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HomeMy WebLinkAbout2013 VINCENT D.CULLEN,CPA (1950-2013) CULLEN & DANOWSKI, LLP CERTIFIED PUBLIC ACCOUNTANTS JAMES F ODRIGUE. ,CPA Z PETER RDRIGUEZ,CPA JILL S.SANDERS,CPA DONALD J.HOFFMANN,CPA CHRISTOPHER V.REINO,CPA ALAN YU,CPA May 7, 2014 The Board of Fire Commissioners Southold Fire District Southold,New York In planning and performing our audit of the financial statements of the Southold Fire District(District) as of and for the year ended December 31,2013,in accordance with auditing standards generally accepted in the United States of America, we considered the District's internal control over financial reporting (internal control) as a basis for designing auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District's internal control.Accordingly,we do not express an opinion on the effectiveness of the District's internal control. However, during our audit we became aware of deficiencies in internal control other than significant deficiencies and material weaknesses and matters that are opportunities for strengthening internal controls and operating efficiency. The memorandum that accompanies this letter summarizes our comments and suggestions concerning those matters. This letter does not affect our report dated May 7, 2014,on the financial statements of the Southold Fire District. We will review the status of these comments during our next audit engagement. We have already discussed many of these comments and suggestions with various District personnel,and we will be pleased to discuss them in further detail at your convenience,to perform any additional study of these matters, or to assist you in implementing the recommendations. This communication is intended solely for the information and use of the Board of Fire Commissioners, management,others you deem appropriate within the District, and any governmental authorities you need to share this information with. It is not intended to be, and should not be,used by anyone other than these specified parties. Very truly yours, &xt&,i 9f- LJ-10 Cullen&Danowski,LLP 1650 ROUTE 112,PORT JEFFERSON STATION,NEW YORK 11776-3060 0 0 PHONE:631-473-3400•FAX:631-473-4863•WWWCDLLP.NET r Southold Fire District For the Year Ended December 31, 2013 STATUS OF PRIOR YEAR COMMENTS There were no prior year comments to report. CURRENT YEAR COMMENTS Advance Payment of Vouchers New York State Town Law Article 11 Section 176 4(a) permits the Board of Fire Commissioners to pass a resolution to authorize the payment in advance of the review and approval of claims for light, telephone, postage, freight and express charges. These claims must be presented at the next regular Board meeting for audit. During our audit,we noted that the District passed a resolution to pay certain claims in advance. However, this resolution includes items that are not covered by Town Law Article 11 Section 176 4(a) such as health insurance premiums, real estate taxes and credit cards. We noted instances during the year when these items were being paid in advance of Board review and also noted their inclusion in the items to be reviewed at the next scheduled meeting. We recommend that the District amend their prepayment resolution to comply with New York State Town Law. Page 2 VINCENT D.CULLEN,CPA (1950-2013) CULLEN & DANOWSKI, LLP CERTIFIED PUBLIC ACCOUNTANTS JAMES ODRIGU ,CPA Z PETER F..RDR[GUEZ,CPA JILL S.SANDERS,CPA DONALD J.HOFFMANN,CPA CHRISTOPHER V.REINO,CPA ALAN YU,CPA May 7,2014 To the Board of Fire Commissioners Southold Fire District Southold,New York We have audited the financial statements of the Southold Fire District (District) for the year ended December 31,2013,and have issued our report thereon dated May 7, 2014. Professional standards require that we provide you with the following information related to our audit. Our Responsibilities under U.S. Generally Accepted Auditing Standards and Government Auditina Standards As stated in our engagement letter dated December 1, 2013, our responsibility, as described by professional standards, is to express opinions about whether financial statements prepared by management with your oversight are fairly presented, in all material respects, in accordance with the financial reporting provisions of the New York State Office of the State Comptroller, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America (GAAP) as applied to governmental units. Our audit of the financial statements does not relieve you or management of its responsibilities. As part of our audit,we considered the internal control of the District. Such considerations were solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control. As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement,we performed tests of the District's compliance with certain provisions of laws, regulations, contracts and grants. However,the objective of our tests was not to provide an opinion on compliance with such provisions. Our responsibility for the supplementary information accompanying the financial statements,as described by professional standards, is to evaluate the presentation of the supplementary information in relation to the financial statements as a whole and to report on whether the supplementary information is fairly stated,in all material respects,in relation to the financial statements as a whole. We are responsible for communicating significant matters related to the audit that are, in our professional judgment, relevant to your responsibilities in overseeing the financial reporting process. However,we are not required to design procedures specifically to identify such matters. Our Responsibility for Other Information in Documents Containing Audited Financial Statements Our responsibility for other information in documents containing the District's audited financial statements does not extend beyond the financial information identified in our report and we have no professional obligation to perform procedures to corroborate such other information. In the event the financial statements are incorporated into a printed document, please forward a printer's proof for our approval before final production. 