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Home My WebLink About2005 . I FINANCIAL SECTION I Independent Auditors' Report................................................... .......... ....... ........ . REQUIRED SUPPLEMENTARY INFORMATION . Management's Discussion and Analysis BASIC FINANCIAL STATEMENTS . Government-Wide Financial Statements Statement of Net Assets.................................................. Statement of Activities .................................................. . Fund Financial Statements Governmental Fund Financial Statements Balance Sheet and Reconciliation of the Governmental Funds Balance Sheet to The Statement of Net Assets.. ................................... ... ........ 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.. ............ .............. ..... ............ Fiduciary Fund Financial Statements Statement of Fiduciary Net Assets.... . .......... ..... ..... ................... . Notes to Financial Statements ............................................................ 1-2 3-11 12 13 14-15 16-17 18 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 .............. ........................... Highway Fund ........................................... .......... ............. ........... . OTHER SUPPLEMENTARY INFORMATION . COMBINING FUND STATEMENTS: Non-major Governmental Funds Combining Balance Sheet... ............... ........................... .............. ........ Combining Statement of Revenues. Expenditures. and Changes in Fund Balances.. DISCRETELY PRESENTED COMPONENT UNITS . Discretely Presented Component Units: Combining Statement of Net Assets .................................................... 34 35 36 37 38 Combining Statement of Activities..................... .......................................................................... ..... ...... 39 . . OTHER REPORTS Schedule of Expenditures of Federal Awards......................................................................................... 40 . Notes to Schedule of Expenditures of Federal Awards .......................................................................... 41 . Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards... .............................................................................. ........................... ....... ......... 42 Report on Compliance with Requirements Applicable To Each Major Program and Internal Control Over Compliance in Accordance with OMB Circular A-133 ...................................................................... 43-44 . Schedule of Findings and Questioned Costs.................................................................................... 45-46 . . " . . . . . . . . . . . . . . . CERTIFIED PUBLIC ACCOUNTANTS, BUSINESS ADVISORS AND CONSULTANTS 25 Suffolk Court, Hauppauge, New York 11788 631.434.9500 . Fax 631.434.9518 www.avz.com INDEPENDENT AUDITORS' REPORT Honorable Supervisor and Town Board Town of Southold Southold, New York We have audited the accompanying financial statements of the governmental activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the Town of Southold, New York, as of December 31, 2005, 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 34% of the net assets of the discretely presented component units. The financial statements of the Fishers Island Ferry District were audited by other auditors whose report thereon have been furnished to us and in our opinion, insofar as it relates to the amounts included for that one component unit, is based solely on the reports of the other auditors. In our opinion, except for the effects of such adjustments if any as might have been determined to be necessary had the unaudited component units financial statements been audited and 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, 2005, 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 - ALBRECHT, VlOOINlO. ZURECK & COMPANY, P.C. IN~MDl."'OP'IIKR~ . . 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. . In accordance with Government Auditing Standards, we have also issued a report dated June 8, 2006 on our consideration of the Town of Southold, New York internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. . Our audit was performed for the purpose of forming an opinion on the general-purpose financial statements, taken as a whole. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is not a required part of the general purpose financial statements of the Town of Southold, New York. Such information has been subjected to the auditing procedures applied in the audit of the general purpose financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the general purpose financial statements taken as a whole. . ().1N-Ax; '(,.;,:.-. ? ( L~ c.,"7' f? c. Hauppauge, New York June 8, 2006 . . . . . . -2- . . . . . REQUIRED SUPPLEMENTARY INFORMATION Management's Discussion and Analysis . . . . . . . TOWN OF SOUTHOLD MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2005 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 31,2005. Use this section in conjunction with 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 agent for the benefit of those outside of the government. ReportinQ 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 Activities is significantly different than a typical Statement of Revenues, Expenses, and Changes in Fund Balance. You will notice that expenses are listed in the first column with revenues from that particular program reported to the right. The result is a net (expense )/revenue. The reason for this kind of format is to highlight the relative financial burden of each of the functions on the Town's taxpayers. It also identifies how much each function draws from the general revenues or if it is self-financing through fees and grants. All of the current year's revenues and expenses are taken into account regardless of when cash is received or paid. These two statements report the Town's net assets and their respective changes. You can think of the Town's net assets-the difference between assets and liabilities-as one way to measure the Town's financial health, or financial position. Over time, increases or decreases in the Town's net assets are one indicator of whether its financial health is improving or deteriorating. You will need to consider other non-financial factors, however, such as changes in the Town's property tax base and the condition of the Town's buildings, roads, drainage and other assets to assess the overall health of the Town. In the Statement of Net Assets and the Statement of Activities, we divide the Town into two kinds of activities: . Governmental activities - The Town's basic services are reported here, including: general government support; public safety; public health; transportation; economic assistance and opportunity; 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, 2005 Reportinq the Town's Most Siqnificant 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 governmental 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 . ReportinG 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. . FINANCIAL ANALYSIS OF THE TOWN AS A WHOLE Our analysis below focuses on the net assets and changes in net assets of the Town's governmental activities. . Condensed Statement of Net Assets Govemmental Activities as of December 31, 2005 and 2004 . Assets Current and other assets Capital assets Total assets Liabilities Other liabilities Long-term liabilities T otalliabilities Net assets Invested in capital assets, net of related debt Unrestricted Total net assets . . . 