Loading...
HomeMy WebLinkAbout2015 Southold Fire District Financial Statements (Regulatory Basis) with Independent Auditor's Report December 31, 2015 a r SOUTHOLD FIRE DISTRICT Table of Contents • December 31,2015 Page Independent Auditor's Report 1 Basic Financial Statements(Regulatory 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 Other Supplementary Information Schedule of Revenues,Expenditures and Changes in Fund Balance -Budget and Actual-General Fund-Operating 20 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 21 r~ 1 - VINCENT D.CULLEN,CPA (1950-2013) - CULLEN &'DANOWSKI, LLP JAMES E.DANOWSKI,CPA CERTIFIED PU-B LICLACCOUNTANTS PETER F.RODRIGUEZ,CPA JILL S.SANDERS,CPA DONALD J.HOFFMANN,CPA CHRISTOPHER V.REINO,CPA INDEPENDENT AUDITOR'S REPORT ALAN VU,CPA 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, 2015, 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, as described in Note 1,to meet the reporting requirements of New York State. Management is also responsible for 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 and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the 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. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the assets, deferred outflows of resources, liabilities and fund balances of each fund and account group of the Southold Fire District, as of December 31, 2015, 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. 1650 ROUTE 112,PORT JEFFERSON STATION,NEW YORK 11776-3060 - 1 0 0 PHONE:631-473-3400•FAX:631-473-4863•WWW.CDLLP.NET Changes in Accounting Principles As described in Note 2 to the financial statements, "Changes in Accounting Principles", the District has adopted the provisions of GASB Statement No. 68, Accounting and Financial Reporting for Pensions - an I 7 Amendment of GASB Statement No. 27 and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date-an Amendment of GASB Statement No. 68, as of December 31, 2015. Our opinion is not modified with respect to that matter. 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 reporting 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 - 1 comprise the Southold Fire District's basic financial statements. The other supplementary information on page 20 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 a—i 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 ti 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 April 28, 2016, 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. April 28, 2016 - 2 - SOUTHOLD FIRE DISTRICT Balance Sheet-General Fund and Account Groups December 31,2015 Account Groups Non-Current Non-Current General Governmental Governmental Fund Assets Liabilities Total ASSETS Cash Unrestricted $ 643,145 $ $ $ 643,145 Restricted 782,549 782,549 Prepaids 76,425 76,425 Land 258,752 258,752 Buildings and improvements 3,472,949 3,472,949 Equipment 4,181,713 4,181,713 Amount to be provided for retirement of long-term debt 316,972 316,972 Total Assets 1,502,119 7,913,414 316,972 9,732,505 DEFERRED OUTFLOWS OF RESOURCES J � Pensions 9,452 9,452 Total Assets and Deferred Outflows of Resources $ 1,502,119 $ 7,922,866 $ 316,972 $ 9,741,957 LIABILITIES ' Accounts payable $ 73,222 $ $ $ 73,222 Accrued liabilities 1,708 1,708 Bonds payable 300,000 300,000 Net pension liability-proportionate share 16,972 16,972 Total Liabilities 74,930 - 316,972 391,902 - FUND BALANCE Investment in non-current governmental assets 7,922,866 7,922,866 Nonspendable 76,425 76,425 Restricted: Capital,equipment 751,210 751,210 Capital,building 31,339 31,339 Assigned:Unappropriated 33,355 33,355 Unassigned 534,860 534,860 Total Fund Balance 1,427,189 7,922,866 - 9,350,055 Total Liabilities and Fund Balance $ 1,502,119 $ 7,922,866 $ 316,972 $ 9,741,957 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 31,2015 Capital Operating Reserve Total REVENUES Real property taxes $ 1,861,556 $ $ 1,861,556 Interest and earnings 602 1,688 2,290 - Rentals 27,719 27,719 Sale of equipment 84,860 84,860 x r Refund of prior year's expenditures 1,287 1,287 Insurance recoveries 5,113 5,113 Miscellaneous 375 375 Total Revenues 1,981,512 1,688 1,983,200 EXPENDITURES Personal services 264,608 264,608 Equipment and capital outlay 90,000 1,347,995 1,437,995 Fire protection 506,002 506,002 - State retirement system 32,581 32,581 Service award program 357,214 357,214 Social security 20,188 20,188 f Workers'compensation 50,224 50,224 + ; Medical and accident insurance 28,807 28,807 - Debt service-principal 150,000 150,000 Debt service-interest 18,450 18,450 Total Expenditures 1,518,074 1,347,995 2,866,069 - Excess of Revenues Over Expenditures 463,438 (1,346,307) (882,869) - 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 243,438 (1,126,307) (882,869) Fund Balance-Beginning of Year 401,202 1,908,856 2,310,058 Fund Balance-End of Year $ 644,640 $ 782,549 $ 1,427,189 V See Notes to Financial Statements -4- SOUTHOLD FIRE DISTRICT Statement of Fiduciary Net Position-Fiduciary Fund