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Home My WebLink About2008 Outside Audit ReportCERTIFIED PUBLIC ACCOUNTANTS RECEI¥'ED FEB ~.~ ~ To Honorable Supervisor and Town Board Town of Southold Southold, New York '~oulhol4 Town In planning and performing our audit of the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Town of Southold as of and for the year ended December 31, 2008, in accordance with auditing standards generally accepted in the United States Df America, we considered the Town of $outhold's internal control over financial reporting (internal control) 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 Governmental Unit's internal control. Our consideration of internal control included procedures to evaluate the design of controls relevant to an audit of financial statements and to determine whether they have been implemented, but it did not include procedures to test the operating effectiveness of controls, and accordingly, was not directed to discovering significant deficiencies in internal control. Accordingly, we do not express an opinion on the effectiveness Df the Town of Southold's internal control. 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 entity's internal control. Our consideration of internal control was for the limited purpose described in the first paragraph and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control that we consider to be material weaknesses, as defined above. However, we identified in the attached schedule deficiencies in internal control that we consider to be significant deficiencies. A control deficiency exists when the design or operation of a control does not allow management Dr 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 a combination of control deficiencies, that adversely affects the entity's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the entity's financial statements that is more than inconsequential will not be prevented or detected by the entity's internal control. We consider the following deficiencies to be significant deficiencies in internal control. Hauppauge, New York December 16, 2009 PERSONAL SERVICE. TRUSTED ADVICE. T~wn of Southold December 16, 2009 Page 2 PURCHASING AND PROCUREMENT Observation New York State General Municipal Law requires purchases of similar items to be aggregated to determine if they meet the threshold for formal competitive bidding or required price quotes. Although the Town has a system in place to provide accurate historical information to be used to estimate future purchases, during the course of the audit, we noted several instances where the Highway Department and the Department of Public Works did not obtain and/or retain verbal or written quotes as required by the Town's adopted Procurement Policy. In addition, there was no evidence that these departments had secured quotes to document that it was receiving the lowest price for services purchased. Recommendation We recommend that the Board ensure that the Highway Department and Department of Public Works are complying with Board adopted policies and the requirements of General Municipal Law. We further recommend that to document such compliance properly, the departments should solicit and retain competitive quotations gathered from a sufficient number of vendors, as required by the policy and attach all documentation to the completed voucher packet. BANK RECONCILIATIONS AND RECONCILING ITEMS - JUSTICE COURT AND TOWN CLERK Observation During our audit, we noted that bank reconciliations for Town Clerk and Justice Court accounts were improperly reconciled, reconciled balances per the reconciliations did not agree to the general ledger, and reconciling items were not being followed up on and / or corrected. Upon our audit of the Justice Court, we noted that the bank reconciliations did not accurately reflect outstanding checks and deposits in transit throughout the year. We noted that certain outstanding checks for Justice Court accounts were more than one year old. Recommendation Bank reconciliations should include all reconciling items and should be prepared on a monthly basis for all cash accounts maintained by the Town. In addition, all bank reconciliations should tie into the general ledger as of month-end and all necessary entries should be posted. To aid in the preparation of bank reconciliations and to reflect an accurate cash balance in the financial statements, all checks outstanding more than six months old should be investigated and written-off as and disposed of in accordance with NYS Comptroller guidance. JUSTICECOURTREPORTFILINGS Observation During our audit of the Justice Court, we noted that three reports were filed late. According to the Office of the New York State Comptroller's Handbook for Town and Vi#age Justices and Court Clerks, "Reports are due between the Ist and the 10th of the month, for every month that you hold office. Reports that are received after the 10th of the month are considered late even if they are mailed on or before the 10th of the month. Reports that are received prior to the 1st are premature and may be incomplete if additional cases were heard during that month and were not included in the report." Recommendation The Justice Court should report to Office of the New York State Comptroller timely. CERTIFIED PUBLIC ACCOUNTANTS FEB ,23 2010 To the Town Board Town of Southold Southold, New York ~,ouJJ:c,l~l To~n CIe~, We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Town of Southold for the year ended December 31, 2008, and have issued our report thereon dated December 16, 2009. Professional standards require that we provide you with the following information related to cur audit. Our Responsibility under U.S. Generally Accepted Auditing Standards As stated in our engagement letter dated December 31, 2008, our responsibility, as described by professional standards, is to express an opinion about whether the financial statements prepared by management with your oversight are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles. Our audit of the financial statements does not relieve you or management of your responsibilities. Planned Scope and Timing of Audit We performed the audit according to the planned scope and timing previously communicated to you in our engagement letter and communicated with the Town Comptroller about planning matters dudng May 2009. Significant Audit Findings Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies, in accordance with the terms of our engagement letter, we will advise management about the appropriateness of accounting policies and their application. The significant accounting policies used by the Town of Southold are described in Note A to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during 2008. We noted no transactions entered into by the governmental unit during the year for which there is a lack of authoritative guidance or consensus. There are no significant transactions that have been recognized in the financial statements in a different period than when the transaction occurred. Accounting estimates are an integral pad of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. At~dit Committee of the Board of Directors of Town of Southold Page 2 Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly than those expected. The most sensitive estimates affecting the financial statements were: Management's estimate of depreciation expense of $4,112,239 is based on the estimation of the useful lives of the fixed assets determined by the Town. We evaluated the key factors and assumptions used to develop the depreciation expense in determining that it is reasonable in relation to the financial statements taken as a whole. Management's estimate of the compensated absences liability of $7,378,322 is based on what the Town will be expected to pay in vacation and sick time when an employee terminates their employment with the Town. We evaluated the key factors and assumptions used to develop the compensated absences liability in determining that it is reasonable in relation to the financial statements taken as a whole. Management's estimate for landfill closure and post-closure care costs of $516,444 is based on what the Town expects to pay for the monitoring and maintenance costs of their landfill over thirty years based on an estimate provided by engineers. We evaluated the key factors and assumptions used to develop the landfill closure and post-closure care costs in determining that it is reasonable in relation to the financial statements taken as a whole. Management's estimate of other post-employment benefits payable of $3,674,879 and the unfunded actuarial accrued liability of $45,806,258 is based on what the Town expects to pay in medical insurance costs and benefits to retired employees currently and over the next thirty years, respectively, based on certain assumptions provided by an actuary. We evaluated the key factors and assumptions used to develop the other post-employment benefits liability in determining that it is reasonable in relation to the financial statements taken as a whole. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified dudng the audit, other than those that are trivial, and communicate them to appropriate level of management. We did not detect any misstatements that were material, either individually or in the aggregate, to the financial statements taken as a whole. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting, or auditing matter that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. ,~udit Committee of the Board of Directors of Town of Southold Page 3 Management Representations We have requested certain representations from management that are included in the management representation letter dated December 16, 2009. Manaflement Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the Town's financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Other Audit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the Town's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. This information is intended solely for the use of the Board of Directors and management of Town of Southold and is not intended to be and should not be used by anyone other than these specified parties. Very truly yours, Albrecht, Viggiano, Zureck & Co., P.C. Hauppauge, New York December 16, 2009 CERTIFIED PUBLIC ACCOUNTANTS Presentation of the Town of Southold's Audit Plan AUDIT, TAX AND BUSINESS ADVISORS · AVZ's Audit Engagement Team · Reports and Communication · Management's Responsibilities · AVZ's Responsibilities · Summary · Audit Timeline · Audit and Accounting Matters · Other Matters · AVZ's Audit Methodology · General Considerations 2 INDEPENDENT MEMBER OF BKR INTERNATIONAL ENGAGEMENT PARTNER CONCURRING REVIEW PARTNER AUDITPRINCIPAU MANAGER AUDIT AND ADVISORY PROFESSIONALS 3 INDEPENDENT MEMBER OF BKR INTERNATIONAL Issuance of the following opinions and reports: Opinions on the following financial statements of the Town of Southold: governmental activities, the discretely presented component unit and each major fund and the aggregate remaining funds. Report on the Town's internal controls over financial reporting and on compliance and other matters based on an audit of financial statements in accordance with Government Auditing Standards. · Report on the Town's compliance with requirements applicable to each major program and on internal control over compliance in accordance with OMB Circular A-133. · Report on the Town's compliance and controls over state transportation assistance received as applicable per Draft 43 of New York Codification of Rules and Regulations. · Opinion on the statement of collections and disbursements of the Town of Southold Justice Court. Issue management letter to the Supervisor and Board of Trustees on our recommendations regarding internal control and other operational matters pursuant to SAS No. 115. Report the above and other matters to the Supervisor and Board of Trustees in accordance with SAS No. 114, Auditors Communication with Those Charged with Governance. 4 iNDEPENDENT MEMBER OF BKR INTERNATIONAL Management must: · Design and maintain an adequate internal control system, which includes financial reporting and financial statement disclosure controls. · Develop prudent judgments and estimates. Prepare timely and accurate financial statements, footnotes and required supplementary information, in accordance with accounting principles generally accepted in the United States of America as applied to governmental units. 5 INDEPENDENT MEMBER OF BKR INTERNATIONAL · We have a responsibility to conduct our audit in accordance with professional standards. In carrying out this responsibility, we plan and perform the audit to obtain reasonable - not absolute - assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud. · We have no responsibility to obtain reasonable assurance that misstatements that are not material are detected. 6 INDEPENDENT MEMBER OF tSKR INTERNATIONAL · Risk based audit approach focused on internal control coupled with significant substantive testing. · Creating consistent application of auditing procedures for the Town. · Consideration of the utilization of new computer auditing assistance tools (CAATS). · Increased planning and ongoing dialogue. · Continued involvement of internal audit, if applicable. · Review of non-routine transactions - real time; on a continuous basis. · Substantial coverage as part of audit scope selection process. · Identify best practices based on past experiences. 7 INDEPENDENT MEMBER OF BKR INTERNATIONAL 8 INDEPENDENT MEMBER OF BKR INTERNATIONAL We identify audit and accounting matters that could have a material impact on the Town's financial statements. We then consider these matters when developing our audit approach and tailor our procedures to address these risks. 9 INDEPENDENT MEMBER OF BKR INTERNATIONAL · Understanding the organizational structure · Related party transactions · SAS No. 115, Communicating Internal Control Related Matters Identified in an Audit · SAS No. 114, Communication with Those Charged with Governance · Follow up to prior year findings and corrective action plan 10 INDEPENDENT MEMBER OF BKR INTERNATIONAL iNDEPENDENT MEMBER OF BKR iNTERNATIONAL 12 INDEPENDENT MEMBER OF BKR INTERNATIONAL INDEPENDENT MEMBER OF BKR INTERNATIONAL 1 3 INDEPENDENT MEMBER OF BKR ~NTERNATIONAL 14 · · · · · · · · · · · INDEPENDENT MEMBER OF BKR INTERNATIONAL 1 5 INDEPENDENT MEMBER OF BKR INTERNATIONAL 1 6 Scope Identification of significant accounts and substantial coverage Establishing an on-going testing plan Timing of work effort Spreading the work effort through-out interim and final audit stages Approach to interim testing and related year-end updates and roll-forwards Opportunities for improved usage of "monitoring controls" Coordination with others Advisors Internal Audit Information Technology Others Plan for evaluation of weaknesses Building sustainabitity INDEPENDENT MEMBER OF BKR INTERNATIONAL 1 7 · Timing and extent of testing Considerations for testing of control environment and monitoring controls · Testing of control activities · Review of IT general controls Relationship of general controls (and related testing) to application controls · Service organizations and SAS No. 70 matters, if applicable · Testing exceptions and the relationship to deficiencies · Sampling techniques · Other special areas - Non-routine/complex transactions iNDEPENDENT MEMBER OF BKR iNTERNATIONAL 18 INDEPENDENT MEMBER OF BKR INTERNATIONAL Identification of fraud risks: · Perform risk assessment procedures to identify fraud risks, both at the financial statement level and at the assertion level · Discuss among the audit team the susceptibility to fraud · Inquire of management, Town Board members and others · Evaluate bread programs/controls that prevent, deter and detect fraud Response to identified fraud risks: · Evaluate design of mitigating contrets · Test effectiveness of controls · Address revenue recognition and risk of management override of controls Perform specific substantive audit procedures (incorporate elements of unpredictability) · Evaluate audit evidence · Communicate to management, Supervisor and Town Board INDEPENDENT MEMBER OF BKR INTERNATIONAL 20 TOWN OF SOUTHOLD SINGLE AUDIT REPORTS Year ended December 31, 2008 RECEIVED FEB 2 3 2010 ~ootbold I'e~e 0,4~ FINANCIAL SECTION Independent Auditors' Report .................................................................................................................... 