2005 2004 $ 26,265,665 $ 25,448,645 90,294,079 81,374,480 116,559,744 106,823,125 16,289,370 14,665,546 14,916,051 15,732,844 31,205,421 30,398,390 $ 81,044,981 4,309,342 85,354,323 71,352,951 5,071,784 76,424,735 $ -4- . TOWN OF SOUTHOLD MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2005 . FINANCIAL ANALYSIS OF THE TOWN AS A WHOLE (continued) Total assets in the Towns as of December 31, 2005 were $116.5 million, an increase of $9.7 million. Total liabilities as of December 31,2005 were $31 million, an increase of approximately $1 million. This results in a net asset balance of $85.3 million, an increase of $8.9 million. Of the Town's net asset balance $81 million were invested in capital assets, net of related debt; while $4.3 million was unrestricted. . Changes in Net Assets Governmental Activities for the years ended December 31, 2005 and 2004 . . Program Revenues Charges for services Operating grants and contributions Capital grants and contributions Total Program Revenues General Revenues Real property taxes Other real property tax items Non-property tax items Interest earnings State aid - unrestricted Other . . Total General Revenues Total Revenues . Program Expenses General government support Public safety Public health Transportation Economic assistance and opportunity Culture and recreation Home and community services Interest on debt . Total Expenses I ncrease in Net Assets $ . . -5- 2005 $ 10,723,686 859,484 3,502,247 15,085,417 20,795,041 80,369 628,857 766,413 2,527,110 709,352 25,507,142 40,592,559 6,621,408 11,342,991 43,559 6,627,876 1,208,467 356,167 4,961,051 501,452 31,662,971 8,929,588 2004 $ 9,556,554 790,169 915,998 11,262,721 19,989,545 72,504 751,210 264,223 2,867,169 228,738 24,173,389 35,436,110 7,274,110 9,899,209 42,551 6,297,105 1,225,690 447,119 2,052,178 460,838 27,698,800 $ 7,737,310 . TOWN OF SOUTHOLD MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2005 FINANCIAL ANALYSIS OF THE TOWN AS A WHOLE (continued) . Net Cost of Services Governmental Activities for the year ended December 31, 2005 . 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 6,621,408 11,342,991 43,559 6,627,876 1,208,467 356,167 4,961,051 501,452 31,662,971 $ Net Cost of Services 6,265,526 10,588,154 33,574 6,426,952 833,388 168,136 (8,239,628) 501,452 16,577,554 $ $ The cost of all governmental activities this year was $31.6 million. The net cost of these services, however, after subsidized by program revenues including charges for services and program grants, was $16.5 million. The Town's change in net assets after general revenues of $25.5 million was an increase of $8.9 million. . Net Cost of Services Governmental Activities for the year ended December 31,2005 . . General government support Public safety Public health Transportation Economic assistance and opportunity Culture and recreation Home and community services Interest on debt . . . -6- $ Total Cost of Services 6,621,408 11,342,991 43,559 6,627,876 1,208,467 356,167 4,961,051 501,452 31,662,971 $ $ Program Revenues 355,882 754,837 9,985 200,924 375,079 188,031 13,200,679 $ 15,085,417 . TOWN OF SOUTH OLD MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2005 . FINANCIAL ANALYSIS OF THE TOWN AS A WHOLE (continued) $14,000,000 Expenses and Program Revenues Governmental Activities $12,000,000 . $10,000,000 $8,000,000 . $6,000,000 $4,000,000 $2,000,000 . $- General government support . Expenses . Program Revenues Real property taxes 52% Public safety Public health Transportatfon Economic assistance and opportunity Interest on debt Culture and recreation Home and corrm,mily services . . Operating grants and contributions 2% Capital grants and contributions 9% . Othe, general revenues 5% . . State ald- . Revenue by Source Governmental Activities For the year ended December 31,2005 Real property taxes State aid - unrestricted Charges for services Other general revenues Operating grants and contributions Capital grants and contributions -7- $ 20,795,041 2,527,110 10,723,686 2,184,991 859,484 3,502,247 $ 40,592,559 . TOWN OF SOUTHOLD MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2005 FINANCIAL ANALYSIS OF THE TOWN AS A WHOLE (continued) . THE TOWN'S FUNDS The general fund balance has decreased by approximately $600,000 due primarily to actual expenditures in excess of revenues. Although there was a decrease in fund balance, this decrease was less than amounts budgeted. . 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, 2005, and the amount of change and percentage of total in relation to the prior year. Increase % . 2005 2004 (Decrease) Change RI::VI::NUES Real property taxes $ 20,795,041 $ 19,989,545 $ 805,496 3.9% Other real property tax items 80,369 72,504 7,865 9.8% Non-property tax items 628,857 751,210 (122,353) -19.5% . Departmental income 2,850,836 2,861,801 (10,965) -0.4% Intergovernmental charges 7,453,845 6,342,748 1 ,111 ,097 14.9% Use of money and property 906,664 407,338 499,326 55.1% Licenses and permits 426,269 419,247 7,022 1.6% Fines and forfeitures 140,192 107,315 32,877 23.5% Sale of property and compensation for loss 205,223 484,106 (278,883 ) -135.9% . Miscellaneous local sources 1,292,371 294,522 997,849 77.2% State aid 3,946,391 3,825,015 121,376 3.1% Federal aid 1,909,023 326,705 1,582,318 82.9% Total Governmental Fund Revenues $ 40,635,081 $ 35,882,056 $ 4,753,025 11.7% EXPENDITURES . General government support $ 4,741,463 $ 4,488,085 $ 253,378 5.3% Public safety 7,984,619 6,993,563 991,056 12.4% Public health 40,152 39,952 200 0.5% Transportation 3,360,645 3,039,987 320,658 9.5% Economic assistance and opportunity 901,139 931,566 (30,427) -3.4% Culture and recreation 3,457,407 3,567,350 (109,943) -3.2% . Home and community services 315,273 304,071 11,202 3.6% Employee benefits 6,803,164 5,654,256 1,148,908 16.9% Capital 12,788,366 8,756,057 4,032,309 31.5% Debt service principal and interest 2,439,675 2,215,224 224,451 9.2% Total Governmental Fund Expenditures $ 42,831,903 $ 35,990,111 $ 6,841,792 16.0% . 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 MANAGEMENTS DISCUSSION AND ANALYSIS December 31, 2005 CAPITAL ASSET AND DEBT ADMINISTRATION . Capital Assets As of December 31, 2005 the Town had $90.3 million in net capital assets including land, buildings, improvements, machinery and equipment, and infrastructure. The Town's component units had $8 million in net capital assets including land, buildings, improvements, machinery and equipment, and sewer mains. . . Capital Assets at December 31, Primarv Qovernment 2005 2004 Land $ 47,772,278 $ 37,795,087 Construction in progress 1,608,081 398,912 Buildings 4,574,513 4,569,296 Improvements other than buildings 13,498,954 13,469,136 Machinery and equipment 9,522,815 8,686,593 Infrastructure 70,038,525 69,334,187 Total capital assets 147,015,166 134,253,211 Less accumulated depreciation 56,721,087 52,878,731 Primary government - Total net capital assets $ 90,294,079 $ 81,374,480 Component units Land $ 2,213,759 $ 2,213,759 Buildings 3,540,111 3,416,944 Improvements other than buildings 2,575,589 2,575,589 Machinery and equipment 3,200,728 3,170,695 Infrastructure 2,138,386 2,121,386 Total capital assets 13,668,573 13,498,373 Less accumulated depreciation 5,639,830 5,236,652 Component units - Total net capital assets $ 8,028,743 $ 8,261,721 . . . . . . . -9- . TOWN OF SOUTHOLD MANAGEMENTS DISCUSSION AND ANALYSIS December 31, 2005 CAPITAL ASSET AND DEBT ADMINISTRATION (continued) . Capital Assets (continued) . The capital program is a long range financing guide and not a definitive plan. Each appropriation must be authorized by Town Board resolution before being undertaken. Each may be financed by issuance of general obligation 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 2006 . General Fund Highway Fund Special Districts $ 345,900 2,500 20,000 368.400 Total Equipment $ Improvements . General Fund Special Districts $ 440,130 800,000 1.240.130 Total Improvements $ $ 1 608 530 Total Program . 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 credit rating from Moody's Investors Services was upgraded to A1 from A2 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 . 31,2005was2.16%. At December 31, 2005, the Town had approximately $9.2 million in long term general obligation bonds outstanding, of which $9 million was for general Town purposes. Also outstanding at year-end were bond anticipation notes in the amount of $8.8 million of which $6 million was for general Town purposes. . Additional information on the Town's debt activity can be found in Note C.4 to the financial statements. . -10- . TOWN OF SOUTHOLD MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2005 . ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES . . . . . . . . . Property Tax The Town has adopted a budget for the 2006 fiscal year which factors in inflation and other adjustments to revenues and expenditures as well as prior year positive and negative fund balances. The 2006 budget includes an overall increase in real property tax revenues from the prior year of approximately 3.9% 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 2005, financial assistance included state aid consisting of mortgage tax of $2.5 million, consolidated highway aid of $188 thousand, and community preservation aid of approximately $1 million. State aid per capita was $75.3 thousand and County local government assistance was $211.7 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 2006 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 2005. When establishing the 2005 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 the 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 SOUTH OLD GOVERNMENT-WIDE FINANCIAL STATEMENTS STATEMENT OF NET ASSETS December 31, 2005 Primary . Governmental Component Activities Units ASSETS Current Assets: Cash and investments $ 20,968,117 $ 1,250,827 . Accounts receivable, net of allowances 236,215 3,561 Due from fiduciary funds 68 Due from other governments 2,631,939 Due from primary government 949,145 State and federal aid receivables 1,127,523 48,767 Prepaid charges 1,130,599 45,140 . Inventory of material and supplies 1,204 Total Current Assets 26,095,665 2,297,440 Non-Current Assets: Deferred charges, net of accumulated amortization 170,000 Non-depreciable capital assets 49,380,359 15,284,596 . Depreciable capital assets, net of depreciation 40,913,720 5,918,714 Total Non-Current Assets 90,464,079 21,203,310 Total Assets 116,559,744 23,500,750 LIABILITIES Current Liabilities: . Accounts payable and accrued liabilities 1,344,864 442,802 Accrued interest payable 227,617 63,941 Bond anticipation notes payable 8,875,000 2,845,000 Due to other governments 393,570 2,271 Due to fiduciary funds 7,044 Unearned revenue 4,402,014 392,414 . Other liabilities Non-current liabilities due within one year General obligation bonds payable 755,000 195,000 Due to Employees Retirement System 45,189 Claims and judgments payable 220,000 Estimated liability for landfill closure . and postclosure care costs 19,072 Total Current Liabilities 16,289,370 3,941,428 Non-Current Liabilities: General obligation bonds payable 8,494,098 2,855,000 Due to Employees Retirement System 48,804 . Compensated absences 5,779,826 Estimated liability for landfill closure and postclosure care costs 593,323 Total Non-Current Liabilities 14,916,051 2,855,000 Total Liabilities 31,205,421 6,796,428 . NET ASSETS Investment in capital assets, net of related debt 81,044,981 14,093,268 Unrestricted 4,309,342 2,611,054 Total Net Assets $ 85,354,323 $ 16,704,322 . See notes to the financial statements -12- . TOWN OF SOUTHOLD GOVERNMENT-WIDE FINANCIAL STATEMENTS STATEMENT OF ACTIVITIES Year ended December 31, 2005 . 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 $ 6,621,408 $ 204,757 $ 151,125 $ 6,265,526 Public safety 11,342,991 539,891 214,946 10,588,154 Public health 43,559 9,985 33,574 Transportation 6,627,876 12,777 $ 188,147 6,426,952 Economic assistance and opportunity 1,208,467 174,830 200,249 833,388 . Culture and recreation 356,167 188,031 168,136 Home and community services 4,961,051 9,603,400 283,179 3,314,100 (8,239,628) Interest on debt 501,452 501,452 Total Primary Government $ 31,662,971 $ 10,723,686 $ 859,484 $ 3,502,247 $ 16,577,554 . COMPONENT UNITS General government support $ 80,610 $ 80,610 Public health 60,371 60,371 Transportation 2,532,192 $ 1,884,374 $ 1,983,139 (1,335,321 ) Culture and recreation 814,501 814,501 . Home and community services 495,832 47,644 448,188 Interest on debt 102,579 102,579 Total Component Units $ 4,086,085 $ 1,932,018 $ 1,983,139 $ 170,928 GENERAL REVENUES . Real property taxes $ 20,795,041 $ 1,960,880 Other real property tax items 80,369 566 Non-property tax items 628,857 18,449 Interest earnings 766,413 68,863 State aid 2,527,110 684 Other 709,352 40,296 . Total General Revenues 25,507,142 2,089,738 Change in Net Assets 8,929,588 1,918,810 Net Assets at Beginning of Year 76,424,735 14,785,512 . Net Assets at End of Year $ 85,354,323 $ 16,704,322 . See notes to the financial staternents. . -13- . TOWN OF SOUTH OLD BALANCE SHEET GOVERNMENTAL FUNDS December 31, 2005 . MAJOR FUNDS Non-Major Capital Governmental General Highway Projects Funds Totals ASSETS . Cash and investments $ 9,292,437 $ 1,022,924 $ 9,406,620 $ 1,246,136 $ 20,968,117 Accounts receivable, net of allowance 24,533 8,190 30,500 172,992 236,215 Due from other funds 176,390 828,984 251,100 733,039 1,989,513 Due from trust funds 68 68 State and federal aid receivable 81,849 43,424 1,002,250 1,127,523 Due from other governments 1,867,136 759,803 5,000 2,631,939 Supply inventory 1,204 1,204 . Prepaids 498,344 56,947 54,024 609,315 Total Assets $ 11,941,961 $ 1,960,469 $ 11,450,273 $ 2,211,191 $ 27,563,894 LIABILITIES AND FUND BALANCES LIABILITIES Accounts payable $ 627,049 $ 72,436 $ 337,613 $ 227,184 $ 1,264,282 Retained percentages 80,580 80,580 . Bond anticipation notes payable 8,875,000 8,875,000 Due to other funds 1,888,241 73,598 27,674 1,989,513 Due to trust funds 7,044 7,044 Due to other governments 393,570 393,570 Deferred revenue 3,018,595 831,185 552,234 4,402,014 Total Liabilities 5,934,499 903,621 9,366,791 807,092 17,012,003 FUND BALANCE . Fund Balances - reserved: Encumbrances 4,009 4,009 Supply inventory 1,204 1,204 Prepaids 498,344 26,686 525,030 Insurance claims 1,105,879 1,105,879 Fund Balance - unreserved: 16,000 16,000 Designated - ensuing yea~s budget 2,657,200 339,900 348,596 3,345,696 . Undesignated 1,740,826 700,948 2,083,482 1,028,817 5,554,073 Total Fund Equity 6,007,462 1,056,848 2,083,482 1,404,099 10,551,891 Total Liabilities and Fund Equity $ 11,941,961 $ 1,960,469 $ 11,450,273 $ 2,211,191 $ 27,563,894 . . . 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, 2005 . Total Fund Balances - Governmental Funds $ 10,551,891 . 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 $49,380,359 Capital assets - depreciable 97,634,807 Accumulated depreciation (56,721,087) 90,294,079 Other long-term assets are not available to pay for current-period . expenditures and, therefore, are deferred in the funds 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 (9,249,098) Due to Employees Retirement System (93,993) . Compensated absences (5,779,826) Claims and judgments payable (220,000) Estimated liability for landfill closure and postclosure care costs (612,395) (15,955,312) . Prepaid items included in the Statement of Net Assets 521,282 Deferred charges included in the Statement of Net Assets 170,000 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. (227,617) Net Assets of Governmental Activities $ 85,354,323 . See notes to the financial statements. . -15- . TOWN OF SOUTHOlD STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS For the year ended December 31, 2005 . MAJOR GOVERNMENTAL FUNDS Non-Major Capital Governmental . General Highway Projects Funds Totals REVENUES Real property taxes $ 14,608,674 $ 3,805,032 $2,381,335 $ 20,795,041 Other real property tax items 68,807 9,046 2,516 80,369 Non-property tax items 415,071 213,786 628,857 Departmental income 345,956 2,504,880 2,850,836 Intergovernmental charges 252,558 $ 7,200,274 1,013 7,453,845 Use of money and property 489,796 77,817 274,959 64,092 906,664 . licenses and permits 249,178 11,126 165,965 426,269 Fines and forfeitures 140,192 140,192 Sale of property and compensation for loss 93,290 2,796 109,137 205,223 Miscellaneous local sources 432,269 155,054 551,457 153,591 1,292,371 State aid 2,637,870 188,147 1,045,000 