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Home My WebLink About2004 RECEWED r "f\n' 'NO\! 1 ') LuJJ So~\b""~ 'town {'el'tl 'n, TOWN OF SOUTH OLD AUDIT REPORTS December 31, 2004 , . iiii . . . . . . . . . . . FINANCIAL SECTION Independent Auditors' Report... ................................................................................................................. 1-2 REQUIRED SUPPLEMENTARY INFORMATION Management's Discussion and Analysis...... ......... ...... ............ ... ... ...... ...... ......... ........ ............... 3-11 BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements Statement of Net Assets ......... ... ........................... ...... ........ .............. .................... .................................. 12 Statement of Activities............................................................................................................................. 13 Fund Financial Statements Governmental Fund Financial Statements Balance Sheet and Reconciliation of the Govemmental Funds Balance Sheet to The Statement of Net Assets... ...... ... ...... ............ ...... ... ...... '" ... ......... ......... ....... .............. 14-15 Statement of Revenues, Expenditures, and Changes in Fund Balances and Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, And Changes in Fund Balances to the Statement of Activities... ......... ...... ... ......... ..... ............. 16-17 Fiduciary Fund Financial Statements Statement of Fiduciary Net Assets... '" ... ......... ...... ... ...... ......... ... ...... ...... ................................... 18 Notes to Financial Statements............................................................... ............................................ ........ 19-33 REQUIRED SUPPLEMENTARY INFORMATION OTHER THAN MANGEMENT DISCUSSION AND ANALYSIS Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual General Fund ...... ...... ...... ...... ... ... ...... ... ... ... ...... ....... ... ...... ...... ... ...... ... ...... ... ... ...... ....... 34 Highway Fund... ......... ... ... ............ ... ...... ... ......... ......... ... ... ...... ... ... ...... ... ... ... ................. 35 OTHER SUPPLEMENTARY INFORMATION COMBINING FUND STATEMENTS: Non-major Governmental Funds Combining Balance Shoo!............ ... ... ......... ......... ......... ...... ...... ...... ...... ...... ...... ......... ... Combining Statement of Revenues, Expenditures, and Changes in Fund Balances.................... 36 37 DISCRETELY PRESENTED COMPONENT UNITS Discretely Presented Component Units: Combining Statement of Net Assets................................................................. ..... ................................. 38 Combining Statement of Activities................... ....................................................................................... 39 . . . . . . . . ALBRECHT, VIGGIANO, ZURECK & COMPANY, P.C. CERTIFIED PUBLIC ACCOUNTANTS 25 SUFFOLK COURT HAUPPAUGE, NY 11788 (631) 434-9500 INDEPENDENT AUDITORS' REPORT Honorable Supervisor and Town Board Town of Southold Southold, New York We have audited the accompanying financial statements of the govemmental activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the Town of Southold, New York, as of December 31, 2004, and for the year then ended, which collectively comprise the Town's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Town's management. Our responsibility is to express an opinion on these financial statements based on our audit. Except as discussed in the following paragraph, we conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. The financial statements of the component units presented discretely in these financial statements with the exception of one, the Fishers Island Ferry District, were not audited in accordance with Government Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The financial statements supporting the financial activities of the Town of Southold's discretely presented component units with the exception of one, the Fishers Island Ferry District, were not audited as of the report date, nor were we able to satisfy ourselves as to those financial activities by other auditing procedures. Those financial activities represent approximately 36% of the net assets of the discretely presented component units. The financial statements of the Fishers Island Ferry District were audited by other auditors whose report thereon have been fumished to us and in our opinion, insofar as it relates to the amounts included for that one component unit, is based solely on the reports of the other auditors. In our opinion, except for the effects of such adjustments if any as might have been determined to be necessary had the unaudited component units financial statements been audited and based on our audit and the reports of other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of the Town of Southold, New York, as of December 31, 2004, and the results of its operations for the year then ended in conformity with accounting principles generally . accepted in the United States of America. The Management's Discussion and Analysis and the budgetary information are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the . supplementary information. However, we did not audit the information and express no opinion on it. . -1- . Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the Town of Southold, New York's basic financial statements. The combining and individual fund financial statements are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund financial statements has been subjected to the auditing procedures applied in the audit of the basic financial statements of the · Town of Southold, New York, and, in our opinion, is fairly presented in all material respects in relation to the basic financial statements taken as a whole. . ~, V~/2~+ ~"U, f.c. Hauppauge, New York June 8, 2005 . . . . . . . . -2- . . . . . REQUIRED SUPPLEMENTARY INFORMATION Management's Discussion and Analysis . . . . . . . TOWN OF SOUTH OLD MANAGEMENT'S DISCUSSION AND ANALYSIS December 31 , 2004 The following is a discussion and analysis of the Town of Southold's financial performance, providing an overview of the Town's financial activities for the year ended December 31, 2004. Use this section in conjunction w~h the . Town's basic financial statements. . . . . . . . . . USING THIS ANNUAL REPORT This annual report consists of a series of financial statements. The Statement of Net Assets and the Statement of Activities provide information about the activities of the Town as a whole and present a longer- term view of the Town's finances. For governmental activities, these statements tell how these services were financed in the short term as well as what remains for future spending. Fund financial statements also report the Town's operations in more detail than the government-wide statements by providing information about the Town's most significant funds. The remaining statements provide financial information about activities for which the Town acts solely as a trustee or agent for the benefit of those outside of the government. RePOrtinll the Town as a Whole The Statement of Net Assets and the Statement of Activities One of the most important questions asked about the Town's finances is, "Is the Town as a whole better off or worse off as a result of the year's activities?" The Statement of Net Assets and the Statement of Activities report information about the Town as a whole and about its activities in a way that helps answer this question. These statements include all assets and liabilities using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. The Statement of Activ~ies is significanUy different than a typical Statement of Revenues, Expenses, and Changes in Fund Balance. You will notice that expenses are listed in the first column with revenues from that particular program reported to the right. The result is a net (expense)/revenue. The reason for this kind of format is to highlight the relative financial burden of each of the functions on the Town's taxpayers. It also identifies how much each function draws from the general revenues or if it is self-financing through fees and grants. All of the current year's revenues and expenses are taken into account regardless of when cash is received or paid. These two statements report the Town's net assets and their respective changes. You can think of the Town's net assets-the difference between assets and Iiabilities-as one way to measure the Town's financial health, or financial position. Over time, increases or decreases in the Town's net assets are one indicator of whether its financial health is improving or deteriorating. You will need to consider other non-financial factors, however, such as changes in the Town's property tax base and the condition of the Town's buildings, roads, drainage and other assets to assess the overall health of the Town. In the Statement of Net Assets and the Statement of Activities, we divide the Town into two kinds of activities: . Governmental activities - The Town's basic services are reported here, including: general government support; public safety; public health; transportation; economic assistance and opportunity; culture and recreation and home and community services. Property taxes, sales taxes, franchise fees, fines, and state and federal grants finance these activities. The Town also charges fees to customers to help it cover the cost of certain services it provides. . Component units - The Town includes 7 separate legal entities in its report (one ferry district, one sanitation district, one mosquito district and four park districts). Although legally separate, these "component units" are important because the Town is financially accountable for them. Complete financial statements of the individual component units can be obtained from their respective administrative offices (Note A). -3- . TOWN OF SOUTHOLD MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2004 ReDortina the Town's Most Sianificant Funds . Fund Financial Statements The fund financial statements provide detailed information about the most significant funds-not the Town as a whole. Some funds are required to be established by State law and by bond covenants. However, the Town establishes many other funds to help it control and manage sources of funding and spending related to specific activities. . The Town's basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end that are available for spending. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The govemmental fund statements provide a detailed short-term view of the Town's general government operations and the basic services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the Town's programs. We describe the relationship (or differences) between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds in a reconciliation that follows these fund financial statements. . The Town as Trustee . Reoortino the Town's Fiduciarv ReSPOnsibilities All of the Town's fiduciary activities are reported in a separate Statement of Fiduciary Net Assets. We exclude these activities from the Town's other financial statements because the Town cannot use these assets to finance its operations. The Town is responsible for ensuring that the assets reported in these funds are used for their intended purposes. . THE TOWN AS A WHOLE Our analysis below focuses on the net assets and changes in net assets of the Town's govemmental activities. Condensed Statement of Net Assets . Governmental Activities as of December 31, 2004 and 2003 . 