1-2 REQUIRED SUPPLEMENTARY INFORMATION Management's Discussion and Analysis ................................................................................................... 3-10 BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements Statement of Net Assets ......................................................................................................................... 11 Statement of Activities ............................................................................................................................. 12 Fund Financial Statements Governmental Fund Financial Statements Balance Sheet and Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets .............................................................................................................. 13-14 Statement of Revenues, Expenditures, and Changes in Fund Balances and Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities ......................................................... 15-16 Fiduciary Fund Financial Statements Statement of Fiduciary Net Assets .......................................................................................................... 17 Notes to Financial Statements ................................................................................................................... 18-38 REQUIRED SUPPLEMENTARY INFORMATION OTHER THAN MANAGEMENT DISCUSSION AND ANALYSTS Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual General Fund ........................................................................................................................................ 39 Highway Fund ....................................................................................................................................... 40 OTHER SUPPLEMENTARY INFORMATION Combining Fund Statements: Non-major Governmental Funds Combining Balance Sheet .................................................................................................................... Combining Statement of Revenues, Expenditures, and Changes in Fund Balances ........................ DISCRETELY PRESENTED COMPONENT UNITS 41 42 Discretely Presented Component Units: Combining Statement of Net Assets ....................................................................................................... 43 Combining Statement of Activities .......................................................................................................... 44 OTHER REPORTS Schedule of Expenditures of Federal Awards ................................................................................... 45 Note to Schedule of Expenditures of Federal Awards ....................................................................... 46 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 ........................................................................................................ 47-48 Report on Compliance with Requirements Applicable To Each Major Program and Internal Control Over Compliance in Accordance with OMB Circular A-133 ....................................................................... 49-50 Schedule of Findings and Questioned Costs .................................................................................... 51-52 FINANCIAL SECTION CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITORS' REPORT Honorable Supervisor and Town Board Town of Southold Southold, New York We have audited the accompanying financial statements of the governmental activities, each major fund, the aggregate discretely presented component units, and the aggregate remaining fund information of the Town of Southold, New York, as of December 31, 2008, and for the year then ended, which collectively compdse the Town's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Town's management. Our responsibility is to express opinions on these financial statements based on our audit. Except as discussed in the following paragraph, we conducted our audit in accordance with auditing standards generally accepted in the United States of Amedca 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. The financial statements of the Town of Southold's discretely presented component units with the exception of one, the Fishers Island Ferry District, was not audited as of the report date, nor were we able to satisfy ourselves as to those financial activities by other auditing procedures. The discretely presented component units not audited represent 32.4%, 37.3% and 36.8%, respectively, of the assets, net assets and revenues of the aggregate discretely presented component units. The financial statements of the Fishers Island Ferry District was audited by other auditors whose report thereon have been furnished to us and in our opinion, insofar as it relates to the amounts included for that one component unit, are based solely on the reports of the other auditors. In our opinion, except for the effects of such adjustments discussed in the preceding paragraph, the financial statements referred to above present faidy, in all material respects, the respective financial position of the governmental activities, each major fund, the aggregate discretely presented component units, and the aggregate remaining fund information of the Town of Southold, New York, as of December 31, 2008, and the respective changes in financial position for the year then ended in conformity with accounting principles generally accepted in the United States of America. As discussed in Note A.6 to the financial statements the Town adopted the provisions of GASB Statement No. 45, Accounting and Financial Reporting by Employers for Post-employment Benefits Other Than Pensions. PERSONAL SERVICE. TRUSTED ADVICE. ALBRECHT, VIGGIANO, ZURECK & COMPANY, RC 245 PARK AVENUE, 24TH FLOOR 25 SUFFOLK COURT NEWYORK, NY 10167 HAUPPAUGE, NY 11788-3715 -1- T: 212.792.4075 T: 631.434.9500 F: 631,434,9518 www. avz.com In accordance with Government Auditing Standards, we have also issued our report dated December 16, 2009 on our consideration of the Town of Southold'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 mattem. 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. The Management's Discussion and Analysis and the budgetary information are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of Amedca. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the Town of Southold, New York's basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Cimular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is also not a required part of the basic financial statements of the Town of Southold, New York. The combining and individual nonmajor fund financial statements and the schedule of expenditures of federal awards have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is faidy presented in all matedal respects in relation to the basic financial statements taken as a whole. Hauppauge, New York December 16, 2009 -2- REQUIRED SUPPLEMENTARY INFORMATION Management's Discussion and Analysis TOWN OF SOUTHOLD MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2008 The following is a discussion and analysis of the Town of Southold's financial performance, providing an overview of the Town's financial activities for the year ended December 31, 2008. Use this section in conjunction with the Town's basic financial statements. USING THIS ANNUAL REPORT This annual report consists of a series of financial statements. The Statement of Net Assets and the Statement of Activities provide information about the activities of the Town as a whole and present a longer- term view of the Town's finances. For governmental activities, these statements tell how these services were financed in the short term as well as what remains for future spending. Fund financial statements also report the Town's operations in more detail than the government-wide statements by providing information about the Town's most significant funds. The remaining statements provide financial information about activities for which the Town acts solely as a trustee agent for the benefit of those outside of the government. Reporting the Town as a Whole The Statement of Net Assets and the Statement of Activities One of the most important questions asked about the Town's finances is, "Is the Town as a whole better off or worse off as a result of the year's activities?" The Statement of Net Assets and the Statement of Activities report information about the Town as a whole and about its activities in a way that helps answer this question. These statements include all assets and liabilities using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. The Statement of Activities is significantly different than a typical Statement of Revenues, Expenses, and Changes in Fund Balance. You will notice that expenses are listed in the first column with revenues from that particular program reported to the right. The result is a net (expense)/revenue. The reason for this kind of format is to highlight the relative financial burden of each of the functions on the Town's taxpayers. It also identifies how much each function draws from the general revenues or if it is self-financing through fees and grants. All of the current year's revenues and expenses are taken into account regardless of when cash is received or paid. These two statements report the Town's net assets and their respective changes. You can think of the Town's net assets--the difference between assets and liabilities--as one way to measure the Town's financial health, or financial position. Over time, increases or decreases in the Town's net assets are one indicator of whether its financial health is improving or deteriorating. You will need to consider other non-financial factors, however, such as changes in the Town's property tax base and the condition of the Town's buildings, roads, drainage and other assets to assess the overall health of the Town. In the Statement of Net Assets and the Statement of Activities, we divide the Town into two kinds of activities: Governmental activities - The Town's basic services are reported here, including: general government support; public safety; public health; transportation; economic assistance and opportunity; culture and recreation and home and community services. Property taxes, sales taxes, franchise fees, fines, and state and federal grants finance these activities. The Town also charges fees to customers to help it cover the cost of certain services it provides. Component units - The Town includes seven separate legal entities in its report (one ferry district, one sanitation district, one mosquito district and four park districts). Although legally separate, these component units are important because the Town is financially accountable for them. Complete financial statements of the individual component units can be obtained from their respective administrative offices (Note A.2). -3- TOWN OF SOUTHOLD MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2008 Reporting the Town's Most Significant Funds Fund Financial Statements The fund financial statements provide detailed information about the most significant funds--not the Town as a whole. Some funds are required to be established by state law and by bond covenants. However, the Town establishes many other funds to help it control and manage sources of funding and spending related to specific activities. The Town's basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end that are available for spending. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the Town's general government operations and the basic services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the Town's programs. We describe the relationship (or differences) between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds in a reconciliation that follows these fund financial statements. The Town as Trustee Reporting the Town's Fiduciary Responsibilities All of the Town's fiduciary activities are reported in a separate Statement of Fiduciary Net Assets. We exclude these activities from the Town's other financial statements because the Town cannot use these assets to finance its operations. The Town is responsible for ensuring that the assets reported in these funds are used for their intended purposes. FINANCIAL ANALYSIS OF THE TOWN AS A WHOLE Our analysis below focuses on the net assets and changes in net assets of the Town's governmental activities. Condensed Statement of Net Assets Primary Governmental Activities December 31, 2008 and 2007 2008 2007 Assets Current and other assets $ 18,927,261 $ 43,347,669 Capital assets 137,470,841 109,728,421 Total assets 156,398,102 153,076,090 Liabilities Current and other liabilities 16,801,316 24,314,029 Long-term liabilities 38,933,700 28,413,510 Total liabilities 55,735,016 52,727,539 Net assets Invested in capital assets, net of related debt 104,156,915 83,294,421 Restricted: Land acquisition 2,674,872 13,909,980 Debt service 14,158 79,339 Unrestricted (6,182,859) 3,064,811 Total net assets $ 100,663,086 $ 100,348,551 TOWN OF SOUTHOLD MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2008 FINANCIAL ANALYSIS OF THE TOWN AS A WHOLE (continued) Total assets of the primary government as of December 31, 2008 were $156.4 million, an increase of $3.3 million. Total liabilities as of December 31, 2008 were $55.7 million, which represents an increase of $3.0 million from December 31, 2007. This results in a net asset balance of $100.7 million, an increase of $.3 million. Of the Town's net asset balance, $104.2 million were invested in capital assets, net of related debt; $2.7 million was restricted for future land acquisition and payments on debt service while there was a deficit of ($6.2) million in unrestricted net assets. The deficit balance of unrestricted net assets does not necessarily indicate stress. The deficit balance of unrestricted net assets arose primarily because of the reclassification of net assets from unrestricted to invested in capital assets, net of related debt due to the purchases of assets including community preservation properties. In addition, long-term liabilities, which include other post-employment benefits payable, compensated absences, and landfill closure and post closure care monitoring which will be funded through future budgetary appropriations when they become payable in future periods. Changes in Net Assets Primary Governmental Activities For the years ended December 31, 2008 and 2007 Program Revenues Charges for services Operating grants and contributions Capital grants and contributions General Revenues Real property taxes Other real property tax items Non-property tax items Interest earnings State aid - unrestricted Other Total Revenues Program Expenses General government suppod Public safety Public health Transportation Economic assistance and opportunity Culture and recreation Home and community services Interest on debt Total Expenses Increase in Net Assets $ 2008 2007 $ 3,603,426 $ 3,260,873 834,112 842,604 2,681,338 2,121,558 7,118,876 6,225,035 24,569,013 23,065,503 112,305 109,909 6,258,627 6,989,400 737,846 1,502,349 1,551,461 2,293,295 771,265 930,666 34,000,517 34,891,122 41,119,393 41,116,157 9,508,486 7,020,895 15,390,212 12,358,296 46,925 46,146 7,767,309 6,980,032 1,820,114 1,506,488 275,382 629,444 4,796,995 5,390,045 1,199,435 837,461 40,804,858 34,768,807 314,535 $ 6,347,350 -5- TOWN OF SOUTHOLD MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2008 FINANCIAL ANALYSIS OF THE TOWN AS A WHOLE (continued) Net Cost of Services Primaw Governmental Activities For the year ended December 31,2008 General government support Public safety Public health Transportation Economic assistance and opportunity Culture and recreation Home and community services Interest on debt Total Cost Program Net Cost of Services Revenues of Services $ 9,508,486 $ 352,686 $ 9,155,800 15,390,212 689,084 14,701,128 46,925 10,449 36,476 7,767,309 389,713 7,377,596 1,820,114 440,185 1,379,929 275,382 210,108 65,274 4,796,995 5,026,651 (229,656) 1,199,435 1,199,435 $ 40,804,858 $ 7,118,876 $33,685,982 The cost of all governmental activities this year was $40.8 million. The net cost of these