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Home My WebLink About1997 . TOWN OF SOUTHOLD SINGLE AUDIT REPORTS . December 31, 1997 . . . . . . . . TABLE OF CONTENTS .fg . Independent Auditors' Report ..................................................................................................... 1 GENERAL PURPOSE FINANCIAL STATEMENTS Combined Balance Sheet . All Fund Types, Aa:ount Groups and Discretely Presented Component Units.............................. 2 Combined S1atement of Revenues, Expenditures and Changes in Fund Balances All Governmental Fund Types, Aa:ount Groups and Discretely Presented Component Units...... 3 Combined S1atement of Revenues, Expenditures, and . Changes in Fund Balances-Budget to Actual: General Fund ........................................................................................................................... 4 Special Revenue Funds............ ........................... ............ ............... ......................................... 5 Capital Projects Fund .............................................................................................................. 6 . Notes to Financial Statements..................... ........................................ ......... ............. .......................... 7-26 COMBINING INDMDUAL FUND STATEMENTS AND SCHEDULES Special Revenue Funds: . Combining Balance Sheet.................................................................................................... 27 Combing S1atement of Revenues, Expenditures and Changes in Fund Balance ............. 28 Special Disbicts: . Combining Balance Sheet.................................................................................................... 29 Combing Statement of Revenues, Expenditures and Changes in Fund Balance ............. 30 Fiduciary Funds: Combining Balance Sheet.................................................................................................... 31 . Discretely Presented Component Units: Combining Balance ..Sheet.................................................................................................. 32 Combing Statement of Revenues, Expenditures and Changes in Fund Balance ............. 33 . OTHER REPORTS Schedule of Expenditures of Federal Awards............................................................................. 34 Report on Compliance and on Internal Control Over . Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ...................................................................................................................... 35-38 Report on Compliance with Requirements Applicable To Each Major Program and Internal Control Over . Compliance in Accordance with OMB Circular A-133 ................................................................ 39-42 . -1- ALBRECHT, VIGGIANO, ZURECK & COMPANY, P.C. . CERTIFIED PUBLIC ACCOUNTANTS 25 SUFFOlK COURT HAUPPAUGE, NY 11788 (516) 434-9500 . INDEPENDENT AUDITORS' REPORT Town Board Town of Southold . 53095 Main Road Southold, New York We have audited the acoompanying general purpose financial statsments of the Town of Southold, as of and for the year ended December 31, 1997 as IisIed in the table of contents. These general purpose financial stataments are the responsibility of the . Town of SouthoId's management. Our responsibility is to e>cpress an opinion on these general purpose financial statements basad on our audit We did not audit the financial statements of all the component units which, represents 100% of the assets and revenues of the component units disaeteIy presented In the general purpose financial slalemenls. One of the seven componant units was audited by oIher auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for that COOIpOIIeI1t unit, is based solely on the report of the oIher auditors. Except as dio<;o ""ed in the foIowing paragraph, we conducted our audit in accordanca with generally acceptad auditing standards and the standards applicable to financial audits contained in GoIIemment Auditing Stand8tds, issued by the . Comptroller General of the United Slates. Those slandards require that we plan and perfonn the aud'rt to obtain reasonable 8S8Urance about whether the financial statsments are free of material misstatement An audit Includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statsments. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement pre se ,1atiu.1. Wa believe that our audit provides a reasonable basis for our opinion. The financial ""'1>.,180111I of six of the seven componant units of the Town of SouthoId discretely pi ssented were not audited, . nor were we able to satisfy ourselves as to those financial activities by otIJ!Ir auditing procedures. Those financial activities are included in the component unit column and represent 17% and 39% of the assets and reveroes, nsspactiveIy, of the discretely presented component units column. In our opinion, except for the eft'eds of such adjustments, If any, as might have been detennined to be necessary had the unaudited COOIpOIIeI1t 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 statsments referred to above present fairly, in all material . respects, the financial position of the Town of SouthoId, as of December 31, 1997, and the resuits of its operations for the year then ended in cxri)rmity with generally acoepted accounting principles. In accordance with Government AudIing Slandan:Js, we have also issued a report dated June 12, 1998 on our consideration of the Town of SouthoId's internal control over financial reporting and our tests of its compliance with certain provisions of laws, ragulations, contracts and grants. . Our audit was performed for the purpose of fonning an opinion on the general purpose financial statsments of the Town of SouthoId, taken as a whole. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Of!ica Management and Budget CiraJlar A-133, Audits of Slates, Local Governments, and Non-Profit Organizations, and is not a required part of the general purpose financial statements. Such infonnation 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. . f.6 cw,...u., V:,r-, z.