December 31,2015 1 Trust and Agency ASSETS Service award program assets $ 3,629,479 Total Assets $ 3,629,479 f LIABILITIES Service awards $ 3,629,479 Total Liabilities $ 3,629,479 } 1r Imo! 1 ! See Notes to Financial Statements -5- ; 1 ' 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, 2015, 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 1-1 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 payments of long-term debt and other long-term liabilities are recognized as expenditures 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 Ir 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 primaryfunction of the District is toprovide fire-protection, rescue and emergency services to the P g Y 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 7-1 financial interdependency, selection of governing authority, designation of management, ability to significantly influence operations and accountability for fiscal matters. �1 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. 1 I -6- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) The District records its transactions in the fund types described below: Governmental Funds j 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: r— j 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. i 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. The two account groups are not "funds". They are accounting entities, not fiscal entities and are concerned only with the measurement of financial position,and not with the results of operations. The District utilizes the following account groups: Non-Current Governmental Assets Account Group - the non-current governmental assets account group is used to account for land, buildings, improvements and equipment owned by the District. Also included are deferred outflows of resources related to pensions. Non-Current Governmental Liabilities Account Group - the non-current governmental liabilities account group is used to account for all long-term debt and other obligations of the l 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- " I SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) 41 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 I expenditures during the reporting period. Accordingly,actual results could differ from those estimates. li F. Cash � Cash consists of cash on hand, demand deposits and short-term investments with original maturities of L three months or less from date of acquisition. G. Prepaids II 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. H. Restricted Assets Certain cash balances are restricted by various legal and contractual obligations,such as legal reserves. I. General Fixed Assets Capital assets are reported in the non-current governmental assets 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 a l accounts,is$1,000 for all assets. J. Deferred Outflows of Resources Deferred outflows of resources, in the non-current governmental assets account group, relates to pensions and represents the effect of the net change in the District's proportion of the collective net pension asset or liability and difference during the measurement period between the District's contributions and its proportionate share of total contributions to the pension systems. 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. District employees may choose to participate in the District's elective deferred compensation plans established under Internal Revenue Code§457. -8- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) L. 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 Li 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. The Board of Fire Commissioners shall retain the authority to assign fund balance. n Li 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 Ispent first from the restricted fund balance to the extent that an approved permissive referendum is 1 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. -9- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) (� 2. CHANGES IN ACCOUNTING PRINCIPLES GASB Statements No.68 and 71 ' For the fiscal year ended December 31, 2015, the District implemented GASB Statement No. 68, Accounting and Financial Reporting for Pensions - an Amendment of GASB Statement No. 27 and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date—an Amendment of GASB Statement No. 68. The implementation of the Statements requires the District to report as an asset and/or liability its portion of the collective net pension asset and/or liability in the New York State Employees' Retirement System.The implementation of the Statements also requires the District to report a deferred outflow and/or inflow for the effect of the net change in the District's proportion of the collective net pension asset and/or liability and difference during the measurement period between the District's contributions and its proportionate share of total contributions to the i f pension system not included in pension expense. 3. 