Loading...
HomeMy WebLinkAbout2006 . . . . MATTITUCK FIRE DISTRICT FINANCIAL STATEMENTS Year ended December 31, 2006 . . . . . . . . TABLE OF CONTENTS . ~~ INDEPENDENT AUDITORS' REPORT .............................................................................................. 1-2 . FINANCIAL STATEMENTS Balance Sheet - Governmental Funds................................................................................................ 3 . Statement of Revenues, Expenditures and Changes in Fund Balances (Deficit) - Governmental Funds............................................................................. 4 Statement of Assets and Liabilities - Fiduciary Fund.......................................................................... 5 . Notes to Financial Statements ............................................................................................................. 6-13 SUPPLEMENTARY INFORMATION . General Fund - Schedule of Revenues, Expenditures and Changes in Fund Balance (Deficit) Budget and Actual.................................................................. 14 General Fund - Schedule of Detailed Expenditures and Appropriations by Departments......... ..... ......... ..... .... ..................... .................................................. 15-16 . Capital Reserve Funds - Combining Balance Sheet.......................................................................... 17 Capital Reserve Funds - Schedule of Revenues, Expenditures and Changes in Fund Balance by Reserve .................................................................................... 18 . OTHER REPORTS 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 .................... 19 . Schedule of Findings and Questioned Costs ...................................................................................... 20-22 . . . . . . . . . . . . . -1- CERTIFIED PUBLIC ACCOUNTANTS, BUSINESS ADVISORS AND CONSULTANTS 25 Suffolk Court, Hauppauge, New York 1/788 631.434.9500 . Fax 631.434.9518 WW\-v. avz. com INDEPENDENT AUDITORS' REPORT To Board of Fire Commissioners Mattituck Fire District Town of Southold Mattituck, New York We have audited the accompanying financial statements of the Mattituck Fire District, New York, as of and for the year ended December 31, 2006, as listed in the table of contents. These financial statements are the responsibility of the Mattituck Fire District's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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. As described in Note 1, the District prepares its financial statements on a prescribed basis of accounting that demonstrates compliance with the regulatory basis of accounting and budget laws of the State of New York, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America. The differences between the regulatory basis of accounting and accounting principles generally accepted in the United States of America are also described in Note 1. In our opinion the financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of the governmental activities and the fiduciary fund information of the Mattituck Fire District, New York, as of December 31, 2006, and its changes in financial position in conformity with the New York State regulatory basis of accounting for fire districts that approximates the modified accrual basis of accounting as described in Note 1. In accordance with Government Auditing Standards, we have also issued our report dated April 10, 2007, on our consideration of the Mattituck Fire District, New York's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of intemal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the intemal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. ALBRECHT, ViGGIANO, ZURECK & COMPANY, RC. INDEPENDENT MEMBER OF BKR INTERNATIONAL . -2- . Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying financial information listed as supplementary information in the table of contents is presented for purposes of additional analysis and is not a required part of the basic financial statements of the Mattituck Fire District, New York. Such information has been subjected to the auditing procedures applied in the audit and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. ~'I,~}Jt~ rc. . Hauppauge, New York April 1 0, 2007 . . . . . . . . . -3- . MATTITUCK FIRE DISTRICT GOVERNMENTAL FUNDS BALANCE SHEET December 31, 2006 General Capital Fund Fund Totals . ASSETS Cash $ 87,433 $ 837,350 $ 924,783 Total Assets $ 87,433 $ 837,350 $ 924,783 LIABILITIES . Accounts payable $ 32,947 $ 32,947 Accrued expenses 5,636 5,636 Total Liabilities 38,583 $ -0- 38,583 FUND BALANCES (DEFICIT) . Reserve for encumbrances 666,894 666,894 Reserve for capital projects 170,456 170,456 Unreserved - undesignated 48,850 48,850 Total Fund Balances (Deficit) 48,850 837,350 886,200 . Total Liabilities and Fund Balances $ 87,433 $ 837,350 $ 924,783 . . . . . See notes to financial statements. . -4- . MATTITUCK FIRE DISTRICT GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES (DEFICIT) Year ended December 31, 2006 General Capital Fund Fund Totals . REVENUES Real property taxes $ 1,818,135 $ 1,818,135 Interest and earnings 4,434 $ 4,048 8,482 Insurance recoveries and refunds 8,854 8,854 Refund of prior year's expenses 4,283 4,283 Miscellaneous income 256 256 . Total Revenues 1,835,962 4,048 1,840,010 EXPENDITURES Personal services 142,054 142,054 . Equipment and capital outlay 120,184 904,447 1,024,631 Fire protection 615,891 615,891 Employee benefits 355,517 355,517 Debt service 107,725 107,725 ,. Total Expenditures 1,341,371 904,447 2,245,818 Excess (Deficiency) of Revenues Over Expenditures 494,591 (900,399) (405,808) OTHER FINANCING SOURCES AND (USES) . Operating transfers in (out) (422,622) 422,622 -0- Capitalized leases 764,478 764,478 Total other Financing Sources and (Uses) (422,622) 1,187,100 764,4 78 Excess of Revenues Over Expenditures . and Other Financing Sources and (Uses) 71,969 286,701 358,670 Fund Balance (Deficit) at Beginning of Year (23,119) 550,649 527,530 Fund Balance at End of Year $ 48,850 $ 837,350 $ 886,200 . . . See notes to financial statements. . -5- MATTITUCK FIRE DISTRICT FIDUCIARY FUND STATEMENT OF ASSETS AND LIABILITIES Year ended December 31, 2006 . Trust Fund . ASSETS Service award program assets $ 1,129,084 Total Assets $ 1,129,084 LIABILITIES . Service awards $ 1,129,084 Total Liabilities $ 1,129,084 . . . . . . . See notes to financial statements. . -6- MATTITUCK FIRE DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2006 . Note 1 - Reporting Entity The Mattituck Fire District (The "District") was incorporated under New York State town law in 1905. The governing body of the District is the Board of Comrnissioners which consists of five commissioners all of whom are elected to five year terms. The District provides fire protection service and education for fire prevention to its residents. The financial reporting entity includes all functions and activities over which the elected officials exercise responsibility. No other governmental organizations have been included or excluded from the reporting entity. . . . . . . . . . The financial statements of the District have not been prepared in conformity with accounting principles generally accepted in the United Slates of America (GAAP) as applied to governmental units. The District prepares its financial statements on a prescribed basis of accounting that demonstrates compliance with the regulatory basis of accounting and budget laws of the State of New York, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America. Note 2 - Summary of Significant Accounting Policies Fund Financial Statements The accounts of the District are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund balances, revenues, and expenditures, which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions or limitations. The various funds are presented by type in the fund financial statements. Accordingly, the District maintains the following fund types: Governmental Funds - Governmental funds are those through which most govemmental functions are financed. The acquisition, use and balances of expendable financial resources and the reiated 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. Government funds are further classified as major and non-major funds. The District reports the following major governmental funds: General Fund - the principal operating fund and includes all receipts and disbursements not required to be included in other funds. Capital Fund - the capital fund is provided to account for capital expenditures financed from the proceeds of bonds, bond anticipation notes and capital notes. This fund is also used to account for construction projects financed, in whole or in part, from general fund monies. Also included in the capital fund is: Capital Reserves - established in accordance with the provisions of general municipal law (Section 6g). Capital expenditures may be made only for the purpose of which the fund was established. The principal sources of revenue for these funds are budgetary appropriations. The amount appropriated should be transferred from the general fund. Additionally, the District reports the following fiduciary funds: Fiduciarv Funds -The fiduciary funds are used to account for assets held by the District in a trustee capacity or as an agent for individuals, private organizations, and other governments. Basis of Accountinq The District follows the accounting principles as described by the State of New York in its Fire District Accounting and Reporting Manual. Under this system the District utilizes the modified accrual basis of accounting, whereby revenues are recognized when received, not earned, and expenditures are recognized when disbursed, not incurred. Accruals of revenues and expenditures are not provided. This basis of accounting differs from accounting principles generally accepted in the United States of America for governments as promulgated by the Govemment Accounting Standards Board. . -7- MATTITUCK FIRE DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2006 . Note 2 - Summary of Significant Accounting Policies (continued) Basis of Accountino (continued) . Encumbrance accounting, under which purchase orders, contracts and other commitments are recorded for budgetary control purposes in order to reserve that portion of the applicable appropriation, is employed in the governmental funds. Appropriations for all 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. Capital Reserve Funds . Although the New York State Uniform System of Accounts issued by the New York State Comptrollers Office requires capital reserve type funds to be accounted for in the general fund, management has elected to account for these funds in a capital fund in order to better demonstrate compliance with New York State laws and regulations. Note 3 - Assets, Liabilities and Fund Equity . Interfund Receivables and Pavables During the course of operations, numerous transactions occur between individual funds that may result in amounts owed between funds. Those transactions are classified as "due to and from other funds." Capital Assets . All fixed assets with an original cost of $500 or more are valued at historical cost or estimated historical costs if actual is unavailable, except