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HomeMy WebLinkAbout2009CULLEN & DANOWSKI, LLP CERTIFIED PUBLIC ACCOUNTANTS VINCENT D. CULEEN, CPA lAMES [. DANOWSKI, CPA PETER F. RODRIGUEZ, CPA JILL S. SANDERS, CPA DONALD J. HOFFMANN, CPA CHRISTOPH ER V. REINO. CPA Al,AN YU, CPA RECEIVED March 15, 2010 The Board of Fire Commissioners Southold Fire District Southold, New York JUN 1 7 2010 Sou hold Town Clerk In planning and performing our audit of the financial statements of the Southold Fire District (District) as of and for the year ended December 31, 2009, we considered the District's internal control in order to determine our auditing procedures for the purpose of expressing an opinion on the financial statements and not to provide assurance on internal control. However, during our audit we became aware of matters that are opportunities for strengthening internal controls and operating efficiency. This letter summarizes our comments and suggestions concerning those matters. This letter does not affect our report dated March 15, 2010, on the financial statements of the Southold Fire District. The accompanying comments and recommendations are intended solely for the use and information of the Board of Fire Commissioners, management, others you deem appropriate within the District, and any governmental authorities you need to share this information with. It is not intended for use by anyone other than these specified parties. Very truly yours, Cullen & Danowski, LLP T \Office\20,000 s\25400\ 0 g : ' ~e1~~ ?]x~. ~l~-.ef~p~:~kybN STATION, NEW YORK 11776-3060 · o PHONE: 631-473-3400 · FAX: 631-473-4863 ' WWW. CDLLENET Southold Fire District For the Year Ended December 31, 2009 STATUS OF PRIOR YEAR COMMENTS Annual Installation Dinner The District, in accordance with Town Law, expends money for an annual installation and/or inspection dinner. However, there is no guidance under the law as to what constitutes an appropriate expenditure and who is allowed to attend. In recent audits, the New York State Office of the State Comptroller has been focusing on this area and recommending that the Board develop a policy governing this expenditure. During our previous audit, we noted that the Board has not developed guidelines for the annual dinner that address allowable costs and allowable attendees. During the current year audit, we noted that the Board has adopted a policy covering the annual installation dinner. PERMISSIVE REFERENDUMS Section 6-g (4) of the General Municipal Law addresses expenditures paid out of the capital reserve funds, which are subiect to permissive referendums. The District is required to publish a legal advertisement within 10 working days at,er the Board adopts a resolution for any capital project or equipment acquisition to be funded out of the capital reserves. During our previous audit, we noted that a permissive referendum's legal advertisement was published 16 days, instead of 10 days, at, er the Board adopted the resolution. During our current year audit, we noted that there were no permissive referendums approved during the year. CURRENT YEAR COMMENTS Capital reserves are created to set aside funds to finance all or part of the cost of construction, reconstruction, or acquisition of equipment. The District presently has reserve funds that historically have been accounted for in the Capital Projects Fund. During the current year, we noted that the New York State Office of the State Comptroller has directed that Districts using the double entry method of accounting must account for these reserves in the General Fund. Accordingly, entries have been made to move reserve activity for the current year into the general fund for reporting purposes both on the annual update document and the financial statements. We recommend that the District establish savings account in the general fund for each of the reserves in order to accumulate funding for future needs. The District will then transfer any amounts approved for expenditure by permissive referendum to the Capital Projects Fund. Page 2 CULLEN & DANOWSKI, LLP CERTIFIED PUBLIC ACCOUNTANTS VINCENT D. CULLEN, CPA JAMES E. DANOWSKI. CPA PETER F. RODPdGUEZ, CPA JILl. S. SANDERS, CPA DONALD J. HOFFMANN, CPA CHRISTOPHER~ REINO, CPA ALAN YU, CPA March 15, 2010 JUN 1 7 2010 To the Board of Fire Commissioners Southold Fire District Southold, New York Sour. hold Town Clerk We have audited the financial statements of the Southold Fire District {District} for the year ended December 31, 2009, and have issued our report thereon dated March 15, 2010. Professional standards require that we provide you with the following information related to our audit. Our Responsibilities under U.S. Generally Accepted Auditine Standards and Government Auditing Standards As stated in our engagement letter dated December 1, 2009, our responsibility, as described by professional standards, is to plan and perform our audit to obtain reasonable, but not absolute, assurance about whether the financial statements are free of material misstatement and to express opinions about whether the financial statements prepared by management with your oversight are fairly presented, in all material respects, in conformity with the Uniform System of Accounts, an Other Comprehensive Basis of Accounting prescribed by the New York State Office of the State Comptroller. Our audit of the financial statements does not relieve you or management of its responsibilities. As part of our audit, we considered the internal control of the District. Such considerations were solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control. As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we performed tests of the District's compliance with certain provisions of laws, regulations, contracts and grants. However, the objective of our tests was not to provide an opinion on compliance with such provisions. We are responsible for communicating significant matters related to the audit that are, in our professional judgment, relevant to your responsibilities in overseeing the financial reporting process. However, we are not required to design procedures specifically to identify such matters. Our Resoonsibilitv for Other Information in Documents Containino Audited Financial Statementg Our responsibility for other information in documents containing the District's audited financial statements does not extend beyond the financial information identified in our report and we have no professional obligation to perform procedures to corroborate such other information. In the event the financial statements are incorporated into a printed document, please forward a printer's proof for our approval before final production. 