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HomeMy WebLinkAbout2012 FI Waste Management District I I C.., a u ~;~~~~~~Cr~L~ I ~ D AUG 2 3 2013 TCCv'N OF SOUTHOLD ACCCU^T!P:G w FINCNCE D[PT. I I FISHERS ISLAND WASTE MANAGEMENT DISTRICT A COMPONENT UNIT OF THE TOWN OF SOUTHOLD FINANCIAL STATEMENTS DECEMBER 31, 2012 O H E RTY EA LS 8~ A N KS, P_C_ CERTIFIED PUBLIC ACCOUNTANTS I 1 1 t FISHERS ISLAND WASTE,MANAGEMENT DISTRICT A COMPONENT UNIT OF THE ' TOWN OF SOUTHOLD ' BASIC FINANCIAL STATEMENTS AS OF DECEMBER 31, 2012 1 ' TOGETHER WITH INDEPENDENT AUDITORS' REPORT 1 AND REQUIRED SUPPLEMENTARY INFORMATION 1 1 1 1 ' DOHERTY, BEALS & BANKS, P.C. FISHERS ISLAND WASTE MANAGEMENT ' A COMPONENT UNIT OF THE TOWN OF SOUTHOLD FINANCIAL STATEMENTS DECEMBER 31, 2012 ' INANCIAL SECTIO Independent Auditor's Report ...........................................................................................................1 1 UIRED SUPPLEMENTARY IlVFORMATIO ' Management's Discussion and Analysis ................................................................................................3-6 ASIC FINANCIAL STATEMENTS ' Statement of Net Assets ................................................................................................................7 Statement of Activities ..................................................................................................................8 Statement ofActivities -Governmental Activities ................:................................................................9 ' Reconciliation of the Government Funds Balance Sheet to the Statement of Net Assets ..........................................................................10 ' Statement of Revenues, Expenditures, and Changes In Fund Balances-Governmental Funds .................................................................................1 l Balance Sheet-Governmental Funds .................................................................................................12 ' Reconciliation of the Government Funds Statement of Revenues, Expenditures and Changes in Fund Balances ' To [he Statement of Activities .............................................................................................13 Notes to the Financial Statements ...................................................................................................14 1 ' DOHERTY, BEALS & BANKS, P.C. a~TYr B~ ~ o ° CPA a 1 Board of Commissioners ' Fishers Island Waste Management District PO Box 22 Fishers Island, NY 06390 1 INDEPENDENT AUDITOR'S REPORT ' Report on the Financial Statements ' We have audited the accompanying financial statements of the governmental activities of the Fishers Island Waste Management District, A Component Unit of the Town of Southold as of and for the year ended December 31, 2012, and the related notes to the financial statements, which collectively comprise the District's basic financial statements ' as listed in the table of contents. The prior yeaz summarized comparative information has been derived from the District's 2011 fmancial statements and, in our report dated June 7, 2012, we expressed an unqualified opinion on those financial statements. ' Management's Responsibility for the Financial Statements Management is responsible for the prepazation and fair presentation of these fmancial statements in accordance with ' accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of fmancial statements that aze free from material misstatement, whether due to fraud or eaor. ' Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in ' accordance with auditing standazds generally accepted in the United States of America. Those standazds require that we plan and perform the audit to obtain reasonable assurance about whether the fmancial statements aze free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and ' disclosures in the fmancial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's prepazation and fair presentation ' of the fmancial statements in order to design audit procedures that aze appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial ' statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit ' opinions. ' Stacey L. Gualtieri, CPA Kathleen A. Steamer, CPA David J. Miceli, CPA Audrey A. Leone, CPA H. Bruce Fielding, CPA -1- 187 Williams St. ~ New London, CT 06320 ~ (v) 860.443.2033 ~ (f) 860.444.7086 ~ dbbcpa.com ' 38 East Main St. Suite 6 ~ Mystic, CT 06355 ~ (v) 860.572.7373 ~ (f) 860.572.0107 ' Opinions In our opinion, the financial statements refersed [o above present fairly, in all material respects, the respective financial t position of the governmental activities of the Fishers Island Waste Management District, A Component Unit of the Town of Southold, as of December 31, 2012, and the respective changes in financial position thereof for the year then ended inconformity with accounting principles generally accepted in