources 149,069 109,026 (40,043) State Aid 1.074,066 1,465,312 391 ,246 Federal Aid 152,617 239,649 87,032 Total Revenues 14,409,028 14,738,344 329,316 . EXPENDITURES General Government Support 3,363,414 3,170,906 192,508 Public Safety 5,809,323 5,755,775 53,548 Public Health 42,800 33,288 9,512 Transportation 375,100 335,583 39,517 Economic Assistance and Opportunity 811,532 802,249 9,283 . Culture and Recreation 363,415 356,570 6,845 Home and Community Services 582,120 501,790 80,330 Employee Benefits 3,352,996 2,742.583 610,413 Debt Service - Principal and Interest 1,655,300 1,402,074 253,226 Total Expenditures 16,356,000 15,100,818 1,255,182 . Deficiency of Revenues Over Expenditures (1,946,972) (362,474) 1,584,498 Other Financing Sources (Uses) . Operating Transfers In 1,710,100 1,650,724 (59,376) Operating Transfers Out (1,158,400) (1,072,732) 85,668 Total Other Financing Sources (Uses) 551,700 577 ,992 26,292 Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses $ (1,395,272) 215.518 $ 1,610,790 . Fund Balance at Beginning of Year 3,101,561 Fund Balance at End of Year $ 3,317,079 . See notes to the financial statements. . -6- TOWN OF SOUTHOLD COMBINED STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES . IN FUND BALANCES - BUDGET AND ACTUAL SPECIAL REVENUE FUNDS Year ended December 31,2001 Variance Favorable . Budget Actual (Unfavorable) REVENUES Real Property Taxes $ 4,818,729 $ 4,749,320 $ (69,409) Other Real Property Tax Items 1 ,400 7,065 5,665 Non-Property Tax Items 140,000 98,076 (41,924) Departmental Income 1,746,330 2,125,493 379,163 . Intergovernmental Charges 74,500 131,221 56,721 Use of Money and Property 149,975 172,621 22,646 Licenses and Permits 146,200 145,502 (698) Sale of Property and Compensation for Loss 109,000 86,521 (22,479) Miscellaneous Local Sources 32,416 14,878 (17,538) . Interfund Revenues 7,000 10,791 3,791 State Aid 298,846 325,658 26,812 Federal Aid -0- 210,644 210,644 Total Revenues 7,524,396 8,077,790 553,394 . EXPENDITURES General Government Support 62,509 42,052 20,457 Public Safety 843,353 786,251 57,102 Public Health 6,000 5,924 76 Transportation 3,361,908 3,076,012 285,896 Culture and Recreation 2,449,834 2,872,654 (422,820) . Employee Benefits 476,762 469,613 7,149 Debt Service - Principal and Interest 853,355 412,463 440,892 Total Expenditures 8,053,721 7,664,969 388,752 Excess (Deficiency) of Revenues . Over Expenditures (529,325) 412,821 942,146 Other Financing Uses Operating Transfers Out (668,048) (872,589) (204,541 ) . Total Other Financing Uses (668,048) (872,589) (204,541 ) Excess (Deficiency) of Revenues Over Expenditures and Other Uses $ (1,197,373) (459,768) $ 737,605 . Fund Balance at Beginning of Year 2,413,843 Fund Balance at End of Year $ 1,954,075 . See notes to the financial statements. . -7- TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31,2001 . A. Summary of Significant Accounting Policies The financial statements of the Town of Southold have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to government units. The Governmental Accounting Standards Board (GASB) is the accepted standard setting . body for establishing governmental accounting and financial reporting principles. The more significant of the govemment's accounting policies are described below. 1. Financial Reporting Entity . The Town of Southold, which was established in 1640, is governed by its Charter, the Local Municipal 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 Supervisor serves as Chief Executive Officer and as Chief Fiscal Officer. . Basic services provided included Public Safety, Health, Transportation, Economic Assistance and Opportunity, Culture and Recreation, and Home and Community Services. All governmental activities and functions performed for the Town is its direct responsibility. No other governmental organizations have been included or excluded from the reporting entity. . The financial reporting entity consists of (a) the primary government which is the Town of Southold, (b) organizations for which the primary government is financially accountable and (c) other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete as set forth in . GASB Statement 14. The decision to include a potential component unit in the Town's reporting entity is based on several criteria set forth in GASB 14 including legal standing, fiscal dependency, and financial accountability. Based on the application of these criteria, . the following is a brief review of certain entities considered in determining the Town of Southold's reporting entity. Certain special districts of the Town of South old 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. Long-term debt backed by the full faith and credit of the Town and other financial matters result in a fiscal interdependency with the Town. Accordingly, these special districts have been determined to be component units of the Town of Southold and are presented discretely in a separate column in the combined financial statements . to emphasize that they are legally separate from the primary government. These districts include the following: . . -8- TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31,2001 . A. Summary of Significant Accounting Policies (continued) 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 South old Park District, established in 1907 Mattituck Park District, established in 1941 . 