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 $ 1,885,031 Encumbrances from prior year 74,585 Li Final Budget $ 1,959,616 J i B. Encumbrances Lj 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) 4. 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 I� 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 Jj 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: 4 � _J� A. Uncollateralized, B. Collateralized by securities held by the pledging financial institution,or t C. Collateralized by securities held by the pledging financial institution's trust department or agent 1 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: j� � 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, 2015 are $216,092,818, which consisted of $8,500,000 in certificate deposits,$5,000,000 in treasury bills,$105,801,031 in repurchase agreements r__ collateralized by a U.S. Government Agency Security, $73,000,000 in U.S. Treasury Securities, and $23,791,787 in collateralized bank deposits,with various interest rates and due dates. The following amounts are included as cash: Carrying Fund Amount General fund $ 244,608 General fund-Capital reserves 263,057 $ 507,665 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) 5. 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 1 December 31, 2015,were as follows: Balance Balance j December 31, December 31, 2014 Additions Deletions 2015 Land $ 258,752 $ - $ - $ 258,752 Buildings and improvements 3,456,189 16,760 - 3,472,949 Equipment 3,392,246 1,406,763 (617,296) 4,181,713 $ 7,107,187 $ 1,423,523 $ (617,296) $ 7,913,414 6. CAPITAL RESERVES i Activity for the capital reserves during the year under audit is as follows: ii Building Equipment Reserve Reserve Total Reserve Balance-Beginning of Year $ 31,323 $ 1,877,533 $ 1,908,856 Additions to Reserve: Board approved transfers: Planned budgeted increase 220,000 220,000 Interest 16 1,672 1,688 Use of Reserve: Capital outlay - (1,347,995) _ (1,347,995) Reserve Balance-End of Year $ 31,339 $ 751,210 $ 782,549 7. PENSION PLANS A. New York State and Local Employees'Retirement System r ' Plan Description The District participates in the New York State and Local Employees' Retirement System (ERS). This is a cost-sharing, multiple-employer retirement system. The net position of ERS is held in the New 1 ` York State Common Retirement Fund (the Fund), which was established to hold all net assets and record changes in fiduciary net position allocated to ERS. The Comptroller of the State of New York serves as the trustee of the Fund and is the administrative head of ERS. System benefits are established under the provisions of the New York State Retirement and Social Security Law (RSSL). Once a public employer elects to participate in ERS, the election is irrevocable. The New York State Constitution provides that pension membership is a contractual relationship and plan benefits cannot be diminished or impaired. Benefits can be changed for future members only by enactment of a State statute. The District also participates in the Public Employees' Group Life Insurance Plan (GLIP), which provides death benefits in the form of life insurance.The ERS is included in the State's financial report as a pension trust fund. That report may be found at the NYS Comptroller's website at www.osc.state.ny.us/retire/publications/index.php or may be obtained by writing to: NYS and Local Retirement System, 110 State Street,Albany, NY 12244. _, - 12- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) �fl Contributions 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. The resulting contributions paid in the current year and two preceding years were equal to 100 percent of the contributions required,and were as follows: 2015 2014 2013 District contributions paid $ 32,748 $ 32,081 $ 30,316 B. Pension Liabilities,Pension Expense,and Deferred Outflows of Resources Related to Pensions At December 31, 2015,the District reported the following liability for its proportionate share of the net pension liability for ERS in the non-current governmental liabilities account group. The net pension liability was measured as of March 31, 2015. The total pension liability used to calculate the net pension liability was determined by an actuarial valuation.The District's proportion of the net pension liability was based on a projection of the District's long-term share of contributions to ERS relative to the projected contributions of all participating members, actuarially determined. This information was provided by the ERS in reports provided to the District. Actuarial valuation date April 1,2014 Net pension asset/(liability) $ (16,972) District's portion of the Plan's total net pension asset/(liability) 0.0005024% Deferred outflows of resources have been reported in the non-current governmental assets group. Deferred Outflows of Resources Differences between expected and actual experience $ 543 H Net difference between projected and actual earnings on pension plan investments 2,948 Changes in proportion