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2012
Y~ O 50170 Si GCE t107 OR75 Year nc{e December 31, 2812 FINANCIAL SECTION Independent Auditors' Report 1-3 REQUIRED SUPPLEMENTARY INFORMATION Management's discussion and Analysis 4-15 BASIG,FINANGIAL STATEMENTS- [ Government-Wide Financial Statements Statement of Net Position. : ~ . 16 Statement of Activities : 17 Fund Financial Statements Governmental Fund Financial Statements Balance Sheet and Reconciliation of the Governmental Funds Balance Sheet to tha Statement of Net Position....::, ...:e.;. 18-19 Statement of Revenues, Expenditures, and Ghanges in Fund Balances and Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Ghanges in Fund Balances to the Statement of Activities....::.. 24-21 Fiduciary Fund Financial Statements Statement of Fiduciary Net Position 22 Notes to Financial Statements 23-46 REQUIRED SUPPLEMENTARY INFORMATION OTHER THAN MANAf EMENT DISCUSSION AND ANALYSIS Schedule of Revenues, Expenditures and Ghanges in Fund Balance -Budget and Actual General Fund 47 Highway Fund , 48 Community Preservation Fund......::. 49 Postemployment Benefits Healthoare Costs -Schedule of Funding Progress 54 OTHER SUPPLEMENTARY INFORMATION Combining Fund Statements: Non-major Governmental Funds Combining Balance Sheet 51 Combining Statement of Revenues, Expenditures, and Ghanges in Fund Balances 52 orHeR RePORrs Schedule of Expenditures of Federal Awards.:„ 53 Notes to Schedule of Expenditures of Federal Awards 54 Report on Internal Control Over Financial Reporting and on Oompliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with GovernmenfAudifingStandards....;.:. 55-55 Independent Auditors' Report on Compliance for Each Major Program and on Internal Oontrol fiver Compliance as Required by QMB Circular A-133 57-58 Schedule of Findings and Questioned Costs..... 59-64 1 1 I CERTIFIED PUBLIC ACCOUNTANT5 INDEPENDENT AUDITORS' REPORT Honorable Supervisor and Town Board Town of Southold Southald, New York We have audited the accompanying financial statements of the governmental activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fiend information of the Town of Southold, New York, as of and for the year ended December 31, 2fl12, and the related notes to the financial statements, which collectively comprise the Town's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementaticn, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of two of the seven component units, Fishers Island Ferry District and Fishers Island Waste Management District, which represent 79.2°I°, 78.1°f°, and 78.9°0, respectively, of the assets, net position, and revenues of the aggregate discretely presented aompanent units which were audited by other auditors whose report thereon have been furnished to us and in our opinion, insofar as it re{ates to the amounts included for those two component units, are based solely on the reports of ether auditors. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' 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 Town's preparation and fair presentaticn of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion an the effectiveness of the Town'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 presentaticn 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. Basis far Qualified Opinion Tha financial statements of the five component units, Gutchogue-New Suffolk Park District, Southold Park District, Orient-East Park District, Mattituck Park District and Orient Mosquito District have not been audited, and we were not engaged to audit these financial statements as part of our audit of the Town of Southald; New York's basic financial statements. These financial activities are included in the Town's basis financial statements as discretely presented component units and represent 20.8°I°, 23.9°l°, and 2i.1°JO, respectively, of the assets, net position, and revenues of the Town's aggregate discretely presented component units. PERSONAL SERVICE.TRUSTED ADVICE. AtBRECNT, VIGGIANO, ZURECK & COMPANu, RC - 245 PARK AVENUE, 34TH FLOOR 25 SU'~~ FOLK COURT NEW "ORK, NY 10167 HAUPPAUGE, NY 11788-3715 T: 212.742.4075 T b31.434R50G F: b31.434.9518 - ws*nv.avz.cam -1- INLEPENLEhi hlEHt&FHOF 9KR INTFRNRTI3NA~ Qualified Opinion In our opinion, except for the possible effects of the matter discussed in the `°Basis far Qualified Opinion" paragraph, the financial statements referred to above present ffairly, in all material respects, the respective financial position of the governmental acT.ivities, the aggregate discretely presented component units, each major fund, and the aggregate remaining} fund information of the Town of Southold, New York; as of Docernber 31, 2012, and the respective changes ir7 financial position for the yeaar ttaer7 ended in cor7t'orrnity witia accounting principles generally accepted in the United States of America. Unmodified Opinfans In our apinion, the financial statements referred to in the first paragraph present fairly, in all material respects, the respective financ°ial position of the governmental activities, each major fund, and the aggregato remair7ing fund information for the Town of Southold, New York as of fecember 31, 2012, and the respectivo changes in financial position far the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Note C.0 to the financial statements, during the year ended December 31, 2012, the Town made changes to the valuation of premiums paid on retiree benefits which now ino{udes utilizing actual figures versus expected figures due to the fact that the actual figures were readily available to the Tawn for the year ended December 31, 2012. gther Matters Required Supplementary Information Accounting principles generally accepted in the United States of .America require that the management's discussion and analysis, scheduling of funding progress for the pastemploymant benefits healthcare costs and the budgetary comparison infom~ation be presented to supplement the basic financial statements. Such inforrnatian, although oat a part of the basic financial statements, is required by the Governmental Accounting Standards Beard, who considers it to be an essential part of financial reporting for placing the basic, financial statements in an appropriate aperatianai, economic, or historical context. We .have applied certain limited procedures to the required supplementary information in accordance with auditing standards 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 far cansistenry with managements responses to our inquiries, the basic, ffinanciai statements, and other knowledge we abT.ained during our audit of the basic, financial statements. We do oat express an opinion or provide any assurance an the information because the limited procedures do not provide us with sufficient evidence T.a express an apinion or provide any assurance. Clther dnformatiora Our audit was conducted far the purpose of farming opinions on the financial statements that collectively comprise the Town of Southold, New York's financial statements. The combining and individual nonmajor fund financial statements are presented far purposes of additional analysis and are not a required part of the financial statements. The schedrpie of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, LocaP Governments, and Non-Profit Oagataizatrons, and is also oat a required part of the basic financial statements. The combining and individual nonmajor fund financial statemenTs and the schedule of expenditures of federal awards are the responsibility of management and were derdved ffrom and related directly to the underlying? accounting and other records used to prepare the financial statements. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing anci reconciling such information directly to the underlying accounting and ether records used to prepare the basic financial statements or the basic financial statements thcarnsalves, and other additional procedures in accordance with auditing standards generally aocopted in the United States of America. In our opinion, based on our audit and the report of other auditors, the information is fairly stated in all material respects in relation to the basic financial stttternents as a whale. -2= Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated September 24, 2013, on our consideration of the Town of Southold, New York'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 Resting of internal controB over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Town of Southold, New York's internal control over financial reporting and compliance. Hauppauge, New York September 24, 2013 _3_ I I I a ant's isc si li TOWN OF SOUTHOLD MANAGkmMEN-f'S C)ISCUSSIQN AND ANAIYSIS C)eccanrber 3t, 2012 As rnanagernent of the Town of Southold, New York (the "Yawn"}, we offer readers of the financial statements this narrative overview and analysis of the financial activities for the yeaar ended Deramber 31, 2012. We encourage readers to consider the infarrnation presented herr:= ire conjunc:tiorr with additional infarmation that we have furnished in our letter of transmittal of this report. FINANCAAt_ HIGHLIGHTS + The assets of the Tawn exceed its liabilities at the close of 2U12 by $95,217,460 (net position). • The Town°s governmental net position decreased by $4,984,917. Tho must notable faetrar contributing to this ctecreaso is the onyoirag recognitican of the postamploynaent benefits healthcare liability. + As of the class of 2012, the Town's goverrarnenttal funds rE>parted combined ending fund balances of $21,466,122. Of this amount, $9U5,486 is not in spendable farm or is required to remain intact. The remaining of $20,580,636 ar approximately 96°'° of total fund balance is in spendable form with various levels of spending constraint: restricted, assigned, or unassigned making them available far spending at the Town's discretion (See Note A.4.) + At the end r:rf 2012, the 'T'own's total fund balance for the General Fund was $8,899,494, era iracrea:,e of $674,762 ar 8.2°n from the prior year. The assigned and unassigned fund balance for the Ge~nerail Furrd was $8,180,621 ar 3'1.4°ia of total General Fund expenditures arad other uses. + Tho Yawn's total bonded debt was $4U,U05,UUU, and is a decrease of 5.8% from the prier year. OVERVIEW OF THE FINANCIAL STATEMENTS The discussion and analysis is intended to serve as an introduction to the Town's basic financial statements. The Town's basic financial statements comprise components: 1) government-wide fhanaiaB statements, 2} fund financial statements 3) fiduciary fund financial staTements and 4} notes to basic financial statements. This report also contains supplementary information in addition to the basic financial statements themselves. Government-wide Financial Statements The government-wide financial statements are c-tesigned to provide readers with a broad overview of the Town's finances, in a manner similar to a private-soctor business. The intent of the government-wide financial statements is to give the reader a long-term view of the Town's financial condition. The Statement of Net Position presents financial information an all of the °fawn's assets and liabilities, with the difference between the two reported as net position. This combines and consolidates the Town°s current financial resources with capital assets and fang-term obligations. The purpose of this statement is to give the reader an understanding of the Town's total net worth. Ovcar time, increases or decreases in the Town's net position are ate indicator of whether its financial health is improving or deteriorating. Yau will need to consider ether nonfinancial factors, however, such as changes in the Yawn's property tax base and the condition of the Town's buildings, rands, drainage and athor asscats to assess the overall health of the Town. The Statement of Activities presents information showing haw the Town"5 nP.t pa5ltian Changed d4lYing the most recent year. Revenues and expenses are reparteci by activity to give the reader an understanding of haw each of the Tawn°s activities is being supported. Ail changes in net po>itian are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement far some items that will only result in cash flows in future periods. This method is known as the accrual basis of accounting and is different from The modified accrual basis of acCaurating used in the Town's farad financial statements. The Town's government-wide financial statements includes both the governmental activities of the Town itself (known as the primary government} aced of its legally separate component units far which the Town is financially accountable. Financial information for all component units is reported separairaly (discretely presented) from the financial information presented for the primary government. r4v TOWN OF 50UTHOLD MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 20i OVERVIEW OF THE FINANCIAL STATEMENTS {continued) Government-wide Financial Statements {continued) Governmental Activities -The Town's basic; servipr:~s are reported hors, including: general government support; public safety; transportation; aconamic assistance and opportunity; culturaP and recraatian and home and Community services. Property taxes, martgago taxes, franchise fees, fines, and state and federal grants finance tlrasa activities. The Tawn also charges fees to custamurs to help it cover flea cost of ccartain services i4 provides. Component Unrts -Component units are legally seaparata organizations far which the Town is either financially acpoaantablu, or the nature and significance of their relatiaraship with the Town is such that exrlueian would cause the Town's financial statements to bo rnisluading or iracomlaloto. All of these entities are reported in a separate column in the government-wide staterraants as discretely proseratad. Information on separately issued firaanrial statements is shown in Note E to the financial statements. Fund Financial Statements 7"he fund financial staT.omunts faous an current available resources and aro organize=d an<i talaorated an the basis of funds, each of which is defined as an accountirag entity with aself-balancing set of accounts established far the purpose of parrying an speplfic or attaining certain objectives ire ac;corciaraca with special regulations, restriction or limitations. The Town, like other gavurrrrnurats, uses farad acoounting to ensure and dempnsT.rate compliance with finance-related legal requirements. All of the fune:is of iho Town can be divided into two categories: governmental funds and fiduciary funds. Governmental Funds The Town's activities are retorted in goverrarnantal funds. Governmental funds are used to account far essentially the same functions reported as yovornmental activities in the government-wide financial statamenT.s, However, unlike the gaverrarnunt-wide finarcial slalornerats, governmental fund finanpial statements faous on near-term inflows and outflows of spendable resources, as wall as on balances of spendable resources available at the end of the year. Such infarmatiara may bo useful in evaluating a government's near-term finanpial requirements. t3opause the faous of governmental funds is narrower than that of the government-wide finanpial statements, it is taseftal to pomparu the information presented for governmontal funds with similar information presented fpr governmental aptivitias in the government-wide financial statements. Hy doing sa, readers may better understand the long-term effect of the Town`s near form financial decisions. k3oth the governmental fund balanpu shoat and yovarnnaantal fund statemurat of ravanuas, expenditure.=,s, and change in fund balanpas provide a reconciliatipn to facilitate this comparison between governmontal funds and governmental activities. The Town maintains ten (10) Individual governmontal funds, Information is presented separately in the governmental fund balance shoat grad in the govarnmmtal fund statement of ravanuas, expenditures, and changes in fund balances for the four (4) major funds. 'T'he Cameral Fund, Highway Fund, Capital Projects Fund and Community Prusenratiara Furad era rapartecl as major funds, Data from T.he six (6) ether gavanamantal funds are contained into a siraglo, aggrogatect presentation. The Tawn adopts an annual appropriated budget for its General and Spacial Ravanua Funds, except far flee Capital Projects Fund and Special Grant fund, A budgetary comparison sphedula far the General Furad, Highway Fund, grad Carnrnunity Preservation Fund ran be found in the suction labeled "fiuquired Supplementary Information Other Thera Management's Discussion and Analysis°. Fiduciary Farads All of the Town's fiduciary activities aro reported in a separate Statement of Fiduciary Nat Assets. Wo exclude tlaesu activities from the Town's other financial statements beCauso the Town pannat use these assets to finanpe its oparatians. Thu Town is responsible far ensuring that the assets reported in thuso funds are used for their intended purposes. :5- TOWN OF SOUTHpI.D MANAGEMENT'S DISCUSSIC3N AND ANALYSIS December 31, 2012 OVERVIEW OF THE FINANCIAL STATEMENTS (continued) Notes to the finanslal statements The Hates provide additional information that is essential to a full understanding of the data provided in the governmt=rat-wide ana-1 fund financial statements, The notes to the financial statements can be feared fallawinr.3 the basic financial statements. Other Information In addition to the basic, financial staTements this report aantains supplementary infarrnatian immediately fallowing the notes to the financial statements. GOVERNMENT-WIDE FINANCIAL ANALYSIS As Hated earlier, neT. position may serve over time as a useful indicator of a governments finarcial pasitian, In the case of the 'Y'awn, assets exceeded Iiaktilities by $95,`L17,460 at the class of the most recent year. Carrdensed Statement of Nei iosition Prirrrary Governmental Activities December 31, 2012 2011 Assets Currant and other assets $ 30,851,657 $ 41,152,877 Capital assets ...149,314,250. 