services, however, after subsidized by program revenues including charges for services and program grants, was $33.7 million. The Town's change in net assets after general revenues of $34.0 million was an overall increase of $.3 million. $18,000,000 $16,000,000 $14,000,000 $12,000,000 $10,000,000 $8,0O0,000 $6,000,000 $4,000,000 $2,000,000 $- Expenses and Program Revenues Go~emmentalActi¥ities Expenses B Program Revenues -6- TOWN OF SOUTHOLD MANAGEMENT'S DISCUSSION AND ANALYSIS December 31,2008 FINANCIAL ANALYSIS OF THE TOWN AS A WHOLE (continued) Other general revenues 19% State aid ~ unrestricted 6% Revenue by Source Governmental Activities for the year ended December 31,2008 Real property taxes $ 24,569,013 State aid - unrestricted 1,551,461 Charges for services 3,603,426 Other general revenues 7,880,043 Operating grants and contributions 834,112 Capital grants and contributions 2,681,338 $ 41,119,393 THE TOWN'S FUNDS The general fund balance has decreased by approximately $1.7 million due to the decrease in mortgage tax and interest earnings in the current year due to the current economic conditions. The following schedule presents a summary of the governmental funds - (general, special revenue, and capital projects) revenues and expenditures for the year ended December 31, 2008, and the amount of change and percentage of total in relation to the prior year. Increase % 2008 2007 (Decrease) Change REVENUES Real property taxes $ 24,569,013 Other real property tax items 112,305 Non-property tax items 6,258,627 Departmental income 2,999,459 Intergovernmental charges 262,977 Use of money and property 876,863 Licenses and permits 425,860 Fines and forfeitures 169,119 Sale of property and compensation for loss 379,797 Miscellaneous local sources 551,492 State aid 2,757,616 Federal aid 1,757,284 TotaIGovernmental Fund Revenues $ 41,120,412 $ 23,065,503 $ 1,503,510 6.5% 109,909 2,396 2.2% 917,964 5,340,663 581.8% 2,559,292 440,167 17.2% 6,401,543 (6,138,566) -95.9% 1,650,001 (773,138) -46.9% 433,194 (7,334) -1.7% 155,477 13,642 8.8% 393,933 (14,136) -3.6% 487,582 63,910 13.1% 3,696,346 (938,730) -25.4% 1,280,709 476,575 37.2% $ 41,151,453 $ (31,041) ~ -7- TOWN OF SOUTHOLD MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2008 THE TOWN'S FUNDS (continued) Increase % 2~ ~7 (Decrease) Change General government support $ 5,747,219 $ 5,322,653 $ 424,556 8.0% Public safe~j 9,455,215 8,764,954 690,261 7.9°/0 Public health 42,608 42,608 0.0% Tr~ 4,014,414 3,968,092 26,322 0.7% Economic assistance and opportunity 1,147,293 1,064,905 82,388 7.7% Home and co,[[,pJnity,s~M~c~ ~52,568 3,518,654 (3,056,056) -87.1% Culture and recreation 3,749,271 417,654 3,331,617 797.7% Employee beneffi:s 8,245,765 7,151,453 1,094,312 15.3°/o Capital 30,430,379 12,436,627 17,993,752 144.7°/o De~ sen/ice ~ndpal and interest 2,683,567 1,622,942 1,060,625 65.4°,/= To{al Govemrnent~ Fund Expenditures $ 65,968,319 $ 44,330,542 $ 21,637,777 48.8% GENERAL FUND BUDGETARY HIGHLIGHTS The Town appropriated expenditures in the original General Fund budget in excess of estimated revenues in the amounts of approximately $2.2 million, by designating unreserved fund balance from the prior year. Actual revenues were less than anticipated by approximately $.8 million. Actual mortgage tax revenue was less than anticipated by approximately $.7 million. Actual expenditures in all budgetary line items were less than the budgetary appropriation by approximately $2~6 million. Over the course of the year the Town Board revises the budget as needed so that expenditures do not exceed appropriations. In all Town funds, various transfers between appropriations were approved for this purpose. The change in odginal budget to final budget for revenues did not change significantly. The increase in the original budget to the final budget in expenditures is attributable to the increase in the employee benefits due to an increase in medical claims paid during 2008. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets As of December 31, 2008 the primary government had $137.5 million in net capital assets including land, buildings, improvements, machinery and equipment, and infrastructure. The Town's component units had $21.3 million in net capital assets including land, buildings, improvements, machinery and equipment, and infrastructure. Buildings $ 8,829,508 $ 8,316,323 Improvements other than buildings 13,645,007 13,624,650 Machinery and equipment 11,038,290 10,197,793 Infrastructure 72,869,891 71,461,368 Total capital assets Less accumulated depreciation Primary government - Total net capital assets Comoonent units Lend Construction in progress Buildings Improvements other than buildings Machinery and equipment Infrastructure Total capital assets Less accumulated depreciation Component un[ts - Total net capital assets 205,352,656 173,597,074 67,881,815 63,868,653 $ 137,470,841 $ 109,728,421 2,193,353 $ 2,193,353 -0- 404,367 3,899,322 3,500,910 17,048,419 17,028,469 3,418,972 3,504,995 2,538,150 2,172.080 29,098,216 28,804,174 7,760,911 6,702,685 21,337,305 $ 22,101,489 TOWN OF SOUTHOLD MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2008 CAPITAL ASSET AND DEBT ADMINISTRATION (continued) Capital Assets (continued) The capital program is a long range financing guide and not a definitive plan. Each appropriation must be authorized by Town Board resolution before being undertaken. Each may be financed by issuance of general obligation bonds, which, at times, are preceded by issuance of bond anticipation notes for various periods of time depending on the probable usefulness of the purpose of expenditure. The following sets forth a summary of the Town's capital program. Equipment 2009 General Fund $ 12,900 Highway Fund 380,000 Special Districts 85,000 Total Equipment $ 477,900 Improvements General Fund $ 221,500 Highway Fund 900,000 Special Districts 800,000 Total Improvements $ 1,921,500 Total Program Additional information on the Town's capital assets can be found in Note C.3 to the financial statements. Debt Administration The Town of Southold's bond credit rating from Moody's Investors Services was Aa3 as of December 31, 2008. Debt Limit - The Town has the power to contract indebtedness for any Town purpose so long as the principal amount thereof, subject to certain limited exceptions, shall not exceed seven percent of the average full valuation of taxable real estate of the Town, and subject to certain enumerated exclusions and deductions such as water and certain sewer facilities and cash or appropriations for current debt service. The constitutional method for determining full valuation is calculated by taking the assessed valuation of taxable real estate as shown upon the latest completed assessment roll and dividing the same by the equalization rate as determined by the State Board of Equalization and Assessment. The State Legislature is required to prescribe the manner by which such ratio shall be determined. Average full valuation is determined by taking the sum of the full valuation of the last completed assessment roll and the four preceding assessment rolls and dividing such sum by five. Percentage of debt contracting power exhausted at December 31, 2008 was 5.80%. At December 31, 2008, the Town had approximately $32.2 million in long term general obligation bonds outstanding, of which $29.7 million was for general Town purposes. Also outstanding at year-end were bond anticipation notes in the amount of $6.6 million of which $5.2 million was for general Town purposes. Additional information on the Town's debt activity can be found in Note C.4 to the financial statements. TOWN OF SOUTHOLD MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2008 ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES Property Tax The Town has adopted a budget for the 2009 fiscal year which factors in inflation and other adjustments to revenues and expenditures as well as prior year positive and negative fund balances. The 2009 budget includes an overall increase in real property tax revenues from the prior year of approximately 10.38% for the general Town governmental activities. State Aid and Local Assistance The Town receives financial assistance from New York State and from Suffolk County. During 2008, financial assistance included state aid consisting of mortgage tax of $1.6 million, consolidated highway aid of $327 thousand, and other state aid of approximately $778 thousand. State aid per capita was $53 thousand and County local government assistance was $143 thousand. Additionally, if the State should not adopt its budget in a timely manner, municipalities and school districts in the State, including the Town, may be affected by a delay in the payment of state aid. The State is not constitutionally obligated to maintain or continue state aid to the Town. The Town's 2009 budget included similar amounts for this financial assistance. CONTACTING THE TOWN'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, and creditors with a general overview of the Town's finances and to show the Town's accountability for the money it receives. If you have questions about this report or need additional financial information, contact the Town of Southold, Office of the Town Comptroller, Southold, New York. -10- BASIC FINANCIAL STATEMENTS TOWN OF SOUTHOLD GOVERNMENT-WIDE FINANCIAL STATEMENT STATEMENT OF NET ASSETS December 31, 2008 ASSETS Current Assets: Cash and investments Cash - restricted Accounts receivable Due from fiduciary funds Due from other governments Due from primary government State and federal aid receivables Prepaid charges Inventory of matedal and supplies Total Current Assets Non-Current Assets: Deferred charges, net of accumulated amortization Non-depreciable capital assets Depreciable capital assets, net of depreciation Total Non-Current Assets Total Assets LIABILITIES Current Uabilities: Accounts payable and accrued liabilities Accrued interest payable Bond anticipation notes payable Due to component units Unearned revenue Non-current liabilities due within one year General obligation bends payable Compensated absences Claims and judgments payable Estimated liability for landfill closure and postclosure cam costs Total Current Liabilities Non-Current Liabilities: General obligation bonds payable Compensated absences Claims and judgments payable Estimated liability for landfill closure and postclosure care costs Other post-employment benefits payable Total Non-Current Liabilities Total Liabilities NET ASSETS Investment in capital assets, net of related debt Restricted: Land acquisition Debt service Unrestricted Total Net Assets Pdmary Governmental Component Activities Units $ 13,042,627 $ 2,010,547 2,016,779 211,694 72,532 64,670 1,849,401 356,557 693,869 16,822 1,005,770 48,875 871 18,821,011 2,570,003 106,250 98,969,960 2,193,352 38,500,881 19,143,953 137,577,091 21,337,305 156,398,102 23,907,308 1,437,313 233,816 265,543 46,991 5,179,300 1,399,800 356,557 7,206,658 506,561 1,870,000 205,000 466,125 165,077 45,438 19,820 16,801,316 2,602,683 27,850,000 2,250,000 6,912,197 47,665 496,624 3,674,879 95,099 38,933,700 2,392,764 55,735,016 4,995,447 104,156,915 18,034,616 2,674,872 14,158 (6,182,859) 877,245 $100,663,086 $ 18,911,861 See notes to the financial statements. Function/Program PRIMARY GOVERNMENT Govemment Activities: General government support Public safety Public health Transportation Economic assistance and opportunity Culture and recreation Home and community services Interest on debt Total Pdmary Government COMPONENT UNITS General govemment support Public health Transportation Culture and recreation Home and community services Interest on debt TOWN OF SOUTHOLD GOVERNMENT-WIDE FINANCIAL STATEMENT STATEMENT OF ACTIVITIES Year ended December 31,2008 Program Revenues Operating Capital Charges for Grants and Grants and Expenses Services Contributions Contributions Net Expenses (Revenues) and Change in Net Assets Prima~y Component Govemment Units 9,508,486 $ 217,644 $ 135,042 15,390,212 583,364 105,720 46,925 10,449 7,767,309 26,893 36,000 1,820,114 186,093 254,092 275,382 210,108 4,796,995 2,379,324 292,809 1,199,435 $ 40,804,858 $ 3,603,426 $ 834,112 326,820 2,354,518 9,155,800 14,701,128 36,476 7,377,596 1,379,929 65,274 (229,656) 1,199,435 $ 2,681,338 $ 33,685,982 182,040 91,371 3,794,749 $ 2,497,801 836,395 727,308 41,726 144,802 Total Component Units $ 5,776,665 $ 2,539,527 ~ $ $ 305,493 -0- $ 3O5,493 GENERAL REVENUES Real property taxes Other real property tax items Non-property tax items Interest eamings Sl~te aid - unrestricted Other Total General Revenues Change in Net Assets Net Assets at Beginning of Year Net Assets at End of Year 182,040 91,371 991,455 836,395 685,582 144,802 $ 2,931,645 $ 24,569,013 $ 2,216,709 112,305 1,593 6,258,627 6,762 737,846 100,040 1,551,461 159,716 771,265 170,991 34,000,517 2,655,811 314,535 (275,834) 100,348,551 19,187,695 $ 100,663,086 $ 18,911,861 See notes to financial statements. -12- ASSETS Cash and investments Cash - restricted · Accounts receivable Due from other funds State and federal aid receivable Due from other governments Supply inventory Prepaids Total Assets · LIABILITIES AND FUND BALANCES LIABILITIES Accounts payable Retained percentages Bond anticipation notes payable Due to other funds Due to component units · Due to other governments Deferred revenue Total Liabilities FUND BALANCE Fund Balances - Reserved: Encumbrances Supply inventory · Prepaids Community preservation Debt service Fond Balance - Unreserved: Designated - Ensuing year's budget Insurance claims Special revenue funds · Undesignated Total Fund Balance (Deficit) Total Liabilities and Fund Balance TOWN OF SOUTHOLD BALANCE SHEET GOVERNMENTAL FUNDS December 31, 2008 MAJOR GOVERNMENTAL FUNDS General Capital Highway Projects Community Preservation $ 8,437,480 $ 1,701,250 57,096 229,666 524,836 59,343 1,534,523 871 456,001 45,600 $ 10,774,980 $ 2,271,686 Non-Major Governmental Funds Totals $ 1,604,503 $ 1,299,394 $ 13,042,627 $ 2,016,779 2,016,779 6,494 148,104 211,694 15,538 482,782 1,252,822 125,895 431,868 76,763 693,869 314,878 1,849,401 871 44,575 546,176 $ 1,745,936 $ 2,770,019 $ 2,051,618 $ 19,614,239 $ 668,607 $ 147,830 1,181,019 25,164 356,557 1,511 5,204,960 1,175,130 $ 189,244 142,163 5,179,300 46,105 7,412,654 1,348,124 5,556,812 $ 95,147 $ 192,811 $ 1,293,639 142,163 5,179,300 534 1,252,822 356,557 1,511 826,568 7,206,658 95,147 1,019,913 15,432,650 51,076 871 456,001 45,600 14,158 1,262,000 381,020 343,316 1,249,062 496,942 {3,825,034) 3,362,326 923,562 (3,810,876) $ 10,774,980 $ 2,271,686 $ 1,745,936 2,674,872 44,575 51,076 871 546,176 2,674,872 14,158 1,643,020 343,316 372,700 372,700 614,430 (1,464,600) 2,674,872 1,031,705 4,181,589 $ 2,770,019 $ 2,051,618 $ 19,614,239 See notes to the financial statements. -13- TOWN OF SOUTHOLD RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS December 31, 2008 Total Fund Balances - Governmental Funds Amounts reported for governmental activities in the Statement of Net Assets are different because: Capital assets less accumulated depreciation are included in the Statement of Net Assets: Capital assets - non-depreciable Capital assets - depreciable Accumulated depreciation Long-term liabilities applicable to the Town's governmental activities are not due and payable in the current period and accordingly are not reported in the funds. However these liabilities are included in the Statement of Net Assets: General obligation bonds payable Compensated absences Estimated liability for landfill closure and postclosure care costs Other postemployment benefits payable Prepaid items included in the Statement of Net Assets Deferred charges, included in the Statement of Net Assets Interest payable applicable to the Town's governmental activities are not due and payable in the current period and accordingly are not reported in the funds. However these liabilities are included in the Statement of Net Assets. Net Assets of Governmental Activities $ 98,969,960 106,382,696 (67,881,815) $ (29,720,000) (7,378,322) (516,444) (3,674,879) 4,181,589 137,470,841 (41,289,645) 459,594 106,250 (265,543) $ 100,663,086 See notes to financial statements. -14- TOWN OFSOUTHOLD STATEMENT OFREVENUES, EXPENDITURES AND CHANGESINFUND BALANCES GOVERNMENTALFUNDS Yew ended December31,2008 MAJOR GOVERNMENTAL FUNDS Non-Major Capital