for donated fixed assets which are recorded at their estimated fair value at the date of donation. Depreciation is provided over the assets' estimated useful lives using the straight-line method of depreciation. The range of estimated useful lives by type of asset is as follows: . Buildings Infrastructure Vehicles and related equipment Equipment 20-50 years 40 years 5-20 years 5-20 years Additional information related fixed assets are disclosed in these notes to the financial statements. . Eouitv Classifications In the fund financial 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 and capital represent portions of fund equity which are required to be segregated in accordance with state . law or accounting principles generally accepted in the United States of America. Designations of fund balances in governmental funds indicated the utilization of these resources in the ensuing year's budget or tentative plans for future use. . . . -8- MATTITUCK FIRE DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2006 . Note 4 - Revenues and Expenditures Property Taxes Property taxes are collected by the Town of Southold on behalf of the District. Payments from the Town are normally received at various intervals during the year. . Interfund Transactions Interfund transfers represent payments by the general fund to the capital fund to fund various capital reserves established by the District. Total Columns on the Financial Statements . The total columns in the combined financial statements are presented only to facilitate financial analysis. Data in these columns do not present the financial position, results of operations or changes in financial position in conformity with accounting principles generally accepted in the United States of America, nor is such data comparable to a consolidation. Inter-fund eliminations have not been made in the aggregation of this data. . Note 5 - Stewardship, Compliance and Accountability Budaetarv Procedures . The District prepares an annual budget for the general fund, which is approved by the Board of Commissioners. The budget is then submitted to the Town of Southold for inclusion in the Town Budget and a public hearing is held thereon. The budget is not subject to referendum. Any revisions to the annual budget are adopted by resolution of the Board of Commissioners. Note 6 - Cash and Investments . Custodial Credit Risk - Deposits - Custodial credit risk for deposits exists when, in the event of the failure of a depository financial institution, a government may be unable to recover deposits, or recover collateral securities that are in possession of an outside agency. The District investment policies are governed by State statutes. In addition, the District has its own investment policy. District monies must be deposited in FDIC-insured commercial banks or trust companies located within the State. The Treasurer is authorized to use demand accounts and certificates of deposit. Permissible investments include obligations of the U.S. treasury and U.S. agencies, and obligations of New York State or its localities. . Collateral is required for demand and time deposits at 105% of all deposits not covered by federal deposit insurance. Obligations that may be pledged as collateral are obligations of the United States and its agencies and obligations of the State or its municipalities. Governmental Accounting Standards Board Statement #40 directs that deposits be disclosed as exposed to custodial credit risk if they are not covered by depository insurance, and the deposits are either: . .Uncollateralized; .Collateralized with securities held by the pledging financial institution in the District's name; or .Collateralized with securities held by the pledging financial institution's trust department or agent, but not in the District's name. . At December 31, 2006, the District's bank balances were $932,974. Of the District's bank balances, $187,877 was covered by federal deposit insurance, $782,260 was secured by collateral held by the District's agent, a third party financial institution, in the District's name, and $-0- was collateralized with securities held by the pledging financial institution, or its trust department, in the name of the District. . . -9- MATTITUCK FIRE DISTRICT NOTES TO FINANCIAL STATEMENTS December 31,2006 . Note 6 - Cash and Investments (continued) The District does not typically purchase investments for long enough duration to cause it to believe that it is exposed to any material interest rate risk. The District does not typically purchase investments dominated in a foreign currency, and is not exposed to foreign currency risk. . Note 7 - Interfund Transfers At December 31,2006, individual fund interfund transfer balances were as follows: Transfer Transfer In Out . General fund $ 485,250 Capital fund $ 485.250 Total $ 485 250 $ 485 250 . Note 8 - Capital Assets Capital assets consist of the following at December 31,2006. Balance 12/31/2006 . Capital assets not being depreciated: Land $ 16,000 T otai capital assets not being depreciated $ 16,000 . Depreciable capital assets: Buildings Infrastructure Vehicles and related equipment Equipment $ 2,543,548 425,300 2,395,953 505,323 . Total depreciable capital assets $ 5,870,124 . Less accumulated depreciation: Buildings Infrastructure Vehicles and related equipment Equipment $ 481,026 235,721 1,278,695 151,590 Total accumulated depreciation $ 2,147,032 Total net depreciable capital assets 3,723,092 . Total net capital assets $ 3,739,092 Total depreciation expense $ 275,546 . . -10- MATTITUCK FIRE DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2006 . Note 9 - Retirement System Plan Description . The District participates in the New York State and Local Employees' Retirement System (ERS). This is a cost- sharing multiple public employer retirement system. The System provides retirement benefits as well as death and disability benefits. A publicly available annual report containing financial statements and required supplemental information for this retirement system may be obtained by writing to the following address: . New York State Retirement Syslems Governor Smith State Building Albany, NY 12244 . Obligations of employers and employees to contribute and benefits provided 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 (the "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 Systems and for the custody and control of their funds. Payments and Funding Status . 