1. Financial Reporting Entity (continued) Complete financial statements of these component units can be obtained from their respective administrative offices: . Orient Mosquito District Fishers Island Garbage Main Road & Refuse District Orient, NY 11957 Fishers Island, NY 06390 . Cutchogue-New Suffolk Orient-East Marion Park District Park District P.O. Box 311 Route 25 Cutchogue, NY 11935 Orient, NY 11957 Southold Park District Mattituck Park District . P.O. Box 959 P.O. Box 1413 Southold, NY 11971 Mattituck, NY 11952 Fishers Island Ferry District Main Street . Southold, NY 11971 2. Fund Accountina The Town of South old uses funds and account groups to report on its financial . position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain government functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. An . account group, however, is a financial reporting device designed to provide accountability for certain assets and liabilities that are not recorded in the funds because they do not directly affect net expendable available financial resources. The Town records its transactions in the fund types and account groups described below. . . -9- TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2001 . A. Summary of Significant Accounting Policies (continued) 2. Fund Accounting (continued) Fund Categories . Governmental Funds - Governmental funds are those through which most governmental functions are financed. The acquisition, use and balance 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. The following are the Town's governmental fund types. General Fund - the principal operating fund, which includes all operations not required to be recorded in other funds. . Special Revenue Funds - used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specific purposes. The following Special Revenue Funds are utilized: Highway Funds - To maintain and operate highways. . 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. Capital Projects 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 funds and trust funds). Fiduciary Funds - used to account for assets held by the local government in a trustee or custodial capacity. Trust and Agency Funds - used to account for money received and held in the . capacity of trustee, custodian or agent. These include expendable trusts, non-expendable trusts, and agency funds. Account Groups Account Groups are used to establish accounting control and accountability for . general fixed assets and general long-term debt. The two account groups are not "funds". They are concerned with measurement of financial position and not results of operations. . . -10- TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31,2001 . A. Summary of Significant Accounting Policies (continued) The General Fixed Assets Account Group - used to account for land, buildings, improvements other than buildings, and equipment utilized for general government purposes. . The General Long-Term Debt Account GrouD - used to account for all long-term debt. 3. Basis of Accounting/Measurement Focus . Basis of accounting refers to when revenues and expenditures and the related assets and liabilities are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurements made, regardless of the measurement focus. Measurement focus is the determination of . what is measured, Le. expenditures. Modified Accrual Basis - All governmental funds and expendable trust funds are accounted for using the modified accrual basis of accounting. . Under this basis of accounting, revenues are recorded when measurable and available. Available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. Material revenues that are accrued include state and federal aid, sales tax and certain user charges. If expenditures are the prime factor for determining eligibility, . these revenues (federal and state grants) are accrued when the expenditure is made. Expenditures are recorded when incurred except that: . Principal and Interest on indebtedness are not recognized as an expenditure until due. Compensated absences, such as vacations and sick leave, which vests or accumulates, are charged as an expenditure when paid. . Account Groups - General fixed assets are recorded at actual or estimated cost or, in the case of gifts and contributions, at the fair market value at the time received. No provision for depreciation is made. General long-term debt liabilities are recorded at the par value of the principal amount. No liability is recorded for interest payable at . maturity, Purposes to reserve that portion of the applicable appropriations is employed in all govemmental funds. Encumbrances are reported as reservations of fund balances since they do not constitute expenditures or liabilities. Expenditures for such commitments are recorded in the period in which the liability is incurred. . . -11- TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31,2001 . A. Summary of Significant Accounting Policies (continued) 4. Encumbrances Encumbrance accounting, under which purchase orders, contracts and other . commitments for the expenditure of monies are recorded for budgetary control. 