150,£370,904 Total Assets 180,165,907 192,023,781 Liabilities Current and ether liabilities 12,115,Ofi6 24,280,'729 Long-term liabilities 72,833,3£31 67;540,6'75 Total Liabilities .84,943,447 9'1;821,404 Net Position Net Investment in Capital Assets 109,401,091 112;161,093 Restricted: Land acquisition 10,392,932 10,855,1 fi3 Unrestricted (24,576,563) 22;813,879 Total Net Position $ 95,217,460 $ 100,202,377 Tat¢tl assets of they primary govearnment as of December 31, 20'12 were $180,165,907 a decrease of $11,957,874 from December 31, 2011. Total liabilities as of December 31, 2012 were $84,948,447, which represents a decrease of $6,872,957 from I..?ecember 31, 2011. This resulted in a net position of $95,217,460 a decrease of $4,984,917 from f)erember 3'1, 20'1't. Qf the Yawn's net position, $109,401,091 was invested in capital assets ¢tntl $10,392,932 was restricted for future land acquisition leaving a $24,576,563 unrestricted deficit. By far the largest portion of the Town's rret pasitiarr $109,401,091, reflects its investment in capital assets (i.e. Land, buildings, m<tchirrery and equipment; intangibles, and infrastructure); Bess any related debt used to acquire these assets that is still outstanding. The 'T"own uses these capital assets to provide services to citizens; consequently, these assets are: trot available far future spending. Although the Yawn's investment in its capital assets is reported net of related debt, it should be Hated that the resoaarces needed to repay this debt must be provided Pram ether sources, since the capital assets tlaarnselvas will not be used to liquidate Chase liabilities. _6~ TOWM1I OF SOUTHOLD MANAGEMENT'S DISCUSSION ANC) ANALYSIS C)ecerrrber 31, 2012 GOVERNMENT-WIDE FINANCIAL ANALYSIS (cantimaed) The deficit in the unrestrioteri net position does not necessaridy indicate fiscal stress. At the end of the current year, the Town is able to report a positive balance in the categories of investment in capital assets, and restricted. The same situation held true far the prier year. The deficit balance in unrestricted erase primarily due to long-terra Iiabllities wiaieh include ether posternpiaymerrt benefits, compensated absences, cl¢tirns and judgments and landfill closure and pastalosure costs that will be funded through future budgetary appropriations wharf they beoorne payable in #uture periods. Changes in Net positian Primary Govarnmaratai Activities For the years ended Deacember 31, ?.012 2011 Prayram Ra:uenues Charges far services $ 3,985,019 $ 3,915,039 Operating grants and contributions 1,528,069 1,278,652 C;apitai grants ancf rontributians 986,593 1,939,799 6,499,681 7,133,490 C:)enerai Revenues Racal property taxes 30,414,642 29,694,522 Other real progaerty tax items 95,672 94,277 Non-proporty tax itarrrs 5,258,726 4,770,088 Interest earnings 99,292 130,503 ,`'state aid -unrestricted 1,031,030 947,121 Other 814,118 1,695,355 37,713,480 37,331,866 Total Revenues 44,213,161 44,465,356 Program Expenses General government support 10,172,561 9,366,688 Public safety 19,270,909 18,12L,010 Public health 33,8001 33,7813 Transportation 8,391,915 7,964,250 Economic assistance and opportunity 2,271,426 1,998,22.0 Cuffure and recreation 575,234 537,449 Herne earl community services 6,954,101 6,815,221 Interest car? debt 1,528,142 1.409;80D Total Expanses 49,198,t)78 46,236,426 Decrease in Net PosiT.ion $ 4,984;917 $ 1,771,07p~ Net positian, from ail government activities; decreased by $4,984;917 in the current year,.. Key elements of the governrnentai activities era:: « Overaii program revenues decreased by $633,809 from the prior year. Charges for services remained relatively consistent with the prier year. Operating grants and contributions increased by $249,417 primarily due to an increase in FEMA aid relating to Hurricane Sandy. Capital grants decreased by $953,206 primarily related to Fedcrzti aid received to fund the land acquisitions in the prior year. General revenues increased $381,614 due to a combination of increased real propeety taxes of $720,120, an increase in mortgage tax and transfer tax revenue of $572,547 offset by a decrease in other revenues of $881,237 which is a result of tlae Tawn receiving a large insurance recovery of $1,000,000 in the prior year. » Overall expenses increased by $2,981,652. The Increase is due to the increase in employee benefits of $2,266,624 which has been aBiocated to fhe various functions and the inrrease in the angcing raoagnitian of the GPEE3 oasts. Included in She ocsrrent year t7PEB expense ds a one-time charge of $852,3()2 resulting from a change in the premiums used to calculate the (7PEE3 liability. In addition the compensated absences liability increased $840,104 which is primarily a result of the increase in retraactive pay rates duo to the P8A contract settlement for 2010 and 2011 contract years. •7 TOWN OF SOUTHOLD MANAGEMENT'S DISdUSSION AND ANALYSIS December 81, 2012 GOVERNMENT-WIDE FINANCIAL ANALY515 (continued) "tbkal Cost of Services Primary Ggvemnrental Activities rqr the years ended December 31, Total Cost of Services Program Revenues Net Cost of Services 2092 2019 2012...2011... 2012.2011.. General ggvemnrent suppgrl $ 10,172,551 $ 9,35,.,688 $ 395,476 $ 568,'180 $ (4,777,075) $ (8,787,508) Publla safety 18,270,509 '18,122,010 756,665 814,737 {18,614,2.44} (17,307,?.79) Publir, health ,33,800 39,788 9,527 18,193 (24,273} (23,595} Transportation 8,399,.<315 7,984,250 898,346 847,046 {7 Rl93,570) (7,117,204) Ecgngmic assistance end gppgriunity 2,'L79,426 9,998,220 458,996 472,873 (1,892,480} (1,525,349) Culture and recreation 5'75,234 537,449 229,624 222,502 (345,690} {314,947) Home and cgmmunity services 6,954,101 6,815,221 3,751,048 4,997,953 (3,203,053} {2,617,268) Interest an debt 1,078,142 .1,409,800_ ('1,528,142} {1,405,800). $ 49,198,078 $ 46,236,426 $ 6,499,681 $ 7,133,490 $ (42,898,397) $ {39,102,936} The tatal cost of all governmental activiCies 411is year was $49,198,076. The net asst of these services after being subsidized by program revenues ref $6,4g9,EiEi1 was ~i42,698,697. $25ADO,OOp Expensesans&PragramRevenues GouernmentalAotivities _i $20,UOO,U00 sExoenses ®Froyram. RCVanUE3 j I i $95,000,000 $10.000,000 $,5,006,006) - . General eoverninent Pablic safety C'ublic health Y'ransportaHOn Econum c Culture. antl Herne antl Inte!eel un tlept sucpbn asi&tanco antl rocroatlen cammurity S©rvices opta>rnmhY -6- TOWN OF SOUTHOLD MANAGEMENT'S DISCUSSIGN AND ANALYSIS December 31, 2012 FINANCIAL ANALYSIS OF THE TOWN'S FUNDS Governmental Funds i Operating I grants and Capital contributions grants and 4% contributions 2! Other general revenues 14% Charges for services Real property taxes.... 681 State aid - unrestricted 2l ..............................................................................................__........___._._._______...:i. Revenue by Source Primary Governmental Activities for the year ended December 31, 2012. 2011 Real property taxes $ 30,414,642 $ 29,694,522 State aid -unrestricted 1,031,030 947,121 Charges for services 3,985,019 3,915,039 Other general revenues 6,267,808 6,690,223 Operating grants and contributions 1,528,069 1,278,652 Capital grants and contributions 986,593 1,939,799 $ 44,213,161 $ 44,465,356 _g. TOWN OF SOUTHOLD MANAGEMENT'S I'.)ISCUSSION AND ANALYSIS December 31, 20'12 FINANCIAL ANALYSIS OF THE TOWN'S FUNDS (continued) Governmental Funds (continued) The faros of the Town's governmental funds is to provide information on near term inflows, outflows, and balances of spendable resources. Such information is usofui in asscassing The Town's financing requirements. In particular, spendable fund balance may serve as <t useful mcaasure of a government's net resources available for spending at the end of the year. Nanspendable fund balance - $905,486 (inherently non spendable) includes the portion of net resources that cannot be spent because they must be maintained intact. » Restricted fund balance - $10,392,932 (externally enfarreable limitations on use} include amounts subject to limitations imprtsed by c°reditors, grantors, contributors, or laws and regulations of other gavernrnents. « Assigned fund balance - $6,258,959 (limitation resulting fi'om intended use} consists of arnaunts where the intended use is established kry the highest Ievel of decision making. • Unassigned fund balance - $3,908,746 {residual net resources) is the total fund balance: in the General Funct in excess of nonspendable, restricted, and assigned fund balance, the $4,285,446 irr the General Fund is o#fset by the deficit $376,701 in the Capital Projects Fund in excess of restricted fund balance. The #ollawing sciledulo presents a summary of T.he Govermmental Funds - (General, Special Revenue, and Capital Projects) revenues anti expenditures for the year ended December 31, 2012, and the amount of change and percentage of total in relation to the prior year. Increase °/a 2012 2011 (Decrease) Change REVENUES .{m Reaipropertytaxes $ 30,414,64.?. $ 29,694,522 $ 720,120 2.4`ib Other real property tax items 95,672 94,277 1;395 1.54~G Non-property tax items 5,258,726 4,770,088 4E38,83fi 10.2aq De1>artmentai incorrre 2,967,707 3,031,325 (73,618) -2.4% Intergovernmental charges 265.615 2'71,087 (5,57.?.) -2.1°i° Use at money and property 298,609 330,249 (31,640) -9.6% Licenses and permits 441,6t}1 448,045 (6,544) -9.6% Fines and forfeitures 171,916 184,388 (12,470) -6.8°/a Sale of property and compensation for loss '1,672,031 1,392,5£i0 279,451 20.1% Miscrailancaous local sources 362,976 320,475 42,501 13.3°/a Interfuncl revenues 30,000 30,000 -0- 0.0°.~a State aid 2,2t}6,577 1,74°2,257 464,320 26.7°~a Federal aid 1,023,2Fi5 2,213,870 (1,'190,605) -63.8°ia Total Covernmerrtal Pund Revemles $ 45;199,139 ~ 44,523,183.. -675 978. 1.5°ia General government support $ 5,768,083 $ Ei,878,258 $ (112,175) -1.9"/<, Public safety 9,977,973 10,534,630 (552,667) -5.2°~° Public health 33,800 33,78£3 12 0.0°!„ Transportation 3,732,86.7 3,650,352 82,515 2.3°ia Econorrric assistance and opportunity 1,229,260 1,185,355 63,905 5.5°,~° Culture and recreation 285;985 277,281 8,704 3.1 a/a Home and community services 6,832,639 12,333,966 (5,701,327) -46.2°i° Employee benefits 11,161,657 10,234,066 927,59'1 9.1% Capital 418,447 1,673,943 (1,257,496} -75.1°i~ Debt service f~rlnclpal anct interest ....4,076,812... 3,201 012... 87580q 27,4x1° Total Governmental Fund Expenditures $ ..43,313,523 $ 48,978,851 $ '55,12II) -11.6°~a -10- TOWN OF SOUTHOLD MANAGEMENT'S DISCUSSION ANC? ANALYSIS Docembr:r 31, 2012 FINANCIAL ANALYSIS OF THE TOWN'S FUNDS (caratinucrd) Governmental Funds (continued) The Tawn appropriated a total of $2,483,662 of prior year fund balance far the 2012 budget. Total revenues are consistent with prior year. There was an increase irr real property taxes of $'720,120 and an increase in non-property tax items of $488;838 which is due to the increase ir} mortgage tax. ha addition, the Town received additional state aid of $464,320 far the reimbursement of expenditures due to Hurricane Sandy. These increases were offset by a decrease in federal aid of $1,190,605. Overall, gvvernrnental expenditures decreased $5,665,128. The decrease is due to the fallowing: decreases in public safety salaries of $504,102; decreases in borne ztnd cvrnrnunity expenditures due to $5,922,150 lass land being purchased with Cornrnunity Preservation Funds as in the prier year; decreases ire capital outlay as Iaryer pre%jc:cts wcr& closed ire the privy year of $1,257,497. In addition, there wars increasrs in earnplayco bvnetits f}rimarily roiatirrg to irtsurancc benefits of $263,024 and retirement benefits of $325,1&8. General Fund The General Fund is tho c:frief operating fund of tYic> Tawn. At the end of the currcarrt year, the total fund balance of the Gcnc>rttl Fund was $8,899,494 increasing by $674;762 or 8% frvrn the prior year. Of this arraount, $718,873 is net in spendable fvr (inventory ttnd propairj items). Thv rornaining $8;180,621 of the fund balance is ire spendable farm as fellows: $976,020 is assigner) far insurance claims; $2,780,000 has bvvrr assign€~d by the Town Beard far the subsequent year's budget arrd $139,155 ha:'; been assigned far purchtise orders by the Tawn Comptroller, and the remaining $4,285,446 represents spvrrdabie, urrassigrred farad balance. As a measure of the General Funds` liquidity, it may be useful to cvrnpare sClendabie fund balance and total fund balance to total fund expenditures grad ottaer financiny uses. Spendable and tota6 fund balance represarrts 32°!n and 34% of total General Fund expenditures arrd other financing uses. The Itey elements of the fund balance increase of $674,'762 are as follows There was a planned fund balance reduction of $1,753,178, a result of appropriations in the current year's budget. General government support was $885,243 under budget due to unallocated insurance and judgment and claims expenditures $417,000 under budget, $173,000 in buildings and grounds under budget due to budgeted salaried positions not being filled and improvements budgeted that were lower than anticipated and the general irnplementatian of expenditure reductions providing additional savings of $295,000. « Public safety was $1,033;641 under budget due to the Tawn budgetiny fvr substaratiai salary increases due to the expiration of the PBA contract. As a result, the renegotiated contracts contained lower than expected increases. In adciitian, the Towra Ytad budgeted far new police hires that did not occur. Actual costs were considerably lower due tea cvrrtract neyatiativns. « Employee benefits were $657,131 under budget due to the Town conservatively budyetiny fvr health irasurarrce prvrniums grad retirerrrvnt contributions whicia arnaunled tv approximately $522,000.1n addition, the Towrr estimates Social Security benefits sirrcv collective barg¢tinirry agreame=nt sattlernerrts are unknown. These costs were ztppraxirnately $136,000 under budget. Highway Fund AY the end of the current year, the takal fund balanc~a of the Highway Fund was $1,313,318 increasiny by $318,798 ar 32% fiorn the prier year. Of this amount, $96,863 is not in spendable far (prepaid items). The remaining $1,216,455 of the fund balance is in spendable form as follows: $336,150 has been assigned by the Town Board far the subsequent year's budget, $64,864 has been assigned far purohase orders by the Town Comptroller, and the remaining $815,441 is assigned for highway purposes. -11- TOWN OF SOUTHOLp MANAGEMENT'S DISCUSSIt?N ANC) ANACY5IS December 31, ?_O1?_ FINANCIAt_ ANAt.VSIS OF THE TOWN'S FUNpS (continued} Highway Fund (continued} The key elements of the fund balance increase of $318,798 are as follows: There was a planned fund balance reductian of $29a,t)Oa, a rcasult of alapropriations in the currenT. year's budget. Federal aid was over budget by $406,593 which resulted almost entirely from a FEMA reimbursement far storm cleanup costs rcalated to Hurricanr: Sandy in late C3ctokaar 2.012. + Transportation savir7gs of $277,665 resulted fram budgetad raacl stabilization costs which did net occur in 2012 and additional budgetad axpenelituras relating to severe weather {i.e, snow remavai) which were not Er7currad during 2a12. Capital Projects Fund At the end of the current year, the Capital Projects Fund had a total fund balance deficit of $3'76,7x1. Thr:= deficit will be eliminated with the issuance of long term bands in subsequent periods. l°ha fund balance increased in the Capital Projects Fund by $1,376,33Ei from the prier year. • The increase resulted fram differences in timing between praject expenditures and ancurnbrancos and the recognition of corresponding permanent financing. Community Preservation Fund At the end of the current year, the Community Preservation Fund had a total restricted fund balance of $10,392,?_Sx. The fur7d balance decreased irr the Community Prasarvatian Fund by $452,90x. The dcacreasc~ resulla.=,d in the increase in debt service payments as principal payments came due on bonds issued in 2x11 for open space press>rvation. Nonmajor Governmental Funds TEve net change in fund balances was a decrease of $31,38x. • There was an oriyinaily planncad use of fund balance of $44x,484 to hold the line an property taxes in 2x12. • The Town recaivarl an increase of franrhisa fees due to a rate increase fram Cablevisian which amounted to $218,225 in additianal revenue in the Part Town Fund. • An inrraase in retiramani payments. General Fund Budgetary Highlights The Town appropriated expenditures in the ariginal General Fund h3udget in excess of estimated revenues (n the amaunts of $1,815,989, inclusive of $62,811 of encumbrances, by assigning fund balance fram the prier year. Actutti revenues weare lass than anticipated by $'t 52,994. Actual expenditures in all budgetary line items were ices than tho budgetary appropriation lay $2,838,662_. t?vet the cant se of the year, the Town Beard revises the budget as needed sa that expenditures da net exceed appropriations. In all Town funds, various transfers batweer7 appropriations were approved for This purpasa. 'The following are the Pnain components of the increase in appropriations: • Sale of property and cnmpensatian far (ass increased try $217,4x7 due to the appropriation of several self- insured medical plan insurance recoveries. Employee benefits increased by $42x,899 due to several excessive self-insured medical plan claims paid. -12- TOWN OP 5OUTHOLD MANAGEMENT'S DISCUSSI(9N AND ANALYSIS k)erember 31, 2012 CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets As of December 31, 2012 the primary yovernrnent had $149,514,250 in net capital assets including land, land development rights, buildings, improvements, machinery and equipment„ and infrastructure. The Town"s ccarrrponent units had $18,338,491 in net capital assets including land, buildings, improvements, machinery and ec;uipmant, and infrastructure. Capital Assets at December 31, Primer Government 2012 _ 2011 Land uu 7,358,34 $ 6,835,131 Land development rights 108,449,317 107,618,052 C;anstructian in progress 19,618 880,052 C3uiddirgs 13,228,240 12,770,832 Improvements ether than buildings 15,756,291 15,701,292 Machinery and equipment 11,011,357 10,783,984 Software 1,027,556 742,498 Infrastructure 78,059,090 .75,375,350 Total Capitad Assets 232,907,813 230,285,191 Less: acc:umulafed clef:rreciation 83,593,563 79,414,287 Primary Government -Total Net Capital Assets $ 149,314,260. $ 150,870,904 Cameonent Units -----Land $ 2,193,353 $ 2,193,353 Consiructionin prayress 40;790 -0- Buildings 14,2,54;332 14;243,397 Improvements other than buildings 2,427;227 2,349,227 Machinery and equipment 3,565;204 3,530,487 infrastructure 2 899.442 2,899,442 Total Capital Assets 25,380,348 25,216,906 Less: accumulated depreciation 9,°J41,f357 E3,270,2f3C Camporrent Units -Total Net Capital Assets $ 18,:338,491 $ 16,94,5,820 In 2012; the Tawn of Sauthofd's major capital asset expenditures were as follaws: « Land and land development rights of $2,375,447 Highway resurfacing and drainage of $883,740 The capital program is a long range financing guide and not a definitive plan. Eacfs appropriation rnusl be authorized by Tawn Cioard resolutian befare being undertaken. Eac;fr may be iinttnced by issuance oi' general obligation bonds, which, aT times, era preceded by issuance of bond araticlptrlion motes for variaus periods of time depending an the prabable usefulness of the, purpose of expenditure. Tfae followiray sets forth a surnrnary of the "G'own's capital program. Epua~praent 2013... General Fund $ ;}20,1)84 Solid Waste District Fund 3.600 Total Equipment 323.584 lm covements Gtarreral Fund 2,508,820 HigYiway Fund 30.000 Total Improvements 2 538 820 Total Program ~ 2862 204. -13- TGWN OF SOUTNOLD MANAGEMENT'S DiSCUSSIC}N AND ANALYSIS December 31, 2012 CAPITAL ASSET AND pEBT ADMINISTRATION {continued} Capital Assets {continued} Additional information on the Town's capital assets can be found in Note C.3 to the financial statements... Long-Term Debt The Town of Southold's bond credit rating from Moody's Investors Services was Aa2 as of December 31, 2412. C?ebt Limit -The Town has the power to contract indebtedness for any Town purpose so long as the principal amount thereof, subject to certain limited exceptions, shall not exceed seven percent of the average full valuation of taxable real estate of the Town, and subject to certain enumerated exclusions and deductions such as water and certain sewer facilities and cash or appropriations for current debt service. The canstitutional method for determining full valuation is calculated by taking the assessed valuation of taxable real estate as shown upon the latest completed assessment roll and dividing the same by the equalization rate as determined by the State Board of Equalization and Assessment. The State Legislature is required to prescribe the manner by which such ratio shall be determined. Average full valuation is determined by taking the sum of the full valuation of the last completed assessment roll and the four preceding assessment rolls and dividing such sum by five. Percentage of debt contracting power exhausted at December 31, 2012 was 5.7$°'°. At December 31, 2012. the Town had approximately 541:7 million in long term general obligation bonds outstanding, of which $40.0 million was far the primary government. Also outstanding at year-end were bond anticipation notes in the amount of $1.5 million of which $965 thousand was for the primary government. Additional information on the Town's debt activity can be found in Note G.4 to the financial statements. ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES Property Tax The Town has adopted a budget for the 2013 fiscal year which factors in inflation and other adjustments to revenues and expenditures as well as prior year positive and negative fund balances. The 2013 budget includes an overaPl increase in real property tax revenues from the prior year of approximately 1.84°t° for the general Town governmental activities. In June 2011, New York State enacted Chapter 97, Laws of 2411 Rea) Property Tax Levy Cap and Mandate Relief Provisions, which includes a 2°t° property tax cap for municipalities that affects the Town and its municipal component units. Beginning in 2012, and lasting thrcugh at least June 15, 2016, no local government is authorized to increase its property tax levy by more than 2°t° ar the rata of inflation {whichever is Tess}; however the permitted increase will not be less than 1°t°. Local governments can exceed the tax levy limit by a 60°t° vote of the governing body, or local law. There are permitted exceptions and adjustments. The Town is currently evaluating the effect of the cap on future year's budgets. State Ald and Local Assistance The Tawn receives finanoial assistance from New York State and from Suffolk County. During 2012, financial assistance included state aid consisting of mortgage tax of $989,154, consolidated highway aid of $326,649, $599,915 in capital grants and other state aid of approximately $202,571. State aid per capita was $88,328 and County local government assistance was $193,418. Additionally, if the State should not adopt its budget in a timely manner, municipalities and school districts in the State, including the Town, may be affected by a delzy in the payment of state aid. The State fs not constitutionally obligated to maintain or continue state aid to the Town. The Town's 2013 budget included similar amounts far this financial assistance. 14° TOWN QF 50UTHOLD MANAGImMENT'S DISCUSSICIN AND ANALYSIS December 31, 2412 CONTACTING THE TOWN'S FINANCIAL MANAGEMENT This financial report is designed to provide our citdzens, taxpayers, custamers, and creditors with a general overview of the Town's finances and to show the Town's accountability for the money it receives. If you have graestions abaut this report or need additional financial information, contact The Town of Southafd, Office of the Town GomptroNer, Southall, New York. _1~~ ~ t TOWN OF SOUTHOLD GC?VERNMENT-WIDE FINANCIAL STATEMENT STATEMENT dF NET POSITIpN December 31, 2012 Primary Governmental Component Activities Units ASSETS Current Assets: Gash and investments $ 18,254,848 $ 2.528,720 Gash -restricted 9,687,212 Acoounis receivable 393,182 37.239 Due from other governments 1,587.246 Due from primary government 329,5118 State and federal aid receivables 1,933:4^13 Prepaid charges 90:9,72[} 94;342 Inventory of material and supplies ..1.766 Total Current Assets ,}0,761,387 2,989;889 Non-Current Assets: Deferred charges, net of accumulated amortization 94,270 Non-depreciable capital assets 115,827,279 2,234,143 Dopreciablo capital assets, net of depreciation 33,486,971 14.104,348 Total Nan-Current Assets 149,404,620 16,338,491 Total Assets 180,185,907 19,328,380 LIABILITIES Current Liabilities: Accounts payable and accrued liabilities 1,306,477 286;343 Accrued interest payable 392,946 22,254 Bond anticipation notes payable 965,000 55©,000 Due to other governments (42,598 1.518 Dua to component units 329,588 Unearned revenue 6,026,799 329,588 Non-current liabilitios due within one year General obligation bonds payable 2,370,004 725,004 Compensated absencos 300,000 37,376 Claims and judgments payable 296,521 Estimated liability for landfill closure and postclosure care costs 25,145 Total Current Liabilities 12,115,066 ,1,952,439 Non-Current Liabilities: General obligation bonds payable 87,835,000 1,000,000 Duo to employees retirement system 187,054 Compensated absences 8,027,394 112,127 Estimated liability for landfill closure and postclosure care casts 919,421 Other postemployment benefits payable 26:064,516 329,285 Total Non-Currant Liabilities .72,833,381 1,441,412 Total Liabilities 84.948,447 3,393,451 NET POSITION Nei Investment in Gapitai Assets 109,401,091 1 "d,555,534 Restricted 14,332,932 Unrestricted (24.576,563}... 2.3'9„395 Total Net Position $ 95.217,480 $ 15,934,929 See notes to the financial statements. _10_ TN 4F 5UTHflL G©VERNMENT-WIDE FINANGIAL STATEMENT STATEMENT OF AGT]VITIES Year Ended December 31, 2012 Net Expenses and Program Revenues Ohan e in Net Position... Operating Capital Charges far Grants and Grants and Primary Component FunctionlPmgram Expensas Sarvicas Cantribukions , Oontributions Governmant _ Unts PRIMARY CvOVERNMENT Governmeni Activities: General govemment support $ 10,172,551 S 221,923 S 173,553 $ {9,777,fl75} Pubiia safety 19,274,909 577.51$ 179,147 {18,514,244} Public health 33,800 9,527 {24;273} Transportation 8,391,915 47,322 524,414 $ 926,6179 {7,493,570} Economic assistance and oppartunioj 2,271,426 193,41$ 265,578 {1,812,430} Culture and recreation 575,234 229,824 {345,610} Home and communiy services 6,954,101 2,715,214 375,$50 659,984 {3,203,053} Interest on debt 1,52$:142 1.528 142}. Total Primary Government 49.19$A78 3.985,419 1„42£1 469 ..986.593 {42,$9$,39T. COMPONENT UNITS General government support 207,942 $ {207,942} Public heaiih $5,877 {85,577} Transportation 3,335,798 2,658;573 1,350 {675,875} Culture and recreation 90a"",924 20,670 {585,254) Nome and community services 618,554 48,969 (569,585} Interest on debt 71,740 71,740. Total Component Units $ 5,225,795 $ 2,728,212 9 1,350 $ -Q- (2,496,233) C9ENERA~ REVENUES Real proporfy fazes 34,414,642 2,245,975 Other real property tax items 95.672 6 Non-properly tax items 5,258,726 Interest earnings 99,292 6,27& State aid - unrestricted 1,031,034 Other 814,118 86843 Total General Revenues 97,7t3,484 2,339.102 Change in NetPasiiion {4.984,917} {157.131} Net Position at Beginning of Year 140,202,377 16,fl92,46fl Net Position at End of Year $ 95,217,460 $ 15,934,929 See notes to financial statements. 17_ TOWN F SQUT OLD BALANCE SHEET G{?VERNMENTA~ FUNDS December 31, 2012 MAJOR GOVERNMENTAL FUNDS Non-Major Capital Community Gauernmental ...General Highway. Protects Preservation Funds Totals ASSETS Gash and invastmenis $ 13,966,287 $ 609,927 $ 376,252 $ 1,302,342 $ 10,254,808 Cash - rastrlcted $ 9.887,212 9,687,212 Accounts receivable 75,131 47,540 270,505 393,182 Due from other funds 113,775 935,560 165,525 808,572 2,019,432 Stato and federal aid receivable 465,474 756,289 133,855 459,238 118,637 1,933,493 Due fmm other governments 1,053,616 52,420 212,886 1,318,922 Supply inventory 1,766 1,766 Prepaids 717JA7. 96.863 .89750 903,720 Total Assets $ 1.8,993,156 $ 2 398 639 $ 724 052 $ 10 406,882 $ 2,589,806 $ 32 512,535 LIABILITIES AND FUND BALANCES LIABILITIES Accounts payable $ 848,828 $ 149,003 $ 28,220 $ 14,602 $ 453,449 $ 1,?~&,002 Judgments and claims 296,521 298,521 Retained percentages 1 Q475 16,475 Bond anticipation notes payable 965,000 985,000 Due to athar funds 1,907,47$ 4;547 97,058 10,349 2,019,432 Due to component units 329,588 329,588 Due to other govommsnts 102,598 102,596 Deferred revenue 4207 651 930 871 888,277... ..6,026,799.. 1-otal Liabilities 7,493,882 f 08~ 33.5 1 100 753 14,602 1 352 075 11,046 413 FUND BALANCE Nonspandable 718,873 98,883 89,750 905,48fi Restricted 10,392,280 652 10,392,932 Assigned 3,895,175 1,216,455 7,147,329 6,258,959 Unassigned __4,285,446 _376,701 ....3908745.. Total Fund Balance (DePicitJ .8,899,494 1,313,318 {378,701 } 10,392 280. 1,237,731. 2t,466.122 Total Liabilities and Fund Balance $ 16,393,156 8 .2,398,639 $ 724,052. 10,406,882 $ ...2,589 808 $ ..32,512,535 See notes to the financial statements. -18- TQWN QF 5OUTHOLD RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION December 31, 2012 Total Fund Balances -Governmental Funds $ 21,468,122 Amounts reported for governmental activities in the Statement of Net Position are different because: Capital assets less accumulated depreciation are included in the Statement off Net Position: Capital assets -non-depreciable $ i 15,827,279 Capital assets -depreciable 117,080,534 Accumulated depreciation (83,593,563} 149,314,250 Long-term liabilities applicable to the Town's governmental activities are not due and payable in the current period and accordingly are not reported in the funds. However these liabilities are included in the Statement of Net Position: General obligation bonds payable $ {40,005,D00} Due to employees retirement system (187,050} Compensated absences (8,327,394} Estimated liability for Landfill closure and posiclosure care costs {944,566} Other postemployment benefits payable ...(26,064,516} {75,528,526} Revenues in the Statement of Activities that do nat provide current financial resources are not reported as revenues in the funds. 288,284 Deferred charges, included in the Statement of Net Position 90,270 Interest payable applicable to the Town's governmental activities are not due and payable in the current period and accordingly are not reported in the funds. Hotivever these liabilities are included in the Statement of Net Position. (392,940} Net Position of Governmental Activities $ ....95,217,460 See notes to financial statements. _1g- TOWN OF SOUTOLD STATEMENT OF REVENUES, EXPENDITURES, ANSI GRANGES IN FUND BALANCES GOVERNMENTAL FUNDS For the year Ended December 31, 2012 MAJGR GOVERNMENTALFUNDS Non-Major Capifat Community Governmental General }ii hwa Proiacts Pr~sen,~anon Funds Totals REVENUES Reel propeny taxes S 22,412,761 $ 4,762.748 R 3,239,132 3.. 30,454,642 Other real property tax Items 87,167 7,568 99G 95,872 Non-property tax itern5 685,473 4~ 3,942,756 53Q485 5,25E+725 Departmental income 366,974 2,592,&33 2,957707 Intergovernmental ahargsa and local aid 266,516 265,5 t5 Use of money and prvparty 258,080 11,971 $ 3,310 16,158 9,G89 298,609 2lcmrvses end permits 252,662 12,322 178,377 441,501 Fir±es end fcrtehures t71,818 171,978 Ssle of property-and cornpensatlon for loss 352,696 987,866 321,485 1,672,031 Mlscallaneo~.is local sources 366,561 3,kS58 52_,419 657 362,570 intertund revenues 9Q606 30,000 State aid 1,108,200 x38.278 133,855 465,G60 160,184 2,200,57: Federal old 243,583_ 483.710 43,473 272.389 1,023,265 Total Revenues .20746126 5.599.998.... L187.434 4,3684fi6 7,3113,127. 45199,139.. EXPENDITURES Current: General govemmont support 5,674,226 6,010 86,247 5,7E6,033 Public safely 6,oBQ449 1,29!,';24 8,977,973 Public haalCh 33,800 33,86:1 Transportation 474,117 3,258,75G 3.732,86/ Economic assistance and opportunity 1,228,26(7 1,2282E8 Culture and recreation 285,98,=, 285,385 Home and community services 421,651 2,467,079 3,743,339 6;632,638 Employee benefits 8,192,673 '1,706,fl67 1,262,617 ri;101,057 Capital Catlay 416,x47 416,44' Debt Service: Principal 651,360 155,6017 i,177,7pG 496,OOG 2430,060 Interest 198,115 32,698 1.176,581 189,220 1,536,812 Total Exoenditures 25~ ~ 416 447 4.621.366 >',074 507 13 313,523 Excess {Deficiency) of Revenues Over Expendifures 899,134 43y 775 770987 {g52,90G) 226,626 1,885.616 Other Financing Sources (Uaeaj Transfers in 605,949 685,349 Transfers ovt 1224,3'2}. (126,97%4.. (266,6:967 (685,349) Total C7ther Finanr,ing Sources ;Uses; .(224 972} ( n0 477; 6['75,949 -Q- ;260,0007 -0~ Net Change in Fund 0alance 674,752 316,798 1,376336 {452,900) (31,380) 1,865,616 Fund Balances {Deficit) of Beginning of Vear 6,224x73^_ 884,620 ~ 1.753.037) 18,845.100 i~,2sa9;a 11 t9 efh6,6U6 Fund Balances {Detlcit} aC End of Yoar 5 8,888,464 1,3"3 312. 6 ;376 1011 $ 18,382,280 S 1.,23 731 6. 21 466 122 See notes to the tinancial statements. _20_ TOWN OF SOUTHOLD RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND GRANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES For the Year Ended December 31, 2012 Net Change in Fund Balance $ 1,885,616 Governmental funds report capital outlays as expenditures. However, in the Statement of Activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. The amount by which depreciation exceeds capital outlay in the current period is: Capital outlay $ 3,646,600 Depreciation expense {4,348,275} Lass on dispositions {848,978} {1,556,653) Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds. 41,871 Some expenses reported in the Statement of Activities do nat require the use of current financial resources and therefore, are not reported as expenditures in governmental funds: Deferred charges {31,116} The issuance of long-term debt and increase in obligations under capital leases provides current financial resources to governmental funds, while the repayment of the principal of long term debt and capital leases consumes the current financial resources of governmental funds. Neither transaction has any effect on net position. Repayment of bond principal 2,480,006 Due to employees retirement system 53,859 Compensated absences {840,103} Estimated liability for landfill closure and postclosure care costs 24.540 Other postemployment benefits payable {7,111,667) Accrued interest payable 68,676 Change in Net Position of GovernmentaB Activities $ {4,984,917) See notes to financial statements. -21- TOWN OF SOUTHOLD STATEMENT OF FICDIICIARY NET POSITION December 31, 2012 Trstals ASSETS Cash and investments Ji 16,893,610 Other receiuatales 555 Total Assets $ 16,£3J4,165 LIABILITIES CI412 t4 OtlleY CJOVernmentS ~ 16,429,213 Other liabilities ?..51,775 Depcasits helc9 213,177 Tratal Liabilities $ 16,894,165 See notes to financial statements. -22- TOWN OF 50UTNOt_Ct N<JTES TO FINANCIAL STATEMENTS Decomber 3't, ?012 A. SUMMARY aF 51GNIFICANT ACCOUNTING Paf.ICIES l"he Tawn of Southold (the "Taws"), which was established in 1fi4Q; is governed by Town Law and other general Taws of the State of New York and various local laws. The Town Board is the legislative body responsible for overall operations. The Town Board consists of the Supervisor who is elected far a term of fouryears and five council rncrnbers who are elsc4ed for terms of four years. The Town Board appoints the'Cawn Attorney and Tawn Comptroller whose terms are fixed by Town Law. The Town Clerk, Receiver of 'T axes, Superintendent of hkighways, Justices and Tawn Trustees are all elected and serve for four years, respectively. The Town provides a full range of municipal services, including public safety, transpartatian, hens and community services, public wracks and road maintenance, recreation and parks, ancf general and administrative services. The finanaial statements of the Town of Southold have been prepared in conformity with accounting principles generatly accepted in the United States of America (CaAAP) as applied to yavernmsntal units. The Governmental Accounting Siandarris Board {GASH) is the arasptad standard setting body for ssT.ablishing governmental arcauntirag and financial reporting principles. The mare significant of the government's accounting policies ors dasoribad below. 1. REPORTING ENTITY The financial reporting entity consists of: (a) fhs primary government, which is the Tawn of Southold; {b) aryaniz~"3tions for which the primary government i5 financially accour7table~; and (c) ether aryanizations far which the nature anrS significanos of their reiatianship with the primary government ors such that exclusion would cause the reporting entity's financial statements to bo misleading ar incomplete. The deoision to include a potential component unit in the Town of Sorathald reporting entity is based an several criteria including legal standing, dependency and financial accountability. Based an the application of these criteria, the following is a summary of certain entities considered in determining T.he Tawn of Southold's reporting entity. Certain special districts of the Tawn of Sauthtald are separate legal entities and have separately elected boards of commissioners. These special districts provide sanitation, ferry, and park services to residents and businesses within thta districts. Special districts cannot issue bonded debt without the approval and the backing of the full faith and credit of the Tawn. Budgets and tax rates are approved by the Town. Tax levies of the special districts are collected by the Town's Receiver of Taxes. As a result of this fiscal dependency, the Town is financially accountable far these special districts. Accordingly, these special districts have been determined T.o be component units of the Tawn and are presented discretely in a separate column in the combined financial statements to emphasize that they arc legally separate from the primary government. Condensed financial statements along with the addresses of the administrative office, for these component units are presented in Nate E. 2. GavERNnnENT-wtoE ANa FuNet FINANCIAYm STATEr~ENTS The Town's basic financial statcrnents include both government-wide (reporting the Town as a whale) and fund finanaial statements (reporting rho Town's major funds). Government-wide Finas"aolal Statements Ths government-wide finanaial statements {i.e. the statement of not position and the statement of activities) report information on all of the non-fiduciary activities of the Town as a whale with separate columns for the primary governmental activities as well as this discretely presented campancnt units. For the most part, the affect of interfund activity has been eliminated from the government-wirJe financial sta4enrsnts, except for interfund services provided and used. ~2g_ TOWN OF SOUTHON,D NQTES Td FINANCIAL STATEMEN'T'S Decerrrber 3t, 2012 A. SUMMARY OF SIGNIFICANT ACCOUNTING POI.fGNES (t:antinued} 2. GOVERNMENT-WIDE AND FUND FBNANCIAL STATEMENTS (continued) Gouernment-wide Financial Statements (cor7tinued) 'T'he government-wide Statement of Activities demonstrates the cfa>gree to which the direct expenses of a given functfpn are offset by program revenue. L7irort expenses are these that are clearly identifiable with a specific function. Pragrarn revenues incluriaa (1) charges tp customers ar applicants who purchase, use, or directly ber7efit from goods, services, or privileges provided by a given ftanation, (2} grants and contributions that are resirictari to mooting the aperatian and capital requirements of a particular function; (3} intorost earned an grants or capital projects that is required to be used to support a particular program or prajert. Taxes and other items net properly included among pragrarn rr;.+venuos are rraportead as general revenues. The Town does net allocate indirect expenses tp specific function; in the StatemenT. cf Activities. Fund Financial Statements Separate financial staternonts are pn:+videa-I far governmental funds and fiduciary funds, even though the fiduciary funds are exclude.=,d from thc: government-wide financial statements. Major individual gavemmental funds are ra:portod as separate columns in the fund financial statements. The accounts of the Town arc organized on the basis of funds, each of which is considered a separate accounting er7tity. Tfae aporations of each fund are accounted for with a separate set of self-balancing accounts that cornpriso its assents, liabilities, fund bafanras, revenues, and expenditures, which are segregated fpr the purposo of carrying an specific activities ar attaining certain objectives in accordance with special regulations, restdrtions pr IimitaT.ions, The various funds are presented kay type in the fund financial statements. Certain funds of the Tpwn are utilized to account for resources derived from andlor expenditures ataplicable To an area less than the entire Town, The focus of the gaverr+mental funds financial statements is an the major funds, Accordingly, the Tawn maintains the following fund types: Governmental Funds - Gavernrnental funds arc tfrose through which most governmental functions are financed, Tha acquisition, use and kaalances of oxporrdablo financial rescxarcas and the related liabilities are accounted for through governrnontal fund s. The measurement focus of the governmental funds is upon determination pf financial positic+rr and changes in financial pasitian. Governmental funds are further classified as major and norrmajor funds. The Tawn reports the following major governmental funds: General Fund - is the principal operating fund of the Tawn. Tlvis fund is used to account far all financial resources except those required to be accounted for in c:+thor funds. 