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. 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 rnade by employers to the pension accumulation fund. . The District is required to contribute at an actuarially determined rate. The actual contributions were equal to 100% of the actuarially required amounts, adjusted by modifications made by the ERS to prior years' contributions. The required contributions, for the primary government, for the current year and two preceding years were: Percent Contribution of Covered Year Amount Payroll . 2006 $ 19,099 9.70% 2005 $ 12,843 10.20% 2004 $ 10,987 11.40% . Since 1989 and subsequent years, the Systems' billings have been based on Chapter 62 of the Laws of 1989 of the State of New York. This legislation requires participating employers to begin making payments on a current basis, while amortizing existing unpaid amounts relating to the System's years ending March 31, 1988 and 1989 (which otherwise were to have been paid on June 30, 1989 and 1990, respectively) over a 17 -year period, with an interest factor ranging from 8.00% to 8.75%. Local governments were given the option to prepay this liability. The District elected to make the full payment. . . . -11- MATTITUCK FIRE DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2006 . Note 10 - Service Award Program Plan Description . The Mattituck Fire District Length of Service Award Program (the "Plan") is a single-employer, defined benefit pension plan covering the District's volunteer firefighters. The Plan is available to firefighters 18 years of age with one year of qualifying service and provides retirement benefits as will as death benefits. The Plan is administered by Penftex, Inc. with all provisions and amendments subject to approval of the Board of Fire Commissioners. An annual actuarial valuation report for the plan can be obtained from the Districts business office. Fundina Policv The Plan is established under New York State Law Section 5605-B, A7635-B, Article 11A. The Plan is non-contributory. . The District is required to contribute the total amount sufficient to cover the normal cost of the Plan. Any volunteer fireman who completes one year of service and attains age 62 is eligible for normal retirement benefits. The amount of the monthly retirement income payable to a fireman eligible for normal retirement benefits is equal to $20 multiplied by the total years of service, which is not to exceed 40 years. . Pension expense is determined based on an annual actuarial calculation. The required contribution for the Plan consists of the current year "normal cost", plus a payment to amortize the unfunded past service liability. Based upon accepted actuarial methods and the assumptions used, it has been determined that the contribution of $247,150 for the year ended December 31, 2006, was sufficient to satisfy current and future service award obligations upon eligibility for retirement. All Plan assets were invested in money market funds and annuities and are accounted for in the fiduciary fund. . Funded Status and Funding Progress: The funded status of the plan as of December 31,2006, was as follows: Actuarial accrued liability (AAL) Actuarial value of plan assets $ 2,510,192 1.129.084 . Unfunded actuarial accrued liability (UAAL) $ 1381 108 Funded ratio (actuarial value of plan assets/AAL) 44.98% Note 11 - Indebtedness . Long-Term Debt The following is a summary of changes in long-term debt transactions for the year ended December 31, 2006: Balance Balance 1/01/06 Increases Reductions 12/31106 . Serial Bonds $ 1,200,000 $ -0- $ 63,000 $ 1,137,000 Capital Lease Obligation -0- 764,478 -0- 764,478 $ 1,200,000 $ 764,478 $ 63,000 $ 1,901,478 . . . -12- MATTITUCK FIRE DISTRICT NOTES TO FINANCiAl STATEMENTS December 31, 2006 . Note 11 -Indebtedness (continued) Long-Term Debt (continued) General Oblioation Serial Bonds - The District borrows money in order to acquire land, equipment, construct buildings or make improvements. This enables the cost of these capital assets to be borne by the present and future taxpayers receiving the benefit of the capital assets. These long-term liabilities are full faith and credil debt of the District. The . provision to be made in future budgets for capital indebtedness represents the amount, exclusive of interest, authorized to be collected in future years from taxpayers and others for liquidation of the long-term liabilities. General obligation serial bonds of the District will be repaid from tax revenues. General obligation serial bonds bear interest at 3.70% and 4.20% and have final maturity dates through 2019. The following is a summary of maturity of general obligation serial bonds: . Final Interest Outstanding Issue Date Maturity Rate 12/31/06 2004 2019 3.70% $ 900,000 2005 2019 4.20% 237,000 . $ 1,137,000 . Future principal