5. Assets. Liabilities and Fund Equity Receivables . Receivables include amounts due from Federal, State, and other governments and individuals for services provided by the Town. Receivables and revenues are recorded as earned or as specific program expenditures are incurred. . Inventory - Materials and Supplies Inventory in the General Fund is valued at cost, using weighted average cost method. Inventory in these funds is accounted for under the consumption method. . Property. Plant and EquiDment . General Fixed assets purchased for general governmental purposes are recorded as expenditures in the governmental funds and are capitalized at costs (or estimated historical costs for assets purchased prior to 1976) in the General Fixed Assets Account Group. Contributed fixed assets are recorded at fair market value at the . date received. Fixed assets consisting of certain infrastructure type improvements other than buildings, including roads, bridges, curbs and gutters, streets and sidewalks, drainage and lighting systems, have not been capitalized. Such assets normally are . immovable and of value only to the Town. Therefore, the purposes of stewardship for capital expenditures can be satisfied without recording these assets. No depreciation has been provided on general fixed assets, nor has interest on general fixed assets construction in progress been capitalized. . Deferred Revenue Deferred revenues are those where asset recognition criteria have been met, but which revenue recognition criteria have not been met. Such amounts have been deemed to be "measurable" but not "available" pursuant to GAAP. . . -12- . TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31,2001 . A. Summary of Significant Accounting Policies (continued) 5. Assets. Liabilities and Fund Equity (continued) Long-Term Obligations . Long-term debt is recognized as a liability of a governmental fund when due. For other long-term obligations, only that portion expected to be financed from expendable available financial resources is reported as a fund liability of a governmental fund. The remaining portion of such obligations is reported in the . General Long-Term Debt Account Group. Fund Equity - Reservations and Designations 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, represent portions of fund equity which are required to be segregated in accordance with State law or GAAP. Designations of fund balances in governmental funds indicate the utilization of these resources in the subsequent year's budget or tentative plans for future use. . 6. Revenue and Expenditures Property Taxes Real property taxes for the ensuing year are levied annually and become a lien on . December 1. Taxes are collected during the period December 1 to May 31, with the first half due January 10 and the second half due May 31. Tax payments made during the period December 1 to December 31 are recognized as revenue in the subsequent year. . Taxes for county purposes (apportioned to the area of the county inside the Town of Southold) are levied together with taxes for town and special district purposes as a single bill. The towns and special districts receive the full amount of their levies annually out of the first amounts collected on the combined bills. The county assumes enforcement responsibility for all taxes levied in the towns (and for unpaid . county taxes in the Town). Unpaid property taxes and school district taxes are turned over to the county for enforcement. Any such taxes remaining unpaid at year-end are relieved as county taxes in the subsequent year. . Interfund Revenues Interfund revenues are quasi-external transactions in the operating funds that represent amounts charged for services or facilities provided by those operating funds. . -13- . TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31,2001 . A. Summary of Significant Accounting Policies (continued) 6. Revenue and Expenditures (continued) . The amounts paid by the fund receiving the benefit of the service or facilities are reflected as an expenditure of that fund. Operating Transfers . Operating transfers represent payments to the Risk Retention Fund and Capital Projects Fund from other funds for their appropriate share of the risk retention and capital projects. Insurance . The Town assumes the liability for most risk including, but not limited to, property damage and personal injury liability. Judgments and claims are recorded when it is probable that an asset has been impaired or a liability has been incurred and the amount of loss can be reasonably estimated. . Compensated Absences Vested or accumulated vacation or sick leave of governmental funds that is expected to be liquidated with expendable available financial resources is reported as an expenditure and a fund liability of the respective fund that will pay it. Amounts of . vested or accumulated vacation or sick leave of governmental funds that are not expected to be liquidated with expendable available financial resources are reported in the General Long-Term Debt Account Group. No expenditure is reported for these amounts. In accordance with the provisions of Statement No. 16 of the Governmental Accounting Standards Board, Accounting for Compensated . Absences, no liability is recorded for non-vesting accumulating rights to receive sick pay benefits. Total Columns on the General Purpose Financial Statements . Total columns on the general-purpose financial statements are captioned "Memorandum Only" to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position, results of operations or changes in financial position in conformity with generally accepted accounting principles, nor is such data comparable to a consolidation. Interfund . elimination's have not been made in the aggregation of the data. Budgets are 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. . . -14- TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31,2001 . B. Stewardship. Compliance. Accountability (continued) Budgetary Data (continued) . 