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HomeMy WebLinkAbout2007MATTITUCK FIRE DISTRICT FINANCIAL STATEMENTS Year ended December 31, 2007 TABLE OF CONTENTS PaRe No. INDEPENDENT AUD~ORS'REPORT .............................................................................................. 1-2 FINANCIAL STATEMENTS Balance Sheet - Governmental Funds ................................................................................................ 3 Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds .......................................................................................... 4 Statement of Assets and Liabilities - Fiduciary Fund .......................................................................... 5 Notes to Financial Statements ............................................................................................................. 6-15 SUPPLEMENTARY INFORMATION General Fund - Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual ................................................................................ 16 General Fund - Schedule of Detailed Expenditures and Appropriations by Departments ....................................................................................................... Capital Funds - Combining Balance Sheet ......................................................................................... 17-18 19 Capital Funds - Combining Schedule of Revenues, Expenditures and Changes in Fund Balance ........................................................................................................ OTHER REPORTS Independent Auditors' Report on Internal Control Over Financial Reporting and on Compliance and other Matters Based on an Audit of Financial Statements Performed In Accordance with GovemmentAuditing Standards .................... Schedule of Findings and Questioned Costs ...................................................................................... 20 21-22 23 -1- CERTIFIED PUBLIC ACCOUNTANTS, BUSINESS ADVISORS AND CONSULTANTS 25 Suffolk Court, Hauppauge, New York 11788 631.434.9500 · Fax 631.434.9518 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 governmental activities and the fiduciary fund information of the Mattituck Fire District, New York, as of and for the year ended December 31, 2007, 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 Mattituck Fire 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 2. In our opinion the financial statements referred to in the first paragraph present faidy, 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, 2007, 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 2. In accordance with Government Auditing Standards, we have also issued our report dated March 25, 2008, 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 internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal 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, VR~GIANO, ZURECK ~ COMP. aridly, P.C. -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. Hauppauge, New York March 25, 2008 -3- MATTITUCK FIRE DISTRICT GOVERNMENTALFUNDS BALANCE SHEET December31,2007 General Capital Fund Fund Totals ASSETS Cash $ 165,707 $ 294,457 $ 460,164 Total Assets $ 165,707 $ 294,457 $ 460,164 LIABILITIES Accounts payable $ 44,537 $ 44,537 Accrued expenses 5,996 5,996 Total Liabilities 50,533 $ -0- 50,533 47,048 47,048 294,457 294,457 68,126 68,126 FUND EQUITY Reserve for encumbrances Reserve for capital projects Unreserved - undesignated Total Fund Equity 115,174 294,457 409,631 Total Liabilities and Fund Equity $ 165,707 $ 294,457 $ 460,164 See notes to financial statements. -4- MATTITUCK FIRE DISTRICT GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES Year ended December 31, 2007 REVENUES Real property taxes Interest and earnings Sale of apparatus and equipment Insurance recoveries and refunds Refund of prior year's expenses Miscellaneous income General Capital Fund Fund Totals EXPENDITURES Personal services Equipment and capital outlay Fire protection Employee benefits Debt service 1,857,967 $ 1,857,967 21,962 $ 13,462 35,424 12,000 12,000 635 635 856 856 243 243 Total Revenues 1,893,663 13,462 1,907,125 150,520 150,520 150,845 727,630 878,475 741,740 741,740 402,210 402,210 210,749 210,749 Total Expenditures 1,656,064 727,630 2,383,694 Excess (Deficiency) of Revenues Over Expenditures OTHER FINANCING SOURCES AND (USES) Operating transfers in (out) Net Change in Fund Balance Fund Balance at Beginning of Year Fund Balance at End of Year 237,599 (714,168) (476,569) (171,275) 171,275 -0- 66,324 (542,893) (476,569) 48,850 837,350 886,200 $ 115,174 $ 294,457 $ 409,631 See notes to financial statements. -5- MATTITUCK FIRE DISTRICT FIDUCIARY FUND STATEMENT OF ASSETS AND LIABILITIES December 31, 2007 ASSETS Service award program assets LIABILITIES Service awards Total Assets Total Liabilities Trust Fund $ 1,447,780 $ 1,447,780 $ 1,447,780 $ 1,447,780 See notes to financial statements, MATTITUCK FIRE DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2007 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 Fire Commissioners 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 exemise 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 States 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 governmental functions are financed. The acquisition, use and balances of expendable financial resoumes and the related liabilities are accounted for through governmental funds. The measurement focus of the governmental funds is upon determination of financial position and changes in financial position. Government funds are further classified as major and non-major funds. The District considers each of its governmental funds to be major. 