1650 ROUTE 112, PORT JEFFERSON STATION, NEW YORK 11776-3060 O PHONE: 631-473-3400 ' FAX: 631-473-4863 ' WWW. CDLLENET $outhold Fire District For the Year Ended December 31, 2009 Planned Scope and Timing of the Audit We performed the audit according to the planned scope and timing previously communicated to you in our meeting about planning matters. Significant Audit Findings Oualitative Aspects of Accounting Practices Management has the responsibility for the selection and use of appropriate accounting policies. The significant accounting policies used by the District are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during the year ended December 31, 2009. We noted no transactions entered into by the District 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 part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. Management feels that their estimates are reasonable in relation to the financial statements taken as a whole. Difficulties Encountered in Performing the Audit We encountered no significan~ difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to communicate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. In our judgment, none of the adjustments correcting misstatements that we proposed, which were all recorded by the District, either individually or in the aggregate, indicate matters that could have a significant effect on the District's financial reporting process. 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. Management Representations We have requested certain representations from management that are included in the management representation letter dated March 15, 2010. Page 2 Southold Fire District For the Year Ended December 31, 2009 Management 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. Ifa consultation involves application of an accounting principle to the District'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 Finding 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 District'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 Fire Commissioners and management of Southold Fir e Di strict an d is not intended to be and should not be used by anyone other than these specified parties. Very truly yours, Cullen & Danowski, LLP Page 3 Southhol Fire District Adjusting Journal Entries December 31, 2009 Entries by Fund Account/Code GeneralFund Description 10-1070-0480-000 10-5068-3410-480 10-5090-9010-800 10-3310-0911-000 10-3010-0889-000 Prepaid Expenses F/P - Insurance State Retirement System Fund Balance - Unreserved Reserve for Prepaids To record current year prepaid expenditures and reserve for prepaid. 10-5010-3410-103 10-5010-3410-101 10-5100-9030-800 10-2010-0601-000 10-2010-0601-003 10-5010-3410-106 10-2010-0601-002 F/P- Personal Services-Janitor's Salary F/P- Personal Services-Radio Operator Salary Social Security Accrued Liabilities - Payroll Liabilities Accrued Liabilities - Federal & FICA Payable F/P Personal Services-Payroll Expenses Accrued Liabilities - NYS Witholding To record change in accrued liabilities as of 12/31/09 10-3310-0911-000 Fund Balance - Unreserved 10-3010-0821-000 Reserve for Encumbrances To record encumbrances as of 12/31/09 Trus£&AflencyFund 4 70-1060-0461-000 70-2020-0461-000 Service Award Program Assets Service Award Payable To record change in LOSAP assets as of 12/31/09 Debit Credit 22,907.31 20,251.31 2,656.00 22,907.31 22,907.31 1,022.06 2,087.80 486.93 3,109.86 486.93 175.83 175.83 30,318.50 30,318.50 131,262.38 131,262.38 90-1082-0102-000 90-1086-0104-000 90-1086-0104-000 90-3000-0151-000 Buildings Machinery & Equipment Machinery & Equipment Investment in Long Lived Assets To record the change in fixed assets as of 12/31/2009 57,768.00 307,500.00 149545 215,723.00 Southold Fire District Reclassifying Entries December 31, 2009 Entries Account/Code Description Debit Credit R|E 1 51-3310-0911-000 51-4040-2401-000 51-2090-0630-000 Fund Balance - Unreserved Interest & Earnings Due to Other Funds Building Res- To move the reserve's opening equity and current year interest earned to the General fund. 31,142.52 83.68 31,226.20 RJE 2 10-1030-0391-001 10-3310-0911-002 10-4040-2401-005 10-3310-0911-000 10-3310-0911-002 Due from Other Funds - Building Reserve Fund Equity- Building Reserve interest & Earnings - Capital Fund Balance - Unreserved Fund Equity- Building Reserve General Fund- To record building res opening equity and current year activity in the General fund. 31,226.20 83.68 31,142.52 83.68 83.68 RJE 3 $0-3310-0911-000 50-4040-2401-000 50-4200-5031-000 50-2090-0630-000 Fund Balance - Unreserved Interest & Earnings Operating Transfers In Due to Other Funds Equipment Res- To move opening equity (less PY permissive referendum amount) and curre year activity to the General fund. 595,341.24 1,820.68 175,000.00 772,161.92 RJE 4 10-1030-0391-000 10-5200-9950-900 10-4040-2401-005 10-3310-0911-001 10-3310-0911-000 10-3310-0911-001 Due from Other Funds - Equipment Reserve Operating Transfers Out-Equipment Reserve Interest & Earnings - Capital Fund Equity- Equipment Reserve Fund Balance - Unreserved Fund Equity- Equipment Reserve 772,161.92 176,820.68 175,000.00 1,820.68 595,341.24 176,820.68 I I I ! I I I I I I I I I I I I I I I RE¢~IYED JUN ] 7 2010 Southo!d ¥own Clerk Southold Fire District Financial Statements (Regulatory Basis) with Independent Auditor's Report December 31, 2009 I I SOUTHOLD FIRE DISTRICT Table of Contents December 31, 2009 I I I I I I I I I I I i I I I I I Independent Auditor's Report Basic Financial Statements (Regulatory Basis) Balance Sheet - Governmental Funds and Account Groups Statement of Revenues, Expenditures and Changes in