the United States of America. Other Matters Accounting principles generally accepted in the United States of America require that the management's discussion ' and analysis and budgetary comparison information on pages 3 through 6 be presented to supplement the basic fmancial statements. Such information, although not a part of the basic fmancial statements, is required by the Govermnental Accounting Standards Boazd, who considers it to be an essential par[ of financial reporting for placing ' the basic fmancial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standazds generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing ' the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other lmowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. t OHERTY EALS & BANKS, P.C. July 29, 2013 1 1 1 -2- ' DOHERTY, BEALS & BANKS, P.C. FISHERS ISLAND WASTE MANAGEMENT DISTRICT ' MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2012 ' The following is a discussion and analysis of the Fishers Island Waste Management's financial performance, providing an overview of the Fishers Island Waste Managements financial activities for [he yeaz ended December 31, 2012. Use [his section in conjunction with the Fishers Island Waste Management's basic financial statements. ' FINANCIAL HIGHLIGHTS ' Net assets for 2012 decreased by $40,352, due to total expenses exceeding revenue for the yeaz. • The General Fund's fund balance decreased by $6,132 to $909,885. ' • Revenues were slightly higher than anticipated and operating expenses were lower tlian expected for the 2012 fiscal yeaz. USING THIS ANNUAL REPORT This annual report consists of a series of financial statements. The Statement of Net Assets and the Statement of ' Activities provide information about the activities of the District as a whole and present alonger-term view of the Distdct's finances. Fund Financial statements start with page seven (7). For governmental activities, these statements tell how these services were financed in the short terra as well as what remains for future spending. Fund financial ' statements also report the District's operations in more detail than the government-wide statements by providing information about the District's most significant funds. ' Reporting the Fishers Island Waste Management District as a Whole Our analysis of the District as a whole begins with page seven One of the most important questions asked about the District finances is, "Is the District as a whole better off or worse off as a result of the yeaz's activities?" The Statement of Net Assets and the Statement of Activities report information about the District as a whole and about its activities in a way that helps answer this question. These statements include all assets and liabilities using the accrual basis of accounting, which is similaz to the accounting used by most private-sector companies. All of the current ' yeaz's revenues and expenses aze taken into account regardless of when cash is received or paid. These two statements report the District's net assets and changes in them. You can think of the District's net assets- the difference between assets and liabilities-as one way to measure the District's financial health, or financial ' position. Over time, increases or decreases in the District's net assets are one indicator of whether its financial health is improving or deteriorating. You will need [o consider other non-financial factors, however, such as changes in the population levels of the District's member towns, to assess the overall health of the District. ' In the Statement of Net Assets and the Statement of Activities, the District shows the following activity: • Governmental activities-The District's governmental services aze reported here. Most of these activities aze a t result of taxes levied on the residents of Southold. ' ~ Reporting the Fishers Island Waste Management District's Most Significant Funds • Our analysis of the District's major funds begins in the section titled "Fishers Island Waste Management ' District's". The fund financial statements begin on page seven (7) and provide detailed informaton about the most significant funds-not the District as a whole. Some funds aze required to be established by State law and by bond covenants, if any. ' 3 ' DOHERTY, BEALS & BANKS, P.C. FISHERS ISLAND WASTE MANAGEMENT DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2012 ' USING THIS ANNUAL REPORT (Continued) • Governmental funds-The District's basic services ate reported in governmental funds, which focus on how ' money flows into and out of those funds and the balances left at yeaz-end that aze available for spending. These funds aze reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed shoe-term view of the District's general government operations and [he basic services it provides. Goverrmrental fund information helps you determine whether there aze