and interest payments to maturity are as follows: Year Principal Interest Total 2007 $ 69,000 $ 41,943 $ 110,943 2008 70,000 39,299 109,299 2009 75,000 36,541 111,541 2010 76,000 33,670 109,670 2011 82,000 30,665 112,665 2012-2016 454,000 103,986 557,986 2017-2019 311,000 18,025 329,025 $ 1,137,000 $ 304,129 $ 1,441,129 . . Capital Lease Oblioations - In June 2006, the District entered into a contract to acquire a 95 Foot Aerial Platform fire truck under a capital lease agreement. The truck is scheduled to be delivered in 2007. The liability for this obligation is payable in 10 annual installments starting in May 2007 and matures in May 2016. Interest is at 5.15%. The cost for the underlying equipment was $764,478. . Future principal and interest payments to maturity are as follows: Year Principal Interest 2007 $ 65,626 $ 33,886 2008 62,675 36,837 2009 65,978 33,534 . 2010 69,456 30,056 2011 73,117 26,395 2012-2016 427,626 69,936 $ 764,4 78 $ 230,644 . Total $ 99,512 99,512 99,512 99,512 99,512 497,562 $ 995,122 . -13- MATTITUCK FIRE DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2006 . Note 12 . Commitments Risk Manaqement . The District is exposed to various risks of loss related to torts, theft of, damage to, and destruction of assets; injuries to employees, errors and omissions; natural disasters, etc. These risks are covered by commercial insurance purchased from independent third parties. Settled claims from these risks have not exceeded commercial insurance coverage for the past two years. Management believes that all claims currently pending are either adequately covered by insurance or will not materially affect the financial position or results of operations of the District. Lease Aqreement . The District leases training space in Mattituck, New York under an operating lease agreement which commenced June 1, 2005 and expires in May 2010. The District has the option to renew this lease for two (2) additional five (5) year periods. The Lease payments are $200 per month payable annually on anniversary date of the initial lease term. Lease Aqreement (continued) The District leases equipment under operating lease agreements which commenced June 1, 2006 and expires on April 1, . 2011. Lease payments in the amount of approximately $207 are payable monthly. Expenditures under all operating lease agreements for the year ended December 31, 2006 was approximately $4,879. Minimum annual commitments under the operating leases described above are as follows: . Year ended December 31,2007 2008 2009 2010 2011 $ 4,879 4,879 4,879 3,479 825 . $ 18941 . . . . . -14- MATTITUCK FIRE DISTRICT GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE (DEFICIT) - BUDGET AND ACTUAL . Year ended December 31 , 2006 Variance Original Final Positive Budget Budget Actual (Negative) . REVENUES Real property taxes $ 1,818,135 $ 1,818,135 $ 1,818,135 $ -0- Interest and earnings 4,434 4,434 Insurance recoveries and refunds 8,854 8,854 Refund of prior yea~s expenses 4,283 4,283 Miscellaneous income 256 256 . Total Revenues 1,818,135 1,818,135 1,835,962 17,827 EXPENDITURES Personal services 131,250 131,250 142,054 (10,804) Equipment and capital outlay 136,000 136,000 120,184 15,816 . Fire protection 596,296 596,296 615,891 (19,595) Employee benefits 361,887 361,887 355,517 6,370 Debt service 107,452 107,452 107,725 (273) Total Expenditures 1,332,885 1,332,885 1,341,371 (8,486) . Excess of Revenues Over Expenditures 485,250 485,250 494,591 9,341 OTHER FINANCING SOURCES AND (USES) Operating transfers in (out) (485,250) (485,250) (422,622) 62,628 Excess of Revenues Over Expenditures and Other Financing Uses $ -0- $ -0- 71,969 $ 71,969 . Fund Balance (Deficit) at Beginning of Year (23,119) Fund Balance at End of Year $ 48,850 . . . . _______________n_ . -15- MATTITUCK FIRE DISTRICT GENERAL FUND SCHEDULE OF DETAILED EXPENDITURES AND APPROPRIATIONS BY DEPARTMENTS . Year ended December 31, 2006 Variance Original Final Positive Budget Budget Actual (Negative) . Personal Services $ 131,250 $ 131,250 $ 142,054 $ (10,804) Equipment and Capital Outlay 136,000 136,000 120,184 15,816 Fire Protection Services Administrative Expenses . Office supplies 25,782 25,782 23,284 2,498 Association dues 1,825 1,825 670 1,155 Legal and audit fees 55,000 55,000 76,422 (21,422) Publications 6,750 6,750 1,931 4,819 Election Expense -0- -0- 355 (355) . Total Administrative Expenses 89,357 89,357 102,662 (13,305) Utility and Water Expenses Gas and electric 61,000 61,000 50,931 10,069 Telephone 20,000 20,000 13,827 6,173 Hydrant rental 18,000 18,000 32,041 (14,041) . Total Utility and Water Expenses 99,000 99,000 96,799 2,201 Firefighters Expense Uniforms 20,000 20,000 10,444 9,556 Medical exams 35,000 35,000 33,897 1,103 . Inspection dinner 25,500 25,500 34,671 (9,171) Total Firefighters Expense 80,500 80,500 79,012 1,488 Travel and Convention Expenses 40,670 40,670 25,871 14,799 Building Costs . Building repairs 100,000 100,000 101,379 (1,379) Total Building Costs 100,000 100,000 101,379 (1,379) Fire Equipment and Alarm Radios 1,500 1,500 1,500 Gas and Diesel 16,500 16,500 17,904 (1,404) . Repairs and maintenance 95,000 95,000 128,426 (33,426) Medical supplies 30,000 30,000 19,004 10,996 Total Fire Equipment and Alarm 143,000 143,000 165,334 (22,334 ) Insurance Costs . Vehicle and property 43,769 43,769 44,834 (1,065) Total Insurance Costs 43,769 43,769 44,834 (1,065) Total Fire Protection Services 596,296 596,296 615,891 (19,595) (continued) . . -16- . MATTITUCK FIRE DISTRICT GENERAL FUND SCHEDULE OF DETAILED EXPENDITURES AND APPROPRIATIONS BY DEPARTMENTS Year ended December 31, 2006 . Variance Original Final Positive