Fund Balance - Governmental Funds Statement of Fiduciary Net Assets - Fiduciary Funds Notes to Financial Statements Other Supplementary Information Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual - General Fund 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 T:\Office\20,00 O's\2540 O\ Financial\2009\ Financial 2009.docx Page 18 19 I Io I I ! I I I I I I I I i I I I I I CULLEN & DANOWSKI, LLP CERTIFIED PUBLIC ACCOUNTANTS VINCENT D. CULLEN, CPA JAMES E. DANOWSKI, CPA PETER F. RODRIGUEZ. CPA JILL S. SANDERS, CPA DONALD J. HOFFMANN, CPA CHRISTOPH ER V. REINO, CPA ALAN YU, CPA INDEPENDENT AUDITOR'S REPORT To the Board of Fire Commissioners Southold Fire District Southold, New York We have audited the accompanying financial statements of the Southold Fire District {~District), as of and for the year ended December 31, 2009, as listed in the table of contents. These financial statements are the responsibility of the District's management. Our responsibility is to express opinions on the financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the District's internal control over financial reporting. Accordingly, we express no such opinion. 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 opinions. As described more fully in Note 1, the Southold Fire District has prepared these financial statements using accounting practices prescribed and permitted by the New York State Office of the State Comptroller, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America. The effects on the financial statements of the variances between these regulatory accounting practices and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material. In our opinion, the financial statements referred to above present fairly, in all material respects, the assets, liabilities and fund balances of each fund of the Southold Fire District, as of December 31, 2009, and their respective revenues and expenditures for the year then ended, on the basis of accounting described in Note 1. In accordance with GovernmentAuditfng Standards, we have also issued our report dated March 15, 2010, on our consideration of the Southold Fire District's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in assessing the results of our audit. 1650 ROUTE 112, PORT JEFFERSON STATION, NEW YORK 11776-3060 PHONE: 631-473-3400 . FAX: 631-473-4863 , WWW. CDLLP. NET I I I I i I I I I I I I I I I I I I I The other supplementary information on page 18 is not a required part of the basic financial statements but is provided for additional analysis. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the other supplementary information. However, we did not audit the information and express no opinion on it. This report is intended solely for the use and information of the Board of Fire Commissioners and management of the Southold Fire District and the New York State Office of the State Comptroller and is not intended to be and should not be used by anyone other than these specified parties. March 15, 2010 I I I I I I ! I I I I I I I I I I I I SOUTHOLD FIRE DISTRICT Balance Sheet - Governmental Funds and Account Groups December 31, 2009 ASSETS Cash Due from other funds Prepaid expenses Land and buildings Equipment Amounts to be provided for retirement of long-term debt Total Assets LIABILITIES Accounts payable Accrued liabilities Due to other funds Bonds payable Total Liabilities FUND BALANCE Reserved for: Encumbrances Prepaid expenses Capital - Equipment reserve Capital - Building reserve Investment in general fixed assets Unreserved - undesignated Governmental Funds Account Groups General Capital Fixed Long-Term General Projects Assets Debt Total $ 366,459 $ 803,135 $ $ $ 1,169,594 803,135 803,135 22,907 22,907 3,435,110 3,435,110 3,107,628 3,107,62g 1,150,000 1,150,000 $ 1,192,501 $ 803,135 $ 6,542,738 $ 1,150,000 $ 9,68g,374 $ 47,839 $ $ $ $ 47,839 8,912 8,912 803,135 803,135 1,150,000 1,150,000 56,751 803,135 1,150,000 2,009,886 30,318 30,318 22,907 22,907 772,162 772,162 31,226 31,226 6,542,738 6,542,738 279,137 279,137 Total Fund Balance 1,135,750 6,542,738 7,678,488 Total Liabilities and Fund Balance $ 1,192,501 $ 803,135 $ 6,542,738 $ 1,150,000 $ 9,688,374 See Notes to Financial Statements -3- ! I I I I I i I I i I ! I ! I I i I I SOUTHOLD FIRE DISTRICT Statement of Revenues, Expenditures and Changes in Fund Balance - Governmental Funds For the Year Ended December 31, 2009 REVENUES Real property taxes Interest and earnings Rentals Insurance recoveries Miscellaneous General Total Capital Governmental Projects Funds $ 1,694,060 $ $ 1,694,060 6,322 6,322 20,013 20,013 1,132 1,132 300 300 TotalRevenues 1,721,827 1,721,827 EXPENDITURES Personal services Equipment and capital outlay Fire protection State retirement system Service award program Social security Workers' compensation Medical and accident insurance Debt service - principal Debt service - interest 219,980 219,980 103,343 149,047 252,390 501,310 501,310 10,706 10,706 295,844 295,844 17,514 17,514 $8,36S 58,36S 23,192 23,192 125,000 125,000 49,838 49,838 Total Expenditures 1,405,092 14%047 1,554,139 316,735 (149,047) 167,688 819,015 149,047 968,062 $ 1,135,750 $ $ 1,135,750 Excess (Deficiency) of Revenues Over Expenditures Fund Balance - Beginning of Year as Restated Fund Balance - End of Year See Notes to Financial Statements -4- I I i I I I ! I I I I I I I I I I I I ASSETS Service award program assets Total Assets LIABILITIES Service awards Total Liabilities See Notes to Financial Statements SOUTHOLD FIRE DISTRICT Statement of Fiduciary Net Assets - Fiduciary Funds December 31, 2009 Trust and Agency $ 2,622,947 $ 2,622,947 $ 2,622,947 $ 2,622,947 I i SOUTHOLD FIRE DISTRICT Notes to Financial Statements ! I I I I I I I I I I ! i I I i I 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the Southold Fire District (District), as of and for the year ended December 31, 2009, have been prepared using accounting practices prescribed and permitted by the New York State Office of the State Comptroller, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America (GAAP) as applied to governmental units. The financial statements of the District have been prepared using only