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HomeMy WebLinkAbout2013 FI Waste Management h FISHERS ISLAND WASTE MANAGEMENT DISTRICT A COMPONENT UNIT OF THE TOWN OF SOUTHOLD FINANCIAL STATEMENTS DECEMBER 31,2013 FISHERS ISLAND WASTE MANAGEMENT DISTRICT A COMPONENT UNIT OF THE TOWN OF SOUTHOLD BASIC FINANCIAL STATEMENTS AS OF DECEMBER 31,2013 TOGETHER WITH INDEPENDENT AUDITORS'REPORT AND REQUIRED SUPPLEMENTARY INFORMATION � � FISHERS ISLAND WASTE MANAGEMENT A COMPONENT UNIT OF THE TOWN OF0KDUTHKDLD FINANCIAL STATEMENTS DECEMBER 31, 2013 ' Independent Auditor's Depmrt-.---...'.-.......'-...-.--..-..-...---....-_......-...---.----1 � Management's Discussion and Aouh/ is--_------.-.--........ -. ......... ....... ...--............3-7 Statement of Net Aometm__--_-__----_--......... .-__- ...... ............. ......... ...... 8 Statement of Activities.......-......................-. .............. . .............. .................... . ......... y Statement ofActivities-Governmental Activities- ........... -- ............... - .......... ...... ......... ........1,0 Reconciliation o[the Govermoent Funds Balance Sheet tothe Statement o[Net Assets...... ....... ............ ....... ll Statement o[Revenues,Expenditures, and Changes luFund Balances-Governmental Funds......_-.--__..-........ ....... ......... _-----...-i2 Balance Foudm ... ...-- ....-.....-_-._..-... ...-.....-.__..--.--...----B Reconciliation o[the Government Funds Statement o[Revenues,Expenditures and Changes 6zFund Balances Tothe Statement ofActivities..........................................................................................-.i4 Notes to the Financial Statements......_._....-......... ........ ..................~_...... ..............................U5 DOHERTY,DQAL8&BANKS,P.C. P Board of Commissioners 7a Fishers Island Waste Management District PO Box 22 Fishers Island,NY 06390 INDEPENDENT AUDITOR'S REPORT Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities of the Fishers Island Waste Management District, A Component Unit of the Town of Southold as of and for the year ended December 31, 2013, and the related notes to the financial statements, which collectively comprise the District's basic financial statements as listed in the table of contents. The prior year summarized comparative information has been derived from the District's 2012 financial statements and, in our report dated July 29, 2013, we expressed an unmodified opinion on those financial statements. 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, 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 Our 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. Those standards require,that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit 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. Stacey L. Gualtieri, CPA Kathleen A. Steamer, CPA David 1. Miceli, CPA 1Audrey A. Leone, CPA - - 187 Williams St. I New London, CT 06320 1 (v) 860.443.2033 1 (f) 860.444.7086 1 dbbcpa.com 38 East Main St. Suite 6 1 Mystic, CT 06355 1 (v) 860.572.7373 1 (f) 860.572.0107 Opinions In our opinion,the financial statements referred to above present fairly, in all material respects,the respective financial position of the governmental activities of the Fishers Island Waste Management District, A Component Unit of the Town of Southold, as of December 31,2013, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. Other Matters Accounting principles generally accepted in the United States of America require that the management's discussion and analysis and budgetary comparison information on pages 3 through 6 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, 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 for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. C)N 11�;1�TYb�� S&BANKS,P.C,. June 30,2014 -2- DOHERTY,BEALS&BANKS,P.C. FISHERS ISLAND WASTE MANAGEMENT DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS December 31,2013 The following is a discussion and analysis of the Fishers Island Waste Management's financial performance, providing an overview of the Fishers Island Waste Management's financial activities for the year ended December 31, 2013. Use this section in conjunction with the Fishers Island Waste'Management's basic financial statements. FINANCIAL HIGHLIGHTS • Net assets for 2013 increased by$38,181,due to total revenue exceeding expenses for the year. • The General Fund's fund balance increased by$99,172 to$1,009,056. • Revenues were slightly lower than anticipated and operating expenses