~4- c.... r- '~I" Hauppauge, New York June 12, 1998 . . -2- TOWN OF SOUTHOLD COMBINED BAlANCE SHEET ALL FUND TYPES, ACCOUNT GROUPS AND DISCRETELY PRESENTED COMPONENT UNITS December 31, 1997 TOTALS TOTALS FIDUCIARY (Memorandum (Memorandum GOVERNMENTAL FUNDS FUNDS ACCOUNT GROUPS only) only) Special Capital Trust and General General Long Primary Component Reporting General Revenue Projects Agency Fixed Assets Term Debt Government Units Entity ASSETS Cash and Investments $10,553,452 $ 2,401,727 $ 286,041 $ 197,402 $13,438,622 $ 1,100,114 $ 14,538,736 Assessments Receivable 48,474,124 945 48,475,069 48,475,069 Accounts Receivable, net of allowance 92,369 113,798 206,167 183 206,350 Due from Other Funds 442,121 3,893,520 37,057 2,000 4,374,698 4,374,698 State and Federal Aid Receivable 55,266 305,996 115,441 476,703 476,703 Due from Other Governments 328,673 90,000 418,673 418,673 Due from Primary Government 1,086,877 1,086,877 Other Receivables 19,759 19,759 19,759 Supply Inventory 569 569 569 Prepaid expenses 31,808 75 31,883 2,686 34,569 Deferred Compensation Assets 1,558,566 1,558,566 1,558,566 Land $ 7,556,515 7,556,515 41,717 7,598,232 Buildings 2,432,855 2,432,855 4,283,540 6,716,395 Machinery and Equipment 9,313,109 9,313,109 3,517,254 12,830,363 Provisions to be made in Future Budgets $ 9,926,208 9,926,208 242,628 10,168,836 Total Assets $59,978,382 $ 6,806,061 $ 438,539 $ 1,m,727 $19,302,479 $ 9,926,208 $98,229,396 $10,274,999 $108,504,395 LIABILITIES AND FUND EQUITY LIABILITIES Accounts Payable $ 328,168 $ 474,566 $ 42,360 $ 845,094 $ 27,571 $ 872,665 Agency Liabilities: Deferred Compensation Plan Liability $ 1,557,590 1,557,590 1,557,590 Deposits Held 179,978 179,978 179,978 Bond Anticipation Notes Payable 1,264,000 1,264,000 1,264,000 General Obligation Bonds Payable $ 6,562,372 6,562,372 242,628 6,805,000 Due to Other Funds 3,890,576 2,230 441,863 40,029 4,374,696 4,374,698 Due to Other Governments 43,060,349 130 43,060,479 1,167 43,061,646 Due to Component Units 1,086,877 1,086,877 1,086,877 Due to New York State DEC 260,000 260,000 260,000 . Compensarted Absences 2,103,836 2,103,836 2,103,836 Judgements and Claims 1,000,000 1,000,000 1,000,000 Deferred Revenue 9,407,672 4,121,655 13,529,327 1,047,735 14,577,062 Total Liabilities 57,773,642 4,598,451 1,748,223 1,777,727 9,926,208 75,824,251 1,319,101 77,143,352 FUND EQUITY (DEFICIT) Investment in Fixed Assets $19,302,479 19,302,479 7,842,511 27,144,990 Retained Earnings - Unreserved Fund Balances - Reserved: Reserved for Bonded Debt 311 311 311 Fund Balances - Unreserved: Designated - Ensuing Year's Budget 947,553 610,370 148,033 1,705,956 214,050 1,920,006 Undesignated 1,257,187 1,596,929 (1,457,717) 1,396,399 899,337 2,295,736 Total Fund Equity (Deficit) 2,204,740 2,207,610 (1,309,684) 19,302,479 22,405,145 8,955,898 31,361,043 Total Liabilities and Fund Equity (Deficit) $59,978,382 $ 6,806,061 $ 438,539 $ 1,777,727 $19,302,479 $ 9,926,208 $98,229,396 $10,274,999 $ 108,504,395 See notes to the financial statements. ~ ~ ~ E <')CX)CX)N.....N<OO)lC)<O <')<0 I/') <oCX).....oiCX)CX)....i 0 I/') 00)0) 0 I/') CX) <') I/') "I .....<') <0.................. 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'g !II </I ~ ~ :; '5 .J!! .8" .! ~ ~ ~ 5 i ~ 'u : ><Q)><8iii'Ot:;;:JftlCSQ) E J!lIDEii:C ~ :I.s!.s! 'u.. CID ~ g.~ ..5 5j i If ~ ~...I ~ E C .1Il ~ E :!! it I Ii: </I ~ ~ J!I '&i GI .! 'g ~Il: ~ J!I EE !'g.f ~ g ~ '0 ~ ~~:E:B ~ ~ 8 ~ ~ u g' 1 ~ ~ ~ e. ~ i a! ftI C ftI e Q) c:: .- ... ""' ftI C '0 '-.- u cnw ~ 2 ~ ~ ~ ~ ~ 'g 0. i'g:s! <C ~ 0 &1j:! ~ .SlE ftI i ~ ~ ~ g .. .~.~ !If ~ 5 a., ... '"' 't:: 0... rlI ftI ... = <C I!! - I!! 0. I!! ~en ftI 0. - - U:I ~ iiiii!~[~~~~c~~~~-8 i~:!!~~!ig8:E~g,E:C .s:c~~ ~t8 &I 1!:!Q)-oQ)-rlI~._ftl'--"'GI W ;;:J;;:J",;;:JO CP "Q)o.o. '0 wC::Ozc..5::>~u.en:!:..5enu. D. o.o.I-WUJ:WC ~COO C II:: ~ 0 ~ . . . . . . . . . . . . -4- TOWN OF SOUTHOLD COMBINED STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND . Vear ended December 31, 1997 Variance Favorable . Budget Actual (Unfavorable) REVENUES Real Property Taxes $ 9,145,022 $ 9,145,022 Other Real Property Tax Items 63,000 75,306 $ 12,306 Non-Property Tax Items 225,000 257,976 32,976 Departmental Income 267,881 257,190 (10,691) . Intergovernmental Charges 179,897 200,151 20,254 Use of Money and Property 539,311 569,686 30,375 Licenses and Permits 148,200 150,080 1,880 Fines and Forfeituras 71,000 66,489 (4,511) Sale of Property and Compensation for Loss 3,150 98,640 95,490 Miscellaneous Local Sources 56,301 106,896 50,595 . State Aid 464,485 575,132 110,647 Federal Aid 127,484 125,456 (2,028) Total Revenues 11,290,731 11,628,024 337,293 EXPENDITURES . General Government Support 2,359,798 2,111,329 248,469 Public Safety 4,694,767 4,678,767 16,000 Health 41,604 41,192 412 Transportation 342,335 332,528 9,807 Economic Assistance and Opportunity 588,955 568,297 20,658 Culture and Recnsation 416,720 358,266 58,454 . Home and Community Sarvices 179,496 166,892 12,604 Employee Benefits 1,591,920 1,202,805 389,115 Debt Sarvice - Principal and Interest 1,055,284 984,805 70,479 Total Expenditures 11,270,879 10,444,881 825,998 Ex_ (DefIciency) of Revenues . Over expenditures 19,852 1,183,143 1,163,291 Other financing aourcetl (uses) Operating Transfers In 58 58 Operating Transfers Out (766,700) (720,552) 48,148 . Total Other Financing Sources (Uses) (766,700) (720,494) 46,206 Exc_ (DefIciency) of Revenues and other Sources Over expenditures and Other Uaes $ (746,848) 462,649 $ 1,209,497 . Fund Balances at Beginning of Vear 1,742,091 Fund Balances at End of Vear $ 2,204,740 See notas to the financial statements. . -5- TOWN OF SOUTHOLD COMBINED STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL . SPECIAL REVENUE FUNDS Year ended December 31, 1997 Variance Favorable . Budget Actual (Unfavorable) REVENUES Real Property Taxes $ 3,770,961 $ 3,770,961 Other Real Property Tax Items 9,291 11,307 2,016 Non-Property Tax Items 100,000 144,352 44,352 Departmental Income 1,746,167 1,706,523 (39,644) . Intergovemmental Charges 28,800 28,800 Use of Money and Property 191,641 188,795 (2,846) Licenses and Permits 129,900 4,856 (125,044) Sale of Property and Compensation fur Loss 206,250 99,856 (106,394) Miscellaneous Local Sources 65,000 61,270 (3,730) State Aid 277,561 592,400 314,839 . Federal Aid 1,020,951 825,160 (195,791) Total Revenues 7,546,522 7,434,280 (112,242) EXPENDITURES . General Govemment Support 185,475 154,568 30,907 Public Safety 434,475 407,141 27,334 Health 4,150 3,700 450 Transportation 2,701,579 2,416,207 285,372 Home and Community Services 3,821,259 3,272,688 548,571 Employee Benefits 1,501,379 1,246,810 254,569 . Debt Service - Principal and Interest 186,654 179,751 6,903 Total Ejq>endltunes 8,834,971 7,680,865 1,154,106 Excess (Deficiency) of Revenues Over Expenditures (1,288,449) (246,585) 1,041,864 . Other financing sources (uses) Operating Transfers In 1,070,900 986,048 (84,852) Operating Transfers Out (487,759) (454,657) 33,102 Total Other Financing Sources (Uses) 583,141 531,391 (51,750) . Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses $ (705,308) 284,806 $ 990,114 . Fund Balances at Beginning of Year 1,922,804 Fund Balances at End of Year $ 2,207,610 . See notes to the financial statements. . -6- TOWN OF SOUTHOLD COMBINED STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL . CAPITAL PROJECTS FUND Year ended December 31, 1997 Variance Favorable . Budget Actual (Unfavorable) REVENUES Use of Money and Property $ 35,861 $ 40,278 $ 4,417 Miscellaneous Local Sources 22,000 15,000 (7,000) State Aid 454,366 27,941 (426,425) Federal Aid 548,000 100,000 (448,000) . Total Revenues 1,060,227 183,219 (877,008) EXPENDITURES General Government Support 6,369,880 2,042,175 4,327,705 Transportation 701,793 175,694 526,099 . Economic Assistance and Opportunity 18,437 17,647 790 Culture and Recreation 20,000 20,000 Horne and Community Services 6,312,900 127,623 6,185,277 Debt Service - Principal and Interest 62,100 62,100 Total Expenditures 13,485,110 2,445,239 11,039,871 . Excess (Deficiency) of Revenues Over expenditures (12,424,883) (2,262,020) 10,162,863 Otherflnanclng sources (uses) Debt Proceeds 10,788,500 272,000 (10,516,500) Operating Transfers In 275,150 189,103 (86,047) Total Other Financing Sources (Uses) 11,063,650 461,103 (10,602,547) . Excess (DefIciency) of Revenues and Other Sources Over expenditures and Other Uses $ (1,361,233) (1,800,917) $ (439,684) Fund Balances at Beginning of Year 491,233 Fund Balances at End of Year $ (1,309,684) . . . See notes to the financial staternents. . -7 - TOWN OF SOUTHOLD NOTES TO THE FINANCIAL STATEMENTS . December 31,1997 A. Summary of Sianificant Accountina Policies The financial statements of the Town of Southold have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to govemment units. The . Govemmental Accounting Standards Board (GAS B) is the accepted standard setting body for establishing govemmental accounting and financial reporting principles. The more significant of the govemment's accounting policies are described below. 1. Financial ReDOrtina Entity The Town of Southold, which was established in 1640, is govemed 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 govemmental activities and functions performed for the Town are its direct responsibility. No other govemmental organizations have been included or excluded from the reporting entity. The financial reporting entity consists of (a) the primary govemment which is the . Town of Southold, (b) organizations for which the primary govemment is financially accountable and (c) other organizations for which the nature and significance of their relationship with the primary govemment 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 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. 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 govemment. These districts include the following: The Fishers Island Ferry District, established in 1947 I- 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 I Southold Park District, established in 1907 I Mattituck Park District, established in 1941 I. . -8- TOWN OF SOUTHOLD NOTES TO THE FINANCIAL STATEMENTS . December 31, 1997 A. Summary of Sianificant Accountina Policies (continued) 1. Financial ReDOrtina Entitv (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 Southold 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 govemment functions or activities. . A fund is a separate accounting entity with a self-balancing set of accounts. An account group, on the other hand, 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. Fund Cateaories Governmental Funds - Govemmental funds are those through which most . govemmental functions are financed. The acquisition, use and balance of expendable financial resources and the related liabilities are accounted for through govemmental funds. The measurement focus of the govemmental funds is upon detemnination of financial position and changes in financial position. The fOllowing are the Town's govemmental fund types. . . -9- TOWN OF SOUTHOLD NOTES TO THE FINANCIAL STATEMENTS . December 31, 1997 A. Summary of SiGnificant AccountinG Policies (continued) 2. Fund AccountinG (continued) . Fund Cateaories (continued) General Fund - the principal operating fund which includes all operations not required to be recorded in other funds. . SDecial 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: Hiahwav Funds - To maintain and operate highways. General Fund Part Town - To provide general services outside the Village . of Greenport. SDecial Grant Fund - Segregate and account for projects funded by Community Development revenue. Risk Retention Fund - To provide health benefits to certain Town . employees. SDecial District Funds - To provide special services to areas that encompass less than the whole town. CaDital Proiects 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). Fiduciarv Funds - used to account for assets held by the local govemment in a trustee or custodial capacity: . Trust and Aaencv 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. . The General Fixed Assets Account GrouD - used to account for land, buildings, improvements other than buildings, and equipment utilized for general government purposes, except those accounted for in proprietary funds. The General Lona-Term Debt Account GrouD - used to account for all long-term debt except that accounted for in proprietary and special assessment funds. . . .10 - TOWN OF SOUTHOLD NOTES TO THE FINANCIAL STATEMENTS . December 31,1997 A. Summary of Sianlficant Accountina Policies (continued) 3. Basis of AccountlnalMeasurement 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, i.e. expenditures or expenses. . 