the modified accrual basis of accounting. This method differs from GAAP, which requires the preparation of additional financial statements using the accrual basis of accounting. The accrual basis financial statements require the capitalization and depreciation of property and equipment and the recording of long-term liabilities. Under the modified accrual basis of accounting, property and equipment are recorded as an expenditure when purchased and long-term liabilities are recognized when paid. In addition, GAAP requires the financial statements to be prepared in accordance with the Governmental Accounting Standards Board (GASB) No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments. GASB 34 financial statements require the presentation of government-wide financial statements and management's discussion and analysis. The accounting practices used to prepare these financial statements do not require compliance with GASB 34. The significant accounting policies of the District are described below: A. Financial Reporting Entity The District is a district corporation and political subdivision of the state of New York, distinct from the municipalities in which it is located. In general, the District is governed by an elected board of fire commissioners (Board) and is required to have a treasurer and a secretary. The District has the legal authority to levy taxes on real property and to borrow in its own name. The District is governed by General Municipal Law and other laws of the state of New York and its subdivisions. The scope of activities included in the accompanying financial statements is the transactions which comprise the District's operations. The primary function of the District is to provide fire-protection, rescue and emergency services to the community. Services such as firefighting, fire prevention and public education support the primary function. The financial reporting entity includes all funds, functions and organizations over which the District's Board exercises oversight responsibility. Oversight responsibility is determined on the basis of financial interdependency, selection of governing authority, designation of management, ability to significantly influence operations and accountability for fiscal matters. B. Basis of Presentation Fund Financial Statements The District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to assist management by segregating transactions related to certain government functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. -6- I I SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) ! I I I I I i I I ! ! I I I I i I The District records its transactions in the fund types described below: 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 based upon determination of financial position and changes in financial position. The following are the District's governmental fund types: General Fund - the general fund is the principal operating fund of the District. It is used to account for all financial resources except those required to be accounted for in another fund. Capital Projects Fund - the capital projects fund is used to account for the accumulation of financial resources and the disbursements for the acquisition, construction or renovation of major capital facilities, or equipment. Fiduciary Funds Fiduciary Funds are used to account for assets held by the District in a trustee or custodial capacity. Trust and A~ency Fund - the trust and agency fund is used to account for money (and/or property) received and held in the capacity of trustee, custodian, or agent. Account Groups Account Groups are used to establish accounting control and accountability for the District's general fixed assets and general long-term obligations. The two account groups are not 'funds'. They are accounting entities, not fiscal entities, and are concerned only with the measurement of financial position, and not with the results of operations. General Fixed Assets Account Group - the general fixed assets account group is used to account for land, buildings, improvements and equipment owned by the District. General Lony-Term Debt Account Group - the general long-term debt account group is used to account for all long-term debt and other obligations of the District. C. Basis of Accounting and Measurement Focus Basis of accounting refers to when revenues and expenditures and the related assets and liabilities are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurements made, regardless of the measurement focus. Measurement focus is the determination of what is measured (i.e., expenditures or expenses). All governmental funds are accounted for using a current financial resources focus. With this measurement focus, only current assets and current liabilities are included on the balance sheet. Operating statements present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in fund balance. -7- I I SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) I I i I I I I I I I I ! I I I I I Modified Accrual Basis - All governmental funds are accounted for using the modified accrual basis of accounting. Under this basis of accounting, revenues are recorded when measurable and available. Available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. Revenues are considered to be available if collected within 60 days after the end of the calendar year. Expenditures are recorded when the related liability is incurred except that expenditures for prepaid expenses and inventory-type items are recognized at the time of purchase, and principal and interest on indebtedness and compensated absences, such as vacation and sick leave which vests or accumulates, are not recognized as expenditures until due and payable. D. Property Taxes Real property taxes are levied annually by the District no later than November ist and become a lien on December Ist. The District's tax levy is collected by the town of Southold and then remitted to the District from January to June. The county of Suffolk is responsible for all uncollected taxes. E. lnterfund Transactions The operations of the District include transactions between funds. These transactions may be temporary in