were also lower than expected for the 2013 fiscal year. USING THIS ANNUAL REPORT This annual report consists of a series of financial statements. The Statement of Net Assets and the Statement of Activities provide information about the activities of the District as a whole and present a longer-term view of the District's finances. Fund financial statements start with page eight(8). For governmental activities, these statements tell how these services were financed in the short term as well as what remains for future spending. Fund financial statements also report the District's operations in more detail than the government-wide statements by providing information about the District's most significant funds. Reporting the Fishers Island Waste Management District as a Whole Our analysis of the District as a whole begins with page eight(8). One of the most important questions asked about the District finances is, "Is the District as a whole better or worse off as a result of the year's activities?" The Statement of Net Assets and the Statement of Activities report information about the District as a whole and about its' activities in a way that helps answer this question. These statements include all assets and liabilities using the accrual basis of.accounting, which. is similar to the accounting used by most private-sector companies. All of the current year's revenues and expenses are taken into account regardless of when cash is received or disbursed. These two statements report the District's net assets and changes in them. Think of the District's net assets—the difference between assets and liabilities—as .one way to measure the District's financial health, or financial position. Over time, increases or decreases in the District's net assets. are one indicator of whether its'financial health is improving or deteriorating. However, you will need to consider other non-financial factors such as changes in the population levels of the District's member towns,to assess the overall health of the District. In the Statement of Net Assets and the Statement of Activities,the District shows the following activity: • Governmental activities—The District's governmental services are reported here. Most of these activities are a result of taxes levied on the residents of Southold. Reporting the Fishers Island Waste Management District's Most Significant Funds • Our analysis of the District's major funds begins in the section titled "Fishers Island Waste Management District's". The fund financial statements begin on page eight(8)and provide detailed information about the most significant funds—not the District as a whole. Some funds are required to be established by State law and by bond covenants,if any. -3 - DOHERTY,BEALS&BANKS,P.C. FISHERS ISLAND WASTE MANAGEMENT DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS December 31,2013 USING THIS ANNUAL REPORT(Continued) • Governmental funds—The District's basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end that are available for spending. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can be readily converted to cash. The governmental fund statements provide a detailed short-term view of the District's general government operations and the basic services it provides. Governmental fund information helps determine whether there is an excess or deficiency of financial resources that can be spent in the near future to. finance the District's programs. We describe the relationship (or differences) between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds in a reconciliation provided on page thirteen(13)of the fund financial statements. FINANCIAL ANALYSIS OF THE FISHERS ISLAND WASTE MANAGEMENT Our analysis below focuses on the net assets and changes in net assets of the Fishers Island Waste Management's activities. Condensed Statement of Net Assets Primary Activities December 31,2013 and 2012 Assets _ 2013 2012 Current and other assets $ 1,160,458 $ 946,329 Capital assets 2,660,8092,721,800 Total assets ........3_.g2.�.��............� _..........�.....�....�_�,_.� 3267 3,668,129 Liabilities Current and other liabilities 151,401 36,444 Total liabilities .._.....1.5140 ..... 36,444 Net Assets Unrestricted(deficit) 3,669,866 3,631,685 Total net assets m$mmm 3,821,267µµµW µ$µµµµW3,668,129 Changes in Net Assets Fishers Island Waste Management For the years ended December 31,2013 and 2012 Program Revenues 2013 2012 Charges for services $.............. .W___.......... 