Budget Budget Actual (Negative) Employee Benefits Social security 11,571 11,571 10,879 692 State retirement system 17,605 17,605 22,761 (5,156) Service award program 247,150 247,150 247,150 -0- Workers compensation insurance 39,690 39,690 32,565 7,125 Unemployment insurance 2,874 2,874 686 2,188 Life insurance 20,947 20,947 15,355 5,592 Medical and accident insurance 22,050 22,050 26,121 (4,071) Total Employee Benefits 361,887 361,887 355,517 6,370 Debt Service Principle 63,000 63,000 63,000 -0- Interest 44,452 44,452 44,725 (273) Total Debt Service 107,452 107,452 107,725 (273) Totals $ 1,332,885 $ 1,332,885 $ 1,341,371 $ (8,486) . . . . . . . . . -17- MATTITUCK FIRE DISTRICT CAPITAL FUNDS COMBINING BALANCE SHEET December 31, 2006 . Building and Grounds Apparatus Total . ASSETS Cash $ 183,533 $ 653,817 $ 837,350 Total Assets $ 183,533 $ 653,817 $ 837,350 . FUND BALANCES Reserve for encumbrances $ 165,000 $ 501,894 $ 666,894 Reserve for capital projects 18,533 151,923 170,456 Total Fund Balances 183,533 653,817 837,350 . Total Liabilities and Fund Balances $ 183,533 $ 653,817 $ 837,350 . . . . . . . -18- . MATTITUCK FIRE DISTRICT CAPITAL FUNDS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BY RESERVE Year ended December 31, 2006 Buildin9s Capital and . Projects Grounds Apparatus Total REVENUES Interest and earnings $ 1,284 $ 2,784 $ 4,048 Total Revenues 1,284 2,764 4,048 . EXPENDITURES Equipment and capital outlay $ 764,478 58,639 81,330 904,447 Total Expenditures 764,478 58,639 81,330 904,447 Deficiency of Revenues Over Expenditures (764,478) (57,355) (78,566) (900,399) . OTHER FINANCING SOURCES Operating transfers in 41,485 381,137 422,622 Capitalized leases 764,478 764.478 Total other Financing Sources 764.478 41,485 381,137 1,187,100 . Excess of Revenues Over Expenditures and Other Financing Sources -0- (15,870) 302,571 286,701 Fund Balance at Beginning of Year -0- 199,403 351,246 550,649 Fund Balance at End of Year $ -0- $ 183,533 $ 653,817 $ 837,350 . . . . . . . . . ~ . . . . . . . -19- CERTIFIED PUBLIC ACCOUNTANTS, BUSINESS ADVISORS AND CONSULTANTS 25 Suffolk Court, Hauppauge, New York 11788 631.434.9500 . Fax 631.434.9518 WlVW. 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 To Board of Fire Commissioners Mattttuck Fire District Town of Southold Mattituck, New York We have audited the basic financial statements of the Mattituck Fire District, New York, as of December 31, 2006, and for the year then ended, as listed in the table of contents and have issued our report thereon dated April 1 0, 2007. 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 ReportinG In planning and performing our audit, we considered the Mattituck Fire District'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 an opinion on the internal control over financial reporting. However, we noted certain matters involving the internal control over financial reporting and its operation that we consider to be control deficiencies. A control deficiency exits when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the entity's ability to initiate, authorize, record, process, or report financial data reliably in accordance with accounting principles generally accepted in the United States of America such that there is more than a remote likelihood that a misstatement of the Mattituck Fire District's financial statements that is more than inconsequential will not be prevented or detected by the Mattituck Fire District's internal control. Control deficiencies are described in the accompanying schedule of findings and questioned costs as items 06-01, 06-02, and 06-03 A material weakness is a significant deficiency, or a combination of significant deficiencies that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the Mattituck Fire District's internal control. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be a significant deficiency and, accordingly, would not necessarily disclose all significant deficiencies that are also considered to be material weaknesses. However. of the significant deficiencies described above, we consider items 06-01, 06- 02, and 06-03 to be materiai weaknesses. We also noted other matters involving internal control over financial reporting, which we have reported to management of the Mattituck Fire District in a separate letter dated April 10,2007. Compliance and Other Matters As part of obtaining reasonable assurance about whether the Mattituck Fire District's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, 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 required to be reported under Government Auditing Standards. This report is intended solely for the information and use of the Board, management, and federal or state awarding agencies and is not intended to be and should not be used by anyone other than specified parties. ~ V,~ G,,,^",~ ,f (- pC Hauppauge, New 'YOrk O~-- "'I, April 10, 2007 AL.BRECHT, VIGGIANO, ZURECK Ii. COMPANY, RC. INDEPE.NDENT MEMBER OF' BKR INTERNATIONAL . . . . " . . . . . . " . -20- MATTITUCK FIRE DISTRICT SCHEDULE OF FINDINGS AND QUESTIONED COSTS December 31,2006 FINDINGS - FINANCIAL STATEMENTS AUDIT 06~1 FINANCIAL STATEMENT PREPARATION Condition Starting in 2006, all fire district audits conducted in New York State are subject to Government Auditing Standards, issued by the Comptroller General of the United States. The independence standards contained in Government Auditing Standards and recent Statements on Auditing Standards issued by the AICPA require an evaluation on whether or not an entity has the ability to prepare its financial statements and related note disclosures acceptable under current standards or in