nature, such as with interfund borrowings. The District typically loans resources between funds for the purpose of providing cash flow. These interfund receivables and payables are expected to be repaid within one year. Permanent transfers of funds include transfers to provide financing or other services. This includes the transfer of unrestricted general fund revenues to finance various programs that the District must account for in other funds in accordance with budgetary authorizations. A detailed disclosure by individual fund for interfund receivables, payables, transfers in and transfers out is provided subsequently in these Notes to Financial Statements. F. Use of Estimates The preparation of financial statements in conformity with a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates. Cash Cash consists of cash on hand, demand deposits and short-term investments with original maturities of three months or less from date of acquisition. -8- I I SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) I I i I I I I I I I I I I I I I I H. Prepaid Items Prepaid items represent payments made by the District for which benefits extend beyond year end. These payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in the financial statements. A current asset for the prepaid amounts is recorded at the time of purchase and an expenditure is reported in the year the goods or services are consumed. I. General Fixed Assets The financial statements of the District report the District's capital assets at original cost. Capital thresholds, the dollar value above which asset acquisitions are added to the capital asset accounts are reported as follows: Capitalization Threshold Buildings and improvements Site improvements Furniture and equipment $ 1,000 1,000 1,000 Long-Term Obligations The liabilities reported in the general long-term debt account group represent the District's liability for serial bonds. K. Fund Balance - Reserves and Designations Fund balance reserves are created to satisfy legal restrictions, plan for future expenditures or relate to resources not available for general use or appropriation. These reserve funds are established through Board action or voter approval and a separate identity must be maintained for each reserve. Earnings on the invested resources become part of the respective reserve funds; however, separate bank accounts are not necessary for each reserve fund. Fund balance reserves currently in use by the District include the following: Reserve for Encumbrances Reserve for encumbrances represents the amount of outstanding encumbrances at the end of the calendar year. The reserve is accounted for in the general fund and capital projects fund. Reserve for Prepaid Reserve for prepaid is used to restrict that portion of fund balance, which is not available for appropriation. The reserve is accounted for in the general fund. Reserve for Canital Reserve for capital is used to finance all or part of the cost of construction, reconstruction or acquisition of a specific or type of capital improvement or acquisition of a specific item or items or type of equipment. These reserves are accounted for in the general fund. -9- ! ! SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) I I I I I I I I I 2. STEWARDSHIP. COMPLIANCE AND ACCOUNTABILITY A. Budgets The District administration prepares a proposed budget for approval by the Board for the general fund, the only fund with a legally adopted budget. Budgets are adopted annually on a basis consistent with the accounting method used to prepare the Annual Financial Report Update Document. Appropriations are adopted at the program line item level. Appropriations established by the adoption of the budget constitute a limitation on expenditures (and encumbrances) that may be incurred. Appropriations authorized for the year are increased by the amount of encumbrances carried forward from the prior year. Appropriations lapse at the end of the fiscal year unless expended or encumbered. Encumbrances will lapse if not expended in the subsequent year. Appropriations authorized for the current year are increased by the planned use of specific reserves, and budget amendments approved by the Board as a result of selected new revenue sources not included in the original budget (when permitted by law). These supplemental appropriations may occur subject to legal restrictions, if the Board approves them because of a need that exists which was not determined at the time the budget was adopted. No supplemental appropriations occurred during the year. A summary of the general fund budget is as follows: Budget approved by Board of Fire Commissioners Encumbrances from prior year $ 1,738,237 57,273 Final Budget $ 1,795,510 B. Encumbrances I I I I I I I Encumbrance accounting, under which purchase orders, contracts and other co remitments for the expenditure of monies are recorded for budgetary control purposes to reserve that portion of the applicable appropriations, is employed as a control in preventing over expenditure of established appropriations. Open encumbrances are reported as reservations of fund balances since they do not constitute expenditures or liabilities and will be honored through budget appropriations in the subsequent year. Expenditures for such commitments are recorded in the period in which the liability is incurred. DEPOSITS WITH FINANCIAL INSTITUTIONS AND INVESTMENTS The District's investment policies are governed by state statutes and District policy. Resources must be deposited in Federal Deposit Insurance Corporation (FDIC) insured commercial banks or trust companies located within the state. Permissible investments include obligations of the U.S. Treasury and U.S. Agencies, repurchase agreements and obligations of New York State or its localities. Collateral is required for demand and time deposits and certificates of deposit not covered by FDIC insurance. Obligations that may be pledged as collateral are obligations of the United State and its Agencies and obligations of New York State and its municipalities. Investments are stated at fair value. Custodial credit risk is the risk that in the event of a bank failure, the