42,997 $ 48,969 42,997 48,969 General Revenues Property taxes 536,950 526,900 Interest earnings 3,872 2,333 Grant revenue 11,517 552,339 529,233 Total Revenues 595,336 578,202 Program Expenses Operating expenses 557,155 618,554 Total Expenses 557,155 618,554 Increase(decrease)in Net Assets $ 38,181 $ (40,352) -4- DOHERTY,BEALS&BANKS,P.C. FISHERS ISLAND WASTE MANAGEMENT DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS December 31,2013 FINANCIAL ANALYSIS OF THE FISHERS ISLAND WASTE MANAGEMENT(continued) The following schedule presents a summary of Fishers Island Waste Management revenues and expenses for the year ended December 31,2013 and the amount of change and percentage of total in relation to the prior year. Increase % 2013 2012 (Decrease) Change .... .....__...._ . ...m ..._._�_ _ Revenues Charges for services $ 42,997 $ 48,969 (5,972) (12.20%) Property taxes 536,950 526,900 10,050 1.91% Interest earnings 3,872 2,333 1,539 65.97% Grant revenue 11,517 - 11,517 100.00% Total Revenues $ 595,336 $..... 578 202 IT $ ....w_ 17,.134 2.96% Program Expenses , 618,554 $ (61,399 ° ) Operating expenses $ 557 155 $ ..............�a._ ) (�7.9'r1'�w Total Expenses $ 557,155 $ 618,554 $ (61,399) GOVERNMENTAL ACTIVITIES The table below presents the cost of each of the District's governmental programs as well as each governmental program's net cost(total cost less revenues generated by the activities). Governmental Type Activities Total Cost Net Cost oeCV1CeSIncr.) of Se f S of..Services (Incr.) ...................................... .. . ...._ ( _ ..�.�_ 2013 2012 Deer. 2013 2012 Deer. _._ _ �,,,-----.,-- ...._......e�... Governmental Activities Waste services $ 557,155 $ 618,554 -9.9% $ 34,369 $ (42,685) 180.37% Totals $ 557,155 $ 618,554 ° -9.9% $ 34,309 $ (42,685) 180.37% BUDGETARY HIGHLIGHTS Over the course of the year,the Fishers Island Waste Management revises the budget as needed so that expenditures do not exceed appropriations. Various transfers between appropriations were approved for this purpose. Transfers do not increase the total budget,but instead pull appropriations from one expense line to another. -5- DOHERTY,BEALS&BANKS,P.C. FISHERS ISLAND WASTE MANAGEMENT DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS December 31,2013 BUDGETARY HIGHLIGHTS(continued) Below is a summarized view of the final budget and actual results for the General Fund: General Fund—Budget Summary Final Revenues Budget _ Actual Variance Property Taxes $ 536,950 $ 536,950 $ Charges for Services 66,000 42,997 (23,003) Grants - 11,517 11,517 Interest 4,000 3,872 (128) Total Revenues $ 606,950 $ 595;336 $ (11,614) Expenditures Current—waste services 629,450 496,t64 (133 286) Total ex enditures 629,450 , 496164_ (13 p 3,286) Excess(deficiency)of Revenues over expenditures (22,500) 99,172 (144,900) Increase(decrease) in fund balance $ (22,500) $ 99,172 $ (144,900) • Charges for services were$23,003 less than anticipated,interest income was$128 lower than anticipated and other income was$11,571 higher than anticipated. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets - At the end of fiscal year 2013, the Fishers Island Waste Management District had $3,658,786 invested in capital assets. Capital assets purchased during fiscal year 2013 totaled$44,812. More detailed information about the Fishers Island Waste Management District's capital assets is presented in Note One to the financial statements. Debt — At the end of fiscal year 2013, the Fishers Island Waste Management District had no bonds or notes outstanding. ECONOMIC FACTORS AND NEXT YEAR'S BUDGET The Fishers Island Waste Management District considers many factors when setting the annual budget including tax levies imposed by the Town of Southold and fees that will be charged for the governmental activities. These factors include budget projections, economic and housing trends, emerging waste service needs, state matching funds and available fund balance. -6- DOHERTY,BEALS&BANKS,P.C. FISHERS ISLAND WASTE MANAGEMENT DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS December 31,2013 CONTACTING THE DISTRICT This financial report is designed to provide the reader with a general overview of Fishers Island Waste Management's finances and to demonstrate Fishers Island Waste Management's accountability for the funds it receives. Requests for additional information can be directed to: Sara Rafferty,Chairperson,Fishers Island Waste Management District,Fishers Island,NY 06390. -7- DOHERTY,BEALS&BANKS,P.C. FISHERS ISLAND WASTE MANAGEMENT COMPONENT UNIT OF THE TOWN