1. Budget Basis of Accounting Budgetary controls for special revenue funds are established in accordance with the applicable grant agreement, 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. . 2. Budaet Policies - The budget policies are as follows: a. No later than October 1, the Supervisor submits a tentative budget to the Town Board for the following fiscal year. The tentative budget includes the proposed means of financing for all funds. . b. After public hearings 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. . 3. Material Violations of Finance Related Activities There are no material violations of finance-related provisions. 4. Fund Balances 1. Certain funds of the Town apply to areas less than the entire Town. The fund . equity at December 31,2001 is allocated as follows: General Fund (Town-Wide) $ 3,317,079 Special Revenue Funds General Fund Part Town 729,320 Highway Fund - Town wide 258,030 . Highway Fund - Part Town 229,475 Special Grant 5,000 Special District Funds East-West Fire Protection 19,548 Southold Wastewater Disposal 70,049 . Fishers Island Sewer 49,703 Solid Waste Management 592,950 Discretely Presented Component Units Fishers Island Refuse & Garbage 302,337 Fishers Island Ferry 354,394 Cutchogue-New Suffolk Park 47,982 . Southold Park 46,786 Orient-East Marion Park 8,255 Mattituck Park 21 ,495 Orient Mosquito 10.797 . Total $ 6.063.200 . -15- TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31,2001 . B. Stewardship. Compliance. Accountability (continued) Budgetary Data (continued) 4. Fund Balances (continued) . Deficit Fund Balances The capital projects fund had a deficit fund balance at December 31, 2001. The deficit will be eliminated as short-term debt is redeemed or converted to permanent financing. . C. Detail Notes on all Funds and Account Groups 1. Assets 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. State statutes govem Town investment policies. In addition, the Town has its own . written investment policy. Town monies are deposited in FDIC insured commercial banks or trust companies located within the state. The Supervisor is authorized to use demand accounts and certificates of deposits. Permissible investments include obligations of the U.S. Treasury and U.S. Agencies, repurchase agreements, obligations of New York State or its localities, and investments made by the Cooperative Liquid Asset Security System (CLASS). CLASS is a cooperative . investment plan consisting of U.S. Treasury obligations and repurchase agreements relating to treasury obligations. The written investment policy requires that repurchase agreements be purchased from banks located within the State and that underlying securities must be . obligations of the federal government. Underlying securities must have a market value of at least 102 percent of the cost of the repurchase agreement. Collateral is required for demand deposits and certificates of deposit at 102 percent of 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. Deposits - All deposits, including certificates of deposits, are carried at cost plus accrued interest. Deposits at year-end were entirely covered by federal depository insurance or by collateral held by the Town's custodial banks in the Town's name. . At December 31, 2001, the cash in banks was $26,972,213 and collateral held against cash in banks was $42,275,325 consisting of FDIC insurance and/or securities held in the name of the Town of Southold. Restricted Cash . Restricted Cash consists of assessments collected by the Receiver of Taxes not yet remitted to the appropriate governmental entity. . -16- TOWN OF SOUTH OLD NOTES TO FINANCIAL STATEMENTS December 31,2001 . C. Detail Notes on all Funds and Account Groups (continued) 2. Fixed Assets A summary of changes within the General Fixed Assets Account Group for the Town . of Southold for the year ended December 31, 2001 is as follows: Balance Balance 1/1/01 Additions Deletions 12/31/01 . Primary Government: Land $ 12,457,652 $ 2,506,145 $ 129,717 $ 14,834,080 Building & improvements 2,592,010 184,137 2,776,147 Other improvements 132,389 132,389 Machinery & equipment 10.675,440 1.172.682 392.566 11,455.556 . Total $ 25.725.102 $3.995.353 $ 522.283 $ 29.198.172 Balance Balance 1/1/01 Additions Deletions 12/31/01 . Component Units: Land $ 362,786 $ 154,615 $ 517,401 Building & improvements 7,394,267 341,559 $ 1,951,829 5,783,997 Machinery & equipment 2.894.783 2.086.213 4.980.996 Total $10.651.836 $ 2.582.387 $ 1.951.829 $ 11.282.394 . 3. Interfund Receivables and Payables Interfund receivables and payables for the primary government at December 31, 2001 were as follows: . Interfund Interfund Fund Receivables Payables General Fund Whole Town $ 33,831 $ 5,510,958 General Fund Part Town 314,302 -0- . Highway Fund Whole Town 1,102,210 -0- Highway Fund Part Town 2,326,885 -0- Special Grant 5,000 -0- East-West Fire Protection District 305,758 -0- Solid Waste Management District 861,242 -0- . Wastewater Disposal District 129,329 2,600 Fishers Island Sewer District 4,952 -0- Capital Projects 144,405 3,049 Trust & Agency 395.395 106.702 . Totals $ 5,623.309 $ 5.623.309 . -17- TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31,2001 . C. Detail Notes on all Funds and Account Groups (continued) 4. Due TolFrom Primary Government and Component Units Amou nt Amount . Receivable Payable Component Units: Fishers Island Refuse & Garbage District $ 432,450 -0- Fishers Island Ferry District 401,204 -0- Orient Mosquito District 50,000 -0- . Cutchogue-New Suffolk Park District 117,750 -0- South old Park District 246,100 -0- Orient-East Marion Park District 21,700 -0- Mattituck Park District 274,014 -0- Primary Government: . General Fund -0- $ 1.543.218 Totals $ 1.543.218 $ 1.543.218 5. Indebtedness . Short-Term Debt Liabilities for bond anticipation notes (BAN's) are generally accounted for in the capital projects funds. 