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 previsions of general municipal law (Section 6g). Capital expenditures may be made only for the purpose of which the fund was established. The principal soumes of revenue for these funds are budgetary appropriations transferred from the general fund. Expenditures from these funds are subject to permissive referendum. Additionally, the District reports the following fiduciary funds: Fiduciary Fund - the fiduciary fund is 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 in the Fire District Accounting and Reporting Manual issued by the Office of the New York State Comptroller. Under this system the District utilizes the modified accrual basis of accounting, whereby revenues are recognized in the accounting period in which they are available and measurable, and expenditures will generally be recognized in the accounting period in which the liability is actually incurred. This basis of accounting differs from accounting principles generally accepted in the United States of America for governments as promulgated by the Government Accounting Standards Board. -7- MATTITUCK FIRE DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2007 Note 2 - Summary of Significant Accounting Policies (continued) Basis of Accountin.q (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 as a reservation of fund balance 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 Payables 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 to fixed assets is disclosed in these notes to the financial statements. Equity 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. MA'i-FITUCK FIRE DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2007 Note 4 - Revenues and Expenditures Propedy Taxes Property taxes am collected by the Town of Southold on behalf of the District. Payments from the Town am 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 Budgetary Procedures The District prepares an annual budget for the general fund, which is approved by the Board of Fire 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 Fire 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's 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 #A0 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; oCollateralized with securities held by the pledging financial institution in the District's name; or oCollateralized with securities held by the pledging financial institution's trust department or agent, but not in the District's name. At December 31, 2007, the District's bank balances were $473,072. Of the District's bank balances, $100,000 was covered by federal deposit insurance, $373,072 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- MA-ri'rrucK FIRE DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2007 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 materiat 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, 2007, individual fund interfund transfer balances were as follows: Transfer Transfer In Out General fund Capital fund $ 171,275 Total L 171.275 Note 8 - Capital Assets Capital assets consist of the following at December 31,2007: Balance 01/01/07 Additions $ 171,275 $ 171.275 Balance Deletions 12/31/07 Capital assets not being depreciated: Land $ 16,000 Total capital assets not being depreciated $ 16,000 $ -0- $ Depreciable capital assets: Buildings Infrastructure Vehicles and related equipment Equipment Total depreciable capital assets Less accumulated depreciation: Buildings Infrastructure Vehicles and related equipment Equipment Total accumulated depreciation Total net depreciable capital assets Total net capital assets $ 16,000 -0- $ 16,000 $ 2,543,548 $ 8,450 $ 2,551,998 425,300 425,300 2,395,953 1,417,822 $ 108,830 3,704,945 505,323 50,312 555,635 $ 5,870,124 $ 1,476,584 $ 108,830 $ 7,237,878 $ 481,026 $ 66,240 $ 547,266 235,721 10,633 246,354 1,278,695 191,950 $ 108,830 1,361,815 151,590 50,808 202,398 $ 2,147,032 $ 319,631 $ 108,830 $ 2,357,833 4,88O,045 $ 4,896,045 $ 319,631 Total depreciation expense -10- MATTITUCK FIRE DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2007 Note 8 - Capital Assets (continued) The District evaluates prominent events or changes in cimumstances affecting capital assets to determine whether impairment of a capital asset has occurred. The District's policy is to record an impairment loss in the period when the District determines that the carrying amount of the asset will not be recoverable. At December 31, 2007, the District has not recorded any such impairment losses. Note 9 - Retirement System Plan Description The District participates in the New York State and Local Employees' Retirement System (ERS) (the "System"). 