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Home My WebLink About2011 Cutchogue Fire District ANNUAL FINANCIAL REPORT December 31,2011 I~,~,~ 1 6 2012 Sou/hold To'~;n Cirri ~COM?A~ TABLE OF CONTENTS PAGE INDEPENDENT AUDITORS' REPORT ........................................ A ANNUAL FINANCIAL REPORT UPDATE DOCUMENT: FINANCIAL SECTION ............................................... 1 SUPPLEMENTAL SECTION .......................................... 22 NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT ......... 29 REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF ANNUAL FINANCIAL REPORT UPDATE DOCUMENT PERFORMED IN ACCORDANCE WITtI GOVER~5~IENTAUDITI:VG STANDARDS ................................ 4l ~COMPANY COMPANY A PROFESSIONAL CORPORA¥10N OF CERTIFIED PUBLIC ACCOUNTANTS www.sheehancpa.com INDEPENDENT AUDITORS' REPORT To the Board of Fire Commissioners Cutchogue, New York We have audited the accompanying Annual Financial Report Update Document (AUD) (Financial Section) of Cutchogue Fire District (the District), as of and for the years ended December 31,2011 and 2010, as listed in the table of contents. The AUD is the responsibility of the District's management. Our responsibility is to express opinions on the AUD based on our audits. We conducted our audits 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 audits to obtain reasonable assurance about whether the AUD is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the AUD. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall AUD presentation. We believe that our audits provide a reasonable basis for our opinions. As described more fully in Note 1, the District prepares its AUD using accounting practices prescribed or 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 AUD 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 opinions, the AUD referred to above presents fairly, in all material respects, the assets, liabilities and fund balances of the District, as of December 31, 2011 and 2010, and the revenues it received and expenditures made for the years then ended in conformity with the basis of accounting described in Note I. Our audits were conducted for the purpose of forming opinions on the AUD (Financial Section) taken as a whole. The Supplemental Section listed on page 2 of the AUD is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information, except for the Fire District Questionnaire, has not been subjected to the auditing procedures applied in our audits of the AUD (Financial Section) and, accordingly, we express no opinions on them. -A- An Independent Member of the BDO Seidman Alliance To the Board of Fire Commissioners Cutchogue, New York In accordance xvith Government Audiling Standards, we have also issued our report dated February 21, 2012, on our consideration of the District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. February 21, 2012 ~COMP~ All Numbe:. in This Report Have Been Rounded To The Nearest Dollar ANNUAL FINANCIAL REPORT UPDATE DOCUMENT For The FIRE DISTRICT of Cutchogue County of Suffolk For the Fiscal Year Ended 12/31/2011 AUTHORIZATION ARTICLE 3, SECTION 30 of the GENERAL MUNICPAL LAW: 1. ***Every Municipal Corporation *** shall annually make a report of its financial condition to the Comptroller. Such report shall be made by the Chief Fiscal Officer of such Municipal Corporation *** 5. All reports shall be certified by the officer making the same and shall be filed with the Comptroller *** It shall be the duty of the incumbent officer at the time such reports are required to be filed with the Comptroller to file such report *** State of NEW YORK Office of The State Comptroller Division of Local Government and School Accountability Albany, New York 12236 Page 1 FIRE DISTRICT OF Cutchogue *** FINANCIAL SECTION *** Financial Information for the following funds and account groups are included in the Annual Financial Report filed by your government for the fiscal year ended 2010 and has been used by the OSC as the basis for preparing this update document for the fiscal year ended 2011: (A) GENERAL (K) GENERAL FIXED ASSETS (R) Reserve (TA) AGENCY (W) GENERAL LONG-TERM DEBT All amounts included in this update document for 2010 represent data filed by your government with OSC as reviewed and adjusted where necessary. *** ARRA SECTION *** The American Recovery and Reinvestment Act (ARRA) section of your Annual Financial Report is designed to report revenues and expenditures of federal stimulus money for the current fiscal year ended. *** SUPPLEMENTAL SECTION *** The Supplemental Section includes the following sections: 1) Statement of Indebtedness 2) Schedule of Time Deposits and Investments 3) Bank Reconciliation 4) Local Government Questionnaire 5) Schedule of Employee and Retiree Benefits 6) Schedule of Energy Costs and Consumption 7) Schedule of Other Post Employment Benefits (OPEB) All numbers in this report will be rounded to the nearest dollar. · Page 2 Cutchogue FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2011 · (A) GENERAL Balance Sheet Assets Cash TOTAL Cash Due From Other Governments Additional Descr ~t*on FEMA-4020-DR-NY ,Hurricane irene, TOTAL Due From Other Governments Cash Special