1650 ROUTE 112,PORT JEFFERSON STATION,NEW YORK 11776-3060 n o PHONE:631-473-3400•FAX:631-473-4863•WWW.CDLLP.NET Southold Fire District For the Year Ended December 31, 2013 Planned Scope and Timing of the Audit We performed the audit according to the planned scope and timing previously communicated to you in our engagement letter. Significant Audit Findings Qualitative Aspects of Accounting Practices Management has the responsibility for the selection and use of appropriate accounting policies. The significant accounting policies used by the District are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during the year. We noted no transactions entered into by the District during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. Management feels that their estimates are reasonable in relation to the financial statements taken as a whole. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit,other than those that are trivial,and communicate them to the appropriate level of management. In our judgment, none of the adjustments correcting misstatements that we proposed, which were accepted and recorded by the District and are attached to this communication, were material either individually or in the aggregate,to each opinion unit's financial statements taken as a whole. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction,concerning a financial accounting,reporting,or auditing matter that could be significant to the financial statements or the auditor's report.We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in the management representation letter dated May 7,2014. Page 2 Southold Fire District For the Year Ended December 31, 2013 Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters,similar to obtaining a"second opinion" on certain situations. If a consultation involves application of an accounting principle to the District's financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Other Audit Finding or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the District's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. Other Matters With respect to the supplementary information accompanying the financial statements, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with the financial reporting provisions of the New York State Office of the State Comptroller, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. This information is intended solely for the use of the Board of Fire Commissioners and management of Southold Fire District and is not intended to be and should not be used by anyone other than these specified parties. Very truly yours, &-at"i 7- Ltm-,Lqe�, LJ.-e Cullen&Danowski,LLP Page 3 Southold Fire District Adjusting Journal Entries For the Year Ended December 31,2013 Account Description Debit Credit Adjusting Journal Entry# 1 General Fund-To record accounts receivable at year end. A0.1020.0380.000 Accounts Receivable 3,643.90 A0.4050.2410.000 Rentals 3,643.90 Total 3,643.90 3,643.90 Adjusting Journal Entry# 2 General Fund-To record prepaid expenses at year end. A0.1050.0480.000 Prepaid Expenses 5,166.75 A0.1050.0480.000 Prepaid Expenses 9,229.65 A0.5110.3410.480 FP-Insurance Costs 9,229.65 A0.5130.9010.800 Emp.Benefits-State Retirement System Contribution 5,166.75 Total 14,396.40 14,396.40 Adjusting Journal Entry# 3 General Fund-To adjust nonspendable fund balance to agree with prepaids at year end. A0.3310.0917.000 Unassigned: Fund Balance 14,396.40 A0.3010.0806.000 Nonspendable: Prepaids 14,396.40 Total 14,396.40 14,396.40 Adjusting Journal Entry# 4 General Fund-To reclassify amount owed to SCWA out of utilities expense and into hydrant rental. A0.5070.3410.417 FP-Utility&Water Expenses/Hydrant Rental 24,300.56 A0.5070.3410.415 FP-Utility&Water Expenses/Utilities&Telephone 24,300.56 Total 24,300.56 24,300.56 Adjusting Journal Entry# 5 General Fund-To correct miscoding of payroll expenses. A0.5030.3410.103 FP-Personal Services/Janitor's Salary 3,567.00 A0.5030.3410.108 FP-Personal Services/Maint Mechanic 2,218.13 A0.5030.3410.106 FP-Personal Services/Payroll Expenses 5,785.13 Total 5,785.13 5,785.13 Adjusting Journal Entry# 6 Equipment reserve-To adjust encumbrances balance at year end. H0.3020.0911.000 Restricted for Capital-Encumbrances 161,643.00 H0.3020.0910.000 Restricted for Capital 161,643.00 Total 161,643.00 161,643.00 Adjusting Journal Entry# 7 General Fund-To adjust encumbrances at year end. A0.3310.0917.000 Unassigned:Fund Balance 200.00 A0.3305.0915.001 Assigned:Unappropriated/Encumbrances 200.00 Total 200.00 200.00 1 of 2 Account Description Debit Credit Adjusting Journal Entry# 8 General Fund-To record encumbrance for bunker gear per Board request and client information provided. A0.3310.0917.000 Unassigned:Fund Balance 6,500.00 A0.3305.0915.001 Assigned: Unappropriated/Encumbrances 6,500.00 Total 6,500.00 6,500.00 Adjusting Journal Entry# 9 Capital Reserves-To close out net income to restricted fund balance for financial statement presentation purposes. H0.3310.0917.000 Unassigned:Fund Balance 43,650.34 H1.3310.0917.000 Unassigned: Fund Balance 5.02 H0.3020.0910.000 Restricted for Capital 43,650.34 H1.3020.0910.000 Restricted for Capital 5.02 Total 43,655.36 43,655.36 Adjusting Journal Entry# 10 Financial Statement adjustment-adjust restricted cash to equal reserves A0.1010.0200.000 Restricted Cash F/S adjustment 253.00 A0.1000.0200.003 Cash-Checking-BNB 253.00 Total 253.00 253.00 2of2 1 1 1 Southold Fire District Financial Statements (Regulatory Basis) 1 with Independent Auditor's Report December 31, 2013 1 1 1 1 1 ' SOUTHOLD FIRE DISTRICT Table of Contents December 31, 2013 Paee Independent Auditors Report 1 Basic Financial Statementslato Re � � rY Basis) Balance Sheet-General Fund and Account Groups 3 Statement of Revenues, Expenditures and Changes in Fund Balance-General Fund 4 Statement of Fiduciary Net Position-Fiduciary Fund 5 Notes to Financial Statements 6 1 Other Supplementary Information Schedule of Revenues, Expenditures and Changes in Fund Balance -Budget and Actual-General Fund-Operating 18 Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 19 i 1 i 1 VINCENT D.CULLEN,CPA (1950-2013) CULLEN & DANOWSKI, LLP JAMES E.DANOWSKI,CPA CERTIFIED PUBLIC ACCOUNTANTS PETER F.RODRIGUEZ,CPA JILL S.SANDERS,CPA ' DONALD 1.HOFFMANN,CPA CHRISTOPHER V.REINO,CPA ALAN YU,CPA r INDEPENDENT AUDITOR'S REPORT i . To the Board of Fire Commissioners ' Southold Fire District Southold,New York We have audited the accompanying financial