the case of your District, in conformity with the New York State regulatory basis of accounting for fire districts that approximates the modified accrual basis ot accounting Criteria During the course of the audit, we noted your books and records did not agree to the financial statements issued for the year ended December 31, 2005 as a result of your books and records being maintained on the cash basis of accounting instead of the modified accrual basis of accounting in conformity with the New York State regulatory basis of accounting for fire districts. As a result, we suggested 14 audit adjustments which were needed to restate your books in order to agree to the correct opening balance and to recorded adjustments needed to convert you books and records to the modified accrual basis of accounting and to record a capital lease obligation. Recommendation We recommend that the District look into additional training to insure the books and records are maintained in accordance with New York State requirements. Further, the District's Treasurer should be preparing the schedules necessary to complete the notes to the financial statements after performing the year end close of the books and records. Under the Independence rules contained in Government Auditing Standards, issued by the Comptroller General of the United States, independent auditors are prohibited from becoming part of a client's internal control. 06~2 MODIFIED ACCRUAL BASIS OF ACCOUNTING Criteria Financial reporting is a responsibility of management and requires the proper level of expertise to ensure transactions are properly reflected in the books and records in accordance with Financial Information for Fire District Officials and the New York State Accounting and Reporting Manual for Fire Districts, issued by the New York State Comptrollers Office. The responsibility for determining and recording amounts reported in the financial statements is an accounting function that in the case of the District is being completed by the District's Treasurer. In accordance with recent legislation and the Accounting and Reporting Manual for Fire Districts, fire districts with revenues of $500,000 or more must maintain their books and records on the modified accrual basis of accounting. Under this basis of accounting, amounts related to accounts payables, accrued liabilities, receivables, and deferred revenue need to be accounted for in the books and records of the District. For example, accounts payable is maintained throughout the year or at the very least recorded at year end. An analysis of all invoices received subsequent to year end needs to be conducted in order to determine the invoices and dollar amounts that need to be reflected in the prior period's books and records as accounts payable. . . . . , . . . . . . - -21- MATTITUCK FIRE DISTRICT SCHEDULE OF FINDINGS AND QUESTIONED COSTS December 31, 2006 FINDINGS - FINANCIAL STATEMENTS AUDIT (continued) 06.{)2 MODIFIED ACCRUAL BASIS OF ACCOUNTING (continued) Condition During the course of the audit, we were informed that your prior independent auditors were preparing the schedules needed to report your financial statements on the modified accrual basis of accounting. Your internal books and records however, were maintained on the cash basis of accounting and did not agree to the amounts reported in the financial statement issued for the year ended December 31, 2005 due to the omission of various items such as accounts payable and accrued expenses. As a result of the items previously mentioned, we advised the District's Treasurer to contact your prior independent auditors to obtain the journal entries needed to correct your books and records in order to ensure that they would agree to the financial statements as issued for the year ended December 31, 2005. In addition, we determined 14 adjusting journal entries affecting all funds which were needed to correct your books and records at December 31, 2006. These adjusting journal entries are considered audit adjustments under professional standards. The journal entries primarily related to the correction of the opening general fund balance, amounts for accounts payable, accrued expense, reclassification of account balances and to record the District's capital lease obligation entered into during 2006. Recommendation AVZ recommends that the District maintain its books and records on the modified accrual basis of accounting in accordance with the Accounting and Reporting Manual for Fire Districts, issued by the Office of the New Yorl< State Comptroller. The Board should be aware that starting in 2006, Fire District audits are now subject to standards contained in Government Audfting standards, issued by the Comptroller General of the United States. As a result of the new independence requirements contained in those standards, independent auditors are prohibited from making joumal entries to your books and records and effectively becoming part of your internal control. 