Community Governmental General Highway Projects Preservation Funds Totals REVENUES Real property taxes $17.391.288 $4.316.095 $2,861,630 $ 24,569,013 Other real property tax items 94.113 11,777 6,415 112,305 Non-properly tax items 751.073 $ 5.251.258 256.296 6.258.627 Departmental income 611,598 2.387,861 2.999.459 Intergovernmental charges 262,977 262.977 Use of money and properly 496.395 61.374 $ 67.076 209.082 42.936 876.863 Licenses and permits 244.910 13.190 167.760 425.860 Fines and forfeitures 169,119 169.119 Sale of property and compensation for loss 159,726 7.416 212.655 379.797 Miscellaneous local sources 190,816 13.703 14.064 332,020 889 551.492 State aid 1,656,760 326.820 125.895 431.868 216.273 2.757.616 Federal aid 147.711 1.464.735 144.838 1.757.284 Total Revenues 22,176,486 4.750,375 207.035 7.6881963 6.297,553 41.120.412 EXPENDITURES Current: General government support 5.479.661 135 267.423 5,747.219 Public safety 8.398.429 1,056,786 9.455.215 ~11 Health 35.238 7,370 42.608 Transportation 470.797 3,543.617 4.014.414 Economic assistance and opportunity 1.147,293 1.147.293 Culture and recreation 452,588 452.588 Home and community services 426.656 3.322,615 3.749.271 Employee benefits 7.276.770 498.813 470,182 8.245,765 Capital Outlay 13,677.617 16.752.762 30,430,379 Debt Service: ~1 Principal 703.040 27.100 346.300 418.560 1.495.000 Interest 270.747 13,128 146,322 525,034 233.336 1.188.567 Total Expenditures 24.661.219 4.082.793 13.823.939 17.624.096 5.776,272 65.968.319 Excess (Deficiency) of Revenues Over Expenditures (2,484.733) 667,582 (13.616.904) (9.935.133) 521.281 (24.847.907) · Other Financing Sources (Uses) Debt proceeds 8,850.000 8.850.000 Transfers in 3,493.057 678.382 4.171.439 Transfers out (2,729.790) (823.241) (618.408) (4.171.439) Total Other Financing Sources (Uses) 763.267 (823.241) 9.528.382 -0- (618,408) 8.850,000 Net Change in Fund Balance (1,721.466) (155.659) (4,088.522) (9.935.133) (97.127) (15.997.907) Fund Balances at Beginning of Year 5.083,792 1,079,221 277.646 12,610.005 1.128,832 20.179,496 Fund Balances at End of Year $ 3.362.326 $ 923.562 $ (3.810.876) $ 2,674.872 $1,031,705 $ 4.181.589 See notes to the financial statements, -15- TOWN OF SOUTHOLD RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES Year ended December 31, 2008 Net Change in Fund Balance Governmental funds report capital outlays as expenditures. However, in the Statement of Activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. The amount by which capital outlay exceeds depreciation in the current period is: Capital outlay Depreciation expense Loss on dispositions 31,860,086 (4,112,239) (5,427) Some expenses reported in the Statement of Activities do not require the use of current financial resources and therefore, are not reported as expenditures in governmental funds: Prepaid charges Deferred charges The issuance of long-term debt and increase in obligations under capital leases provides current financial resources to governmental funds, while the repayment of the principal of long term debt and capital leases consumes the current financial resources of governmental funds. Neither transaction has any effect on net assets. Bonds issued Repayment of bond principal Compensated absences Estimated liability for landfill closure and postclosure care costs Other postemployment benefits payable Accrued interest payable Change in Net Assets of Governmental Activities $ (15,997,907) 27,742,420 (27,385) (21,250) (8,850,000) 1,495,000 (406,925) 66,329 (3,674,879) (10,868) $ 314,535 See notes to financial statements. -16- TOWN OF SOUTHOLD STATEMENT OF FIDUCIARY NET ASSETS December 31, 2008 ASSETS Cash and investments Total Assets Fishers Island Town Ferry Distdct Totals $ 10,731,186 $ 64,670 $10,795,856 $ 10,731,186 $ 64,670 $10,795,856 LIABILITIES Other liabilities $ 4,762 $ 64,670 $ 69,432 Due to other governments 10,024,906 10,024,906 Other liabilities 418,151 418,151 Deposits held 283,367 283,367 Total Liabilities $ 10,731,186 $ 64,670 $10,795,856 See notes to financial statements. -17- TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2008 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Town of Southold (the "Town"), which was established in 1640, is governed by Town Law and other general laws of the State of New York and various local laws. The Town Board is the legislative body responsible for overall operations. The Town Board consists of the Supewisor who is elected for a term of four years and five council members who ara elected for terms of four years. The Town Board appoints the Town Attorney, Comptroller and the Commissioner of Public Works whose terms ara fixed by Town Law. The Town Clerk, Receiver of Taxes, Superintendent of Highways, Justices and Town Trustees are all elected and serve for four years, respectively. The Town provides a full range of municipal services, including public safety, transportation, home and community services, public works and read maintenance, recreation and parks, and general and administrative services. The financial statements of the Town of Southold have been prepared in conformity with accounting principles generally accepted in the United States of Amedca (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The more significant of the government's accounting policies are described below. 1. REPORTING ENTITY The financial reporting entity consists of: (a) the primary government, which is the Town of Southold; (b) organizations for which the pdmary government is financially accountable; and (c) other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete as set forth in GASB Statement No. 14. The decision to include a potential component unit in the Town of Southold reporting entity is based on several criteda set forth in GASB Statement No. 14 including legal standing, dependency and financial accountability. Based on the application of these criteria, the following is a summary of certain entities considered in determining the Town of Southold's reporting entity. Certain special districts of the Town of Southold provide sanitation, ferry, and park services to residents and businesses within the districts. These special districts are organized under New York State Town law and have separately elected boards. Special districts cannot issue bonded debt without the approval and the backing of the full faith and credit of the Town. Tax levies of the special districts are collected by the Town Receiver of Taxes. As a result of this fiscal dependency, the Town is financially accountable for these special districts. Accordingly, these special districts have been determined to be component units of the Town and are presented discretely in a separate column in the combined financial statements to emphasize that they are legally separate from the pdmary government. 2. BASIS OF PRESENTATION The Town's basic financial statements include both government-wide (reporting the Town as a whole) and fund financial statements (reporting the Town's major funds). Government-wide Financial Statements The government-wide financial statements reports information on the Town as a whole, except fiduciary activities, with separate columns for the primary governmental activities as well as the discretely presented component units. In the government-wide Statement of Net Assets, the Town's governmental activities are presented on a consolidated basis and are reported on a full accrual, economic resource basis, which recognizes all long-term assets and receivables as well as long-term debt and obligations. The Town's net assets are reported in three parts--investments in capital assets, net of related debt; restricted net assets; and unrestricted net assets. -18- TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2008 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2, BASIS OF PRESENTATION (continued) The government-wide Statement of Activities reports both the gross and net cost of each of the Town's functional categories (public safety, transportation, home and community services, etc.), which are otherwise supported by general government revenues (property, sales and use taxes, certain intergovernmental revenues, fines, permits and charges, etc.). The Statement of Activities reduces gross expenses (including depreciation), by related program revenues and operating and capital grants, to produce the net cost of each program. Program revenues include (a) charges for services and (b) operating and capital grants and contributions that are directly associated with the function. Operating grants include operating-specific and discretionary (either operating or capital) grants while the capital grants column reflects capital- specific grants. The net costs (by function) are normally covered by general revenue (property taxes, intergovernmental revenues, interest income, etc). As a general rule the effect of interfund activity has been eliminated in the general purpose financial statements. This government-wide focus is more on the sustainability of the Town as an entity and the change in the Town's net assets resulting from the current year's activities. Fund Financial Statements The fund financial statements are similar to the financial statements presented in the previous model. The new emphasis is on the major funds in the fund financial statements. Non-major funds are summarized into a single column. The accounts of the Town are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund balances, revenues, and expenditures, which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions or limitations. The various funds are presented by type in the fund financial statements. Accordingly, the Town maintains the following fund types: Governmental Funds - Governmental funds are those through which most governmental functions are financed. The acquisition, use and balances of expendable financial resources and the related liabilities are accounted for through governmental funds. The measurement focus of the governmental funds is upon determination of financial position and changes in financial position. Governmental funds are further classified as major and non-major funds. The Town reports the following major governmental funds: General Fund - is the principal operating fund of the Town. This fund is used to account for all financial resources except those required to be accounted for in other funds. Hiqhway Funds - used to account for the maintenance and operation of highways. Capital Projects Fund - used to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by special assessment funds and trust funds). Community Preservation Fund - is used to account for financial resources for the purchase of land. -19- TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2008 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2. BASIS OF PRESENTATION (continued) Fund Financial Statements (continued) Additionally, the Town reports the following non-major funds: Special Revenue Funds - are used to account for the proceeds of specific revenue sources (other than major capital projects) that are legally restricted to expenditures for specified purposes. Special Revenue Funds include the following: General Fund Part Town - To provide general services outside the Village of Greenport. Special Grant Fund - Segregate and account for projects funded by Community Development revenue. Special District Funds - To provide special services to areas that encompass less than the whole town. Fiduciary Funds - Fiduciary Funds are used to account for assets held by the Town in a trustee or custodial capacity. Agency Fund - is for money (and/or property) received and held in the capacity of trustee, custodian or agent. Discretely Presented Component Units Certain special districts that have separately elected boards provide transportation, park, mosquito control, and sanitation services to residents and businesses within these districts, and follow government fund accounting principles. These districts, which are accounted for as discretely presented component units, are as follows: The Fishers Island Ferry District, established in 1947 Orient Mosquito District, established in 1916 Fishers Island Garbage and Refuse District, established in 1952 Cutchogue-New Suffolk Park District, established in 1953 Orient-East Marion Park District, established in 1969 Southold Park District, established in 1907 Mattituck Park District, established in 1941 Complete financial statements of these component units can be obtained from their respective administrative offices: Orient Mosquito District 145 Platt Road Orient, NY 11957 Cutchogue-New Suffolk Park District P.O. Box 311 Cutchogue, NY 11935 Southold Park District P.O. Box 959 Southold, NY 11971 Fishers island Ferry District P.O. Box 1179 Southold, NY 11971 Fishers Island Garbage & Refuse District Fishers Island, NY 06390 Orient-East Marion Park District P.O. Box 12 Orient, NY 11957 Mattituck Park District P.O. Box 1413 Mattituck, NY 11952 - 20 - TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2008 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3. BASIS OF ACCOUNTING/MEASUREMENT FOCUS Measurement focus refers to what is being measured whereas the basis of accounting refers to when revenues and expenditures are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurement made, regardless of the measurement focus applied. In the government-wide statements, governmental activities are presented using the economic resources measurement focus and are presented using the accrual basis of.accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred or economic asset used. Revenues, expenses, gains, losses, assets, and liabilities resulting from exchange and exchange-like transactions are recognized when the exchange takes place. In the funds statements, governmental funds use a current financial resources measurement focus and are accounted for using the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual (measurable and available to finance current operations). "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to pay liabilities of the current pedod. The Town considers all revenues available if they are collected within 60 days after the year end. Revenues susceptible to accrual include Suffolk County local assistance at year end on behalf of the Town, franchise fees, and charges for services, intergovernmental revenues and operating transfers. Permits, fees, and other similar revenues are not susceptible to accrual because generally they are not measurable until they are received in cash. In those instances where expenditures are the prime factor in determining eligibility for state and federal grants, revenues are recognized when the expenditure is incurred. In the capital projects fund, long-term debt is recognized as revenue upon receipt of the proceeds. Expenditures are recorded on the accrual basis except that (a) expenditures for prepaid expenses are recognized when incurred; (b) principal and interest on indebtedness are recognized as expenditures when due; (c) compensated absences, such as vacation and sick leave, which vest or accumulate, are charged as expenditures when paid. Encumbrance accounting, under which purchase orders, contracts and other commitments are recorded for budgetary control purposes in order to reserve that portion of the applicable apprepdation, is employed in the governmental funds. Apprepdations for all governmental funds except the capital projects fund lapse at year-end. However, encumbrances reserved against fund balances are re-appropriated in the ensuing year. Encumbrances are reported as reservations of fund balances since they do not constitute expenditures or liabilities. Expenditures for such commitments are recorded in the period in which the liability is incurred. 