2004 2003 Assets Capital assets $ 81,374,480 $ 76,948,071 Current and other assets 25,448,645 23,970,315 Total assets 106,823,125 100,918,386 Liabilities Long-term liabilities 15,732,844 14,461,033 Other liabilities 14,665,546 17,769,928 Total liabilities 30,398,390 32,230,961 Net assets Invested in capital assets, net of related debt 71,352,951 69,872,715 Unrestricted 5,071,784 (1,185,290) Total net assets $ 76,424,735 $ 68,687,425 . . . -4- . TOWN OF SOUTHOLD MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2004 . THE TOWN AS A WHOLE (continued) . Total assets in the Towns as of December 31, 2004 were $106.8 million, an increase of 5.9 million. Total liabilities as of December 31, 2004 were $30 million, a decrease of approximately $2 million. This results in a net asset balance of $76.4 million, an increase of $7.7 million. Of the Town's net asset balance $71.3 million were invested in capital assets, net of related debt; while $2.4 million was unrestricted. . In the prior year there was a deficit balance of unrestricted net assets. This deficit fund balance does not necessarily indicate stress. The deficit balance of unrestricted net assets arose primarily because of certain factors. The Town, in an effort to maintain present tax rates, used up cash reserves and borrowed funds as needed. In addition, long-term liabilities which include compensated absences, early retirement incentives, claims and judgments, the landfill closure and post closure monitoring will be funded through future budgetary appropriations when they become payable in future periods. . Changes in Net Assets Governmental Activities for the years ended December 31,2004 and 2003 It 2004 2003 Program Revenues Charges for services $ 9,556,554 $ 7,827,147 Operating grants and contributions 790,169 760,118 Capital grants and contributions 915,998 2,406,727 11,262,721 10,993,992 General Revenues Real property taxes 19,989,545 18,958,999 Other real property tax items 72,504 58,613 Non-property tax items 751,210 518,484 Interest earnings 264,223 205,719 State aid - unrestricted 2,867,169 2,138,006 Other 228,738 317,347 24,173,389 22,197,168 Total Revenues 35,436,110 33,191,160 Program Expenses General government support 7,274,110 5,218,482 Public safety 9,899,209 9,652,286 Public health 42,551 41,639 Transportation 6,297,105 6,777,032 Economic assistance and opportunity 1,225,690 1,124,806 Culture and recreation 447,119 227,789 Home and community services 2,052,178 3,470,584 Interest on debt 460,838 508,605 Total Expenses 27,698,800 27,021,223 Increase in Net Assets $ 7,737,310 $ 6,169,937 . . . . . -5- . TOWN OF SOUTH OLD MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2004 THE TOWN AS A WHOLE (continued) . Net Cost of Services Governmental Activities for the year ended December 31, 2004 . General govemment support Public safety Public health Transportation Economic assistance and opportunity Culture and recreation Home and community services Interest on debt . . $ Total Cost of Services 7,274,110 9,899,209 42,551 6,297,105 1,225,690 447,119 2,052,178 460,838 27,698,800 Net Cost of Services $ 6,983,099 9,141,066 32,762 5,712,632 817,596 284,147 (6,996,061) 460,838 $ 16,436,079 $ The cost of all govemmental activities this year was $27.6 million. The net cost of these services, however, after subsidized by program revenues including charges for services and program grants, was $16.4 million. The Town's change in net assets after general revenues of $24.1 million was an increase of $7.7 million. . Net Cost of Services Governmental Activities for the year ended December 31,2004 . General government support Public safety Public health Transportation Economic assistance and opportunity Culture and recreation Home and community services Interest on debt . . . . Total Cost of Services $ 7,274,110 9,899,209 42,551 6,297,105 1,225,690 447,119 2,052,178 460,838 $ 27,698,800 -6- Program Revenues $ 291,011 758,143 9,789 584,473 408,094 162,972 9,048,239 $ 11,262,721 . TOWN OF SOUTHOLD MANAGEMENT'S DISCUSSION AND ANALYSIS December 31 , 2004 THE TOWN AS A WHOLE (continuedl . $12,000,000 $10,000.000 . $8,OOO,QOO $6,000,000 . $4,000,000 $2,000,000 . $- Gen",,' government '"""" . Expenses . Program Revenues Public safety Public health Transportation Econon'ic assistance aM opportunity Interest on ."', . . Operating grants and Capital contributions grants and Other 2% contributions general 3% revenues 4% . Charges f services 27% . State aid- unrestricted 8 . . CUlture and reaeallon Home and cormunity oenrices Revenue by Source Governmental Activities For the year ended December 31,2004 Real property taxes State aid - unrestricted Charges for services Other general revenues Operating grants and contributions Capital grants and contributions Reill prope<ty taxes 56% -7- $ 19,989,545 2,867,169 9,556,554 1,316,675 790,169 915,998 $ 35,436,110 ------- --------- . TOWN OF SOUTHOLD MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2004 THE TOWN AS A WHOLE (continued) . THE TOWN'S FUNDS The general fund balance has increased by $1.3 million due primarily to actual revenues in excess of those amounts budgeted. Mortgage tax received this year was up from the prior by $729 thousand. The following schedule presents a summary of the governmental fund - (general, special revenue, and capital . projects) revenues and expenditures for the year ended December 31,2004, and the amount of change and percentage of total in relation to the prior year. Increase % 2004 2003 (Decrease ) Change . REVENUES Real property taxes $ 19,989,545 $ 18,958,999 $ 1,030,546 5.2% O1her real property tax items 72,504 58,613 13,891 19.2% Non-property tax items 751,210 518,484 232,726 31.0% Departmental income 2,861,801 2,654,516 207,285 7.2% Intergovemmental charges 6,342,748 4,823,458 1,519,290 24.0% . Use of money and property 407,338 320,963 86,375 21.2% Licenses and permits 419,247 336,331 82,916 19.8% Fines and forfeitures 107,315 156,084 (48,769) -45.4% Sale of property and compensation for loss 484,106 121,376 362,730 74.9% Miscellaneous local sources 294,522 211,240 83,282 28.3% State aid 3,825,015 4,226,230 (401,215) -10.5% . Federal aid 326,705 872,572 (545,867) -167.1% Total Governmental Fund Revenues $ 35,882,056 $ 33,258,866 $ 2,623,190 7.3% EXPENDITURES General government support $ 4,488,085 $ 3,886,438 $ 601,647 13.4% Public safety 6,993,563 6,783,111 210,452 3.0% Public health 39,952 39,396 556 1.4% . Transportation 3,039,987 3,131,876 (91,889) -3.0% Economic assistance and opportunity 931,566 833,501 98,065 10.5% Cu~ure and recreation 3,567,350 3,547,970 19,380 0.5% Home and community services 304,071 228,578 75,493 24.8% Employee benefits 5,654,256 4,468,238 1,186,018 21.0% Cap~al 8,756,057 5,801,066 2,954,991 33.7% . Debt service principal and interest 2,215,224 1,171,737 1,043,487 47.1% Total Govemmental Fund Expend~ures $ 35,990,111 $ 29,891,911 $ 6,098,200 16.9% GENERAL FUND BUDGETARY HIGHLIGHTS . Over the course of the year the Town Board revises the budget as needed so that expenditures do not exceed appropriations. In all Town funds, various transfers between appropriations were approved for this purpose. . . -8- . TOWN OF SOUTHOLD MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2004 CAPITAL ASSET AND DEBT ADMINISTRATION . Caoital Assets As of December 31, 2004 the Town had $81.3 million in net capital assets including land, buildings, improvements, machinery and equipment, and infrastructure. The Town's component units had $8.2 million in net capital assets including land, buildings, improvements, machinery and equipment, and sewer mains. . . Capital Assets at December 31, Primary aovernment 2004 2003 Land $ 37,795,087 $ 31,253,329 Construction in progress 398,912 3,066,170 Buildings 4,569,296 4,352,714 Improvements other than buildings 13,469,136 10,585,564 Machinery and equipment 8,686,593 8,118,119 Infrastructure 69,334,187 68,977,685 Total capital assets 134,253,211 126,353,581 Less accumulated depreciation 52,878,731 49,405,510 Primary govemment - Total net capital assets $ 81,374,480 $ 76,948,071 Comoonent units Land $ 2,213,759 $ 2,213,759 Buildings 3,416,944 3,361,906 Improvements other than buildings 2,575,589 3,916,748 Machinery and equipment 3,170,695 2,959,367 Infrastructure 2,121,386 2,121,386 Total capital assets 13,498,373 14,573,166 Less accumulated depreciation 5,236,652 4,837,344 Component units - Total net capital assets $ 8,261,721 $ 9,735,822 . . . . . . . -9- . TOWN OF SOUTHOLD MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2004 CAPITAL ASSET AND DEBT ADMINISTRATION (continued) . Caoital Assets (continued) . The capital program is a long range financing guide and not a definitive plan. Each appropriation must be authorized by Town Board resolution before being undertaken. Each may be financed by issuance of general obligation bonds, which, at times, are preceded by issuance of bond anticipation notes for various periods of time depending on the probable usefulness of the purpose of expenditure. The following sets forth a summary of the Town's capital program. (Dollars in thousands): EQuipment General Fund . Total Equipment 2005 $ 133 $ 133 . Improvements General Fund Highway Fund Special Districts Total Improvements Total Program, $7,000 350 3,125 $10,475 $10,680 Additional information on the Town's capital assets can be found in Note C.3 to the financial statements. . Debt Administration . The Town of Southold's A2 credit rating from Moody's investment rating has changed to Al in February 2005. Debt Limit - The Town has the power to contract indebtedness for any Town purpose so long as the principal amount thereof, subject to certain limited exceptions, shall not exceed seven percent of the average full valuation of taxable real estate of the Town, and subject to certain enumerated exclusions and deductions such as water and certain sewer facilities and cash or appropriations for current debt service. . The constitutional method for determining full valuation is calculated by taking the assessed valuation of taxable real estate as shown upon the latest completed assessment roll and dividing the same by the equalization rate as determined by the State Board of Equalization and Assessment. The State Legislature is required to prescribe the manner by which such ratio shall be determined. Average full valuation is determined by taking the sum of the full valuation of the last completed assessment roll and the four preceding assessment rolls and dividing such sum by five. Percentage of debt contracting power exhausted at December 31,2004 was 2.16%. At December 31, 2004, the Town had approximately $10.3 million in long term general obligation bonds outstanding, of which $10 million was for general Town purposes. Also outstanding at year-end were bond anticipation notes in the amount of $12.6 million of which $6.7 million was for general Town purposes. . Additional information on the Town's debt activity can be found in Note C.4 to the financial statements. . . -10- . . . . . . . . . . . TOWN OF SOUTHOlD MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2004 ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES Prooertv Tax The Town has adopted a budget for the 2004 fiscal year which factors in inflation and other adjustments to revenues and expenditures as well as prior year positive and negative fund balances. The 2004 budget includes an