75,374 3,946,391 Federal aid 174,348 1,510,539 224,136 1,909,023 Total Revenues 19,908,009 4,249,018 10,582,229 5,895,825 40,635,081 . EXPENDITURES Current General government support 4,641,568 99,895 4,741,463 Public safety 7,177,145 807,474 7,984,619 Public heaith 33,288 6,864 40,152 Transportation 446,877 2,913,768 3,360,645 Economic assistance and opportunity 901,139 901,139 . Home and community services 354,768 3,102,639 3,457,407 Culture and recreation 315,273 315,273 Employee benefits 5,857,963 500,343 444,858 6,803,164 Capital outlay 12,788,366 12,788,366 Principal and interest 1,560,055 178,371 29,529 671,720 2,439,675 Bond issuance costs 70,075 70,075 Advanced refunding escrow 112,758 112,758 . Total Expenditures 21,288,076 3,592,482 13,000,728 5,133,450 43,014,736 Excess (Deficiency) of Revenues Over Expenditures (1,380,067) 656,536 (2,418,499) 762,375 (2,379,655) Other Financing Sources (Uses) Proceeds of refunding bonds 2,380,000 2,380,000 Payments to refunded bond escrow agents (2,210,000) (2,210,000) . Premium on special assessment debt 12,833 12,833 BANs redeemed from appropriations 1,065,095 1,065,095 Transfers in 2,642,859 276,969 2,919,828 Transfers out (1,895,023) (520,085) (504,720) (2,919,828) Total Other Financing Sources (Uses) 747,836 (520,085) 1,524,897 (504,720) 1,247,928 Excess (Deficiency) of Revenues and Other . Sources Over Expenditures and Other Uses (632,231) 136,451 (893,602) 257,655 (1,131,727) Fund Balance at Beginning of Year 6,639,693 920,397 2,977,084 1,146,444 11,683,618 Fund Balances at End of Year $ 6,007,462 $1,056,848 $ 2,083,482 $1,404,099 $ 10,551,891 . See notes to the financial statements. . -16- . TOWN OF SOUTHOLD RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES For the year ended December 31,2005 . Net Change in Fund Balance $ (1.131,727) . 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 $13.205.174 (4,082,748) (202,828) 8.919.598 . 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 Deferred charges (53.286) 170.000 . 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 (2.380.000) 3.162,431 41.841 (117,468) 378.630 . 18.872 (79,303) . Change in Net Assets of Governmental Activities $ 8.929.588 . See notes to the financial statements. . -17- . TOWN OF SOUTHOlD STATEMENT OF FIDUCIARY NET ASSETS December 31, 2005 . Fishers Island Town Ferry District Totals . ASSETS Cash and investments $ 14,898,809 $ 43,462 $14,942,271 Other receivables 17 40,638 40,655 Due from other funds 7,044 7,044 . Total Assets $ 14,905,870 $ 84,100 $14,989,970 LIABILITIES Due to other funds $ 68 $ 38,829 $ 38,897 Due to school districts 11,675,920 11,675,920 . Due to component units 517,902 517,902 Due to other governments 1,664,259 1 ,664,259 Other liabilities 8,881 8,881 Deposits held 1,038,840 45,271 1,084,111 . Total Liabilities $ 14,905,870 $ 84,100 $14,989,970 . . . . See notes to the financial statements. . -18- . . . . . . . . . . . TOWN OF SOUTH OLD NOTES TO FINANCIAL STATEMENTS December 31, 2005 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Town of Southold (the "Town"), which was established in 1640, is governed by Town Law and other general laws of the State of New York and various local laws. The Town Board is the legislative body responsible for overall operations. The Town Board consists of the Supervisor who is elected for a term of two years and five council members who are elected for terms of four years. The Town Board appoints the Town Attorney, Comptroller and the Commissioner of Public Works whose terms are fixed by Town 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 governmental units. The Governmental Accounting Standards Board (GAS B) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The more significant of the governmenfs 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 Southold 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 distlicts 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 ofTaxes. As a result of this fiscal dependency, the Town is financially accountable for these special districts. Accordingly, these special distlicts 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 government. 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 governmental 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-investments in capital assets, net of related debt; restricted net assets; and unrestricted net assets. -19- . . . . . . . . . . . TOWN OF SOUTH OLD NOTES TO FINANCIAL STATEMENTS December 31, 2005 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 t1he financial statements presented in t1he previous model. The new emphasis is on t1he major funds in the fund financial statements. Non-major funds are summarized into a single column. The accounts of the Town are organized on t1he 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 t1hat comprise its assets, liabilities, fund balances, revenues, and expenditures, which are segregated for t1he purpose of carrying on specific activities or attaining certain objectives in accordance witlh 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 t1hrough which most govemmental functions are financed. The acquisition, use and balances of expendable financial resources and t1he 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 t1he Town. This fund is used to account for all financial resources except those required to be accounted for in otlher funds. Hiahwav 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, 2005 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. Soecial Grant Fund - segregate and account for projects funded by Community . Development revenue. . Soecial 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 distJicts that have separately elected boards provide transportation, park, mosquito control, and sanitation services to residents and businesses within these districts, and follow government fund accounting principles. These districts, which are accounted for as discretely presented component units, are as follows: . . The Fishers Island Ferry District, established in 1947 Orient Mosquito District, established in 1916 Fishers Island Garbage and Refuse District, established in 1952 Cutchogue-New Suffolk Park District, established in 1953 Orient-East Marion Park District, established in 1969 Southold Park District, established in 1907 Mattituck Park District, established in 1941 . Complete financial statements of these component units can be obtained from their respective administrative offices: . Orient Mosquito District 145 Platt Road Orient, NY 11957 Cutch09ue-New Suffolk Park District P.O. Box311 Cutchogue, NY 11935 Southold Park District P.O. Box 959 Southold, NY 11971 Fishers Island Ferry District P.O. Box 1179 Southold, NY 11971 Fishers Island Garbage & Refuse District Fishers Island, NY 06390 Orient-East Marion Park District P.O. Box 12 Orient, NY 11957 Mattituck Park District P.O. Box 1413 Mattituck, NY 11952 . . - 21 - . . . . . . . . . . . A. TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2005 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, intergovemmental 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 governmental funds. Appropriations for all governmental 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. 4. ASSETS, LIABILITIES AND FUND EQUITY RECEIVABLES Receivables include amounts due from Federal, State, and other govemments 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 SOUTH OLD NOTES TO FINANCIAL STATEMENTS December 31,2005 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 governmental fund upon acquisition. DEFERRED REVENUE/UNEARNED INCOME Deferred revenues/unearned income are those where asset recognition criteria have been met, but which revenue recognition criteria have not been met. Such amounts include collections in advance, unearned income and amounts that have been deemed to be "measurable" but not "available" to finance current expenses pursuant to generally accepted accounting principles. PREPAIDS 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 benefit a future period. LONG-TERM OBLIGATIONS The liabilities for long-term obligations consisting of general obligation bonds, compensated absences, due to employee retirement system, judgments, claims and liability for landfill closure and post closure costs are recognized in the government-wide financial statements. In the fund statements, long-term obligations are not reported as liabilities. The debt proceeds are reported as other financing sources and payment of principal and interest reported as expenditures. 