4. ASSETS, LIABILITIES AND FUND EQUITY CASH AND CASH EQUIVALENTS Cash consists of funds deposited in demand accounts, time deposit accounts and certificates of deposit with maturities of less than three months. RESTRICTED ASSETS Certain assets of the community preservation fund are classified as restricted assets because their use is restricted by contractual agreements and regulations. -21 - TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2008 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 4. ASSETS, LIABILITIES AND FUND EQUITY (continued) RECEIVABLES Receivables include amounts due from Federal, State, and other govemments or entities for services provided by the Town. Receivables ara racorded and revenues recognized as earned or as specific program expenditures are incurred. INVENTORY-MATERIALSAND SUPPLIES Inventory in the general and special revenue funds is valued at cost. Inventory in these funds is accounted for under the consumption method. CAPITAL ASSETS Capital assets pumhased or acquired with an original cost of $5,000 or more are reported at historical cost or estimated historical cost. Contributed assets are raported at fair market value as of the date received. Additions, improvements and other capital outlays that significantly extend the useful life of an asset are capitalized. Other costs incurred for repairs and maintenance ara expensed as incurred. Depreciation on all assets is provided on the straight- line basis over the following estimated useful lives: Buildings Improvements and other Machinery and equipment Infrastructure 10-40 years 20 years 5-10 years 20-30 years Infrastructure assets, consisting of certain improvements other than buildings including roads, curbs, sidewalks, bridges and street lighting are capitalized along with other capital assets. In the fund financial statements, capital assets are recorded as capital outlay expenditures in the governmental fund upon acquisition. DEFERRED REVENUE/UNEARNED INCOME Deferred revenues/unearned income are those whera asset recognition cdteria have been met, but which revenue recognition criteria have not been met. Such amounts include collections in advance, unearned income and amounts that have been deemed to be "measurable" but not "available" to finance current expenses pursuant to generally accepted accounting principles. PREP~DS Prepaids record payments to vendors that benefit future recording pedods and ara raported on the consumption basis. Prepaids in the general and special revenue funds represent insurance pramiums paid for coverage that will benefit the subsequent period and for retirament benefits that will benefit a future period. LONG-TERM OBLIGATIONS The liabilities for long-term obligations consisting of general obligation bonds, compensated absences, due to employee retirament system, judgments and claims, other post employment benefits, and liability for landfill closure and post closure costs ara recognized in the government- wide financial statements. In the fund statements, long-term obligations are not reported as liabilities. The debt proceeds are reported as other financing sources and payment of principal and interest reported as expenditures. - 22 - TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2008 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 4. ASSETS, LIABILITIES AND FUND EQUrFY (continued) EQUITY CLASSIFICATIONS In the Government-wide Statements, equity is classified as net assets and displayed in three components: a) Invested in capital assets, net of related debt~onsists of capital assets including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. b) Restricted net assets---Consists of net assets with constraints placed on the use either by (1) external groups such as creditors, grantors, contributors, or laws or regulations of other governments; or (2) law through constitutional provisions or enabling legislation. c) Unrestricted net assets--All other net assets that do not meet the definition of 'restricted" or "invested in capital assets, net of related debt." In the Fund Statements, governmental fund equity is classified as fund balance. Fund balance is further classified as reserved and unreserved, with unreserved further split between designated and undesignated. Portions offund equity are segregated for future useand therefore not available for future appropriation or expenditure. Amounts reserved for encumbrances, inventory, insurance claims and debt service represent portions of fund equity, which are required to be segregated in accordance with state law or GAAP. Designations of fund balances in governmental funds indicate the utilization of these resources in the subsequent year's budget or tentative plans for future use. 5. REVENUES AND EXPENDITURES REAL PROPERTY TAX ASSESSMENT AND COLLECTION PROCEDURES In Suffolk County, the assessment and lien of real property for taxation is done by the County Department of Assessment. Real property taxes become a lien on December I for both school and general taxes. The Town's assessment rolls are used for the levy of real property taxes by the Town and the School Districts, as well as by the County and by Special Districts of the County and the Town. The Town of Southold Receiver of Taxes collects all real property taxes for the Town, Suffolk County, Town Special Districts and School Districts. These taxes are levied on December 1, and are due in two installments, 50% on December 1 and 50% on May 10, payable without penalty to January 10 and May 31, respectively. Penalties are imposed thereafter at the rate of 1% per month from January 10th until May 31 st, after which taxes are payable to the County Treasurer. The Town retains the total amount of Town, Highway and Town Special Districts levies from the amount collected, and forwards the balance collected to the County which assumes collection responsibility. The Town and Town's Special Districts therefore realize annually the 100% collection of real property taxes. School District property taxes are also levied on December 1, and are also payable in two installments. School property taxes are due in two installments, 50% on December 1 and 50% on May 10 payable without penalty to January 10 and May 31, respectively. The County is also responsible for uncollected school taxes. - 23 - TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2008 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 5. REVENUES AND EXPENDITURES (continued) INTERFUND TRANSACTIONS Interfund transactions have been eliminated from the government-wide financial statements. In the funds statements interfund transactions include: a) Interfund Revenues Interfund revenues, which are quasi-external transactions, in the general fund represent amounts charged for services or facilities provided by the general fund. The amounts paid by the fund receiving the benefit of the service or facilities are reflected as an expenditure of that fund. b) Transfers Transfers represent payments to the general fund and capital projects funds from the other funds for their appropriate share of the general fund er capital project costs. COMPENSATED ABSENCES The liability for vested or accumulated vacation or sick leave (compensated absences) is recorded as current and non-current obligations in the government-wide statements. The current portion of this debt is estimated based on historical trends. In the fund financial statements only the compensated absence liability payable from expendable available financial resources is incurred, The amount that is expected to be liquidated with expendable available financial resources is reported as expenditures and a liability in the funds statement in the respective fund that will pay it. OTHER POST EMPLOYMENT BENEFITS In addition to providing pension benefits, the Town provides health insurance coverage and survivor benefits for retired employees and their survivors. Substantially all of the Town's employees may become eligible for these benefits if they reach normal retirement age while working for the Town. Health care benefits in accordance with New York State Health Insurance Rules and Regulations (administered by the New York State Department of Civil Service), are provided through the New York State Empire Plan (the "Empire Plan") whose premiums are based on the benefits paid throughout the State during the year or under the Town of Southold's self insurance plan which is further described in Note D. The Town recognizes the cost of providing benefits by recording its share of insurance premiums as an expenditure in the year paid. The liability for these other pest-employment benefits payable is recorded as long-term debt in the government-wide statements. The Town's union contracts and ordinances require that it provide its eligible enrollees with Empire Plan benefit coverege, or if another provider is utilized, the equivalent coverage. Under the provisions of the Empire Plan, premiums are adjusted on a prospective basis for any losses experience by the Empire Plan. The Town has the option to terminate its participation in the Empire Plan at any time without liability for its respective share of any previously incurred loss. NL=W ACCOUNTING PRINCIPLES Effective with this financial report for the year ended December 31, 2008, the Town has adopted Governmental Accounting Standards Board Statement No. 45, Accounting and Financial Reporting by Employers fcr Post-employment Benefits Other than Pensions (OPEB). This statement establishes standards for reporting the liability for non-pension post-employment benefits, chiefly the health care premiums for retirees. - 24 - TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31,2008 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 6. NEW ACCOUNTING PRINCIPLES (continued) Effective with this financial report for the year ended December 31, 2008, the Town has adopted Govemmental Accounting Standards Board Statement No. 49 "Accounting and Financial Reporting for Pollution Remediation Obligations." The Statement establishes accounting and financial reporting standards for pollution remediation obligations which are obligations to address the current or potential detrimental effects of existing pollution (e.g., hazardous waste spills and asbestos contamination) by participating in pollution remediation activities such as site assessments and cleanups. Pollution remediation obligations exclude pollution prevention or control obligations relating to current operations and future pollution remediation activities such as landfill closure and post-closure care. Statement No. 49 identifies the obligation events which require a governmental entity to estimate the components of expected pollution remediation outlays and determine whether outlays for those components should be accrued as a liability, or, if appropriate, capitalized when goods and services are acquired. The Town has determined that there is no impact on its financial position or results of operations resulting from the adoption. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY 1. BUDGETARY DATA Budgets are adopted annually on a basis consistent with generally accepted accounting principles. Appropriations authorized for the current year are increased by the amount of encumbrances carried forward from the prior year. Budgetary controls for special revenue funds are established in accordance with the applicable grant agreement, which may cover a period other than the Town's fiscal year. Appropriate budgetary adjustments have been made to reflect these grant agreements during the Town's fiscal year. The Town follow~ the procedures enumerated below in establishing the budgetary data reflected in the financial statements: a) No later than October 1, the Supervisor submits a tentative budget to the Town Board for the fiscal year commencing the following fiscal year. The tentative budget includes the proposed means of financing for all funds. b) After public hearings are conducted to obtain taxpayer comments, no later than November 20, the Town Board adopts the budget. c) The Town Board must approve all modifications of the budget. However, the Supervisor is authorized to transfer certain budgeted amounts within departments. - 25 - TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2008 STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY (continued) 2. FUND BALANCES DESIGNATION OF FUND BALANCE Portions of the unreserved balances at December 31, 2008 were designated for the subsequent year's operating budgets as follows: Fund Balance Unreserved and Fund Balance Designated Unreserved and Total for Subsequent Designated Fund Balance Fund Balance Year's for Insurance Unreserved Fund Unreserved Budget Claims Undesignated Major Govemmental Funds General Fund- Townwide $2,854,378 $1,262,000 Highway Fund 877,962 381,020 Non-Major Funds: Town Outside Village 731,359 292,000 East West Fire Protection District 14,781 5,700 Southold Wastewater Distdct 251,871 75,000 Fishers Island Sewer Distdct 36,484 Solid Waste Management District (47,365) FUND DEFICITS $ 343,316 $1,249,062 496,942 439,359 9,081 176,871 36,484 (47,365) The capital projects fund had a deficit fund balance at December 31, 2008. The capital projects fund deficit will be eliminated as short-term debt is redeemed or converted to permanent financing. The solid waste management fund has a deficit fund balance at December 31, 2008. The solid waste management fund deficit is due to budgeted revenues primarily tipping fees exceeding actual amounts received. The 2009 budget includes an appropriation to fund this deficit. DETAILED NOTES ON ALL FUNDS 1. CASH AND INVESTMENTS Cash consists of funds deposited in demand accounts, time deposit accounts, and certificates of deposit with maturities of less than three months. The Town's investments are governed by a formal investment policy. The Town's monies must be deposited in FDIC-insured commercial banks or trust companies located within the state. The Town is authorized to use demand accounts and certificates of deposit. Permissible investments include obligations of the U.S. Treasury, U.S. Agencies and investments made by the Cooperative Liquid Asset Security System (CLASS). CLASS is a cooperative investment plan consisting of U.S. Treasury Obligations and repumhase agreements relating to treasury obligations. Investments are stated at cost, which approximates market value. CLASS was established as a cooperative investment arrangement organized under the CLASS Municipal Cooperation Agreement made pursuant to New York General Municipal Law, Article 3A and 5-G. Collateral is required for demand deposits and time deposit accounts at 105% of all deposits not covered by federal deposit insurance. Obligations that may be pledged as collateral include obligations of the United States and its agencies and obligations of the State and its municipalities and school districts. The Town's collateral agreements are based on the Town's available balance. - 26 - TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2008 DETAILED NOTES ON ALL FUNDS (continued) 1. CASH AND INVESTMENTS (continued) Custodial Credit Risk - Deposits/Investments - 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. Custodial credit risk for investments exists when, in the event of the failure of the counterparty, a government will not be able to recover the value of its investments or collateral securities that are in possession of an outside party. Governmental Accounting Standards Board Statement No. 