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 Systems 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 System 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 made 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 2007 $ 12,536 8.80% 2006 $ 19,099 9.70% 2005 $ 12,843 10.20% Since 1989 and subsequent years, the System's 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- MA'I-FITUCK FIRE DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2007 Note '10 - Length of Service Awards Program The District's Length of Service Award Program (the "Plan") financial statements am for the year ended December 31, 2007. The District established a defined benefit Plan for the active volunteer firefighters. The Plan took effect on January 1, 1992. The Plan was established pursuant to Article 11-A of New York State General Municipal Law. The Plan provides municipally-funded pensionlike benefits to facilitate the recruitment and retention of active volunteer firefighters. The District is the sponsor of the Plan. Plan Description Participation, Vesting and Service Credit Active volunteer firefighters who have reached the age of 18 and who have completed one year of firefighting service are eligible to participate in the Plan. Participants acquire a nonforfeitable right to a service award after being credited with one year of firefighting service or upon attaining the Plan's entitlement age. The Plan's entitlement age is age 62. In general, an active volunteer firefighter is credited with a year of firefighting service for each calendar year after the establishment of the Plan in which he or she accumulates fifty points. Points are granted for the performance of certain activities in accordance with a system ("Point System") established by the District on the basis of a statutory list of activities and point values. A Participant may also receive credit for service prior to January 1, 1991 (called "Prior Service") for years of firefighting service rendered prior to the establishment of the Plan. In order to receive Prior Service credit, a Participant must have been an active volunteer fire fighter on January 1, 1992 and must have earned a year of service credit under the Point System during 1992. Benefits A Participant's benefit under the Plan is the actuarial equivalent of a monthly payment for life equal to $20 multiplied by the Participant's total number of years of firefighting service. The number of years of firefighting service used to compute the benefit cannot exceed forty. Effective January 1, 2003, except in the case of disability or death, benefits are not payable until a Participant reaches the Entitlement Age ("EA') of 62 or the Participant's age on December 31 of the first calendar year after 1990 during which the Participant earns a year of service credit under the Point System. The Plan provides statutorily mandated death and disability benefits. The Plan also provides optional line of duty disability benefits. Should a volunteer firefighter of the District become totally and temporarily disabled, or partially and permanently disabled, as certified by the Workers' Compensation Board or other competent authority approved by the Board of Fire Commissioners, and the disability occurs during the course of service as a volunteer, while actively engaged in providing line of duty services, as defined in subdivision one of section five of the Volunteer Firefighter' Benefit Law, the firefighter shall receive five points for each complete calendar month of such disability under the Point System up to the earlier of the date such volunteer is no longer totally and temporarily or partially and permanently disabled or attains the EA. However, if such disability becomes a permanent and total disability and a Mattituck Fire District Service Award Program Total and Permanent Disability is awarded on account of such disablement, then no future points shall be credited under this special line of duty disability benefit provision after the date of the awarding of such Total and Permanent Disability by the Board of Fire Commissioners. If a Participant is awarded a Total and Permanent Service Award Program Disability by the Board of Fire Commissioners before attaining the EA for a disability commencing after December 31, 1991, the Participant is entitled to receive an amount equal to the Participant's Accrued Service Award earned as of the date such disability payment is awarded by the Board of Fire Commissioners and payable on the first day of every month for the lifetime of the Participant for ten years, whichever is greater. Once a Participant is awarded a Total and Permanent Service Award Program Disability under the Plan provisions, such Participant shall no longer be eligibte to participate in the District's Plan. If a Participant dies before attaining the EA, a lump-sum shall be paid to the Participant's designated beneficiary equal to the discounted actuarial present value of the Participant's Accrued Service Award earned as of the date of death. If the Participant was an active volunteer firefighter of the District as of the date of death, the minimum death benefit payable to the Participant's designated beneficiary shall be $20,000. -12- MA'I-rlTUCK FIRE DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2007 Note 10 - Length of Service Awards Program (continued) Fiduciary Investment and Control Service credit is determined based on information