Reserves TOTAL Restricted Assets TOTAL Assets 343,237 A200 209,060 343,237 209,060 A440 9.601 0 9,601 I 636.917 A2.30 ~ 439.807 t,636,917 1,439,807 1,980,154 1,658,468 Page 3 OSC Municipality Code 471179002500 Cutchogue FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 201 (A) GENERAL Balance Sheet Liabilities Accounts Payable TOTAL Accounts Payable Accrued Liabilities TOTAL Accrued Liabilities Other Liabilities TOTAL Other Liabilities Deferred Revenues Additional Description FEMA-4020-DR-NY (Hurricane Irene) TOTAL Deferred Revenues TOTAL Liabilities Reserve For Encumbrances TOTAL Reserve For Encumbrances Capital Reserve TOTAL Restricted Fund Balance Unreserved Fund Balance Appropnatea TOTAL Assigned Fund Balance Unreserved Fund Balance Unappropnatea Unassigned Fund Balance TOTAL Unassigned Fund Balance TOTAL Fund Equity TOTAL Liabilities And Fund Equity 117,050 A600 40,833 117,060 : 40,833 17,000 A601 10,000 17,000 10,000 13,752 A688 13,792 0 A691 9,601 0 9,60t 147,902 60,434 48.617 A621 48,617 0 1.589.445 A878 1.439,807 1,589,448 1,439,807 125.000 A910 125,000 0 69.290 A911 A917 158,227 69 290 t58,227 1,832,352 1,598,0~4 t,980, t54 1,658,468 Page 4 nSC Municipality Code 471179002500 Cutchogue FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 201 1 (A) GENERAL Results of Operation Real Property Taxes TOTAL Real ProPerty Taxes Interest And Earnings Rental of Real Property TOTAL Use of Money And ProPerty Sales of Equipment TOTAL SaJe of ProPerty And ComPensation For Loss Refunds of Prior Year's Expenditures Unclassified (specify) TOTAl. Miscellaneous Local SOurcsa TOTAL Revenues TOTAL Detail Revenues And Other Sources 991,050 A1001 99%050 A2410 tl,779 5 $ 1,002;834 1,020,444 %o2O,,~ 150 5,263 A2665 3,671 3,671 A2701 409 A2770 ~ o29~87 Page 5 OSC Municipality Code 471179002500 Cutchogue FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 201 1 (A) GENERAL Results of Operation Expenditures Payment of Mta Payroll Tax,contr Expend TOTA~ PaYment 0~ Mta Payr°lt Tax ToTAL'General G0Vernment support Fire, Pets Serv Fire, Equip & Cap Outlay Fire, Contr Expend TOTAL Fire TOTAL Public Safety State Retirement System Local Pension Fund, Empl Bnfts Social Security, Employer Cont Worker's Compensation, Empl Bnffs Unemployment Insurance, Empl Bnlts Disability Insurance, Empl Bnffs Hospital & Medical (dental) Ins, Empl Bnfl TOTAL Employee Benefits TOTAL Expenditures TOTAL Detail Expenditures And Other Uses 685 A19804 699 ~5 659 685 699 201,520 A34101 205,512 274,167 A34102 371,849 361,856 A34104 390,704 837,543 968,065 837,543 ! 968'065 11,945 A90108 15,784 201,617 A90258 216,664 15,416 A90308 15,722 36,861 A90408 37,142 1,190 A90508 1,154 709 A90558 300 8,458 A90608 8,575 276,196 295,341 1,114,424 1;264;105 1 ,t t 4,424 t ,264~105 Page 6 OSC Municipality Code 471179002500 Cutchogue FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2011 (A) GENERAL Changes in Fund Equity ANALYSIS OF CHANGES IN FUND EQUITY Fund Equity-Beginning of Year Restated Fund Equity - Beg of Year ADD - REVENUES AND OTHER SOURCES DEDUCT - EXPENDITURES AND OTHER USES Fund Equity-End of Year 1,943,942 A8021 1,832,352 1,943,942 A8022 1,832,352 1,002,834 1,029,787 1,114,424 1,264,105 1,832,352 A8029 1,598,034 Page 7 OSC Municipality Code 471179002500 Cutchogue FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 201 1 (A) GENERAL Budget Summary Estimated Revenues Est Rev - Real Properly Taxes Est Rev - Use of Money And Property TOTAL Estimated R~venue$ Approprialed Reserve TOTAL Estimated Other Sources TOTAL Estimated RevenUes And Other Sources 1,020,440 A1049N 1,250,525 2,000 A2499N 1,000 1,022,440 1,25'1,$25 125,000 A511N 125,000 0 1,147,440 Page 8 OSC Municipality Code 471179002500 Cutchogue FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2011 (A) GENERAL Budget Summary Appropriations App - Public Safety App - Employee Benefits TOTAL Appr°pr aflons App - Inten~und Transfer TOTAL Other USes TOTAL Appropriations And Other Uses 806,090 A3999N 825,775 291,350 A9199N 325,750 1,097,440 1,151,5~5 50,000 A9999N 100,000 50,000 100,000 1,147;440 · 1,25t,525 Page 9 OSC Municipality Code 471179002500 Balance Sheet Cutchogue FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2011 Page 10 Balance Sheet Cutchogue FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2011 Page 11 Cutchogue FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2011 Balance Sheet Page 12 Balance Sheet Cutchogue FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2011 Page 13 Results of Operation Cutchogue FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 20'11 Page 14 Cutchogue FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2011 Results of Operation Page 15 Cutchogue FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2011 (R) Reserve Changes in Fund Equity ANALYSIS OF CHANGES IN FUND EQUITY Fund Equity - Beginning of Year R8021 · Fund Equity - End of Year R8029 Page 16 OSC Municipality Code 471179002500 (TA) AGENCY Balance Sheet Assets Service Award Program Assets Cutchogue FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 201 658,297 TA461 763,031 Page 17 OSC Municipality Code 471179002500 (TA) AGENCY Balance Sheet Cutchogue FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2011 