District's deposits may not be returned to it. GASB directs that deposits be disclosed as exposed to custodial credit risk if they are not covered by depository insurance and the deposits are as follows: I I SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) I I I I I I I I I I I I I i I I I A. Uncollateralized, B. Collateralized by securities held by the pledging financial institution, or C. Collateralized by securities held by the pledging financial institution's trust department or agent but not in the District's name. None of the District's aggregate bank balances, not covered by depository insurance, were exposed to custodial credit risk as described above at year end. The District did not have any investments at year end or during the year. Consequently, the District was not exposed to any material interest rate risk. Investment pool: The District participates in a multi-municipal cooperative investment pool agreement pursuant to New York State General Municipal Law Article 5-G, §119-O, whereby it holds a portion of the investments in cooperation with other participants. The investments are highly liquid and are considered to be cash equivalents. Total investments of the cooperative as of December 31, 2009 are $622,520,894, which consisted of $156,091,714 in repurchase agreements, $221,250,000 in U.S. Treasury Securities, $6,179,180 in U.S. Government Guaranteed Securities, $100,000,000 in collateralized bank deposits and $139,000,000 in FDIC Guaranteed Insurance, with various interest rate and due dates. The following amounts are included as cash in the District's funds: Fund Carrying Amount $ 95,339 803,135 $ 898,474 General fund Capital projects fund The above amounts represent the cost of the investment pool shares, and are considered to approximate market value. The investment pool is categorically exempt from the New York State collateral requirements. Additional information concerning the cooperative is presented in the annual report of MBIA, Inc. 4, GENERAL FIXED ASSETS During the current year, the District obtained an independent appraisal of its land, buildings and equipment. Capital assets are valued at original cost. Capital assets balances and activity for the year ended December 31, 2009, is as follows: ! I SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) I I I I i I I I I I I I I i I I I Balance December 31, 2008 Additions Land $ 258,752 $ Buildings 3,118,590 57,768 Equipment 2,949,673 307,500 $ 6,327,015 $ 365,268 Deletions 5. INTERFUND TRANSACTIONS Interfund balances at December 31, 2009, are as follows: lnterfund Receivable Payables Balance December 31, 2009 General fund $ 803,135 $ Capital projects fund 003,135 $ $ 258,752 3,176,350 (149,545) 3,107,628 $ (149,545) $ 6,542,738 $ 803,135 $ 803,135 The District transfers from the general fund to the capital projects fund in accordance with permissive referendums approved throughout the year. There were no interfund transfers in the current year. 6. CAPITAL RESERVES Activity for the capital reserves during the year under audit is as follows: Building Equipment Reserve Reserve Total $ 31,142 $ 595,342 $ 626,484 175,000 175,000 84 1,820 1,904 $ 31,226 $ 772,162 $ 803,388 Reserve Balance - Beginning of Year Additions to Reserve: Transfers in Interest Reserve Balance - End of Year 7. PENSION PLANS A. New York State and Local Employees' Retirement System Plan Description The District elected to participate in the New York State and Local Employees' Retirement System (ERS). This system is a cost-sharing, multiple-employer, defined benefit pension plan. The system offers retirement and disability benefits, annual cost of living increases, and death benefits to plan members and beneficiaries. -12- ! I SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) I I I I I i I I I I I I I I I I I The ERS is established pursuant to the New York State Retirement and Social Security Law to provide benefits for the state, local governments, and their employees. ERS plan benefits are guaranteed by state constitution. The system issues publicly available financial reports that include financial statements and required supplementary information. These reports may be obtained by writing to the following location: NYS and Local Retirement Systems, Gov. Alfred E. Smith State Office Building, 110 State Street, Albany, NY 12244. Funding Policy The system is noncontributory except for employees who joined the retirement system after July 27, 1976, with less than ten years of service, who contribute 3% of their salary. Regardless of start date, all members may elect to make member contributions. The New York State Comptroller shall annually certify the rates expressed as proportions of the members' payroll, which shall be used in computing the contributions required to be made by employers to the pension accumulation fund. The District is required to contribute on an annual basis. Contributions are generally made to the ERS on December 15, for the period April 1 to March 31 of the following year based on estimated eligible employees' salaries. Contributions are adjusted in the following year based on actual salaries. The followtng represents the Dtstncts regula pension contribution to the system based on annual covered payroll: 2009 2008 2007 District contributions $ 10,523 $ 11,356 $ 12,472 The District's contribution to the system is actuarially determined and is established and may be amended by the ERS Board of Trustees. B. Length of Service Award Program {LOSAP} The District established a defined benefit LOSAP for the active volunteer firefighters of the Southold Fire Department. The program took effect on January 1, 1993. The program was established pursuant to Article ll-A of the General Municipal Law. The program provides municipally-funded pension-like benefits to facilitate the recruitment and retention of active volunteer firefighters. The District is the sponsor of the program. The information contained in this note is based on information for the Length of Service Award Program for the plan year ending on December 31, 2008, which is the most recent plan year for which complete information is available. Program