5. REVENUES AND EXPENDITURES REAL PROPERTY TAX ASSESSMENT AND COLLECTION PROCEDURES In Suffolk County, the assessment and lien of real property for taxation is done by the County Department of Assessment. Real property taxes become a lien on December 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, 2005 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 property taxes. School District property taxes are also levied on December 1, and are also payable in two installments. School property taxes are due in two installments, 50% on December 1 and 50% on May 10 payable without penalty to January 10 and May 31, respectively. The County is also responsible for uncollected 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 b) Interfund revenues, quasi-external 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. 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 it. 6. EQUITY CLASSIFICATIONS In the government-wide statements, equity is classified as net assets and displayed in three components: a) Invested in capital assets, net of related debt - consists of capital assets including restricted capital assets, net of accumulated depreciation 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 SOUTH OLD NOTES TO FINANCIAL STATEMENTS December 31, 2005 . 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 split between designated and undesignated. Portions of fund equity are segregated for future use and therefore not available for future appropriation or expenditure. Amounts reserved for encumbrances, inventory, insurance claims and debt service represent portions of fund equity, which are required to be segregated in accordance with state law or GMP. Designations of fund balances in govemmental funds indicate the utilization of these resources in the subsequent year's budget or tentative plans for future use. . 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 31,2005 . B. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY (continued) 2. FUND BALANCES DESIGNATION OF FUND BALANCE . Portions of the unreserved balances at December 31, 2005 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 $ 845,309 $ 370,932 $ 474,377 East West Fire Protection District 15,112 4,350 10,762 Southold Wastewater District 176,657 176,657 Fishers Island Sewer District 32,546 32,546 Solid Waste Management District 334,475 334,475 Total $ 1,404,099 $ 375,282 $ 1,028,817 . . 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 deposit with maturities of less than three months. . The Town's investments are governed by a formal investment policy. The Town's monies must be deposited in FDIC-insured commercial banks or trust ccmpanies located within the state. The Town is authorized to use demand acccunts and certificates of deposit. Permissible investments include obligations of the U.S. Treasury, U.S. Agencies and investments made by the Cooperative Liquid Asset Security System (CLASS). CLASS is a cooperative investment plan consisting of U.S. Treasury Obligations and repurchase agreements relating to treasury obligations. Investments are stated at cost, which approximates market value. CLASS was established as a ccoperative investment arrangement organized under the CLASS Municipal Cooperation Agreement made pursuant to New York General Municipal Law, Article 3A and 5-G. It is the Town's policy to require collateral held in the name of the Town for demand deposits, money market deposits and certificates of deposit for all deposits not covered by federal deposit insurance. Obligations that may be pledged as collateral are obligations of the United States and its agencies and obligations of the State and its municipalities and school districts. . . At December 31, 2005 the cash in banks was approximately $37,160,000 and collateral held against cash in banks was $60,410,000 consisting of FDIC insurance and/or securities held in the name of the Town of Southold. . -26 - . TOWN OF SOUTH OLD NOTES TO FINANCIAL STATEMENTS December 31, 2005 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, 2005 were as follows: . C. . . General Fund - Town wide Highway Fund Capital Projects Fund Part Town East-West Fire District Southold Wastewater District Fishers Island Sewer District Solid Waste Management District Amount Receivable $ 176,390 $ 828,984 251,100 152,519 92,199 4,752 325 483.244 Amount Pavable 1,888,241 73,598 6,974 $ 1989513 $ 1989513 20.700 . Interfund receivable and payable balances for the primary government at December 31, 2005 are expected to be paid currently. 3. CAPITAL ASSETS . Primary government Capital assets not being depreciated Land Construction in progress Total capital assets not being depreciated Depreciable capital assets Buildings Improvements other than buildings Machinery and equipment Infrastructure Total depreciable capital assets Less accumulated depreciation Buildings Improvements other than buildings Machinery and equipment Infrastructure Total accumulated depreciation Total net depreciable capital assets Total net capital assets . . . . . Balance 1/1/05 $ 37,795,087 398,912 38,193,999 4,569,296 13,469,136 8,686,593 69,334,187 96,059,212 1,933,832 3,020,775 5,567,555 42,356,569 $ 52,878,731 -27 - Additions $ 9,977,191 1,362,656 11,339,847 5,217 29,818 1,125,955 704,338 1,865,328 134,698 521,309 714,211 2,712,530 $ 4,082,748 Deletions $ -0- $ 153,487 153,487 289,733 289,733 240,392 $ 240,392 Balance 12/31/05 47,772,278 1,608,081 49,380,359 4,574,513 13,498,954 9,522,815 70,038,525 97,634,807 2,068,530 3,542,084 6,041,374 45,069,099 56,721,087 40,913,720 $ 90,294,079 . TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2005 . 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 Public safety Transportation Economic assistance and opportunity Culture and recreation Home and community services $ 231,471 179,200 2,923,649 36,230 61,206 650,992 $ 4,082,748 . . Balance Balance Discretely presented component units 1/1/05 Additions Deletions 12/31/05 Capital assets not being depreciated Land $ 2,213,759 $ 2,213,759 . Construction in progress 10,592,179 $ 2,598,828 $ 16,440 13,174,567 Total capital assets not being depreciated 12,805,938 2,598,828 16,440 15,388,326 Depreciable capital assets Buildings 3,416,944 123,167 3,540,111 . Improvements other than buildings 2,575,589 2,575,589 Machinery and equipment 3,170,695 30,033 3,200,728 Infrastructure 2,121,386 17,000 2,138,386 Total depreciable capital assets 11,284,614 170,200 11,454,814 . Less accumulated depreciation Buildings 1,186,077 103,656 1,289,733 Improvements other than buildings 973,574 88,000 1,061,574 Machinery and equipment 2,003,454 129,203 2,132,657 . Infrastructure 1,073,547 82,319 1,155,866 Total accumulated depreciation $ 5,236,652 $ 403,178 5,639,830 Total net depreciable capital assets 5,814,984 Total net capital assets $ 21,203,310 . . - 28- . TOWN OF SOUTH OLD NOTES TO FINANCIAL STATEMENTS December 31,2005 . 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 2.64% to 3.06% and are due at various dates through 2006. . 