Liabilities Service Awards TOTA~ AgencY Liabilities TOTAL Liabilities And Fund EquitY 658,297 TA13 763,031 763~031 Page 18 OSC Municipality Code 471179002500 Balance Sheet Cutchogue FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2011 · Page 19 Balance Sheet Cutchogue FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2011 Page 20 Cutchogue FIRE DISTRICT Financial Comments For the Fiscal Year Ending 2011 Page 21 Cutchogue FIRE DISTRICT Statement of Indebtedness For the Fiscal Year Ending 2011 Page 22 Cutchogue FIRE DISTRICT Schedule of Time Deposits and Investments For the Fiscal Year Ending 2011 CASH: On Hand Demand Deposits Time Deposits Total COLLATERAL: - FDIC Insurance Collateralized with securities held in possession of municipality or its agent Total EDP Code 9Z2001 9Z2011 9Z2021 9Z2014 9Z2014A Amount $1,662,082.00 $1,662,082.00 $662,955.OO $1,049,084.00 $1,712,039.00 INVESTMENTS: - Securities (450) Book Value (cost) Market Value at Balance Sheet Date Collateralized with securities held in possession of municipality or its agent 9Z4501 9Z4502 9Z4504A - Repurchase Agreements (451) Book Value (cost) Market Value at Balance Sheet Date Collateralized with securities held in possession of municipality or its agent 9Z4511 9Z4512 9Z4514A Page 23 OSC Municipality Code 471179002500 Cutchogue FIRE DISTRICT Bank Reconciliation For the Fiscal Year Ending 2011 Include All Checking, Savings and C.D. Accounts Bank Account Number ..... -2534 .... *-2591 ..... -2609 ..... -2617 *****-6570 Add: Less: Adjusted Bank Deposit Outstanding Bank Balance In Transit Checks Balance , $42,955 $0 $63,263 ($20,308) · $269,056 ~ $50,000 $0 $319,056 ' $229,352 ~ $750,719 ' $370,000 Total Adjusted Bank Balance Betty Cash Adjustments Total Cash Total Cash Balance All Funds * Must be equal $0 $0 $229,352 $0 $0 $750,719 $0 $0 $370,000 9ZCASH 9ZCASHB $1,648,819 $.00 $48.00 $1,648,867 $1,648,867 Page 24 OSC Municipality Code 471179002500 Cutchogue FIRE DISTRICT Fire District Questionnaire For the Fiscal Year Ending 2011 1) Has your district adopted a written procurement proiicy and is it complied with? 2) Has your district contracted to have an independent audit of its financial statements? If not, has the Board of Fire Commissioners performed an internal audit of the · Treasurer's records and reports? 3) Does your district have a written travel policy and is it complied with? 4) Are monthly bank reconciliations performed? 5) What is your district's statutory spending limitation margin (amount) for the next fisca · 6) Does your district have a Length of Service Award Program (LOSAP) for volunteer firefighters? If so, how are the LOSAP funds invested? Marketable Securities · Annuities Life Insurance Other (describe) Response Y Y Y Y $1,297,630 N Y Y Y 7) Has your Fire District adopted an investment policy as required by General Municipal Law, Section 39? Page 25 Cutchogue FIRE DISTRICT Employee and Retiree Benefits For the Fiscal Year Ending 201 1 Total Full Time Employees: Total Part Time Employees: ~ '~Cco~nT ' ' D~ri~p~o~ ............. Total ~i~ "':~ # of Part # of Retirees Code i Expenditures i Time I Time i (All Funds) ! Employees Employees 90108F State Retirement System $15,784.00 2 90158~~- Police and Fire Retirement I 90258~ Local Pension Fund $216,664.0C §0398" Social Security $15,722.0(: 3 1C --90408 Worker's Compensafion $37,142.0£ 3 1C 90451 Lire Insurance 90508 U~employment Insurance $1,154.0d 3 lC 90558 Disability insurance $300.0C~ 90608 Hospital and Medical $8,575.0C~ 3 -- (Dental) Insurance 90708 Union Welfare Benefits 90858 Supplemental Benefit Payment to Disabled Fire Fighters ~18~ Other Employee Benefits Total ~n~)uted Total From F:inancial ........ ~95,34'1 ~0c~J !Section (comparative purposes only) Page 26 O$C Municipality 471179002500 Cutchogue FIRE DISTRICT Energy Costs and Consumption For the Fiscal Year Ending 2011 Energy Type Total Total Volume Expenditures Gasoline DieseI Fuel Ji Units Of Alternative Measure Units Of Measure gallons j~ gallons ~L Fuel Oil iNalural Gas ii Electricity ~. __,L" $23,96 134,66 kilowatts Coal " ~ ~ tons Page 27 OSC Municipality 471179002500 Cutchogue FIRE DISTRICT Schedule of Other Post Employment Benefits (OPEB) For the Fiscal Year Ending 2011 Annual OPEB Cost and Net OPEB Obligation 1 Type of Other Post Employment Benefits Plan 2~ Annual Required Contribution(ARC) 3. interest on Net OPEB Obligation 4. Adjustment to Annual Required Contribution 5. Annual OPEB Expense 6, Less: Actual Contribution Made 7. Increase in Net OPEB Obligation 8. Net OPEB Obligation - beginning of year 9. Net OPEB Obligation - end of year 10. Total Other Post Employment Benefits as reported in Accounts 683 in Financial Section, Current Fiscal Year 11. Percentage of Annual OPEB Cost Contributed (Actual Contribution Made/Annual OPEB Cost) Funded Status and Funding Process 12. Actuarial Accrued Liability(AAL) 13. Less: Actuarial Value of Plan Assets 14, Unfunded Actuarial Accrued Liability(UAAL) 15. Funded Ratio(Actuarial Value of Plan Assets/AAL) 16. Annual Covered Payroll (of active employees covered by the plan) 17. UAAL as Percentage of Annual Covered Payroll Other OPEB Information 18. Date of most