Description Participation, Vesting and Service Credit Active volunteer firefighters who have reached the age of 18 and who have completed 1 year of firefighting service are eligible to participate in the program. Participants acquire a nonforfeitable right to a service award after being credited with 5 years of firefighting services or upon attaining the -13- I I SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) I I I I I I I I I I I I I I I I I program's entitlement age. The program's entitlement age is age 62. In general, an active firefighter is credited with a year of firefighting service for each calendar year after the establishment of the program which he or she accumulates fifty points. Points are granted for the performance of certain activities in accordance with a system established by the sponsor on the basis of a statutory list of activities and point values. A participant may also receive credit for 5 years of firefighting service rendered prior to the establishment of the program, provided the total entitlement does not exceed the maximum dollar amount established by the Plan. Benefits A participant's benefit under the program is the actuarial equivalent of a monthly payment for life equal to $20 multiplied by the person's total number of years of firefighting service. The number of years of firefighting service used to compute the benefit cannot exceed forty. Benefits are not payable until the Plan anniversary date of the month after the participant's 62nd birthday, except in the case of disability or death. The program provides statutorily mandated death and disability benefits. Fiduciary Investment and Control Service credit is determined by the governing board of the sponsor, based on information certified to the governing board by each fire company having members who participate in the program. Each fire company must maintain all required records on forms prescribed by the governing board. The governing board of the sponsor has retained and designated Hometown/RSA Consultants to assist in the administration of the program. The designated program administrator's primary responsibility is to administer the plan for the exclusive benefit of the participants and their beneficiaries. Such duties include, but are not limited to, determining eligibility of firefighters to participate in the plan, compute participant entitlement, authorize disbursements to participants, compute necessary contribution amounts, maintain all necessary records and consult with the sponsor and the trustee on long-term investment plans. Disbursements of program assets for the payment of benefits or administrative expenses must be reviewed by the trustee (i.e. the Board of Fire Commissioners) and signed by at least two board members prior to being disbursed by the administrator. Program assets are required to be held in trust by LOSAP legislation, for the exclusive purpose of providing benefits to participants and their beneficiaries or for the purpose of defraying the reasonable expenses of the operation and administration of the program. The trust agreement is dated February 8, 2005, and the trustee is the Board of Fire Commissioners. Authority to invest program assets is vested in the administrator, with the Board of Fire Commissioners' prior written approval. Subject to restrictions in the program document, program assets are invested in accordance with a statutory "prudent person" rule. The program document calls for all investment decisions to be chosen and approved by the trustee, the Board of Fire Commissioners, prior to being invested by the administrator. The sponsor is required to retain an actuary to determine the amount of the sponsor s contr.buttons to the plan. The actuary retained by the sponsor for this purpose is Harbridge Consulting Group, LLC. Portions of the following information are derived from a report prepared by the actuary dated March, 2009. -14- ! ! SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) I I I I I I I I I I I I I I I I I Program Financial Condition Assets and Liabilities Actuarial Present Value of Benefits at December 31, 2008 Less: Assets Available for Benefits TFUSt Annuity Insurance contracts Total Net Assets Available for Benefits Total Unfunded Benefits Less: Unfunded Liability for Prior Service Unfunded Normal Benefits Prior Service Costs % of total 14.174% $ 353,178 65.271% 1,626,338 20.555% 512,168 Prior service costs are being amortized over 18 years at a discount rate of 6.00%. Receipts and Disbursements Plan Net Assets, Beginning of Year Changes during the year + Plan contributions 290,859 + Investment income earned 78,204 +/- Changes in fair market value of investments (25,986) - Plan benefit withdrawals (232,318) + Administrative and other fees/charges 3,900 Plan Net Assets, End of Year Contributions Maximum amount of sponsor's contribution recommended by actuary: Minimum amount of sponsor's contribution recommended by actuary: Amount of sponsor's actual contribution: $ 3,419,891 2,491,684 928,207 (928,207} $ 2,377,025 114,659 $ 2,491,684 $ 319,195 276,232 290,859 -15- I I SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) I I I I I I I I I I I I I I I I I Administration Fees Fees paid to designated program administrator Fees paid to trustee Fees paid for investment management (if separate from fee paid to trustee) Fee paid to actuary Other administration fees (list) $ 3,900 Normal Costs The actuarial valuation methodology used by the actuary to determine the sponsor's contribution is the unit credit cost method. The assumptions used by the actuary to determine the sponsor's contribution and the actuarial present value of benefits are: Assumed rate of return on investment 6.00% Mortality tables used for Withdrawal Disability Retirement Death (actives) Death (inactives) None None 1994 Group Annui ,ty - Male None None None Other The District's actual plan assets as of December 31, 2009, as reflected in the financial statements are $2,622,947. The District's current year contribution was $295,844. 