more or fewer financial resources that can be spent m the neaz future to finance the District's programs. We describe the relationship (or differences) between ' governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds in a reconciliation provided on page twelve (12) of the fund fmancial statements. FINANCIAL ANALYSIS OF THE FISHERS ISLAND WASTE MANAGEMENT Our analysis below focuses on the net assets and changes in net assets of the Fishers Island Waste Management's activities. Condensed Statement of Net Assets Primary Activities ' December 31, 2012 and 2011 Assets 2012 2011 Current and other assets $ 946,329 $ 930,983 ' Capital assets 2,721,800 2,756,020 Total assets 3,668,129 3,687,003 Liabilities ' Current and other liabilities 36,444 14,966 Total liabilities 36,444 14,966 Net Assets Unrestricted (deficit) 3,631,685 3,672,037 To[al net assets $ 3,668,129 $ 3,672,037 ' Changes in Net Assets Fishers Island Waste Management For the years ended December 31, 2012 and 2011 ' Program Revenues 2012 2011 Changes for services $ 48,969 $ 48,857 48,969 48,857 General Revenues Property taxes 526,900 516,660 ' Interest earnings 2,333 3,340 529,233 520,000 Total Revenues 578,202 568,857 ' Program Expenses Operating expenses 618,884 620,829 Total Expenses 618,884 620,829 ' Increase (decrease) in Net Assets $ (40,352) $ (51,972) -4- ' DOHERTY, BEALS & BANKS, P.C. FISHERS ISLAND WASTE MANAGEMENT DISTRICT ' MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2012 FINANCLAL ANALYSIS OF THE FISHERS ISLAND WASTE MANAGEMENT (continued) The following schedule presents a summary of Fishers Island Waste Management revenues and expenses for the yeaz ' ended December 31, 2012 and the amount of change and percentage of total in relation to the prior year. Increase 2012. 2011 (Decrease) Change Revenues Chazges for services $ 48,969 $ 48,857 $ 112 .20% Property taxes 526,900 516,660 10,240 1.98% Interest earnings 2,333 3,340 (1,007) (30.15%) Total Revenues $ 578,202 $ 568,857 $ 9,345 (27.97%) ' Program Expenses Operating expenses $ 618,554 $ 620,829 $ (2,275) (.37%) TotalExpenses $ 618,554 $ 620,829 $ (2,275) (.37%) GOVERNMENTAL ACTIVTTIES ' Table 3 presents the cost of each of the District's governmental programs as well as each governmental program's net cos[ (total cost less revenues generated by the activities). ' Governmental Type Activities Total Cost Net Cost ' of Services (Incr.) of Services (Incr.) 2012 2011 Decr. 2012 2011 Decr. Governmental Activities ' Waste services $ 618,554 $ 620,829 .37% $ (42,685) $ (55,312) 22.83% Totals $ 618,554 $ 620,829 .37% $ (42,685) $ (55,312) 22.83% BUDGETARY HIGHLIGHTS Over the course of the yeaz, the Fishers Island Waste Management revises the budget as needed so that expenditures ' do not exceed appropriations. Various transfers between appropriations were approved for this purpose. Transfers do not increase the total budget, but instead pull appropriations from one expense line to another. 1 5 ' DOBERTY, BEALS & BANKS, P.C. FISHERS ISLAND WASTE MANAGEMENT DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2012 ' BUDGETARY HIGHLIGHTS,(continued) Below is a summarized view of the final budget and actual results for the General Fund: ' General Fund -Budget Summary ' Final Revenues Budget Actual Variance Property Taxes $ 526,900 $ 526,900 $ - Chazges for Services 40,000 48,969 8,969 ' Interest - 2,333 2,333 Total Revenues $ 566,900 $ 578,202 $ 11,302 Expenditures Current-waste services 718,900 584,334 (134,566) ' Total expenditures 718,900 584,334 (134,566) Excess (deficiency) of Revenues over expenditures (152,000) (6,132) (123,264) 1 Increase (decrease) in fund balance $ (152,000) $ (6,132) $ (123,264) ' As mentioned eazlier -revenues were slightly higher than anticipated while expenses were less than anticipated. • Chazges for services were $8,969 higher than anticipated and interest income was $2,333 higher than anticipated. ' CAPITAL ASSET AND DEBT ADMINISTRATION ' Capital Assets - At the end of the 2012 fiscal yeaz, the Fishers Island Waste Management District had $3,613,973 invested is capital assets. Capital assets purchased during the 2012 fiscal year totaled $68,800. More detailed information about the Fishers Island Waste Management District's capital assets is presented in Note One to the financial statements. 1 Debt - At We end of the 2012 fiscal yeaz, the Fishers Island Waste Management District had no bonds or notes outstanding. Noncurrent liabilities of the District consisted solely of account and payroll taxes payable. ' ECONOMIC FACTORS AND NEXT YEAR'S BUDGET ' The Fishers Island Waste Management District considers many factors when setting the annual budget including tax levies imposed by the Town of Southold and fees that will be charged for the governmental activities. 