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 real property taxes, state and federal aid, sales tax and certain user charges. If expenditures are the prime factor for determining eligibility, revenues from federal and state grants are accrued when the . expenditure is made. Expenditures are recorded when incurred except that: Expenditures for prepaid expenses and inventory-type items are recognized at the time of purchase. . 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 ( See Note I(J)). Account GroUI)S - 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. 4. Encumbrances Encumbrance accounting, under which purchase orders, contracts and other commitments for the expenditure of monies are recorded for budgetary control purposes to reserve that portion of the applicable appropriations is employed in all 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 THE FINANCIAL STATEMENTS . December 31, 1997 A. Summary of Slanificant Accountina Policies (continued) . 5. Assets. Uabilities and Fund Eauity Receivables Receivables include amounts due from Federal, State, and other govemments and individuals for services provided by the Town. Receivables are recorded and . revenues as eamed or as specific program expenditures are incurred. Inventorv - 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 Eauipment - General Fixed assets purchased for general govemmental purposes are recorded as expenditures in the govemmental 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. Long-Term Obligations Long-term debt is recognized as a liability of a govemmental 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 . govemmental fund. The remaining portion of such obligations is reported in the General Long-Term Debt Account Group. . . -12 - TOWN OF SOUTHOLD NOTES TO THE FINANCIAL STATEMENTS . December 31, 1997 A. Summarv of Significant Accountina Policies (continued) 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 . govemmental funds indicate the utilization of these resources in the subsequent year's budget or tentative plans for future use. 6. Revenue and Expenditures ProDertv 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 village taxes and school district taxes are tumed over to the county for enforcement. Any such taxes remaining unpaid at year end are relieved as county taxes in the subsequent year. . Inmrfund Transactions Inmrfund Revenues Interfund revenues, quasi-extemal transactions, in the operating funds represent . amounts charged for services or facilities provided by that operating funds. The amounts paid by the fund receiving the benefit of the service or facilities are reflected as an expenditure of that fund. ODeratina 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. . I . - 13- TOWN OF SOUTHOLD NOTES TO THE FINANCIAL STATEMENTS . December 31, 1997 A. Summary of Sianificant Accountina Policies (continued) 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. . ComDensated Absences Vested or accumulated vacation or sick leave of govemmental 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 govemmental 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 Govemmental 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 PUl'Dose 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. B. Stewards hiD. ComDliance. Accountabilitv Budaetarv Data . 1. Budaet Basis of Accountina 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. 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. . I . .14 - TOWN OF SOUTH OLD NOTES TO THE FINANCIAL STATEMENTS . December 31, 1997 B. Stewardship. Compliance. Accountabilitv (continued) Budaetarv Data (continued) . 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 fiscal year commencing 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. All modifications of the budget must be approved by the Town Board. 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, 1997 is allocated as follows: General Fund (Townwide) $2,204,740 Special Revenue Funds General Fund Part Town 280,655 . Highway Fund - Townwide 296,238 Highway Fund - Part Town 415,364 Risk Retention Fund 542,245 Special District Funds Shorecrest Road Improvement 1,936 . Lands End Road Improvement (28) East-West Fire Protection 5,997 Southold Wastewater Disposal 358,415 Fishers Island Sewer 47,668 Solid Waste Management 259,120 I. Discretely Presented Component Units Fishers Island Refuse & Garbage 437,669 Fishers Island Ferry 613,278 Cutchogue-New Suffolk Park 22,721 Southold Park 7,051 Orient-East Marion Park 19,383 . Mattituck Park 6,261 Orient Mosquito 7.024 Total $ 5.525.731: . . - 15- TOWN OF SOUTHOLD NOTES TO THE FINANCIAL STATEMENTS . December 31, 1997 B. StewardshiD. ComDliance. Accountabilitv (continued) Deficit Fund Balances . The capital projects fund had a deficit fund balance at December 31, 1997. The deficit will be eliminated as short-term debt is redeemed or converted to permanent financing. 2. Reserves . The capital projects fund equity includes capital reserve funds established for the following purpose: Purcose Balance End of Year Preservation of Open Spaces (160,156) Mattituck Creek Drainage Mitigation 24,677 Seaview Trails of the North Fork 7,948 . Lands End Road Improvement (12,500) Shorecrest Road Improvement (18,OOO) Southold Park District (20,OOO) Yard Waste Composting (21,500) Lighting & Heating Improvements (25,OOO) Cutchogue landfill Capping & Closure (29,807) . Landfill Tub Grinder & Stump Buster (57,600) Highway Sweeper & Payloader (70,400) Landfill Payloader (88,961 ) Computer Equipment Upgrade (123,830) Landfill Truck Tractor & Payloader (153,OOO) . Highway Drain Cleaner (155,141) Agricultural land Development Rights (166,414) Landfill Trommel Screen & leaf Shredde (240.000) Total S (1 309 684\ During 1997, the Town acquired land, which is expected to be partially funded by a New York State Grant. As of the date of this report, this money has not been . received, therefore, no revenue has been recorded in 1997. It is anticipated that this money will be received and recognized in 1998. 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. Town investment policies are governed by state statutes. 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 (C. L. A. S. S.). C.L.A.S.S. is a . cooperative investment plan consisting of U.S. Treasury obligations and repurchase agreements relating to treasury obligations. . -16 - TOWN OF SOUTHOLD NOTES TO THE FINANCIAL STATEMENTS . December 31, 1997 C. Detail Notes on all Funds and Account Groups (continued) . 