'Special Revenue Funds -are used to aaoourtt far and report the prtaceods of slecific revenue saurres that are restricted ar committed to expenditures for sftocifiori purposes other than debt service or oapital projects. Hiahwav Fund - is a Special Revenue Fund used to account far revenues and expenditures for' highway purposes. The major areas of oxponditures are repairs and improvements, machinery, and snow and rniscellanoous. Tho nrajar saurre of rtavemaea is real property taxes. Cammunitu Preservation Fund - is used to account for anti report financial resources that are restricted for T.he purchase of land and land devedaprnent rights. Caoital_Pro""ect_~___s Fund -used tp account for and report flnancial resources that are restricted, cpmmitted, ar assigned to expenditure for capital outlays, including the acquisition ar cpnstruotion of major capital facilities and other capital assets. -24- TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 3t, 2012 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (continued) Fund Financial Statements (continued) Additionally, the Town accounts for and repaPts tl~e following non-rnajar funds: General. Fund Part Town - is used to account for revenues and expenditw~es for certain seivioes pidvided tay the area of the Town located outside of the Village of Gree;nport. The major source of revenue is real property taxes and building permits. S ecial~ Grant Fund is used to account for Federal Aid for thc: Cornrnunity Deva:lopment 131ock Grant Program. S ecial District Funds are used to account for taxes or ollaar rovenue.~s, which are raised or received to provide special services to areas that encompass less than the whola~ towrr. The Special District Funds corrsisl of a nurnbear of separate: districts, which are administered by then Town Board as follows: East-West Fire Prota~ction District, Southold Wastewater District, Fishers Island Sower District, and Solid Waste Maragement Cistrict. Fiduciary Funds -Fiduciary Funds are used to account for assets held by the Town in a trustee or custodial cap<tcity. A end cy Fund - is used to account for rnonoy (and(or property) received and held in the capacity of trustee, custodian or agent. Discretely Presented Cnmpnnent Units Certain spacial districts that have separately efacted boards provide transportation, park, mosquito control, and sanitation sePVices to residents and businesses within these districts, and follow government fund accounting principles. These districts, whictr are accounted far as discretely presented component units, are as follows: Orient Mosquito District, established in 1916 Gutchogue-New Suffalk Park District, established in 19b3 Southold Park District, established in 1907 Fishers Island Ferry District, established in 1947 Fishers Island Waste Management District, established in 13b2 Orient-East Marion Park District, established in 1969 Mattituck Park District, established in 1941 3. MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION Measurement focus refers to what is being measured whereas the basis of accounting refers to when revenues and expenditures are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurement made, regardless of the measurement forus applied. The government-wide statements are reported using the economic resources maasurernant faces and the accrual basis of arcrnsnting. Under the accrual basis of accounting, revenues are rracognizad when darned and expenses are recorded when the liability is incaarred, regardless of the tirreing of related cash flaws. Property taxes are recognized as revenues in the year far which they are levied. Grants and similar items are rocogniza>d as revenue as soon as all eligibility requirements unposed by the provided have been met. _`S_ TqN qF SQUTHOLD NtJTES TC7 FINANCIAIw STATEMENTS Deceml:rer 31, 2012 A. SUMMARY qF SIGNIFICANT ACCgUNTING PgLIC1ES {continued) 3. MEASUREMENT FAGUS, BASIS qF ACCgUNTING, AND FINANCIAL STATEMENT PRESENTATIgN (continued) Governmental fund financial statements are reported using the current financial rosourres measurement focus and iha modified accrual basis of accounting. Revenues are recognized as soon as they are both measureable acrd availataie. Revenues are oansldered available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. Far this purpase, the Tawn generally considers revemaes to be available if they are collected within 60 days after the year end. In certain circumstances this appliaatian of the Town's normal availability period for a given revenue source; might distork revenue trends from ano year to the next. In such unusual circumstances, revenues may be considered available if received beyond 6d days however to the extent the revenue rEamains unctallerted after one year the Tawn would classify the fund balance as nonsperadatale. Revenues susoeptible to accrual ir7clude Suffolk County laoal assistanoe at year sand on behalf of the Town, franchise fees, mortgage taxes and certain charges for services and intergovernmental revenues. Permits, fees, anti ether similar revenues are not susceptible to accrual because generally they are net measurable until they are received in cash. In those instances where expenditures are the prime factor ire determining eligibility for state and fedora) grants, revenues are recognized when the expenditure is incurred. In the Capital Projects Funrl and Community Preservation Fund, lor7g-term debt is recognized as revenue upon recoipt of the proceeds. Expenditures generally are rocordecl when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to comfrensateci absences, claims and judgments, landfill closure and postc:losure Dare costs, and other pastemployment healthcare costs benefits are recorded when payment is due. General capital asset acquisitions are reported as expenditures in governmental funds. Issuance of long-term debt is sported as ether financing sources and uses. Because governmental fund staterner7ts ara presented using a measurement focus and a basis of accounting different from that used in the government-wide statements governmental column, recor7ciliatian is presented that briefly explains tyro ae:ijustment necessary to reconcile onding net position and the change in net position. A. ASSETS, LIABILITIES AND FUND EgU1TY CASH AND INVESTMENTS Cash consists of funds deposited in dernanci accounts, time deposit accounts and certificates of deposit with maturities of less than three months. State statutes govern the Town's investment policies. The °fown's investments are governead by a formal investment polioy. The Tawrti's monies must iae deposited in FDIC-insured commercial banks ar trust companies located within the State. The Town is authorized to use darnanci accounts and certifioates of dapaslt. Permissilzle investments include ataligatians of the U.S. Treasury, U.S. Agencies and invesirnents made by the Cooperative Liquid Asset Security System (CLASS}. Collateral is reaquired far demand deposits and time deposit accounts at iQ0% of all deposits not covered by tede?cal deposit insurance. Obligations that may be pledged as collateral include obligations of the United States and its agencies, abligatirtns of the State and its municipalities, and school districts. The: Tawn°s collateral agreements are based on the'Town's available balance. RESTRICTED CASH Certain assets of the Community Preservation Fund are classified as restricted assets because tlseir use is restricted by contractual ayrcemants and regulations. -26- TOWN OF SOUTHOLD NOTES TQ FINANCIAL STATEMENTS December 3i, 2012 A. SUMMARY qF SIGNIFICANT ACCOUNTING POLICIES (continued} 4. ASSETS, LIABILITIES AND FUND EQUITY (rontine.red} RECEIVABLES AND PAYABLES Receivables inaude amounts due Pram Federal, State and other yavernments or entities for services pravided by the Town. Receivables are recorded as revenues recognized as earned ar as specific prayram expenditures are incurred. dnterfund transactions, exclusive of interfund services pravided and used, have been eliminated from the government-wide financial statements. In the funds statements interfund transactions include: a} Inferfund Revenues Inted'und revenues, which are quasi-external transactions, in the (~enEaral Fund represent amaunts charyed far services ar facilities pravided by the General Fund. The amcaunt paid by the fund receiving the boraafit of the service or facilities is reflecteri as an expenditure of that fund. b) Transfers Transfers primarily represent laaynrenT.s to the Capital Projects Fund from the other funds for their appropriate share of 4he capital project costs or related BAN debt service amounts. DUE FROMJTO OTMER FUNDS C3udng the course of operations The yovernment has activity between funds for various purposes. Any residual taalarrce outstanding at year-and era reported as due from/due to ether funds. While these balances are reported in fund financial statements, certain eliminations era made in the preparation of The government-wide financial statements. INVENTORY AND PREPAID ITEMS Inventory is ualuecS at cosT. and a:onsists of supplies an hand. Inventory in these funds is accounted for under the ransumption meChad. Certain r}ayments to venders reflect casts applicakale to future accounting periods and are ropartecf as prepaid items in bath the yavernrnent-wide and fund financial sl'aternents. Prepaids in Oho General and Special Revertue Funds represent retirement benefits tlaa4 will benef'rf a future period. In yavernmental funds, amounts reported as inventories and prepaid items are equally offset by nonspendable fund balance amaunts, indicating that they do not constitute "available spendable resaurces° even T.houyh they are a. component of net current assets. CAPITAL ASSETS Capital assets purchased or acquired with an oriyinal cost of $5,0(70 or more are reported at historical cast or estimated historiaal cost. Donated assets are reported at estimated fair market value as of the date of donation. Additions, improvements and ether capital outlays that significantly extend the useful life of an asset are capitalized. ether casts incurred for repairs and maintenance are expensed as incurred. Depreaiatian and amartizakion an all assets is pravided an the straight-line basis aver the fallawiny estimated useful lives: Buildings 10-~d0 years Improvements and other 20 years Machinery and equipment 5-f 0 years Software 5-10 years Infrastructure ;gip-30 years _p7_ TOWN OF SOUTHOLD NC1TE=S TO FINANCIAL STATEMENTS December 31, 2tJ12 A. SUMMARY OF 51GNIFICANT ACCOUNTING POLICIES (continued) 4. A55ET5, LIABILITIES AND FUND EQUITY (continued} CAPITAL A55ET5 (continued) Infrastructure ascots, consisting of certain improvements other than buildings including roads; curbs, sidewalks, bridges, and street lighting are capitalized slang with other capital assets. intangible assets lack physical substarrcca, are nonfinancial in nature, anti haves an estimated useful life extending beyond a sirrglr.+ reporting period. The term deprec:iatian, as used in these footnotes, includes amortization of intangible seer.+ts. In the fund financial statements, capital assets are recrarded as capital outlay expenditures in the governmental fund upon aoquisitiaa. DEFERRED REVENUEIUNEARNED REVENUE Deferred revenue/unearned lnr;ome are those where ascot rerognition r.,riteria have been meat, but which revenue recognition criteria have rro4 been rnet. Such amounts lrrclude callertians in advance, unearned income and amounts That have been doomed to be "measurable" but not "available" to finance current expenses. LONG-TERM OBLIGATION5 In the government-wide financial statements, IVabilltles for long-term obligations consisting of general ablig2tion bonds, compensated absences, claims anti judgments, liability for lanrfllll closure 2nd postclosure costs, other pasternployrnent benefits, and due to ernployess retirement system ere recognized in the statement of net position. Bond prarniurns or discounts, as wtall as issuance cosTS, are deferred and amortized an a straight-line basis over the Ilfe of the bonrjs. Bonds payable are reported net of applicable bond premium or discount. Bond issuance costs that are immatorial are charged as a General Fund operating expense. In the fund financial statements, governmental funds recognized bond premiums and discounts, as well as bond issuance costs, during the cun~ent period. The face amount of the debt issuers is reported as ether financing sources. Premiums received on debt issuances are reported as other financing sources while discounts an debt issuances are reported as ether financing uses. Issuance costs, whether ar not withheld from actual debt proceeds received, are reported as debt service expenditures. NET P05ITION AND FUND EQUITY CLA551FICATIONS Irr tho-~ government-wide statements, equity is classified as net position and displayed !n three components: a) Net investment in capital assets -Consists of capital assets innluding restrictati capital assets, net of accumulated depreciation and reduced by the outstanding balaracas of arry bonds, notes, or othr=r borrowings that are attritautable to the acquisition, construction, or improvement of thane assets. Accounts payable in the Capital Projects Fund are capital related debt and are used in the calculation of net investment in capital assets. b} Restricted net position -Consists of net position with constraints placed on the use either by (1} external groups such as creditors, grantors, contributors, or laws or regulations of other governments; car (2) law through e:ansti4utianal provisions or enabling legislation. c} Unrestricted -All other net position that da not moot the definition of "restricieeP' or "net investment in capital assets." -28- TQWN dF SC?UTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2012 A. SUMMARY t7F SIGNIFICANT ACCOUNTING PQLICIES (continued} 4. ASSETS, LIABILITIES AND FUND EQUITY (continued) NET PQSITION AND FUND EQUITY CLASSIFICATIQN5 (continued} In the fund financial statements, governmental funds report aggregate amaunts far five q{assification of fund balances based on the constraints irnpased on the use of these resources; they are (1) nonspendable, (2) restricted, (3) committed, (4) assigned, or (5) unassigned 1} Nonspendable fund balance includes amaunts that cannot be spent because they are either (aj not in spendable farm (i.e, prepaid items or inventories), or (b) will not convect to cash within the current period {i.e. tang-term receivables and financial assets held for resale}, or (o) legally or contractually required to be maintained intact (i.a. the principal of a permanent fund). 'The spendable portion of the fund balance comprises the remaining 'four classifications: restricted; committed, assigned; and unassigned. 2) Ftestricteci fund balance reflects the constrainta irnpased on resources either (a) externally fay creditors, grantors, contributors, or laws ar regulation of other governments, or (h} imposed by law through canstitutianal provisions ar enabling legislation. 3) Committed fund balance reflects amaunts that can only ba used far specific purposa> by a government. using iT.s hdghast and most binding level of dec'ssdon making authority. 1 he Town's highest cSecision making authority is T.he Town ESoard, who by adoption oi' a Tawn ordinance prior to year end, can commit fund balance. Those committed amounts cannot ba used for any other purpose unless the Town Board removes or changes the specifiod use by taking the same type of action imposing the commitment. Assigned fund balance reflects the amounts constrained by the Town's "intent" to be used far specifie purposes, but are neither restricted nor committed. The Town board has the authority to assign amounts to be used for specific purposes. Assigned fund balances include all remaining amounts (except negative balanaes} that are reported in governmental funds, other than the General Fund, that are not classified as nonspendable and are neither restricted nor committed. 5} Unassigned fund balance is the residual rlassificaT.ion for the General Funcl. It is also used to report negative fund balances in other governmental funds. NET PASITIK7N AND FUND BALANCE FLAW ASSUMPTIQNS When ouf.Iays for a particular purpose can be funded from both resT.rirted anri unrestricted net position resources it is the government°s policy T.o consider restricted - neT. position to have laeen depleted before IAnYP.SkYIC4P.d -net paSitlan IS applied. When both restricted and unrestricted resorsrcas are available for use, it is the Tawn.s default policy to use restricted resources first, and than unrestricted resources - committers, assigned and unassignarS - in order as needed. FUND BALANCE Pt3LiC1ES The Town has, toy resolution, adopted a fund balance policy that states the Town must maintain a minimum unassigned fund balance in the General Fund equal to 10°io of General Fund expenditures. In the event that the balance drops below iha establisher) minimum level, iho Town's Board will develop a plan to replenish the fund balarrco to the ostablished rninimurn level within the current or ensuing fiscal yeas. -29- TpWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 3't, 2012 p. SUMMARY qF 51GNIFIGANT AGGgUNTING pgLIGIES (continued) 5. REVENUES AND EXPENDITURES REAL pRgpERTY TAX ASSESSMENT AND GCALLEGTIgN pRgGEDURE5 Real property taxes are levied annually no later than December t'r and are recognized as revenue January ifi` of the year for which they were levied. The Tawn has its awn Assessor's Office whose respansibiiities are independent and distinct from those of the Receiver of Taxes ("Receivee"}. The Tawn assessment rolls are used for the levy of property taxes by the Tawn and the srhaol districts, as well as by the County of Suffolk, New York ("Ccaunty") and by special districts based upon a single tax bill. The Tawn of Southold Rs:=ceiver of Taxes callcacts all real property taxes for the Town, Suffolk County, Town Special Districts and School C7istrie;ts. These taxes are levied an December 1, and are due in two Installments, 50°,~n on December 1 and 50°6 on May '10, payable without penalty to January 10 and May 31, respectively. penalties are imposed thereafter at the raT.e of one-twalftl~ of the rate of interest determined by the State Commissioner of 'T'axation and Finance, after which taxes are payable to the County Treasurer. "f'he "fawn retains the total amount of Town, Highway and Town Special Districts levies Pram the amount collected, and forwards the balance collected to the Counfy which assumes crrllectian responsibility. 'T'he Tawn and Town's Spaoial Districts therefore realize annually the 100°vo collection of real property taxes. gTMER PgSTEMpt_gVMENT BENEFNTS hi addition to providing pension benefits, the Town provides health insurance coverage and survivor benefits for retired employees. Substantially all at' the Town's employees may become eligible for tl}ese benefits if they reach normal ratirc:ment age while working far the'T'bwn. Health care benefits In accordance with New York State? Health Insurance Rules and Ragralatians (administered by the New Yark State Department of Civil Service), are provided through the New York State Empire Plan (the °Ernpire Plan") whosr:~ premiums are based an the benefits paid throughout the State during the year or under the Tawn of Sauthald's calf-Insurance plan which is further described in Nate D. The Tawn recognizes the cost of providing benefits by recording its share of insurance premiums as an expenditure in the year paid. The Town's urslon contracts and arc-tinances require that iT. provide iks eligible enrollees with Empire Plan benefit coverage, rrr if another provider is utilized, the equivalent coverage. Under the previsions of the Empire Flan, premiums are adjusted an a prospective basis for any losses experienced by the Empire Plan. The Town has the option to terminate its participation in the Empire Plan at any tune without liability far its respor..tiue share of any previously incurred loss. The liability tar prsstarnployrnent Ienefits payable is recorded as a non-current liability in the government-wide statements. The current year increase in the Iiabilidy is based an the most recent actuarial valuation. GC?MPENSATED ABSENCES The liability for vested or accumulated vacation ar sick leave (compensated absences} is raaarded as current and non-current obligations in the government-wide statements. The current portion of this debt is estimated based on historical trends and currently known facts. Compensated absence liabilities and expenses are reported in governmental funds only if they have matured, for example, as a result of employee resignations; terrninatians, and retirements. The amount that is expected to be liquidated with expendable available financial resources is reported as expenditures and a IiabillTy in the funds statement in the respective fund that will pay the liability. -30- TQWN 4F SpUTHpLD NC3TES TO FINANCIAL. STATEMENTS December 31, 20'12 A. SUMMARY pF SIGNIFICANT ACCQUN7ING PpLIC1E5 (rontsnued} 5. REVENUES AND EXPENDITURES (oantinua.