statements (regulatory basis) of the Southold Fire District, as of and for the year ended December 31, 2013, and the related notes to the 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 the financial reporting provisions of the New York State Office of the State Comptroller; this includes the design,implementation, 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. Auditor's Responsibility rOur responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the ' standards applicable to financial audits contained in the Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment,including the assessment of the risks of material misstatement of the financial statements,whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation 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 on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management,as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. r r 1650 ROUTE 112,PORT JEFFERSON STATION,NEW YORK 11776-3060 _ 1 1 PHONE:631-473-3400•FAX:631-473-4863•WWW.CDLLP.NET Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the assets, liabilities and fund balances of each fund and account group of the Southold Fire District, as of December 31, 2013, and their respective revenues, expenditures and changes in fund balance for the year then ended, in accordance with the financial reporting provisions of the New York State Office of the State Comptroller as described in Note 1. ' Basis of Accounting We draw attention to Note 1 of the financial statements, which describes the basis of accounting. The financial statements are prepared on the basis of the financial reporting provisions of the New York State Office of the State Comptroller, which is a basis of accounting other than accounting principles generally accepted in the United States of America,to comply with the requirements of the New York State Office of the State Comptroller. Our opinion is not modified with respect to that matter. Other Supplementary Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Southold Fire District's basic financial statements. The other supplementary information on page 18 is presented for purposes of additional analysis and is not a required part of the basic financial statements. The other supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial ' statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the other supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards,we have also issued our report dated May 7, 2014, on our consideration of the Southold Fire District's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance.That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Southold Fire District's internal control over financial reporting and compliance. Restriction of Use This report is intended solely for the use and information of the Board of Fire Commissioners and management of the Southold Fire District and the New York State Office of the State Comptroller and is not intended to be and should not be used by anyone other than these specified parties. May 7,2014 - 2 - ' SOUTHOLD FIRE DISTRICT Balance Sheet-General Fund and Account Groups 1 December 31,2013 Account Groups General General ' General Fixed Long-Term Fund Assets Debt Total ASSETS ' Cash Unrestricted $ 650,813 $ $ $ 650,813 Restricted 1,506,953 1,506,953 Accounts receivable 3,644 3,644 Prepaids 14,396 14,396 Land 258,752 258,752 Buildings and improvements 3,279,547 3,279,547 Equipment 3,328,682 3,328,682 Amount to be provided for retirement of long-term debt 600,000 600,000 Total Assets $ 2,175,806 $ 6,866,981 $ 600,000 $ 9,642,787 LIABILITIES Accounts payable $ 60,116 $ $ $ 60,116 Accrued liabilities 780 780 Bonds payable 600,000 600,000 Total Liabilities 60,896 - 600,000 660,896 FUND BALANCE Investment in general fixed assets 6,866,981 6,866,981 Nonspendable 14,396 14,396 Restricted: Capital,equipment 1,475,640 1,475,640 Capital,building 31,313 31,313 Assigned:Unappropriated 18,700 18,700 Unassigned 574,861574,861 - Total Fund Balance 2,114,910 6,866,981 81981,891 Total Liabilities and Fund Balance $ 2,175,806 $ 6,866,981 $ 600,000 $ 9,642,787 See Notes to Financial Statements -3- ' SOUTHOLD FIRE DISTRICT Statement of Revenues,Expenditures and Changes in Fund Balance-General Fund For the Year Ended December 31,2013 Capital Operating Reserve Total REVENUES Real property taxes $ 1,808,413 $ $ 1,808,413 Interest and earnings 1,038 1,657 2,695 Rentals 22,525 22,525 Sale of equipment 10,000 10,000 Insurance recoveries 3,707 3,707 Miscellaneous 225 225 Total Revenues 1,845,908 1,657 1,847,565 EXPENDITURES Personal services 245,347 245,347 Equipment and capital outlay 136,898 178,001 314,899 Fire protection 436,770 436,770 State retirement system 22,737 22,737 Service award program 355,867 355,867 Social security 18,733 18,733 Workers'compensation 49,728 49,728 Medical and accident insurance 27,042 27,042 Debt service-principal 150,000 150,000 Debt service-interest 30,150 30,150 Total Expenditures 1,473,272 178,001 1,651,273 Excess(Deficiency)of Revenues Over Expenditures 372,636 (176,344) 196,292 OTHER SOURCES AND USES Operating transfers in 220,000 220,000 Operating transfers out (220,000) (220,000) Total Other Sources and Uses (220,000) 220,000 - Net Change in Fund Balances 152,636 43,656 196,292 Fund Balance-Beginning of Year 455,321 1,463,297 1,918,618 Fund Balance-End of Year $ 607,957 $ 1,506,953 $ 2,114,910 i iSee Notes to Financial Statements -4- SOUTHOLD FIRE DISTRICT Statement of Fiduciary Net Position-Fiduciary Fund December 31,2013 Trust and Agency ASSETS Service award program assets $ 3,291,128 Total Assets $ 3,291,128 LIABILITIES Service awards $ 3,291,128 Total Liabilities $ 3,291,128 r 1 r r r r r 1 r r r See Notes to Financial Statements -5- SOUTHOLD FIRE DISTRICT Notes to Financial Statements 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the Southold Fire District (District) as of and for the year ended December 31, ' 2013, have been prepared in accordance with the financial reporting provisions of the New York State Office of the State Comptroller, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America (GAAP) for governmental units. The Governmental Accounting Standards Board (GASB) is the standard-setting body for establishing GAAP for governmental units. The financial statements of