overall increase in real property tax revenues from the prior year of approximately 2.8% for the general Town governmental activities. State Aid and Local Assistance The Town receives financial assistance from New York State and from Suffolk County. During 2004, financial assistance included state aid consisting of mortgage tax of $2.8 million, consolidated highway aid of $223 thousand, transportation and capital aid of $350 thousand and landfill closure aid of $200 thousand. State aid per capita was $72.6 thousand and County local government assistance was $178.4 thousand. Additionally, if the State should not adopt its budget in a timely manner, municipalities and school districts in the State, including the Town, may be affected by a delay in the payment of state aid. The State is not constitutionally obligated to maintain or continue state aid to the Town. The Town's 2005 budget included similar amounts for this financial assistance. Retirement Svstem The New York State Employees Retirement System, having suffered some adverse effects of the weak stock market conditions, was expected to require payments in excess of amounts the State had originally anticipated for the year ended 2004. When establishing the 2004 budget, the Town had anticipated these excess payments. However, due to a change in the billing cycle, the State was able to hold the contribution rates to those the State had originally anticipated. The Town subsequently re-appropriated that budgeted but unexpended excess payment in the 2005 budget. The State's new billing cycle will require a minimum contribution rate of 4.5%. Employer contribution for subsequent years will be based on the Russell 3000 performance as of April 1 of the preceding two years. In 2003 the Town of Southold adopted the New York State Early Retirement Incentive Program as authorized by Chapter 69 of the Laws of 2002. The option to retire early ran through December 31, 2002. The eligibility varied based on tier, age and years of service, but all options required that the employees be at least fifty (50) years of age and being vested in the New York State Retirement System. As part of its contractual agreements with the unions, the Town of Southold also offers fully paid health insurance benefits (but not welfare benefits) for the retiree and their present spouse until death of the retiree. CONTACTING THE TOWN'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers. customers, and creditors with a general overview of the Town's finances and to show the Town's accountability for the money it receives. If you have questions about this report or need additional financial information, contact the Town of Southold, Office of the Town Comptroller, Southold, New York. -11- . TOWN OF SOUTHOLD GOVERNMENT-WIDE FINANCIAL STATEMENT STATEMENT OF NET ASSETS December 31, 2004 . Primary Governmental Component Activities Units ASSETS Current Assets: Cash and investments $ 21,490,864 $ 2,041,037 . Accounts receivable, net of allowances 229,411 4,139 Due from fiduciary funds 73 Due from other governments 2,079,823 Due from primary government 991,975 State and federal aid receivables 311,121 49,674 . Prepaid charges 1,333,647 41,968 Inventory of material and supplies 1,487 Other assets 2,219 Total Current Assets 25,448,645 3,128,793 Non-Current Assets: Non-depreciable capital assets 38,193,999 12,805,938 . Depreciable capital assets, net of depreciation 43,180,481 6,047,962 Total Non-Current Assets 81,374,480 18,853,900 Total Assets 106,823,125 21,982,693 LIABILITIES Current Liabilities: . Accounts payable and accrued liabilities 1,916,795 611,646 Accrued interest payable 148,314 25,056 Bond anticipation notes payable 6,730,600 5,895,000 Due to other governments 388,944 2,604 Due to fiduciary funds 4,248 2,000 Unearned revenue 4,149,871 388,306 . Non-current liabilities due within one year General obligation bonds payable 887,431 72,569 Due to Employees Retirement System 41,841 Claims and judgments payable 378,630 Estimated liability for landfill closure . and postclosure care costs 18,872 Total Current Liabilities 14,665,546 6,997,181 Non-Current Liabilities: General obligation bonds payable 9,144,098 200,000 Due to Employees Retirement System 93,993 Compensated absences 5,662,358 . Claims and judgments payable 220,000 Estimated liability for landfill closure and postclosure care costs 612,395 Total Non-Current Liabilities 15,732,844 200,000 Total Liabilities 30,398,390 7,197,181 . NET ASSETS Investment in capital assets, net of related debt 71,352,951 11,785,893 Unrestricted 5,071,784 2,999,619 Total Net Assets $ 76,424,735 $ 14,785,512 . See notes to the financial statements -12- ------ . TOWN OF SOUTHOLD GOVERNMENT-WIDE FINANCIAL STATEMENT STATEMENT OF ACTIVITIES Year ended December 31, 2004 . Net Expenses (Revenues) and Program Revenues Change in Net Assets Operating Capital Charges for Grants and Grants and Primary Component Function/Program Expenses Services Contributions Contributions Government Units PRIMARY GOVERNMENT . Government Activities: General government support $ 7,274,110 $ 169,454 $ 121,557 $ 6,983,099 Public safety 9,899,209 622,230 135,913 9,141,066 Public health 42,551 9,789 32,762 Transportation 6,297,105 6,137 $ 578,336 5,712,632 Economic assistance and opportunity 1,225,690 164,986 243,108 817,596 . Culture and recreation 447,119 162,972 284,147 Home and community services 2,052,178 8,430,775 279,802 337,662 (6,996,061 ) Interest on debt 460,838 460,838 Total Primary Government $ 27,698,800 $ 9,556,554 $ 790,169 $ 915,998 $ 16,436,079 . COMPONENT UNITS General government support $ 93,240 $ 93,240 Public health 60,001 60,001 Transportation (299,680) $ 1,783,486 $ 2,000 $ 2,807,118 (4,892,284) Culture and recreation 832,057 832,057 . Home and community services 486,660 26,452 460,208 Interest on debt 91,689 91,689 Total Component Units $ 1,263,967 $ 1,809,938 $ 2,000 $ 2,807,118 $ (3,355,089) GENERAL REVENUES . Real property taxes $ 19,989,545 $ 1,759,293 Other real property tax items 72,504 155 Non-property tax items 751,210 Interest earnings 264,223 68,464 State aid 2,867,169 1,073,260 . Other 228,738 28,705 Total General Revenues 24,173,389 2,929,877 Change in Net Assets 7,737,310 6,284,966 Net Assets at Beginning of Year 68,687,425 8,500,546 . Net Assets at End of Year 14,785,512 $ 76,424,735 $ . See notes to financial statements. . -13- . TOWN OF SOUTHOLD BALANCE SHEET GOVERNMENTAL FUNDS December 31, 2004 . MAJOR GOVERNMENTAL FUNDS Non-Major Capital Governmental General Highway Projects Funds Totals ASSETS . Cash and Investments $ 10,081,581 $ 990,554 $ 9,358,842 $ 1,059,887 $ 21,490,864 Accounts Receivable 85,426 2,433 141,552 229,411 Due from Other Funds 320,243 778,294 73,332 696,930 1,868,799 Due from Trust Funds 73 73 State and Federal Aid Receivable 56,357 54,764 200,000 311,121 Due from Other Governments 1,537,312 484,562 57,949 2,079,823 . Supply Inventory 1,487 1,487 Prepaids 526,857 142,059 90,161 759,077 Deposit 2,219 2,219 Total Assets $ 12,611,555 $ 1,968,104 $ 10,116,736 $ 2,046,479 $ 26,742,874 LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable $ 1,052,240 $ 269,824 $ 104,926 $ 406,805 $ 1,833,795 . Retained Percentages 83,000 83,000 Bond Anticipation Notes Payable 6,730,600 6,730,600 Due to Other Funds 1,625,700 221,126 21,973 1,868,799 Due to Trust Funds 4,248 4,248 Due to Other Governments 388,944 388,944 Deferred Revenue 2,900,729 777,884 471,258 4,149,871 . T alai Liabilities 5,971,861 1,047,708 7,139,652 900,036 15,059,257 FUND BALANCE Fund Balances - Reserved: Encumbrances 71,342 71,342 Supply Inventory 1,487 1,487 Prepaids 526,857 31,108 557,965 Insurance Claims 1,234,066 1,234,066 . Fund Balance - Unreserved: 125,000 125,000 Designated - Ensuing Y ea~s Budget 1,978,987 369,564 226,436 2,574,987 Undesignated 2,826,955 425,832 2,977,084 888,899 7,118,770 Total Fund Equity 6,639,694 920,396 2,977,084 1,146,443 11,683,617 Tolal Liabilities and Fund Equity $ 12,611,555 $ 1,968,104 $ 10,116,736 $ 2,046,479 $ 26,742,874 . . . See notes to the financial statements. . -14- . TOWN OF SOUTHOLD RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS December 31, 2004 . Total Fund Balances - Governmental Funds $ 11,683,617 . Amounts reported for governmental activities in the Statement of Net Assets are different because: Capital assets less accumulated depreciation are included in the Statement of Net Assets: . Capital assets - non-depreciable $38,193,999 Capital assets - depreciable 96,059,212 Accumulated depreciation (52,878,731) 81,374,480 . Long-term liabilities applicable to the Town's governmental activities are not due and payable in the current period and accordingly are not reported in the funds. However these liabilities are included in the Statement of Net Assets: . General obligation bonds payable (10,031,529) Due to Employees Retirement System (135,834) Compensated absences (5,662,358) Claims and judgments payable (598,630) . Estimated liability for landfill closure and postclosure care costs (631,267) (17,059,618) Prepaid items included in the Statement of Net Assets 574,570 . Interest payable applicable to the Town's governmental activities are not due and payable in the current period and accordingly are not reported in the funds. However these liabilities are included in the Statement of Net Assets. (148,314) . Net Assets of Governmental Activities $ 76,424,735 . See notes to financial statements. . -15- . TOWN OF SOUTHOLD STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS For the year ended December 31, 2004 . MAJOR GOVERNMENTAL FUNDS Non-Major Capital Governmental . General Highway Projects Funds Totals REVENUES Real Property Taxes $ 13,962,268 $ 3,520,332 $2,506,945 $ 19,989,545 Other Real Property Tax Items 65,720 3,679 3,105 72,504 Non-Property Tax ~ems 415,071 336,139 751,210 Departmental Income 344,217 2,517,584 2,861,801 Intergovemmental Charges 296,050 $ 6,045,685 1,013 6,342,748 . Use of Money and Property 254,142 23,884 107,947 21,365 407,336 Licenses and Permits 214,461 4,937 199,849 419,247 Fines and Forfeitures 107,315 107,315 Sale of Property and Compensation for Loss 405,077 2,960 76,069 484,106 Miscellaneous Local Sources 128.027 16 161,454 5,025 294,522 State Aid 2,974,027 228,337 550,000 72,651 3,825,015 Federal Aid 160,337 166,368 326,705 Total Revenues 19,326,712 3,784,145 6,865,086 5,906,113 35,882,056 . EXPENDITURES Current General Govemment Support 4,395,571 92,514 4,488,085 Public Safety 6,254,365 739,198 6,993,563 Public Health 33,288 6,684 39,952 Transportation 401,866 2,638,121 3,039,967 Economic Assistance and Opportunity 931,566 931,566 . Home and Communjty Services 341,784 3,225,586 3,567,350 Culture and Recreation 304,071 304,071 Employee Benefits 4,868,116 415,102 371,038 5,654,256 Capital OuUay 8,756,057 8,756,057 Principal and interest 2,104,202 22,219 88,803 2,215,224 Total Expenditures 19,634,809 3,075,442 8,756,057 4,523,803 35,990,111 . Excess (Deficiency) of Revenues Over Expenditures (308,097) 708,703 (1,890,971) 1,382,310 (108,055) Other Financing Sources (Uses) Debt Proceeds 3,789,098 3,789,098 BANs redeemed from appropriations 1,126,000 1,126,000 Transfers In 2,932,574 143,452 3,076,026 Transfers Out (1,304,195) (690,390) (1,081,441) (3,076,026) . Total Other Financing Sources (Uses) 1,628,379 (690,390) 5,058,550 (1,081,441) 4,915,098 Excess (Deficiency) of Revenues and Other Sources OVer Expenditures and Other Uses 1,320,282 18,313 3,167,579 300,869 4,807,043 Fund Balance (Deficit) at Beginning of Year 5,319,412 902,Q83 (190,495) 845,574 6,876,574 . Fund Balances at End of Year $ 6,639,694 $ 920,396 $ 2,977,084 $1,146,443 $ 11,683,617 . See notes to the financial statements. . -16- . TOWN OF SOUTH OLD RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES For the year ended December 31, 2004 . Net Change in Fund Balance $ 4,807,043 . Governmental funds report capital outlays as expenditures. However, in the Statement of Activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. The amount by which capital outlay exceeds depreciation in the current period is: . Capital outlay Depreciation expense Loss on dispositions $10,903,315 (3,947,020) (2,529,886) 4,426,409 . Some expenses reported in the Statement of Activities do not require the use of current financial resources and therefore, are not reported as expenditures in governmental funds: Prepaid charges 417,526 The issuance of long-term debt and increase in obligations under capital . leases provides current financial resources to governmental funds, while the repayment of the principal of long term debt and capital leases consumes the current financial resources of governmental funds. Neither transaction has any effect on net assets. . Bonds issued Repayment of bond principal Due to Employees Retirement System Compensated absences Claims and judgments payable Estimated liability for landfill closure and postclosure care costs Accrued interest payable (3,789,098) 642,429 38,742 (479,489) 401,370 . 