1. Assets (continued) Cash and Investments (continued) 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 govemment. 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. DeDosits - 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, 1997, the cash in banks was $10,005,126 and collateral held against cash in banks was $15,444,814 consisting of FDIC insurance and/or securities held in the name of the Town of Southold. 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, 1997 is as follows: Balance Balance 1/1/97 Additions Deletions 12/31/97 . Primary Govemment: Land $ 4,615,222 $ 2,941,293 $ -0- $ 7,556,515 Building and improvements 2,432,855 2,432,855 Machinery and equipment 8.961.768 779.332 427.991 9.313.109 Total $16 009.845 $ 3 720 625 $ 427991 $19302479 i. Balance Balance 1/1/97 Additions Deletions 12/31/97 Component Units: Land $ 41,717 $ 41,717 . Building and improvements 4,327,090 $ 43,550 4,283,540 Machinery and equipment 3.472.091 $ 61.317 16.154 3.517.254 Total $ 7.840 898 $ 61.317 $ 59704 $ 7.842 511 . . -17- TOWN OF SOUTHOLD NOTES TO THE FINANCIAL STATEMENTS . December 31, 1997 C. Detail Notes on all Funds and Account GrouDs (continued) 3. Interfund Receivables and Payables . Interfund receivables and payables for the primary govemment at December 31, 1997 were as follows: Interfund Interfund Fund Receivables Pavables . General Fund Whole Town $ 442,121 $ 3,890,576 General Fund Part Town 313,704 202 Highway Fund Whole Town 942,077 Highway Fund Part Town 1,673,553 Risk Retention Fund 210 . Shorecrest Road Imp. District 8,025 Lands End Road Imp. District 13,135 28 East-West Fire Protection District 261,023 Solid Waste Management District 681,793 2,000 Capital Projects 37,057 441,B63 Trust & Agency 2.000 40.029 . T otallnterfund S 4374698 S 4374698 4. Due ToIFrom Primary Government and Component Units Amount Amount . Receivable Pavable Component Units: Fishers Island Refuse & Garbage District $ 371,400 Fishers Island Feny District 259,142 Orient Mosquito District 50,000 Cutchogue-New Suffolk Park District 70,750 . Southold Park District 124,500 Orient-East Marion Park District 16,000 Mattituck Park District 195,085 Primary Govemment General fund ~ 1,086,877 . $ 1,086,(llZ S 1,Oe6,877 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. . . -18 - TOWN OF SOUTHOLD NOTES TO THE FINANCIAL STATEMENTS . December 31, 1997 C. Detail Notes on all Funds and Account Groups (continued) . 5. Indebtedness (continued) Short-Term Debt (continued) 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 1998 Interest Budget . DescriDtion Amount Rate ADDroDriations Bonds Various Purposes $ 309,000 4.03% $ 83,000 $ 226,000 Various Purposes 935,000 3.88% 319,000 616,000 Southold Park District 20.000 3.79% 20.000 0 Total $ 1.264,OQQ S 422.QQg S 842.000 . Lona-Term Debt a. At December 31, 1997 the total outstanding indebtedness of the Town, excluding the above obligations aggregated $6,805,000. Of this amount, . $6,305,000 was subject to the constitutional debt limit and represented approximately 2.74% of its debt limit. 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 bome 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 govemment, 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 Lona-Term Debt - In addition to the above long-term debt, the local govemment 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. . - 19- TOWN OF SOUTHOLD NOTES TO THE FINANCIAL STATEMENTS . December 31,1997 C. Detail Notes on all Funds and Account Groups (continued) 5. Indebtedness (continued) . d. Summary Lona-Term Debt - The following is a summary of long-term liabilities outstanding at December 31, 1997 by fund type and account group: General Long Term Discretely Presented . Liability Debt Account GrouD ComDonent Unit Total Serial Bonds $ 6,562,372 $ 242,628 $ 6,805,000 Due to NYSDEC 260,000 260,000 JUdgements and Claims 1,000,000 1,000,000 Compensated Absences 2.103.836 2.103.836 . Total Long-Term Debt Account Group S 9.92~,20~ S 242.6~ $ 10,168,83~ e. The following is a summary of changes in the long term liabilities for the period ended December 31, 1997: . Bonds and Due to Compensated Notes NYSDEC Absences Payable at beginning of Fiscal Year $ 7,390,000 $ 325,000 $ 2,059,831 Additions . Deletions 585.000 65.000 Payable at end of Fiscal Year S 6,805.0QQ $ 260.0Q2 $ 2.10M36 . Additions and deletions to compensated absences are shown net since it is impracticable to determine these amounts separately. f. Lona Term Debt Maturitv Schedule - The following is a statement of serial bonds with corresponding maturity schedules: . Payable from: General Fund, Special Revenue Fund, Discretely Presented Component Unit Description: Various Purposes Dated: October 1, 1984 Issue Amount: $2,172,500 . Interest Rate: 9.1% Final Maturity Date: April 1 , 2005 Balance as of December 31,1997: $980,000 . . -20 - TOWN OF SOUTHOLD NOTES TO THE FINANCIAL STATEMENTS . December31,1997 C. Detail Notes on all Funds and Account Groups (continued) 5. Indebtedness (continued) . f. Lona Term Debt Maturity Schedule (continued) Payable from: General Fund, Special Revenue Fund Description: Various Purposes Dated: February 15, 1991 Issue Amount: $2,708,500 . Interest Rate: 6.375% Final Maturity Date: February 15, 2011 Balance as of December31,1997: $1,425,000 . Payable from: General Fund, Special Revenue Fund Description: Various Purposes Dated: April 15, 1993 Issue Amount: $2,695,000 Interest Rate: 5.00% . Final Maturity Date: February 15, 2012 Balance as of December 31, 1997: $1,975,000 Payable from: General Fund, Special Revenue Fund, Discretely Presented Component Unit . Description: Pension System Dated: October 1, 1993 Issue Amount: $678,000 Interest Rate: October 1, 1993 to October 1, 2001 - 6.000% October 1, 2001 to October 1, 2003 - 6.100% October 1, 2003 to October 1, 2005 - 6.125% . Final Maturity Date: October 1, 2005 Balance as of December 31,1997: $480,000 Payable from: General Fund . Description: Agricultural Land Development Rights Dated: November 1, 1995 Issue Amount: $1,750,000 Interest Rate: November 1,1995 to November 1,1997 - 5.00% November 1, 1997 to