OF SOUTHOLD STATEMENT OF NET ASSETS AS OF DECEMBER 31,2013 WITH COMPARATIVE TOTAL'S FOR 2012 ASSETS Governmental Activities 2013 2012 CURRENT ASSETS Cash and cash equivalents $ 21,763 $ 30,371 Accounts receivable 800 206 Due from primary government 139,854 - Prepaid expenses 28,774 24,555 TOTAL CURRENT ASSETS 191,191 55,132 NONCURRENT ASSETS Garbage facilities and improvements 3,294,475 3,294,475 Equipment 364,311 319,499 3,658,786 3,613,974 Less:accumulated depreciation (997,977) (892,173) TOTAL NONCURRENT ASSETS 2,660,809 2,721,801 OTHER ASSETS Investments-Fixed Income 969,267 891,197 TOTAL ASSETS $ 3,821,267 $ 3,668,129 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payable $ 9,978 $ 34,926 Payroll taxes payable 1,569 1,518 Deferred revenue 139,854 - TOTAL CURRENT LIABILITIES 151,401 36,444 NET ASSETS Investments in fixed assets 2,660,809 2,721,800 Unrestricted 1,009,057 909„885 TOTAL NET ASSETS 3,669,866 3,631,685 TOTAL LIABILITIES AND NET ASSETS $ 3,821,267 $ 3,668,129 The accompanying notes are an integral part of these Financial Statements. -8- ,BEALS&BANKS,P.C. FISHERS ISLAND WASTE MANAGEMENT DISTRICT COMPONENT UNIT OF THE TOWN OF SOUTHOLD STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 31,2013 WITH COMPARATIVE TOTALS FOR 2012 2013 2012 REVENUE Town of Southold $ 536,950 $ 526,900 Interest 3,872 2,333 Grant revenue 11,517 - Landfill revenue 42,997 48,969 TOTAL REVENUE 595,336 578,202 EXPENSES Accounting 8,425 7,385 Bank charges 5,595 2,346 Building maintenance 499 1,126 Building utilities 8,163 9,228 Casual labor 8,101 1,675 Commissioners'fees 14,130 11,940 Compost equipment maintenance 30,751 18,346 Compost station utilities 3,316 2,037 Consultants 3,700 1,600 Depreciation 105,804 103,020 Employee benefits 56,030 66,532 Employee training _ 432 Equipment maintenance 4,611 16,207 Ferry transportation 47,063 53,752 Garbage tipping fees and hauling 74,262 77,615 Hazardous waste removal - 16,525 Insurance 19,896 21,704 Landfill maintenance 8,790 9,162 Legal fees 6,469 13,210 Office expense 3,137 3,166 Payroll expenses 12,362 13,894 Transfer station utilities 2,999 3,914 Transfer station improvements 10,441 Wages 114,996 154,067 Workmens compensation insurance 7,615 9,671 TOTAL EXPENSES 557,155 618,554 CHANGE IN NET ASSETS 38,181 (40,352) NET ASSETS-BEGINNING 3,631,685 3,672,037 NET ASSETS-ENDING $3;669,866 $3,631,685 The accompanying notes are an integral part of the Financial Statements -9- DOHERTY,BEALS&BANKS,P.C. FISHERS ISLAND WASTE MANAGEMENT DISTRICT COMPONENT UNIT OF THE TOWN OF SOUTHOLD STATEMENT OF ACTIVITIES - GOVERNMENTAL ACTIVITIES FOR THE YEAR ENDED DECEMBER 31,2013 Net Program Revenues (Expense) Operating Grants Charges and Govern- for Contribu- mental Functions/Programs Expenses Services tions Activities GOVERNMENTAL ACTIVITIES Waste Services $ (496,164) $ 42,997 $548,467 $ 95,300 GENERAL REVENUES Interest income 3,872 Total general revenues 3,872 Change in net assets 99,172 NET ASSETS,beginning of year 909,885 NET ASSETS,end of year $1,009,057 The accompanying notes are an integral part of these Financial Statements,. - 10- DOHERTY,BEALS&BANKS,P.C. FISHERS ISLAND WASTE MANAGEMENT COMPONENT UNIT OF TOWN OF SOUTHOLD RECONCILIATION OF THE GOVERNMENT FUNDS BALANCE SHEET TO.THE STATEMENT OF NET ASSETS AS OF DECEMBER 31,2013 Total Governmental Fund Balances $ 1,009,057 Amounts reported for governmental activities in the Statement of Net Assets are different because: The cost of building and acquiring capital assets(land,buildings,equipment) financed from the governmental funds are reported as expenditures in the year they are incurred,and the assets do not appear on the balance sheet. However, the Statement of Net Assets includes those capital assets among the assets of Fishers Island Waste Management as a whole,and their original costs are expensed over their useful lives. Original cost of capital assets 3,658,786 Accumulated depreciation (997,977) 2,660,809 Total net assets $ 3,669,866 See notes to f nancial statements. - 11 - DOHERTY,BEALS&BANKS,P.C. FISHERS ISLAND WASTE MANAGEMENT COMPONENT UNIT OF TOWN OF SOUTHOLD STATEMENT OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES- GOVERNMENTAL FUNDS FOR THE YEAR ENDED DECEMBER 31,2013 Total Governmental REVENUES General Fund Real property taxes $ 536,950 $ 536,950 Landfill revenue 42,997 42,997 Grants 11,51.7 11,517 Use of money and property 3,872 3,872 Total revenues 595,336 595,336 EXPENDITURES General government support 58,215 58,215 Landfill operation 270,067 270,067 