8. LONG-TERM LIABILITIES Long-term liability balances and activity for the year are summarized below: Balance Balance Amounts January 1, December 31, Due Within 2009 Additions Reductions 2009 OneYear $ 1,275,000 $ $ 125,000 $ 1,150,000 $ 125,000 Long-term debt: Bonds payable The general fund has typically been used to liquidate long-term liabilities. -16- I I I I I I I I I I I I I I I I I I I SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued} Bonds payable are comprised of the following: Issue Final Interest Description Date Maturity Rate Outstanding at December 31, 2009 Bond 6/24/2002 7/9/2017 3.7 - 4.2% $ 1,150,000 The following is a summary of debt service requirements for bonds payable: Fiscal Year Ending December 31, Principal Interest Total 2010 $ 125,000 $ 45,150 $ 170,150 2011 125,000 40,462 165,462 2012 150,000 35,775 185,775 2013 150,000 30,150 180,150 2014 150,000 24,450 17~450 2015-2017 450,000 37,200 487,200 Total $ 1,150,000 $ 213,187 $ 1,363,187 Interest on long-term debt for the year was $49,838. 9. RESTATEMENT OF FUND BALANCES The following accounts were restated to account for the capital reserve balances in the general fund: General Fund Capital Reserve Fund Balance Fund Balance December 31, 2008 as originally stated $ 192,531 $ 775,531 Transfer of capital reserve fund balance at December 31, 2008 to the general fund December 31, 2008, as restated 626,484 (626,484) $ 819,015 $ 149,047 10. COMMITMENTS AND CONTINGENCIES A. Risk Management The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; iniuries to employees; errors and omissions; and natural disasters, etc. These risks are covered by commercial insurance purchased from independent third parties. Settled claims from these risks have not exceeded commercial insurance coverage for the past three years. 11. SPENDING LIMITATION The District did not exceed the statutory spending limitation imposed by New York State Law for the year ended December 31, 2009, and the budget for the year ending December 31, 2010. -17- I I I I I I I I I I I I I I I I I I I SOUTHOLD FIRE DISTRICT Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - General Fund For the Year Ended December 31, 2009 REVENUES Real property taxes Interest and earnings Rentals Insurance recoveries Miscellaneous Board - Final Budget Approved Final Variance with Budget Budget Actual Actual $ 1,694,037 $ 1,694,037 $ 1,694,060 $ 23 25,000 25,000 6,322 (18,678) 19,200 19,200 20,013 813 1,132 1,132 300 300 Total Revenues 1,738,237 1,738,237 1,721,827 $~(16,410) EXPENDITURES Personal services Equipment and capital outlay Fire protection State retirement system Service award program Social security Workers' compensation Medical and accident insurance Debt service - principal Debt service - interest Final Budget Variance with Year End Actual and Encumbrances Encumbrances $ 224,287 $ 224,287 $ 219,980 $ $ 4,307 145,000 202,273 103,343 30,318 68,612 543,499 543,499 501,310 42,189 13,000 13,000 10,706 2,294 300,000 300,000 295,844 4,156 17,213 17,213 17,514 (301) 60,100 60,100 58,365 1,73S 25,300 25,300 23,192 2,108 125,000 125,000 125,000 49,838 49,838 49,838 Total Expenditures 1,503,237 1,560,510 1,405,092 30,318 125,100 OTHER USES Operating transfers (out) 235,000 235,000 235,000 Total Expenditures and Other Uses 1,738,237 1,795,510 1,405,092 $ 30,318 $ 360,100 Net Change in Fund Balances Fund Balance - Beginning of Year as restated (57,273) 316,735 57,273 819,015 Fund Balance-End of Year $ $ $ 1,135,750 * Amount represents transfers to reserves eliminated in the recording of reserve activity in the general fund. See Note 6 for additional information. See Paragraph on Supplementm3, Information Included in Auditor's Report - 18- CULLEN & DANOWSKI, LLP I CERTIFIED PUBLIC ACCOUNTANTS I VINCENT D. CULLEN, CPA JAMES E. DANOWSKI, CPA PETER F. RODRIGUEZ, CPA JELL S. SANDERS, CPA DONALD ]. HOFFMANN, CPA CH RISTOPH ER V. REINO, CPA ALAN YU, CPA I I 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 AIIDITING STANDARDS I I I I I To the Board of Fire Commissioners Southold Fire District Southold, New York We have audited the financial statements of the Southold Fire District, as of and for the year ended December 31, 2009, as listed in the table of contents, which collectively comprise the District's basic financial statements and have issued our report thereon dated March 1S, 2010. As described more fully in Note 1, the Southold Fire District has prepared these financial statements using accounting practices prescribed and permitted by the New York State Office of the State Comptroller, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reportinz I I I I I I I I In planning and performing our audit, we considered the Southold Fire District's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Southold Fire District's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Southold Fire District'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 District's ability to initiate, authorize, record, process, or report financial data reliably in accordance with accounting practices as described more fully in Note 1, such that there is more than a remote likelihood that a misstatement of the District's financial statements that is more than inconsequential will not be prevented or detected by the District'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 District's internal control. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies 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. I 1650 ROUTE 112, PORT JEFFERSON STATION, NEW YORK 11776-3060 - 19 - O PHONE: 631-473-3400 ' FAX: 631-473-4863 ' VOAFvV. CDLLP. NET O I I I I I I I I I I I I I I I I I I I Compliance and Other Matters As part of obtaining reasonable assurance about whether the Southold Fire District's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. We noted certain matters that we have reported to the Board of Fire Commissioners and management of the Southold Fire District in a separate letter dated March 15, 2010. This report is intended solely for the use and information of the Board of Fire Commissioners and management of the Southold Fire District and the New York State Office of the State Comptroller and is not intended to be and should not be used by anyone other than these specified parties. March 15, 2010 -20-