06-03 MANAGEMENT OVERSIGHT OF BUDGET Criteria The annual operating budget of a fire district represents an orderly financial plan for the operation of District activities and is an essential ingredient in the financial planning, legal level of control and evaluation process of local governments. The legal level of control is the level at which management can reassign appropriations without governing board approval. The appropriations in it represent choices by the Board as to the allocation of District resources to specific purposes and establish spending limits for these various purposes. Therefore, the requirement that an appropriation be available prior to an expenditure being made is more than just a legal formality. This is also a requirement of effective budgetary control, needed to insure that monies are available for expenditures for each of the purposes enumerated in the budget. Failure to limit expenditures to available appropriations creates the risk that money may not be available when required for necessary expenditures. The Office of the State Comptroller requires that budgets must be adopted at a minimum level of function and object of expenditure or expense. Before any function appropriation can be exceeded, Board approval must be obtained. So if there is a need to expend in excess of an object code and there is a balance available in another object code of the same function, Board approval must be obtained before a transfer is made even though the function will not be over-expended. The District should not incur an expenditure of funds for which an appropriation has not been made. Formal budgetary accounting is a management control technique used to assist in controlling expenditures and tracking revenues. Budgetary accounting techniques are important because the annual budget is a legal compliance standard against which the operations of government are evaluated. . . . . , . . . . . . "- . -22- MATTITUCK FIRE DISTRICT SCHEDULE OF FINDINGS AND QUESTIONED COSTS December 31, 2006 FINDINGS - FINANCIAL STATEMENTS AUDIT (continued) 06-03 MANAGEMENT OVERSIGHT OF BUDGET (continued) Criteria (continued) Because statutory laws of the State of New York require staying within appropriated budgets, the accounting structure is designed to ensure and demonstrate compliance with the budget. To achieve this goal, appropriated budgets are integrated into the accounting system. "Integrating the budget" means the accounting system is specifically designed to provide ongoing and timely information on unrealized budgetary revenues, as well as remaining uncommitted balances of appropriations. Use of an encumbrance system throughout the year is also an important tool of budgetary accounting. Encumbrance accounting, under which purchase orders, contracts and other commitments for the expenditure of monies are recorded for budgetary control purposes, in order to reserve that portion of the applicable appropriation. Generally, an encumbrance should be created when a purchase order is generated. Accounting software for municipalities and good internal control should prevent the generation of a purchase order if an appropriation is not available. 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. Encumbrances reserved against fund balances are re-appropriated in the ensuing year. The District has an automated accounting software system installed on District computers. When properiy utilized, the accounting system should provide District officials with up-to-date and accurate information to be utilized in managing District operations and monitoring District finances. Condition The District's operating budget was not effectively used to control expenditures resulting in a general fund deficit of $13,778 and the 2006 budget was overexpended by $5,986. As a result, the District is in violation of various laws and regulations for not adjusting the budget in advance of expending funds. Additionally, the District is not utilizing an encumbrance system to aid in monitoring commitments existing within the District for which invoices have not yet been received nor booking accounts payable. Recommendation The District should document in a formal accounting policy or in the minutes to the annual reorganization meeting the policy for approving budget transfers. The District's management should throughout the year monitor expenditures as compared to the budget and secure approvals for budget transfers, as appropriate. Monthly, the Board and other appropriate personnel should get an accounting of the budget via use of a report that shows original budget, modified budget, expenditures, encumbrances, favorable and (unfavorable) variances. No expenditures should be incurred without first having an appropriation in place. In addition, the District should take steps to strengthen its internal control relating to the budget process by using an encumbrance system during the year, better communication to the Board and other appropriate personnel to insure that all expenditures and other commitments are identified. The Board should establish procedures to effectively monitor the District's budget. The monitoring should ensure that District appropriations are not over expended. In addition, the Board should take steps to better control expenditures. When it becomes apparent that the level of appropriations provided in the adopted budget will not be sufficient, or when the anticipated financing sources for those appropriations will not be realized, the Board should take action to provide additional financing, reallocate appropriations or reduce appropriations to make up for unexpected budget shortfalls. We further recommend that the adopted budgets for the 2007 year be examined immediately and compared to actual amounts to date to see if the District's revenues and expenditures are within the adopted budget amounts, and if need be, the District should take steps to reduce expenditures where possible to help stabilize fund balance and minimize the chance that over expenditures in funds will occur again. The Board should carefully review the 2007 budget to make sure that it contains provisions for increasing overall fund balance in the general fund in order to return to sufficient fund equity levels and ensure the stability of the Districts finances in future years.