17rese factors include budget projections, economic and housing trends, emerging waste service needs, state matching funds and available fund balance. . ' CONTACTING THE DISTRICT ' This £mancial report is designed to provide the reader with a general overview of Fishers Island Waste Management's finances and to demonstrate Fishers Island Waste Management's accountability for the funds it receives. Requests for additional information can be duected to: ' Sara Rafferty, Chairperson, Fishers Island Waste Management District, Fishers Island, NY 06390. -6- ' DOHERTY, BEALS & BANKS, P.C. FISHERS ISLAND WASTE MANAGEMENT COMPONENT UNIT OF THE TOWN OF SOUTHOLD STATEMENT OF NET ASSETS ' AS OF DECEMBER 31, 2012 WITH COMPARATIVE TOTALS FOR 2011 ' ASSETS Governmental Activities 2012 2011 CURRENT ASSETS ' Cash and cash equivalents $ 30,371 $ 23,856 Accounts receivable 206 835 Prepaid expenses 24,555 10,189 TOTAL CURRENT ASSETS 55,132 34,880 ' NONCURRENT ASSETS Gazbage facilities and improvements 3,294,475 3,225,675 ' Equipment 319,499 319,499 3,613,973 3,545,174 Less: accumulated depreciation (892,173) (789,154) ' TOTAL NONCURRENT ASSETS 2,721,800 2,756,020 t OTHER ASSETS Investments -Fixed Income 891,197 896,103 ' TOTAL ASSETS $ 3,668,129 $ 3,687,003 ' LIABII.ITIES AND NET ASSETS CURRENT LL4BILITIES ' Accounts payable $ 34,926 $ 12,639 Payroll taxes payable 1,518 2,327 ' TOTAL CURRENT LIABII,ITIES 36,444 14,966 NET ASSETS ' Investments in fixed assets 2,721,800 2,756,020 Unrestricted 909,885 916,017 ' TOTAL NET ASSETS 3,631,685 3,672,037 TOTAL LLABILITIES AND NET ASSETS $ 3,668,129 $ 3,687,003 ' The accompanying notes are an Integra/part of these Financial Statements. -7- ' DOHERTY, BEALS & BANKS, P.C. 1 FISHERS ISLAND WASTE MANAGEMENT DISTRICT ' COMPONENT UNIT OF THE TOWN OF SOUTHOLD STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 31, 2012 ' WITH COMPARATIVE TOTALS FOR 2011 ' 2012 2011 REVENUE Town of Southold $ 526,900 $ 516,660 Interest 2,333 3,340 Landfill revenue 48,969 48,857 TOTAL REVENUE 578,202 568,857 EXPENSES Accounting 7,385 11,100 Bank charges 2,346 2,873 Building maintenance 1,126 4,338 ' Building utilities 9,228 7,838 Casual labor 1,675 1,719 Commissioners' fees 11,940 13,332 Compost equipment maintenance 18,346 41,082 t Compost station utilities 2,037 2,887 Consultants 1,600 Depreciation 103,020 101,185 ' Employee benefits 66,532 54,138 Employee training 432 608 Equipment maintenance 16,207 17,525 ' Ferry transportation 53,752 55,651 Gazbage tipping fees and hauling 77,615 76,522 Hazazdous waste removal 16,525 24,326 Insurance 21,704 21,179 ' Landfill maintenance 9,162 6,950 Legal fees 13,210 .375 Office expense 3,166 3,001 ' Payroll expenses 13,894 11,095 Transfer station utilities 3,914 3,364 Wages 154,067 151,373 ' Workmans compensation insurance 9,671 8,368 TOTAL EXPENSES 618,554 620,829 ' CHANGE IN NET ASSETS (40,352) (51,972) NET ASSETS -BEGINNING 3,672,037 3,724,009 ' NET ASSETS -ENDING $ 3,631,685 $ 3,672,037 The accompanying notes are an integral part ojthe Financial Statements _g_ DOHERTY, BEALS & BANKS, P.C. ' FISHERS ISLAND WASTE MANAGEMENT DISTRICT COMPONENT UNIT OF THE TOWN OF SOUTHOLD ' STATEMENT OF ACTIVITIES -GOVERNMENTAL ACTIVITIES FOR THE YEAR ENDED DECEMBER 31, 2012 t Net Program Revenues (Expense) Operating Grants ' Charges and Govern- for Contribu- mental Functions/Programs Expenses Services lions Activities ' GOVERNMENTAL ACTIVITIES ' Waste Services $ (584,334) $ 48,969 $ 526,900 $ (8,465) ' GENERAL REVENUES Interest income 2,333 Total general revenues 2,333 ' Change in net assets (6,132) ' NET ASSETS, beginning of yeaz 916,017 NET ASSETS, end of yeaz $ 909,885 The accompanying notes are an integral part oJthese Financial Statements. -9_ DOHERTY, BEALS & BANKS, P.C. 1 FISHERS ISLAND WASTE MANAGEMENT ' COMPONENT UNIT OF TOWN OF SOUTHOLD RECONCILIATION OF THE GOVERNMENT FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS ' AS OF DECEMBER 31, 2012 ' Total Governmental Fund Balances $ 909,885 Amounts reported for govemmental activities in the Statement of Net Assets are different because: The cost of building and acquiring capital assets (land, buildings, equipment) ' financed from the govemmental funds aze reported as expenditures in the year they aze incurred, and the assets do not appeaz on the balance sheet. However, the Statement of Net Assets includes those capital assets among the assets of Fishers Island ' Waste Management as a whole, and their original costs are expensed over their useful lives. Original cos[ of capital assets 3,613,973 ' Accumulated depreciation (892,173) 2,721,800 ' Total net assets $ 3,631,685 1 1 ' See notes to financial statements. -10- ' DOHERTY, BEALS & BANKS, P.C. 1 FISHERS ISLAND WASTE MANAGEMENT ' COMPONENT UNIT OF TOWN OF SOUTHOLD STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES- GOVERNMENTAL FUNDS FOR THE YEAR ENDED DECEMBER 31, 2012 Total Governmental ' REVENUES General Fund Real property taxes $ 526,900 $ 526,900 Landfill revenue 48,969 48,969 Use of money and property 2,333 2,333 ' Total revenues 578,202 578,202 ' EXPENDITURES General govemmen[ support 58,617 58,617 Landfill operation 313,068 313,068 Transportation 53,752 53,752 ' Employee benefits 90,097 90,097 Capital outlay 68,800 68,800 ' To[al expenditures 584,334 584,334 Excess (Deficiency) of Revenues over Expenditures (6,132) (6,132) Fund balances- beginning of the year 916,017 916,017 ' Fund balances- end of the year $ 909,885 $ 909,885 1 1 1 ' See notes to financia[statements. -ll- DOHERTY, BEALS & BANKS, P.C. 1 FISHERS ISLAND WASTE MANAGEMENT ' COMPONENT UNIT OF THE TOWN OF SOUTHOLD BALANCE SHEET- GOVERNMENTAL FUNDS AS OF DECEMBER 31, 2012 Total ' Governmental ASSETS General Fund Cash and investments $ 921,568 $ 921,568 ' Accounts receivables 206 206 Prepaid expenses 24,555 24,555 1 Total assets $ 946,329 $ 946,329 ' LIABII.ITIES Current Liabilities Accounts payable $ 34,926 $ 34,926 Payroll taxes payable 1,518 1,518 ' Total liabilities 36,444 36,444 ' FUND BALANCES Nonspendable fund balance 24,555 24,555 Unassigned fund balance 885,330 885,330 Total fund balances 909,885 909,885 Total liabilities and net assets $ 946,329 $ 946,329 1 ' Amounts reported for governmental activities in the statement of net assets are different because: ' Capital assets used in govemmental activities aze not fmanical resources and therefore are not reported in the funds. 2,721,800 ' Net assets of governmental activities $ 3,631,685 1 ' The accompanying notes are an integral part ojihese Financial Statements. -12- DOHERTY, BEALS & BANKS, P.C. 1 FISHERS ISLAND WASTE MANAGEMENT ' COMPONENT UNIT OF TOWN OF SOUTHOLD RECONCILIATION OF THE GOVERNMENT FUNDS STATEMENT REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ' ACTIVITIES AS OF DECEMBER 31, 2012 1 Net Change in Fund Balances $ (6,132) Amounts reported for governmental activities in the Statement of Activities aze different because: 1 Capital Related Differences Capital outlays to purchase of build capital assets aze reported in governmental funds as expenditures. However, for governmental activities those costs aze capitalized and shown in the statement of net assets and allocated over their useful lives as annual ' depreciation expenses in the Statement of activities Capital outlays 68,800 ' Depreciation expense (103,020) (34,220) Total change in net assets $ (40,352) 1 1 1 ' See notes to financial statements. -13- ' DOHERTY, BEALS & BANKS, P.C. FISHERS ISLAND WASTE MANAGEMENT DISTRICT ' NOTES TO FINANCIAL STATEMENTS December 31, 2012 ' 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the Fishers Island Waste Management District (FIWMD) have been prepared in ' confomuty with accounting principles generally accepted in the United States of America (GAAP) for governmental units. The Governmental Accounting Standazds Board (GASB) is the standazd-setting body for establishing governmental accounting and financial reporting principles. Significant accounting principles ' and policies used by FIWMD aze as follows: A. Reporting Entity FIWMD is governed by the laws of New York State. FIWMD is an independent entity governed by an elected Boazd of Commissioners consisting of five members. The Boazd is responsible for, and ' controls all activities within FIWMD. Boazd members have authority to make decisions, power to ' appoint management, and primary accountability for all fiscal matters. The fwancial reporting entity is based on criteria set forth by GASB Statement No. 14, The Financial Reporting Entity and No. 39, Determining Whether Certain Organizations are ' Component Units. The financial reporting entity consists of the primary government, organizations for which the primary government is financially accountable and other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause theteporting entity's financial statements to be misleading or incomplete. ' The accompanying financial statements present the activities of FIWMD. FIWMD is a component unit of The Town of Southold, another reporting entity. ' B. Basis of Presentation Fund Financial Statements ' The fund financial statements provide information about FIWMD's funds. The emphasis of fund financial statements is on major governmental funds as defined by GASB. The financial statements reflect the following fund category: Governmental Fund.