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I I I I I I I I I I I I I I I I RECEIVED laA¥ 2 5 2011 Sm'hold Town £1erk Southold Fire District Financial Statements (Regulatory Basis} with Independent Auditor's Report December 31, 2010 1 1 SOUTHOLD FIRE DISTRICT Table of Contents December 31, 2010 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 GovernmentAuditin§ Standards Page 1 4 6 18 19 I I I .CULLEN & DANOWSKI, ELP CERTIFIED PUBLIC ACCOUNTANTS VINCENT D. CULLEN CPA lAMES E, DANOWSKI. CPA PETER F. RODRIGUEZ. CPA JILL S. SANDERS, CPA DONALD ]. HOFFMANN, CPA CH RISTOPH EP, V. RE[NO, CPA ALAN YU, CPA INDEPENDENT AUDITOR'S REPORT I I To the Board of Fire Commissioners Southold Fire District Southold, New York I I I i I I I I I I I I We have audited the accompanying financial statements of the Southold Fire District (District), as of and for the year ended December 31, 2010, 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 ¢overnmentAuditin~l 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, 2010, and their respective revenues and expenditures for the year then ended, on the basis of accounting described in Note 1. In accordance with GovernmentAuditin9 Standards, we have also issued our report dated March 21, 2011, 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 GovernmentAuditin§ 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 PHON[: 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 21, 20:11 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, 2010 ASSETS Cash Accounts receivable 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 - designated Unreserved - undesignated Governmental Funds AccountGroups General Capital Fixed Long-Term General Projects Assets Debt Total $ 391,180 $ 1,079,676 $ $ $ 1,470,856 3,397 3,397 1,079,929 253 1,080,182 23,694 23,694 3,435,110 3,435,110 3,089,301 3,089,301 1,025,000 1,025,000 $ 1,498,200 $ 1,079,929 $ 6,524,411 $ 1,025,000 $ 10,127,540 $ 51,304 $ $ $ $ 51,304 46,968 46,968 253 1,079,929 1,080,182 1,025,000 1,025,000 98,525 1,079,929 1,025,000 2,203,454 6,669 6,669 23,694 23,694 1,048,644 1,048,644 31,285 31,285 6,52~411 6,524,411 120,000 120,000 169,383 169,383 Total Fund Balance 1,399,675 6,524,411 7,924,086 Total Liabilities and Fund Balance . $ 1,498,200 $ 1,079,929 $ 6,524,411 $ 1,025,000 $ 10,127,540 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, 2010 REVENUES Real property taxes Interest and earnings Rentals Sale of equipment Insurance recoveries Miscellaneous Total Capital Governmental General Proiects Funds $ 1,735,231 $ $ 1,735,231 4,556 4,556 20,614 20,614 8,000 8,000 3,670 3,670 320 320 TotalRevenues 1,772,391 1,772,391 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 235,853 235,853 12~465 124,465 528,311 528,311 14,400 1~400 340,000 340,000 18,600 18,600 52,331 52,331 24,356 24,356 125,000 125,000 45,150 45,150 Total Expenditures 1,508,466 1,508,466 263,925 263,925 1,135,750 1,135,750 $ 1,399,675 $ $ 1,399,675 NetChangein Fund Balance Fund Balance- Beginning of Year 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, 2010 Trust and Agency $ 2,777,525 $ 2,777,525 $ 2,777,525 $ 2,777,525 -5- 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, 2010, 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. Dnder the modified accrual basis of accounting, property and equipment are recorded as an expenditure when purchased and long-term liabilities are recognized to the extent that the liabilities mature during the year. 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- ! ! SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued} I I 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 - is used to account for financial resources used for the acquisition, construction or major repair of capital facilities and equipment. Fiduciary Funds Fiduciary Funds are used to account for assets held by the District in a trustee or custodial capacity. Trust and Agency 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 Long-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- ! ! 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 the goods and services are consumed, 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 1st and become a lien on December 1st. 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 for the acquisition, construction or major repair of capital facilities. 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. G, 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. H. Receivables Receivables are shown net of an allowance for uncollectibles, if any. However, no allowance for uncollectibles has been provided since it is believed that such allowance would not be material. -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. 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. J. 