=,d) ENCUMBRANCES Encumbrance accaur7ting, under whicfa purchases orr:iers, car7tracts and other rvmmitmants for the expenditures of monies are recorded far budgetary control purposes, is employed in the governmental funds. Envurnbrar7cvs are reportcad as restrictions, commitments, or assignments of fund balances sines they do not canstitute caxpenrJitures or liabilities. Expenditures tar such commitments are recorded in the period in which the liability is incurred. B. USE pF ESTIMATES The preparation of basic firancial statements, in rvnformity with accounting principles generally accepter) in the Uniter:i States of America, requires management to make estimates and assumptions that affeacf tyre repartacl amounts of assets and liabilities, and disolpsure of contingent assets and liabilities, at the date of the financial statements, and the reparted amounts of revenues and exl:renriitures during the reparting period. AMual results could differ fram thane estimates. 7. NEW AGCQUNTINCa PRINCIPLES The Town has adopted all of the rurrant Statements of the Governmental Acvunting Standards Board (GASH} tfrat are applicable. During the year ended December 31, 2012, the Tvwn adopted: 1} GASH Statarnent No. ~0, Accounting and Financial Reporting for Service Corrcession Arr<trrgements. 2} GASH Statement Na. 6?., Cadificatiort of Accourtfrng and Fr"nancial Repvrtirrg Guidance Gorrtarrred in Pre-Naverrrbar.30. f,989 FASB and AtCPA Pranouncernents. 3} GASH Slatcmrsnt Na. ~a3, FinAancial Reportrny of t?eferred Ouh`lows of Resources, L7eferred lrrttows of Rcasourcas arrd Net Position. The adoption of these pronour7cernents has net had a significant impact on the financial statements. SUBSEQUENT EVENTS Management has evaluated subsequent events for dise:losure andlor recognition in the financial statements tl7rvugh the date of the tinar7cial statasrnenls. B. STEWARDSHIP, CpMPLIANCE AND ACCQUNTABNLITY 1. BUDGETARY INFQRMATIpIV Budgets are adopted annually an a basis cronsistent with generally acrepted accounting principles. Appropriations aarfhcarized for the curraarrt year are increased by the amount of encumbrances carried forward from the prier year. Budgets for the General and Special Revenue Fur7ds exclusive of tfae Special Grant Fund, are legally adapted far each year. The budgets are adoptcad on a basis of accounting consistent with GAAP, except that appropriations authorized for the current year are increased by the amotant of encusnfarances carried forward from the prior years. In the event that unanticipafead revenues are received (i.e. specific grant revenues) and exceed budgeted amounts, additional budgetary appropriations may be made. The Capital Projects and Special Grant funds are budgeted on a project or grant basis. _gi_ TOWN OF SOUTHOLD NOTES TC FIRlANCIAl. STATEMENTS Ctecernher 31, 2012 B. STEWARDSHIP, COMPLIANCE AND ACCOUNTABNLNTY (continued) 1. BUDGETARY INFORMATION (continued) The Town follows the procedures enumerated below in establishing the budgetary dale reflected in the flnanclal Statements: a) No later Than Qotober 1, the Supervisor submits a tentative. bucfgG*t to the Town Board Erse the fiscal year commencing tl7e following fiscal year. The teratativo budget includes the proposed means of financing for all funds. b) After public hearings are conducted to obtairr taxl7aye~r camments, no later than November 2U, the Town Board adopts the budgcat. c) The Town Board must approve all rnodificaticrr+s at'tl+e budget. However, the Supervisor is authorized to transfer certain budgolcci amounts within departments. d) In Jurie 2011, New Park State enarted Chapter 97, Laws of 2011 Raal Property Tax Levy Cap sand Mandate Relief Provisians, which includes a 2°!o property tax cap for municipalities. Beginning in ?.0712 and lasting through at least June 16, 2016, no local government is authorized to increase its property fax levy by more than 2°io ar the rate of inflatiarr (whrichever is Iess}; however Iaoal governments can exceed the tax levy limit by a 60% vote of thr.~ governing body and annually adopting a local law. 2. FUND EOUITY PUND BALANCE The following table provides the detail regarding farad balance categories grid class'rlicatians for the governmental funds whir^h show ocmponents of nonspendakile farad balances, as well as the purposes for restricted, and assigned fund balance. The uraassignad fund balance is also s;hawn. Capita', Community Other rdeneral Highway Projects Pr¢saneeiun Gnvarnrne»tal Fund Furai Funtl, Funtl .Rinds T!tt<aL Fund Balances: Nonspendabie: Inventory $ 1,708 $ 1,706 Preotxid horns 777;107 $ 96,863 $ 89,7x0 803,720 Tote) NonsPendabie 718,873 88,803 $ -0- b ,6,. 89.750 905,930 flestYiCted foY: Orantnrs and donee rastncrtlons NOma ffnd C6nltFani{y SarViCP,S 662 657 Other reserves 10,392,280 10,392,284 Total Frasrrctad -0• -0~ 10,382,280 65? 14:392,932 Assigned to: Subsequent Yeats budget 2,780,04b 336,154 205,629 3,927,779 Purchases an order or contractual oblfgatl 139.155 94,$£4 27,413 225,032 Sp9C7al revenue funds 81 b441 920,087 1,796,123 Judgments and rAaints 976,020 976,020 Total ASSfgnad 3.885,175. 12t$,455 -S1 -6 i,147,32A 6258,909 Unassignod, reported in General Fund 4,285,446 4,295,446 GaPital ProleCfs {37fi,F67~. {$7Q,7Q1). Total Unrestficted 4 P45A48 -0- {8Y0,701J ^0~ -6 3,903,745 Total Fund balances $ 8,890,484 $ 1,313,318 $ (378,701) $ 16,992,780 $ 1,237,731 $ 21,466,122 .'.j"J_ TOWN OF 5OUTHOLD Nt7TES Tt~ FINANCIAL STATEMENTS December 3t, 2012 B. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY {continued} 2. FUND EQUITY (continued} DEFICIT FUND EQUITY The Capital Projects Fund deficit of $3'76.701 at December 81, 24112 resulted from differences in tirrring between project expenditures and encumbrances and the rece:rgnitian of corresponding permanent financing sources. This deficit will be elirninatcd as short-term debt is redeemed or atrturartasd to permanent financing. C. DETAILED NOTES ON ALL FUNDS 1. CASH AND INVESTMENTS Custodial Credit Risk - Deposits/ Investments -Custodial credit risk for deposits exists when, in the event of the failure of a depositary financial institution, a government may be unable to recover deposits, ar recover collateral securities that are in possession of an outside agency. Custodial credit risk for Investments exists when, in the event of the failure of the counterparty, a government will net be able to recover 4he value ct its investments or rollateral securities that are in possession of an outside party. CLASS is a ooaperativa investrttent plan consisting of U.S. Treasury Qbligatians and repurchase agreements relating tv treasury obligatiarrs. Inuestments are stated at cost, which approximates marker. value. CLASS was established as a caoperativa> investment arrangement organized under the CLASS Municipal Cooperation Agreerttenf made pursuant to New York General Municipal Law, Article 3A and 5-G. Collateral is required for dernartd deaposits ared certificates of deposit not covered by federal depositary insurance. Obligations that may be pledged as rallateral are abligations of the United StaT.es and its agencies and obligations of the state and its municipalities and school districts. Deposits are required to ba disclosead as exposed tc custodial credit risk if they are net covered by depositary insurance, and the dapo~tits are either: Uncollateralized Collateralized with securities held by the pledging financial institution, ar « Call~ateralized with securities held by the pledging financial institution's trust department or agent but rrot in the Town's name At December 31, 2()12 the Town's cash book b<alanca was apprrtximately $42,835,049. This amount is inclusive of Fidtaciary Fund deposits of $96,893;810 but exclusive of petty cash of $5ES1. The available bank balance was $42,984;741, Of the bank balarrcca, $4,775,743 was covered by Federal deposit insurance, and $38,2Q8,g98 was covered by collateral held by the Town's agent, a third-party financial institution, in the Town's name. The Town's $57,579 CLASS inuestntent consists of U.S Treasury Obligations and repurchase <rgreements relating to Treasury abligations and is not sutajert to risk categorization. Credit Risk -State law and Town law Ilmit investments to those authorized by State statutes. The Town has a written investment policy. Interest-Rata Risk -Interest-rate risk arises because lotential purchasers of debt securities will not agree to pay face value for those securities if interest rates sutsstantially increase, thet'eby affording potential purchasers more favorable rates on essentially equivalent securities. Accordingly, such investments would have to be held to maturity to avoid a potentiaal loss. -3t3- TdWN dF SDUTHOt_D NC?TE5 TO FdNANCIAI STATEMENTS December 31, 2q1 C. DTANLD NDTES t3N A<WL FUNDS (continued} 1. CASN AND INVESTMENTS {continued) Concen ra !on of Credit C~tisk -Credit risk can arise as a result of faidure to adequately diversify investrraents. Ccsracentration risk disclosure is required for positions of 5 percent or mare in securities cf a single issuer. As of t.)ecember 31, 2012, the Town did not have any investments subject to credit risk; interest- rate risk or cancentraT.iosa of credit risk, The Dash in the Community Preservation Farad is classified as restricted cash because its use is ry restgr~icte~dyby cpoyn!^tprwa~c^t(u}alpa[grCe~^eu men~tps a®n{d r[e~gulatVonsry. g+ ry G. INTERFUND rAAw.iliwlMAB3 M,&.eF, PAW A®B.,Eti AN®TRANJFEIIS Interfund receivablr.~ and payatzle balances for the primary government at December 31, 2012 are expected to be paid currently. These balances represent various temporary Irraras, recharges, anrj reimbursements between frsnds and are stated as follows: Amount Amount TT °iv~itld Payable Majvr Governmental Funds: General Fund -Town whir. `5 113,775 $ 1,907,4'78 I-IigYtway Farad 935,56q 4;547 Capital Projects Fund 161,525 9'7,058 Non-Major Governmental Farads: General Fund -Part Town 197,13q 8,732. Special Grant 44,253 East-West Fire District 138,824 Southold Wastewater District 2q,173 Fishers Island Sewer District 7,684 Solid Waste Maraayernent District 401 328 .............1,617 Total ~.._..__~~q19 4.32 2 019,43? lntedurad transfer balances for the primary government at December 31, 2012 represent primarily the paymenT. of BAN debt service expenditures anti are stated as frrHaws: Transfers Transfers In Crut Major Governmantai Funds. General Fund -Town wide $ 22.4,372 Highway Fund 120,977 Capital Projects Fund $ 605:349 Ncrra-Major Governmental Funds: Southold Wastewater District 110;000 Solid Waste Management District 150.000 'Total ~%::::::::::-Si~:,r~ ~:::-:__..6g5~~4 -34- TOWN OF 5OUTOLD NOTES TCr pINANCIAL STATEMENTS Deceriitaer 31, 2012 C. DETAILED NOTES ON ALL 1=UN (coritiriucd) 3. CAPITAL. ASSETS Capit<tI asset actVvity tcrr Cf°lf3 year carideci L7{u~ccaliiba°,~r 31, 2012 is aas PoMlrrws v~ialarrc:H r3i]r111CP, Primar r~overnmenk 1!11]2 Additions 5ubtractiuns 12!'31/12 (9apital assHPS not beinc,) depreria9'.ed !..and $ ff,fi;3!1i,131 bti 1,:142,182$ Al B,6{i9 7,359,344 l..anricJevelaprnarrl',ricltris 1U7,E>1e,D52 E3,i;},26ti 1U?3.:34t:1,317 Grsnr;#r'urkian in progress &9(D,P51 ...060,433. 99.619 'l"rata! caprP al :t,:>e9'. rio[tx;ing depreciated 114.831;234 '2,3/5,44"r"" 1.,47!"+,402 195,9'T~7,279 17epreriable rapifa! as:>r:#s buildings 12,77q,E2C{3 455,407 13,22G,24D Improvements other than buildings 15,7D1,292 64;999 15,756,291 Maghinery ar7d ayuiprnent '1 D,763,994 446,392 199,D09 1'1,011,357 Saitwaro 74?..,498 2&5,068 1,027,56Ei Infrasd'uchire 75,375,35D 6fl3,740 76,059,090 Total depreciable capital aseets 9'95,353,y57 1,925,586 199,D09 117,080,534 Loss accumulated depreciation BuildinDs 3,811,351 348,579 4,15;i,93r7 Impr'avaman4s othotr than buildings 5,306 ~89 699,362 5,9D5,F.ro61 Machinery and eGuipmant 8,162,445 664,2.76 168,999 8,fi57,7;i?t Softwaro 579,529 56,732 636?fit Infrastructure 91,554,673 2,678,327 64,234,DD0 Total accumulated def.~reciation $ 79,414,1287 $ 4 348,<275 $ 168,399 83 ~i93,6Ei3 Total not depreciable capital assats. 3:1;186 ~iD71 To[rrl net capiRa! asserts S 149,314.250 t,)E1lrr'r,1taE'rtlrm exl,>enl;e was ;:hareied to ;luvernnrerntal functions eu follam Caerrer'<tl tinvarnrnen! support $ 3D2;216 Put>lir, sorely 271,97.5 "I1'arrsi~)<xPatlorr 3,D77,15i Econarnio assistance and opportunity 19,326 Culture <arid recrt~:tition 97,D87 l'iorne grid cornmunily services 560,540 $ 4,348,276 Thl{> Trawra evail.aatas laronlinent events or' rha,nges in rirrula7sta,nce6 aflec#ing capital assets to deterlaline wiietfis.~r iriipa'Irment rat a ral7ital asset has occ[trred. The Town's policy i9 to record an imfaairlrlent Ions in tiie iaerior3 when the Town rl~:terlaaine6 that the ca,rryirac~ amo##nt of ti7e asset will l1Clt be recoverable. At L7acru?rT1L1Eur i1 , rr'i~1 `~'1, the t QWn has nQt ref:QYdeCS any 3(dDh Il7rpalnYtP.nt Ins3e3. °`.3~° TOWN OF SOUTHOLD N+DTES TO FINANCIAL STATEMENTS December 31, 2012 G. DETAILED NQTES ON ALB. FUNDS (aontinued} 3. CAPITAL ASSETS {continued} Balance Balance Discrekely presented component units 111!'12 Additions Subtractions 12(3'1(12 Capital assets not being deprer.,iated Land yi 2,193,353 $ 2,193,353 Constructipn in progress $ 40,790 40,'790 Total capital assets not being depreciated 2,193,353 40,790 $ -0- 2,234,143 Depreciable capital assets Buildings 14,243;397 1 Q,935 14,254,332 Improvements other than buildings 2,349,227 78,000 2,427,227 fVlarhinery and equipment 3;530,487 34,717 3,565,204 Infrastructure 2,899,442 2,899,442 Total depreciable capital assets 23,022,553... ...123,652 0- 23,146,205. Less accumulated depreciation Buildings 3,050,396 452,042 3,502,438 Improvements other than buildings 470,877 95,604 566,481 Machinery and equipment 2,914,685 123,500 3,038,185 Nnfrastructure '1,834,328 '100,425. 1,934,753 'fotaN accumulated c9eprei;iation $ 8,270,286 $ 771,571 $ 0 9,041,857 Total net depreciable capita! assets 14,104,348 Total net capital assets $16,338,491 4. INDEBTEDNESS SHOftT TERM DEBT Bond Antioipation Notes (BANS) -Bond anticipation notes {BANS} are used as a temporary means of financing capital expenditures in the Capital Projects Fur7d. State law requires that BANS issued for capital purposes bo converted to long-term obligaticns within five years after the original issue date. The notes or renewal thereof may not extend more than two years beyond the original date of issue unless a portion is redeemed within two years and within each 12 month period thereafter. Liabilities for BANs are generally accour7ted for in the Capital Projects Fund. BANs are expected to be paid from the proceeds of future bond issues after renewal of these notes. These BANs bear interest at various rates from .40% to .50°!° and are due of various dates through 2013. A summary of changes in short term BANs for tho year ended December 31, 2012 is as follows: Balance Balance 1j1112 Increases Reductions 12!31112 PrimaryUovernment $ 2,342;000 $ 120,000 $ 1,497,000 $ 985,000 Component Units 650 000 100.000 550.000 $.....2 992,000 $ 120.0(70 1 597 C10ta S 1.515.00, -36- TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS December 31, 2012 G. DETAILED NOTES ON ALL FUNDS (continued) 4. INDEBTEDNESS (continued) LONG TERM DEBT General Obligatian Bonds -The Town borrows money in order to acquire land, equipment or construct buildings and improvements. This enables the cost of these capital assets to be borne by the present and future taxpayers receiving the benefit of the capital assets.. These long-term liabilities are backed by the full faith and credit of the Town, including bands of the Town Special Districts which are payable for tax revenues of the areas benefits. Interest rates of these bonds vary from 2.00°!o to 5.00°lo and have maturiky dates in 2013 through 2030. Future principal and interest payments to maturity for both the primary government and the component units are as fcllows: Prima... Government .Component Units Years Ending December 3l, Principal Interest Totals Principal Interest Totals 2013 2,370,000 1,467,558 3,837,558 175,06D 65,388 24D,388 2014 2,400,D00 1,394,143 3,794,143 175,006 58,825 233,825 2015 2,425,ODD '1,317,324 3,742,324 175,000 52,263 227,263 2016 2,36D,D00 1,239,004 3,599,DD4 2DD,ODD 45,700 245,70D 2017 2,44D,OD0 1,156,153 3,596,153 200,ODD 38,200 238,200 2D18-2622 10,710,OD0 4,528,977 15,238,977 800,000 77,500 877,500 2023-2027 10,760,000 2,508,368 13,266,369 2028-203D 6,54Q000 .464,866 7,OD0,886 Total $40,OD5,OOD $14,070,394. ...$54,075,394 $1,725,ODD $337,876 $2,D62,876 CHANGES IN LONG-TERM LIABILITIES Long-term liability activity for the year ended Decem bet 31, 2012 is as follows Nan-current Balance Balance IiahilitieS due Non-uurrenS 111(12 Increases. Redncfpns ".2x31/12 wikhin one near liabilities Primary Government: General obligation bends $ 42,465,000 $ 2,-080,000 $ 40,005,090 $ 2,370,000 $ 37,835,COD Due ht Employees Retirement System 240,909 53,859 187,050 18?.OSD Compensated absences 7,467,291984,987 144,584 8,32?,394 300,000 8,927,394 Claims and judgments 1,296,335 4,954,954 5,054,788 2°6,521 290,521 Estimated liability for landfill closure and post-closure care costs 969,106 24,549 944,598 25,145 919,421 Ocher postemployment benefits payatrle 18,952,999 8,290.501 1,178,894 20.904,518 28,084,6'..8 Component Units: Bondanticipati°n ogles 859,000 650,093 General obligation bonds 1,900,000 175,900 1,726,090 725,009 1,090,000 Compensated absences 213,912 84,499 1-09,503 37,378 112,127 Other postemployment benafts payable 323,155 28A48 21,918 329,285 329,285 Liabilities for general obligation bonds, general liability claims and judgments and landfill closure and post closure care costs are liquidated through future budgetary appropriations in the General Fund. The liabilities far compensated absences, claims and judgments, ether postemployment benefits, and due to Employees' Retirement System are liquidated through future budgetary appropriation in the fund that gave rise to the liability. -37- TOWN OF SOUTHOLD NOTES TO FINANCIAL STATEMENTS C)ec:ember 31, 2012 G. DETAILED NOTES ON ALL FUNDS (continued} b, ETIfIEENT SYS7EM Plan CSescri~tiari The Tawrr of Soaakhald participates in the New York State and Loral Employees' Retirement System {ERS} and Loca! Paiicea and Fire Retirement System (PFRSj, This is avast-sharing multiple- errsployer retirement system. The System provides retirement benefits as well as death and disability benefits. Obligation of araaplayers and empioyees to contribute and benefits to employees are governed by the New York Stake Retiremenk and Social Security Law (NYSRSSL). As set forth in the NYSRSSL, the Comptroller of 4he Skate of New York (Comptroller} serves as sole trustee and administrative head of the Syskern. The Comptroller shall adopt and may amend rules and regulations for the administration and tra,nsaatron of the business of the System and far the custariy and control of their funds. The System issues a publicly available financial raper[ that includes firaarrcial statements and required supplemental information. That report may be found at htkp:/iwww.aso.state.nv.ustretlreiaaablicatiansiindex,php or obtained by writing to the New York State ane:i Local Retire.