certified to the Board of Fire Commissioners by each fire company having members who participate in the Plan. Each fire company must maintain all required records on forms prescribed by the Board of Fire Commissioners. The Board of Fire Commissioners of the District has retained and designated Penflex, Inc. to assist in the administration of the Plan. The designated Plan administrator's functions include calculating the amount to be contributed at the end of each year based upon the criteria set forth in the Plan Document. Disbursements of Plan assets for the payment of benefits or administrative expenses must be approved by the Board of Fire Commissioners and delivered to the Custodian through a Payment Schedule. The Board of Fire Commissioners of the District has retained and designated AG Edwards Trust Company FSB ("AG Edwards") as the Custodian of the Plan's assets. AG Edwards shall make payments to Plan Participants and their beneficiaries in accordance with the Payment Schedule. Plan assets are required to be held in trust by Length of Service Award Program legislation, for the exclusive purpose of providing benefits to Participants and their beneficiaries or for the purpose of defraying the reasonable expenses of the operation and administration of the Plan. The trust agreement is dated January 1, 1992 as amended, and the trustees are the Board of Fire Commissioners of the District. Authority to invest Plan assets is vested in the Board of Fire Commissioners of the District. Subject to restrictions in the Plan document, Plan assets are invested in accordance with a statutory "prudent person" rule. The Plan document restricts the Trustee from investing in securities or obligations issued by the Mattituck Fire District, other than a de minimis amount held in common investment vehicles in which the Trustee invests. The District is required to retain an actuary to determine the amount of the District's contributions to the plan. The actuary retained by the District for this purpose is Edward Holohan, President and ASA and Tom FioriIIo, ASA of Penflex, Inc. Portions of the following information are derived from a report prepared by the actuary dated February 2007. Plan Financial Condition As of and for the year ended December 31, 2007 Funded Status of the Plan Actuarial present value of benefits Less: total assets available for benefits Unfunded actuarial present value of benefits Funded ratio 2,718,932 1,447,780 1.271.152 53.25% Assets Available for Benefits Cash and equivalents Fixed Income bond funds Mutual funds Total assets available for benefits Receipts and Disbursements Plan assets, beginning of year Changes during the year: Plan contributions Insurance premiums reimbursed Investment income earned Changes in fair market value of investments Investment expense Plan benefit withdrawals Plan assets, end of year $ 24,044 1,122,046 301,690 $ t.447.780 $ 1,129,084 293,993 6,691 101,958 (20,626) (63,320) $ 1.447.780 -13- MATI'ITUCK FIRE DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2007 Note '10 ~ Length of Service Awards Program (continued) Prior Service Costs There are no prior service costs associated with the Plan. Contributions The amount of the District's contribution recommended by the actuary based in the December 31, 2007 report was $289,698. The amount of the District's actual contribution was $324,388. The District made the 2007 contribution on February 15, 2008. Administration Fees Fees paid to designated Plan administrator / actuary: $4,293 Fees paid to trustee: $20,626 Funding Methodology and Actuarial Assumptions Normal Costs The actuarial valuation methodology used by the actuary to determine the District's contribution is the "Attained Age Normal Frozen Initial Liability". Under this cost method, there are two components to the annual cost each year. The first component, the "normal cost", is equal to the level annual payment required to fund the current Participant's projected benefits based on their service credit earned after the effective date of the Plan and before the EA. The second component, the annual amortization cost, equals the level annual payments required to fund over the amortization period(s), the Participant's benefits, if any based on (1) either service credit earned before the effective date of the Plan or service credit earned after the attainment of the EA, or (2) Plan amendments that create an immediate unfunded liability and are required to be amortized. Amortization period for liability for service after EA - 5 years Amortization period for liability for service after EA, Retro - 5 years Under the Attained Age Normal Frozen Initial Liability cost method, actuarial gains and losses are amortized over the future years of firefighting service before the EA for the group of firefighters participating in the Plan on the valuation date. Higher than expected investment income, for example, in any one particular year will reduce the normal cost in that year and in each of the future years based upon the ages of the current firefighters participating in the program on the valuation date. Likewise, losses to the Plan's Trust Fund will result in an increase in the future annual normal cost. The assumptions used by the actuary to determine the District's contribution