the District have been prepared using only the modified accrual basis of accounting. This method differs from GAAP,which requires the preparation of additional financial statements using the accrual basis of accounting. The accrual basis financial statements require the capitalization and depreciation of property and equipment and the recording of long-term liabilities. Under the modified accrual basis of accounting, property and equipment are recorded as an expenditure when purchased,the proceeds of long-term debt are reported as other financing sources and the payment of long-term debt and other long-term liabilities are recognized to the extent that the liabilities mature during the year. In addition, GAAP requires the financial statements to be prepared in accordance with GASB Statement No. 34, Basic Financial Statements- and Management's Discussion and Analysis -for State and Local Governments. GASB 34 financial statements require the presentation of government-wide financial statements and management's discussion and analysis. The accounting practices used to prepare these financial statements do not require compliance with GASB 34. The significant accounting policies of the District are described below: A. Financial Reporting Entity The District is a district corporation and political subdivision of the state of New York, distinct from the municipalities in which it is located. In general, the District is governed by an elected board of commissioners (Board) and is required to have a treasurer and a secretary. The District has the legal authority to levy taxes on real property and to borrow in its own name. The District is governed by General Municipal Law and other laws of the state of New York and its subdivisions. The scope of activities included in the accompanying financial statements is the transactions which comprise the District's operations. The primary function of the District is to provide fire-protection, rescue and emergency services to the community. Services such as firefighting, fire prevention and public education support the primary function. The financial reporting entity includes all funds, functions and organizations over which the District's Board exercises oversight responsibility. Oversight responsibility is determined on the basis of financial interdependency, selection of governing authority, designation of management, ability to significantly influence operations and accountability for fiscal matters. B. Basis of Presentation Fund Financial Statements The District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to assist management by segregating transactions related to certain government functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. ' - 6- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) The District records its transactions in the fund types described below: Governmental Funds Governmental funds are those through which most governmental functions are financed. The acquisition, use and balances of expendable financial resources and the related liabilities are accounted for through governmental funds. The measurement focus of the governmental funds is based upon determination of financial position and changes in financial position. The District utilizes the following governmental fund: General Fund - the general fund is the principal operating fund of the District. It is used to account for all financial resources except those required to be accounted for in another fund. Fiduciary Funds Fiduciary funds are used to account for assets held by the District in a trustee or custodial capacity. Trust and Agency Fund - the trust and agency fund is used to account for money (and/or property)received and held in the capacity of trustee,custodian,or agent. Account Groups Account groups are used to establish accounting control and accountability for the District's general fixed assets and general long-term obligations. Account groups are not "funds". They are concerned only with the measurement of financial position, and not with the results of operations. The District utilizes the following account groups: General Fixed Assets Account Group - the general fixed assets account group is used to account for land,buildings,improvements and equipment owned by the District. General Long-Term Debt Account Group-the general long-term debt account group is used to account for all long-term debt and other obligations of the District. C. Measurement Focus and Basis of Accounting ' The fund statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized when measurable and available. The District considers all revenues reported in the governmental funds to be available if the revenues are collected within 60 days after the end of the fiscal year. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt and claims and judgments,which are recognized as expenditures to the extent they have matured.General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term debt and acquisitions under capital leases are reported as other financing sources. D. Real Property Taxes Real property taxes are levied annually by the District no later than November 1St and become a lien on December 1St. The District's tax levy is collected by the Town of Southold and then remitted to the District from January to June. The County of Suffolk is responsible for all uncollected taxes. - 7- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) E. Use of Estimates The preparation of financial statements in conformity with a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenditures during the reporting period. Accordingly,actual results could differ from those estimates. ' F. Cash ' Cash consists of cash on hand, demand deposits and short-term investments with original maturities of three months or less from date of acquisition. G. Accounts Receivable Accounts receivable are shown net of an allowance for uncollectibles, if any. However, no allowance for uncollectibles has been provided since it is believed that such allowance would not be material. H. Prepaids Prepaids represent payments made by the District for which benefits extend beyond year end. These payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid ' expenditures in the financial statements. A current asset for the prepaid amounts is recorded at the time of