November 1, 2008 - 5.10% November 1, 2008 to November 1, 2009 - 5.20% . November 1, 2009 to November 1, 2010 - 5.30% November 1, 2010 to November 1, 2011 - 5.375% November 1, 2011 to November 1, 2012 - 5.40% November 1, 2012 to November 1, 2015 - 5.50% Final Maturity Date: November 1, 2015 . Balance as of December 31, 1997: $1,675,000 . -21 - TOWN OF SOUTHOLD NOTES TO THE FINANCIAL STATEMENTS . December 31, 1997 C. Detail Notes on all Funds and Account GrouDS (continued) 5. Indebtedness (continued) . f. Lona Term Debt Maturity Schedule (continued) Payable from: General Fund Description: NYS Environmental Facilities Corporation - State Water Pollution . Control Revolving Fund Revenue Bonds Dated: February 15, 1996 Issue Amount: $300,000 Interest Rate: 2.95% Final Maturity Date: December 15, 2014 . Balance as of December 31, 1997: $270,000 g. The following table summarizes the Town's future debt service requirements for Serial Bonds as of December 31,1997: . Year Endina PrinciDal Interest 1998 $ 500,000 $ 395,647 1999 505,000 364,061 2000 505,000 332,189 2001 535,000 299,386 . 2002 485,000 266,651 2003-2007 2,190,000 876,220 2008-2012 1,715,000 340,350 2013-2015 370.000 39.410 Totals S 6.805.QQQ S 2.913.W . h. The following table summarizes the Town's future payment requirements for the stipulation of settlement with the NYS Dept. of Environmental Conservation as of December 31, 1997: . Year Endina Amount 1998 $ 65,000 1999 65,000 2000 65,000 2001 65.000 . Total S 260.00Q . . - 22- TOWN OF SOUTHOLD NOTES TO THE FINANCIAL STATEMENTS . December 31, 1997 D. Detail Notes on all Funds and Account Groups (continued) 5. Indebtedness (continued) . i. In addition to the debt shown above, the following long-term debt has been authorized but remains unissued at December 31, 1997: Payable from: General Fund . Description: Acquisition of Agricultural Land Development Rights Authorized Amount: $ 2,000,000 Payable from: General Fund Description: Preservation of Open Spaces Authorized Amount: $ 2,000,000 . Payable from: Southold Solid Waste Management District Description: Scale House and Composting Equipment Authorized Amount: $ 200,000 Payable from: Southold Solid Waste Management District . Description: Cutchogue Landfill Capping and Closure Authorized Amount: $ 5,800,000 6. Retirement System Plan DescriDtion . 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. Obligations of employers to contribute and benefits to . employees are governed 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 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. . Fundina Policv The Systems are noncontributory except for employees who joined the New York State and Local Employees' Retirement System after July 27, 1976 who 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. . - 23- TOWN OF SOUTHOLD NOTES TO THE FINANCIAL STATEMENTS . December31,1997 C. Detail Notes on all Funds and Account Groups (continued) 6. Retirement System (continued) . Fundina Policv (continued) 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 1997 $ 84,275 $ 273,906 1996 $ 155,243 $ 300,392 1995 $ 78,732 $ 277,526 . The Town's contributions made to the Systems were equal to 100% of the contributions required for each year. 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 govemments 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 178 of the Laws of 1991 and Chapter 12 of the laws of 1995, the State Legislature authorized local govemments to make available a retirement incentive program with estimated total costs of $105,799, of which $10,542 was charged to expenditures/expense in the govemmental funds in the current fiscal year. The cost of the programs will be billed and paid over five years beginning . December 15,1992 for Chapter 178 and December 15, 1996 for Chapter 12 and will include interest at 8.75%. 7. Post Retirement Benefits In addition to providing pension benefits, the Town provides health insurance . coverage and survivor benefits for retired 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 the Risk Retention Fund 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 Risk Retention Fund as an expenditure in the year paid. During the year, $1,247,535 was paid on behalf of 75 retirees and 185 active employees and is recorded as an expenditure in the Risk Retention Fund and the General Fund. The cost of providing benefits for 75 retirees . is not separable from the cost of providing benefits for the 185 active employees. . - 24- TOWN OF SOUTHOLD NOTES TO THE FINANCIAL STATEMENTS . December 31, 1997 C. Detail Notes on all Funds and Account GrouDS (continued) 8. ComDensatorv Absences . Town employees are granted vacation and sick leave and eam 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 govemmental 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 Mure financial resources, or as a fund liability and expenditures if payable from current resources. 9. Deferred ComDensation Plan Employees of the Town may elect to participate in a Deferred Compensation Plan . created in accordance with Intemal Revenue Code Section 457. The plan, available to all employees, permits them to defer a portion of their salary until future years, usually after retirement. As of December 31, 1997, the market value of the assets of the plan totaled . $1,558,566. This amount is reflected as an Agency Fund asset along with corresponding liabilities to the employees participating in the plan. D. Commitments and Continaencies The Town has received grants which are subject to audit by agencies of the State . and Federal Govemments. Such audits may result in disallowances and a request for a return of funds to the federal and state govemments. Based on past audits, the local government administration believes disallowances, if any, will be immaterial. 1. Landfill Closure and Postclosure Care Costs . The Town ceased accepting waste at it's 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. 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. . . - 25- TOWN OF SOUTHOLD NOTES TO THE FINANCIAL STATEMENTS . December 31,1997 D. Commitments and Continaencies (continued) Actual costs associated with the placement of the final cover are estimated at . $5,800,000. 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. Costs associated with postclosure care will be covered by charges to future landfill users and future tax revenue. . 