and differences between the District's contributions and proportionate share of contributions 5,961 li Total $ 9,452 - 13 - SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) `"} Actuarial Assumptions The total pension liability as of the measurement date was determined by using an actuarial valuation as noted in the table below, with update procedures used to roll forward the total pension liability to the measurement date.The actuarial valuations used the following actuarial assumptions: Measurement date March 31,2015 Actuarial valuation date April 1,2014 Interest rate 7.5% Salary scale 4.9% Decrement tables April 1,2005- March 31,2010 System's Experience Inflation rate 2.7% I I Annuitant mortality rates are based on April 1, 2005 - March 31, 2010 System's experience with adjustments for mortality improvements based on MP-2014. The actuarial assumptions used in the April 1, 2014 valuation are based on the results of an actuarial experience study for the period April 1, 2005-March 31,2010. The long-term expected rate of return on pension plan investments was determined in accordance with Actuarial Standard of Practice (ASOP) No. 27,Selection of Economic Assumptions for Measuring Pension Obligations.ASOP No.27 provides guidance on the selection of an appropriate assumed investment rate of return. Consideration was given to expected future real rates of return (expected returns, net of pension plan investment expense and inflation) for each major asset class, as well as historical investment data and plan performance. The target allocation and best estimates of the arithmetic real rates of return for each major asset class are summarized as follows: Long-term Target Expected Rate �^ Allocation of Return ) j Measurement date March 31,2015 Asset type J Domestic equity 38.0% 7.30% International equity 13.0% 8.55% Real estate 8.0% 8.25% 1 J Alternative investments 19.0% 6.75-11.00% Domestic fixed income securities } Global fixed income securities Li Bonds and mortgages 18.0% 4.00% Short-term Cash 2.0% 2.25% Inflation indexed bonds 2.0% 4.00% 100.0% -14- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) Discount Rate The discount rate used to calculate the total pension liability was 7.5%. The projection of cash flows used to determine the discount rate assumes that contributions from plan members will be made at the current contribution rates and that contributions from employers will be made at statutorily required rates, actuarially determined. Based upon the assumptions, the System's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. LiSensitivity of the Proportionate Share of the Net Pension Liability to the Discount Rate Assumption The following presents the District's proportionate share of the net pension liability calculated using the discount rate of 7.5%, as well as what the District's proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (6.5%) or 1 percentage point higher (8.5%)than the current rate: Current 1%Decrease Assumption 1%Increase (6.50)% (7.50)% (8.50)% ,_ District's proportionate share of the net pension asset(liability) $ (113,124) $ (16,972) $ 64,204 Pension Plan Fiduciary Net Position The components of the current-year net pension liability of the employers as of the respective measurement date were as follows: Measurement date March 31,2015 Employers'total pension liability $ (164,591,504) Plan fiduciary net position 161,213,259 Employers'net pension liability $ (3,378,245) Ratio of plan fiduciary net position to the employers'total pension liability 97.95% Prepayment to the Pension Plan Employer contributions are paid annually based on the System's fiscal year,which ends on March 31St. Annual payments are due February 1st.An employer can elect to prepay the amount due by December 15th to receive a 1% discount. The District paid the annual invoice in December, which resulted in a prepayment of$8,187 for the period January 1, 2016 through March 31, 2016. Employee contributions are remitted monthly. -15- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) r C. 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 31,2015. 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 jr 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 I 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. r I -16- 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 r 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 BPAS Actuarial&Pension Services, LLC. Portions of the following information are derived from a report prepared by the actuary dated March 2016 for the plan year ended December 31,2015. Program Financial Condition Assets and Liabilities if Actuarial Present Value of Benefits at December 31,2015 $ 4,689,924 Less: Assets Available for Benefits %of total Trust 1.04% $ 37,842 Annuities 79.14% 2,872,481 Insurance contracts 19.81% 719,156 Total Net Assets Available for Benefits 3,629,479 Total Unfunded Benefits 1,060,445 Less:Unfunded Liability for Prior Service (1,060,445) Unfunded