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, or · Collateralized with securities held by the pledging financial institution's trust department or agent but not in the Town's name At December 31, 2008 the Town's cash book balance was approximately $25,900,000. This amount is inclusive of Fiduciary fund deposits of approximately $10,800,000 but exclusive of petty cash of approximately $2,400. The available bank balance was approximately $29,100,000. Of the bank balance, $1,740,628 was covered by Federal deposit insurance, and approximately $37,200,000 was covered by collateral held by the Town's agent, a third-party financial institution, in the Town's name. 2. INTERFUND RECEIVABLES AND PAYABLES Interfund receivables and payables for the primary government at December 31, 2008 were as follows: Major Governmental Funds: General Fund - Town wide Highway Fund Capital Projects Fund Non-Major Governmental Funds: General Fund - Part Town Special Grant Fund East-West Fire District Southold Wastewater District Fishem Island Sewer District Solid Waste Management District Amount Amount Receivable Payable $ 229,666$ 1,181,019 524,836 25,164 15,538 46,105 122,581 534 74,366 668 3O6 284,861 Total $ 1.252.822 $ 1.252.822 Interfund receivable and payable balances for the primary government at December 31, 2008 are expected to be paid currently. - 27 - TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2008 DETAILED NOTES ON ALL FUNDS (continued) 2. INTERFUND RECEIVABLES AND PAYABLES (continued) Interfund transfer balances for the primary government at December 31, 2008 represent primarily the payment of operating and capital expenditures and are stated as follows: Major Governmental Funds: General Fund - Town wide Highway Fund Capital Projects Fund Non-Major Governmental Funds: General Fund - Part Town Fishem Island Sewer District Solid Waste Management District 3. CAPITAL ASSETS Total Primary f;Iovemment Capital assets not being depreciated Land Construction in progress Total capital assets not being depreciated Depreciable capital assets Buildings Improvements other than buildings Machinery and equipment Infrastructure Total depreciable capital asse~s Less accumulated depreciation Buildings Improvements other than buildings Machinery and equipment Infrastructure Total accumulated depreciation Total net depreciable capital assets Total net capital assets Transfers Transfers In Out $ 3,493,057 $ 2,729,790 823,241 678,382 236,179 3,700 378,529 $ 4.171.439 $ 4.171.439 Balance Balance 1/1/08 Additions Deletions 12/31/08 $ 68,929,202 $ 26,612,576 $ 95,541,778 1,067,738 2,425,545 $ 65,101 3,428,182 69,996,940 29,038,121 65,101 98,969,960 8,316,323 513,185 8,829,508 13,624,650 20,357 13,645,007 10,197,793 945,001 104,504 11,038,290 71,461,368 1,408,523 72,869,891 103,600,134 2,887,066 104,504 106,382,696 2,328,886 138,642 2,467,528 4,342,211 411,421 4,753,632 6,650,154 790,624 99,077 7,341,701 50,547,402 2,771,552 53,318,954 $ 63,868,653 $ 4,112,239 $ 99,077 67,881,815 38,500,881 $137,470,841 Depreciation expense was charged to governmental functions as follows: General government support Public safety Transpo~ation Economic assistance and opportunity Culture and recreation Home and community services $ 260,106 172,597 3,049,245 37,013 66,708 526,570 $ 4,112,239 - 28 - TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31,2008 DETAILED NOTES ON ALL FUNDS (continued) 3. CAPITAL ASSETS (continued) Discretely presented component units Capital assets not being depreciated Land Construction in progress Total capital assets not being depredated Depreciabie capital assets Buildings Improvements other than buildings Machinery and equipment Infrastructure Total depreciable capital assets Less accumulated depreciation Buildings Improvements other than buildings Machinery and equipment infrastructure Total accumulated depreciation $ Total net depreciable capital assets Total net capital assets INDEBTEDNESS SHORT TERM DEBT Balance Balance 1/1/08 Additions Deletions 12/31/08 $ 2,193,353 $ 2,193,353 404,367 $ 404,367 -0- 2,597,720 -0- 404,367 2,193,353 3,500,910 398,412 3,899,322 17,028,469 19,950 17,048,419 3,504,995 23,683 109,706 3,418,972 2,172,080 366,070 2,538,150 26,206,454 808,115 109,706 26,904,863 1,458,075 114,031 1,572,106 1,551,097 716,095 2,267,192 2,371,528 152,536 11,825 2,512,239 1,321,985 87,389 1,409,374 6,702,685 $ 1,070,051 $ 11,825 7,760,911 19,143,952 $ 21,337,305 Bond Anticipation Notes (BANs) - Bond anticipation notes (BANs) are used as a temporary means of financing capital expenditures in the capital projects fund. State law requires that BANs issued for capital purposes be converted to long-term obligations within five years after the odginal issue date. The notes or renewal thereof may not extend more than two years beyond the original date of issue unless a portion is redeemed within two years and within each 12 month period thereafter. Liabilities for BANs are generally accounted for in the capital projects fund. BANs are expected to be paid from the proceeds of future bond issues after renewal of these notes. These BANs bear interest at various rates from 1.9% to 3.95% and are due at various dates through 2008. When BANs are not redeemed with the proceeds of bond issues, but instead paid from budgetary appropriations, the principal amount paid is recorded as an expenditure in the operating fund and a financing source is recorded in the capital projects fund. These notes are summarized as follows: Interest Description Amount Rate Various Purposes $ 3,230,000 3.95% Various Purposes 558,000 3.75% Various Purposes 1,065,000 2.28% Various Purposes 205,000 1.90% Fishers Island Sewer 121,300 3.35% New London Wharf 1,200,000 3.70% Mattituck Park 199,800 3.00% Total $ 6.579~100 - 29 - TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31,2008 DETAILED NOTES ON ALL FUNDS (continued) 4. INDEBTEDNESS (continued) SHORT TERM DEBT (continued) A summary of changes in BANs for the year ended December 31, 2008 is as follows: Balance Balance 1/1/08 Increases Reductions 12/31/08 PrimaryGovernment $ 4,384,000 $ 1,342,000 $ 546,700 $ 5,179,300 Component Units 1,860,000 199,800 660,000 1,399,800 $ 6.244.00~0 $ 1.541.800 ~ $ 6.579.100 LONG-TERM DEBT Summary of changes in long-term debt transactions for the year ended December 31, 2008 is as follows: Non-current Balance Balance liabilities due Non~urrent 1/1/08 Increases Reductions 12/31/08 within one year liabilities primary Government: General obtigation bends $ 22,365,000 $ 8,850,000 Net compensated absences 6,971,397 406,925 Estimated tiability for landfill closure and post-closure care costs 582,773 66,329 516,444 19,820 496,624 Other postemployment benefits payable -0- 4,798,081 1,123,202 3,674,879 -0- 3,674,879 Component Units: General obligation bends 2,655,000 200,000 2,455,000 205,000 2,250,000 Net compensated absences q3- 165,077 165,077 ~)- 165,077 Claims and judgments 150,000 56,897 93,103 45,438 47,665 Other pestsmployment benefits payable -0- 108,973 13,874 95,099 -0- 95,099 $ 1,495,000 $ 29,720,000 $ 1,870,000 $ 27,850,000 7,378,322 466,125 6,912,197 General Obligation Bonds - The Town borrows money in order to acquire land, equipment or construct buildings and improvements. This enables the cost of these capital assets to be borne by the present and future taxpayers receiving the benefit of the capital assets. These long-term liabilities, which are backed by the full faith and credit of the Town, bear interest at vadous rates from 3.14% to 6.375% and have maturity dates in 2009 through 2030. Future principal and interest payments to maturity for both the primary government and the component units are as follows: Year Endin~l Principal Interest 2009 $ 2,075,000 $ 1,242,518 2010 1,900,000 1,168,315 2011 1,925,000 1,096,262 2012 1,890,000 1,024,225 2013 1,775,000 955,164 2014-2018 8,965,000 3,746,531 2019-2023 6,220,000 2,197,651 2024-2028 5,375,000 985,125 2026-2030 2,050,000 87,125 Totals - 30 - TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31,2008 DETAILED NOTES ON ALL FUNDS (continued) 4. INDEBTEDNESS (continued) Other long-term liabilities for claims and judgments, compensated absences, other post employment benefits, and the estimated liability for landfill closure and post closure costs are to be paid by the fund that gave rise to the liability. PRIOR YEAR DEFEASANCE OF DEBT In prior years, the Town defeased cedain bonds by placing the proceeds of new bonds in an irrevocable trust with an escrow agent to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and liability for the defeased bonds are not included in the Town's financial statements. At December 31, 2008, $1,340,000 of these bonds outstanding are considered defeased. 5. RETIREMENT SYSTEM Plan Description The Town of Southold participates in the New York State and Local Employees' Retirement System (ERS) and Local Police and Fire Retirement System (PFRS). This is a cost-sharing multiple- employer retirement system. The System provides retirement benefits as well as death and disability benefits. Obligation of employers and employees to contribute and benefits to employees are governed by the New York State Retirement and Social Security Law (NYSRSSL). As set forth in the NYSRSSL, the Comptroller of the State of New York (Comptroller) serves as sole trustee and administrative head of the System. The Comptroller shall adopt and may amend rules and regulations for the administration and transaction of the business of the System and for the custody and control of their funds. A publicly available annual report containing financial statements and required supplemental information for the Employees' Retirement System may be obtained by writing to the New York State Retirement System, Governor Smith State Building, Albany, NY 12244. Funding Policy The System is noncontributory except for employees who joined the New York State and Local Employees' Retirement System a~ter 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 f'~een of the NYSRSSL, who contribute 3% of their salary. Prior to October 1, 2000, all employees who joined the System after July 27, 1976 were required to contribute 3% of their salary. Under the authority of the NYSRSSL, the Comptroller shall certify annually the rates expressed as proportions of payroll of members, which shall be used in computing the contributions required to be made by employers to the pension accumulation fund. The Town is required to contribute at an actuarially determined rate. The actual contributions w~re equal to the actuarially required amounts and also include additional contributions to fund various early retirement incentives made available to the Town employees. The credits and miscellaneous adjustments represent modification made by the ERS for prior year's contributions. The required contributions, for the primary government, for the current year and two preceding years were: ERS PFRS 2008 $ 932,918 $ 905,458 2007 $ 980,628 $ 967,286 2006 $ 1,096,547 $ 741,445 The Town's contribution to the system was 100% of the contributions required each year. - 31 - TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2008 DETAILED NOTES ON ALL FUNDS (continued) 6. OTHER POST-EMPLOYMENT BENEFITS (OBLIGATIONS FOR HEALTH INSURANCE) In the government-wide financial statements, the cost of post employment healthcare benefits, like the cost of pension benefits, generally should be associated with the period in which the cost occurs, rather than in the future year when it will be paid. In adopting the requirements of GASB 45, during the year ended December 31, 2008, the Town recognizes the cost of post employment healthcare in the year when the employee services are received, reports the accumulated liability from prior years and provide information useful in assessing potential demands on the Town's future cash flows. Recognition of the liability accumulated from prior years will be phased in over 30 years, commencing with the 2008 liability. Plan Description: The Town, as a single-employer defined benefit OPEB plan, per its contracts with employees, will pay full premium costs for medical (currently provided by the Empire Plan) insurance coverage at retirement. For non-police participants, the Town provides continuation of medical insurance to employees who retire under the NYS Retirement System or who are at least 55 years old and have at least 10 years of service with the Town. For police, the Town provides continuation of medical insurence for employees who have at least 20 years of service with the Town. The retiree is eligible for full Medicare reimbursement in the amount of $1,157 per year. Healthcare benefits for non-union employees are similar to those of union employees. Surviving spouses of deceased employees may continue coverage by paying the premium equivalent for participants. They are also entitled to Medicare part B premium reimbursement. The number of participants as of January 1, 2008, the effective date of the OPEB valuation is as follows. There have been no significant changes in the number or type of coverage since that date. Active employees 205 Retirees 167 Spouses of retired employees 13 Total 385 Fundinq Policy: The Town currently pays for post employment health care benefits on a pay-as-you-go basis. Annual Other Post-Employment Benefits Cost and Net Obliqation: For the year ended December 31, 2008, the Town's annual other post-employment benefit costs (expenses) were $4,798,081. Considering the annual expense as well as the payment of current health insurance premiums, which totaled $1,123,202 for retirees and their beneficiaries, the result was an increase in the other post-employment benefits liability of $3,674,879 for the year ended December 31, 2008. The Town's component units annual other post-employment benefits cost (expenses) were $108,973. Considering the annual expense as well as the payment of current health insurance premiums, which totaled $13,874 for retirees, the result was an increase in the other post-employment benefits liability of $95,099 for the year ended December 31, 2008. Refired employees Active employees Unfunded actuarial accrued liability (UAAL) Benefit Obli.qations and Normal Cost $ 19,563,574 26,242,684 $ 45.806.25~8 - 32 - TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2008 DETAILED NOTES ON ALL FUNDS (continued) 6. OTHER POST-EMPLOYMENT BENEFITS (OBLIGATIONS FOR HEALTH INSURANCE) (continued) Annual Other Post-Employment Benefits Cost and Net Obliqation (continued) The Town's annual other post-employment benefit cost is calculated based on the annual required contribution (ARC) of the employer, an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The Town's annual other post-employment benefits cost, the amount actually paid and changes to the Town's net other post-employment benefits obligation to the Plan for the year ended December 31, 2008 are as follows: Normal Cost $ 1,900,~.-!. Amortization of unfunded actuarial Liability (UAAL) over 30 years Interest 2,691,021 206,616 Annual required contribution (ARC) Interest on net other post-employment benefits obligation Adjustment to ARC Annual OPEB cost (expense) Less: contribution for year ended December 31,2008 Increase in net OPEB obligation Net OPEB obligation- beginning of year Net OPEB obligation- end of year Percent of annual OPEB cost contributed 4,798,081 -0- -0- 4,798,081 1,123,202 3,674,879 -0- $ 3,674.879 30.56% Funded Status and Funding Progress: The percentage contributed for the current year was: Annual Percentage OPEB Cost Contributed $ 4,798,081 30.56% Net OPEB Obli.qation $ 3,674,879 The funded status of the plan as of January 1, 2008 is as follows: Actuarial Accrued Unfunded UAAL as a Value of Liability AN._ Funded Assets {AAL) (UAAL) Ratio Percentage Covered of Payroll Payroll Town $ -0- $ 45,806,258 $ 45,806,258 0% $ 13,830,871 331.19% Component Unit -0- 1,068,859 1,068,859 0% 928,159 115.16% Actuarial Methods and Assumptions: The projection of future benefits for an ongoing plan involves estimates of the value of reported amounts and assumptions about the probability of occurrence of future events far into the future. Amounts determined regarding the funded status of a plan and the employer's annual required contributions are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. - 33 - TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2008 DETAILED NOTES ON ALL FUNDS (continued) 6. OTHER POST-EMPLOYMENT BENEFITS {OBLIGATIONS FOR HEALTH INSURANCE) (continued) Actuarial Methods and Assumptions {continued) Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term liability in actuarial accrued liabilities, consistent with the long-term perspective of the calculations. In the January 1, 2008 actuarial valuation, the liabilities were computed using the projected unit credit cost method. The actuarial assumptions utilized a 4.5% discount rate. The valuation assumes a 10-12% healthcare cost trend increase for the year, reduced by decrements down to 5% in fiscal year 2015. The remaining amortization period at December 31, 2008 was twenty nine years. 