1,286,421 (14,043) Change in Net Assets of Governmental Activities $ 7,737,310 . . See notes to financial statements. . -17- . TOWN OF SOUTHOLD STATEMENT OF FIDUCIARY NET ASSETS December 31, 2004 . Fishers Island . Town Ferry District Totals ASSETS Cash and investments $ 13,753,439 $ 80,247 $13,833,686 Other receivables 34,001 34,001 Due from other funds 4,248 4,248 . Total Assets $ 13,757,687 $ 114,248 $13,871,935 LIABILITIES Due to other funds $ 74 $ 86,012 $ 86,086 . Due to school districts 10,769,279 10,769,279 Due to component units 517,658 517,658 Due to other governments 1,655,020 1,655,020 Other liabilities 342 342 Deposits held 815,314 28,236 843,550 . Total Liabilities $ 13,757,687 $ 114,248 $13,871,935 . . . . See notes to financial statements. . -18- . . . . . . . . . . . TOWN OF SOUTH OLD NOTES TO FINANCIAL STATEMENTS December 31, 2004 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Town of Southold (the "Town"), which was established in 1640, is govemed by Town Law and other general laws of the State of New York and various local laws. The Town Board is the legislative body responsible for overall operations. The Town Board consists of the Supervisor who is elected for a term of two years and fIVe council members who are elected for terms of four years. The Town Board appoints the Town Attomey, Comptroller and the Commissioner of Public Works whose terms are fixed by Town Law. The Town Clerk, Receiver of Taxes, Superintendent of Highways, Justices and Town Trustees are all elected and serve for four years, respectively. The Town provides a full range of municipal services, including public safety, transportation, home and community services, public works and road maintenance, recreation and parks, and general and administrative services. The financial statements of the Town of Southold have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) as applied to govemmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing govemmental accounting and financial reporting principles. The more signifICant of the government's accounting policies are described below. 1. REPORTING ENTITY 2. 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 No. 14. The decision to include a potential component unit in the Town of South old reporting entity is based on several criteria set forth in GASB Statement No. 14 including legal standing, dependency and financial accountability. Based on the application of these criteria, the following is a summary of certain entities considered in determining the Town of Southold's reporting entity. Certain special districts of the Town of Southold provide sanitation, ferry, and park services to residents and businesses within the districts. These special districts are organized under New York State Town law and have separately elected boards. Special districts cannot issue bonded debt without the approval and the backing of the full faith and credit of the Town. Tax levies of the special districts are collected by the Town Receiver of Taxes. As a result of this fiscal dependency, the Town is financially accountable for these special districts. Accordingly, these special districts have been determined to be component units of the Town and are presented discretely in a separate column in the combined financial statements to emphasize that they are legally separate from the primary govemment. BASIS OF PRESENTATION The Town's basic financial statements include both government-wide (reporting the Town as a whole) and fund financial statements (reporting the Town's major funds). Government-wide Financial Statements The government-wide financial statements reports information on the Town as a whole, except fiduciary activities, with separate columns for the primary governmental activities as well as the discretely presented component units. In the government-wide Statement of Net Assets, the Town's govemmental activities are presented on a consolidated basis and are reported on a full accrual, economic resource basis, which recognizes all long-term assets and receivables as well as long-term debt and obligations. The Town's net assets are reported in three parts-investrnents in capital assets, net of related debt; restricted net assets; and unrestricted net assets. -19- . . . . . . . . . . . TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2004 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2. BASIS OF PRESENTATION (continued) The government-wide Statement of Activities reports both the gross and net cost of each of the Town's functional categories (public safety, transportation, home and community services, etc.), which are otherwise supported by general government revenues (property, sales and use taxes, certain intergovernmental revenues, fines, permits and charges, etc.). The Statement of Activities reduces gross expenses (including depreciation), by related program revenues and operating and capital grants, to produce the net cost of each program. Program revenues include (a) charges for services and (b) operating and capital grants and contributions that are directly associated with the function. Operating grants include operating-specific and discretionary (either operating or capital) grants while the capital grants column reflects capital- specific grants. The net costs (by function) are normally covered by general revenue (property, taxes, intergovernmental revenues, interest income, etc). As a general rule the effect of interfund activity has been eliminated in general purpose financial statements. This government-wide focus is more on the sustainability of the Town as an entity and the change in the Town's net assets resulting from the current year's activities. Fund Financial Statements The fund financial statements are similar to the financial statements presented in the previous model. The new emphasis is on the major funds in the fund financial statements. Non-major funds are summarized into a single column. The accounts of the Town are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund balances, revenues, and expenditures, which are segregated for the purpose of carrying on specifIC activities or attaining certain objectives in accordance with special regulations, restrictions or limitations. The various funds are presented by type in the fund financial statements. Accordingly, the Town maintains the following fund types: Governmental Funds - Governmental funds are those through which most governmental functions are financed. The acquisition, use and balances of expendable financial resources and the related liabilities are accounted for through governmental funds. The measurement focus of the governmental funds is upon determination of financial position and changes in financial position. Governmental funds are further classified as major and non-major funds. The Town reports the following major governmental funds: General Fund - is the principal operating fund of the Town. This fund is used to account for all financial resources except those required to be accounted for in other funds. Hiohwav Funds - To maintain and operate highways. Caoital 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). -20- . . . . . . . . . . . TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2004 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2. BASIS OF PRESENTATION (continued) Fund Financial Statements (continued) Additionally, the Town reports the following non-major funds: Special Revenue Funds - are used to account for the proceeds of specific revenue sources (other than major capital projects) that are legally restricted to expenditures for specified purposes. Special Revenue Funds include the following: 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. SDecial District Funds - To provide special services to areas that encompass less than the whole town. Fiduciary Funds - Fiduciary Funds are used to account for assets held by the Town in a trustee or custodial capacity. Agency Fund - is for money (and/or property) received and held in the capacity of trustee, custodian or agent. Discretely Presented Component Units Certain special districts that have separately elected boards provide transportation, park, mosquito control, and sanitation services to residents and businesses within these districts, and follow govemment fund accounting principles. These districts, which are accounted for as discretely presented component units, are as follows: These districts include the following: The Fishers Island Ferry District, established in 1947 Orient Mosquito District, established in 1916 Fishers Island Garbage and Refuse District, established in 1952 Cutchogue-New Suffolk Park District, established in 1953 Orient-East Marion Park District, established in 1969 Southold Park District, established in 1907 Maltituck Park District, established in 1941 Complete financial statements of these component units can be obtained from their respective administrative offices: Orient Mosquito District Main Road Orient, NY 11957 Cutchogue-New Suffolk Park District P.O. Box 311 Cutchogue, NY 11935 Southold Park District P.O. Box 959 Southold, NY 11971 Fishers Island Ferry District Main Street Southold, NY 11971 Fishers Island Garbage & Refuse District Fishers Island, NY 06390 Orient-East Marion Park District Route 25 Orient, NY 11957 Maltituck Park District P.O. Box 1413 Maltituck, NY 11952 -21- . . . . . . . . . . . A. 4. TOWN OF SOUTH OLD NOTES TO FINANCIAL STATEMENTS December 31,2004 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3. BASIS OF ACCOUNTING/MEASUREMENT FOCUS Measurement focus refers to what is being measured whereas the basis of accounting refers to when revenues and expenditures are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurement made, regardless of the measurement focus applied. In the govemment-wide statements, governmental activities are presented using the economic resources measurement focus and are presented using the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred or economic asset used. Revenues, expenses, gains, losses, assets, and