purchase and an expenditure is reported in the year the goods or services are consumed. A portion of fund balance has been classified as nonspendable to indicate that prepaids do not constitute available spendable resources. I. Restricted Assets ' Certain cash balances are restricted by various legal and contractual obligations,such as legal reserves. J. General Fixed Assets Capital assets are reported in the general fixed asset account group at original cost, when the information is available, or estimated historical cost based on professional third-party information. The capital threshold, the dollar value above which asset acquisitions are added to the capital assets accounts,is$1,000 for all assets. K. Employee Benefits-Pension Plans Eligible District employees participate in the New York State Employees' Retirement System. Eligible volunteer firefighters and ambulance volunteers participate in the District sponsored Length of Service Award Program. -8- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) L. Accrued Liabilities and Long-Term Obligations In the governmental funds,payables and accrued liabilities are paid in a timely manner and in full from current financial resources. When applicable, claims and judgments that will be paid from the governmental funds, are reported as a liability in the fund financial statements only to the extent that they have matured. Bonds and other long-term obligations that will be paid from governmental funds are recognized as a liability in the fund financial statements when due. Long-term obligations represent the District's future obligations or future economic outflows. The liabilities are reported in the general long-term debt account group. ' M. Fund Balance The fund statements report fund balance classifications according to the relative strength of spending constraints placed on the purpose for which resources can be used,as follows: Nonspendable - Consists of amounts that are inherently nonspendable in the current period either because of their form or because they must be maintained intact. Nonspendable fund balance consists of prepaids. ' Restricted-Consists of amounts that are subject to externally enforceable legal purpose restrictions imposed by creditors, grantors, contributors, or laws and regulations of other governments; or through constitutional provisions or enabling legislation.The District has established the following restricted fund balances: Capital Reserve A Capital Reserve (General Municipal Law Section 6-g) is used to finance all or part of the costs of construction, reconstruction, or acquisition of "specific" or "type" capital improvements or equipment. The establishment of any capital reserve is subject to mandatory referendum (voter approval). Expenditures from a "specific" reserve require a resolution by the Board of Commissioners. Expenditures from a "type" reserve require a resolution by the Board of Commissioners,subject to permissive referendum. Assigned-Consists of amounts that are subject to a purpose constraint that represents an intended use established by the District's Board of Fire Commissioners.The purpose of the assignment must be narrower than the purpose of the general fund, and in funds other than the general fund, assigned fund balance represents the residual amount of fund balance. Assigned fund balance includes encumbrances not classified as restricted at the end of the fiscal year. Unassigned- represents the residual classification for the District's general fund and could report a surplus or deficit. In funds other than the general fund,the unassigned classification should be used only to report a deficit fund balance resulting from overspending for specific purposes for which amounts had been restricted or assigned. Fund Balance Classification Any portion of fund balance may be applied or transferred for a specific purpose either by voter ' approval if required by law or by formal action of the Board of Fire Commissioners if voter approval is not required. Amendments or modification to the applied or transferred fund balance must also be approved by formal action of the Board of Fire Commissioners. -9 - SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) The Board of Fire Commissioners shall retain the authority to assign fund balance. In circumstances where an expenditure is incurred for a purpose for which amounts are available in multiple fund balance classifications (e.g., expenditures related to reserves) the expenditure is to be spent first from the restricted fund balance to the extent that an approved permissive referendum is in place or the reserve has been appropriated by the Board of Fire Commissioners,and then from the unrestricted fund balance. Expenditures incurred in the unrestricted fund balances shall be applied first to the assigned fund balance to the extent that there is an assignment and then to the unassigned fund balance. 2. STEWARDSHIP.COMPLIANCE AND ACCOUNTABILITY A. Budgets The District administration prepares a proposed budget for approval by the Board for the general fund, the only fund with a legally adopted budget. Budgets are adopted annually on the basis of the financial reporting provisions of the New York State Office of the State Comptroller to comply with the filing requirements of the District's Annual Financial Update Document. Appropriations are adopted at the program line item level. Appropriations established by the adoption of the budget constitute a limitation on expenditures (and encumbrances) that may be incurred. Appropriations authorized for the year are increased by the amount of encumbrances carried forward from the prior year. Appropriations lapse at the end of the fiscal year unless expended or encumbered. Encumbrances will lapse if not expended in the subsequent year. Appropriations authorized for the current year can be funded by the planned use of specific reserves, and can be increased by budget amendments approved by the Board as a result of selected new revenue sources not included in the original budget (when permitted by law) and appropriation of fund balance. These supplemental appropriations may occur subject to legal restrictions, if the Board approves them because of a need that exists which was not determined at the time the budget was adopted. A summary of the general