=,rnent System, 110 State Street, Albany, NY 12244-0001. Fundino Poliay The System is raonaontributary except for employees who joined the New Yark State and Lacai Employees' Retirarraent System after duly 27, 1978 who contribute 3U'o of their salary far the first ten years of membership ,emplayaes who joined on or after tlanuary 1, 2010 who generally contribute 3% of thou salary for the entire length of service, and employees who joined on ar after April 1, 2012 who coratril:~ute 3°~ to 8% of Their salary, depending upon their annual wages, far the entire length of senric;e. Under the authoriky of the NYSRSSL, the Comptroller annually certifies the ac'kuarially dekarminad rates expressed as pralaortians of payroll members, used In computing the erraployars•' contributions basori on salaries paid during the System's fiscal year ending March 31, The Town i:< required to contribute at an actuarially determined rate. The actual contributions were equal to 100°i° of the actuarially required amounts and also include additional contributions to fund various early retirement incentives made available to the Town empioyees, The credits and rnisceilarreaus arJjus~tments repro>sent moditicatian made toy T.he NYSERS to the prior year's contributions due to difforaracas between estimated and actual salaries far the plan year. 7haa required conT.ribuT.ions, far the Town, for the current year and two preceding years were: _ER5 PFRS-- 2012 5......2,068,73£3 $....1,209,715 2011 1,827,936 1,308,331 2010 1,265,284 95'7,407 Pursuant to Chapter 105 of the Laws of 2010, the New York State L.cagislature authorized local governments to make available a retirarncant incentive program with estimated total costs to the Town of $312„837. The cost of the program is being billed and paid over five years beginning in 201E and will include interest at 7.5°'°. Future principal and Interest payments to maturity are as follows: Total Principal Principal Interest and Interest For years ending December 31, 2013 $ -0- $ -0- $ -0- 2014 57,899 14,029 71,928 2016 82,242 9,686 71,928 2016 86.909 5.019 .71,928 Totals 5_______1$ZU54 $._:-.........2~;Z~4 $ ............._z15, -38_ TOWN OF SOUTHOLD NOTES TO FINANCIAL. STATEMENTS December 31, 2012 C. DETAILED NOTES Ofd Al_f. FUNDS (rontinuad) ti. oTNER POSTEPLOYMENT BENEFITS (OI.IC;ATIONS FOR HEALTH 1NSUliANCE} In the government-wide financial statements, the cast of posfa'.mplayment healthcare tenefits, dike the cost of pension benefits, geroarally sl'iauld lee assor:iatad with the periocS in which the cast occurs, rather than in the future year wfran Pt will be paid. The Tawn recognizes the cost of post- employment healthcare in the year when the employee services are rerelved, reports the accumulated liability from prior years, arrd provide information useful in assessing potential demands rx~ the Tawrr's future Hash flows. Recagrrffion of the liability accumulaTed from prior years will be phased in over 30 years, wl'sichs commenced with the 20t18 liability. F Iatr fJesca i tiCa.~: The Town, as a sirrgla-employer defined benefit ORES plan, per its contracts with employees, will pay full premium r.:osts far rneciical (currently prauided by the Empire Plan and the Town's self- funded medical plan) irasurancea coverage at retirement. Far Han-police participants, the Town provides continuation of medical insurance to employees who retire under the NYS Retirement System or who are at least 55 years old and have t0 years of service with the Town. For police; the Town provides continuation of medical insur'anre for employees who have at least 20 years of service with the Tawn. The retiree and spouse are eligible for full Medicare premium roirnburscarnent. Y-lealtfacare benefits for Han-union employees are similar to these of urrion employees. Surviving spouses of deceased employees may continue coverage by paying the premium equivalent far participants. The number of participants as of ,.lanuary t, 20'f i, the effective date of the QPEB valuation is as folfaws. Thera have been rao significant changes in the number or type of coverage since that date. Active ernployoes 192 Retirees 2U8 Spouses of retired emplayeas y_~__5 Totaf Q5 Fundin Rnlic The Tawn currently pays for pastemplaymcarrt health care benefits on spay-as-you-go basis. Summa of Chan es from Prior Actuarial Valuation Since the prior valuation as of January 1, 2011, chant;as were: made that resulted in a, change in the beyir~ning Net OPEB Ofaligatian. In prier valuations, prcajecsted premium payments were utilized to reduce the Net (JREB Obdigatiora sirrccr actual information was unavailable ai the time the valuation was perfarrned. The following shows the irrrpacet of the changes an the beginning balance: Net OPEB Obligation as of January 1, 2012 based $ 18,952,909 on prier assurnptioras Reflects differertice in expected expenciifures and actual expenditures 852.302. Net OPEB Obligation as of January 1, 2D12 ~ 1 J,tfUS.~J.1, -39- TOWN OF SOUTHOLD NOTES TC7 FINANCIAL STATEMENTS December 31, 2012 C. C7ETAfLED NOTES ON ALL FUNDS (continuod} fi. OTHER POSTEMPLOYENT BENEFfTS (Of3LfGATIONS FOR HEALTH INSURANGEj (continued) Anr7uai Otha:r Postemplaymont Bcxnefits Cost and Net C?biigation: For the year ended t.)erember 31, 2012, the 7cawn's annual other Izaslemployment benefits cost (expenses} were ,".57,438,199. Considering the annual expense as well as the payment of current health insurance premiums, which totaled $1,178,894 far retirees anti their beneficiaries, the result was an increase in the other pastempioyment benefits liability of $6,259,305 far the year ended December 31, 2012. The Town's component unit's annual other postemployment benefits cast (eXpenSes} were $28,3$8, C."ianSldP,ril7g tI1P, annual P.xpP,nse aS well a5 the payment Of aIaYYP,nt health insurance premiums, which totaled $21,918 for retirees, the result was an increase in the other postempioyment benefits liability of $6,430 for the year ended December 31, 2012, Benefit Obiigatians and IVorrnai Cost Retired ernpiayaes $ 3$,4$9,326 Active employees .....47.671,910 Unfunded actuarial accrued liability (UAAL} S___$2.12 The Town"s annual other postemployrnent benefit cost is caloulated based on the annual required contribution (ARC} of the employer, an arnount actuarially determined. The ARC represents a level of funding that, if paid an an angoing basis, is projected to cover normal post each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. Annual Other Postemplaym€:r7t Benefits Cost anti Net C~bligafion: (continued) The Town's annua! other postemployment benefits cost, the amount actually paid and changes to the Town's nat. other postemployment benefits obligation to the Pian far the year ended I.}ecember 31.2012 are as fellows: Normal Gast $ 3,084,670 Arnortizatior7 of unfunded actuarial liability (UAALj over 30 years 4,439,504 Interest 282.'i 57 Annual required contribution (ARC} 7;806,331 Interest on net other posternployrnent benefits abligatian 742;695 Adjustment to ARC 1 110 827) Annual CfPEB cost (expense} 7;$38,199 L7ifferenc:e in expecated axpanr:iitura.=,s and actual expenditures 852,302 Less: contribution for year ended C}eaember 31, 2012 .1.1:78:.£394 Increase in net OPEB obiigatran 7,111,607 Net OPEB obligation -beginning of year 18,952,909 Net OPEB akaligatian -end of year ,-:~~.,~~~x~1 Percent of annual OPEB r..ost cantril:ruted 15.85%6 _4Q~ TOWN OF SpUTHC1LD N®TES TO FINANCIAL STATEMENTS December 31, 2012 C. DETAILEt) NpTES 4N ALL FUNCIS (continued) 6. QTHER Pt7STEMPLQYMENT BENEFITS (t7BLIGATIONS FC1R HEALTN INSURANCE] (Iwantinued) Funded Status anc4._Fundie~ Proe less: The percentage yantributed, as it relates to the Tawr1 0l Srauthrrld, for the current year and preceding year was: Annual Annual Contrikaution Percentage Net OPEB CPEB Cyst... .:.:Made Contributed Obli ti#jaPl 2012 ~ 7,438,199 $ 1,176,£394 15.65% $ 26,U54,51G 2011 G,895,930 1,6GU,96U 23.94% 18,952,909 2010 G,f24,1U3 1,636,730 24.69% 13,707,+339 The schedule of funding prygress presents trend infarmation about whether the actuarial value of plan assets is increasing ar decreasing OV2P' time redative to the actuarial accrued liabil'rly far bP.rlP.fllS. 'The funded status of the plan as of January 1, 2012 is as follows: AcKuarial Au:rued Unfunded UAAI.. as a Peroentage Value nt l.iabiliky AAL. Funded Covered of ....Assets..... Paproli Payroll Town S -0- $ 82,1?'1;236 82,121,236 0`~ $11,316,486 573.Ei1°.d, Component I)nii? -6- 431,462 461,462 ri°~ S3Ei8,fS62 42.54`%4, Actuarial Methods and Assumptions: f'he projection of future benefits for an ongoing plan involves estimates of the value of reported amyunts and assumpT.ions about the probability of oaaurrence of future events far into the future. Amounts determined regarding the funded status of a plan and the employer's anrlu<tl required contributions are subject. to continual revision as actual results are compared with past expeytatians and new estimates are made abou# the future. Projections of benefits far financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members} and include the types of benefits provided at the time of each valuation and the historical pattern of sharing benefit casts faetween the employer and plan members to that point. The actuarial methods and assumptions used include: techniques that are designed to reduce the effects of short-terlTt liability in actuarial accrued liabilities, consistent with the long-term perspeative of the calculations. In the January 1, 2011 actuarial valuation, the liabilities were computed usir)g the projected urlit credit cast method and the level dollar amortization method. The actuarial assurnptiyns utilized a 4% disrount rate. The valuation assumes a 10°,~~ healthcare cost trend irrorease fyr the year, reduced by decrements dawn to 5% in fisaai year 201 G. The remaining amortization periaci at C)ecemher 3'1, 2012. was twenty five years. _41_ TOWN 4F SOUTHOLD NC3TES TC7 FINANCIAL. STATEMENTS Docernber 31, 2012 C. DETAILED NOTES ON ALL Ft1ND5 (continued) 7. CQMPENSATED ABSENCES Tawn employees are granted vacatian and sick leave and earn compensatory absences in varying amounts. In the event of termination or upon retirement, an employee is entitled to payment for accumulated vacation and sick leave and unused compensatory absences at various rates subject to certain maximum limitations. Estimated vacation, sick Heave and compensatary absences accumulated by gavernmentai fund type employees have been recorded in the statements of net position. Payment of vacatian time and sick leave is dependent upon many faotors; therafare, timing of future payments is net readily determinable. However, management believes that sufficient resources will be made available for the payments of vacatian, sick have and compensatary absences when such payments become duo. As of Clecernbar 31; 2012, the value of the accumulated vacation Limo anri sick leave was $8,327,394 for tho primary government. D. OOMMITMENTS AND CONTINC;ENCIES Risk Management In commas with ether municipalities, Cho-.=. Town receives numoraus notices of claims. The Town estabiishr;~d a sr:~lf-insurance risk management program for general liability and health insurance which are bath <accountad for in the Risk Retontian Fund. Far the year ended L7eoarmber 31, 2012; the Town has a do-=ductible liability exposuro of $50,000 per claim far general liability, $25,000 per claim for automobile liability, police liability and employee benefits, and $10,000 por claim for public afficiais and employment practices. Any liability exposure above the deductible arnrnmts is covered by primary insurance policies up to $1,000,000 per claim for general liability, public officials, p.~alice and employment practices, and employee berefits. Aggregate exposures are $1,000,000 par claim far public officials, police and employment practices, $3,000,000 far employee benefits and general liability. Alter primary policy lirrrits are exhausted, tho excess exposure above the per claim or aggregate limits is covered by an umbrella liability policy of $10,OOO,UOU per claim and $10,000,000 in the aggregate. Far insurance far health benefits that are self-insured, the Town has insurance policies which provide coverage far specific medical cases in excess of $100,000 incurred during the year and paid within three months after year end, as well as coverage for ail other claims in the aggregate. The exposure to the Tawn under the aggregate policy is based on mor7thly enrollment. Considering the changes to enrollment during 2012, the attachment point for the aggregate policy was $4,045,385. There have been no significant reductior~rs in insurance coverage as compared to the prior year, and there were no settlements in excess of insurance coverage aver the last three years. The Town reserves for general liability claims are determined by a third panty administrator, and are reported when it is probable that a lass has occurred and the amount of that lass can be reasonably estimated. Claims reserves for general liability claims are re-evaluated periodically to take into consideration recently settled claims and any new developments and changes. The Town's liabilities for medical tlairns outstanding at year end are reported by the third party administrator, and are recorded when it is prababie that a loss has occurred and the amount of that loss can be reasanabiy estimated. Claims reserves for the general liability claims are re-evaluated periodically to take into oansidaratian recently settled claims and any new developments and changes. The Town's liabilities for medical claims outstanding at year end are reported by the third party administrator and are retarded when T.he tia,im has been inrurrerS and paid within 80 days of the year end. The Tnwn's cfiscreteiy presented componer7t units aro not included in the Town's self'-insurance risk management program for any claims. -42- TOWN qF SOUTHOLD Nt~TES TO FINANCIAL STATEMENTS December 31, 2012 D. CgMMITMENTS AND CONTINGENCIES (continued} Risk Management (aarrtinuad) Fund balance in the Risk f-ietention Fund is resT.ricted for futtare catasT.rophic losses and is not available for afhr.~r usos. Chanyras in the liability for claims and judgments for the year ended December 31, 2012 and 2011 are as follows: General Medical Liabilit 2012 2011 2012 2011 Unpaid C1¢tirns as of Dcaco-:rnbar 31; prior year $ 1,289.970 $ 272,213 $ G,386 $ G.62G Incurred Claims: Provision far insured events of the current fisoai year 3,944,732 ~I,041,1R94 59,155 4,G84 Increase (der.,raasoj in net provision for insured events of prior fiscal years 37.139 f50 t3) 13.928 3 040 Total incurrtad Claims and Claire adjustment<5 5 271 84'1 4 308 344 79 448 8.170 Payments af: Claims during the current year ..4.992.736 3.018:3'74. 62,033 1,805 Unpaid Claims as of December 31, aurrentyear $ 279,106 S 1,289,970 $ Cantfngent Liabilities Amounts received ar rac,aivabie frarrr grant agencies are subject T.o audit and adjustment by grantor agencies, principally the fedora) anr:i state government. Any d'asallowed claims, including amounts already collecked; may canstituta a liability of the applicable funds. The amount, if any, of expenditures that may be disallawed by the grantor carnal be detorrnined at this time, afihoug}r the Town expects such amrxu~ts, if any, to be irnrnaterial. Landtlll Closure and Past-Clasure Care Casts State and federal laws and reyulations required the Town to piece a final cover an ifs landfill sites and to perform certain maintenance and monitoring funotians at the sites far thirty years after closurca. The Town ceased accepting waste a4 its Cutchayue landfill as of C7ctober 8, 1993. Accordingly, as of December 31, 2012 the Tawn has recorded a liability of $344,566, in the government-wide financial sfaternants which represents the prevision to be made in future budgets for unfunded closure and postciosure landfill costs. As the liability is based on 100% of capacity fhere are no estirrrated costs of ciasure or postclasure remaining to be recognized. Actual costs may vary due to infiatian or dsaflatian; chanyes in ter..hnology, ar changes in regulations ar applicable laws. Canstructian and gthar Capital Acquisitian Cammitments The °f'awn is committed to capital improvements to its various facilities and infrastructure. At Decernbor 31, 20'12, these oammitments, reported in the Capital Projects Funcf amounted to $97,480. Animal Shelter Agreement in May 2011, the '7"awn enT.ered into an ayreement with The North Fork Animal Welfare League to operate and manage the 'T'own of Southold Animal Shelter. The agreement is far a term of four years commencing an June 1, 20i 1. The future payments associated with this ayreement axe as foilaws: ?013 $ 214,845 2014 ?..17,484 2015 9Fi183 52E3,512 _43_ TOWN OF SOUTHOLD NCaTES TO FINANCIAL. STATEMENTS December 31, 2412 d. COMMITMENTS AND CONTINGENCIES (continued} Lease Commitments grad Leased Assets The Tawn leases property and equipment under aperatinc~ leases. Total rental expenditures an such leases far the year ended December 31, 2012 were $261,685. Future obligations over the primary terms of the Town's leases as of December 31, 2012 areas Follows: 2013 $ 227,850 2014 194,559 2015 193,463 2816 104,049 2017 and thereafter 168.047 Total $ HEi3.077 E. CONdENSEd FINANCIAL STATEMENTS FOR THE dISCRETELY PRESENTEd COMPONENT UNITS The fallowing represents condensed financial stakements for the discretely presented component units as of and for the year ended December 31, 2012: Cnndanzetl 5tmemant n# Nat Pozitidn: Due from Capital Assets C'rthe:r Current ?rimary Nei of Current Lony-Term Nat Assets Govemmerrt Depreciation Liabilties Liabilities Position Fishers Island Perry D(stdct $ 938,704 $ 144,2?5 $ 70,554,393 $ 9,708,358 $ 1 Ag1,412 $ 8,487,528 Fishers Island Weste Management District 946,329 2,727,800 38,A44 3,631,685 Cutchogue-New Suffolk Park Olstnct {unaudited) 908,357 24,G97 117,558 24,617 225,915 Southold Park District (unaudited) 67,3fi5 60,596 879,180 77,958 920.183 Orient-East Marion park District (unaudited} 8,817 7,641 432,985 7,541 441,802 Mattltuck Park District (unaudited) 586.867 76,628 t,628,t92 80,675 2,210,012 Orient MOSqulto Distrtd{unaudited) .4,862 16,(Yi1 ..4,457. 16,548 8.804. $ 2,6fi0,301 $ 329,588 $ 1&,338,491 $ 1,952,039 $ 9,449,412 $ 15,934;924 Contlensad Statement of Activities: Pro ram Genera! Ravgnue Net Position Property Expenses Revenue. Net Expense. Tax .Other. .Change... ....111112.... __12131112. Fishers Island Ferry Dlstdot $ 3,625,905 $ 2,859,423 $ 985,982 $ 750,615 $ 79,118 $ (205,840) $ 8,693,377 $ 8,487,52II Fishers Island Waste Management Dlstrid 618,654 48,969 58Q685 526,900 2,333 {40,352} 3,872,037 3,631,585 Cutchogue-Now Suffdk Park District (unaudited} 144,187 144,167 230,000 506 (13,661} 230,578 225.915 Southold Park District (unaudited) .368,421 358,421 318,090 44,381 7.,980 918,223 929,183 Orient-East Marion Park DlstrlIX {unaudited) 36,026 38,0'lfi 3fl,200 18 1,192 44Q,610 441,802 Mattt[uck Park Distrtd (unaudited) 356,84b 29,870 338,175 464,860 35,754 704,434 2,105,573 2,270,012 Orient Mesquite District {woudRetl) 8G,877 BG,877 80,000. 47 6, 6~, 14,664 $.804 $ 5,225,795 $ 2,729,562 $ 2,498,233 $ 2,245,975 $ 93127 157131} $18,092,060 $15,934.929 _aq_ TOWN QF SOUTHOLO Nt)TES TO FINANCIAL STATEMENTS December 31, 2012 E. CONDENSED FINANCIAL STATEMENT5 FOR THE DISCRETELY PRESENTED COMPONENT UNITS {continued} Cornpieta financial statements of thr,=se componarrt units car? ba obtained from their respective administrative office=.s: tJriant Mosquito District Fishers Island Waste 145 Platt Hrtad Management District Orient, NY 11957 Fishers Island, NY 06390 Cutchogue-New 5uffalk Orient-East Marian Park District Park District P.O, f3ox'~'11 P.O. Box 12 Cutchoyue, NY 11935 Orient, NY 1195'! Southold Park Cistrict Mattiturk Park C')istrict P.O. E3ox 959 P.O. Box '1413 Southold; NY 11971 Mattiturk, NY 11952 Fishers Island Ferry District F.O. Box 1179 Southold. NY 11971 F. 2°lo TRANSFER TAX Transfer tax receipts are recorrJed in the Community Preservation Fund, and arc used for the purchase and/ar preservation of agricultural land, open space, parks, or historic preservation sitar. The tax applies to sales of vacant land worth $100,000 or more or sales or improved land worth $250,OOQ car more. Conveyance of real property far span space, parks or historic preservation purposes are exornpt from this tax. G. SUBSEQUENT EVENTS In April 2013, the Town redeemed $157,000 on the $715,006 BAN and added an additiorrai $500,000, for the Fisher's Island Ferry District's North Hemp Project on Fishers Island, resulting in a 13AN renewal of $1,058,000. The interest rate is.47% and is due April 2014. In August 2013, the Town redeemed $335,000 on the $800,000 t3AN, resulting in a BAN renewal of $465,000. °f'he interest rate is ..57°,~n ancS is dcae AugusT. 