Normal Benefits $ - Prior Service Costs Prior service costs are being amortized over a range of 10 to 11 years at a discount rate of 5.25%. - 17- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) Receipts and Disbursements Plan Net Assets,Beginning of Year $ 3,458,972 Changes during the year +Plan contributions $ 295,000 +Insurance premiums 57,116 +Investment income earned 44,027 +/-Changes in fair market value of investments (32,021) j_C -Plan benefit withdrawals (252,871) +Insurance receipts 59,256 170,507 ri i j Plan Net Assets,End of Year $ 3,629,479 Contributions Maximum amount of sponsor's contribution recommended by actuary: $ 338,489 Minimum amount of sponsor's contribution recommended by actuary: 320,092 Amount of sponsor's actual contribution: 295,000 ( Administration Fees Fee paid to actuary $ 5,100 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 RP-2000 Mortality Table Death(actives) None Death(inactives) None Other None i ! D. Deferred Compensation Plan The District has established a deferred compensation plan in 2015 in accordance with Internal Revenue Code §457 for all employees. The District makes no contributions in this Plan. No amount was deferred by eligible employees for the year ended December 31,2015. it -18- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) 8. LONG-TERM LIABILITIES Long-term liability balances and activity for the year are summarized below: Balance Balance Amounts December 31, December 31, Due Within 2014 Additions Reductions 2015 One Year Long-term debt: Bonds payable $ 450,000 $ - $ 150,000 $ 300,000 $ 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 2015 Serial bond 6/24/2002 7/9/2017 3.7-4.2% $ 300,000 The following is a summary of debt service requirements for bonds payable: Fiscal Year Ending December 31, Principal Interest Total 2016 $ 150,000 $ 12,450 $ 162,450 2017 150,000 6,300 156,300 Total $ 300,000 $ 18,750 $ 318,750 Interest on long-term debt for the year was$18,450. 9. COMMITMENTS AND CONTINGENCIES A. Encumbrances All encumbrances are classified as either restricted or assigned fund balance. At December 31, 2015, the District encumbered the following amounts: I�) Assigned:Fund Balance General Fund Fire Protection $ 33,355 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. 10. SPENDING LIMITATION The District did not exceed the statutory spending limitation imposed by New York State Law for the year ended December 31,2015,and the budget for the year ending December 31,2016. -19- i-' SOUTHOLD FIRE DISTRICT _ Schedule of Revenues,Expenditures and Changes in Fund Balance- Budget and Actual-General Fund-Operating For the Year Ended December 31,2015 Board- Final Budget c Approved Final Variance with Budget Budget Actual Actual REVENUES Real property taxes $ 1,861,545 $ 1,861,545 $ 1,861,556 $ 11 Interest and earnings 602 602 Rentals 23,486 23,486 27,719 4,233 Sale of equipment 84,860 84,860 Refund of prior year's expenditures 1,287 1,287 f Insurance recoveries 5,113 5,113 Miscellaneous 375 375 Total Revenues 1,885,031 1,885,031 1,981,512 $ 96,481 i APPROPRIATED FUND BALANCE Prior year's encumbrances - 74,585 j Total Revenues and Appropriated Fund Balance $ 1,885,031 $ 1,959,616 Final Budget -i Variance with Year End Actual and Encumbrances Encumbrances EXPENDITURES Personal services $ 290,000 $ 294,000 264,608 $ $ 29,392 Equipment and capital outlay 100,000 155,220 90,000 65,220 Fire protection 598,892 619,257 506,002 33,355 79,900 State retirement system 32,081 32,748 32,581 167 Service award program 360,000 360,000 357,214 2,786 Social security 20,608 20,608 20,188 420 Workers'compensation 60,000 54,333 50,224 4,109 Medical and accident insurance 35,000 35,000 28,807 6,193 Debt service-principal 150,000 150,000 150,000 - Debt service-interest 18,450 18,450 18,450 - Total Expenditures 1,665,031 1,739,616 1,518,074 33,355 188,187 ' OTHER USES Operating transfers out 220,000 220,000 220,000 - j Total Expenditures and Other Uses $ 1,885,031 $ 1,959,616 1,738,074 $ 33,355 $ 188,187 Net Change in Fund Balance 243,438 - Fund Balance-Beginning of Year 401,202 Fund Balance-End of Year $ 644,640 1 ,i See Paragraph on Other Supplementary Information Included in Auditor's Report -20- ri VINCENT D.CULLEN,CPA (1950-2013) 1-1 CULLEN(6 'DANOWSKI, LLP JAMES E.DANOWSKI,CPA CERTIFIED PU-B-LICLACCOUNTANTS PETER F.RODRIGUEZ,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, 2015, 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 April 28, 2016.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 District's 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 r- 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. 1650 ROUTE 112,PORT JEFFERSON STATION,NEW YORK 11776-3060 0 0 PHONE:631-473-3400•FAX:631-473-4863•WWW.CDLLP.NET -21 - 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 I- 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 April 28,2016. 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. ii Itat(44) Loa° April 28,2016 I , I ' � I -22 -