• ' General Fund - is the general operating fund and is used to account for all financial transactions except those required to be accounted for in another fund. ' C. Basis of Accounting and Measurement Focus The statement of activities and the statement of net assets are reported on the accrual basis of accounting using the economic resources measurement focus. Revenues aze recorded when earned ' and expenses are recorded at the time liabilities aze incuned, regazdless of when the related cash transaction takes place. On an accrual basis, revenue from real property taxes is recognized in the fiscal yeaz for which the taxes aze levied. Revenue from ferry operations and grants aze recognized ' in the fiscal yeaz in which all eligibility requirements have been satisfied and the related expenditures aze incurred. -14- ' DOHERTY, BEALS & BANKS, P.C. ' FISHERS ISLAND WASTE MANAGEMENT DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2012 ' 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The fund statements aze reported on the modified accrual basis of accounting using the current ' financial resources measurement focus. Revenues aze recognized when measurable and available. FIWMD considers all revenues reported in the governmental funds to be available if the revenues aze collected within 180 days after the end of the fiscal yeaz, except for real properly taxes, which are considered to be available if they aze collected within 60 days after the end of the fiscal yeaz. ' Expenditures aze recorded when the related fund liabIlity is incurred, except for principal and interest on general long-term debt, claims and judgments, and compensated absences, which are ' recognized as expenditures to the extent they have matured. General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term debt and acquisitions under capital leases aze reported as other financing sources. ' D. Real Property Taxes Calendaz ' Real property taxes are levied annually by the Town of Southold no later than October 1~` and become a lien on December 1~`. Taxes were collected by the Town of Southold and remitted to FIWMD from December to June. ' Enforcement Uncollected real property taxes are subsequently enforced by the County of Suffolk in June. E. Restricted Resources When an expense is incurred for purposes for which both restricted and umes[ricted net assets are available, FIWMD's policy concerning which to apply fast varies with the intended use, and with associated legal requirements, many of which are described elsewhere in these Notes to Financial Statements. F. Use of Estimates ' The preparation of financial statements inconformity with 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. Estimates and assumptions are made in a variety of azeas, including computation of encumbrances, compensated absences, potential contingent liabilities and useful lives of long-lived assets. ' G. Cash and Cash Equivalents/Investments ' Cash and cash equivalents consist of cash on hand and bank deposits with a maturity date of three months or less from date of acquisition. ' H. Receivables Receivables include amounts due from customers for services provided by the FNVMD. Receivables are recorded and revenues recognized as earned or as specific program expenditures are incurred. ' -15- t DOHERTY, BEALS & BANKS, P.C. FISHERS ISLAND WASTE MANAGEMENT DISTRICT ' NOTES TO FINANCIAL STATEMENTS December 31, 2012 ' 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Conflnued) I. Prepaid Items Prepaid items represent payments made by FIWMD for which benefits extend beyond yeaz-end. These payments to vendors reflect costs applicable to future accounting periods and are recorded as ' prepaid items in the fund financial statements. A current asset for the prepaid amounts is recorded at the time of purchase and an expense/expenditure is reported in the yeaz the goods or services aze consumed. ' J. Capital Assets Capital assets purchased or acquired with an original cost of $10,000 or more aze reported at historical cost or estimated historical cost. Contributed assets aze reported at fair mazket value as of ' the date received.. Additions, improvements, and other capital outlays that significantly extend the useful life of an asset aze capitalized. Other costs incurred for repairs and maintenance are expensed as incurred. Depreciation on all assets is provided on the straight-line basis over the following ' estimated useful lives: Buildings 10-40 years Improvements and other 20 years Machinery and equipment 5-10 years ' Infrastructure 20-30 years Infrastnrcture assets, consisting of certain improvements other than buildings including roads, curbs, sidewalks, bridges and street lighting aze capitalized along with other capital assets. ' In the fund fmancial statements, capital assets aze recorded as capital outlay expenditures in the governmental fund upon acquisition. K. Deferred Revenue Deferred revenue arises when potential revenues do not meet both the measurable and available ' criteria for recognition in the current period. Deferred revenues also arise when resources aze received by FIWMD before it has a legal claim to them, as when grant monies aze received prior to the incurrence of qualifying expenditures. In subsequent periods, when both recognition criteria are met, or when FPJVMD has legal claim to the resources, the liability for deferred revenues is removed ' and revenues are recognized. L. Accrued Liabilities and Long-Term Obligations In the governmental funds, payables and accmed liabilities aze paid