2. Litiaation 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. A resident of the Town has commenced a lawsuit against the Town for unlawful discharge of pollutants from the Town's landfill. As of the date of this report, the likelihood of an unfavorable outcome is also uncertain. . Finally, 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, 1997 were approximately $42,064. Future obligations over the primary terms of the Town's leases as of December 31, 1997 are as follows: . 1998 $ 27,266 1999 13,763 2000 11,493 2001 6,804 . 2002 6,804 2003 6,804 2004 & thereafter 3.200 Total $ 76,134 . E. Subseauent Event Subsequent to year-end, the Town issued a bond in the amount of $2,000,000 for the Acquisition of Agricultural Land Development Rights with a net interest rate of 4.8726%. This bond was approved but not issued as of December 31, 1997 as . previously described in note C(5)(I). . - 26- TOWN OF SOUTHOLD NOTES TO THE FINANCIAL STATEMENTS . December 31, 1997 F. Other In the State Annual Update Document, the Road Improvement Districts are included . in the Highway Fund Whole Town; in the audit report, these funds are included as Special District Funds. . . . . . . . , . I. r--It)COO<DOIt) ...... <DOlt)...... ...... 00) 0 ...... "I ",,"0)"1 cnOr-- <D <D('I)1t) It) ...... r--N ...... <D VI r-- cn r-- It) 0) 0 0 It) "I <D. 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COMBINING BAlANCE SHEET December 31, 1997 . Agency and Trust Fishers Island Town Ferry District Totals ASSETS Cash and Investments $ 175,265 $ 22,137 $ 197,402 . Other Receivables 19,759 19,759 Due from Other Funds 2,000 2,000 Deferred Compensation Assets $1,394,778 163,788 1,558,566 Total Assets $1,572,043 $ 205,684 $1,777,727 . LIABILITIES AND FUND EQUITY LIABILITIES Due to Other Funds $ 887 $ 39,142 $ 40,029 . Deferred Compensation 1,393,802 163,788 1,557,590 Other Liabilities 130 130 Deposits Held 177,224 2,754 179,978 Total Liabilities 1 ,572,043 205,684 1,777,727 . FUND EQUITY (DEFICIT) Fund Balance - Unreserved: Appropriated . Undesignated Total Fund Equity (Deficit) Total Liabilities and Fund Equity (Deficit) $1,572,043 $ 205,684 $1,777,727 . . . 'OfMI'-COl'-O'OfCO 0) .....COl'-IO..... ..... 01'- CO 0) .....COl'-CO.....'OfION 0) I'-NCOM 0 ..... 10M 0) 0) UI .......... CO. I'!. 1'-. 10. N. CO. 0)_ 10. I'!. ...... 1'-_....._ 10. O. M. 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LL. ~ e III ~ OIl e ~~ OIl '0 ~ 11 .8 (J e ..."'~.... ::I Q. l- E o mC) CJ) OIl ... b " en '5'0 0 U Q)Q)(J)Q) III ::J e 'c > it u ......... 'f""_ OIl , III e .5 ...... .l: C ::I t- o .... 0 E w en ~ ~ .. . . . . '" III III - .l: E 'C E :;: Q. .!L!;j .. !:i 0 0 III III 0 . U u.. Z U J: U as as . . -35- ALBRECHT, VIGGIANO, ZURECK & COMPANY, P.C. . CERTIFIED PUBLIC ACCOUNTANTS 25 SUFFOlK COURT HAUPPAUGE,NY 11788 (516) 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 Southolcl 53095 Main Road Southold, New York 11971 . We have audited the financial statements of the Town of Southold, as of and for the year ended December 31, 1997, and have issued our report thereon dated June 12, 1998. We have conducted our audit in accordance with generally accepted auditing standards and . Government Auditing Standards, issued by the Comptroller General of the United States. ComDliance 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 instances of noncompliance that are required to be reported under Government Auditing . Standards which are described in the accompanying schedule of findings and questioned costs. Intemal Control Over Financial Reoortina In planning and performing our audit, we considered the Town of Southold's intemal control . over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control over financial reporting. However, we noted certain matters involving the intemal control over financial reporting and its operation that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating to significant . deficiencies in the design or operation of the intemal control over financial reporting that, in our judgment, could adversely affect Town of Southold's ability to record, process, summarize and report financial data consistent with the assertions of management in the financial statements. Reportable conditions are described in the accompanying schedule of findings and questioned costs. . . -36- . A material weakness is a condition in which the design or operation of one or more of the intemal control components does not reduce to a relatively low 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. Our consideration of the intemal control over . financial reporting would not necessarily disclose all matters in the intemal control that might be reportable conditions that are also considered to be material weaknesses. However, we believe none of the reportable conditions described above is a material weakness. This report is intended for the information of the Town Board, management and federal awarding agencies and pass-through entities. However, this report is a matter of public record . and its distribution is not limited. ~ V~, Z~.Ar (r f'" t}, P.l.. . Hauppauge, New York June 12, 1998 . . . . . . . -37- TOWN OF SOUTHOLD SCHEDULE OF FINDINGS AND QUESTION COSTS . December 31, 1997 SCHEDULE OF REPORTABLE CONDITIONS Internal Control . Findina The Town Supervisor's signature stamp was found to be located in the Comptroller's Office rather than locked in a safe or safeguarded in some manner with the Supervisor's Office or another appropriate Town Official. . Recommendation We recommend that the Town have stronger controls over this signature stamp by placing it in the control of the Supervisor's Office. A logbook should be maintained wherein those who are . using it must sign the stamp out and sign again upon its retum to the office. It is our understanding that the Town is currently looking into this matter and plans to have the Supervisor's Office set up an operating procedure. Payroll . Findina Upon review of Town personnel files, we found, in most instances, there were no 1-9 forms contained within the files for employees hired prior to January 1, 1988. . Recommendation We recommend that the Town take steps to ensure that each employee complete the 1-9 