fund budget is as follows: Budget approved by the Board of Fire Commissioners $ 1,830,875 Encumbrances from prior year 12,000 Final Budget $ 1,842,875 B. Encumbrances Encumbrance accounting is used for budget control and monitoring purposes and is reported as a part of the governmental funds. Under this method, purchase orders, contracts and other commitments for the expenditure of monies are recorded to reserve applicable appropriations. Outstanding encumbrances as of year-end are presented as part of assigned unappropriated fund balance, unless classified as restricted or committed, and do not represent expenditures or liabilities. These commitments will be honored in the subsequent period. Related expenditures are recognized at that time,as the liability is incurred or the commitment is paid. - 10 - SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) 3. DEPOSITS WITH FINANCIAL INSTITUTIONS AND INVESTMENTS The District's investment policies are governed by state statutes and District policy. Resources must be deposited in Federal Deposit Insurance Corporation (FDIC) insured commercial banks or trust companies located within the state. Permissible investments include obligations of the U.S. Treasury and U.S. Agencies, repurchase agreements and obligations of New York State or its localities. Collateral is required for demand and time deposits and certificates of deposit not covered by FDIC insurance. Obligations that may be pledged as collateral are obligations of the United State and its Agencies and obligations of New York State and its municipalities. Investments are stated at fair value. Custodial credit risk is the risk that in the event of a bank failure, the District's deposits may not be returned to it. GASB directs that deposits be disclosed as exposed to custodial credit risk if they are not covered by depository insurance and the deposits are as follows: A. Uncollateralized, B. Collateralized by securities held by the pledging financial institution,or C. Collateralized by securities held by the pledging financial institution's trust department or agent but not in the District's name. None of the District's aggregate bank balances, not covered by depository insurance, were exposed to custodial credit risk as described above at year end. The District did not have any investments at year end or during the year. Consequently, the District was not exposed to any material interest rate risk. Investment pool: The District participates in the Cooperative Liquid Assets Securities System - New York (NYCLASS), a multi-municipal cooperative investment pool agreement pursuant to New York State General Municipal Law Article 3-A and 5-G, whereby it holds a portion of the investments in cooperation with other participants.The investments are highly liquid and are considered to be cash equivalents.All NYCLASS investment and collateral policies are in accordance with General Municipal Law,Sections 10 and 11. ' Total investments of the cooperative at December 31, 2013 are $159,717,027, which consisted of $53,263,606 in repurchase agreements collateralized by a U.S. Government Agency Security, $46,182,721 in U.S. Treasury Securities $5,270,700 in municipal bonds, and $55,000,000 in collateralized bank deposits,with various interest rates and due dates. The following amounts are included as cash: Carrying Fund Amount General fund $ 304,277 General fund-Capital reserves 1,002,526 $ 1,306,803 The above amounts represent the cost of the investment pool shares, and are considered to approximate market value. The Lead Participant of NYCLASS is the Village of Potsdam. Additional information concerning NYCLASS, including the annual report, can be found on its website at www.newyorkclass.org. - 11 - SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) 4. GENERAL FIXED ASSETS The District obtained an independent appraisal dated December 31, 2011. This appraisal has been updated for current year additions and deletions. Capital assets balances and activity for the year ended December 31, 2013,were as follows: Balance Balance December 31, December 31, 2012 Additions Deletions 2013 Land $ 258,752 $ - $ - $ 258,752 ' Buildings and improvements 3,268,995 10,552 - 3,279,547 Equipment 3,240,678 304,733 (216,729) 3,328,682 $ 6,768,425 $ 315,285 $ (216,7291 $ 6,866,981 S. PENSION PLANS A. New York State and Local Employees'Retirement System Plan Description The District elected to participate in the New York State and Local Employees' Retirement System (ERS). This system is a cost-sharing, multiple-employer, defined benefit pension plan. The ERS provides retirement and disability benefits, annual cost of living increases, and death benefits to plan members and beneficiaries. Obligations of employers and employees to contribute and benefits to employees are governed by the New York State Retirement and Social Security Law (NYSRSSL). As set forth in the NYSRSSL, the Comptroller of the State of New York (Comptroller) serves as sole trustee and administrative head of the ERS.The Comptroller shall adopt and may amend rules and regulations for the administration and transaction of the business of the ERS and for the custody and control of its funds. The ERS issues publicly available financial reports that include financial statements and required supplementary information. These reports may be found at www.osc.state.ny.us or may be obtained by writing to: NYS and Local Retirement Systems, Office of the State Comptroller, 110 State Street, Albany, NY 12244. Funding Policy Plan members who joined the system before July 27, 1976, are not required to make contributions. Those joining on or after July 27, 1976, and before January 1, 2010, with less than ten years of credited services are required to contribute 3% of their salary. Those joining on or after January 1, 2010 and before April 1, 2012, are required to contribute 3% of their salary throughout active membership. Those joining on or after April 1, 2012, are required to contribute between 3% and 6% dependent on their salary throughout active membership. The Comptroller annually certifies the actuarially determined rates expressly used in computing the employers' contributions based on salaries paid during the ERS' fiscal year ending March 31. Contributions for the current year and two preceding years