Transportation 47,063 47,063 Employee benefits 76,007 76,007 Capital outlay 44,812 44,812 Total expenditures 496,164 496,164 Excess(Deficiency)of Revenues over Expenditures 99,172 99,172 Fund balances-beginning of the year 909,885 909,885 Fund balances-end of the year $ 1,009,057 $ 1,009,057 See notes to finandal statements. -12- ERTY,BEALS&BANKS,P.C. FISHERS ISLAND WASTE MANAGEMENT COMPONENT UNIT OF THE TOWN OF SOUTHOLD BALANCE SHEET- GOVERNMENTAL FUNDS AS OF DECEMBER 31,2013 Total Governmental ASSETS General Fund Cash and investments $ 991,030 $ 991,030 Accounts receivables 800 800 Due from primary government 139,854 139,854 Prepaid expenses 28,774 28,774 Total assets $ 1,160,458 $ 1,160,458 LIABILITIES Current Liabilities Accounts payable $ 9,978 $ 9,978 Deferred revenue 139,854 139,854 Payroll taxes payable 1,569 1,569 Total liabilities 151,401 151,401 FUND BALANCES Nonspendable fund balance 28,774 28,774 Unassigned fund balance 980,283 980,283 Total fund balances 1,009,057 1,009,057 Total liabilities and net assets $ 1,160,458 $ 1,160,458 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not fmanical resources and therefore are not reported in the funds. 2,660,809 Net assets of governmental activities $ 3,669,866 The accompanying notes are an integral part of these Financial Statements. - 13- DOHERTY,BEALS&BANKS,P.C. FISHERS ISLAND WASTE MANAGEMENT COMPONENT UNIT OF TOWN OF SOUTHOLD RECONCILIATION OF THE.GOVERNMENT FUNDS STATEMENT REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES AS OF DECEMBER 31,2013 Net Change in Fund Balances $ 99,172 Amounts reported for governmental activities in the Statement of Activities are different because: Capital Related Differences Capital outlays to purchase or build capital assets are reported in governmental funds as expenditures. However,for governmental activities those costs are capitalized and shown in the statement of net assets and allocated over their useful lives as annual depreciation expenses in the Statement of activities Capital outlays 44,812 Depreciation expense (I 1_11,8114) w50,992) Total change in net assets $ 38,180 See notes to financial statements. - 14- DOHERTY,BEALS&BANKS,P.C. FISHERS ISLAND WASTE MANAGEMENT DISTRICT NOTES TO FINANCIAL STATEMENTS December 31,2013 1, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the Fishers Island Waste Management District(FIWMD)have been prepared in conformity with 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 governmental accounting and financial reporting principles. Significant accounting principles and policies used by FIWMD are as follows: A. Reporting Entity FIWMD is governed by the laws of New York State. FIWMD is an independent entity governed by an elected Board of Commissioners consisting of five members. The Board is responsible for, and controls all activities within FIWMD. Board members have authority to make decisions, power to appoint management,and primary accountability for all fiscal matters, The financial reporting entity is based on criteria set forth by GASB Statement No. 14, The Financial Reporting Entity and No. 39, Determining Whether Certain Organizations are Component Units. The financial reporting entity consists of the primary government, organizations for which the primary government is financially accountable and other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. The accompanying financial statements present the activities of FIWMD. FIWMD is a component unit of The Town of Southold,another reporting entity. B. Basis of Presentation Fund Financial Statements The fund financial statements provide information about FIWMD's funds. The emphasis of fund financial statements is on major governmental funds as defined by GASB. The financial statements reflect the following fund category: Governmental Fund: General Fund — is the general operating fund and is used to account for all financial transactions except those required to be accounted for in another fund. C. Basis of Accounting and Measurement Focus The Statement of Activities and the Statement of Net Assets are reported on the accrual basis of accounting using the economic resources measurement focus. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash transaction takes place. On the accrual basis,revenues from real property taxes are recognized in the fiscal year for which the taxes are levied. Revenue from ferry operations and grants are recognized in the fiscal year in which all eligibility requirements have been satisfied and the related expenditures are incurred. - 15- DOHERTY,BEALS&BANKS,P.C. FISHERS ISLAND WASTE MANAGEMENT DISTRICT NOTES TO FINANCIAL STATEMENTS December 31,2013 1, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued) The fund statements are reported on the modified accrual basis of accounting using the current financial resources measurement focus. Revenues are recognized when measurable and available. FIWMD considers all revenues reported in the governmental funds to be available if the revenues are collected within 180 days after the end of the fiscal year, except for real property taxes, which are considered to be available if they 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, claims and judgments, and compensated absences, all of 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 Calendar Real property taxes are levied annually by the Town of Southold no later than October 1" and become a lien on December I". Taxes are collected by the Town of Southold and remitted to FIWMD from December to June. Enforcement Uncollected real property taxes are subsequently enforced by the County of Suffolk in June. E. Restricted Resources When an expense is incurred for purposes for which both restricted and unrestricted net assets are available, FIWMD's policy concerning which to apply first varies. The policy depends on the intended use, and the associated legal requirements,many of which are described elsewhere in these Notes to Financial Statements. F. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates. Estimates and assumptions are made in a variety of areas, including computation of encumbrances, compensated absences, potential contingent liabilities and useful lives of long-lived assets. G. Cash and Cash Equivalents/Investments Cash and cash equivalents consist of cash on hand and bank deposits with a maturity date of three months or less from date of acquisition. H. Receivables Receivables include amounts due from customers for services provided by the FIWMD.Receivables are recorded and revenues recognized as earned or as specific program expenditures are incurred. - 16- DOHERTY,BEALS&BANKS,P.C. FISHERS ISLAND WASTE MANAGEMENT DISTRICT NOTES TO FINANCIAL STATEMENTS December 31,2013 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 1, Prepaid Items Prepaid items represent payments made by FIWMD for which benefits extend beyond year-end. These payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in the fund financial statements. A current asset for the prepaid amounts is recorded at the time of purchase and an expense/expenditure is reported in the year.the goods or services are consumed. 1'. Capital Assets Capital assets purchased or acquired with an original cost of $10,000 or more are reported at historical cost or estimated historical cost. Contributed assets are reported at fair market value as of the date received. Additions, improvements, and other capital outlays that significantly extend the useful life of an asset are capitalized. Other costs incurred for repairs and maintenance are expensed as incurred. Depreciation on all assets is provided on the straight-line basis over the following estimated useful lives: Buildings 10-40 years Improvements and other 20 years Machinery and equipment 5-10 years Infrastructure 20-30 years Infrastructure assets,consisting of certain improvements other than buildings including roads, curbs, sidewalks,bridges and street lighting are capitalized along with other capital assets. In the fund financial statements, capital assets are recorded as capital outlay expenditures in the governmental fund upon acquisition. K. Deferred Revenue Deferred revenue arises when potential revenues do not meet both the measurable and available criteria for recognition in the current period. Deferred revenues also arise when resources are received by FIWMD before it has a legal claim to them, as when grant monies are received prior to the incurrence of qualifying expenditures. In subsequent periods, when both recognition criteria are met,or when FIWMD has legal claim to the resources,the liability for deferred revenues is removed and revenues are recognized. L. Accrued Liabilities and Long-Term Obligations In the governmental funds, payables and accrued liabilities are paid in a timely manner and in full from current financial resources. M. Equity Classifications In the Government-Wide Financial Statements,net assets are classified in the following categories: Invested in Capital Assets—this category groups all capital assets into one component