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. . State law requires that BAN's issued for capital purposes be converted to long-term obligations within five years after the original issue date. However, BAN's issued for assessable improvement projects may be renewed for periods equivalent to the maximum life of the permanent financing, provided that stipulated annual reductions . of principal are made. To Be Redeemed 2002 Interest Budget Description Amount Rate Appropriations Bonds . Various Purposes $ 979,000 3.25% $ 310,000 $ 669,000 Various Purposes 1,885,000 2.47% 399,500 1,485,500 Landfill Closure 5,300,000 2.19% 310,000 4,990,000 Composting Site 2.600.000 3.00% 100.000 2.500.000 Total $ 10.764.000 $ 1.119.500 $ 9.644.500 . Long-Term Debt a) At December 31, 2001 the total outstanding indebtedness of the Town, excluding the above obligations aggregated $8,260,000. Of this amount, $8,260,000 was subject to the constitutional debt limit and represented approximately 2.66% of its . debt limit. . -18- TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2001 . C. Detail Notes on all Funds and Account Groups (continued) 5. Indebtedness (continued) Long-Term Debt (continued) . b) Serial 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 full faith and credit debt . of the local government, are recorded in the General Long-Term Debt Account Group. The provision to be made in future budgets for capital indebtedness represents the amount exclusive of interest, authorized to be collected in future years from taxpayers and others for liquidation of the long-term liabilities. c) Other Long-Term Debt - In addition to the above long-term debt, the local . government had the following non-current liabilities: . Due to New York State Department of Environmental Conservation (NYSDEC) - Represents the non-current portion of the liability due under the settlement in which all charges of operational violations at the . Cutchogue landfill were dropped. . Compensated Absences - Represents the value of earned and unused portion of the liability for compensated absences. d) Summary Long-Term Debt - The following is a summary of long-term liabilities outstanding at December 31,2001 by fund type and account group: General Discretely Long-Term Presented Debt Account Component Group Unit Total Serial Bonds $ 8,130,086 $ 129,914 $ 8,260,000 Judgments and Claims 2,000,000 2,000,000 Estimated Liability for Landfill Closure Costs 1,204,000 1,204,000 Compensated Absences 2.515.809 2.515,809 Total Long-Term Debt Account Group $ 13.849.895 $ 129.914 $ 13.979.809 . -19- TOWN OF SOUTH OLD NOTES TO FINANCIAL STATEMENTS December 31, 2001 . C. Detail Notes on all Funds and Account Groups (continued) 5. Indebtedness (continued) Long-Term Debt (continued) . e) The following is a summary of changes in the long-term liabilities for the period ended December 31,2001: Other Net Balance Increase or Balance 1/1/01 Issued Reductions (Decrease) 12131/01 . Primary Government: General Obligation Bonds $ 8,792,882 $ -0- $ 662,796 $ 8,130,086 Due to Employees Retirement System 29,640 $ (29,640) -0- Compensated Absences 2,474,887 40,922 2,515,809 . Claims and Judgments 2,000,000 2,000,000 Estimated Liability for Landfill Closure Costs 6,650,000 (5,446,000) 1,204,000 Due to NYSDEC 65,000 65.000 -0- $20.012.409 $ -0- $ 727.796 $ (5.434,718) $ 13.849.895 . Component Unit: General Obligation Bonds $ 162,118 $ -0- $ 32,204 $ -0- $ 129,914 Additions and deletions to compensated absences are shown net since it is . impracticable to determine these amounts separately. f) The following table summarizes the Town's future debt service requirements for Serial Bonds as of December 31,2001: Year Ending Principal Interest 2002 $ 645,000 $ 430,118 . 2003 665,000 391,019 2004 675,000 351,053 2005 700,000 309,748 2006 500,000 273,545 2007-2011 2,735,000 955,625 . 2012-2016 1,750,000 345,651 2017-2020 590.000 36.845 Totals $ 8.260.000 $ 3.093.604 g) There are no future payment requirements for the stipulation of settlement with the NYS Dept. of Environmental Conservation as of December 31,2001. . . . -20- TOWN OF SOUTH OLD NOTES TO FINANCIAL STATEMENTS December 31,2001 . C. Detail Notes on all Funds and Account Groups (continued) 6. Retirement System Plan Description . The Town participates in the New York Employee's Retirement System, the New York State Policemen's and Firemen's Retirement System and the Public Employee's Group Life Insurance Plan (Systems). These are cost-sharing multiple- employer retirement systems. The Systems provide retirement benefit as well as . death and disability benefits. The New York State Retirement and Social Security Law (NYSRSSL) govern obligations of employers to contribute and benefits to employees. As set forth in the NYSRSSL, the Comptroller of the