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: . Description Various Purposes Various Purposes New London Wharf Fishers Island Garbage Total Amount $ 7,175,000 1,700,000 1,725,000 1.120.000 $ 11720000 Interest Rate 2.64% 3.05% 2.75% 3.06% Of the $11,720,000 in bond anticipation notes, $8,875,000 relates to the primary government and the remaining $2,845,000 relates to the component units. . LONG TERM DEBT Summary of changes in long-term debt transactions for the year ended December 31, 2005 is as follows: Non-current . Balance Balance liabilities due Non-current 1/1/05 Increases Reductions 12/31/05 within one year liabilities Primary Government: General obligation bonds $ 10,031,529 $ 2,380,000 $ 3,162,431 $ 9,249,098 $ 755,000 $ 8,494,098 Due to Employees Retirement Systel 135,834 41,841 93,993 45,189 48,804 . Compensated absences 5,662,358 860,531 743,063 5,779,826 5,779,826 Claims and judgments 598,630 378,630 220,000 220,000 Estimated liability for landfill closure and post-closure care costs 631,267 18,872 612,395 19,072 593,323 Component Units: . General obligation bonds 272,569 3,000,000 222,569 3,050,000 195,000 2,855,000 . - 29- . . . . . . . . . . . TOWN OF SOUTH OLD NOTES TO FINANCIAL STATEMENTS December 31, 2005 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 bome 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 6.375% and have maturity dates in 2006 through 2021. Future principal and interest payments to maturity for both the primary govemment and the component units are as follows: Year Endinq Principal 2006 $ 950,000 2007 979,098 2008 995,000 2009 1,025,000 2010 1,000,000 2011-2015 4,390,000 2016-2021 2.960.000 Totals $ 12299098 Interest $ 405,624 376,466 345,307 312,347 277,956 910,394 265.814 $ 2 893 908 5. 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. During the year ended 2005, the Town issued $2,380,000 in general obligation bonds with an interest rate ranging from 2.50% to 3.75% to advance refund $2,210,000 of outstanding 1993 and 1995 Serial bonds with interest rates between 5.00% and 5.10%. The net proceeds of $2,392,833 include an original issue premium of $12,833 which were used in part to pay insurance, underwriting fees and administrative costs of $70,075 with the balance deposited in an irrevocable trust with an escrow agent to provide for all future debt service payments on the various general obligation bonds. As a result, these bonds are considered to be defeased and the liability for those bonds has been removed from the Town. The Towns advance refunded the various general obligation bonds in order to reduce its total debt service payments over the next 10 years by $100,505 and to obtain an economic gain of $66,538 (difference between the present values of the debt service payments on the old and new debt). RETIREMENT SYSTEM Plan Description 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 benefits 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. -30- . . . . . . . . . . . TOWN OF SOUTH OLD NOTES TO FINANCIAL STATEMENTS December 31,2005 C. DETAILED NOTES ON ALL FUNDS AND ACCOUNT GROUPS (continued) 5. RETIREMENT SYSTEM (continued) 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. The Town is required to contribute at an actuarially determined rate. The actual contributions were equal to the actuarially required amounts and also include additional 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: 2005 2004 2003 ERS $ 1,068,200 $ 992,023 $ 443,861 $ $ $ PFRS 1,016,937 679,079 240,756 The Town's contribution to the system was 100% of the contributions required each year. 6. POST EMPLOYMENT BENEFITS In addition to providing pension benefits, the Town provides health insurance coverage and survivor benefits 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 with 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. During the 2005 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. - 31 - . . . . . . . . . . . TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2005 C. DETAILED NOTES ON ALL FUNDS AND ACCOUNT GROUPS (continued) 7. COMPENSATED ABSENCES (continued) Estimated vacation, sick leave and compensatory absences accumulated by governmental fund type employees have been recorded in the statements of net assets. Payment of vacation time and sick leave is dependent upon many factors; therefore, timing of future payments is not readily determinable. However, management believes that sufficient resources will be made available for the payments of vacation, sick leave and compensatory absences when such payments become due. As of December 31,2005, the value of the accumulated vacation time and sick leave was $5,779,826 for the primary government. 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 31,2005 is $200,131. 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 2005, 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 2005 without an SIR. As a result, in 2005 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 2005 claims cannot presently be determined, the Town's third party administrator has estimated unsettled claims at December 31, 2005 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 2005, 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 31,2005 the Town has recorded a liability of $612,395 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. - 32- . TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31,2005 . D. COMMITMENTS AND CONTINGENCIES (continued) 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 31,2005 were approximately $205,000. Future obligations over the primary terms of the Town's leases as of December 31,2005 are as follows: 2006 $ 115,977 2007 94,997 2008 85,184 2009 and thereafter 684.824 Total $ 980 982 . 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 , 2005: . Condensed Statement of Net Assets: Due from Capital Assets Other Current Primary Net 01 Current Long-Term Net District Assets Government Depreciation Liabilities Liabilities Assets . Fishers Island Ferry $ 333,136 $ 119,344 $ 15,757,994 $ 2,439,520 $ 2,700,000 $ 11,070,954 Fishers Island Refuse and Garbage 640,862 631,328 3,026,171 1,235,336 3,063,025 Cutchogue-New Suffolk Park 125,728 28,382 124,218 28,382 249,946 Southold Park 21,550 63,406 648,159 65,677 667,438 Orient~East Marion Park 4,182 5,559 432,985 16,002 426,724 Mattituck Park 190,451 85,771 1,204,103 141,156 155,000 1,184,169 . Orient Mosquito 32,386 15,355 9,680 15,355 42,066 $ 1,348,295 $ 949,145 $ 21,203,310 $ 3,941,428 $ 2,855,000 $ 16,704,322 Condensed Statement of Activities: . Program General Revenue Net Assets Property District Expenses Revenue Net Expense Tax Other Change 1/1/05 12/31/05 . Fishers ISland Ferry $ 2,714,385 $ 1,884,374 $ 830,011 $ 400,000 $ 2,026,871 $ (1,596,860) $ 9,474,094 $ 11 ,070,954 Fishers Island Refuse & Garbage 489,606 47,644 441,962 599,400 36,698 (194,136) 2,868,889 3,063,025 Cutchogue-New Suffolk Park 138,633 138,633 141,000 2,850 (5,217) 244,729 249,946 Southold Par1< 350,088 350,088 315,000 34,090 998 668,436 667,438 Orient~East Marion Park 29,000 29,000 24,900 62 4,038 430,762 426,724 Mattiluck Park 304,002 304,002 405,930 11,025 (112,953) 1,071,216 1,184,169 . Orient Mosquito 60,371 60,371 74,650 401 (14,680) 27,386 42,066 $ 4,086,085 $ 1,932,018 $ 2,154,067 $ 1,960,880 $ 2,111,997 $ (1,918,810) $ 14.785,512 $ 16,704,322 . - 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, 2005 Original Final Variance . Budget Budget Actual Positive/(Negative ) REVENUES Real property taxes $14,608,674 $ 14,608,674 $ 14,608,674 Other real property tax items 66,000 66,000 68,807 2,807 Non-property tax items 401,035 401,035 415,071 14,036 Departmental income 349,900 349,900 345,956 (3,944) . Intergovemmental charges 194,160 269,823 252,558 (17,265) Use of money and property 286,625 286,625 489,796 203,171 Licenses and permits 218,330 218,330 249,178 30,848 Fines and forfeitures 112,000 112,000 140,192 28,192 Sale of property and compensation for loss 45,350 70,025 93,290 23,265 Miscellaneous local sources 86,646 113,654 432,269 318,615 . State aid 2,348,264 2,483,083 2,637,870 154,787 Federal aid 270,000 270,000 174,348 (95,652) Total Revenues 18,986,984 19,249,149 19,908,009 658,860 EXPENDITURES General government support 5,545,742 5,764,043 4,641,568 1,122,475 . Public safety 6,889,518 7,189,570 7,177,145 12,425 Public health 33,300 33,300 33,288 12 T ransportalion 420,500 466,131 446,877 19,254 Economic assistance and opportunity 993,400 982,510 901,139 81,371 Cullure and recreation 388,870 398,370 354,768 43,602 Home and community services 299,101 316,755 315,273 1 ,482 . Employee benefits 5,811,949 5,868,274 5,857,963 10,311 Debt service - principal and interest 1,773,100 1,577,799 1,560,055 17,744 Total Expenditures 22,155,480 22,596,752 21,288,076 1,308,676 Deficiency of Revenues Over Expenditures (3,168,496) (3,347,603) (1,380,067) 1,967,536 . Other Financing Sources (Uses) Transfers in 5,488,341 5,559,682 2,642,859 (2,916,823) Transfers out (2,319,845) (2,212,079) (1,895,023) 317,056 Total Other Financing Sources (Uses) 3,168,496 3,347,603 747,836 (2,599,767) . Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses (632,231 ) $ (632,231 ) Fund Balance at Beginning of Year 6,639,693 Fund Balance at End of Year $ 6,007,462 . 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, 2005 Original Final Variance . REVENUES Budget Budget Actual Positive/(Negative) Real Property Taxes $ 3,805,032 $ 3,805,032 $ 3,805,032 Other Real Property Tax Items 3,600 3,600 8,935 5,335 Non-Property Tax Items 111 111 Use of Money and Property 25,300 25,300 77,817 52,517 . Licenses and Permits 5,000 5,000 11,126 6,126 Sale of Property and Compensation for Loss 1,000 1,000 2,796 1,796 Miscellaneous Local Sources 155,054 155,054 State Aid 223,700 223,700 188,147 (35,553) Total Revenues 4,063,632 4,063,632 4,249,018 185,386 . EXPENDITURES Transportation 3,228,488 3,228,488 2,913,768 314,720 Employee Benefits 553,741 553,741 500,343 53,398 Debt Service - Principal and Interest 189,932 189,932 178,371 11,561 Total Expenditures 3,972,161 3,972,161 3,592,482 379,679 . Excess of Revenues Over Expenditures 91,471 91,471 656,536 565,065 Other Financing Uses (Sources) . Operating Transfers In 494,564 494,564 (494,564) Transfers Out (586,035) (586,035) (520,085) 65,950 Total Other Financing Uses (91,471 ) (91,471) (520,085) (428,614) Excess of Revenues Over . Expenditures and Other Uses 136,451 $ 136,451 Fund Balance at Beginning of Year 920,396 Fund Balance at End of Year $ 1,056,847 . . See notes to the financial statements. . -35- . TOWN OF SOUTH OLD COMBINING BALANCE SHEET NON-MAJOR GOVERNMENTAL FUNDS December 31, 2005 . 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 $ 740,370 $ 27,767 $ 176,492 $ 30,994 $ 270,513 $1,246,136 Accounts receivable, net of allowance 46,769 1,289 124,934 172,992 . Due from other funds 152,519 92,199 4,752 325 483,244 733,039 Due from other govemments $ 5,000 5,000 State and Federal Receivables Prepaid expenditures 26,686 27,338 54,024 . Total Assets $ 966,344 $ 5,000 $ 119,966 $ 181,244 $ 32,608 $ 906,029 $ 2,211,191 LIABILITIES AND FUND EQUITY LIABILITIES Accounts payable $ 14,395 $ 5,000 $ 12,656 $ 62 $ 195,071 $ 227,184 . Due to other funds 6,974 20,700 27,674 Deferred revenue 99,666 92,198 $ 4,587 355,783 552,234 Total Liabilities 121,035 5,000 104,854 4,587 62 571,554 807,092 . FUND EQUITY Fund balance - reserved: Prepaid expenses 26,686 26,686 Fund balance - unreserved: . Designated - ensuing year's budget 344,246 4,350 348,596 Undesignated 474,377 10,762 176,657 32,546 334,475 1,028,817 Total Fund Equity 845,309 15,112 176,657 32,546 334,475 1,404,099 . Total Liabilities and Fund Equity $ 966,344 $ 5,000 $ 119,966 $ 181,244 $ 32,608 $ 906,029 $ 2,211,191 . . -36- . TOWN OF SOUTH OLD COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - NON-MAJOR GOVERNMENTAL FUNDS Year ended December 31, 2005 . East-West Fire South old Fishers Solid Waste General Fund Special Protection Wastewater Island Sewer Management . Part Town Grant District District District District Totals REVENUES Real property taxes $ 538,773 $ 413,058 $ 137,450 $ 1,614 $ 1,290,440 $ 2,381,335 Other real property tax items 1,220 290 97 2 907 2,516 Non property tax items 213,786 213,786 . Departmental income 739,283 26,231 17,423 1,721,943 2,504,880 Intergovernmental charges 1,013 1,013 Use of money and property 28,321 2,689 6,666 1,190 25,226 64,092 Licenses and permits 5,200 160,765 165,965 Sale of property and compensation for loss 8,556 100,581 109,137 . Miscellaneous local sources 74,427 4,621 74,543 153,591 State aid 75,374 75,374 Federal aid $ 224,136 224,136 Total Revenues 1,684,940 224,136 416,037 175,065 20,229 3,375,418 5,895,825 . EXPENDITURES General government support 99,895 99,895 Public safety 393,192 414,282 807,474 Public health 6,864 6,864 Home and community services 563,269 224,755 1,846 29,598 2,283,171 3,102,639 . Employee benefits 210,776 212 233,870 444,858 Debt service - principal and interest 5,385 2,475 663,860 671,720 Total Expenditures 1,279,381 224,755 414,282 4,533 29,598 3,180,901 5,133,450 Excess (Deficiency) of Revenues . Over Expenditures 405,559 (619) 1,755 170,532 (9,369) 194,517 762,375 Other Financing Uses: Operating transfers out (264,969) (239,751 ) (504,720) Total Other Financing Uses (264,969) (239,751 ) (504,720) . Excess (Deficiency) of Revenues Over Expenditures and Other Uses 140,590 (619) 1,755 170,532 (9,369) (45,234) 257,655 Fund Balance at Beginning of Year 704,719 619 13,357 6,125 41,915 379,709 1,146,444 . Fund Balances at End of Year $ 845,309 $ -0- $ 15,112 $ 176,657 $ 32,546 $ 334,475 $ 1,404,099 . -37- . . . . DISCRETELY PRESENTED COMPONENT UNITS . . . . . . . . TOWN OF SOUTHOLD DISCRETElY PRESENTED COMPONENT UNITS COMBINING STATEMENT OF NET ASSETS December 31, 2005 . Fishers Island Cutchogue- Southold Orient-East Mallituck 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 $ 259,882 $ 617,409 $ 125,728 $ 21,550 $ 4,182 $ 189,690 $ 32,386 $ 1,250,827 . Accounts receivable, net of allowance 3,561 3,561 Due from primary government 119,344 631,328 28,382 63,406 5,559 85,771 15,355 949,145 State and federal receivables 48,767 48,767 Prepaid charges 24,487 19,892 761 45,140 Total Current Assets 452,480 1,272,190 154,110 84,956 9,741 276,222 47,741 2,297,440 . Non-Current Assets: Non-depreciable capital assets 11,203,523 2,442,737 101,198 588,847 432,985 515,306 15,284,596 Depreciable capital assets, net of depreciation 4,554,471 583,434 23,020 59,312 688,797 9,680 5,918,714 Total Assets 16,210,474 4,298,361 278,328 733,115 442,726 1,480,325 57,421 23,500,750 . LIABILITIES Current Liabilities: Accounts payable and accrued liabilities 421,634 1,910 10,443 8,815 442,802 Accrued interest payable 62,371 1,570 63,941 Due to other governments 2,271 2,271 . Other liabilities Deferred revenue 80,515 113,426 28,382 63,406 5,559 85,771 15,355 392,414 Due to other funds Bond anticipation notes payable 1,725,000 1,120,000 2,845,000 . Non-currentliabilities due within one year General obligation bonds payable 150,000 45,000 195,000 Total Current Liabilities 2,439,520 1,235,336 28,382 65,677 16,002 141,156 15,355 3,941,428 Noncurrent Liabilities: General obligation bonds payable 2,700,000 155,000 2,855,000 . Total Liabilities 5,139,520 1,235,336 28,382 65,677 16,002 296,156 15,355 6,796,428 NET ASSETS Investment in capital assets, net of related debt 11,182,994 1,906,171 1,004,103 14,093,268 Unrestricted (112,040) 1,156,854 249,946 667,438 426,724 180,066 42,066 2,611,054 . Total Net Assets $ 11,070,954 $ 3,063,025 $ 249,946 $ 667,438 $ 426,724 $ 1,184,169 $ 42,066 $ 16,704,322 . -38- . . TOWN OF SOUTHOLD DISCRETELY PRESENTED COMPONENT UNITS COMBINING STATEMENT OF ACTIVITIES Year ended December 31, 2005 . 