2014. H. NEW PRONOUNCEMENTS The Govemnaant Accounting Standards Board (GASH} has issued Statement No. 61 "The Financial Reporting Entity: Ornnil>crs - an amendment of CaASFi Statement Nc, i4 and 84."This statement modifies certain requirements for inclusion of component units in T.he financial reporting entity. The requirements of the clew statement ba>come effective for fiiscal periods beginning after June '15, 2012. The Governmental Accounting Standarcs Board {GASH) has issued Statement No. 65 °7tem5 F~reviocrsty RepOt#ed a5 .455£'t5 and Llat1(/Itle5". TI115 Statement establishes accounting and financial reporting standards that reclassify, as deferred outflows of resources or deferred inflows of resources, certain items that ware previously reported as assets and liabilities and recognizes, as outflows of resources or inflows of resources, certain items that were previously reported as resets and liabilities. The require.=,rnenis of the new statement become effective for fiscal periods beginning after December 15, 2012.. -45- TOWN OF SOUTHOLC} NrJTES TO FPNANCIAI. STATEMENTS December 31, 2012 NEW PRONOUNCEMENTS (continued) The Govermmental Accounting Standards 6oarrJ (GASH} has issued Statement No. 80 "Technical C.arreatians 2072 - an amerrdrnernt of GASH Statements No. 70 arrd No. 62. The objoctivo cat this Statement is tc improve acaaunting and financial reporting for a govermnental financiaR repoitirtg entity by resolving conflicting guidance that resulted ffram the issuance of two pronouncements, Statements No. 54, Fund Balance 8?eparfr`ng and Governrrrz.~rrtal Fund Type L~effnitions, and No. 62, Codificatian at' Accaunting and Finarralat Reporting ~uldance CvrrPadrrecl irr Pre-Naverrrber 3C7, 7989 FASB and A7CPA Pranauncements. The requirements of the new statement become eH'eckfve for fiscal periods beginning after December 16, 2012. The Town is currently evaluating the impact cat' the abovs.+ prcanouncomenis. _yG_ 1 1 I T 1 TOWN OF SOUTHOLD GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL Year Ended December 31, 2012 Variance Original Final Positive Budget Budget Actual .(Negative).... REVENUES Real property taxes $ 22,412,761 $ 22,412,761 $ 22,412,761 Other real property tax items 86,000 86,000 87,107 $ 1,107 Non-property tax items 885,473 885,473 885,473 Departmental income 417,700 469,700 365,374 {104,326} Intergovernmental charges and Iocal aid 460,385 495,385 265,515 {229,870} Use of money and property 273,600 273,600 258,080 (15,520} Licenses and permits 262,480 262,480 252,802 (9,678} Fines and forfeitures 225,500 225,500 171,918 {53,582} Sale of property and compensation for Toss 77,fi25 295,032 352,696 57,664 Miscellaneous Iocal sources 257,677 273,537 306,501 32;964 Interfund revenues 30,000 30,000 3fl,fl00 Skate aid 1,125,000 1,125,000 1,10$204 {16,800} Federal aid 55,50fl 58,646 243,693 185,047 Total Revenues 26 569,701 26.893 114 26 740,120 152 9942 EXPENDITURES General government support 6,493,011 6,559,469 5,674,226 885,243 Public safety 9,620,340 9,714,090 8,680,449 1,©33,641 Public health 34,300 34;8{}0 33,840 1,fl00 Transportation 532,400 524,456 474,117 50,339 Economic assistance and opportunity 1,304,700 1,304,633 1,229,260 75,373 Culture and recreation 314,810 315,327 285,985 29,342 Hame and community services 452,969 457,969 421,661 36,308 Employee benefits 8,428,805 8,849;204 8,192,073 657,131 Debt service -principal and interest 919,700 919;700 849,415 70,285 Total Expenditures .28,101,035. 28,$79;648 25,84Q986 ...2,838,662. Excess (Deficiency} of Revenues Over Expenditures {1,531;334) {1,786,534) 899,.134 2,685,fi68 Other Financing Uses Transfers out {284,655} {284,655} {224,372} 6fl.283 Total Other Financing Uses {284.655) {284.655) 224,372} 60,283 Net Change in Fund Balance $ {1.,815;989)..$ {2,071,1.89) 674,762 $ 2,745,951, Fund Balance at Beginning of Year 8,224;732 Fund Balance at End of Year ....$.......8,899:494. See notes to the financial statements: -47- TOWN OF SOUTHOLD HIGHWAY FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUdGET AND ACTUAL Year Ended December 31, 2012 Variance Original Final Positive REVENUES Budget Budget Actual {Negative) Realprapertytaxes $ 4,762;749 $ 4,762,749 $ 4,762,749 Other real properly tax items 7,050 7,050 7,569 $ 519 Use of money and property 5,500 5,500 11,971 6,471 Licenses and permits 7,000 7,000 12,322 5,322 Sale of property and compensation for loss 30,000 30,000 3,399 (26,601) State aid 326,819 338,007 338,278 271 Federal Aid 57;117 463,710 406.593 Total Revenues 5,139,118 5 207 423 5 595 998 392 575 EXPENDITURES General government support 12,100 12,100 6,610 5,490 Transportation 3,468,112 3,536,415 3,258,750 277,665 Employee benefits 1,709,754 1,709,756 1,706,967 2;789 Debt service -principal and interest 188 970 188,970 187.896 1..074 Total Expenditures 5:378936 5447,241 6,160,223 287,018 Excess {Deficiency) of Revenues Over Expenditures {239,818} {239,818} d39,775 679,593 Other Financing Uses Transfers out {121;OOOj {121.,000} {12(},977)_ 23 Total Other Financing Uses {121;000} {121,000} {120,977) 23 Net Change in Fund Balance $......360,818)... $ 360,818 318,798 $ ..679,616 Fund Balance at Beginning of Year 994,520.. Fund Balance at End of Year $ 1,313,318 See notes to the financial statements. -48- TOWN OF SOUTHOLD COMMUNITY PRESERVATION FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN EUND BALANCES -BUDGET AND ACTUAL Year Ended December 31, 2012 Variance Original Final Positive REVENUES Budget Bud,. et Actual Ne ative~ Non-property tax items $ 3,594,792 $ 3,594,792 $ 3,842,768 $ 247,976 Use of money and property 10,09fl 15,321 16,159 838 Miscellaneous local sources State aid 85,876 85,876 466,fl60 380,184 Federal Aid ..56,960.... 43 473 13 487 Total Revenues 3,690,758 3,752,949 4,368,460 615,511 EXPENDITURES Home and community services 3,120,919 6,197,150 2,467,079 3,730,071 Debt service -principal and interest 2 355 400 2 382 167 2 354281 27 886 Total Expenditures 5,476,319 8,579.317 4,821;360 .3,757,957 Excess {Deficienoyj of Revenues Over Expenditures (1,785,561} (4,826,368} (452,940) 4,373,468 Net Change in Fund Balance $ (1;785,561} $ (4,826,368}, (452;9fl0} 3 4,373;4~F3 Fund Balance at Beginning of Year ..10,845,180.. Fund Balance at End of Year $ 10,392,280 See notes to the financial statements, _4g_ TQWN t}F SOUTHt7LD PC7STEMPLGYMENT DENEFITS MEALTMGARE G®5TS -SCHEDULE OF FUNCtINCx PRQC-rRESS Year Ended Derembar 31, 2012 Ur7fundari Actuarial Actuarial Liability as a Valuation Date Actuariaal Value A<;crued llnfur7cted Percer7tage of January 1, of Assets Liability.... Liability Funded t4atin Covered C'ayroll Covered Payrcall 2012 $ =0- $ $2,121,23$ $ 82,12'1,23$ q.Oq% $ '14,316,48$ 573.61°i& 2011 -q• 74,366,$q$ 74,366,$q$ O.qO°/a 13,634,750 545.42°%u 2010 =0= 0$,597,$49 ` 66,597,$49 q.qq% '15,492,700 429.87% 2009 •CP- $2,493,2$0 62,493,280 q.q0°ia 14,754,952 423.54°.~° 20{78 -q= 45,806,25$ 45,886,258 q.q0°,~° '13,830,$71 331.19°l0 Rollfoward projection year _50_ 1 TI TOWN O SOUTLD COMBINING BALANCE SHEET NpN-MAJC}R GOVERNMENTAL FUNDS december 31, 2012 East-West Fire $outnold Fishers Solid Waste General Fund Special Protection Wastewater !s!and Sewer Management PartTOwn Grano Dls#rict District District District ,Totals, ASSETS _ Cash and inves'.manis $ 537,493 $ 29,416 $ 87,688 $ 33,269 $ 834,876 $ 1,302,342 Accounts reuaivadla 137,949 3.830 125,626 270,545 Dus from other funds 197,138 $ 44,253 138,024 24,173 7,684 461,328 808,672 State and faderai rsoaivab!as 30,997 87,644 115,637 Prepa'ds 43 094 46 fi56 89, t50 Total Assets $ 946 683 $ 44,253 $ i 67 639 $ 87,882 $ 44,863 $ 1 289 126. $ 2,588,806 LIAEILITdES AND FUND BALANCE LIABILITIES Accounts payable $ 19,169 $ 43,601 $ 13,136 $ 3,826 $ 373,717 $ 453,449 Due to other funds 8,732 1,617 14,349 Deferred revenue 213,413 138 424 ~ 20,446 016,792 888,277 Total l..iabilities 241,914 43,641 151=16Q 20,648 3828 892,128 1 352,476. FUND BALANCE Nenspendable 43,404 46,656 89.750 Restricted 652 652 Assigned 662,255 _.15,879. ..67,814. 41 A37 ...360,394... _.1,147,329. Total Fund Balance 796,349 662 15,879 67,814 41,037 407 040 1,237,731. Total Liabiidies and Funtl Balance $ 546,663 $ 84.253 $ 767,039 87 862 $ 44,663 $ ..1,299,126 $ 2,589,886 -61- T F STOL CC}MBINING STATEMENT C1F REVENUES, EXPENCtITURES, ANd CHANGES iN FUNL7 BALANCES - NC7N-MAJCIR (.aCVERNMENTAL FUNt')S For the Year Ended ®ecember 31, ~n12 Eaut-WPSt Fra Southol5 Fishers Solid WEtsta General Fund SpeF:ai Pratect(on tp7aete.vater Island hewer Management P2r1 Tawn.. la rent District District Dffinct D:sh:cl Tgiats~_... REVENUES Rnal prni)nrty )axru:a $ 587,678 749'389 tOt,950 ~ 1,808,814 3,239,132 C7ther rsal (,'ni)adV hex Iteme 9A~1 15 37 Eti3f7 Nnn-prepr,3ny ta~~ ItemS 580,~~186 5PJ0,485 Depegmentn htn9:ne 821,8G3 968 40,127 1,929,378 n u;r2s3rS U~wr ui r' iw uy aru9 pra9u~rty 6,46f3. 773 '.154 1rCti'~ 4 [dt1E3 9,f)89 Lieurraur u U i.~urrr'ilts 6,080 I IU,3'Y'7 l8 s'1"')" Sala of proped'y and compensation for lass 321,485 21,485 FAi&csllaneous Ic al sc~rces 657 657 State sld 158,847 337 160,184 Federal atd 3 184,437. 07,802 272,388 Tolel Favenuas 1,010,121 184fi87 744,177 162.874 40,25a 4,'21,216 7,303127 E%PENDITURES Orinaral ~,~au~rnmant culapoR 54,400 39,757 85,247 Pubiir.. ;,cafe=ty 558,564 73C7,8fiD 1,2U~,5?4 Hcm© and cnmmunlty snrvlcss 668,02M1 193,878 745 18.24; 2£301,805 3,743,599 Eml:rlnyee tmn~=fih;, 617,25r', 64Ei„dtisl 1202,6'17 Debt .service: Principal :;'..'I OfJ &1,8UU 4H'l,JU0 495,fJ(I(l Irrt treat 3764_. 4.CYI t} 1819'7,6.. 1______fi.3~m2(7 "I":.fu Lxf:¢andfE~_irc" 1 O'3f3,iv' 1,510 "7;58 464 +i ry ?Y,41 Y _ 4 S1U! Y49 / fYlr .,iCJ7. 3S4 I, 4,s Excess (Peticiency) of Revenues Over Expenditures '9'1.'967 {','1.;331) 5,'817 9{i,7~a~S 11,°,95 119!l67 22SAE0 Other Finsncin3 Uses: fransfvrcs out (11tt,r.,00; f1El},[)f)0 ('260,OOOi C uPed Oilier f~ irsancir~..y flora:: ft [7~~ U (11U 6Uft) I3~ f 15ft U08} ts00 CIOt! Net CPasnge in Fund Relunce 11,167 (,y„33i) 5,217 (13,2"a5j 71,335 (3ti,533) (,31;3801 Fund Rslsnues sP BeGirawring of Yusr 884,16? 8,90:3 1p,Ei62 H1,OEi9 !9,7112 140,533 °,26(1,111 F unr9 Liedanau„aP Ei°id C+f YUa! 705,:i4s3 S 652 1.5,87!3 `b fi7,tit4 41,0);17 4f7 r',UiJU 17'57,7;31 TOWN 4F SdUTH4LD SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Year ended December 31, 2012 Pass - Federal Through Federal GrantoriPass-through Grantort CFDA Identifying Federal Pro ram or Cluster Ti I Number Number Expenditures U. S. Department of Housing and Urban Development Pass-through pragram from: Suffolk County, New York Community Development Block Grant Program 14.218 $ 184,487 U.S. Department of Health and Human Services Pass-through pragram from: Suffolk County, New York Special Programs for the Aging -Title III, Part C -Nutrition 93.445 SCS10000001792 93,223 Nutrition Services Incentive Program 93.453 SCS10000001792 28,368 U.S. Departmen# of Transportation Pass-through program from: New York State Highway Planning and Construction 20.205 C0224031D030245 46,670 Pass-through program from: New York State Selective Traffic Enforcement Program 20.600 1,073 Pass-through program from: New York State Safety Incentive Grants for the Use of Seatlielts 20.604 PT-5259081 2,088 U.S. Department of the Interior Pass-through program from: New York State Clean Vessel Act 15.616 7,650 U.S. Department of Homeland Seeurity Pass-through program from: New Yerk State Severe Winter Storm, December 2010 97.036 FEMA-1957-DF3-NY 67,321 Hurricane Irene: August 2011 97.036 FEMA-4020-DR-NY 7,407 Hurricane Sandy, October 2012 97.036 FEMA-4085-DR-NY 538,521 Pass-through program from: New York State and Suffolk County 97.067 6 824 Homeland Security Grant Program Total expenditures of federal awards 9i 983 632 See accompanying notes to schedule of expenditures of federal awards _53_ TQWN OF SOUTH4LD NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS December 31, 2012 Note A-Basis of Presentation The accompanying schedule of expenditures of federal awards includes the federal grant activity of the Town of Southold and is presented on the modified accrual basis of accounting. The information in this schedule is presorted in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and dVon-Profit Organlzafions. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements. Note B -Summary of Signifioant Accounting Policies {1} Expenditures reported on the Schedule are reported on the modified accrual basis of accounting. Such expenditures are recognized following the cost principles contained in OMB Circular A-87, Cost Principles for State, Local and dndian Tribal Governments, wherein certain types of expenditures are not allowable or are limited as to reimbursement. (2) Pass-through entity identifying numbers are presented where available. (3} during October 2012, the Town of Southold, New York and much of the United States Eastern Coast, experienced significant damage from Hurricane Sandy which was declared a federal disaster. The federad disaster declaration enables the reimbursement of certain costs incurred related to debris removal and approved permanent work through the Federal Emergency Management Agency (FEMA} of the U.S. Department of Homeland Security. Significant debris removal costs were incurred during 2012.Tha Town of Southold, New York has reported federal expenditures relating to Hurricane Sandy (4085 DR NY} based on federally funded costs incurred during the year ended December 31, 2012 in the amount of $538,521 for which the Town has an approved Project Worksheet in place. Federal expenditures included in the schedule of federal awards relate to the following Project Worksheets: 01221 and 01091 for which expenditures were incurred during 2012. The remaining FEMA expenditures were costs related to the Severe Winter Storm (1957 DR NY} in the amount of $87,321 reported on Project Worksheet 00085 and Hurricane Irene {4020 DR NY} in the amount of $7,407 which were reported on Project Worksheet 03275. (4} Federal grants received by the Town are subject to audit and adjustment. If any expenditures are disallowed by the grantor agencies as a result of such an audit, the grantor agencies could make claims for reimbursement, which would become a liability of the Town. °54- CERTPFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITCIp'~S' 4~EPORT C7N INTEFCNAf.. (:ON7"igOL OVER FINANOIAL REPORTING AND ON COMPLIANCE ANC) OTNER MA'TT'ERS BASEG ON AN AUDIT pE FINdaNCIAI. STATEMENTS PEf~E=65tRCritFD'N AGGORC?ANE WITH G?11cFffVli~~NT.rtC!ZaI71N 7r~N"~AF?~,5 Honprable SupePVisrar grad Town F3oard Tawn of Southold Sputhpld, New York We have auditacl, in accordance with the auditing standards generally accepted in the lJnitarJ SCates r:rf America. and tho staancfards applicable tp the financial audits captained in Gaverrrrrrenf Auditirrc7 SfKarrrfarrfs issued by the CompCroller Graraeral pC the United States, the financial statements of the governmental activities, the atgregate discrr.=tely presearlted coraalaonent units, each majpr fund, and the aggregate remaining fund infcarrnation of Town of Srauthualci, New York, as pf and for the year ended December 31, 2012, and the related notes to the financial stratcamants, which callactively comprise the Town of Southold, New York's financial sCaterncants and (rave issued our rcaport thaarraon dated September 2a, 2Q13. The financial statr.~raaents of the Tr:rwn of Sauthold's discretely presented component units with the exception of twee, the Fishers Islzanrl Ferry [)istrict and the F'i>hers Island Wasie Management District, were pat audited as of the report date, nor were we ablra to satlst'y ourselves as to those financial activities by ether auditing procedures. The dlsr.,retely tareseratpcl cornponearat snits aradited represent 79.2"?<>, 76.1"/'0, and 76.940, respectively, of Clae assets, net positron, acrd revenues of then aggregate discretely presented aamppnant units. The financial statements of the Fishers IslansJ Ferry District and the Fishears Island Waste Management District were audited by other aurlitars whase report therean have beers furnishrad fo us grad in our opinion, insofar as it relates to the amounts included for those two component units, are taaseci solely an ttac reports cat' other auditprs. The financial statements of the Fishers Island Ferry District were audiCe.~d in accorciarsca= wittP Goverrxrnerrt Aarditrnc7 Standard's. Internal Control Over Financial Reporting Ira planning grad performing our audit of the financial statements, we ponsidered Town of Sauthcald, New Ycsrk's irrterrral control over financial reaporting (internal control) tp determine the audit procedures that are apprapri<ttrw in ttae circurnstancr.~ for thcx purposes pf expressing our apinions on the financial statements, but pat for the purpose of exprcassirag err opinion on the effectiveness of the Town of Southold, New York's internal control over t'iraanc,ial reporting. Apcorriingly, wta do net express an opinion pn the Pffectiveness of the Town pf Sauthald, New York's internal control over financial rel:uarting. A cfefror"errcy r}r irrPern[nt r.;orairol laxist s when the design or operation of a control does not allpw rnanagrxrnr~~nt e:rr ernplayees, irr the normal course of performing their assigned functions, to prevent, ar detect and correct rnisstatcaraaents ore a timely hiasis. A material weakness is a deficiency, or a carnkainatian cal deficiencies, Pn internal control such that thaxre is a reasanaksle possibility Shat a material misstatement of the Town of Southold, New York's finaraeial slatcaraacants will pat be prevented, or deter.ted and oarreeted an a timely basis. A sicynifictanf deticierrcy is a deficiency, or a c°ombinatian of deficiencies, in internal control that is less severe than a material tiveaicness, yet irnportarat enough to rasorit aCtentipn toy those rharraed with governance. PERSONAL SERVICE. TRWSTED ADVICE. ALBREC.HT, VIGGIANr~t, ~LLIRECK & (_•.C?I1rPANY, I'.C 2~~5 PARKAVEIVUE, s9Tl-I R..OOft 25 SU~°FOLKCOUhT NEW YORK, NY '10167 HAI_IpPAUt3E, NY'1178f; 3115 T. 212.792.1075 T.' bi;1.