State of New York (Comptroller) serves as sole trustee and administrative head of the Systems. The Comptroller shall adopt and may amend rules and regulations for the administration and transactions of the business of the Systems and for the custody and control of . their funds. The Systems issue a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing the New York State and Local Retirement System, Gov. Alfred E. Smith State Office Building, Albany, N. Y. 12244. . Funding Policy The Systems are 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 service with a . retirement system under the provisions of article fourteen or fifteen of the NYSRSSL, who contribute 3% of their salary. Prior 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 certify annually the rates expressed as proportions of payroll of members, which shall be used in computing . the contributions required to be made by employers to the pension accumulation fund. The Town of Southold is required to contribute at an actuarially determined rate. The required contributions for the current year and two preceding years were as follows: . ERS PFRS 2001 $ 61,327 $ 63,568 2000 32,226 86,149 . 1999 24,343 67,993 The Town's contributions made to the Systems were equal to 100% of the contributions required for each year. . . -21- TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2001 . . C. Detail Notes on all Funds and Account Groups (continued) 6. Retirement System (continued) Funding Policy (continued) . Since 1989, the Systems' billings have been based on Chapter 62 of the Laws of 1989 of the State of New York. This legislation requires participating employers to make payments on a current basis, while amortizing existing unpaid amounts relating to the Systems' fiscal years ending March 31, 1988 and 1989 (which otherwise were to have been paid on June 30, 1989 and 1990, respectively) over a 17-year period, . with an 8.75% interest factor added. Local governments were given the option to prepay this liability. The Town elected to make the full payment on December 15, 1993, by issuing serial bonds to replace this debt. Pursuant to Chapter 12 of the Laws of 1995 and Chapter 30 of the Laws of 1996, the . State Legislature authorized local governments to make available a retirement incentive program with total costs of $9,500 plus interest, of which $1,900 was charged to expenditures in the governmental funds in the current fiscal year. The cost of the programs are billed and paid over five years and began December 15, 1996 for Chapter 12 and December 15, 1997 for Chapter 30. Furthermore, another . incentive was made available pursuant to Chapter 47 ofthe Laws of 1998 with a total estimated cost of $32,492 plus interest, of which $6,468 was charged to expenditures in the governmental funds in the current fiscal year. The cost of the programs are billed and paid over five years and began December 15, 1999. 7. Post Retirement Benefits . In addition to providing pension benefits, the Town provides health insurance coverage and survivor benefits for reti red employees and their survivors. Substantially, all Town employees may become eligible for these benefits if they reach normal retirement age while working for the Town. Health care benefits and . survivors' benefits are provided through either an insurance company or a self- funded plan whose premiums are based on the benefits paid during the year. The Town recognizes the cost of providing benefits by recording its share of insurance premiums or the actual benefits paid from the General Fund as expenditure in the year paid. During the year, $1,740,059 was paid on behalf of 80 retirees and 205 . active employees and is recorded as expenditures in the General Fund. The cost of providing benefits for retirees is not separable from the cost of providing benefits for active employees. . . -22- TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31,2001 . C. Detail Notes on all Funds and Account Groups (continued) 8. Compensatory 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 and sick leave and compensatory absences accumulated by governmental fund type employees have been recorded in the general long-term obligations account group. Vested vacation and sick leave are recorded as a long-term liability in the general . long-term debt account group if payable from future financial resources, or as a fund liability and expenditures if payable from current resources. D. Commitments and Contingencies . There is a matter under discussion with the United States Coast Guard regarding the reconstruction of the Brushes Creek Bridge. The Town believes it is at least reasonably possible that there will be $1,000,000 of potential forced capital outlay to reconstruct the bridge. This amount has been provided for in the General Long-Term debt account group. . The Town is self-insured for medical insurance only. The amount of claims outstanding at December 31,2001 is $108,581 and is reserved against fund balance in the General Fund. 1. Landfill Closure and Post Closure Care Costs . 