recent actuarial valuation 19. Actuarial method used 20 Assumed rate of return on investments discount rate 21. Amortization period of UAAL(in years) 00% Page 28 OSC Municipality 471179002500 FIRE DISTRICT DEMOGRAPHICS Postal or Mailing Address: Street Address or PO Box City State Zip t(631) 734-6907 (631) 734-7079 Fire Distnct Telephone Number Fire District Fax Number cutfd@optonline.net http:llw*,vw cutchogueflredept.orgl Official Email Address Website Physical Address: (If Different From Postal Address) Street Address City State Zip BOARD DEMOGRAPHICS CHIEF FISCAL OFFICER Name Title j260 New Suffolk Road Street Address or PO Box City State Zip Telephone Numar Fax Number Email Address Term End Date CHAIRMAN OF THE BOARD iSanford Friemann Commissioner Name i260 New Suffolk Road Street Address or PO Box i(631)734-6907 Telephone Number Icutfd@optonline net Email Address Title iCulchogue NY 11935 City State Zip i(631)734-7079 Fax Number ! 12/31/2012 Term End Cate , iPeter J. Zwerle~n hereby cerhty that I am the Chief Fiscal Officer of the iCutchogue Fire District , and that the information provided in the annual , for the fiscal year ended financial repod of the Cutchogue Fire District 12/31/2011 , is true and correct to the best of my knowledge and belief By entering the personal identification number assigned by the Office of the State Comptroller to me as the Chief Fiscal Officer of the Cutchogue Fire District , and adopted by me as my signature for use in conjunction with the filing of the Cutchogue Fire District financial repod, I am evidencing my express intent to authenticate my cedifloation of the ,~utc'-~og--ue Fire-- ---- ~istric~'--t- 's annual financial report repod for the fiscal year ended[12 31/2011 and fl ed by means of elec ronm data transmission Name of Repod Preparer if different than Chief Fiscal Officer Cutchogue Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT Summary of significant accounting policies: The Annual Financial Report Update Document (AUD) of the Cutchogue Fire District (the District), as of and lbr the year ended December 31, 2011 has been prepared in conformity xvith the modified accrual regulatory basis of accounting as prescribed by the State Comptroller's Office, which is a comprehensive basis of accounting other than U.S. generally accepted accounting principles. Financial reporting entiW: The District is a governmental entity that provides fire protection to the local community. The District receives most of its funding from property taxes. The District is governed by laws of the State of New York. The Board of Fire Commissioners is the legislative body responsible for the overall operation of the District. All activities and functions performed for the District are its direct responsibility. The Treasurer serves as Chief Fiscal Officer of the District. Basis of presentation: The AUD provides information about the District's funds, including fiduciary funds. The accounts of the District are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions or limitations. The following fund types are used: Governmental: General Fund The General Fund is the principal operating fund of the District and is used to account for all financial resources except those required to be accounted for in another fund. Debt service is also accounted for in the General Fund. Equipment Reserve Fund The Equipment Reserve Fund is used to account for and report financial resources to be used for the acquisition of equipment needed by the District. -29- COMP Cutchogue Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT Summary of significant accounting policies (continued): Governmental (continued): Building Reserve Fund The Building Reserve Fund is used to account for and report financial resources to be used for the acquisition, construction or renovation of major capital facilities. For AUD purposes, these funds are all combined and shown as the General Fund. Fiduciary Fund Fiduciary funds are used to account for assets held by the District in a trustee or custodial capacity. The District utilizes the following fund: Agency Fund The Agency Fund is used to account for and report assets held by the District in the capacity of trustee, custodian or agent for individuals. Agency funds are custodial in nature and do not involve measurement of results of operations. Basis of accounting: The accompanying AUD has been prepared on the modified accrual regulatory basis of accounting using the current financial resources measurement focus. Revenues are recognized when measurable and available. "Available" means collectible within the current period or within 60 days after year end. Expenditures are generally recognized under the modified accrual regulatory basis of accounting when the related liability is incurred. The exception to this general rule is that principal and interest on general obligation long-term debt, if any, is recognized when due. Cash and cash equivalents: Cash and cash equivalents include demand deposits and temporary investments with original maturities of three months or less from the date of acquisition. Interfnnd transfers: The operations of the District give rise to certain transactions between