liabilities resulting from exchange and exchange-like transactions are recognized when the exchange takes place. In the funds statements, govemmental funds use a current financial resources measurement focus and are accounted for using the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual (measurable and available to finance current operations). "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to pay liabilities of the current period. The Town considers all revenues available if they are collected within 60 days after the year end. Revenues susceptible to accrual include Suffolk County local assistance at year end on behalf of the Town, franchise fees, and charges for services, intergovernmental revenues and operating transfers. Permits, fees, and other similar revenues are not susceptible to accrual because generally they are not measurable until they are received in cash. In those instances where expenditures are the prime factor in determining eligibility for state and federal grants, revenues are recognized when the expenditure is incurred. In the Capital Projects Fund, long-term debt is recognized as revenue upon receipt of the proceeds. Expenditures are recorded on the accrual basis except that (a) expenditures for prepaid expenses are recognized when incurred; (b) principal and interest on indebtedness are recognized as expenditures when due; (c) compensated absences, such as vacation and sick leave, which vest or accumulate, are charged as expenditures when paid. Encumbrance accounting, under which purchase orders, contracts and other commitments are recorded for budgetary control purposes in order to reserve that portion of the applicable appropriation, is employed in the govemmental funds. Appropriations for all govemmental funds except the capital projects fund lapse at year-end. However, encumbrances reserved against fund balances are re-appropriated in the ensuing year. Encumbrances are reported as reservations of fund balances since they do not constitute expenditures or liabilities. Expenditures for such commitments are recorded in the period in which the liability is incurred. ASSETS, LIABILITIES AND FUND EQUITY RECEIVABLES Receivables include amounts due from Federal, State, and other governments or entities for services provided by the Town. Receivables are recorded and revenues recognized as eamed or as specifIC program expenditures are incurred. INVENTORY - MATERIALS AND SUPPLIES Inventory in the general and special revenue funds is valued at cost. Inventory in these funds is accounted for under the consumption method. -22- . . . . . . . . . . . TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2004 A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 4. ASSETS, LIABILITIES AND FUND EQUITY (continued) CAPITAL ASSETS Capital assets purchased or acquired with an original cost of $5,000 or more are reported at historical cost or estimated historical cost. Contributed assets are reported at fair market value as of the date received. Additions, improvements and other capital outlays that significantly extend the useful life of an asset are capitalized. Other costs incurred for repairs and maintenance are expensed as incurred. Depreciation on all assets is provided on the straight- line basis over the following estimated useful lives: Buildings Improvements and other Machinery and equipment Infrastructure 10-40 years 20 years 5-10 years 20-30 years Infrastructure assets, consisting of certain improvements other than buildings including roads, curbs, sidewalks, bridges, street lighting are capitalized along with other capital assets. In the fund financial statements, capital assets are recorded as capital outlay expenditures in the govemmental fund upon acquisition. DEFERRED REVENUE/UNEARNED REVENUE Deferred revenues/uneamed revenue are those where asset recognition criteria have been met, but which revenue recognition criteria have not been met. Such amounts include collections in advance, uneamed income and amounts have been deemed to be "measurable" but not "available" to finance current expenses pursuant to generally accepted accounting principles. PREPAlDS Prepaids record payments to venders that benefit future recording periods and are reported on the consumption basis. Prepaids in the General and Special Revenue Funds represent insurance premiums paid for coverage that will benefit the subsequent period and for retirement benefits that will benefrt a future period. LONG-TERM OBLIGATIONS The liabilities for long-term obligations consisting of general obligation bond, compensated absences, due to employee retirement system, judgments, claims and liability for landfill closure and post closure costs are recognized in the govemment-wide financial statements. In the fund statements, long-term obligations are not reported as liabilities. The debt proceeds are reported as other financing sources and payment of principal and interest reported as expenditures. 5. REVENUES AND EXPENDITURES REAL PROPERTY TAX ASSESSMENT AND COLLECTION PROCEDURES In Suffolk County, the assessment and lien of real property for taxation is done by the County Department of Assessment. Real property taxes become a lien on December 1 for both school and general taxes. The Town's assessment rolls are used for the levy of real property taxes by the Town and the School Districts, as well as by the County and by Special Districts of the County and the Town. -23- . TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2004 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) . 5. REVENUES AND EXPENDITURES (continued) REAL PROPERTY TAX ASSESSMENT AND COLLECTION PROCEDURES (continued) The Town of Southold Receiver of Taxes collects all real property taxes for the Town, Suffolk County, Town Special Districts and School Districts. These taxes are levied on December 1, and are due in two installments, 50% on December 1 and 50% on May 10, payable without penalty to January 10 and May 31, respectively. Penalties are imposed thereafter at the rate of one-twelfth of the rate of interest determined by the State Commissioner of Taxation and Finance, after which taxes are payable to the County Treasurer. The Town retains the total amount of Town, Highway and Town Special Districts levies from the amount collected, and forwards the balance collected to the County which assumes collection responsibility. The Town and Town's Special Districts therefore realize annually the 100% collection of real properly taxes. . . School District properly taxes are also levied on December 1, and are also payable in two installments. School properly taxes are due in two installments, 50% on December 1 and 50% on May 10 payable without penalty to January 10 and May 31, respectively. The County is also responsible for uncollected school taxes. . INTERFUND TRANSACTIONS Interfund transactions have been eliminated from the government-wide financial statements. In the funds statements interfund transactions include: . a) Interfund Revenues Interfund revenues, quasi-extemal transactions, in the general fund represent amounts charged for services or facilities provided by the general fund. The amounts paid by the fund receiving the benefit of the service or facilities are reflected as an expenditure of that fund. b) Transfers . Transfers represent payments to the debt service, general fund and capital projects funds from the other funds for their appropriate share of the debt service, general fund or capital project costs. COMPENSATED ABSENCES . The liability for vested or accumulated vacation or sick leave (compensated absences) is recorded as current and noncurrent obligations in the government-wide statements. The current portion of this debt is estimated based on historical trends. In the fund financial statements only the compensated absence liability payable from expendable available financial resources is incurred. . The amount that is expected to be liquidated with expendable available financial resources is reported as expenditures and a liability in the funds statement in the respective fund that will pay n. 6. EQUITY CLASSIFICATIONS . In the Government-wide Statements, equity is classified as net assets and displayed in three components: a) Invested in capital assets, net of related debt-Gonsists of capital assets including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. . -24- . . . . . . . . . . . TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2004 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 6. EQUITY CLASSIFICATIONS (continued) b) Restricted net assets-Consists of net assets with constraints placed on the use either by (1) external groups such as creditors, grantors, contributors, or laws or regulations of other governments; or (2) law through constitutional provisions or enabling legislation. c) Unrestricted net assets-All other net assets that do not meet the definition of "restricted" or "invested in capital assets, net of related debt." In the Fund Statements, governmental fund equity is classified as fund balance. Fund balance is further classified as reserved and unreserved, with unreserved further spin between designated and undesignated. Portions of fund equity are segregated for future use and therefore not available for future appropriation or expendnure. Amounts reserved for encumbrances, inventory, insurance claims and debt service represent portions of fund equny, which are required to be segregated in accordance wnh 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. B. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY 1. BUDGETARY 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. 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. The Town follows the procedures enumerated below in establishing the budgetary data reflected in the financial statements: a. No later than October 1, the Supervisor submits a tentative budget to the Town Board for the fiscal year commencing the following fiscal year. The tentative budget includes the proposed means of financing for all funds. b. After public 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. In order to show the full legal level of budgetary compliance for the general and certain special revenue funds, detailed individual statements of revenues, expenditures and changes in fund balances - budget and actual, are presented in a separate budget report. -25- . TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2004 B. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY (continued) . 