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 is expected to be completed in the summer of 2002. In addition to placement 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. . . -23- TOWN OF SOUTH OLD NOTES TO FINANCIAL STATEMENTS December 31,2001 . D. Commitments and Contingencies (continued) 1. Landfill Closure and Post Closure Care Costs (continued) . Actual costs associated with the placement of the final cover are estimated at $7,800,000. Financing for closure activities will be provided through a grant from the New York State Department of Environmental Conservation up to the maximum of $2,000,000 with the balance provided with a State subsidized loan through the New York State Environmental Facilities Corporation. As of December 31, 2001, the . Town has borrowed approximately $6,596,000 for closure costs, of which, approximately $1,296,000 has been repaid. The Town estimates that it will cost an additional $1,204,000 to finalize the landfill closure. Costs associated with post closure care will be covered by charges to future landfill users and future tax revenue. . 2. Litigation 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. Any amounts reserved on all lawsuits have been recorded in the General Long-Term Debt account group and in the opinion of the Town's management and legal counsel, . all other claims are expected to be resolved with no further anticipated reserves considered necessary. 3. 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, 2001 were approximately $65,081. Future obligations over the primary terms of the Town's leases as of December 31,2001 are as follows: 2002 $ 67,443 . 2003 56,431 2004 51,873 2005 53,997 2006 & thereafter 36.245 . Total $ 265.989 . . -24- TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31,2001 . E. Condensed Financial Statements for the Discretely Presented ComDonent Units The following represents condensed financial statements for the discretely presented component units as of and for the year ended December 31 , 2001: . Condensed Balance Sheet Assets and Other Debits Liabilities Amounts to be . Due From Property Provided for Other Bonds and Current Primary Buildin9 & Long-Term Current Long-Term Assets Government EauiDment Debt Liabilities Liabilities Fishers Island Ferry District $ 738,630 $ 401,204 $ 9,410.293 $ 129,914 $ 384,236 $ 129,914 Fishers Island Garbage District 788,789 432,450 1,209,816 486,452 Cutchogue-New Suffolk Park Dis!. 165,732 117,750 478,869 117,750 Southold Park District 292,886 246,100 246,100 . Orient-East Marion Park District 37,122 21,700 28,867 Mattltuck Park District 296,973 274,014 181,471 275,965 Orient Mosquito District 60 797 50 000 1,945 50,000 $ 2.~80,929 $ 1.543,218 $ 11,282,394 $ 129914 $ 1.589,370 $ 129.914 . Condensed Statement of Revenues, Expenditures and Changes in Fund Balances Excess (Deficiency) Expenditures of Revenue Capital Debt and Revenues Current Outlav Service EXDenditures . Fishers Island Ferry District $ 1,800,137 $ 1,319,207 $ 245,468 $ 45,390 $ 190,072 Fishers Island Garbage District 700.775 389,077 157,092 154.606 Cutchogue-New Suffolk Park Dis!. 97,454 61.288 58,863 (22,697) Southold Park District 245,854 172,421 82,690 (9,257) Orient-East Marion Park District 22.528 22,514 14 Mattituck Park District 329,732 246.700 94.037 (11,005) . Orient Mosquito District 55.049 54.486 563 $ 3.251,529 $ 2.265693 $ 638.150 $ - 45.390 $ 302.296 F. GASB Pronouncements . The Government Accounting Standards Board has adopted the following: Statement No. 34, Basic Financial Statements and Management's Discussion and Analysis for State and Local Govemments, which establishes specific standards for the basic financial statements, management's discussion and analysis (MD&A), and certain required supplementary information (RSI) other than MD&A; Statement No. 37, Basic Financial Statements and Management's Discussion and Analysis for State and Local . Governments: Omnibus, which make modifications to statement No. 34; and, Statement No. 38, Certain Financial Statement Note Disclosures, which modifies, establishes and rescinds certain financial statement disclosure requirements. The statements will be effective for the Town for periods beginning after December 31, 2002. The Town is in the process of evaluating the effects that these pronouncements will have on the . general purpose financial statements. . . . . . COMBINING INDIVIDUAL FUND STATEMENTS AND SCHEDULES . . . . . . NOeoeo,,",'<tl'- N 1'-00 I'- I'- oeo It) N <O<PO>I'-I'-OO eo '<to<OI'-eoo> It) ~<OI'- It) 0> ,,",eo 0 It) fn ..~~~~~ ~ ~~.... ......... - ONlt)O>lt)""' eo NNO> '<t eo'<t '<t eo CO 0 '<tl'- ""' N It) eo NN I() ""' '0 ~ O..~ 1.0.. ..q- T-.. LO.. om 0).. U1 I-- C\I L() ...... 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Q)'-'CC U .u- .=1- .- c III o."'Q)....O"'....Q) ....-'0.- U U GI GI 1/)0Q)E~::2:"'ll.c'O'O :)"'c3!~ 'ii cO> &;:: 0. U wo:O::t::o_Q)-"'c~ !::oo co >,Q) C "':5 CGl)(; :) ...."'0>0~02J::I cUQ)oOO _ Cco w_ Zw "'Q)~ Q)o.~ 9l!Q Q) '" 'a5-m z:O E Eo.:c III u: ij ";; ~ &I ...... -w""CtJ._-~ W::JO Q) en ...a. en> > 0:: 0 O..5::J:::J 00::2:..5 00 o..ll.IWO GI GlO GlO" W >< ~;; ~ C 0:: W wOw ~ " . . . . . -29- TOWN OF SOUTHOLD FIDUCIARY FUNDS . COMBINING BALANCE SHEET December 31,2001 . Fishers Island Town Ferry District Totals ASSETS Cash and Investments $ 378,798 $ 10,532 $ 389,330 . Other Receivables 63,389 63,389 Due from Other Funds 395,395 395,395 Total Assets $ 774,193 $ 73,921 $ 848,114 . LIABILITIES LIABILITIES Due to Other Funds $ 35,498 $ 71,204 $ 106,702 Other Liabilities 584,431 2,717 587,148 . Deposits Held 154,264 154,264 Total Liabilities $ 774,193 $ 73,921 $ 848,114 . . . . . ~COOT"""t--.<O..q- ,..... """VT"'"LO,..... V oeo 0 ~ O'-T"""OO>O),... 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"1::0-'0=<( C ns ~<tIC>o Q)Q) c:O.