in a timely manner and in full from current financial resources. ' M. Equity Classifications In the Government-Wide Financial Statements, net assets aze classified in the following categories: ' Invested in Capital Assets -[his category groups all capital assets into one component of net assets. Accumulated depreciation that is attributable to the acquisition, construction, or improvement of these assets reduces this category. ' Unrestricted Net Assets -this category represents the net assets of the District, which aze not restricted for any project or other purpose. ' -16- ' DOHERTY, BEALS & BANKS, P.C. FISHERS ISLAND WASTE MANAGEMENT DISTRICT ' NOTES TO FINANCIAL STATEMENTS December 31, 2012 ' Equity Classifications (continued) ' In the Fund Financial Statements, fund balances of governmental funds are classified in five separate categories as follows: ' Nonspendable -represents amounts associated with nonspendable assets. Restricted Fund Balance -represents that portion of fund equity that can be spent only For specific purposes stipulated by constitution, external resource providers, or through legislation. ' Committed Fund Balance -represents that portion of fund equity that can only be used for specific purposes determined by a formal action of the government's highest level of decision-malting ' authority. Assigned Fund Balance -represents that portion of fund equity to be used by the government for specific purposes but do not meet the criteria to be classified or restricted or committed. Unassigned Fund Balance -represents that portion of fund equity which is available for appropriation and expenditures in future periods. ' 2. EXPLANATION OF CERTAIN DIFFERENCES BETWEEN THE GOVERNMENTAL FUND ' STATEMENTS AND THE DISTRICT-WH)E STATEMENTS Due to the differences in the measurement focus and basis of accounting used in the governmental fund statements and the district-wide statements, certain fmaucial transactions are treated differently. The basis financial statements contain a full reconciliation of these items. The differences result primarily from the economic resource measurement focus of the Statement of Activities, compared with the cunent financial resource measurement focus of the governmental funds. A. Total Fund Balances of Governmental Funds vs. Net Assets of Governmental Activities Total fund balances of FIWMD's governmental funds differ from "net assets" of governmental ' activities reported in the Statement of Net Assets. This difference primarily results from the additional long-term economic focus of the Statement of Net Assets versus the solely current fitancial resources focus of the governmental fund Balance Sheets. B. Statement of Revenues, Expenditures and Changes in Fund Balance vs. Statement of Activities 1 Differences between the Statement of Revenues, Expenditures and Changes in Fund Balance and the Statement of Activities fall into one of three broad categories. Long-Term Revenue and Expense Differences ' Long-term revenue differences azise because governmental funds report revenues only when they are considered "available," whereas the Statement of Activities reports revenues when earned. Differences in long-term expenses arise because governmental funds report on a modified accrual ' basis, whereas the accrual basis of accounting is used on the Statement of Activities. ' -17- DOHERTY, BEALS & BANKS, P.C. FISHERS ISLAND WASTE MANAGEMENT DISTRICT ' NOTES TO FINANCIAL STATEMENTS December 31, 2012 ' 2. EXPLANATION OF CERTAIN DIFFERENCES BETWEEN TAE GOVERNMENTAL FUND STATEMENTS AND THE DISTRICT-WIDE STATEMENTS (Continued) ' Capital Related Differences Capital related differences include the difference between proceeds for the sale of capital assets ' reported on fund statements and the gain or loss on the sale of assets as reported on the Statement of Activities, and the difference between recording an expenditure for the purchase of capital items in the fund statements and depreciation expense on those items as recorded in the Statement of Activities. Long-Term Debt Transaction Differences Long-term debt transaction differences occur because the issuance of long-term debt provides ' current £mancial resources to governmental funds, but is recorded as a liability in the Statement of Net Assets. In addition, both interest and principal payments aze recorded as expenditures in the fund statements when due and payable, whereas interest expense is recorded in the Statement of ' Activities as it accrues, and principal payments aze recorded as a reduction of liabilities in the Statement of Net Assets. There aze no Long-Term Debt Transaction differences in current yeaz. ' 3. STEWARDSHIP, COMPLIANCE AND ACCOUNTABII.ITY A. Budgets ' The FIWMD administration prepares a proposed budget for approval by the Boazd of Commissions for the general fund, the only fund with a legally adopted budget. ' Appropriations aze 