2. FUND BALANCES DESIGNATION OF FUND BALANCE Portions of the unreserved balances at December 31, 2004 were designated for the subsequent year's operating budgets as follows: . . Fund Balance Unreserved and Designated Total for Subsequent Fund Balance Fund Balance Year's Unreserved Fund Unreserved Budget Undesignated Non-Major Funds: Town Outside Village $ 704,719 $ 251,625 $ 453,094 Special Grant 619 619 East West Fire Protection District 13,357 5,300 8,057 Southold Wastewater District 6,125 6,125 Fishers Island Sewer District 41,915 41,915 Solid Waste Management District 379,708 379,708 Total $ 1,146,443 $ 257,544 $ 888,899 . . C. DETAILED NOTES ON ALL FUNDS AND ACCOUNT GROUPS 1. CASH AND INVESTMENTS . Cash consists of funds deposited in demand accounts, time deposit accounts and certificates of depostt with maturtties of less than three months. . The Town's investments are govemed by a formal investment policy. The Town's monies must be deposited in FDIC-insured commercial banks or trust companies located wtthin the state. The Town is authorized to use demand accounts and certificates of depostt. Permissible investments include obligations of the U.S. Treasury, U.S. Agencies and investments made by the Cooperative Liquid Asset Securtty System (CLASS). CLASS is a cooperative investment plan consisting of U.S. Treasury Obligations and repurchase agreements relating to treasury obligations. Investments are stated at cost, which approximates market value. CLASS was established as a cooperative investment arrangement organized under the CLASS Municipal Cooperation Agreement made pursuant to New York General Municipal Law, Article 3A and 5-G. It is the Town's policy to require collateral held in the name of the Town for demand deposits, money market deposits and certificates of deposit for all deposits not covered by federal deposit insurance. Obligations that may be pledged as collateral are obligations of the Untted States and its agencies and obligations of the State and its municipalities and school districts. . . At December 31, 2004 the cash in banks was approximately $24,950,000 and collateral held against cash in banks was $52,450,000 consisting of FDIC insurance and/or securities held in the name of the Town of Southold. . -26- . TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2004 C. DETAILED NOTES ON ALL FUNDS AND ACCOUNT GROUPS (continued) . 2. INTERFUND RECEIVABLES AND PAYABLES Interfund receivables and payables for the primary government at December 31, 2004 were as follows: Amount Amount . Receivable Pavable General Fund - Town wide $ 320,243 $ 1,625,700 Highway Fund 778,294 Capital Projects Fund 73,332 221,126 Part Town 158,881 East-West Fire District 81,799 . Southold Wastewater District 27,859 2,543 Fishers Island Sewer District 448 Solid Waste Management District 427.943 19.430 $ 1 868 799 $ 1.868 799 . Interfund receivable and payable balances for the primary government at December 31, 2004 are expected to be paid currently. 3. CAPITAL ASSETS Balance Balance . Primary government 1/1104 Addnions Deletions 12/31/04 Capital assets not being depreciated land $ 31,253,329 $ 6,606,975 $ 65,217 $ 37,795,087 Construction in progress 3,066,170 221,851 2,889,109 398,912 . Total capnal assets not being depreciated 34,319.499 6,828,826 2,954,326 38,193,999 Depreciable capnal assets Buildings 4,352,714 216,582 4,569,296 Improvements other than buildings 10,585,564 2,883,572 13,469,136 Machinery and equipment 8,118,119 1,149,347 580,873 8,686,593 . Infrastructure 68,977,685 356,502 69,334,187 Total depreciable capnal assets 92,034,082 4,606,003 580,873 96,059,212 Less accumulated depreciation Buildings 1,809,556 124,276 1,933,832 Improvements other than buildings 2,501,104 519,671 3,020,775 . Machinery and equipment 5.431,352 610,002 473,799 5,567,555 Infrastructure 39,663,498 2,693,071 42,356,569 Total accumulated depreciation $ 49,405,510 $ 3,947,020 $ 473,799 52,878,731 Total net depreciable capnal assets 43,180.481 . Total net capital assets $ 81,374.480 . -27- . TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2004 C. DETAILED NOTES ON ALL FUNDS AND ACCOUNT GROUPS (continued) . 3. CAPITAL ASSETS (continued) Depreciation expense was charged to governmental functions as follows: General government support $ 216,283 . Public safety 147,102 Transportation 2,903,911 Economic assistance and opportunity 35,228 Culture and recreation 60,604 Home and commun~y services 583,892 . $ 3,947,020 Balance Balance Discretely presented component un~ 111/04 Add~ions Deletions 12/31/04 . Capital assets not being depreciated Land $ 2,213,759 $ 2,213,759 Construction in progress $ 10,592,179 10,592,179 T otal cap~aJ assets not being depreciated 2,213,759 10,592,179 12,805,938 . Depreciable cap~al assets Buildings 3,361,906 55,038 3,416,944 Improvements other than buildings 3,916,748 584,312 $ 1,925,471 2,575,589 Machinery and equipment 2,959,367 211,328 3,170,695 Infrastructure 2,121,386 2,121,386 . Total depreciable cap~al assets 12,359,407 850,678 $ 1,925,471 11,284,614 Less accumulated depreciation Buildings 1,082,310 103,767 1,186,077 Improvements other than buildings 885,573 88,001 973,574 . Machinery and equipment 1,877,837 125,617 2,003,454 Infrastructure 991,624 81,923 1,073,547 Total accumulated depreciation $ 4,837,344 $ 399,308 5,236,652 Total net depreciable capital assets 6,047,962 . Total net cap~1 assets $ 18,853,900 . . -28- . . . . . . . . . . . TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2004 C. DETAILED NOTES ON ALL FUNDS AND ACCOUNT GROUPS (continued) 4. INDEBTEDNESS SHORT TERM DEBT Bond Anticipation Notes (BANs) - Bond anticipation notes (BANs) are used as a temporary means of financing capital expenditures in the capital projects fund. State law requires that BANs issued for capital purposes be converted to long-term obligations within fIVe years after the original issue date. The notes or renewal thereof may not extend more than two years beyond the original date of issue unless a portion is redeemed within two years and within each 12 month period thereafter. Liabilities for BANs are generally accounted for in the capital projects fund. BANs are expected to be paid from the proceeds of future bond issues after renewal of these notes. These BANs bear interest at various rates from 1.08% to 2.00% and are due at various dates through 2005. When BANs are not redeemed with the proceeds of bond issues, but instead paid from budgetary appropriations, the principal amount paid is recorded as an expenditure in the operating fund and a financing source is recorded in the capital projects fund. These notes are summarized as follows: Descriotion Various Purposes Various Purposes Various Purposes New London Wharf New London Wharf New London Wharf Fishers Island Garbage Total Amount $ 3,011,600 1,719,000 2,000,000 2,975,000 1,000,000 750,000 1.170.000 $ 12625600 Interest Rate 1.550% 1.190% 1.080% 1.400% 1.170% 2.000% 1.350% Of the $12,625,600 in bond anticipation notes, $6,730,600 relates to the primary government and the remaining $5,895,000 relates to the component units. LONG TERM DEBT Summary of changes in long-term debt transactions for the year ended December 31, 2004 is as follows: NorH:urrent Balance Balance liabilities due Non-current 1/1/04 Iweeses Reductions 12/31104 within one year liabilities Primary Govemment: General obligation bonds $ 6,664,660 $ 3,769,096 $ 642.429 $ 10,031,529 $ 667,431 $ 9,144,096 Due to Employees Retirement System 174,576 36,742 135,634 41,641 93,993 Compensated absences 5,162,669 534,319 54,630 5,662,356 5,662,356 Claims and judgments 1,000,000 401,370 598,630 376,630 220,000 Estimated Iiabiiily for landfill dosure and post.dosure care costs 1,917,666 1,286,421 631,267 16,872 612,395 Component Units: General obligation bonds 65,140 240,000 32,571 272,569 72,569 200,000 -29- . . . . . . . . . . . TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2004 C. DETAILED NOTES ON ALL FUNDS AND ACCOUNT GROUPS (continued) 4. INDEBTEDNESS (continued) LONG TERM DEBT (continued) General Obligation Bonds - The Town borrows money in order to acquire land or equipment or construct buildings and improvements. This enables the cost of these capital assets to be borne by the present and future taxpayers receiving the benefit of the capital assets. These long-term liabilities, which are backed by the full faith and credit of the Town, bear interest at various rates from 2.95% to 9.1 % and have maturity dates in 2005 through 2019. Future principal and interest payments to maturity for both the primary govemment and the component units are as follows: Year Endina Princioal Interest 2005 $ 960,000 $ 373,677 2006 770,000 337,019 2007 804,098 308,708 2008 825,000 278,704 2009 860,000 246,737 2010-2014 3,690,000 765,260 2015-2019 2.395.000 180.674 Totals $ 10304 098 $ 2.490.779 Other long-term liabilities for claims and judgments, compensated absences, retirement system and the estimated liability for landfill closure and post closure costs are to be paid by the fund that gave rise to the liability. 5. RETIREMENT SYSTEM Plan Descriotion The Town of Southold participates in the New York State and Local Employees' Retirement System (ERS) and Local Police and Fire Retirement System (PFRS). This is a cost-sharing multiple- employer retirement system. The System provides retirement benefrts as well as death and disability benefits. Obligation of employers and employees 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 System. The Comptroller shall adopt and may amend rules and regulations for the administration and transaction of the business of the System and for the custody and control of their funds. A publicly available annual report containing financial statements and required supplemental information for the Employees' Retirement System may be obtained by writing to the New York State Retirement System, Govemor Smith State Building, Albany, NY 12244. Fundina Policv The System is noncontributory except for employees who joined the New York State and Local Employees' Retirement System after July 27, 1976 and who have less than ten years of membership and less than ten years of credited 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. -30- . . . . . . . . . . . TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2004 C. DETAILED NOTES ON ALL FUNDS AND ACCOUNT GROUPS (continued) 5. RETIREMENT SYSTEM (continued) Fundina Policv (continued) The Town is required to contribute at an actuarially determined rate. The actual contributions were equal to the actuarially required amounts and also include addnional contributions to fund various early retirement incentives made available to the Town employees. The credits and miscellaneous adjustments represent modification made by the ERS for prior year's contributions. The required contributions, for the Primary government, for the current year and two preceding years were: 2004 2003 2002 ERS $ 992,023 $ 443,861 $ 99,200 PFRS 679,079 240,756 65,087 $ $ $ The Town's contribution to the system was 100% of the contributions required each year. 6. POST EMPLOYMENT BENEFITS In addnion to providing pension benefrts, the Town provides health insurance coverage and survivor benefrts for retired employees and their survivors. Substantially all of the Town's employees may become eligible for these benefits if they reach normal retirement age while working for the Town. Health care benefits are provided through either a self-funded plan whose premiums are based on the benefits paid during the year or are provided in accordance wnh New York State Health Insurance Rules and Regulations (administered by the New York State Department of Civil Service) through the New York State Empire Plan (the "Empire Plan") whose premiums are based on the benefits paid throughout the State during the year. The Town recognizes the cost of providing benefits by recording its share of insurance premiums or the actual benefits paid as expenditure in the year paid. The Town's union contracts and ordinances require that it provide its eligible enrollees with benefit coverage under either the self-funded plan or the Empire Plan. Under the provisions of the Empire Plan, premiums are adjusted on a prospective basis for any losses experienced by the Empire Plan. The Town has the option to terminate its participation in the Empire Plan at any time without liability for its respective share of any previously incurred loss. Durin9 the 2004 year, $3,014,128 was paid on behalf