form and maintain it within hislher personnel file. . Seareaation of Duties Findina The Tax Receiver of the Town of Southold reviews taxpayer overpayments, processes and . signs refund checks. This function does not constitute an adequate segregation of duties, as the Tax Receiver should not be in charge of all functions. The person who processes the overpayment should be independent of the person who issues the refund check to the taxpayer. . Recommendation We recommend that the Town initiate a procedure to require dual signatures on all checks issued by the Tax Receiver's Office to ensure that the same individual does not perform each function. . . -38- TOWN OF SOUTHOLD SCHEDULE OF FINDINGS AND QUESTION COSTS . December 31, 1997 SCHEDULE OF REPORTABLE CONDITIONS (continued) Fund RePOrtlna . Findina The Town of Southold currently accounts for the financial transactions of the Risk Retention Fund in a Special Revenue Fund. Generally Accepted Auditing Standards require that Risk . Retention Funds be accounted for in either the General Fund or an Enterprise Fund. Recommendation We recommend that the Town should account for all risk retention transactions in the General Fund. . . . . . . . . -39- ALBRECHT, VIGGIANO, ZURECK & COMPANY, P.C. . CERTIFIED PUBLIC ACCOUNTANTS 25 SUFFOlK COURT HAUPPAUGE, NY 11788 (516) 434-9500 REPORT ON COMPLIANCE WITH REQUIREMENTS . APPLICABLE TO EACH MAJOR PROGRAM AND INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 . Town Board Town of Southold 53095 Main Road Southold, New York 11971 . ComDliance We have audited the compliance of the Town of Southold, with the 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, 1997. 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's compliance based on our audit. . We conducted our audit of compliance in accordance with generally accepted auditing standards; 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'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 on the Town of Southold's compliance with those requirements. In our opinion, the Town of Southold 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, 1997. However, the results of our auditing procedures disclosed instances of noncompliance with those requirements that are required to be reported in accordance with OMB Circular A-133 and which are described in the accompanying schedule of findings and questioned costs. . . -40- Intemal Control Over ComDliance . The management of the Town of Southold is responsible for establishing and maintaining effective intemal control over compliance with requirements of laws, regulations, contracts and grants applicable to federal programs. In planning and performing our audit, we considered the Town of Southold's intemal 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 intemal control over compliance in accordance with OMS Circular A-133. Our consideration of the intemal control over compliance would not necessarily disclose all matters in the intemal control that might be material weaknesses. A material weakness is a . condition in which the design or operation of one or more of the intemal control components does not reduce to a relatively low level the risk that noncompliance with applicable requirements of laws, regulations, contracts and grants that would be material in relation to a major federal program being auditing 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 compliance and its operation that we consider to be material . weaknesses. This report is intended for the information of the Town Board, management and federal awarding agencies and pass-through entities. However, this report is a matter of public record and its distribution is not limited. . ~ rJ~-.o, z,.-..J... t- G.-~ ct. foe. . Hauppauge, New York June 12, 1998 . . . . . -41- TOWN OF SOUTHOLD SCHEDULE OF FINDINGS AND QUESTIONED COSTS . Year ended December 31, 1997 SUBRECIPIENT MONITORING . Criteria The pass-through entity is responsible for monitoring the subrecipienfs activities to provide reasonable assurance that the subrecipient administers Federal awards in compliance with Federal requirements and evaluating the impact of subrecipient activities on the pass-through . entity's ability to comply with applicable Federal regulations. Observation An audit is performed on a regular basis of the sUbrecipient, The North Fork Housing Alliance (NFHA). However, the Town does not have any monitoring activities in place, such as . reviewing reports submitted by the NFHA, or performing site visits to review financial and programmatic records and observe operations. Recommendation . In order to effectively monitor its sUbrecipient, we recommend the Town set up monitoring procedures to follow; such as visiting the location on a quarter1y basis, examining their records to provide reasonable assurance that the subrecipient administers Federal awards in compliance with Federal requirements and ensure that appropriate corrective action is taken on audit findings. . DAVIS BACON Criteria When required by the Davis Bacon Act, the Department of Labor's (DOL) govemment-wide . implementation of the Davis Bacon Act, or by Federal program legislation, all laborers and mechanics employed by contractor's or subcontractors to work on construction contracts in excess of $2,000 financed by Federal assistance funds must be paid wages not less than those established for the locality of the project (prevailing wage rates). . Observation The Town of Southold obtains signed documentation from its vendors stating that they are paying prevailing wage rates with the DOL, however, they do not test any of the wages paid to ensure that contractors and subcontractors are paid prevailing wage rate for projects covered . by the Davis Bacon Act. . . -42- TOWN OF SOUTHOLD SCHEDULE OF FINDINGS AND QUESTIONED COSTS . Year ended December 31, 1997 Recommendation . The Town of Southold should implement a procedure wherein they test construction contracts and subcontracts to verify that the required prevailing wage rate clauses were included in the contracts for construction which exceed $2,000 and ascertain that submissions of payroll indicate that laborers were paid the prevailing wage rates established by the DOL for the locality at the time of the construction payroll. . . . . . . . .