and the actuarial present value of benefits are: Assumed rate of return on investment 6% Mortality Tables used for: Withdrawal: Disability: Retirement: Death (Active): Death (Inactive): None Assumed 1.5% load of active and terminated vested Participants present value of projected benefits 100% at Entitlement Age None Assumed 1994 Unisex Pensioner Male Mortality Table projected with scale AA to 2007 -14- MATTITUCK FIRE DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2007 Note 11 - Indebtedness Long-Term Debt The following is a summary of changes in long-term debt transactions for the year ended December 31, 2007: Balance Balance 1/1/07 Increases Reductions 12/31/07 Serial bonds $ 1,137,000 $ -0- $ 69,000 $ 1,068,000 Capital lease obligation 764,478 -0- 65,627 698,851 $ 1,901,478 $ -0- $ 134,627 $ 1,766,851 General ObIigat on Sera 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 credit 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 taxpayem and others for liquidation of the long-term liabilities. General obligation serial bonds of the Distdct 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 12/31/07 2004 2019 3.70% $ 845,000 2005 2019 4.20% 223,000 $ 1,068,000 Future principal and interest payments to maturity are as follows: Year Principal Interest Total 2008 $ 70,000 $ 39,614 $ 109,614 2009 75,000 36,856 111,856 2010 76,000 34,006 110,006 2011 82,000 31,022 113,022 2012 82,000 27,903 109,903 2013-2017 473,000 88,415 561,415 2017-2019 210,000 9,054 219,054 $ 1,068,000 $ 266,870 $ 1,334,870 Capital Lease Obliqations - 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 was delivered and placed into service during 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. -15- MATTITUCK FIRE DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2007 Note 11 - Indebtedness (continued) Long-Term Debt (continued) Future principal and interest payments to maturity are as follows: Year Principal Interest Total 2008 $ 62,675 $ 36,837 $ 99,512 2009 65,978 33,534 99,512 2010 69,456 30,056 99,512 2011 73,117 26,395 99,512 2012 76,971 22,541 99,512 2013-2016 350,654 47,395 398,049 Note t2 - Commitments Risk ManaRement $ 698,851 $ 196,758 $ 895,609 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 Agreement 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. 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, 2007 was approximately $4,879. Minimum annual commitments under the operating leases described above are as follows: Year ended December 31,2008 $ 4,879 2009 4,879 2010 3,479 2011 825 $ 14.062 -16- MATTITUCK FIRE DISTRICT GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL Year ended December 31, 2007 REVENUES Real property taxes Interest and earnings Sale of apparatus and equipment Insurance recoveries and refunds Refund of prior year's expenses Miscellaneous income Variance Original Final Positive Budget Budget Actual Encumbrances (Negative) $ 1,857,967 $ 1,857,967 $ 1,857,967 $ -0- 21,962 21,962 12,000 12,000 635 635 856 856 243 243 EXPENDITURES Persona[ services Equipment and capital outlay Fire protection Employee benefits Debt service Total Revenues 1,857,967 1,857,967 1,893,663 35,696 147,813 150,520 150,520 -0- 140,000 155,000 150,845 4,155 768,069 797,253 741,740 47,048 8,465 423,353 404,170 402,210 1,960 207,457 210,749 210,749 -0- Total Expenditures 1,686,692 1,717,692 1,656,064 47,048 14,580 Excess of Revenues Over Expenditures OTHER FINANCING USES Operating transfers out Net Change in Fund Balance $ Fund Balance at Beginning of Year Fund Balance at End of Year 171,275 140,275 237,599 (47,048) 50,276 (171,275) (171,275) (171,275) -0- $ (31,000) 66,324 48,850 $ 115,174 $ (47,048) $ 50,276 -17- MATTITUCK FIRE DISTRICT GENERAL FUND SCHEDULE OF DETAILED EXPENDITURES AND APPROPRIATIONS BY DEPARTMENTS Year ended December 31,2007 Personal Services Equipment and Capital Outlay Fire Protection Services Administrative Expenses Office supplies Association dues Legal and audit fees Publications Election expense Total Administrative Expenses Utility and Water Expenses Gas and electric Telephone Hydrant rental Total Utility and Water Expenses Firefighters Expense Uniforms Medical exams Inspection dinner Total Firefighters Expense Travel and Convention Expenses Building Costs Building repairs Total Building Costs Fire Equipment and Alarm Fire alarm service Gas and diesel Repairs and maintenance Medical supplies Total Fire Equipment and Alarm Insurance Costs Vehicle and property Total Insurance Costs Total Fire Protection Services Variance Odginal Final Positive Budget Budget Actual Encumbrances (Negative) $ 147,813 $ 150,520 $ 150,520 $ 140,000 155,000 150,845 4,155 28,960 19,151 19,107 44 1,825 1,195 1,195 -0- 71,124 75,678 75,678 -0- 6,750 6,013 5,480 533 -0- 385 385 -0h 108,659 102,422 101,845 ~0- 577 67,100 47,100 46,903 197 20,000 15,000 14,185 815 22,000 23,069 23,069 -0- 109,100 85,169 84,157 -0- 1,012 20,000 26,000 18,685 6,320 995 35,000 31,264 31,264 -0h 32,000 45,368 45,368 -0- 87,000 102,632 95,317 6,320 995 42,703 35,203 32,410 2,793 205,000 185,343 172,641 11,000 1,702 205,000 185,343 172,641 11,000 1,702 1,500 2,000 1,570 430 18,150 26,943 26,943 -0- 115,000 204,584 174,856 29,728 -0- 30,000 15,000 14,521 479 164,650 248,527 217,890 29,728 909 50,957 37,957 37,480 