funds, including transfers of expenditures and revenues to provide services and construct assets. This is either by budget, Board resolution, permissive referendum or mandatory referendum. -30- COMP Cutchogue Fire District NOTES TO ANNUAL FINANCIAl, REPORT UPDATE DOCUMENT Summary of significant accounting policies (continued): Fund balance.: In fiscal year 2011, the District implemented Goverrunent Accounting Standards Board (GASB) Statement No. 54, "Fund Balance Reporting and Governmental Fund Type Definitions", (GASB 54). GASB 54 changed the classification of fund balance to focus on the constraints imposed on resources in govermmental funds, instead of thc previous focus on availability for appropriation. Fund balance is now broken down into five different classifications: non-spendable, restricted, committed, assigned and unassigned. Non-spendable consists of assets that are inherently non-spendable in the current period either because of their form or because they must be maintained intact, including prepaid items, inventories, long-term portions of loan receivable, financial assets held for resale and principal of endowments. Restricted consists of amounts that are subject to externally enforceable legal purpose restrictions imposed by creditors, grantors, contributors or laws and regulations of other governments or through constitutional provisions or enabling legislation. Committed consists of amounts that are subject to a purpose constraint imposed by a formal action of the government's highest level of decision-making authority before the end of the fiscal year and that require the same level of formal action to remove the constraint. The Board of Fire Commissioners is the decision-making authority that can, by Board resolution, prior to the end of the fiscal year, commit fund balance. Assigned consists of amounts that are subject to a purpose constraint that represents an intended use established by the government's highest level of decision-making authority or by their designated body or official. The purpose of the assignment must be narrower than the purpose of the General Fund and, in funds other than the General Fund, assigned fund balance represents the residual amount of fund balance. The Board of Fire Commissioners, by Board resolution, can authorize the Treasurer to assign fund balance. Unassigned represents the residual classification for the government's General Fund and could report a surplus or deficit. In funds other than the General Fund, the unassigned classification should be used only to report a deficit balance resulting from overspending for specific purposes for which amounts had been restricted, committed or assigned. -31- ~?COMPANY Cutchogue Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT Summary of significant accounting policies (continued): Fund balance (continued): When resources are available from multiple classifications, the District spends funds in the follo~ving order: Restricted amounts are deemed to have been spent when an expenditure is incurred for purposes for which both restricted and unrestricted (committed, assigned or unassigned) amounts are available. Within unrestricted fund balance, expenditures are deemed to be spent first from committed amounts, followed by assigned amounts and then unassigned amounts when expenditures are incurred for purposes for which amounts in any of those unrestricted fund balance classifications could be used. Real property taxes: All real property assessments are made by the Town of Southold. Real property tax payments are due in two equal installments; the first half payable on December 1 (lien and levy date) preceding the year for which the same is levied and the second half payable May 10, with the first half payable without penalty to January 10 and the second half payable without penalty to May 31. After May 31, all taxes must be paid to Suffolk County Treasurer with a 5% penalty charge and interest at the rate of 1% per month from February 1. The Town of Southold Receiver of Taxes collects all real estate taxes for the District. The Town of Southold Receiver of Taxes distributes the tax collections to the District. All payments made to the District are made in the year for which the tax has been levied. The Town of Southold Receiver of Taxes turns over uncollected items to the Suflblk County Treasurer who continues the collection of these items. Responsibility for the collection of unpaid taxes rests xvith Suffolk County. Budgetary data: The District prepares an operating budget for the General Fund each year. The budget is adopted by the Board of Fire Commissioners as its final budget for the coming year as it relates to total spending. The District can adjust the budget as needed by transferring certain budgeted amounts between accounts. The budget is not subject to referendum. All budget appropriations lapse at the end of each year. -32- C?COMPANY Cutchogue Fire District NOTES TO ANNUAl, FINANCIAL REPORT UPDATE DOCUMENT o Summary of significant accounting policies (continued): Use of estimates: The preparation of the AUD in conformity with the modified accrual regulatory basis of accounting requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. 