of net assets. Accumulated depreciation that is attributable to the acquisition, construction, or improvement of these assets reduces these balances. Unrestricted Net Assets — this category represents the net assets of the District, which are not restricted for any project or other purpose. - 17- DOHERTY,BEALS&BANKS,P.C. FISHERS ISLAND WASTE MANAGEMENT DISTRICT NOTES TO FINANCIAL STATEMENTS December 31,2013 Equity Classifications(continued) In the Fund Financial Statements, fund balances of governmental funds are classified in five separate categories as follows: Nonspendable—represents amounts associated with nonspendable assets. Restricted Fund Balance—represents that portion of fund equity that can be spent only for specific purposes stipulated by constitution, external resource providers,or through legislation. Committed Fund Balance—represents that portion of fund equity that can only be used for specific purposes determined by a formal action of the government's highest level of decision-making authority. Assigned Fund Balance— represents that portion of fund equity to be used by the government for specific purposes but do not meet the criteria to be classified as restricted or committed. Unassigned Fund Balance — represents that portion of fund equity which is available for appropriation and expenditures in future periods. 2. EXPLANATION OF CERTAIN DIFFERENCES BETWEEN THE GOVERNMENTAL FUND STATEMENTS AND THE DISTRICT-WIDE STATEMENTS Due to the differences in the measurement focus and basis of accounting used in the governmental fund statements and the district-wide statements, certain financial transactions are treated differently. The basis financial statements contain a full reconciliation of these items. The differences result primarily from the economic resource measurement focus of the Statement of Activities, compared with the current financial resource measurement focus of the governmental funds. A. Total Fund Balances of Governmental Funds vs.Net Assets of Governmental Activities Total fund balances of FIWMD's governmental funds differ from "net assets" of governmental activities reported in the Statement of Net Assets. This difference primarily results from the additional long-term economic focus of the Statement of Net Assets versus the solely current financial resources focus of the governmental fund Balance Sheets. B. Statement of Revenues,Expenditures and Changes in Fund Balance vs. Statement of Activities Differences between the Statement of Revenues, Expenditures and Changes in Fund Balance and the Statement of Activities fall into one of three broad categories. Long-Term Revenue and Expense Differences Long-term revenue differences arise because governmental funds report revenues only when they are considered "available," whereas the Statement of Activities reports revenues when earned. Differences in long-term expenses arise because governmental funds report on a modified accrual basis,whereas the accrual basis of accounting is used on the Statement of Activities. - 18- DOHERTY,BEALS&BANKS,P.C. FISHERS ISLAND WASTE MANAGEMENT DISTRICT NOTES TO FINANCIAL STATEMENTS December 31,2013 2. EXPLANATION OF CERTAIN DIFFERENCES BETWEEN THE GOVERNMENTAL FUND STATEMENTS AND THE DISTRICT-WIDE STATEMENTS (continued) Capital Related Differences Capital related differences include the difference between proceeds for the sale of capital assets reported on fund statements and the gain or loss on the sale of assets as reported on the Statement of Activities, and the difference between recording an expenditure for the purchase of capital items in the fund statements and depreciation expense on'those items as recorded in the Statement of Activities. Long-Term Debt Transaction Differences Long-term debt transaction differences occur because the issuance of long-term debt provides current financial resources to governmental funds, but is recorded as a liability in the Statement of Net Assets. In addition, both interest and principal payments are recorded as expenditures in the fund statements when due and payable, whereas interest expense is recorded in the Statement of Activities as it accrues, and principal payments are recorded as a reduction of liabilities in the Statement of Net Assets. There are no Long-Term Debt Transaction differences in current year. 3. STEWARDSHIP.COMPLIANCE AND ACCOUNTABILITY A. Budgets The FIWMD administration prepares a proposed budget for approval by the Board of Commissions for the general fund,the only fund with a legally adopted budget. 