477 50,957 37,957 37,480 -0- 477 768,069 797,253 741,740 47,048 8,465 (continued) -18- MATTITUCK FIRE DISTRICT GENERAL FUND SCHEDULE OF DETAILED EXPENDITURES AND APPROPRIATIONS BY DEPARTMENTS Year ended December 31, 2007 Original Final Budget Budget Actual Encumbrances Variance Positive (Negative/ Employee Benefits Social security 14,071 11,484 11,484 State retirement system 21,221 12,536 12,536 Service award program 297,743 297,743 297,743 Workers compensation insurance 41,675 31,675 30,698 Unemployment insurance 3,495 451 451 Life insurance 21,995 12,995 12,012 Medical and accident insurance 23,153 37,286 37,286 Total Employee Benefits 423,353 404,170 402,210 Debt Service Principle Interest -0- 158,000 134,626 134,626 49,457 76,123 76,123 Total Debt Service 207,457 210,749 210,749 -0- -0- 977 983 1,960 -0- -0- Totals $ 1,686,692 $ 1,717,692 $ 1,656,064 $ 47,048 $ 14,580 -19- MATTITUCK FIRE DISTRICT CAPITAL FUNDS COMBINING BALANCE SHEET December 31, 2007 ASSETS Cash FUND EQUITY Reserve for capital projects Total Assets $ $ Total Fund Equity Capital Reserves Building and Grounds Apparatus Total $ 42,087 $ 252,370 $ 294,457 42,087 $ 252,370 $ 294,457 42,087 $ 252,370 $ 294,457 42,087 252,370 294,457 Total Liabilities and Fund Equity $ 42,087 $ 252,370 $ 294,457 -20- MATTITUCK FIRE DISTRICT CAPITAL FUNDS COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE Year ended December 31, 2007 REVENUES Interest and earnings Total Revenues EXPENDITURES Equipment and capital outlay Total Expenditures Deficiency of Revenues Over Expenditures OTHER FINANCING SOURCES Operating transfers in Total other Financing Sources Net Change in Fund Balance Fund Balance at Beginning of Year Fund Balance at End of Year Capital Reserves Buildings and Grounds Apparatus Total $ 1,282 $ 12,180 $ 13,462 1,282 12,180 13,462 164,003 563,627 727,630. 164,003 563,627 727,630 (162,721) (551,447) (714,168) 21,275 150,000 171,275 21,275 150,000 171,275 (141,446) (401,447) (542,893) 183,533 653,817 837,350 $ 42,087 $ 252,370 $ 294,457 -21- CERtifIED PUBLIC ACCOUNTANTS, BUSINESS ADVISORS AND CONSULtANtS 25 Suffolk Court, Hauppauge, New York 11788 631.434.9500 · Fax 631.434.9518 INDEPENDENT AUDITORS' 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 Mattituck Fire District Town of Southold Mattituck, New York We have audited the financial statements of the governmental activities and the fiduciary fund information of the Mattituck Fire District, New York, as of December 31, 2007, and for the year then ended, as listed in the table of contents and have issued our report thereon dated March 25, 2008. 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 Reportinq In planning and performing our audit, we considered the Mattituck Fire District's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Mattituck Fire District's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Mattituck Fire District's internal control over financial reporting. Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses. However, as discussed below, we identified certain deficiencies in internal control over financial reporting that we consider to be significant 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 Mattituck Fire District'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. We consider the deficiency described in the accompanying schedule of findings and questioned costs as item 07- 01 to be a significant deficiency in internal control over financial reporting. 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 was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies and accordingly, would not necessarily disclose all significant deficiencies that are also considered to be material weaknesses. However, we believe that none of the significant deficiencies described above is a material weakness. ALBRECHT, VIGGIANO, ZUReCK ~ COHPANY, ~C. -22- 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 or other matter that is required to be reported under Government Auditing Standards. We also noted certain matters that we reported to management of the Mattituck Fire District, in a separate letter dated March 25, 2008. The Mattituck Fire District's response to the findings identified in our audit is described in the accompanying schedule of findings and questioned costs. We did not audit the Mattituck Fire District's response and accordingly, we express no opinion on it This report is intended solely for the information and use of the Board of Fire Commissioners, management, and federal or state awarding agencies and is not intended to be and should not be used by anyone other than specified parties. Hauppauge, New York March 25, 2008 -23- MATI'ITUCK FIRE DISTRICT SCHEDULE OF FINDINGS AND QUESTIONED COSTS December 31, 2007 FINDINGS - FINANCIAL STATEMENTS AUDIT 07-01 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 of accounting Criteria District employees involved in maintaining the books and records and financial statement preparation lack the qualifications and training to fulfill their assigned functions related to financial accounting and reporting related to preventing, detecting, and correcting a potential misstatement or omission to the financial statements and related note disclosures. 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.