were equal to 100 percent of the contributions required,and were as follows: 2013 2012 2011 District contributions $ 30,316 $ 28,948 $ 20,244 1 - 12 - SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) B. Length of Service Award Program(LOSAP) The District established a defined benefit LOSAP for the active volunteer firefighters of the Southold Fire Department. The program took effect on January 1, 1993. The program was established pursuant to Article 11-A of the General Municipal Law. The program provides municipally-funded pension-like benefits to facilitate the recruitment and retention of active volunteer firefighters. The District is the sponsor of the program.The information contained in this note is based on information for the Length of Service Award Program for the plan year ending on December 31, 2013. Program Description Participation, Vesting and Service Credit Active volunteer firefighters who have reached the age of 18 and who have completed 1 year of firefighting service are eligible to participate in the program. Participants acquire a nonforfeitable right to a service award after being credited with 5 years of firefighting services or upon attaining the program's entitlement age. The program's entitlement age is age 62 and completion of 1 year of service. In general,an active firefighter is credited with a year of firefighting service for each calendar year after the establishment of the program which he or she accumulates fifty points. Points are granted for the performance of certain activities in accordance with a system established by the sponsor on the basis of a statutory list of activities and point values. A participant may also receive credit for 5 years of firefighting service rendered prior to the establishment of the program. ' Benefits A participant's benefit under the program is life annuity with 10 years certain equal to$20 multiplied by the person's total number of years of firefighting service. The number of years of firefighting service used to compute the benefit cannot exceed 40, and except in the case of disability or death, benefits are payable when a participant reaches entitlement age. The program provides statutorily mandated death and disability benefits. Fiduciary Investment and Control Service credit is determined by the governing board of the sponsor, based on information certified to the governing board by each fire company having members who participate in the program. Each fire company must maintain all required records on forms prescribed by the governing board. The governing board of the sponsor has retained and designated Hometown/RSA Consultants to assist in the administration of the program. The designated program administrator's primary responsibility is to administer the plan for the exclusive benefit of the participants and their beneficiaries. Such duties include, but are not limited to, determining eligibility of firefighters to participate in the plan, compute participant entitlement, authorize disbursements to participants, compute necessary contribution amounts, maintain all necessary records and consult with the sponsor and the trustee on long-term investment plans. Disbursements of program assets for the payment of benefits or administrative expenses must be reviewed by the trustee, the Board of Fire Commissioners, and signed by at least two board members prior to being disbursed by the administrator. - 13 - SOUTHOLD FIRE DISTRICT Notes to Financial Statements ' (Continued) Program assets are required to be held in trust by LOSAP legislation, for the exclusive purpose of providing benefits to participants and their beneficiaries or for the purpose of defraying the reasonable expenses of the operation and administration of the program. The trust agreement is ' dated February 8, 2005,and the trustee is the Board of Fire Commissioners. Authority to invest program assets is vested in the administrator, with the Board of Fire Commissioners' prior written approval. Subject to restrictions in the program document, program ' assets are invested in accordance with a statutory"prudent person" rule.The program document calls for all investment decisions to be chosen and approved by the trustee, prior to being invested by the administrator. The sponsor is required to retain an actuary to determine the amount of the sponsor's contributions to the plan.The actuary retained by the sponsor for this purpose is Harbridge Consulting Group, LLC. ' Portions of the following information are derived from a report prepared by the actuary dated March 2014 for the plan year ended December 31,2013. Program Financial Condition Assets and Liabilities ' Actuarial Present Value of Benefits at December 31,2013 $ 4,401,539 Less: Assets Available for Benefits %of total Trust 3.86% $ 126,925 ' Annuities 76.30% 2,511,039 Insurance contracts 19.85% 653,164 Total Net Assets Available for Benefits 3,291,128 Total Unfunded Benefits 1,110,411 Less: Unfunded Liability for Prior Service (1,110,411) Unfunded Normal Benefits $ Prior Service Costs Prior service costs are being amortized over a range of 13 to 10 years at a discount rate of 5.25%. - 14- SOUTHOLD FIRE DISTRICT Notes to Financial Statements ' (Continued) Receipts and Disbursements Plan Net Assets,Beginning of Year $ 3,129,444 ' Changes during the year +Plan contributions $ 290,000 +Insurance premiums 61,467 +Investment income earned 82,455 ' +/-Changes in fair market value of investments 10,125 Plan benefit withdrawals (393,138) +Insurance receipts 110,775 ' 161,684 Plan Net Assets,End of Year $ 3,291,128 Contributions ' Maximum amount of sponsor's contribution recommended by actuary: $ 335,164 Minimum amount of sponsor's contribution recommended by actuary: 303,704 ' Amount of sponsor's actual contribution: 290,000 Administration Fees Fee paid to actuary $ 4,400 ' Normal Costs The actuarial valuation methodology used by the actuary to determine the sponsor's contribution is the unit credit cost method. The assumptions used by the actuary to determine the sponsor's contribution and the actuarial present value of benefits are: Assumed rate of return on investment 5.25% Mortality tables used for ' Withdrawal None Disability None Retirement 1994 Group Annuity-Male ' Death(actives) None Death(inactives) None ' Other None - 15 - ' SOUTHOLD FIRE DISTRICT Notes to Financial Statements ' (Continued) 6. LONG-TERM LIABILITIES Long-term liability balances and activity for the year are summarized below: ' Balance Balance Amounts December 31, December 31, Due Within ' 2012 Additions Reductions 2013 One Year Long-term debt: Bonds payable $ 750,000 $ - $ 150,000 $ 600,000 $ 150,000 The general fund has typically been used to liquidate long-term liabilities. Bonds payable are comprised of the following: Outstanding at Issue Final Interest December 31, ' Description Date Maturity Rate 2013 Serial bond 6/24/2002 7/9/2017 3.7-4.2% $ 600,000 ' The following is a summary of debt service requirements for bonds payable: ' Fiscal Year Ending December 31, Principal Interest Total 2014 $ 150,000 $ 24,450 $ 174,450 2015 150,000 18,450 168,450 2016 150,000 12,450 162,450 2017 150,000 6,300 156,300 Total $ 600,000 $ 61650 $ 661,650 ' Interest on long-term debt for the year was$30,150. 