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 $ 1,884,374 $ 47,644 $ 1,932,018 Real property taxes 400,000 599,400 $ 141,000 $ 315,000 $ 24,900 $ 405,930 $ 74,650 1,960,880 Other real property tax items 281 285 566 Miscellaneous revenue, other governments 18,449 18,449 Interest and earnings 17,420 36,698 2,850 62 11 ,432 401 68,863 . State Aid 684 684 Federal Aid 1,983,139 1,983,139 Other 6,898 34,090 (692) 40,296 Total Revenues 4,311,245 683,742 143,850 349,090 24,962 416,955 75,051 6,004,895 . EXPENSES General government support 80,610 80,610 Public health 60,371 60,371 Transportation 2,532,192 2,532,192 Culture and recreation 138,633 350,088 29,000 296,780 814,501 . Home and community services 16,942 478,890 495,832 Interest 84,641 10,716 7,222 102,579 Total Expenses 2,714,385 489,606 138,633 350,088 29,000 304,002 60,371 4,086,085 . Changes in Net Assets 1,596,860 194,136 5,217 (998) (4,038) 112,953 14,680 1,918,810 Net Assets at Beginning of Year 9,474,094 2,868,889 244,729 668,436 430,762 1,071,216 27,386 14,785,512 . Net Assets at End of Year $11,070,954 $ 3,063,025 $ 249,946 $ 667,438 $ 426,724 $ 1,184,169 $ 42,066 $16,704,322 . . -39- . TOWN OF SOUTH OLD SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS December 31, 2005 FEDERAL . FEDERAL GRANTOR/PASS CFDA THROUGH GRANTOR/PROGRAM TITLE NUMBER EXPENDITURES U.S Department of Aariculture Passed throuah Suffolk County: Cash-In-Lieu of Food Awards 10.550 $ 21,174 . U.S Department of Health & Human Services Passed throuah Suffolk County: Nutrition 93.045 103,174 U.,S. Department of Homeland Security Passed throuah the State of New York . Buffer Zone Protection Plan 97.078 50,000 U.S Department of Aariculture Natural Resouce Conservation Service Farm & Ranchland Protection Program 10.913 510,539 U.S Department of Housina and Urban Development . Passed throuah Suffolk County: Community Development Block Grant 14.218 224,136 U.S Department of the Interior Fish and Wildlife Service Passed throuah the State of New York . Department of Environmental Conservation: Coastal Wetlands Conservation Grant 15.614 1,000,000 $ 1,909,023 . . . . . -40- . TOWN OF SOUTH OLD NOTE TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS December 31, 2005 . Note A - Basis of Presentation . The accompanying schedule of expenditures of federal awards includes the federal grant activity of the Town of Southold and is presented on the modified accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of OMS Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements. . . . . . . . . -41- . . CERTIFIED PUBLIC ACCOUNTANTS, BUSINESS ADVISORS AND CONSULTANTS 25 Suffolk Court, Hauppauge, New York 11788 631.434.9500 . Fax 631.434.9518 WWlY.avz.com . REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Town Board Town of Southold Southold, New York . . We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Town of Southold, New York as of and for the year ended December 31, 2005, which collectively comprise the Town of Southold's basic financial statements, and have issued our report thereon dated June 8, 2006, which was qualified because the Town of Southold's discretely presented component units with the exception of one, the Fishers Island Ferry District, were not audited as of the report date. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reportino . In planning and performing our audit, we considered the Town of Southold, New York's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and not to provide assurance on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal conrol over financial reporting that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses. . Compliance and Other Matters . As part of obtaining reasonable assurance about whether the Town of Southold's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grants, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. . This report is intended solely for the information of the Town Board, management, others within the organization, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than those specified parties. . ~, V~( 2.-Jv ...... G-y-,./ R (/ Hauppauge, New York June 8, 2006 -42 - . ALBRECHT, VIGGIANO, ZURECK IS. COMPANY, RC. INDKN:NDlENT Maqat cw BKR IN'TIENM1'IOtW.. . . CERTIFIED PUBLIC ACCOUNTANTS, BUSINESS ADVISORS AND CONSULTANTS 25 Suffolk Court, Hauppauge, New York 11788 631.434.9500 . Fax 631.434.9518 www.avz.com REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 Town Board . Town of Southold Southold, New York . . . . . . . . Compliance We have audited the compliance of the Town of Southold, New York with types of compliance requirements described in the U. S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that are applicable to each of its major federal programs for the year ended December 31, 2005. The Town of Southold's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major federal programs is the responsibility of the Town of Southold, New York's management. Our responsibility is to express an opinion on the Town of Southold, New York's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the Town of Southold, New York's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination of the Town of Southold, New York's compliance with those requirements. In our opinion, the Town of Southold, New York complied, in all material respects, with the requirements referred to above that are applicable to each of its major federal programs for the year ended December 31, 2005. Internal Control Over Compliance The management of the Town of Southold is responsible for establishing and maintaining effective intemal control over compliance with the requirements of laws, regulations, contracts, and grants applicable to federal programs. In planning and performing our audit, we considered the Town of Southold's internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on the internal control over compliance in accordance with OMB Circular A-133. Our consideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might be a material weakness. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk of noncompliance with applicable requirements of laws, regulations, contracts and grants that would be material in relation to a major federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing the assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses. -43 - ALBRECHT, VlOOIANO, ZURECK l5. COMPW<<. P.C. t~MDl."'OP'IIKR~ . This report is intended solely for the information of the Town Board, management, others within the organization, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than those specified parties. . ~I \!~l ~.-.,,--J- Crr,,~G . Hauppauge, New York June 8, 2006 . . . . . . . . -44- . TOWN OF SOUTH OLD SCHEDULE OF FINDINGS AND QUESTIONED COSTS . Year ended December 31, 2005 . SUMMARY OF AUDIT RESULTS . 1. The auditor's report expresses a qualified opinion on the financial statements of the Town of Southold due to the fact that six of the seven component units of the Town of Southold that were discretely presented were not audited. The remaining component unit, the Fishers Island Ferry District, was audited by other auditors. . 2. No reportable conditions disclosed during the audit of the financial statements are reported in the "REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS". None of the conditions are reported as a material weakness. 3. No instances of noncompliance material to the financial statements of the Town of Southold were disclosed during the audit. 4. No reportable conditions disclosed during the audit of the major federal award programs are reported in the "REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM . AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A- 133". No material weaknesses were noted. 5. The auditor's report on compliance for the U.S. Department of the Interior- Fish and Wildlife Service expresses an unqualified opinion; the report on the remaining programs are unqualified. . 6. No audit findings relative to the major federal award programs for the Town of South old are reported in this schedule. 7. The Town of South old had two "Type A" programs for the year ended December 31, 2005. 8. The program tested as a major program includes: . CFDA Number Name of Federal Proqram or Cluster 15.614 U.S. Department of the Interior Fish and Wildlife Service . 9. The threshold for distinguishing Types A and B programs was $500,000. 10. The Town of Southold was determined to be a low-risk auditee. . . . -45- . TOWN OF SOUTHOLD SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year ended December 31, 2005 . FINDINGS-FINANCIAL STATEMENTS AUDIT REPORTABLE CONDITIONS. . FINDINGS AND QUESTIONED COSTS- MAJOR FEDERAL AWARD PROGRAMS AUDIT - . . Questioned Cost . . . . . . -46- None None $