of 88 retirees and 207 active employees and is recorded as an expenditure in the General Fund. 7. COMPENSATED ABSENCES Town employees are granted vacation and sick leave and earn compensatory absences in varying amounts. In the event of termination or upon retirement, an employee is entitled to payment for accumulated vacation and sick leave and unused compensatory absences at various rates subject to certain maximum limitations. Estimated vacation, sick leave and compensatory absences accumulated by govemmental fund type employees have been recorded in the statements of net assets. Payment of vacation time and sick leave is dependent upon many factors; therefore, timing of future payments is not readily determinable. However, management believes that suffICient resources will be made available for the payments of vacation, sick leave and compensatory absences when such payments become due. As of December 31,2004, the value of the accumulated vacation time and sick leave was $5,662,358 for the primary government. -31- . . . . . . . . . . . TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2004 D. COMMITMENTS AND CONTINGENCIES Risk Management The Town is self-insured for both medical insurance and general liability insurance. The amount of medical claims outstanding at December 31, 2004 is $160,082. This amount has been reserved against fund balance in the General Fund. In common with other municipalities, the Town receives numerous notices of claims. Prior to 2004, coverage for bodily injury and property damage was previously written on a primary non-self insured retention ("SIR") basis. Insurance market conditions and availability precluded the Town from obtaining coverage in 2004 without an SIR. As a result, in 2004 the Town self-insured for bodily injury and property damage up to a maximum of $50,000 per claim. The $50,000 limitation was the minimum retention amount available to the Town. Claims in excess of $50,000 are covered by excess liability policies providing coverage for $10,000,000 per occurrence and in the aggregate. Although the eventual outcome of these 2004 claims cannot presently be determined, the Town's third party administrator has estimated unsettled claims at December 31, 2004 to be $94 thousand. These amounts have been reserved against fund balance in the General Fund. The Town is of the opinion that the ultimate settlement of the outstanding claims will not result in a material adverse effect on the Town's financial position. Since 2004, there have been no significant reductions in insurance coverage as compared to the prior year; in addition there were no settlements on excess of insurance coverage over the last three years. The Town is also self-insured for unemployment benefits paid. Landfill Closure and Post-Closure Care Costs State and federal laws and regulations require the Town to place a final cover on its landfill sites and to perform certain maintenance and monitoring functions at the sites for thirty years after closure. The Town ceased accepting waste at its Cutchogue landfill as of October 8, 1993. The Town entered into a stipulation of settlement with the New York State Department of Environmental Conservation in October of 1994 in which all charges of operational violations at the Cutchogue landfill were dropped. Under the stipulation, the Town agreed to close and place a final cover over the landfill and to pay a civil penalty of $650,000 over seven years. Construction of the final cover commenced in the summer of 2001 and was completed in the fall of 2003. In addition to 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. Accordingly, as of December 31,2004 the Town has recorded a liability of $631,267 which represents the provision to be made in future budgets for post-closure landfill costs. Actual costs may vary due to inflation or deflation, changes in technology, or changes in regulations or applicable laws. Actual costs associated with the placement of the final cover totaled $7,681,719. Financing for closure activities was provided through a $2,000,000 grant from the New York State Department of Environmental Conservation with the balance provided with a state subsidized loan through the New York State Environmental Facilities Corporation. Costs associated with post closure care will be covered by charges to future landfill users and future tax revenue. Lease Commitments and Leased Assets The Town leases property and equipment under operating leases. Total rental expenditures on such leases for the fiscal year ended December 31,2004 were approximately $205,612. Future obligations over the primary terms of the Town's leases as of December 31, 2004 are as follows: 2005 2006 2007 2008 and thereafter Total $ 137,069 116,204 68,224 747.192 1 068 689 $ -32- . TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2004 E. CONDENSED FINANCIAL STATEMENTS FOR THE DISCRETELY PRESENTED COMPONENT UNITS . The following represents condensed financial statements for the discretely presented component units as of and for the year ended December 31, 2004: Condensed Statement of Net Assets: Current Assets Due from Primary Government Capital Assets Net 01 Depreciation Current Uabilities Other Long-Term liabilities Net Assets . . Fishers Island Ferry District Fishers Island Refuse and Garbage Cutchogue-New Suffolk Park Distrie! Southold Park District Orient~East Marion Park District Mallituck Park District Orient Mosquho District $ 1,198,717 476,643 119,493 18,861 9,201 297,347 16,556 $ 2,136,818 $ 165,224 $ 13,551,149 $ 5,440,996 $ 9,474,094 636,356 3,049,222 1,293,334 2,868,889 27,922 125,236 27,922 244,729 62,380 652,010 64,815 686,436 4,921 432,985 16,345 430,762 80,387 1,032,468 138,986 $ 200,000 1,071,216 14,783 10,830 14,783 27,386 991,975 $ 18,853,900 $ 6,997,181 $ 200,000 $ 14,785,512 . $ Condensed Statement of Activities: . Program General Revenue Net Assets Net I:xpense Property Expenses Revenue (Revenue) Tax Other Change 111104 12/31104 Fishers Island Ferry District $ (95,812) $ 1,861,389 $ (1.957,201) $ 390,000 $ 2.743,820 $ (5,091,021) $ 4,383,073 $ 9,474,094 Fishers Island Refuse and Garbage 450,739 26,452 424,287 455,350 1,084,005 (1,115,068) 1,753,821 2,868,889 CUlchogue-New Suffolk Park Distric 121,593 121,593 141,013 712 (20,132) 224,597 244,729 Southold Park District 291,804 291,804 295,000 38,102 (41,298) 627,138 668,436 Orient-East Marion Park District 23,854 23,854 21,700 58 2,096 432,858 430,762 Mallituck Park District 411,788 411.788 386,230 34,897 (9,339) 1,061,877 1,071,216 Orient Mosquno District 60,001 60,001 70,000 205 (10,204) 17,182 27,386 $ 1,263,967 $ 1,887,841 $ (623,874) $ 1.759.293 $ 3,901.799 $ (6,284,966) $ 8,500,546 $14,785,512 F. SUBSEQUENT EVENTS . . . On February 15, 2005, the Town issued Refunding Serial Bonds in the amount of $2,380,000. These bonds refunded $1,100,000 of the outstanding principal of the Town's $2,695,000 Various Purposes Serial Bonds-1993 (interest rate of 5%) and $1,110,000 of the outstanding principal of the Town's $1,750,000 Agricultural Land Preservation Serial Bonds-1995 (interest rate from 5% to 5.5%). The present value of the total debt service savings to the Town resulting from the issuance of the Refunding Bonds was $66.5 thousand. The interest rates on the Refunding Bonds are 2.5% for bonds maturing in 2005 to 2007,2.75% for bonds maturing in 2008, 3% for bonds maturing in 2009 to 2010, 3.25% for bonds maturing in 2011, 3.5% for bonds maturing in 2012 to 2013, 3.625% for bonds maturing in 2014, and 3.75% for bonds maturing in 2015. The final maturity date is 2015. On March 1, 2005, the Town issued Serial Bonds for the Fishers Island Ferry District New London Terminal project in the amount of $3,000,000. The interest rate on the bonds is 3.75% for bonds maturing in 2005 to 2018, 3.8% for bonds maturing in 2019 to 2020 and 4% for bonds maturing in 2021. The final maturity date is 2021. In June 2005, the Town reached a settlement with the Civil Service Employees Association, Local 1000, AFSCME, AFL-CIO, Town of Southold Unit, Suffolk County Local 852, for a successor agreement to the collective bargaining agreement which ended on December 31,2002. . . -33- . . . . . REQUIRED SUPPLEMENTARY INFORMATION OTHER THAN MANAGEMENT DISCUSSION AND ANALYSIS . . . . . . . TOWN OF SOUTHOLD GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL . Year ended December 31, 2004 Variance with Original Final Final Budget . Budget Budget Actual Positivel(Negative) REVENUES Real Property Taxes $13,962,268 $ 13,962,268 $ 13,962,268 Other Real Property Tax Items 48,500 48,500 65,720 $ 17,220 Non-Property Tax Items 401,035 401,035 415,071 14,036 Departmental Income 364,800 439,942 344,217 (95,725) . Intergovernmental Charges 330,610 226,689 296,050 69,361 Use of Money and Property 214,301 214,301 254,142 39,841 Licenses and Permits 221,130 221,130 214.461 (6,669) Fines and Forfeitures 102,000 102,000 107,315 5,315 Sale of Property and Compensation for Loss 250,300 256,770 405,077 148,307 Miscellaneous Local Sources 82,891 110,141 128,027 17,886 State Aid 1,543,034 1,602,649 2,974,027 1,371,378 . Federal Aid 161,769 160,337 (1,432) Total Revenues 17,520,869 17,747,194 19,326,712 1,579,518 EXPENDITURES General Government Support 4,885,830 5,280,164 4,395,571 884,593 . Public Safety 6,362,055 6,429,081 6,254,365 174,716 Public Health 33,300 33,300 33,288 12 Transportation 405,900 419,883 401,866 18,017 Economic Assistance and Opportunity 930,875 941,330 931,566 9,764 Culture and Recreation 373,530 373,530 341,764 31,766 Home and Community Services 257,781 329.464 304,071 25,393 . Employee Benefits 5,748,625 5.433,668 4,868,116 565,552 Debt Service - Principal and Interest 1,540.400 2,114,401 2,104,202 10,199 Total Expenditures 20,538,296 21,354,821 19,634,809 1,720,012 Deficiency of Revenues Over Expenditures (3,017,427) (3,607,627) (308,097) 3,299,530 . Other Financing Sources (Uses) Transfers In 2.402,109 3,123,109 2,932,574 (190,535) Transfers Out (1,392,682) (1,523.482) (1,304,195) 219,287 Total Other Financing Sources (Uses) 1,009.427 1,599,627 1,628,379 28,752 . Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses $ (2,008,000) $ (2,008,000) 1,320,282 $ 3,328,282 Fund Balance at Beginning of Year 5,319.412 Fund Balance at End of Year $ 6,639,694 . See notes to the financial statements. . -34- . TOWN OF SOUTHOLD HIGHWAY FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL . Year ended December 31, 2004 Variance with Original Final Final Budget . REVENUES Budget Budget Actual Positive/(Negative} Real Property Taxes $ 3,520,332 $ 3,520,332 $ 3,520,332 Other Real Property Tax Items 5,600 5,600 3,544 $ (2,056) Non-Property Tax Items 135 135 Use of Money and Property 20,500 20,500 23,864 3,364 . Licenses and Permits 21,000 21,000 4,937 (16,063) Sale of Property and Compensation for Loss 500 500 2,960 2,460 Miscellaneous Local Sources 5,000 16 16 State Aid 223,700 233,700 228,337 (5,363) Total Revenues 3,796,632 3,801,632 3,764,145 (17,487) . EXPENDITURES Transportation 2,883,400 2,893,400 2,638,121 255,279 Employee Benefits 542,500 543,200 415,102 128,098 Debt Service - Principal and Interest 148,170 148,170 22,219 125,951 Total Expenditures 3,574,070 3,564,770 3,075,442 509,328 . Excess (Deficiency) of Revenues Over Expenditures 222,562 216,862 708,703 491,641 Other Financing Uses . Transfers Out (568,562) (568,562) (690,390) (121,828) Total Other Financing Uses (568,562) (568,562) (690,390) (121,828) Excess (Deficiency) of Revenues Over . Expenditures and Other Uses $ (346,OOO) $ (351,700) 18,313 $ 370,013 Fund Balance at Beginning of Year 902,083 Fund Balance at End of Year $ 920,396 . . See notes to the financial statements. . -35- . . TOWN OF SOUTHOLD COMBINING BALANCE SHEET NON-MAJOR GOVERNMENTAL FUNDS December 31, 2004 East-West Fire Southold Fishers Solid Waste General Fund Special Protection Wastewater Island Sewer Management . Part Town Grant District District District District Totals ASSETS Cash and investments $ 669,200 $ 25,900 $ 32,670 $ 42,253 $ 289,864 $ 1,059,887 Accounts receivable, net of allowance 50,488 $ 5,000 1,812 84,252 141,552 . Due from other funds 158,881 81,799 27,859 448 427,943 696,930 Due from other governments 57,949 57,949 Prepaid expenditures 31,108 59,053 90,161 Total Assets $ 909,677 $ 62,949 $ 107,699 $ 60,529 $ 44,513 $ 861,112 $ 2,046,479 . LIABILITIES AND FUND EQUITY LIABILITIES Accounts payable $ 98,264 $ 62,330 $ 12,544 $ 24,642 $ 2,598 $ 206,427 $ 406,805 . Due to other funds 2,543 19,430 21,973 Deferred revenue 106,694 81,798 27,219 255,547 471,258 Total Liabilities 204,958 62,330 94,342 54,404 2,598 481,404 900,036 . FUND EQUITY Fund balance - reserved: Prepaid expenses 31,108 31,108 Fund balance - unreserved: . Designated - ensuing year's budget 220,517 619 5,300 226,436 Undesignated 453,094 8,057 6,125 41,915 379,708 888,899 Total Fund Equity 704,719 619 13,357 6,125 41,915 379,708 1,146,443 . Total Liabilities and Fund Equity $ 909,677 $ 62,949 $ 107,699 $ 60,529 $ 44,513 $ 861,112 $ 2,046,479 . . -36- . TOWN OF SOUTH OLD COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - NON-MAJOR GOVERNMENTAL FUNDS Year ended December 31, 2004 . East-West Fire Southold Fishers Solid Waste General Fund Special Protection Wastewater Island Sewer Management . Part Town Grant District District District District Totals REVENUES Real property taxes $ 442,976 $ 373,523 $ 132,702 $ 2,260 $ 1 ,555,484 $ 2,506,945 Other real property tax items 2,845 47 17 196 3,105 Non property tax items 336,139 336,139 . Departmental income 708,741 62,642 17,453 1,728,748 2,517,584 Intergovernmental charges 1,013 1,013 Use of money and property 8,636 817 2,941 486 8,485 21,365 Licenses and permits 7,000 192,849 199,849 Sale of property and compensation for loss 8,297 3,976 63,796 76,069 . Miscellaneous local sources 25 $ 5,000 5,025 State aid 72,651 72,651 Federal aid 166,368 166,368 Total Revenues 1,587,310 171,368 374,387 202,278 20,199 3,550,571 5,906,113 . EXPENDITURES General government support 92,514 92,514 Public safety 370,636 368,562 739,198 Public health 6,664 6,664 Home and community services 506,313 170,749 190,157 14,350 2,344,017 3,225,586 . Employee benefits 167,365 11,809 191,864 371,038 Debt service - principal and interest 5,700 2,850 80,253 88,803 Total Expenditures 1,149,192 170,749 368,562 204,816 14,350 2,616,134 4,523,803 Excess (Deficiency) of Revenues . Over Expenditures 438,118 619 5,825 (2,538) 5,849 934,437 1,382,310 Other Financing Uses: Operating transfers out (288,755) (13,602) (779,084 ) (1,081,441 ) Total Other Financing Uses (288,755) (13,602) (779,084) (1,081,441 ) - - Excess (Deficiency) of Revenues Over Expenditures and Other Uses 149,363 619 5,825 (16,140) 5,849 155,353 300,869 Fund Balance at Beginning of Year 555,356 7,532 22,265 36,066 224,355 845,574 Fund Balances at End of Year $ 704,719 $ 619 $ 13,357 $ 6,125 $41,915 $ 379,708 $ 1,146,443 -37- . . . . . DISCRETELY PRESENTED COMPONENT UNITS . . . . . . . TOWN OF SOUTHOLD DISCRETELY PRESENTED COMPONENT UNITS COMBINING STATEMENT OF NET ASSETS December 31, 2004 . Fishers Island Cutchogue- Southold Orient-East Mattituck Orient Fishers Refuse and New Suffolk Park Marion Park Park Mosquito . Island Ferry Garbage District Park District District District District District District (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Totals ASSETS Current Assets: Cash and investments $ 1,115,625 $ 464,935 $ 119,493 $ 18,861 $ 9,201 $ 296,366 $ 16,556 $ 2,041,037 . Accounts receivable, net of allowance 4,130 9 4,139 Due from primary govemment 165,224 636,358 27,922 62,380 4,921 80,387 14,783 991,975 State and federal receivables 49,674 49,674 Prepaid charges 33,418 7,578 972 41,968 Total Current Assets 1,363,941 1,113,001 147,415 81,241 14,122 377,734 31,339 3,128,793 . Non-Current Assets: Non-depreciable capital assets 8,708,425 2,442,737 101,198 588,847 432,985 531,746 12,805,938 Depreciable capital assets, net of depreciation 4,842,724 606,485 24,038 63,163 500,722 10,830 6,047,962 Total Assets 14,915,090 4,162,223 272,651 733,251 447,107 1,410,202 42,169 21,982,693 . LIABILITIES Current Liabilities: Accounts payable and accrued liabilities 581,052 4,634 9,424 16,536 611,646 Accrued interest payable 23,162 10 1,884 25,056 . Due to other govemments 2,425 179 2,604 Other Liabilities 2,000 2,000 Deferred Revenue 79,213 118,700 27,922 62,380 4,921 80,387 14,783 388,306 Bond anticipation notes payable 4,725,000 1,170,000 5,895,000 Non-current liabilities due within one year . General obligation bonds payable 32,569 40,000 72,569 Total Current Liabilities 5,440,996 1,293,334 27,922 64,815 16,345 138,986 14,783 6,997,181 Noncurrent Liabilities: General obligation bonds payable 200,000 200,000 . Total Liabilities 5,440,996 1,293,334 27,922 64,815 16,345 338,986 14,783 7,197,181 NET ASSETS Investment in capital assets, net of related debt 8,790,918 1,879,222 1,115,753 11,785,893 Unrestricted 683,176 989,667 244,729 668,436 430,762 (44,537) 27,386 2,999,619 . Total Net Assets $ 9,474,094 $ 2,868,889 $ 244,729 $ 668,436 $ 430,762 $ 1,071,216 $ 27,386 $ 14,785,512 . -38- . TOWN OF SOUTH OLD DISCRETELY PRESENTED COMPONENT UNITS COMBINING STATEMENT OF ACTIVITIES Year ended December 31,2004 .. . Fishers Island Cutchogue- Southold Orient-East Mattituck Orient Fishers Refuse and New Suffolk Park Marion Park Park Mosquito Island Ferry Garbage District Park District District District District District District (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Totals REVENUES . Program revenues $ 1,861,389 $ 26,452 $ 1,887,841 Real property taxes 390,000 455,350 $ 141,013 $ 295,000 $ 21,700 $ 386,230 $ 70,000 1,759,293 Other real property tax items 49 57 49 155 Interest and eamings 12,556 10,688 712 38,102 58 6,143 205 68,464 State Aid 1,073,260 1,073,260 . Federal Aid 2,731,215 2,731,215 Other 28,705 28,705 Total Revenues 4,995,209 1,565,807 141,725 333,102 21,758 421,127 70,205 7,548,933 EXPENSES . General govemment support 93,240 93,240 Public Safety Public health 60,001 60,001 Transportation (299,680) (299,680) Culture and recreation 121,593 291,706 23,854 394,904 832,057 Home and community services 35,921 450,739 486,660 . Interest 74,707 98 16,884 91,689 Total Expenses (95,812) 450,739 121,593 291,804 23,854 411,788 60,001 1,263,967 . Changes in Net Assets 5,091,021 1,115,068 20,132 41,298 (2,096) 9,339 10,204 6,284,966 Net Assets at Beginning of Year 4,383,073 1,753,821 224,597 627,138 432,858 1,061,877 17,182 8,500,546 . Net Assets at End of Year $ 9,474,094 $ 2,868,889 $ 244,729 $ 668,436 $ 430,762 $ 1,071,216 $ 27,386 $14,785,512 . . -39- . CERTIFIED PUBLIC ACCOUNTANTS, BUSINESS ADVISORS AND CONSULTANTS 25 Suffolk Court, Hauppauge. New York 11788 631.434.9500 . Fax 631.434.9518 WWlv.avz.com RECElVm June 8, 2005 NOV 1 5 2'J5 Sou~hc'~J T0\.'''-1 (~".\( To the Honorable Supervisor and Town Board Town of Southold Southold, New York We have audited the financial statements of the Town of Southold (the "Town") as of December 31, 2004 and for the year then ended, and have issued our report thereon dated June 8, 2005. Professional standards require that we provide you with the following information related to our audit. Our Responsibilitv under Generallv Accepted Auditinq Standards Our responsibility, as described by professional standards, is to plan and perform our audit to obtain reasonable, but not absolute, assurance that the financial statements are free of material misstatement and are fairly presented in accordance with accounting principles generally accepted in the United States of America. Because an audit is designed to provide reasonable, but not absolute assurance and because we did not perform a detailed examination of all transactions, there is a risk that material errors, fraud, or illegal acts may exist and not be detected by us. As part of our audit, we considered the internal control of the Town. Such considerations were solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control. Siqnificant Accountinq Policies Management has the responsibility for selection and use of appropriate accounting policies. In accordance with the terms of our engagement letter, we will advise management about the appropriateness of accounting policies and their application. The significant accounting policies used by the Town are described in Note A to the financial statements. For the year ended December 31, 2004, the Town has adopted the Governmental Accounting Standards Board (GASB) Statement No. 34, Basic Financial Statements- and Management's Discussion and Analysis-for State and Local Governments. The implementation of GASB Statement No. 34 is required for all governmental entities preparing financial statements in accordance with generally accepted accounting principles. ALBRECHT, VIGGIANO. ZURECK & COMPANY, RC. INDEPENDENT MEMBER OF BKR INTERNATIONAL , To the Honorable Supervisor and Town Board June 8, 2005 Page 2 We noted no transactions entered into by the Town during the year that were both significant and unusual, and of which, under professional standards, we are required to inform you, or transactions for which there is a lack of authoritative guidance or consensus. Accountino Estimates Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the financial statements were compensated absences and judgment and claims. We evaluated the key factors and assumptions used to develop these estimates in determining that it is reasonable in relation to the financial statements taken as a whole. Audit Adiustments For purposes of this letter, professional standards define an audit adjustment as a proposed correction of the financial statements that, in our judgment, may not have been detected except through our auditing procedures. An adjustment mayor may not indicate matters that could have a significant effect on the Town's financial reporting process (that is, cause future financial statements to be materially misstated). We did not propose any audit adjustments Disaoreements with Manaoement For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting, or auditing matter that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the governmental unit's financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. To the Honorable Supervisor and Town Board June 8, 2005 Page 3 Consultations with Other Independent Accountants Issues Discussed Prior to Retention of Independent Auditors We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the Town's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. Difficulties Encountered in Performino the Audit We encountered no significant difficulties in dealing with management in performing our audit. This information is intended solely for the use of the Town Board and management of the Town of South old and is not intended to be and should not be used by anyone other than these specified parties. Very truly yours, 11~/ !I~/~~ 9' ~ I': c... (, ALBRECHT, VIGGIANO, ZURECK & COMPANY, P.C. T:\2OO4\1205 TOWN OF SOUTHOLD\OO1 TOWN OF SQUTHOLD\WORD\CORRESPONDENCE\04 SAS61 letteLDOC