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: Buildings and improvements Site improvements Furniture and equipment Capitalization Threshold $ 1,000 1,000 1,000 K. Long-Term Obligations The liabilities reported in the general long-term debt account group represent the District's liability for serial bonds. L. Fund Balance - Reserves and Designations A designation of unreserved fund balance indicates the planned use of resources in the subsequent year's budget. Unreserved fund balance consists of two classifications. First, a designation of unreserved fund balance indicates the planned use of these resources in the subsequent year's budget. Second, the undesignated portion reports remaining fund balance that has not been designated or reserved. 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. 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. -9- 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 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. 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. During the year, the Board of Fire Commissioners approved a supplemental appropriation for a retroactive LOSAP liability payment. A summary of the general fund budget is as follows: Budget approved by Board of Fire Commissioners Encumbrances from prior year Additional appropriations funded by prior year undesignated fund balances: Retroactive LOSAP liability $ 1,760,225 30,318 40,000 $ 1,830,543 Final Budget B. Encumbrances Encumbrance accounting, under which purchase orders, contracts and other commitments 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. - 10- 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 3. DEPO$1T~ 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: 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 rislc Investment pool: The District participates in a multi-municipal cooperative investment pool agreement pursuant to New York State General Municipal Law Article 5-G, §119-0, 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, 2010 are $553,165,199, which consisted of $334,926,207 in repurchase agreements, $168,238,992 in U.S. Treasury Securities and $50,000,000 in collateralized bank deposits, with various interest rate and due dates. The following amounts are included as cash in the District's funds: Carrying Fund Amount General fund Capital projects fund $ 146,087 1~079~676 $ 1,225,763 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. -11- 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 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, 2010, were as follows: Balance Balance December 31, December 31, 2009 Additions Deletions 2010 Land $ 258,752 $ $ $ 258,752 Buildings 3,176,358 3,176,358 Equipment 3~107~628 __ 56,258 (74~585) 3,089,301 $ 6,542,738 $ 56____,258 $ (74,585) $ 6,524,41____!_1 5, INTERFUND TRANSACTIONS Interfund balances at December 31, 2010, are as follows: Interfund Receivable Payables General fund $ 1,079,929 $ 253 Capital projects fund 253 1,079,929 $ 1,080,182 $ 1,080,182 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: Reserve Balance - Beginning of Year Additions to Reserve: Planned budgeted increase Board approved transfer of 2009 surplus Interest Reserve Balance - End of Year Building Equipment Reserve Reserve Total $ 31,226 $ 772,162 $ 803,388 200,000 200,000 75,000 75,000 59 1,482 1,541 $ 31,285 $ 1,048,644 $ 1,079,929 -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 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. 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; or joined the system on or after January 1, 2010 who contribute 3% of their salary throughout active membership. 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 following represents the District's regular pension contribution to the system based on annual covered payroll: 2010 2009 2008 District contributions $ 15,659 $ 10,523 $ 11,356 The District's contribution to the system is actuarially determined and is established and may be amended by the ERS Board of Trustees. -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 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 11-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, 2010, 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 I year of firefighting service are eligible to participate in the program. Participants acquire a non forfeitable right to a service award after being credited with 5 years of firefighting services or upon attaining the program's entitlement age. The program's entitlement age is 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 life annuity with ten years certain; or 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 62.d 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. - 14 - I I SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) I I I I I I I I I I I I I I iI I I 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 contributions 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 18, 2010. Program Financial Condition Assets and Liabilities Actuarial Present Value of Benefits at December 31, 2009 $ 3,558,621 Less: Assets Available for Benefits Trust Annuity Insurance contracts Total Net Assets Available for Benefits Total Unfunded Benefits Less: Unfunded Liability for Prior Service Unfunded