7. COMPENSATED ABSENCES Town employees are granted vacation and sick leave and earn compensatory absences in varying amounts. In the event of termination or upon retirement, an employee is entitled to payment for accumulated vacation and sick leave and unused compensatory absences at various rates subject to certain maximum limitations. Estimated vacation, sick leave and compensatory absences accumulated by governmental fund type employees have been recorded in the statements of net assets. Payment of vacation time and sick leave is dependent upon many factors; therefore, timing of future payments is not readily determinable. However, management believes that sufficient resources will be made available for the payments of vacation, sick leave and compensatory absences when such payments become due. As of December 31, 2008, the value of the accumulated vacation time and sick leave was $7,378,322 for the primary government. COMMITMENTS AND CONTINGENCIES Risk Management In common with other municipalities, the Town receives numerous notices of claims. The Town established a self-insurance risk management program for general liability and health insurance which are both accounted for in the Risk Retention Fund which is reported in the General Fund. For general liability, the Town has a self-insured liability exposure of $50,000 per claim. Any liability exposure above the $50,000 self-insured liability for General Liability, Automobile Liability, and Police Liability is covered by primary insurance policies up to $1,000,000 per claim and $3,000,000 in aggregate for the year. After primary policy limits are exhausted, the excess exposure above the $1,000,000 is covered by an Umbrella Liability Policy of $10,000,000 per claim and $10,000,000 in the aggregate. The Town has a Public Officials Liability policy with a $25,000 deductible per claim, with the excess exposure above that $25,000 amount covered by a Primary Liability rider of up to $1,000,000 per claim, with the excess exposure above that $1,000,000 amount covered by the aforementioned Umbrella Liability Policy. For insurance for health benefits that are self-insured, the Town has insurance policies which provide coverage for specific medical cases in excess of $175,000 incurred and paid within the calendar year, as well as coverage for all other claims in the aggregate. The exposure to the Town under the aggregate policy is based on monthly enrollment. Considering the changes to enrollment during 2008, the attachment point for the aggregate policy was $2,910,475. - 34 - TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2008 COMMITMENTS AND CONTINGENCIES (continued) Risk Management (continued) There have been no significant reductions in insurance coverage as compared to the prior year, and there were no settlements in excess of insurance coverage over the last three years. The Risk Retention Fund reserves for general liability claims are determined by a third party administrator, and are reported when it is probable that a loss has occurred and the amount of that loss can be reasonably estimated. Claims reserves for general liability claims are reevaluated periodically to take into consideration recently settled claims and any new developments and changes. The Risk Retention Fund liabilities for medical claims outstanding at year end are reported by the third party administrator and are recorded when the claim has been incurred and paid within 60 days of the year end. The Town's discretely presented component units are not included in the Town's self-insurance risk management program for any claims. Net assets in the Risk Retention Fund are reserved for future catastrophic losses and are not available for other uses. Changes in the liability for claims and judgments for the year ended December 31, 2008 and 2007 are as follows: General Medical Liability 2008 2007 2008 2007 Unpaid Claims as of December 31, pdor year Incurred Claims: Prevision for insured events of the current fiscal year Increase (decrease) in net prevision for insured events of prior fiscal years Total Incurred Claims and Claim adjustments Payments of: Claims during the current year Unpaid Claims as of December 31, $ 447,844 $ 161,976 $ 1,215 $ 906 3,126,515 2,524,953 20,904 6,857 (531276) 48 556 (127) 309 3,521,083 2,735,485 21,992 8,072 3,353,593 2,287,641 20,904 6,857 current year $ 167.490 $ 447~844 $ 1.088 $ 1.215 During the year ended December 31, 2008 charges to the operating funds for the self-insurance programs were made as follows: Medical General Fund Whole Town General Fund Part Town Highway Fund Part Town Solid Waste District $ 1,911,381 223,403 622,241 230,827 $ 2,987,852 $ 479,653 12,776 121776 5051205 $ 3.493.057 General Liability General Fund Whole Town General Fund Part Town Solid Waste District Total Charges - 35 - TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2008 COMMITMENTS AND CONTINGENCIES (continued) Landfill Closure and Post-Closure Care Costs State and federal laws and regulations required the Town to place a final cover on its landfill sites and to perform certain maintenance and monitoring functions at the sites for thirty years after closure. The Town ceased accepting waste at its Cutchogue landfill as of October 8, 1993. The Town entered into a stipulation of settlement with the New York State Department of Environmental Conservation in October of 1994 in which all charges of operational violations at the Cutchogue landfill were dropped. Under the stipulation, the Town agreed to close and place a final cover over the landfill and to pay a civil penalty of $650,000 over seven years. Construction of the final cover commenced in the summer of 2001 and was completed in the fall of 2003. In addition to placement of the final cover on the landfill, state and federal regulations presently require the Town to perform certain maintenance and monitoring functions at the site for up to thirty years. Accordingly, as of December 31, 2008 the Town has recorded a liability of $516,~,~.~. which represents the provision to be made in future budgets for post-closure landfill costs. Actual costs may vary due to inflation or deflation, changes in technology, or changes in regulations or applicable laws. Actual costs associated with the placement of the final cover totaled $7,681,719. Financing for closure activities was provided through a $2,000,000 grant from the New York State Department of Environmental Conservation with the balance provided with a state subsidized loan through the New York State Environmental Facilities Corporation. Costs associated with post closure care will be covered by charges to future landfill users and future tax revenue. Lease Commitments and Leased Assets The Town leases property and equipment under operating leases. Total rental expenditures on such leases for the year ended December 31, 2008 were $197,281. Future obligations over the primary terms of the Town's leases as of December 31, 2008 are as follows: 2009 $ 188,297 2010 133,658 2011 107,881 2012 95,910 2013 and thereafter 443,199 Total $ 968.945 CONDENSED FINANCIAL STATEMENTS FOR THE DISCRETELY PRESENTED COMPONENT UNITS The following represents condensed financial statements for the discretely presented component units as of and for the year ended December 31, 2008: Condensed Statement of Net Assets: Due from Capital Assets Other Current Primary Net of Current Long-Term Net Assets Government Depredation Liabilities Liabilities Assets Fishers Island Ferry District $ 488,947 Fishers Island Refuse and Garbage 1,084,975 Cutchogue-New Suffolk Park District 159,308 Southold Park District 123,180 Orient-East Marion Park District 4,906 Mattituck Park District 329,809 Odent Mosquito District 22,321 $ 74,472 $ 15,606,174 $ 1,749,140 $ 2,557,841 $ 11,862,612 50,464 2,899,178 174,331 3,860,286 18,302 121,163 18,302 280,471 39,760 748,856 42,882 868,914 4,491 432,985 16,044 426,338 160,232 1,510,197 414,673 1,585,565 8,836 18,752 22,234 27,675 $ 2,213,446 $ 356,557 $ 21,337,305 $ 2,437,606 $ 2,557,841 $ 18,911,861 - 36 - TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31,2008 E. CONDENSED FINANCIAL STATEMENTS FOR THE DISCRETELY PRESENTED COMPONENT UNITS (continued) Condensed Statement of Activities: Propelty Expenses Revenue Net Expense Tax O~her Change 1/1108 12/31/08 Fish~s Island Feny Dis~ct $ 4,122,369 $ 2,497,801 $1,824,568 $ 590,000 $ 391,015 $ (643,553) $12,506,165 $11,862,612 5,776,665 $ 2,539,527 $ 3,237,138 $ 2,216,709 $ 744,595 $ (275,834) $19,187,695 $18,911,861 F. 2% TRANSFER TAX In November 1998, the votem of the Town approved a referendum for a 2% Transfer Tax, which became effective on April 1, 1999. The transfer tax receipts are recorded in the community preservation fund, and are used for the purchase and/or preservation of agricultural land, open space, parks, or historic preservation sites. The tax applies to sales of vacant land worth $100,000 or more or sales or improved land worth $250,000 or more. Conveyance of real property for open space, parks or historic preservation purposes are exempt from this tax. At December 31, 2008, and for the four previous years, the Town has the following 2% transfer tax revenue which was utilized for the conservation, environmental or histodc preservation expenses of: Revenues Expenditures Yearend December31,2008 $ 5,251,258 $ 17,624,096 2007 6,071,436 2,423,659 2006 5,823,714 10,969,280 2005 7,200,274 10,132,009 2004 6,045,685 6,408,951 G. SUBSEQUENT EVENTS The Town issued Public Improvement Serial Bonds in the amount of $5,283,000 which was dated March 15, 2009. This issue included $5,000,000 for Open Space purchases and various town improvements. Interest rates vary from 3% to 4.375%, and the final payment is due March 2030. In March 2009, the Town refunded $2,125,000 serial bonds. The issues refunded were 1998 $2,020,000 and 1999 $2,070,000 serial bonds. Interest rates vary from 2% to 5% which mature in March 2019. H. NEW PRONOUNCEMENTS The GASB has issued Statement No. 51, "Accounting and Financial Reporting for Intangible Assets." This statement established accounting and financial reporting requirements for intangible assets including easements, water rights, timber rights, patents, trademarks, and computer software. The requirements of this statement become effective for the Town for the year ended December 31, 2010. - 37 - TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2008 H. NEW PRONOUNCEMENTS (continued) The GASB has issued Statement No. 53, "Accounting and Financial Reporting for Derivative Instruments." This statement addressed the recognition, measurement, and disclosure of information regarding derivative instruments entered into by state and local governments. The requirements of this statement become effective for the Town for the year ended December 31, 2010. The GASB has issued Statement No. 54, "Fund Balance Reporting and Governmental Fund Type Definitions." This statement establishes criteria for classifying fund balances into specifically defined classifications and clarifies definitions for governmental fund types. The requirements of this statement become effective for the Town for the year ended December 31,2011. The Town is currently evaluating the impact of the above pronouncements. - 38 - REQUIRED SUPPLEMENTARY INFORMATION OTHER THAN MANAGEMENT DISCUSSION AND ANALYSIS TOWN OF SOUTNOLD GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL Year ended December 31, 2008 Vadance Odginal Final Positive Budget Budget Actual__~___ (Negative) REVENUES Real property taxes $17,391,288 Other real property tax items 93,000 Non-property tax items 616,670 Departmental income 669,116 Intergovernmental charges 269,518 Use of money and property 735,000 Licenses and permits 288,455 Fines and fo#eitums 165,000 Sale of property and compensation for loss 28,500 Miscellaneous local sources 196,644 State aid 2,339,522 Federal aid Total Revenues $17,391,288 $17,391,288 93,000 94,113 $ 1,113 616,670 751,073 134,403 822,275 611,598 (210,677) 158,154 262,977 104,823 735,000 496,395 (238,605) 288,455 244,910 (43,645) 165,000 169,119 4,119 32,900 159,726 126,826 204,494 190,816 (13,678) 2,396,269 1,656,760 (739,509) 111,364 147,711 36,347 22,792,713 23,014,869 22,176,486 (838,383) EXPENDITURES General government support 6,498,699 Public safety 8,728,075 Public health 38,250 Transportation 488,500 Economic assistance and opportunity 1,135,950 Culture and recreation 382,530 Home and community services 460,012 Employee benefits 6,891,738 Debt Service - Principal and Interest 1,118,475 Total Expenditures Excess (Deficiency) of Revenues Over Expenditures Other Financing Sources (Uses) Transfers in Transfers out Total Other Financing Sources (Uses) Net Change in Fund Balance Fund Balance at Beginning of Year Fund Balance at End of Year 6,308,574 5,479,661 828,913 8,747,488 8,398,429 349,059 38,250 35,238 3,012 491,200 470,797 20,403 1,175,950 1,147,293 28,657 502,530 452,588 49,942 501,981 426,656 75,325 7,404,938 7,276,770 128,168 1,118,475 973,787 144,688 25,742,229 26,289,386 24,661,219 1,628,167 (2,949,516) (3,274,517) (2,464,733) 789,764 3,261,856 3,761,856 3,493,057 (268,799) (2,521,381) (3,046,381) (2,729,790) 316,591 740,475 715,475 763,267 47,792 (2,209,041) $ (2,559,042) (1,721,466) $ 837,576 5,083,792 $ 3,362,326 See notes to the financial statements. -39- TOWN OF SOUTHOLD HIGHWAY FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL Year ended December 31, 2008 REVENUES Vadance Original Final Positive Budget Budget Actual (Negative) Real pmpertytaxes $ 4,316,095 $ 4,316,095 Other real property tax items 12,700 12,700 Use of money and property 145,000 140,000 Licenses and permits 7,000 7,000 Sale of property and compensation for loss 5,000 Miscellaneous local sources State aid 231,332 326,820 $ 4,316,095 11,777 $ (923) 61,374 (78,626) 13,190 6,190 7,416 2,416 13,703 13,703 326,820 -0- Total Revenues 4,712,127 4,807,615 4,750,375 (57,240) EXPENDITURES Public safety 140 Transportation 3,749,227 3,844,715 Employee benefits 569,300 569,300 Debt Service - Principal and Interest 68,900 64,219 Total Expenditures Excess of Revenues Over Expenditures Other Financing Uses Transfers out Total Other Financing Uses Net Change in Fund Balance $ Fund Balance at Beginning of Year Fund Balance at End of Year 135 5 3,543,617 301,098 498,813 70,487 40,228 23,991 4,387,427 4,478,374 4,082,793 395,581 324,700 329,241 667,582 338,341 (815,700) (820,241) (823,241) (3,000) (815,700) (820,241) (823,241) (3,000) (491,000) $ (491,000) (155,659) $ 335,341 1,079,221 $ 923,562 See notes to the financial statements. -40- OTHER SUPPLEMENTARY INFORMATION TOWN OF SOUTHOLD COMBINING BALANCE SHEET NON-MAJOR GOVERNMENTAL FUNDS December 31, 2008 ASSETS Cash and investments Accounts receivable Due from other funds State and federal receivables Prepaids Total Assets LIABILITIES AND FUND BALANCE LIABILITIES Accounts payable Due to other funds Deferred revenue General Fund Part Town FUND BALANCE Fund Balance - Reserved: Prepaids Fund Balance - Unreserved: Designated - ensuing year's budget Undesignated $ 771,368 65,057 122,581 51,373 22,905 East-West Fire Southold Fishers Solid Waste Special Protection Wastewater Island Sewer Management Grant Distdct Distdct Distdct Distdct $ 18,125 $ 109,271 74,366 $ 252,261 668 $ 35,179 1,871 306 $ 131,315 81,176 284,861 7,265 21,670 $1,033,284 $ 18,125 $ 183,637 $ 252,929 $ 37,356 $ 526,287 $ 27,753 $ 17,591 $ 12,655 534 251,267 156,201 Total Liabilities 279,020 18,125 168,856 5,700 9,081 22,905 292,000 439,359 $ 1,058 1,058 75,000 176,871 754,264 -0- 14,781 251,871 $1,033,284 $ 18,125 $ 183,637 $ 252,929 Total Fund Balance $ 872 872 36,484 36,484 $ 37,356 Total Liabilities and Fund Balance $ 133,940 418,042 551,982 21,670 (47,365) (25,695) $ 526,287 Totals $1,299,394 148,104 482,782 76,763 44,575 $ 2,051,618 $ 192,811 534 826,568 1,019,913 44,575 372,700 614,430 1,031,705 $ 2,051,618 -41- TOWN OF SOUTHOLD COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - NON-MAJOR GOVERNMENTAL FUNDS Year ended December 31, 2008 REVENUES Real property taxes Other real property tax items Non-property tax items Departmental income Use of money and property Licenses and permits Sale of property and compensation for loss Miscellaneous local sources State Aid Federal Aid EXPENDITURES General government support Public safety Health Home and community Employee benefits Debt Service: Principal Interest Excess (Deficiency) of Revenues Over Expenditures Other Financing Uses: Transfers out Total Revenues Total Expenditures Total Other Financing Uses East-West Fire Southold General Fund Special Protection Wastewater Part Town Grant Distdct Distdct $ 809,977 2,194 256,296 632,198 20,352 5,500 4,922 147,302 1,878,741 97,231 506,202 7,370 767,517 232,938 1,611,258 267,483 (236,179) (236,179) $ 144,838 144,838 144,838 144,838 $ 541,463 $ 3,245 475 3 7,070 3,229 4,953 Fishers Island Sewer Distdct $ 2,422 27,495 973 Solid Waste Management District $ 1,506,945 1,321 1,721,098 13,429 162,260 207,733 889 