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 lapse at the end of the fiscal yeaz unless expended or encumbered. Encumbrances will lapse if not expended in the subsequent yeaz. Appropriations authorized for the current yeaz aze increased by the planned use of specific reserves, and budget amendments approved by the Boazd of Commissions as a result of selected new revenue ' sources not included in the original budget (when pemtitted by law). These supplemental appropriations may occur subject to legal restrictions, if the Boazd approved them because of a need that exists which was not determined at the time the budget was adopted. ' Budgets aze adopted annually on a basis consistent with GAAP. Appropriations authorized for the yeaz aze increased by Ure amount of encumbrances carried forwazd from the prior yeaz. ' Budgets are established and used for individual capital project funds expenditures as approved by a special referendum of FIWM's voters. The maximum project amount authorized is based primarily upon the cost of the project, plus any requirements for external borrowings, not annual appropriations. These budgets do not lapse and aze carried over to subsequent fiscal yeazs until the completion of [he projects. ' -18- ' DOHERTY, BEALS & BANKS, P.C. FISHERS ISLAND WASTE MANAGEMENT DISTRICT ' NOTES TO FINANCIAL STATEMENTS December 31, 2012 ' 3. STEWARDSHII', COMPLIANCE AND ACCOUNTABILITY (continued) B. Encumbrances ' Encumbrance accounting is used for budget control and monitoring purposes and is reported as a part of the governmental funds. -Under this method, pwchase orders, contracts and other ' commitments for the expenditwe of monies aze recorded to reserve applicable appropriations. Outstanding encumbrances as of yeaz-end aze presented as reservations of fund balance and do not represent expenditwes or liabilities. These commitments will be honored in the subsequent period. Related expenditwes aze recognized ar that time, as the liability is incwred or the commitment is ' paid. 4. DEPOSITS WITH FINANCIAL INSTITUTIONS AND INVESTMENTS The FIWMD's investment policies aze governed by state statutes and District policy. Resowces must be deposited in Federal Deposit Inswance Corporation (FDIC) inswed commercial banks or trust companies located within the state. Permissible investments include obligations of the U.S. Treasury and U.S. Agencies, repwchase 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 inswance. Obligations that maybe pledged as collateral are obligations of the United States 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 failwe, FIWM's deposits may not be returned to it. ' GASB duects that deposits be disclosed as exposed to custodial credit risk if they are not covered by depository inswance and the deposits are either: 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 FIWM's Warne. ' None of FIWM'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, FIWM was not exposed to any material interest mte risk or foreign currency risk. 1 ' -19- ' DOHERTY, BEALS & BANKS, P.C. ' FISHERS ISLAND WASTE MANAGEMENT DISTRICT ' NOTES TO FINANCIAL STATEMENTS December 31, 2012 ' S. CAPTTAL ASSETS Capital asset balances and activity for the yeaz ended December 31, 2012 were as follows: Balance Balance 1/1/2012 Additions Reductions 12/31/12 ' Governmental activities Capital assets not being depreciated Land $ 517,262 $ - $ - $ 517,262 ' Total capital assets not being depreciated 517,262 517,262 Capital assets being depreciated Buildings and improvements 2,708,413 68,800 - 2,777,213 Machinery and equipment 319,499 319,499 Total capital assets being depreciated 3,027,912 68,800 - 3,096,712 ' Less accumulated depreciation for: Buildings and improvements 545,390 91,835 - 637,225 ' Machinery and equipment 243,764 11,185 - 254,949 Total accumulated depreciation 789,154 103,020 892,174 Total capital assets, ' being depreciated, net 2,238,758 (34,220) - 2,204,538 Capital assets, net $ 2,756,020 $ (34,220) $ - $2,721,800 6. RISK MANAGEMENT ' The District is exposed to various risks of losses related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; aad natural disasters. The District has obtained coverage from commercial insurance companies and has effectively managed risk through various employee education and prevention programs. There have been no significant reductions in insurance coverage and settlements have not exceeded insurance coverage for each of the past three fiscal years. All risk management activities aze accounted for in the general fund. ' 7. EXPENSES IN EXCESS OF APPROPRIATIONS ' For the yeaz ended December 30, 2012, the following expenses were in excess of their budgeted appropriations by the following amounts: ' Compost Equipment Maintenance $ 13,346 Equipment Maintenance $ 6,207 Legal Fees $ 12,210 Total expenses were not in excess of total appropriations for the yeaz. ' 20 ' DOHERTY, BEALS & BANKS, P.C.