Normal Benefits % of total 0.837% $ 21,949 77.413% 2,030,494 21.750% 570,504 2,622,947 935,674 (935,674) $ Prior Service Costs Prior service costs are being amortized over 17 years at a discount rate of 5.25%. -15- I I SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) I I I I I I I I I I I I :1 I I Receipts and Disbursements Plan Net Assets, Beginning of Year Changes during the year + Plan contributions + Investment income earned +/- Changes in fair market value of investments - Plan benefit withdrawals + Administrative and other fees/charges Plan Net Assets, End of Year 29L444 69,691 1,969 (236,241) 41400 $ 2,491,684 131,263 2,622,947 307,355 269,254 291,444 4,400 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: 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) 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) Other None None 1994 Group Annuity - Male None None None The District's actual plan assets as of December 31, 2010, as reflected in the financial statements are $2,777,525. The District's current year contribution was $340,000. It was noted that the current year contribution included a $40,000 accrued liability for retroactive LOSAP entitlement benefits. -16- 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 8. LONG-TERM LIABILITIES Long-term liability balances and activity for the year are summarized below: Balance Balance Amounts }anuary 1, December 31, Due Within 2010 Additions Reductions 2010 OneYear Long-term debt: Bonds payable $ 1,150,000 $ $ 125,000 $ 1,025,000 $ 125,000 The general fund has typically been used to liquidate long-term liabilities. Bonds payable are comprised of the following: Issue Description Date Outstanding at Final Interest December 31, Maturi .ty Rate 2010 Bond 6/24/2002 7/9/2017 3.7- 4.2% $ 1,025,000 The following is a summary of debt service requirements for bonds payable: Fiscal Year Ending December 31, Principal Interest Total 2011 $ 125,000 $ 40,462 $ 165,462 2012 150,000 35,775 185,775 2013 150,000 30,150 180,150 2014 150,000 2~450 174,450 2015 150,000 18,450 16~450 2016-2017 300,000 18,750 318,750 Total $1,025,000 $ 16__~_8,037 $ 1,193,037 Interest on long-term debt for the year was $45,150. 9. FUND BALANCE. RESERVED - DESIGNATED The amount of $120,000 has been designated in the General Fund by the Board of Fire Commissioners for the purchase ora new bus. 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; injuries 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, 2010, and the budget for the year ending December 31, 2011. -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, 2010 REVENUES Real property taxes Interest and earnings Rentals Sale of equipment Insurance recoveries Miscellaneous Board - Final Budget Approved Final Variance with Budget Bud§et Actual Actual $ 1,735,225 $ 1,735,225 $ 1,735,231 $ 6 5,000 5,000 4,556 (444) 20,000 20,000 20,614 614 8,000 8,000 3,670 3,670 320 320 TotalRevenues 1,760,225 1,760,225 1,772,391 $ 12,166 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 $ 235,555 $ 235,555 $ 235,853 $ $ (298) 200,000 230,318 12~465 6,669 99,184 523,500 523,500 528,311 (4,811) 13,000 13,000 14,400 [1,400) 300,000 340,000 340,000 18,020 18,020 18,600 (580) 70,000 70,000 52,331 17,669 30,000 30,000 24,356 5,644 125,000 125,000 125,000 45,150 45,150 45,150 Total Expenditures 1,560,225 1,630,543 1,508,466 $ 6,669 $ 115,408 OTHERUSES Plannedincreasetocapitalreserves 200,000 200,000 1,760,225 1,830,543 1,508,466 (70,318) 263,925 70,318 1,135,750 $ $ $ 1,399,675 Total Expenditures and Other Uses Net Change in Fund Balances Fund Balance - Beginning of Year Fund Balance - End of Year See Paragraph on Supplementary Information Included in Auditor's Report -18- I I CULLEN & DANOWSKI, LLP CERTIFIED PUBLIC ACCOUNTANTS VINCENF D CULLEN, CPA lAMES E. DANOWSKI, CPA PETER F. RODRIGUEZ, CPA IILL S. SANDERS. CPA DONALD J. ItOFFMANN, CPA CIIRISTOPHERV. 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 AUDITING STANDARDS 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, 2010, as listed in the table of contents, which collectively comprise the District's basic financial statements and have issued our report thereon dated March 21, 2011. 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 GovernmentAuditin~] Standards, issued by the Comptroller General of the United States. I I I I I I Internal Control Over Financial Reoortin~ 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 deficiency in internal control 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 and correct misstatements on a timely basis. A material weakness is a deficiency or combination of deficiencies in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be deficiencies, 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 ' WWW. CDLI.P. 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 $outhold 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 6overnment 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 21, 2011. 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 21, 2011 -20-