68,971 Totals $ 2,861,630 6,415 256,296 2,387,861 42,936 167,760 212,655 889 216,273 144,838 545,167 15,271 30,890 3,682,646 6,297,553 10,425 16,443 1,960 3O4 2,264 13,007 13,007 238,864 $ 251,871 550,584 159,767 2,393,817 237,244 416,600 232,613 3,440,041 242,605 (378,529) (378,529) (135,924) 110,229 550,584 (5,417) 419 27,287 3,603 (3,700) (3,700) (97) 36,581 $ 36,484 267,423 1,056,786 7,370 3,322,615 470,182 418,560 233,336 5,776,272 521,281 (618,408) (618,408) (97,127) 1,128,832 Net Change in Fund Balance Fund Balances at Beginning of Year Fund Balances at End of Year 31,304 722,960 $ 754,264 (5,417) 20,198 -0~ $ 14,781 $(25,695) $ 1,031,705 -42- DISCRETELY PRESENTED COMPONENT UNITS TOWN OF SOUTHOLD DISCRETELY PRESENTED COMPONENT UNITS COMBINING STATEMENT OF NET ASSETS December 31, 2008 ASSETS Current Assets: Cash and investments Accounts receivable Due from pdmary government Due from fiduciary funds State and federal aid receivables Prepaid charges Total Current Assets Non-Current Assets: Non-depreciable capital assets Depreciable capital assets, net of depreciation Total Non-Current Assets Total Assets LIABILITIES Current Liabilities: Accounts payable and accrued liabilities Accrued interest payable Bond anticipation notes payable Unearned revenue Non-current liabilities due within one year General obligation bonds payable Claims and judgments payable Total Current Liabilities Non-Current Liabilities: General obligation bonds payable Compensated absences payable Claims and judgments payable Other post-employment benefits payable Total Non-Current Liabilities Fishers Island Femj District Fishers Island Cutchogue- Southold Orient-East Mat'dtuck Odent Garbage and New Suffolk Pad< Madon Pad< Pad< Mosquito Refuse District Pad< Distdct District Distdct Distdct District (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Totals $ 311,048 $ 1,059,975 $ 159,308 $ 123,180 72,532 74,472 50,464 18,302 39,760 64,670 16,822 23,875 25,000 563,419 1,135,439 177,610 41,717 517,263 101,198 15,564,457 2,381,915 19,965 15,606,174 2,899,178 121,163 16,169,593 4,034,617 298,773 4,906 $ 329,809 4,491 160,232 162,940 9,397 490,041 588,849 432,985 511,340 160,007 998,857 748,856 432,985 1,510,197 911,796 442,382 2,000,238 22,321 $ 2,010,547 72,532 8,836 356,557 64,670 16,822 48,875 31,157 2,576,003 2,193,352 18,752 19,143,953 18,752 21,337,305 49,909 23,907,308 144,909 45,151 1,200,000 163,642 48,898 125,433 18,302 3,122 11,553 25,071 263 233,816 1,840 46,991 199,800 1,399,800 39,760 4,491 132,962 21,971 506,561 150,000 45,438 55,000 205,000 45,438 1,749,140 174,331 18,302 42,882 16,044 414,673 22,234 2,437,606 2,250,000 165,077 47,665 95,099 2,557,841 -0- -0- -0- -0- -0- 2,250,000 165,077 47,665 95,099 2,557,841 Total Liabilities 4,306,981 174,331 18,302 42,882 16,044 414,673 22,234 4,995,447 NET ASSETS Investment in capital assets, net of related debt Restricted: Unrestricted Total Net Assets 12,006,174 (143,562) $ 11,862,612 3,818,221 755,024 1,455,197 18,034,616 42,065 280,471 113,890 426,338 130,368 27,675 877,245 $ 3,860,286 $ 280,47~1 $ 868,914 $ 426,338 $ 1,585,565 $ __27,675 $ 18,911,861 -43- TOWN OF SOUTHOLD DISCRETELY PRESENTED COMPONENT UNITS COMBINING STATEMENT OF ACTIVITIES Year ended December 31, 2008 REVENUES Program revenues Real property taxes Other real property tax items Non-property tax items Interest earnings State Aid Federal Aid Other Total Revenues EXPENSES General government support Public health Transportation Culture and recreation Home and community services Interest on debt Total Expenses Changes in Net Assets Net Assets at Beginning of Year Net Assets at End of Year Fishers Island Cutchogue- Southold Orient-East Mattituck Odent Fishers Garbage and New Suffolk Park Madon Park Park Mosquito Island Ferry Refuse Distdct Park District District Distdct Distdct District Distdct (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Totals $ 2,497,801 $ 41,726 $ 2,539,527 590,000 563,800 $ 145,000 $ 315,000 $ 34,780 $ 481,229 $ 86,900 2,216,709 518 495 127 31 422 1,593 6,762 6,762 16,036 22,478 4,557 44,625 57 11,470 817 100,040 18,593 141,123 159,716 305,493 305,493 50,375 120,616 170,991 3,478,816 776,384 149,684 359,625 34,868 613,737 87,717 5,500,831 182,040 182,040 3,794,749 91,371 91,371 3,794,749 12,102 119,424 245,735 33,636 425,498 836,395 727,308 727,308 133,478 7,011 4,313 144,802 4,122,369 734,319 119,424 245,735 33,636 429,811 91,371 5,776,665 (643,553) 42,065 30,260 113,890 1,232 183,926 (3,654) (275,834) 12,506,165 3,818,221 250,211 755,024 425,106 1,401,639 31,329 19,187,695 $11,862,612 $ 3,860,286 $ 280,471 $ 868,914 $ 426,338 $ 1,585,565 $ 27,675 $18,911,861 -44- OTHER REPORTS TOWN OF SOUTHOLD SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Year ended December 31,2008 Federal Grantor/Pass-through Grantor/ Pro,qram or Cluster Title Fedeml CFDA Number U. S. Department of Housing and Urban Development Pass-through program from: Suffolk County, New York Community Development Block Grant Program 14.218 U.S. Department of Health and Human Services Pass-through program from: Suffolk County, New York Special Programs for the Aging - Title III, Part C - Nutrition Nutrition Services Incentive Program 93.045 93.053 U.S. Department of Justice Pass-through program from: New York State Bulletproof Vest Partnership 16.607 U.S. Department of Transportation Pass-through program from: New York State Highway Planning and Construction 20.205 U.S. Department of Commerce Direct program from: National Oceanic and Atmospheric Administration Coastal Zone Management Administration Award 11.419 Total expenditures of federal awards Federal Expenditures 144,838 85,743 25,621 347 36,000 1,464,735 1,757.284 See accompanying note to schedule of expenditures of federal awards -45- TOWN OF SOUTHOLD NOTE TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS December 31, 2008 Note A- Basis of Presentation The accompanying schedule of expenditures of federal awards includes the federal grant activity of the Town of Southold and is presented on the modified accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements. CERTIFIED PUBLIC ACCOUNTANTS 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 Honorable Supervisor and Town Board Town of Southold Southold, New York We have audited the financial statements of the governmental activitiesl the discretely presented component unit, each major fund, and the aggregate remaining fund information of Town of Southold, New York, as of and for the year ended December 31, 2008, which collectively comprise the Town of Southold, New York's basic financial statements and have issued our report thereon dated December 16, 2009. We conducted our audit in accordance with auditing standards generally accepted in the United States of Amedca and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. The financial statements of the Town of Southold's discretely presented component units with the exception of one, the Fishers Island Ferry District, was not audited as of the report date, nor were we able to satisfy ourselves as to those financial activities by other auditing procedures. The discretely presented component units not audited represent 32.4%, 37.3% and 36.8%, respectively, of the assets, net assets and revenues of the aggregate discretely presented component units. The financial statements of the Fishers Island Ferry District were audited by other auditors whose report thereon have been furnished to us and in our opinion, insofar as it relates to the amounts included for that one component unit, are based solely on the reports of the other auditors. The financial statements of Fishers Island Ferry District were not audited in accordance with GovemmentAuditing Standards. Internal Control Over F nanca ReportinR In planning and performing our audit, we considered Town of Southold, New York'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 Town of Southold, New York's internal control over financial repoding. Accordingly, we do not express an opinion on the effectiveness of the Town of Southold, New York's internal control over financial reporting. A control deficiency exists 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 Town of Southold, New York's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generelly accepted accounting principles such that there is more than a remote likelihood that a misstatement of the Town of Southold, New York's financial statements that is more than inconsequential will not be prevented or detected by the Town of Southold, New York's internal control. A material weakness is a significant deficiency, or 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 Town of Southold, New York's internal control. PERSONAL SERVICE. TRUSTED ADVICE. ALBRECHT, VIGGIANO, ZURECK & COMPANY, RC. 245 PARK AVENUE, 24TH FLOOR 25 SUFFOLK COURT NBWYORK, NY 10167 HAUPPAUGE, NY 11788-3715 · T: 212.792.4075 T: 631.434.9500 F: 631.434.9518 www. avz.com Our consideration of the internal control over financial reporting was for the limited purpose described in the fimt paragraph of this section and would not necessarily identify all deficiencies in the internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. Compliance and Other Matters As part of obtaining reasonable assurance about whether the Town of Southold, New York'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 matedal 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 matters that are required to be reported under Government Auditing Standards. We noted certain other matters that we reported to management of the Town of Southold in a separate letter dated December 16, 2009. This report is intended solely for the information and use of management, Town Board, federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Hauppauge, New York December 16, 2009 CERTIFIED PUBLIC ACCOUNTANTS REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 Honorable Supervisor and Town Board Town of Southold Southold, New York Compliance We have audited the compliance of Town of Southold, New York, with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that arc applicable to its major federal program for the year ended December 31, 2008. Town of Southold, New York's major federal program is identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Compliance with the requircments of laws, regulations, contracts, and grants applicable to its major federal program is the responsibility of Town of Southold, New York's management. Our responsibility is to express an opinion on Town of Southold, New York's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether nonccempliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Town of Southold, New York's compliance with those requirements and performing such other procedures as we considered necessary under the circumstances. We believe that our audit provides a rcasonable basis for our opinion. Our audit does not provide a legal determination of Town of Southold, New York's compliance with those rcquircments. In our opinion, the Town of Southold, New York, complied, in all material respects, with the requirements referred to above that are applicable to each of its major federal programs for the year ended December 31, 2008. Internal Controls Over Compliance The management of Town of Southold, New York, is responsible for establishing and maintaining effective internal control over compliance with the rcquirements of laws, regulations, contracts, and grants applicable to federal programs. In planning and performing our audit, we considercd the Town of Southold, New York's internal control over compliance with the requirements that could have a dircct and material effect on a major federal program in order to determine our auditing procedurcs for the purpose of exprcssing our opinion on compliance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Town of Southold, New York's internal control over compliance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in the entity's internal control that might be significant deficiencies or material weaknesses as defined above. However, as discussed above, we identified certain deficiencies in internal control over compliance that we consider to be significant deficiencies. PERSONAL SERVICE. TRUSTED ADVICE. ALBRECHT, VIGGIANO, ZURECK & COMPANY, P.C. 245 PARK AVENUE, 24TH FLOOR 25 SUFFOLK COURT NEW YORK, NY 10167 HAUPPAUGE, NY 11788-3715 T: 212.792.4075 T: 631.434.9500 F: 631.434 9518 -49- www.avz.com A control deficiency in an enfity's internal control over compliance exists 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 noncompliance with a type of compliance requirement of a federal program on a timely basis. A significant def'miency is a control deficiency, or combination of control deficiencies, that adversely affects the entity's ability to administer a federal program such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a federal program that is more than inconsequential will not be prevented or detected by the entity's intemal control. We consider the deficiency described in the accompanying schedule of findings and questioned costs to be a significant deficiency in internal control over financial reporting as item 2008- 01 to be a significant deficiency. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement of a federal program will not be prevented or detected by the entity's internal control. Of the significant deficiencies in internal control over compliance described in the accompanying schedule of findings and questioned costs, we consider no items to be material weaknesses. Town of Southold, New York's response to the findings identified in our audit is described in the accompanying schedule of findings and questioned costs. We did not audit Town of $outhold, New York's response and, accordingly, we express no opinion on it. This roper is intended solely for the information and use of management, Town Board, others within the Town, federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Hauppauge, New York December 16, 2009 -50- TOWN OF SOUTHOLD SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year ended December 31,2008 SUMMARY OF AUDIT RESULTS 1. The auditors' report expresses an unqualified opinion on the basic financial statements of the Town of Southold. 2. No control deficiencies in internal control relating to the audit of the financial statements are reported in the "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~. 3. No instances of noncompliance material to the financial statements of the Town of Southold were disclosed during the audit. 4. One deficiency in internal control relating to the audit of the major federal award programs are reported in the "REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-1 5. The auditors' report on compliance for the major federal awards programs for the Town of Southold expresses an unqualified opinion on all major federal programs. 6. Audit findings that are required to be reported in accordance with Section 510(a) of OMB Circular A- 133 are reported in this Schedule. 7. The program tested as major programs was: CFDA Number Name of Federal Pro,qram or Cluster 11.419 Coastal Zone Management Administration Award 8. The threshold for distinguishing Types A and B programs was $300,000. 9, The Town of Southold was not determined to be a Iow-risk auditee. -51- TOWN OF SOUTHOLD SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year ended December 31, 2008 FINDINGS AND QIJESTIONED COSTS - MAJOR FEDERAL AWARD PROGRAMS AUDIT FINDINGS PROGRAMS DEPARTMENT OF COMMERCE NATIONAL OCEANIC ADMINISTRATION AWARD COASTAL ZONE MANAGEMENT ADMINISTRATION AWARD - CFDA No. 11.419 2008-01 Criteria Appraisals performed should be examined by a review appraiser and the review appraiser should prepare a signed statement that explains the basis for adjusting comparable sales to reach the review appraiser's determination of the fair market value. Condition It was noted that a review appraisal was not performed. Effect The value of the appraised property can be improperly valued. Recommendation The Town should obtain a review appraisal for appraisals performed to determine if the amount appraised is reasonable and accurate. Questioned Cost Unknown. ManaRement's Response The Town has put a system in place to monitor the appraisals for land purchased with federal funds. -52-