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 where the payment and interest are guaranteed by the United States of America and includes special time deposit accounts, certificates of deposit, obligations of the United States of America, obligations guaranteed by agencies of the United States of America and obligations of the State of New York. Collateral is required for demand and time deposits and certificates of deposit not covered by FDIC insurance. Custodial credit risk is the risk that in the event of a bank failure, the District's deposits may not be returned to it. The District's risk exposure can be categorized as tbllows: 1. Insured by FDIC insurance. 2. Collateralized by securities held by the pledging financial institution's trust department or agent, but not in the District's name. 3. Collateralized by securities held by the pledging financial institution, but not in the District's name. 4. Uncollateralized. The District's deposits held by the banks are categorized, based on the above criteria, as follows: Category, Amount 1. $ 662,955 2. 1,049,084 3. 4. Total $1,? 12,039 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. -33- L C0MPANY Cutchogue Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT Pension Plan: Plan description: The District participates in the New York State and Local Employees' Retirement System (ERS). This is a cost-sharing, multiple-employer retirement system. The System provides retirement benefits as well as death and disability benefits. Obligations of employers and employees to contribute and benefits to employees are governed by the New York State Retirement and Social Security Laxv (NYSRSSL). As set forth in the NYSRSSL, the Comptroller of the State of New York (Comptroller) serves as sole trustee and administrative head of the System. The Comptroller shall adopt and may amend rules and regulations for the administration and transaction of the business of the System and for the custody and control of their funds. The System issues a publicly available financial report that includes financial statements and required supplementary information. That report may be found at http://www.osc.state.n¥.us/retire/publications/index.php or obtained by writing to the New York State and Local Employees' Retirement Systems, 110 State Street, Albany, New York 12244. Funding policy: The System is non-contributory except for employees who joined the ERS after July 27, 1976 who contribute 3% of their salary for the first I0 years of membership and employees who joined on or after January 1, 2010 (ERS) who generally contribute 3% of their salary for the entire length of service. Under the authority of the NYSRSSL, the Comptroller annually certifies the actuarially determined rates expressed used in computing the employers' contributions based on salaries paid during the System's fiscal year ending March 31. Contributions ~tbr the current year and two preceding years were equal to 100% of the contributions required and were as follows: Year Ending December 31~ Amount 2011 $15,784 2010 $11,945 2O09 $ 5,463 Chapter 260 of the Laws of 2004 of the State of New York was enacted that allows local employers to bond or amortize a portion of their retirement bill for up to 10 years in accordance with the following schedule: -34- ~CO~h~ Cutchogue Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT Pension Plan (continued): Funding policy (continued): For State Fiscal Year (SFY) 2004-05, the amount in excess of 7.00% of employees' covered pensionable salaries, with the first payment of those pension costs not due until the fiscal year succeeding that fiscal year in which the bonding/amortization was instituted. For SFY 2005-06, the amount in excess of 9.50% of employees' covered pensionable salaries. For SFY 2007-08, the amount in excess of 10.50% of employees' covered pension salaries. This law requires participating employers to make payments on a current basis, while bonding or amortizing existing unpaid amounts relating to the System's fiscal years ending March 31, 2005 through 2008. Chapter 57 of the Laws of 2010 of the State of New York was enacted that allows local employers to amortize a portion of their retirement bill for 10 years in accordance with the following stipulations: For SFY 2010-11, the amount in excess of the graded rate of 9.50% of employees covered pensionable salaries, with the first payment of those pension costs not due until the fiscal year succeeding that fiscal year in which the amortization was instituted. For subsequent SFY's, the graded rate will increase or decrease by up to 1.00% depending on the gap bet;veen the increase or decrease in the System's average rate and the previous graded rate. For subsequent SFY's in which the System's average rates are lower than the graded rates, the employer will be required to pay the graded rate. Any additional contributions made will first be used to pay off existing amortizations and then any excess will be deposited into a reserve account and will be used to off'set future increases in contribution rates. This law requires participating employers to make payments on a current basis, while amortizing existing unpaid