~,;;A,4500 F:61 ~~t34.9518 w~,vw.av!.corn _CC_ I'JLEf idUENY h9&IVIL+FF CiF BVk IIJTEFIVAf).FIM1, Internal Oontrol Ovec €inancial Reporting (continued) 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 internaB cantroB that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that have not been identified. Given these limitations, during our audit we did not identify any deficiencies in internal control we consider to be material weaknesses. However, materia( weaknesses may exist that have not been identified. We did identify certain deficiencies in internal control, described in the accompanying schedule of findings and questioned casts as 2012-01 and 2Di2-02 that we consider to be significant deficiencies. Oomoliance and Other Matters As part of obtaining reasonable assurance about whether the Town of Southold, New York's financial statements are free of materia{ misstatement, we performed tests of its compliance with certain provisions of Taws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and materiaB effect on the determination of financial statement amounts. However, praviding an opinion on compliance with those provisions was not an objective off our audit; and accordingly, we da 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 Govemment Auditing Standards. Town of Southold. New York's Response to Findings The Town of Southold, New York's responses to the findings identified in our audit are described in the accompanying schedule of findings and questioned costs. The Tawn of Southold, New York's responses were not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on these responses. Purpose of this Reoort The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Town of Southold, New York's internal control or on compliance. This repork is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Town of Southold, New York's internal control and compliance. Accordingly, this communication is not suitable far any other purpose. We noted certain other matters that we reported to management of the Town of Southold in a separate letter dated September 24, 2013. Hauppauge, New York September 24, 2013 -56- x~ . CERTIFIED PUBI_dC Af_COUNTANTS IN NDE T DiT 135' EgEPC)FiT bN C;C7MPI_IANGF O E H MAJ(7t3 F'F3QGaf~AM ANY.) ON INTFNgNA1.. C.C)N°f'Nt~L C3VYmH C7MPLIAN .E AS FiE UIRE.L? BY C7Mk3 CIHCUk.Att A-133 Honorable Superviscar anri Town Board Town of Southold Southold. New York I~etJOdt on CamplNance ft:rr Each Maior N=arderal f'ro, rq aim We have audita=.c9 the Towr1 of Soarthalci, New York's rcmpliance wiT.h the types, of compliance requirements describec9 in the bMl3 f:;irruJrar A-733 Corarptrance Supplement that could have a direct and material effeat or+ the Town of Southold, Naaw York"s major federal program fur the year ended December 31, 20i2. The Town of SouthalrJ, New York's major fedoral program is identified in the summary csf auditors' results section of the accad'npar7ying schodulc* of findings arrd questianeci casts. Management'snt's Ro_r~nrrsibilitY Management is responsible far campliance with thr~ raaquirementr; of laws, regulations, contraa;ts, and grants applicable to its federal programs. Auditors' Igesponsibility C)ur responsibility is to express an opinion on compliance the Town of Southold, New York's rnajar ts.deral program btiascod on our audit of the types of compliance requirements referred to above. We conducted our audit of cnrnp(iarace in accordarrC,e with auditinf; standards generally acrepT.ed in the United States of America; tyre standards applicable it:r finanr,Nal audits rantained in Government Atrdifing Standarrts, issued by the CornptralNer GeneraN of the Unite:=cY Staates; and C)MB Cars,:ular A-133, Atrdtts of States, Loaad Governments, and Nvn-Prnr`it Clrgtanizratiorrs. Those strrrrdards and (aMB C,ircdJlar A-'133 require that we plan and perform the audit to obtain reasanaf~Ie assurance about whether norrct:arnplianre with the types of a°,c>mplianre requirements referred to above that could have a direct anrf materiaal effcact on ra rraajtrr federal program ccrurred. An audit inchades examining, an a test basis, evidence about Town r>f Southcriri, New Ytark's compliarrca>, with thaase requirements and performing such other procedures as we ccsnsictererJ necr.`ssary ira ihc^ circumstances. We believe that our audit provides a reasonablca krzasis for our opiniran an acarnpNiance for the major federal program. However, raur audit does not pravida~ rr IegaN cieterrnirlation of 'T'own of Southold, New York`s compliance. C} r~lnion on._Each Ma'or 1=ederal Prra rarer In our opinion, the Tawn of Southold, New Ydrk; complied, in all rnatruxrial respects, wikla tho roe.{uirc>merrts referred to above that cotald have a direct and material effect ara its rnajar federal program for the year errrdotl f')erember 31, 2012. PERSCafJAL SERVrCE.TRUSTED ADVICE. AI,t3'~',-(::hiT, V'~~C3c3IAN0,.r'..IJRECK 2s COMF,+~1N1', PC - '245 PARK AVENUE, 39TH f~L.O<)R 25 ~tJf FC71..K: CCSt1RT NE11jYORK, N" 1D'IE>7 HAtJPFAUGE; N`('~..779R 3715 7~ 212.792.4075 'f~. b31.434.9500 F: (,31.434 9;r 1$ ww~n~.av-_com -5~- i ¢ r .raoeKrrner.•e e ~r arias.-eaN+~n~~an, _ Report on Internal Control Over Compliance Management of Town of Southold, New York, is responsible for establishing and maintaining effective internal control aver compliance with the types of requirements referred to above. In planning and performing our audit, we considered the Town of Southold, New York's internal control over compliance with the requirements that could have a direct and material effect on a major federal program to determine the auditing procedures that are appropriate in the ciroumstances for the purpose of expressing an opinion on compliance for its major federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Town of Southold, New York's internal control over compliance. A deficrancy in internal control over compliance exists when the design or operation of a control over compliance does not alBow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncomplianoe with a type of compliance requirement of a federal program on a timely basis. A materiaP weakness in interne! oonfrol over compliance is a deficiency, or combination of deficiencies, in internal control aver compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program wiBl not be prevented, or deteoted and corrected, on a timely basis. A significant deficiency in intema! confrod over compliance is a deficiency or a combination of deficiencies, in internal control aver compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal pontrol over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over complianoe that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal oontroB over compliance that we consider to be material weaknesses. However, we identified certain deficiencies in internal control over compliance, as described in the aocornpanying schedule of findings and questioned costs as items 2012-03 and 2012-04 that we consider to be significant deficiencies. The Town of Southold, New York's response to the internal oontroB over oornplianoe findings identified in our audit is described in the acoompanying schedule of findings and questioned ousts. The Town of Southold, New York's response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response. Purpose of this Report The purpose of this report on internaB control over compliance is solely to describe the scope of our testing of internaB control over compliance and the results of that testing based on the requirements of OM8 Circular A-133. Accordingly, this report is not suitable for any other purpose. Hauppauge, Now York September 24, 2013 -58- Tt1WN OP SOUTHOLD SCHEDULE OF FINDINGS AND OUESTIONED COSTS Year Ended December 31, '012 SUMMARY t7F AUDITC3R5' RESULTS 1. The auditors' rapart expresses a qualified opinion an the basic financial statemenTs of the Tawn of Sauthalrj, New York. 2. Two significant deficiencies in internal cantral relating to the audit of the financial statements are ropartc~d in 4he "IN[)EPENt7EN'T AUt'71'TORS' REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL S'T'A'T'EMENT:s PERFORMER IN ACCORDANCE WITH GQVEf1NMENT AClL)tT1NC 3. No instances of noncompliance material to the financial statements of the Tawn of 5outhald, New York were disrlased during T.he audit. 4. 'T'wa contra) deficiencies relating to the audit of the major federal award program are reported in the "IN['7EPENDENT AUDITORS' REPORT ON COMPLIANCE ON EACH MAJOR PROGRAM AND ON IN'T'ERNAL CONTROL OVER COMPLANCE REOUIRED BY OMB CIRCULAR A-133". 5. "f'he auditors' report an compliance for the major federal awards programs for the Town of Southold, New York expresses an unmodified oF~rinion an all major federal programs. 6. There were no audit findings that are required to be raparted in aacordanae with Section 510(x) of OMB Circular A-133. 7. The program tested major program was: CFC:)A Number Name of Federal Program or Cluster 97.0'36 Dlsastar Grants - PUbla ASSISta.nCP. 8. The threshold for distinguishing Types A and B programs was $300,000. 9. The lawn at' Southold was not determined to be a Iow-risk auditee. ~5g_ TOWN OF SOUTHOLD SCHEDULE OF FINDINGS AND QUESTICINED COSTS Year Ended December 31, 2012 FINDINGS AND QUESTIONED CO5T5 -FINANCIAL 5TATEMENTS AUDIT 2012-01 RECEIVER OF TAXES -SEGREGATION OF DUTIES (Repeat Finding} Condition We nototi that the Receiver of Taxes is the only aulhorizeti chr.=ek signer, prepares the deposit slips, brings the deposit to the har7k, receives the bank statements, and reconciles thae hank accounts. Criteria Internal centrals should be in place to provide for segregation of duties within accounting functions relating to cash receipts, check signing and bank reconciliations to reduce 4he risk of potential errors and fraud. Effect intentional or unintentional errors could ba made and no4 detected. Recommendation We recommend that the Receiver of Taxes separates these duties relating to the cash receipts and recanciliatian cycle to another employee so that no one person handles ail elements of a single transaction. We recommend that the Receiver of Taxes duties of preparing the bank deposit, depositing the funds and reconciling the bank statement be assigned to same other employee in order to establish a proper segregation of duties over cash receipts. Mena ement's Res onse Due to the small size of the Tax Receiver's office, certair7 furctions have been sefaaraled to alleviate the segregation of duties contiititar7. Tho Tax Recover is in the process of training the Deputy Tax Receiver in the preparation of the bank reconciliations. The Deputy Tax Receiver will also receive tf7e bank statements directly anti then subsequently prepare the monthly bank reconciliations. In addition; during the conduct of business during 2012, several bank deposit farms were cornpieted by the Deputy Receiver and the physical riepasits were made by the Deputy or another staff person. 2012-02 PURCHASING AND PROCUREMENT (Repeat Finding) Condition. The following was Hated when Testing the Town's rompiiancs with the board approved Procurement Policy: « Three instances where purchase order were dated subsequent to the invoice date Three instance where the purchase orders and the irrvaice dates were the same « CDne instance where a purchase order was not in place + qne instance where emergency repair was not properly documented « Cane instance where sole source provider was not properly documented + C8r7e instance where quotes were nut obtairsed C7ne instance where the Town did not c;o out To bid on certain services that aggregately exceeded the compatitiue bidding limits We also noted that there is no system 4n place to aggregate purchases by type and by vendor, In addition, when testing the internal control over cash disbursements, wa noted an instance where one voucher package, which supported a petty cash purchase, did Hat have the appropriate documenkation attached. Criteria The Town's purchasing policy requires that `neither goods nor services are to be ordered without first obtaining a purchase order signed by the Department Head and the Supervisor..." In addition, the Town's procurement. policy states that the purchaser should estimate the cumulative amount of the items of supply ar~ equipment needed in a given fiscal year. -60- TOWN OF SOUTHOLD SCHEf)tJLE OF FINDINGS AND QUESTIONED COSTS Year Ended December 31, 2012 FINDINGS AND QUESTIONED COSTS -FINANCIAL STATEMENTS AUDIT (continued) 2Q12-p2 PURCHASING AND PROCUREMENT (Repea# Finding) (continued) Effect The Town may be violating its purchasing policy ar7d General Municipal Law. 8ecommendation Wa recommend that the Board ensure that the Town departments are complying with Beard adopted palicies ar7d 4hta rc~quiroments eaf General Municipal Law. We further recommend that fhe Tawn should irnplemont a system which will provide accurate historical information on purchases of similar Items to monitor #ho aggregation at' purchases by vendor in order to obtain proper pricing on goads and services. In instances where the vendor utilized is a sole source provider, or emergency repair, dacumentatiara of such should be ncatad e:rn the respective purchase order. We also recommend that purchase orders are in placo in all instances where required as per the Town's adopted Procurement Policy. Management's Response The Town continues to work care a procedure to monitor the aggregation of purchases of similar type itertas. In addition, the Town has enforced their Procurement policy to the various departments to obtain quotes for items exceeding the Town's policy lirnfls ar7d to hotter document on the voucher packet exception items to the procurement policy (i.e, emergency regaair, sale saurco provider). FINDINGS AND QUESTIONED COSTS -MAJOR FEDERAL AWARD PROGRAMS U.S. DEPARTMENT qF HOMELAND SECURITY 2p12-p3 ALLOWABLE COSTS Federal Pro rq am Disaster Grants, Public Assistance, 1+357 DR NY, 4020 C.)R NY, 408, DR NY - CFDA Number 97.036 Critoria OMB Circular A-87 establishes principles and standards far determining allowable direct and indirect costs for Federal awards. Additionally, in aecardanae with OMB Circular A-87, Cost Principles for Ste#e, Local and Indian Tribal Gavernrnents, all eligible casts must be supportcci by adequate documc>ntation. Additionally, per the New York State Office of Emergency Management Public Assistance Handbook of Policies and Procedures (the "Handbook"), addresses cost reimbursement as well. Reirarbursernent of wages; based ore compensation paid in acrardanae with Town policy and actual time devoted to the project. Eligibility guidelines for applicant-owned equipment is limited to operating time only and calculated based an the hourly rates per the established FEMA Schedule of Equipment Rates.. Equipment not in actual use is considereri standby time and is not eligible for reimbursement. The Town is responsible for reviewing projec;# worksheets before submitting them for reimbursement. Coraditiara During the audit we noT.ed the fallowing: • Instances where the hours worked per the L)aily Activity Reports did net agree to the Project Worksheets » Instances where the payroll hourly rate per the Daily Activity Reports did net agree to the Praject Worksheets Instances where the Praject Worksheets used an incorrect fringe benefits percentage to determine reimbursement • Instances where the equipment rate per tlaa L)aily Activity Relaort did not agree to the Project Worksheets • Instances where the equipment hours worked per #ho Daily Activity Reports did not agree to the Project Worksheets -(i1- TOWN OF SOUTMOLD SCHEDUt_E OF FINDINGS AND C'~UESTICNED CC7STS Year Ended Deoember 31, 2012 FINDINGS AND Ql1ESTIDNED CDSTS - MAJDR FEDERAL AWARD PRAGRAMS (continued} Fp12-Q3 ALLC?WABLE CASTS (continued} Effect The 1 own may have received reimbursementlgrant praceads in excels of allowable costs. Recommendation We recammand the "l"awn establish policies to review the supportuig documentation to the project worksheets prepared by FEMA before submitting them far reimbursement to ensure the hours and pay rates agree to the Town's payroll records. In addition, Tawn parsannel should be familiar with certain oalculatians including fringe benefits when performing the calculation of full payroll expenditures which can be submitted for reimbursement. ManaaemanYS Raspanse The Town is warking with representatives from SEMO to revise the project worksheets prepared by FEMA to ensure accuracy and completeness. The Tawn ca7tinues to review supporting documentation far all project warksheats submitted far reimbursement. 20Y2-q4 REPDRTING federal Program Disaster GP'antS, Public Assistance, FEMA 4020 DR NY - CFDA Number a7.Q36 Criteria In acaordanre with the pmvisian listed in the Public Assistance Program Handbook of Palioias and Guidelines far Applicants related to FEMA 4020 DR NY hturricana Irene (`Handbook"}, within thirty days of completion of all wank associated with a project ar a defined Blue Baak date, the grantee is required to notify New Yark State C3ivisdon of Homeland Security and Emergency Services of the prajecT. completion using the FEMA Project #.dsting worksheet (P.4 certification) inr,Iuded in the Prajeot Application Supplement. Condition During the audit we noted the fallowing with respect to the completion and filing of the P.4 certification forms> + FEMA 4020 DR NY: it was determined that the Tawn did not file a P.4 farm oartifying that the project was complete, therafara the Tawn is required to file quarterly reports far all fpur quarters of 2012. The Town only filed one quarterly report far the first quarter ending 3131112. Effect The Town is not in cormpliance with the reporting requirements of the Handbook and grant agreement. Becoammandatian We recommend the Tawn implement policies and procedures to ensure individuals administering the grant agreements are aware of the necessary reporting requirements. Managermant's Restaanse Tha'f awn is warking an imlalemanting procedures to ensure reports are submitted on a 4imaly lassie. -62- TOWN OF SOUTNOLD SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year 1=ndP,d DF.CP,mbk?Y 31,x'012 SUMMARY SCHEDULE AF PRIOR AUDIT FINDINGS 2011-03 PROCUREMENT, SUSPENSION, AND DEBARMENT Federal Pragra,m Disaster Grants --CFDA Number 97.036 Criteria Per OMB Circular Compliance Supialement it inc-licates that laral governments are required to follow their awn procurement procedures provided they are in compliance with General Municipal Law guidelines. Condition We Hated one instance where items that should have been public bid in accordance with the Tawn°s procurement policy. .Effect. The Town may violate bath genera! municipal law and 4he Town's adopicd prtar:urement policy. Rectrrnmerrdatian We recornrnentt the Board ensures that the departrnen4s who contract with federal t'unrts are cornplyinq with Board adapted policies and the requirements of General Muralcipal Law. Mann ement's Ftes once. The Town will closely monitor the departrrrents receiving fedaral funds to ensure they are complying with the Town's adopted procurement policy. Current.Status The Tawn will continue to monitor purchasing by ali departments tra ensure they are complying with the Town's adopted procurement policy. 2011-04 FILING DEADLINES FOR AUDITED FINANCIAL STATEMENTS -Material Weakness Federal._Prp~ram Farm and Ranah Lands Protection Program -CFDA Number 10.313 Disaster Grants -CFDA Number 97.036 Criteria OMB Circular A-133 at Sectiar 320(x) states that the reporting package (which includes the audit reports) must be submitted na later than 30 days after the reports are receiver) from the indepentterrt auditors but no later than nine months after the end of the audit period. The Federal Audit Clearinghouse considers the submission requirement complete when it has received ba4h the da4a collection form anrt the reporting package electronically. Condition. The Tawn did Hat moat the required September 30, 2012 filing deadline for the audited financial statements duo to the incomplete audit at the one of the Town's component units, Fishers Island Ferry District. -63- TOWN OF SOUTHOLD SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended December 31, 2012 FINDINGS AND QUESTIONED COSTS -MAJOR FEDERAL AWARD PROGRAMS (continued) 2011-t}4 FILNNG DEADLINES FOR AUD{TED FINANCIAL STATEMENTS -Material Weakness (continued) Federal Proggr'arn (c.ontirxued) Farm and Ranch Lands Protection Program - CFDA Number 10.913 Disaster Grants - CFI:)A Number 97.036 Effect The Town is not in cpmplianre with OM6 Ciroular A-133 requirements Reconamendatlon We recommend that going forward the Town communicate,<s a strict deadline to its component units to submiT. their audited financial statements so that 4hey may he included in the Towrr's audit report so the Town can file timely. Management s Response I:)ue to the turnover at the Fishers Island Ferry District, the audit was unable to be completed timely and therefore delaying the filing of the Tawn's single audit. The Town has, communicated this issue to the management of the Fishers Island Ferry District and they are working arti a solution to ensure that future audits are completed kry a pa+ticular date in order for the Town tca filo their single audit report by the filing deadline of September 30`". Cu went. Stet us The Town ha,s verbally communicated with the Fisher's bland Ferry District that their audited financial statements Head to be completed and issued no later than September 30''" each ye:~ar. ~6ef~