7. COMMITMENTS AND CONTINGENCIES A. Encumbrances ' All encumbrances are classified as either restricted or assigned fund balance. At December 31, 2013, the District encumbered the following amounts: ' Assigned: Fund Balance General Fund ' Fire Protection $ 18,700 - 16- ' SOUTHOLD FIRE DISTRICT Notes to Financial Statements ' (Continued) ' B. Risk Management The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of ' assets; injuries to employees; errors and omissions; and natural disasters, etc. These risks are covered by commercial insurance purchased from independent third parties. Settled claims from these risks have not exceeded commercial insurance coverage for the past three years. ' 8. SPENDING LIMITATION The District did not exceed the statutory spending limitation imposed by New York State Law for the year ended December 31,2013,and the budget for the year ending December 31, 2014. - 17- SOUTHOLD FIRE DISTRICT Schedule of Revenues,Expenditures and Changes in Fund Balance- ' Budget and Actual-General Fund-Operating For the Year Ended December 31,2013 Board- Final Budget Approved Final Variance with Budget Budget Actual Actual ' REVENUES Real property taxes $ 1,808,382 $ 1,808,382 $ 1,808,413 $ 31 Interest and earnings 355 355 1,038 683 Rentals 22,138 22,138 22,525 387 Sale of equipment 10,000 10,000 Insurance recoveries 3,707 Miscellaneous 225 225 ' Total Revenues 1,830,875 1,830,875 1,845,908 $ 11,326 ' APPROPRIATED FUND BALANCE Prior year's encumbrances 12,000 Total Revenues and ' Appropriated Fund Balance $ 1,830,875 $ 1,842,875 Final Budget ' Variance with Year End Actual and Encumbrances Encumbrances EXPENDITURES Personal services $ 260,100 $ 260,100 245,347 $ $ 14,753 Equipment and capital outlay 95,000 147,500 136,898 10,602 Fire protection 572,725 549,225 436,770 18,700 93,755 ' State retirement system 28,000 28,000 22,737 5,263 Service award program 365,000 358,000 355,867 2,133 Social security 19,900 19,900 18,733 1,167 Workers'compensation 60,000 50,000 49,728 272 Medical and accident insurance 30,000 30,000 27,042 2,958 Debt service-principal 150,000 150,000 150,000 - Debt service-interest 30,150 30,150 30,150 - ' Total Expenditures 1,610,875 1,622,875 1,473,272 $ 18,700 $ 130,903 ' OTHER USES Operating transfers out 220,000 220,000 220,000 ' Total Other Uses 220,000 220,000 220,000 Total Expenditures and Other Uses $ 1,830,875 $ 1,842,875 1,693,272 Net Change in Fund Balance 152,636 Fund Balance-Beginning of Year 455,321 Fund Balance-End of Year $ 607,957 See Paragraph on Other Supplementary Information Included in Auditor's Report -18- VINCENT D.CULLEN,CPA N 950-2013) CULLEN & DANOWSKI, LLP ' CERTIFIED PUBLIC ACCOUNTANTS JAMES Z PETER F..RODRIGU ,CPA DRIGUEZ,CPA JILL S.SANDERS,CPA DONALD J.HOFFMANN,CPA CHRISTOPHER V.REINO,CPA ALAN YU,CPA ' INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS ' PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS ' To the Board of Fire Commissioners Southold Fire District ' Southold,New York We have audited,in accordance with auditing standards generally accepted in the United States of America and ' the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the financial statements of the Southold Fire District (District), as of and for the year ended December 31, 2013, and the related notes to financial statements, as listed in the table of contents, which collectively comprise the District's basic financial statements and have issued our report thereon dated May 7, 2014. As described more fully in Note 1, the Southold Fire District has prepared these financial statements in accordance with financial reporting provisions of the New York State Office of the State Comptroller,which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the Southold Fire District's ' internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Southold Fire Districts internal control. ' Accordingly,we do not express an opinion on the effectiveness of the Southold Fire District's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the District's financial statements will not be prevented, or detected and corrected on a timely basis.A significant deficiency ' is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. ' Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in ' internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. ' y 1650 ROUTE 112,PORT JEFFERSON STATION,NEW YORK 11776-3060 _ 19 - PHONE: 19 _PHONE:631-473-3400•FAX:631-473-4863 •WWW.CDLLP.NET Compliance and Other Matters ' As part of obtaining reasonable assurance about whether the Southold Fire District's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, ' regulations,contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts.However,providing an opinion on compliance with those provisions was not an objective of our audit,and accordingly,we do not express such an opinion.The results of ' our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. ' We noted certain matters that we have reported to the Board of Fire Commissioners and management of the Southold Fire District in a separate letter dated May 7,2014. Purpose of this Report ' 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 District's internal control or ' on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District's internal control and compliance.Accordingly,this communication is not suitable for any other purpose. May 7,2014 ' - 20-