amounts relating to the System's fiscal years when the local employer opts to participate in the program. Thc total unpaid liability at the end of the fiscal year was $-0-. -35- ~COMPANY Cutchogue Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT Length of Service Award Program (LOSAP): The District's AUD is for the year ended December 31,2011. However, the information contained in this note is based on information for the LOSAP for the plan year ending on February 28, 2012, which is the most recent plan year for which complete information is available. The funding detail is for the period March 1, 2010 through February 28,2011. The District established a defined benefit LOSAP for the active volunteer fire fighters of the District. The Program took effect on March 1, I993. ']['he Program was established pursuant to Article I 1-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. Program description: Participation~ vesting and service credit: Active volunteer firefighters who have reached the age of 18 and who have completed their probationary period are eligible to participate in the Program. Participants acquire a nonforfeitable right to a service award after being credited with 5 years of fire fighting service or upon attaining the Program's entitlement age. The Program's entitlement age is age 65. In general, an active volunteer firefighter is credited with a year of firefighting service for each calendar year after the establishment of the Program in which he or she accumulates 50 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 tbr 5 years of firefighting service rendered prior to the establishment of the Program. 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 30. Benefits are not payable until the first day of the month coincident with or following the attainment of age 65 and completion of I year of plan participation. Except in the case of disability or death, benefits are payable when a participant reaches entitlement age. The Program provides statutorily mandated death and disability benefits. -36- ~CO~ANY Cutchogue Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT Length of Service Award Program (LOSAP) (continued): Program description (continued): 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 tbrms prescribed by the Governing Board. The Governing Board of the sponsor has retained and designated Volunteers Firemen's Insurance Services, Inc. (VFiS) to assist in the administration of the Program. The designated program administrator's functions include providing basic annual administration services as follows: a) Providing participant enrollment forms; b) Providing an annual reminder letter with a review list for the current anniversary date; c) Preparation of Explanation of Plan Benefits; d) Calculation of Schedule of Benefits and costs annually; e) Participants' benefit calculation at time of severance or retirement; Auxiliary Fund valuation and suggested deposit; g) Summary of required annual contribution; h) Annual actuarial review and recommended benefit enhancements. Disbursements of Program assets for the payment of benefits or administrative expenses must be approved. The lbllowing is an explanation of the process for approving disbursements: Payment of benefits: Entitlement benefits - VFIS prepares and submits to the plan sponsor a Verification of Benefits statement and an Annuity Enrollment form for participants active at entitlement age and for vested participants upon termination from the plan. Following review for accuracy, the plan sponsor signs and returns the paperwork to VFIS authorizing VFIS to disburse entitlement benefits. Death benefits - Upon notification from the plan sponsor of a participant's death, VFIS prepares a Verification of Benefits statement and a Lump-Sum Death Benefit form. Following review for accuracy, the plan sponsor signs and returns the paperwork accompanied by a death certificate to VFIS authorizing VFIS to disburse a death benefit. -37- CO ANY Cutchogue Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT Length of Service Award Program (LOSAP) (continued): Payment benefits (continued): Disability benefits - Upon notification from the plan sponsor of a participant's total and permanent disability, VFIS prepares a Verification of Benefits statement, a Physician Statement form and a Lump-Sum Disability Benefit form. Following review fbr accuracy, the plan sponsor signs and returns the paperwork authorizing VFIS to disburse a disability benefit. Payment of administrative expenses: 1. Per the executed Service Fee Agreement, the plan sponsor agrees to payment as contracted. Authority to invest Program assets is vested in The Hartford Life Insurance Company. Subject to restrictions in the Program document, Program assets are invested in accordance with a statutory "prudent person" rule. The sponsor invested plan funds in a Group Annuity Contract with guarantees of both principal and interest. The sponsor is required to retain an actuary to determine the amount of sponsor's contributions to the plan. The actuary retained by the sponsor for this purpose is JF Actuarial Services. Portions of the following information were derived from a report prepared by the