~en~Q)oCJ) ~ Cii zC(i Q) c."" Q)Q) tJ_ Z c: j5 c: .a E C.15 1/1 IQ W Q)f; Q)~ cn1ij.~S w~:J~:JoEQ) 1/1 >0:::00's::JCJ):2:CJ) a.. c..I-U:I:WO CD 'a W U c II:: ~ >< :I W u.. . . . . . . . . . OTHER REPORTS . . . . . . . . -32- TOWN OF SOUTHOLD SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS . December 31, 2001 . Federal Federal Grantor/Pass CFDA Through Grantor/Program Title Number Expenditures U.S. Department of AQriculture Passed throuQh Suffolk County: . Cash-in-Lieu of Food Awards 10.550 $ 36,738 U.S. Department of Health & Human Services Passed through Suffolk County: Nutrition 93.045 164,649 . U.S. Department of HousinQ and Urban Development Passed through Suffolk County: Community Development Block Grant 14.218 210,644 . U.S. Department of Justice Office of Community Oriented PolicinQ Services COPS FAST 16.710 75,000 Department of Transportation . Federal Highway Administration Passed through the State of New York Scenic Byway Program pursuant to Section 1047 of the Intermodal Surface Transportation Efficiency Act of 1991 20.205 6.600 . Total Expenditures of Federal Awards $ 493,631 . . . See accompanying note to schedule of expenditures of federal awards. . -33- TOWN OF SOUTH OLD NOTE TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS . December 31,2001 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. . . . . . . . . -34- 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 Southold Southold, New York . We have audited the general purpose financial statements of the Town of Southold, New York as of and for the year ended December 31, 2001, and have issued our report thereon dated April 30, 2002, 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 Govemment Auditing Standards, issued by the Comptroller General of the United States. Compliance . As part of obtaining reasonable assurance about whether the Town of Southold, New York's general purpose 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 opinion on the general purpose 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 conrol over financial reporting that might be material weaknesses. . . -35- 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 low level the risk that . misstatements in amounts that would be material in relation to the general purpose 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. . \1-' 7-~Jr~1 ~c, ~, ~, Hauppauge, New York . April 30, 2002 . . . . . . . -36- 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 ON INTERNAL CONTROL OVER . COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 Town Board Town of Southold Southold, New York . Compliance 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, 2001, - The Town of Southold, New York'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, New York'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 Governments, 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 material 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, New York'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 , 2001. . . . -37- Internal Controls Over Compliance . The management of the Town of Southold, New York is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts, and grants applicable to federal programs. In planning and performing our audit, we considered the Town of Southold, New York'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 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 low level the risk of noncompliance with applicable requirements of laws, regulations, contracts and grants that would be material 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. ~ V~ I c~ --+- Grvr--a-, f- C . Hauppauge, New York April 30, 2002 . . . . . -38- TOWN OF SOUTH OLD SCHEDULE OF FINDINGS AND QUESTIONED COSTS . Year ended December 31,2001 SUMMARY OF AUDIT RESULTS 1. The auditor's report expresses a qualified opinion on the general purpose financial . statements of the Town of Southold due to the fact that six of the seven component units of the Town of South old that were discretely presented were not audited. The remaining component unit, the Fishers Island Ferry District, was audited by other auditors, 2. 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". None of the conditions are reported as a material weakness. . 3. No instances of noncompliance material to the financial statements of the Town of Southold were disclosed during the audit. 4. 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 Nutrition 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 South old had no "Type A" programs for the year ended December 31, 2001. 8. The program tested as a major program includes: CFDA Number Name of Federal Program or Cluster . 93.045 Nutrition Program 9. The threshold for distinguishing Types A and B programs was $300,000. . 10. The Town of Southold was determined to be a low-risk auditee. . . -39- . TOWN OF SOUTHOLD SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year ended December 31, 2001 FINDINGS-FINANCIAL STATEMENTS AUDIT . REPORT ABLE CONDITIONS There were no findings or reportable conditions noted, . FINDINGS AND QUESTIONED COSTS- MAJOR FEDERAL AWARD PROGRAMS AUDIT Nutrition Program- CFDA # 93.045 . There were no findings or reportable conditions noted. Questioned Cost $ -0- . . . . . . . . TOWN OF SOUTHOLD SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS DECEMBER 31,2001 . There were no prior year audit findings for the year ended December 31,2000. . . . . . . . . .