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 lapse at the end of the fiscal year unless expended or encumbered. Encumbrances will lapse if not expended in the subsequent year. Appropriations authorized for the current year are increased by the planned use of specific reserves, and budget amendments approved by the Board of Commissions as a result of selected new revenue sources not included in the original budget (when permitted by law). These supplemental appropriations may occur subject to legal restrictions, if the Board approved them because of a need that exists which was not determined at the time the budget was adopted. Budgets are adopted annually on a basis consistent with GAAP. Appropriations authorized for the year are increased by the amount of encumbrances carried forward from the prior year. Budgets are established and used for individual capital project funds expenditures as approved by a special referendum of FIWM's voters. The maximum project amount authorized is based primarily upon the cost of the project, plus any requirements for external borrowings, not annual appropriations. These budgets do not lapse and are carried over to subsequent fiscal years until the completion of the projects. - 19- DOHERTY,BEALS&BANKS,P.C. FISHERS ISLAND WASTE MANAGEMENT DISTRICT NOTES TO FINANCIAL STATEMENTS December 31,2013 3. STEWARDSHIP,COMPLIANCE AND ACCOUNTABILITY(continued) B. Encumbrances Encumbrance accounting is used for budget control and monitoring purposes and is reported as a part of the governmental funds. Under this method, 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 reservations of fund balance 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. 4. DEPOSITS WITH FINANCIAL INSTITUTIONS AND INVESTMENTS The FIWMD'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 States and its Agencies and obligations of New York State and its municipalities. Investments are stated at fair value. Custodial credit risk is the risk that in the event of a bank failure,FIWM'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 either: A. Uncollateralized, B. Collateralized by securities held by the pledging financial institution, or C. Collateralized by securities held by the pledging financial institution's trust department or agent but not in FIWM's name. None of FIWM's aggregate bank balances, not covered by depository insurance, were exposed to custodial credit risk as described above at year-end. The District did not have any investments at year-end or during the year. Consequently, FIWM was not exposed to any material interest rate risk or foreign currency risk. -20- DOHERTY,BEALS&BANKS,P.C. FISHERS ISLAND WASTE MANAGEMENT DISTRICT NOTES TO FINANCIAL STATEMENTS December 31,2013 5. CAPITAL ASSETS Capital asset balances and activity for the year ended December 31,2013 were as follows: Balance Balance 1/1/2013 Additions Reductions 12/31/13 Governmental activities __.__...........� _..... Capital assets not being depreciated Land $ 517,262 $ $ - $ 517,262 Total capital assets not being depreciated 517,262 - - 517,262 Capital assets being depreciated Buildings and improvements 2,777,213 - 2,777,213 Machinery and equipment 319,499 44,812 - 364,311 Total capital assets being depreciated 3,096,712 44,812 - 3,141,524 Less accumulated depreciation for: Buildings and improvements 637,225 92,751 - 729,976 Machinery and equipment 254,949 13,052 - 268,001 Total accumulated depreciation 892.174 105,803 997,977 Total capital assets, being depreciated,reciated net 2,204,538 (6�,991) 2,143,547 Capital assets,net $ 2,721,800 $ (60,991) $ - $2,660,809 6. RISK MANAGEMENT The District is exposed to various risks of losses related to torts;theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The District has obtained coverage from commercial insurance companies and has effectively managed risk through various employee education and prevention programs. There have been no significant reductions in insurance coverage and settlements have not exceeded insurance coverage for each of the past three fiscal years. All risk management activities are accounted for in the general fund. 7. EXPENSES IN EXCESS OF APPROPRIATIONS For the year ended December 30, 2013, the following expenses were in excess of their budgeted appropriations by the following amounts: Commissioner Fees $2,130 Transfer Station Improvements $5,441 Compactor Maintenance $2,783 Total expenses were not in excess of total appropriations for the year. -21 - DOHERTY,BEALS&BANKS,P.C.