actuary dated August 30, 2011. Program financial condition: Assets and Liabilities % of Total Actuarial present value of accrued benefits at February 28, 2011: Vested Non-vested Less assets available for benefits: Group Annuity Fixed Funds Total net assets available for benefits Total unfunded benefits 1 O0% $666,781 $1,342,937 23,609 1,366,546 666,781 $ 699,7~ -38- ffCOMPANY Cutchogue Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT Length of Service Award Program (LOSAP) (continued): Program financial condition (continued): Prior service cost: The unfunded liability is associated with the frozen initial liability that was established at March 1, 1993 for prior service costs. The initial liability was $731,356, of which $468,873 is still unpaid at this time. The prior service costs are being amortized over 30 years at a discount rate of 5.75%. Receipts and Disbursements Plan net assets, beginning of year Changes during the year (increases/(decreases)): Plan contributions $ 201,617 investment income earned 31,657 Change in fair market value of investments 5,203 Plan benefit withdrawals (204,482) Administrative and other fees/charges (3,647) Life insurance premium (14,874) $651,307 15,474 Plan net assets, end of year $666,781 Contributions Amount of sponsor's contribution recommended by actuary Amount of sponsor's actual contribution $212,96_5 $201:617 Contributions paid in excess of recommended amount are for administration fees and other adjustments. Administration Fees Fees paid to designated program administrator $ 3,647 -39- ~COMPANY Cutchogue Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT Length of Service Award Program (LOSAP) (continued): Funding methodology and actuarial assumptions: Normal costs: The actuarial valuation methodology used by the actuary to determine the sponsor's contribution is Entry Age Normal Frozen Initial Liability. The assumptions used by thc actuary to determine thc sponsor's contribution and the actuarial present value of benefits are: Assumed rate of return on investment 5.75% Mortality tables used for: Pre-retirement Post-retirement U8400 U8400 Commitments and contingencies: Legal: The District is exposed to various risks of loss related to torts, theft og damage to and destruction of assets, injuries to employees, errors and omissions, natural disasters, etc. These risks are covered by commercial insurance purchased l¥om independent third- partics. Settled claims from these risks have not exceeded commercial insurance coverage. -40- ,;C0MP &COMPANY A PROFRSSIONAI CORPORAIION OF CERTIFIED PURLIC ACCOUNT^N1S To the Board of Fire Commissioners Cutchogue, New York We have audited the Annual Financial Report Update Document (AUD) of Cutchogue Fire District (the District), as of and for the year ended December 31,2011 and have issued our report thereon dated February 21, 2012. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered the District's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the AUD, but not for the purpose of expressing an opinion on the effectiveness of the District's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the District's internal control over financial reporting. Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses and, therefore, there can be no assurance that all deficiencies, significant deficiencies or material weaknesses have been identified. However, as described below, we identified certain deficiencies in internal controls over financial reporting that we consider to be a significant deficiency, as well as a material weakness. 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 a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's AUD will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider the following deficiency to be a material weakness: Controls over financial reporting process as they pertain to the preparation of the AUD, including related disclosures. -41- An Independent Member of the BDO Seidman Atliance To the Board of Fire Commissioners Cutchogue, New York The District's response is that its sizc and limited resources do not warrant the cost of having a full-time certified public accountant on its payroll. The District feels that this deficiency has been appropriately mitigated. Compliance and Other Matters As part of obtaining reasonable assurance about whether the District's AUD is free of material misstatement, we performed tests of its compliance ~vith certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of AUD 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 instance of noncompliance or other matters that are required to be reported under Government Auditing Standards. We noted certain matters that we reported to those charged with governance, in a separate letter dated February 21, 2012. The District's response to the findings identified in our audit is described above. We did not audit the District's response and, accordingly, we express no opinion on it. This report is intended solely for the intbrmation and use of the District's Board of Fire Commissioners and management and is not intended to be and should not be used by anyone other than these specified parties. 5 5,. February 2 I, 2012 -42- gtCOMP